<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ X ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as Permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
QUAKER STATE CORPORATION
(Name of Registrant as Specified in its Charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
<PAGE> 2
QUAKER STATE CORPORATION
255 Elm Street
Oil City, Pennsylvania 16301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--MAY 25, 1995
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Quaker State Corporation will be held
at the The Westin William Penn, 530 William Penn Place, Pittsburgh, Allegheny
County, Pennsylvania, on Thursday, May 25, 1995 at 1:00 P.M., for the following
purposes:
1. To elect twelve Directors;
2. To approve a proposal to amend the Corporation's Certificate of
Incorporation to increase the authorized number of shares of the
Corporation's Capital Stock from 37,500,000 to 95,000,000 shares;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors to audit the financial statements of the Corporation
and its subsidiaries for the year 1995; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
A complete list of the stockholders entitled to vote at the Annual Meeting
will be open to the examination of any stockholder during ordinary business
hours at the location of the Annual Meeting set forth above for a period of at
least ten days prior to the meeting.
This notice is being sent to stockholders of record at the close of
business on March 27, 1995, who will be entitled to vote at the Annual Meeting.
The Quaker State Annual Report to Stockholders for 1994 is enclosed.
It is important for your shares to be represented at the Annual Meeting.
Please sign, date and mail the enclosed proxy card at your earliest convenience
in the envelope provided. You also should indicate on the card whether you plan
to attend the meeting in person.
By Order of the Board of Directors,
Paul E. Konney,
Vice President, General
Counsel and Secretary
Oil City, Pennsylvania
March , 1995
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
<PAGE> 3
QUAKER STATE CORPORATION
255 ELM STREET
OIL CITY, PENNSYLVANIA 16301
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1995
This Proxy Statement is furnished to stockholders in connection with the
solicitation by the Board of Directors of Quaker State Corporation (the
"Corporation") of proxies in the accompanying form for use at the Annual Meeting
of Stockholders of the Corporation to be held on May 25, 1995 and at any
adjournment thereof. If a proxy in the accompanying form is duly executed and
returned, the shares represented will be voted at the Annual Meeting and, where
a choice is specified, will be voted in accordance with the specification made.
Any stockholder who gives a proxy has the power to revoke it by notice to the
Secretary at any time before it is exercised. A later dated proxy will revoke an
earlier proxy, and stockholders who attend the Annual Meeting may, if they wish,
vote in person even though they have submitted a proxy, in which event the proxy
will be deemed to have been revoked.
The Corporation has only one class of Capital Stock (the "Capital Stock")
of which shares were issued and outstanding as of the close of business
on March 27, 1995. Stockholders of record as of the close of business on March
27, 1995 have the right to receive notice of and to vote at the Annual Meeting.
Stockholders are entitled to one vote for each share held on all matters to be
considered and acted upon at the meeting and do not have cumulative voting
rights in the election of directors.
Under the terms and conditions of the Corporation's Automatic Dividend
Reinvestment Plan, Mellon Securities Trust Services, the administrator, will
vote the full shares of Capital Stock that it holds for a participant's account
at the Annual Meeting in accordance with (i) the proxy returned by the
participant to the Corporation with respect to the shares which the participant
holds of record, (ii) the participant's vote in person at the Annual Meeting
with respect to such shares or (iii) written instructions received directly by
the administrator from the participant. The administrator will vote fractional
shares credited to the accounts of participants under the plan by aggregating
all the fractional shares to be voted in the same manner.
ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Corporation provide that the number of directors is
twelve, and the Board of Directors has nominated the twelve persons who are
named below for election as directors at the Annual Meeting. The Board of
Directors recommends that the stockholders vote "FOR" the twelve nominees.
Unless authority to vote for one or more of the nominees is withheld, it is
intended that proxies solicited hereby will be voted for the election of the
twelve nominees. All the nominees except Lorne R. Waxlax are currently directors
of the Corporation. Dr. H. Bryce Jordan, a current director, is retiring and is
not standing for re-election as a director. Mr. Waxlax has been nominated to
succeed him. W. Craig McClelland, who served as a director throughout 1994, also
has retired.
VOTE REQUIRED
Only affirmative votes are counted in the election of directors. The twelve
nominees for election as directors at the Annual Meeting who receive the
greatest number of votes cast for the election of directors by the holders of
the Capital Stock present in person or represented by proxy and entitled to vote
at the meeting, a quorum being present, will be elected as directors.
In the event that any of the nominees should for any reason not be
available for election at the date of the Annual Meeting, the proxies received
will be voted for the election of the other nominees and such substitute
2
<PAGE> 4
nominees as shall be designated by the Board of Directors unless the Bylaws of
the Corporation have been amended to reduce the number of directors to the
number of named nominees then available for election. In this event, the proxies
will be voted for the reduced number of directors. Directors who are elected
will serve until the next Annual Meeting of Stockholders and until their
successors are elected and qualify.
The nominees have held the positions shown for more than five years unless
otherwise indicated.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR
NOMINEE SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
- - --------------------- ----- ------------------------------
<S> <C> <C>
Herbert M. Baum 1993 Chairman and Chief Executive Officer of the Corporation
since June 1993 and President of the Corporation since
September 1994; Executive Vice President of Campbell Soup
Company (manufacturer of food products) from prior to
1990 to June 1993; Also, President, Campbell North and
South America from January 1992 to June 1993; Director,
Meredith Corporation; age 58.
Leonard M. Carroll 1993 President and Chief Operating Officer of Integra
Financial Corporation (bank holding company) since
January 1991; Executive Vice President of Integra
Financial Corporation from prior to 1990 to January 1991;
age 52.
Conrad A. Conrad 1988 Vice Chairman and Chief Administrative Officer of the
Corporation since September 1994; President and Chief
Operating Officer of the Corporation from February 1990
to September 1994; Vice President, Finance and Chief
Financial Officer from prior to 1990 to February 1990;
age 49.
Laurel Cutler 1993 Vice Chairman of FCB/Leber Katz Partners (advertising
agency); also Vice President of Chrysler Corporation
(automobile manufacturer) from prior to 1990 to December
1990; Director of True North Communications, Inc. and
Hannaford Brothers Company; age 68.
C. Frederick 1993 Retired since August 1991; President and Chief Operating
Fetterolf Officer of Aluminum Company of America (manufacturer of
aluminum and aluminum products) from prior to 1990 to
August 1991; Director of Allegheny Ludlum Corporation,
Mellon Bank Corporation, Praxair, Inc., Union Carbide
Corporation and Urethane Technologies, Inc.; age 66.
Thomas A. Gardner 1979 Personal investments; Physician and former Director of
Radiology of Northwest Medical Center; Director of
Integra Trust Company, N.A., a subsidiary of Integra
Financial Corporation; age 67.
F. William Grube 1994 President of Calumet Lubricants Co. (producer of
specialty oils) since October 1990; personal investments
from prior to 1990 to October 1990; age 47.
Forrest R. Haselton 1995 Retired since August 1993; President--Retail of Sears
Merchandise Group, a division of Sears Roebuck and
Company (retail merchandiser) from January 1992 to August
1993; Vice President--Automotive of Sears Merchandise
Group from prior to 1990 to January 1992; age 56.
Delbert J. McQuaide 1981 Senior Partner of McQuaide, Blasko, Schwartz, Fleming &
Faulkner, Inc.(law firm); Director, Mid-State Bank and
Trust Company, a subsidiary of Keystone Financial, Inc.;
age 58.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR
NOMINEE SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
- - --------------------- ----- ------------------------------
<S> <C> <C>
L. David Myatt 1994 Vice Chairman of the Corporation and Chief Executive
Officer of the Corporation's Motor Oil Division;
President of the Specialty Oil Companies (lubricants
distributor) and Westland Oil Company, Inc. (lubricants
blender and packager) from prior to 1990 to September
1994; age 49.
Raymond A. Ross, Jr. 1991 President and sole owner of Ross Management, an
unincorporated real estate investment and development
firm; age 59.
Lorne R. Waxlax -- Independent consultant since December, 1993; Executive Vice
President of The Gillette Company (manufacturer and
marketer of razor blades, shaving products and other
consumer products) from prior to 1990 to December 1993;
Director, Waban Inc., Hon Industries, Inc. Amtrol, Inc,
and Clean Harbors Inc.; age 61.
</TABLE>
During 1994, there were eleven meetings of the Board of Directors. Average
attendance at these meetings was 95%.
SECURITY OWNERSHIP OF DIRECTORS AND OTHERS
The directors, those persons named in the Summary Compensation Table and
all directors and executive officers of the Corporation as a group beneficially
owned as of March 20, 1995 the number of shares of Capital Stock set forth in
the table below.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------------------------------
NAME OR GROUP NUMBER OF SHARES PERCENT OF CLASS
------------- ---------------- ----------------
<S> <C> <C>
Herbert M. Baum 302,182(2)(3)(4) (8)
Leonard M. Carroll 2,500(2) (8)
Conrad A. Conrad 95,257(2)(3)(4)(5) (8)
Laurel Cutler 2,000(2) (8)
C. Frederick Fetterolf 3,000(2) (8)
Thomas A. Gardner 5,827(2) (8)
F. William Grube 20,000(5) (8)
Forrest R. Haselton 0 (8)
H. Bryce Jordan 2,209(2)(5) (8)
Delbert J. McQuaide 3,008(2)(6) (8)
L. David Myatt 1,383,075 4.37%
Raymond A. Ross, Jr. 5,100(2) (8)
Charles F. Bechtel 37,114(2)(3)(4) (8)
Gerald W. Callahan 42,426(2)(3)(4) (8)
R. Scott Keefer 39,109(2)(3)(4)(5) (8)
All directors and executive
officers as a group (15 persons) 1,900,381(7) 6.01%
<FN>
- - ---------
(1) Under the proxy rules of the Securities and Exchange Commission (the
"SEC"), a person who directly or indirectly has or shares voting power
and/or investment power with respect to a security is considered as a
beneficial owner of the security. Voting power includes the power to
vote or direct the voting of shares, and investment power includes the
power to dispose of or direct the disposition of shares. Shares as to
which voting power and/or investment power may be acquired within 60
days are also considered as beneficially owned under the proxy rules.
The directors and executive officers have sole voting power and sole
investment power with respect to all shares set forth in the table
except as indicated in the footnotes which follow.
4
<PAGE> 6
(2) Includes shares which may be acquired by the following persons upon the
exercise of stock options: Mr. Baum, 36,500 shares; Mr. Carroll, 1,000
shares; Mr. Conrad, 60,100 shares; Ms. Cutler, 1,000 shares; Mr.
Fetterolf, 1,000 shares; Mr. Gardner, 1,000 shares; Dr. Jordan, 1,000
shares; Mr. McQuaide, 1,000 shares; Mr. Ross, 1,000 shares; Mr.
Bechtel, 27,000 shares; Mr. Callahan, 20,850 shares; Mr. Keefer,
25,900 shares; and all directors and executive officers as a group,
156,500 shares. The non-employee directors were granted their stock
options under the Corporation's 1994 Non-Employee Directors' Stock
Option Plan, which was approved by the stockholders at the Annual
Meeting held in 1994.
(3) Includes restricted shares as to which the following persons have sole
voting power but do not have investment power: Mr. Baum, 72,000 shares;
Mr. Conrad, 11,700 shares; Mr. Bechtel, 5,500 shares; Mr. Callahan, 967
shares; Mr. Keefer, 5,500 shares; and all directors and executive
officers as a group, 94,700 shares.
(4) Includes full shares credited to, or represented by units credited to,
the accounts of the following persons under the Corporation's Thrift
and Stock Purchase Plan and/or Employee Stock Ownership Plan: Mr.
Baum, 322 shares; Mr. Conrad, 11,458 shares; Mr. Bechtel, 101 shares;
Mr. Callahan, 9,621 shares; Mr. Keefer, 5,542 shares; and all
directors and executive officers as a group, 17,423 shares. These
shares are voted by the plan trustees in accordance with directions
received from the plan participants and may only be voted by the plan
trustees if voting instructions are not received from the participants.
(5) Includes shares held jointly by the following persons with their
spouses, as to which voting power and investment power are shared: Mr.
Conrad, 11,757 shares; Mr. Grube, 20,000 shares; Dr. Jordan, 1,209
shares; Mr. Keefer, 2,167 shares; and all directors and executive
officers as a group, 35,133 shares.
(6) Includes shares held in a pension trust as to which Mr. McQuaide shares
voting power and has sole investment power.
(7) Includes all the shares shown in the table except for the shares held
by the nominee who is not presently a director and those held by Mr.
Callahan who retired as an executive officer at the end of 1994.
(8) Less than 1.00% of the class is beneficially owned. In determining the
percentage of the class owned by each person and all directors and
executive officers as a group, the shares included in the table that
may be acquired upon the exercise of stock options by the person and
group are deemed outstanding.
</TABLE>
BOARD COMMITTEES
The principal committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Organization and Compensation Committee and
the Environmental and Ethics Committee.
The Executive Committee consists of Dr. Jordan (Chairman) and Messrs. Baum,
McQuaide and Myatt. During 1994, Mr. McClelland, a former Director, also served
on the Executive Committee. The Executive Committee is authorized to exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, except as limited by Delaware law. The
Executive Committee also acts as a nominating committee, develops criteria for
the selection of candidates for election to the Board, evaluates the
qualifications of candidates, and makes recommendations to the Board of
candidates for Board membership. The Executive Committee will consider nominees
for Board membership recommended by stockholders and is empowered to determine
the supporting data required to be submitted with any nomination. The Executive
Committee held six meetings in 1994.
The Audit Committee consists of Messrs. Carroll (Chairman) and Ross and Dr.
Jordan. The responsibilities of the Audit Committee include, but are not limited
to, reviewing the scope of the internal and external audit programs and the
audit process to assure that audit coverage and internal controls are
5
<PAGE> 7
satisfactory, reviewing the annual financial statements of the Corporation and
its subsidiaries with the independent auditors and management of the
Corporation, verifying the independence of the independent auditors, and
recommending to the Board of Directors the retention or selection of the
independent auditors. The Audit Committee held four meetings in 1994.
The Organization and Compensation Committee consists of Dr. Gardner
(Chairman) and Messrs. Fetterolf and McQuaide. During 1994, Mr. McClelland also
served on the Organization and Compensation Committee. The Committee has
responsibility for setting policy with respect to executive compensation and
reviews and approves salaries, benefits and incentive compensation programs for
the Corporation's executive officers and other senior executives. The Committee
has the responsibility for supervising the administration of the Corporation's
Thrift and Stock Purchase Plan, Employee Stock Ownership Plan, 1976 and 1986
Stock Option Plans, 1994 Non-Employee Directors' Stock Option Plan, 1994 Stock
Incentive Plan, Supplemental Excess Retirement Plan and Annual Incentive Bonus
Plan. Stock options and awards are granted by the Committee under the 1986 Stock
Option Plan and 1994 Stock Incentive Plan. The Committee reviews major
organizational changes recommended by management. The Organization and
Compensation Committee held ten meetings in 1994.
The Environmental and Ethics Committee consists of Mr. Fetterolf
(Chairman), Ms. Cutler and Mr. Ross. The Committee reviews compliance by
employees with the Corporation's Statement of Ethical Values and Code of
Business Conduct. The Committee also has responsibility for oversight of the
implementation of the Corporation's commitment to the protection of the
environment and the health and safety of employees and others, including review
of the Corporation's compliance with applicable laws and regulations. The
Environmental and Ethics Committee held four meetings in 1994.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation receive an annual fee
and a meeting fee for each Board and Board Committee meeting they attend.
Effective January 1, 1994, the annual fee was increased from $14,000 to $21,000.
Chairmen of Board Committees receive an additional $3,000 per annum. The fee for
attending Board and Board Committee meetings is $1,000 per meeting.
Any non-employee director who serves on the Board of Directors for ten
years or longer, or who began serving as a director at age 60 or older and
serves for at least five years, is entitled to an annual retirement benefit. The
annual retirement benefit is the amount of the annual retainer at the time of
termination of service as a director. Any non-employee director who was under
age 60 when he or she began serving as a director and who has served for at
least five but fewer than ten years when Board service terminates is entitled to
a pro rata share of the retirement benefit based upon the relationship of years
served to ten.
In the event of termination of service as a director after a change of
control (as defined), a non-employee director is entitled to a full retirement
benefit if at the time of termination of service the director has served at
least five years. For directors whose service began after 1992, payment of the
annual retirement benefit will not commence unless or until the director has
reached age 65. For directors whose service began before 1992, payment of the
annual retirement benefit will commence upon termination of service.
Under a group term life insurance plan, all the non-employee directors are
provided a life insurance benefit of $25,000. The benefit is reduced by 50% when
a director ceases to serve if the director has served for five consecutive
years, and the benefit terminates when a director ceases to serve if the
director has not served for five consecutive years.
All the directors, except Messrs. Baum, Conrad and Myatt, participate in
the Corporation's 1994 Non-Employee Directors' Stock Option Plan. The plan
automatically provides yearly grants of options to purchase 1,000 shares of the
Corporation's Capital Stock at an option price of 100% of the fair market value
of the Capital Stock on the date of grant (the third business day following each
Annual Meeting of Stockholders). The stock options are not exercisable during
the first six months of their term except in the case of death or certain change
of control events (as defined in the plan). Payment of the option price may be
made in cash, shares of Capital Stock or a combination of each. The stock
options expire ten years from the
6
<PAGE> 8
date of grant or earlier in the event of termination of service as a director as
provided in the plan. The number of shares covered by stock options and the
option price are subject to anti-dilution provisions. In 1994, each non-employee
director received an option to purchase 1,000 shares of Capital Stock at
$13.9375 per share.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation paid
for services rendered in all capacities to the Corporation and its subsidiaries
for the last three calendar years to the following persons: (i) Mr. Baum and
(ii) the Corporation's four most highly compensated executive officers other
than Mr. Baum who were serving as executive officers on December 31, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- -------------------------------------
AWARDS PAYOUTS
------------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
SALARY BONUS SATION AWARDS SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) (SHARES)(5) ($) ($)(6)
--------------------------- ---- -------- -------- ------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HERBERT M. BAUM 1994 $491,670 $275,004 $832,500 -0- -0- 60,500
Chairman of the Board, 1993 252,273 -0- 728,750 270,000 -0- 1,372,017
President and Chief
Executive Officer
CONRAD A. CONRAD 1994 225,000 129,896 -0- -0- -0- 11,460
Vice Chairman and Chief 1993 161,674 -0- -0- 15,000 -0- 5,813
Administrative Officer 1992 147,177 -0- -0- 13,000 -0- 5,785
CHARLES F. BECHTEL 1994 190,008 19,951 -0- -0- -0- 8,710
Executive Vice President, 1993 23,031 60,000 -0- 27,000 -0- -0-
Sales and Marketing of the
Motor Oil Division
R. SCOTT KEEFER 1994 145,008 74,414 -0- -0- -0- 9,425
Vice President, Finance 1993 100,008 -0- -0- 4,000 -0- 2,500
and Chief Financial Officer 1992 93,934 -0- -0- 4,000 -0- 2,782
GERALD W. CALLAHAN 1994 120,000 53,883 -0- -0- -0- 10,121
Vice President, 1993 113,966 -0- -0- 5,000 -0- 5,158
General Counsel (through 1992 108,015 -0- -0- 4,800 -0- 4,952
August 1994) and Secretary
<FN>
- - ---------
(1) This column represents base salary and includes any tax-deferred Section
401(k) contributions under the Corporation's Thrift and Stock Purchase
Plan. For 1993, the salary for Mr. Baum is for the period from June 9, 1993
through the end of the year, and the salary for Mr. Bechtel is for the
period from November 17, 1993 through the end of the year. Messrs. Baum and
Bechtel became employees and executive officers of the Corporation in June
1993 and November 1993, respectively.
(2) During 1994, Mr. Baum entered into a new Employment Agreement with the
Corporation which provides that for 1994 Mr. Baum was entitled to a bonus
of 50% of his base salary in effect on December 31, 1994 ($550,000) if the
Corporation attained or exceeded certain targeted operating and/or
financial goals established at the beginning of 1994 by the Organization
and Compensation Committee. Since these goals were achieved, the bonus was
earned. In February 1994, the Corporation adopted an Annual Incentive Bonus
Plan for key employees in which Mr. Baum did not participate for 1994 but
under which the other named executive officers earned cash bonuses for
1994. Mr. Bechtel's 1993 bonus was a signing bonus he received at the time
of his employment.
(3) The dollar value of perquisites and other personal benefits is required to
be disclosed under this column for any person if the amount for such person
equals or exceeds the lesser of $50,000 or 10% of the total of
7
<PAGE> 9
salary and bonus. The dollar value of the perquisites and other personal
benefits did not exceed the threshold amount for any of the persons named
for any of the years covered in the table.
(4) Pursuant to his new Employment Agreement, Mr. Baum was awarded 60,000 shares
of restricted stock under the Corporation's 1994 Stock Incentive Plan. The
shares are valued in the table at the closing market price of the Capital
Stock ($13.875) on August 1, 1994, the effective date of the award. The
shares are subject to transferability and forfeiture restrictions which are
not performance-based and which lapse with respect to 20,000 shares on
August 1 in each of the years 1995 through 1997. During 1993, Mr. Baum was
awarded 55,000 shares of non-performance-based restricted stock under his
original Employment Agreement. The transferability and forfeiture
restrictions on 23,000 of these shares lapsed during 1994. Of the remaining
shares, the restrictions lapsed as to 20,000 shares on January 1, 1995 and
will lapse with respect to 3,000 shares on August 13 in each of the years
1995-1998. The restrictions on the shares also will lapse (i) upon the
death of Mr. Baum, (ii) in the event he is discharged without cause, (iii)
in the event he resigns after being notified that the term of his
employment will not be extended or under certain other circumstances or
(iv) upon the occurrence of a change of control event (as defined in the
Employment Agreements). All rights to these shares also will terminate and
be forfeited if Mr. Baum is discharged for cause, resigns from employment
without good reason or in the case of the 1994 award, violates a
non-competition provision. As of December 31, 1994, the 92,000 shares on
which the restrictions had not lapsed had an aggregate value of $1,288,000.
Dividends have been and will be paid on the restricted stock during the
restriction periods, and Mr. Baum has sole voting power with respect to the
restricted stock. Mr. Baum also received performance-based restricted stock
under his new Employment Agreement (see "Long-Term Incentive Awards").
(5) The stock options granted to Mr. Baum in 1993 were pursuant to his original
Employment Agreement and included a stock option for 50,000 shares, which
was granted under the Corporation's 1986 Stock Option Plan. The stock
options granted to the other named executive officers in 1992 and 1993 also
were granted under this plan.
(6) For 1994, this column includes a special bonus of $50,000 paid to Mr. Baum
upon execution of his new Employment Agreement. For 1994, this column also
includes: (a) the following employer contributions and allocations for the
accounts of the persons named in the table under the Corporation's Thrift
and Stock Purchase Plan and Employee Stock Ownership Plan: Mr. Baum,
$10,500; Mr. Conrad, $10,500; Mr. Bechtel, $1,102; Mr. Keefer, $9,425; and
Mr. Callahan, $8,400; and (b) the following premiums paid by the
Corporation for the accounts of the persons named in the table under the
Corporation's Split Dollar Life Insurance Plan: Mr. Baum, none; Mr. Conrad,
$960; Mr. Bechtel, $7,602; Mr. Keefer, none; and Mr. Callahan, $1,721.
</TABLE>
Option Grants. No stock options were granted to the persons named in the
Summary Compensation Table during 1994.
Option/SAR Values. As to the persons named in the Summary Compensation
Table, the following table sets forth the number of shares of Capital Stock
acquired upon the exercise of stock options during 1994, the value realized from
such exercises, the number of shares covered by unexercised stock options held
at December 31, 1994 and the value of unexercised in-the-money stock options at
December 31, 1994:
8
<PAGE> 10
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND 1994 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
ACQUIRED VALUE AT 1994 YEAR END(#)(2) AT 1994 YEAR END($)(3)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Baum -0- $ -0- 36,500 233,500 $54,438 $ 206,816
Conrad A. Conrad 4,000 13,250 60,100 -0- 70,688 -0-
Charles F. Bechtel -0- -0- 27,000 -0- 37,125 -0-
R. Scott Keefer -0- -0- 25,900 -0- 22,125 -0-
Gerald W. Callahan -0- -0- 28,850 -0- 15,875 -0-
<FN>
- - ---------
(1) The value realized is the difference between the aggregate fair market value
of the shares acquired on exercise and the aggregate exercise price.
(2) Alternative stock appreciation rights were granted in conjunction with all
stock options granted prior to 1992. The named persons hold alternative
stock appreciation rights granted in conjunction with stock options for the
following number of shares: Mr. Baum, none; Mr. Conrad, 45,100 shares; Mr.
Bechtel, none; Mr. Keefer, 21,900 shares; and Mr. Callahan, 23,850 shares.
(3) The value is the aggregate amount by which the fair market value of the
shares covered by in-the-money stock options at December 31, 1994 (at
$14.00 per share) exceeded the exercise price of such stock options.
</TABLE>
Long-Term Incentive Awards. The following table sets forth as to the
persons named in the Summary Compensation Table information with respect to
long-term incentive awards made by the Corporation during 1994:
LONG-TERM INCENTIVE PLANS-AWARDS IN 1994
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK
PERFORMANCE OR OTHER PRICE-BASED PLANS
NUMBER OF PERIOD UNTIL --------------------------
SHARES, UNITS OR MATURATION OR TARGET/
NAME OTHER RIGHTS(#) PAYMENT THRESHOLD(#) MAXIMUM(#)
- - -------------------- ---------------- -------------------- ------------ ----------
<S> <C> <C> <C> <C>
August 1, 1994-
Herbert M. Baum 100,000(1) July 31, 1999 N/A N/A
Conrad A. Conrad 11,700(2) 1994 through 1996 5,850 11,700
Charles F. Bechtel 5,500(2) 1994 through 1996 2,750 5,500
R. Scott Keefer 5,500(2) 1994 through 1996 2,750 5,500
Gerald W. Callahan 2,900(3) 1994 through 1996 483 966
<FN>
- - ---------
(1) Pursuant to his new Employment Agreement, Mr. Baum was awarded 100,000
shares of performance-based restricted stock under the Corporation's 1994
Stock Incentive Plan. The transferability and forfeiture restrictions
applicable to 33,333 shares will lapse if prior to August 1, 1999 the
average closing price of the Corporation's Capital Stock for any ten
consecutive trading days equals or exceeds $20 per share. The
transferability and forfeiture restrictions applicable to another 33,333
shares will lapse if prior to such date such price equals or exceeds $25
per share. The transferability and forfeiture restrictions applicable to
the remaining 33,334 shares will lapse if prior to such date such price
equals or exceeds $30 per share. The shares will be forfeited if the
average closing prices are not reached; however, the restrictions also will
lapse (i) upon the death of Mr. Baum, (ii) in the event he is discharged
without
9
<PAGE> 11
cause, (iii) in the event he resigns after being notified that the term of
his employment will not be extended or under certain other circumstances or
(iv) upon the occurrence of a change of control event (as defined in the
Employment Agreement). The shares also will be forfeited if Mr. Baum is
discharged for cause, resigns from employment without good reason or
violates a noncompetition provision. Dividends paid on the restricted stock
(other than dividends paid in shares of the Corporation's Capital Stock)
are credited to a dividend account which earns monthly interest at money
market rates. The balance credited to the dividend account, or a portion
thereof corresponding to the shares as to which restrictions lapse, will be
paid to Mr. Baum when and if the restrictions lapse. If shares are
forfeited, all rights to the amount then credited to the dividend account
are likewise forfeited. Dividends paid in shares of the Corporation's
Capital Stock on the restricted stock during the restriction period will be
subject to the same restrictions as are applicable to the restricted stock.
Mr. Baum has sole voting power with respect to the shares of restricted
stock.
(2) During 1994, Messrs. Conrad, Bechtel and Keefer received awards of 11,700,
5,500 and 5,500 restricted performance shares, respectively, under the
Corporation's 1994 Stock Incentive Plan. The awards were effective on May
12, 1994, the date the adoption of this plan was approved by the
Corporation's stockholders. The awards are for a three-year performance
cycle from 1994 through 1996 and are subject to forfeiture if the goals for
three-year average return on average equity ("Average ROE") and three-year
cumulative earnings per share ("Cumulative EPS") established by the
Organization and Compensation Committee are not achieved. The
transferability and forfeiture restrictions with respect to all the shares
will lapse if both the target Average ROE goal and the target Cumulative
EPS goal are achieved for the full three-year period of the award cycle.
The restrictions with respect to 50% of the shares will lapse if the target
Average ROE goal is achieved for the full award cycle and a lesser
threshold Cumulative EPS goal is achieved but not exceeded for the full
award cycle. The restrictions will lapse as to more than 50% but less than
100% of the shares if the target Average ROE goal is achieved for the full
award cycle and the Cumulative EPS for the full award cycle is more than
the threshold Cumulative EPS goal but less than the target Cumulative EPS
goal. The restrictions with respect to all the shares also will lapse upon
the occurrence of a change of control event as defined in the 1994 Stock
Incentive Plan. Dividends have been and will be paid on the restricted
performance shares during the restriction period, except that any dividends
paid in shares of the Corporation's Capital Stock will be subject to the
same restrictions as are applicable to the restricted performance shares.
The grantees hold sole voting power with respect to the restricted
performance shares.
(3) Mr. Callahan received an award of 2,900 restricted performance shares under
the Corporation's 1994 Stock Incentive Plan at the same time and subject to
the same terms and conditions as the awards granted to Messrs. Conrad,
Bechtel and Keefer, but Mr. Callahan retired at the end of 1994 with the
result that two-thirds of his award was forfeited.
</TABLE>
The long-term incentive plan adopted by the Corporation in 1992 has been
discontinued. Messrs. Conrad, Keefer and Callahan surrendered their contingent
cash awards under the 1992 plan for the three-year award cycles 1992-94 and
1993-95 upon the award of the restricted performance shares for the 1994-96
award cycle under the 1994 Stock Incentive Plan.
EMPLOYMENT AGREEMENT
Mr. Baum is employed by the Corporation under an Employment Agreement,
dated as of August 1, 1994, which superseded a prior Employment Agreement, dated
as of June 9, 1993. The current Employment Agreement provides for the employment
of Mr. Baum as Chairman of the Board, President and Chief Executive Officer
through July 31, 1998 at a base salary of not less than $550,000 per year. The
term of the Employment Agreement will be extended automatically for one
additional year as of August 1, 1998 and on each anniversary date thereafter
through August 1, 2000 unless, no later than 90 days prior to any renewal date,
either the Board of Directors or Mr. Baum gives written notice to the other that
the Employment Agreement shall not be extended. The base salary may be increased
during the term of the Employment Agreement.
10
<PAGE> 12
For 1994, Mr. Baum was entitled to receive a cash bonus under the
Employment Agreement as described under "Compensation of Executive Officers"
above. For all years after 1994 during the term of the Employment Agreement,
unless the Organization and Compensation Committee approves a different
arrangement no less favorable to Mr. Baum, he will be entitled to participate in
the same cash bonus and incentive plans and arrangements that are applicable to
other executive officers of the Corporation.
Mr. Baum was awarded shares of restricted stock under the Employment
Agreement as described under "Compensation of Executive Officers" above. The
Employment Agreement provides that Mr. Baum will participate in the
Corporation's various retirement, welfare, fringe benefit and executive
perquisite plans, programs and arrangements to the extent he is eligible for
participation.
The Employment Agreement provides that it will terminate in the event of:
(i) Mr. Baum's death or disability, (ii) his discharge for cause, (iii) his
discharge without cause or (iv) his resignation. In the event the Employment
Agreement terminates by reason of Mr. Baum's disability, discharge without cause
or resignation, the Corporation is required to make a severance/retirement
payment to Mr. Baum in an amount, calculated as of the date of termination,
which is the monthly equivalent of a $200,000 annual benefit reduced by the
actuarial equivalent of (i) Mr. Baum's projected primary social security benefit
and (ii) the benefits payable to Mr. Baum under all tax qualified retirement
plans maintained by the Corporation. The severance/ retirement payment will be
suspended during any period in which Mr. Baum is an employee or independent
contractor of another company with a rate of compensation equal to or in excess
of $16,667 per month and, in the event of Mr. Baum's disability, the payment
will be reduced dollar for dollar by the amount of disability benefits, if any,
paid to Mr. Baum in accordance with any disability policy or program of the
Corporation.
In the event Mr. Baum is discharged without cause or resigns with good
reason at any time within two years following the date that a change in control
as defined in the Employment Agreement occurs, he will be entitled to receive
annually from the Corporation for a period of three years from the date of
termination of employment an amount equal to the total of his base salary and
his target bonus for the calendar year in which the date of termination occurs.
The Employment Agreement also contains a non-competition and
non-solicitation agreement on the part of Mr. Baum, which covers the period of
his employment under the Employment Agreement and the three years after any
termination of employment.
PENSION BENEFITS
The Salaried Pension Plan (the "Pension Plan") of the Corporation covers
substantially all of its salaried employees. The Pension Plan is a
non-contributory, defined benefit plan providing for pensions based upon years
of credited service and average annual base salary for the thirty-six
consecutive months of highest earnings in the last ten years of service. Pension
benefits become vested after five years of vesting service.
There are separate benefit formulas for participants with five or more
years of vesting service as of March 1, 1993 ("Class I Participants") and for
employees who became participants on or after March 1, 1993 and who did not have
five years of vesting service as of March 1, 1993 ("Class II Participants").
Pension Plan Tables I and II below present the estimated annual retirement
benefits under the Pension Plan under both formulas for the average annual base
salary and years of credited service indicated, on the assumptions that full
retirement benefits will be payable and that the benefits will be paid in the
form of a straight life annuity.
Pension Plan Table I provides information for Class I Participants who
receive up to 30 years of credited service. The pension for these participants
is reduced by up to 66% of the employee's primary social security benefit, but
the retirement benefits shown do not reflect the deduction. Messrs. Conrad,
Keefer and Callahan are Class I Participants.
Pension Plan Table II provides information for Class II Participants who
receive up to 35 years of credited service. The retirement benefit for these
participants is equal to a percentage of average annual base salary plus an
additional percentage of the amount by which average annual base salary exceeds
average annual social-security-covered compensation for the year of the
employee's termination of employment or retirement, whichever is earlier, and
the preceding 34 years. The retirement benefits shown in the table are
11
<PAGE> 13
based on average annual social-security-covered compensation for the 35-year
period through and including 1994. Messrs. Baum and Bechtel are Class II
Participants.
PENSION PLAN TABLE I
<TABLE>
<CAPTION>
AVERAGE ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF CREDITED SERVICE INDICATED
ANNUAL ----------------------------------------------------------------------------
BASE SALARY 10 YR. 15 YR. 20 YR. 25 YR. 30 YR.
- - ----------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
100,000....... 27,500 41,250 55,000 60,000 65,000
150,000....... 41,250 61,875 82,500 90,000 97,500
200,000....... 55,000 82,500 110,000 120,000 130,000
250,000....... 68,750 103,125 137,500 150,000 162,500
300,000....... 82,500 123,750 165,000 180,000 195,000
350,000....... 96,250 144,375 192,500 210,000 227,500
</TABLE>
PENSION PLAN TABLE II
<TABLE>
<CAPTION>
AVERAGE ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF CREDITED SERVICE INDICATED
ANNUAL ------------------------------------------------------------------------------
BASE SALARY 5 YR. 10 YR. 15 YR. 20 YR. 25 YR. 30 YR. 35 YR.
- - ----------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100,000...... 7,135 14,270 21,405 28,540 35,675 42,810 49,945
150,000...... 11,010 22,020 33,030 44,040 55,050 66,050 77,070
200,000...... 14,885 29,770 44,655 59,540 74,425 89,310 104,195
250,000...... 18,760 37,520 56,280 75,040 93,800 112,560 131,320
300,000...... 22,635 45,270 67,905 90,540 113,175 135,810 158,445
350,000...... 26,510 53,020 79,530 106,040 132,550 159,060 185,570
400,000...... 30,385 60,770 91,155 121,540 151,928 182,310 212,695
450,000...... 34,260 68,520 102,780 137,040 171,300 205,560 239,820
500,000...... 38,135 76,270 114,405 152,540 190,675 228,810 266,945
550,000...... 42,010 84,020 126,030 168,040 210,050 252,060 294,070
700,000...... 53,635 107,270 160,905 214,540 268,175 321,810 375,445
</TABLE>
Base salary is the only compensation taken into account for the purpose of
determining the benefits under the Pension Plan. The salaries reflected in the
Summary Compensation Table for Messrs. Conrad and Keefer for the last three
years are the salaries which would have been taken into account had their
service terminated on December 31, 1994. As of that date, Messrs. Baum and
Bechtel had eighteen months and thirteen months of credited service
respectively, and Messrs. Conrad and Keefer each had 20 years of credited
service. Mr. Callahan retired at the end of 1994 with an average annual base
salary of $120,000 and 21 years of credited service for purposes of the pension
plan.
Sections 401(a)(17) and 415 of the Internal Revenue Code limit,
respectively, the amount of compensation which may be used in calculating
pension benefits, and the maximum amount of annual benefits which may be paid,
under tax-qualified retirement plans such as the Pension Plan. The Corporation
has a Supplemental Excess Retirement Plan which authorizes the payment from
general funds of the Corporation of any benefits calculated under the provisions
of the Pension Plan that may be above the limits under these Sections.
The Pension Plan provides that if it is terminated within three years
following a change of control (as defined in the Pension Plan) and if upon such
termination there exist excess Pension Plan assets, then all active participants
in the Pension Plan who are not otherwise vested will become fully vested, and
any excess assets will be allocated among all (i) active participants, (ii)
retirees who began receiving benefits under the Pension Plan at the time of
termination of their employment and (iii) beneficiaries of the foregoing
12
<PAGE> 14
proportionately on the basis of their respective benefits payable under the
Pension Plan as of its termination date. This provision of the Pension Plan may
not be amended for three years following a change of control.
Mr. Baum is entitled to a Severance/Retirement Payment under certain
circumstances as described under "Employment Agreement" above. The
Severance/Retirement Payment is subject to reduction in the event Mr. Baum
becomes entitled to pension benefits under the Pension Plan.
SEVERANCE BENEFITS
The Corporation has a severance plan (the "Severance Plan") under which
eligible employees are entitled to a severance allowance in the event of
termination of employment following a change of control (as defined in the
Severance Plan). All non-union full-time salaried employees and all non-union
full-time hourly employees of the Corporation and its domestic subsidiaries are
entitled to participate. Under the Severance Plan, an eligible employee whose
employment is terminated by employer action other than for cause following a
change of control or who resigns under certain circumstances following a change
of control is entitled to a severance allowance equal to two weeks' earnings for
each full year the employee has been employed plus earned but unused vacation
pay. For purposes of determining the severance allowance, an employee's earnings
include his or her regular rate of salary for the calendar year in which the
change of control occurs plus bonuses earned for the preceding calendar year,
reduced to a weekly average; provided, however, that if such earnings for the
calendar year in which the termination occurs are higher, the higher earnings
are used. The severance allowance is payable semi-monthly over the number of
weeks of earnings to be paid, but payments cease upon the death of the former
employee. Participation in any pension or medical plan in which the employee
participated at the time of termination of employment continues during the
severance allowance payment period. The Severance Plan may not be amended or
terminated for three years following a change of control.
The Corporation has a Severance Pay Plan for Salaried and Hourly Non-Union
Employees which covers substantially all its salaried employees and which
provides for severance benefits in the event the Corporation reduces the
workforce, eliminates the covered employee's position or closes or sells the
facility at which the covered employee is employed. The payments under this plan
amount to one week of base salary multiplied by years of service. None of the
persons named in the Summary Compensation Table above could receive severance
payments in excess of $100,000 under this plan, and payments under this plan are
not made if payments are made under the Severance Plan.
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and officers, and persons who own more than ten percent
of the Corporation's Capital Stock, to file reports of beneficial ownership of
the Corporation's Capital Stock with the SEC on SEC Forms 3, 4 and 5. During
1994, Ms. Cutler was late in reporting on Form 4 one transaction involving a
purchase of shares of the Corporation's Capital Stock in May 1994.
During 1994, Robert Cohen, Executive Vice President of the Motor Oil
Division, was late in reporting one transaction in September 1994 involving the
transfer of shares of the Corporation's Capital Stock from direct to indirect
beneficial ownership. The transfer was subsequently reported on an amended
report on Form 5.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation has a $45,000,000 revolving credit facility with a group of
banks, including Integra Bank/North, which participates in such facility to the
extent of $5,000,000. Integra Bank/North is a wholly-owned subsidiary of Integra
Financial Corporation, of which Mr. Carroll is President and Chief Operating
Officer. The Corporation is entitled to make borrowings under this facility at
current interest rates selected by the Corporation from several interest rate
options. No amount was borrowed under the revolving credit facility during 1994
and there were no outstanding borrowings under it as of December 31, 1994.
13
<PAGE> 15
The Corporation and a trust for the benefit of the three children of Mr.
Ross are parties to a lease pursuant to which the Corporation leases a warehouse
and office space in Miami, Florida at an annual rental of $84,000 plus taxes.
The lease expires on December 31, 1995.
The Corporation acquired Westland Oil Company, Inc. ("Westland") and the
Specialty Oil Companies on September 30, 1994. All of the stock of Westland was
acquired by the Corporation from L. David Myatt, Dennis M. Myatt, Jr., other
members of the Myatt family and various trusts created for the benefit of
members of the Myatt family in exchange for 4,000,000 shares of the
Corporation's Capital Stock. The Specialty Oil Companies (four separate
companies controlled by members of the Myatt family) were acquired by merger of
the Specialty Oil Companies into Specialty Oil Company, Inc. ("Specialty"), a
newly-formed, wholly-owned subsidiary of the Corporation, for $19,500,000. The
acquisition agreements include indemnities by the Corporation of L. David Myatt
and Dennis M. Myatt, Jr. with respect to certain tax matters related to the
transaction and certain debt obligations of the acquired companies. L. David
Myatt became a director of the Corporation following the transactions and is
Vice Chairman of the Corporation and Chief Executive Officer of its Motor Oil
Division, the headquarters of which was moved to Shreveport, Louisiana after the
transactions. Dennis M. Myatt, Jr. who is the brother of L. David Myatt, is a
Vice President of the Motor Oil Division.
The Corporation purchased certain equipment used by the acquired companies
from Moon Realty, a partnership controlled by Messrs. L. David and Dennis M.
Myatt, Jr. for approximately $1,500,000, and subject to certain conditions,
agreed to purchase for approximately $9 million certain property in Shreveport,
Louisiana that is leased by Moon Realty to Westland. The assets acquired and to
be acquired from Moon Realty were held by Moon Realty more than two years prior
to the agreements of sale and the purchase prices were determined through arm's
length negotiations. Moon Realty leases to Westland or Specialty warehouse and
office space, including the property to be acquired, in Louisiana, Mississippi
and Arkansas at aggregate annual rentals of $1,423,884 plus taxes. Myatt
Investments, a separate partnership in which Messrs. L. David and Dennis M.
Myatt, Jr. are partners, leases to Specialty or Westland warehouse and office
space at various locations in Louisiana at aggregate annual rentals of $78,684
plus taxes. All the Moon Realty and Myatt Investments leases with Westland and
Specialty expire in 2004.
On September 30, 1994, the Corporation and L. David Myatt entered into an
agreement for his employment as Vice Chairman and Chief Executive Officer of the
Motor Oil Division for a term of five years at an annual base salary of at least
$200,000. Pursuant to this agreement, L. David Myatt also was granted an option
to purchase 250,000 shares of the Corporation's capital stock under the
Corporation's 1986 Stock Option Plan and 1994 Stock Incentive Plan. One-half of
the stock options may be exercised at 100% of fair market value on the date of
grant, one-quarter at such fair market value plus $2.00 and the remainder at
such fair market value plus $3.00. The stock options are exercisable in 20%
increments on the first through the fifth anniversaries of the date of grant or
earlier upon the occurrence of a change of control (as defined in the
agreement). The agreement provides for certain other benefits and perquisites,
includes a non-competition covenant on the part of Mr. Myatt and may be
terminated under certain circumstances. If Mr. Myatt's employment terminates
within two years after a change of control, he will be entitled to be paid his
base salary and target annual bonus at the time of termination for three years.
Westland regularly purchases lubricant base stocks from Calumet Lubricants
Co., of which Mr. Grube serves as President. The amount of such purchases in
1994 was approximately $2.7 million, of which approximately $393,000 was
purchased after the Corporation's acquisition of Westland. In October 1994 the
Corporation and Legacy Resources Company, a limited partnership of which Mr.
Grube is a 25% limited partner and a 20% owner of the general partner, entered
into a farmout agreement for the development of certain oil and gas properties
owned by the Corporation. Under this agreement, Legacy Resources Corporation
paid $244,800 to the Corporation and reimbursed the Corporation for certain
expenses in 1994. The consideration was determined through arm's length
negotiations.
ORGANIZATION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, the members of the Organization and Compensation Committee
were Dr. Gardner (Chairman) and Messrs. Fetterolf, McClelland and McQuaide, all
of whom are non-employee directors.
14
<PAGE> 16
During 1994, there were, and there presently are, no interlocking
relationships, as defined in the regulations of the SEC, involving members of
the Organization and Compensation Committee.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee is comprised of four
independent directors. The responsibilities of the Committee are described at
pages 5 and 6. The Committee has adopted a policy of relating a significant
portion of executive compensation to corporate performance and stockholder
value. During 1994, the Committee worked with a compensation consultant to
determine changes in compensation for the Chief Executive Officer and other key
executives.
1994 CEO Compensation Package. The compensation package given to Mr. Baum
at his hiring in 1993 was designed to provide a strong incentive to improve the
Corporation's financial and stock performance. His base salary was established
at approximately the 50th percentile of general industry executive pay for
comparably sized companies. Since Mr. Baum became CEO, the Corporation has
experienced improved financial performance and significantly improved revenues
and market share in its core motor oil business. Mr. Baum has also devised and
implemented a well defined business strategy for the Corporation and its core
motor oil business. In addition, Mr. Baum was responsible for acquiring Westland
and the Specialty Oil Companies, substantially increasing the Corporation's
motor oil business. Accordingly, the Committee approved a new employment
contract for Mr. Baum effective as of August 1, 1994. Under the new employment
agreement, the term of Mr. Baum's employment was extended, his base salary was
increased from $450,000 to $550,000 per year and he was awarded a $50,000 cash
bonus at signing to reflect the Corporation's improved financial performance. As
was the case with his prior agreement, the new agreement provided for a bonus
for 1994 based on the achievement of performance goals established by the
Committee. The goals were based on certain increases in corporate net income and
sales revenues. Mr. Baum was entitled to a bonus of 50% of his new base salary
if the goals were achieved, and the bonus was earned. Mr. Baum did not
participate in the bonus plan for the other executive officers.
Under the new employment agreement, Mr. Baum also was awarded shares of
restricted stock under the Corporation's 1994 Stock Incentive Plan, which was
recommended for adoption by the Committee in December 1993 and approved by the
Corporation's stockholders at the 1994 Annual Meeting. An award of 60,000
shares, the restrictions on 20,000 shares of which lapse at one year intervals,
was made in recognition of Mr. Baum's performance and the improved performance
of the Corporation. In addition, in order to provide a long-term performance
incentive, Mr. Baum was awarded 100,000 shares of restricted stock, with the
removal of the restrictions contingent upon the Corporation's Capital Stock
reaching certain average closing prices (well above market at the time of the
award) for a period of ten consecutive trading days at any time prior to August
1, 1999. This award was made to tie Mr. Baum's compensation package to increased
stockholder value and is described in greater detail under "Compensation of
Executive Officers-Long Term Incentive Awards" in this Proxy Statement.
Other Key Executives. In December 1993, the Committee approved an
executive compensation program for 1994 and subsequent years. The Committee
decided on an executive compensation philosophy of providing 50th percentile
competitive compensation with respect to salaries and bonuses paid by companies
with comparable sales. Through its compensation consultant, the Committee has
access to information with respect to such salaries and bonuses. No particular
weight is given to the compensation paid by the companies in the peer groups for
which information is provided in the Corporation's Stockholder Return
Performance Graphs. As a result of the new philosophy and their individual
performance, several key executives received salary increases for 1994.
With respect to bonus opportunities, the Committee approved and the
Corporation adopted a new Annual Incentive Bonus Plan covering executive
officers and other key employees of the Corporation and its subsidiaries. For
1994, for executive officers with corporate-wide responsibility, target bonuses
of up to 50% of base salary could be earned if goals established for corporate
net income or earnings per share and sales revenues were met. Threshold goals
entitling participants to 50% of the target bonus and maximum goals
15
<PAGE> 17
entitling participants to 150% of the target bonus also were established. The
plan was adopted to provide cash incentives for improved short-term corporate
performance.
A new long-term incentive compensation program was implemented with the
adoption of the 1994 Stock Incentive Plan which provides for the grant of stock
options and the award of restricted shares, performance shares and other share
awards. The plan is designed to make a significant part of executive
compensation dependent upon corporate performance and return to stockholders.
For 1994, restricted performance shares were granted to the executive officers
named in the Summary Compensation Table, not including Mr. Baum, and to other
key executives. The shares have a three-year performance cycle and the
restrictions will lapse at the end of the cycle, if three-year average return on
average equity and three-year cumulative earnings per share goals established by
the Committee are achieved. These awards are described in greater detail under
"Compensation of Executive Officers--Long-Term Incentive Awards" in this Proxy
Statement.
While stock options traditionally have been granted annually by the
Committee, there was no general grant of stock options during 1994 because of
the restricted performance share awards. Stock options were, however, granted
under the 1994 Stock Incentive Plan and its predecessor, the 1986 Stock Option
Plan, to newly hired key employees and persons who became key employees as a
result of the acquisition in September 1994 of the Specialty Oil Companies and
Westland. In particular, in recognition of his election as Vice Chairman of the
Corporation and Chief Executive Officer of its Motor Oil Division, options for
the purchase of 250,000 shares of the Corporation's Capital Stock were granted
to L. David Myatt under the 1994 Stock Incentive Plan and 1986 Stock Option
Plan. The awards of the restricted performance shares and grants of stock
options under the 1994 Stock Incentive Plan will not be subject to the
deductibility limitation of Section 162(m) of the Internal Revenue Code.
Finally, as part of the new executive compensation program, minimum share
ownership goals for executives were established. Over a four year period, the
Chief Executive Officer and the two Vice Chairmen are expected to achieve
ownership of shares of Capital Stock having a fair market value equivalent to at
least two times annual base salary, and all other officers are expected to
achieve over a four year period ownership of shares having a value equivalent to
at least one times annual base salary.
In general, the Committee will set executive compensation with due
consideration of the requirements for deductibility under Section 162(m) of the
Internal Revenue Code, which may limit the deductibility of annual compensation
in excess of $1 million for certain executives. However, under appropriate
circumstances and when merited by individual performance, the Committee may
authorize compensation that may not be fully deductible by the Corporation.
The Committee intends to continue to structure the Corporation's executive
compensation so that long-term compensation programs will be tied to objective
standards of corporate performance and increased stockholder value.
<TABLE>
<S> <C>
Thomas R. Gardner, Chairman W. Craig McClelland
C. Frederick Fetterolf Delbert J. McQuaide
</TABLE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder returns over
the years 1990 through 1994 of (i) the Corporation's Capital Stock, (ii) the
Standard and Poor's 500 Stock Index and (iii) two groups of peer companies
selected by the Corporation. The performance graph assumes that $100 was
invested on January 1, 1990 in the Corporation's Capital Stock, the index and
the peer groups, and that all dividends were reinvested.
Peer Group I includes the Corporation and the following petroleum refiners
and marketers: Ashland Oil, Inc., Diamond Shamrock, Inc., Getty Petroleum Corp.,
Holly Corporation, Pennzoil Company, Sun Company, Inc., Tesoro Petroleum
Corporation, Tosco Corp., Total Petroleum, N.A., Ultramar Corp. and Valero
Energy Corporation. Peer Group II includes the Corporation, certain petroleum
refiners and marketers, and certain companies specializing in the marketing of
branded consumer products: Armor All Products Corporation, Ashland Oil, Inc.,
Diamond Shamrock, Inc., First Brands Corporation, Monro Muffler
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<PAGE> 18
Brake, Inc., Pennzoil Company, Sun Company, Inc., WD-40 Company, Witco
Corporation, and Wynn's International, Inc.
Peer Group I has been included in prior performance graphs provided by the
Corporation and was selected from a group of petroleum refiners and marketers
included in a research report prepared for the Corporation. Peer Group II is
being included for the first time to provide a comparison with a group of
oil-related and marketing businesses toward which the Corporation is positioning
itself. This group also was selected from a group of companies included in a
research report prepared for the Corporation. The performance of Peer Group II
exceeded the performance of Peer Group I during 1990-94 and came closer to the
performance of the Corporation.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE CORPORATION, S&P 500 STOCK INDEX AND PEER GROUPS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500
(FISCAL YEAR COVERED) QUAKER STATE INDEX PEER GROUP I PEER GROUP II
<S> <C> <C> <C> <C>
1989 100 100 100 100
1990 80 97 75 75
1991 104 126 84 82
1992 97 136 78 85
1993 119 150 94 101
1994 128 152 94 99
</TABLE>
AMENDMENT OF CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL STOCK
GENERAL
The Corporation is proposing to amend Article FOURTH of the Certificate of
Incorporation to increase to 95,000,000 the authorized number of shares of
Capital Stock. The text of the proposed amendment is set forth in Exhibit A to
this Proxy Statement. Article FOURTH of the Certificate of Incorporation
currently authorizes the issuance of 37,500,000 shares of Capital Stock, par
value $1.00 per share.
As of March 27, 1995, 31,474,482 shares of Capital Stock were issued and
outstanding, and 42,823 shares of Capital Stock were held in the treasury of
the Corporation. An additional 2,228,032 shares of Capital Stock were reserved
for issuance upon exercise of outstanding options granted under the
Corporation's 1976 and 1986 Stock Option Plans, 1994 Stock Incentive Plan, 1994
Non-Employee Directors' Stock Option Plan and Mr. Baum's original employment
agreement. Not including the reserved shares, 3,754,663 shares of Capital Stock
remains available for issuance.
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<PAGE> 19
Because of the limited number of shares of Capital Stock available for
issuance, the Board of Directors recommends that the stockholders approve the
amendment to the Certificate of Incorporation to increase the number of
authorized shares of Capital Stock. Such an increase will enable the Corporation
to enjoy greater flexibility in raising capital and could facilitate
acquisitions of assets or companies, the issuance of stock dividends, the
institution of employee benefit plans and other corporate purposes. An increase
in the number of authorized shares of Capital Stock also would allow shares to
be issued without the expense and delay of a special stockholders' meeting.
The additional shares would not be required to be offered first to the
stockholders and would be available for issuance without further stockholder
action unless required by the Certificate of Incorporation, applicable law or
the rules of any stock exchange upon which the Corporation's securities may be
listed. The New York Stock Exchange, on which shares of Capital Stock presently
are listed, currently requires stockholder approval as a prerequisite to listing
shares in several instances, including certain acquisition transactions.
POSSIBLE ANTI-TAKEOVER EFFECT
The availability of the additional shares could discourage or frustrate an
attempt to effect a change in control of the Corporation. The additional shares
could be used to dilute the stock ownership of a person seeking to obtain
control of the Corporation. Article FOURTEENTH of the Corporation's Certificate
of Incorporation currently requires a 95% stockholder vote to approve a merger
or other business combination with an entity owning at least 30% of the
Corporation's voting stock unless certain price and procedural requirements are
satisfied, or unless the Board of Directors approves the transaction. Shares of
Capital Stock could be issued to prevent a proposed business combination from
receiving the necessary 95% stockholder approval. The additional shares also
could be used to underlie a rights plan, pursuant to which stockholders would be
given the right to purchase shares of Capital Stock at a discount in the event
that a bidder acquired more than a specified percentage of the Corporation's
Capital Stock, unless the Corporation's Board of Directors had first approved
the redemption of the rights or an amendment of the rights plan. Such a plan
would tend to discourage persons from purchasing large amounts of Capital Stock
without the consent of the Board of Directors, and so would make it more
difficult for someone to acquire control of the Corporation without offering a
price that the directors found to be fair to the stockholders. The proposed
amendment therefore may make it more difficult to remove the Corporation's
incumbent management.
The Board of Directors has discussed the concept of a rights plan, and may
adopt such a plan if the amendment is adopted. At present, the Corporation has
no agreements, plans or commitments with respect to the sale or issuance of the
additional shares of Capital Stock which would be authorized by the proposed
amendment. The Board of Directors is not aware that any person is seeking to
obtain control of the Corporation.
VOTE REQUIRED
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of the Corporation's Capital Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting, a quorum being
present, is needed to approve the proposed amendment. An abstention from voting
on a matter by a stockholder present in person or represented by proxy and
entitled to vote, or a broker non-vote, has the same effect as a vote "Against"
the matter.
The Board of Directors recommends that you vote "FOR" the proposed
amendment to the Certificate of Incorporation. Unless otherwise directed
therein, the proxies solicited hereby will be voted for the proposed amendment
to the certificate of incorporation.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as
independent auditors to audit the financial statements of the Corporation and
its subsidiaries for the year 1995. Coopers & Lybrand L.L.P. has audited the
financial statements of the Corporation and its subsidiaries since the
Corporation was organized in
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<PAGE> 20
1931. Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting, will have the opportunity to make a statement if they choose to do so
and will be available to respond to appropriate questions.
The Board of Directors recommends that you vote "FOR" the ratification of
the appointment of Coopers & Lybrand L.L.P. Unless otherwise directed therein,
the proxies solicited hereby will be voted for the ratification of the
appointment of Coopers & Lybrand L.L.P. In the event the stockholders fail to
ratify the appointment, the Board will reconsider its selection of independent
auditors. Coopers & Lybrand L.L.P. has advised the Corporation that no member of
its firm has any direct or material indirect financial interest in the
Corporation or any of its subsidiaries.
VOTE REQUIRED
Under Delaware law, the affirmative vote of the holders of a majority of
the shares of the Corporation's stock present in person or represented by proxy
and entitled to vote at the Annual Meeting, a quorum being present, is necessary
for the ratification of the appointment of Coopers & Lybrand L.L.P. An
abstention from voting on a matter by a stockholder present in person or
represented by proxy and entitled to vote has the same legal effect as a vote,
or a broker non-vote, "Against" the matter.
OTHER MATTERS
The Board of Directors knows of no other matter to be voted upon at the
Annual Meeting. Should other matters properly come before the meeting or any
adjournment thereof, the proxy holders will vote upon such matters in accordance
with their best judgment.
EXPENSES OF SOLICITATION
The cost of the solicitation of proxies for the Annual Meeting will be paid
by the Corporation. In addition to solicitation of proxies by mail, the officers
and regular employees of the Corporation may solicit proxies in person or by
telephone. Brokers, banks and their nominees will be reimbursed for their
reasonable out-of-pocket expenses incurred in forwarding proxy material and the
Corporation's 1994 Annual Report to Stockholders to beneficial owners of shares.
The Corporation has engaged Morrow & Co., Inc. ("Morrow") to assist in the
solicitation of proxies. Morrow has advised the Corporation that its services
will include contacting brokers, banks, nominees and individual holders of
record owning a large number of shares. Morrow's fees (estimated at $6,500) and
expenses will be paid by the Corporation.
1996 STOCKHOLDER PROPOSALS
A proposal submitted by a stockholder for the regular Annual Meeting to be
held in 1996 must be received by the Secretary, Quaker State Corporation, 255
Elm Street, Oil City, Pennsylvania 16301 on or prior to December 15, 1995 in
order to be eligible to be included in the Corporation's Proxy Statement for
that meeting. Under the Corporation's Bylaws, proposals by stockholders for
consideration at the 1996 Annual Meeting that are not submitted for possible
inclusion in the Proxy Statement for that meeting must be received by the
Secretary at the above address between February 23, 1996 and March 25, 1996.
By Order of the Board of Directors,
Paul E. Konney,
Vice President, General Counsel
and Secretary
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EXHIBIT A
The following is the proposed amended Article FOURTH of the Corporation's
Certificate of Incorporation:
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is ninety-five million (95,000,000) shares of
the par value of one dollar ($1.00) each.
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<PAGE> 22
QUAKER STATE CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
THE WESTIN WILLIAM PENN, 530 WILLIAM PENN PLACE, PITTSBURGH, PENNSYLVANIA
THURSDAY, MAY 25, 1995 -- 1:00 P.M., E.D.S.T.
The undersigned stockholder of Quaker State Corporation (the "Corporation")
does hereby appoint Herbert M. Baum and Delbert J. McQuaide, or each of them
acting individually, as proxies of the undersigned to vote at the Annual
Meeting of Stockholders of the Corporation to be held May 25, 1995 (the "Annual
Meeting"), and at all adjournments thereof, all the shares of Capital Stock of
the Corporation which the undersigned may be entitled to vote, on the matters
set out on the reverse side of this card described in the Proxy Statement and,
at their discretion, on any other business which may properly come before the
Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" ITEMS 1,
2, AND 3.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
FOLD AND DETACH HERE
<PAGE> 23
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS, 1, 2, AND 3
Please check if
you will attend
the Annual Meeting.
0
<TABLE>
<C> <S> <C>
Item 1--The election of the following twelve individuals as Directors:
FOR ALL WITHHOLD Herbert M. Baum, Leonard M. Carroll, Conrad A. Conrad, Laurel Cutler, C. Frederick
NOMINEES AUTHORITY Fetterolf, Thomas A. Gardner, F. William Grube, Forrest D. Haselton, Delbert J. McQuaide,
(EXCEPT AS TO VOTE FOR L. David Myatt, Raymond A. Ross, Jr., and Lorne R. Waxlax. A vote FOR includes
SHOWN BELOW) ALL NOMINEES discretionary authority to vote for a substituted nominee if any of the nominees listed
becomes unable to serve or for good cause will not serve.
0 0 (To withhold authority to vote for any individual nominee, print that
nominee's name on the line below.)
______________________________________________________________________________________
Item 2--The approval of the amendment of the Corporation's Item 3--The ratification of the appointment of
Certificate of Incorporation to increase the authorized number Coopers & Lybrand as independent
of shares of the Corporation's Capital Stock from 37,500,000 auditors for 1995.
to 95,000,000 shares.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
0 0 0 0 0 0
</TABLE>
PLEASE DATE AND SIGN exactly as your
name appears hereon and return in the
enclosed envelope. If acting as attorney,
executor, administrator, guardian or
trustee, please so indicate with your full
title when signing. If a Corporation,
please sign in full corporate name, by
duly authorized officer. IF SHARES ARE HELD
JOINTLY, EACH STOCKHOLDER NAMED SHOULD
SIGN.
Dated: ____________________________, 1995
_________________________________________
_________________________________________
THE SIGNER HEREBY REVOKES ALL PREVIOUS
PROXIES FOR THE ANNUAL MEETING,
ACKNOWLEDGES RECEIPT OF THE NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS AND PROXY
STATEMENT BOTH DATED MARCH 28, 1995, AND OF
THE ANNUAL REPORT TO STOCKHOLDERS FOR 1994
AND HEREBY RATIFIES ALL THAT THE SAID
PROXIES MAY DO BY VIRTURE HEREOF.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
FOLD AND DETACH HERE
