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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-2677
QUAKER STATE CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 25-0742820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Elm Street
Oil City, Pennsylvania 16301
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 814-676-7676
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Capital Stock, par value New York Stock Exchange
$1.00 per share Pacific Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for at least the past 90 days. Yes X No
- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The registrant estimates that as of March 15, 1995 the aggregate market
value of the shares of its Capital Stock held by non-affiliates of the
registrant was more than $417,000,000.
As of March 15, 1995, there were 31,472,516 shares of Capital Stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Quaker State's 1994 Annual Report to Stockholders are
incorporated by reference into Parts I and II of this annual report on Form
10-K.
Portions of the Proxy Statement for Quaker State's Annual Meeting of
Stockholders to be held on May 25, 1995 are incorporated by reference into Part
III of this annual report on Form 10-K.
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PART I
ITEM 1. BUSINESS.
Quaker State Corporation ("Quaker State" or the "Company"), a Delaware
corporation formed in 1931, has its principal place of business at 255 Elm
Street, Oil City, Pennsylvania. Quaker State's dominant business is the
manufacture and sale of branded and private label motor oils and lubricants (see
"Motor Oil Division" below). Quaker State's business segments also include the
production of natural gas and crude oil, fast lube operations, the manufacture
and sale of safety lighting equipment and docking operations (see "Natural Gas
Exploration and Production Division," "Q Lube", "Truck-Lite" and "Docking
Operations" below). Quaker State is no longer engaged in insurance or coal
operations (see "Discontinued Insurance Operations" and "Discontinued Coal
Operations" below).
MOTOR OIL DIVISION
The Quaker State Motor Oil Division manufactures and sells lubricants
(primarily motor oils for automobiles and trucks) and fuels. The lubricants
include transmission fluids, gear lubricants and greases for automobiles and
trucks, as well as specialty lubricants designed for other types of vehicles,
such as sport utility vehicles, marine craft, motorcycles and snowmobiles. All
the lubricants except certain of those sold through Specialty Oil Company, Inc.
(see below) are sold under the Quaker State brand name. The fuels sold by Quaker
State include gasoline, fuel oils (diesel fuel and heating oils) and kerosene.
Quaker State also purchases and resells automotive consumer products.
On September 30, 1994, Quaker State completed the acquisition by merger of
the four Specialty Oil Companies into a wholly owned subsidiary named Specialty
Oil Company, Inc. ("Specialty") for $19,500,000 in cash and the purchase of all
of the capital stock of Westland Oil Company, Inc. ("Westland") in exchange for
4,000,000 shares of Quaker State capital stock. Specialty and Westland are
headquartered in Shreveport, Louisiana and are now part of the Quaker State
Motor Oil Division. Through Specialty, Quaker State markets and distributes
private label, proprietary brand and major national brand lubricants and other
automotive aftermarket products. Through the Specialty Environmental Services
Division of Specialty, Quaker State provides collection, transportation and
recycling services for used oil, brake fluid and antifreeze and used oil
filters. Westland blends and packages motor oils, other lubricants and related
products, which are sold primarily to Specialty. Unless otherwise noted, 1994
results include the fourth quarter results of operations of Specialty and
Westland.
Manufacturing. Motor oils are made by blending additives with lubricant
stocks refined from crude oil. Quaker State's motor oils are made from lubricant
stocks produced at its Congo refinery located in Newell, West Virginia or from
lubricant stocks purchased from other refiners. The Congo refinery is specially
designed to maximize the production of lubricant stocks from Pennsylvania Grade
crude oil. Although it was built in 1971, the Congo refinery remains one of the
newer lubricant stock refineries in the United States, and it has sufficient
capacity to meet planned production requirements.
During the three years ended December 31, 1994, the following amounts of
Pennsylvania Grade crude oil were processed at the Congo refinery:
1994-3,919,000 barrels; 1993-3,710,000 barrels; and 1992-3,743,000 barrels.
Crude oil is available from a large number of suppliers. Quaker State purchases
most of its crude oil from suppliers with whom, for the most part, Quaker State
has been doing business for many years. During 1994, Quaker State purchased
crude oil from approximately 1,400 producers, including one producer which
accounted for approximately 12% of Quaker State's purchases. Purchases are made
pursuant to informal arrangements which may be terminated at any time or
pursuant to joint venture, operating, farmout or similar agreements under which
Quaker State has the contractual right to purchase the crude oil if produced.
During the three years ended December 31, 1994, the weighted average price per
barrel of crude oil purchased by Quaker State was: 1994-$15.59; 1993-$16.17; and
1992-$17.32. A small portion of the crude oil processed by Quaker State at the
Congo refinery is produced by Quaker State itself (see "Natural Gas Exploration
and Production Division-Crude Oil" below).
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During 1994, 1993 and 1992, approximately 43%, 44% and 45%, respectively,
of the lubricant stocks used in Quaker State branded motor oils were produced at
the Congo refinery. Some lubricant stocks produced at the Congo refinery are
sold to third parties.
Quaker State blends lubricant stocks with additives to produce motor oils
at facilities at the Congo refinery, at a blending and packaging plant owned and
operated by Quaker State in Vicksburg, Mississippi, and at a blending and
packaging plant owned and operated by Quaker State in Carson, California (near
Los Angeles).
Quaker State's Canadian subsidiary, Quaker State, Inc., owns and operates a
plant in Burlington, Ontario (near Toronto) to package blended motor oils
supplied by the Congo refinery.
Westland purchases lubricant base stocks and chemical additives, blends
them into finished lubricants and related products and packages finished
lubricants and related products at a leased blending and packaging plant in
Shreveport, Louisiana and at a blending and packaging plant owned by Westland in
San Antonio, Texas.
Quaker State sells the majority of its branded motor oils (by volume) in
packages; however, it sells a significant amount in bulk. Packaged motor oils
are sold primarily in one quart plastic bottles. In the United States, the
plastic bottles are made by others to Quaker State's specifications. In Canada,
the plastic bottles are made by Quaker State, Inc. at the Burlington, Ontario
facility. Westland packages lubricants in containers ranging in size from four
ounces to 55 gallons and also sells lubricants in bulk. Westland makes certain
plastic containers itself and purchases the other containers from a number of
suppliers.
Greases and some specialty lubricants sold by Quaker State are made by
others to the Company's specifications.
Gasoline, fuel oils and kerosene account for approximately 57% of the
output (by volume) of the Congo refinery. Wax is also a by-product of the
refining process.
Raw materials other than crude oil and containers consist primarily of
lubricant stocks produced by other refiners, chemicals, fuels and additives,
which are available from a number of sources. Availability of Pennsylvania Grade
crude oil depends primarily on the price which purchasers, including Quaker
State, are willing to pay, which in turn depends on the prevailing market prices
for all types of crude oil. The available supply of Pennsylvania Grade crude oil
has been declining for some time and is expected to continue to decline.
Although Quaker State believes that an adequate supply of Pennsylvania Grade
crude oil will be available for the Congo refinery for the near future, the
Company is studying the cost and availability of alternatives, should a shortage
occur.
Quaker State owns and operates a fleet of tank trucks to gather crude oil
produced in eastern Ohio and western Pennsylvania and transport it to the Congo
refinery or to a crude oil terminal and storage complex owned and operated by
Quaker State at Magnolia, Ohio. From there, crude oil flows through a pipeline
to the Congo refinery. Other crude oil is gathered by regulated pipeline
companies and barged to the Congo refinery.
Domestic Sales. Quaker State sells motor oils and other lubricants to
retailers directly and through independent distributors.
Direct sales are made to national and regional chain stores, to fast lube
centers and to resellers and end users primarily in large metropolitan areas.
The resellers include wholesalers and retailers, and the end users include
industrial and commercial accounts and fleet customers.
As of December 31, 1994, Quaker State had 97 independent distributors
selling in all 50 states. Independent distributors resell to service stations,
retailers, automobile dealers, repair shops, fast lube centers, automobile parts
stores, retail food chains, fleet and commercial customers and wholesale
outlets. During the three years ended December 31, 1994, the independent
distributors accounted for the following percentages of Quaker State's total
branded motor oil sales revenues in the United States: 1994-33.6%; 1993-35.3%;
and 1992-33.6%.
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Gasoline, fuel oils and kerosene are sold F.O.B. the Congo Refinery to
wholesalers located for the most part in Ohio, Pennsylvania and West Virginia.
Sales of automotive consumer products are made to the same entities to
which lubricant sales are made. The leading products are oil, air and fuel
filters. Antifreeze, brake and power steering fluids, fuel additives, spray
lubricants and cleaners and automotive undercoatings also are sold.
Foreign and Export Sales. Quaker State, Inc. has sold Quaker State branded
motor oils in Canada for many years. Sales in Canada are made primarily through
independent distributors under contract with the Canadian subsidiary, but also
directly to customers. Quaker State believes that its motor oils are the largest
selling branded motor oil in Canada.
Quaker State sells branded motor oils in Japan through a Quaker State
subsidiary formed in 1990 and in Mexico through a licensee. Quaker State
believes that its motor oils are the largest selling independent brand in
Mexico.
Quaker State makes export sales of motor oils in 74 foreign countries
through independent distributors. Export sales have increased significantly
during the 1990s and efforts are being made to further increase these sales. The
largest amount of export sales is made in the Dominican Republic. During 1994, a
significant part of the export sales also was made to Guatemala, Ecuador,
Poland, Sweden and Taiwan.
Small amounts of greases, gear lubricants and automotive consumer products
such as filters and chemicals are exported to certain foreign countries.
During the three years ended December 31, 1994, total revenues from foreign
operations, including export sales, were: 1994- $68,661,000; 1993-$55,436,000;
and 1992-$47,389,000. The largest component of these revenues is attributable to
Canada.
Marketing. Quaker State aggressively markets its branded lubricants and
automotive consumer products. In particular, Quaker State relies heavily on
media advertising to project the quality image of its motor oils and other
products and to maintain its competitive position.
In addition to media advertising, total marketing costs include sponsorship
of automobile racing teams, participation in automotive trade shows and
distribution of promotional materials. Quaker State also provides marketing
allowances to its customers and has incentive programs for its direct retail
customers and independent distributors.
Quaker State has trademark registrations or applications in effect covering
the use of its trademarks "Quaker State," "Quaker State 4X4," "Lubriguard,"
"Itasca" and other product names, logos and designs utilized in connection with
the sale of its products. Quaker State believes that these registrations and
applications are important to the success of its marketing efforts and have been
effective in preventing the use of the trademarks by others. The trademark
registrations expire at various dates, but in each case may be renewed.
Operating Profit. During the three years ended December 31, 1994, the
operating profit for the Motor Oil Division (including the foreign operations)
was: 1994-$16,401,000; 1993-$17,484,000; and 1992-$23,336,000. Branded motor oil
sales volume increased in 1994, but operating profits were lower than in 1993
due to a change in product mix and increased selling, marketing, freight and
administrative expenses.
NATURAL GAS EXPLORATION AND PRODUCTION DIVISION
Natural Gas--Quaker State owns interests in, explores for and develops
natural gas production properties, primarily in the Pennsylvania Grade crude oil
producing area (see "Crude Oil" below). As of December 31, 1994, 1993 and 1992,
Quaker State had 425, 364, and 334 net productive natural gas wells,
respectively. During the three years ended December 31, 1994, Quaker State's net
natural gas production was: 1994-6,948,000 mcf.; 1993-5,841,000 mcf.; and
1992-5,635,000 mcf. Quaker State acts as operator of most of the wells. Much of
the 1994 increase in natural gas production is attributable to the completion in
1994 of a
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natural gas pipeline to the Stagecoach Field in south central New York and north
central Pennsylvania, where sales had been restricted by lack of pipeline
capacity for several years.
During the three years ended December 31, 1994, the weighted average price
per mcf. received by Quaker State for natural gas was: 1994-$2.23; 1993-$2.30;
and 1992-$2.26. The price of natural gas declined significantly in the second
half of 1994 and is expected to remain depressed during 1995, negatively
impacting revenue and operating profit in this segment. Most natural gas is sold
directly to industrial customers or to brokers who resell to industrial
customers and is transported to these customers from producing areas by common
carrier pipelines. Some natural gas is sold directly to state regulated utility
companies. As of December 31, 1994, Quaker State had 49,225,000 mcf. and
25,739,000 mcf. of developed and undeveloped natural gas reserves, respectively.
Capital expenditures for exploration and development of natural gas
production properties have been significant throughout the 1990s. The success of
these activities is reflected in the increased production shown above. During
1994, 34.5 net productive developmental wells, 8.3 net productive exploratory
wells and 7.4 net dry holes were drilled.
Crude Oil--Quaker State produces Pennsylvania Grade crude oil from its own
crude oil producing properties in Ohio and West Virginia. As of December 31,
1994, 1993 and 1992, Quaker State had 1,103, 1,208, and 1,278 net productive oil
wells, respectively. During the three years ended December 31, 1994, Quaker
State's net crude oil production in barrels was: 1994-367,000; 1993-423,000; and
1992-438,000. Quaker State acts as operator of most of these wells.
During 1994, two net productive developmental oil wells were drilled. As of
December 31, 1994, Quaker State had 2,848,000 barrels and 731,000 barrels of
developed and undeveloped Pennsylvania Grade crude oil reserves, respectively.
During 1994, crude oil produced by Quaker State accounted for approximately
7.5% of the crude oil processed by the Congo refinery. For segment reporting
purposes, crude oil is sold by the Natural Gas Exploration and Production
Division ("Natural Gas E & P") to the Motor Oil Division at the same daily
market price at which Pennsylvania Grade crude oil is purchased by Quaker State
from third parties. Certain crude oil produced by Quaker State is sold to third
parties.
Other--Quaker State also receives income from: (i) transporting gas owned
by others through gas gathering systems in which Quaker State has an ownership
interest, (ii) overhead fees for operating natural gas and oil wells for others
and (iii) timber sales from properties acquired by Quaker State in conjunction
with oil and gas activities.
Operating Profit--During the three years ended December 31, 1994, Natural
Gas E & P had the following operating profit: 1994-$5,387,000; 1993-$3,103,000;
and 1992-$3,835,000. Operating profit in 1994 increased as a result of an
increased volume of natural gas sales.
Q LUBE
Quaker State, through its subsidiaries Q Lube, Inc. (formerly known as
Quaker State Minit-Lube, Inc.) and McQuik's Oilube, Inc. (collectively, "Q
Lube"), is one of the largest operators and franchisors of fast lube centers in
the United States. Fast lube centers are service outlets providing quick and
inexpensive oil changes and lubrication for automobiles and related services. Q
Lube, Inc. was acquired in November 1985 and McQuik's Oilube, Inc. in May 1989.
The administrative offices of Q Lube are located in Salt Lake City, Utah.
As of December 31, 1994, there were 428 Q Lube stores in the United States,
of which 319 were owned or leased and operated by Q Lube and 109 were operated
by franchisees. The fast lube centers owned by Q Lube and its franchisees are
operated under the names Q Lube, McQuik's Oilube or Quaker State Minit-Lube.
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The fast lube centers of Q Lube and its franchisees are located in 24
states primarily in the West, Midwest and Southeast. There are also 26 fast lube
centers in the Province of Ontario that are owned and operated or franchised by
a joint venture between Q Lube and another company.
Q Lube is one of Quaker State's largest customers. Quaker State supplies
most of the motor oils used and sold in the Q Lube centers, and these centers
are the largest users of Quaker State motor oils sold in bulk. For segment
reporting purposes, motor oils and other automotive consumer products, such as
filters, are sold by the Motor Oil Division to Q Lube at prices comparable to
the prices the Motor Oil Division charges to other customers.
In September 1994, Q Lube entered into a license agreement with Interline
Resources Corporation under which Q Lube obtained a license to use certain used
oil recovery technology. Q Lube currently plans to open a pilot used oil
recovery unit utilizing this technology during 1995, and may construct
additional units depending upon the operating results of the pilot unit.
Beginning in 1992, Q Lube began to convert certain of its company-operated
fast lube centers to the name Q Lube, featuring heightened Quaker State
identification. As of December 31, 1994, approximately 45% of the
company-operated centers were operated under the Q Lube name. Most of the
remaining company-operated centers will be converted over the next two years.
Operating Profit. During the three years ended December 31, 1994, Q Lube's
operating profit was: 1994-$5,726,000; 1993- $3,045,000; and 1992-$1,958,000.
Operating profit in 1994 increased as a result of an increase in the number of
cars serviced at company-owned centers. The increase in operating profit for
1993 was attributable primarily to the result of disposition during the first
quarter by Q Lube of 16 fast lube centers in unprofitable markets and reductions
in operating costs. The 1992 operating profit is before a one-time charge of
$3,200,000 for the planned conversion to the Q Lube name.
TRUCK-LITE
Quaker State's subsidiary Truck-Lite Co., Inc. ("Truck-Lite") manufactures
vehicular safety lighting equipment, which is sold to original equipment
manufacturers and replacement parts distributors. Truck-Lite's product line
consists of custom designed safety and interior lights for passenger cars, light
trucks and vans; sealed and bulb replaceable stop, turn and indicator lights for
heavy-duty trucks; and sealed wiring harness systems for heavy-duty truck
trailers. The administrative offices of Truck-Lite are located in Falconer, New
York.
Most of Truck-Lite's products for passenger cars, light trucks and vans are
manufactured in Falconer, New York. Most of the products for heavy-duty trucks
and truck trailers are manufactured in McElhattan and Wellsboro, Pennsylvania.
The Wellsboro operation was acquired by Truck-Lite during 1994 from a former
contractor for Truck-Lite. The Falconer facilities are owned; the McElhattan and
Wellsboro facilities are leased.
Products for passenger cars, light trucks and vans are distributed from the
Falconer facility. Products for heavy-duty trucks and truck trailers are
distributed from leased distribution centers in McElhattan and Sacramento,
California. Truck-Lite also manufactures specially designed heavy-duty lighting
products for sale in Europe through a subsidiary formed for this purpose.
During the three years ended December 31, 1994, Truck-Lite's operating
profit (loss) was: 1994-$11,756,000; 1993-$5,731,000; and 1992-($3,665,000).
Sales volume and operating profit for 1994 reached record high levels for
Truck-Lite.
DOCKING OPERATIONS
Quaker State's subsidiary Valley Camp, Inc. operates iron ore pellet and
potash terminals and a bulk materials handling dock accessible to Lake Superior
at Thunder Bay, Ontario.
During the three years ended December 31, 1994, the operating profit of the
docks business was: 1994-$1,753,000; 1993- $1,138,000; and 1992-$2,137,000. The
figures for 1992 include the operating profit of
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a subsidiary engaged in docking operations that was sold at the end of 1992. The
1994 results include a pretax gain due to termination of the pension plan at the
docking operations.
DISCONTINUED INSURANCE OPERATIONS
From 1984 to 1994, Quaker State was engaged in the insurance business,
including credit life insurance, accident and health insurance and specialty
indemnity coverages for automobiles and consumer appliances, through its
subsidiary Heritage Insurance Group, Inc. ("Heritage"). On August 31, 1994,
Quaker State completed the sale of all of the capital stock of Heritage to
General Electric Capital Corporation for approximately $82,000,000 after
satisfaction of certain intercompany obligations. Heritage's operating results
are segregated and reported as discontinued insurance operations in Quaker
State's 1994 Consolidated Statement of Operations.
For further information with respect to the discontinued insurance
operations, see Note 3 of the Notes to Consolidated Financial Statements in
Quaker State's 1994 Annual Report to Stockholders (the "1994 Annual Report").
DISCONTINUED COAL OPERATIONS
From 1976 to 1992, Quaker State was engaged in coal operations through its
subsidiary The Valley Camp Coal Company ("Valley Camp"). In December 1992,
Valley Camp discontinued its coal operations and, accordingly, its operating
results were segregated and reported as discontinued coal operations in Quaker
State's 1992 Consolidated Statement of Operations. Reclamation work proceeded in
1994 at the mines formerly operated by two of Valley Camp's subsidiaries, as did
sales of the remaining assets related to the discontinued coal operations. As of
December 31, 1994, approximately $2.2 million in assets of the discontinued coal
operations remained to be sold.
As of December 31, 1992, Valley Camp and its subsidiaries had 555
employees. Hourly employees were covered by a union pension plan. Salaried
employees were covered by Quaker State's salaried pension plan. As of December
31, 1994, Valley Camp and its subsidiaries had 5 employees.
For further information with respect to the discontinued coal operations,
see Notes 4 and 13 of the Notes to Consolidated Financial Statements contained
in the 1994 Annual Report.
FINANCIAL INFORMATION BY BUSINESS SEGMENT
Financial information as to Quaker State's operations by business segment
(i.e., Motor Oil Division, Natural Gas E & P, Q Lube, Truck-Lite and Docking
Operations) is set forth in the segment information table which appears on page
20 of the 1994 Annual Report as well as under the heading "Management's
Discussion and Analysis" which appears on pages 17 through 19 of the 1994 Annual
Report. This financial information is incorporated in this item by reference.
Certain information (identifiable assets, capital expenditures and
depreciation, depletion and amortization) relating to the discontinued
operations is included in the segment information table and is incorporated in
this item by reference.
COMPETITION
The branded motor oil business is highly competitive. In the United States,
the major competitors of Quaker State and their principal brands of motor oil
are Pennzoil Company (Pennzoil), Ashland Oil, Inc. (Valvoline), Texaco, Inc.
(Havoline) and Burmah Castrol PLC (Castrol). In foreign countries, Quaker State
competes with foreign manufacturers (including some that are government-owned)
and with its major U.S. competitors. Many of the competitors, particularly the
major integrated oil companies, have finished motor oil capacities and financial
resources substantially greater than Quaker State's. The principal methods of
competition in the branded motor oil business are product quality, distribution
capability, advertising and sales promotion. Quaker State also competes with
Pennzoil Company and Witco Chemical Corporation in the purchase of Pennsylvania
Grade crude oil.
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In the sale of private label lubricants, Quaker State competes with a
number of small blending and packaging companies. The principal methods of
competition are product quality and price. In the waste oil collection,
transportation, management and recycling business, Quaker State competes with
Safety Kleen Corporation, International Petroleum Company, the First Recovery
division of Ashland Oil, Inc. and a number of regional waste oil haulers. The
principal methods of competition are price, quality and reliability of service.
The fast lube business is also highly competitive. The major competitors of
Quaker State are Jiffy Lube International, Inc. (a subsidiary of Pennzoil
Company) and Ashland Oil, Inc. through its Valvoline Instant Oil Change centers.
In addition to competing with other fast lube centers, Q Lube competes with
local automobile dealers, service stations and garages. The principal methods of
competition are quality of service, price and sales promotion.
The market for vehicular safety lighting equipment is highly competitive.
Truck-Lite competes with other independent manufacturers including Grote
Industries, Peterson Manufacturing Company and the Signal Stat Division of
Federal Mogul, as well as with companies owned by truck and automobile
manufacturers. The principal methods of competition are quality, price and
technical innovation.
RESEARCH AND DEVELOPMENT
Research and development activities in the Motor Oil Division are directed
toward continued improvement of Quaker State motor oils and other lubricants and
the development of new or improved automotive consumer products. Research and
development personnel develop quality control programs to assure the continuous
production of high quality products and provide extensive technical services in
the manufacturing, packaging, sales and marketing operations as well as to
customers. Research and development activities are also conducted at Truck-Lite,
to develop new products and to improve existing products and processes. The
amount spent on research and development by Quaker State during each of the
three years ended December 31, 1994 is not material.
GOVERNMENT REGULATION
Environmental. Quaker State and certain of its subsidiaries are subject to
various federal, state and local air, water, land use and waste management laws
and regulations. In particular, these laws and regulations affect motor oil
manufacturing operations, natural gas and crude oil producing activities, used
oil and other automotive fluids collection and fast lube operations. In motor
oil manufacturing, permits are required for the discharge of water used in
operations into navigable waters and for certain hazardous waste activities. Air
pollution regulations apply to emissions from boilers. In natural gas and crude
oil production, the laws and regulations relate principally to the discharge of
crude oil, the disposal of wastes such as brine from drilling operations and the
cleanup and plugging of wells upon abandonment of producing properties.
Regulations govern the collection, transportation and disposition of used motor
oil and other automotive fluids. Federal regulations impose standards for tanks
and tank farms storing these materials, recordkeeping and labelling requirements
and management standards. In the fast lube operations, waste management
regulations apply to the disposition of used motor oil and other petroleum
products.
Other. Truck-Lite's products are subject to regulations of the Federal
Department of Transportation that govern the brightness, placement and
physical durability of lighting.
ENVIRONMENTAL EXPENDITURES
Capital expenditures for pollution control facilities during the three
years ended December 31, 1994 were as follows: 1994-$3,152,000; 1993-$1,823,000;
and 1992-$1,950,000. Capital expenditures for pollution control facilities
during 1995 are expected to amount to approximately $2,300,000.
The capital expenditures for pollution control facilities in 1994, 1993 and
1992 included upgrading and replacing underground storage tanks in Q Lube's
operations. In all three years, expenditures were made in connection with new
drilling by Natural Gas E & P. Anticipated expenditures in 1995 for pollution
control
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facilities include expenditures related to new drilling by Natural Gas E & P,
continued upgrading and replacement of underground storage tanks in the Q Lube
operations, and the installation of new boiler stacks, monitoring equipment and
flow meters at the Congo refinery to comply with the federal Clean Air Act.
Quaker State and certain of its subsidiaries have received notices from the
United State Environmental Protection Agency (the "USEPA") and a similar state
agency that they may be responsible for response and cleanup costs with respect
to certain Superfund sites (see Item 3 of this annual report).
Quaker State sold its crude oil refinery in St. Mary's, West Virginia in
December 1987. The purchaser filed for bankruptcy in December 1988 and in August
1991 the bankruptcy trustee sold the refinery to a second purchaser. In
connection with this transaction, Quaker State provided certain indemnities with
respect to the environmental conditions at the refinery. In May 1990, Quaker
State sold its crude oil refinery in Farmers Valley, Pennsylvania and a wax
plant (formerly also a crude oil refinery) in Emlenton, Pennsylvania and
provided the purchaser with similar indemnities. Quaker State expects that it
will incur some expenditures related to these indemnities and also expects that
it will incur some expenditures for environmental conditions associated with its
discontinued coal operations.
For further information with respect to environmental expenditures, see the
information under the heading "Management's Discussion and Analysis", and Notes
1, 8 and 10 of the Notes to Consolidated Financial Statements, contained in the
1994 Annual Report.
EMPLOYEES
As of December 31, 1994, Quaker State and its subsidiaries had 4,939
full-time employees (excluding employees of its discontinued coal operations)
and 466 temporary and part-time employees.
Approximately 13% of the Company's employees are represented by various
labor unions. Collective bargaining agreements are in effect with all of the
unions. The collective bargaining agreement covering the bargaining unit at the
Congo refinery expires in January 1996.
ITEM 2. PROPERTIES.
Information with respect to the location and general character of the
materially important principal properties of Quaker State and its subsidiaries,
identified by the business segments utilizing such properties, is included in
Item 1 of this annual report and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
Congo Refinery Environmental Litigation. In December 1993, the United
States commenced a lawsuit against Quaker State in the United States District
Court for the Northern District of West Virginia. The Amended Complaint alleges,
inter alia, that Quaker State has violated the federal Resource Conservation and
Recovery Act ("RCRA") and the federal Clean Air Act at its Congo refinery. The
Amended Complaint alleges that several units that are part of the plant
wastewater treatment system also receive hazardous waste and should properly be
characterized and permitted as hazardous waste surface impoundments. Quaker
State has contended that these units are tanks and are exempt from federal
hazardous waste regulation.
The United States alleges that, if characterized as surface impoundments,
the structures have not had proper permits since 1980, that Quaker State has
violated various regulations relating to the structures and that Quaker State's
management of the units has constituted improper treatment and disposal of
hazardous wastes at various dates after 1980. The Amended Complaint also alleges
Clean Air Act violations pertaining to asbestos removal at the Congo refinery
during 1990, 1991 and 1992, alleged violations of the State Implementation Plan
since November 1991 (relating to combustion of process and sour gas streams) and
an alleged opacity violation in April 1993.
The Amended Complaint requests injunctive relief and civil penalties not
exceeding $25,000 for each day of violation of RCRA and the Clean Air Act.
Extensive discovery has been conducted by the parties to date. Quaker State and
the United States are engaged in settlement negotiations, but no final
settlement has been
9
<PAGE> 10
reached. For further information with respect to this lawsuit, see the
information under the heading "Management's Discussion and Analysis", and Note
10 of the Notes to Consolidated Financial Statements, contained in the 1994
Annual Report.
CERCLA Matters. In December 1988, Q Lube received a notice from the
USEPA pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), identifying Q Lube as a potentially
responsible party ("PRP") for response and cleanup costs with respect to a
waste disposal site known as the Petrochem/Ekotek Superfund Site in Salt Lake
City, Utah. In August 1989, Q Lube and 34 other respondents entered into a
Consent Order under which the respondents agreed to fund the costs of the
cleanup of the surface of the contaminated property. The respondents have
advanced $10,000,000 toward these costs, of which Q Lube's share to date has
amounted to approximately $600,000. A comprehensive remedial investigation and
feasibility study of this site was recently completed, and discussions with the
USEPA concerning a remedial plan are expected to begin in the near future.
Quaker State and certain of its subsidiaries have received similar notices
from the USEPA under CERCLA that each may be a PRP responsible for cleanup costs
with respect to a waste disposal site identified by the USEPA. In addition,
Quaker State has received a similar notice from the California Department of
Toxic Substances Control (the "DTSC") under CERCLA as well as a California
statute. The USEPA and DTSC are conducting investigations regarding alleged
releases or threatened releases of hazardous substances from these sites and
have contacted all parties that may have arranged for the disposal, treatment or
transportation of hazardous substances to the sites.
For further information with respect to CERCLA matters, see the information
under the heading "Management's Discussion and Analysis," and Note 10 of the
Notes to Consolidated Financial Statements, contained in the 1994 Annual Report.
Penn Grade Crude Antitrust Litigation. On April 19, 1994, Lazy Oil, Inc.,
a Pennsylvania corporation, commenced a class action in the United States
District Court for the Western District of Pennsylvania against Witco
Corporation, Quaker State and Pennzoil Company. Three similar actions were
subsequently commenced and were consolidated with the original action. The
Consolidated Amended Complaint alleges violations of Section 1 of the Sherman
Act, based upon an allegation that the defendants, since at least January 1,
1981, combined and conspired to fix, lower, maintain and stabilize the purchase
price of Pennsylvania Grade crude oil purchased from the plaintiffs and others.
The plaintiffs purport to represent a class of all persons who sold Pennsylvania
Grade crude oil to one or more of the defendants during the period from January
1, 1981 to the present. The Complaint alleges that the applicable statute of
limitations has been tolled by a fraudulent concealment of the alleged
combination and conspiracy.
The Complaint seeks a class determination, treble damages, an injunction
and the recovery of costs, including attorneys' fees. The defendants have filed
answers to the Complaint, denying all liability. Since the date of filing,
extensive discovery has been undertaken by both sides. In December 1994, Quaker
State and the other defendants filed a motion for summary judgment, which has
not yet been decided by the court. Quaker State believes there is no basis for
the allegations in the Complaint and intends to defend this matter vigorously.
Employment Litigation. In October 1993, Larry Tucker and 13 other former
salaried supervisory employees of Donaldson Mine Company, a subsidiary of Quaker
State's Valley Camp subsidiary, instituted an action in the Circuit Court of
Kanawha County, West Virginia against Quaker State, Valley Camp and Donaldson
Mine Company. The suit alleges that each of the plaintiffs had a contract of
employment with the defendants that was breached by termination of the
plaintiffs' employment, and that the terminations were discriminatory and in bad
faith. Each plaintiff claims damages in the amount of $1,250,000, punitive
damages in the amount of $1,250,000, the costs of a search for new employment,
attorneys' fees and the costs of suit. The complaint subsequently was amended to
assert similar claims on behalf of four additional individuals. Quaker State,
Valley Camp and Donaldson Mine Company intend to defend this action vigorously.
10
<PAGE> 11
Quaker State and certain of its subsidiaries are also defendants in several
other proceedings brought by individual plaintiffs seeking damages as a result
of termination of employment. These proceedings are being vigorously defended as
well.
Reliance Purchase Litigation. Nine civil actions were commenced in the
Court of Chancery of the State of Delaware in April 1984 against Quaker State
and its then directors related to the purchase by Quaker State in March 1984 of
1,962,100 shares of Quaker State capital stock from Reliance Group Holdings
Inc., a corporation controlled by Saul P. Steinberg, members of his family and
trusts for the benefit of such persons. The suits included a derivative claim
based on an alleged breach of fiduciary duty in purchasing the stock at a
premium over market price and a class action claim on behalf of all Quaker State
stockholders other than the defendants alleging that the seller was improperly
favored over other stockholders. Rescission of the transaction and damages were
sought. This litigation was dismissed without prejudice by stipulation in
January 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1994.
EXECUTIVE OFFICERS OF QUAKER STATE
In accordance with Instruction 3 of Item 401(b) of Regulation S-K, the
executive officers of Quaker State are set forth below:
<TABLE>
<S> <C> <C>
Herbert M. Baum 58 Chairman of the Board, President and Chief Executive Officer of
Quaker State
Conrad A. Conrad 49 Vice Chairman and Chief Administrative Officer of Quaker State
L. David Myatt 49 Vice Chairman of Quaker State and Chief Executive Officer of the
Motor Oil Division
R. Scott Keefer 47 Vice President, Finance and Chief Financial Officer of Quaker
State
Paul E. Konney 50 Vice President, General Counsel and Secretary of Quaker State
Charles F. Bechtel 50 Executive Vice President, Sales and Marketing of the Motor Oil
Division
</TABLE>
Mr. Baum has been Chairman of the Board and Chief Executive Officer and a
Director of Quaker State since June 1993. He assumed the additional position of
President of Quaker State in September 1994. He was Executive Vice President of
Campbell Soup Company from prior to 1990 to June 1993, and was President,
Campbell North and South America from January 1992 to June 1993.
Mr. Conrad has been Vice Chairman and Chief Administrative Officer of
Quaker State since September 1994. He has been a Director of Quaker State since
January 1988. He was President and Chief Operating Officer of Quaker State from
February 1990 to September 1994 and Vice President, Finance and Chief Financial
Officer of Quaker State from prior to 1990 to February 1990.
Mr. Myatt has been Vice Chairman and a Director of Quaker State and Chief
Executive Officer of the Motor Oil Division since September 1994. He was
President of the Specialty Oil Companies from prior to 1990 to September 1994
and has been President of Westland Oil Company, Inc. from prior to 1990 to the
present.
Mr. Keefer has been Vice President, Finance and Chief Financial Officer of
Quaker State since February 1990; he was also Treasurer of Quaker State from
prior to 1990 through May 1992.
Mr. Konney has been Vice President and General Counsel of Quaker State
since September 1994 and Secretary of Quaker State since January 1995. From July
1993 to September 1994, he was in the private practice of law. He was Senior
Vice President-General Counsel and Secretary of Tambrands Inc. from prior to
1990 to July 1993.
11
<PAGE> 12
Mr. Bechtel has been Executive Vice President, Sales and Marketing of the
Motor Oil Division since November 1994. From November 1993 to November 1994, he
was Executive Vice President, Sales of the Motor Oil Division. He was President
of Bechtel and Associates, a sales consulting firm, from October 1992 to
November 1993 and Executive Vice President, Sales of 21st Century Foods, Inc.
from September 1992 to November 1993. He was Executive Vice President and Chief
Operating Officer of Old Fashioned Kitchens, Inc. from August 1991 to September
1992, and was Executive Vice President, Sales and Marketing of Slim-Fast Foods,
Inc. and President of the Powdered Drink Division of Slim-Fast Foods, Inc. from
prior to 1990 to August 1991.
There is no family relationship between any executive officer of Quaker
State and any Director or other executive officer of Quaker State. L. David
Myatt, Vice Chairman and a Director of Quaker State and Chief Executive Officer
of the Motor Oil Division, is the brother of Dennis M. Myatt, Jr., Vice
President of the Motor Oil Division.
The executive officers of Quaker State are elected annually by the Board of
Directors immediately after each Annual Meeting of Stockholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Quaker State capital stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange and trades under the trading symbol KSF. The market
prices of Quaker State capital stock appear under the caption "Quaker State
(KSF) Market Prices by Quarter" on page 36 of the 1994 Annual Report. Dividend
information appears in Note 14 of the Notes to Consolidated Financial Statements
contained in the 1994 Annual Report. All such information is incorporated in
this annual report by reference. As of March 15, 1995, there were 10,495 holders
of record of Quaker State's capital stock.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item 6 appears under the caption
"Five-Year Summary of Net Income and Comparative Statistical Data" on page 21 of
the 1994 Annual Report and is incorporated in this annual report by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Discussion and Analysis of Financial Condition and Results of
Operations required by this Item 7 appears on pages 17 through 19 of the 1994
Annual Report and is incorporated in this annual report by reference.
ITEM 8. FINANCIAL STATEMENTS.
The following financial statements and related report on the consolidated
financial statements of Quaker State and its subsidiaries for the years ended
December 31, 1994, 1993, and 1992 required by this Item 8
12
<PAGE> 13
appear on the pages indicated in the 1994 Annual Report and are incorporated in
this annual report by reference:
<TABLE>
<CAPTION>
PAGE(S) IN 1994
FINANCIAL STATEMENTS AND RELATED REPORT ANNUAL REPORT
--------------------------------------- ---------------
<S> <C>
Report of Independent Certified Public Accountants, dated January 25,
1995..................................................................... 35
Consolidated Statement of Operations for the years ended
December 31, 1994, 1993, and 1992........................................ 22
Consolidated Statement of Cash Flows for the years ended
December 31, 1994, 1993 and 1992......................................... 23
Consolidated Balance Sheet as of December 31, 1994 and 1993................ 24
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1994, 1993, and 1992........................................ 25
Notes to Consolidated Financial Statements................................. 26-35
Financial Results by Quarter............................................... 34
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEMS 10 THROUGH 13.
Information concerning the executive officers of Quaker State appears at
the end of Part I of this annual report. In accordance with the provisions of
General Instruction G to Form 10-K, the other information required by Item 10
(Directors and Executive Officers of the Registrant) and the information
required by Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and
Related Transactions) is incorporated in this annual report by reference from
the definitive Proxy Statement to be filed by Quaker State pursuant to
Regulation 14A no later than April 30, 1995 (except for the information required
to be included in such Proxy Statement by paragraphs (i), (k) and (l) of Item
402 of Regulation S-K).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS:
The consolidated financial statements of Quaker State and its
subsidiaries, together with the report of Coopers & Lybrand L.L.P., dated
January 25, 1995, appearing on pages 22 through 35 and on page 35,
respectively, of the 1994 Annual Report are incorporated in this annual
report by reference (see Item 8 above).
(A)(2) FINANCIAL STATEMENT SCHEDULE:
The financial statement schedule and related report listed below are
filed as part of this annual report:
<TABLE>
<CAPTION>
PAGE IN THIS
FINANCIAL STATEMENT SCHEDULE AND RELATED REPORT ANNUAL REPORT
- ------------------------------------------------------------------------------- -------------
<S> <C>
Report of Independent Certified Public Accountants, dated January 25, 1995..... S-1
Schedule II--Valuation and Qualifying Accounts for the years ended
December 31, 1994, 1993 and 1992............................................. S-2
</TABLE>
13
<PAGE> 14
All other financial statement schedules are omitted because they either are
not applicable or are not material, or because the information required therein
is contained in the consolidated financial statements or notes thereto set forth
in the 1994 Annual Report.
(A)(3) EXHIBITS:
The exhibits listed below are filed as a part of this annual report:
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
- -------- --------
<S> <C>
3(i) Composite Certificate of Incorporation, filed herewith.
3(ii) Bylaws, as amended and restated February 28, 1995, filed herewith.
4(a) Credit Agreement, dated as of March 31, 1992, by and among Quaker State, certain
Banks and Pittsburgh National Bank, as Agent for the Banks (the "Credit
Agreement"), filed as Exhibit 19 to Form 10-Q for the fiscal quarter ended March
31, 1992 and incorporated herein by reference.
4(b) Amendment No. 1 to Credit Agreement, dated as of September 30, 1992, filed as
Exhibit 4(b) to Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference.
4(c) Amendment No. 2 to Credit Agreement, dated as of August 16, 1993, filed as Exhibit
4(c) to Form 10-K for the fiscal year ended December 31, 1993 and incorporated
herein by reference.
4(d) Amendment No. 3 to Credit Agreement, dated as of August 1, 1994, filed as Exhibit
4(a) to Form 10-Q for the fiscal quarter ended September 30, 1994 and incorporated
herein by reference.
4(e) Amendment No. 4 to Credit Agreement, dated as of September 30, 1994, filed as
Exhibit 4(b) to Form 10-Q for the fiscal quarter ended September 30, 1994 and
incorporated herein by reference.
4(f) Composite Note Agreement, dated as of September 1, 1992, between Quaker State and
certain insurance companies, with respect to $50,000,000 8.73% Senior Notes Due
September 30, 2002 (the "Note Agreement"), filed as Exhibit 4 to Form 10-Q for the
fiscal quarter ended September 30, 1992 and incorporated herein by reference.
4(g) First Amendment to Note Agreements, dated as of December 31, 1992, filed as Exhibit
4(d) to Form 10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference.
4(h) Second Amendment to Note Agreements, dated as of September 30, 1994, filed as
Exhibit 4(c) to Form 10-Q for the fiscal quarter ended September 30, 1994 and
incorporated herein by reference.
10(a) 1976 Stock Option Plan, as amended through April 30, 1987, filed as Exhibit 10(a)
to Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by
reference.*
10(b) 1986 Stock Option Plan, as amended through April 30, 1987, filed as Exhibit 10(b)
to Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by
reference.*
10(c) Resolution, adopted on February 27, 1992 by the Board of Directors of Quaker State,
amending Section 5(D) of the 1986 Stock Option Plan, filed as Exhibit 10(c) to Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.*
10(d) 1994 Non-Employee Directors' Stock Option Plan, filed herewith.
10(e) 1994 Stock Incentive Plan, filed herewith.*
10(f) Forms of Split Dollar Life Insurance Agreement and related Collateral Assignment
Agreement, filed as Exhibit 10(c) to Form 10-K for the fiscal year ended December
31, 1987 and incorporated herein by reference.*
10(g) First Amendment to Split Dollar Life Insurance Agreement, filed herewith.*
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
- ------- --------
<S> <C>
10(h) Annual Incentive Bonus Plan, as amended and restated effective January 1, 1995,
filed herewith.*
10(i) Quaker State Corporation Amended and Restated Severance Plan, effective September
30, 1988, filed as Exhibit 28.1 to Form 8-K filed on October 17, 1988 and
incorporated herein by reference.*
10(j) Articles X and XI of the Quaker State Corporation Salaried Pension Plan, as Amended
and Restated effective July 1, 1989 for Quaker State and certain of its
subsidiaries, filed as Exhibit 28(b) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(k) Articles X and XI of the Quaker State Corporation Hourly Pension Plan, as Amended
and Restated effective July 1, 1989 for Quaker State and certain of its
subsidiaries, filed as Exhibit 28(e) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(l) Quaker State Corporation Supplemental Excess Retirement Plan, filed as Exhibit
10(k) to Form 10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference.*
10(m) Employment Agreement, dated as of August 1, 1994, between Quaker State Corporation
and Herbert M. Baum, filed as Exhibit 10(a) to Form 10-Q for the fiscal quarter
ended September 30, 1994 and incorporated herein by reference.*
10(n) Employment Agreement, dated as of September 30, 1994, between Quaker State
Corporation and L. David Myatt, filed as Exhibit 10(b) to Form 10-Q for the fiscal
quarter ended September 30, 1994 and incorporated herein by reference.*
10(o) Form of Indemnification and Insurance Agreement entered into between Quaker State
and each of its directors, filed as Exhibit 10(g) to Form 10-K for the fiscal year
ended December 31, 1987 and incorporated herein by reference.
10(p) Form of letter agreement entered into between Quaker State and each of its
non-employee directors regarding the retirement benefits provided by Quaker State
to its non-employee directors, filed as Exhibit 10(n) to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated herein by reference.
10(q) Outside Directors' Group Life Plan, filed as Exhibit 10(d) to Form 10-K for the
fiscal year ended December 31, 1986 and incorporated herein by reference.
11 Statement re Computation of Per Share Earnings, filed herewith.
13 Those portions of the 1994 Annual Report which are expressly incorporated in this
annual report by reference, filed herewith.
22 List of subsidiaries of Quaker State Corporation, filed herewith.
24 Consent of Coopers & Lybrand L.L.P., filed herewith.
25 Powers of Attorney, filed herewith.
27 Financial Data Schedule, filed herewith.
<FN>
- ---------
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.
</TABLE>
Quaker State agrees to furnish to the Commission upon request copies of all
instruments not listed above which define the rights of holders of long-term
debt of Quaker State and its subsidiaries.
Copies of the above exhibits are available at a cost of $.20 per page to
any stockholder upon written request to the Secretary, Quaker State Corporation,
255 Elm Street, Oil City, Pennsylvania 16301.
15
<PAGE> 16
(B) REPORTS ON FORM 8-K:
On October 14, 1994, Quaker State filed a report on Form 8-K, reporting
under Item 2 that on September 30, 1994, Quaker State completed the acquisition
of all of the stock of Westland Oil Company, Inc. by purchase and the
acquisition of the Specialty Oil Companies (four affiliated corporations) by
merger with and into a wholly-owned subsidiary of Quaker State. On November 23,
1994, Quaker State amended this filing on Form 8-K by filing Form 8-K/A1.
Included with this amended report were the following financial statements of the
businesses acquired: Report of Independent Accountants; Combined Balance Sheets
as of December 25, 1993 and December 26, 1992; Combined Statements of Income for
the Fiscal Years ending December 25, 1993 and December 26, 1992 and December 28,
1991; Combined Statements of Stockholders' Equity for the Fiscal Years ending
December 25, 1993 and December 26, 1992 and December 28, 1991; Combined
Statements of Cash Flows for the Fiscal Years ending December 25, 1993 and
December 26, 1992 and December 28, 1991; Notes to Combined Financial Statements;
and Note to Make Combined Financial Statements Conform to Regulation S-X. Also
filed with this amended report were Pro Forma Consolidated Statements of
Operations of Quaker State Corporation and Subsidiaries for the year ended
December 31, 1993 and for the nine months ended September 30, 1994.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Quaker State has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
QUAKER STATE CORPORATION
/S/ HERBERT M. BAUM
By: -------------------------------
Herbert M. Baum, Chairman
of the Board, President
and Chief Executive Officer
</TABLE>
Date: March 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Quaker State
in the capacities indicated on March 28, 1995.
<TABLE>
<S> <C>
/S/ HERBERT M. BAUM /S/ R. SCOTT KEEFER
--------------------------------- -----------------------------
Herbert M. Baum R. Scott Keefer
(Chairman of the Board, President (Principal Financial Officer)
and Chief Executive Officer)
/S/ DAVID A. HOGUE
------------------------------
David A. Hogue
(Principal Accounting Officer)
</TABLE>
Leonard M. Carroll,
Conrad A. Conrad,
Laurel Cutler,
C. Fred Fetterolf,
Thomas A. Gardner,
F. William Grube,
Forrest R. Haselton,
H. Bryce Jordan,
Delbert J. McQuaide,
L. David Myatt and
Raymond A. Ross, Jr.
/S/ PAUL E. KONNEY
By ---------------------
Paul E. Konney,
Attorney-In-Fact
17
<PAGE> 18
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Stockholders
Quaker State Corporation:
Our report on the consolidated financial statements of Quaker State
Corporation and Subsidiaries has been incorporated by reference in this Form
10-K from page 35 of the 1994 Annual Report to Stockholders of Quaker State
Corporation. In connection with our audits of such financial statements, we have
also audited the related financial statement schedule listed in the index on
page 13 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Pittsburgh, Pennsylvania
January 25, 1995
S-1
<PAGE> 19
QUAKER STATE CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN C
COLUMN B -------- COLUMN E
-------- ADDITIONS --------
COLUMN A BALANCE AT CHARGED COLUMN D BALANCE AT
-------- BEGINNING TO COSTS AND -------- END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts and notes
receivable:
1994......................................... $1,679 $1,188(B) $ 682(A) $2,185
1993......................................... 1,406 854 581(A) 1,679
1992......................................... 1,400 1,220 1,214(A) 1,406
Amortization of intangible assets:
1994......................................... $9,591 $1,782 $3,508(C) $7,865
1993......................................... 9,082 1,427 918 9,591
1992......................................... 8,043 1,911 872 9,082
Deferred tax asset valuation allowance:
1994......................................... $1,101 -- $ 562 $ 539
1993......................................... 2,989 -- 1,888 1,101
1992......................................... -- 2,989 -- 2,989
<FN>
- ---------
(A) Accounts and notes receivable written off during the year.
(B) Includes $380,000 of additions due to business acquisitions.
(C) Includes $3,503,000 of amortization relating to the Heritage Insurance Group
which was sold in August 1994.
</TABLE>
S-2
<PAGE> 20
FORM 10-K
Quaker State Corporation
EXHIBIT INDEX
The following exhibits are required to be filed with this annual report
on Form 10-K. Exhibits are incorporated herein by reference to other documents
pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended,
as indicated in the index. Exhibits not incorporated herein by reference follow
this index.
Exhibit No. Document
3(i) Composite Certificate of Incorporation, filed herewith.
3(ii) By-Laws, as amended and restated February 28, 1995, filed
herewith.
4(a) Credit Agreement, dated as of March 31, 1992, by and among
Quaker State, certain Banks and Pittsburgh National Bank, as
agent for the Banks (the "Credit Agreement"), filed as
Exhibit 19 to Form 10-Q for the fiscal quarter ended
March 31, 1992 and incorporated herein by reference.
4(b) Amendment No. 1 to Credit Agreement, dated as of September 30,
1992, filed as Exhibit 4(b) to Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference.
4(c) Amendment No. 2 to Credit Agreement, dated as of August 16,
1993, filed as Exhibit 4(c) to Form 10-K for the fiscal year
ended December 31, 1993 and incorporated herein by reference.
4(d) Amendment No. 3 to Credit Agreement, dated as of August 1,
1994, filed as Exhibit 4(a) to form 10-Q for the fiscal
quarter ended September 30, 1994 and incorporated herein by
reference.
4(e) Amendment No. 4 to Credit Agreement, dated as of September 30,
1994, filed as Exhibit 4(b) to Form 10-Q for the fiscal
quarter ended September 30, 1994 and incorporated herein
by reference.
4(f) Composite Note Agreement, dated as of September 1, 1992, between
Quaker State and certain insurance companies, with respect to
$50,000,000 8.73% Senior Notes Due September 30, 2002 (the
"Note Agreement"), filed as Exhibit 4 to Form 10-Q for the
fiscal quarter ended September 30, 1992 and incorporated
herein by reference.
4(g) First Amendment to Note Agreements, dated as of December 31,
1992, filed as Exhibit 4(d) to Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference.
<PAGE> 21
Exhibit No. Document
4(h) Second Amendment to Note Agreements, dated as of September 30,
1994, filed as Exhibit 4(c) to Form 10-Q for the fiscal
quarter ended September 30, 1994 and incorporated herein by
reference.
10(a) 1976 Stock Option Plan, as amended through April 20, 1987,
filed as Exhibit 10(a) to Form 10-K for the fiscal year ended
December 31, 1987 and incorporated herein by reference.*
10(b) 1986 Stock Option Plan, as amended through April 30, 1987,
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended
December 31, 1987 and incorporated herein by reference.*
10(c) Resolution, adopted on February 27, 1992 by the Board of
Directors of Quaker State, amending section 5(D) of the 1986
Stock Option Plan, filed as Exhibit 10(c) to Form 10-K for
the fiscal year ended December 31, 1991 and incorporated
herein by reference.*
10(d) 1994 Non-Employee Directors' Stock Option Plan, filed
herewith.
10(e) 1994 Stock Incentive Plan, filed herewith.*
10(f) Forms of Split Dollar Life Insurance Agreement and related
Collateral Assignment Agreement, filed as Exhibit 10(c) to
Form 10-K for the fiscal year ended December 31, 1987
and incorporated herein by reference.*
10(g) First Amendment to Split Dollar Life Insurance Agreement,
filed herewith.*
10(h) Annual Incentive Bonus Plan, as amended and restated effective
January 1, 1995, filed herewith.*
10(i) Quaker State Corporation Amended and Restated Severance Plan,
effective September 30, 1988, filed as Exhibit 28.1 to
Form 8-K filed on October 17, 1988 and incorporated herein by
reference.*
10(j) Articles X and XI of the Quaker State Corporation Salaried
Pension Plan, as Amended and Restated effective July 1, 1989,
for Quaker State and certain of its subsidiaries, filed as
Exhibit 28(b) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
<PAGE> 22
Exhibit No. Document
10(k) Articles X and XI of the Quaker State Corporation Hourly
Pension Plan, as Amended and Restated effective July 1, 1989,
for Quaker State and certain of its subsidiaries, filed
as Exhibit 28(e) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(l) Quaker State Supplemental Excess Retirement Plan, filed as
Exhibit 10(k) to Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference.*
10(m) Employment Agreement, dated as of August 1, 1994, between
Quaker State Corporation and Herbert M. Baum, filed as
Exhibit 10(a) to Form 10-Q for the fiscal quarter ended
September 30, 1994 and incorporated herein by reference.*
10(n) Employment Agreement, dated as of September 30, 1994, between
Quaker State Corporation and L. David Myatt, filed as
Exhibit 10(b) to Form 10-Q for the fiscal quarter ended
September 30, 1994 and incorporated herein by reference.*
10(o) Form of Indemnification and Insurance Agreement entered into
between Quaker State and each of its directors, filed as
Exhibit 10(g) to Form 10-K for the fiscal year ended
December 31, 1987 and incorporated herein by reference.
10(p) Form of letter agreement entered into between Quaker State and
each of its non-employee directors regarding the retirement
benefits provided by Quaker State to its non-employee
directors, filed as Exhibit 10(n) to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated herein by
reference.
10(q) Outside Directors' Group Life Plan, filed as Exhibit 10(d) to
Form 10-K for the fiscal year ended December 31, 1986 and
incorporated herein by reference.
11 Statement re Computation of Per Share Earnings, filed herewith.
13 Those portions of the 1994 Annual Report which are expressly
incorporated in this annual report by reference,
filed herewith.
22 List of subsidiaries of Quaker State Corporation, filed
herewith.
24 Consent of Coopers & Lybrand L.L.P., filed herewith.
<PAGE> 23
Exhibit No. Document
25 Powers of Attorney, filed herewith.
27 Financial Data Schedule, filed herewith.
- -----------
* Management contract or compensatory plan, contract or arrangement required to
be filed by Item 601(b)(10)(iii) of Regulation S-K.
<PAGE> 1
Exhibit 3(i)
C E R T I F I C A T E
O F
I N C O R P O R A T I O N
O F
QUAKER STATE CORPORATION
<PAGE> 2
C E R T I F I C A T E
O F
I N C O R P O R A T I O N
O F
QUAKER STATE CORPORATION
**********
FIRST. The name of the corporation is Quaker State
Corporation.
SECOND. Its registered office in the State of Delaware is
located at 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name and address of its registered agent is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware.
THIRD. The nature of the business, or objects or purposes to
be transacted, promoted or carried on are:
To purchase, lease or otherwise acquire lands, or oil, gas and
mineral rights in land, for the purpose of producing and to produce therefrom
oil, gas, or other volatile or mineral substances; to develop said lands by
drilling oil and gas wells thereon and by the installation of plants, machinery
and appliances for said purposes and to deal in, transport, store, supply,
market and sell oil, gas or volatile or mineral substances for either light,
heat or both or other purposes and for any or all of said purposes to own,
maintain and operate pipes, pipe lines, tanks, and such other devices,
property and appliances as may be necessary and incidental thereto.
<PAGE> 3
To produce or otherwise acquire, transport, store and refine
petroleum and manufacture, compound and deal in the refined and semi-refined
products of petroleum, and own and operate all property, plants and refineries
necessary and incidental thereto.
To acquire by exchange or otherwise and subscribe for,
purchase, hold, own, assign, pledge and otherwise dispose of shares of capital
stock, bonds, mortgages, debentures, notes and other securities, obligations,
contracts and evidences of indebtedness of corporations of this State,
including this corporation, or of any other State, Country, Nation or
Government and to issue, execute and deliver in exchange therefor its stocks,
bonds or other obligations and to exercise in respect of any such shares of
stock, bonds and other securities so held, owned or possessed, any and all
rights, powers and privileges of ownership.
To manufacture, purchase or otherwise acquire, own, mortgage,
pledge, sell, assign and transfer, or otherwise dispose of, to invest, trade,
deal in and deal with goods, wares and merchandise and real and personal
property of every class and description.
To acquire, and pay for in cash, stock or bonds of this
corporation or otherwise, the good will, rights, assets and property, and to
undertake or assume the whole or any part of the obligations or liabilities of
any person, firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in
respect of, mortgage, or otherwise dispose of letters patent of the United
States or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trademarks and trade names,
relating to or useful in connection with any business of this corporation.
<PAGE> 4
To guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of shares of the capital stock of, or any
bonds, securities or evidences of indebtedness created by any other corporation
or corporations organized under the laws of the this State or any other State,
Country, Nation or Government, and while the owner thereof to exercise all the
rights, powers and privileges of ownership.
To enter into, make and perform contracts of every kind and
description with any person, firm, association, corporation, municipality,
county, state, body politic or government or colony or dependency thereof.
To borrow or raise moneys for any of the purposes of the
corporation and, from time to time, without limit as to amount, to draw, make,
accept, endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness, and to secure the payment of any thereof and of
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation, whether at
the time owned or thereafter acquired and to sell, pledge or otherwise dispose
of such bonds or other obligations of the corporation for its corporate
purposes.
To purchase, hold, sell and transfer the shares of its own
capital stock; provided it shall not use its funds or property for the purchase
of its own shares of capital stock when such use would cause any impairment of
its capital except as otherwise permitted by law, and provided further that
shares of its own capital stock belonging to it shall not be voted upon
directly or indirectly.
<PAGE> 5
To have one or more offices, to carry on all or any of its
operations and business and without restriction or limit as to amount to
purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise
dispose of real and personal property of every class and description in any of
the States, Districts, Territories or Colonies of the United States, and in any
and all foreign countries, subject to the laws of such State, District,
Territory, Colony or Country.
In general, to carry on any other business in connection with
the foregoing, and to have and exercise all the powers conferred by the laws of
Delaware upon corporations formed under the act hereinafter referred to, and to
do any or all of the things hereinbefore set forth to the same extent as
natural persons might or could do.
The objects and purposes specified in the foregoing clauses
shall, except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other clause in this
certificate of incorporation, but the objects and purposes specified in each of
the foregoing clauses of this article shall be regarded as independent objects
and purposes.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Thirty-seven Million Five Hundred
Thousand (37,500,000) shares of the par value of one dollar ($1.00) each.
<PAGE> 6
FIFTH: Except as authorized by the Board of Directors in its
discretion, no stockholder of any class shall have any preemptive or
preferential right to purchase or subscribe for either (i) any shares of the
Corporation which the Corporation may issue or sell, whether out of the number
of shares authorized by this Certificate of Incorporation or any amendment
hereto or whether out of shares of the Corporation acquired by the Corporation
after the issue thereof, or (ii) any obligation or security of the Corporation
which the Corporation may issue or sell, that shall be convertible into, or
exchangeable for, any shares of the Corporation of any class, or (iii) any
warrant or option of the Corporation which the Corporation may issue or sell,
that confers upon the holder or owner thereof the right to subscribe for or
purchase from the Corporation any shares of the Corporation of any class.
SIXTH. The amount of capital with which the corporation will
commence business is One Hundred Thousand Dollars ($100,000).
SEVENTH. The names and places of residence of the
incorporators are as follows:
<TABLE>
<CAPTION>
NAMES RESIDENCES
----- ----------
<S> <C>
C.S. Peabbles Wilmington, Delaware
H. H. Snow Wilmington, Delaware
L. H. Herman Wilmington, Delaware
</TABLE>
EIGHTH. The corporation is to have perpetual existence.
NINTH. The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
<PAGE> 7
TENTH. In furtherance, and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
To make and alter the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose or to
abolish any such reserve in the manner in which it was created.
By resolution or resolutions, passed by a majority of the
whole Board to designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions or in the by-laws of the corporation, shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, and may have power to authorize
the seal of the corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be stated in
the by-laws of the corporation or as may be determined from time to time by
resolution adopted by the board of directors.
<PAGE> 8
When and as authorized by the affirmative vote of the holders
of a majority of the stock issued and outstanding having voting power given at
a stockholders' meeting duly called for that purpose, or when authorized by the
written consent of the holders of a majority of the voting stock issued and
outstanding, the board of directors shall have power and authority to sell,
lease or exchange all of the property and assets of the corporation, including
its good will and its corporate franchises, upon such terms and conditions and
for such consideration, which may be in whole or in part shares of stock in,
and/or other securities of, any other corporation or corporations, as its board
of directors shall deem expedient and for the best interests of the
corporation.
The corporation may in its by-laws confer powers upon its
board of directors in addition to the foregoing, and in addition to the powers
and authorities expressly conferred upon it by statute.
ELEVENTH. Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of this corporation or of any creditor or stockholder thereof, or
on the application of any receiver or receivers appointed for this corporation
under the provisions of Section 3883 of the Revised Code of 1915 of said State,
or on the application of trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of Section 43 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said Court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholder or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and said reorganization shall, if sanctioned by the
Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
<PAGE> 9
TWELFTH. Both stockholders and directors shall have power, if
the by-laws so provide, to hold their meetings, and to have one or more offices
within or without the State of Delaware, and to keep the books of this
corporation (subject to the provisions of the statutes), outside of the State
of Delaware at such places as may be from time to time designated by the board
of directors.
THIRTEENTH. The corporation reserves the right to amend,
alter, change or repeal any provision contained in this certificate of
incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
FOURTEENTH. 1. The affirmative vote or consent of the
holders of ninety-five percent (95%) of all shares of stock of the Corporation
entitled to vote in elections of directors, considered for the purposes of this
Article FOURTEEN as one class, shall be required for the adoption or
authorization of a business combination (as hereinafter defined) with any other
entity (as hereinafter defined) if, as of the record date for the determination
of stockholders entitled to notice thereof and to vote thereon or consent
thereto, such other entity is the beneficial owner, directly or indirectly, of
more than thirty percent (30%) of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors considered for the
purposes of this Article FOURTEEN as one class; provided that such ninety-five
per cent (95%) voting requirement shall not be applicable if:
<PAGE> 10
(a) The cash, or fair market value of other consideration, to
be received per share by capital stockholders of the Corporation in
such business combination bears the same or a greater percentage
relationship to the market price of the Corporation's Capital Stock
immediately prior to the announcement of such business combination
as the highest per share price (including brokerage commissions
and/or soliciting dealers fees) which such other entity has
theretofore paid for any of the shares of the Corporation's Capital
Stock already owned by it bears to the market price of the Capital
Stock of the Corporation immediately prior to the commencement of
acquisition of the Corporation's Capital Stock by such other entity;
(b) The cash, or fair market value of other consideration, to
be received per share by capital stockholders of the Corporation in
such business combination (i) is not less than the highest per share
price (including brokerage commissions and/or soliciting dealers'
fees) paid by such other entity in acquiring any of its holdings of
the Corporation's Capital Stock, and (ii) is not less than the
earnings per share of Capital Stock of the Corporation for the four
full consecutive fiscal quarters immediately preceding the record
date for solicitation of votes on such business combination,
multiplied by the then price/earnings multiple (if any) of such
other entity as customarily computed and reported in the financial
community;
(c) After such other entity has acquired a thirty per cent
(30%) interest and prior to the consummation of such business
combination: (i) such other entity shall have taken steps to ensure
that the Corporation's Board of Directors included at all times
representation by continuing director(s) (as hereinafter defined)
proportionate to the stockholdings of the Corporation's public
capital stockholders not affiliated with such other entity (with a
continuing director to occupy any resulting fractional board
position); (ii) there shall have been no reduction in the rate of
dividends payable on the Corporation's Capital Stock except as
necessary to insure that a quarterly dividend payment does not
exceed 12.5% of the net income of the Corporation for the four full
consecutive fiscal quarters immediately preceding the declaration
date of such dividend, or except as may have been approved by a
unanimous vote of the directors; (iii) such other entity shall not
have acquired any newly issued shares of stock, directly or
indirectly, from the Corporation (except upon conversion of
convertible securities acquired by it prior to obtaining a thirty
per cent (30%) interest or as a result of a pro rata stock dividend
or stock split); and (iv) such other entity shall not have acquired
any additional shares of the Corporation's outstanding Capital Stock
or securities convertible into Capital Stock except as a part of the
transaction which results in such other entity acquiring its thirty
percent (30%) interest;
(d) Such other entity shall not have (i) received the benefit,
directly or indirectly (except proportionately as a stockholder) of
any loans, advances, guarantees, pledges or other financial
assistance or tax credits provided by the Corporation, or (ii) made
any major change in the Corporation's business or equity capital
structure without the unanimous approval of the directors, in either
case prior to the consummation of such business combination; and
<PAGE> 11
(e) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 shall be mailed to public
stockholders of the Corporation for the purpose of soliciting
stockholder approval of such business combination and shall contain
at the front thereof, in a prominent place, any recommendations as
to the advisability (or inadvisability) of the business combination
which the continuing directors, or any of them, may choose to state
and, if deemed advisable by a majority of the continuing directors,
an opinion of a reputable investment banking firm as to the fairness
(or not) of the terms of such business combination, from the point
of view of the remaining public stockholders of the Corporation
(such investment banking firm to be selected by a majority of the
continuing directors and to be paid a reasonable fee for their
services by the Corporation upon receipt of such opinion).
The provisions of this Article FOURTEENTH shall also apply to
a business combination with any other entity which at any time has been the
beneficial owner, directly or indirectly, of more than thirty percent (30%) of
the outstanding shares of stock of the Corporation entitled to vote in
elections of directors considered for the purposes of this Article FOURTEENTH
as one class, notwithstanding the fact that such other entity has reduced its
shareholdings below thirty percent (30%) if, as of the record date for the
determination of stockholders entitled to notice of and to vote on or consent
to the business combination, such other entity is an "affiliate" of the
Corporation (as hereinafter defined).
2. As used in this Article FOURTEENTH, (a) the term "other
entity" shall include any corporation, person or other entity and any other
entity with which it or its "affiliate" or "associate" (as defined below) has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of stock of the Corporation,
or which is its "affiliate" or "associate" as those terms are defined in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934 as in effect on July 1, 1979, together with the successors and assigns of
such persons in any transaction or series of transactions not involving a
public offering of the Corporation's stock within the meaning of the Securities
Act of 1933; (b) another entity shall be deemed to be the beneficial owner of
any shares of stock of the Corporation which the other entity (as defined
above) has the right to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise; (c) the outstanding
shares of any class of stock of the Corporation shall include shares deemed
owned through application of clause (b) above but shall not include any other
shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise; (d) the term "business
combination" shall include any merger or consolidation of the Corporation with
or into any other corporation, or the sale or lease of all or any substantial
part of the assets of the Corporation to, or any sale or lease to the
Corporation or any subsidiary thereof in exchange for securities of the
Corporation of any assets (except assets having an aggregate fair market
value of less than $5,000,000) of any other entity; (e) the term "continuing
director" shall mean a person who was a member of the Board of Directors of
the Corporation elected by the public stockholders prior to the time that
such other entity acquired in excess of ten percent (10%) of the stock of
the Corporation entitled to vote in the election of directors, or a person
recommended to succeed a continuing director by a majority of continuing
directors; and (f) for the purposes of subparagraphs 1(a) and (b) of this
Article FOURTEENTH the term "other consideration to be received" shall mean
Capital Stock of the Corporation retained by its existing public stockholders
in the event of a business combination with such other entity in which the
Corporation is the surviving corporation.
3. A majority of the continuing directors shall have the
power and duty to determine for the purposes of this Article FOURTEENTH on the
basis of information known to them whether (a) such other entity beneficially
owns more than thirty percent (30%) of the outstanding shares of stock of the
Corporation entitled to vote in election of directors, (b) an other entity is
an "affiliate" or "associate" (as defined above) of another, (c) an other
entity has an agreement, arrangement or understanding with another, or (d) the
assets being acquired by the Corporation, or any subsidiary thereof, have an
aggregate fair market value of less than $5,000,000.
<PAGE> 12
4. No amendment to the Certificate of Incorporation of the
Corporation shall amend, alter, change or repeal any of the provisions of this
Article FOURTEENTH, unless the amendment effecting such amendment, alteration,
change or repeal shall receive the affirmative vote or consent of the holders
of ninety-five percent (95%) of all shares of stock of the Corporation entitled
to vote in election of directors, considered for the purposes of this Article
FOURTEENTH as one class; provided that this paragraph 4 shall not apply to, and
such ninety-five percent (95%) vote or consent shall not be required for, any
amendment, alteration, change or repeal unanimously recommended to the
stockholders by the Board of Directors of the Corporation if all of such
directors are persons who would be eligible to serve as "continuing directors"
within the meaning of paragraph 2 of this Article FOURTEENTH.
5. Nothing contained in this Article FOURTEENTH shall be
construed to relieve any other entity from any fiduciary obligation imposed by
law.
FIFTEENTH. 1. To the fullest extent that the law of the
State of Delaware, as the same exists or may hereafter be amended, permits
elimination of the personal liability of directors, no director of this
Corporation shall be personally liable to this Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
2. The provisions of this Article FIFTEENTH shall be deemed
to be a contract with each director of this Corporation who serves as such at
any time while this Article FIFTEENTH is in effect, and each such director
shall be deemed to be serving as such in reliance on the provisions of this
Article FIFTEENTH. Any amendment or repeal of this Article FIFTEENTH or
adoption of any By-Law of this Corporation or other provision of the
Certificate of Incorporation of this Corporation which has the effect of
increasing director liability shall operate prospectively only and shall not
affect any action taken, or any failure to act, by a director of this
Corporation prior to the effectiveness of such amendment, repeal, By-Law or
other provisions.
<PAGE> 13
SIXTEENTH. 1. Right to Indemnification. Except as
prohibited by law, every director and officer of the Corporation shall be
entitled as of right to be indemnified by the Corporation against reasonable
expenses and any liability paid or incurred by such person in connection with
any actual or threatened claim, action, suit or proceeding, civil, criminal,
administrative, investigative or other, whether brought by or in the right of
the Corporation or otherwise, in which he or she may be involved, as a party or
otherwise, by reason of such person being or having been a director or officer
of the Corporation or by reason of the fact that such person is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary
or other representative of another corporation, partnership, joint venture,
trust, employee benefit plan or other entity (such claim, action, suit or
proceeding hereinafter being referred to as an "Action"); provided, however,
that no such right to indemnification shall exist with respect to an Action
brought by an indemnitee (as defined below) against the Corporation (an
"Indemnitee Action") except as provided in the last sentence of this Paragraph
1. Persons who are not directors or officers of the Corporation may be
similarly indemnified in respect of service to the Corporation or to another
such entity at the request of the Corporation to the extent the Board of
Directors of the Corporation at any time denominates any of such persons as
entitled to the benefits of this Article SIXTEENTH. As used in this Article
SIXTEENTH, "indemnitee" shall include each director and officer of the
Corporation and each other person denominated by the Board of Directors of the
Corporation as entitled to the benefits of this Paragraph 1; "expenses" shall
include fees and expenses of counsel selected by an indemnitee and "liability"
shall include amounts of judgments, excise taxes, fines, penalties and amounts
paid in settlement. An indemnitee shall be entitled to be indemnified pursuant
to this Paragraph 1 against expenses incurred in connection with an Indemnitee
Action only if (i) the Indemnitee Action is instituted under Paragraph 3 of
this Article SIXTEENTH and the indemnitee is successful in whole or in part in
such Indemnitee Action, (ii) the indemnitee is successful in whole or in part
in another Indemnitee Action for which expenses are claimed or (iii) the
indemnification for expenses is included in a settlement of, or is awarded by a
court in, such other Indemnitee Action.
2. Right to Advancement of Expenses. Every indemnitee shall
be entitled as of right to have the expenses of the indemnitee in defending any
Action or in bringing and pursuing any Indemnitee Action under Paragraph 3 of
this Article SIXTEENTH paid in advance by the Corporation prior to final
disposition of the Action or Indemnitee Action provided that the Corporation
receives a written undertaking by or on behalf of the indemnitee to repay the
amount advanced if it should ultimately be determined that the indemnitee is
not entitled to be indemnified for the expenses.
<PAGE> 14
3. Right of Indemnitee to Bring Action. If a written claim
for indemnification under Paragraph 1 of this Article SIXTEENTH or for
advancement of expenses under Paragraph 2 of this Article SIXTEENTH is not paid
in full by the Corporation within 30 days after the claim has been received by
the Corporation, the Indemnitee may at any time thereafter bring an Indemnitee
Action to recover the unpaid amount of the claim and, if successful in whole or
in part, the indemnitee shall also be entitled to be paid the expense of
bringing and pursuing such Indemnitee Action. The only defense to an
Indemnitee Action to recover on a claim for indemnification under Paragraph 1
of this Article SIXTEENTH shall be that the conduct of the indemnitee was such
that under Delaware law the Corporation is prohibited from indemnifying the
indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel and stockholders) to have made a
determination prior to the commencement of such Indemnitee Action that
indemnification of the indemnitee is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or stockholders) that the conduct of the indemnitee was such that
indemnification is prohibited by Delaware law, shall be a defense to such
Indemnitee Action or create a presumption that the conduct of the indemnitee
was such that indemnification is prohibited by Delaware law. The only defense
to an Indemnitee Action to recover on a claim for advancement of expenses under
Paragraph 2 of this Article SIXTEENTH shall be failure by the indemnitee to
provide the undertaking required by Paragraph 2 of this Article SIXTEENTH.
4. Funding and Insurance. The Corporation may create a trust
fund, grant a security interest, cause a letter of credit to be issued or use
other means (whether or not similar to the foregoing) to ensure the payment of
all sums required to be paid by the Corporation to effect indemnification as
provided in this Article SIXTEENTH. The Corporation may purchase and maintain
insurance to protect itself and any indemnitee against any expenses or
liability incurred by the indemnitee in connection with any Action, whether or
not the Corporation would have the power to indemnify the indemnitee against
the expenses or liability by law or under the provisions of this Article
SIXTEENTH.
<PAGE> 15
5. Non-Exclusivity; Nature and Extent of Rights. The rights
to indemnification and advancement of expenses provided for in this Article
SIXTEENTH shall (i) not be deemed exclusive of any other rights, whether now
existing or hereafter created, to which any indemnitee may be entitled under
any agreement, provision in the Certificate of Incorporation or By-laws of the
Corporation, vote of stockholders or disinterested directors or otherwise, (ii)
be deemed to create contractual rights in favor of each indemnitee who serves
the Corporation at any time while this Section 5 is in effect (and each such
indemnitee shall be deemed to be so serving in reliance on the provisions of
this Section 5), (iii) continue as to each indemnitee who has ceased to have
the status pursuant to which the indemnitee was entitled or was denominated as
entitled to indemnification under this Article SIXTEENTH and shall inure to the
benefit of the heirs and legal representatives of each indemnitee and (iv) be
applicable to Actions commenced after the effectiveness of this Article
SIXTEENTH, whether arising from acts or omissions occurring before or after the
effectiveness of this Article SIXTEENTH. Any amendment or repeal of this
Article SIXTEENTH or adoption of any By-Law of this Corporation or other
provision of the Certificate of Incorporation of this Corporation which has the
effect of limiting in any way the rights to indemnification or advancement of
expenses provided for in this Article SIXTEENTH shall operate prospectively
only and shall not affect any action taken, or any failure to act, by an
indemnitee prior to the effectiveness of any such amendment, repeal, By-law or
other provision.
6. Partial Indemnity. If an indemnitee is entitled under any
provision of this Article SIXTEENTH to indemnification by the Corporation for
some or a portion of the expenses or a liability paid or incurred by the
indemnitee in the preparation, investigation, defense, appeal or settlement of
any Action or Indemnitee Action but not, however, for the total amount thereof,
the Corporation shall indemnify the indemnitee for the portion of such expenses
or liability to which the indemnitee is entitled.
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named for the purpose of forming a corporation to do business both
within and without the State of Delaware, and in pursuance of the General
Corporation Law of the State of Delaware, being Chapter 65 of the Revised Code
of Delaware, and the acts amendatory thereof and supplemental thereto, do make
this certificate, hereby declaring and certifying that the facts herein stated
are true, and accordingly have hereunto set our hands and seals this 23rd day
of June, A.D. 1931.
In presence of
Harold E. Grantland C.S. Peabbles (Seal)
H.H. Snow (Seal)
L.H. Herman (Seal)
<PAGE> 16
STATE OF DELAWARE )
) SS
COUNTY OF NEW CASTLE )
BE IT REMEMBERED, that on this 23rd day of June, A.D. 1931,
personally came before me, Harold E. Grantland, a Notary Public for the State
of Delaware, C.S. Peabbles, H.H. Snow, L.H. Herman, all of the parties to the
foregoing certificate of incorporation, known to me personally to be such, and
severally acknowledged the said certificate to be the act and deed of the
signers respectively and that the facts therein stated are truly set forth.
GIVEN under my hand and seal of office the day and year
aforesaid.
Harold E. Grantland
Notary Public
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""
" Harold E. Grantland "
" Notary Public "
" Appointed January 12, 1931 "
" State of Delaware "
" Term Two Years "
""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""
<PAGE> 1
Exhibit 3(ii)
QUAKER STATE CORPORATION
BYLAWS
As Amended and Restated on February 28, 1995
<PAGE> 2
QUAKER STATE CORPORATION
BYLAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<S> <C> <C>
STOCKHOLDERS .................... 1
Section 1.1. Time and Place of Meetings ................ 1
Section 1.2. Annual Meetings ........................... 1
Section 1.3. Special Meetings .......................... 1
Section 1.4. Notice of Meetings; Waiver ................ 1
Section 1.5. Quorum .................................... 2
Section 1.6. Voting .................................... 2
Section 1.7. Adjournment ............................... 2
Section 1.8. Proxies ................................... 2
Section 1.9. Nomination of Directors ................... 2
Section 1.10. Transaction of Business ................... 4
Section 1.11. Inspectors of Election .................... 5
Section 1.12. Opening and Closing of Polls .............. 6
Section 1.13. Consent of Stockholders in
Lieu of Meeting ........................ 6
ARTICLE II
BOARD OF DIRECTORS ................ 8
Section 2.1. General Powers ........................... 8
Section 2.2. Number and Term of Office ................ 8
Section 2.3. Election of Directors .................... 8
Section 2.4. Annual and Regular Meetings .............. 8
Section 2.5. Special Meetings; Notice ................. 9
Section 2.6. Quorum; Voting ........................... 9
Section 2.7. Adjournment .............................. 9
Section 2.8. Action Without a Meeting ................. 9
Section 2.9. Regulations; Manner of Acting ............ 9
Section 2.10. Meeting by Telephonic Communications ..... 9
Section 2.11. Resignations; Retirement ................. 10
Section 2.12. Vacancies and Newly Created
Directorships ......................... 10
Section 2.13. Compensation and Stock Ownership ......... 10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
ARTICLE III
<S> <C> <C>
EXECUTIVE COMMITTEE AND OTHER COMMITTEES ............. 10
Section 3.1. How Constituted ......................... 10
Section 3.2. Powers .................................. 11
Section 3.3. Proceedings and Minutes ................. 11
Section 3.4. Quorum and Manner of Acting ............. 11
Section 3.5. Meeting by Telephonic Communications .... 12
Section 3.6. Absent or Disqualified Members .......... 12
Section 3.7. Resignations ............................ 12
Section 3.8. Removal ................................. 12
Section 3.9. Vacancies ............................... 12
Section 3.10. Compensation ............................ 12
ARTICLE IV 12
OFFICERS .................... 12
Section 4.1. Number .................................. 13
Section 4.2 Election ................................ 13
Section 4.3. Removal and Resignation; Vacancies ...... 13
Section 4.4. Authority and Duties of Officers ........ 13
Section 4.5. Chairman of the Board ................... 13
Section 4.6. Chief Executive Officer ................. 13
Section 4.7. President ............................... 14
Section 4.8. Vice Chairman ........................... 14
Section 4.9. Vice President .......................... 14
Section 4.10. Secretary and Assistant Secretaries ..... 14
Section 4.11. Treasurer and Assistant Treasurers ...... 15
Section 4.12. Additional Officers ..................... 15
Section 4.13. Security ................................ 16
ARTICLE V
CAPITAL STOCK ................. 16
Section 5.1. Certificates of Stock, Uncertificated
Shares ............................... 16
Section 5.2. Lost, Stolen or Destroyed Certificates .. 16
Section 5.3. Transfer of Stock ....................... 16
Section 5.4. Record Date ............................. 17
Section 5.5. Transfer Agent and Registrar ............ 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
ARTICLE VI
<S> <C> <C>
OFFICES ..................... 17
Section 6.1. Registered Office ....................... 17
Section 6.2. Other Offices ........................... 17
ARTICLE VII
GENERAL PROVISIONS ............... 18
Section 7.1. Dividends ............................... 18
Section 7.2. Execution of Instruments ................ 18
Section 7.3. Corporate Indebtedness .................. 18
Section 7.4. Deposits ................................ 18
Section 7.5. Sale, Transfer, etc. of Securities ...... 19
Section 7.6. Voting as Stockholder ................... 19
Section 7.7. Fiscal Year ............................. 19
Section 7.8. Seal .................................... 19
ARTICLE VIII
AMENDMENT OF BYLAWS ............... 19
Section 8.1. Amendment ............................... 19
ARTICLE IX
BUSINESS COMBINATIONS .............. 20
Section 9.1 Business Combinations ................... 20
ARTICLE X
CONSTRUCTION ................. 20
Section 10.1. Construction ............................ 20
</TABLE>
iii
<PAGE> 5
Quaker State Corporation
QUAKER STATE CORPORATION
BYLAWS
As amended and restated on February 28, 1995
ARTICLE I
STOCKHOLDERS
Section 1.1. TIME AND PLACE OF MEETINGS. All meetings of the
stockholders for the election of directors or for any other purpose shall be
held at such time and place, within or without the State of Delaware, as may be
designated by the Board of Directors, or in the absence of a designation by the
Board of Directors, by the Chairman of the Board, the Chief Executive Officer,
the President or the Secretary, and as may be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 1.2. ANNUAL MEETINGS. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of
such other business as properly may come before such meeting shall be held at
such place, either within or without the State of Delaware, and at 1:00 p.m.
local time on the last Thursday of May (or, if such day is a legal holiday,
then on the next succeeding business day), or at such other date and time as
may be fixed from time to time by resolution of the Board of Directors and set
forth in the notice of meeting or a duly executed waiver of notice thereof. At
the annual meeting, the stockholders shall elect by a plurality vote the
directors to succeed those whose terms expire at that meeting and shall
transact such other business as may properly be brought before the meeting.
Section 1.3. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may only be called by the Chairman of the Board,
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors, by the President or by the Secretary.
Section 1.4. NOTICE OF MEETINGS; WAIVER. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting.
<PAGE> 6
Quaker State Corporation
Section 1.5. QUORUM. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting.
Section 1.6. VOTING. Every holder of record of shares entitled to
vote at a meeting of stockholders shall be entitled to one vote for each share
outstanding in the name of such stockholder on the books of the Corporation
at the close of business on the record date for the meeting. Except as
otherwise required by law or by the Certificate of Incorporation, the vote of a
majority of the shares represented in person or by proxy at any meeting at
which a quorum is present shall be sufficient for the transaction of any
business at such meeting. No vote of the stockholders need be taken by written
ballot unless otherwise required by law.
Section 1.7. ADJOURNMENT. If a quorum is not present at any meeting
of the stockholders, the stockholders present in person or by proxy shall have
the power to adjourn any such meeting from time to time until a quorum is
present. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given if the place, date and hour thereof are announced
at the meeting at which the adjournment is taken, provided, however, that if
the adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed, a notice of the adjourned
meeting, conforming to the requirements of Section 1.4 hereof, shall be given
to each stockholder of record entitled to vote at such meeting. At any
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted on the original date of the meeting.
Section 1.8. PROXIES. Any stockholder entitled to vote at any meeting
of the stockholders or to express consent to or dissent from corporate action
without a meeting may authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless it provides for a longer period. Every proxy shall be
revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy that is not irrevocable by attending the
meeting and voting in person, by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary.
Section 1.9. NOMINATION OF DIRECTORS. Only persons who are nominated
in accordance with the procedures set forth in this Section 1.9 shall be
eligible for election as directors of the Corporation.
<PAGE> 7
Quaker State Corporation
(a) Nominations of persons for election to the Board of
Directors of the Corporation may be made at any annual meeting of stockholders
by or at the direction of the Board of Directors or by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
was a stockholder of record at the time of giving of notice provided for in
this Section 1.9(a) and who complies with the notice procedures set forth in
this Section 1.9(a). Any such nomination by a stockholder shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To
be timely notice for an annual meeting, a stockholder's notice shall be
delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than
the 90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting or the 10th
day following the day on which public announcement (as defined in Article I,
Section 1.10) of the date of such meeting is first made. Notwithstanding
anything in the foregoing sentence to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 1.9(a)
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary
of the Corporation at the principal executive offices of the Corporation not
later than the close of business on the 10th day following the day on which
such public announcement is first made by the Corporation. Such stockholder's
notice shall set forth in writing (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director (A) the name,
age, business address and residence of such person, (B) the principal
occupation or employment of such person, (C) the number of shares of stock of
the Corporation that are beneficially owned by such person, and (D) any other
information relating to such person that is required to be disclosed in
connection with the solicitation of proxies for the election of directors, or
as otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including,
without limitation, such person's written consent to being named in a proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination is made (A) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (B)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
-3-
<PAGE> 8
Quaker State Corporation
(b) Nominations of persons for election to the Board of Directors of
the Corporation may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the Board of Directors or (ii) provided that the
Board of Directors has determined that one or more directors shall be elected
at such special meeting, by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 1.9(b), who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 1.9(b). To be timely
notice for a special meeting, a stockholder's notice must be delivered to the
Secretary of the Corporation at the principal executive offices of the
Corporation not earlier than the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public announcement
(as defined in Article I, Section 1.10) is first made of the date of the
special meeting and of the nominee(s) proposed by the Board of Directors to be
elected at such meeting.
(c) At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information pertaining to the nominee which
is required to be set forth in a stockholder's notice of nomination. The
Chairman of the Board, or in his or her absence the Chief Executive Officer,
the President, any Vice President or the Secretary, shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and in that event
the defective nomination shall be disregarded.
Section 1.10. TRANSACTION OF BUSINESS. To be properly brought before
an annual meeting of stockholders, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this Section 1.10, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 1.10. For business to be properly brought before an
annual meeting by a stockholder, if such business is related to any matter
other than the election of directors of the Corporation, the stockholder must
have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered in
accordance with the procedures in Section 1.9(a) applicable to a stockholder's
nomination of directors at an annual meeting. Such stockholder's notice shall
set forth in writing as to each matter the stockholder proposes to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting, the reasons for conducting such business at
the annual meeting, and any
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<PAGE> 9
Quaker State Corporation
material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (ii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the proposal is made (A) the name and address of such stockholder, as they
appear on the Corporation's books, and of such beneficial owner and (B) the
class and number of shares of the Corporation which are owned beneficially and
of record by such stockholder and such beneficial owner. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
Section 1.10. The Chairman of the Board, or in his or her absence the Chief
Executive Officer, the President, any Vice President or the Secretary, shall,
if the facts warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with the provisions of
this Section 1.10, and in that event the business shall not be transacted. For
purposes of this Section 1.10 and Article I, Section 1.9, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act. In addition to the
provisions of this Section 1.10, a stockholder also shall comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing in these
Bylaws shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
Section 1.11. INSPECTORS OF ELECTIONS. Prior to any meeting of the
stockholders, the Board of Directors shall appoint one or more persons to act
as inspectors of elections, and may designate one or more alternate inspectors.
In the event no inspector or alternate is able to act, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of the duties of an inspector,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspector shall:
(a) ascertain the number of shares outstanding and the voting power
of each;
(b) determine the shares represented at a meeting and the validity of
proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors; and
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<PAGE> 10
Quaker State Corporation
(e) certify his or her determination of the number of shares
represented at the meeting, and his or her count of all votes and ballots.
The inspector may appoint or retain other persons or entities to assist in the
performance of the duties of inspector.
When determining the shares represented and the validity of proxies
and ballots, the inspector shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
accordance with Section 1.8 of these Bylaws, ballots and the regular books and
records of the Corporation. The inspector may consider other reliable informa-
tion for the limited purpose of reconciling proxies and ballots submitted by or
on behalf of banks, brokers or their nominees or a similar person which
represent more votes than the holder of a proxy is authorized by the record
owner to cast or more votes than the stockholder holds of record. If the
inspector considers other reliable information as outlined in this section, the
inspector, at the time of his or her certification pursuant to paragraph (e) of
this section shall specify the precise information considered, the person or
persons from whom the information was obtained, when this information was
obtained, the means by which the information was obtained, and the basis for
the inspector's belief that such information is accurate and reliable.
Section 1.12. OPENING AND CLOSING OF POLLS. The date and time for
the opening and the closing of the polls for each matter to be voted upon at a
meeting of stockholders shall be announced at the meeting. The inspector of
the election shall be prohibited from accepting any ballots, proxies or votes
or any revocations thereof or changes thereto after the closing of the polls,
unless the Court of Chancery upon application by a stockholder shall determine
otherwise.
Section 1.13. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. (a)
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any annual or special meeting of the
stockholders of the Corporation may, subject to the provisions of this Section
1.13, be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the actions so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall
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<PAGE> 11
Quaker State Corporation
be effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered to the Corporation, written
consents signed by a sufficient number of holders to take such action are
delivered to the Corporation.
(c) The record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be fixed by the Board of
Directors. Any stockholder seeking to have the stockholders authorize or take
corporate action by written consent without a meeting shall, by written notice
to the Secretary of the Corporation, request the Board of Directors to fix a
record date. Upon receipt of such a request, the Secretary of the Corporation
shall, as promptly as practicable, direct the Chairman of the Board, the Chief
Executive Officer or the President to call a special meeting of the Board of
Directors to be held as promptly as practicable, but in any event not more than
10 days following the date of receipt of such a request. At such a meeting,
the Board of Directors shall fix a record date, which shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which shall not be more than 10 days after the date on which
the resolution fixing the record date is adopted by the Board of Directors.
Notice of the record date shall be published in accordance with the rules and
policies of any stock exchange on which securities of the Corporation are then
listed or, if the securities of the Corporation are not listed on a stock
exchange, then in accordance with the rules and policies of the National
Association of Securities Dealers Automatic Quotation National Market System.
If no record date has been so fixed by the Board of Directors, the record date
for determining the stockholders entitled to consent to corporate action in
writing without a meeting, where no prior action by the Board of Directors is
required by the Delaware General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation. If no date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by the
Delaware General Corporation Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(d) In the event of the delivery to the Corporation of a written
consent or consents purporting to represent the requisite voting power to
authorize or take corporate action and/or related revocations, the Secretary of
the Corporation shall provide for the safekeeping of such consents and
revocations and shall, as promptly as practicable, engage inspectors for the
purpose of promptly performing a ministerial review of the validity of the
consents and revocations. No action by written consent without a meeting shall
be effective until such inspectors have completed their review, determined that
the requisite number of valid and unrevoked consents has been obtained to
authorize or take actions specified in the
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<PAGE> 12
Quaker State Corporation
consents and certified such determination for entry in the records of the
Corporation for the purpose of recording the proceedings of meetings of the
stockholders.
(e) For purposes of this Section 1.13, delivery to the Corporation
shall be effected by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. GENERAL POWERS. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these Bylaws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors, and the Board of Directors may exercise
all the powers of the Corporation.
Section 2.2. NUMBER AND TERM OF OFFICE. The number of Directors
constituting the entire Board of Directors shall be twelve, which number may be
modified from time to time by resolution of the Board of Directors, provided
that the number of Directors shall in no event be less than one. Each Director
(whenever elected) shall hold office until his successor has been duly elected
and qualified, or until his earlier death, resignation or removal.
Section 2.3. ELECTION OF DIRECTORS. Except as otherwise provided in
Section 2.12 of these Bylaws, the Directors shall be elected at each annual
meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall
cause the meeting to be held as soon thereafter as convenient. At each meeting
of the stockholders for the election of Directors, provided a quorum is
present, the Directors shall be elected by a plurality of the votes validly
cast in such election.
Section 2.4. ANNUAL AND REGULAR MEETINGS. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
practical following adjournment of the annual meeting of the stockholders at
the place of such annual meeting of the stockholders. Notice of such annual
meeting of the Board of Directors need not be given. The Board of Directors
from time to time may by resolution provide for the holding of regular meetings
and fix the place (which may be within or without the State of Delaware) and
the date and hour of such meetings. Notice of regular meetings need not be
given.
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<PAGE> 13
Quaker State Corporation
Section 2.5. SPECIAL MEETINGS; NOTICE. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board, the
Chief Executive Officer or the President or, in the event of their absence or
disability, by any Vice President or the Secretary, or by the Secretary upon
the request of four Directors, at such place (within or without the State of
Delaware), date and hour as may be specified in the respective notices or
waivers of notice of such meetings. Special meetings of the Board of Directors
may be called on 24 hours' notice, if notice is given to each Director
personally, by telephone or by electronic means, or on five days' notice, if
notice is mailed to each Director, addressed to the Director at his or her
usual place of business.
Section 2.6. QUORUM; VOTING. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the Certificate of Incorporation or these Bylaws,
the vote of a majority of the Directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 2.7. ADJOURNMENT. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.5 shall be given to each Director.
Section 2.8. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors.
Section 2.9. REGULATIONS; MANNER OF ACTING. To the extent consistent
with applicable law, the Certificate of Incorporation and these Bylaws, the
Board of Directors may adopt such rules and regulations for the conduct of
meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. MEETING BY TELEPHONIC COMMUNICATIONS. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment through
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
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<PAGE> 14
Quaker State Corporation
Section 2.11. RESIGNATIONS; RETIREMENT. Any Director may resign at
any time by delivering a written notice of resignation, signed by such
Director, to the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. A Director who is not and never
has been an officer of the Corporation, and any Director who has served as
Chief Executive Officer of the Corporation, shall retire from the Board of
Directors not later than the date of the annual meeting of stockholders next
following his or her 70th birthday. A Director who is or has been an officer
of the Corporation other than the Chief Executive Officer shall retire from the
Board of Directors not later than the earlier of the date of the annual meeting
of stockholders next following his or her 65th birthday or the date of his or
her retirement as an employee of the Corporation.
Section 2.12. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. If any
vacancy shall occur in the Board of Directors, by reason of death, resignation,
retirement, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and any
such vacancy or newly created directorship may be filled by a majority of the
Directors then in office, although less than a quorum. A Director elected to
fill a vacancy or a newly created directorship shall hold office until his
successor has been elected and qualified or until his or her earlier death,
resignation, retirement or removal. Any such vacancy or newly created
directorship may also be filled at any time by vote of the stockholders.
Section 2.13. COMPENSATION AND STOCK OWNERSHIP. The Board of
Directors shall fix from time to time by resolution the compensation, if any,
which each Director shall be entitled to receive for service as such.
Beginning no later than one year following election to the Board of Directors,
a Director shall own at least 1,000 shares of the Corporation's capital stock
at all times while serving as a Director.
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.1. HOW CONSTITUTED. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one Director as Chairman of
any such Committee. Thereafter, members and Chairmen of each such Committee
may be designated at the annual meeting of the Board of Directors. Any such
Committee may be abolished or re-designated from time to time by the Board of
Directors. Each member of any such Committee
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Quaker State Corporation
(whether designated at an annual meeting of the Board of Directors or to fill a
vacancy or otherwise) shall hold office until his or her successor shall have
been designated or until he or she shall cease to be a Director, or until his
or her earlier death, resignation, retirement or removal.
Section 3.2. POWERS. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation, including the power to declare dividends and to authorize the
issuance of stock. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors. The
power and authority of the Executive Committee and any such other Committee
shall be subject to the provisions of Section 141(c) of the Delaware General
Corporation Law and any successor provisions. The Executive Committee shall
have, and any such other Committee may be granted by the Board of Directors,
power to authorize the seal of the Corporation to be affixed to any or all
papers which may require it.
Section 3.3. PROCEEDINGS AND MINUTES. Each such Committee may fix its
own rules of procedure and may meet at such place (within or without the State
of Delaware), at such time and upon such notice, if any, as it shall determine
from time to time. Each such Committee shall keep minutes of its proceedings
and shall report such proceedings to the Board of Directors at the meeting of
the Board of Directors next following any such proceedings.
Section 3.4. QUORUM AND MANNER OF ACTING. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members constituting a majority of the total
authorized membership of such Committee shall constitute a quorum for the
transaction of business. The act of the majority of the members present at any
meeting at which a quorum is present shall be the act of such Committee. Any
action required or permitted to be taken at any meeting of any such Committee
may be taken without a meeting, if all members of such Committee shall consent
to such action in writing and such writing or writings are filed with the
minutes of the proceedings of the Committee. The members of any such Committee
shall act only as a Committee, and the individual members of such Committee
shall have no power as such.
Section 3.5. MEETING BY TELEPHONIC COMMUNICATIONS. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment through which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting.
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Quaker State Corporation
Section 3.6. ABSENT OR DISQUALIFIED MEMBERS. In the event of the
absence or disqualification of a member of any Committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not constituting a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.7. RESIGNATIONS. Any member (and any alternate member) of
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman of the Board, the Chief
Executive Officer, the President or the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
Section 3.8. REMOVAL. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.9. VACANCIES. If any vacancy shall occur in any Committee,
by reason of disqualification, death, resignation, retirement, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
Section 3.10. COMPENSATION. The Board of Directors shall fix from
time to time by resolution the compensation, if any, which each Director shall
be entitled to receive for service as a member or as Chairman of any Committee.
ARTICLE IV
OFFICERS
Section 4.1. NUMBER. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Board of Directors also may elect
a Chairman of the Board, a Chief Executive Officer and one or more Vice
Chairmen, Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person. The President and the Chief Executive
Officer, if any, shall be chosen from the members of the Board of Directors,
but no other officer need be a Director of the Corporation.
Section 4.2. ELECTION. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual
meeting, officers
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Quaker State Corporation
may be elected at any regular or special meeting of the Board of Directors.
Each officer shall hold office until his or her successor has been elected and
qualified, or until his or her earlier death, resignation, retirement or
removal.
Section 4.3. REMOVAL AND RESIGNATION; VACANCIES. Any officer may be
removed for or without cause at any time by the Board of Directors. Any
officer may resign at any time by delivering a written notice of resignation,
signed by such officer, to the Board of Directors, the Chairman of the Board,
the Chief Executive Officer, the President or the Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any
vacancy occurring in any office of the Corporation by death, resignation,
retirement, removal or otherwise, may be filled by the Board of Directors, by
the Chief Executive Officer or if there be none, by the President, subject to
ratification by the Board of Directors at its next regular meeting.
Section 4.4. AUTHORITY AND DUTIES OF OFFICERS. The officers of the
Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these Bylaws, as may be specified
from time to time by the Board of Directors in a resolution that is not
inconsistent with these Bylaws, or as are customarily incident to the
respective officers' offices, except that in any event, each officer shall
exercise such powers and perform such duties as may be required by law.
Section 4.5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors and
shall have such other duties and responsibilities as may be assigned by the
Board of Directors. The Chairman of the Board may delegate to any qualified
person authority to chair any meeting of the stockholders, either on a
temporary or a permanent basis.
Section 4.6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be responsible for the active management and direction of the business
and affairs of the Corporation. In case of the inability or failure of the
Chairman of the Board to perform the duties of that office, the Chief Executive
Officer shall perform the duties of the Chairman of the Board, unless otherwise
determined by the Board of Directors.
Section 4.7. PRESIDENT. In the event that no Chief Executive Officer
has been elected by the Board of Directors, the President shall perform the
duties of the Chief Executive Officer, unless otherwise determined by the Board
of Directors.
Section 4.8. VICE CHAIRMAN. Any Vice Chairman shall perform such
duties and exercise such powers as may be assigned from time to time by the
Chairman of the Board or the Chief Executive Officer, or if there be no Chief
Executive Officer, by the President.
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Quaker State Corporation
Section 4.9. VICE PRESIDENT. Each Vice President shall perform such
duties and exercise such powers as may be assigned from time to time by the
Chief Executive Officer, or if there be none, by the President.
Section 4.10. SECRETARY AND ASSISTANT SECRETARIES. The Secretary
shall have the following powers and duties:
(a) The Secretary shall attend all meetings of the stockholders and
of the Board of Directors, shall keep or cause to be kept a record of all
proceedings of such meetings and shall perform like duties for any Committee of
the Board of Directors upon the request of the Chairman of the Board, the Chief
Executive Officer or the President.
(b) The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and the Board of Directors in accordance with the
provisions of these Bylaws and as required by law.
(c) The Secretary shall be the custodian of the records and of the
seal of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf of
the Corporation under its seal shall have been duly authorized in accordance
with these Bylaws, and when so affixed, the Secretary or any Assistant
Secretary may attest the same.
(d) The Secretary shall properly maintain all books, reports,
statements, certificates and all other documents and records of the Corporation
required by law, the Certificate of Incorporation or these Bylaws, except those
for which some other officer or agent of the Corporation has been made
responsible or is otherwise accountable.
(e) The Secretary shall have charge of the stock books and records of
the Corporation and shall maintain or cause to be maintained the stock transfer
books for shares of stock of the Corporation of each class issued and
outstanding.
(f) The Secretary shall sign certificates representing shares of the
Corporation the issuance of which shall have been authorized by the Board of
Directors.
(g) Any Assistant Secretary shall assist the Secretary in performing
the duties and exercising the authority of the Secretary. In case of the
inability or failure of the Secretary to perform the duties of that office, an
Assistant Secretary shall perform the duties of the Secretary, unless otherwise
determined by the Board of Directors.
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Quaker State Corporation
Section 4.11. TREASURER AND ASSISTANT TREASURERS. The Treasurer
shall have the following powers and duties:
(a) The Treasurer shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of the
Corporation, and shall keep or cause to be kept full and accurate records of
all receipts of the Corporation.
(b) The Treasurer shall cause the moneys and other valuable effects
of the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositories as shall be selected in accordance with Section 7.4 of these
Bylaws.
(c) The Treasurer shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 7.2 of these
Bylaws) upon the authorized depositaries of the Corporation and cause to be
taken and preserved proper vouchers for all moneys disbursed.
(d) Any Assistant Treasurer shall assist the Treasurer in performing
the duties and exercising the authority of the Treasurer. In case of the
inability or failure of the Treasurer to perform the duties of that office, an
Assistant Treasurer shall perform the duties of the Treasurer, unless otherwise
determined by the Board of Directors.
Section 4.12. ADDITIONAL OFFICERS. The Board of Directors may
appoint such other officers as it may deem appropriate, and the Chief Executive
Officer or if there be none, the President, may appoint such other officers as
he or she may deem appropriate, subject to ratification by the Board of
Directors at its next regular meeting. Such other officers shall hold their
offices for such terms and shall exercise such powers and perform such duties
as may be determined from time to time by the Board of Directors, the Chief
Executive Officer, or if there be none, the President. The Board of Directors
from time to time may delegate to any officer the power to appoint subordinate
officers and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer may remove any such subordinate officer appointed
by him or her, for or without cause.
Section 4.13. SECURITY. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his or her duties, in such amount and of such character
as may be determined from time to time by the Board of Directors.
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Quaker State Corporation
ARTICLE V
CAPITAL STOCK
Section 5.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES. The shares
of the Corporation shall be represented by certificates, provided that the
Board of Directors may provide by resolution or resolutions that some or all of
any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock in the Corporation represented by certificates
and upon request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the Corporation, by the Chief
Executive Officer or the President, and by the Secretary or an Assistant
Secretary, representing the number of shares registered in certificate form.
Such certificate shall be in such form as the Board of Directors may determine,
to the extent consistent with applicable law, the Certificate of Incorporation
and these Bylaws.
Section 5.2. LOST, STOLEN OR DESTROYED CERTIFICATES. The Secretary
may direct that a new certificate be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon delivery to the Secretary of an affidavit of the owner or
owners of such certificate, setting forth such allegation. The Secretary may
require the owner of such lost, stolen or destroyed certificate, or his or her
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate.
Section 5.3. TRANSFER OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to the General Corporation Law of the State of Delaware.
Subject to the provisions of the Certificate of Incorporation and these Bylaws,
the Board of Directors may prescribe such additional rules and regulations as
it may deem appropriate relating to the issue, transfer and registration of
shares of the Corporation.
Section 5.4. RECORD DATE. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty nor
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Quaker State Corporation
less than ten days before the date of such meeting. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting, provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange or stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 5.5. TRANSFER AGENT AND REGISTRAR. The Board of Directors,
the Chief Executive Officer, the President or the Secretary may appoint one or
more transfer agents and one or more registrars, and may require all
certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
OFFICES
Section 6.1. REGISTERED OFFICE. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 6.2. OTHER OFFICES. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. DIVIDENDS. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the outstanding shares of
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors, and any such dividend
may be paid in cash, property, or shares of the Corporation's capital stock.
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Quaker State Corporation
Section 7.2. EXECUTION OF INSTRUMENTS. The Chief Executive Officer,
the President, any Vice Chairman, any Vice President, the Secretary or the
Treasurer may enter into any contract or execute and deliver any instrument in
the name and on behalf of the Corporation. The Board of Directors, the Chief
Executive Officer or the President may authorize any other officer to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
Section 7.3. CORPORATE INDEBTEDNESS. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors, the Chief Executive
Officer, the President or any Vice Chairman. Such authorization may be
general or confined to specific instances. Loans so authorized may be effected
at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual. All bonds,
debentures, notes and other obligations or evidences of indebtedness of the
Corporation issued for such loans shall be made, executed and delivered as the
Board of Directors, the Chief Executive Officer, the President or any Vice
Chairman shall authorize. When so authorized by the Board of Directors, the
Chief Executive Officer, the President or any Vice Chairman, any part of or all
the properties, including contract rights, assets, business or goodwill of the
Corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
Section 7.4. DEPOSITS. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositaries as may
be determined by the Board of Directors, the Chief Executive Officer, the
President or any Vice Chairman, or by such officers as may be authorized by the
Board of Directors, the Chief Executive Officer or the President to make such
determination.
Section 7.5. SALE, TRANSFER, ETC. OF SECURITIES. To the extent
authorized by the Board of Directors, by the Chief Executive Officer or by the
President, any Vice President, the Secretary, the Treasurer or any other
officers designated by the Board of Directors, the Chief Executive Officer or
the President may sell, transfer, endorse, and assign any shares of stock,
bonds or other securities owned by or held in the name of the Corporation, and
may make, execute and deliver in the name of the Corporation, under its
corporate seal, any instruments that may be appropriate to effect any such
sale, transfer, endorsement or assignment.
Section 7.6. VOTING AS STOCKHOLDER. Unless otherwise determined by
resolution of the Board of Directors, the Chief
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Quaker State Corporation
Executive Officer, the President, any Vice President or the Secretary shall
have full power and authority on behalf of the Corporation to attend any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and to act, vote (or execute proxies to vote) and exercise in person or
by proxy all other rights, powers and privileges incident to the ownership of
such stock. Such officers acting on behalf of the Corporation shall have full
power and authority to execute any instrument expressing consent to or dissent
from any action of any such corporation without a meeting. The Board of
Directors may by resolution from time to time confer such power and authority
upon any other person or persons.
Section 7.7. FISCAL YEAR. The fiscal year of the Corporation shall
commence on January 1 of each year and shall terminate on December 31.
Section 7.8. SEAL. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware." The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
ARTICLE VIII
AMENDMENT OF BYLAWS
Section 8.1. AMENDMENT. These Bylaws may be amended, altered or
repealed:
(a) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained in
the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders if, in the
case of such special meeting only, notice of such amendment, alteration or
repeal is contained in the notice or waiver of notice of such meeting.
ARTICLE IX
BUSINESS COMBINATIONS
Section 9.1. BUSINESS COMBINATIONS. Pursuant to authority granted in
subsection (b)(2) of Section 203 of subchapter VI, Chapter 1, Title 8 of the
Delaware Code Relating to the General
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Corporate Law, the Board of Directors elects not to be governed by the
aforesaid Section 203 entitled "Business Combinations with Interested
Stockholders."
ARTICLE X
CONSTRUCTION
Section 10.1. CONSTRUCTION. In the event of any conflict between the
provisions of these Bylaws as in effect from time to time and the provisions of
the Certificate of Incorporation of the Corporation as in effect from time to
time, the provisions of such Certificate of Incorporation shall be controlling.
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Exhibit 10(d)
QUAKER STATE CORPORATION
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
--------------
As Approved by Stockholders
May 12, 1994
<PAGE> 2
QUAKER STATE CORPORATION
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The purposes of the 1994 Non-Employee Directors' Stock Option Plan (the "PIan")
are to promote the long-term success of Quaker State Corporation (the
"Corporation") by creating a long-term mutuality of interests between the
non-employee Directors and stockholders of the Corporation, to provide an
additional inducement for such Directors to remain with the Corporation and to
provide a means through which the Corporation may attract able persons to serve
as Directors of the Corporation
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed by
the Board of Directors of the Corporation (the "Board") and consisting of not
less than two members of the Board. The Committee shall keep records of action
taken at its meetings. A majority of the Committee shall constitute a quorum at
any meeting, and the acts of a majority of the members present at any meeting
at which a quorum is present, or acts approved in writing by all the members of
the Committee, shall be the acts of the Committee.
The Committee shall interpret the Plan and prescribe such rules, regulations
and procedures in connection with the operations of the Plan as it shall deem
to be necessary and advisable for the administration of the Plan consistent
with the purposes of the Plan. All questions of interpretation and application
of the Plan, or as to stock options granted under the Plan, shall be subject to
the determination of the Committee, which shall be final and binding.
Notwithstanding the above, the selection of the Directors to whom stock options
are to be granted, the timing of such grants, the number of shares subject to
any stock option, the exercise price of any stock option, the periods during
which any stock option may be exercised and the term of any stock option shall
be as hereinafter provided, and the Committee shall have no discretion as to
such matters.
SECTION 2
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares which may be issued and as to which grants of
stock options may be made under the Plan is 100,000 shares of the Capital
Stock, par value $1.00 per share, of the Corporation (the "Capital Stock"),
subject to adjustment and substitution as set forth in Section 5. If any stock
option granted under the Plan is cancelled by mutual consent or terminates or
expires for any reason without having been exercised in full, the number of
shares subject thereto shall again be available for purposes of the Plan. The
shares which may be issued under the Plan may be either authorized but unissued
shares or treasury shares or partly each.
SECTION 3
GRANT OF STOCK OPTIONS
On the third business day following the day of each annual meeting of the
stockholders of the Corporation, each person who is then a member of the Board
and who is not then an employee of the Corporation or any of its subsidiaries
(a "non-employee Director") shall automatically and without further action by
the Board or the Committee be granted a "nonstatutory stock option" (i.e., a
stock option which does not qualify under Sections 422 or 423 of the Internal
Revenue Code Or 1986 (the "Code") ) to purchase 1,000 shares of Capital Stock,
subject to adjustment and substitution as set forth in Section 5. If the number
of shares then remaining available for the grant of stock options under the
Plan is not sufficient for each non-
1
<PAGE> 3
employee Director to be granted an option for 1,000 shares (or the number of
adjusted or substituted shares pursuant to Section 5), then each non-employee
Director shall be granted an option for a number of whole shares equal to the
number of shares then remaining available divided by the number of non-employee
Directors, disregarding any fractions of a share.
SECTION 4
TERMS AND CONDITIONS OF STOCK OPTIONS
Stock options granted under the Plan shall be subject to the following
terms and conditions:
(A) The purchase price at which each stock option may be exercised (the
"option price") shall be one hundred percent (100%) of the fair market
value per share of the Capital Stock covered by the stock option on the
date of grant, determined as provided in Section 4(G).
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order); provided, however, that in lieu of such
cash the person exercising the stock option may pay the option price in
whole or in part by delivering to the Corporation shares of the Capital
Stock having a fair market value on the date of exercise of the stock
option, determined as provided in Section 4(G), equal to the option price
for the shares being purchased; except that (i) any portion of the option
price representing a fraction of a share shall in any event be paid in cash
and (ii) no shares of the Capital Stock which have been held for less than
six months may be delivered in payment of the option price of a stock
option. Delivery of shares may also be accomplished through the effective
transfer to the Corporation of shares held by a broker or other agent. The
Corporation will also cooperate with any person exercising a stock option
who participates in a cashless exercise program of a broker or other agent
under which all or part of the shares received upon exercise of the stock
option are sold through the broker or other agent or under which the broker
or other agent makes a loan to such person. Notwithstanding the foregoing,
the exercise of the stock option shall not be deemed to occur and no shares
of Capital Stock will be issued by the Corporation upon exercise of the
stock option until the Corporation has received payment of the option price
in full. The date of exercise of a stock option shall be determined under
procedures established by the Committee, and as of the date of exercise the
person exercising the stock option shall be considered for all purposes to
be the owner of the shares with respect to which the stock option has been
exercised. Payment of the option price with shares shall not increase the
number of shares of the Capital Stock which may be issued under the Plan as
provided in Section 2.
(C) No stock option shall be exercisable during the first six months of
its term except in case of death as provided in Section 4(E) or in case of
a Section 6 Event as provided in Section 6. Subject to the preceding
sentence and subject to Section 4(E) which provides for earlier termination
of a stock option under certain circumstances, each stock option shall be
exercisable for ten years from the date of grant and not thereafter. A
stock option to the extent exercisable at any time may be exercised in
whole or in part.
(D) No stock option shall be transferable by the grantee otherwise than
by Will, or if the grantee dies intestate, by the laws of descent and
distribution of the state of domicile of the grantee at the time of death.
All stock options shall be exercisable during the lifetime of the grantee
only by the grantee or the grantee's guardian or legal representative.
These restrictions on transferability shall not apply to the extent such
restrictions are not at the time required for the Plan to continue to meet
the requirements of Rule 16b-3 under the Securities Exchange Act of 1934
(the "1934 Act"), or any successor Rule.
(E) If a grantee ceases to be a Director of the Corporation for any
reason, any outstanding stock options held by the grantee shall be
exercisable according to the following provisions:
(i) If a grantee ceases to be a Director of the Corporation for
any reason other than resignation, removal for cause or death, any
outstanding stock option held by such grantee shall be exercisable by
the grantee (but only if exercisable by the grantee immediately prior
to ceasing to be a Director) at
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any time prior to the expiration date of such stock option or
within three years after the date the grantee ceases to be a Director,
whichever is the shorter period;
(ii) If during his term of office as a Director a grantee
resigns from the Board or is removed from office for cause, any
outstanding stock option held by the grantee which is not exercisable
by the grantee immediately prior to resignation or removal shall
terminate as of the date of resignation or removal, and any
outstanding stock option held by the grantee which is exercisable by
the grantee immediately prior to resignation or removal shall be
exercisable by the grantee at any time prior to the expiration date of
such stock option or within three months after the date of resignation
or removal of the grantee, whichever is the shorter period;
(iii) Following the death of a grantee during service as a
Director of the Corporation, any outstanding stock option held by the
grantee at the time of death (whether or not exercisable by the
grantee immediately prior to death) shall be exercisable by the person
entitled to do so under the Will of the grantee, or, if the grantee
shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or within three
years after the date of death of the grantee, whichever is the shorter
period;
(iv) Following the death of a grantee after ceasing to be a
Director and during a period when a stock option is exercisable under
clause (ii) above, the stock option shall be exercisable by such
person entitled to do so under the Will of the grantee or by such
legal representative at any time prior to the expiration date of the
stock option or within one year after the date of death, whichever is
the shorter period; and
(v) Following the death of a grantee after ceasing to be a
Director and during a period when a stock option is exercisable under
clause (i) above, the stock option shall be exercisable by such person
entitled to do so under the Will of the grantee or by such legal
representative at any time during the shorter of the following two
periods: (i) until the expiration date of the stock option or (ii)
until three years after the grantee ceased being a Director or one
year after the date of death of the grantee (whichever is longer).
A stock option held by a grantee who has ceased to be a Director of the
Corporation shall terminate upon the expiration of the applicable exercise
period, if any, specified in this Section 4(E).
(F) All stock options shall be confirmed by an agreement, or an
amendment thereto, which shall be executed on behalf of the Corporation by
the Chief Executive Officer (if other than the President), the President or
any Vice President and by the grantee.
(G) Fair market value of the Capital Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Capital Stock is listed on the New York
Stock Exchange, the highest and lowest sales prices per share of the
Capital Stock as quoted in the NYSE-Composite Transactions listing for such
date, (ii) if the Capital Stock is not listed on such exchange, the highest
and lowest sales prices per share of Capital Stock for such date on (or on
any composite index including) the principal United States securities
exchange registered under the 1934 Act on which the Capital Stock is
listed, or (iii) if the Capital Stock is not listed on any such exchange,
the highest and lowest sales prices per share of the Capital Stock for such
date on the National Association of Securities Dealers Automated Quotations
System or any successor system then in use ("NASDAQ"). If there are no such
sale price quotations for the date as of which fair market value is to be
determined but there are such sale price quotations within a reasonable
period both before and after such date, then fair market value shall be
determined by taking a weighted average of the means between the highest
and lowest sales prices per share of the Capital Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair
market value is to be determined. The average should be weighted inversely
by the respective numbers of trading days between the selling dates and the
date as of which fair market value is to be determined. If there are
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no such sale price quotations on or within a reasonable period both
before and after the date as of which fair market value is to be
determined, then fair market value of the Capital Stock shall be the mean
between the bona fide bid and asked prices per share of Capital Stock as so
quoted for such date on NASDAQ, or if none, the weighted average of the
means between such bona fide bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which fair
market value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner described
above in this Section 4(G). If the fair market value of the Capital Stock
cannot be determined on the basis previously set forth in this Section 4(G)
for the date as of which fair market value is to be determined, the
Committee shall in good faith determine the fair market value of the
Capital Stock on such date. Fair market value shall be determined without
regard to any restriction other than a restriction which, by its terms,
will never lapse.
(H) The obligation of the Corporation to issue shares of the Capital
Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Corporation, (ii) the condition that the shares shall have been listed
(or authorized for listing upon official notice of issuance) upon each
stock exchange, if any, on which the Capital Stock may then be listed and
(iii) all other applicable laws, regulations, rules and orders which may
then be in effect.
Subject to the foregoing provisions of this Section 4 and the other
provisions of the Plan, any stock option granted under the Plan shall be
subject to such restrictions and other terms and conditions, if any, as shall
be determined, in its discretion, by the Committee and set forth in the
agreement referred to in Section 4(F), or an amendment thereto; except that in
no event shall the Committee or the Board have any power or authority which
would cause the Plan to fail to be a plan described in Rule 16b-3(c)(2)(ii), or
any successor Rule.
SECTION 5
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Capital
Stock payable in shares of the Capital Stock, the number of shares of the
Capital Stock set forth in Section 3, the number of shares of the Capital Stock
then subject to any outstanding stock options and the number of shares of the
Capital Stock which may be issued under the Plan but are not then subject to
outstanding stock options on the date fixed for determining the stockholders
entitled to receive such stock dividend or distribution shall be adjusted by
adding thereto the number of shares of the Capital Stock which would have been
distributable thereon if such shares had been outstanding on such date.
If the outstanding shares of the Capital Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Capital Stock set forth in Section 3, for each share of the
Capital Stock subject to any then outstanding stock option and for each share
of the Capital Stock which may be issued under the Plan but which is not then
subject to any outstanding stock option, the number and kind of shares of stock
or other securities into which each outstanding share of the Capital Stock
shall be so changed or for which each such share shall be exchangeable.
In case of any adjustment or substitution as provided for in the first
two paragraphs of this Section 5, the aggregate option price for all shares
subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have been
adjusted or which shall have been substituted for such shares. Any new option
price per share shall be carried to at least three decimal places with the last
decimal place rounded upwards to the nearest whole number.
If the outstanding shares of the Capital Stock shall be changed in
value by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Capital Stock, the Committee shall make any adjustments to
any then outstanding stock
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option which it determines are equitably required to prevent dilution or
enlargement of the rights of grantees which would otherwise result from any
such transaction.
No adjustment or substitution provided for in this Section 5 shall
require the Corporation to issue or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution.
Except as provided in this Section 5, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 6
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) DEFINITIONS.
For purposes of this Section 6, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act as in effect on the effective date of the
Plan.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) A specified percentage of "Voting Power" of a company shall mean
such number of the Voting Shares as shall enable the holders thereof to
cast such percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of any class of
stock other than the common stock of the company to elect directors by a
separate class vote); and "Voting Shares" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate class
vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or
opposed by the Board.
(5) "Continuing Directors" shall mean a director of the Corporation who
either (a) was a director of the Corporation on the effective date of the
Plan or (b) is an individual whose election, or nomination for election, as
a director of the Corporation was approved by a vote of at least two-thirds
of the directors then still in office who were Continuing Directors (other
than an individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election of
directors of the Corporation which would be subject to Rule 14a-11 under
the 1934 Act, or any successor Rule).
(6) "Section 6 Event" shall mean the date upon which any of the
following events occurs:
(a) The Corporation acquires actual knowledge that any Person
other than the Corporation, a Subsidiary or any employee benefit
plan(s) sponsored by the Corporation or a Subsidiary has acquired the
Beneficial Ownership, directly or indirectly, of securities of the
Corporation entitling such Person to 30% or more of the Voting Power
of the Corporation;
(b) A Tender Offer is made to acquire securities of the
Corporation entitling the holders thereof to 30% or more of the Voting
Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act
(or any successor Rule) relating to the election or removal of 50% or
more of the members of the Board or any class of the Board
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shall be made by any person other than the Corporation or less
than 51% of the members Or the Board shall be Continuing Directors; or
(d) The stockholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other disposition
of assets of the Corporation as a result of which the stockholders of
the Corporation immediately prior to such transaction shall not hold,
directly or indirectly, immediately following such transaction a
majority of the Voting Power of (i) in the case of a merger or
consolidation, the surviving or resulting corporation, (ii) in the
case of a share exchange, the acquiring corporation or (iii) in the
case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately
following the transaction, holds more than 10% of the consolidated
assets of the Corporation immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a
grantee are included in determining the Beneficial Ownership of a Person
referred to in paragraph 6(a), (ii) a grantee is required to be named
pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing
requirement) required to be filed by the bidder making a Tender Offer
referred to in paragraph 6(b) or (iii) if a grantee is a "participant" as
defined in Instruction 3 to Item 4 of Schedule 14A under the 1934 Act (or
any successor Rule) in a solicitation (other than a solicitation by the
Corporation) referred to in paragraph 6(c), then no Section 6 Event with
respect to such grantee shall be deemed to have occurred by reason of such
event.
(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS.
Notwithstanding any other provision contained in the Plan, in case any
"Section 6 Event" occurs all outstanding stock options (other than those held
by a person referred to in the proviso to Section 6(A) (6)) shall become
immediately and fully exercisable whether or not otherwise exercisable by their
terms.
SECTION 7
EFFECT OF THE PLAN ON THE RIGHTS OF CORPORATION AND STOCKHOLDERS
Nothing in the Plan, in any stock option granted under the Plan, or in
any stock option agreement shall confer any right to any person to continue as
a Director of the Corporation or interfere in any way with the rights of the
stockholders of the Corporation or the Board of Directors to elect and remove
Directors.
SECTION 8
AMENDMENT AND TERMINATION
The right to amend the Plan at any time and from time to time and the
right to terminate the Plan at any time are hereby specifically reserved to the
Board; provided always that no such termination shall terminate any outstanding
stock options granted under the Plan; and provided further that no amendment of
the Plan shall (i) be made without stockholder approval if stockholder approval
of the amendment is at the time required for stock options under the Plan to
qualify for the exemption from Section 16(b) of the 1934 Act provided by Rule
16b-3, or any successor Rule, or by the rules of any stock exchange on which
the Capital Stock may then be listed, (ii) amend more than once every six
months the provisions of the Plan relating to the selection of the Directors to
whom stock options are to be granted, the timing of such grants, the number of
shares subject to any stock option, the exercise price of any stock option, the
periods during which any stock option may be exercised and the term of any
stock option other than to comport with changes in the Code or the rules and
regulations thereunder or (iii) otherwise amend the Plan in any manner that
would cause stock options under the Plan not to qualify for the exemption
provided by Rule 16b-3, or any successor Rule. No amendment or termination of
the Plan shall, without the written consent of the holder of a stock option
theretofore awarded under the Plan, adversely affect the rights of such holder
with respect thereto.
Notwithstanding anything contained in the preceding paragraph or any
other provision of the Plan or any stock option agreement, the Board shall have
the power to amend the Plan in any manner deemed necessary or
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advisable for stock options granted under the Plan to qualify for the exemption
provided by Rule 16b-3 (or any successor rule relating to exemption from
Section 16(b) of the 1934 Act), and any such amendment shall, to the extent
deemed necessary or advisable by the Board, be applicable to any outstanding
stock options theretofore granted under the Plan notwithstanding any contrary
provisions contained in any stock option agreement. In the event of any such
amendment to the Plan, the holder of any stock option outstanding under the
Plan shall, upon request of the Committee and as a condition to the
exercisability of such option, execute a conforming amendment in the form
prescribed by the Committee to the stock option agreement referred to in
Section 4(F) within such reasonable time as the Committee shall specify in such
request.
SECTION 9
EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon approval by the affirmative vote
of the holders of a majority of the Capital Stock present in person or by proxy
and entitled to vote at a duly called and convened meeting of such holders. If
such approval is obtained at the Annual Meeting of Stockholders in 1994, the
Plan shall be effective on the date of such meeting, the first stock options
shall be granted on the third business day thereafter and the last stock
options granted under the Plan shall be granted on the third business day after
the Annual Meeting of Stockholders in 2003.
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Exhibit 10(e)
QUAKER STATE CORPORATION
1994 STOCK INCENTIVE PLAN
------------
AS APPROVED BY STOCKHOLDERS
MAY 12, 1994
<PAGE> 2
QUAKER STATE CORPORATION
1994 STOCK INCENTIVE PLAN
The purposes of the 1994 Stock Incentive Plan (the "Plan") are to
encourage eligible employees of Quaker State Corporation (the "Corporation")
and its Subsidiaries to increase their efforts to make the Corporation and each
Subsidiary more successful, to provide an additional inducement for such
employees to remain with the Corporation or a Subsidiary, to reward such
employees by providing an opportunity to acquire shares of the Capital Stock,
par value $1.00 per share, of the Corporation (the "Capital Stock") on
favorable terms and to provide a means through which the Corporation may
attract able persons to enter the employ of the Corporation or one of its
Subsidiaries. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the
Corporation, if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing at least fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee")
appointed by the Board of Directors of the Corporation (the "Board") and
consisting of not less than two members of the Board, each of whom at the time
of appointment to the Committee and at all times during service as a member of
the Committee shall be (i) a "disinterested person" as then defined under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
or any successor Rule and (ii) an "outside director" under Section 162(m) (4)
(C) of the Internal Revenue Code of 1986 (the "Code"), or any successor
provision.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan, or as to grants or awards under the Plan, shall be
subject to the determination of the Committee, which shall be final and
binding.
The Committee shall keep records of action taken. A majority of the
Committee shall constitute a quorum at any meeting, and the acts of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by all the members of the Committee, shall be the acts of
the Committee.
SECTION 2
ELIGIBILITY
Those key employees of the Corporation or any Subsidiary (including,
but not limited to, covered employees as defined in Section 162(m) (3) of the
Code, or any successor provision) who share responsibility for the management,
growth or protection of the business of the Corporation or any Subsidiary shall
be eligible to be granted stock options (with or without alternative stock
appreciation rights and/or cash payment rights) and to receive awards of
restricted, performance and other shares as described herein.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its discretion, to grant stock options (with or without
alternative stock appreciation rights and/or cash payment rights) and to award
restricted, performance and other shares as described herein and to determine
the employees to whom any such grant or award shall be made and the number of
shares to be covered thereby. In determining the eligibility of any employee,
as well as in determining the number of shares covered by each grant or award
and whether alternative stock appreciation rights and/or cash payment rights
shall be granted in conjunction with a stock option, the Committee shall
consider the position and the responsibilities of the employee being
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considered, the nature and value to the Corporation or a Subsidiary of his or
her services, his or her present and/or potential contribution to the success
of the Corporation or a Subsidiary and such other factors as the Committee may
deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Capital Stock that may be issued
and as to which grants or awards may be made under the Plan is 1,250,000
shares, subject to adjustment and substitution as set forth in Section 7. If
any stock option granted under the Plan is cancelled by mutual consent or
terminates or expires for any reason without having been exercised in full, the
number of shares subject thereto shall again be available for purposes of the
Plan, except that to the extent that alternative stock appreciation rights
granted in conjunction with a stock option under the Plan are exercised and the
related stock option surrendered the number of shares available for purposes of
the Plan shall be reduced by the number of shares of Capital Stock issued upon
exercise of such alternative stock appreciation rights. If shares of Capital
Stock are forfeited to the Corporation pursuant to the restrictions applicable
to restricted shares awarded under the Plan, the shares so forfeited shall not
again be available for purposes of the Plan unless during the period such
shares were outstanding the grantee received no dividends or other benefits of
ownership from such shares. For the purpose of applying this standard, no
benefit is deemed to be derived by a grantee from voting rights or where
dividends accumulate but due to forfeiture are never realized. To the extent
any performance shares are not earned, the number of shares shall again be
available for purposes of the Plan.
The shares which may be issued under the Plan may be either authorized
but unissued shares or treasury shares or partly each.
SECTION 4
GRANT OF STOCK OPTIONS, ALTERNATIVE
STOCK APPRECIATION RIGHTS AND CASH
PAYMENT RIGHTS AND AWARD OF RESTRICTED,
PERFORMANCE AND OTHER SHARES
The Committee shall have authority, in its discretion, (i) to grant
"incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem), (ii) to award restricted shares, (iii) to award performance
shares and (iv) to make other share awards, all as provided herein. The
Committee also shall have the authority, in its discretion, to grant
alternative stock appreciation rights in conjunction with incentive stock
options or nonstatutory stock options with the effect provided in Section 5(D)
and to grant cash payment rights in conjunction with nonstatutory stock options
with the effect provided in Section 5(E). Alternative stock appreciation rights
granted in conjunction with an incentive stock option may only be granted at
the time the incentive stock option is granted. Cash payment rights may not be
granted in conjunction with incentive stock options. Alternative stock
appreciation rights and/or cash payment rights granted in conjunction with a
nonstatutory stock option may be granted either at the time the stock option is
granted or at any time thereafter during the term of the stock option.
During the duration of the Plan, the maximum number of shares as to
which stock options may be granted and as to which shares may be awarded under
the Plan to any one employee during any calendar year is 200,000 shares,
subject to adjustment and substitution as set forth in Section 7. For the
purposes of this limitation, any adjustment or substitution made pursuant to
Section 7 with respect to the maximum number of shares set forth in the
preceding sentence shall also be made with respect to any shares subject to
stock options or share awards previously granted under the Plan to such
employee during the same calendar year.
Notwithstanding any other provision contained in the Plan or in any
agreement referred to in Section 5(1), but subject to the possible exercise of
the Committee's discretion contemplated in the last
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sentence of this paragraph, the aggregate fair market value, determined as
provided in Section 5(J) on the date of grant, of the shares with respect to
which incentive stock options are exercisable for the first time by an employee
during any calendar year under all plans of the corporation employing such
employee, any parent or subsidiary corporation of such corporation and any
predecessor corporation of any such corporation shall not exceed $100,000. If
the date on which one or more of such incentive stock options could first be
exercised would be accelerated pursuant to any provision of the Plan or any
stock option agreement, and the acceleration of such exercise date would result
in a violation of the limitation set forth in the preceding sentence, then,
notwithstanding any such provision, but subject to the provisions of the next
succeeding sentence, the exercise dates of such incentive stock options shall
be accelerated only to the date or dates, if any, that do not result in a
violation of such limitation and, in such event, the exercise dates of the
incentive stock options with the lowest option prices shall be accelerated to
the earliest such dates. The Committee may, in its discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even
if such acceleration would violate the $100,000 limitation set forth in the
first sentence of this paragraph and even if such incentive stock options are
thereby converted in whole or in part to nonstatutory stock options.
The Committee may accept the cancellation of outstanding stock options
or the contribution or surrender of restricted shares in return for the grant
of new stock options for the same or a different number of shares and at the
same or a different option price or for restricted shares with different
restrictions.
SECTION 5
STOCK OPTIONS, ALTERNATIVE STOCK APPRECIATION
RIGHTS AND CASH PAYMENT RIGHTS
Stock options, alternative stock appreciation rights and cash payment
rights granted under the Plan shall be subject to the following terms and
conditions:
(A) The purchase price at which each stock option may be exercised (the
"option price") shall be such price as the Committee, in its discretion,
shall determine but shall not be less than one hundred percent (1OO%) of
the fair market value per share of the Capital Stock covered by the stock
option on the date of grant, except that in the case of an incentive stock
option granted to an employee who, immediately prior to such grant, owns
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Corporation or any Subsidiary (a "Ten
Percent Employee"), the option price shall not be less than one hundred ten
percent (110%) of such fair market value on the date of grant. For purposes
of this Section 5(A), the fair market value of the Capital Stock shall be
determined as provided in Section 5(J). For purposes of this Section 5(A),
an individual (i) shall be considered as owning not only shares of stock
owned individually but also all shares of stock that are at the time owned,
directly or indirectly, by or for the spouse, ancestors, lineal descendants
and brothers and sisters (whether by the whole or half blood) of such
individual and (ii) shall be considered as owning proportionately any
shares owned, directly or indirectly, by or for any corporation,
partnership, estate or trust in which such individual is a stockholder,
partner or beneficiary.
(B) The option price for each stock option shall be payable in cash in
United States dollars (including check, bank draft or money order);
provided, however, that in lieu of cash the person exercising the stock
option may (if authorized by the Committee at the time of grant in the case
of an incentive stock option, or at any time in the case of a nonstatutory
stock option) pay the option price in whole or in part by delivering to the
Corporation shares of the Capital Stock having a fair market value on the
date of exercise of the stock option, determined as provided in Section
5(J), equal to the option price for the shares being purchased, except that
(i) any portion of the option price representing a fraction of a share
shall in any event be paid in cash and (ii) no shares of the Capital Stock
which have been held for less than six months may be delivered in payment
of the option price of a stock option. Delivery of shares, if authorized,
may also be accomplished through the effective transfer to the Corporation
of shares held by a broker or other agent. The Corporation will also
cooperate with any person exercising a stock option who participates in a
cashless exercise program of a broker or other agent under which all or
part of the shares received upon exercise of the stock option are sold
through the broker or other agent or under
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which the broker or other agent makes a loan to such person.
Notwithstanding the foregoing, unless the Committee, in its discretion,
shall otherwise determine at the time of grant in the case of an incentive
stock option, or at any time in the case of a nonstatutory stock option,
the exercise of the stock option shall not be deemed to occur and no shares
of Capital Stock will be issued by the Corporation upon exercise of the
stock option until the Corporation has received payment of the option price
in full. The date of exercise of a stock option shall be determined under
procedures established by the Committee, and as of the date of exercise the
person exercising the stock option shall be considered for all purposes to
be the owner of the shares with respect to which the stock option has been
exercised. Payment of the option price with shares shall not increase the
number of shares of the Capital Stock which may be issued under the Plan as
provided in Section 3.
(C) Each stock option shall be exercisable at such time or times as the
Committee, in its discretion, shall determine, except that no stock option
shall be exercisable after the expiration of ten years (five years in the
case of an incentive stock option granted to a Ten Percent Employee) from
the date of grant. A stock option to the extent exercisable at any time
may be exercised in whole or in part.
(D) Alternative stock appreciation rights granted in conjunction with a
stock option shall entitle the person exercising the alternative stock
appreciation rights to surrender the related stock option, or any portion
thereof, and to receive from the Corporation in exchange therefor that
number of shares of the Capital Stock having an aggregate fair market value
on the date of exercise of the alternative stock appreciation rights equal
to the excess of the fair market value of one share of the Capital Stock on
such date of exercise over the option price per share times the number of
shares covered by the related stock option, or portion thereof, which is
surrendered. Alternative stock appreciation rights shall be exercisable to
the extent that the related stock option is exercisable and only by the
same person who is entitled to exercise the related stock option; provided,
however, that alternative stock appreciation rights granted in conjunction
with an incentive stock option shall not be exercisable unless the then
fair market value of the Capital Stock exceeds the option price of the
shares subject to the incentive stock option. Cash shall be paid in lieu of
any fractional shares. The date of exercise of alternative stock
appreciation rights shall be determined under procedures established by the
Committee, and as of the date of exercise the person exercising the
alternative stock appreciation rights shall be considered for all purposes
to be the owner of the shares to be received. To the extent that a stock
option as to which alternative stock appreciation rights have been granted
is exercised, cancelled, terminates or expires, the alternative stock
appreciation rights shall be cancelled. For the purposes of this Section
5(D), the fair market value of the Capital Stock shall be determined as
provided in Section 5(J).
(E) Cash payment rights granted in conjunction with a nonstatutory
stock option shall entitle the person who is entitled to exercise the stock
option, upon exercise of the stock option or any portion thereof, to
receive cash from the Corporation (in addition to the shares to be received
upon exercise of the stock option) equal to such percentage as the
Committee, in its discretion, shall determine not greater than one hundred
percent (100%) of the excess of the fair market value of a share of the
Capital Stock on the date of exercise of the stock option over the option
price per share of the stock option times the number of shares covered by
the stock option, or portion thereof, which is exercised. Payment of the
cash provided for in this Section 5 (E) shall be made by the Corporation as
soon as practicable after the time the amount payable is determined. For
purposes of this Section 5(E), the fair market value of the Capital Stock
shall be determined as provided in Section 5(J).
(F) Unless the Committee, in its discretion, shall otherwise determine,
(i) no stock option shall be transferable by the grantee otherwise than by
Will, or if the grantee dies intestate, by the laws of descent and
distribution of the state of domicile of the grantee at the time of death
and (ii) all stock options shall be exercisable during the lifetime of the
grantee only by the grantee.
(G) Subject to the provisions of Section 4 in the case of incentive
stock options, unless the Committee, in its discretion, shall otherwise
determine:
(i) If the employment of a grantee is voluntarily terminated
with the consent of the Corporation or a Subsidiary, the grantee
becomes entitled to a severance benefit under the
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Corporation's Severance Pay Plan for Salaried and Hourly
Non-Union Employees (the "Severance Plan") or a grantee retires under
any retirement plan of the Corporation or a Subsidiary, any
outstanding stock option held by such grantee shall be exercisable by
the grantee (but only to the extent exercisable by the grantee
immediately prior to the termination of employment) at any time prior
to the expiration date of such stock option or within three years
after the date of termination of employment of the grantee, whichever
is the shorter period, and to the extent not exercisable shall
terminate;
(ii) Following the death of a grantee during employment, any
outstanding stock option held by the grantee at the time of death
shall be exercisable in full (whether or not so exercisable by the
grantee immediately prior to the death of the grantee) by the person
entitled to do so under the Will of the grantee, or, if the grantee
shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or within three
years after the date of death of the grantee, whichever is the shorter
period;
(iii) Following the death of a grantee after termination of
employment during a period when a stock option is exercisable, the
stock option shall be exercisable by such person entitled to do so
under the Will of the grantee or by such legal representative during
the shorter of the following two periods: (i) until the expiration
date of the stock option or (ii) within three years after the
termination of employment of the grantee or one year after the date of
death of the grantee (whichever is longer).
(iv) Unless Section 8 (C) applies following termination of
employment, if the employment of a grantee terminates for any reason
other than voluntary termination with the consent of the Corporation
or a Subsidiary, severance under the Severance Plan, retirement under
any retirement plan of the Corporation or a Subsidiary or death, all
outstanding stock options held by the grantee at the time of such
termination of employment shall automatically terminate.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee
shall be final and binding.
(H) If a grantee of a stock option (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of
employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that this clause shall not apply if
Section 8(C) applies following termination of employment), (ii) induces or
attempts to induce any customer, supplier, licensee or other individual,
corporation or other business organization having a business relationship
with the Corporation or any of its Subsidiaries to cease doing business
with the Corporation or any of its Subsidiaries or in any way interferes
with the relationship between any such customer, supplier, licensee or
other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to
leave the employment thereof or in any way interferes with the relationship
of such employee with the Corporation or any of its Subsidiaries, the
Committee, in its discretion, may immediately terminate all outstanding
stock options held by the grantee. Whether a grantee has engaged in any of
the activities referred to the preceding sentence which would cause the
outstanding stock options to be terminated shall be determined, in its
discretion, by the Committee, and any such determination by the Committee
shall be final and binding.
(I) All stock options, alternative stock appreciation rights and cash
payment rights shall be confirmed by an agreement which shall be executed
on behalf of the Corporation by the Chief Executive Officer (if other than
the President), the President or any Vice President and by the grantee. The
agreement confirming a stock option shall specify whether the stock option
is an incentive stock option or a nonstatutory stock option. The provisions
of such agreements need not be identical.
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(J) Fair market value of the Capital Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Capital Stock is listed on the New York
Stock Exchange, the highest and lowest sales prices per share of the
Capital Stock as quoted in the NYSE-Composite Transactions listing for such
date, (ii) if the Capital Stock is not listed on such exchange, the highest
and lowest sales prices per share of Capital Stock for such date on (or on
any composite index including) the principal United States securities
exchange registered under the 1934 Act on which the Capital Stock is listed
or (iii) if the Capital Stock is not listed on any such exchange, the
highest and lowest sales prices per share of the Capital Stock for such
date on the National Association of Securities Dealers Automated Quotations
System or any successor system then in use ("NASDAQ"). If there are no such
sale price quotations for the date as of which fair market value is to be
determined but there are such sale price quotations within a reasonable
period both before and after such date, then fair market value shall be
determined by taking a weighted average of the means between the highest
and lowest sales prices per share of the Capital Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair
market value is to be determined. The average should be weighted inversely
by the respective numbers of trading days between the selling dates and the
date as of which fair market value is to be determined. If there are no
such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Capital Stock shall be the mean between the bona fide
bid and asked prices per share of Capital Stock as so quoted for such date
on NASDAQ, or if none, the weighted average of the means between such bona
fide bid and asked prices on the nearest trading date before and the
nearest trading date after the date as of which fair market value is to be
determined, if both such dates are within a reasonable period. The average
is to be determined in the manner described above in this Section 5(J). If
the fair market value of the Capital Stock cannot be determined on any
basis previously set forth in this Section 5(J) for the date as of which
fair market value is to be determined, the Committee shall in good faith
determine the fair market value of the Capital Stock on such date. Fair
market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(K) The obligation of the Corporation to issue shares of the Capital
Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Corporation, (ii) the condition that the shares shall have been listed
(or authorized for listing upon official notice of issuance) upon each
stock exchange, if any, on which the Capital Stock may then be listed and
(iii) all other applicable laws, regulations, rules and orders which may
then be in effect.
Subject to the foregoing provisions of this Section 5 and the other
provisions of the Plan, stock options, alternative stock appreciation rights
and cash payment rights granted under the Plan shall be subject to such
restrictions and other terms and conditions, if any, as shall be determined, in
its discretion, by the Committee and set forth in the agreement referred to in
Section 5(I).
SECTION 6
RESTRICTED SHARES, PERFORMANCE SHARES AND
OTHER SHARE AWARDS
(A) RESTRICTED SHARES
Awards of restricted shares shall be confirmed by an agreement which
shall set forth the number of shares of the Capital Stock awarded, the
restrictions imposed thereon (including, without limitation, restrictions on
the right of the grantee to sell, assign, transfer or encumber such shares
(except as provided below) while such shares are subject to other restrictions
imposed under this Section 6(A)), the duration of such restrictions, events
(which may, in the discretion of the Committee, include termination of
employment and/or performance-based events) the occurrence of which would cause
a forfeiture of the restricted shares
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and such other terms and conditions as shall be determined, in its discretion,
by the Committee. The agreement shall be executed on behalf of the Corporation
by the Chief Executive Officer (if other than the Prcsident), the President or
any Vice President and by the grantee. The provisions of such agreements need
not be identical. Awards of restricted shares shall be effective on the date
determined, in its discretion, by the Committee.
Following the award of restricted shares and prior to the lapse or
termination of the applicable restrictions, share certificates for the
restricted shares shall be issued in the name of the grantee and deposited with
the Corporation in escrow together with related stock powers signed by the
grantee. Except as provided in Section 7, the Committee, in its discretion, may
determine that dividends and other distributions on the shares held in escrow
shall not be paid to the grantee until the lapse or termination of the
applicable restrictions. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Upon the lapse or termination of the applicable restrictions (and not before
such time), the grantee shall receive the share certificates for the restricted
shares (subject to the provisions of Section 10) and unpaid dividends, if any.
From the date the award of restricted shares is effective, the grantee shall be
a stockholder with respect to all the shares represented by the share
certificates and shall have all the rights of a stockholder with respect to all
the restricted shares, including the right to vote such shares and to receive
all dividends and other distributions paid with respect to such shares, subject
only to the preceding provisions of this paragraph and the other restrictions
imposed by the Committee.
If a grantee of restricted shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment)
which is in competition with the Corporation or any of its Subsidiaries
(provided, however, that this clause shall not apply if Section 8(D) applies),
(ii) induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to leave
the employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed. Whether a grantee has engaged in
any of the activities referred to in the preceding sentence which would cause
the restricted shares to be forfeited shall be determined, in its discretion,
by the Committee, and any such determination by the Committee shall be final
and binding.
Neither this Section 6(A) nor any other provision of the Plan shall
preclude a grantee from transferring or assigning restricted shares to (i) the
trustee of a trust that is revocable by such grantee alone, both at the time of
the transfer or assignment and at all times thereafter prior to such grantee's
death or (ii) the trustee of any other trust to the extent approved in advance
by the Committee in writing. A transfer or assignment of restricted shares from
such trustee to any person other than such grantee shall be permitted only to
the extent approved in advance by the Committee in writing, and restricted
shares held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable agreement as if such
trustee were a party to such agreement.
Restricted Performance Shares. Specifically, the Committee, in its
discretion, may award restricted performance shares with three-year performance
cycles which will vest if three-year average return on average equity ("Average
ROE") and three-year cumulative earnings per share ('Cumulative EPS") goals
established by the Committee are achieved. The Average ROE percentage and the
Cumulative EPS figure will be calculated from the consolidated financial
statements of the Corporation and its Subsidiaries, excluding (i) the effect of
changes in Federal income tax rates, (ii) the effect of unusual and
extraordinary items as defined by Generally Accepted Accounting Principles
("GAAP") and (iii) the cumulative effect of changes in accounting principles in
accordance with GAAP. The Cumulative EPS figure will also be calculated using
primary net income per share, excluding the effect of share distributions for
which under GAAP net income per share is adjusted.
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The restricted performance shares for a particular three-year
performance cycle and the performance goals to apply to these shares must be
established in the year prior to the first year of the three-year period,
except that the key employees designated to receive restricted performance
shares for the three-year period 1994-1996 and the performance goals to apply
to these shares were determined by the Committee on or prior to March 23, 1994.
Restricted performance shares as to which the restrictions do not lapse will be
forfeited. Awards of restricted performance shares need not be made every year.
Dividends and other distributions (except dividends or other
distributions payable in shares of the Corporation's Capital Stock) on the
restricted performance shares held in escrow shall be paid by the Corporation
to the grantees of the restricted performance shares at the time such dividends
or other distributions would be payable to stockholders, unless the Committee,
in its discretion, determines otherwise. It is intended that any compensation
received by grantees of restricted performance shares will qualify as
performance-based compensation under Section 162(m) of the Code and this
portion of Section 6(A) shall be interpreted consistently with that intention.
(B) PERFORMANCE SHARES
An award of performance shares shall entitle the grantee to receive up
to the number of shares of Capital Stock covered by the award at the end of or
at a specified time or times during a specified award period contingent upon
the extent to which one or more predetermined performance targets have been met
during the award period. All the terms and conditions of an award of
performance shares shall be determined, in its discretion, by the Committee and
shall be confirmed by an agreement which shall be executed on behalf of the
Corporation by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the grantee.
The performance target or targets may be expressed in terms of earnings
per share, return on stockholder equity, operating profit, return on capital
employed or such other measures of accomplishment by the Corporation or a
Subsidiary, or any branch, department or other portion thereof, or the grantee
individually, as may be established, in its discretion, by the Committee. The
performance target or targets may vary for different award periods and need not
be the same for each grantee receiving an award for an award period.
At any time prior to the end of an award period, the Committee may
adjust downward (but not upward) the performance target or targets as a result
of major events unforeseen at the time of the award, such as changes in the
economy, in the industry or laws affecting the operations of the Corporation or
a Subsidiary, or any branch, department or other portion thereof, or any other
event the Committee determines would have a significant impact upon the
probability of attaining the previously established performance target or
targets.
Payment of earned performance shares shall be made to grantees as soon
as practicable after the shares have been earned. The Committee, in its
discretion, may determine that grantees shall also be entitled to any dividends
or other distributions that would have been paid on earned performance shares
had the shares been outstanding during the period from the award to the payment
of the performance shares. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Unless otherwise provided in the agreement confirming the award of the
performance shares, if prior to the close of an award period, the employment of
a grantee of performance shares is voluntarily terminated with the consent of
the Corporation or a Subsidiary, the grantee becomes entitled to a severance
benefit under the Severance Plan, the grantee retires under any retirement plan
of the Corporation or a Subsidiary or the grantee dies during employment, the
Committee in its discretion, may determine to pay to the grantee all or part of
the performance shares based upon the extent to which the Committee determines
the performance target or targets have been achieved as of the date of
termination of employment, retirement or death, the period of time remaining
until the end of the award period and/or such other factors as the Committee
may deem relevant. If the Committee, in its discretion, determines that all or
any part of the performance shares shall be paid, payment shall be made to the
grantee or the estate of the grantee as promptly as practicable following such
determination.
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Except as otherwise provided in Section 8(E), if the employment of a
grantee of an award of performance shares terminates prior to the time the
performance shares have been earned for any reason other than voluntary
termination with the consent of the Corporation or a Subsidiary, severance
under the Severance Plan, retirement under any retirement plan of the
Corporation or a Subsidiary or death, the unearned performance shares shall be
deemed not to have been earned and such shares shall not be paid to the
grantee.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee shall
be final and binding.
If a grantee of performance shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment)
which is in competition with the Corporation or any of its Subsidiaries
(provided, however, that this clause shall not apply if Section 8(E) applies),
(ii) induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to leave
the employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately cancel the award. Whether a grantee has engaged in any of the
activities referred to the preceding sentence which would cause the award of
performance shares to be cancelled shall be determined, in its discretion, by
the Committee, and any such determination by the Committee shall be final and
binding.
(C) OTHER SHARE AWARDS
The Committee, in its discretion, may from time to time make other
awards of shares of Capital Stock under the Plan as an inducement to the
grantee to enter the employment of the Corporation or a Subsidiary, in
recognition of the contribution of the grantee to the performance of the
Corporation or a Subsidiary, or any branch, department or other portion
thereof, in recognition of the grantee's individual performance or on the basis
of such other factors as the Committee may deem relevant. Capital Stock issued
as a bonus pursuant to this Section 6(C) shall be issued for such consideration
as the Committee shall determine in its sole discretion.
SECTION 7
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Capital
Stock payable in shares of the Capital Stock, the number of shares of the
Capital Stock subject to any outstanding stock options or performance share
awards, the number of shares of the Capital Stock which may be issued under the
Plan but are not subject to outstanding stock options or performance share
awards and the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the Plan to any employee
during any calendar year under Section 4 on the date fixed for determining the
stockholders entitled to receive such stock dividend or distribution shall be
adjusted by adding thereto the number of shares of the Capital Stock which
would have been distributable thereon if such shares had been outstanding on
such date. Shares of Capital Stock so distributed with respect to any
restricted shares held in escrow shall also be held by the Corporation in
escrow and shall be subject to the same restrictions as are applicable to the
restricted shares on which they were distributed.
If the outstanding shares of the Capital Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Capital Stock subject to any then
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outstanding stock option or performance share award, and for each share of the
Capital Stock which may be issued under the Plan but which is not then subject
to any outstanding stock option or performance share award, the number and kind
of shares of stock or other securities into which each outstanding share of the
Capital Stock shall be so changed or for which each such share shall be
exchangeable. Unless otherwise determined by the Committee, in its discretion,
any such stock or securities, as well as any cash or other property, into or
for which any restricted shares held in escrow shall be changed or exchangeable
in any such transaction shall also be held by the Corporation in escrow and
shall be subject to the same restrictions as are applicable to the restricted
shares in respect of which such stock, securities, cash or other property was
issued or distributed.
In case of any adjustment or substitution as provided for in the first
two paragraphs of this Section 7, the aggregate option price for all shares
subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have been
adjusted or which shall have been substituted for such shares. Any new option
price per share shall be carried to at least three decimal places with the last
decimal place rounded upwards to the nearest whole number.
If the outstanding shares of the Capital Stock shall be changed in
value by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Capital Stock, (i) the Committee shall make any adjustments
to any then outstanding stock option which it determines are equitably required
to prevent dilution or enlargement of the rights of grantees which would
otherwise result from any such transaction, and (ii) unless otherwise
determined by the Committee, in its discretion, any stock, securities, cash or
other property distributed with respect to any restricted shares held in escrow
or for which any restricted shares held in escrow shall be exchanged in any
such transaction shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was distributed
or exchanged.
No adjustment or substitution provided for in this Section 7 shall
require the Corporation to issue or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution. Owners of restricted
shares held in escrow shall be treated in the same manner as owners of Capital
Stock not held in escrow with respect to fractional shares created by an
adjustment or substitution of shares, except that, unless otherwise determined
by the Committee, in its discretion, any cash or other property paid in lieu of
a fractional share shall be subject to restrictions similar to those applicable
to the restricted shares exchanged therefor.
If any adjustment or substitution provided for in this Section 7
requires the approval of stockholders in order to enable the Corporation to
grant incentive stock options, then no such adjustment or substitution shall be
made without the required stockholder approval. Notwithstanding the foregoing,
in the case of incentive stock options, if the effect of any such adjustment or
substitution would be to cause the stock option to fail to continue to qualify
as an incentive stock option or to cause a modification, extension or renewal
of such stock option within the meaning of Section 424 of the Code, the
Committee may elect that such adjustment or substitution not be made but rather
shall use reasonable efforts to effect such other adjustment of each then
outstanding stock option as the Committee, in its discretion, shall deem
equitable and which will not result in any disqualification, modification,
extension or renewal (within the meaning of Section 424 of the Code) of the
incentive stock option.
Except as provided in this Section 7, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
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SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) Definitions.
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act as in effect on the effective date of the
Plan.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) A specified percentage of "Voting Power" of a company shall mean
such number of the Voting Shares as shall enable the holders thereof to
cast such percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of any class of
stock other than the common stock of the company to elect directors by a
separate class vote); and "Voting Shares" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate class
vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or
opposed by the Board.
(5) "Continuing Directors" shall mean a director of the Corporation who
either (a) was a director of the Corporation on the effective date of the
Plan or (b) is an individual whose election, or nomination for election, as
a director of the Corporation was approved by a vote of at least two-thirds
of the directors then still in office who were Continuing Directors (other
than an individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election of
directors of the Corporation which would be subject to Rule 14a-11 under
the 1934 Act, or any successor Rule).
(6) "Section 8 Event" shall mean the date upon which any of the
following events occurs:
(a) The Corporation acquires actual knowledge that any Person
other than the Corporation, a Subsidiary or any employee benefit
plan(s) sponsored by the Corporation or a Subsidiary has acquired the
Beneficial Ownership, directly or indirectly, of securities of the
Corporation entitling such Person to 30% or more of the Voting Power
of the Corporation;
(b) A Tender Offer is made to acquire securities of the
Corporation entitling the holders thereof to 30% or more of the Voting
Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act
(or any successor Rule) relating to the election or removal of 50% or
more of the members of the Board or any class of the Board shall be
made by any person other than the Corporation or less than 51% of the
members of the Board shall be Continuing Directors; or
(d) The stockholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other disposition
of assets of the Corporation as a result of which the stockholders of
the Corporation immediately prior to such transaction shall not hold,
directly or indirectly, immediately following such transaction a
majority of the Voting Power of (i) in the case of a merger or
consolidation, the surviving or resulting corporation, (ii) in the
case of a share exchange, the acquiring corporation or (iii) in the
case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately
following the transaction, holds more than 10% of the consolidated
assets of the Corporation immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a
grantee are included in determining the Beneficial Ownership of a Person
referred to in paragraph 6(a), (ii) a grantee is required to be named
pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing
requirement) required to be
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filed by the bidder making a Tender Offer referred to in paragraph 6(b)
or (iii) if a grantee is a "participant" as defined in Instruction 3 to
Item 4 of Schedule 14A under the 1934 Act (or any successor Rule) in a
solicitation (other than a solicitation by the Corporation) referred to in
paragraph 6(c), then no Section 8 Event with respect to such grantee shall
be deemed to have occurred by reason of such event.
(B) Acceleration of the Exercise Date of Stock Options.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, in case any
"Section 8 Event" occurs all outstanding stock options (other than those held
by a person referred to in the proviso to Section 8(A)(6)) shall become
immediately and fully exercisable whether or not otherwise exercisable by their
terms.
(C) Extension of the Expiration Date of Stock Options.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, all
outstanding stock options held by a grantee (other than a grantee referred to
in the proviso to Section 8(A)(6)) whose employment with the Corporation or a
Subsidiary terminates within one year of any Section 8 Event for any reason
other than voluntary termination with the consent of the Corporation or a
Subsidiary, severance under the Severance Plan, retirement under any retirement
plan of the Corporation or a Subsidiary or death which are exercisable shall
continue to be exercisable for a period of three years from the date of such
termination of employment, but in no event after the expiration date of the
stock option.
(D) Lapse of Restrictions on Restricted Share Awards.
Unless the agreement referred to in Section 6(A) shall otherwise
provide, notwithstanding any other provision contained in the Plan, if any
"Section 8 Event" occurs prior to the scheduled lapse of all restrictions
applicable to restricted share awards under the Plan (other than those held by
a person referred to in the proviso to Section 8(A)(6)), all such restrictions
shall lapse upon the occurrence of any such "Section 8 Event" regardless of the
scheduled lapse of such restrictions.
(E) Payment of Performance Shares
Unless the agreement referred to in Section 6(B) shall otherwise
provide, notwithstanding any other provision contained in the Plan, if any
"Section 8 Event" occurs prior to the end of an award period with respect to an
award of performance shares to a grantee, the performance shares (unless the
grantee is a person referred to in the proviso to Section 8 (A) (6) ) shall be
deemed to have been fully earned as of the date of the Section 8 Event,
regardless of the attainment or nonattainment of any performance target and
shall be paid to the grantee as promptly as practicable after the Section 8
Event.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee any right
to be granted a stock option (with or without alternative stock appreciation
rights and/or cash payment rights) or an award under the Plan. Nothing in the
Plan, in any stock option, alternative stock appreciation rights or cash
payment rights granted under the Plan or in any award under the Plan or in any
agreement providing for any of the foregoing shall confer any right on any
employee to continue in the employ of the Corporation or any Subsidiary or
interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the employment of any employee at any time.
12
<PAGE> 14
SECTION 10
WITHHOLDING
Income or employment taxes may be required to be withheld by the
Corporation or a Subsidiary in connection with the exercise of a stock option
or alternative stock appreciation rights, upon a "disqualifying disposition" of
the shares acquired upon exercise of an incentive stock option, at the time
restricted shares are granted or vest or performance shares are earned or upon
the receipt by the grantee of cash in payment of cash payment rights or
dividends on restricted stock which has not vested. Except as provided below,
the grantee shall pay the Corporation in cash the amount required to be
withheld.
A grantee may elect to have any withholding obligation at the time of
the exercise of a nonstatutory stock option or alternative stock appreciation
rights or at the time restricted shares vest or performance shares are earned
satisfied by the Corporation withholding from the shares of Capital Stock the
grantee would otherwise receive full shares of Capital Stock having a fair
market value, determined as provided in Section 5(J), on the date that the
amount of tax to be withheld is determined (the "Tax Date") equal to, or as
nearly equal as possible to but less than, the amount required to be withheld.
The Corporation will request that the grantee pay any additional amount
required to be withheld directly to the Corporation in cash. Any income or
employment taxes required to be withheld by the Corporation or any of its
Subsidiaries upon the receipt by the grantee of cash in payment of cash payment
rights or dividends will be satisfied by the Corporation by withholding the
taxes required to be withheld from the cash the grantee would otherwise
receive.
If the grantee is a person who is subject to the provisions of Section
16 of the 1934 Act on the Tax Date, the election referred to in the preceding
paragraph must be made at least six months prior to the Tax Date and must be
irrevocable when made (except that a revocation of such an election may be made
if it is to become effective six months after the date of the revocation and is
also irrevocable) or in the alternative, if the election is in connection with
the exercise of a nonstatutory stock option or alternative stock appreciation
rights, the election must be made during a period beginning on the third and
ending on the twelfth business day following the date of release for
publication of the quarterly or annual summary statements of sales and earnings
of the Corporation (provided in this case the nonstatutory stock option or
alternative stock appreciation rights to which the election applies is/are also
exercised during the same ten-day period). Any election during one of the
ten-day periods is subject to the approval of the Committee, and if the
Committee, in its discretion, would not approve the election, the election
would not be effective.
A grantee may also elect to have any withholding obligation in
connection with the exercise of a nonstatutory stock option or alternative
stock appreciation rights, upon a "disqualifying disposition" of the shares
acquired upon the exercise of an incentive stock option or at the time
restricted shares are granted or vest or performance shares are earned
satisfied in whole or in part by the grantee tendering to the Corporation a
number of previously owned shares of Capital Stock having a fair market value,
determined as provided in Section 5(J), on the Tax Date equal to or less than
the amount required to be withheld.
If a grantee does not pay any income or employment taxes required to be
withheld by the Corporation or any of its Subsidiaries within ten days after a
request for the payment of such taxes, the Corporation or such Subsidiary may
withhold such taxes from any other compensation to which the grantee is
entitled from the Corporation or any of its Subsidiaries.
SECTION 11
AMENDMENT
The right to alter and amend the Plan at any time and from time to time
and the right to revoke or terminate the Plan are hereby specifically reserved
to the Board; provided that no such alteration or amendment of the Plan shall,
without stockholder approval, (i) increase the number of shares which may be
issued under the Plan as set forth in Section 3, (ii) increase the maximum
number of shares as to which stock options may be granted and as to which
shares may be awarded under the Plan to any one employee during any one
calendar year as set forth in Section 4, (iii) materially increase the benefits
accruing under the Plan to
13
<PAGE> 15
persons subject to the provisions of Section 16(b) of the 1934 Act, (iv)
materially modify the requirements as to eligibility for participation in the
Plan by persons subject to the provisions of Section 16(b) of the 1934 Act, (v)
make any changes in the class of employees eligible to receive incentive stock
options under the Plan or (vi) extend the duration of the Plan. No alteration,
amendment, revocation or termination of the Plan shall, without the written
consent of the holder of an outstanding grant or award under the Plan,
adversely affect the rights of such holder with respect to such outstanding
grant or award.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be December
16, 1993, the date of adoption of the Plan by the Board, provided that such
adoption of the Plan by the Board is approved by the affirmative votes of the
holders of a majority of the Capital Stock present in person or by proxy and
entitled to vote at a meeting of stockholders duly called and held on or prior
to December 15, 1994. No stock option or alternative stock appreciation rights
granted under the Plan may be exercised and no restricted shares may be awarded
until after such approval. No stock option, alternative stock appreciation
rights or cash payment rights may be granted and no awards may be made under
the Plan subsequent to December 15, 2003.
14
<PAGE> 1
Exhibit 10(g)
FIRST AMENDMENT TO THE
QUAKER STATE CORPORATION
SPLIT DOLLAR AGREEMENT
THIS FIRST AMENDMENT is made this _____ day of _______ 1995, by
QUAKER STATE CORPORATION ("Quaker State") and _________________________
("Participant").
WITNESSETH:
WHEREAS, Quaker State and Participant are parties to a Split Dollar
Agreement dated ________________ (the "Agreement"); and
WHEREAS, the Agreement may be amended in accordance with Section 12
thereof; and
WHEREAS, Quaker State and Participant desire to amend the Agreement to
extend the period during which Participant may repay premium advances made to
Participant by Quaker State;
NOW, THEREFORE, pursuant to Section 12 of the Agreement and pursuant to
the authorization of the Board of Directors on September 29, 1994, Quaker State
and Participant hereby amend the Agreement as follows:
1. Section 8(d) of the Agreement is deleted in its entirety and
replaced with the following:
(d) The end of any policy year, beginning with the tenth (lOth) policy
year but in no event later than the fifteenth (15th) policy year, in which
there is sufficient cash value in the Insurance to repay the premium
advances made to Participant by Quaker State without voiding the Insurance;
2. In all other respects, the provisions of the Agreement are hereby
ratified and confirmed and they shall continue in full force and effect. This
First Amendment shall be effective as of the date first written above and,
together with the Agreement, shall constitute the entire agreement between the
parties with respect to the subject matter of the Agreement.
IN WITNESS WHEREOF, Quaker State and Participant evidence the due
execution of the foregoing First Amendment to the Agreement on the date first
written above.
ATTEST: QUAKER STATE CORPORATION
(Quaker State)
_____________________________ By _________________________
Asst. Secretary Chairman and
Chief Executive Officer
(SEAL)
_____________________________ _________________________
Witness Participant
<PAGE> 1
Exhibit 10(h)
APPROVED BY THE ORGANIZATION &
COMPENSATION COMMITTEE 2/28/95
QUAKER STATE CORPORATION
ANNUAL INCENTIVE BONUS PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1995
<PAGE> 2
QUAKER STATE CORPORATION
ANNUAL INCENTIVE BONUS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I PURPOSE ................................. 1
Section 1.01 Purpose ................................. 1
Section 1.02 Application of this Amended and
Restated Plan ......................... 1
ARTICLE II DEFINITIONS ............................. 2
Section 2.01 Definitions ............................. 2
ARTICLE III ADMINISTRATION OF THE PLAN............... 4
Section 3.01 Committee and Agents..................... 4
Section 3.02 Rules and Regulations ................... 4
Section 3.03 Committee Action ........................ 4
Section 3.04 Plan Interpretation ..................... 4
Section 3.05 Notice of Participation ................. 4
Section 3.06 Costs.................................... 4
Section 3.07 Unsecured Creditor ...................... 4
Section 3.08 Authority of Board and Committee ........ 5
Section 3.09 Amendment, Modification or Termination .. 5
Section 3.10 Claim and Appeal Procedure .............. 5
Section 3.11 Certificates and Reports ................ 6
ARTICLE IV PARTICIPANT ELIGIBILITY ................. 7
Section 4.01 Designation of Groups ................... 7
Section 4.02 Participants............................. 7
Section 4.03 New Participating Entities .............. 7
Section 4.04 Termination of Employment................ 7
Section 4.05 Directors ............................... 8
ARTICLE V DETERMINATION OF AWARD AND
DISCRETIONARY BONUS ................... 9
Section 5.01 Required Performance Levels.............. 9
Section 5.02 Performance Criteria..................... 9
Section 5.03 Determination of Salary Percentage
and Allocation of Performance Criteria. 10
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.04 Determination of Award ................... 10
Section 5.05 Determination of Discretionary Bonus...... 10
Section 5.06 Committee Determinations ................. 10
ARTICLE VI PAYMENT TO PARTICIPANTS AND DEFERRALS .... 12
Section 6.01 Timing of Payment......................... 12
Section 6.02 Beneficiary Designation .................. 12
Section 6.03 Deferral of Payment ...................... 12
Section 6.04 Deferral Account ......................... 12
Section 6.05 Payment of Deferred Amounts............... 13
Section 6.06 Amount of Deferred Payment ............... 14
Section 6.07 Automatic Cash Out........................ 14
Section 6.08 Hardship Withdrawal ...................... 14
Section 6.09 Tax Withholding .......................... 15
Section 6.10 Forfeiture for Competition ............... 15
Section 6.11 No Reinstatement ......................... 16
Section 6.12 Other Remedies............................ 16
ARTICLE VII MISCELLANEOUS PROVISIONS ................. 17
Section 7.01 No Recourse............................... 17
Section 7.02 Expense .................................. 17
Section 7.03 Merger or Consolidation .................. 17
Section 7.04 Gender and Number......................... 17
Section 7.05 Construction.............................. 17
Section 7.06 Non-alienation............................ 17
Section 7.07 No Employment Rights ..................... 18
Section 7.08 Minor or Incompetent...................... 18
Section 7.09 Illegal or Invalid Provision ............. 18
Section 7.10 Written Notice............................ 18
</TABLE>
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<PAGE> 4
ARTICLE I
PURPOSE
Section 1.01 - Purpose. The Quaker State Corporation Annual Incentive
Bonus Plan (the "Plan") is an incentive compensation plan designed to enhance
and reinforce Quaker State's profitable growth by providing key employees with
a cash reward based on attainment of predetermined goals. A further purpose of
the Plan is to aid in obtaining, maintaining, and developing a management group
capable of assuring Quaker State's future success.
Section 1.02 - Application of this Amended and Restated Plan. The
amended and restated Plan set forth herein is effective as of January 1, 1995
and shall continue in effect for Participants in the Plan on and after January
1, 1995 and Awards for Performance Periods beginning on or after January 1,
1995 until amended or terminated by the Committee as provided herein.
<PAGE> 5
ARTICLE II
DEFINITIONS
Section 2.01 - Definitions. As used herein, the following words and
phrases shall have the meanings below, unless the context clearly indicates
otherwise:
(a) "AWARD" shall mean the cash bonus awarded to a Participant
for a Performance Period as determined under Article V.
(b) "COMMITTEE" shall mean the Organization and Compensation
Committee of the Board of Directors of Quaker State.
(c) "DEFERRAL ACCOUNT" shall mean the bookkeeping account
established on the books and records of Quaker State or a
Participating Entity, as applicable, for a Participant to reflect
deferred Awards credited to the Participant and adjustments thereto
under the various provisions of the Plan. The use of the term
Deferral Account shall not mean, under any circumstances, that a
Participant or Designated Beneficiary, or the Participant's estate,
shall have title to any specific assets of Quaker State or a
Participating Entity.
(d) "DEFERRAL ELECTION" shall mean the written notice, in the
form prescribed by the Committee or its delegate, filed with the
Committee, which indicates the Award which the Participant elects to
defer in accordance with the terms of the Plan. No Deferral Election
shall be effective until it is received and acknowledged by the
Committee or its delegate.
(e) "DESIGNATED BENEFICIARY" shall mean the person or persons,
natural or legal, designated in writing by the Participant in
accordance with Section 6.02 to receive any benefits under the Plan
which may become payable in the event of the Participant's death or,
if none is designated or surviving at the time of the Participant's
death, the Participant's surviving spouse shall be the Designated
Beneficiary or, if there is no surviving spouse, then the estate of
the Participant shall be the Designated Beneficiary.
(f) "DISABILITY" shall mean the total and permanent disability
of a Participant, as defined by any Long-Term Disability Plan
maintained by Quaker State or a Participating Entity which is
applicable to the Participant and in effect at the time of
determination .
(g) "EMPLOYEE" shall mean any common law employee of Quaker
State or a Participating Entity who is a key employee in a position
of special responsibility and trust in the conduct of the business
of Quaker State and its subsidiaries.
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<PAGE> 6
(h) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(i) "GROUP" shall mean the group to which a Participant is
assigned in accordance with Section 4.01.
(j) "QUAKER STATE" shall mean Quaker State Corporation.
(k) "PARTICIPANT" shall mean an Employee who following
recommendation of the Chief Executive Officer of Quaker State is
approved by the Committee to be a participant in the Plan in
accordance with Section 3.05, and only for as long as such approval
remains in effect, or where the context requires, shall mean a
former Employee with a Deferral Account.
(l) "PARTICIPATING ENTITY" shall mean Specialty Oil Company,
Inc., Westland Oil Company, Inc. and any other subsidiary or
affiliate of Quaker State, which elects to participate in the Plan
with respect to its Employees and is approved by the Board or the
Committee to participate in the Plan, with such status as a
Participating Entity and participation in the Plan ceasing
automatically on the date the subsidiary or affiliate ceases to be a
subsidiary or affiliate of Quaker State.
(m) "PERFORMANCE GOALS" or "GOALS" shall mean the objectives or
levels of Performance, determined from time to time by the
Committee, which when attained will result in the payment of Awards.
(n) "PERFORMANCE" shall mean the financial performance of
Quaker State, a Participating Entity, Quaker State subsidiaries or
affiliates, or any combination thereof based on standards utilized
and as determined from time to time by the Committee or its
delegate.
(o) "PERFORMANCE PERIOD" shall mean the fiscal year of the
Corporation during which Performance is measured.
(p) "PLAN" shall mean the Quaker State Corporation Annual
Incentive Bonus Plan, amended and restated effective January 1,
1995, as set forth herein, and as it may be amended from time to
time hereafter.
(q) "SALARY" shall mean the Participant's base salary from
Quaker State or a Participating Entity.
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<PAGE> 7
ARTICLE III
ADMINISTRATION OF THE PLAN
Section 3.01 - Committee and Agents. Full power and authority to
administer the Plan shall be vested in the Committee. The Committee may also
employ such agents as it deems appropriate to assist it with the administration
of the Plan.
Section 3.02 - Rules and Regulations. The Committee may, from time to
time, establish rules, forms and procedures of general application for the
administration of the Plan.
Section 3.03 - Committee Action. The Committee shall transact business
relating to the Plan in accordance with its by-laws.
Section 3.04 - Plan Interpretation. The Committee shall have the full
power and authority to construe and interpret the Plan, make all determinations
of Awards under the Plan including that there shall be no Awards for a
Performance Period, select which Employees shall be approved to be
Participants, determine the Group to which a Participant is assigned under
Section 4.01, and determine all facts and other issues relating to claims and
appeals under the Plan.
Section 3.05 - Notice of Participation. The Committee or its delegate
shall send a written notice, in the form prescribed by the Committee or its
delegate, informing the Employee that he or she has been approved to be a
Participant in the Plan and specifying the period for which such approval is to
remain in effect. No Employee shall have the right to become a Participant and
shall not be a Participant until the date specified in the notice. Furthermore,
being a Participant does not guarantee an Employee that an Award will be earned
or that such Employee will be permitted to defer receipt of an Award pursuant
to Section 6.03.
Section 3.06 - Costs. All costs and expenses involved in the
administration of the Plan shall be borne by Quaker State or the Participating
Entity.
Section 3.07 - Unsecured Creditor. The Plan constitutes only a promise
by Quaker State or the Participating Entity to make benefit payments in the
future. Quaker State's and the Participating Entities' obligations under the
Plan shall be unfunded and unsecured promises to pay. Quaker State and the
Participating Entities shall not be obligated under any circumstance to fund
their respective financial obligations under the Plan. Any of them may, in its
discretion, set aside funds in a trust or other vehicle, subject to the claims
of its creditors, in order to assist it in meeting its obligations under the
Plan, if such arrangement will not cause the Plan to be considered a funded
deferred compensation plan under ERISA, or the Internal Revenue Code of 1986,
as amended. Quaker State, the Participating Entities, and the Plan do not give
the Participant any beneficial ownership interest in any asset of Quaker State
or the Participating Entity. The Participants and their Designated
Beneficiaries shall have the status of, and their rights to receive payment of
Awards shall be no greater than the rights of, general unsecured creditors of
Quaker State or the applicable Participating Entity.
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<PAGE> 8
Section 3.08 - Authority of Board and Committee. Any determination or
action of the Committee or the Board as evidenced by their minutes or other
records shall be final, conclusive and binding on all Participants and
Designated Beneficiaries, and their beneficiaries, heirs, personal
representatives, executors and administrators, and upon Quaker State, the
Participating Entities and all other persons having or claiming to have any
right or interest in or under the Plan. No Participant shall participate in any
decision of the Board or the Committee which directly or indirectly affects the
Participant's Deferral Election or Deferral Account.
Section 3.09 - Amendment, Modification or Termination. The Board or the
Committee, in its sole discretion, may amend, modify or terminate the Plan, in
whole or in part, at any time and from time to time, provided that no such
amendment, modification, or termination shall reduce the Participant's or
Designated Beneficiary's vested interest in the Deferral Account as of the day
before any such amendment, modification or termination, or adversely affect any
rights or obligations with respect to any prior Awards under the Plan, unless
consented to by the affected Participant or by the Designated Beneficiary if
the Participant is deceased.
Section 3.10- Claim and Appeal Procedure.
(a) The value of a Participant's Deferral Account shall be paid
in accordance with the provisions of the Plan. In the event of a
claim by a Participant or a Participant's Designated Beneficiary
for or in respect of any benefit under the Plan or the method of
payment thereof, such Participant or Designated Beneficiary shall
present the reason for his claim in writing to the Committee,
addressed to the principal place of business of Quaker State, or
such other person or entity designated by the Committee. The
Committee shall, within ninety (90) days after the receipt of such
written claim, send written notification to the Participant or
Designated Beneficiary as to its disposition, unless special
circumstances require an extension of time for processing the
claim. If such an extension of time for processing is required,
written notice of the extension shall be furnished to the claimant
prior to the termination of the initial ninety (90) day period. In
no event shall such extension exceed a period of ninety (90) days
from the end of such initial period. The extension notice shall
indicate the special circumstances requiring an extension of time
and the date by which the Committee expects to render the final
decision .
In the event the claim is wholly or partially denied, the
written notification shall state the specific reason or reasons for
the denial, include specific references to pertinent Plan
provisions on which the denial is based, provide an explanation of
any additional material or information necessary for the
Participant or Designated Beneficiary to perfect the claim and a
statement of why such material or information is necessary, and set
forth the procedure by which the Participant or Designated
Beneficiary may appeal the denial of the claim. If the claim has
not been granted and notice is not furnished within the time period
specified in the
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<PAGE> 9
preceding paragraph, the claim shall be deemed denied for the
purpose of proceeding to appeal in accordance with paragraph (b)
below.
(b) In the event a Participant or Designated Beneficiary wishes
to appeal the denial of his claim, he may request a review of such
denial by making written application to the Committee, addressed to
the principal place of business of Quaker State, or such other
person or entity designated by the Committee, within sixty (60)
days after receipt of the written notice of denial (or the date on
which such claim is deemed denied if written notice is not received
within the applicable time period specified in paragraph (a)
above). Such Participant or Designated Beneficiary (or his duly
authorized representative) may, upon written request to the
Committee, review documents which are pertinent to such claim, and
submit in writing issues and comments in support of his position.
Within sixty (60) days after receipt of the written appeal (unless
an extension of time is necessary due to special circumstances or
is agreed to by the parties, but in no event more than one hundred
and twenty (120) days after such receipt), the Committee shall
notify the Participant or Designated Beneficiary of its final
decision. Such final decision shall be in writing and shall include
specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and specific references to the
pertinent Plan provisions on which the decision is based. If an
extension of time for review is required because of special
circumstances, written notice of the extension shall be furnished
to the claimant prior to the commencement of the extension. If the
claim has not been granted and written notice is not provided
within the time period specified above, the appeal shall be deemed
denied.
(c) If a Participant or Designated Beneficiary does not follow
the procedures set forth in paragraphs (a) and (b) above, he shall
be deemed to have waived his right to appeal benefit determinations
under the Plan. In addition, the decisions, actions, and records of
the Committee shall be conclusive and binding upon Quaker State,
the Participating Entities and all persons having or claiming to
have any right or interest in or under the Plan.
Section 3.11 - Certificates and Reports. The members of the Committee
and the officers and directors of Quaker State and the Participating Entities
shall be entitled to rely on all certificates and reports made by any
accountants, and on all opinions given by legal counsel.
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<PAGE> 10
ARTICLE IV
PARTICIPANT ELIGIBILITY
Section 4.01 - Designation of Groups. An Employee who is approved by the
Committee as a Participant for a Performance Period shall be a member of a
Group, as determined from time to time by the Committee or its delegate taking
into account the Participant's position and potential impact on Performance.
With respect to a Participant who moves from one Group to another during a
Performance Period, such Participant shall be treated as a member of each Group
for the period of time in that Group during the Performance Period and the
Participant's actual Salary for the period in each Group shall be used to
calculate the Award applicable for the period of time in each Group.
Section 4.02 - Participants. Except as otherwise provided in this
Section 4.02, or in Section 4.03, an Employee who is not a Participant as of
the first day of a Performance Period shall not be a Participant for that
Performance Period. A new Employee of Quaker State or a Participating Entity
hired during a Performance Period, and an Employee promoted to a Group during
the Performance Period who was not a Participant at the beginning of the
Performance Period, may become a Participant during a Performance Period with
the approval of the Committee and participate in the Plan for such Performance
Period on a pro rata or other basis specified by the Committee.
Section 4.03 - New Participating Entities. Except as otherwise provided
in this Section 4.03, a Participating Entity may only join the Plan as of the
first day of a Performance Period. An entity which becomes a subsidiary or
other affiliate of Quaker State during a Performance Period or for other
reasons is not participating in the Plan at the beginning of the Performance
Period may become a Participating Entity during a Performance Period with the
approval of the Committee and participate in the Plan for such Performance
Period on a pro rata basis, or other basis specified by the Committee.
Section 4.04 - Termination of Employment.
(a) In the event of a Participant's termination of employment
by reason of death, Disability, retirement under any retirement
plan of Quaker State, a Participating Entity or other affiliate, or
voluntary termination with the consent of Quaker State or a
Participating Entity, or in the event that the Participant becomes
entitled to a severance benefit under Quaker State's Severance Pay
Plan for Salaried and Hourly Non-Union Employees (the "Severance
Plan") prior to the end of a Performance Period, the Participant
shall receive a pro rata share of any Award for the Performance
Period if the Performance Goals for that Performance Period are
met. The pro rata share shall be based on the weeks worked in the
Performance Period by the Participant divided by fifty-two. Whether
the termination of employment is a voluntary termination with the
consent of Quaker State or a Participating Entity shall be
determined by the Committee and any such
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<PAGE> 11
determination shall be final and binding, but such termination
will be treated as voluntary unless the Committee by resolution
makes a determination to the contrary.
(b) In the event a Participant's termination of employment
prior to the end of the Performance Period is for a reason other
than death, Disability, retirement under any retirement plan of
Quaker State or a Participating Entity, or voluntary termination
with the consent of Quaker State, a Participating Entity or other
affiliate, and in the event he is not entitled to a severance
benefit under the Severance Plan, all rights to payment of an Award
under the Plan for that Performance Period will cease to exist on
the date of termination or employment, except as otherwise
determined by the Committee or its delegate.
(c) If, during a Performance Period, a Participant is granted a
leave of absence, or is transferred to a non-Participating
Entity or out of all Groups, the Committee may, in its discretion
or under such uniform rules as it may prescribe, make a partial or
full payment of an Award for the Performance Period.
Section 4.05 - Directors. A member of the Board of Directors of Quaker
State or a Participating Entity who is not a Participant in one of the Groups
may not participate in the Plan.
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<PAGE> 12
ARTICLE V
DETERMINATION OF AWARD
AND DISCRETIONARY BONUS
Section 5.01 - Required Performance Levels. In order for an Award to be
made for a Performance Period, the following performance levels must be
reached:
(a) The minimum level of Performance established by the
Committee for a Performance Period for Quaker State or a
Participating Entity must be reached before any Award based on
Quaker State's or such Participating Entity's Performance can be
made.
(b) Quaker State's Performance for the Performance Period must
be a percentage of the minimum level of Performance established for
Quaker State under (a) above, as determined by the Committee.
(c) The Committee shall establish from time to time and
communicate to Participants the performance rating required to
apply the minimum, maximum and other intermediate percentages
within the performance criteria established under Section 5.02 for
purposes of calculating the Award for a Performance Period;
provided, however, that, notwithstanding any other provision of the
Plan to the contrary, any Participant who receives a rating of
"needs improvement" on any performance appraisal report during a
Performance Period shall be ineligible for an Award for that
Performance Period, and any Participant who receives a rating of
"satisfactory" on any performance appraisal report during a
Performance Period shall be eligible for all or part of any Award
for that Performance Period only if approved by the Committee upon
recommendation of the Chief Executive Officer of Quaker State.
Section 5.02 - Performance Criteria.
(a) The Award for a Participant may be calculated in part on
the basis of Quaker State's Performance and in part on the basis of
the Performance of the Participating Entity which employs the
Participant as determined by the Committee and communicated to
Participants from time to time during the Performance Period.
(b) In addition to the Performance criteria referred to in
Section 5.02(a) above, the Award for a Participant may be
calculated in part based on the Participant's individual
performance and/or performance of the Participant's job unit, the
levels of which will be measured by general criteria and in part by
individual criteria. Guidelines for determining the requirements
for achieving the various performance levels (e.g., Outstanding,
Meets Expectations, etc.) will be developed by the Committee or its
delegate and communicated to Participants from time to time during
the Performance Period.
-9-
<PAGE> 13
(c) The Committee may, in its sole discretion, change or
eliminate the performance criteria referred to in paragraphs (a) or
(b) above, and may establish new or additional performance
criteria, from time to time, provided that the applicable
performance criteria are communicated to affected Participants.
Section 5.03 - Determination of Salarv Percentage and Allocation of
Performance Criteria. The Committee shall determine and, itself or through its
delegate, communicate to Participants from time to time the percentage of a
Participant's Salary to be taken into account for purposes of determining a
Participant's Award for a Performance Period. The Committee shall also
determine and, itself or through its delegate, communicate to Participants the
percentages of the performance criteria established under Section 5.02 above
which are applicable to Participants in each Group, and for this purpose may
subdivide each Group into Quaker State Participants and Participating Entity
Participants, or such other subgroups as it may determine.
Section 5.04 - Determination of Award. The amount of a Participant's
Award for a Performance Period, if any, shall be determined by the Committee or
its delegate in accordance with the terms of the Plan and shall be communicated
in writing to the Participant on or before March 15th of the year following the
Performance Period.
Section 5.05 - Determination of Discretionarv Bonus. The Committee may
grant, from time to time in its sole discretion, a bonus to any Participant
based on any criteria it determines. Such bonus, if specifically designated by
the Committee as payable under this Plan, shall be subject to such provisions
of the Plan as it shall specify; provided, however, that such bonus may not be
subject to the provisions of Section 6.03 regarding elective deferrals or the
provisions of Sections 6.05 or 6.06 regarding the Participant's election of the
form and time of payment.
Section 5.06 - Committee Determinations. The Committee shall annually
make the following determinations, in its sole discretion:
(a) whether an Award will be granted for the following
Performance Period;
(b) the Employees who will be approved as Participants for the
following Performance Period;
(c) the percentage of Salary which will be paid out upon
attaining threshold, target and maximum Performance Goals within
the range established by the Committee;
(d) the Performance Goals for attaining threshold, target and
maximum Awards; and
(e) whether the Goals for the preceding Performance Year have
been met.
-10-
<PAGE> 14
The Committee's determination under paragraph (e) above may consider
the effect of acquisitions, divestitures, changes in accounting policies or
standards and other unusual events or items.
-11-
<PAGE> 15
ARTICLE Vl
PAYMENT TO PARTICIPANTS AND DEFERRALS
Section 6.01 - Timing of Payment. Subject to Section 6.10, an Award for
a Performance Period shall be paid to the Participant, or in the case of death
to the Participant's Designated Beneficiary, on or before March 15th of the
next year, unless the Participant has made an election to defer receipt until a
later date by filing a Deferral Election with the Committee which is effective
for the Performance Period in accordance with Section 6.03.
Section 6.02 - Beneficiary Designation. A Participant may file with the
Committee or its delegate a completed Designated Beneficiary Form as prescribed
by the Committee or its delegate. Such designation may be made, revoked or
changed by the Participant at any time before death or receipt of the balance
of the Deferral Account, but such designation will not be effective and
supersede all prior designations until it is received and acknowledged by the
Committee or its delegate. If the Committee has any doubt as to the proper
Designated Beneficiary to receive payments hereunder, the Committee shall have
the right to withhold such payments until the matter is finally adjudicated.
However, any payment made in good faith shall fully discharge the Committee,
Quaker State, the Participating Entities and the Board from all further
obligations with respect to that payment.
Section 6.03 - Deferral of Payment. A Participant who is determined by
the Committee or its delegate to be in the group of Participants constituting a
select group of management or highly compensated employees of Quaker State and
Participating Entities for purposes of Title I of ERISA may elect to defer
receipt of 100% of the Award for a Performance Period, with payment of deferred
amounts to be made following termination of employment or death as provided in
Section 6.05. In order for a Deferral Election to be effective for a
Performance Period, a Participant must complete and file the appropriate forms
provided the Committee, in accordance with procedures established by the
Committee, prior to the beginning of the Performance Period or not more than
thirty (30) days from the date of becoming a Participant if not notified of
eligibility to make a Deferral Election until after the beginning of a
Performance Period. A Deferral Election shall continue in effect for future
Performance Periods until rescinded by the Participant in writing on a form
provided by and delivered to the Committee prior to January 1 of the
Performance Period for which the recision is to be effective.
Section 6.04- Deferral Account. The Committee shall cause a Deferral
Account to be established and maintained only on the books of Quaker State or
the Participating Entity for each Participant who elects to defer payment of
the Award pursuant to Section 6.03. Such account shall be credited with the
amount of the deferred Award as of the date such payment would have been paid
to the Participant under Section 6.01 above, and thereafter shall be adjusted
quarterly as provided below, and debited for any payment to the Participant or
the Participant's Designated Beneficiary. A separate subaccount within the
Deferral Account shall be maintained for each Performance Period with respect
to which a Participant's Deferral Election provides for a number of installment
payments or a payment commencement date which is different from the
Participant's Deferral Election applicable to other Performance Periods, and as
otherwise determined by the Committee. The amount in the Participant's Deferral
Account shall be adjusted on a quarterly basis as of the last
-12-
<PAGE> 16
day of each calendar quarter to reflect net earnings, gains or losses for the
quarter. The adjustment for earnings, gains or losses for each quarter shall
be equal to the average of the top annual rates paid by major New York banks on
primary new issues of negotiable three (3) month Certificates of Deposit, as
reported in the Money Rates section of the Wall Street Journal, Midwest
Edition, for the last business day of the quarter, divided by twelve (12), and
multiplied by the balance in the Participant's Deferral Account as of the end
of each month in the current quarter.
Section 6.05 - Payment of Deferred Amounts.
(a) Subject to Section 6.10, deferred Awards shall be paid in a
lump sum or annual installments, for a period not to exceed ten
(10) years, to the Participant as indicated on the Participant's
Deferral Election form. The first payment to the Participant shall
be made on the first day of the calendar month which is at least
ninety (90) days after the Participant's termination of employment
with Quaker State, all Participating Entities and all affiliates
occurs or, if earlier, the date specified in the Participant's
Deferral Election or supplemental Deferral Election filed pursuant
to paragraph (d) below. For this purpose, termination of employment
includes voluntary or involuntary termination of employment due to
retirement or any other reason other than death, including
Disability, and shall be the date reflected on Quaker State's, the
Participating Entity's or the affiliate's records as the
Participant's termination date.
(b) In the event of the Participant's death prior to commencement of
installment payments due under the Plan, the first installment
payment to the Designated Beneficiary shall be made on the first
day of the month which is at least ninety (90) days after the date
of the Participant's death and shall be paid in the same form of
payment as would have been applicable to the Participant had the
Participant survived.
(c) In the event of the Participant's death after commencement
of installment payments to the Participant but prior to full
payment of the installments due, the remaining installments due
under the Plan in respect of the Participant shall continue to the
Designated Beneficiary on the same basis as they would have been
paid to the Participant. The first payment to the Designated
Beneficiary shall be made on the later of the date payment would
otherwise have been made or the last day of the second month
following the month in which the Participant's death occurs and
shall include all payments due to the Designated Beneficiary
following death and prior to the first payment.
(d) Not later than the last day of the Performance Period which
is two (2) years prior to the year in which the deferred Award is
to be paid, an Employee may further defer the payment commencement
date of such Award for at least one year by filing a supplemental
Deferral Election form provided by the Committee. (E.g., to
-13-
<PAGE> 17
further defer payment in 1997, can make an election by December
31, 1995 to defer payment until a date in 1998 or later.)
Section 6.06 - Amount of Deferred Payment. If a lump sum payment is
elected for a deferred Award, such payment shall be equal to the value of the
Participant's Deferral Account as adjusted on the last day of the calendar
quarter prior to the date the lump sum payment is to be made. If annual
installments are elected as the payment method for a deferred Award, the amount
of the first installment shall be calculated by dividing the lump sum value of
the Participant's Deferral Account, as determined above, by the number of
installments to be paid. Each later installment shall be determined on the
same basis as the first installment except that the value shall be divided by
the number of installments remaining to be paid. Amounts held pending
distribution from the Plan shall continue to be credited with earnings, gains
or losses on a quarterly basis pursuant to Section 6.04.
Section 6.07 - Automatic Cash Out. The Plan is intended to constitute
an unfunded plan for tax purposes and for purposes of Title I of ERISA and is
intended to be maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
of Quaker State and Participating Entities and to qualify for the exclusions
from Title I of ERISA which are provided for in Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA. Notwithstanding any provision in this Plan to the
contrary, in the event that the Department of Labor, or any other regulatory or
other body, issues final regulations which provide, or a court issues a final
determination, that the Plan does not qualify for any of such exclusions under
ERISA, the Board or the Committee may amend the Plan to change the deferral
eligibility provisions, and the Committee or the Board may revoke the approval
of all or some Employees as Participants for the current or future Performance
Periods, and the Committee or the Board may take such other action as it
determines to be appropriate in order for the Plan to qualify for such
exclusions. In addition, Participants who are precluded from participating in
the deferral provisions because of this Section 6.07 shall have the balance in
their Deferral Account, determined as of the end of the preceding calendar
quarter, plus the amount of any Award deferred during the current calendar
quarter, distributed in a single lump sum as soon as practicable after it is
determined that their deferrals should cease, and such Participant's Deferral
Elections shall be void and of no further effect. Quaker State, the
Participating Entities, the Committee and the Board shall have no liability to
any Participant who receives a distribution from the Plan or whose
participation is otherwise affected by reason of this Section 6.07.
Section 6.08 - Hardship Withdrawal. Notwithstanding the terms of any
Deferral Election made by a Participant hereunder, the Committee may, in its
sole discretion, permit the withdrawal of all or a portion of the amounts
credited to a Participant's Deferral Account, upon the request of the
Participant or the Participant's representative, or following the death of a
Participant upon the request of a Participant's Designated Beneficiary or such
Designated Beneficiary's representative, if the Committee determines that the
Participant or Designated Beneficiary, as the case may be, is confronted with
an unforeseeable emergency. For this purpose, an unforeseeable emergency is an
unanticipated emergency caused by an event that is beyond the control of the
Participant or Designated Beneficiary and that would result in severe financial
hardship to the Participant or Designated Beneficiary if an early hardship
withdrawal were not permitted. The Participant or Designated Beneficiary shall
provide to the Committee such evidence as the Committee may require to
-14-
<PAGE> 18
demonstrate that such emergency exists and financial hardship would occur if
the withdrawal were not permitted. Any withdrawal under this Section 6.08 shall
be limited to the amount necessary to meet the emergency. For purposes of the
Plan, severe financial hardship means an unexpected need for cash to pay for
expenses incurred by the Participant or a member of his immediate family
(spouse and/or natural or adopted children) such as those arising from illness,
casualty loss, or death. Cash needs arising from foreseeable events, such as
the purchase or building of a house or education expenses will not be
considered to be the result of an unforeseeable financial emergency. Payment
shall be made, as soon as practicable after the Committee approves the payment
and determines the amount of the payment, in a single lump sum from the portion
of the Deferral Account representing Performance Periods with the longest
number of installment payments being first, and then from the portion of the
Deferral Account representing Performance Periods with the latest payment
commencement dates first.
Section 6.09 - Tax Withholding. All Awards, whether or not deferred
under the Plan, shall be subject to Federal income, FICA, and other tax
withholding as required by applicable law. At the time that tax withholding is
required, if an amount is payable under the Plan to the Participant the amount
of the required tax withholding shall be withheld from and reduce such payment.
If, however, an amount is not then payable or the amount payable under the Plan
to the Participant is less than the required withholding, the Participant shall
pay, by check or money order payable to Quaker State or the Participating
Entity employing the Participant, not later than the date such withholding is
required, the amount of the required tax withholding or, at the sole election
of Quaker State or such Participating Entity, the amount of required tax
withholding shall be withheld from other compensation or amounts payable to the
Participant. The Participant shall hold Quaker State or such Participating
Entity harmless from any liability for acting to satisfy the withholding
obligation in this manner.
Section 6.10 - Forfeiture for Competition. Notwithstanding any other
provisions in this Article 6 or elsewhere in the Plan, the Committee may
determine that the Participant shall forfeit and no longer be entitled to his
or her entire interest in the Plan (and any related death benefit shall also be
forfeited) if it finds that the Participant has while employed by Quaker State,
a Participating Entity, or its affiliates or within twenty-four (24) months
after retirement engaged in "Competition" with Quaker State, a Participating
Entity, or affiliates or, without the prior written consent of Quaker State,
has during that time disclosed "Confidential Information" or made it available
to anyone outside the organization at any time.
(a) "Competition" shall mean:
(1) entering into the employment of or rendering services in
any capacity to, or having any ownership or other relationship
directly or indirectly with, any business if such employment or
services would involve or relate to the manufacture, sale or
attempted sale, within the United States, or outside of the United
States where Quaker State, a Participating Entity or an affiliate
is doing business at the time of a Participant's termination of
employment, of products competitive with any products sold by
Quaker State, a Participating Entity, or affiliates;
-15-
<PAGE> 19
(2) calling on or otherwise soliciting, directly or indirectly,
business from any of the customers or suppliers of Quaker State, a
Participating Entity, or affiliates; or
(3) encouraging or soliciting, directly or indirectly, any
employee of Quaker State, a Participating Entity, or affiliates to
leave employment with Quaker State, a Participating Entity, or
affiliates for any reason, or hiring any such employee.
(b) "Confidential Information" shall mean confidential and
proprietary data and trade secrets, including, but not limited to,
information concerning sales, sales volume, sales methods, sales
proposals, customers and prospective customers, identity of
customers and prospective customers, identity of key purchasing
personnel in the employ of customers and prospective customers,
amount or kind of customer purchases, sources of supply, computer
programs, system documentation, special hardware, product hardware,
related software development, manuals, formulae, processes,
methods, machines, compositions, ideas, improvements, inventions,
or other confidential or proprietary information belonging to or
relating to the affairs of Quaker State, a Participating Entity, or
affiliates.
Section 6.11 - No Reinstatement. If a Participant's interest in the
Plan is forfeited for any reason, it cannot be reinstated.
Section 6.12 - Other Remedies. The forfeiture of Plan benefits will not
provide an adequate or exclusive remedy for breach of the covenant not to
engage in Competition or the covenant not to disclose Confidential Information.
Quaker State and the Participating Entities shall have available for any such
breach the remedies of specific performance and injunctive relief, the right to
sue the Participant or other recipient to recover any amounts paid under the
Plan, and all other available remedies at law or in equity.
-16-
<PAGE> 20
ARTICLE Vll
MISCELLANEOUS PROVISIONS
Section 7.01 - No Recourse. If the Performance taken into account for
determination of an Award is found to be incorrect by Quaker State's
independent certified public accountants at any time during the following
Performance Period so that the Award exceeded the correct amount, there shall
be no recourse by Quaker State or the Participating Entity directly against any
person or estate. However, Quaker State or the Participating Entity shall have
the right to correct such error by reducing by the entire excess amount any
subsequent payments yet to be made under the Plan for all Performance Periods.
Any underpayment as a result of such error in the Performance taken into
account shall be corrected within six (6) months after the accountants report
the error, provided that the Committee confirms the error.
Section 7.02 - Expense. For purposes of determining Performance, Awards
shall be treated as an expense for book purposes in the fiscal year of Quaker
State or the Participating Entity, as applicable, in which the Award is earned
by a Participant, as opposed to subsequent fiscal year(s) during which the
Award is paid, except as determined otherwise by the Committee or its delegate.
Section 7.03 - Merger or Consolidation. All obligations for amounts
earned but not yet paid under this Plan shall survive any merger, consolidation
or sale of all or substantially all of Quaker State's or a Participating
Entity's assets to any entity, and be the liability of the successor to the
merger or consolidation or the purchaser of assets, unless otherwise agreed by
the parties thereto.
Section 7.04 - Gender and Number. The masculine pronoun whenever used in
Plan shall include the feminine and vice versa. The singular shall include the
plural and the plural shall include the singular whenever used herein unless
the context requires otherwise.
Section 7.05 - Construction. The provisions of the Plan shall be
construed, administered and governed by the laws of the Commonwealth of
Pennsylvania, including its statute of limitations provisions, to the extent
not preempted by ERISA or other applicable Federal law. Titles of Articles and
Sections of the Plan are for convenience of reference only and are not to be
taken into account when construing and interpreting the provisions of the Plan.
Section 7.06 - Non-alienation. Except as may be required by law,
neither the Participant nor any Designated Beneficiary shall have the right to,
directly or indirectly, alienate, assign, transfer, pledge, anticipate or
encumber (except by reason of death) any amount that is or may be payable
hereunder, including in respect of any liability of a Participant or Designated
Beneficiary for alimony or other payments for the support of a spouse, former
spouse, child or other dependent, prior to actually being received by the
Participant or Designated Beneficiary hereunder, nor shall the Participant's or
Designated Beneficiary's rights to benefit payments under the Plan be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or
Designated Beneficiary or to the debts, contracts, liabilities,
-17-
<PAGE> 21
engagements, or torts of any Participant or Designated Beneficiary, or transfer
by operation of law in the event of bankruptcy or insolvency of the Participant
or any Designated Beneficiary, or any legal process.
Section 7.07 - No Employment Rights. Neither the adoption of the Plan
nor any provision of the Plan shall be construed as a contract of employment
between Quaker State or a Participating Entity and any Employee or Participant,
or as a guarantee or right of any Employee or Participant to future or
continued employment with Quaker State or a Participating Entity, or as a
limitation on the right of Quaker State or a Participating Entity to discharge
any of its Employees with or without cause. Specifically, approval as a
Participant does not create any rights, and no rights are created under the
Plan, with respect to continued or future employment or conditions of
employment.
Section 7.08 - Minor or Incompetent. If the Committee determines that
any Participant or Designated Beneficiary entitled to a payment under the Plan
is a minor or incompetent by reason of physical or mental disability, it may,
in its sole discretion, cause any payment thereafter becoming due to such
person to be made to any other person for his benefit, without responsibility
to follow application of amounts so paid. Payments made pursuant to this
provision shall completely discharge Quaker State, the Participating Entities,
the Plan, the Committee and the Board.
Section 7.09 - Illegal or Invalid Provision. In case any provision of
the Plan shall be held illegal or invalid for any reason, such illegal or
invalid provision shall not affect the remaining parts of the Plan, but the
Plan shall be construed and enforced without regard to such illegal or invalid
provision.
Section 7.10 - Written Notice. Any notice to the Committee which shall
be or may be given under the Plan and Deferral Elections shall be in writing
and delivered to the Committee or its delegate. Notice to a Participant shall
be addressed to the address shown on such Participant's Deferral Election. Any
party may, from time to time, change the address to which notices shall be
mailed by giving written notice of such new address to the other party.
-18-
<PAGE> 22
QUAKER STATE CORPORATION
ANNUAL INCENTIVE BONUS PLAN
BONUS DEFERRAL AGREEMENT
WHEREAS, Quaker State Corporation and participating employers
(hereinafter known as "Quaker State") maintain the Quaker State Corporation
Annual Incentive Bonus Plan (hereinafter known as the "Plan") for eligible
employees; and
WHEREAS, the Plan permits certain eligible employees to elect to defer
receipt of payments thereunder for a period of time; and
WHEREAS, as such an eligible employee and Participant under said Plan,
I now desire to elect to defer my Awards in accordance with the terms of the
Plan;
NOW, THEREFORE, I make the following election after having read and
understood the Plan:
1. I elect to defer receipt of 100% of any Award to which I may become
entitled under said Plan with respect to services I shall perform for Quaker
State or a Participating Entity during the Performance Period beginning January
1, 1995 and each Performance Period thereafter, until this election is
rescinded according to paragraph 5 below .
My election is subject to the following understandings and
restrictions:
2. The Award covered by this election shall be paid in (1-10)
annual installment payments. If only one annual installment payment is elected,
it shall be deemed a lump-sum payment.
3. A lump-sum payment or the first annual installment payment,
whichever applies, shall commence:
(a) on the first day of the month which is at least ninety (90)
days after the date of my termination of employment, or
(b) if earlier, on ______________________
(insert a date or N/A)
or on the date specified in a supplemental Deferral Election
made by me by December 31 of the Plan Year which is at least
two (2) years prior to the year which includes the date entered
above, if applicable.
4. If I die before or after payment of deferred Awards has commenced to
me, payment to my Designated Beneficiary shall be made in accordance with the
terms of the Plan.
5. This election shall remain in effect for Performance Periods
beginning on or after January 1, 1995 until rescinded by me in writing on a
form provided by and delivered to the Committee prior to January 1 of the
Performance Period for which this election is to be rescinded.
<PAGE> 23
6. All other terms of this Deferral Election shall be governed by the
Quaker State Corporation Annual Incentive Bonus Plan, including amendments
thereto, as in effect at the time of this election. All of the terms and
conditions of said Plan are incorporated herein by reference thereto.
____________________________________ _________________________________
Participant's Name Birthdate
(Please print or type)
____________________________________ _________________________________
Participant's Signature Date
Participant's Social Security Number: _______________________________________
=============================================================================
Received and acknowledged for the Quaker State Corporation Organization and
Compensation Committee of the Board of Directors
by __________________________________________ __________________________
Date
REV-2/95
<PAGE> 24
QUAKER STATE CORPORATION
ANNUAL INCENTIVE BONUS PLAN
SUPPLEMENTAL DEFERRAL AGREEMENT
WHEREAS, Quaker State Corporation and participating employers
(hereinafter known as "Quaker State") maintain the Quaker State Corporation
Annual Incentive Bonus Plan (hereinafter known as the "Plan") for eligible
employees; and
WHEREAS, the Plan permits certain eligible employees to elect to defer
receipt of payments thereunder for a period of time; and
WHEREAS, as such an eligible employee and Participant under said Plan,
I elected to defer Awards from one or more previous Performance Periods in
accordance with the terms of the Plan; and
WHEREAS, as such an eligible employee and Participant, I would like to
elect to further defer the deferred Award(s) which would otherwise be payable
in one or more Performance Years beginning on or after January 1, 1997.
NOW, THEREFORE,
1. I elect to defer receipt of the Award which would otherwise be
payable commencing on _____________ and receive it instead commencing on the
first day of the month which is at least ninety (90) days after the date of my
termination of employment, or on ___________________, if earlier and if I have
not further deferred such payment date in accordance with the terms of the
Plan.
2. All other terms of this Deferral Election shall be governed by the
Quaker State Corporation Annual Incentive Bonus Plan, including amendments
thereto, as in effect at the time of this election and the terms of the prior
Deferral Election with regard to the above-referenced Award. All of the terms
and conditions of said Plan are incorporated herein by reference thereto.
____________________________________ _________________________________
Participant's Name Birthdate
(Please print or type)
____________________________________ _________________________________
Participant's Signature Date
Participant's Social Security Number: _______________________________________
=============================================================================
Received and acknowledged for the Quaker State Corporation Organization and
Compensation Committee of the Board of Directors
by __________________________________________ __________________________
Date
REV-2/95
<PAGE> 1
EXHIBIT 11
Quaker State Corporation and Subsidiaries
STATEMENT re COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
1. Net income (loss)............................................ $ 18,766 $ 13,702 $ (93,848)
======== ======== =========
2. Average number of shares of capital stock outstanding........ 28,368 27,203 27,152
3. Shares issuable upon exercise of dilutive stock options
outstanding during the year, based on average market
prices....................................................... 91 31 32
4. Shares issuable upon exercise of dilutive stock options
outstanding during the year, based on higher of
average or year-end prices................................... 96 49 33
5. Average number of capital and capital equivalent shares
outstanding (2 + 3).......................................... 28,459 27,234 27,184
======== ======== =========
6. Average number of capital shares outstanding, assuming
a full dilution (2 + 4)...................................... 28,464 27,252 27,185
======== ======== =========
7. Net income (loss) per capital and equivalent share
(1 divided by 5)............................................. $.66 $.50 $(3.45)
======== ======== =========
8. Net income (loss) per capital share, assuming full dilution
(1 divided by 6) ............................................ $.66 $.50 $(3.45)
======== ======== =========
</TABLE>
<PAGE> 1
Exhibit 13
- --------------------------------------------------------------------------------
FINANCIAL
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
The consolidated financial statements and related notes (pages 22 to 35) and
information about the company's operations in different segments included on
page 20 should be read as an integral part of this review.
In 1994, Quaker State management made two strategic moves which had a
significant impact on the 1994 operations. On August 31, 1994, consistent with
the company's strategy to opportunistically exit non-core businesses, the
company completed the sale of its wholly owned subsidiary, Heritage Insurance
Group, Inc. (Heritage), to General Electric Capital Corporation for
approximately $82,000,000 after satisfaction of certain intercompany
obligations. Accordingly, the operating results of the insurance business,
including the gain on the sale, have been segregated and reported as a
discontinued operation in the accompanying Consolidated Statement of Operations
for the year ended December 31, 1994. Prior year financial statements have been
reclassified to conform to current year presentation. (Refer to Note 3 of Notes
to Consolidated Financial Statements.)
On September 30, 1994, the company acquired the stock of the Specialty Oil
Companies (Specialty) and Westland Oil Company, Inc. (Westland) of Shreveport,
Louisiana for $19,500,000 and 4,000,000 shares of capital stock valued at
$57,750,000. The company also purchased certain related equipment for
$1,500,000 and assumed approximately $40,000,000 of debt of the acquired
companies. Specialty and Westland are engaged in the blending, packaging, sale
and distribution of private label and branded lubricants, antifreeze and
greases and the collection and transportation of used motor oil, brake fluid,
antifreeze and used oil filters. This acquisition is consistent with the
company's strategy to support and enhance its core lubricants and lubricant
services business. It is expected that the acquisition will initially add over
$300,000,000 in annual operating revenues and provide operating and marketing
advantages that will enhance efficiencies and have a positive effect on
operating results. The operating results of Specialty and Westland have been
included in the accompanying consolidated financial statements from the date of
acquisition. Specialty and Westland revenues and operating results are reported
as part of the Motor Oil business segment.
CONSOLIDATED REVIEW OF OPERATIONS
Quaker State reported net income of $18,766,000, or $.66 per share, in 1994
compared to $13,702,000, or $.50 per share, in 1993. Net income included
discontinued insurance operations' income of $4,761,000, or $.17 per share, in
1994 compared to $3,810,000, or $.14 per share, in 1993. A net loss of
$93,848,000, or $3.45 loss per share, was recorded in 1992. The 1992 loss
includes several accounting adjustments totalling $102,300,000 for
discontinuing the coal operations, implementing Financial Accounting Standards
Board (FASB) Standard Nos. 106 and 109 and recording a charge for impaired
assets. (Refer to Notes 4, 5, 12 and 13 of Notes to Consolidated Financial
Statements.)
Income from continuing operations in 1994 of $14,005,000, or $.49 per share,
compared to $9,892,000, or $.36 per share, in 1993. Operating profit
improvements, primarily based on sales volume increases over 1993, were
realized at four of the business segments. At Q Lube, car counts increased 8%
while operating profit rose 88%; natural gas volume at Natural Gas E&P went up
18% contributing to an operating profit increase of 74%; and automotive and
heavy duty lighting sales volume rose 17% at Truck-Lite and resulted in a 105%
increase in operating profits. Branded motor oil sales volume, including sales
by Specialty and Westland in the fourth quarter, increased 7% in 1994 but
higher selling, marketing, freight and administrative expenses of approximately
$19,000,000 combined with a change in product mix reduced motor oil operating
profit by 6%. Specialty and Westland contributed $654,000 of operating profit
to the Motor Oil segment in 1994. The Docks operating results included a
pre-tax gain of $1,100,000 from the termination of a pension plan in the fourth
quarter of 1994. An increase in the 1994 consolidated effective tax rate
resulted from higher income and adjustments in 1993 due to a federal tax rate
change and a reduction in the valuation allowance.
Income from continuing operations in 1993 improved 117% over 1992's total of
$4,555,000, or $.17 per share. This increase resulted primarily from a
$9,396,000 improvement in operating profits at Truck-Lite which experienced a
sales volume increase of 19% along with reduced operating costs. In addition, Q
Lube operating profits improved $4,287,000 primarily because 1992 results
included a charge related to future conversions to the Q Lube name. Higher
corporate interest income also contributed to the improved 1993 results. These
improvements were partially offset by an operating profit decline in the Motor
Oil segment. Increased promotion and advertising costs, a change in product
sales mix and decreased motor oil volume negatively affected 1993 Motor Oil
results. Increased income taxes also negatively impacted 1993 income from
continuing operations.
Sales and operating revenues from continuing operations for 1994 were
$755,293,000 compared to $628,336,000 in 1993 and $609,952,000 in 1992. Higher
sales volumes at each of the major businesses accounted for the increased
revenues in 1994, while a 19% increase in 1993 sales volume at Truck-Lite
accounted for the increase in 1993 revenues.
MOTOR OIL
Operating profits in 1994 declined 6% to $16,401,000 from $17,484,000 in
1993 and included $654,000 from the Specialty and Westland businesses acquired
on September 30, 1994. Branded motor oil sales volume was 7% ahead of 1993 and
automotive consumer product sales were up 20%. The increase in operating
profits resulting from the higher sales volume was offset by the negative
impact of a shift in product mix to more bulk sales where the gross margin is
lower and an increase of approximately $19,000,000 in marketing, selling,
freight and administrative expenses. These increased expenses resulted
primarily from higher volumes and aggressive share-building programs geared
towards developing additional sales volume. The company expects to continue
this higher level of spending in 1995 to support its marketing strategy for
branded motor oil. The company also recorded $1,700,000 of expenses and
reserves associated with a lawsuit commenced against the company for alleged
environmental violations at the Congo refinery. (Refer to Note 10 of Notes to
Consolidated Financial Statements.)
-17-
<PAGE> 2
Revenues in 1994 of $541,205,000, including $71,416,000 from fourth quarter
sales at Specialty and Westland, were 23% ahead of 1993's total of
$439,283,000. This resulted from a 7% increase in branded motor oil volume and
an additional 20% of automotive consumer product sales. Despite a 3% price
increase for branded motor oil, effective September 1, 1994, the 1994 average
sales price for these products declined due to a shift in product mix to bulk
sales where the average sales price was 33% below that for packaged goods.
Another price increase took effect on January 3, 1995, for branded motor oil
and should improve gross margins throughout 1995. Gasoline, fuel oil and
kerosene sales volumes were up 3% in 1994, but the average sales prices were
down 4%.
Operating profits in 1993 were 25% below profits of $23,336,000 in 1992.
Several items contributed to the decline including: a 7% increase in promotion
and advertising expenses, an 11% increase in freight costs related to a higher
percentage of bulk motor oil sales, approximately $1,400,000 of LIFO inventory
costs resulting from reduced inventory levels, an 8% drop in the average price
of gasoline and fuel oil, a 2% decline in 1993 motor oil sales volume, and a
charge of approximately $750,000 to close the St. Louis blending and warehouse
facility.
Motor Oil revenues declined $1,722,000 in 1993 from $441,005,000 in 1992.
Slight increases in lube stock volume and automotive consumer product sales
were offset by declines in the sale of gasoline, fuel oil and excess crude oil.
Q LUBE
Operating profits in 1994 of $5,726,000 were up 88% compared to $3,045,000
in 1993. An 8% increase in the number of cars serviced in company stores
primarily accounts for the improvement in operating results. Advertising,
depreciation and repair and maintenance expenses increased $2,023,000. The
higher sales volume and expenses resulted from the conversion of 67 company
stores in 1994 to a new Q Lube format. This conversion will continue in 1995
with 100 additional company stores expected to be completed by the end of 1995.
Q Lube revenues of $113,674,000 in 1994 were up 8% as a result of the
increase in the number of cars serviced at company stores.
The 1993 operating profits of $3,045,000 compared to an operating loss of
$1,242,000 in 1992. The 1992 loss included an unusual charge of $3,200,000
representing the impairment of certain assets as a result of the planned
conversion of existing Minit-Lube stores to Q Lube. Excluding the unusual
item, operating profits were $1,958,000 in 1992. The company's divestiture of
sixteen stores in unprofitable markets in the first quarter of 1993 and reduced
operating expenses account for the improved 1993 operating profits.
Revenues of $105,361,000 in 1993 were flat when compared to $104,398,000 in
1992 as total cars serviced and average ticket price remained about the same.
NATURAL GAS EXPLORATION AND PRODUCTION
Operating profits improved 74% to $5,387,000 in 1994 compared to $3,103,000
in the prior year. The improvement resulted from an 18% increase in natural gas
sales volume due in part to completion of the Stagecoach pipeline in
southwestern New York. Average natural gas prices have declined $.22 per mcf,
or 9%, since June 30, 1994 and are expected to remain at depressed levels
throughout 1995, negatively impacting revenue and operating profit. Crude oil
sales volume and average prices declined 12% and 11% in 1994. Depreciation and
depletion expense increased $836,000, or 9%, over 1993 due to higher natural
gas production.
Operating revenues of $27,284,000 in 1994, compared to $25,313,000 in 1993,
increased due to the higher natural gas sales volume offset, in part, by the
decline in natural gas and crude oil average prices and lower crude oil volume.
Operating profits of $3,103,000 in 1993 compared to $3,835,000 in 1992. The
19% decline in 1993 operating profits resulted from approximately $700,000 of
additional dry hole expense due to an increase in exploratory drilling.
Revenues in 1993 of $25,313,000 compared to $25,507,000 in 1992. Declines in
crude oil sales volume and average sales price of 4% and 8% were partially
offset by natural gas volume and average price increases of 3% and 2%.
TRUCK-LITE
Truck-Lite had a record year in 1994 for both sales volume and operating
profits. Sales volume increased 17% and resulted in operating profits of
$11,756,000 which more than doubled 1993's operating profits of $5,731,000.
Strong sales were recorded in both the automotive business and the heavy duty
safety lighting business. Selling, general and administrative expenses were up
$1,282,000 in 1994 as a result of higher legal, environmental and incentive
costs. Operating results included a $1,500,000 charge recorded in the fourth
quarter of 1994 to reserve for future losses associated with a contract to
manufacture automotive safety lights. This coincides with a shift in strategy
to focus more on the heavy duty truck and trailer lighting business in the
future.
Revenues in 1994 increased to $99,638,000 from $80,776,000 in 1993, due to
the sales volume increase and a shift in product mix to higher priced products.
Operating profits in 1993 increased to $5,731,000 compared to a loss of
$3,665,000 in 1992, as a result of a 19% sales volume increase combined with
manufacturing efficiencies and a 22% reduction in selling, general and
administrative expenses. The 1992 operating loss included a $1,600,000
write-off of unrecoverable development costs.
Revenues increased 26% to $80,776,000 from $63,878,000 in 1992 due to the
higher sales volume.
DOCKS
Operating profits in 1994 of $1,753,000 compared to $1,138,000 in 1993. The
1994 profits included a pre-tax gain of $1,100,000 from the termination of a
pension plan in the fourth quarter of 1994. Revenues in 1994 of $2,997,000
compared to $2,955,000 in 1993.
Operating profits in 1993 were $1,138,000 on revenues of $2,955,000 compared
to operating profits of $2,137,000 on revenues of $5,319,000 in 1992. The
decline in 1993 revenues and operating profits resulted from the sale of the
U.S. dock operations in December 1992 and a new long-term contract at the
Canadian dock operation.
CORPORATE
Corporate expenses in 1994 increased $3,476,000 to $18,669,000 from
$15,193,000 in 1993. Higher expenses for postretirement benefits, performance
incentives and legal services account for this increase.
-18-
<PAGE> 3
Corporate income of $3,235,000 in 1994 included additional interest of
$614,000 on the proceeds from the sale of Heritage. In 1993, corporate income
was $2,730,000 compared to $187,000 in 1992. The 1993 income includes
$1,120,000 of interest on an income tax refund and $1,484,000 of interest on
supplemental payments from the December 30, 1992 sale of certain coal assets.
(Refer to Note 4 of Notes to Consolidated Financial Statements.) Corporate
expenses of $15,193,000 in 1993 did not change significantly from the prior
year.
Interest expense of $4,534,000 in 1994 is down 16% from 1993 due to lower
average debt in 1994. Higher interest expense in 1993, over 1992, includes the
cost of the 8.73 percent fixed rate private placement debt.
The 1994 effective tax rate of 33% for continuing operations is higher than
the 1993 rate of 22% due to higher income in 1994 and benefits in 1993 from an
enacted federal rate change that increased the value of deferred tax assets,
net adjustments to the valuation allowance and other credits. The company's
effective tax rate for continuing operations in 1993 increased to 22% from 4%
in 1992 primarily due to higher earnings. (Refer to Note 12 of Notes to
Consolidated Financial Statements.)
LIQUIDITY AND FINANCIAL CONDITION
Cash flow from operations was $37,562,000 in 1994 compared to $47,235,000 in
1993 and $31,825,000 in 1992. The decrease in 1994 versus 1993 cash flow from
operations was due to increased working capital requirements. The increase in
1993 versus 1992 cash flow from operations resulted from higher income in
continuing operations, reductions in working capital requirements and changes
in the insurance operations. Net cash used by discontinued coal activities in
1994 and 1993 was approximately $14,700,000 and $10,000,000. It is expected
that $9,000,000 of cash will be used in discontinued coal operations in 1995.
Investing activities generated $5,543,000 of cash in 1994. Cash from the sale
of Heritage of $76,851,000 combined with the sale of coal assets of $1,678,000
to provide $78,529,000 proceeds from the sale of discontinued operations. Cash
used to purchase Specialty and Westland was $28,366,000. Capital expenditures
were $36,444,000 in 1994 with 37% of that total spent by Motor Oil, 24% spent
by Natural Gas Exploration and Production, and 31% spent by Q Lube. Proceeds
from the sale of assets generated $4,556,000. Investment activity at Heritage
used net cash of $12,732,000. Capital expenditures for 1995 are anticipated to
be approximately $40,000,000. Approximately 60% is planned for use by Motor
Oil, including Specialty and Westland, primarily for manufacturing upgrades and
capital commitments to enhance long-term branded motor oil volume. Another 20%
is allocated to Q Lube to convert company stores to the new Q Lube format.
Financing activities required $28,928,000, which included dividends of
$11,358,000. Total debt at December 31, 1994 was $73,249,000, including
$21,950,000 from the Specialty and Westland acquisitions, compared to
$51,450,000 at December 31, 1993 with a debt to capital ratio of 22.5% and
21.4%. The company currently has $68,200,000 of unused lines of credit.
Working capital at December 31, 1994, stood at $101,439,000 with a ratio of
current assets to current liabilities of 1.84 to 1 compared to $35,403,000 and
1.34 to 1 at December 31, 1993.
OTHER FINANCIAL INFORMATION
Stockholders' equity at December 31, 1994 was $251,850,000 ($8.00 per share)
compared to $188,750,000 ($6.93 per share) at December 31, 1993. The market
price of capital stock was $14.00 per share at December 31, 1994. The net
deferred tax asset recorded on the balance sheet at December 31, 1994 of
$40,324,000 will be realized either through the carryback provisions of the tax
law or recovered in the future through existing levels of taxable income from
continuing operations.
During 1994, the effect of inflation had a minor impact on the company's
results of operations and the carrying value of its assets and liabilities.
Historically, the company has been able to meet the effects of inflation
through increased productivity, adjustments to selling prices and cost
controls.
Federal, state, and local environmental laws continue to have an impact on
the company's operations. Compliance with such laws has been accomplished
without a material effect on the company's financial position and results of
operations.
In December 1993, the United States commenced a lawsuit against the company
in the U.S. District Court for the Northern District of West Virginia. The
complaint alleges the company violated the federal Resource Conservation and
Recovery Act and the Clean Air Act at the Congo refinery on various dates
starting in 1980 and seeks civil penalties not to exceed $25,000 per day for
each violation. The company intends to vigorously defend this lawsuit. In 1994,
the company recorded a charge of $1,000,000 as its estimate of probable
liability associated with this lawsuit.
The company has been named as a party or a potentially responsible party in a
number of government and private actions based on environmental laws and
regulations. The company anticipates some liability for long-term remediation
or reclamation at formerly owned facilities including three refineries and
various coal operations.
In April 1994, class actions were commenced in the U.S. District Court for
the Western District of Pennsylvania against the company and two other refiners
of Pennsylvania Grade crude oil. The complaints allege violations of Section 1
of the Sherman Act. The company believes there is no basis for the allegations
in the complaints and intends to defend these matters vigorously.
While it is impossible at this time to determine with certainty the ultimate
outcome of all environmental and legal matters involving the company, the
company has accrued for all items which are probable and can be reasonably
estimated, and does not expect any material adverse effect on its financial
position. However, it is possible that one or more of these matters may be
decided against the company and could have a material impact on results of
operations or cash flows in that period.
It is the company's strategy to be a world-class marketer of quality
lubricants and lubricant services, to build and enhance its lubricant services
business, and to seek new lubricant businesses. The company will selectively
expand globally and opportunistically exit non-core businesses.
-19-
<PAGE> 4
- --------------------------------------------------------------------------------
SEGMENT INFORMATION
- --------------------------------------------------------------------------------
The company's operations are organized into five segments. The Motor Oil
segment produces and markets lubricants and also sells related petroleum and
automotive aftermarket products to distributors and national and regional
retailers. On September 30, 1994, the company purchased the Specialty Oil
Companies and Westland Oil Company, Inc. (Specialty/Westland). In addition to
the above activities, the Specialty/Westland companies package, sell and
distribute private label lubricants, antifreeze and greases and collect and
transport used motor oil, brake fluid, antifreeze and used oil filters. The
revenues and operating profits generated by the Specialty/ Westland companies
from the date of acquisition to December 31, 1994, are included in the 1994
Motor Oil segment revenues and operating profits.
Q Lube is the fast service automobile oil change and lubrication business
operated through company owned and franchised centers.The Natural Gas
Exploration and Production segment owns interests in, explores for, develops
and operates natural gas and crude oil properties. Truck-Lite manufactures and
sells automotive and heavy-duty truck lighting. The Dock operation is a bulk
material handling dock accessible to Lake Superior at Thunder Bay, Ontario,
Canada.
Intersegment sales are at market. Operating profits are total segment revenues
less segment expenses. Corporate expenses are those which are not directly
related to the company's segments. Corporate assets consist principally of
deferred tax assets, cash and cash equivalents and assets not identifiable with
the operations of a segment.
Revenues and operating profits exclude Insurance, which was discontinued in
the second quarter of 1994, and Coal, which was discontinued in the fourth
quarter of 1992. (Refer to Notes 3 and 4 of Notes to Consolidated Financial
Statements.)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Motor Oil
Lubricants $419,408 $343,767 $337,347
Fuels 47,874 48,351 53,651
Other 73,923 47,165 50,007
- -------------------------------------------------------------
Total Motor Oil 541,205 439,283 441,005
Q-Lube 113,674 105,361 104,398
Natural Gas E&P 27,284 25,313 25,507
Truck-Lite 99,638 80,776 63,878
Docks 2,997 2,955 5,319
Intersegment sales (29,505) (25,352) (30,155)
- -------------------------------------------------------------
Total $755,293 $628,336 $609,952
=============================================================
</TABLE>
The amounts for intersegment eliminations included in
revenues are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------
<S> <C> <C> <C>
Motor Oil $24,880 $21,290 $21,950
Natural Gas E&P 4,625 4,062 8,205
- -------------------------------------------------------------
Total $29,505 $25,352 $30,155
=============================================================
OPERATING PROFITS
Motor Oil $16,401 $17,484 $23,336
- -------------------------------------------------------------
Q Lube 5,726 3,045 1,958
Unusual item (Note 5) - - (3,200)
- -------------------------------------------------------------
Total Q Lube 5,726 3,045 (1,242)
- -------------------------------------------------------------
Natural Gas E&P 5,387 3,103 3,835
Truck-Lite 11,756 5,731 (3,665)
Docks 1,753 1,138 2,137
- -------------------------------------------------------------
Total operating profits 41,023 30,501 24,401
- -------------------------------------------------------------
Corporate income 3,235 2,730 187
Interest expense (4,534) (5,410) (4,282)
Corporate expense (18,669) (15,193) (15,570)
- -------------------------------------------------------------
Income from continuing
operations before
income taxes $ 21,055 $ 12,628 $ 4,736
=============================================================
IDENTIFIABLE ASSETS
Motor Oil $309,894 $144,687 $151,348
Q Lube 113,733 114,703 122,692
Natural Gas E&P 45,168 47,872 49,300
Truck-Lite 37,497 33,433 37,501
Docks 2,481 2,112 3,438
Discontinued operations 4,281 341,307 306,494
- -------------------------------------------------------------
Subtotal 513,054 684,114 670,773
Corporate 116,964 99,563 122,047
- -------------------------------------------------------------
Total $630,018 $783,677 $792,820
=============================================================
CAPITAL EXPENDITURES
Motor Oil $ 13,385 $ 11,459 $ 7,523
Q Lube 11,463 5,522 3,489
Natural Gas E&P 8,618 10,890 9,773
Truck-Lite 2,978 1,884 1,583
Docks - 5 135
Discontinued operations - - 3,203
- -------------------------------------------------------------
Total $ 36,444 $ 29,760 $ 25,706
=============================================================
DEPRECIATION, DEPLETION AND AMORTIZATION
Motor Oil $ 12,784 $ 10,767 $ 10,680
Q Lube 6,597 5,879 6,109
Natural Gas E&P 10,414 9,578 9,210
Truck-Lite 2,426 2,496 2,393
Docks 38 38 895
Discontinued operations - - 5,796
- -------------------------------------------------------------
Total $ 32,259 $ 28,758 $ 35,083
=============================================================
</TABLE>
-20-
<PAGE> 5
FIVE-YEAR SUMMARY OF NET INCOME AND COMPARATIVE STATISTICAL DATA
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years ended December 31 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands except per share and statistical data)
REVENUES
Sales and operating revenues $ 755,293 $ 628,336 $ 609,952 $ 593,350 $ 665,064
Other, net 9,390 8,292 6,308 6,412 8,627
- -------------------------------------------------------------------------------------------------------------------------------
Total 764,683 636,628 616,260 599,762 673,691
- -------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales and operating costs 509,058 429,453 411,851 402,595 471,483
Selling, general and administrative 197,196 160,068 162,401 143,099 143,386
Depreciation, depletion and amortization 32,259 28,758 29,287 28,847 29,769
Interest 5,115 5,721 4,785 4,567 5,172
Unusual items - - 3,200(c) - (5,398)(d)
- -------------------------------------------------------------------------------------------------------------------------------
Total 743,628 624,000 611,524 579,108 644,412
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 21,055 12,628 4,736 20,654 29,279
PROVISION FOR INCOME TAXES 7,050 2,736 181 8,031 10,053
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 14,005 9,892 4,555 12,623 19,226
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS(A) 4,761 3,810 (35,803) 2,916 331
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 18,766 13,702 (31,248) 15,539 19,557
CUMULATIVE EFFECT OF ACCOUNTING
CHANGES (B) - - (62,600) 7,170 -
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 18,766 $ 13,702 $ (93,848) $ 22,709 $ 19,557
===============================================================================================================================
PER SHARE:
Income from continuing operations before
cumulative effect of accounting changes $ .49 $ .36 $ .17 $ .47 $ .71
Income (loss) from discontinued operations (a) .17 .14 (1.32) .11 .01
Cumulative effect of accounting changes (b) - - (2.30) .26 -
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .66 $ .50 $ (3.45) $ .84 $ .72
===============================================================================================================================
DIVIDENDS:
Cash per share $ .40 $ .60 $ .80 $ .80 $ .80
Amount 11,358 16,310 21,720 21,704 21,700
Capital expenditures 36,444 29,760 25,706 32,037 40,178
Working capital 101,439 35,403 74,911 43,041 41,311
Total assets 630,018 783,677 792,820 751,496 757,229
Total debt 73,249 51,450 79,183 88,924 72,146
Stockholders' equity 251,850 188,750 191,194 307,790 304,511
Book value per share 8.00 6.93 7.04 11.34 11.23
- -------------------------------------------------------------------------------------------------------------------------------
Number of stockholders of record 11,792 12,147 12,606 12,308 12,172
Weighted average capital and
equivalent shares outstanding 28,459,000 27,234,000 27,184,000 27,167,000 27,155,000
===============================================================================================================================
<FN>
a. In the second quarter of 1994 the company decided to exit the
insurance business. Prior year amounts have been reclassified to exclude
insurance activities. In the fourth quarter of 1992 the company decided to
exit the coal business. These businesses have been reported as discontinued
operations. Refer to Notes 3 and 4 of Notes to Consolidated Financial
Statements.
b. Cumulative effect of implementing Statement of Financial Accounting
Standard No. 106, "Employers' Accounting For Postretirement Benefits Other
Than Pensions" and Standard No. 109, "Accounting For Income Taxes" in 1992
and Standard No. 96, "Accounting For Income Taxes" in 1991. Refer to Notes
12 and 13 of Notes to Consolidated Financial Statements.
c. Charge for assets to be replaced by future conversion of Minit-Lube
stores to Q Lube facilities. Refer to Note 5 of Notes to Consolidated
Financial Statements.
d. Gain on the sale of the McKean and Emlenton facilities.
</TABLE>
21
<PAGE> 6
CONSOLIDATED STATEMENT OF OPERATIONS
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands except per share data)
REVENUES
Sales and operating revenues $755,293 $628,336 $609,952
Other, net 9,390 8,292 6,308
- ----------------------------------------------------------------------------------------------------
Total 764,683 636,628 616,260
- ----------------------------------------------------------------------------------------------------
COST AND EXPENSES
Cost of sales and operating costs 509,058 429,453 411,851
Selling, general and administrative 197,196 160,068 162,401
Depreciation, depletion and amortization 32,259 28,758 29,287
Interest 5,115 5,721 4,785
Unusual item (Note 5) _ - 3,200
- ----------------------------------------------------------------------------------------------------
Total 743,628 624,000 611,524
- ----------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 21,055 12,628 4,736
- ----------------------------------------------------------------------------------------------------
PROVISION FOR (BENEFIT FROM) INCOME TAXES (NOTE 12)
Current 9,600 10,365 4,764
Deferred (2,550) (7,629) (4,583)
- ----------------------------------------------------------------------------------------------------
Total 7,050 2,736 181
- ----------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 14,005 9,892 4,555
- ----------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS (NOTE 3 AND 4)
Income from operations, net of taxes 4,384 3,810 1,897
Income (loss) on disposition, net of taxes 377 - (37,700)
- ----------------------------------------------------------------------------------------------------
Total 4,761 3,810 (35,803)
- ----------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 18,766 13,702 (31,248)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES (NOTES 12 AND 13) - - (62,600)
- ----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 18,766 $ 13,702 $(93,848)
====================================================================================================
PER SHARE:
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES $ .49 $ .36 $ .17
INCOME (LOSS) FROM DISCONTINUED OPERATIONS .17 .14 (1.32)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES - - (2.30)
- ----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE $ .66 $ .50 $ (3.45)
====================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-22-
<PAGE> 7
CONSOLIDATED STATEMENT OF CASH FLOWS
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years ended December 31 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 18,766 $ 13,702 $(93,848)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 32,259 28,758 35,083
Deferred income taxes and investment tax credit 2,669 3,380 (4,900)
Postretirement benefits other than pensions 826 2,810 5,600
Unusual items--noncurrent - - 3,200
(Gain) loss on disposition of discontinued operations (Notes 3 and 4) (377) - 37,700
Cumulative effect of changes in accounting principles
(Notes 12 and 13) - - 62,600
Increase (decrease) from changes in:
Receivables (2,168) 4,274 (5,711)
Inventories (3,732) 12,036 (2,958)
Other current assets 4,743 2,265 8,304
Accounts Payable (8,537) 3,267 (5,453)
Accrued liabilities (11,434) (25,028) (17,753)
Other 458 (8,621) 7,694
Changes in discontinued insurance operations 4,089 10,392 2,267
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 37,562 47,235 31,825
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property and equipment 4,556 1,741 6,806
Capital expenditures (36,444) (29,760) (25,706)
Proceeds from sale of discontinued operations,
net of discontinued operations cash (Notes 3 and 4) 78,529 6,261 47,929
Discontinued insurance operations:
Proceeds from sale of bonds and securities 47,781 105,052 41,520
Purchase of bonds and securities (60,513) (112,206) (46,786)
Acquisitions, net of cash acquired (Notes 2 and 15) (28,366) - -
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 5,543 (28,912) 23,763
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (11,358) (16,310) (21,720)
Proceeds from long-term debt 418) 223 93,918
Payments on long-term debt (17,988) (27,956) (101,535)
- ----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (28,928) (44,043) (29,337)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 14,177 (25,720) 26,251
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year:
Other than insurance 6,220 34,146 9,305
Discontinued insurance operations 9,408 7,202 5,792
- ----------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents at beginning of year 15,628 41,348 15,097
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year:
Other than insurance 29,805 6,220 34,146
Discontinued insurance operations - 9,408 7,202
- ----------------------------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS AT END OF YEAR $ 29,805 $ 15,628 $ 41,348
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-23-
<PAGE> 8
CONSOLIDATED BALANCE SHEET
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31 1994 1993
- -------------------------------------------------------------------------------
(in thousands except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,805 $ 6,220
Accounts and notes receivable, less allowance of
$2,185 in 1994 and $1,679 in 1993 94,401 56,818
Inventories (Note 6) 73,604 40,103
Deferred income taxes (Note 12) 11,790 18,375
Other current assets 12,540 17,468
- -------------------------------------------------------------------------------
Total current assets 222,140 138,984
- -------------------------------------------------------------------------------
Property, plant and equipment, net of accumulated
depreciation and depletion (Note 7) 247,935 225,828
Other assets (Note 6) 159,943 82,903
- -------------------------------------------------------------------------------
Total assets other than insurance 630,018 447,715
- -------------------------------------------------------------------------------
Discontinued insurance assets (Note 3) - 335,962
- -------------------------------------------------------------------------------
TOTAL ASSETS $630,018 $783,677
===============================================================================
LIABILITIES
Current liabilities:
Accounts payable $ 58,500 $ 35,980
Accrued liabilities (Note 8) 58,487 67,339
Debt payable within one year 3,714 262
- -------------------------------------------------------------------------------
Total current liabilities 120,701 103,581
- -------------------------------------------------------------------------------
Long-term debt, less debt payable within one year (Note 9) 69,535 51,188
Other long-term liabilities (Note 8) 187,932 179,054
- -------------------------------------------------------------------------------
Total liabilities other than insurance 378,168 333,823
- -------------------------------------------------------------------------------
Discontinued insurance liabilities (Note 3) - 261,104
- -------------------------------------------------------------------------------
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY
Capital stock $1.00 par value; authorized shares,
37,500,000; issued shares, 31,517,305 in 1994
and 27,250,818 in 1993 (Note 11) 31,517 27,251
Treasury stock, 33,498 shares, at cost (467) -
Additional capital 120,131 63,044
Retained earnings (Note 9) 104,286 98,877
Cumulative foreign currency translation adjustment (709) 75
Unearned compensation (Note 11) (2,908) (497)
- -------------------------------------------------------------------------------
Total stockholders' equity 251,850 188,750
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $630,018 $783,677
===============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-24-
<PAGE> 9
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
Foreign
Currency
Capital Additional Retained Translation Unearned
(in thousands except shares and per share data) Stock Capital Earnings Adjustment Compensation Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 $27,145 $ 61,921 $217,147 $ 1,577 -- $307,790
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss -- -- (93,848) -- -- (93,848)
Cash dividends ($.80 per share) -- -- (21,720) -- -- (21,720)
7,183 shares of capital stock issued under
stock option plan (Note 11) 7 83 -- -- -- 90
Net changes in unrealized gains and losses
on marketable equity securities of
discontinued insurance operations -- -- 56 -- -- 56
Change in foreign currency translation -- -- -- (1,174) -- (1,174)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1992 27,152 62,004 101,635 403 -- 191,194
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income -- -- 13,702 -- -- 13,702
Cash dividends ($.60 per share) -- -- (16,310) -- -- (16,310)
98,963 shares of capital stock issued under
stock option plans and employment
contract (Note 11) 99 1,040 -- -- $ (497) 642
Net changes in unrealized gains and losses
on marketable equity securities of
discontinued insurance operations -- -- (150) -- -- (150)
Change in foreign currency translation -- -- -- (328) -- (328)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 27,251 63,044 98,877 75 (497) 188,750
- -----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- 18,766 -- -- 18,766
Cash dividends ($.40 per share) -- -- (11,358) -- -- (11,358)
265,687 shares of capital stock issued under
stock option and incentive plans (Note 11) 266 3,337 -- -- (2,411) 1,192
Net changes in unrealized gains and losses
on marketable equity securities of
discontinued insurance operations -- -- (1,999) -- -- (1,999)
Change in foreign currency translation -- -- -- (784) -- (784)
4,000,000 shares issued for acquisition (Note 2) 4,000 53,750 -- -- -- 57,750
Purchase of 33,497 shares for treasury (33) (434) -- -- -- (467)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 $31,484 $119,697 $104,286 $ (709) $(2,908) $251,850
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-25-
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quaker State Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. BASIS OF CONSOLIDATION: The consolidated financial statements
include the accounts of Quaker State Corporation and all of its subsidiaries
more than 50% owned (the company). Intercompany accounts and transactions are
eliminated.
B. INVENTORIES: Inventories are stated at the lower of cost or market.
Cost is determined on the last-in, first-out (LIFO) basis for all crude oil,
the majority of company refined petroleum products and vehicular lighting.
For other inventories, including purchased finished lubricating oils and
automotive aftermarket products, cost is determined on the first-in, first-out
(FIFO) basis.
C. PROPERTY, PLANT AND EQUIPMENT, AT COST: Costs of buildings and
equipment, other than natural gas and crude oil producing properties, are
charged against income over their estimated useful lives, using the
straight-line method of depreciation. Repairs and maintenance, which are not
considered betterments and do not extend the useful life of property, are
charged to expense as incurred. When property, plant and equipment is retired
or otherwise disposed of, the asset and accumulated depreciation are removed
from the accounts and the resulting profit or loss is reflected in income.
Costs of natural gas and crude oil producing properties are accounted
for under the successful efforts method. Lease acquisition costs are
capitalized and amortized by the unit of production method based on proved
reserves, and equipment and intangible drilling costs are capitalized and
amortized by the unit of production method based on proved developed
reserves. An additional provision for depreciation and depletion is provided if
the net capitalized costs of production properties exceed the discounted
future net revenues for natural gas and crude oil reserves on a company-wide
basis, using year-end prices and an annual discount rate of 10%.
Costs of individual natural gas and crude oil wells determined to be
uneconomical are charged to the allowance for accumulated depreciation and
depletion when abandoned, with no gain or loss being recognized until the
property group is abandoned. Exploratory costs associated with dry holes,
geological and geophysical costs and annual delay rentals are charged to
expense.
Estimated costs of future dismantlement, restoration, reclamation and
abandonment of natural gas and crude oil producing properties are accrued
through a charge to operations on a unit of production basis.
The company capitalizes interest cost as a part of constructing major
facilities. Interest cost capitalized in 1994, 1993 and 1992 was not material.
D. INCOME TAXES AND INVESTMENT CREDIT: The company uses the liability
method of accounting for income taxes. The company accounts for investment
credit on the deferral method which recognizes the investment credit as a
reduction of the provision for income taxes over the life of the related
assets.
E. EARNINGS PER SHARE: The calculation of earnings per share is based
on the weighted average number of shares of capital stock outstanding and
capital stock equivalents which would arise from the exercise of stock options.
F. PRE-OPENING COSTS: Costs associated with the opening of new fast
service automobile lubrication centers are expensed as incurred.
G. CASH EQUIVALENTS: The company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
H. FOREIGN CURRENCY TRANSLATION: For all foreign operations the
functional currency is the local currency. The assets and liabilities for the
company's foreign operations are translated into U.S. dollars using current
exchange rates. Income statement items are translated at average exchange rates
prevailing during the period. Exchange gains or losses are not material.
I. ENVIRONMENTAL EXPENDITURES: Costs in connection with compliance and
monitoring of compliance with existing environmental regulations as they relate
to ongoing operations are expensed or capitalized as appropriate. Costs
associated with remediation efforts resulting from prior activities are
recorded no later than at the completion of an environmental site assessment.
A liability is recorded earlier if it is probable that a liability exists and a
cost can be reasonably estimated. All cleanup estimates are based on current
technology. Evaluations of the probability of potential insurance or other
third party recoveries are made independently of the liability assessment.
Environmental costs are capitalized only if they extend the life, increase the
capacity, or improve the safety or efficiency of the property.
J. INTANGIBLES: Goodwill and other intangible assets arising from
acquisitions are being amortized on a straight line basis over periods not
exceeding 40 years. The company regularly evaluates whether events or
circumstances have occurred that indicate the intangible asset may not be
recoverable. When factors indicate the asset may not be recoverable, the
company uses an estimate of the related undiscounted future cash flows compared
to the carrying value of intangibles to determine if an impairment exists.
Adjustments are made if the sum of expected future net cash flows is less than
carrying value.
K. ADVERTISING COSTS: Advertising costs are expensed as incurred.
2. ACQUISITION:
On September 30,1994, the company acquired all the stock of the
Specialty Oil Companies (Specialty) and Westland Oil Company, Inc. (Westland)
of Shreveport, Louisiana. Specialty was acquired for $19,500,000. The purchase
price of Westland was 4,000,000 shares of capital stock with a market value of
$57,750,000. The company also purchased certain related equipment for
approximately $1,500,000 and assumed approximately $40,000,000 of debt of the
acquired companies of which
-26-
<PAGE> 11
approximately $22,000,000 was satisfied by the company at the time of closing.
The agreements also provide for the purchase by the company of certain
real property used in the acquired companies' operations for $9,000,000
at a later date. The company indemnified the prior owners for certain loan
obligations, tax-related and other liabilities.
Specialty and Westland are engaged in the blending, packaging, sale and
distribution of private label and branded lubricants, antifreeze and greases
and the collection and transportation of used motor oil, brake fluid,
antifreeze and used oil filters.
The acquisition has been accounted for under the purchase method and,
accordingly, the operating results of Specialty and Westland are included in
the accompanying consolidated financial statements from the date of
acquisition.
The acquisition resulted in goodwill of $54,072,000 and other
intangible assets, primarily covenants not to compete and brand names, of
$26,525,000. These items are being amortized monthly on a straight-line basis
over periods of 8 years for $6,525,000 of covenants not to compete and 40 years
for the remaining intangible assets.
The following summary is prepared on a pro forma basis as though
Specialty and Westland had been acquired as of the beginning of the periods
presented, after including the impact of adjustments, such as amortization of
intangible assets, the intercompany sales elimination, and related tax effects.
The discontinued insurance operations have also been excluded.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in thousands except 1994 1993
per share amounts) (UNAUDITED) (unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $1,007,071 $919,145
Income from
continuing operations $ 17,032 $ 12,407
Income per share from
continuing operations $ .54 $ .40
- -------------------------------------------------------------------------------
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combining
the operations.
3. DISCONTINUED INSURANCE OPERATIONS:
On August 31, 1994, the company sold the stock of its wholly owned
subsidiary, Heritage Insurance Group, Inc., to General Electric Capital
Corporation for approximately $82,000,000 paid at the time of closing after
satisfaction of certain intercompany obligations. Accordingly, the operating
results of the insurance business, including the gain on the sale, have been
segregated and reported as a discontinued operation in the accompanying
Consolidated Statement of Operations. Prior year financial statements have been
reclassified to conform to the current year presentation.
A gain on the sale of $377,000, net of taxes of $2,695,000, was
recorded in the third quarter. Taxes related to the sale included $1,969,000 to
reflect the probable tax liability which will result from certain tax elections
to be made by the purchaser. If the purchaser does not make such elections, the
company will record $1,969,000 as additional gain on the sale of discontinued
insurance operations at that time.
Condensed income statements for the eight months ended August 31, 1994
and the years ended December 31, 1993 and 1992 are presented below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 87,566 $131,265 $114,440
Cost and expenses (82,392) (127,741) (109,033)
- -------------------------------------------------------------------------------
Income before income
taxes 5,174 3,524 5,407
- -------------------------------------------------------------------------------
Provision for (benefit
from) income taxes 790 (286) 569
- -------------------------------------------------------------------------------
Net income $ 4,384 $ 3,810 $ 4,838
===============================================================================
</TABLE>
The effective tax rates for discontinued insurance operations differ
from the federal statutory rate due primarily to tax exempt interest and
dividends received deductions.
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" which addresses the accounting and reporting for investments
in equity securities that have readily determinable values and for investments
in debt securities. This Standard did not have a material impact on the
company's financial position and results of operations.
4. DISCONTINUED COAL OPERATIONS:
In December 1992, the company discontinued its coal operations. The
operating results of the coal business have been segregated and reported as a
discontinued operation in the accompanying Consolidated Statement of
Operations. The company recorded an estimated loss on disposal of $37,700,000,
net of income tax benefits of $22,700,000.
The sale of certain coal assets resulted in a payment to be received
from the purchaser from 1994 through 2013 which was recorded as an $18,800,000
receivable, at present value at the time of the sale. Amounts in excess of the
minimum payment may be received subject to the delivery requirements of a
long-term coal sales agreement of the purchaser.
The cessation of the coal operations continued throughout 1994 and
1993. No adjustments to the 1992 estimated loss on disposition were required as
a result of 1994 and 1993 activity.
The Condensed Statement of Operations relating to the discontinued coal
operations for the year December 31, 1992 is presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------
(in thousands) 1992
- --------------------------------------------------------
<S> <C>
Revenues $ 95,140
Costs and expenses (102,181)
- --------------------------------------------------------
Loss before income taxes (7,041)
Income tax benefit 4,100
- --------------------------------------------------------
Net loss $ (2,941)
========================================================
</TABLE>
-27-
<PAGE> 12
At December 31, 1994 and 1993, assets held for sale of approximately
$2,200,000 and $4,400,000, respectively, related to the discontinued coal
operations are classified as other current assets in the Consolidated Balance
Sheet. Other liabilities at December 31, 1994 and 1993 related to the
discontinued coal operations include workers' compensation and black lung
liabilities of $21,300,000 and $24,300,000 and health care and death benefit
liabilities of $23,400,000 and $25,700,000, respectively.
5. UNUSUAL ITEMS:
In the fourth quarter of 1992, the company's fast lube subsidiary,
Q Lube, Inc., recorded a pretax charge of $3,200,000 to reserve for the future
replacement of signage and other assets impaired by the planned conversion of
existing Minit-Lube stores to the Q Lube format.
6. INVENTORIES AND OTHER ASSETS:
Inventories consist of:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(in thousands) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Crude oil $ 1,490 $ 2,591
Finished and in-process
petroleum products 49,252 23,225
Other 22,862 14,287
- ---------------------------------------------------------------------------
Total $73,604 $40,103
===========================================================================
</TABLE>
The reserve to reduce the carrying value of inventories from current
costs to the LIFO basis amounted to $20,267,000 in 1994 and $19,090,000 in
1993.
At December 31, 1994 and 1993, $38,430,000 and $19,883,000,
respectively, of inventories were valued on the LIFO basis.
During 1993 and 1992 certain inventory quantities were reduced
resulting in liquidations of LIFO inventory. The effect of these liquidations
was a decrease in net income of $900,000, or $.03 per share, in 1993 and an
increase in net income of $400,000, or $.01 per share, in 1992.
Other assets consist of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in thousands) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 58,656 $ 4,756
Other intangible assets 32,861 6,184
Deferred tax asset 28,534 34,524
Notes and royalties receivable 28,726 27,998
Prepaid pension cost 9,483 8,423
Other 1,683 1,018
- ------------------------------------------------------------------------------
Total $159,943 $82,903
==============================================================================
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT:
Major classes of property, including land and construction work in
progress of $47,475,000 in 1994 and $49,652,000 in 1993 are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in thousands) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
MOTOR OIL:
Refining $ 97,710 $ 97,453
Marketing 126,360 98,425
Q LUBE 122,611 118,316
NATURAL GAS E&P 209,983 210,942
TRUCK-LITE 31,341 33,595
DOCKS 12,948 12,948
- ------------------------------------------------------------------------------
Subtotal 600,953 571,679
Less: accumulated depreciation
and depletion 353,018 345,851
- ------------------------------------------------------------------------------
Total $247,935 $225,828
==============================================================================
</TABLE>
8. ACCRUED LIABILITIES, OTHER LONG-TERM LIABILITIES
AND ADVERTISING EXPENSES:
Accrued liabilities include workers' compensation and health
self-insurance, advertising accruals and accrued royalties of $5,704,000,
$6,672,000 and $1,330,000, respectively, at December 31, 1994 and $6,888,000,
$9,255,000 and $7,013,000, respectively, at December 31, 1993.
Other long-term liabilities include postretirement benefits, other
employee benefits and environmental reserves of $91,206,000, $48,660,000 and
$21,800,000, respectively, at December 31, 1994 and $90,380,000, $53,500,000 and
$18,200,000, respectively, at December 31, 1993.
Advertising expenses were $77,791,000, $71,297,000 and $67,834,000 in
1994, 1993, and 1992, respectively.
9. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS:
Long-term debt consists of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in thousands) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Senior Notes due 2002 (a) $50,000 $50,000
Revolving credit loan due 1997 (b) - -
Revolving credit loan due 1997 (c) 9,000 -
Term loan due 1997 (c) 10,184 -
Others, 3% to 10.50% due
in various installments to 2005 4,065 1,450
- ------------------------------------------------------------------------------
Subtotal 73,249 51,450
Less: payments due within one year 3,714 262
- ------------------------------------------------------------------------------
Total $69,535 $51,188
==============================================================================
<FN>
(a) On September 30, 1992, the company issued $50,000,000 of Senior
Notes, due September 30, 2002. The notes have a fixed interest rate of 8.73%,
are subject to an early prepayment premium and do not require payment on
principal until maturity.
(b) This agreement provides for a $45,000,000 revolving line of credit
until June 30, 1997, with annual extensions available at the option of the
lenders, and has a variable interest rate based, at the option of the com-
pany, upon prime, LIBOR or CD rates for one, two, three or six month periods.
The annual commitment fee is 1/4 percent of the average daily unborrowed funds.
</TABLE>
-28-
<PAGE> 13
(c) This agreement provides to the company's subsidiary, Westland Oil
Company, Inc., a $15,000,000 revolving line of credit and a term loan for
$10,720,000 until September 1,1997. The revolving line of credit and term
loan have a variable interest rate based upon LIBOR rates plus one percent.
The unpaid balance of the revolving line of credit is to be paid at
termination date and the term loan is to be repaid in monthly install-
ments until termination date. The revolving line of credit has an annual
commitment fee of 1/4 percent of the average daily unborrowed funds. The
loans are collateralized by Westland Oil Company, Inc.'s accounts receiv-
able, inventory and cash funds. In addition, the loans are guaranteed by
the current Vice Chairman and Chief Executive Officer, Motor Oil Division
and a Vice President of the Motor Oil Division, both previous owners of
Westland Oil Company, Inc.
At December 31,1994, the company had unused bank lines of credit
aggregating $68,200,000 providing for borrowings at various rates.
The debt agreements contain various restrictions pertaining to tangible
net worth, financial ratios, and dividends. Under the most restrictive of these
provisions, approximately $19,700,000 of consolidated retained earnings at
December 31,1994, was free of any restrictions as to payment of cash dividends.
The aggregate long-term debt maturing in the next five years is
approximately as follows: 1995-$3,714,000; 1996-$2,720,000; 1997-$15,444,000;
1998-$554,000; 1999-$493,000.
The fair value of debt at December 31,1994 was $71,994,000 and for
other financial instruments the fair value does not materially differ from the
value reflected in the financial statements. The fair value of the instruments
was based upon quoted market prices of the same or similar instruments or on a
discounted basis using the rates available to the company for instruments of
the same remaining maturity.
10. COMMITMENTS, RELATED PARTIES AND CONTINGENCIES:
The company has operating leases for continuing operations in effect
for equipment and facilities with initial terms ranging from 2 to 20 years,
with renewal options generally being available. Future minimum annual rentals,
net of estimated sublease rentals under operating leases of $13,900,000, during
each of the next five years are: 1995-$14,300,000; 1996-$11,500,000;
1997-$10,600,000; 1998-$8,800,000; 1999-$7,200,000 and thereafter $56,500,000.
Rental expense for continuing operations amounted to approximately
$15,700,000 for 1994, $15,400,000 for 1993 and $15,800,000 for 1992, net of
sublease rentals of approximately $3,800,000 for 1994, $3,900,000 for 1993
and $3,600,000 for 1992.
As part of its acquisition of the Specialty Oil Companies (refer to
Note 2) the company assumed the terms of 10 operating leases, which expire in
2004, for facilities located throughout the southwest. These facilities are
leased from a real estate firm that is owned, in part, by the current Vice
Chairman and Chief Executive Officer of the Motor Oil Division. The amount paid
for these leases since October 1994 was $376,000.
On September 13,1994, the company's subsidiary, Q Lube Inc. (Q Lube),
entered into license and construction agreements with Interline Resources
Corporation (Interline) that provide for the exclusive use of Interline's used
oil rerefining technology in North America and for the construction of
facilities at which the rerefining process will be conducted by Q Lube. Under
the agreement Q Lube could pay up to $9,400,000 over six years to maintain the
exclusitivity rights; however, Q Lube is not obligated to pay in full for these
rights. Q Lube paid $500,000 in 1994 for these rights.
Westland Oil Company, Inc. regularly purchases lubricant base stocks
from Calumet Lubricants Co., the President of which is a Director of the
company. The amount of such purchases in the fourth quarter of 1994 was
$393,000 at prices comparable to other purchases. In addition, in October 1994,
the company and Legacy Resources Company (Legacy), a limited partnership in
which the same Director owns partnership interests, entered into a farmout
agreement for the development of certain oil and gas properties owned by the
company. The amount paid to the company by Legacy was $364,000.
In December 1993, the United States commenced a lawsuit against the
company in the U.S. District Court for the Northern District of West Virginia.
The complaint alleges the company violated the federal Resource Conservation
and Recovery Act and the federal Clean Air Act at the Congo refinery on
various dates starting in 1980 and seeks civil penalties not to exceed $25,000
per day for each violation. The company intends to vigorously defend this
lawsuit. In 1994, the company recorded a charge of $1,000,000 as its estimate
of probable liability associated with this lawsuit.
In addition, the company has received notices from the EPA and others
that it is a "potentially responsible party" relative to certain waste
disposal sites identified by the EPA and may be required to share in the cost
of cleanup. The company has accrued for all matters which are probable and
can be reasonably estimated.
In April 1994, purported class actions were commenced in the U.S.
District Court for the Western District of Pennsylvania against the company and
two other oil companies. The complaints allege violations of Section 1 of the
Sherman Act. The company believes there is no basis for the allegations in the
complaint and intends to defend the matter vigorously.
Contingent liabilities of an indeterminate amount exist in connection
with suits and claims arising in the ordinary course of business.
In the opinion of management, all matters discussed above are
adequately accrued for or covered by insurance or, if not so provided for, are
without merit or the disposition is not anticipated to have a material effect
on the company's financial position; however, one or more of these matters
could have a material effect on future quarterly or annual results of
operations or cash flow when resolved.
11. STOCK OPTIONS AND MANAGEMENT COMPENSATION:
The company has various stock option, incentive and award plans.
Under these plans, options have been granted to employees to purchase
capital stock at a price no less than 100% of the market value on the date of
grant. Options granted may not be exercised for at least six months from the
date of grant and substantially all options must be exercised within ten years
of the date granted.
-29-
<PAGE> 14
Options issued prior to December 31, 1991, also provide for stock
appreciation rights (SARs), which are an alternate form of settlement on an
option giving an optionee the right, subject to certain conditions, to
surrender an option or portion of an option and receive cash and/or shares of
capital stock of the company, having a value equal to the appreciation on such
option or portion thereof. The change in appreciation of the optioned shares
most likely to be surrendered for SARs results in a charge or credit to income
as applicable.
In May 1994, the company's stockholders approved the 1994 Stock Incentive
Plan. Under this plan, 1,250,000 shares may be issued and the plan includes
stock options, SARs, cash payment rights, restricted shares, performance shares
and other share awards. In 1994, 225,800 shares were issued under this plan to
certain key employees as follows: (1) 165,800 performance restricted shares and
(2) 60,000 restricted shares. Of the 165,800 performance restricted shares,
65,800 shares are subject to forfeiture if certain three year performance goals
are not met and are expensed as compensation expense over the performance
period. The remaining 100,000 performance restricted shares are subject to
forfeiture if the market price of the company's stock does not achieve
specified levels prior to August 1999. Compensation expense will be recorded
related to these shares upon achieving the specified stock market price levels.
The 60,000 restricted shares are subject to certain employment restrictions
that expire at various dates through July 1997 and are expensed as compensation
expense over the restriction period. As a result of the grant of these shares,
the company recognized $485,000 as compensation expense for 1994 and recorded
unearned compensation of $2,624,000 at December 31, 1994 on the Consolidated
Balance Sheet. Unearned compensation and related compensation expense are
adjusted for the performance restricted shares based on the appreciation or
depreciation in the company's stock market price.
In May 1994, the company's stockholders also approved the 1994 Non-Employee
Directors' Stock Option Plan. The number of shares which may be issued under
this plan is 100,000. Each non-employee who is a member of the Board of
Directors of the company is annually granted a non-statutory stock option to
purchase 1,000 shares of the company's capital stock. The exercise price for
each stock option is the fair market value of the stock on the date the stock
option is granted. In 1994, 8,000 shares were granted under this plan.
In conjunction with the acquisition of the Specialty and Westland Companies
(refer to Note 2) employment contracts were issued to certain key employees of
those companies. These contracts were for five years and included provisions
for a base salary, grants of an aggregate of 390,000 stock options and
non-competition clauses that extend three years beyond the end of the
employment contracts. Expenses related to these contracts amounted to $237,000
since October 1994.
During 1993, the company entered into an employment contract with Herbert
M. Baum who was named Chairman and Chief Executive Officer. In 1994 a new
contract was executed that provides for annual compensation, a signing bonus,
stock award grants and stock option grants. In connection with the stock award
grant, the company issued 90,000 shares of capital stock, at no cost, of which
55,000 shares are subject to restrictions which expire at various dates through
August 1998. Compensation expense is charged to earnings over the initial
employment contract term.The unearned compensation related to these restricted
grants was $284,000 and $497,000 at December 31, 1994 and 1993, respectively,
on the Consolidated Balance Sheet. In 1994 and 1993, the company recognized
$213,000 and $532,000, respectively, as compensation expense for these stock
grants and approximately $800,000 and $1,000,000, respectively, for all other
provisions of this employment contract. The stock option grant provides for the
purchase of 270,000 shares of capital stock at various prices, no less than
market value on the date of grant ($11.625 to $17.935), at various dates. These
options expire at various dates through June 2005.
The options outstanding at the end of 1994 were exercisable at $9.4375 to
$26.4375 per share except for 648,500 shares which will become exercisable
between March 29, 1995 and October 27, 1999 at a range of $11.625 to $17.9375.
At December 31, 1994 and 1993, 905,449 and 122,013 shares of capital stock,
respectively, are available for grant.
At December 31, 1994, 1993 and 1992, 2,512,520, 1,465,917 and 1,285,120
shares of capital stock, respectively, were reserved for options outstanding
and for options or other awards which may be granted in the future.
Information with respect to shares under option for the aforementioned
plans is summarized below:
<TABLE>
Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding stock options at the beginning of year 1,343,904 1,073,414 911,094
Options granted during the year:
1994, $13.375 to $16.50 per share
1993, $11.625 to $17.9375 per share
1992, $12.4375 per share 434,000 378,200 245,250
Options exercised at $13.125 to $15.9375 (40,704) (8,963) (7,183)
Options surrendered upon exercise of SARs (49,296) (24,287) (30,567)
Options lapsed and cancelled (80,833) (74,460) (45,180)
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding stock options at end of year 1,607,071 1,343,904 1,073,414
===================================================================================================================================
</TABLE>
-30-
<PAGE> 15
12. INCOME TAXES:
Effective January 1, 1992, the company adopted Statement of Financial
Accounting Standard No. 109 "Accounting for Income Taxes." The cumulative
effect of the accounting change was not material.
Income before income taxes from continuing operations consists of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $18,301 $11,574 $2,695
Foreign 2,754 1,054 2,041
- -------------------------------------------------------------------------------
Total $21,055 $12,628 $4,736
===============================================================================
</TABLE>
The components of the provision for income taxes from continuing operations
are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 6,900 $ 6,665 $ 1,064
State 1,000 2,350 1,400
Foreign 1,700 1,350 2,300
Deferred:
Federal (1,950) (4,829) (2,083)
State - (1,900) (700)
Foreign (200) - (600)
Tax credits amortized (400) (900) (1,200)
- -------------------------------------------------------------------------------
Total $ 7,050 $ 2,736 $ 181
===============================================================================
</TABLE>
The 1993 tax provision benefited from an adjustment of $1,200,000 to
deferred taxes for the enacted U.S. tax rate changes and an adjustment to the
beginning of the year valuation allowance of $1,400,000 to recognize the
realizability of deferred tax assets in future years. A reconciliation from the
federal statutory tax rate to the effective tax rate for continuing operations
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(% of pretax income) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0 35.0 34.0
Add (deduct) the tax effect of:
Investment credit (1.8) (5.0) (16.6)
Nonconventional fuels credits (4.3) (9.8) (26.7)
Net adjustments to
valuation allowance - (10.8) -
Enacted rate change - (9.5) -
Other tax credits (0.9) (1.6) (1.1)
State and foreign income taxes 4.4 10.0 6.9
Other, net 1.1 13.4 7.3
- -------------------------------------------------------------------------------
Effective tax rate 33.5 21.7 3.8
===============================================================================
</TABLE>
-31-
<PAGE> 16
The deferred tax assets and liabilities as of December 31, 1994, and
1993 are as follows:
<TABLE>
Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1994 1994 1993 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation, depletion and amortization -- $32,553 -- $26,572
Employee benefits $56,287 -- $ 56,387 --
Coal loss provision 1,436 -- 6,604 --
Insurance policy reserves -- -- 31,795 --
Deferred policy acquisition costs -- -- -- 20,402
Due from reinsurers -- -- -- 11,267
Environmental reserves 8,308 -- 7,278 --
Other 14,980 7,595 21,877 7,591
- -----------------------------------------------------------------------------------------------------------------------------------
Subtotal 81,011 40,148 123,941 65,832
- -----------------------------------------------------------------------------------------------------------------------------------
Valuation allowance 539 -- 1,101 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total $80,472 $40,148 $122,840 $65,832
===================================================================================================================================
</TABLE>
Deferred investment tax credit amounted to $600,000 and $900,000 at
December 31, 1994 and 1993, respectively.
13. EMPLOYEE RETIREMENT AND BENEFIT PLANS:
The company has noncontributory pension plans covering substantially all
of its employees. Plans covering salaried employees provide pension benefits
that are generally based on the employees' compensation and length of
service. Plans covering hourly employees provide benefits of stated amounts
for each year of service. The company's funding policy is based on an
actuarially determined cost method allowable under statutory regulations.
Net pension cost for 1994, 1993, 1992 is summarized below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits earned during the period $ 3,675 $ 3,130 $ 3,996
Interest cost 9,015 8,840 8,584
Actual return on assets (1,025) (13,371) (11,850)
Net amortization and deferral (11,188) 1,325 (280)
- -----------------------------------------------------------------------------------------------------------------------------------
Total pension cost (income) 477 (76) 450
Less: pension cost (income) of discontinued operations 186 204 (753)
- -----------------------------------------------------------------------------------------------------------------------------------
Pension cost (income) of continuing operations $ 291 $ (280) $ 1,203
===================================================================================================================================
</TABLE>
The funded status of the plans is reconciled to prepaid pension cost at
December 31, 1994 and 1993 as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value, primarily investments in IPG insurance contracts
and pooled separate accounts $127,623 $135,807
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation, including vested benefits of:
1994-$104,320; 1993-$112,052 111,640 120,001
Effect of future salary increases 11,692 12,681
- -----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 123,332 132,682
- -----------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit
obligations 4,291 3,125
Unrecognized net loss 16,458 18,035
Unrecognized transition asset (11,266) (12,737)
- -----------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost $ 9,483 $ 8,423
===================================================================================================================================
</TABLE>
-32-
<PAGE> 17
Significant assumptions used in determining net pension costs and
related pension obigations are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8% 7% 71/2%
Rate of increase in compensation levels 41/2% 41/2% 41/2%
Expected long-term rate of return on assets 9% 9% 9%
==============================================================================
</TABLE>
Former hourly employees of the discontinued coal operations are covered
by a pension plan of the United Mine Workers of America (UMWA). Former salaried
coal employees are covered by the company's pension plan. Payments made to the
plan administered by the UMWA were based on hours worked and were $526,000 and
$4,153,000 for 1993 and 1992. As a result of the company's decision to
discontinue coal operations in 1992 (refer to Note 4), the company will withdraw
from the UMWA plan resulting in an estimated withdrawal liability of
approximately $11,000,000. In addition, in 1992 the company recognized a
$4,519,000 pension curtailment gain related to the salaried coal employees. The
withdrawal liability and the curtailment gain are reflected in the 1992
Consolidated Statement of Operations as a component of the loss on disposition
related to the discontinued coal operations.
In 1994, the Docks operation terminated a pension plan that resulted in a
pre-tax gain of $1,100,000.
The company has certain defined contribution plans including a Thrift and
Stock Purchase Plan and an Employee Stock Ownership Plan. The 1994 cost of
these plans was $2,450,000 and the 1993 and 1992 cost of these plans was
$1,100,000 per year.
In addition to providing pension benefits, Quaker State and certain of its
subsidiaries provide health care and life insurance benefits for active and
retired employees. These plans are unfunded, and the company retains the right
to modify or eliminate these benefits.
Effective January 1, 1992, the company adopted Statement of Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions."
As of January 1, 1992, the company recognized the full amount of its
estimated accumulated postretirement benefit obligation on that date, which
represented the present value of the estimated future benefits payable to
current retirees and a pro rata portion of the estimated benefits payable to
eligible active employees after retirement. The accounting change resulted in a
one-time charge to 1992 earnings of approximately $62,600,000, net of taxes of
$40,100,000, or $2.30 per share. The components of periodic expense for
postretirement benefits in 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs of benefits earned $ 805 $ 947 $ 1,865
Interest cost on liability 6,812 7,300 8,485
Amortization of gain (115) (240) -
- --------------------------------------------------------------------------------
Net periodic postretirement benefit cost 7,502 8,007 10,350
- --------------------------------------------------------------------------------
Less: discontinued coal operations cost - - 6,344
- --------------------------------------------------------------------------------
Continuing operations cost $7,502 $8,007 $ 4,006
- --------------------------------------------------------------------------------
</TABLE>
The accumulated postretirement benefit obligation (APBO) at December 31,
1994 and 1993 is summarized below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in thousands) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Retirees $74,154 $74,803
Fully eligible active participants 6,906 6,667
Other active participants 9,910 13,035
- -------------------------------------------------------------------------------
APBO 90,970 94,505
Unrecognized net gain 5,236 875
Less: current portion (5,000) (5,000)
- -------------------------------------------------------------------------------
Long-term portion $91,206 $90,380
===============================================================================
</TABLE>
-33-
<PAGE> 18
As a result of the company's decision during 1992 to discontinue its
coal operations (refer to Note 4), it recognized in 1992 a $16,206,000
curtailment gain related to its postretirement benefit plans other than pension
plans. This curtailment gain is reflected in the 1992 Consolidated Statement of
Operations as a component of the loss on disposition related to the
discontinued coal operations.
For measurement purposes, a 10% annual rate of increase in the per capita
claims cost was assumed for 1995, declining gradually to 5% by the year 2002
and thereafter.
Significant assumptions used in determining postretirement benefit
expenses and accumulated postretirement benefit obligations are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31, 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8% 7-1/2% 8-1/2%
Rate of increase in compensation levels 4-1/2% 5% 5-1/2%
===============================================================================
</TABLE>
The health care cost trend rate assumption has a significant effect on
the APBO and net periodic benefit costs. A 1% increase in the trend rate for
health care costs would have increased the APBO at December 31, 1994 by 11% and
1994 service and interest costs by 12%.
In 1993, the company adopted Statement of Financial Accounting Standard
No. 112, "Employers' Accounting for Postemployment Benefits." This Standard
requires the cost of benefits provided to former or inactive employees, after
employment and before retirement, be recognized on the accrual basis of
accounting. The cumulative effect of this accounting change was not material.
14. FINANCIAL RESULTS BY QUARTER:
(unaudited)
<TABLE>
<CAPTION>
Quarters Ended March 31 June 30 September 30 December 31
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share data) 1994 1993 1994 1993 1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues (a) $175,478 $150,368 $168,192 $163,722 $184,427 $159,432 $227,196 $154,814
Gross profit (a)(b)(c)(d) 63,464 46,907 56,531 51,786 60,102 51,293 66,138 48,897
Income from continuing
operations (a)(e) 3,819 1,831 3,548 2,294 3,922 4,943 2,716 824
Income (loss) from
discontinued operations 1,764 1,572 1,521 2,087 1,476 (967) - 1,118
Net income $ 5,583 $ 3,403 $ 5,069 $ 4,381 $ 5,398 $ 3,976 $ 2,716 $ 1,942
=================================================================================================================================
PER SHARE:
Income from continuing
operations $ .14 $ .07 $ .13 $ .08 $ .14 $ .18 $ .09 $ .03
Income (loss) from
discontinued operations .06 .06 .06 .08 .05 (.04) - .04
Net income .20 .13 .19 .16 .19 .14 .09 .07
Dividends .10 .20 .10 .20 .10 .10 .10 .10
=================================================================================================================================
<FN>
(a) In the second quarter of 1994, the company decided to exit the insurance business and report it as a discontinued
operation. Amounts exclude insurance activities which are reported as income from discontinued operations (refer to Note 3).
(b) Gross profit equals total sales and operating revenues less cost of sales and operating costs (excluding depreciation,
depletion and amortization) and unusual items.
(c) Gross profit for the third and fourth quarter of 1993 was impacted negatively by the effect of LIFO liquidations of
approximately $600,000 and $800,000.
(d) Truck-Lite operating results included a $1,500,000 charge recorded in the fourth quarter of 1994 to reserve for future
losses associated with a contract to manufacture automotive safety lights.
(e) Income from continuing operations in the third quarter of 1994 and 1993 was positively impacted by a change of
$1,400,000 due to a reduction in the estimated state tax rate and additional tax credits and a one-time benefit of $1,200,000
related to the change in U.S. corporate tax rate, respectively. Income from continuing operations in the fourth quarter of 1993
was impacted positively by a change of $1,300,000 in estimated taxes, resulting from a lower tax rate due to valuation allowance
adjustments and lower earnings in 1993.
</TABLE>
-34-
<PAGE> 19
15. SUPPLEMENTAL CASH FLOW INFORMATION:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PAID DURING THE YEAR FOR:
Interest, net of amounts capitalized $ 5,101 $ 5,717 $ 6,126
Income taxes 9,174 9,714 14,581
================================================================================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Supplemental receivable (Note 4) -- -- $18,800
Preferred stock -- -- 10,000
Capital stock issued for acquisition
(Note 2) $ 57,750 -- --
Capital stock issued under incentive
plan (Note 11) 3,109 -- --
================================================================================
DETAILS OF ACQUISITION (NOTE 2):
Fair value of assets acquired $171,219 -- --
Liabilities assumed 82,748 -- --
Stock issued 57,750 -- --
- --------------------------------------------------------------------------------
Cash paid 30,721 -- --
Less: cash acquired 2,355 -- --
- --------------------------------------------------------------------------------
Net cash paid for acquisition $ 28,366 -- --
================================================================================
</TABLE>
In 1992, as a result of the bankruptcy of the purchaser of the McKean and
Emlenton plants, the company eliminated preferred stock and deferred income,
associated with the sale, from the Consolidated Balance Sheet.
16. SEGMENT INFORMATION:
Information on the company's operations in different segments is contained
on page 20 of this report.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Stockholders
Quaker State Corporation:
We have audited the accompanying consolidated balance sheets of Quaker
State Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Quaker
State Corporation and Subsidiaries as of December 31, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Notes 12 and 13 of Notes to Consolidated Financial
Statements, the company changed its method of accounting for income taxes and
postretirement benefits other than pensions in 1992.
Coopers & Lybrand L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
January 25, 1995
-35-
<PAGE> 20
MANAGEMENT REPORT
The consolidated financial statements of Quaker State Corporation (the
company) and other financial information appearing in this report have been
prepared at the direction of the management of the company, which is
responsible for their integrity and objectivity. The statements, which were
prepared in conformity with generally accepted accounting principles, reflect
estimates, where appropriate, based upon the judgment of management.
The company's system of internal accounting control is designed to provide
reasonable assurance that the financial statements and other financial
information are fairly presented and that the assets of the company are
safeguarded. This system of internal control includes both administrative and
accounting controls with each supplementing the other and both being
complemented by an effective control environment.
As part of the internal control system, the company has a Statement of
Ethical Values and Code of Business Conduct. All directors, officers and key
employees are required to submit annually a signed statement regarding
compliance with these policies.
The Internal Audit Department of the company reviews, evaluates, monitors,
and makes recommendations on both administrative and accounting controls and
thus acts as an integral, but independent, part of the control system. A staff
of professional auditors performs audits at reasonable intervals throughout the
company and its subsidiaries.
The Audit Committee of the Board of Directors, consisting of three outside
directors, is directly responsible for assuring that management fulfills its
financial reporting responsibility and for monitoring the corporate audit
function. Both the internal auditors and the independent auditors periodically
meet alone with the Audit Committee and have access to the Audit Committee at
any time.
<TABLE>
<CAPTION>
QUAKER STATE (KSF) MARKET PRICES BY QUARTER
- ----------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter High 14-3/8 13 15-1/8
Low 12-5/8 11-1/8 12-7/8
Close 13 12-1/8 12-7/8
- ----------------------------------------------------------------------------------------------------------------------
Second Quarter High 16-1/8 12-7/8 14-3/4
Low 12-3/4 11-1/4 12-1/4
Close 14 11-3/4 13-5/8
- ----------------------------------------------------------------------------------------------------------------------
Third Quarter High 15-3/8 14-1/4 15
Low 13-1/2 11-3/4 10-1/2
Close 14-1/2 13-7/8 11-1/2
- ----------------------------------------------------------------------------------------------------------------------
Fourth Quarter High 14-1/2 15 12-1/2
Low 13 12-1/8 10-5/8
Close 14 13-3/8 11-1/2
======================================================================================================================
</TABLE>
-36-
<PAGE> 1
Exhibit 22
QUAKER STATE CORPORATION
Subsidiaries
All of the following subsidiaries are 100% owned by Quaker State
Corporation unless otherwise indicated:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
------------------ ---------------
<S> <C>
Fort William Coal Dock Company, Ltd. Ontario
Green Shield, Inc. Delaware
Lubricants, Inc. Arkansas
Myatt-Brooks, Inc. (1) Arkansas
QS/Brooks Distribution Company (2) Tennessee
QS Holding Company Delaware
Quaker Oil Corporation Texas
Quaker State, Inc. Canada
Quaker State Investment Corporation Delaware
Freedom Freightways, Inc. (3) Missouri
McQuik's Oilube, Inc. (3) Delaware
QSE&P, Inc. (3) Delaware
Q Lube, Inc. (3) Delaware
Quaker State Minit-Lube Canada, Inc. (4) Ontario
Minit-Lube Ontario, Inc. (5) Ontario
Lubeco, Inc. (4) Delaware
The Valley Camp Coal Company (3) Delaware
Donaldson Mine Company (6) West Virginia
Kelley's Creek and Northwestern Railroad Company (6) West Virginia
Valley Camp Investment Company (6) Delaware
Elm Grove Coal Company (7) West Virginia
Valley Camp Coal Sales Company (7) Ohio
The Helen Mining Company (7) Pennsylvania
Kanawha and Hocking Coal and Coke Company (7) West Virginia
Shrewsbury Coal Company (7) West Virginia
Valley Camp of Utah, Inc. (7) Utah
Truck-Lite Co., Inc. (3) New York
T-L Automotive Industries, Inc. (8) Delaware
Truck-Lite International, Inc. (8) Delaware
Valley Camp, Inc. (3) Canada
Quaker State Japan Co., Ltd. Japan
Quaker State Oil Refining Corporation, B.V. Holland
Specialty Oil Company, Inc. Delaware
Myatt-Brooks, Inc. (9) Arkansas
Westland Oil Company, Inc. Louisiana
<FN>
- -------------------------------------------------------
(1) 50% owned by Lubricants, Inc.
(2) 50% owned by Myatt-Brooks, Inc.
(3) 100% owned by Quaker State Investment Corporation
(4) 100% owned by Q Lube, Inc.
(5) 50% owned by Quaker State Minit-Lube Canada, Inc.
(6) 100% owned by The Valley Camp Coal Company
(7) 100% owned by Valley Camp Investment Company
(8) 100% owned by Truck-Lite Co., Inc.
(9) 50% owned by Specialty Oil Company, Inc.
</TABLE>
3/95
<PAGE> 1
Exhibit 24
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference of our reports, dated
January 25, 1995, on our audits of the consolidated financial statements and
financial statement schedule of Quaker State Corporation and Subsidiaries as of
December 31, 1994 and 1993, and for the three years in the period ended
December 31, 1994, which reports are incorporated by reference or included in
this annual report on Form 10-K, in the following documents:
1. Registration Statement No. 33-20416 on Form S-8 for the Quaker State
Corporation Thrift and Stock Purchase Plan, filed under the Securities
Act of 1933, as amended, and the Prospectus used in connection with such
Registration Statement;
2. Registration Statements No. 2-56158, No. 2-85634 and No. 33-7163 on Form
S-8 for the 1976 Stock Option Plan and the 1986 Stock Option Plan of
Quaker State Corporation, filed under the Securities Act of 1933, as
amended, and the Prospectus used in connection with such Registration
Statements;
3. Registration Statement No. 33-65862 on Form S-8 for the Baum Employment
Agreement, filed under the Securities Act of 1933, as amended;
4. Registration Statement No. 33-53605 on Form S-8 for the 1994
Non-Employee Directors' Stock Option Plan, filed under the Securities
Act of 1933, as amended, and the Prospectus used in connection with such
Registration Statement; and
5. Registration Statement No. 33-53617 on Form S-8 for the 1994 Stock
Incentive Plan, filed under the Securities Act of 1933, as amended, and
the Prospectus used in connection with such Registration Statement.
We also Consent to the references to our firm under the caption
"Experts" in the Prospectuses used in connection with Registration Statement
Nos. 33-20416, 2-56158, 2-85634, 33-7163, 33-65862, 33-53605, and 33-53617
solely as it relates to the current financial statements being incorporated by
reference.
/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Pittsburgh, Pennsylvania
March 28, 1995
<PAGE> 1
Exhibit 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ Raymond A. Ross, Jr.
------------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
March 5, 1995 /s/ C. Frederick Fetterolf
--------------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
March 6, 1995 /s/ Laurel Cutler
-----------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ Thomas A. Gardner
-----------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ Delbert J. McQuaide
-----------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ Leonard M. Carroll
-----------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ L. David Myatt
-----------------------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ F. William Grube
-----------------------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
February 28, 1995 /s/ Forrest R. Haselton
-----------------------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 of
Quaker State Corporation, and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
March 6, 1995 /s/ H. Bryce Jordan
-----------------------
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum and Paul E. Konney, and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 of Quaker State
Corporation, and any and all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
March 17, 1995 /s/ Conrad A. Conrad
------------------------
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 29,805
<SECURITIES> 0
<RECEIVABLES> 96,586
<ALLOWANCES> 2,185
<INVENTORY> 73,604
<CURRENT-ASSETS> 222,140
<PP&E> 600,953
<DEPRECIATION> 353,018
<TOTAL-ASSETS> 630,018
<CURRENT-LIABILITIES> 120,701
<BONDS> 0
<COMMON> 31,517
0
0
<OTHER-SE> 220,333
<TOTAL-LIABILITY-AND-EQUITY> 630,018
<SALES> 755,293
<TOTAL-REVENUES> 764,683
<CGS> 353,176
<TOTAL-COSTS> 509,058
<OTHER-EXPENSES> 228,267
<LOSS-PROVISION> 1,188
<INTEREST-EXPENSE> 5,115
<INCOME-PRETAX> 21,055
<INCOME-TAX> 7,050
<INCOME-CONTINUING> 14,005
<DISCONTINUED> 4,761
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,766
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
