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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ___________ TO ____________
COMMISSION FILE NUMBER 1-2677
QUAKER STATE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 25-0742820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 East John Carpenter Freeway
Irving, Texas 75062
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 214-868-0400
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
Capital Stock, par value New York Stock Exchange
$1.00 per share Pacific Stock Exchange
Rights to Purchase Capital Stock, New York Stock Exchange
par value $1.00 per share Pacific Stock Exchange
6.5% Notes due 2005 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for at least the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The registrant estimates that as of March 15, 1996 the aggregate market
value of the shares of its Capital Stock held by non-affiliates of the
registrant was more than $417,400,000.
As of March 15, 1996, there were 32,858,094 shares of Capital Stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Quaker State's 1995 Annual Report to Stockholders are
incorporated by reference into Parts I and II of this annual report on Form
10-K.
Portions of the Proxy Statement for Quaker State's Annual Meeting of
Stockholders to be held on May 16, 1996 are incorporated by reference into Part
III of this annual report on Form 10-K.
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PART I
ITEM 1. BUSINESS.
Quaker State Corporation ("Quaker State" or the "Company"), a Delaware
corporation formed in 1931, has its principal place of business at 225 E. John
Carpenter Freeway, Irving, Texas, following the relocation in 1995 from its
former headquarters in Oil City, Pennsylvania. Quaker State's dominant business
is the manufacture and sale of branded and private label motor oils and
lubricants and branded engine and fuel treatments (see "Motor Oil Division"
below). Quaker State's business segments also include fast lube operations, the
manufacture and sale of safety lighting equipment and docking operations (see "Q
Lube", "Truck-Lite" and "Docking Operations" below). Quaker State is no longer
engaged in natural gas and crude oil exploration and production, insurance or
coal operations (see "Discontinued Operations" below).
MOTOR OIL DIVISION
The Motor Oil Division manufactures and sells lubricants (primarily motor
oils for automobiles and trucks) and fuels. The lubricants include transmission
fluids, gear lubricants and greases for automobiles and trucks, as well as
specialty lubricants designed for other types of vehicles, such as sport utility
vehicles, marine craft, motorcycles and snowmobiles. The lubricants are sold
under the Quaker State brand name and certain private label and proprietary
brand names. The fuels sold by Quaker State include gasoline, fuel oils (diesel
fuel and heating oils) and kerosene. Quaker State also purchases and resells
automotive consumer products.
In September 1994, Quaker State completed the acquisition by merger of the
four Specialty Oil Companies into a wholly owned subsidiary named Specialty Oil
Company, Inc. ("Specialty") and the purchase of all of the capital stock of
Westland Oil Company, Inc. ("Westland"). Specialty and Westland are now part of
the Motor Oil Division. Through Specialty, Quaker State markets and distributes
private label, proprietary brand and major national brand lubricants and other
automotive aftermarket products. Through the Specialty Environmental Services
Division of Specialty, Quaker State provides collection, transportation and
recycling services for used oil, brake fluid and antifreeze and used oil filters
in certain regions of the United States. Westland blends and packages motor
oils, other lubricants and related products, which are sold primarily to
Specialty.
In July 1995, the Company acquired Slick 50, Inc. ("Slick 50"), a marketer
of automotive engine and fuel treatments and related automotive and industrial
chemicals, for approximately $22.6 million in cash, 1,260,403 shares of Quaker
State capital stock and approximately $11 million to satisfy certain debts of
Slick 50. Quaker State believes that Slick 50's engine treatment product is the
best selling engine treatment in the United States.
Manufacturing. Motor oils are made by blending additives with lubricant
stocks refined from crude oil. Quaker State's motor oils are made from lubricant
stocks produced at its Congo refinery located at Newell, West Virginia or from
lubricant stocks purchased from other refiners. The Congo refinery is specially
designed to maximize the production of lubricant stocks from Pennsylvania Grade
crude oil. Although it was built in 1971, the Congo refinery remains one of the
newer lubricant stock refineries in the United States, and it has sufficient
capacity to meet planned production requirements.
During the three years ended December 31, 1995, the following amounts of
Pennsylvania Grade crude oil were processed at the Congo refinery:
1995-3,944,000 barrels; 1994-3,919,000 barrels; and 1993-3,710,000 barrels.
Crude oil is available from a large number of suppliers. Quaker State purchases
most of its crude oil from suppliers with whom, for the most part, Quaker State
has been doing business for many years. During 1995, Quaker State purchased
crude oil from approximately 1,300 producers, including one producer which
accounted for approximately 11% 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, farm-out or similar agreements under which
Quaker State has the contractual right to purchase the crude oil if produced.
During the three years ended December 31, 1995, the weighted average price per
barrel of crude oil purchased by Quaker State was: 1995-$16.33; 1994-$15.59; and
1993-$16.17. A small portion of the crude oil processed by
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Quaker State at the Congo refinery in 1995 was produced by Quaker State itself
(see "Discontinued Operations" below).
Approximately 42.5% of the lubricant stocks used in Quaker State branded
motor oils are produced at the Congo refinery. Some lubricant stocks produced at
the Congo refinery are sold to third parties.
Quaker State blends lubricant stocks with additives to produce motor oils
at the Congo refinery, and at blending and packaging plants owned and operated
by Quaker State in Vicksburg, Mississippi and Carson, California (near Los
Angeles).
Quaker State's Canadian subsidiary, Quaker State, Inc., owns and operates a
plant in Burlington, Ontario (near Toronto) to package blended motor oils
supplied by the Congo refinery.
Westland purchases lubricant base stocks and chemical additives, blends
them into finished lubricants and related products, and packages finished
lubricants and related products at a blending and packaging plant owned by
Quaker State in Shreveport, Louisiana and at a blending and packaging plant
owned by Westland in San Antonio, Texas.
Slick 50 purchases motor oils, additives and chemicals and contracts with
Gold Eagle Company of Chicago, Illinois to have these materials blended into
finished products in accordance with Slick 50's specifications.
Quaker State sells the majority of its branded motor oils (by volume) in
packages; however, it sells a significant amount in bulk. Packaged motor oils
are sold primarily in one quart plastic bottles, which are made by others to
Quaker State's specifications. Westland packages lubricants in containers
ranging in size from four ounces to 55 gallons and also sells lubricants in
bulk. Westland makes certain plastic containers itself and purchases its other
containers from a number of suppliers.
Greases and some specialty lubricants sold by Quaker State are made by
others to the Company's specifications.
Gasoline, fuel oils and kerosene account for approximately 57% of the
output (by volume) of the Congo refinery. Wax is also a by-product of the
refining process.
Raw materials other than crude oil and containers consist primarily of the
lubricant stocks produced by other refiners, chemicals, fuels and additives,
which are available from a number of sources. Availability of Pennsylvania Grade
crude oil depends primarily on the price which purchasers, including Quaker
State, are willing to pay, which in turn depends on the prevailing market prices
for all types of crude oil. The available supply of Pennsylvania Grade crude oil
has been declining for some time and is expected to continue to decline.
Although Quaker State believes that an adequate supply of Pennsylvania Grade
crude oil will be available for the Congo refinery for the near future, the
Company is studying the cost and availability of alternatives, should a shortage
occur.
Quaker State owns and operates a fleet of tank trucks to gather crude oil
produced in eastern Ohio and western Pennsylvania and transport it to the Congo
refinery or to a crude oil terminal and storage complex owned and operated by
Quaker State at Magnolia, Ohio. From there, crude oil flows through a pipeline
to the Congo refinery. Other crude oil is gathered by regulated pipeline
companies and barged to the Congo refinery.
Domestic Sales. Quaker State sells motor oils and other lubricants to
retailers directly and through independent distributors.
Direct sales are made to national and regional chain stores, to fast lube
centers and to resellers and end users primarily in large metropolitan areas.
The resellers include wholesalers and retailers, and the end users include
industrial and commercial accounts and fleet customers. In 1995, sales to
Wal-Mart Stores, Inc. and its affiliated companies exceeded 10% of Quaker
State's consolidated revenues.
As of December 31, 1995, there were 92 independent distributors selling
Quaker State products in all 50 states. Independent distributors resell to
service stations, retailers, automobile dealers, repair shops, fast lube
centers, automobile parts stores, retail food chains, fleet and commercial
customers and wholesale outlets.
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During the three years ended December 31, 1995, the independent distributors
accounted for the following percentages of Quaker State's total branded motor
oil sales revenues in the United States: 1995-28.9%; 1994-33.6%; and 1993-35.3%.
The decline in 1995 is primarily attributable to the acquisition of Specialty
Oil, which was formerly Quaker State's largest distributor.
Gasoline, fuel oils and kerosene are sold F.O.B. the Congo refinery to
wholesalers located for the most part in Ohio, Pennsylvania and West Virginia.
Sales of automotive consumer products are made to the same entities to
which lubricant sales are made. The leading products are oil, air and fuel
filters. The Company also sells antifreeze, brake and power steering fluids,
fuel additives, spray lubricants and cleaners and automotive undercoatings.
Slick 50's products are sold through independent distributors or directly
to major national retailers.
Foreign and Export Sales. Quaker State, Inc. has sold Quaker State branded
motor oils in Canada for many years. Sales in Canada are made primarily through
independent distributors under contract with the Canadian subsidiary, but also
directly to customers. Quaker State believes that its motor oils are the largest
selling branded motor oil in Canada.
Quaker State sells branded motor oils in Japan through a Quaker State
subsidiary formed in 1990 and in Mexico through a licensee. Quaker State
believes that its motor oils are the largest selling independent brand in
Mexico.
Quaker State makes export sales of motor oils in 84 foreign countries
through independent distributors. Export sales have increased significantly
during the 1990s and efforts are being made to increase these sales further. The
largest amount of export sales is made in the Dominican Republic. During 1995,
Quaker State also made a significant part of its export sales to Ecuador,
Guatemala, Poland, Sweden and Taiwan.
Small amounts of greases, gear lubricants and automotive consumer products
such as filters and chemicals are exported to certain foreign countries.
Slick 50 products are sold in approximately 40 foreign countries, primarily
through distributors and by a direct sales unit in Japan.
During the three years ended December 31, 1995, total revenues from foreign
operations, including export sales, were: 1995-$81,558,000; 1994-$68,661,000;
and 1993-$55,436,000. The revenues for 1994 include Specialty revenues from the
time of acquisition and for 1995 include Slick 50 revenues from the time of
acquisition. The largest component of these revenues comes from Canada.
Marketing. Quaker State aggressively markets its branded lubricants, engine
and fuel treatments and automotive consumer products. In particular, Quaker
State relies heavily on media advertising to project the quality image of its
motor oils and other products and to maintain its competitive position.
In addition to media advertising, total marketing costs include sponsorship
of automobile racing teams, participation in automotive trade shows and
distribution of promotional materials. Quaker State also provides marketing
allowances to its customers and has incentive programs for its direct retail
customers and independent distributors.
Quaker State and its subsidiaries have trademark registrations or
applications in effect covering the use of the trademarks "Quaker State,"
"Quaker State 4X4," "Lubriguard," "Itasca," "Slick 50" and other product names,
logos and designs utilized in connection with the sale of their products. Quaker
State believes that these registrations and applications are important to the
success of its marketing efforts and have been effective in preventing use of
the trademarks by others. The trademark registrations expire at various dates,
but in each case may be renewed.
Operating Profit. During the three years ended December 31, 1995, the
operating profit, excluding unusual items, of the Motor Oil Division (including
the foreign operations) was: 1995-$33,522,000; 1994-$16,401,000 and
1993-$17,484,000. The increase in 1995 operating profits, compared to 1994,
resulted from recent acquisitions, improved product margins, reduced marketing
expenses and LIFO profits, partially
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offset by property and equipment writedowns. Branded motor oil sales volume
increased in 1994, but operating profits were lower than in 1993 due to a change
in product mix and increased selling, marketing, freight and administrative
expenses.
Q LUBE
Quaker State, through its subsidiary Q Lube, Inc. (formerly known as Quaker
State Minit-Lube, Inc. and hereafter referred to as "Q Lube"), is one of the
largest operators and franchisors of fast lube centers in the United States.
Fast lube centers are service outlets providing quick and inexpensive oil
changes, lubrication and related services for automobiles. Q Lube was acquired
in November 1985. A former subsidiary, McQuik's Oilube, Inc., was acquired in
May 1989 and was merged into Q Lube in January 1996. The administrative offices
of Q Lube are located in Salt Lake City, Utah.
As of December 31, 1995, there were 440 Q Lube stores in the United States,
of which 336 were owned or leased and operated by Q Lube and 104 were operated
by franchisees. The fast lube centers owned by Q Lube and its franchisees are
operated under the names Q Lube, McQuik's Oilube or Quaker State Minit-Lube.
The fast lube centers of Q Lube and its franchisees are located in 24
states primarily in the West, Midwest and Southeast. There are also 26 fast lube
centers in the Province of Ontario that are owned and operated or franchised by
a joint venture between Q Lube and another company.
Q Lube is one of Quaker State's largest customers. Quaker State supplies
most of the motor oils used and sold in the Q Lube centers, and these centers
are the largest users of Quaker State motor oils sold in bulk.
In September 1994, Q Lube entered into an agreement with Interline
Resources Corporation under which Q Lube obtained a license to use certain used
oil recovery technology. The first used oil recovery unit utilizing this
technology began operation in early 1996, and a number of additional units may
be constructed depending upon the operating results of this unit.
In 1992, Q Lube began to convert certain of its company-operated fast lube
centers to the name Q Lube, featuring heightened Quaker State identification.
Because of the success of the conversions, Q Lube intends to redesign virtually
all of its company-operated centers to Q Lube identification by the end of 1997.
As of December 31, 1995, approximately 62% of the company-operated centers were
identified by the Q Lube name.
Operating Profit. During the three years ended December 31, 1995, Q Lube's
operating profit was: 1995-$8,283,000; 1994-$5,726,000 and 1993-$3,045,000. The
increase in operating profit in 1995 resulted from increases in car counts and
the average ticket price. Operating profit in 1994 increased from 1993 as a
result of an increase in the number of cars serviced at company-owned centers.
TRUCK-LITE
Quaker State's subsidiary Truck-Lite Co., Inc. ("Truck-Lite") manufactures
vehicular safety lighting equipment, which is sold to original equipment
manufacturers and replacement parts distributors. Truck-Lite's product line
consists of custom designed safety and interior lights for passenger cars, light
trucks and vans; sealed and bulb replaceable stop, turn and indicator lights for
heavy-duty trucks; and sealed wiring harness systems for heavy-duty truck
trailers. In 1995, Truck-Lite began to exit the automotive original equipment
business and to increase its focus on the heavy duty truck and trailer lighting
business. This shift in strategy will continue in 1996. The administrative
offices of Truck-Lite are located in Falconer, New York.
Most of Truck-Lite's products for passenger cars, light trucks and vans are
manufactured in Falconer, New York. Most of the products for heavy-duty trucks
and truck trailers are manufactured in McElhattan and Wellsboro, Pennsylvania.
The Falconer and Wellsboro facilities are owned; the McElhattan facility is
leased.
Products for passenger cars, light trucks and vans are distributed from the
Falconer facility. Products for heavy-duty trucks and truck trailers are
distributed from leased distribution centers in McElhattan and
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Sacramento, California. Truck-Lite also manufactures specially designed
heavy-duty lighting products for sale in Europe through a subsidiary formed for
this purpose.
During the three years ended December 31, 1995, Truck-Lite's operating
profit was: 1995-$9,823,000; 1994-$11,756,000; and 1993-$5,731,000. Operating
profit declined in 1995 due to softening in the automotive market which resulted
in reduced sales of automobile lighting products. Sales volume and operating
profit for 1994 reached record high levels for Truck-Lite.
DOCKING OPERATIONS
Quaker State's subsidiary Valley Camp, Inc. operates iron ore pellet and
potash terminals and a bulk materials handling dock accessible to Lake Superior
at Thunder Bay, Ontario.
During the three years ended December 31, 1995, the operating profit of the
docks business was: 1995- $943,000; 1994-$1,753,000; and 1993-$1,138,000. The
1994 results include a pretax gain due to termination of the pension plan at the
docking operations, which accounts for the lower operating profits in 1995 in
comparison to 1994.
DISCONTINUED OPERATIONS
For many years, Quaker State was engaged in the exploration for and
production of natural gas and crude oil and related activities. In the third and
fourth quarters of 1995, Quaker State sold most of its exploration and
production assets in several transactions for consideration totalling
approximately $67.7 million, with an after-tax gain of $12 million. The sales
included interests in 1,460 producing oil and gas wells in New York, Ohio,
Pennsylvania and West Virginia; approximately 250,000 acres of leasehold
interests; certain gas-gathering lines and 10,000 acres of timber interests. For
further information, see Note 5 of the Notes to Consolidated Financial
Statements in Quaker State's 1995 Annual Report to Stockholders (the "1995
Annual Report").
From 1984 to 1994, Quaker State, through its subsidiary Heritage Insurance
Group, Inc. ("Heritage"), was engaged in the insurance business, including
credit life insurance, accident and health insurance and specialty indemnity
coverages for automobiles and consumer appliances. In August 1994, Quaker State
completed the sale of all of the capital stock of Heritage to General Electric
Capital Corporation for approximately $82 million after satisfaction of certain
intercompany obligations. For further information with respect to the
discontinued insurance operations, see Note 5 of the Notes to Consolidated
Financial Statements in the 1995 Annual Report.
From 1976 to 1992, Quaker State was engaged in coal operations through its
subsidiary The Valley Camp Coal Company ("Valley Camp"). In December 1992,
Valley Camp discontinued its coal operations and, accordingly, its operating
results were segregated and reported as discontinued coal operations in Quaker
State's 1992 Consolidated Statement of Operations. Reclamation work proceeded in
1995 at the mines formerly operated by two of Valley Camp's subsidiaries, as did
sales of the remaining assets related to the discontinued coal operations. As of
December 31, 1995, approximately $1,800,000 in assets of the discontinued coal
operations remained to be sold.
FINANCIAL INFORMATION BY BUSINESS SEGMENT
Financial information as to Quaker State's operations by business segment
(i.e., Motor Oil Division, Q Lube, Truck-Lite and docking operations) is set
forth in the segment information table which appears on page 19 of the 1995
Annual Report as well as under the heading "Management's Discussion and
Analysis" which appears on pages 16 through 18 of the 1995 Annual Report. This
financial information is incorporated in this item by reference.
Certain information (identifiable assets, capital expenditures and
depreciation, depletion and amortization) relating to the discontinued
operations is included in the segment information table and is incorporated in
this item by reference.
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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. Many of the competitors, particularly the
major integrated oil companies, have substantially greater finished motor oil
capacities and financial resources than Quaker State. The principal methods of
competition in the branded motor oil business and the engine additive business
are product quality, distribution capability, advertising and sales promotion.
Quaker State also competes with Pennzoil Company and Witco Chemical Corporation
in the purchase of Pennsylvania Grade crude oil.
In the sale of private label lubricants, Quaker State competes with
Ashland, Inc. and a number of small blending and packaging companies. The
principal methods of competition are product quality and price. In the waste oil
collection, transportation, management and recycling business, Quaker State
competes with Safety Kleen Corporation, International Petroleum Corp., the First
Recovery, Inc. division of Ashland, Inc. and a number of regional waste oil
haulers. The principal methods of competition are price, quality and reliability
of service.
The major competitors of Slick 50 and their principal brands of engine
additives are First Brands Corporation (STP), Howe Laboratories (Duralube) and
Hilton Oil Company (T-Plus).
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. 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.
RESEARCH AND DEVELOPMENT
Research and development activities in the Motor Oil Division are directed
toward continued improvement of Quaker State motor oils, other lubricants and
engine additives and the development of new or improved automotive consumer
products. Research and development personnel develop quality control programs to
assure the continuous production of high quality products and provide extensive
technical services in the manufacturing, packaging, sales and marketing
operations as well as to customers. Research and development activities are also
conducted at Truck-Lite, to develop new products and to improve existing
products and processes. The amounts spent on research and development by Quaker
State during the three years ended December 31, 1995 are not material.
GOVERNMENT REGULATION
Environmental. Quaker State and certain of its subsidiaries are subject to
various federal, state and local air, water, land use and waste management laws
and regulations. In particular, these laws and regulations affect motor oil
manufacturing operations, used oil and other automotive fluids collection and
fast lube operations. In motor oil manufacturing, permits are required for the
discharge of water used in operations into navigable waters and for certain
hazardous waste activities. Air pollution regulations apply to emissions from
boilers. In the collection and transportation of used motor oil and other
automotive fluids, regulations govern the proper handling and disposition of
these materials. Federal regulations impose standards for storage tanks and tank
farms, recordkeeping and labeling requirements and management standards. In the
fast lube operations, waste management regulations apply to the disposition of
used motor oil and other petroleum products.
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Truck-Lite's products are subject to regulations of the Federal Department
of Transportation that govern the brightness, placement and physical durability
of lighting.
ENVIRONMENTAL EXPENDITURES
Capital expenditures for pollution control facilities during the three
years ended December 31, 1995 were as follows: 1995-$2,653,000; 1994-$3,152,000
and 1993-$1,823,000. Capital expenditures for pollution control facilities
during 1996 are expected to amount to approximately $2,250,000.
The capital expenditures for pollution control facilities in 1995, 1994 and
1993 were primarily made for upgrading and replacing underground storage tanks
in Q Lube's operations, facilities associated with new drilling prior to the
sale of the discontinued natural gas and crude oil exploration and production
division and in 1995 the upgrading of bulk oil storage facilities at Specialty
and Westland. Anticipated expenditures in 1996 for pollution control facilities
include expenditures for continued upgrading and replacement of underground
storage tanks in the Q Lube operations and upgrading of bulk oil storage
facilities at Specialty and Westland.
Quaker State and certain of its subsidiaries have received notices from the
United States Environmental Protection Agency (the "USEPA") and a similar state
agency that they may be responsible for response and cleanup costs with respect
to certain Superfund sites (see Item 3 of this annual report).
Quaker State sold its crude oil refinery at St. Mary's, West Virginia in
December 1987 and has provided certain indemnities with respect to the
environmental conditions at the refinery to a subsequent owner. In May 1990,
Quaker State sold its crude oil refinery at Farmers Valley, Pennsylvania and a
wax plant (formerly also a crude oil refinery) at 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 and natural gas and oil exploration and production operations.
For further information with respect to environmental expenditures, see the
information under the heading "Management's Discussion and Analysis", and Notes
1, 10 and 11 of the Notes to Consolidated Financial Statements, contained in the
1995 Annual Report.
EMPLOYEES
As of December 31, 1995, Quaker State and its subsidiaries had 4,757
full-time employees and 351 temporary and part-time employees.
Approximately 11% of the Company's full-time employees are represented by
various labor unions. Collective bargaining agreements are in effect with all of
the unions. The collective bargaining agreement covering the bargaining unit at
the Congo refinery expires in January 1999.
ITEM 2. PROPERTIES.
Information with respect to the location and general character of the
materially important principal properties of Quaker State and its subsidiaries,
identified by the business segments utilizing such properties, is included in
Item 1 of this annual report and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
Congo Refinery Environmental Litigation. In December 1993, the United
States commenced a lawsuit against Quaker State in the United States District
Court for the Northern District of West Virginia. The Amended Complaint alleges,
among other things, that Quaker State has violated the federal Resource
Conservation and Recovery Act ("RCRA") and the federal Clean Air Act at its
Congo, West Virginia refinery. The Amended Complaint alleges that several units
that are part of the plant wastewater treatment system also receive hazardous
waste and should properly be characterized and permitted as hazardous waste
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surface impoundments. Quaker State has contended that these units are tanks and
are exempt from federal hazardous waste regulation.
The United States alleges that, if characterized as surface impoundments,
the structures have not had proper permits since 1980, that Quaker State has
violated various regulations relating to the structures and that Quaker State's
management of the units has constituted improper treatment and disposal of
hazardous wastes at various dates after 1980. The Amended Complaint also alleges
Clean Air Act violations pertaining to asbestos removal at the Congo refinery
during 1990, 1991 and 1992, violations of the State Implementation Plan since
November 1991 (relating to combustion of process and sour gas streams) and an
opacity violation in April 1993.
The Amended Complaint requests injunctive relief and civil penalties not
exceeding $25,000 for each day of violation of RCRA and the Clean Air Act.
Extensive discovery has been conducted by the parties to date. Quaker State and
the United States are engaged in settlement negotiations, but no final
settlement has been reached. If the case is not settled, a trial is scheduled to
begin in 1996. For further information with respect to this lawsuit, see the
information under the heading "Management's Discussion and Analysis", and Note
11 of the Notes to Consolidated Financial Statements, contained in the 1995
Annual Report.
CERCLA Matters. In December 1988, Q Lube received a notice from the USEPA
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), identifying Q Lube as a potentially responsible
party ("PRP") for response and cleanup costs with respect to a waste disposal
site known as the Petrochem/Ekotek Superfund Site in Salt Lake City, Utah. In
August 1989, Q Lube and 34 other respondents entered into a Consent Order under
which they agreed to fund the costs to clean up the surface of the contaminated
property. The respondents have advanced $10,000,000 toward these costs, of which
Q Lube's share to date has amounted to approximately $600,000. A comprehensive
remedial investigation and feasibility study of this site was recently
completed, discussions between the respondents and USEPA concerning a remedial
plan have occurred, and the USEPA will eventually issue its record of decision
containing a plan for further remediation of this site.
Quaker State and certain of its subsidiaries have received similar notices
from the USEPA under CERCLA that each may be a PRP responsible for cleanup costs
with respect to a waste disposal site identified by the USEPA. In addition,
Quaker State has received a similar notice from the California Department of
Toxic Substances Control (the "DTSC") under CERCLA as well as a California
statute. The USEPA and DTSC are conducting investigations regarding alleged
releases or threatened releases of hazardous substances from these sites and
have contacted all parties who may have arranged for the disposal, treatment or
transportation of hazardous substances to the sites.
For further information with respect to CERCLA matters, see the information
under the heading "Management's Discussion and Analysis" and Note 11 of the
Notes to Consolidated Financial Statements contained in the 1995 Annual Report.
Penn Grade Crude Antitrust Litigation. In April 1994, Lazy Oil, Inc., a
Pennsylvania corporation, commenced a class action in the Federal District Court
for the Western District of Pennsylvania against Witco Corporation, Quaker State
and Pennzoil Company. Three similar actions were subsequently commenced and were
consolidated with the original action. The Consolidated Amended Complaint
alleges violations of Section 1 of the Sherman Act, based upon an allegation
that the defendants, since at least January 1, 1981, combined and conspired to
fix, lower, maintain and stabilize the purchase price of Pennsylvania Grade
crude oil purchased from the plaintiffs and others. The plaintiffs 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 Amended
Complaint alleges that the applicable statute of limitations has been tolled by
a fraudulent concealment of the alleged combination and conspiracy.
The Amended Complaint seeks treble damages, an injunction and the recovery
of costs, including attorneys' fees. The defendants filed answers to the Amended
Complaint, denying all liability. In July 1995, the Court certified the
proceeding as a class action and denied a motion for summary judgment filed by
the defendants, without prejudice to renewal after the close of discovery.
9
<PAGE> 10
In December 1995, the plaintiffs and Quaker State entered into a settlement
agreement compromising and settling all claims against Quaker State in the class
action. Pursuant to the settlement agreement, Quaker State has paid $4,400,000
into a settlement fund, subject to return of up to $2,400,000 if at any time
before a jury is impaneled another defendant reaches a more favorable settlement
with the plaintiffs. A hearing on preliminary approval by the Court of the
settlement was held on March 7, 1996.
Quaker State vigorously denies the allegations made against it in the
litigation and entered into the settlement agreement without any admission of
liability on its part.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
EXECUTIVE OFFICERS OF QUAKER STATE
In accordance with Instruction 3 of Item 401(b) of Regulation S-K, the
executive officers of Quaker State are set forth below:
<TABLE>
<S> <C> <C>
Herbert M. Baum 59 Chairman of the Board and Chief Executive Officer of
Quaker State
John D. Barr 48 President and Chief Operating Officer of Quaker State and Chief
Executive Officer of the Motor Oil Division
Conrad A. Conrad 50 Vice Chairman and Chief Financial Officer of Quaker State
L. David Myatt 50 Vice Chairman of Quaker State
Charles F. Bechtel 51 Senior Vice President, Sales of the Motor Oil Division
Paul E. Konney 51 Vice President, General Counsel and Secretary of Quaker State
</TABLE>
Mr. Baum has been Chairman of the Board and Chief Executive Officer and a
Director of Quaker State since June 1993. He held the additional position of
President of Quaker State from September 1994 to July 1995. He was Executive
Vice President of Campbell Soup Company from prior to 1991 to June 1993, and was
President, Campbell North and South America from January 1992 to June 1993.
Mr. Barr has been President and Chief Operating Officer of Quaker State and
Chief Executive Officer of the Motor Oil Division since July 1995. He was Senior
Vice President of Ashland, Inc. and President of its subsidiary, The Valvoline
Company, from prior to 1991 to July 1995.
Mr. Conrad has been Vice Chairman of Quaker State since September 1994. He
became Chief Financial Officer of Quaker State in July 1995. He has been a
Director of Quaker State since January 1988. He was President and Chief
Operating Officer of Quaker State from prior to 1991 to September 1994 and Chief
Administrative Officer of Quaker State from September 1994 to July 1995.
Mr. Myatt has been Vice Chairman and a Director of Quaker State since
September 1994. He was Chief Executive Officer of the Motor Oil Division from
September 1994 to July 1995. He was President of the Specialty Oil Companies
(lubricant distributors) and Westland Oil Company, Inc. (lubricants blender and
packager) from prior to 1991 to September 1994 when these companies were
acquired by Quaker State.
Mr. Bechtel has been Senior Vice President, Sales of the Motor Oil Division
since October 1995 and was Executive Vice President, Sales and Marketing of the
Motor Oil Division from November 1994 to October 1995. From November 1993 to
November 1994, he was Executive Vice President, Sales of the Motor Oil Division.
He was President of Bechtel and Associates, a sales consulting firm, from
October 1992 to November 1993 and Executive Vice President, Sales of 21st
Century Foods, Inc. from September 1992 to November 1993. He was Executive Vice
President and Chief Operating Officer of Old Fashioned Kitchens, Inc. from
August 1991 to September 1992, and was Executive Vice President, Sales and
Marketing of Slim-Fast Foods, Inc. and President of the Powdered Drink Division
of Slim-Fast Foods, Inc. from prior to 1991 to August 1991.
10
<PAGE> 11
Mr. Konney has been Vice President and General Counsel of Quaker State
since September 1994 and Secretary of Quaker State since January 1995. From July
1993 to September 1994, he was in the private practice of law. He was Senior
Vice President-General Counsel and Secretary of Tambrands Inc. from prior to
1991 to July 1993.
There is no family relationship between any executive officer of Quaker
State and any Director or other executive officer of Quaker State. L. David
Myatt, Vice Chairman and a Director of Quaker State, is the brother of Dennis M.
Myatt, Jr., Vice President of the Motor Oil Division.
The officers of Quaker State are elected annually by the Board of Directors
immediately after each Annual Meeting of Stockholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Quaker State capital stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange and trades under the trading symbol KSF. The market
prices of Quaker State capital stock appear under the caption "Quaker State
(KSF) Market Prices by Quarter" on page 35 of the 1995 Annual Report. Dividend
information appears in Note 16 of the Notes to Consolidated Financial Statements
contained in the 1995 Annual Report. All such information is incorporated in
this annual report by reference. As of March 15, 1996, there were 9,748 holders
of record of Quaker State's capital stock.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item 6 appears under the caption
"Five-Year Summary of Net Income and Comparative Statistical Data" on page 20 of
the 1995 Annual Report and is incorporated in this annual report by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Discussion and Analysis of Financial Condition and Results of
Operations required by this Item 7 appears on pages 16 through 18 of the 1995
Annual Report and is incorporated in this annual report by reference.
ITEM 8. FINANCIAL STATEMENTS.
The following financial statements and related report on the consolidated
financial statements of Quaker State and Subsidiaries for the years ended
December 31, 1995, 1994, and 1993 required by this Item 8 appear on the pages
indicated in the 1995 Annual Report and are incorporated in this annual report
by reference:
<TABLE>
<CAPTION>
PAGE(S) IN 1995
FINANCIAL STATEMENTS AND RELATED REPORT ANNUAL REPORT
- --------------------------------------------------------------------------- ----------------
<S> <C>
Report of Independent Certified Public Accountants, dated January 30,
1996..................................................................... 34
Consolidated Statement of Income for the years ended December 31, 1995,
1994 and 1993............................................................ 21
Consolidated Statement of Cash Flows for the years ended December 31, 1995,
1994 and 1993............................................................ 22
Consolidated Balance Sheet as of December 31, 1995 and 1994................ 23
Consolidated Statement of Stockholders' Equity for the years ended December
31, 1995, 1994 and 1993.................................................. 24
Notes to Consolidated Financial Statements................................. 25-33
</TABLE>
The supplementary financial information required by this Item 8 appears in
Note 16 of the Notes to Consolidated Financial Statements contained in the 1995
Annual Report and is incorporated in this annual report by reference.
11
<PAGE> 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEMS 10 THROUGH 13.
Information concerning the executive officers of Quaker State appears at
the end of Part I of this annual report. In accordance with the provisions of
General Instruction G to Form 10-K, the other information required by Item 10
(Directors and Executive Officers of the Registrant) and the information
required by Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and
Related Transactions) is incorporated in this annual report by reference from
the definitive Proxy Statement to be filed by Quaker State pursuant to
Regulation 14A no later than April 29, 1996 (except for the information required
to be included in such Proxy Statement by paragraphs (i), (k) and (l) of Item
402 of Regulation S-K).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS:
The consolidated financial statements of Quaker State and Subsidiaries,
together with the report of Coopers & Lybrand L.L.P. dated January 30,
1996, appearing on pages 21 through 33 and on page 34, respectively, of
the 1995 Annual Report are incorporated in this annual report by
reference (see Item 8 above).
(A)(2) FINANCIAL STATEMENT SCHEDULES:
The financial statement schedule and related report listed below are
filed as part of this annual report:
<TABLE>
<CAPTION>
PAGE IN THIS
FINANCIAL STATEMENT SCHEDULE AND RELATED REPORT ANNUAL REPORT
-------------
<S> <C>
Report of Independent Certified Public Accountants, dated January 30, 1996..... S-1
Schedule II--Valuation and Qualifying Accounts for the years ended December 31,
1995, 1994 and 1993.......................................................... S-2
</TABLE>
All other financial statement schedules are omitted because they either are
not applicable or are not material, or because the information required therein
is contained in the consolidated financial statements or notes thereto set forth
in the 1995 Annual Report.
(A)(3) EXHIBITS:
The exhibits listed below are filed as a part of this annual report:
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------ -----------------------------------------------------------------------------------
<S> <C>
3(i) Composite Certificate of Incorporation of Quaker State, filed as Exhibit 3(i) to
Form 10-Q for the fiscal quarter ended June 30, 1995 and incorporated herein by
reference.
3(ii) Bylaws, as amended October 26, 1995, filed herewith.
4(a) Credit Agreement, dated as of September 28, 1995, between Quaker State and Morgan
Guaranty Trust Company of New York, as Agent, filed as Exhibit 4(a) to Form 10-Q
for the fiscal quarter ended September 30, 1995 and incorporated herein by
reference.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------ -----------------------------------------------------------------------------------
<S> <C>
4(b) Form of Indenture between Quaker State and Chemical Bank, as Trustee, related to
$100,000,000 of 6.5% Notes due 2005, filed as Exhibit 4.1 to Amendment No. 1 to
Registration Statement on Form S-3 filed October 10, 1995 and incorporated herein
by reference.
4(c) Rights Agreement, dated as of September 28, 1995, between Quaker State and Mellon
Securities Trust Company, Rights Agent, related to Rights to Purchase Capital
Stock, filed as Exhibit 1 to Form 8-K filed on October 20, 1995 and incorporated
herein by reference.
10(a) 1986 Stock Option Plan, as amended through April 30, 1987, filed as Exhibit 10(b)
to Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by
reference.*
10(b) Resolution, adopted on February 27, 1992 by the Board of Directors of Quaker State,
amending Section 5(D) of the 1986 Stock Option Plan, filed as Exhibit 10(c) to Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.*
10(c) 1994 Non-Employee Directors' Stock Option Plan, filed as Exhibit 10(d) to Form 10-K
for the fiscal year ended December 31, 1994 and incorporated herein by reference.
10(d) 1994 Stock Incentive Plan, filed as Exhibit 10(e) to Form 10-K for the fiscal year
ended December 31, 1994 and incorporated herein by reference.*
10(e) Forms of Split Dollar Life Insurance Agreement and related Collateral Assignment
Agreement, filed herewith.*
10(f) Annual Incentive Bonus Plan, as amended and restated effective January 1, 1995,
filed as Exhibit 10(a) to Form 10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference.*
10(g) Quaker State Corporation Amended and Restated Severance Plan, effective September
30, 1988, filed as Exhibit 28.1 to Form 8-K filed on October 17, 1988 and
incorporated herein by reference.*
10(h) Articles X and XI of the Quaker State Corporation Salaried Pension Plan, as Amended
and Restated effective July 1, 1989 for Quaker State and certain of its
subsidiaries, filed as Exhibit 28(b) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(i) Articles X and XI of the Quaker State Corporation Hourly Pension Plan, as Amended
and Restated effective July 1, 1989 for Quaker State and certain of its
subsidiaries, filed as Exhibit 28(e) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(j) Quaker State Corporation Supplemental Excess Retirement Plan, filed as Exhibit
10(k) to Form 10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference.*
10(k) Employment Agreement, dated as of August 1, 1994, between Quaker State and Herbert
M. Baum, filed as Exhibit 10(a) to Form 10-Q for the fiscal quarter ended September
30, 1994 and incorporated herein by reference.*
10(l) Employment Agreement, dated as of September 30, 1994, between Quaker State and L.
David Myatt, filed as Exhibit 10(b) to Form 10-Q for the fiscal quarter ended
September 30, 1994 and incorporated herein by reference.*
10(m) Letter, dated as of June 5, 1995, between Quaker State and John D. Barr, filed
herewith.*
10(n) Letter Agreement, dated February 28, 1996, between Quaker State and John D. Barr,
filed herewith.*
10(o) Letter Agreement, dated March 4, 1996, between Quaker State and Charles F. Bechtel,
filed herewith.*
10(p) Form of Employment Continuation Agreement entered into between Quaker State and
certain of its executive officers, filed herewith.*
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------ -----------------------------------------------------------------------------------
<S> <C>
10(q) Form of Indemnification and Insurance Agreement entered into between Quaker State
and certain of its directors, filed as Exhibit 10(g) to Form 10-K for the fiscal
year ended December 31, 1987 and incorporated herein by reference.
10(r) Form of letter agreement entered into between Quaker State and each of its
non-employee directors regarding the retirement benefits provided by Quaker State
to its non-employee directors, filed as Exhibit 10(n) to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated herein by reference.
10(s) Outside Directors' Group Life Plan, filed as Exhibit 10(d) to Form 10-K for the
fiscal year ended December 31, 1986 and incorporated herein by reference.
11 Statement re Computation of Per Share Earnings, filed herewith.
13 Those portions of the 1995 Annual Report which are expressly incorporated in this
annual report by reference, filed herewith.
21 List of subsidiaries of Quaker State Corporation, filed herewith.
23 Consent of Coopers & Lybrand L.L.P., filed herewith.
24 Powers of Attorney, filed herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
- ---------
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.
Quaker State agrees to furnish to the Commission upon request copies of all
instruments not listed above which define the rights of holders of long-term
debt of Quaker State and its subsidiaries.
Copies of the above exhibits are available at a cost of $.20 per page to
any stockholder upon written request to the Secretary, Quaker State Corporation,
225 E. John Carpenter Freeway, Irving, Texas 75062.
(B) REPORTS ON FORM 8-K:
On October 20, 1995, Quaker State filed a report on Form 8-K, reporting
under Item 5 that on September 28, 1995 the Quaker State Board of Directors
declared a dividend of one right to purchase one share of Quaker State Capital
Stock or, under certain circumstances, one share of common stock of an acquiring
company for each outstanding share of Quaker State Capital Stock to be issued to
each stockholder of record on October 18, 1995. No financial statements were
filed with this report.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Quaker State has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
QUAKER STATE CORPORATION
By: /S/ HERBERT M. BAUM
----------------------------
Herbert M. Baum, Chairman
of the Board and
Chief Executive Officer
</TABLE>
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Quaker State
in the capacities indicated on March 28, 1996.
<TABLE>
<S> <C>
/S/ HERBERT M. BAUM /S/ JOHN D. BARR
- -------------------------------------------- --------------------------------------------
Herbert M. Baum John D. Barr
(Chairman of the Board and (Director)
Chief Executive Officer)
/S/ CONRAD A. CONRAD /S/ KEITH S. KRZEMINSKI
- ------------------------------------------- ---------------------------------------------
Conrad A. Conrad Keith S. Krzeminski
(Principal Financial (Principal Accounting Officer)
Officer and Director)
</TABLE>
Leonard M. Carroll,
Laurel Cutler,
C. Frederick Fetterolf,
Thomas A. Gardner,
F. William Grube,
Forrest R. Haselton,
Delbert J. McQuaide,
L. David Myatt,
Raymond A. Ross, Jr. and
Lorne R. Waxlax
By /S/ PAUL E. KONNEY
----------------------------------------
Paul E. Konney,
Attorney-In-Fact
15
<PAGE> 16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Stockholders
Quaker State Corporation
Our report on the consolidated financial statements of Quaker State
Corporation and Subsidiaries has been incorporated by reference in this Form
10-K from page 34 of the 1995 Annual Report to Stockholders of Quaker State
Corporation. In connection with our audits of such financial statements, we have
also audited the related financial statement schedule listed in the index on
page 12 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
January 30, 1996
S-1
<PAGE> 17
QUAKER STATE CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN B COLUMN C COLUMN E
---------- ---------------- ---------
COLUMN A BALANCE AT ADDITIONS COLUMN D BALANCE
- --------------------------------------------- BEGINNING CHARGED TO COSTS ---------- AT END OF
DESCRIPTION OF PERIOD AND EXPENSES DEDUCTIONS PERIOD
- --------------------------------------------- ---------- ---------------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
and notes receivable:
1995....................................... $ 2,185 $2,970(A) $1,648(C) $ 3,507(D)
1994....................................... 1,679 1,188(B) 682(C) 2,185(D)
1993....................................... 1,406 854 581(C) 1,679
Amortization of intangible assets:
1995....................................... $ 9,442 $5,883 $ 561 $14,764
1994....................................... 10,300 2,650 3,508(E) 9,442
1993....................................... 9,727 1,771 1,198 10,300
Deferred tax asset valuation allowance:
1995....................................... $ 539 $ -- $ 79 $ 460
1994....................................... 1,101 -- 562 539
1993....................................... 2,989 -- 1,888 1,101
</TABLE>
- ---------------
(A) Includes $1.4 million of additions due to business acquisitions.
(B) Includes $380,000 of additions due to business acquisitions.
(C) Accounts and notes receivable written off during the year.
(D) Includes $12,000 related to discontinued exploration and production
business.
(E) Includes $3.5 million of amortization relating to the Heritage Insurance
Group which was sold in August 1994.
S-2
<PAGE> 18
INDEX TO EXHIBITS
The following exhibits are required to be filed with this annual report on
Form 10-K. Exhibits are incorporated herein by reference to other documents
pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended,
as indicated in the index. Exhibits not incorporated herein by reference follow
this index.
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------ -----------------------------------------------------------------------------------
<S> <C>
3(i) Composite Certificate of Incorporation of Quaker State, filed as Exhibit 3(i) to
Form 10-Q for the fiscal quarter ended June 30, 1995 and incorporated herein by
reference.
3(ii) Bylaws, as amended October 26, 1995, filed herewith.
4(a) Credit Agreement, dated as of September 28, 1995, between Quaker State and Morgan
Guaranty Trust Company of New York, as Agent, filed as Exhibit 4(a) to Form 10-Q
for the fiscal quarter ended September 30, 1995 and incorporated herein by
reference.
4(b) Form of Indenture between Quaker State and Chemical Bank, as Trustee, related to
$100,000,000 of 6.5% Notes due 2005, filed as Exhibit 4.1 to Amendment No. 1 to
Registration Statement on Form S-3 filed October 10, 1995 and incorporated herein
by reference.
4(c) Rights Agreement, dated as of September 28, 1995, between Quaker State and Mellon
Securities Trust Company, Rights Agent, related to Rights to Purchase Capital
Stock, filed as Exhibit 1 to Form 8-K filed on October 20, 1995 and incorporated
herein by reference.
10(a) 1986 Stock Option Plan, as amended through April 30, 1987, filed as Exhibit 10(b)
to Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by
reference.*
10(b) Resolution, adopted on February 27, 1992 by the Board of Directors of Quaker State,
amending Section 5(D) of the 1986 Stock Option Plan, filed as Exhibit 10(c) to Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.*
10(c) 1994 Non-Employee Directors' Stock Option Plan, filed as Exhibit 10(d) to Form 10-K
for the fiscal year ended December 31, 1994 and incorporated herein by reference.
10(d) 1994 Stock Incentive Plan, filed as Exhibit 10(e) to Form 10-K for the fiscal year
ended December 31, 1994 and incorporated herein by reference.*
10(e) Forms of Split Dollar Life Insurance Agreement and related Collateral Assignment
Agreement, filed herewith.*
10(f) Annual Incentive Bonus Plan, as amended and restated effective January 1, 1995,
filed as Exhibit 10(a) to Form 10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference.*
10(g) Quaker State Corporation Amended and Restated Severance Plan, effective September
30, 1988, filed as Exhibit 28.1 to Form 8-K filed on October 17, 1988 and
incorporated herein by reference.*
10(h) Articles X and XI of the Quaker State Corporation Salaried Pension Plan, as Amended
and Restated effective July 1, 1989 for Quaker State and certain of its
subsidiaries, filed as Exhibit 28(b) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(i) Articles X and XI of the Quaker State Corporation Hourly Pension Plan, as Amended
and Restated effective July 1, 1989 for Quaker State and certain of its
subsidiaries, filed as Exhibit 28(e) to Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.*
10(j) Quaker State Corporation Supplemental Excess Retirement Plan, filed as Exhibit
10(k) to Form 10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference.*
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------ -----------------------------------------------------------------------------------
<S> <C>
10(k) Employment Agreement, dated as of August 1, 1994, between Quaker State and Herbert
M. Baum, filed as Exhibit 10(a) to Form 10-Q for the fiscal quarter ended September
30, 1994 and incorporated herein by reference.*
10(l) Employment Agreement, dated as of September 30, 1994, between Quaker State and L.
David Myatt, filed as Exhibit 10(b) to Form 10-Q for the fiscal quarter ended
September 30, 1994 and incorporated herein by reference.*
10(m) Letter, dated as of June 5, 1995, between Quaker State and John D. Barr, filed
herewith.*
10(n) Letter Agreement, dated February 28, 1996, between Quaker State and John D. Barr,
filed herewith.*
10(o) Letter Agreement, dated March 4, 1996, between Quaker State and Charles F. Bechtel,
filed herewith.*
10(p) Form of Employment Continuation Agreement entered into between Quaker State and
certain of its executive officers, filed herewith.*
10(q) Form of Indemnification and Insurance Agreement entered into between Quaker State
and certain of its directors, filed as Exhibit 10(g) to Form 10-K for the fiscal
year ended December 31, 1987 and incorporated herein by reference.
10(r) Form of letter agreement entered into between Quaker State and each of its
non-employee directors regarding the retirement benefits provided by Quaker State
to its non-employee directors, filed as Exhibit 10(n) to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated herein by reference.
10(s) Outside Directors' Group Life Plan, filed as Exhibit 10(d) to Form 10-K for the
fiscal year ended December 31, 1986 and incorporated herein by reference.
11 Statement re Computation of Per Share Earnings, filed herewith.
13 Those portions of the 1995 Annual Report which are expressly incorporated in this
annual report by reference, filed herewith.
21 List of subsidiaries of Quaker State Corporation, filed herewith.
23 Consent of Coopers & Lybrand L.L.P., filed herewith.
24 Powers of Attorney, filed herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
- ---------
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.
<PAGE> 1
EXHIBIT 3(ii)
Quaker State Corporation
QUAKER STATE CORPORATION
BYLAWS
As amended and restated on October 26, 1995
ARTICLE I
STOCKHOLDERS
Section 1.1. Time and Place of Meetings. All meetings of the
stockholders for the election of directors or for any other purpose shall be
held at such time and place, within or without the State of Delaware, as may be
designated by the Board of Directors, or in the absence of a designation by the
Board of Directors, by the Chairman of the Board, the Chief Executive Officer,
the President or the Secretary, and as may be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 1.2. Annual Meetings. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of
such other business as properly may come before such meeting shall be held at
such place, either within or without the State of Delaware, and at 1:00 p.m.
local time on the last Thursday of May (or, if such day is a legal holiday,
then on the next succeeding business day), or at such other date and time as
may be fixed from time to time by resolution of the Board of Directors and set
forth in the notice of meeting or a duly executed waiver of notice thereof. At
the annual meeting, the stockholders shall elect by a plurality vote the
directors to succeed those whose terms expire at that meeting and shall
transact such other business as may properly be brought before the meeting.
Section 1.3. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may only be called by the Chairman of the Board,
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors, by the President or by the Secretary.
<PAGE> 2
Quaker State Corporation
Section 1.4. Notice of Meetings; Waiver. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting.
Section 1.5. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting.
Section 1.6. Voting. Every holder of record of shares entitled to
vote at a meeting of stockholders shall be entitled to one vote for each share
outstanding in the name of such stockholder on the books of the Corporation
at the close of business on the record date for the meeting. Except as
otherwise required by law or by the Certificate of Incorporation, the vote of a
majority of the shares represented in person or by proxy at any meeting at
which a quorum is present shall be sufficient for the transaction of any
business at such meeting. No vote of the stockholders need be taken by written
ballot unless otherwise required by law.
Section 1.7. Adjournment. If a quorum is not present at any meeting
of the stockholders, the stockholders present in person or by proxy shall have
the power to adjourn any such meeting from time to time until a quorum is
present. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given if the place, date and hour thereof are announced
at the meeting at which the adjournment is taken, provided, however, that if
the adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed, a notice of the adjourned
meeting, conforming to the requirements of Section 1.4 hereof, shall be given
to each stockholder of record entitled to vote at such meeting. At any
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted on the original date of the meeting.
Section 1.8. Proxies. Any stockholder entitled to vote at any
meeting of the stockholders or to express consent to or dissent from corporate
action without a meeting may authorize another person or persons to vote at any
such meeting and express such consent or dissent for him by proxy. No such
proxy shall be voted or acted upon after the expiration of three years from the
date of such proxy, unless it provides for a longer period. Every proxy shall
be
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revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy that is not irrevocable by attending the
meeting and voting in person, by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary.
Section 1.9. Nomination of Directors. Only persons who are nominated
in accordance with the procedures set forth in this Section 1.9 shall be
eligible for election as directors of the Corporation.
(a) Nominations of persons for election to the Board of Directors of
the Corporation may be made at any annual meeting of stockholders by or at the
direction of the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who was a
stockholder of record at the time of giving of notice provided for in this
Section 1.9(a) and who complies with the notice procedures set forth in this
Section 1.9(a). Any such nomination by a stockholder shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely
notice for an annual meeting, a stockholder's notice shall be delivered to the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stock- holder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement (as defined in Article I, Section 1.10) of
the date of such meeting is first made. Notwithstanding anything in the
foregoing sentence to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Corporation
at least 70 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 1.9(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary of the
Corporation at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Corporation. Such stockholder's
notice shall set forth in writing (i) as to each person
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whom the stockholder proposes to nominate for election or re-election as a
director (A) the name, age, business address and residence of such person, (B)
the principal occupation or employment of such person, (C) the number of shares
of stock of the Corporation that are beneficially owned by such person, and (D)
any other information relating to such person that is required to be disclosed
in connection with the solicitation of proxies for the election of directors,
or as otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including,
without limitation, such person's written consent to being named in a proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination is made (A) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (B)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(b) Nominations of persons for election to the Board of Directors of
the Corporation may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting
(i) by or at the direction of the Board of Directors or (ii) provided that the
Board of Directors has determined that one or more directors shall be elected
at such special meeting, by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 1.9(b), who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 1.9(b). To be timely
notice for a special meeting, a stockholder's notice must be delivered to the
Secretary of the Corporation at the principal executive offices of the
Corporation not earlier than the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public announcement
(as defined in Article I, Section 1.10) is first made of the date of the
special meeting and of the nominee(s) proposed by the Board of Directors to be
elected at such meeting.
(c) At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information pertaining to the nominee which
is required to be set forth in a stockholder's notice of nomination. The
Chairman of the Board, or in his or her absence the Chief Executive Officer,
the President, any Vice President or the Secretary, shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made
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in accordance with the procedures prescribed by these Bylaws, and in that event
the defective nomination shall be disregarded.
Section 1.10. Transaction of Business. To be properly brought before
an annual meeting of stockholders, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this Section 1.10, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 1.10. For business to be properly brought before an
annual meeting by a stockholder, if such business is related to any matter
other than the election of directors of the Corporation, the stockholder must
have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered in
accordance with the procedures in Section 1.9(a) applicable to a stockholder's
nomination of directors at an annual meeting. Such stockholder's notice shall
set forth in writing as to each matter the stockholder proposes to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting, the reasons for conducting such business at
the annual meeting, and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (ii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the proposal is made (A) the name and address of
such stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (B) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this Section 1.10. The Chairman of the Board, or in
his or her absence the Chief Executive Officer, the President, any Vice
President or the Secretary, shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the meeting in
accordance with the provisions of this Section 1.10, and in that event the
business shall not be transacted. For purposes of this Section 1.10 and
Article I, Section 1.9, "public announcement" shall mean disclosure in a press
release reported by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act. In addition to the provisions of this Section 1.10, a
stockholder also shall comply with
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all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing in these
Bylaws shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
Section 1.11. Inspectors of Elections. Prior to any meeting of the
stockholders, the Board of Directors shall appoint one or more persons to act
as inspectors of elections, and may designate one or more alternate inspectors.
In the event no inspector or alternate is able to act, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of the duties of an inspector,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspector shall:
(a) ascertain the number of shares outstanding and the voting power
of each;
(b) determine the shares represented at a meeting and the validity of
proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors; and
(e) certify his or her determination of the number of shares
represented at the meeting, and his or her count of all votes and ballots.
The inspector may appoint or retain other persons or entities to assist in the
performance of the duties of inspector.
When determining the shares represented and the validity of proxies
and ballots, the inspector shall be limited to an exam- ination of the proxies,
any envelopes submitted with those proxies, any information provided in
accordance with Section 1.8 of these Bylaws, ballots and the regular books and
records of the Corporation. The inspector may consider other reliable informa-
tion for the limited purpose of reconciling proxies and ballots submitted by or
on behalf of banks, brokers or their nominees or a similar person which
represent more votes than the holder of a proxy is authorized by the record
owner to cast or more votes than the stockholder holds of record. If the
inspector considers other reliable information as
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outlined in this section, the inspector, at the time of his or her
certification pursuant to paragraph (e) of this section shall specify the
precise information considered, the person or persons from whom the information
was obtained, when this information was obtained, the means by which the
information was obtained, and the basis for the inspector's belief that such
information is accurate and reliable.
Section 1.12. Opening and Closing of Polls. The date and time for
the opening and the closing of the polls for each matter to be voted upon at a
meeting of stockholders shall be announced at the meeting. The inspector of
the election shall be prohibited from accepting any ballots, proxies or votes
or any revocations thereof or changes thereto after the closing of the polls,
unless the Court of Chancery upon application by a stockholder shall determine
otherwise.
Section 1.13. Consent of Stockholders in Lieu of Meeting. (a)
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any annual or special meeting of the
stockholders of the Corporation may, subject to the provisions of this Section
1.13, be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the actions so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered to the Corporation, written consents signed by
a sufficient number of holders to take such action are delivered to the
Corporation.
(c) The record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be fixed by the Board of
Directors. Any stockholder seeking to have the stockholders authorize or take
corporate action by written consent without a meeting shall, by written notice
to the Secretary of the Corporation, request the Board of Directors to fix a
record date. Upon receipt of such a request, the Secretary of the Corporation
shall, as promptly as practicable, direct the Chairman of the Board, the Chief
Executive Officer or the President to call a special meeting of the Board of
Directors to be held as promptly as
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practicable, but in any event not more than 10 days following the date of
receipt of such a request. At such a meeting, the Board of Directors shall fix
a record date, which shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which shall
not be more than 10 days after the date on which the resolution fixing the
record date is adopted by the Board of Directors. Notice of the record date
shall be published in accordance with the rules and policies of any stock
exchange on which securities of the Corporation are then listed or, if the
securities of the Corporation are not listed on a stock exchange, then in
accordance with the rules and policies of the National Association of
Securities Dealers Automatic Quotation National Market System. If no record
date has been so fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, where no prior action by the Board of Directors is required
by the Delaware General Corporation Law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation. If no date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by the
Delaware General Corporation Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(d) In the event of the delivery to the Corporation of a written
consent or consents purporting to represent the requisite voting power to
authorize or take corporate action and/or related revocations, the Secretary of
the Corporation shall provide for the safekeeping of such consents and
revocations and shall, as promptly as practicable, engage inspectors for the
purpose of promptly performing a ministerial review of the validity of the
consents and revocations. No action by written consent without a meeting shall
be effective until such inspectors have completed their review, determined that
the requisite number of valid and unrevoked consents has been obtained to
authorize or take actions specified in the consents and certified such
determination for entry in the records of the Corporation for the purpose of
recording the proceedings of meetings of the stockholders.
(e) For purposes of this Section 1.13, delivery to the Corporation
shall be effected by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made
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to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these Bylaws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors, and the Board of Directors may exercise
all the powers of the Corporation.
Section 2.2. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be thirteen, which number may
be modified from time to time by resolution of the Board of Directors, provided
that the number of Directors shall in no event be less than one. Each Director
(whenever elected) shall hold office until his successor has been duly elected
and qualified, or until his earlier death, resignation or removal.
Section 2.3. Election of Directors. Except as otherwise provided in
Section 2.12 of these Bylaws, the Directors shall be elected at each annual
meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall
cause the meeting to be held as soon thereafter as convenient. At each meeting
of the stockholders for the election of Directors, provided a quorum is
present, the Directors shall be elected by a plurality of the votes validly
cast in such election.
Section 2.4. Annual and Regular Meetings. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
practical following adjournment of the annual meeting of the stockholders at
the place of such annual meeting of the stockholders. Notice of such annual
meeting of the Board of Directors need not be given. The Board of Directors
from time to time may by resolution provide for the holding of regular meetings
and fix the place (which may be within or without the State of Delaware) and
the date and hour of such meetings. Notice of regular meetings need not be
given.
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Section 2.5. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board, the
Chief Executive Officer or the President or, in the event of their absence or
disability, by any Vice President or the Secretary, or by the Secretary upon
the request of four Directors, at such place (within or without the State of
Delaware), date and hour as may be specified in the respective notices or
waivers of notice of such meetings. Special meetings of the Board of Directors
may be called on 24 hours' notice, if notice is given to each Director
personally, by telephone or by electronic means, or on five days' notice, if
notice is mailed to each Director, addressed to the Director at his or her
usual place of business.
Section 2.6. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the Certificate of Incorporation or these Bylaws,
the vote of a majority of the Directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 2.7. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.5 shall be given to each Director.
Section 2.8. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors.
Section 2.9. Regulations; Manner of Acting. To the extent consistent
with applicable law, the Certificate of Incorporation and these Bylaws, the
Board of Directors may adopt such rules and regulations for the conduct of
meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Meeting by Telephonic Communications. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communi-
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cations equipment through which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
Section 2.11. Resignations; Retirement. Any Director may resign at
any time by delivering a written notice of resignation, signed by such
Director, to the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. A Director who is not and never
has been an officer of the Corporation, and any Director who has served as
Chief Executive Officer of the Corporation, shall retire from the Board of
Directors not later than the date of the annual meeting of stockholders next
following his or her 70th birthday. A Director who is or has been an officer
of the Corporation other than the Chief Executive Officer shall retire from the
Board of Directors not later than the earlier of the date of the annual meeting
of stockholders next following his or her 65th birthday or the date of his or
her retirement as an employee of the Corporation.
Section 2.12. Vacancies and Newly Created Directorships. If any
vacancy shall occur in the Board of Directors, by reason of death, resignation,
retirement, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and any
such vacancy or newly created directorship may be filled by a majority of the
Directors then in office, although less than a quorum. A Director elected to
fill a vacancy or a newly created directorship shall hold office until his
successor has been elected and qualified or until his or her earlier death,
resignation, retirement or removal. Any such vacancy or newly created
directorship may also be filled at any time by vote of the stockholders.
Section 2.13. Compensation and Stock Ownership. The Board of
Directors shall fix from time to time by resolution the compensation, if any,
which each Director shall be entitled to receive for service as such.
Beginning no later than one year following election to the Board of Directors,
a Director shall own at least 1,000 shares of the Corporation's capital stock
at all times while serving as a Director.
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.1. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or
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more Committees, including an Executive Committee, each such Committee to
consist of such number of Directors as from time to time may be fixed by the
Board of Directors. The Board of Directors may designate one Director as
Chairman of any such Committee. Thereafter, members and Chairmen of each such
Committee may be designated at the annual meeting of the Board of Directors.
Any such Committee may be abolished or re-designated from time to time by the
Board of Directors. Each member of any such Committee (whether designated at
an annual meeting of the Board of Directors or to fill a vacancy or otherwise)
shall hold office until his or her successor shall have been designated or
until he or she shall cease to be a Director, or until his or her earlier
death, resignation, retirement or removal.
Section 3.2. Powers. During the intervals between the meetings of
the Board of Directors, the Executive Committee, except as otherwise provided
in this section, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the property, affairs and business
of the Corporation, including the power to declare dividends and to authorize
the issuance of stock. Each such other Committee, except as otherwise provided
in this section, shall have and may exercise such powers of the Board of
Directors as may be provided by resolution or resolutions of the Board of
Directors. The power and authority of the Executive Committee and any such
other Committee shall be subject to the provisions of Section 141(c) of the
Delaware General Corporation Law and any successor provisions. The Executive
Committee shall have, and any such other Committee may be granted by the Board
of Directors, power to authorize the seal of the Corporation to be affixed to
any or all papers which may require it.
Section 3.3. Proceedings and Minutes. Each such Committee may fix
its own rules of procedure and may meet at such place (within or without the
State of Delaware), at such time and upon such notice, if any, as it shall
determine from time to time. Each such Committee shall keep minutes of its
proceedings and shall report such proceedings to the Board of Directors at the
meeting of the Board of Directors next following any such proceedings.
Section 3.4. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members constituting a majority of the total
authorized membership of such Committee shall constitute a quorum for the
transaction of business. The act of the majority of the members present at any
meeting at which a quorum is present shall be the act of such Committee. Any
action required or permitted to be taken at any meeting of any such Committee
may be
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taken without a meeting, if all members of such Committee shall consent to such
action in writing and such writing or writings are filed with the minutes of
the proceedings of the Committee. The members of any such Committee shall act
only as a Committee, and the individual members of such Committee shall have no
power as such.
Section 3.5. Meeting by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment through which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting.
Section 3.6. Absent or Disqualified Members. In the event of the
absence or disqualification of a member of any Committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not constituting a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.7. Resignations. Any member (and any alternate member) of
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman of the Board, the Chief
Executive Officer, the President or the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
Section 3.8. Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.9. Vacancies. If any vacancy shall occur in any Committee,
by reason of disqualification, death, resignation, retirement, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
Section 3.10. Compensation. The Board of Directors shall fix from
time to time by resolution the compensation, if any, which each Director shall
be entitled to receive for service as a member or as Chairman of any Committee.
ARTICLE IV
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OFFICERS
Section 4.1. Number. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Board of Directors also may elect
a Chairman of the Board, a Chief Executive Officer and one or more Vice
Chairmen, Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person. The President and the Chief Executive
Officer, if any, shall be chosen from the members of the Board of Directors,
but no other officer need be a Director of the Corporation.
Section 4.2. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual
meeting, officers may be elected at any regular or special meeting of the Board
of Directors. Each officer shall hold office until his or her successor has
been elected and qualified, or until his or her earlier death, resignation,
retirement or removal.
Section 4.3. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any
officer may resign at any time by delivering a written notice of resignation,
signed by such officer, to the Board of Directors, the Chairman of the Board,
the Chief Executive Officer, the President or the Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any
vacancy occurring in any office of the Corporation by death, resignation,
retirement, removal or otherwise, may be filled by the Board of Directors, by
the Chief Executive Officer or if there be none, by the President, subject to
ratification by the Board of Directors at its next regular meeting.
Section 4.4. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these Bylaws, as may be specified
from time to time by the Board of Directors in a resolution that is not
inconsistent with these Bylaws, or as are customarily incident to the
respective officers' offices, except that in any event, each officer shall
exercise such powers and perform such duties as may be required by law.
Section 4.5. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of
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Directors and shall have such other duties and responsibilities as may be
assigned by the Board of Directors. The Chairman of the Board may delegate to
any qualified person authority to chair any meeting of the stockholders, either
on a temporary or a permanent basis.
Section 4.6. Chief Executive Officer. The Chief Executive Officer
shall be responsible for the active management and direction of the business
and affairs of the Corporation. In case of the inability or failure of the
Chairman of the Board to perform the duties of that office, the Chief Executive
Officer shall perform the duties of the Chairman of the Board, unless otherwise
determined by the Board of Directors.
Section 4.7. President. In the event that no Chief Executive Officer
has been elected by the Board of Directors, the President shall perform the
duties of the Chief Executive Officer, unless otherwise determined by the Board
of Directors.
Section 4.8. Vice Chairman. Any Vice Chairman shall perform such
duties and exercise such powers as may be assigned from time to time by the
Chairman of the Board or the Chief Executive Officer, or if there be no Chief
Executive Officer, by the President.
Section 4.9. Vice President. Each Vice President shall perform such
duties and exercise such powers as may be assigned from time to time by the
Chief Executive Officer, or if there be none, by the President.
Section 4.10. Secretary and Assistant Secretaries. The Secretary
shall have the following powers and duties:
(a) The Secretary shall attend all meetings of the stockholders and
of the Board of Directors, shall keep or cause to be kept a record of all
proceedings of such meetings and shall perform like duties for any Committee of
the Board of Directors upon the request of the Chairman of the Board, the Chief
Executive Officer or the President.
(b) The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and the Board of Directors in accordance with the
provisions of these Bylaws and as required by law.
(c) The Secretary shall be the custodian of the records and of the
seal of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments
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Quaker State Corporation
the execution of which on behalf of the Corporation under its seal shall have
been duly authorized in accordance with these Bylaws, and when so affixed, the
Secretary or any Assistant Secretary may attest the same.
(d) The Secretary shall properly maintain all books, reports,
statements, certificates and all other documents and records of the Corporation
required by law, the Certificate of Incorporation or these Bylaws, except those
for which some other officer or agent of the Corporation has been made
responsible or is otherwise accountable.
(e) The Secretary shall have charge of the stock books and records of
the Corporation and shall maintain or cause to be maintained the stock transfer
books for shares of stock of the Corporation of each class issued and
outstanding.
(f) The Secretary shall sign certificates representing shares of the
Corporation the issuance of which shall have been authorized by the Board of
Directors.
(g) Any Assistant Secretary shall assist the Secretary in performing
the duties and exercising the authority of the Secretary. In case of the
inability or failure of the Secretary to perform the duties of that office, an
Assistant Secretary shall perform the duties of the Secretary, unless otherwise
determined by the Board of Directors.
Section 4.11. Treasurer and Assistant Treasurers. The Treasurer
shall have the following powers and duties:
(a) The Treasurer shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of the
Corporation, and shall keep or cause to be kept full and accurate records of
all receipts of the Corporation.
(b) The Treasurer shall cause the moneys and other valuable effects
of the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositories as shall be selected in accordance with Section 7.4 of these
Bylaws.
(c) The Treasurer shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 7.2 of these
Bylaws) upon the authorized depositaries of the Corporation and cause to be
taken and preserved proper vouchers for all moneys disbursed.
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Quaker State Corporation
(d) Any Assistant Treasurer shall assist the Treasurer in performing
the duties and exercising the authority of the Treasurer. In case of the
inability or failure of the Treasurer to perform the duties of that office, an
Assistant Treasurer shall perform the duties of the Treasurer, unless otherwise
determined by the Board of Directors.
Section 4.12. Additional Officers. The Board of Directors may
appoint such other officers as it may deem appropriate, and the Chief Executive
Officer or if there be none, the President, may appoint such other officers as
he or she may deem appropriate, subject to ratification by the Board of
Directors at its next regular meeting. Such other officers shall hold their
offices for such terms and shall exercise such powers and perform such duties
as may be determined from time to time by the Board of Directors, the Chief
Executive Officer, or if there be none, the President. The Board of Directors
from time to time may delegate to any officer the power to appoint subordinate
officers and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer may remove any such subordinate officer appointed
by him or her, for or without cause.
Section 4.13. Security. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his or her duties, in such amount and of such character
as may be determined from time to time by the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificates of Stock; Uncertificated Shares. The
shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or
all of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock in the Corporation represented by certificates
and upon request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the Corporation, by the Chief
Executive Officer or the President, and by the Secretary or an Assistant
Secretary, representing the number
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<PAGE> 18
Quaker State Corporation
of shares registered in certificate form. Such certificate shall be in such
form as the Board of Directors may determine, to the extent consistent with
applicable law, the Certificate of Incorporation and these Bylaws.
Section 5.2. Lost, Stolen or Destroyed Certificates. The Secretary
may direct that a new certificate be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon delivery to the Secretary of an affidavit of the owner or
owners of such certificate, setting forth such allegation. The Secretary may
require the owner of such lost, stolen or destroyed certificate, or his or her
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate.
Section 5.3. Transfer of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to the General Corporation Law of the State of Delaware.
Subject to the provisions of the Certificate of Incorporation and these Bylaws,
the Board of Directors may prescribe such additional rules and regulations as
it may deem appropriate relating to the issue, transfer and registration of
shares of the Corporation.
Section 5.4. Record Date. In order to determine the stock- holders
entitled to notice of or to vote at any meeting of stock- holders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or
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Quaker State Corporation
allotment of any rights, or the stockholders entitled to exercise any rights in
respect of any change, conversion or exchange or stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 5.5. Transfer Agent and Registrar. The Board of Directors,
the Chief Executive Officer, the President or the Secretary may appoint one or
more transfer agents and one or more registrars, and may require all
certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
OFFICES
Section 6.1. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 6.2. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the outstanding shares of
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors, and any such dividend
may be paid in cash, property, or shares of the Corporation's capital stock.
Section 7.2. Execution of Instruments. The Chief Executive Officer,
the President, any Vice Chairman, any Vice President, the Secretary or the
Treasurer may enter into any contract or execute and deliver any instrument in
the name and on behalf of the Corporation.
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Quaker State Corporation
The Board of Directors, the Chief Executive Officer or the President may
authorize any other officer to enter into any contract or execute and deliver
any instrument in the name and on behalf of the Corporation. Any such
authorization may be general or limited to specific contracts or instruments.
Section 7.3. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors, the Chief Executive
Officer, the President or any Vice Chairman. Such authorization may be
general or confined to specific instances. Loans so authorized may be effected
at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual. All bonds,
debentures, notes and other obligations or evidences of indebtedness of the
Corporation issued for such loans shall be made, executed and delivered as the
Board of Directors, the Chief Executive Officer, the President or any Vice
Chairman shall authorize. When so authorized by the Board of Directors, the
Chief Executive Officer, the President or any Vice Chairman, any part of or all
the properties, including contract rights, assets, business or goodwill of the
Corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
Section 7.4. Deposits. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositaries as may
be determined by the Board of Directors, the Chief Executive Officer, the
President or any Vice Chairman, or by such officers as may be authorized by the
Board of Directors, the Chief Executive Officer or the President to make such
determination.
Section 7.5. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors, by the Chief Executive Officer or by the
President, any Vice President, the Secretary, the Treasurer or any other
officers designated by the Board of Directors, the Chief Executive Officer or
the President may sell, transfer, endorse, and assign any shares of stock,
bonds or other securities owned by or held in the name of the Corporation, and
may make, execute and deliver in the name of the Corporation, under its
corporate seal, any instruments that may be appropriate to effect any such
sale, transfer, endorsement or assignment.
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Quaker State Corporation
Section 7.6. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the Chief Executive Officer, the
President, any Vice President or the Secretary shall have full power and
authority on behalf of the Corporation to attend any meeting of stockholders of
any corporation in which the Corporation may hold stock, and to act, vote (or
execute proxies to vote) and exercise in person or by proxy all other rights,
powers and privileges incident to the ownership of such stock. Such officers
acting on behalf of the Corporation shall have full power and authority to
execute any instrument expressing consent to or dissent from any action of any
such corporation without a meeting. The Board of Directors may by resolution
from time to time confer such power and authority upon any other person or
persons.
Section 7.7. Fiscal Year. The fiscal year of the Corporation shall
commence on January 1 of each year and shall terminate on December 31.
Section 7.8. Seal. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware." The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
ARTICLE VIII
AMENDMENT OF BYLAWS
Section 8.1. Amendment. These Bylaws may be amended, altered or
repealed:
(a) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained in
the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders if, in the
case of such special meeting only, notice of such amendment, alteration or
repeal is contained in the notice or waiver of notice of such meeting.
ARTICLE IX
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Quaker State Corporation
BUSINESS COMBINATIONS
Section 9.1. Business Combinations. Pursuant to authority granted in
subsection (b)(2) of Section 203 of subchapter VI, Chapter 1, Title 8 of the
Delaware Code Relating to the General Corporate Law, the Board of Directors
elects not to be governed by the aforesaid Section 203 entitled "Business
Combinations with Interested Stockholders."
ARTICLE X
CONSTRUCTION
Section 10.1. Construction. In the event of any conflict between the
provisions of these Bylaws as in effect from time to time and the provisions of
the Certificate of Incorporation of the Corporation as in effect from time to
time, the provisions of such Certificate of Incorporation shall be controlling.
22
<PAGE> 1
Exhibit 10(e)
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT, made as of __________________, 19___ by and
between QUAKER STATE CORPORATION, a Delaware corporation with offices in Oil
City, Pennsylvania, ("Quaker State") and ___________________________________,
an individual residing in the ____________ of __________________, ("Employee").
WHEREAS, Employee has rendered faithful and competent services
to Quaker State and Quaker State desires to encourage Employee's continued
employment with Quaker State; and
WHEREAS, Employee owns or coincidentally herewith will become
the owner of a policy insuring the life of Employee under insurance issued by
The Equitable Life Assurance Society of the United States ("Insurer"); and
WHEREAS, in respect of Employee's services previously rendered
to Quaker State and to be rendered to Quaker State, Quaker State desires to
assist Employee in purchasing life insurance by advancing to the Employee a
portion of the annual premiums due on said insurance; and
WHEREAS, pursuant to the terms of this Agreement, Employee is
to own the insurance and certain rights with respect to the same are to be
assigned to Quaker State as security in respect of the payment of obligations
accruing due to Quaker State's advances to the Employee of a portion of the
annual premiums due on the insurance.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the mutual covenants and agreements herein contained and other
good and valuable consideration, the parties hereto agree as follows:
1. Employee owns or coincidentally herewith shall become
the owner of insurance on his life, issued by Insurer, in the face amount of
$__________________ (the "Insurance"). The policy number, face amount of
Insurance, and the register date shall be recorded on Schedule A annexed
hereto, and the Insurance shall be subject to the terms and conditions of this
Agreement and the collateral assignment to be made in accordance with paragraph
6 hereof.
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<PAGE> 2
2. Employee shall own the Insurance and may exercise all
rights of ownership with respect to it, except as otherwise provided
hereinafter.
3. (a) All dividends declared by Insurer on the
Insurance shall be applied to purchase paid- up additional whole life insurance
on Employee's life which additional insurance shall also be subject to this
Agreement (the "Paid-up Additions").
(b) Employee will elect and maintain in effect
with respect to the Insurance and Paid-up Additions the dividend option
described in subparagraph (a) of this paragraph 3.
4. (a) Until termination of this Agreement for any
reason, on or before the due date of the annual premium on the Insurance Quaker
State will advance to Employee, solely for the payment of such premium, the
full amount of the annual premium minus the amount of taxable income that would
be imputed to Employee if Quaker State paid the full amount of such annual
premium.
(b) On or before the due date of each annual
premium on the Insurance, Employee shall pay the Insurer the full amount of the
annual premium. Employee shall provide Quaker State, within fifteen days after
the due date of each annual premium, evidence that such annual premium has been
paid.
5. Employee shall be obligated to repay to Quaker State
the amount of premiums advanced to Employee by Quaker State pursuant to
subparagraph (a) of paragraph 4 above. This obligation of Employee to Quaker
State shall be payable solely as provided in paragraphs 7 and 9 hereof.
6. Coincident with this Agreement and in accordance with
the Collateral Assignment Agreement attached hereto, Employee will
collaterally assign to Quaker State (and maintain such collateral assignment in
effect) certain rights in the Insurance (including Paid-up Additions) as
security for the repayment of the amount to which reference is made in
paragraph 5 above. Quaker State shall have no right to assign any right under
this Agreement without Employee's consent, except if such assignment is to
Employee. The collateral assignment pursuant to this paragraph 6 shall not be
terminated, altered or amended by Employee without the express written consent
of Quaker State.
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<PAGE> 3
7. (a) Upon Employee's death, Quaker State shall be
entitled to receive, in a single sum, a portion of the death benefits provided
under the Insurance (including Paid-up Additions). The amount to which Quaker
State will be entitled shall be the amount which Employee is obligated to repay
Quaker State pursuant to paragraph 5 above. The determination of such amount
shall be in the sole discretion of Quaker State. Employee agrees that such
determination is proper as to Employee, his successors, assigns, heirs,
executors, administrators and beneficiaries. The receipt of such amount by
Quaker State shall constitute satisfaction of Employee's obligation under
paragraph 5 above.
(b) Upon Employee's death, the beneficiary or
beneficiaries named by Employee shall be entitled to receive the amount of the
death benefits provided under the Insurance (including Paid-up Additions) in
excess of the amount payable to Quaker State under subparagraph (a) of this
paragraph 7.
(c) The parties hereto agree that the beneficiary
designation provision of the Insurance shall not conflict with the provisions
hereof.
8. This Agreement shall terminate on the occurrence of
any of the following events:
(a) By written notice of the Employee to Quaker
State at any time, provided no premium on the Insurance is overdue;
(b) By mutual written consent of the Employee and
Quaker State;
(c) By surrender or cancellation of the entire
Insurance (including Paid-up Additions);
(d) The end of any policy year, beginning with
the tenth (10th) policy year but in no event later than the fifteenth (15th)
policy year, in which there is sufficient cash value in the Insurance to repay
the premium advances made to Participant by Quaker State without voiding the
Insurance;
(e) The date the Employee quits if such date is (i)
prior to the Employee's eligibility for retirement under the Quaker State
Salaried Pension Plan, or (ii) after the
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<PAGE> 4
Employee's eligibility for retirement under the Quaker State Salaried Pension
Plan and the Employee does not elect to commence receipt of retirement benefits
but becomes employed by a competitor of Quaker State;
(f) The date the Employee is terminated by the
Board of Directors of Quaker State as constituted on the date of this Agreement
("the current Board") or another Board of Directors of Quaker State consisting
of a majority of directors on the current Board and/or persons recommended to
succeed one or more of the Directors on the current Board by a majority of the
Directors on the current Board and/or their successors as provided above;
(g) Payment to Quaker State of the amount
referred to in subparagraph (a) of paragraph 7 upon the death of the Employee;
or
(h) Upon the election of Quaker State, if the
Employee fails to fulfill any obligation hereunder for any reason including the
failure to pay the annual premium on the Insurance when due; provided that any
election to terminate this Agreement under this clause must be made within
ninety (90) days after the later of (i) the failure to fulfill such obligation
occurs, or (ii) Quaker State has knowledge that such failure has occurred.
9. (a) If this Agreement is terminated under
subparagraphs (a) through (f) or (h) of paragraph 8 above, Employee shall have
thirty (30) days in which to make full payment to Quaker State of the amount
the Employee is obligated to repay Quaker State pursuant to paragraph 5 above.
Upon receipt of such repayment in full, Quaker State shall release the
collateral assignment made by Employee to Quaker State pursuant to paragraph 6
above.
(b) If the Employee does not repay the full
amount due to Quaker State within thirty (30) days, as provided in subparagraph
(a) above, then Quaker State may enforce its right to be repaid in accordance
with paragraph 5 above under the collateral assignment only (i) from the cash
surrender value of the Insurance (including Paid-up Additions); provided that
in the event the cash surrender value exceeds the amount due to Quaker State,
such excess shall be paid to Employee; or (ii) from a loan against the
Insurance (including Paid-up Additions).
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<PAGE> 5
10. Insurer shall:
(a) Not be deemed to be a party to this Agreement
for any purpose nor in any way responsible for its validity;
(b) Not be obligated to inquire as to the
distribution of any monies payable or paid by it under the Insurance (including
Paid-up Additions); and
(c) Be fully discharged from any and all
liability under the terms of any policy issued by it, which is subject to the
terms of this Agreement, upon payment or other performance of its obligation in
accordance with the terms thereof, but as restricted by the collateral
assignment referred to in paragraph 6 above.
11. This Agreement contains the entire and only agreement
between the parties with respect to the subject matter of this Agreement, there
being merged into this Agreement all prior and collateral representations,
promises, and conditions in connection with the subject matter of this
Agreement. Any representation, promise or condition not incorporated in this
Agreement shall not be binding on the parties, their heirs, successors or
assigns.
12. No amendment, modification, variation, extension,
supplementation, renewal, termination (other than termination in accordance
with paragraph 8 above), assignment or any future representation, promise, or
agreement in connection with the subject matter of this Agreement shall be
binding unless made in writing and signed by each party, or their respective
heirs, successors or assigns.
13. This Agreement shall be binding upon and inure to the
benefit of Quaker State and its successors and assigns, and the Employee, his
successors, assigns, heirs, executors, administrators and beneficiaries.
14. Employee has voluntarily entered into this Agreement
with the understanding that Quaker State's sole obligation is to assist
Employee with the purchase of the Insurance as provided in paragraph 4(a) above
and to take whatever steps are necessary with regard to obtaining repayment of
the amount Employee is obligated to repay to Quaker State pursuant to paragraph
5 above. Quaker State shall have the sole discretion to determine the steps to
be taken to obtain such repayment and any such determination shall be binding
on Employee and Employee's successors, assigns, heirs, executors,
administrators and beneficiaries.
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<PAGE> 6
15. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed and enforced according to the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first stated above.
ATTEST: QUAKER STATE CORPORATION
(Quaker State)
By:
- ----------------------------------- ------------------------------------
Assistant Corporate Secretary Chairman and Chief Executive Officer
(SEAL)
- ----------------------------------- ------------------------------------
Witness Employee:
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<PAGE> 7
SCHEDULE A
The following life insurance policy is subject to the attached
Split-Dollar Agreement.
<TABLE>
<S> <C>
Insurer: The Equitable Life Assurance Society of the
United States
Insured:
Policy Number:
Face Amount: $
Dividend Option: Dividend Additions
Life Insurance Plan: Whole Life-Level Face Amount Plan
Register
(Effective) Date:
Issue Date:
</TABLE>
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<PAGE> 8
EXHIBIT 10(e)
COLLATERAL ASSIGNMENT AGREEMENT
THIS AGREEMENT, made as of February _____, 199__, by and between
________________ ("Assignor") and QUAKER STATE CORPORATION ("Assignee").
WITNESSETH:
INTENDING to be legally bound hereby and in consideration of the
mutual covenants and agreements herein contained and other good and valuable
consideration, the parties hereto agree as follows:
1. Assignor hereby assigns, transfers and sets over to Assignee,
its successors and assigns, a right to surrender, a right to borrow against and
a right to the death benefit under Policy No. ________________ issued upon the
life of Assignor by The Equitable Life Assurance Society of the United States
("Insurer"), including paid-up additions and any contracts supplementary
thereto (said policy, paid-up additions and contracts referred to as the
"Policy") to the extent of the Liabilities (as hereinafter defined) subject to
all terms and conditions of the Policy and this Agreement.
2. This assignment is made as collateral security for the
discharge of all liabilities of Assignor to Assignee, either now existing or
hereafter arising under a Split Dollar Agreement dated as of February ____,
199__ between Assignor and Assignee relating to the Policy ("Liabilities").
3. Assignee has the right to collect Policy proceeds from Insurer
as set forth in paragraph 4, the right to surrender the Policy and to collect
the cash value thereof as set forth in paragraph 5, and the right to borrow
against the Policy as set forth in paragraph 6. ASSIGNOR
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<PAGE> 9
RESERVES AND RETAINS ALL OTHER RIGHTS IN THE POLICY, unless otherwise
restricted herein.
4. (a) Upon Assignor's death, Assignee shall be entitled to
collect, in a single sum, Policy proceeds from Insurer to the extent of the
Liabilities. The receipt of such amount by Assignee shall constitute
satisfaction of the Liabilities by Assignor.
(b) Upon Assignor's death, the beneficiary or
beneficiaries named by Assignor shall be entitled to collect the Policy
proceeds from Insurer in excess of the amount payable to Assignee under
subparagraph (a) of this paragraph 4.
5. Assignee may surrender the Policy on termination of the Split
Dollar Agreement referred to in paragraph 2 above and receive from the Insurer
the full amount of the cash value of the Policy. The receipt of such amount by
Assignee shall constitute satisfaction of the Liabilities by Assignor. To the
extent the cash value exceeds the Liabilities, Assignee shall pay such excess
to Assignor.
6. Assignee may borrow against the Policy on termination of the
Split Dollar Agreement referred to in paragraph 2 above to the extent of the
Liabilities prior to such loan. The loan to Assignee shall constitute
satisfaction of the Liabilities by Assignor. Assignor shall be obligated to
pay the interest on any such loan.
7. Assignor shall have no right to borrow against or surrender
the Policy while this Agreement is in effect or to change the paid-up additions
dividend option required to be maintained in effect under the Split Dollar
Agreement.
8. Assignee shall not assign any right under this Agreement
without Assignor's consent, except if such assignment is to Assignor.
2 of 4
<PAGE> 10
9. Assignee shall have the sole right to determine the amount of
the Liabilities, to determine whether the Split Dollar Agreement has been
terminated and to interpret and administer the provisions hereof. Insurer may
recognize Assignee's claims without verifying Liabilities or investigating
Assignee's application of any amount. Assignee's receipt shall be a full
discharge and release of Insurer. Payment by Insurer of any death benefit
assigned herein shall be as provided in paragraph 4 above.
10. Assignee has no obligation under this Agreement to pay any
Policy premium. Any policy charge shall be Assignor's obligation. Assignor
may not exercise any automatic premium loan options while this Agreement is in
effect.
11. All notices from Insurer regarding Assignor's failure to pay
any annual premium by the due date thereof shall be sent to Assignee at the
following address:
Quaker State Corporation
c/o Treasurer
225 E. John Carpenter Freeway
Irving, TX 75062
Assignee shall have the sole discretion to select the option under the Policy
which will apply in case the Policy lapses.
12. Upon satisfaction of the Liabilities by Assignor pursuant to
paragraph 4, 5 or 6 above, Assignee shall release the assignment made hereunder
and this Agreement shall terminate.
13. This Agreement may not be altered, amended or otherwise
modified except in writing signed by Assignor and Assignee.
14. In the event of any conflict between this Agreement and any
other agreement between the parties, this Agreement shall control with respect
to the Policy.
3 of 4
<PAGE> 11
WITNESS the due execution hereof as of the date first stated above.
____________________________________ ____________________________________
Witness Assignor:
ATTEST QUAKER STATE CORPORATION
(Assignee)
_____________________________________ ____________________________________
Assistant Corporate Secretary Chairman and Chief Executive Officer
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<PAGE> 1
EXHIBIT 10 (M)
June 5, 1995
Mr. John D. Barr
1768 Eastwood Drive
Lexington, KY 40502
Dear John:
I am pleased to offer you a position at Quaker State Corporation on the terms
set forth below. Whenever it is stated that we will recommend action by the
Board of Directors or the Organization and Compensation Committee (the
"Committee"), you should understand that we see this as a formality and fully
expect our recommendation to be accepted, based on our prior discussions with
those groups.
1. Position. You will be President and Chief Operating Officer of Quaker
State Corporation, reporting to the Chairman and Chief Executive Officer. Your
appointment as President (and my resignation from that position) will require
the approval of the Quaker State Board of Directors, which we will recommend.
You will be located at the corporate headquarters in the Dallas, Texas area.
2. Board Membership. We will recommend that the Board of Directors elect you
as a member of the Board by December 1995.
3. Base Salary. Your base salary will be $375,000 per year, to be reviewed
annually.
4. Incentive Compensation. You will participate in the Quaker State annual
incentive plan, with a target bonus of 45% of base salary. For the year 1995,
Quaker State will make an incentive payment to you in the amount of $150,000 in
lieu of a bonus calculated under the plan. This payment will be made at the
same time as bonuses are paid for 1995 under the plan. In addition, to offset
the loss of incentives from your current employer, you will receive a cash
payment of $100,000 upon your relocation to Texas. These payments will be
subject to normal withholding. Beginning in 1996, you will participate in the
new annual and long-term incentive plans based on Economic Value Added.
5. Stock Options. We will recommend that the Committee award you options to
purchase 150,000 shares of Quaker State stock, exercisable for ten years
beginning six months after the date of the award. The exercise price of the
options will be as follows:
<PAGE> 2
Page 2
Mr. John D. Barr
June 5, 1995
100,000 shares fair market value as of the date
of the award
25,000 shares 25% above fair market value as
of the date of the award
25,000 shares 50% above fair market value as
of the date of the award
6. Restricted Stock. We will recommend that the Committee award you 35,000
restricted shares of Quaker State stock. The restrictions will expire with
respect to 7,000 of such shares on each of the first five anniversaries of your
date of employment. All restrictions on such shares will lapse in the event
that your employment is terminated without cause or by mutual consent, or in
the event of your death.
7. Relocation. Quaker State will arrange for the purchase of your current
residence in Lexington, Kentucky for a minimum of (a) the current appraised
market value or (b) the amount of your equity investment (including
improvements as defined in the Internal Revenue Code), whichever is higher.
Quaker State will provide relocation benefits under our current relocation
program in connection with our corporate relocation to the Dallas, Texas area.
At your request, Quaker State will provide a swing loan to assist you in the
purchase of a new home in the Dallas area prior to the sale of your existing
home.
8. Insurance. Upon acceptance of this offer, or at such later date as you may
specify, you and your family will be covered by the Quaker State medical and
dental insurance programs, and you will be covered by the Quaker State group
life insurance policy.
9. Change of Control. The Committee is considering a program to provide
protection for key executives against changes in their compensation and
benefits in the event of a change of control of the corporation. You will be
included, along with other executives, in any such program.
10. Severance. In the event that you are terminated without cause, or in the
event that we reach a mutual agreement for you to leave Quaker State, Quaker
State will provide you with base salary continuation for two years, conditioned
on your agreement to protect the confidentiality of Quaker State information
and to not work for any organization in competition with Quaker State for two
years. At any time after December 1, 1998, you will have the right to
terminate your employment unilaterally and receive this severance benefit,
subject to the same confidentiality and non-compete requirements.
11. Pension. We will recommend that the Committee provide you with a
supplemental pension which, when combined with any pension to which you may be
entitled under the Pension Plan for Salaried and Hourly Employees of Quaker
State Corporation, will result in the following annual benefit payments as if
you retired at the ages shown:
<PAGE> 3
Page 3
Mr. John D. Barr
June 5, 1995
<TABLE>
<CAPTION>
Annual
Age Benefit
--- -------
<S> <C>
48 --
49 --
50 $150,000
51 $150,000
52 $150,000
53 $150,000
54 $150,000
55 $200,000
56 and older 40% of covered compensation
</TABLE>
Your supplemental pension benefit will be conditioned upon your agreement to
protect the confidentiality of Quaker State information and to not work for any
organization in competition with Quaker State for a period of three years
following your retirement. If you die prior to your retirement, your wife will
receive the benefit to which she is entitled by law. If you die after your
retirement, she will receive the benefit which you will have elected, with her
consent, upon your retirement.
12. Vacation and Physical Exam. You will be entitled to four weeks of
vacation annually and to a thorough physical examination annually at Quaker
State's expense.
* * *
If this offer is acceptable, please sign the enclosed copy in the space
provided below and return the copy to me. I look forward to working with you
to continue and accelerate the success of the New Quaker State.
Sincerely,
/s/ HERBERT M. BAUM
Herbert M. Baum
PEK:HMB:br
Enclosure
Accepted and agreed to:
June 7, 1995
/s/ JOHN D. BARR
- -----------------------------------
John D. Barr
<PAGE> 1
EXHIBIT 10 (N)
February 28, 1996
Mr. John D. Barr
5226 Brookview Drive
Dallas, TX 75220
Re: Supplemental Pension
Dear John:
In June of last year, you accepted your current position as Quaker State's
President and Chief Operating Officer in accordance with the terms set forth in
my June 5, 1995 letter to you (the "Offer Letter"). Pursuant to Item 11 of the
Offer Letter, you are eligible to receive a supplemental pension which, when
combined with any pension to which you may be entitled under the Quaker State
Corporation Pension Plan (the "Pension Plan"), will result in annual pension
benefits determined in accordance with the following table (the "Benefit
Table"):
<TABLE>
<CAPTION>
Age at Retirement Monthly Benefit
----------------- ---------------
<S> <C>
Under 50 ------
50 - 54 $12,500.00 ($150,000 annualized)
55 $16,666.67 ($200,000 annualized)
56 and above 3-1/3% of covered compensation
(40% annualized)
</TABLE>
The Offer Letter provides that the supplemental pension benefit is conditioned
upon your agreement to protect the confidentiality of Quaker State information
and not to work for any competing organization for three years after
retirement. If you die prior to retirement, the Offer Letter provides that
"your wife will receive the benefit to which she is entitled by law." The
Offer Letter also provides that if you die after retirement, your wife "will
receive the benefit which you will have elected, with her consent, upon your
retirement."
The Offer Letter did not specifically address many of the terms of the
supplemental pension. The purpose of this letter is to provide the details of
the supplemental pension, in order to avoid any future uncertainty or
misunderstanding. The specific terms of the supplemental pension are as
follows:
1. Commencement of Supplemental Pension Payments. To receive the
supplemental pension, your retirement must be at the request of Quaker State
for reasons other than cause, or by mutual agreement between you and Quaker
State. Quaker State will not unreasonably withhold its agreement with respect
to your request to retire, but in no event shall Quaker State agree to your
retirement if circumstances exist which reasonably justify termination of your
employment for cause. The supplemental pension will begin as of the first day
of the month following the date of your retirement from Quaker State, even if
you are not then eligible to begin receiving benefits under the Pension Plan
(payment of benefits under the Pension Plan presently cannot begin prior to age
55). However, no supplemental pension will be payable during any period when
payments under the Pension Plan could begin after retirement but are deferred
by you.
2. Amount of Supplemental Pension Benefit - In General. The figures
shown in the Benefit Table are gross amounts (before tax withholding) payable
in the form of a single life annuity. The monthly amount
<PAGE> 2
determined under the Benefit Table with respect to a particular retirement age
will be referred to in this letter as the "Combined Benefit". A single life
annuity provides payments to you during your life, with no payments to anyone
following your death. However, as discussed below, your normal form of annuity
will be a qualified joint and survivor annuity ("QJSA") with your wife when
your payments begin. Under the QJSA, monthly payments will be made to you
during your lifetime and, after your death, to her in an amount equal to 50% of
the monthly amount payable during your lifetime. If you receive a QJSA, or an
optional form of benefit which provides for payments to a survivor following
your death, the total gross amount which you actually receive from the
supplemental pension and the Pension Plan each month during your lifetime will
be less than the Combined Benefit, because of a necessary reduction to reflect
the actuarial value of the survivorship benefit.
The monthly amount of the supplemental pension will be determined in the
following manner:
a. The monthly amount payable to you under the Pension Plan will be
calculated as follows: (i) if you retire when you are not vested under
the Pension Plan, this amount will be zero; (ii) if you retire when
you are vested under the Pension Plan but prior to the earliest
retirement age under the Pension Plan (presently the later of age 55
or the completion of 5 years of participation), this amount prior to
the earliest retirement age will be zero, and on and after the
earliest retirement age will be equal to the monthly benefit amount
which you would receive in the form of a single life annuity
commencing as of the first day of the month coinciding with or
immediately following your earliest retirement age or the date of
actual commencement if later; or (iii) if you retire on or after the
earliest retirement age under the Pension Plan, this amount will be
equal to the monthly benefit which you would receive in the form of a
single life annuity commencing as of the first day of the month
coinciding with or immediately following your retirement or the date
of actual commencement if later.
b. The monthly amount determined under (a) above will be subtracted from
the Combined Benefit based upon your age at retirement.
c. The monthly amount determined under (b) above will be actuarially
adjusted if the form of payment of the supplemental pension is other
than a single life annuity. The actuarial reduction will be based
upon the actuarial factors set forth in the Pension Plan.
3. Special Provisions - Retirement Age of 56 or Above. If you retire on
or after age 56, the Offer Letter provides that your annualized Combined
Benefit will equal 40% of your "covered compensation". For this purpose, your
covered compensation will be the greater of (i) your base salary as of the
April 30th which precedes your retirement, or (ii) the amount determined under
such other definition of "Compensation" as exists under the Pension Plan as of
your date of retirement, but without regard to any limitations on the maximum
amount of such compensation that may be taken into account under the Pension
Plan. In no event, however, will your Combined Benefit upon retirement at or
after age 56 be less than it would have been if you had retired at age 55
(i.e., it will be at least $16,666.67 per month if paid in the form of a single
life annuity), nor will it be less than the monthly amount which would have
been paid to you if you had retired at any age after age 55 but prior to your
actual retirement age (i.e., in the unforeseen event that your base salary
would decline at any time after age 55, such a decline would not result in a
reduction of your Combined Benefit as determined immediately prior to the base
salary reduction).
4. Form of Supplemental Pension Payments. In general, your supplemental
pension will be paid in the same form in which benefits are paid under the
Pension Plan, and your designated beneficiary, if any, under the Pension Plan
will be the designated beneficiary for supplemental pension purposes. No
supplemental pension benefits will be payable in the form of a single sum, even
if that form is available under the Pension Plan. However, if you retire prior
to the earliest retirement age under the Pension Plan,
<PAGE> 3
you will be given the opportunity to elect from the forms of payment available
under the Pension Plan, other than a lump sum, the form in which your
supplemental pension will be paid until you begin receiving benefits under the
Pension Plan. When the Pension Plan payments begin, your supplemental pension
will automatically begin to be paid in the same form as your benefit under the
Pension Plan (unless, as stated above, your benefit under the Pension Plan is
paid in the form of a lump sum) after adjustment to reflect the form of payment
using the actuarial factors set forth in the Pension Plan. Likewise, if a lump
sum payment option is added to the Pension Plan, and if you elect such option
with respect to your benefits under the Pension Plan, you will have the
opportunity to make an election regarding the form of payment of your
supplemental pension (unless such an election is already in place because of
the commencement of supplemental pension payments prior to the commencement of
payments under the Pension Plan).
If you are eligible under the preceding paragraph to make a separate election
with respect to your supplemental pension, your normal form of pension will be
a QJSA with your spouse, or if none, a single life annuity. You may elect to
waive the QJSA (with your wife's written and notarized consent) or the single
life annuity and instead elect any of the optional distribution forms then
available under the Pension Plan other than a single sum payment.
5. Termination of Supplemental Pension Payments. Your supplemental
pension payments will terminate on the earlier of (i) your death or (ii) a date
within three years of your retirement from Quaker State on which you fail to
protect the confidentiality of Quaker State information or commence employment
with a competing organization; provided, however, that supplemental pension
payments will continue after your death if the form of payment which you have
elected so provides. If payments continue until your death, the availability
and amount of payments to a beneficiary following your death will be determined
in accordance with the form of annuity you are receiving at your death. If
your payments cease because you fail to protect the confidentiality of
information or because you are employed by a competing organization, no
supplemental pension payments will be made to anyone following your death.
6. Post-Retirement Death Benefit. If you die after you retire, the
supplemental pension payable following your death will depend upon the form of
payment of your supplemental pension. For example, if a single life annuity
has been paid to you, no further payments will be made following your death.
Any payments following your death will begin in the month following the month
of your death, and the final payment will be for the month in which the death
beneficiary dies.
7. Preretirement Surviving Spouse Benefit. If you die after age 50 and
before you retire but while employed by Quaker State, your surviving wife, if
any, will receive a lifetime monthly preretirement survivor benefit. Payment
will begin in the month following the month of your death, and the final
payment will be made for the month of your wife's death. If your wife
predeceases you, or if you are not married when you die, no preretirement death
benefit will be payable with respect to the supplemental pension.
The amount of the preretirement surviving spouse benefit payable each month
with respect to the supplemental pension will be calculated as follows:
a. The Combined Benefit to which you would have been entitled if you had
retired on your date of death will be determined.
b. The monthly single life annuity amount determined in (a) above will be
actuarially converted to a QJSA amount using the actuarial factors set
forth in the Pension Plan.
c. The monthly amount determined under (b) above will be reduced by 50%
to reflect the surviving spouse's share of the benefit.
<PAGE> 4
d. The monthly amount determined in (c) above will be further reduced by
the monthly amount of the Preretirement Surviving Spouse Benefit
("PSSB") payable under the Pension Plan. If payment of the
supplemental pension preretirement surviving spouse benefit begins
before the earliest permitted payment date of the PSSB (this date is
presently the first day of the month after the deceased participant's
55th birthday), the reduction will begin when the PSSB payments begin
under the Pension Plan.
8. Interpretation of this Letter. Any interpretation required to
implement the terms of the supplemental pension as set forth in this
letter will be made at the sole discretion of the Organization and
Compensation Committee of the Quaker State Board of Directors or the
Committee's successor, on recommendation of Quaker State's Counsel and
senior Human Resources officer or their successors.
* * *
If the proposed terms of the supplemental pension, as set forth in this letter,
are acceptable to you, please sign and date the enclosed copy in the spaces
below and return the copy to me.
Sincerely,
/s/ Herbert M. Baum
Herbert M. Baum
Chairman and Chief Executive Officer
Accepted and agreed to:
February 28, 1996
/s/ John D. Barr
John D. Barr
<PAGE> 1
EXHIBIT 10 (O)
March 4, 1996
Mr. Charles F. Bechtel
Executive Vice President-Sales
Quaker State Motor Oil Division
225 E. John Carpenter Freeway
Irving, TX 75062
Re: Supplemental Pension
Dear Charlie:
The Quaker State Corporation Organization and Compensation Committee has
approved a form of supplemental pension for you if you retire at or after age
60 (November 30, 2004). The supplemental pension will provide you with an
annual pension amount which when added to the pensions payable from the Quaker
State Pension Plan and the Campbell Soup Retirement Plan equals $100,000
($8,333.33 per month). This amount will be payable until age 65 (November 30,
2009). At age 65, the supplemental pension amount determined above will be
reduced by the amount of Social Security you receive. The purpose of this
letter is to provide the details of the supplemental pension in order to avoid
any future uncertainty or misunderstanding. The specific terms of the
supplemental pension are as follows:
1. Commencement of Supplemental Pension Payments. To receive the
supplemental pension, your retirement must be at or after age 60 and either at
the request of Quaker State for reasons other than cause, or by mutual
agreement between you and Quaker State. The supplemental pension will begin as
of the first day of the month following the date of your retirement from Quaker
State and all affiliates. No supplemental pension will be payable during any
period when payments under the Quaker State Pension Plan or the Campbell Soup
Retirement Plan could begin after retirement but are deferred by you.
2. Amount of Supplemental Pension Benefit - In General. The dollar
amount of the supplemental pension determined above is a gross annual amount
(before tax withholding) payable in the form of a single life annuity. A
single life annuity provides payments to you during your life, with no payments
to anyone following your death.
The monthly amount of the supplemental pension will be determined in the
following manner:
a. The monthly amount payable to you under the Quaker State Pension Plan
and the Campbell Soup Retirement Plan will be calculated as follows:
(i) if you retire when you are not vested under a plan, this amount
will be zero for that plan; (ii) if you retire when you are vested but
prior to the earliest retirement age under a plan, this amount prior
to the earliest retirement age will be zero for that plan, and on and
after the earliest retirement age for that plan will be equal to the
monthly benefit amount which you would receive in the form of a single
life annuity commencing as of the first day of the month coinciding
with or immediately following your earliest retirement age under that
plan or the date of actual commencement under that plan if later; or
(iii) if you retire on or after the earliest retirement age under a
plan, this amount for that plan will be equal to the monthly benefit
which you would receive in the form of a single life annuity
commencing as of the first day of the month coinciding with or
immediately following your retirement under that plan or the date of
actual commencement under that plan if later.
<PAGE> 2
b. The monthly amount of your Social Security benefit will be calculated.
c. Until age 65, the amount determined under (a) above will be subtracted
from $8,333.33; at 65, the amounts determined under (a) and (b) above
will be subtracted from $8,333.33.
3. Termination of Supplemental Pension Payments. Your supplemental
pension payments will terminate on your death.
4. Interpretation of this Letter. Any interpretation required to
implement the terms of the supplemental pension as set forth in this letter
will be made at the sole discretion of the Organization and Compensation
Committee of the Quaker State Board of Directors or the Committee's successor,
on recommendation of Quaker State's General Counsel and senior Human Resources
officer or their successors.
* * *
If the proposed terms of the supplemental pension, as set forth in this letter,
are acceptable to you, please sign and date the enclosed copy in the spaces
below and return the copy to me.
Sincerely,
/s/ John D. Barr
John D. Barr
President and Chief Operating Officer
Accepted and agreed to:
March 4, 1996
/s/ Charles F. Bechtel
Charles F. Bechtel
<PAGE> 1
EXHIBIT 10 (P)
EMPLOYMENT CONTINUATION AGREEMENT
THIS AGREEMENT between Quaker State Corporation, a Delaware
corporation (the "Company"), and _____________________________________ (the
"Executive"), dated as of this _______ day of ____________________________,
19____.
W I T N E S S E T H:
WHEREAS, the Company has employed the Executive in an officer position
and has determined that the Executive holds an important position with the
Company;
WHEREAS, the Company believes that, in the event it is confronted
with a situation that could result in a change in ownership or control of the
Company, continuity of management will be essential to its ability to evaluate
and respond to such situation in the best interests of shareholders;
WHEREAS, the Company understands that any such situation will present
significant concerns for the Executive with respect to his financial and job
security;
WHEREAS, the Company desires to assure itself of the Executive's
services during the period in which it is confronting such a situation, and to
provide the Executive certain financial assurances to enable the Executive to
perform the responsibilities of his position without undue distraction and to
exercise his judgment without bias due to his personal circumstances;
WHEREAS, to achieve these objectives, the Company and the Executive
desire to enter into an agreement providing the Company and the Executive with
certain rights and obligations upon the occurrence of a Change of Control or
Potential Change of Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. Operation of Agreement. (a) Effective Date. The effective date
of this Agreement shall be the date on which a Change of Control occurs (the
"Effective Date"), provided that, except as provided in Section 1 (b), if the
Executive is not employed by the Company on the Effective Date, this Agreement
shall be void and without effect.
(b) Termination of Employment Following a Potential Change of
Control. Notwithstanding Section 1 (a), if (i) the
Executive's employment is terminated by the Company Without
Cause (as defined in Section 6(c)) after the occurrence of a
Potential Change of Control and prior to the occurrence of a
Change of Control and (ii) a Change of Control occurs within
one year of such termination, the Executive shall be deemed,
solely
1
<PAGE> 2
for purposes of determining his rights under this Agreement to
have remained employed until the date such Change of Control
occurs and to have been terminated by the Company Without
Cause immediately after this Agreement becomes effective.
2. Definitions. (a) Change of Control. For the purposes of this
Agreement, a "Change of Control" shall be deemed to have occurred if:
(i) any Person (as defined below) has acquired,
"beneficial ownership" (within the meaning of Rule
13d-3, as promulgated under Section 13(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of securities of the Company
representing 30% or more of the combined Voting Power
(as defined below) of the Company's securities;
(ii) as a result of a solicitation subject to Rule 14a-11
under the Exchange Act (or any successor rule
thereto), the persons who were directors of the
Company immediately before such solicitation shall
cease to constitute at least a majority of the Board
or the board of directors of any successor to the
Company; or
(iii) the stockholders of the Company approve a merger,
consolidation, share exchange, division, sale or
other disposition of the assets of the Company (a
"Corporate Event"), as a result of which the
shareholders of the Company immediately prior to such
Corporate Event shall not hold, directly or
indirectly, immediately following such Corporate
Event a majority of the Voting Power of (x) in the
case of a merger or consolidation, the surviving or
resulting corporation, (y) in the case of a share
exchange, the acquiring corporation or (z) in the
case of a division or a sale or other disposition of
assets, each surviving, resulting or acquiring
corporation which, immediately following the relevant
Corporate Event, holds more than 10% of the
consolidated assets of the Company immediately prior
to such Event.
(b) Potential Change of Control. For the purposes of this
Agreement, a Potential Change of Control shall be deemed to
have occurred if:
(i) a Person commences a tender offer (with adequate
financing) for securities representing at least 20%
of the Voting Power of the Company's securities;
(ii) the Company enters into an agreement the consummation
of which would constitute a Change of Control;
2
<PAGE> 3
(iii) proxies for the election of directors of the Company
are solicited by anyone other than the Company; or
(iv) any other event occurs which is deemed to be a
Potential Change of Control by the Board.
(c) Person Defined. For purposes of this Section 2, "Person"
shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act, as supplemented by Section
13(d)(3) of the Exchange Act; provided, however, that Person
shall not include (i) the Company or any subsidiary of the
Company or (ii) any employee benefit plan sponsored by the
Company or any subsidiary of the Company.
(d) Voting Power Defined. A specified percentage of "Voting
Power" of a company shall mean such number of the Voting
Securities as shall enable the holders thereof to cast such
percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of
any class of stock other than the common stock of the company
to elect directors by a separate class vote); and "Voting
Securities" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock
other than the common stock of the company to elect directors
by a separate class vote).
3. Employment Period. Subject to Section 6 of this Agreement, the
Company agrees to continue the Executive in its employ, and the Executive
agrees to remain in the employ of the Company, for the period (the "Employment
Period") commencing on the Effective Date and ending on the second anniversary
of the Effective Date. Notwithstanding the foregoing, if, prior to the
Effective Date, the Executive is demoted to a lower position than the position
held on the date first set forth above, the Board may declare that this
Agreement shall be without force and effect by written notice delivered to the
Executive (i) within 30 days following such demotion and (ii) prior to the
occurrence of a Potential Change of Control or a Change of Control.
4. Position and Duties. (a) No Reduction in Position. During the
Employment Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with those held, exercised and
assigned immediately prior to the Effective Date. It is understood that, for
purposes of this Agreement, such position, authority and responsibilities shall
not be regarded as not commensurate merely by virtue of the fact that a
successor shall have acquired all or substantially all of the business and/or
assets of the Company as contemplated by Section 12(b) of this Agreement. The
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date.
(b) Business Time. From and after the Effective Date, the
Executive agrees to devote his full attention during normal
business hours to the business and
3
<PAGE> 4
affairs of the Company and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to
him hereunder, to the extent necessary to discharge such
responsibilities, except for (i) time spent in managing his
personal, financial and legal affairs and serving on
corporate, civic or charitable boards or committees, in each
case only if and to the extent not substantially interfering
with the performance of such responsibilities, and (ii)
periods of vacation and sick leave to which he is entitled. It
is expressly understood and agreed that the Executive's
continuing to serve on any boards and committees on which he
is serving or with which he is otherwise associated
immediately preceding the Effective Date shall not be deemed
to interfere with the performance of the Executive's services
to the Company.
5. Compensation. (a) Base Salary. During the Employment Period,
the Executive shall receive a base salary at a monthly rate at least equal to
the monthly salary paid to the Executive by the Company and any of its
affiliated companies immediately prior to the Effective Date. The base salary
shall be reviewed at least once each year after the Effective Date, and may be
increased (but not decreased) at any time and from time to time by action of
the Board or any committee thereof or any individual having authority to take
such action in accordance with the Company's regular practices. The Executive's
base salary, as it may be increased from time to time, shall hereafter be
referred to as "Base Salary". Neither the Base Salary nor any increase in Base
Salary after the Effective Date shall serve to limit or reduce any other
obligation of the Company hereunder.
(b) Annual Bonus. During the Employment Period, in addition to
the Base Salary, for each fiscal year of the Company ending
during the Employment Period, the Executive shall be afforded
the opportunity to receive an annual bonus on terms and
conditions no less favorable to the Executive (taking into
account reasonable changes in the Company's goals and
objectives) than the annual bonus opportunity that had been
made available to the Executive for the fiscal year ended
immediately prior to the Effective Date (the "Annual Bonus
Opportunity"). Any amount payable in respect of the Annual
Bonus Opportunity shall be paid as soon as practicable
following the year for which the amount (or prorated portion)
is earned or awarded, unless electively deferred by the
Executive pursuant to any deferral programs or arrangements
that the Company may make available to the Executive.
(c) Long-term Incentive Compensation Programs. During the
Employment Period, the Executive shall participate in all
long-term incentive compensation programs for key executives
at a level that is commensurate with the Executive's
participation in such plans immediately prior to the Effective
Date, or, if more favorable to the Executive, at the level
made available to the Executive or other similarly situated
officers at any time thereafter.
4
<PAGE> 5
(d) Benefit Plans. During the Employment Period, the Executive
(and, to the extent applicable, his dependents) shall be
entitled to participate in or be covered under all pension,
retirement, deferred compensation, savings, medical, dental,
health, disability, group life, accidental death and travel
accident insurance plans and programs of the Company and its
affiliated companies at a level that is commensurate with the
Executive's participation in such plans immediately prior to
the Effective Date, or, if more favorable to the Executive, at
the level made available to the Executive or other similarly
situated officers at any time thereafter.
(e) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the
policies and procedures of the Company as in effect
immediately prior to the Effective Date. Notwithstanding the
foregoing, the Company may apply the policies and procedures
in effect after the Effective Date to the Executive, if such
policies and procedures are more favorable to the Executive
than those in effect immediately prior to the Effective Date.
(f) Vacation and Fringe Benefits. During the Employment Period,
the Executive shall be entitled to paid vacation and fringe
benefits at a level that is commensurate with the paid
vacation and fringe benefits available to the Executive
immediately prior to the Effective Date, or, if more favorable
to the Executive, at the level made available from time to
time to the Executive or other similarly situated officers at
any time thereafter.
(g) Indemnification. During and after the Employment Period, the
Company shall indemnify the Executive and hold the Executive
harmless from and against any claim, loss or cause of action
arising from or out of the Executive's performance as an
officer, director or employee of the Company or any of its
Subsidiaries or in any other capacity, including any fiduciary
capacity, in which the Executive serves at the request of the
Company to the maximum extent permitted by applicable law and
the Company's Certificate of Incorporation and By-Laws (the
"Governing Documents"), provided that in no event shall the
protection afforded to the Executive hereunder be less than
that afforded under the Governing Documents as in effect
immediately prior to the Effective Date.
(h) Office and Support Staff. The Executive shall be entitled to
an office with furnishings and other appointments, and to
secretarial and other assistance, at a level that is at least
commensurate with the foregoing provided to other similarly
situated officers.
6. Termination. (a) Death, Disability or Retirement. Subject to
the provisions of Section 1 hereof, this Agreement shall terminate
automatically upon the Executive's death, termination due to "Disability" (as
defined below) or voluntary
5
<PAGE> 6
retirement under any of the Company's retirement plans as in effect from time
to time. For purposes of this Agreement, Disability shall mean the Executive's
inability to perform the duties of his position, as determined in accordance
with the policies and procedures applicable with respect to the Company's
long-term disability plan, as in effect immediately prior to the Effective
Date.
(b) Voluntary Termination. Notwithstanding anything in this
Agreement to the contrary, following a Change of Control the
Executive may, upon not less than 30 days' written notice to
the Company, voluntarily terminate employment for any reason
(including early retirement under the terms of any of the
Company's retirement plans as in effect from time to time),
provided that any termination by the Executive pursuant to
Section 6(d) on account of Good Reason (as defined therein)
shall not be treated as a voluntary termination under this
Section 6(b).
(c) Cause. The Company may terminate the Executive's employment
for Cause. For purposes of this Agreement, "Cause" means (i)
the Executive's conviction or plea of nolo contendere to a
felony; (ii) an act or acts of dishonesty or gross misconduct
on the Executive's part which result or are intended to result
in material damage to the Company's business or reputation; or
(iii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement, which
violations are demonstrably willful and deliberate on the
Executive's part and which result in material damage to the
Company's business or reputation.
(d) Good Reason. Following the occurrence of a Change of Control,
the Executive may terminate his employment for Good Reason.
For purposes of this Agreement, "Good Reason" means the
occurrence of any of the following, without the express
written consent of the Executive, after the occurrence of a
Change of Control:
(i) (A) the assignment to the Executive of any duties
inconsistent in any material adverse respect with the
Executive's position, authority or responsibilities
as contemplated by Section 4 of this Agreement, or
(B) any other material adverse change in such
position, including title, authority or
responsibilities;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than
an insubstantial or inadvertent failure remedied by
the Company promptly after receipt of notice thereof
given by the Executive;
(iii) the Company's requiring the Executive to be based at
any office or location more than 50 miles (or such
other distance as shall be set forth in the Company's
relocation policy as in effect at the Effective Time)
from that location at which he performed his services
6
<PAGE> 7
specified under the provisions of Section 4
immediately prior to the Change of Control, except for
travel reasonably required in the performance of the
Executive's responsibilities; or
(iv) any failure by the Company to obtain the assumption
and agreement to perform this Agreement by a
successor as contemplated by Section 12(b).
In no event shall the mere occurrence of a Change of Control, absent any
further impact on the Executive, be deemed to constitute Good Reason.
(e) Notice of Termination. Any termination by the Company for
Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 13(e). For purposes of
this Agreement, a "Notice of Termination" means a written
notice given, in the case of a termination for Cause, within
10 business days of the Company's having actual knowledge of
the events giving rise to such termination, and in the case of
a termination for Good Reason, within 180 days of the
Executive's having actual knowledge of the events giving rise
to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the
termination date is other than the date of receipt of such
notice, specifies the termination date (which date shall be
not more than 15 days after the giving of such notice). The
failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this Agreement, the
term "Date of Termination" means (i) in the case of a
termination for which a Notice of Termination is required, the
date of receipt of such Notice of Termination or, if later,
the date specified therein, as the case may be, and (ii) in
all other cases, the actual date on which the Executive's
employment terminates during the Employment Period.
7. Obligations of the Company upon Termination. (a) Death or
disability. If the Executive's employment is terminated during the Employment
Period by reason of the Executive's death or Disability, this Agreement shall
terminate without further obligations to the Executive or the Executive's legal
representatives under this Agreement other than those obligations accrued
hereunder at the Date of Termination, and the Company shall pay to the
Executive (or his beneficiary or estate) (i) the Executive's full Base Salary
through the Date of Termination (the "Earned Salary"), (ii) any vested amounts
or benefits owing to the Executive under the Company's otherwise applicable
employee benefit plans
7
<PAGE> 8
and programs, including any compensation previously deferred by the Executive
(together with any accrued earnings thereon) and not yet paid by the Company
and any accrued vacation pay not yet paid by the Company (the "Accrued
Obligations"), and (iii) any other benefits payable due to the Executive's
death or Disability under the Company's plans, policies or programs (the
"Additional Benefits").
Any Earned Salary shall be paid in cash in a single lump sum as soon
as practicable, but in no event more than 30 days (or at such earlier date
required b, law), following the Date of Termination. Accrued Obligations and
Additional Benefits shall be paid in accordance with the terms of the
applicable plan, program or arrangement.
(b) Cause and Voluntary Termination. If, during the Employment
Period, the Executive's employment shall be terminated for
Cause or voluntarily terminated by the Executive (other than
on account of Good Reason following a Change of Control), the
Company shall pay the Executive (i) the Earned Salary in cash
in a single lump sum as soon as practicable, but in no event
more than 10 days, following the Date of Termination, and (ii)
the Accrued Obligations in accordance with the terms of the
applicable plan, program or arrangement.
(c) Termination by the Company other than for Cause and
Termination by the Executive for Good Reason.
(i) Lump Sum Payments. If, during the Employment Period,
the Company terminates the Executive's employment
other than for Cause, or following a Change of
Control the Executive terminates his employment for
Good Reason, the Company shall pay to the Executive
the following amounts:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance Amount") equal
to three times the sum of
(1) the Executive's annual Base Salary;
and
(2) the average of the bonuses payable
to the Executive for the three
fiscal years of the Company ending
immediately prior to the Effective
Date;
(C) a cash amount (the "Incremental Retirement
Benefit") equal to the present value,
calculated using a discount rate equal to the
then prevailing applicable Federal rate as
determined under Section 1274(d) of the
Internal Revenue Code of 1986, as amended
(the "Code"), of the additional retirement
benefits (including, without limitation, any
pension, retiree
8
<PAGE> 9
life or retiree medical benefits) that would
have been payable or available to the
Executive under any employee benefit plan
qualified (a "Qualified Plan") under Section
401(a) of the Code and under any supplemental
retirement plan based on (x) the age and
service the Executive would have attained or
completed had the Executive continued in the
Company's employ until the expiration of the
Employment Period and (y) where compensation
is a relevant factor, his pensionable
compensation at the Date of Termination;
(D) the Accrued Obligations.
The Earned Salary, Severance Amount and Incremental Retirement Benefit shall be
paid in cash in a single lump sum as soon as practicable, but in no event more
than 30 days (or at such earlier date required by law), following the Date of
Termination. Accrued Obligations shall be paid in accordance with the terms of
the applicable plan, program or arrangement.
(ii) Continuation of Benefits. If, during the Employment
Period, the Company terminates the Executive's
employment other than for Cause, or following a
Change of Control the Executive terminates his
employment for Good Reason, the Executive (and, to
the extent applicable, his dependents) shall be
entitled, after the Date of Termination until the
earlier of (1) the second anniversary of the Date of
Termination (the "End Date") and (2) the date the
Executive becomes eligible for comparable benefits
under a similar plan, policy or program of a
subsequent employer, to continue participation in all
of the Company's employee and executive welfare and
fringe benefit plans (the "Benefit Plans"). To the
extent any such benefits cannot be provided under the
terms of the applicable plan, policy or program, the
Company shall provide a comparable benefit under
another plan or from the Company's general assets.
The Executive's participation in the Benefit Plans
will be on the same terms and conditions that would
have applied had the Executive continued to be
employed by the Company through the End Date.
(d) Discharge of the Company's Obligations. Except as expressly
provided in the last sentence of this Section 7(d), the
amounts payable to the Executive pursuant to this Section 7
(whether or not reduced pursuant to Section 7(e)) following
termination of his employment shall be in full and complete
satisfaction of the Executive's rights under this Agreement
and any other claims he may have in respect of his employment
by the Company or any of its Subsidiaries. Such amounts shall
constitute liquidated damages with respect to any and all such
rights and claims and, upon the Executive's
9
<PAGE> 10
receipt of such amounts, the Company shall be released and
discharged from any and all liability to the Executive in
connection with this Agreement or otherwise in connection with
the Executive's employment with the Company and its
Subsidiaries. Nothing in this Section 7(d) shall be construed
to release the Company from its commitment to indemnify the
Executive and hold the Executive harmless from and against any
claim, loss or cause of action arising from or out of the
Executive's performance as an officer, director or employee of
the Company or any of its Subsidiaries or in any other
capacity, including any fiduciary capacity, in which the
Executive served at the request of the Company to the maximum
extent permitted by applicable law and the Governing
Documents.
(e) Limit on Payments by the Company.
(i) Application of Section 7(e). In the event that any
amount or benefit paid or distributed to the
Executive pursuant to this Agreement, taken together
with any amounts or benefits otherwise paid or
distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered
Payments"), would be an "excess parachute payment" as
defined in Section 280G of the Code and would thereby
subject the Executive to the tax (the "Excise Tax")
imposed under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the
provisions of this Section 7(e) shall apply to
determine the amounts payable to Executive pursuant
to this Agreement.
(ii) Calculation of Benefits. Immediately following
delivery of any Notice of Termination, the Company
shall notify the Executive of the aggregate present
value of all termination benefits to which he would
be entitled under this Agreement and any other plan,
program or arrangement as of the projected Date of
Termination, together with the projected maximum
payments, determined as of such projected Date of
Termination, that could be paid without the Executive
being subject to the Excise Tax.
(iii) Imposition of Payment Cap. If (x) the aggregate value
of all compensation payments or benefits to be paid
or provided to the Executive under this Agreement and
any other plan, agreement or arrangement with the
Company exceeds the amount which can be paid to the
Executive without the Executive incurring an Excise
Tax and (y) the Executive would receive a greater
net-after-tax amount (taking into account all
applicable taxes payable by the Executive, including
any Excise Tax) by applying the limitation contained
in this Section 7(e)(iii), then the amounts payable
to the Executive under this Section 7 shall be
reduced (but not
10
<PAGE> 11
below zero) to the maximum amount which may be paid
hereunder without the Executive becoming subject to
such an Excise Tax (such reduced payments to be
referred to as the "Payment Cap"). In the event that
Executive receives reduced payments and benefits
hereunder, Executive shall have the right to
designate which of the payments and benefits
otherwise provided for in this Agreement that he will
receive in connection with the application of the
Payment Cap.
(iv) Application of Section 280G. For purposes of
determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such
Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of
Section 280G of the Code, and all "parachute
payments" in excess of the "base amount" (as
defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise
Tax, unless, and except to the extent that,
in the good faith judgment of the Company's
independent certified public accountants
appointed prior to the Effective Date or tax
counsel selected by such Accountants (the
"Accountants"), the Company has a reasonable
basis to conclude that such Covered Payments
(in whole or in part) either do not
constitute "parachute payments" or represent
reasonable compensation for personal services
actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess
of the "base amount," or such "parachute
payments" are otherwise not subject to such
Excise Tax, and
(B) the value of any non-cash benefits or any
deferred payment or benefit shall be
determined by the Accountants in accordance
with the principles of Section 280G of the
Code.
(v) Applicable Tax Rates. For purposes of determining
whether the Executive would receive a greater
net-after-tax benefit were the amounts payable under
this Agreement reduced in accordance with Paragraph
7(e)(iii), the Executive shall be deemed to pay:
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<PAGE> 12
(A) Federal income taxes at the highest
applicable marginal rate of Federal income
taxation for the calendar year in which the
first amounts are to be paid hereunder, and
(B) any applicable state and local income taxes
at the highest applicable marginal rate of
taxation for such calendar year, net of the
maximum reduction in Federal income taxes
which could be obtained from the deduction of
such state or local taxes if paid in such
year; provided, however, that the Executive
may request that such determination be made
based on his individual tax circumstances,
which shall govern such determination so long
as the Executive provides to the Accountants
such information and documents as the
Accountants shall reasonably request to
determine such individual circumstances.
(vi) Adjustments in Respect of the Payment Cap. If the
Executive receives reduced payments and benefits
under this Section 7(e) (or this Section 7(e) is
determined not to be applicable to the Executive
because the Accountants conclude that Executive is
not subject to any Excise Tax) and it is established
pursuant to a final determination of a court or an
Internal Revenue Service proceeding (a "Final
Determination") that, notwithstanding the good faith
of the Executive and the Company in applying the
terms of this Agreement, the aggregate "parachute
payments" within the meaning of Section 280G of the
Code paid to the Executive or for his benefit are in
an amount that would result in the Executive's being
subject an Excise Tax, then the amount equal to such
excess parachute payments shall be deemed for all
purposes to be a loan to the Executive made on the
date of receipt of such excess payments, which the
Executive shall have an obligation to repay to the
Company on demand, together with interest on such
amount at the applicable Federal rate (as defined in
Section 1274(d) of the Code) from the date of the
payment hereunder to the date of repayment by the
Executive. If this Section 7(e) is not applied to
reduce the Executive's entitlements under this
Section 7 because the Accountants determine that the
Executive would not receive a greater net-after-tax
benefit by applying this Section 7(e) and it is
established pursuant to a Final Determination that,
notwithstanding the good faith of the Executive and
the Company in applying the terms of this Agreement,
the Executive would have received a greater
net-after-tax benefit by subjecting his payments and
benefits hereunder to the Payment Cap, then the
aggregate "parachute payments" paid to the Executive
or for his benefit in excess of the Payment Cap shall
be deemed for all purposes a loan to the
12
<PAGE> 13
Executive made on the date of receipt of such excess
payments, which the Executive shall have an
obligation to repay to the Company on demand,
together with interest on such amount at the
applicable Federal rate (as defined in Section
1274(d) of the Code) from the date of the payment
hereunder to the date of repayment by the Executive.
If the Executive receives reduced payments and
benefits by reason of this Section 7(e) and it is
established pursuant to a Final Determination that
the Executive could have received a greater amount
without exceeding the Payment Cap, then the Company
shall promptly thereafter pay the Executive the
aggregate additional amount which could have been
paid without exceeding the Payment Cap, together with
interest on such amount at the applicable Federal
rate (as defined in Section 1274(d) of the Code) from
the original payment due date to the date of actual
payment by the Company.
8. Non-Exclusivity of Rights. Except as expressly provided
herein, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any benefit, bonus, incentive or other
plan or program provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein limit or
otherwise prejudice such rights as the Executive may have under any other
agreements with the Company or any of its affiliated companies, including
employment agreements or stock option agreements. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan or
program.
9. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or otherwise. In the event
that the Executive shall in good faith give a Notice of Termination for Good
Reason and it shall thereafter be determined that Good Reason did not exist,
the employment of the Executive shall, unless the Company and the Executive
shall otherwise mutually agree, be deemed to have terminated, at the date of
giving such purported Notice of Termination, by mutual consent of the Company
and the Executive and, except as provided in the last preceding sentence, the
Executive shall be entitled to receive only those payments and benefits which
he would have been entitled to receive upon a voluntary termination, including
his Earned Salary and the Accrued Obligations.
10. Legal Fees and Expenses. If the Executive asserts any claim in
any contest (whether initiated by the Executive or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Executive's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorneys' fees, on a
quarterly basis, upon presentation of proof of such expenses in a form
acceptable to the Company, provided that the Executive shall reimburse the
Company for such amounts, plus simple interest thereon at the 90-day United
States Treasury Bill rate as in effect
13
<PAGE> 14
from time to time, compounded annually, if the Executive shall not prevail, in
whole or in part, as to any material issue as to the validity, enforceability
or interpretation of any provision of this Agreement.
11. Confidential Information; Company Property. For and in
consideration of the salary and benefits to be provided by the Company
hereunder, including the severance arrangements set forth herein, the Executive
agrees that:
(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their
respective businesses, (i) obtained by the Executive during
his employment by the Company or any of its affiliated
companies and (ii) not otherwise public knowledge (other than
by reason of an unauthorized act by the Executive). After
termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of
the Company, unless compelled pursuant to an order of a court
or other body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it.
(b) Company Property. Except as expressly provided herein,
promptly following the Executive's termination of employment,
the Executive shall return to the Company all property of the
Company and all copies thereof in the Executive's possession
or under his control.
(c) Injunctive Relief and Other Remedies with Respect to
Covenants. The Executive acknowledges and agrees that the
covenants and obligations of the Executive with respect to
confidentiality and Company property relate to special, unique
and extraordinary matters and that a violation of any of the
terms of such covenants and obligations will cause the Company
irreparable injury for which adequate remedies are not
available at law. Therefore, the Executive agrees that the
Company shall (i) be entitled to an injunction, restraining
order or such other equitable relief (without the requirement
to post bond) restraining Executive from committing any
violation of the covenants and obligations contained in this
Section 11 and (ii) have no further obligation to make any
payments to the Executive hereunder following any finding by a
court or an arbitrator that the Executive has engaged in a
material violation of the covenants and obligations contained
in this Section 11. These remedies are cumulative and are in
addition to any other rights and remedies the Company may have
at law or in equity. In no event shall an asserted violation
of the provisions of this Section 11 constitute a basis for
deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
14
<PAGE> 15
12. Successors. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require
any successor to all or substantially all of the business
and/or assets of the Company, whether direct or indirect, by
purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory
to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as
the Company would be required to perform if no such succession
had taken place.
13. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
applied without reference to principles of conflict of laws.
(b) Arbitration. Except to the extent provided in Section 11 (c),
any dispute or controversy arising under or in connection with
this Agreement shall be resolved by binding arbitration. The
arbitration shall be held in the city of Dallas, Texas and
except to the extent inconsistent with this Agreement, shall
be conducted in accordance with the Expedited Employment
Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court
of law or equity. The arbitrator shall be acceptable to both
the Company and the Executive. If the parties cannot agree on
an acceptable arbitrator, the dispute shall be heard by a
panel of three arbitrators, one appointed by each of the
parties and the third appointed by the other two arbitrators.
(c) Amendments. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal
representatives.
(d) Entire Agreement. This Agreement (as supplemented in
accordance with Section 1(b)) constitutes the entire agreement
between the parties hereto with respect to the matters
referred to herein. No other agreement relating to the terms
of the Executive's employment by the Company, oral or
otherwise, shall be binding between the parties unless it is
in writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or
statements between the parties other than those that are
expressly contained herein. The Executive acknowledges that he
is entering into this Agreement of his own free will and
accord, and with no duress, that he has read this Agreement
and that he understands it and its legal consequences.
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<PAGE> 16
(e) Notices. All notices and other communications hereunder shall
be in writing and shall be given by hand-delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: at the home address of the
Executive noted on the records
of the Company
If to the Company: Quaker State Corporation
225 E. John Carpenter Freeway
Irving, Texas 75062
Attn.: Secretary
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence K. Cagney, Esq.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(f) Tax Withholding. The Company shall withhold from any amounts
payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(g) Severability; Reformation. In the event that one or more of
the provisions of this Agreement shall become invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
shall not be affected thereby. In the event that any of the
provisions of Section 11(a) is not enforceable in accordance
with its terms, the Executive and the Company agree that such
Section shall be reformed to make such Section enforceable in
a manner which provides the Company the maximum rights
permitted at law.
(h) Waiver. Waiver by any party hereto of any breach or default
by the other party of any of the terms of this Agreement shall
not operate as a waiver of any other breach or default,
whether similar to or different from the breach or default
waived. No waiver of any provision of this Agreement shall be
implied from any course of dealing between the parties hereto
or from any failure by either party hereto to assert its or
his rights hereunder on any occasion or series of occasions.
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<PAGE> 17
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(j) Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, and
its corporate seal to be hereunto affixed and attested by its Secretary, all as
of the day and year first above written.
QUAKER STATE CORPORATION
-----------------------------------
Herbert M. Baum
Title: Chairman and Chief
Executive Officer
[SEAL]
WITNESSED:
- -----------------------------------
EXECUTIVE:
-----------------------------------
WITNESSED:
- -----------------------------------
17
<PAGE> 1
EXHIBIT 11
Quaker State Corporation and Subsidiaries
STATEMENT re COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
1. Net income..................................................... $12,100 $18,766 $13,702
=========================================
2. Average number of shares of capital stock outstanding.......... 32,119 28,368 27,203
3. Shares issuable upon exercise of dilutive stock options
outstanding during the year, based on average market
prices........................................................ 107 91 31
4. Shares issuable upon exercise of dilutive stock options
outstanding during the year, based on higher of
average or year-end prices.................................... 121 96 49
5. Average number of capital and capital equivalent shares
outstanding (2 + 3)........................................... 32,226 28,459 27,234
=========================================
6. Average number of capital shares outstanding, assuming
a full dilution (2 + 4)....................................... 32,240 28,464 27,252
=========================================
7. Net income per capital and equivalent share
(1 divided by 5).............................................. $ 0.38 $ 0.66 $ 0.50
=========================================
8. Net income per capital share, assuming full dilution
(1 divided by 6).............................................. $ 0.38 $ 0.66 $ 0.50
=========================================
</TABLE>
<PAGE> 1
EXHIBIT 13
FINANCIAL SUMMARY
<TABLE>
<S> <C>
16 Management's discussion and analysis
18 Segment information
20 Five-year statistical summary
21 Financial statements
25 Notes to financial statements
1. Summary of significant accounting policies
2. Acquisitions
26 3. Usual items
4. Income taxes
27 5. Discontinued operations
28 6. Inventories
7. Property, plant and equipment
8. Other assets
9. Long-term debt and financial instruments
29 10. Other long-term liabilities
11. Commitments, contingencies and related parties
30 12. Stock options and management incentive plans
31 13. Employee benefit plans
32 14. Supplemental cash flow information
15. Segment information
33 16. Financial results by quarter
34 Report of independent accountants and Management report
35 Market prices by quarters
36 Board of Directors, Officers and Divisions
</TABLE>
<PAGE> 2
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The consolidated financial statements and related notes (pages 21 to 33) and
the segment information included on pages 18 to 19 should be read as an
integral part of this review.
In 1995, the company made significant progress in focusing on its core
business of lubricant and lubricant services, by selling the assets of its
Natural Gas Exploration and Production Division, acquiring Slick 50, Inc., and
moving its Motor Oil Division and corporate headquarters to the Dallas, Texas
area.
In April 1995, the company announced plans to relocate the corporate
headquarters, the headquarters of its Motor Oil Division and the headquarters
of certain of its subsidiaries to the Dallas, Texas area. The restructuring
program was aimed at integrating recent acquisitions, consolidating management
and administrative activities and streamlining operations. Total restructuring
costs were $22.6 million, $13.8 million after tax. (See Note 3 to the
Consolidated Financial Statements.) The company currently estimates that upon
the completion of its restructuring program in 1996, it will realize an
annualized reduction in operating costs of up to $10 million.
In July 1995, the company acquired Slick 50, Inc. (Slick 50), a
marketer of automotive engine treatments and related automotive chemicals, for
$22.6 million in cash, 1,260,403 shares of the company's capital stock and paid
$11 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 1996, 1997 and 1998, subject to offset
for indemnification obligations of Slick 50 stockholders. It is expected that
the Slick 50 acquisition will add over $80 million in annual revenues. The
revenues and operating results of Slick 50 are reported as part of the Motor
Oil segment.
During 1995, the company completed the sale of the assets of its
Natural Gas Exploration and Production Division (E&P) for $67.7 million. The
company recognized a pretax gain of $19.5 million, $12 million after tax, as a
result of the sale. Accordingly, the operating results of E&P, including the
gain on the sale have been excluded from continuing operations and reclassified
as discontinued operations in the accompanying Consolidated Statement of
Income for each of the three years ended December 31, 1995.
These actions accompanied by the company's 1994 sale of Heritage
Insurance Group, Inc. (Heritage) (see Note 5 to the Consolidated Financial
Statements) and acquisition of Specialty Oil Companies (Specialty) and Westland
Oil Company, Inc. (Westland) (see Note 2 to the Consolidated Financial
Statements) have enhanced the company's core lubricant and lubricant services
businesses.
CONSOLIDATED REVIEW OF OPERATIONS
Net income for 1995 was $12.1 million, or $.38 per share compared to $18.8
million, or $.66 per share, in 1994. Net income for 1995 included $16.5
million, net of taxes, or $.51 per share, related to two unusual items,
restructuring charges of $13.8 million, or $.43 per share, and the settlement
of a class-action lawsuit for $2.7 million, or $.08 per share (see Note 3 to
the Consolidated Financial Statements), $14.5 million, or $.45 per share,
related to discontinued operations (see Note 5 to the Consolidated Financial
Statements) and $4.1 million, or $.13 per share, for an extraordinary loss
related to early extinguishment of debt (see Note 9 to the Consolidated
Financial Statements). Net income in 1994 included $9.3 million, or $.33 per
share, related to discontinued operations (see Note 5 to the Consolidated
Financial Statements). Net income of $13.7 million, or $.50 per share in 1993
included $6.7 million, or $.25 per share, related to discontinued operations.
Income from continuing operations in 1995 was $1.8 million, or $.06
per share, compared to $9.5 million, or $.33 per share, in 1994. Included in
income from continuing operations in 1995 is $27 million, related to the two
unusual items and the operating results of Slick 50, Specialty and Westland.
Operating profits before unusual items at Motor Oil and Q Lube were up 104% and
45%, respectively, due to increased sales volume over 1994. Operating profit at
Truck-Lite was down 16%, due to a decrease in volumes relating to automotive
lighting.
Income from continuing operations in 1994 was up 36% from $7.0 million
in 1993. Operating profit improvements, were primarily based on sales volume
increases over 1993. Operating profit rose 88% at Q Lube due to increased car
counts. Automotive and heavy duty lighting sales were up, increasing operating
profit at Truck-Lite by 105%. Branded motor oil sales were up, but higher
selling, marketing, freight and administrative expenses reduced Motor Oil
operating profit by 6% in 1994.
Sales and operating revenues in 1995 were $1,035.6 million compared to
$732.6 million in 1994 and $607.1 million in 1993. The inclusion of recent
Motor Oil acquisitions and increased sales volumes at Q Lube have contributed
to the increase in revenues in 1995. The increase in sales and operating
revenues in 1994 over 1993 was due to increased sales volumes in each of the
company's major businesses.
MOTOR OIL
Operating profits, excluding the restructuring charge of $13.4 million
allocated to the Motor Oil division and the settlement of the class-action
lawsuit of $4.4 million, increased 104% in 1995 to $33.5 million from $16.4
million in 1994. The increase in operating profits was favorably impacted by
the company's recent acquisitions, improved branded motor oil and refinery
product margins, reduced marketing expenses, and LIFO profits of $2.2 million,
offset by plant and equipment write-downs of $1.5 million related primarily to
the blending and packaging facility located in Ontario, Canada. The write-down
in Canada was a result of transferring a portion of the operation to another
facility. Branded motor oil volumes in 1995 were flat compared to 1994.
Operating profit in 1994 was down 6% from 1993 operating profit of
$17.5 million. Branded motor oil sales volume in 1994 increased 7% over 1993
and automotive consumer product sales were up 20% in 1994. The increase in
operating profit was offset by
16
<PAGE> 3
a shift in product mix, to more bulk sales where gross margin is lower, and a
$19 million increase in marketing, selling, freight, and administrative
expense, due to aggressive share-building programs geared towards developing
additional sales volumes. In addition, 1994 included $1.7 million of expenses
and reserves associated with a lawsuit commenced against the company for
alleged environmental violations at the Congo Refinery (see Note 11 to the
Consolidated Financial Statements).
Operating revenues were $847.6 million in 1995 compared to $541.2
million in 1994. The increase in revenues is due to the company's recent
acquisitions. Operating revenues from recent acquisitions contributed $377.9
million and $71.4 million in 1995 and 1994. Operating revenues for 1994 were up
23% compared to 1993 operating revenues of $439.3 million primarily due to the
Specialty and Westland acquisition on September 30, 1994.
Q LUBE
Operating profit in 1995 increased 45% to $8.3 million from $5.7 million in
1994. The increase was due to a 5% increase in total car count and a 4%
increase in average ticket price. Average cars serviced per day in 1995
remained consistent with 1994. Due to the conversion of Minit-Lube stores to
the Q Lube format, advertising and depreciation expense were up $1.2 million,
7% and 11%, respectively. The company plans to convert 100 additional stores to
the Q Lube format in 1996.
Operating profit for 1994 increased 88% over 1993 operating profit of
$3 million. This was primarily due to an 8% increase in car counts as a result
of the conversion of 67 stores to the Q Lube format.
Operating revenues were $123.6 million in 1995 compared to $113.7
million in 1994. The increase in operating revenues is due to increased car
counts and increased average ticket price. Operating revenues for 1994 were up
8% compared to 1993 operating revenues of $105.4 million.
TRUCK-LITE
As a result of a softening automotive market, operating profits decreased to
$9.8 million in 1995 compared to $11.8 million in 1994. In 1995, Truck-Lite
began a transition out of the automotive original equipment supply business
which coincides with a strategy to focus on the heavy-duty truck and trailer
business. The transition out of the automotive business will continue in 1996.
Operating profit in 1994 was up 105% over $5.7 million in 1993. Strong sales in
the automotive and heavy-duty safety lighting businesses in 1994 resulted in a
record year. The 1994 results also included a $1.5 million charge to reserve
for future losses associated with an automotive lighting contract.
Sales and operating revenues in 1995 were $90.3 million, down 9% from
$99.6 million in 1994 as a result of the soft automotive market. Sales and
operating revenues in 1994 were up 23% over $80.8 million in 1993.
DOCKS
Operating profit decreased to $943,000 in 1995 from $1.8 million in 1994 due to
a gain of $1.1 million in 1994 from the termination of a pension plan.
Operating profit in 1994 was up $615,000 over $1.1 million in 1993. Operating
revenues in 1995 were $3.3 million, up from $3.0 million in 1994 and 1993.
CORPORATE
Corporate income was up 71% to $5.5 million in 1995 from $3.2 million in 1994.
The increase resulted primarily from additional royalty income received from
the acquirer of the coal operations. Corporate expenses, excluding
restructuring charges of $9.2 million, increased to $19.8 million in 1995 from
$18.7 million in 1994 as a result of higher employee benefit costs. Interest
expense increased 59% to $7.2 million in 1995 from $4.5 million in 1994 as a
result of an increase in average debt outstanding in 1995.
Corporate income in 1994 was up 18% compared to $2.7 million in 1993
due to increased interest income. Corporate expenses increased 23% in 1994
from $15.2 million in 1993, as a result of increased postretirement benefits,
performance incentives and legal costs. Interest expense in 1994 decreased 16%
compared to 1993, as a result of lower average debt in 1994.
LIQUIDITY AND FINANCIAL CONDITION
The company has successfully divested non-core businesses and acquired core
business complements during 1995 and 1994.
The company expects to spend $39 million on capital expenditures in
1996. These expenditures will relate primarily to adding Q Lube stores,
converting various locations to the Q Lube format and various Motor Oil
expenditures. A $25 million Shreveport port facility project has been delayed,
pending the completion of an evaluation of the company's blending and packaging
facilities.
Capital expenditures in 1995 included conversion of 62 locations to
the Q Lube format, the addition of 31 Q Lubes and the acquisition of Slick 50.
Cash received in connection with the sale of E&P was used to fund the
acquisition of Slick 50.
In 1995, the company retired its $50 million, 8.73% Senior Notes due
2002, as a result of successfully issuing $100 million of 6.625% Notes due
2005. As a result of the early extinguishment, the company paid a premium of
$6.5 million and wrote off $300,000 of debt-issue costs associated with the
8.73% Senior Notes and recorded an extraordinary item of $4.1 million, net of
tax benefits of $2.7 million. The company's total debt was $125.8 million at
December 31, 1995, compared to $73.2 million at December 31, 1994. The company
had available $70 million of committed variable-rate lines of credit at
December 31, 1995.
Working capital at December 31, 1995 was $132.1 million with a ratio
of current assets to current liabilities of 1.91 to 1 compared to $101.4
million and 1.84 to 1 at December 31, 1994.
Cash flow from operations was $4.9 million in 1995 compared to $37.6
million in 1994. The decrease in 1995 was primarily due to increased working
capital needs and cash paid of $10.1 million in connection with the 1995
restructuring program. Cash flow from operations for 1994 was down $9.7 million
from 1993 due to increased working capital requirements.
Cash used in investing activities of $29.7 million in 1995 was
primarily due to $31 million used in the
17
<PAGE> 4
acquisition of Slick 50 and $45.1 million of capital expenditures, which were
offset by the sale of E&P, which provided cash of $46.8 million, after current
taxes. In 1994, cash provided by investing activities was $5.5 million, which
primarily comprised $78.5 million of proceeds from the sale of Heritage and
coal assets, the purchase of Specialty and Westland for $28.4 million and
capital expenditures of $36.4 million. In 1993, capital expenditures of $29.8
million primarily accounted for the cash used by investing activities of $28.9
million.
Cash provided by financing activities of $25.6 million in 1995 was
primarily the result of $12.9 million in dividends, the extinguishment of the
$50 million, 8.73% Senior Notes due 2002, and the issuance of $100 million,
6.625% Notes due 2005. Cash used in financing activities in 1994 and 1993 was a
result of $11.4 million and $16.3 million of dividends and $17.6 million and
$27.7 million net payments on debt.
ADDITIONAL FINANCIAL INFORMATION
The net deferred tax asset at December 31, 1995 of $47.6 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. The 1995 effective tax rate of 57% for continuing operations is
higher than the 1994 rate of 39% due to lower income and increased
nondeductible goodwill amortization in 1995. The company's effective tax rate
for continuing operations in 1994 increased to 39% from 27% in 1993 primarily
due to higher income in 1994 and benefits in 1993 for rate changes and other
credits. (See Note 4 to the Consolidated Financial Statements.)
Federal, state, and local environmental laws continue to have an
impact on the company's operations. Compliance with such laws has been
accomplished without a material effect on the company's financial position and
results of operations.
In 1993, the United States commenced a lawsuit against the company in
the U.S. District Court for the Northern District of West Virginia. The
complaint alleges the company violated the Federal Resource Conservation and
Recovery Act and the Clean Air Act at the Congo refinery on various dates
starting in 1980 and seeks civil penalties not to exceed $25,000 per day for
each violation. During 1995, the company continued settlement discussions to
resolve this matter.
The company has been named as a party or a potentially responsible
party in a number of government and private actions based on environmental laws
and regulations. The company anticipates some liability for long-term
remediation or reclamation at formerly owned facilities, including three
refineries and various coal operations.
While it is impossible at this time to determine with certainty the
ultimate outcome of all environmental and legal matters involving the company,
the company has accrued for all items which are probable and can be reasonably
estimated, and does not expect any material adverse effect on its financial
position. However, it is possible that one or more of these matters may be
decided against the company and could have a material impact on results of
operations or cash flows in that period.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS AND STOCK OPTIONS
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 will require the company to evaluate the
impairment of its long-lived assets using the guidance set forth in the
Standard. The new Standard must be adopted in 1996. The company does not expect
the adoption of the new Standard to have a material impact on its financial
position or results of operations.
In October 1995, the Financial Accounting Standards Board issued
Standard No. 123, "Accounting for Stock-Based Compensation", which introduces a
fair-value based method of accounting for stock-based compensation plans. The
company does not intend to adopt this new method of accounting; however, the
company will make the required disclosures.
SEGMENT INFORMATION
The company's operations are organized into four segments. The Motor Oil
segment produces and markets branded and private label lubricants, markets
related petroleum and automotive aftermarket products to distributors and
national and regional retailers, and collects and transports used motor oil,
brake fluid, antifreeze and oil filters. In July 1995, the company acquired
Slick 50, a marketer of automotive chemicals. In September 1994, the Company
acquired Specialty and Westland. The revenue and operating profit generated by
Slick 50, Specialty and Westland from their respective date of acquisition are
included in the 1995 and 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 Dock
operation is a bulk material handling dock accessible to Lake Superior at
Thunder Bay, Ontario, Canada.
Intersegment sales are at market. Operating profits are total segment
revenues less segment expenses. Corporate expenses are those which are not
directly related to the company's segments. Corporate assets consist
principally of deferred tax assets, cash and cash equivalents and assets not
identifiable with the operations of a segment. Revenues and operating profits
exclude Natural Gas Exploration and Production, which was discontinued in 1995
and Insurance, which was discontinued in 1994. (See Note 5 to Consolidated
Financial Statements).
18
<PAGE> 5
SEGMENT INFORMATION, CONTINUED
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
=====================================================================================================
<S> <C> <C> <C>
REVENUES
Motor Oil (a)
Lubricants $ 655,719 $ 419,408 $ 343,767
Fuels 50,732 47,874 48,351
Other (primarily filters, antifreeze and chemicals) 141,176 73,923 47,165
-------------------------------------
Total Motor Oil 847,627 541,205 439,283
Q Lube 123,588 113,674 105,361
Truck-Lite 90,312 99,638 80,776
Docks 3,252 2,997 2,955
Intersegment Motor Oil sales (29,209) (24,880) (21,290)
-------------------------------------
$1,035,570 $ 732,634 $ 607,085
=====================================================================================================
OPERATING PROFITS
Motor Oil $ 33,522 $ 16,401 $ 17,484
Unusual items (b) (17,800) -- --
-------------------------------------
Total Motor Oil 15,722 16,401 17,484
Q Lube 8,283 5,726 3,045
Truck-Lite 9,823 11,756 5,731
Docks 943 1,753 1,138
-------------------------------------
Total operating profits 34,771 35,636 27,398
Corporate income 5,523 3,235 2,730
Interest expense (7,228) (4,534) (5,410)
-------------------------------------
Corporate expenses (19,816) (18,669) (15,193)
Unusual item (c) (9,200) -- --
-------------------------------------
Total Corporate expenses (29,016) (18,669) (15,193)
-------------------------------------
Income from continuing operations before income taxes $ 4,050 $ 15,668 $ 9,525
=====================================================================================================
IDENTIFIABLE ASSETS
Motor Oil $ 405,527 $ 309,894 $ 144,687
Q Lube 118,439 113,733 114,703
Truck-Lite 40,636 37,497 33,433
Docks 3,502 2,481 2,112
Discontinued operations 4,279 49,449 389,179
-------------------------------------
572,383 513,054 684,114
Corporate 144,640 116,964 99,563
-------------------------------------
$ 717,023 $ 630,018 $ 783,677
=====================================================================================================
CAPITAL EXPENDITURES
Motor Oil $ 19,396 $ 13,385 $ 11,459
Q Lube 19,948 11,463 5,522
Truck-Lite 5,039 2,978 1,884
Docks 19 -- 5
Discontinued operations 728 8,618 10,890
-------------------------------------
$ 45,130 $ 36,444 $ 29,760
=====================================================================================================
DEPRECIATION, DEPLETION AND AMORTIZATION
Motor Oil $ 22,696 $ 12,784 $ 10,767
Q Lube 7,725 6,597 5,879
Truck-Lite 2,459 2,426 2,496
Docks 39 38 38
Discontinued operations 5,411 10,414 9,578
-------------------------------------
$ 38,330 $ 32,259 $ 28,758
=====================================================================================================
</TABLE>
a) In 1995, sales to one customer and its affiliated companies exceeded
10% of consolidated revenues.
b) Represents $13.4 million for restructuring charges and $4.4 million
related to settlement of a class-action lawsuit (see Note 3 to
Consolidated Financial Statements).
c) Represents corporate restructuring charges(see Note 3 to Consolidated
Financial Statements).
19
<PAGE> 6
FIVE-YEAR SUMMARY OF NET INCOME AND COMPARATIVE STATISTICAL DATA
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(In thousands except per share and
statistical data) 1995 1994 1993 1992 1991
==============================================================================================================
<S> <C> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $1,035,570 $ 732,634 $ 607,085 $ 592,650 $ 577,613
Other, net 9,894 6,923 5,595 4,063 4,450
---------------------------------------------------------------
1,045,464 739,557 612,680 596,713 582,063
---------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales and operating costs 718,996 503,539 421,894 408,830 399,747
Selling, general and administrative 255,271 193,390 156,359 158,920 139,709
Depreciation and amortization 32,919 21,845 19,181 20,077 20,148
Interest 7,228 5,115 5,721 4,785 4,567
Unusual items (a) 27,000 -- -- 3,200 --
---------------------------------------------------------------
1,041,414 723,889 603,155 595,812 564,171
---------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND EXTRAORDINARY ITEM 4,050 15,668 9,525 901 17,892
PROVISION FOR INCOME TAXES 2,300 6,167 2,534 245 7,443
---------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM 1,750 9,501 6,991 656 10,449
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS (b) 14,489 9,265 6,711 (31,904) 5,090
---------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 16,239 18,766 13,702 (31,248) 15,539
EXTRAORDINARY ITEM (c) (4,139) -- -- -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGES (d) -- -- -- (62,600) 7,170
---------------------------------------------------------------
NET INCOME (LOSS) $ 12,100 $ 18,766 $ 13,702 $ (93,848) $ 22,709
==============================================================================================================
PER SHARE:
Income from continuing operations before
extraordinary loss and cumulative effect
of accounting changes $ .06 $ .33 $ .25 $ .02 $ .39
Income (loss) from discontinued operations .45 .33 .25 (1.17) .19
Extraordinary item (.13) -- -- -- --
Cumulative effect of accounting changes -- -- -- (2.30) .26
---------------------------------------------------------------
Net income (loss) $ .38 $ .66 $ .50 $ (3.45) $ .84
==============================================================================================================
Dividends:
Cash per share $ .40 $ .40 $ .60 $ .80 $ .80
Amount 12,867 11,358 16,310 21,720 21,704
Capital expenditures 45,130 36,444 29,760 25,706 32,037
Working capital 132,073 101,439 35,403 74,911 43,041
Total assets 717,023 630,018 783,677 792,820 751,496
Total debt 125,762 73,249 51,450 79,183 88,924
Stockholders' equity 272,155 251,850 188,750 191,194 307,790
Book value per share 8.29 8.00 6.93 7.04 11.34
---------------------------------------------------------------
Number of stockholders of record 9,776 11,792 12,147 12,606 12,308
Weighted average capital and equivalent
shares outstanding 32,226,000 28,459,000 27,234,000 27,184,000 27,167,000
==============================================================================================================
</TABLE>
a) The company recorded $22.6 million of restructuring charges and $4.4
million for the settlement of a class-action lawsuit in 1995. See Note 3 to
Consolidated Financial Statements. The Company recognized a charge in 1992
for assets to be replaced by future conversion of Minit-Lube stores to Q
Lube format.
b) The company sold its exploration and production business in 1995, its
insurance business in 1994 and discontinued its coal business in 1992.
These businesses have been reported as discontinued operations. See Note 5
to Consolidated Financial Statements.
c) Premium on early extinguishment of $50 million, 8,73% Senior Notes. See
Note 9 to Consolidated Financial Statements.
d) 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.
20
<PAGE> 7
CONSOLIDATED STATEMENT OF INCOME
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(In thousands except per share data) 1995 1994 1993
======================================================================================================
<S> <C> <C> <C>
REVENUES
Sales and operating revenues $1,035,570 $ 732,634 $ 607,085
Other, net 9,894 6,923 5,595
-------------------------------------
1,045,464 739,557 612,680
-------------------------------------
COSTS AND EXPENSES
Cost of sales and operating costs 718,996 503,539 421,894
Selling, general and administrative 255,271 193,390 156,359
Depreciation and amortization 32,919 21,845 19,181
Interest 7,228 5,115 5,721
Unusual items (Note 3) 27,000 -- --
-------------------------------------
1,041,414 723,889 603,155
-------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 4,050 15,668 9,525
-------------------------------------
PROVISION FOR (BENEFIT FROM) INCOME TAXES (NOTE 4)
Current 11,200 9,550 9,800
Deferred (8,900) (3,383) (7,266)
-------------------------------------
2,300 6,167 2,534
-------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM 1,750 9,501 6,991
DISCONTINUED OPERATIONS (NOTE 5)
Income from discontinued operations, net of taxes 1,794 8,888 6,711
Income on disposition, net of taxes 12,695 377 --
-------------------------------------
TOTAL 14,489 9,265 6,711
-------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 16,239 18,766 13,702
EXTRAORDINARY ITEM (NOTE 9) (4,139) -- --
-------------------------------------
NET INCOME $ 12,100 $ 18,766 $ 13,702
======================================================================================================
PER SHARE:
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM $ .06 $ .33 $ .25
INCOME FROM DISCONTINUED OPERATIONS .45 .33 .25
EXTRAORDINARY ITEM (.13) -- --
-------------------------------------
NET INCOME PER SHARE $ .38 $ .66 $ .50
======================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 8
CONSOLIDATED STATEMENT OF CASH FLOWS
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(IN THOUSANDS) 1995 1994 1993
========================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 12,100 $ 18,766 $ 13,702
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 38,330 32,259 28,758
Unusual item - noncurrent 7,864 -- --
Gain on disposition of discontinued operations (Note 5) (12,695) (377) --
Extraordinary loss on extinguishment of debt 4,139 -- --
Deferred income taxes and investment tax credit (17,937) 2,669 3,380
Changes in discontinued operations 1,359 2,663 11,472
Increase (decrease) from changes in:
Receivables (22,078) (1,154) 3,703
Inventories (1,120) (3,719) 12,035
Other current assets (7,548) 5,018 2,335
Accounts payable (7,039) (7,920) 2,745
Accrued liabilities 4,999 (11,509) (24,970)
Other 4,554 866 (5,925)
-------------------------------------
Net cash provided by operating activities 4,928 37,562 47,235
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (45,130) (36,444) (29,760)
Proceeds from disposal of property and equipment 4,910 4,556 1,741
Proceeds from sale of discontinued operations, net of
discontinued operations cash and current taxes (Note 5) 47,213 78,529 6,261
Discontinued insurance operations:
Proceeds from sale of bonds and securities -- 47,781 105,052
Purchase of bonds and securities -- (60,513) (112,206)
Acquisition of businesses, net of cash acquired (Note 2) (31,008) (28,366) --
Other, net (5,685) -- --
-------------------------------------
Net cash provided by (used in) investing activities (29,700) 5,543 (28,912)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (12,867) (11,358) (16,310)
Proceeds from debt 99,375 418 223
Payments on debt (60,882) (17,988) (27,956)
-------------------------------------
Net cash provided by (used in) financing activities 25,626 (28,928) (44,043)
-------------------------------------
Net increase (decrease) in cash and cash equivalents 854 14,177 (25,720)
-------------------------------------
Cash and cash equivalents at beginning of year:
Other than insurance 29,805 6,220 34,146
Discontinued insurance operations -- 9,408 7,202
-------------------------------------
Total cash and cash equivalents at beginning of year 29,805 15,628 41,348
-------------------------------------
Cash and cash equivalents at end of year:
Other than insurance 30,659 29,805 6,220
Discontinued insurance operations -- -- 9,408
-------------------------------------
TOTAL CASH AND CASH EQUIVALENTS AT END OF YEAR $ 30,659 $ 29,805 $ 15,628
========================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 9
CONSOLIDATED BALANCE SHEET
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
DECEMBER 31
(In thousands except per share data) 1995 1994
========================================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 30,659 $ 29,805
Accounts and notes receivable, less allowance of
$3,495 and $2,173 in 1995 and 1994 129,267 91,858
Inventories (Note 6) 80,284 73,442
Deferred income taxes (Note 4) 12,050 11,790
Other current assets 23,792 11,708
Discontinued operation assets (Note 5) 954 3,537
----------------------------
Total current assets 277,006 222,140
----------------------------
Property, plant and equipment, net of accumulated
depreciation (Note 7) 203,259 199,983
Other assets (Note 8) 236,666 170,404
Discontinued operation assets (Note 5) 92 37,491
----------------------------
TOTAL ASSETS $ 717,023 $ 630,018
========================================================================================================
LIABILITIES
Current liabilities:
Accounts payable $ 53,465 $ 58,500
Accrued liabilities 84,225 58,487
Debt payable within one year 7,243 3,714
----------------------------
Total current liabilities 144,933 120,701
----------------------------
Long-term debt, less debt payable within one year (Note 9) 118,519 69,535
Other long-term liabilities (Note 10) 181,416 187,932
----------------------------
Total liabilities 444,868 378,168
----------------------------
Commitments and contingencies (Notes 11)
STOCKHOLDERS' EQUITY
Capital stock $1.00 par value; authorized shares, 95,000,000
and 37,500,000 at December 31, 1995 and 1994; issued and
outstanding shares, 32,824,157 and 31,517,305 in 1995 and 1994 32,824 31,517
Additional capital 139,068 120,131
Retained earnings 103,519 104,286
Cumulative foreign currency translation adjustment (111) (709)
Treasury stock, at cost, 8,447 and 33,948 shares in 1995 and 1994 (120) (467)
Unearned compensation (Note 12) (3,025) (2,908)
----------------------------
Total stockholders' equity 272,155 251,850
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 717,023 $ 630,018
========================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 10
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Quaker State Corporation and Subsidiaries
YEARS ENDED DECEMBER 31
(In thousands except shares and per share)
<TABLE>
<CAPTION>
Foreign
Currency
Capital Additional Retained Translation Treasury Unearned
Stock Capital Earnings Adjustment Stock Compensation Total
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
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 incentive plans 99 1,040 -- -- -- $ (497) 642
Net changes in unrealized gains and
losses on marketable securities -- -- (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 incentive plans 266 3,337 -- -- -- (2,411) 1,192
Net changes in unrealized gains and
losses on marketable securities -- -- (1,999) -- -- -- (1,999)
Change in foreign currency translation -- -- -- (784) -- -- (784)
4,000,000 shares issued for acquisition 4,000 53,750 -- -- -- -- 57,750
Purchase of 33,948 shares -- -- -- $ (467) -- (467)
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 31,517 120,131 104,286 (709) (467) (2,908) 251,850
-----------------------------------------------------------------------------
Net income -- -- 12,100 -- -- -- 12,100
Cash dividends ($.40 per share) -- -- (12,867) -- -- -- (12,867)
103,030 shares of capital stock issued
under incentive plans 47 661 -- -- 789 (117) 1,380
Change in foreign currency translation -- -- 598 -- -- 598
1,260,403 shares issued for acquisition 1,260 18,276 -- -- -- -- 19,536
Purchase of 30,529 shares (442) (442)
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $ 32,824 $139,068 $103,519 $ (111) $ (120) $ (3,025) $ 272,155
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUAKER STATE CORPORATION AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Quaker State Corporation and Subsidiaries (the company) are engaged principally
in the manufacturing and marketing of lubricants and lubricant services.
Branded and private label products are sold to distributors and national and
regional retailers. Through its wholly owned subsidiary Q Lube, the company
provides fast automobile oil change and lubrication services.
a. Basis of consolidation: The consolidated financial statements include
the accounts of Quaker State Corporation and all of its subsidiaries more than
50% owned. Intercompany accounts and transactions are eliminated.
b. Cash equivalents: The company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
c. 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.
d. Property, plant and equipment, at cost: Costs of buildings and equipment
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.
e. Intangibles: Goodwill and other intangible assets are 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. 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 when 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.
g. Pre-opening costs: Costs associated with the opening of new Q Lube
automobile lubrication centers are expensed as incurred.
h. Advertising Costs: Advertising costs are expensed as incurred.
Advertising costs were $92.7 million, $77.8 million and $71.3 million in 1995,
1994, and 1993, respectively.
i. 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.
j. 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.
k. 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.
l. Estimates: The preparation of the consolidated financial statements
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities and reported amounts of revenues and expenses. Actual results could
differ from those estimates.
2. ACQUISITIONS:
In July 1995, the company completed the acquisition of all the stock of Slick
50, Inc. (Slick 50) for $22.6 million in cash, 1,260,403 shares of capital
stock with a market value of $19.5 million, and the payment of $11 million to
satisfy certain Slick 50 indebtedness outstanding prior to the closing.
Additional consideration may be payable by the company, depending upon
performance during 1996, 1997 and 1998 but subject to offset for
indemnification obligations of Slick 50 stockholders. The acquisition has been
accounted for under the purchase method and, accordingly, the operating results
of Slick 50 are included in the accompanying consolidated financial statements
from the date of acquisition. The acquisition resulted in $63 million of
intangible assets. These items are being amortized on a straight-line basis
over periods not exceeding 40 years.
In September 1994, the company acquired all the stock of the Specialty Oil
Companies (Specialty) and Westland Oil Company, Inc. (Westland) for $19.5
million and 4,000,000 shares of capital stock with a market value of $57.8
million. The company also purchased certain related equipment for
approximately $1.5 million and assumed approximately $40 million of debt of the
acquired companies, of which $22 million was satisfied by the company at the
time of closing. The acquisition was 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 agreements provide for the purchase by the company of certain
real property used in the acquired companies' operations for $9 million. This
property will be acquired in February 1996. The company indemnified the prior
25
<PAGE> 12
owners for certain loan obligations, tax-related and other liabilities. The
acquisition resulted in $80.6 million of intangible assets. These items are
being amortized on a straight-line basis over periods not exceeding 40 years.
The following summary is prepared on a pro forma basis as though Slick 50,
Specialty and Westland had been acquired as of January 1, 1994 after including
the impact of adjustments, such as amortization of intangible assets, the
intercompany sales elimination, interest expense adjustments and related tax
effects. The discontinued E&P and insurance operations have been excluded.
<TABLE>
<CAPTION>
(Unaudited, in thousands except per share amounts) 1995 1994
=====================================================================================================
<S> <C> <C>
REVENUES $ 1,084,685 $ 1,071,089
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (56) $ 9,388
INCOME PER SHARE FROM CONTINUING OPERATIONS $ -- $ .29
======================================================================================================
</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. UNUSUAL ITEMS:
In April 1995, the company announced plans to restructure its organization, to
integrate recent acquisitions, consolidate management and administrative
activities, and relocate its Motor Oil Division and corporate headquarters to
the Dallas, Texas area. The pretax costs and expenses associated with the
restructuring were $22.6 million, ($13.8 million after tax).
A reserve of $15.8 million ($9.5 million after tax) was recorded in the
second quarter of 1995, which primarily related to the write-down and disposal
of the Oil City headquarter facilities and severance and employee benefits to
terminated employees. At December 31, 1995, a reserve of $5.6 million remained
that relates primarily to disposal costs of the Oil City headquarters and
severance and benefit payments to terminated employees. The company expects to
make these payments in 1996. In addition, the company expensed as incurred $6.8
million in connection with the restructuring.
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 refiners of Pennsylvania Grade crude oil. The complaints alleged
violations of Section 1 of the Sherman Act. In 1995, the company settled this
matter for $4.4 million, ($2.7 million after tax). The company paid $2.2
million under the settlement agreement in December 1995 with the remainder paid
in January 1996. The settlement is subject to court approval.
4. INCOME TAXES:
Income before income taxes from continuing operations consists of:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
==================================================================================================
<S> <C> <C> <C>
DOMESTIC $ 4,028 $12,914 $8,471
FOREIGN 22 2,754 1,054
-------------------------------
TOTAL $ 4,050 $15,668 $9,525
==================================================================================================
</TABLE>
The components of the provision for income taxes from continuing operations are
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
==================================================================================================
<S> <C> <C> <C>
CURRENT:
FEDERAL $ 8,900 $ 7,170 $ 6,394
STATE 1,600 680 2,056
FOREIGN 700 1,700 1,350
DEFERRED:
FEDERAL (6,900) (2,827) (4,531)
STATE (1,200) 44 (1,835)
FOREIGN (600) (200) --
TAX CREDITS AMORTIZED (200) (400) (900)
-------------------------------
TOTAL $ 2,300 $ 6,167 $ 2,534
==================================================================================================
</TABLE>
26
<PAGE> 13
The 1993 tax provision benefited from an adjustment of $1.2 million to
deferred taxes for the enacted U.S. tax rate changes and an adjustment to the
beginning-of-the-year valuation allowance of $1.4 million to recognize the
realizability of deferred tax assets in future years. A reconciliation from the
federal statutory tax rate to the effective tax rate for continuing operations
follows:
<TABLE>
<CAPTION>
(% of pretax income) 1995 1994 1993
====================================================================================================
<S> <C> <C> <C>
FEDERAL STATUTORY TAX RATE 35.0 35.0 35.0
ADD (DEDUCT) THE TAX EFFECT OF:
GOODWILL AMORTIZATION 17.2 1.8 1.6
INVESTMENT CREDIT (3.8) (2.4) (6.6)
NET ADJUSTMENT TO VALUATION ALLOWANCE -- -- (14.3)
ENACTED RATE CHANGE -- -- (12.4)
OTHER TAX CREDITS (10.4) (1.2) (2.1)
STATE AND FOREIGN INCOME TAXES 8.0 4.7 11.7
OTHER, NET 10.8 1.4 13.7
--------------------------------
EFFECTIVE TAX RATE 56.8 39.3 26.6
====================================================================================================
</TABLE>
The deferred tax assets and liabilities as of December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------------- ------------------------
Deferred Deferred Tax Deferred Deferred Tax
(IN THOUSANDS) Tax Assets Liabilities Tax Assets Liabilities
============================================================================================================
<S> <C> <C> <C> <C>
DEPRECIATION, DEPLETION AND AMORTIZATION -- $30,645 -- $32,553
EMPLOYEE BENEFITS $58,774 -- $56,287 --
ENVIRONMENTAL RESERVES 8,293 -- 8,308 --
OTHER 23,804 12,167 16,416 7,595
-------------------------------------------------
SUBTOTAL 90,871 42,812 81,011 40,148
VALUATION ALLOWANCE 460 -- 539 --
-------------------------------------------------
TOTAL $90,411 $42,812 $80,472 $40,148
============================================================================================================
</TABLE>
5. DISCONTINUED OPERATIONS:
In the third and fourth quarters of 1995, the company sold the assets of its
Natural Gas Exploration and Production Division (E&P) for $67.7 million.
Accordingly, the operating results of E&P have been reported as discontinued
operations in the accompanying Consolidated Statement of Income for the
three years ended December 31, 1995. The sales resulted in a gain on
disposition of $12 million, net of taxes of $7.5 million. Additionally, the
assets of E&P are reported as discontinued operation assets on the Consolidated
Balance Sheet as of December 31, 1995 and 1994.
Condensed income statements relating to the E&P operations for the seven
months ended July 31, 1995 and the years ended December 31, 1994 and 1993 are
presented below:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
===========================================================================================================
<S> <C> <C> <C>
REVENUES $14,641 $29,751 $28,010
COSTS AND EXPENSES 12,617 24,364 24,907
----------------------------------
INCOME BEFORE INCOME TAXES 2,024 5,387 3,103
PROVISION FOR INCOME TAXES 230 883 202
----------------------------------
NET INCOME $ 1,794 $ 4,504 $ 2,901
===========================================================================================================
</TABLE>
In 1994, the company sold the stock of its wholly owned subsidiary,
Heritage Insurance Group, Inc. (Heritage), for $82 million after satisfaction
of certain intercompany obligations. Accordingly, the operating results of
Heritage, including the gain on the sale, are reported as discontinued
operations in the accompanying Consolidated Statement of Income. The sale
resulted in a gain of $377,000, net of taxes of $2.7 million. During 1995, the
company recognized additional gain on sale of $650,000 as a result of settling
certain sale related contingencies. Condensed income statements relating to
Heritage's operations for the eight months ended August 31, 1994 and the year
ended December 31, 1993 are presented below:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
===========================================================================================================
<S> <C> <C>
REVENUES $87,566 $131,265
COST AND EXPENSES 82,392 127,741
----------------------
INCOME BEFORE INCOME TAXES 5,174 3,524
PROVISION FOR (BENEFIT FROM) INCOME TAXES 790 (286)
----------------------
NET INCOME $ 4,384 $ 3,810
===========================================================================================================
</TABLE>
27
<PAGE> 14
6. INVENTORIES:
Inventories consist of:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
===============================================================================================
<S> <C> <C>
CRUDE OIL $ 4,718 $ 1,328
FINISHED AND IN-PROCESS PETROLEUM PRODUCTS 51,658 49,252
OTHER 23,908 22,862
-----------------
TOTAL $80,284 $73,442
===============================================================================================
</TABLE>
The reserve to reduce the carrying value of inventories from current costs
to the LIFO basis amounted to $18.9 million in 1995 and $19.9 million in 1994.
At December 31, 1995 and 1994, $32.1 million and $38.3 million,
respectively, of inventories were valued on the LIFO basis.
In 1995 and 1993, certain inventory quantities were reduced resulting in
liquidations of LIFO inventory. The effect of these liquidations was an
increase in net income of $1.3 million or $.04 per share, in 1995 and a
decrease in net income of $900,000 or $.03 per share, in 1993.
7. PROPERTY, PLANT AND EQUIPMENT:
Major classes of property, including land and construction work in progress of
$46.6 million in 1995 and $45.2 million in 1994 are:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
================================================================================================
<S> <C> <C>
MOTOR OIL
REFINING $ 99,102 $ 97,710
MARKETING 133,484 126,360
Q LUBE 132,506 122,611
TRUCK-LITE 36,051 31,341
DOCKS 12,967 12,948
-------------------
SUBTOTAL 414,110 390,970
LESS: ACCUMULATED DEPRECIATION 210,851 190,987
-------------------
TOTAL $203,259 $199,983
================================================================================================
</TABLE>
Depreciation expense was $27.4 million, $20.9 million and $18.3 million in
1995, 1994 and 1993, respectively.
8. OTHER ASSETS:
Other assets consist of:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
=================================================================================================
<S> <C> <C>
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $5,806 AND $3,680 $ 88,567 $ 58,656
OTHER INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION
OF $8,958 AND $5,762 67,823 32,861
DEFERRED TAX ASSET 35,549 39,300
NOTES AND ROYALTIES RECEIVABLE 35,927 28,726
PREPAID PENSION COST 8,768 9,483
OTHER 32 1,378
--------------------
TOTAL $236,666 $170,404
=================================================================================================
</TABLE>
9. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS:
Long-term debt consists of:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
=================================================================================================
<S> <C> <C>
6.625% NOTES DUE 2005, NET OF DISCOUNT $ 99,396 --
8.73% SENIOR NOTES DUE 2002 -- $ 50,000
LIBOR PLUS 1% REVOLVING CREDIT LOAN DUE 1997 9,540 9,000
LIBOR PLUS 1% TERM LOAN, PAYABLE MONTHLY, DUE 1997 8,040 10,184
PRIME PLUS 1% NOTE, PAYABLE MONTHLY, DUE 1996 3,836 --
OTHER, 2% TO 9% DUE IN VARIOUS INSTALLMENTS TO 2005 4,950 4,065
--------------------
SUBTOTAL 125,762 73,249
LESS: PAYMENTS DUE WITHIN ONE YEAR 7,243 3,714
--------------------
TOTAL $118,519 $ 69,535
=================================================================================================
</TABLE>
28
<PAGE> 15
In 1995, the company issued $100 million of 6.625% Notes due 2005. A
portion of the proceeds of these notes was used to retire $50 million of 8.73%
Senior Notes due 2002. In connection with the early retirement of the notes,
the company paid a premium of $6.5 million and wrote off $300,000 of
unamortized issuance costs. These transactions resulted in an extraordinary
charge of $4.1 million, net of tax benefits of $2.7 million.
The revolving credit and term loans due in 1997 are collateralized by
certain assets of the company's subsidiary, Westland. These loans are
guaranteed by a current Vice Chairman and a Vice President of the Motor Oil
Division, both previous owners of Westland.
As of December 31, 1995, the company had available $70 million of committed
variable rate lines of credit. The largest of these is a $45 million line which
expires September 1996. Borrowings outstanding under these lines of credit as
of December 31, 1995, were $9.5 million. The lines of credit contain various
covenants pertaining to tangible net worth, financial ratios, and interest
coverage. Under the most restrictive of these provisions, $23.8 million of
consolidated retained earnings as of December 31, 1995 was free of any
restrictions as to the payment of cash dividends. The company intends to
negotiate a new revolving credit facility in 1996.
The aggregate long-term debt maturing in the next five years is as follows:
1996-$7.2 million; 1997-$16.2 million; 1998-$.8 million; 1999-$.8 million;
2000-$.2 million.
The fair value of debt at December 31, 1995 was $128.6 million 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
similar maturity.
10. OTHER LONG-TERM LIABILITIES:
Other long-term liabilities consist of:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
===============================================================================================
<S> <C> <C>
POSTRETIREMENT BENEFITS $ 94,784 $ 91,206
ENVIRONMENTAL RESERVES 18,399 19,822
OTHER 15,328 15,525
DISCONTINUED COAL LIABILITIES:
WORKER'S COMPENSATION AND BLACK LUNG 15,658 17,200
HEALTH CARE AND DEATH BENEFITS 20,133 22,300
OTHER 17,114 21,879
------------------
TOTAL $181,416 $187,932
===============================================================================================
</TABLE>
11. COMMITMENTS, CONTINGENCIES AND RELATED PARTIES:
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 $8.2 million, during
each of the next five years are: 1996-$15.2 million; 1997-$11.3 million;
1998-$10.2 million; 1999-$9 million; 2000-$8.6 million and thereafter $38.5
million.
Rental expenses for continuing operations amounted to approximately $18.3
million, $15.5 million and $15.2 million for 1995, 1994 and 1993, respectively,
net of sublease rentals of approximately $3.3 million, $3.8 million and $3.9
million for 1995, 1994 and 1993, respectively.
As part of its acquisition of Specialty and Westland (see Note 2) the
company assumed the terms of ten operating leases, which expire in 2004, for
various facilities. These facilities are leased from a real estate firm that is
owned, in part, by a current Vice Chairman. The company paid $1.5 million and
$376,000 in 1995 and 1994 for these leases.
In 1994, the company 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. Under the agreement the company could pay up to
$9.4 million over six years to maintain the exclusivity rights; however, the
company is not obligated to pay in full for these rights. The company paid
$500,000 in 1995 and 1994 for these rights.
Westland regularly purchases lubricant base stocks from Calumet Lubricants
Co., the President of which is a Director of the company. Westland purchased
$1.6 million and $393,000 of base stocks in 1995 and 1994 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 farm-out 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 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. During 1995, the company continued settlement discussions to resolve
this matter. A charge of $1 million was recorded in 1994 as the company's
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.
29
<PAGE> 16
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.
12. STOCK OPTIONS AND MANAGEMENT INCENTIVE PLANS:
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 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 1995 and 1994, 72,845 and 225,800 shares were issued
under this plan to certain key employees as follows: (1) 1995 - 37,845, 1994 -
165,800 performance restricted shares and (2) 1995 - 35,000, 1994 - 60,000
restricted shares. Of the performance restricted shares, 103,645 shares are
subject to forfeiture if certain three-year performance goals are not met and
are expensed as compensation expense over the performance period. The remaining
100,000 performance restricted shares are subject to forfeiture if the market
price of the company's stock does not achieve specified levels prior to August
1999. Compensation expense will be recorded related to these shares when it is
probable the specified stock market price levels will be achieved. The 95,000
restricted shares are subject to certain employment restrictions that expire at
various dates through June 2000 and are expensed as compensation expense over
the restriction period. As a result of these grants, the company recognized
$842,000 and $485,000 as compensation expense in 1995 and 1994. 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 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 1995 and 1994, 9,000 and 8,000 shares were granted under
this plan. In conjunction with the acquisition of Specialty and Westland (see
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.
The company has employment contracts with two key executives, that provide
for annual compensation, bonus, restricted awards and stock option grants.
Compensation expense on restricted awards is charged to earnings over the
contract terms.
Information with respect to shares under option follows:
<TABLE>
<S> <C>
==================================================================================================
BALANCE, JANUARY 1, 1993 1,073,414
GRANTED 378,200
SURRENDERED FOR SARS (24,287)
CANCELLED OR EXPIRED (74,460)
EXERCISED ($13.125 TO $15.9375) (8,963)
---------------
BALANCE, DECEMBER 31, 1993 ($9.4375 TO $27.00) 1,343,904
GRANTED 434,000
SURRENDERED FOR SARS (49,296)
CANCELLED OR EXPIRED (80,833)
EXERCISED ($13.125 TO $15.9375) (40,704)
---------------
BALANCE, DECEMBER 31, 1994 ($9.4375 TO $26.4375) 1,607,071
GRANTED 486,500
SURRENDERED FOR SARS (38,579)
CANCELLED OR EXPIRED (40,420)
EXERCISED ($10.1875 TO $16.25) (25,622)
---------------
BALANCE, DECEMBER 31, 1995 ($10.1875 TO $26.4375) 1,988,950
==================================================================================================
AT DECEMBER 31, 1995:
SHARES EXERCISABLE 1,168,950
SHARES AVAILABLE FOR OPTION (905,449 AT DECEMBER 31, 1994) 420,604
CAPITAL STOCK RESERVED (2,512,520 AT DECEMBER 31, 1994) 2,409,554
==================================================================================================
</TABLE>
30
<PAGE> 17
13. EMPLOYEE BENEFIT PLANS:
The company has noncontributory pension plans covering substantially all of its
employees. Plans covering salaried employees provide pension benefits that are
generally based on the employees' compensation and length of service. Plans
covering hourly employees provide benefits of stated amounts for each year of
service. The company's funding policy is based on an actuarially determined
cost method allowable under statutory regulations.
Net pension cost for 1995, 1994, and 1993 is summarized below:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
===================================================================================================
<S> <C> <C> <C>
SERVICE COST BENEFITS EARNED DURING THE PERIOD $ 4,033 $ 3,675 $ 3,130
INTEREST COST 9,629 9,015 8,840
ACTUAL RETURN ON ASSETS (22,791) (1,025) (13,371)
NET AMORTIZATION AND DEFERRAL 11,121 (11,188) 1,325
----------------------------------
TOTAL PENSION COST (INCOME) (A) $ 1,992 $ 477 $ (76)
===================================================================================================
</TABLE>
a) Excludes $1.8 million and $800,000 curtailment gain and $3 million and
$500,000 cost of special termination benefits due to restructuring and
sale of E&P in 1995.
The funded status of the plans is reconciled to prepaid pension cost at
December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
===================================================================================================
<S> <C> <C>
PLAN ASSETS AT FAIR VALUE, PRIMARILY INVESTMENTS IN IPG INSURANCE
CONTRACTS AND POOLED SEPARATE ACCOUNTS $ 142,683 $ 127,623
-----------------------
ACCUMULATED BENEFIT OBLIGATION, INCLUDING VESTED BENEFITS OF:
1995 $128.8 MILLION; 1994 $104.3 MILLION 134,930 111,640
EFFECT OF FUTURE SALARY INCREASES 8,183 11,692
-----------------------
PROJECTED BENEFIT OBLIGATION 143,113 123,332
-----------------------
PLAN ASSETS (LESS THAN) IN EXCESS OF PROJECTED BENEFIT
OBLIGATION (430) 4,291
UNRECOGNIZED NET LOSS 18,439 16,458
UNRECOGNIZED TRANSITION ASSET (9,241) (11,266)
-----------------------
PREPAID PENSION COST $ 8,768 $ 9,483
===================================================================================================
</TABLE>
Significant assumptions used in determining net pension costs and related
pension obligations are:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994 1993
==================================================================================================
<S> <C> <C> <C>
DISCOUNT RATE 7% 8% 7%
RATE OF INCREASE IN COMPENSATION LEVELS 4% 4 1/2% 4 1/2%
EXPECTED LONG-TERM RATE OF RETURN ON ASSETS 9% 9% 9%
==================================================================================================
</TABLE>
The Docks operation terminated a pension plan that resulted in a pre-tax
gain of $1.1 million in 1994.
The company has certain defined contribution plans including a Thrift and
Stock Purchase Plan and an Employee Stock Ownership Plan. The cost of these
plans was $1.4 million, $2,5 million and $1.1 million in 1995, 1994 and 1993,
respectively.
In addition to providing pension benefits, the company provides health care
and life insurance benefits for active and retired employees of certain
subsidiaries. These plans are unfunded, and the company retains the right to
modify or eliminate these benefits.
The components of periodic expense for postretirement benefits in 1995,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
==================================================================================================
<S> <C> <C> <C>
SERVICE COST BENEFITS EARNED $ 697 $ 805 $ 947
INTEREST COST ON LIABILITY 7,565 6,812 7,300
AMORTIZATION OF GAIN OR (LOSS) 129 (115) (240)
--------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COST (A) $ 8,391 $ 7,502 $ 8,007
==================================================================================================
</TABLE>
a) Excludes $600,000 and $800,000 cost of curtailment due to
restructuring and sale of E&P in 1995.
31
<PAGE> 18
The accumulated postretirement benefit obligation (APBO) at December 31, 1995
and 1994 is summarized below:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994
===================================================================================================
<S> <C> <C>
RETIREES $ 98,035 $ 74,154
FULLY ELIGIBLE ACTIVE PARTICIPANTS 7,784 6,906
OTHER ACTIVE PARTICIPANTS 7,914 9,910
---------------------
APBO 113,733 90,970
UNRECOGNIZED NET GAIN OR (LOSS) (13,949) 5,236
LESS: CURRENT PORTION (5,000) (5,000)
---------------------
LONG-TERM PORTION $ 94,784 $ 91,206
===================================================================================================
</TABLE>
For measurement purposes, a 10% annual rate of increase in the per capita
claims cost was assumed for 1996, declining gradually to 5% by the year 2002
and thereafter.
Significant assumptions used in determining postretirement benefit expenses
and accumulated postretirement benefit obligations are:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994 1993
=================================================================================================
<S> <C> <C> <C>
DISCOUNT RATE 7% 8% 7 1/2%
RATE OF INCREASE IN COMPENSATION LEVELS 4% 4 1/2% 5%
=================================================================================================
</TABLE>
The health care cost trend rate assumption can have a significant effect on
the APBO, health care and death benefit liabilities and net periodic benefit
costs.
A 1% increase in the trend rate for health care costs would have increased
the APBO at December 31, 1995 by 11% and 1995 service and interest costs by
12%.
14. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
==================================================================================================
<S> <C> <C> <C>
CASH PAID DURING THE YEAR FOR:
INTEREST, NET OF AMOUNTS CAPITALIZED $ 6,911 $ 5,101 $ 5,717
INCOME TAXES 30,562 9,174 9,714
==================================================================================================
NONCASH INVESTING AND FINANCING ACTIVITIES:
CAPITAL STOCK ISSUED FOR ACQUISITION (NOTE 2) $ 19,536 $57,750 --
CAPITAL STOCK ISSUED UNDER INCENTIVE PLAN (NOTE 12) 1,055 3,109 --
==================================================================================================
DETAILS OF ACQUISITION (NOTE 2):
FAIR VALUE OF ASSETS ACQUIRED $ 79,486 $171,219 --
LIABILITIES ASSUMED (26,289) (82,748) --
STOCK ISSUED (19,536) (57,750) --
--------------------------------
CASH PAID 33,661 30,721 --
LESS CASH ACQUIRED (2,653) (2,355) --
--------------------------------
NET CASH PAID FOR ACQUISITION $ 31,008 $ 28,366 --
==================================================================================================
</TABLE>
15. Segment Information:
Information on the company's operations in different segments is contained on
pages 18 to 19 of this report.
32
<PAGE> 19
16. FINANCIAL RESULTS BY QUARTER (UNAUDITED):
(In thousands except per share data)
<TABLE>
<CAPTION>
1995
----------------------------------------------------------------
QUARTERS ENDED March 31, June 30, September 30, December 31, Total
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Revenues(a) $ 239,533 $ 257,698 $ 277,109 $ 261,230 $ 1,035,570
Gross profit(a)(b)(c) 68,454 59,010 86,474 75,636 289,574
Income (loss) from continuing operations(a)(d) 4,221 (4,528) 4,073 (2,016) 1,750
Income from discontinued operations 1,375 1,303 11,255 556 14,489
Extraordinary item -- -- -- (4,139) (4,139)
----------------------------------------------------------------
Net income (loss) $ 5,596 $ (3,225) $ 15,328 $ (5,599) $ 12,100
=================================================================================================================
Per Share:
Income (loss) from continuing operations $ .13 $ (.14) $ .13 $ (.06) $ .06
Income from discontinued operations .05 .04 .34 .02 .45
Extraordinary item -- -- -- (.13) (.13)
Net income (loss) .18 (.10) .47 (.17) .38
Dividends .10 .10 .10 .10 .40
=================================================================================================================
</TABLE>
a) The company discontinued its E&P business in 1995 (see Note 5).
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 second and fourth quarter of 1995 was impacted
positively by the effect of LIFO liquidations of approximately $1.5
million and $700,000.
d) Motor oil operating results included plant and equipment write-downs
of $1.5 million in the fourth quarter.
(In thousands except per share data)
<TABLE>
<CAPTION>
1994
QUARTERS ENDED March 31, June 30, September 30, December 31, Total
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Revenues(a) $ 168,515 $ 161,545 $ 179,702 $ 222,872 $ 732,634
Gross profit(a)(b)(c) 58,586 50,958 57,051 62,500 229,095
Income from continuing operations(a)(d) 2,284 1,622 3,872 1,723 9,501
Income from discontinued operations 3,299 3,447 1,526 993 9,265
----------------------------------------------------------------
Net income $ 5,583 $ 5,069 $ 5,398 $ 2,716 $ 18,766
=================================================================================================================
Per Share:
Income from continuing operations $ .08 $ .06 $ .14 $ .06 $ .33
Income from discontinued operations .12 .13 .05 .03 .33
Net income .20 .19 .19 .09 .66
Dividends .10 .10 .10 .10 .40
=================================================================================================================
</TABLE>
a) The company discontinued its insurance business in 1994 (see Note 5).
b) Gross profit equals total sales and operating revenues less cost of
sales and operating costs (excluding depreciation and amortization)
and unusual items.
c) Truck-Lite 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.
d) Income from continuing operations in the third quarter of 1994 was
impacted positively by a change of $1.4 million due to a reduction in
the estimated state tax rate and additional tax credits.
33
<PAGE> 20
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, 1995 and 1994, and the related
consolidated statements of income, cash flows and stockholders' equity for each
of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Dallas, Texas
January 30, 1996
MANAGEMENT REPORT
Quaker State Corporation and Subsidiaries
The consolidated financial statements of Quaker State Corporation (the company)
and other financial information appearing in this report have been prepared at
the direction of the management of the company, who are responsible for their
integrity and objectivity. The statements, which were prepared in conformity
with generally accepted accounting principles, reflect estimates, where
appropriate, based upon the judgment of management.
The company's system of internal accounting control is designed to provide
reasonable assurance that the financial statements and other financial
information are fairly presented and that the assets of the company are
safeguarded. This system of internal control includes both administrative and
accounting controls with each supplementing the other and both being
complemented by an effective control environment.
As part of the internal control system, the company has a Statement of
Ethical Values and Code of Business Conduct. All directors, officers and key
employees are required to submit annually a signed statement regarding
compliance with these policies.
The Internal Audit Department of the company reviews, evaluates, monitors,
and makes recommendations on both administrative and accounting controls and
thus acts as an integral, but independent, part of the control system. A staff
of professional auditors perform audits at reasonable intervals throughout the
company and its subsidiaries.
The Audit Committee of the Board of Directors, consisting of three outside
directors, is directly responsible for assuring that management fulfills its
financial reporting responsibility and for monitoring the corporate audit
function. Both the internal auditors and the independent auditors periodically
meet alone with the Audit Committee and have access to the Audit Committee at
any time.
34
<PAGE> 21
<TABLE>
<CAPTION>
QUAKER STATE (KSF) MARKET PRICES BY QUARTER 1995 1994 1993
==================================================================================================
<S> <C> <C> <C> <C>
First Quarter High 15 1/8 14 3/8 13
Low 13 3/8 12 5/8 11 1/8
Close 13 3/4 13 12 1/8
- --------------------------------------------------------------------------------------------------
Second Quarter High 15 1/8 16 1/8 12 7/8
Low 13 1/2 12 3/4 11 1/4
Close 15 14 11 3/4
- --------------------------------------------------------------------------------------------------
Third Quarter High 16 1/2 15 3/8 14 1/4
Low 14 5/8 13 1/2 11 3/4
Close 14 5/8 14 1/2 13 7/8
- --------------------------------------------------------------------------------------------------
Fourth Quarter High 14 3/4 14 1/2 15
Low 12 1/8 13 12 1/8
Close 12 3/4 14 13 3/8
==================================================================================================
</TABLE>
35
<PAGE> 1
EXHIBIT 21
QUAKER STATE CORPORATION
Subsidiaries
All of the following subsidiaries are 100% owned by Quaker State
Corporation unless otherwise indicated:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ --------------
<S> <C>
Fort William Coal Dock Company, Ltd. Ontario
Green Shield, Inc. Delaware
Lubricants, Inc. Arkansas
Myatt-Brooks, Inc. (1) Arkansas
QS/Brooks Distribution Company (2) Tennessee
QS Holding Company Delaware
Quaker Oil Corporation Texas
Quaker State, Inc. Canada
Quaker State Investment Corporation Delaware
Freedom Freightways, Inc. (3) Missouri
QSE&P, Inc. (3) Delaware
Q Lube, Inc. (3) Delaware
Quaker State Minit-Lube Canada, Inc. (4) Ontario
Minit-Lube Ontario, Inc. (5) Ontario
Lubeco, Inc. (4) Delaware
Quaker State Resources L.L.C. (4) Utah
The Valley Camp Coal Company (3) Delaware
Donaldson Mine Company (6) West Virginia
Kelley's Creek and Northwestern Railroad Company (6) West Virginia
Valley Camp Investment Company (6) Delaware
Elm Grove Coal Company (7) West Virginia
Valley Camp Coal Sales Company (7) Ohio
The Helen Mining Company (7) Pennsylvania
Kanawha and Hocking Coal and Coke Company (7) West Virginia
Shrewsbury Coal Company (7) West Virginia
Valley Camp of Utah, Inc. (7) Utah
Truck-Lite Co., Inc. (3) New York
T-L Automotive Industries, Inc. (8) Delaware
Truck-Lite International, Inc. (8) Delaware
Valley Camp, Inc. (3) Canada
Quaker State Japan Co., Ltd. Japan
Quaker State Oil Refining Corporation, B.V. Holland
Quaker State - Slick 50, Inc. Delaware
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ --------------
<S> <C>
Petrolon UK Ltd. (9) United Kingdom
Sutherwell Ltd. (14) United Kingdom
Petrolon British Isles Ltd. (15) United Kingdom
Petrolon Deutschland GMBH (10) Germany
Petrolon Australia Pty. Ltd. (11) Australia
Petrolon International Management Monaco
SAM (10)
Petrolon International Limited (10) Isle of Man
Petrolon Overseas Ltd. (12) United Kingdom
Petrolon Europe Ltd. (13) Isle of Man
Slick 50 Management, Inc. (10) Delaware
Slick 50 Products Corporation (16) Delaware
Slick 50 Corporation (16) Delaware
Specialty Oil Company, Inc. Delaware
Westland Oil Company, Inc. Louisiana
</TABLE>
- --------------------------------------------------------------------------------
(1) 50% owned by Lubricants, Inc. and 50% owned by Specialty Oil Company, Inc.
(2) 50% owned by Myatt-Brooks, Inc.
(3) 100% owned by Quaker State Investment Corporation
(4) 100% owned by Q Lube, Inc.
(5) 50% owned by Quaker State Minit-Lube Canada, Inc.
(6) 100% owned by The Valley Camp Coal Company
(7) 100% owned by Valley Camp Investment Company
(8) 100% owned by Truck-Lite Co., Inc.
(9) 5% owned by Quaker State - Slick 50, Inc.;
95% owned by Petrolon Europe Ltd.
(10) 100% owned by Quaker State - Slick 50, Inc.
(11) 5% owned by Quaker State - Slick 50, Inc.;
95% owned by Petrolon Europe, Ltd.
(12) 100% owned by Petrolon International Ltd.
(13) 99% owned by Petrolon International Ltd.;
1% owned by third party.
(14) 100% owned by Petrolon UK Ltd.
(15) 100% owned by Sutherwell Ltd.
(16) 100% owned by Slick 50 Management, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference of our reports, dated
January 30, 1996, on our audits of the consolidated financial statements and
financial statement schedule of Quaker State Corporation and Subsidiaries as of
December 31, 1995 and 1994, and for the three years in the period ended
December 31, 1995, which reports are incorporated by reference or included in
this annual report on Form 10-K, in the following documents:
1. Registration Statement No. 33-20416 on Form S-8 for the Quaker State
Corporation Thrift and Stock Purchase Plan, filed under the Securities
Act of 1993, as amended, and the Prospectus used in connection with
such Registration Statement;
2. Registration Statement No. 33-7163 on Form S-8 for the 1986 Stock
Option Plan of Quaker State Corporation, filed under the Securities
Act of 1933, as amended, and the Prospectus used in connection with
such Registration Statement;
3. Registration Statement No. 33-65862 on Form S-8 for the Baum
Employment Agreement, filed under the Securities Act of 1933, as
amended, and the Prospectus used in connection with such Registration
Statement;
4. Registration Statement No. 33-53605 on Form S-8 for the 1994
Non-Employee Directors' Stock Option Plan, filed under the Securities
Act of 1933, as amended, and the Prospectus used in connection with
such Registration Statement; and
5. Registration Statement No. 33-53617 on Form S-8 for the 1994 Stock
Incentive Plan, filed under the Securities Act of 1933, as amended,
and the Prospectus used in connection with such Registration
Statement.
We also Consent to the references to our firm under the caption
"Experts" in the Prospectuses used in connection with Registration Statement
Nos. 33-20416, 33-7163, 33-65862, 33-53605 and 33-53617 solely as it relates to
the current financial statements being incorporated by reference.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 28, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ Raymond A. Ross
----------------------------------------
<PAGE> 2
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ C. Frederick Fetterolf
----------------------------------------
<PAGE> 3
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ Laurel Cutler
----------------------------------------
<PAGE> 4
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ Thomas A. Gardner
----------------------------------------
<PAGE> 5
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 26, 1996 /s/ Delbert J. McQuaide
----------------------------------------
<PAGE> 6
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ Leonard M. Carroll
----------------------------------------
<PAGE> 7
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ L. David Myatt
----------------------------------------
<PAGE> 8
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ F. William Grube
----------------------------------------
<PAGE> 9
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ Forrest R. Haselton
----------------------------------------
<PAGE> 10
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Herbert M. Baum, Conrad A. Conrad, and Paul E. Konney, and each of
them, the undersigned's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, of
Quaker State Corporation and any and all amendments thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as the undersigned might or could do in
person and hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitutes may lawfully do or cause to
be done by virtue hereof.
March 21, 1996 /s/ Lorne R. Waxlax
----------------------------------------
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