EXHIBIT 1
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PENNZOIL-QUAKER STATE COMPANY
(a Delaware corporation)
$200,000,000 6 3/4% NOTES DUE 2009
$400,000,000 7 3/8% Debentures Due 2029
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UNDERWRITING AGREEMENT
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Dated: March 25, 1999
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TABLE OF CONTENTS
UNDERWRITING AGREEMENT..................................................... 4
SECTION 1. Representations and Warranties.................................. 3
(a) Representations and Warranties by the Company................... 3
(1) Compliance with Registration Requirements................. 3
(2) Incorporated Documents.................................... 3
(3) Independent Accountants................................... 4
(4) Financial Statements...................................... 4
(5) No Material Adverse Change in Business.................... 4
(6) Good Standing of the Company.............................. 5
(7) Good Standing of Subsidiaries............................. 5
(8) Capitalization............................................ 6
(9) Authorization of this Agreement........................... 6
(10) Authorization of the Indenture............................ 6
(11) Authorization of the Securities........................... 6
(12) Description of the Securities and the Indenture........... 6
(13) Absence of Defaults and Conflicts......................... 6
(14) Absence of Labor Disputes................................. 7
(15) Absence of Proceedings.................................... 7
(16) Accuracy of Exhibits...................................... 8
(17) Absence of Further Requirements........................... 8
(18) Possession of Intellectual Property....................... 8
(19) Possession of Licenses and Permits........................ 8
(20) Tax Returns............................................... 8
(21) Environmental Laws........................................ 9
(22) Insurance................................................. 9
(23) No Stabilization.......................................... 9
(24) Investment Company Act.................................... 9
(b) Officers' Certificates.......................................... 10
SECTION 2. Sale and Delivery to Underwriters; Closing...................... 10
(a) Securities...................................................... 10
(b) Payment......................................................... 10
(c) Denominations; Registration..................................... 10
SECTION 3. Covenants of the Company........................................ 11
(a) Compliance with Securities Regulations and Commission Requests.. 11
(b) Filing of Amendments............................................ 11
(c) Delivery of Registration Statements............................. 11
(d) Delivery of Prospectus.......................................... 12
(e) Continued Compliance with Securities Laws....................... 12
(f) Blue Sky Qualifications......................................... 12
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(g) Earnings Statement.............................................. 12
(h) Use of Proceeds................................................. 13
(i) Restriction on Sale of Securities............................... 13
(j) Reporting Requirements.......................................... 13
SECTION 4. Payment of Expenses............................................. 13
(a) Expenses........................................................ 13
(b) Termination of Agreement........................................ 13
SECTION 5. Conditions of Underwriters' Obligations......................... 14
(a) Effectiveness of Registration Statement......................... 14
(b) Opinion of Counsel for Company.................................. 14
(c) Opinion of Counsel for Underwriters............................. 14
(d) Officers' Certificate........................................... 15
(e) Accountant's Comfort Letters.................................... 15
(f) Bring-down Comfort Letter....................................... 15
(g) Maintenance of Rating........................................... 15
(h) Additional Documents............................................ 15
(i) Termination of Agreement........................................ 16
SECTION 6. Indemnification................................................. 16
(a) Indemnification of Underwriters by the Company.................. 16
(b) Indemnification of Company, Directors and Officers.............. 17
(c) Actions against Parties; Notification........................... 17
(d) Settlement without Consent if Failure to Reimburse.............. 18
SECTION 7. Contribution.................................................... 18
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.. 19
SECTION 9. Termination of Agreement........................................ 20
(a) Termination; General............................................ 20
(b) Liabilities..................................................... 20
SECTION 10. Default by One or More of the Underwriters...................... 20
SECTION 11. Notices......................................................... 21
SECTION 12. Parties......................................................... 21
SECTION 13. Governing Law and Time.......................................... 21
SECTION 14. Effect of Headlines............................................. 21
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SCHEDULES
Schedule A - List of Underwriters.......................................... Sch A-1
Schedule B - Pricing Information........................................... Sch B-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel........................... A-1
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PENNZOIL-QUAKER STATE COMPANY
(a Delaware corporation)
$200,000,000 6 3/4% Notes Due 2009
$400,000,000 7 3/8% Debentures Due 2029
UNDERWRITING AGREEMENT
March 25, 1999
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as Representatives of the several Underwriters
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Pennzoil-Quaker State Company, a Delaware corporation (the "Company")
confirms its agreement with Chase Securities Inc., Lehman Brothers and Merrill
Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and each of the other Underwriters named in Schedule A-1 and A-2 hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Chase
Securities Inc., Lehman Brothers and Merrill Lynch are acting as Joint Book-
Running Manager Representatives (in such capacity, the "Representatives"), with
respect to the issue and sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of (a) $200,000,000 aggregate
principal amount of the Company's 6 3/4% Notes due 2009 (the "2009 Notes") in
the principal amounts set forth in Schedule A-1 hereof and (b) $400,000,000
aggregate principal amount of the Company's 7 3/8% Debentures due 2029 (the
"2029 Debentures") in the principal amounts set forth in Schedule A-2 hereof
(collectively, the "Securities"). The Securities are to be issued pursuant to
the indenture dated as of February 1, 1999 (the "Indenture") between the Company
and Chase
Bank of Texas, National Association, as trustee (the "Trustee"). The term
"Indenture," as used herein, includes the Board Resolutions and Officer's
Certificate (as defined in the Indenture) or the supplemental indenture
establishing the form and terms of the Securities pursuant to Sections 301 and
904 of the Indenture.
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-65909) and pre-
effective Amendment No. 1 thereto for the registration of the Securities under
the Securities Act of 1933, as amended (the "1933 Act"), and the offering
thereof from time to time in accordance with Rule 415 of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations"),
and the Company has filed such post-effective amendments thereto as may be
required. Such registration statement (as so amended, if applicable) has been
declared effective by the Commission and the Indenture has been duly qualified
under the 1939 Act. Such registration statement (as so amended, if applicable),
including the information, if any, deemed to be a part thereof pursuant to Rule
430A(b) of the 1933 Act Regulations (the "Rule 430A Information") is referred to
herein as the "Registration Statement"; and the final prospectus and the final
prospectus supplement relating to the offering of the Underwritten Securities,
in the form first furnished to the Underwriters by the Company for use in
connection with the offering of the Underwritten Securities, are collectively
referred to herein as the "Prospectus"; provided, however, that all references
to the "Registration Statement" and the "Prospectus" shall also be deemed to
include all documents incorporated therein by reference pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). A "preliminary
prospectus" shall be deemed to refer to the prospectus dated January 25, 1999,
and any preliminary prospectus supplement used before the filing or delivery of
a final prospectus and final prospectus supplement relating to the offering
filed with the Commission pursuant to Rule 424(b) of the 1933 Act. For purposes
of this Underwriting Agreement, all references to the Registration Statement,
Prospectus or preliminary prospectus or to any amendment or supplement to any of
the foregoing shall be deemed to include any copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the 1934 Act which is incorporated by reference in the
Registration Statement, such preliminary prospectus or the Prospectus, as the
case may be.
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SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each Underwriter, as of the date hereof, as of the Closing Time
referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
(1) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. The Registration
Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been instituted
or are pending or, to the knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission for additional
information has been complied with. In addition, the Indenture has been
duly qualified under the 1939 Act.
At the respective times the Registration Statement and any post-
effective amendments thereto became effective and at the Closing Time, the
Registration Statement and any amendments and supplements thereto complied
and will comply in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations and the 1939 Act and the rules and
regulations of the Commission under the 1939 Act (the "1939 Act
Regulations"), and did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any amendments or
supplements thereto were issued and at the Closing Time, included or will
include an untrue statement of a material fact or omitted or will omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished in writing by any Underwriter through
any of the Representatives expressly for use in the Registration Statement
or the Prospectus.
Each preliminary prospectus and prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and, if
applicable, each preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with the offering of the Securities
will, at the time of such delivery, be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(2) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and Prospectus,
when they became effective or at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and
3
regulations of the Commission thereunder (the "1934 Act Regulations") and,
when read together with the other information in the Prospectus, at the
date of the Prospectus, and at the Closing Time did not and will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(3) Independent Accountants. The accountants who certified the
financial statements and supporting schedules of each of the Company and
Quaker State Corporation ("Quaker State") included in the Registration
Statement and the Prospectus are independent certified public accountants
with respect to the Company and its subsidiaries and Quaker State and its
subsidiaries, respectively, within the meaning of Regulation S-X under the
1933 Act.
(4) Financial Statements. The financial statements of the Company
included or incorporated by reference in the Registration Statement and the
Prospectus, together with the related schedules and notes, as well as those
financial statements, schedules and notes of any other entity included
therein, present fairly in all material respects the financial position of
the Company and its consolidated subsidiaries at the dates indicated and
the statement of operations and cash flows of the Company and its
consolidated subsidiaries for the periods specified. The financial
statements of Quaker State included or incorporated by reference in the
Registration Statement and the Prospectus, together with the related
schedules and notes, as well as those financial statements, schedules and
notes of any other entity included therein, present fairly in all material
respects the financial position of Quaker State and its consolidated
subsidiaries at the dates indicated and the statement of operations and
cash flows of Quaker State and its consolidated subsidiaries for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved. The supporting
schedules, if any, included or incorporated by reference in the
Registration Statement and Prospectus present fairly in all material
respects in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included or incorporated by reference in the Registration Statement and the
Prospectus present fairly in all material respects the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements included or incorporated by reference in the
Registration Statement and the Prospectus. In addition, any pro forma
financial statements of the Company and its subsidiaries and the related
notes thereto included or incorporated by reference in the Registration
Statement and the Prospectus present fairly in all material respects the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(5) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition,
4
financial or otherwise, or in the earnings or business affairs of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business (a "Material Adverse Effect"),
(B) there have been no transactions entered into by the Company or any of
its subsidiaries, other than those arising in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise and (C) except for cash dividends
on the Company's common stock in amounts not exceeding an aggregate of
$0.25 per share, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock
since December 31, 1998.
(6) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the state of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under, or as contemplated under, this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in good
standing would not result in a Material Adverse Effect.
(7) Good Standing of Subsidiaries. Each Subsidiary (as defined
herein) of the Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
organization, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus
and is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in good
standing would not result in a Material Adverse Effect. Except as
otherwise stated in the Registration Statement and the Prospectus, all of
the issued and outstanding capital stock of each Subsidiary has been duly
authorized and is validly issued, fully paid and non-assessable and is
owned by the Company, directly or through Subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or equity
other than the pledges to banks under the loan agreements of the Company.
None of the outstanding shares of capital stock of the Subsidiaries was
issued in violation of preemptive or other similar rights arising by
operation of law, under the charter or by-laws of any Subsidiary or under
any agreement to which the Company or any Subsidiary is a party. Except
for the stock of the Subsidiaries and as disclosed in the Registration
Statement, the Company does not own, and at the Closing Date will not own,
directly or indirectly, any shares of stock or any other equity or long-
term debt securities of any corporation or have any equity interest in any
firm, partnership, joint venture, association or other entity that
constitutes a "significant subsidiary" as such term is defined in Rule 1-02
of Regulation S-X promulgated under the Act. Complete and correct copies
of the certificate of incorporation and of the by-laws of the Company,
Quaker State and Jiffy Lube International, Inc. ("Jiffy Lube" and
collectively with Quaker State, the "Subsidiaries") and
5
all amendments thereto have been delivered to the Underwriters, and no
changes therein will be made subsequent to the date hereof and prior to the
Closing Date.
(8) Capitalization. The capitalization of the Company as of December
31, 1998, is as set forth in the Prospectus in the column entitled
"December 31, 1998 - Historical" under the caption "Capitalization" (except
for subsequent issuances of capital stock, if any, pursuant to employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus).
(9) Authorization of this Agreement. This Agreement has been, as of
the date hereof, duly authorized, executed and delivered by the Company.
(10) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and duly qualified under the 1939 Act and, when
duly executed and delivered by the Company and the Trustee, will constitute
a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights and remedies
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(11) Authorization of the Securities. The Securities have been duly
authorized and, at the Closing Time, will have been duly executed by the
Company, and, when authenticated, issued and delivered in the manner
provided for in the Indenture and delivered against payment of the purchase
price therefor as provided in this Agreement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights and remedies generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law), and will be in the form contemplated by, and entitled to the
benefits of, the Indenture.
(12) Description of the Securities and the Indenture. The Securities
and the Indenture conform in all material respects to the respective
statements relating thereto contained in the Prospectus and the Indenture
is in substantially the form filed or incorporated by reference, as the
case may be, as exhibits to the Registration Statement.
(13) Absence of Defaults and Conflicts. Neither the Company nor any
of its Subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of material contract or agreement to which
the Company or any of its Subsidiaries is a party or by which it or any of
them may be bound, or to which any of the property or assets of the Company
or any Subsidiary is subject (collectively, "Agreements
6
and Instruments"), except for such defaults as would not result in a
Material Adverse Effect. The execution, delivery and performance of this
Agreement and any other agreement or instrument entered into or issued or
to be entered into or issued by the Company in connection with the
transactions contemplated hereby or thereby or in the Registration
Statement and the Prospectus and the consummation of the transactions
contemplated herein and in the Registration Statement and the Prospectus
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described under the caption
"Use of Proceeds") and compliance by the Company with its obligations under
this Agreement have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any assets,
properties or operations of the Company or any of its Subsidiaries pursuant
to, any Agreements and Instruments, except for such conflicts, breaches,
defaults, events or liens, charges or encumbrances that, singly or in the
aggregate, would not result in a Material Adverse Effect, nor will such
action result in any violation of any existing applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its Subsidiaries or any of their
assets or properties, which violation would result in a Material Adverse
Effect, nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or any of its Subsidiaries. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(14) Absence of Labor Disputes. No labor dispute with the employees
of the Company or any of its Subsidiaries exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
Subsidiaries' principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has
violated (i) any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees applicable to the
Company or any of its Subsidiaries or (ii) any applicable wage or hour laws
in any manner, which violation could reasonably be expected to have a
Material Adverse Effect.
(15) Absence of Proceedings. Except as disclosed in the Registration
Statement and the Prospectus, there is no action, suit, proceeding, inquiry
or investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any Subsidiary which is
required to be disclosed in the Registration Statement and the Prospectus
(other than as stated therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the purchase and sale of the Securities
or would be required to be disclosed in the Registration Statement or the
Prospectus which is not disclosed in the Registration Statement or
7
Prospectus. The aggregate of all pending legal or governmental proceedings
to which the Company or any Subsidiary thereof is a party or of which any
of their respective assets or properties is the subject which are not
described in the Registration Statement and the Prospectus, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(16) Accuracy of Exhibits. There are no contracts or documents which
are required to be described in the Registration Statement, the Prospectus
or the documents incorporated by reference therein or to be filed as
exhibits thereto which have not been so described and/or filed as required.
(17) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations under this Agreement or in connection with the transactions
contemplated under this Agreement or for the due execution, delivery or
performance of the Indenture by the Company, except such as have been
already obtained or as may be required under state securities laws.
(18) Possession of Intellectual Property. The Company and its
Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its Subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its Subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(19) Possession of Licenses and Permits. The Company and its
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now conducted by them except where the
absence of such Governmental Licenses would not have a Material Adverse
Effect.
(20) Tax Returns. All material United States federal income tax
returns of the Company and its Subsidiaries required by law to be filed
have been filed and all taxes shown by such returns or otherwise assessed,
which are due and payable, have been paid, except for such taxes, if any,
as are being contested in good faith and as to which adequate reserves have
been provided. The Company and its Subsidiaries have filed all other
material tax returns that are required to have been filed by them pursuant
to applicable foreign, state, local
8
or other law except insofar as the failure to file such returns would not
result in a Material Adverse Effect, and has paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Company and its
Subsidiaries, except for such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided.
(21) Environmental Laws. Except as described in the Registration
Statement and the Prospectus and except such matters as would not, singly
or in the aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of its Subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code, policy or
rule of common law or any judicial or administrative order, consent, decree
or judgment thereof, including any judicial or administrative order,
consent, decree or judgment relating to pollution or protection of human
health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the release
or threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its Subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, and (C) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, individually
or in the aggregate result in a Material Adverse Effect.
(22) Insurance. The Company maintains insurance coverage covering
its properties, operations, personnel and businesses. In the Company's
reasonable judgement, such insurance insures against such losses and risks
as are adequate to protect the Company. The Company has not received notice
from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to
continue such insurance; all such insurance is outstanding and duly in
force on the date hereof and will be outstanding and duly in force at
Closing Time.
(23) No Stabilization. Neither the Company nor any of its officers,
directors or controlling persons has taken, directly or indirectly, any
action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.
(24) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
9
Company Act of 1940, as amended, and the rules and regulations of the
Commission promulgated thereunder (the "1940 Act").
(b) Officers' Certificates. Any certificate signed by any officer of the
Company or any Subsidiary and delivered to the Representatives or to counsel for
the Underwriters in connection with the offering of the Securities shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby on the date of such certificate.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Securities. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price set forth in Schedule B-1 and Schedule B-2, the aggregate principal
amount of respective Securities set forth in Schedule A-1 and Schedule A-2
opposite the name of such Underwriter, plus any additional principal amount of
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for the Securities shall be made at the office of Andrews & Kurth
L.L.P., 600 Travis Street, Suite 4200, Houston, Texas 77002-3090, or at such
other place as shall be agreed upon by the Representatives and the Company, at
10:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10 hereof), or such other
time not later than ten business days after such date as shall be agreed upon by
the Representatives and the Company (such time and date of payment and delivery
being herein called "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company against delivery to
the Representatives for the respective accounts of the Underwriters of one or
more global notes in the aggregate principal amount of the 2009 Notes and one
or more global notes in the aggregate principal amount of the 2029 Debentures,
collectively representing the Securities to be purchased by them. Delivery of
the Securities shall be made through the facilities of the Depository Trust
Company unless the Underwriters shall otherwise instruct. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has severally agreed to purchase. The Representatives,
individually and not as representatives of the Underwriters may (but shall not
be obligated to) make payment of the purchase price for the Securities to be
purchased by any Underwriter whose funds have not been received by the Closing
Time, but such payment shall not relieve such Underwriter from its obligations
hereunder.
(c) Denominations; Registration. The Certificates for the Securities
shall be in global form and in such denominations and registered in such names
as the Representatives may request in writing at least one full business day
prior to the Closing Time. The Securities which may be in temporary form will
be made available for examination and packaging by the Representatives in the
10
City of New York not later than 10:00 A.M. (Eastern time) on the business day
prior to the Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter participating in the offering of Securities, as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company subject to Section 3(b), will comply with the requirements of Rule 430A,
and will notify the Representatives immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement or any amendment, supplement or revision to either the Prospectus
included in the Registration Statement at the time it became effective or to the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will
furnish the Representatives with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or counsel
for the Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, (i) signed copies of the Registration Statement as originally filed and
of each amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein), (ii) copies of the Registration Statement and each amendment
thereto in the form electronically filed with the Commission pursuant to EDGAR
and (iii) signed copies of all consents and certificates of experts, and will
also deliver to the Representatives, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Underwriters. The Registration Statement and
any amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
11
(d) Delivery of Prospectus. The Company has delivered to each
Underwriter, without charge, as many copies of the prospectus and preliminary
prospectus supplement as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each Underwriter, without charge, during the
period when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. The Prospectus and any
amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement and the Prospectus. If at any time when a
Prospectus is required by the 1933 Act or the 1934 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the Underwriters or for the Company, to amend the Registration Statement in
order that the Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or to amend or
supplement any Prospectus in order that the Prospectus will not include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus comply with
such requirements, and the Company will furnish to the Underwriters, without
charge, such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities and any related
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Representatives may
designate and to maintain such qualifications in effect for a period of not less
than one year from the date of this Agreement; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so qualified,
the Company will file such statements and reports as may be required by the laws
of such jurisdiction to continue such qualification in effect for a period of
not less than one year from the date of this Agreement.
(g) Earnings Statement. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its security holders as soon as practicable
12
an earnings statement for the purposes of, and to provide the benefits
contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectus under
"Use of Proceeds".
(i) Restriction on Sale of Securities. During the period from the date of
this agreement through the date that the Underwriters have completed their
distribution of the Securities, the Company will not, without the prior written
consent of the Representatives, directly or indirectly, sell, offer to sell,
grant any option for the sale of, or otherwise dispose of, any debt securities
of the Company.
(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay
all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters, the Indentures, and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the Securities and
any certificates for the Securities to the Underwriters, including any transfer
taxes and any stamp or other duties payable upon the sale, issuance or delivery
of the Securities to the Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors or agents (including transfer
agents and registrars), as well as the fees and disbursements of the Trustees
and their respective counsel, (v) the qualification of the Securities under
state securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation,
printing and delivery of the Blue Sky Survey, and any amendment thereto, (vi)
the printing and delivery to the Underwriters of copies of each preliminary
prospectus, and the Prospectus and any amendments or supplements thereto, (vii)
the fees charged by nationally recognized statistical rating organizations for
the rating of the Securities, if applicable, (viii) the fees and expenses
incurred with respect to the listing of the Securities, if applicable, and (ix)
the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review, if any, by the
National Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Securities.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) or Section 10 hereof, the Company shall reimburse the Underwriters for
all of their reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of counsel for the Underwriters; provided, however, that such
13
reimbursement after termination pursuant to Section 10 shall be limited to non-
defaulting Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Securities are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any of its
Subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement
has become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been initiated or be
pending or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus containing
information relating to the description of the Securities, the specific method
of distribution and similar matters shall have been filed with the Commission in
accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any
required post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule 430A).
(b) Opinion of Counsel for Company. At Closing Time, the Representatives
shall have received the favorable opinion, dated as of Closing Time, of Baker &
Botts, L.L.P. counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters, to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the Underwriters may reasonably
request. In giving such opinion such counsel may rely, as to matters governed
by the laws of jurisdictions other than the contract law of the State of New
York, the federal law of the United States and the General Corporation Law of
the State of Delaware, upon the opinions of counsel satisfactory to the
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Andrews & Kurth L.L.P., counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (i), (ii), (v) (vi) through
(xi), inclusive, (xiv) and the penultimate paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York, the federal
law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the Representatives.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company and its subsidiaries and certificates of public
officials.
14
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change or any development
involving a prospective material adverse change in the condition, financial or
otherwise, or in the earnings or business affairs of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and the Representatives shall have received a
certificate of the Company, executed by the President or a Vice President of
the Company and the chief financial officer or chief accounting officer of the
Company, dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in Section 1(a)
hereof are true and correct with the same force and effect as though expressly
made at and as of the Closing Time, (iii) the Company has complied in all
material respects with all agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Time, (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been initiated or, to the Company's
knowledge, threatened by the Commission.
(e) Accountant's Comfort Letters. At the time of the execution of this
Agreement, the Representatives shall have received from Arthur Andersen LLP,
independent accountants for the Company and PricewaterhouseCoopers LLP, former
independent accountants for Quaker State, letters dated such date, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the Underwriters, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
certain financial information in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from Arthur Andersen LLP and PricewaterhouseCoopers LLP letters,
dated as of Closing Time, to the effect that they reaffirm the statements made
in the letter furnished pursuant to subsection (e) of this Section 5, except
that the specified date referred to shall be a date not more than three business
days prior to the Closing Time.
(g) Maintenance of Rating. At Closing Time, the Securities shall be rated
at least Baa2 by Moody's Investor's Service Inc. and BBB- by Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., and the Company shall have
delivered to the Representatives a letter dated the Closing Time, from each such
rating agency, or other evidence satisfactory to the Representatives, confirming
that the Securities have such ratings; and since the date of this Agreement,
there shall not have occurred a downgrading in the rating assigned to the
Securities or any of the Company's other securities by any "nationally
recognized statistical rating agency", as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the 1933 Act, and no such organization
shall have publicly announced that it has under surveillance or review its
rating of the Securities or any of the Company's other securities.
(h) Additional Documents. At Closing Time, counsel for the Underwriters
shall have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
15
of the conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Representatives
and counsel for the Underwriters.
(i) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representatives by notice to the Company at
any time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7 and 8 shall survive any such termination and remain
in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters by the Company. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information deemed to be a part thereof, if applicable, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading
or arising out of any untrue statement or alleged untrue statement of a
material fact included in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Representatives),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement
16
or omission made in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through the Representatives
expressly for use in the Registration Statement (or any amendment thereto),
including the Rule 430A Information deemed to be a part thereof, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(b) Indemnification of Company, Directors and Officers. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors, each
of its officers who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information deemed to be a
part thereof, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel satisfactory to the indemnified party to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements
17
and other charges of counsel will be at the expense of the indemnifying party or
parties. An indemnifying party may participate at its own expense in the defense
of any such action; provided, however, that counsel to the indemnifying party
shall not (except with the consent of the indemnified party) also be counsel to
the indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(c) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Underwriters, on the other hand, from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and of the
Underwriters, on the other hand, in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the
Underwriters, on the other hand, in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such
Securities (before deducting expenses) received by the Company and the total
underwriting
18
discounts received by the Underwriters, in each case as set forth on the cover
of the Prospectus, bear to the aggregate public offering price of such
Securities as set forth on such cover.
The relative fault of the Company, on the one hand, and the Underwriters,
on the other hand, shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1993 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Securities set forth opposite their respective names
in Schedule A-1 and Schedule A-2 hereto, and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its Subsidiaries submitted
pursuant hereto or thereto shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of and payment for the Securities.
19
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or in the earnings or
business affairs of the Company whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section
9, such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time to purchase the Securities
which it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), then the Representatives shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the aggregate
principal amount of the Securities to be purchased hereunder, this Agreement
shall terminate without liability on the part of any non-defaulting Underwriter.
20
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in the termination
of this Agreement, either the Representatives or the Company shall have the
right to postpone the Closing Time, for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or the
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for a Underwriter under this
Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives, c/o Merrill Lynch at 1221
McKinney, Houston, Texas 77010, attention of William C. Montgomery and notices
to the Company shall be directed to it at Pennzoil-Quaker State Company,
Pennzoil Place, Houston, Texas 77252-2967.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the Company and the Underwriters and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof and thereof are intended to
be for the sole and exclusive benefit of the parties hereto and thereto and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE TERMS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 14. Effect of Headlines. The Article and Section headings
herein and any table of contents are for convenience only and shall not affect
the construction hereof.
21
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
Agreement, along with all counterparts, will become a binding agreement among
the Underwriters and the Company in accordance with its terms.
Very truly yours,
PENNZOIL-QUAKER STATE COMPANY
By: /s/ David P. Alderson II
---------------------------------
Name: David P. Aldserson II
Title: Group Vice President, Chief
Financial Officer and Treasurer
22
CONFIRMED AND ACCEPTED,
as of the date first
above written:
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated
By: CHASE SECURITIES INC.
By: /s/ William Dexter Rogers
------------------------------
Authorized Signatory
By: LEHMAN BROTHERS INC.
By: /s/ Grant Porter
------------------------------
Authorized Signatory
By: MERRILL LYNCH, PIERCE, FENNER & SMITH,
INCORPORATED
By: /s/ William B. Montgomery
------------------------------
Authorized Signatory
For themselves and as the Representatives of the other
Underwriters.
23
SCHEDULE A-1
$200,000,000 6 3/4% Notes due 2009
Principal
Amount of
Name of Underwriter 2009 Notes
------------------- ------------
Chase Securities Inc...................................... $ 44,000,000
Lehman Brothers Inc....................................... 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. 64,000,000
Deutsche Bank Securities Inc.............................. 6,000,000
J.P. Morgan Securities Inc................................ 6,000,000
Morgan Stanley& Co. Incorporated.......................... 6,000,000
NationsBanc Montgomery Securities LLC..................... 6,000,000
PaineWebber Incorporated.................................. 6,000,000
Salomon Smith Barney Inc.................................. 6,000,000
Warburg Dillon Read LCC................................... 6,000,000
------------
Total..................................................... $200,000,000
============
24
SCHEDULE A-2
$400,000,000 7 3/4% Debentures due 2029
Principal
Amount of
Name of Underwriter 2029 Debentures
------------------- ---------------
Chase Securities Inc.................................... $ 88,000,000
Lehman Brothers Inc..................................... 100,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................ 128,000,000
Deutsche Bank Securities Inc............................ 12,000,000
J.P. Morgan Securities Inc.............................. 12,000,000
Morgan Stanley & Co. Incorporated....................... 12,000,000
NationsBanc Montgomery Securities LLC................... 12,000,000
PaineWebber Incorporated................................ 12,000,000
Salomon Smith Barney Inc................................ 12,000,000
Warburg Dillon Read LCC................................. 12,000,000
------------
Total................................................... $400,000,000
============
25
SCHEDULE B-1
PENNZOIL-QUAKER STATE COMPANY
$200,000,000 6 3/4% Notes due 2009
1. The initial public offering price of the 2009 Notes shall be
99.490% of the principal amount thereof, plus accrued interest, if any, from the
date of issuance.
2. The purchase price to be paid by the Underwriters for the 2009
Notes shall be 98.840% of the principal amount thereof.
3. The interest rate on the 2009 Notes shall be 6.75% per annum.
4. The Notes will be redeemable as a whole or in part, at the option
of the Company at any time at a redemption price equal to the greater of (i)
100% of the principal amount of the Notes to be redeemed and (ii) the sum of the
present values of the remaining scheduled payments of principal and interest on
the Notes discounted to the redemption date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate (as
defined in the Indenture) plus 25 basis points, plus accrued interest thereon to
the date of redemption.
26
SCHEDULE B-2
PENNZOIL-QUAKER STATE COMPANY
$400,000,000 7 3/8% Debentures due 2029
1. The initial public offering price of the 2029 Debentures shall be
99.479% of the principal amount thereof, plus accrued interest, if any, from the
date of issuance.
2. The purchase price to be paid by the Underwriters for the 2029
Debentures shall be 98.622% of the principal amount thereof.
3. The interest rate on the 2029 Debentures shall be 7.375% per
annum.
4. The Debentures will be redeemable as a whole or in part, at the
option of the Company at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of the Debentures to be redeemed and (ii) the
sum of the present values of the remaining scheduled payments of principal and
interest on the Debentures discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate (as defined in the Indenture) plus 35 basis points, plus accrued
interest thereon to the date of redemption.
27
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to execute and deliver and perform its obligations under the
Underwriting Agreement.
(iii) Each Subsidiary is a corporation duly incorporated and validly
existing in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary is validly issued, fully paid and
non-assessable and, to the best of our knowledge, is owned by the Company,
directly or through Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(v) The Indenture has been duly authorized, executed and delivered by
the Company and (assuming the due authorization, execution and delivery thereof
by the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights and
remedies generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(vi) The Securities are in the form contemplated by the Indenture,
have been duly authorized by the Company and, assuming the Securities have been
authenticated by the Trustee in the manner provided for in the Indenture (which
we have not independently determined) and delivered against payment of the
consideration therefor specified in the Underwriting Agreement, will constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights and remedies generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether
A-1
enforcement is considered in a proceeding in equity or at law), and each
registered holder thereof is entitled to the benefits of the Indenture.
(vii) The Indenture has been duly qualified under the 1939 Act.
(viii) The Securities and the Indenture conform as to legal matters
in all material respects to the descriptions thereof contained in the Prospectus
and are in substantially the form filed or incorporated by reference, as the
case may be, as an exhibit to the Registration Statement.
(ix) The Registration Statement has been declared effective under the
1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and, to
the best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the 1933 Act.
(x) The Registration Statement and the Prospectus, excluding the
documents incorporated by reference therein (other than the financial statements
and other financial data and supporting schedules included therein or omitted
therefrom and the Trustee's Statement of Eligibility on Form T-1 (the "Form T-
1"), as to which we express no opinion) as of their respective effective or
issue dates appear on their face to have been appropriately responsive in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(xi) The documents incorporated by reference in the Prospectus (other
than the financial statements, other financial data and supporting schedules
included therein or omitted therefrom, as to which we express no opinion, and
except to the extent that any statement therein is modified or superseded in the
Prospectus), as of the dates they became effective or were filed with the
Commission, as the case may be, appear on their face to be appropriately
responsive in all material respects with the requirements of the 1934 Act and
the 1934 Act Regulations.
(xii) Except as set forth in the Prospectus (or incorporated by
reference therein), we do not know of any action, suit, proceeding, inquiry or
investigation pending or threatened against the Company or any of its
subsidiaries, or to which the property of the Company or any of its subsidiaries
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, that is material to the Company and its consolidated
subsidiaries taken as a whole.
(xiii) We do not know of any statutes or regulations or any pending
or threatened legal or governmental proceedings required to be described in the
Prospectus which are not described as required, nor of any material contracts or
documents of a character required to be described in the Registration Statement
or Prospectus or to be filed or incorporated as exhibits to the Registration
Statement which are not described and filed or incorporated as required.
(xiv) No authorization, approval, consent or license of any
regulatory body or authority (other than under the 1933 Act, the 1939 Act and
the securities or Blue Sky laws of the various states) and no approval of the
stockholders of the Company is required for the valid
A-2
authorization, issuance, sale and delivery of the Securities by the Company, or
for the execution, delivery or performance of the Indenture.
(xv) The execution and delivery of the Underwriting Agreement and the
Indenture, the consummation of the transactions contemplated in the Underwriting
Agreement and compliance with the terms of the Underwriting Agreement and the
Indenture do not and will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, the charter or by-laws of
the Company or any of the Subsidiaries, or, to our knowledge, any indenture,
mortgage or other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which they or any of their property is bound, or
any existing applicable law, rule, regulation, or, to our knowledge, any
judgment, order or decree of any government, governmental instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of the
Subsidiaries or any of their properties, which is material to the Company and
its Subsidiaries, considered as one enterprise.
(xvi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
We have participated in conferences with officers and other
representatives of the Company, counsel employed by the Company, representatives
of the independent accountants of the Company and Quaker State, representatives
of the independent engineers of the Company and your representatives and your
counsel at which the contents of the Registration Statement and the Prospectus
and related matters were discussed. Although we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus (except for
the statements referred to in paragraph (viii), upon which we are passing), we
advise you that, on the basis of the foregoing (relying in part upon the factual
statements of officers and other representatives of the Company), no facts have
come to our attention which lead us to believe that the Registration Statement
(except for the financial statements and other financial data included therein
or omitted therefrom, and the Form T-1, as to which we have not been asked to
comment), at the time such Registration Statement became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus (except for the financial statements and other financial
data included therein or omitted therefrom, and the Form T-1, as to which we
have not been asked to comment), at the time the Prospectus was issued, or at
the Closing Time, contained or contains an untrue statement of material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
A-3