Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 33-50553 and
33-50553-01
SUBJECT TO COMPLETION, DATED JUNE 3, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 21, 1993
[LOGO]
SHARES
TEXACO CAPITAL LLC
CUMULATIVE ADJUSTABLE RATE MONTHLY INCOME
PREFERRED SHARES ("MIPS"*), SERIES B (LIQUIDATION PREFERENCE $25 PER SHARE)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TEXACO INC.
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The Cumulative Adjustable Rate Monthly Income Preferred Shares, Series B
(the "Series B Preferred Shares"), par value $25 per Share, offered hereby are
being issued by Texaco Capital LLC, a limited life company organized under the
laws of the Turks and Caicos Islands (the "Company"). The Company is a wholly
owned subsidiary of Texaco Inc., a Delaware corporation. The Company was formed
for the sole purpose of issuing preferred shares, including the Series B
Preferred Shares, and common shares and lending the proceeds thereof to Texaco
Inc. or its subsidiaries. It is anticipated that the Company's earnings
available for the payment of dividends on the Series B Preferred Shares will
result solely from payments under the Loans (the "Series B Loans") of the
proceeds from the sale of the Series B Preferred Shares and the issuance of the
related common equity.
The payment of dividends, if and to the extent declared out of moneys held
by the Company and lawfully available therefor, and payments on liquidation or
redemption with respect to the Series B Preferred Shares are guaranteed by
Texaco Inc. to the extent described in the accompanying Prospectus (the "Texaco
Guarantee"). The Series B Preferred Shares will entitle holders to receive
cumulative preferential cash dividends, accruing from the date of original
issuance and payable, in United States dollars, monthly in arrears on the last
day of each calendar month of each year, commencing June 30, 1994. The dividend
rate will be adjusted quarterly. The rate for the initial period from the date
of original issuance to September 30, 1994 will be % per annum, which is
equivalent to $ per share. Thereafter, dividends on the Series B Preferred
Shares will be payable at the "Applicable Rate" from time to time in effect. The
Applicable Rate for any quarter will be equal to % of the highest of the
"Treasury Bill Rate", the "Ten Year Constant Maturity Rate" and the "Thirty Year
Constant Maturity Rate" determined in advance of such quarter. The Applicable
Rate for any quarter will not be less than % per annum nor greater than
% per annum. See "Description of Series B Preferred Shares--Dividends".
The Texaco Guarantee does not cover payment of undeclared dividends. In such
event, the remedy of a holder of the Series B Preferred Shares is to enforce the
obligations of Texaco Inc. under the Series B Loan Agreements and other
undertakings described herein. No portion of the dividends received by a holder
of the Series B Preferred Shares will be eligible for the dividends received
deduction for U.S. federal income tax purposes. See "Taxation" in the
accompanying prospectus.
The Series B Preferred Shares are redeemable, at the option of the Company
(with Texaco Inc.'s consent) in whole or in part from time to time, at $25 per
share on or after May 31, 1999, plus in each case accrued and unpaid dividends
to the date fixed for redemption, and will be redeemed, under certain
circumstances, from the proceeds of any prepayment and repayment of the loan of
the proceeds hereof to Texaco Inc. In addition, if at any time the Company or
Texaco Inc. is or would be required to pay certain additional amounts or to
withhold or deduct certain amounts, the Series B Preferred Shares are redeemable
at the option of the Company (with Texaco Inc.'s consent), from time to time, at
$25 per share plus accrued and unpaid dividends to the date fixed for
redemption. See "Certain Terms of the Series B Preferred Shares--Redemption".
The Texaco Guarantee will rank junior to all liabilities of Texaco Inc. At
December 31, 1993, Texaco Inc. had total liabilities of approximately $15.8
billion.
In the event of liquidation of the Company, holders of Series B Preferred
Shares will be entitled to receive for each Series B Preferred Share a
liquidation preference of $25 plus accrued and unpaid dividends to the date of
payment, subject to certain limitations. See "Certain Terms of the Series B
Preferred Shares--Liquidation Distribution".
See "Texaco Capital LLC", "Description of Preferred Shares--Mandatory
Redemption" and "Description of the Guarantee" in the accompanying Prospectus
and "Description of the Series B Loans" herein for a description of various
contractual backup obligations of Texaco Inc.
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SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE SERIES B PREFERRED SHARES, INCLUDING THE CIRCUMSTANCES
UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES B PREFERRED SHARES MAY BE
DEFERRED.
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Application has been made to list the Series B Preferred Shares on the New
York Stock Exchange.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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INITIAL PUBLIC UNDERWRITING
OFFERING PRICE COMMISSIONS(1)
-------------- ---------------
Per Share............................................................................ $25.00 (2)
Total(4)............................................................................. $ (2)
PROCEEDS TO
COMPANY(2)(3)
--------------
Per Share............................................................................ $25.00
Total(4)............................................................................. $
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(1) The Company and Texaco Inc. have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series B Preferred
Shares will be lent to Texaco Inc., Texaco Inc. has agreed to pay to the
Underwriters as compensation for their services under the Underwriting
Agreement $ per Series B Preferred Share (or $ in the aggregate).
See "Underwriting".
(3) Before deducting expenses payable by Texaco Inc. estimated at $ .
(4) The Company has granted to the Underwriters a 30-day option to purchase, on
the same terms set forth above, up to additional Series B
Preferred Shares at the Initial Public Offering Price (with an additional
Underwriting Commission) solely to cover over-allotments, if any. If the
option is exercised in full, the total Initial Public Offering Price,
Underwriting Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting".
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The Series B Preferred Shares are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the Series B Preferred Shares will be made only in book-entry form through the
facilities of The Depository Trust Company on or about , 1994.
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* An application has been filed by Goldman, Sachs & Co. with the United States
Patent and Trademark Office for the registration of the MIPS servicemark.
GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
KIDDER, PEABODY & CO. INCORPORATED
LEHMAN BROTHERS INC.
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
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The date of this Prospectus Supplement is , 1994.
INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES B
PREFERRED SHARES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series B Preferred Shares should carefully
review the information contained in the Prospectus and elsewhere in this
Prospectus Supplement and should particularly consider the following matters:
SUBORDINATION
Texaco Inc.'s obligations under the Guarantee are subordinate and junior in
right of payment to all other liabilities of Texaco Inc., and its obligations
under the Series B Loan Agreements are subordinate and junior in right of
payment to all Senior Indebtedness of Texaco Inc. (as defined under "Description
of the Series B Loans--Subordination"), but not to the obligations to other
creditors such as trade creditors. At December 31, 1993, Texaco Inc. had total
liabilities of approximately $15.8 billion, all of which rank senior to the
Guarantee. Texaco Inc. may in the future incur additional Senior Indebtedness
and issue securities or enter into guarantees that will rank senior to or pari
passu with the Guarantee and the Series B Loan Agreements, all without
restriction under the terms of the Series B Preferred Shares.
EXTENSION OF INTEREST PAYMENT
Under the terms of the Series B Loans, Texaco Inc. has the right to extend
the interest period to 60 months, during which period the Company would have no
cash to pay any dividends on the Series B Preferred Shares, although the Company
would continue to accrue interest which the holders of the Series B Preferred
Shares would be required to include in their gross income for U.S. federal
income tax purposes. The holders would not receive the cash relating to such
income if they disposed of the Series B Preferred Shares prior to the expiration
of any extended interest payment period, except to the extent the price received
on the disposition reflected such cash. During the continuation of any such
extension, Texaco Inc. would not be permitted to pay any dividends on its
outstanding equity securities, and therefore such extension is, in the view of
the Company, remote. See "Description of the Series B Loans" and "Taxation"
herein and "Taxation--Potential Extension of Payment Period" in the accompanying
Prospectus.
ENFORCEABILITY OF CIVIL JUDGMENTS
The Company is a limited life subsidiary of Texaco Inc. organized under the
laws of the Turks and Caicos Islands with no physical assets located in the
United States. As a result it may not be possible for purchasers of the Series B
Preferred Shares to effect service of process within the United States upon the
Company or to enforce civil judgments against the Company in United States
courts based upon federal securities laws of the United States. In addition,
there is doubt as to the enforceability of actions based upon the federal
securities laws of the United States in the Turks and Caicos Islands courts.
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TEXACO CAPITAL LLC
Texaco Capital LLC, a wholly owned subsidiary of Texaco Inc., is a limited
life company organized under the laws of the Turks and Caicos Islands. The
Company exists solely for the purpose of issuing preferred and common shares and
lending the net proceeds thereof to Texaco Inc. or its subsidiaries. Under the
Articles of Association of the Company, holders of the Series B Preferred Shares
are entitled to true and full information regarding the state of the business
and financial condition of the Company.
TEXACO INC.
Texaco, together with affiliates owned 50% or less, represents 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.
In 1993 Texaco, including equity in an affiliate, had average daily net
production worldwide of 728,000 barrels of crude oil and natural gas liquids and
2 billion cubic feet of natural gas.
Texaco's U.S. oil and gas producing properties include large areas of the
Gulf of Mexico, off Texas and Louisiana, onshore and offshore areas of
California, and large onshore acreage holdings in Texas, Oklahoma, Louisiana and
New Mexico. Texaco also has significant interests in oil and gas properties
outside the United States, particularly in the United Kingdom, Angola, Colombia,
Indonesia and the Partitioned Neutral Zone between Saudi Arabia and Kuwait. As
of year-end 1993, Texaco Inc. through its subsidiaries and an affiliate had
estimated net proved reserves of crude oil and natural gas liquids of 2.7
billion barrels and estimated net proved natural gas reserves of 6.1 trillion
cubic feet.
As of year-end 1993, Texaco and affiliates owned or had interests in seven
refineries in the United States and 18 plants abroad. During 1993, Texaco's
share of the average crude oil input for these refineries totalled 1.5 million
barrels per day.
At year-end 1993, Texaco and affiliates were marketing Texaco-branded motor
fuels through more than 14,000 retail outlets in the United States and more than
9,000 retail outlets in Europe, Central and South America, the Caribbean and
West Africa.
For the year 1993, Texaco Inc. through its subsidiaries and affiliates had
average refined product sales of 2.3 million barrels per day.
At year-end 1993, Texaco owned some 11,000 miles of crude and product
pipelines and had varying interests in some 21,000 additional miles of crude and
product pipelines. Its ocean-going tanker fleet consisted of 29 vessels owned or
operated under term charter, totalling 4.2 million deadweight tons.
Additionally, in the fast growing markets of the Pacific Rim, the 50%-owned
Caltex Petroleum Corporation and its subsidiaries and affiliates continue to
upgrade high-volume outlets and install value-added services, such as
quick-lubes. The success of Caltex in serving a 63-nation area, primarily east
of Suez, builds on its number one position for motor fuel and lubricant
sales--with shares of 18% and 20%, respectively, in the markets in which it
participates.
RECENT EVENTS
On April 21, 1994, Texaco Inc. received $850 million as part of the sale of
Texaco Chemical Company, consisting of $650 million in cash and $200 million in
an 11-year subordinated note. Not included as part of this transaction is
Texaco's worldwide lubricant additives business, which Texaco is working in
cooperation with Huntsman Financial Corporation to sell to a third party. In the
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absence of such a third party sale, Huntsman Financial Corporation will acquire
Texaco's lubricant additives business by September 30, 1994. Texaco also granted
to Huntsman Corporation, for an additional $10 million in cash, a two-year
option to purchase either 50 percent or 100 percent of a Texaco facility
currently under construction in Port Neches, Texas, which will produce 400
million pounds per year of propylene oxide and 14,000 barrels per day of methyl
tertiary butyl ether (MTBE). It is anticipated that the proceeds from such sale
will be used in support of Texaco's investment programs in its core business as
well as other general corporate purposes.
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(A)
THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED -------------------------------------------------------
MARCH 31, 1994 1993 1992 1991 1990 1989
--------------------- ----------- --------- --------- --------- ---------
Ratio of earnings to combined fixed charges and
preferred stock dividends of Texaco on a total
enterprise basis (unaudited)(b).................. 2.67 2.61 2.75 2.76 3.50 3.88(c)
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(a) Excludes discontinued chemical operations.
(b) Preferred stock dividend requirements have been adjusted to reflect the
pre-tax earnings which would be required to cover the Series C and Series E
Variable Rate Cumulative Preferred Stock and Market Auction Preferred Shares
dividends and to exclude the interest portion of the Series B and Series F
ESOP Convertible Preferred Stock dividends.
(c) Excluding the gains from the sale of Texaco Canada Inc. and the sale of a
20% stock interest in a subsidiary, as well as the 1989 restructuring
charges, the ratio of earnings to combined fixed charges and preferred stock
dividends on a total enterprise basis approximated 2.03.
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SELECTED FINANCIAL DATA OF TEXACO INC.
The financial information set forth below has been selected from the
audited and unaudited consolidated financial statements of Texaco. The
information should be read in connection with, and is qualified in its entirety
by reference to, Texaco's consolidated financial statements and notes thereto
included in the 1993 Form 10-K and Texaco's interim financial statements and
notes thereto included in the Form 10-Qs. The interim data reflect all
adjustments, consisting of only normal recurring adjustments, which, in the
opinion of the management of Texaco, are necessary to present fairly such
information for the interim periods. The results of operations for the interim
1994 period are not necessarily indicative of the results expected for 1994 or
any other interim period.
SUMMARY FINANCIAL DATA
(UNAUDITED)
--------------------
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AND RATIO DATA)
STATEMENT OF CONSOLIDATED INCOME DATA(1):
Total Revenues.................................. $ 7,434 $ 8,233 $ 34,071 $ 36,530 $ 37,162 $ 40,508 $ 34,209
Earnings from Continuing Operations before
Interest, Income Taxes, DD&A and Cumulative
Effect of Accounting Changes...................... 837 870 3,199 3,362 3,476 4,283 4,981
Interest Expense................................ 122 110 459 477 558 567 681
Depreciation, Depletion and Amortization........ 408 375 1,568 1,536 1,496 1,597 1,603
Income from Continuing Operations before Income
Taxes and Cumulative Effect of Accounting
Changes........................................... 307 385 1,172 1,349 1,422 2,119 2,697
Provision for (Benefit from) Income Taxes....... 105 104 (87) 311 130 714 591
Net Income from Continuing Operations before
Cumulative Effect of Accounting Changes........... 202 281 1,259 1,038 1,292 1,405 2,106
Discontinued Operations:
Net Income (Loss) from Operations............. -- (3) (17) (26) 2 45 307
Net Loss on Disposal.......................... -- -- (174) -- -- -- --
Cumulative Effect of Accounting Changes......... -- -- -- (300) -- -- --
Net Income...................................... 202 278 1,068 712 1,294 1,450 2,413
Preferred Stock Dividend Requirements........... 24 27 101 99 103 104 64
Net Income Available for Common Stock........... 178 251 967 613 1,191 1,346 2,349
Per Common Share: (dollars)
Net Income (Loss) before Cumulative Effect of
Accounting Changes
Continuing Operations....................... .69 .98 4.47 3.63 4.60 5.01 7.93
Discontinued Operations..................... -- (.01) (.73) (.10) .01 .17 1.19
Cumulative Effect of Accounting Changes....... -- -- -- (1.16) -- -- --
Net Income.................................... .69 .97 3.74 2.37 4.61 5.18 9.12
CONSOLIDATED BALANCE SHEET DATA
AS OF(2):
Current Assets.................................. 6,460 5,687 6,865 5,611 6,581 7,256 7,730
Net Properties, Plant and Equipment............. 14,172 15,122 14,171 15,226 14,944 14,277 13,812
Total Assets.................................... 26,343 26,021 26,626 25,992 26,182 25,975 25,636
Current Liabilities............................. 4,538 4,026 4,756 4,225 6,290 6,968 6,409
Long-Term Debt and Capital Lease Obligations.... 6,259 6,520 6,157 6,441 5,173 4,485 4,714
Total Debt...................................... 6,996 6,654 6,826 6,581 6,504 6,001 6,025
Total Liabilities and Minority Interest......... 16,006 15,961 16,347 16,019 16,354 16,590 16,456
Total Stockholders' Equity...................... 10,337 10,060 10,279 9,973 9,828 9,385 9,180
STATEMENT OF CONSOLIDATED CASH FLOWS:
Net Cash Provided by Operating Activities....... 463 563 2,362 2,675 2,966 2,518 1,489
Capital and Exploratory Expenditures............ 545 416 2,326 2,533 2,795 2,731 1,952
OTHER DATA:
Ratio of Total Debt to Earnings from Continuing
Operations before Interest, Income Taxes, DD&A
and Cumulative Effect of Accounting Changes... N/A N/A 2.13 1.96 1.87 1.40 1.21
Ratio of Earnings from Continuing Operations
before Interest, Income Taxes, DD&A and
Cumulative Effect of Accounting Changes to
Interest Expense.................................. 6.86 7.91 6.97 7.05 6.23 7.55 7.31
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(1) The results for chemical operations have been classified as discontinued
operations for all periods presented.
(2) Assets and liabilities of the discontinued operations have been classified
as "net assets of discontinued operations" within current assets in the
March 31, 1994 and December 31, 1993 Consolidated Balance Sheet.
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CONSOLIDATED SHORT-TERM DEBT AND CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of Texaco as of March 31, 1994 and as adjusted to give effect to
the issuance by the Company of the Series B Preferred Shares offered hereby. See
"Use of Proceeds" in the accompanying Prospectus.
(UNAUDITED)
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MARCH 31, 1994 AS ADJUSTED
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(MILLIONS OF DOLLARS)
Short-Term Debt:
Notes payable, commercial paper and current portion
of long-term debt.......................................................... $ 737 $ 737
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Long-Term Debt and Minority Interest:
Long-term debt including capital lease obligations............................ $ 6,259 $ []
Minority interest in subsidiary companies..................................... 535 []
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Total Long-Term Debt and Minority Interest................................. 6,794 6,794
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Stockholders' Equity:
Variable Rate Cumulative Preferred Stock...................................... 648 648
Market Auction Preferred Shares............................................... 300 300
ESOP Convertible Preferred Stock.............................................. 528 528
Unearned employee compensation................................................ (333) (333)
Common stock--par value $6.25:
Shares authorized--350,000,000
Shares issued--274,293,417, including treasury stock....................... 1,714 1,714
Paid-in capital in excess of par value..................................... 653 653
Retained earnings.......................................................... 7,447 7,447
Currency translation adjustment............................................ 72 72
Unrealized net gain on investments......................................... 75 75
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11,104 11,104
Less--Common stock held in treasury--15,075,819 shares, at cost............... 767 767
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Total stockholders' equity.................................................... 10,337 10,337
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Total Capitalization....................................................... $ 17,131 $ 17,131
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CERTAIN TERMS OF THE SERIES B PREFERRED SHARES
GENERAL
The following summary of certain terms and provisions of the Series B
Preferred Shares supplements the description of certain terms and provisions of
the Preferred Shares of any series set forth in the accompanying Prospectus
under the heading "Description of Preferred Shares", to which description
reference is hereby made. The Series B Preferred Shares constitute a series of
Preferred Shares of the Company, which Preferred Shares may be issued from time
to time in one or more series with such designations, dividend rights,
liquidation value per share, redemption provisions, voting rights and other
rights, preferences, privileges, limitations and restrictions as are established
by the Memorandum of Association of the Company (the "Memorandum"), the Articles
of Association of the Company (the "Articles") and resolutions adopted, or to be
adopted, by Texaco Inc., as manager of the Company (the "Manager"), as
designated in the Articles. The summary of certain terms and provisions of the
Series B Preferred Shares set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Memorandum, the
Articles and the resolutions adopted by the Manager establishing the rights,
preferences, privileges, limitations and restrictions relating to the Series B
Preferred Shares, a copy of which resolutions will have been filed with the
Commission at or prior to the time of the sale of the Series B Preferred Shares.
SERIES A PREFERRED SHARES
In October 1993, the Company issued 14,000,000 shares of 6 7/8% Cumulative
Monthly Income Preferred Shares, Series A (the "Series A Preferred Shares"). The
proceeds from the issuance of the Series A Preferred Shares and the initial
issuance of the Company's Common Stock and related capital contributions were
lent by the Company to Texaco Inc. (the "Prior Loans"), pursuant to Loan
Agreements dated October 27, 1993 (the "Prior Loan Agreements").
DIVIDENDS
Cumulative dividends on the Series B Preferred Shares will accrue from the
date of the original issue thereof and are payable monthly in arrears on the
last day of each calendar month of each year, commencing June 30, 1994, when, as
and if declared by the Company, except as otherwise described under "Description
of Preferred Shares--Dividends" in the accompanying Prospectus, to the holders
of record on the business day immediately preceding the relevant payment date.
Dividends in arrears for more than one month will bear interest thereon at a
rate per annum equal to the dividend rate during the period of arrearage. The
term "dividends" as used herein includes any such interest unless otherwise
stated. Payment of dividends is limited in relation to the amount of funds held
by the Company and legally available therefor. See "Description of Preferred
Shares-- Dividends" in the accompanying Prospectus.
The dividend rate will be adjusted quarterly. The rate for the initial
period from the date of original issuance to September 30, 1994 will be
% per annum, which is equivalent to $ per share. Thereafter,
dividends on the Series B Preferred Shares will be payable at the "Applicable
Rate" (as defined below) from time to time in effect.
Dividends on the Series B Preferred Shares will be declared by the Company
in any calendar year or portion thereof to the extent that the Company
reasonably anticipates that at the time of payment it will have, and will be
paid by the Company to the extent that at the time of proposed payment it has,
(x) earnings legally available for the payment of such dividends and (y) cash in
hand sufficient to permit such payments (excluding any cash received as a
payment or prepayment of, or of interest on, the Prior Loans). For purposes of
the Series B Preferred Shares, the undertaking by the Company, set forth under
"Description of Preferred Shares--Dividends", to pay
S-7
dividends if it has "cash in hand sufficient to permit such payments" shall be
applicable only to the extent it has cash in hand, other than any cash received
as a payment or prepayment of, or of interest on, the Prior Loans, sufficient to
make dividend payments on the Series B Preferred Shares. It is anticipated that
the Company's earnings, other than earnings received as a payment or prepayment
of, or as interest on, the Prior Loans, will result from payments under the
Series B Loans (the loans of the proceeds from the sale of the Series B
Preferred Shares and the issuance of the additional common equity (as described
under "Description of the Series B Loans")).
Except as provided below in this paragraph, the "Applicable Rate" for any
quarter (other than the initial period) will be equal to % of the
Effective Rate (as defined below), but not less than % per annum nor
more than % per annum. The "Effective Rate" for any quarter will be
equal to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate (each as defined below) for such
quarter. The Applicable Rate will be rounded to the nearest five hundredth of a
percent. In the event that the Company determines in good faith that for any
reason:
(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate or the Thirty Year Constant Maturity Rate cannot be determined for any
quarter, then the Effective Rate for such quarter will be equal to the
higher of whichever two of such rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be determined
for any quarter, then the Effective Rate for such quarter will be equal to
whichever such rate can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate or the Thirty Year Constant Maturity Rate can be determined for any
quarter, then the Effective Rate for the preceding quarter will be
continued for such quarter.
Except as described below in this paragraph, the "Treasury Bill Rate" for
each quarter will be the arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly per annum secondary
market discount rate, if only one such rate is published during the relevant
Calendar Period (as defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board (as defined below) during the
Calendar Period immediately preceding the last ten calendar days preceding the
quarter for which the dividend rate on the Series B Preferred Shares is being
determined. In the event that the Federal Reserve Board does not publish such a
weekly per annum secondary market discount rate during any such Calendar Period,
then the Treasury Bill Rate for such quarter will be the arithmetic average of
the two most recent weekly per annum secondary market discount rates (or the one
weekly per annum secondary market discount rate, if only one such rate is
published during the relevant Calendar Period) for three-month U.S. Treasury
bills, as published weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company. In
the event that a per annum secondary market discount rate for three-month U.S.
Treasury bills is not published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such Calendar
Period, then the Treasury Bill Rate for such quarter will be the arithmetic
average of the two most recent weekly per annum secondary market discount rates
(or the one weekly per annum secondary market discount rate, if only one such
rate is published during the relevant Calendar Period) for all of the U.S.
Treasury bills then having remaining maturities of not less than 80 nor more
than 100 days, as published during such Calendar Period by the Federal Reserve
Board, or if the Federal Reserve Board does not publish such rates, by any
Federal Reserve Bank or by any U.S. Government department or agency selected by
the Company. In the event that the Company determines in good faith that for any
reason no such U.S. Treasury bill rates are published as provided above during
such Calendar Period, then the Treasury Bill Rate for such quarter will be the
arithmetic average of the per annum secondary market discount rates based upon
the closing bids during such Calendar Period for each
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of the issues of marketable non-interest-bearing U.S. Treasury securities with a
remaining maturity of not less than 80 nor more than 100 days from the date of
each such quotation, as chosen and quoted daily for each business day in New
York City (or less frequently if daily quotations are not generally available)
to the Company by at least three recognized dealers in U.S. Government
securities selected by the Company. In the event that the Company determines in
good faith that for any reason the Company cannot determine the Treasury Bill
Rate for any quarter as provided above in this paragraph, the Treasury Bill Rate
for such quarter will be the arithmetic average of the per annum secondary
market discount rates based upon the closing bids during such Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury securities
with a remaining maturity of not less than 80 nor more than 100 days, as chosen
and quoted daily for each business day in New York City (or less frequently if
daily quotations are not generally available) to the Company by at least three
recognized dealers in U.S. Government securities selected by the Company.
Except as described below in this paragraph, the "Ten Year Constant
Maturity Rate" for each quarter will be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (as defined below) (or the one
weekly per annum Ten Year Average Yield, if only one such yield is published
during the relevant Calendar Period), as published weekly by the Federal Reserve
Board during the Calendar Period immediately preceding the last ten calendar
days preceding the quarter for which the dividend rate on the Series B Preferred
Shares is being determined. In the event that the Federal Reserve Board does not
publish such a weekly per annum Ten Year Average Yield during such Calendar
Period, then the Ten Year Constant Maturity Rate for such quarter will be the
arithmetic average of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In the event that a per
annum Ten Year Average Yield is not published by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then the
Ten Year Constant Maturity Rate for such quarter will be the arithmetic average
of the two most recent weekly per annum average yields to maturity (or the one
weekly per annum average yield to maturity, if only one such yield is published
during the relevant Calendar Period) for all of the actively traded marketable
U.S. Treasury fixed interest rate securities (other than Special Securities (as
defined below)) then having remaining maturities of not less than eight nor more
than twelve years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board does not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency selected
by the Company. In the event that the Company determines in good faith that for
any reason the Company cannot determine the Ten Year Constant Maturity Rate for
any quarter as provided above in this paragraph, then the Ten Year Constant
Maturity Rate for such quarter will be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a final maturity
date not less than eight or more than twelve years from the date of each such
quotation, as chosen and quoted daily for each business day in New York City (or
less frequently if daily quotations are not generally available) to the Company
by at least three recognized dealers in U.S. Government securities selected by
the Company.
Except as described below in this paragraph, the "Thirty Year Constant
Maturity Rate" for each quarter will be the arithmetic average of the two most
recent weekly per annum Thirty Year Average Yields (as defined below) (or the
one weekly per annum Thirty Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the last
ten calendar days preceding the quarter for which the dividend rate on the
Series B Preferred Shares is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum
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Thirty Year Average Yield during such Calendar Period, then the Thirty Year
Constant Maturity Rate for such quarter will be the arithmetic average of the
two most recent weekly per annum Thirty Year Average Yields (or the one weekly
per annum Thirty Year Average Yield, if only one such yield is published during
the relevant Calendar Period), as published weekly during such Calendar Period
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Company. In the event that a per annum Thirty Year Average Yield
is not published by the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such Calendar Period, then
the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic
average of the two most recent weekly per annum average yields to maturity (or
the one weekly per annum average yield to maturity, if only one such yield is
published during the relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having remaining maturities of not less than twenty-eight nor
more than thirty-two years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board does not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company determines in good
faith that for any reason the Company cannot determine the Thirty Year Constant
Maturity Rate for any quarter as provided above in this paragraph, then the
Thirty Year Constant Maturity Rate for such quarter will be the arithmetic
average of the per annum average yields to maturity based upon the closing bids
during such Calendar Period for each of the issues of actively traded marketable
U.S. Treasury fixed interest rate securities (other than Special Securities)
with a final maturity date not less than twenty-eight nor more than thirty-two
years from the date of each such quotation, as chosen and quoted daily for each
business day in New York City (or less frequently if daily quotations are not
generally available) to the Company by at least three recognized dealers in U.S.
Government securities selected by the Company.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest one hundredth of
a percent.
The Applicable Rate with respect to each quarter (other than the initial
period) will be calculated as promptly as practicable by the Company according
to the appropriate method described above. The Company will cause each
Applicable Rate to be published in a newspaper of general circulation in New
York City before the commencement of the quarter to which it applies and will
cause notice of such Applicable Rate to be given to The Depository Trust Company
("DTC"), New York, NY, the securities depository for the Preferred Shares. See
"Description of Preferred Shares--Book-Entry-Only Issuances; The Depository
Trust Company".
As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors of
the Federal Reserve System; the term "Special Securities" means securities which
can, at the option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and are priced to
reflect such tax benefits or which were originally issued at a deep or
substantial discount; the term "Ten Year Average Yield" means the average yield
to maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and the term "Thirty
Year Average Yield" means the average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities (adjusted to constant
maturities of thirty years).
REDEMPTION
The proceeds from any prepayment or repayment of principal on the Series B
Loans, or from any prepayment or repayment of any reloan of any such proceeds as
described below, shall be applied to redeem the Series B Preferred Shares,
provided that any such amounts may be lent or
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relent to Texaco Inc., and not used for such redemption, if at the time of each
such loan, and as determined in the judgment of Texaco Inc., as Manager, and its
financial advisor, (a) Texaco Inc. is not in bankruptcy, (b) Texaco Inc. is not
in default on any loan pertaining to Preferred Shares of any series, (c) Texaco
Inc. has timely made payments on the repaid or prepaid loan for the immediately
prior 18 months, (d) the Company is not in arrearage on payments of dividends on
the Series B Preferred Shares, (e) Texaco Inc. is expected to be able to make
timely payment of principal and interest on such loan, (f) such loan is being
made on terms, and under circumstances, that are consistent with those which a
lender would require for a loan to an unrelated party, (g) such loan is being
made at a rate sufficient to provide payments equal to or greater than the
amount of dividend payments required under the Series B Preferred Shares, (h)
the senior unsecured long-term debt of Texaco Inc. is rated among the four
highest categories by a nationally recognized rating organization or, in the
event of changes in those categories, such subsequent categories as shall then
be applicable, (i) such loan is being made for a term that is consistent with
market circumstances and Texaco Inc.'s financial condition, and that is in no
event more than 30 years, and (j) in any event, the final maturity of such loan
shall not be later than the fiftieth anniversary of the issuance of the Series B
Preferred Shares.
The Series B Preferred Shares are redeemable, at the option of the Company
subject to the prior consent of Texaco Inc., in whole or in part from time to
time, on or after May 31, 1999, upon not less than 30 nor more than 60 days'
notice, at the redemption price of $25, plus accrued and unpaid dividends to the
date fixed for redemption.
Notwithstanding the foregoing, if at any time after the issuance of the
Series B Preferred Shares the Company or Texaco Inc. is or would be required to
pay additional amounts or would be required to withhold or deduct certain
amounts as described under "Additional Amounts" herein and "Description of the
Guarantee--Additional Amounts" in the accompanying Prospectus, respectively,
then, subject to the prior consent of Texaco Inc., the Company may, at its
option, upon not less than 30 nor more than 60 days' notice to the holders of
the Series B Preferred Shares (which notice shall be irrevocable), redeem the
Series B Preferred Shares in whole (or, if such requirement relates to only
certain of the Series B Preferred Shares, the Series B Preferred Shares subject
to such requirement) at the liquidation preference of $25 per share plus accrued
and unpaid dividends to the date fixed for redemption, whether or not declared.
As of the date hereof, it is anticipated that no Additional Amounts would
be required to be paid by the Company or Texaco Inc. upon the making of any
required payment in respect of the Series B Preferred Shares. If any Additional
Amounts would be required to be paid, the Series B Preferred Shares would be
subject to call for redemption under the foregoing provisions.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series B Preferred Shares at the
time outstanding will be entitled to receive out of the assets of the Company
available for distribution to stockholders, before any distribution of assets is
made to holders of common shares or any other class of shares of the Company
ranking junior to the Series B Preferred Shares as regards participation in
assets of the Company, but together with the holders of every other series of
preferred or preference stock of the Company outstanding, if any, ranking pari
passu with the Series B Preferred Shares as regards participation in the assets
of the Company ("Company Liquidation Parity Shares"), an amount equal, in the
case of the holders of the Series B Preferred Shares, to the aggregate of the
liquidation preference of $25 per Series B Preferred Share and all accumulated
arrears and accruals of unpaid dividends (whether or not declared) to the date
of payment (the "Liquidation Distribution"). If, upon any such liquidation, the
Liquidation Distributions can be paid only in part because the Company has
insufficient assets available to pay in full the aggregate Liquidation
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Distributions and the aggregate maximum Liquidation Distributions on the Company
Liquidation Parity Shares, then the amounts payable directly by the Company on
the Series B Preferred Shares and on such Company Liquidation Parity Shares
shall be paid on a pro rata basis, so that
(i)(x) the aggregate amount paid as Liquidation Distributions on the
Series B Preferred Shares bears to (y) the aggregate amount paid as
Liquidation Distributions on the Company Liquidation Parity Shares the same
ratio as
(ii)(x) the aggregate Liquidation Distributions bears to (y) the
aggregate maximum Liquidation Distributions on the Company Liquidation
Parity Shares.
VOTING RIGHTS
If (i) the Company fails to pay dividends in full on the Series B Preferred
Shares for 18 consecutive monthly dividend periods or (ii) Texaco Inc. breaches
any of its obligations under the Series B Loans (as defined under "Description
of the Series B Loans") or Texaco Inc. breaches any of its obligations under the
Guarantee (as defined in "Description of the Guarantee" in the accompanying
Prospectus), then the holders of outstanding Series B Preferred Shares, together
with the holders of any other shares of preferred or preference stock of the
Company having the right to vote for the appointment of a trustee in such event,
acting as a single class, will be entitled, by ordinary resolution passed by the
holders of a majority in liquidation preference (plus all accumulated arrears
and accruals of dividends per share) of such shares present in person or by
proxy at a separate general meeting of such holders convened for such purpose,
to appoint and authorize a trustee to enforce the Company's creditor rights
under the Series B Loans against Texaco Inc., enforce the obligations undertaken
by Texaco Inc. under the Guarantee and declare and pay dividends. Not later than
30 days after such entitlement arises, the Manager will convene a separate
general meeting for the above purpose. If the Manager fails to convene such
meeting within such 30-day period, the holders of 10% in liquidation preference
(plus all accumulated arrears and accruals of dividends per share) of the
outstanding Series B Preferred Shares and such other preferred or preference
stock will be entitled to convene such separate general meeting. The provisions
of the Articles relating to the convening and conduct of the general meetings of
shareholders will apply with respect to any such separate general meeting. Any
trustee so appointed shall vacate office, subject to the terms of such other
preferred or preference stock, if the Company (or Texaco Inc. pursuant to the
Guarantee) shall have paid in full all accumulated arrears and accruals of
unpaid dividends on the Series B Preferred Shares (if the event that gave rise
to such appointment was clause (i) of this paragraph) or such breach by Texaco
shall have been cured (if the event that gave rise to such appointment was
clause (ii) of this paragraph).
If any resolution is proposed for adoption by the shareholders of the
Company providing for (x) any variation or abrogation of the rights, preferences
and privileges of the Series B Preferred Shares by way of amendment of the
Company's Articles or otherwise (including, without limitation, the
authorization or issuance of any shares of the Company ranking, as to
participation in the profits or assets of the Company, senior to the Series B
Preferred Shares) or (y) the liquidation, dissolution or winding up of the
Company, then the holders of outstanding Preferred Shares of all series (and, in
the case of a resolution described in clause (x) above which would equally
adversely affect the rights, preferences or privileges of any Company Dividend
Parity Shares or any Company Liquidation Parity Shares, such Company Dividend
Parity Shares or such Company Liquidation Parity Shares, as the case may be, or,
in the case of any resolution described in clause (y) above, all Company
Liquidation Parity Shares) will be entitled to vote together as a class on such
resolution (but not on any other resolution) (i) at a separate meeting of such
holders, (ii) at the general meeting of shareholders of the Company called for
the purpose of adopting such resolution or (iii) without a meeting but in
writing, and such resolution shall not be effective except with the approval, in
the case of clauses (i) and (ii), of the holders of 66 2/3% in liquidation
preference (plus
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all accumulated arrears and accruals of dividends) of such outstanding shares
present in person or by proxy at a meeting at which 66 2/3% in liquidation
preference (plus all accumulated arrears and accruals of dividends) of such
shares are so present or, in the case of clause (iii), by the holders of 66 2/3%
in liquidation preference (plus all accumulated arrears and accruals of
dividends) of such shares; provided, however, that no such approval shall be
required under clauses (x) and (y) if the liquidation, dissolution and winding
up of the Company is proposed or initiated upon the initiation of proceedings,
or after proceedings have been initiated, for the liquidation, dissolution, or
winding up of Texaco Inc.
The rights attached to the Series B Preferred Shares will be deemed not to
be varied by the creation or issue of, and no vote will be required for the
creation of, any further series of preference shares or any further shares of
the Company ranking as regards participation in the profits or assets of the
Company pari passu with or junior to the Series B Preferred Shares.
The Company will cause a notice of any meeting at which holders of the
Series B Preferred Shares are entitled to vote to be mailed to each holder of
record of the Series B Preferred Shares. Each such notice will include a
statement setting forth (i) the date of such meeting, (ii) a description of any
resolution to be proposed for adoption at such meeting on which such holders are
entitled to vote and (iii) instructions for the delivery of proxies.
No vote of the holders of the Series B Preferred Shares will be required
for the Company to redeem and cancel Series B Preferred Shares in accordance
with the Articles.
Notwithstanding that holders of Series B Preferred Shares are entitled to
vote under any of the circumstances described above, any of the Series B
Preferred Shares and such other preference shares entitled to vote with such
Series B Preferred Shares as a single class outstanding at such time that are
owned by Texaco Inc. or any entity owned 20% or more by Texaco, either directly
or indirectly, shall not be entitled to vote and shall, for the purposes of such
vote, be treated as if they were not outstanding.
ADDITIONAL AMOUNTS
All payments in respect of the Series B Preferred Shares by the Company
will be made without withholding or deduction for or on account of any present
or future taxes, duties, assessments or governmental charges of whatever nature
imposed or levied upon or as a result of such payment by or on behalf of the
Turks and Caicos Islands or any authority therein or thereof having power to
tax, unless the withholding or deduction of such taxes, duties, assessments or
governmental charges is required by law. In that event, the Company will pay as
a dividend such Additional Amounts as may be necessary in order that the net
amounts received by the holders of the Series B Preferred Shares after such
withholding or deduction will equal the amount which would have been receivable
in respect of such Series B Preferred Shares in the absence of such withholding
or deduction, except that no such Additional Amounts will be payable to a holder
of Series B Preferred Shares (or a third party on such holder's behalf) with
respect to Series B Preferred Shares:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of such Series B Preferred Shares by reason
of such holder's having some connection with the Turks and Caicos Islands
other than being a holder of such Series B Preferred Shares, or
(b) if such holder has been notified of the obligation to withhold
taxes and has been requested but has not provided a declaration of
non-residence or other claim for exemption, and such withholding or
deduction would not have been required had such declaration or claim been
received.
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DESCRIPTION OF THE SERIES B LOANS
Set forth below is condensed information concerning the loans from the
Company to Texaco Inc. of the proceeds of the issuance of (i) the Series B
Preferred Shares and (ii) the additional shares of the Company's Common Stock
and related capital contributions issued in connection with the issuance of the
Series B Preferred Shares ("Additional Common Share Payments"). This summary
contains all material information concerning such loan agreements (the "Series B
Loan Agreements") but does not purport to be complete. References to provisions
of the Series B Loan Agreements are qualified in their entirety by reference to
the text of the Series B Loan Agreements, copies of which have been filed with
the Commission at or prior to the time of the sale of the Series B Preferred
Shares.
GENERAL
Pursuant to the Series B Loan Agreements to be dated , 1994, the
Company has agreed to make loans (the "Series B Loans") to Texaco Inc. in an
aggregate principal amount equal to $ , such amount being the aggregate
Liquidation Preference of the Series B Preferred Shares issued and sold by the
Company and the aggregate Additional Common Share Payments.
The entire principal amount of the Series B Loans shall become due and
payable (together with any accrued and unpaid interest thereon, including
Additional Interest (as hereinafter defined), if any, on the earliest of May 31,
2024 or the date upon which Texaco Inc. shall be dissolved or liquidated or the
date upon which the Company shall be dissolved or liquidated.
MANDATORY PREPAYMENT
If the Company redeems Series B Preferred Shares in accordance with the
terms thereof, the Loan of the Series B Preferred Share proceeds will become due
and payable in a principal amount equal to the aggregate Liquidation Preference
of the Series B Preferred Shares so redeemed. Any payment pursuant to this
provision shall be made prior to 12:00 noon, New York time, on the date of such
redemption or at such other time on such earlier date as the Company and Texaco
Inc. shall agree.
OPTIONAL PREPAYMENT
Texaco Inc. shall have the right to prepay the Series B Loans, without
premium or penalty,
(i) in whole or in part (together with any accrued but unpaid
interest, including Additional Interest, if any, on the portion being
prepaid) at any time following May 31, 1999; and
(ii) in whole (together with all accrued and unpaid interest,
including Additional Interest, if any, thereon) at any time after the date
hereof if Texaco Inc. is or would be required to pay any Additional
Interest pursuant to the terms of the Series B Loan Agreements or, if such
requirement shall relate only to a portion of the Series B Loans, the
portion of the Series B Loans affected by any such requirement. In no
event, however, shall Texaco Inc. have the right to prepay the Series B
Loans, or a portion thereof, under this clause (ii) based on a technical
obligation to pay Additional Interest in the absence of any actual
liability for withholding taxes, duties, assessments or government charges,
as the case may be.
INTEREST
The Series B Loans shall bear interest at a variable rate from the date
they are made until maturity. The interest rate will be adjusted quarterly. The
rate for the initial period from the date the Series B Loans are made to
September 30, 1994 will be % per annum. Thereafter, interest on the Series B
Loans will be payable at the "Applicable Rate" from time to time in effect. The
Applicable
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Rate for any quarter will be equal to % of the highest of the "Treasury Bill
Rate", the "Ten Year Constant Maturity Rate" and the "Thirty Year Constant
Maturity Rate" determined in advance of such quarter. The Applicable Rate for
any quarter will not be less than % per annum nor greater than % per annum.
The "Treasury Bill Rate", the "Ten Year Constant Maturity Rate" and the "Thirty
Year Constant Maturity Rate" with respect to any quarter shall be determined by
the Company in the same manner as, and consistent with its determinations with
respect to, quarters for the purpose of dividends payable on the Series B
Preferred Shares. See "Certain Terms of the Series B Preferred
Shares--Dividends."
Such interest shall be payable on the last day of each calendar month of
each year, commencing June 30, 1994. In the event that any date on which
interest is payable on the Series B Loans is not a day on which banks in The
City of New York are open for business and on which foreign exchange dealings
may be conducted in The City of New York (a "Business Day"), then payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date; provided that
Texaco Inc. shall have the right at any time during the term of the Series B
Loans, so long as Texaco Inc. is not in default in the payment of interest on
the Series B Loans, to extend the interest payment period to 60 months, at the
end of which period Texaco Inc. shall pay all interest then accrued and unpaid
(together with interest thereon at the weighted average rate applicable to the
Series B Loans to the extent permitted by applicable law); and provided further
that, during any such extended interest payment period, or at any time during
which there is an uncured Event of Default under the Series B Loans, Texaco Inc.
shall not pay dividends on any of its shares of equity stock. Notwithstanding
anything else contained herein or in the Series B Loan Agreements, the time
within which all payments of the principal of and interest on the Series B Loans
(or any replacement loans) shall be made shall not be later than the fiftieth
anniversary of the issuance of the Series B Preferred Shares. Texaco Inc. has
covenanted (x) not to exercise the right to extend the interest period with
respect to the Prior Loans unless it exercises or has exercised the right to
extend the interest period with respect to the Series B Loans in a way which
will insure that, during the entire time when an interest period with respect to
the Prior Loans has been extended under its terms, the interest period with
respect to the Series B Loans shall also be extended as provided in the Series B
Loan Agreements, and (y) not to exercise the right to extend the interest period
with respect to the Prior Loans if the specified maturity date on the Series B
Loans would occur during such interest extension period. Texaco Inc. shall give
the Company such prior notice of its selection of such longer interest payment
period with respect to the Series B Loans as shall enable the Company to give at
least eleven Business Days prior notice under the Series B Loan Agreements to
the holders of the Series B Preferred Shares, and Texaco Inc. shall cause the
Company to give such notice to the holders of the Series B Preferred Shares.
ADDITIONAL INTEREST
In addition, if at any time following the date of the Series B Loan
Agreements (a) the Company shall be required to pay any Additional Amounts in
respect of the Series B Preferred Shares, pursuant to the terms thereof, (b)
Texaco Inc. shall be required to withhold or deduct any amounts, for or on
account of any taxes, duties or governmental charges of whatever nature imposed
by the United States of America (or any political subdivision thereof or
therein), from the interest payments to be made by Texaco Inc. on the Series B
Loans or (c) the Company shall be required to pay, with respect to its income
derived from the interest payments on the Series B Loans, any amounts, for or on
account of any taxes, duties or governmental charges of whatever nature imposed
by the Turks and Caicos Islands (or any political subdivision thereof or
therein), then, in any such case, Texaco Inc. will pay as interest such
additional amounts ("Additional Interest") as may be necessary in order that the
net amounts received and retained by the Company after paying
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such Additional Amounts, or after such withholding or deduction or the payment
of such taxes, duties, assessments or governmental charges, as the case may be,
shall result in the Company's having such funds as it would have had in the
absence of the obligation to pay such Additional Amounts, or such withholding or
deduction or the payment of such taxes, duties, assessments or governmental
charges, as the case may be. The obligation to pay Additional Interest under (b)
above shall be reduced proportionately to the extent that (x) holders of Series
B Preferred Shares have been notified of the obligation to withhold taxes and
have been requested but have not provided declarations of non-residence or other
claim for exemption and (y) such withholding or deduction would not have been
required had such declaration or claim been received.
METHOD AND DATE OF PAYMENT
Each payment by Texaco Inc. of principal and interest (including Additional
Interest, if any) on the Series B Loans shall be made to the Company in lawful
money of the United States, at such place and to such account as may be
designated by the Company.
SET-OFF
Notwithstanding anything to the contrary in the Series B Loan Agreements,
Texaco Inc. shall have the right to set-off any payment it is otherwise required
to make thereunder with and to the extent Texaco Inc. has theretofore made, or
is concurrently on the date of such payment making, a payment under the
Guarantee.
SUBORDINATION
Texaco Inc. and the Company covenant and agree that each of the Series B
Loans is subordinate and junior in right of payment to all Senior Indebtedness
as provided in the Series B Loan Agreements. The term "Senior Indebtedness"
shall mean the principal, premium, if any, and interest on (i) all indebtedness
of Texaco Inc. (excluding the Prior Loans, with which the Series B Loans shall
rank on a pari passu basis), whether outstanding on the date of the Series B
Loan Agreements or thereafter created, incurred or assumed, which is for money
borrowed, or evidenced by a note or similar instrument given in connection with
the acquisition of any business, properties or assets, including securities,
(ii) any indebtedness of others of the kinds described in the preceding clause
(i) for the payment of which Texaco Inc. is responsible or liable as guarantor
or otherwise and (iii) amendments, renewals, extensions and refundings of any
such indebtedness, unless in any instrument or instruments evidencing or
securing such indebtedness or pursuant to which the same is outstanding, or in
any such amendment, renewal, extension or refunding, it is expressly provided
that such indebtedness is not superior in right of payment to the Series B
Loans. Obligations to other creditors, including trade creditors, do not
constitute Senior Indebtedness. The Series B Loan Agreements expressly provide
that the Series B Loans will rank pari passu with, and will not be superior in
right of payment to, the Prior Loans. The Senior Indebtedness shall continue to
be Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
the Senior Indebtedness or extension or renewal of the Senior Indebtedness.
In the event that (i) Texaco Inc. shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness permitting the holders thereof to accelerate
the maturity thereof and written notice of such event of default is given to
Texaco Inc. by the holders of Senior Indebtedness, then unless and until such
default in payment and event of default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the
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Series B Loans or interest thereon or in respect of any repayment, redemption,
retirement, purchase or other acquisition of the Series B Loans.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to Texaco Inc., its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of Texaco Inc., voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Texaco Inc. for the benefit of creditors, or (iv) any
other marshalling of the assets of Texaco Inc., all Senior Indebtedness shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made to Texaco Inc. on account of the
Series B Loans. Any payment or distribution, whether in cash, securities or
other property (other than securities of Texaco Inc. or any other corporation
provided for by a plan of reorganization or a readjustment, the payment of which
is subordinate, at least to the extent provided in the subordination provisions
of the Series B Loan Agreements with respect to the indebtedness evidenced by
the Series B Loans, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect to the Series B
Loans shall be paid or delivered directly to the holders of Senior Indebtedness
in accordance with the priorities then existing among such holders until all
Senior Indebtedness shall have been paid in full. No present or future holder of
any Senior Indebtedness shall be prejudiced in the right to enforce
subordination of the indebtedness constituting the Series B Loans by any act or
failure to act on the part of Texaco Inc.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the Company shall be subrogated to all the
rights of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the Series B Loans
shall have been paid in full, and such payments or distributions received by the
Company, by reason of such subrogation, of cash, securities or other property
which otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between Texaco Inc. and its creditors other than the
holders of Senior Indebtedness, on the one hand, and the Company, on the other,
be deemed to be a payment by Texaco Inc. on account of Senior Indebtedness, and
not on account of the Series B Loans.
COVENANTS
Texaco Inc. will agree (i) to maintain direct or indirect 100% ownership of
the common shares of the Company, (ii) not to voluntarily dissolve, wind-up or
liquidate the Company so long as any Series B Preferred Shares are outstanding
and (iii) to timely perform all of its duties as Manager of the Company. See
"Interest" for a discussion of additional covenants with respect to the
extension of interest periods.
EVENTS OF DEFAULT
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) default in the payment of interest on the Series B Loans,
including any Additional Amounts in respect thereof, when due for 10 days;
provided that a valid extension of the interest payment period by Texaco
Inc. shall not constitute a default in the payment of interest for this
purpose (see "--Interest");
(b) default in the payment of principal on the Series B Loans;
S-17
(c) dissolution or winding-up or liquidation of the Company;
(d) the bankruptcy, insolvency or liquidation of Texaco Inc.; or
(e) the breach by Texaco Inc. of any of its covenants under the Series
B Loans;
then the Company will have the right to declare the principal of and the
interest on the Series B Loans and all other amounts payable under the Series B
Loan Agreements to be forthwith due and payable and to enforce its other rights
as a defaulted creditor with respect to the Series B Loans. Under the terms of
the Series B Preferred Shares, the holders of outstanding Series B Preferred
Shares will have the rights referred to under "Certain Terms of the Series B
Preferred Shares-- Voting Rights", including the right to appoint a trustee,
which trustee shall be authorized to exercise the Company's right to accelerate
the principal amount of the Series B Loans and to enforce the Company's other
creditor rights under the Series B Loans.
MISCELLANEOUS
Texaco Inc. shall have the right at all times to assign any of its rights
or obligations under the Series B Loan Agreements to a direct or indirect wholly
owned subsidiary of Texaco Inc.; provided that, in the event of any such
assignment, Texaco Inc. shall remain jointly and severally liable for all such
obligations. The Company may not assign any of its rights under the Series B
Loan Agreements without the prior written consent of Texaco Inc. Subject to the
foregoing, the Series B Loan Agreements shall be binding upon and inure to the
benefit of Texaco Inc. and the Company and their respective successors and
assigns. Any assignment by Texaco Inc. or the Company in contravention of these
provisions will be null and void.
Except as to matters relating to the authorization, execution and delivery
of the Series B Loan Agreements by the Company, which will be governed by the
laws of the Turks and Caicos Islands, the Series B Loan Agreements will be
governed by and construed in accordance with the laws of the State of New York.
The Series B Loan Agreements may be amended by mutual consent of the
parties in the manner the parties shall agree; provided that, so long as any of
the Series B Preferred Shares remain outstanding, no such amendment shall be
made, and no termination of the Series B Loan Agreements shall occur, without
the prior consent of at least 66 2/3% of the holders of the Series B Preferred
Shares, in writing or at a duly constituted meeting of such holders, unless and
until the Series B Loans and all accrued and unpaid interest thereon (including
Additional Interest, if any) shall have been paid in full.
S-18
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom Goldman, Sachs & Co., Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc.,
Kidder, Peabody & Co. Incorporated, Lehman Brothers Inc., Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated and
Smith Barney Inc. are acting as representatives, has severally agreed to
purchase, the number of Series B Preferred Shares set forth opposite its name
below:
SERIES B
UNDERWRITERS PREFERRED SHARES
- ------------------------------------------------------------------------------------ ------------------
Goldman, Sachs & Co.................................................................
Dean Witter Reynolds Inc. ..........................................................
A.G. Edwards & Sons, Inc. ..........................................................
Kidder, Peabody & Co. Incorporated..................................................
Lehman Brothers Inc. ...............................................................
Morgan Stanley & Co. Incorporated...................................................
PaineWebber Incorporated............................................................
Prudential Securities Incorporated..................................................
Smith Barney Inc. ..................................................................
Total........................................................................
------------------
------------------
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Series B Preferred
Shares, if any are taken.
The Underwriters propose to offer the Series B Preferred Shares in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain securities
dealers at such price less a concession of $ per Series B Preferred
Share. The Underwriters may allow and such dealers may reallow a concession not
in excess of $ per Series B Preferred Share to certain brokers and
dealers. After the Series B Preferred Shares are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the representatives.
In view of the fact that the proceeds of the sale of the Series B Preferred
Shares will be lent to Texaco Inc., Texaco Inc. has agreed to pay to Goldman,
Sachs & Co. in New York Clearing House (next day) funds $ per Series B
Preferred Share for the accounts of the several Underwriters as compensation for
the services of the Underwriters under the Underwriting Agreement.
The Company has granted the Underwriters an option for 30 days after the
date of this Prospectus Supplement exercisable in whole or in part to purchase
up to [ ] additional Series B Preferred Shares to cover over-allotments, if
any, at the initial public offering price (with an additional underwriting
commission), as set forth on the cover page of this Prospectus Supplement. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed,
S-19
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of Series B Preferred Shares to be purchased by each of
them, as shown in the foregoing table, bears to the number of Series B Preferred
Shares initially offered hereby.
Prior to this offering, there has been no market for the Series B Preferred
Shares. In order to meet one of the requirements for listing the Series B
Preferred Shares on the New York Stock Exchange, the Underwriters will undertake
to sell lots of 100 or more Series B Preferred Shares to a minimum of 400
beneficial holders.
The Company and Texaco Inc. have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the United States
Securities Act of 1933, as amended.
Certain of the Underwriters are customers of, or engage in transactions
with, and from time to time have performed services for, Texaco and its
affiliated companies in the ordinary course of business. Alfred C. DeCrane, Jr.,
the Chairman of the Board of Directors and Chief Executive Officer of Texaco
Inc., is a member of the board of directors of Dean Witter, Discover & Co.,
which is the parent company of Dean Witter Reynolds Inc.
Payment by each initial purchaser of the Series B Preferred Shares will be
made on the date of delivery of such Series B Preferred Shares by official bank
or certified check payable in New York Clearing House (next day) funds.
TAXATION
The following is a summary of the principal United States federal income
tax consequences of the ownership of Series B Preferred Shares as set forth in
the accompanying Prospectus under the caption "Taxation", which discussion
should be read in conjunction with the following summary. This summary and such
prior information is based upon the opinion of Sullivan & Cromwell, special
United States tax counsel.
INCOME FROM PREFERRED SHARES
In the opinion of Sullivan & Cromwell, the Company will be treated as a
partnership for federal income tax purposes. Each holder of Series B Preferred
Shares (a "Shareholder") will be required to include in gross income the
Shareholder's distributive share of the Company's net income. Such income will
not exceed dividends received on a Series B Preferred Share, except in limited
circumstances as described under "Potential Extension of Payment Period" in the
accompanying Prospectus. No portion of the amounts received on a Series B
Preferred Share will be eligible for the dividends received deduction. The
payment of such income to United States persons and the payment of interest on
the Series B Loans is not subject to withholding under present United States
federal income tax law.
DISPOSITION OF PREFERRED SHARES
Gain or loss will be recognized on a sale of Series B Preferred Shares
equal to the difference between the amount realized and the Shareholder's tax
basis for the Series B Preferred Shares sold. Gain or loss recognized by a
Shareholder on the sale or exchange of Series B Preferred Shares held for more
than one year will generally be taxable as long-term capital gain or loss.
UNITED STATES ALIEN HOLDERS
Under present United States federal income tax law, and assuming
satisfaction by Texaco Inc. of its withholding tax obligations, if any:
(i) payments by the Company or any of its paying agents to any holder
of a Series B Preferred Share who or which is a United States Alien Holder
(as defined in the Prospectus)
S-20
will not be subject to United States federal withholding tax, provided that
the conditions specified in the Prospectus are satisfied; and
(ii) a United States Alien Holder of a Series B Preferred Share will
not be subject to United States federal withholding tax on any gain
realized on the sale or exchange of a Series B Preferred Share.
COMPANY INFORMATION RETURNS
Texaco Inc., as Manager of the Company, anticipates that it will be able to
furnish a holder of the Series B Preferred Shares with a Schedule K-1 setting
forth such Shareholder's allocable share of income for any taxable year of the
Company prior to March 1 in the following year.
Should any United States withholding tax be imposed on payments on the
Series B Preferred Shares, such shares may be subject to a call for redemption
as provided under "Redemption" above.
VALIDITY OF SECURITIES
The validity of the Series B Preferred Shares will be passed upon by Misick
& Stanbrook, Turks and Caicos Islands counsel to the Company. The validity of
the Guarantee relating to the Series B Preferred Shares will be passed upon on
behalf of the Company and Texaco Inc. by Misick & Stanbrook, Turks and Caicos
Islands counsel to the Company and Texaco Inc., and Arthur G. Taylor, Esq.,
Associate General Counsel of Texaco Inc. or such other attorney of Texaco Inc.
as the Company and Texaco Inc. may designate, and on behalf of the Underwriters
by Davis Polk & Wardwell, United States counsel to the Underwriters. As to all
matters of Turks and Caicos Islands law, Arthur G. Taylor, Esq., Davis Polk &
Wardwell and Sullivan & Cromwell, special United States tax counsel, will rely
upon the opinions of Misick & Stanbrook. As to all matters of United States and
New York law, Misick & Stanbrook will rely upon the opinions of Arthur G.
Taylor, Esq.
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, 1993 filed on Form 10-K, incorporated herein by
reference, have been audited by Arthur Andersen & Co., 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. Reference is made to
said reports, which include an explanatory paragraph with respect to the change
in methods of accounting for income taxes and postretirement benefits other than
pensions in 1992, as discussed in Note 2 to the consolidated financial
statements.
S-21
TEXACO CAPITAL LLC
CUMULATIVE GUARANTEED MONTHLY INCOME PREFERRED SHARES ("MIPS*")
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY
TEXACO INC.
---------------------
Texaco Capital LLC (the "Company"), a limited life company organized under
the laws of the Turks and Caicos Islands, may offer from time to time, in one or
more series, its authorized but unissued shares of Cumulative Guaranteed Monthly
Income Preferred Shares, par value $25 per share (the "MIPS*" or "Preferred
Shares"). The Company is a wholly owned subsidiary of Texaco Inc. (the
"Guarantor"), a Delaware corporation. The payment of dividends, if and to the
extent declared out of moneys held by the Company and lawfully available
therefor, and payments on liquidation or redemption with respect to the
Preferred Shares are guaranteed (the "Guarantee") by the Guarantor to the extent
set forth herein. The Guarantee will rank junior to all liabilities of the
Guarantor and pari passu with the most senior preferred or preference stock
issued by the Guarantor. See "Texaco Capital LLC", "Description of Preferred
Shares--Mandatory Redemption" and "Description of the Guarantee" for a
description of various contractual backup obligations of Texaco Inc. The total
number of Preferred Shares of all series to be issued under the registration
statement of which this Prospectus forms a part will not exceed 24,000,000.
The terms of the Preferred Shares of a particular series will be determined
at the time of sale. The specific designation, liquidation value per share,
initial public offering price, dividend rate (or method of determination
thereof), dates on which dividends will be payable, voting rights, any
redemption provisions and the other rights, preferences, privileges, limitations
and restrictions relating to the Preferred Shares of the particular series in
respect of which this Prospectus is being delivered will be set forth in the
Prospectus Supplement pertaining to such series (the "Prospectus Supplement").
The Preferred Shares may be sold for public offering to or through
underwriters, including Goldman, Sachs & Co., or dealers or may be sold through
agents designated from time to time or directly by the Company. See "Plan of
Distribution". The names of any such underwriters, dealers or agents involved in
the sale of the Preferred Shares of the particular series in respect of which
this Prospectus is being delivered, the number of Preferred Shares to be
purchased by any such underwriters and any applicable commissions or discounts
will be set forth in the Prospectus Supplement. The net proceeds to the Company
will also be set forth in the Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
No person has been authorized to give any information or to make any
representations, other than as contained herein or incorporated by reference in
this Prospectus, in connection with the offer contained in this Prospectus, and,
if given or made, such information or representations must not be relied upon.
Neither the delivery of this Prospectus nor any sale hereunder shall under any
circumstances create an implication that there has been no change in the affairs
of the Company or the Guarantor since the date hereof.
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.
This Prospectus may not be used to consummate sales of Preferred Shares
unless accompanied by a Prospectus Supplement.
- ---------------
* An application is being filed by Goldman, Sachs & Co. with the United States
Patent and Trademark Office for the registration of the MIPS servicemark.
GOLDMAN, SACHS & CO.
---------------------
The date of this Prospectus is October 21, 1993
TABLE OF CONTENTS
PAGE
----
Available Information................................................... 2
Documents Incorporated by Reference..................................... 3
Texaco.................................................................. 4
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends............................................................... 4
Texaco Capital LLC...................................................... 5
Use of Proceeds......................................................... 5
Description of Preferred Shares......................................... 5
Description of the Guarantee............................................ 10
Limitations Affecting Securities Holders................................ 13
Taxation................................................................ 13
Plan of Distribution.................................................... 15
Validity of Securities.................................................. 16
Experts................................................................. 16
Further Information..................................................... 17
AVAILABLE INFORMATION
Texaco Inc. is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Texaco Inc.'s annual proxy statements so filed
contain, among other things, certain information concerning directors and
officers, including their compensation, the number of shares of common stock of
Texaco Inc. owned by the directors and owners of 5% or more of any class of such
securities, and any material interests of such persons in certain transactions.
Such reports, proxy statements and other information filed by Texaco Inc. with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549, as well as at the Regional Offices of the Commission at 7 World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, certain reports, proxy materials and other information concerning
Texaco Inc. can be inspected at the offices of The New York Stock Exchange,
Inc., 20 Broad Street, New York, New York and the Midwest Stock Exchange, 120
South LaSalle Street, Chicago, Illinois, on which Exchanges the common stock of
Texaco Inc. is listed.
Texaco Inc. will provide without charge to each person to whom a copy of
this Prospectus or any Prospectus Supplement is delivered, on the request of any
such person, a copy of any or all of the documents incorporated in this
Prospectus or any Prospectus Supplement by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
in such documents). Written or telephone requests for such copies should be
directed to the executive offices of Texaco Inc. c/o the Secretary, 2000
Westchester Avenue, White Plains, New York 10650 (Telephone: (914) 253-4000).
No separate financial statements of the Company have been included herein.
The Company and Texaco Inc. do not consider that such financial statements would
be material to holders of the Preferred Shares because the Company is a newly
organized special purpose entity, has no operating history and no independent
operations and is not engaged in any activity other than the issuance of the
Preferred Shares and its common shares, and the lending of the net proceeds
thereof to Texaco Inc. or its subsidiaries. See "Texaco Capital LLC". The
Company is a limited life company organized under the laws of the Turks and
Caicos Islands and will be managed by Texaco
2
Inc., which beneficially owns all of the Company's common stock, which is
nontransferable. The Company has no physical assets located within the United
States. As a result, it may not be possible for investors to effect service of
process within the United States upon the Company or to enforce against it in
the United States courts judgments obtained in such courts predicated upon civil
liability provisions of the federal securities laws of the United States. The
Company has been advised by its Turks and Caicos Islands legal counsel, Misick &
Stanbrook, that there may be doubt as to the enforceability, in the Turks and
Caicos Islands in original actions or in actions for enforcement of judgments of
United States courts, of liabilities predicated solely upon the federal
securities laws of the United States.
DOCUMENTS INCORPORATED BY REFERENCE
The documents listed below, filed by Texaco Inc. with the Securities and
Exchange Commission (File No. 1-27) pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, contain the most recently published corporate
and financial data regarding Texaco Inc., and are incorporated by reference in
this Prospectus:
(a) Annual Report of Texaco Inc. for the fiscal year ended December
31, 1992, filed on Form 10-K (dated and filed March 17, 1993) (the "1992
Form 10-K");
(b) Texaco Inc.'s Proxy Statement dated April 5, 1993, issued in
connection with Texaco Inc.'s 1993 Annual Meeting;
(c) Quarterly Reports of Texaco Inc. for the quarterly periods ended
March 31, 1993 and June 30, 1993, filed on Form 10-Q (dated and filed May
14, 1993 and August 12, 1993, respectively) (the "Form 10-Qs");
(d) Form 8-K--Texaco Inc.--date of earliest event reported, January
21, 1993 (dated January 22, 1993 and filed January 25, 1993);
(e) Form 8-K--Texaco Inc.--date of earliest event reported, February
17, 1993 (dated and filed February 19, 1993);
(f) Form 8-K--Texaco Inc.--date of earliest event reported, March 4,
1993 (dated and filed March 8, 1993);
(g) Form 8-K--Texaco Inc.--date of earliest event reported, April 22,
1993 (dated and filed April 23, 1993);
(h) Form 8-K--Texaco Inc.--date of earliest event reported, July 22,
1993 (dated and filed July 22, 1993);
(i) Form 8-K--Texaco Inc.--date of earliest event reported, August 12,
1993 (dated and filed August 13, 1993);
(j) Form 8-K--Texaco Inc.--date of earliest event reported, September
3, 1993 (dated and filed September 7, 1993);
(k) Form 8-K--Texaco Inc.--date of earliest event reported, September
9, 1993 (dated and filed September 10, 1993); and
(l) Form 8-K--Texaco Inc.--date of earliest event reported, September
13, 1993 (dated and filed September 14, 1993).
All documents subsequently filed by Texaco Inc. pursuant to Sections 13(a),
13(c), 13(d), 14 and 15(d) of the Exchange Act (except those relating to
employee benefit plans), prior to the termination of the offering described
herein, shall be deemed to be incorporated by reference in
3
this Prospectus or in any Prospectus Supplement and to be a part hereof and
thereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein or
in any Prospectus Supplement shall be deemed to be modified or superseded for
purposes of this Prospectus and any Prospectus Supplement to the extent that a
statement contained herein or therein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein or
therein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
TEXACO
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 together with affiliates owned 50% or less represents 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, including petrochemicals.
On September 13, 1993, Texaco Inc. announced that it had entered into a
memorandum of understanding to sell on January 1, 1994, subject to the signing
of definitive agreements and to obtaining necessary government and other
approvals, Texaco Chemical Company, a wholly owned subsidiary, and substantially
all of its worldwide chemical operations to Huntsman Financial Corporation, an
affiliate of the Jon M. Huntsman Group of Companies, for a purchase price of
$1.05 billion.
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------
1993 1992 1991 1990 1989 1988
--------------- --------- --------- --------- --------- ---------
Ratio of earnings to combined fixed charges and
preferred stock dividends of Texaco on a total
enterprise basis (unaudited)(a)......................... 3.08 2.57 2.77 3.57 4.28(b) 3.14
- ---------------
(a) Preferred stock dividend requirements have been adjusted to reflect the pre-tax earnings which would be
required to cover the Series C and Series E Variable Rate Cumulative Preferred Stock and Market Auction
Preferred Shares dividends and to exclude the interest portion of the Series B and Series F ESOP Convertible
Preferred Stock dividends.
(b) Excluding the gains from the sale of Texaco Canada Inc. and the sale of a 20% stock interest in a subsidiary,
as well as the 1989 restructuring charges, the ratio of earnings to combined fixed charges and preferred
stock dividends on a total enterprise basis approximated 2.48.
4
TEXACO CAPITAL LLC
Texaco Capital LLC, a wholly owned subsidiary of Texaco Inc., is a limited
life company organized under the laws of the Turks and Caicos Islands. The
Company's registered offices are located at MacLaw House, P.O. Box 103, Duke
Street, Grand Turk, Turks and Caicos Islands, British West Indies, telephone:
(809) 946-2476. The principal executive offices of its Manager (as defined
below) are located at 2000 Westchester Avenue, White Plains, New York 10650,
telephone: (914) 253-4000. Texaco Inc. will own directly or indirectly all of
the common shares of the Company, which shares are nontransferable. The Company
exists solely for the purpose of issuing preferred and common shares and lending
the net proceeds thereof to Texaco Inc. or its subsidiaries.
Texaco Inc. and the Company will enter into an agreement pursuant to which
Texaco Inc. has agreed to guarantee the payment of any liabilities incurred by
the Company (other than obligations to holders of Preferred Shares). The
agreement expressly provides that such agreement is for the benefit of, and is
enforceable by, third parties to whom the Company owes such obligations.
USE OF PROCEEDS
It is expected that the net proceeds from the sale of the Preferred Shares
will be lent to Texaco Inc. or its subsidiaries to be used for working capital,
for retirement of debt and for other general corporate purposes.
DESCRIPTION OF PREFERRED SHARES
The following is a summary of certain terms and provisions of the Preferred
Shares of any series. Certain terms and provisions of the Preferred Shares of a
particular series will be summarized in the Prospectus Supplement relating to
the Preferred Shares of such series. If so indicated in the Prospectus
Supplement, the terms and provisions of the Preferred Shares of a particular
series may differ from the terms set forth below. The summaries set forth below
and in the applicable Prospectus Supplement address the material terms of the
Preferred Shares of any particular series but do not purport to be complete and
are subject to, and qualified in their entirety by reference to, the Memorandum
of Association of the Company (the "Memorandum"), the Articles of Association of
the Company (the "Articles") and the resolutions adopted, or to be adopted, by
Texaco Inc., as manager (the "Manager"), as designated in the Articles
establishing the rights, preferences, privileges, limitations and restrictions
relating to the Preferred Shares of any series or of a particular series. Copies
of the Memorandum and the Articles have been filed or incorporated by reference
as exhibits to the Registration Statement of which this Prospectus is a part.
GENERAL
The Company is authorized to issue up to 24,000,000 preference shares, in
one or more series or classes, with such dividend rights, liquidation preference
per share, redemption provisions, voting rights and other rights, preferences,
privileges, limitations and restrictions as shall be set forth in the Articles
and the resolutions providing for the issuance thereof adopted by the Manager.
All of the Preferred Shares, to be issued in one or more series or classes, will
rank pari passu with each other with respect to participation in profits and
assets. The Articles as currently in effect do not permit the issuance of any
preference shares ranking, as to participation in the profits or the assets of
the Company, senior to the Preferred Shares.
5
The Preferred Shares of any series will be issued in registered form only
without dividend coupons. Registration of, and registration of transfers of, the
Preferred Shares of any series will be by book entry only. The Preferred Shares
of any series will have the dividend rights, rights upon liquidation, redemption
provisions and voting rights set forth below, unless otherwise provided in the
Prospectus Supplement relating to the Preferred Shares of a particular series.
Reference is made to the Prospectus Supplement relating to the Preferred Shares
of a particular series for specific terms including (i) the designation of the
Preferred Shares of such series, (ii) the price at which the Preferred Shares of
such series will be issued, (iii) the dividend rate (or method of calculation
thereof) and the dates on which dividends will be payable, (iv) the voting
rights of the Preferred Shares of such series, (v) any redemption provisions,
(vi) any other rights, preferences, privileges, limitations and restrictions
relating to the Preferred Shares of such series and (vii) the terms upon which
the proceeds from the sale of the Preferred Shares of such series will be lent
to Texaco.
DIVIDENDS
Cumulative dividends on any series of Preferred Shares will accrue from the
date of original issue thereof and will be payable in arrears at the dates
specified in the Prospectus Supplement relating to each such series. Payment of
dividends is limited in relation to the amount of funds held by the Company and
legally available therefor. See "Description of the Loan" in the Prospectus
Supplement and "Description of the Guarantee--General" below.
The dividend payable on Preferred Shares of a particular series will be
fixed at the rate specified in the Prospectus Supplement relating to such
series. The amount of dividends payable for any period will be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full monthly dividend period, will be computed on the basis of the actual
number of days elapsed in such period.
Dividends declared on the Preferred Shares of any series will be payable to
the record holders thereof as they appear on the register for the Preferred
Shares of such series on the relevant record dates, which will be, unless
otherwise specified in the Prospectus Supplement relating to each such series,
the relevant payment dates. Subject to any applicable fiscal or other laws and
regulations, each such payment will be made as described under "Book-Entry-Only
Issuance; The Depository Trust Company" below. In the event that any date on
which dividends are payable on the Preferred Shares of any series is not a day
on which banks in The City of New York are open for business and on which
foreign exchange dealings may be conducted in The City of New York (a "Business
Day"), then payment of the dividend payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
Dividends on the Preferred Shares of any series will be cumulative.
Dividends on the Preferred Shares of such series will be declared by the Company
in any calendar year or portion thereof to the extent that the Company
reasonably anticipates that at the time of payment it will have, and will be
paid by the Company to the extent that at the time of proposed payment it has,
(x) earnings legally available for the payment of such dividends and (y) cash in
hand sufficient to permit such payments.
If dividends can be paid only in part on the Preferred Shares of a
particular series in any calendar year or portion thereof as a result of the
lack of sufficient funds legally available for the payment of dividends, then
such partial dividends shall be paid on the respective dividend payment dates on
a pro rata basis to holders of such Preferred Shares.
6
If at any time dividends on Preferred Shares are in arrears for any monthly
dividend period, any dividend payments in respect thereof must be applied in
respect of all dividend periods in arrears, pro rata in accordance with the
respective amounts in arrears for each such period in equal amounts for each
such period.
Except as described herein and in the Prospectus Supplement relating to the
Preferred Shares of a particular series, holders of the Preferred Shares of any
series will have no other right to participate in the profits of the Company.
CERTAIN RESTRICTIONS ON THE COMPANY
If dividends have not been paid in full on the Preferred Shares of any
series, the Company shall not:
(i) pay, or declare and set aside for payment, any dividends on any
other preferred or preference stock of the Company ranking pari passu with
the Preferred Shares of such series as regards participation in profits of
the Company ("Company Dividend Parity Shares"), unless the amount of any
dividends declared on any Company Dividend Parity Shares is paid on the
Company Dividend Parity Shares and the Preferred Shares of such series on a
pro rata basis on the date such dividends are paid on such Company Dividend
Parity Shares, so that
(x) (A) the aggregate amount of dividends paid on the Preferred
Shares of such series bears to (B) the aggregate amount of dividends
paid on such Company Dividend Parity Shares the same ratio as
(y) (A) the aggregate of all accumulated arrears of unpaid
dividends in respect of the Preferred Shares of such series bears to (B)
the aggregate of all accumulated arrears of unpaid dividends in respect
of such Company Dividend Parity Shares;
(ii) pay, or declare and set aside for payment, any dividends on any
shares of the Company ranking junior to the Preferred Shares of such series
as to dividends ("Company Dividend Junior Shares"); or
(iii) redeem, purchase or otherwise acquire any Company Dividend
Parity Shares or Company Dividend Junior Shares;
until, in each case, such time as all accumulated arrears of unpaid dividends on
the Preferred Shares of such series shall have been paid in full for all
dividend periods terminating on or prior to, in the case of clauses (i) and
(ii), such payment, and in the case of clause (iii), the date of such
redemption, purchase or acquisition. As of the date of this Prospectus, there
are no Company Dividend Parity Shares outstanding.
MANDATORY REDEMPTION
The proceeds from any prepayment or repayment of principal on a loan to
Texaco of the proceeds from the issuance of any series of Preferred Shares must
be applied to redeem the Preferred Shares of such series; provided that amounts
of repayment at maturity may be lent to Texaco if at the time of such loan, and
as determined in the judgment of Texaco Inc., as Manager, and its financial
advisor, (a) Texaco is not in bankruptcy, (b) Texaco is not in default on any
loan pertaining to Preferred Shares of any series, (c) Texaco has made monthly
payments on the repaid loan for the immediately prior 18 months, (d) the Company
is not in arrearage on payments of dividends on the Preferred Shares of such
series, (e) Texaco is expected to be able to make timely payment of principal
and interest on the loan, (f) such loan is being made on terms, and under
circumstances, that are consistent with those which a lender would require for a
loan to an unrelated party, (g) such loan is being made at a rate sufficient to
provide payments equal to or greater than the amount of dividend payments
required under the Preferred Shares of such series
7
and (h) such loan is being made for a term that is consistent with market
circumstances and Texaco's financial condition.
OPTIONAL REDEMPTION
The Preferred Shares of any series will be redeemable, if at all, as
specified in the Prospectus Supplement relating to such series.
Notice of any redemption of the Preferred Shares of any series will be
given by the Company by mail to each record holder to be redeemed not fewer than
30 nor more than 60 days prior to the date fixed for redemption thereof.
In the event that fewer than all the outstanding Preferred Shares of a
particular series are to be redeemed, the Preferred Shares of such series to be
redeemed will be selected as described under "Book-Entry-Only Issuance; The
Depository Trust Company" below. The Company will not redeem fewer than all the
outstanding Preferred Shares of a particular series unless all accumulated
arrears of unpaid dividends have been paid on all Preferred Shares of such
series for all monthly dividend periods terminating on or prior to the date of
redemption.
If the Company gives a notice of redemption in respect of Preferred Shares
of a particular series, then, by 12:00 noon, New York time, on the redemption
date, the Company will irrevocably deposit with The Depository Trust Company
funds sufficient to pay the applicable redemption price, including an amount
equal to an accumulated arrears and accruals of unpaid dividends (whether or not
declared) to the date fixed for redemption, and will give The Depository Trust
Company irrevocable instructions and authority to pay the redemption price to
the holders thereof. See "Book-Entry-Only Issuance; The Depository Trust
Company". If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of holders of such
Preferred Shares of a series so called for redemption will cease, except the
right of the holders of such shares to receive the redemption price, plus
accumulated arrears and accruals of unpaid dividends, if any, but without
interest, and such shares will cease to be outstanding. In the event that any
date on which any payment in respect of the redemption of Preferred Shares of
any series is not a Business Day, then payment of the redemption price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
redemption price in respect of Preferred Shares of any series is improperly
withheld or refused and not paid either by the Company or by the Guarantor
pursuant to the Guarantee, dividends on such shares will continue to accrue, at
the then applicable rate, from the redemption date to the date of payment of
such redemption price.
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws) Texaco Inc. or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Shares of any series by
tender, in the open market or by private agreement.
BOOK-ENTRY-ONLY ISSUANCE; THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the Preferred Shares. The Preferred Shares will be issued as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One fully-registered Preferred Share certificate will be
issued for each series of Preferred Shares, each in the aggregate liquidation
preference of such issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial
8
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants"). The
Rules applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Preferred Shares under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Shares on DTC's records. The ownership interest of each actual purchaser of each
Preferred Share ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Preferred Shares are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Preferred Shares, except in the event that use of the book-entry
system for the Preferred Shares is discontinued.
To facilitate subsequent transfers, all Preferred Shares deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Preferred Shares with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Shares; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Preferred Shares are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Shares of any series are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
series to be redeemed.
Although voting with respect to the Preferred Shares is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will consent or vote
with respect to Preferred Shares. Under its usual procedures, DTC mails an
Omnibus Proxy to the Company as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Preferred Shares are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Dividend payments on the Preferred Shares will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant
9
and not of DTC or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of dividends to DTC
is the responsibility of the Company, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Shares at any time by giving reasonable notice to the
Company. Under such circumstances, in the event that a successor securities
depository is not obtained, Preferred Share certificates are required to be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Texaco Inc. will act as registrar, transfer agent and paying agent for the
Preferred Shares (the "Paying Agent").
Registration of transfers of Preferred Shares of any series will be
effected without charge by or on behalf of the Company, but upon payment (with
the giving of such indemnity as the Company or Texaco Inc. may require) in
respect of any tax or other governmental charges which may be imposed in
relation to it.
The Company will not be required to register or cause to be registered the
transfer of Preferred Shares of a particular series after such Preferred Shares
have been called for redemption.
MISCELLANEOUS
The Company is not subject to any mandatory redemption or sinking fund
provisions with respect to the Preferred Shares of any series. Holders of
Preferred Shares of any series have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is condensed information concerning the guarantee (the
"Guarantee") which will be executed and delivered by the Guarantor for the
benefit of the holders from time to time of Preferred Shares. This summary
contains all material information concerning the Guarantee but does not purport
to be complete. References to provisions of the Guarantee are qualified in their
entirety by reference to the text of the Guarantee, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is
part.
GENERAL
The Guarantor will irrevocably and unconditionally agree, to the extent set
forth herein, to pay in full, to the holders of the Preferred Shares of any
series, the Guarantee Payments (as defined below) (except to the extent paid by
the Company), as and when due, regardless of any defense, right of set-off or
counterclaim which the Company may have or assert. The following payments to the
extent not paid by the Company (the "Guarantee Payments") will be subject to the
Guarantee (without duplication): (i) any accumulated arrears and accruals of
unpaid dividends which have been theretofore declared on the Preferred Shares of
such series out of moneys legally available therefor, (ii) the redemption price
(including all accumulated arrears and accruals of unpaid dividends) payable
with respect to Preferred Shares of any series called for redemption by the
Company as an optional redemption or otherwise out of funds available to the
Company, (iii) the
10
lesser of (a) the aggregate of the liquidation preference and all accumulated
arrears and accruals of unpaid dividends (whether or not declared) to the date
of payment and (b) the amount of remaining assets of the Company and (iv) any
Additional Amounts payable by the Company (as described in the accompanying
Prospectus Supplement). The Guarantor's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Guarantor to
the holders of Preferred Shares of any series or by causing the Company to pay
such amounts to such holders.
CERTAIN COVENANTS OF TEXACO
If, at any time that the Guarantor fails to comply with its obligations
under the Guarantee, any proposal by the management of the Guarantor is made to
declare dividends on any shares of the Guarantor ranking junior to the
Guarantor's obligations under the Guarantee as to participation in profits, the
Guarantor shall, or shall cause the Company to, set aside for payment in a
segregated account at the office of the Paying Agent an amount equal to all
accumulated arrears of dividends payable on the Preferred Shares of such series
out of moneys held and legally available therefor and irrevocably instruct the
Paying Agent to pay such amounts as dividends payable on the Preferred Shares of
such series on the day following the date on which such proposal is approved by
the Guarantor's shareholders. The Paying Agent shall make such payment on such
day unless it shall have received, prior to 10:00 a.m., New York time, on such
day, a certificate from the Guarantor certifying that such proposal has not been
adopted by the Guarantor's shareholders. In such case, the amounts deposited in
such account shall be remitted forthwith to the Guarantor or the Company, as the
case may be. In all cases, any interest accrued on the amounts deposited in such
account shall be remitted by the Paying Agent to the Guarantor or the Company,
as the case may be.
In addition, if, at any time that the Guarantor fails to comply with its
obligations under the Guarantee, the Guarantor (or any subsidiary of the
Guarantor using funds provided by the Guarantor) redeems or purchases or
otherwise acquires any shares of the Guarantor ranking junior to the Guarantor's
obligations under the Guarantee as to participation in assets of the Guarantor
upon liquidation, all accumulated arrears of dividends payable on the Preferred
Shares of such series out of moneys held and legally available therefor shall
immediately become due and payable under the Guarantee; provided, however, that
no such payment shall be required if any such shares of the Guarantor are
redeemed, purchased or otherwise acquired pursuant to any employee stock option
plan of the Guarantor.
Neither the Guarantor, nor any subsidiary of the Guarantor using funds
provided by the Guarantor, shall redeem, purchase or acquire, or pay a
liquidation preference with respect to, any preferred or preference stock of the
Guarantor ranking pari passu with the Guarantee, any preferred or preference
stock of affiliates of the Guarantor (including the Company) entitled to the
benefits of a guarantee of the Guarantor ranking pari passu with the Guarantee
or any preferred or preference stock of affiliates of the Guarantor entitled to
the benefits of a guarantee ranking junior to the Guarantee as to participation
in assets of the Guarantor upon liquidation if at such time the Guarantor shall
be in default with respect to its obligations under the Guarantee.
Neither the Guarantor, nor any subsidiary of the Guarantor using funds
provided by the Guarantor, shall pay dividends, or make guarantee payments with
respect to dividends, on any preferred or preference stock of affiliates of the
Guarantor entitled to the benefits of a guarantee ranking junior to the
Guarantee as to participation in profits of the Guarantor if at such time the
Guarantor shall be in default with respect to its obligations under the
Guarantee.
Pursuant to the Guarantee, the Guarantor will agree (i) to maintain direct
or indirect 100% ownership of the common shares of the Company and (ii) not to
voluntarily dissolve, wind-up or liquidate the Company so long as any Preferred
Shares are outstanding.
11
If the Guarantor issues, following the date of this Prospectus, any
preferred or preference shares ranking senior to its obligations under the
Guarantee or enters into any guarantee in respect of any preferred or preference
shares of any affiliate of the Guarantor, which guarantee would rank junior to
all liabilities of the Guarantor but senior to the Guarantee as regards rights
in respect of dividends, liquidation preference and distributions, and rights
upon redemption, then the Guarantee will be deemed to give the holders of
Preferred Shares such rights and entitlements as are contained in or attached to
such other preferred or preference stock or guarantee such that the Guarantee
ranks pari passu as to such rights and entitlements with any such preferred or
preference stock or other guarantee.
ADDITIONAL AMOUNTS
All Guarantee Payments will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such payment
by or on behalf of the United States, any State thereof or any other
jurisdiction through which or from which such payment is made, or any authority
therein or thereof having power to tax, unless the withholding or deduction of
such taxes, duties, assessments or governmental charges is required by law. In
that event, the Guarantor will pay such additional amounts as may be necessary
in order that the net amounts received by the holders of the Preferred Shares
after such withholding or deduction will equal the amount which would have been
receivable in respect of the Preferred Shares in the absence of such withholding
or deduction (the "Additional Amounts"), except that no such Additional Amounts
will be payable to a holder of the Preferred Shares (or a third party on his
behalf) with respect to any of the Preferred Shares:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Preferred Shares by reason of such
holder's having some connection with the United States, any State thereof
or any other jurisdiction through which or from which such payment is made,
other than being a holder of the Preferred Shares, or
(b) if the Company or the Guarantor has notified such holder of the
obligation to withhold taxes and requested but not received from such
holder a declaration of non-residence or other similar claim for exemption,
and such withholding or deduction would not have been required had such
declaration or similar claim been received.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders (in which case no vote will be required), the Guarantee may be
changed only with the prior approval of the holders of not less than 66-2/3% in
liquidation preference of the Preferred Shares given either in writing or by
vote at a duly constituted meeting of such holders. All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the holders of the Preferred Shares. The quorum for any such meeting
and the determination of the Preferred Shares entitled to vote shall be as set
forth under "Description of Preferred Shares--Voting Rights" in the Prospectus
Supplement relating to Preferred Shares of a particular series.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price (including all accumulated arrears and
accruals of unpaid dividends) of all Preferred Shares or upon full payment of
the amounts payable upon liquidation of the Company. The Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of Preferred Shares of any series must restore payment of any sums paid
under the Preferred Shares of such series or the Guarantee.
12
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Guarantor and
will rank (i) junior to all liabilities of the Guarantor, (ii) pari passu with
the most senior preferred or preference stock issued by the Guarantor and with
any guarantee entered into by the Guarantor in respect of any preferred or
preference stock of any affiliate of the Guarantor and (iii) senior to the
Guarantor's common shares.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Preferred Shares may enforce the Guarantee directly against the
Guarantor, and the Guarantor will waive any right or remedy to require that any
action be brought against the Company or any other person or entity before
proceeding against the Guarantor. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Company
and by complete performance of all obligations under the Guarantee.
GOVERNING LAW
The Guarantee will be governed and construed in accordance with the laws of
the State of New York.
LIMITATIONS AFFECTING SECURITIES HOLDERS
There are no exchange control laws or regulations in effect under current
Turks and Caicos Islands legislation.
TAXATION
The following discussion is a summary of certain Turks and Caicos Islands
and United States federal income tax consequences of the purchase, ownership and
disposition of Preferred Shares and is based upon the advice of Misick &
Stanbrook with respect to Turks and Caicos Islands taxes, and Sullivan &
Cromwell, special United States tax counsel, with respect to United States
federal income taxes. It deals only with Preferred Shares held as capital assets
by initial purchasers, and not with special classes of holders, such as dealers
in securities or currencies, life insurance companies, persons holding Preferred
Shares as a hedge or hedged against currency risks or as part of a straddle, or
persons whose functional currency is not the U.S. dollar. The summary deals only
with holders who purchase Preferred Shares of any series, and is subject to
additional discussion of material Turks and Caicos Islands and United States
federal tax consequences that may appear in a Prospectus Supplement delivered in
connection with a particular series of Preferred Shares. This summary is based
on tax laws in effect in the United States and the Turks and Caicos Islands, and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change (possibly on a retroactive basis).
PROSPECTIVE PURCHASERS OF PREFERRED SHARES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE TURKS AND CAICOS ISLANDS, UNITED STATES OR OTHER TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF PREFERRED SHARES,
INCLUDING THE EFFECT OF ANY STATE OR LOCAL TAX LAWS.
13
UNITED STATES
INCOME FROM PREFERRED SHARES
In the opinion of Sullivan & Cromwell, the Company will be treated as a
partnership for federal income tax purposes. Each holder of Preferred Shares (a
"Shareholder") will be required to include in gross income his distributive
share of the Company's net income. Such income will not exceed dividends
received on a Preferred Share, except in limited circumstances as described
below under "Potential Extension of Payment Period". No portion of such income
will be eligible for the dividends received deduction.
DISPOSITION OF PREFERRED SHARES
Gain or loss will be recognized on a sale of Preferred Shares equal to the
difference between the amount realized and the Shareholder's tax basis for the
Preferred Shares sold. Gain or loss recognized by a Shareholder on the sale or
exchange of a Preferred Share held for more than one year will generally be
taxable as long-term capital gain or loss.
COMPANY INFORMATION RETURNS AND AUDIT PROCEDURES
Texaco Inc., as Manager of the Company, will furnish each Shareholder with
a Schedule K-1 setting forth each Shareholder's allocable share of income within
90 days after the close of the Company's taxable year.
Any person who holds Preferred Shares as a nominee for another person is
required to furnish to the Company (a) the name, address and taxpayer
identification number of the beneficial owners and the nominee; (b) whether the
beneficial owner is (i) a person that is not a United States person, (ii) a
foreign government, an international organization or any wholly owned agency or
instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c)
the amount and description of Preferred Shares held, acquired or transferred for
the beneficial owners; and (d) certain information including the dates of
acquisitions and transfers, means of acquisitions and transfers, and acquisition
cost for purchases, as well as the amount of net proceeds from sales. Brokers
and financial institutions are required to furnish additional information,
including whether they are a United States person and certain information on
Preferred Shares they acquire, hold or transfer for their own account. A penalty
of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by
the Internal Revenue Code for failure to report such information to the Company.
The nominee is required to supply the beneficial owner of the Preferred Shares
with the information furnished to the Company.
POTENTIAL EXTENSION OF PAYMENT PERIOD
Under the terms of any loan which may be made from the proceeds of issuance
of preferred shares, Texaco may be permitted to extend the payment period to 18
months. In the event that Texaco exercises this right, Texaco Inc. may not
declare dividends on any share of its preferred or common stock, and therefore,
the extension of a payment period is, in the view of the Company, remote. In the
event that the payment period is extended, the Company will continue to accrue
income, equal to the amount of the interest payment due at the end of the
extended payment period over the length of the extended payment period.
Accrued income will be allocated, but not distributed, to holders of record
on the last day of each calendar month. As a result, holders of record during an
extended interest payment period will include interest in gross income in
advance of the receipt of cash. The tax basis of a Preferred Share will be
increased by the amount of any interest that is included in income without a
receipt of cash, and will be decreased again when such cash is subsequently
received from the Company.
14
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Preferred
Share.
Under present United States federal income tax law, and assuming
satisfaction by Texaco Inc. of its withholding tax obligations, if any:
(i) payments by the Company or any of its paying agents to any holder
of a Preferred Share who or which is a United States Alien Holder will not
be subject to United States federal withholding tax; provided that (a) the
beneficial owner of the Preferred Share does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of Texaco Inc. entitled to vote, (b) the beneficial owner of the Preferred
Share is not a controlled foreign corporation that is related to Texaco
Inc. through stock ownership, and (c) either (A) the beneficial owner of
the Preferred Share certifies to the Company or its agent, under penalties
of perjury, that it is not a United States Holder and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Preferred Share
certifies to the Company or its agent under penalties of perjury that such
statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof; and
(ii) A United States Alien Holder of a Preferred Share will not be
subject to United States federal withholding tax on any gain realized on
the sale or exchange of a Preferred Share.
TURKS AND CAICOS ISLANDS
Payment of dividends on the Preferred Shares will not be subject to any
withholding under the tax laws of the Turks and Caicos Islands.
There are no taxes in the Turks and Caicos Islands on income, profits,
capital gains or turnover, nor are there any inheritance, estate, or gift taxes
or duties in the Turks and Caicos Islands. The Company is exempted from the
payment of stamp duty on the issuance of any shares, debentures or other
obligations of the Company. No stamp duty is payable on the transfer or
redemption of shares in the Company. The Company has been issued a certificate
by the Governor of the Turks and Caicos Islands stating that the Company is
exempt, for a period of twenty years from the date of its organization, October
7, 1993, from the payment of any taxes or duties which may be imposed in the
future on profits, income, capital gains, assets or appreciations and any such
tax or duty or tax in the nature of estate duty or inheritance tax payable on
the shares, debentures or other obligations of the Company.
PLAN OF DISTRIBUTION
The Company may sell Preferred Shares (i) through underwriters, including
Goldman, Sachs & Co., (ii) through dealers, (iii) through agents or (iv)
directly to purchasers. The Prospectus Supplement relating to the Preferred
Shares of a particular series will set forth the terms of such offering,
including the names of any underwriters, dealers or agents involved in the sale
of such Preferred Shares, the number of Preferred Shares of such series to be
purchased by any underwriters and any applicable commissions or discounts. The
net estimated proceeds to the Company from such series of Preferred Shares will
also be set forth in the Prospectus Supplement.
15
If underwriters are used in the sale, the Preferred Shares being sold will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. Unless otherwise set forth in the Prospectus Supplement relating to the
Preferred Shares of a particular series, the obligations of the underwriters to
purchase such Preferred Shares will be subject to certain conditions precedent
and the underwriters will be obliged to purchase all of such Preferred Shares if
any of such Preferred Shares are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If dealers are used in the sale, unless otherwise indicated in the
Prospectus Supplement relating to the Preferred Shares of a particular series,
the Company will sell such Preferred Shares to the dealers as principals. The
dealers may then resell such Preferred Shares to the public at varying prices to
be determined by such dealers at the time of resale.
Preferred Shares of a particular series may also be sold through agents
designated by the Company from time to time or directly by the Company. Any
agent involved in the offering and sale of any such Preferred Shares will be
named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement relating to the Preferred Shares of such
series. Unless otherwise indicated in such Prospectus Supplement, any such Agent
will act on a best efforts basis for the period of its appointment.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), or to contribution with respect to payments which the
underwriters, dealers or agents may be required to make in respect thereof.
Underwriters, dealers and agents may be customers of, engage in transactions
with, or perform services for, the Company in the ordinary course of business.
VALIDITY OF SECURITIES
The validity of the Preferred Shares will be passed upon by Misick &
Stanbrook, Turks and Caicos Islands counsel to the Company. The validity of the
Guarantee relating to the Preferred Shares will be passed upon on behalf of the
Company and Texaco Inc. by Misick & Stanbrook, Turks and Caicos Islands counsel
to the Company and Texaco Inc., and Arthur G. Taylor, Esq., Associate General
Counsel of Texaco Inc. or such other attorney of Texaco Inc. as the Company and
Texaco Inc. may designate, and on behalf of the Underwriters by Davis Polk &
Wardwell, United States counsel to the Underwriters. As to all matters of Turks
and Caicos Islands law, Arthur G. Taylor, Esq., Davis Polk & Wardwell and
Sullivan & Cromwell, special United States tax counsel, will rely upon the
opinions of Misick & Stanbrook. As to all matters of United States and New York
law, Misick & Stanbrook will rely upon the opinions of Arthur G. Taylor, Esq.
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, 1992 filed on Form 10-K, incorporated herein by
reference, have been audited by Arthur Andersen & Co., 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. Reference is made to
said report, which includes an explanatory
16
paragraph with respect to the change in methods of accounting for income taxes
and postretirement benefits other than pensions in 1992, as discussed in Note 2
to the consolidated financial statements.
FURTHER INFORMATION
The Company and Texaco Inc. have filed with the Commission a registration
statement on Form S-3 (the "Registration Statement") relating to the Preferred
Shares and the Guarantee offered hereby under the Securities Act. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Additional information concerning the Company,
Texaco Inc., the Preferred Shares and the Guarantee is to be found in the
Registration Statement, including the exhibits thereto, which may be inspected
at the offices of the Commission. See "Available Information".
17
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NO DEALER, SALES PERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS IN CONNECTION WITH THE OFFER HEREUNDER AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY TEXACO INC., THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY THE SERIES B PREFERRED SHARES
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF GUARANTEED
TO THE EXTENT SET FORTH THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR
IN THE AFFAIRS OF TEXACO INC. OR THE COMPANY
SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Certain Investment Considerations............. S-2
Texaco Capital LLC............................ S-3
Texaco Inc. .................................. S-3
Recent Events................................. S-3
Selected Financial Data
of Texaco Inc............................... S-5
Certain Terms of the Series B Preferred
Shares........................................ S-7
Description of the Series B Loans............. S-14
Underwriting.................................. S-19
Taxation...................................... S-20
Validity of Securities........................ S-21
Experts....................................... S-21
PROSPECTUS
Available Information......................... 2
Documents Incorporated
by Reference................................ 3
Texaco........................................ 4
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends....... 4
Texaco Capital LLC............................ 5
Use of Proceeds............................... 5
Description of Preferred Shares............... 5
Description of the Guarantee.................. 10
Limitations Affecting Securities
Holders..................................... 13
Taxation...................................... 13
Plan of Distribution.......................... 15
Validity of Securities........................ 16
Experts....................................... 16
Further Information........................... 17
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[Logo]
SHARES
TEXACO CAPITAL LLC
CUMULATIVE ADJUSTABLE RATE
MONTHLY INCOME PREFERRED SHARES,
SERIES B
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY
TEXACO INC.
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
KIDDER, PEABODY & CO. INCORPORATED
LEHMAN BROTHERS INC.
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
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