SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e) (2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 14a-11(c) or Rule 14a-12
TEXACO INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[TEXACO LOGO]
Texaco Inc.
2000 Westchester Avenue
White Plains, NY 10650
NOTICE OF ANNUAL MEETING
Dear Stockholder:
Your Board of Directors and your management cordially invite you to attend
the Annual Meeting of the Stockholders of Texaco Inc. which will be held at the
Rye Town Hilton, 699 Westchester Avenue, Rye Brook, New York on Tuesday, April
28, 1998, at 2:00 p.m. to transact such business as may properly come before the
meeting.
We intend to present for your approval at this meeting
(1) the election of five directors,
(2) the appointment of auditors for the year 1998,
(3) approval of amendment to the Stockholder Rights Plan
In addition, certain stockholders have notified the Company that they
intend to present to the meeting proposals regarding: an independent Chairman of
the Board and classification of the Board of Directors.
Stockholders of record at the close of business on February 27, 1998 are
entitled to notice of and vote at this meeting or any adjournment thereof.
Please complete, sign and mail promptly in the return envelope provided the
enclosed proxy card which is being solicited on behalf of the management,
whether or not you plan to attend the meeting. If you are a stockholder of
record, you can use the toll-free telephone number on the proxy card to have
your shares voted.
Only those stockholders or their properly identified proxies with valid
admission cards will be admitted to the meeting. If you are a stockholder of
record, an admission card is included with your proxy card. Other stockholders
should contact the bank or broker holding their shares for an admission card.
Carl B. Davidson
Vice President and Secretary
March 17, 1998
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
________________________________________________________________________________________________________________
Page
<S> <C>
Proxy Statement
General Information 1
Description of Capital Stock 1
Voting of Shares 2
Confidential Voting 2
The Board of Directors
Governance 3
Committees 5
Qualifications and Nomination of Directors 6
Compensation of Directors 7
Certain Transactions 7
Security Ownership of Directors and Management - Section 16(a) Reporting Compliance 8
Proposals Before the Meeting
Management Proposals
Item 1 - Election of Directors 9
Item 2 - Approval of Auditors 14
Item 3 - Approval of Amendment to the Stockholder Rights Plan 14
Stockholder Proposals Relating to:
Item 4 - An Independent Chairperson 25
Item 5 - Classification of the Board of Directors 27
Executive Compensation
Compensation Committee Report 29
Summary Compensation Table 32
Option Grants in 1997 33
Aggregated Option Exercises in 1997 and Year-End Option Values 36
Performance Graphs 37
Retirement Plan 38
Future Stockholder Proposals 39
Exhibit I 40
Exhibit A to Exhibit I 70
Exhibit B to Exhibit I 75
</TABLE>
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PROXY STATEMENT
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General Information
We are mailing this proxy statement and accompanying proxy card to you
beginning March 17, 1998. The Board of Directors of Texaco Inc. is soliciting
the proxy, and the Company will bear the cost. Proxies may be solicited by mail,
telephone, the internet, facsimile, or in person. We will request persons
holding stock in their names for others, or in the names of nominees for others,
to obtain voting instructions from the beneficial owner, and we will reimburse
them for their reasonable out-of-pocket expenses in obtaining voting
instructions. Morrow & Co., Inc. has been retained to assist in soliciting
proxies at a fee not to exceed $17,500, plus reasonable out-of-pocket expenses.
We are sending with this Proxy Statement a copy of the Annual Report to
Stockholders for 1997, including audited financial statements. It is not proxy
soliciting material.
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Description of Capital Stock
Excluding _________ shares of the Company's Common Stock held in the
Company's treasury, there were outstanding, at February 27, 1998, the following
series of voting securities: ___________ shares of Common Stock, __________
shares of Series B ESOP Convertible Preferred Stock and _________ shares of
Series F ESOP Convertible Preferred Stock. Each outstanding share of Common
Stock is entitled to one vote, each outstanding share of Series B Preferred
Stock is entitled to 25.7 votes and each outstanding share of Series F Preferred
Stock is entitled to twenty votes on all matters properly brought before the
meeting. All the shares of the Series B and Series F Preferred Stock are voted
by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02104-1389, the independent Trustee of the Company's Employee
Stock Ownership Plans. State Street Bank and Trust Company filed a Schedule 13G
with the Securities and Exchange Commission disclosing that, as of December 31,
1997, it had voting and dispositive power over __________ shares, or
approximately __% of the Company's outstanding voting securities, as Trustee of
the foregoing plans (as well as various collective investment funds and personal
trust accounts). Under the terms of these plans, State Street Bank and Trust
Company is required to vote shares attributable to any participant in accordance
with confidential instructions received from the participant and to vote all
shares for which it shall not have received instructions in the same ratio as
the shares with respect to which instructions were received.
A Schedule 13G was also filed by The Capital Group Companies, Inc., Capital
Research and Management Company, 333 South Hope Street, Los Angeles, CA 90071
disclosing that as of December 31, 1997 it had sole dispositive power over
30,874,300 shares or approximately 5.8% of the Company's outstanding common
stock.
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Voting of Shares
Approval of matters presented to the meeting requires the affirmative vote
of a majority of the voting power of the shares present in person or represented
by proxy and entitled to vote on the subject matter, except for the election of
directors, which requires a plurality.
If you are a stockholder of record, you can have your shares voted by
calling the toll-free telephone number on the proxy card or by mailing your
signed proxy card in the postage-paid envelope provided. Specific instructions
to be followed by any owner of record interested in granting a proxy by
telephone are set forth in the enclosed proxy card.
Your executed proxy will be voted at the meeting, unless you revoke it. You
can revoke your proxy at any time before it is exercised by giving written
notice to the Secretary, by submitting a later-dated proxy or by voting in
person at the meeting.
Signed, unmarked proxy cards are voted as the Board recommends. The number
of shares abstaining on each proposal are counted and reported as a separate
total. Abstentions are included in the tally of shares represented, but are not
included in the determination of the number of votes cast for or against a
particular item. Therefore, abstentions have the effect of a vote cast against a
particular item. Shares not voted simply as a consequence of brokers voting less
than all of their entitlement on non-discretionary items under the provisions of
New York Stock Exchange Rule 452 are not included in the tally of the number of
shares cast for, against or abstained from any proposal, and will, therefore,
have the effect of reducing the number of shares needed to approve any item.
The Company has established a grantor trust and contributed to such trust
9,200,000 shares of Common Stock to be held as a reserve for the discharge of
the Company's obligations under certain nonqualified deferred compensation plans
and arrangements. These shares are voted by the Trustee in accordance with
written instructions received from the beneficiaries of the trust. Shares for
which no instructions are received are voted in the same ratio as the shares
with respect to which instructions are received.
Unless otherwise indicated on any proxy card, the persons named as your
proxies in the proxy card intend to vote the shares it represents FOR all the
nominees for director, FOR Items 2, and 3 and AGAINST Items 4 and 5.
Confidential Voting
All voted proxies and ballots are handled so as to protect employee and
individual stockholder voting privacy. No such vote shall be disclosed except:
as necessary to meet any legal requirements; in limited circumstances such as a
proxy contest in opposition to the Board of Directors; to permit independent
Inspectors of Election to tabulate and certify the vote; and to respond to
stockholders who have written comments on their proxy cards.
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THE BOARD OF DIRECTORS
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Governance
We believe that the cornerstone of good governance is the integrity and
quality of leadership - the Board of Directors and
those whom the Board chooses to manage the Company. To help implement this
belief, we have established the following policies and practices:
* Currently 13 of 14 members of the Board are outside, independent
directors, and the following Committees are composed entirely of outside
directors:
- Non-Management Directors
- Audit
- Compensation
- Pension
- Public Responsibility
- Directors and Board Governance
* We have assured a free flow of information about the Company's
business. New directors participate in orientation programs, which include
visits to company facilities and discussions with management personnel.
Pre-meeting materials include supporting data and write-ups of items coming
before the Board, as well as operational and financial information. Senior
officers routinely attend Board meetings, and they and other members of
management frequently brief the Board. Board members take these and other
opportunities to discuss company business with these officers.
* The Board and management discuss and define mutual expectations and
requirements for each other. Guidelines for the Board include:
- loyalty to and pride in Texaco and its reputation;
- independence and integrity;
- representation of the total stockholder constituency;
- good understanding of the business; study and understanding of Board
issues;
- active, objective and constructive participation at meetings of the
Board and its committees; - collective breadth of experience;
- appraisal of executive management; - management succession planning
and review;
- assistance in representing Texaco to the outside world; and
- individual availability for consultation on corporate issues.
* The Board has clearly delineated its role and that of management. It
views its role as providing guidance and strategic oversight to the management,
both collectively and individually, in order to realize the mutual objective of
increasing shareholder wealth. It is management's responsibility and obligation
to conduct the day-to-day operations in a way that will meet this objective. The
Board, in discharging its fiduciary duty to the owners of the Company, holds
management strictly accountable for the financial results and has delegated to
management the power and responsibility to achieve superior results, while
assuring management it can call on the Board's support, advice and experience.
* We strive for open and continuous communication with institutional
investors, other stockholders and the press.
* The Board periodically evaluates its effectiveness in creating and
protecting value for our stockholders as measured against the following nine
areas of Board involvement and responsibility:
1. Review and approval of Texaco's tactical plans, monitoring their
accomplishment and comparing
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Texaco's competitive positioning.
2. Review of Texaco's strategic plan and its long range goals, the
evaluation of Texaco's performance against such plan and goals and
against the competition, and the evaluation of the desirability, as
appropriate, of modifications to such plan and goals.
3. Oversight of Texaco's financial health.
4. Monitoring of such activities of Texaco as pose significant risks and
of the Company's programs to respond to and contain such risks.
5. Review of the performance of the Chief Executive Officer and other
senior officers and their compensation relative to performance.
6. Review of Texaco's adherence to its corporate "Vision and Values" which
include its responsibilities to its stockholders, employees, customers
and the community.
7. Preparedness for the selection of a successor Chief Executive Officer,
and the monitoring of the Company's development and selection of key
personnel.
8. Selection process for Board membership and the overall quality and
preparedness of its members.
9. Availability of the information that the Board and management believe
is needed for the Board to perform its duties effectively.
* Each committee of Texaco's Board annually assesses its performance
to confirm that it is meeting its responsibilities under its charter. Some of
the items that Board committees consider in their self-evaluation are:
- the appropriateness of the scope of its charter;
- appropriateness of matters presented for information and for approval;
- sufficiency of time for consideration of agenda items;
- frequency of meetings;
- length of meetings;
- quality and length of written materials; and
- quality of oral presentations.
* Our by-laws provide for stockholder nominations of director
candidates. We have published guidelines and qualifications for director
candidates. The criteria require that they have:
- the highest personal and professional ethics, integrity and values;
- education and breadth of experience to understand business problems
and evaluate and postulate solutions;
- personality to work well with others with depth and wide perspective
in dealing with people and situations;
- respect for the views of others and not rigid in approach to problems;
- a reasoned and balanced commitment to the social responsibilities of
the Company;
- an interest and availability of time to be involved with the Company
and its employees over a sustained period;
- stature to represent the Company before the public, stockholders and
the other various individuals and groups that affect the Company;
- the willingness to objectively appraise management performance in the
interest of the stockholders;
- an open mind on all polic issues and areas of activity affecting
overall interests of the Company and its stockholders; and
- involvement only in other activities or interests that do not create a
conflict with the director's responsibilities to the Company and its
stockholders.
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* The Board has discussed and adopted a compilation of our Corporate
Governance Policies, specifically addressing thirty distinct issues. This
compilation is available from the Secretary.
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Committees
The Board is organized so that a significant portion of its business is
conducted through the following committees:
The Committee of Non-Management Directors, composed of all of the
non-employee directors, was established in 1949. The Chairman, Mr. Thomas S.
Murphy, leads the personal performance appraisals of the Chief Executive Officer
and also serves as a contact point on Board issues. It consults on such matters
as the Chief Executive Officer or the Chairman of the Committee shall bring
before it with special emphasis on, but not limited to, organization, executive
development, management succession and corporate structure. It reviews the
recommendations of the Compensation Committee concerning the compensation of
Officer-Directors and gives final approval to the salaries for these
individuals. It provides advice and counsel to the Compensation Committee with
respect to the Company's incentive awards programs. This committee provides a
forum for the non-management directors to privately discuss the performance of
management. It held two meetings in 1997.
The Public Responsibility Committee, consisting of Dr. Brademas (Chair),
Mr. Hawley, Dr. Jenifer, Sen. Nunn, Mrs. Smith and Mr. Steere, met three times
in 1997. It reviews and makes recommendations regarding the policies and
procedures affecting the Company's role as a responsible corporate citizen,
including those related to equal employment opportunity, health, environmental
and safety matters, the Company's relationship with its several constituencies
and the Company's philanthropic programs.
The Audit Committee, has been composed of non-management directors since
its formation in 1939, 38 years before the New York Stock Exchange imposed this
requirement on listed companies. It held two meetings in 1997. Its members are
Mr. Vanderslice (Chair), Mr. Hawley, Mr. Murphy, Mrs. Smith, and Drs. Brademas
and Jenifer. Depending on the nature of the matters under review, the outside
auditors, and such officers and other employees as necessary, attend all or part
of the meetings of the committee. The committee reviews and evaluates the scope
of the audit, accounting policies and reporting practices, internal auditing,
internal controls, security procedures and other matters deemed appropriate. The
committee also reviews the performance by Arthur Andersen LLP in their audit of
the Company's financial statements and evaluates their independence and
professional competence. It reserves time at each meeting to meet separately
with outside auditors to discuss issues of importance, including the sufficiency
of management cooperation.
The Compensation Committee, which met five times in 1997, is composed of
Messrs. Butcher (Chair), Carpenter, Steere, Vanderslice and Amb. Price. It
surveys and reviews compensation practices in industry to make certain that the
Company remains competitive and able to recruit and retain highly qualified
personnel, and that the Company's compensation structure incorporates programs
that reflect operating and financial performance, motivate performance that will
best serve the stockholders' interest and are in full compliance with Texaco's
"Vision and Values." The committee approves the
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<PAGE>
compensation of elected officers, company incentive plan awards, and may approve
any special benefit plans.
The Finance Committee, consisting of Mr. Bijur (Chair), Ms. Bush, Amb.
Price and Messrs. Butcher, Carpenter, and Wrigley, met three times in 1997. It
reviews and makes recommendations to the Board concerning the Company's
financial strategies, policies and structure including: the current and
projected financial position and capital structure; the obtaining of funds
necessary for general operation; cash management activities, such as investment
guidelines, the investment portfolio and cash mobilization systems; exposure to
fluctuation in foreign currency exchange rates and interest rates; and changes
in dividend policy.
The Committee on Directors and Board Governance, consisting of Mrs. Smith
(Chair) and Messrs. Butcher, Murphy, Vanderslice and Wrigley, met three times in
1997. It maintains oversight of Board operation and effectiveness, reviews the
size and composition of the Board, reviews the qualifications of a broad range
of candidates for Board membership identified from many sources and recommends
candidates to the Board as nominees for election as directors.
The Pension Committee met three times in 1997. The members are Messrs.
Wrigley (Chair), Murphy, Steere and Amb. Price. It approves investment policy
and guidelines, reviews investment performance, and appoints and retains
trustees, insurance carriers and investment managers for funds allocated to the
Company's retirement plans.
The Board of Directors also has an Executive Committee, which may exercise
all of the powers of the Board in the management and direction of the business
and affairs of the Company, except those that by statute are reserved to the
Board of Directors. This committee, consisting of Messrs. Bijur (Chair),
Butcher, Carpenter, Murphy and Vanderslice, and Amb. Price and Mrs. Smith, met
once in 1997.
The Board of Directors held eleven meetings in 1997. Overall attendance by
directors at meetings of the Board and its committees on which the directors
served exceeded 95%.
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Qualifications and Nomination
of Directors
Candidates are selected on the basis of the contributions they can make in
providing advice and guidance to the Board and management. the Company is
committed to an inclusive Board with a diversity of experience and outlook. The
search process to identify suitable candidates is continual and involves a broad
variety of sources. The criteria for director candidates, developed in
consultation with individual and institutional holders, are set forth in full on
page 4. The Committee on Directors and Board Governance also will consider
proposals for nomination from stockholders of record which are made in writing
to the Secretary, are timely, contain sufficient background information
concerning the nominee to enable a proper judgment to be made as to his or her
qualifications and include a written consent of the proposed nominee to stand
for election if nominated and to serve if elected. The requirements for making
nominations are set forth in the Company's by-laws.
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6
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Compensation of Directors
Employee directors receive no compensation for service on the Board or
its committees. Non-employee directors receive an annual retainer of $30,000,
and $1,250 for each Board and committee meeting attended, as well as an annual
fee of 900 restricted stock-equivalent units which have significant vesting and
transferability restrictions. Committee Chairs receive annual retainers of
$7,000. One half of the annual retainers are paid in Common Stock or restricted
stock-equivalent units. Directors may elect to receive all or any part of the
remaining retainers and fees in Common Stock and to defer payment of fees, in
cash, in Common Stock or in restricted stock-equivalent units.
Directors may participate in a group personal liability and property damage
insurance program administered and partially funded by the Company.
As part of its corporate-wide effort to encourage charitable giving, the
Company has established a directors' gift program. Institutions that are
qualified recipients of grants from the Texaco Foundation are the only
institutions that may qualify as recipients of gifts under the directors'
program. Upon the death of a director, the Company will donate up to a total of
one million dollars to one or more qualifying charitable organizations
designated by the director. The directors' program is funded entirely by
insurance policies on the life of each director. The Company owns the policies,
pays the premiums for such insurance ($673,171 for 1997) and is entitled to all
tax deductions resulting from such contributions to charitable organizations.
Individual directors derive no financial benefit from this program.
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Certain Transactions
Sen. Nunn is a member of the law firm of King & Spalding, which has
provided legal services to the Company for many years.
Payments of $274,924 for oil barge movement services were made to
Wilmington Transportation Company. Mr. Wrigley is controlling stockholder and
Chairman of the Board of Santa Catalina Island Company, of which Wilmington
Transportation Company is a wholly owned subsidiary.
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7
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Security Ownership of Directors
and Management - Section 16(a)
Reporting Compliance
The table below sets forth, as of February 1, 1998, information with
respect to the Company's voting securities and non-voting stock-equivalent
restricted units beneficially owned by directors, executive officers included in
the "Summary Compensation Table" on page 35 and all directors and executive
officers of the Company as a group. Except as otherwise noted, each person has
sole voting and investment power over the shares listed in the first column. The
total beneficial ownership of voting securities of all directors and executive
officers as a group represents less than 1% of each class of shares outstanding.
The rules of the Securities and Exchange Commission require that the
Company disclose late filings of reports of stock ownership (and changes in
stock ownership) by its directors and executive officers. To the best of the
Company's knowledge, based on a review of the relevant forms and written
representations from the Company's directors and executive officers, there were
no late filings during 1997.
<TABLE>
<CAPTION>
Number of Shares or Units
Shares Underlying Stock-Equivalent
Total Stock Common Options Exercisable Series B Restricted
Beneficial Owners Interest Stock Within 60 Days Preferred Units
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<S> <C> <C> <C> <C> <C>
Peter I. Bijur 320,450 201,126 112,956 248 --
C. Robert Black 143,520 138,051 -- 213 --
John Brademas 5,805 3,450 -- -- 2,355
Mary K. Bush 899 30 -- -- 869
Willard C. Butcher 7,316(1) 4,961 -- -- 2,355
Edmund M. Carpenter 6,343 753 -- -- 5,590
Clarence P. Cazalot 143,624 74,941 64,010 182 --
Michael C. Hawley 5,530 400 -- -- 5,130
Franklyn G. Jenifer 4,277 200 -- -- 4,077
Patrick J. Lynch 196,316 120,634 70,675 195 --
Thomas S. Murphy 45,641 43,286 -- -- 2,355
Sam Nunn 1,253 400 -- -- 853
Charles H. Price, II 11,546 3,453 -- -- 8,093
Robin B. Smith 5,475 600 -- -- 4,875
William C. Steere, Jr. 11,957 1,400 -- -- 10,557
Glenn F. Tilton 176,911 119,548 52,870 175 --
Thomas A. Vanderslice 38,903 22,694 -- -- 16,209
William Wrigley 64,667(2) 62,312 -- -- 2,355
Directors and Executive
Officers as a group 2,537,294 1,583,188 808,889 3,098 65,673
<FN>
(1) Does not include 42 shares held by Mr. Butcher's wife as custodian for
their minor son, as to which Mr. Butcher disclaims beneficial interest.
(2) Does not include 249,592 shares owned of record by the Wm. Wrigley Jr.
Company Foundation, of which Mr. Wrigley is Chairman of the Board and
among the officers authorized to vote the shares held by the
Foundation, or 2,000 shares held in a trust, of which Mr. Wrigley is
the trustee with sole voting and investment power, for the benefit of
his son. Mr. Wrigley disclaims any beneficial interest in such shares.
</FN>
</TABLE>
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PROPOSALS BEFORE THE MEETING
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Item 1-Election of Directors
The Board is divided into three classes of directors. At each annual
meeting of stockholders, members of one of the classes, on a rotating basis, are
elected for a three-year term.
In accordance with the Company's Certificate of Incorporation and By-Laws,
the Board of Directors by resolution fixed the total number of directors at 13.
The Board has designated five persons as nominees for election as directors
at the Annual Meeting. All of the nominees are currently directors and, except
for Mary K. Bush and Sam Nunn, were previously elected by the stockholders. In
accordance with the Board's retirement policy for directors, Dr. Brademas will
retire at the Annual Meeting in 1999, prior to the expiration of his three-year
term.
The Company has no reason to believe that any of the nominees will be
disqualified or unable or unwilling to serve if elected. However, if any nominee
should become unavailable for any reason, proxies may be voted for another
person nominated by the present Board of Directors to fill the vacancy, or the
size of the Board may be reduced.
Following is certain biographical information concerning the nominees, as
well as those directors whose terms of office are continuing after the meeting.
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NOMINEES FOR THREE YEAR TERM EXPIRING AT
THE 2001 ANNUAL MEETING
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[photo]
Peter I. Bijur, 55, Chairman of the Board and Chief Executive Officer of
Texaco Inc., was elected a director in 1996. He joined the Company in 1966
and was elected a Vice President in 1983. In 1990 he was appointed President
of Texaco Europe. He was elected a Senior Vice President of Texaco Inc. in
1992. He is a Director of International Paper Company and the American
Petroleum Institute and serves on its Management Committee. He is also a
member of The Business Council, The Business Roundtable, The Conference
Board, and the National Petroleum Council. In addition, he currently serves
on the Board of Trustees of Middlebury College and New York University
Medical Center. He is a Managing Director of the Metropolitan Opera
Association, Inc., Director of the New York Botanical Garden and a Fellow
both of the Institute of Petroleum and the Royal Society of Arts in London.
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[photo]
John Brademas, 71, President Emeritus of New York University, became a
director in 1989. He served eleven terms in Congress as a Representative from
Indiana, the last two as Majority Whip. He is a graduate of Harvard and
Oxford Universities, where he was a Rhodes Scholar. He is a director of Loews
Corporation, Scholastic, Inc., Kos Pharmaceuticals, Inc. and Bell Atlantic
Corporation, Chairman of the President's Committee on the Arts and
Humanities, and is active in numerous academic and philanthropic
organizations.
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[photo]
Mary K. Bush, 49, President of Bush & Company, an international financial
consulting firm, joined the Board on July 25, 1997. Prior to founding Bush &
Company, she served from 1989 to 1991 as Managing Director of the U.S.
Federal Housing Board. Prior to that position, she was Vice President -
International Finance at the Federal National Mortgage Associate (Fannie
Mae). From 1984 to 1988, she served as U.S. Alternate Executive Director of
the International Monetary Fund (IMF). She serves on a number of boards and
advisory boards, including Mortgage Guaranty Insurance Corporation, a number
of Pioneer mutual funds, Novecon Management Company, Washington Mutual
Investors Fund, March of Dimes, Hoover Institution, Wilberforce University,
the Folger Shakespeare Library, Project 2000, Inc., Small Enterprise
Assistance Funds and the Bretton Woods Committee.
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[photo]
Sam Nunn, 59, former U.S. Senator from Georgia, was elected to the Board
September 25, 1997. He was a member of the U.S. Senate from 1972 to 1997,
where he served as chairman of the Senate Armed Services Committee. He is
a senior partner in the Atlanta law firm of King & Spalding, where his
practice focuses on international and corporate matters. He is also a
distinguished professor in the Sam Nunn School of International Affairs
at Georgia Tech. Among the non-profit boards on which he serves are
the Center for Strategic and International Studies, the Aspen Strategy
Group, the Carnegie Corporation of New York and Emory University. He also
serves on the boards of Coca-Cola Company, General Electric Company,
National Service Industries, Inc., Total System Services, Inc. and
Scientific-Atlanta, Inc.
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[photo]
Charles H. Price, II, 66, former Chairman of Mercantile Bank of Kansas City
and former United States Ambassador to the United Kingdom (1983-1989) and
Belgium (1981-1983), became a director in 1989. He is an advisory director of
the Mercantile Bancorporation, Inc. and a director of Mercantile Bank of
Kansas City, 360(degree) Communications, Inc., The New York Times Company,
Hanson PLC and U.S. Industries, Inc. Prior to service as a United States
Ambassador, he had been Chairman of the Board of the Price Candy Company,
American Bancorporation and American Bank and Trust Company.
11
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DIRECTORS CONTINUING IN OFFICE UNTIL
THE 2000 ANNUAL MEETING
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[photo]
Willard C. Butcher, 71, former Chairman and Chief Executive Officer of the
Chase Manhattan Bank, N.A. has been a director since 1981. He is a director
of ASARCO, Incorporated and International Paper Co. He is a member of The
Business Council, the International Advisory Board for Banca Nazionale del
Lavoro, and the International Advisory Council of the Chase Manhattan Bank,
and vice chairman of Lincoln Center for the Performing Arts, Inc. He is a
Trustee emeritus of the American Enterprise Institute for Public Policy
Research and a fellow emeritus of Brown University.
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[photo]
Edmund M. Carpenter, 56, Sr. Managing Director of Clayton, Dubilier & Rice,
Inc. since 1997, was elected a director in 1991. He was Chairman and Chief
Executive Officer of General Signal Corporation from 1988 to 1995. Prior
to serving with General Signal, he was President, Chief Operating Officer
and a director of ITT Corporation. He is a director of Campbell Soup Company
and Dana Corporation.
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[photo]
Franklyn G. Jenifer, 58, President of the University of Texas at Dallas, has
been a Director since 1993. Following an academic career as a professor of
biology, he was President of Howard University from 1990 to 1994. Prior to
that he was Chancellor of the Massachusetts Board of Regents of Higher
Education, and from 1979 to 1986, Vice Chancellor of the New Jersey
Department of Higher Education. He serves on the Board of Visitors of the
John F. Kennedy School of Government of Harvard University, the Corporation
of Woods Hole Oceanographic Institution, the National Foundation for
Biomedical Research, the Board of Trustees of Universities Research
Association, Inc., the Board of Directors of the United Way of Metropolitan
Dallas, the Monitoring Committee for the Louisiana Desegregation Settlement
Agreement, and the Texas Science and Technology Council.
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[photo]
Thomas A. Vanderslice, 66, President of TAVAssociates, has been a director
since 1980. He was formerly Chairman of the Board, President and Chief
Executive Officer of M/A-COM, Inc., Chairman and Chief Executive Officer of
Apollo Computer, Inc., President and Chief Operating Officer of GTE
Corporation, and an officer of General Electric Company. He is a member of
the Board of Trustees of Boston College and of the Board of Directors of W.
R. Grace & Co., the National Academy of Engineering, the American Chemical
Society, and the American Institute of Physics, and Chairman of the
Massachusetts High Technology Council.
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DIRECTORS CONTINUING IN OFFICE UNTIL
THE 1999 ANNUAL MEETING
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[photo]
Michael C. Hawley, 60, President and Chief Operating Officer and Director of
The Gillette Company since April 1995, has been a director since 1995. After
joining Gillette in 1961, he held management positions of increasing
responsibility in a variety of countries and returned to Boston in 1985 when
he was appointed Vice President, Operations Services, and elected a
corporate Vice President. In 1989 he was elected President of Oral-B
Laboratories, a Gillette subsidiary, and in 1993 was elected Executive Vice
President, International Group. He is also a director of Arthur D. Little,
Inc. and the John Hancock Mutual Life Insurance Co.
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[photo]
Robin B. Smith, 58, Chairman and Chief Executive Officer of Publishers
Clearing House since August 1996 and President and Chief Executive Officer
since 1988, was elected a director in 1992. Prior to joining Publishers
Clearing House in 1981 as President and Chief Operating Officer, she
concluded her sixteen year career with Doubleday & Co., Inc. as President and
General Manager of its Dell Publishing subsidiary. She is a director of
Springs Industries, Inc., BellSouth Corporation, Kmart Corporation and a
number of Prudential mutual funds.
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[photo]
William C. Steere, Jr., 61, Chairman and Chief Executive Officer of Pfizer
Inc., was elected a director in 1992. Mr. Steere began his career with
Pfizer, a diversified health care company with global operations, and
attained the positions of President of Pfizer Pharmaceutical Group and
President and Chief Executive Officer before elevation to his present
position in 1992. He is a director of the Federal Reserve Bank of New York,
Dow Jones & Company, Inc., the New York Botanical Garden, Minerals
Technologies Inc., WNET-Thirteen, the Business Council, the Business
Roundtable and the New York University Medical Center. He is also past
chairman of the Board of Directors of the Pharmaceutical Manufacturers
Association.
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[photo]
William Wrigley, 65, President, Chief Executive Officer and a director of Wm.
Wrigley Jr. Company, has been a director since 1974. He is Chairman of the
Board, Chairman of the Executive Committee and a director of Santa Catalina
Island Company; a director of American Home Products Corporation and Grocery
Manufacturers of America, Inc. He also serves as a Trustee of the University
of Southern California and is a Benefactor and Life Member of the Santa
Catalina Island Conservancy.
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Item 2-Approval of Auditors
The following resolution concerning the appointment of independent auditors
will be offered at the meeting:
"RESOLVED, that the appointment by the Board of Directors of the
Company of Arthur Andersen LLP to audit the financial statements of the
Company and its subsidiaries for the fiscal year 1998 is hereby ratified
and approved."
Arthur Andersen LLP has been auditing the accounts of the Company and its
subsidiaries for many years. In recommending the approval by the stockholders of
the appointment of that firm, the Board of Directors is acting upon the
recommendation of the Audit Committee, which has satisfied itself as to the
firm's professional competence and standing.
Representatives of Arthur Andersen LLP will be present at the meeting with
the opportunity to make a statement and to respond to appropriate questions.
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Item 3-Approval of Amendment to the Stockholder Rights Plan
Introduction
Our Board is recommending that you approve a five-year extension of
Texaco's Stockholder Rights Plan, which was last approved by stockholders in
1989. Our plan combines unique features that not only protect the value of your
investment in Texaco, but also give you, the stockholders, the right to
determine whether certain offers to acquire all of the Company should be
accepted.
Under our plan, "rights" have been issued to all stockholders which, if
triggered, entitle holders to acquire additional shares (or in certain cases,
other securities or property) at a considerable discount. The rights would be
triggered ten days following the public announcement that an acquiror has
accumulated or begun a tender offer for 20 percent or more of Texaco's Common
Stock without meeting certain conditions.
When the Board adopted the current plan, stockholders were given the right
to approve that decision. While under certain circumstances the Board could
adopt a rights plan without stockholder approval, we do not believe that
stockholders should be denied that right. To our knowledge, we are unique among
major industrial companies in seeking stockholder approval for the continuation
of a rights plan.
A very important aspect of our plan is the feature that in the event of a
fully-financed, all-cash tender offer to all of the Company's stockholders that
remains open for 45 business days, such offer can proceed free of any
impediments from our rights plan, even if the offer is opposed by the Board.
We continue to believe that without our plan, you could be deprived of the full
value of your investment in the Company by:
* coercive two-tier, front-end loaded or partial offers which may not offer fair
value to all stockholders,
* market accumulators who through open market or private purchases may achieve a
position of substantial influence or control without paying the other
stockholders a fair "control premium," and
* market accumulators who are only interested in putting the Company "in play",
without concern as to how their activities affect the business of the Company.
Our plan will expire on April 3, 1999. This is prior to the regular date
for our 1999 Annual Meeting. Therefore, your approval to
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amend our Rights Agreement to extend the plan beyond its current expiration date
is being presented to you now, rather than at next year's annual meeting, to
prevent a gap in the effectiveness of the plan.
We believe that the plan continues to provide the benefits to the
stockholders that it was designed to provide when it was adopted:
* it provides a disincentive to potential raiders who are not willing or able to
make and complete a fully-financed, all-cash offer to all stockholders at a fair
price, and
* it provides the Board with time, 45 business days, to consider the available
alternatives and act in the best interests of all stockholders in the event an
unsolicited offer is made.
Several studies have indicated that rights plans do not deter takeovers and,
in fact, that stockholders of companies with rights plans received takeover
premiums higher than those received by stockholders of companies not protected
by such plans. A study released in November, 1997 by Georgeson & Co., a
nationally recognized proxy solicitation firm, showed:
* premiums paid to acquire companies with rights plans were on average eight
percentage points higher than premiums paid for companies that did not have such
plans,
* the presence of a rights plan at a company did not increase the likelihood of
the defeat of a hostile takeover bid nor the withdrawal of a friendly bid, and
* a rights plan did not reduce the likelihood that a company would become a
takeover target: the takeover rate was similar for companies with and without
rights plans.
Other reputable studies have confirmed similar findings.
We have attached the full text of the plan, as we propose to amend it, as
an exhibit to this proxy statement. It is the same plan that you approved in
1989, with one change: we will amend the Final Expiration Date of the plan from
April 3, 1999 to May 1, 2004.
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES A VOTE FOR THIS AMENDMENT TO THE
STOCKHOLDER RIGHTS PLAN.
This introduction is not intended to be a complete discussion of this item.
Please read the following material for further details on this proposal.
Description of the Rights Plan
The terms of the current Rights Plan (the "Plan") are set forth in a Rights
Agreement dated as of March 16, 1989, between the Company and The Chase
Manhattan Bank, as Rights Agent (the "Rights Agreement"). The Rights Agreement,
as it is proposed to be amended, is attached as Exhibit I to this Proxy
Statement. Exhibit I also reflects the adjustments to the Plan resulting from
the Company's 1997 two-for-one stock split. As a result of that split, each
share of Common Stock currently has one half a Right attached to it. The
following summary of the provisions of the Plan is qualified in its entirety by
reference to the complete text of the Rights Agreement (including the exhibits
thereto).
Right to Purchase Series D Preferred Stock. Each Right currently entitles
the registered holder, after an event which results in the occurrence of a
"Distribution Date" (described below) but prior to a "Flip-In Event" (described
below), to purchase from the Company a unit consisting of one one-hundredth of a
share (a "Unit") of a series of Preferred Stock designated as Series D Junior
Participating Preferred Stock, par value $1.00 per share (the "Series D
Preferred Stock"), at a purchase price of $150 per Unit (the "Purchase Price"),
subject to customary
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antidilution adjustments. The Rights are attached to all certificates
representing shares of Common Stock now outstanding, and no separate
certificates representing the Rights have been distributed. As soon as
practicable after the Distribution Date, separate certificates representing the
Rights (the "Rights Certificates") will be mailed to the stockholders.
Triggering Events. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of
(A) 10 days following the date (the "Stock Acquisition Date") on which a
public announcement is made that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained
the right to acquire, beneficial ownership of 20% or more of the then
outstanding shares of Common Stock other than
(i) pursuant to a "Qualifying Offer" (described below) or
(ii) as a result of the repurchase of shares of Common Stock by the
Company (unless and until the Acquiring Person acquires more stock),
or
(B) 10 business days (or such later date as the Board of Directors may
determine) after a tender offer for 20% or more of the then outstanding
shares of Common Stock.
If a Distribution Date occurs as a result of an event described in clause
(A) of this paragraph, a Flip-In Event will have also occurred, entitling the
holders of Rights to acquire additional shares at a substantial discount, as
described below.
Until the Distribution Date, the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates.
Expiration of Rights. The Rights will not be exercisable until the
Distribution Date and will cease to be exercisable on the Final Expiration Date.
Currently the Final Expiration Date is April 3, 1999. We are proposing to amend
it to May 1, 2004. The Rights will expire automatically (without payment of any
redemption amount) upon the acquisition of the Company pursuant to an all cash
merger or consolidation which follows a Qualifying Offer and is at the same
price per share paid in the Qualifying Offer. In addition, the Rights will
expire automatically (without payment of any redemption amount) at the close of
business on April 3, 1999, if you do not approve the amendment of the Rights
Agreement at the meeting.
Activation of Rights - "Flip-In Events". In the event (a "Flip-In Event")
that a person or group becomes the beneficial owner of 20% or more of the then
outstanding shares of Common Stock other than
(A) pursuant to a Qualifying Offer, or
(B) as a result of the repurchase of shares of Common Stock by the Company
(unless and until such person or group purchases or otherwise becomes
the beneficial owner of additional shares of Common Stock constituting
1% or more of the then outstanding shares of Common Stock except
pursuant to a Qualifying Offer),
each Right (other than Rights owned by any acquiring person) will thereafter
entitle the holder to receive, upon exercise of the Right and payment of the
applicable Purchase Price, in lieu of the Series D Preferred Stock, a number of
shares of Common Stock having a value equal to two times the exercise price of
the Right. The actual value of such shares
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will depend upon the market price of a share of Common Stock after the Flip-In
Event, giving effect to any dilution resulting from the issuance of such shares.
If insufficient shares of Common Stock are available for this purpose, the
Company may deliver cash, property or other securities of the Company having a
value equal to that which the shareholder would otherwise be entitled to
receive.
As an example of the effect of a Flip-In Event, at an exercise price of
$150 per Right, each Right which has not become null and void following a
Flip-In Event would entitle its holder to purchase $300 worth of Common Stock,
based upon the average market price of a share of Common Stock during a
specified period prior to the Flip-In Event, for $150. Assuming that the Common
Stock had a per share value of $50 during the specified measuring period, the
holder of each valid Right would be entitled to purchase six shares of Common
Stock for $150.
"Qualifying Offer". A" Qualifying Offer" is an all-cash tender offer for
all outstanding shares of Common Stock which meets all of the following
requirements:
(1) the person or group making the tender offer must, prior to or upon
commencing such offer, have provided to the Company firm written
commitments from responsible financial institutions, which have been
accepted by such person or group, to provide , subject only to
customary terms and conditions, funds for such offer which, when added
to the amount of cash and cash equivalents which such person or group
then has available and has irrevocably committed in writing to the
Company to utilize for purposes of the offer, will be sufficient to pay
for all shares outstanding on a fully diluted basis and all related
expenses;
(2) such person or group must own, after consummating such offer, shares of
voting stock of the Company representing a majority of the voting power
of the then outstanding shares of voting stock;
(3) such offer must in all events (except in certain limited circumstances)
remain open for at least 45 business days and must be extended for at
least 20 business days after the last increase or permitted decrease
in the price offered and after any bona fide higher alternative
offer is made; and
(4) prior to or upon commencing such offer, such person or group must
irrevocably commit in writing to the Company
(x) to consummate promptly upon completion of the offer an all-cash
transaction whereby all remaining shares of Common Stock will be
acquired at the same price per share paid pursuant to the offer,
(y) that such person or group will not materially amend such offer, and
(z) that such person or g roup will not make any offer for any equity
securities of the Company for six months after commencement of the
original offer if the original offer does not result in the tender
of the number of shares required to be purchased pursuant to clause
(2) above, unless another all-cash tender offer which meets certain
conditions for all outstanding shares of Common Stock is commenced.
In the event that, at any time following the Stock Acquisition Date,
(A) the Company is acquired in a
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transaction in which the Company is not the surviving corporation or in
which the the shares of the Company's Common Stock are changed or
exchanged, or
(B) 50% or more of the Company's assets or earning power is sold or
transferred,
each holder of a valid Right shall thereafter have 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.
Redemption of the Rights. In general, the Company may redeem the Rights in
whole, but not in part, at any
time until ten days following the Stock Acquisition Date (which period may be
extended by the Board indefinitely at any time while the Rights are still
redeemable), at a price of $.01 per Right. To encourage third parties seeking to
acquire the Company to make a non-coercive offer which will maximize value for
all stockholders, the Rights Agreement provides that the Board of Directors
shall consider, in determining whether to redeem the Rights, whether any
proposal or offer meets the requirements of a Qualifying Offer and, if not, in
what respects such proposal or offer fails to meet such requirements.
Voting and Dividends. Until a Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the Company, including the right
to vote or to receive dividends.
Taxation. Although there is no authority directly on point, if the Rights
separate from the Common Stock on a Distribution Date, or become exercisable for
Common Stock upon the occurrence of a Flip in Event, such events should not
result in recognition of income, gain or loss by stockholders for federal income
tax purposes (provided the Series D Preferred Stock is junior to all other
classes of the Company's preferred stock at the time that the Rights separate
from the Common Stock). A stockholder generally should not recognize any gain or
loss if a Right separates and becomes exercisable for common stock of an
acquiring company as a result of a tax-free acquisition of the Company. However,
a stockholder will recognize taxable gain if a Right separates and becomes
exercisable for an acquiring company's common stock as a result of a taxable
acquisition of the Company or its assets. The amount of gain recognized in this
case should equal the excess of the fair market value of the Right at the time
it becomes exercisable for the acquiring company's stock over the holder's
basis, if any, in the Right. If the rights are redeemed prior to a Distribution
Date, the cash received by stockholders upon such redemption will be treated as
a taxable dividend to the extent of the Company's current and accumulated
earnings and profits. If the Rights are redeemed after a Distribution Date, a
holder of a Right will recognize gain which will be capital gain if the stock
for which the Right was exercisable would have been a capital asset in the hands
of the holder.
Amendments. The criteria that must be met for an offer to be a Qualifying
Offer and the basic economic terms of the Rights may not be amended or waived,
except with stockholder approval (by the affirmative vote of a majority of the
votes cast for or against such amendment) prior to the Distribution Date. In
addition, amendment of the Final Expiration Date of the Rights, currently April
3, 1999, requires stockholder approval. Prior to the Distribution Date, the
Rights Agreement may be amended by the Board of Directors of the Company in any
manner approved by stockholders, to shorten or lengthen any time period and,
subject to the immediately preceding sentence, in any other manner which the
Board determines is generally consistent with the purposes for which the Rights
Agreement was adopted.
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After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to make changes that do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement.
Description of the Series D
Preferred Stock
In connection with the adoption of the Plan in 1989, the Board of Directors
authorized 3,000,000 shares of Series D Preferred Stock for issuance upon
exercise of the Rights in accordance with the Rights Agreement. In general, the
terms of the Series D Preferred Stock have been designed so that each 1 1/200th
of a share of Series D Preferred Stock should be substantially the economic
equivalent of one share of Common Stock. The Series D Preferred Stock will, if
issued, be junior to any other series of Preferred Stock that may be authorized
and issued, unless the terms of such other series provide otherwise. Each share
of the Series D Preferred Stock which may be issued will be entitled to receive
a quarterly dividend equal to the greater of (i) $5.00 per share or (ii) 200
times the quarterly dividend declared per share of Common Stock, subject to
adjustment.
In the event of liquidation of the Company, the holders of the Series D
Preferred Stock will be entitled to receive a preferred liquidation payment of
$100 per share plus accrued and unpaid dividends to the date of payment, but in
no event less than an amount equal to 200 times the payment made per share of
Common Stock, if greater.
The Series D Preferred Stock will be redeemable at the option of the
Company at a redemption price per share equal to 200 times the then market price
of a share of Common Stock, plus accrued and unpaid dividends. Each share of the
Series D Preferred Stock will have 200 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 Preferred
Stock will be entitled to receive 200 times the amount received per share of
Common Stock.
If dividends on the Series D Preferred Stock 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 Preferred Stock
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
Preferred Stock will also have a separate class vote on certain matters which
would adversely affect the rights and preferences of the Series D Preferred
Stock.
The Purchase Price payable, and the number of Units of Series D Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution.
Reasons for and Effects of the
Rights Plan
We continue to believe that, without a stockholder rights plan, control of
the Company could be acquired in the open market or otherwise, without fair
value being offered to all stockholders and without the Board of Directors
having an opportunity to explore all available alternatives to ensure that
stockholders receive the maximum value for their shares. Accordingly, we are
recommending extension of the Plan order to
(i) reduce the risk of coercive two-tier, front-end loaded or partial
offers which may not offer fair value to
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all stockholders;
(ii) deter market accumulators who through open-market or private purchases
may achieve a position of substantial influence or control without
paying to selling or remaining stockholders a fair control premium; and
(iii) deter market accumulators who are simply interested in putting the
Company "in play."
At the same time, the Plan is intended to encourage those interested in
seeking control of the Company through an acquisition of shares not approved by
the Board to make a bona fide, fully financed offer for all shares which will
remain open for a sufficient period of time to enable the Board to explore all
available alternatives to maximize stockholder values.
Dilution of Acquiror's Equity Interest. The Plan is expected to achieve
these goals by confronting a potential acquiror of a substantial percentage (20%
or more) of the outstanding Common Stock who is not willing and financially able
to make and complete an all-cash offer for all shares with the possibility that
the Company's stockholders will be able to dilute substantially the acquiror's
equity interest by exercising the Rights to buy additional securities (or in
certain circumstances cash or other property) of the Company (or in certain
cases, common stock of the acquiror) at a substantial discount. Exercise of the
Rights after a Flip-In Event would significantly increase the Company's market
capitalization, thereby making an acquisition of the Company more expensive and
diluting the Company's earnings per share. In addition, to the extent that the
Company issues additional shares of Common Stock with Rights after the
Distribution Date and such Rights are exercised following a Flip-In Event, the
foregoing effects would be greater.
"Qualifying Offers" Unaffected. The Plan is not intended to interfere in
any significant manner with a bona fide offer for all outstanding shares of
Common Stock. In fact, the Plan specifically provides that a Flip-In Event will
not occur, even though a person or group acquires 20% or more of the outstanding
shares of Common Stock, if such acquisition is made pursuant to an all-cash
tender offer which meets the criteria of a Qualifying Offer.
Firm Financing Required. By requiring that in order to be a Qualifying
Offer the offeror have firm financing commitments from responsible financial
institutions sufficient to pay for all outstanding shares, the Plan is designed
to encourage only bona fide offers by serious acquirors, and to deter bidders
who are not financially willing and able to complete an acquisition of the
Company from making an offer simply to put the Company "in play," thereby
helping to assure that the Company and its stockholders will not suffer the
business disruptions and distractions which this would entail.
Offer Open for 45 Business Days. By requiring that in order to be a
Qualifying Offer a tender offer remain open for at least 45 business days (25
business days longer than required by the federal tender offer rules) from
commencement and at least 20 business days after the last increase or permitted
decrease in the price offered or after any bona fide higher alternative offer is
made (except in certain limited circumstances), the Plan is designed to strike
an appropriate balance so as not to be an indefinite or undue burden on any
person willing to make a serious bid to acquire the Company, while at the same
time affording the Board of Directors a reasonable opportunity to explore the
available alternatives to maximize stockholder values.
Second Step Required. Also, for an
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offer to be a Qualifying Offer, the offeror must irrevocably commit to acquire
for cash promptly following consummation of the offer, the remaining shares at
the same price paid in the offer, and the offeror must own, after consummation
of the offer, shares representing a majority of the voting power of the then
outstanding shares of voting stock. These additional requirements are designed
to help assure that following consummation of a first-step tender offer the
remaining minority stockholders will receive promptly the same consideration as
that paid pursuant to the offer and that the price being offered is one that is
acceptable to most of the Company's stockholders.
Acquisitions by Management Covered. Under the Plan, if a management group
were to acquire 20% or more of the outstanding Common Stock, the acquisition
would be subject to the provisions of the Plan in the same manner and to the
same extent as any such acquisition by any other person or group. Unless the
acquisition were made pursuant to a Qualifying Offer or the Rights were
redeemed, the acquisition would constitute a Flip-In Event. In addition, any
decision by the Board to redeem the Rights in the case of a management group
offer, as in the case of any other offer, would be subject to the Board's
fiduciary obligations under Delaware law.
Other Protections Inadequate. In recommending continuation of the Plan, the
Board of Directors considered that the classified board provision and the "fair
price/supermajority" provision (the "Fair Price Provision") set forth in our
Certificate of Incorporation ("Charter"), and Section 203 of the Delaware
General Corporation Law ("Section 203"), are also intended to discourage
two-tier, front-end loaded or partial offers or market accumulation programs
which do not treat all stockholders fairly. However, we believe that the
classified board, the Fair Price Provision and Section 203 do not sufficiently
protect stockholders against persons who intend to obtain a controlling position
in the Company without offering to acquire all outstanding shares, or who are
simply interested in putting the Company "in play." None of these provisions
provides any assurance
(i) that all stockholders will have the opportunity to realize fair value
in an acquisition of shares which results in a change in control of the
Company,
(ii) that a second-step transaction or transactions will promptly be
consummated in which the shares not purchased in a first-step tender
offer will be acquired at the same price and for the same consideration
paid in the offer, or
(iii) that the Board of Directors will have a reasonable opportunity after
an unsolicited takeover bid is commenced to explore the available
alternatives to maximize stockholder values.
The Board believes that the requirements of a Qualifying Offer should
provide greater assurance that the initial offer will be available to all
stockholders, that a second-step transaction or transactions at the offer price
will be consummated promptly after the initial offer, and that after an
unsolicited offer is commenced, there will be sufficient time for the Board to
seek and consider more attractive alternative transactions and for third parties
that may be interested in making a competing bid to complete their due diligence
and arrange the necessary financing.
Some Offers May be Discouraged. The Plan may have the effect of
discouraging or making more difficult or expensive certain mergers, tender
offers, open market purchase programs or other purchases of shares of Common
Stock that are not prohibited by the Charter or Section 203 under circumstances
that may afford stockholders an opportunity to sell some or all of their shares
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at a premium to then prevailing market prices. To the extent the Plan has these
effects, it may be beneficial to incumbent management in certain unsolicited
tender offers, and may discourage or render more difficult or expensive the
assumption of control by a holder of a substantial block of the Company's shares
and the removal of incumbent management. Although the requirements which must be
met for an offer to be a Qualifying Offer may deter certain transactions, we
continue to believe that the Plan should not be an unreasonable obstacle to a
serious bidder willing to make a bona fide, non-coercive offer for all shares.
In order to help assure that all unsolicited third party offers will be
non-coercive offers that will enable stockholders to realize full value for
their shares, the Rights Agreement provides that the criteria which define a
Qualifying Offer may not be amended or waived by the Board of Directors except
with stockholder approval before the Distribution Date. In addition, the Rights
Agreement provides that, in determining whether to redeem the Rights, the Board
shall consider whether any proposal or offer meets the requirements of a
Qualifying Offer and, if not, in what respects the proposal or offer fails to
meet such requirements. This requirement is designed to help assure that any
bona fide offer receives due consideration by the Board and is not intended or
expected to delay any determination by the Board with respect to the redemption
of, or the consummation of a transaction with respect to which the Board has
agreed to redeem, the Rights. As described in the next paragraph, stockholder
approval of continuation of the Plan may allow the Board greater latitude in
determining whether or not to redeem the Rights in connection with an offer
which does not satisfy the criteria of a Qualifying Offer and which is otherwise
inconsistent with the purposes of the Plan. Accordingly, to the extent that an
offer fails to satisfy such criteria and the Board determines not to redeem the
Rights, consummation of such an offer may be made more difficult.
Approval of continuation of the Plan by stockholders will not restrict the
Board's ability, in its discretion, to redeem the Rights in connection with an
offer or proposal to acquire the Company, regardless of whether or not such
offer or proposal satisfies the criteria of a Qualifying Offer. If continuation
of the Plan is approved by stockholders, the Board will continue to be subject
to its fiduciary obligation to consider and act in the best interests of the
Company and its stockholders in connection with any such offer or proposal.
However, given the purposes of the Plan to deter certain coercive takeover
tactics and to encourage persons seeking control of the Company to do so by
means of an offer that meets the criteria of a Qualifying Offer,in fulfilling
such fiduciary obligation the Board is affirmatively directed by the terms of
the Plan to consider, among other factors it deems appropriate, whether such a
proposal or offer meets the requirements of a Qualifying Offer and, if not, in
what respects such proposal or offer fails to meet such requirements.
Stockholder approval of continuation of the Plan may allow the Board greater
latitude in determining not to redeem the Rights in connection with an offer
which does not satisfy the criteria of a Qualifying Offer and that is otherwise
inconsistent with the purposes of the Plan.
Effect on Proxy Contests. Since the Rights Agreement provides, in effect,
that obtaining the right to vote shares pursuant to a public proxy solicitation
will not by itself result in a separation of the Rights from the Common Stock or
a Flip-In Event, the Plan should not interfere with proxy contests. However, it
will limit to 19.99% the percentage of the outstanding shares of Common Stock
that may be owned by
22
<PAGE>
the members of a group conducting a proxy contest.
Summary of Certain Charter and
Statutory Provisions
The Charter currently includes provisions that may have anti-takeover
effects which could, among other things, delay the consummation of a second-step
merger by a majority stockholder.
Classified Board. The Board of Directors is divided into three classes,
each class serving for a period of three years. This could delay a holder of
shares representing a majority of the voting power from obtaining control of the
Company's Board of Directors because the holder would not be able to replace a
majority of the directors prior to at least the second annual meeting of
stockholders after it acquired a majority position. The Charter provides that,
except as otherwise required by law and subject to the rights of holders of
Preferred Stock, special meetings of stockholders of the Company may be called
only by the Board pursuant to a resolution approved by a majority of the entire
Board. The Charter also provides that stockholder action must be effected at a
duly called annual or special meeting of stockholders and may not be effected by
written consent.
Fair Price Provision. The Fair Price Provision provides that in order for
an "interested stockholder" (generally, a 20% stockholder) to engage in a
"business combination" (defined to include a merger and certain self-dealing
transactions) with the Company, the business combination must be approved by an
80% vote. However, the supermajority voting requirement is not applicable if (i)
the business combination has been approved by the Company's disinterested
directors or (ii) the cash or fair market value of other consideration to be
paid per share of each class of capital stock in such business combination meets
certain fair price criteria and the interested stockholder refrains from
engaging in certain self-dealing transactions.
Delaware Section 203. The Company, as a Delaware corporation, is subject to
Section 203 of the Delaware General Corporation Law. Section 203 prevents an
"interested stockholder" (generally, a 15% stockholder) from engaging in a
"business combination" (defined to include a merger and certain other
self-dealing transactions) with the corporation for a period of three years
following the date on which such stockholder became an interested stockholder
unless (i) prior to such date the corporation's board of directors approved
either the business combination or the transaction which resulted in such
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction which resulted in such stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the corporation's
voting stock, or (iii) on or subsequent to such date the business combination is
approved by the corporation's board of directors and at least 66 2/3% of the
stock not owned by the interested stockholder.
* However, under Section 203, the restrictions (and the 85% requirement)
described above do not apply to, among other things, a business combination
proposed by an interested stockholder prior to the consummation or abandonment
of and subsequent to the earlier of the public announcement or the notice
required under Section 203:
* of any merger or consolidation of the corporation (other than certain mergers
for which stockholder approval is not required),
* any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of assets of the corporation or any majority owned subsidiary of the corporation
having an
23
<PAGE>
aggregate market value equal to 50% or more of either the value of all of the
assets of the corporation or the value of all the outstanding stock of the
corporation, or
* any tender or exchange offer for 50% or more of the outstanding voting stock
of the corporation,
which (i) is not with or by an interested stockholder, and (ii) is approved or
not opposed by a majority of disinterested directors.
It should be noted that certain offers and transactions not approved by the
Board of Directors, whereby a person would acquire all of the Company's
outstanding shares, which would be permitted under the Fair Price Provision and
Section 203 would not satisfy the criteria of a Qualifying Offer under the Plan.
In particular, in order to be a Qualifying Offer, the consideration paid in the
offer and the required second-step transaction or transactions must be all cash,
and the offer must satisfy certain timing and financing requirements which are
not required to be met by either the Fair Price Provision or Section 203. In
addition, there are certain exceptions to the requirements of the Fair Price
Provision and Section 203 for certain offers and transactions which may not
satisfy the criteria for a Qualifying Offer under the Plan.
It should also be noted that the Fair Price Provision or Section 203 may
delay or impede the consummation of certain second-step business combination
transactions following a Qualifying Offer by requiring a supermajority
stockholder vote or the satisfaction of certain other conditions where, in the
case of Section 203, the transaction pursuant to which the person or group
making the Qualifying Offer became an interested stockholder (as defined in
Section 203) was not approved by the Board of Directors or, in the case of the
Fair Price Provision, the second-step business combination transaction is not
approved by the disinterested directors.
Authorized and Unissued Stock. As of February 27, 1998, the Company was
authorized to issue an additional 00,000,000 shares of Common Stock, and
00,000,000 shares of Preferred Stock with such terms, rights and preferences as
the Board of Directors may determine. In the event of a proposed merger, tender
offer or other attempt to gain control of the Company not approved by the Board,
it might be possible for the Board to authorize the issuance of additional
shares of Common Stock or a series of Preferred Stock with rights and
preferences that could impede the completion of the transaction. However, the
rules of national stock exchanges (including the New York Stock Exchange on
which the Common Stock is presently listed) and national securities associations
which have been adopted pursuant to Rule 19c-4 promulgated under the Exchange
Act may prohibit the Common Stock from being or remaining listed or authorized
for quotation if the Company issued securities, or took other corporate action,
that would have the effect of restricting or disparately reducing the per share
voting rights of the holders of the Common Stock. In addition, under the current
rules of the New York Stock Exchange, stockholder approval is required as a
prerequisite to listing shares in several instances, including acquisition
transactions where the present or potential issuance of shares results or could
result in an increase of at least 20% in the number of outstanding shares of
Common Stock.
Vote Required for Approval
Section 1(s) of the Rights Agreement provides that the "Final Expiration
Date" of the Rights means the close of business on April 3, 1999. Section 26 of
the Rights Agreement provides that the "Final Expiration Date" can be amended
only by
24
<PAGE>
affirmative vote of the holders of a majority of the voting power of the shares
entitled to vote and voting (in person or by proxy) at the meeting for or
against such amendment.
If this amendment is not approved by stockholders at the meeting, we may
explore whether any alternative measures are available (including, possibly
adoption of a different stockholder rights plan) that would deter coercive
takeover tactics and give us sufficient time to explore available alternatives
to maximize stockholder values in the face of an unsolicited offer for the
Company. However, we currently have no specific plans with regard to any such
alternative measures. We are not proposing this amendment in response to any
specific efforts to obtain control of the Company, and we do not presently
intend to propose other measures in future proxy solicitations that may have the
effect of discouraging attempted changes in control.
The Board of Directors has determined that continuation of the Rights Plan
is in the best interests of the Company and all its stockholders and recommends
that stockholders vote FOR the foregoing amendment to the Rights Agreement.
----------
Stockholder Proposals
The company is not responsible for the content of the stockholder proposals
contained in Items 4 and 5 which are printed as they were submitted. The names,
addresses and shareholdings of the proponents may be obtained upon oral or
written request to the Secretary of the Company.
Item 4-Stockholder Proposal Relating to an Independent Chairperson
"RESOLVED, that the stockholders of Texaco Inc. (the "Company") recommend
that the Board of Directors take steps necessary to amend the Company's Bylaws
to require that the Board's Chairperson be an Independent Director. For purposes
of this proposal, the stockholders further recommend that the term"Independent
Director" means a director who: (i) has not been employed by the Company in an
executive capacity within the last five years; (ii) is not, and is not
affiliated with a company that is, an advisor or consultant to the Company;
(iii) is not affiliated with a significant customer or supplier of the Company;
(iv) has no personal services contract(s) with the Company; (v) is not
affiliated with a not-for-profit entity that receives significant contributions
from the Company; (vi) within the last five years, has not had any business
relationship with the Company (other than service as a director) for which the
Company has been required to make disclosure under Regulation S-K of the
Securities Exchange Commission; (vii) is not employed by a public company at
which an executive officer of the Company serves as a director; (viii) has not
had a relationship described in (i) through (vii) above with any affiliate of
the Company; and (ix) is not a member of the immediate family of any person
described in (i) through (viii) above. This provision may only be amended by the
affirmative vote of the holders of the outstanding common stock of the Company.
Supporting Statement
It's obvious that the Board - and most particularly its Chairperson - is of
paramount importance to the success of the Corporation. This is why I am
sponsoring this proposal which urges the Board to amend the Company's bylaws so
that the Board's leader will be a person who is independent of the Company and
its officers. Through this proposal we seek to promote strong, objective
leadership on the Board.
A Board of Directors must formulate
25
<PAGE>
corporate policies and monitor management's implementations of those policies.
The Chairperson is responsible for leading the Board in these tasks, and
ensuring that directors are given the information necessary to perform their
duties. In our view, when the Board's Chairperson is also an officer, employee
or otherwise closely related to the Company's management, it is difficult to
objectively perform this monitoring and evaluation function. We believe that an
independent Chairperson would best ensure that the interests of the stockholders
are served, rather than the interests of the management.
The benefits of independent directors are generally well accepted. The New
York Stock Exchange, for example, requires that at least two members of the
board of a listed company, and all members of the Company's audit committee,
must meet the Exchange's standards of independence. The Investment Company Act
of 1940 (the law that governs the activities of investment companies) also
includes an independent director provision, generally requiring investment
company boards to be comprised of at least 40 percent "disinterested" directors.
Your positive consideration of this proposal is appreciated.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
The Board believes that it is not in the best interests of the Company and
its stockholders to adopt a by-law provision that would require the separation
of the positions of Chairman of the Board and Chief Executive Officer. It is the
Board's view that it should be free to make this choice in a manner that seems
best for the Company at any point in time. The proposed by-law would instead
require a particular structure and deprive the Board of its flexibility to
organize its functions and conduct its business in the manner it deems most
efficient, a responsibility of the board which is specifically recognized in the
Policy Statement on Corporate Governance of TIAA-CREF, a major institutional
investor widely recognized for its leadership in Corporate Governance.
The Board believes Texaco is currently best served by having one person,
Mr. Bijur, serve as both Chairman and CEO, acting as a bridge between the Board
and the whole operating organization and providing critical leadership for the
strategic initiatives and challenges of the future.
Board independence and oversight
is maintained effectively through the composition of the Board and through
sound Corporate Governance practices as set out on pages 3 through 6. As stated
therein, the independent director who chairs the Committee of Non-Management
Directors serves as the lead director, a function similar to that of an
independent Chairman. Further, independence of the board as a whole is assured
as 13 of 14 directors are outside independent directors. Moreover, the
Non-Management, Audit, Compensation, Pension, Public Responsibility and Director
and Board Governance Committees are all composed entirely of outside directors.
From January 1987 to April 1993 Texaco did separate the position of
Chairman from that of Chief Executive Officer and found that to be an effective
form of organization to meet the Company's needs at that time. If circumstances
dictated, the Company might well separate these functions again.
However, the Board believes that no purpose is served by imposing an
absolute rule against a Chief Executive Officer serving as Board Chairman.
Therefore, the Board opposes the resolution because it would reduce the Board's
flexibility to select a style of leadership depending on time and circumstances.
26
<PAGE>
Therefore, the Board of Directors recommends a vote AGAINST this proposal.
----------
Item 5-Stockholder Proposal
Relating to Classification of the Board
of Directors
RESOLVED: That the stockholders of Texaco request that the Board of
Directors take the steps necessary to declassify the elections of Directors by
providing that at future Board elections new directors be elected annually and
not by classes as is now provided. The declassification shall be phased in that
it does not affect the unexpired terms of Directors previously elected.
Supporting Statement
This resolution requests that the Board end the staggered board system in
place at Texaco and instead have all our Directors elected annually. Presently
Texaco has 3 classes of Directors and 1/3 of our Board is elected each year and
each Director now serves a 3 year term.
Increasingly, institutional investors are calling for the end of this
system of staggered voting. They believe it makes a Board less accountable to
shareholders when directors do not stand for annual election. Significant
institutional investors such as the Public Employees Retirement System of the
State of California, New York City pension funds, New York State pension funds
and many others have been supporting this position. As a result shareholder
resolutions to end this staggered system of voting have been receiving
increasingly large votes. In fact this resolution received a massive vote at
Texaco's 1997 stockholder meeting of approximately 46% indicating that many
Texaco shareholders feel the time has come for this reform. Numerous companies
have demonstrated leadership by changing this practice. Included among them are
Westinghouse, Chemical Bank, Commonwealth Edison of Chicago, the Equitable
companies.
We believe this is a practice in which corporations seeking to be
accountable to their investors are increasingly putting into place. Studies by
the Chief Economist of the SEChave shown that adoption of a classified Board
tends to depress a company's stock price and may be contrary to shareholder
interests.
The election of corporate directors is a primary avenue for shareholders to
influence corporate affairs and exert accountability on management. We strongly
believe that our company's financial performance is linked to its corporate
governance policies and procedures and the level of management accountability
they impose. Therefore, as shareholders concerned about the value of our
investment, we're concerned by our company's current system of electing only
one-third of the Board of Directors each year. On other governance issues Texaco
is often considered a leader. We believe this staggering of director terms
prevents shareholders from annually registering their views on the performance
of the board collectively and each director individually.
Most alarming, a staggered board can help insulate directors and senior
executives from the consequences of poor financial or social performance by
denying shareholders the opportunity to challenge an entire Board which is
pursuing failed policies.
In addition socially concerned investors also support this reform since the
1996 revelations regarding racial discrimination and the legal settlement of
$170 million demonstrates the need for annual board accountability. Much
positive has been done on that front but the Board should annually
27
<PAGE>
be accountable on this issue as well as on financial performance.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
The Company's practice of having a classified Board was approved
overwhelmingly by stockholders by a vote of 86.4% and instituted in 1984, as
part of a corporate governance system that would help Texaco carry out its
long-term business strategy and also assist in protecting the interests of
stockholders against raids on their stock value by possible hostile
approaches.
A classified Board offers a number of advantages to a corporation,
especially one like Texaco, that must plan effectively over the long term. the
Company's Board structure helps assure stability, since a majority of the
directors at any one time will have prior experience as directors of the
Company, and helps the Company to attract and retain highly qualified
individuals willing to commit the time and dedication necessary to understand
the Company, its operations and its competitive environment.
Directors on the Company's classified Board can best properly represent the
interests of all stockholders. For example, this structure can give the Board
needed time to evaluate any proposal to acquire the Company, study alternative
proposals, and help ensure that the best price will be obtained in any
transaction involving the Company. A classified Board also encourages persons
seeking to acquire control of the Company to initiate such an acquisition
through arm's-length negotiations with the Board, which would then be in a
position to negotiate a transaction that is fair to all stockholders.
A number of leading institutional investors and commentators have
recognized the benefits inherent in a classified Board. For example, the
Teachers Insurance and Annuity Association - College Retirement Equities Fund,
has concluded that a classified Board is in full accordance with the principles
of good corporate governance, and has recognized and supported the right of a
Board to organize its functions and its business in the manner it deems most
efficient.
As detailed in the Section providing information concerning the Board of
Directors beginning on page 3, Texaco has been a consistent leader in
implementing corporate governance policies that ensure responsiveness and
accountability to stockholders. In recognition of this leadership role, in both
1994 and 1995 Chief Executive magazine named Texaco's Board of Directors as one
of the five best boards of the 200 companies examined.
The Board continues to believe that a classified Board is appropriate and
prudent in protecting the interests of all of Texaco's stockholders, and that
the continuity and quality of leadership that results from a classified Board
provides the proper environment in which to foster the creation of long-term
value for stockholders.
A similar proposal was rejected by the stockholders last year, confirming
the Board's view that a classified board structure is a significant stockholder
rights protection that should be retained.
Therefore, the Board of Directors recommends a vote AGAINST this proposal.
----------
28
<PAGE>
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Compensation Committee Report
The Compensation Committee of the Board of Director is composed entirely
of independent outside directors. The Committee is responsible for the
compensation of the Company's officers and the incentive programs for all
management personnel.
The Company's management pay structure and award opportunities are targeted
to be competitive with a group of eight other oil companies. In addition, the
Committee also surveys the compensation practices of a group of non-oil
companies as a further source of information and basis for comparison. These
non-oil companies were selected based on size, complexity and operational
challenge in relation to Texaco. All of these companies, oil and non-oil, except
for the U.S. subsidiary of one foreign-based oil company, are included in the
S&P 500 Index, and four of the oil companies are also included in the S&P
Integrated International Oil Index.
In addition, each year the Company and the Committee test Texaco's
performance against the results of its competitors. That comparison is reflected
in the graphs on page __.
The compensation program is composed of three elements: salary at a
competitive level to attract and retain the highest caliber of employees;
performance bonus; and long-term stock-based incentives. The bonus is based on
performance with respect to financial and operating objectives, and the
long-term awards are tied to total return to stockholders compared to other oil
companies. This mix of compensation elements places more of total compensation
at risk and emphasizes performance.
As a person's level of responsibility in the Company increases, a greater
portion of potential total compensation opportunity is shifted from salary to
performance incentives and to greater reliance on growing total return to
stockholders through stock-based awards. This increasingly aligns the interests
of these managers with the interests of stockholders.
The total compensation of a chief executive officer reflects that person's
success in setting objectives, formulating corporate strategies and
demonstrating progress in attaining management's goals, all of which are
designed to increase stockholder value. Measures of success in 1997 included
record operating earnings, progress toward diversity objectives, reserve
replacements exceeding 160% of production and acquisition of new reserves, and
the completion of the downstream alliance in the U.S. with Shell Oil Company and
Star Enterprise.
In administering executive level salaries, the Committee sets salary ranges
which are consistent with the ranges for all Texaco salaried employees. They are
adjusted as necessary to keep them competitive with those of the other eight
comparator oil companies. Individual salaries are generally maintained within
the appropriate range for a position and are reviewed annually. Actual salaries
are determined by individual performance, experience and position in the range.
In accordance with these guidelines, the Committee raised executive salary
ranges by 3% for 1997, the first such increase since 1994. Mr. Bijur's base
salary was increased in 1997 to a level reflecting the length of his tenure in
office, which is below the median base salary for the Chief Executive Officer
position at the comparator oil companies.
29
<PAGE>
A target bonus is determined for each salary grade based on comparator
company practices. Participants may earn more or less than target depending on
performance. The Incentive Bonus performance matrix was changed in 1997 to add
objective measures for Safety, Respect For The Individual, and Diversity. These
are in addition to the financial performance measures compared to peer
companies, to prior year results and to tactical plan objectives. Mr. Bijur's
bonus for 1997, when he was Chief Executive Officer for the entire year as
compared to only six months for 1996, was based entirely on the Company's
performance in these objective categories as applied to the target level for his
position grade.
The bonus formula for non-officer participants contains a subjective
element under which they are rated with respect to initiative, managerial
ability, overall contribution to corporate and/or unit performance, fostering
the Company's "Vision and Values" and compliance with the Corporate Conduct
Guidelines. The successful Texaco manager must perform effectively in many areas
that are not measured specifically by financial or operating results.
Performance is also assessed against standards of business conduct reflecting
social values and the expectations of the Company's key constituencies including
its employees and stockholders, the consumers of its products, suppliers and
customers, the communities in which it operates and the countries where it does
business.
The long-term incentive program, consisting of stock options and
performance restricted shares (which vest based on the Company's total return to
stockholders vs. the S&P Integrated International Oil Index), emphasizes total
return to stockholders, motivates stock ownership by the management by requiring
that vested benefits be received in stock and not cash, and encourages retention
and continuity of management. While the Company has no obligatory levels for
equity holdings by management personnel, long-term incentive awards are designed
and administered to encourage share ownership and have done so. The Committee
reviews the ownership by officers each year. In general, the officers have stock
holdings in excess of typical target or mandatory levels where they have been
established by some companies in industry. The five officers named in the table
on page __ had, on average, holdings in Texaco stock of ____ times salary as of
December 31, 1997. The values of the packages of long-term incentive award
targets comprised of performance shares and options at each grade level are
established by the Committee and are intended to be fully competitive with the
programs offered by the comparable companies. There is no mandated relationship
to awards in prior years.
The Committee reviews information on compensation and other data at
competitor and comparable sized companies that it receives from outside
independent consultants, at least annually. During 1997 the Committee
specifically requested a consultant to study and advise it with respect to the
following: (1) the appropriate Stock Incentive Plan target award levels for the
Chief Executive Officer position based on comparable company practices; (2)
whether the Incentive Bonus Plan objective performance categories are the most
appropriate in order to motivate performance consistent with the Company's
goals; and (3) the composition of the non-oil company group to be used for
comparability purposes.
As a result of the consultant's report: (1) the Chief Executive Officer
position Stock Incentive Plan target award was not adjusted compared to other
position levels in the award structure; in 1997 the value opportunity of
long-term awards was increased approximately 29% over 1996 based on comparator
company actions; (2) changes will be made to the Incentive Bonus Plan
30
<PAGE>
financial objective performance categories beginning with the performance year
1998; and (3) several changes will be made in the makeup of the non-oil company
comparator group to reflect changed circumstances since the group was
constructed in 1988.
Texaco's incentive bonus and stock incentive plans are performance-based
plans. Therefore, under I.R.C. Section 162 (m), compensation paid in 1997 is
fully deductible and it is the intention of the Committee to continue to comply
to the extent practicable.
In conclusion, the Committee believes that the quality and motivation of
all of Texaco's employees, including its managers, make a significant difference
in the long-term performance of the Company. The Committee also believes that
compensation programs which reward performance that meets or exceeds high
standards also benefit the stockholders, so long as there is an appropriate
downside risk element to compensation when performance falls short of such
standards and that the Committee has appropriate flexibility in administering
these programs to achieve their objectives. The Committee is of the opinion that
Texaco's management compensation programs meet these requirements, have
contributed to the Company's success and are deserving of stockholder support.
Willard C. Butcher
Chairman
Edmund M. Carpenter Charles H. Price, II
William C. Steere Thomas A. Vanderslice
31
<PAGE>
The following compensation information is furnished for service performed
by the Company's Chief Executive Officer and its four other most highly
compensated Executive Officers for the three years indicated.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
------------------------------------ -------------------
Securities
Other Restricted Underlying All
Name and Principal Annual Stock Options/ Other
Position Year Salary($) Bonus($) Compensation($) Awards($)(1) SARs(#) Compensation($)(2)
-------- ---- --------- -------- --------------- ------------ ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
P.I. Bijur 1997 825,000 5,139 1,291,547 326,304 49,500
Chairman of the 1996 638,833 939,089 4,985 971,904 310,146 38,322
Board/CEO 1995 405,333 251,363 3,518 200,330 131,152 27,200
C.R. Black 1997 418,250 7,604 315,020 213,895 25,095
Senior Vice 1996 406,667 278,634 7,206 179,341 133,808 24,420
President 1995 390,000 204,232 12,623 162,267 104,326 28,408
P.J. Lynch 1997 410,000 5,288 315,020 161,157 24,600
Senior Vice 1996 366,667 278,634 4,994 188,337 129,934 21,888
President/CFO 1995 351,667 204,232 5,447 162,267 95,468 21,090
G.F. Tilton 1997 379,750 28,343 318,871 173,988 96,483
Senior Vice 1996 360,000 342,934 39,279 230,351 140,630 52,415
President 1995 322,500 251,361 31,431 200,330 108,316 104,659
C.P. Cazalot, Jr. 1997 366,125 27,276 232,496 117,498 47,308
Vice President 1996 352,083 330,878 27,776 179,341 89,156 60,272
1995 320,000 223,019 26,871 162,267 66,946 74,096
<FN>
(1) Messrs. Bijur, Black, Lynch, Tilton and Cazalot had restricted
stockholdings of 168,473; 112,052; 101,302; 109,202; and 66,508 shares,
respectively, as of December 31, 1997. The shares had a market value of
$9,160,719; $6,092,828; $5,508,296; $5,937,859; and $3,616,373,
respectively, at December 31, 1997, based on a value of $54.375 per share.
These share numbers and values include the awards since the last proxy
statement which are reported in the "Restricted Stock Awards" column above.
Dividends are paid on the restricted stock at the same time and rate as
dividends paid to holders of unrestricted stock.
(2) Matching contributions to the qualified and nonqualified Employees Thrift
Plans and moving expenses associated with job reassignment are provided on
the same basis for all employees.
</FN>
</TABLE>
32
<PAGE>
OPTION GRANTS IN 1997
Individual Grants of Options
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.I. Bijur 07/01/97 164,332 1.613% 55.01565 07/01/2007 1,119,101
C.R. Black 07/01/97 40,082 0.393% 55.01565 07/01/2007 272,958
P.J. Lynch 07/01/97 40,082 0.393% 55.01565 07/01/2007 272,958
G.F. Tilton 07/01/97 40,572 0.398% 55.01565 07/01/2007 276,295
C.P. Cazalot, Jr. 07/01/97 29,582 0.290% 55.01565 07/01/2007 201,453
</TABLE>
Individual Grants of Restored Options
- --------------------------------------------------------------------------------
All options include a restoration feature, by which options are granted to
replace shares that are exchanged by participants as full or partial payment to
the Company of the purchase price of shares being acquired through the exercise
of a stock option or withheld by the Company in satisfaction of tax withholding
obligations. Since restored options are granted at an exercise price which is
equal to the market price of the Company's Common Stock on the day of grant,
they are issued at an exercise price which is at a higher price than the
exercise price of the original grant. Options vest 50% after one year and are
fully exercisable after two years. Restored options are fully exercisable after
six months and expire at the date of the original grant.
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.I. Bijur 01/09/97 6,176 0.061% 50.81250 01/02/2000 37,612
01/09/97 9,012 0.088% 50.81250 06/24/2004 54,883
01/09/97 3,144 0.031% 50.81250 02/24/2005 19,147
01/09/97 1,290 0.013% 50.81250 06/23/2005 7,856
04/28/97 3,098 0.030% 51.56250 02/24/2005 20,044
04/28/97 9,692 0.095% 51.56250 06/23/2005 62,707
06/23/97 12,606 0.124% 55.62500 06/23/2005 86,981
07/01/97 2,710 0.027% 55.07815 05/09/1999 18,482
07/01/97 3,878 0.038% 55.07815 01/02/2000 26,448
07/01/97 4,994 0.049% 55.07815 06/22/2000 34,059
07/01/97 3,520 0.035% 55.07815 06/26/2002 24,006
07/01/97 61,762 0.606% 55.07815 06/28/2006 421,217
07/09/97 5,906 0.058% 57.39065 05/09/1999 41,992
07/09/97 4,186 0.041% 57.39065 06/22/2000 29,762
07/09/97 2,888 0.028% 57.39065 06/28/2001 20,534
07/09/97 3,316 0.033% 57.39065 06/26/2002 23,577
07/09/97 7,190 0.071% 57.39065 06/25/2003 51,121
10/28/97 1,314 0.013% 57.28125 01/02/2000 9,067
10/28/97 2,878 0.028% 57.28125 06/28/2001 19,858
10/28/97 6,950 0.068% 57.28125 06/25/2003 47,955
10/28/97 5,462 0.054% 57.28125 06/24/2004 37,688
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
C.R. Black 01/27/97 5,748 0.056% 53.87500 06/22/2000 38,282
01/27/97 564 0.006% 53.87500 06/28/2001 3,756
01/27/97 11,272 0.111% 53.87500 06/26/2002 75,072
01/27/97 3,480 0.034% 53.87500 06/25/2003 23,177
01/27/97 2,480 0.024% 53.87500 06/24/2004 16,517
04/28/97 9,496 0.093% 51.56250 05/09/1999 61,439
04/28/97 7,510 0.074% 51.56250 10/28/2007 48,590
04/28/97 3,126 0.031% 51.56250 06/26/2002 20,225
04/28/97 12,660 0.124% 51.56250 06/24/2004 81,910
04/28/97 6,196 0.061% 51.56250 02/24/2005 40,088
05/05/97 4,194 0.041% 52.37500 06/25/2003 27,219
05/07/97 3,118 0.031% 54.50000 01/02/2000 21,452
05/07/97 3,028 0.030% 54.50000 06/22/2000 20,833
06/26/97 1,584 0.016% 55.43750 06/28/2001 10,898
06/26/97 10,244 0.101% 55.43750 06/23/2005 70,479
07/01/97 6,102 0.060% 55.07815 06/28/2006 41,616
07/28/97 1,702 0.017% 56.42190 06/22/2000 11,778
07/28/97 7,490 0.074% 56.42190 06/28/2001 51,831
07/28/97 1,842 0.018% 56.42190 06/26/2002 12,747
07/28/97 7,096 0.070% 56.42190 06/25/2003 49,104
07/28/97 5,172 0.051% 56.42190 06/28/2006 35,790
10/28/97 8,548 0.084% 57.28125 05/09/1999 58,981
10/28/97 6,761 0.066% 57.28125 01/02/2000 46,651
10/28/97 2,941 0.029% 57.28125 06/22/2000 20,293
10/28/97 2,814 0.028% 57.28125 06/26/2002 19,417
10/28/97 782 0.008% 57.28125 06/25/2003 5,396
10/28/97 11,397 0.112% 57.28125 06/24/2004 78,639
10/28/97 5,578 0.055% 57.28125 02/24/2005 38,488
10/28/97 9,916 0.097% 57.28125 06/23/2005 68,420
11/05/97 614 0.006% 57.96880 06/22/2000 4,286
11/05/97 3,790 0.037% 57.96880 06/25/2003 26,454
11/07/97 1,840 0.018% 57.46880 06/22/2000 12,714
11/07/97 529 0.005% 57.46880 06/28/2001 3,655
11/07/97 4,199 0.041% 57.46880 06/26/2002 29,015
P.J. Lynch 02/05/97 5,542 0.054% 52.12500 01/02/2000 34,804
02/05/97 230 0.002% 52.12500 06/02/2000 1,444
02/05/97 6,164 0.061% 52.12500 06/24/2004 38,710
02/05/97 4,816 0.047% 52.12500 06/23/2005 30,244
04/28/97 2,142 0.021% 51.56250 06/22/2000 13,859
04/28/97 4,626 0.045% 51.56250 06/24/2004 29,930
04/28/97 5,170 0.051% 51.56250 02/24/2005 33,450
04/28/97 6,150 0.060% 51.56250 06/23/2005 39,791
06/26/97 6,406 0.063% 55.43750 05/09/1999 44,073
06/26/97 4,020 0.039% 55.43750 06/22/2000 27,658
06/26/97 3,880 0.038% 55.43750 06/28/2001 26,694
06/26/97 8,390 0.082% 55.43750 06/26/2002 57,723
06/26/97 4,412 0.043% 55.43750 06/25/2003 30,355
06/26/97 10,244 0.101% 55.43750 06/23/2005 70,479
07/01/97 5,238 0.051% 55.07815 06/28/2006 35,723
08/05/97 4,910 0.048% 57.50000 01/02/2000 35,057
08/05/97 570 0.006% 57.50000 06/22/2000 4,070
08/05/97 2,914 0.029% 57.50000 06/28/2001 20,806
08/05/97 116 0.001% 57.50000 06/26/2002 828
08/05/97 4,252 0.042% 57.50000 06/25/2003 30,359
08/05/97 1,444 0.014% 57.50000 06/24/2004 10,310
08/05/97 6,448 0.063% 57.50000 06/28/2006 46,039
10/28/97 3,266 0.032% 57.28125 01/02/2000 22,535
10/28/97 2,139 0.021% 57.28125 06/22/2000 14,759
10/28/97 7,395 0.073% 57.28125 06/24/2004 51,026
10/28/97 4,654 0.046% 57.28125 02/24/2005 32,113
10/28/97 5,537 0.054% 57.28125 06/23/2005 38,205
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
G.F. Tilton 04/28/97 1,822 0.018% 51.56250 01/02/2000 11,788
04/28/97 142 0.001% 51.56250 06/28/2001 919
04/28/97 5,104 0.050% 51.56250 06/24/2004 33,023
04/28/97 2,584 0.025% 51.56250 02/24/2005 16,718
04/28/97 9,994 0.098% 51.56250 06/23/2005 64,661
05/05/97 3,018 0.030% 52.37500 06/22/2000 19,587
05/05/97 4,508 0.044% 52.37500 06/26/2002 29,257
05/05/97 6,238 0.061% 52.37500 06/25/2003 40,485
05/05/97 2,544 0.025% 52.37500 02/24/2005 16,511
05/12/97 1,678 0.016% 54.53125 05/09/1999 11,444
05/12/97 88 0.001% 54.53125 06/22/2000 600
05/12/97 4,978 0.049% 54.53125 06/25/2003 33,950
06/26/97 5,620 0.055% 55.43750 05/09/1999 38,666
06/26/97 3,110 0.031% 55.43750 01/02/2000 21,397
06/26/97 2,638 0.026% 55.43750 06/22/2000 18,149
06/26/97 6,760 0.066% 55.43750 06/28/2001 46,509
06/26/97 2,742 0.027% 55.43750 06/26/2002 18,865
06/26/97 12,648 0.124% 55.43750 06/23/2005 87,018
07/01/97 6,390 0.063% 55.07815 06/28/2006 43,580
10/28/97 3,478 0.034% 57.28125 01/02/2000 23,998
10/28/97 1,153 0.011% 57.28125 06/22/2000 7,956
10/28/97 1,465 0.014% 57.28125 06/26/2002 10,109
10/28/97 1,157 0.011% 57.28125 06/25/2003 7,983
10/28/97 6,627 0.065% 57.28125 06/24/2004 45,726
10/28/97 3,248 0.032% 57.28125 06/23/2005 22,411
10/28/97 7,932 0.078% 57.28125 06/28/2006 54,731
11/05/97 679 0.007% 57.96875 01/02/2000 4,739
11/05/97 1,697 0.017% 57.96875 06/22/2000 11,845
11/05/97 127 0.001% 57.96875 06/28/2001 886
11/05/97 4,540 0.045% 57.96875 06/24/2004 31,689
11/05/97 2,299 0.023% 57.96875 02/24/2005 16,047
11/05/97 8,890 0.087% 57.96875 06/23/2005 62,052
11/12/97 1,044 0.010% 57.21875 06/22/2000 7,162
11/12/97 4,127 0.041% 57.21875 06/26/2002 28,311
11/12/97 2,347 0.023% 57.21875 06/25/2003 16,100
C.P. Cazalot, Jr. 01/13/97 1,362 0.013% 52.81250 06/22/2000 8,799
01/13/97 534 0.005% 52.81250 06/28/2001 3,450
01/13/97 14,144 0.139% 52.81250 06/26/2002 91,370
01/13/97 3,116 0.031% 52.81250 06/25/2003 20,129
05/12/97 906 0.009% 54.53125 05/09/1999 6,179
05/12/97 50 0.000% 54.53125 06/28/2001 341
05/12/97 5,804 0.057% 54.53125 06/25/2003 39,583
05/12/97 4,802 0.047% 54.53125 06/24/2004 32,750
05/12/97 2,444 0.024% 54.53125 02/24/2005 16,668
06/26/97 1,912 0.019% 55.43750 06/28/2001 13,155
06/26/97 414 0.004% 55.43750 06/25/2003 2,848
06/26/97 10,244 0.101% 55.43750 06/23/2005 70,479
07/01/97 5,294 0.052% 55.07815 06/28/2006 36,105
07/14/97 436 0.004% 55.29690 05/09/1999 2,965
07/14/97 3,260 0.032% 55.29690 06/25/2003 22,168
07/14/97 5,248 0.052% 55.29690 06/24/2004 35,686
07/14/97 2,410 0.024% 55.29690 02/24/2005 16,388
07/14/97 6,080 0.060% 55.29690 06/28/2006 41,344
11/12/97 2,115 0.021% 57.21875 05/09/1999 14,509
11/12/97 2,843 0.028% 57.21875 06/22/2000 19,503
11/12/97 493 0.005% 57.21875 06/28/2001 3,382
11/12/97 2,358 0.023% 57.21875 06/26/2002 16,176
11/12/97 1,585 0.016% 57.21875 06/24/2004 10,873
11/12/97 10,062 0.099% 57.21875 06/23/2005 69,025
<FN>
* Valuation. All options are granted at an exercise price equal to the market value of the Company's Common Stock on the date of
grant. Therefore, if there is no appreciation in that market value, no value will be realizable. In accordance with Securities
and Exchange Commission rules, the Black-Scholes option pricing model was chosen to estimate the grant date present value of the
options set forth in this table. The Company's use of this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option valuation models, including the Black-Scholes model, require a prediction about the future
movement of the stock price. The following assumptions were made for purposes of calculating the Grant Date Present Value: for all
grants the option term is assumed to be two years, volatility at 18.6%, dividend yield of 3.0% per share and interest rates of
5.53% to 6.54%. The real value of the options in this table depends solely upon the actual performance of the Company's stock
during the applicable period.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1997 AND
YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Year-End(#)* at Year-End($) **
on Value ----------------------- ----------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
P.I. Bijur 43,293 2,374,391 59,681 361,442 155,590 956,862
C.R. Black 37,558 2,069,245 30,727 143,985 6,377 176,556
P.J. Lynch 27,186 1,566,049 44,783 104,497 16,720 185,413
G.F. Tilton 29,204 1,607,353 46,480 116,770 12,436 226,789
C.P. Cazalot, Jr. 28,652 1,569,818 41,282 86,556 22,978 176,556
<FN>
* Includes options reported in the chart entitled "Option Grants in 1997".
** Based on the 1997 year-end price of $54.375.
</FN>
</TABLE>
36
<PAGE>
Performance Graphs
- --------------------------------------------------------------------------------
The two graphs on the following page compare the cumulative total
stockholder return on Texaco's Common Stock with the cumulative total return of
the Standard & Poor's 500 Stock Index and the Standard & Poor's Integrated
International Oil Index during five-year and ten-year periods. The measurement
period in the first graph begins on December 31, 1992, and the second graph
begins five years earlier on December 31, 1987. The second graph reflects the
market performance of the Company's stock over the full period from the
commencement of the extensive restructuring initiated by the Company in 1988.
<TABLE>
<CAPTION>
Five-Year Comparison
Cumulative Return to Shareholders
(Price Appreciation and the Reinvestment of Dividends)
Texaco vs. S&P Indices
DOLLARS (END-OF-PERIOD)
Total Return
Annual Growth
1992 1993 1994 1995 1996 1997 Rate
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Texaco $100.00 $113.83 $110.91 $152.33 $197.51 $225.80 17.7%
S&P 500 $100.00 $110.03 $111.53 $153.29 $188.39 $251.16 20.2%
S&P Oils $100.00 $119.93 $127.39 $170.97 $211.33 $262.48 21.3%
</TABLE>
<TABLE>
<CAPTION>
Ten-Year Comparison
Cumulative Return to Shareholders
(Price Appreciation and the Reinvestment of Dividends)
Texaco vs. S&P Indices
DOLLARS (END-OF-PERIOD)
Total Return
Annual Growth
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Rate
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Texaco $100.00 $143.84 $204.05 $220.67 $235.16 $241.74 $275.17 $268.11 $368.25 $477.47 $545.86 18.5%
S&P 500 $100.00 $116.50 $153.30 $148.52 $193.57 $208.30 $229.20 $232.31 $319.30 $392.42 $523.18 18.0%
S&P Oils $100.00 $119.43 $160.98 $172.17 $198.48 $203.48 $244.02 $259.21 $347.88 $430.02 $534.09 18.2%
</TABLE>
37
<PAGE>
Retirement Plan
Over ______ employees of the Company and its subsidiaries, including the __
elected officers, are eligible to participate in the Retirement Plan. The plan
is a qualified plan under the Internal Revenue Code and provides benefits funded
by company contributions. In addition, participants have the option of making
contributions to the plan and receiving greater pension benefits. Contributions
are paid to a Master Trustee and to insurance companies for investment.
For purposes of calculating pension benefits for the named executive
officers, the plan recognizes salary and bonus only and does not take into
account other forms of compensation. For the named executive officers, salary
and bonus for the last three years are shown in the salary and bonus columns of
the Summary Compensation Table. Effective January 1, 1997, IRSregulations
provide that covered remuneration cannot exceed $160,000 per year (as indexed
for inflation) for purposes of this plan. The amount of an employee's pension is
the greater of a benefit based upon a final pay formula (applicable in most
cases), a career average formula, or a minimum retirement benefit.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
YEARS OF BENEFIT SERVICE
COVERED REMUNERATION* 15 20 25 30 35 40 45
- --------------------- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 22,500 $ 30,000 $ 37,350 $ 44,450 $ 51,450 $ 58,450 $ 65,450
200,000 45,000 60,000 74,700 88,900 102,900 116,900 130,900
400,000 90,000 120,000 149,400 177,800 205,800 233,800 261,800
600,000 135,000 180,000 224,100 266,700 308,700 350,700 392,700
800,000 180,000 240,000 298,800 355,600 411,600 467,600 523,600
1,000,000 225,000 300,000 373,500 444,500 514,500 584,500 654,500
1,200,000 270,000 360,000 448,200 533,400 617,400 701,400 785,400
1,400,000 315,000 420,000 522,900 622,300 720,300 818,300 916,300
1,600,000 360,000 480,000 597,600 711,200 823,200 935,200 1,047,200
1,800,000 405,000 540,000 672,300 800,100 926,100 1,052,100 1,178,100
2,000,000 450,000 600,000 747,000 889,000 1,029,000 1,169,000 1,309,000
<FN>
* "Covered Remuneration" means the highest three-year average salary and bonus, if any, during the last ten years of
employment. The years of benefit service for the following individuals are: Mr. Bijur, 31; Mr. Black, 40; Mr. Lynch,
36; Mr. Tilton, 28; and Mr. Cazalot, 25. With respect to the plan, annual pension benefits are based on the
non-contributory final pay formula (up to 1.5% of final average pay times benefit service) and assume the participant
retires at age 65 and has been a non-contributory member of the plan throughout the period of service. These amounts,
however, do not reflect a reduction for Social Security benefits pursuant to the provisions of the plan. They do
include those additional sums, if any, payable under a Supplemental Pension Plan to compensate those employees who have
earned annual pension benefits payable under the plan but which are limited by Section 415 of the Internal Revenue Code.
</FN>
</TABLE>
38
<PAGE>
Future Stockholder Proposals
Stockholders may present proposals to be considered for inclusion in the
1999 Proxy Statement, provided they are received at the Company's principal
executive office no later thanNovember 18, 1998, and are in compliance with
applicable laws and Securities and Exchange Commission regulations. In addition,
the Company's by-laws establish procedures for stockholders to bring business
before the Annual Meeting of Stockholders, by providing written notice to the
Company not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's Annual Meeting of Stockholders (subject to
adjustment if the subsequent year's meeting date is substantially moved). The
notice must briefly describe the proposed business and contain certain
information about the stockholder intending to present it. Any such proposals or
notice should be addressed to: Secretary, Texaco Inc., 2000 Westchester Avenue,
White Plains, New York 10650.
CARL B. DAVIDSON
Vice President and Secretary.
March 17, 1998
39
<PAGE>
EXHIBIT I
================================================================================
AMENDED
RIGHTS AGREEMENT
Dated as of March 16, 1989, as amended
as of April 28, 1998
Between
TEXACO INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Rights Agent
================================================================================
40
<PAGE>
AMENDED RIGHTS AGREEMENT
AMENDED RIGHTS AGREEMENT, dated as of March 16, 1989, as amended as of
April 28, 1998, between Texaco Inc., a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent").
WITNESSETH
WHEREAS, on March 16, 1989 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the close of business on April 3, 1989
(the "Record Date"), and authorized the issuance of one such right (adjusted to
one-half right as a result of a two-for-one split of the Company's Common Stock
on September 29, 1997, and as such number may be further adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the Distribution Date (as hereinafter defined),
each such whole right representing the right to purchase one one-hundredth of a
share of Series D Junior Participating Preferred Stock of the Company upon the
terms and subject to the conditions hereinafter set forth (the "Rights"); and
WHEREAS, at the 1998 Annual Meeting of Stockholders, stockholders will be
asked to vote upon an amendment to this Agreement which will change the current
"Final Expiration Date" from April 3, 1999 to May 1, 2004, and this Agreement
will continue in effect beyond April 3, 1999 only upon the affirmative vote of
the holders of a majority of the votes cast at the meeting for or against such
amendment and continuation (such affirmative vote being referred to as the
"Requisite Stockholder Vote"); and
WHEREAS, the Board of Directors of the Company believes, and by approving
the amendment and continuation of this Agreement the Company's stockholders will
have confirmed, that certain coercive or unfair takeover tactics or offers,
including without limitation two-tier or partial offers, "street sweeps" or
market accumulation programs, are not in the best interests of the Company or
its stockholders and that issuance of the Rights pursuant to this Agreement
constitutes a reasonable means to deter such tactics or offers; and
WHEREAS, the Board of Directors of the Company also believes, and by
approving the amendment and continuation of this Agreement the Company's
stockholders will have confirmed, that it is in the best interests of the
Company and its stockholders to encourage any person seeking control of the
Company through an acquisition of shares not approved by the Board of Directors
to do so by making an all cash offer which is bona fide (as evidenced by firm
written commitments from responsible financial institutions to provide
sufficient funds to pay for all shares being sought in the offer), is available
to all stockholders, is at a price which is acceptable to most of the Company's
stockholders and is kept open for a sufficient period of time to afford the
Board of Directors of the Company a reasonable opportunity to explore available
alternatives to maximize stockholder values, and that in this regard the
issuance of the Rights pursuant to this Agreement constitutes a reasonable means
to protect the interests of all the Company's stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with
any of its Affiliates and Associates, shall be the Beneficial Owner of 20%
or more of the shares of Common Stock then outstanding
41
<PAGE>
other than pursuant to a Qualifying Offer, but, in any event, shall not
include the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan; provided, however, that a Person
shall not become an Acquiring Person if such Person, together with its
Affiliates and Associates, shall become the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding solely as a result of
a reduction in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, unless and until such
time as such Person shall purchase or otherwise become (as a result of
actions taken by such Person or its Affiliates or Associates) the
Beneficial Owner of additional shares of Common Stock constituting 1%
or more of the then outstanding shares ofCommon Stock other than pursuant
to a Qualifying Offer.
b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.
(c) "Adjustment Shares" shall have the meaning set forth in Section 11
(a)(ii) hereof.
(d) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms inRule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended and as in effect on
the date of this Agreement (the "Exchange Act").
(e) "Agreement" shall mean this Rights Agreement as originally executed
or as it may from time to time be supplemented or amended pursuant to the
applicable provisions hereof.
(f) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i)which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights,
other rights, warrants or options, or otherwise: provided, however, that
a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and
in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, or (B) is made solely to participate
in a proxy or consent solicitation made, or to be made, pursuant to, and
in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) (A) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding,
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voting (except as set forth in clauses (A) or (B) of the proviso to
subparagraph (ii) of this paragraph (f)) or disposing of any voting
securities of the Company or (B) is acting together or engaging in
coordinated activities in connection with efforts to influence or control
the management or policies of the Company (except if such actions or
activities are directed solely at the voting of voting securities as set
forth in clauses (A) or (B) of the proviso to subparagraph (ii) of
this paragraph (f)), whether or not such actions or activities constitute
such Person and any and all other such Persons as a "group" for purposes
of Section 13(d) of the Exchange Act; provided,
however, that nothing in this paragraph (f) shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such
Person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition.
(g) "Board" shall mean the Board of Directors of the Company.
(h) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(j) "Common Stock" shall mean the common stock, par value $3.125 per
share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(k) "Common Stock Equivalents" shall have the meaning set forth in
Section 11 (a)(iii) hereof.
(1) "Company" shall mean the Person named as the "Company" in the first
paragraph of this Agreement until a successor corporation shall have become
such or until a Principal Party shall assume, and thereafter be liable for,
all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall
mean such successor corporation or Principal Party.
(m) "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
(n) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(o) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(p) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11 (b) hereof.
(q) "Exchange Act" shall have the meaning set forth in Section 1(d)
hereof.
(r) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(s) "Final Expiration Date" shall mean the Close of Business on May 1,
2004.
(t) "Initial Exercise Price" shall be $150.
(u) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(v) "Preferred Stock" shall mean shares of Series D Junior Participating
Preferred Stock, par value $ 1.00 per share, of the Company, and, to the
extent that there are not a sufficient number of shares of Series D Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of Preferred Stock, par value $ 1.00 per share, of
the Company designated for such purpose containing terms
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substantially similar to the terms of the Series D Junior Participating
Preferred Stock.
(w) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof
(x) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(y) "Qualifying Offer" shall mean a tender offer as described in Section
11 (a)(ii).
(z) "Record Date" shall have the meaning set forth in the first WHEREAS
clause at the beginning of the Agreement.
(aa) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(bb) "Requisite Stockholder Vote" shall have the meaning set forth in
the third WHEREAS clause at the beginning of this Agreement.
(cc) "Rights" shall have the meaning set forth in the first WHEREAS
clause at the beginning of the Agreement.
(dd) "Rights Agent" shall mean the Person named as the "Rights Agent" in
the first paragraph of this Agreement until a successor Rights Agent shall
have become such pursuant to the applicable provisions hereof, and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any
time there is more than one Person appointed by the Company as Rights Agent
pursuant to the applicable provisions of this Agreement, "Rights Agent"
shall mean and include each such Person.
(ee) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
(ff) "Rights Dividend Declaration Date" shall have the meaning set forth
in the first WHEREAS clause at the beginning of the Agreement.
(gg) "Section 11 (a)(ii) Event" shall mean any event described in
Section 11 (a)(ii) hereof.
(hh) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(ii) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(jj) "Spread" shall have the meaning set forth in Section 11 (a)(iii)
hereof.
(kk) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include without
limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(ll) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation isbeneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such
Person.
(mm) "Substitution Period" shall have the meaning set forth in Section
11 (a)(iii) hereof.
(nn) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
(oo) "Trading Day" shall have the meaning set forth in Section 1l (d)(i)
hereof.
(pp) "Triggering Event" shall mean any Section 1l (a)(ii) Event or any
Section 13 Event.
(qq) "Unit" shall mean one one-hundredth of a share of Preferred Stock.
SECTION 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for
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the Company and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date also be the holders of the Common
Stock) in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. Issuance of Rights Certificates. (a) Until the earlier of (i)
the Close of Business on the tenth day after the Stock Acquisition Date (or, if
the tenth day after the Stock Acquisition Date occurs before the Record Date,
the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth Business Day (or such later date as the Board shall determine) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
commenced within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (A) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (B) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as to the Close
of Business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in the form specified
in Section 4 hereof (the "Rights Certificates"), evidencing one-half Right for
each share of Common Stock so held, subject to adjustment as provided herein. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made pursuant to Section 11(p) hereof, at the time of distribution of
the Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send or otherwise make available a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of
the Common Stock as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company. With respect to
certificates for the Common Stock outstanding as of the Record Date, until
the Distribution Date, the Rights will be evidenced by such certificates
for the Common Stock and the registered holders of the Common Stock shall
also be the registered holders of the associated Rights. Until the earlier
of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights
have been issued shall also constitute the transfer of the Rights
associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or
the Expiration Date. Rights shall also be issued to the extent provided in
Section 22 in respect of all shares of Common Stock which are issued
(whether originally issued or from the Company's treasury) after the
Distribution Date and prior to the Expiration Date. Certificates
representing such shares of Common Stock in respect of which Rights are
issued pursuant to the first sentence of this Section 3(c) shall also be
deemed to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights
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Agreement between Texaco Inc. (the "Company") and The Chase Manhattan
Bank the "Rights Agent") dated as of March 16, 1989 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of the Rights
Agent. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
SECTION 4. Form of Rights Certificates. (a) The Rights Certificates (and
the forms of election to purchase and of assignment to be printed on the reverse
thereof) shall each be substantially in the form set forth in Exhibit B hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of Units as shall be
set forth therein at the price set forth therein (such exercise price per Unit,
the "Purchase Price"), but the amount and type of securities purchasable upon
the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified in Section 7(e)
of such Agreement.
SECTION 5. Countersignature and Registration. (a) The Rights Certificates
shall be executed on behalf of the Company by its President, Chairman of the
Board, Treasurer or any Vice President, either manually or by
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facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its office designated as the appropriate place for surrender
of Rights Certificates upon exercise or transfer, books for registration
and transfer of the Rights Certificates issued hereunder. Such books shall
show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.
SECTION 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of Units (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of
the Rights Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section
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11 (a)(iii) and Section 23(a) hereof) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase set forth on the reverse side thereof and the certificate
contained therein duly executed, to the Rights Agent at the office of the Rights
Agent designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of Units (or other shares,
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i) the
Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof, (iii) the time at which the Rights expire
pursuant to Section 13(d) hereof or (iv) the time at which the Rights expire
pursuant to Section 7(g) hereof (the earliest of (i), (ii), (iii) and (iv) being
herein referred to as the "Expiration Date").
(b) The Purchase Price for each Unit pursuant to the exercise of a Right
shall initially be the Initial Exercise Price and shall be subject to
adjustment from time to time as provided in Sections 11 and 13(a) hereof
and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per Unit (or other shares, securities, cash or other
assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of Units to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of Units as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of
cash, if any, to be paid in lieu of fractional shares in accordance with
Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of
such Rights Certificate. The payment of the Purchase Price (as such amount
may be reduced pursuant to Section 11 (a)(iii) hereof) shall be made by
certified check, cashier's check or bank draft payable to the order of the
Company or the Rights Agent. In the event that the Company is obligated to
issue other securities (including Common Stock) of the Company, pay cash
and/or distribute other property pursuant to Section 11 (a) hereof, the
Company will make all arrangements necessary so that such other securities,
cash and/or other property are available for distribution by the Rights
Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon
the order of, the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, subject to the
provisions of Section 14 hereof,
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11 (a)(ii) Event any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate
of an Acquiring Person, (ii) a transferee of any such Acquiring Person (or
of any such Affiliate or Associate)
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who becomes a transferee after such Acquiring Person becomes such, or
(iii) a transferee of any such Acquiring Person (or of any such Affiliate
or Associate) who becomes a transferee prior to or concurrently with such
Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from such Acquiring
Person to holders of equity interests in such Acquiring Person or to any
Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of
this Section 7(e), shall become null and void without any further action
and no holder of such Rights shall have any rights whatsoever with respect
to such Rights, whether under any provision of this Agreement or otherwise.
The Company shall use all reasonable efforts to ensure that the provisions
of this Section 7(e) and Section 4(b) hereof are complied with, but shall
have no liability to any holder of Rights Certificates or other Person as a
result of its failure to make any determinations with respect to an
Acquiring Person or any such Affiliate, Associate or transferee hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have (i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial
Owner) or Affiliates or Associates thereof as the Company shall reasonably
request.
SECTION 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Capital Stock. (a) The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and unissued shares of
Common Stock and/or other securities or out of its authorized and issued shares
held in its treasury), the number of shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
that, as provided in this Agreement including Section 11 (a)(iii) hereof, will
be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event on which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with this
Agreement, a registration statement under
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the Act. with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement
to become effective as soon as practicable after such filing, and (iii)
cause such registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities
and (B) the Expiration Date. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue
sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not
to exceed ninety (90) days after the date set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to
become effective. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective. Upon any
suspension of the exercisability of the Rights referred to in this Section
9(c), the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification
in such jurisdiction shall not have been obtained, the exercise thereof
shall not be permitted under applicable law or a registration statement
shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Units (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and
validity authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of Units (or Common Stock
and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax which
may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a
number of Units (or Common Stock and/or other securities, as the case may
be) in respect of a name other than that of, the registered holder of the
Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of Units (or Common Stock and/or
other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
SECTION 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of Units (or Common Stock and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of such fractional shares of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for
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which the Rights shall be exercisable, including, without limitation, the right
to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable
on such date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, upon payment
of the aggregate adjusted Purchase Price then in effect necessary to
exercise a Right in full, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock (or other capital stock, as the case may be) transfer
books of the Company were open, he would have owned upon such exercise and
by virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both this
Section 11 (a)(i) and Section 11 (a)(ii) hereof, the adjustment provided
for in this Section 11 (a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11 (a)(ii) hereof.
(ii) In the event any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan),
alone or together with any of its Affiliates and Associates. shall, at any
time after the Rights Dividend Declaration Date, become the Beneficial
Owner of 20% or more of the shares of Common Stock then outstanding,
unless the event causing the 20% threshold to be crossed is a transaction
set forth in Section 13(a) hereof, or is an acquisition of shares of
Common Stock pursuant to a cash tender offer for all outstanding shares of
Common Stock which meets all of the following requirements:
(1) on or prior to the date such offer is commenced within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, such Person has, and has provided to the Company,
firm written commitments from responsible financial institutions,
which have been accepted by such Person (or one of its Affiliates),
to provide, subject only to customary terms and conditions, funds
for such offer which, when added to the amount of cash and cash
equivalents which such Person then has available and has irrevocably
committed in writing to the Company to utilize for purposes of such
offer, will be sufficient to pay for all shares of Common Stock
outstanding on a fully diluted basis and all related expenses;
(2) after the consummation of such offer, such Person, alone
or together with any of its Affiliates and Associates, owns shares
of the Company's voting stock representing a majority of the voting
power of the then outstanding shares of the Company's voting stock;
(3) such offer remains open for at least 45 Business Days;
provided, that (x) if there is any increase in the cash price of
such offer, such offer must remain open for at least an additional
20 Business Days after the last such increase, (y) such offer must
remain open for at least 20 Business Days after the date
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that any bona fide alternative offer is made which, in the
opinion of one or more investment banking firms designated by the
Company, provides for consideration per share in excess of that
provided for in such offer, and (z) such offer must remain open for
at least 20 Business Days after the date on which such Person
reduces the per share price offered in accordance with clause
(4)(y) of this Section 11 (a)(ii); provided further, however, that
such offer need not remain open, as a result of this clause (3),
beyond (i) the time which any other offer satisfying the criteria
for a Qualifying Offer is then required to be kept open under this
clause (3), or (ii) the scheduled expiration date, as such date
may be extended by public announcement prior to the then scheduled
expiration date, of any other offer with respect to which the Board
of Directors has agreed to redeem the Rights immediately prior
to acceptance for payment of shares thereunder unless such other
offer is terminated prior to its expiration without any shares
having been purchased thereunder); and
(4) prior to or on the date that such offer is commenced
within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, such Person makes an irrevocable
written commitment to the Company (x) to consummate an all-cash
transaction or transactions promptly upon the completion of such
offer, whereby all shares of Common Stock not purchased in such
offer will be acquired at the same price per share paid in such
offer, provided that the Board of Directors shall have granted any
approvals required to enable such Person to consummate such
transaction or transactions following consummation of such offer
without obtaining the vote of any other stockholder, (y) that such
Person will not make any amendment to the original offer which
reduces the per share price offered (other than a reduction to
reflect any dividend declared by the Company after the commencement
of such offer or any material change in the capital structure of the
Company initiated by the Company after the commencement of such
offer, whether by way of recapitalization, reorganization,
repurchase or otherwise, or a reduction following a 20% or greater
drop since the commencement of such offer in the average of the
daily closing prices of a "basket" of securities consisting of one
share of common stock (or, to the extent applicable, one American
Depositary Receipt), to the extent publicly traded on a U.S.
national securities exchange, of the following companies or their
successors: Exxon Corporation, Royal Dutch Petroleum Company, The
British Petroleum Company p.l.c., Chevron Corporation, Mobil
Corporation, Amoco Corporation and Atlantic Richfield Company),
changes the form of consideration offered, reduces the number of
shares being sought or which is in any other respect materially
adverse to the Company's stockholders, and (z) that neither such
Person nor of any its Affiliates or Associates will make any offer
for any equity securities of the Company for a period of six months
after the commencement of the original offer it such original offer
does not result in the tender of the number shares of Common Stock
required to be purchased pursuant to clause (2) above, unless
another all cash tender offer for all outstanding shares of Common
Stock is commenced (a) at a price per share in excess of that
provided for in such original offer, (b) on terms satisfying clauses
(1) and (4) of this Section 11(a)(ii) (in which event, any new offer
by such Person or of any of its Affiliates or Associates must be at
a price no less than that provided for in such original offer), or
(c) with the approval of the Board of Directors of the Company (in
which event, any new offer by such Person or of any of its
Affiliates or Associates must be at a price no less than that
provided for in such approved offer) an offer meeting the
requirements set forth above being referred to herein as a
"Qualifying Offer"); provided, however, that if such Person shall
have become the Beneficial Owner of 20% or more of the shares of
Common Stock then outstanding solely as a result of a reduction in
the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, then such
Person shall not be deemed the Beneficial Owner of 20% or more of
the shares of Common Stock then outstanding and this Section 11
(a)(ii) shall not apply unless and until such Person shall purchase
or otherwise become (as a result of actions taken by such Person or
its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1 % or more of the then
outstanding shares of Common Stock other than pursuant to a
Qualifying Offer, then, immediately upon the first occurrence of a
Section 11 (a)(ii) Event, proper provision shall be made so that
each holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of Units, such number
of shares of Common Stock of the Company as shall equal the result
obtained by (1) multiplying the then current Purchase Price by the
then number of Units for which a Right was or would have been
exercis-
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able immediately prior to the first occurrence of a Section
11(a)(ii) Event, whether or not such Right was then exercisable, and
(2) dividing that product (which, following such first occurrence,
shall thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by 50% of the Current
Market Price per share of Common Stock on the date of such first
occurrence (such number of shares being referred to as the
"Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11 (a), the Company shall (A) determine the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), and (B) with
respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation. shares, or units
of shares, of preferred stock, such as the Preferred Stock, which the
Board has deemed to have essentially the same value as shares of Common
Stock (such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction in the Purchase
Price), where such aggregate value has been determined by the Board based
upon the advice of a nationally recognized investment banking firm
selected by the Board; provided, however, that if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first occurrence of
a Section 11 (a)(ii) Event and (y) the date on which the Company's right
of redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11 (a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares of
Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. For
purposes of the preceding sentence, the term "Spread" shall mean the
excess of (i) the Current Value over (ii) the Purchase Price. If the Board
determines in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in
full of the Rights, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after
the Section 11 (a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
thirty (30) day period, as it may be extended, is herein called the
"Substitution Period"). To the extent that action is to be taken pursuant
to the first and/or third sentences of this Section 11(a)(iii), the
Company (1) shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights, and (2) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder approval for such
authorization of additional shares and/or to decide the appropriate form
of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11 (a)(iii), the value of each Adjustment Share
shall be the Current Market Price per share of the Common Stock on the
Section 11 (a) (ii) Trigger Date and the per share or per unit value of
any Common Stock Equivalent shall be deemed to equal the Current Market
Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling
them to subscribe for or purchase (for a period expiring within forty-five
(45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and
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preferences as the shares of Preferred Stock ("Equivalent Preferred
Stock")) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price per share of Preferred Stock on such
record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be
the number of shares of Preferred Stock outstanding on such record date,
plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock or Equivalent
Preferred Stock so to be offered (or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such
Current Market Price, and the denominator of which shall be the number of
shares of Preferred Stock outstanding on such record date, plus the number
of additional shares of Preferred Stock or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the holders of the Rights. Shares of Preferred Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11 (b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price per share of Preferred
Stock on such record date, less the fair market value (as determined in
good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets
or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Preferred Stock and the
denominator of which shall be such Current Market Price per share of
Preferred Stock. Such adjustments shall be made successively whenever such
a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current
Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days immediately prior to such date,
and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that the Current
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
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dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, then, and in each such case, the Current
Market Price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, it the shares of
Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or such other system then in use, or, if
on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock
selected by the Board. If on any such date no market maker is making a
market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board shall be used. The term "Trading
Day" shall mean a day on which the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading is
open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share
as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11
(d) (other than the last sentence thereof). If the Current Market Price
per share of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded
in a manner described in clause (i) of this Section 11 (d), the Current
Market Price per share of Preferred Stock shall be conclusively deemed to
be an amount equal to 200 (as such number may be appropriately adjusted
for such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock occurring after the date of this
Agreement) multiplied by the Current Market Price per share of the Common
Stock. If neither the Common Stock nor the Preferred Stock is publicly
held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good
faith by the Board, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes. For
all purposes of this Agreement, the Current Market Price of a Unit shall
be equal to the Current Market Price of one share of Preferred Stock
divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11
(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a
share of Common Stock or other share or one-millionth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11 (e), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three (3) years from the date of the
transaction which mandates
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such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11 (a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11 (a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m) hereof, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Units purchasable
from time to time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c) hereof, each
Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that number of Units (calculated to the nearest one-millionth of a share of
Preferred Stock) obtained by (i) multiplying (x) the number of Units
covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of Units purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Units for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to
such adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment
of the number of Rights pursuant to this Section 11 (i), the Company shall,
as promptly as practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights
to which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Rights Certificates on the record
date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Units issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express
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the Purchase Price per Unit and the number of Units which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of Units
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that
the Company may validly and legally issue fully paid and nonassessable such
number of Units at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date the number of Units and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the number
of Units and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares (fractional or otherwise)
or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that in its good faith judgment the Board shall determine to
be advisable in order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash
of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Company to holders of its Preferred
Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that, except as permitted by
Section 13(d) it shall not, at any time after the Distribution Date, (i)
consolidate with any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11 (o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in one transaction
or a series of related transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), if (A) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (B) prior to,
simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of the Person who constitutes, or would constitute,
the "Principal Party" for purposes of Section 13(a) hereof shall have
received a distribution of Rights previously owned by such Person or any of
its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date
it will not, except as permitted by Section 13(d), Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will
diminish substantially or eliminate the benefits intended to be afforded by
the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend
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on the outstanding shares of Common Stock payable 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, the number of Rights associated with each share of Common Stock
then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any
such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Stock immediately prior to such
event by a fraction the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to the occurrence of
the event and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately following the occurrence of such
event. In the event that the Company shall at any time after the Rights
Dividend Declaration Date and prior to the Distribution Date (i) declare a
dividend or other distribution on the outstanding shares of Common Stock
payable in securities which are convertible into, exchangeable for or which
otherwise represent the right to acquire shares of Common Stock, equitable
adjustments in the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be made as deemed appropriate by the Board.
SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that, following the Stock Acquisition Date (which for
purposes of this Section 13(a) only shall also include the date of the first
pubic announcement (including, without limitation, a report filed pursuant to
Section 13(d) under the Exchange Act) that any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan),
together with any of such Person's Affiliates and Associates, has become the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding
pursuant to a Qualifying Offer), directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof), proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable shares of
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Common Stock of the Principal Party, not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
Units for which a Right is exercisable immediately prior to the first occurrence
of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such Units
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) 50% of the Current
Market Price per share of the Common Stock of such Principal Party on the date
of consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11 (a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean,
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a) hereof, the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and it no securities are so
issued, the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit
the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section
13 and further providing that, as soon as practicable after the date of any
such Section 13 Event, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until
the Expiration Date; and
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(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs (x)
and (y) of Section 13(a) hereof if (i) such transaction is consummated with
a Person or Persons who acquired shares of Common Stock pursuant to a
Qualifying Offer (or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant
to such Qualifying Offer and (iii) the form of consideration being offered
to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
Qualifying Offer. Upon consummation of any such transaction contemplated by
this Section 13(d), all Rights hereunder shall expire.
SECTION 14. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights, except prior to the Distribution
Date as provided in Section 11 (p) hereof, or to distribute Rights Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Rights Certificates with regard to
which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use or, it
on any such date the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board. If on any such date no such
market maker is making a market in the Rights the fair value of the Rights on
such date as determined in good faith by the Board shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than, except as provided in Section 7(c) hereof,
fractions which are integral multiples of one Unit) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than, except as provided in Section 7(c) hereof,
fractions which are integral multiples of one Unit). In lieu of fractional
shares of Preferred Stock that are not integral multiples of one Unit, the
Company may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Unit. For purposes
of this Section 14(b), the current market value of a Unit shall be one
one-hundredth of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
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(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one (1) share of Common
Stock. For purposes of this Section 14(c), the current market value of one
share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 11 (d)(i) hereof) for the Trading
Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right, except as permitted by this Section 14.
SECTION 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock) and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
SECTION 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer, with the form
of assignment set forth on the reverse thereof and the certificate therein
duly completed and executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of
a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation;
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provided, however, the Company must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
SECTION 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of Units or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. Concerning the Rights Agent. (a) The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and disbursements and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance Rights Agent for of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to
be signed, executed and, where necessary, verified or acknowledged, by the
proper Person or Persons
SECTION 19. Merger or Consolidation or Change of Name of Rights Agent. (a)
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights
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Certificates shall have the full force provided in the Rights Certificates
and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and
the determination of Current Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the President, the Chairman of the Board, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to or verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity
or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights
Certificate: nor shall it be responsible for any adjustment required under
the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after
actual notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the President, the Chairman of the Board, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant
Secretary, of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for
any action
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taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniary interested in any transaction
in which the Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct; provided, however, reasonable
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 or 2 thereof, the Rights Agent shall not
take any further action with respect to such requested exercise of transfer
without first consulting with the Company.
SECTION 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of the State of New York (or any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of New York), in good standing,
having a principal office in the State of New York, which is authorized under
such laws to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100,000,000 or (b) an Affiliate of a corporation described in clause (a)
of this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
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further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board to reflect any adjustment or change in the Purchase
Price and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date (other than upon exercise
of a Right) and prior to the redemption or expiration of the Rights, the Company
(a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, or upon
the exercise, conversion or exchange of securities issued by the Company to the
extent that the terms of such securities do not otherwise adequately adjust for
the issuance of the Rights, and (b) may, in any other case, if deemed necessary
or appropriate by the Board, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. Redemption and Termination. (a) The Board may, at its option,
at any time prior to the earliest of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), (ii) the time at which the Rights expire pursuant to
Section 7(g) or Section 13(d) hereof, or (iii) the Final Expiration Date, redeem
all but not less than all of the then outstanding Rights at a redemption price
of $.0l per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). To encourage third parties seeking to acquire the Company to make a
non-coercive offer which will maximize value for all stockholders, the Board
shall consider, in determining whether to redeem the Rights in connection with
any proposal or offer, whether such proposal or offer meets the requirements of
a Qualifying Offer and, if not, in what respects such offer or proposal fails to
meet such requirements. Notwithstanding anything contained in this Agreement to
the contrary, the Rights (x) shall not be exercisable after the first occurrence
of a Section 11(a)(ii) Event until such time as the Company's right of
redemption hereunder has expired and (y) shall become non-redeemable on and
following any merger to which the Company is a party and which has not been
approved by stockholders at an annual or special meeting of the Company, if
within the period of thirty (30) days prior to such a merger a Triggering Event
shall have occurred. The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock (based on the Current Market Price of the Common
Stock at the time of redemption) or any other form of consideration deemed
appropriate by the Board.
(b) Immediately upon the action of the Board ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent
and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right
so held. Promptly after the action of the Board ordering the
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<PAGE>
redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's
last address as it appear s upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made.
SECTION 24. Notice of Certain Events. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company), or
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), or (iv) to
effect any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or to effect any said or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11 (o) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock whichever
shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible, in accordance with
Section 25 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights
under Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Stock shall be deemed thereafter to refer to Common
Stock and/or, it appropriate, other securities.
SECTION 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be
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<PAGE>
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
ChaseMellon Shareholder Services, L.L.C.
50 West 33rd Street
New York, New York 10001
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry records of the Company or the Rights Agent.
SECTION 26. Supplements and Amendments. Prior to the Distribution Date
and subject to the fourth sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock and Rights to shorten or
lengthen any time period and to otherwise amend or supplement this
Agreement in a manner which the Board determines is generally consistent
with the purposes for which this Agreement was executed. From and after the
Distribution Date and subject to the fourth sentence of this Section 26,
the Company and the Rights Agent shall at any time and from time to time,
it the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change
or supplement the provisions hereunder in any manner which the Company may
deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring
Person or an Affiliate or Associate of any such Person); provided, however,
that this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of or the
benefits to the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of any such Person). Upon the delivery of a
certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of
this Section 26, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Agreement to the
contrary, except as provided in the next sentence, no supplement or
amendment shall be made or provision hereof waived which changes the
requirements which must be met for a cash tender offer to constitute a
Qualifying Offer pursuant to Section 11 (a)(ii) hereof or which changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the
number of Units for which a Right is exercisable. In addition to the right
of amendment set forth in the foregoing provisions of this Section 26,
prior to the Distribution Date, the Company and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Agreement
in any respect which the Board shall determine if such supplement or
amendment has been approved at an annual or special meeting of stockholders
at which a quorum is present by the affirmative vote of the holders of a
majority of the voting power of the shares entitled to vote and voting (in
person or by proxy) for or against such supplement or amendment at such
meeting. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of
Common Stock.
SECTION 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
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<PAGE>
SECTION 28. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (a) interpret the provisions of this Agreement and (b) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for the purpose of clause (y)
below, all omissions with respect to the foregoing) which are done or made by
the Board in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject any director to any liability to the holders of the Rights.
SECTION 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
SECTION 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would materially and adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board. Without limiting the
foregoing, if any provision requiring that a determination be made by less than
the entire Board is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, such determination shall then be made by
the entire Board.
SECTION 31. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
SECTION 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: TEXACO INC.
By /s/ R. E. KOCH By / s / PATRICK J. LYNCH
............................... .................................
Name: R.E. Koch Name: Patrick J. Lynch
Title: Assistant Secretary Title: Senior Vice President and
Chief Financial Officer
Attest: THE CHASEMELLON BANK N.A.
By / s / By /s/ MICHAEL NESPOLI
............................... ................................
Name: Name: Michael Nespoli
Title: Title: Vice President
69
<PAGE>
EXHIBIT A
to
EXHIBIT I
[Form of Rights Certificate]
Certificate No. R Rights
NOT EXERCISABLE AFTER MAY 1, 2004, SUBJECT TO EARLIER REDEMPTION OR EXPIRATION
AT PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE COMPANY, AT $.0l PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. (THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND
VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*
Rights Certificate
TEXACO INC.
This certifies that _________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of March 16, 1989, as amended as of April 28,
1998 (the "Rights Agreement"), between Texaco Inc., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent"),
to purchase from the Company at any time prior to 5:00 P.M. (New York City time)
on May 1, 2004 at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one one-hundredth of a fully paid,
nonassessable share of Series D Junior Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $150 per one
one-hundredth of a share (the "Purchase Price"), upon presentation and surrender
of this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of ________________, based on the Preferred Stock as
constituted at such date.
Upon the occurrence of a Section 11 (a)(ii) Event (as such term is defined
in the Rights Agreement), it the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Persons, Associate or Affiliate who becomes a
transferee after such Acquiring Person, Associate or Affiliate becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee prior to or concurrently with such Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred
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<PAGE>
Stock or other securities, which may be purchased upon the exercise of the
Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events, including Triggering Events (as
such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
The Rights Agreement is on file at the above-mentioned office of the Rights
Agent. Copies of the Rights Agreement are available upon written request to the
Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.0l per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Agreement), and (ii) the
Expiration Date (as defined in the Rights Agreement).
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
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<PAGE>
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its
corporate seal.
Dated as of , 19
ATTEST: TEXACO INC.
.............................. By...........................................
Secretary Title
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By......................................................... .
Authorized Signature
72
<PAGE>
(Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
- ----------------------------------------------------------------------------
(please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein.
and does hereby irrevocably constitute and appoint Attorney, to transfer the
within Rights Certificate on the books of the within-named Company, with full
power of substitution.
Dated: , 19
By.........................................
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined
in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [
] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or
an Affiliate or Associate of any such Person.
Dated: , 19 By.......................................
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
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<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the
Rights Certificate.)
To: TEXACO INC.:
The undersigned hereby irrevocably elects to exercise Rights represented by this
Rights Certificate to purchase the shares of Preferred Stock issuable upon the
exercise of the Rights (or such other securities of the Company or of any other
person which may be issuable upon the exercise of the Rights) and requests that
certificates for such shares be issued in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by these
Rights Certificates, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: , 19 ..................................
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [
] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate
or Associate of any such Person.
Dated: , 19 ...................................
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
74
<PAGE>
EXHIBIT B
to
EXHIBIT I
FORM OF
SUMMARY OF RIGHTS
On March 16, 1989, the Board of Directors of Texaco Inc., (the "Company")
declared a dividend distribution of one Right (adjusted to one-half right as a
result of a two-for-one split of the Company's Common Stock on September 29,
1997) for each outstanding share of Texaco Inc. Common Stock held of record at
the close of business on April 3, 1989. Each Right entitles the registered
holder, after an event which results in the occurrence of a Distribution Date
(described below) to purchase from the Company a unit consisting of one
one-hundredth of a share (a "Unit") of Series D Junior Participating Preferred
Stock, par value $1.00 per share (the "Series D Preferred Stock"), at a purchase
of $150 per Unit (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates
representing the Rights will be distributed. The Rights will separate from the
Common Stock and a Distribution Date will occur upon the earlier of (A) 10 days
following the date (the "Stock Acquisition Date") on which a public announcement
is made that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership (as such term is used in the Rights Agreement) of 20% or more of the
then outstanding shares of Common Stock other than (i) pursuant to a Qualifying
Offer (described below) or (ii) as a result of the repurchase of shares of
Common Stock by the Company (unless and until such person or group purchases or
otherwise becomes the beneficial owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock except
pursuant to a Qualifying Offer), or (B) 10 business days (or such later date as
the Board of Directors may determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 20% or more of the then outstanding shares of Common Stock.
Until the Distribution Date, (A) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (B) new Common Stock certificates issued after April 3, 1989 will
contain a notation incorporating by reference the Rights Agreement and (C) the
surrender for transfer of any certificate for Common Stock outstanding will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
The Rights will not be exercisable until the Distribution Date and will
cease to be exercisable at the close of business on May 1, 2004. In addition,
the Rights will expire automatically, (without payment of any redemption amount)
upon the acquisition of the Company pursuant to an all-cash merger or
consolidation which follows a Qualifying Offer and is at the same price per
share paid in the Qualifying Offer.
As soon as practicable after the Distribution Date, separate certificates
representing the Rights (the "Rights Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date,
and thereafter the separate Rights Certificates alone will represent the Rights.
All shares of Common Stock issued prior to the Distribution Date will be issued
with Rights. Shares of Common Stock issued after the Distribution Date under any
employee plan or arrangement or in certain cases upon conversion of convertible
securities of the Company, and in all other cases deemed necessary or
appropriate by the Board of Directors, will be issued with Rights.
In the event (a "Flip-In Event") that a person or group becomes the
beneficial owner of 20% or more of the
75
<PAGE>
then outstanding shares of Common Stock other than (A) pursuant to a Qualifying
Offer or (B) as a result of the repurchase of shares of Common Stock by the
Company (unless and until such person or group purchases or otherwise becomes
the beneficial owner of additional shares of Common Stock constituting 1% or
more of the then outstanding shares of Common Stock except pursuant to a
Qualifying Offer), each Right (other than Rights which have become null and void
as described below) will thereafter entitle the holder to receive, upon exercise
of the Right and payment of the applicable Purchase Price, in lieu of the Series
D Preferred Stock, Common Stock (or, in certain circumstances, including if
insufficient shares of Common Stock are authorized and available, cash, property
or other securities of the Company) having a value equal to two times the
exercise price of the Right. However, Rights will not become exercisable
following the occurrence of a Stock Acquisition Date until such time as the
Rights are no longer redeemable by the Company as described below. In addition,
following the occurrence of a Flip-In Event, all Rights that are, or under
certain circumstances specified in the Rights Agreement were, beneficially owned
by any Acquiring Person (or certain related persons) will be null and void.
As an example of the effect of a Flip-In Event, at an exercise price of
$150 per Right, each Right which has not become null and void following a
Flip-In Event would entitle its holder to purchase $300 worth of Common Stock
(or other consideration, as noted above, for $150. Assuming that the Common
Stock had a per share value of $50 at such time, the holder of each valid Right
would be entitled to purchase six shares of Common Stock for $150.
A "Qualifying Offer" is an all-cash tender offer for all outstanding shares
of Common Stock which meets all of the following requirements: (1) the person or
group making the tender offer must, prior to or upon commencing such offer, have
provided to the Company firm written commitments from responsible financial
institutions, which have been accepted by such person or group, to provide,
subject only to customary terms and conditions, funds for such offer which, when
added to the amount of cash and cash equivalents which such person or group then
has available and has irrevocably committed in writing to the Company to utilize
for purposes of the offer, will be sufficient to pay for all shares outstanding
on a fully diluted basis and all related expenses; (2) such person or group must
own, after consummating such offer, shares of voting stock of the Company
representing a majority of the voting power of the then outstanding shares of
voting stock; (3) such offer must in all events remain open for at least 45
business days and must be extended for at least 20 business days after the last
increase or permitted decrease in the price offered and after any bona fide
higher alternative offer is made (except in certain limited circumstances set
forth in the Rights Agreement); and (4) prior to or upon commencing such offer,
such person or group must irrevocably commit in writing to the Company (x) to
consummate promptly upon completion of the offer an all-cash transaction or
transactions whereby all remaining shares of Common Stock will be acquired at
the same price per share paid pursuant to the offer, provided that the Board of
Directors has granted any approvals required to enable such person or group to
consummate such transaction or transactions without obtaining the vote of any
other stockholder, (y) that such person or group will not amend such offer to
reduce the per share price offered (except in certain limited circumstances set
forth in the Rights Agreement), change the form of consideration offered, reduce
the number of shares being sought or in any other respect which is materially
adverse to the Company's stockholders, and (z) that such person or group will
not make any offer for any equity securities of the Company for six months after
commencement of the original offer if the original offer does not result in the
tender of the number of shares required to be purchased pursuant to clause (2)
above, unless another all-cash tender offer for all outstanding shares of Common
Stock is commenced (a) at a price in excess of that provided for in such
original offer, (b) on terms satisfying clauses (1) and (4) of this paragraph
(in which event, any new offer by such person or group must be at a price no
less than that provided for in the original offer of such person or group) or
(c) with the approval of the Company's Board of Directors (in which event any
new offer by such person or group must be at a price no less than that provided
for in such approved offer).
In the event that, at any time following the Stock Acquisition Date, (A)
the Company is acquired in a merger
76
<PAGE>
or other business combination transaction in which the Company is not the
surviving corporation (other than an all-cash merger or consolidation which
follows a Qualifying Offer and is at the same price per share paid in the
Qualifying Offer), or (B) 50% or more of the Company's assets or earning power
is sold or transferred, each holder of a Right (except Rights which previously
have been voided as set forth above) shall thereafter have 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.
In general, the Company may redeem the Rights in whole, but not in part, at
any time until ten days following the Stock Acquisition Date (which period may
be extended at any time while the Rights are still redeemable), at a price of
$.0l per Right, payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors. To encourage third parties seeking to
acquire the Company to make a non-coercive offer which will maximize value for
all stockholders, the Rights Agreement provides that the Board of Directors
shall consider, in determining whether to redeem the Rights in connection with
any proposal or offer, whether such proposal or offer meets the requirements of
a Qualifying Offer and, if not, in what respects such proposal or offer fails to
meet such requirements. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.0l per Right redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including the right to vote or to
receive dividends.
Although there is no authority directly on point, if the Rights separate
from the Common Stock on a Distribution Date, or become exercisable for Common
Stock upon the occurrence of a Flip in Event, such events should not result in
recognition of income, gain or loss by stockholders for federal income tax
purposes (provided the Series D Preferred Stock is junior to all other classes
of the Company's preferred stock at the time that the Rights separate from the
Common Stock). Under regulations that become effective on March 6, 1998, a
stockholder generally should not recognize any gain or loss if a Right separates
and becomes exercisable for common stock of an acquiring company as a result of
a tax-free acquisition of the Company. However, a stockholder will recognize
taxable gain if a Right separates and becomes exercisable for an acquiring
company's common stock as a result of a taxable acquisition of the Company or
its assets. The amount of gain recognized in this case should equal the excess
of the fair market value of the Right at the time it becomes exercisable for the
acquiring company's stock over the holder's basis, if any, in the Right. If the
rights are redeemed prior to a Distribution Date, the cash received by
stockholders upon such redemption will be treated as a taxable dividend to the
extent of the Company's current and accumulated earnings and profits. If the
Rights are redeemed after a Distribution Date, a holder of a Right will
recognize gain which will be capital gain if the stock for which the Right was
exercisable would have been a capital asset in the hands of the holder.
Other than those provisions relating to the basic economic terms of the
Rights and the criteria which define a Qualifying Offer, any of the provisions
of the Rights Agreement may be amended by the Board of Directors of the Company
prior to the Distribution Date to shorten or lengthen any time period and
otherwise in any manner which the Board determines is generally consistent with
the purposes for which the Rights Agreement was adopted; provided, however, that
the Rights Agreement may be amended in any respect by the Board prior to the
Distribution Date if the amendment has been approved at an annual or special
meeting of stockholders at which a quorum is present by the affirmative vote of
the holders of a majority of the voting power of the shares entitled to vote and
voting (in person or by proxy) for or against such amendment at such meeting.
After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are
77
<PAGE>
not redeemable.
The form of Rights Agreement will be sent to stockholders as an exhibit to
the Company's Annual Meeting proxy statement. In addition, a copy of the 1989
Rights Agreement was filed with the Securities and Exchange Commission as an
Exhibit to a Registration Statement on Form 8-A. A copy of the Rights Agreement
is also available free of charge from the Company. This summary description does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
78
[TEXACO LOGO]
<PAGE>
PROXY
Please specify your choices by clearly marking the appropriate boxes. Unless
specified, this proxy will be voted FOR items 1, 2, and 3, AGAINST items 4 and 5
and will be voted in the discretion of the proxies on such other matters as may
properly come before the meeting or any adjournment thereof.
- -------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ITEMS 1, 2 AND 3
- -------------------------------------------------------------------------------
1. Election of Directors for the terms indicated in the Proxy Statement:
Nominees are: (01) P. I. Bijur
(02) J. Brademas
(03) M. K. Bush
(04) S. Nunn
(05) C. H. Price, II
[_] FOR all listed nominees
[_] WITHHOLD vote from all listed nominees
[_] WITHHOLD vote only from ___________________________________________________
2. Approval of Arthur Andersen LLP as Auditors for the year 1998:
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of Amendment to the Stockholder Rights Plan.................
[_] FOR [_] AGAINST [_] ABSTAIN
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE AGAINST ITEMS 4 AND 5
- --------------------------------------------------------------------------------
4. Stockholder proposal relating to an independent Board
Chairperson ..........................................................
[_] FOR [_] AGAINST [_] ABSTAIN
5. Stockholder proposal relating to classification of directors .........
[_] FOR [_] AGAINST [_] ABSTAIN
- --------------------------------------------------------------------------------
IF YOU WISH TO VOTE BY TELEPHONE, PLEASE
READ THE VOTING INSTRUCTIONS TO THE RIGHT
- --------------------------------------------------------------------------------
ACCOUNT NO.
-----------
PLEASE SIGN, DATE AND RETURN CUSIP 881694 10 3
SEE REVERSE SIDE
________________________________________________________ DATE _____________ 1998
(Sign exactly as name appears, indicating position or representative capacity,
where applicable)
<PAGE>
[TEXACO LOGO]
VOTE BY TELEPHONE
QUICK o EASY o IMMEDIATE
CALL TOLL-FREE ON A TOUCH TONE PHONE
THERE IS NO CHARGE FOR THIS CALL.
1-888-266-6794
ANYTIME - 24 hours per day - 7 days a week.
Enter the CONTROL NUMBER [ ]
PLEASE ENTER ALL NUMBERS
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you signed, dated, and return your proxy card.
You will hear these instructions:
OPTION #1
To grant a proxy to vote as the Board of Directors recommends on all
proposals: Press 1 now. When you press 1, your selection will be confirmed
and your proxy will be voted as directed. END OF CALL.
OPTION #2
If you selected to grant a proxy to vote on each proposal separately, you
will hear these instructions:
Proposal 1: To grant a proxy to vote FOR ALL nominees for Director, press
1; to WITHHOLD FROM ALL nominees, press 9; to WITHHOLD FROM AN
INDIVIDUAL nominee, press 0 and listen to the instructions.
For All Other Proposals: You may make your selection any time:
To grant a proxy to vote FOR, press 1
To grant a proxy to vote AGAINST, press 9
To grant a proxy to ABSTAIN, press 0
Your selections will be repeated and you will have an opportunity to
confirm them.
- --------------------------------------------------------------------------------
IF YOU USE THE TELEPHONE VOTING PROCEDURES, YOU DO NOT NEED TO RETURN THE
PROXY CARD.
- --------------------------------------------------------------------------------
<PAGE>
ADMISSION TICKET
to
Texaco's 1998 Annual Meeting of Stockholders
[TEXACO LOGO]
This is your Admission Ticket to gain access to Texaco's 1998 Annual Meeting of
Stockholders to be held in the Westchester Ballroom of the Rye Town Hilton in
Rye Brook, New York, on Tuesday, April 28, 1998, at 2:00 p.m. Please present
this Admission Ticket to one of the registration stations where you will be
asked to display some form of personal identification. Stockholders will be
admitted through the hotel's Westchester Ballroom entrance.
This ticket is not transferable
(DETACH AND RETURN IN THE ENCLOSED ENVELOPE)
- --------------------------------------------------------------------------------
<PAGE>
For your comments...
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
As part of the Company's continuing efforts to eliminate unnecessary
expenses, we are attempting to stop duplicate mailing of Annual Reports to the
same family residence. If more than one member of your household is receiving
copies of the Annual Report, please help us economize by completing the
following authorization:
[ ] Discontinue mailing the Annual Report to my account because I have a
copy available to me from another source.
Name:______________________________ Signature:__________________________________
Account Number (shown on face of proxy card):___________________________________
(DETACH AND RETURN IN THE ENCLOSED ENVELOPE)
- --------------------------------------------------------------------------------
Dear Texaco Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held at the Rye Town Hilton, 699 Westchester Ave., Rye Brook, New York, on
Tuesday, April 28, 1998, at 2:00 p.m. If you plan to attend, please carry the
attached admission ticket with you to the meeting.
Please keep in mind that your vote is important. Whether or not you are
able to attend the meeting in person, please either use our telephone voting
system to register your vote, or mark the attached proxy card to indicate your
voting preferences and sign, detach, and return the proxy card in the
accompanying postage paid envelope.
I also welcome any comments or questions you have concerning the Company's
activities. For your convenience in providing such comments, space is provided
on the card above, which you can detach and return with your signed proxy card.
In view of the large number of comments and questions we generally receive, it
will not be possible to respond to them individually. However, I assure you that
each one will be read and that subjects of general interest will be covered at
the meeting or in other information from the Company.
Peter I. Bijur
Chairman of the Board &
Chief Executive Officer
(DETACH AND RETURN IN THE ENCLOSED ENVELOPE)
- --------------------------------------------------------------------------------
[ LOGO ] THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Texaco Inc.
2000 Westchester Ave.
White Plains, NY 10650
P. I. Bijur, M. C. Hawley, R. B. Smith, W. C. Steere, W. Wrigley, and each
of them, as proxies, with full power of substitution, are hereby authorized to
represent and to vote, as designated on the reverse side, all Common Stock of
Texaco Inc. held of record by the undersigned on February 27, 1998, at the
Annual Meeting of Stockholders to be held at the Rye Town Hilton, 699
Westchester Ave., Rye Brook, N.Y. on Tuesday, April 28, 1998 at 2:00 p.m.
If you plan to attend the Annual Meeting, please check the appropriate box
below. If you and a family member are attending, please provide Texaco with the
family member's name.
[ ] Stockholder will attend the Annual Meeting
[ ] Stockholder and a family member will attend the Annual Meeting
_______________________________________________________________________
Family member's name (Please Print)
