<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
QUAKER STATE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
QUAKER STATE CORPORATION
LOGO 225 East John Carpenter Freeway
Irving, Texas 75062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--MAY 16, 1996
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Quaker State Corporation will be held
at the Omni Mandalay Hotel, 221 East Las Colinas Boulevard, Irving, Texas, on
Thursday, May 16, 1996 at 1:00 P.M., for the following purposes:
1. To elect thirteen Directors;
2. To approve the adoption of the 1996 Directors' Fee Plan;
3. To approve the adoption of an amendment to the 1994 Stock Incentive
Plan to authorize issuance under the Plan of shares previously authorized
for issuance, but not issued, under the 1986 Stock Option Plan;
4. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors to audit the financial statements of the Company and
its subsidiaries for the year 1996; and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
This notice is being sent to stockholders of record at the close of
business on March 18, 1996, who will be entitled to vote at the Annual Meeting.
The Company's Annual Report to Stockholders for 1995 is enclosed.
It is important for your shares to be represented at the Annual Meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AT YOUR EARLIEST
CONVENIENCE in the envelope provided.
By Order of the Board of Directors,
Paul E. Konney,
Vice President, General
Counsel and Secretary
Irving, Texas
March 29, 1996
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
<PAGE> 3
QUAKER STATE CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1 -- ELECTION OF DIRECTORS......................................................... 2
Security Ownership of Directors and Executive Directors................................. 4
Board of Directors...................................................................... 5
- Board Committees.................................................................... 5
- Compensation of Directors........................................................... 6
Executive Officers...................................................................... 8
- Executive Compensation.............................................................. 8
- Option Grants....................................................................... 10
- Option/SAR Exercises and Values..................................................... 11
- Long-Term Incentive Awards.......................................................... 11
- Baum Employment Agreement........................................................... 12
- Barr Employment Arrangement......................................................... 13
- Myatt Employment Agreement.......................................................... 13
- Employment Continuation Agreements.................................................. 13
- Other Severance Agreements.......................................................... 14
- Pension Benefits.................................................................... 15
- Supplemental Retirement Benefits.................................................... 16
Certain Relationships and Related Transactions.......................................... 17
Organization and Compensation Committee Interlocks and Insider Participation............ 18
Organization and Compensation Committee Report on Executive Compensation................ 18
Stockholder Return Performance Graph.................................................... 21
ITEM 2 -- APPROVAL OF ADOPTION OF 1996 DIRECTORS' FEE PLAN.............................. 22
ITEM 3 -- APPROVAL OF ADOPTION OF AMENDMENT TO 1994 STOCK INCENTIVE PLAN................ 24
ITEM 4 -- RATIFICATION OF APPOINTMENT OF AUDITORS....................................... 30
Other Matters........................................................................... 30
Expenses of Solicitation................................................................ 30
1997 Stockholder Proposals.............................................................. 31
Exhibit 1............................................................................... A-1
</TABLE>
- ---------------
Items in boldface are to be voted on at the meeting.
1
<PAGE> 4
MARCH 29, 1996
QUAKER STATE CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1996
This Proxy Statement is furnished to stockholders in connection with the
solicitation by the Board of Directors of Quaker State Corporation ("Quaker
State" or the "Company") of proxies in the accompanying form for use at the
Annual Meeting of Stockholders to be held on May 16, 1996 and at any adjournment
thereof. If a proxy in the accompanying form is duly executed and returned, the
shares represented will be voted at the Annual Meeting and, where a choice is
specified, will be voted in accordance with the specification made. Any
stockholder who gives a proxy has the power to revoke it by notice to the
Secretary at any time before it is exercised. A later dated proxy will revoke an
earlier proxy, and stockholders who attend the Annual Meeting may, if they wish,
vote in person even though they have submitted a proxy, in which event the proxy
will be deemed to have been revoked.
The Company has only one class of capital stock (the "Capital Stock"), of
which 32,858,094 shares were issued and outstanding as of the close of business
on March 18, 1996. Stockholders of record as of the close of business on March
18, 1996 have the right to receive notice of and to vote at the Annual Meeting.
Stockholders are entitled to one vote for each share held on all matters to be
considered and acted upon at the meeting and do not have cumulative voting
rights in the election of directors.
Under the terms and conditions of the Company's Automatic Dividend
Reinvestment Plan, Mellon Securities Trust Services, the administrator, will
vote the full shares of Capital Stock that it holds for a participant's account
under this plan at the Annual Meeting in accordance with (i) the proxy returned
by the participant to the Company with respect to the shares which the
participant holds of record, (ii) the participant's vote in person at the Annual
Meeting with respect to such shares or (iii) written instructions received
directly by the administrator from the participant. The administrator will vote
fractional shares credited to the accounts of participants under the plan by
aggregating all the fractional shares to be voted in the same manner.
ITEM 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The Bylaws provide for thirteen directors, and the Board of Directors has
nominated the thirteen persons who are named below for election as directors at
the Annual Meeting. Unless authority to vote for one or more of the nominees is
withheld, the proxies solicited hereby will be voted for the election of the
thirteen nominees. All the nominees are currently directors of Quaker State.
Only affirmative votes are counted in the election of directors. The
thirteen nominees who receive the greatest number of votes cast for the election
of directors by the holders of the Capital Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting, a quorum being
present, will be elected as directors.
In the event that any of the nominees should for any reason not be
available for election at the date of the Annual Meeting, the proxies received
will be voted for the election of the other nominees and such substitute
nominees as shall be designated by the Board of Directors; however, management
knows of no reason why any nominee should be unavailable for election. If the
Bylaws have been amended to reduce the number of directors to the number of
named nominees then available for election, the proxies will be voted for the
2
<PAGE> 5
reduced number of directors. Directors who are elected will serve until the next
Annual Meeting of Stockholders and until their successors are elected and
qualify.
The nominees have held the positions shown for more than five years unless
otherwise indicated.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR
NOMINEE SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
- --------------------- -------- ---------------------------------------------------------
<S> <C> <C>
John D. Barr 1995 President and Chief Operating Officer of Quaker State and
Chief Executive Officer of the Company's Motor Oil
Division since July 1995; Senior Vice President of
Ashland, Inc. and President of its subsidiary The
Valvoline Company (manufacturer of motor oils and
lubricants) from prior to 1991 to July 1995; age 48.
Herbert M. Baum 1993 Chairman and Chief Executive Officer of Quaker State
since June 1993; President of Quaker State from June 1993
to July 1995; Executive Vice President of Campbell Soup
Company (manufacturer of food products) from prior to
1991 to June 1993, and President, Campbell North and
South America from January 1992 to June 1993; Director of
Meredith Corporation and Whitman Corporation; age 59.
Leonard M. Carroll 1993 President and Chief Operating Officer of Integra
Financial Corporation (bank holding company) since
January 1991; age 53.
Conrad A. Conrad 1988 Vice Chairman of Quaker State since September 1994; Chief
Financial Officer of Quaker State since July 1995; Chief
Administrative Officer of Quaker State from September
1994 to July 1995; President and Chief Operating Officer
of Quaker State from prior to 1991 to September 1994; age
50.
Laurel Cutler 1993 Vice Chairman of FCB/Leber Katz Partners (advertising
agency); Director of Hannaford Brothers Company and True
North Communications, Inc.; age 69.
C. Frederick 1993 Retired since August 1991; President and Chief Operating
Fetterolf Officer of Aluminum Company of America (manufacturer of
aluminum and aluminum products) from prior to 1991 to
August 1991; Director of Allegheny Ludlum Corporation,
CasTech Aluminum Group, Dentsply International, Mellon
Bank Corporation, Praxair, Inc., Union Carbide
Corporation and Urethane Technologies, Inc.; age 67.
Thomas A. Gardner 1979 Personal investments; Physician and former Director of
Radiology of Northwest Medical Center; Director of
Integra Trust Company, N.A., a subsidiary of Integra
Financial Corporation; age 68.
F. William Grube 1994 President of Calumet Lubricants Co. (producer of
specialty oils); age 48.
Forrest R. Haselton 1995 Retired since August 1993; President--Retail of Sears
Merchandise Group, a division of Sears Roebuck and
Company (retail merchandiser) from January 1992 to August
1993; Vice President--Automotive of Sears Merchandise
Group from prior to 1991 to January 1992; age 57.
Delbert J. McQuaide 1981 Senior Partner of McQuaide, Blasko, Schwartz, Fleming &
Faulkner, Inc. (law firm); Director of Mid-State Bank and
Trust Company, a subsidiary of Keystone Financial, Inc.;
age 59.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR
NOMINEE SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
- --------------------- -------- ---------------------------------------------------------
<S> <C> <C>
L. David Myatt 1994 Vice Chairman of Quaker State since September 1994; Chief
Executive Officer of the Company's Motor Oil Division
from September 1994 to July 1995; President of the
Specialty Oil Companies ("Specialty Oil") (lubricant
distributors) and Westland Oil Company, Inc. ("Westland
Oil") (lubricant blender and packager) from prior to 1991
to September 1994; age 50.
Raymond A. Ross, Jr. 1991 Personal investments; President and sole owner of Ross
Management, an unincorporated real estate investment and
development firm, from prior to 1991 to December 1995;
age 60.
Lorne R. Waxlax 1995 Independent consultant since December 1993; Executive
Vice President of The Gillette Company (manufacturer and
marketer of razor blades, shaving products and other
consumer products) from prior to 1991 to December 1993;
Director of Amtrol, Inc., Clean Harbors, Inc., Hon
Industries, Inc. and Waban Inc.; age 62.
</TABLE>
During 1995, there were nine meetings of the Board of Directors. All
directors attended at least 75% of the Board meetings and meetings of Committees
of which they were members except Mr. Fetterolf, who attended 73% of such
meetings.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Each director, the persons named in the Summary Compensation Table below
and all directors and executive officers of the Company as a group beneficially
owned as of March 18, 1996 the number of shares of Capital Stock set forth in
the table below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP(1)
-----------------------------------------------
NAME OR GROUP NUMBER OF SHARES PERCENT OF STOCK
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
John D. Barr 202,500 (2)(3) *
- ---------------------------------------------------------------------------------------------------
Herbert M. Baum 344,086 (2)(3)(4) *
- ---------------------------------------------------------------------------------------------------
Charles F. Bechtel 44,694 (2)(3)(4) *
- ---------------------------------------------------------------------------------------------------
Leonard M. Carroll 3,500 (2) *
- ---------------------------------------------------------------------------------------------------
Conrad A. Conrad 108,384 (2)(3)(4)(5) *
- ---------------------------------------------------------------------------------------------------
Laurel Cutler 3,000 (2) *
- ---------------------------------------------------------------------------------------------------
C. Frederick Fetterolf 4,000 (2) *
- ---------------------------------------------------------------------------------------------------
Thomas A. Gardner 6,827 (2) *
- ---------------------------------------------------------------------------------------------------
F. William Grube 21,000 (2)(5) *
- ---------------------------------------------------------------------------------------------------
Forrest R. Haselton 1,100 (2) *
- ---------------------------------------------------------------------------------------------------
Delbert J. McQuaide 4,021 (2)(6) *
- ---------------------------------------------------------------------------------------------------
L. David Myatt 1,641,850 (2)(3)(4) 4.9%
- ---------------------------------------------------------------------------------------------------
Raymond A. Ross, Jr. 6,100 (2) *
- ---------------------------------------------------------------------------------------------------
Lorne R. Waxlax 16,000 (2) *
- ---------------------------------------------------------------------------------------------------
All directors and executive officers as a group
(15 persons) 2,442,939 (2)(3)(4)(5)(6) 7.3%
- ---------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
- ---------
* Less than 1.00% of the outstanding stock is beneficially owned. In
determining the percentage of the outstanding stock owned by each
person and by all directors and executive officers as a group, the
shares included in the table that may be acquired upon the exercise of
stock options are deemed outstanding.
(1) The directors and executive officers have sole voting power and sole
investment power with respect to all shares set forth in the table
except as indicated in the footnotes which follow.
(2) Includes shares which may be acquired by the following persons upon the
exercise of stock options which are presently exercisable or become
exercisable within 60 days: Mr. Barr, 167,500 shares; Mr. Baum, 85,500
shares; Mr. Bechtel, 31,500 shares; Mr. Carroll, 2,000 shares; Mr.
Conrad, 69,600 shares; Ms. Cutler, 2,000 shares; Mr. Fetterolf, 2,000
shares; Dr. Gardner, 2,000 shares; Mr. Grube, 1,000 shares; Mr.
Haselton, 1,000 shares; Mr. McQuaide, 2,000 shares; Mr. Myatt, 250,000
shares; Mr. Ross, 2,000 shares; Mr. Waxlax, 1,000 shares; and all
directors and executive officers as a group, 651,000 shares.
(3) Includes restricted shares as to which the following persons have sole
voting power but do not have investment power: Mr. Barr, 35,000 shares;
Mr. Baum, 149,000 shares; Mr. Bechtel, 5,500 shares; Mr. Conrad, 11,700
shares; Mr. Myatt, 8,775 shares; and all directors and executive
officers as a group, 214,253 shares.
(4) Includes full shares credited to, or represented by units credited to,
the accounts of the following persons under the Quaker State Thrift and
Stock Purchase Plan and/or Employee Stock Ownership Plan: Mr. Baum,
1,519 shares; Mr. Bechtel, 1,123 shares; Mr. Conrad, 13,125 shares; Mr.
Myatt, 9,834 shares; and all directors and executive officers as a
group, 25,601 shares. These shares are voted by the plan trustees in
accordance with directions received from the plan participants and may
only be voted by the plan trustees if voting instructions are not
received from the participants.
(5) Includes shares held jointly by the following persons with their
spouses: Mr. Conrad, 13,959 shares; Mr. Grube, 20,000 shares; and all
directors and executive officers as a group, 35,133 shares.
(6) Includes 2,021 shares held in a pension trust as to which Mr. McQuaide
shares voting power and has sole investment power.
BOARD OF DIRECTORS
BOARD COMMITTEES
The principal committees of the Board of Directors are the Audit Committee,
the Environmental and Ethics Committee, the Executive Committee and the
Organization and Compensation Committee.
Membership as of the record date of March 18, 1996 was as follows:
<TABLE>
<CAPTION>
AUDIT ENVIRONMENTAL AND ETHICS
----- ------------------------
<S> <C>
Mr. Carroll, Chair Mr. Fetterolf, Chair
Mr. Ross Ms. Cutler
Mr. Waxlax Mr. Ross
Mr. Grube
</TABLE>
<TABLE>
<CAPTION>
EXECUTIVE ORGANIZATION AND COMPENSATION
--------- -----------------------------
<S> <C>
Mr. McQuaide, Chair Dr. Gardner, Chair
Mr. Baum Ms. Cutler
Mr. Fetterolf Mr. Fetterolf
Mr. Myatt Mr. Haselton
Mr. Ross Mr. McQuaide
</TABLE>
5
<PAGE> 8
AUDIT COMMITTEE 5 MEETINGS IN 1995
- Reviews the scope of the internal and external audit programs and the
audit process to assure that audit coverage and internal controls are
satisfactory.
- Reviews the annual financial statements of the Company and its
subsidiaries with the independent auditors and management of the Company.
- Verifies the independence of the independent auditors.
- Recommends to the Board of Directors the retention or selection of the
independent auditors.
ENVIRONMENTAL AND ETHICS COMMITTEE 2 MEETINGS IN 1995
- Has responsibility for oversight of the implementation of the Company's
policy of commitment to the protection of the environment and the health
and safety of employees and others.
- Reviews the Company's compliance with applicable laws and regulations,
and employees' compliance with the Company's Statement of Ethical Values
and Code of Business Conduct.
EXECUTIVE COMMITTEE 8 MEETINGS IN 1995
- Exercises all the powers of the Board of Directors in the management of
the business and affairs of the Company, except as limited by Delaware
law.
- Acts as a nominating committee, develops criteria for the selection of
candidates for election to the Board, evaluates the qualifications of
candidates and makes recommendations to the Board of candidates for Board
membership. The Committee will consider nominees for Board membership
recommended by stockholders. Nominations may be addressed to the
Secretary of Quaker State at the address set forth on the first page of
this Proxy Statement. In accordance with the Bylaws, no person may be
nominated as a director by a stockholder at any Annual Meeting unless
written notice of such proposed nomination, containing certain
information required by the Bylaws, is delivered to the Secretary not
less than 60 days nor more than 90 days prior to the anniversary of the
prior year's Annual Meeting, subject to an exception set forth in the
Bylaws.
ORGANIZATION AND COMPENSATION COMMITTEE 9 MEETINGS IN 1995
- Sets policy with respect to executive compensation and reviews and
approves salaries, benefits and incentive compensation programs for the
Company's executive officers and other senior executives.
- Supervises the administration of the Quaker State Annual Incentive Bonus
Plan, 1994 Stock Incentive Plan, 1986 Stock Option Plan, 1994
Non-Employee Directors' Stock Option Plan, Thrift and Stock Purchase
Plan, Employee Stock Ownership Plan and Supplemental Excess Retirement
Plan.
- Grants stock options and awards under the 1994 Stock Incentive Plan.
- Reviews major organizational changes and succession plans recommended by
management.
COMPENSATION OF DIRECTORS
Directors who are not Quaker State employees receive an annual fee of
$21,000 and a meeting fee of $1,000 for each Board and Committee meeting they
attend. Chairs of Board Committees receive an additional $3,000 per annum.
Quaker State provides a retirement benefit for non-employee directors whose
service on the Board began prior to April 1, 1996. Any such non-employee
director who serves on the Board of Directors for ten years or longer, or who
began serving as a director at age 60 or older and serves for at least five
years, is entitled to an annual retirement benefit payable until his or her
death. The annual retirement benefit is the amount of the current annual
retainer. Any such non-employee director who was under age 60 when he or she
began serving as a director and who has served for at least five but fewer than
ten years when Board service terminates is
6
<PAGE> 9
entitled to a pro rata share of the retirement benefit based upon the
relationship of years served to ten. In the event of termination of service as a
director after a change of control (as defined), a non-employee director is
entitled to a full retirement benefit if at the time of termination of service
the director has served at least five years.
Under a group term life insurance plan, all non-employee directors are
provided a life insurance benefit of $25,000. The benefit is reduced by 50% when
a director ceases to serve if the director has served for five consecutive
years, and the benefit terminates when a director ceases to serve if the
director has not served for five consecutive years.
All non-employee directors participate in the 1994 Non-Employee Directors'
Stock Option Plan. The plan automatically provides yearly grants of options to
purchase 1,000 shares of the Capital Stock at an option price of 100% of the
fair market value of the Capital Stock on the date of grant. The stock options
are not exercisable during the first six months of their term except in the case
of death or certain change of control events (as defined in the Plan). The stock
options expire ten years from the date of grant or earlier in the event of
termination of service as a director as provided in the Plan. After the Annual
Meetings in 1994 and 1995, each non-employee director was granted an option to
purchase 1,000 shares of Capital Stock.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7
<PAGE> 10
EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
for services rendered in all capacities to Quaker State and its subsidiaries for
the last three calendar years to the following persons: (i) Mr. Baum and (ii)
the Company's four most highly compensated executive officers other than Mr.
Baum who were serving as executive officers on December 31, 1995:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION ALL OTHER
-------------------------------- ------------------------------------ COMPEN-
AWARDS PAYOUTS SATION(6)
------------------------- -------
OTHER SECURITIES
ANNUAL UNDERLYING
COMPEN- RESTRICTED OPTIONS/
NAME AND PRINCIPAL SATION STOCK SARS LTIP
POSITIONS YEAR SALARY(1) BONUS(2) ($)(3) AWARDS (SHARES) PAYOUTS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HERBERT M. BAUM 1995 $550,008 $ 48,811 -0- -0- -0- $ 51,716
Chairman of the Board 1994 $491,670 $325,004 $832,500(4) -0- -0- $ 10,500
and Chief Executive 1993 $252,273 -0- $728,750(4) 270,000 -0- $1,372,017
Officer;
President through June 1995
- --------------------------------------------------------------------------------------------------------------------------------
JOHN D. BARR 1995 $208,806 $250,000 $555,625(5) 167,500 -0- $ 243,647
President and Chief
Operating Officer and
Chief Executive Officer
of the Motor Oil Division
since July 1995
- --------------------------------------------------------------------------------------------------------------------------------
CONRAD A. CONRAD 1995 $225,000 $ 17,971 -0- 12,000 -0- $ 26,207
Vice Chairman and Chief 1994 $225,000 $129,896 -0- -0- -0- $ 11,460
Administrative Officer 1993 $161,471 -0- -0- 15,000 -0- $ 5,813
through June 1995;
Vice Chairman and
Chief Financial Officer
since July 1995
- --------------------------------------------------------------------------------------------------------------------------------
L. DAVID MYATT 1995 $200,004 $ 11,131 -0- -0- -0- $ 24,620
Vice Chairman; Chief 1994 $ 50,000 -0- -0- 250,000 -0- -0-
Executive Officer of
the Motor Oil Division
through June 1995
- --------------------------------------------------------------------------------------------------------------------------------
CHARLES F. BECHTEL 1995 $190,008 $ 13,823 -0- 7,500 -0- $ 67,793
Senior Vice President, 1994 $190,008 $ 19,951 -0- -0- -0- $ 8,710
Sales of the Motor Oil 1993 $ 23,031 $ 60,000 -0- 27,000 $27,000 -0-
Division since October
1995; Executive Vice
President, Sales and
Marketing of the Motor
Oil Division through
September 1995
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) This column represents base salary and includes any tax-deferred Section
401(k) contributions under the Company's Thrift and Stock Purchase Plan.
Mr. Baum's salary for 1993 is for the period from June 9, 1993 through the
end of the year; Mr. Barr's salary for 1995 is for the period from July 1,
1995 through the end of the year; Mr. Myatt's salary for 1994 is for the
period from October 1, 1994 through the end of the year; and Mr. Bechtel's
salary for 1993 is for the period from November 17, 1993 through the end of
the year.
8
<PAGE> 11
(2) The bonuses earned for 1995, except the bonus paid to Mr. Barr, were
awarded under the Annual Incentive Bonus Plan. As part of the terms of his
employment, Mr. Barr received an incentive payment in the amount of
$150,000 in lieu of a bonus under the Annual Incentive Bonus Plan and
$100,000 to offset the loss of incentives from his prior employer. For
1994, Mr. Baum received a bonus of $50,000 upon amendment and restatement
of his Employment Agreement and earned a bonus of $275,004 under the terms
of the agreement. The other bonuses for 1994 were earned under the Annual
Incentive Bonus Plan. Mr. Bechtel's bonus for 1993 was received at the
time of his employment.
(3) The dollar value of perquisites and other personal benefits did not exceed
the lesser of $50,000 or 10% of the total of salary and bonus for any of
the persons named for any of the years covered in the table.
(4) Mr. Baum received non-performance-based awards of 60,000 and 55,000 shares
of restricted stock during 1994 and 1993, respectively, pursuant to his
Employment Agreement. The shares are valued in the table at the closing
market prices of the Capital Stock on the effective date of the awards. As
of December 31, 1995, the transferability and forfeiture restrictions with
respect to 66,000 of the shares had lapsed. As to the remaining 49,000
shares, the restrictions lapse with respect to 20,000 shares on August 1 in
each of the years 1996 and 1997 and with respect to 3,000 shares on August
13 in each of the years 1996 through 1998. The restrictions also lapse (i)
upon the death of Mr. Baum, (ii) in the event he is discharged without
cause, (iii) in the event he resigns after being notified that the term of
his employment will not be extended or under certain other circumstances or
(iv) upon the occurrence of a change of control event (as defined in the
Employment Agreement). All rights to the shares also will terminate and be
forfeited if Mr. Baum is discharged for cause, resigns from employment
without good reason or in the case of the 1994 award, violates a
non-competition provision. As of December 31, 1995, the 49,000 shares as to
which the restrictions had not lapsed had an aggregate value of $624,750.
Dividends have been and will be paid on the restricted stock during the
restriction periods. Mr. Baum has sole voting power with respect to the
restricted stock.
(5) Mr. Barr received a non-performance-based award of 35,000 shares of
restricted stock during 1995. The shares are valued in the table at the
closing market price of the Capital Stock on the effective date of the
award. The transferability and forfeiture restrictions lapse with respect
to 7,000 shares on July 26 in each of the years 1996 through 2000. The
restrictions also lapse (i) upon the death of Mr. Barr, (ii) in the event
he is discharged without cause or (iii) upon the occurrence of a change of
control event (as defined in the 1994 Stock Incentive Plan). All rights to
the shares will terminate and be forfeited if Mr. Barr is discharged for
cause, he resigns from employment without the Company's consent or he
violates a non-competition provision. As of December 31, 1995, the 35,000
shares had a value of $446,250. Dividends have been and will be paid on the
restricted stock during the restriction period. Mr. Barr has sole voting
power with respect to the restricted shares.
(6) For 1995, this column includes: (i) $40,716, $235,470, $20,546 and $58,901
paid to Messrs. Baum, Barr, Conrad and Bechtel, respectively, in connection
with their relocation to Texas; (ii) the following employer contributions,
allocations or credits for the accounts of the persons named in the table
under the Thrift and Stock Purchase Plan: Mr. Baum, $11,000; Mr. Conrad,
$4,620; Mr. Myatt, $4,620; and Mr. Bechtel, $4,620; and (iii) the following
premiums paid by the Company under split dollar life insurance agreements:
Mr. Barr, $8,177; Mr. Conrad, $1,041; Mr. Myatt, $20,000; and Mr. Bechtel,
$4,272.
9
<PAGE> 12
OPTION GRANTS
The following table sets forth as to the persons named in the Summary
Compensation Table additional information with respect to the stock options
granted during 1995, including the potential realizable value from the stock
options assuming they are exercised at the end of the option term and assuming
5% and 10% annual rates of stock price appreciation (compounded annually) during
the option term.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
OPTION GRANTS IN 1995
- --------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(2)
GRANTED EMPLOYEES PRICE EXPIRATION ----------------------
NAME (SHARES) IN 1995 /SH DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Herbert M. Baum -0- -0- N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------
John D. Barr(1) 100,000 20.9 $ 15.813 07/25/05 $995,000 $2,519,000
25,000 5.2 $ 19.766 07/25/05 $150,000 $ 530,950
25,000 5.2 $ 23.719 07/25/05 $ 51,025 $ 432,107
17,500 3.7 $ 14.75 09/27/05 $162,225 $ 411,600
- --------------------------------------------------------------------------------------------------------
Conrad A. Conrad(1) 12,000 2.5 $ 13.00 10/16/05 $ 98,040 $ 248,400
- --------------------------------------------------------------------------------------------------------
L. David Myatt -0- -0- N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------
Charles F. Bechtel(1) 7,500 1.6 $ 13.00 10/16/05 $ 61,275 $ 155,250
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) All the stock options were granted under the Company's 1994 Stock Incentive
Plan and 1986 Stock Option Plan, expire ten years from the date of grant
and became or will become exercisable six months from the date of grant.
All the stock options were granted at 100% of fair market value of the
Company's Capital Stock on the date of grant except for the two grants of
stock options for 25,000 shares to Mr. Barr, which were made at 125% and
150% of such fair market value, respectively. The stock options may be
exercised following termination of employment under certain circumstances,
and the exercise price of the stock options may be paid in cash, in shares
of Capital Stock which have been held for at least six months or in any
combination of cash and shares. Each stock option may be terminated by the
Organization and Compensation Committee in its discretion if the optionee
engages in any business which is in competition with the Company or certain
other activities which in any way interfere with the relationship between
the Company and its customers or employees.
(2) The assumed 5% and 10% annual rates of stock price appreciation do not
reflect recent annual rates of appreciation of the Capital Stock and are
not intended to forecast possible future stock price appreciation.
10
<PAGE> 13
OPTION/SAR EXERCISES AND VALUES
The following table sets forth as to the persons named in the Summary
Compensation Table the number of shares of Capital Stock acquired upon the
exercise of stock options during 1995, the value realized from such exercises,
the number of shares covered by unexercised stock options held at December 31,
1995 and the value of unexercised in-the-money stock options at December 31,
1995:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND 1995 YEAR-END OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS OPTIONS/SARS
ON EXERCISE REALIZED AT 1995 YEAR END(2) AT 1995 YEAR END(3)
(SHARES) (1) -----------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Herbert M. Baum -0- -0- 85,500 184,500 $47,675 $57,375
- ------------------------------------------------------------------------------------------------------------------
John D. Barr -0- -0- -0- 167,500 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Conrad A. Conrad -0- -0- 57,600 12,000 $21,312 -0-
- ------------------------------------------------------------------------------------------------------------------
L. David Myatt -0- -0- 50,000 200,000 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Charles F. Bechtel 1,500 $3,187 25,500 7,500 $ 3,187 -0-
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) The value realized is the difference between the aggregate fair market
value of the shares acquired on exercise and the aggregate exercise price.
(2) Alternative stock appreciation rights were granted in conjunction with all
stock options granted prior to 1992. Alternative stock appreciation rights,
all of which are presently exercisable, have been granted to Mr. Conrad in
conjunction with stock options for 45,100 shares.
(3) The value is the aggregate amount by which the fair market value of the
shares covered by in-the-money stock options at December 31, 1995 ($12.75
per share) exceeded the exercise price of such stock options.
LONG-TERM INCENTIVE AWARDS
The following table sets forth as to the persons named in the Summary
Compensation Table information with respect to the long-term incentive awards
made during 1995:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN AWARDS IN 1995
- --------------------------------------------------------------------------------------------
ESTIMATED FUTURE
PAYOUTS UNDER NON-
STOCK PRICE-BASED
PERFORMANCE OR OTHER PLANS
NUMBER OF PERIOD UNTIL ---------------------
SHARES, UNITS OR MATURATION OR TARGET/
NAME OTHER RIGHTS PAYMENT THRESHOLD MAXIMUM
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Herbert M. Baum -0- N/A N/A N/A
- --------------------------------------------------------------------------------------------
John D. Barr -0- N/A N/A N/A
- --------------------------------------------------------------------------------------------
Conrad A. Conrad -0- N/A N/A N/A
- --------------------------------------------------------------------------------------------
L. David Myatt(1) 8,775 1994 through 1996 $ 4,388 $8,775
- --------------------------------------------------------------------------------------------
Charles F. Bechtel -0- N/A N/A N/A
- --------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) During 1995, Mr. Myatt received an award of 8,775 restricted performance
shares under the 1994 Stock Incentive Plan. The number of shares awarded
was based on his position, his base salary and the period of his employment
with Quaker State. The award is for a three-year performance cycle from
1994 through 1996 and is subject to forfeiture if the goals for three-year
average return on average equity ("Average
11
<PAGE> 14
ROE") and three-year cumulative earnings per share ("Cumulative EPS")
established by the Organization and Compensation Committee are not
achieved. The transferability and forfeiture restrictions with respect to
all the shares will lapse if both the target Average ROE goal and the
target Cumulative EPS goal are achieved for the full three-year period of
the award cycle. The restrictions with respect to 50% of the shares will
lapse if the target Average ROE goal is achieved for the full award cycle
and a lesser threshold Cumulative EPS goal is achieved but not exceeded for
the full award cycle. The restrictions will lapse as to more than 50% but
less than 100% of the shares if the target Average ROE goal is achieved for
the full award cycle and the Cumulative EPS for the full award cycle is
more than the threshold Cumulative EPS goal but less than the target
Cumulative EPS goal. The restrictions with respect to all the shares also
will lapse upon the death of Mr. Myatt or the occurrence of a change of
control event as defined in the 1994 Stock Incentive Plan. All rights to
the shares will terminate and be forfeited if the employment of Mr. Myatt
terminates for any reason other than voluntary termination with the
Company's consent, severance or retirement under a Quaker State plan or
death or he violates a non-competition provision. Dividends have been and
will be paid on the restricted performance shares during the restriction
period, except that any dividends paid in shares of the Capital Stock will
be subject to the same restrictions as are applicable to the restricted
performance shares. The grantee has sole voting power with respect to the
restricted performance shares.
BAUM EMPLOYMENT AGREEMENT
Mr. Baum is employed under an Employment Agreement, which was amended and
restated during 1994. The agreement provides for his employment as Chairman of
the Board and Chief Executive Officer through July 31, 1998 at a base salary of
not less than $550,000 per year. The term of the agreement is extended
automatically for one additional year as of August 1, 1998 and on each
anniversary date thereafter through August 1, 2000 unless, no later than 90 days
prior to any renewal date, either the Board of Directors or Mr. Baum gives
written notice to the other that the agreement is not to be extended.
The Employment Agreement provides that Mr. Baum is entitled to participate
in the same cash bonus and incentive plans and arrangements that are applicable
to other executive officers of Quaker State unless the Organization and
Compensation Committee approves a different arrangement no less favorable to Mr.
Baum. The agreement also provides that Mr. Baum is entitled to participate in
the Company's various retirement, welfare, fringe benefit and executive
perquisite plans, programs and arrangements to the extent he is eligible for
participation and to receive certain other personal benefits.
The Employment Agreement provides that it will terminate in the event of:
(i) Mr. Baum's death or disability, (ii) his discharge for cause, (iii) his
discharge without cause or (iv) his resignation. In the event the agreement
terminates by reason of death or discharge for cause, Mr. Baum will only be
entitled to accrued compensation and benefits. In the event the agreement
terminates by reason of disability, discharge without cause or resignation, Mr.
Baum, in addition to accrued compensation and benefits, will be entitled to a
monthly severance/retirement payment calculated as of the date of termination,
which is the monthly equivalent of a $200,000 annual benefit reduced by the
actuarial equivalent of (i) Mr. Baum's projected primary social security amount
and (ii) the benefits payable to Mr. Baum under all tax qualified retirement
plans maintained by the Company. The severance/retirement payments will be
suspended during any period in which Mr. Baum is an employee or independent
contractor of another company with a rate of compensation equal to or in excess
of $16,667 per month and, in the event of Mr. Baum's disability, the payment
will be reduced dollar for dollar by the amount of disability benefits, if any,
paid to Mr. Baum in accordance with any disability policy or program of Quaker
State.
In the event Mr. Baum is discharged without cause or resigns with good
reason at any time within two years following the date that a change of control
as defined in the Employment Agreement occurs, the agreement provides that in
addition to the other amounts payable under the agreement, Mr. Baum will be
entitled to receive for a period of three years from the date of termination his
base salary and an annual bonus equal to his target bonus for the calendar year
in which the date of termination occurs. The payments under the agreement may in
certain circumstances be reduced if all or part of the payments are determined
to be "excess parachute payments" within the meaning of the Internal Revenue
Code (the "Code").
12
<PAGE> 15
The Employment Agreement contains a non-competition and non-solicitation
agreement by Mr. Baum which covers the period of his employment under the
agreement and the three years after any termination of employment.
BARR EMPLOYMENT ARRANGEMENT
Mr. Barr was employed as President and Chief Operating Officer of Quaker
State and Chief Executive Officer of the Motor Oil Division at a base salary of
$375,000 per year, with participation in the Company's Annual Incentive Bonus
Plan at a target bonus of 45% of base salary, commencing in 1996. Quaker State
agreed that in the event Mr. Barr's employment was terminated without cause or
as a result of mutual agreement between the Company and Mr. Barr, Mr. Barr would
be paid base salary continuation for two years, conditioned upon his agreement
to protect the confidentiality of corporate information and not to be employed
by any organization in competition with Quaker State for two years. At any time
after December 1, 1998, Mr. Barr has the right to terminate his employment
unilaterally and receive the severance benefit subject to the same
confidentiality and non-competition requirements. Mr. Barr is also entitled to
supplemental retirement benefits (see "Supplemental Retirement Benefits" below).
MYATT EMPLOYMENT AGREEMENT
Mr. Myatt is employed by Quaker State under an Employment Agreement entered
into in 1994 at the time of the acquisition of Specialty Oil and Westland Oil.
The agreement originally provided for his employment as Vice Chairman of Quaker
State and Chief Executive Officer of the Motor Oil Division through September
30, 1999 at a base salary of not less than $200,000 per year. The term of the
agreement is extended automatically for one additional year as of October 1,
1999 and on each anniversary date thereafter unless, no later than 90 days prior
to any extension date, either the Board of Directors or Mr. Myatt gives written
notice to the other that the agreement is not to be extended.
Following the employment of Mr. Barr as President and Chief Operating
Officer of Quaker State and Chief Executive Officer of the Motor Oil Division,
with the approval of the Organization and Compensation Committee, the duties of
Mr. Myatt as Vice Chairman were redefined without a formal amendment of the
Employment Agreement. Among other things, Mr. Myatt will act on behalf of and at
the request of the Chief Executive Officer to (i) negotiate major supply
contracts and technical agreements, (ii) represent Quaker State in its trade
relations with major customers, and (iii) oversee development of the Company's
used-oil recycling business.
The Employment Agreement provides that in addition to salary, Mr. Myatt is
eligible to participate at the next to the highest level under the Company's
executive compensation arrangements, to participate in the Company's various
retirement and welfare plans to the extent he is eligible for participation and
to receive certain other personal benefits.
The Employment Agreement provides that it will terminate in the event of
(i) Mr. Myatt's death or disability, (ii) his discharge for cause, (iii) his
discharge without cause or (iv) his resignation. Mr. Myatt is entitled only to
accrued compensation and benefits upon termination of the agreement, except that
in the event Mr. Myatt is discharged without cause or resigns with good reason
at any time within two years following the date that a change of control as
defined in the agreement occurs, he also will be entitled to receive for a
period of three years from the date of termination his base salary and an annual
bonus equal to his target bonus for the calendar year in which the date of
termination occurs.
The Employment Agreement contains a non-competition and non-solicitation
agreement by Mr. Myatt which covers the period of his employment under the
agreement and the three years after any termination of employment.
EMPLOYMENT CONTINUATION AGREEMENTS
During 1995, Quaker State entered into Employment Continuation Agreements
with a number of key executives, including Messrs. Barr, Conrad, and Bechtel but
not including Messrs. Baum and Myatt. The
13
<PAGE> 16
agreements provide for the continued employment of the executives for a period
of two years following a change of control as defined in the agreements. Under
the agreements, during this employment period, the executive's position,
authority and responsibilities shall be at least commensurate with those held,
exercised and assigned immediately prior to the change of control, and the
executive shall receive a base salary at a monthly rate at least equal to the
monthly salary paid to the executive immediately prior to the change of control
and shall be afforded the opportunity to receive an annual bonus on terms no
less favorable to the executive than the annual bonus opportunity that had been
available to the executive for the calendar year ended immediately prior to the
change of control. During the employment period, the executive also shall be
entitled to participate in all long-term incentive compensation programs and
employee benefit plans at essentially the same level as prior to the change of
control.
The Employment Continuation Agreements provide that if the executive's
employment terminates during the employment period by reason of death or
disability, the executive or his beneficiary or estate shall be entitled to
accrued compensation and benefits as well as any additional benefits payable due
to death or disability under Quaker State's plans, policies or programs. The
executive also is entitled to accrued compensation and benefits if the
executive's employment is terminated during the employment period for cause or
the executive voluntarily terminates his employment during such period other
than on account of good reason. However, 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
agreements provide that the Company will pay the executive in addition to
accrued compensation and benefits cash amounts equal to (i) three times the sum
of (a) the executive's annual base salary and (b) the average of the bonuses
payable to the executive for the three calendar years ending immediately prior
to the change of control and (ii) the present value of the additional retirement
benefits that would have been payable to the executive under Quaker State's
Pension Plan or any supplemental retirement arrangements had the executive
remained in employment until the expiration of the employment period.
In the event any amount paid to an executive under an Employment
Continuation Agreement would be an "excess parachute payment" as defined in the
Code, the amount payable under the agreement may be reduced.
OTHER SEVERANCE AGREEMENTS
Since 1988, Quaker State has had a severance plan (the "Severance Plan")
under which eligible employees are entitled to a severance allowance in the
event of termination of employment following a change of control (as defined in
the plan). All non-union full-time salaried employees and all non-union
full-time hourly employees of Quaker State and its domestic subsidiaries are
entitled to participate. Under the Severance Plan, an eligible employee whose
employment is terminated by employer action other than for cause following a
change of control or who resigns under certain circumstances following a change
of control is entitled to a severance allowance equal to two weeks' earnings for
each full year the employee has been employed plus earned but unused vacation
pay. For purposes of determining the severance allowance, an employee's earnings
include his or her regular rate of salary for the calendar year in which the
change of control occurs plus bonuses earned for the preceding calendar year,
reduced to a weekly average; provided, however, that if such earnings for the
calendar year in which the termination occurs are higher, the higher earnings
are used. Participation in any pension or medical plan in which the employee
participated at the time of termination of employment continues during the
severance allowance payment period. The Severance Plan may not be amended or
terminated for three years following a change of control. All the executives
named in the Summary Compensation Table are entitled to participate in the
Severance Plan.
Quaker State also has a Severance Pay Plan for Salaried and Hourly
Non-Union Employees which covers substantially all its salaried employees and
which provides for severance benefits in the event the Company reduces the
workforce, eliminates the covered employee's position or closes or sells the
facility at which the covered employee is employed. The payments under this plan
are one week of base salary multiplied by years of service. None of the persons
named in the Summary Compensation Table above could receive severance payments
in excess of $100,000 under this plan, and payments under this plan are not made
if payments are made under the Severance Plan.
14
<PAGE> 17
PENSION BENEFITS
The Quaker State Pension Plan (the "Pension Plan") covers substantially all
the Company's salaried employees. The Pension Plan is a non-contributory,
defined benefit plan providing for pensions based upon years of service and
average annual base salary for the thirty-six consecutive months of highest
earnings in the last ten years of service. Pension benefits become vested after
five years of service.
There are separate benefit formulas for employees with five or more years
of service as of March 1, 1993 ("Class I Participants") and for employees who
did not have five years of service as of March 1, 1993 ("Class II
Participants"). Pension Plan Tables I and II below present the estimated annual
retirement benefits under the Pension Plan under both formulas for the average
annual base salary and years of service indicated, on the assumptions that full
retirement benefits will be payable and that the benefits will be paid in the
form of a single life annuity.
Pension Plan Table I provides information for Class I Participants who
receive credit for up to 30 years of service. The pension for these participants
is reduced by up to 66% of the employee's primary social security benefit, but
the retirement benefits shown do not reflect the deduction. Mr. Conrad is a
Class I Participant.
Pension Plan Table II provides information for Class II Participants who
receive credit for up to 35 years of service. The retirement benefit for these
participants is equal to a percentage of average annual base salary plus an
additional percentage of the amount by which average annual base salary exceeds
average annual social-security-covered compensation for the year of the
employee's termination of employment or retirement, whichever is earlier, and
the preceding 34 years. The retirement benefits shown in the table are based on
average annual social-security-covered compensation for the 35-year period
through and including 1995. Messrs. Baum, Barr, Myatt and Bechtel are Class II
Participants.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PENSION PLAN TABLE I
- ---------------------------------------------------------------------------
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF
AVERAGE SERVICE INDICATED ($)
ANNUAL -------------------------------------------------------
BASE SALARY ($) 10 YR. 15 YR. 20 YR. 25 YR. 30 YR.
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
100,000 27,500 41,250 55,000 60,000 65,000
- ---------------------------------------------------------------------------
150,000 41,250 61,875 82,500 90,000 97,500
- ---------------------------------------------------------------------------
200,000 55,000 82,500 110,000 120,000 130,000
- ---------------------------------------------------------------------------
250,000 68,750 103,125 137,500 150,000 162,500
- ---------------------------------------------------------------------------
300,000 82,500 123,750 165,000 180,000 195,000
- ---------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PENSION PLAN TABLE II
- -------------------------------------------------------------------------------------------
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE INDICATED ($)
AVERAGE
ANNUAL -----------------------------------------------------------------------
BASE SALARY ($) 5 YR. 10 YR. 15 YR. 20 YR. 25 YR. 30 YR.
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
100,000 7,102 14,204 21,306 28,408 35,510 49,714
- -------------------------------------------------------------------------------------------
150,000 10,977 21,954 32,931 43,908 54,885 76,839
- -------------------------------------------------------------------------------------------
200,000 14,852 29,704 44,556 59,408 74,260 103,964
- -------------------------------------------------------------------------------------------
250,000 18,727 37,454 56,181 74,908 93,635 131,089
- -------------------------------------------------------------------------------------------
300,000 22,602 45,204 67,806 90,408 113,010 158,214
- -------------------------------------------------------------------------------------------
350,000 26,477 52,954 79,431 105,908 132,385 185,339
- -------------------------------------------------------------------------------------------
400,000 30,352 60,704 91,056 121,408 151,760 212,464
- -------------------------------------------------------------------------------------------
450,000 34,227 68,454 102,681 136,908 171,135 239,589
- -------------------------------------------------------------------------------------------
500,000 38,102 76,204 114,306 152,408 190,510 266,714
- -------------------------------------------------------------------------------------------
550,000 41,977 83,954 125,931 167,908 209,885 293,839
- -------------------------------------------------------------------------------------------
700,000 53,602 107,204 160,806 214,408 268,010 375,214
- -------------------------------------------------------------------------------------------
</TABLE>
Base salary is the only compensation taken into account for the purpose of
determining the benefits under the Pension Plan. The salary reflected in the
Summary Compensation Table for Mr. Conrad for the last three years is the salary
which would have been taken into account had his service terminated on December
31, 1995 with 21 years of service. As of that date, Messrs. Baum, Barr, Myatt
and Bechtel had thirty months, six months, fifteen months and twenty-five months
of service, respectively.
Sections 401(a)(17) and 415 of the Code limit, respectively, the amount of
compensation which may be used in calculating pension benefits, and the maximum
amount of annual benefits which may be paid, under tax-qualified retirement
plans such as the Pension Plan. Quaker State has a Supplemental Excess
Retirement Plan which authorizes the payment from general funds of the Company
of any benefits calculated under the provisions of the Pension Plan that may be
above the limits under these Sections.
The Pension Plan provides that if it is terminated within three years
following a change of control (as defined in the Pension Plan) and if upon such
termination there exist excess Pension Plan assets, then all active participants
in the Pension Plan who are not otherwise vested will become fully vested, and
any excess assets will be allocated among all (i) active participants, (ii)
retirees who began receiving benefits under the Pension Plan at the time of
termination of their employment and (iii) beneficiaries of the foregoing
proportionately on the basis of their respective benefits payable under the
Pension Plan as of its termination date. This provision of the Pension Plan may
not be amended for three years following a change of control.
SUPPLEMENTAL RETIREMENT BENEFITS
Mr. Baum will be entitled to monthly severance/retirement payments under
certain circumstances as described under "Baum Employment Agreement" above. Any
such payments will be subject to reduction in the event Mr. Baum becomes
entitled to pension benefits under the Pension Plan.
At the time of the employment of Mr. Barr as President and Chief Operating
Officer and Chief Executive Officer of the Motor Oil Division, the Company
agreed to provide Mr. Barr with monthly supplemental retirement benefits in the
event of retirement at or after age 50 at the request of the Company for reasons
other than cause or as a result of mutual agreement between Mr. Barr and the
Company. Under the arrangement, Mr. Barr will be entitled to receive a
supplemental pension, payable in the form of a single life annuity, which when
combined with any pension to which he may be entitled under the Pension Plan,
will result in an annual pension benefit of $150,000 should he retire at ages 50
through 54, $200,000 should he retire at age 55 and 50% of base salary (but not
less than $200,000) should he retire at or after age 56. Other
16
<PAGE> 19
payment options are available. The supplemental pension benefits will terminate
on the earlier of Mr. Barr's death, his failure during the first three years of
his retirement to protect the confidentiality of corporate information or his
commencement of employment with a competing organization; provided, however,
that supplemental retirement payments will continue after Mr. Barr's death if
the form of payment which Mr. Barr elects so provides. The monthly payments will
be actuarially reduced if the form of payment is other than a single life
annuity. Under the arrangement, surviving spouse benefits also are available
should Mr. Barr die before retirement while employed by the Company. The
supplemental retirement benefits payable to Mr. Barr are not subject to
reduction during any period when he is receiving severance payments as described
under "Barr Employment Arrangement" above.
Quaker State also has agreed to provide Mr. Bechtel with monthly
supplemental retirement benefits in the event of his retirement at or after age
60 at the request of the Company for reasons other than cause or as a result of
mutual agreement between Mr. Bechtel and the Company. Under the arrangement, Mr.
Bechtel will be entitled to receive a supplemental pension, payable in the form
of a single life annuity, which, when combined with any pension to which he may
be entitled under the Pension Plan and the pension plan of a previous employer,
will result in an annual pension benefit of $100,000 prior to age 65, and which
when combined with such pensions and the annual amount of social security
benefits will result in an annual pension benefit of $100,000 after age 65. The
supplemental pension benefits will terminate at his death.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Quaker State had a $45,000,000 revolving credit facility with a group of
banks, including Integra National Bank/North, which participated in such
facility to the extent of $5,000,000. Integra National Bank/North is a
wholly-owned subsidiary of Integra Financial Corporation, of which Mr. Carroll
is President and Chief Operating Officer. Quaker State was entitled to make
borrowings under this facility at interest rates selected by Quaker State from
several interest rate options. Quaker State paid fees and interest under this
facility totaling $223,653 in 1995. The facility was terminated by Quaker State
in September 1995.
Quaker State and a trust for the benefit of Mr. Ross's three children were
parties to a lease under which Quaker State leased a warehouse and office space
in Miami, Florida at an annual rental of $89,460 plus taxes. The lease expired
on December 31, 1995. The Company continues to occupy the premises on a
month-to-month basis during negotiation of a new lease. The terms of the prior
lease were determined through negotiations before Mr. Ross became a director and
were comparable to the terms that would have applied in a transaction with a
non-affiliate.
Moon Realty, a partnership controlled by Mr. Myatt, leases warehouse and
office space in Arkansas, Louisiana and Mississippi to the Company's
subsidiaries Westland Oil or Specialty Oil. During 1995, the aggregate annual
rentals amounted to approximately $1,460,000 plus taxes. Double M Investments, a
separate partnership in which Mr. Myatt and his brother are partners, also
leases warehouse and office space to Westland Oil or Specialty Oil at various
locations in Louisiana. The aggregate annual rentals during 1995 amounted to
approximately $79,000 plus taxes. All the Moon Realty and Double M Investments
leases were entered into before Quaker State acquired Specialty and Westland and
expire in 2004. Mr. Myatt's brother is a Vice President of Quaker State's Motor
Oil Division.
In February 1996, Quaker State completed the purchase for approximately
$9,000,000 of manufacturing and warehouse property in Shreveport, Louisiana
owned by Moon Realty. The property had been acquired by Moon Realty more than
two years prior to the transaction and the purchase price was determined through
arm's length negotiations before Mr. Myatt's affiliation with the Company.
Westland Oil regularly purchases lubricant base stocks from Calumet
Lubricants Co., of which Mr. Grube is President. The amount of such purchases in
1995 was approximately $1,600,000. The purchases were made at prices comparable
to those paid for lubricant base stocks purchased from unrelated parties.
At the time of his employment, Quaker State loaned Mr. Barr, President and
Chief Operating Officer and Chief Executive Officer of the Motor Oil Division,
$150,000 to assist him in his purchase of a new residence in Dallas, Texas. No
interest was charged and the debt was repaid in full prior to the end of 1995.
17
<PAGE> 20
ORGANIZATION AND COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Dr. Gardner (Chair) and Messrs. Fetterolf and McQuaide were members of the
Organization and Compensation Committee throughout 1995. W. Craig McClelland, a
former director, was a member of the Committee until February 1995. Mr. Haselton
and Ms. Cutler became members of the Committee on February 28, 1995 and May 25,
1995, respectively. All the members of the Committee are and have been non-
employee directors.
During 1995, there were, and there presently are, no interlocking
relationships, as defined in the regulations of the Securities and Exchange
Commission, involving members of the Organization and Compensation Committee.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Organization and Compensation Committee has responsibility for setting
policy with respect to executive compensation. The Committee reviews and
approves the base salaries, bonuses, long-term incentive compensation and
employee benefits of the Company's executive officers and other key executives.
Compensation Philosophy. Quaker State's executive compensation program
provides executives with competitive compensation opportunities relative to
other comparably sized employers and links executive compensation to increases
in stockholder value. The program is based heavily on the use of short- and
long-term incentive compensation, which ties the compensation of executives to
the overall success of the Company. The 1994 Stock Incentive Plan creates a
significant compensation and wealth-building opportunity based on the
performance of the Company's Capital Stock.
The Company's compensation consultant provides management and the Committee
with competitive compensation data relative to other comparably sized companies
in general industry. The Company generally targets each element of the
compensation package at the median of competitive practice. Competitive data
typically do not include all the companies used in the peer group for the
Stockholder Return Performance Graph included in this Proxy Statement.
1995 CEO Compensation Package. Mr. Baum's compensation is provided for in
his Employment Agreement, which was amended effective August 1, 1994 and
approved by the Committee. Under the amended agreement, Mr. Baum's base salary
was increased from $450,000 to $550,000 per year to reflect Quaker State's
improved financial performance since Mr. Baum was employed in June 1993. Mr.
Baum's base salary was not changed during 1995. For 1995, Mr. Baum participated
in the Company's Annual Incentive Bonus Plan with a target bonus of 50% of his
base salary upon the achievement of performance goals established by the
Committee. Mr. Baum's bonus reflected 88% attainment of the revenue goal, which
accounted for 20% of the total performance target, and non-attainment of the net
income per share goal, which accounted for 80% (see "Annual Incentive Bonus
Plan" below). Mr. Baum did not receive any long-term incentive compensation
during 1995 because he received substantial stock option grants and restricted
stock awards during 1993 and 1994 under his original and amended Employment
Agreements. Over half of Mr. Baum's stock options were granted at exercise
prices in excess of the market price of the Capital Stock on the date of the
grants, and approximately half of Mr. Baum's restricted stock awards will be
forfeited if market price levels in excess of the market price of the Capital
Stock on the date of the awards are not achieved. In accordance with the
Committee's policy, Mr. Baum's compensation package depends in large measure on
improvements in corporate performance and increased stockholder value.
President and COO. In July 1995, Quaker State employed Mr. Barr as
President and Chief Operating Officer of the Company and Chief Executive Officer
of the Motor Oil Division. Mr. Barr's compensation package was approved by the
Committee. His base salary was established at $375,000 per year, to be reviewed
annually. In 1996 and thereafter, Mr. Barr will participate in the Annual
Incentive Bonus Plan with a target bonus of 45% of base salary. For 1995, he
received an incentive payment of $150,000 in lieu of any bonus under the Annual
Incentive Bonus Plan. Under the terms of his employment, Mr. Barr received
$100,000 to
18
<PAGE> 21
offset the loss of incentives from his prior employer, stock options for 167,500
shares, 50,000 of which were granted at exercise prices in excess of the market
price of the Capital Stock on the date of grant, and a restricted stock award of
35,000 shares as to which the restrictions lapse over time. In accordance with
the Committee's policy, Mr. Barr's total compensation depends on improvements in
corporate performance and increased stockholder value.
During the latter part of 1995, the Company's compensation consultant
completed a study for the Committee of the relationship in pay between the Chief
Executive Officer and the Chief Operating Officer and concluded that the
Company's pay levels for these positions are in line with competitive practice
among companies with similar revenues. None of the companies included in the
study were companies in the peer group for which information is included in the
Stockholder Return Performance Graph.
Annual Incentive Bonus Plan. Effective at the beginning of 1995, Quaker
State's Annual Incentive Bonus Plan was amended with the Committee's approval to
link the bonuses of all participants to total corporate performance. The
performance goals established by the Committee for executive officers with
corporate-wide responsibility, such as Messrs. Baum, Conrad and Myatt, were
specified increases in net income per share and total revenue. These performance
goals were weighted 80% on income and 20% on revenue. The performance goals
established by the Committee for executives of the Motor Oil Division, including
Mr. Bechtel, were specified increases in earnings before interest and taxes
(weighted 60%), net income per share (weighted 20%) and total gallons of motor
oil sold (weighted 20%). Threshold goals were established entitling participants
to 50% of the target bonus, and maximum goals were established entitling
participants to 150% of the target bonus. The performance goals were designed by
the Committee to provide cash incentives for improved short-term corporate
performance.
Long-Term Incentive Compensation. Long-term incentive compensation may be
granted under Quaker State's 1994 Stock Incentive Plan, which provides for the
grant of stock options, restricted stock awards and other share awards. During
1994 and 1995, restricted performance share awards for a 1994-1996 performance
cycle were granted to all executive officers except Messrs. Baum and Barr. The
restrictions will lapse at the end of the cycle if three-year average return on
average equity and three-year cumulative earnings per share goals established by
the Committee are achieved.
Stock option grants were made by the Committee under the 1994 Stock
Incentive Plan to a large number of key employees in October and December 1995,
including all executive officers other than Messrs. Baum, Barr and Myatt. The
grants were made at 100% of the market price of the Capital Stock on the date of
grant. It is the intention of the Committee to make stock option grants to a
broad group of key employees approximately every two years, the last broad-based
grant having been made in December 1993. Messrs. Baum, Barr and Myatt did not
participate in the 1995 grants because of the stock option grants made to them
in connection with their employment. Except for such executive officers, who
received front-loaded grants in connection with their employment, the Committee
does not formally consider the number of previously granted stock options in
making its awards. Instead, the Committee bases long-term incentive grants on
competitive data and individual performance.
Other Executive Officers. The Committee's compensation philosophy requires
that total compensation depend on improvements in corporate performance and
increased shareholder value. During 1995, the Company's compensation consultant
presented an analysis of Quaker State's top ten executive positions in
comparison to (i) the consultant's proprietary compensation database and another
confidential exhaustive pay survey, and (ii) compensation data publicly
disclosed for Quaker State's peer group of companies included in the Stockholder
Return Performance Graph. The analysis showed that Quaker State's executive
compensation was reasonably close to market norms.
Share Ownership Requirement. During 1993, the Committee established minimum
share ownership goals for Quaker State's executive officers, to be achieved over
a four-year period. The CEO, COO and the two Vice Chairmen are expected to
achieve ownership of shares of Capital Stock having a fair market value
equivalent to at least two times annual base salary. The other executive
officers are expected to achieve ownership of shares having a value equivalent
to at least their annual base salary.
19
<PAGE> 22
Other Committee Action. During 1995, the Committee approved Employment
Continuation Agreements that provide protection for the executive officers in
the event of a change of control. The agreements are described in this Proxy
Statement under the caption "Employment Continuation Agreements". Mr. Baum
recommended and the Committee approved the key executives who received these
agreements. Messrs. Baum and Myatt were not offered Employment Continuation
Agreements because their Employment Agreements provide similar protection.
General. In general, the Committee will set executive compensation with due
consideration of the requirements for deductibility under Section 162(m) of the
Code, which may limit the deductibility of annual compensation in excess of $1
million for certain executives. However, under appropriate circumstances and
when merited by individual performance, the Committee may authorize compensation
that may not be fully deductible by the Company. In recognition of his
contribution to the Company, Mr. Baum's compensation has been established by the
Committee at a level at which a portion of his compensation each year may not be
deductible under Section 162(m).
The Committee intends to continue to structure the Company's executive
compensation so that a significant portion of the compensation will be tied to
objective standards of corporate performance and increased stockholder value.
Thomas A. Gardner, Chair Forrest R. Haselton
Laurel Cutler Delbert J. McQuaide
C. Frederick Fetterolf
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE> 23
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder returns over
the years 1991 through 1995 of (i) the Capital Stock, (ii) the Standard and
Poor's 500 Stock Index and (iii) a group of peer companies selected by Quaker
State. The performance graph assumes that $100 was invested on January 1, 1991
in the Capital Stock, the index and the peer group, and that all dividends were
reinvested.
The peer group includes Quaker State, certain petroleum refiners and
marketers, and certain companies specializing in the marketing of branded
consumer products: Armor All Products Corporation, Ashland Oil, Inc., Diamond
Shamrock, Inc., First Brands Corporation, Monro Muffler Brake, Inc., Pennzoil
Company, Sun Company, Inc., WD-40 Company, Witco Corporation and Wynn's
International, Inc. The peer group was selected from a group of oil-related and
marketing companies toward which Quaker State is positioning itself. The
companies were included in a research report prepared for Quaker State.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE S&P 500 STOCK INDEX AND THE PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 IN-
(FISCAL YEAR COVERED) QUAKER STATE DEX PEER GROUP
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 128.87 126.42 109.46
1992 121.09 136.05 135.27
1993 147.82 149.76 160.51
1994 159.10 151.74 163.76
1995 149.05 214.86 179.60
</TABLE>
21
<PAGE> 24
ITEM 2
APPROVAL OF ADOPTION OF
1996 DIRECTORS' FEE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
Quaker State's 1996 Directors' Fee Plan (the "Directors' Plan") was adopted
by the Board of Directors on March 21, 1996, subject to approval by the
stockholders at the Annual Meeting. Unless otherwise directed therein, the
proxies solicited hereby will be voted for approval of adoption of the
Directors' Plan.
The principal features of the Directors' Plan are summarized below, but the
summary is qualified in its entirety by the full text of the Directors' Plan,
which is set forth as Exhibit 1 to this Proxy Statement.
GENERAL
The purposes of the Directors' Plan are to provide Quaker State directors
with payment alternatives for fees ("Directors' Fees") payable for future
services as members of the Board of Directors or of any Board Committee and to
increase the identification of interests between such directors and the
stockholders of the Company by providing directors the opportunity to elect to
receive payment of Directors' Fees in Capital Stock. Any director who is
separately compensated for services on the Board or a Board Committee is
eligible to participate in the Directors' Plan. Directors who are employees of
Quaker State are not separately compensated for services as a director.
Non-employee directors currently receive an annual retainer of $21,000,
plus $1,000 for each Board meeting or Board Committee meeting attended. Chairs
of Board Committees receive an additional $3,000 per annum. Directors currently
receive payment of Directors' Fees in cash. The Directors' Plan would add three
additional payment alternatives: (1) current payment in shares of Capital Stock,
(2) deferral for subsequent payment in cash and (3) deferral for subsequent
payment in shares of Capital Stock. The aggregate number of shares of Capital
Stock which may be issued or credited to directors' Deferred Stock Compensation
Accounts under the Directors' Plan is limited to 50,000 shares per year, subject
to proportionate adjustment in the event of stock splits and similar events.
FEE PAYMENT ALTERNATIVES
The Directors' Plan would permit eligible directors to elect among four
alternatives for the payment of Directors' Fees:
(1) Current Cash Payment. Unless an election of another method of
payment is in effect, payment of Directors' Fees will be made in cash on
the date such fees are otherwise payable.
(2) Cash Deferral Election. A director may elect to defer payment of
all or a portion of the Directors' Fees otherwise payable in a calendar
year for subsequent payment in cash (a "Cash Deferral Election"). Deferred
Directors' Fees would be credited to a bookkeeping account (a "Deferred
Cash Compensation Account") for the director. The director may elect to
have amounts credited to his or her Deferred Cash Compensation Account
treated as if invested in one or more of the funds (other than the Quaker
State Stock Fund) available to employees under the Company's Thrift and
Stock Purchase Plan or such other funds as the Board may from time to time
authorize.
(3) Current Stock Election. A director may elect to receive payment of
Directors' Fees in shares of Capital Stock on the date such fees would
otherwise be payable in cash (a "Current Stock Election"). On each date on
which Directors' Fees would otherwise be paid in cash, the director would
receive a number of shares of Capital Stock equal to 105% of the amount of
the cash otherwise payable divided by the fair market value on such date of
a share of Capital Stock. Fair market value, for purposes of the Directors'
Plan, will generally be the mean between the publicly reported high and low
sale prices per share of the Capital Stock for the date as of which fair
market value is to be determined. On March 15, 1996 the fair market value
of a share of the Capital Stock, as so computed, was $13.4375.
22
<PAGE> 25
(4) Stock Deferral Election. A director may elect to defer payment of
all Directors' Fees otherwise payable in a calendar year for subsequent
payment in shares of Capital Stock (a "Stock Deferral Election"). On each
date on which Directors' Fees would otherwise be paid in cash, a
bookkeeping account (a "Deferred Stock Compensation Account") for the
director would be credited with a number of shares of Capital Stock
(including fractional shares) equal to 105% of the amount of the cash
otherwise payable divided by the fair market value on such date of a share
of Capital Stock. On each dividend payment date, the director's Deferred
Stock Compensation Account would be credited with an additional number of
shares of Capital Stock equal to the amount of the dividend on the number
of shares held in the account divided by the fair market value on such date
of a share of Capital Stock.
PAYMENT OF DEFERRED AMOUNTS
Payment of cash credited to a director's Deferred Cash Compensation Account
or shares of Capital Stock credited to a director's Deferred Stock Compensation
Account for any year would be made either in a lump sum or in up to ten annual
installments, as elected by the director prior to the commencement of the year
of deferral, commencing on March 30 of the year following the year during which
the director ceases to be a director for any reason. A director may designate a
beneficiary or beneficiaries to receive payment of deferred amounts following
his death. Advance payment of deferred amounts may be permitted by the Board
only to the extent necessary to avoid severe financial hardship resulting from
an unanticipated financial emergency beyond the control of the director or his
or her beneficiary.
Deferred Cash Compensation Accounts and Deferred Stock Compensation
Accounts will be maintained only on the books of the Company, and no cash,
shares of Capital Stock or other assets will be set aside until cash or shares
of Capital Stock actually become payable to a director or his or her
beneficiary. No person shall have voting rights with respect to shares of
Capital Stock credited to a Deferred Stock Compensation Account and not yet
payable to the director or his or her beneficiary.
MISCELLANEOUS
The Board shall have full power and authority to interpret and administer
the Directors' Plan, and decisions of the Board shall be final and binding upon
all parties.
The Board may amend or terminate the Directors' Plan at any time, provided
that no amendment or termination shall adversely affect rights with respect to
amounts or shares then credited to any Deferred Cash Compensation Account or
Deferred Stock Compensation Account. In order for acquisitions by directors of
shares of Capital Stock under the Directors' Plan to be exempt from short-swing
profit liability under Section 16(b) of the Securities Exchange Act of 1934 (the
"1934 Act"), any amendment to the Directors' Plan would have to be approved by
the stockholders if it would (i) increase by more than 10% the number of shares
of Capital Stock which may be acquired by directors under the Plan or (ii)
materially increase the benefits provided by the Plan to directors.
VOTE REQUIRED
Under Delaware law, the affirmative vote of a majority of the shares of
Quaker State's Capital Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting, a quorum being present, is necessary for
approval of the adoption of the Directors' Plan. The aggregate number of shares
voted "For," "Against" or "Abstain" is counted for the purpose of determining
the minimum number of affirmative votes required, and the total number of shares
voted "For" is counted for the purpose of determining whether sufficient votes
are received. An abstention from voting on a matter by a stockholder present in
person or represented by proxy and entitled to vote has the same legal effect as
a vote "Against" the matter.
23
<PAGE> 26
ITEM 3
APPROVAL OF ADOPTION
OF AMENDMENT TO
1994 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
Quaker State's 1994 Stock Incentive Plan (the "1994 Plan") was adopted by
the Board of Directors on December 16, 1993, subject to stockholder approval
which was obtained on May 12, 1994. The aggregate number of shares of the
Company's Capital Stock which could be issued under the 1994 Plan was 1,250,000.
As of the date of this Proxy Statement, 712,000 shares are subject to
outstanding stock options and 298,645 shares of restricted stock have been
issued. No stock options granted under the 1994 Plan have been exercised and
none of the restrictions on the shares of restricted stock have lapsed.
Quaker State's 1986 Stock Option Plan (the "1986 Plan") was adopted by the
Board of Directors on March 27, 1986 subject to stockholder approval which was
obtained on May 8, 1986. No stock options may be granted under the 1986 Plan
subsequent to March 26, 1996 and as of that date 112,978 shares remained
available for the grant of stock options under the 1986 Plan.
On January 31, 1996, the Board of Directors, acting upon the recommendation
of the Organization and Compensation Committee, amended the 1994 Plan to
increase the total number of shares of the Capital Stock which may be issued
thereunder by the number of shares remaining available for the grant of stock
options under the 1986 Plan on March 26, 1996. This amendment is subject to
approval by the stockholders at the Annual Meeting. Unless otherwise directed
therein, the proxies solicited hereby will be voted for approval of the adoption
of the amendment of the 1994 Plan.
The principal features of the 1994 Plan, as approved by the stockholders on
May 12, 1994, are summarized below.
GENERAL
Among the purposes of the 1994 Plan are to encourage eligible employees of
Quaker State and its subsidiaries to increase their efforts to make Quaker State
and its subsidiaries more successful, to provide an additional inducement for
such employees to remain with Quaker State and to attract able persons to the
Company. Those key employees who share responsibility for the management, growth
or protection of the business of the Company or any subsidiary are eligible to
be granted stock options and other awards under the 1994 Plan.
The maximum number of shares as to which stock options may be granted and
as to which shares may be awarded under the 1994 Plan to any one employee during
any calendar year is 200,000 shares. The aggregate number of shares which may be
issued under the 1994 Plan and the number that may be granted to any one
employee during any calendar year are subject to anti-dilution provisions set
forth in the 1994 Plan. No stock options or other awards may be granted under
the 1994 Plan subsequent to December 15, 2003.
If any stock option granted under the 1994 Plan is canceled by mutual
consent or terminates or expires for any reason without having been exercised in
full, the number of shares subject to the stock option will again be available
for purposes of the 1994 Plan, except that to the extent that alternative stock
appreciation rights granted in conjunction with a stock option under the 1994
Plan are exercised and the related stock option is surrendered, the number of
shares available for purposes of the 1994 Plan will be reduced by the number of
shares of Capital Stock issued upon exercise of the alternative stock
appreciation rights. If shares of Capital Stock are forfeited pursuant to the
restrictions applicable to restricted shares awarded under the 1994 Plan, the
shares forfeited will not again be available for purposes of the 1994 Plan
unless during the period the shares were outstanding the awardee received no
dividends or other benefits of ownership from the shares. To the extent
performance shares are not earned, the number of shares is again available for
purposes of the 1994 Plan.
24
<PAGE> 27
The shares of the Capital Stock which may be issued under the 1994 Plan may
be either authorized but unissued shares or treasury shares or both.
ADMINISTRATION
The 1994 Plan is required to be administered by a committee appointed by
the Board of Directors and consisting of not less than two members of the Board,
none of whom is eligible to participate in the 1994 Plan. The Organization and
Compensation Committee of the Board has been appointed to administer the 1994
Plan.
The Committee has the power to interpret the 1994 Plan and full authority,
in its discretion, to grant awards under the 1994 Plan and to determine the
employees to whom awards will be granted and the number of shares to be covered
by each award.
STOCK OPTIONS
The Committee has authority, in its discretion, to grant incentive stock
options (stock options qualifying under Section 422 of the Code), nonstatutory
stock options (stock options not qualifying under Section 422 or 423 of the
Code) or both types of stock options (but not in tandem). The Committee may
grant alternative stock appreciation rights in conjunction with incentive stock
options or nonstatutory stock options and may grant cash payment rights in
conjunction with nonstatutory stock options.
The option price for each stock option is such price as the Committee, in
its discretion, determines but will not be less than 100% of the fair market
value of the Capital Stock on the date of grant of the stock option. Fair market
value for all purposes under the 1994 Plan is the mean between the highest and
lowest sales prices per share of the Capital Stock as quoted in the
NYSE-Composite Transactions listing in The Wall Street Journal for the date as
of which fair market value is determined. On March 15, 1996, the fair market
value of a share of the Capital Stock, as so computed, was $13.4375.
Each stock option is exercisable at such time or times as the Committee, in
its discretion, determines, except that no stock option will be exercisable
after the expiration of ten years from the date of grant. A stock option to the
extent exercisable at any time may be exercised in whole or in part.
Unless the Committee, in its discretion, otherwise determines, the option
price for each stock option will be payable in full in cash at the time of
exercise; however, in lieu of cash the person exercising the stock option may
pay the option price in whole or in part with Capital Stock.
For incentive stock options, the aggregate fair market value (determined on
the date of grant) of the shares with respect to which incentive stock options
are exercisable for the first time by an employee during any calendar year may
not exceed $100,000.
Unless the Committee, in its discretion, otherwise determines, (i) no stock
option granted under the 1994 Plan will be transferable other than by will or by
the laws of descent and distribution and (ii) a stock option may be exercised
during an optionee's lifetime only by the optionee.
Alternative stock appreciation rights. Alternative stock appreciation
rights granted in conjunction with an incentive stock option may only be granted
at the time of the stock option grant. Alternative stock appreciation rights
granted in conjunction with a nonstatutory stock option may be granted either at
the time the stock option is granted or at any time during the term of the stock
option.
Alternative stock appreciation rights are exercisable to the extent that
the related stock option is exercisable. An alternative stock appreciation right
entitles the optionee to surrender the related stock option or any portion
thereof without exercising the stock option and to receive that number of shares
of the Capital Stock having an aggregate fair market value on the date of
exercise of the alternative stock appreciation right equal to the excess of the
fair market value of one share of the Capital Stock on such date over the option
price per share times the number of shares covered by the stock option or
portion thereof which is surrendered. Alternative stock appreciation rights
granted under the 1994 Plan may not be settled in cash.
25
<PAGE> 28
Cash payment rights. Cash payment rights granted in conjunction with a
nonstatutory stock option entitle the person who is entitled to exercise the
stock option, upon exercise of the stock option, or any portion thereof, to
receive cash (in addition to the shares of Capital Stock to be received upon
exercise of the stock option) equal to a percentage (not greater than 100%)
determined by the Committee of the excess of the fair market value of a share of
Capital Stock on the date of exercise over the option price per share,
multiplied by the number of shares covered by the stock option, or portion
thereof, which is exercised. Cash payment rights may be used by the Committee to
provide funds to the option holder to pay the income taxes payable upon exercise
of a nonstatutory stock option (See "Federal Income Taxes -- Nonstatutory Stock
Options" below).
General -- Subject to the foregoing and the other provisions of the 1994
Plan, stock options granted under the 1994 Plan may be exercised at such times
and in such amounts and be subject to such restrictions and other terms and
conditions, if any, as are determined, in its discretion, by the Committee.
RESTRICTED SHARES
Shares of Capital Stock may be awarded by the Committee which are subject
to such restrictions (including restrictions on the right to transfer or
encumber the shares while subject to restrictions) as the Committee may impose
thereon and be subject to forfeiture if certain events (which may, in the
discretion of the Committee, include termination of employment and/or
performance-based events) specified by the Committee occur prior to the lapse of
the restrictions.
The Committee, in its discretion, may determine that dividends and other
distributions on restricted shares will not be paid to the awardee until the
lapse or termination of the applicable restrictions. From the date a restricted
share award is effective, however, the awardee is a stockholder with respect to
the restricted shares and will have all the rights of a stockholder with respect
to the shares, including the right to vote the shares and to receive all
dividends and other distributions paid with respect to the shares, subject only
to the preceding sentence and the other restrictions imposed by the Committee.
PERFORMANCE SHARES
The Committee may award performance shares which will entitle the awardee
to receive up to the number of shares of Capital Stock covered by the award at
the end of or at a specified time or times during a specified award period
contingent upon the extent to which one or more predetermined performance
targets are satisfied during the award period. The performance target or targets
may vary for different award periods and need not be the same for each awardee
receiving an award for an award period. At any time prior to the end of an award
period, the Committee may adjust downward (but not upward) the performance
target or targets as a result of major events unforeseen at the time of the
award. The Committee, in its discretion, may determine that awardees are
entitled to any dividends or other distributions that would have been paid on
earned performance shares had the shares been outstanding during the period from
the award to the payment of the performance shares.
OTHER SHARES
The Committee, in its discretion, may from time to time make other awards
of shares of the Capital Stock under the 1994 Plan as an inducement to the
awardee to enter into employment, in recognition of the contribution of the
awardee to the performance of the Company, in recognition of the awardee's
individual performance or on the basis of such other factors as the Committee
may deem relevant.
ADDITIONAL RIGHTS IN CERTAIN EVENTS
The 1994 Plan provides for certain additional rights upon the occurrence of
one or more events related to the ownership or continued existence of the
Company ("Change of Control Events"), as defined in the 1994 Plan.
If any Change of Control Event occurs, unless the Committee in its
discretion otherwise determines (i) all outstanding stock options will become
immediately and fully exercisable, (ii) all stock options held by
26
<PAGE> 29
an optionee whose employment terminates within one year of any Change of Control
Event for any reason other than voluntary termination, with the consent of the
Company or any subsidiary, severance under the Company's Severance Pay Plan for
Salaried and Hourly Non-Union Employees, retirement under any retirement plan of
the Company or any subsidiary or death will be exercisable for a period of three
years from the date of such termination of employment, but in no event after the
expiration date of the stock option (iii) all restrictions applicable to
restricted shares awarded under the 1994 Plan will lapse and (iv) all
performance shares awarded under the 1994 Plan will be deemed to have been fully
earned as of the date of the Change of Control Event, regardless of the
attainment or nonattainment of any performance target.
POSSIBLE ANTI-TAKEOVER EFFECT
The provisions of the 1994 Plan providing for the acceleration of the
exercise date of stock options, the lapse of restrictions applicable to
restricted shares and the deemed earnout of performance shares upon the
occurrence of a Change of Control Event, and for the extension of the period
during which stock options may be exercised upon termination of employment
following a Change of Control Event, may be considered as having an
anti-takeover effect.
MISCELLANEOUS
The Board of Directors may amend or terminate the 1994 Plan at any time,
provided that without stockholder approval no amendment of the 1994 Plan may (i)
increase the total number of shares which may be issued under the 1994 Plan,
(ii) increase the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the 1994 Plan to any one
employee during any calendar year, (iii) materially increase the benefits
accruing under the 1994 Plan to persons subject to the provisions of Section
16(b) of the 1934 Act, (iv) materially modify the requirements as to eligibility
for participation in the 1994 Plan by persons subject to the provisions of
Section 16(b), (v) make any changes in the class of employees eligible to
receive incentive stock options or (vi) extend the duration of the 1994 Plan. No
amendment or termination of the 1994 Plan may, without the written consent of
the holder of an outstanding grant or award under the 1994 Plan, adversely
affect the rights of such holder with respect thereto.
The Committee may accept the cancellation of outstanding stock options or
the contribution or surrender of restricted shares in return for the grant of
new stock options for the same or a different number of shares and at the same
or a different option price or for restricted shares with different
restrictions.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of stock options and other awards under
present law.
Incentive Stock Options. An optionee does not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, upon the exercise of an incentive stock option. The exercise of an
incentive stock option generally will result in an increase in an optionee's
taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other disposition within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of is treated as a long-term
capital gain, and any loss is treated as a long-term capital loss. In the event
of a "disqualifying disposition," the difference between the fair market value
of the shares received on the date of exercise and the option price (limited, in
the case of a taxable sale or exchange, to the excess of the amount realized
upon disposition over the optionee's tax basis in the shares) is treated as
compensation received by the optionee and is taxable in the year of disposition.
Any additional gain is taxable as a capital gain and any loss as a capital loss,
which is long-term or short-term depending on whether the shares were held for
more than one year. Under proposed regulations, special rules apply in
determining the compensation income recognized upon a "disqualifying
disposition" if the option price of the incentive stock option is paid in shares
of the
27
<PAGE> 30
Company's Capital Stock or, in certain limited circumstances, if the optionee is
subject to Section 16(b) of the 1934 Act. If shares of Capital Stock received
upon the prior exercise of an incentive stock option are transferred to the
Company in payment of the option price of an incentive stock option within
either of the periods referred to above, the transfer is considered a
"disqualifying disposition" of the shares transferred, but, under proposed
regulations, only compensation income determined as stated above, and no capital
gain or loss, is recognized.
If the employment of an optionee terminates, any incentive stock option
held by the optionee that is not terminated will be converted into a
nonstatutory stock option, with the tax consequences described below, if it is
not exercised within three months from the date of termination (or one year from
the date of termination if the optionee is disabled).
Neither Quaker State nor any of its subsidiaries is entitled to a deduction
for compensation paid with respect to shares received by an optionee upon
exercise of an incentive stock option and not disposed of in a "disqualifying
disposition." If an amount is treated as compensation received by an optionee
because of a "disqualifying disposition," Quaker State or one of its
subsidiaries generally is entitled to a corresponding deduction in the same
amount for compensation paid.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income for Federal income tax purposes upon receipt of a nonstatutory stock
option.
Upon the exercise of a nonstatutory stock option with cash, the amount by
which the fair market value of the shares received, determined as of the date of
exercise, exceeds the option price is generally treated as compensation received
in the year of exercise.
If the option price of a nonstatutory stock option is paid in whole or in
part in shares of the Company's Capital Stock, no income, gain or loss is
recognized on the receipt of shares equal in value on the date of exercise to
the shares delivered in payment of the option price. The fair market value of
the remainder of the shares received upon exercise of the nonstatutory stock
option, determined as of the date of exercise, less the amount of cash, if any,
paid upon exercise is generally treated as compensation income received on the
date of exercise.
Optionees who are subject to Section 16(b) of the 1934 Act are subject to a
special Federal income tax rule upon the exercise of a nonstatutory stock option
(i) if the exercise is within six months of the date of grant or (ii) in the
event the fair market value of the shares acquired is less than the option price
on the date of exercise. In these situations, unless an election provided for in
Section 83(b) of the Code is made to be taxed as of the date of exercise, the
amount taxable as provided above is determined instead as of the date of
expiration of the period following exercise during which the sale of the shares
received could subject the optionee to liability under Section 16(b) (the
"Section 16(b) restriction period"). The "fair market value" of shares, as used
in this discussion of Federal income tax consequences, is determined without
regard to the fact that the optionee is a person subject to Section 16(b).
Alternative stock appreciation rights. An optionee does not recognize any
taxable income for Federal income tax purposes upon receipt of alternative stock
appreciation rights. Upon the exercise of alternative stock appreciation rights,
the fair market value of the shares received, determined as of the date of
exercise, and any cash received in lieu of a fraction of a share, is generally
treated as compensation received in the year of exercise. For optionees who are
subject to Section 16(b) of the 1934 Act, the amount taxable as provided above
is determined instead as of the date of expiration of the Section 16(b)
restriction period if the exercise of alternative stock appreciation rights is
within six months of the date of grant unless an election provided for in
Section 83(b) of the Code is made to be taxed as of the date of exercise.
Cash Payment Rights. An optionee does not recognize any taxable income for
Federal income tax purposes upon receipt of cash payment rights. Any cash
received in payment of cash payment rights is treated as compensation received
in the year in which the related stock option is exercised.
Restricted Shares. A grantee of restricted shares, including restricted
performance shares, does not recognize any taxable income for Federal income tax
purposes in the year of the award, provided the shares
28
<PAGE> 31
are subject to restrictions (that is, they are nontransferable and subject to a
substantial risk of forfeiture). If a grantee is subject to Section 16(b) of the
1934 Act on the date of the award, the shares generally are deemed to be subject
to restrictions (in addition to the restrictions imposed by the award) for at
least six months following the date of the award. However, a grantee may elect
under Section 83(b) of the Code to recognize compensation income in the year of
the award in an amount equal to the fair market value of the shares on the date
of the award, determined without regard to the restrictions. If the grantee does
not make a Section 83(b) election, the fair market value of the shares on the
date the restrictions lapse is treated as compensation income to the grantee and
is taxable in the year the restrictions lapse.
Performance and Other Shares. A grantee of performance shares does not
recognize any taxable income for Federal income tax purposes upon receipt of the
award. Any shares of the Company's Capital Stock received pursuant to the award
of performance shares or award of other shares are treated as compensation
income received generally in the year in which the shares are received. If the
grantee is subject to Section 16(b) of the 1934 Act on the date of receipt, the
grantee generally will not recognize compensation income until the expiration of
six months from the date of receipt, unless the grantee makes an election under
Section 83(b) of the Code to recognize compensation income on the date of
receipt. In each case, the amount of compensation income is the fair market
value of the shares on the date compensation income is recognized.
Other Tax Matters. The acceleration of the exercise date of a stock option
or the exercise of a stock option, the lapse of restrictions on restricted
shares or the deemed earnout of performance shares following the occurrence of a
Section 8 Event, in certain circumstances, may result in (i) a 20% Federal
excise tax (in addition to Federal income tax) to the optionee or grantee on
certain amounts associated with the stock option and certain payments of the
Company's Capital Stock resulting from such lapse of restrictions on restricted
shares or deemed earnout of performance shares and (ii) the loss of a
compensation deduction which would otherwise be allowable to Quaker State or one
of its subsidiaries.
In each instance that an amount is treated as compensation received from
nonstatutory stock options, alternative stock appreciation rights, cash payment
rights, restricted shares, performance shares and other share awards, Quaker
State or one of its subsidiaries generally is entitled to a corresponding
deduction in the same amount for compensation paid. However, under Section
162(m) of the Code, Quaker State or one of its subsidiaries may lose a
compensation deduction, which would otherwise be allowable, for all or a part of
the compensation paid in the form of (i) restricted shares other than restricted
performance shares, (ii) performance shares or (iii) other share awards, to any
employee if, as of the close of the tax year, the employee is the Chief
Executive Officer of the Company or is among the four most highly compensated
officers for that tax year (other than the Chief Executive Officer) for whom
total compensation is required to be reported to stockholders under the 1934
Act, if the total compensation paid to such employee exceeds $1,000,000.
VOTE REQUIRED
Under Delaware law, the affirmative vote of the holders of a majority of
the shares of the Capital Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting, a quorum being present, is necessary for
the approval of the adoption of the amendment to the Plan. The aggregate number
of shares voted "For", "Against" or "Abstain" is counted for the purpose of
determining the minimum number of affirmative votes required, and the total
number of shares voted "For" is counted for the purpose of determining whether
sufficient votes are received. An abstention from voting on a matter by a
stockholder present in person or represented by proxy and entitled to vote has
the same legal effect as a vote "Against" the matter.
29
<PAGE> 32
ITEM 4
RATIFICATION OF APPOINTMENT OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
The Board of Directors has appointed Coopers & Lybrand L.L.P. as
independent auditors to audit the financial statements of Quaker State and its
subsidiaries for the year 1996. Coopers & Lybrand L.L.P. has audited the
financial statements of the Company and its subsidiaries since the Company was
organized in 1931. Representatives of Coopers & Lybrand L.L.P. will be present
at the Annual Meeting, will have the opportunity to make a statement if they
choose to do so and will be available to respond to appropriate questions.
Coopers & Lybrand L.L.P. has advised Quaker State that no member of its
firm has any direct or material indirect financial interest in Quaker State or
any of its subsidiaries.
Unless otherwise directed therein, the proxies solicited hereby will be
voted for the ratification of the appointment of Coopers & Lybrand L.L.P. In the
event the stockholders fail to ratify the appointment, the Board will reconsider
its selection of independent auditors.
VOTE REQUIRED
Under Delaware law, the affirmative vote of the holders of a majority of
the shares of the Capital Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting, a quorum being present, is needed for
the ratification of the appointment of Coopers & Lybrand L.L.P. The aggregate
number of shares voted "For", "Against" or "Abstain" is counted for the purpose
of determining the minimum number of affirmative votes required, and the total
number of shares voted "For" is counted for the purpose of determining whether
sufficient votes are received. An abstention from voting on the matter by a
stockholder present in person or represented by proxy and entitled to vote has
the same legal effect as a vote "Against" the matter.
OTHER MATTERS
The Board of Directors knows of no other matter to be voted upon at the
Annual Meeting. Should other matters properly come before the meeting or any
adjournment thereof, the proxy holders will vote upon such matters in accordance
with their best judgment.
EXPENSES OF SOLICITATION
The cost of the solicitation of proxies for the Annual Meeting will be paid
by Quaker State. In addition to solicitation of proxies by mail, the officers
and regular employees of Quaker State may solicit proxies in person or by
telephone. Brokers, banks and their nominees will be reimbursed for their
reasonable out-of-pocket expenses incurred in forwarding proxy material and
Quaker State's 1995 Annual Report to beneficial owners of shares.
Quaker State has engaged Corporate Investor Communications, Inc. ("CIC") to
assist in the solicitation of proxies. CIC has advised Quaker State that CIC's
services will include contacting brokers, banks, nominees and individual holders
of record owning large numbers of shares. CIC's fees (estimated at $4,700) and
expenses will be paid by Quaker State.
30
<PAGE> 33
1997 STOCKHOLDER PROPOSALS
A proposal submitted by a stockholder for the regular Annual Meeting to be
held in 1997 must be received by the Secretary, Quaker State Corporation, 225
East John Carpenter Freeway, Irving, Texas 75062 on or prior to November 29,
1996 in order to be eligible to be included in the Company's Proxy Statement for
that meeting. Under the Company's Bylaws, proposals by stockholders for
consideration at the 1997 Annual Meeting that are not submitted for possible
inclusion in the Proxy Statement for that meeting must be received by the
Secretary at the above address between February 15 and March 17, 1997.
By Order of the Board of Directors,
Paul E. Konney,
Vice President, General Counsel
and Secretary
31
<PAGE> 34
EXHIBIT 1
QUAKER STATE CORPORATION
1996 DIRECTORS' FEE PLAN
1
PURPOSE; RESERVATION OF SHARES
The purposes of the 1996 Directors' Fee Plan (the "Plan") are to provide
Directors of Quaker State Corporation (the "Corporation") with payment
alternatives for fees payable for future services as a member of the Board of
Directors of the Corporation (hereinafter referred to as the "Board") or as a
member of any committee thereof ("Director Fees") and to increase the
identification of interests between such Directors and the stockholders of the
Corporation by providing Directors the opportunity to elect to receive payment
of Director Fees in shares of Capital Stock, par value $1.00 per share, of the
Corporation ("Capital Stock"). For each calendar year, the aggregate number of
shares of Capital Stock which may be issued under Current Stock Elections or
credited to Deferred Stock Compensation Accounts for subsequent issuance under
the Plan is limited to 50,000 shares, subject to adjustment and substitution as
set forth in Section 5(b).
2
ELIGIBILITY
Any Director of the Corporation who is separately compensated for services
on the Board or on any committee of the Board shall be eligible to participate
in the Plan.
3
ELECTIONS
(a) GENERAL. Each Director may elect to receive current payment of Director
Fees (on the date on which the Director Fees are payable) either in cash or in
shares of Capital Stock. Each Director also may elect to defer payment of
Director Fees for a calendar year and to receive such deferred payment either in
cash or in shares of Capital Stock. The election by a Director to receive
payment of Director Fees other than in cash on the date on which the Director
Fees are otherwise payable is made by filing with the Secretary of the
Corporation a Notice of Election in the form prescribed by the Corporation (an
"Election"). Director Fees earned at any time for which an Election is not
effective shall be paid in cash on the date when the Director Fees are otherwise
payable. Subject to the terms of the Plan, an Election may be changed, modified
or terminated by filing with the Secretary of the Corporation a new Notice of
Election, with respect to a change or modification, or a Notice of Termination
in the form prescribed by the Corporation, with respect to a termination. Any
Election shall terminate on the date a Director ceases to be a member of the
Board. Any Notice of Election or Notice of Termination shall become irrevocable
when filed, except by the filing of a new Notice of Election or a Notice of
Termination which thereafter becomes effective in accordance with the provisions
of this Section 3. Notwithstanding the provisions set forth below regarding the
effective date of an Election, no Election filed which changes or modifies an
existing Election shall become effective until the existing Election is
terminated or modified by the new Election under the provisions set forth below.
(b) SECTION 16 RESTRICTIONS ON ELECTIONS. Notwithstanding any other
provision contained in the Plan, if a Notice of Election or Notice of
Termination would result in a change in the method of payment of Director Fees
(A) from current cash or deferred cash to current stock or deferred stock or (B)
from current stock or deferred stock to current cash or deferred cash, such
Notice of Election or Notice of Termination shall not become effective until the
later of (x) six months from the date it is filed with the Secretary of the
Corporation or (y) the date it would otherwise become effective under the
provisions of this Section 3. For purposes of clause (x) of the preceding
sentence, any Notice of Election filed prior to the date of shareholder approval
of the Plan shall be treated as if it had been filed on the date of such
shareholder approval. A Notice
A-1
<PAGE> 35
of Election or Notice of Termination filed by a Director shall not be subject to
the restriction provided in the first sentence of this paragraph and shall
become effective on the date otherwise provided in this Section 3 if it provides
only for (i) a change in the method of payment of subsequently earned Director
Fees (A) from current cash to deferred cash or from deferred cash to current
cash or (B) from current stock to deferred stock or from deferred stock to
current stock or (ii) a change in the amount of cash compensation to be deferred
where all Director Fees are to be paid in cash.
(c) CURRENT STOCK PAYMENT. Subject to the provisions of Sections 3(d) and
3(e), an Election to receive payment of Director Fees in shares of Capital Stock
on the date on which the Director Fees are payable (a "Current Stock Election")
shall be effective on the date on which the Notice of Election is filed or on
the date provided in Section 3(b), if later. The Current Stock Election may be
terminated (i) by filing a Notice of Termination, in which case the termination
shall be effective on the date the Notice of Termination is filed or on the date
provided in Section 3(b), if later, or (ii) by filing a Notice of Election
changing the method of payment, in which case the termination shall be effective
when the new Election becomes effective as provided in Section 3(d) or 3(e).
During the period a Current Stock Election is effective, all Director Fees
payable shall be paid by the issuance to the Director of a number of whole
shares of Capital Stock equal to (x) 105% of the cash amount of the Director
Fees payable divided by (y) the Fair Market Value of one share of the Capital
Stock, as defined in Section 11 hereof, on the date on which such Director Fees
are payable. Any amount of Director Fees which is not paid in Capital Stock on
the date otherwise payable because less than the Fair Market Value of a whole
share shall be accumulated in cash without interest and added to the amount used
in computing the number of shares of Capital Stock issuable on the next
succeeding date on which Director Fees are payable under the Current Stock
Election. Any such accumulated fractional amount remaining as of the effective
date of any termination of a Current Stock Election or of the termination of the
Plan shall be paid to the Director in cash on the next succeeding date on which
Director Fees would have been payable to the Director under the Current Stock
Election. The Corporation shall issue share certificates to the Director for the
shares of Capital Stock acquired or, if requested in writing by the Director and
permitted under such plan, the shares acquired shall be added to the Director's
account under the Corporation's Automatic Dividend Reinvestment Plan. As of the
date on which the Director Fees are payable in shares of Capital Stock, the
Director shall be a stockholder of the Corporation with respect to such shares.
(d) DEFERRED CASH PAYMENT. Subject to the next succeeding sentence, an
Election to defer the receipt of all or a portion of Director Fees and to
receive eventual payment of such Director Fees in cash (a "Cash Deferral
Election") shall be effective on January 1 of the year following the date on
which the Notice of Election is filed or on the date provided in Section 3(b),
if later. A Cash Deferral Election shall be effective (1) on the later of the
date the Notice of Election is filed or date of shareholder approval of the Plan
with respect to Director Fees payable for the portion of calendar year 1996
which remains following such effective date, provided the Director files the
Notice of Election on or before 30 days subsequent to the date of such
shareholder approval and (2) on the date the Notice of Election is filed with
respect to Director Fees payable for any portion of a calendar year which
remains at the date of such filing, provided the Director files the Notice of
Election on or before 30 days subsequent to the Director's initial election to
the office of Director. If only a portion of Director's Fees otherwise payable
during a calendar year are deferred pursuant to a Cash Deferral Election, the
Director Fees deferred shall be the first Director Fees paid during such year
after the Cash Deferral Election becomes effective up to the amount of the
Director Fees subject to such Cash Deferral Election, and any later Director
Fees with respect to such calendar year shall be paid to the Director currently
in cash. A Cash Deferral Election may not be modified or terminated with respect
to Director Fees payable for the calendar year or for any portion of a calendar
year for which such Cash Deferral Election is effective, and such Cash Deferral
Election, unless modified or terminated by filing a new Notice of Election or a
Notice of Termination on or before December 31 immediately preceding the
calendar year for which such modification or termination is to be effective,
shall be effective for and apply to Director Fees payable with respect to each
subsequent calendar year.
(e) DEFERRED STOCK PAYMENT. Subject to the next succeeding sentence, an
Election to defer the receipt of Director Fees and to receive eventual payment
of such Director Fees in shares of Capital Stock (a "Stock Deferral Election")
shall be effective on January 1 of the year following the date on which the
Notice of
A-2
<PAGE> 36
Election is filed or on the date provided in Section 3(b), if later. A Stock
Deferral Election shall be effective (1) six months from the later of the date
the Notice of Election is filed or date of shareholder approval of the Plan with
respect to Director Fees payable for the portion of calendar year 1996 which
remains following such effective date, provided the Director files the Notice of
Election on or before 30 days subsequent to the date of such shareholder
approval and (2) six months from the date the Notice of Election is filed with
respect to Director Fees payable for any portion of a calendar year which
remains at such effective date, provided the Director files the Notice of
Election on or before 30 days subsequent to the Director's initial election to
the office of Director. A Stock Deferral Election shall apply to all Director
Fees otherwise payable while such Stock Deferral Election is effective. A Stock
Deferral Election may not be modified or terminated with respect to Director
Fees payable for the calendar year or for any portion of a calendar year for
which such Stock Deferral Election is effective. A Stock Deferral Election may
be modified or terminated with respect to future Director Fees payable, but such
modification or termination shall not be effective until January 1 of the year
following the date on which a new Notice of Election or a Notice of Termination
is filed or on the date provided in Section 3(b), if later. A Stock Deferral
Election shall continue in effect until the effective date of any modification
or termination.
4
DEFERRED CASH COMPENSATION ACCOUNT
(a) GENERAL. The amount of any Director Fees deferred in accordance with a
Cash Deferral Election shall be credited on the date on which such Director Fees
are otherwise payable to a deferred cash compensation account maintained by the
Corporation in the name of the Director (a "Deferred Cash Compensation
Account"). A separate Deferred Cash Compensation Account shall be maintained for
each calendar year for which a Director has elected a different number of
payment installments or as otherwise determined by the Board.
(b) ADJUSTMENT FOR EARNINGS OR LOSSES. The amount in the Director's
Deferred Cash Compensation Account shall be adjusted on a quarterly basis as of
the last day of each calendar quarter to reflect net earnings, gains or losses
for the quarter. The adjustment for earnings, gains or losses for each quarter
shall be equal to the amount determined under (1) below as follows:
(1) DEEMED INVESTMENT OPTIONS. The total amount determined by
multiplying the rate earned (positive or negative) by each fund available
below (taking into account earnings distributed and share appreciation
(gains) or depreciation (losses) on the value of shares of the fund) for
each month of the current calendar quarter by the portion of the balance in
the Director's Deferred Cash Compensation Account as of the end of each
such month, respectively, which is deemed to be invested in such fund
pursuant to paragraph (2) below.
Subject to elimination, modification or addition by the Board, the
following shall be the funds available for the Director's election of
deemed investments pursuant to paragraph (2) below:
(A) Income Fund. The Income Fund shall be the same as the Income
Fund (Fund A) used from time to time by the Quaker State Corporation
Thrift and Stock Purchase Plan (the "Thrift Plan"). Fund A is currently
invested in the PNC Money Market Portfolio. According to information
supplied by PNC Bank, the PNC Money Market Portfolio is a mutual fund
comprised of investments in a broad range of short-term, high quality,
U.S. dollar-denominated instruments, such as government bonds, bank
deposits, commercial and other short-term investments. The objective is
to provide as high a level of current interest income as possible while
maintaining liquidity and stability of principal; however, principal is
not guaranteed. Earnings on Fund A investments are reinvested in the PNC
Money Market Portfolio.
(B) Bond Fund. The Bond Fund shall be the same as the Bond Fund
(Fund B) used from time to time by the Thrift Plan. Fund B is currently
invested in the PNC Intermediate Government Portfolio. According to
information supplied by PNC Bank, the PNC Intermediate Government
Portfolio is a mutual fund comprised primarily of U.S. Treasury and
Agency obligations or
A-3
<PAGE> 37
instruments collateralized by such obligations. This portfolio tends to
perform best when interest rates are stable or in decline. The objective
is to maximize current income while preserving capital; however,
principal is not guaranteed. Until contributions directed to Fund B are
used to purchase investments, and at such other times as are necessary
to properly administer the Thrift Plan, monies may be invested by the
Trustee of the Thrift Plan in the PNC Money Market Portfolio described
above. Earnings on Fund B investments are reinvested in Fund B.
(C) Equity Fund. The Equity Fund shall be the same as the Equity
Fund (Fund D) used from time to time by the Thrift Plan. Fund D is
currently invested in the PNC Index Equity Portfolio. According to
information supplied by PNC Bank, the PNC Index Equity Portfolio is a
mutual fund consisting of a diversified holding of common stocks of
companies which make up the Standard & Poor's 500 Stock Index in
approximately the same proportions as represented on the Index. The
objective of the Portfolio is to duplicate or exceed the capital
performance and dividend income of the Standard & Poor's 500 Stock
Index. The Portfolio will fluctuate along with the stock market and will
experience gain or loss on investments similar to the gain or loss
represented by the Standard & Poor's 500 Stock Index; principal is not
guaranteed. Until contributions directed to Fund D are used to purchase
investments, and at such other times as are necessary to properly
administer the Thrift Plan, monies may be invested by the Thrift Plan
Trustee in the PNC Money Market Portfolio described above. Earnings on
Fund D investments are reinvested in Fund D.
(D) Other Options. In addition to, or in lieu of, the investment
options described above, other funds may be established from time to
time, as determined by the Board, and the Board may provide any other
form of investment option it determines to be advisable; provided,
however, that such funds and options shall be made available and
communicated to all Directors on a uniform basis.
(2) DEEMED INVESTMENT ELECTIONS.
(A) The Director shall designate, on a form prescribed by the
Corporation, the percentage, in ten percent (10%) multiples (or such other
percentage as permitted from time to time by the Board), of the deferred
Director Fees that are to be deemed to be invested in the available funds
under paragraph (1) above. Said designation shall be effective on a date
specified by the Board and remain in effect and apply to all subsequent
deferred Director Fees until changed as provided below.
(B) A Director may elect to change, on a calendar quarter basis, the
deemed investment election under paragraph (A) above with respect to future
deferred Director Fees among one or more of the options then available by
written notice to the Secretary of the Corporation, on a form prescribed by
the Corporation (or by voice or other form of notice permitted by the
Corporation), at least 10 days before the first day of the calendar quarter
as of which the change is to be effective, with such change to be effective
for deferred Director Fees credited to the Deferred Cash Compensation
Account on or after the effective date.
(C) A Director may elect to reallocate the balance of his Deferred
Cash Compensation Account, subject to limitations imposed by the Board, on
a calendar quarter basis, in ten percent (10%) multiples (or such other
percentage as permitted from time to time by the Board), among the deemed
investment options then available. A Director may make such an election by
written notice to the Secretary of the Corporation, on a form prescribed by
the Corporation (or by voice or other form of notice permitted by the
Corporation), at least 10 days before the first day of the calendar quarter
as of which the transfer election is to be effective, with such transfer to
be based on the value of the Deferred Cash Compensation Account on the last
day of the preceding quarter.
(D) The election of deemed investments among the options provided
above shall be the sole responsibility of each Director. The Corporation
and Board members are not authorized to make any recommendation to any
Director with respect to such election. Each Director assumes all risk
connected with any adjustment to the value of his Deferred Cash
Compensation Account. Neither the Board nor the Corporation in any way
guarantees against loss or depreciation.
A-4
<PAGE> 38
(E) All payments from the Plan shall be made pro rata from the portion
of the Director's Deferred Cash Compensation Account which is deemed to be
invested in the Income Fund, the Bond Fund and the Equity Fund and/or such
other funds as may be available from time to time for deemed investment
elections under the Plan.
(c) MANNER OF PAYMENT. The balance of a Director's Deferred Cash
Compensation Account will be paid to the Director or, in the event of the
Director's death, to the Director's designated beneficiary, in accordance with
the Cash Deferral Election. A Director may elect at the time of filing of the
Notice of Election for a Cash Deferral Election to receive payment of the
Director Fees in annual installments rather than a lump sum, provided that the
payment period for installment payments shall not exceed ten years following the
Payment Commencement Date, as described in Section 6 hereof. The amount of any
installment shall be determined by multiplying (i) the balance in the Director's
Deferred Cash Compensation Account on the date of such installment by (ii) a
fraction, the numerator of which is one and the denominator of which is the
number of remaining unpaid installments. The balance of the Deferred Cash
Compensation Account shall be appropriately reduced on the date of payment to
the Director or the Director's designated beneficiary to reflect the installment
payments made hereunder. Amounts held pending distribution pursuant to this
Section 4(c) shall continue to be credited with the earnings, gains or losses on
a quarterly basis as described in Section 4(b) hereof.
5
DEFERRED STOCK COMPENSATION ACCOUNT
(a) GENERAL. The amount of any Director Fees deferred in accordance with a
Stock Deferral Election shall be credited to a deferred stock compensation
account maintained by the Corporation in the name of the Director (a "Deferred
Stock Compensation Account"). A separate Deferred Stock Compensation Account
shall be maintained for each calendar year for which a Director has elected a
different number of payment installments or as otherwise determined by the
Board. On each date on which Director Fees are otherwise payable and a Stock
Deferral Election is effective for a Director, the Director's Deferred Stock
Compensation Account for that calendar year shall be credited with a number of
shares of Capital Stock (including fractional shares) equal to (x) 105% of the
cash amount of the Director Fees payable divided by (y) the Fair Market Value of
one share of the Capital Stock, as defined in Section 11 hereof, on the date on
which such Director Fees are payable. If a dividend or distribution is paid on
the Capital Stock in cash or property other than Capital Stock, on the date of
payment of the dividend or distribution to holders of the Capital Stock each
Deferred Stock Compensation Account shall be credited with a number of shares of
Capital Stock (including fractional shares) equal to the number of shares of
Capital Stock credited to such Account on the date fixed for determining the
stockholders entitled to receive such dividend or distribution times the amount
of the dividend or distribution paid per share of Capital Stock divided by the
Fair Market Value of one share of the Capital Stock, as defined in Section 11
hereof, on the date on which the dividend or distribution is paid. If the
dividend or distribution is paid in property, the amount of the dividend or
distribution shall equal the fair market value of the property on the date on
which the dividend or distribution is paid. The Deferred Stock Compensation
Account of a Director shall be charged on the date of distribution with any
distribution of shares of Capital Stock made to the Director from such Account
pursuant to Section 5(c) hereof.
(b) ADJUSTMENT AND SUBSTITUTION. The number of shares of Capital Stock
credited to each Deferred Stock Compensation Account, and the number of shares
of Capital Stock available for issuance or crediting under the Plan in each
calendar year in accordance with Section 1 hereof, shall be proportionately
adjusted to reflect any dividend or other distribution on the outstanding
Capital Stock payable in shares of Capital Stock or any split or consolidation
of the outstanding shares of Capital Stock. If the outstanding Capital Stock
shall, in whole or in part, be changed into or exchangeable for a different
class or classes of securities of the Corporation or securities of another
corporation or cash or property other than Capital Stock, whether through
reorganization, reclassification, recapitalization, merger, consolidation or
otherwise, the Board shall adopt such amendments to the Plan as it deems
necessary to carry out the purposes of the Plan, including the continuing
deferral of any amount of any Deferred Stock Compensation Account.
A-5
<PAGE> 39
(c) MANNER OF PAYMENT. The balance of a Director's Deferred Stock
Compensation Account will be paid in shares of Capital Stock to the Director or,
in the event of the Director's death, to the Director's designated beneficiary,
in accordance with the Stock Deferral Election. A Director may elect at the time
of filing of the Notice of Election for a Stock Deferral Election to receive
payment of the shares of Capital Stock credited to the Director's Deferred Stock
Compensation Account in annual installments rather than a lump sum, provided
that the payment period for installment payments shall not exceed ten years
following the Payment Commencement Date as described in Section 6 hereof. The
number of shares of Capital Stock distributed in each installment shall be
determined by multiplying (i) the number of shares of Capital Stock in the
Deferred Stock Compensation Account on the date of payment of such installment,
by (ii) a fraction, the numerator of which is one and the denominator of which
is the number of remaining unpaid installments, and by rounding such result down
to the nearest whole number of shares. The balance of the number of shares of
Capital Stock in the Deferred Stock Compensation Account shall be appropriately
reduced in accordance with Section 5(a) hereof to reflect the installment
payments made hereunder. Shares of Capital Stock remaining in a Deferred Stock
Compensation Account pending distribution pursuant to this Section 5(c) shall
continue to be credited with respect to dividends or distributions paid on the
Capital Stock pursuant to Section 5(a) hereof and shall be subject to adjustment
pursuant to Section 5(b) hereof. If a lump sum payment or the final installment
payment hereunder would result in the issuance of a fractional share of Capital
Stock, such fractional share shall not be issued and cash in lieu of such
fractional share shall be paid to the Director based on the Fair Market Value of
a share of Capital Stock, as defined in Section 11 hereof, on the date
immediately preceding the date of such payment. The Corporation shall issue
share certificates to the Director, or the Director's designated beneficiary,
for the shares of Capital Stock distributed hereunder, or if requested in
writing by the Director and permitted under such plan, the shares to be
distributed shall be added to the Director's account under the Corporation's
Automatic Dividend Reinvestment Plan. As of the date on which the Director is
entitled to receive payment of shares of Capital Stock, a Director shall be a
stockholder of the Corporation with respect to such shares.
6
PAYMENT COMMENCEMENT DATE
Payment of amounts in a Deferred Cash Compensation Account or a Deferred
Stock Compensation Account shall commence on March 30 (or if March 30 is not a
business day, on the first preceding business day) of the calendar year
following the calendar year during which the Director ceases to be a member of
the Board for any reason, including death or disability.
7
BENEFICIARY DESIGNATION
A Director may designate, in the Beneficiary Designation form prescribed by
the Corporation, any person to whom payments of cash or shares of Capital Stock
are to be made if the Director dies before receiving payment of all amounts due
hereunder. A beneficiary designation will be effective only after the signed
beneficiary designation form is filed with the Secretary of the Corporation
while the Director is alive and will cancel all beneficiary designations signed
and filed earlier. If the Director fails to designate a beneficiary, or if all
designated beneficiaries of the Director die before the Director or before
complete payment of all amounts due hereunder, any remaining unpaid amounts
shall be paid in one lump sum to the estate of the last to die of the Director
or the Director's designated beneficiaries, if any.
A-6
<PAGE> 40
8
NON-ALIENABILITY OF BENEFITS
Neither the Director nor any beneficiary designated by the Director shall
have the right to, directly or indirectly, alienate, assign, transfer, pledge,
anticipate or encumber (except by reason of death) any amount that is or may be
payable hereunder, nor shall any such amount be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Director or the Director's designated
beneficiary or to the debts, contracts, liabilities, engagements, or torts of
any Director or designated beneficiary, or transfer by operation of law in the
event of bankruptcy or insolvency of the Director or any beneficiary, or any
legal process.
9
NATURE OF DEFERRED ACCOUNTS
Any Deferred Cash Compensation Account or Deferred Stock Compensation
Account and any cash fractional amount accumulated under Section 3(c) shall be
established and maintained only on the books and records of the Corporation, and
no assets or funds of the Corporation or the Plan or shares of Capital Stock of
the Corporation shall be removed from the claims of the Corporation's general or
judgment creditors or otherwise made available until such amounts are actually
payable to Directors or their designated beneficiaries as provided herein. The
Plan constitutes a mere promise by the Corporation to make payments in the
future. The Directors and their designated beneficiaries shall have the status
of, and their rights to receive a payment of cash or shares of Capital Stock
under the Plan shall be no greater than the rights of, general unsecured
creditors of the Corporation. No person shall be entitled to any voting rights
with respect to shares credited to a Deferred Stock Compensation Account and not
yet payable to a Director or the Director's designated beneficiary. The
Corporation shall not be obligated under any circumstance to fund its financial
obligations under the Plan, and the Plan is intended to constitute an unfunded
plan for tax purposes. However, the Corporation may, in its discretion, set
aside funds in a trust or other vehicle, subject to the claims of its creditors,
in order to assist it in meeting its obligations under the Plan, if such
arrangement will not cause the Plan to be considered a funded deferred
compensation plan under the Internal Revenue Code of 1986, as amended.
10
ADMINISTRATION OF PLAN; HARDSHIP WITHDRAWAL
Full power and authority to construe, interpret, and administer the Plan
shall be vested in the Board. Decisions of the Board shall be final, conclusive,
and binding upon all parties. Notwithstanding the terms of a Cash Deferral
Election or a Stock Deferral Election made by a Director hereunder, the Board
may, in its sole discretion, permit the withdrawal of amounts credited to a
Deferred Cash Compensation Account or shares credited to a Deferred Stock
Compensation Account with respect to Director Fees previously payable, upon the
request of a Director or the Director's representative, or following the death
of a Director upon the request of a Director's beneficiary or such beneficiary's
representative, if the Board determines that the Director or the Director's
beneficiary, as the case may be, is confronted with an unforeseeable emergency.
For this purpose, an unforeseeable emergency is an unanticipated emergency
caused by an event that is beyond the control of the Director or the Director's
beneficiary and that would result in severe financial hardship to the Director
or the Director's beneficiary if an early hardship withdrawal were not
permitted. The Director or the Director's beneficiary shall provide to the Board
such evidence as the Board, in its discretion, may require to demonstrate that
such emergency exists and financial hardship would occur if the withdrawal were
not permitted. The withdrawal shall be limited to the amount or to the number of
shares, as the case may be, necessary to meet the emergency. For purposes of the
Plan, a hardship shall be considered to constitute an immediate and unforeseen
financial hardship if the Director has an unexpected need for cash to pay for
expenses incurred by him or a member of his immediate family (spouse and/or
natural or adopted children) such as those arising from illness, casualty loss,
or death. Cash needs arising from foreseeable events, such as the purchase or
A-7
<PAGE> 41
building of a house or education expenses, will not be considered to be the
result of an unforeseeable financial emergency. Payment shall be made as soon as
practicable after the Board approves the payment and determines the amount of
the payment or number of shares which shall be withdrawn, in a single lump sum
from the portion of the Deferred Cash Compensation Account or Deferred Stock
Compensation Account, as applicable, with the longest number of installment
payments first, in each case in accordance with Section 4(b)(2)(E) if the
distribution is from the Deferred Cash Compensation Account. No Director shall
participate in any decision of the Board regarding such Director's request for a
withdrawal under this Section 10.
11
FAIR MARKET VALUE
Fair market value of the Capital Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Board or its delegate, in its discretion, may determine to
rely upon): (a) if the Capital Stock is listed on the New York Stock Exchange,
the highest and lowest sales prices per share of the Capital Stock as quoted in
the NYSE-Composite Transactions listing for such date, (b) if the Capital Stock
is not listed on such exchange, the highest and lowest sales prices per share of
Capital Stock for such date on (or on any composite index including) the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which the Capital Stock is listed, or (c) if the Capital
Stock is not listed on any such exchange, the highest and lowest sales prices
per share of the Capital Stock for such date on the National Association of
Securities Dealers Automated Quotations System or any successor system then in
use ("NASDAQ"). If there are no such sale price quotations for the date as of
which fair market value is to be determined but there are such sale price
quotations within a reasonable period both before and after such date, then fair
market value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of the Capital Stock as so
quoted on the nearest date before and the nearest date after the date as of
which fair market value is to be determined. The average should be weighted
inversely by the respective numbers of trading days between the selling dates
and the date as of which fair market value is to be determined. If there are no
such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Capital Stock shall be the mean between the bona fide bid
and asked prices per share of Capital Stock as so quoted for such date on
NASDAQ, or if none, the weighted average of the means between such bona fide bid
and asked prices on the nearest trading date before and the nearest trading date
after the date as of which fair market value is to be determined, if both such
dates are within a reasonable period. The average is to be determined in the
manner described above in this Section 11. If the fair market value of the
Capital Stock cannot be determined on the basis previously set forth in this
Section 11 on the date as of which fair market value is to be determined, the
Board or its delegate shall in good faith determine the fair market value of the
Capital Stock on such date. Fair market value shall be determined without regard
to any restriction other than a restriction which, by its terms, will never
lapse.
12
SECURITIES LAWS; ISSUANCE OF SHARES
The obligation of the Corporation to issue or credit shares of Capital
Stock under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Corporation, (ii)
the condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange, if any, on which the
Capital Stock shares may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect. If, on the date on
which any shares of Capital Stock would be issued pursuant to a Current Stock
Election or credited to a Deferred Stock Compensation Account, sufficient shares
of Capital Stock are not available under the Plan or the Corporation is not
obligated to issue shares pursuant to this Section 12, then no shares of Capital
Stock shall be issued or credited but
A-8
<PAGE> 42
rather, in the case of a Current Stock Election, cash shall be paid in payment
of the Director Fees payable, and in the case of a Deferred Stock Compensation
Account, Director Fees and dividends which would otherwise have been credited in
shares of Capital Stock shall be credited in cash to a Deferred Cash
Compensation Account in the name of the Director. The Board shall adopt
appropriate rules and regulations to carry out the intent of the immediately
preceding sentence if the need for such rules and regulations arises.
13
GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Delaware.
14
EFFECTIVE DATE; AMENDMENT AND TERMINATION
The Plan was adopted by the Board on March 21, 1996, subject to approval by
the stockholders of the Corporation at its 1996 Annual Meeting or any
adjournment thereof, and if so approved by the stockholders, the Plan shall
become effective on the date of such approval. The Board may amend or terminate
the Plan at any time, provided that no such amendment or termination shall
adversely affect rights with respect to amounts or shares then credited to any
Deferred Cash Compensation Account or Deferred Stock Compensation Account.
A-9
<PAGE> 43
QUAKER STATE CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
THE OMNI MANDALAY HOTEL, 221 EAST
LAS COLINAS BLVD., IRVING, TEXAS
THURSDAY, MAY 16, 1996 - 1:00 P.M., C.D.S.T.
The undersigned stockholder of Quaker State Corporation (the
"Corporation") does hereby appoint Herbert M. Baum and Delbert J. McQuaide, or
each of them acting individually, as proxies of the undersigned to vote at the
Annual Meeting of Stockholders of the Corporation to be held May 16, 1996 (the
"Annual Meeting"), and at all adjournments thereof, all the shares of Capital
Stock of the Corporation which the undersigned may be entitled to vote, on the
matters set out on the reverse side of this card described in the Proxy
Statement and, at their discretion, on any other business which may properly
come before the Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" ITEMS
1, 2, 3 AND 4.
(Continued and to be signed, on the other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 44
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
Please mark [ ]
your vote as
indicated in
this example
Item 1 - The election of the following thirteen individuals as Directors:
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to the to vote for all nominees
contrary) listed to the right
[ ] [ ]
John D. Barr, Herbert M. Baum, Leonard M. Carroll, Conrad A. Conrad, 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. A vote FOR includes discretionary authority to vote for a
substitute nominee if any of the nominees listed becomes unable to serve or for
good cause will not serve.
(To withhold authority to vote for any individual nominee, print that nominee's
name on the line below.)
- --------------------------------------------------------------------------------
Item 2-To approve the adoption of the 1996 Directors' Fee Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3-To approve the adoption of an amendment to the 1994 Stock Incentive Plan
to authorize issuance under the Plan of shares previously authorized for
issuance, but not issued, under the 1986 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 4-The ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors for 1996.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign exactly as your name appears
hereon and return in the enclosed envelope. If
acting as attorney, executor, administrator,
guardian or trustee, please so indicate with
your full title when signing. If a corporation
please sign in full corporate name, by duly
authorized officer. If shares are held jointly,
each stockholder named should sign.
Dated: , 1996
------------------------------------
-------------------------------------------------
-------------------------------------------------
The signer hereby revokes all previous proxies
for the Annual Meeting acknowledges receipt of
the Notice of Annual Meeting of Stockholders and
Proxy Statement, both dated March 29, 1996, and
of the Annual Report to Stockholders for 1995
and hereby ratifies all that the said proxies
may do by virtue hereof.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
