Filed Pursuant to Rule 424(b)(2)
Registration Numbers 333-46527 and 333-46527-01
P R O S P E C T U S S U P P L E M E N T
(TO PROSPECTUS DATED FEBRUARY 26, 1998)
$400,000,000
[LOGO]
TEXACO CAPITAL INC.
5.50% NOTES DUE 2009
PAYMENT OF PRINCIPAL AND INTEREST IS UNCONDITIONALLY GUARANTEED BY
TEXACO INC.
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The Notes are unsecured obligations of Texaco Capital. The Notes will mature
on January 15, 2009. Texaco Capital will pay interest on the Notes on January 15
and July 15 of each year to registered holders of the Notes on the preceding
January 1 and July 1. The first such payment will be made on July 15, 1999.
Texaco Capital has the option to redeem all or a portion of the Notes at any
time at a redemption price equal to the principal amount of Notes being redeemed
plus a make-whole premium, as described under "Description of the Notes".
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
Per Note Total
----------- -----------
Public Offering Price 99.133% $396,532,000
Underwriting Discount 0.650% $ 2,600,000
Proceeds to Texaco Capital (before expenses) 98.483% $393,932,000
The public offering price set forth above does not include accrued interest,
if any. Interest on the Notes will accrue from January 25, 1999, and must be
paid by the purchaser if the Notes are delivered after January 25,1999.
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The underwriters are offering the Notes subject to various conditions. The
underwriters expect to deliver the Notes in book-entry form only through the
facilities of The Depository Trust Company against payment for the Notes in New
York, New York on or about January 25,1999.
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SALOMON SMITH BARNEY
BLAYLOCK & PARTNERS, L.P. MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
ORMES CAPITAL MARKETS, INC. THE WILLIAMS CAPITAL GROUP, L.P.
January 20, 1999
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.
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TABLE OF CONTENTS
Page
-----------
PROSPECTUS SUPPLEMENT
Where You Can Find Additional Information................................................................. S-3
Recent Developments....................................................................................... S-3
Selected Financial Data of Texaco......................................................................... S-5
Ratios of Earnings to Fixed Charges....................................................................... S-6
Description of the Notes.................................................................................. S-6
Underwriting.............................................................................................. S-9
Experts................................................................................................... S-10
Legal Opinions............................................................................................ S-10
PROSPECTUS
Table of Contents......................................................................................... 2
Where You Can Find More Information....................................................................... 2
Documents Incorporated by Reference....................................................................... 3
Texaco Inc................................................................................................ 3
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock
Dividends............................................................................................... 4
Texaco Capital Inc........................................................................................ 4
Use of Proceeds........................................................................................... 4
Plan of Distribution...................................................................................... 4
Description of the Debt Securities........................................................................ 5
Description of Texaco Inc. Common Stock................................................................... 11
Description of Texaco Inc. Preferred Stock................................................................ 11
Description of the Depositary Shares...................................................................... 14
Description of the Warrants............................................................................... 17
Experts................................................................................................... 18
Legal Opinions............................................................................................ 18
S-2
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to these documents. Since February 26, 1998, the date of the prospectus
attached to this prospectus supplement, Texaco has filed with the SEC (1) its
Annual Report on Form 10-K for the year ended December 31, 1997, (2) its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30,
1998 and September 30, 1998, and (3) its Current Reports on Form 8-K filed on
March 5, 1998, April 1, 1998, April 23, 1998, April 29, 1998, July 1, 1998, July
21, 1998, September 3, 1998, October 21, 1998, November 30, 1998, and January 8,
1999. We are incorporating these documents by reference in this prospectus
supplement.
RECENT DEVELOPMENTS
INVENTORY AND ASSET WRITE-DOWNS AND RESTRUCTURING COSTS
Our fourth quarter 1998 results will include net special charges of
approximately $350 million, comprised of:
- inventory write-downs of approximately $170 million in businesses in
Europe, the United States and the operating areas of our affiliate,
Caltex, to recognize current values of crude oil, natural gas and refined
product prices;
- asset write-downs of $100 million relating to the impairment of upstream
investments in the United States, Canada and the U.K. North Sea;
- employee separation costs of $95 million relating to the restructuring of
our upstream and natural gas businesses, our corporate center
restructuring and other cost-cutting initiatives; and
- tax benefits of $20 million on asset sales.
Excluding these special charges, we estimate that results for the fourth
quarter will be in the range of $.13 to $.16 per share, as the result of
continuing low crude oil prices, weak refining margins and currency translation
losses of $65 million in the Asian operations of Caltex.
Also, Caltex elected to adopt SOP 98-5, an accounting rule adopted by the
American Institute of Certified Public Accountants, which caused Caltex to
change the accounting for start-up costs of its Thailand refinery. As a result,
our first quarter 1998 earnings will be restated to include an after-tax charge
of $25 million.
REDUCTION IN 1999 CAPITAL AND EXPLORATORY SPENDING AND COST REDUCTIONS
As a result of the current price environment, we have revised our 1999
capital and exploratory spending plan from $4.3 billion to $3.7 billion,
including spending by our subsidiaries and affiliates.
Also, significant efforts are underway to accelerate to 1999 the realization
of $650 million annual cost and expense reductions that we announced in December
1998.
YEAR 2000 READINESS
The Year 2000 ("Y2K") problem concerns the inability of information and
technology-based operating systems to properly recognize and process
date-sensitive information beyond December 31, 1999. This could result in
systems failures and miscalculations, which could cause business disruptions.
Equipment that uses a date, such as computers and operating control systems, may
be affected. This includes equipment used by our customers and suppliers, as
well as by utilities and governmental entities that provide critical services to
us.
STATE OF READINESS We started working on the Y2K problem in early 1995. By
early 1996, we formed a Business Unit Steering Team and a Corporate Year 2000
Office. Our progress is reported
S-3
monthly to our Chief Executive Officer, and quarterly to our Board of Directors.
Additionally, we are actively performing both internal audits and external
reviews to ensure that we reach our objectives.
We recognize that the Y2K issue affects every aspect of our business,
including computer software, computer hardware, telecommunications, industrial
automation and relationships with our suppliers and customers. Our Y2K effort
has included an extensive program to educate our employees, and development of
detailed guidelines for project management, testing, and remediation. Each
business unit is periodically graded on their progress toward reaching their
project milestones. Our major affiliates are undertaking similar programs.
In our computers and computer software, most of the problems we have found
involve our corporate financial software applications. Approximately 95% of
these need some type of modification or upgrade. In our industrial automation
systems, which we use in our refinery, lubricant plant, gas plant and oil well
operations to monitor, control and log data about the processes, approximately
5% need modification or upgrade. The majority of these are auxiliary systems,
such as laboratory analyzers and alarm logging functions, but several of the
higher level supervisory data acquisition systems and flow metering systems also
require upgrades. At the end of 1998, we were approximately 80% through the
effort of inventorying, assessing and fixing our systems. Almost all systems
should be ready by the end of the first quarter of 1999, but a few will be
delayed until later in 1999 as we wait for vendor upgrades. We are also
progressing in our reviews with critical suppliers and customers as to their Y2K
state of readiness.
COSTS Because we began early, we have been able to do most of the work
ourselves. This has kept our costs low, and we project that we will spend no
more than $75 million on making our systems Y2K ready. As of September 30, 1998,
we have incurred costs of approximately $35 million.
RISKS Certain Y2K risk factors which could have a material adverse effect
on our results of operations, liquidity, and financial condition include, but
are not limited to: failure to identify critical systems which will experience
failures, errors in efforts to correct problems, unexpected failures by key
business suppliers and customers, extended failures by public and private
utility companies or common carriers supplying services to us, and failures in
global banking systems and capital markets.
We routinely analyze all of our production and automation systems for
potential failures and appropriate responses are identified and documented. If
we have missed a potential Y2K problem, it will most likely be in our financial
software, or in auxiliary systems in our operations, such as laboratory
analyzers and alarm logging functions, where we have found the majority of the
problems. We do not anticipate that a problem in these areas will have a
significant impact on our ability to pursue our primary business objectives. Any
problems in our primary industrial automation systems can be dealt with using
our existing engineering procedures.
The worst case scenario would be that our failure or failures by our
important suppliers and customers to correct material Y2K problems could result
in serious disruptions in normal business activities and operations. Such
disruptions could prevent us from producing crude oil and natural gas, and
manufacturing and delivering refined products to customers. For example, failure
by a utility company to deliver electricity to our producing operations could
cause us to shut-in production leading to lost sales and income. While we do not
expect a worst case scenario, if it occurs, Y2K failures, if not corrected on a
timely basis or otherwise mitigated by our contingency plans, could have a
material adverse effect on our results of operations, liquidity and overall
financial condition.
CONTINGENCY PLANS We are well into our program to identify and assess our
Y2K readiness and the Y2K readiness of our critical and important suppliers and
customers. We will either seek alternative suppliers and customers for those we
assess as risky, or we will develop and test contingency plans. We have begun to
develop these contingency plans. In addition, we are reviewing our existing
business resumption plans. We expect to arrange alternative suppliers or develop
and complete the testing of contingency plans no later than July 1, 1999.
S-4
FORWARD-LOOKING STATEMENTS
Portions of the foregoing discussion of recent developments contain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are based on our current expectations, estimates and projections.
Therefore, they could ultimately prove to be inaccurate. Final fourth quarter
results may be different when actual results are determined. Our plans for
capital and exploratory spending and for cost and expense reduction may change
if business conditions, such as energy prices and world economic conditions,
change. Factors which could affect our ability to be Y2K compliant by the end of
1999 include: the failure of our customers and suppliers, governmental entities
and others to achieve compliance and the inaccuracy of certifications received
from them; our inability to identify and remediate every possible problem; and a
shortage of necessary programmers, hardware and software.
SELECTED FINANCIAL DATA OF TEXACO
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------------
(MILLIONS OF DOLLARS, EXCEPT WHERE NOTED) 1998 1997 1996 1995 1994 1993
- ---------------------------------------------------- ------------- --------- --------- --------- --------- ---------
Revenues from continuing operations................. $ 23,898 $ 46,667 $ 45,500 $ 36,787 $ 33,353 $ 34,071
Income (loss) before cumulative effect of accounting
change
Continuing operations............................. $ 816 $ 2,664 $ 2,018 $ 728 $ 979 $ 1,259
Discontinued operations........................... -- -- -- -- (69) (191)
Cumulative effect of accounting change............ -- -- -- (121) -- --
------------- --------- --------- --------- --------- ---------
Net income........................................ $ 816 $ 2,664 $ 2,018 $ 607 $ 910 $ 1,068
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Net income per common share (dollars)
Basic
Income (loss) before cumulative effect of
accounting change
Continuing operations............................. $ 1.47 $ 4.99 $ 3.77 $ 1.29 $ 1.72 $ 2.24
Discontinued operations........................... -- -- -- -- (.14) (.37)
Cumulative effect of accounting change............ -- -- -- (.24) -- --
------------- --------- --------- --------- --------- ---------
Net income........................................ $ 1.47 $ 4.99 $ 3.77 $ 1.05 $ 1.58 $ 1.87
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Diluted
Income from continuing operations................. $ 1.46 $ 4.87 $ 3.68 $ 1.28 $ 1.72 $ 2.21
Net income........................................ $ 1.46 $ 4.87 $ 3.68 $ 1.05 $ 1.58 $ 1.87
Nonowner changes in equity.......................... $ 818 $ 2,601 $ 1,863 $ 592 $ 972 $ 1,168
Cash dividends per common share (dollars)........... $ 1.35 $ 1.75 $ 1.65 $ 1.60 $ 1.60 $ 1.60
Total cash dividends paid on common stock........... $ 716 $ 918 $ 859 $ 832 $ 830 $ 828
At end of period:
Total assets........................................ $ 28,495 $ 29,600 $ 26,963 $ 24,937 $ 25,505 $ 26,626
Debt and capital lease obligations
Short-term........................................ $ 899 $ 885 $ 465 $ 737 $ 917 $ 669
Long-term......................................... 6,061 5,507 5,125 5,503 5,564 6,157
------------- --------- --------- --------- --------- ---------
Total debt and capital lease obligations.......... $ 6,960 $ 6,392 $ 5,590 $ 6,240 $ 6,481 $ 6,826
------------- --------- --------- --------- --------- ---------
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S-5
RATIOS OF EARNINGS TO FIXED CHARGES
In addition to the ratios of earnings to fixed charges for the periods set
forth in the attached prospectus, Texaco's ratios of earnings to fixed charges
for the year ended December 31, 1997 was 6.04 and for the nine months ended
September 30, 1998 was 3.00.
DESCRIPTION OF THE NOTES
GENERAL
Each Note will mature on January 15, 2009.
The Notes will be limited to $400,000,000 aggregate principal amount.
Although the Indenture provides that Texaco Capital Inc. ("Texaco Capital")
may terminate its obligations with respect to any Series of Securities by making
certain deposits in trust with the Trustee, Texaco Capital has agreed that it
will not exercise this right with respect to the Notes.
The Notes do not contain event risk provisions designed to require Texaco
Capital to redeem the Notes, reset the interest rate or take other actions in
response to highly leveraged transactions, change in credit rating or other
similar occurrences.
GUARANTIES
Texaco Inc. will unconditionally guarantee the due and punctual payment of
the principal of, and interest on the Notes, when and as the same shall become
due and payable, whether at maturity or otherwise.
INTEREST
The interest rate on the Notes will be 5.50% per annum. Interest will accrue
from January 25, 1999, and will be payable semiannually on January 15 and July
15, commencing July 15, 1999, to the persons in whose names the Notes are
registered at the close of business on the preceding January 1 and July 1,
respectively.
OPTIONAL REDEMPTION
Texaco Capital has the option to redeem the Notes in whole or in part at any
time, at a redemption price equal to the greater of (1) 100% of the principal
amount of the Notes to be redeemed and (2) the sum of the present values of the
Remaining Schedule Payments (as defined below) thereon, discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 15 basis points, plus, in each
case, accrued interest on the principal amount being redeemed to the redemption
date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with us.
S-6
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the arithmetic average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (2) if such release (or any successor release) is not
published or does not contain such prices on such business day, (a) the
arithmetic average of the Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations, or (b) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer" means each of Salomon Smith Barney Inc.,
Blaylock & Partners, L.P., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Morgan Stanley & Co. Incorporated and their respective successors; PROVIDED,
HOWEVER, that if any of the foregoing or their successors shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), we will substitute for them another nationally recognized investment
bank that is a Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the arithmetic average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer by 3:30 p.m. New York
time on the third business day preceding such redemption date.
"Remaining Scheduled Payments" means, with respect to any Note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; PROVIDED, HOWEVER, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
We will mail any notice of a redemption between 30 to 60 days before the
redemption dates to holders of Notes to be redeemed. If less than all the Notes
are to be redeemed, the particular Notes to be redeemed will be selected by the
Trustee by lot or by such other method as the Trustee deems fair and
appropriate. Unless Texaco Capital defaults in payment of the redemption price,
on and after the redemption date, interest will cease to accrue on the Notes or
the portions of the Notes called for redemption.
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more Global Securities. We will
deposit each Global Security with, or on behalf of, The Depository Trust Company
("DTC"). Each Global Security will be registered in the name of a nominee of
DTC. Except under circumstances described below, we will not issue the Notes in
definitive form.
Upon the issuance of a Global Security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
Underwriters with the respective principal amounts of the Notes represented by
the Global Security. Ownership of beneficial interests in a Global Security will
be limited to persons that have accounts with DTC or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in a Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of persons other than
participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair a purchaser's ability to transfer beneficial
interests in a Global Security.
S-7
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by that Global Security for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have Notes represented by that Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
owners or holders of Notes under the Indenture.
We will make principal and interest payments on Notes registered in the name
of DTC or its nominee to DTC or its nominee, as the case may be, as the
registered owner of the relevant Global Security. None of Texaco Capital, the
Trustee, any paying agent or the registrar for the Notes will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the relevant Global Security as shown on the records of DTC or its
nominee. We also expect that payments by participants to owners of beneficial
interests in a Global Security held through such participants will be governed
by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as a depositary and we
do not appoint a successor depositary within 90 days, we will issue Notes in
definitive form in exchange for the entire Global Security. In addition, we may
at any time and in our sole discretion determine not to have Notes represented
by a Global Security and, in such event, we will issue Notes in definitive form
in exchange for the entire Global Security. In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
in definitive form of Notes represented by such Global Security equal in
principal amount to such beneficial interest and to have such Notes registered
in the owner's name. Notes so issued in definitive form will be issued as
registered Notes in denominations of $1,000 and integral multiples thereof,
unless otherwise specified by us.
S-8
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and we have agreed to sell to them, severally, the
respective principal amounts of Notes set forth opposite their respective names:
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
- ---------------------------------------------------------- ----------------
Salomon Smith Barney Inc. ................................ $200,000,000
Blaylock & Partners, L.P. ................................ 60,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated ....... 60,000,000
Morgan Stanley & Co. Incorporated......................... 60,000,000
Ormes Capital Markets, Inc. .............................. 10,000,000
The Williams Capital Group, L.P. ......................... 10,000,000
----------------
Total................................................. $400,000,000
----------------
----------------
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the Notes
if any are taken.
The Underwriters propose to offer part of the Notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and part to certain dealers at a price that represents a concession
not in excess of 0.40% of the principal amount under the public offering price.
Any Underwriter may allow, and such dealers may reallow, a discount not in
excess of 0.25% of the principal amount to certain other dealers.
The Underwriters have advised us that they intend to make a market in the
Notes, but that they are not obligated to do so and may discontinue making a
market at any time without notice. We currently have no intention to list the
Notes on any securities exchange, and we can give you no assurance as to the
liquidity of, or trading market for, the Notes.
In connection with the offering and sale of the Notes, Salomon Smith Barney
Inc., on behalf of the Underwriters, may engage in overallotment, stabilizing
transactions and syndicate covering transactions in accordance with Regulation M
under the Exchange Act. Overallotment involves sales in excess of the offering
size, which creates a short position for the Underwriters. Stabilizing
transactions permit bids to purchase the Notes in the open market for the
purpose of pegging, fixing or maintaining the price of the Notes. Syndicate
covering transactions involve purchases of the Notes in the open market after
the distribution has been completed in order to cover short positions. Such
stabilizing transactions and syndicate covering transactions may cause the price
of the Notes to be higher than it would otherwise be in the absence of such
transactions. Such activities, if commenced, may be discontinued at any time.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will not exceed $150,000.
We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
S-9
EXPERTS
The audited consolidated financial statements incorporated by reference in
the Annual Report of Texaco Inc. for the fiscal year ended December 31, 1997
filed on Form 10-K, incorporated herein by reference, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
LEGAL OPINIONS
The validity of the Notes we are offering will be passed upon for Texaco
Capital and Texaco Inc. by Paul R. Lovejoy, Associate General Counsel of Texaco
Inc., or such other attorney of Texaco Inc. as we may designate, and for the
Underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017.
S-10
PROSPECTUS
TEXACO INC.
AND
TEXACO CAPITAL INC.
GUARANTEED DEBT SECURITIES
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
This Prospectus relates to the following securities:
(i) debt securities ("Debt Securities") to be issued by Texaco Capital
Inc. ("Texaco Capital"), which will be guaranteed by Texaco Inc. ("Texaco
Inc.");
(ii) debt securities to be issued by Texaco Inc. ("Texaco Inc. Debt
Securities");
(iii) common stock to be issued by Texaco Inc. ("Common Stock");
(iv) preferred stock to be issued by Texaco Inc. ("Preferred Stock");
(v) warrants to purchase Debt Securities, Texaco Inc. Debt Securities,
Common Stock or Preferred Stock ("Warrants") and
(vi) depositary shares relating to Preferred Stock ("Depositary Shares"
and together with Debt Securities, Texaco Inc. Debt Securities, Common Stock
and Preferred Stock, "Securities").
The specific terms of any such offering will be described in a supplement to
this Prospectus. The net proceeds from such offerings will not exceed
$1,250,000,000.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Securities may be offered directly to investors, through dealers, through
underwriters, or through agents designated from time to time, as set forth in
the Prospectus Supplement. Net proceeds to Texaco Capital or Texaco Inc. will be
the purchase price in the case of a dealer, the public offering price less
discount in the case of an underwriter or the bid purchase price less commission
in the case of an agent--in each case less other expenses attributable to
issuance and distribution. See "Plan of Distribution" for possible
indemnification arrangements for dealers, underwriters and agents.
This Prospectus and the Prospectus Supplement do not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to whom it is unlawful to make such offer in
such jurisdiction.
February 26, 1998
TABLE OF CONTENTS
PAGE
-----
Where You Can Find More Information........................................................................ 2
Documents Incorporated by Reference........................................................................ 3
Texaco Inc. ............................................................................................... 3
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends... 4
Texaco Capital Inc. ....................................................................................... 4
Use of Proceeds............................................................................................ 4
Plan of Distribution....................................................................................... 4
Description of the Debt Securities......................................................................... 5
Description of Texaco Inc. Common Stock.................................................................... 11
Description of Texaco Inc. Preferred Stock................................................................. 11
Description of the Depositary Shares....................................................................... 14
Description of the Warrants................................................................................ 17
Experts.................................................................................................... 18
Legal Opinions............................................................................................. 18
WHERE YOU CAN FIND MORE INFORMATION
Texaco Inc. is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy any reports, statements or other information filed by Texaco at
the public reference rooms maintained by the SEC at its principal offices at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, in Washington, D.C. 20549
and its regional offices at Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300,
New York, New York 10048. Texaco's SEC filings are also available to the public
from commercial document retrieval services, from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates
and at the web site maintained by the SEC at "http://www.sec.gov". Such material
should also be available for inspection at the library of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
SEPARATE FINANCIAL INFORMATION FOR TEXACO CAPITAL IS NOT INCLUDED HEREIN AND
WILL NOT BE INCLUDED IN ANY REPORTS FILED PURSUANT TO THE EXCHANGE ACT, AS
TEXACO CAPITAL IS WHOLLY OWNED BY TEXACO INC., IT ESSENTIALLY HAS NO INDEPENDENT
OPERATIONS, AND ANY DEBT SECURITIES ISSUED BY TEXACO CAPITAL WILL BE FULLY AND
UNCONDITIONALLY GUARANTEED BY TEXACO INC.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS. NEITHER TEXACO CAPITAL NOR TEXACO INC. HAS AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS IS DATED FEBRUARY 18, 1998. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN SUCH DATE AND NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ISSUANCE OF ANY SECURITIES UNDER IT SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
2
DOCUMENTS INCORPORATED BY REFERENCE
The SEC rules allow Texaco to "incorporate by reference" information into
this Prospectus, which means important information may be disclosed to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Prospectus, except for
any information superseded by information in (or incorporated by reference in)
this Prospectus. This Prospectus incorporates by reference the documents set
forth below that have been previously filed with the SEC. These documents
contain important information about Texaco and its finances.
TEXACO SEC FILINGS (FILE NO. I-27) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
Annual Report on Form 10-K.............................. Year ended December 31, 1996.
Quarterly Reports on Form 10-Q.......................... Quarters ended September 30, 1997, June 30, 1997 and
March 31, 1997.
Current Reports on Form 8-K............................. Filed January 30, 1998; January 23, 1998; November 6,
1997; October 21, 1997; August 19, 1997; July 25,
1997; July 22, 1997; July 17, 1997; June 19, 1997;
April 22, 1997; March 19, 1997; January 29, 1997;
January 23, 1997; January 7, 1997.
Texaco is also incorporating by reference additional documents that it may
file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act between the date of this Prospectus and the termination of the offering
described in this Prospectus.
You can obtain copies of any of the documents described above through Texaco
or the SEC. Documents incorporated by reference are available from Texaco
without charge, excluding all exhibits unless we have specifically incorporated
by reference an exhibit in this Prospectus. You may obtain documents
incorporated by reference in this Prospectus by requesting them in writing or by
telephone from Texaco at the following address:
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Tel: (914) 253-4000
Attention: Secretary
TEXACO INC.
Texaco Inc. was incorporated in Delaware on August 26, 1926 as The Texas
Corporation. Its name was changed in 1941 to The Texas Company and in 1959 to
Texaco Inc. It is the successor of a corporation incorporated in Texas in 1902.
Its principal executive offices are located at 2000 Westchester Avenue, White
Plains, New York 10650; telephone: (914) 253-4000. As used herein, Texaco
(unless the context otherwise indicates) refers to Texaco Inc. and all of its
consolidated subsidiary companies.
Texaco and its affiliates owned 50% or less, represent a vertically
integrated enterprise principally engaged in the worldwide exploration for and
production, transportation, refining and marketing of crude oil, natural gas and
petroleum products.
3
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -------------------------------------------------------------------------
1997 1996 1995(A) 1994(B) 1993(B) 1992(A)(B)
----------------- ------------- ------------- ------------- ------------- -------------
Ratio of earnings to fixed charges of
Texaco Inc. on a total enterprise
basis (unaudited)................... 5.90 5.75 2.55 2.86 2.91 3.10
Ratio of earnings to combined fixed
charges and preferred stock
dividends of Texaco Inc. on a total
enterprise basis (unaudited) (c).... 5.57 5.36 2.40 2.58 2.61 2.75
- ------------------------
(a) Excludes cumulative effect of accounting changes.
(b) Excludes discontinued operations.
(c) Preferred stock dividend requirements have been adjusted to reflect the
pre-tax earnings which would be required to cover the Series C Variable Rate
Cumulative Preferred Stock (redeemed on September 30, 1994), Series E
Variable Rate Cumulative Preferred Stock (exchanged for Common Stock on
November 8, 1994) and Market Auction Preferred Shares dividends and to
exclude the interest portion of the Series B and Series F ESOP Convertible
Preferred Stock dividends.
TEXACO CAPITAL INC.
Texaco Capital Inc., a wholly owned subsidiary of Texaco Inc., is a Delaware
corporation which was incorporated on June 24, 1983. Its principal executive
offices are located at 1013 Centre Road, Wilmington, Delaware 19801; telephone:
(800) 927-9800. The Company is engaged principally in the business of lending
funds borrowed from unrelated persons to Texaco Inc. and its subsidiaries for
general corporate purposes.
USE OF PROCEEDS
The net proceeds from the sale of the Securities by Texaco Inc. will be used
for working capital, for retirement of debt and for other general corporate
purposes. The net proceeds from the sale of any Debt Securities by Texaco
Capital will be lent to Texaco Inc. or its subsidiaries to be used for similar
purposes.
PLAN OF DISTRIBUTION
The Securities may be sold in any one or more of the following ways: (1)
directly to investors, (2) to investors through agents, (3) to dealers, (4)
through underwriting syndicates led by one or more managing underwriters as
Texaco Capital or Texaco Inc. may select from time to time, or (5) through one
or more underwriters acting alone.
If underwriters are utilized in the sale, the obligations of the
underwriters will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all Securities, if any are purchased.
The specific managing underwriter or underwriters, if any, with respect to the
offer and sale of the Securities are set forth on the cover of the Prospectus
Supplement relating to such Securities and the members of the underwriting
syndicate, if any, are named in such Prospectus Supplement. Only underwriters so
named in the Prospectus Supplement are deemed to be underwriters in connection
with the Securities offered thereby and any firms not named in the Prospectus
Supplement are not parties to the Underwriting Agreement in respect of such
Securities, will not be purchasing any of the Securities from Texaco Capital or
Texaco Inc. and will have no direct or indirect participation in the
underwriting of such
4
Securities, although they may participate in the distribution of such Securities
under circumstances where they may be entitled to a dealer's commission. The
Prospectus Supplement also describes the discounts and commissions to be allowed
or paid to the underwriters, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers, if
any, and the exchanges, if any, on which the Securities will be listed.
If offers to purchase are to be solicited by agents designated by Texaco
Capital or Texaco Inc., any such agent may be deemed to be an underwriter as
that term is defined in the Securities Act of 1933, as amended (the "Securities
Act"). Agents involved in the offer or sale of the Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable by
Texaco Capital or Texaco Inc. to such agents set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, Texaco Capital or Texaco Inc. will sell such
Securities to the dealer as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale.
Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, or otherwise, by one or
more firms ("remarketing firms"), acting as principals for their own accounts or
as agents for Texaco Capital or Texaco Inc.. Any remarketing firm will be
identified and the terms of its agreement, if any, with Texaco Capital or Texaco
Inc. and its compensation will be described in the Prospectus Supplement.
Remarketing firms may be deemed to be underwriters in connection with the
Securities remarketed thereby.
If so indicated in the Prospectus Supplement, Texaco Capital or Texaco Inc.
will authorize underwriters, dealers or agents to solicit offers by certain
institutions to purchase the Securities from Texaco Capital or Texaco Inc. at
the price set forth in the Prospectus Supplement pursuant to Delayed Delivery
Contracts providing for payment and delivery at a future date.
Underwriters, agents, dealers and remarketing firms may be entitled under
agreements which may be entered into with Texaco Capital and Texaco Inc. to
indemnification by Texaco Capital and Texaco Inc. against certain civil
liabilities, including liabilities under the Securities Act and may be customers
of, engage in transactions with or perform services for Texaco Capital or Texaco
Inc. in the ordinary course of business.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be offered by Texaco Capital and will be fully and
unconditionally guaranteed by Texaco Inc. The Debt Securities are to be issued
under an indenture dated as of August 24, 1984 as supplemented and restated by
(1) the First Supplemental Indenture dated as of January 31, 1990 (a copy of
which is filed as Exhibit 4.1 to Registration Statement Nos. 33-33303 and
33-33303-01, filed on February 1, 1990), (2) the First Supplement to the First
Supplemental Indenture dated as of October 11, 1990 (a copy of which is filed as
Exhibit 4.1(a) to Texaco Inc.'s Current Report on Form 8-K, dated October 12,
1990 and filed on October 15, 1990), and (3) the Second Supplement to the First
Supplemental Indenture, dated as of August 5, 1997, (a copy of which is filed as
Exhibit 4.1(b) to Texaco Inc.'s Form 10-Q for the quarterly period ended June
30, 1997, and filed on August 13, 1997) (as so supplemented and amended, the
"Indenture") among Texaco Capital, Texaco Inc. and The Chase Manhattan Bank, as
Trustee (the "Trustee"). The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all provisions of the Indenture. Unless otherwise
defined herein, all capitalized terms shall have the definitions set forth in
the Indenture.
The following description of the Indenture is subject to the detailed
provisions of such Indenture; whenever particular provisions of the Indenture
are referred to, such provisions are incorporated by
5
reference as a part of the statement made, and the statement is qualified in its
entirety by such reference. Whenever a defined term is referred to and not
defined under "Description of the Debt Securities", the definition thereof is
contained in the Indenture.
The Indenture provides that, in addition to the Debt Securities offered
hereby, additional Debt Securities may be issued thereunder without limitation
as to aggregate principal amount, but subject to limitations from time to time
established by Texaco Capital's Board of Directors.
Unless specified in the Prospectus Supplement, Debt Securities offered by
Texaco Capital hereby will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of Texaco Capital. The Guaranties will rank equally
with all other unsecured and unsubordinated indebtedness of Texaco Inc.
Reference is made to the Prospectus Supplement for the following terms of
the Debt Securities being offered hereby: (1) the designation of such Debt
Securities; (2) the aggregate principal amount and currency or currency unit of
such Debt Securities; (3) the denominations in which such Debt Securities are
authorized to be issued; (4) the percentage of their principal amount at which
such Debt Securities will be issued; (5) the date on which such Debt Securities
will mature; (6) if the Debt Securities are to bear interest, the rate per annum
at which such Debt Securities will bear interest (or the method by which such
rate will be determined); (7) the times at which such interest, if any, will be
payable or the manner of determining the same; (8) the date, if any, after which
such Debt Securities may be redeemed or purchased and the redemption or purchase
price; (9) the sinking fund requirements, if any; (10) special United States
federal income tax considerations, if any; (11) whether such Debt Securities are
to be issued in the form of one or more temporary or permanent Global Securities
and, if so, the identity of the Depositary for such Global Securities; (12)
information with respect to book-entry procedures, if any; (13) the manner in
which the amount of any payments of principal and interest on the Debt
Securities determined by reference to an index are determined; and (14) any
other terms of the Debt Securities not inconsistent with the Indenture.
The Indenture does not contain any provisions which may afford holders of
the Securities protection in the event of a highly leveraged transaction,
although such a provision could be added to the Indenture in the future with
respect to the Securities or any series thereof, in which event a description
thereof will be included in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the Prospectus Supplement, the Debt Securities
of a series will be issuable in registered form without coupons ("Registered
Securities") or in the form of one or more global securities ("Global
Securities"), as described below under "Global Securities". Unless otherwise
provided in an applicable Prospectus Supplement with respect to a series of Debt
Securities, Registered Securities denominated in U.S. dollars will be issued
only in denominations of $1,000 or any integral multiple thereof. One or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the aggregate principal amount of outstanding Debt Securities of the
series represented by such Global Security. The Prospectus Supplement relating
to a series of Debt Securities denominated in a foreign or composite currency
will specify the denominations thereof.
Unless otherwise indicated in the Prospectus Supplement, Registered
Securities (other than a Global Security) may be presented for registration of
transfer (with the form of transfer duly executed), at the office of the
Registrar or at the office of any transfer agent designated by Texaco Capital
for such purpose with respect to any series of Debt Securities and referred to
in an applicable Prospectus Supplement, without service charge and upon payment
of any taxes and other governmental charges as described in the Indenture. Such
transfer or exchange will be effected upon the Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request. Texaco Capital has initially appointed the
Trustee as Registrar under the Indenture. If a Prospectus Supplement refers to
any transfer agents (in addition to the Registrar) initially designated by
Texaco Capital with
6
respect to any series of Registered Securities, Texaco Capital may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except that Texaco Capital
will maintain a transfer agent in the City of New York. Texaco Capital may at
any time designate additional transfer agents with respect to any series of Debt
Securities.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest, if any, on Registered
Securities (other than a Global Security) will be made at the office of such
Paying Agent or Paying Agents as Texaco Capital may designate from time to time,
except that at the option of Texaco Capital, payment of any interest may be made
(i) by check mailed to the address of the person entitled thereto as such
address shall appear in the register or (ii) by wire transfer to an account
maintained by the person entitled thereto as specified in the register. Unless
otherwise indicated in an applicable Prospectus Supplement, payment of any
installment of interest on Registered Securities will be made to the person in
whose name such Debt Security is registered at the close of business on the
regular Record Date for such interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of the Trustee in the City of New York will be designated as
Texaco Capital's sole Paying Agent for payments with respect to Registered
Securities.
All moneys paid by Texaco Capital to a Paying Agent for the payment of
principal of (and premium, if any) and interest, if any, on any Debt Security
which remains unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to Texaco Capital and
the Holder of such Debt Security will thereafter look only to Texaco Capital for
payment thereof.
GUARANTIES
Texaco Inc. will unconditionally guarantee the due and punctual payment of
the principal of, (and premium, if any) and interest, if any, on the Debt
Securities issued by Texaco Capital, when and as the same shall become due and
payable, whether at maturity or upon redemption, declaration or otherwise.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
fully registered global Debt Securities (a "Global Security") that will be
deposited with a depositary (the "Depositary"), or with a nominee for a
Depositary identified in the Prospectus Supplement relating to such series. In
such case, one or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding Debt Securities of such series. Unless and until it is exchanged
in whole or in part for Debt Securities in definitive registered form, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the Prospectus Supplement relating to such series. Texaco Capital
anticipates that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial
7
interests in such Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary
for such Global Security (with respect to interests of participants) or by
participants or persons that hold through participants (with respect to
interests of persons other than participants).
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a Global
Security will not be entitled to have the Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of such Debt Securities in definitive form and will
not be considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest, if any, on Debt
Securities represented by a Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Global Security. None of Texaco
Capital, Texaco Inc., the Trustee or any Paying Agent for such Debt Securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in such Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Texaco Capital expects that the Depositary for any Debt Securities
represented by a Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depositary. Texaco Capital also expects that payments by participants to owners
of beneficial interest in such Global Security held through such participants
will be governed by standing instructions and customary practices, as is now the
case with the securities held for the accounts of customers registered in
"street names" and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by Texaco Capital within ninety days, Texaco Capital
will issue such Debt Securities in definitive form in exchange for such Global
Security. In addition, Texaco Capital may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of such
series in definitive form in exchange therefor.
CERTAIN LIMITATIONS ON LIENS
The Indenture provides that Texaco Inc. shall not, and it shall not permit
any Principal Subsidiary (defined as a Subsidiary (i) substantially all of the
assets of which are located, and substantially all of the operations of which
are conducted, in the United States, (ii) which owns a Principal Property,
defined as an important oil and gas producing property onshore or offshore the
United States or any important refinery or manufacturing plant located in the
United States and (iii) in which Texaco Inc.'s direct or indirect net investment
exceeds $100,000,000) to, incur a Lien to secure a Long-Term Debt on a Principal
Property, any Capital Stock or a Long-Term Debt ("Debt") of a Principal
Subsidiary unless: (1) the Lien equally and ratably secures the Debt Securities
and the secured Debt; (2) the Lien is in existence at the time a corporation
merges into or consolidates with Texaco Inc. or a Principal Subsidiary or
becomes a Principal Subsidiary; (3) the Lien is on a Principal Property at the
time Texaco Inc. or a Principal Subsidiary acquires the Principal Property; (4)
the Lien secures Debt incurred to finance all or some of the purchase price of a
Principal Property or a Principal Subsidiary; (5) the Lien secures Debt incurred
to finance all or some of the costs of Improvements on a Principal Property; (6)
the Lien secures Debt of a Principal Subsidiary owing to Texaco Inc. or another
Principal Subsidiary; (7) the Lien extends, renews or replaces in whole or
8
in part a Lien permitted by any of clauses (1) through (6); or (8) the secured
Debt plus all other Debt secured by Liens on Principal Properties, Capital Stock
or Debt of a Principal Subsidiary at the time does not exceed 10% of Texaco's
Consolidated Net Tangible Assets. However, Debt secured by a Lien permitted by
any of clauses (1) through (7) shall be excluded from all other Debt in the
determination.
LIMITATIONS ON SALE AND LEASEBACK
The Indenture provides that Texaco Inc. shall not, and it shall not permit
any Principal Subsidiary to, enter into a Sale-Leaseback Transaction unless: (1)
the lease has a term of three years or less; (2) the lease is between Texaco
Inc. and a Principal Subsidiary or between Principal Subsidiaries; (3) Texaco
Inc. or a Principal Subsidiary under the terms of the Indenture could create a
Lien on the Principal Property to secure a Debt at least equal in amount to the
Attributable Debt for the lease; or (4) Texaco Inc. or a Principal Subsidiary
within 120 days of the effective date of the Sale-Leaseback Transaction (i)
retires Debt of Texaco Inc. or of a Principal Subsidiary at least equal in
amount to the fair value (as determined by Texaco Inc.'s Board of Directors) of
the Principal Property at the time the Principal Property is leased or (ii) if
the net proceeds of the Sale-Leaseback Transaction equal or exceed the fair
value of the Principal Property (as determined by Texaco Inc.'s Board of
Directors), applies the net proceeds to fund investment in other Principal
Properties which investments were made within twelve months prior to or
subsequent to the transaction.
CONSOLIDATION AND MERGER
The Indenture provides that either Texaco Capital or Texaco Inc. may
consolidate or merge into, or transfer its properties and assets substantially
as an entirety to, another person without the consent of the Holders of any of
the Debt Securities outstanding under the Indenture, provided the person assumes
by supplemental indenture all the obligations of Texaco Capital or Texaco Inc.,
as the case may be, under the Debt Securities and the Indenture and immediately
after the transaction no Default exists. Thereafter, all such obligations of
Texaco Capital or Texaco Inc., as the case may be, shall terminate.
DEFAULT
The Indenture defines an "Event of Default" with respect to any series of
the Debt Securities as being any one of the following events: (1) default for 30
days in the payment of interest on any Debt Security of that series; (2) default
in the payment of the principal of, or premium, if any, on, or in the making of
any sinking fund payments on any Debt Security of that series when due; (3)
failure to comply with any other agreements in the Debt Securities of that
series, the Indenture or any supplemental indenture under which the Debt
Securities may have been issued and continuation of the default for the period
and after the notice specified below; and (4) certain events in bankruptcy,
insolvency, or reorganization.
A default under clause (3) is not an Event of Default until the Trustee or
the Holders of at least 25% in principal amount of all of the Debt Securities of
that series outstanding notify Texaco Capital of the default and the default is
not cured within 90 days after receipt of the notice.
If an Event of Default occurs with respect to the Debt Securities of any
series and is continuing, the Trustee by notice to Texaco Capital, or the
Holders of at least 25% in principal amount of all of the Debt Securities of
that series outstanding by notice to Texaco Capital and the Trustee, may declare
the principal of and premium and accrued interest, if any, on all the Debt
Securities of that series to be due and payable immediately. The Holders of a
majority in principal amount of all of the Debt Securities of that series by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree by a court of
competent jurisdiction and if all existing Events of Default have been cured or
waived except nonpayment of principal or premium or interest, if any, that has
become due solely because of the acceleration.
9
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal or premium or interest, if any, on the Debt Securities of the series
that is in default or to enforce the performance of any provision of the Debt
Securities or the Indenture.
Subject to certain exceptions, the Holders of a majority in principal amount
of the Debt Securities by notice to the Trustee may waive an existing default
and its consequences.
MODIFICATION OF THE INDENTURE
The Indenture provides that Texaco Capital, Texaco Inc. and the Trustee may
enter into a supplemental indenture to amend the Indenture or the Debt
Securities without the consent of any Securityholder: (1) to cure any ambiguity,
defect or inconsistency; (2) to comply with Article 5 of the Indenture to permit
a successor to assume Texaco Capital's or Texaco Inc.'s obligations under the
Indenture; (3) to make any change that does not adversely affect the rights of
any Securityholder; or (4) to provide for the issuance of and establish the
terms and conditions of Debt Securities of any series.
Texaco Capital, Texaco Inc. and the Trustee may enter into a supplemental
indenture to amend the Indenture or the Debt Securities of a series with the
written consent of the Holders of at least 50.1% in principal amount of the Debt
Securities of the series affected. The Holders of at least 50.1% in principal
amount of the Debt Securities by notice to the Trustee may waive compliance by
Texaco Capital or Texaco Inc. with any provision of the Indenture or the Debt
Securities.
Notwithstanding the foregoing, without the consent of each Securityholder
affected, an amendment or waiver may not: (1) reduce the amount of Debt
Securities whose Holders must consent to an amendment or waiver; (2) reduce the
rate of or extend the time for payment of interest on any Debt Security; (3)
reduce the principal of or extend the fixed maturity of any Debt Security; (4)
waive a default in the payment of the principal, premium or interest, if any, on
any Debt Security; or (5) make any Debt Security payable in money other than
that stated in the Debt Security.
DEFEASANCE AND DISCHARGE
The Indenture provides that Texaco Capital may terminate its obligations
with respect to any series of Debt Securities, on the terms and subject to the
conditions contained in the Indenture, by depositing in trust with the Trustee
money or U.S. Government Obligations sufficient to pay principal, premium and
interest, if any, on such series to redemption or maturity. Upon the termination
of the Company's obligations with respect to all the Debt Securities of a
series, the Trustee, at the request of Texaco Capital, shall release its rights
and interests with respect to such series of Debt Securities in any security
granted by Texaco Capital or Texaco Inc. As a condition to any such termination,
Texaco Capital is required to furnish an opinion of recognized independent tax
counsel to the effect that such proposed deposit and termination will not have
any effect on the Holders of the Debt Securities for Federal income tax
purposes. Such opinion must be based upon a ruling of the Internal Revenue
Service or a change in United States federal income tax law occurring after the
date of this Prospectus since such a result would not occur under current tax
law.
OTHER DEBT SECURITIES
In addition to the Debt Securities described above, Texaco Capital may issue
subordinated debt securities (which will be guaranteed on a subordinated basis
by Texaco Inc.) and Texaco Inc. may issue either senior or subordinated debt
securities. Any such debt securities will be described in a Prospectus
Supplement and will be issued pursuant to an indenture entered into among Texaco
Inc., a trustee and, if applicable, Texaco Capital, which indenture will be
filed with the SEC and qualified under the Trust Indenture Act.
10
DESCRIPTION OF TEXACO INC. COMMON STOCK
As of the date of this Prospectus, Texaco Inc.'s Certificate of
Incorporation authorizes the issuance of 700,000,000 shares of Common Stock,
$3.125 par value per share. As of February 5, 1998, 540,987,148 shares of Common
Stock were outstanding.
Subject to the rights of the holders of any outstanding shares of preferred
stock, holders of Common Stock are entitled to receive such dividends, in cash,
securities, or property, as may from time to time be declared by the Board of
Directors. Subject to the provisions of Texaco Inc.'s By-laws, as from time to
time amended, with respect to the closing of the transfer books and the fixing
of a record date, holders of shares of Common Stock are entitled to one vote per
share of Common Stock held on all matters requiring a vote of the stockholders.
In the event of any liquidation, dissolution, or winding up of Texaco Inc.,
either voluntary or involuntary, after payment shall have been made to the
holders of preferred stock of the full amount to which they shall be entitled,
the holders of Common Stock shall be entitled to share ratably, according to the
number of shares held by them, in all remaining assets of Texaco Inc. available
for distribution. Shares of Common Stock are not redeemable and have no
subscription, conversion or preemptive rights. Each share of Common Stock has
attached to it a Right to purchase, under certain circumstances, additional
shares of Common Stock or other securities at a significant discount, when
certain conditions are met.
DESCRIPTION OF TEXACO INC. PREFERRED STOCK
The following is a description of certain general terms and provisions of
Texaco Inc.'s Preferred Stock. The particular terms of any series of Preferred
Stock will be described in the applicable Prospectus Supplement. If so indicated
in a Prospectus Supplement, the terms of any such series may differ from the
terms set forth below.
The summary of terms of Texaco Inc.'s Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of Texaco Inc.'s Certificate of Incorporation
and the certificate of designations relating to each series of the Preferred
Stock (the "Certificate of Designations"), which will be filed as an exhibit to
or incorporated by reference in the Registration Statement of which this
Prospectus is a part at or prior to the time of issuance of such series of the
Preferred Stock.
Texaco Inc.'s Certificate of Incorporation authorizes the issuance of
30,000,000 shares of Preferred Stock, par value $1.00 per share. The Texaco Inc.
Board is authorized to designate any series of Preferred Stock and the powers,
preferences and rights of the shares of such series and the qualifications,
limitations or restrictions thereof without further action by the holders of
Common Stock. As of February 5, 1998, there were outstanding 691,020 shares of
Series B ESOP Convertible Preferred Stock, 55,695 shares of Series F ESOP
Convertible Preferred Stock and 1,200 shares of Market Auction Preferred Stock.
There are 3,000,000 shares designated as Series D Junior Participating Preferred
Stock, none of which are currently outstanding.
The Texaco Inc. Board is authorized to determine, for each series of
Preferred Stock, and the Prospectus Supplement shall set forth with respect to
such series: (i) whether the holders thereof shall be entitled to cumulative,
noncumulative, or partially cumulative dividends and, with respect to shares
entitled to dividends, the dividend rate or rates, including without limitation
the methods and procedures for determining such rate or rates, and any other
terms and conditions relating to such dividends; (ii) whether, and if so to what
extent and upon what terms and conditions, the holders thereof shall be entitled
to rights upon the liquidation of, or upon any distribution of the assets of,
Texaco Inc.; (iii) whether, and if so upon what terms and conditions, such
shares shall be convertible into Debt Securities, any other series of Preferred
Stock, Depositary Shares or Common Stock, or exchangeable for the securities of
any other corporation; (iv) whether, and if so upon what terms and conditions,
such shares shall be redeemable; (v) whether the shares shall be redeemable and
subject to any sinking fund provided
11
for the purchase or redemption of such shares and, if so, the terms of such
fund; (vi) whether the holders thereof shall be entitled to voting rights and,
if so, the terms and conditions for the exercise thereof; and (vii) whether the
holders thereof shall be entitled to other preferences or rights, and, if so,
the qualifications, limitations, or restrictions of such preferences or rights.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds of Texaco Inc. legally
available for payment, cash dividends payable at such dates and at such rates
per share per annum as set forth in the applicable Prospectus Supplement. The
Prospectus Supplement will also state applicable record dates regarding the
payment of dividends. Except as set forth below, no dividends shall be declared
or paid or set apart for payment on any series of Preferred Stock unless full
dividends for all series of Preferred Stock (including any accumulation in
respect of unpaid dividends for prior dividend periods, if dividends on such
Preferred Stock are cumulative) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment. When dividends are not so paid in full (or a sum sufficient for
such full payment is not so set apart) upon the Preferred Stock, dividends
declared (if any) on the Preferred Stock shall be declared pro-rata so that the
amount of dividends declared per share on each series of Preferred Stock shall
in all cases bear to each other series the same ratio that (x) accrued dividends
(including any accumulation with respect to unpaid dividends for prior dividend
periods, if dividends for such series are cumulative) for the then-current
dividend period per share for each respective series of Preferred Stock bear to
(y) aggregate accrued dividends for the then-current dividend period (including
all accumulations with respect to unpaid dividends for prior periods for all
series which are cumulative) for all outstanding shares of Preferred Stock.
Unless all dividends on the Preferred Stock shall have been paid in full (i)
no dividend shall be declared and paid or declared and a sum sufficient thereof
set apart for payment (other than a dividend in Texaco Inc.'s common stock or in
any other class ranking junior to the Preferred Stock as to dividends and
liquidation preferences) or other distribution declared or made upon the shares
of Texaco Inc.'s common stock or upon any other class ranking junior to the
Preferred Stock as to dividends or liquidation preferences and (ii) no shares of
Texaco Inc.'s common stock or class of stock ranking junior to the Preferred
Stock as to dividends or liquidation preferences may be redeemed, purchased or
otherwise acquired by Texaco Inc. except by conversion into or exchange for
shares of Texaco Inc. ranking junior to the Preferred Stock as to dividends and
liquidation preferences.
No series of Preferred Stock will be convertible into, or exchangeable for,
other securities or property except as set forth in the related Prospectus
Supplement.
REDEMPTION AND SINKING FUND
No series of Preferred Stock will be redeemable or receive the benefit of a
sinking fund except as set forth in the related Prospectus Supplement.
LIQUIDATION
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Texaco Inc., holders of any series of Preferred Stock will be entitled to
receive the liquidation preference per share specified in the Prospectus
Supplement, if any, in each case together with any applicable accrued and unpaid
dividends and before any distribution to holders of Texaco Inc.'s common stock
or any class of stock ranking junior to the Preferred Stock as to dividends and
liquidation preferences. In the event there are insufficient assets to pay such
liquidation preferences for all classes of Preferred Stock in full, the
remaining assets shall be allocated ratably among all series of Preferred Stock
based upon the aggregate liquidation preference for all outstanding shares for
each such series. After payment of the full amount of the liquidation preference
to
12
which they are entitled, the holders of shares of Preferred Stock will not be
entitled to any further participation in any distribution of assets by Texaco
Inc. unless otherwise provided in a Prospectus Supplement, and the remaining
assets of Texaco Inc. shall be distributable exclusively among the holders of
Texaco Inc.'s common stock and any class of stock ranking junior to the
Preferred Stock as to dividends and liquidation preferences, according to their
respective interests.
VOTING
No series of Preferred Stock will be entitled to vote except as provided
below or in the related Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, if at any time Texaco Inc. shall have failed to
declare and pay in full dividends for six quarterly periods, whether consecutive
or not, on any applicable series of Preferred Stock and all such preferred
dividends remain unpaid (a "Preferred Dividend Default"), the number of
directors of Texaco Inc. shall be increased by two and the holders of such
series of Preferred Stock, voting together as a class with all other series of
Preferred Stock then entitled to vote on such election of directors, shall be
entitled to elect such two additional directors until the full dividends
accumulated on all outstanding shares of such series shall have been declared
and paid in full. Upon the occurrence of a Preferred Dividend Default, Texaco
Inc.'s Board of Directors shall within 10 business days of such default call a
special meeting of the holders of shares of all affected series, for which there
is a Preferred Dividend Default, for the purpose of electing the additional
directors. In lieu of holding such meeting, the holders of record of a majority
of the outstanding shares of all series for which there is a Preferred Dividend
Default who are then entitled to participate in the election of directors may,
by action taken by written consent, elect such additional directors. If and when
all accumulated dividends on any series of Preferred Stock have been paid in
full, the holders of shares of such series shall be divested of the foregoing
voting rights subject to revesting in the event of each and every Preferred
Dividend Default. Upon termination of such special voting rights attributable to
all series for which there has been a Preferred Dividend Default, the term of
office of each director so elected (a "Preferred Stock Director") shall
terminate and the number of directors of Texaco Inc. shall, without further
action, be reduced by two, subject always to the increase in the number of
directors pursuant to the foregoing provisions in case of a future Preferred
Dividend Default. Any Preferred Stock Director may be removed at any time with
or without cause by, and shall not be removed otherwise than by, the vote of the
holders of record of a majority of the outstanding shares of all series of
Preferred Stock who were entitled to participate in such director's election,
voting as a separate class, at a meeting called for such purpose or by written
consent. So long as a Preferred Stock Default shall continue, any vacancy in the
office of a Preferred Stock Director may be filled by written consent of the
Preferred Stock Director remaining in office, or if none remains in office, by a
vote of the holders of record of a majority of the outstanding series of
Preferred Stock who are then entitled to participate in the election of such
Preferred Stock Directors as provided above. As long as the Preferred Dividend
Default shall continue, holders of the Preferred Stock shall not, as such
stockholders, be entitled to vote on the election or removal or directors, other
than Preferred Stock Directors, but shall not be divested of any other voting
rights provided to the holders of Preferred Stock by law with respect to any
other matter to be acted upon by the stockholders of Texaco Inc. The Preferred
Stock Directors shall each be entitled to one vote per director on any matter.
Additionally, unless otherwise specified in a Prospectus Supplement, the
affirmative vote of the holders of a majority of the outstanding shares of each
series of Preferred Stock voting together as a class, is required to authorize
any amendment, alteration or repeal of Texaco Inc.'s Certificate of
Incorporation or any Certificate of Designations which would adversely affect
the powers, preferences, or special rights of the Preferred Stock including
authorizing any class of stock with superior dividend and liquidation
preferences.
MISCELLANEOUS
The holders of Preferred Stock will have no preemptive rights. The Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. Shares of Preferred Stock redeemed or otherwise
reacquired by Texaco Inc. shall resume the status of authorized
13
and unissued shares of Preferred Stock undesignated as to series, and shall be
available for subsequent issuance. There are no restrictions on repurchase or
redemption of the Preferred Stock while there is any arrearage on sinking fund
installments except as may be set forth in a Prospectus Supplement. Neither the
par value nor the liquidation preference is indicative of the price at which the
Preferred Stock will actually trade on or after the date of issuance. Payment of
dividends on any series of Preferred Stock may be restricted by loan agreements,
indentures and other transactions entered into by Texaco Inc.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the related Prospectus Supplement, Texaco Inc.'s
Certificate of Incorporation or Certificate of Designations for the applicable
series of Preferred Stock or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
DESCRIPTION OF THE DEPOSITARY SHARES
Texaco Inc. may, at its option, elect to offer Depositary Shares rather than
full shares of Preferred Stock. In the event such option is exercised, each of
the Depositary Shares will represent ownership of and entitlement to all rights
and preferences of a fraction of a share of Preferred Stock of a specified
series (including dividend, voting, redemption and liquidation rights). The
applicable fraction will be specified in the Prospectus Supplement. The shares
of Preferred Stock represented by the Depositary Shares will be deposited with a
Depositary (the "Depositary") named in the applicable Prospectus Supplement,
under a Deposit Agreement (the "Deposit Agreement"), among Texaco Inc., the
Depositary and the holders of the Depositary Receipts. Certificates evidencing
Depositary Shares ("Depositary Receipts") will be delivered to those persons
purchasing Depositary Shares in the offering. The Depositary will be the
transfer agent, registrar and dividend disbursing agent for the Depositary
Shares. Holders of Depositary Receipts agree to be bound by the Deposit
Agreement, which requires holders to take certain actions such as filing proof
of residence and paying certain charges.
The summary of terms of Texaco Inc.'s Depositary Shares contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Deposit Agreement, Texaco Inc.'s
Certificate of Incorporation and the Certificate of Designations for the
applicable series of Preferred Stock.
DIVIDENDS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the series of Preferred Stock represented
by the Depositary Shares to the record holders of Depositary Receipts in
proportion to the number of Depositary Shares owned by such holders on the
relevant record date, which will be the same date as the record date fixed by
Texaco Inc. for the applicable series of Preferred Stock. The Depositary,
however, will distribute only such amount as can be distributed without
attributing to any Depositary Share a fraction of one cent, and any balance not
so distributed will be added to and treated as part of the next sum received by
the Depositary for distribution to record holders of Depositary Receipts then
outstanding.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Receipts
entitled thereto, in proportion, as nearly as may be practicable, to the number
of Depositary Shares owned by such holders on the relevant record date, unless
the Depositary determines (after consultation with Texaco Inc.) that it is not
feasible to make such
14
distribution, in which case the Depositary may (with the approval of Texaco
Inc.) adopt any other method for such distribution as it deems appropriate,
including the sale of such property and distribution of the net proceeds from
such sale to such holders.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the affairs of
Texaco Inc., whether voluntary or involuntary, the holders of each Depositary
Share will be entitled to the fraction of the liquidation preference accorded
each share of the applicable series of Preferred Stock, as set forth in the
Prospectus Supplement.
REDEMPTION
If the series of Preferred Stock represented by the applicable series of
Depositary Shares is redeemable, such Depositary Shares will be redeemed from
the proceeds received by the Depositary resulting from the redemption, in whole
or in part, of Preferred Stock held by the Depositary. Whenever Texaco Inc.
redeems any Preferred Stock held by the Depositary, the Depositary will redeem
as of the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed. The Depositary will mail the notice of redemption
promptly upon receipt of such notice from Texaco Inc. and not less than 35 nor
more than 60 days prior to the date fixed for redemption of the Preferred Stock
and the Depositary Shares to the record holders of the Depositary Receipts.
VOTING
Promptly upon receipt of notice of any meeting at which the holders of the
series of Preferred Stock represented by the applicable series of Depositary
Shares are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Receipts as of
the record date for such meeting. Each such record holder of Depositary Receipts
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock represented by such
record holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote such Preferred Stock represented by such Depositary Shares
in accordance with such instructions, and Texaco Inc. will agree to take all
action which may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting any of the
Preferred Stock to the extent that it does not receive specific instructions
from the holders of Depositary Receipts.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Depositary, upon payment of any unpaid amount due the Depositary, and subject to
the terms of the Deposit Agreement, the owner of the Depositary Shares evidenced
thereby is entitled to delivery of the number of whole shares of Preferred Stock
and all money and other property, if any, represented by such Depositary Shares.
Partial shares of Preferred Stock will not be issued. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares. Holders of Preferred Stock thus withdrawn will not thereafter be
entitled to deposit such shares under the Deposit Agreement or to receive
Depositary Receipts evidencing Depositary Shares therefor.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between Texaco Inc. and the Depositary. However, any
amendment which materially and adversely alters the rights of the holders
15
(other than any change in fees) of Depositary Shares will not be effective
unless such amendment has been approved by at least a majority of the Depositary
Shares then outstanding. No such amendment may impair the right, subject to the
terms of the Deposit Agreement, of any owner of any Depositary Shares to
surrender the Depositary Receipt evidencing such Depositary Shares with
instructions to the Depositary to deliver to the holder the Preferred Stock and
all money and other property, if any, represented thereby, except in order to
comply with mandatory provisions of applicable law. The Deposit Agreement may be
terminated by Texaco Inc. or the Depositary only if (i) all outstanding
Depositary Shares have been redeemed or (ii) there has been a final distribution
in respect of the Preferred Stock in connection with any dissolution of Texaco
Inc. and such distribution has been made to all the holders of Depositary
Shares.
CHARGES OF DEPOSITARY
Texaco Inc. will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. Texaco Inc.
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the initial issuance of the Depositary Shares, any
redemption of the Preferred Stock and all withdrawals of Preferred Stock by
owners of Depositary Shares. Holders of Depositary Receipts will pay transfer,
income and other taxes and governmental charges and certain other charges as are
provided in the Deposit Agreement to be for their accounts. In certain
circumstances, the Depositary may refuse to transfer Depositary Shares, may
withhold dividends and distributions and sell the Depositary Shares evidenced by
such Depositary Receipt if such charges are not paid.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Receipts all
reports and communications from Texaco Inc. which are delivered to the
Depositary and which Texaco Inc. is required to furnish to the holders of the
Preferred Stock. In addition, the Depositary will make available for inspection
by holders of Depositary Receipts at the principal office of the Depositary, and
at such other places as it may from time to time deem advisable, any reports and
communications received from Texaco Inc. which are received by the Depositary as
the holder of Preferred Stock.
Neither the Depositary nor Texaco Inc. assumes any obligation or will be
subject to any liability under the Deposit Agreement to holders of Depositary
Receipts other than for its negligence or willful misconduct. Neither the
Depositary nor Texaco Inc. will be liable if it is prevented or delayed by law
or any circumstance beyond its control in performing its obligations under the
Deposit Agreement. The obligations of Texaco Inc. and the Depositary under the
Deposit Agreement will be limited to performance in good faith of their duties
thereunder, and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. Texaco Inc. and the Depositary may rely on
written advice of counsel or accountants, on information provided by holders of
Depositary Receipts or other persons believed in good faith to be competent to
give such information and on documents believed to be genuine and to have been
signed or presented by the proper party or parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to Texaco Inc. notice of
its election to do so, and Texaco Inc. may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice for
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $150,000,000.
16
FEDERAL INCOME TAX CONSEQUENCES
Owners of the Depositary Shares will be treated for Federal income tax
purposes as if they were owners of the Preferred Stock represented by such
Depositary Shares. Accordingly, such owners will be entitled to take into
account for Federal income tax purposes income and deductions to which they
would be entitled if they were holders of such Preferred Stock. In addition, (i)
no gain or loss will be recognized for Federal income tax purposes upon the
withdrawal of Preferred Stock in exchange for Depositary Shares, (ii) the tax
basis of each share of Preferred Stock to an exchanging owner of Depositary
Shares will, upon such exchange, be the same as the aggregate tax basis of the
Depositary Shares exchanged therefor, and (iii) the holding period for Preferred
Stock in the hands of an exchanging owner of Depositary Shares will include the
period during which such person owned such Depositary Shares.
DESCRIPTION OF THE WARRANTS
Texaco Capital may issue Warrants for the purchase of Debt Securities and
Texaco Inc. may issue Warrants for the Purchase of Texaco Inc. Debt Securities,
Preferred Stock or Common Stock. Warrants may be issued independently or
together with Debt Securities, Texaco Inc. Debt Securities, Preferred Stock or
Common Stock offered by any Prospectus Supplement and may be attached to or
separate from any such Securities. Each series of Warrants will be issued under
a separate warrant agreement (a "Warrant Agreement") to be entered into between
Texaco Capital or Texaco Inc. and a bank or trust company, as warrant agent (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of Texaco Inc.
or Texaco Capital in connection with the Warrants and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The following summary of certain provisions of
the Warrants does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the Warrant Agreement that will
be filed with the SEC in connection with the offering of such Warrants.
DEBT WARRANTS
The Prospectus Supplement relating to a particular issue of Warrants to
issue Debt Securities ("Debt Warrants") will describe the terms of such Debt
Warrants, including the following: (a) the title of such Debt Warrants; (b) the
offering price for such Debt Warrants, if any; (c) the aggregate number of such
Debt Warrants; (d) the designation and terms of the Debt Securities or Texaco
Inc. Debt Securities purchasable upon exercise of such Debt Warrants; (e) if
applicable, the designation and terms of the Debt Securities or Texaco Inc. Debt
Securities with which such Debt Warrants are issued and the number of such Debt
Warrants issued with each such Debt Security or Texaco Inc. Debt Security; (f)
if applicable, the date from and after which such Debt Warrants and any Debt
Securities or Texaco Inc. Debt Securities issued therewith will be separately
transferable; (g) the principal amount of Debt Securities or Texaco Inc. Debt
Securities purchasable upon exercise of a Debt Warrant and the price at which
such principal amount of Debt Securities or Texaco Inc. Debt Securities may be
purchased upon exercise (which price may be payable in cash, securities, or
other property); (h) the date on which the right to exercise such Debt Warrants
shall commence and the date on which such right shall expire; (i) if applicable,
the minimum or maximum amount of such Debt Warrants that may be exercised at any
one time; (j) whether the Debt Warrants represented by the Debt Warrant
certificates, Debt Securities or Texaco Inc. Debt Securities that may be issued
upon exercise of the Debt Warrants will be issued in registered or bearer form;
(k) information with respect to book-entry procedures, if any; (l) the currency
or currency units in which the offering price, if any, and the exercise price
are payable; (m) if applicable, a discussion of material United States federal
income tax considerations; (n) the antidilution provisions of such Debt
Warrants, if any; (o) the redemption or call provisions, if any, applicable to
such Debt Warrants; and (p) any additional terms of the Debt Warrants, including
terms, procedures, and limitations relating to the exchange and exercise of such
Debt Warrants.
17
STOCK WARRANTS
The Prospectus Supplement relating to any particular issue of Warrants to
issue Common Stock or Preferred Stock will describe the terms of such Warrants,
including the following: (a) the title of such Warrants; (b) the offering price
for such Warrants, if any; (c) the aggregate number of such Warrants; (d) the
designation and terms of the Common Stock or Preferred Stock purchasable upon
exercise of such Warrants; (e) if applicable, the designation and terms of the
Securities with which such Warrants are issued and the number of such Warrants
issued with each such Security; (f) if applicable, the date from and after which
such Warrants and any Securities issued therewith will be separately
transferable; (g) the number of shares of Common Stock or Preferred Stock
purchasable upon exercise of a Warrant and the price at which such shares may be
purchased upon exercise; (h) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (i) if
applicable, the minimum or maximum amount of such Warrants that may be exercised
at any one time; (j) the currency or currency units in which the offering price,
if any, and the exercise price are payable; (k) if applicable, a discussion of
material United States federal income tax considerations; (l) the antidilution
provisions of such Warrants, if any; (m) the redemption or call provisions, if
any, applicable to such Warrants; and (n) any additional terms of the Warrants,
including terms, procedures, and limitations relating to the exchange and
exercise of such Warrants.
EXPERTS
The audited consolidated financial statements and schedules included or
incorporated by reference in the Annual Report of Texaco Inc. for the fiscal
year ended December 31, 1996 filed on Form 10-K, incorporated herein by
reference, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
LEGAL OPINIONS
The validity of the Securities being offered hereby will be passed upon for
Texaco Capital and Texaco Inc. by Paul R. Lovejoy, Esq., Assistant General
Counsel of Texaco Inc. or such other attorney of Texaco Inc. as Texaco Capital
and Texaco Inc. may designate, and for the purchasers by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017.
18
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$400,000,000
TEXACO CAPITAL INC.
5.50% NOTES DUE 2009
PAYMENT OF PRINCIPAL AND INTEREST IS UNCONDITIONALLY GUARANTEED BY
TEXACO INC.
[LOGO]
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P R O S P E C T U S S U P P L E M E N T
JANUARY 20, 1999
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SALOMON SMITH BARNEY
BLAYLOCK & PARTNERS, L.P.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
ORMES CAPITAL MARKETS, INC.
THE WILLIAMS CAPITAL GROUP, L.P.
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