[logo]
Texaco Inc.
2000 Westchester Avenue
White Plains, NY 10650
NOTICE OF ANNUAL MEETING
To Our Stockholders:
Our 2000 Annual Meeting of Stockholders will be held at The Performing Arts
Center, Purchase College, The State University of New York, 735 Anderson Hill
Road, Purchase, New York, on Wednesday, April 26, 2000, at 2:00 p.m.
We intend to present for your approval at this meeting:
o the election of four directors, and
o the appointment of auditors for 2000.
In addition, stockholders have notified us that they intend to present
proposals at the meeting regarding:
o classification of the Board of Directors, and
o a code of conduct on worker rights.
Your vote is important to us. Even if you do not plan to attend the
meeting, please complete and sign the enclosed proxy card and mail it promptly
in the return envelope. If you are a stockholder of record, you can also vote
over the Internet or by calling the toll-free telephone number shown on the
proxy card.
You must have an admission card to be admitted to the meeting. If you are a
stockholder of record, we have included an admission card with your proxy card.
If you are not a stockholder of record, you should contact the bank or broker
holding your shares to obtain an admission card.
Michael H. Rudy
Secretary
March 14, 2000
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Page
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
Compensation of Directors 7
Transactions With Directors and Officers 7
Security Ownership of Directors and Management 8
Section 16(a) Beneficial Ownership Reporting Compliance 8
Proposals Before the Meeting
Management Proposals
Item 1 - Election of Directors 9
Item 2 - Approval of Auditors 13
Stockholder Proposals
Item 3 - Classification of the Board of Directors 13
Item 4 - Code of Conduct on Worker Rights 15
Executive Compensation
Compensation Committee Report 17
Summary Compensation Table 20
Option Grants in 1999 21
Aggregated Option Exercises in 1999 and Year-End Option Values 23
Performance Graph 23
Retirement Plan 24
Stockholder Proposals and Nominations for Directors for the 2001 Annual Meeting 25
</TABLE>
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PROXY STATEMENT
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General Information
If you were a stockholder of record at the close of business on February
28, 2000, you are entitled to vote at the meeting. You can examine the list of
stockholders entitled to vote at the meeting between the hours of 9:00 A.M. and
5:00 P.M. at our offices, 2000 Westchester Avenue, White Plains, NY 10650 from
April 16, 2000 through April 26, 2000. Please contact the Secretary of the
Company if you would like to do so.
We are mailing this proxy statement and accompanying proxy card to our
stockholders beginning March 14, 2000. The Board of Directors of Texaco Inc. is
soliciting the proxy, and the Company will bear the cost. We may solicit proxies
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. We have retained Morrow & Co., Inc. to assist us in soliciting
proxies at a fee not to exceed $28,000, plus reasonable out-of-pocket expenses.
We are delivering to you with this Proxy Statement a copy of our Annual Report
to Stockholders for 1999, including audited financial statements. The Annual
Report is not proxy soliciting material.
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Description of Capital Stock
Excluding 14,450,029 shares of the Company's Common Stock held in the
Company's treasury, there were outstanding, at February 28, 2000, 553,126,475
shares of Common Stock. Each outstanding share of Common Stock is entitled to
one vote on all matters properly brought before the meeting.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02104-1389, filed a Schedule 13G with the Securities and Exchange
Commission disclosing that, as of December 31, 1999, it had shared voting and
dispositive power over 41,315,805 shares, or approximately 7.47% of the
Company's outstanding Common Stock, as Trustee of our Employee Stock Ownership
Plan (ESOP) and a similar plan maintained for our affiliates (as well as various
collective investment funds and personal trust accounts). Under the terms of the
ESOPs, State Street is required to vote shares it holds for the plan
participants in accordance with confidential instructions received from the
participants and to vote all shares for which it shall not have received
instructions in the same ratio as the shares with respect to which it received
instructions.
Capital Research and Management Company, 333 South Hope Street, Los
Angeles, CA 90071, also filed a Schedule 13G, disclosing that as of December 31,
1999, it had sole dispositive power over 30,247,300 shares, or approximately
5.5% of our outstanding Common Stock.
We have established a grantor trust and contributed to such trust 9,200,000
shares of Common Stock. These shares are held by the Trustee to ensure that we
satisfy our obligations under our nonqualified deferred compensation plans and
arrangements. The Trustee votes the shares in the trust as the beneficiaries of
the trust instruct it. The Trustee votes shares for which no instructions are
received in the same ratio as the shares for which instructions have been
received.
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1
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Voting of Shares
In the election of directors, the four persons receiving the highest number
of "for" votes will be elected. All other proposals require the "for" vote of a
majority of those shares present in person or represented by proxy and entitled
to vote on the subject matter.
Whether you hold shares directly as the stockholder of record or
beneficially in street name, you may direct your vote without attending the
meeting. You may vote by granting a proxy or, for shares you hold in street
name, by submitting voting instructions to your broker or nominee. In most
instances, you will be able to do this either over the Internet, by telephone or
by mail. Please refer to the summary instructions below and those included on
your proxy card or, for shares you hold in street name, the voting instruction
card included by your broker or nominee.
By Internet - If you have Internet access, you may submit your proxy from any
location in the world by following the "Vote by Internet" instructions on the
proxy card.
By Telephone - If you live in the United States or Canada, you may submit your
proxy by following the instructions on the proxy card.
By Mail - You may submit your proxy by signing your proxy card and mailing it in
the enclosed, postage prepaid and addressed envelope. For shares you hold in
street name, you may sign the voting instruction card included by your broker or
nominee and mail it in the envelope provided.
You may change your proxy instructions at any time prior to the vote at the
annual meeting. For shares held directly in your name, you may do this by
granting a new proxy or by attending the annual meeting and voting in person.
Attendance at the meeting will not cause your previously granted proxy to be
revoked, unless you specifically request it. You may change your proxy
instructions for beneficially held shares by submitting new voting instructions
to your broker or nominee.
Signed, unmarked proxy cards are voted in accordance with Board
recommendations. 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 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 abstaining from any proposal, and will, therefore, have the
effect of reducing the number of shares needed to approve any item.
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 Item 2 and AGAINST Items 3 and 4.
Confidential Voting
All voted proxies and ballots are handled to protect employee and
individual stockholder voting privacy. No such vote shall be disclosed except:
o as necessary to meet any legal requirements
o in limited circumstances such as a proxy contest in opposition to the
Board of Directors
o to permit independent Inspectors of Election to tabulate and certify the
vote, or
o to respond to stockholders who have written comments on their proxy cards
2
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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 the leadership - the Board of Directors and the individuals the Board
selects to lead the Company. To help advance this belief, we have established
the following policies and practices:
o Currently 11 of 12 members of the Board are outside, independent
directors. The following Committees are composed entirely of outside directors:
- Non-Management Directors
- Audit
- Compensation
- Public Responsibility
- Directors and Board Governance
o Directors receive regular and timely information about the Company's
business. Pre-meeting materials include written summaries and data to support
and explain items coming before the Board, as well as operational and financial
information. Directors are immediately notified of significant events and
occurrences. 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 the business with these officers. Occasional
Board trips are scheduled which offer Directors the opportunity to visit sites
and facilities at different locations. New directors participate in orientation
programs and discussions with management personnel.
o 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
- individual availability for consultation on corporate issues
o The Board has clearly delineated its role and the role of management. The
role of the Board is to provide guidance and strategic oversight to management,
individually and collectively, and to realize the mutual objective of increasing
shareholder wealth. It is management's responsibility 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 accountable for
achieving superior results and has delegated to management the power and
authority to do so, while assuring that management can call on the Board's
support, advice and experience.
o We strive for open and continuous communication with institutional
investors, other stockholders and the press.
o The Board annually evaluates its effectiveness in creating and protecting
value for our stockholders as measured against the following nine areas of Board
involvement and responsibility:
- Review and approval of our tactical plans, monitoring their
accomplishment and comparing our competitive positioning
3
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- Review of our strategic plan and our long range goals, the evaluation
of our 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
- Oversight of our financial health
- Monitoring activities that pose significant risks and our programs to
respond to and contain such risks
- Review of the performance of our Chief Executive Officer and other
senior officers and their compensation relative to performance
- Review of our adherence to our corporate "Vision and Values" which
include our responsibilities to our stockholders, employees, customers
and the community
- Preparedness for the selection of a successor Chief Executive Officer,
and the monitoring of our development and selection of key personnel
- Selection process for Board membership and the overall quality and
preparedness of its members
- Availability of sufficient, accurate and timely information and
appropriate reporting systems to allow senior management and the Board
to reach informed judgments about both our compliance with the law and
our business performance
o Each committee of our 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
- quality of oral presentations
o We select director candidates on the basis of the contributions they can
make in providing advice and guidance to the Board and management. We are
committed to an inclusive Board with a diversity of experience and outlook. We
have published the following guidelines and criteria for director candidates:
- The highest personal and professional ethics, integrity and values
- The education and breadth of experience to understand business problems
and evaluate and postulate solutions
- The 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 be 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
- The 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 policy issues and areas of activity affecting
overall interests of the Company and its stockholders
- No involvement in other activities or interests that create a conflict
with the director's responsibilities to the Company and its
stockholders
4
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o The Board has adopted and regularly reviews and updates, as necessary,
our Corporate Governance Policies, specifically addressing thirty distinct
issues. You can obtain these policies from our 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 Chair, Mr. Vanderslice,
leads the personal performance appraisals of the Chief Executive Officer and
also serves as a contact point on Board issues. The committee consults on such
matters as the Chief Executive Officer or the chair 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 our incentive awards programs. This committee provides a forum for
the non-management directors to privately discuss the performance of management.
It held four meetings in 1999.
The Public Responsibility Committee, consisting of Dr. Jenifer (Chair), Mr.
Baillie. Ms. Bush, Mr. Hawley, Sen. Nunn, Mrs. Smith and Mr. Steere, met three
times in 1999. It reviews and makes recommendations regarding the policies and
procedures affecting our role as a responsible corporate citizen, including
those related to equal employment opportunity, safety, health, and environmental
matters, our relationship with our many constituencies and our philanthropic
programs.
The Audit Committee is composed of six independent directors. The Committee
was formed in 1939 and has, since its formation, been made up entirely of
non-management directors, 38 years before the New York Stock Exchange imposed
this requirement on listed companies. It held four meetings in 1999. Its members
are Mr. Vanderslice (Chair), Mr. Hawley, Dr. Jenifer, Sen. Nunn, Mr. Shoemate
and Mrs. Smith. Independent and internal auditors attend the meeting and,
depending on the nature of the matters under review, such officers and other
employees as necessary, attend all or part of the meetings. The committee
reviews and evaluates the scope of the audit, accounting policies and reporting
practices, internal auditing, internal controls 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 the independent and internal auditors to discuss issues of
importance, including the sufficiency of management cooperation.
The Compensation Committee, which met four times in 1999, is composed of
Messrs. Steere (Chair), Carpenter, Hawley, Shoemate and Vanderslice and Amb.
Price. It surveys and reviews compensation practices in industry to make certain
that we remain competitive and able to recruit and retain highly qualified
personnel, and that our compensation structure incorporates programs that
reflect 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 compensation of elected officers, incentive
plan awards, and may approve any special benefit plans.
5
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The Finance Committee, consisting of Mr. Bijur (Chair), Ms. Bush, Amb.
Price and Messrs. Baillie, Carpenter and Steere, which assumed the function of
the Pension Committee, met five times in 1999. It reviews and makes
recommendations to the Board concerning our 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; performance of the Pension Plan including asset
allocation; 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. Carpenter, Hawley and Vanderslice, met three times in 1999.
It maintains oversight of Board governance, operation and effectiveness, reviews
the size and composition of the Board, reviews the qualifications of candidates
for Board membership identified from many sources and recommends candidates to
the Board as nominees for election as directors.
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
full Board. This committee, consisting of Messrs. Bijur (Chair), Carpenter, and
Vanderslice, Dr. Jenifer, Sen. Nunn, Amb. Price and Mrs. Smith, met once in
1999.
The Board of Directors held eleven meetings in 1999. Overall attendance by
directors at meetings of the Board and its committees on which the directors
served was 94%.
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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 they attend, 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. We pay one-half of each annual retainer 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 which we administer and partially fund.
As part of our corporate-wide effort to encourage charitable giving, we
have established a directors' gift program. Only institutions that are qualified
recipients of grants from the Texaco Foundation may receive gifts under the
directors' program. Upon the death of a director, we 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. We own the policies, pay the
premiums for such insurance ($81,243 paid for all directors in 1999) and are
entitled to all tax deductions resulting from any contributions made to the
qualifying charitable organizations. Individual directors derive no financial
benefit from this program.
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Transactions With Directors and Officers
Sen. Nunn is a member of the law firm of King & Spalding, which has
provided legal services to us for many years.
Mr. Wicker has a three-year employment agreement that commenced on August
4, 1997. In addition to participation in benefit plans and programs for someone
at his level, the agreement provides for (a) an annual salary of not less than
$400,000; (b) additional service credit for employee benefit purposes; and (c)
an award of stock options and performance restricted shares.
Mr. O'Connor has an employment agreement that is terminable at will. The
agreement provides for salary and benefits in accordance with his position
grade, an award of stock options and performance restricted shares, and
additional service credit for welfare benefit plan purposes.
Most of our employees will receive severance payments if their employment
is terminated or the conditions of their employment are changed following a
"change of control."
If the Company terminates an executive officer's employment without just
cause, or the executive officer resigns for good reason following a change of
control, he or she will be entitled to the following severance benefits: three
years' base pay, bonus and the annual value of benefits accrued under the
retirement and thrift plans; and continuation of medical, dental and life
insurance coverage for up to three years following termination of employment.
These benefits would be grossed-up to the extent they are subject to excise
taxes.
7
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Security Ownership of Directors and Management
The table below sets forth, as of February 1, 2000, information on Texaco
stock and units owned by our directors and executive officers. Each person has
sole voting and investment power over the shares listed. Directors and executive
officers as a group own less than 1% of our outstanding Common Stock.
Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the Securities and Exchange Commission require that we
disclose late filings of reports of stock ownership and changes in stock
ownership by our directors and executive officers. To the best of our knowledge,
based on a review of the relevant forms and written representations from the
directors and officers, there were no late filings during 1999.
<TABLE>
<CAPTION>
Number of Shares or Units
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Shares Underlying Stock-Equivalent
Total Stock Common Options Exercisable Restricted
Beneficial Owners Interest Stock Within 60 Days of 2/1/00 Units
----------------- ----------- ------ ------------------------ ------------------
<S> <C> <C> <C> <C>
A. Charles Baillie 4,704 3,000 -- 1,704
Peter I. Bijur 611,821 362,502 249,319 --
Mary K. Bush 3,344 30 -- 3,314
Edmund M. Carpenter 9,764 800 -- 8,964
Michael C. Hawley 9,728 400 -- 9,328
Franklyn G. Jenifer 6,963 200 -- 6,763
Patrick J. Lynch 261,446 149,565 111,881 --
Sam Nunn 5,023 423 -- 4,600
John J. O'Connor 69,676 22,333 47,343 --
Charles H. Price, II 15,173 3,481 -- 11,692
Charles R. Shoemate 5,051 2,500 -- 2,551
Robin B. Smith 8,294 600 -- 7,694
William C. Steere, Jr. 16,490 1,400 -- 15,090
Glenn F. Tilton 287,394 162,946 124,448 --
Thomas A. Vanderslice 44,710 23,206 -- 21,504
William M. Wicker 75,279 21,582 53,697 --
All Directors and Executive
Officers as a group
(28 persons) 2,660,721 1,414,923 1,152,594 93,204
</TABLE>
8
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PROPOSALS BEFORE THE MEETING
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Item 1-Election of Directors
Our 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 our Certificate of Incorporation and by-laws, the Board
of Directors fixed the total number of directors at 12, effective April 26,
2000.
The Board has designated four persons as nominees for election as directors
at the Annual Meeting. All of the nominees are currently directors and were
previously elected by the stockholders.
We have 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 we may
reduce the size of the Board.
Following is certain biographical information concerning the nominees, as
well as those directors whose terms of office are continuing after the meeting.
9
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NOMINEES FOR THE THREE YEAR TERM EXPIRING AT
THE 2003 ANNUAL MEETING
[photo]
A. Charles Baillie, 60, Chairman and Chief Executive Officer of the
Toronto-Dominion Bank, was elected a Director on December 11, 1998. He was
elected Chief Executive Officer of Toronto-Dominion Bank in 1997 and
Chairman of the Board in 1998. He joined the bank in 1964 and progressed
through a variety of assignments both in the United States and Toronto. He
was elected Vice Chairman in 1992 and President in 1995. Baillie serves as
a director of the Dana Corporation and Cadillac Fairview Corporation and is
Chairman of TD Waterhouse. He is on the Executive Committee of the
British-North American Committee, an honorary governor of The Shaw Festival
and a board member of the Calmeadow Foundation. Baillie is serving as the
Chairperson of Toronto's United Way Campaign and currently is on the
Executive Committee of the University of Toronto's campaign.
[photo]
Edmund M. Carpenter, 58, President and Chief Executive Officer of Barnes
Group, Inc., was elected a director in 1991. He was Sr. Managing Director
of Clayton, Dubilier & Rice, Inc. since 1997 and 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.
[photo]
Franklyn G. Jenifer, 60, 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 Trustees of
Universities Research Association, Inc. and of the Texas Health Research
Institute, 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.
[photo]
Thomas A. Vanderslice, 68, a private investor, has been a director since
1980. He is President of TAV Associates, and formerly was 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 the
National Academy of Engineering, the American Chemical Society, and the
American Institute of Physics.
10
<PAGE>
DIRECTORS CONTINUING IN OFFICE UNTIL
THE 2001 ANNUAL MEETING
[photo]
Peter I. Bijur, 57, Chairman of the Board and Chief Executive Officer of
Texaco Inc. since 1996, was also 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. He is Chairman of the American Petroleum Institute and The
Business Council of New York State, Inc., and serves on the Board of
Trustees of The Conference Board. He is also a member of The Business
Council, The Business Roundtable, the National Petroleum Council, and the
Council on Foreign Relations. In addition, he currently serves on the Board
of Trustees of Middlebury College and Mount Sinai- New York University
Medical Center. He is a Managing Director of the Metropolitan Opera
Association and a member of the Board of The New York Botanical Garden.
[photo]
Mary K. Bush, 51, President of Bush & Company, an international financial
consulting firm, joined the Board in 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, R.J.
Reynolds Tobacco Holdings, Inc., 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.
[photo]
Sam Nunn, 61, former U.S. Senator from Georgia, was elected to the Board in
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 The
Coca-Cola Company, Dell Computer Corporation, General Electric Company,
Internet Securities Systems Group, Inc., National Service Industries, Inc.,
Total System Services, Inc. and Scientific-Atlanta, Inc.
[photo]
Charles H. Price, II, 68, 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 a director of The New
York Times Company 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 2002 ANNUAL MEETING
[photo]
Michael C. Hawley, 62, Chairman and Chief Executive Officer of The Gillette
Company, has been a director since 1995. After joining Gillette in 1961, he
held management positions of increasing responsibility in a variety of
countries and in 1985 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. In 1995 he was named
President and Chief Operating Officer of the Gillette Company and a member
of its Board of Directors. He is also a director of the John Hancock
Financial Services Co. and the Grocery Manufacturers of America.
[photo]
Charles R. Shoemate, 60, Chairman, President and Chief Executive Officer of
Bestfoods, was elected to the Board in October 1998. He joined Bestfoods,
formerly CPC International, in 1962 and progressed through a variety of
positions in manufacturing, finance and business management within the
consumer foods and corn refining businesses. He was elected President and a
member of its Board of Directors in 1988, Chief Executive Officer in August
1990 and Chairman in September 1990. He is a director of CIGNA Corporation,
International Paper and Chairman of the Conference Board. He is a member of
the Business Roundtable and the Board of Directors of the Grocery
Manufacturers of America.
[photo]
Robin B. Smith, 60, Chairman and Chief Executive Officer of Publishers
Clearing House since 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.
[photo]
William C. Steere, Jr., 63, Chairman and Chief Executive Officer of Pfizer
Inc., was elected a director in 1992. Mr. Steere began his career with
Pfizer, a diversified pharmaceutical 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 Metropolitan Life Insurance Company,
Dow Jones & Company, Inc., the New York Botanical Garden, Minerals
Technologies Inc., WNET-Thirteen, 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.
12
<PAGE>
Item 2-Approval of Auditors
We will present the following resolution concerning the appointment of
independent auditors 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 2000 is hereby ratified
and approved."
Arthur Andersen LLP has been auditing our accounts 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 questions.
----------
Stockholder Proposals
Items 3 and 4 below are proposals submitted by stockholders. You may obtain
the names, addresses and shareholdings of the proponents by calling or writing
our Secretary.
Item 3 - 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 so
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 massive votes at
Texaco's 1996 and 1997 stockholder meeting of over 43% indicating that many
Texaco shareholders feel the time has come for this reform. In 1998 this
resolution received a 48% vote in support, almost passing. Numerous companies
have demonstrated leadership by changing this practice in response to
shareholder interest in this change.
We believe this is a practice which corporations seeking to be accountable
to their investors are increasingly putting into place. Studies by the Chief
Economist of the SEC have 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
13
<PAGE>
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
believing the Board should annually be accountable on issues like diversity and
the environment as well as on financial performance.
Please vote for this important corporate governance reform or your vote
will be automatically cast against it by management.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
o Stockholders rejected similar proposals in each of the five years that they
considered them since 1994.
o Our classified Board structure was overwhelmingly approved by our
stockholders as part of a corporate governance system to help us
carry out our long-term business strategy and protect stockholders
against a diminished value of their stock caused by a hostile acquisition.
o The classified board structure does not prevent a change of control, but
encourages outside persons seeking control of the Company to initiate
arm's-length negotiations with the Board. The Board is then in a better
position to negotiate to achieve the best price for all stockholders, not
just for those with a large block of shares.
o A classified Board structure helps ensure stability because, at any given
time, a majority of Directors possess the experience and depth of
understanding which comes from service on the Board.
o Leading institutional investors and commentators have recognized the
benefits inherent in a classified Board. For example, the Teacher's
Insurance and Annuity Association - College Retirement Equities Fund has
concluded that a classified Board is consistent with the principles of good
corporate governance, and has recognized and supported the right of a Board
to organize its functions and business in the manner it deems most
efficient.
We believe that a classified Board protects the interests of all of
Texaco's stockholders. The continuity and depth of knowledge that results from a
classified Board provides the proper environment in which to foster the creation
of long-term value for all stockholders.
Therefore, the Board of Directors recommends a vote AGAINST this proposal.
----------
14
<PAGE>
Item 4 - Stockholder Proposal Relating to a Code of Conduct on Worker Rights
Texaco Inc. (the "Company" or "Texaco") is a global corporation and its
international operations and sourcing arrangements expose the company to a
variety of risks. This proposal is designed, therefore, to manage the risk of
being a party to serious human rights violations in the workplace. Texaco
operates or has business relationships in a number of countries, including China
and Nigeria, where, according to such sources as the U.S. State Department,
Amnesty International, and Human Rights Watch, human rights are not adequately
protected by law and/or public policy.
The success of many Texaco businesses depends on consumer and governmental
good will. Since brand name is one of the Company's most significant assets, the
Company would benefit from adopting and enforcing a code of conduct that would
ensure that it is not associated with human rights violations in the workplace.
This would protect Texaco's brand name and/or its relationships with its
customers and the numerous governments under which the Company operates and with
which it does business.
In addition, institutional investors are increasingly concerned with the
impact of company workplace practices on shareholder value. At least two of the
world's largest pension funds have adopted responsible contractor and workplace
practice guidelines. The adoption of such a code of conduct would increase
attractiveness to the institutional investor community.
Resolved: The shareholders urge the Board of Directors to adopt, implement
and enforce the workplace code of conduct as based on the International Labor
Organization's (ILO) Conventions on workplace human rights, and including the
following principles:
1. All workers have the right to form and join trade unions and to bargain
collectively. (ILOConventions 87 and 98)
2. Workers' representatives shall not be the subject of discrimination and
shall have access to all workplaces necessary to enable them to carry
out their representation functions. (ILO Convention 135)
3. There shall be no discrimination or intimidation in employment. Texaco
shall provide equality of opportunity and treatment regardless of race,
color, sex, religion, political opinion, age, nationality, social
origin or other distinguishing characteristics.(ILO Conventions 100 and
111)
4. Employment shall be freely chosen. There shall be no use of forced,
including bonded or voluntary prison, labor. (ILO Conventions 29 and
105)
5. There shall be no use of child labor. (ILO Convention 138)
The shareholders urge the Board of Directors to issue an annual report on
the status of the company's adoption, implementation and enforcement of the
above-stated code.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
As a global energy company, Texaco operates under a wide variety of
societies and legal regimes. Notwithstanding those differences, Texaco adheres
to a consistent set of corporate policies and guiding principles that underscore
our commitment to ethical business standards and worker human rights.
Texaco's Corporate Conduct Guidelines are the standards that direct our
behavior and business decisions. These guidelines were built on Texaco's ten
core values - respect
15
<PAGE>
for the individual, inspired leadership, technological leadership, teamwork,
quality, customer service, communication, highest ethical standards, corporate
responsibility and shareholder return.
We believe that worker human rights begin with respect for the individual.
Every employee deserves respect, dignified treatment and the opportunity to
develop and advance to the utmost of his or her capabilities. We recognize that
when we respect one another, the unique talents, dedication, creativity and
wisdom of our employees are unleashed, producing a workforce where each
individual can make a difference and contribute to Texaco's growth and
prosperity.
Texaco's policy regarding equal opportunity is at the heart of our
commitment to respect for the individual. Discrimination is not tolerated at
Texaco. Our company provides equal opportunity for all employees and all
qualified applicants for employment, without regard to race, religion, color,
national origin, age, sex, sexual orientation, disability or veteran status.
We also believe that each employee deserves a safe and healthful work
environment. Texaco provides the rules and practices, training, equipment and
medical and industrial hygiene programs necessary to protect the safety of our
employees. This effort is enhanced by our employees' recognition that they have
a personal and vital responsibility to contribute to safe work performance.
We respect each employee's right to engage in or refrain from engaging in
activities associated with representation by a labor organization. In those
countries where unions exist and employees elect to be represented, we will
negotiate in good faith with the labor organization selected by the employees.
We believe that Texaco's adoption and enforcement of the Corporate Conduct
Guidelines effectively address our workplace practices. Furthermore, wherever we
operate we take our responsibility as a vehicle for economic prosperity,
environmental stewardship and social progress seriously.
Therefore, the Board of Directors recommends a vote AGAINST this proposal.
----------
16
<PAGE>
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Compensation Committee Report
The Compensation Committee of the Board of Directors is composed entirely
of independent outside directors. We are responsible for the compensation of the
Company's officers and the incentive programs for all management personnel.
The management pay structure and award opportunities are designed to be
competitive with a group of five other oil companies. In addition, we survey the
compensation practices of a group of non-oil companies, selected based on size,
complexity and operational challenge in relation to Texaco to benchmark Texaco's
compensation practices. All of the comparator companies with the exception of
one international oil company were included in the S&P 500 Index, and three of
the oil companies were also included in the S&P Integrated International Oil
Index.
In addition, each year we compare Texaco's return to stockholders with that
of Texaco's competitors. That comparison is reflected in the performance graph
on page 23.
The Compensation Program
The compensation program is composed of three elements:
o Salary
o Performance bonus
o Long-term stock-based incentives.
Salary is fixed at a competitive level to attract and retain the highest
caliber of employees. Bonuses are based on performance with respect to financial
objectives, as well as objectives relating to respect for the individual, safety
and workforce diversity. Long-term awards are tied to total return to
stockholders. This mix of compensation elements places more of total
compensation at risk and emphasizes performance.
As a person's level of responsibility increases, a greater portion of
potential total compensation opportunity is shifted from salary to
performance-based incentives and to greater reliance on growing total return to
stockholders through stock-based awards. This directly aligns the interests of
these managers with the interests of stockholders.
Salary. We set executive level salary ranges consistent with the ranges for
all Texaco salaried employees. We adjust the ranges, as necessary, to maintain
their competitiveness with those of the other five comparator oil companies. We
maintain individual salaries within the appropriate range for a position and
review them annually. We determine actual salaries based on individual
performance, experience and position in the range.
In accordance with these guidelines, we raised executive salary ranges by
2% for 1999.
In 1999, neither Mr. Bijur nor anyone else in executive management received
merit increases. This salary freeze was the result of the Company's
disappointing results in 1998.
Performance Bonus. We established competitive target bonus opportunities
for each position grade level. Participants in the incentive bonus program can
earn more or less than the target bonus, depending on the achievement of the
following financial objective measures:
o Earnings Growth vs. Peers
o Cash Growth vs. Peers
o Return on Capital Employed vs. Peers
o Earnings vs. Plan
17
<PAGE>
and the following non-financial measures:
o Respect for the Individual
o Safety
o Diversity
The bonus formula also contains additional subjective elements including:
o Overall contribution to corporate and/or business unit performance
o Managerial ability
o Initiative
o Fostering the Company's "Vision and Values"
o Compliance with the Corporate Conduct Guidelines
o Fostering Diversity
We based 1999 bonuses paid to the executive officers (including Mr. Bijur
and the other named executive officers) on two factors: the Company's
performance in 1999, as determined by the financial objective measures listed
above, and the individual's performance rating. Bonus payments for 1999 to Mr.
Bijur and the other named executive officers were higher than those made for
1998, chiefly due to the strong individual performances achieved by each of
these persons and because the Company's performance, including a 36% growth in
earnings, improved relative to the performance of its peers.
Long-Term Stock-Based Incentives. The long-term incentive program consists
of stock options and performance restricted shares. Performance restricted
shares vest based on the Company's total return to stockholders versus the S&P
Integrated International Oil Index. This program:
o emphasizes total return to stockholders
o encourages stock ownership by management by awarding them stock rather than
cash
o enhances retention and continuity of management
While we have not established obligatory levels for equity holdings by
management personnel, we have designed the long-term incentive award program to
encourage share ownership. We review the officers' stock ownership each year. In
general, the officers have stockholdings in excess of typical targets or
mandatory levels that have been established by some major companies. At January
1, 2000, the seventeen executive officers had, on average, holdings of Texaco
stock in excess of eleven times their 1999 salaries. The value of the long-term
incentive awards are intended to be fully competitive with the programs offered
by the comparator companies.
1999 Review. During 1999, we retained an independent consultant to study
and advise us with respect to the following:
o The appropriate Stock Incentive Plan target award levels based on comparator
company practices
o The composition of the comparator group
As a result of the consultant's report and recommendations, we concluded
that the Stock Incentive Plan targets had fallen below competitive levels.
Therefore, we selectively increased the level of long-term awards for 1999.
Tax Deductibility. Texaco's incentive bonus and stock incentive plans are
performance-based plans. Therefore, under Internal Revenue Code Section 162(m),
compensation paid in 1999 under these plans is fully deductible and it is our
intention to continue to maximize deductibility to the extent practicable.
18
<PAGE>
Our Conclusion. We firmly believe that the quality and motivation of all of
Texaco's employees, including its managers, make a significant difference in
Texaco's long-term performance. We also believe that stockholders directly
benefit from compensation programs that:
o reward superior performance
o contain an appropriate downside risk element when performance falls short of
clearly defined standards
o give appropriate administrative flexibility to achieve their objectives
We believe that Texaco's management compensation programs meet these
requirements and will continue to be an important factor in driving the
Company's success.
William C. Steere, Jr.
Chairman
Edmund M. Carpenter Charles R. Shoemate
Michael C. Hawley Thomas A. Vanderslice
Charles H. Price, II
19
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------------------------- ------------------------
Securities
Other Restricted Underlying All
Name and Principal Annual Stock Options/ Other
Position Year Salary($)(1) Bonus($) Compensation($)(3) Awards($)(4) SARs(#) Compensation($)(5)
- ------------------ ---- ------------ -------- ------------------ ------------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
P.I. Bijur 1999 950,000 1,015,059 4,420 2,169,092 677,553 57,000
Chairman of the 1998 925,000 597,749 5,407 1,853,438 546,797 55,500
Board/CEO 1997 825,000 1,046,047 5,139 1,291,547 326,304 49,500
P.J. Lynch 1999 435,000 338,634 5,124 497,855 214,427 26,100
Senior Vice 1998 428,750 182,245 5,573 501,911 174,560 25,725
President/CFO 1997 410,000 321,710 5,288 315,020 161,157 24,600
J.J. O'Connor 1999 450,000 373,855 -0- 497,855 80,877 27,000
Senior Vice 1998 450,000 182,245 49,515 710,324 85,498 63,989
President
G.F. Tilton 1999 406,000 284,021 3,805 497,855 214,485 24,360
Senior Vice 1998 400,250 189,918 12,709 419,248 186,053 24,015
President 1997 379,750 298,701 28,343 318,871 173,988 96,483
W.M. Wicker 1999 412,000 284,021 3,810 497,855 67,171 24,720
Senior Vice 1998 409,000 182,245 4,533 419,248 52,026 8,240
President 1997 166,665(2) 321,710 -0- 260,130 31,668 -0-
<FN>
(1) No executive officers received a salary increase during 1999. The change in
salary since 1998 reflects an April 1998 salary increase.
(2) Mr. Wicker commenced employment on August 4, 1997 at a salary of $400,000
per year.
(3) This column includes our aggregate incremental cost of providing various
perquisites and personal benefits in excess of reporting thresholds
including, for Mr. O'Connor in 1998, $49,515 for reimbursement of taxes
applicable to moving expenses.
(4) Messrs. Bijur, Lynch, O'Connor, Tilton and Wicker had restricted
stockholdings of 323,649; 116,162; 20,144; 141,873; and 20,962 shares,
respectively, as of December 31, 1999. The shares had a market value of
$17,578,186; $6,309,049; $1,094,071; $7,705,477; and $1,138,499
respectively, at December 31, 1999, based on a value of $54.3125 per share.
These share numbers and values include the awards since the last proxy
statement which are reported in the "Restricted Stock Awards" column above.
Dividends are paid on the restricted stock at the same time and rate as
dividends paid to holders of unrestricted stock.
(5) Matching contributions to the qualified and nonqualified Employees Thrift
Plan and relocation expenses.
</FN>
</TABLE>
20
<PAGE>
Option Grants in 1999
Individual Grants of Options
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.I. Bijur 06/25/99 241,850 2.556% 62.78125 06/25/2009 2,684,535
P.J. Lynch 06/25/99 55,510 0.587% 62.78125 06/25/2009 616,161
J.J. O'Connor 06/25/99 55,510 0.587% 62.78125 06/25/2009 616,161
G.F. Tilton 06/25/99 55,510 0.587% 62.78125 06/25/2009 616,161
W.M.Wicker 06/25/99 55,510 0.587% 62.78125 06/25/2009 616,161
</TABLE>
Individual Grants of Restored Options
All options include a restoration feature, by which participants receive
options to replace shares that they are using to either (1) pay the Company for
shares they are acquiring when they exercise a stock option or (2) satisfy their
tax withholding obligations. Since restored options are granted at an exercise
price which is equal to the market price of the Company's Common Stock on the
day of grant, they are issued at an exercise price which is at a higher price
than the exercise price of the original grant. Options vest 50% after one year
and become fully exercisable after two years. Restored options are fully
exercisable after six months and expire at the date of the original grant. All
of the option grants listed below are restored options.
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.I. Bijur 05/05/99 7,506 0.079% 65.06250 05/09/99 1,726
05/05/99 8,002 0.085% 65.06250 01/02/00 50,733
05/05/99 4,229 0.045% 65.06250 06/22/00 35,354
05/05/99 3,288 0.035% 65.06250 06/28/01 36,957
05/05/99 9,202 0.097% 65.06250 06/26/02 103,430
05/05/99 7,040 0.074% 65.06250 06/24/04 79,130
05/05/99 4,911 0.052% 65.06250 02/24/05 55,200
05/05/99 10,782 0.114% 65.06250 06/23/05 121,190
05/05/99 69,770 0.737% 65.06250 06/28/06 784,215
05/05/99 67,781 0.716% 65.06250 07/01/07 761,858
05/05/99 1,700 0.018% 65.06250 07/02/07 19,108
07/09/99 2,286 0.024% 66.15625 06/28/06 26,769
07/09/99 66,659 0.704% 66.15625 07/01/07 780,577
07/09/99 1,671 0.018% 66.15625 07/02/07 19,567
11/18/99 1,143 0.012% 65.90625 01/02/00 3,132
11/18/99 3,646 0.039% 65.90625 06/22/00 22,715
11/18/99 5,018 0.053% 65.90625 06/28/01 52,789
11/18/99 2,889 0.031% 65.90625 06/26/02 34,148
11/18/99 12,303 0.130% 65.90625 06/25/03 145,421
11/18/99 4,749 0.050% 65.90625 06/24/04 56,133
11/18/99 10,640 0.112% 65.90625 06/23/05 125,765
11/18/99 32,059 0.339% 65.90625 06/28/06 378,937
11/18/99 98,429 1.040% 65.90625 06/26/08 1,163,431
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Number
of
Securities
Underlying % of Total Exercise or Grant Date
Options Options Base Expiration Present
Name Date Granted(#) Granted Price($/Sh.) Date Value $*
- ---- ---- ---------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P.J. Lynch 05/05/99 5,570 0.059% 65.06250 05/09/99 1,281
05/05/99 7,362 0.078% 65.06250 01/02/00 46,675
05/05/99 5,932 0.063% 65.06250 06/22/00 49,592
05/05/99 6,002 0.063% 65.06250 06/28/01 67,462
05/05/99 7,400 0.078% 65.06250 06/26/02 83,176
05/05/99 7,672 0.081% 65.06250 06/25/03 86,233
05/05/99 10,136 0.107% 65.06250 06/24/04 113,929
05/05/99 4,181 0.044% 65.06250 02/24/05 46,994
05/05/99 17,914 0.189% 65.06250 06/23/05 201,353
05/05/99 17,975 0.190% 65.06250 06/28/06 202,039
05/05/99 17,144 0.181% 65.06250 07/01/07 192,699
05/05/99 909 0.010% 65.06250 07/02/07 10,217
07/09/99 16,616 0.176% 66.15625 07/01/07 194,573
11/12/99 4,923 0.052% 63.75000 06/28/06 55,630
11/12/99 353 0.004% 63.75000 07/01/07 3,989
11/12/99 953 0.010% 63.75000 07/01/07 10,769
11/12/99 27,875 0.295% 63.75000 06/26/08 314,988
J.J. O'Connor 03/30/99 12,605 0.133% 58.34750 01/02/08 123,529
10/04/99 12,762 0.135% 63.34375 01/02/08 142,807
G.F. Tilton 05/05/99 6,197 0.065% 65.06250 05/09/99 1,425
05/05/99 6,319 0.067% 65.06250 01/02/00 40,062
05/05/99 5,771 0.061% 65.06250 06/22/00 48,246
05/05/99 5,875 0.062% 65.06250 06/28/01 66,035
05/05/99 7,258 0.077% 65.06250 06/26/02 81,580
05/05/99 10,218 0.108% 65.06250 06/25/03 114,850
05/05/99 9,881 0.104% 65.06250 06/24/04 111,062
05/05/99 4,099 0.043% 65.06250 02/24/05 46,073
05/05/99 21,560 0.228% 65.06250 06/23/05 242,334
05/05/99 24,787 0.262% 65.06250 06/28/06 278,606
05/05/99 16,067 0.170% 65.06250 07/01/07 180,593
05/05/99 1,090 0.012% 65.06250 07/02/07 12,252
07/09/99 15,799 0.167% 66.15625 07/01/07 185,006
07/09/99 1,072 0.011% 66.15625 07/02/07 12,553
07/09/99 971 0.010% 66.15625 06/26/08 11,370
11/12/99 22,011 0.233% 63.75000 06/26/08 248,724
W.M. Wicker 05/05/99 11,661 0.123% 65.06250 08/04/07 131,070
<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, we chose the
Black-Scholes option pricing model to estimate the grant date present value of
the options set forth in this table. Our 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. We made the following
assumptions for purposes of calculating the Grant Date Present Value: the
option term is assumed to be two years, volatility at 29.1%, dividend yield of
3.0% per share and interest rate of 5.4%. The real value of the options in
this table depends solely upon the actual performance of the Company's Common
Stock during the applicable period.
</FN>
</TABLE>
22
<PAGE>
Aggregated Option Exercises in 1999 and Year-End Option Values
<TABLE>
<CAPTION>
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 44,270 2,905,925 186,705 588,342 -0- -0-
P.J. Lynch 11,396 743,254 102,627 134,664 -0- -0-
J.J. O'Connor 2,581 158,119 28,345 111,021 -0- 13,061
G.F. Tilton 11,636 759,957 112,925 119,114 -0- -0-
W.M. Wicker 1,371 89,201 53,697 79,261 -0- -0-
<FN>
* Includes options reported in the chart entitled "Option Grants in 1999".
** Based on the 1999 year-end price of $54.3125.
</FN>
</TABLE>
Performance Graph
The following graph compares 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 the five-year period from December 31, 1994 through December 31, 1999.
<TABLE>
<CAPTION>
Five-Year Comparison
Cumulative Return to Shareholders
(Price Appreciation and the Reinvestment of Dividends)
Texaco versus S&P Indices
DOLLARS (END-OF-PERIOD)
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Texaco $100.00 $137.35 $178.09 $203.60 $204.61 $216.16
S&P 500 $100.00 $137.44 $168.92 $225.20 $289.43 $350.26
S&P Oils $100.00 $134.21 $165.90 $206.05 $233.94 $274.69
</TABLE>
23
<PAGE>
Retirement Plan
Approximately 9,800 employees, including the 17 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 retirement benefits. Contributions are paid to
a Master Trustee and to insurance companies for investment.
For purposes of calculating pension benefits for the executive officers
named on page 20, the plan recognizes salary only and does not take into account
other forms of compensation. For the executive officers, salary and bonus for
the last three years are shown in the salary and bonus columns of the Summary
Compensation Table. The Internal Revenue Code provides that qualified plans may
not consider remuneration exceeding $170,000 per year (as indexed for inflation)
for purposes of calculating benefits under the Retirement Plan. The amount of an
employee's retirement benefit 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. In addition to the qualified Retirement Plan, we sponsor
supplemental plans which take into account bonuses paid to a participant and
salary in excess of the Internal Revenue Code limitations.
Retirement Plan Table
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
COVERED REMUNERATION* 15 20 25 30 35 40
- --------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 44,650 $ 51,650 $ 58,650
200,000 45,000 60,000 75,000 89,300 103,300 117,300
400,000 90,000 120,000 150,000 178,600 206,600 234,600
600,000 135,000 180,000 225,000 267,900 309,900 351,900
800,000 180,000 240,000 300,000 357,200 413,200 469,200
1,000,000 225,000 300,000 375,000 446,500 516,500 586,500
1,200,000 270,000 360,000 450,000 535,800 619,800 703,800
1,400,000 315,000 420,000 525,000 625,100 723,100 821,100
1,600,000 360,000 480,000 600,000 714,400 826,400 938,400
1,800,000 405,000 540,000 675,000 803,700 929,700 1,055,700
2,000,000 450,000 600,000 750,000 893,000 1,033,000 1,173,000
<FN>
* "Covered Remuneration" means the highest three-year average salary and highest three-year average
bonus, if any, during the last ten years of employment. The company recognizes the following years
of benefit service for the following individuals as of December 31, 1999: Mr. Bijur, 34; Mr. Lynch, 39;
Mr. O'Connor, 2; Mr. Tilton, 30; and Mr. Wicker, 10. With respect to the plans, annual pension benefits are based on
the non-contributory final pay formula (up to 1.5% of final average covered remuneration 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 Retirement Plan. They do include those additional sums, if any, payable under a Supplemental Retirement Plan to
compensate those employees who have earned annual retirement benefits payable under the Retirement Plan but which are
limited by the Internal Revenue Code.
</FN>
</TABLE>
24
<PAGE>
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTORS FOR THE 2001 ANNUAL MEETING
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You may present a proposal to be considered for inclusion in our 2001 Proxy
Statement, provided we receive it at our principal executive office no later
thanNovember 14, 2000, and that it complies with applicable laws and Securities
and Exchange Commission regulations. In addition, our by-laws allow you to bring
business before the Annual Meeting of Stockholders, if you have given us written
notice 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). Your
notice must include the proposed business and your interest in it, your address,
and your stockholdings.
You may also nominate candidates for election to the Board of Directors at
the stockholders meeting. Our by-laws require you to give written notice to the
Secretary of your intention to do so. We must receive your notice not later than
ninety days before our annual stockholders meeting, or with respect to a special
meeting, by the close of business on the seventh day following the date we first
notify stockholders of the meeting. Your notice of nomination must contain the
information about you and the nominee that is listed in our by-laws. We may
require that a proposed nominee furnish other information to determine that
person's eligibility to serve as director. We cannot consider a nomination which
does not comply with the above procedure.
You should address your proposal or nomination to: Secretary, Texaco Inc.,
2000 Westchester Avenue, White Plains, New York 10650.
Michael H. Rudy
Secretary
March 14, 2000
<PAGE>
[logo]
<PAGE>
<PAGE>
[LOGO]
TEXACO INC.
2000 WESTCHESTER AVENUE
WHITE PLAINS, NY 10650
Admission Ticket
This is your Admission Ticket to Texaco's 2000 Annual Meeting of Stockholders.
The meeting will be held at The Performing Arts Center, Purchase College, The
State University of New York, 735 Anderson Hill Road, Purchase, New York, on
Wednesday, April 26, 2000, at 2:00 p.m. Please present this Admission Ticket at
one of the registration stations where you will be asked to display some form of
personal identification. You should enter through the underpass entrance of The
Performing Arts Center.
2000 Proxy Voting
Your Vote is Important
You can vote by telephone, through the Internet, or by mail. Please refer to the
voting instructions below.
The proxies will vote the shares represented by this Proxy as you direct. If you
do not tell them how to vote, they will vote FOR items 1 and 2, and AGAINST
items 3 and 4, and as they determine on other matters that may properly come
before the meeting or any adjournment of the meeting.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
Have your proxy card in hand when you call. You will be prompted to enter your
12-digit Control Number, which is located below, and then follow the simple
instructions the Vote Voice provides you.
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your
proxy card in hand when you access the website. You will be prompted to enter
your 12-digit Control Number, which is located below, to obtain your records and
create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Texaco Inc., c/o ADP, 51 Mercedes Way, Edgewood,
NY 11717.
If you vote by phone or vote using the Internet,
please do not mail your proxy.
THANK YOU FOR VOTING.
TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS: [X] TEXPRX KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
TEXACO PROXY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
[ ] Discontinue mailing the Annual Report to my account
because I have a copy available to me from another source.
<TABLE>
<CAPTION>
DIRECTORS RECOMMEND A VOTE FOR ITEMS 1 AND 2. DIRECTORS RECOMMEND A VOTE AGAINST
Election of Directors for the terms indicated in ITEMS 3 and 4 For Against Abstain
the Proxy Statement:
<S> <C> <C> <C> <C>
1. Nominees are: (01) A.C. Baillie, (02) E.M. Carpenter,
(03) F.G. Jenifer, (04) T.A. Vanderslice
For Withhold For All To withhold authority to vote, mark 3. Stockholder Proposal Relating
All All Except "For All Except" and write the to Classification of the
nominee's number on the line below. Board of Directors: [ ] [ ] [ ]
[ ] [ ] [ ] -----------------------------------
Vote On Proposals For Against Abstain
2. Approval of Arthur Andersen LLP
as Auditors for the year 2000: [ ] [ ] [ ] 4. Stockholder Proposal Relating to
a Code of Conduct on Worker
Rights [ ] [ ] [ ]
<FN>
- ------------------------------------------------------------ --------------------------------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
</FN>
</TABLE>
[logo]
Texaco Inc.
2000 Westchester Avenue
White Plains, NY 10650
Dear Texaco Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at The Performing Arts Center, Purchase College, The State University of
New York, 735 Anderson Hill Road, Purchase, New York, on Wednesday, April 26,
2000, at 2:00 p.m. If you plan to attend, please carry your admission ticket
(this form) with you to the meeting.
Please keep in mind that your vote is important to us. Whether or not you are
able to attend the meeting in person, please either:
o use our toll-free telephone voting system, or
o use our Internet voting system, or
o mark the attached proxy card to indicate your voting preferences,
then sign, detach and return the proxy card in the accompanying
postage-paid envelope.
I also welcome any comments or questions you have concerning our activities. For
your convenience in providing such comments, we have provided space on the proxy
card below. In view of the large number of comments and questions we generally
receive, we will not be able to respond to them individually. However, I assure
you that we will read each one and that we will cover subjects of general
interest at the meeting or in other materials we send you.
Peter I. Bijur
Chairman of the Board &
Chief Executive Officer
This Proxy is solicited on behalf of the Board of Directors
I hereby appoint P.I. Bijur, M.K. Bush, S. Nunn, C.H. Price II, and each of
them, as my proxies, with full power of substitution. My proxies are authorized
to represent and to vote, as designated on the reverse Proxy, all Common Stock
of Texaco Inc., which I held of record on February 28, 2000, at the Annual
Meeting of Stockholders to be held at The Performing Arts Center, Purchase
College, The State University of New York, 735 Anderson Hill Road, Purchase, New
York, on Wednesday, April 26, 2000, at 2:00 p.m.
For your comments.....
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Signature:_________________________________________
<PAGE>
