QUAKER STATE CORP, S-3, 1995-10-06

QUAKER STATE CORP
S-3, 1995-10-06
PETROLEUM REFINING

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1995
REGISTRATION NO. 33-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

QUAKER STATE CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 25-0742820
(State of incorporation) (IRS Employer
Identification Number)
</TABLE>

255 ELM STREET
OIL CITY, PENNSYLVANIA 16301
(814) 676-7676

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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

PAUL E. KONNEY
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
QUAKER STATE CORPORATION
255 ELM STREET
OIL CITY, PENNSYLVANIA 16301
(814) 676-7676

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

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

COPIES TO:

<TABLE>
<S> <C>
ANN BAILEN FISHER MORTON A. PIERCE
SULLIVAN & CROMWELL DEWEY BALLANTINE
250 PARK AVENUE 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10177 NEW YORK, NEW YORK 10019
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
by market conditions and other factors.

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

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ___________________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / / ___________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT* OFFERING PRICE* REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

% Notes Due 2005.................... $100,000,000 100% $100,000,000 $34,483
===========================================================================================================
</TABLE>

* Estimated solely for the purpose of determining the registration fee and not a
representation as to the actual offering or re-offering price.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED OCTOBER 6, 1995.
[LOGO]
$100,000,000

Quaker State Corporation

% Notes Due 2005
Interest payable and Due , 2005

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

The Notes will be redeemable in whole or in part, at the option of the Company
at any time, at a redemption price equal to the greater of (i) 100% of their
principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted, on a
semiannual basis, at the Treasury Yield (as defined herein) plus 15
basis points, together with accrued interest to the date of
redemption. The Notes will not be subject to any sinking
fund.

The Notes will be represented by one or more Global Securities (as defined
herein) registered in the name of the nominee of The Depository Trust Company
("DTC"). Except as provided herein, Notes in definitive form will not
be issued. Settlement for the Notes will be made in immediately
available funds. The Notes will trade in DTC's Same-Day Funds
Settlement System until Maturity, and secondary market
trading activity for the Notes will therefore settle in
immediately available funds. See "Description of
Notes" herein.

Application will be made to have the Notes approved for listing on the New York
Stock Exchange.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Company(1)(2)
--------- ------------- -------------
<S> <C> <C> <C>
Per Note..................................... % % %
Total........................................ $ $ $
</TABLE>

(1) Plus accrued interest, if any, from , 1995.
(2) Before deduction of expenses payable by the Company estimated at
$ .
------------------

The Notes are offered by the several Underwriters when, as and if issued by
the Company, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Notes, in book-entry form, will be made through the facilities of DTC on or
about , 1995, against payment in immediately available funds.

CS First Boston J.P. Morgan Securities Inc.

The date of this Prospectus is , 1995.
<PAGE> 3

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Room 1400,
7 World Trade Center, Suite 1300, New York, New York 10048, and Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005 and the Pacific Stock Exchange, 301 Pine
Street, San Francisco, California 94104, on which exchanges the common stock of
the Company is listed.

This Prospectus does not contain all information set forth in the
Registration Statement on Form S-3 and Exhibits thereto which the Company has
filed with the Commission, certain portions of which have been omitted pursuant
to the Rules and Regulations of the Commission, and to which reference is hereby
made.

INFORMATION INCORPORATED BY REFERENCE

The Company hereby incorporates into this Prospectus by reference the
following documents filed with the Commission:

(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994;

(ii) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1995; and

(iii) the Company's Current Reports on Form 8-K, dated July 24, 1995
and August 21, 1995 and Current Report on Form 8-K/A1, dated September 20,
1995.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Notes covered by this Prospectus shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the dates of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the information incorporated by reference in the Registration
Statement of which this Prospectus is a part, other than exhibits to such
information unless specifically incorporated by reference in such information.
Written requests should be addressed to: Quaker State Corporation, 255 Elm
Street, Oil City, Pennsylvania 16301, Attention: Secretary. Telephone requests
may be directed to (814) 676-7676.

2
<PAGE> 4

THE COMPANY

Quaker State Corporation ("Quaker State" or the "Company") is a leading
producer and marketer of branded and private label motor oils and other
lubricants. The Company also operates fast lube centers throughout the United
States and Canada, manufactures and sells vehicular safety lighting equipment
and operates a materials handling facility in Canada.

The Company's Motor Oil Division produces, markets and distributes major
national brand, private label and proprietary brand lubricants and other
automotive aftermarket products. The base oil stocks used in Quaker State
lubricants are blended with additives and packaged at manufacturing facilities
operated by the Company in the United States and Canada. Approximately
one-quarter of the base oil stocks used by the Company are produced at its Congo
refinery in West Virginia. The Motor Oil Division also provides collection,
transportation and recycling services for used oil, brake fluid, antifreeze and
filters in certain regions of the United States. During the first six months of
1995, revenues from the Motor Oil Division comprised approximately 78% of the
Company's total revenues from continuing operations.

Quaker State believes that, through its fast lube subsidiaries ("Q Lube"),
it is one of the largest operators of fast lube centers in the United States.
Fast lube centers offer consumers quick and economical oil changes and related
services for passenger vehicles. As of June 30, 1995, there were 434 Q Lube
stores in the United States, of which 326 were owned or leased and operated by Q
Lube and 108 were operated by franchisees. These stores are located in 24
states, primarily in the West, Midwest and Southeast. The Company also has 26
fast lube centers in the Province of Ontario that are owned and operated or
franchised through a joint venture. During the first six months of 1995,
revenues from Q Lube comprised approximately 12% of the Company's total revenues
from continuing operations.

The Company's Truck-Lite subsidiary manufactures safety lighting equipment
for trucks and automobiles, which is sold to original equipment manufacturers
and replacement parts distributors. During the first six months of 1995,
revenues from Truck-Lite comprised approximately 10% of the Company's total
revenues from continuing operations.

The Company also operates an iron ore pellet and potash terminal and a bulk
materials handling dock accessible to Lake Superior at Thunder Bay, Ontario.
During the first six months of 1995, revenues from the materials handling
operations comprised less than 1% of the Company's total revenues from
continuing operations.

Following the appointment of Herbert M. Baum as Chairman and Chief
Executive Officer in June 1993, the Company has taken initiatives to increase
its share of the branded motor oil market. These efforts have included
introducing new products and repositioning the Company's current product line,
extending the Company's existing brands, creating niche markets for the
Company's products, offering incentive programs and marketing allowances to
customers and independent distributors, and emphasizing the Quaker State name
through a new logo, contemporary packaging and increased advertising. According
to the NPD Group, Inc., an independent market research firm, the Company's share
of the U.S. motor oil market increased from 13.3% for 1992 to 14.9% for the
six-month period ended June 30, 1995.

Quaker State's goal is to continue the growth of its core lubricants and
lubricant services businesses and to strengthen further its position as a
leading North American motor oil company by capitalizing on the Company's brand
name, expanding its Q Lube operations, emphasizing its distribution, customer
service and technological capabilities and providing comprehensive lubricant
products and services, including the recycling of used oil and related
materials.

Consistent with the Company's focus on its core businesses, Quaker State
opportunistically has exited non-core businesses and made selective acquisitions
while maintaining a capital structure that the Company believes is conservative.
The Company discontinued its coal operations in December 1992; sold its
insurance subsidiary, Heritage Insurance Group, Inc. ("Heritage"), in August
1994; and sold most of the assets of its Natural Gas Exploration and Production
Division ("E&P") in the third quarter of 1995.

3
<PAGE> 5

The Company has made two principal acquisitions which have expanded the
product range and distribution capabilities of its Motor Oil Division. First, in
September 1994, the Company acquired the Specialty Oil Companies ("Specialty")
and Westland Oil Company, Inc. ("Westland"), which together have provided the
Company with a substantial private label motor oil business, two additional
blending and packaging facilities and a network of approximately 25 sales and
distribution operations. In addition, in July 1995, the Company acquired Slick
50, Inc. ("Slick 50"), a producer of automotive engine treatments and related
automotive chemicals. While Quaker State believes that acquisitions and
divestitures will be an important aspect of its corporate strategy, there can be
no assurance that the Company will be successful in finding other suitable
acquisition or expansion opportunities or will exit any of its other businesses.

Quaker State has initiated a restructuring program aimed at integrating its
recent acquisitions, consolidating management and administrative activities and
streamlining operations. As part of these efforts, in April 1995, the Company
announced plans to relocate its corporate headquarters, the headquarters of its
Motor Oil Division and the headquarters of certain of its subsidiaries to the
Dallas, Texas area by early 1996. The Company currently estimates that,
following the anticipated completion of its restructuring program in 1996 (other
than certain actions relating to Q Lube, which are expected to continue beyond
the end of 1996), it will realize an annualized reduction in operating costs of
up to $10 million.

The Company, a Delaware corporation formed in 1931, has its principal
executive offices at 255 Elm Street, Oil City, Pennsylvania 16301. Its telephone
number is (814) 676-7676.

USE OF PROCEEDS

The net proceeds from the sale of the Notes are estimated to be
approximately $ million, of which approximately $56 million will be used to
prepay the Company's outstanding Senior Notes due 2002 which bear interest at a
fixed rate of 8.73%. The remainder of the net proceeds will be used for general
corporate purposes, acquisitions, capital expenditures or the reduction of other
indebtedness. Funds not required immediately for such purposes may be invested
temporarily in short-term marketable securities. The precise amounts and timing
of the application of proceeds will depend upon the funding requirements of the
Company and the availability of other funds. The Company considers certain
acquisitions from time to time but currently has no specific plans to enter into
any such transactions.

4
<PAGE> 6

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of August 31, 1995, and as adjusted to reflect the sale of the Notes
offered hereby and the application of a portion of the net proceeds to prepay
the Company's outstanding Senior Notes due 2002. (See "Use of Proceeds.") This
table should be read in conjunction with the Consolidated Financial Statements
of the Company included in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 31, 1995
(UNAUDITED)
----------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash.................................................................... $ 52.2 $
===== =====
Short-term Debt......................................................... $ 4.3 $ 4.3
===== =====
Long-term Debt:
Revolving credit loan due 1998(1)..................................... -- --
Revolving credit loan due 1997(2)..................................... 9.0 9.0
8.73% Senior Notes Due 2002........................................... 50.0 --
% Notes Due 2005.................................................. -- 100.0
Other................................................................. 12.2 12.2
----- -----
Total Long-term Debt............................................... 71.2 121.2
Total Stockholders' Equity.............................................. 281.5 281.5
----- -----
Total Capitalization.................................................... $352.7 $ 402.7
===== =====
</TABLE>

- ---------------
(1) Revolving credit loan of the Company. On October 4, 1995, the Company
terminated its revolving credit agreement and executed a new $45.0 million
credit agreement due on September 28, 1996.

(2) Revolving credit loan of Westland.

5
<PAGE> 7

SELECTED FINANCIAL INFORMATION

The following table sets forth summary financial information relating to
the Company. The summary financial data for the five years ended December 31,
1994 are derived from the Consolidated Financial Statements of the Company which
have been audited by Coopers & Lybrand L.L.P., independent certified public
accountants to the Company. In the third quarter of 1995, the Company sold most
of the assets of E&P. Accordingly the operating results of E&P have been
excluded from continuing operations and reclassified as discontinued operations
on the following table for the six months ended June 30, 1995 and 1994 and the
five years ended December 31, 1994. The financial data for the six-month periods
ended June 30, 1995 and 1994 are derived from the unaudited consolidated
financial statements of the Company. Operating results for the six months ended
June 30, 1995 are not necessarily indicative of the results that may be expected
for the full year ending December 31, 1995. The data should be read in
conjunction with the Consolidated Financial Statements included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------- -------------------
1994 1993 1992 1991 1990 1995 1994
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues............................. $739.5 $612.7 $596.7 $582.0 $654.6 $502.8 $332.1
Costs and expenses
Cost of sales and operating costs........ 503.5 421.9 408.8 399.7 473.2 354.1 220.5
Selling, general and administrative...... 193.4 156.4 158.9 139.7 140.1 115.7 90.8
Depreciation and amortization ........... 21.8 19.2 20.1 20.1 20.8 14.6 10.0
Interest................................. 5.1 5.7 4.8 4.6 5.2 3.1 2.4
Unusual items............................ -- -- 3.2 -- (5.4) 15.8 --
Income from continuing operations before
income taxes............................. 15.7 9.5 0.9 17.9 20.7 (0.5) 8.4
Provision for (benefit from) income
taxes.................................... 6.2 2.5 0.2 7.5 7.5 (0.2) 4.7
------ ------ ------ ------ ------ ------ ------
Income (loss) from continuing operations... 9.5 7.0 0.7 10.4 13.2 (0.3) 3.7
Income (loss) from discontinued operations
(net of taxes)........................... 9.3 6.7 (31.9) 5.1 6.4 2.7 7.0
Cumulative effect of accounting changes.... -- -- (62.6) 7.2 -- -- --
------ ------ ------ ------ ------ ------ ------
Net income (loss).......................... $18.8 $13.7 $(93.8) $22.7 $19.6 $2.4 $10.7
====== ====== ====== ====== ====== ====== ======
BALANCE SHEET DATA
Cash and cash equivalents.................. $ 29.8 $ 15.6 $ 41.3 $ 15.1 $ 12.1 $ 11.6 $ 8.8
Working capital............................ 101.4 35.4 74.9 43.0 41.3 129.9 36.7
Total assets............................... 630.0 783.7 792.8 751.5 757.2 631.7 788.1
Long-term debt............................. 69.5 51.2 73.7 84.1 67.5 68.5 51.2
Total debt................................. 73.2 51.5 79.2 88.9 72.1 71.8 51.3
Stockholders' equity....................... 251.9 188.8 191.2 307.8 304.5 248.4 191.5
</TABLE>

6
<PAGE> 8

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------- -----------------
1994 1993 1992 1991 1990 1995 1994
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
SEGMENT INFORMATION
REVENUES
Motor Oil................ $541.2 $439.3 $441.0 $444.0 $512.2 $399.5 $235.1
Q Lube................... 113.7 105.3 104.4 98.5 93.0 60.3 54.1
Truck-Lite............... 99.6 80.8 63.9 49.9 54.4 49.6 51.2
Materials Handling....... 3.0 3.0 5.3 5.6 6.1 1.7 1.5
Intersegment sales....... (24.9) (21.3) (22.0) (20.4) (15.8) (13.9) (11.8)
------ ------ ------ ------ ------ ------ ------
Total.................... $732.6 $607.1 $592.6 $577.6 $649.9 $497.2 $330.1
====== ====== ====== ====== ====== ====== ======
OPERATING PROFITS
Motor Oil................ $ 16.4 $ 17.5 $ 23.3 $ 36.8 $ 18.8 $ 12.9 $ 8.3
Unusual item(1).......... -- -- -- -- 5.4 -- --
------ ------ ------ ------ ------ ------ ------
Total Motor
Oil............ 16.4 17.5 23.3 36.8 24.2 12.9 8.3
Q Lube................... 5.7 3.1 2.0 (1.1) 6.1 4.1 2.8
Unusual item(2).......... -- -- (3.2) -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total Q Lube..... 5.7 3.1 (1.2) (1.1) 6.1 4.1 2.8
Truck-Lite............... 11.7 5.7 (3.6) (0.3) 3.9 7.3 7.4
Materials Handling....... 1.8 1.1 2.1 1.9 2.5 0.5 0.5
------ ------ ------ ------ ------ ------ ------
Total operating profits.... 35.6 27.4 20.6 37.3 36.7 24.8 19.0
------ ------ ------ ------ ------ ------ ------
Corporate income......... 3.2 2.7 .2 .2 -- 2.6 1.2
Interest expense......... (4.5) (5.4) (4.3) (3.3) (3.3) (3.0) (2.3)
Corporate expense........ (18.6) (15.2) (15.6) (16.3) (12.7) (9.1) (9.5)
Unusual item(3).......... -- -- -- -- -- (15.8) --
------ ------ ------ ------ ------ ------ ------
Income from continuing
operations before
income taxes.......... $ 15.7 $ 9.5 $ .9 $ 17.9 $ 20.7 $ (0.5) $ 8.4
====== ====== ====== ====== ====== ====== ======
OTHER STATISTICS
EBITDA(4).................. $ 42.6 $ 34.4 $ 29.0 $ 42.6 $ 41.3 $ 33.0 $ 20.8
Capital expenditures(5).... 27.9 18.9 12.7 15.0 23.3 15.7 9.5
Ratio of EBITDA to gross
interest expense......... 8.4x 6.0x 6.0x 9.3x 7.9x 10.6x 8.7x
Ratio of total debt to
EBITDA(6)................ 1.7x 1.5x 2.7x 2.1x 1.7x 1.1x 1.2x
Ratio of earnings to fixed
charges.................. 2.3x 1.8x 1.1x 2.6x 2.9x 0.9x(7) 2.4x
</TABLE>

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

(1) Gain on the sale of the McKean, Pennsylvania and Emlenton, Pennsylvania
facilities.

(2) In the fourth quarter of 1992, Q Lube recorded a pretax charge of $3.2 to
reserve for the future replacement of signage and other assets impaired by
the planned conversion of existing Minit-Lube stores into the Q Lube format.

(3) The restructuring charge of $15.8 includes $9.3 that relates to the Motor
Oil Division.

(4) EBITDA means income from continuing operations before interest, taxes,
unusual items, depreciation and amortization. EBITDA is used as a measure of
the Company's debt service ability. EBITDA should not be construed as an
alternative to cash flows from operating activities or as an indicator of
operating performance.

(5) For continuing operations.

(6) For purposes of this computation, EBITDA for the six months ended June 30,
1994 and June 30, 1995 have been annualized.

(7) Ratio is less than one as a result of the $15.8 restructuring charge
recorded in the second quarter of 1995 which impacted earnings.

7
<PAGE> 9

BUSINESS

MOTOR OIL

The Company's Motor Oil Division produces, markets and distributes major
national brand, private label and proprietary brand lubricants and other
automotive aftermarket products. Lubricants produced by the Company include
motor oils, transmission fluids, gear lubricants for automobiles and trucks, as
well as specialty lubricants designed for sport-utility vehicles, marine craft,
farm equipment, motorcycles, snowmobiles and other types of vehicles. Quaker
State also sells certain by-products of its refining process, such as gasoline,
fuel oils (diesel fuel and heating oils) and kerosene, which are not used in the
manufacture of its lubricants. Greases and some specialty lubricants sold by
Quaker State are made by others to the Company's specifications. In addition,
the Company purchases and resells automotive consumer products such as oil, air
and fuel filters, antifreeze, brake and power steering fluids, fuel additives,
spray lubricants and cleaners and automotive undercoatings. The Company's
products are sold under the Quaker State, Slick 50 and certain private label and
proprietary brand names.

Recent Acquisitions. The Company has made two principal acquisitions which
have expanded the product range and distribution capabilities of its Motor Oil
Division.

In September 1994, the Company acquired Specialty, which had been the
Company's largest independent distributor, and Westland, a related blending and
packaging company, in a combined transaction for total consideration of
approximately $119.0 million, consisting of $20.0 million in cash, 4,000,000
shares of Quaker State common stock, approximately $1.5 million for the purchase
of certain related equipment and approximately $40.0 million of assumed
indebtedness. The Specialty and Westland acquisitions have significantly
increased the size of the Company's lubricants business by providing the Company
with an extended product portfolio in branded and private label niche markets, a
stronger distribution network and greater operating efficiencies. These
acquisitions also have provided Quaker State with a significant presence in the
fleet, commercial and industrial markets. Through the Environmental Services
Division of Specialty, Quaker State provides collection, transportation and
recycling services for used oil, brake fluid, antifreeze and oil filters in
certain regions of the country.

In July 1995, the Company acquired Slick 50, a manufacturer of automotive
engine treatments and related automotive chemicals, for total consideration
consisting of approximately $22.0 million in cash, 1,260,403 shares of Quaker
State common stock and approximately $11.0 million in satisfaction of certain
Slick 50 indebtedness. Additional consideration may be payable in the event that
certain financial performance levels are achieved by Slick 50 during the fiscal
years ending December 31, 1996, 1997 and 1998, subject to offset for
indemnification obligations of Slick 50 stockholders. Through the acquisition of
Slick 50, the Company's product line has been expanded to include automotive
engine treatments and related chemicals. Slick 50 had revenues of approximately
$39.1 million and $89.1 million for the six months ended June 30, 1995 and the
fiscal year ended December 31, 1994, respectively. In connection with the Slick
50 acquisition, the Company increased its goodwill and other intangible assets
by approximately $50.0 million which will be amortized on a straight line basis
over periods not exceeding 40 years.

Raw Materials. Motor oils are produced by blending additives with base oil
stocks which are refined from crude oil. Quaker State's motor oils are made from
base oil stocks produced at its Congo refinery located in Newell, West Virginia
or purchased from other refiners. Currently, approximately one-quarter of the
Company's base oil stock requirements are produced at the Congo refinery.

The Congo refinery is designed to produce base oil stocks specifically from
Pennsylvania Grade crude oil. Quaker State purchases most of its crude oil
requirements from suppliers with which Quaker State has been doing business for
many years. During 1994, Quaker State purchased Pennsylvania Grade crude oil
from approximately 1,400 producers, the largest of 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. Raw materials
other than crude oil consist primarily of base oil stocks produced by other
refiners, chemicals, fuels and additives, all of which are currently available

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from a number of sources. During the first six months of 1995, the weighted
average price per barrel of crude oil purchased by Quaker State was $17.27.

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 world market prices for all types of crude oil.
Although the available supply of Pennsylvania Grade crude oil has been declining
for some time and is expected to continue to decline, 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 for the Congo refinery.

Manufacturing. The Congo refinery, which was built in 1971, remains one of
the newer lubricant stock refineries in the United States. The Company believes
the Congo refinery has sufficient capacity to meet currently planned production
requirements. During the year ended December 31, 1994, 3,919,000 barrels of
Pennsylvania Grade crude oil were processed at the Congo refinery. A portion of
the base oil stocks produced at the Congo refinery are also sold to third
parties. As of June 30, 1995, gasoline, fuel oils and kerosene, which are
by-products of the refining process, accounted for approximately 56% of the
output (by volume) of the Congo refinery. Wax is also a by-product of the
refining process and is sold to third parties.

Quaker State owns and operates blending and packaging plants, where it
blends base oil stocks with chemical additives to produce motor oils, at the
Congo refinery and in Vicksburg, Mississippi, Carson, California, San Antonio,
Texas, and Burlington, Ontario. The Company also blends base oil stocks and
chemical additives into finished lubricants and related products and packages
its products at a leased blending and packaging plant in Shreveport, Louisiana.
The Company has announced plans for a development project at the Red River port
in Shreveport, Louisiana which will serve as its lubricants manufacturing and
technical headquarters. The port development project is subject to a number of
conditions, including the availability of state and local funding for land and
certain infrastructure which, to date, has not been finalized.

Domestic Sales. Quaker State sells motor oils and other lubricants and
automotive consumer products through independent distributors and directly to
retailers, including national and regional chain stores and fast lube centers.
Direct sales are also made to resellers and end users primarily in large
metropolitan areas. Resellers include wholesalers, and end users include
industrial and commercial accounts and fleet customers.

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. Independent
distributors sell motor oils and lubricants produced by other companies in
addition to Quaker State products. As of June 30, 1995, Quaker State had 97
independent distributors which sell its products throughout all 50 states. These
independent distributors accounted for approximately 25% of Quaker State's total
branded motor oil sales revenues in the United States during the first six
months of 1995.

Gasoline, fuel oils and kerosene are sold F.O.B. the Congo refinery to
wholesalers located primarily in Ohio, Pennsylvania and West Virginia.

Foreign and Export Sales. Quaker State sells its motor oils in over 74
foreign countries through subsidiaries and independent distributors. The Company
also exports small amounts of greases, gear lubricants and automotive consumer
products, such as filters and chemicals. During the first six months of 1995 and
the three years ended December 31, 1994, total revenues from foreign operations,
including export sales, were approximately $35.7 million, $68.7 million, $55.4
million and $47.4 million, respectively. The largest component of these revenues
was attributable to sales in Canada.

Quaker State believes that its motor oils are the largest selling
independent branded motor oil in Canada as well as the leading private brand in
Mexico and the Dominican Republic. During 1994 and the first six months of 1995,
a significant part of the Company's export sales also were made to Guatemala,
Ecuador, Poland, Sweden and Taiwan. Efforts are being made to increase export
sales by strengthening management, adding distributors and entering into joint
ventures with current distributors and others.

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Sales in Canada are made primarily through independent distributors under
contract with the Company's Canadian subsidiary, but are also made directly to
customers. The Company sells branded motor oils in Japan through a subsidiary.
Sales in Mexico are made through a licensee.

Marketing. Quaker State aggressively markets its branded lubricants and
automotive consumer products. The Company believes that the motor oil business
is brand-driven and has created a marketing strategy which focuses on the
establishment of a unique identity for the Company's products. In particular,
Quaker State relies heavily on media advertising to project the quality image of
its motor oils and other products. In addition to media advertising, the
Company's marketing efforts 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.

Following the introduction of Quaker State's new logo in late 1993, the
Company developed a contemporary design for its packaging to heighten the
visibility of Quaker State products. In the spring of 1994, the Company launched
its "Intelligent Oil" advertising campaign which promotes the Quaker State brand
as a high-tech motor oil that adapts to the changing needs of automotive
engines. In the fall of 1994, the Company introduced Quaker State 4X4 motor oil,
a brand designed to meet the needs of sport-utility vehicles.

Quaker State has trademark registrations in effect or applications pending
covering the use of its trademarks "Quaker State," "Quaker State 4X4," "Slick
50," "Lubriguard," "Itasca" and other product names, logos and designs utilized
in connection with the sale of its products. The trademark registrations expire
at various dates, but in each case may be renewed.

Q LUBE

Quaker State believes that, through its fast lube subsidiaries, Q Lube,
Inc. and McQuik's Oilube, Inc. (collectively, "Q Lube"), it is one of the
largest operators of fast lube centers in the United States. Fast lube centers
offer consumers quick and economical oil changes and related services for
passenger vehicles. As of June 30, 1995, there were 434 Q Lube stores in the
United States, of which 326 were owned or leased and operated by Q Lube and 108
were operated by franchisees. These stores are located in 24 states, primarily
in the West, Midwest and Southeast. In addition, Q Lube owns and operates or
franchises 26 fast lube centers in Ontario, Canada through a joint venture.
Quaker State supplies most of the motor oils used and sold in the Q Lube stores,
which, collectively, are the largest purchasers of Quaker State motor oils sold
in bulk.

Fast lube operations have experienced significant growth over the past
several years as the installed ("do-it-for-me") segment of the motor oil market
has become more in demand by consumers. As a result, the "do-it-for-me" segment
of the motor oil market has outpaced the "do-it-yourself" segment, capturing
approximately 42% of the motor oil market in 1994, as compared to 27% of the
motor oil market in 1985. In 1994, sales in the "do-it-for-me" segment of the
motor oil market increased more than 4%. The Company's Q Lube operations
recorded an 8% increase in revenues in 1994 and an 11% increase for the first
six months of 1995.

Certain of the Company's fast lube centers are operated under the names
McQuik's Oilube and Quaker State Minit Lube. In 1992, the Company began
conversion of its fast lube centers to the name Q Lube in order to emphasize the
relationship between Quaker State and its fast lube centers. As of June 30,
1995, approximately 55% of Company-operated centers were operated under the Q
Lube name. The Company plans to complete the conversion of the remaining
Company-operated centers by 1997.

In September 1994, Q Lube entered into a license agreement with Interline
Resources Corporation ("Interline") which provides for the use by Q Lube of
Interline's re-refining technology for the conversion of waste oil into reusable
products in the United States, Canada and Mexico. Q Lube's construction of its
first used oil recovery unit utilizing the technology is nearing completion.
Construction of any additional units will depend upon, among other things, the
operating results of the first unit.

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TRUCK-LITE

Truck-Lite Co., Inc. ("Truck-Lite"), a subsidiary of Quaker State,
manufactures safety lighting equipment for trucks and automobiles, 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 Company plans to emphasize the heavy-
duty truck and truck trailer lighting businesses which the Company believes
offer more attractive margins than Truck-Lite's other product lines.

Most of Truck-Lite's products for passenger cars, light trucks and vans are
manufactured and distributed from a Company owned and operated facility in
Falconer, New York. Most of the products for heavy-duty trucks and truck
trailers are manufactured at a leased facility in McElhattan, Pennsylvania and a
Company-owned facility in Wellsboro, Pennsylvania and distributed from leased
distribution centers in McElhattan, Pennsylvania and Sacramento, California.

MATERIALS HANDLING

Quaker State's subsidiary, Valley Camp, Inc., operates an iron ore pellet
and potash terminal and a bulk materials handling dock accessible to Lake
Superior at Thunder Bay, Ontario, pursuant to a contract scheduled to expire on
December 31, 1997. The Company currently plans to renew the contract, provided
favorable terms can be negotiated.

DIVESTITURES AND DISCONTINUED OPERATIONS

Consistent with the Company's focus on its core lubricants and lubricant
services businesses, Quaker State opportunistically has exited certain of its
non-core businesses during the past several years.

Natural Gas Exploration and Production Division. In the third quarter of
1995, Quaker State sold most of the assets of E&P for approximately $65.2
million (net gain of approximately $11.2 million after taxes), subject to
certain adjustments. The sales included interests in approximately 1,460
producing oil and gas wells in New York, Ohio, Pennsylvania and West Virginia,
approximately 250,000 leasehold acres, gas-gathering lines, and approximately
10,000 timber acres.

Insurance. 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
Heritage. In August 1994, Quaker State sold Heritage for approximately $82.0
million after satisfaction of certain intercompany obligations.

Coal. 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. Reclamation work
continues at the mines formerly operated by two of Valley Camp's subsidiaries,
as do sales of the remaining assets related to the discontinued coal operations.

COST REDUCTION AND RELOCATION

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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 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. The principal methods of competition in the
branded motor oil business are product quality, distribution capability,
advertising and sales promotion. Many of the competitors, particularly the major
integrated oil companies, have greater motor oil production capacities and
financial resources substantially greater than those of the Company. Quaker
State also competes with Pennzoil Company and Witco Corporation in the purchase
of Pennsylvania Grade crude oil.

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 Corp., International Petroleum Corp., the First Recovery, Inc.
division of Ashland Inc. and a number of regional waste oil haulers. The
principal methods of competition are reliability and quality of service and
price.

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 Inc. through its Valvoline Instant Oil Change centers.
There are also a significant number of independent fast lube chains operating on
a local or regional basis. 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, Inc., Peterson Manufacturing Co., Inc. and the Signal-Stat Division
of Federal-Mogul Corporation, as well as with companies owned by truck and
automobile manufacturers. The principal methods of competition are quality,
price, delivery and technical innovation.

GOVERNMENT REGULATION

Environmental. Quaker State and its subsidiaries are subject to extensive
federal, state and local laws and regulations governing, among other things, air
emissions, waste water discharges, hazardous materials, land use, waste
management and employee health and safety. In particular, these laws and
regulations affect motor oil refining and manufacturing operations, natural gas
and crude oil producing activities, used oil and other automotive fluids
collection and fast lube operations. In motor oil refining and manufacturing,
permits are required for, among other things, the discharge of waste water, air
emissions and for hazardous waste activities. 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 handling and disposition of used motor oil and filters,
other petroleum products and antifreeze. While the Company does not believe that
current and anticipated future environmental compliance requirements are likely
to have a material adverse effect upon its financial position, environmental
laws and regulations are subject to frequent change and have become more
stringent in recent years so that there can be no assurance that future
environmental requirements would not have a material adverse effect on the
Company's future quarterly or annual results of operations or cash flows.

Certain environmental laws, such as the federal Superfund law, can impose
joint and several liability for the cleanup of hazardous waste sites upon
certain statutorily defined categories of parties regardless of the lawfulness
of the original activity or disposal. Quaker State and certain of its
subsidiaries have received notices from the U.S. Environmental Protection Agency
(the "EPA") and similar state agencies that they may be responsible for response
and cleanup costs with respect to certain Superfund and state waste sites.
Although the Company does not anticipate, based on current information, that
environmental liabilities associated with

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third party waste sites or currently or formerly owned properties are likely to
have a material adverse effect upon its financial position, there can be no
assurance that new or changed remediation requirements, information regarding
site conditions or liability allocations would not have a material adverse
effect upon the Company's future quarterly or annual results of operations or
cash flows. (See "Legal Proceedings" and "Capital Expenditures.")

Other. Truck-Lite's products are subject to regulations of the U.S.
Department of Transportation that govern the brightness, placement and physical
durability of vehicular lighting.

CAPITAL EXPENDITURES

In April 1995, the Company announced plans for a $25 million development
project for the Red River port in Shreveport, Louisiana which will serve as the
Company's lubricants manufacturing and technical headquarters. The port
development will include a blending, packaging and warehousing facility in
Shreveport, as well as a laboratory and tank farm near the Red River. In
addition, the Company plans to improve and upgrade existing plant and
facilities, and construct additional storage tanks and bulk loading and
unloading facilities near the Red River. The port development project is subject
to a number of conditions, including the availability of state and local funding
for land and certain infrastructure which, to date, has not been finalized.

Capital expenditures in 1995 are anticipated to be $39.7 million, of which
approximately $16.2 million was incurred as of June 30, 1995. Approximately 62%
is planned for use by the Motor Oil Division primarily for manufacturing
upgrades and capital commitments to enhance long-term branded motor oil volumes.
Another 21% is allocated to Q Lube to convert Company stores to the new Q Lube
format. The total planned capital expenditures for 1995 includes approximately
$4.5 million related to the $25 million development project in Shreveport,
Louisiana which should commence in the fourth quarter of 1995.

Capital expenditures for pollution control facilities during the first six
months of 1995 and the three years ended December 31, 1994 were $1.3 million,
$3.2 million, $1.8 million and $2.0 million, respectively. Capital expenditures
for pollution control facilities during the remainder of 1995 are expected to
amount to approximately $1.4 million. Capital expenditures for pollution control
facilities in 1994, 1993 and 1992 included upgrading and replacing underground
storage tanks in Q Lube's operations. During the three years ended December 31,
1994, expenditures were made in connection with new drilling by E&P which was
sold in the third quarter of 1995. Anticipated expenditures in 1995 for
pollution control facilities include expenditures related to 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.

LEGAL PROCEEDINGS

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 thousand per day
for each violation. While the Company intends to defend this lawsuit vigorously,
it has engaged in settlement discussions with the EPA. In 1994, the Company
accrued $1.0 million in accordance with its estimate of the probable liability
associated with this lawsuit. In recent settlement discussions, the Company has
proposed supplemental environmental projects and waste water treatment plant
modifications as part of its settlement proposal which would be implemented over
time and which could cost the Company a total of approximately $2.0 million to
$3.0 million.

Quaker State and certain of its subsidiaries have received notices from the
EPA and a similar state agency that they may be responsible for response and
cleanup costs with respect to certain Superfund sites.

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 future liability for

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long-term remediation or reclamation at certain 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 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. In July 1995, the U.S. District Court
certified the proceeding as a class action and denied the defendants' motion for
summary judgment, without prejudice to renewal after the close of discovery.
Discovery in this proceeding is continuing. The Company believes there is no
basis for the allegations in the complaint.

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 April 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.

The Company and a subsidiary are involved in several non-judicial
proceedings in which the Federal Trade Commission and two competitors separately
are challenging the accuracy of advertising for different products. The Company
is involved in various other legal proceedings incidental to the normal course
of its business.

While it is impossible at this time to determine with certainty the
ultimate outcome of all current and potential environmental and legal matters
involving the Company, Quaker State has accrued reserves for all items which are
believed by the Company to be probable and can be reasonably estimated and does
not expect any material adverse effect on its financial position. However, not
all of these matters can be predicted with certainty so it is possible that one
or more of these matters could be decided against the Company and result in a
material adverse impact on future quarterly or annual results of operations or
cash flows when resolved. (See "Government Regulation.")

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information set forth below is derived from management's discussion and
analysis contained or incorporated by reference in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 and the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 (the "10-K"), each of
which is incorporated by reference into the Registration Statement of which this
Prospectus forms a part. In the third quarter of 1995, the Company sold most of
the assets of E&P. Accordingly, the operating results of E&P have been excluded
from continuing operations and reclassified as discontinued operations in the
following discussions.

References in the following discussion to specific notes to the financial
statements are references to notes in the Consolidated Financial Statements,
incorporated by reference in the 10-K and included elsewhere in this Prospectus,
as relates to the discussion for the annual periods.

SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1994

Consolidated Review of Operations

Quaker State's net income for the first six months of 1995 was $2.4 million
compared to $10.7 million for the first six months of 1994. Sales and operating
revenues from continuing operations were $497.2 million for the first six months
of 1995 compared to $330.1 million for the corresponding period in 1994. The
1995 sales and operating revenues included $164.6 million of additional sales
and operating revenues for the first six months of 1995 from Specialty and
Westland. Expenses for the first six months of 1995 include a pretax
restructuring charge of $15.8 million related to the Company's announced
relocation to the Dallas, Texas area. Total costs under the restructuring plan
are estimated to be $25.0 million with the remainder of such costs to be
expensed as incurred. This charge accounted for the pretax loss from continuing
operations of $495 thousand for the first six months of 1995. Operating profits
from continuing operations, excluding restructuring charges, increased 31%, to
$24.8 million for the first six months of 1995, compared with $19.0 million in
1994, reflecting higher sales for branded motor oil and improved Q Lube
operating results.

Income from discontinued operations was $2.7 million for the first six
months of 1995 compared to $7.0 million for the comparable period of 1994.
Income from discontinued operations in 1994 also included the E&P operations and
the insurance operations of Heritage which were discontinued and sold in 1994.

Motor Oil. Operating profits for the Motor Oil Division, excluding
restructuring charges of $9.3 million, were $12.9 million for the first six
months of 1995 compared to $8.3 million for the comparable period of 1994. Sales
and operating revenues of $399.5 million in this period increased 70% over the
comparable period of 1994 and included 1995 revenues from Specialty and
Westland. Operating profits improved as a result of a 2% increase in branded
motor oil sales volume in the first six months of 1995 compared to the first six
months of 1994. In addition, refinery product margins improved as a result of
higher sales prices for base stocks, gasoline and fuel oil. Operating results
also include $1.5 million of LIFO inventory profits recorded in the second
quarter of 1995 as a result of liquidating certain inventory quantities. In the
Motor Oil Division's private label and industrial lubricants business, operating
results improved in the second quarter of 1995 as first quarter sales price
increases partially offset the impact of higher materials costs.

Q Lube. Q Lube reported operating profits during the first six months of
1995 of $4.1 million on sales and operating revenues of $60.3 million compared
to profits of $2.8 million on sales and operating revenues of $54.1 million for
the comparable period of 1994. Car counts in 1995 increased 6% and average per
car sales were up 5% in the first six months of 1995 compared to the first six
months of 1994 to account for the revenue and operating result improvements.
Higher advertising, depreciation and amortization expenses resulting from the
conversion of fast lube centers to the Q Lube format partially offset the
improvement in operating results. This conversion is expected to continue in the
remainder of 1995 with approximately 100 additional stores expected to be
completed during 1995.

Truck-Lite. Truck-Lite's operating profits in the first six months of 1995
were $7.3 million compared to $7.4 million in the comparable period of 1994.
Sales and operating revenues were down 3% to $49.6 million for

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the first six months of 1995 from $51.2 million during the first six months of
1994. Lower sales volume and negative product mix adversely affected operating
results. Automotive sales slowed down in the second quarter of 1995 as the
overall car market softened. Management was able to reduce operating expenses
for the first six months of 1995 by approximately $1.5 million which partially
offset the slowdown in the business.

Materials Handling. Operating profits during the first six months of 1995
were $481 thousand compared to $469 thousand for the comparable period of 1994.
Sales and operating revenues were $1.7 million for the first six months of 1995
compared to $1.5 million for the comparable period of 1994.

Corporate. Corporate income for the first six months of 1995 was $2.6
million compared to $1.2 million for the comparable period of 1994 and included
approximately $1.0 million of additional royalty payments received for coal
deliveries made by the purchaser under a long-term coal sales agreement.
Six-month interest expense in 1995 increased 30% over the comparable period of
1994 to $3.0 million as a result of debt assumed in the acquisition of Westland.
Corporate expenses were $9.1 million for the first six months of 1995 compared
to $9.5 million for the comparable period of 1994. Lower salary and benefit
expenses account for the reduction in corporate expenses. An unusual charge of
$15.8 million was recorded in the second quarter of 1995 to reserve for
severance costs, employee benefit expenses and the write-off of assets related
to the Company's relocation to the Dallas, Texas area. Approximately $9.3
million of this charge relates to the Motor Oil Division.

The effective tax rate of 38% for continuing operations is higher than the
35% federal rate due to the added impact of state and foreign taxes. The
effective tax rate for continuing operations of 38% is lower than the 1994 rate
of 56% due to lower income from continuing operations, a reduction in the
estimated state tax rate and other changes in estimates.

1994 COMPARED TO 1993 COMPARED TO 1992

In 1994, Quaker State management made two strategic moves, the disposition
of Heritage and the acquisition of Specialty, which were consistent with the
Company's strategy to focus on its core lubricants and lubricant services
businesses and which had a significant impact on the 1994 operations. As a
result of the sale of Heritage in August 1994, as described under
"BUSINESS -- Divestitures and Discontinued Operations -- Insurance," the
operating results of the insurance business, including the gain on the sale,
were segregated and reported as a discontinued operation in the Consolidated
Statement of Operations for the year ended December 31, 1994. Prior year
financial statements were reclassified to conform to current year presentation.
(See Note 3 to the Consolidated Financial Statements.)

In September 1994, the Company acquired the stock of Specialty and Westland
for $19.5 million and 4,000,000 shares of Quaker State common stock valued at
$57.8 million. The Company also purchased certain related equipment for $1.5
million and assumed approximately $40.0 million of debt of the acquired
companies. The operating results of Specialty and Westland have been included in
the Company's Consolidated Financial Statements from the date of acquisition.
Specialty and Westland revenues and operating results are reported as part of
the Motor Oil Division. (See "BUSINESS -- Motor Oil Division.")

Consolidated Review of Operations

Quaker State reported net income of $18.8 million in 1994 compared to $13.7
million in 1993. Net income included discontinued operations income of $9.3
million in 1994 compared to $6.7 million in 1993. A net loss of $93.8 million
was recorded in 1992. The 1992 loss included several accounting adjustments
totalling $102.3 million for discontinuing the coal operations of Valley Camp,
implementing Financial Accounting Standards Board Standard Nos. 106 and 109 and
recording a charge for impaired assets. (See Notes 4, 5, 12 and 13 to the
Consolidated Financial Statements.)

Income from continuing operations in 1994 was $9.5 million compared to $7.0
million in 1993. Operating profit improvements, primarily based on sales volume
increases over 1993, were realized by three of the business segments. At Q Lube,
car counts increased 8% while operating profit rose 88%; and automotive and
heavy duty lighting sales volume rose 17% at Truck-Lite which resulted in a 105%
increase in operating

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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 $19.0 million
combined with a shift in product sales mix from packaged goods to bulk sales,
for which the gross margin is lower, reduced motor oil operating profit by 6%.
Specialty and Westland contributed $654 thousand of operating profit to the
Motor Oil Division in 1994. Operating results from materials handling included a
pretax gain of $1.1 million from the termination of a pension plan in the fourth
quarter of 1994. An increase in the 1994 continuing operations 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 to $7.0 million from
$656 thousand in 1992. This increase resulted primarily from a $9.4 million
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 $4.3 million 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 Division. Increased promotion and advertising costs, a shift in product
sales mix from packaged goods to bulk sales, for which the gross margin is
lower, and decreased motor oil volume negatively affected 1993 Motor Oil
Division results. Increased income taxes also negatively impacted 1993 income
from continuing operations.

Sales and operating revenues from continuing operations for 1994 were
$732.6 million compared to $607.1 million in 1993 and $592.6 million 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 $16.4 million from
$17.5 million in 1993 and included $654 thousand 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 $19.0 million 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 also recorded $1.7
million of expenses and reserves associated with a lawsuit commenced against the
Company for alleged environmental violations at the Congo refinery. (See
"BUSINESS -- Legal Proceedings" and Note 10 to the Consolidated Financial
Statements.) 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.

Sales and operating revenues in 1994 of $541.2 million, including $71.4
million from fourth quarter sales at Specialty and Westland, were 23% ahead of
1993's total of $439.3 million. 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 in January 1995 for branded
motor oil which improved gross margins in 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 of $17.5 million were 25% below profits of $23.3
million 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 $1.4
million 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 thousand to close the
Company's St. Louis blending and warehouse facility.

Motor Oil Division sales and operating revenues declined $1.7 million in
1993 to $439.3 million from $441.0 million 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.

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<PAGE> 19

Q Lube. Operating profits in 1994 of $5.7 million were up 88% compared to
$3.1 million in 1993. An 8% increase in the number of cars serviced in
Company-operated stores primarily accounted for the improvement in operating
results. Advertising, depreciation and repair and maintenance expenses increased
$2.0 million. The higher sales volume and expenses resulted from the conversion
of 67 Company stores in 1994 to Q Lube format. Q Lube revenues of $113.7 million
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 $3.1 million compared to an operating loss of
$1.2 million in 1992. The 1992 loss included an unusual charge of $3.2 million
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 $2.0 million in 1992. The Company's divestiture of 16
stores in unprofitable markets in the first quarter of 1993 and reduced
operating expenses accounted for the improved 1993 operating profits.

Sales and operating revenues of $105.3 million in 1993 were flat compared
to $104.4 million in 1992 as total cars serviced and average ticket price
remained about the same.

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 $11.7 million which more than doubled 1993 operating profits of $5.7 million.
Strong sales were recorded in both the automotive business and the heavy duty
safety lighting business. Selling, general and administrative expenses were up
$1.3 million in 1994 as a result of higher legal, environmental and incentive
costs. Operating results included a $1.5 million charge recorded in the fourth
quarter of 1994 to reserve for future losses associated with a contract to
manufacture automotive safety lights. In the future, the Company plans to
emphasize its heavy duty truck and trailer lighting businesses which offer more
attractive margins than other product lines.

Sales and operating revenues in 1994 increased to $99.6 million from $80.8
million in 1993, due to the sales volume increase and a shift in product mix to
higher priced products.

Operating profits in 1993 increased to $5.7 million compared to a loss of
$3.6 million 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 $1.6 million
write-off of unrecoverable development costs.

Sales and operating revenues increased 26% to $80.8 million from $63.9
million in 1992 due to the higher sales volume.

Materials Handling. Operating profits in 1994 of $1.8 million compared to
$1.1 million in 1993. The 1994 operating profits included a pretax gain of $1.1
million from the termination of a pension plan in the fourth quarter of 1994.
Revenues in each of 1993 and 1994 were approximately $3.0 million.

Operating profits in 1993 were $1.1 million on sales and operating revenues
of $3.0 million compared to operating profits of $2.1 million on sales and
operating revenues of $5.3 million in 1992. The decline in 1993 sales and
operating revenues and operating profits resulted from the sale of the Company's
U.S. materials handling operation in December 1992 and a new long-term contract
at the Company's Canadian materials handling operation.

Corporate. Corporate expenses in 1994 increased $3.4 million to $18.6
million from $15.2 million in 1993. Higher expenses for postretirement benefits,
performance incentives and legal services accounted for this increase.

Corporate income of $3.2 million in 1994 included additional interest of
$614 thousand on the proceeds from the sale of Heritage. In 1993, corporate
income was $2.7 million compared to $187 thousand in 1992. The 1993 income
includes $1.1 million of interest on an income tax refund and $1.5 million of
interest on supplemental payments from the December 30, 1992 sale of certain
coal assets. (See Note 4 to the Consolidated Financial Statements.) Corporate
expenses of $15.2 million in 1993 did not change significantly from 1992.

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<PAGE> 20

Interest expense of $4.5 million in 1994 was down 16% from 1993 due to
lower average debt in 1994. Higher interest expense in 1993, over 1992, included
the cost of the 8.73% Senior Notes due 2002.

The 1994 effective tax rate of 39% for continuing operations was higher
than the 1993 rate of 27% 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. (See Note 12 to
the Consolidated Financial Statements.)

LIQUIDITY AND FINANCIAL CONDITION

Net cash provided by operations for the first six months of 1995 was $2.2
million compared to $19.1 million for the comparable period in 1994. This
decrease resulted from additional working capital requirements and the loss of
operating cash flows from Heritage which was sold in the third quarter of 1994.
Cash used by discontinued coal activities in the first six months of 1995 was
$5.8 million compared to $8.9 million in the corresponding period of 1994. Cash
used in financing activities was $7.8 million and included $6.3 million paid for
dividends and $1.5 million paid on long-term debt, primarily related to
Westland. It is expected that $9.0 million of cash will be used in discontinued
coal operations in 1995.

Cash used by investing activities during the first six months of 1995
included capital expenditures of $16.2 million and proceeds from the sale of
property and equipment of $3.6 million, of which $412 thousand related to
discontinued coal operations. In July 1995, the Company acquired Slick 50 for
total consideration that included $22.0 million in cash and approximately $11.0
million in satisfaction of certain Slick 50 indebtedness.

Capital expenditures for 1995 are anticipated to be approximately $39.7
million. Approximately 62% is planned for use by the Motor Oil Division,
including Specialty and Westland, primarily for manufacturing upgrades and
capital commitments to enhance long-term branded motor oil volume. Another 21%
is allocated to Q Lube to convert Company stores to the Q Lube format.

Total debt at June 30, 1995 was $71.8 million, compared to $73.2 million at
December 31, 1994 with a total debt to total capital ratio of 22.4% and 22.5% at
June 30, 1995 and December 31, 1994, respectively. The Company had $68.2 million
of unused lines of credit at June 30, 1995.

In light of the Slick 50 acquisition and employee loans which the Company
has made in connection with its relocation to Dallas, Texas and in order to
facilitate the offering of the Notes contemplated hereby, the Company has
obtained waivers through December 30, 1995 from compliance with certain of the
covenants under the Note Agreement, dated as of September 1, 1992, as amended
(the "Note Agreement"), relating to the Company's 8.73% Senior Notes Due
September 30, 2002. The waivers relate to covenants requiring the Company to
maintain a specified minimum Consolidated Tangible Net Worth (as defined),
covenants restricting loans to employees and covenants relating to maximum
leverage and maintenance of a specified minimum fixed charge coverage ratio. The
Company has committed to the lenders under the Note Agreement that, upon
completion of the offering contemplated hereby, it will notify the lenders of
its intention to repay the indebtedness under the Note Agreement, as described
under "Use of Proceeds." In addition, on October 4, 1995, the Company executed a
$45.0 million credit agreement with Morgan Guaranty Trust Company of New York
(an affiliate of J.P. Morgan Securities Inc.), as agent, and terminated its
revolving credit agreement with a different group of banks which contained
covenants similar to those in the Note Agreement. The new credit agreement
expires on September 28, 1996.

Working capital at June 30, 1995 was approximately $129.9 million with a
ratio of current assets to current liabilities of 2.0 to 1.0 compared to $101.4
million and 1.8 to 1.0 at December 31, 1994.

Stockholders' equity at June 30, 1995 was $248.4 million compared to $251.9
million at December 31, 1994. The net deferred tax asset recorded on the balance
sheet at December 31, 1994 of $40.3 million 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.

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<PAGE> 21

On July 27, 1995, the Board of Directors of the Company declared a
quarterly dividend of $0.10 per share, payable September 15, 1995 to
shareholders of record as of August 15, 1995.

ADDITIONAL FINANCIAL AND OTHER INFORMATION

The effect of inflation has 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.

On May 25, 1995, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to increase the authorized number of
shares of Quaker State common stock from 37,500,000 to 95,000,000 shares.

On September 28, 1995, the Board of Directors of the Company adopted a
stockholder rights plan.

RECENT ACCOUNTING STATEMENTS

In March 1995, the Financial Accounting Standards Board issued Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. The new Standard must be
implemented in 1996. The Company is currently evaluating what effect, if any,
this Standard will have on its financial position and results of operations.

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<PAGE> 22

DESCRIPTION OF NOTES

The Notes will be issued under an Indenture, to be dated as of
, 1995 (the "Indenture") between the Company and Chemical Bank,
as Trustee (the "Trustee"), a form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Indenture do not purport to be complete,
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Indenture, including the definitions therein of certain
terms. Section references appearing below are references to sections in the
Indenture. Whenever particular sections or defined terms of the Indenture are
referred to herein, such sections and defined terms are incorporated herein by
reference.

GENERAL

The Notes will be unsecured obligations of the Company, will be limited to
$100,000,000 aggregate principal amount, will mature on , 2005
and will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company. The Notes are not redeemable prior to Maturity by
the Company except as provided below and do not provide for any sinking fund.
The Notes will bear interest at the rate per annum stated on the cover page of
this Prospectus from , 19 or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semi-annually on and of each year, commencing
, 19 , to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the preceding or
, as the case may be. (Sections 301 and 307)

Principal of (and premium, if any) and interest on the Notes will be
payable, and, subject to the limitations applicable to global securities, the
Notes will be exchangeable and transfers thereof will be registrable, at the
corporate trust office of the Trustee in New York, New York. In addition, at the
option of the Company, payment of interest may be made by check mailed to the
address of the Person entitled thereto as it appears in the Security Register.
Payment of any interest due on any Note will be made to the Person in whose name
such Note is registered at the close of business on the Regular Record Date for
such interest. (Sections 301, 305, 307 and 1002)

OPTIONAL REDEMPTION

The Notes will be redeemable in whole or in part, at the option of the
Company at any time, at a redemption price equal to the greater of (i) 100% of
their principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted, on a semiannual
basis, at the Treasury Yield plus 15 basis points, together with accrued
interest to the date of redemption. Interest shall be calculated on the basis of
a 360-day year consisting of twelve 30-day months.

Holders of Notes to be redeemed will receive notice thereof by first-class
mail at least 30 and not more than 60 days prior to the date fixed for
redemption.

GLOBAL NOTES; FORM, EXCHANGE AND TRANSFER

The Notes will be issued in the form of one or more fully registered global
securities (collectively, a "Global Note") registered in the name of The
Depository Trust Company (the "Depositary") or the Depositary's nominee. Such
Global Note will be deposited with, or on behalf of, the Depositary and will
bear a legend regarding the restrictions on exchange and registration of
transfer thereof as provided for in the Indenture. Unless and until it is
exchanged in whole or in part for Notes in definitive form as set forth below, a
Global Note may not be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary.

Upon the issuance of a Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Notes represented by such Global Note to the accounts of institutions that
have accounts with the Depositary or its nominee ("Participants"). The accounts
to be credited will be designated by the Underwriters, dealers or agents.
Ownership of beneficial interests in a

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<PAGE> 23

Global Note will be limited to Participants and to Persons that may hold
beneficial interests through Participants. Ownership of beneficial interests in
such Global Note will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to Participants' interests) or any such Participant (with respect
to interests of Persons held by such Participants on their behalf). The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. The depositary arrangements
described above and such laws may impair the ability to transfer or pledge
beneficial interests in a Global Note.

As long as the Depositary, or its nominee, is the registered Holder of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Note and the Notes
represented thereby for all purposes under the Notes and the Indenture. Except
as set forth below, owners of beneficial interests in the Global Note will not
be entitled to have the Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Notes in definitive form and will not be considered to be the
owners or Holders of any Notes under the Indenture. Accordingly, each Person
owning a beneficial interest in a Global Note must rely on the procedures of the
Depositary and, if such Person is not a Participant, on the procedures of the
Participant through which such Person owns its interest, to exercise any rights
of a Holder of Notes under the Indenture or such Global Note. The Company
understands that under existing industry practice, in the event the Company
requests any action of Holders of Notes or an owner of a beneficial interest in
a Global Note desires to take any action that the Depositary, as the holder of
such Global Note, is entitled to take, the Depositary would authorize the
Participants to take such action, and that the Participants would authorize
beneficial owners owning through such Participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.

All payments of principal of (and premium, if any) and interest on a Global
Note will be made to the Depositary or its nominee, as the case may be, as the
Holder thereof. The Company has been advised that the Depositary, upon receipt
of any payment of principal of (and premium, if any) or interest in respect of a
Global Note, will credit immediately the accounts of the Participants with such
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interest in the Global Note as shown on the records of the
Depositary. The Company expects that payments by Participants to owners of
beneficial interests in a Global Note held through such Participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such Participants. None of
the Company, the Trustee or any agent of the Company or the Trustee will have
any responsibility or liability for any aspect of the Depositary's or any
Participant's records relating to, or for payments made on account of,
beneficial interests in a Global Note, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.

Notes represented by a Global Note will be exchangeable for Notes in
definitive form of like tenor as such Global Note in denominations of $1,000 and
in any greater amount that is an integral multiple thereof if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for such Global Note and is not replaced by a successor depositary approved by
the Trustee, or if at any time the Depositary ceases to be a clearing agency
registered under the Exchange Act, (ii) the Company in its sole discretion at
any time determines not to have all of the Notes represented by the Global Note
and notifies the Trustee thereof or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes represented by such
Global Note. Any Global Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated Notes in definitive form issuable in
authorized denominations and registered in such names as the Depositary shall
direct and an owner of a beneficial interest in a Global Note will be entitled
to physical delivery of such Notes in definitive form. Subject to the foregoing,
a Global Note is not exchangeable except for a Global Note or Global Notes of
the same aggregate denominations to be registered in the name of the Depositary
or its nominee. (Sections 204 and 305)

Subject to the terms of the Indenture and the limitations applicable to
Global Notes, Notes may be presented for exchange as provided above or for
registration of transfer (duly endorsed or with the form of transfer endorsed
thereon duly executed) at the office of the Security Registrar or at the office
of any transfer agent designated by the Company for such purpose. No service
charge will be made for any registration of

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<PAGE> 24

transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the Person making the request. The Company
has appointed the Trustee as Security Registrar. (Section 305) The Company may
at any time designate additional transfer agents or rescind the designation of
any transfer agent or approve a change in the office through which any transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each Place of Payment for the Notes. (Section 1002)

The Depositary has advised the Company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of Participants and to facilitate the
clearance and settlement of securities transactions among the Participants in
deposited securities through electronic book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of securities
and certificates. Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations, some of which (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants"). Persons who are not Participants may
beneficially own securities held by the Depositary only through Participants or
indirect Participants. The rules applicable to the Depositary and the
Participants are on file with the Commission. The Depositary currently accepts
only notes denominated and payable in U.S. dollars.

SAME DAY SETTLEMENT AND PAYMENT

Settlement for the Notes will be made by the Underwriters in immediately
available funds. Secondary trading in notes and debentures of corporate issuers
is generally settled in clearinghouse (next-day) funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity, and
secondary market trading activity in the Notes will therefore settle in
immediately available funds. No assurance can be given as to the effect, if any,
of settlements in immediately available funds on trading activity in the Notes.

CERTAIN COVENANTS OF THE COMPANY

Restrictions on Liens

The Indenture contains a covenant providing that so long as any of the
Notes are Outstanding, the Company will not, and will not permit any Restricted
Subsidiary to, issue, assume, incur or guarantee any Indebtedness secured by a
Lien on or with respect to any Principal Property of the Company or any
Restricted Subsidiary, or upon any shares of capital stock or indebtedness of
any Restricted Subsidiary, whether now owned or leased or hereafter acquired,
without in any such case effectively providing that the Notes shall be secured
equally and ratably with (or prior to) such Indebtedness, except that the
foregoing restrictions shall not apply to (a) Liens existing as of the date of
the Indenture, (b) Liens to secure the payment of all or any part of the
purchase price or cost of construction or improvements in respect of property or
properties acquired by the Company or a Restricted Subsidiary after the date of
the Indenture securing Indebtedness incurred prior to, at the time of, or within
270 days after, the acquisition of any such property or the completion of any
such construction or improvements and which secure indebtedness not in excess of
the amount expended in the acquisition of, or construction or improvements on,
such properties, (c) Liens upon any property owned or leased by any Restricted
Subsidiary when it becomes a Restricted Subsidiary, (d) Liens existing on any
property at the time of its acquisition by the Company or a Restricted
Subsidiary (including acquisition through merger or consolidation), (e) Liens
securing Indebtedness of a Restricted Subsidiary to the Company or to another
Restricted Subsidiary and (f) the extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or in part, of any
Lien referred to in the foregoing clauses (a) through

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<PAGE> 25

(e), or of any Indebtedness secured thereby, but only if the principal amount of
Indebtedness secured by the Lien immediately prior thereto is not increased and
the Lien is not extended to other property. Notwithstanding the foregoing, the
Company or any Restricted Subsidiary may issue, assume, incur or guarantee
Indebtedness secured by Liens which otherwise would be subject to the foregoing
restrictions, in an aggregate amount which, together with all other such
Indebtedness outstanding secured by Liens as provided above (not including
Indebtedness excluded as provided in clauses (a) through (f) above) and all
Attributable Debt in respect of Sale and Leaseback Transactions which would not
be permitted by either clause (a), (b) or (c) under "Restrictions on Sale and
Leaseback Transactions" below, does not exceed 15% of Consolidated Net Tangible
Assets.

Restrictions on Sale and Leaseback Transactions

The Indenture contains a covenant providing that so long as any of the
Notes are Outstanding, the Company will not, nor will it permit any Restricted
Subsidiary to, enter into any arrangement with any Person (other than the
Company or a Restricted Subsidiary) providing for the leasing by the Company or
any Restricted Subsidiary of any Principal Property, whether now owned or
hereafter acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such Persons with the intention of
taking back a lease on such property (a "Sale and Leaseback Transaction") unless
(a) such transaction involves a lease or right to possession or use for a
temporary period not to exceed three years following such sale, by the end of
which it is intended that the use of such property by the lessee will be
discontinued, (b) the Company or such Restricted Subsidiary would, on the
effective date of such transaction, be entitled to issue, assume or guarantee
Indebtedness secured by a Lien on such property at least equal in an amount to
the Attributable Debt in respect thereof, without equally and ratably securing
the Notes as set forth in the Indenture, or (c) if the proceeds of such sale (i)
are equal to or greater than the fair market value (as determined by the Board
of Directors of the Company) of such property and (ii) are applied within 270
days after the receipt of the proceeds of sale or transfer to either the
purchase or acquisition of fixed assets or equipment used in the operation of
the business or the construction of fixed improvements on real property or to
the repayment of Notes or Senior Funded Debt of the Company or any Restricted
Subsidiary. The preceding restrictions shall not apply to any Sale and Leaseback
Transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries. Notwithstanding the foregoing, the Company or any
Restricted Subsidiary may enter into Sale and Leaseback Transactions in addition
to any permitted by the two immediately preceding sentences and without any
obligation to retire any Notes or other Indebtedness, provided that, at the time
of entering into such Sale and Leaseback Transactions, and after giving effect
thereto, the amount of Attributable Debt in respect of such Sale and Leaseback
Transaction, together with all such other Attributable Debt outstanding and all
Indebtedness outstanding secured by Liens (not including Indebtedness excluded
as provided in clauses (a) through (f) under "Restrictions on Liens" above),
does not exceed 15% of Consolidated Net Tangible Assets.

Certain Definitions. Set forth below are certain significant terms which
are defined in Section 101 of the Indenture:

"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
at the time of determination, the then present value (discounted at the actual
rate of interest of such transaction) of the obligation of the lessee for net
rental payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).

"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
Notes. "Independent Investment Banker" means CS First Boston Corporation or, if
such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee.

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<PAGE> 26

"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption
date.

"Consolidated" when used with respect to any of the terms defined in the
Indenture, refers to such terms as reflected in a consolidation of the accounts
of the Company and its Subsidiaries in accordance with GAAP.

"Funded Debt" means Indebtedness of the Company and its Restricted
Subsidiaries, whether incurred, assumed or guaranteed, which by its terms
matures more than one year from the date of creation thereof, or which is
extendable or renewable at the sole option of the obligor so that it may become
payable more than one year from such date.

"GAAP" means, unless otherwise specified in the Indenture, such accounting
principles as are generally accepted in the United States as of the date of the
relevant calculation.

"Indebtedness" of any person means, without duplication, notes, bonds,
debentures or other evidences of indebtedness for borrowed money and all
indebtedness under purchase money mortgages or other purchase money liens or
conditional sales or similar title retention agreements, in each case where such
indebtedness has been created, incurred, assumed or guaranteed by such person or
where such person is otherwise liable therefor, and indebtedness for borrowed
money secured by any mortgage, pledge or other lien or encumbrance upon property
owned by such person even though such person has not assumed or become liable
for the payment of such indebtedness.

"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority, or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).

"Net Tangible Assets" means the total amounts of assets (less depreciation
and valuation reserves and other reserves and items deductible from gross book
value of specific asset accounts under generally accepted accounting principles)
which under GAAP would be included on a balance sheet after deducting therefrom
(a) all liability items except Funded Debt and stockholders' equity and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, which in each such case would be so included
on such balance sheet.

"Principal Property" means any refinery, processing or manufacturing plant
(together with any pipeline, terminal or other facility related to such refinery
or processing or manufacturing plant and necessary for its economic operation),
blending, packaging or bulk materials handling facility, distribution center,
service center or store in any case located in the United States or Canada and
owned or leased by the Company or a Subsidiary or any interest of the Company or
any Subsidiary in such property (in each case including the real estate related
thereto), except any such property which the Company's Board of Directors, in
its good faith opinion, reasonably determines not to be of material importance
to the business of the Company and its Subsidiaries, as evidenced by a Board
Resolution.

"Reference Treasury Dealer" means each of CS First Boston Corporation and
J.P. Morgan Securities Inc. and their respective successors; provided, however,
that if any of the foregoing shall cease to be a primary

25
<PAGE> 27

U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.

"Restricted Subsidiary" means any Subsidiary that owns or leases any
Principal Property.

"Senior Funded Debt" means all Funded Debt, except Funded Debt the payment
of which is subordinated to the payment of the Notes.

"Subsidiary" means a corporation, partnership or other business entity of
which more than 50% of the outstanding voting stock is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting stock" means stock which ordinarily has voting power for the election of
directors, managers or trustees, whether at all times or only so long as no
senior class of stock has such voting power by reason of any contingency.

"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.

CONSOLIDATION, MERGER AND DISPOSITION OF ASSETS

The Company may not consolidate with or merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, any Person, and
may not permit any Person to consolidate with or merge into, or convey, transfer
or lease its properties and assets substantially as an entirety to, the Company,
unless (a) the successor is a Person organized and validly existing under the
laws of any domestic jurisdiction, and such successor, if other than the
Company, expressly assumes the Company's obligations under the Indenture and the
Notes, (b) immediately after giving effect to such transaction, no Event of
Default under the Indenture or event which, after notice or lapse of time or
both, would become an Event of Default thereunder would exist and be continuing,
(c) if, as a result of such transaction, properties or assets of the Company
would become subject to a Lien that would not be permitted under the limitation
on Liens described above under "Certain Covenants of the Company," the Company
takes such steps as shall be necessary to secure the Notes equally and ratably
with (or prior to) all indebtedness secured by such Lien and (d) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such transaction complies with the Indenture. Upon compliance
with these provisions, the successor Person will succeed to, and be substituted
for, the Company under the Indenture, and the Company will be relieved (except
in the case of a lease) of its obligations under the Indenture and the Notes.
(Sections 801 and 802)

EVENTS OF DEFAULT

Each of the following will constitute an "Event of Default" under the
Indenture with respect to the Notes: (a) default in the payment of any interest
upon any Note when due, continued for 30 days, (b) default in the payment of
principal of (or premium, if any, on) any Note, (c) default in the performance,
or breach, of any covenant or warranty of the Indenture (other than a covenant
or warranty otherwise specifically dealt with in the Indenture) continued for 60
days after written notice to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 10% in principal amount of the
Outstanding Notes, (d) default in the payment of principal at maturity (subject
to any applicable grace period) of any indebtedness for money borrowed by the
Company or any Subsidiary in an aggregate principal amount of $15 million or
more or the acceleration of such indebtedness, if such acceleration is not
rescinded or annulled within 10 days after written notice as specified in clause
(c), and (e) certain events of bankruptcy, insolvency or reorganization.
(Section 501)

If an Event of Default (other than an Event of Default described in clause
(e) above) with respect to the Outstanding Notes shall occur and be continuing,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes may, by notice in writing to the Company (and to
the Trustee if given by Holders), declare the principal amount of all Notes to
be due and payable immediately. If an Event of Default described in clause (e)
above with respect to the Notes shall occur, the principal amount

26
<PAGE> 28

of all the Notes will automatically, and without any action by the Trustee or
any Holder, become immediately due and payable. (Section 502) After any such
acceleration, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Notes may, under certain circumstances, rescind and
annul such acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
(Section 502) For information as to waiver of defaults, see "--Modification and
Waivers."

The Indenture will provide that the Trustee shall, within 90 days after the
occurrence of a default with respect to the Notes, give to the Holders of the
Notes notice of such default known to it, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
payment of the principal of or interest on any of the Notes, the Trustee shall
be protected in withholding such notice if in good faith it determines that the
withholding of such notice is in the interest of such Holders; and provided,
further, that in the case of a default in respect of certain covenants and
warranties, no such notice shall be given until at least 60 days after the
occurrence of such default. (Section 602) The Indenture provides that, subject
to the duty of the Trustee during a default to act with the required standard of
care, the Trustee will not be under an obligation to exercise any right or power
under the Indenture at the request or direction of any of the Holders, unless
the Holders shall have offered to the Trustee a reasonable indemnity. (Sections
601 and 603) The Indenture provides that the Holders of a majority in aggregate
principal amount of the Outstanding Notes may direct the time, method and place
of conducting proceedings for remedies available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Notes. (Section
512)

No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (a) such Holder shall have previously
given to the Trustee written notice of a continuing Event of Default with
respect to the Notes, (b) the Holders of not less than 25% in aggregate
principal amount of the Outstanding Notes shall have made written request to the
Trustee to institute proceedings as Trustee, (c) such Holder or Holders shall
have offered to the Trustee reasonable indemnity, (d) the Trustee shall have
failed to institute such proceeding within 60 days thereafter and (e) the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request. (Section 507) However, such limitations do not apply to a suit
instituted by a Holder of a Note for the enforcement of payment of the principal
of and premium, if any, or interest on such Note or after the applicable due
date specified in such Note. (Section 508)

The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of its obligations under the Indenture and
as to any default in such performance. (Section 1004)

MODIFICATION AND WAIVERS

Modifications and amendments of the Indenture may be made by the Company
and the Trustee, with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes, by executing supplemental indentures
for the purpose of adding any provisions to, or changing or eliminating any of
the provisions of, the Indenture or modifying the rights of the Holders of the
Outstanding Notes; provided, that no such modification or amendment may, without
the consent of the Holders of each Outstanding Note affected thereby, (a) change
the Stated Maturity of the principal of, or any installment of interest on, any
Note, (b) reduce the principal amount of, or premium or interest on, any Note,
(c) change the place or currency of payment of principal of, or the premium or
any interest on, any Note, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note when due, (e) reduce
the percentage of aggregate principal amount of Outstanding Notes necessary to
modify or amend the Indenture or for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, or (f) modify
certain provisions of the Indenture with respect to modification and waiver.
(Section 902)

The Holders of at least a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1010) The Holders of not less than a
majority in aggregate principal amount of the Outstanding Notes may waive any
past default

27
<PAGE> 29

under the Indenture, except a default in the payment of the principal of (or
premium, if any) or interest on any Note and certain covenants and provisions of
the Indenture which cannot be modified or amended without the consent of the
Holder of each Outstanding Note. (Section 513)

DEFEASANCE AND COVENANT DEFEASANCE

Defeasance and Discharge

The Indenture will provide that the Company, at its option, (a) will be
discharged from any and all obligations with respect to the Notes (except for
certain obligations which include exchanging or registering the transfer of the
Notes, replacing stolen, lost or mutilated Notes, maintaining paying agencies
and holding monies for payment in trust) ("defeasance"), or (b) need not comply
with certain restrictive covenants of the Indenture ("covenant defeasance"), and
the occurrence of certain Events of Default will be deemed not to be or result
in an Event of Default with respect to the Notes, upon the deposit with the
Trustee, in trust for the benefit of the Holders of the Notes, of money or U.S.
Government Obligations, or both, which through the payment of principal of (or
premium, if any) and interest in respect thereof in accordance with their terms
will provide money in an amount sufficient to pay principal of and any premium
and interest on the Notes on the dates such payments are due in accordance with
the terms of the Indenture. To establish such defeasance or covenant defeasance,
the Company will be required to meet certain conditions, including delivery to
the Trustee of an Opinion of Counsel to the effect that the Holders of the Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred. In the case of defeasance pursuant to clause (a), such Opinion of
Counsel must refer to and be based upon either (i) a ruling received by the
Company from, or published by, the Internal Revenue Service or (ii) a change in
applicable Federal income tax law after the date of the Indenture. (Article 11)

Defeasance and Events of Default

In the event the Company establishes covenant defeasance and the Notes are
declared due and payable because of the occurrence of any Event of Default, the
amount of money and U.S. Government Obligations on deposit with the Trustee
should be sufficient to pay amounts due on the Notes at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Notes at the time
of the acceleration resulting from such Event of Default. In such case, the
Company would remain liable for such payments. (Sections 1103 and 1104)

NOTICES

Notices to Holders of Notes will be given by mail to the addresses of such
Holders as they may appear in the Security Register. (Sections 106 and 305)

TITLE

The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Note is registered as the absolute owner
thereof (whether or not such Note may be overdue) for the purpose of making
payment and for all other purposes. (Section 308)

GOVERNING LAW

The Indenture and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 112)

CONCERNING THE TRUSTEE

Chemical Bank is the Trustee under the Indenture. The Company may maintain
banking and other commercial relationships with the Trustee in the ordinary
course of business. (See "Underwriting.")

28
<PAGE> 30

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated , 1995 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters"), for whom CS First Boston
Corporation and J.P. Morgan Securities Inc. are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from the
Company the following respective principal amounts of the Notes:

<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
------------ ---------
<S> <C>
CS First Boston Corporation............................................ $
J.P. Morgan Securities Inc. ...........................................
Chemical Securities Inc. ..............................................
NationsBanc Capital Markets, Inc. .....................................
------------
Total........................................................ $100,000,000
============
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all the Notes, if any are purchased.
The Underwriting Agreement provides that, in the event of a default by an
Underwriter, in certain circumstances the purchase commitments of non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.

The Company has been advised by the Representatives that the Underwriters
propose to offer the Notes to the public initially at the public offering price
set forth on the cover page of this Prospectus and, through the Representatives,
to certain dealers at such price less a concession of % of the principal
amount per Note, and the Underwriters and such dealers may allow a discount of
% of such principal amount per Note on sales to certain other dealers.
After the initial public offering, the public offering price and concession and
discount to dealers may be changed by the Representatives.

Application will be made to have the Notes approved for listing on the New
York Stock Exchange.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof.

In the ordinary course of their respective businesses, the Representatives
and Chemical Securities Inc. and their respective affiliates have engaged, and
may in the future engage, in financial advisory, commercial banking and
investment banking transactions with the Company and affiliates of the Company.
Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan
Securities Inc., is the sole agent for the Company's $45.0 million credit
agreement, dated as of September 29, 1995. Chemical Bank, an affiliate of
Chemical Securities Inc., is Trustee under the Indenture related to the Notes.
(See "Description of Notes -- Concerning the Trustee.")

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Company prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Notes.

29
<PAGE> 31

REPRESENTATIONS OF PURCHASERS

Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Company and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION AND ENFORCEMENT

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Notes to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes acquired
by such purchaser pursuant to this offering. Such report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #88/5, a
copy of which may be obtained from the Company. Only one such report must be
filed in respect of Notes acquired on the same date and under the same
prospectus exemption.

VALIDITY OF NOTES

The validity of the Notes will be passed upon for the Company by Sullivan &
Cromwell, New York, New York. Certain legal matters will be passed upon for the
Underwriters by Dewey Ballantine, New York, New York.

EXPERTS

The consolidated financial statements of the Company and its Subsidiaries
at December 31, 1994 and 1993 and for each of the three years in the period
ended December 31, 1994 appearing in this Prospectus and the consolidated
financial statements and the related financial statement schedule included in
the Company's Annual Report on Form 10-K which is incorporated by reference into
the Registration Statement have been audited by Coopers & Lybrand L.L.P.,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein by reference and in the Registration Statement, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

30
<PAGE> 32

QUAKER STATE CORPORATION

YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
REPORT OF COOPERS & LYBRAND L.L.P., INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....... F-5
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Operations for each of the three years in the period
ended December 31, 1994....................................................... F-6
Consolidated Statement of Cash Flows for each of the three years in the period
ended December 31, 1994....................................................... F-7
Consolidated Balance Sheet as of December 31, 1994 and 1993...................... F-8
Consolidated Statement of Stockholders' Equity for each of the three years in the
period ended December 31, 1994................................................ F-9
Notes to Consolidated Financial Statements....................................... F-10-24
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Operations for each of the six-month periods ended June
30, 1995 and 1994............................................................. F-25
Consolidated Statement of Cash Flows for each of the six-month periods ended June
30, 1995 and 1994............................................................. F-26
Consolidated Balance Sheet as of June 30, 1995................................... F-27
Other Financial Information for each of the six-month periods ended June 30, 1995
and 1994...................................................................... F-28
Notes to Consolidated Financial Statements....................................... F-29-31
</TABLE>

F-1
<PAGE> 33

SEGMENT INFORMATION

The company's operations are organized into four 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. Truck-Lite manufactures
and sells automotive and heavy-duty truck lighting. The Materials Handling
operation is a bulk material handling dock accessible to Lake Superior at
Thunder Bay, Ontario, Canada.

Intersegment Motor Oil 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 Natural Gas Exploration and
Production Division which was discontinued in the second quarter of 1995,
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, 4 and 17 of
Notes to Consolidated Financial Statements.)

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<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
Truck-Lite......................................... 99,638 80,776 63,878
Materials Handling................................. 2,997 2,955 5,319
Intersegment Motor Oil sales....................... (24,880) (21,290) (21,950)
-------- -------- --------
Total.............................................. $732,634 $607,085 $592,650
======== ======== ========
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)
-------- -------- --------
Truck-Lite......................................... 11,756 5,731 (3,665)
Materials Handling................................. 1,753 1,138 2,137
-------- -------- --------
Total operating profits............................ 35,636 27,398 20,566
-------- -------- --------
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............................................ $ 15,668 $ 9,525 $ 901
======== ======== ========
</TABLE>

F-2
<PAGE> 34

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Motor Oil.......................................... $309,894 $144,687 $151,348
Q Lube............................................. 113,733 114,703 122,692
Truck-Lite......................................... 37,497 33,433 37,501
Materials Handling................................. 2,481 2,112 3,438
Discontinued operations............................ 49,449 389,179 355,794
-------- -------- --------
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
Truck-Lite......................................... 2,978 1,884 1,583
Materials Handling................................. -- 5 135
Discontinued operations............................ 8,618 10,890 12,976
-------- -------- --------
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
Truck-Lite......................................... 2,426 2,496 2,393
Materials Handling................................. 38 38 895
Discontinued operations............................ 10,414 9,578 15,006
-------- -------- --------
Total.............................................. $ 32,259 $ 28,758 $ 35,083
======== ======== ========
</TABLE>

F-3
<PAGE> 35

QUAKER STATE CORPORATION AND SUBSIDIARIES

FIVE-YEAR SUMMARY OF NET INCOME AND COMPARATIVE STATISTICAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Sales and operating revenues....................... $732,634 $607,085 $592,650 $577,613 $649,892
Other, net......................................... 6,923 5,595 4,063 4,450 4,694
----------- ----------- ----------- ----------- -----------
Total............................................ 739,557 612,680 596,713 582,063 654,586
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales and operating costs.................. 503,539 421,894 408,830 399,747 473,219
Selling, general and administrative................ 193,390 156,359 158,920 139,709 140,112
Depreciation and amortization...................... 21,845 19,181 20,077 20,148 20,796
Interest........................................... 5,115 5,721 4,785 4,567 5,172
Unusual items...................................... -- -- 3,200(c) -- (5,398)(d)
----------- ----------- ----------- ----------- -----------
Total............................................ 723,889 603,155 595,812 564,171 633,901
----------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES............................... 15,668 9,525 901 17,892 20,685
PROVISION FOR INCOME TAXES......................... 6,167 2,534 245 7,443 7,518
----------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES..................... 9,501 6,991 656 10,449 13,167
INCOME (LOSS) FROM DISCONTINUED OPERATIONS(a)...... 9,265 6,711 (31,904) 5,090 6,390
----------- ----------- ----------- ----------- -----------
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..................... $ .33 $ .25 $ .02 $ .39 $ .48
Income (loss) from discontinued operations(a)...... .33 .25 (1.17) .19 .24
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
=========== =========== =========== =========== ===========
</TABLE>

- ---------------
(a) In the second quarter of 1995 the company discontinued its Natural Gas
Exploration and Production (E&P) business. Prior year amounts have been
reclassified to exclude E & P activities. In the second quarter of 1994 the
company decided to exit the insurance business. 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, 4 and 17 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.

F-4
<PAGE> 36

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 methods 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, except as to Note 17, for which
the date is August 9, 1995.

F-5
<PAGE> 37

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
REVENUES
Sales and operating revenues............................... $732,634 $607,085 $592,650
Other, net................................................. 6,923 5,595 4,063
-------- -------- --------
Total.................................................... 739,557 612,680 596,713
-------- -------- --------
COSTS AND EXPENSES
Cost of sales and operating costs.......................... 503,539 421,894 408,830
Selling, general and administrative........................ 193,390 156,359 158,920
Depreciation and amortization.............................. 21,845 19,181 20,077
Interest................................................... 5,115 5,721 4,785
Unusual item (Note 5)...................................... -- -- 3,200
-------- -------- --------
Total.................................................... 723,889 603,155 595,812
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES.................. 15,668 9,525 901
-------- -------- --------
PROVISION FOR (BENEFIT FROM) INCOME TAXES (NOTE 12)
Current.................................................... 9,550 9,800 6,064
Deferred................................................... (3,383) (7,266) (5,819)
-------- -------- --------
Total.................................................... 6,167 2,534 245
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES.................................... 9,501 6,991 656
-------- -------- --------
DISCONTINUED OPERATIONS (NOTES 3, 4 AND 17)
Income from operations, net of taxes....................... 8,888 6,711 5,796
Income (loss) on disposition, net of taxes................. 377 -- (37,700)
-------- -------- --------
Total.................................................... 9,265 6,711 (31,904)
-------- -------- --------
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.................................... $ .33 $ .25 $ .02
INCOME (LOSS) FROM DISCONTINUED OPERATIONS................. .33 .25 (1.17)
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.

F-6
<PAGE> 38

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
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................................................... (4,711) 2,746 (8,011)
Inventories................................................... (3,894) 11,887 (3,705)
Other current assets.......................................... 3,911 1,708 7,817
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 operations.............................. 7,626 12,626 5,801
-------- --------- ---------
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.

F-7
<PAGE> 39

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
(IN THOUSANDS
EXCEPT SHARE DATA)
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................................................... 91,858 55,290
Inventories (Note 6)................................................... 73,442 39,954
Deferred income taxes (Note 12)........................................ 11,790 18,375
Other current assets................................................... 11,708 16,911
Discontinued operation assets (Note 17)................................ 3,537 2,234
-------- --------
Total current assets................................................. 222,140 138,984
-------- --------
Property, plant and equipment, net of accumulated depreciation
(Note 7).............................................................. 199,983 175,047
Discontinued operation assets (Note 17)................................ 37,491 40,458
Other assets (Note 6).................................................. 170,404 93,226
-------- --------
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.

F-8
<PAGE> 40

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOREIGN
CURRENCY
CAPITAL ADDITIONAL RETAINED TRANSLATION UNEARNED
STOCK CAPITAL EARNINGS ADJUSTMENT COMPENSATION TOTAL
------- ---------- -------- ----------- ------------ --------
(IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
<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.

F-9
<PAGE> 41

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

F-10
<PAGE> 42

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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 and Natural Gas Exploration and Production operations
have also been excluded.

<TABLE>
<CAPTION>
1994 1993
----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues..................................................... $ 981,945 $ 895,197
Income from continuing operations............................ $ 12,216 $ 9,506
Income per share from continuing operations.................. $ .39 $ .30
</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.

F-11
<PAGE> 43

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
1994 1993 1992
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues......................................... $ 87,566 $ 131,265 $ 114,440
Costs 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>
1992
---------------
(IN THOUSANDS)
<S> <C>
Revenues............................................... $ 95,140
Costs and expenses..................................... (102,181)
---------
Loss before income taxes............................... (7,041)
Income tax benefit..................................... 4,100
---------
Net income............................................. $ (2,941)
=========
</TABLE>

F-12
<PAGE> 44

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Crude oil........................................................ $ 1,328 $ 2,442
Finished and in-process petroleum products....................... 49,252 23,225
Other............................................................ 22,862 14,287
------ ------
Total............................................................ $73,442 $39,954
====== ======
</TABLE>

The reserve to reduce the carrying value of inventories from current costs
to the LIFO basis amounted to $19,915,000 in 1994 and $18,807,000 in 1993.

At December 31, 1994 and 1993, $38,268,000 and $19,734,000, 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>
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Goodwill........................................................ $ 58,656 $ 4,756
Other intangible assets......................................... 32,861 6,184
Deferred tax asset.............................................. 39,300 45,130
Notes and royalties receivable.................................. 28,726 27,998
Prepaid pension cost............................................ 9,483 8,423
Other........................................................... 1,378 735
------- ------
Total........................................................... $170,404 $93,226
======= ======
</TABLE>

F-13
<PAGE> 45

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. PROPERTY, PLANT AND EQUIPMENT

Major classes of property, including land and construction work in progress
of $45,205,000 in 1994 and $46,961,000 in 1993 are:

<TABLE>
<CAPTION>
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
MOTOR OIL
Refining..................................................... $ 97,710 $ 97,453
Marketing.................................................... 126,360 98,425
Q LUBE......................................................... 122,611 118,316
TRUCK-LITE..................................................... 31,341 33,595
MATERIALS HANDLING............................................. 12,948 12,948
------- -------
Subtotal..................................................... 390,970 360,737
Less: accumulated depreciation................................. 190,987 185,690
------- -------
Total.......................................................... $199,983 $175,047
======= =======
</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>
1994 1993
------- -------
(IN THOUSANDS)
<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 --
Other, 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
======= =======
</TABLE>

(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

F-14
<PAGE> 46

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

company, 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.

(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 installments
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
receivable, 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-$14,200,000; 1996-$11,500,000; 1997-$10,600,000;
1998-$8,800,000; 1999-$7,200,000 and thereafter $56,500,000.

Rental expenses for continuing operations amounted to approximately
$15,500,000 for 1994, $15,200,000 for 1993 and $15,500,000 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 re-refining 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
exclusivity rights; however, Q Lube is not obligated to pay in full for these
rights. Q Lube paid $500,000 in 1994 for these rights.

F-15
<PAGE> 47

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 commended 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.

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

F-16
<PAGE> 48

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

F-17
<PAGE> 49

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 canceled....................... (80,833) (74,460) (45,180)
--------- --------- ---------
Outstanding stock options at end of year.......... 1,607,071 1,343,904 1,073,414
========= ========= =========
</TABLE>

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>
1994 1993 1992
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic $12,914 $8,471 $(1,140)
Foreign 2,754 1,054 2,041
------ ----- ------
Total $15,668 $9,525 $ 901
====== ===== ======
</TABLE>

The components of the provision for income taxes from continuing operations
are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $ 7,170 $ 6,394 $ 2,395
State............................................... 680 2,056 1,369
Foreign............................................. 1,700 1,350 2,300
Deferred:
Federal............................................. (2,827) (4,531) (3,160)
State............................................... 44 (1,835) (859)
Foreign............................................. (200) -- (600)
Tax credits amortized............................... (400) (900) (1,200)
----- ------ ------
Total................................................. $ 6,167 $ 2,534 $ 245
===== ====== ======
</TABLE>

F-18
<PAGE> 50

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
1994 1993 1992
---- ----- -----
(% OF PRETAX INCOME)
<S> <C> <C> <C>
Federal statutory tax rate........................................... 35.0 35.0 34.0
Add (deduct) the tax effect of:
Investment credit.................................................. (2.4) (6.6) (87.5)
Net adjustment to valuation allowance.............................. -- (14.3) --
Enacted rate change................................................ -- (12.4) --
Other tax credits.................................................. (1.2) (2.1) (5.7)
State and foreign income taxes..................................... 4.7 11.7 22.2
Other, net......................................................... 3.2 15.3 64.2
---- ----- -----
Effective tax rate................................................... 39.3 26.6 27.2
==== ===== =====
</TABLE>

The deferred tax assets and liabilities as of December 31, 1994 and 1993
are as follows:

<TABLE>
<CAPTION>
DEFERRED DEFERRED DEFERRED
TAX DEFERRED TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
1994 1994 1993 1993
------- ------------ -------- -----------
(IN THOUSANDS)
<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.

F-19
<PAGE> 51

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net pension cost for 1994, 1993, 1992 is summarized below:

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<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>
1994 1993
-------- --------
(IN THOUSANDS)
<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>

Significant assumptions used in determining net pension costs and related
pension obligations are:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate................................................. 8% 7% 7 1/2%
Rate of increase in compensation levels....................... 4 1/2% 4 1/2% 4 1/2%
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 Materials Handling operation terminated a pension plan that
resulted in a pre-tax gain of $1,100,000.

F-20
<PAGE> 52

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
1994 1993 1992
------ ------ -------
(IN THOUSANDS)
<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 operations cost...................... 267 257 6,591
------ ------ -------
Continuing operations cost.............................. $7,235 $7,750 $ 3,759
====== ====== =======
</TABLE>

The accumulated postretirement benefit obligation (APBO) at December 31,
1994 and 1993 is summarized below:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<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>

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.

F-21
<PAGE> 53

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 for 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

<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------------- ------------------- ------------------- -------------------
1994 1993 1994 1993 1994 1993 1994 1993
-------- -------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues (a).............. $168,515 $144,431 $161,545 $158,217 $179,702 $154,765 $222,872 $149,672
Gross profit
(a)(b)(c)(d)............ 58,586 42,520 50,958 48,162 57,051 48,881 62,500 45,628
Income from continuing
operations (a)(e)....... 2,284 126 1,622 1,169 3,872 5,101 1,724 595
Income (loss) from
discontinued
operations.............. 3,299 3,277 3,447 3,212 1,526 (1,125) 992 1,347
Net income................ $ 5,583 $ 3,403 $ 5,069 $ 4,381 $ 5,398 $ 3,976 $ 2,716 $ 1,942
======== ======== ======== ======== ======== ======== ======== ========
PER SHARE:
Income from continuing
operations.............. $ .08 $ .01 $ .06 $ .04 $ .14 $ .18 $ .06 $ .02
Income (loss) from
discontinued
operations.............. .12 .12 .13 .12 .05 (.04) .03 .05
Net Income................ .20 .13 .19 .16 .19 .14 .09 .07
Dividends................. .10 .20 .10 .20 .10 .10 .10 .10
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

- ---------------
(a) In the second quarter of 1995, the company discontinued the Natural Gas
Exploration and Production (E & P) business and reported it as a
discontinued operation. Amounts exclude E & P activities which are reported
as discontinued operations (refer to Note 17). 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 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.

F-22
<PAGE> 54

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(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.

15. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
1994 1993 1992
-------- ------ -------
(IN THOUSANDS)
<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 pages F-2 and F-3 of this report.

17. SUBSEQUENT EVENTS

On July 11, 1995, Quaker State completed the acquisition of all the stock
of Slick 50 through the merger of Slick 50 into a wholly owned subsidiary of
Quaker State named Quaker State -- Slick 50, Inc. The consideration given in the
acquisition included payment of approximately $22,000,000 in cash and the
issuance of 1,260,403 shares of Quaker State capital stock. In addition, the
company paid approximately $11,000,000 to satisfy certain Slick 50 indebtedness
outstanding prior to the closing. Under the terms of the Merger Agreement,
additional consideration may be payable by Quaker State for Slick 50 stock
depending upon the merged company's performance during the fiscal years ending
December 31, 1996, 1997 and 1998 but subject to offset for indemnification
obligations of Slick 50 stockholders under the Merger Agreement. The acquisition
will be accounted for under the purchase method.

On August 9, 1995 the company sold most of the assets of its Natural Gas
Exploration and Production Division. Accordingly, the operating results of the
Natural Gas Exploration and Production Division have

F-23
<PAGE> 55

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

been reclassified as discontinued operations in the Consolidated Statement of
Operations for the years ended December 31, 1994, 1993, and 1992. All prior
periods have been reclassified to conform to this presentation. Additionally,
the assets of the Natural Gas Exploration and Production Division have been
reclassified as discontinued operation assets on the Consolidated Balance Sheet
as of December 31, 1994 and 1993. Notes to Consolidated Financial Statement have
been restated to exclude the Natural Gas and Production Division where the
information was available and it was practical to do.

Condensed income statements for the years ended December 31, 1994, 1993,
and 1992 are presented below:

<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues.............................................. $29,751 $28,010 $27,752
Cost and expenses..................................... 24,364 24,907 23,917
------ ------ ------
Income before income taxes............................ 5,387 3,103 3,835
Provision for (benefit from) income taxes............. 883 202 (64)
------ ------ ------
Net income............................................ $ 4,504 $ 2,901 $ 3,899
====== ====== ======
</TABLE>

F-24
<PAGE> 56

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
6/30/95 6/30/94
-------- --------
(IN THOUSANDS EXCEPT
PER SHARE DATA,
UNAUDITED)
<S> <C> <C>
Revenues
Sales and operating revenues......................................... $497,231 $330,060
Other, net........................................................... 5,609 2,073
-------- --------
502,840 332,133
Costs and expenses
Cost of sales and operating costs.................................... 354,136 220,516
Selling, general and administrative.................................. 115,711 90,857
Depreciation and amortization........................................ 14,570 10,004
Interest............................................................. 3,118 2,403
Unusual item (Note 6)................................................ 15,800 --
-------- --------
503,335 323,780
-------- --------
Income (loss) from continuing operations before income taxes......... (495) 8,353
-------- --------
Provision for (benefit from) income taxes
Current............................................................ (400) 6,000
Deferred........................................................... 212 (1,317)
-------- --------
(188) 4,683
-------- --------
Income (loss) from continuing operations............................. (307) 3,670
Income from discontinued operations, net of taxes (Note 11).......... 2,678 6,982
-------- --------
Net income (loss).................................................... $ 2,371 $ 10,652
======== ========
Per share:
Income (loss) from continuing operations............................. $ (.01) $ .13
Income from discontinued operations.................................. .09 .26
-------- --------
Net income (loss) per share.......................................... $ .08 $ .39
======== ========
Weighted average shares outstanding.................................. 31,591 27,358
======== ========
Cash dividends paid per share........................................ $ .20 $ .20
======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-25
<PAGE> 57

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
---------------------
1995 1994
-------- --------
(IN THOUSANDS,
UNAUDITED)
<S> <C> <C>
Cash flows from operating activities
Net income............................................................. $ 2,371 $ 10,652
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization............................. 19,289 15,465
Unusual item......................................................... 15,800 --
Deferred income taxes and investment tax credit...................... 1,861 (121)
Increase (decrease) from changes in:
Receivables....................................................... (13,945) (6,336)
Inventories....................................................... (1,988) (5,182)
Other current assets.............................................. (268) (911)
Accounts payable.................................................. 3,245 525
Accrued liabilities............................................... (7,924) 1,687
Other............................................................. (16,195) (1,934)
Changes in discontinued insurance operations......................... -- 5,224
-------- --------
Net cash provided by operating activities....................... 2,246 19,069
-------- --------
Cash flow from investing activities
Proceeds from disposal of property and equipment....................... 3,175 1,544
Capital expenditures................................................... (16,189) (11,555)
Proceeds from sale of discontinued coal operation assets............... 412 1,568
Discontinued insurance operations
Proceeds from sale of bonds and securities........................... -- 37,046
Purchase of bonds and securities..................................... -- (49,259)
-------- --------
Net cash used in investing activities........................... (12,602) (20,656)
-------- --------
Cash flow from financing activities
Dividends paid......................................................... (6,303) (5,457)
(Payments on) Proceeds from notes payable.............................. (34) 320
Payments on long-term debt............................................. (1,464) (137)
-------- --------
Net cash used in financing activities........................... (7,801) (5,274)
-------- --------
Net increase (decrease) in cash and cash equivalents................... (18,157) (6,861)
Cash and cash equivalents at beginning of year:
Other than discontinued insurance operations......................... 29,805 6,220
Discontinued insurance operations.................................... -- 9,408
-------- --------
Total cash and cash equivalents at beginning of year................... 29,805 15,628
-------- --------
Cash and cash equivalents at end of period:
Other than discontinued insurance operations......................... 11,648 3,063
Discontinued insurance operations.................................... -- 5,704
-------- --------
Cash and cash equivalents at end of period............................. $ 11,648 $ 8,767
======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-26
<PAGE> 58

QUAKER STATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

6/30/95 12/31/94*
-------- -----------
(UNAUDITED)
(IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 11,648 $ 29,805
Accounts and notes receivable, less allowance of $3,049
at 6/30/95 and $2,185 at 12/31/94..................................... 104,920 91,858
-------- --------
Inventories: (Note 2)
Crude oil............................................................. 1,816 976
Finished and in-process petroleum products............................ 45,533 49,252
Other................................................................. 27,797 22,862
-------- --------
Total inventories.................................................. 75,146 73,090
-------- --------
Deferred income taxes................................................... 9,929 11,790
Other current assets.................................................... 11,637 11,708
Discontinued operation assets (Note 11)................................. 48,052 3,889
-------- --------
Total current assets.................................................. 261,332 222,140
Property, plant, and equipment, net of accumulated depreciation
of $202,126 at 6/30/95 and $190,986 at 12/31/94....................... 199,962 199,983
Discontinued operation assets (Note 11)................................. -- 48,257
Other assets............................................................ 170,401 159,638
-------- --------
Total assets....................................................... $631,695 $630,018
======== ========
LIABILITIES
Current Liabilities:
Accounts payable........................................................ $ 61,711 $ 58,500
Accrued liabilities..................................................... 66,363 58,487
Installments on long-term debt.......................................... 3,314 3,714
-------- --------
Total current liabilities............................................. 131,388 120,701
-------- --------
Long-term debt, less debt payable within one year....................... 68,471 69,535
Other long-term liabilities............................................. 183,456 187,932
-------- --------
Total liabilities..................................................... 383,315 378,168
-------- --------
Commitments and contingencies (Note 3)
STOCKHOLDERS' EQUITY
Capital stock, $1.00 par value; authorized shares, 95,000,000;
issued shares, 31,513,968 at 6/30/95 and 31,517,305 at 12/31/94....... 31,514 31,517
Treasury stock, at cost, 49,786 shares at 6/30/95 and 33,498 shares at
12/31/94.............................................................. (690) (467)
Additional capital...................................................... 120,757 120,131
Retained earnings....................................................... 100,354 104,286
Cumulative foreign currency translation adjustment...................... (488) (709)
Unearned compensation................................................... (3,067) (2,908)
-------- --------
Total stockholders' equity............................................ 248,380 251,850
-------- --------
Total liabilities and stockholders' equity......................... $631,695 $630,018
======== ========
</TABLE>

- ---------------
* Amounts are from December 31, 1994 audited balance sheet and footnotes.

The accompanying notes are an integral part of the financial statements.

F-27
<PAGE> 59

OTHER FINANCIAL INFORMATION

QUAKER STATE CORPORATION AND SUBSIDIARIES

The sales and operating revenues and contributions to income from
continuing operations, by industry segment, are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
6/30/95 6/30/94
-------- --------
(IN THOUSANDS,
UNAUDITED)
<S> <C> <C>
Sales and operating revenue
Motor oil.............................................................. 399,577 235,047
Fast lube.............................................................. 60,264 54,126
Truck-Lite............................................................. 49,617 51,218
Materials Handling..................................................... 1,662 1,447
Intersegment sales..................................................... (13,889) (11,778)
-------- --------
Total sales and operating revenue.................................... $497,231 $330,060
======== ========
Operating profit (loss)
Motor oil.............................................................. 12,874 8,268
Fast lube.............................................................. 4,140 2,779
Truck-Lite............................................................. 7,343 7,434
Materials Handling..................................................... 481 469
-------- --------
Total operating profit from continuing operations...................... 24,838 18,950
Corporate income....................................................... 2,577 1,253
Interest expense....................................................... (3,023) (2,318)
Corporate expenses..................................................... (9,087) (9,532)
Unusual item*.......................................................... (15,800) --
-------- --------
Income (loss) from continuing operations before income taxes........... (495) 8,353
======== ========
</TABLE>

- ---------------
* The restructuring charge of $15,800 includes $9,280 that relates to Motor oil.

The accompanying notes are an integral part of the financial statements.

F-28
<PAGE> 60

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. In the opinion of management of Quaker State Corporation (the company), the
accompanying financial statements include all adjustments which are
necessary to a fair statement of the results for such periods. All of these
adjustments are of a normal recurring nature. These statements should be
read in conjunction with the financial statements included as a part of the
1994 annual report on Form 10-K.

2. 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 and vehicular lighting products; and on the
first-in, first-out (FIFO) basis for other inventories. The reserve to
reduce the carrying value of inventories from FIFO basis to LIFO basis
amounted to $22,255,000 at June 30, 1995, and $20,267,000 at December 31,
1994.

In the second quarter of 1995 certain inventory quantities were reduced
resulting in liquidations of LIFO inventory. The effect of these
liquidations was an increase in net income of $900,000, or $.03 per share.

3. In December 1993, the United States commenced a lawsuit against the company
in the U.S. District Court for 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. However, the ultimate outcome of this litigation cannot presently
be determined.

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. In July 1995, the United States District Court certified
the proceeding as a class action and denied the defendants' motion for
summary judgment. 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 when resolved.

4. The effective tax rate of 38% for continuing operations is higher than the
35% federal rate due to the added impact of state and foreign taxes. The
effective tax rate for continuing operations of 38% is lower than the 1994
rate of 56% due to lower income from continuing operations, a reduction in
the estimated state tax rate, and other changes in estimates.

5. On July 11, 1995, Quaker State completed the acquisition of all the stock of
Slick 50 through the merger of Slick 50 into a wholly owned subsidiary of
Quaker State named Quaker State-Slick 50, Inc. The consideration given in
the acquisition included payment of approximately $22,000,000 in cash and
the issuance of 1,260,403 shares of Quaker State capital stock. In addition,
the company paid approximately $11,000,000 to satisfy certain Slick 50
indebtedness outstanding prior to the closing. Under the terms of the Merger
Agreement, additional consideration may be payable by Quaker State for Slick
50 stock depending upon the merged company's performance during the fiscal
years ending December 31, 1996,

F-29
<PAGE> 61

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

1997 and 1998 but subject to offset for indemnification obligations of Slick
50 stockholders under the Merger Agreement.

The source of funds used for cash consideration in the transaction and
the payment of Slick 50 indebtedness was borrowing under Quaker State's
$45,000,000 Revolving Credit Agreement.

The acquisition will be accounted for under the purchase method.

6. On April 28, 1995 the company announced plans to restructure its
organization to integrate recent acquisitions, consolidate management and
administrative activities, and move its corporate headquarters and Motor Oil
Division to the Dallas, Texas area. The company plans to complete the move
by the first quarter of 1996. The pre-tax costs and expenses associated with
the restructuring and relocating the workforce and closing the headquarters
facility in Oil City, Pennsylvania and its administrative unit in
Shreveport, Louisiana will approximate $25,000,000. A charge of $15,800,000
was recorded in the second quarter, of which $9,280,000 related directly to
the Motor Oil Division. The after tax restructuring charge recorded in the
quarter was $9,490,000. The remainder will be expensed as incurred.

7. On April 28, 1995 the company announced that the Board of Directors approved
a $25,000,000 development project for the Red River port in Shreveport,
Louisiana, which will become the company's manufacturing and technical
headquarters.

8. The following schedule is prepared on a pro forma basis as though Specialty
and Westland had been acquired as of the beginning of 1994, after including
the impact of adjustments, such as amortization of intangible assets,
intercompany sales elimination and related tax effects.

For the six months ended June 30, 1994

<TABLE>
<CAPTION>
For the Six Months Ended
6/30/94
------------------------
(in thousands except
per share data,
unaudited)
<S> <C>
Revenues............................................... $483,979
Income from continuing operations (Note 11)............ $ 6,520
Income per share from continuing
operations........................................... $ 0.21
</TABLE>

The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the 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.

9. In March 1995, the Financial Accounting Standards Board issued Standard No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of " which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. The new
Standard must be implemented in 1996. The company is currently evaluating
what effect, if any, this Standard will have on its financial position and
results of operations.

10. On May 25, 1995 the company's stockholders approved the Amendment of Quaker
State's Certificate of Incorporation to increase the authorized number of
shares of Quaker State's capital stock from 37,500,000 to 95,000,000 shares.

11. On July 26, 1995 Quaker State signed a definitive agreement to sell most of
the assets of its Natural Gas Exploration and Production Division to Belden
& Blake Corporation of Canton, Ohio for a purchase price of $56,000,000
subject to certain possible adjustments. Accordingly, the operating results
of Natural Gas Exploration and Production have been reported as a
discontinued operation in the accompanying

F-30
<PAGE> 62

QUAKER STATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

Consolidated Statement of Operations for the period ending June 30, 1995.
Prior year and prior period financial statements have been reclassified to
conform to the current period presentation. Completion of the transaction
occurred on August 9, 1995. The company expects to record a gain from the
sale of these assets which will be reported under discontinued operations in
the third quarter.

F-31
<PAGE> 63

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................
Information Incorporated by
Reference...........................
The Company...........................
Use of Proceeds.......................
Capitalization........................
Selected Financial Information........
Business..............................
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................
Description of Notes..................
Underwriting..........................
Notice to Canadian Residents..........
Validity of Notes.....................
Experts...............................
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

[LOGO]
QUAKER STATE
CORPORATION

$100,000,000

% Notes Due 2005

P R O S P E C T U S

CS First Boston

J.P. Morgan Securities Inc.

- ------------------------------------------------------
<PAGE> 64

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*

The fees and expenses to be paid in connection with the distribution of the
Notes being registered hereby are established as follows:

<TABLE>
<S> <C>
Registration Fee.......................................................... $ 34,483
National Association of Securities Dealers, Inc. Filing Fee............... 10,500
Legal Fees and Expenses................................................... *
Printing and Engraving Expenses........................................... *
Trustee Fees.............................................................. *
Accounting Fees and Expenses.............................................. *
Rating Agency Fees........................................................ *
Blue Sky Fees and Expenses (including legal fees and disbursements)....... *
Miscellaneous............................................................. *
-------
Total........................................................... $ *
=======
</TABLE>

- ---------------
* To be completed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Certificate of Incorporation of the Company provides that 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 the Company shall be personally liable to the Company
or to its stockholders for monetary damages for breach of fiduciary duty as a
director. The Delaware General Corporation Law (the "DGCL") permits a
corporation's certificate of incorporation to provide that no director of the
corporation shall be personally liable to the corporation or its stockholders
for monetary damages for any breach of his or her fiduciary duty as a director;
provided that such provision shall not eliminate or limit the liability of a
director (1) for any breach of a director's duty of loyalty to the corporation
or its stockholders, (2) for acts or omissions that are not in good faith or
involve intentional misconduct or a knowing violation of the law, (3) under
Section 174 of the DGCL or (4) for any transaction from which the director
derived an improper personal benefit.

The Certificate of Incorporation of the Company also provides, in general,
that the Company shall indemnify its officers and directors 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 Company 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 Company or by reason of the fact that such person is or was serving at
the request of the Company as a director, officer, employee, fiduciary or other
representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other entity, except as prohibited by law. Section 145
of the DGCL provides, in general, that each director and officer of a
corporation may be indemnified against expenses (including attorneys' fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which he is involved by reason of the fact
that he is or was a director or officer if he acted in good faith and in a
manner that he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, if he
had no reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the corporation, the director or
officer may not be indemnified in respect of any claim, issue or matter as to
which he shall have

II-1
<PAGE> 65

been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless a court determines otherwise.

In addition, the Certificate of Incorporation of the Company provides that
the Company may purchase and maintain insurance to protect itself and any
director or officer entitled to indemnification pursuant to the Certificate of
Incorporation. Accordingly, the Company carries directors and officers liability
coverage which is subject to certain limitations and exclusions.

Reference is made to the indemnity agreements contained in the Underwriting
Agreement relating to the Notes filed as Exhibit 1 to the Registration
Statement.

ITEM 16. EXHIBITS

The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
<S> <C>
1.1 Form of Underwriting Agreement.*

4.1 Form of Indenture, to be dated as of , 1995, between the Company and
Chemical Bank, as Trustee.*

5.1 Opinion of Sullivan & Cromwell with respect to the legality of the Notes.

10.1 Credit Agreement, dated as of September 29, 1995, among the Company, the Banks from
time to time party thereto and Morgan Guaranty Trust Company of New York, as Agent.

12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.

23.1 Consent of Sullivan & Cromwell (included in its opinion filed as Exhibit 5.1).

23.2 Consent of Coopers & Lybrand L.L.P.

24.1 Powers of Attorney (included as part of the signature page).

25.1 Statement of Eligibility on Form T-1 of Chemical Bank, as trustee for the Notes
(bound separately).
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnifica-

II-2
<PAGE> 66

tion by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 67

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oil City, Commonwealth of Pennsylvania, on October 6,
1995.

QUAKER STATE CORPORATION

By: /s/ HERBERT M. BAUM
------------------------------------

POWER OF ATTORNEY

We, the undersigned officers and directors of Quaker State Corporation,
hereby severally constitute Conrad A. Conrad and Paul E. Konney and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below the
Registration Statement filed herewith and any and all amendments to said
Registration Statement, and generally to do all such things in our name and
behalf in our capacities as officers and directors to enable Quaker State
Corporation to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney have been signed by the following
persons in the capacities and on the date indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- -----
<C> <S> <C>
/s/ HERBERT M. BAUM Chairman of the Board, Chief
- ---------------------------------------- Executive Officer and Director
(Herbert M. Baum) (Principal Executive Officer)

/s/ CONRAD A. CONRAD Vice Chairman, Chief Financial
- ---------------------------------------- Officer and Director (Principal
(Conrad A. Conrad) Financial Officer)

/s/ KEITH S. KRZEMINSKI Controller (Principal Accounting
- ---------------------------------------- Officer)
(Keith S. Krzeminski)

/s/ LEONARD M. CARROLL Director
- ----------------------------------------
(Leonard M. Carroll)

/s/ LAUREL CUTLER Director
- ----------------------------------------
(Laurel Cutler)

/s/ C. FREDERICK FETTEROLF Director
- ----------------------------------------
(C. Frederick Fetterolf)
</TABLE>

II-4
<PAGE> 68

<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- ---------------------------------- ----------------
<C> <S> <C>
/s/ THOMAS A GARDNER Director
- ----------------------------------------
(Thomas A. Gardner)

/s/ F. WILLIAM GRUBE Director
- ----------------------------------------
(F. William Grube)

/s/ FORREST R. HASELTON Director
- ----------------------------------------
(Forrest R. Haselton)

/s/ DELBERT J. MCQUAIDE Director
- ----------------------------------------
(Delbert J. McQuaide)

/s/ L. DAVID MYATT Director
- ----------------------------------------
(L. David Myatt)

/s/ RAYMOND A. ROSS, JR. Director
- ----------------------------------------
(Raymond A. Ross, Jr.)

/s/ LORNE R. WAXLAX Director
- ----------------------------------------
(Lorne R. Waxlax)
</TABLE>

II-5
<PAGE> 69

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement* ...............................................

4.1 Form of Indenture, to be dated as of , 1995, between the Company
and Chemical Bank, as Trustee* ................................................

5.1 Opinion of Sullivan & Cromwell with respect to the legality of the Notes ......

10.1 Credit Agreement, dated as of September 29, 1995, among the Company, the Banks
from time to time party thereto and Morgan Guaranty Trust Company of New York,
as Agent ......................................................................

12.1 Statement re Computation of Ratio of Earnings to Fixed Charges ................

23.1 Consent of Sullivan & Cromwell (included in its opinion filed as
Exhibit 5.1)...................................................................

23.2 Consent of Coopers & Lybrand L.L.P. ...........................................

24.1 Powers of Attorney (included as part of the signature page) ...................

25.1 Statement of Eligibility on Form T-1 of Chemical Bank, as trustee for the Notes
(bound separately). ...........................................................
</TABLE>

- ---------------
* To be filed by amendment.

<PAGE> 1
EXHIBIT 5.1

October 6, 1995

CS First Boston Corporation
J.P. Morgan Securities Inc.,
As Representatives of Several Underwriters,
c/o CS First Boston Corporation,
Park Avenue Plaza,
New York, N.Y. 10055.

Dear Sirs:

In connection with the registration under the Securities Act of 1933
(the "Act") of $100,000,000 principal amount of ___% Notes Due 2005 (the
"Securities") of Quaker State Corporation, a Delaware corporation (the
"Company"), we, as your special counsel, have examined such corporate records,
certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.

Upon the basis of such examination, we advise you that, in our
opinion, when the Registration Statement has

<PAGE> 2
CS First Boston Corporation
J.P. Morgan Securities Inc. -2-

become effective under the Act, the Indenture relating to the Securities has
been duly authorized, executed and delivered, the terms of the Securities and of
their issuance and sale have been duly established in conformity with the
Indenture so as not to violate any applicable law or result in a default under
or breach of any agreement or instrument binding upon the Company and so as to
comply with any requirement or restriction imposed by any court or governmental
body having jurisdiction over the Company, and the Securities have been duly
executed and authenticated in accordance with the Indenture and issued and sold
as contemplated in the Registration Statement, the Securities will constitute
valid and legally binding obligations of the Company, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.

The foregoing opinion is limited to the Federal laws of the United
States, and the laws of the State of

<PAGE> 3
CS First Boston Corporation
J.P. Morgan Securities Inc. -3-

New York and the General Corporation Law of the State of Delaware, and we are
expressing no opinion as to the effect of the laws of any other jurisdiction.

We have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by us to be
responsible.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Validity
of Notes" in the Prospectus. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act.

Very truly yours,

/s/ SULLIVAN & CROMWELL
-----------------------

<PAGE> 1
EXHIBIT 10.1

[EXECUTION COPY]

$45,000,000

CREDIT AGREEMENT

dated as of

September 29, 1995

among

Quaker State Corporation,

The Banks Parties Hereto

and

Morgan Guaranty Trust Company of New York,
as Agent

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1

DEFINITIONS

1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. References to Credit Agreement . . . . . . . . . . . . . . . . . . . 7

ARTICLE 2

THE CREDITS

2.1. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.7. Optional Termination or Reduction of Commitments . . . . . . . . . . 14
2.8. Method of Electing Interest Rates . . . . . . . . . . . . . . . . . 14
2.9. Mandatory Termination of Commitments . . . . . . . . . . . . . . . . 16
2.10. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . 16
2.11. General Provisions as to Payments . . . . . . . . . . . . . . . . . 16
2.12. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.13. Computation of Interest and Fees . . . . . . . . . . . . . . . . . 17

ARTICLE 3

CONDITIONS

3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1. Corporate and Governmental Authorization; No Contravention . . . . . 19
4.2. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3. Financial Information . . . . . . . . . . . . . . . . . . . . . . . 20
4.4. Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE 5

COVENANTS
</TABLE>

<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6

DEFAULTS

6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE 7

THE AGENT

7.1. Appointment and Authorization . . . . . . . . . . . . . . . . . . . 22
7.2. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . 23
7.5. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.7. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.8. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE 8

CHANGE IN CIRCUMSTANCES

8.1. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . 25
8.2. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . 26
8.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.5. Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . . 29

ARTICLE 9

MISCELLANEOUS

9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . 31
9.4. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 32
9.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 32
9.7. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.8. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . 34
9.9. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . 35
EXHIBIT A - Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT B - Opinion of Counsel for the Borrower . . . . . . . . . . . . . 1
</TABLE>

<PAGE> 4
<TABLE>
Page

<S> <C>
EXHIBIT C - Opinion of Special Counsel for the Agent . . . . . . . . . . . 1
EXHIBIT D - Assignment and Assumption Agreement . . . . . . . . . . . . . 3
</TABLE>

iii

<PAGE> 5

AGREEMENT dated as of September 29, 1995 among QUAKER STATE
CORPORATION, the BANKS from time to time parties hereto and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Agent.

The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:

"Adjusted CD Rate" has the meaning set forth in Section 2.5(b).

"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.5(c).

"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Company) duly completed by such Bank.

"Agent" means Morgan Guaranty Trust Company of New York in its capacity
as agent for the Banks hereunder, and its successors in such capacity.

"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.

"Assessment Rate" has the meaning set forth in Section 2.5(b).

"Assignee" has the meaning set forth in Section 9.6(c).

"Bank" means the bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective
successors.

"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and

<PAGE> 6

(ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day.

"Base Rate Loan" means (i) a Loan which bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Article 8 or (ii) an overdue amount which was a
Base Rate Loan immediately before it became overdue.

"Borrowing" means a borrowing hereunder consisting of Loans made to the
Company on the same day pursuant to Article 2, all of which Loans are of the
same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period. A Borrowing is a "Domestic Borrowing" if
such Loans are Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are
Euro-Dollar Loans. A Domestic Borrowing is a "CD Borrowing" if such Domestic
Loans are CD Loans or a "Base Rate Borrowing" if such Domestic Loans are Base
Rate Loans.

"CD Base Rate" has the meaning set forth in Section 2.5(b).

"CD Loan" means (i) a Loan which bears interest at a CD Rate pursuant
to the applicable Notice of Borrowing or Notice of Interest Rate Election or
(ii) an overdue amount which was a CD Loan immediately before it became overdue.

"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.

"CD Rate" means a rate of interest determined pursuant to Section
2.5(b) on the basis of an Adjusted CD Rate.

"CD Reference Bank" means Morgan Guaranty Trust Company of New York.

"Closing Date" means the date on or after the Effective Date on which
the Agent shall have received the documents specified in or pursuant to Section
3.1.

"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount may
be reduced from time to time pursuant to Section 2.7 or increased or reduced
pursuant to Section 9.6.

"Company" means Quaker State Corporation, a Delaware corporation, and
its successors.

<PAGE> 7

"Company's 1994 Form 10-K" means the Company's annual report on Form
10-K for 1994, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.

"Company's Latest Form 10-Q" means the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1995, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.

"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company in
its consolidated financial statements if such statements were prepared as of
such date.

"Credit Agreement" has the meaning set forth in Section 1.2.

"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.

"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.

"Domestic Loans" means CD Loans or Base Rate Loans or both.

"Domestic Reserve Percentage" has the meaning set forth in Section
2.5(b).

"Effective Date" means the date this Agreement becomes
effective in accordance with Section 9.9.

<PAGE> 8

"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.

"Euro-Dollar Lending Office" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Agent.

"Euro-Dollar Loan" means (i) a Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of
Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan
immediately before it became overdue.

"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.

"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.5(c) on the basis of an Adjusted London Interbank Offered Rate.

"Euro-Dollar Reference Bank" means the principal London office of
Morgan Guaranty Trust Company of New York.

"Event of Default" has the meaning set forth in Section 6.1.

"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.

"Fixed Rate Borrowing" means a CD Borrowing or a Euro-Dollar Borrowing
or both.

<PAGE> 9

"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both.

"Group of Loans" means at any time a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time, (ii) all Euro-Dollar Loans
having the same Interest Period at such time or (iii) all CD Loans having the
same interest period at such time, provided that, if a Loan of any particular
Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such
Loan shall be included in the same Group or Groups of Loans from time to time as
it would have been in if it had not been so converted or made.

"Indemnitee" has the meaning set forth in Section 9.3(b).

"Interest Period" means: (1) with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Company may
elect in the applicable notice; provided that:

(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;

(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business Day
of a calendar month; and

(2) with respect to each CD Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice
provided that:

<PAGE> 10

(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and

(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.

"Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans" means
Domestic Loans, Euro-Dollar Loans or both.

"London Interbank Offered Rate" has the meaning set forth in Section
2.5(c).

"Maturity Date" means October 15, 1997, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.

"Notes" means promissory notes of the Company, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Company to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.

"Notice of Borrowing" has the meaning set forth in Section 2.2.

"Notice of Interest Rate Election" has the meaning set forth in Section
2.8.

"Parent" means, with respect to any Bank, any Person controlling such
Bank.

"Participant" has the meaning set forth in Section 9.6(b).

"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

"Pricing Schedule" means the Schedule attached hereto identified as
such.

"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.

<PAGE> 11

"Reference Bank" means the CD Reference Bank or the Euro-Dollar
Reference Bank, as the context may require.

"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time and shall include any
successor or other regulations or official interpretations of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the Federal
Reserve System.

"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.

"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.

"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.

"Termination Date" means September 28, 1996, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.

"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.

SECTION 1.2. References to Credit Agreement. References herein to the
"Credit Agreement" are to the Credit Agreement dated as of March 31, 1992 among
the Company, Pittsburgh National Bank, Morgan Guaranty Trust Company of New
York, Marine Bank and Integra National Bank/North, and Pittsburgh National Bank,
as Agent, as amended by each of the amendments set forth on Schedule I. For
purposes of provisions of the Credit Agreement incorporated herein by reference:
(a) references to this "Agreement" or the like and to the "Notes" or the like
shall be deemed references to this Agreement and the Notes issued hereunder, (b)
references to the "Agent", any one or more of the "Banks" or the "Required
Banks" shall be deemed references to the Agent, the Banks or the Required Banks

<PAGE> 12

hereunder, respectively, (c) references to a "Potential Default" or an "Event of
Default" shall be deemed references to a Default or an Event of Default
hereunder, respectively, and (d) each reference to a "Loan" or the like shall be
deemed a reference to a Loan or a Borrowing or Group of Loans hereunder, as the
context may require. Such incorporation by reference shall survive the
termination of the Credit Agreement. The incorporation by reference of any
provision of the Credit Agreement shall include any related definitions and
ancillary provisions.

ARTICLE 2

THE CREDITS

SECTION 2.1. Commitments to Lend. During the Revolving Credit Period,
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Company from time to time in amounts such that
the aggregate principal amount of Loans by such Bank at any one time outstanding
shall not exceed the amount of its Commitment. Each Borrowing under this Section
shall be in an aggregate principal amount of $5,000,000 or any larger multiple
of $1,000,000 (except that any such Borrowing may be in the aggregate amount of
the unused Commitments) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Company may borrow under this Section, prepay Loans to the extent permitted by
Section 2.10 and reborrow at any time during the Revolving Credit Period under
this Section.

SECTION 2.2. Method of Borrowing. (a) The Company shall give the Agent
notice (a "Notice of Borrowing") not later than 10:30 A.M. (New York City time)
on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business
Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before
each Euro-Dollar Borrowing, specifying:

(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing;

(ii) the aggregate amount of such Borrowing;

<PAGE> 13

(iii) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate; and

(iv) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.

(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's ratable share of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Company.

(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.1. Unless the Agent determines that any
applicable condition specified in Article 3 has not been satisfied, the Agent
will make the funds so received from the Banks available to the Company at the
Agent's aforesaid address.

(d) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsection (c) of this Section and the Agent may, in reliance
upon such assumption, make available to the Company on such date a corresponding
amount. If and to the extent that such Bank shall not have so made such share
available to the Agent, such Bank and the Company severally agree to repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the Company
until the date such amount is repaid to the Agent, at (i) in the case of the
Company, a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable thereto pursuant to Section 2.5 and (ii) in the case of
such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement.

SECTION 2.3. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office

<PAGE> 14

in an amount equal to the aggregate unpaid principal amount of such Bank's
Loans.

(b) Each Bank may, by notice to the Company and the Agent, request that
its Loans of a particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such Loans. Each such Note
shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
type. Each reference in this Agreement to the "Note" of such Bank shall be
deemed to refer to and include any or all of such Notes, as the context may
require.

(c) Upon receipt of each Bank's Note pursuant to Section 3.1(a), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount and type of each Loan made by it and the date and amount of each payment
of principal made by the Company with respect thereto, and may, if such Bank so
elects in connection with any transfer or enforcement of its Note, endorse on
the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding; provided
that the failure of any Bank to make any such recordation or endorsement shall
not affect the obligations of the Company hereunder or under the Notes. Each
Bank is hereby irrevocably authorized by the Company so to endorse its Note and
to attach to and make a part of its Note a continuation of any such schedule as
and when required.

SECTION 2.4. Maturity of Loans. Each Loan shall mature, and the
principal amount thereof shall be due and payable, on the Maturity Date.

SECTION 2.5. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable quarterly in arrears on each
March 31, June 30, September 30 and December 31 and, with respect to the
principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar
Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or
interest on any Base Rate Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the rate
otherwise applicable to Base Rate Loans for such day.

(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during

<PAGE> 15

each Interest Period applicable thereto, at a rate per annum equal to the sum of
the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest
Period; provided that if any CD Loan shall, as a result of clause (2)(b)
of the definition of Interest Period, have an Interest Period of less than 30
days, such CD Loan shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, at intervals of 90 days after the first day thereof. Any
overdue principal of or interest on any CD Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the higher of (i) the rate applicable to Base Rate Loans for such day and (ii)
the sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan at
the date such payment was due.

The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:

[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]

ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate

----------
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%

The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the prevailing rate per annum bid at
10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from the CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of the CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.

"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect

<PAGE> 16

on such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) for
a member bank of the Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of new non-personal time deposits in
dollars in New York City having a maturity comparable to the related Interest
Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be
adjusted automatically on and as of the effective date of any change in the
Domestic Reserve Percentage.

"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.

(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.

The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.

The "London Interbank Offered Rate" applicable to any Interest Period
means the rate per annum at which deposits in dollars are offered to the
Euro-Dollar Reference Bank in the London interbank market at approximately 11:00
A.M. (London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Euro-Dollar Loan of the Euro-Dollar Reference Bank to which such Interest Period
is

<PAGE> 17

to apply and for a period of time comparable to such Interest Period.

"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.

(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the rate per annum at which one day (or, if such
amount due remains unpaid more than three Euro-Dollar Business Days, then for
such other period of time not longer than three months as the Agent may select)
deposits in dollars in an amount approximately equal to such overdue payment due
to the Euro-Dollar Reference Bank are offered to the Euro-Dollar Reference Bank
in the London interbank market for the applicable period determined as provided
above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.1 shall exist, at a
rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day) and (ii) the sum of 2% plus the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Loan at
the date such payment was due.

(e) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Company and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.

SECTION 2.6. Fees. During the Revolving Credit Period, the Borrower
shall pay to the Agent for the account

<PAGE> 18

of the Banks ratably in proportion to their Commitments a commitment fee at the
Commitment Fee Rate (determined daily in accordance with the Pricing Schedule)
on the daily amount by which the aggregate amount of the Commitments exceeds the
aggregate outstanding principal amount of the Loans. Such commitment fee shall
accrue from and including the Closing Date to but excluding the date of
termination of the Commitments in their entirety.

SECTION 2.7. Optional Termination or Reduction of Commitments. During
the Revolving Credit Period, the Company may, upon notice to the Agent not later
than 10:30 A.M. (New York City time) on the effective date of any such
termination or reduction, (i) terminate the Commitments at any time, if no Loans
are outstanding at such time or (ii) ratably reduce from time to time by an
aggregate amount of $5,000,000 or a larger multiple of $1,000,000, the aggregate
amount of the Commitments in excess of the aggregate outstanding principal
amount of the Loans.

SECTION 2.8. Method of Electing Interest Rates. (a) The Loans included
in each Borrowing shall bear interest initially at the type of rate specified by
the Company in the applicable Notice of Borrowing. Thereafter, the Company may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject in each case to the provisions of Article 8), as
follows:

(i) if such Loans are Base Rate Loans, the Company may elect to convert
such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar
Loans as of any Euro-Dollar Business Day;

(ii) if such Loans are CD Loans, the Company may elect to convert such
Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such
Loans as CD Loans for an additional Interest Period, subject to Section 2.12
in the case of any such conversion or continuation effective on any day
other than the last day of the then current Interest Period applicable to
such Loans; and

(iii) if such Loans are Euro-Dollar Loans, the Company may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, subject to
Section 2.12 in the case of any such conversion or continuation effective on
any day other than the last day of the then current Interest Period
applicable to such Loans.

<PAGE> 19

Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Agent not later than 10:30 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective (unless the relevant
Loans are to be converted to Domestic Loans of the other type or are CD Rate
Loans to be continued as CD Rate Loans for an additional Interest Period, in
which case such notice shall be delivered to the Agent not later than 10:30
A.M. (New York City time) on the second Domestic Business Day before such
conversion or continuation is to be effective). A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such
portion is allocated ratably among the Loans comprising such Group and (ii)
the portion to which such Notice applies, and the remaining portion to which
it does not apply, are each $5,000,000 or any larger multiple of $1,000,000.

(b) Each Notice of Interest Rate Election shall specify:

(i) the Group of Loans (or portion thereof) to which such notice
applies;

(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;

(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if the Loans being converted are to be Fixed
Rate Loans, the duration of the next succeeding Interest Period
applicable thereto; and

(iv) if such Loans are to be continued as CD Loans or Euro-Dollar
Loans for an additional Interest Period, the duration of such
additional Interest Period.

Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.

(c) Upon receipt of a Notice of Interest Rate Election from the
Company pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such notice shall not thereafter be revocable
by the Company.

<PAGE> 20

(d) An election by the Company to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section shall not
constitute a "Borrowing" subject to the provisions of Section 3.2.

SECTION 2.9. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date.

SECTION 2.10. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Borrowing to Section 2.12, the Company may (i) upon notice to the
Agent not later than 10:30 A.M. (New York City time) on the date of prepayment,
prepay on any Domestic Business Day the Group of Base Rate Loans, (ii) upon at
least two Domestic Business Days' notice to the Agent, prepay any Group of CD
Loans or (iii) upon at least three Euro-Dollar Business Days' notice to the
Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time,
or from time to time in part in amounts aggregating $5,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Group.

(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment and such notice shall not thereafter be
revocable by the Company.

SECTION 2.11. General Provisions as to Payments. (a) The Company shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.1. The Agent will promptly distribute to
each Bank its ratable share of each such payment received by the Agent for the
account of the Banks. Whenever any payment of principal of, or interest on, the
Domestic Loans or of fees shall be due on a day which is not a Domestic Business
Day, the date for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar

<PAGE> 21

Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.

(b) Unless the Agent shall have received notice from the Company prior
to the date on which any payment is due to the Banks hereunder that the Company
will not make such payment in full, the Agent may assume that the Company has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Company shall not have so made such payment, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate.

SECTION 2.12. Funding Losses. If the Company makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.5(d), or if the Company fails to
borrow, prepay, convert or continue any Fixed Rate Loans after notice has been
given to any Bank in accordance with Section 2.2(b), 2.10(b) or 2.8(c) the
Company shall reimburse each Bank within 15 days after demand for any resulting
loss or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or conversion or failure to
borrow, prepay, convert or continue, provided that such Bank shall have
delivered to the Company a certificate as to the amount of such loss or expense,
which certificate shall be conclusive in the absence of manifest error.

SECTION 2.13. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
facility fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).

<PAGE> 22

ARTICLE 3

CONDITIONS

SECTION 3.1. Closing. The closing hereunder shall occur upon receipt by
the Agent of the following documents, each dated the Closing Date unless
otherwise indicated:

(a) a duly executed Note for the account of each Bank dated on or
before the Closing Date complying with the provisions of Section 2.3;

(b) an opinion of in-house counsel for the Company, substantially in
the form of Exhibit B hereto and covering such additional matters relating
to the transactions contemplated hereby as the Required Banks may reasonably
request;

(c) an opinion of Davis Polk & Wardwell, special counsel for the Agent,
substantially in the form of Exhibit C hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request;

(d) evidence satisfactory to it that the commitments under the Credit
Agreement have terminated, all loans thereunder have been repaid in full and
all accrued fees and other amounts payable thereunder (including, without
limitation, any funding costs payable pursuant to the Credit Agreement) have
been paid in full;

(e) evidence satisfactory to it that the "Phase I upfront fee" referred
to in the letter dated September 22, 1995 among the Company, the Bank and
J.P. Morgan Securities Inc. has been paid in full; and

(f) all documents the Agent may reasonably request relating to the
existence of the Company, the corporate authority for and the validity of
this Agreement and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agent.

The Agent shall promptly notify the Company and the Banks of the Closing Date,
and such notice shall be conclusive and binding on all parties hereto.

<PAGE> 23

SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan on
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:

(a) the fact that the Closing Date shall have occurred on or prior to
October 10, 1995;

(b) receipt by the Agent of a Notice of Borrowing as required by
Section 2.2;

(c) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;

(d) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and

(e) the fact that the representations and warranties of the Company
contained in this Agreement shall be true on and as of the date of such
Borrowing.

Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company on the date of such Borrowing as to the facts specified in clauses
(c), (d) and (e) of this Section.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants that:

SECTION 4.1. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company of this
Agreement and the Notes are within the corporate powers of the Company, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any material provision of
applicable material law or regulation or of the certificate of incorporation or
by-laws of the Company or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Company or any of its
Subsidiaries or result in the creation or imposition of any material lien on any
asset of the Company or any of its Subsidiaries.

<PAGE> 24

SECTION 4.2. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Company and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Company, in each case enforceable in accordance with its terms.

SECTION 4.3. Financial Information. (a) The consolidated balance sheet
of the Company and its Consolidated Subsidiaries as of December 31, 1994 and the
related consolidated statements of income and cash flow for the fiscal year then
ended, reported on by Coopers & Lybrand L.L.P. and set forth in the Company's
1994 Form 10-K, a copy of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Company and its Consolidated Subsidiaries
as of such date and their consolidated results of operations and cash flows for
such fiscal year.

(b) The unaudited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of June 30, 1995 and the related unaudited
consolidated statements of income and cash flows for the six months then ended,
set forth in the Company's Latest Form 10-Q, a copy of which has been delivered
to each of the Banks, fairly present, in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such six
month period (subject to normal year-end adjustments).

(c) Since June 30, 1995 no Material Adverse Change (as defined in the
Credit Agreement and incorporated herein by reference in accordance with Section
1.2) has occurred.

SECTION 4.4. Incorporation by Reference. The Company hereby makes for
the benefit of the Agent and the Banks the representations and warranties made
by the Company in Sections 5.01(a), 5.01(e), 5.01(f) and 5.01(h) through (q) of
the Credit Agreement, which representations and warranties are incorporated
herein by reference into this Article 4 as if fully set forth herein.

ARTICLE 5

COVENANTS

<PAGE> 25

The Company agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid, the Company will
perform for the benefit of the Agent and the Banks the covenants of the Company
in Article VII of the Credit Agreement, which covenants are hereby incorporated
by reference into this Article 5 as if fully set forth herein; provided that for
purposes of this Article 5:

(i) Section 7.01(j) of the Credit Agreement shall be deemed to read in
its entirety as follows:

(j) Use of Proceeds. The Company will use the proceeds of Loans for
general corporate purposes. None of the proceeds of the Loans shall be used
in any manner which would violate or cause any Bank to be in violation of
Regulations G, T or U of the Board of Governors of the Federal Reserve
System.

(ii) The term "Consolidated Tangible Net Worth" in Section 7.02(e) and
(g) shall be deemed to read in its entirety as follows: "Consolidated Tangible
Net Worth" shall mean as of any date of determination total stockholders equity
less intangible assets of the Borrower and its Subsidiaries as of such date
(excluding from the Borrower's intangible assets up to $50,000,000 of the
intangible assets acquired pursuant to the acquisition by the Borrower of Slick
Fifty), determined and consolidated in accordance with GAAP.

(iii) The dollar amount "$1,000,000" in clause (ii) of Section 7.02(h)
shall be deemed to be "$6,000,000".

(iv) The ratio "1.5 : 1.0" in Section 7.02(k) shall be deemed to be
"1.4 : 1".

ARTICLE 6

DEFAULTS

SECTION 6.1. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:

(a) the Company shall fail to pay when due any principal of any Loan or
shall fail to pay within five days of the date when due any interest, any
fees or any other amount payable hereunder;

<PAGE> 26

(b) any of the "Events of Defaults" set forth in Article VIII of the
Credit Agreement, which are hereby incorporated by reference into this
Article 6 as if fully set forth herein; or

(c) any representation, warranty, certification or statement made by
the Company in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);

then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Company terminate the Commitments and they shall
thereupon terminate, and (ii) if requested by the Required Banks, by notice to
the Company declare the Loans (together with accrued interest thereon) to be,
and the Loans shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company; provided that in the case of any of the
Events of Default specified in Section 8.01(j) or (k) of the Credit Agreement,
without any notice to the Company or any other act by the Agent or the Banks,
the Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company.

SECTION 6.2. Notice of Default. The Agent shall give notice to the
Company to the extent required under Section 6.1(b) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.

ARTICLE 7

THE AGENT

SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.

<PAGE> 27

SECTION 7.2. Agent and Affiliates. Morgan Guaranty Trust Company of New
York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Company or any Subsidiary or affiliate of the Company as if it
were not the Agent.

SECTION 7.3. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6.

SECTION 7.4. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.

SECTION 7.5. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or (ii) in the
absence of its own gross negligence or willful misconduct. Neither the Agent nor
any of its affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of the Company; (iii) the satisfaction of any
condition specified in Article 3, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.

SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the

<PAGE> 28

Agent, its affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Company) against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnitees hereunder.

SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.

SECTION 7.8. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Company. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.

SECTION 7.9. Fees. The Company shall pay to Morgan
Guaranty Trust Company of New York for its own account fees in such amounts and
at such time previously agreed upon between the Company and the Agent.

ARTICLE 8

<PAGE> 29

CHANGE IN CIRCUMSTANCES

SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any CD Loan or
Euro-Dollar Loan:

(a) the Agent is advised by the Reference Bank that deposits in dollars
(in the applicable amounts) are not being offered to the Reference Bank in
the relevant market for such Interest Period, or

(b) Banks having 50% or more of the aggregate principal amount of the
affected Loans advise the Agent that the Adjusted CD Rate or the Adjusted
London Interbank Offered Rate, as the case may be, as determined by the
Agent will not adequately and fairly reflect the cost to such Banks of
funding their CD Loans or Euro-Dollar Loans, as the case may be, for such
Interest Period,

the Agent shall forthwith give notice thereof to the Company and the Banks,
whereupon until the Agent notifies the Company that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or
convert outstanding Loans as or into CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar
Loan, as the case may be, shall be converted into a Base Rate Loan on the last
day of the then current Interest Period applicable thereto. Unless the Company
notifies the Agent at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made
as a Base Rate Borrowing.

SECTION 8.2. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the

<PAGE> 30

Agent, the Agent shall forthwith give notice thereof to the other Banks and the
Company, whereupon until such Bank notifies the Company and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into
Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such notice is given, each Euro-Dollar Loan of such Bank then
outstanding shall be converted to a Base Rate Loan either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Bank may lawfully continue to maintain and fund such Loan to such day or (b)
immediately if such Bank shall determine that it may not lawfully continue to
maintain and fund such Loan to such day.

SECTION 8.3. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
(i) with respect to any CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement with respect to which such Bank is entitled to compensation
during the relevant interest period under Section ?), special deposit, insurance
assessment (excluding, with respect to any CD Loan, any such requirement
reflected in an applicable Assessment Rate) or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Bank
(or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its Fixed
Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result
of any of the foregoing is to increase the cost to such Bank (or its Applicable
Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the
amount of

<PAGE> 31

any sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto, by an amount deemed
by such Bank to be material, then, within 15 days after demand by such Bank
(with a copy to the Agent), the Company shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction.

(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, (including any determination by any such authority, central bank or
comparable agency that, for purposes of capital adequacy requirements, the
Commitments hereunder do not constitute commitments with an original maturity of
one year or less) has or would have the effect of reducing the rate of return on
capital of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent) for
such reduction.

(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.

SECTION 8.4. Taxes. (a) For the purposes of this Section 8.4, the
following terms have the following meanings:

<PAGE> 32

"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Company pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as the case may be)
is organized or in which its principal executive office is located or, in the
case of each Bank, in which its Applicable Lending Office is located and (ii) in
the case of each Bank, any United States withholding tax imposed on such
payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.

"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note.

(b) Any and all payments by the Company to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Company shall be required by
law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Company shall make such deductions, (iii) the Company shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Company shall furnish to the Agent,
at its address referred to in Section 9.1, the original or a certified copy of a
receipt evidencing payment thereof.

(c) The Company agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Bank or the Agent (as the case may be) makes demand therefor.

<PAGE> 33

(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Company (but
only so long as such Bank remains lawfully able to do so), shall provide the
Company and the Agent with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Bank or certifying that the income receivable pursuant
to this Agreement is effectively connected with the conduct of a trade or
business in the United States.

(e) For any period with respect to which a Bank has failed to provide
the Company or the Agent with the appropriate form pursuant to Section 8.4(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.4(b) or (c) with respect to Taxes imposed by the United States; provided that
if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Company shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.

(f) If the Company is required to pay additional amounts to or for the
account of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.

SECTION 8.5. Base Rate Loans Substituted for Affected Fixed Rate Loans.
If (i) the obligation of any Bank to make, or convert outstanding Loans to,
Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any Bank
has demanded compensation under Section 8.3 or 8.4 with respect to its CD Loans
or Euro-Dollar Loans and the Company shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Agent, have elected that
the provisions of this Section shall apply to such Bank, then,

29
<PAGE> 34
unless and until such Bank notifies the Company that the circumstances giving
rise to such suspension or demand for compensation no longer exist:

(a) all Loans which would otherwise be made by such Bank as
(or continued as or converted into) CD Loans or Euro-Dollar Loans, as
the case may be, shall instead be Base Rate Loans (on which interest
and principal shall be payable contemporaneously with the related Fixed
Rate Loans of the other Banks); and

(b) after each of its CD Loans or Euro-Dollar Loans, as the
case may be, has been repaid (or converted to a Base Rate Loan), all
payments of principal which would otherwise be applied to repay such
Fixed Rate Loans shall be applied to repay its Base Rate Loans instead.

If such Bank notifies the Company that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.

ARTICLE 9

MISCELLANEOUS

SECTION 9.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (a) in the case of the Company or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (b) in the case
of any Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (c) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Company. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile

30
<PAGE> 35

transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
Agent under Article 2 or Article 8 shall not be effective until received.

SECTION 9.2. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.

SECTION 9.3. Expenses; Indemnification. (a) The Company
shall pay (i) all out-of-pocket expenses of the Agent, including fees and
disbursements of special counsel for the Agent ,in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Agent and each Bank, including (without duplication) the fees and
disbursements of outside counsel and the allocated cost of inside counsel, in
connection with such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom.

(b) The Company agrees to indemnify the Agent and each Bank,
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.

31
<PAGE> 36

SECTION 9.4. Sharing of Set-Offs. Each Bank agrees that if
it shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of the
Company other than its indebtedness hereunder. The Company agrees, to the
fullest extent it may effectively do so under applicable law, that any holder of
a participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Company in the amount of such participation.

SECTION 9.5. Amendments and Waivers . Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for any scheduled reduction or
termination of any Commitment or (iv) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes, or the number of
Banks, which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement.

SECTION 9.6. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Company may
not

32
<PAGE> 37

assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.

(b) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a Bank
of a participating interest to a Participant, whether or not upon notice to the
Company and the Agent, such Bank shall remain responsible for the performance of
its obligations hereunder, and the Company and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any Bank may
grant such a participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of the Company
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii), or (iii) of Section 9.5 without the consent of the Participant. The
Company agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).

(c) Any Bank may at any time assign to one or more banks or
other institutions (each an "Assignee") all, or a proportionate part (equivalent
to an initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit D hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Company,
which shall not be unreasonably withheld, and the Agent; provided that if an
Assignee is an affiliate of such transferor Bank or was a Bank immediately prior
to such assignment, no such consent shall be required. Upon execution and
delivery of such instrument and payment by such Assignee to such transferor Bank
of an amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank with a Commitment as set forth in
such instrument

33
<PAGE> 38

of assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Agent and the Company shall make
appropriate arrangements so that, if required, a new Note is issued to the
Assignee. In connection with any such assignment, the transferor Bank shall pay
to the Agent an administrative fee for processing such assignment in the amount
of $2,500. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall deliver to the Company and the
Agent certification as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 8.4.

(d) Any Bank may at any time assign all or any portion of
its rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.

(e) No Assignee, Participant or other transferee of any
Bank's rights shall be entitled to receive any greater payment under Section 8.3
or 8.4 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Company's prior
written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.

SECTION 9.7. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.

SECTION 9.8. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Company hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in

34
<PAGE> 39

such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.

SECTION 9.9. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of any
party as to which an executed counterpart shall not have been received, receipt
by the Agent in form satisfactory to it of telegraphic, telex, facsimile or
other written confirmation from such party of execution of a counterpart hereof
by such party).

35
<PAGE> 40

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

QUAKER STATE CORPORATION

By _______________________________
Title:

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent

By _______________________________
Title:

Commitments
- -----------

$45,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK

By ______________________________
Title:

- -------------
$45,000,000
===========

36
<PAGE> 41

PRICING SCHEDULE

Each of "Euro-Dollar Margin", "CD Margin" and "Commitment Fee
Rate" means, for any date, the rates set forth below in the row opposite such
term and in the column corresponding to the "Pricing Level" that applies at such
date:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CD Margin
For any day prior to
4/1/96 0.40% 0.475% 0.55% 0.625% 0.875%
For any day on or
after 4/1/96 0.525% 0.60% 0.675% 0.75% 1.0%
- --------------------------------------------------------------------------------------------------------
Euro-Dollar
Margin
For any day prior to
4/1/96 0.275% 0.35% 0.425% 0.50% 0.75%
For any day on or
after 4/1/96 0.40% 0.475% 0.55% 0.625% 0.875%
- --------------------------------------------------------------------------------------------------------
Commitment Fee
Rate
For any day prior to
4/1/96 0.10% 0.125% 0.15% 0.175% 0.25%
For any day on or
after 4/1/96 0.15% 0.175% 0.20% 0.225% 0.30%
- --------------------------------------------------------------------------------------------------------
</TABLE>

For purposes of this Schedule, the following terms have the
following meanings, subject to the last paragraph of this Schedule:

"Level I Pricing" applies at any date if, at such date, the
Borrower's long-term debt is rated A or higher by S&P or A1 or higher by
Moody's.

"Level II Pricing" applies at any date if, at such date, (i)
the Borrower's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher
by Moody's and (ii) Level I Pricing does not apply.

"Level III Pricing" applies at any date if, at such date,
(i) the Borrower's long-term debt is rated BBB or higher by S&P or Baa2 or
higher by Moody's and (ii) neither Level I Pricing nor Level II Pricing applies

37
<PAGE> 42

"Level IV Pricing" applies at any date if, at such date, (i)
the Borrower's long-term debt is rated BBB- or higher by S&P or Baa3 or higher
by Moody's and (ii) none of Level I Pricing, Level II Pricing and Level III
Pricing applies.

"Level V Pricing" applies at any date if, at such date, no
other Pricing Level applies.

"Moody's" means Moody's Investors Service, Inc.

"Pricing Level" refers to the determination of which of
Level I, Level II, Level III, Level IV or Level V applies at any date.

"S&P" means Standard & Poor's Ratings Group.

The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The rating in effect at any
date is that in effect at the close of business on such date. In the case of
split ratings from S&P or Moody's, the rating to be used to determine which
Pricing Level is the higher of the two (e.g. BB+/Baa3 results in Level IV
Pricing); provided that if the split is more than one full rating
category, the intermediate (or the higher of the two intermediate ratings) will
be used (e.g., BBB+/Baa3 results in Level III Pricing).

38
<PAGE> 43

SCHEDULE I

Amendments

Amendment No. 1 dated as of September 30, 1992

Amendment No. 2 dated as of ______, 1993

Amendment No. 3 dated as of August 1, 1994

Amendment No. 4 dated as of September 30, 1994

Amendment No. 5 dated as of July 7, 1995

39
<PAGE> 44

EXHIBIT A - Note

NOTE

For value received, QUAKER STATE CORPORATION, a Delaware
corporation (the "Borrower"), promises to pay to the order of
______________________ (the "Bank"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below on the maturity date
provided for in the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.

All Loans made by the Bank, the respective types thereof and
all repayments of the principal thereof shall be recorded by the Bank and, if
the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.

This note is one of the Notes referred to in the Credit
Agreement dated as of September 29, 1995 among Quaker State Corporation, the
banks listed on the signature pages thereof and Morgan Guaranty Trust Company of
New York, as Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.

QUAKER STATE CORPORATION

<PAGE> 45

By____________________
Name:
Title:

2
<PAGE> 46

LOANS AND PAYMENTS OF PRINCIPAL

- --------------------------------------------------------------------------
Amount Type Amount of
of of Principal Notation
Date Loan Loan Repaid Made By
- --------------------------------------------------------------------------

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

<PAGE> 47

EXHIBIT B - Opinion of Counsel for the Borrower

OPINION OF
COUNSEL FOR THE BORROWER

________________, 1995

To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260

Dear Sirs:

We have acted as counsel for Quaker State Corporation (the
"Borrower") in connection with the Credit Agreement (the "Credit Agreement")
dated as of September 29, 1995 among the Borrower, the banks listed on the
signature pages thereof, and Morgan Guaranty Trust Company of New York, as
Agent. Terms defined in the Credit Agreement are used herein as therein defined.
This opinion is being rendered to you at the request of our client pursuant to
Section 3.1(b) of the Credit Agreement.

We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.

Upon the basis of the foregoing, we are of the opinion that:

1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.

<PAGE> 48

2. The execution, delivery and performance by the Borrower
of the Credit Agreement and the Notes are within the corporate powers of the
Borrower, have been duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Borrower or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower or any of its Subsidiaries or result
in the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.

3. The Credit Agreement constitutes a valid and binding
agreement of the Borrower and each Note constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.

4. Except as set forth in the Company's reports filed with
the Securities and Exchange Commission, there is no action, suit or proceeding
pending against, or to the best of our knowledge threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official, in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries, considered as a
whole, or which in any manner draws into question the validity of the Credit
Agreement or the Notes.

5. Each of the Borrower's material corporate Subsidiaries is
a corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.

Very truly yours,

2
<PAGE> 49

EXHIBIT C - Opinion of Special Counsel for the Agent

OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT

________________, 1995

To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260

Dear Sirs:

We have participated in the preparation of the Credit
Agreement (the "Credit Agreement") dated as of September 29, 1995 among Quaker
State Corporation, a Delaware corporation (the "Borrower"), the banks listed on
the signature pages thereof (the "Banks"), and Morgan Guaranty Trust Company of
New York, as Agent (the "Agent"), and have acted as special counsel for the
Agent for the purpose of rendering this opinion pursuant to Section 3.1(c) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.

We have assumed that the execution, delivery and performance
by the Borrower of the Credit Agreement and the Notes are within the Borrower's
corporate powers and have been duly authorized by all necessary corporate
action.

Upon the basis of the foregoing, we are of the opinion that
the Credit Agreement constitutes a valid and

<PAGE> 50

binding agreement of the Borrower and each Note constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.

We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. In giving the foregoing opinion,
we express no opinion as to the effect (if any) of any law of any jurisdiction
(except the State of New York) in which any Bank is located which limits the
rate of interest that such Bank may charge or collect.

This opinion is rendered solely to you in connection with
the above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written consent.

2
<PAGE> 51

EXHIBIT D - Assignment and Assumption Agreement

ASSIGNMENT AND ASSUMPTION AGREEMENT

AGREEMENT dated as of _________, 19__ among (NAME OF
ASSIGNOR) (the "Assignor"), (NAME OF ASSIGNEE) (the "Assignee"), QUAKER STATE
CORPORATION (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Agent (the "Agent").

WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of September 29, 1995
among the Borrower, the Assignor and the other Banks party thereto, as Banks,
and the Agent (the "Credit Agreement");

WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans to the Borrower in an aggregate
principal amount at any time outstanding not to exceed $__________;

WHEREAS, Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and

WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;

NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:

SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.

3
<PAGE> 52

SECTION 2. Assignment. The Assignor hereby assigns and sells
to the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, (the Borrower and
the Agent) and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount,
and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced
by a like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.

SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.1 It
is understood that commitment fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.

- -----------------------------
1 Amount should combine principal together with accrued
interest and breakage compensation, if any, to be paid by the Assignee, net of
any portion of any upfront fee to be paid by the Assignor to the Assignee. It
may be preferable in an appropriate case to specify these amounts generically or
by formula rather than as a fixed sum.

4
<PAGE> 53

[SECTION 4. Consent of the Borrower and the Agent. This
Agreement is conditioned upon the consent of the Borrower and the Agent pursuant
to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by
the Borrower and the Agent is evidence of this consent. Pursuant to Section
9.6(c), the Borrower agrees to execute and deliver a Note payable to the order
of the Assignee to evidence the assignment and assumption provided for herein.]

SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.

SECTION 6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.

SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered by their duly authorized officers as of the date
first above written.

(NAME OF ASSIGNOR)

By_________________________
Name:
Title:

(NAME OF ASSIGNEE)

5
<PAGE> 54

By__________________________
Name:
Title:

QUAKER STATE CORPORATION

By__________________________
Name:
Title:

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent

By__________________________
Name:
Title:

<PAGE> 1

EXHIBIT 12.1

QUAKER STATE CORPORATION

STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------- -------------------
1994 1993 1992 1991 1990 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest expense.............. $ 5,115 $ 5,721 $ 4,785 $ 4,567 $ 5,172 $ 3,118 $ 2,403
Amortization of debt costs.... 44 44 9 -- -- 22 22
Interest Factor of rental
expense(1).................. 6,974 6,908 6,704 6,318 5,915 4,047 3,406
------- ------- ------- ------- ------- ------- -------
Total fixed charges........... $12,133 $12,673 $11,498 $10,885 $11,087 $ 7,187 $ 5,831
======= ======= ======= ======= ======= ======= =======
Income from continuing
operations before income
taxes....................... $15,668 $ 9,525 $ 901 $17,892 $20,685 $ (495) $ 8,353
Fixed charges................. 12,133 12,673 11,498 10,885 11,087 7,187 5,831
------- ------- ------- ------- ------- ------- -------
Total earnings................ $27,801 $22,198 $12,399 $28,777 $31,772 $ 6,692 $14,184
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed
charges..................... 2.3 1.8 1.1 2.6 2.9 0.9(2) 2.4
======= ======= ======= ======= ======= ======= =======
</TABLE>

- ---------------
(1) Interest factor of rental expense computed based on (a) average interest
factor from a sample of leases for operations representing in excess of 50%
of rentals from continuing operations, and (b) one-third factor of rentals
for other operations.

(2) Ratio is less than one due to earnings deficiency of $495 which is a result
of $15,800 restructuring charge recorded in the second quarter of 1995.

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Registration Statement
of Quaker State Corporation on Form S-3 (related to the Debt Offering of
$100,000,000 in Notes) 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 each
of the three years in the period ended December 31, 1994, which reports are
incorporated by reference in the Quaker State Corporation Annual Report on Form
10-K for the year ended December 31, 1994. We also consent to the inclusion in
this Registration Statement of our report dated January 25, 1995 except for Note
17, as to which the date is August 9, 1995 on our audits of the consolidated
financial statements of Quaker State Corporation and Subsidiaries as of December
31, 1994 and 1993 and for each of the three years in the period ended December
31, 1994. We also consent to the reference to our firm under the caption
"Experts."

COOPERS & LYBRAND L.L.P.

/s/ Coopers & Lybrand L.L.P.

Pittsburgh, Pennsylvania
October 6, 1995

<PAGE> 1
EXHIBIT 25.1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

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

FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE

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

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)
------------------------

CHEMICAL BANK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
NEW YORK 13-4994650
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A NATIONAL BANK) IDENTIFICATION NO.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
</TABLE>

WILLIAM H. MCDAVID
GENERAL COUNSEL
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TEL: (212) 270-2611
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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

QUAKER STATE CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 25-0742820
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF
INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
255 ELM STREET
OIL CITY, PENNSYLVANIA 16301
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
</TABLE>

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

% NOTES DUE 2005
(TITLE OF THE INDENTURE SECURITIES)

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

GENERAL

ITEM 1. GENERAL INFORMATION.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority to
which it is subject.

New York State Banking Department, State House, Albany, New York
12110.

Board of Governors of the Federal Reserve System, Washington, D.C.,
20551.

Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.

Federal Deposit Insurance Corporation, Washington, D.C., 20429.

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

ITEM 2. AFFILIATIONS WITH THE OBLIGOR.

If the obligor is an affiliate of the trustee, describe each such
affiliation.

None.

ITEM 16. LIST OF EXHIBITS

List below all exhibits filed as a part of this Statement of Eligibility.

1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is incorporated by
reference).

2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference).

3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.

4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
filed in connection with Registration Statement No. 33-84460, which is
incorporated by reference).

5. Not applicable.

6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference).

7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.

8. Not applicable.

9. Not applicable.

2
<PAGE> 3

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chemical Bank, a corporation organized and existing under the laws of
the State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York and State of New York, on the 2ND day of OCTOBER, 1995.

CHEMICAL BANK

By /s/ F. J. GRIPPO

------------------------------------
F. J. Grippo
Vice President

3
<PAGE> 4

EXHIBIT 7 TO FORM T-1

BANK CALL NOTICE

RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF

CHEMICAL BANK
OF 270 PARK AVENUE, NEW YORK, NEW YORK 10017
AND FOREIGN AND DOMESTIC SUBSIDIARIES,
A MEMBER OF THE FEDERAL RESERVE SYSTEM,

AT THE CLOSE OF BUSINESS JUNE 30, 1995, IN
ACCORDANCE WITH A CALL MADE BY THE FEDERAL RESERVE BANK OF THIS
DISTRICT PURSUANT TO THE PROVISIONS OF THE FEDERAL RESERVE ACT.

<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN MILLIONS
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.................... $ 5,573
Interest-bearing balances............................................. 2,681
Securities:
Held to maturity securities............................................. 6,027
Available for sale securities........................................... 18,304
Federal Funds sold and securities purchased under agreements to resell
in domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBF's:
Federal funds sold.................................................... 1,516
Securities purchased under agreements to resell....................... 287
Loans and lease financing receivables:
Loans and leases, net of unearned income.............................. $73,829
Less: Allowance for loan and lease losses............................. 1,885
Less: Allocated transfer risk reserve................................. 104
--------
Loans and leases, net of unearned income, allowance, and reserve...... 71,840
Trading Assets.......................................................... 25,315
Premises and fixed assets (including capitalized leases)................ 1,395
Other real estate owned................................................. 69
Investments in unconsolidated subsidiaries and associated companies..... 158
Customer's liability to this bank on acceptances outstanding............ 1,120
Intangible assets....................................................... 484
Other assets............................................................ 7,254
TOTAL ASSETS............................................................ $142,023
</TABLE>

4
<PAGE> 5

<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN MILLIONS
<S> <C> <C>
LIABILITIES
Deposits
In domestic offices................................................... $ 46,128
Noninterest-bearing................................................... $16,282
Interest-bearing...................................................... 29,846
--------
In foreign offices, Edge and Agreement subsidiaries, and IBF's........ 30,833
Noninterest-bearing..................................................... $ 199
Interest-bearing...................................................... 30,634
--------
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBF's Federal funds purchased.......... 16,779
Securities sold under agreements to repurchase........................ 810
Demand notes issued to the U.S. Treasury................................ 1,001
Trading liabilities..................................................... 20,888
Other Borrowed money:
With original maturity of one year or less............................ 6,505
With original maturity of more than one year.......................... 602
Mortgage indebtedness and obligations under capitalized leases.......... 18
Bank's liability on acceptances executed and outstanding................ 1,126
Subordinated notes and debentures....................................... 3,411
Other liabilities....................................................... 6,287
TOTAL LIABILITIES....................................................... 134,388
EQUITY CAPITAL
Common stock............................................................ 620
Surplus................................................................. 4,524
Undivided profits and capital reserves.................................. 2,724
Net unrealized holding gains (Losses) on available-for-sale
securities............................................................ (241)
Cumulative foreign currency translation adjustments..................... 8
TOTAL EQUITY CAPITAL.................................................... 7,635
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK AND EQUITY CAPITAL...... $142,023
</TABLE>

I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do
hereby declare that this Report of Condition has been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority and
is true to the best of my knowledge and belief.

JOSEPH L. SCLAFANI

We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.

WALTER V. SHIPLEY
EDWARD D. MILLER DIRECTORS
WILLIAM B. HARRISON