===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-27
T e x a c o I n c .
(Exact name of registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
2000 Westchester Avenue
White Plains, New York 10650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 253-4000
___________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, par value $6.25 New York Stock Exchange
Midwest Stock Exchange
The Stock Exchange, London
Basle, Geneva and Zurich Exchanges
Amsterdam, Antwerp and Brussels
Exchanges
Rights to Purchase Series D Junior
Participating Preferred Stock New York Stock Exchange
Cumulative Adjustable Rate Monthly
Income Preferred Shares, Series B* New York Stock Exchange
6-7/8% Cumulative Guaranteed Monthly
Income Preferred Shares, Series A* New York Stock Exchange
8-1/2% Notes, due February 15, 2003** New York Stock Exchange
8-5/8% Debentures, due June 30, 2010** New York Stock Exchange
8.65% Notes, due January 30, 1998** New York Stock Exchange
9% Notes, due November 15, 1996** New York Stock Exchange
9% Notes, due November 15, 1997** New York Stock Exchange
9% Notes, due December 15, 1999** New York Stock Exchange
9-3/4% Debentures, due March 15, 2020** New York Stock Exchange
Extendible Notes, due June 1, 1999
(8-1/2% to June 1, 1998)** New York Stock Exchange
Extendible Notes, due March 1, 2000
(9.45% to March 1, 2000)** New York Stock Exchange
Extendible Notes, due January 15, 2000
(8.95% to January 15, 2000)** New York Stock Exchange
_________
* Issued by Texaco Capital LLC and the payments of dividends and payments on
liquidation or redemption are guaranteed by Texaco Inc.
** Issued by Texaco Capital Inc. and unconditionally guaranteed by Texaco Inc.
___________________
The Registrant (1) HAS FILED all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and (2) HAS BEEN subject to such filing requirements for the past
90 days.
No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is contained herein, and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
The aggregate market value of Texaco Inc. Common Stock held by
non-affiliates at the close of business on February 28, 1995, based on the New
York Stock Exchange composite sales price, was approximately $16,540,000,000.
The market value of Series B ESOP Convertible Preferred Stock held in the
Employees Thrift Plan of Texaco Inc. at the close of business on February 28,
1995, totaled approximately $635,740,000. The liquidation value of Series F
ESOP Convertible Preferred Stock held in the Employees Savings Plan of Texaco
Inc. at the close of business on February 28, 1995, totaled approximately
$46,190,000.
As of February 28, 1995, there were 259,607,356 outstanding shares of
Texaco Inc. Common Stock.
Documents incorporated by reference
(to the extent indicated herein)
Part of
Form 10-K
---------
Texaco Inc. Annual Report to Stockholders for the year 1994 ..... I, II
Proxy Statement of Texaco Inc. relating to the 1995 Annual
Meeting of Stockholders ....................................... III
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------------------------------------------------
Texaco Inc.
Texaco Inc. Year 1994 Texaco Inc.
Year 1994 Annual Report March 27, 1995
Form 10-K Item Form 10-K To Stockholders Proxy Statement
-------------- --------- --------------- ---------------
<S> <C> <C> <C>
PART I
1. and 2. Business and Properties
Development and Description of Business .......................... 1 _ _
Certain Factors Which May Affect Business ........................ 2-3 _ _
Worldwide Operations ............................................. 4 9-24, 37 and 59-60 _
Supplementary Exploration and Production Information ............. 4-6 62-64 and 67 _
3. Legal Proceedings ...................................................... 7-8 59 _
4. Submission of Matters to a Vote of Security Holders .................... 8 _ _
Executive Officers of the Registrant ...................................... 9 _ _
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters ...................................... 10 71 _
6. Selected Financial Data ................................................ 10 70 _
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................. 10 26-36 _
8. Financial Statements and Supplementary Data
- Financial Statements ............................ 10 37-61 _
- Oil and Gas Information ......................... 10 62-68 _
- Selected Quarterly Financial Results ............ 10 69 _
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ............................... 10 _ _
PART III
10. Directors and Executive Officers of the Registrant ..................... 10 _ 2-10
11. Executive Compensation ................................................. 10 _ 5-6, 26-28 and 30
12. Security Ownership of Certain Beneficial Owners
and Management ....................................................... 10 _ 6-7
13. Certain Relationships and Related Transactions ......................... 10 _ 6
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ....... 11-12 _ _
</TABLE>
<PAGE>
PART I
TEXACO INC.
Items 1. and 2. Business and Properties
DEVELOPMENT AND DESCRIPTION OF BUSINESS
Texaco Inc. was incorporated in Delaware on August 26, 1926, as The Texas
Corporation. Its name was changed in 1941 to The Texas Company and in 1959 to
Texaco Inc. It is the successor of a corporation incorporated in Texas in
1902. As used herein and within the portions of the documents incorporated by
reference, the term Texaco Inc. refers solely to Texaco Inc., a Delaware
corporation. The use of such terms as "Texaco," "company," "division,"
"organization," "we," "us," "our" and "its," when referring either to Texaco
Inc. and its consolidated subsidiaries or to subsidiaries and affiliates either
individually or collectively, is only for convenience and is not intended to
describe legal relationships.
Texaco Inc. and its subsidiary companies, together with affiliates owned
50% or less, represent a vertically integrated enterprise principally engaged
in the worldwide exploration for and production, transportation, refining and
marketing of crude oil, natural gas and petroleum products.
Research Expenditures
Worldwide expenditures of Texaco Inc. and subsidiary companies for
research, development and technical support for continuing operations amounted
to approximately $175 million in 1994, $185 million in 1993 and $200 million
in 1992. These expenditures exclude amounts applicable to discontinued
chemical operations of approximately $20 million in 1994, $45 million in 1993
and $50 million in 1992.
Environmental Expenditures
Information regarding capital expenditures of Texaco Inc. and subsidiary
companies, including equity in affiliates, during 1994, and projections for
1995 and 1996, for air, water and solid waste pollution abatement, and
related environmental projects and facilities, is incorporated herein by
reference from pages 32 and 33 of Texaco Inc.'s 1994 Annual Report to
Stockholders.
Employees
The number of employees of Texaco Inc. and subsidiary companies engaged in
continuing operations as of December 31, 1994 totaled 29,713. The comparable
number of employees as of December 31, 1993 was 32,514.
The 1993 total excludes approximately 2,400 employees involved in
discontinued chemical operations. Of the 2,400 employees, some 2,100 supported
the discontinued chemical operations sold during 1994 or were separated from
service. The remaining employees support operations expected to be joint
ventured during 1995 and accordingly, these employees were also excluded from
the 1994 total. For additional information, see "Note 4, Discontinued
Operations" to the 1994 Consolidated Financial Statements.
1
<PAGE>
CERTAIN FACTORS WHICH MAY AFFECT BUSINESS
In recent years, a number of changes affecting the petroleum industry have
occurred both in the United States and abroad. In the United States and other
countries in which Texaco operates, various laws and regulations are either now
in force, in standby status or under consideration, dealing with such matters
as production restrictions, import and export controls, price controls, crude
oil and refined product allocations, refined product specifications,
environmental, health and safety regulations, retroactive and prospective tax
increases, cancellation of contract rights, expropriation of property,
divestiture of certain operations, foreign exchange rate changes and
restrictions as to convertibility of currencies, tariffs and other
international trade restrictions. The industry may also be affected by strikes
and other industrial disputes. All of these factors have contributed to an
environment of change both in the United States and abroad.
A number of legislative proposals are currently under consideration by the
U.S. Congress and various State legislatures. Although it is not possible at
this time to predict the ultimate form that any such proposals might take, or
the likelihood of their enactment, such legislation, if passed, could adversely
affect the petroleum industry and Texaco.
The world economy expanded at a 3.2% rate in 1994, the highest rate of
growth since 1989. Spurred by accommodative monetary policy and rising exports,
Continental Europe joined North America and the United Kingdom in economic
recovery. The Japanese economy remained relatively weak, but showed some signs
of improvement after being stimulated by tax cuts and increased public works
spending. The strongest economic growth last year continued to be in the
developing world, especially in the newly industrializing nations of the
Pacific Rim and Latin America. Gross Domestic Product continued to fall in most
of the former Soviet republics, but positive growth occurred in several of the
Eastern European economies.
<TABLE>
<CAPTION>
WORLD PETROLEUM DEMAND
(MILLION BPD)
1994 1993 1992
<S> <C> <C> <C>
INDUSTRIAL NATIONS 39.9 39.0 38.8
DEVELOPING NATIONS 22.1 21.3 20.2
FORMER SOVIET BLOC 6.2 6.9 8.2
TOTAL 68.2 67.2 67.2
</TABLE>
World petroleum demand rose to a record 68.2 million barrels per day (BPD)
in 1994, an increase of one million BPD from its 1993 level. Demand in the
industrialized nations increased by 0.9 million BPD, reflecting the combined
effects of the economic recovery, unusually cold winter weather in the United
States, and a summer heat wave in Japan. In the developing countries, petroleum
consumption grew by an additional 0.8 million BPD, bolstered by strong
increases in demand in the Pacific Rim countries and Latin America. Despite
increased demand in Eastern Europe, oil demand in the former Soviet bloc as a
whole (including Eastern Europe) continued its downward trend of recent years,
falling by 0.7 million BPD.
On the supply side, total net non-OPEC crude oil production rose from 35.2
million BPD to 35.6 million BPD, reversing a five-year decline. Buoyed by
higher output from the United Kingdom, the North Sea reached a record level of
over 5 million BPD in 1994. There were gains in other non-OPEC producing
countries as well, particularly Argentina and Yemen. These increases, which
totaled 1.2 million BPD, were more than sufficient to offset a 0.2 million BPD
decline in crude output in the United States and a 0.6 million BPD production
loss in the former Soviet Union.
OPEC crude oil production also rose in 1994, averaging 25 million BPD, an
increase of 0.3 million BPD from 1993 levels. Iraq, OPEC's historically second
largest producer, remained excluded from the international market by United
Nations sanctions.
Despite the general improvement in economic and petroleum demand
fundamentals, excess oil inventories worldwide depressed international
petroleum prices during the early months of 1994. The
2
<PAGE>
per-barrel spot price of U.S. benchmark West Texas Intermediate (WTI), for
example, averaged just $14.85 during the January-March period, the lowest
quarterly level since the end of 1988. However, OPEC production restraint, the
general firming in demand,and supply disruptions in Nigeria helped boost prices
in the late spring and summer. WTI briefly approached $21 per barrel in June,
before declining somewhat over the second half of the year. For 1994 overall,
WTI averaged $17.19 per barrel, 6.8% below the previous year.
Even with lower average crude oil prices, refiners' margins in 1994
weakened in most major regions as significant additions to global refining
capacity outstripped growth in world petroleum demand.
Near-Term Outlook
World economic growth is expected to accelerate in 1995. While the U.S.
economy could slow somewhat as a result of tightening monetary measures by the
Federal Reserve, the expansion in Western Europe is projected to gain momentum.
Moreover, the negative near-term effects of the Kobe earthquake on Japan's
economic growth are expected to be offset by reconstruction spending in the
later part of the year. The economies of the former Soviet Union will probably
experience another decline in 1995, but many of the countries of Eastern
Europe are anticipated to experience positive economic growth.
<TABLE>
<CAPTION>
NEAR-TERM WORLD SUPPLY/DEMAND BALANCE
(MILLION BPD)
1995 1994
<S> <C> <C>
DEMAND 69.1 68.2
SUPPLY
NON-OPEC CRUDE 36.0 35.6
OPEC CRUDE 25.1 25.0
OTHER LIQUIDS 8.3 8.0
TOTAL SUPPLY 69.4 68.6
STOCK CHANGE 0.3 0.4
</TABLE>
Robust economic expansion is expected to boost world oil demand from 68.2
to 69.1 million BPD in 1995. In the United States, slower economic growth and
an assumed return to normal weather conditions, should limit oil demand growth
to only about 0.1 million BPD. The economic upswing in Western Europe will add
another 0.2 million BPD to world demand. Most of the growth in oil demand will
continue to come from the developing countries, where petroleum usage is
expected to expand by about one million BPD. The declines in the former Soviet
bloc are projected to slow significantly to about 0.4 million BPD.
Non-OPEC crude production is expected to increase by 0.4 million BPD in
1995 to 36.0 million BPD. North Sea production will advance further and
additional increases are expected from the development of Colombia's Cusiana
field and from other producing countries. The combined losses from the United
States and the former Soviet Union are anticipated to average about 0.5 million
BPD (compared to 0.8 million BPD last year), as the rates of decline moderate
in both regions.
Purchases of OPEC oil are projected to increase slightly in 1995, as
growth in non-OPEC supplies alone will not meet rising world demand for oil.
However, international oil markets could remain unstable and potentially weak
in 1995, depending on OPEC's adherence to its quota, the status of Iraqi export
flows and other major market forces.
Colder than normal weather in the first part of the year helped push U.S.
natural gas consumption up by 0.4 trillion cubic feet (TCF) in 1994 to 20.7
TCF. However, an increase in domestic gas production and additional inflows
from Canada contributed to a slide in natural gas prices in the latter part of
the year. Despite the expected slowing of the U.S. economy, natural gas
consumption is expected to continue to grow in 1995.
_________________________
In addition to the above factors, operations and investments in some
foreign areas are subject to political and business risks. The nature of these
risks varies from country to country and from time to time. The overall effect
of the foregoing on Texaco cannot be predicted with any certainty.
3
<PAGE>
WORLDWIDE OPERATIONS
Texaco owns, leases, or has interests in extensive production,
manufacturing, marketing, transportation and other facilities throughout the
world. A description of the company's worldwide operations appears on pages 9
through 24, and information regarding sales to significant affiliates and
geographical financial data appear on pages 37 and 59-60, respectively, of
Texaco Inc.'s 1994 Annual Report to Stockholders, applicable portions of which
are incorporated herein by reference. Except as indicated under Items 1, 2, 3,
5, 6, 7, 8 and 14, no other data appearing in the 1994 Annual Report to
Stockholders are deemed to be filed as part of this Annual Report on Form 10-K.
In 1993, Texaco entered into memorandums of understanding with an
affiliate of the Jon M. Huntsman Group of Companies for the sale of
substantially all of Texaco's worldwide chemical operations. Except for the
lubricant additives portion of the chemical business, the sale to Huntsman
Corporation was completed in April, 1994. On February 14, 1995, Texaco and
Huntsman Corporation announced that they intend to form a joint venture to own
and operate Texaco's worldwide lubricant additives business. Formation of the
joint venture is expected to take place during 1995.
On March 1, 1995, Texaco completed the sale of more than 300 producing
fields to Apache Corporation. The sale includes properties located in the
Permian Basin of Texas, offshore Gulf of Mexico, onshore Louisiana, East and
South Texas, the Rocky Mountains and the Mid-Continent area of the United
States.
SUPPLEMENTARY EXPLORATION AND PRODUCTION INFORMATION
The following information concerns the oil and gas exploration,
development and producing activities of Texaco Inc. and consolidated
subsidiaries, as well as Texaco's equity in P.T. Caltex Pacific Indonesia
(CPI), a 50%-owned affiliate operating in Other Eastern Hemisphere areas:
Estimates of Total Proved Net Oil and Gas Reserve Data Provided to Other
Governmental Bodies and Availability of Oil and Gas
Information concerning estimates of total proved net oil and gas reserve
data provided to other governmental bodies and availability of oil and gas is
incorporated herein by reference from pages 62 to 64 of Texaco Inc.'s 1994
Annual Report to Stockholders.
Average Sales Prices and Production Costs-Per Unit
Information concerning average sales prices and production costs on a per
unit basis is incorporated herein by reference from page 67 of Texaco Inc.'s
1994 Annual Report to Stockholders.
______________________
The information presented in the tables on pages 5 and 6 includes
applicable amounts relating to the aforementioned sale of more than 300
producing fields to Apache Corporation.
4
<PAGE>
<TABLE>
<CAPTION>
Oil and Gas Acreage
As of December 31, 1994
-----------------------
Thousands of acres Gross Net
------------------ ----- ---
<S> <C> <C>
Producing
Texaco Inc. and Consolidated Subsidiaries
United States ............................................ 3,843 2,376
Other Western Hemisphere ................................. 519 157
Europe ................................................... 225 97
Other Eastern Hemisphere ................................. 784 195
------ ------
Total Texaco Inc. and Consolidated Subsidiaries ....... 5,371 2,825
Equity in an Affiliate-Other Eastern Hemisphere ............. 207 103
------ ------
Total worldwide ........................... 5,578 2,928
------ ------
Undeveloped
Texaco Inc. and Consolidated Subsidiaries
United States ............................................ 6,318 4,899
Other Western Hemisphere ................................. 9,571 6,381
Europe ................................................... 5,089 1,828
Other Eastern Hemisphere ................................. 68,007 27,858
------ ------
Total Texaco Inc. and Consolidated Subsidiaries ....... 88,985 40,966
Equity in an Affiliate-Other Eastern Hemisphere ............. 2,239 1,120
------ ------
Total worldwide ........................... 91,224 42,086
------ ------
Total Oil and Gas Acreage ....................... 96,802 45,014
====== ======
Number of Wells Capable of Producing* As of December 31, 1994
-----------------------
Oil wells Gross Net
Texaco Inc. and Consolidated Subsidiaries ----- ---
United States ............................................ 44,044 18,072
Other Western Hemisphere ................................. 2,241 410
Europe ................................................... 230 59
Other Eastern Hemisphere ................................. 1,287 436
------ ------
Total Texaco Inc. and Consolidated Subsidiaries ....... 47,802 18,977
Equity in an Affiliate-Other Eastern Hemisphere ............. 3,975 1,988
------ ------
Total worldwide** ......................... 51,777 20,965
====== ======
Gas wells
Texaco Inc. and Consolidated Subsidiaries
United States............................................. 6,406 2,849
Other Western Hemisphere ................................. 281 68
Europe ................................................... 47 13
Other Eastern Hemisphere ................................. 22 6
------ ------
Total Texaco Inc. and Consolidated Subsidiaries ....... 6,756 2,936
Equity in an Affiliate-Other Eastern Hemisphere ............. 22 11
------ ------
Total worldwide** ......................... 6,778 2,947
====== ======
<FN>
_____________
* Producible well counts include active wells and wells temporarily shut-in. Consistent
with general industry practice, injection or service wells and wells shut-in that have
been identified for plug and abandonment have been excluded from the number of wells
capable of producing.
** Includes 347 gross and 221 net multiple completion oil wells and 129 gross and 107 net
multiple completion gas wells.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Oil, Gas and Dry Wells Completed For the years ended December 31,
-------------------------------------------------------------------
1994 1993 1992
---- ---- ----
Oil Gas Dry Oil Gas Dry Oil Gas Dry
--- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net exploratory wells*
Texaco Inc. and Consolidated Subsidiaries
United States .......................... 16 23 17 24 29 29 16 24 20
Other Western Hemisphere ............... _ _ 1 _ _ 1 2 1 3
Europe ................................. _ _ 2 _ _ 8 _ _ 4
Other Eastern Hemisphere ............... 2 _ 11 _ 1 8 1 _ 3
Total Texaco Inc. and Consolidated --- --- --- --- --- --- --- --- ---
Subsidiaries ..................... 18 23 31 24 30 46 19 25 30
Equity in an Affiliate-Other Eastern
Hemisphere ............................. _ _ 1 1 _ 1 1 _ _
--- --- --- --- --- --- --- --- ---
Total worldwide .................. 18 23 32 25 30 47 20 25 30
=== === === === === === === === ===
Net development wells
Texaco Inc. and Consolidated Subsidiaries
United States .......................... 244 82 7 212 101 13 163 72 8
Other Western Hemisphere ............... 5 5 1 8 2 2 3 1 1
Europe ................................. 7 2 _ 7 1 _ 4 _ _
Other Eastern Hemisphere ............... 13 _ _ 14 _ _ 9 _ _
Total Texaco Inc. and Consolidated --- --- --- --- --- --- --- --- ---
Subsidiaries ..................... 269 89 8 241 104 15 179 73 9
Equity in an Affiliate-Other Eastern
Hemisphere ............................. 98 _ _ 76 _ _ 159 _ 4
--- --- --- --- --- --- --- --- ---
Total worldwide .................. 367 89 8 317 104 15 338 73 13
=== === === === === === === === ===
<FN>
* Exploratory wells which identify oil and gas reserves, but have not resulted in recording of proved reserves
pending further evaluation, are not considered completed wells. Reserves which are identified by such wells are
included in Texaco's proved reserves when sufficient information is available to make that determination. This
is particularly applicable to deep exploratory areas which may require extended time periods to assess, such as
the U.K. sector of the North Sea.
</TABLE>
<TABLE>
<CAPTION>
Additional Well Data As of December 31, 1994
----------------------------------------------------
Pressure Maintenance
Wells in the --------------------------------
process of Projects in
drilling Installations the process of
Gross Net in operation being installed
----- --- ------------- ---------------
<S> <C> <C> <C> <C>
Texaco Inc. and Consolidated Subsidiaries
United States .............................. 62 48 496 1
Other Western Hemisphere ................... _ _ 13 _
Europe ..................................... 37 24 13 _
Other Eastern Hemisphere ................... 42 9 4 _
--- -- --- --
Total Texaco Inc. and Consolidated
Subsidiaries ......................... 141 81 526 1
Equity in an Affiliate-Other Eastern
Hemisphere ................................. 3 2 6 _
--- -- --- --
Total worldwide ......................... 144 83 532 1
=== == === ==
</TABLE>
6
<PAGE>
Item 3. Legal Proceedings
Litigation-Information relative to legal proceedings pending against
Texaco Inc. and subsidiary companies is presented in Note 17, Contingent
Liabilities, on page 59 of Texaco Inc.'s 1994 Annual Report to Stockholders,
which note is incorporated herein by reference.
As of December 31, 1994, Texaco Inc. and its subsidiaries were parties to
various proceedings instituted by governmental authorities arising under the
provisions of applicable laws or regulations relating to the discharge of
materials into the environment or otherwise relating to the protection of the
environment, none of which is material to the business or financial condition
of the Company. The following is a brief description of proceedings which,
because of the amounts involved, require disclosure under applicable Securities
and Exchange Commission regulations.
On June 9, 1992, an administrative complaint was served on Texaco
Chemical Company ("TCC")* by the U.S. Environmental Protection Agency
("EPA"), Region VI, alleging certain violations of the State
Implementation Plan at TCC's Port Neches, Texas chemical plant. The EPA is
seeking civil penalties of $149,000. Texaco Inc. is contesting liability.
On December 28, 1992, an administrative complaint was served on TCC
by the EPA, Region VI, alleging hazardous waste, PCB, release notification
and reporting violations at TCC's Port Neches chemical plant. The EPA is
seeking civil penalties of $3.8 million. Texaco Inc. is contesting
liability.
On January 21, 1994, an administrative proceeding was initiated by
the Texas Natural Resource Conservation Commission ("TNRCC"), alleging
violations of the Texas Solid Waste Disposal Act and the Texas Water Code
at TCC's Port Neches chemical plant. The TNRCC is seeking civil penalties
of $381,840 and remediation of alleged violations. Texaco Inc. is
contesting liability.
On May 23, 1994, the EPA, Region VII, instituted an administrative
proceeding alleging that on 12 occasions pipelines owned by Texaco Trading
and Transportation Inc. ("TTTI") released oil into surface waters in
violation of the Federal Clean Water Act. The agency is seeking a penalty
of $10,000 for each release. TTTI is contesting liability.
On February 15, 1995, Texaco Refining and Marketing Inc. ("TRMI")
and Star Enterprise ("Star") settled an administrative matter pending
before the Pennsylvania Department of Environmental Resources. The
State alleged that hydrocarbons were discharged into groundwaters
at the Pittsburgh Terminal, formerly owned by TRMI, in violation of
Pennsylvania's Clean Streams Act and Solid Waste Disposal Act.
On February 22, 1995, Texaco Refining and Marketing (East) Inc. and
Star entered into an Agreed Judicial Consent Order to settle an action
contemplated against them and another company by the TNRCC alleging
violations of the Texas Solid Waste Disposal Act and Texas Water Code at
Star's Port Arthur, Texas refinery.
_______________
* Texaco Chemical Company was sold on April 21, 1994 and, by agreement, Texaco
Inc. retains obligations applicable to events occurring prior to the closing
date.
7
<PAGE>
In February 1995, TRMI settled an investigative matter conducted by
the California Air Resources Board to determine TRMI's and other gasoline
marketers' compliance with California's additive injection requirements
during 1992 and 1993.
In February 1995, Texaco Inc., Texaco Caribbean Inc. and Texaco
Puerto Rico Inc. settled a suit filed in 1991 against the three companies
by the Virgin Islands Water and Power Authority ("WAPA"). The suit
alleged that a leak from an underground storage tank at a Texaco service
station in St. Croix contaminated a WAPA water well.
In addition, Texaco Inc., on behalf of itself and its subsidiaries and
affiliates, has agreed to participate in the U.S. Environmental Protection
Agency's Toxic Substances Control Act ("TSCA") Section 8(e) Compliance Audit
Program. There are 125 participants in this program. As a participant, Texaco
has agreed to audit its files for materials which under current EPA guidelines
would be subject to substantial risk notification under Section 8(e) of TSCA
and to pay stipulated penalties for each such report submitted under this
program. Based on its audit to date, Texaco estimates that its liability will
be in excess of $100,000, but is unable to calculate the exact amount at this
time. However, under this program, Texaco's liability cannot exceed $1 million
in the aggregate. No administrative proceeding is pending; however, Texaco
will be required to enter an Administrative Order On Consent pursuant to this
program in late 1995 or 1996.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
______________________
8
<PAGE>
Executive Officers of Texaco Inc.
The executive and other elected officers of Texaco Inc. as of March 24,
1995 are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Alfred C. DeCrane, Jr. ....... 63 Chairman of the Board and Chief Executive Officer
Allen J. Krowe ............... 62 Vice Chairman
Peter I. Bijur ............... 52 Senior Vice President
C. Robert Black .............. 59 Senior Vice President
William C. Bousquette ........ 58 Senior Vice President and Chief Financial Officer
James L. Dunlap .............. 57 Senior Vice President
William K. Tell, Jr. ......... 61 Senior Vice President
Stephen M. Turner ............ 56 Senior Vice President and General Counsel
John D. Ambler ............... 60 Vice President
Clarence P. Cazalot, Jr. ..... 44 Vice President
David C. Crikelair ........... 47 Vice President
Carl B. Davidson ............. 61 Vice President and Secretary
William P. Doyle ............. 63 Vice President
Patrick J. Lynch ............. 57 Vice President
Thomas M. Matthews ........... 51 Vice President
Elizabeth P. Smith ........... 45 Vice President
Robert A. Solberg ............ 49 Vice President
Glenn F. Tilton .............. 46 Vice President
Michael N. Ambler ............ 58 General Tax Counsel
James F. Link ................ 50 Treasurer
Robert C. Oelkers ............ 50 Comptroller
</TABLE>
For more than five years, each of the officers of Texaco Inc. listed
above, except for William C. Bousquette, has been actively engaged in the
business of Texaco Inc. or one of its subsidiary or affiliated companies.
Mr. Bousquette joined Texaco in January 1995 as Senior Vice President and
Chief Financial Officer. Prior to joining Texaco, Mr. Bousquette was Executive
Vice President and Chief Financial Officer of Tandy Corporation. Mr. Bousquette
joined Tandy in 1990 as Chief Financial Officer.
There is no family relationship among any of the officers of Texaco Inc.
9
<PAGE>
PART II
The following information, contained in Texaco Inc.'s 1994 Annual Report
to Stockholders, is incorporated herein by reference. The page references
indicated are to the actual and complete paper document version of Texaco
Inc.'s 1994 Annual Report to Stockholders, as provided to stockholders:
<TABLE>
<CAPTION>
1994
Annual Report to
Stockholders
Form 10-K Item Page Reference
-------------- ----------------
<S> <C>
Item 5. Market for Texaco Inc.'s Common Equity and Related
Stockholder Matters 71(a)
Item 6. Selected Financial Data
Five-Year Comparison of Selected Financial Data 70
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 26-36
Item 8. Financial Statements and Supplementary Data
Statement of Consolidated Income 37
Consolidated Balance Sheet 38
Statement of Consolidated Cash Flows 39
Statement of Consolidated Stockholders' Equity 40-41
Notes to Consolidated Financial Statements 42-60
Report of Independent Public Accountants 61
Supplemental Information on Oil and Gas Producing Activities 62-68
Selected Quarterly Financial Data 69
Item 9. Changes in and Disagreements with Accountants on ---------------
Accounting and Financial Disclosure Not applicable.
<FN>
(a) Only data provided under the captions Market Information and Common Stock Dividends
are deemed to be filed as part of this Annual Report on Form 10-K.
</TABLE>
PART III
The following information, contained in Texaco Inc.'s Proxy Statement dated
March 27, 1995, relating to the 1995 Annual Meeting of Stockholders, is
incorporated herein by reference. The page references indicated are to the
actual and complete paper document version of Texaco Inc.'s 1995 Proxy
Statement, as provided to stockholders:
<TABLE>
<CAPTION>
March 27, 1995
Proxy Statement
Form 10-K Item Page Reference
-------------- ----------------
<S> <C>
Item 10. Directors and Executive Officers of the Registrant
- Information Concerning the Board of Directors; its Governance
Procedures, Committees and Compensation 2-7
- Item 1-Election of Directors 7-10
Item 11. Executive Compensation
- Compensation of the Directors 5-6
- Summary Compensation Table 26
- Option Grants in 1994 27
- Aggregated Option Exercises in 1994 and Year-End Option Values 28
- Retirement Plan 30
Item 12. Security Ownership of Certain Beneficial Owners and Management
- Voting Securities 6
- Security Ownership of Directors and Management 6-7
Item 13. Certain Relationships and Related Transactions
- Other Relationships 6
</TABLE>
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following information, contained in Texaco Inc.'s 1994 Annual Report
to Stockholders, is incorporated herein by reference. The page references
indicated are to the actual and complete paper document version of Texaco
Inc.'s 1994 Annual Report to Stockholders, as provided to stockholders:
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
1994
Annual Report
To Stockholders
Page Reference
----------------
<S> <C>
1. Financial Statements (incorporated by reference from the indicated
pages of Texaco Inc.'s 1994 Annual Report to Stockholders):
Statement of Consolidated Income for the three years
ended December 31, 1994 ....................................... 37
Consolidated Balance Sheet at December 31, 1994 and 1993 ......... 38
Statement of Consolidated Cash Flows for the three years
ended December 31, 1994 ....................................... 39
Statement of Consolidated Stockholders' Equity
for the three years ended December 31, 1994 ................... 40-41
Notes to Consolidated Financial Statements ....................... 42-60
Report of Independent Public Accountants ......................... 61
2. Financial Statement Schedules
Caltex Group of Companies Combined Financial Statements,
the investments in which are accounted for on the equity
method and are filed as part of this report.
</TABLE>
Financial statements and schedules of certain affiliated companies have
been omitted in accordance with the provisions of Rule 3.09 of Regulation S-X.
Financial Statement Schedules are omitted as permitted under Rule 4.03 and
Rule 5.04 of Regulation S-X.
3. Exhibits
_ (3.1) Copy of Restated Certificate of Incorporation of Texaco
Inc., as amended to and including November 9, 1994,
including Certificate of Designations, Preferences and
Rights of Series B ESOP Convertible Preferred Stock,
Series D Junior Participating Preferred Stock, Series F
ESOP Convertible Preferred Stock and Series G, H, I and
J Market Auction Preferred Shares.
_ (3.2) Copy of By-Laws of Texaco Inc., as amended to and
including February 26, 1993. (This document was
previously filed as Exhibit 3.2 to Texaco Inc.'s Annual
Report on Form 10-K for 1992 dated March 17, 1993, SEC
File No. 1-27, and is being filed herein only for EDGAR
purposes.)
_ (4) Instruments defining the rights of holders of long-term
debt of Texaco Inc. and its subsidiary companies are not
being filed, since the total amount of securities
authorized under each of such instruments does not
exceed 10 percent of the total assets of Texaco Inc. and
its subsidiary companies on a consolidated basis. Texaco
Inc. agrees to furnish a copy of any instrument to the
Securities and Exchange Commission upon request.
_ (10(iii)(a)) Texaco Inc.'s Stock Incentive Plan, incorporated by
reference to pages A-1 through A-8 of Texaco Inc.'s
proxy statement dated April 5, 1993, SEC File No. 1-27.
_ (10(iii)(b)) Texaco Inc.'s Stock Incentive Plan, incorporated by
reference to pages IV-1 through IV-5 of Texaco Inc.'s
proxy statement dated April 10, 1989, as such Plan was
amended by Exhibit A to Texaco Inc.'s proxy statement
dated March 29, 1991, incorporated herein by reference,
SEC File No. 1-27.
11
<PAGE>
_ (10(iii)(c)) Texaco Inc.'s Incentive Bonus Plan, incorporated by
reference to page IV-5 of Texaco Inc.'s proxy statement
dated April 10, 1989, SEC File No. 1-27.
_ (10(iii)(d)) Description of Texaco Inc.'s Supplemental Pension
Benefits Plan, incorporated by reference to pages 8 and
9 of Texaco Inc.'s proxy statement dated March 17, 1981,
SEC File No. 1-27.
_ (10(iii)(e)) Description of Texaco Inc.'s Revised Supplemental Plan,
incorporated by reference to pages 24 through 27 of
Texaco Inc.'s proxy statement dated March 9, 1978, SEC
File No. 1-27.
_ (10(iii)(f)) Description of Texaco Inc.'s Revised Incentive
Compensation Plan, incorporated by reference to pages 10
and 11 of Texaco Inc.'s proxy statement dated March 13,
1969, SEC File No. 1-27.
_ (11) Computation of Earnings Per Share of Common Stock of
Texaco Inc. and Subsidiary Companies.
_ (12.1) Computation of Ratio of Earnings to Fixed Charges of
Texaco on a Total Enterprise Basis.
_ (12.2) Definitions of Selected Financial Ratios.
_ (13) Copy of those portions of Texaco Inc.'s 1994 Annual
Report to Stockholders that are incorporated by
reference into this Annual Report on Form 10-K.
_ (21) Listing of significant Texaco Inc. subsidiary companies
and the name of the state or other jurisdiction in which
each subsidiary was organized.
_ (23) Consent of Arthur Andersen LLP.
_ (24) Powers of Attorney for the Directors and certain
Officers of Texaco Inc. authorizing, among other things,
the signing of Texaco Inc.'s Annual Report on Form 10-K
on their behalf.
- (27) Financial Data Schedule.
12
<PAGE>
(b) _ Reports on Form 8-K.
During the fourth quarter of 1994, Texaco Inc. filed Current Reports
on Form 8-K relating to the following events:
1. October 25, 1994 (date of earliest event reported: October 25, 1994)
Item 5. Other Events-reported that Texaco issued an Earnings Press
Release for the third quarter and first nine months of 1994.
Texaco appended as an exhibit thereto a copy of the Press Release
entitled "Texaco Reports Results for the Third Quarter and First
Nine Months of 1994" dated October 25, 1994.
2. December 1, 1994 (date of earliest event reported: November 29, 1994)
Item 5. Other Events-reported that Texaco had entered into a
memorandum of understanding with Apache Corporation outlining the
terms of the sale of certain producing fields to Apache. Texaco
appended as an exhibit thereto a copy of the Press Release entitled
"Texaco Announces Sale of Producing Properties to Apache
Corporation" dated November 29, 1994.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Town of
Harrison, State of New York, on the 27th day of March, 1995.
TEXACO INC.
(Registrant)
Carl B. Davidson
By ----------------------------
(Carl B. Davidson)
Vice President and Secretary
Attest:
R. E. Koch
By ------------------------
(R. E. Koch)
Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Alfred C. DeCrane, Jr. .. Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
William C. Bousquette ... Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Robert C. Oelkers ....... Comptroller
(Principal Accounting Officer)
Directors:
Robert A. Beck Thomas S. Murphy
John Brademas Charles H. Price, II
Willard C. Butcher Robin B. Smith
Edmund M. Carpenter William C. Steere, Jr.
Alfred C. DeCrane, Jr. Thomas A. Vanderslice
Franklyn G. Jenifer William Wrigley
Allen J. Krowe
R. E. Koch
By --------------------------------------
(R. E. Koch)
Attorney-in-fact for the above-named
officers and directors
March 27, 1995
14
<PAGE>
INDEX TO EXHIBITS
The exhibits designated by an asterisk are incorporated herein by
reference to documents previously filed by Texaco Inc. with the Securities and
Exchange Commission, SEC File No. 1-27.
Exhibits
(3.1) Copy of Restated Certificate of Incorporation of Texaco Inc.,
as amended to and including November 9, 1994, including
Certificate of Designations, Preferences and Rights of Series
B ESOP Convertible Preferred Stock, Series D Junior
Participating Preferred Stock, Series F ESOP Convertible
Preferred Stock and Series G, H, I and J Market Auction
Preferred Shares
(3.2) Copy of By-Laws of Texaco Inc., as amended to and including
February 26, 1993. (This document was previously filed as
Exhibit 3.2 to Texaco Inc.'s Annual Report on Form 10-K for
1992 and is being filed herein only for EDGAR purposes).
(10(iii)(a)) Texaco Inc.'s Stock Incentive Plan, incorporated by reference
to pages A-1 through A-8 of Texaco Inc.'s proxy statement
dated April 5, 1993. *
(10(iii)(b)) Texaco Inc.'s Stock Incentive Plan, incorporated by reference
to pages IV-1 through IV-5 of Texaco Inc.'s proxy statement
dated April 10, 1989, as such Plan was amended by Exhibit A
to Texaco Inc.'s proxy statement dated March 29, 1991,
incorporated herein by reference. *
(10(iii)(c)) Texaco Inc.'s Incentive Bonus Plan, incorporated by reference
to page IV-5 of Texaco Inc.'s proxy statement dated April
10, 1989. *
(10(iii)(d)) Description of Texaco Inc.'s Supplemental Pension Benefits
Plan, incorporated by reference to pages 8 and 9 of Texaco
Inc.'s proxy statement dated March 17, 1981. *
(10(iii)(e)) Description of Texaco Inc.'s Revised Supplemental Plan,
incorporated by reference to pages 24 through 27 of Texaco
Inc.'s proxy statement dated March 9, 1978. *
(10(iii)(f)) Description of Texaco Inc.'s Revised Incentive Compensation
Plan, incorporated by reference to pages 10 and 11 of
Texaco Inc.'s proxy statement dated March 13, 1969. *
(11) Computation of Earnings Per Share of Common Stock of
Texaco Inc. and Subsidiary Companies.
(12.1) Computation of Ratio of Earnings to Fixed Charges of Texaco
on a Total Enterprise Basis.
15
<PAGE>
(12.2) Definitions of Selected Financial Ratios.
(13) Copy of those portions of Texaco Inc.'s 1994 Annual Report
to Stockholders that are incorporated by reference into this
Annual Report on Form 10-K.
(21) Listing of significant Texaco Inc. subsidiary companies and the
name of the state or other jurisdiction in which each subsidiary
was organized.
(23) Consent of Arthur Andersen LLP.
(24) Powers of Attorney for the Directors and certain Officers of
Texaco Inc. authorizing, among other things, the signing of
Texaco Inc.'s Annual Report on Form 10-K on their behalf.
(27) Financial Data Schedule.
16
CALTEX GROUP OF COMPANIES
COMBINED FINANCIAL STATEMENTS
December 31, 1994
<PAGE>
CALTEX GROUP OF COMPANIES
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
INDEX
Page
----
General Information 1-2
Independent Auditors' Report 3
Combined Balance Sheet 4-5
Combined Statement of Income 6
Combined Statement of Retained Earnings 7
Combined Statement of Cash Flows 7
Notes to Combined Financial Statements 8-18
Note: Financial statement schedules are omitted as permitted by Rule 4.03 and
Rule 5.04 of Regulation S-X.
<PAGE>
CALTEX GROUP OF COMPANIES
GENERAL INFORMATION
The Caltex Group of Companies (Group) is jointly owned 50% each by Chevron
Corporation and Texaco Inc. The private joint venture was created in Bahrain
in 1936 by its two owners to produce, transport, refine and market crude oil
and refined products. The Group is comprised of the following companies:
* Caltex Petroleum Corporation, a company incorporated in Delaware, that
through its many subsidiaries and affiliates, conducts refining, marketing
and transporting activities in the Eastern Hemisphere;
* P. T. Caltex Pacific Indonesia, an exploration and production company
incorporated and operating in Indonesia;
* American Overseas Petroleum Limited, a company incorporated in the
Bahamas, that, through its subsidiaries, manages certain exploration and
production operations in Indonesia in which Chevron and Texaco have
interests, but not necessarily jointly or in the same properties.
A brief description of each company's operations and the Group's
environmental activities follows:
Caltex Petroleum Corporation (Caltex)
-------------------------------------
Through its subsidiaries and affiliates, Caltex operates in 61 countries
with some of the highest economic and petroleum growth rates in the world,
principally in Africa, Asia, the Middle East, New Zealand and Australia.
Certain refining and marketing operations are conducted through joint ventures,
with equity interests in 14 refineries in 11 countries. Caltex' share of
refinery inputs approximated 920,000 barrels per day in 1994. Caltex continues
to improve its refineries with investments designed to provide higher yields
and meet environmental regulations. Construction of a new 130,000 barrels per
day refinery in Thailand is progressing with completion anticipated in 1996.
At year end 1994, Caltex had over 8,000 employees, of which about 3% were
located in the United States.
With a strong presence in its principal operating areas, Caltex has an
average market share of 17.4% with refined product sales of approximately 1.3
million barrels per day in 1994. Caltex built 119 new branded retail outlets
during 1994 and refurbished 177 existing locations in its aim to upgrade its
retail distribution network.
Caltex conducts international crude oil and refined product logistics and
trading operations from a subsidiary in Singapore. Other offices are located
in London, Dallas, Capetown, Bahrain and Tokyo. The company has an interest
in a fleet of vessels and owns or has equity interests in numerous pipelines,
terminals and depots. Currently, Caltex is active in the petrochemical
business, particularly in Japan and South Korea.
P. T. Caltex Pacific Indonesia (CPI)
------------------------------------
CPI holds a Production Sharing Contract in Central Sumatra for which the
Indonesian government granted an extension to the year 2021 during 1992. CPI
also acts as operator for four other petroleum contract areas in Sumatra, which
are jointly held by Chevron and Texaco. Exploration is pursued through an area
comprising 2.446 million acres with production established in the giant Minas
and Duri fields, along with more than 80 smaller fields. Gross production from
fields operated by CPI for 1994 was 718,000 barrels per day. CPI entitlements
are sold to its shareholders, who use it in their systems or sell it to third
parties. At year-end 1994, CPI had over 6,400 employees, all located in
Indonesia.
1
<PAGE>
CALTEX GROUP OF COMPANIES
GENERAL INFORMATION
American Overseas Petroleum Limited (AOPL)
------------------------------------------
In addition to coordinating the CPI activities, AOPL, through its
subsidiary Amoseas Indonesia Inc., manages Texaco's and Chevron's undivided
interest holdings which include ten contract areas in Indonesia, excluding
Sumatra. Oil production is currently established in two contract areas, while
exploration was being pursued in seven others. Before year end 1994, two of
those seven exploration areas had been relinquished. The remaining area is in
Darajat, West Java, which contains geothermal reserves sufficient to supply a
55-megawatt power generating plant for over 30 years. Production of the
geothermal reserves began in 1994 and amounted to 62,185,795 KWH. AOPL's 1994
share of crude oil production amounted to 18,600 barrels per day. At year end,
AOPL had 254 employees, of which about 13% were located in the United States.
Environmental Activities
------------------------
The Group's activities are subject to environmental, health and safety
regulations in each of the countries in which it operates. Such regulations
vary significantly in degree of scope, standards and enforcement. The Group's
policy is to comply with all applicable environmental, health and safety laws
and regulations. The Group has an active program to ensure its environmental
standards are maintained, which includes closely monitoring applicable
statutory and regulatory requirements, as well as enforcement policies, in each
of the countries in which it operates, and conducting periodic environmental
compliance audits. At December 31, 1994, the Group had accrued $12 million for
various remediation activities. The environmental guidelines and definitions
promulgated by the American Petroleum Institute provide the basis for reporting
the Group's expenditures. For the year ended December 31, 1994, the Group,
including its equity share of nonsubsidiary companies, incurred capital costs
of $233 million and nonremediation related operating expenses of $132 million.
The major component of the Group's expenditures is for the prevention of air
pollution. In addition, as of December 31, 1994, reserves relative to the
future cost of restoring and abandoning existing oil and gas properties were
$27 million. Based upon existing statutory and regulatory requirements,
investment and operating plans and known exposures, the Group believes
environmental expenditures will not materially affect its liquidity, financial
position or results of operations.
2
<PAGE>
Independent Auditors' Report
----------------------------
To the Stockholders
The Caltex Group of Companies:
We have audited the accompanying combined balance sheets of the Caltex Group
of Companies as of December 31, 1994 and 1993, and the related combined
statements of income, retained earnings, and cash flows for each of the years
in the three-year period ended December 31, 1994. These combined financial
statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Caltex Group of
Companies as of December 31, 1994 and 1993 and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the combined financial statements, effective
January 1, 1992, the Group adopted the provisions of the Financial Accounting
Standards Board's Statements of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
No. 109, "Accounting for Income Taxes." As discussed in Note 2, effective
January 1, 1994, the Group adopted the provisions of the Financial Accounting
Standards Board's SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities."
KPMG Peat Marwick LLP
Dallas, Texas
February 14, 1995
3
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED BALANCE SHEET - DECEMBER 31, 1994 AND 1993
(MILLIONS OF DOLLARS)
ASSETS
1994 1993
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (including time deposits of
$136 in 1994 and $64 in 1993) $ 251 $ 166
Notes and accounts receivable, less allowance for doubtful
accounts of $14 in 1994 and 1993:
Trade 1,107 950
Other 187 155
Nonsubsidiary companies 88 112
------ ------
1,382 1,217
Inventories:
Crude oil 132 148
Refined products 573 532
Materials and supplies 73 56
------ ------
778 736
Deferred income taxes 10 4
------ ------
Total current assets 2,421 2,123
INVESTMENTS AND ADVANCES:
Nonsubsidiary companies at equity 2,370 1,796
Miscellaneous investments and long-term receivables,
less allowance of $8 in 1994 and $7 in 1993 198 195
------ ------
2,568 1,991
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Producing 3,284 3,027
Refining 1,787 1,483
Marketing 2,552 2,252
Marine 35 35
Capitalized leases 119 119
------ ------
7,777 6,916
Less: Accumulated depreciation, depletion and amortization 3,165 2,878
------ ------
4,612 4,038
PREPAID AND DEFERRED CHARGES 209 237
------ ------
Total assets $9,810 $8,389
====== ======
<FN>
See accompanying Notes to Combined Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED BALANCE SHEET - DECEMBER 31, 1994 AND 1993
(MILLIONS OF DOLLARS)
LIABILITIES AND STOCKHOLDERS' EQUITY
1994 1993
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks and other financial institutions $1,229 $ 966
Long-term debt due within one year 157 51
Accounts payable:
Trade and other 1,240 967
Stockholder companies 77 87
Nonsubsidiary companies 123 149
------ ------
1,440 1,203
Accrued liabilities 113 86
Estimated income taxes 133 105
------ ------
Total current liabilities 3,072 2,411
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 715 530
ACCRUED LIABILITY FOR EMPLOYEE BENEFITS 113 98
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES 789 646
DEFERRED INCOME TAXES 236 263
MINORITY INTEREST IN SUBSIDIARY COMPANIES 152 146
STOCKHOLDERS' EQUITY:
Common stock 355 355
Additional paid-in capital 2 2
Retained earnings 3,898 3,688
Currency translation adjustment 399 250
Unrealized holding gain on investments 79 -
------ ------
Total stockholders' equity 4,733 4,295
COMMITMENTS AND CONTINGENT LIABILITIES _____ _____
Total liabilities and stockholders' equity $9,810 $8,389
====== ======
<FN>
See accompanying Notes to Combined Financial Statements.
5
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(MILLIONS OF DOLLARS)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
SALES AND OTHER OPERATING REVENUES(1) $14,751 $15,409 $17,281
OPERATING CHARGES:
Cost of sales and operating expenses(2) 12,801 13,431 15,348
Selling, general and administrative expenses 568 496 479
Depreciation, depletion and amortization 331 295 263
Maintenance and repairs 160 170 165
------- ------- -------
13,860 14,392 16,255
------- ------- -------
Operating income 891 1,017 1,026
OTHER INCOME (DEDUCTIONS):
Equity in net income of nonsubsidiary companies 263 140 163
Dividends, interest and other income 134 99 83
Foreign exchange, net (73) 23 21
Interest expense (101) (93) (102)
Minority interest in subsidiary companies (3) (8) (13)
------- ------- -------
220 161 152
------- ------- -------
Income before provision for income taxes and
cumulative effects of changes in accounting principles 1,111 1,178 1,178
------- ------- -------
PROVISION FOR INCOME TAXES:
Current 467 433 456
Deferred (45) 25 53
------- ------- -------
Total provision for income taxes 422 458 509
------- ------- -------
Income before cumulative effects of changes
in accounting principles 689 720 669
Cumulative effects of changes in accounting principles - - 51
------- ------- -------
Net income $ 689 $ 720 $ 720
======= ======= =======
(1) Includes sales to:
Stockholder companies $ 1,192 $ 907 $ 835
Nonsubsidiary companies $ 1,044 $ 944 $ 924
(2) Includes purchases from:
Stockholder companies $ 1,800 $ 3,333 $ 3,917
Nonsubsidiary companies $ 1,612 $ 1,385 $ 641
<FN>
See accompanying Notes to Combined Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED STATEMENT OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(MILLIONS OF DOLLARS)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 3,688 $ 3,310 $ 2,955
Net income 689 720 720
Cash dividends (479) (342) (365)
------- ------- -------
Balance at end of year $ 3,898 $ 3,688 $ 3,310
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(MILLIONS OF DOLLARS)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 689 $ 720 $ 720
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effects of changes in accounting principles - - (51)
Depreciation, depletion and amortization 331 295 263
Dividends from nonsubsidiary companies,
less than equity in net income (220) (103) (133)
Net gains on asset sales (17) (4) (4)
Deferred income taxes (45) 25 53
Prepaid charges and deferred credits 115 (41) 25
Changes in operating working capital 58 31 (58)
Other 77 10 (46)
------- ------- -------
Net cash provided by operating activities 988 933 769
------- ------- -------
INVESTING ACTIVITIES:
Capital expenditures (837) (763) (711)
Investments in and advances to nonsubsidiary companies (131) (149) (17)
Net purchases/sales of investment instruments 14 (21) (11)
Proceeds from asset sales 37 73 144
------- ------- -------
Net cash used in investing activities (917) (860) (595)
------- ------- -------
FINANCING ACTIVITIES:
Proceeds from borrowings having original terms
in excess of three months 1,257 745 831
Repayments of borrowings having original terms
in excess of three months (880) (704) (857)
Net increase in other borrowings 135 140 94
Dividends paid, including minority interest (482) (342) (365)
------- ------- -------
Net cash provided by (used in) financing activities 30 (161) (297)
------- ------- -------
Effect of exchange rate changes on cash
and cash equivalents (16) 15 (8)
------- ------- -------
Net change in cash and cash equivalents 85 (73) (131)
Cash and cash equivalents at beginning of year 166 239 370
------- ------- -------
Cash and cash equivalents at end of year $ 251 $ 166 $ 239
======= ======= =======
<FN>
See accompanying Notes to Combined Financial Statements.
</TABLE>
7
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Principles of Combination
The combined financial statements of the Caltex Group of Companies (Group)
include the accounts of Caltex Petroleum Corporation and subsidiaries, American
Overseas Petroleum Limited and subsidiary and P.T. Caltex Pacific Indonesia
after the elimination of intercompany balances and transactions. A subsidiary
of Chevron Corporation and two subsidiaries of Texaco Inc. (stockholders) each
own 50% of the outstanding common shares. The Group is primarily engaged in
exploring, producing, refining and marketing crude oil and refined products in
the Eastern Hemisphere. The Group employs accounting policies that are in
accordance with generally accepted accounting principles in the United States.
Translation of Foreign Currencies
The U.S. dollar is the functional currency for all principal subsidiary
operations. Nonsubsidiary companies in Japan and Korea use the local currency
as the functional currency.
Inventories
Crude oil and refined product inventories are stated at the lower of cost
(primarily determined on the last-in, first-out (LIFO) method) or current
market value. Costs include applicable purchase and refining costs, duties,
import taxes, freight, etc. Materials and supplies are valued at average cost.
Investments and Advances
Investments in and advances to nonsubsidiary companies in which 20% to 50% of
the voting stock is owned by the Group, or in which the Group has the ability
to exercise significant influence, are accounted for by the equity method.
Under this method, the Group's equity in the earnings or losses of these
companies is included in current results, and the related investments reflect
the equity in the book value of underlying net assets. Investments in other
nonsubsidiary companies are carried at cost and related dividends are reported
as income.
Property, Plant and Equipment
Exploration and production activities are accounted for under the "successful
efforts" method. Depreciation, depletion and amortization expenses for
capitalized costs relating to the producing area, including intangible
development costs, are computed using the unit-of-production method.
All other assets are depreciated by class on a uniform straight-line basis.
Depreciation rates are based upon the estimated useful life of each class of
property.
Maintenance and repairs necessary to maintain facilities in operating
condition are charged to income as incurred. Additions and betterments that
materially extend the life of properties are capitalized. Upon disposal of
properties, any net gain or loss is included in other income.
8
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies - Continued
Environmental Matters
Compliance with environmental regulations is determined in consideration of
the existing laws in each of the countries in which the Group operates and the
Group's own internal standards. The Group capitalizes expenditures that create
future benefits or contribute to future revenue generation. Remediation costs
are accrued based on estimates of known environmental exposure even if
uncertainties exist about the ultimate cost of the remediation. Such accruals
are based on the best available nondiscounted estimated costs using data
developed by third party experts. Costs of environmental compliance for past
and ongoing operations, including maintenance and monitoring, are expensed as
incurred. Recoveries from third parties are recorded as assets when
realization is determined to be probable.
(2) Changes In Accounting Principles
The Group adopted SFAS No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" effective January 1, 1992, using the immediate
recognition option. SFAS No. 106 requires accrual, during the employees'
service with the Group, of the cost of their retiree health and life insurance
benefits. Prior to 1992, postretirement benefits were included in expense as
the benefits were paid. The adoption of SFAS No. 106 resulted in a cumulative
after-tax charge of $26 million.
Effective January 1, 1992, deferred income taxes are recognized according to
the asset and liability method specified in Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes" by applying individual
jurisdiction tax rates applicable to future years to differences between the
financial statement and tax basis carrying amounts of assets and liabilities.
The effect of tax rate changes on previously recorded deferred taxes is
recognized in the current year. The adoption of SFAS No. 109 resulted in a
cumulative benefit of $77 million.
Effective January 1, 1994, the Group adopted SFAS No. 112 "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires companies to
accrue for the cost for benefits provided to former or inactive employees
after employment but prior to retirement. Adoption of this standard did not
materially impact the combined financial statements of the Group.
The Group adopted SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" effective January 1, 1994. SFAS No. 115 requires that
investments in equity securities that have readily determinable fair values
and all investments in debt securities be classified into three categories
based on management's intent. Such investments are to be reported at fair
value except for debt securities intended to be held to maturity which are to
be reported at amortized cost. Previously, all such investments were
accounted for at amortized cost. The cumulative effect of this change at
January 1, 1994 was an increase in stockholders' equity of $70 million, after
related taxes, representing unrealized net gains applicable to securities
categorized as available-for-sale under the new standard. Such securities are
primarily held by nonsubsidiary companies accounted for by the equity method.
9
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(3) Inventories
The excess of current cost over the stated value of inventory maintained on
the LIFO basis was approximately $56 million and $40 million at December 31,
1994 and 1993, respectively.
During 1994, 1993 and 1992, inventory quantities maintained on the LIFO basis
were reduced at certain locations. The inventory reductions resulted in a
decrease in the earnings of consolidated subsidiaries and nonsubsidiary
companies at equity of approximately $12 million and $2 million in 1994 and
1992, respectively, and an increase in earnings of $1 million in 1993.
Charges of $104 million reduced income in 1993 to reflect a market value of
certain inventories lower than their LIFO carrying value. Earnings of $34
million and $14 million were recorded in 1994 and 1992, respectively, to
reflect a partial recovery of prior year charges.
(4) Nonsubsidiary Companies at Equity
Investments in and advances to nonsubsidiary companies at equity at December
31 include the following (in millions):
<TABLE>
<CAPTION>
Equity Share 1994 1993
------------ ---- ----
<S> <C> <C> <C>
Nippon Petroleum Refining Company, Ltd. 50% $ 997 $ 829
Koa Oil Company, Ltd. 50% 448 310
Honam Oil Refinery Company, Ltd. 50% 557 423
All other Various 368 234
------- -------
$ 2,370 $ 1,796
======= =======
</TABLE>
Shown below is summarized combined financial information for these
nonsubsidiary companies (in millions):
<TABLE>
<CAPTION>
100% Equity Share
---------------------- ----------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current assets $ 5,352 $ 4,680 $ 2,651 $ 2,316
Other assets 7,821 6,147 3,858 2,975
Current liabilities 4,940 4,900 2,363 2,349
Other liabilities 3,504 2,306 1,776 1,146
Net worth 4,729 3,621 2,370 1,796
</TABLE>
<TABLE>
<CAPTION>
100% Equity Share
----------------------------- -----------------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $10,886 $10,679 $10,502 $ 5,418 $ 5,304 $ 5,216
Operating income 770 494 645 381 242 319
Net income 526 281 326 263 140 163
</TABLE>
10
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(4) Nonsubsidiary Companies at Equity - Continued
Retained earnings at December 31, 1994, includes $1.4 billion representing
the Group's share of undistributed earnings of nonsubsidiary companies at
equity.
Cash dividends received from these nonsubsidiary companies were $43 million,
$37 million, and $30 million in 1994, 1993, and 1992, respectively.
Sales to the other 50 percent owner of Nippon Petroleum Refining Company,
Ltd. of products refined by Nippon Petroleum Refining Company, Ltd. and Koa
Oil Company, Ltd. were approximately $2 billion, $1.9 billion, and $2 billion
in 1994, 1993, and 1992, respectively.
(5) Notes Payable
Short-term financing consists primarily of demand loans, promissory notes,
acceptance credits and overdrafts. The weighted average interest rates on
short-term financing at December 31, 1994, and 1993 were 6.8% and 4.7%,
respectively.
Unutilized lines of credit available for short-term financing totaled $678
million at December 31, 1994.
(6) Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations, with related interest rates at
December 31, 1994, consist of the following (in millions):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
U.S. dollars:
Variable interest rate term loans $233 $173
Fixed interest rate term loans
with 7.6% average rate 206 220
Australian dollars:
Debentures with interest rates at 12.5%
due 1996 4 8
Promissory notes payable with
7.2% average rate 81 76
Fixed interest rate loan with
11.2% rate due 2001 132 -
Commercial paper with 7.0%
average rate 23 -
Capital lease obligations 11 33
New Zealand dollars:
Term loans with interest
rates 6-6.35% due 1996-1997 16 14
Other 9 6
---- ----
$715 $530
==== ====
</TABLE>
11
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(6) Long-Term Debt and Capital Lease Obligations - Continued
At December 31, 1994 and 1993, $124 million and $101 million, respectively,
of short-term borrowings were classified as long-term debt. Settlement of
these obligations is not expected to require the use of working capital in
1995, as the Group has both the intent and ability to refinance this debt on a
long-term basis. At December 31, 1994 and 1993, $170 million and $101 million,
respectively, of long-term committed credit facilities were available with
major banks to support notes payable classified as long-term debt.
Contractual maturities subsequent to December 31, 1994 follow (in millions):
1995 - $157 (included on the combined balance sheet as a current liability and
excluding short-term borrowings classified as long-term debt); 1996 - $101;
1997 - $61; 1998 - $94; 1999 - $137; 2000 and thereafter - $322.
(7) Employee Benefits
The Group has retirement plans covering substantially all eligible employees.
Generally, these plans provide defined benefits based on final or final average
pay, as defined. The benefit levels, vesting terms and funding practices vary
among plans.
The funded status of retirement plans, primarily foreign and inclusive of
nonsubsidiary companies at equity, at December 31 follows (in millions):
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Funding Status Benefits Exceed Assets
-------------- ------------- -------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $282 $280 $137 $117
Accumulated benefit obligation 317 309 161 137
Projected benefit obligation 493 484 225 195
Amount of assets available for benefits:
Funded assets at fair value $435 $450 $ 58 $ 39
Net pension (asset) liability recorded (8) (11) 136 128
---- ---- ---- ----
Total assets $427 $439 $194 $167
==== ==== ==== ====
Assets less than projected benefit obligation $(66) $(45) $(31) $(28)
Consisting of:
Unrecognized transition net assets
(liabilities) 16 31 (3) (2)
Unrecognized net losses (55) (44) (25) (23)
Unrecognized prior service costs (27) (32) (3) (3)
Weighted average rate assumptions:
Discount rate 9.7% 9.5% 6.6% 6.5%
Rate of increase in compensation 7.2% 7.4% 4.6% 4.7%
Expected return on plan assets 10.2% 10.3% 5.5% 5.5%
</TABLE>
12
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(7) Employee Benefits - Continued
<TABLE>
<CAPTION>
Expenses (Funded & Unfunded Combined) 1994 1993 1992
-------- ---- ---- ----
<S> <C> <C> <C>
Cost of benefits earned during the year $27 $27 $26
Interest cost on projected benefit obligation 55 58 54
Actual return on plan assets (23) (59) (9)
Net amortization and deferral (16) 16 (38)
--- --- ---
$43 $42 $33
=== === ===
</TABLE>
(8) Operating Leases
The Group has various operating leases involving service stations, equipment
and other facilities for which net rental expense was $121 million, $110
million, and $95 million in 1994, 1993 and 1992, respectively.
Future net minimum rental commitments under operating leases having
noncancelable terms in excess of one year are as follows (in millions):
1995 - $55; 1996 - $67; 1997 - $52; 1998 - $47; 1999 - $44; 2000 and
thereafter - $106.
(9) Commitments and Contingencies
On January 25, 1990, Caltex Petroleum Corporation and certain of its
subsidiaries were named as defendants, along with privately held Philippine
ferry and shipping companies and the shipping company's insurer, in a lawsuit
filed in Houston, Texas State Court. After removal to Federal District Court
in Houston, the litigation's disposition turned on questions of federal court
jurisdiction and whether the case should be dismissed for forum non conveniens.
The plaintiffs' petition purported to be a class action on behalf of at least
3,350 parties, who were either survivors of, or next of kin of persons deceased
in a collision in Philippine waters on December 20, 1987. One vessel involved
in the collision was carrying Group products in connection with a freight
contract. Although the Group had no direct or indirect ownership in or
operational responsibility for either vessel, various theories of liability
were alleged against the Group. No specific monetary recovery was sought
although the petition contained a variety of demands for various categories of
compensatory as well as punitive damages. These issues were resolved in the
Group's favor by the Federal District Court in March 1992, through a forum non
conveniens dismissal, and that decision is now final. Subsequent to that
dismissal, but consistent with its terms, cases were filed against the Group
entities in the Philippine courts (over and above those previously filed there
subsequent to the collision, all of which are in various stages of litigation
and are being vigorously resisted). However, and notwithstanding the Houston
Federal District Court dismissal, the plaintiffs filed another lawsuit,
alleging the same causes of action as in the Texas litigation, in Louisiana
State Court in New Orleans. The Group removed that case to Federal District
Court in New Orleans from which it was remanded back to Louisiana State Court.
The Group then sought injunctive and other relief from the Federal District
Court in Houston in order to ensure that that Court's previous dismissal
would be given proper effect. On having its request for relief denied, the
Group then filed an expedited appeal to the U. S. Fifth Circuit Court of
Appeals. That Court's ruling is expected shortly. Management is contesting
this case vigorously. It is not possible to estimate the amount of damages
involved, if any.
The Group may be subject to loss contingencies pursuant to environmental
laws and regulations in each of the countries in which it operates that, in
the future, may require the Group to take action to correct or remediate the
effects on the environment of prior disposal or release of petroleum substances
by the Group. The amount of such future cost is indeterminable due to such
factors as the nature of the new regulations, the unknown magnitude of any
possible contamination, the unknown timing and extent of the corrective actions
that may be required, and the extent to which such costs are recoverable from
third party insurance.
13
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(9) Commitments and Contingencies - Continued
The Group is also involved in certain other litigation and Internal Revenue
Service tax audits that could involve significant payments if such items are
all ultimately resolved adversely to the Group.
While it is impossible to ascertain the ultimate legal and financial
liability with respect to the above mentioned contingent liabilities, the
aggregate amount that may arise from such liabilities is not anticipated to be
material in relation to the Group's combined financial position, results of
operations, or liquidity.
Unconditional purchase obligations in 1992 and 1993 were not considered
material. However, in April 1994, a Group subsidiary entered into a
contractual commitment, effective October 1996, for a period of eleven years,
to purchase refined products in conjunction with the financing of a refinery
that is presently under construction by a nonsubsidiary company. Total future
estimated commitments (in billions) for the Group under this and other similar
contracts, based on current pricing and projected growth rates, are:
1995 - $.6, 1996 - $.9, 1997 - $1.1, 1998 - $1.3, 1999 - $1.5, and 2000 to
expiration of contracts - $9.6. Purchases (in billions) under similar
contracts were $.5, $.6, and $.4 in 1994, 1993, and 1992, respectively.
The Group is in the process of finalizing sales of certain property required
by a local government. The Group will be compensated for the value of the
property transferred and the cost of replacing operating assets affected by the
transfer. While the compensation is to be fully utilized in the reconstruction
program over a five year period, the excess of the compensation over the net
book value of the property and the dismantled operating assets will be
recognized in earnings in early 1995. The impact to the Group's earnings is
currently estimated to be a net after-tax gain of approximately $155 million.
(10) Financial Instruments
Certain Group companies are parties to financial instruments with off-balance
sheet credit and market risk, principally interest rate risk. As of December
31, the Group had commitments outstanding for interest rate swaps and foreign
currency transactions for which the notional or contractual amounts are as
follows (in millions):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Interest rate swaps - Pay Fixed, Receive Floating $363 $294
Interest rate swaps - Pay Floating, Receive Fixed $182 $ 50
Commitments to purchase foreign currencies $252 $244
Commitments to sell foreign currencies $274 $183
</TABLE>
The Group enters into interest rate swaps in managing its interest rate
risk, and their effects are recognized in the statement of income at the same
time as the interest expense on the debt to which they relate. The swap
contracts have remaining maturities up to eight years. The fair values of
these swaps are not material.
The Group enters into forward exchange contracts to hedge against some of
its foreign currency exposure stemming from existing liabilities and firm
commitments. Forward exchange contracts hedging existing liabilities have
maturities of up to seven years, and those contracts hedging firm commitments
have maturities of under a year. Gains and losses on the forward exchange
contracts are recognized in income concurrent with the income recognition of
the underlying hedged transaction. The fair values of these forward exchange
contracts are not material.
14
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(10) Financial Instruments - Continued
The Group's activity in commodity-based derivative contracts, that must be
settled in cash, is not material.
The Group's long-term debt, excluding capital lease obligations, of $704
million and $497 million at December 31, 1994 and 1993, respectively, had fair
values of $696 million and $511 million at December 31, 1994 and 1993,
respectively. The fair value estimates were based on the present value of
expected cash flows discounted at current market rates for similar obligations.
The reported amounts of financial instruments such as cash and cash
equivalents, notes and accounts receivable, and all current liabilities
approximate fair value because of their short maturity.
At December 31, 1994, the Group had investments in debt securities
available-for-sale and debt securities held to maturity at amortized costs of
$63 million (maturity less than ten years) and $77 million (maturity less than
one year), respectively. The fair value of these securities approximates
amortized costs. The investment in marketable equity securities is not
material. At December 31, 1994, the Group's carrying amount for investments
in nonsubsidiary companies accounted for at equity included $83 million for
net-of-tax unrealized net gains on investments held by these nonsubsidiaries.
Certain Group companies were contingently liable as guarantors for $2
million and $7 million at December 31, 1994 and 1993, respectively. The Group
also had commitments of $99 million and $36 million at December 31, 1994 and
1993, respectively, in the form of letters of credit which have been issued on
behalf of Group companies to facilitate either the Group's or other parties'
ability to trade in the normal course of business. In addition, the Group is
contingently liable at December 31, 1994, for a maximum of $192 million, to a
nonsubsidiary for precompletion sponsor support of its project finance
obligations.
The Group is exposed to credit risks in the event of non-performance by
counterparties to financial instruments. For financial instruments with
institutions, the Group does not expect any counterparty to fail to meet their
obligations given their high credit ratings. Other financial instruments
exposed to credit risk consist primarily of trade receivables. These
receivables are dispersed among the countries in which the Group operates,
thus limiting concentrations of such risk.
The Group performs ongoing credit evaluations of its customers and generally
does not require collateral. Letters of credit are the principal security
obtained to support lines of credit when the financial strength of a customer
or country is not considered sufficient. Credit losses have been historically
within management's expectations.
(11) Taxes
Taxes charged to income consist of the following (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Taxes other than income taxes:
Duties, import and excise taxes $2,384 $1,978 $1,891
Other 32 29 29
------ ------ ------
Total taxes other than income taxes 2,416 2,007 1,920
Provision for income taxes 422 458 509
------ ------ ------
$2,838 $2,465 $2,429
====== ====== ======
</TABLE>
15
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(11) Taxes - Continued
The provision for income taxes, substantially all foreign, has been computed
on an individual company basis at rates in effect in the various countries of
operation. The actual tax expense differs from the "expected" tax expense
(computed by applying the U.S. Federal corporate tax rate to income before
provision for income taxes) as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense 35.0% 35.0% 34.0%
Effect of recording equity in net
income of nonsubsidiary companies
on an after tax basis (8.3) (4.2) (4.9)
Effect of dividends received
from subsidiary and
nonsubsidiary companies 4.4 4.2 3.8
Foreign income subject to foreign taxes
in excess of U.S. statutory tax rate 6.9 7.4 11.6
Increase/(Decrease) in deferred tax asset
valuation allowance .3 (3.1) (.4)
Other (.3) (.4) (.9)
---- ---- ----
38.0% 38.9% 43.2%
==== ==== ====
</TABLE>
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of assets and liabilities.
Temporary differences and tax loss carryforwards which give rise to deferred
tax assets and liabilities at December 31, 1994 and 1993 are as follows
(in millions):
<TABLE>
<CAPTION>
Deferred Deferred
Tax Assets Tax Liabilities
------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Inventory $ 17 $ 10 $ 12 $ 18
Depreciation - - 310 298
Retirement plans 34 33 2 3
Tax loss carryforwards 27 29 - -
Investment allowances 40 8 - -
Other 30 20 41 34
---- ---- ---- ----
148 100 365 353
Valuation allowance (9) (6) - -
---- ---- ---- ----
Total deferred taxes $139 $ 94 $365 $353
==== ==== ==== ====
</TABLE>
16
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(11) Taxes - Continued
The valuation allowance has been established to record deferred tax assets at
amounts where recoverability is more likely than not. Net income was decreased
in 1994 by $3 million and increased by $36 million and $5 million in 1993 and
1992, respectively, for changes in the deferred tax asset valuation allowance.
Undistributed earnings for which no deferred income tax provision has been
made approximated $3.8 billion at December 31, 1994. Such earnings have been
or are intended to be indefinitely reinvested. These earnings would become
taxable in the U.S. only upon remittance as dividends. It is not practical to
estimate the amount of tax that might be payable on the eventual remittance of
such earnings. Upon remittance, certain foreign countries impose withholding
taxes which, subject to certain limitations, are then available for use as tax
credits against a U.S. tax liability, if any.
(12) Cash Flows
For purposes of the statement of cash flows, all highly liquid debt
instruments with original maturities of three months or less are considered
cash equivalents.
The "Changes in Operating Working Capital" consists of the following
(in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Notes and accounts receivable $ (97) $ 82 $ (45)
Inventories (37) 66 (114)
Accounts payable 152 (147) 212
Accrued liabilities 16 16 (27)
Estimated income taxes 24 14 (84)
----- ----- -----
Total $ 58 $ 31 $ (58)
===== ===== =====
</TABLE>
"Net Cash Provided by Operating Activities" includes the following cash
payments for interest and income taxes (in millions):
<TABLE>
<CPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest paid (net of capitalized interest) $ 94 $ 92 $ 106
Income taxes paid $ 444 $ 391 $ 528
</TABLE>
No significant non-cash investing or financing transactions occurred in 1994,
1993 or 1992.
(13) Other
On December 14, 1994, Caltex Australia Limited (CAL), a subsidiary of the
Group, entered into a conditional agreement to form a petroleum refining and
marketing joint venture with Ampol Limited, a competitor, effective January
1, 1995. The agreement was subject to completion of certain conditions which
included, among others, confirmation by the Australian Trade Practices
Commission (TPC) that the merger would not contravene local laws. On February
2, 1995, CAL received notification of the TPC's opinion that the merger would
lessen competition and, therefore, would contravene Australian regulations.
CAL and Ampol Limited are currently evaluating alternative options to address
the TPC ruling and have not yet formed a joint venture.
17
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(14) Oil and Gas Exploration, Development and Producing Activities
The financial statements of Chevron Corporation and Texaco Inc. contain
required supplementary information on oil and gas producing activities,
including disclosures on equity affiliates. Accordingly, such disclosures
are not presented herein.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL INCLUDED IN EXHIBIT 13 - TEXACO INC.'S
1994 ANNUAL REPORT TO STOCKHOLDERS.
The following information is depicted in graphic or image form in Texaco Inc.'s
1994 Annual Report to Stockholders filed as Exhibit 13 to Texaco's Inc.'s 1994
Annual Report on Form 10-K and all page references included in the following
descriptions are to the actual and complete paper format version of Texaco
Inc.'s 1994 Annual Report to Stockholders as provided to Texaco Inc.'s
shareholders.
This Appendix is separated into two parts. Part A (Items A1-A22) describes
the graphic and image material contained in the portion of Texaco Inc.'s 1994
Annual Report to Stockholders which is incorporated by reference, into Texaco
Inc.'s 1994 Annual Report on Form 10-K, in response to Form 10-K Items 1 and
2-Business and Properties. Part B (Items B1-B17) describes the graphic
material contained in the portion of Texaco Inc.'s 1994 Annual Report to
Stockholders which is incorporated by reference, into Texaco Inc.'s 1994 Annual
Report on Form 10-K, in response to Form 10-K Item 7-Management's Discussion
and Analysis of Financial Condition and Results of Operations.
PART A
------
A1. The first item is a graph which is located in the left margin of page 9.
The bar graph is entitled "Worldwide Reserve Replacement Ratios and
Finding Costs - Three Year Rolling Average." The left Y axis depicts
percentages from 0% to 120% with 20% increments. The right Y axis
depicts dollars per barrel from $0 to $6 in $1 increments. The X axis
depicts three individual three year rolling average periods (1990-1992,
1991-1993 and 1992-1994). Each three year period has two bar graphs,
side by side. The first bar (blue) represents a three year rolling
average of production replacement percentages. The second bar (yellow)
represents a three year rolling average of finding and development costs
per barrel. The plot points are as follows:
<TABLE>
<CAPTION>
Production Finding and Development
Replacement Percent Costs per Barrel
----------------------- ---------------------------
<S> <C> <C>
1990-1992 105% $4.48
1991-1993 101% $4.53
1992-1994 106% $4.04
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
A2. The second item is a graph which is located in the right margin of page 9.
The bar graph is entitled "Projected Net Equivalent Production." The Y
axis depicts thousands of barrels a day from 0 to 1400 with 200
increments. The X axis depicts the years 1994, 1995, 1996, 1997, 1998 and
1999. Each years' bar graph is segmented into 2 colors representing
- 1 -
<PAGE>
production in the United States (red) and International (yellow). The
plot points are as follows:
<TABLE>
<CAPTION>
United States International Total
-------------- -------------- ------
<S> <C> <C> <C>
1994 692 428 1120
1995 627 437 1064
1996 646 471 1117
1997 663 543 1206
1998 694 555 1249
1999 709 573 1282
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
A3. The third item is a pie chart in the top left margin of page 10. The pie
chart is entitled "Worldwide Net Liquids Production Profile" and is shown
in thousands of barrels a day. The pie chart is segmented with 5 colors,
each representing a country or region. The 5 segments are the United
States (green), Indonesia (orange), Europe (blue), Other (yellow) and the
Partitioned Neutral Zone (red). For each pie segment shown there is a
corresponding amount representing thousands of barrels a day. The
applicable production levels are as follows:
<TABLE>
<CAPTION>
Thousands of Barrels
a Day
-----------------------------
<S> <C>
United States 407
Indonesia 154
Europe 120
Other 60
Partitioned Neutral Zone 42
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
A4. The fourth item is a picture located in the lower right margin of page 10.
The picture is of an onshore oil platform and is captioned "Efficient
Steamflood Operation." The accompanying subcaption reads as follows, "At
the Kern River steamflood in Southern California, heightened efficiency
improves recovery and profitability."
A5. The fifth item is a map of the United States located on the top of page
11. The map captioned, "U. S. Exploration and Production - Core Operating
Areas" highlights the core operating areas for U.S. exploration and
production activities. The map highlights the company's operations at the
Kern River field in Bakersfield, California, the Permian Basin oil fields
of West Texas and Southwest New Mexico, offshore and onshore operations in
the Gulf of Mexico, as well as operations in the Rocky Mountains and
Midcontinent area.
A6. The sixth item is a depiction of "Gridstat Software" located in the right
- 2 -
<PAGE>
margin in the middle of page 11. The accompanying subcaption reads as
follows, "Data from gamma-ray well logs, interpreted by Texaco-developed
software, predict flow rate of oil from layers of a reservoir."
A7. The seventh item is a full page picture of the Louisiana Coastal Waters
located on page 12. The caption accompanying the picture reads as
follows, "In mature producing basins of coastal Louisiana, 3-D seismic and
other advanced technologies, supported by existing infrastructure, add
reserves and cash flow."
A8. The eighth item is a graph located in the right margin in the middle of
page 13. The bar graph is entitled "North Sea Net Equivalent Production."
The Y axis depicts thousands of barrels a day from 0 to 250 with 50
increments. The X axis depicts the years 1994, 1995, 1996, 1997, 1998 and
1999. The plot points are depicted as follows:
<TABLE>
<CAPTION>
Thousands of Barrels
a Day
--------------------
<S> <C>
1994 148
1995 151
1996 156
1997 209
1998 206
1999 204
</TABLE>
A9. The ninth item is a pie chart in the left margin of page 14. The pie
chart is entitled "Texaco's Crude Oil and NGL Reserve Profile"-Total - 2.7
billion barrels, Heavy-0.9 billion barrels at year-end 1994. The pie
chart is segmented with 5 colors, each representing a type of crude oil.
The 5 segments are Light Oil (red), Kern River Heavy (yellow), Other U.S.
Heavy (blue), CPI Heavy (orange) and Other International Heavy (green).
For each segment shown there is a corresponding percentage. This
percentage represents the particular crude oil's percentage of the total
reserves at year-end 1994. The applicable reserve levels are as follows:
<TABLE>
<CAPTION>
Percentage
-----------
<S> <C>
Light Oil 68%
Kern River Heavy 12%
Other U.S. Heavy 6%
CPI Heavy 8%
Other International
Heavy 6%
</TABLE>
Below the pie chart legend a footnote appears which states "Includes
equity in an affiliate."
- 3 -
<PAGE>
A10. The tenth item is a picture located in the top left margin of page 15.
The caption accompanying the picture is "East China Sea Drilling." The
subcaption under the picture reads as follows, "A Texaco-led consortium
is the first foreign contractor to drill in a previously underexplored
area of the East China Sea."
A11. The eleventh item is a graph located in the left margin in the middle of
page 16. The bar graph is entitled "Refinery Yields - U.S. Owned
Refineries." The Y axis depicts percentages from 0% to 60% with 10
increments. The X axis depicts the years 1992, 1993 and 1994. Each year
has three bar graphs, side by side. The first bar represents gasoline
yields (yellow), the second bar represents middle distillates and avjets
yields (green) and the third bar represents other yields (blue). The plot
points are depicted as follows:
<TABLE>
<CAPTION>
Middle Distillates
Gasolines and Avjets Other
---------- ------------------- ------
<S> <C> <C> <C>
1992 50.5% 29.4% 20.1%
1993 48.0% 29.3% 22.7%
1994 50.7% 28.3% 21.0%
</TABLE>
A12. The twelfth item is a graph located in the left margin at the bottom of
page 17. The bar graph is entitled "U.S. Texaco Branded Gasoline Sales"
and is shown in thousands of barrels a day. The Y axis depicts thousands
of barrels a day from 0 to 600 with 100 increments. The X axis depicts
the years 1992, 1993 and 1994. The plot points depicted are as follows:
<TABLE>
<CAPTION>
Thousands of Barrels
a Day
---------------------
<S> <C>
1992 530
1993 538
1994 547
</TABLE>
Below the graph a footnote appears which states "Data includes 100% of
sales volumes for joint-ventured facilities."
A13. The thirteenth item is a full page picture on page 18 of a refinery
employee working on location. The caption that accompanies the picture
reads as follows, "Reliability engineering programs are underway to
curtail downtime and improve safety and overall efficiency in our
refineries, producing fields and distribution systems."
A14. The fourteenth item is a graph located in the right margin at the top of
page 19. The bar graph is entitled "Projected Refined Product Sales."
The Y axis depicts thousands of barrels a day from 0 to 3000 with 500
increments. The X axis depicts the years 1994, 1995, 1996, 1997, 1998 and
1999. Each years' bar graph is segmented into 2 colors representing sales
in the United States (red) and International (yellow). The plot points
are depicted as follows:
- 4 -
<PAGE>
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1994 882 1470 2352
1995 906 1545 2451
1996 936 1644 2580
1997 957 1704 2661
1998 986 1782 2768
1999 993 1797 2790
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
A15. The fifteenth item is a graph which is located in the left margin in the
middle of page 20. The bar graph is entitled "Caltex Refined Product
Sales." The Y axis depicts thousands of barrels a day from 0 to 1500
with 300 increments. The X axis depicts the years 1992, 1993 and 1994.
The plot points are depicted as follows:
<TABLE>
<CAPTION>
Thousands of Barrels
a Day
--------------------
<S> <C>
1992 1158
1993 1246
1994 1244
</TABLE>
A16. The sixteenth item is a picture located in the right margin at the top of
page 20. The picture is of a container of motor oil and is captioned
"Havoline International." The accompanying subcaption reads as follows,
"In key Caltex markets, such as Thailand in the Pacific Rim area, the
introduction of Havoline Formula3 motor oils extends Havoline's reach as
a global brand."
A17. The seventeenth item is an illustration depicting a "3-D Reservoir
Simulator" located in the left margin of page 21. The subcaption
accompanying the illustration reads as follows, "Computerized reservoir
simulation improves the economics of projects such as the U.K. North Sea
Captain field by helping engineers to plan the direction of horizontal
wells."
A18. The eighteenth item is a picture of an "Automatic Water Cut Monitor"
located in the right margin in the middle of page 21. The subcaption
accompanying the picture reads as follows, "Continuous and automatic
measurement of the percentage of water in fluids being produced by a well
allows rapid response to changes by field operators."
A19. The nineteenth item is an illustration depicting a "3-D "Fault" Mapping
Program" located in the left margin at the top of page 22. The subcaption
accompanying the illustration reads as follows, "Texaco-developed Gridstat
software helps to pinpoint drilling prospects and predicts how fluids will
move in the reservoir during production."
- 5 -
<PAGE>
A20. The twentieth item is a picture of a Texaco gasoline pump located in the
right margin at the bottom of page 22. The picture is captioned "Brand of
Choice" and the accompanying subcaption reads as follows, "Development in
Texaco laboratories of high-performance additives for new CleanSystem3
gasolines, introduced in 1994, helped to increase branded sales in the
U.S., Latin America and Europe."
A21. The twenty-first item is a full page picture on page 23 of a scientist
working on location. The caption that accompanies the picture reads as
follows, "Development and testing of advanced catalysts in Texaco
laboratories lead to increases in both the value and yields of products
in our worldwide refining system."
A22. The twenty-second item is a picture in the left margin in the middle of
page 24. The picture is of Texaco's Vision and Values booklet. The
picture is captioned "Vision and Values" and contains the following
subcaption, "This booklet reaffirms Texaco's core values and its goal:
To be one of the most admired, profitable and competitive companies, and
to make Texaco the leader in its industry."
PART B
------
B1. The first graph is located on the top of page 26 to the right of the
Consolidated Highlights table. The bar graph is entitled "Returns on
Average Stockholders' Equity." The Y axis depicts percentages from 0%
to 15% with 3% increments. The X axis depicts the years 1992, 1993 and
1994. Each year has 2 bar graphs, side by side, representing rate of
return excluding special items (blue) and rate of return based on net
income as reported (yellow). The plot points are depicted as follows:
<TABLE>
<CAPTION>
Excluding
Special Items As Reported
------------- -----------
<S> <C> <C>
1992 12.0% 10.9%
1993 11.3% 12.5%
1994 9.2% 9.8%
</TABLE>
Below the graph a footnote appears which states "Returns exclude
discontinued operations and the 1992 cumulative effect of accounting
changes."
B2. The second graph is located in the middle of page 26 to the right of the
Consolidated Highlights table. The bar graph is entitled "Total Debt to
Total Borrowed And Invested Capital." The Y axis depicts percentages from
0% to 40% with 10% increments. The X axis depicts the years 1992, 1993 and
1994. The plot points are depicted as follows:
<TABLE>
<S> <C>
1992 39.3%
1993 38.7%
1994 38.5%
</TABLE>
- 6 -
<PAGE>
B3. The third graph is located on the top of page 27 to the right of the first
paragraph. The bar graph is entitled "Revenues." The Y axis depicts
dollars in billions from $0 to $40 with $10 increments. The X axis
depicts the years 1992, 1993 and 1994. Each years' bar graph is segmented
into 4 colors representing the sources of revenues from refined products
(blue), crude oil (red), natural gas (green) and other revenues (including
equity and services) (yellow). The revenues, in billions of dollars, for
each year and segment are depicted as follows:
<TABLE>
<CAPTION>
Other Revenues
Refined Crude Natural (Including Equity
Products Oil Gas and Services) Total
-------- ----- --------- ----------------- -------
<S> <C> <C> <C> <C> <C>
1992 $18.4 $12.8 $1.9 $3.4 $36.5
1993 $17.5 $11.1 $2.3 $3.2 $34.1
1994 $17.9 $ 9.8 $2.4 $3.3 $33.4
</TABLE>
Below the graph a footnote appears which states "Excludes revenues for
discontinued operations."
B4. The fourth graph is located in the middle of page 27 to the right of the
second and third paragraphs. The bar graph is entitled "Costs and
Expenses." The Y axis depicts dollars in billions from $0 to $40 with $10
increments. The X axis depicts the years 1992, 1993 and 1994. Each
years' bar graph is segmented into 2 colors representing purchases and
other costs (red) and expenses (yellow). Purchases and other costs and
expenses, in billions of dollars, for each year and segment are depicted
as follows:
<TABLE>
<CAPTION>
Purchases and
Other Costs Expenses Total
------------- -------- -----
<S> <C> <C> <C>
1992 $27.0 $8.2 $35.2
1993 $24.7 $8.2 $32.9
1994 $23.9 $8.2 $32.1
</TABLE>
Below the graph a footnote appears which states "Excludes amounts for
discontinued operations."
B5. The fifth graph is located on the top of page 28 to the right of the first
paragraph. The bar graph is entitled "Operating Earnings by Geographic
Area." The Y axis depicts dollars in millions from $0 to $2000 with $500
increments. The X axis depicts the years 1992, 1993 and 1994. Each
years' bar graph is segmented into 2 colors representing operating
earnings in the United States (red) and International (yellow). The plot
points are depicted as follows:
- 7 -
<PAGE>
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1992 $809 $698 $1507
1993 $708 $760 $1468
1994 $656 $596 $1252
</TABLE>
Below the graph a footnote appears which states "Operating earnings
exclude corporate and nonoperating costs, cumulative effect of accounting
changes and discontinued operations."
B6. The sixth graph is located in the middle of page 28 to the right of the
third and fourth paragraphs. The bar graph is entitled "Exploration And
Production - Total Operating Earnings." The Y axis depicts dollars in
millions from $0 to $1200 with $300 increments. The X axis depicts the
years 1992, 1993 and 1994. Each years' bar graph is segmented into 2
colors representing operating earnings in the United States (blue) and
International (yellow). The plot points are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1992 $543 $416 $959
1993 $510 $322 $832
1994 $414 $253 $667
</TABLE>
B7. The seventh graph is located on the top of page 29 to the right of the
first paragraph. The line graph is entitled "Average Crude Oil Selling
Prices-Per Quarter" and is shown in dollars per barrel by quarter for the
years 1992, 1993 and 1994. The Y axis depicts dollars per barrel from $5
to $20 with $5 increments. The X axis depicts the calendar quarters for
1992, 1993 and 1994. Each quarter has 2 sets of points plotted
represented by a purple line and a red line graph. The purple line
represents average crude oil selling prices in the United States
and the red line represents average International crude oil selling
prices. The plot points are depicted as follows:
<TABLE>
<CAPTION>
United States International
----------------- -----------------
<S> <C> <C>
First Quarter 1992 $14.48 per barrel $16.52 per barrel
Second Quarter 1992 $16.70 per barrel $17.47 per barrel
Third Quarter 1992 $17.81 per barrel $18.42 per barrel
Fourth Quarter 1992 $16.50 per barrel $18.01 per barrel
First Quarter 1993 $15.46 per barrel $16.90 per barrel
Second Quarter 1993 $15.70 per barrel $17.01 per barrel
Third Quarter 1993 $13.55 per barrel $15.49 per barrel
Fourth Quarter 1993 $12.36 per barrel $14.05 per barrel
First Quarter 1994 $11.02 per barrel $13.12 per barrel
Second Quarter 1994 $13.45 per barrel $14.57 per barrel
Third Quarter 1994 $14.82 per barrel $16.02 per barrel
Fourth Quarter 1994 $14.45 per barrel $15.58 per barrel
</TABLE>
- 8 -
<PAGE>
B8. The eighth graph is located in the middle of page 29 to the right of the
second and third paragraphs. The line graph is entitled "Average U.S.
Natural Gas Selling Price-Per Quarter" and is shown in dollars per
thousand cubic feet by quarter for the years 1992, 1993 and 1994. The Y
axis depicts dollars per thousand cubic feet from $1.00 to $2.50 with
$0.50 increments. The X axis depicts the calendar quarters for the years
1992, 1993 and 1994. The plot points are depicted as follows:
<TABLE>
<S> <C>
First Quarter 1992 $1.72 Per MCF
Second Quarter 1992 $1.51 Per MCF
Third Quarter 1992 $1.83 Per MCF
Fourth Quarter 1992 $2.40 Per MCF
First Quarter 1993 $1.99 Per MCF
Second Quarter 1993 $2.26 Per MCF
Third Quarter 1993 $2.17 Per MCF
Fourth Quarter 1993 $2.34 Per MCF
First Quarter 1994 $2.32 Per MCF
Second Quarter 1994 $2.02 Per MCF
Third Quarter 1994 $1.84 Per MCF
Fourth Quarter 1994 $1.80 Per MCF
</TABLE>
B9. The ninth graph is located on top of page 30 to the right of the first and
second paragraphs. The bar graph is entitled "Manufacturing, Marketing
and Distribution - Total Operating Earnings." The Y axis depicts dollars
in millions from $0 to $800 with $200 increments. The X axis depicts the
years 1992, 1993 and 1994. Each years' bar graph is segmented into 2
colors representing operating earnings in the United States (blue) and
International (yellow). The plot points are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1992 $267 $300 $567
1993 $215 $434 $649
1994 $257 $360 $617
</TABLE>
B10. The tenth graph is located on page 30 to the right of the Manufacturing,
Marketing and Distribution - United States earnings and operating data
table. The bar graph is entitled "Refined Product Sales-U.S. by Principal
Products." The Y axis depicts thousands of barrels per day from 0 to
1000 with 200 increments. The X axis depicts the years 1992, 1993 and
1994. Each years' bar graph is segmented into 5 colors representing
sales of gasolines (purple), middle distillates (red), avjets (blue),
residuals (green) and other (yellow). Refined product sales, in
thousands of barrels a day for each year and segment, are depicted as
follows:
- 9 -
<PAGE>
<TABLE>
<CAPTION>
Middle
Gasolines Distillates Avjets Residuals Other Total
--------- ----------- ------ --------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
1992 441 172 98 100 69 880
1993 425 180 84 61 80 830
1994 443 182 88 51 118 882
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
B11. The eleventh graph is located on the top of page 32 to the right of the
first paragraph. The bar graph is entitled "Environmental-Cash
Expenditures." The Y axis depicts dollars in millions from $0 to $1000
with $200 increments. The X axis depicts the years 1992, 1993 and 1994.
Each years' bar graph is segmented into 2 colors representing capital
expenditures (blue) and other (green). Environmental cash expenditures,
in millions of dollars, for each year and segment are depicted as follows:
<TABLE>
<CAPTION>
Capital
Expenditures Other Total
------------ ----- -----
<S> <C> <C> <C>
1992 $270 $403 $673
1993 $302 $475 $777
1994 $350 $640 $990
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
B12. The twelfth graph is located in the middle of page 32 to the right of the
second paragraph. The bar graph is entitled "Environmental - Cash
Expenditures by Geographic Location." The Y axis depicts dollars in
millions from $0 to $1000 with $200 increments. The X axis depicts the
years 1992, 1993 and 1994. Each years' bar graph is segmented into 2
colors representing cash expenditures in the United States (red) and
International (yellow). Environmental cash expenditures, in millions of
dollars, for each year and segment are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1992 $563 $110 $673
1993 $627 $150 $777
1994 $752 $238 $990
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
B13. The thirteenth graph is located on the top of page 33 to the right of the
first paragraph. The pie chart is entitled "1994 Sources of Cash and Cash
Equivalents" and each source is shown as a percentage of the total. The
pie chart is segmented with 4 colors depicting the 1994 sources of cash
and cash equivalents. The four sources are operations (blue), borrowings
and issuance of preferred stock by subsidiary (yellow), sale of
discontinued operations (purple) and asset sales (red). The legend below
- 10 -
<PAGE>
the pie chart lists each source as well as corresponding dollar amounts in
billions. The dollar amounts and percentages are as follows:
<TABLE>
<CAPTION>
1994 Sources of Cash Billions of
and Cash Equivalents Dollars Percent
-------------------- ----------- -------
<S> <C> <C>
Operations $2.9 62%
Borrowings and Issuance of
Preferred Stock by Subsidiary $0.8 17%
Sale of Discontinued Operations $0.6 14%
Asset Sales $0.3 7%
----
Total $4.6
</TABLE>
B14. The fourteenth graph is located in the middle of page 33 to the right of
the first and second paragraphs. The pie chart is entitled "1994 Uses of
Cash and Cash Equivalents" and each use is shown as a percentage of the
total. The pie chart is segmented with 4 colors depicting the 1994 uses
of cash and cash equivalents. The four uses are capital and exploratory
(capex) (green), dividends (orange), repayments of borrowings and other
uses (blue) and retirement of preferred stock issues (yellow). The legend
below the pie chart lists each use as well as corresponding dollar amounts
in billions. The dollar amounts and percentages are as follows:
<TABLE>
<CAPTION>
1994 Uses of Cash Billions of
and Cash Equivalents Dollars Percent
-------------------- ----------- -------
<S> <C> <C>
Capex $2.1 44%
Dividends $1.0 21%
Repayments of Borrowings and
Other Uses $1.0 21%
Retirement of Preferred
Stock Issues $0.6 14%
----
Total $4.7
</TABLE>
B15. The fifteenth graph is located on the bottom of page 33 to the right of
the third and fourth paragraphs. The bar graph is entitled "Debt
Profile." The Y axis depicts numerical values from 0 to 15 with 3
increments. The X axis depicts two sets of bar graphs for the years 1992,
1993 and 1994. The first set of bar graphs represent the average
interest rate percentages (red) at each year-end. The second set of bar
graphs represent the average maturity years (purple) at each year-end.
The applicable plot points are as follows:
- 11 -
<PAGE>
<TABLE>
<CAPTION>
Average Average
Interest Rate Maturity
------------- --------
<S> <C> <C>
1992 7.2% 9.0 years
1993 7.1% 12.3 years
1994 7.6% 12.2 years
</TABLE>
B16. The sixteenth graph is located on the top of page 34 to the right of the
first paragraph. The bar graph is entitled "Total Production and Reserve
Additions." The Y axis depicts barrels of oil equivalent, in millions,
from 0 to 500 with 100 increments. The X axis depicts the years 1992, 1993
and 1994. Each year has 2 bar graphs, side by side. The first bar (blue)
represents total production. The second bar depicts reserve additions and
is segmented into 2 colors representing extensions, discoveries and
additions (red) and revisions (yellow). The production and reserve
additions, in million barrels of oil equivalent, for each year and segment
are depicted as follows:
<TABLE>
<CAPTION>
Reserve Additions
---------------------------------------------------
Extensions,
Total Discoveries Total Reserve
Production and Additions Revisions Additions
---------- ------------- --------- -------------
<S> <C> <C> <C> <C>
1992 404 215 167 382
1993 403 303 147 450
1994 427 369 103 472
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
B17. The seventeenth graph is located in the middle of page 34 to the right of
the third paragraph. The bar graph is entitled "Capital and Exploratory
Expenditures." The Y axis depicts dollars in billions from $0 to $4 with
$1 increments. The X axis depicts two sets of bar graphs for the years
1992, 1993 and 1994. The first set of bar graphs segments the
expenditures by function representing exploration and production (red),
manufacturing, marketing and distribution (green) and other (purple). The
second set of bar graphs segments the expenditures geographically
representing the United States (blue) and International (yellow). Capital
and exploratory expenditures, in millions of dollars, for each year and
segment are depicted as follows:
<TABLE>
<CAPTION>
Exploration Manufacturing,
and Marketing
Production and Distribution Other Total
---------- ---------------- ----- -----
<S> <C> <C> <C> <C>
1992 $1.7 $1.2 $0.1 $3.0
1993 $1.7 $1.1 $0.1 $2.9
1994 $1.5 $1.1 $0.1 $2.7
</TABLE>
- 12 -
<PAGE>
Capital and exploratory expenditures, in millions of dollars, for each
year and segregated geographically are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1992 $1.4 $1.6 $3.0
1993 $1.3 $1.6 $2.9
1994 $1.2 $1.5 $2.7
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates and excludes amounts for discontinued operations."
FDeB:bbm
PR/94append
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TEXACO INC.
(as amended to and including November 9, 1994)
A Restated Certificate of Incorporation was duly adopted by the Board of
Directors of Texaco Inc. on April 27, 1990, pursuant to Section 245 of the
General Corporation Law of the State of Delaware and was amended on December
22, 1992 and November 9, 1994. This document only restates and integrates the
provisions of the Company's Restated Certificate of Incorporation as heretofore
amended or supplemented.
The Company was incorporated under the laws of Delaware on August 26, 1926,
as The Texas Corporation.
I.
The name of this Company is TEXACO INC.
II.
Its principal office in the State of Delaware is located at 32 Loockerman
Square, Suite L-100, in the City of Dover, County of Kent, and the name of its
resident agent is The Prentice-Hall Corporation System, Inc., whose address is
32 Loockerman Square, Suite L-100, Dover, Delaware.
III.
The objects or purposes for which the Company is formed and the nature of
the business to be carried on, any one or all of which it may pursue in the
United States of America and the states, districts, territories and possessions
thereof and in foreign countries, are as follows:
A. to engage in and carry on the petroleum business and the various
branches thereof, including the extraction, production, storage,
transportation, purchase and sale of oil and gas, natural gas liquids, shale
and other hydrocarbon substances and their products and by-products, and
refining, treating, applying, compounding, processing and otherwise preparing
them for market;
B. to engage in and carry on any other business, without limit as to kind
and whether or not related to, similar to or different from, the petroleum
business, including but not limited to, the businesses of mining,
manufacturing, processing, storage, construction, service, transportation and
merchandising;
C. to acquire, own, hold, enjoy, lease, deal in, operate, dispose of and
convey real and personal property of every kind and description, rights and
interests therein, and the business, property, assets and good will of any
person, partnership, association, firm, corporation or other entity;
D. to acquire, own, hold, enjoy, deal in and sell, transfer or otherwise
dispose of stock, bonds, notes and other securities, as well as accounts,
contracts and evidences of indebtedness of any person, partnership,
association, firm, corporation or other entity, in whatsoever business or
activity engaged and whether private or public in character, and to exercise
all rights in respect thereto;
E. to make secured and unsecured loans, with or without interest, to assume
or guarantee the stock, bonds, and obligations of, or otherwise to assist, any
<PAGE>
person, partnership, association, firm, corporation or other entity, in
whatsoever business or activity engaged and whether public or private in
character, when so doing, in the opinion of the Board of Directors, would tend
to promote the business of this Company;
F. to acquire, own, hold, enjoy, grant, deal in, transfer, sell or
otherwise dispose of intangible property of every kind and description,
including, without limitation, patents, patent rights, trademarks, trade names,
copyrights, licenses, formulae and choses in action of any kind;
G. to do all and everything useful in or incidental to the accomplishment
of the objects and purposes herein stated, as principal, agent, contractor,
trustee, or otherwise, either alone or in association with others, to the same
extent and as fully as could natural persons.
No enumeration of specific objects, purposes or powers, or particular
description of business in this article shall be held to limit or restrict in
any manner those enumerations or descriptions which are general in their
character, and the objects, powers and descriptions of one section shall in no
wise be limited or restricted by reference to or inference from the terms of
any other section.
IV.
The total number of shares of all classes of stock which the Company shall
have authority to issue is 380,000,000 shares, consisting of 30,000,000 shares
of Preferred Stock of the par value of $1.00 each and 350,000,000 shares of
Common Stock of the par value of $6.25 each.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the Preferred Stock and the
Common Stock are as follows:
A. The Preferred Stock may be issued from time to time in one or more
series. Subject to the limitations set forth herein and any limitations
prescribed by law, the Board of Directors is expressly authorized, prior to
issuance of any series of Preferred Stock, to fix by resolution or resolutions
providing for the issue of any series the number of shares included in such
series and the designation, relative powers, preferences and rights, and the
qualifications, limitations or restrictions of such series. Pursuant to the
foregoing general authority vested in the Board of Directors, but not in
limitation of the powers conferred on the Board of Directors thereby and by the
General Corporation Law of the State of Delaware, the Board of Directors is
expressly authorized to determine with respect to each series of Preferred
Stock:
1. the designation or designations of such series and the number of
shares (which number from time to time may be decreased by the Board of
Directors, but not below the number of such shares of such series then
outstanding, or may be increased by the Board of Directors unless otherwise
provided in creating such series) constituting such series;
2. the rate or amount and times at which, and the preferences and
conditions under which, dividends shall be payable on shares of such
series, the status of such dividends as cumulative or non-cumulative, the
date or dates from which dividends, if cumulative, shall accumulate, and
the status of such as participating or non-participating after the payment
of dividends as to which such shares are entitled to any preference;
3. the rights and preferences, if any, of the holders of shares of such
series upon the liquidation, dissolution or winding up of the affairs of,
or upon any distribution of the assets of, the Company, which amount may
vary depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
2
<PAGE>
and the status of the shares of such series as participating or
non-participating after the satisfaction of any such rights and
preferences;
4. the full or limited voting rights, if any, to be provided for shares
of such series, in addition to the voting rights provided by law;
5. the times, terms and conditions, if any, upon which shares of such
series shall be subject to redemption, including the amount the holders of
shares of such series shall be entitled to receive upon redemption (which
amount may vary under different conditions or at different redemption
dates) and the amount, terms, conditions and manner of operation of any
purchase, retirement or sinking fund to be provided for the shares of such
series;
6. the rights, if any, of holders of shares of such series to convert
such shares into, or to exchange such shares for, shares of any other class
or classes or of any other series of the same class, the prices or rates of
conversion or exchange, and adjustments thereto, and any other terms and
conditions applicable to such conversion or exchange;
7. the limitations, if any, applicable while such series is outstanding
on the payment of dividends or making of distributions on, or the
acquisition or redemption of, Common Stock or any other class of shares
ranking junior, either as to dividends or upon liquidation, to the shares
of such series;
8. the conditions or restrictions, if any, upon the issue of any
additional shares (including additional shares of such series or any other
series or of any other class) ranking on a parity with or prior to the
shares of such series either as to dividends or upon liquidation; and
9. any other relative powers, preferences and participating, optional
or other special rights, and the qualifications, limitations or
restrictions thereof, of shares of such series;
in each case, so far as not inconsistent with the provisions of this
Certificate of Incorporation or the General Corporation Law of the State of
Delaware as then in effect. All shares of Preferred Stock shall be identical
and of equal rank except in respect to the particulars that may be fixed by
the Board of Directors as provided above, and all shares of each series of
Preferred Stock shall be identical and of equal rank except as to the times
from which cumulative dividends, if any, thereon shall be cumulative.
B. Pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation, the Board of Directors has created the
following series of Preferred Stock, with the following voting powers,
preferences and relative, participating, optional or other special rights, and
the following qualifications, limitations or restrictions.
Series B ESOP Convertible Preferred Stock
Section 1. Designation and Amount; Special Purpose Restricted Transfer Issue.
(A) The shares of such series shall be designated as "Series B ESOP
Convertible Preferred Stock" ("Series B Preferred Stock") and the number of
shares constituting such series shall be 833,333 1/3.
(B) Shares of Series B Preferred Stock shall be issued only to State Street
Bank and Trust Company, as trustee (the "Trustee") of the employee stock
ownership plan feature of the Employees Thrift Plan of the Company (the
"Plan"). All references to the holder of shares of Series B Preferred Stock
3
<PAGE>
shall mean the Trustee or any successor trustee under the Plan. In the event
of any transfer of record ownership of shares of Series B Preferred Stock to
any person other than any successor trustee under the Plan, the shares of
Series B Preferred Stock so transferred, upon such transfer and without any
further action by the Company or the holder thereof, shall be automatically
converted into shares of Common Stock on the terms otherwise provided for the
conversion of shares of Series B Preferred Stock into shares of Common Stock
pursuant to Section 5 hereof and no such transferee shall have any of the
voting powers, preferences and relative, participating, optional or special
rights ascribed to shares of Series B Preferred Stock hereunder but, rather,
only the powers and rights pertaining to the Common Stock into which such
shares of Series B Preferred Stock shall be so converted. In the event of
such a conversion, the transferee of the shares of Series B Preferred Stock
shall be treated for all purposes as the record holder of the shares of
Common Stock into which such shares of Series B Preferred Stock have been
automatically converted as of the date of such transfer. Certificates
representing shares of Series B Preferred Stock shall bear a legend to reflect
the foregoing provisions. Notwithstanding the foregoing provisions of this
paragraph (B) of Section 1, shares of Series B Preferred Stock (i) may be
converted into shares of Common Stock as provided by Section 5 hereof and the
shares of Common Stock issued upon such conversion may be transferred by the
holder thereof as permitted by law and (ii) shall be redeemable by the Company
upon the terms and conditions provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distribution.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series B Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Preferred Dividends") in an amount per
share equal to $57.00 per share per annum, and no more, payable semiannually
in arrears, one-half on the 20th day of December and one-half on the 20th day
of June of each year (each a "Dividend Payment Date") commencing on June 20,
1989, to holders of record at the start of business on such Dividend Payment
Date. In the event that any Dividend Payment Date shall fall on any day other
than a "Business Day" (as hereinafter defined), the dividend payment due on
such Dividend Payment Date shall be paid on the Business Day immediately
preceding such Dividend Payment Date. Preferred Dividends shall begin to accrue
on outstanding shares of Series B Preferred Stock from the date of issuance of
such shares of Series B Preferred Stock. Preferred Dividends shall accrue on a
daily basis whether or not the Company shall have earnings or surplus at the
time, but Preferred Dividends accrued after issuance on the shares of Series B
Preferred Stock for any period less than a full semiannual period between
Dividend Payment Dates shall be computed on the basis of a 360-day year of
30-day months. Accrued but unpaid Preferred Dividends shall cumulate as of the
Dividend Payment Date on which they first become payable, but no interest
shall accrue on accumulated but unpaid Preferred Dividends.
(B) So long as any shares of Series B Preferred Stock shall be outstanding,
no dividend shall be declared or paid or set apart for payment on any other
series of stock ranking on a parity with the Series B Preferred Stock as to
dividends, unless there shall also be or have been declared and paid or set
apart for payment on the Series B Preferred Stock, dividends for all dividend
payment periods of the Series B Preferred Stock ending on or before the
Dividend Payment Date of such parity stock, ratably in proportion to the
respective amounts of dividends accumulated and unpaid through such dividend
period on the Series B Preferred Stock and accumulated and unpaid on such
parity stock through the dividend payment period on such parity stock next
preceding such Dividend Payment Date. In the event that full cumulative
dividends on the Series B Preferred Stock have not been declared and paid or
set apart for payment when due, the Company shall not declare or pay or set
apart for payment any dividends or make any other distributions on, or make any
payment on account of the purchase, redemption or other retirement of any other
class of stock or series thereof of the Company ranking, as to dividends or as
to distributions in the event of a liquidation, dissolution or winding up of
the Company, junior to the Series B Preferred Stock until full cumulative
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<PAGE>
dividends on the Series B Preferred Stock shall have been paid or declared and
set apart for payment; provided, however, that the foregoing shall not apply
to (i) any dividend payable solely in any shares of any stock ranking, as to
dividends and as to distributions in the event of a liquidation, dissolution or
winding up of the Company, junior to the Series B Preferred Stock or (ii) the
acquisition of shares of any stock ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding up of the
Company, junior to the Series B Preferred Stock in exchange solely for shares
of any other stock ranking, as to dividends and as to distributions in the
event of a liquidation, dissolution or winding up of the Company, junior to the
Series B Preferred Stock.
Section 3. Voting Rights.
The holders of shares of Series B Preferred Stock shall have the following
voting rights:
(A) The holders of Series B Preferred Stock shall be entitled to vote on
all matters submitted to a vote of the stockholders of the Company, voting
together with the holders of Common Stock as one class. The holder of each
share of Series B Preferred Stock shall be entitled to a number of votes equal
to the number of shares of Common Stock into which such share of Series B
Preferred Stock could be converted on the record date for determining the
stockholders entitled to vote, rounded to the nearest one-tenth of a vote; it
being understood that whenever the "Conversion Price" (as defined in Section 5
hereof) is adjusted as provided in Section 9 hereof, the voting rights of the
Series B Preferred Stock shall also be similarly adjusted.
(B) Except as otherwise required by law or set forth herein, holders of
Series B Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for the taking of any corporate
action; provided, however, that the vote of at least 66 2/3% of the outstanding
shares of Series B Preferred Stock, voting separately as a series, shall be
necessary to adopt any alteration, amendment or repeal of any provision of the
Restated Certificate of Incorporation of the Company, as amended, or this
Resolution (including any such alteration, amendment or repeal effected by any
merger or consolidation in which the Company is the surviving or resulting
corporation), if such amendment, alteration or repeal would alter or change
the powers, preferences or special rights of the shares of Series B Preferred
Stock so as to affect them adversely.
Section 4. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of Series B Preferred Stock shall be entitled to
receive out of assets of the Company which remain after satisfaction in full of
all valid claims of creditors of the Company and which are available for
payment to stockholders, and subject to the rights of the holders of any stock
of the Company ranking senior to or on a parity with the Series B Preferred
Stock in respect of distributions upon liquidation, dissolution or winding up
of the Company, before any amount shall be paid or distributed among the
holders of Common Stock or any other shares ranking junior to the Series B
Preferred Stock in respect of distributions upon liquidation, dissolution or
winding up of the Company, liquidating distributions in the amount of $600 per
share, plus an amount equal to all accrued and unpaid dividends thereon to the
date fixed for distribution, and no more. If upon any liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the Series B
Preferred Stock and any other stock ranking as to any such distribution on a
parity with the Series B Preferred Stock are not paid in full, the holders of
the Series B Preferred Stock and such other stock shall share ratably in any
distribution of assets in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount to which
5
<PAGE>
they are entitled as provided by the foregoing provisions of this paragraph
4(A), the holders of shares of Series B Preferred Stock shall not be entitled
to any further right or claim to any of the remaining assets of the Company.
(B) Neither the merger or consolidation of the Company with or into any other
corporation, nor the merger or consolidation of any other corporation with or
into the Company, nor the sale, lease, exchange or other transfer of all or
any portion of the assets of the Company, shall be deemed to be a dissolution,
liquidation or winding up of the affairs of the Company for purposes of this
Section 4, but the holders of Series B Preferred Stock shall nevertheless be
entitled in the event of any such merger or consolidation to the rights
provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, stating the payment date or dates when, and the
place or places where, the amounts distributable to holders of Series B
Preferred Stock in such circumstances shall be payable, shall be given by
first-class mail, postage prepaid, mailed not less than twenty (20) days prior
to any payment date stated therein, to the holders of Series B Preferred Stock,
at the address shown on the books of the Company or any transfer agent for the
Series B Preferred Stock.
Section 5. Conversion into Common Stock.
(A) A holder of shares of Series B Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of
such shares pursuant to Sections 6, 7 and 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock, initially at a conversion
rate equal to the ratio of $600 to the amount which initially shall be $60 and
which shall be adjusted as hereinafter provided (and, as so adjusted, is
hereinafter sometimes referred to as the "Conversion Price") (that is, a
conversion rate initially equivalent to ten shares of Common Stock for each
share of Series B Preferred Stock so converted, which is subject to adjustment
as the Conversion Price is adjusted as hereinafter provided).
(B) Any holder of shares of Series B Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender the certificate or
certificates representing the shares of Series B Preferred Stock being
converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Company or the offices of the transfer agent for the
Series B Preferred Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time be designated by
notice to the holders of the Series B Preferred Stock by the Company or the
transfer agent for the Series B Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series B Preferred Stock to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Stock and for any
shares of Series B Preferred Stock not to be so converted to be issued and
(ii) the address to which such holder wishes delivery to be made of such new
certificates to be issued upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series B Preferred Stock for conversion, the Company shall issue and send by
hand delivery (with receipt to be acknowledged) or by first-class mail, postage
prepaid, to the holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled upon conversion.
In the event that there shall have been surrendered a certificate or
certificates representing shares of Series B Preferred Stock, only part of
which are to be converted, the Company shall issue and deliver to such holder
or such holder's designee a new certificate or certificates representing the
number of shares of Series B Preferred Stock which shall not have been
converted.
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<PAGE>
(D) The issuance by the Company of shares of Common Stock upon a conversion
of shares of Series B Preferred Stock into shares of Common Stock made at the
option of the holder thereof shall be effective as of the earlier of (i) the
delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof or
(ii) the commencement of business on the second business day after the
surrender of the certificate or certificates for the shares of Series B
Preferred Stock to be converted, duly assigned or endorsed for transfer to the
Company (or accompanied by duly executed stock powers relating thereto) as
provided by this Resolution. On and after the effective day of conversion, the
person or persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock, but no allowance or adjustment shall be made in
respect of dividends payable to holders of Common Stock in respect of any
period prior to such effective date. The Company shall not be obligated to pay
any dividends which shall have been declared and shall be payable to holders of
shares of Series B Preferred Stock on a Dividend Payment Date if such Dividend
Payment Date for such dividend is subsequent to the effective date of
conversion of such shares.
(E) The Company shall not be obligated to deliver to holders of Series B
Preferred Stock any fractional share of shares of Common Stock issuable upon
any conversion of such shares of Series B Preferred Stock, but in lieu thereof
may make a cash payment in respect thereof in any manner permitted by law.
(F) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the conversion
of shares of Series B Preferred Stock as herein provided, free from any
preemptive rights, such number of shares of Common Stock as shall from time to
time be issuable upon the conversion of all the shares of Series B Preferred
Stock then outstanding. Nothing contained herein shall preclude the Company
from issuing shares of Common Stock held in its treasury upon the conversion
of shares of Series B Preferred Stock into Common Stock pursuant to the terms
hereof. The Company shall prepare and shall use its best efforts to obtain and
keep in force such governmental or regulatory permits or other authorizations
as may be required by law, and shall comply with all requirements as to
registration or qualification of the Common Stock, in order to enable the
Company lawfully to issue and deliver to each holder of record of Series B
Preferred Stock such number of shares of its Common Stock as shall from time
to time be sufficient to effect the conversion of all shares of Series B
Preferred Stock then outstanding and convertible into shares of Common Stock.
Section 6. Redemption at the Option of the Company.
(A) The Series B Preferred Stock shall be redeemable, in whole or in part,
at the option of the Company at any time after December 20, 1991, or at any
time after the date of issuance, if permitted by paragraph (D) of this Section
6, at the following redemption prices per share:
<TABLE>
<CAPTION>
During the Twelve-
Month Period Price Per
Beginning December 20 Share
--------------------- ---------
<S> <C>
1988 .......................................... $ 657.00
1989 .......................................... $ 651.30
1990 .......................................... $ 645.60
1991 .......................................... $ 639.90
1992 .......................................... $ 634.20
1993 .......................................... $ 628.50
1994 .......................................... $ 622.80
1995 .......................................... $ 617.10
1996 .......................................... $ 611.40
1997 .......................................... $ 605.70
</TABLE>
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<PAGE>
and thereafter at $600 per share, plus, in each case, an amount equal to all
accrued and unpaid dividends thereon to the date fixed for redemption. Payment
of the redemption price shall be made by the Company in cash or shares of
Common Stock, or a combination thereof, as permitted by paragraph (F) of this
Section 6. From and after the date fixed for redemption, dividends on shares
of Series B Preferred Stock called for redemption will cease to accrue, such
shares will no longer be deemed to be outstanding and all rights in respect of
such shares of the Company shall cease, except the right to receive the
redemption price. If less than all of the outstanding shares of Series B
Preferred Stock are to be redeemed, the Company shall either redeem a portion
of the shares of each holder determined pro rata based on the number of shares
held by each holder or shall select the shares to be redeemed by lot, as may be
determined by the Board of Directors of the Company.
(B) Unless otherwise required by law, notice of redemption will be sent to
the holders of Series B Preferred Stock at the address shown on the books of
the Company or any transfer agent for the Series B Preferred Stock by
first-class mail, postage prepaid, mailed not less than twenty (20) days nor
more than sixty (60) days prior to the redemption date. Each such notice shall
state: (i) the redemption date; (ii) the total number of shares of the Series B
Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the conversion rights of the shares to be redeemed,
the period within which conversion rights may be exercised, and the Conversion
Price and number of shares of Common Stock issuable upon conversion of a share
of Series B Preferred Stock at the time. Upon surrender of the certificate for
any shares so called for redemption and not previously converted (properly
endorsed or assigned for transfer, if the Board of Directors of the Company
shall so require and the notice shall so state), such shares shall be redeemed
by the Company at the date fixed for redemption and at the redemption price set
forth in this Section 6.
(C) In the event of a change in the federal tax law of the United States of
America which has the effect of precluding the Company from claiming any of the
tax deductions for dividends paid on the Series B Preferred Stock when such
dividends are used as provided under Section 404(k) (2) of the Internal Revenue
Code of 1986, as amended and in effect on the date shares of Series B Preferred
Stock are initially issued, the Company may, in its sole discretion and
notwithstanding anything to the contrary in paragraph (A) of this Section 6,
elect to redeem any or all of such shares for the amount payable in respect of
the shares upon liquidation of the Company pursuant to Section 4 hereof.
(D) Notwithstanding anything to the contrary in paragraph (A) of this
Section 6, the Company may elect to redeem any or all of the shares of Series B
Preferred Stock at any time on or prior to December 20, 1991, on the terms and
conditions set forth in paragraphs (A) and (B) of this Section 6, if the last
reported sales price, regular way, of a share of Common Stock, as reported on
the New York Stock Exchange Composite Tape or, if the Common Stock is not
listed or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which such stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or, if Common Stock is not quoted on such National Market System, the average
of the closing bid and asked prices in the over-the-counter market as reported
by NASDAQ, for at least twenty (20) trading days within a period of thirty (30)
consecutive trading days ending within five (5) days of the notice of
redemption, equals or exceeds one hundred fifty percent (150%) of the
Conversion Price (giving effect in making such calculation to any adjustments
required by Section 9 hereof).
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<PAGE>
(E) In the event that the Plan is terminated in accordance with its terms,
and notwithstanding anything to the contrary in paragraph (A) of this Section
6, the Company shall, as soon thereafter as practicable, call for redemption
all then outstanding shares of Series B Preferred Stock for the amount payable
in respect of the shares upon liquidation of the Company pursuant to Section 4
hereof.
(F) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series B Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares of Common Stock to be valued for such purposes at their Fair Market
Value (as defined in paragraph (G) of Section 9 hereof).
Section 7. Other Redemption Rights.
Shares of Series B Preferred Stock shall be redeemed by the Company for
cash or, if the Company so elects, in shares of Common Stock, or a combination
of such shares and cash, any such shares of Common Stock to be valued for such
purpose as provided by paragraph (F) of Section 6, at a redemption price of
$600 per share plus accrued and unpaid dividends thereon to the date fixed for
redemption, at the option of the holder, at any time and from time to time
upon notice to the Company given not less than five (5) business days prior to
the date fixed by the holder in such notice for such redemption, upon
certification by such holder to the Company of the following events: (i) when
and to the extent necessary for such holder to provide for distributions
required to be made to participants under, or to satisfy an investment election
provided to participants in accordance with, the Plan, or any successor plan;
(ii) when and to the extent necessary for such holder to make any payments of
principal, interest or premium due and payable (whether as scheduled or upon
acceleration) under the Loan Agreement among the Trustee, certain banking
parties thereto (collectively, the "Banks") and Chase Manhattan Bank (National
Association), as agent for the Banks or any indebtedness incurred by the holder
for the benefit of the Plan; or (iii) in the event that the Plan is not
initially determined by the Internal Revenue Service to be qualified within the
meaning of Sections 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986,
as amended.
Section 8. Consolidation, Merger, etc.
(A) In the event that the Company shall consummate any consolidation or
merger or similar business combination, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting
corporation (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series B Preferred Stock within the
meaning of Section 409(l) of the Internal Revenue Code of 1986, as amended, and
Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provisions of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, the shares of Series B Preferred
Stock of such holder shall, in connection with such consolidation, merger or
similar business combination, be assumed by and shall become preferred stock of
such successor or resulting corporation, having in respect of such corporation,
insofar as possible, the same powers, preferences and relative, participating,
optional or other special rights (including the redemption rights provided by
Sections 6, 7 and 8 hereof), and the qualifications, limitations or
restrictions thereon, that the Series B Preferred Stock had immediately prior
to such transaction, except that after such transaction each share of the
Series B Preferred Stock shall be convertible, otherwise on the terms and
conditions provided by Section 5 hereof, into the number and kind of qualifying
employer securities so receivable by a holder of the number of shares of Common
Stock into which such shares of Series B Preferred Stock could have been
converted immediately prior to such transaction; provided, however, that if
by virtue of the structure of such transaction, a holder of Common Stock is
required to make an election with respect to the nature and kind of
consideration to be received in such transaction, which election cannot
practicably be made by the holders of the Series B Preferred Stock, then the
shares of Series B Preferred Stock shall, by virtue of such transaction and on
the same terms as apply to the holders of Common Stock, be converted into or
exchanged for the aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of shares of Common
Stock into which such shares of Series B Preferred Stock could have been
converted immediately prior to such transaction if such holder of Common Stock
failed to exercise any rights of election to receive any kind or amount of
stock, securities, cash or other property (other than such qualifying employer
securities and a cash payment, if applicable, in lieu of fractional shares)
receivable upon such transaction (provided that, if the kind or amount of
qualifying employer securities receivable upon such transaction is not the same
for each non-electing share, then the kind and amount so receivable upon such
transaction for each non-electing share shall be the kind and amount so
receivable per share by the plurality of the non-electing shares). The rights
of the Series B Preferred Stock as preferred stock of such successor or
resulting corporation shall successively be subject to adjustments pursuant to
Section 9 hereof after any such transaction as nearly equivalent as practicable
to the adjustment provided for by such section prior to such transaction. The
Company shall not consummate any such merger, consolidation or similar
transaction unless all then outstanding shares of Series B Preferred Stock
shall be assumed and authorized by the successor or resulting corporation as
aforesaid.
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<PAGE>
(B) In the event that the Company shall consummate any consolidation or
merger or similar business combination, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such consideration which
is constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu
of fractional shares, outstanding shares of Series B Preferred Stock shall,
without any action on the part of the Company or any holder thereof (but
subject to paragraph (C) of this Section 8), be automatically converted by
virtue of such merger, consolidation or similar transaction immediately prior
to such consummation into the number of shares of Common Stock into which such
shares of Series B Preferred Stock could have been converted at such time so
that each share of Series B Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of Common Stock, be
converted into or exchanged for the aggregate amount of stock, securities, cash
or other property (payable in like kind) receivable by a holder of the number
of shares of Common Stock into which such shares of Series B Preferred Stock
could have been converted immediately prior to such transaction; provided,
however, that if by virtue of the structure of such transaction, a holder of
Common Stock is required to make an election with respect to the nature and
kind of consideration to be received in such transaction, which election cannot
practicably be made by the holders of the Series B Preferred Stock, then the
shares of Series B Preferred Stock shall, by virtue of such transaction and on
the same terms as apply to the holders of Common Stock, be converted into or
exchanged for the aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of shares of Common
Stock into which such shares of Series B Preferred Stock could have been
converted immediately prior to such transaction if such holder of Common Stock
failed to exercise any rights of election as to the kind or amount of stock,
securities, cash or other property receivable upon such transaction (provided
that, if the kind or amount of stock, securities, cash or other property
receivable upon such transaction is not the same for each non-electing share,
then the kind and amount of stock, securities, cash or other property
receivable upon such transaction for each non-electing share shall be the kind
and amount so receivable per share by a plurality of the non-electing shares).
(C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar business combination described in
paragraph (B) of this Section 8, then the Company shall as soon as practicable
thereafter (and in any event at least ten (10) business days before
consummation of such transaction) give notice of such agreement and the
material terms thereof to each holder of Series B Preferred Stock and each such
holder shall have the right to elect, by written notice to the Company, to
10
<PAGE>
receive, upon consummation of such transaction (if and when such transaction is
consummated), from the Company or the successor of the Company, in redemption
and retirement of such Series B Preferred Stock, a cash payment equal to the
amount payable in respect of shares of Series B Preferred Stock upon
liquidation of the Company pursuant to Section 4 thereof. No such notice of
redemption shall be effective unless given to the Company prior to the close of
business on the fifth business day prior to consummation of such transaction,
unless the Company or the successor of the Company shall waive such prior
notice, but any notice of redemption so given prior to such time may be
withdrawn by notice of withdrawal given to the Company prior to the close of
business on the fifth business day prior to consummation of such transaction.
Section 9. Anti-Dilution Adjustments.
(A) In the event the Company shall, at any time or from time to time while
any of the shares of the Series B Preferred Stock are outstanding, (i) pay a
dividend or make a distribution in respect of the Common Stock in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
in each case whether by reclassification of shares, recapitalization of the
Company (including a recapitalization effected by a merger or consolidation to
which Section 8 hereof does not apply) or otherwise, the Conversion Price in
effect immediately prior to such action shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately before such event, and the denominator
of which is the number of shares of Common Stock outstanding immediately after
such event. An adjustment made pursuant to this paragraph 9(A) shall be given
effect, upon payment of such a dividend or distribution, as of the record date
for the determination of stockholders entitled to receive such dividend or
distribution (on a retroactive basis) and in the case of a subdivision or
combination shall become effective immediately as of the effective date
thereof.
(B) In the event that the Company shall, at any time or from time to time
while any of the shares of Series B Preferred Stock are outstanding, issue to
holders of shares of Common Stock as a dividend or distribution, including by
way of a reclassification of shares or a recapitalization of the Company, any
right or warrant to purchase shares of Common Stock (but not including as such
a right or warrant any security convertible into or exchangeable for shares of
Common Stock) at a purchase price per share less than the Fair Market Value
(as hereinafter defined) of a share of Common Stock on the date of issuance of
such right or warrant, then, subject to the provisions of paragraphs (E) and
(F) of this Section 9, the Conversion Price shall be adjusted by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately before such issuance of
rights or warrants plus the number of shares of Common Stock which could be
purchased at the Fair Market Value of a share of Common Stock at the time of
such issuance for the maximum aggregate consideration payable upon exercise in
full of all such rights or warrants, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately before such issuance
of rights or warrants plus the maximum number of shares of Common Stock that
could be acquired upon exercise in full of all such rights and warrants.
(C) In the event the Company shall, at any time or from time to time while
any of the shares of Series B Preferred Stock are outstanding, issue, sell or
exchange shares of Common Stock (other than pursuant to any right or warrant
to purchase or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of Common
Stock) and other than pursuant to any employee or director incentive or benefit
plan or arrangement, including any employment, severance or consulting
agreement, of the Company or any subsidiary of the Company heretofore or
hereafter adopted) for a consideration having a Fair Market Value, on the date
of such issuance, sale or exchange, less than the Fair Market Value of such
shares on the date of issuance, sale or exchange, then, subject to the
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provisions of paragraphs (E) and (F) of this Section 9, the Conversion Price
shall be adjusted by multiplying such Conversion Price by the fraction the
numerator of which shall be the sum of (i) the Fair Market Value of all the
shares of Common Stock outstanding on the day immediately preceding the first
public announcement of such issuance, sale or exchange plus (ii) the Fair
Market Value of the consideration received by the Company in respect of such
issuance, sale or exchange of shares of Common Stock, and the denominator of
which shall be the product of (a) the Fair Market Value of a share of Common
Stock on the day immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (b) the sum of the number of shares
of Common Stock outstanding on such day plus the number of shares of Common
Stock so issued, sold or exchanged by the Company. In the event the Company
shall, at any time or from time to time while any shares of Series B Preferred
Stock are outstanding, issue, sell or exchange any right or warrant to purchase
or acquire shares of Common Stock (including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock), other
than any such issuance to holders of shares of Common Stock as a dividend or
distribution (including by way of a reclassification of shares or a
recapitalization of the Company) and other than pursuant to any employee or
director incentive or benefit plan or arrangement (including any employment,
severance or consulting agreement) of the Company or any subsidiary of the
Company heretofore or hereafter adopted, for a consideration having a Fair
Market Value, on the date of such issuance, sale or exchange, less than the
Non-Dilutive Amount (as hereinafter defined), then, subject to the provisions
of paragraphs (E) and (F) of this Section 9, the Conversion Price shall be
adjusted by multiplying such Conversion Price by a fraction the numerator of
which shall be the sum of (i) the Fair Market Value of all the shares of
Common Stock outstanding on the day immediately preceding the first public
announcement of such issuance, sale or exchange plus (ii) the Fair Market
Value of the consideration received by the Company in respect of such issuance,
sale or exchange of such right or warrant plus (iii) the Fair Market Value at
the time of such issuance of the consideration which the Corporation would
receive upon exercise in full of all such rights or warrants, and the
denominator of which shall be the product of (a) the Fair Market Value of a
share of Common Stock on the day immediately preceding the first public
announcement of such issuance, sale or exchange multiplied by (b) the sum of
the number of shares of Common Stock outstanding on such day plus the maximum
number of shares of Common Stock which could be acquired pursuant to such right
or warrant at the time of the issuance, sale or exchange of such right or
warrant (assuming shares of Common Stock could be acquired pursuant to such
right or warrant at such time).
(D) In the event the Company shall, at any time or from time to time while
any of the shares of Series B Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Company (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 8
hereof does not apply) or effect a Pro Rata Repurchase (as hereinafter defined)
of Common Stock, the Conversion Price in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs
(E) and (F) of this Section 9, be adjusted by multiplying such Conversion
Price by the fraction the numerator of which is (i) the product of (x) the
number of shares of Common Stock outstanding immediately before such
Extraordinary Distribution or Pro Rata Repurchase multiplied by (y) the Fair
Market Value of a share of Common Stock on the day before the ex-dividend date
with respect to an Extraordinary Distribution which is paid in cash and on the
distribution date with respect to an Extraordinary Distribution which is paid
other than in cash, or on the applicable expiration date (including all
extensions hereof) of any tender offer which is a Pro Rata Repurchase, or on
the date of purchase with respect to any Pro Rata Repurchase which is not a
tender offer, as the case may be, minus (ii) the Fair Market Value of the
Extraordinary Distribution or the aggregate purchase price of the Pro Rata
Repurchase, as the case may be, and the denominator of which shall be the
product of (a) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Company multiplied by (b) the Fair Market Value of a share of Common Stock on
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the day before the ex-dividend date with respect to an Extraordinary
Distribution which is paid in cash and on the distribution date with respect
to an Extraordinary Distribution which is paid other than in cash, or on the
applicable expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase or on the date of purchase with respect to
any Pro Rata Repurchase which is not a tender offer, as the case may be. The
Company shall send each holder of Series B Preferred Stock (i) notice of its
intent to make any dividend or distribution and (ii) notice of any offer by the
Company to make a Pro Rata Repurchase, in each case at the same time as, or
as soon as practicable after, such offer is first communicated (including by
announcement of a record date in accordance with the rules of any stock
exchange on which the Common Stock is listed or admitted to trading) to holders
of Common Stock. Such notice shall indicate the intended record date and the
amount and nature of such dividend or distribution, or the number of shares
subject to such offer for a Pro Rata Repurchase and the purchase price payable
by the Company pursuant to such offer, as well as the Conversion Price and the
number of shares of Common Stock into which a share of Series B Preferred Stock
may be converted at such time.
(E) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make any adjustment to the Conversion Price unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Conversion Price. Any lesser adjustment shall be carried forward
and shall be made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one
percent (1%) in the Conversion Price.
(F) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an adjustment to the Conversion Price
pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Company shall consider whether such action is of such a nature that an
adjustment to the Conversion Price should equitably be made in respect of such
transaction. If in such case the Board of Directors of the Company determines
that an adjustment to the Conversion Price should be made, an adjustment shall
be made effective as of such date, as determined by the Board of Directors of
the Company. The determination of the Board of Directors of the Company as to
whether an adjustment to the Conversion Price should be made pursuant to the
foregoing provisions of this paragraph 9(F), and, if so, as to what adjustment
should be made and when, shall be final and binding on the Company and all
stockholders of the Company. The Company shall be entitled to make such
additional adjustments in the Conversion Price, in addition to those required
by the foregoing provisions of this Section 9, as shall be necessary in order
that any dividend or distribution in shares of capital stock of the Company,
subdivision, reclassification or combination of shares of stock of the Company
or any recapitalization of the Company shall not be taxable to the holders of
the Common Stock.
(G) For purposes of this Resolution, the following definitions shall apply:
"Business Day" shall mean each day that is not a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Company or any other
issuer for any day shall mean the last reported sales price, regular way, or,
in the event that no sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in either case as reported on the
New York Stock Exchange Composite Tape or, if such security is not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on
the NASDAQ National Market System or, if such security is not quoted on such
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National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors of the
Company or a committee thereof, in each case, on each trading day during the
Adjustment Period. "Adjustment Period" shall mean the period of five (5)
consecutive trading days preceding, and including, the date as of which the
Fair Market Value of a security is to be determined. The "Fair Market Value" of
any security which is not publicly traded or of any other property shall mean
the fair value thereof as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors of the Company or a committee
thereof, or, if no such investment banking or appraisal firm is in the good
faith judgment of the Board of Directors or such committee available to make
such determination, as determined in good faith by the Board of Directors of
the Company or such committee.
"Extraordinary Distribution" shall mean any dividend or other distribution
to holders of Common Stock (effected while any of the shares of Series B
Preferred Stock are outstanding) (i) of cash, where the aggregate amount of
such cash dividend or distribution together with the amount of all cash
dividends and distributions made during the preceding period of 12 months, when
combined with the aggregate amount of all Pro Rata Repurchases (for this
purpose, including only that portion of the aggregate purchase price of such
Pro Rata Repurchase which is in excess of the Fair Market Value of the Common
Stock repurchased as determined on the applicable expiration date (including
all extensions thereof) of any tender offer or exchange offer which is a Pro
Rata Repurchase, or the date of purchase with respect to any other Pro Rata
Repurchase which is not a tender offer or exchange offer made during such
period), exceeds twelve and one-half percent (12 1/2%) of the aggregate Fair
Market Value of all shares of Common Stock outstanding on the day before the
ex-dividend date with respect to such Extraordinary Distribution which is paid
in cash and on the distribution date with respect to an Extraordinary
Distribution which is paid other than in cash, and/or (ii) of any shares of
capital stock of the Company (other than shares of Common Stock), other
securities of the Company (other than securities of the type referred to in
paragraph (B) or (C) of this Section 9), evidences of indebtedness of the
Company or any other person or any other property (including shares of any
subsidiary of the Company) or any combination thereof. The Fair Market Value of
an Extraordinary Distribution for purposes of paragraph (D) of this Section 9
shall be equal to the sum of the Fair Market Value of such Extraordinary
Distribution plus the amount of any cash dividends which are not Extraordinary
Distributions made during such 12-month period and not previously included in
the calculation of an adjustment pursuant to paragraph (D) of this Section 9.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Company or any other issuer which
are publicly traded, the average of the Current Market Prices of such shares or
securities for each day of the Adjustment Period. "Non-Dilutive Amount" in
respect of an issuance, sale or exchange by the Corporation of any right or
warrant to purchase or acquire shares of Common Stock (including any security
convertible into or exchangeable for shares of Common Stock) shall mean the
remainder of (i) the product of the Fair Market Value of a share of Common
Stock on the day preceding the first public announcement of such issuance, sale
or exchange multiplied by the maximum number of shares of Common Stock which
could be acquired on such date upon the exercise in full of such rights and
warrants (including upon the conversion or exchange of all such convertible or
exchangeable securities), whether or not exercisable (or convertible or
exchangeable) at such date, minus (ii) the aggregate amount payable pursuant to
such right or warrant to purchase or acquire such maximum number of shares of
Common Stock; provided, however, that in no event shall the Non-Dilutive Amount
be less than zero. For purposes of the foregoing sentence, in the case of a
security convertible into or exchangeable for shares of Common Stock, the
amount payable pursuant to a right or warrant to purchase or acquire shares of
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Common Stock shall be the Fair Market Value of such security on the date of the
issuance, sale or exchange of such security by the Company.
"Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by
the Company or any subsidiary thereof, whether for cash, shares of capital
stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property
(including shares of a subsidiary of the Company), or any combination thereof,
effected while any of the shares of Series B Preferred Stock are outstanding,
pursuant to any tender offer or exchange offer subject to Section 13(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no purchase
of shares by the Company, or any subsidiary thereof made in open market
transactions shall be deemed a Pro Rata Repurchase. For purposes of this
paragraph 9(G), shares shall be deemed to have been purchased by the Company
or any subsidiary thereof "in open market transactions" if they have been
purchased substantially in accordance with the requirements of Rule 10b-18 as
in effect under the Exchange Act, on the date shares of Series B Preferred
Stock are initially issued by the Company or on such other terms and conditions
as the Board of Directors of the Company or a committee thereof shall have
determined are reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.
(H) Whenever an adjustment to the Conversion Price and the related voting
rights of the Series B Preferred Stock is required pursuant to this Resolution,
the Company shall forthwith place on file with the transfer agent for the
Common Stock and the Series B Preferred Stock, and with the Secretary of the
Company, a statement signed by two officers of the Company stating the adjusted
Conversion Price determined as provided herein and the resulting conversion
ratio, and the voting rights (as appropriately adjusted), of the Series B
Preferred Stock. Such statement shall set forth in reasonable detail such facts
as shall be necessary to show the reason and the manner of computing such
adjustment, including any determination of Fair Market Value involved in such
computation. Promptly after each adjustment to the Conversion Price and the
related voting rights of the Series B Preferred Stock, the Company shall mail a
notice thereof and of the then prevailing conversion ratio to each holder of
shares of the Series B Preferred Stock.
Section 10. Ranking; Attributable Capital and Adequacy of Surplus; Retirement
of Shares.
(A) The Series B Preferred Stock shall rank senior to the Common Stock as
to the payment of dividends and the distribution of assets on liquidation,
dissolution and winding up of the Company, and, unless otherwise provided in
the Restated Certificate of Incorporation of the Company, as the same may be
amended, or a certificate of designations relating to a subsequent series of
Preferred Stock, par value $1.00 per share, of the Company, the Series B
Preferred Stock shall rank junior to all series of the Company's Preferred
Stock, par value $1.00 per share, as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up.
(B) In addition to any vote of stockholders required by law, the vote of
the holders of a majority of the outstanding shares of Series B Preferred Stock
shall be required to increase the par value of the Common Stock or otherwise
increase the capital of the Company allocable to the Common Stock for the
purpose of the Delaware General Corporation Law (the "DGCL") if, as a result
thereof, the surplus of the Company for purposes of the DGCL would be less than
the amount of Preferred Dividends that would accrue on the then outstanding
shares of Series B Preferred Stock during the following three years.
(C) Any shares of Series B Preferred Stock acquired by the Company by
reason of the conversion or redemption of such shares as provided by this
Resolution, or otherwise so acquired, shall be retired as shares of Series B
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Preferred Stock and restored to the status of authorized but unissued shares of
Preferred Stock, par value $1.00 per share, of the Company, undesignated as to
series, and may thereafter be reissued as part of a new series of such
Preferred Stock as permitted by law.
Section 11. Miscellaneous.
(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt
thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms of this Resolution) with postage prepaid,
addressed: (i) if to the Company, to its office at 2000 Westchester Avenue,
White Plains, New York 10650 (Attention: Secretary) or to the transfer agent
for the Series B Preferred Stock, or other agent of the Company designated as
permitted by this Resolution or (ii) if to any holder of the Series B Preferred
Stock or Common Stock, as the case may be, to such holder at the address of
such holder as listed in the stock record books of the Company (which may
include the records of any transfer agent for the Series B Preferred Stock or
Common Stock, as the case may be) or (iii) to such other address as the Company
or any such holder, as the case may be, shall have designated by notice
similarly given.
(B) The term "Common Stock" as used in this Resolution means the Company's
Common Stock, par value $6.25 per share, as the same exists at the date of
filing of a certificate of designations relating to Series B Preferred Stock or
any other class of stock resulting from successive changes or reclassifications
of such Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the event that, at
any time as a result of an adjustment made pursuant to Section 9 of this
Resolution, the holder of any share of the Series B Preferred Stock upon
thereafter surrendering such shares for conversion, shall become entitled to
receive any shares or other securities of the Company other than shares of
Common Stock, the Conversion Price in respect of such other shares or
securities so receivable upon conversion of shares of Series B Preferred Stock
shall thereafter be adjusted, and shall be subject to further adjustment from
time to time, in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Stock contained in Section 9 hereof, and
the provisions of Sections 1 through 8, 10 and 11 of this Resolution with
respect to the Common Stock shall apply on like or similar terms to any such
other shares or securities.
(C) The Company shall pay any and all stock transfer and documentary stamp
taxes that may be payable in respect of any issuance or delivery of shares of
Series B Preferred Stock or shares of Common Stock or other securities issued
on account of Series B Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series B Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series B Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any
payment to any person with respect to any such shares or securities other than
a payment, to the registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the person otherwise
entitled to such issuance, delivery or payment 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 or is not payable.
(D) In the event that a holder of shares of Series B Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series B Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series B
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Preferred Stock as shown on the records of the Company and to send the
certificate or certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Company.
(E) Unless otherwise provided in the Restated Certificate of Incorporation,
as the same may be amended, of the Company, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution, liquidation
or winding-up or otherwise made upon the shares of Series B Preferred Stock and
any other stock ranking on a parity with the Series B Preferred Stock with
respect to such dividend or distribution shall be pro rata, so that amounts
paid per share on the Series B Preferred Stock and such other stock shall in
all cases bear to each other the same ratio that the required dividends,
distributions or payments, as the case may be, then payable per share on the
shares of the Series B Preferred Stock and such other stock bear to each other.
(F) The Company may appoint, and from time to time discharge and change, a
transfer agent for the Series B Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Company shall send notice thereof by
first-class mail postage prepaid, to each holder or record of Series B
Preferred Stock.
Series D Junior Participating Preferred Stock
Section 1. Designation and Amount.
The shares of such series shall be designated as "Series D Junior
Participating Preferred Stock" and the number of shares constituting such
series shall be 3,000,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series D Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series D Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash
on the 15th day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series D Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $5.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of common stock, par value $6.25 per share, of the Company (the "Common
Stock") or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series D Junior Participating Preferred Stock. In the
event the Company shall at any time after March 16, 1989 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series D Junior Participating
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
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(B) The Company shall declare a dividend or distribution on the Series D
Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $5.00 per share
on the Series D Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series D Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series D Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of
Series D Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series D Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series D Junior Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than 45 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights.
The holders of shares of Series D Junior Participating Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series D Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Company. In the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of Series D
Junior Participating Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series D Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Company.
(C) If at the time of any annual meeting of stockholders for the election
of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of preferred stock are in default,
the number of directors constituting the Board of Directors of the Company
shall be increased by two. The holders of record of the Series D Junior
Participating Preferred Stock, voting separately as a class with the holders of
shares of any one or more other series of preferred stock upon which like
voting rights have been conferred, shall be entitled at said meeting of
stockholders (and at each subsequent annual meeting of stockholders), unless
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all dividends in arrears have been paid or declared and set apart for payment
prior thereto, to vote for the election of two directors of the Company, the
holders of any Series D Junior Participating Preferred Stock being entitled to
cast 100 votes per share of Series D Junior Participating Preferred Stock, with
the remaining directors of the Company to be elected by the holders of shares
of any other class or classes or series of stock entitled to vote therefor.
Until the default in payments of all dividends which permitted the election of
said directors shall cease to exist, any director who shall have been so
elected pursuant to the next preceding sentence may be removed at any time,
either with or without cause, only by the affirmative vote of the holders of
the shares at the time entitled to cast a majority of the votes entitled to be
cast for the election of any such director at a special meeting of such holders
called for that purpose, and any vacancy thereby created may be filled by the
vote of such holders. If and when such default shall cease to exist, the
holders of the Series D Junior Participating Preferred Stock and the holders
of shares of any one or more series of preferred stock upon which like voting
rights have been conferred shall be divested of the foregoing special voting
rights, subject to revesting in the event of each and every subsequent like
default in payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been elected
directors pursuant to said special voting rights shall forthwith terminate, and
the number of directors constituting the Board of Directors shall be reduced
by two.
(D) Except as set forth herein, holders of Series D Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) In the event that full cumulative dividends on the Series D Junior
Participating Preferred Stock have not been declared and paid or set apart for
payment when due, the Company shall not declare or pay or set apart for
payment any dividends or make any other distributions on, or make any payment
on account of the purchase, redemption or other retirement of any other class
of stock or series thereof of the Company ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding-up of the
Company, junior to the Series D Junior Participating Preferred Stock until full
cumulative dividends on the Series D Junior Participating Preferred Stock shall
have been paid or declared and set apart for payment; provided, however, that
the foregoing shall not apply to (i) any dividend payable solely in any shares
of any stock ranking, as to dividends and as to distributions in the event of a
liquidation, dissolution or winding-up of the Company, junior to the Series D
Junior Participating Preferred Stock or (ii) the acquisition of shares of any
stock ranking, as to dividends or as to distributions in the event of a
liquidation, dissolution or winding-up of the Company, junior to the Series D
Junior Participating Preferred Stock in exchange solely for shares of any other
stock ranking, as to dividends and as to distributions in the event of a
liquidation, dissolution or winding-up of the Company, junior to the Series D
Junior Participating Preferred Stock.
(B) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company
unless the Company could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares.
Any shares of Series D Junior Participating Preferred Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
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<PAGE>
may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Company, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series D Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series D Junior Participating Preferred
Stock shall have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment (the "Series D Liquidation Preference"). Following the
payment of the full amount of the Series D Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series D
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series D
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii) immediately above being referred to as the "Adjustment Number"). Following
the payment of the full amount of the Series D Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series D Junior
Participating Preferred Stock and Common Stock, respectively, holders of
Series D Junior Participating Preferred Stock and holders of shares of Common
Stock shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to one (1) with
respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series D Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series D Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Company shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc.
In case the Company shall enter into any consolidation, merger, combination
or other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of Series D Junior Participating Preferred Stock shall
at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Company shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
20
<PAGE>
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series D Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. Redemption.
The outstanding shares of Series D Junior Participating Preferred Stock may
be redeemed at the option of the Board of Directors as a whole, or in part, at
any time, or from time to time, at a cash price per share equal to the product
of the Adjustment Number times the Average Market Value (as such term is
hereinafter defined) of the Common Stock on the date of mailing of the notice
of redemption, plus all dividends which on the redemption date have accrued on
the shares to be redeemed and have not been paid, or declared and a sum
sufficient for the payment thereof set apart, without interest. The "Average
Market Value" as of a particular date is the average of the closing sale prices
of the Common Stock during the 10 consecutive Trading Day period immediately
preceding such date on the Composite Tape for New York Stock Exchange Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934, as amended, on which such stock is listed, or, if such
stock is not listed on any such exchange, the average of the closing sale
prices with respect to a share of Common Stock during such 10-day period, as
quoted on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the fair market value of the Common Stock as determined by the Board
of Directors in good faith. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Common Stock is listed
or admitted to trading is open for the transaction of business or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking
institutions in the State of New York are not authorized or obligated by law or
executive order to close.
Section 9. Ranking.
The Series D Junior Participating Preferred Stock shall rank junior to the
Company's Series B ESOP Convertible Preferred Stock, and shall rank junior to
all other series of the Company's Preferred Stock unless the terms of any such
other series shall provide otherwise, as to the payment of dividends and the
distribution of assets.
Section 10. Amendment.
The Restated Certificate of Incorporation of the Company shall not be
further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series D Junior Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series D Junior
Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares.
Series D Junior Participating Preferred Stock may be issued in fractions of
a share which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series
D Junior Participating Preferred Stock.
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<PAGE>
Series F ESOP Convertible Preferred Stock
Section 1. Designation and Amount; Special Purpose Restricted Transfer Issue.
(A) The shares of such series shall be designated as "Series F ESOP
Convertible Preferred Stock" ("Series F Preferred Stock") and the number of
shares constituting such series shall be 67,796.61.
(B) Shares of Series F Preferred Stock shall be issued only to State Street
Bank and Trust Company, as a trustee (the "Trustee") of the Employees Savings
Plan of the Company (the "Plan"). All references to the holder of shares of
Series F Preferred Stock shall mean the Trustee or any successor trustee under
the Plan. In the event of any transfer of record ownership of shares of Series
F Preferred Stock to any person other than any successor trustee under the
Plan, the shares of Series F Preferred Stock so transferred, upon such transfer
and without any further action by the Company or the holder thereof, shall be
automatically converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of Series F Preferred Stock into shares
of Common Stock pursuant to Section 5 hereof and no such transferee shall have
any of the voting powers, preferences and relative, participating, optional or
special rights ascribed to shares of Series F Preferred Stock hereunder but,
rather, only the powers and rights pertaining to the Common Stock into which
such shares of Series F Preferred Stock shall be so converted. In the event of
such a conversion, the transferee of the shares of Series F Preferred Stock
shall be treated for all purposes as the record holder of the shares of Common
Stock into which such shares of Series F Preferred Stock have been
automatically converted as of the date of such transfer. Certificates
representing shares of Series F Preferred Stock shall bear a legend to reflect
the foregoing provisions. Notwithstanding the foregoing provisions of this
paragraph (B) of Section 1, shares of Series F Preferred Stock (i) may be
converted into shares of Common Stock as provided by Section 5 hereof and the
shares of Common Stock issued upon such conversion may be transferred by the
holder thereof as permitted by law and (ii) shall be redeemable by the Company
upon the terms and conditions provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series F Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Preferred Dividends") in an amount per
share equal to $64.53 per share per annum, and no more, payable semi-annually
in arrears, one-half on the 13th day of February and one-half on the 13th day
of August of each year (each a "Dividend Payment Date") commencing on August
13, 1990, to holders of record at the start of business on such Dividend
Payment Date. In the event that any Dividend Payment Date shall fall on any day
other than a "Business Day" (as hereinafter defined), the dividend payment due
on such Dividend Payment Date shall be paid on the Business Day immediately
preceding such Dividend Payment Date. Preferred Dividends shall begin to accrue
on outstanding shares of Series F Preferred Stock from the date of issuance of
such shares of Series F Preferred Stock. Preferred Dividends shall accrue on a
daily basis whether or not the Company shall have earnings or surplus at the
time, but Preferred Dividends accrued after issuance on the shares of Series F
Preferred Stock for any period less than a full semi-annual period between
Dividend Payment Dates shall be computed on the basis of a 360-day year of
30-day months. Accrued but unpaid Preferred Dividends shall cumulate as of the
Dividend Payment Date on which they first become payable, but no interest shall
accrue on accumulated but unpaid Preferred Dividends.
(B) So long as any shares of Series F Preferred Stock shall be outstanding,
no dividend shall be declared or paid or set apart for payment on any other
series of stock ranking on a parity with the Series F Preferred Stock as to
dividends, unless there shall also be or have been declared and paid or set
apart for payment on the Series F Preferred Stock, dividends for all dividend
payment periods of the Series F Preferred Stock ending on or before the
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<PAGE>
dividend payment date of such parity stock, ratably in proportion to the
respective amounts of dividends accumulated and unpaid through such dividend
period on the Series F Preferred Stock and accumulated and unpaid on such
parity stock through the dividend payment period on such parity stock next
preceding such dividend payment date. In the event that full cumulative
dividends on the Series F Preferred Stock have not been declared and paid or
set apart for payment when due, the Company shall not declare or pay or set
apart for payment any dividends or make any other distributions on, or make any
payment on account of the purchase, redemption or other retirement of any other
class of stock or series thereof of the Company ranking, as to dividends or as
to distributions in the event of a liquidation, dissolution or winding-up of
the Company, junior to the Series F Preferred Stock until full cumulative
dividends on the Series F Preferred Stock shall have been paid or declared and
set apart for payment; provided, however, that the foregoing shall not apply
to (i) any dividend payable solely in any shares of any stock ranking, as to
dividends and as to distributions in the event of a liquidation, dissolution or
winding-up of the Company, junior to the Series F Preferred Stock or (ii) the
acquisition of shares of any stock ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding-up of the
Company, junior to the Series F Preferred Stock in exchange solely for shares
of any other stock ranking, as to dividends and as to distributions in the
event of a liquidation, dissolution or winding-up of the Company, junior to the
Series F Preferred Stock.
Section 3. Voting Rights.
The holders of shares of Series F Preferred Stock shall have the following
voting rights:
(A) The holders of Series F Preferred Stock shall be entitled to vote on
all matters submitted to a vote of the stockholders of the Company, voting
together with the holders of Common Stock as one class. The holder of each
share of Series F Preferred Stock shall be entitled to a number of votes equal
to the number of shares of Common Stock into which such share of Series F
Preferred Stock could be converted on the record date for determining the
stockholders entitled to vote, rounded to the nearest one-tenth of a vote; it
being understood that whenever the "Conversion Price" (as defined in Section 5
hereof) is adjusted as provided in Section 9 hereof, the voting rights of the
Series F Preferred Stock shall also be similarly adjusted.
(B) Except as otherwise required by law or set forth herein, holders of
Series F Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for the taking of any corporate
action; provided, however, that the vote of at least 66 2/3% of the outstanding
shares of Series F Preferred Stock, voting separately as a series, shall be
necessary to adopt any alteration, amendment or repeal of any provision of the
Restated Certificate of Incorporation of the Company, as amended, or this
Resolution (including any such alteration, amendment or repeal effected by any
merger or consolidation in which the Company is the surviving or resulting
corporation), if such amendment, alteration or repeal would alter or change the
powers, preferences, or special rights of the shares of Series F Preferred
Stock so as to affect them adversely.
Section 4. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of Series F Preferred Stock shall be entitled to
receive out of assets of the Company which remain after satisfaction in full of
all valid claims of creditors of the Company and which are available for
payment to stockholders, and subject to the rights of the holders of any stock
of the Company ranking senior to or on a parity with the Series F Preferred
Stock in respect of distributions upon liquidation, dissolution or winding up
of the Company, before any amount shall be paid or distributed among the
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<PAGE>
holders of Common Stock or any other shares ranking junior to the Series F
Preferred Stock in respect of distributions upon liquidation, dissolution or
winding up of the Company, liquidating distributions in the amount of $737.50
per share, plus an amount equal to all accrued and unpaid dividends thereon to
the date fixed for distribution, and no more. If upon any liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Series F Preferred Stock and any other stock ranking as to any such
distribution on a parity with the Series F Preferred Stock are not paid in
full, the holders of the Series F Preferred Stock and such other stock shall
share ratably in any distribution of assets in proportion to the full
respective preferential amounts to which they are entitled. After payment of
the full amount to which they are entitled as provided by the foregoing
provisions of this paragraph 4(A), the holders of shares of Series F Preferred
Stock shall not be entitled to any further right or claim to any of the
remaining assets of the Company.
(B) Neither the merger or consolidation of the Company with or into any
other corporation, nor the merger or consolidation of any other corporation
with or into the Company, nor the sale, lease, exchange or other transfer of
all or any portion of the assets of the Company, shall be deemed to be a
dissolution, liquidation or winding up of the affairs of the Company for
purposes of this Section 4, but the holders of Series F Preferred Stock shall
nevertheless be entitled in the event of any such merger or consolidation to
the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, stating the payment date or dates when, and the
place or places where, the amounts distributable to holders of Series F
Preferred Stock in such circumstances shall be payable, shall be given by
first-class mail, postage prepaid, mailed not less than twenty (20) days prior
to any payment date stated therein, to the holders of Series F Preferred Stock,
at the address shown on the books of the Company or any transfer agent for the
Series F Preferred Stock.
Section 5. Conversion into Common Stock.
(A) A holder of shares of Series F Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of
such shares pursuant to Sections 6, 7 and 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock, initially at a conversion
rate equal to the ratio of $737.50 to the amount which initially shall be
$73.75 and which shall be adjusted as hereinafter provided (and, as so
adjusted, is hereinafter sometimes referred to as the "Conversion Price")
(that is, a conversion rate initially equivalent to ten shares of Common Stock
for each share of Series F Preferred Stock so converted, which is subject
to adjustment as the Conversion Price is adjusted as hereinafter provided).
(B) Any holder of shares of Series F Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender the certificate or
certificates representing the shares of Series F Preferred Stock being
converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Company or the offices of the transfer agent for the
Series F Preferred Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time be designated by
notice to the holders of the Series F Preferred Stock by the Company or the
transfer agent for the Series F Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series F Preferred Stock to be converted and the name or names in which such
holder wishes the certificates certificate or for Common Stock and for any
shares of Series F Preferred Stock not to be so converted to be issued and
(ii) the address to which such holder wishes delivery to be made of such new
certificates to be issued upon such conversion.
24
<PAGE>
(C) Upon surrender of a certificate representing a share or shares of
Series F Preferred Stock for conversion, the Company shall issue and send by
hand delivery (with receipt to be acknowledged) or by first-class mail, postage
prepaid, to the holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled upon conversion.
In the event that there shall have been surrendered a certificate or
certificates representing shares of Series F Preferred Stock, only part of
which are to be converted, the Company shall issue and deliver to such holder
or such holder's designee a new certificate or certificates representing the
number of shares of Series F Preferred Stock which shall not have been
converted.
(D) The issuance by the Company of shares of Common Stock upon a conversion
of shares of Series F Preferred Stock into shares of Common Stock made at the
option of the holder thereof shall be effective as of the earlier of (i) the
delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof or (ii)
the commencement of business on the second business day after the surrender of
the certificate or certificates for the shares of Series F Preferred Stock to
be converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto) as provided by this
Resolution. On and after the effective day of conversion, the person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock, but no allowance or adjustment shall be made in respect of
dividends payable to holders of Common Stock in respect of any period prior to
such effective date. The Company shall not be obligated to pay any dividends
which shall have been declared and shall be payable to holders of shares of
Series F Preferred Stock on a Dividend Payment Date if such Dividend Payment
Date for such dividend is subsequent to the effective date of conversion of
such shares.
(E) The Company shall not be obligated to deliver to holders of Series F
Preferred Stock any fractional share or shares of Common Stock issuable upon
any conversion of such shares of Series F Preferred Stock, but in lieu thereof
may make a cash payment in respect thereof in any manner permitted by law.
(F) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the conversion
of shares of Series F Preferred Stock as herein provided, free from any
preemptive rights, such number of shares of Common Stock as shall from time to
time be issuable upon the conversion of all the shares of Series F Preferred
Stock then outstanding. Nothing contained herein shall preclude the Company
from issuing shares of Common Stock held in its treasury upon the conversion of
shares of Series F Preferred Stock into Common Stock pursuant to the terms
hereof. The Company shall prepare and shall use its best efforts to obtain and
keep in force such governmental or regulatory permits or other authorizations
as may be required by law, and shall comply with all requirements as to
registration or qualification of the Common Stock, in order to enable the
Company lawfully to issue and deliver to each holder of record of Series F
Preferred Stock such number of shares of its Common Stock as shall from time to
time be sufficient to effect the conversion of all shares of Series F Preferred
Stock then outstanding and convertible into shares of Common Stock.
Section 6. Redemption At the Option of the Company.
(A) The Series F Preferred Stock shall be redeemable, in whole or in part, at
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<PAGE>
the option of the Company at any time after February 13, 1993, or at any time
after the date of issuance, if permitted by paragraph (D) of this Section 6,
at the following redemption prices per share:
<TABLE>
<CAPTION>
During the Twelve-Month Period Price Per
Beginning February 13 Share
______________________________ _________
<S> <C>
1990 ................................... $802.03
1991 ................................... $795.58
1992 ................................... $789.12
1993 ................................... $782.67
1994 ................................... $776.22
1995 ................................... $769.77
1996 ................................... $763.31
1997 ................................... $756.86
1998 ................................... $750.41
1999 ................................... $743.95
</TABLE>
and thereafter at $737.50 per share, plus, in each case, an amount equal to all
accrued and unpaid dividends thereon to the date fixed for redemption. Payment
of the redemption price shall be made by the Company in cash or shares of
Common Stock, or a combination thereof, as permitted by paragraph (F) of this
Section 6. From and after the date fixed for redemption, dividends on shares
of Series F Preferred Stock called for redemption will cease to accrue, such
shares will no longer be deemed to be outstanding and all rights in respect of
such shares of the Company shall cease, except the right to receive the
redemption price. If less than all of the outstanding shares of Series F
Preferred Stock are to be redeemed, the Company shall either redeem a portion
of the shares of each holder determined pro rata based on the number of shares
held by each holder or shall select the shares to be redeemed by lot, as may be
determined by the Board of Directors of the Company.
(B) Unless otherwise required by law, notice of redemption will be sent to
the holders of Series F Preferred Stock at the address shown on the books of
the Company or any transfer agent for the Series F Preferred Stock by
first-class mail, postage prepaid, mailed not less than twenty (20) days nor
more than sixty (60) days prior to the redemption date. Each such notice shall
state: (i) the redemption date; (ii) the total number of shares of the Series F
Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the conversion rights of the shares to be redeemed,
the period within which conversion rights may be exercised, and the Conversion
Price and number of shares of Common Stock issuable upon conversion of a share
of Series F Preferred Stock at the time. Upon surrender of the certificate for
any shares so called for redemption and not previously converted (properly
endorsed or assigned for transfer, if the Board of Directors of the Company
shall so require and the notice shall so state), such shares shall be redeemed
by the Company at the date fixed for redemption and at the redemption price set
forth in this Section 6.
(C) In the event of a change in the federal tax law of the United States of
America which has the effect of materially limiting the Company from claiming
any of the tax deductions for dividends paid on the Series F Preferred Stock
when such dividends are used as provided under Section 404(k)(2) of the
Internal Revenue Code of 1986, as amended and in effect on the date shares of
Series F Preferred Stock are initially issued, the Company may, in its sole
discretion and notwithstanding anything to the contrary in paragraph (A) of
this Section 6, elect to redeem any or all of such shares for the amount
payable in respect of the shares upon liquidation of the Company pursuant to
Section 4 hereof.
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<PAGE>
(D) Notwithstanding anything to the contrary in paragraph (A) of this
Section 6, the Company may elect to redeem any or all of the shares of Series F
Preferred Stock at any time on or prior to February 13, 1993 on the terms and
conditions set forth in paragraphs (A) and (B) of this Section 6, if the last
reported sales price, regular way, of a share of Common Stock, as reported on
the New York Stock Exchange Composite Tape or, if the Common Stock is not
listed or admitted to trading on the New York Stock Exchange, Inc. (the
"NYSE"), on the principal national securities exchange on which such stock is
listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, on the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") or, if Common Stock is not quoted on such National Market
System, the average of the closing bid and asked prices in the over-the-counter
market as reported by NASDAQ, for at least twenty (20) trading days within a
period of thirty (30) consecutive trading days ending within five (5) days of
the notice of redemption, equals or exceeds one hundred fifty percent (150%)
of the Conversion Price (giving effect in making such calculation to any
adjustments required by Section 9 hereof).
(E) In the event that shares of Series F Preferred Stock are held by an
employee benefit plan intended to qualify as an employee stock ownership plan
within the meaning of Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), and such plan does not so qualify, the Corporation may in
its sole discretion and notwithstanding anything to the contrary in paragraph
(A) of this Section 6, elect to redeem any or all of such shares of Series F
Preferred Stock for the amount payable in respect of the shares upon
liquidation of the Company pursuant to Section 4 hereof.
(F) In the event that the Plan is terminated or the employee stock
ownership plan component of the Plan pursuant to which the shares of Series F
Preferred Stock are then held by the Trustee is eliminated from the Plan in
accordance with its terms, and notwithstanding anything to the contrary in
paragraph (A) of this Section 6, the Company shall, as soon thereafter as
practicable, call for redemption all then outstanding shares of Series F
Preferred Stock for the amount payable in respect of the shares upon
liquidation of the Company pursuant to Section 4 hereof.
(G) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series F Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares of Common Stock to be valued for such purposes at their Fair Market
Value (as defined in paragraph (G) of Section 9 hereof).
Section 7. Other Redemption Rights.
Shares of Series F Preferred Stock shall be redeemed by the Company for
cash or, if the Company so elects, in shares of Common Stock, or a combination
of such shares and cash, any such shares of Common Stock to be valued for such
purpose as provided by paragraph (G) of Section 6, at a redemption price of
$737.50 per share plus accrued and unpaid dividends thereon to the date fixed
for redemption, at the option of the holder, at any time and from time to time
upon notice to the Company given not less than five (5) business days prior to
the date fixed by the holder in such notice for such redemption, upon
certification by such holder to the Company of the following events: (i) when
and to the extent necessary for such holder to provide for distributions
required to be made to participants under, or to satisfy an investment election
provided to participants in accordance with, the Plan, or any successor plan;
or (ii) in the event that the Plan is not initially determined by the Internal
Revenue Service to be qualified within the meaning of Sec. 401(a) of the Code
or the employee stock ownership plan component of the Plan is not initially
determined by the Internal Revenue Service to be qualified within the meaning
of Sec. Number 4975(e)(7) of the Code.
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Section 8. Consolidation, Merger, etc.
(A) In the event that the Company shall consummate any consolidation or
merger or similar business combination, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting
corporation (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series F Preferred Stock within the
meaning of Section 409(1) of the Code and Section 407(d)(5) of the Employee
Retirement Income Security Act of 1974, as amended, or any successor provisions
of law, and, if applicable, for a cash payment in lieu of fractional shares, if
any, the shares of Series F Preferred Stock of such holder shall, in connection
with such consolidation, merger or similar business combination, be assumed by
and shall become preferred stock of such successor or resulting corporation,
having in respect of such corporation, insofar as possible, the same powers,
preferences and relative, participating, optional or other special rights
(including the redemption rights provided by Sections 6, 7 and 8 hereof), and
the qualifications, limitations or restrictions thereon, that the Series F
Preferred Stock had immediately prior to such transaction, except that after
such transaction each share of the Series F Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by Section 5
hereof, into the number and kind of qualifying employer securities so
receivable by a holder of the number of shares of Common Stock into which such
shares of Series F Preferred Stock could have been converted immediately prior
to such transaction; provided, however, that if by virtue of the structure of
such transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by the holders of the
Series F Preferred Stock, then the shares of Series F Preferred Stock shall, by
virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in kind) receivable by a holder of
the number of shares of Common Stock into which such shares of Series F
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election to
receive any kind or amount of stock, securities, cash or other property (other
than such qualifying employer securities and a cash payment, if applicable, in
lieu of fractional shares) receivable upon such transaction (provided that, if
the kind or amount of qualifying employer securities receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount so receivable upon such transaction for each non-electing share shall be
the kind and amount so receivable per share by the plurality of the
non-electing shares). The rights of the Series F Preferred Stock as preferred
stock of such successor or resulting corporation shall successively be subject
to adjustments pursuant to Section 9 hereof after any such transaction as
nearly equivalent as practicable to the adjustment provided for by such section
prior to such transaction. The Company shall not consummate any such merger,
consolidation or similar transaction unless all then outstanding shares of
Series F Preferred Stock shall be assumed and authorized by the successor or
resulting corporation as aforesaid.
(B) In the event that the Company shall consummate any consolidation or
merger or similar business combination, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such consideration which
is constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series F Preferred Stock shall,
without any action on the part of the Company or any holder thereof (but
subject to paragraph (C) of this Section 8), be automatically converted by
virtue of such merger, consolidation or similar transaction immediately prior
to such consummation into the number of shares of Common Stock into which such
shares of Series F Preferred Stock could have been converted at such time so
that each share of Series F Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of Common Stock, be
converted into or exchanged for the aggregate amount of stock, securities, cash
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or other property (payable in like kind) receivable by a holder of the number
of shares of Common Stock into which such shares of Series F Preferred Stock
could have been converted immediately prior to such transaction; provided,
however, that if by virtue of the structure of such transaction, a holder of
Common Stock is required to make an election with respect to the nature and
kind of consideration to be received in such transaction, which election cannot
practicably be made by the holders of the Series F Preferred Stock, then the
shares of Series F Preferred Stock shall, by virtue of such transaction and on
the same terms as apply to the holders of Common Stock, be converted into or
exchanged for the aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of shares of Common
Stock into which such shares of Series F Preferred Stock could have been
converted immediately prior to such transaction if such holder of Common Stock
failed to exercise any rights of election as to the kind or amount of stock,
securities, cash or other property receivable upon such transaction (provided
that, if the kind or amount of stock, securities, cash or other property
receivable upon such transaction is not the same for each non-electing share,
then the kind and amount of stock, securities, cash or other property
receivable upon such transaction for each non-electing share shall be the kind
and amount so receivable per share by a plurality of the non-electing shares).
(C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar business combination described in
paragraph (B) of this Section 8, then the Company shall as soon as practicable
thereafter (and in any event at least ten (10) business days before
consummation of such transaction) give notice of such agreement and the
material terms thereof to each holder of Series F Preferred Stock and each such
holder shall have the right to elect, by written notice to the Company, to
receive, immediately prior to the consummation of such transaction (if and when
such transaction is consummated), from the Company or the successor of the
Company, in redemption and retirement of such Series F Preferred Stock, a cash
payment equal to the amount payable in respect of shares of Series F Preferred
Stock upon liquidation of the Company pursuant to Section 4 thereof. No such
notice of redemption shall be effective unless given to the Company prior to
the close of business on the fifth business day prior to consummation of such
transaction, unless the Company or the successor of the Company shall waive
such prior notice, but any notice of redemption so given prior to such time may
be withdrawn by notice of withdrawal given to the Company prior to the close of
business on the fifth business day prior to consummation of such transaction.
Section 9. Anti-Dilution Adjustments.
(A) In the event the Company shall, at any time or from time to time while
any of the shares of the Series F Preferred Stock are outstanding, (i) pay a
dividend or make a distribution in respect of the Common Stock in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
in each case whether by reclassification of shares, recapitalization of the
Company (including a recapitalization effected by a merger or consolidation to
which Section 8 hereof does not apply) or otherwise, the Conversion Price in
effect immediately prior to such action shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately before such event, and the denominator
of which is the number of shares of Common Stock outstanding immediately after
such event. An adjustment made pursuant to this paragraph 9(A) shall be given
effect, upon payment of such a dividend or distribution, as of the record date
for the determination of stockholders entitled to receive such dividend or
distribution (on a retroactive basis) and in the case of a subdivision or
combination shall become effective immediately as of the effective date
thereof.
(B) In the event that the Company shall, at any time or from time to time
while any of the shares of Series F Preferred Stock are outstanding, issue to
holders of shares of Common Stock as a dividend or distribution, including by
way of a reclassification of shares or a recapitalization of the Company, any
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right or warrant to purchase shares of Common Stock (but not including as such
a right or warrant any security convertible into or exchangeable for shares of
Common Stock) at a purchase price per share less than the Fair Market Value (as
hereinafter defined) of a share of Common Stock on the date of issuance of such
right or warrant, then, subject to the provisions of paragraphs (E) and (F) of
this Section 9, the Conversion Price shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights
or warrants plus the number of shares of Common Stock which could be purchased
at the Fair Market Value of a share of Common Stock at the time of such
issuance for the maximum aggregate consideration payable upon exercise in full
of all such rights or warrants, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately before such issuance
of rights or warrants plus the maximum number of shares of Common Stock that
could be acquired upon exercise in full of all such rights and warrants.
(C) In the event the Company shall, at any time or from time to time while
any of the shares of Series F Preferred Stock are outstanding, issue, sell or
exchange shares of Common Stock (other than pursuant to any right or warrant to
purchase or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of Common
Stock) and other than pursuant to any employee or director incentive or benefit
plan or arrangement, including any employment, severance or consulting
agreement, of the Company or any subsidiary of the Company heretofore or
hereafter adopted) for a consideration having a Fair Market Value, on the date
of such issuance, sale or exchange, less than the Fair Market Value of such
shares on the date of issuance, sale or exchange, then, subject to the
provisions of paragraphs (E) and (F) of this Section 9, the Conversion Price
shall be adjusted by multiplying such Conversion Price by the fraction the
numerator of which shall be the sum of (i) the Fair Market Value of all the
shares of Common Stock outstanding on the day immediately preceding the first
public announcement of such issuance, sale or exchange plus (ii) the Fair
Market Value of the consideration received by the Company in respect of such
issuance, sale or exchange of shares of Common Stock, and the denominator of
which shall be the product of (a) the Fair Market Value of a share of Common
Stock on the day immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (b) the sum of the number of shares
of Common Stock outstanding on such day plus the number of shares of Common
Stock so issued, sold or exchanged by the Company. In the event the Company
shall, at any time or from time to time while any shares of Series F Preferred
Stock are outstanding, issue, sell or exchange any right or warrant to purchase
or acquire shares of Common Stock (including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock), other
than any such issuance to holders of shares of Common Stock as a dividend or
distribution (including by way of a reclassification of shares or a
recapitalization of the Company) and other than pursuant to any employee or
director incentive or benefit plan or arrangement (including any employment,
severance or consulting agreement) of the Company or any subsidiary of the
Company heretofore or hereafter adopted, for a consideration having a Fair
Market Value, on the date of such issuance, sale or exchange, less than the
Non-Dilutive Amount (as hereinafter defined), then, subject to the provisions
of paragraphs (E) and (F) of this Section 9, the Conversion Price shall be
adjusted by multiplying such Conversion Price by a fraction the numerator of
which shall be the sum of (I) the Fair Market Value of all the shares of Common
Stock outstanding on the day immediately preceding the first public
announcement of such issuance, sale or exchange plus (II) the Fair Market Value
of the consideration received by the Company in respect of such issuance, sale
or exchange of such right or warrant plus (III) the Fair Market Value at the
time of such issuance of the consideration which the Company would receive upon
exercise in full of all such rights or warrants, and the denominator of which
shall be the product of (A) the Fair Market Value of a share of Common Stock on
the day immediately preceding the first public announcement of such issuance,
sale or exchange multiplied by (B) the sum of the number of shares of Common
Stock outstanding on such day plus the maximum number of shares of Common
Stock which could be acquired pursuant to such right or warrant at the time of
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the issuance, sale or exchange of such right or warrant (assuming shares of
Common Stock could be acquired pursuant to such right or warrant at such time).
(D) In the event the Company shall, at any time or from time to time while
any of the shares of Series F Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Company (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 8
hereof does not apply) or effect a Pro Rata Repurchase (as hereinafter defined)
of Common Stock, the Conversion Price in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs
(E) and (F) of this Section 9, be adjusted by multiplying such Conversion
Price by the fraction the numerator of which is (i) the product of (x) the
number of shares of Common Stock outstanding immediately before such
Extraordinary Distribution or Pro Rata Repurchase multiplied by (y) the Fair
Market Value of a share of Common Stock on the day before the ex-dividend date
with respect to an Extraordinary Distribution which is paid in cash and on the
distribution date with respect to an Extraordinary Distribution which is paid
other than in cash, or the earlier of the ex-dividend date and the distribution
date in the event of an Extraordinary Distribution, a portion of which is paid
in cash and a portion of which is paid other than in cash, or on the applicable
expiration date (including all extensions thereof) of any tender offer which is
a Pro Rata Repurchase, or on the date of purchase with respect to any Pro Rata
Repurchase which is not a tender offer, as the case may be, minus (ii) the Fair
Market Value of the Extraordinary Distribution or the aggregate purchase price
of the Pro Rata Repurchase, as the case may be, and the denominator of which
shall be the product of (a) the number of shares of Common Stock outstanding
immediately before such Extraordinary Dividend or Pro Rata Repurchase minus, in
the case of a Pro Rata Repurchase, the number of shares of Common Stock
repurchased by the Company multiplied by (b) the Fair Market Value of a share
of Common Stock on the day before the ex-dividend date with respect to an
Extraordinary Distribution which is paid in cash and on the distribution date
with respect to an Extraordinary Distribution which is paid other than in cash,
or the earlier of the ex-dividend date and the distribution date in the event
of an Extraordinary Distribution, a portion of which is paid in cash and a
portion of which is paid other than in cash, or on the applicable expiration
date (including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be. The Company shall send each
holder of Series F Preferred Stock (i) notice of its intent to make any
dividend or distribution and (ii) notice of any offer by the Company to make a
Pro Rata Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated (including by announcement
of a record date in accordance with the rules of any stock exchange on which
the Common Stock is listed or admitted to trading) to holders of Common Stock.
Such notice shall indicate the intended record date and the amount and nature
of such dividend or distribution, or the number of shares subject to such offer
for a Pro Rata Repurchase and the purchase price payable by the Company
pursuant to such offer, as well as the Conversion Price and the number of
shares of Common Stock into which a share of Series F Preferred Stock may be
converted at such time.
(E) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make any adjustment to the Conversion Price unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Conversion Price. Any lesser adjustment shall be carried forward
and shall be made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one
percent (1%) in the Conversion Price.
(F) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an adjustment to the Conversion Price
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pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Company shall consider whether such action is of such a nature that an
adjustment to the Conversion Price should equitably be made in respect of such
transaction. If in such case the Board of Directors of the Company determines
that an adjustment to the Conversion Price should be made, an adjustment shall
be made effective as of such date, as determined by the Board of Directors of
the Company. The determination of the Board of Directors of the Company as to
whether an adjustment to the Conversion Price should be made pursuant to the
foregoing provisions of this paragraph 9(F), and, if so, as to what adjustment
should be made and when, shall be final and binding on the Company and all
stockholders of the Company. The Company shall be entitled to make such
additional adjustments in the Conversion Price, in addition to those required
by the foregoing provisions of this Section 9, as shall be necessary in order
that any dividend or distribution in shares of capital stock of the Company,
subdivision, reclassification or combination of shares of stock of the Company
or any recapitalization of the Company shall not be taxable to the holders of
the Common Stock.
(G) For purposes of this Resolution, the following definitions shall apply:
"Business Day" shall mean each day that is not a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New
York, are not required to be open.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Company or any other
issuer for any day shall mean the last reported sales price, regular way, or,
in the event that no sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in either case as reported on the
New York Stock Exchange Composite Tape or, if such security is not listed or
admitted to trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the NASDAQ National
Market System or, if such security is not quoted on such National Market
System, the average of the closing bid and asked prices on each such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked prices for
such security on each such day shall not have been reported through NASDAQ, the
average of the bid and asked prices for such day as furnished by any NYSE
member firm regularly making a market in such security selected for such
purpose by the Board of Directors of the Company or a committee thereof, in
each case, on each trading day during the Adjustment Period.
"Adjustment Period" shall mean the period of five (5) consecutive trading
days preceding, and including, the date as of which the Fair Market Value of a
security is to be determined. The "Fair Market Value" of any security which is
not publicly traded or of any other property shall mean the fair value thereof
as determined by an independent investment banking or appraisal firm
experienced in the valuation of such securities or property selected in good
faith by the Board of Directors of the Company or a committee thereof, or, if
no such investment banking or appraisal firm is in the good faith judgment of
the Board of Directors or such committee available to make such determination,
as determined in good faith by the Board of Directors of the Company or such
committee.
"Extraordinary Distribution" shall mean any dividend or other distribution
to holders of Common Stock (effected while any of the shares of Series F
Preferred Stock are outstanding) (i) of cash (other than a regularly scheduled
quarterly dividend not exceeding 120% of the average quarterly dividends for
the preceding period of 12 months), where the aggregate amount of such cash
dividend or distribution together with the amount of all cash dividends and
distributions made during the preceding period of 12 months (other than
regularly scheduled quarterly dividends not exceeding 120% of the aggregate
quarterly dividends for the preceding period of 12 months), when combined with
the aggregate amount of all Pro Rata Repurchases (for this purpose, including
only that portion of the aggregate purchase price of such Pro Rata Repurchase
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which is in excess of the Fair Market Value of the Common Stock repurchased as
determined on the applicable expiration date (including all extensions thereof)
of any tender offer or exchange offer which is a Pro Rata Repurchase, or the
date of purchase with respect to any other Pro Rata Repurchase which is not a
tender offer or exchange offer made during such period), exceeds nine and
one-half percent (9 1/2%) the aggregate Fair Market Value of all shares of
Common Stock outstanding on the day before the ex-dividend date with respect to
such Extraordinary Distribution which is paid in cash and on the distribution
date with respect to an Extraordinary Distribution which is paid other than in
cash, and/or (ii) of any shares of capital stock of the Company (other than
shares of Common Stock), other securities of the Company (other than
securities of the type referred to in paragraph (B) or (C) of this Section 9),
evidences of indebtedness of the Company or any other person or any other
property (including shares of any subsidiary of the Company) or any combination
thereof. The Fair Market Value of an Extraordinary Distribution for purposes of
paragraph (D) of this Section 9 shall be equal to the sum of the Fair Market
Value of such Extraordinary Distribution plus the amount of any cash dividends
(other than regularly scheduled quarterly dividends not exceeding 120% of the
aggregate quarterly dividends for the preceding period of 12 months) which are
not Extraordinary Distributions made during such 12-month period and not
previously included in the calculation of an adjustment pursuant to paragraph
(D) of this Section 9.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Company or any other issuer which
are publicly traded, the average of the Current Market Prices of such shares or
securities for each day of the Adjustment Period.
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by the
Company of any right or warrant to purchase or acquire shares of Common Stock
(including any security convertible into or exchangeable for shares of Common
Stock) shall mean the remainder of (i) the product of the Fair Market Value of
a share of Common Stock on the day preceding the first public announcement of
such issuance, sale or exchange multiplied by the maximum number of shares of
Common Stock which could be acquired on such date upon the exercise in full of
such rights and warrants (including upon the conversion or exchange of all such
convertible or exchangeable securities), whether or not exercisable (or
convertible or exchangeable) at such date, minus (ii) the aggregate amount
payable pursuant to such right or warrant to purchase or acquire such maximum
number of shares of Common Stock; provided, however, that in no event shall the
Non-Dilutive Amount be less than zero. For purposes of the foregoing sentence,
in the case of a security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to purchase or acquire
shares of Common Stock shall be the Fair Market Value of such security on the
date of the issuance, sale or exchange of such security by the Company.
"Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by
the Company or any subsidiary thereof, whether for cash, shares of capital
stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property
(including shares of a subsidiary of the Company), or any combination thereof,
effected while any of the shares of Series F Preferred Stock are outstanding,
pursuant to any tender offer or exchange offer subject to Section 13(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no purchase
of shares by the Company, or any subsidiary thereof made in open market
transactions shall be deemed a Pro Rata Repurchase. For purposes of this
paragraph 9(G), shares shall be deemed to have been purchased by the Company or
any subsidiary thereof "in open market transactions" if they have been
purchased substantially in accordance with the requirements of Rule 10b-18 as
in effect under the Exchange Act, on the date shares of Series F Preferred
Stock are initially issued by the Company or on such other terms and conditions
as the Board of Directors of the Company or a committee thereof shall have
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determined are reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.
Whenever an adjustment to the Conversion Price and the related voting
rights of the Series F Preferred Stock is required pursuant to this Resolution,
the Company shall forthwith place on file with the transfer agent for the
Common Stock and the Series F Preferred Stock, and with the Secretary of the
Company, a statement signed by two officers of the Company stating the adjusted
Conversion Price determined as provided herein and the resulting conversion
ratio, and the voting rights (as appropriately adjusted), of the Series F
Preferred Stock. Such statement shall set forth in reasonable detail such facts
as shall be necessary to show the reason and the manner of computing such
adjustment, including any determination of Fair Market Value involved in such
computation. Promptly after each adjustment to the Conversion Price and the
related voting rights of the Series F Preferred Stock, the Company shall mail
a notice thereof and of the then prevailing conversion ratio to each holder of
shares of the Series F Preferred Stock.
Section 10. Ranking; Attributable Capital and Adequacy of Surplus; Retirement
of Shares.
(A) The Series F Preferred Stock shall rank senior to the Common Stock and
to the Series D Junior Participating Preferred Stock, par value $1.00 per
share, as to the payment of dividends and the distribution of assets on
liquidation, dissolution and winding up of the Company, on a parity with the
Company's Series B ESOP Convertible Preferred Stock, par value $1.00 per share,
the Company's Series C Variable Rate Cumulative Preferred Stock, par value
$1.00 per share and the Company's Series E Variable Rate Cumulative Preferred
Stock, par value $1.00 per share, as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up, and, unless
otherwise provided in the Restated Certificate of Incorporation of the Company,
as the same may be amended, or a Certificate of Designations relating to a
subsequent series of Preferred Stock, par value $1.00 per share, of the
Company, the Series F Preferred Stock shall rank junior to all series of the
Company's Preferred Stock, par value $1.00 per share, as to the payment of
dividends and the distribution of assets on liquidation, dissolution or
winding up.
(B) In addition to any vote of stockholders required by law, the vote of
the holders of a majority of the outstanding shares of Series F Preferred Stock
shall be required to increase the par value of the Common Stock or otherwise
increase the capital of the Company allocable to the Common Stock for the
purpose of the Delaware General Corporation Law (the "DGCL") if, as a result
thereof, the surplus of the Company for purposes of the DGCL would be less than
the amount of Preferred Dividends that would accrue on the then outstanding
shares of Series F Preferred Stock during the following three years.
(C) Any shares of Series F Preferred Stock acquired by the Company by
reason of the conversion or redemption of such shares as provided by this
Resolution, or otherwise so acquired, shall be retired as shares of Series F
Preferred Stock and restored to the status of authorized but unissued shares of
Preferred Stock, par value $1.00 per share, of the Company, undesignated as to
series, and may thereafter be reissued as part of a new series of such
Preferred Stock as permitted by law.
Section 11. Miscellaneous.
(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt
thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms of this Resolution) with postage prepaid,
addressed: (i) if to the Company, to its office at 2000 Westchester Avenue,
White Plains, New York 10650 (Attention: Secretary) or to the transfer agent
for the Series F Preferred Stock, or other agent of the Company designated as
permitted by this Resolution or (ii) if to any holder of the Series F Preferred
Stock or Common Stock, as the case may be, to such holder at the address of
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such holder as listed in the stock record books of the Company (which may
include the records of any transfer agent for the Series F Preferred Stock or
Common Stock, as the case may be) or (iii) to such other address as the Company
or any such holder, as the case may be, shall have designated by notice
similarly given.
(B) The term "Common Stock" as used in this Resolution means the Company's
Common Stock, par value $6.25 per share, as the same exists at the date of
filing of a Certificate of Designations relating to Series F Preferred Stock
or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
In the event that, at any time as a result of an adjustment made pursuant to
Section 9 of this Resolution, the holder of any share of the Series F Preferred
Stock upon thereafter surrendering such shares for conversion, shall become
entitled to receive any shares or other securities of the Company other than
shares of Common Stock, the Conversion Price in respect of such other shares or
securities so receivable upon conversion of shares of Series F Preferred Stock
shall thereafter be adjusted, and shall be subject to further adjustment from
time to time, in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Stock contained in Section 9 hereof, and
the provisions of Sections 1 through 8, 10 and 11 of this Resolution with
respect to the Common Stock shall apply on like or similar terms to any such
other shares or securities.
(C) The Company shall pay any and all stock transfer and documentary stamp
taxes that may be payable in respect of any issuance or delivery of shares of
Series F Preferred Stock or shares of Common Stock or other securities issued
on account of Series F Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series F Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series F Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any
payment to any person with respect to any such shares or securities other than
a payment to the registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the person otherwise
entitled to such issuance, delivery or payment 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 or is not payable.
(D) In the event that a holder of shares of Series F Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series F Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series F
Preferred Stock as shown on the records of the Company and to send the
certificate or certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Company.
(E) Unless otherwise provided in the Restated Certificate of Incorporation,
as the same may be amended, of the Company, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution, liquidation
or winding-up or otherwise made upon the shares of Series F Preferred Stock and
any other stock ranking on a parity with the Series F Preferred Stock with
respect to such dividend or distribution shall be pro rata, so that amounts
paid per share on the Series F Preferred Stock and such other stock shall in
all cases bear to each other the same ratio that the required dividends,
distributions or payments, as the case may be, then payable per share on the
shares of the Series F Preferred Stock and such other stock bear to each other.
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(F) The Company may appoint, and from time to time discharge and change,
a transfer agent for the Series F Preferred Stock. Upon any such appointment
or discharge of a transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of Series F
Preferred Stock.
Market Auction Preferred Shares
Section 1. Designation; Amount and Series.
The Preferred Stock authorized hereby consists of 1,200 shares (each share
a series) designated as "Market Auction Preferred Shares" (referred to as the
"Auction Preferred", the "Preferred Stock" or the "Remarketing Preferred")
issuable in the following groups of series (each group a "Series"): 300 shares
designated "Market Auction Preferred Shares, Series G-1 through G-300" (the
"Series G Preferred Stock"), 300 shares designated "Market Auction Preferred
Shares, Series H-1 through H-300" (the "Series H Preferred Stock"), 300 shares
designated "Market Auction Preferred Shares, Series I-1 through I-300" (the
"Series I Preferred Stock") and 300 shares designated "Market Auction Preferred
Shares, Series J-1 through J-300" (the "Series J Preferred Stock"). Except as
expressly provided herein, each share of each separate Series of Auction
Preferred shall be identical and equal in all aspects to every other share of
such Series, and the shares of all of the Series shall be identical and equal
in all respects.
Section 2. Definitions.
Any references to Sections or subsections that are made in this part of
Article IV(B) shall be to Sections or subsections contained in this part of
Article IV(B). Unless the context or use indicates another or different meaning
or intent, the following terms shall have the following meanings when used in
this part of Article IV(B), whether used in the singular or plural:
"Act" means the Securities Act of 1933, as amended.
"Additional Payments" means an amount equal to the product of (i) the
Default Rate on the date on which such Failure to Deposit occurred (or, if such
Failure to Deposit relates to a failure to pay dividends other than at the end
of a Dividend Period, the Default Rate computed using the Percentage applicable
to the rating category below "baa3" or "BBB-" as of the Business Day
immediately preceding the Auction Date or the date of the immediately preceding
Remarketing for such shares), times (ii) a fraction, the numerator of which
will be the number of days during which such failure existed and was not cured
as described in Section 3(i)(B) (including the day such failure occurs and
excluding the day such failure is cured) and the denominator of which will be
360, times (iii) the full amount of the dividends required to be paid on the
Dividend Payment Date with respect to which such failure occurred.
"Affiliate" means any Person controlled by, in control of, or under common
control with, the Corporation.
"Applicable 'AA' Composite Commercial Paper Rate", on any date, means, in
the case of any Dividend Period of (1) 1 to 48 days, the interest equivalent of
the 30-day rate, (2) 49 days or more but less than 70 days, the interest
equivalent of the 60-day rate, (3) 70 days or more but less than 85 days, the
arithmetic average of the interest equivalent of the 60-day and 90-day rates,
(4) 85 days or more but less than 120 days, the interest equivalent of the
90-day rate, (5) 120 days or more but less than 148 days, the arithmetic
average of the interest equivalent of the 90-day and 180-day rates, (6) 148
days or more but less than 184 days, the interest equivalent of the 180-day
rate, in each case, on commercial paper placed on behalf of issuers whose
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corporate bonds are rated "AA" by S&P or "Aa" by Moody's, or the equivalent of
such rating by another rating agency, as made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date. In the event that the Federal Reserve Bank of
New York does not make available any of the foregoing rates, then such rates
shall be the 30-day, 60-day, 90-day or 180-day rate or arithmetic average of
such rates, as the case may be, as quoted on a discount basis or otherwise, by
the Commercial Paper Dealers to the Auction Agent or the applicable Remarketing
Agent as of the close of business on the Business Day next preceding such date.
If any Commercial Paper Dealer does not quote a rate required to determine the
Applicable "AA" Composite Commercial Paper Rate, the Applicable "AA" Composite
Commercial Paper Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining Commercial Paper Dealer (if any) and any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates or, if the
Corporation does not select any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer
(if any). For purposes of this definition, the "interest equivalent" means the
equivalent yield on a 360-day basis of a discount-basis security to an
interest-bearing security.
"Applicable Determining Rate" means (i) for any Dividend Period from 1 to
48 days, Standard Dividend Period or Short-Dividend Period of 183 days or less,
the Applicable "AA" Composite Commercial Paper Rate, (ii) for any Short
Dividend Period of 184 to 364 days, the Applicable Treasury Bill Rate and
(iii) for any Long Dividend Period, the Applicable Treasury Note Rate.
"Applicable Rate" means the dividend rate payable on a share of Preferred
Stock for any Dividend Period subsequent to the Initial Dividend Period for
such share established pursuant to Section 3 below.
"Applicable Treasury Bill Rate" for any Short Dividend Period in excess of
183 days and "Applicable Treasury Note Rate" for any Long Dividend Period, on
any date, means the interest equivalent of the rate for direct obligations of
the United States Treasury having an original maturity which is equal to, or
next lower than, the length of such Short Dividend Period or Long Dividend
Period, as the case may be, as published weekly by the Federal Reserve Board in
"Federal Reserve Statistical Release H.15(519)-Selected Interest Rates", or any
successor publication by the Federal Reserve Board, within 5 Business Days
preceding such date. In the event that the Federal Reserve Board does not
publish such rate, or if such release is not available, the Applicable Treasury
Bill Rate or Applicable Treasury Note Rate will be the arithmetic mean of the
secondary market bid rates as of approximately 3:30 P.M., New York City time,
on the Business Day next preceding such date of the U.S. Government Securities
Dealers furnished to the Auction Agent or the applicable Remarketing Agent for
the issue of direct obligations of the United States Treasury, in an aggregate
principal amount of at least $250,000 with a remaining maturity equal to, or
next lower than, the length of such Short Dividend Period or Long Dividend
Period, as the case may be. If any U.S. Government Securities Dealer does not
quote a rate required to determine the Applicable Treasury Bill Rate or the
Applicable Treasury Note Rate, the Applicable Treasury Bill Rate or Applicable
Treasury Note Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining U.S. Government Securities Dealer (if
any) or any Substitute U.S. Government Securities Dealer or Dealers selected
by the Corporation to provide such rate or rates or, if the Corporation does
not select any such Substitute U.S. Government Securities Dealer, by the
remaining U.S. Government Securities Dealer (if any); provided that, if the
Corporation is unable to cause such quotations to be furnished to the Auction
Agent or the applicable Remarketing Agent by such sources, the Corporation may
cause such rates to be furnished to the Auction Agent or the applicable
Remarketing Agent by such alternative source as the Corporation in good faith
deems to be reliable. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis shall be equal to the quotient
of (A) the discount rate divided by (B) the difference between 1.00 and the
discount rate.
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"Articles of Incorporation" means the Restated Certificate of
Incorporation, as amended, of the Corporation.
"Auction" means each periodic implementation of the Auction Procedures.
"Auction Agent" means The Bank of New York, unless or until another bank or
trust company has been appointed as such by the Corporation.
"Auction Agent Agreement" has the meaning set forth in Section 8 below.
"Auction Date" means, for any Series of Auction Preferred, the first
Business Day preceding the first day of each Dividend Period for such Series
other than the Initial Dividend Period for such Series.
"Auction Method" means a method of determining Dividend Periods and
dividend rates for the Auction Preferred of a Series pursuant to the Auction
Procedures.
"Auction Preferred" means the Auction Preferred, including the Converted
Remarketing Preferred, being auctioned pursuant to the Auction Procedures.
"Auction Procedures" means the procedures for conducting Auctions set forth
in Section 7 below.
"Board of Directors" means the Board of Directors of the Corporation or any
duly authorized committee of the Board of Directors acting on behalf thereof.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in these Auction
Procedures, that has been selected by the Corporation and has entered into a
Broker-Dealer Agreement with the Auction Agent that remains effective.
"Business Day" means a day on which the New York Stock Exchange is open for
trading and which is not a day on which banks in The City of New York are
authorized or obliged by law to close.
"Certificate of Designations" or "Certificate" means the Certificate of
Designations, Preferences and Rights of Market Auction Preferred Shares of the
Corporation dated and filed with the Delaware Secretary of State on December
22, 1992.
"Chief Financial Officer" has the meaning set forth in Section 3(g)(ii)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Morgan Stanley and First Boston or, in
lieu thereof, their respective affiliates or successors.
"Converted Auction Preferred" means shares of Auction Preferred which, by
reason of an election by the Method Selection Agent of a different Dividend
Determination Method, will become Remarketing Preferred at the end of the
then-current Dividend Period applicable thereto.
"Converted Remarketing Preferred" means shares of Remarketing Preferred
which, by reason of an election by the Method Selection Agent of a different
Dividend Determination Method, will become Auction Preferred at the end of the
then-current Dividend Period applicable thereto.
"Corporation" means Texaco Inc., a Delaware corporation, or its successor.
"Date of Original Issue", with respect to any share of Preferred Stock,
means the date on which the Corporation originally issued such share of
Preferred Stock.
"Default Period" has the meaning set forth in Section 6(b)(i) below.
"Default Rate" means the higher of (A) the Maximum Applicable Rate obtained
by multiplying the Applicable Determining Rate, determined as of the Business
Day next preceding the date of the Failure to Deposit that, pursuant to Section
3(i), caused the application of such Default Rate, by the Percentage for the
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<PAGE>
rating category below "baa3" or "BBB-", and (B) (i) if the Corporation has
failed timely to pay dividends, the dividend rate in effect for the Dividend
Period in respect of which such Failure to Deposit occurred, or (ii) if the
Corporation has failed timely to pay the redemption price (including
accumulated and unpaid dividends) of shares of any Series of Preferred Stock
called for redemption, the dividend rate in effect on the date such redemption
price was to have been paid. The Percentage used to determine the Default Rate
for any shares of Preferred Stock shall be the Percentage for the rating
category below "baa3" or "BBB-" (i) in effect on the immediately preceding
Auction Date or the date of the immediately preceding Remarketing, in the case
of a Default Rate that applies to the portion of a Dividend Period occurring
after a failure to pay dividends and (ii) in effect on the date of
determination, in all other cases.
"Depository Agreement" means each agreement among the Corporation, the
Remarketing Depository and a Remarketing Agent.
"Dividend Determination Method" or "Method" shall mean either the Auction
Method or the Remarketing Method.
"Dividend Payment Date" has the meaning set forth in Section 3(b)(iii)
below.
"Dividend Period" has the meaning set forth in Section 3(b)(v) below.
"Dividend Quarter" has the meaning set forth in Section 3(b)(iii) below.
"Dividends-Received Deduction" has the meaning set forth in Section 3(f)(v)
below.
"Existing Holder" means a Person who has signed a Master Purchaser's Letter
and is listed as the beneficial owner of any shares of Auction Preferred in the
records of the Auction Agent.
"Failure to Deposit" means the failure by the Corporation to pay to the
Paying Agent by 11:00 A.M., New York City Time, in immediately available funds,
(i) on a Dividend Payment Date, the full amount of any dividend (whether or
not earned or declared) to be paid on such Dividend Payment Date on any shares
of Preferred Stock or (ii) on any redemption date, the full redemption price
(including accumulated and unpaid dividends), to be paid on such redemption
date for any shares of Preferred Stock.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"First Boston" means The First Boston Corporation.
"Holder" means an Existing Holder or any beneficial owner of Preferred
Stock acquired pursuant to a Remarketing.
"Initial Auction Date" means the Business Day immediately preceding the
first day of a Dividend Period for Auction Preferred.
"Initial Dividend Rate" has the meaning set forth in Section 3(g)(i) below.
"Initial Dividend Period" means the periods commencing on the Date of
Original Issue and ending on the respective days immediately preceding the
Initial Dividend Payment Dates for each Series of Preferred Stock.
"Initial Dividend Payment Date" has the meaning set forth in Section 3(b)
below.
"Long Dividend Period" has the meaning set forth in Section 3(b)(v) below.
"Marketing Conditions" means the following factors: (i) short-term and
long-term market rates and indices of such short-term and long-term rates,
(ii) market supply and demand for short-term and long-term securities,
(iii) yield curves for short-term and long-term securities comparable to the
Preferred Stock, (iv) industry and financial conditions which may affect the
Preferred Stock, (v) the number of shares of Preferred Stock to be sold
pursuant to an Auction or a Remarketing, as the case may be, (vi) the number
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<PAGE>
of potential purchasers of Preferred Stock, (vii) the Dividend Periods and
dividend rates at which current and potential holders would remain or become
holders, (viii) current tax laws and administrative interpretations with
respect thereto and (ix) the Corporation's current and projected funding
requirements based on its asset and liability position, tax position and
current financing objectives. If Marketing Conditions are being assessed by the
Chief Financial Officer, such officer's evaluation of the factors described in
clauses (vi) and (vii) above may be based on discussions with one or more
Broker-Dealers or Remarketing Agents. If Marketing Conditions are being
assessed by the Term Selection Agent or the Method Selection Agent, such
agent's evaluation of the factor described in clause (ix) above may be based
on discussions with representatives of the Corporation.
"Maximum Applicable Rate", as of any date, means the rate obtained by
multiplying the Applicable Determining Rate then in effect for a Dividend
Period by the Percentage (as it may be adjusted from time to time based on
certain factors by the Chief Financial Officer in accordance with the
provisions hereof) determined as set forth below based on the lower of the
credit ratings assigned to the Preferred Stock by Moody's and S&P.
<TABLE>
<CAPTION>
Credit Rating
__________________________________
Moody's S & P Percentage
_______ _____ __________
<S> <C> <C>
"aa3" or Above AA- or Above 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 225%
Below "baa3" Below BBB 275%
</TABLE>
The Corporation will take all reasonable action necessary to enable Moody's
and S&P to provide ratings for the Preferred Stock. If either Moody's or S&P
does not make such rating available or neither Moody's nor S&P shall make such
a rating available, the Corporation will designate a rating agency or rating
agencies as a substitute rating agency or substitute rating agencies, as the
case may be, subject to the approval of Morgan Stanley and First Boston, such
approval not to be unreasonably withheld, and the Corporation will take all
reasonable action to enable such rating agency or rating agencies to provide a
rating or ratings for each Series of Preferred Stock. If either Moody's or S&P
shall change its rating categories for preferred stock, or if one or more
substitute rating agencies are designated, then the determination set forth
above will be made based upon the substantially equivalent new rating
categories for preferred stock of such rating agency or substitute rating
agency.
"Memorandum" means the Private Placement Memorandum dated December 16, 1992
relating to the Corporation and the placement of the shares of Preferred Stock.
"Method Selection Agent" means any entity appointed by the Corporation to
act on its behalf in selecting Dividend Determination Methods for a Series of
Preferred Stock, provided that if the Corporation shall appoint more than one
entity to so act with respect to a Series, "Method Selection Agent" shall mean,
unless the context otherwise requires, all entities so appointed.
"Method Selection Agreement" means an agreement between the Corporation and
the Method Selection Agent pursuant to which the Method Selection Agent agrees
to determine the Method applicable to a Series of Preferred Stock.
"Minimum Holding Period" has the meaning set forth in Section 3(f)(v)
below.
"Moody's" means Moody's Investors Service, Inc., or its successor, so long
as such agency (or successor) is in the business of rating securities of the
type of the Preferred Stock and, if such agency is not in such business, then
a Substitute Rating Agency.
"Morgan Stanley" means Morgan Stanley & Co. Incorporated.
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<PAGE>
"Normal Dividend Payment Date" has the meaning set forth in Section
3(b)(ii) below.
"Notice of Change in Dividend Period" has the meaning set forth in Section
3(d)(ii) below.
"Notice of Method Revocation" has the meaning set forth in Section 3(c)(ii)
below.
"Notice of Method Selection" has the meaning set forth in Section 3(c)(i)
below.
"Notice of Percentage Increase" has the meaning set forth in Section
3(h)(i) below.
"Notice of Removal" has the meaning set forth in Section 3(c)(iii) below.
"Notice of Revocation" has the meaning set forth in Section 3(d)(ii) below.
"Outstanding" means, as of any date, shares of Preferred Stock theretofore
issued except, without duplication, (i) any shares of Preferred Stock
theretofore cancelled, delivered to the Corporation for cancellation or
redeemed and (ii) as of any Auction Date or Remarketing Date, any shares of
Preferred Stock subject to redemption on the next following Business Day.
"Participant" means the member of the Securities Depository that will act
on behalf of an Existing Holder or a Potential Holder, in the case of Auction
Preferred, or the beneficial owner, in the case of Remarketing Preferred, and
that is identified as such in such Holder's or Potential Holder's Master
Purchaser's Letter.
"Paying Agent" means the Auction Agent unless another bank or trust company
has been appointed to act as the paying agent for the shares of Preferred Stock
by resolution of the Board of Directors.
"Percentage" has the meaning set forth in Section 3(h)(i) below.
"Person" means and includes an individual, a partnership, a corporation, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"Purchaser's Letter" means a Master Purchaser's Letter substantially in the
form of Appendix E to the Memorandum delivered to the initial purchasers of the
Preferred Stock which each prospective purchaser of Preferred Stock will be
required to sign as a condition to purchasing Preferred Stock or participating
in an Auction or Remarketing.
"Redemption Agent" means the Auction Agent unless another bank or trust
company has been appointed to act as the redemption agent for the shares of
Preferred Stock by resolution of the Board of Directors.
"Remarketing" means the implementation of Remarketing Procedures.
"Remarketing Agent" means, at any time, the entity or entities appointed by
the Corporation to act on its behalf in establishing dividend rates and
Dividend Periods for Remarketing Preferred and to act on behalf of holders of
Remarketing Preferred in remarketing such Remarketing Preferred as provided in
the Remarketing Procedures.
"Remarketing Depository" means The Bank of New York, and its successors or
any other depository selected by the Corporation which agrees to follow the
procedures required to be followed by such depository in connection with shares
of Remarketing Preferred with a Dividend Period of less than 7 days.
"Remarketing Method" means a method of determining Dividend Periods and
dividend rates for the Preferred Stock.
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<PAGE>
"Remarketing Preferred" means the Preferred Stock, including the Converted
Auction Preferred for which the dividend rate and Dividend Period are to be
determined pursuant to the Remarketing Method.
"Remarketing Procedures" means the procedures for remarketing shares of
Remarketing Preferred as set forth in Section 9.
"Securities Depository" means The Depository Trust Company or any other
securities depository selected by the Corporation that agrees to follow the
procedures required to be followed by such securities depository in connection
with the Preferred Stock.
"Series" means any of the Series G, Series H, Series I or Series J of the
Preferred Stock authorized by this Certificate.
"Short Dividend Period" has the meaning set forth in Section 3(b)(v) below.
"Standard Dividend Period" has the meaning set forth in Section 3(b)(v)
below.
"Standard & Poor's" or "S&P" means Standard & Poor's Corporation, or its
successor, so long as such agency (or successor) is in the business of rating
securities of the type of the Preferred Stock and, if such agency is not in
such business, then a Substitute Rating Agency.
"Stock Books" means the stock transfer books of the Corporation maintained
by the Paying Agent.
"Substitute Commercial Paper Dealer" means Goldman, Sachs & Co., Shearson
Lehman Brothers Inc. or Merrill Lynch, Pierce, Fenner & Smith Incorporated, or
their respective affiliates or successors or, if none of such firms furnishes
commercial paper quotations, a leading dealer in the commercial paper market
selected by the Corporation in good faith.
"Substitute Rating Agency" means a nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the
Securities Exchange Act of 1934) selected by the Corporation, subject to
approval by Morgan Stanley and First Boston, which approval is not to be
unreasonably withheld.
"Substitute U.S. Government Securities Dealers" means Goldman, Sachs & Co.,
Shearson Lehman Brothers Inc. or Merrill Lynch, Pierce, Fenner & Smith
Incorporated, or their respective affiliates or successors or, if none of such
firms provides quotes in U.S. government securities, a leading dealer in the
government securities market selected by the Corporation in good faith.
"Tender Agent" means, at any time, the bank or the organization (initially
The Bank of New York) appointed by the Corporation to perform the duties of
Tender Agent as provided in the Remarketing Procedures.
"Term Selection Agent" means any entity appointed by the Corporation to act
on its behalf in establishing the length of any Dividend Period other than the
Standard Dividend Period, the Dividend Payment Dates for any Short Dividend
Period and, in the case of any Long Dividend Period, additional redemption
provisions, if any, for a Series of Auction Preferred, provided that if the
Corporation shall appoint more than one entity to so act with respect to a
Series, "Term Selection Agent" shall mean, unless the context otherwise
requires, all entities so appointed.
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"U.S. Government Securities Dealers" means Morgan Stanley and First Boston
or, in lieu thereof, their respective affiliates or successors.
Section 3. Dividends.
(a) Holders of shares of Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate per annum,
determined as set forth in Section 3(f) below, and no more, payable on the
respective dates set forth below.
(b) (i) Dividends on the shares of Preferred Stock of each Series shall
accumulate (whether or not declared) from the Date of Original Issue.
(ii) Dividends on each Series of Preferred Stock shall be payable on
the Initial Dividend Payment Date for such Series. After the Initial Dividend
Periods, dividends on any shares of Preferred Stock with (a) a Dividend Period
of 1 to 48 days (which, in the case of Auction Preferred, shall be a period of
days divisible by 7) will be payable on the day following the last day of such
Dividend Period, (b) a Standard Dividend Period will be payable on the day
following the last day of such Standard Dividend Period (which last day of such
Standard Dividend Period will normally be each seventh Wednesday following the
preceding Dividend Payment Date for such Series), (c) a Short Dividend Period,
on the day following the last day of such Short Dividend Period and on such
other Dividend Payment Dates as established at the time such Short Dividend
Period is determined and (d) a Long Dividend Period, on the day following the
last day of such Long Dividend Period and on the March 31, June 30, September
30 and December 31 of each year during such dividend period. Each day on which
dividends on shares of Preferred Stock of each Series would be payable as
determined as set forth in this clause (ii) but for adjustments set forth in
Section 3(f)(v) below, other than adjustments to reflect changes in the Minimum
Holding Period, is referred to herein as a "Normal Dividend Payment Date".
(iii) Each date on which dividends for each share of Preferred Stock
shall be payable as set forth herein is referred to herein as a "Dividend
Payment Date". If applicable, the period from the preceding Dividend Payment
Date to the next Dividend Payment Date for any share of Preferred Stock with a
Long Dividend Period is herein referred to as a "Dividend Quarter". Although
any particular Dividend Payment Date may not occur on the originally scheduled
Normal Dividend Payment Date because of the adjustments set forth in Section
3(f)(v) below, each succeeding Dividend Payment Date shall be, subject to such
adjustments, the date determined as set forth in clause (ii) above as if each
preceding Dividend Payment Date had occurred on the respective originally
scheduled Normal Dividend Payment Date.
(iv) Dividend Periods may be of any duration (including perpetual
duration) and not less than (i) seven days in the case of Auction Preferred
(other than Converted Remarketing Preferred) and (ii) one day in the case of
Remarketing Preferred (other than Converted Auction Preferred). The duration of
each subsequent Dividend Period following the Initial Dividend Period for each
Series and the Applicable Rate for such subsequent Dividend Period will be
determined by either the Auction Method or the Remarketing Method.
(v) The Initial Dividend Payment Date for the Initial Dividend Period
for Series G Preferred Stock shall be February 11, 1993, for Series H Preferred
Stock shall be February 18, 1993, for Series I Preferred Stock shall be
February 25, 1993 and for Series J Preferred Stock shall be March 4, 1993.
After the Initial Dividend Period for each Series of Preferred Stock, each
subsequent Dividend Period for any shares of Preferred Stock shall (except for
the adjustments for non-Business Days described in Section 3(f)(v) below) be
49 days (each such 49-day period, subject to any adjustment as a result of a
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<PAGE>
change in law adjusting the Minimum Holding Period as described in Section
3(f)(v) below, being referred to herein as a "Standard Dividend Period"),
unless as provided in clause (d) below, the Term Selection Agent or the
applicable Remarketing Agent, as the case may be, specifies that any such
subsequent Dividend Period for a particular share of Preferred Stock shall be
(A) a Dividend Period of 1 to 48 days (which in the case of Auction Preferred,
shall be a period of days divisible by 7), (B) a Dividend Period of 50 to 364
days and consisting of a whole number of weeks (a "Short Dividend Period") or
(C) a Dividend Period of 365 days or longer and consisting of a whole number
of weeks (a "Long Dividend Period"). Each such Dividend Period of 1 to 48 days,
Standard Dividend Period, Short Dividend Period and Long Dividend Period
(together with (i) any Initial Dividend Periods and (ii) any period commencing
on a redemption date on which there is a Failure to Deposit and ending on the
date the redemption price for such shares is paid to the Paying Agent) being
referred to herein as a "Dividend Period").
(c) (i) Subject to certain limitations set forth in clause (v) below,
either Dividend Determination Method may be selected by the Method Selection
Agent for a Series of Preferred Stock for any subsequent Dividend Period with
respect to all shares of such Series, provided that such Method Selection
Agent determines at the time of such selection that a change in the Dividend
Determination Method will be the most favorable financing alternative for the
Corporation based upon the then-current Marketing Conditions. If more than one
entity is serving as Method Selection Agent for a Series, such entities shall
act in concert in performing their duties, provided that notices referred to
herein may be given by one entity on behalf of all such entities. The Method
Selection Agent for any Series of Preferred Stock will make such selection in
a notice (a "Notice of Method Selection") sent by such Method Selection Agent
to the Corporation, the Term Selection Agent, the Auction Agent, the Securities
Depository, the Remarketing Depository, the Tender Agent and any applicable
Remarketing Agent by telephone (with confirmation in writing), and to any other
record holders of the shares of Preferred Stock of such Series by first-class
mail, postage prepaid, not less then seven Business Days prior to the first day
of such subsequent Dividend Period. Each Notice of Method Selection will state
the Method selected by the Method Selection Agent. If the Method Selection
Agent for a Series which is then a Series of Remarketing Preferred selects the
Auction Method for any subsequent Dividend Period, the Remarketing Agent for
such Series will establish Dividend Periods and Applicable Rates for shares of
such Series until the Initial Auction Date in a manner that will best promote
an orderly transition to the Auction Method. Any Dividend Determination Method
so selected by the Method Selection Agent for a Series shall continue in effect
for such Series until the Method Selection Agent selects the other Method in
the aforesaid manner. Until a Method Selection Agent for any Series has been
appointed, the Dividend Determination Method will be the Auction Method.
(ii) A Notice of Method Selection may be revoked (a "Notice of Method
Revocation") by the Method Selection Agent on or prior to 10:00 A.M. on the
second Business Day preceding the first day of the subsequent Dividend Period
by giving a Notice of Method Revocation to the Corporation, the Term Selection
Agent, the Securities Depository, the Remarketing Depository, the Auction
Agent, the Tender Agent, any applicable Remarketing Agent and any other record
holders of the shares of Preferred Stock of such Series.
(iii) Any Notice of Method Selection with respect to any subsequent
Dividend Period for any Series of Preferred Stock shall be deemed to have been
withdrawn if on or prior to the second Business Day preceding the first day of
such subsequent Dividend Period the Corporation shall have removed the Method
Selection Agent for such Series, provided that the Corporation shall have given
a notice (a "Notice of Removal") to the Term Selection Agent, the Securities
Depository, the Remarketing Depository, the Auction Agent, the Tender Agent,
any applicable Remarketing Agent and any other record holders of shares of
Preferred Stock of such Series no later than 3:00 P.M., New York City time,
on such second Business Day. If more than one entity has been appointed and
is acting as Method Selection Agent for that Series, such Notice of Method
Selection shall be deemed to have been withdrawn only if the Corporation shall
have removed all such entities; and the removal at any time by the Corporation
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<PAGE>
of one or more but not all such entities shall not effect a deemed withdrawal
of a Notice of Method Selection and in any such event no Notice of Removal
need be given. If the Method Selection Agent for any Series of Preferred Stock
resigns or is removed (or, in either case, if more than one entity has been
appointed and is acting as Method Selection Agent for that Series then all
such entities), the Dividend Determination Method applicable to such Series in
effect at the time of such resignation or removal will continue in effect until
the Corporation appoints a successor Method Selection Agent for such Series and
such Method Selection Agent sends a Notice of Method Selection. If, as a result
of the resignation or removal of the Method Selection Agent, the Dividend
Determination Method for any Series will continue to be the Auction Method,
then the duration of the next succeeding Dividend Period for such Series will
be the Standard Dividend Period.
(iv) Any Method for a Series of Preferred Stock selected by the Method
Selection Agent for such Series pursuant to a Notice of Method Selection
(except a Notice of Method Selection that is revoked or deemed to have been
withdrawn) shall be conclusive and binding on the Corporation and the holders
of Preferred Stock of such Series. If the Notice of Method Selection is not
revoked or deemed to have been withdrawn, any Method so selected by the Method
Selection Agent for a Series will continue in effect for that Series until such
Method Selection Agent or any successor selects the other Method in the
aforesaid manner. No defect in the Notice of Method Selection, the Notice of
Method Revocation or the Notice of Removal of the Method Selection Agent or in
the mailing thereof shall affect the validity of any change in the Dividend
Determination Method or any withdrawal, revocation or removal.
(v) Notwithstanding the foregoing, the Method Selection Agent shall not
be entitled to change the Dividend Determination Method then applicable to a
Series if (i) at the time of an election that the Remarketing Method apply to a
Series, the Corporation has not appointed (and given notice or taken such other
action as may be necessary for the timely effectiveness of such appointment) a
Remarketing Agent, a Tender Agent, a Securities Depository and a Remarketing
Depository for such Series, (ii) at the time of an election that the Auction
Method apply to a Series, the Corporation has not appointed (and given notice
or taken such other action as aforesaid) an Auction Agent, a Securities
Depository and at least one Broker-Dealer for such Series, or such election
would result in more than one Dividend Period for the shares of Preferred Stock
of such Series or (iii) at the time of any such election, a Failure to Deposit
has occurred and is continuing. Once the Method Selection Agent has selected a
Dividend Determination Method for a Series in the aforesaid manner, such
selection shall become effective on the last day of the Dividend Period(s) then
applicable to shares of Preferred Stock of such Series notwithstanding any
Failure to Deposit for such Series which may occur after the delivery of the
Notice of Method Selection by such Method Selection Agent, the failure to
remarket tendered shares of Remarketing Preferred of such Series, in the case
of the selection of the Remarketing Method, or the lack of Sufficient Clearing
Bids in the Auction for such Series, in the case of the selection of the
Auction Method.
(d) (i) With respect to shares of Auction Preferred, each successive
Dividend Period shall commence on the Dividend Payment Date for the preceding
Dividend Period for such Series and shall end (A) in the case of a Dividend
Period of 7 to 48 days or a Standard Dividend Period, on the day preceding the
next Dividend Payment Date and (B) in the case of a Short Dividend Period or a
Long Dividend Period, on the last day of the Short Dividend Period or Long
Dividend Period, as the case may be, specified by the Term Selection Agent, in
the related Notice of Change in Dividend Period.
(ii) The Term Selection Agent will give telephonic and written notice,
not less than 10 and not more than 30 days prior to an Auction Date and based
on the then-current Marketing Conditions, to the Corporation, the Auction
Agent, the Method Selection Agent, the Securities Depository and any other
record holders of a Series of Auction Preferred if it determines that the next
succeeding Dividend Period for such Series will be a Dividend Period of 7 to 48
days, a Short Dividend Period or a Long Dividend Period (any such notice, a
"Notice of Change in Dividend Period"); provided, that if the then-current
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<PAGE>
Dividend Period is less than 10 days, the Term Selection Agent will give such
Notice of Change in Dividend Period no less than 5 days prior to an Auction
Date. Each such Notice of Change in Dividend Period shall be in substantially
the form of Exhibit D to the Auction Agent Agreement and shall specify the
following terms, (A) the next succeeding Dividend Period for such Series as a
Dividend Period of 7 to 48 days, a Short Dividend Period or a Long Dividend
Period; provided that a Dividend Period of 7 to 48 days shall only be
established so long as corporate holders of such Series of Preferred Stock
shall not lose entitlement to the Dividends-Received Deduction as a result of
the length of such Dividend Period, (B) the term thereof, (C) in the case of a
Short Dividend Period, the Dividend Payment Dates with respect thereto and (D)
in the case of a Long Dividend Period, additional redemption provisions or
restrictions on redemption, if any, as authorized in Section 4(b)(ii) hereof.
However, for any Auction occurring after the initial Auction, the Term
Selection Agent may not give a Notice of Change in Dividend Period (and any
such Notice of Change in Dividend Period shall be null and void) unless
Sufficient Clearing Bids were made in the last occurring Auction for any Series
and full cumulative dividends, if any, for all Series of Auction Preferred
payable prior to the date of such notice have been paid in full. The Term
Selection Agent may establish a Dividend Period of 7 to 48 days, a Short
Dividend Period or a Long Dividend Period for any Series of Preferred Stock, if
the Term Selection Agent determines that such Dividend Period and, in the case
of a Long Dividend Period, additional redemption provisions or restrictions on
redemption, provide the Corporation with the most favorable financing
alternative based upon the then-current Marketing Conditions. A Notice of
Change in Dividend Period may be revoked by the Term Selection Agent on or
prior to 10:00 A.M. New York City time on the related Auction Date by
telephonic and written notice (a "Notice of Revocation"), in substantially the
form of Exhibit E to the Auction Agent Agreement, to the Corporation, the
Auction Agent, the Method Selection Agent, the Securities Depository and any
other record holders of the shares of such Series, specifying that the Term
Selection Agent has determined that because of subsequent changes in such
Marketing Conditions, such Dividend Period would not result in the most
favorable financing alternative for the Corporation. Notices of Revocation
given by the Term Selection Agent will be conclusive and binding upon the
Corporation and the holders of shares of Auction Preferred and, except as set
forth below in clause (iv), a Notice of Change in Dividend Period given
by the Term Selection Agent will be conclusive and binding upon the Corporation
and the holder of shares of Auction Preferred.
(iii) Any Notice of Change in Dividend Period with respect to any
subsequent Dividend Period for any Series of Auction Preferred will be deemed
to have been withdrawn if on or prior to the second Business Day preceding an
Auction Date the Corporation shall have removed the Term Selection Agent,
provided that the Corporation shall have given Notice of Removal to the Auction
Agent, the Method Selection Agent and the Securities Depository and any other
record holders of the shares of such Series, no later than 3:00 P.M., New York
City time, on such second Business Day. If the Term Selection Agent resigns or
is removed, the Dividend Period for each Series of Auction Preferred shall be
a Standard Dividend Period until the Corporation appoints a successor Term
Selection Agent for such Series and such Term Selection Agent sends a Notice of
Change in Dividend Period.
(iv) If the Term Selection Agent does not give a Notice of Change in
Dividend Period with respect to the next succeeding Dividend Period for any
Series of Auction Preferred or has given such a Notice of Change in Dividend
Period and gives a Notice of Revocation with respect thereto or such Notice of
Change in Dividend Period is deemed to be withdrawn, such next succeeding
Dividend Period shall be a Standard Dividend Period with respect to such
Series. In addition, in the event the Term Selection Agent has given a Notice
of Change in Dividend Period with respect to the next succeeding Dividend
Period for a Series of Preferred Stock and such notice has not been revoked or
deemed to be withdrawn, but Sufficient Clearing Bids are not made in the
related Auction or such Auction is not held for any reason, such next
succeeding Dividend Period for such Series will, notwithstanding such Notice of
Change in Dividend Period, be a Standard Dividend Period and the Term Selection
Agent may not again give a Notice of Change in Dividend Period (and any such
Notice of Change in Dividend Period shall be null and void) for such Series
until Sufficient Clearing Bids have been made in an Auction for such Series.
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<PAGE>
(e) (i) With respect to shares of Remarketing Preferred, the duration of
each subsequent Dividend Period and the Applicable Rate for each such
subsequent Dividend Period shall be established by the Remarketing Agent for
such shares of Remarketing Preferred and will be conclusive and binding on the
Corporation and the holders of such shares.
(ii) For each Dividend Period the applicable Remarketing Agent shall
establish a dividend rate, not in excess of the Maximum Applicable Rate, which
it determines shall be the lowest rate at which tendered shares of Remarketing
Preferred would be remarketed at $250,000 per share. In establishing each
Dividend Period and dividend rate, each Remarketing Agent will establish
Dividend Periods and dividend rates which it determines will result in the most
favorable financing alternative for the Corporation based on the then-current
Marketing Conditions.
(iii) Each Holder will be deemed to have tendered its shares of
Remarketing Preferred for sale by Remarketing on the Business Day immediately
preceding the first day of each subsequent Dividend Period applicable thereto,
unless it gives irrevocable notice otherwise. Consequently, a Holder will hold
shares of Remarketing Preferred only for a Dividend Period and at a dividend
rate accepted by that holder, except for one or more successive Dividend
Periods of one day resulting from a Failure to Deposit or the failure to
remarket such shares as described below. At any time, any or all shares of
Remarketing Preferred of a Series may have Dividend Periods of various lengths.
Depending on Marketing Conditions at the time of Remarketing, any or all
shares of Remarketing Preferred of a Series may have different Applicable
Rates, including those set on the same day for Dividend Periods of equal
length.
(f) (i) Not later than 11:00 A.M. New York City time on the Dividend
Payment Date (except as provided in Section 3(f)(v) below) for each share of
Preferred Stock, the Corporation is required to deposit with the Paying Agent
sufficient immediately available funds for the payment of declared dividends.
(ii) Each dividend shall be payable to the holder or holders of record
of such shares of Preferred Stock as such holders' names appear on the Stock
Books on the Business Day next preceding the applicable Dividend Payment Date.
Subject to Section 3(i) below, dividends in arrears (including any Additional
Payments) for any past Dividend Payment Date may be declared by the Board of
Directors and paid at any time, without reference to any regular Dividend
Payment Date, to the holder or holders of record as such holders appear on the
Stock Books as of the Business Day next preceding such Dividend Payment Date.
Any dividend payment made on any shares of Preferred Stock shall first be
credited against the dividends accumulated with respect to the earliest
Dividend Payment Date for which dividends have not been paid with respect to
such shares.
(iii) So long as the shares of Preferred Stock are held of record by
the nominee of the Securities Depository or the Remarketing Depository, as the
case may be, dividends will be paid to the nominee of the Securities Depository
or the Remarketing Depository, on each Dividend Payment Date. Dividends on
shares of Preferred Stock held through the Securities Depository will be paid
through the Securities Depository on each Dividend Payment Date in accordance
with its normal procedures.
(iv) Dividends on any shares of Preferred Stock held by the Remarketing
Depository will be paid through the Remarketing Depository on each Dividend
Payment Date by wire or other transfer of immediately available funds to a
Holder's account with a commercial bank in the United States so long as such
Holder has provided the Remarketing Depository with the necessary information
to effect such transfer. Any payments not made by wire or other transfer will
be made by check to the Holder of such Preferred Stock.
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<PAGE>
(v) In the case of dividends payable with respect to a share of
Preferred Stock with a Dividend Period of 7 to 48 days, a Standard Dividend
Period or a Short Dividend Period, if:
(A)(x) The Securities Depository shall continue to make available
to Participants the amounts due as dividends on such shares of Preferred
Stock in next-day funds on the dates on which such dividends are payable
and (y) a Normal Dividend Payment Date is not a Business Day, or the day
next succeeding such Normal Dividend Payment Date is not a Business Day,
then dividends shall be payable on the first Business Day preceding such
Normal Dividend Payment Date that is next succeeded by a Business Day; or
(B)(x) The Securities Depository shall make available to
Participants the amounts due as dividends on such shares of Preferred
Stock in immediately available funds on the dates on which such dividends
are payable (and the Securities Depository shall have so advised the
Auction Agent) and (y) a Normal Dividend Payment Date is not a Business
Day, then dividends shall be payable on the first Business Day following
such Normal Dividend Payment Date.
(C) In the case of dividends payable with respect to shares of
Preferred Stock with a Long Dividend Period, if:
(I)(x) The Securities Depository shall continue to make
available to its Participants the amounts due as dividends on such
shares of Preferred Stock in next-day funds on the dates on which
such dividends are payable and (y) a Normal Dividend Payment Date is
not a Business Day, or the day next succeeding such Normal Dividend
Payment Date is not a Business Day, then dividends shall be payable
on the first Business Day following such Normal Dividend Payment Date
that is next succeeded by a Business Day; or
(II)(x) The Securities Depository shall make available to its
Participants the amounts due as dividends on such shares of Preferred
Stock in immediately available funds on the dates on which such
dividends are payable (and the Securities Depository shall have so
advised the Auction Agent) and (y) a Normal Dividend Payment Date is
not a Business Day, then dividends shall be payable on the first
Business Day following such Normal Dividend Payment Date.
(D) Notwithstanding the foregoing, in case of payment in next-day
funds, if the date on which dividends on shares of Preferred Stock would
be payable as determined as set forth in clauses (A), (B) and (C) above
is a day that would result, due to such procedures, in the number of days
between successive Auction Dates or Remarketing Dates for such shares
(determined by excluding the first Auction Date or Remarketing Date, as
the case may be, and including the second Auction Date and the second
Remarketing Date, as the case may be), not being at least equal to the
then-current minimum holding period (currently set forth in Section
246(c) of the Code) (the "Minimum Holding Period") required for corporate
taxpayers to be entitled to the dividends- received deduction on
preferred stock held by nonaffiliated corporations (currently set forth
in Section 243(a) of the Code) (the "Dividends-Received Deduction"), then
dividends on such shares shall be payable on the first Business Day
following such date on which dividends would be so payable that is next
succeeded by a Business Day that results in the number of days between
such successive Auction Dates or Remarketing Dates, as the case may be
(determined as set forth above), being at least equal to the then current
Minimum Holding Period.
(E) In addition, notwithstanding the foregoing, in the event of a
change in law altering the Minimum Holding Period, the period of time
between Dividend Payment Dates shall automatically be adjusted so that
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<PAGE>
there shall be a uniform number of days in subsequent Dividend Periods
(such number of days without giving effect to the adjustments referred to
above being referred to herein as "Subsequent Dividend Period Days")
commencing after the date of such change in law equal to or, to the
extent necessary, in excess of the then current Minimum Holding Period;
provided that the number of Subsequent Dividend Period Days shall not
exceed by more than nine days the length of such then-current Minimum
Holding Period and shall be evenly divisible by seven, and the maximum
number of Subsequent Dividend Period Days, as adjusted pursuant to this
provision, in no event shall exceed 119 days.
(F) If a Normal Dividend Payment Date for shares of Remarketing
Preferred with Dividend Periods of less than 7 days is not a Business
Day, then dividends shall be payable on the first Business Day following
such Normal Dividend Payment Date.
(g)(i) For the Initial Dividend Periods dividends will accumulate at a
rate per annum of 3.25% for Series G Preferred Stock, 3.25% for Series H
Preferred Stock, 3.25% for Series I Preferred Stock, and 3.25% for Series J
Preferred Stock (in each case, the "Initial Dividend Rate"). The dividend rate
for each share of Preferred Stock for each subsequent Dividend Period shall be
the Applicable Rate determined by either the Auction Method or the Remarketing
Method.
(ii) Notwithstanding the application of either the Auction Method
or the Remarketing Method, the dividend rate on each share of Preferred Stock
shall not exceed the Maximum Applicable Rate per annum for any Dividend Period;
provided, however, that the Chief Financial Officer of the Corporation (the
"Chief Financial Officer") based on certain factors may increase the Percentage
used to calculate the Maximum Applicable Rate at any time up to certain amounts
set forth below in Section 3(h)(ii). The provisions of the immediately
preceding sentence notwithstanding, at any time that the application of the
provisions with respect to a Failure to Deposit would, but for the provisions
of the immediately preceding sentence, result in a dividend rate on a share of
Preferred Stock being in excess of the Maximum Applicable Rate per annum, the
maximum dividend rate applicable to such share of Preferred Stock shall be such
higher dividend rate as provided below.
(h)(i) Not later than 10:00 A.M., New York City time, on the related
Auction Date or Remarketing Date, as the case may be, and based on the criteria
set forth below, the Chief Financial Officer may, upon telephonic and written
notice, to the Auction Agent, each applicable Remarketing Agent, the Securities
Depository, the Remarketing Depository and any other record holder of shares of
Preferred Stock affected thereby, increase the percentage (the "Percentage")
used to calculate the Maximum Applicable Rate for any shares of Preferred Stock
(a "Notice of Percentage Increase"). Such Notice of Percentage Increase shall
specify the new Percentages to be used to calculate the Maximum Applicable Rate
and shall be in substantially the form of Exhibit G to the Auction Agent
Agreement.
The Chief Financial Officer may increase such Percentages if the
Chief Financial Officer determines that supervening considerations make the
Percentages then in effect inimical to the financial interests of the
Corporation and that such increase is necessary to enable the operation of the
then-applicable Method to provide the Corporation with the most favorable
financing alternatives based on then-current Marketing Conditions. The Chief
Financial Officer may not revoke a Notice of Percentage increase and the
Percentages specified therein will be the applicable Percentages for the
determination of the Maximum Applicable Rate with respect to such shares for
subsequent Dividend Periods, except as described below, until a new Notice of
Percentage Increase shall be delivered in accordance with the terms thereof.
(ii) Except as described below, the Chief Financial Officer may not
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<PAGE>
increase the Percentage used to calculate the Maximum Applicable Rate to above
the Percentages set forth in the third column of the table below corresponding
to the applicable credit ratings set forth in the first two columns of the
table below.
<TABLE>
<CAPTION>
Maximum Percentage
Permitted to be
Credit Rating Used to Calculate
------------------------------------------ Maximum Applicable
Moody's Standard & Poor's Rate
------- ----------------- ----
<S> <C> <C>
"aa3" or Above AA- or Above 175%
"a3" to "a1" A- to A+ 225%
"baa3" to "baa1" BBB- to BBB+ 250%
Below "baa3" Below BBB 275%
</TABLE>
The maximum percentages set forth in the third column of the above table may be
increased by the Chief Financial Officer, upon receipt of an opinion of counsel
addressed to the Corporation to the effect that the use of such higher
percentages to calculate the Maximum Applicable Rate will not adversely affect
the tax treatment of the Preferred Stock.
(iii) The Chief Financial Officer may only raise the Percentage
applicable to a Series of Auction Preferred if the Chief Financial Officer
raises such Percentage for all the shares of such Series. The Chief Financial
Officer may, however, only raise the Percentage applicable to shares of
Remarketing Preferred with respect to those shares of Remarketing Preferred
being remarketed on the same date, and shall not be required to raise the
Percentage applicable to any other shares of Remarketing Preferred. However, if
the Percentage applicable to a share of Remarketing Preferred is less than the
Percentage applicable to any other share of Remarketing Preferred of the same
Series, the lower Percentage applicable to such share shall, at the end of the
current Dividend Period for such share, automatically be increased to the
highest Percentage then applicable to any share of Remarketing Preferred of
such Series, unless the Chief Financial Officer elects to increase further the
Percentage applicable to such share.
(i)(A) In the event a Failure to Deposit occurs and any such Failure to
Deposit shall not have been cured within three Business Days after such
occurrence, then until such time as the full amount due shall have been paid to
the Paying Agent, the Auction Procedures and the Remarketing Procedures will be
suspended. The Applicable Rate for each Dividend Period commencing on or after
any such Dividend Payment Date (or redemption date, as the case may be) on
which there has been a Failure to Deposit and such Failure to Deposit has not
been cured within three Business Days shall be equal to the Default Rate for
such Dividend Period. In addition, if any such Dividend Payment Date was not
the last day of a Dividend Period, the Applicable Rate for the portion of such
Dividend Period commencing on such Dividend Payment Date and ending on the day
preceding the next succeeding Dividend Payment Date shall be the Default Rate
for such period, computed as if such period were a "Dividend Period". If there
has been a failure to pay dividends on the last day of a Dividend Period, the
Dividend Period to which such Default Rate will apply shall be a Standard
Dividend Period in the case of Auction Preferred and successive one day periods
in the case of Remarketing Preferred. If there has been a failure to pay the
redemption price of shares of Preferred Stock called for redemption, the
Dividend Period to which such Default Rate will apply shall be the period
commencing on, and including, the redemption date and ending on, but excluding,
the date the redemption price is paid to the Paying Agent. The suspension of
the Auction Procedures and the Remarketing Procedures shall continue in effect
ntil there shall occur a Dividend Payment Date at least one Business Day prior
to which the full amount of any dividends (whether or not earned or declared)
payable on each Dividend Payment Date prior to and including such Dividend
Payment Date along with any Additional Payments then due, and the full amount
of any redemption price (including accumulated and unpaid dividends) then due
shall have been paid to the Paying Agent, and thereupon application of the
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Auction Procedures and the Remarketing Procedures shall resume for any
Outstanding shares on the terms stated herein for Dividend Periods commencing
with such Dividend Payment Date. If a Failure to Deposit is cured within three
Business Days, then the Applicable Rate will be the dividend rate established
in connection with any Auction or Remarketing relating to such shares of
Preferred Stock conducted immediately preceding the Failure to Deposit,
provided that the Applicable Rate shall be the Default Rate for each day
(excluding the date of deposit) until the Failure to Deposit is cured. Such
Default Rate shall be computed using the Dividend Period established in
connection with any Auction or Remarketing relating to such shares of
Preferred Stock conducted immediately preceding the Failure to Deposit.
(B) Any Failure to Deposit with respect to any share of Preferred
Stock shall be deemed to be cured if, with respect to a Failure to Deposit
relating to (a) the payment of dividends on such shares of Preferred Stock,
the Corporation deposits with the Paying Agent by 11:00 A.M., New York City
time, all accumulated and unpaid dividends on such shares of Preferred Stock,
including the full amount of any dividends to be paid with respect to the
Dividend Period or portion thereof with respect to which the Failure to Deposit
occurred, plus Additional Payments, and (b) the redemption of such shares, the
Corporation deposits with the Paying Agent by 11:00 A.M., New York City time,
funds sufficient for the redemption of such shares (including accumulated and
unpaid dividends) and gives irrevocable instructions to apply such funds and,
if applicable, the income and proceeds therefrom, to the payment of the
redemption price (including accumulated and unpaid dividends) for such shares.
If the Corporation shall have cured such Failure to Deposit by making timely
payment to the Paying Agent, either the Auction Agent or the Remarketing Agent,
as the case may be, will give telephonic and written notice of such cure to
each Holder of shares of Preferred Stock at the telephone number and address
specified in such Holder's Master Purchaser's Letter and to each Broker-Dealer,
in the case of the Auction Agent, as promptly as practicable after such cure is
effected. Additional Payments paid to the Paying Agent with respect to a
Failure to Deposit will be payable to the Holders of shares of Preferred Stock
on the Record Date for the Dividend Payment Date with respect to which such
Failure to Deposit occurred.
(j) If an Auction or Remarketing for any shares of Preferred Stock is
not held on an Auction Date or Remarketing Date for any reason (other than
because of the suspension of Auctions or Remarketing due to a Failure to
Deposit as described above), the dividend rate for such shares shall be the
Maximum Applicable Rate (calculated assuming a Standard Dividend Period)
determined as of such Auction Date or Remarketing Date and the Dividend Period
shall be a Standard Dividend Period, in the case of Auction Preferred, and
successive Dividend Periods of one day, in the case of Remarketing Preferred,
until such shares of Remarketing Preferred are remarketed.
(k) The amount of dividends per share payable on any Dividend Payment
Date on a share of Preferred Stock having a Dividend Period of up to 364 days
shall be computed by multiplying the Applicable Rate for each Dividend Period
by a fraction the numerator of which shall be the number of days between
Dividend Payment Dates (calculated by counting the date of the preceding
Dividend Payment Date as the first day and the day preceding the current
Dividend Payment Date as the last day) and the denominator of which shall be
360, and multiplying the amount so obtained by $250,000. During any Dividend
Period of 365 days or longer, the amount of dividends accumulated on each share
will be computed on the basis of a 360-day year consisting of twelve 30-day
months.
(l)(i) Holders of shares of each Series of Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of full cumulative dividends. So long as any shares of Preferred Stock
are Outstanding, the Corporation shall not declare or pay or set apart for
payment any dividends or make any other distributions on, or payment on account
of the purchase, redemption or other retirement of the common stock of the
Corporation or any other capital stock of the Corporation ranking junior to the
Preferred Stock as to dividends or as to distributions upon liquidation,
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dissolution or winding-up of the Corporation unless (i) full cumulative
dividends on the Preferred Stock have been paid (or declared and a sum
sufficient for the payment thereof set apart for such payment) for all Dividend
Periods terminating on or prior to the date of such payment, distribution,
purchase, redemption or other retirement with respect to such junior capital
stock and (ii) the Corporation is not in default with respect to any obligation
to redeem or retire shares of the Preferred Stock; provided, however, that the
foregoing shall not apply to (i) any dividend payable solely in any shares of
any stock ranking, as to dividends and as to distributions in the event of a
liquidation, dissolution or winding-up of the Corporation, junior to the
Preferred Stock or (ii) the acquisition of shares of any stock ranking, as to
dividends or as to distributions in the event of a liquidation, dissolution or
winding-up of the Corporation, junior to the Preferred Stock in exchange solely
for shares of any other stock ranking, as to dividends and as to distributions
in the event of a liquidation, dissolution or winding-up of the Corporation,
junior to the Preferred Stock.
(ii) Each dividend will be payable to the holder or holders of
record of shares of Preferred stock as they appear on the Stock Books on the
Business Day next preceding the applicable Dividend Payment Date. Dividends
in arrears for any past Dividend Period (and for any past Dividend Payment Date
occurring prior to the end of a Long Dividend Period or a Short Dividend
Period) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the record holders of such shares. Any dividend
payment made on any shares of Preferred Stock shall first be credited against
the dividends accumulated with respect to the earliest Dividend Payment Date
for which dividends have not been paid with respect to such shares. So long as
the shares of Preferred stock are held of record by the nominee of the
Securities Depository or the Remarketing Depository, as the case may be,
dividends will be paid to the nominee of the Securities Depository or the
Remarketing Depository, on each Dividend Payment Date.
(iii) Unless otherwise provided for in the Restated Certificate of
Incorporation, as the same may be amended, of the Corporation, all payments in
the form of dividends made upon shares of Preferred Stock and any other stock
ranking on a parity with the Preferred Stock with respect to such dividend
shall be pro rata, so that amounts paid per share on the Preferred Stock and
such other stock shall in all cases bear to each other the same ratio that the
required dividends then payable per share on the shares of Preferred Stock and
such other stock bear to each other.
Section 4. Optional Redemption.
(a) At the option of the Corporation, by resolution of the Board of
Directors, the shares of a Series of Preferred Stock may be redeemed, in whole
or in part, out of funds legally available therefor, on the Business Day
immediately preceding any Dividend Payment Date for such shares, upon at least
15 but not more than 45 days notice, at a redemption price per share equal to
the sum of $250,000 plus premium thereon, if any, and an amount equal to
accrued and unpaid dividends thereon (whether or not earned or declared) to the
date that the Corporation pays the full amount payable upon redemption of such
shares; provided that such redemption date shall be the Dividend Payment Date
for such shares if the payment on the Business Day preceding such date would
reduce the holding period for such shares since the Auction Date or Remarketing
Date preceding such payment below the Minimum Holding Period. Pursuant to such
right of optional redemption, the Corporation may elect to redeem some or all
of the shares of Preferred Stock of any Series without redeeming shares of any
other Series.
(b)(i) Notwithstanding the foregoing, if any dividends on shares of any
Series of Preferred Stock are in arrears, (i) no shares of such Series of
Preferred Stock or of any other Series of Preferred Stock shall be redeemed
unless all outstanding shares of each Series of Preferred Stock are
simultaneously redeemed and (ii) the Corporation shall not purchase or
otherwise acquire any shares of Preferred Stock; provided, however, that the
foregoing shall not prevent the purchase or acquisition of shares of Preferred
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Stock pursuant to an otherwise lawful purchase or exchange offer made on the
same terms to all Holders of Outstanding shares of Preferred Stock.
(ii) In connection with the selection of a Long Dividend Period, the
Term Selection Agent or the applicable Remarketing Agent, as the case may be,
may restrict the Corporation's ability to redeem shares of Preferred Stock by
providing for the payment of a redemption premium or fixing a period of time
during which such shares of Preferred Stock may not be redeemed if the Term
Selection Agent or the applicable Remarketing Agent, as the case be,
determines, based on the then-current Marketing Conditions, that adding such
terms will result in the most favorable financing alternative for the
Corporation.
(c)(i) If shares of Preferred Stock are to be redeemed, the Redemption
Agent will, at the direction of the Corporation, cause to be sent, by
first-class or air mail, postage prepaid, telex or facsimile, a notice of
redemption to each holder of record (initially Cede & Co., as nominee of the
Securities Depository) of shares of Preferred Stock to be redeemed. Such notice
of redemption shall be sent not fewer than fifteen nor more than 45 days prior
to the redemption date. Each notice of redemption will identify the Preferred
Stock to be redeemed by CUSIP number and will state (a) the redemption date,
(b) the redemption price, (c) the place where the redemption price is to be
paid and (d) the number of shares of Preferred Stock and the Series thereof to
be redeemed. The notice will also be published in The Wall Street Journal.
(ii) No defect in the notice of redemption or in the mailing or
publication thereof will affect the validity of the redemption proceedings,
except as required by applicable law. A notice of redemption will be deemed
given on the day that it is mailed in accordance with the foregoing
description.
(iii) The Corporation may elect to redeem some or all of the shares of
each Series of Preferred Stock.
(iv) In the case of shares of a Series of Auction Preferred, so long as
the Securities Depository's nominee is the record holder of such shares, the
Redemption Agent will give notice to the Securities Depository, and the
Securities Depository will determine the number of shares of each such Series
to be redeemed from the accounts of each of its Participants. A Participant may
determine to redeem shares from certain of the beneficial holders holding
through such Participant (which may include a Participant holding shares for
its own account) without redeeming shares from the accounts of other beneficial
owners. Any such redemption will be made in accordance with applicable laws
and rules.
(v) In the case of shares of Remarketing Preferred, notice of such
redemption shall be given to the Securities Depository or the Remarketing
Depository, as the case may be, and any other record holders of the Remarketing
Preferred to be redeemed. The Corporation shall identify by CUSIP number the
shares of Remarketing Preferred to be redeemed. To the extent less than all of
the shares of Remarketing Preferred represented by a certificate with a
particular CUSIP number are to be redeemed, the applicable Depository shall
determine the shares represented by such certificate to be redeemed. In the
case of the Securities Depository, the shares to be redeemed shall be
determined as described in the preceding paragraph, and in the case of the
Remarketing Depository, the Remarketing Depository shall determine the number
of shares represented by such certificate to be redeemed from each Holder
thereof.
(vi) If any shares of Preferred Stock to be redeemed are not held of
record by a nominee for the Securities Depository or the Remarketing
Depository, the particular shares of Preferred Stock to be redeemed shall be
selected by the Corporation by lot or by such other method as the Corporation
shall deem fair and equitable.
(vii) Upon any date fixed for redemption (unless a Failure to Deposit
occurs), all rights of the Holders of shares of Preferred Stock called for
redemption will cease and terminate, except the right of such Holders to
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receive the amounts payable in respect of such redemption therefor, but
without interest, and such shares of Preferred Stock will be deemed no longer
outstanding and, upon the taking of any action required by applicable law,
shall have the status of authorized and unissued shares of preferred stock and
may be reissued by the Corporation at any time as shares of any series of
preferred stock other than as shares of Preferred Stock.
Section 5. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the holders of the shares of the Preferred Stock shall be entitled to receive,
out of the assets of the Corporation, whether such assets are capital or
surplus and whether or not any dividends as such are declared but before any
payment or distribution of assets is made to holders of common stock of the
Corporation or any other class of stock or series thereof ranking junior to the
Preferred Stock with respect to the distribution of assets, a preferential
liquidation distribution in the amount of $250,000 per share of Preferred Stock
plus an amount equal to accumulated and unpaid dividends on each such share
(whether or not declared) to and including the date of such distribution and no
more. Neither the merger or consolidation of the Corporation with or into any
other corporation, nor the merger or consolidation of any other corporation
with or into the Corporation, nor the sale, lease, exchange or other transfer
of all or any portion of the assets of the Corporation, shall be deemed to be
a liquidation, dissolution or winding up of the Corporation within the meaning
of this Section 5.
(b) If upon any liquidation, dissolution or winding up of the affairs of
the Corporation, whether voluntary or involuntary, the assets of the
Corporation available for distribution to the holders of Preferred Stock and
any other series of capital stock of the Corporation ranking on a parity with
the Preferred Stock are insufficient to pay the holders of the Preferred Stock
the full amount of the preferential liquidation distributions to which they are
entitled, then such assets of the Corporation shall be distributed ratably
among the holders of Preferred Stock and any other series of capital stock of
the Corporation ranking on a parity with the Preferred Stock based upon the
ratio of (x) the aggregate amount available for distribution on all shares of
Preferred Stock and such parity stock to (y) the total amount distributable on
all shares of Preferred Stock and such parity stock upon liquidation.
Section 6. Voting Rights.
(a) Holders of the Preferred Stock will have no voting rights except as
hereinafter described or as otherwise provided by the General Corporation Law
of the State of Delaware; provided, however, that the affirmative vote of the
holders of record of at least 66 2/3% of the Outstanding shares of Preferred
Stock, voting separately as one class, shall be necessary to adopt any
alteration, amendment or repeal of any provision of the Articles of
Incorporation or this Certificate of Designations (including any such
alteration, amendment or repeal effected by any merger or consolidation), if
such alteration, amendment or repeal would alter or change the powers,
preferences or special rights of the shares of Preferred Stock so as to affect
them adversely.
(b)(i) If at any time the equivalent of six or more full quarterly
dividends (whether or not consecutive) payable on the Preferred Stock shall be
in arrears (to any extent) (a "Default Period"), the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two (2), and the holders of record of the Preferred Stock shall have the
exclusive right, voting as a class with any other shares of preferred stock of
the Corporation so entitled to vote thereon, to elect the directors to fill
such newly created directorships. This right shall remain vested until all
dividends in arrears on the Preferred Stock have been paid or declared and set
apart for payment, at which time (A) the right shall terminate (subject to
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revesting), (B) the term of the directors then in office elected in accordance
with the foregoing shall terminate, and (C) the number of directors
constituting the Board of Directors of the Corporation shall be reduced by the
number of directors whose term has been terminated pursuant to clause (B)
above. For purposes of the foregoing, default in the payment of dividends for
the equivalent of six quarterly dividends means, in the case of Preferred Stock
which pays dividends either more or less frequently than every quarter, default
in the payment of dividends in respect of one or more Dividend Periods
containing not less than 540 days.
(ii) Whenever such right shall vest, it may be exercised initially by
the vote of the holders of record of a majority of the shares of Preferred
Stock present and voting, in person or by proxy, at a special meeting of
holders of record of the Preferred Stock or at the next annual meeting of
stockholders. A special meeting for the exercise of such right shall be called
by the Secretary of the Corporation as promptly as possible, and in any event
within 10 days after receipt of a written request signed by the holders of
record of at least 25% of the Outstanding shares of the Preferred Stock,
subject to any applicable notice requirements imposed by law. Notwithstanding
the provisions of this paragraph, no such special meeting shall be held during
the 30-day period preceding the date fixed for the annual meeting of
stockholders of the Corporation.
(iii) So long as a Default Period continues, any director who shall
have been elected by holders of record of Preferred Stock entitled to vote in
accordance herewith shall hold office for a term expiring at the next annual
meeting of stockholders and during such term may be removed at any time,
without cause by, and only by, the affirmative vote of the holders of record of
a majority of the shares of Preferred Stock present and voting, in person or by
proxy, at a special meeting of such stockholders of record called for such
purpose, and any vacancy created by such removal may also be filled at such
meeting. A meeting for the removal of a director elected by the holders of
record of Preferred Stock and the filling of the vacancy created thereby shall
be called by the Secretary of the Corporation as promptly as possible and in
any event within 10 days after receipt of request therefor signed by the
holders of record of not less than 25% of the Outstanding shares of Preferred
Stock, subject to any applicable notice requirements imposed by law. Such
meeting shall be held at the earliest practicable date thereafter.
Notwithstanding the provisions of this paragraph, no such meeting shall be
held during the 30-day period preceding the date fixed for the annual meeting
of stockholders of the Corporation.
(iv) Any vacancy caused by the death, resignation or expiration of the
term of office of a director who shall have been elected in accordance with
these provisions may be filled by the remaining director so elected or, if not
so filled, by a vote of holders of record of a majority of the shares of
Preferred Stock present and voting, in person or by proxy, at a meeting called
for such purpose (or, in the case of expiration of the term of office of such
director, at the annual meeting of stockholders of the Corporation). Unless
such vacancy shall have been filled by the remaining director or by vote at the
annual meeting of stockholders, such special meeting shall be called by the
Secretary of the Corporation at the earliest practicable date after such death,
resignation or expiration of term of office, and in any event within 10 days
after receipt of a written request signed by the holders of record of at least
25% of the Outstanding shares of Preferred Stock. Notwithstanding the
provisions of this paragraph, no such special meeting shall be held during the
30-day period preceding the date fixed for the annual meeting of stockholders
of the Corporation.
(v) If any meeting of the holders of the Preferred Stock required above
to be called shall not have been called within 10 days after personal service
of a written request therefor upon the Secretary of the Corporation or within
15 days after mailing the same by registered mail addressed to the Secretary
of the Corporation at his principal office, subject to any applicable notice
requirements imposed by law, then the holders of record of at least 25% of the
Outstanding shares of Preferred Stock may designate in writing a holder of
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Preferred Stock to call such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated upon the notice
required for annual meetings of stockholders or such shorter notice (but in no
event shorter than permitted by law) as may be acceptable to the holders of a
majority of the total number of shares of Preferred Stock. Any holder of
Preferred Stock so designated shall have access to the stock books of the
Corporation for the purpose of causing such meeting to be called pursuant to
these provisions. Such meeting shall be held at the earliest practicable date
thereafter. Notwithstanding the provisions of this paragraph, no such meeting
shall be held during the 30-day period preceding the date fixed for the annual
meeting of stockholders of the Corporation.
(vi) At any meeting of the holders of record of the Preferred Stock
called in accordance with the above provisions for the election or removal of
directors, the presence in person or by proxy of the holders of record of
one-third of the total number of Outstanding shares of Preferred Stock shall be
required to constitute a quorum; in the absence of a quorum, a majority of the
holders of record present in person or by proxy shall have power to adjourn the
meeting from time to time without notice, other than announcement at the
meeting, until a quorum shall be present.
Section 7. Auction Procedures.
(a) Certain Definitions. Capitalized terms not defined in this Section 7
shall have the respective meanings specified elsewhere in this part of Article
IV(B). As used in this Section 7, the following terms shall have the following
meanings, unless the context otherwise requires:
(i) "Available Shares of Auction Preferred" has the meaning set forth
in subsection (d)(i) below.
(ii) "Bid" has the meaning set forth in subsection (b)(i) below.
(iii) "Bidder" has the meaning set forth in subsection (b)(i) below.
(iv) "Broker-Dealer Agreement" means an agreement between the Auction
Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow
the procedures specified in these Auction Procedures.
(v) "Hold Order" has the meaning set forth in subsection (b)(i) below.
(vi) "Order" has the meaning set forth in subsection (b)(i) below.
(vii) "Potential Holder" means any Person, including any Existing
Holder, (A) who shall have executed a Purchaser's Letter and (B) who may be
interested in acquiring shares of Auction Preferred (or, in the case of an
Existing Holder, additional shares of Auction Preferred).
(viii) "Sell Order" has the meaning set forth in subsection (b)(i)
below.
(ix) "Submission Deadline" means 1:00 P.M., New York City time, on any
Auction Date, or such other time on any Auction Date as may be specified from
time to time by the Auction Agent as the time prior to which each Broker-Dealer
must submit to the Auction Agent in writing all Orders obtained by it for the
Auction to be conducted on such Auction Date.
(x) "Submitted Bid" has the meaning set forth in subsection (c)(i)
below.
(xi) "Submitted Hold Order" has the meaning set forth in subsection
(c)(i) below.
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(xii) "Submitted Order" has the meaning set forth in subsection
(c)(i) below.
(xiii) "Submitted Sell Order" has the meaning set forth in subsection
(c)(i) below.
(xiv) "Sufficient Clearing Bids" has the meaning set forth in
subsection (d)(i) below.
(xv) "Winning Bid Rate" has the meaning set forth in subsection
(d)(i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) Prior to the Submission Deadline on each Auction Date for any
Series of Auction Preferred:
(A) each Existing Holder may submit to a Broker-Dealer information
as to:
(1) the number of Outstanding shares of Auction Preferred, if
any, held by such Existing Holder that such Existing Holder desires
to continue to hold without regard to the Applicable Rate for the
next succeeding Dividend Period;
(2) the number of Outstanding shares of Auction Preferred, if
any, held by such Existing Holder that such Existing Holder desires
to sell, provided that the Applicable Rate for the next succeeding
Dividend Period is less than the rate per annum specified by such
Existing Holder; and/or
(3) the number of Outstanding shares of Auction Preferred, if
any, held by such Existing Holder that such Existing Holder desires
to sell without regard to the Applicable Rate for the next
succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Holders that
shall be maintained in accordance with the provisions set forth in the
Broker-Dealer Agreement for the purpose of conducting a competitive
Auction, shall contact both Existing Holders and Potential Holders,
including Existing Holders with respect to an offer by any such
Existing Holder to purchase additional shares of Auction Preferred, on
such list to notify such Existing Holders and Potential Holders as to
the length of the next Dividend Period and (i) with respect to any
Short Dividend Period or Long Dividend Period, the Dividend Payment
Date(s) and (ii) with respect to any Long Dividend Period, any dates
before which shares of Auction Preferred may not be redeemed and any
redemption premium applicable in an optional redemption and to
determine the number of Outstanding shares of Auction Preferred, if
any, with respect to which each such Existing Holder and each Potential
Holder desires to submit an Order and each such Potential Holder offers
to purchase, provided that the Applicable Rate for the next succeeding
Dividend Period shall not be less than the rate per annum specified by
such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this Subsection (b)(i) is
hereinafter referred to as an "Order" and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder;" an
Order containing the information referred to in clause (A)(1) of this
Subsection (b)(i) is hereinafter referred to as a "Hold Order;" an Order
containing the information referred to in clause (A)(2) or (B) of this
Subsection (b)(i) is hereinafter referred to as a "Bid;" and an Order
containing the information referred to in clause (A)(3) of this Subsection
(b)(i) is hereinafter referred to as a "Sell Order".
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
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(1) the number of Outstanding shares of Auction Preferred
specified in such Bid if the Applicable Rate determined on such Auction
Date shall be less than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of
Auction Preferred to be determined as set forth in Subsections (e)(i)(D)
and (e)(iii) if the Applicable Rate determined on such Auction Date shall
be equal to the rate per annum specified therein; or
(3) a lesser number of Outstanding shares of Auction Preferred
to be determined as set forth in Subsections (e)(ii)(C) and (e)(iii) if
such specified rate per annum shall be higher than the Maximum Applicable
Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of Auction Preferred
specified in such Sell Order; or
(2) such number or a lesser number of Outstanding shares of
Auction Preferred to be determined as set forth in Subsections (e)(ii)(C)
and (e)(iii) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable
offer to purchase:
(1) the number of Outstanding shares of Auction Preferred
specified in such Bid if the Applicable Rate determined on such Auction
Date shall be higher than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of
Auction Preferred to be determined as set forth in Subsections (e)(i)(E)
and (e)(iv) if the Applicable Rate determined on such Auction Date shall be
equal to the rate per annum specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date for any Series of Auction
Preferred all Orders obtained by such Broker-Dealer specifying with respect to
each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding shares of Auction Preferred
that are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares of Auction Preferred, if
any, subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares of Auction Preferred, if
any, subject to any Bid placed by such Existing Holder and the rate
per annum specified in such Bid; and
(3) the number of Outstanding shares of Auction Preferred, if
any, subject to any Sell Order placed by such Existing Holder; and
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(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
(Each "Hold Order", "Bid" or "Sell Order" as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually
as a "Submitted Hold Order", a "Submitted Bid" or a "Submitted Sell
Order", as the case may be, or as a "Submitted Order".)
(ii) If any rate per annum specified in any Submitted Bid contains more
than three figures to the right of the decimal point, the Auction Agent shall
round such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If one or more Orders covering in the aggregate all of the
Outstanding shares of Auction Preferred held by an Existing Holder are not
submitted to the Auction Agent prior to the Submission Deadline for any reason
(including the failure of a Broker-Dealer to contact such Existing Holder or to
submit such Existing Holder's Order or Orders), such Existing Holder shall be
deemed to have submitted a Hold Order covering the number of Outstanding shares
of Auction Preferred held by such Existing Holder that are not subject to
Orders submitted to the Auction Agent.
(iv) A Submitted Order or Submitted Orders of an Existing Holder that
cover in the aggregate more than the number of Outstanding shares of Auction
Preferred held by such Existing Holder will be considered valid in the
following order of priority:
(A) any Submitted Hold Order of such Existing Holder will be
considered valid up to and including the number of Outstanding shares
of Auction Preferred held by such Existing Holder, provided that, if
there is more than one such Submitted Hold Order and the aggregate
number of shares of Auction Preferred subject to such Submitted Hold
Orders exceeds the number of Outstanding shares of Auction Preferred
held by such Existing Holder, the number of shares of Auction Preferred
subject to each of such Submitted Hold Orders will be reduced pro rata
so that such Submitted Hold Orders in the aggregate will cover exactly
the number of Outstanding shares of Auction Preferred held by such
Existing Holder;
(B) any Submitted Bids of such Existing Holder will be considered
valid (in the ascending order of their respective rates per annum if
there is more than one Submitted Bid of such Existing Holder) for the
number of Outstanding shares of Auction Preferred held by such Existing
Holder equal to the difference between (i) the number of Outstanding
shares of Auction Preferred held by such Existing Holder and (ii) the
number of Outstanding shares of Auction Preferred subject to any
Submitted Hold Order of such Existing Holder referred to in clause
(iv)(A) above (and, if more than one Submitted Bid of such Existing
Holder specifies the same rate per annum and together they cover more
than the remaining number of shares of Auction Preferred that can be
the subject of valid Submitted Bids of such Existing Holder after
application of clause (iv)(A) above and of the foregoing portion of
this clause (iv)(B) to any Submitted Bid or Submitted Bids of such
Existing Holder specifying a lower rate or rates per annum, the number
of shares of Auction Preferred subject to each of such Submitted Bids
specifying the same rate per annum will be reduced pro rata so that
such Submitted Bids, in the aggregate, cover exactly such remaining
number of Outstanding shares of Auction Preferred of such Existing
Holder).
(C) any Submitted Sell Order of an Existing Holder will be
considered valid up to and including the excess of the number of
Outstanding shares of Auction Preferred held by such Existing Holder
over the sum of (a) the number of shares of Auction Preferred subject
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to Submitted Hold Orders by such Existing Holder referred to in clause
(iv)(A) above and (b) the number of shares of Auction Preferred subject
to valid Submitted Bids by such Existing Holder referred to in clause
(iv)(B) above; provided that, if there is more than one Submitted Sell
Order of such Existing Holder and the number of shares of Auction
Preferred subject to such Submitted Sell Orders is greater than such
excess, the number of shares of Auction Preferred subject to each of
such Submitted Sell Orders will be reduced pro rata so that such
Submitted Sell Orders, in the aggregate, will cover exactly the number
of shares of Auction Preferred equal to such excess.
The number of Outstanding shares of Auction Preferred, if any, subject to
Submitted Bids of such Existing Holder not valid under clause (iv)(B) above
shall be treated as the subject of a Submitted Bid by a Potential Holder at the
rate per annum specified in such Submitted Bids.
(v) If there is more than one Submitted Bid by any Potential Holder in
any Auction, each such Submitted Bid shall be considered a separate Submitted
Bid with respect to the rate per annum and number of shares of Auction
Preferred specified therein.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date for
any Series of Auction Preferred, the Auction Agent shall assemble all Orders
submitted or deemed submitted to it by the Broker-Dealers and shall determine:
(A) the excess of the total number of Outstanding shares of Auction
Preferred over the number of shares of Auction Preferred that are the
subject of Submitted Hold Orders (such excess being hereinafter referred to
as the "Available Shares of Auction Preferred");
(B) from the Submitted Orders, whether the number of Outstanding
shares of Auction Preferred that are the subject of Submitted Bids by
Potential Holders specifying one or more rates per annum equal to or lower
than the Maximum Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding shares of Auction Preferred that
are the subject of Submitted Bids by Existing Holders specifying one or
more rates per annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding shares of Auction Preferred that
are subject to Submitted Sell Orders.
(if such excess or such equality exists (other than because the number
of Outstanding shares of Auction Preferred in clauses (1) and (2) above
are each zero because all of the Outstanding shares of Auction
Preferred are the subject of Submitted Hold Orders), there shall exist
"Sufficient Clearing Bids" and such Submitted Bids by Potential Holders
shall be hereinafter referred to collectively as "Sufficient Clearing
Bids"); and
(C) if Sufficient Clearing Bids exist, the winning bid rate (the
"Winning Bid Rate"), which shall be the lowest rate per annum specified in
the Submitted Bids that if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing Holders
specifying lower rates per annum were accepted, thus entitling such
Existing Holders to continue to hold the shares of Auction Preferred
that are the subject of such Submitted Bids, and
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<PAGE>
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other submitted Bids from Potential Holders
specifying lower rates per annum were accepted, thus entitling such
Potential Holders to purchase the shares of Auction Preferred that are
the subject of such Submitted Bids,
would result in such Existing Holders described in subclause (C)(1)
continuing to hold an aggregate number of Outstanding shares of Auction
Preferred that, when added to the number of Outstanding shares of
Auction Preferred to be purchased by such Potential Holders described
in subclause (C)(2), would equal or exceed the number of Available
Shares of Auction Preferred.
(ii) In connection with any Auction and promptly after the Auction
Agent has made the determinations pursuant to Subsection (d)(i), the
Auction Agent shall advise the Corporation of the Maximum Applicable Rate
and, based on such determinations, the Applicable Rate for the next
succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate
for the next succeeding Dividend Period shall be equal to the Winning
Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than because
all of the Outstanding shares of Auction Preferred are the subject of
Submitted Hold Orders), that the next succeeding Dividend Period will
be a Standard Dividend Period and the Applicable Rate for the next
succeeding Dividend Period determined shall be equal to the Maximum
Applicable Rate for a Standard Dividend Period determined on the
Business Day immediately preceding such Auction; or
(C) if all of the Outstanding shares of Auction Preferred are the
subject of Submitted Hold Orders, that the Applicable Rate for the next
succeeding Dividend Period shall be equal to 58% of the Applicable "AA"
Composite Commercial Paper Rate, in the case of Auction Preferred with
a Dividend Period of 7 to 48 days, a Standard Dividend Period or a
Short Dividend Period of 183 days or less, 58% of the Applicable
Treasury Bill Rate in the case of Auction Preferred with a Short
Dividend Period of 184 to 364 days, or 58% of the Applicable Treasury
Note Rate, in the case of Auction Preferred with a Long Dividend
Period, in effect on the Auction Date.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares of Auction Preferred. Based on the determinations made
pursuant to Subsection (d)(i), the Submitted Bids and Submitted Sell Orders
shall be accepted or rejected and the Auction Agent shall take such other
action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of Subsections (e)(iii) and (e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order
of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is higher than the Winning Bid Rate shall be
rejected, thus requiring each such Existing Holder to sell the
Outstanding shares of Auction Preferred that are the subject of such
Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted, thus entitling each such Existing Holder to continue to hold
the Outstanding shares of Auction Preferred that are the subject of
such Submitted Bid;
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<PAGE>
(C) the Submitted Bid of each of the Potential Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted,
thus entitling each such Existing Holder to continue to hold the
Outstanding shares of Auction Preferred that are the subject of such
Submitted Bid, unless the number of Outstanding shares of Auction
Preferred subject to all such Submitted Bids shall be greater than the
number of Outstanding shares of Auction Preferred ("Remaining Shares of
Auction Preferred") equal to the excess of the Available Shares of
Auction Preferred over the number of Outstanding shares of Auction
Preferred subject to Submitted Bids described in Subsections (e)(i)(B)
and (e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be rejected, and each such Existing Holder shall be
required to sell Outstanding shares of Auction Preferred, but only in
an amount equal to the difference between (1) the number of Outstanding
shares of Auction Preferred then held by such Existing Holder subject
to such Submitted Bid and (2) the number of shares of Auction Preferred
obtained by multiplying (x) the number of Remaining Shares of Auction
Preferred by (y) a fraction, the numerator of which shall be the number
of Outstanding shares of Auction Preferred held by such Existing Holder
subject to such Submitted Bid and the denominator of which shall be the
aggregate number of Outstanding shares of Auction Preferred subject to
such Submitted Bids made by all such Existing Holders that specified a
rate per annum equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted,
but only in an amount equal to the number of Outstanding shares of
Auction Preferred obtained by multiplying (x) the difference between
the Available Shares of Auction Preferred and the number of Outstanding
shares of Auction Preferred subject to Submitted Bids described in
Subsections (e)(i)(B), (e)(i)(C) and (e)(i)(D) by (y) a fraction, the
numerator of which shall be the number of Outstanding shares of Auction
Preferred subject to such Submitted Bid and the denominator of which
shall be the sum of the number of Outstanding shares of Auction
Preferred subject to such Submitted Bids made by all such Potential
Holders that specified rates per annum equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding shares of Auction Preferred are subject to Submitted
Hold Orders), subject to the provisions of Subsection (e)(iii), Submitted
Orders shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids of Potential Holders shall be
rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus entitling such Existing Holder to continue to
hold the Outstanding shares of Auction Preferred that are the subject
of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus requiring such Potential Holder to purchase the
Outstanding shares of Auction Preferred that are the subject of such
Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
rejected, thus requiring each such Existing Holder to sell the
Outstanding shares of Auction Preferred that are the subject of such
Submitted Bid, and the Submitted Sell Orders of each Existing Holder
shall be accepted, in both cases only in an amount equal to the
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difference between (1) the number of Outstanding shares of Auction
Preferred then held by such Existing Holder subject to such Submitted
Bid or Submitted Sell Order and (2) the number of shares of Auction
Preferred obtained by multiplying (x) the difference between the
Available Shares of Auction Preferred and the aggregate number of
Outstanding shares of Auction Preferred subject to Submitted Bids
described in Subsections (e)(ii)(A) and (e)(ii)(B) by (y) a fraction,
the numerator of which shall be the number of Outstanding shares of
Auction Preferred held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and the denominator of which
shall be the aggregate number of Outstanding shares of Auction
Preferred subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in Subsections (e)(i)
or (e)(ii), any Existing Holder would be entitled or required to sell or
any Potential Holder would be entitled or required to purchase, a fraction
of a share of Auction Preferred on any Auction Date, the Auction Agent
shall, in such manner as in its sole discretion it shall determine, round
up or down the number of shares of Auction Preferred to be purchased or
sold by any Existing Holder or Potential Holder on such Auction Date so
that only whole shares of Auction Preferred will be entitled or required to
be sold or purchased.
(iv) If, as a result of the procedures described in Subsection (e)(i),
any Potential Holder would be entitled or required to purchase less than a
whole share of Auction Preferred on any Auction Date, the Auction Agent
shall, in such manner as in its sole discretion it shall determine,
allocate shares of Auction Preferred for purchase among Potential Holders
so that only whole shares of Auction Preferred are purchased on such
Auction Date by any Potential Holder, even if such allocation results in
one or more of such Potential Holders not purchasing any shares of Auction
Preferred on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding shares of Auction Preferred to be purchased and the
aggregate number of Outstanding shares of Auction Preferred to be sold by
such Potential Holders and Existing Holders and, to the extent that such
aggregate number of Outstanding shares of Auction Preferred to be purchased
and such aggregate number of Outstanding shares of Auction Preferred to be
sold differ, the Auction Agent shall determine to which other Broker-Dealer
or Broker-Dealers acting for one or more purchasers such Broker-Dealer
shall deliver, or from which other Broker-Dealer or Broker-Dealers acting
for one or more sellers such Broker-Dealer shall receive, as the case may
be, Outstanding shares of Auction Preferred.
Section 8. Auction Agent.
The Corporation shall use its best efforts to maintain, pursuant to a
written agreement (the "Auction Agent Agreement"), an Auction Agent with
respect to each Series of Auction Preferred, to act in accordance with the
provisions set forth herein with respect to such Series.
Section 9. Remarketing Procedures.
(a) Determination of Dividend Periods and Dividend Rates for Remarketing
MAPS. Subject to Section 3 hereof, the duration of each subsequent Dividend
Period and the dividend rate for each subsequent Dividend Period with respect
to any share of Remarketing Preferred will be established by a Remarketing
Agent and will be conclusive and binding on the Corporation and the Holder of
such share of Remarketing Preferred. Each Remarketing Agent will establish
dividend rates, not in excess of the Maximum Applicable Rate, for each Dividend
Period which it determines will be the lowest rate at which tendered Shares of
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<PAGE>
Remarketing Preferred would be remarketed at $250,000 per share. In
establishing each Dividend Period and dividend rate, each Remarketing Agent
will establish Dividend Periods and dividend rates which it determines will
result in the most favorable financing alternative for the Corporation based on
the then-current Marketing Conditions.
(b) Remarketing; Tender for Remarketing. The following procedures shall be
applicable to each share of Remarketing Preferred:
(i) The Remarketing Agent. Each Remarketing Agent shall use its best
efforts, on behalf of the Holders thereof, to remarket all shares of
Remarketing Preferred tendered for sale by Remarketing for which it is
acting as Remarketing Agent without charge to such Holder, only at $250,000
per share, provided that no such Remarketing Agent shall be obligated to
remarket such Remarketing Preferred if there shall be a material
misstatement or omission in any disclosure document provided by the
Corporation and used in connection with the Remarketing of such Remarketing
Preferred or at any time such Remarketing Agent shall have determined that
it is not advisable to remarket Remarketing Preferred by reason of: (i) a
pending or proposed change in applicable tax laws, (ii) a material adverse
change in the financial condition of the Corporation, (iii) a banking
moratorium, (iv) domestic or international hostilities, (v) an amendment of
the provisions hereof which materially and adversely changes the nature of
the shares of Remarketing Preferred or the Remarketing Procedures or (vi) a
Failure to Deposit. Any Remarketing Agent may, but shall not be obligated
to, purchase tendered Remarketing Preferred for its own account. Should the
Remarketing Agent for any share of Remarketing Preferred not succeed in
Remarketing all such shares of Remarketing Preferred so tendered for
Remarketing on any date, such Remarketing Agent shall select the shares of
such Remarketing Preferred to be sold from those tendered pro rata.
Payments in the amount of $250,000 per share of Remarketing Preferred
remarketed shall be made by the Tender Agent by crediting such payments to
the accounts of the Holders thereof maintained by the Tender Agent or, to
the extent duly requested of the Tender Agent by Holders, by wire or other
transfer in immediately available funds to their accounts with commercial
banks in the United States. If for any reason a share of Remarketing
Preferred is not remarketed on the date of tender, such share will be
retained by its Holder. Until remarketed, each such share of Remarketing
Preferred will have successive Dividend Periods of one day and will be
entitled to dividends, payable on each succeeding Business Day at the
Maximum Applicable Rate.
(ii) Notice of Shares of Remarketing Preferred to be Retained. Each
share of Remarketing Preferred will be deemed to have been tendered for
sale by Remarketing on the last day of each Dividend Period, unless the
Holder thereof gives irrevocable notice to the contrary to the Remarketing
Agent for such share of Remarketing Preferred or if so instructed by such
Remarketing Agent, to the Tender Agent. Such notice, which may be
telephonic or written, must be delivered, prior to 3:00 P.M., New York City
time, on the Business Day immediately preceding the last day of a Dividend
Period or on the earlier day specified in a notice, if any, mailed by the
Tender Agent at the direction of such Remarketing Agent to such record
holder at its address as the same appears on the Stock Books of the
Corporation, which day will be a Business Day at least four Business Days
after the mailing of such notice. The notice from such Holder of an
election to retain shares of Remarketing Preferred shall state:
(A) the number of shares of such Remarketing Preferred held by the
Securities Depository or the Remarketing Depository, and
(B) the number of such shares of Remarketing Preferred which shall
be deemed not to have been so tendered.
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<PAGE>
(iii) Shares Deemed to Have Been Tendered. The failure to give notice
of an election to retain any shares of Remarketing Preferred as provided
in (b)(ii) above will constitute the irrevocable tender for sale by
Remarketing of such shares of Remarketing Preferred. Certificates
representing shares of Remarketing Preferred remarketed will be issued to
the Securities Depository or the Remarketing Depository, as the case may
be, irrespective of whether the certificates formerly representing such
shares of Remarketing Preferred have been delivered to the Tender Agent.
A Holder which has not given notice that it will retain its shares of
Remarketing Preferred shall have no further rights with respect to such
shares of Remarketing Preferred upon the Remarketing of such shares of
Remarketing Preferred, except the right to receive any declared but unpaid
dividends thereon and the proceeds of the Remarketing of such shares.
(iv) Funds for Purchase of Shares. Payments to Holders of shares of
Remarketing Preferred remarketed will be made solely from the proceeds
received from the purchasers of such shares in a Remarketing. Neither the
Corporation, the Tender Agent nor any Remarketing Agent shall be obligated
to provide funds to make payment to the holders of shares of Remarketing
Preferred tendered for Remarketing.
(c) The Remarketing Process. The Remarketing process will be conducted on
the following schedule and in the following manner (all times are New York
City time):
<TABLE>
<CAPTION>
The Last Business Day of a Dividend Period:*
Beginning Not Later Than
<S> <C>
1:00 P.M. ............... The Remarketing Agent for the shares of Remarketing
Preferred will determine and, upon request, make
available to all interested persons non-binding indications of
Dividend Periods and dividend rates based upon then- current
Marketing Conditions. Each Holder may obtain a binding
commitment as to the specific Dividend Period or Dividend
Periods and the related Applicable Rate or Applicable Rates
which will be applicable to such Holder's shares should such
Holder elect to retain them.
At 3:00 P.M ............. Holders of shares of Remarketing Preferred will be deemed
to have tendered shares of Remarketing Preferred for sale by
Remarketing at $250,000 per share unless they have
given contrary instructions to the Remarketing Agent for
such shares of Remarketing Preferred or, if so instructed
by such Remarketing Agent, to the Tender Agent.
After 3:00 P.M .......... The applicable Remarketing Agent will solicit and receive
orders from prospective investors to purchase tendered
shares of Remarketing Preferred. A purchaser, at the
time of its agreement to purchase shares of Remarketing
Preferred, may obtain a binding commitment as to the
specific Dividend Period or Dividend Periods and the
related Applicable Rate or Applicable Rates for such shares
of Remarketing Preferred based upon then-current Marketing
Conditions.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
First Business Day of Next Dividend Period:
<S> <C>
Opening of Business ..... The applicable Remarketing Agent will continue, if neces-
sary, remarketing shares of Remarketing Preferred as
described above.
By 1:00 P.M. ............ The applicable Remarketing Agent will have completed
Remarketing and will advise the Tender Agent as to the
Applicable Rate and Dividend Period applicable to each
share of Remarketing Preferred commencing a Dividend
Period on that day and of any failure to remarket.
By 2:30 P.M ............. New Holders must deliver the purchase price as instructed by
the applicable Remarketing Agent. Former Holders will be
paid the proceeds of the Remarketing of their shares by
the Tender Agent (upon surrender of their certificates, if
applicable).
<FN>
__________
*Or such other time and day as may have been specified in a notice mailed to the holders of
Remarketing Preferred.
</TABLE>
Section 10. The Remarketing Agent.
The Corporation will take all reasonable action necessary so that, at all
times, at least one investment bank, broker, dealer or other organization
qualified to remarket shares of Remarketing Preferred and to establish
Dividend Periods and Applicable Rates is acting as Remarketing Agent for each
share of Remarketing Preferred.
Section 11. Book Entry System.
(a) Shares of Preferred Stock with Dividend Periods of 7 days or longer
shall be represented by a global certificate or certificates registered in the
name of a nominee of the Securities Depository, as depository for such shares
of Preferred Stock. Shares of Remarketing Preferred with Dividend Periods of
less than 7 days shall be represented by a global certificate or certificates
registered in the name of a nominee of the Remarketing Depository, as
depository for such shares of Remarketing Preferred.
(b) All of the Outstanding shares of Auction Preferred of each Series shall
be represented by a single certificate for each Series registered in the name
of the nominee of the Securities Depository unless otherwise required by law or
unless there is no Securities Depository. If there is no Securities Depository,
shares of Auction Preferred shall be registered in the Stock Books in the name
of the Existing Holder thereof and such Existing Holder thereupon will be
entitled to receive a certificate therefor and be required to deliver a
certificate therefor upon transfer or exchange thereof.
(c) Each Series of Remarketing Preferred shall be represented by a separate
global security or global securities and shares of Remarketing Preferred having
different Dividend Payment Dates, dividend rates, redemption provisions or
Percentages, if any, shall be represented by a separate global security.
(d) Interests in shares of Preferred Stock represented by a global security
will be shown on, and transfers thereof will be effected only through, records
maintained by the respective depository.
(e) If the Securities Depository should resign and the Corporation not
select a substitute securities depository, physical delivery of certificates
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<PAGE>
shall be made in the names of designated transferees in exchange for the
global security or securities held for the account of the Securities
Depository.
Section 12. Miscellaneous.
(a) So long as the dividend rate is based on the results of an Auction or
Remarketing, a Holder (i) may sell, transfer or otherwise dispose of shares of
Auction Preferred only pursuant to a Bid or Sell Order in accordance with the
Auction Procedures or to or through a Broker-Dealer or to a Person that has
delivered a signed copy of a Purchaser's Letter to a Broker-Dealer, and in the
case of all transfers other than pursuant to Auctions, such Existing Holder of
the shares of Auction Preferred, its Broker-Dealer or its Participant advises
the Auction Agent of such transfer, (ii) may transfer shares of Remarketing
Preferred only pursuant to a tender of such shares to the Tender Agent or to a
person that has delivered a signed copy of a Purchaser's Letter to a
Remarketing Agent, and in the case of all transfers of shares of Remarketing
Preferred other than pursuant to a tender of such shares, the holder of the
shares so transferred advises a Remarketing Agent of such transfer and (iii)
unless otherwise required by law, shall have its ownership of shares of
Preferred Stock maintained in book entry form by the Securities Depository or,
in the case of shares of Remarketing Preferred with a Dividend Period of less
than 7 days, the Remarketing Depository.
(b) Each Remarketing Agent will be required to register on a list
maintained pursuant to a Remarketing Agreement a transfer of shares of
Remarketing Preferred for which it is the Remarketing Agent from a holder to
another persononly if such transfer is made to a person that has delivered a
signed copy of a Purchaser's Letter to such Remarketing Agent and if (i) such
transfer is pursuant to a Remarketing or (ii) such Remarketing Agent has been
notified in writing (A) by such holder of such transfer or (B) by any person
that purchased or sold such Remarketing Preferred in a Remarketing of the
failure of such Remarketing Preferred to be delivered or paid for, as the case
may be, in connection with such Remarketing. A Remarketing Agent is not
required to register a transfer of Remarketing Preferred pursuant to clause
(ii) above on or prior to the Business Day immediately preceding the first day
of a subsequent Dividend Period for such Remarketing Preferred unless it
receives the written notice required by such clause (ii) by 3:00 P.M., New York
City time, on the second Business Day preceding the first day of such
subsequent Dividend Period. Such Remarketing Agent will rescind a transfer
registered on such list as a result of a Remarketing if the Remarketing Agent
is notified in writing of the failure of shares of Remarketing Preferred to be
delivered or paid for as required. Any transfer of shares of Remarketing
Preferred made in violation of the terms of a Purchaser's Letter may affect the
right of the Person acquiring such shares to participate in Remarketings.
(c)(i) If the Method of determining the Dividend Rate for some or all of
the Series of Preferred Stock is the Auction Method, the Corporation or any
Affiliate of the Corporation may not submit for its own account a Bid or Hold
Order in an Auction. If the Corporation or any Affiliate holds shares of
Auction Preferred for its own account, it must submit a Sell Order in the next
auction with respect to such shares. Any Broker-Dealer that is an Affiliate of
the Corporation may not submit for its own account Bid Orders or Hold Orders in
Auctions. If such affiliated Broker-Dealer holds shares of Auction Preferred
for its own account, it must submit a Sell Order in the next Auction with
respect to such shares of Auction Preferred.
(ii) The Corporation or any Affiliate of the Corporation may acquire,
hold or dispose of shares of Remarketing Preferred. Subject to such limitations
as the Corporation and the Remarketing Agent may agree, it and its Affiliates
will purchase shares of Remarketing Preferred, if any, during Remarketings only
after 3:00 P.M. on the Business Day immediately preceding the first day of each
subsequent Dividend Period and only at Applicable Rates and for Dividend
Periods established by the Remarketing Agents without regard to such offers by
the Corporation or its Affiliates and will tender shares of Remarketing
Preferred for Remarketing only upon at least 10 days' prior notice to the
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<PAGE>
Remarketing Agents; provided, however, that if the then current Dividend Period
is less than 10 days, the Corporation will give notice to the Remarketing Agent
on the day such Dividend Period of less than 10 days commences. In the event
that the Corporation or its Affiliates purchase shares of Remarketing Preferred
for their respective accounts, all shares of Remarketing Preferred tendered by
other holders, including any such Remarketing Preferred owned by a Remarketing
Agent, will be remarketed before the Remarketing of any such Remarketing
Preferred owned by the Corporation or its Affiliates. If any shares of
Remarketing Preferred tendered for Remarketing are not sold, any shares of
Remarketing Preferred tendered for Remarketing by the Corporation or an
Affiliate of the Corporation, up to the number of such shares not so sold, will
be deemed not to have been so tendered.
(d) The purchase price of each share of Preferred Stock which is sold
either through the Auction Procedures or the Remarketing Procedures shall be
$250,000.
(e) If a holder of Converted Auction Preferred fails to give irrevocable
notice otherwise to the Remarketing Agent for such Remarketing Preferred (or,
if so instructed by such Remarketing Agent, to the Tender Agent) by no later
than 3:00 P.M., New York City time, on the Business Day immediately preceding
the first day of the subsequent Dividend Period applicable thereto, or such
other day as is specified in a notice delivered in the manner set forth in
Section 9(b)(ii), such holder will be deemed to have tendered such Converted
Auction Preferred for sale by Remarketing on such Business Day.
(f) An Auction will be held in respect of each Series of Converted
Remarketing Preferred on the Initial Auction Date. If a holder of Converted
Remarketing Preferred does not submit an Order in such Auction, such holder
will be deemed to have submitted a Sell Order in such Auction.
13. Exclusive Remedy. In the event that dividends are not timely declared
on the shares of Preferred Stock, the exclusive remedy of Holders against the
Corporation shall be as set forth in this part of Article IV (B) and in no
event shall Holders of such shares have a specifically enforceable right to the
declaration of dividends.
14. Additional Terms. (a) The Board of Directors may interpret the
provisions of this part of Article IV (B) to resolve any inconsistency or
ambiguity or remedy any formal defect.
(b) The headings of the various subdivisions of this part of Article IV (B)
are for convenience of reference only and shall not affect the interpretation
of any of the provisions hereof.
_______________________________
C. Except as otherwise provided by the General Corporation Law of the State
of Delaware or by any resolution heretofore or hereafter adopted by the Board
of Directors fixing the relative powers, preferences and rights and the
qualifications, limitations or restrictions of any additional series of
Preferred Stock, the entire voting power of the shares of the Company for the
election of directors and for all other purposes, as well as all other rights
appertaining to shares of the Company, shall be vested exclusively in the
Common Stock. Each share of Common Stock shall have one vote upon all matters
to be voted on by the holders of the Common Stock, and shall be entitled to
participate equally in all dividends payable with respect to the Common Stock
and to share ratably, subject to the rights and preferences of any Preferred
Stock, in all assets of the Company in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, or upon any distribution of the assets of the Company.
D. The Company shall not, without either the prior approval of a majority
of the total number of shares then issued and outstanding and entitled to vote
or the receipt by the Company of a favorable opinion issued by a nationally
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<PAGE>
recognized investment banking firm designated by the Committee of Equity
Security Holders of Texaco Inc. appointed in the Company's jointly administered
Chapter 11 case in the United States Bankruptcy Court for the Southern District
of New York or its last chairman (or his designee) to the effect that the
proposed issuance is fair from a finance point of view to the stockholders of
the Company issue to its stockholders generally (i) any warrant or other right
to purchase any security of the Company, any successor thereto or any other
person or entity or (ii) any security of the Company containing any such right
to purchase, which warrant, right or security (a) is exercisable, exchangeable
or convertible, based or conditioned in whole or in part on (I) a change of
control of the Company or (II) the owning or holding of any number or
percentage of outstanding shares or voting power or any offer to acquire any
number of shares or percentage of voting power by any entity, individual or
group of entities and/or individuals or (b) discriminates among holders of the
same class of securities (or the class of securities for which such warrant or
right is exercisable or exchangeable) of the Company or any successor thereto.
V.
The Company is to have perpetual existence.
VI.
The private property of the stockholders is not to be subject to the
payment of corporate debts to any extent whatever.
VII.
No holder of stock of the Company shall have any preferential right of
subscription to any share of any class of stock of the Company issued or sold,
or to any obligations convertible into stock of the Company, or any right of
subscription to any thereof other than such, if any, as the Board of Directors
in its discretion may determine, and at such prices as the Board of Directors
may fix.
VIII.
The Company may use its surplus earnings or accumulated profits in the
purchase or acquisition of its own capital stock from time to time as its Board
of Directors shall determine, and such capital stock so purchased may, if the
directors so determine, be held in the treasury of the Company as treasury
stock, to be thereafter disposed of in such manner as the directors shall deem
proper.
IX.
(A) Number, Election and Terms of Directors. Except as otherwise fixed by
or pursuant to the provisions of Article IV hereof relating to the rights of
the holders of any class or series of stock having preference over the Common
Stock as to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of the directors of the Company shall be
fixed from time to time by or pursuant to the by-laws. The directors, other
than those who may be elected by the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
shall be classified, with respect to the time for which they severally hold
office, into three classes, as nearly equal in number as possible, as shall be
provided in the manner specified in the by-laws, one class to be originally
elected for a term expiring at the annual meeting of stockholders to be held
in 1985, another class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1986, and another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1987, with each class to hold office until its successor is elected
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and qualified. At each annual meeting of the stockholders of the Company, the
successors of the class of directors whose term expires at that meeting shall
be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
(B) Stockholder Nomination of Director Candidates. Advance notice of
stockholder nominations for the election of directors shall be given in the
manner provided in the by-laws.
(C) Newly Created Directorships and Vacancies. Except as otherwise provided
for or fixed by or pursuant to the provisions of Article IV hereof relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect directors
under specified circumstances, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation or disqualification, or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then
in office, even though less than a quorum of the Board of Directors. Any
director so elected shall stand for election (for the balance of his term) at
the next annual meeting of stockholders, unless his term expires at such annual
meeting. Any vacancy on the Board of Directors resulting from removal by
stockholder vote shall be filled only by the vote of a majority of the voting
power of all shares of the Company entitled to vote generally in the election
of directors, voting together as a single class.
(D) Removal. Subject to the rights of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of
66 2/3% of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors, voting together as a
single class.
(E) Amendment, Repeal, Etc. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 66 2/3% of the voting power of all shares of the Company
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to alter, amend, adopt any provision
inconsistent with or repeal this Article IX.
X.
In furtherance, and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
(A) to fix in the by-laws from time to time the number of directors of the
Company, none of whom need be stockholders;
(B) to fix the amount to be reserved as working capital over and above its
capital stock paid in;
(C) to borrow money and to make and issue notes, bonds, debentures,
obligations and evidence of indebtedness of all kinds, with or without the
privilege of conversion into stock of the Company; and also to authorize and
cause to be executed mortgages and liens upon the real and personal property
of the Company and conveyances of its real estate;
(D) from time to time to determine whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts and
books of the Company (other than the stock ledger), or any of them, shall be
open to inspection of stockholders; and no stockholder shall have any right of
inspecting any account book or document of the Company except as conferred by
statute, unless authorized by a resolution of the stockholders or directors;
and
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(E) if the by-laws so provide, to designate by resolution three or more of
its number to constitute an executive committee, which committee shall, for
the time being, have and exercise such of the powers of the Board of Directors
in the management of the business and affairs of the Company, and have power
to authorize the seal of the Company to be affixed to all papers which may
require it.
The Company may in its by-laws confer powers upon its directors in addition
to the foregoing and in addition to the powers and authorities expressly
conferred upon them by statute.
Both stockholders and directors shall have power, if the by-laws so
provide, to hold their meeting and to have one or more offices within or
without the State of Delaware, and to keep the books of the Company (subject to
the provisions of applicable laws), outside of the State of Delaware at such
places as may be from time to time designated by the Board of Directors.
XI.
Any action required or permitted to be taken by the stockholders of the
Company must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders.
Except as otherwise required by law and subject to the rights of the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, special meetings of stockholders of the Company
may be called only by the Board of Directors pursuant to a resolution approved
by a majority of the entire Board of Directors. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 66 2/3% of the voting power of all shares of
the Company entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal this Article XI.
XII.
The Board of Directors shall have power to make, alter, amend and repeal
the by-laws (except so far as the by-laws adopted by the stockholders shall
otherwise provide). Any by-laws made by the directors under the powers
conferred hereby may be altered, amended or repealed by the directors or by
the stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, Section 2 of Article I and
Sections 1,2,3 and 4 of Article II of the by-laws shall not be altered, amended
or repealed and no provision inconsistent therewith shall be adopted without
the affirmative vote of the holders of at least 66 2/3% of the voting power of
all the shares of the Company entitled to vote generally in the election of
directors, voting together as a single class. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 66 2/3% of the voting power of all shares of
the Company entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal this Article XII.
XIII.
(A) Vote Required for Certain Business Combinations.
(1) Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or this Certificate of Incorporation, and
except as otherwise expressly provided in Section B of this Article XIII:
(a) any merger or consolidation of the Company or any Subsidiary
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(as hereinafter defined) with (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other Company (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Company or any Subsidiary having an
aggregate Fair Market Value of $100 million or more; or
(c) the issuance or transfer by the Company or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Company or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $100 million or more or;
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Company or any
Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of capital stock of the
Company entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class (it being understood
that for purposes of this Article XIII, each share of the Voting Stock
shall have the number of votes granted to it pursuant to Article IV of
this Certificate of Incorporation). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(2) Definition of "Business Combination." The term "Business
Combination" as used in this Article XIII shall mean any transaction which
is referred to in any one or more of clauses (a) through (e) of paragraph
(1) of this Section (A).
(B) When Higher Vote is Not Required. The provisions of Section A of this
Article XIII shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote as is
required by law and any other provision of this Certificate of Incorporation,
if all of the conditions specified in either of the following paragraphs (1)
and (2) are met:
(1) Approval by Disinterested Directors. The Business Combination shall
have been approved by a majority of the Disinterested Directors (as
hereinafter defined).
(2) Price and Procedure Requirements. All of the following conditions
shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share
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by holders of Common Stock in such Business Combination shall be at
least equal to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any shares of Common Stock
acquired by it (a) within the two-year period immediately prior to
the first publication announcement of the proposal of the Business
Combination (the "Announcement Date") or (b) in the transaction in
which it became an Interested Stockholder, whichever is higher; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Article XIII as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any other class of outstanding Voting Stock shall be at least
equal to the highest of the following (it being intended that the
requirements of this paragraph 2(b) shall be required to be met with
respect to every class of outstanding Voting Stock, whether or not the
Interested Stockholder has previously acquired any shares of a
particular class of Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any shares of such class of
Voting Stock acquired by it (a) within the two-year period
immediately prior to the Announcement Date or (b) in the
transaction in which it became an Interested Stockholder, whichever
is higher;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company; and
(iii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
(c) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as the Interested Stockholder has previously
paid for shares of such class of Voting Stock. If the Interested
Stockholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock previously
acquired by it. The price determined in accordance with paragraph 2(a)
and 2(b) of this Section B shall be subject to appropriate adjustment
in the event of any stock dividend, stock split, combination of shares
or similar event.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(i) except as approved by a majority of the Disinterested Directors,
there shall have been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not cumulative) on
the outstanding Preferred Stock; (ii) there shall have been (A) no
reduction in the annual rate of dividends paid on the Common Stock
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(except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors, and
(B) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number of outstanding shares of the Common
Stock unless the failure so to increase such annual rate is approved by
a majority of the Disinterested Directors; and (iii) such Interested
Stockholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Company, whether in anticipation of or in connection
with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public stockholders of the Company at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
(C) Vote Required for Certain Stock Repurchases. In addition to any other
requirement of this Certificate of Incorporation, the affirmative vote of the
holders of at least 50% of the Voting Stock (other than Voting Stock
beneficially owned by a Selling Stockholder (as hereinafter defined)), shall be
required before the Company purchases any outstanding shares of Common Stock at
a price above the Market Price (as hereinafter defined) from a person actually
known by the Company to be a Selling Stockholder, unless the purchase is made
by the Company (i) on the same terms and as a result of an offer made generally
to all holders of Common Stock or (ii) pursuant to statutory appraisal right.
(D) Certain Definitions. For the purposes of this Article XIII:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean any person (other than the
Company or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more than
20% of the voting power of the outstanding Voting Stock; or
(b) is an Affiliate of the Company and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 20% or more of the voting
power of the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
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(3) A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (ii) the right
to vote pursuant to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
(4) For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph 2 of this Section C, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph 3 of this Section C but shall not include
any other shares which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(5) "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on March 1, 1984.
(6) "Subsidiary" means any corporation of which a majority of any class
of equity security is owned, directly or indirectly, by the Company;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph 2 of this Section C, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Company.
(7) "Disinterested Director" means any member of the Board of Directors
who is unaffiliated with the Interested Stockholder and was a member of the
Board of Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and any successor of a Disinterested Director
who is unaffiliated with the Interested Stockholder and is recommended to
succeed a Disinterested Director by a majority of Disinterested Directors
then on the Board of Directors.
(8) "Fair Market Value" means: (a) in the case of the stock, the
highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for
New York Stock Exchange-Listed Stocks, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in
use, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by the Board of
Directors in good faith; and (b) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined by the Board of Directors in good faith.
(9) "Selling Stockholder" means any person who or which is the
beneficial owner of in the aggregate more than 1% of the outstanding shares
of Common Stock and who or which has purchased or agreed to purchase any
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of such shares within the most recent two-year period and who sells or
proposes to sell Common Stock in a transaction requiring the affirmative
vote provided for in Section C of this Article XIII.
(10) "Market Price" means the highest sale price on or during the
period of five trading days immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or if such stock is not quoted on the Composite
Tape on the New York Stock Exchange, or, if such stock is not listed
on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of stock on or during the
period of five trading days immediately preceding the date in question on
the National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are available,
the fair market value on the date in question of a share of such stock as
determined by a majority of the Disinterested Directors.
(E) Powers of the Board of Directors. A majority of the directors shall
have the power and duty to determine for the purposes of this Article XIII, on
the basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Company or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $100 million or more. A
majority of the directors shall have the further power to interpret all of the
terms and provisions of this Article XIII.
(F) No Effect on Fiduciary Obligations of Interested Stockholders. Nothing
contained in this Article XIII shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
(G) Amendment, Repeal, etc. Notwithstanding any other provisions of this
Certificate of Incorporation or the by-laws (and notwithstanding the fact that
a lesser percentage may be specified by law, this Certificate of Incorporation
or the by-laws) the affirmative vote of the holders of 80% or more of the
outstanding Voting Stock, voting together as a single class, shall be required
to amend or repeal, or adopt any provisions inconsistent with this Article
XIII.
XIV.
A director of the Company shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted under the Delaware General Corporation Law as the same exists or may
hereafter be amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Company shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.
XV.
The Company reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by this Certificate of Incorporation or statute, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
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I, Robert E. Koch, an Assistant Secretary of Texaco Inc., a Delaware
corporation, do hereby certify that the foregoing includes all of the
provisions of the Restated Certificate of Incorporation of Texaco Inc. filed
with the Delaware Secretary of State on April 27, 1990, as amended on December
22, 1992 and November 9, 1994.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of the Company this 27th day of March, 1995.
Robert E. Koch
............................................
Assistant Secretary
77
EXHIBIT 3.2
BY-LAWS OF TEXACO INC,
A Delaware Corporation
ARTICLE I.
Stockholders.
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be held
on the second Tuesday in May of each year at 10:00 in the morning, or at such
time of day or on such other date in each calendar year as may be fixed by the
Board of Directors, for the election of directors and the transaction of any
other business as may properly come before the meeting.
SECTION 2. Stockholder Action; Special Meetings. Any action required or
permitted to be taken by the stockholders of the Company must be effected at
a duly called annual or special meeting of such holders and may not be
effected by any consent in writing by such holders. Except as otherwise
required by law and subject to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to dividends or upon
liquidation, special meetings of stockholders of the Company may be called only
by the Board of Directors pursuant to a resolution approved by a majority of
the entire Board of Directors.
SECTION 3. Notice of Meetings. Notice of each meeting of stockholders,
annual or special, stating the time and place, and, if a special meeting, the
purpose or purposes in general terms, shall be mailed no earlier than 60 days
and no later than 10 days prior to the meeting to each stockholder at the
stockholder's address as the same appears on the books of the Company.
SECTION 4. Place. Meetings of the stockholders shall be held at such place
or places as the Board of Directors may direct, the place to be specified in
the notice.
SECTION 5. Quorum. At any meeting of stockholders, the holders of a
majority of the voting shares issued and outstanding, being present in person
or represented by proxy, shall be a quorum for all purposes, except where
otherwise provided by statute.
SECTION 6. Adjournments. Any annual or special meeting of stockholders
duly and regularly called in accordance with these by-laws may adjourn one
or more times and no further notice of such adjourned meeting or meetings
shall be necessary. If at any annual or special meeting of stockholders a
quorum shall fail to attend in person or by proxy, a majority in interest of
the stockholders attending in person or by proxy may adjourn the meeting to
another time, or to another time and place, and there may be successive
adjournments for like cause and in like manner without further notice until a
quorum shall attend. Any business may be transacted at any such adjourned
meeting or meetings which might have been transacted at the meeting as
originally called.
SECTION 7. Organization. The Chairman of the Board, or, in his absence,
the Vice Chairman, or, in their absence, the President, or, in their absence,
one of the Executive Vice Presidents, or, in their absence, one of the Senior
Vice Presidents, or, in their absence, a Vice President appointed by the
stockholders, shall call meetings of the stockholders to order and shall act
as chairman thereof. The Secretary of the Company, if present, shall act as
secretary of all meetings of the stockholders; and, in his absence, the
presiding officer may appoint a secretary.
SECTION 8. Voting. At each meeting of the stockholders, every stockholder
of record (at the closing of the transfer books if closed) shall be entitled
to vote in person or by proxy appointed by an instrument in writing subscribed
by such stockholder or by his duly authorized attorney and delivered to and
filed with the Secretary at the meeting; and each stockholder shall have one
vote for each share of stock standing in his name. Voting for directors, and
upon any question at any meeting, shall be by ballot, if demanded by any
stockholder.
SECTION 9. List of Stockholders. The Secretary shall keep records from
which a list of stockholders can be compiled, and shall furnish such list
upon order of the Board of Directors.
ARTICLE II.
The Board of Directors.
SECTION 1. Number, Election and Terms. Except as otherwise fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the directors
of the Company shall be fixed from time to time by the Board of Directors but
shall not be less than three. The directors, other than those who may be
elected by the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes,
as nearly equal in number as possible, as determined by the Board of Directors,
one class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1985, another class to be originally elected for a
term expiring at
* 1 *
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the annual meeting of stockholders to be held in 1986, and another class to be
originally elected for a term expiring at the annual meeting of stockholders
to be held in 1987, with each class to hold office until its successor is
elected and qualified. At each annual meeting of the stockholders of the
Company, the successors of the class of directors whose term expires at that
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year followingthe year of their
election.
SECTION 2. Newly Created Directorships and Vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article IV of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, newly
created directorships resulting from any increases in the number of directors
or any vacancies on the Board of Directors resulting from death, resignation or
disqualification, or other cause shall be filled by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director so elected shall stand for
election (for the balance of his term) at the next annual meeting of
stockholders, unless his term expires at such Annual Meeting. Any vacancy on
the Board of Directors resulting from removal by stockholder vote shall be
filled only by the vote of a majority of the voting power of all shares of the
Company entitled to vote generally in the election of directors, voting
together as a single class. The affirmative vote of the holders of at least a
majority of the then outstanding shares of capital stock of the Company voting
generally in the election of directors, voting together as a single class,
shall be required to repeal the foregoing provisions.
SECTION 3. Removal. Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation
to elect Directors under specified circumstances, any director may be removed
from office, with or without cause, only by the affirmative vote of the holders
of 66-2/3% of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors, voting together as a
single class.
SECTION 4. Nominations. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, nominations for the election of directors may be made by the
Board of Directors or a proxy committee appointed by the Board of Directors or
by any stockholder entitled to vote in the election of directors generally.
However, any stockholder entitled to vote in the election of directors
generally may nominate one or more persons for election as directors at a
meeting only if written notice of such stockholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Company not later
than (i) with respect to an election to be held at an annual meeting of
stockholders, 90 days in advance of such meeting, and (ii) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to stockholders. Each such notice shall
set forth: (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as a director of the Company if so elected. The chairman
of the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the foregoing procedure.
SECTION 5. First Meeting of Board. After each annual meeting of
stockholders, the Board of Directors shall meet for the purpose of
organization, the election of officers, and the transaction of other business,
forthwith after each annual meeting, and if a majority of the directors are
present at such place and time, no other notice of such meeting shall be
required to be given to the directors. The place and time of such first
meeting may also be fixed by written consent of the directors.
SECTION 6. Regular Meetings. Regular meetings of the Board are fixed and
may be held without notice at the office of the Company in Harrison, New York
on the fourth Friday in each month at 9:00 A.M., or at such other time and
place, either within or without the State of Delaware, as the Board may provide
by resolution, without other notice than such resolution. If less than a
quorum is present at any meeting time and place, those present may adjourn from
time to time until a quorum shall be present, but if there shall be no quorum
prior to another regular meeting time, then such meetings of less than a quorum
need not be recorded.
SECTION 7. Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, or, in his absence, by the Vice
Chairman of the Board, or, in their absence, by the President, or by one-third
of the directors then in office. The person or persons authorized to call
special meetings of the Board may fix any place, either within or without the
State of Delaware, as the place for holding any special meeting. Unless
otherwise specified in the notice thereof, any business may be transacted at a
special meeting.
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SECTION 8. Notice of Special Meetings. The Secretary shall mail to each
director notice of any special meeting at least two days before the meeting,
or shall telegraph or telephone such notice not later than the day before the
meeting. When all directors are present, any business may be transacted
without any previous notice. Any director may waive notice of any meeting.
SECTION 9. Quorum. A majority of the total number of directors, or half of
the total number when the number of directors then in office is even, shall
constitute a quorum for the transaction of business, and a majority of those
present at the time and place of any regular or special meeting, although less
than a quorum, may adjourn the same from time to time, as provided in these
by-laws.
SECTION 10. Chairman. At all meetings of the Board, the Chairman of
the Board, or, in his absence, the Vice Chairman of the Board, or, in their
absence, the President, or, in their absence, a chairman chosen by the
directors present, shall preside.
SECTION 11. Action without Meeting. A statement in writing, signed by all
members of the Board of Directors or the Executive Committee, shall be deemed
to be action by the Board or Committee, as the case may be, to the effect
therein expressed, and it shall be the duty of the Secretary to record such
statement in the minute books of the Company under its proper date.
ARTICLE III.
Executive Committee and Other Committees.
SECTION 1. Executive Committee. The Board of Directors shall appoint an
Executive Committee of seven or more members to serve during the pleasure of
the Board to consist of the Chairman of the Executive Committee, the Chairman
of the Board, the Vice Chairman of the Board, the President, and such
additional directors as the Board may from time to time designate.
SECTION 2. The Chairman of the Executive Committee. The Chairman of the
Executive Committee shall be designated by the Board of Directors and shall be
a member of the Board and of the Executive Committee. He shall preside at
meetings of the Executive Committee, and shall do and perform such other things
as may from time to time by assigned to him by the Board of Directors.
SECTION 3. Vacancies. Vacancies in the Executive Committee shall be filled
by the Board.
SECTION 4. Executive Committee to Report. All action by the Executive
Committee shall be reported promptly to the Board and such action shall be
subject to review by the Board, provided that no rights of third parties shall
be affected by such review.
SECTION 5. Procedure. The Executive Committee, by a vote of a majority of
all of its members, shall fix its own times and places of meeting, shall
determine the number of its members constituting a quorum for the transaction
of business, and shall prescribe its own rules of procedure, no change in which
shall be made save by a majority vote of all of its members.
SECTION 6. Powers. During the intervals between the meetings of the Board,
the Executive Committee shall possess and may exercise all the powers of the
Board in the management and direction of the business and affairs of the
Company, except those which by applicable statute are reserved to the Board
of Directors.
SECTION 7. Other Committees. From time to time the Board may appoint other
committees, and they shall have such powers as shall be specified in the
resolution of appointment.
ARTICLE IV.
Officers.
SECTION 1. Number. The Board of Directors shall elect the executive
officers of the Company which may include a Chairman of the Board, one or more
Vice Chairmen of the Board, a President, one or more Vice Presidents (one or
more of whom may be designated as Executive Vice Presidents or as Senior Vice
Presidents or by other designations), a General Counsel, a Secretary, a
Treasurer, a Comptroller, and a General Tax Counsel. A person may at the
same time hold, exercise and perform the powers and duties of more than one
executive officer position. In addition to the executive officers, the Board
may appoint one or more Assistant Secretaries, Assistant Treasurers and
Assistant Comptrollers and such other officers or agents as the Board may
from time to time deem necessary or desirable. All officers and agents shall
perform the duties and exercise the powers usually incident to the offices or
positions held by them, those prescribed by these by-laws, and those assigned
to them from time to time by the Board or by the Chief Executive Officer.
SECTION 2. The Chairman of the Board. The Chairman of the Board shall be a
member of the Board of Directors and of the Executive Committee. He shall
preside at meetings of the stockholders and of the directors, and shall keep in
close touch with the administration of the affairs of the Company, shall advise
and counsel
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with the Vice Chairman of the Board and the President, and with other
executives of the Company and shall do and perform such other duties as may
from time to time be assigned to him by the Board of Directors or by the
Executive Committee.
SECTION 3. The Vice Chairman of the Board. The Vice Chairman of the Board
shall be a member of the Board of Directors and the Executive Committee. He
shall keep in close touch with the administration of the affairs of the
Company, shall advise and counsel with the Chairman of the Board and the
President, and with other executives of the Company, and shall do and perform
such other duties as may from time to time be assigned to him by the Board of
Directors or the Executive Committee.
SECTION 4. The President. The President shall be a member of the Board of
Directors and of the Executive Committee. He shall keep in close touch with
the administration of the affairs of the Company, shall advise and counsel with
the Chairman of the Board and the Vice Chairman of the Board and with other
executives of the Company, and shall do and perform such other duties as may
from time to time be assigned to him by the Board of Directors or by the
Executive Committee. In the absence of the Chairman of the Board, he shall
preside at meetings of the stockholders and of the directors.
SECTION 5. The Chief Executive Officer. Either the Chairman of the Board,
or the President, as the Board of Directors may designate, shall be the Chief
Executive Officer of the Company. The officer so designated shall have, in
addition to the powers and duties applicable to the office set forth in either
Section 2 or 4 of this Article IV, general active supervision over the business
and affairs of the Company and over its several officers, agents, and
employees, subject, however, to the direction and control of the Board or the
Executive Committee. The Chief Executive Officer shall see that all orders and
resolutions of the Board or the Executive Committee are carried into effect,
and, in general, shall perform all duties incident to the position of Chief
Executive Officer and such other duties as may from time to time be assigned
by the Board or the Executive Committee.
SECTION 6. The Executive Vice Presidents. The Executive Vice Presidents
shall keep in touch with the administration of the affairs of the Company,
shall advise and counsel with the Chairman of the Board, the Vice Chairman of
the Board and with the President and with other executives of the Company, and
shall do and perform such other duties as from time to time may be assigned to
them by the Board of Directors, the Executive Committee, the Chairman of the
Board, the Vice Chairman of the Board, or the President. In the absence of the
Chairman of the Board, the Vice Chairman of the Board and the President, the
senior Executive Vice President shall preside at meetings of the stockholders.
SECTION 7. The Senior Vice Presidents. Each Senior Vice President shall
have such powers as may be conferred upon him by the Board of Directors, and
shall perform such duties as from time to time may be assigned to him by the
Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President.
SECTION 8. The Vice Presidents. Each Vice President shall have such powers
as may be conferred upon him by the Board of Directors, and shall perform such
duties as from time to time may be assigned to him by the Board of Directors,
the Executive Committee, the Chairman of the Board the Vice Chairman of the
Board, or the President.
SECTION 9. The General Counsel. The General Counsel shall have charge of
all the legal affairs of the Company and shall exercise supervision over its
contract relations.
SECTION 10. The Secretary. The Secretary shall keep the minutes of all
meetings of the stockholders and the Board of Directors in books provided for
the purpose. He shall attend to the giving and serving of all notices for the
Company. He shall sign with the Chairman of the Board, the Vice Chairman of
the Board, the President, and Executive Vice President, a Senior Vice
President, or a Vice President, such contracts as may require his signature,
and shall in proper cases affix the seal of the Company thereto. He shall
have charge of the certificate books and such other books and papers as the
Board of Directors may direct. He shall sign with the Chairman, the President,
or a Vice President certificates of stock, and he shall in general perform all
the duties incident to the Office of Secretary, subject to the control of the
Board, and shall perform such other duties as from time to time may be assigned
to him by the Board of Directors, the Executive Committee, the Chairman of the
Board, the Vice Chairman of the Board, or the President. Any Assistant
Secretary may, in his own name, perform any duty of the Secretary, when so
requested by the Secretary or in the absence of that officer, and may perform
such duties as may be prescribed by the Board. In the absence of the Secretary
and of all Assistant Secretaries, minutes of any meetings may be kept by a
Secretary pro tem, appointed for that purpose by the presiding officer.
SECTION 11. The Treasurer. The Treasurer shall have charge and custody of
and be responsible for all the funds and securities of the Company, and may
invest the same in any securities as may be permitted by law; designate
depositories in which all monies and other valuables to the credit of the
Company may be deposited; render to the Board, or any committee designated by
the Board, whenever the Board or such committee may require, an account of all
transactions as Treasurer; and in general perform all the duties of the office
of Treasurer and such other duties as from time to time may be assigned by the
Chairman of the Board, the
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Vice Chairman of the Board, the President, the officer of the Company who may
be designated Chief Financial Officer, and the Board of Directors. In case
one or more Assistant Treasurers be appointed, the Treasurer may delegate to
them the authority to perform such duties as the Treasurer may determine.
SECTION 12. The Comptroller. The Comptroller shall be the principal
accounting officer of the corporation; shall have charge of the Company's books
of accounts, records and auditing, shall ensure that the necessary internal
controls exist within the Company to provide reasonable assurance that the
Company's assets are safeguarded and that financial records are maintained and
publicly disclosed in accordance with generally accepted accounting principles;
and in general perform all the duties incident to the office of Comptroller and
such other duties as from time to time may be assigned by the Chairman of the
Board, the Vice Chairman of the Board, the President, the officer of the
Company who may be designated Chief Financial Officer, and the Board of
Directors. In case one or more Assistant Comptrollers be appointed, the
Comptroller may delegate to them such duties as the Comptroller may determine.
SECTION 13. The General Tax Counsel. The General Tax Counsel shall have
charge of all the tax affairs of the Company.
SECTION 14. Tenure of Officers: Removal. All officers elected or appointed
by the Board shall hold office until their successor is elected or appointed
and qualified, or until their earlier resignation or removal. All such
officers shall be subject to removal, with or without cause, at any time by the
affirmative vote of a majority of the whole Board.
ARTICLE V.
Indemnification.
SECTION 1. Right to Indemnification. The Company shall indemnify, defend
and hold harmless any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or other, including
appeals, by reason of the fact that he is or was a director, officer or
employee of the Company, or is or was serving at the request of the Company as
a director, officer or employee of any corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or employee or in any other capacity while
serving as a director, officer or employee, to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said Law permitted the Company to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that except as provided in Section 2 hereof with respect to
proceedings seeking to enforce rights to indemnification, the Company shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding
(or part thereof) was authorized by the Board of Directors of the Company.
The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the Company expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that if required by law at the time of such payment, the payment of
such expenses incurred by a director or officer in his capacity as a director
or officer (and not in any other capacity in which service was or is rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of
such proceeding, shall be made only upon delivery to the Company of an
undertaking, by or on behalf of such director or officer to repay all amounts
so advanced if it should be determined ultimately that such director or officer
is not entitled to be indemnified under this Section or otherwise.
"Employee." as used herein, includes both an active employee in the
Company's service as well as a retired employee who is or has been a party to
a written agreement under which he might be, or might have been obligated to
render services to the Company.
SECTION 2. Right of Claimant to Bring Suit. If a claim under Section 1 is
not paid in full by the Company within sixty days or, in cases of advances of
expenses, twenty days, after a written claim has been received by the Company,
the claimant may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking has been tendered to
the Company) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Company to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Company (including
its Board of Directors, independent legal counsel or its stockholders) that the
claimant had not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant had not met the applicable
standard of conduct. The Company shall be precluded from asserting in any
judicial proceeding commenced pursuant to this Article that the procedures and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such proceeding that the Company is bound by all the
provisions of this Article.
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SECTION 3. Non-Exclusivity and Survival. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article (a) shall apply to acts or
omissions antedating the adoption of this by-law, (b) shall be severable,
(c) shall not be exclusive of other rights to which any director, officer or
employe may now or hereafter be entitled, (d) shall continue as to a person who
has ceased to be such director, officer or employe and (e) shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE VI.
Capital Stock.
SECTION 1. Form and Execution of Certificates. The certificates of shares
of the capital stock of the Company shall be in such form as shall be approved
by the Board. The certificates shall be signed by the Chairman of the Board,
the President, or a Vice President, and the Secretary or an Assistant
Secretary.
SECTION 2. Certificates to be Entered. Certificates shall be consecutively
numbered, and the names of the owners, the number of shares and the date of
issue, shall be entered in the books of the Company.
SECTION 3. Old Certificates to be Canceled. Except in the case of lost
or destroyed certificates, and in that case only upon performance of such
conditions as the Board may prescribe, no new certificate shall be issued in
lieu of a former certificate until such former certificate shall have been
surrendered and canceled.
SECTION 4. Transfer of Shares. Shares shall be transferred only on the
books of the Company by a holder thereof in person or by his attorney appointed
in writing, upon the surrender and cancellation of certificates for a like
number of shares.
SECTION 5. Regulations. The Board may make such rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates of stock of the Company.
SECTION 6. Registrar. The Board may appoint a registrar of transfers and
may require all certificates to bear the signature of such registrar.
SECTION 7. Closing of Transfer Books. If deemed expedient by the Board,
the stock books and transfer books may be closed for the meetings of the
stockholders, or for other purposes, during such periods as from time to time
may be fixed by the Board, and during such periods no stock shall be
transferable on said books.
SECTION 8. Dates of Record. If deemed expedient by the Board, the directors
may fix in advance, a date, not exceeding 60 days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting or entitled to receive payment of any such dividend, or to any
such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the Company after any such record date fixed as aforesaid.
SECTION 9. Rights to Purchase Securities. The Company shall not, without
either the prior approval of a majority of the total number of shares then
issued and outstanding and entitled to vote or the receipt by the Company of a
favorable opinion issued by a nationally recognized investment banking firm
designated by the Committee of Equity Security Holders of Texaco Inc. appointed
in the Company's jointly administered chapter 11 case in the United States
Bankruptcy Court for the Southern District of New York or its last chairman
(or his designee) to the effect that the proposed issuance is fair from a
finance point of view to the stockholders of the Company issue to its
stockholders generally (i) any warrant or other right to purchase any security
of the Company, any successor thereto or any other person or entity or (ii) any
security of the Company containing any such right to purchase, which warrant,
right or security (a) is exercisable, exchangeable or convertible, based or
conditioned in whole or in part on (I) a change of control of the Company or
(II) the owning or holding of any number or percentage of outstanding shares
or voting power or any offer to acquire any number of shares or percentage of
voting power by any entity, individual or group of entities and/or individuals
or (b) discriminates among holders of the same class of securities (or the
class of securities for which such warrant or right is exercisable or
exchangeable) of the Company or any successor thereto. The affirmative vote
of the holders of at least a majority of the then outstanding shares of capital
stock of the Company voting generally in the election of directors, voting
together as a single class, shall be required to repeal the foregoing
provisions.
ARTICLE VII.
Fair Price.
A. Vote Required for Certain Business Combinations.
1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or the Certificate of Incorporation, and
except as otherwise expressly provided in Section B of this Article VII:
a. any merger or consolidation of the Company or any Subsidiary (as
hereinafter defined) with (i) any Interested Stockholder (as hereinafter
defined) or (ii) any other person (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested Stockholder; or
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b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of any
assets of the Company or any Subsidiary having an aggregate Fair Market
Value of $100 million or more; or
c. the issuance or transfer by the Company or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Company
or any Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value of $100
million or more; or
d. the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
e. any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity or
convertible securities of the Company or any Subsidiary which is directly
or indirectly owned by any Interested Stockholder or any Affiliate of any
Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of capital stock of the Company entitled
to vote generally in the election of directors (the "Voting Stock"), voting
together as a single class (it being understood that for purposes of this
Article VII, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article IV of the Certificate of Incorporation).
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
2. Definition of "Business Combination". The term "Business Combination" as
used in this Article VII shall mean any transaction which is referred to in any
one or more of clauses (a) through (e) of paragraph 1 of this Section A.
B. When Higher Vote is Not Required. The provisions of Section A of this
Article VII shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote as is
required by law and any provision of the Certificate of Incorporation, if all
of the conditions specified in either of the following paragraphs 1 and 2
are met:
1. Approval by Disinterested Directors. The Business Combination shall have
been approved by a majority of the Disinterested Directors (as hereinafter
defined).
2. Price and Procedure Requirements. All of the following conditions shall
have been met:
a. The aggregate amount of the cash to be received per share by holders
of Common Stock in such Business Combination shall be at least equal to the
higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of Common Stock acquired by
it (a) within the two-year period immediately prior to the first
publication announcement of the proposal of the Business Combination (the
"Announcement Date") or (b) in the transaction in which it became an
Interested Stockholder, whichever is higher; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (such latter date is referred to in
this Article VII as the "Determination Date"), whichever is higher.
b. The aggregate amount of the cash to be received per share by holders
of shares of any other class of outstanding Voting Stock shall be at least
equal to the highest of the following (it being intended that the
requirements of this paragraph 2b shall be required to be met with respect
to every class of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular class of
Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of such class of Voting
Stock acquired by it (a) within the two-year period immediately prior to
the Announcement Date or (b) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential amount per share to
which the holders of shares of such class of Voting Stock are entitled in
the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company; and
(iii) the Fair Market Value per share of such class of Voting Stock on
the Announcement Date or on the Determination Date, whichever is higher.
c. The consideration to be received by holders of a particular class of
outstanding Voting Stock (including Common Stock) shall be in cash. The
price determined in accordance with paragraphs 2a and 2b of this Section B
shall be subject to appropriate adjustment in the event of any stock
dividend, stock split, combination of shares or similar event.
d. After such Interested Stockholder has become an Interested Stockholder
and prior to the consummation of such Business Combination: (i) except as
approved by a majority of the Disinterested Directors, there shall have been
no failure to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on the outstanding Preferred
Stock; (ii) there shall have been (a) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors, and (b) an increase in such annual rate of
dividends as
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necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock unless the failure so to increase such annual
rate is approved by a majority of the Disinterested Directors; and (iii)
such Interested Stockholder shall have not become the beneficial owner of
any additional shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an Interested
Stockholder.
e. After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the Company, whether in
anticipation of or in connection with such Business Combination or
otherwise.
f. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
public stockholders of the Company at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. Vote Required for Certain Stock Repurchases. In addition to any other
requirement of this Certificate of Incorporation, the affirmative vote of
the holders of at least 50% of the Voting Stock (other than Voting Stock
beneficially owned by a Selling Stockholder (as hereinafter defined)), shall be
required before the Company purchases any outstanding shares of Common Stock
at a price above the Market Price (as hereinafter defined) from a person
actually known by the Company to be a Selling Stockholder, unless the purchase
is made by the Company (a) on the same terms and as a result of an offer made
generally to all holders of Common Stock or (b) pursuant to statutory
appraisal rights.
D. Certain Definitions. For the purpose of this Article VII:
1. A "person" shall mean any individual, firm, corporation or other entity.
2. "Interested Stockholder" shall mean any person (other than the Company
or any Subsidiary) who or which:
a. is the beneficial owner, directly or indirectly, of more than 20% of
the voting power of the outstanding Voting Stock; or
b. is an Affiliate of the Company and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 20% or more of the voting power of the then
outstanding Voting Stock; or
c. is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within
the meaning of the Securities Act of 1933.
3. A person shall be a "beneficial owner" of any Voting Stock:
a. which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns directly or indirectly; or
b. which such person or any of its Affiliates or Associates has (i) the
right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding; or
c. which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
4. For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph 2 of this Section D, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph 3 of this Section D but shall not include any other
shares which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
5."Affiliate" or "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1988.
6."Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Company; provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in paragraph 2 of this Section D, the term "Subsidiary" shall mean only
a corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the Company.
7. "Disinterested Director" means any member of the Board of Directors who
is unaffiliated with the Interested Stockholder and was a member of the Board
of Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Disinterested Director who is
unaffiliated with the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
Board of Directors.
8. "Fair Market Value" means (a) in the case of the stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for the New York
Stock Exchange-Listed Stocks, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations
* 8 *
<PAGE>
System or any system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined by the Board of Directors in good faith; and (b) in the case of
property other than cash or stock, the fair market value of such property on
the date in question as determined by a majority of the Disinterested
Directors.
9."Selling Stockholder" means any person who or which is the beneficial
owner of in the aggregate more than 1% of the outstanding shares of Common
Stock and who or which has purchased or agreed to purchase any of such shares
within the most recent two-year period and who sells or proposes to sell
Common Stock in a transaction requiring the affirmative vote provided for in
Section C of this Article VII.
10. "Market Price" means the highest sale price on or during the period of
five trading days immediately preceding the date in question of a share of
such stock on the Composite Tape for New York Stock Exchange-Listed Stock, or
if such stock is not quoted on the Composite Tape on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not listed on any
such exchange, the highest closing bid quotation with respect to a share of
stock on or during the period of five trading days immediately preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Disinterested Directors.
E. Powers of the Board of Directors. A majority of the directors shall have
the power and duty to determine for the purposes of this Article VII, on the
basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Company or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value of $100 million or
more. A majority of the directors shall have the further power to interpret
all of the terms and provisions of this Article VII.
F. No Effect on Fiduciary Obligations of Interested Stockholders. Nothing
contained in this Article VII shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
G. Amendment, Repeal, etc. Notwithstanding any other provisions of the
Certificate of Incorporation or these by-laws (and notwithstanding the fact
that a lesser percentage may be specified by law, the Certificate of
Incorporation or these by-laws) the affirmative vote of the holders of at least
a majority of then outstanding shares of capital stock of the Company voting
generally in the election of directors, voting together as a single class shall
be required to repeal the foregoing provisions of this Article VII.
ARTICLE VIII.
Seal.
The seal of the Company shall be in circular form containing the name of the
Company around the margin, with a five pointed star in the center embodying a
capital "T".
ARTICLE IX.
By-Law Amendments.
Subject to the provisions of the Certificate of Incorporation, these by-laws
may be altered, amended or repealed at any regular meeting of the stockholders
(or at any special meeting thereof duly called for that purpose) by a majority
vote of the shares represented and entitled to vote at such meeting; provided
that in the notice of such special meeting notice of such purpose shall be
given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these by-laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend these by-laws,
or enact such other by-laws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the Company.
_______________________
I, Robert E. Koch, Assistant Secretary of Texaco Inc., a Delaware corporation,
do hereby certify that the above and foregoing is a true and correct copy of
the by-laws of said Company as amended to February, 26, 1993, and now
in effect.
Dated Harrison, N.Y. March 27, 19 95 Robert E. Koch
------------------- ----- ---------------------------
Assistant Secretary
* 9 *
EXHIBIT 11
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------
(Millions of dollars, except per share amounts)
Primary Net Income Per Common Share 1994 1993 1992
----------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net income from continuing operations, before
cumulative effect of accounting changes $ 979 $ 1,259 $ 1,038
Net loss from discontinued operations (69) (191) (26)
Cumulative effect of accounting changes _ _ (300)
------- ------- -------
Net income 910 1,068 712
Preferred stock dividend requirements (91) (101) (99)
------- ------- -------
Primary net income available for common stock $ 819 $ 967 $ 613
======= ======= =======
Average number of primary common shares
outstanding (thousands) 258,813 258,923 258,656
======= ======= =======
Primary net income per common share $ 3.17 $ 3.74 $ 2.37
======= ======= =======
Fully Diluted Net Income Per Common Share
-----------------------------------------
Net income $ 910 $ 1,068 $ 712
Preferred stock dividend requirements of non-dilutive
issues and adjustments to net income associated
with dilutive securities (90) (64) (100)
------- ------- -------
Fully diluted net income $ 820 $ 1,004 $ 612
======= ======= =======
Average number of primary common shares
outstanding (thousands) 258,813 258,923 258,656
Additional shares outstanding assuming full
conversion of dilutive convertible securities
into common stock (thousands):
Convertible debentures 148 148 159
Series B ESOP Convertible
Preferred Stock _ 10,499 _
Other 69 81 96
------- ------- -------
Average number of fully diluted common
shares outstanding (thousands) 259,030 269,651 258,911
======= ======= =======
Fully diluted net income per common share $ 3.17 $ 3.72 $ 2.36
======= ======= =======
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
OF TEXACO ON A TOTAL ENTERPRISE BASIS (UNAUDITED)
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1994 (a)
(in millions of dollars)
Years Ended December 31,
----------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from continuing operations, before provision or
benefit for income taxes and cumulative effect of
accounting changes effective 1-1-92 $1,409 $1,392 $1,707 $1,744 $2,448
Dividends from less than 50% owned companies
more or (less) than equity in net income (1) (8) (9) 5 (7)
Minority interest in net income 44 17 18 16 12
Previously capitalized interest charged to
income during the period 29 33 30 23 16
------ ------ ------ ------ ------
Total earnings 1,481 1,434 1,746 1,788 2,469
------ ------ ------ ------ ------
Fixed charges:
Items charged to income:
Interest charges 594 546 551 644 676
Interest factor attributable to operating
lease rentals 118 91 94 76 58
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc. 31 4 _ _ _
------ ------ ------ ------ ------
Total items charged to income 743 641 645 720 734
Interest capitalized 21 57 109 80 50
Interest on ESOP debt guaranteed by Texaco Inc. 14 14 18 26 38
------ ------ ------ ------ ------
Total fixed charges 778 712 772 826 822
------ ------ ------ ------ ------
Earnings available for payment of fixed charges $2,224 $2,075 $2,391 $2,508 $3,203
(Total earnings + Total items charged to income)
====== ====== ====== ====== ======
Ratio of earnings to fixed charges of Texaco
on a total enterprise basis 2.86 2.91 3.10 3.04 3.90
====== ====== ====== ====== ======
<FN>
(a) Excludes discontinued chemical operations.
</TABLE>
EXHIBIT 12.2
DEFINITIONS OF SELECTED FINANCIAL RATIOS
CURRENT RATIO
-------------
Current assets divided by current liabilities.
RETURN ON AVERAGE STOCKHOLDERS' EQUITY
--------------------------------------
Net income divided by average stockholders' equity. Average stockholders'
equity is computed using the average of the monthly stockholders' equity
balances.
RETURN ON AVERAGE CAPITAL EMPLOYED
----------------------------------
Net income plus minority interest plus after-tax interest expense divided
by average capital employed. Capital employed consists of stockholders'
equity, total debt and minority interest. Average capital employed is
computed on a four-quarter average basis.
TOTAL DEBT TO TOTAL BORROWED AND INVESTED CAPITAL
-------------------------------------------------
Total debt, including capital lease obligations, divided by total debt
plus minority interest liability and stockholders' equity.
EXHIBIT 13
EXPLORATION AND PRODUCTION
Our plan for growth is designed to add to the value of our
worldwide oil and gas reserves by focusing investment on
the best upstream opportunities while disposing of
underperforming, and therefore unprofitable, fields. During
1994, we increased our oil and gas production rate and replaced
111% of our combined worldwide liquids and gas production, at
a highly competitive cost of $3.54 per barrel. Each dollar we
invested in our upstream business added $1.99 to the net present
value of our reserves. We will build on that outstanding perfor-
mance--already among the best in our industry. We expect to
increase our production by 14% over the next five years.
Beyond that, we will continue to pursue aggressive exploration
programs in those areas of the world where we can leverage
our technological capabilities and business experience.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A1.
UNITED STATES
Our U.S. upstream assets, which produced
407,000 barrels of crude oil and natural
gas liquids and 1.7 billion cubic feet of natural
gas a day last year--about 62% of the compa-
ny's worldwide equivalent net production--
are a focal point of Texaco's growth plan.
Our strategy is to generate sustained
growth in cash flow and earnings from the
remaining core assets by increasing produc-
tion 13%, or some 80,000 barrels of oil equiv-
alent a day, from 1995 to 1999. This produc-
tion increase will flow from low-to-modest-
risk programs to further develop current
fields, additional exploratory drilling in pro-
ductive basins, and other well-defined
opportunities, mainly within the Gulf of
Mexico, Southern Louisiana and the
Permian Basin of West Texas and New
Mexico.
Our sale on March 1, 1995, to Apache
Corporation of more than 300 scattered,
mature producing fields located in Texas,
Louisiana, the Rocky Mountains and the
Mid-Continent area represented a milestone
in our U.S. growth plan. Cumulatively, these
fields and others still to be sold represent
about half of Texaco's U.S. producing fields,
but they account for less than 10% of our
total U.S. production, reserves and cash flow,
and were not contributors to earnings.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A2.
Texaco Inc. 1994 Annual Report to Stockholders page 9.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A ITEM A3.
The proceeds from these and similar
sales of underperforming U.S. assets will be
redeployed to strengthen Texaco's financial
position and to invest in growth opportuni-
ties, primarily core U.S. properties where
technologies such as 3-D seismic, horizontal
drilling and enhanced recovery techniques
will generate significant new production.
By concentrating our efforts on core
properties and by utilizing the latest explo-
ration and production technology, we hope
to achieve our goal of reducing lifting costs.
DEVELOPING THE GULF OF MEXICO
In the prolific Gulf of Mexico region, a major
contributor to Texaco's upstream profitability,
we hold interests in 87 producing fields and
105 undeveloped leases off the coasts of
Texas, Alabama and Louisiana.
Daily net production averaged 44,000
barrels of oil and 779 million cubic feet of
natural gas during 1994, with gas production
up 10% over 1993.
Prominent developments include the
Hercules project in the Ewing Bank area
(33.3% Texaco), which began production in
September 1994. Our share of peak gross
production of 42,000 barrels of oil a
day from this platform represents 6% of our total
anticipated 1995 Gulf equivalent production.
A discovery on the wholly owned Teal
South prospect in the Eugene Island area
directly resulted from utilizing 3-D seismic
data developed in our operations at the adja-
cent Teal field. This efficient leveraging of
data is expected to yield daily production of
5,000 barrels of oil and 5 million cubic feet of
gas by the end of 1995.
The 50%-owned Shasta prospect in the
Green Canyon area, which will begin pro-
duction in late 1995, will be our first compa-
ny-operated subsea installation in the Gulf
of Mexico. This installation, employing a
production template on the sea bottom in
water 850 feet deep and a nine-mile pipeline
to a Texaco platform, will be a model for
future subsea developments in the Gulf.
We have embarked on a five-year explo-
ration plan focused on the 37 deepwater
prospects we own in the Gulf, in depths from
1,300 to 7,800 feet, to identify significant
reserves for future production.
EXPANDING ONSHORE RESERVES
The revitalization of mature producing areas
along the Louisiana coast is made possible
through the application of world-class tech-
nology and energized by the satisfactory
1994 settlement of our long-standing royal-
ties dispute with the State of Louisiana. We
will explore and develop many opportunities
in this area over the years ahead.
One example is Bay de Chene, where we
completed our first horizontal well onshore
Louisiana during 1994. This 50-year-old
field, like many others in South Louisiana,
contains oil remaining in the reservoirs after
production from vertical wells declined.
The new horizontal well at Bay de Chene
produces 950 barrels of oil a day, compared
with the 200 barrels we might expect from a
marginally economical vertical well drilled
in the same location. This project demon-
strates how horizontal drilling technology
can add reserves, improve recovery rates
and accelerate cash flow, especially in those
areas where we already have in place pro-
duction and transportation infrastructure.
In South Louisiana and South Texas, we
made extensive use of 3-D seismic programs
to both discover new and better define old
reservoirs in more than 20 fields. Through
1994, initial drilling in five of these fields
yielded a success rate of 83% and the com-
pany booked 14.7 million barrels of oil equiv-
alent reserves.
The Permian Basin oil fields of West
Texas and Southwest New Mexico remain
highly profitable, with net daily production
in 1994 of 47,000 barrels of oil and 192 mil-
lion cubic feet of gas. Texaco is an industry
leader in the Permian Basin, where we have
added 87 million barrels of oil equivalent to
booked reserves since 1989.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A4.
Texaco Inc. 1994 Annual Report to Stockholders page 10.
U.S. EXPLORATION AND PRODUCTION
CORE OPERATING AREAS
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A5.
In other U.S. core assets, the application
of leading-edge technology and heightened
efficiencies are also adding economical
reserves and profitable production.
At the giant Kern River field in Bakers-
field, California, one of the world's largest
heavy-oil steamflood operations, we have
maintained net production of 80,000 barrels
a day, while reducing operating expenses,
excluding fuel, by 30% since 1991.
In 1994, we booked 13.5 million barrels of
additional reserves at Kern River as a result
of recovery improvements primarily due to
innovative heat-management practices.
Contributing to the energy efficiency of
Kern River and other heavy-oil fields
onshore California are six cogeneration
plants, fueled by natural gas, which provide
steam for the operation of the fields and
electric power for sale to the local utility.
WELLHEAD TO BURNER-TIP
Texaco's natural gas operations continue to
grow as this fuel becomes an increasingly
important component of the world energy
mix. To capitalize on opportunities arising
from increased demand and the recent
deregulation of U.S. gas markets, we are
pursuing a wellhead-to-burner-tip strategy
that integrates our ability to gather,
process, store, transport and market natural
gas and gas liquids.
Our new Gulf Coast Star Center (SM) (Service Mark)--
encompassing four Texaco-operated gas pro-
cessing plants, gas-gathering and intrastate
pipelines and a large gas storage facility in
Louisiana--is ideally designed to capture
value for Texaco. The Star Center delivers
some 224 million cubic feet a day of Texaco
equity natural gas to customers directly
connected to our Bridgeline Gas Distribu-
tion System. Bridgeline is the leading gas
marketer in Louisiana, accounting for 20%
of the gas market.
Our Sabine Pipe Line Company, an inter-
state pipeline serving the Gulf Coast area,
increased its volume and service base to 660
million cubic feet a day and over 140 cus-
tomers in 1994. Through a strategic alliance
with other market service centers, Sabine
can now service customers in the Northeast.
LATIN AMERICA
Privatization trends and growing
economies in various Latin American
countries, combined with rising demand for
hydrocarbon products, offer new opportu-
nity for the oil and gas industry.
During 1994, Texaco's net production in
Latin America averaged 18,000 barrels of oil
and 117 million cubic feet of natural gas a
day from operations in Colombia and
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A6.
Texaco Inc. 1994 Annual Report to Stockholders page 11.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A7.
Texaco Inc. 1994 Annual Report to Stockholders page 12
Trinidad. We expect to double our gas sales
there by 1998 by expanding our production
capacity and our markets in both countries.
INVESTING IN CORE BUSINESSES
In Colombia, we are improving our position
through new investment in our core natural
gas business, while moving ahead with the
divestiture of marginal assets. By the end of
1994, we sold five oil fields in Colombia, and
we expect to sell our remaining heavy oil
fields there in 1995.
The natural gas business in Colombia
continues to grow, and production from the
50%-owned Guajira block meets about 75% of
the country's total demand. To help satisfy
the anticipated need for more than 500 mil-
lion cubic feet of gas a day in Colombia by
the year 2000, we plan to place a second off-
shore platform in the Guajira block during
1996. In addition, two contracts we are cur-
rently finalizing will pave the way for new
exploration in the prolific Middle
Magdalena Valley.
Development of the large Dolphin gas
field, 60 miles off the eastern coast of
Trinidad, also ties into our worldwide strat-
egy to increase gas production. Dolphin
development is proceeding on budget, with
first deliveries planned early in 1996. The
field, jointly owned by Texaco and British
Gas, has estimated gross proved reserves of
about 250 billion cubic feet of gas, targeted
for the industrial market in Trinidad, and
may contain substantially more reserves.
In Ecuador--where our affiliate, Texaco
Petroleum Company (Texpet), ceased to be
the operator of a joint venture with the
national oil company in 1990--two indepen-
dent audits have concluded that there is no
widespread or lasting environmental impact
from the former joint operations. Recently,
Texpet and the Ecuadorean government
reached an agreement in principle on the
scope of remediation to be conducted, based
on these reports. Texpet is committed to
restoring any areas for which it is responsi-
ble, and continues to work with the govern-
ment of Ecuador toward that goal.
EUROPE
We intend to double the net present
value of our upstream business in
Europe by the year 2000, and we made
strong progress toward that goal during
1994. Net production increased by 52,000
barrels a day of oil equivalent during the
year, and a major development project
underway in the U.K. North Sea Captain
field (see pages 6 and 7) dramatically
improved our reserve position and will con-
tribute 60,000 barrels a day of oil equivalent
to production by early 1997.
GROWING NORTH SEA VALUE
Texaco operates or has interests in 11 pro-
ducing fields in the U.K. North Sea, where
our 1994 net daily production increased
dramatically to 95,000 barrels of liquids (up
64% vs. 1993) and approximately 98 million
cubic feet of salable natural gas (a 347%
increase vs. 1993). The 1994 improvements
were due primarily to the first full-year con-
tributions from the Orwell and Strathspey
fields, and production from the new replace-
ment Bravo platform in the Piper field.
The Danish Underground Consortium
(DUC), 15%-owned by Texaco, achieved
record production levels during 1994.
Texaco's share totaled 25,000 barrels of oil
and 61 million cubic feet of salable gas a day.
A full year of production from DUC's new
Regnar and Valdemar fields, plus an active
program of development drilling, con-
tributed significantly to these results.
DUC embarked on a substantial new
investment program during the year, which
will provide the facilities to produce, process
and transport an additional 1.4 trillion cubic
feet of gas (some 210 billion cubic feet
Texaco's share) under an expanded sales
contract with the Danish national gas
company. Initial sales should begin in 1997.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A8.
Texaco Inc. 1994 Annual Report to Stockholders page 13.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A9.
LONG-TERM POTENTIAL IN RUSSIA
In partnership with Exxon, Amoco and
Norsk Hydro, Texaco formed the Timan
Pechora Company L.L.C. to negotiate a
production-sharing agreement with the
Russian Government, covering a large area
in the Timan Pechora Basin some 1,100 miles
northeast of Moscow.
When the required government approvals
and the legislative framework are in place,
Timan Pechora Company will embark on an
appraisal program in a contract area that the
Russians have calculated may contain more
than 2 billion barrels of oil.
Another major project that has potential
for significant, long-term production is the
2,700-square-mile Kirinsky block offshore
Sakhalin Island in Russia's Far East. Texaco
and its partner Mobil are negotiating with
the Russian Government for a production-
sharing agreement covering this block.
Our production restoration project with
Sutorminskneft in Western Siberia, provid-
ing technical services and equipment in
return for part of the restored crude produc-
tion, was suspended in 1994 after the suc-
cessful completion of the initial phase.
Continuation of the project into its second
phase was not warranted, due to an
insufficient level of crude export quota guar-
antees from the Russian Government.
WEST AFRICA
Despite political instability in Nigeria and
civil war in Angola, we managed to main-
tain valuable oil production in these troubled
regions during 1994.
Offshore Nigeria, we operate and hold a
20% working interest in a consortium that
maintained Texaco's share of crude oil
production at 9,000 barrels a day, despite a
1994 strike by oil workers against the
Nigerian Government.
We also recently acquired a 30% equity
interest in prime deepwater blocks near our
current Nigerian operations from Statoil, the
Norwegian state oil company, and British
Petroleum. That joint venture will begin fur-
ther exploration in 1995.
Despite the civil war in Angola, which
resulted in the temporary shut-in of two
fields in the northern portion of an offshore
block in which Texaco owns a 20% interest,
we increased our share of production slightly
to 7,000 barrels a day during 1994 at the
southern end of the block.
Following the signing of a ceasefire agree-
ment late in 1994, we are moving ahead with
plans to expand production offshore Angola
and resume some production from restored
onshore facilities during the second half of
1995.
MIDDLE EAST/FAR EAST
Our upstream operations in the Middle
East and Far East increased their total
production by 17% during 1994 to 220,000
barrels of crude oil a day. These operations
offer a number of strategic opportunities for
growing additional production and reserves.
EXPANDING THE CORE
In Indonesia, a core producing area for
Texaco over many years, the operations of
our affiliate P.T. Caltex Pacific Indonesia
(CPI), owned equally by Texaco and Chevron,
include four production-sharing contract
areas on the island of Sumatra, accounting for
nearly half of Indonesia's total oil production.
CPI's total production has grown from
698,000 barrels a day in 1991 to 718,000 in
1994. Texaco's share of 1994 production was
122,000 barrels a day. The Duri steamflood,
the largest such operation in the world,
reached record high production of 300,000 bar-
rels a day in October 1994. CPI expects to
sustain high rates of Duri production, through
phased development, into the next decade.
In a totally new undertaking, a geother-
mal energy project has been brought on line
by Amoseas Indonesia, a Texaco-Chevron
Texaco Inc. 1994 Annual Report to Stockholders page 14.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A10.
joint venture dedicated primarily to energy
exploration outside Sumatra. The 55-mega-
watt Darajat Geothermal Project, located on
the island of Java, is supplying electricity to
the national electric power company.
STRATEGIC DEVELOPMENT IN CHINA
Texaco has greatly expanded its activities in
China, which is opening a number of signifi-
cant basins to foreign participation. Our share
of production from the ACT Operators Group,
a joint venture with AGIP, Chevron and the
China National Offshore Oil Corporation in
the South China Sea, was 8,000 barrels of oil
a day in 1994. The two platforms the Group
plans to bring on stream during the summer
of 1995 will boost our share of daily net pro-
duction to approximately 12,000 barrels.
With Texaco as operator, exploration
drilling has begun on three highly prospec-
tive blocks in the East China Sea, offshore
Shanghai. A consortium of Texaco (40%
interest), AGIP and Maersk is the first foreign
contractor to drill in this major underex-
plored area with large potential reserves.
In February 1994, we signed a produc-
tion-sharing contract giving us a 20%
interest in an upstream project within the
remote Tarim Basin of northwestern China,
the first major onshore area to be opened to
international investors.
Onshore China offers numerous other
opportunities for Texaco to leverage our
technological expertise and history of good
relations with that country. Projects now
under discussion with Chinese companies
include enhanced oil recovery programs at
existing fields, and a number of gas explo-
ration and development opportunities.
NATURAL GAS INITIATIVES
The rapid growth of Pacific Rim markets
offers Texaco significant opportunities
for expanding our position in the natural
gas business.
In the Gulf of Martaban off the coast of
Myanmar (formerly Burma), we have a 50%
interest and are the operator in a consortium
appraising four natural gas blocks. Although
additional confirmation drilling is necessary,
first commercial production from the
Yetagun field, discovered in 1992, could occur
by 1998, with anticipated production of 200
million cubic feet a day. We are investigating
opportunities to market the gas in Thailand.
The large Gorgon gas field off the coast of
western Australia offers another solid strate-
gic opportunity. Based on ongoing evalua-
tions in the Gorgon field, operated by West
Australian Petroleum (WAPET), a consortium
in which Texaco has a 28.6% interest, the
field may contain substantial reserves of nat-
ural gas. In December 1994, WAPET made
another significant gas discovery on the
Chrysaor structure, north of Gorgon.
We are also participating through WAPET
in oil exploration and producing activities in
western Australia. Texaco's net daily produc-
tion here increased by over 40%, to 19,000
barrels, late in 1994 after the Roller and
Skate fields came on stream.
RESTORED MIDDLE EAST PRODUCTION
Through our wholly owned subsidiary, Saudi
Arabian Texaco Inc., Texaco holds a conces-
sion from Saudi Arabia covering 50% of the
petroleum resources in the onshore Parti-
tioned Neutral Zone (PNZ), between Kuwait
and Saudi Arabia.
Reconstruction of the producing facilities
in the PNZ since the Gulf War has returned
the area to nearly 90% of its prewar capacity
of some 140,000 barrels a day. Texaco's share
of production reached 48,000 barrels a day by
the end of 1994.
GROWING RESERVES AND PRODUCTION
We are aggressively applying our action
steps for growth throughout our worldwide
exploration and producing operations.
We are focusing on opportunities that
build on Texaco's record as an efficient oil and
gas producer. We will continue to leverage
our solid asset base and technological capa-
bilities as we grow the volume and the value
of our reserves and production.
Texaco Inc. 1994 Annual Report to Stockholders page 15.
MANUFACTURING AND MARKETING
Maintaining the highest levels of performance and effi-
ciency throughout our manufacturing and marketing
systems is crucial to the success of Texaco's plan for
growth. With this in mind, we are applying the principles of
reliability engineering to curtail downtime and increase product
output, without any compromise of safety or the environment,
throughout our manufacturing system. Concurrently, we are
streamlining our marketing network, while invigorating the
level of customer service within our retail outlets. We are uni-
formly dedicated to capturing maximum value from the sales of
such world-class products as our new CleanSystem3 gasolines
and Havoline motor oils.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A11.
UNITED STATES
Texaco's equity crude processing capacity
at seven U.S. refineries, including our
share of three plants operated by Star
Enterprise, our joint venture with the Saudi
Arabian Oil Company for manufacturing and
marketing along the U.S. East and Gulf
Coasts, totaled 674,000 barrels a day at
year-end 1994.
Investments at all of these facilities are
currently focused on enhancing manufactur-
ing efficiency, on optimizing our conversion
capacity and on efficiently meeting govern-
ment rules for fuel composition.
* Our Los Angeles refinery and Star's
Delaware City plant installed units last year
to help us produce reformulated gasolines,
responding to recent Federal mandates for
cleaner fuels.
* To increase its output of higher value light
fuels, Star Enterprise is also spending near-
ly $90 million to upgrade the fluid catalytic
cracking units at Port Arthur, Texas;
Convent, Louisiana; and Delaware City.
* And, at Texaco's El Dorado, Kansas, refin-
ery, a $75-million coke gasification/cogenera-
tion plant, due to come on stream in 1996,
will capitalize on Texaco's patented gasifica-
tion technology to cut the costs of process
steam and electricity, while providing a
lower cost, environmentally superior
method of handling low-grade coke and
refinery wastes.
GROWING U.S. MARKETS
The introduction of our new CleanSystem3
gasolines in March 1994--supported by an
advertising campaign that emphasized the
Texaco Inc. 1994 Annual Report to Stockholders page 16.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A12.
new product's high performance, improved
mileage and lower emissions--contributed to
solid growth in Texaco-branded gasoline
sales throughout the U.S.
These gasoline sales increased by some
150 million gallons for the year, including
Star Enterprise, which markets its gasoline
under the Texaco brand. High-performance
Power Plus and Power Premium grades
posted especially strong gains.
To capture significant additional value
from our retail network, we expanded the
prestigious Star Mart (R) (Registered) convenience store
operation in 1994 to 263 locations, and we
plan to add 185 more outlets to the Texaco
and Star Enterprise systems in 1995. Both
systems are also forging strategic alliances
with fast-food companies to generate addi-
tional customer traffic and sources of
revenue.
To leverage those relationships, Texaco
Refining and Marketing has developed and
test-marketed new-generation facilities--
combining a gasoline and convenience store
format with fast-food service--in four states.
Star Enterprise launched similar co-develop-
ment programs in five additional areas.
BUILDING A GLOBAL BRAND
Our Havoline Formula 3 (R) (Registered) brand remains the
top selling motor oil in the U.S. among the
major integrated oil companies. In addition,
it is now a global brand that is sold in 64
countries, giving Texaco a new opportunity
to build market share in some of the world's
most exciting economies.
In addition, Texaco Lubricants Company
maintains its momentum into the installed oil
market. The operation of 450 Texaco Xpress
Lube R (Registered) facilities in 41 states is part of an
ambitious, five-year program to expand our
motor oil and industrial lubricants business.
In September we opened our first U.S.
used oil recycling plant in Marrero,
Louisiana. The facility, which will process up to
50 million gallons of used oil annually, recycling
it to marine fuels, is the prototype for others
planned for the U.S., Europe and the Far East.
Texaco's worldwide fuels and marine mar-
keting arm sold some 80 million barrels of fuel
in 1994 to shipping companies, utilities and
other commercial customers.
LATIN AMERICA
Texaco manufactures or markets petrole-
um products in over 40 Caribbean and
Latin American countries. During 1994, our
Latin American downstream units continued
to benefit from a positive business environ-
ment, buttressed by our traditional market
prominence throughout much of the region.
We enhanced efficiency during the year
through a restructuring program designed to
reduce operating expenses. As part of this
plan, we downsized the divisional headquar-
ters in Coral Gables, Florida, and entered
into joint-terminal arrangements in the
eastern Caribbean, Colombia and Brazil.
Three wholly or partly owned refineries
in Panama, Guatemala and Martinique, sup-
plemented by a sophisticated trading and
transportation system, enable us to supply
the region with gasoline, kerosine, jet fuel,
diesel and fuel oil at fully competitive costs.
We continued a $77-million upgrading and
expansion of our wholly owned Panama refin-
ery, scheduled for completion by mid-1995,
which is expected to increase plant through-
put to 60,000 barrels of crude oil a day.
Also in 1994, the introduction of our
CleanSystem3 gasolines into much of the
Caribbean and Central America enhanced
our penetration of these rapidly growing
markets. In this region, we are the leading
marketer, supplying about 27% of the retail
fuel demand and 30% of lubricants through
some 1,200 branded retail outlets.
In Haiti, we resumed operations following
the termination of the U.S. sanctions and plan
to recover our former strong market pres-
ence there during 1995.
In Brazil, Texaco's second largest market
Texaco Inc. 1994 Annual Report to Stockholders page 17.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A13.
Texaco Inc. 1994 Annual Report to Stockholders page 18.
outside the United States, annual economic
growth of 5% offers us solid future
prospects. Texaco Brazil--with sales of over
1.2 million barrels a year--has a 22% share
of this, the largest lubricants market in
Latin America.
We are also breaking new ground
throughout much of Latin America with our
Star Mart stores, as well as through joint
ventures with fast-food chains, banks, video
rental companies and dry cleaners.
EUROPE
Surplus products and stiff competition
continue to pressure margins in many of
our European markets. Economic growth is
expected to remain slow over 1995.
Anticipated environmental legislation will
mandate cleaner products from more effi-
cient and environmentally sound manufac-
turing plants. We are responding to these
challenges on a country-by-country basis.
Northwestern Europe is a mature mar-
keting area in which growth will come pri-
marily from extending current lines of busi-
ness and forming new business alliances.
In 1994, we sold our 50% interest in the
Swedish joint-venture marketing company,
Texaco Marketing AB, to our partner OK
Petroleum AB. And, early in 1995, we entered
into a joint venture with Norsk Hydro to sell
petroleum products in Denmark, Norway
and, potentially, the Baltic States. The joint
venture, which combines the partners' service
station networks, will hold a strong position
in Norway and Denmark, with about 20% and
17% of the respective national gasoline
markets.
Meanwhile, we intend to selectively
expand Texaco's presence in the growing
markets of southern and eastern Europe.
ENHANCING COMPETITIVENESS
At our wholly owned, 180,000-barrel-a-day
Pembroke refinery in Wales, we are evaluat-
ing alternatives to optimize gasoline capabil-
ity and increase the quantity and quality of
diesel production. This refinery, in combina-
tion with our 65% share of the throughput of
the Pembroke Cracking Company, is one of
the premier refining facilities in Europe.
Our financial and operational results
in 1994 were adversely impacted by an
explosion and fire which occurred in July at
the Pembroke Cracking Company. The
affected units returned to full operation in
December. Engineering and reliability stud-
ies are underway to assure Pembroke's
long-term competitive performance.
Expansion of the catalytic cracking unit
at the end of 1993 and the associated con-
struction of an MTBE unit early in 1994 at
the 35%-owned, 399,000-barrel-a-day
Nerefco refinery in Rotterdam expanded
our production of gasoline components.
We gained a quality advantage and
achieved increases in branded gasoline sales
throughout northwestern Europe following
the introduction of CleanSystem3 gasolines
in March 1994. In an overall declining mar-
ket, volume at our 1,380 investment stations
in Europe increased by 1.6% over 1993,
averaging some 54,000 gallons a month.
Our strategy to strengthen Texaco's
retail network incorporates new service sta-
tion design and convenience formats in our
state-of-the-art retail outlets throughout the
U.K., the Netherlands and Scandinavia.
We are also consolidating our down-
stream operations on the Continent. A new
region will be responsible for marketing
from the Benelux to the Mediterranean,
where changing markets offer excellent
growth possibilities. Business development is
accelerating in Eastern Europe, and we have
targeted Poland as a prime marketing area.
In the U.K., our largest market in
Europe, we have significantly restructured
and rationalized operations to reduce costs
and organize the downstream business to
compete more effectively. We are develop-
ing strategic marketing partnerships,
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A14.
Texaco Inc. 1994 Annual Report to Stockholders page 19.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A15.
including an alliance with Pepsico to estab-
lish Pizza Hut R (Registered) units in selected Star
Markets and our co-development project
with another major fast-food chain. In addi-
tion, we introduced the first co-branded Visa
Global credit card in 1994.
Texaco also established a natural gas mar-
keting department in the U.K. to capitalize
on the recently deregulated gas market.
CALTEX
Caltex Petroleum Corporation, our 50%
joint venture with Chevron, manufac-
tures and markets refined petroleum prod-
ucts in over 60 countries, primarily east of
Suez. It is pursuing an ambitious program to
upgrade its refining system and marketing
network to capitalize fully on the key growth
markets of the Pacific Rim region.
MAJOR UPGRADING AND EXPANSION
Caltex has equity interests in 14 refineries in
the Asia-Pacific region, Africa and the Mid-
dle East. Total equity capacity is nearly one
million barrels a day.
Caltex plans capital investments, includ-
ing its share in affiliates, of some $8 billion
between 1995 and 1999, of which some 60% is
targeted for refining. Upgrading and expan-
sion projects will allow use of lower cost
feedstocks, increase output of light products
and meet stringent environmental standards.
In Thailand, Caltex has an equity interest
in a $1.7-billion grassroots refinery currently
under construction. It is also adding crude
running and product upgrading capacity to
its principal export refinery in Singapore. To
meet Korea's increasing demand for trans-
portation fuels, Caltex' 50%-owned affiliate,
Honam Oil, is constructing a 70,000-barrel-a-day
catalytic cracking unit. These projects
will come on stream over the next two years.
ATTRACTIVE CALTEX MARKETS
Despite weakness in the refining sector last
year, marketing margins remain robust. With
average shares of 18% in motor fuels and
20% in lubricants, Caltex directed the major-
ity of its marketing investments in 1994 to
expanding and improving its retail network,
which includes more than 18,000 outlets.
Caltex continues to invest in high-poten-
tial growth markets, including some coun-
tries that have only recently opened their
borders to foreign investment.
Asia's emerging markets, with their huge
populations and rapidly expanding eco-
nomies, are a centerpiece of our strategy to
grow Caltex. China offers enormous retail
potential and Caltex is aggressively pursuing
opportunities to expand its retail and lubri-
cants operations. Caltex is also conducting a
refinery investment feasibility study and is
considering constructing a major liquefied
petroleum gas (LPG) terminal in Shantou.
In India, Caltex is capitalizing on the
country's increasing openness to foreign
investment. Caltex manufactures and mar-
kets lubricants through a joint venture with
a local Indian company and is planning to
become a major LPG marketer.
Following the lifting of U.S. sanctions,
Caltex opened an office in Vietnam which,
along with the rest of Indochina, represents a
significant market expansion opportunity.
POWER OF THE STAR
Our plan for growth calls on Texaco people to
build on the power of the Star--our valued
trademark--to augment our ongoing success
in adding sales in selective markets.
We will also continue to enhance the effi-
ciency of our refineries as we battle to over-
come increased costs from mandated regula-
tions and arbitrary product specifications,
and market-driven decreases in margins.
Our strategies for growing volume
through streamlined, productive business
units are designed to help us "make our own
margins" in highly competitive markets,
thereby increasing the value of our share-
holders' investment.
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A16.
Texaco Inc. 1994 Annual Report to Stockholders page 20.
TECHNOLOGY AND RESEARCH
Technological innovation supports and energizes all of
Texaco's core businesses. We are a leader in identifying and
applying the most advanced technologies for discovering
and producing hydrocarbons. These technologies enable us to in-
crease cost-effective production of oil and natural gas from new
and existing fields and to extend our reserve base. Downstream,
our international research teams help improve refinery processes
and grow profitable market share with petroleum products that
meet changing customer needs. Our commitment to supporting
research and technology creates value for stockholders by en-
hancing our operations, and it opens new doors to strategic part-
nerships with businesses and governments worldwide.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A17.
ADVANCED UPSTREAM TECHNOLOGY
In the Houston laboratories of our Explo-
ration and Production Technology Depart-
ment (EPTD), multidisciplinary teams of
geoscientists and engineers are developing
integrated technology that maximizes the po-
tential of Texaco's hydrocarbon resources.
To gain optimal production from our wholly
owned Captain field in the U.K. North Sea,
Texaco teams will combine horizontal drilling
with new subsea pumping and metering
systems that incorporate Texaco technology.
Economic development of Captain's heavy oil
depends on advances that make it possible to
drill horizontal wells as long as 6,000 feet in
highly unconsolidated sands.
To complement this drilling technology,
engineers and scientists at EPTD's multi-
phase flow research facility near Humble,
Texas, have successfully created an "extended-
reach" production system to transport un-
separated mixtures of oil and gas over long
distances, eliminating the number of offshore
structures for development, reducing costs
and expanding our operating environment.
Underscoring Texaco's technological capa-
bility is our leadership in the Deepstar Pro-
gram, a consortium of companies pooling
technology to recover potentially huge oil and
gas reserves in deepwater areas of the Gulf of
Mexico. The subsea development of the Shasta
prospect in late 1995 will be the first com-
mercial application of Deepstar technology.
At Texaco's two large steamflood opera-
tions--Kern River field in California and
Indonesia's Duri field, operated by Texaco's
affiliate Caltex Pacific Indonesia--engineers
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A18.
Texaco Inc. 1994 Annual Report to Stockholders page 21.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A19.
and scientists continually seek new technologies
to address the challenges of heat management.
At Kern River, engineering and research
teams in 1994 introduced Texaco's patent-
pending SpliTigator TM (Trade Mark) steam distribution
piping technique, which supplies the optimal
level of heat to extract the field's highly viscous
oil, reducing production fuel costs by 10%.
Duri's heat management program gener-
ates 50% more daily production than antici-
pated with the same amount of steam, adding
5,000 barrels a day of oil in 1994. And Texaco-
developed pressure and rate control devices
will facilitate efforts to recover several hun-
dred million barrels of oil from a new reservoir
in Duri's shallow Rindu zone sands.
While these innovative techniques are
reducing lifting costs and adding value to our
hydrocarbon reserves, work is also proceeding
on the Texaco Energy and Environmental
Multispectral Imaging Spectrometer, which
will increase our position as a cost-competitive
finder of oil and natural gas reserves. Sched-
uled for deployment in the second quarter of
1995, this aircraft-mounted sensor will help
Texaco identify prospective hydrocarbon de-
posits and monitor the impact of producing op-
erations in environmentally sensitive areas.
CREATING HIGH-PERFORMANCE PRODUCTS
At our Research and Development Depart-
ment laboratories in Beacon, New York;
Port Arthur, Texas; and Ghent, Belgium,
Texaco scientists formulate high-performance
products to help expand our market share
and bolster our competitive advantage.
Texaco's line of CleanSystem3 gasolines, in-
troduced last year in the U.S., Europe and
Latin America, is one example. This superior
motor fuel not only cleans fuel injectors and in-
take valves, but also removes existing deposits
from the combustion chamber. Motorists' ac-
ceptance of CleanSystem3 demonstrates that
technologically advanced products carry their
value directly to the bottom line.
Also contributing to Texaco's growth is our
ability to create lubricant products that meet
rising automotive performance standards, and
demands of industrial and commercial users. In
1994, we developed, improved or commercialized
more than 50 industrial and transportation
lubricants tailored to customer requirements.
Texaco scientists and engineers also apply
innovative technology to improve the manu-
facturing processes that generate our prod-
ucts, often by entering strategic alliances and
licensing agreements with other companies.
For example, in conjunction with a promi-
nent catalyst manufacturer, we developed and
successfully tested our new Tex-2710 ultra-
low sediment catalyst in 1994. Designed for
use with Texaco-licensed H-Oil R (Registered) refining tech-
nology, this catalyst enhances the production
of light petroleum products from residual oil,
thereby increasing refinery yields.
We made excellent progress during 1994
and into 1995 in the licensing of facilities based
on our unique Texaco Gasification Process, an
advanced technology that converts low-grade
hydrocarbons such as high-sulfur coal, petro-
leum coke and heavy oil into a clean synthesis
gas for the production of electric power, chem-
icals and other industrial products. During
1994, this proprietary technology was selected
for six important projects in the U.S., China
and Spain, with additional major gasification
agreements concluded early in 1995.
Texaco's concern for the environment is a
major consideration in all our operations, and
a number of research projects are undertaken
solely to make our processes environmentally
sound. Among these are a membrane-based,
wastewater treatment unit; membrane tech-
nology to reclaim fluid emulsions used in
the metalworking industry; and continuing
research in bioremediation techniques.
In every aspect of our business, our ability
to apply advanced, innovative technologies
gives Texaco a competitive advantage. Our
strong commitment to research and technology
underpins our plan for growth and profitability.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A20.
Texaco Inc. 1994 Annual Report to Stockholders page 22.
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A21.
Texaco Inc. 1994 Annual Report to Stockholders page 23.
TEXACO'S VISION AND VALUES
IMAGE MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A22.
Throughout its 93-year history, Texaco
has lived by--and thrived on--a set of
sustaining corporate values. These values
reinforce our commitment to produce high-
quality products and services for our cus-
tomers in order to generate consistent, fully
competitive returns for our shareholders.
Our core values also energize our drive to
develop the full potential of every Texaco
employee, and commit us to exacting stan-
dards of ethical conduct and corporate
responsibility within the communities we
serve throughout the world.
If Texaco is to achieve our vision of
industry leadership, we must have a highly
motivated and effective workforce, prepared
to respond to the competitive rigors we face.
Central to our goal is the need for clear
channels of interactive, meaningful commu-
nications throughout the organization.
To facilitate communication, to test the
scope and depth of commitment to our val-
ues and progress on employee-related
issues, periodic surveys are conducted
across the entire Texaco team. Among the
results of such activity are the refinement
and focusing of the broad array of training
services we offer to hone the professional
skills of Texaco employees, the broadened
use of teams to tackle vexing operational
and managerial issues and the programs ini-
tiated to underscore and understand the
importance of diversity in the workplace.
We have been making solid progress on
affirmative action plans, through which we
have increased the representation of minori-
ty groups and women in our workforce at a
time when the redefinition of how we man-
age and how we do business has seen a
reduction in worldwide workforce for con-
tinuing operations of some 21% since year-
end 1991. To assure our commitment to con-
tinued progress, we are updating and broad-
ening our studies in regard to equal
employment opportunity and affirmative
action. As in the past, a report will be avail-
able to shareholders later in 1995.
Equally important and under constant
consideration is Texaco's core value of dedi-
cation to protection of the environment, as
well as the health and safety of our employ-
ees, customers and neighbors.
As we strive for continuous improvement
in this crucial arena, we have focused on
such areas as reducing atmospheric releases
of chemicals, managing wastes from our
operations more effectively and reducing
the number of lost-time incidents. Audit
teams regularly review environment, health
and safety issues at operating facilities
worldwide. We have compiled and reported
on our progress in the third edition of
Texaco's Environment, Health and Safety
Review, which was sent to shareholders
in 1994.
Texaco invigorates its commitment to
social responsibility through our corporate
contributions programs, distributions by the
Texaco Foundation and ever-broadening
employee volunteer programs. From our
long-standing support of major cultural
institutions such as the Metropolitan Opera,
to equally significant efforts to enhance edu-
cation and beautify the environment, Texaco
seeks to improve the quality of life within
the communities we serve.
With our corporate principles and values
as guides, we will continue to monitor,
assess and report our progress in corporate
social responsibility, environmental compli-
ance, ethical conduct and respect for the
individual.
Texaco Inc. 1994 Annual Report to Stockholders page 24.
FINANCIAL AND OPERATIONAL INFORMATION
Texaco Inc. and Subsidiary Companies
26 FINANCIAL REVIEW
37 STATEMENT OF CONSOLIDATED INCOME
38 CONSOLIDATED BALANCE SHEET
39 STATEMENT OF CONSOLIDATED
CASH FLOWS
40 STATEMENT OF CONSOLIDATED
STOCKHOLDERS' EQUITY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
42 Note 1. Description of Significant Accounting
Policies
43 Note 2. Changes in Accounting Principles
44 Note 3. Assets Under Agreements for Sale
44 Note 4. Discontinued Operations
45 Note 5. Inventories
45 Note 6. Investments and Advances
46 Note 7. Properties, Plant and Equipment
46 Note 8. Short-Term Debt, Long-Term Debt,
Capital Lease Obligations and
Related Derivatives
49 Note 9. Lease Commitments and Rental
Expense
49 Note 10. Preferred Stock and Rights
51 Note 11. Foreign Currency
51 Note 12. Taxes
53 Note 13. Employee Benefit Plans
56 Note 14. Stock Incentive Plan
56 Note 15. Other Financial Information
57 Note 16. Financial Instruments and
Commitments
59 Note 17. Contingent Liabilities
59 Note 18. Financial Data by Geographic Area
61 REPORT OF MANAGEMENT
61 REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
SUPPLEMENTAL OIL AND GAS
INFORMATION
62 Estimated Proved Reserves
65 Capitalized Costs
65 Costs Incurred
66 Results of Operations
67 Average Sales Prices and Production Costs--
Per Unit
67 Standardized Measure of Discounted Future Net
Cash Flows
68 Changes in the Standardized Measure of
Discounted Future Net Cash Flows
SELECTED FINANCIAL DATA
69 Selected Quarterly Financial Data
70 Five-Year Comparison of Selected Financial Data
71 INVESTOR INFORMATION
Texaco Inc. 1994 Annual Report to Stockholders page 25.
FINANCIAL REVIEW
Texaco Inc. and Subsidiary Companies
<TABLE>
CONSOLIDATED HIGHLIGHTS
<CAPTION>
(Millions of dollars, except
per share and ratio data) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Revenues from
continuing
operations $33,353 $34,071 $36,530
Net income from
continuing oper-
ations, before
cumulative effect
of accounting
changes $ 979 $ 1,259 $ 1,038
Discontinued chem-
ical operations:
Net loss from
operations -- (17) (26)
Net loss on
disposal (69) (174) --
---------------------------------
(69) (191) (26)
Cumulative effect
of accounting
changes -- -- (300)
---------------------------------
Net income $ 910 $ 1,068 $ 712
Stockholders'
equity $ 9,749 $10,279 $ 9,973
Total assets $25,505 $26,626 $25,992
Total debt $ 6,481 $ 6,826 $ 6,581
Per common share
(dollars)
Net income (loss)
before cumu-
lative effect
of accounting
changes:
Continuing
operations $ 3.43 $ 4.47 $ 3.63
Discontinued
chemical
operations (.26) (.73) (.10)
Cumulative effect
of accounting
changes -- -- (1.16)
---------------------------------
Net income $ 3.17 $ 3.74 $ 2.37
Cash dividends $ 3.20 $ 3.20 $ 3.20
Current ratio 1.20 1.44 1.33
Return on average
stockholders'
equity* 9.8% 12.5% 10.9%
Return on average
capital employed* 8.0% 9.4% 8.5%
Total debt to total
borrowed and
invested capital 38.5% 38.7% 39.3%
=================================
<FN>
*Returns exclude discontinued chemical operations and the
1992 cumulative effect of accounting changes.
</TABLE>
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B1 AND ITEM B2.
Consolidated worldwide net income for the year
1994 was $910 million, or $3.17 per common share,
compared with $1,068 million, or $3.74 per common
share for the year 1993 and $712 million, or $2.37
per common share for the year 1992.
These results include special gains and charges
as well as discontinued chemical operations. Also,
results for 1992 reflect the cumulative effect of the
adoption of Statement of Financial Accounting
Standards (SFAS) 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions,"
and SFAS 109, "Accounting for Income Taxes,"
including Texaco's equity in the Caltex group of
companies and Star Enterprise. The adoption of
these two Standards resulted in a net cumulative
charge as of January 1, 1992 of $300 million,
or $1.16 per common share. Excluding the cumula-
tive effect of accounting changes, net income for
1992 amounted to $1,012 million, or $3.53 per
common share.
DISCONTINUED CHEMICAL OPERATIONS
In 1993, Texaco entered into memorandums of
understanding with an affiliate of the Jon M.
Huntsman Group of Companies for the sale of
substantially all of Texaco's worldwide chemical
operations and, therefore, has accounted for these
operations as discontinued operations.
On April 21, 1994, Texaco Inc. received from
Huntsman Corporation $850 million on the sale of
Texaco Chemical Company and related interna-
tional operations, consisting of $650 million in
cash and an 11-year subordinated note with a face
amount of $200 million. Not included in this trans-
action was Texaco's worldwide lubricant additives
business. On February 14, 1995, Texaco and Hunts-
man Corporation announced that they intend to
form a joint venture to own and operate this busi-
ness, which includes manufacturing facilities in
Port Arthur, Texas and Ghent, Belgium, among
others, as well as sales and marketing offices in
various locations in the U.S. and abroad. Forma-
tion of the joint venture is expected to take place
during the first half of 1995.
Summary statements and other detailed finan-
cial information on discontinued chemical opera-
tions can be found in Note 4 to the Consolidated
Financial Statements on page 44 of this report.
Texaco Inc. 1994 Annual Report to Stockholders page 26.
PLAN FOR GROWTH
On July 5, 1994, Texaco announced a plan for
growth, designed to thrust the company into top
quartile performance among petroleum industry
competitors. Building on the company's demon-
strated successes as a cost-competitive finder of oil
and natural gas resources, the action plan focuses
on asset redeployment, the reduction of overheads
and improved operating efficiencies through cost
controls and strengthened core businesses.
By the end of 1994, initial achievements
included the following:
Texaco has reversed the trend of production
decline, increasing worldwide output by 66,000
barrels of oil equivalent per day in 1994. Higher
production of crude oil in the North Sea, Indo-
nesia and the Partitioned Neutral Zone, joined
by increased natural gas output, were key
factors.
Sales of Texaco branded motor fuels increased,
aided by the introduction of CleanSystem3 gaso-
lines in the U.S., Europe and Latin America.
Texaco cut overhead costs by some $200 million
during 1994, continuing the company's trend of
reducing operating expenses.
In addition, Texaco has taken the following
actions:
Completed the sale, during the third quarter of
1994, of its 50% equity interest in the joint-
venture company, Texaco Marketing AB, which
operates service stations and manufactures and
markets lubricants in Sweden, to its partner
OK Petroleum AB for a purchase price of $60
million.
Completed the sale, in March 1995, of more than
300 scattered Texaco producing fields to Apache
Corporation for approximately $600 million.
The properties included in the sale are located
in the Permian Basin of Texas, offshore Gulf
of Mexico, onshore Louisiana, East and South
Texas, the Rocky Mountains and the Mid-
Continent area of the United States.
Signed an agreement with STENA, a Swedish
marine transportation company, to create a
strategic alliance to coordinate Texaco's inter-
national marine transportation requirements.
The alliance is to be completed during the first
quarter of 1995.
Signed an agreement with Norsk Hydro to cre-
ate a joint venture, effective January 1, 1995, for
the sale of petroleum products in Norway, Den-
mark and, potentially, in the Baltic States. The
joint venture will hold a strong position in the
Norwegian and Danish markets, with a gasoline
market share of approximately 20% and 17%,
respectively. The joint venture will also have the
capacity for future growth in the region, and
will have a major presence in markets for diesel,
lubricants and heating fuel.
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B3 AND ITEM B4.
Announced a projected capital expenditure
level for 1995 of $3.3 billion, an increase of 20%
over the 1994 spending level.
RESULTS OF CONTINUING OPERATIONS
The following analysis relates to Texaco's consoli-
dated and functional results for continuing
operations.
REVENUES
Consolidated worldwide revenues from continuing
operations were $33.4 billion in 1994 as compared
to $34.1 billion in 1993 and $36.5 billion in 1992.
Revenues for 1994 as compared to 1993 decreased
principally due to lower worldwide average crude
oil prices and lower U.S. crude oil volumes, par-
tially offset by increased international sales as a
result of higher production. Higher sales volumes
of natural gas in the U.S. and sales from new gas
production in Europe were generally offset by
lower U.S. natural gas prices. Sales volumes of
refined products increased, mainly in the U.S.,
including higher sales of gasolines, which were
somewhat offset by lower product prices. Product
sales in Latin America benefited from both higher
volumes and prices, which were partly offset by
lower prices and volumes in Europe.
In 1993, revenues declined as compared to 1992
reflecting lower worldwide prices for crude oil and
refined products, partially offset by higher natural
gas prices.
COSTS AND EXPENSES
Purchases and other costs were $23.9 billion in
1994, $24.7 billion in 1993 and $27.0 billion in 1992.
This downward trend reflects the impact of declin-
ing worldwide average crude oil prices and lower
purchases. Partially offsetting the 1994 decreases
were higher volumes of natural gas purchased in
the United States. Costs for refined products for
1994 as compared with 1993 were virtually
unchanged, yet declined from 1992 reflecting lower
volumes.
Texaco Inc. 1994 Annual Report to Stockholders page 27.
In 1994, Texaco continued to realize benefits
from decreased expenses from its initiatives to
reduce overheads and improve operational effi-
ciencies. During each of the last three years,
the company was successful in reducing cash oper-
ating expenses. These improvements were
achieved despite higher levels of activity, the pres-
sures of inflation and expenses associated with
efforts to reduce overheads and restructure oper-
ations. Texaco has reduced the number of
employees in worldwide continuing operations
from 37,500 at the end of 1991 to 29,700 in 1994, a
decrease of approximately 21%.
Depreciation, depletion and amortization
expenses increased in 1994, as compared to 1993,
mainly reflecting higher international oil and gas
production resulting from successful project com-
pletions, mainly in the U.K. North Sea.
INCOME TAXES
Income tax expense was $225 million in 1994, a tax
benefit of $87 million in 1993 and a tax expense of
$311 million in 1992. The year 1994 included higher
taxable income from the expanding international
producing operations which are generally subject
to high statutory tax rates. Also, the year 1994 had
lower tax benefits relating to the sales of interests
in a subsidiary than in 1993. The year 1993 also
included certain nonrecurring tax benefits from
tax law and rate changes in the United Kingdom.
NET INCOME
Consolidated net income from continuing oper-
ations includes special items in addition to net
income directly related to the current production,
manufacturing, marketing and distribution of
products and services of the company. The ele-
ments of consolidated net income from continuing
operations are provided below. Explanations of net
income are shown in the functional analysis which
follows.
<TABLE>
<CAPTION>
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Net income, before
special items $ 915 $1,132 $1,138
Net special charges (125) (83) (130)
Tax benefits on
sales of interests
in a subsidiary 189 210 30
-------------------------------
Net income from
continuing oper-
ations, before
cumulative effect
of accounting
changes $ 979 $1,259 $1,038
===============================
</TABLE>
The Consolidated Financial Statements and
related Notes should be read in conjunction with
this financial review.
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B5 AND ITEM B6.
FUNCTIONAL ANALYSIS
Worldwide net income from continuing operations
in the following table is segregated between oper-
ating and corporate/nonoperating. Operating re-
sults are further segregated functionally and
geographically.
<TABLE>
NET INCOME
<CAPTION>
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Operating earnings
(losses)
Petroleum and
natural gas
Exploration and
production
United States $ 414 $ 510 $ 543
International 253 322 416
--------------------------------
Total 667 832 959
Manufacturing,
marketing and
distribution
United States 257 215 267
International 360 434 300
--------------------------------
Total 617 649 567
Total petro-
leum and
natural gas 1,284 1,481 1,526
Nonpetroleum (32) (13) (19)
--------------------------------
Total
operating
earnings 1,252 1,468 1,507
Corporate/
nonoperating (273) (209) (469)
--------------------------------
Net income from
continuing oper-
ations, before
cumulative effect
of accounting
changes $ 979 $1,259 $1,038
================================
</TABLE>
PETROLEUM AND NATURAL GAS
EXPLORATION AND PRODUCTION
<TABLE>
UNITED STATES
<CAPTION>
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Operating earnings,
before special
items $ 438 $ 548 $ 576
Special charges (24) (38) (33)
--------------------------------
Total operating
earnings $ 414 $ 510 $ 543
Selected Operating
Data
Net production of
crude oil and
NGL's (MBPD) 407 423 432
Net production of
natural gas--
available for sale
(MMCFPD) 1,716 1,729 1,782
Natural gas sales
(MMCFPD) 3,092 2,735 2,705
================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 28.
Total domestic upstream operating earnings
were $414 million, $510 million and $543 million
for the years 1994, 1993 and 1992, respectively.
Operating earnings in the U.S. were impacted by
the downward slide in average crude oil prices
during the three-year period. Texaco's average
crude oil price of $16.36 per barrel in 1992 declined
$2.10 per barrel in 1993 and an additional $.83 per
barrel in 1994. In 1994, crude oil prices rose stead-
ily during the first six months from a low of approx-
imately $11 per barrel at the beginning of the year
to about $14 per barrel at year-end.
Operating earnings in 1994 as compared to 1993
were also adversely impacted by a $.20 per MCF
drop in average natural gas prices from the price
levels experienced in 1993. Most of this drop in
natural gas prices in 1994 occurred in the second
half of the year due to oversupply conditions and
unseasonably warm weather on the U.S. East
Coast during the fourth quarter. This decrease in
natural gas prices contrasted with a 20% increase
in average natural gas prices in 1993 over 1992
levels.
Operating results were also impacted by lower
crude oil and natural gas production, which has
declined less than 3% annually on a barrel of oil
equivalent basis during the past two years. The
impact of normal production declines from matur-
ing fields was largely offset by added production
from the company's successful exploration and
development program. Although natural gas sales
volumes remained virtually flat from 1992 to 1993,
sales increased approximately 13% in 1994 as com-
pared to 1993, reflecting increased marketing
efforts to meet rising demand.
Significantly lower operating expenses in all
periods benefited results. Expense reductions,
before taxes and special items, of $67 million in
1993 as compared to 1992, and an additional $111
million in 1994, exemplify the company's beneficial
restructuring programs and business process
initiatives to reduce producing and overhead
expenses.
Operating results for the year 1994 include a net
gain of $4 million resulting from gains on sales of
various producing properties of $36 million less
certain asset write-downs of $32 million.
Total operating earnings for 1994 included spe-
cial charges of $24 million for the estimated cost of
employee separations.
Total operating earnings for 1993 included a
deferred tax charge due to the U.S. income tax rate
increase and a special charge related to staff reduc-
tions. Results for 1992 included special charges
primarily related to staff reductions, property
damage associated with Hurricane Andrew and
environmental and other issues.
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B7 AND ITEM B8.
<TABLE>
INTERNATIONAL
<CAPTION>
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Operating earnings,
before special
items $269 $212 $414
Net special
(charges) credits (16) 110 2
------------------------------
Total operating
earnings $253 $322 $416
Selected Operating
Data
Net production of
crude oil and
NGL's, including
CPI (MBPD) 376 305 304
Net production of
natural gas--
available for sale
(MMCFPD) 319 238 213
Natural gas sales
(MMCFPD) 337 255 223
==============================
</TABLE>
Texaco's total operating results outside the
United States were $253 million, $322 million and
$416 million for 1994, 1993 and 1992, respectively.
Total operating earnings for 1994 included special
charges of $16 million related to the adjustment to
fair market value of certain facilities being offered
for sale and the estimated cost of employee separa-
tions. Total operating results for 1993 included a
benefit of $169 million related to changes in the
U.K. Petroleum Revenue Tax associated with the
taxability of certain items, as well as a tax rate
reduction. This was partially offset by special
charges related to staff reductions and the write-
down of the carrying value of certain assets, prin-
cipally in the North Sea, brought about by changes
in the Petroleum Revenue Tax laws. Special items
for 1992 included a gain related to the favorable
settlement of a Danish tax issue and special
charges primarily related to staff reductions.
Excluding special items, operating results bene-
fited in all three years from increasing crude oil
production, mainly in the North Sea, Australia,
Indonesia and the Partitioned Neutral Zone
between Kuwait and Saudi Arabia. North Sea
crude oil production in 1994 increased significantly
over 1993 levels primarily from new production
and development at the Strathspey, Saltire and
Piper fields. The shut-in of North Sea production
platforms for scheduled maintenance and installa-
tion of safety equipment negatively impacted
results for 1992. New production in Australia from
the Roller and Skate fields benefited results in
1994, whereas new production in Indonesia from
the Belida field in 1993 benefited results for both
years. Also, natural gas results in 1994 increased
mainly due to new production in the North Sea
from the Orwell, Strathspey and Saltire fields.
Texaco Inc. 1994 Annual Report to Stockholders page 29.
Lower worldwide crude oil prices resulting from
global economic and supply/demand factors,
caused Texaco's average international crude oil
prices to decrease from 1992 through 1994, which
adversely impacted earnings.
Operating results were impacted by non-cash
charges of $15 million in 1994 and benefits of $8
million and $99 million for 1993 and 1992, respec-
tively, relating to the currency exchange impacts
under SFAS 109 of the Pound Sterling on deferred
income taxes.
MANUFACTURING, MARKETING AND
DISTRIBUTION
<TABLE>
UNITED STATES
<CAPTION>
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Operating earnings,
before special
items $ 281 $ 306 $ 288
Net special charges (24) (91) (21)
-------------------------------
Total operating
earnings $ 257 $ 215 $ 267
Selected Operating
Data--including
interest in an
affiliate
Refinery input
(MBPD) 673 658 652
Refined product
sales (MBPD) 882 830 880
===============================
</TABLE>
Total operating earnings for 1994 were $257
million versus $215 million and $267 million in
1993 and 1992, respectively. Included in 1994 total
operating earnings were special charges of $24 mil-
lion related to the adjustment to fair market value
of certain facilities offered for sale and the esti-
mated cost of employee separations. Total operat-
ing results for 1993 included special charges
mainly for staff reductions and reserves for
environmental remediation. Special charges in
1992 related mainly to staff reductions and prop-
erty damage associated with a fire at the Los
Angeles refinery.
Excluding special items, operating results for
1992 through 1994 benefited from increased sales
of branded gasolines of over 3% from 1992, in part
due to the successful introduction in March 1994
of Texaco's CleanSystem3. Sales volumes in 1994
also included a greater volume of higher margin
premium gasoline sales. However, rising crude
costs and oversupply conditions in the mar-
ketplace, some of which arose during the fourth
quarter due to new reformulated gasoline require-
ments and unseasonably warm weather on the
East Coast, decreased margins during 1994.
Results for 1993 versus 1992 reflect improved prod-
uct margins especially on the East and Gulf Coasts
of the U.S. due to lower crude costs. However, oper-
ating earnings for the year 1992 and the year 1993,
as well as the first quarter of 1994, were adversely
impacted by downtime at various refineries. Earn-
ings for 1994 benefited from improved refinery
performance during the last half of the year, as
refinery throughputs for the year exceeded 1993
levels.
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B9 AND ITEM B10.
Texaco's trading and pipeline transportation
network continued to be a strong contributor to
the downstream results throughout these periods.
<TABLE>
INTERNATIONAL
<CAPTION>
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Operating earnings,
before special
items $ 375 $ 464 $ 335
Net special charges (15) (30) (35)
--------------------------------
Total operating
earnings $ 360 $ 434 $ 300
Selected Operating
Data--including
interests in
affiliates
Refinery input
(MBPD) 780 812 769
Refined product
sales (MBPD) 1,470 1,504 1,454
================================
</TABLE>
Texaco's total operating earnings outside the
United States were $360 million in 1994 compared
with $434 million and $300 million in 1993 and
1992, respectively. In the areas served by the com-
pany's affiliate Caltex, including most Pacific Rim
countries and South Africa, strong margins pre-
vailed in 1993 as compared with 1992. However, in
1994, decreased results reflect depressed refining
margins in Bahrain, Japan and Singapore due to
rising crude prices during the year, as well as
unfavorable currency exchange effects, mainly in
the early part of the year. Benefits of $16 million
were realized in 1994 as compared to charges of $51
million in 1993 due to lower of cost or market
adjustments of inventories.
Higher margins and product volumes in the
Latin American operating areas, mainly in Brazil,
continued to benefit earnings from 1992 through
1994. However, 1994 earnings, as compared to 1993,
were negatively impacted as a result of downtime
caused by the Panama refinery fire.
Operating results in Europe in 1994, as com-
pared to 1993, reflect decreased product margins
due to rising crude prices and oversupply condi-
tions during the year and the negative impact from
the Pembroke, Wales, refinery fire. Earnings for
1993 as compared to 1992 benefited from improved
product margins.
Operating results for 1994 included non-cash
charges of $16 million, as compared to benefits
of $4 million and $23 million in the years 1993
and 1992, respectively, relating to the currency
exchange impacts under SFAS 109 of the Pound
Sterling on deferred income taxes.
Texaco Inc. 1994 Annual Report to Stockholders page 30.
Total operating earnings for 1994 included special charges
related to the estimated cost of employee separations of $29
million, and the adjustment to fair market value of certain prop-
erties being offered for sale of $9 million, partly offset by a gain of
$23 million related to the sale of our interest in a downstream
joint venture in Sweden.
Special charges included in operating results for 1993 related
to staff reductions and the reduction in the carrying value of
certain marketing assets. Special charges in 1992 primarily
related to financial reserves for the expected resolution of
environmental and other issues, the write-down of the carrying
value of certain assets and staff reductions.
<TABLE>
NONPETROLEUM
<CAPTION>
(Millions of dollars) 1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
Operating losses, before
special items $ (3) $ (9) $ (1)
Special charges (29) (4) (18)
----------------------------
Total operating losses $(32) $(13) $(19)
============================
</TABLE>
Operating results in 1994, as compared to 1993, benefited from
higher revenues from the licensing of gasification technology.
These licensing profits in 1993 were somewhat less than in 1992.
Included in total 1994 operating results were special charges of
$29 million by an insurance subsidiary related to property dam-
age from the fires occurring at both the Pembroke, Wales, and
Panama refineries in the latter half of the year.
The year 1993 included a special charge relating to an increase
in the U.S. income tax rate. The year 1992 included special
charges by an insurance subsidiary for property damage related
to a fire at the Los Angeles refinery and Hurricane Andrew, as
well as charges related to financial reserves for the expected
resolution of litigation issues.
<TABLE>
CORPORATE/NONOPERATING
<CAPTION>
(Millions of dollars) 1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
Corporate/nonoperating, before
special items $(445) $(389) $(474)
Net special charges (17) (30) (25)
Tax benefits on sales of interests
in a subsidiary 189 210 30
-----------------------------
Total $(273) $(209) $(469)
=============================
</TABLE>
Corporate/nonoperating results include interest expense, gen-
eral corporate expenses as well as interest income, dividends and
other nonoperating income.
For 1994, 1993 and 1992, benefits were realized from lower
corporate overhead, resulting from the company's continuing
expense reduction efforts. In all periods, results were adversely
impacted by lower U.S. tax benefits associated with interest
expense.
During 1994, results were adversely affected by the reduction
in capitalized interest expense resulting from project comple-
tions, mainly in the North Sea. Also, benefits from sales of mar-
ketable securities in 1994 were lower than amounts realized in
1993 and 1992.
Results for 1992, before special items, included a $15 million
charge related to the early call of several high cost debt issues.
The year 1992 also benefited from the receipt of interest income
on U.K. and Danish tax refunds.
Special items for years 1994 and 1993 included the impact of
current tax benefits realized and deferred tax benefits realizable
through the sales of interests in a subsidiary. These benefits are
realizable due to taxable gains on completed and announced sales
of non-core assets, including the sale of discontinued chemical
operations. Additionally, special items in 1994 and 1993 included
charges relating to staff reductions.
Also included in 1993 were benefits from a tax law change, a
windfall profits tax refund and special charges relating to oil and
gas issues. The year 1992 included tax benefits related to the sale
of an interest in a subsidiary, special charges primarily related to
staff reductions and the write-down of the carrying value of
certain assets.
EMPLOYEE SEVERANCE PROGRAM
On July 5, 1994, Texaco announced its plan for growth which
includes a series of action steps to increase competitiveness and
profitability. This program also calls for reduction in overheads
and improvements in operating efficiencies. Implementation of
Texaco's program is expected to result in the reduction of approx-
imately 2,500 employees involving both the U.S. and interna-
tional upstream and downstream segments, as well as various
support staff functions. During the second quarter of 1994,
Texaco recorded a charge of $88 million, net of tax, for the antici-
pated severance costs associated with the reduction of the 2,500
employees.
As of December 31, 1994, implementation of Texaco's program
has included reductions of approximately 1,365 employees
worldwide with a related commitment to severance payments of
$64 million, or an after-tax cost of $43 million. Of this commit-
ment, payments of $39 million have been made as of December 31,
1994. Currently, there is no change in the company's projections
under this program.
Texaco Inc. 1994 Annual Report to Stockholders page 31.
ENVIRONMENTAL MATTERS
As one of Texaco's core strategies, the Environ-
ment, Health and Safety (EHS) policies underscore
the importance of safeguarding both the environ-
ment wherever the company conducts its business,
and the health and safety of our employees and
neighbors. The company has an ongoing EHS pro-
cess that emphasizes continuous improvement
and works closely with governmental agencies to
ensure that all domestic and international laws
and regulations are met. The worldwide respon-
sibilities for this process are coordinated by a cor-
porate division president and are overseen by the
Public Responsibility Committee of the Board of
Directors. The company has realized improve-
ments in its systems for managing EHS activities
which include enhanced facility auditing practices,
diverse remediation and emergency preparedness
systems, and innovative processes and tech-
nologies that are compatible with a clean environ-
ment while providing our customers with
competitively priced products and services.
Texaco is involved in many proactive organiza-
tions that define and promote environmental stan-
dards such as the American Petroleum Institute,
the Global Climate Coalition and the International
Chamber of Commerce. Texaco is associated with
over 30 oil spill cooperatives worldwide which
includes the Oil Spill Response Limited, East Asia
Response Limited and the Marine Spill Response
Corporation. Additionally, Texaco underwrites its
own International Oil Spill Response team and
carries out regional drills under the provisions of
the U.S. Oil Pollution Act of 1990.
Texaco makes substantial capital and operating
expenditures concerning the environment. These
expenditures relate to the reduction of the release
of pollutants into the air and water and to the
appropriate recycling or disposal of wastes. These
expenditures also include costs associated with
remediation obligations at company operated sites,
previously operated sites and certain third party
sites.
The discussion that follows details environmen-
tal expenditures and reserve information relative
to Texaco and its equity in affiliates.
In 1994, Texaco's capital environmental expen-
ditures totaled $350 million, or nearly 13% of
Texaco's 1994 capital expenditure program, with
$198 million expended in the United States. Capi-
tal expenditures projected for the company for
1995 and 1996 total $375 million and $291 million,
respectively. For these 1995 and 1996 capital expen-
ditures, approximately 64% and 66%, respectively,
will relate to operations in the United States.
Included in the foregoing expenditures are
amounts associated with the modification of the
company's refining and distribution systems to
produce reformulated gasoline which is required
under the U.S. Clean Air Act. The requirement for
Phase I reformulated gasoline was effective Janu-
ary 1, 1995.
GRAPHIC MATERIALS APPEARS HERE.
SEE APPENDIX, PART B, ITEM B11 AND B12.
Texaco spent and expensed $436 million in 1994
associated with the reduction of pollution in the
company's ongoing operations, the manufacturing
of cleaner burning fuels and in the management of
the company's environmental programs, including
Superfund taxes. A similar level of expenditures is
expected in 1995.
Expenditures in 1994 relating to remediation
amounted to $152 million. The company had finan-
cial reserves of $709 million at the end of 1994 for
the estimated future costs of its environmental
remediation programs. These expenditures and
reserves principally relate to remediation activities
at refineries, terminals and service stations, and to
third party waste sites in which Texaco has been
named a responsible party.
Since the enactment of the Comprehensive
Environmental Response, Compensation and Lia-
bility Act (commonly referred to as Superfund), the
Environmental Protection Agency (EPA), other
regulatory agencies and groups have identified
Texaco as a potentially responsible party (PRP) for
cleanup of hazardous waste sites. Texaco has deter-
mined that it may have potential exposure, though
limited in certain cases, at about 190 multiparty
hazardous waste sites, of which 78 sites are on the
EPA's National Priority List. Although liability
under Superfund is joint and several, the company
is actively pursuing and/or participating in the
sharing of Superfund costs with other identified
PRP's on the basis of the weight, volume and tox-
icity of the material contributed by the PRP's. The
expenditures in 1994 relating to remediation
included $18 million for multiparty waste sites.
The financial reserves for environmental remedia-
tion include $73 million relative to multiparty
waste sites. This reserve is based on the company's
analysis of developments at various of these sites
for which costs can reasonably be estimated. How-
ever, there are potential additional costs for waste
sites for which a range of exposures cannot reason-
ably be estimated until further information
develops. In many cases, the amounts and types of
wastes are still under investigation by regulatory
agencies.
In addition to the environmental remediation
reserves, the company also provides financial
reserves to cover the cost of restoration and aban-
donment of its oil and gas producing properties.
These reserves at December 31, 1994 totaled $840
million. Expenditures in 1994 for restoration and
abandonment amounted to $52 million.
In summary, Texaco has provided, to the extent
reasonably measurable, financial reserves for its
probable environmental remediation liabilities.
The recording of these obligations is based on tech-
Texaco Inc. 1994 Annual Report to Stockholders page 32.
nical evaluations of the currently available facts,
interpretation of the regulations and the com-
pany's experience with similar sites. Additional
financial reserve requirements relative to existing
and new remediation sites may be necessary in the
future when more facts are known. In addition,
capital and other environmental expenditures may
be required in the future as the result of new or
revised regulations. The potential also exists for
further legislation to provide limitations on lia-
bility. It is not possible to project the costs or a
range of costs for environmental items beyond that
disclosed above due to uncertainty surrounding
future developments, both in relation to remedia-
tion exposure and to regulatory initiatives. How-
ever, while future environmental expenditures
that will be incurred by the petroleum industry
may certainly be significant in the absolute, they
will be a cost of doing business that will have to be
recovered in the marketplace. The fact that Texaco
has taken a proactive approach to prevention,
detection and remediation of environmental prob-
lems gives the company a competitive position in
our industry with respect to future environmental
costs. Moreover, it is not believed that such future
costs will be material to the company's financial
position nor to its operating results over any rea-
sonable period of time.
LIQUIDITY AND CAPITAL RESOURCES
The company's cash, cash equivalents and short-
term investments totaled $464 million at Decem-
ber 31, 1994 as compared with $536 million at
year-end 1993.
Texaco's net cash provided by operating activi-
ties for 1994 of $2.9 billion (as presented on the
Statement of Consolidated Cash Flows) was
impacted by several significant cash inflows and
outflows that were not directly related to current
period operations. These items include a cash
inflow relating to the discontinuation of financing
by Texaco of credit card receivables of its affiliate,
Star Enterprise, and cash outflows for payments
related to the State of Louisiana royalties settle-
ment which is discussed below and certain
environmental, severance and legal expenditures.
In the aggregate, these items increased Texaco's
net cash flow by some $70 million.
In addition to cash from operating activities,
proceeds of nearly $1 billion were received from
asset sales, including $650 million from the sale of
its chemical operations. These sources of cash plus
financing activities were used to support Texaco's
capital and exploratory program of $2.1 billion, for
the payment of dividends to common, preferred
and minority shareholders of $1 billion, the retire-
ment of $648 million of preferred stock, the retire-
ment of debt and for other general corporate
purposes.
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B13, ITEM B14 AND ITEM B15.
In April of 1994, Texaco completed the sale of
substantially all of its worldwide chemical opera-
tions, which had been classified as discontinued
operations. In addition to the $650 million cash
proceeds received, the company also received an 11-
year subordinated note with a face amount of $200
million. Additional information regarding discon-
tinued operations is contained in Note 4.
In 1994, Texaco reduced total debt some $300
million to $6.5 billion at year-end 1994. This
decline lowered Texaco's ratio of total debt to total
borrowed and invested capital to 38.5% at Decem-
ber 31, 1994 from 38.7% at year-end 1993.
During the 1992 through 1994 period, Texaco
continued to restructure its debt portfolio by
redeeming, prior to maturity, over $1 billion of high
cost debt, in addition to scheduled debt maturities,
and securing over $2 billion of attractive term-
committed funding. As a result, the company's
liquidity position was improved as the average
maturity of its debt at year-end increased from 9.0
years in 1992 to 12.2 years in 1994. Contractual
annual maturities of long-term debt over the next
five years have been balanced to avoid unusual
draws on cash in any one year. The company's
weighted average interest rate on total debt out-
standing at December 31, 1994, including the
immaterial effect of debt-related derivatives, rose
by only one-half of a percentage point to 7.6% from
a year ago. This was achieved despite sharply rising
interest rates as measured by the 2.5 percentage
point increase in U.S. Federal Funds rate.
Financing activities in 1994 also reflect the issu-
ance of $112 million of preferred stock by Texaco
Capital LLC, a finance subsidiary of Texaco Inc.
During 1994, Texaco redeemed in cash and retired
all outstanding shares of its Series C Variable Rate
Cumulative Preferred Stock having an aggregate
liquidation preference of $267 million. Addi-
tionally, during 1994, Texaco commenced a stock
repurchase program and purchased 6.1 million
shares of its common stock through open market
transactions. On November 8, 1994, the company
exchanged the purchased shares of common stock
for all of the shares of Texaco Inc.'s Series E Vari-
able Rate Cumulative Preferred Stock, with a
stated value of $381 million, which were then
retired. These actions, in conjunction with related
financing and investing activities, reduced the
company's overall cost of capital.
Texaco continues to maintain a $2 billion
revolving credit facility as of year-end 1994 as com-
pared to credit facilities of $2.35 billion at Decem-
ber 31, 1993. The $2 billion facility remained
unused at year-end 1994. During the year, Texaco
terminated a $350 million revolving credit facility.
Texaco also terminated its $400 million accounts
receivable sales facility. Additionally, in 1994, a sub-
sidiary of Texaco entered into a revolving credit
Texaco Inc. 1994 Annual Report to Stockholders page 33.
facility for $330 million, which was fully utilized as
of December 31, 1994 and is reflected in long-term
debt.
During 1994, Texaco reached an out-of-court
global settlement with the State of Louisiana in
which Texaco agreed to pay the State $250 million
to end a long-standing royalties dispute. This
amount, which was fully reserved for in previous
years, did not result in a 1994 charge to income.
Texaco paid the first installment of $150 million in
February 1994 and will pay $50 million in 1995 and
$50 million in 1996. Texaco also agreed to and has
initiated an economic expansion program in Loui-
siana which will cause $152 million to be spent over
a five-year period on expanded activity and invest-
ments affecting state-owned oil and gas properties
in which Texaco has interests.
Subsequent to 1994, Texaco completed a sale to
Apache Corporation of more than 300 scattered
producing fields for approximately $600 million.
Proceeds from this sale will be reinvested in core
businesses and used to strengthen Texaco's finan-
cial position to ensure that the Company is well
positioned for future growth opportunities.
As an international petroleum company, Texaco
is exposed to commodity price, foreign exchange
and interest rate risks. These risks are primarily
managed by the careful structuring of transactions
with their related exposures. To a lesser extent, the
company also employs certain commonly used
derivative financial instruments as a cost-effective
and efficient means of managing its risks. Deriva-
tive usage is subject to corporate risk management
policies which prohibit speculative positions and
restrict the amount of exposure on all derivative
transactions by establishing dollar, term and vol-
umetric limits. Accordingly, the company's
exposure in derivative transactions, in the aggre-
gate, is immaterial.
The company considers its financial position
sufficient to meet its anticipated future financial
requirements.
RESERVES
Texaco's worldwide net proved reserves at year-
end 1994, including equity in P.T. Caltex Pacific
Indonesia (CPI), a 50% owned affiliate operating in
Indonesia, totaled 3.7 billion barrels of oil equiva-
lent, of which 57% are located in the United States.
The worldwide reserves include 2.7 billion barrels
of crude oil and natural gas liquids, and 6.2 trillion
cubic feet of natural gas.
GRAPHIC MATERIALS APPEAR HERE.
SEE APPENDIX, PART B, ITEM B16 AND ITEM B17.
On a worldwide basis, including equity reserves
and excluding purchases and sales, the company
added new volumes to its reserve base equal to
111% of combined liquids and gas production in
1994, 112% in 1993 and 94% in 1992. During 1994,
the company added new volumes to its reserve base
equal to 90% of combined liquids and gas produc-
tion in the United States and 141% outside the
United States. The three-year worldwide reserve
replacement average for 1992-1994 was 106% and
the five-year replacement average for 1990-1994
was 107%.
Texaco's worldwide finding and development
costs were $3.54 in 1994, $4.04 over the three-year
period 1992-1994 and $4.15 over the five-year
period 1990-1994.
See the "Supplemental Oil and Gas Informa-
tion" section starting on page 62 for further infor-
mation regarding Texaco's estimated proved reserves.
CAPITAL AND EXPLORATORY
EXPENDITURES
Worldwide capital and exploratory expenditures
for continuing operations, including equity in such
expenditures of affiliates, were $2.7 billion for the
year 1994 as compared to $2.9 billion in 1993 and
$3.0 billion in 1992. The decline reflects the impact
of continuing depressed crude oil prices and low
refined product margins. Texaco, however, is com-
mitted to its worldwide plan for growth and adding
value for its shareholders. The company continues
to add to its underground reserve base through a
focused and balanced approach. This approach
mixes a selection of low to high risk exploration
opportunities with those opportunities where
established core reserves can be exploited through
enhanced reserve recovery programs utilizing
Texaco's technological expertise. Texaco is also
upgrading refinery facilities to enhance the pro-
duction of valuable light-end products and to meet
the challenges of environmental mandates. Texaco
continues to improve product distribution through
investments in its retail marketing outlets. Many
of these opportunities are in the international sec-
tor as evidenced by the increased focus on expendi-
tures outside the United States over recent years.
Texaco Inc. 1994 Annual Report to Stockholders page 34.
UNITED STATES
Upstream capital and exploratory expenditures in 1994 were
essentially unchanged as compared to 1993 and increased when
compared to 1992 representing higher drilling and workover
activity with particular emphasis on developmental gas projects.
Downstream expenditures in 1994 by Texaco and its affiliate, Star
Enterprise, declined as compared to recent years due primarily to
the completion of major refinery projects and upgrades in 1993,
partially offset by increased investments in 1994 involving a
reformulated gasoline project and higher expenditures relating to
marketing and pipeline investments as compared to 1992.
INTERNATIONAL
Upstream capital and exploratory expenditures in 1994 declined
from recent years reflecting successful project completions in the
U.K. North Sea which have increased production of liquids and
natural gas. This decline was partially offset by increased invest-
ments in Nigeria, Trinidad and Australia, as well as development
activities which began in a U.K. North Sea field in 1994. Down-
stream expenditures in 1994 increased compared to 1993 and
1992, reflecting refinery upgrades and modernization and higher
marketing investments by the company's affiliate, Caltex, which
conducts operations in the Middle East and Far East. In addition,
expenditures increased due to an ongoing refinery upgrade proj-
ect in Panama which began late in 1993. These increases were
partially offset by lower expenditures for service station construc-
tion and rehabilitation in the U.K. and the completion of Euro-
pean refinery upgrades underway in 1993 and 1992.
1995 CAPITAL AND EXPLORATORY
EXPENDITURES
Texaco's capital and exploratory spending level, including equity
in such expenditures of affiliates, is projected to approximate $3.3
billion during 1995, an increase of 20% over the 1994 spending
level. This level of expenditures includes the partial reinvestment
of proceeds from asset sales and reflects Texaco's determination
to expand upon its core activities and aggressively pursue attrac-
tive opportunities around the world to grow shareholder value in
1995 and beyond. Of this amount, 56% has been designated for
upstream opportunities and 44% for downstream and other activ-
ities. On a geographical basis, 55% will be directed to interna-
tional areas and 45% to the U.S.
Upstream investments encompass a focused worldwide risk-
balanced exploration program, as well as major offshore develop-
ments such as the Captain field in the U.K. North Sea and other
opportunities in Trinidad, Colombia and West Africa. In the
United States, capital spending will be targeted on existing
growth properties, mainly in South Louisiana, the Gulf of Mexico
and the Permian Basin in Texas. In addition, expenditures con-
tinue to be designated for development projects in the Partitioned
Neutral Zone, an area located between Kuwait and Saudi Arabia.
Downstream investments will emphasize selective high
growth areas around the world. The 1995 program includes
expanding our presence in the Pacific Rim through Texaco's affili-
ate, Caltex, and capitalizing on the synergies of broader market-
ing alliances, such as Texaco's joint venture with Norsk Hydro in
Norway, Denmark and, potentially, in the Baltic States. In the
U.S., expenditures will concentrate on increased marketing
investments by Texaco and its affiliate, Star Enterprise, as well as
continued expenditures to upgrade our refineries and meet
environmental requirements.
Texaco is also accelerating its strategic marketing with com-
panies such as Subway R (Registered) and Taco Bell R (Registered)
to support co-development projects in Texaco convenience stores.
Other planned investments will continue to support Alternate
Energy as a growth business through opportunities in cogenera-
tion, gasification and power generation projects.
<TABLE>
CAPITAL AND EXPLORATORY
EXPENDITURES
<CAPTION>
(Millions of dollars) 1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
Texaco Inc. and subsidiary
companies
United States
Exploration $ 194 $ 194 $ 190
Production 595 602 545
Manufacturing, marketing
and distribution 271 347 363
Other 35 37 60
-----------------------------
Total 1,095 1,180 1,158
-----------------------------
International
Exploration 241 280 254
Production 404 475 607
Manufacturing, marketing
and distribution 292 291 318
Other 2 6 16
-----------------------------
Total 939 1,052 1,195
-----------------------------
Total Texaco Inc. and
subsidiary companies 2,034 2,232 2,353
-----------------------------
Equity in affiliates
United States
Exploration and production 1 3 3
Manufacturing, marketing
and distribution 152 147 246
Other 3 7 17
-----------------------------
Total 156 157 266
-----------------------------
International
Exploration and production 150 151 148
Manufacturing, marketing
and other* 401 352 237
-----------------------------
Total 551 503 385
-----------------------------
Total equity in affiliates 707 660 651
-----------------------------
Total continuing operations 2,741 2,892 3,004
Discontinued operations 22 84 160
-----------------------------
Total worldwide $2,763 $2,976 $3,164
=============================
<FN>
*Excludes expenditures of Caltex' affiliated companies.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 35.
INDUSTRY REVIEW
REVIEW OF 1994
The world economy expanded at a 3.2% rate in 1994, the highest
rate of growth since 1989. Spurred by accommodative monetary
policy and rising exports, Continental Europe joined North Amer-
ica and the United Kingdom in economic recovery. The Japanese
economy remained relatively weak, but showed some signs of
improvement after being stimulated by tax cuts and increased
public works spending. The strongest economic growth last year
continued to be in the developing world, especially in the newly
industrializing nations of the Pacific Rim and Latin America.
Gross Domestic Product continued to fall in most of the former
Soviet republics, but positive growth occurred in several of the
Eastern European economies.
World petroleum demand rose to a record 68.2 million BPD in
1994, an increase of one million BPD from its 1993 level. Demand
in the industrialized nations increased by 0.9 million BPD, reflect-
ing the combined effects of the economic recovery, unusually cold
winter weather in the United States, and a summer heat wave in
Japan. In the developing countries, petroleum consumption grew
by an additional 0.8 million BPD, bolstered by strong increases in
demand in the Pacific Rim countries and Latin America. Despite
increased demand in Eastern Europe, oil demand in the former
Soviet bloc as a whole (including Eastern Europe) continued its
downward trend of recent years, falling by 0.7 million BPD.
<TABLE>
WORLD PETROLEUM DEMAND
<CAPTION>
(MBPD) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Industrial nations 39.9 39.0 38.8
Developing nations 22.1 21.3 20.2
Former Soviet bloc 6.2 6.9 8.2
------------------------------
Total 68.2 67.2 67.2
==============================
</TABLE>
On the supply side, total net non-OPEC crude oil production
rose from 35.2 million BPD to 35.6 million BPD, reversing a five-
year decline. Buoyed by higher output from the United Kingdom,
the North Sea reached a record level of over 5 million BPD in 1994.
There were gains in other non-OPEC producing countries as well,
particularly Argentina and Yemen. These increases, which
totaled 1.2 million BPD, were more than sufficient to offset a 0.2
million BPD decline in crude output in the United States and a 0.6
million BPD production loss in the former Soviet Union.
OPEC crude oil production also rose in 1994, averaging 25
million BPD, an increase of 0.3 million BPD from 1993 levels. Iraq,
OPEC's historically second largest producer, remained excluded
from the international market by United Nations sanctions.
Despite the general improvement in economic and petroleum
demand fundamentals, excess oil inventories worldwide
depressed international petroleum prices during the early
months of 1994. The per-barrel spot price of U.S. benchmark West
Texas Intermediate (WTI), for example, averaged just $14.85 dur-
ing the January-March period, the lowest quarterly level since
the end of 1988. However, OPEC production restraint, the general
firming in demand, and supply disruptions in Nigeria helped
boost prices in the late spring and summer. WTI briefly
approached $21 per barrel in June, before declining somewhat
over the second half of the year. For 1994 overall, WTI averaged
$17.19 per barrel, 6.8% below the previous year.
Even with lower average crude oil prices, refiners' margins in
1994 weakened in most major regions as significant additions to
global refining capacity outstripped growth in world petroleum
demand.
NEAR-TERM OUTLOOK
World economic growth is expected to accelerate in 1995. While
the U.S. economy could slow somewhat as a result of tightening
monetary measures by the Federal Reserve, the expansion in
Western Europe is projected to gain momentum.
Moreover, the negative near-term effects of the Kobe earth-
quake on Japan's economic growth are expected to be offset by
reconstruction spending in the later part of the year. The econo-
mies of the former Soviet Union will probably experience another
decline in 1995, but many of the countries of Eastern Europe are
anticipated to experience positive economic growth.
Robust economic expansion is expected to boost world oil
demand from 68.2 to 69.1 million BPD in 1995. In the United
States, slower economic growth and an assumed return to normal
weather conditions, should limit oil demand growth to only about
0.1 million BPD. The economic upswing in Western Europe will
add another 0.2 million BPD to world demand. Most of the growth
in oil demand will continue to come from the developing coun-
tries, where petroleum usage is expected to expand by about one
million BPD. The declines in the former Soviet bloc are projected
to slow significantly to about 0.4 million BPD.
<TABLE>
NEAR-TERM WORLD SUPPLY/DEMAND
BALANCE
<CAPTION>
(MBPD) 1995 1994
--------------------------------------------------------
<S> <C> <C>
Demand 69.1 68.2
Supply
Non-OPEC Crude 36.0 35.6
OPEC Crude 25.1 25.0
Other Liquids 8.3 8.0
------------------
Total Supply 69.4 68.6
------------------
Stock Change 0.3 0.4
==================
</TABLE>
Non-OPEC crude production is expected to increase by 0.4
million BPD in 1995 to 36.0 million BPD. North Sea production will
advance further and additional increases are expected from the
development of Colombia's Cusiana field and from other produc-
ing countries. The combined losses from the United States and
the former Soviet Union are anticipated to average about 0.5
million BPD (compared to 0.8 million BPD last year), as the rates of
decline moderate in both regions.
Purchases of OPEC oil are projected to increase slightly in
1995, as growth in non-OPEC supplies alone will not meet rising
world demand for oil. However, international oil markets could
remain unstable and potentially weak in 1995, depending on
OPEC's adherence to its quota, the status of Iraqi export flows and
other major market forces.
Colder than normal weather in the first part of the year helped
push U.S. natural gas consumption up by 0.4 trillion cubic feet
(TCF) in 1994 to 20.7 TCF. However, an increase in domestic gas
production and additional inflows from Canada contributed to a
slide in natural gas prices in the latter part of the year. Despite the
expected slowing of the U.S. economy, natural gas consumption is
expected to continue to grow in 1995.
Texaco Inc. 1994 Annual Report to Stockholders page 36.
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
Texaco Inc. and Subsidiary Companies
<CAPTION>
(Millions of dollars) For the years ended December 31 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Sales and services (includes transactions with significant affiliates of $2,561 million in 1994,
$3,027 million in 1993 and $3,672 million in 1992) $ 32,540 $ 33,245 $ 35,687
Equity in income of affiliates, income from dividends, interest, asset sales and other 813 826 843
--------------------------------
33,353 34,071 36,530
--------------------------------
Deductions
Purchases and other costs (includes transactions with significant affiliates
of $1,679 million in 1994, $1,709 million in 1993 and $1,838 million in 1992) 23,931 24,667 26,961
Operating expenses 3,069 3,086 3,072
Selling, general and administrative expenses 1,679 1,783 1,792
Maintenance and repairs 390 418 446
Exploratory expenses 307 352 349
Depreciation, depletion and amortization 1,735 1,568 1,536
Interest expense 498 459 477
Taxes other than income taxes 496 549 530
Minority interest 44 17 18
--------------------------------
32,149 32,899 35,181
--------------------------------
Income from continuing operations, before income taxes and cumulative effect
of accounting changes 1,204 1,172 1,349
Provision for (benefit from) income taxes 225 (87) 311
--------------------------------
Net income from continuing operations, before cumulative effect of accounting changes 979 1,259 1,038
Discontinued operations
Net loss from operations -- (17) (26)
Net loss on disposal (69) (174) --
--------------------------------
(69) (191) (26)
Cumulative effect of accounting changes -- -- (300)
--------------------------------
Net Income $ 910 $ 1,068 $ 712
================================
Preferred stock dividend requirements $ 91 $ 101 $ 99
--------------------------------
Net income available for common stock $ 819 $ 967 $ 613
================================
Net Income Per Common Share (dollars)
Net income (loss) before cumulative effect of accounting changes
Continuing operations $ 3.43 $ 4.47 $ 3.63
Discontinued operations (.26) (.73) (.10)
Cumulative effect of accounting changes -- -- (1.16)
--------------------------------
Net income $ 3.17 $ 3.74 $ 2.37
================================
Average Number of Common Shares Outstanding (thousands) 258,813 258,923 258,656
================================
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 37.
CONSOLIDATED BALANCE SHEET
Texaco Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 404 $ 488
Short-term investments--at fair value 60 48
Accounts and notes receivable (includes receivables from significant affiliates
of $142 million in 1994 and $199 million in 1993), less allowance for doubtful
accounts of $25 million in 1994 and $28 million in 1993 3,297 3,529
Inventories 1,358 1,298
Assets under agreements for sale (see Note 3) 488 --
Net assets of discontinued operations (see Note 4) 195 1,180
Deferred income taxes and other current assets 217 322
----------------------
Total current assets 6,019 6,865
Investments and Advances 5,336 4,984
Net Properties, Plant and Equipment 13,483 14,171
Deferred Charges 667 606
---------------------
Total $25,505 $26,626
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, commercial paper and current portion of long-term debt $ 917 $ 669
Accounts payable and accrued liabilities (includes payables to significant
affiliates of $93 million in 1994 and $81 million in 1993)
Trade liabilities 1,980 1,887
Accrued liabilities 1,317 1,437
Estimated income and other taxes 801 763
---------------------
Total current liabilities 5,015 4,756
Long-Term Debt and Capital Lease Obligations 5,564 6,157
Deferred Income Taxes 879 1,162
Employee Retirement Benefits 1,130 1,104
Deferred Credits and Other Noncurrent Liabilities 2,558 2,636
Minority Interest in Subsidiary Companies 610 532
---------------------
Total 15,756 16,347
Stockholders' Equity
Variable Rate Cumulative Preferred Stock -- 648
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 515 536
Unearned employee compensation (282) (337)
Common stock--274,293,417 shares issued 1,714 1,714
Paid-in capital in excess of par value 654 655
Retained earnings 7,463 7,463
Currency translation adjustment 87 18
Unrealized net gain on investments 51 58
---------------------
10,502 11,055
Less--Common stock held in treasury, at cost--14,761,296 shares in 1994
and 15,273,372 shares in 1993 753 776
---------------------
Total stockholders' equity 9,749 10,279
---------------------
Total $25,505 $26,626
=====================
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 38.
STATEMENT OF CONSOLIDATED CASH FLOWS
Texaco Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) For the years ended December 31 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 910 $ 1,068 $ 712
Reconciliation to net cash provided by (used in) operating activities
Loss on disposal of discontinued operations 103 223 --
Cumulative effect of accounting changes -- -- 300
Depreciation, depletion and amortization 1,735 1,631 1,627
Deferred income taxes (213) (283) 67
Exploratory expenses 307 352 349
Minority interest in net income 44 17 18
Dividends from affiliates, less than equity in income (79) (227) (149)
Gains on asset sales (125) (23) (27)
Changes in operating working capital
Accounts and notes receivable 278 (275) 650
Inventories (60) 26 45
Accounts payable and accrued liabilities (350) (215) (529)
Other--mainly estimated income and other taxes 23 (108) (184)
Other--net 286 176 (204)
-------------------------------
Net cash provided by operating activities 2,859 2,362 2,675
INVESTING ACTIVITIES
Capital and exploratory expenditures (2,050) (2,326) (2,533)
Proceeds from sale of discontinued operations,
net of cash and cash equivalents sold 645 -- --
Proceeds from sales of assets 328 373 176
Purchases of investment instruments (693) (1,342) (1,457)
Sales/maturities of investment instruments 672 1,258 1,303
Other--net (7) (7) (2)
-------------------------------
Net cash used in investing activities (1,105) (2,044) (2,513)
FINANCING ACTIVITIES
Borrowings having original terms in excess of three months
Proceeds 660 821 1,707
Repayments (707) (796) (1,529)
Net increase (decrease) in other borrowings (251) 296 (49)
Issuance of preferred stock -- -- 300
Issuance of preferred stock by subsidiaries 112 425 --
Redemption of Series C Preferred Stock (267) -- --
Purchases of common stock for Series E Preferred Stock exchange (381) -- --
Dividends paid to the company's stockholders
Common (830) (828) (828)
Preferred (91) (101) (99)
Dividends paid to minority shareholders (87) (84) (8)
Other--net (3) (11) --
-------------------------------
Net cash used in financing activities (1,845) (278) (506)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 7 (13) (38)
-------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (84) 27 (382)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 488 461 843
-------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 404 $ 488 $ 461
===============================
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 39.
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
Texaco Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
(Shares in thousands; amounts in millions of dollars) 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK--par value $1; Shares Amount Shares Amount Shares Amount
Shares authorized--30,000,000 -------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Series C Variable Rate Cumulative Preferred Stock--
stated value of $50 per share
Beginning of year 5,334 $ 267 5,334 $ 267 5,334 $ 267
Redemption (5,334) (267) -- -- -- --
--------------------------------------------------------------
End of year -- -- 5,334 267 5,334 267
--------------------------------------------------------------
Series E Variable Rate Cumulative Preferred Stock--
stated value of $100,000 per share
Beginning of year 4 381 4 381 4 381
Redemption (4) (381) -- -- -- --
--------------------------------------------------------------
End of year -- -- 4 381 4 381
--------------------------------------------------------------
Market Auction Preferred Shares (Series G, H, I and J)--
liquidation preference of $250,000 per share
Beginning of year 1 300 1 300 -- --
Issuance -- -- -- -- 1 300
--------------------------------------------------------------
End of year 1 300 1 300 1 300
--------------------------------------------------------------
Series B ESOP Convertible Preferred Stock--
liquidation value of $600 per share
Beginning of year 812 487 823 494 828 497
Retirements (32) (19) (11) (7) (5) (3)
--------------------------------------------------------------
End of year 780 468 812 487 823 494
--------------------------------------------------------------
Series F ESOP Convertible Preferred Stock--
liquidation value of $737.50 per share
Beginning of year 66 49 67 49 68 50
Retirements (3) (2) (1) -- (1) (1)
--------------------------------------------------------------
End of year 63 47 66 49 67 49
--------------------------------------------------------------
UNEARNED EMPLOYEE COMPENSATION (related to ESOP
preferred stock and restricted stock awards)
Beginning of year (337) (385) (435)
Establishment (5) (10) --
Amortization and other 60 58 50
--------------------------------------------------------------
End of year (282) (337) (385)
--------------------------------------------------------------
COMMON STOCK--par value $6.25;
Shares authorized--350,000,000
Issued 274,293 1,714 274,293 1,714 274,293 1,714
--------------------------------------------------------------
COMMON STOCK HELD IN TREASURY, AT COST
Beginning of year 15,273 (776) 15,545 (789) 15,799 (799)
Debenture conversions -- -- -- -- (12) 1
Stock repurchases for preferred stock exchange 6,107 (381) -- -- -- --
Preferred stock exchange (6,107) 381 -- -- -- --
Other--mainly employee compensation plans (512) 23 (272) 13 (242) 9
--------------------------------------------------------------
End of year 14,761 (753) 15,273 (776) 15,545 (789)
==============================================================
(Continued on next page)
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 40.
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
Texaco Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAID-IN CAPITAL IN EXCESS OF PAR VALUE
Beginning of year $ 655 $ 654 $ 658
Issuance and redemption of preferred stock, treasury stock transactions
relating to investor services plan and employee compensation plans (1) 1 (4)
--------------------------------
End of year 654 655 654
--------------------------------
RETAINED EARNINGS
Balance at beginning of year 7,463 7,312 7,514
Add:
Net income 910 1,068 712
Tax benefit on unallocated ESOP Convertible
Preferred Stock dividends 11 13 13
Deduct: Dividends declared on
Common stock ($3.20 per share in 1994, 1993 and 1992) 830 828 828
Preferred stock
Series C Variable Rate Cumulative Preferred Stock 13 18 20
Series E Variable Rate Cumulative Preferred Stock 19 25 28
Market Auction Preferred Shares (Series G, H, I and J) 10 8 --
Series B ESOP Convertible Preferred Stock 45 47 47
Series F ESOP Convertible Preferred Stock 4 4 4
--------------------------------
Balance at end of year 7,463 7,463 7,312
--------------------------------
CURRENCY TRANSLATION ADJUSTMENT
Beginning of year 18 (24) (19)
Change during year 69 42 (5)
--------------------------------
End of year 87 18 (24)
--------------------------------
UNREALIZED NET GAIN ON INVESTMENTS
Beginning of year 58 -- --
Change during year (7) 58 --
--------------------------------
End of year 51 58 --
--------------------------------
STOCKHOLDERS' EQUITY--END OF YEAR (including preceding page) $ 9,749 $ 10,279 $ 9,973
================================
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 41.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Texaco Inc. and Subsidiary Companies
NOTE 1. DESCRIPTION OF SIGNIFICANT ACCOUNTING
POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements consist of the accounts of
Texaco Inc. and subsidiary companies owned directly or indirectly
more than 50 percent. Intercompany accounts and transactions
are eliminated.
The U.S. Dollar is the functional currency of all the company's
operations and of a substantial portion of the operations of its
affiliates accounted for on the equity method. For these opera-
tions, all gains and losses from transactions not denominated in
the functional currency are included in income currently, except
for certain hedging transactions. The cumulative translation
effects for the equity affiliates using functional currencies other
than the U.S. Dollar are included in the currency translation
adjustment in stockholders' equity.
CASH EQUIVALENTS
Highly liquid investments with a maturity of three months or less
when purchased are generally considered to be cash equivalents.
INVENTORIES
Virtually all inventories of crude oil, petroleum products and
petrochemicals are stated at cost, determined on the last-in, first-
out (LIFO) method. Other merchandise inventories are stated at
cost, determined on the first-in, first-out (FIFO) method. Mate-
rials and supplies are stated at average cost. Inventories are
valued at the lower of cost or market.
INVESTMENTS AND ADVANCES
The equity method of accounting is used for investments in
certain affiliates owned 50 percent or less, including corporate
joint ventures and partnerships. Under this method, equity in the
pre-tax income or losses of partnerships and in the net income or
losses of corporate joint-venture companies is reflected currently
in Texaco's revenues, rather than when realized through divi-
dends or distributions. Investments in the entities accounted for
on this method generally reflect Texaco's equity in their underly-
ing net assets.
The company's interest in the net income of affiliates
accounted for at cost is reflected in net income when realized
through dividends.
Investments in debt securities and in equity securities with
readily determinable fair values are generally accounted for at
fair value.
PROPERTIES, PLANT AND EQUIPMENT AND
DEPRECIATION, DEPLETION AND AMORTIZATION
Texaco follows the "successful efforts" method of accounting for
its oil and gas exploration and producing operations.
Lease acquisition costs related to properties held for oil, gas
and mineral production are capitalized when incurred. Unproved
properties with acquisition costs which are individually signifi-
cant are assessed on a property-by-property basis, and a loss is
recognized, by provision of a valuation allowance, when the
assessment indicates an impairment in value. Unproved proper-
ties with acquisition costs which are not individually significant
are generally aggregated and the portion of such costs estimated
to be nonproductive, based on historical experience, is amortized
on an average holding period basis.
For purposes of determining and recognizing permanent
impairment of productive properties, excluding those assets held
for sale, the aggregate carrying value of the productive properties
in a geographical operating area is tested against the undis-
counted projection of net future cash flows for that area. However,
for evaluation of proved properties not yet part of the productive
pool of assets, any significant impairment is determined and
recognized on an individual property basis.
Exploratory costs, excluding the costs of exploratory wells, are
charged to expense as incurred. Costs of drilling exploratory
wells, including stratigraphic test wells, are capitalized pending
determination whether the wells have found proved reserves
which justify commercial development. If such reserves are not
found, the drilling costs are charged to exploratory expenses.
Intangible drilling costs applicable to productive wells and to
development dry holes, as well as tangible equipment costs
related to the development of oil and gas reserves, are capitalized.
The costs of productive leaseholds and other capitalized costs
related to producing activities, including tangible and intangible
costs, are amortized principally by field on the unit-of-production
basis by applying the ratio of produced oil and gas to estimated
recoverable proved oil and gas reserves. Estimated future resto-
ration and abandonment costs are taken into account in deter-
mining amortization and depreciation rates.
Depreciation of properties, plant and equipment related to
facilities other than producing properties is provided generally on
the group plan, using the straight-line method, with depreciation
rates based upon estimated useful life applied to the cost of each
class of property. Assets not on the group plan are depreciated
based on estimated useful lives using the straight-line method.
Capitalized nonmineral leases are amortized over the esti-
mated useful life of the asset or the lease term, as appropriate,
using the straight-line method.
Periodic maintenance and repairs applicable to marine vessels
and manufacturing facilities are accounted for on the accrual
basis. Normal maintenance and repairs of all other properties,
plant and equipment are charged to expense as incurred.
Renewals, betterments and major repairs that materially extend
the useful life of properties are capitalized and the assets
replaced, if any, are retired.
When capital assets representing complete units of property
are disposed of, the difference between the disposal proceeds and
net book value is credited or charged to income. When miscella-
Texaco Inc. 1994 Annual Report to Stockholders page 42.
neous business properties are disposed of, the difference between
asset cost and salvage value is charged or credited to accumulated
depreciation.
ENVIRONMENTAL EXPENDITURES
When remediation of a property is probable and the related costs
can be reasonably estimated, environmentally-related remedia-
tion costs are expensed and recorded as liabilities. If recoveries of
environmental costs from third parties are probable, a receivable
is recorded. Other environmental expenditures, principally main-
tenance or preventive in nature, are recorded when expended and
are expensed or capitalized as appropriate.
MINORITY INTEREST IN SUBSIDIARY COMPANIES
Minority interest in the Consolidated Balance Sheet reflects
minority owners' share of stockholders' equity in subsidiaries.
DEFERRED INCOME TAXES
Deferred income taxes are determined utilizing a liability
approach. The income statement effect is derived from changes in
deferred income taxes on the balance sheet. This approach gives
consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets
and liabilities. These differences relate to items such as deprecia-
ble and depletable properties, exploratory and intangible drilling
costs, nonproductive leases, merchandise inventories and certain
liabilities. This approach gives immediate effect to changes in
income tax laws upon enactment.
Provision is not made for possible income taxes payable upon
distribution of accumulated earnings of foreign subsidiary com-
panies and affiliated corporate joint-venture companies when
such earnings are deemed to be permanently reinvested.
The company adopted Statement of Financial Accounting
Standards 109 as of January 1, 1992. For additional information,
refer to Note 2.
NET INCOME PER COMMON SHARE
Primary net income per common share is based on net income
less preferred stock dividend requirements divided by the average
number of common shares outstanding and common equivalents.
Fully diluted net income per common share assumes full conver-
sion of all convertible securities into common stock at the later of
the beginning of the year or date of issuance (unless antidilutive).
ACCOUNTING FOR CONTINGENCIES
Certain conditions may exist as of the date financial statements
are issued, which may result in a loss to the company, but which
will only be resolved when one or more future events occur or fail
to occur. Such contingent liabilities are assessed by the company's
management and legal counsel. The assessment of loss con-
tingencies necessarily involves an exercise of judgment and
is a matter of opinion. In assessing loss contingencies related to
legal proceedings that are pending against the company or unas-
serted claims that may result in such proceedings, the company's
legal counsel evaluates the perceived merits of any legal proceed-
ings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the
liability can be estimated, then the estimated liability would be
accrued in the company's financial statements. If the assessment
indicates that a potentially material loss contingency is not proba-
ble, but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and
material, would be disclosed.
Loss contingencies considered remote are generally not dis-
closed unless they involve guarantees, in which case the nature of
the guarantee would be disclosed. However, in some instances in
which disclosure is not otherwise required, the company may
disclose contingent liabilities of an unusual nature which, in the
judgment of management and its legal counsel, may be of interest
to shareholders or others.
NOTE 2. CHANGES IN ACCOUNTING PRINCIPLES
During the first quarter of 1994, the Caltex group of companies,
owned 50% by Texaco, adopted the following Statement of Finan-
cial Accounting Standards (SFAS).
Accounting For Certain Investments in Debt and Equity
Securities--SFAS 115 requires that certain investments be classi-
fied into three categories based on management's intent and be
reported at fair value unless intended to be held to maturity.
Adoption of SFAS 115, which was effective January 1, 1994, has no
effect on reported net income. The cumulative effect on Texaco of
Caltex's adoption of SFAS 115 at January 1, 1994 was not material,
resulting in an increase in stockholders' equity of $35 million.
The net effect on Texaco for the year 1994 was an additional net
increase to stockholders' equity of $5 million. These increases are
primarily unrealized gains on investments classified as available-
for-sale by certain affiliates of Caltex.
In 1993, the company adopted the following Statements.
Employers' Accounting for Postemployment Benefits--SFAS 112
requires companies to accrue the cost of postemployment benefits
either during the years that the employee renders the necessary
service or at the date of the event giving rise to the benefit,
depending upon whether certain conditions are met. Adoption of
the Standard as of January 1, 1993 did not impact 1993 net income
since the company had been accounting for substantially all of
these costs in accordance with the new Standard.
Accounting for Certain Investments in Debt and Equity
Securities--SFAS 115 requires that investments in equity securi-
ties that have readily determinable fair values and all invest-
ments in debt securities be classified into three categories based
on management's intent. Such investments are to be reported at
fair value except for investments intended to be held to maturity
which are to be reported at amortized cost. Previously, all such
investments were accounted for at amortized cost.
The cumulative effect on the consolidated financial state-
ments of adopting SFAS 115 as of December 31, 1993 was not
material. Adoption of this Standard resulted in an increase in
stockholders' equity of $58 million, after related income taxes,
representing unrealized net gains applicable to securities cate-
gorized as available-for-sale under the new Standard. SFAS 115
prohibits restatement of previous financial statements.
Texaco Inc. 1994 Annual Report to Stockholders page 43.
During the fourth quarter of 1992, the company and its signifi-
cant affiliates adopted the following Statements, retroactive to
January 1, 1992.
Employers' Accounting for Postretirement Benefits Other Than
Pensions--SFAS 106 requires accrual of the cost of postretirement
benefits over the estimated service lives of employees. For Texaco,
these benefits principally relate to life insurance and health-care
coverage. Previously, such costs were accounted for on a pay-as-
you-go basis. The adoption of SFAS 106 resulted in a cumulative
after-tax charge of $536 million, or $2.07 per com-
mon share, and an after-tax charge for the year 1992 of $27
million, or $.10 per common share.
Accounting for Income Taxes--SFAS 109 maintains the liability
concept of income tax accounting in SFAS 96, but allows for the
assumption of future taxable income in the recognition of
deferred tax assets. Additionally, under SFAS 109 deferred taxes
are not recorded on the differences between the historic and
current translation rates for accounts translated for financial
reporting at historic rates. SFAS 96 required the recording of
deferred taxes on such differences. The adoption of SFAS 109
resulted in a cumulative benefit of $236 million, or $.91 per
common share, and a benefit for the year 1992 of $177 million, or
$.68 per common share.
NOTE 3. ASSETS UNDER AGREEMENTS FOR SALE
In 1994, Texaco announced that it agreed to sell more than 300
domestic producing fields to Apache Corporation and agreed to
form a strategic alliance with STENA which involves the sale of a
portion of its international marine fleet. At December 31, 1994,
the net properties, plant and equipment and deferred income
taxes relating to those assets, and for other non-core assets for
which sales agreements have been signed, have been classified as
current assets on the Consolidated Balance Sheet. These sales are
expected to be completed during the first quarter of 1995.
NOTE 4. DISCONTINUED OPERATIONS
In 1993, Texaco entered into memorandums of understanding
with an affiliate of the Jon M. Huntsman Group of Companies for
the sale of substantially all of Texaco's worldwide chemical oper-
ations and, therefore, has accounted for these operations as discon-
tinued operations.
On April 21, 1994, Texaco Inc. received from Huntsman Corpo-
ration $850 million on the sale of Texaco Chemical Company and
related international operations, consisting of $650 million in
cash and an 11-year subordinated note with a face amount of $200
million. Not included in this transaction was Texaco's worldwide
lubricant additives business. On February 14, 1995, Texaco and
Huntsman Corporation announced that they intend to form a
joint venture to own and operate this business, which includes
manufacturing facilities in Port Arthur, Texas and Ghent, Bel-
gium, among others, as well as sales and marketing offices in
various locations in the U.S. and abroad. Formation of the joint
venture is expected to take place during the first half of 1995.
Huntsman Corporation assumed and the joint venture shall
assume current liabilities and ongoing contractual obligations of
the respective operations, while Texaco retains or shall retain the
remaining obligations applicable to events occurring prior to the
closing dates.
The results for chemical operations have been classified as dis-
continued operations for all periods presented in the Statement of
Consolidated Income. The assets and liabilities of discontinued
operations have been classified in the Consolidated
Balance Sheet as "Net assets of discontinued operations" and as
of December 31, 1994, the balance in this caption reflects the
assets and liabilities of the worldwide lubricant additives bus-
iness. Discontinued operations have not been segregated in the
Statement of Consolidated Cash Flows and, therefore, amounts
for certain captions will not agree with the respective Statement
of Consolidated Income.
Related party transactions between the discontinued opera-
tions and Texaco's significant affiliates included both sale and
purchase transactions. Sales to affiliates amounted to $12 million,
$67 million and $81 million for 1994, 1993 and 1992, respectively.
For the years 1994, 1993 and 1992, purchases from affiliates
amounted to $20 million, $118 million and $102 million, respec-
tively. Receivables from and payables to these affiliates at the end
of each of these periods were immaterial.
The summarized results of discontinued operations and
related per common share effects are as follows:
<TABLE>
<CAPTION>
(Millions of dollars)
For the years ended December 31 1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 415 $1,114 $1,128
=============================
Loss from operations before
income taxes $ -- $ (19) $ (44)
Benefit from income taxes -- 2 18
-----------------------------
Net loss from operations $ -- $ (17) $ (26)
-----------------------------
Loss on disposal before
income taxes* $ (103) $ (223) $ --
Benefit from income taxes 34 49 --
-----------------------------
Net loss on disposal $ (69) $ (174) $ --
-----------------------------
Total net loss $ (69) $ (191) $ (26)
=============================
<FN>
*1994 includes $15 million of
income and 1993 includes $19
million of losses during the
phase-out period.
Per common share (dollars)
Net loss from operations $ -- $ (.06) $ (.10)
Loss on disposal (.26) (.67) --
-----------------------------
Total net loss $ (.26) $ (.73) $ (.10)
=============================
</TABLE>
Summarized balance sheet data for the discontinued opera-
tions is as follows. The difference between the net assets below at
December 31, 1993 and the purchase price at that date is reflected
in current liabilities in the Consolidated Balance Sheet.
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
----------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Accounts receivable $ 31 $ 128
Inventories 30 121
Other 6 25
------------------
Total current assets 67 274
Net Properties, Plant and Equipment 148 1,025
Other Noncurrent Assets -- 9
------------------
Total $ 215 $1,308
------------------
Liabilities
Current Liabilities $ 19 $ 109
Noncurrent Liabilities 1 19
------------------
Total $ 20 $ 128
------------------
Net assets of discontinued operations $ 195 $1,180
==================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 44.
NOTE 5. INVENTORIES
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
---------------------------------------------------------------
<S> <C> <C>
Crude oil $ 284 $ 304
Petroleum products and petrochemicals 854 726
Other merchandise 30 52
Materials and supplies 190 216
-------------------
Total $1,358 $1,298
===================
</TABLE>
The excess of estimated current cost over the book value of
inventories carried on the LIFO basis of accounting was approx-
imately $207 million and $137 million at December 31, 1994 and
1993, respectively.
NOTE 6. INVESTMENTS AND ADVANCES
Investments in affiliates, including corporate joint ventures and
partnerships, owned 50% or less are accounted for on the equity
method. Texaco's total investments and advances are sum-
marized as follows:
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
---------------------------------------------------------------
<S> <C> <C>
Affiliates accounted for on the equity method
Caltex group of companies
Exploration and production $ 494 $ 500
Manufacturing, marketing and
distribution 1,873 1,647
-------------------
Total Caltex group of companies 2,367 2,147
Star Enterprise 830 863
Other affiliates 709 731
-------------------
3,906 3,741
Miscellaneous investments,
long-term receivables,
etc., accounted for at
Fair value 631 699
Cost, less reserve 799 544
-------------------
Total $5,336 $4,984
===================
</TABLE>
Texaco's equity in the net income of affiliates accounted for on the
equity method, adjusted to reflect income taxes for partnerships
whose income is directly taxable to Texaco, is as follows:
<TABLE>
<CAPTION>
(Millions of dollars)
For the years ended December 31 1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
Equity in net income
Caltex group of companies
Exploration and production $136 $134 $154
Manufacturing, marketing
and distribution 210 227 180
---------------------------
Total Caltex group of companies 346 361 334
Star Enterprise 37 61 7
Cumulative effect of accounting
changes--Caltex and Star -- -- (11)
Other affiliates 111 108 125
---------------------------
Total $494 $530 $455
---------------------------
Dividends received from these
companies $467 $366 $351
===========================
</TABLE>
The undistributed earnings of these affiliates accounted for on
the equity method included in Texaco's retained earnings were
$2,657 million, $2,585 million and $2,363 million as of December
31, 1994, 1993 and 1992, respectively.
CALTEX GROUP
Texaco has investments in the Caltex group of companies, owned
50% by Texaco and 50% by Chevron Corporation. The Caltex
group consists of Caltex Petroleum Corporation and subsidiaries,
P.T. Caltex Pacific Indonesia and American Overseas Petroleum
Limited and subsidiaries. This group of companies is engaged in
the exploration for and production, transportation, refining and
marketing of crude oil and products in Africa, Asia, the Middle
East, Australia and New Zealand.
STAR ENTERPRISE
Star Enterprise (Star) is a joint-venture partnership owned 50%
by Texaco and 50% by the Saudi Arabian Oil Company. The
partnership refines, distributes and markets Texaco-branded
petroleum products in 26 East and Gulf Coast states and the
District of Columbia.
The following table provides summarized financial information
on a 100% basis for the Caltex group, Star and all other affiliates
accounted for on the equity method, as well as Texaco's share. The
net income of all partnerships, including Star, is net of estimated
income taxes. The actual income tax liability is reflected in the
accounts of the respective partners and not shown in the follow-
ing table.
Star's assets at the respective balance sheet dates include the
remaining portion of the assets which were originally transferred
from Texaco to Star at the fair market value on the date of
formation. Texaco's investment and equity in the income of Star,
as reported in the consolidated financial statements, reflect the
remaining unamortized historical carrying cost of the assets
transferred to Star at formation. Additionally, Texaco's invest-
ment includes adjustments necessary to reflect contractual
arrangements on the formation of this partnership, principally
involving contributed inventories.
Texaco Inc. 1994 Annual Report to Stockholders page 45.
<TABLE>
<CAPTION>
Caltex group Star Enterprise Other equity affiliates Texaco's share
---------------------------- ----------------------- ----------------------- --------------------------
(Millions of dollars) 1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the years ended
December 31:
Gross revenues $15,148 $15,648 $17,527 $ 6,100 $ 6,399 $ 6,965 $ 3,058 $ 3,233 $ 2,891 $11,766 $12,224 $13,299
Income before income
taxes and cumula-
tive effect of account-
ing changes $ 1,111 $ 1,178 $ 1,178 $ 101 $ 194 $ 29 $ 639 $ 633 $ 634 $ 780 $ 852 $ 781
Net income (loss)* $ 689 $ 720 $ 720 $ 66 $ 126 $ (53)$ 410 $ 406 $ 416 $ 494 $ 530 $ 455
=======================================================================================================
As of December 31:
Current assets $ 2,421 $ 2,123 $ 2,378 $ 928 $ 1,015 $ 1,081 $ 641 $ 635 $ 675 $ 1,711 $ 1,637 $ 1,826
Noncurrent assets 7,389 6,266 5,485 3,247 3,188 3,097 3,351 3,481 3,464 6,453 5,888 5,463
Current liabilities (3,072) (2,411) (2,453) (748) (647) (717) (759) (755) (774) (2,213) (1,835) (1,862)
Noncurrent
liabilities and
deferred credits (1,853) (1,537) (1,453) (1,109) (1,161) (1,170) (1,835) (1,928) (1,979) (1,969) (1,876) (1,890)
Minority interest
in subsidiary
companies (152) (146) (138) -- -- -- -- -- -- (76) (73) (69)
-------------------------------------------------------------------------------------------------------
Net assets (or partners'
equity)** $ 4,733 $ 4,295 $ 3,819 $ 2,318 $ 2,395 $ 2,291 $ 1,398 $ 1,433 $ 1,386 $ 3,906 $ 3,741 $ 3,468
=======================================================================================================
<FN>
*Net income (loss) for 1992 includes the cumulative effect of accounting changes. For the Caltex group, this represents an after-
tax charge of $26 million for SFAS 106 and a benefit of $77 million for SFAS 109. For Star Enterprise, adoption of SFAS 106
resulted in an after-tax charge of $72 million.
**Net assets for the Caltex group includes the cumulative effect at January 1, 1994 of the adoption of SFAS 115, resulting in
an increase in stockholders' equity of $70 million and an additional increase of $9 million during 1994.
</TABLE>
NOTE 7. PROPERTIES, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1994 1993
---------------------- ----------------------
(Millions of dollars) As of December 31 Gross Net Gross Net
---------------------- ----------------------
<S> <C> <C> <C> <C>
Exploration and production $22,467 $ 8,050 $24,759 $ 8,829
Manufacturing 3,140 2,004 2,932 1,891
Marketing 3,319 2,351 3,123 2,250
Marine 242 47 379 125
Pipe lines 943 399 915 397
Other 984 632 1,041 679
----------------------------------------------
Total $31,095 $13,483 $33,149 $14,171
----------------------------------------------
Capital lease amounts included above $ 560 $ 92 $ 578 $ 122
==============================================
Accumulated depreciation, depletion and amortization totaled
$17,612 million and $18,978 million at December 31, 1994 and 1993,
respectively.
NOTE 8. SHORT-TERM DEBT, LONG-TERM DEBT,
CAPITAL LEASE OBLIGATIONS AND RELATED
DERIVATIVES
Notes payable, commercial paper and current portion of
long-term debt
</TABLE>
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
--------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ 862 $1,195
Notes payable to banks and others with
originating terms of one year or less 198 76
Current portion of long-term debt and capital
lease obligations
Indebtedness 497 376
Capital lease obligations 31 47
-------------------------
1,588 1,694
Less short-term obligations intended to be
refinanced 671 1,025
-------------------------
Total $ 917 $ 669
=========================
</TABLE>
The weighted average interest rates of commercial paper and
notes payable to banks at December 31, 1994 and 1993 were 6.0%
and 3.4%, respectively.
Texaco Inc. 1994 Annual Report to Stockholders page 46.
Long-term debt and capital lease obligations
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long-Term Debt
6-7/8% Guaranteed notes, due 1999 $ 200 $ 200
6-7/8% Guaranteed debentures, due 2023 195 195
7-1/2% Guaranteed debentures, due 2043 198 198
7-3/4% Guaranteed debentures, due 2033 198 198
7-7/8% Guaranteed notes, due 1995 150 150
8% Guaranteed debentures, due 2032 147 147
8-1/4% Guaranteed debentures, due 2006 149 149
8-3/8% Guaranteed debentures, due 2022 198 198
8-1/2% Guaranteed notes, due 2003 199 199
8-5/8% Guaranteed debentures, due 2010 150 150
8-5/8% Guaranteed debentures, due 2031 199 199
8-5/8% Guaranteed debentures, due 2032 199 199
8.65% Guaranteed notes, due 1998 200 200
8-7/8% Guaranteed debentures, due 2021 150 150
9% Guaranteed notes, due 1994 -- 250
9% Guaranteed notes, due 1996 400 400
9% Guaranteed notes, due 1997 200 200
9% Guaranteed notes, due 1999 200 200
9-3/4% Guaranteed debentures, due 2020 250 250
Medium-term notes, maturing from 1995 to 2043 (7.8%) 634 692
Revolving Credit Facility, due 1998-2002--variable rate (6.0%) 330 --
Pollution Control Revenue Bonds, due 2012-variable rate (4.0%) 166 166
Other long-term debt:
Texaco Inc.-Guarantee of ESOP Series B and F loans-fixed and variable rates (4.8%) 269 329
U.S. dollars (6.4%) 259 254
Other currencies (6.5%) 32 51
--------------------
Total 5,272 5,324
Capital Lease Obligations (see Note 9) 149 231
--------------------
5,421 5,555
Less current portion of long-term debt and capital lease obligations 528 423
--------------------
4,893 5,132
Short-term obligations intended to be refinanced 671 1,025
--------------------
Total long-term debt and capital lease obligations $5,564 $6,157
====================
</TABLE>
The percentages reflected for variable-rate debt are the interest
rates at December 31, 1994. The percentages reflected for the
categories "Medium-term notes" and "Other long-term debt" are
the weighted average interest rates at year-end 1994. Where
applicable, principal amounts reflected in the preceding schedule
include unamortized premium or discount.
During 1994, a subsidiary of Texaco entered into a revolving
credit facility for $330 million, which was fully utilized as of
December 31, 1994. During 1993, the company completed public
long-term debt offerings totaling $732 million, which included
$132 million under Texaco's medium-term note program. Also
during 1993, the company redeemed, prior to maturity, $71 mil-
lion of 5-3/4% debentures due in 1997.
At December 31, 1994, Texaco was also party to a revolving
credit facility with commitments of $2 billion with a syndicate of
major U.S. and international banks, available as support of the
issuance of the company's commercial paper, as well as for work-
ing capital and for other general corporate purposes. Texaco had
no amounts outstanding under this facility at year-end 1994.
Texaco pays a facility fee on the $2 billion facility. The banks
reserve the right to terminate the credit facility upon the occur-
rence of certain specific events, including change in control.
At December 31, 1994, Texaco's long-term debt included $671
million of short-term obligations scheduled to mature during
1995, which the company has both the intent and the ability to
refinance on a long-term basis, through the use of its $2 billion
revolving credit facility.
Contractual annual maturities of long-term debt, including
sinking fund payments and other redemption requirements, for
the five years subsequent to December 31, 1994 are as follows (in
millions): 1995--$497; 1996--$424; 1997--$340; 1998--$306;
and 1999--$532. The preceding maturities are before considera-
tion of short-term obligations intended to be refinanced and also
exclude capital lease obligations.
Texaco Inc. 1994 Annual Report to Stockholders page 47.
Debt-related derivatives
Texaco seeks to maintain a balanced capital structure that will
provide financial flexibility and support the company's strategic
objectives while achieving a low cost of capital. This is achieved by
balancing the company's liquidity and interest rate exposures.
These exposures are managed primarily through the use of long-
term and short-term debt instruments which are reported on the
balance sheet. However, off-balance sheet derivative instru-
ments, primarily interest rate swaps, are also used as a manage-
ment tool in achieving the company's objectives. These
instruments are used to manage identifiable exposures on a non-
leveraged, non-speculative basis.
As part of its interest rate exposure management, the com-
pany seeks to balance the benefit of the lower cost of floating rate
debt, with its inherent increased risk, with fixed rate debt having
less market risk.
Summarized below are the carrying amounts and fair values of
the company's debt and debt-related derivatives at December 31,
1994 and 1993. Derivative usage during the periods presented was
limited to interest rate swaps and forward rate agreements,
where the company either paid or received the net effect of a fixed
rate versus a floating rate (commercial paper or LIBOR) index at
specified intervals, calculated by reference to an agreed notional
principal amount.
<TABLE>
<CAPTION>
1994 1993
----------------------------------- -----------------------------------
Carrying Fair Carrying Fair
(Millions of dollars) At December 31 Amount Value Amount Value
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Notes Payable and Commercial Paper $1,060 $1,060 $1,271 $1,271
Related Derivatives--Payable 1 3 4 36
Notional principal amount $ 425 $ 550
Weighted average maturity (years) 0.9 1.5
Weighted average fixed pay rate 8.01% 8.19%
Weighted average floating receivable rate 6.26% 3.35%
Long-Term Debt, including current maturities $5,272 $5,225 $5,324 $5,898
Related Derivatives--(Receivable) Payable -- 55 (3) (15)
Notional principal amount $ 777 $ 982
Weighted average maturity (years) 3.2 3.9
Weighted average fixed receivable rate 5.60% 5.54%
Weighted average floating pay rate 6.27% 3.42%
Unamortized net gain on terminated swaps $ 6 $ -- $ 18 $ --
==========================================================================
</TABLE>
Fair values noted above are based upon quoted market prices, as
well as borrowing rates currently available to the company for
bank loans with similar terms and maturities. The fair value of
swaps is the estimated amount that would be received or paid to
terminate the agreements at year-end, taking into account cur-
rent interest rates and the current creditworthiness of the swap
counterparties.
Amounts receivable or payable based on the interest rate
differentials of derivatives are accrued monthly and reflected in
interest expense as a hedge of interest on outstanding debt. Gains
and losses on terminated swaps are deferred and amortized over
the life of the associated debt or the original term of the swap,
whichever is shorter.
Since counterparties to the company's derivative transactions
are major financial institutions with strong credit ratings,
exposure to credit risk on the net interest differential on notional
amounts is minimal. The notional amounts of derivative con-
tracts do not represent cash flow and are not subject to credit risk.
The company's counterparty credit exposure limits have been set
based upon the maturity and notional amounts of new transac-
tions, as well as on the fair value of outstanding transactions.
Texaco Inc. 1994 Annual Report to Stockholders page 48.
NOTE 9. LEASE COMMITMENTS AND RENTAL
EXPENSE
The company has leasing arrangements involving service sta-
tions, tanker charters, a manufacturing plant and other facilities.
Amounts due under capital leases are reflected in the company's
balance sheet as obligations, while Texaco's interest in the related
assets is principally reflected as properties, plant and equipment.
The remaining lease commitments are operating leases, and pay-
ments on such leases are recorded as rental expense.
As of December 31, 1994, Texaco Inc. and its subsidiary com-
panies (excluding discontinued operations) had estimated mini-
mum commitments for payment of rentals (net of noncancelable
sublease rentals) under leases which, at inception, had a noncan-
celable term of more than one year, as follows:
<TABLE>
<CAPTION>
Operating Capital
(Millions of dollars) leases leases
---------------------------------------------------------------
<S> <C> <C>
1995 $ 193 $ 46
1996 128 38
1997 564 21
1998 72 19
1999 52 20
After 1999 415 88
----------------
Total lease commitments $1,424 232
======
Less amounts representing
Executory costs 37
Interest 100
Add noncancelable sublease rentals netted
in capital lease commitments above 54
----
Present value of total capital lease obligations $149
====
</TABLE>
Rental expense (excluding discontinued operations) relative to
operating leases, including contingent rentals based on factors
such as gallons sold, is provided in the table below. Such payments
do not include rentals on leases covering oil and gas mineral
rights.
<TABLE>
<CAPTION>
(Millions of dollars) 1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
Rental expense
Minimum lease rentals $205 $238 $252
Contingent rentals 15 20 24
---------------------------
Total 220 258 276
Less rental income on properties
subleased to others 40 36 36
---------------------------
Net rental expense $180 $222 $240
===========================
</TABLE>
In 1992, Texaco as lessee entered into a five year agreement for
the leasing of a chemical manufacturing plant to be constructed in
Port Neches, Texas. As of December 31, 1994, construction was
largely completed. The lease provides for a substantial residual
value guarantee by the lessee at the termination of the lease. Both
the lease payment amount and the residual value guarantee
amount for this operating lease are included in the preceding
table of minimum rental commitments.
NOTE 10. PREFERRED STOCK AND RIGHTS
SERIES B ESOP CONVERTIBLE PREFERRED STOCK
An amendment to Texaco Inc.'s Employees Thrift Plan created an
Employee Stock Ownership Plan (ESOP) feature. In 1988, the
ESOP purchased 833,333-1/3 shares of Series B ESOP Convertible
Preferred Stock (Series B) from the company for $600 per share,
or an aggregate purchase price of $500 million. Texaco Inc. guar-
anteed a $500 million variable-rate loan made to the ESOP which
was used to acquire the shares of Series B. Subsequently, in 1991,
Texaco Inc. refinanced approximately $103 million of the out-
standing balance through a Grantor Trust structure at a fixed
interest rate. The current fixed interest rate is 6.13%.
Dividends on each share of Series B are cumulative and are
payable semiannually at the rate of $57 per annum. Dividends on
Series B totaled $45 million for 1994 and $47 million for both 1993
and 1992.
Participants may partially convert their Series B into common
stock beginning at age 55, and may elect full conversion upon
retirement or separation from service with the company. The
conversion ratio and number of votes per share of Series B are
subject to adjustment under certain conditions. At present, the
Series B entitles a participant to 12.9 votes per share, voting
together with the holders of common stock, and is currently
convertible into 12.868 shares of common stock. As an alternative
to conversion, a participant can elect to receive $600 per share of
Series B, payable in cash or common stock. If the participant
elects to receive common stock, the company provides shares of
common stock to the plan trustee, who then transmits the shares
to the participant. Should the participant elect to receive cash, it
is the intent of the company to provide the plan trustee with
shares of common stock, so that the trustee can sell such shares in
the open market and have sufficient cash to transmit to the
participant. The shares of Series B may be redeemed by Texaco
Inc. at $622.80 per share through December 19, 1995, and at prices
declining to $600 per share on or after December 20, 1998. Also,
Texaco Inc. may be required to redeem the shares of Series B
under certain circumstances.
SERIES C VARIABLE RATE CUMULATIVE PREFERRED
STOCK
In 1989, the company distributed to its stockholders as a special
dividend one share of Series C Variable Rate Cumulative Pre-
ferred Stock (Series C), with a stated value of $50 per share, for
each 50 shares of common stock owned. The shares of Series C
had an aggregate liquidation preference of $267 million.
On September 30, 1994, the company redeemed in cash and
retired all outstanding shares of its Series C.
During 1994, 1993 and 1992, dividends on the Series C totaled
$13 million ($2.43 per share), $18 million ($3.26 per share) and $20
million ($3.69 per share), respectively.
SERIES D JUNIOR PARTICIPATING PREFERRED
STOCK AND RIGHTS
In 1989, the company declared a dividend distribution of one
Right for each outstanding share of common stock. Under certain
circumstances, each Right may be exercised to purchase from the
company a unit consisting of 1/100th of a share (Unit) of Series D
Junior Participating Preferred Stock (Series D), par value $1.00
Texaco Inc. 1994 Annual Report to Stockholders page 49.
per share, at a purchase price of $150 per Unit (the Purchase
Price), subject to adjustment.
The Rights may be exercised only after a person has acquired,
or obtained the right to acquire, beneficial ownership of 20% or
more of the company's common stock other than pursuant to a
Qualifying Offer, or has commenced a tender offer that would
result in that person owning 20% or more of the common stock.
A Qualifying Offer is an all-cash, fully financed tender offer for
all outstanding shares of common stock which remains open for
45 days, which results in the acquiror owning a majority of the
company's voting stock, and in which the acquiror agrees to
purchase for cash all remaining shares of common stock.
The Rights expire on April 3, 1999, or sooner, upon the acquisi-
tion of the company pursuant to a Qualifying Offer, and may be
redeemed by the company at a price of $.01 per Right at any time
prior to 10 days after the Rights become exercisable.
In the event that a person becomes the beneficial owner of 20%
or more of the common stock other than pursuant to a Qualifying
Offer, each Right will thereafter entitle the holder to receive, upon
exercise of the Right, in lieu of the Series D, a number of shares of
common stock, property, cash or other securities having a formula
value equal to two times the exercise price of the Right.
In the event that the company is acquired in a transaction in
which the company is not the surviving corporation, or in the
event 50% or more of the company's assets or earning power is
sold or transferred, each holder of a Right thereafter has the right
to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.
Until a Right is exercised, the holder thereof, as such, has no
rights as a stockholder of the company, including the rights to
vote or to receive dividends.
As of December 31, 1994, there were 3,000,000 shares desig-
nated as Series D with a liquidation value of $100 per share. In
general, the terms of the Series D have been designed so that each
Unit of Series D should be substantially the economic equivalent
of one share of common stock. The Series D will, if issued, be
junior to any other series of Preferred Stock which may be autho-
rized and issued, unless the terms of such other series provide
otherwise. Each share of the Series D which may be issued will
entitle the holder to receive a quarterly dividend equal to the
greater of (i) $5.00 per share or (ii) 100 times the quarterly divi-
dend declared per share of common stock, subject to adjustment.
In the event of liquidation of the company, the holders of the
Series D will be entitled to receive a preferred liquidation pay-
ment of $100 per share plus accrued and unpaid dividends to the
date of payment, but in no event less than an amount equal to 100
times the payment made per share of common stock, if greater.
The Series D will be redeemable as a whole, or in part, at any time,
or from time to time, at the option of the company at a redemption
price per share equal to 100 times the then market price of a share
of common stock, plus accrued and unpaid dividends through the
redemption date. Each share of the Series D will have 100 votes,
voting together with the common stock. In the event of any
merger, consolidation or other transaction in which the shares of
common stock are exchanged, each share of the Series D will
entitle the holder thereof to receive 100 times the amount
received per share of common stock.
If dividends on the Series D are in arrears in an aggregate
amount equal to six quarterly dividends, the number of directors
of the company will be increased by two, and the holders of the
Series D outstanding at the time of such dividend arrearage,
voting separately as a class with any other series of preferred
stock likewise qualified to vote, will be entitled at the next annual
meeting to elect two directors. The Series D will also have a
separate class vote on certain matters which would adversely
affect the rights and preferences of the Series D.
The Purchase Price payable and the number of Units of Series
D or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time in certain
events to prevent dilution.
SERIES E VARIABLE RATE CUMULATIVE PREFERRED STOCK
In 1989, the company issued 3,814 shares of Series E Variable Rate
Cumulative Preferred Stock (Series E), with a stated value of
$100,000 per share, in connection with a merger transaction. The
shares of Series E had an aggregate liquidation preference of
$381 million.
On November 8, 1994, the company exchanged 6.1 million
shares of its common stock held in treasury, which were acquired
during the year, for all of the issued and outstanding shares of the
Series E, which were then retired.
During 1994, dividends on the Series E totaled $19 million
($4,850 per share). For 1993 and 1992, dividends on Series E
totaled $25 million ($6,513 per share) and $28 million ($7,375
per share), respectively.
SERIES F ESOP CONVERTIBLE PREFERRED STOCK
An amendment to Texaco Inc.'s Employees Savings Plan created
an Employee Stock Ownership Plan (ESOP) feature. In 1990, the
ESOP purchased 67,796.61 shares of Series F ESOP Convertible
Preferred Stock (Series F) from the company for $737.50 per
share, or an aggregate purchase price of $50 million. Texaco Inc.
guaranteed a $50 million variable-rate loan made to the ESOP
which was used to acquire the shares of Series F.
Dividends on each share of Series F are cumulative and are pay-
able semiannually at the rate of $64.53 per annum. Annual divi-
dends on Series F totaled $4 million for 1994, 1993 and 1992.
Participants may partially convert their Series F into common
stock beginning at age 55, and may elect full conversion upon
retirement or separation from service with the company. The
conversion ratio and number of votes per share of Series F are
subject to adjustment under certain conditions. At present, the
Series F entitles a participant to 10 votes per share, voting
together with the holders of common stock, and is convertible
into 10 shares of common stock. As an alternative to conversion, a
participant can elect to receive $737.50 per share of Series F, in
cash or common stock. If the participant elects to receive common
stock, the company provides shares of common stock to the plan
trustee, who then transmits the shares to the participant. Should
the participant elect to receive cash, it is the intent of the company
to provide the plan trustee with shares of common stock, so that
the trustee can sell such shares in the open market and have
sufficient cash to transmit to the participant. The shares of Series
F may be redeemed by Texaco Inc. at $769.77 per share through
February 12, 1996, and at prices declining to $737.50 per share on
or after February 13, 2000. Also, Texaco Inc. may be required to
redeem the shares of Series F under certain circumstances.
Texaco Inc. 1994 Annual Report to Stockholders page 50.
MARKET AUCTION PREFERRED SHARES
In December, 1992, the company issued 1,200 shares of cumula-
tive variable rate preferred stock, called Market Auction Pre-
ferred Shares (MAPS) in a private placement, for an aggregate
purchase price of $300 million. The MAPS are grouped into four
series (300 shares each of Series G, H, I and J) of $75 million each.
The dividend rates for each series during 1994 and 1993 were
determined by Dutch auctions conducted at seven-week inter-
vals. During 1994, the annual dividend rate for the MAPS ranged
between 2.48% and 4.57% and dividends totaled $10 million
($7,784, $8,057, $9,156 and $9,356 per share for Series G, H, I and J,
respectively).
For 1993, the annual dividend rate for the MAPS ranged
between 2.40% and 3.25% and dividends totaled $8 million
($6,281, $6,396, $6,549 and $6,762 per share for Series G, H, I and
J, respectively). For 1992, the initial dividend rate for each series
was 3.25% per annum and the dividend periods ranged from
seven to ten weeks. The length of the dividend periods can be
changed at each auction. Alternatively, the dividend rate and the
dividend period can be negotiated with potential investors.
The company may redeem the MAPS, in whole or in part at any
time at a liquidation preference of $250,000 per share, plus pre-
mium, if any, and accrued and unpaid dividends thereon.
The MAPS are non-voting, except under certain limited
circumstances.
NOTE 11. FOREIGN CURRENCY
Currency translations from continuing operations resulted in a
pre-tax loss of $18 million in 1994 as compared to currency gains
of $35 million in 1993 and $182 million in 1992. After applicable
income taxes, the loss for 1994 was $49 million as compared to
gains in 1993 of $49 million and 1992 of $230 million. These
amounts include Texaco's equity in such gains and losses of affi-
liates accounted for on the equity method of accounting.
Currency exchange impacts for the years 1992 through 1994
were primarily due to the effects under SFAS 109, "Accounting for
Income Taxes," of the Pound Sterling on deferred income taxes,
as well as operations in developing countries reflecting the impact
of strong inflationary factors.
Currency translation adjustments reflected in the separate
stockholders' equity account result from translation items per-
taining to certain affiliates of Caltex.
Refer to Note 16 regarding the company's activity in forward
exchange contracts for hedging of foreign currency exposures.
<TABLE>
NOTE 12. TAXES
<CAPTION>
1994 1993 1992
--------------------------- ------------------------ ------------------------
United United United
(Millions of dollars) States Foreign Total States Foreign Total States Foreign Total
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Direct taxes
Provision (benefit) for income taxes
Current
U.S. Federal and foreign $ (68) $ 296 $ 228 $ 5 $ 143 $ 148 $ 111 $ 103 $ 214
U.S. state and local 36 -- 36 14 -- 14 36 -- 36
Deferred
Tax law changes -- -- -- 17 (169) (152) -- -- --
Other (33) (6) (39) (141) 44 (97) (82) 143 61
---------------------------------------------------------------------------------
Total provision (benefit)
for income taxes (65) 290 225 (105) 18 (87) 65 246 311
Taxes other than income taxes
Oil and gas production 101 8 109 122 17 139 131 2 133
Sales and use -- 55 55 5 59 64 6 10 16
Property 111 18 129 124 16 140 112 21 133
Payroll 78 39 117 87 29 116 81 39 120
Other 38 48 86 75 15 90 59 69 128
---------------------------------------------------------------------------------
Total taxes other than income taxes 328 168 496 413 136 549 389 141 530
Import duties and other
governmental levies 53 3,939 3,992 42 3,735 3,777 39 3,743 3,782
---------------------------------------------------------------------------------
Total direct taxes 316 4,397 4,713 350 3,889 4,239 493 4,130 4,623
Taxes collected from consumers
for governmental agencies 1,360 2,239 3,599 1,068 2,060 3,128 986 2,125 3,111
---------------------------------------------------------------------------------
Total $1,676 $6,636 $8,312 $1,418 $5,949 $7,367 $1,479 $6,255 $7,734
=================================================================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 51.
All tax expense data on the preceding page excludes discontinued
operations. Effective January 1, 1992, the company adopted SFAS
109, "Accounting for Income Taxes". All 1992 tax expense data
excludes the cumulative effect of accounting changes for SFAS 106
and SFAS 109.
The deferred income tax assets and liabilities included in the
Consolidated Balance Sheet as of December 31, 1994 and 1993
amounted to $150 million and $264 million, respectively, as net
current assets and $879 million and $1,162 million, respectively, as
net noncurrent liabilities. The table that follows shows deferred
income tax assets and liabilities by category. Deferred income
taxes are not recorded on differences between financial reporting
and tax bases of investments in stock of subsidiary companies,
unless realization of the effect is probable in the foreseeable
future. Certain potential deferred tax asset amounts for which
possibility of realization is deemed extremely remote have been
eliminated and are therefore excluded from the following table.
<TABLE>
<CAPTION>
(Liability) Asset
---------------------
(Millions of dollars) As of December 31 1994 1993
---------------------------------------------------------------
<S> <C> <C>
Depreciation $ (786) $(1,006)
Depletion (624) (764)
Intangible drilling costs (641) (624)
Other deferred tax liabilities (183) (178)
--------------------
Total (2,234) (2,572)
Employee benefit plans 464 496
Tax loss carryforwards 677 626
Tax-related reserves 152 157
Tax credit carryforwards 280 271
Environmental reserves 219 246
Other deferred tax assets 525 580
--------------------
Total 2,317 2,376
Total before valuation allowance 83 (196)
Valuation allowance (812) (702)
--------------------
Total--net $ (729) $ (898)
====================
</TABLE>
The following schedule reconciles the differences between the
U.S. Federal income tax rate and the effective income tax rate:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income tax rate
assumed to be applicable 35.0% 35.0% 34.0%
Net earnings and dividends
attributable to affiliated
corporations accounted for on the
equity method (10.5) (11.6) (9.5)
Aggregate earnings and losses from
international operations before tax
law changes 11.1 3.5 1.5
Tax law changes -- (13.0) --
Sales of stock of subsidiaries (15.7) (17.9) (2.2)
Energy credits (2.4) (2.5) (1.6)
Other 1.2 (.9) .8
----------------------------
Effective income tax rate 18.7% (7.4%) 23.0%
============================
</TABLE>
The increase in the 1994 effective tax rate as compared to 1993
is mainly due to higher taxable income in 1994 from the interna-
tional producing operations and net deferred tax benefits arising
from 1993 tax law and rate changes in the U.K. and the United
States. The change between 1993 and 1992 is mainly due to
current tax benefits realized and deferred tax benefits realizable
through the sales of interests in a subsidiary as well as net
deferred tax benefits arising from tax law and rate changes in the
U.K. and the United States.
For companies operating in the United States, pre-tax earn-
ings from continuing operations before cumulative effect of
accounting changes aggregated $402 million in 1994, $397 million
in 1993 and $382 million in 1992. For companies with operations
located outside the United States, pre-tax earnings on that basis
aggregated $802 million in 1994, $775 million in 1993 and $967
million in 1992.
Income taxes paid, net of refunds, amounted to $329 million,
$326 million and $283 million in 1994, 1993 and 1992, respectively.
The undistributed earnings of subsidiary companies and of
affiliated corporate joint-venture companies accounted for on the
equity method, for which deferred U.S. income taxes have not
been provided at December 31, 1994 amounted to $1,290 million
and $2,148 million, respectively. The corresponding amounts at
December 31, 1993 were $1,293 million and $2,038 million, respec-
tively. Recording of deferred income taxes on these undistributed
earnings is not required relative to foreign companies and
pre-1992 earnings of domestic companies when the earnings have
been permanently reinvested. These amounts would be subject to
possible U.S. taxation only if remitted as dividends. The deter-
mination of the hypothetical amount of unrecognized deferred
U.S. taxes on undistributed earnings of foreign entities is not
practicable. For domestic entities, such unrecorded deferred
income taxes were not material.
For the years 1994, 1993 and 1992 there was no utilization of
loss carryforwards for U.S. Federal income taxes. For the years
1994, 1993 and 1992, the utilization of loss carryforwards resulted
in income tax benefits of $57 million, $20 million and $85 million
in foreign income taxes, respectively.
At December 31, 1994, Texaco had worldwide tax basis loss
carryforwards of approximately $2,023 million, including $883
million which do not have an expiration date. The remainder
expire at various dates through 2019.
Foreign tax credit carryforwards available for U.S. Federal
income tax purposes amounted to approximately $146 million at
December 31, 1994, expiring at various dates through 1999. Alter-
native minimum tax and other tax credit carryforwards available
for U.S. Federal income tax purposes were $280 million at Decem-
ber 31, 1994, of which $259 million have no expiration date. The
remaining credits expire at various dates through 2009. The
credits that are not utilized by the expiration dates may be taken
as deductions for U.S. Federal income tax purposes.
Texaco Inc. 1994 Annual Report to Stockholders page 52.
NOTE 13. EMPLOYEE BENEFIT PLANS
Texaco Inc. and certain of its non-U.S. subsidiaries sponsor vari-
ous benefit plans for active employees and retirees. The costs of
the savings, health care and life insurance plans relative to
employees' active service are shared by the company and its
employees, with Texaco's costs for these plans charged to expense
as incurred. In addition, reserves for employee benefit plans are
provided principally for the unfunded costs of various pension
plans, retiree health and life insurance benefits, incentive com-
pensation plans and for separation benefits payable to employees.
As of January 1, 1993, Texaco adopted SFAS 112, "Employers'
Accounting for Postemployment Benefits". Adoption of SFAS 112
did not impact 1993 net income since the company had been
accounting for substantially all of these costs in accordance with
the new Standard.
The discussion of employee benefit plans that follows is for
total plan activity, including benefits and amounts applicable to
employees of the discontinued operations. Amounts relative to
the discontinued operations are not material for any of the years
discussed.
EMPLOYEE STOCK OWNERSHIP PLANS (ESOP)
Texaco recorded ESOP expense of $20 million in 1994 and 1993,
and $17 million in 1992. Company contributions to the Employees
Thrift Plan of Texaco Inc. and the Employees Savings Plan of
Texaco Inc. (the Plans) amounted to $20 million in 1994 and 1993,
and $17 million in 1992. These Plans are designed to provide
participants with a benefit of approximately 6% of base pay.
In 1994, 1993 and 1992, the company paid $49 million, $51
million and $51 million, respectively, in dividends on Series B and
Series F stock. The dividends are applied by the trustee to fund
interest payments which amounted to $13 million, $14 million
and $18 million for 1994, 1993 and 1992, respectively, as well as to
reduce principal on the ESOP loans. Dividends on the shares of
Series B and Series F used to service debt of the Plans are tax
deductible to the company.
Reflected in Texaco's long-term debt are the Plans' ESOP loans
which are guaranteed by Texaco Inc. Commensurate with each
repayment on the ESOP loans and as a result of the allocation of
the Series B and Series F stock by the trustee of the Plans to the
individual participating employees, there is a reduction in the
remaining ESOP-related unearned employee compensation
included as a component of stockholders' equity.
PENSION PLANS
The company sponsors pension plans that cover substantially all
employees. Generally, these plans provide defined pension bene-
fits based on final average pay. However, the level of benefits and
terms of vesting vary among plans. Amounts charged to pension
expense, as well as amounts funded, are generally based on actu-
arial studies. Pension plan assets are administered by trustees
and are principally invested in equity and fixed income securities
and deposits with insurance companies.
The total worldwide expense for all employee pension plans of
Texaco, including pension supplementations and the smaller non-
U.S. plans, was $109 million in 1994, $111 million in 1993 and $105
million in 1992.
The following data are provided for U.S. plans and principal
non-U.S. plans.
<TABLE>
COMPONENTS OF PENSION EXPENSE
<CAPTION>
United States Plans Non-U.S. Plans
-------------------------------- ---------------------------------
(Millions of dollars) 1994 1993 1992 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $ 69 $ 67 $ 68 $ 22 $ 14 $ 15
Actual investment return on plan assets, (gain) loss 27 (158) (115) 33 (155) (98)
Interest cost on projected benefit obligations 125 125 134 74 61 56
Amortization of net deferred amounts (145) 39 -- (104) 112 39
--------------------------------------------------------------------
Total $ 76 $ 73 $ 87 $ 25 $ 32 $ 12
====================================================================
The assumed long-term return on plan assets for U.S. plans was 9% for 1994, 1993 and 1992; for non-U.S. plans the weighted
average rate was 8.5% for 1994, 8.6% for 1993 and 8.5% for 1992.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 53.
<TABLE>
FUNDED STATUS OF PENSION PLANS
<CAPTION>
United States Plans
-----------------------------------------------------------------------
1994 1993
---------------------------------- ----------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(Millions of dollars) As of December 31 Benefits Exceed Assets Benefits Exceed Assets
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Present value of the estimated
pension benefits to be paid
in the future
Vested benefits $ (888) $ (59) $(1,302) $ (47)
Nonvested benefits (61) (3) (100) (3)
-----------------------------------------------------------------
Accumulated benefit
obligations (949) (62) (1,402) (50)
Effect of projected future
salary increases (354) (17) (467) (16)
-----------------------------------------------------------------
Total projected benefit
obligations (1,303) (79) (1,869) (66)
-----------------------------------------------------------------
Amount of assets available
for benefits
Funded assets of the plans,
at fair value 1,116 -- 1,513 --
Net pension liability (asset)
recorded on Texaco's
Consolidated Balance Sheet 129 62 128 50
-----------------------------------------------------------------
Total assets 1,245 62 1,641 50
-----------------------------------------------------------------
Assets in excess of (less than)
projected benefit obligations(1) $ (58) $ (17) $ (228) $ (16)
=================================================================
(1)Consisting of:
Net transition asset (liability)
not yet recognized $ 63 $ (13) $ 75 $ (17)
Unrecognized cost of retroactive
benefits granted by a plan
amendment (78) (14) (54) (8)
Effect of changes in
assumptions and differences
between actual and estimated
experience (43) 10 (249) 9
-----------------------------------------------------------------
Total $ (58) $ (17) $ (228) $ (16)
=================================================================
<CAPTION>
Non-U.S. Plans
-----------------------------------------------------------------------
1994 1993
---------------------------------- ----------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(Millions of dollars) As of December 31 Benefits Exceed Assets Benefits Exceed Assets
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Present value of the estimated
pension benefits to be paid
in the future
Vested benefits $(418) $(218) $(344) $(199)
Nonvested benefits (20) (23) (19) (19)
----------------------------------------------------------------
Accumulated benefit
obligations (438) (241) (363) (218)
Effect of projected future
salary increases (31) (24) (54) (29)
----------------------------------------------------------------
Total projected benefit
obligations (469) (265) (417) (247)
----------------------------------------------------------------
Amount of assets available
for benefits
Funded assets of the plans,
at fair value 706 -- 696 --
Net pension liability (asset)
recorded on Texaco's
Consolidated Balance Sheet (253) 241 (237) 218
----------------------------------------------------------------
Total assets 453 241 459 218
----------------------------------------------------------------
Assets in excess of (less than)
projected benefit obligations(1) $ (16) $ (24) $ 42 $ (29)
================================================================
(1)Consisting of:
Net transition asset (liability)
not yet recognized $ 84 $ (14) $ 92 $ (23)
Unrecognized cost of retroactive
benefits granted by a plan
amendment (47) (34) (32) (7)
Effect of changes in
assumptions and differences
between actual and estimated
experience (53) 24 (18) 1
----------------------------------------------------------------
Total $ (16) $ (24) $ 42 $ (29)
================================================================
</TABLE>
<TABLE>
WEIGHTED AVERAGE RATE ASSUMPTIONS USED IN ESTIMATING PENSION BENEFIT OBLIGATIONS
<CAPTION>
United States Plans Non-U.S. Plans
----------------------- ------------------
1994 1993 1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 8.5% 7.0% 12.6% 10.6%
Rate of increase in compensation levels 4.8% 4.8% 10.2% 7.0%
======================================
</TABLE>
OTHER POSTRETIREMENT BENEFITS
Texaco sponsors postretirement plans primarily in the U.S. that
provide health care and life insurance for retirees and eligible
dependents. The company's U.S. health insurance obligation is its
fixed dollar contribution. The plans are unfunded, and the costs
are shared by the company and its employees and retirees.
Effective January 1, 1992, the company adopted SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" using the immediate recognition method for the cumu-
lative effect. This Standard requires companies to accrue for the
cost of such benefits over the service lives of employees. For
Texaco, this Standard primarily applies to the cost of life insur-
ance and health insurance in the U.S. The company's previous
practice was to expense these costs on a pay-as-you-go basis.
Texaco Inc. 1994 Annual Report to Stockholders page 54.
The determination of the company's obligation is based on the
terms of the life and health insurance plans, along with applicable
actuarial assumptions. The company continues to fund these
benefit costs on a pay-as-you-go basis, with retirees paying the
excess over the company's fixed dollar contribution for health
insurance. For employees who retire from Texaco between age 55
and 65, most will be eligible to receive health care benefits, similar
to those available to active employees, as well as life insurance
benefits. The company's cost to provide these postretirement
benefits for health insurance is currently equal to the company's
cost for an active employee. After attaining age 65, the retirees'
health care coverage is coordinated with available Medicare
benefits.
The trend rates used for the purpose of estimating those costs
reflect the expected increase in general U.S. health care inflation
as measured by the health-care cost component of the U.S. Con-
sumer Price Index. For retirees between age 55 and 65, the
assumed rate of increase in the fixed dollar contribution for
health-care benefits was 7.0% in 1994. The rate of increase in the
fixed dollar contribution is expected to rise to 8.5% in 1996 and
then decrease to an ultimate rate of 4.5% in the year 2002, at
which time the company expects general U.S. health care inflation
to increase at a rate approximating general inflation. The fixed
dollar contribution for retirees 65 and older is assumed to
increase by 4.5% per year. The fixed dollar contributions derived
from these assumptions do not necessarily represent an obliga-
tion of the company.
Assuming a 1% increase in the annual rate of increase in the
fixed dollar contribution for health insurance, the accumulated
postretirement benefit obligation and annual expense would
increase by approximately $50 million and $7 million,
respectively.
Certain of the company's non-U.S. subsidiaries have post-
retirement benefit plans. However, most retirees outside the U.S.
are covered by government sponsored and administered pro-
grams, the cost of which is not significant to the company.
The following tables provide information on the status of the
principal postretirement plans:
COMPONENTS OF OTHER POSTRETIREMENT BENEFIT EXPENSE
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------- --------------------------- ---------------------------
Health Life Health Life Health Life
(Millions of dollars) Care Insurance Total Care Insurance Total Care Insurance Total
---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $12 $ 4 $16 $13 $ 4 $17 $12 $ 5 $17
Interest cost on accumulated postretirement
benefit obligations 38 20 58 40 19 59 41 20 61
----------------------------------------------------------------------------------
Total $50 $24 $74 $53 $23 $76 $53 $25 $78
==================================================================================
</TABLE>
FUNDED STATUS OF OTHER POSTRETIREMENT PLANS
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
Health Life Health Life
(Millions of dollars) As of December 31 Care Insurance Total Care Insurance Total
---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Accumulated unfunded postretirement benefit obligations
Retirees $267 $204 $471 $250 $208 $458
Fully eligible active participants 35 17 52 57 26 83
Other active plan participants 108 39 147 172 51 223
-------------------------------------------------------
Total accumulated unfunded postretirement benefit obligations 410 260 670 479 285 764
Unrecognized net gain 89 45 134 35 7 42
-------------------------------------------------------
Net other postretirement benefit liability recorded on Texaco's
Consolidated Balance Sheet $499 $305 $804 $514 $292 $806
=======================================================
</TABLE>
WEIGHTED AVERAGE RATE ASSUMPTIONS USED IN ESTIMATING OTHER
POSTRETIREMENT BENEFIT OBLIGATIONS
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<C> <C>
Discount rate 8.5% 7.7%
Rate of increase in compensation levels 4.8% 4.8%
===============
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 55.
NOTE 14. STOCK INCENTIVE PLAN
Under the company's stock incentive plan (the Plan) approved by
stockholders, among the awards that may be granted to execu-
tives and certain key employees are stock options, with or without
stock appreciation rights, and restricted stock. The total number
of shares available each year for issuance under the Plan through
December 31, 2002 is eight-tenths of one percent (0.8%) of the
aggregate number of shares of common stock issued and out-
standing on December 31 of the previous year, adjusted for certain
plan activity. Shares not issued in the current year are available
for future grant. The option price per share cannot be less than
the fair market value of a share of common stock on the date
granted unless adjusted as provided in the Plan. At December 31,
1994, there were 2,534,044 shares available for awards during
1995, of which 1,981,129 shares were available to all participants
and 552,915 shares were available to those participants who are
not officers or directors. At December 31, 1993 and 1992, there
were 1,243,873 shares and 1,578,445 shares, respectively, available
for future grant.
Stock options granted under the Plan extend for 10 years from
the date of grant and become 50% exercisable on the first anniver-
sary. These options are fully exercisable on the second anniver-
sary, except for the January 1990 awards, which became fully
exercisable on the fourth anniversary of the award.
The Plan permits the company to grant restored options to a
participant in the Plan who has previously been granted stock
options. This feature enables a participant, who exercises an
option by exchanging previously acquired common stock or who
has shares withheld by the company to satisfy tax withholding
obligations, to receive new options, exercisable at the then mar-
ket value, for the same number of shares as were exchanged or
withheld. Under existing regulations, restored options are fully
exercisable six months after the date of grant.
Option activity during 1994, 1993 and 1992 is summarized in
the following table:
<TABLE>
<CAPTION>
Price Range
Stock Options 1994 1993 1992 Per Share
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding
January 1 3,368,949 2,651,746 1,997,467 $46.78-69.25
Granted 643,985 776,375 704,800 57.94-63.69
Canceled -- -- (2,200) 61.44
Exercised (732,286) (831,869) (599,180) 46.78-64.75
Restored 683,450 772,697 550,859 57.44-69.25
Outstanding
December 31 3,964,098 3,368,949 2,651,746 46.78-69.25
Exercisable
December 31 2,671,225 1,394,718 1,167,301 46.78-69.25
===================================================
</TABLE>
NOTE 15. OTHER FINANCIAL INFORMATION
ENVIRONMENTAL RESERVES
Texaco Inc. and subsidiary companies have financial reserves
relating to environmental remediation programs which the com-
pany believes are sufficient for known requirements. At Decem-
ber 31, 1994, reserves for future environmental remediation costs
amounted to $668 million and reserves relative to the future cost
of restoring and abandoning existing oil and gas properties were
$826 million. Texaco's significant affiliates also have recorded
reserves for environmental remediation and restoration and
abandonment costs.
Texaco makes every effort to remain in full compliance with
existing governmental regulations. It is likely that changes in
governmental regulations and/or Texaco's re-evaluation of its
programs will result in additional future costs. However, it is not
believed that such future costs will be material to the company's
financial position nor to its operating results over any reasonable
period of time. It is assumed that any mandated future costs
would be recoverable in the marketplace, since all companies
within the industry would be facing similar requirements.
INTEREST PAID AND INTEREST EXPENSE
CAPITALIZED
Interest paid, net of amounts capitalized, amounted to $500 mil-
lion in 1994, $439 million in 1993 and $481 million in 1992.
Interest expense capitalized as part of properties, plant and
equipment was $13 million in 1994, $49 million in 1993 and $88
million in 1992.
SALE OF RECEIVABLES
During 1994, the company terminated a third-party accounts
receivable agreement under which it had the right to sell approx-
imately $400 million of accounts receivable on a continuing basis
subject to limited recourse. Receivables sold under such facilities
totaled approximately $1.1 billion and $1.4 billion during 1993 and
1992, respectively. At December 31, 1993, no receivables sold
remained uncollected.
PREFERRED STOCK OF SUBSIDIARY COMPANIES
In October 1993, a subsidiary, MVP Production Inc., issued its
variable rate cumulative preferred stock in a private placement
for an aggregate purchase price of $75 million. The shares have
voting rights in the subsidiary and are redeemable on September
30, 2003. Dividend requirements on these shares totaled $3 mil-
lion in 1994.
In November 1993, a subsidiary, Texaco Capital LLC, issued 14
million shares of its Cumulative Guaranteed Monthly Income
Preferred Shares (MIPS), Series A (Series A MIPS), in a public
offering, for an aggregate purchase price of $350 million. In June
1994, Texaco Capital LLC issued 4.5 million shares of Cumulative
Adjustable Rate MIPS, Series B (Series B MIPS), in a public
offering for an aggregate purchase price of $112 million.
The dividend rate for the Series A MIPS is 6-7/8% per annum
and the initial dividend rate for the Series B MIPS was 6.4% per
annum through September 30, 1994 and 6.75% per annum for the
fourth quarter of 1994. The dividend rate on the Series B MIPS is
reset quarterly and is equal to 88% of the highest of three U.S.
Treasury maturities (three-month, ten-year and thirty-year), but
in no event less than 4.5% per annum nor greater than 10.5% per
annum. The payment of dividends and payments on liquidation
or redemption with respect to the Series A MIPS and Series B
MIPS are guaranteed by Texaco Inc. Dividends on the Series A
MIPS and the Series B MIPS are paid monthly, commencing on
the last day of the month of issuance. During 1994 and 1993,
dividends on the Series A MIPS totaled $24 million and $4 mil-
lion, respectively, and dividends on the Series B MIPS in 1994
totaled $4 million.
The Series A MIPS and Series B MIPS are redeemable, at the
option of Texaco Capital LLC (with Texaco Inc.'s consent) in
whole or in part, from time to time, at $25 per share on or after
Texaco Inc. 1994 Annual Report to Stockholders page 56.
October 31, 1998 for the Series A MIPS and June 30, 1999 for the
Series B MIPS, plus, in each case, accrued and unpaid dividends to
the date fixed for redemption. In addition, under certain circum-
stances, Texaco Capital LLC (with Texaco Inc.'s consent) can
redeem the Series A MIPS and the Series B MIPS at any time, in
whole or in part, at $25 per share plus accrued and unpaid
dividends.
The Series A MIPS and Series B MIPS are non-voting, except
under certain limited circumstances.
NOTE 16. FINANCIAL INSTRUMENTS AND
COMMITMENTS
In the normal course of its business, the company utilizes various
types of financial instruments. These instruments include
recorded assets and liabilities, and also items which principally
involve off-balance sheet risk. Information about the company's
financial instruments, including derivatives, is presented below.
Cash and cash equivalents--Fair value approximates cost as
reflected in the Consolidated Balance Sheet at December 31, 1994
and 1993 because of the short-term maturities of these instru-
ments. Cash equivalents are classified as held-to-maturity. The
amortized cost of cash equivalents was as follows:
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1994 1993
------------------------------------------------------------------
<S> <C> <C>
Time deposits and certificates of deposit $ 56 $108
Commercial paper and other 117 140
-----------------
$173 $248
=================
</TABLE>
Short-term and long-term investments--Fair value is primarily
based on quoted market prices and valuation statements
obtained from major financial institutions. Information concern-
ing investments held at December 31, 1994 and 1993 in short-term
and long-term debt securities and in publicly-traded equity secu-
rities that are classified as available-for-sale is shown in the tables
that follow. Excluded from the tables is a $4 million investment in
a time deposit at December 31, 1994, which the company intends
to hold to its maturity in the year 2001.
<TABLE>
<CAPTION>
1994 1993
--------------------- ---------------------
Estimated Estimated
(Millions of dollars) Amortized Fair Amortized Fair
As of December 31 Cost Value Cost Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government
securities $231 $213 $213 $212
Foreign government
securities 284 263 250 250
Corporate and other debt
securities 137 130 174 176
Equity securities 22 85 22 109
----------------------------------------
$674 $691 $659 $747
========================================
</TABLE>
For the above items at year-end 1994, there were gross unrealized
gains of $66 million, primarily related to equity securities, and
gross unrealized losses of $49 million, principally from invest-
ments in U.S. and foreign government debt securities. At year-
end 1993, there were gross unrealized gains of $91 million, pri-
marily related to equity securities, and gross unrealized losses of
$3 million. Proceeds from sales of available-for-sale securities
were $610 million in 1994. These sales resulted in gross realized
gains of $19 million and gross realized losses of $14 million.
At December 31, 1994, available-for-sale debt securities had
the following scheduled maturities:
<TABLE>
<CAPTION>
1994
-----------------------
Amortized Estimated
(Millions of dollars) As of December 31 Cost Fair Value
------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 60 $ 60
Due after one year through five years 255 240
Due after five years 337 306
------------------
$652 $606
==================
</TABLE>
The estimated fair value of other long-term investments not
included above, for which it is practicable to estimate fair value,
approximated the December 31, 1994 and 1993 carrying values of
$369 million and $97 million, respectively.
Short-term debt, long-term debt and related derivatives--Shown
below are the carrying amounts and fair values of Texaco's debt
and related derivatives as of year-end 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
------------------- -----------------
(Millions of dollars) Carrying Fair Carrying Fair
As of December 31 Amount Value Amount Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-term and long-term
debt $6,332 $6,285 $6,595 $7,169
Debt-related derivatives--
liabilities $ 1 $ 58 $ 1 $ 21
======================================
</TABLE>
Refer to Note 8 for additional information concerning debt and
related derivatives outstanding at December 31, 1994 and 1993.
Forward Exchange Contracts--As an international company,
Texaco is exposed to foreign exchange risk. To hedge against
adverse changes in foreign currency exchange rates, the company
will buy and sell foreign currencies forward. Texaco's currency
hedging program involves managing its foreign currency mone-
tary exposures, capital expenditure commitments and foreign
currency denominated investment portfolio. The company had
forward exchange contracts outstanding to buy $552 million and
sell $254 million of foreign currencies at year-end 1994. At year-
end 1993, there were outstanding contracts to buy $126 million
and sell $159 million of foreign currencies. Unrealized gains and
losses applicable to these contracts were immaterial at December
31, 1994 and 1993 since the forward rates approximated the year-
end spot rates. The company's exposure to credit risk on forward
exchange contracts is minimal since the counterparties are major
financial institutions with strong credit ratings. The company
does not anticipate nonperformance by any of the multiple coun-
terparties. Market risk exposure is essentially limited to the risk
related to currency rate movements. The business purposes of
forward exchange contracts are explained below.
At year-end 1994, there were forward exchange contracts out-
standing to buy $105 million of Australian dollars as protection
against the net liability position of Texaco's Australian opera-
tions. These contracts generally have terms of 45 days or less, and
are marked-to-market monthly, with gains and losses included in
income currently as other costs. There were no hedges of the
company's foreign monetary exposures in place at year-end 1993.
In managing its capital expenditure program, the company
will buy foreign currencies forward to hedge portions of signifi-
cant future foreign currency denominated capital expenditures
Texaco Inc. 1994 Annual Report to Stockholders page 57.
and lease commitments. The amount of hedge coverage is
assessed periodically and may be adjusted upward or downward
based on current and anticipated market conditions by subse-
quent forward purchases or sales of foreign currencies. At Decem-
ber 31, 1994, there were forward contracts outstanding of $425
million and $57 million to buy and sell foreign currencies, respec-
tively, in connection with the capital expenditure hedging pro-
gram. Capital expenditure commitments under this program
approximated 471 million British pounds and 1,076 million
Danish krone. Of these planned expenditures, approximately
29% of the British pound commitments and 21% of the Danish
krone commitments were hedged by forward contracts. These
contracts have terms of 60 days or less. At December 31, 1993,
outstanding forward contracts to buy and sell foreign currencies
in connection with this program totaled $89 million and $4 mil-
lion, respectively. Commitments approximated 97 million British
pounds, 1,388 million Danish krone, 12 million Dutch guilders
and 21 million Australian dollars. Of these exposures, approx-
imately 47% of the British pound commitments and 74% of the
Australian dollar commitments were hedged by forward con-
tracts. The British pound contracts had terms of 60 days or less.
The Australian dollar contracts, the last of which matured in
June 1994, had original terms of up to 18 months. Realized gains
and losses on hedges of foreign currency commitments are ini-
tially recorded to deferred charges. Subsequently, the amounts
are applied to the capitalized project cost on a percentage-of-
completion basis, and are amortized to expense over the applica-
ble life. At year-end 1994 and 1993, there were net unamortized
gains of $29 million and $41 million, respectively.
The company also enters into forward exchange contracts to
purchase and sell foreign currency to hedge a portion of its invest-
ment portfolio denominated in foreign currencies. The company's
strategy is to hedge the full value of this portion of the investment
portfolio and to close out forward contracts upon the sale or
maturity of the corresponding investment. At December 31, 1994
and 1993, there were outstanding $203 million and $183 million,
respectively, of such contracts, primarily to sell various major
European currencies. These contracts are valued at market based
upon the foreign currency exchange rates in effect at the balance
sheet dates. Increases and decreases in the value of these con-
tracts are recorded in investments along with the corresponding
instruments being hedged. Related unrealized gains and losses
are recorded, net of applicable income taxes, to stockholders'
equity until the related investment is sold or matures, at which
time they are recorded in income. Realized gains and losses on the
settlement of forward contracts used to hedge foreign currency
investments held as of the balance sheet dates are deferred and
included in stockholders' equity until such time as the corre-
sponding investments are sold or mature.
Commodity Hedging--The company uses established petroleum
futures exchanges, as well as over-the-counter markets, to hedge
a portion of the market risks associated with its crude oil, natural
gas and petroleum product purchases, sales and exchange activi-
ties. All such transactions are subject to the company's corporate
risk management policies which prohibit speculative positions,
set dollar, volumetric and term limits on the contracts that can be
executed and require management approvals as set forth in the
company's delegations of authority. Hedge positions are marked-
to-market on a daily basis for valuation purposes.
Forwards, options and swaps and other derivatives are used as
hedge instruments to reduce the company's exposure to price
volatility. These instruments may be used to establish margins,
costs or revenues, and may be used in conjunction with specifi-
cally identified transactions, projected purchases/sales of inven-
tory, or processing operations. In some cases, selection of an
over-the-counter hedge instrument can be advantageous in com-
parison with futures exchange hedge instruments because the
over-the-counter instrument can be created to achieve specific
hedging objectives and, therefore, afford the company greater
flexibility. In implementing its hedging program, the company
analyzes the sensitivity of its commodity-based cash flows to
market price changes. Based on this market risk profile, as well as
trends in prices and overall business objectives, a determination
is made as to the appropriate hedging strategy.
Gains and losses on hedge instruments, which offset losses
and gains on the underlying cash market transaction, are
recorded to deferred income or charges until the hedged transac-
tion is closed or anticipated future purchase or sale of inventory
or production occurs. At that time, any gain or loss on the hedging
contract is recorded in operating revenues.
Over-the-counter hedge positions, including forwards,
options, swaps and other derivative products, expose the com-
pany to counterparty credit risk. However, because the contracts
are placed with parties whose creditworthiness has been pre-
determined in accordance with the company's credit policy, non-
performance by any counterparty is not anticipated. Such over-
the-counter commodity contracts do not expose the company to
any concentrations of credit risk because of the multiple counter-
parties to the transactions and dollar limits incorporated in risk
management policies.
At December 31, 1994 and 1993, there were open derivative
commodity contracts required to be settled in cash, consisting
mostly of swaps. Notional contract amounts, excluding unre-
alized gains and losses, were $511 million and $560 million,
respectively, at year-end 1994 and 1993. These amounts prin-
cipally represent future values of contract volumes over the
remaining duration of outstanding swap contracts at the respec-
tive dates. These contracts hedge a small fraction of the com-
pany's business activities generally for the next twelve months.
Unrealized gains and losses on contracts outstanding at year-end
1994 and 1993 were not material.
Financial Guarantees
The company has guaranteed the payment of certain debt and
other obligations of third parties and affiliates. These guarantees
totaled $176 million and $154 million at December 31, 1994 and
1993, respectively.
Exposure to credit risk in the event of non-payment by the
obligors is represented by the contractual amount of these instru-
ments. No loss is anticipated under these guarantees.
Throughput Agreements
Texaco Inc. and certain of its subsidiary companies have
entered into certain long-term agreements wherein they have
committed either to ship through affiliated pipeline companies
and an offshore oil port, or to refine at an affiliated refining
company a sufficient volume of crude oil or petroleum products to
enable these affiliated companies to meet a specified portion of
Texaco Inc. 1994 Annual Report to Stockholders page 58.
their individual debt obligations, or, in lieu thereof, to advance
sufficient funds to enable these affiliated companies to meet these
obligations. Additionally, Texaco has entered into long-term pur-
chase commitments with third parties for take or pay gas trans-
portation. The company's maximum exposure to loss was $726
million and $765 million at December 31, 1994 and 1993,
respectively.
However, based on Texaco's right of counterclaim against third
parties in the event of nonperformance, Texaco's net exposure
was approximately $561 million and $590 million at December 31,
1994 and 1993, respectively.
No losses are anticipated as a result of the above obligations.
Other Commitments
At December 31, 1994 and 1993, minority holders owned $537
million and $425 million, respectively, of preferred stock of subsidi-
aries. Such amounts are reflected in minority interest in subsidiary
companies in the Consolidated Balance Sheet. Such preferred stock
currently requires annual dividend payments of approximately $27
million. At present, Texaco is required to redeem $75 million of this
preferred stock in 2003, $112 million in 2024 and $350 million in
2043. The company has the ability to extend the required redemp-
tion dates for the $112 million and $350 million of preferred stock
beyond 2024 and 2043, respectively. For additional information
regarding preferred stock of subsidiary companies, refer to Note 15.
NOTE 17. CONTINGENT LIABILITIES
INTERNAL REVENUE SERVICE CLAIMS
During 1989, Texaco commenced an action in the United States
Tax Court (Tax Court), to challenge certain claimed increases in
the company's 1979-1982 Federal income tax liability. The com-
pany's action contested, among other items, an Internal Revenue
Service (IRS) claim that during the 1979-1981 years, Texaco should
be taxed as if it had resold Saudi crude oil at prices higher than
those mandated by the Saudi Arab Government (Aramco Advan-
tage issue).
On December 22, 1993, the Tax Court issued an opinion
upholding the company's position on the Aramco Advantage
issue. The Tax Court held that the IRS was barred from taxing the
company on income never received, and which could only have
been received by violating Saudi law. Finding that the Saudi Arab
Government's mandate represented the sovereign law of that
country, the Tax Court determined that the company was
required to comply with the Saudi Arab Government's mandate
and did in fact observe it. The IRS has indicated it intends to
appeal the decision following the entry of the Tax Court's decision
as to the correct amount of Texaco's 1979-1982 Federal income tax
liability. All other issues relating to the 1979-1982 years have been
resolved by trial or settlement.
In March 1988, prior to the commencement of the Tax Court
action, the company, as a condition of its emergence from Chapter
11 proceedings, agreed to make certain cash deposits with the IRS
in contemplation of potential tax claims (Deposit Fund). From
time to time, the company has applied Deposit Fund amounts to
final liabilities agreed upon by the company and the IRS for
income tax and windfall profit tax years of Texaco and Getty not
involved in the Tax Court litigation. A portion of the Deposit Fund
also will be applied to issues settled in the 1979-1982 litigation
years. After satisfaction of all liabilities associated with settled
issues, it is anticipated that in excess of $700 million will remain
in the Deposit Fund and continue to accrue interest. If the com-
pany ultimately prevails on the appeal of the Aramco Advantage
issue, the amount remaining in the Deposit Fund will be refunded
to the company, with interest.
In the company's opinion, while it is impossible to ascertain
the ultimate legal and financial liability with respect to the above-
mentioned and other contingent liabilities and commitments,
including lawsuits, claims, guarantees, taxes and regulations, the
aggregate amount of such liability in excess of financial reserves,
together with deposits and prepayments made against disputed
tax claims, is not anticipated to be materially important in rela-
tion to the consolidated financial position or results of operations
of Texaco Inc. and its subsidiaries.
NOTE 18. FINANCIAL DATA BY GEOGRAPHIC AREA
Texaco Inc. and its subsidiary companies, together with affiliates,
represent a vertically integrated enterprise principally engaged
in the worldwide exploration for and production, transportation,
refining and marketing of crude oil, natural gas and petroleum
products, as well as nonpetroleum operations such as insurance
and alternate energy activities. Intergeographic sales and ser-
vices shown are based on prices which are generally representa-
tive of market prices or arm's-length negotiated prices.
Operating profit represents total sales and services as shown
on the Statement of Consolidated Income less operating costs and
expenses, net of income taxes. Corporate/nonoperating includes
interest income and expense, dividends, general corporate
expenses and other nonoperating items, net of income taxes.
Equity in income or losses of partnership joint venture companies
is reflected net of taxes, since this income is directly taxable to
Texaco.
Identifiable assets are those from continuing operations which
can be directly identified or associated with operations which
have been geographically segregated. Net assets of discontinued
operations (see Note 4) for the years 1994 and 1993 and identifia-
ble assets of discontinued operations for the year 1992 are
reflected in corporate/nonoperating to conform to the presenta-
tion of net income (loss) from discontinued operations. Invest-
ments in affiliates pertain to those affiliates which are accounted
for on the equity method. Investments in affiliates relating to
discontinued operations are reflected in corporate/nonoperating.
Corporate assets include cash and cash investments, as well as
receivables, properties, plant and equipment and other assets
which are corporate in nature.
Texaco Inc. 1994 Annual Report to Stockholders page 59.
<TABLE>
<CAPTION>
Other Other
United Western Eastern Corporate/
(Millions of dollars) States Hemisphere Europe Hemisphere Nonoperating* Consolidated
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR 1994
Sales and services
Outside $15,936 $4,710 $8,479 $3,415 $ -- $32,540
Intergeographic 335 198 764 43 (1,340) --
-----------------------------------------------------------------------------------
Total sales and services $16,271 $4,908 $9,243 $3,458 $(1,340) $32,540
-----------------------------------------------------------------------------------
Net income (loss)
Operating profit $ 522 $ 104 $ 65 $ 67 $ -- $ 758
Equity in income of affiliates 134 6 1 353 -- 494
Corporate/nonoperating -- -- -- -- (273) (273)
-----------------------------------------------------------------------------------
Net income (loss) before discontinued
operations 656 110 66 420 (273) 979
Discontinued operations -- -- -- -- (69) (69)
-----------------------------------------------------------------------------------
Total net income (loss) $ 656 $ 110 $ 66 $ 420 $ (342) $ 910
-----------------------------------------------------------------------------------
Identifiable assets $11,851 $1,587 $4,641 $1,180 $ -- $19,259
Net assets of discontinued operations -- -- -- -- 195 195
Investments in affiliates 1,144 26 370 2,366 -- 3,906
Corporate assets -- -- -- -- 2,145 2,145
-----------------------------------------------------------------------------------
Total assets $12,995 $1,613 $5,011 $3,546 $ 2,340 $25,505
===================================================================================
YEAR 1993
Sales and services
Outside $17,417 $4,245 $8,416 $3,167 $ -- $33,245
Intergeographic 289 241 725 43 (1,298) --
-----------------------------------------------------------------------------------
Total sales and services $17,706 $4,486 $9,141 $3,210 $(1,298) $33,245
-----------------------------------------------------------------------------------
Net income (loss)
Operating profit $ 562 $ 107 $ 245 $ 24 $ -- $ 938
Equity in income of affiliates 146 8 8 368 -- 530
Corporate/nonoperating -- -- -- -- (209) (209)
-----------------------------------------------------------------------------------
Net income (loss) before discontinued
operations 708 115 253 392 (209) 1,259
Discontinued operations -- -- -- -- (191) (191)
-----------------------------------------------------------------------------------
Total net income (loss) $ 708 $ 115 $ 253 $ 392 $ (400) $ 1,068
-----------------------------------------------------------------------------------
Identifiable assets $12,603 $1,435 $4,556 $1,107 $ -- $19,701
Net assets of discontinued operations -- -- -- -- 1,180 1,180
Investments in affiliates 1,171 29 388 2,153 -- 3,741
Corporate assets -- -- -- -- 2,004 2,004
-----------------------------------------------------------------------------------
Total assets $13,774 $1,464 $4,944 $3,260 $ 3,184 $26,626
===================================================================================
YEAR 1992
Sales and services
Outside $18,651 $4,023 $9,295 $3,718 $ -- $35,687
Intergeographic 223 233 695 152 (1,303) --
-----------------------------------------------------------------------------------
Total sales and services $18,874 $4,256 $9,990 $3,870 $(1,303) $35,687
-----------------------------------------------------------------------------------
Net income (loss)
Operating profit (loss) $ 714 $ (39) $ 300 $ 66 $ -- $ 1,041
Equity in income of affiliates 95 8 22 341 -- 466
Corporate/nonoperating -- -- -- -- (469) (469)
-----------------------------------------------------------------------------------
Net income (loss) before discontinued
operations and cumulative effect of
accounting changes 809 (31) 322 407 (469) 1,038
Discontinued operations -- -- -- -- (26) (26)
Cumulative effect of accounting changes -- -- -- -- (300) (300)
-----------------------------------------------------------------------------------
Total net income (loss) $ 809 $ (31) $ 322 $ 407 $ (795) $ 712
-----------------------------------------------------------------------------------
Identifiable assets $12,596 $1,452 $4,093 $1,147 $ -- $19,288
Identifiable assets of discontinued
operations -- -- -- -- 1,409 1,409
Investments in affiliates 1,128 29 387 1,921 3 3,468
Corporate assets -- -- -- -- 1,827 1,827
-----------------------------------------------------------------------------------
Total assets $13,724 $1,481 $4,480 $3,068 $ 3,239 $25,992
===================================================================================
<FN>
*Includes intergeographic sales and services eliminations.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 60.
REPORT OF MANAGEMENT
Texaco Inc. and Subsidiary Companies
The consolidated financial statements are the responsibility of
the management of Texaco Inc. They were prepared in accordance
with generally accepted accounting principles and are, in part,
based on certain estimates and judgments, as required. Other
information contained in this Annual Report is presented on a
basis consistent with the financial statements.
To meet these responsibilities, it is Texaco's long-established
corporate policy to maintain a control conscious environment and
an effective internal control system throughout its worldwide
operations. Included in this system are Corporate Conduct
Guidelines which require that all employees maintain the highest
level of ethical standards. The internal control system provides
reasonable assurance that assets are safeguarded against
unauthorized acquisition, use or disposition, and that financial
records are accurately and objectively maintained, thus serving as
a reliable basis for the preparation of financial statements. This
system is augmented by written policies and procedures and an
organizational structure that provides for an appropriate division
of responsibility. Management personnel are required to formally
certify each year that an effective internal control system is
maintained. The internal controls are complemented by Texaco's
internal auditors who conduct regular and extensive internal
audits throughout the company. In addition, the independent
public accounting firm of Arthur Andersen LLP is engaged to
provide an objective, independent audit of the company's finan-
cial statements. Their accompanying report is based on an audit
conducted in accordance with generally accepted auditing stan-
dards, which included obtaining a sufficient understanding of the
company's internal controls to plan their audit and determine the
nature, timing and extent of audit tests to be performed. In
conducting their audits, both the internal and independent audi-
tors have access to the minutes of all meetings of the company's
Board of Directors. The appointment of the independent auditors
is presented to the stockholders for approval at each Annual
Meeting of the Stockholders.
The Board of Directors of Texaco Inc. maintains an Audit
Committee which has been in place since 1939. This Committee,
currently comprised of five nonemployee Directors, met two
times in 1994. Depending on the nature of the matters under
review, the independent auditors, as well as certain officers and
employees of the company, may attend all or part of a meeting.
The Committee reviews and evaluates the company's accounting
policies and reporting practices, internal auditing, internal con-
trols, security procedures and other matters deemed appropriate.
The Audit Committee also reviews the performance of Arthur
Andersen LLP in their audit of Texaco's financial statements and
evaluates their independence and professional competence, as
well as the scope of their audit. Both the internal and independent
auditors have unrestricted access to the Audit Committee to
discuss the results of their audits and the quality of the company's
financial reporting and internal control system.
(Alfred C. DeCrane, Jr.)
Alfred C. DeCrane, Jr.
Chairman of the Board and
Chief Executive Officer
(William C. Bousquette)
William C. Bousquette
Senior Vice President and
Chief Financial Officer
(Robert C. Oelkers)
Robert C. Oelkers
Comptroller
<AUDIT-REPORT>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
To the Stockholders, Texaco Inc.:
We have audited the accompanying consolidated balance sheet of
Texaco Inc. (a Delaware corporation) and subsidiary companies as
of December 31, 1994 and 1993, and the related statements of
consolidated income, cash flows and stockholders' equity for each
of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the company's man-
agement. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstate-
ment. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial state-
ments. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Texaco Inc. and subsidiary companies as of December 31, 1994
and 1993, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1994
in conformity with generally accepted accounting principles.
As discussed in Note 2 to the Consolidated Financial State-
ments, effective January 1, 1992, the company changed its meth-
ods of accounting for income taxes and postretirement benefits
other than pensions.
(Arthur Andersen LLP)
February 23, 1995
New York, N.Y.
</AUDIT-REPORT>
Texaco Inc. 1994 Annual Report to Stockholders page 61.
SUPPLEMENTAL OIL AND GAS INFORMATION
Texaco Inc. and Subsidiary Companies
The following information for Texaco Inc. and consolidated
subsidiaries, as well as Texaco's equity in P.T. Caltex Pacific Indo-
nesia (CPI), a 50%-owned affiliate operating in Other Eastern
Hemisphere areas, is presented in accordance with Statement of
Financial Accounting Standards No. 69, "Disclosures about Oil
and Gas Producing Activities" (SFAS 69).
In July 1994 as part of its plan for growth, Texaco announced it
would sell or trade approximately 50% of its more than 600
producing fields in the United States. Future activities will be
focused on those remaining core U.S. oil and gas assets which
account for more than 90 percent of the producing profits, cash
flow, production and reserve base in the United States. The infor-
mation presented below includes applicable amounts relating to
assets classified as "Assets under agreements for sale" in the
December 31, 1994 Consolidated Balance Sheet.
ESTIMATED PROVED RESERVES
Volumes reported for proved liquid and gas reserves are based
upon reasonable estimates. These estimates are consistent with
current knowledge of the characteristics and production history
of the reserves. Although they are based upon sound geological
and engineering principles, by their very nature, such estimates
are subject to upward and downward revision as additional infor-
mation about producing fields and technology becomes available.
Reported volumes include only such reserves as can reasonably
be classified as proved. Net reserves represent the volumes esti-
mated to be available after deduction of the royalty interests of
others from gross reserves. In addition to reported reserves,
Texaco has a large inventory of potential reserves that will add to
the company's proved reserve base as future investments are
made in exploration and development programs.
CPI's estimated liquids reserves include volumes projected to
be recovered as reimbursement for a portion of costs incurred.
Accordingly, these volumes will fluctuate annually with the price
of crude oil. CPI's natural gas production is all consumed in
its operations.
Annually, Texaco Inc. provides information concerning oil and
gas reserves to the U.S. Department of Energy and to certain
governmental bodies. Such information is compatible with the
information presented in this Annual Report.
During 1994, reserve increases, including equity and excluding
purchases and sales, replaced 111% of worldwide combined oil and
gas production. Of such reserve replacements, 78% were addi-
tions comprised of new fields, new sands, new plants, extensions,
and improved recovery, and 22% were comprised of revisions to
previous estimates. During the three-year period 1992-1994,
Texaco's reserve increases were 106% of worldwide production.
During this period, additions accounted for 68% of reserve
increases and revisions accounted for 32%. During the five-year
period 1990-1994, Texaco's reserve increases were 107% of
worldwide production. During this period, additions accounted
for 66% of reserve increases and revisions accounted for 34%.
Increases in proved reserves during 1994 were primarily due to
the following:
In the United States, liquid reserves were added through drill-
ing that extended the productive limits of existing fields in Cali-
fornia, Illinois, Louisiana, New Mexico, and Texas. Other liquid
reserve increases from drilling resulted from the discovery of new
productive formations in Texas and onshore and offshore Loui-
siana and from new fields discovered offshore Louisiana. Addi-
tional liquid reserve increases also resulted from extending the
life of various gas plant contracts in Texas and New Mexico, from
improved recovery at a steamflood project in California, as well as
from upward revisions that resulted from improved performance
of gas plants in Louisiana, Oklahoma, and Texas. Additions to
natural gas reserves resulted from drilling offshore Louisiana and
Alabama and onshore Texas and Wyoming. Upward revisions to
gas volumes resulted from the utilization of lower abandonment
pressure at an offshore Louisiana field and improved perfor-
mance at offshore gas fields in Louisiana and Texas. The liquids
and natural gas sales of minerals-in-place were principally com-
prised of numerous smaller economically marginal properties
that did not fit into Texaco's business goals.
Outside the United States, in the Other Western Hemisphere
area, liquids reserve additions mainly reflect extensions at an
onshore field in Canada from additional drilling, as well as
upward revisions that reflect improved performance at a Colom-
bia onshore field and also from a successful workover program at
an offshore field in Trinidad. Natural gas additions were from
drilling at several Canadian fields, as well as upward revisions
from the successful workover program at the offshore Trinidad
field. In the Europe area, significant increases in liquid reserves
were from new fields, new sands, and extensions, as well as
upward revisions resulting from improved performance and addi-
tional drilling at several fields--all offshore in the United King-
dom sector of the North Sea. Additional volumes of liquids were
added from improved recovery at a field in the Danish sector of
the North Sea. Additions of European gas reserves were from two
new offshore fields and from new sands discovered at a third
offshore field--all in the United Kingdom portion of the North
Sea. In the Other Eastern Hemisphere area, liquids reserves were
added from extensions as a result of additional drilling at two
fields in the Partitioned Neutral Zone between Saudi Arabia and
Kuwait, and at a field in Indonesia. A waterflood project in Indo-
nesia added liquids reserves from improved recovery. Affiliate
liquids reserves were increased due to the continued improved
performance and additional development of both steamflood and
waterflood projects in Indonesia. Affiliate gas reserves were
increased from new sands discovered in several fields located in
Indonesia.
During 1995, Texaco expects that net production of natural gas
will approximate 2,185 million cubic feet per day. This estimate is
based upon past performance and on the assumption that such
Texaco Inc. 1994 Annual Report to Stockholders page 62.
gas quantities can be produced under operating and economic
conditions existing at December 31, 1994. Possible future changes
in prices or world economic conditions were not factored into this
estimate. These expected production volumes, together with nor-
mal related supply arrangements, are sufficient to meet antici-
pated delivery requirements under contractual arrangements.
Approximately 33% of Texaco's proved natural gas reserves in the
United States as of December 31, 1994, 1993 and 1992 were cov-
ered by long-term sales contracts. These agreements are pri-
marily priced at market.
ESTIMATED NET PROVED DEVELOPED AND UNDEVELOPED RESERVES OF CRUDE OIL
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
-------------------------------------------------------------- ------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Millions of barrels) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1991 1,359 100 239 396 2,094 397 2,491
Increase (decrease) attributable to:
Extensions, discoveries and other additions 14 2 4 11 31 40 71
Improved recovery 32 -- 19 -- 51 35 86
Revisions of previous estimates 37 (2) 19 17 71 4 75
Purchases of minerals-in-place -- 1 -- -- 1 -- 1
Sales of minerals-in-place (10) -- -- -- (10) -- (10)
Production (127) (16) (25) (30) (198) (44) (242)
---------------------------------------------------------------------------------
As of December 31, 1992* 1,305 85 256 394 2,040 432 2,472
Increase (decrease) attributable to:
Extensions, discoveries and other additions 36 1 50 8 95 1 96
Improved recovery 37 -- 9 -- 46 52 98
Revisions of previous estimates 37 (2) 3 14 52 18 70
Purchases of minerals-in-place 1 -- -- -- 1 -- 1
Sales of minerals-in-place (15) (3) (5) -- (23) -- (23)
Production (123) (7) (28) (36) (194) (47) (241)
---------------------------------------------------------------------------------
As of December 31, 1993* 1,278 74 285 380 2,017 456 2,473
Increase (decrease) attributable to:
Extensions, discoveries and other additions 29 2 66 71 168 -- 168
Improved recovery 21 -- 7 7 35 24 59
Revisions of previous estimates 5 5 4 10 24 16 40
Sales of minerals-in-place (9) (2) (5) -- (16) -- (16)
Production (119) (7) (41) (41) (208) (57) (265)
---------------------------------------------------------------------------------
As of December 31, 1994* 1,205 72 316 427 2,020 439 2,459
=================================================================================
*Includes net proved developed reserves
As of December 31, 1992 1,047 73 115 350 1,585 319 1,904
As of December 31, 1993 991 67 123 347 1,528 354 1,882
As of December 31, 1994 947 68 152 365 1,532 356 1,888
=================================================================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 63.
ESTIMATED NET PROVED DEVELOPED AND UNDEVELOPED RESERVES OF NATURAL GAS LIQUIDS
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
-------------------------------------------------------------- ------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Millions of barrels) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1991 188 1 26 -- 215 5 220
Increase (decrease) attributable to:
Extensions, discoveries and other additions 4 -- -- -- 4 1 5
Improved recovery 1 -- -- -- 1 -- 1
Revisions of previous estimates 34 1 1 -- 36 -- 36
Sales of minerals-in-place (1) -- -- -- (1) -- (1)
Production (31) -- (2) -- (33) -- (33)
-------------------------------------------------------------------------------
As of December 31, 1992* 195 2 25 -- 222 6 228
Increase (decrease) attributable to:
Extensions, discoveries and other additions 5 -- -- -- 5 -- 5
Revisions of previous estimates 15 (1) 3 -- 17 (1) 16
Sales of minerals-in-place (3) -- -- -- (3) -- (3)
Production (32) -- (2) -- (34) -- (34)
-------------------------------------------------------------------------------
As of December 31, 1993* 180 1 26 -- 207 5 212
Increase (decrease) attributable to:
Extensions, discoveries and other additions 32 -- 3 -- 35 -- 35
Revisions of previous estimates 12 -- 1 -- 13 1 14
Sales of minerals-in-place (4) -- -- -- (4) -- (4)
Production (29) -- (3) -- (32) -- (32)
-------------------------------------------------------------------------------
As of December 31, 1994* 191 1 27 -- 219 6 225
===============================================================================
<FN>
*Includes net proved developed reserves
As of December 31, 1992 189 1 8 -- 198 5 203
As of December 31, 1993 174 1 7 -- 182 5 187
As of December 31, 1994 182 1 11 -- 194 5 199
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
GRAND TOTAL RESERVES OF CRUDE OIL AND NATURAL GAS LIQUIDS
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1992 1,500 87 281 394 2,262 438 2,700
As of December 31, 1993 1,458 75 311 380 2,224 461 2,685
---------------------------------------------------------------------------------
As of December 31, 1994 1,396 73 343 427 2,239 445 2,684
=================================================================================
</TABLE>
ESTIMATED NET PROVED DEVELOPED AND UNDEVELOPED RESERVES OF NATURAL GAS
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
-------------------------------------------------------------- ------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Billions of cubic feet) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1991 4,697 683 664 84 6,128 149 6,277
Increase (decrease) attributable to:
Extensions, discoveries and other additions 230 14 2 4 250 20 270
Improved recovery 29 -- 5 -- 34 7 41
Revisions of previous estimates 332 5 3 (3) 337 (1) 336
Purchases of minerals-in-place 1 23 -- -- 24 -- 24
Sales of minerals-in-place (91) (15) -- -- (106) -- (106)
Production (672) (55) (26) (2) (755) (17) (772)
---------------------------------------------------------------------------------
As of December 31, 1992** 4,526 655 648 83 5,912 158 6,070
Increase (decrease) attributable to:
Extensions, discoveries and other additions 344 128 110 1 583 -- 583
Improved recovery 26 6 4 -- 36 -- 36
Revisions of previous estimates 257 -- 149 (37) 369 -- 369
Purchases of minerals-in-place 2 4 -- 1 7 -- 7
Sales of minerals-in-place (174) (14) -- (1) (189) -- (189)
Production (652) (57) (36) (3) (748) (18) (766)
---------------------------------------------------------------------------------
As of December 31, 1993** 4,329 722 875 44 5,970 140 6,110
Increase (decrease) attributable to:
Extensions, discoveries and other additions 522 17 71 -- 610 26 636
Improved recovery 2 -- 2 1 5 -- 5
Revisions of previous estimates 260 22 15 4 301 (5) 296
Purchases of minerals-in-place -- 9 -- 1 10 -- 10
Sales of minerals-in-place (61) (1) (20) -- (82) -- (82)
Production (645) (57) (66) (3) (771) (11) (782)
---------------------------------------------------------------------------------
As of December 31, 1994** 4,407 712 877 47 6,043 150 6,193
=================================================================================
<FN>
**Includes net proved developed reserves
As of December 31, 1992 4,064 589 216 74 4,943 150 5,093
As of December 31, 1993 3,971 575 362 41 4,949 128 5,077
As of December 31, 1994 3,899 558 465 44 4,966 133 5,099
=================================================================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 64.
CAPITALIZED COSTS
Capitalized costs represent cumulative expenditures for proved
and unproved properties and support equipment and facilities
used in oil and gas exploration and producing operations
together with related accumulated depreciation, depletion and
amortization (including aggregate provisions for restoration and
abandonment costs, net of such costs expended to date).
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
----------------------------------------------------------- ------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1994
Proved properties $ 18,103 $ 544 $ 3,483 $1,202 $ 23,332 $ 805 $ 24,137
Unproved properties 361 23 182 96 662 353 1,015
Support equipment and facilities 371 40 117 98 626 455 1,081
------------------------------------------------------------------------------------
Gross capitalized costs 18,835 607 3,782 1,396 24,620 1,613 26,233
Accumulated depreciation, depletion
and amortization (12,723) (384) (2,254) (812) (16,173) (699) (16,872)
------------------------------------------------------------------------------------
Net capitalized costs $ 6,112 $ 223 $ 1,528 $ 584 $ 8,447 $ 914 $ 9,361
====================================================================================
As of December 31, 1993
Proved properties $ 18,442 $ 549 $ 3,232 $1,094 $ 23,317 $ 694 $ 24,011
Unproved properties 434 23 258 80 795 356 1,151
Support equipment and facilities 373 48 114 90 625 439 1,064
------------------------------------------------------------------------------------
Gross capitalized costs 19,249 620 3,604 1,264 24,737 1,489 26,226
Accumulated depreciation, depletion
and amortization (12,837) (394) (2,018) (643) (15,892) (629) (16,521)
------------------------------------------------------------------------------------
Net capitalized costs $ 6,412 $ 226 $ 1,586 $ 621 $ 8,845 $ 860 $ 9,705
====================================================================================
</TABLE>
COSTS INCURRED
Costs incurred represent amounts capitalized or charged against
income as expended. Property acquisition costs include costs to
purchase or lease proved and unproved properties. Exploration
costs include the costs of geological and geophysical work, carry-
ing and retaining undeveloped properties and drilling and equip-
ping exploratory wells. Development costs include expenditures
to drill and equip development wells; to provide improved recov-
ery systems; to construct facilities for extraction, treating,
gathering and storing liquids and natural gas; and to maintain
producing facilities for existing developed reserves. Exploration
and development costs include applicable depreciation of support
equipment and facilities used in those activities, rather than the
expenditures to acquire such assets.
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
------------------------------------------------------- ------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1994
Proved property acquisition $ 5 $ 2 $ -- $ -- $ 7 $ -- $ 7
Unproved property acquisition 13 2 -- 33 48 -- 48
Exploration 165 19 58 110 352 9 361
Development 729 43 253 108 1,133 129 1,262
--------------------------------------------------------------------------------
Total $912 $66 $311 $251 $1,540 $138 $1,678
================================================================================
For the year ended December 31, 1993
Proved property acquisition $ 15 $ 2 $ -- $ 3 $ 20 $ -- $ 20
Unproved property acquisition 15 1 -- 8 24 -- 24
Exploration 157 9 141 111 418 10 428
Development 690 29 299 119 1,137 137 1,274
--------------------------------------------------------------------------------
Total $877 $41 $440 $241 $1,599 $147 $1,746
================================================================================
For the year ended December 31, 1992
Proved property acquisition $ 9 $ 3 $ -- $ -- $ 12 $ -- $ 12
Unproved property acquisition 11 -- -- 7 18 -- 18
Exploration 162 55 85 114 416 9 425
Development 639 39 485 87 1,250 171 1,421
--------------------------------------------------------------------------------
Total $821 $97 $570 $208 $1,696 $180 $1,876
================================================================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 65.
RESULTS OF OPERATIONS--OIL AND GAS EXPLORATION AND PRODUCING ACTIVITIES
The results below solely relate to Texaco's exploration for and net
production of liquids and natural gas reserves. They exclude
special items and operating earnings related to the sale of pur-
chased oil and gas, equity earnings of certain affiliates, liquids and
gas trading activity, general overhead, and miscellaneous
operating income. Related estimated income tax expense was
computed by applying the statutory income tax rates, including
state and local income taxes, to the pre-tax results of operations
and reflects applicable credits and allowances.
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
------------------------------------------------------------- -------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1994
Gross revenues from:
Sales and transfers to affiliates and to
divisions and subsidiaries within Texaco $ 2,672 $ -- $ 336 $ 491 $ 3,499 $ 514 $ 4,013
Sales to unaffiliated entities 403 129 448 113 1,093 24 1,117
Production costs (1,100) (37) (325) (198) (1,660) (163) (1,823)
Exploration expenses (115) (17) (53) (115) (300) (9) (309)
Depreciation, depletion and amortization (934) (29) (295) (96) (1,354) (74) (1,428)
Other expenses (249) (8) -- (27) (284) (27) (311)
------------------------------------------------------------------------------------
Results before estimated income taxes 677 38 111 168 994 265 1,259
Estimated income taxes (217) (32) (43) (130) (422) (131) (553)
------------------------------------------------------------------------------------
Net results $ 460 $ 6 $ 68 $ 38 $ 572 $ 134 $ 706
====================================================================================
For the year ended December 31, 1993
Gross revenues from:
Sales and transfers to affiliates and to
divisions and subsidiaries within Texaco $ 2,945 $ -- $ 184 $ 457 $ 3,586 $ 486 $ 4,072
Sales to unaffiliated entities 464 130 350 98 1,042 23 1,065
Production costs (1,203) (50) (252) (205) (1,710) (146) (1,856)
Exploration expenses (102) (13) (76) (92) (283) (9) (292)
Depreciation, depletion and amortization (967) (28) (164) (93) (1,252) (64) (1,316)
Other expenses (213) (11) -- (21) (245) (4) (249)
------------------------------------------------------------------------------------
Results before estimated income taxes 924 28 42 144 1,138 286 1,424
Estimated income taxes (303) (23) (6) (115) (447) (152) (599)
------------------------------------------------------------------------------------
Net results $ 621 $ 5 $ 36 $ 29 $ 691 $ 134 $ 825
====================================================================================
For the year ended December 31, 1992
Gross revenues from:
Sales and transfers to affiliates and to
divisions and subsidiaries within Texaco $ 3,136 $ 55 $ 151 $ 495 $ 3,837 $ 536 $ 4,373
Sales to unaffiliated entities 440 167 389 12 1,008 19 1,027
Production costs (1,281) (87) (261) (173) (1,802) (138) (1,940)
Exploration expenses (107) (55) (73) (102) (337) (8) (345)
Depreciation, depletion and amortization (975) (41) (104) (72) (1,192) (53) (1,245)
Other expenses (244) (26) -- (22) (292) (20) (312)
------------------------------------------------------------------------------------
Results before estimated income taxes 969 13 102 138 1,222 336 1,558
Estimated income taxes (321) (26) 2 (125) (470) (182) (652)
------------------------------------------------------------------------------------
Net results $ 648 $ (13) $ 104 $ 13 $ 752 $ 154 $ 906
====================================================================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 66.
AVERAGE SALES PRICES AND PRODUCTION COSTS--PER UNIT
Average sales prices per unit are based upon the gross revenues
reported in the Results of Operations--Oil and Gas Explora-
tion and Producing Activities table. Average production costs
per composite barrel include related depreciation, depletion and
amortization of support equipment and facilities. It also includes
cash lifting costs, excluding payments for royalties and income
taxes. However, users of this information are cautioned that such
income taxes and royalties substantially add to the total cost of
producing operations and substantially reduce the profitability
and cash flow from such operations.
<TABLE>
<CAPTION>
Average sales prices
--------------------------------------------------------------------------
1994 1993 1992
----------------------- ------------------------ -----------------------
Crude oil Natural Crude oil Natural Crude oil Natural Average production costs
and natural gas per and natural gas per and natural gas per (per composite barrel)
gas liquids thousand gas liquids thousand gas liquids thousand ---------------------------
per barrel cubic feet per barrel cubic feet per barrel cubic feet 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $12.81 $1.87 $13.61 $2.07 $15.50 $1.73 $4.33 $4.60 $4.77
Other Western Hemisphere 10.94 .87 11.11 .89 11.21 .78 2.41 3.06 3.69
Europe 15.24 2.17 16.06 2.33 18.69 2.36 6.01 8.58 8.56
Other Eastern Hemisphere 14.65 2.70 15.18 2.58 17.83 2.89 4.92 5.49 6.17
Affiliate--Other Eastern
Hemisphere 11.96 -- 13.45 -- 14.21 -- 3.13 3.21 3.19
========================================================================================================
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The following table shows estimated future net cash flows from
future production of net developed and undeveloped proved
reserves of crude oil, natural gas liquids and natural gas; there-
fore, reserves exclude the royalty interests of others. As pre-
scribed by SFAS 69, such future net cash flows were estimated
using year-end prices, costs, and tax rates, and a 10% annual
discount factor. Future production costs are based upon current
year costs used uniformly throughout the life of the reserves.
Future development costs include restoration and abandonment
costs, net of residual salvage value. Estimated future income
taxes were computed by applying the statutory income tax rates,
including state and local taxes, to the future pre-tax net cash flows
less appropriate tax deductions, giving effect to tax credits. Effec-
tive tax rates were used for certain foreign areas.
Texaco is presenting this information in accordance with the
requirements of SFAS 69 and has exercised all due care in
developing the data. It is necessary to caution investors and
other users of the information to avoid its simplistic use. While
the intent of this disclosure is to provide a common benchmark to
help financial statement users project future cash flows and com-
pare companies, users should note the following: data in this table
excludes the effect of future changes in prices, costs, and tax rates
which past experience indicates will occur. Such future changes
could significantly impact the disclosed discounted net cash flows.
The data also excludes the estimated net cash flows from reserves
that are yet to be proved. Extensive judgment is used to estimate
the timing of production and future costs over the remaining life
of the reserves utilized in developing this disclosure. Values can
be distorted by the use of year-end prices that may reflect sea-
sonal factors or unpredictable distortions from wars and other
significant world events. For all the preceding reasons, this dis-
closure is not necessarily indicative of Texaco's perception of the
future cash flows to be derived from underground reserves.
Texaco Inc. 1994 Annual Report to Stockholders page 67.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity Total
-------------------------------------------------------------- ------------- ----------
Other Other Affiliate-
United Western Eastern Other Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Worldwide Hemisphere
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1994
Future cash inflows from sale of oil
and gas $ 26,545 $1,568 $ 6,933 $ 6,006 $ 41,052 $ 4,664 $ 45,716
Future production costs (9,374) (609) (2,434) (2,567) (14,984) (1,393) (16,377)
Future development costs (3,011) (134) (1,372) (354) (4,871) (193) (5,064)
Future income tax expense (3,968) (361) (966) (2,229) (7,524) (1,632) (9,156)
------------------------------------------------------------------------------------
Net future cash flows before discount 10,192 464 2,161 856 13,673 1,446 15,119
10% discount for timing of future
cash flows (4,313) (155) (814) (271) (5,553) (554) (6,107)
------------------------------------------------------------------------------------
Standardized measure: discounted future
net cash flows $ 5,879 $ 309 $ 1,347 $ 585 $ 8,120 $ 892 $ 9,012
====================================================================================
As of December 31, 1993
Future cash inflows from sale of oil
and gas $ 24,897 $1,373 $ 5,444 $ 4,044 $ 35,758 $ 4,113 $ 39,871
Future production costs (10,678) (774) (3,023) (1,879) (16,354) (1,573) (17,927)
Future development costs (2,831) (166) (1,060) (418) (4,475) (636) (5,111)
Future income tax expense (3,060) (156) (487) (1,228) (4,931) (1,009) (5,940)
------------------------------------------------------------------------------------
Net future cash flows before discount 8,328 277 874 519 9,998 895 10,893
10% discount for timing of future
cash flows (3,231) (113) (305) (168) (3,817) (349) (4,166)
------------------------------------------------------------------------------------
Standardized measure: discounted future
net cash flows $ 5,097 $ 164 $ 569 $ 351 $ 6,181 $ 546 $ 6,727
====================================================================================
As of December 31, 1992
Future cash inflows from sale of oil
and gas $ 31,609 $1,669 $ 5,917 $ 5,485 $ 44,680 $ 5,154 $ 49,834
Future production costs (11,487) (827) (2,541) (1,615) (16,470) (1,780) (18,250)
Future development costs (3,128) (120) (959) (400) (4,607) (631) (5,238)
Future income tax expense (5,173) (303) (966) (2,476) (8,918) (1,399) (10,317)
------------------------------------------------------------------------------------
Net future cash flows before discount 11,821 419 1,451 994 14,685 1,344 16,029
10% discount for timing of future
cash flows (4,741) (176) (517) (357) (5,791) (522) (6,313)
------------------------------------------------------------------------------------
Standardized measure: discounted future
net cash flows $ 7,080 $ 243 $ 934 $ 637 $ 8,894 $ 822 $ 9,716
====================================================================================
</TABLE>
<TABLE>
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
<CAPTION>
Texaco Inc. and Consolidated Total Including Equity in
Subsidiaries-Worldwide Affiliate-Other Eastern Hemisphere
---------------------------- ----------------------------------
(Millions of dollars) 1994 1993 1992 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Standardized measure--Beginning of year $ 6,181 $ 8,894 $ 7,785 $ 6,727 $ 9,716 $ 8,606
Sales of minerals-in-place (104) (211) (115) (104) (211) (115)
--------------------------------------------------------------------------
6,077 8,683 7,670 6,623 9,505 8,491
Changes in ongoing oil and gas operations:
Sales and transfers of produced oil and gas, net of
production costs during the period (2,932) (2,918) (3,043) (3,307) (3,281) (3,460)
Net changes in prices, production and development
costs 3,024 (5,512) 1,182 3,707 (6,001) 788
Extensions, discoveries and improved recovery, less
related costs 1,355 955 541 1,479 963 763
Development costs incurred during the period 1,133 1,137 1,250 1,262 1,274 1,421
Timing of production and other changes (618) (488) (551) (648) (564) (488)
Revisions of previous quantity estimates 537 725 1,129 626 787 1,111
Purchases of minerals-in-place 7 6 12 7 6 12
Accretion of discount 907 1,398 1,234 1,023 1,566 1,420
Net change in discounted future income taxes (1,370) 2,195 (530) (1,760) 2,472 (342)
--------------------------------------------------------------------------
Standardized measure--End of year $ 8,120 $ 6,181 $ 8,894 $ 9,012 $ 6,727 $ 9,716
==========================================================================
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 68.
SELECTED FINANCIAL DATA
Texaco Inc. and Subsidiary Companies
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA
<CAPTION>
1994 1993
----------------------------------- -------------------------------
First Second Third Fourth First Second Third Fourth
(Millions of dollars) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Sales and services $7,232 $7,865 $8,725 $8,718 $8,061 $8,591 $8,276 $8,317
Equity in income of affiliates, income from dividends,
interest, asset sales and other 202 135 235 241 172 182 214 258
--------------------------------------------------------------------
7,434 8,000 8,960 8,959 8,233 8,773 8,490 8,575
--------------------------------------------------------------------
DEDUCTIONS
Purchases and other costs 5,183 5,787 6,461 6,500 5,957 6,380 6,167 6,163
Operating expenses 731 790 818 730 708 754 835 789
Selling, general and administrative expenses 391 472 366 450 402 418 524 439
Maintenance and repairs 90 95 97 108 98 96 102 122
Exploratory expenses 66 90 52 99 55 60 161 76
Depreciation, depletion and amortization 408 431 445 451 375 386 401 406
Interest expense, taxes other than income taxes and
minority interest 258 248 265 267 253 257 270 245
--------------------------------------------------------------------
7,127 7,913 8,504 8,605 7,848 8,351 8,460 8,240
--------------------------------------------------------------------
Income from continuing operations before
income taxes 307 87 456 354 385 422 30 335
Provision for (benefit from) income taxes 105 (28) 175 (27) 104 110 (287) (14)
--------------------------------------------------------------------
Net income from continuing operations 202 115 281 381 281 312 317 349
Discontinued operations
Net loss from operations -- -- -- -- (3) (3) (11) --
Net income (loss) on disposal -- (87) -- 18 -- -- (164) (10)
--------------------------------------------------------------------
NET INCOME $ 202 $ 28 $ 281 $ 399 $ 278 $ 309 $ 142 $ 339
====================================================================
Per common share (dollars)
Net income (loss)
Continuing operations $ .69 $ .35 $ .98 $ 1.42 $ .98 $ 1.11 $ 1.13 $ 1.25
Discontinued operations -- (.34) -- .07 (.01) (.01) (.68) (.04)
--------------------------------------------------------------------
Net income $ .69 $ .01 $ .98 $ 1.49 $ .97 $ 1.10 $ .45 $ 1.21
====================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 69.
<TABLE>
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
<CAPTION>
(Millions of dollars) 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Revenues from continuing operations $33,353 $34,071 $36,530 $37,162 $40,508
Net income (loss) before cumulative effect of accounting changes
Continuing operations $ 979 $ 1,259 $ 1,038 $ 1,292 $ 1,405
Discontinued operations (69) (191) (26) 2 45
Cumulative effect of accounting changes -- -- (300) -- --
--------------------------------------------------
Net income $ 910 $ 1,068 $ 712 $ 1,294 $ 1,450
--------------------------------------------------
Per common share (dollars)
Net income (loss) before cumulative effect of accounting changes
Continuing operations $ 3.43 $ 4.47 $ 3.63 $ 4.60 $ 5.01
Discontinued operations (.26) (.73) (.10) .01 .17
Cumulative effect of accounting changes -- -- (1.16) -- --
--------------------------------------------------
Net income $ 3.17 $ 3.74 $ 2.37 $ 4.61 $ 5.18
--------------------------------------------------
Dividends $ 3.20 $ 3.20 $ 3.20 $ 3.20 $ 3.05
Total cash dividends paid on common stock $ 830 $ 828 $ 828 $ 827 $ 793
AT END OF YEAR:
Total assets $25,505 $26,626 $25,992 $26,182 $25,975
Debt and capital lease obligations
Short-term $ 917 $ 669 $ 140 $ 1,331 $ 1,516
Long-term 5,564 6,157 6,441 5,173 4,485
--------------------------------------------------
Total debt and capital lease obligations $ 6,481 $ 6,826 $ 6,581 $ 6,504 $ 6,001
==================================================
See accompanying notes to consolidated financial statements.
</TABLE>
Texaco Inc. 1994 Annual Report to Stockholders page 70.
INVESTOR INFORMATION
Texaco Inc. and Subsidiary Companies
STOCKHOLDER INFORMATION
Texaco Inc.'s Form 10-K Report to the Securities and
Exchange Commission for 1994 and a Financial and Oper-
ational Supplement to Texaco's 1994 Annual Report are
available to stockholders and others who request them.
To obtain copies, please write to Mr. Carl B. Davidson, Vice
President and Secretary, Texaco Inc., 2000 Westchester Avenue,
White Plains, New York 10650.
In recognition of Texaco's long-standing commitment to corpo-
rate citizenship, the Texaco Foundation was founded in December
1979 for the purpose of making charitable contributions in the
United States to selected tax-exempt organizations, particularly
in the fields of higher education, arts and culture, civic and public
interest, social betterment, health and the environment. Upon
written request to our White Plains office, the Texaco Foundation
will send a copy of its Annual Report.
Those wishing to receive a report on Texaco's equal oppor-
tunity activities may also do so by writing to Mr. John D. Ambler,
Vice President, Human Resources, at our White Plains office,
requesting a copy of Texaco: Equal Opportunity--Taking
Affirmative Action at Work and in the Community.
INVESTOR SERVICES PLAN
The company's Investor Services Plan provides individuals with a
variety of innovative and quality stockholder services--all
designed to make investing in Texaco common stock easy. Enroll-
ment in the Plan is open to anyone and, even if you are not already
a stockholder, your initial investment can be made directly
through the company. The Plan contains many interesting fea-
tures such as dividend reinvestment, optional cash investments
and custodial service for stock certificates, and is a great way to
start an investment program for family members and friends.
For a complete informational package, including a Plan pro-
spectus, call 1-800-283-9785.
ANNUAL MEETING
Texaco Inc.'s Annual Stockholders Meeting will be held at the
Rye Town Hilton in Rye Brook, NY, on Tuesday, May 9, 1995.
A formal notice of the meeting, together with a proxy state-
ment and proxy form, is being mailed with this Report to
stockholders.
MARKET INFORMATION
The New York Stock Exchange is the principal exchange on which
Texaco Inc. common stock is traded. There were 199,998 stock-
holders of record as of February 23, 1995. The high and low sales
prices of Texaco Inc. common stock as quoted on the composite
tape of the New York Stock Exchange during 1994 and 1993 were as
follows:
1994 1993
-------------------- --------------------
High Low High Low
-----------------------------------------------------------------
First Quarter $68.13 $61.50 $64.63 $57.63
Second Quarter 66.00 60.00 65.75 61.75
Third Quarter 64.25 58.13 68.50 60.63
Fourth Quarter 65.50 59.38 69.50 62.00
==========================================
COMMON STOCK DIVIDENDS
Texaco Inc. paid quarterly cash dividends of 80 cents per share to
its common stockholders in 1994 and 1993, for a total of $3.20 per
share for each year.
STOCK TRANSFER OFFICES
Texaco Inc.
Investor Relations and Shareholder
Services Department
2000 Westchester Avenue
White Plains, New York 10650
Mellon Securities Transfer Services
120 Broadway--33rd Floor
New York, NY 10271
Montreal Trust Company
151 Front Street West--8th Floor
Toronto, Ontario, Canada M5J 2N1
Texaco Inc. 1994 Annual Report to Stockholders page 71.
EXHIBIT 21
--------------------------
Subsidiaries of Registrant
1994
Parents of Registrant
None
Registrant
Texaco Inc.
The operations of the Registrant and its subsidiaries are generally grouped by
divisions. The divisions are comprised of various subsidiaries and affiliates.
The significant subsidiaries included in the consolidated financial statements
of the Registrant, grouped by the division primarily responsible for each, are
as follows:
Organized
under
Texaco U.S.A. the laws of
------------- -----------------------
Four Star Oil and Gas Company Delaware
Texaco Cogeneration Company Delaware
Texaco Pipeline Inc. Delaware
Texaco Exploration and Production Inc. Delaware
Texaco Refining and Marketing Inc. Delaware
Texaco Refining and Marketing (East) Inc. Delaware
Texaco Trading and Transportation Inc. Delaware
Texaco Europe
-------------
Texaco A/S Denmark
Texaco Britain Limited England
Texaco Denmark Inc. Delaware
Texaco Investments (Netherlands), Inc. Delaware
Texaco Limited England
Texaco North Sea U.K. Company Delaware
Texaco Latin America/West Africa
--------------------------------
Texaco Brasil S.A. Produtos de Petroleo Brazil
Texaco Overseas (Nigeria) Petroleum Company Nigeria
Texaco Overseas Petroleum Company Delaware
Texaco Panama Inc. Panama
Texas Petroleum Company New Jersey
Other significant subsidiaries of the Registrant not within
-----------------------------------------------------------
the above divisions
-------------------
Heddington Insurance Ltd. Bermuda
Saudi Arabian Texaco Inc. Delaware
Texaco International Trader Inc. Delaware
Texaco Overseas Holdings Inc. Delaware
TEPI Holdings Inc. Delaware
TRMI Holdings Inc. Delaware
Names of certain subsidiary companies are omitted because, considered in the
aggregate as a single subsidiary company, they do not constitute a significant
subsidiary company.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 23, 1995 incorporated by reference in
Texaco Inc.'s Form 10-K for the year ended December 31, 1994, into the
following previously filed Registration Statements:
1. Form S-3 File Number 2-37010
2. Form S-3 File Number 33-31148
3. Form S-8 File Number 2-67125
4. Form S-8 File Number 2-76755
5. Form S-8 File Number 2-90255
6. Form S-8 File Number 33-34043
7. Form S-3 File Number 33-40309
8. Form S-8 File Number 33-45952
9. Form S-8 File Number 33-45953
10. Form S-3 File Number 33-63996
11. Form S-3 File Number 33-50553 and 33-50553-01
Arthur Andersen LLP
New York, N.Y.
March 27, 1995
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any
stock option, restricted stock grant, incentive, investment, thrift, profit
sharing, or other employee benefit plan relating to the Company's securities,
or (e) any dividend reinvestment or stock purchase plan relating to the
Company's securities; (ii) the Company's Annual Report to the Securities and
Exchange Commission for the year ended December 31, 1994, on Form 10-K, and
any and all amendments thereto on Form 8 or otherwise, under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and (iii) Statements of
Changes of Beneficial Ownership of Securities on Form 4 or Form 5 (or such
other forms as may be designated from time to time for such purposes),
pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 16th day of January, 1995.
ALFRED C. DE CRANE, JR. (SEAL)
-----------------------
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 16th day of January, 1995.
ALLEN J. KROWE (SEAL)
--------------
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 25th day of January, 1995.
William C. Bousquette (SEAL)
---------------------
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 3rd day of February, 1995.
ROBERT C. OELKERS (SEAL)
-----------------
Comptroller
(Principal Accounting Officer)
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 17th day of January, 1995.
ROBERT A. BECK (SEAL)
--------------
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 23rd day of March, 1995.
JOHN BRADEMAS (SEAL)
-------------
EXHIBIT 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 23rd day of January, 1995.
WILLARD C. BUTCHER (SEAL)
------------------
EXHIBIT 24.8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 16st day of January, 1995.
EDMUND M. CARPENTER (SEAL)
-------------------
EXHIBIT 24.9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 1st day of February, 1995.
FRANKLYN G. JENIFER (SEAL)
-------------------
EXHIBIT 24.10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act of
1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 23rd day of March, 1995.
THOMAS S. MURPHY (SEAL)
----------------
EXHIBIT 24.11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e)
any dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 25th day of January, 1995.
CHARLES H. PRICE, II (SEAL)
--------------------
EXHIBIT 24.12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e)
any dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 25th day of January, 1995.
ROBIN B. SMITH (SEAL)
--------------
EXHIBIT 24.13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any and
all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 24th day of January, 1995.
WILLIAM C. STEERE, JR. (SEAL)
----------------------
EXHIBIT 24.14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any and
all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 27th day of January, 1995.
THOMAS A. VANDERSLICE (SEAL)
---------------------
EXHIBIT 24.15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of
them (with full power to act without the other), as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and authority to act in
any and all capacities for and in the name, place and stead of the undersigned
in connection with the filing of: (i) any and all registration statements and
all amendments and post-effective amendments thereto (collectively,
"Registration Statements") under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission, and any and all registrations,
qualifications or notifications under the applicable securities laws of any
and all states and other jurisdictions, with respect to the securities of the
Company of whatever class, including without limitation thereon the Company's
Common Stock, par value $6.25 per share, and preferred stock, par value $1.00
per share, however offered, sold, issued, distributed, placed or resold by the
Company, by any of its subsidiary companies, or by any other person or entity,
that may be required to effect: (a) any such filing, (b) any primary or
secondary offering, sale, distribution, exchange, or conversion of the
Company's securities, (c) any acquisition, merger, reorganization or
consolidation involving the issuance of the Company's securities, (d) any stock
option, restricted stock grant, incentive, investment, thrift, profit sharing,
or other employee benefit plan relating to the Company's securities, or (e) any
dividend reinvestment or stock purchase plan relating to the Company's
securities; (ii) the Company's Annual Report to the Securities and Exchange
Commission for the year ended December 31, 1994, on Form 10-K, and any and all
amendments thereto on Form 8 or otherwise, under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and (iii) Statements of Changes of
Beneficial Ownership of Securities on Form 4 or Form 5 (or such other forms as
may be designated from time to time for such purposes), pursuant to Section
16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority, such
attorneys-in-fact and agents, or either of them, are hereby granted full power
and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such attorneys-in-
fact and agents, and either of them, also include the full right, power and
authority to effect necessary or appropriate substitutions or revocations. The
undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all
action lawfully taken pursuant to the powers and authorities herein granted by
such attorneys-in fact and agents, or either of them, or by their respective
substitutes. This Power of Attorney expires by its terms and shall be of no
further force and effect on March 31, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal as
of the 2nd day of January, 1995.
WILLIAM WRIGLEY (SEAL)
---------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TEXACO INC.'S 1994 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000097349
<NAME> TEXACO INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 404
<SECURITIES> 60
<RECEIVABLES> 3,322
<ALLOWANCES> 25
<INVENTORY> 1,358
<CURRENT-ASSETS> 6,019
<PP&E> 31,095
<DEPRECIATION> 17,612
<TOTAL-ASSETS> 25,505
<CURRENT-LIABILITIES> 5,015
<BONDS> 5,564
<COMMON> 1,615
0
533
<OTHER-SE> 7,601
<TOTAL-LIABILITY-AND-EQUITY> 25,505
<SALES> 32,540
<TOTAL-REVENUES> 33,353
<CGS> 23,931
<TOTAL-COSTS> 27,000
<OTHER-EXPENSES> 4,651
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 498
<INCOME-PRETAX> 1,204
<INCOME-TAX> 225
<INCOME-CONTINUING> 979
<DISCONTINUED> (69)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 910
<EPS-PRIMARY> 3.17
<EPS-DILUTED> 3.17
</TABLE>
