EXHIBIT 4.1(B)



         SECOND  SUPPLEMENT  TO THE FIRST  SUPPLEMENTAL  INDENTURE,  dated as of
August  5,  1997,  among  TEXACO  CAPITAL  INC.,  a  Delaware  corporation  (the
"Company"), TEXACO INC., a Delaware corporation (the "Guarantor"), and THE CHASE
MANHATTAN BANK, as Trustee (the "Trustee").

                                    RECITALS

         The  Company,  the  Guarantor  and the  Trustee  are parties to a First
Supplemental Indenture dated as of January 31, 1990, supplementing and restating
an  Indenture  dated as of August  24,  1984,  (the  "Supplemental  Indenture"),
relating to the issuance from time to time by the Company of its Debt Securities
guaranteed by the Guarantor on terms to be specified at the time of issuance.

         The  Company,  the  Guarantor  and  the  Trustee  entered  into a First
Supplement to the Supplemental Indenture on October 11, 1990.

         The Company and the Guarantor  have  requested the Trustee to join with
it in the execution and delivery of this Second  Supplement to the  Supplemental
Indenture solely in order to establish the terms of a Series of Securities to be
designated "3.50% Guaranteed Cash-Settled Convertible Notes Due 2004".

         Section 2.02 of the Supplemental Indenture provides that the terms of a
Series of Securities may be established by an indenture supplemental thereto.

         Section  9.01(3)  of  the  Supplemental   Indenture  provides  that  an
indenture supplemental thereto may be entered into by the Company, the Guarantor
and the Trustee, without the consent of any Holders of Securities,  to amend the
Supplemental  Indenture to the extent necessary to make any change that does not
adversely affect the rights of any Securityholder.

         The  Company  and  the  Guarantor  have  determined  that  this  Second
Supplement  to the  Supplemental  Indenture  complies with said Section 9.01 and
does  not  require  the  consent  of any  Securityholder.  On the  basis  of the
foregoing,  the  Trustee  has  determined  that this  Second  Supplement  to the
Supplemental Indenture is in form satisfactory to it.

         All things necessary to make this Second Supplement to the Supplemental
Indenture a valid agreement of the Company,  the Guarantor and the Trustee and a
valid supplement to the Supplemental Indenture have been done.



<PAGE>





(NY) /dpw/cw/031/06216/029/FORM/inden.supp.wpd



         Each party  agrees as  follows  for the  benefit  of the other  parties
hereto and for the equal and ratable benefit of the Holders of the Notes:


                                    ARTICLE 1

                                   DEFINITIONS

         SECTION 1.01.  Definitions.

         Capitalized terms herein,  not otherwise  defined,  shall have the same
meanings given them in the Supplemental Indenture.

         "Agency  Agreement"  means the Agency  Agreement of even date  herewith
among the Company,  the Guarantor,  the Trustee, the Principal Paying Agent, the
Principal Conversion Agent, the Paying Agent in Luxembourg, the Conversion Agent
in Luxembourg and the Calculation Agent.

         "Business Day" means any day that is not a Saturday,  a Sunday or a day
on which banking  institutions  or trust  companies in The City of New York, the
City of London or  Luxembourg  are  authorized  or obligated by law or executive
order to close.

         "Conversion Amount" shall have the meaning specified in the Notes.

         "Conversion Date" shall have the meaning specified in the Notes.

         "CSFP" means Credit Suisse Financial Products.

         "Exchange  Date" shall have the meaning  specified  in  paragraph 6 the
Temporary Global Note.

         "Holder" or  "Securityholder"  of any Note or Coupon  shall  mean,  for
purposes  hereof and,  solely  with  respect to the Notes,  for  purposes of the
Supplemental Indenture, the bearer thereof.

         "Interest Payment Date" shall have the meaning specified in the Notes.

         "Legal  Holiday"  means,  for purposes of the  Supplemental  Indenture,
solely with respect to the Notes, any day that is not a Business Day.

         "Non-U.S.  Paying Agent" means the Principal Paying Agent and any other
Paying Agent for the Notes outside the United States.


                                       2
<PAGE>



         SECTION 1.02.  Other Definitions.

<TABLE>
<CAPTION>

                                Term                          Defined in Section
                                ----                          ------------------

<S>                                                                    <C> 
                  "Calculation Agent"                                  5.04
                  "Cedel Bank"                                         3.02
                  "Common Depositary"                                  3.02
                  "Conversion Agent"                                   5.01
                  "Coupon"                                             3.04
                  "Definitive Note"                                    3.04
                  "Euroclear Operator"                                 3.02
                  "Exchange Request"                                   3.04
                  "Notes"                                              2.01
                  "Permanent Global Note"                              3.03
                  "Principal Conversion Agent"                         5.01
                  "Principal Paying Agent"                             4.01
                  "Temporary Global Note"                              3.02
                  "United States"                                      3.06

</TABLE>



                                    ARTICLE 2

                         ESTABLISHMENT OF TERMS OF NOTES

         SECTION 2.01.  Establishment of Terms of Notes.

         Pursuant to Section 2.02 of the Supplemental Indenture, there is hereby
established a Series of Securities designated the "3.50% Guaranteed Cash-Settled
Convertible Notes Due 2004" (the "Notes") with the terms set forth herein and in
the  Notes.  The  Notes  are  limited  to  an  aggregate   principal  amount  of
U.S.$200,000,000.  The terms set forth herein to  establish  the Notes shall not
affect any other series of Securities  issued under the  Supplemental  Indenture
and the Supplemental Indenture shall remain in full force and effect and, except
as otherwise expressly provided herein, shall govern the terms of the Notes.




                                       3
<PAGE>



                                    ARTICLE 3


                    FORM, DENOMINATION, TRANSFER AND EXCHANGE

         SECTION 3.01.  Form and Denomination; Transfer.

         Except as provided  herein,  the Notes shall be issued in bearer  form,
serially  numbered,  in  denominations  of  U.S.$10,000.  Title to the Notes and
Coupons will be transferable by delivery. Except as provided herein, the Company
and any  Agent  may deem and  treat  the  bearer  of any Note or  Coupon  as the
absolute owner thereof (whether or not overdue and notwithstanding any notice of
ownership or writing  thereon or notice of any previous  loss or theft  thereof)
for all purposes.

         SECTION 3.02.  Initial Form and Delivery.

         The Notes shall be initially  issued in temporary  global  bearer form,
without interest coupons, in substantially the same form as set forth in Exhibit
A-1 hereto (the  "Temporary  Global Note").  The Temporary  Global Note shall be
delivered  to  the  Brussels   office  of  a  common   depositary  (the  "Common
Depositary")  for the  benefit  of Morgan  Guaranty  Trust  Company of New York,
Brussels office, as operator of the Euroclear System (the "Euroclear Operator"),
and Cedel  Bank,  societe  anonyme  ("Cedel  Bank"),  for credit to the  account
designated by or on behalf of the initial subscriber thereof.

         SECTION 3.03.  Exchange of Temporary Global Note for Permanent 
Global Note.

         An interest in the  Temporary  Global  Note shall be  exchanged  for an
interest in a Note in permanent global bearer form, without interest coupons, in
substantially  the same form as set forth in Exhibit A-2 hereto (the  "Permanent
Global Note"), on or after the Exchange Date, upon the occurrence of each of the
following events:

                  (i) the account  holder  having  beneficial  ownership of such
         interest  instructs the  Euroclear  Operator or Cedel Bank, as the case
         may be, to request  such  exchange  on its behalf and  delivers  to the
         Euroclear  Operator or Cedel Bank, as the case may be, a certificate in
         the form set forth in Exhibit 1 to the Temporary  Global Note, dated no
         earlier  than 10 days  prior  to the  Exchange  Date,  copies  of which
         completed certificate shall be made available by the Euroclear Operator
         or Cedel Bank, as the case may be, to the Principal Paying Agent, which
         will make such certificate available to the Trustee; and

                                       4

<PAGE>

                 (ii) on or after  the  Exchange  Date,  the  Common  Depositary
         surrenders the Temporary  Global Note to the Principal  Paying Agent to
         be exchanged, in whole or from time to time in part, for an interest in
         the  Permanent  Global  Note;  provided,   however,   that,  upon  such
         presentation by the Common Depositary,  the Temporary Global Note shall
         be accompanied by (i) a certificate dated on or after the Exchange Date
         and signed by the Euroclear Operator as to the portion of the Temporary
         Global  Note  held  for its  account  then to be  exchanged  and (ii) a
         certificate  dated on or after the  Exchange  Date and  signed by Cedel
         Bank as to the  portion  of the  Temporary  Global  Note  held  for its
         account then to be  exchanged,  each in the form set forth in Exhibit 2
         to the Temporary Global Note.

Without  unnecessary  delay but, in any event, not later than the Exchange Date,
the Company  shall deliver to the  Principal  Paying Agent the Permanent  Global
Note.  Upon the first  occurrence of the events  specified in paragraphs (i) and
(ii) above,  the Principal  Paying Agent shall  authenticate  and deliver to the
Common  Depositary,  in exchange  for the portion of the  Temporary  Global Note
being surrendered, the Permanent Global Note, in a principal amount equal to the
aggregate  principal  amount of the Temporary  Global Note so  surrendered.  The
Principal  Paying  Agent shall  endorse the  Temporary  Global Note to reflect a
reduction  in the  principal  amount  equal to the  principal  amount  thereupon
represented  by the  Permanent  Global Note and shall,  after such  endorsement,
redeliver  the  Temporary  Global  Note  to  the  Common  Depositary.  Upon  any
subsequent  occurrence of the events  specified in paragraph (i) and (ii) above,
and upon surrender to the Principal Paying Agent of the Temporary Global Note to
be exchanged and the  Permanent  Global Note,  the Principal  Paying Agent shall
endorse the Temporary Global Note to reflect a reduction in the principal amount
equal to the  portion to be  exchanged,  and the  Principal  Paying  Agent shall
endorse the Permanent Global Note so as to increase the principal amount thereof
by an amount equal to the portion being exchanged and shall thereupon  redeliver
the  Permanent  Global  Note  and  the  Temporary  Global  Note  to  the  Common
Depositary.  At such time as the principal  amount of the Temporary  Global Note
shall have been reduced to zero,  the Trustee shall cancel the Temporary  Global
Note in accordance with Section 2.15 of the Supplemental  Indenture.  In each of
the foregoing cases,  the Euroclear  Operator or Cedel Bank, as the case may be,
shall then credit the portion of the  Permanent  Global Note being  exchanged to
the respective accounts of the beneficial owners of the portion of the Temporary
Global Note so surrendered (or to such other accounts as such beneficial  owners
may direct).

                                       5

<PAGE>



         SECTION 3.04.  Exchange of Permanent Global Note for Definitive Notes.


         The  beneficial  owner of an interest in the  Permanent  Global Note is
entitled to exchange such interest for Notes in definitive bearer form, serially
numbered, with interest coupons ("Coupons") attached,  substantially in the form
set forth in Exhibit  A-3  hereto  ("Definitive  Notes"),  in  denominations  of
U.S. $10,000 and in an  aggregate  principal  amount equal to the amount of such
beneficial interest, upon the occurrence of the following events:

                  (i) the account  holder  having  beneficial  ownership of such
         interest  instructs the  Euroclear  Operator or Cedel Bank, as the case
         may be, to request  such  exchange  on its behalf and  delivers  to any
         Non-U.S.  Paying Agent (which Non-U.S.  Paying Agent shall deliver such
         request to the Trustee and the Company), through the Euroclear Operator
         or Cedel Bank, as the case may be, at least 30 days' written  notice of
         such exchange,  which notice  specifies the number of Definitive  Notes
         into  which  such  interest  shall  be  exchanged  (each  an  "Exchange
         Request"); and

                 (ii) on or after the earliest date on which such  interests may
         be exchanged,  the Common  Depositary  surrenders the Permanent  Global
         Note to the  Principal  Paying  Agent  to be  exchanged  in  whole  for
         Definitive Notes.

         All (but not less than all)  interests  in the  Permanent  Global  Note
shall be so exchanged for one or more  Definitive  Notes (i) upon receipt by the
Company of a copy of an Exchange  Request from the first  beneficial owner of an
interest in the Permanent  Global Note to make such an Exchange  Request or (ii)
upon receipt by the Principal  Paying Agent and the Trustee of a notice from the
Company  stating  that  (x) the  Permanent  Global  Note  has  been  accelerated
following  an Event of Default or (y) the  Euroclear  Operator or Cedel Bank has
been closed for business for a continuous period of fourteen days (other than by
reason of public  holidays) or has  announced  its  intention to cease  business
permanently or in fact has done so. The Company shall, promptly upon delivery of
any such notice to the Principal Paying Agent and the Trustee,  cause the Common
Depositary (i) to instruct the Principal Paying Agent and the Company  regarding
the aggregate  principal  amount of Definitive  Notes that must be authenticated
and  delivered to each  relevant  clearing  system in exchange for the Permanent
Global Note and (ii) to surrender  the  Permanent  Global Note to the  Principal
Paying Agent to be exchanged in whole for Definitive Notes.

         As soon as practicable after either (i) receiving a copy of an Exchange
Request from a Non-U.S.  Paying Agent or (ii) delivering to the Principal Paying

                                       6
<PAGE>

Agent and the Trustee such a notice of acceleration of the Permanent Global Note
or of closure of a relevant  clearing  system,  the Company shall deliver to the
Principal  Paying Agent Definitive  Notes in authorized  denominations  equal in
aggregate principal amount to the principal amount of the Permanent Global Note.
Upon  receiving  an  Exchange  Notice or such a notice  from the Company and the
Permanent  Global Note from the Common  Depositary,  the Principal  Paying Agent
shall  authenticate and deliver to the Euroclear  Operator or Cedel Bank, as the
case may be, in exchange for each  portion of the  Permanent  Global Note,  such
Definitive  Notes.  The  Euroclear  Operator or Cedel Bank,  as the case may be,
shall  then  deliver  such  Definitive  Notes  (A) in the  case  of an  exchange
initiated by an Exchange Request, (x) to the beneficial owner (or to such person
as the beneficial  owner may direct) of the portion of the Permanent Global Note
with  respect  to  which  the  Exchange  Request  was  submitted  and (y) to the
Euroclear  Operator  and Cedel Bank,  as the case may be, for the account of the
beneficial  owners of all remaining  interests in the  Permanent  Global Note in
accordance with their interests,  or (B) in the case of an exchange  following a
notice of acceleration of the Permanent  Global Note or of closure of a relevant
clearing system,  to the beneficial owners of all the interests in the Permanent
Global Note in accordance with their interests.


         SECTION 3.05.  No Exchange in Certain Circumstances.

         None of the Company, the Trustee and any Non-U.S.  Paying Agent will be
required to exchange Notes to be redeemed  during the period of 15 calendar days
preceding the first publication of notice of redemption.

         SECTION 3.06.  No Delivery into the United States.

         No Definitive Note or Coupon delivered in exchange for a portion of the
Permanent Global Note shall be mailed or otherwise  delivered to any location in
the United States.  The term "United  States" means the United States of America
(including the States and the District of Columbia) and its "possessions", which
include Puerto Rico, the U.S. Virgin Islands,  Guam, American Samoa, Wake Island
and the Northern Mariana Islands.

         SECTION 3.07.  Principal Paying Agent Shall be Authenticating Agent.

         The Principal Paying Agent shall be an Authenticating Agent.


                                       7

<PAGE>

                                    ARTICLE 4


                       PAYMENTS OF PRINCIPAL AND INTEREST

         SECTION 4.01.  Appointment of Paying Agents.

         The Company initially appoints the Trustee,  at its office in London at
Trinity Tower,  9 Thomas More Street,  London E19YT,  England,  as the principal
Paying  Agent for the Notes  outside the United  States (the  "Principal  Paying
Agent"). The Company initially appoints Chase Manhattan Bank Luxembourg S.A., at
its office in Luxembourg at 5 rue Plaetis, L-2338 Luxembourg,  Luxembourg,  as a
Paying Agent in  Luxembourg.  So long as the Notes are listed on the  Luxembourg
Stock  Exchange  and the rules of such  exchange so require,  the Company  shall
maintain a Paying Agent in Luxembourg.

         SECTION 4.02.  Payments on Global Notes.

         Principal  and  interest  payable on the  Temporary  Global Note or the
Permanent Global Note shall be payable to the Euroclear  Operator and Cedel Bank
for credit to the respective  accounts of the beneficial owners of the Temporary
Global Note or the Permanent Global Note, as the case may be, provided, however,
that in the case of the Temporary Global Note, (a) payment of such principal and
interest  to the  Euroclear  Operator  or Cedel  Bank,  as the  case may be,  is
conditioned  upon the delivery by the  Euroclear  Operator or Cedel Bank, as the
case may be, to the  Principal  Paying Agent of a  certificate  or  certificates
substantially  in the form set forth in Exhibit 2 to the  Temporary  Global Note
and (b) credit of the  applicable  portion of such principal and interest to the
account of a beneficial  owner of the Temporary  Global Note is conditioned upon
the delivery by such beneficial  owner to the Euroclear  Operator or Cedel Bank,
as the case  may be,  of a  certificate  dated no  earlier  than the  applicable
payment date,  in the form set forth in Exhibit 1 to the Temporary  Global Note.
Notwithstanding  anything to the contrary herein contained,  the  certifications
made pursuant to this Section shall satisfy the  certification  requirements  of
Section 3.03 hereof and the interests of the beneficial  owners of the Temporary
Global Note with respect to which such certification was made will be exchanged,
without  further act or deed by such  beneficial  owners,  for  interests in the
Permanent  Global Note on the Exchange Date or the date of certification if such
date  occurs  after the  Exchange  Date.  Except as  otherwise  provided in this
Section, no payments of principal or interest owing with respect to a beneficial
interest  in the  Temporary  Global  Note will be made to the  beneficial  owner
thereof unless and until such interest shall have been exchanged for an interest
in the  Permanent  Global  Note.  Any  principal  or  interest  received  by the
Euroclear Operator and Cedel Bank in respect of the Temporary Global Note or the
Permanent  Global

                                       8
<PAGE>


Note and not paid as herein  provided shall be returned to the
Trustee  prior to the  expiration of two years after the date of such payment in
order to be  repaid  to the  Company  in  accordance  with  Section  8.03 of the
Supplemental Indenture.


         SECTION 4.03.  Payments on Definitive Notes.

         Payment of principal and interest on a Definitive  Note will be made in
immediately  available  funds,  subject to any applicable laws and  regulations,
only against  presentation and surrender of such Definitive Note or the relevant
Coupon,  as the case may be, at the  office  outside  the  United  States of any
Non-U.S. Paying Agent by check or, at the option of the Holder, by wire transfer
of immediately available funds to an account maintained by the payee with a bank
located outside the United States if appropriate wire transfer instructions have
been received by such Non-U.S. Paying Agent not less than 15 calendar days prior
to an applicable payment date.

         SECTION 4.04.  No Service Charge.

         No service charge shall be made for any exchange of Notes,  except that
the Company may require  payment of a sum  sufficient  to cover any tax or other
governmental charge that may be imposed in relation thereto.



                                    ARTICLE 5

                            CONVERSION AND REDEMPTION

         SECTION 5.01.  Appointment of Conversion Agents.

         The Company initially appoints the Trustee,  at its office in London at
Trinity  Tower,  9 Thomas More Street,  London E19YT,  England,  as a conversion
agent (a "Conversion  Agent") and the principal  Conversion  Agent for the Notes
outside  the United  States  (the  "Principal  Conversion  Agent").  The Company
initially  appoints  Chase  Manhattan  Bank  Luxembourg  S.A.,  at its office in
Luxembourg  at 5 rue Plaetis,  L-2338  Luxembourg,  Luxembourg,  as a Conversion
Agent in Luxembourg.  Each  Conversion  Agent shall be deemed a Paying Agent for
purposes of the  Supplemental  Indenture  solely as it relates to the Notes.  So
long as the Notes are listed on the  Luxembourg  Stock Exchange and the rules of
such  exchange so require,  the Company  shall  maintain a  Conversion  Agent in
Luxembourg.

                                       9

<PAGE>



         SECTION 5.02.  Conversion.


         The Notes shall be convertible into cash as provided therein.

         Each  Conversion  Agent shall  accept,  on or before 5:00 P.M.,  London
time,  on any  Business  Day at its  specified  office,  delivery of  Conversion
Notices and any Notes  (including  unmatured  Coupons  relating  thereto)  being
surrendered  for  conversion,  and will provide the person  delivering  any such
Notes with a receipt  therefor,  and, in the event that an Interest Payment Date
will fall on the next Business Day following  delivery of such Conversion Notice
and such  Notes,  a  separate  receipt  representing  the  Coupon  that would be
redeemable on such Interest  Payment Date. Any Conversion  Notice delivered to a
Conversion  Agent after 5:00 P.M.,  London  time,  on any  Business Day shall be
deemed to have been delivered on the immediately  succeeding  Business Day. Each
Conversion Agent other than the Principal  Conversion  Agent shall,  immediately
upon receipt of a  Conversion  Notice  delivered to it as aforesaid  (and in any
event not later than 5:00 P.M.,  London time,  on the Business Day  delivered to
it),  send a copy  of  such  Conversion  Notice  and the  Notes  (including  all
unmatured   Coupons  relating  thereto)  being  surrendered  for  conversion  by
facsimile to the Principal Conversion Agent.

         In respect of all valid Conversion Notices received on any Business Day
(any  determination  as to  whether  a  Conversion  Notice is valid and has been
properly and completely  delivered as provided in the Notes shall be made by (i)
the Principal Conversion Agent after consultation with the Euroclear Operator or
Cedel Bank,  as the case may be, if the Notes are  represented  by the Permanent
Global Note or by Definitive  Notes that are held by the  Euroclear  Operator or
Cedel Bank or (ii) the Principal  Conversion  Agent if the Notes are represented
by Definitive Notes not held by the Euroclear Operator or Cedel Bank, and shall,
in either of cases (i) or (ii), absent manifest error, be conclusive and binding
on the Company and the relevant Holder), the Principal Conversion Agent shall:

                  (i)  prior to 4:30  P.M.  (London  time) on the  Business  Day
         immediately following the day on which a Conversion Agent receives such
         Conversion  Notices,  notify the Calculation Agent, the Company and, if
         CSFP  is  no  longer  acting  in  its  capacity  as  Calculation  Agent
         hereunder,  CSFP by facsimile  (which  notification  to the Calculation
         Agent  shall  be  preceded  by  oral  notification)  of  the  following
         information with respect to the valid Conversion Notices received by it
         on the relevant Business Day;

                           (1) the name of each  Holder  delivering a Conversion
                  Notice to each Conversion Agent;


                                       10
<PAGE>



                           (2) the principal  amount of Notes being converted by
                  each such Holder at each  Conversion  Agent and the  aggregate
                  principal  amount of all Notes being  converted by all Holders
                  at each Conversion Agent; and


                           (3) the relevant Conversion Date;

                  (ii) confirm with the Euroclear Operator or Cedel Bank, if the
         relevant  Notes are  represented  by the  Permanent  Global  Note or by
         Definitive  Notes held by the  Euroclear  Operator or Cedel  Bank,  the
         principal amount of Notes to which a Conversion  Notice relates and the
         details of the account from which the Notes are to be debited;

                  (iii)  arrange for the payment of  the  Conversion  Amount  in
         accordance with the instructions contained in the Conversion Notice;
         and

                  (iv)  carry out such other  acts as may be  necessary  to give
         effect to the provisions of the Notes.

         On the next Business Day following a Conversion  Date, the  Calculation
Agent shall provide written notice to the Company, the Trustee and the Principal
Conversion Agent of the Conversion  Amount to be delivered to all the converting
Holders by each  Conversion  Agent and the  related  Settlement  Date.  Upon the
occurrence  of an  event  requiring  an  adjustment  to the  calculation  of the
Conversion Amount as set forth in the Notes, the Calculation Agent will promptly
notify the Company and the Principal Conversion Agent, which in turn will notify
the Holders,  of such event and of the method of  calculation to be used to make
any such  adjustment.  So long as the Notes are listed on the  Luxembourg  Stock
Exchange,  the Calculation  Agent will also notify the Luxembourg Stock Exchange
with respect to any such adjustment.

         SECTION 5.03.  Conversion Notices.

         Each Conversion  Agent shall make available,  and promptly upon request
provide to any Holder,  notices substantially in the form set forth in Exhibit B
hereto (or such other form as shall be provided by the Company with the approval
of the Principal  Conversion  Agent,  which approval  shall not be  unreasonably
withheld or delayed),  and at the same time notify such Holder of any additional
certifications or restrictions that may be notified to the Principal  Conversion
Agent by the Company.

                                       11

<PAGE>



         SECTION 5.04.  Calculation Agent.

         The  Company   initially   appoints  CSFP  as  calculation  agent  (the
"Calculation   Agent")  with  respect  to  the  Notes.  All   determinations  or
calculations  made by the Calculation Agent shall be made without taking account
of the interests of the Holders and without liability on its part (other than as
provided in the Agency  Agreement) and shall,  in the absence of manifest error,
be  conclusive  for all purposes and binding on the Company,  the Agents and the
Holders.

         SECTION 5.05.  Optional Redemption.

         The Notes  shall be  redeemable  at the  option of the  Company  in the
manner  set forth  therein.  Notwithstanding  Section  3.03 of the  Supplemental
Indenture,  the Company may give  notice of an optional  redemption  pursuant to
this  Section  at least 15 but not more than 30 days  before  the date fixed for
redemption.

         SECTION 5.06.  Tax Redemption; Withholding.

         The Notes shall be redeemable  upon the occurrence of certain events in
the manner set forth therein and in Article 3 of the Supplemental Indenture.

         If the  Company  is, in respect of any payment in respect of the Notes,
compelled  to withhold or deduct any amount for or on account of any taxes or to
pay  additional  amounts in respect  thereof or elects to withhold or deduct any
amount for or on account of a backup withholding tax or similar charge or elects
to pay additional amounts in respect thereof,  in either case as provided in the
Notes,  the Company  shall give notice to the Trustee and each  Non-U.S.  Paying
Agent (with a copy to the  Calculation  Agent) as soon as it makes such election
or becomes aware of the  requirement to make the  withholding or deduction or to
pay such additional  amounts,  as the case may be, and shall give to each of the
Trustee and each Non-U.S.  Paying Agent such  information as it shall require to
enable it to comply with the requirement.


                                       12

<PAGE>

                                    ARTICLE 6


                                  MISCELLANEOUS

         SECTION 6.01.  Notices.

         Notices to Holders will be given by  publication  in a newspaper in the
English language of general circulation in the City of London or, if publication
in London is not  practical,  in an  English  language  newspaper  with  general
circulation in Western  Europe.  Notwithstanding  the foregoing,  so long as the
Notes are represented by the Temporary  Global Note or the Permanent Global Note
and such Note is held on behalf of the  Euroclear  Operator or Cedel  Bank,  any
such notice may, at the Company's option in lieu of such  publication,  be given
by delivery  to the  Euroclear  Operator  or Cedel Bank,  as the case may be, in
which event such notice shall be deemed to have been given to the Holders on the
seventh  business day in Brussels or  Luxembourg,  as the case may be, after the
day on which such notice is so delivered. So long as the Notes are listed on the
Luxembourg  Stock  Exchange and the rules of the  Luxembourg  Stock  Exchange so
require,  notice to the Holders  will also be  published in English in a leading
newspaper  having  general  circulation in  Luxembourg,  or, if such  Luxembourg
publication  is not  practicable,  in one other leading  English  language daily
newspaper with general  circulation in Europe, such newspaper being published on
each Business Day in morning  editions,  whether or not it shall be published in
Saturday,  Sunday or holiday editions.  Except as set forth above, notices shall
be deemed to have been  given on the date of  publication  as  aforesaid  or, if
published on different dates, on the date of the first such publication.

         Notices to Cedel Bank shall be  given  to  it  at Cedel  Bank,  societe
anonyme,  67  Boulevard  Grande-Duchesse  Charlotte,  Luxembourg-Ville,   L-1010
Luxembourg, Attention: OCE Department, Telex: 2791.

         Notices  to  the  Euroclear  Operator  shall  be  given to it at Morgan
Guaranty  Trust   Company   of   New  York  (as   operator   of  the   Euroclear
System),Brussels office, Boulevard Emile Jacqmain 151, B-1210 Brussels, Belgium,
Attention: Custody Processing Department, Telex: 61025 MGTEC B.

         Notices  to  the  Principal  Paying  Agent and the Principal Conversion
Agent shall be given to it at The Chase  Manhattan Bank,  Trinity Tower,  Thomas
More Street, London E19YT, England, Attention: Manager, Global Trust Operations,
Fax: 44 1202 34 7945, Telex: 8954681 CMBG.

         Notices  to  the  Paying  Agent  and the Conversion Agent in Luxembourg
shall be given to it at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-

                                       13

<PAGE>

2338 Luxembourg,  Luxembourg,  Attention: Manager, Global Trust Operations, Fax:
352 4626 85380, Telex: 1233 CHASLU.

         Notices  to  the  Luxembourg  Stock  Exchange  shall be given to it c/o
Banque  Internationale a Luxembourg S.A., 69, route d'Esch,  L-1470  Luxembourg,
Luxembourg, attention: Jacques Kinnen, Fax: 352 4590 4227.

         Notices  to  the  Calculation  Agent  (and in the event that CSFP is no
longer  Calculation  Agent,  CSFP) shall be given to it c/o CSFP Capital,  Inc.,
Eleven Madison  Avenue,  New York,  N.Y.  10010,  attention:  Ricardo  Harewood/
Sharmila Ruder, Fax: (212) 325-8174.

         SECTION 6.02.  Securityholder Lists.

         The provisions of Section 2.09 of the Supplemental  Indenture shall not
apply to the Notes.

         SECTION 6.03.  Collection Suit by Trustee;  Trustee  May File Proofs of
Claim.

         All rights of action  and of  asserting  claims  under the Notes or any
Coupons or under the Supplemental  Indenture,  with respect to the Notes, may be
enforced by the Trustee without the possession of any of the Notes or Coupons or
the production thereof on any trial or other proceedings relative thereto.

         SECTION 6.04.  Evidence of Action Taken by Securityholders.

         Any request, demand, authorization,  direction, notice, consent, waiver
or other  action  provided  by the  Notes or the  Supplemental  Indenture,  with
respect  to the  Notes,  to be  given  or taken  by a  specified  percentage  in
principal amount of the  Securityholders may be embodied in and evidenced by one
or more  instruments  of  substantially  similar tenor signed by such  specified
percentage of  Securityholders  in person or by agent duly  appointed in writing
and, except as otherwise expressly provided in the Supplemental Indenture,  such
action shall become  effective when such instrument or instruments are delivered
to the Trustee.  Proof of execution of any instrument or of a writing appointing
any  such  agent  shall  be  sufficient  for  any  purpose  of the  Supplemental
Indenture,  with respect to the Notes, and (subject to Sections 7.01 and 7.02 of
the Supplemental  Indenture) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.

                                       14

<PAGE>



         SECTION 6.05.  Proof  of  Execution  of  Instruments  and of Holding of
Securities.


         Subject to Sections 7.01 and 7.02 of the  Supplemental  Indenture,  the
execution of any  instrument  by a  Securityholder  or its agent or proxy may be
proved in the following manner. The fact and date of the execution by any Holder
of any instrument may be proved by the certificate of any notary public or other
officer  of any  jurisdiction  authorized  to take  acknowledgments  of deeds or
administer oaths that the person executing such instruments  acknowledged to him
the execution  thereof,  or by an affidavit of a witness to such execution sworn
to before any such notary or other such officer.  Where such  execution is by or
on behalf of any legal  entity other than an  individual,  such  certificate  or
affidavit shall also constitute  sufficient proof of the authority of the person
executing  the same.  The fact of the  holding by any Holder of a Note,  and the
identifying  number of such Note and the date of its  holding  the same,  may be
proved by the production of such Note or by a certificate  executed by any trust
company,   bank,  banker  or  recognized  securities  dealer  wherever  situated
satisfactory to the Trustee,  if such certificate shall be deemed by the Trustee
to be satisfactory. Each such certificate shall be dated and shall state that on
the date thereof a Note  bearing a specified  identifying  number was  deposited
with or exhibited to such trust company,  bank, banker or recognized  securities
dealer by the person  named in such  certificate.  Any such  certificate  may be
issued in respect of one or more Notes.  The holding by the person  named in any
such  certificate of any Notes  specified  therein shall be presumed to continue
for a period of one year from the date of such certificate unless at the time of
any determination of such holding (i) another  certificate  bearing a later date
issued in respect of the same Notes shall be produced,  (ii) the Notes specified
in such certificate  shall be produced by some other person,  or (iii) the Notes
specified in such  certificate  shall have ceased to be Outstanding.  Subject to
Sections 7.01 and 7.02 of the Supplemental  Indenture,  the fact and date of the
execution of any such instrument and the amount and numbers of Notes held by the
person so executing such instrument and the amount and numbers of Notes may also
be proven in accordance  with such  reasonable  rules and  regulations as may be
prescribed  by the  Trustee or in any other  manner  that the  Trustee  may deem
sufficient.

         SECTION 6.06.  [Reserved].

         SECTION 6.07.  Exhibits.

         The Exhibits hereto shall be deemed a part of this Second Supplement to
the Supplemental Indenture.

                                       15

<PAGE>

         SECTION 6.08.  Duplicate Originals.

         The parties may sign any number of copies of this Second  Supplement to
the Supplemental  Indenture.  Each signed copy shall be an original,  but all of
them together represent the same agreement.



(seal)                                      TEXACO CAPITAL INC.

                                            By:   Peter M. Wissel
                                               -------------------------
                                                  Title:

Attest:
 Eric B. Silberstein
---------------------
Title:  Attorney


(seal)                                      TEXACO INC.

                                            By:    S. Faber
                                               -------------------------
                                                  Title:

Attest:
 Eric B. Silberstein
---------------------
Title:  Attorney


(seal)                                      THE CHASE MANHATTAN BANK,
                                                     as Trustee

                                            By:   R.J. Hollerin
                                               -------------------------
                                                  Title: Second Vice President

Attest:
 John T. Needham, Jr.
---------------------
Title:  Trust Officer


<PAGE>

                                                                     EXHIBIT A-1


                         [FORM OF TEMPORARY GLOBAL NOTE]


ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

                               TEXACO CAPITAL INC.

                              Temporary Global Note

                                  representing

    U.S.$200,000,000 3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                                  Guaranteed by

                                   TEXACO INC.

                           Interest Payable: August 5


         Texaco Capital Inc.  promises  to pay to bearer, upon surrender hereof,
the  principal  sum  specified in Schedule A hereto on August 5, 2004 (except to
the extent previously redeemed).



1.  Interest.

         Texaco Capital Inc. (the "Company"),  a Delaware corporation,  promises
to pay interest on the principal amount of this Note from time to time specified
in Schedule A hereto at the rate per annum  shown  above.  The Company  will pay
interest  annually  on August 5 of each year.  Interest  on the Note will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from August 5, 1997.  Except as provided in the Indenture,  this Note
will

<PAGE>


cease to bear  interest from and after the earlier of (a) August 5, 2004 or
(b) the date fixed for  redemption  of this Note.  If interest is required to be
calculated  for a period  of less than one year,  it will be  calculated  on the
basis of a 360-day year consisting of 12 months of 30 days each.

2.  Method of Payment.

         Upon any payment of interest on this Note,  the Principal  Paying Agent
(as defined below) shall cause Schedule A of this Note to be endorsed to reflect
such  payment.  No  payment on this Note will be made at any office or agency of
the  Company in the United  States (as defined  below) or by check  mailed to an
address in the United States or by wire transfer to an account maintained by the
Holder of this Note with a bank in the United  States except as may be permitted
under United  States  federal tax laws and  regulations  then in effect  without
adverse tax consequences to the Company.  Notwithstanding the foregoing,  in the
event that  payment in U.S.  dollars of the full amount  payable on this Note at
the offices of all Non-U.S. Paying Agents (as defined below) would be illegal or
effectively  precluded as a result of exchange controls or similar restrictions,
payment on this Note will be made by a Paying Agent in the Borough of Manhattan,
The City of New York, if and only if (i) such Paying Agent, under applicable law
and regulations,  would be able to make such payment and (ii) such payment would
not involve,  in the opinion of the Company,  adverse tax  consequences  for the
Company.  Notwithstanding  any other  provision  of this  Note,  no  payment  of
principal  or interest  shall be made on any  portion of this Note unless  there
shall  have  been  delivered  to  the  Principal   Paying  Agent  a  certificate
substantially  in the form of Exhibit 2 hereto  with  respect to the  portion of
this Note with respect to which such  principal or interest is to be paid.  Such
certificate  shall have been  delivered to the Principal  Paying Agent by Morgan
Guaranty  Trust  Company  of New  York,  Brussels  office,  as  operator  of the
Euroclear  System (the  "Euroclear  Operator"),  or Cedel Bank,  societe anonyme
("Cedel Bank") and shall be based on a certificate  substantially in the form of
Exhibit 1 hereto  provided to the Euroclear  Operator or Cedel Bank, as the case
may be, by those of its  account  holders  who are to  receive  such  payment of
principal or  interest.  Owners of  beneficial  interests in this Note must look
solely to the  Euroclear  Operator or Cedel Bank,  as the case may be, for their
share of each payment made to the bearer of this Note.

3.  Paying Agents.

         Initially, The Chase Manhattan Bank, as Trustee (the "Trustee"), at its
office in London at Trinity Tower, 9 Thomas More Street,  London E19YT, England,
will act as the  principal  Paying Agent for the Notes outside the United States
(the "Principal Paying Agent"). Initially, Chase Manhattan Bank 


                                      A-1-2


<PAGE>



Luxembourg  S.A.,  at  its  office  in  Luxembourg  at  5  rue  Plaetis,  L-2338
Luxembourg,  Luxembourg,  will act as a Paying Agent in Luxembourg.  The Company
may appoint  additional  Paying Agents or change any Paying Agent without notice
to Holders (any such additional Paying Agent or other Paying Agent for the Notes
outside the United States, a "Non-U.S. Paying Agent").

4.  Indenture.

         The  Company  issued  this  Note  as part of a  Series  of  Securities,
designated as "3.50%  Guaranteed  Cash-Settled  Convertible Notes Due 2004" (the
"Notes"),  under an indenture dated as of August 24, 1984, as  supplemented  and
restated by the First  Supplemental  Indenture  dated as of January 31, 1990, as
further  amended by the First  Supplement  to the First  Supplemental  Indenture
dated as of October 11, 1990, and as further amended by the Second Supplement to
the First Supplemental  Indenture dated as of August 5, 1997 (as so supplemented
and amended, the "Indenture"),  among the Company,  Texaco Inc. and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the  Indenture by reference to the Trust  Indenture Act of 1939 (15 U.S. Code
ss.ss.  7aaa-77bbbb)  as amended (the  "Act").  This Note is subject to all such
terms,  and the Holder of this Note is referred to the Indenture and the Act for
a  statement  of them.  All terms  used in this Note  which are  defined  in the
Indenture and not otherwise  defined herein shall have the meanings  assigned to
them in the Indenture.

5.  Guaranty.

         The Notes are guaranteed by Texaco Inc.

6.  Exchange for Permanent Global Note.

         This Note is  exchangeable  in whole or from time to time in part on or
after  the  Exchange  Date (as  defined  below)  for an  interest  (equal to the
principal  amount of the  portion  of this  Note  being  exchanged)  in a single
permanent  global  note (the  "Permanent  Global  Note") upon the request of the
Euroclear  Operator  or Cedel  acting on  behalf  of the  owner of a  beneficial
interest  in this Note,  to the  Principal  Paying  Agent upon  delivery  to the
Principal  Paying Agent of a certificate  substantially in the form of Exhibit 2
hereto with respect to the portion of this Note to be  exchanged;  provided that
the Company  shall not be required to exchange this Note for a period of fifteen
calendar days  preceding the first  publication of a notice of redemption of the
Notes.  Such certificate shall have been delivered to the Principal Paying Agent
by the Euroclear  Operator or Cedel, as the case may be, and shall be based on a
certificate  substantially  in the  form of

                                      A-1-3
<PAGE>


Exhibit 1 hereto  provided to the Euroclear  Operator or Cedel,  as the case may
be, by those of its account  holders having an interest in the portion hereof to
be exchanged.  Notwithstanding  the foregoing,  if this Note is subject to a tax
redemption as described on the reverse of the Permanent Global Note, the form of
which is attached hereto,  interests in this Note may be exchanged for interests
in the  Permanent  Global  Note on and  after  such  redemption  date as if such
redemption  date  had  been  the  Exchange  Date,  subject  to  receipt  of  the
certificates  described in the preceding sentence.  Upon exchange of any portion
of this Note for an interest in the Permanent  Global Note, the Principal Paying
Agent  shall  cause  Schedule  A of this  Note to be  endorsed  to  reflect  the
reduction of its principal amount by an amount equal to the aggregate  principal
amount being so exchanged.  Except as otherwise provided herein, until exchanged
for the Permanent Global Note, this Note is governed by the terms and conditions
of the Permanent Global Note to be issued in exchange for this Note, which terms
and conditions are hereby  incorporated by reference herein MUTATIS MUTANDIS and
shall be binding  on the  Company  and the  Holder  hereof as if fully set forth
herein,  and shall in all  respects be entitled to the same  benefits  under the
Indenture  as the  Permanent  Global  Note  duly  authenticated  and  delivered.
Notwithstanding  the  foregoing,  the provisions of paragraph 6 of the Permanent
Global Note shall not apply to this Note. The form of the Permanent  Global Note
is attached hereto.


         As used herein:

                   (a) the  term  "Exchange  Date"  means  September  15,  1997,
         PROVIDED that if an interest represented by this Note is held by Credit
         Suisse First  Boston  (Europe)  Limited,  Swiss Bank  Corporation,  UBS
         Limited or any other manager  participating  in the distribution of the
         Notes as part of an unsold allotment or subscription, the Exchange Date
         with  respect  to such  interest  shall be the day  after the date such
         interest is sold by such manager, all as determined and notified to the
         Principal Paying Agent by Credit Suisse First Boston (Europe)  Limited;
         and

                   (b) the  term  "United States"  means  the  United  States of
         America (including the States and the District  of  Columbia);  and its
         "possessions" include Puerto  Rico,  the  U.S.  Virgin  Islands,  Guam,
         American Samoa, Wake Island and the Northern Mariana Islands.


                                      A-1-4

<PAGE>



7.  Authentication.


         This  Note  shall  not be  valid  until  authenticated  by  the  manual
signature of the Trustee or an authenticating agent.












                                      A-1-5


<PAGE>


Dated: August 5, 1997                                TEXACO CAPITAL INC.

                                                     By: ______________________
                                                            [Title]

                                                     By: ______________________
                                                            [Title]

Authenticated:
THE CHASE MANHATTAN BANK
as Trustee

By: ______________________
       Authorized Officer




                                    GUARANTY

         TEXACO INC., a Delaware corporation (the "Guarantor"),  unconditionally
guarantees  to the  Holder  of this  Note the due and  punctual  payment  of the
principal of and interest on this Note.

         The Guarantor  shall not be entitled to receive any payments based upon
a right of  subrogation  with  respect to any amounts  paid by the  Guarantor to
Holders until the principal of and interest on all Notes shall have been paid in
full or for which payment has been provided.


                                                     TEXACO INC.

                                                     By: ______________________
                                                            [Title]


<PAGE>
                                                                      SCHEDULE A


                       SCHEDULE OF PAYMENTS AND EXCHANGES

         The  initial  Principal  Amount of this Note is  U.S.$200,000,000.  The
following  payments  of  interest  and  exchanges  of a part of this Note for an
interest in the Permanent Global Note have been made:

<TABLE>
<CAPTION>

<S>              <C>                    <C>                  <C>                   <C>
    Date of      Payment of Interest     Principal Amount     Remaining Principal       Notation Made
   Exchange                                Exchanged for       Amount Outstanding     by or on Behalf of
  or Interest                                Permanent             Following        Principal Paying Agent
    Payment                             Global Bearer Note       Such Exchange
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
                                                                       EXHIBIT 1


                       [FORM OF CERTIFICATE TO BE GIVEN BY
                   AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR
                                 AND CEDEL BANK]


                                   CERTIFICATE

                    -----------------------------------------

                               Texaco Capital Inc.
            3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                    Represented by the Temporary Global Note


         This is to certify that as of the date hereof,  and except as set forth
below,  the  above-captioned  Notes held by you for our account (i) are owned by
person(s)  that are not  citizens or residents  of the United  States,  domestic
partnerships,  domestic  corporations or any estate or trust the income of which
is subject to United States  Federal  income  taxation  regardless of its source
("United States person(s)"),  (ii) are owned by United States person(s) that are
(a) foreign branches of United States financial institutions (as defined in U.S.
Treasury  Regulations  Section  1.165-12(c)(1)(v))   ("financial  institutions")
purchasing for their own account or for resale,  or (b) United States  person(s)
who acquired  the Notes  through  foreign  branches of United  States  financial
institutions  and who  hold the  Notes  through  such  United  States  financial
institutions on the date hereof (and in either case (a) or (b), each such United
States  financial  institution  hereby agrees,  on its own behalf or through its
agent,  that you may advise  the  Company  or the  Company's  agent that it will
comply with the  requirements  of Section  165(j)(3)(A),  (B) or (C) of the U.S.
Internal Revenue Code of 1986, as amended, and the regulations  thereunder),  or
(iii)  are  owned by  United  States or  foreign  financial  institution(s)  for
purposes of resale  during the  restricted  period (as defined in U.S.  Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the
Notes is a United States or foreign  financial  institution  described in clause
(iii) above (whether or not also described in clause (i) or (ii)) such financial
institution  has not  acquired  the Notes for  purposes  of resale  directly  or
indirectly  to a United States person or to a person within the United States or
its possessions.



<PAGE>

         As used  herein,  "United  States"  means the United  States of America
(including  the States and the  District  of  Columbia);  and its  "possessions"
include Puerto Rico, the U.S. Virgin Islands,  Guam, American Samoa, Wake Island
and the Northern Mariana Islands.

         We  undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you for our  account in  accordance  with your  Operating  Procedures  if any
applicable  statement  herein is not correct on such date, and in the absence of
any such  notification it may be assumed that this  certification  applies as of
such date.

         This certificate excepts and does not relate to U.S.$ _________ of such
interest  in the above  Notes in respect of which we are not able to certify and
as to which we understand  exchange for and delivery of definitive Notes (or, if
relevant,  exercise of any rights or  collection  of any  principal or interest)
cannot be made until we do so certify.

         We understand  that this  certification  is required in connection with
certain  tax laws and,  if  applicable,  certain  securities  laws of the United
States.  In connection  therewith,  if  administrative  or legal proceedings are
commenced or threatened in connection with which this  certification is or would
be relevant,  we irrevocably  authorize you to produce this certification to any
interested party in such proceedings.

Dated: ___________, ____

[To be dated no earlier than the 10th day
before September 15, 1997]

                                             [NAME OF ACCOUNT HOLDER]


                                             By: _________________________

                                             (Authorized Signatory)
                                             Name:
                                             Title:



                                       2
<PAGE>

                                                                       EXHIBIT 2


                       [FORM OF CERTIFICATE TO BE GIVEN BY
                     THE EUROCLEAR OPERATOR AND CEDEL BANK]


                                   CERTIFICATE

                    -----------------------------------------

                               Texaco Capital Inc.
            3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                    Represented by the Temporary Global Note


         This  is to  certify  that,  based  solely  on  certifications  we have
received in writing,  by tested telex or by electronic  transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations")  substantially
to the effect set forth in the  Temporary  Global  Note,  as of the date hereof,
U.S.$__________  principal amount of the  above-captioned  Notes (i) is owned by
persons  that are not  citizens  or  residents  of the United  States,  domestic
partnerships,  domestic  corporations or any estate or trust the income of which
is subject to United States  Federal  income  taxation  regardless of its source
("United States  persons"),  (ii) is owned by United States persons that are (a)
foreign  branches of United States  financial  institutions  (as defined in U.S.
Treasury  Regulations  Section  1.165-12(c)(1)(v))   ("financial  institutions")
purchasing for their own account or for resale, or (b) United States persons who
acquired  the  Notes  through  foreign   branches  of  United  States  financial
institutions  and who  hold the  Notes  through  such  United  States  financial
institutions on the date hereof (and in either case (a) or (b), each such United
States financial institution has agreed, on its own behalf or through its agent,
that we may advise the Company or the  Company's  agent that it will comply with
the  requirements  of  Section  165(j)(3)(A),  (B) or (C) of the  U.S.  Internal
Revenue Code of 1986, as amended, and the regulations  thereunder),  or (iii) is
owned by United States or foreign financial  institutions for purposes of resale
during the restricted  period (as defined in U.S. Treasury  Regulations  Section
1.163-5(c)(2)(i)(D)(7)),  and in  addition if the owners of the Notes are United
States  or  foreign  financial  institutions  described  in clause  (iii)  above
(whether  or  not  also  described  in  clause  (i)  or  (ii)),  such  financial
institutions  have  certified that they have not acquired the Notes for purposes
of resale directly or

<PAGE>

indirectly  to a United States person or to a person within the United States or
its possessions.

         As used  herein,  "United  States"  means the United  States of America
(including  the States and the  District  of  Columbia);  and its  "possessions"
include Puerto Rico, the U.S. Virgin Islands,  Guam, American Samoa, Wake Island
and the Northern Mariana Islands.

         We further  certify (i) that we are not making  available  herewith for
exchange (or, if relevant, seeking to collect principal or interest with respect
to)  any   portion  of  the   temporary   global   Security   representing   the
above-captioned  Notes excepted in the  above-referenced  certificates of Member
Organizations  and (ii)  that as of the date  hereof  we have not  received  any
notification  from  any of our  Member  Organizations  to the  effect  that  the
statements made by such Member  Organizations with respect to any portion of the
part  submitted  herewith (or, if relevant,  with respect to which  principal or
interest is being  requested) are no longer true and cannot be relied upon as of
the date hereof.

         We understand  that this  certification  is required in connection with
certain  tax laws and,  if  applicable,  certain  securities  laws of the United
States.  In connection  therewith,  if  administrative  or legal proceedings are
commenced or threatened in connection with which this  certification is or would
be relevant,  we irrevocably  authorize you to produce this certification to any
interested party in such proceedings.

Dated: ___________, ____

[To be dated no earlier than
September 15, 1997]

                                           [MORGAN GUARANTY TRUST
                                             COMPANY OF NEW YORK,
                                             BRUSSELS OFFICE, as Operator of the
                                             Euroclear System]

                                           [CEDEL BANK S.A.]

                                           By: ___________________________
                                               Name:
                                               Title:

                                       2
<PAGE>

                                                                     EXHIBIT A-2


                     [FORM OF FACE OF PERMANENT GLOBAL NOTE]


ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

                               TEXACO CAPITAL INC.

                              Permanent Global Note

                               representing up to

    U.S.$200,000,000 3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                                  Guaranteed by

                                   TEXACO INC.

                           Interest Payable: August 5


         Texaco  Capital  Inc. promises to pay to bearer, upon surrender hereof,
the  principal  sum  specified in Schedule A hereto on August 5, 2004 (except to
the extent previously redeemed or converted).




<PAGE>


Dated:   August 5, 1997                     TEXACO CAPITAL INC.

                                            By: ______________________
                                                   [Title]

                                            By: ______________________
                                                   [Title]

Authenticated:
THE CHASE MANHATTAN BANK
as Trustee

By: ______________________
       Authorized Officer




<PAGE>


                   [FORM OF REVERSE OF PERMANENT GLOBAL NOTE]



1.  Interest.

         Texaco Capital Inc. (the "Company"),  a Delaware corporation,  promises
to pay interest on the principal amount of this Note from time to time specified
in Schedule A hereto at the rate per annum  shown  above.  The Company  will pay
interest  annually on August 5 of each year (each, an "Interest  Payment Date").
Interest on the Note will accrue from the most recent date to which interest has
been paid or, if no  interest  has been paid,  from  August 5, 1997 (the  "Issue
Date").  Except as  provided  in the  Indenture,  this  Note will  cease to bear
interest  from and after the earlier of (a) August 5, 2004 or (b) the date fixed
for  redemption of this Note, and any portion of this Note with respect to which
a Conversion  Notice (as defined  below) has been  delivered  will cease to bear
interest  from and after the Interest  Payment Date  immediately  preceding  the
relevant  Conversion  Date (as defined  below) or, if there is no such  Interest
Payment Date,  the Issue Date.  If interest is required to be  calculated  for a
period of less than one year,  it will be  calculated  on the basis of a 360-day
year consisting of 12 months of 30 days each.

2.  Method of Payment.

         Payment of the  principal of this Note and the interest due at maturity
(or on any redemption date) will be made upon presentation and surrender of this
Note at the office or of any Non-U.S. Paying Agent. No payment on this Note will
be made at any office or agency of the Company in the United  States (as defined
below) or by check mailed to an address in the United States or by wire transfer
to an  account  maintained  by the Holder of this Note with a bank in the United
States  except as may be  permitted  under  United  States  federal tax laws and
regulations  then in effect  without  adverse tax  consequences  to the Company.
Notwithstanding the foregoing,  in the event that payment in U.S. dollars of the
full amount  payable on this Note at the offices of all Non-U.S.  Paying  Agents
(as defined  below)  would be illegal or  effectively  precluded  as a result of
exchange controls or similar restrictions,  payment on this Note will be made by
a Paying Agent in the Borough of Manhattan, The City of New York, if and only if
(i) such Paying Agent,  under applicable law and  regulations,  would be able to
make such payment and (ii) such payment would not involve, in the opinion of the
Company,  adverse  tax  consequences  for  the  Company.  Owners  of  beneficial
interests in this Note must look solely to Morgan  Guaranty Trust Company of New
York,  Brussels  office,  as operator of the  Euroclear  System (the  "Euroclear
Operator") or


                                     A-2-3

<PAGE>


Cedel Bank,  societe anonyme ("Cedel Bank"), as the case may be, for their share
of each payment made to the bearer of this Note.

3.  Paying and Conversion Agents.

         Initially, The Chase Manhattan Bank, as Trustee (the "Trustee"), at its
office in London at Trinity Tower, 9 Thomas More Street,  London E19YT, England,
will act as the  principal  Paying Agent for the Notes outside the United States
(the  "Principal  Paying Agent") and as the principal  Conversion  Agent for the
Notes outside the United States (the "Principal  Conversion Agent").  Initially,
Chase  Manhattan  Bank  Luxembourg  S.A.,  at its office in  Luxembourg at 5 rue
Plaetis,  L-2338  Luxembourg,  Luxembourg,  will  act as a  Paying  Agent  and a
Conversion Agent in Luxembourg. The Company may appoint additional Paying Agents
or  Conversion  Agents or change any Paying Agent or  Conversion  Agent  without
notice to Holders  (any such  additional  Paying Agent or other Paying Agent for
the Notes outside the United States, a "Non-U.S. Paying Agent").

4.  Indenture.

         The  Company  issued  this  Note  as part of a  Series  of  Securities,
designated as "3.50%  Guaranteed  Cash-Settled  Convertible Notes Due 2004" (the
"Notes"),  under an indenture dated as of August 24, 1984, as  supplemented  and
restated by the First  Supplemental  Indenture  dated as of January 31, 1990, as
further  amended by the First  Supplement  to the First  Supplemental  Indenture
dated as of October 11, 1990, and as further amended by the Second Supplement to
the First Supplemental  Indenture dated as of August 5, 1997 (as so supplemented
and amended, the "Indenture"),  among the Company,  Texaco Inc. and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the  Indenture by reference to the Trust  Indenture Act of 1939 (15 U.S. Code
ss.ss.  7aaa-77bbbb)  as amended (the  "Act").  This Note is subject to all such
terms,  and the Holder of this Note is referred to the Indenture and the Act for
a  statement  of them.  All terms  used in this Note  which are  defined  in the
Indenture and not otherwise  defined herein shall have the meanings  assigned to
them in the Indenture.

                                     A-2-4

<PAGE>


5.  Guaranty.

         The Notes are guaranteed by Texaco Inc.

6.  Conversion.

         At any time during the Conversion Period (as defined below),  this Note
may be surrendered for conversion  into the cash  Conversion  Amount (as defined
below) at the option of the owners of beneficial interests herein as follows. On
any Business Day (as defined below) during the Conversion Period, the owner of a
beneficial  interest in this Note may give notice to any Conversion  Agent,  who
will  provide  copies to the  Company,  the  Calculation  Agent,  the  Principal
Conversion  Agent  and the  Trustee,  in  writing  in the form  provided  in the
Indenture (a "Conversion  Notice"),  that such owner elects to convert this Note
or a specified  portion  hereof into the  Conversion  Amount.  In addition,  the
converting  owner  of a  beneficial  interest  in this  Note  must  deliver  the
Conversion  Notice to the Euroclear  Operator or Cedel Bank, as the case may be,
together with an authority to debit such owner's account pro tanto. Interests in
this Note may only be converted in a minimum principal amount of U.S.$10,000 and
integral multiples of U.S.$10,000 in excess thereof.  On the relevant Conversion
Date (as defined below),  the Conversion Agent to whom the Conversion  Notice is
delivered shall obtain  confirmation from the Euroclear  Operator or Cedel Bank,
as the case may be,  that such owner is shown on its  records as the owner of at
least the principal amount of Notes in respect of which the Conversion Notice is
delivered,  and the Euroclear  Operator or Cedel Bank, as the case may be, shall
debit  such  owner's  account  with  the  principal  amount  of this  Note to be
converted  and the principal  amount of this Note shall be reduced  accordingly.
Any  question as to the  validity of a  Conversion  Notice or as to whether such
notice has been  properly  and  timely  given  will be  resolved  finally by the
Principal Conversion Agent in its sole discretion.  No interest shall be payable
on any portion of this Note with respect to which a  Conversion  Notice has been
delivered  on any  Interest  Payment  Date  occurring  on or after the  relevant
Conversion Date.

         On  the  Settlement  Date  (as  defined  below)  with  respect  to  the
conversion of a beneficial  interest in this Note,  the Holder of this Note will
be  entitled  to  receive  the  Conversion  Amount in cash.  Any  payment of the
Conversion  Amount shall be deemed to be a payment of principal for all purposes
under the Indenture and the Notes.  Owners of beneficial  interests in this Note
must look solely to the  Euroclear  Operator or Cedel Bank,  as the case may be,
for their share of each payment made to the bearer of this Note.

                                     A-2-5

<PAGE>


         As used herein:

                   (a) the  term  "Business  Day"  means  any day  that is not a
         Saturday,  a Sunday  or a day on which  banking  institutions  or trust
         companies in The City of New York, the City of London or Luxembourg are
         authorized or obligated by law or executive order to close;

                   (b) the term  "Closing  Price"  means,  with  respect  to any
         security on any date,  the  closing  sale price or last  reported  sale
         price for the security on the principal securities exchange or national
         market system on which such security is listed for trading or quoted on
         such date or, if such security is not so listed or quoted on such date,
         the fair market value of such  security on such date,  as determined by
         the Calculation  Agent, in each case subject to adjustment as described
         below;

                   (c) the term "Conversion  Amount" means,  with respect to the
         principal amount of this Note with respect to which a Conversion Notice
         has been given,  (i) if the  relevant  Conversion  Notice is  delivered
         prior to notice of  redemption  having  been given by the  Company,  an
         amount in cash  determined by the  Calculation  Agent to be the Closing
         Price of the Texaco Common Stock on the related Conversion Date (or, if
         the  Conversion  Date is not a Trading Day, on the first  following day
         that is a Trading Day)  multiplied by the Conversion  Ratio, or (ii) if
         the  relevant  Conversion  Notice is  delivered  after the  giving of a
         notice of redemption by the Company or within eight Business Days prior
         to July 22, 2004, an amount in cash determined by the Calculation Agent
         to be the average of the Closing  Prices of the Texaco  Common Stock on
         the  five  consecutive   Trading  Days  commencing  on  the  applicable
         Conversion Date multiplied by the Conversion Ratio;

                   (d) the term  "Conversion  Date"  means,  with respect to any
         portion  of this  Note with  respect  to which a  Conversion  Notice is
         given,  the  second  Business  Day  immediately  following  the date of
         delivery of such Conversion Notice to the relevant Conversion Agent and
         the Euroclear Operator or Cedel Bank, as the case may be;

                   (e) the term "Conversion  Period" means the period commencing
         on September 15, 1997 and ending at 5:00 P.M., London time, on July 22,
         2004 or, if this Note shall have been  called for  redemption  prior to
         August 5, 2004,  ending at 5:00 P.M.,  London  time,  on the date eight
         Business Days prior to the date fixed for redemption thereof;  provided
         that if the Company  defaults  in making  payment in full in respect of
         this  Note or

                                     A-2-6
<PAGE>

         prior to the  date  fixed  for redemption hereof, the Conversion Period
         will continue until 5:00 P.M., London time, on the date upon  which the
         full  amount of the  moneys  payable in respect of  this  Note has been
         duly received  by the Trustee and notice of such  receipt has been duly
         given to the Holders of the Notes by the Trustee;

                   (f)  the term "Conversion Ratio" means 71.35 shares of Texaco
         Common Stock per U.S.$10,000 principal amount of Notes;

                   (g)  the  term  "Settlement  Date"  means  the day as soon as
         reasonably  practicable  after the  Conversion  Date  determined by the
         Calculation Agent and the Principal  Conversion Agent to be the day for
         payment of the Conversion Amount;

                   (h)  the term "Texaco Common Stock" means the common stock of
        Texaco Inc.; and

                   (i) "Trading Day" means,  with respect to any  security,  any
         day that is a  trading  day on the  principal  securities  exchange  or
         national market system on which such security is then listed other than
         a day on which (i) trading on such  exchange or national  market system
         is scheduled to close prior to its regular weekday closing time or (ii)
         there occurs any suspension of or limitation imposed on trading of such
         security on such exchange  during the one-half hour period that ends at
         its regular weekday closing time that is, in the  determination  of the
         Calculation Agent, material.

         The Closing Price of the Texaco Common Stock on any of the Trading Days
used to calculate  the  Conversion  Amount will be subject to  adjustment by the
Calculation  Agent as  described  below  to the  extent  that any of the  events
requiring  such  adjustment  occurs during the period  commencing on the date of
this Note and ending on such Trading Day.

     Texaco Common Stock Dividends and Extraordinary Dividends and Distributions

         In the event that a dividend or other  distribution  is declared (i) on
any class of Texaco  capital  stock,  payable in shares of Texaco  Common Stock,
(ii) on the Texaco Common Stock payable in cash in an amount greater than 10% of
the  Closing  Price  of the  Texaco  Common  Stock  on the  date  fixed  for the
determination  of the  shareholders  of Texaco  entitled  to  receive  such cash
dividend (an "Extraordinary Cash Dividend"), or (iii) on the Texaco Common Stock
of

                                     A-2-7
<PAGE>

evidences of indebtedness  or assets  (including  securities,  but excluding any
dividend or distribution  covered by clause (i) or any Texaco Spin-off described
under  "-Dissolution  of  Texaco;  Mergers,  Consolidations  or Sales of Assets;
Spin-offs" below) (an  "Extraordinary  Distribution"),  any Closing Price of the
Texaco Common Stock used to calculate the  Conversion  Amount on any Trading Day
that follows the date (the "Texaco Record Date") fixed for the  determination of
the   shareholders  of  Texaco  entitled  to  receive  such  dividend  or  other
distribution shall be increased by multiplying such Closing Price by a fraction,
the  numerator  of which  shall be the number of shares of Texaco  Common  Stock
outstanding  on the Texaco  Record  Date plus the number of shares  constituting
such  distribution  or,  in the  case  of any  Extraordinary  Cash  Dividend  or
Extraordinary  Distribution,  plus the number of shares of Texaco  Common  Stock
that could be purchased with the amount of such  Extraordinary  Cash Dividend or
the  fair  market  value  (as  determined  by  the  Calculation   Agent,   whose
determination  shall be conclusive and binding) of the evidences of indebtedness
or assets  constituting such Extraordinary  Distribution at the Closing Price on
the Trading Day  immediately  subsequent  to such Texaco  Record  Date,  and the
denominator  of which  shall be the  number of shares  of  Texaco  Common  Stock
outstanding on the Texaco Record Date.

     Subdivisions and Combinations of the Texaco Common Stock

         In the event that the  outstanding  shares of Texaco  Common  Stock are
subdivided  into a greater  number of shares,  the  Closing  Price of the Texaco
Common Stock used to  calculate  the  Conversion  Amount on any Trading Day that
follows  the  date  on  which  such  subdivision   becomes   effective  will  be
proportionately  increased and,  conversely,  in the event that the  outstanding
shares of Texaco Common Stock are combined into a smaller number of shares, such
Closing Price of the Texaco Common Stock will be proportionately reduced.

     Reclassifications of the Texaco Common Stock

         In the event that the Texaco Common Stock is changed into the same or a
different number of shares of any class or classes of stock,  whether by capital
reorganization,  reclassification  or otherwise  (except to the extent otherwise
provided under "-Texaco Common Stock Dividends and  Extraordinary  Dividends and
Distributions" and "-Subdivisions and Combinations of Texaco Common Stock" above
or pursuant to a Reorganization  Event described under  "-Dissolution of Texaco;
Mergers,  Consolidations or Sales of Assets;  Spin-offs"  below), the Conversion
Amount will be calculated by using the aggregate Closing Prices of the shares of
stock into which a share of Texaco  Common  Stock was changed on any Trading Day
that follows the effectiveness of such change.

                                     A-2-8

<PAGE>

         As  a  result  of   the  foregoing  provisions,   in   the  case  of  a
reorganization  or  reclassification  of the Texaco  Common  Stock,  the Closing
Prices of one or more  securities  in  addition  to or in  substitution  for the
Texaco Common Stock may be used to calculate the Conversion Amount. For example,
if the Texaco  Common Stock were  reclassified  into one share of Texaco Class A
Common Stock and one share of Texaco Class B Common Stock, the Conversion Amount
would be  calculated  by reference  to the Closing  Prices of the Texaco Class A
Common Stock and the Texaco Class B Common Stock.

   Other Dilution Events

         In the event that the Company (with the prior  written  approval of the
Calculation Agent) or the Calculation Agent determines that an adjustment should
be made to the Closing  Price of the Texaco  Common  Stock on any of the Trading
Days used to calculate the  Conversion  Amount as a result of one or more events
or  circumstances  not  otherwise   described  above  (even  if  such  event  or
circumstance  is  specifically  excluded  from the  operation of the  provisions
described  above),  the Company  shall at its own expense and acting  reasonably
request  the  Calculation  Agent  to  determine  as  soon  as  practicable  what
adjustment (if any) is fair and reasonable to take account thereof.

   Dissolution of Texaco; Mergers, Consolidations or Sales of Assets; Spin-offs.

         In the event of any (i)  consolidation or merger of Texaco with or into
another entity (other than a  consolidation  or merger that does not result in a
reclassification,  conversion,  exchange or cancellation  of outstanding  Texaco
Common Stock), (ii) sale, transfer,  lease or conveyance of all or substantially
all of the assets of Texaco,  (iii)  liquidation,  dissolution  or winding up of
Texaco or (iv)  declaration of a distribution  on the Texaco Common Stock of the
common  stock of any  subsidiary  of Texaco (a  "Texaco  Spin-off")  (any of the
events described in (i), (ii),  (iii) or (iv), a  "Reorganization  Event"),  for
purposes of determining the Conversion  Amount,  the Closing Price of the Texaco
Common Stock on any Trading Day subsequent  to, in the case of a  Reorganization
Event other than a Texaco  Spin-off,  the effective time of such  Reorganization
Event  or,  in the case of a Texaco  Spin-off,  the  record  date  fixed for the
determination  of the  shareholders of Texaco entitled to receive the securities
distributed in such Texaco Spin-off (the "Spin-off  Record Date") will be deemed
to be the  amount  equal  to (1)  the  value  of the  cash  and  other  property
(including  securities)  received by a holder of a share of Texaco  Common Stock
(assuming  such holder of Texaco  Common  Stock failed to exercise any rights of
election and  received per share the kind and amount  received by a plurality of
non-electing  shares) in any such  Reorganization  Event (plus, in the case of a
Texaco  Spin-off,  the value of a share

                                     A-2-9
<PAGE>

of  Texaco  Common  Stock),  and (2) to the  extent  that  such  holder  obtains
securities in any Reorganization Event, the value of the cash and other property
received by the holder of such  securities in any subsequent  event with respect
to the issuer of such securities  that would,  if such issuer were Texaco,  be a
Reorganization  Event. For purposes of determining any such Closing Prices,  the
value of (i) any cash and other property (other than securities) received in any
such Reorganization  Event will be an amount equal to the value of such cash and
other property at the effective time of such Reorganization Event (as determined
by the Calculation Agent, whose  determination shall be conclusive and binding),
and  (ii)  any  property   consisting  of   securities   received  in  any  such
Reorganization  Event  will be an  amount  equal to the  Closing  Prices of such
securities on any Trading Day following,  in the case of a Reorganization  Event
other than a Texaco Spin-off,  the effective time of such  Reorganization  Event
or, in the case of a Texaco Spin-off, the Spin-off Record Date.

         If any action would require adjustment of the Closing Price pursuant to
more than one of the foregoing provisions, only one adjustment shall be made and
such adjustment  shall be the amount of adjustment that has the highest absolute
value to the Holder of this Note.  No  adjustment  in the Closing Price shall be
required  unless  such  adjustment  would  require an increase or decrease of at
least 1% of the  Closing  Price,  but any  adjustment  that would  otherwise  be
required  to be made shall be  carried  forward  and taken  into  account in any
subsequent adjustment.

         The  Calculation  Agent  will  promptly  notify  the  Company  and  the
Principal  Conversion Agent, which will in turn notify the Holders, of any event
requiring an adjustment  and of the method of calculation to be used to make any
dilution adjustment as described above.

         All  determinations  made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, shall
be conclusive  for all purposes and binding on the Company and the Holders,  and
the  Calculation  Agent  shall have no  liability  therefor.  All results of any
calculation  of the  Conversion  Amount will be rounded,  if  necessary,  to the
nearest  one-one-hundred-thousandth  of a percent (with five one-millionths of a
percentage point being rounded downward).

                                     A-2-10

<PAGE>


7.  Redemption.

         The Notes are  redeemable,  at the option of the Company,  in whole but
not in part,  at any time on or after August 5, 1999,  at the  principal  amount
thereof upon not less than 15 days' nor more than 30 days' notice to Holders.

8.  Tax Redemption.

         The Notes may be redeemed  as a whole,  at the option of the Company at
any time prior to  maturity,  upon the giving of a notice of  redemption  in the
manner provided in the Indenture, at the principal amount thereof, together with
accrued  interest to the date fixed for  redemption,  if the Company  determines
that, as a result of any change in or amendment to the laws (or any  regulations
or rulings  promulgated  thereunder)  of the United  States or of any  political
subdivision or taxing authority  thereof or therein affecting  taxation,  or any
change in official position  regarding the application or interpretation of such
laws,  regulations or rulings, which change or amendment becomes effective on or
after the date of this Note, the Company or Texaco Inc., as the case may be, has
or will become  obligated  to pay  Additional  Amounts  (as defined  below) with
respect to the Notes as described below under  paragraph 9 hereof.  Prior to the
giving of any notice of redemption pursuant to this paragraph, the Company shall
deliver to the Trustee (i) a certificate stating that the Company is entitled to
effect such  redemption  and setting forth a statement of facts showing that the
conditions precedent to the right of the Company to so redeem have occurred (the
date on which such certificate is delivered to the Trustee being the "Redemption
Determination  Date"), and (ii) an opinion of counsel  reasonably  acceptable to
the Trustee to such effect based on such  statement of facts;  provided  that no
such  notice of  redemption  shall be given  earlier  than 60 days  prior to the
earliest  date on which the Company or Texaco Inc., as the case may be, would be
obligated  to pay such  Additional  Amounts  if a payment in respect of any Note
were then due.

         If the Company shall determine that any payment made outside the United
States by the Company or Texaco Inc., as the case may be, by any Paying Agent of
principal  or interest  due in respect of any Note or Coupon (as defined  below)
would,  under any present or future laws or regulations of the United States, be
subject to any  certification,  identification  or other  information  reporting
requirement  of any kind,  the effect of which is the disclosure to the Company,
Texaco Inc., any Paying Agent or any governmental  authority of the nationality,
residence  or  identity  of a  beneficial  owner of such Note or Coupon who is a
United States Alien (as defined  below under ", Payment of Additional  Amounts")
(other than such a  requirement  (a) that would not be  applicable  to a payment
made by the Company or Texaco Inc., as the case may be, or any Paying

                                     A-2-11
<PAGE>

Agent (i) directly to the  beneficial  owner or (ii) to a custodian,  nominee or
other  agent of the  beneficial  owner,  or (b) that  can be  satisfied  by such
custodian,  nominee or other agent certifying to the effect that such beneficial
owner is a United  States  Alien;  provided  that in each  case  referred  to in
clauses  (a)(ii)  and (b)  payment by such  custodian,  nominee or agent to such
beneficial  owner would not otherwise be subject to any such  requirement),  the
Company shall redeem the Notes,  as a whole,  at the principal  amount  thereof,
together  with  accrued  interest  to the date fixed for  redemption  or, at the
election of the Company or Texaco Inc., as the case may be, if the conditions of
the next paragraph are satisfied,  pay the additional  amounts specified in such
paragraph.  The Company  shall make such  determination  and election as soon as
practicable  and publish  prompt  notice  thereof (the  "Determination  Notice")
stating  the  effective  date of such  certification,  identification  or  other
information reporting requirements, whether the Company will redeem the Notes or
has elected to pay the additional  amounts specified in the next paragraph,  and
(if  applicable)  the last date by which the  redemption  of the Notes must take
place, as provided in the next sentence.  If the Company redeems the Notes, such
redemption  shall  take  place on such  date,  not later than one year after the
publication of the Determination Notice, as the Company shall elect by notice to
the Trustee.  Notwithstanding the foregoing, the Company shall not so redeem the
Notes if the  Company or Texaco  Inc.,  as the case may be,  shall  subsequently
determine,  not less than 30 days prior to the date fixed for  redemption,  that
subsequent   payments   would  not  be  subject   to  any  such   certification,
identification or other  information  reporting  requirement,  in which case the
Company  shall  publish  prompt  notice of such  determination  and any  earlier
redemption notice shall be revoked and of no further effect.

         If   and   so   long  as  the  certification,  identification  or other
information reporting  requirements referred to in the preceding paragraph would
be fully satisfied by payment of a backup withholding tax or similar charge, the
Company  or Texaco  Inc.,  as the case may be,  may  elect to pay as  additional
amounts  such amounts as may be necessary so that every net payment made outside
the United  States  following  the effective  date of such  requirements  by the
Company or Texaco Inc.,  as the case may be, or any Paying Agent of principal or
interest due in respect of any Note or any Coupon of which the beneficial  owner
is a United  States Alien (but  without any  requirement  that the  nationality,
residence  or identity of such  beneficial  owner be  disclosed  to the Company,
Texaco Inc., any Paying Agent or any governmental authority, with respect to the
payment of such  additional  amounts),  after deduction or withholding for or on
account of such backup  withholding  tax or similar  charge (other than a backup
withholding  tax or  similar  charge  that (i)  would not be  applicable  in the
circumstances  referred  to in the  second  parenthetical  clause  of the  first
sentence  of the  preceding  paragraph,  or  (ii)  is  imposed  as a  result  of
presentation of such Note or Coupon for payment

                                     A-2-12
<PAGE>


more than 15 days after the date on which such  payment  becomes due and payable
or on which payment thereof is duly provided for, whichever occurs later),  will
not be less than the amount  provided  for in such Note or Coupon to be then due
and payable. In the event the Company or Texaco Inc., as the case may be, elects
to pay any  additional  amounts  pursuant to the  applicable  provisions of this
paragraph,  the  Company  shall have the right to redeem the Notes as a whole at
any  time  pursuant  to  the  provisions  of the  preceding  paragraph  and  the
redemption  price of such Notes will not be reduced for  applicable  withholding
taxes.  If the  Company  or  Texaco  Inc.,  as the  case may be,  elects  to pay
additional amounts pursuant to this paragraph and the condition specified in the
first sentence of this paragraph should no longer be satisfied, then the Company
will redeem the Notes as a whole,  pursuant to the applicable  provisions of the
preceding paragraph.

9.  Payment of Additional Amounts.

         The Company will,  subject to certain  exceptions and  limitations  set
forth  below,  pay such  additional  amounts (the  "Additional  Amounts") to the
Holder of this Note who is a United  States  Alien as may be  necessary in order
that every net  payment of the  principal  of and  interest on this Note and any
other amounts payable on such Note,  after  withholding for or on account of any
present or future tax,  assessment or  governmental  charge imposed upon or as a
result of such payment by the United  States (or any  political  subdivision  or
taxing authority thereof or therein),  will not be less than the amount provided
for in this Note to be then due and payable.  The Company will not, however,  be
required to make any payment of Additional  Amounts to any such Holder for or on
account of:

               (a) any such tax,  assessment or other  governmental  charge that
          would  not  have  been so  imposed  but for (i) the  existence  of any
          present  or  former  connection  between  such  Holder  (or  between a
          fiduciary, settlor, beneficiary, member or shareholder of such Holder,
          if such Holder is an estate,  a trust, a partnership or a corporation)
          and  the  United  States  and  its  possessions,   including,  without
          limitation,  such  Holder (or such  fiduciary,  settlor,  beneficiary,
          member or  shareholder)  being or having  been a citizen  or  resident
          thereof  or being or having  been  engaged in a trade or  business  or
          present  therein  or having or having  had a  permanent  establishment
          therein  or (ii)  the  presentation  by the  Holder  of this  Note for
          payment  on a date  more  than 15 days  after  the date on which  such
          payment became due and payable or the date on which payment thereof is
          duly provided for, whichever occurs later;

               (b) any estate,  inheritance,  gift, sales,  transfer or personal
          property tax or any similar tax, assessment or governmental charge;


                                     A-2-13

<PAGE>

               (c) any tax,  assessment or other governmental  charge imposed by
          reason of such Holder's past or present  status as a personal  holding
          company or foreign  personal  holding  company or  controlled  foreign
          corporation or passive foreign  investment company with respect to the
          United States or as a corporation that  accumulates  earnings to avoid
          United States federal  income tax or as a private  foundation or other
          tax-exempt organization;

               (d) any tax,  assessment  or other  governmental  charge  that is
          payable  otherwise than by withholding  from payments on or in respect
          of this Note;

               (e) any tax,  assessment or other governmental charge required to
          be withheld by any Paying  Agent from any payment of  principal  of or
          interest  on this  Note,  if such  payment  can be made  without  such
          withholding by any other Paying Agent in a city in Western Europe;

               (f) any tax,  assessment or other governmental  charge that would
          not  have  been   imposed   but  for  the   failure  to  comply   with
          certification,  information or other reporting requirements concerning
          the  nationality,  residence  or identity  of the owner or  beneficial
          owner of this Note,  if such  compliance  is required by statute or by
          regulation  of the United States or of any  political  subdivision  or
          taxing  authority  thereof or therein as a  precondition  to relief or
          exemption from such tax, assessment or other governmental charge;

               (g) any tax,  assessment or other governmental  charge imposed by
          reason  of such  Holder's  past or  present  status  as the  actual or
          constructive  owner of 10% or more of the total combined  voting power
          of all classes of stock entitled to vote of the Company or as a direct
          or indirect subsidiary of the Company; or

               (h) any combination of items (a), (b), (c), (d), (e), (f) or (g);

nor shall Additional Amounts be paid with respect to any payment on this Note to
a United States Alien who is a fiduciary or  partnership  or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of the  United  States (or any  political  subdivision  thereof)  to be
included in the income,  for tax  purposes,  of a  beneficiary  or settlor  with
respect to such fiduciary or a member of such  partnership or a beneficial owner
who would not have been entitled to the Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the Holder of this Note.

                                     A-2-14

<PAGE>

         As used herein,  the term "United  States  Alien" means any person who,
for United States  federal  income tax  purposes,  is a foreign  corporation,  a
nonresident alien individual,  a nonresident alien fiduciary of a foreign estate
or trust,  or a foreign  partnership  one or more of the  members  of which is a
foreign  corporation,  a nonresident  alien  individual  or a nonresident  alien
fiduciary of a foreign estate or trust.

10.  Transfer.

         The Holder of this Note may transfer this Note in  accordance  with the
Indenture;  provided  that  this  Note  may  be  transferred  only  to a  common
depositary  outside the United States for the Euroclear  Operator and Cedel Bank
or to a nominee of such a depositary. The Company may require the Holder of this
Note,  among other  things,  to furnish  appropriate  endorsements  and transfer
documents  and to pay any taxes and fees  required  by law or  permitted  by the
Indenture.

11.  Persons Deemed Owners.

         The  bearer  of this  Note may be  treated  as the  owner of it for all
purposes.

12.  Amendments and Waivers.

         Subject to certain exceptions,  the Notes or the Indenture with respect
to the Notes may be amended with the consent of the Holders of at least 50.1% in
principal  amount of the Notes  outstanding,  and any past default or compliance
with any  provision  may be waived  with the  consent of the Holders of at least
50.1% in principal amount of the Notes  outstanding.  Without the consent of any
Holder, the Indenture or the Notes may be amended to cure any ambiguity,  defect
or  inconsistency;  to provide for  assumption of the Company's  obligations  to
Holders;  or to make any change that does not adversely affect the rights of any
Holder.

13.  Restrictive Covenants.

         The  Notes  are  unsecured general obligation of the Company limited to
$200,000,000 in aggregate  principal amount.  The Indenture does not limit other
unsecured debt. It does limit certain mortgages and sale-leaseback  transactions
of  Texaco  Inc.  if  the  property  mortgaged  or  leased  is a  refinery  or a
manufacturing  plant in the United States or any oil or gas  producing  property
onshore or offshore  the United  States that is of  material  importance  to the
total business of Texaco Inc. and its consolidated subsidiaries. The limitations
are subject to a number of


                                     A-2-15
<PAGE>


important qualifications and exceptions.  Once a year Texaco Inc. must report to
the Trustee on compliance with the limitations.

         When a successor corporation assumes all the obligations of the Company
under the Notes and the Indenture with respect to the Notes, the Company will be
released from those obligations.

14.  Defaults and Remedies.

         An Event of Default  is:  default for 30 days in payment of interest on
the Notes;  default in payment of principal on the Notes; failure by the Company
or by Texaco  Inc.,  as the case may be, for 90 days after notice to the Company
to comply with any of its other  agreements in the Notes or the  Indenture;  and
certain events of bankruptcy or insolvency. If an Event of Default occurs and is
continuing,  the Trustee or the Holders of at least 25% in  principal  amount of
the Notes may declare all the Notes to be due and payable  immediately.  Holders
may not enforce the Notes or the  Indenture  with respect to the Notes except as
provided in the Indenture.  The Trustee may require indemnity satisfactory to it
before it enforces the Notes or the Indenture.  Subject to certain  limitations,
Holders of a majority in principal amount of the Notes may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders notice
of any continuing default (except a default in payment of principal or interest)
if it determines that withholding notice is in their interests.

15.  Trustee Dealings with Company or Texaco Inc.

         The  Chase  Manhattan  Bank as  Trustee  under  the  Indenture,  in its
individual or any other  capacity,  may make loans to, accept deposits from, and
perform services for the Company,  Texaco Inc. or any affiliates of either,  and
may otherwise deal with the Company, Texaco Inc. or any affiliates of either, as
if it were not Trustee.

16.  No Recourse Against Others.

         A director,  officer, employee or stockholder,  as such, of the Company
or Texaco Inc.  shall not have any liability for any  obligations of the Company
or Texaco Inc.  under the Notes or the  Indenture  or for any claim based on, in
respect of or by reason of, such  obligations or their creation.  Each Holder by
accepting a Note waives and releases all such liability.  The waiver and release
are part of the consideration for the issue of the Notes.

                                     A-2-16

<PAGE>

17.  Exchange for Definitive Notes.

         The beneficial  owner of all or a portion of this Note may exchange its
interest in this Note upon not less than 30 days' written notice to any Non-U.S.
Paying  Agent  through the  relevant  clearing  system,  in whole,  for Notes in
definitive bearer form with interest coupons ("Coupons")  attached  ("Definitive
Notes") in  denominations of  U.S.$10,000.  Interests in this Note shall also be
exchanged by the Company in whole,  but not in part, for Definitive Notes if (i)
this Note is  accelerated  following  an Event of  Default  or (ii)  either  the
Euroclear  Operator or Cedel Bank is closed for business for a continuous period
of fourteen  days  (other than by reason of public  holidays)  or  announces  an
intention to cease  business  permanently  or in fact does so. The Company shall
give  notice  to  the  Principal  Paying  Agent  promptly   following  any  such
acceleration  or upon  learning of any such closure.  Any exchanges  referred to
above shall be made at the office of the Principal Paying Agent, upon compliance
with the procedures set forth in the Indenture;  provided that the Company shall
not be  required  to exchange  this Note for a period of fifteen  calendar  days
preceding the first  publication  of a notice of  redemption of the Notes.  Upon
exchange of this Note in whole for Definitive  Notes, the Principal Paying Agent
shall cause  Schedule A of this Note to be endorsed to reflect the  reduction of
the principal amount hereof by an amount equal to the aggregate principal amount
of such Definitive Notes, whereupon the principal amount hereof shall be reduced
for all purposes by the amount so  exchanged  and noted.  All such  exchanges of
this Note will be free of service charge, but the Company may require payment of
a sum  sufficient  to cover  any tax or other  governmental  charge  payable  in
connection  therewith.  The  date of any  Definitive  Note  delivered  upon  any
exchange  of this Note  shall be such that no gain or loss of  interest  results
from such exchange.

         All (and not less than all)  interests  in this Note will be  exchanged
for Definitive Notes as soon as practicable after (i) the first beneficial owner
of an interest in this Note exchanges its interest for Definitive  Notes or (ii)
the Company gives notice to the Principal Paying Agent of an acceleration of the
Note or the closure of a relevant clearing system as described above.

18.  Authentication.

         This  Note  shall  not be  valid  until  authenticated  by  the  manual
signature of the Trustee or an authenticating agent.

                                     A-2-17

<PAGE>

                                    GUARANTY

         TEXACO INC., a Delaware corporation (the "Guarantor"),  unconditionally
guarantees  to the  Holder  of this  Note the due and  punctual  payment  of the
principal of and interest on this Note.

         The Guarantor  shall not be entitled to receive any payments based upon
a right of  subrogation  with  respect to any amounts  paid by the  Guarantor to
Holders until the principal of and interest on all Notes shall have been paid in
full or for which payment has been provided.


                                                      TEXACO INC.

                                                      By: ______________________
                                                      [Title]


<PAGE>

                                                                      SCHEDULE A

                         EXCHANGES FOR DEFINITIVE NOTES

                         AND FROM TEMPORARY GLOBAL NOTE,

                                 AND CONVERSION

         The  initial  principal  amount of this Note is  U.S.$200,000,000.  The
following  (A) exchanges of (i) portions of this Note for  Definitive  Notes and
(ii) portions of the  Temporary  Global Note for an interest in this Note or (B)
conversions of this Note at the option of the Holder have been made:

<TABLE>
<S>                     <C>                  <C>                   <C>                  <C>                   <C>

  Date of Exchange      Principal Amount     Principal Amount      Principal Amount     Remaining Principal   Notation Made by or on
   or Conversion         Exchanged From        Exchanged For       Converted at the      Amount Outstanding          Behalf of
                         the Temporary       Definitive Notes       Option of the          Following Such          Paying Agent
                          Global Note                                     Holder            Exchange or
                                                                                             Conversion

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</TABLE>


<PAGE>


                                                                     EXHIBIT A-3


                        [FORM OF FACE OF DEFINITIVE NOTE]


ISIN:

Serial No.:                                          Certificate No.:

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

                               TEXACO CAPITAL INC.

            3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                                  Guaranteed by

                                   TEXACO INC.

                           Interest Payable: August 5


         Texaco Capital Inc. promises to pay to bearer,  upon surrender  hereof,
the  principal  sum of  U.S.$10,000  on  August 5, 2004  (except  to the  extent
previously redeemed or converted).




<PAGE>


Dated:                                               TEXACO CAPITAL INC.

                                                     By: ______________________
                                                            [Title]

                                                     By: ______________________
                                                            [Title}

Authenticated:
[THE CHASE MANHATTAN BANK
as Trustee

By: ______________________
       Authorized Officer]

[[Name of Authenticating Agent]
as Authenticating Agent

By: ______________________
       Authorized Officer]





                                     A-3-2

<PAGE>

                      [FORM OF REVERSE OF DEFINITIVE NOTE]


1.  Interest.

         Texaco Capital Inc. (the "Company"),  a Delaware corporation,  promises
to pay interest on the principal amount of this Note at the rate per annum shown
above. The Company will pay interest annually on August 5 of each year (each, an
"Interest Payment Date").  Interest on the Note will accrue from the most recent
date to which  interest  has been paid or, if no  interest  has been paid,  from
August 5, 1997 (the "Issue  Date").  Except as provided in the  Indenture,  this
Note will cease to bear  interest  from and after the  earliest of (a) August 5,
2004, (b) the Interest  Payment Date  immediately  preceding the Conversion Date
(as defined  below)  relating to the conversion of this Note into the Conversion
Amount (as defined  below) or, if there is no such Interest  Payment  Date,  the
Issue Date or (c) the date fixed for  redemption  of this Note.  If  interest is
required  to be  calculated  for a  period  of less  than one  year,  it will be
calculated  on the basis of a 360-day  year  consisting  of 12 months of 30 days
each.

2.  Method of Payment.

         Payment  of  principal  and  interest  on  this  Note  will  be made in
immediately  available  funds,  subject to any applicable laws and  regulations,
only against  presentation  and surrender of this Note or the relevant  interest
coupon (a  "Coupon"),  as the case may be, at the office of any Non-U.S.  Paying
Agent by check or, at the option of the Holder of this Note, by wire transfer of
immediately  available  funds to an account  maintained by the payee with a bank
located outside the United States if appropriate wire transfer instructions have
been received by such Non-U.S. Paying Agent not less than 15 calendar days prior
to  an  applicable  payment  date.  No  payment  on  this  Note  or  any  Coupon
appertaining  hereto  will be made at any office or agency of the Company in the
United States (as defined  below) or by check mailed to an address in the United
States or by wire  transfer to an account  maintained by the Holder of this Note
or such Coupon with a bank in the United States except as may be permitted under
United States federal tax laws and  regulations  then in effect without  adverse
tax  consequences to the Company.  Notwithstanding  the foregoing,  in the event
that  payment  in U.S.  dollars of the full  amount  payable on this Note or any
Coupon  appertaining  hereto at the offices of all  Non-U.S.  Paying  Agents (as
defined below) would be illegal or effectively precluded as a result of exchange
controls  or similar  restrictions,  payment on this Note or such Coupon will be
made by a Paying Agent in the Borough of

                                     A-3-3
<PAGE>

Manhattan,  The City of New York,  if and only if (i) such Paying  Agent,  under
applicable law and regulations, would be able to make such payment and (ii) such
payment  would  not  involve,  in  the  opinion  of  the  Company,  adverse  tax
consequences for the Company.

3.  Paying and Conversion Agents.

         Initially, The Chase Manhattan Bank, as Trustee (the "Trustee"), at its
office in London at Trinity Tower, 9 Thomas More Street,  London E19YT, England,
will act as the  principal  Paying Agent for the Notes outside the United States
(the  "Principal  Paying Agent") and as the principal  Conversion  Agent for the
Notes outside the United States (the "Principal  Conversion Agent").  Initially,
Chase  Manhattan  Bank  Luxembourg  S.A.,  at its office in  Luxembourg at 5 rue
Plaetis,  L-2338  Luxembourg,  Luxembourg,  will  act as a  Paying  Agent  and a
Conversion Agent in Luxembourg. The Company may appoint additional Paying Agents
or  Conversion  Agents or change any Paying Agent or  Conversion  Agent  without
notice to Holders  (any such  additional  Paying Agent or other Paying Agent for
the Notes outside the United States, a "Non-U.S. Paying Agent").

4.  Indenture.

         The  Company  issued  this  Note  as part of a  Series  of  Securities,
designated as "3.50%  Guaranteed  Cash-Settled  Convertible Notes Due 2004" (the
"Notes"),  under an indenture dated as of August 24, 1984, as  supplemented  and
restated by the First  Supplemental  Indenture  dated as of January 31, 1990, as
further  amended by the First  Supplement  to the First  Supplemental  Indenture
dated as of October 11, 1990, and as further amended by the Second Supplement to
the First Supplemental  Indenture dated as of August 5, 1997 (as so supplemented
and amended, the "Indenture"),  among the Company,  Texaco Inc. and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the  Indenture by reference to the Trust  Indenture Act of 1939 (15 U.S. Code
ss.ss.  7aaa-77bbbb)  as amended (the  "Act").  This Note is subject to all such
terms,  and the Holder of this Note is referred to the Indenture and the Act for
a  statement  of them.  All terms  used in this Note  which are  defined  in the
Indenture and not otherwise  defined herein shall have the meanings  assigned to
them in the Indenture.

                                     A-3-4

<PAGE>


5.  Guaranty.

         The Notes are guaranteed by Texaco Inc.

6.  Conversion.

         At any time during the Conversion Period (as defined below),  this Note
may be surrendered for conversion  into the cash  Conversion  Amount (as defined
below) at the option of the Holder  hereof as follows.  On any  Business Day (as
defined  below) during the Conversion  Period,  the Holder of this Note may give
notice to any  Conversion  Agent,  who will provide  copies to the Company,  the
Calculation Agent, the Principal Conversion Agent and the Trustee, in writing in
the form provided in the  Indenture (a  "Conversion  Notice"),  that such Holder
elects to convert this Note into the Conversion  Amount.  To be converted,  this
Note, together with all unmatured Coupons  appertaining hereto (for this purpose
treating any Coupon  expressed to be payable on the relevant  Conversion Date as
an unmatured  Coupon),  must be surrendered to a Conversion  Agent together with
the Conversion  Notice  relating  thereto.  Any question as to the validity of a
Conversion  Notice or as to whether  such  notice has been  properly  and timely
given will be resolved  finally by the  Principal  Conversion  Agent in its sole
discretion.  On and  after  the  Conversion  Date  with  respect  to this  Note,
unmatured  Coupons relating hereto (whether or not attached hereto) shall become
void and no payment shall be made in respect thereof.

         On  the  Settlement  Date  (as  defined  below)  with  respect  to  the
conversion of this Note, the Holder of this Note will be entitled to receive the
Conversion  Amount in cash. Any payment of the Conversion Amount shall be deemed
to be a payment of principal for all purposes under the Indenture and the Notes.

         As used herein:

                   (a) the  term  "Business  Day"  means  any day  that is not a
         Saturday,  a Sunday  or a day on which  banking  institutions  or trust
         companies in the City of New York, the City of London or Luxembourg are
         authorized or obligated by law or executive order to close;

                   (b) the term  "Closing  Price"  means,  with  respect  to any
         security on any date,  the  closing  sale price or last  reported  sale
         price for the security on the principal securities exchange or national
         market system on which such security is listed for trading or quoted on
         such date or, if such security is not so listed or quoted on such date,
         the fair market value of

                                     A-3-5
<PAGE>

         such  security on such date,  as determined by  the Calculation  Agent,
         in each case subject to adjustment as described below;


                   (c) the term  "Conversion  Amount" means, (i) if the relevant
         Conversion  Notice is delivered  prior to notice of  redemption  having
         been  given  by the  Company,  an  amount  in  cash  determined  by the
         Calculation Agent to be the Closing Price of the Texaco Common Stock on
         the  related  Conversion  Date  (or,  if the  Conversion  Date is not a
         Trading  Day,  on the  first  following  day  that  is a  Trading  Day)
         multiplied by the Conversion Ratio, or (ii) if the relevant  Conversion
         Notice is delivered  after the giving of a notice of  redemption by the
         Company or within eight Business Days prior to July 22, 2004, an amount
         in cash  determined by the  Calculation  Agent to be the average of the
         Closing  Prices  of the  Texaco  Common  Stock on the five  consecutive
         Trading Days commencing on the applicable Conversion Date multiplied by
         the Conversion Ratio;

                   (d) the term  "Conversion  Date"  means,  with respect to any
         Note  surrendered for  conversion,  the second Business Day immediately
         following the date of delivery of the related  Conversion Notice to the
         relevant Conversion Agent;

                   (e) the term "Conversion  Period" means the period commencing
         on September 15, 1997 and ending at 5:00 P.M., London time, on July 22,
         2004 or, if this Note shall have been  called for  redemption  prior to
         August 5, 2004,  ending at 5:00 P.M.,  London  time,  on the date eight
         Business Days prior to the date fixed for redemption thereof;  provided
         that if the Company  defaults  in making  payment in full in respect of
         this  Note or  prior to the  date  fixed  for  redemption  hereof,  the
         Conversion  Period will continue  until 5:00 P.M.,  London time, on the
         date upon  which the full  amount of the  moneys  payable in respect of
         this Note has been duly  received  by the  Trustee  and  notice of such
         receipt has been duly given to the Holders of the Notes by the Trustee;

                   (f)  the term "Conversion Ratio" means 71.35 shares of Texaco
         Common Stock per U.S. $10,000 principal amount of Notes;

                   (g)  the  term  "Settlement  Date"  means  the day as soon as
         reasonably  practicable  after the  Conversion  Date  determined by the
         Calculation Agent and the Principal  Conversion Agent to be the day for
         payment of the Conversion Amount;


                                     A-3-6
<PAGE>


                   (h)   the term "Texaco Common Stock" means the common stock 
         of Texaco Inc.; and

                   (i) "Trading Day" means,  with respect to any  security,  any
         day that is a  trading  day on the  principal  securities  exchange  or
         national market system on which such security is then listed other than
         a day on which (i) trading on such  exchange or national  market system
         is scheduled to close prior to its regular weekday closing time or (ii)
         there occurs any suspension of or limitation imposed on trading of such
         security on such exchange  during the one-half hour period that ends at
         its regular weekday closing time that is, in the  determination  of the
         Calculation Agent, material.

         The Closing Price of the Texaco Common Stock on any of the Trading Days
used to calculate  the  Conversion  Amount will be subject to  adjustment by the
Calculation  Agent as  described  below  to the  extent  that any of the  events
requiring  such  adjustment  occurs during the period  commencing on the date of
this Note and ending on such Trading Day.

     Texaco Common Stock Dividends and Extraordinary Dividends and Distributions

         In the event that a dividend or other  distribution  is declared (i) on
any class of Texaco  capital  stock,  payable in shares of Texaco  Common Stock,
(ii) on the Texaco Common Stock payable in cash in an amount greater than 10% of
the  Closing  Price  of the  Texaco  Common  Stock  on the  date  fixed  for the
determination  of the  shareholders  of Texaco  entitled  to  receive  such cash
dividend (an "Extraordinary Cash Dividend"), or (iii) on the Texaco Common Stock
of evidences of indebtedness or assets (including securities,  but excluding any
dividend or distribution  covered by clause (i) or any Texaco Spin-off described
under  "-Dissolution  of  Texaco;  Mergers,  Consolidations  or Sales of Assets;
Spin-offs" below) (an  "Extraordinary  Distribution"),  any Closing Price of the
Texaco Common Stock used to calculate the  Conversion  Amount on any Trading Day
that follows the date (the "Texaco Record Date") fixed for the  determination of
the   shareholders  of  Texaco  entitled  to  receive  such  dividend  or  other
distribution shall be increased by multiplying such Closing Price by a fraction,
the  numerator  of which  shall be the number of shares of Texaco  Common  Stock
outstanding  on the Texaco  Record  Date plus the number of shares  constituting
such  distribution  or,  in the  case  of any  Extraordinary  Cash  Dividend  or
Extraordinary  Distribution,  plus the number of shares of Texaco  Common  Stock
that could be purchased with the amount of such  Extraordinary  Cash Dividend or

                                     A-3-7
<PAGE>


the  fair  market  value  (as  determined  by  the  Calculation   Agent,   whose
determination  shall be conclusive and binding) of the evidences of indebtedness
or assets  constituting such Extraordinary  Distribution at the Closing Price on
the Trading Day  immediately  subsequent  to such Texaco  Record  Date,  and the
denominator  of which  shall be the  number of shares  of  Texaco  Common  Stock
outstanding on the Texaco Record Date.

     Subdivisions and Combinations of the Texaco Common Stock

         In the event that the  outstanding  shares of Texaco  Common  Stock are
subdivided  into a greater  number of shares,  the  Closing  Price of the Texaco
Common Stock used to  calculate  the  Conversion  Amount on any Trading Day that
follows  the  date  on  which  such  subdivision   becomes   effective  will  be
proportionately  increased and,  conversely,  in the event that the  outstanding
shares of Texaco Common Stock are combined into a smaller number of shares, such
Closing Price of the Texaco Common Stock will be proportionately reduced.

     Reclassifications of the Texaco Common Stock

         In the event that the Texaco Common Stock is changed into the same or a
different number of shares of any class or classes of stock,  whether by capital
reorganization,  reclassification  or otherwise  (except to the extent otherwise
provided under "-Texaco Common Stock Dividends and  Extraordinary  Dividends and
Distributions" and "-Subdivisions and Combinations of Texaco Common Stock" above
or pursuant to a Reorganization  Event described under  "-Dissolution of Texaco;
Mergers,  Consolidations or Sales of Assets;  Spin-offs"  below), the Conversion
Amount will be calculated by using the aggregate Closing Prices of the shares of
stock into which a share of Texaco  Common  Stock was changed on any Trading Day
that follows the effectiveness of such change.

         As  a  result  of  the   foregoing   provisions,   in  the  case  of  a
reorganization  or  reclassification  of the Texaco  Common  Stock,  the Closing
Prices of one or more  securities  in  addition  to or in  substitution  for the
Texaco Common Stock may be used to calculate the Conversion Amount. For example,
if the Texaco  Common Stock were  reclassified  into one share of Texaco Class A
Common Stock and one share of Texaco Class B Common Stock, the Conversion Amount
would be  calculated  by reference  to the Closing  Prices of the Texaco Class A
Common Stock and the Texaco Class B Common Stock.

                                     A-3-8

<PAGE>

     Other Dilution Events

         In the event that the Company (with the prior  written  approval of the
Calculation Agent) or the Calculation Agent determines that an adjustment should
be made to the Closing  Price of the Texaco  Common  Stock on any of the Trading
Days used to calculate the  Conversion  Amount as a result of one or more events
or  circumstances  not  otherwise   described  above  (even  if  such  event  or
circumstance  is  specifically  excluded  from the  operation of the  provisions
described  above),  the Company  shall at its own expense and acting  reasonably
request  the  Calculation  Agent  to  determine  as  soon  as  practicable  what
adjustment (if any) is fair and reasonable to take account thereof.

     Dissolution  of  Texaco;   Mergers,  Consolidations  or  Sales  of  Assets;
Spin-offs

         In the event of any (i)  consolidation or merger of Texaco with or into
another entity (other than a  consolidation  or merger that does not result in a
reclassification,  conversion,  exchange or cancellation  of outstanding  Texaco
Common Stock), (ii) sale, transfer,  lease or conveyance of all or substantially
all of the assets of Texaco,  (iii)  liquidation,  dissolution  or winding up of
Texaco or (iv)  declaration of a distribution  on the Texaco Common Stock of the
common  stock of any  subsidiary  of Texaco (a  "Texaco  Spin-off")  (any of the
events described in (i), (ii),  (iii) or (iv), a  "Reorganization  Event"),  for
purposes of determining the Conversion  Amount,  the Closing Price of the Texaco
Common Stock on any Trading Day subsequent  to, in the case of a  Reorganization
Event other than a Texaco  Spin-off,  the effective time of such  Reorganization
Event  or,  in the case of a Texaco  Spin-off,  the  record  date  fixed for the
determination  of the  shareholders of Texaco entitled to receive the securities
distributed in such Texaco Spin-off (the "Spin-off  Record Date") will be deemed
to be the  amount  equal  to (1)  the  value  of the  cash  and  other  property
(including  securities)  received by a holder of a share of Texaco  Common Stock
(assuming  such holder of Texaco  Common  Stock failed to exercise any rights of
election and  received per share the kind and amount  received by a plurality of
non-electing  shares) in any such  Reorganization  Event (plus, in the case of a
Texaco  Spin-off,  the value of a share of Texaco Common Stock),  and (2) to the
extent that such holder  obtains  securities in any  Reorganization  Event,  the
value of the cash and other property  received by the holder of such  securities
in any  subsequent  event with  respect to the  issuer of such  securities  that
would, if such issuer were Texaco,  be a  Reorganization  Event. For purposes of
determining  any such  Closing  Prices,  the  value  of (i) any  cash and  other
property (other than securities)  received in any such Reorganization Event will
be an amount equal to the value of such cash and other property at the effective
time of such Reorganization Event (as determined

                                     A-3-9
<PAGE>

by the Calculation Agent, whose  determination shall be conclusive and binding),
and  (ii)  any  property   consisting  of   securities   received  in  any  such
Reorganization  Event  will be an  amount  equal to the  Closing  Prices of such
securities on any Trading Day following,  in the case of a Reorganization  Event
other than a Texaco Spin-off,  the effective time of such  Reorganization  Event
or, in the case of a Texaco Spin-off, the Spin-off Record Date.

         If any action would require adjustment of the Closing Price pursuant to
more than one of the foregoing provisions, only one adjustment shall be made and
such adjustment  shall be the amount of adjustment that has the highest absolute
value to the Holder of this Note.  No  adjustment  in the Closing Price shall be
required  unless  such  adjustment  would  require an increase or decrease of at
least 1% of the  Closing  Price,  but any  adjustment  that would  otherwise  be
required  to be made shall be  carried  forward  and taken  into  account in any
subsequent adjustment.

         The  Calculation  Agent  will  promptly  notify  the  Company  and  the
Principal  Conversion Agent, which will in turn notify the Holders, of any event
requiring an adjustment  and of the method of calculation to be used to make any
dilution adjustment as described above.

         All  determinations  made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, shall
be conclusive  for all purposes and binding on the Company and the Holders,  and
the  Calculation  Agent  shall have no  liability  therefor.  All results of any
calculation  of the  Conversion  Amount will be rounded,  if  necessary,  to the
nearest  one-one-hundred-thousandth  of a percent (with five one-millionths of a
percentage point being rounded downward).

7.  Redemption.

         The Notes are  redeemable,  at the option of the Company,  in whole but
not in part,  at any time on or after August 5, 1999,  at the  principal  amount
thereof upon not less than 15 days' nor more than 30 days' notice to Holders.

8.  Tax Redemption.

         The Notes may be redeemed  as a whole,  at the option of the Company at
any time prior to  maturity,  upon the giving of a notice of  redemption  in the
manner provided in the Indenture, at the principal amount thereof, together with
accrued  interest to the date fixed for  redemption,  if the Company  determines
that,

                                     A-3-10
<PAGE>

as a result of any change in or  amendment  to the laws (or any  regulations  or
rulings  promulgated  thereunder)  of the  United  States  or of  any  political
subdivision or taxing authority  thereof or therein affecting  taxation,  or any
change in official position  regarding the application or interpretation of such
laws,  regulations or rulings, which change or amendment becomes effective on or
after the date of this Note, the Company or Texaco Inc., as the case may be, has
or will become  obligated  to pay  Additional  Amounts  (as defined  below) with
respect to the Notes as described below under  paragraph 9 hereof.  Prior to the
giving of any notice of redemption pursuant to this paragraph, the Company shall
deliver to the Trustee (i) a certificate stating that the Company is entitled to
effect such  redemption  and setting forth a statement of facts showing that the
conditions precedent to the right of the Company to so redeem have occurred (the
date on which such certificate is delivered to the Trustee being the "Redemption
Determination  Date"), and (ii) an opinion of counsel  reasonably  acceptable to
the Trustee to such effect based on such  statement of facts;  provided  that no
such  notice of  redemption  shall be given  earlier  than 60 days  prior to the
earliest  date on which the Company or Texaco Inc., as the case may be, would be
obligated  to pay such  Additional  Amounts  if a payment in respect of any Note
were then due.


         If the Company shall determine that any payment made outside the United
States by the Company or Texaco Inc., as the case may be, by any Paying Agent of
principal  or  interest  due in respect of any Note or Coupon  would,  under any
present or future laws or regulations  of the United  States,  be subject to any
certification,  identification or other information reporting requirement of any
kind,  the effect of which is the  disclosure to the Company,  Texaco Inc.,  any
Paying  Agent or any  governmental  authority of the  nationality,  residence or
identity  of a  beneficial  owner of such Note or Coupon who is a United  States
Alien (as defined  below under ", Payment of  Additional  Amounts")  (other than
such a  requirement  (a) that would not be  applicable  to a payment made by the
Company or Texaco Inc.,  as the case may be, or any Paying Agent (i) directly to
the  beneficial  owner or (ii) to a  custodian,  nominee  or other  agent of the
beneficial  owner,  or (b) that can be satisfied by such  custodian,  nominee or
other  agent  certifying  to the effect that such  beneficial  owner is a United
States Alien;  provided that in each case referred to in clauses (a)(ii) and (b)
payment by such custodian,  nominee or agent to such beneficial  owner would not
otherwise  be subject to any such  requirement),  the Company  shall  redeem the
Notes,  as a whole,  at the  principal  amount  thereof,  together  with accrued
interest to the date fixed for  redemption or, at the election of the Company or
Texaco Inc.,  as the case may be, if the  conditions  of the next  paragraph are
satisfied,  pay the additional amounts specified in such paragraph.  The Company
shall make such  determination  and election as soon as practicable  and publish
prompt notice

                                     A-3-11
<PAGE>

thereof  (the  "Determination  Notice")  stating  the  effective  date  of  such
certification,  identification  or  other  information  reporting  requirements,
whether the Company  will redeem the Notes or has elected to pay the  additional
amounts  specified in the next  paragraph,  and (if applicable) the last date by
which the  redemption  of the Notes must take  place,  as  provided  in the next
sentence.  If the Company redeems the Notes, such redemption shall take place on
such date, not later than one year after the  publication  of the  Determination
Notice, as the Company shall elect by notice to the Trustee. Notwithstanding the
foregoing,  the  Company  shall not so redeem the Notes if the Company or Texaco
Inc., as the case may be, shall  subsequently  determine,  not less than 30 days
prior to the date fixed for redemption,  that  subsequent  payments would not be
subject to any such certification, identification or other information reporting
requirement,  in which case the  Company  shall  publish  prompt  notice of such
determination  and any  earlier  redemption  notice  shall be revoked  and of no
further effect.

         If  and  so  long   as   the  certification,  identification  or  other
information reporting  requirements referred to in the preceding paragraph would
be fully satisfied by payment of a backup withholding tax or similar charge, the
Company  or Texaco  Inc.,  as the case may be,  may  elect to pay as  additional
amounts  such amounts as may be necessary so that every net payment made outside
the United  States  following  the effective  date of such  requirements  by the
Company or Texaco Inc.,  as the case may be, or any Paying Agent of principal or
interest due in respect of any Note or any Coupon of which the beneficial  owner
is a United  States Alien (but  without any  requirement  that the  nationality,
residence  or identity of such  beneficial  owner be  disclosed  to the Company,
Texaco Inc., any Paying Agent or any governmental authority, with respect to the
payment of such  additional  amounts),  after deduction or withholding for or on
account of such backup  withholding  tax or similar  charge (other than a backup
withholding  tax or  similar  charge  that (i)  would not be  applicable  in the
circumstances  referred  to in the  second  parenthetical  clause  of the  first
sentence  of the  preceding  paragraph,  or  (ii)  is  imposed  as a  result  of
presentation of such Note or Coupon for payment more than 15 days after the date
on which such  payment  becomes due and payable or on which  payment  thereof is
duly provided for,  whichever  occurs  later),  will not be less than the amount
provided for in such Note or Coupon to be then due and payable. In the event the
Company or Texaco Inc., as the case may be, elects to pay any additional amounts
pursuant to the applicable provisions of this paragraph,  the Company shall have
the right to redeem the Notes as a whole at any time pursuant to the  provisions
of the preceding  paragraph and the  redemption  price of such Notes will not be
reduced for applicable  withholding taxes. If the Company or Texaco Inc., as the
case may be, elects to pay additional amounts pursuant to this paragraph and the
condition specified in the first sentence of this

                                     A-3-12
<PAGE>

paragraph should no longer be satisfied,  then the Company will redeem the Notes
as a whole, pursuant to the applicable provisions of the preceding paragraph.

9.  Payment of Additional Amounts.

         The Company will,  subject to certain  exceptions and  limitations  set
forth  below,  pay such  additional  amounts (the  "Additional  Amounts") to the
Holder of this Note or of any Coupon  appertaining hereto who is a United States
Alien as may be  necessary  in order that every net payment of the  principal of
and  interest  on this Note and any other  amounts  payable on such Note,  after
withholding  for or on  account  of any  present or future  tax,  assessment  or
governmental  charge  imposed  upon or as a result of such payment by the United
States (or any political  subdivision or taxing  authority  thereof or therein),
will not be less than the amount  provided for in this Note or such Coupon to be
then due and  payable.  The Company will not,  however,  be required to make any
payment of Additional Amounts to any such Holder for or on account of:

               (a) any such tax,  assessment or other  governmental  charge that
          would  not  have  been so  imposed  but for (i) the  existence  of any
          present  or  former  connection  between  such  Holder  (or  between a
          fiduciary, settlor, beneficiary, member or shareholder of such Holder,
          if such Holder is an estate,  a trust, a partnership or a corporation)
          and  the  United  States  and  its  possessions,   including,  without
          limitation,  such  Holder (or such  fiduciary,  settlor,  beneficiary,
          member or  shareholder)  being or having  been a citizen  or  resident
          thereof  or being or having  been  engaged in a trade or  business  or
          present  therein  or having or having  had a  permanent  establishment
          therein  or (ii) the  presentation  by the  Holder of this Note or any
          such  Coupon for payment on a date more than 15 days after the date on
          which such payment became due and payable or the date on which payment
          thereof is duly provided for, whichever occurs later;

               (b) any estate,  inheritance,  gift, sales,  transfer or personal
          property tax or any similar tax, assessment or governmental charge;

               (c) any tax,  assessment or other governmental  charge imposed by
          reason of such Holder's past or present  status as a personal  holding
          company or foreign  personal  holding  company or  controlled  foreign
          corporation or passive foreign  investment company with respect to the
          United States or as a corporation that  accumulates  earnings to avoid
          United States federal  income tax or as a private  foundation or other
          tax-exempt organization;

                                     A-3-13
<PAGE>


               (d) any tax,  assessment  or other  governmental  charge  that is
          payable  otherwise than by withholding  from payments on or in respect
          of this Note;

               (e) any tax,  assessment or other governmental charge required to
          be withheld by any Paying  Agent from any payment of  principal  of or
          interest  on this  Note,  if such  payment  can be made  without  such
          withholding by any other Paying Agent in a city in Western Europe; (f)
          any tax,  assessment or other governmental  charge that would not have
          been  imposed  but for  the  failure  to  comply  with  certification,
          information   or   other   reporting   requirements   concerning   the
          nationality, residence or identity of the owner or beneficial owner of
          this Note, if such  compliance is required by statute or by regulation
          of  the  United  States  or of any  political  subdivision  or  taxing
          authority  thereof or therein as a precondition to relief or exemption
          from such tax, assessment or other governmental charge;

               (g) any tax,  assessment or other governmental  charge imposed by
          reason  of such  Holder's  past or  present  status  as the  actual or
          constructive  owner of 10% or more of the total combined  voting power
          of all classes of stock entitled to vote of the Company or as a direct
          or indirect subsidiary of the Company; or

               (h) any combination of items (a), (b), (c), (d), (e), (f) or (g);

nor shall Additional Amounts be paid with respect to any payment on this Note to
a United States Alien who is a fiduciary or  partnership  or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of the  United  States (or any  political  subdivision  thereof)  to be
included in the income,  for tax  purposes,  of a  beneficiary  or settlor  with
respect to such fiduciary or a member of such  partnership or a beneficial owner
who would not have been entitled to the Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the Holder of this Note.

         As used herein,  the term "United  States  Alien" means any person who,
for United States  federal  income tax  purposes,  is a foreign  corporation,  a
nonresident alien individual,  a nonresident alien fiduciary of a foreign estate
or trust,  or a foreign  partnership  one or more of the  members  of which is a
foreign  corporation,  a nonresident  alien  individual  or a nonresident  alien
fiduciary of a foreign estate or trust.

                                     A-3-14

<PAGE>


10.  Transfer.

         The Holder of this Note may transfer this Note in  accordance  with the
Indenture.  The Company may require the Holder of this Note, among other things,
to furnish appropriate  endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture.

11.  Persons Deemed Owners.

         The  bearer  of this  Note may be  treated  as the  owner of it for all
purposes.

12.  Amendments and Waivers.

         Subject to certain exceptions,  the Notes or the Indenture with respect
to the Notes may be amended with the consent of the Holders of at least 50.1% in
principal  amount of the Notes  outstanding,  and any past default or compliance
with any  provision  may be waived  with the  consent of the Holders of at least
50.1% in principal amount of the Notes  outstanding.  Without the consent of any
Holder, the Indenture or the Notes may be amended to cure any ambiguity,  defect
or  inconsistency;  to provide for  assumption of the Company's  obligations  to
Holders;  or to make any change that does not adversely affect the rights of any
Holder.

13.  Restrictive Covenants.

         The Notes are unsecured  general  obligation of the Company  limited to
$200,000,000 in aggregate  principal amount.  The Indenture does not limit other
unsecured debt. It does limit certain mortgages and sale-leaseback  transactions
of  Texaco  Inc.  if  the  property  mortgaged  or  leased  is a  refinery  or a
manufacturing  plant in the United States or any oil or gas  producing  property
onshore or offshore  the United  States that is of  material  importance  to the
total business of Texaco Inc. and its consolidated subsidiaries. The limitations
are subject to a number of important qualifications and exceptions.  Once a year
Texaco Inc. must report to the Trustee on compliance with the limitations.

         When a successor corporation assumes all the obligations of the Company
under the Notes and the Indenture with respect to the Notes, the Company will be
released from those obligations.

                                     A-3-15

<PAGE>

14.  Defaults and Remedies.

         An Event of Default  is:  default for 30 days in payment of interest on
the Notes;  default in payment of principal on the Notes; failure by the Company
or by Texaco  Inc.,  as the case may be, for 90 days after notice to the Company
to comply with any of its other  agreements in the Notes or the  Indenture;  and
certain events of bankruptcy or insolvency. If an Event of Default occurs and is
continuing,  the Trustee or the Holders of at least 25% in  principal  amount of
the Notes may declare all the Notes to be due and payable  immediately.  Holders
may not enforce the Notes or the Indenture  except as provided in the Indenture.
The Trustee  may require  indemnity  satisfactory  to it before it enforces  the
Notes  or  the  Indenture  with  respect  to  the  Notes.   Subject  to  certain
limitations,  Holders of a majority in principal  amount of the Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders  notice  of any  continuing  default  (except a default  in  payment  of
principal or  interest) if it  determines  that  withholding  notice is in their
interests.

15.  Trustee Dealings with Company or Texaco Inc.

         The  Chase  Manhattan  Bank as  Trustee  under  the  Indenture,  in its
individual or any other  capacity,  may make loans to, accept deposits from, and
perform services for the Company,  Texaco Inc. or any affiliates of either,  and
may otherwise deal with the Company, Texaco Inc. or any affiliates of either, as
if it were not Trustee.

16.  No Recourse Against Others.

         A director,  officer, employee or stockholder,  as such, of the Company
or Texaco Inc.  shall not have any liability for any  obligations of the Company
or Texaco Inc.  under the Notes or the  Indenture  or for any claim based on, in
respect of or by reason of, such  obligations or their creation.  Each Holder by
accepting a Note waives and releases all such liability.  The waiver and release
are part of the consideration for the issue of the Notes.

17.  Authentication.

         This  Note  shall  not be  valid  until  authenticated  by  the  manual
signature of the Trustee or an authenticating agent.

                                     A-3-16

<PAGE>

                                    GUARANTY

         TEXACO INC., a Delaware corporation (the "Guarantor"),  unconditionally
guarantees  to the  Holder  of this  Note the due and  punctual  payment  of the
principal of and interest on this Note.

         The Guarantor  shall not be entitled to receive any payments based upon
a right of  subrogation  with  respect to any amounts  paid by the  Guarantor to
Holders until the principal of and interest on all Notes shall have been paid in
full or for which payment has been provided.


                                                      TEXACO INC.

                                                      By: ______________________
                                                          [Title]







                                     A-3-17

<PAGE>

                            [FORM OF FACE OF COUPON]



ISIN:

Serial No.:                                        No.:

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

                               TEXACO CAPITAL INC.

            3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                                  Guaranteed by

                                   TEXACO INC.


Coupon  for  U.S.  $350,   due  on  August 5, [1998,  1999,  2000,  2001,  2002,
2003, 2004].

This Coupon is separately negotiable, payable to bearer, subject to the terms of
the Notes.




                                     A-3-18
<PAGE>

                           [FORM OF REVERSE OF COUPON]


                                     TRUSTEE

                            The Chase Manhattan Bank
                              450 West 33rd Street
                            New York, New York 10001


                      PRINCIPAL PAYING AND CONVERSION AGENT

                            The Chase Manhattan Bank
                                  Trinity Tower
                              9 Thomas More Street
                                  London E19YT
                                     England
                        Attention: Global Trust Services


                     LUXEMBOURG PAYING AND CONVERSION AGENT

                      Chase Manhattan Bank Luxembourg S.A.
                                  5 rue Plaetis
                                L-2338 Luxembourg
                                   Luxembourg


and such  other or  further  Non-U.S.  Paying  Agents  or  Conversion  Agents or
specified offices as may from time to time be duly appointed by the Company.





                                     A-3-19
<PAGE>



                                                                       EXHIBIT B


                           [FORM OF CONVERSION NOTICE]


                               TEXACO CAPITAL INC.

            3.50% Guaranteed Cash-Settled Convertible Notes Due 2004

                                  Guaranteed by

                                   TEXACO INC.


Delivery of Conversion Notice

Holders and beneficial  owners wishing to convert Notes into the cash Conversion
Amount  should  complete two original  copies of this notice and deliver one (in
person or by pre-paid mail) to Texaco  Capital Inc. and the other in person,  by
pre-paid mail or by tested telex confirmed in writing, to:

If the Notes to be converted are  represented  by the  Permanent  Global Note or
Definitive Notes held in a clearing system

The  Euroclear  Operator  or Cedel Bank at the offices  specified  below or such
other  clearing  system,  as the  case  may be,  with  copies  to the  Principal
Conversion Agent and the Trustee, each at its office specified below. A copy may
also be sent to the Luxembourg Conversion Agent at its office specified below.

If the Notes to be converted are Definitive Notes not held in a clearing system

The Principal Conversion Agent or the Luxembourg  Conversion Agent at its office
specified  below,  together  with  the  definitive   individual   certificate(s)
representing the Notes to be converted,  with copies of the Conversion Notice to
the  Trustee  and,  if  the  original  Conversion  Notice  is  delivered  to the
Luxembourg  Conversion Agent, the Principal Conversion Agent, each at its office
specified below.



<PAGE>

Address for delivery of Conversion Notice:

Cedel Bank:                  Cedel Bank, societe anonyme
                             67 Boulevard Grande-Duchesse Charlotte
                             Luxembourg-Ville
                             L-1010 Luxembourg

                             Attention:     OCE Department
                             Telex:         2791

Euroclear Operator:          Morgan Guaranty Trust Company of New York
                             (as operator of the Euroclear System)
                             Brussels office
                             Boulevard Emile Jacqmain 151
                             B-1210 Brussels
                             Belgium

                             Attention:     Custody Processing Department
                             Telex:         61025 MGTEC B

Principal Conversion
Agent:                       The Chase Manhattan Bank
                             Trinity Tower
                             Thomas More Street
                             London E19YT
                             England

                             Attention:     Manager, Global Trust Operations
                             Fax:           44 1202 34 7945
                             Telex:         8954681 CMBG

Luxembourg
Conversion Agent:            Chase Manhattan Bank Luxembourg S.A.
                             5 rue Plaetis
                             L-2338 Luxembourg
                             Luxembourg

                             Attention:     Manager, Global Trust Operations
                             Fax:           352 4626 85380
                             Telex:         1233 CHASLU


                                      B-2
<PAGE>


Texaco Capital Inc.:         c/o Texaco Inc.
                             2000 Westchester Avenue
                             White Plains, New York 10650
                             United States

                             Attention:
                             Fax:


Trustee:                     The Chase Manhattan Bank
                             450 West 33rd Street
                             New York, New York 10001
                             United States

                             Attention:
                             Fax:


















Failure to properly  complete and deliver this Notice (in the  determination  of
the Principal  Conversion Agent (in consultation with the Euroclear  Operator or
Cedel Bank, as the case may be, if the Notes to be converted are  represented by
the Permanent Global Note or Definitive Notes held by the Euroclear  Operator or
Cedel Bank)) may result in this Notice being treated as null and void.

                                      B-3

<PAGE>


Terms defined in the Notes shall have the same meanings herein.

I, the Holder or  beneficial  owner  specified in  paragraph 1 below,  being the
Holder or beneficial owner of the Notes referred to above, acknowledge that such
Notes are  convertible  into the cash  Conversion  Amount in accordance with the
terms of the Notes and hereby  irrevocably  authorize  Texaco  Capital Inc. (the
"Company")  to convert such Notes as are  specified in paragraph 2 below for the
cash Conversion Amount to which I am entitled with respect to such Notes.


1.       Name and address of Holder or beneficial owner:


         ______________________________________________

         ______________________________________________

         ______________________________________________


2.       Aggregate principal amount of Notes to be converted:

         U.S.$________________

         Certificate numbers of Notes (if relevant):1 __________________________

         Details (including in respect of any missing unmatured Coupon):2

         _______________________________________________________________________


3.       Instructions to the Euroclear Operator/Cedel Bank3

         I   hereby   irrevocably   authorize   and   instruct   the   Euroclear
         Operator/Cedel  Bank to debit the principal amount of Notes referred to
         above from the account referred to below on the Conversion Date.



----------
         1  Not  required for  Notes represented by the Permanent Global Note or
            those held in a clearing system.

         2  An  indemnity  may  be  required  in  respect  of  missing unmatured
            Coupons.

         3  Not required where Definitive Notes are held outside clearing 
systems.




                                      B-4



<PAGE>

         Account No: ____________________________________________
         Name of Account: _______________________________________

         I confirm that the Account referred to  above  is  outside  the  United
         States and is the account to be credited with the Conversion Amount.


4.       Bank Account Details for Holders of Notes held outside clearing systems

         Details  of my bank  account  (which is outside  the United  States) to
         which the Conversion Amount shall be paid are as follows:

         Receiving Bank:  ________________________________________
         Account Number:  ________________________________________        
         Name of Account: ________________________________________
 
5.       Representations

         I hereby  represent  and warrant that the Notes  referred to above (and
         any Coupons  appertaining  thereto)  are free from all liens,  charges,
         encumbrances and all other third party rights.

6.       Authorization of production in proceedings

         I hereby authorize the production of this Notice in any  administrative
         or legal  proceedings  instituted in connection with the Notes to which
         this  Notice  relates or  otherwise  in  connection  with  establishing
         compliance with applicable laws.



Signed: ________________________            Date: __________________





                                      B-5

<PAGE>


________________________________________________________________________________

For Agent's use only:

1.       (A)     Conversion Date:

2.       (A)     Aggregate principal amount of Notes surrendered for conversion:

         (B)     Conversion Amount deliverable:

3.       Details of any indemnity obtained in respect of missing unmatured 
         Coupons:


























                                      B-6