<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
- -------- THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- -------- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number 1-2677
QUAKER STATE CORPORATION
(Exact name of registrant as specified
in its charter)
Delaware 25-0742820
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
225 East John Carpenter Freeway
Irving, Texas 75062
(Address of Principal Executive Offices)
(Zip Code)
(972)868-0400
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
--------- ------------
As of July 31, 1997, 35,155,739 shares of Capital Stock, par value
$1.00 per share, of the registrant were outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
------------------------ --------------------
06/30/97 06/30/96 06/30/97 06/30/96
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
REVENUES
Sales and operating revenues $ 342,799 $ 301,829 $ 660,666 $ 580,610
Other, net 1,032 2,064 2,862 4,090
- ----------------------------------------------------------------------------------------------------------
TOTAL REVENUES 343,831 303,893 663,528 584,700
COSTS AND EXPENSES
Cost of sales and operating costs 220,159 214,266 428,376 401,378
Selling, general and administrative 90,919 67,175 173,935 140,371
Depreciation and amortization 11,065 8,437 21,633 16,836
Interest 6,744 1,773 13,075 3,941
Unusual item -- 369 -- 845
- ----------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 328,887 292,020 637,019 563,371
- ----------------------------------------------------------------------------------------------------------
Pretax income 14,944 11,873 26,509 21,329
Provision for income taxes 6,100 4,700 10,800 8,450
- ----------------------------------------------------------------------------------------------------------
NET INCOME $ 8,844 $ 7,173 $ 15,709 $ 12,879
==========================================================================================================
PER SHARE:
NET INCOME PER SHARE $ 0.25 $ 0.22 $ 0.45 $ 0.39
==========================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 35,330 33,012 35,156 32,973
==========================================================================================================
DIVIDENDS PAID PER SHARE $ 0.10 $ 0.10 $ 0.20 $ 0.20
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
06/30/97 06/30/96
<S> <C> <C>
- -----------------------------------------------------------------------------
(IN THOUSANDS, UNAUDITED)
NET CASH USED IN OPERATING ACTIVITIES $ (6,134) $ (676)
- -----------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposal of property and equipment 1,378 1,607
Capital expenditures (25,965) (26,207)
Acquisition of businesses, net of cash acquired (21,213) (70,645)
Other, net (7,822) (7,103)
- -----------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (53,622) (102,348)
- -----------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid (6,980) (6,572)
Proceeds from debt 212,999 96,532
Payments on debt (166,603) (11,772)
- -----------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 39,416 78,188
- -----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (20,340) (24,836)
Cash and cash equivalents at beginning of period 29,397 30,659
- -----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,057 $ 5,823
=============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEET
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
06/30/97 12/31/96
- -------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT SHARE DATA) (unaudited)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,057 $ 29,397
Accounts and notes receivable, net 208,215 171,346
Inventories 122,300 113,970
Other current assets 23,479 26,518
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 363,051 341,231
- -------------------------------------------------------------------------------
Property, plant and equipment, net of accumulated
depreciation of $257,004 and $244,055 249,494 227,876
Goodwill, brands and other assets 483,580 467,729
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 1,096,125 $ 1,036,836
===============================================================================
LIABILITIES
Current liabilities:
Accounts payable $ 74,290 $ 73,959
Accrued liabilities 78,378 87,559
Debt payable within one year 16,052 17,337
Debt to be refinanced -- 142,000
- -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 168,720 320,855
- -------------------------------------------------------------------------------
Long-term debt 431,952 242,271
Other long-term liabilities 180,763 175,041
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 781,435 738,167
- -------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock, $1.00 par value; authorized shares,
250,000,000 at 6/30/97 and 95,000,000 at 12/31/96;
issued shares, 36,808,580 at 6/30/97 and
36,322,312 at 12/31/96 36,809 36,322
Additional capital 194,039 187,560
Retained earnings 112,209 103,480
Treasury Stock, at cost, 1,690,059 shares at 6/30/97
and 1,593,582 shares at 12/31/96 (26,773) (25,433)
Other, net (1,594) (3,260)
- -------------------------------------------------------------------------------
Total stockholders' equity 314,690 298,669
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,096,125 $ 1,036,836
===============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
SEGMENT INFORMATION
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
06/30/97 06/30/96 06/30/97 06/30/96
- ---------------------------------------------------------------------------------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Lubricants and lubricant services $ 244,744 $256,127 $ 469,283 $ 487,770
Consumer products 77,795 23,890 149,270 48,174
Truck-Lite 23,525 22,737 47,039 46,267
Intersegment sales (3,265) (925) (4,926) (1,601)
- ---------------------------------------------------------------------------------
TOTAL OPERATING REVENUES $ 342,799 $301,829 $ 660,666 $ 580,610
=================================================================================
OPERATING PROFITS
Lubricants and lubricant services $ 12,602 $ 11,939 $ 21,270 $ 24,020
Consumer products 12,694 4,439 24,885 7,019
Truck-Lite 2,107 2,011 3,934 4,021
- ---------------------------------------------------------------------------------
TOTAL OPERATING PROFITS 27,403 18,389 50,089 35,060
- ---------------------------------------------------------------------------------
Interest expense (6,744) (1,773) (13,075) (3,941)
Corporate income 191 825 381 1,576
Corporate expenses (5,906) (5,199) (10,886) (10,521)
Unusual item -- (369) -- (845)
- ---------------------------------------------------------------------------------
PRETAX INCOME $ 14,944 $ 11,873 $ 26,509 $ 21,329
=================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quaker State Corporation and Subsidiaries (unaudited)
1. In the opinion of management of Quaker State Corporation (the company), the
accompanying financial statements include all adjustments which are
necessary for a fair statement of the results for such periods. All of
these adjustments are of a normal recurring nature. The December 31, 1996
condensed consolidated balance sheet was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. These statements should be read in
conjunction with the financial statements included as part of the 1996
Annual Report on Form 10-K. Certain items in 1996 periods have been
reclassified to conform to the 1997 presentation.
2. The effective tax rates are higher than the 35% federal rate due to the
added impact of state and foreign taxes and nondeductible amortization.
3. The following schedule is prepared on a pro forma basis as though Blue
Coral, Inc. (Blue Coral) and Medo Industries, Inc. and its affiliated
companies had been acquired as of the beginning of 1996, after including
the impact of adjustments, such as amortization of goodwill, brands and
other intangible assets, interest expense and related tax effects.
<TABLE>
<S> <C>
For the six months ended June 30, 1996 (in thousands except per share data)
- ------------------------------------------------------------------------------------------------
Revenues $ 672,410
Income from continuing operations 14,853
Income per share from continuing operations .43
- ------------------------------------------------------------------------------------------------
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the acquisitions had been in effect for the period presented.
In addition, they are not intended to be a projection of future results.
4. Inventories consist of:
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
(in thousands) 6/30/97 12/31/96
- ------------------------------------------------------------------------------------------------
Crude oil, lubricants and related materials $ 85,026 $ 76,462
Consumer products 21,529 21,060
Vehicular lighting products 15,745 16,448
- ------------------------------------------------------------------------------------------------
Total $ 122,300 $ 113,970
- ------------------------------------------------------------------------------------------------
</TABLE>
The reserve to reduce the carrying value of inventories from current costs
to LIFO basis amounted to $18.5 million at June 30, 1997 and $21 million at
December 31, 1996.
5
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. In July 1996, the Federal Trade Commission (FTC) filed an administrative
proceeding seeking an order that the company's Slick 50 subsidiary, cease
and desist from making certain product claims concerning Slick 50 engine
treatment and refrain from making other product claims without adequate
substantiation. On July 23, 1997, the FTC released for public comment a
proposed settlement of the administrative proceeding. The proposed consent
decree, if finally approved, would include restrictions on the future
advertising of Slick 50 products and would include agreement by the FTC not
to seek consumer redress provided Slick 50 makes available by January 1998
at least $10,000,000 in consumer redress in the form of coupons, refunds or
free products for former purchasers of Slick 50 products. The proposed
consent decree would be without any admission of wrongdoing by Slick 50.
In May 1997, a purported class action lawsuit was filed in the United States
District Court for the Northern District of Illinois. The action names as
defendants a number of car wax manufacturers including Blue Coral, a
subsidiary of the company, and certain of its present and former officers.
The complaint alleges that the defendants falsely advertised and marketed
wax, polish or protectant products and seeks treble damages, attorneys'
fees and costs for the class for alleged violations of the federal RICO
statute and compensatory damages for the alleged violations of the Ohio
Consumer Sales Practices Act as well as for common law breach of express
warranty.
Also in May 1997, Hot Wax, Inc. filed a suit in the United States District
Court for the Northern District of Illinois. Plaintiff purports to be a
Wisconsin corporation that manufactures a wax product called "Hot Wax"
designed for use in automated car washes. The complaint names Blue Coral
and others as defendants. The case is purportedly brought under the federal
trademark statute, the Lanham Act, and the complaint alleges that Blue
Coral falsely represented certain products it marketed, advertised and sold
to consumers and retailers. Plaintiff seeks an injunction against Blue
Coral and also seeks to recover money damages, attorneys' fees and costs.
In July 1997, Dura Lube Corporation and others filed a suit in the United
States District Court for the District of Delaware. The complaint names the
company and its Slick 50 subsidiary as defendants and asserts claims under
the Sherman Act and the Clayton Act and for tortious interference with
business relations and civil conspiracy. Plaintiff alleges that the
company has attempted and conspired to monopolize the market for engine
treatment. Plaintiff seeks treble damages, punitive damages, attorneys'
fees and costs as well as injunctive relief.
The company has received notices from the EPA and others that it is a
"potentially responsible party" relative to certain waste disposal sites
identified by the EPA and may be required to share in the cost of cleanup.
The company has accrued for all matters which are probable and can be
reasonably estimated.
Contingent liabilities of an indeterminate amount exist in connection with
suits and claims arising in the ordinary course of business.
In the opinion of management, all matters discussed above are adequately
accrued for or covered by insurance, or, if not so provided for, are
without merit or the disposition is not anticipated to have a material
effect on the company's financial position; however, one or more of these
matters could have a material effect on future quarterly or annual results
of operations or cash flow when resolved.
6
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. In June 1997, the company replaced its $140 million and $165 million lines
of credit with a $400 million Credit Agreement. The Credit Agreement
provides for loans from time to time not in excess of $400 million
outstanding at any time, and provides for various interest rate elections
by the company. The Credit Agreement expires June 2002.
7. In July 1997, the company completed the sale of its Newell, West Virginia
refinery and associated inventory for total proceeds of approximately $39
million. Included in the sale were the company's oil gathering and
pipeline facilities in Ohio and Pennsylvania. The company retained
responsibility for certain environmental matters relating to the refinery.
8. On August 1, 1997, subsidiaries of the company acquired all of the assets
of Axius Holdings, L.P. (Axius) for approximately $51 million in cash.
Axius is a marketer of automotive window sun protection products and a
marketer of automotive accessories. The acquisition has been accounted for
under the purchase method. Accordingly, the operating results of Axius are
not included in the accompanying condensed consolidated financial statements
for the three and six months ended June 30, 1997. The operating results of
Axius will be included in the consumer products segment.
9. In February 1997, the Financial Accounting Standards Board issued Standard
No. 128, "Earnings Per Share," which will require the company to calculate
and disclose earnings per share using the guidance set forth in the
Standard. The new Standard is effective for financial statements issued
after December 15, 1997. The company does not expect the adoption of the
new standard to have a material impact on earnings per share.
In June 1997, the Financial Accounting Standards Board issued Standards No.
130 and No. 131, "Reporting Comprehensive Income and Disclosures about
Segments of an Enterprise and Related Information." Standard No. 130 will
require the company to disclose comprehensive income and its components in
its financial statements using the guidance set forth in the Standard.
Standard No. 131 will require the company to report certain information
about operating segments in its financial statements using the guidance set
forth in the Standard. The new Standards are effective for fiscal years
beginning after December 15, 1997. The company is evaluating the impact the
Standards will have on its financial statement presentation.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The condensed consolidated financial statements, segment information and
related notes for Quaker State Corporation (the company) included in this Form
10-Q, should be read as an integral part of this analysis.
The company reported net income of $8.8 million or $.25 per share for the
quarter ended June 30, 1997, compared to net income of $7.2 million or $.22 per
share for the quarter ended June 30, 1996. Sales and operating revenues were
$342.8 million for the quarter ended June 30, 1997 and $301.8 million for the
quarter ended June 30, 1996. These increases are due to the inclusion of Blue
Coral, Inc. (Blue Coral) and Medo Industries, Inc. and its affiliated companies
(Medo), which were acquired in 1996. The increases were offset by lower
revenues in the lubricants and lubricant services segment due to soft retail
market conditions. Operating profit for the quarter ended June 30, 1997,
increased 49% to $27.4 million from $18.4 million for the quarter ended June
30, 1996.
7
<PAGE> 9
Management's Discussion and Analysis of Results of Operations and Financial
Condition, continued
Lubricants and lubricant services operating profit was $12.6 million for the
quarter ended June 30, 1997, compared to $11.9 million for the quarter ended
June 30, 1996. This increase is primarily due to product cost savings,
partially offset by poor refining margins. Revenues for the quarter ended June
30, 1997 were $244.7 million, down 4% from $256.1 million for the quarter ended
June 30, 1996. This decline is primarily due to a decrease in private label
motor oil volume partially offset by a 5% increase in car counts and a 2.5%
increase in average ticket prices at the company's Q Lube operations.
Consumer products operating profit was $12.7 million for the quarter ended June
30, 1997, compared to $4.4 million for the quarter ended June 30, 1996.
Revenues for the quarter ended June 30, 1997 were $77.8 million, compared to
$23.9 million for the quarter ended June 30, 1996. These increases are due to
the inclusion of Blue Coral and Medo and reflect the traditional peak selling
period of the year for Blue Coral products.
Due to strong sales in the heavy duty OEM market, Truck-Lite operating profit
for the quarter ended June 30, 1997 was $2.1 million compared to $2 million for
the quarter ended June 30, 1996. Revenues increased slightly to $23.5 million
for the quarter ended June 30, 1997 from $22.7 million for the quarter ended
June 30, 1996 even though Truck-Lite continues to exit the automotive business
where revenues declined $1.8 million.
For the quarter ended June 30, 1997, corporate income was $191,000 compared to
$825,000 for the quarter ended June 30, 1996. The decrease is due to royalties
and interest received on the long-term receivable settled in December 1996.
Interest expense increased for the quarter ended June 30, 1997 as a result of
utilizing debt in recent acquisitions. Corporate expenses increased to $5.9
million from $5.2 million for the quarter ended June 30, 1996.
The effective tax rate for the quarter ended June 30, 1997 of 40.8% for
continuing operations is higher than the 35% federal rate due to the added
impact of state and foreign taxes and nondeductible amortization.
The company reported net income of $15.7 million or $.45 per share for the six
months ended June 30, 1997, compared to net income of $12.9 million or $.39 per
share for the six months ended June 30, 1996. Sales and operating revenues were
$660.7 million for the six months ended June 30, 1997 and $580.6 million for
the six months ended June 30, 1996. These increases are due to the inclusion
of Blue Coral and Medo, which were acquired in 1996. The increases were offset
by lower revenues in the lubricants and lubricant services segment due to soft
retail market conditions. Operating profit for the six months ended June 30,
1997 increased 43% to $50.1 million from $35.1 million for the six months ended
June 30, 1996.
Lubricants and lubricant services operating profit was $21.3 million for the
six months ended June 30, 1997, compared to $24 million for the six months
ended June 30, 1996. This decrease is primarily due to poor refining margins.
Revenues for the six months ended June 30, 1997 were $469.3 million, down 4%
from $487.8 million for the six months ended June 30, 1996. This decline
reflects a decrease in private label motor oil volume partially offset by a 3%
increase in car counts and a 2% increase in average ticket prices at the
company's Q Lube operations.
Consumer products operating profit was $24.9 million for the six months ended
June 30, 1997, compared to $7 million for the six months ended June 30, 1996.
Revenues for the six months ended June 30, 1997 were $149.3 million, compared
to $48.2 million for the six months ended June 30, 1996. These increases are
due to the inclusion of Blue Coral and Medo in 1997.
8
<PAGE> 10
Management's Discussion and Analysis of Results of Operations and Financial
Condition, continued
Truck-Lite operating profit for the six months ended June 30, 1997 was $3.9
million compared to $4 million for the six months ended June 30, 1996.
Revenues increased slightly to $47 million for the six months ended June 30,
1997 from $46.3 million for the six months ended June 30, 1996. Truck-Lite
continues to exit the OEM automotive business where revenues have declined $3.6
million. The decrease in operating profits is due to planned additional sales
and marketing costs associated with the aftermarket business.
For the six months ended June 30, 1997, corporate income was $381,000 compared
to $1.6 million for the six months ended June 30, 1996. The decrease is due to
royalties and interest received on the long-term receivable settled in December
1996. Interest expense increased for the six months ended June 30, 1997 as a
result of utilizing debt in recent acquisitions. Corporate expenses increased
slightly to $10.9 million from $10.5 million for the six months ended June 30,
1996.
The effective tax rate for the six months ended June 30, 1997 of 40.7% for
continuing operations is higher than the 35% federal rate due to the added
impact of state and foreign taxes and nondeductible amortization.
In July 1997, the company completed the sale of its Newell, West Virginia
refinery and associated inventory for total proceeds of approximately $39
million. Included in the sale were the company's oil gathering and pipeline
facilities in Ohio and Pennsylvania. The company retained responsibility for
certain environmental matters relating to the refinery. The company plans to
continue to operate the blending and packaging facility adjacent to the
refinery.
On August 1, 1997, subsidiaries of the company acquired all of the assets of
Axius Holdings, L.P. (Axius) for approximately $51 million in cash. Axius is a
marketer of automotive window sun protection products and a marketer of
automotive accessories. The acquisition has been accounted for under the
purchase method. Accordingly, the operating results of Axius are not included in
the accompanying condensed consolidated financial statements for the three and
six months ended June 30, 1997. The operating results of Axius will be included
in the consumer products segment.
Cash and cash equivalents decreased by $20.3 million from December 31, 1996.
The decrease was comprised of $6.1 million net cash used in operations, $53.6
million net cash used in investing activities and $39.4 million net cash
provided by financing activities. Cash used in operations was impacted by
additional working capital requirements, specifically increases in accounts
receivable and inventory and a decrease in accrued liabilities.
Cash used in investing activities of $53.6 million was primarily due to $26
million in capital expenditures and $21.2 million used in acquisitions. Cash
provided by financing activities of $39.4 million was primarily due to working
capital needs and investing activities.
In June 1997, the company replaced its $140 million and $165 million lines of
credit with a $400 million Credit Agreement. The Credit Agreement provides for
loans from time to time not in excess of $400 million outstanding at any time,
and provides for various interest rate elections by the company. The Credit
Agreement expires June 2002.
9
<PAGE> 11
Management's Discussion and Analysis of Results of Operations and Financial
Condition, continued
On July 29, 1997 the Board of Directors of the company authorized a quarterly
dividend of $.10 per share, payable to shareholders of record as of August 15,
1997.
In February 1997, the Financial Accounting Standards Board issued Standard No.
128, "Earnings Per Share," which will require the company to calculate and
disclose earnings per share using the guidance set forth in the Standard. The
new Standard is effective for financial statements issued after December 15,
1997. The company does not expect the adoption of the new standard to have a
material impact on earnings per share.
In June 1997, the Financial Accounting Standards Board issued Standards No. 130
and No. 131, "Reporting Comprehensive Income and Disclosures about Segments of
an Enterprise and Related Information." Standard No. 130 will require the
company to disclose comprehensive income and its components in its financial
statements using the guidance set forth in the Standard. Standard No. 131 will
require the company to report certain information about operating segments in
its financial statements using the guidance set forth in the Standard. The new
Standards are effective for fiscal years beginning after December 15, 1997. The
company is evaluating the impact the Standards will have on its financial
statement presentation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Slick 50. As reported in Quaker State Corporation's report on Form 10-K for
the year ending December 31, 1996, the Federal Trade Commission (FTC) filed an
administrative proceeding on July 16, 1996 seeking an order that Quaker State
Slick 50, Inc. (Slick 50), a subsidiary of Quaker State Corporation (company),
and several Slick 50 subsidiaries cease and desist from making certain product
claims concerning Slick 50 engine treatment and refrain from making other
product claims without adequate substantiation. On July 23, 1997, the FTC
released for public comment a proposed settlement of the administrative
proceeding. The proposed consent decree, if finally approved, would include
restrictions on the future advertising of Slick 50 products and would include
agreement by the FTC not to seek consumer redress provided Slick 50 makes
available by January 1998 at least $10,000,000 in consumer redress in the form
of coupons, refunds or free products for former purchasers of Slick 50
products. The proposed consent decree would be without any admission of
wrongdoing by Slick 50.
As the company also reported in its report on Form 10-K for the year ending
December 31, 1996, the respondents in the FTC proceeding and the company in
some instances were later named as defendants in ten lawsuits filed on behalf
of purported classes of purchasers of Slick 50(R) engine treatment alleging
that false, misleading, deceptive and /or unsubstantiated advertising claims
were made for Slick 50(R) engine treatment. On June 23, 1997, the United
States District Court for the Southern District of New York entered an order
remanding to the Supreme Court of New York the case captioned Weiss v. Quaker
State-Slick 50, Inc., et al. The District Court of Hidalgo County, Texas on May
25, 1997 entered an order certifying the case of Garza et al. v. Quaker
State-Slick 50, Inc. et al. as a class action. On June 3, 1997, Anthony
Cianciulli, on behalf of himself and all others similarly situated, brought an
action in the Supreme Court for Nassau County, New York against Slick 50 and
several Slick 50 subsidiaries for alleged violations of the New York General
Business Law and common law fraud through false product advertising. The
complaint seeks injunctive relief, compensatory and punitive damages, treble
damages, attorney's fees and costs.
On July 21, 1997, Dura Lube Corporation and others filed a suit in the United
States District Court for the District of Delaware. The complaint names the
company and its Slick 50 subsidiary as defendants and asserts claims under the
Sherman Act and the Clayton Act and for tortious interference with business
relations and civil conspiracy. Plaintiff alleges that the company has attempted
and conspired to monopolize the market for engine treatment by, among other
things, entering into exclusive dealing arrangements with major automotive parts
retailers around the country. Plaintiff seeks treble damages, punitive damages,
attorneys' fees and costs as well as injunctive relief. The company intends to
contest the action vigorously. There can be no assurance, however, that the
plaintiffs will not be awarded injunctive relief and or money damages, some or
all of which may be payable by the company.
10
<PAGE> 12
Legal Proceedings, continued
Blue Coral. On May 14, 1997, a purported class action lawsuit was filed in the
United States District Court for the Northern District of Illinois by John A.
Garner and Steven G. Grant on their own behalf and on behalf of a class of
persons who purchased wax, polish or protectant products sold by defendants.
The action names as defendants a number of car wax manufacturers including Blue
Coral, a subsidiary of the company, and certain of its present and former
officers. The complaint alleges that the defendants falsely advertised and
marketed such products and seeks treble damages, attorneys' fees and costs for
the class for alleged violations of the federal RICO statute and compensatory
damages for the alleged violations of the Ohio Consumer Sales Practices Act as
well as for common law breach of express warranty. The company intends to
contest the action vigorously. There can be no assurance, however, that the
plaintiffs will not be awarded damages, some or all or which may be payable by
the company.
On May 16, 1997, Hot Wax, Inc. filed a suit in the United States District Court
for the Northern District of Illinois. Plaintiff purports to be a Wisconsin
corporation that manufactures a wax product called "Hot Wax" designed for use
in automated car washes. The complaint names Blue Coral and others as
defendants. The case is brought under the federal trademark statute, the Lanham
Act, and the complaint alleges that Blue Coral falsely represented certain
products it marketed, advertised and sold to consumers and retailers.
Plaintiff seeks an injunction against Blue Coral and also seeks to recover
money damages, attorneys' fees and costs. The company intends to contest the
action vigorously. There can be no assurance, however, that the plaintiffs
will not be awarded injunctive relief and/or money damages, some or all of
which may be payable by the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 16, 1997, Quaker State held its Annual Meeting of Stockholders, at which
four items were submitted to a vote of security holders. The first item voted
upon was the election of directors, and the following individuals were elected
as directors, with the following votes for or withheld from each:
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
---- --------- --------------
<S> <C> <C>
John D. Barr 28,421,260 1,706,912
Herbert M. Baum 28,467,860 1,660,312
Leonard M. Carroll 28,507,344 1,620,828
Conrad A. Conrad 28,516,823 1,611,349
J. Taylor Crandall 28,495,019 1,633,153
Laurel Cutler 28,272,643 1,855,529
C. Frederick Fetterolf 25,820,574 4,307,598
Thomas A. Gardner 28,483,281 1,644,891
F. William Grube 28,323,080 1,805,092
Forrest R. Haselton 28,525,343 1,602,829
L. David Myatt 28,327,920 1,800,252
Raymond A. Ross, Jr. 28,329,252 1,798,920
Lorne R. Waxlax 28,501,891 1,626,281
</TABLE>
11
<PAGE> 13
Submission of Matters to a Vote of Security Holders, continued
The second matter submitted to a vote of security holders was the adoption of
an amendment to the Corporation's Certificate of Incorporation to increase the
number of shares authorized for issuance by the Corporation. On this second
matter, 21,515,749 shares were voted for the proposition, 8,396,537 shares were
voted against and 3,215,886 shares abstained.
The third matter submitted to a vote of security holders was the adoption of an
amendment to the 1994 Stock Incentive Plan to authorize the issuance under the
Plan of additional shares of the Corporation's Capital Stock, $1.00 par value.
On this third matter, 18,414,506 shares were voted for the proposition,
5,122,050 shares were voted against, and 293,860 shares abstained.
The fourth matter submitted to a vote of security holders was the ratification
of the appointment of Coopers & Lybrand L.L.P. as independent auditors for
1997. On this fourth matter, 29,685,584 shares were voted for the proposition,
186,495 were voted against, and 256,093 shares abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3 Composite Certificate of Incorporation of the company amended as of May 16, 1997, filed herewith.
4 Credit Agreement between Quaker State and Morgan Guaranty Trust Company of New York, as Agent, dated as
of June 12, 1997, with a list of omitted schedules and exhibits, filed herewith.
10(a) 1994 Stock Incentive Plan as amended and restated effective May 16, 1997, filed herewith.*
10(b) 1996 Directors' Fee Plan, as amended and restated effective March 27, 1997, filed herewith.*
10(c) Resolution dated March 28, 1997 terminating the letter agreements entered into between Quaker State and
each of its current non-employee directors regarding the retirement benefits provided by Quaker State
to its non-employee directors, filed herewith.*
11 Computation of net income per share for the quarters and six month periods ended June 30, 1997 and
1996, filed herewith.
12 Computation of ratio of earnings to fixed charges for the six month period ended June 30, 1997, filed
herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
(b) No current reports on Form 8-K were filed by the company during the
quarter ending June 30, 1997
*Management contract or compensatory plan, contract or arrangement required to
be filed by Item 601(b)(10)(iii) of Regulation S-K.
12
<PAGE> 14
QUAKER STATE CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUAKER STATE CORPORATION
(Registrant)
Date 8/12/97 By /s/ Herbert M. Baum
--------------- --------------------------------
Herbert M. Baum
Chairman of the Board and
Chief Executive Officer
Date 8/12/97 By /s/ Conrad A. Conrad
--------------- --------------------------------
Conrad A. Conrad
Vice Chairman and
Chief Financial Officer
13
<PAGE> 15
QUAKER STATE CORPORATION
EXHIBIT LIST
The following Exhibits are required to be filed with this quarterly
report on Form 10-Q.
<TABLE>
<CAPTION>
Exhibit No. and Document
- ------------------------
<S> <C>
3 Composite Certificate of Incorporation of the company amended as of May 16, 1997, filed herewith.
4 Credit Agreement between Quaker State and Morgan Guaranty Trust Company of New York, as Agent, dated
as of June 12, 1997, with a list of omitted schedules and exhibits, filed herewith.
10(a) 1994 Stock Incentive Plan as amended and restated effective May 16, 1997, filed herewith.*
10(b) 1996 Directors' Fee Plan, as amended and restated effective March 27, 1997, filed herewith.*
10(c) Resolution dated March 28, 1997 terminating the letter agreements entered into between Quaker State and
each of its current non-employee directors regarding the retirement benefits provided by Quaker State
to its non-employee directors, filed herewith.*
11 Computation of net income per share for the quarters and six month periods ended June 30, 1997 and
1996, filed herewith.
12 Computation of ratio of earnings to fixed charges for the six month period ended June 30, 1997, filed
herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
*Management contract or compensatory plan, contract or arrangement required to
be filed by Item 601(b)(10)(iii) of Regulation S-K.
14
<PAGE> 1
EXHIBIT 3
C E R T I F I C A T E
O F
I N C O R P O R A T I O N
O F
QUAKER STATE CORPORATION
RESTATED MAY 16, 1997
<PAGE> 2
C E R T I F I C A T E
O F
I N C O R P O R A T I O N
O F
QUAKER STATE CORPORATION
**********
FIRST. The name of the corporation is Quaker State
Corporation.
SECOND. Its registered office in the State of Delaware is
located at 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name and address of its registered agent is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware.
THIRD. The nature of the business, or objects or purposes
to be transacted, promoted or carried on are:
To purchase, lease or otherwise acquire lands, or oil, gas
and mineral rights in land, for the purpose of producing and to produce
therefrom oil, gas, or other volatile or mineral substances; to develop said
lands by drilling oil and gas wells thereon and by the installation of plants,
machinery and appliances for said purposes and to deal in, transport, store,
supply, market and sell oil, gas
2
<PAGE> 3
or volatile or mineral substances for either light, heat or both or other
purposes and for any or all of said purposes to own, maintain and operate
pipes, pipe lines, tanks, and such other devices, property and appliances as
may be necessary and incidental thereto.
To produce or otherwise acquire, transport, store and refine
petroleum and manufacture, compound and deal in the refined and semi-refined
products of petroleum, and own and operate all property, plants and refineries
necessary and incidental thereto.
To acquire by exchange or otherwise and subscribe for,
purchase, hold, own, assign, pledge and otherwise dispose of shares of capital
stock, bonds, mortgages, debentures, notes and other securities, obligations,
contracts and evidences of indebtedness of corporations of this State,
including this corporation, or of any other State, Country, Nation or
Government and to issue, execute and deliver in exchange therefor its stocks,
bonds or other obligations and to exercise in respect of any such shares of
stock, bonds and other securities so held, owned or possessed, any and all
rights, powers and privileges of ownership.
To manufacture, purchase or otherwise acquire, own, mortgage,
pledge, sell, assign and transfer, or otherwise dispose of, to invest, trade,
deal in and deal with goods, wares and merchandise and real and personal
property of every class and description.
To acquire, and pay for in cash, stock or bonds of this
corporation
3
<PAGE> 4
or otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in
respect of, mortgage, or otherwise dispose of letters patent of the United
States or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trademarks and trade names,
relating to or useful in connection with any business of this corporation.
To guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of shares of the capital stock of, or any
bonds, securities or evidences of indebtedness created by any other corporation
or corporations organized under the laws of the this State or any other State,
Country, Nation or Government, and while the owner thereof to exercise all the
rights, powers and privileges of ownership.
To enter into, make and perform contracts of every kind and
description with any person, firm, association, corporation, municipality,
county, state, body politic or government or colony or dependency thereof.
To borrow or raise moneys for any of the purposes of the
corporation and, from time to time, without limit as to amount, to draw, make,
accept, endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness, and to secure the payment of any thereof and of
4
<PAGE> 5
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation, whether at
the time owned or thereafter acquired and to sell, pledge or otherwise dispose
of such bonds or other obligations of the corporation for its corporate
purposes.
To purchase, hold, sell and transfer the shares of its own
capital stock; provided it shall not use its funds or property for the purchase
of its own shares of capital stock when such use would cause any impairment of
its capital except as otherwise permitted by law, and provided further that
shares of its own capital stock belonging to it shall not be voted upon
directly or indirectly.
To have one or more offices, to carry on all or any of its
operations and business and without restriction or limit as to amount to
purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise
dispose of real and personal property of every class and description in any of
the States, Districts, Territories or Colonies of the United States, and in any
and all foreign countries, subject to the laws of such State, District,
Territory, Colony or Country.
In general, to carry on any other business in connection with
the foregoing, and to have and exercise all the powers conferred by the laws of
Delaware upon corporations formed under the act hereinafter referred to, and to
do any or all of the things hereinbefore set forth to the same extent as
natural persons might or could do.
The objects and purposes specified in the foregoing clauses
shall,
5
<PAGE> 6
except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other clause in this
certificate of incorporation, but the objects and purposes specified in each of
the foregoing clauses of this article shall be regarded as independent objects
and purposes.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Two Hundred and Fifty Million
(250,000,000) shares of the par value of one dollar ($1.00) each.
FIFTH: Except as authorized by the Board of Directors in its
discretion, no stockholder of any class shall have any preemptive or
preferential right to purchase or subscribe for either (i) any shares of the
Corporation which the Corporation may issue or sell, whether out of the number
of shares authorized by this Certificate of Incorporation or any amendment
hereto or whether out of shares of the Corporation acquired by the Corporation
after the issue thereof, or (ii) any obligation or security of the Corporation
which the Corporation may issue or sell, that shall be convertible into, or
exchangeable for, any shares of the Corporation of any class, or (iii) any
warrant or option of the Corporation which the Corporation may issue or sell,
that confers upon the holder or owner thereof the right to subscribe for or
purchase from the Corporation any shares of the Corporation of any class.
6
<PAGE> 7
SIXTH. The amount of capital with which the corporation will
commence business is One Hundred Thousand Dollars ($100,000).
SEVENTH. The names and places of residence of the
incorporators are as follows:
<TABLE>
<CAPTION>
NAMES RESIDENCES
<S> <C>
C.S. Peabbles Wilmington, Delaware
H. H. Snow Wilmington, Delaware
L. H. Herman Wilmington, Delaware
</TABLE>
EIGHTH. The corporation is to have perpetual existence.
NINTH. The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
TENTH. In furtherance, and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
To make and alter the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens
upon the real and personal property of the corporation.
To set apart out of any of the funds of the corporation
available for
7
<PAGE> 8
dividends a reserve or reserves for any proper purpose or to abolish any such
reserve in the manner in which it was created.
By resolution or resolutions, passed by a majority of the
whole Board to designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions or in the by-laws of the corporation, shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, and may have power to authorize
the seal of the corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be stated in
the by-laws of the corporation or as may be determined from time to time by
resolution adopted by the board of directors.
When and as authorized by the affirmative vote of the holders
of a majority of the stock issued and outstanding having voting power given at
a stockholders' meeting duly called for that purpose, or when authorized by the
written consent of the holders of a majority of the voting stock issued and
outstanding, the board of directors shall have power and authority to sell,
lease or exchange all of the property and assets of the corporation, including
its good will and its corporate franchises, upon such terms and conditions and
for such consideration, which may be in whole or in part shares of stock in,
and/or other
8
<PAGE> 9
securities of, any other corporation or corporations, as its board of directors
shall deem expedient and for the best interests of the corporation.
The corporation may in its by-laws confer powers upon its
board of directors in addition to the foregoing, and in addition to the powers
and authorities expressly conferred upon it by statute.
ELEVENTH. Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of this corporation or of any creditor or stockholder thereof, or
on the application of any receiver or receivers appointed for this corporation
under the provisions of Section 3883 of the Revised Code of 1915 of said State,
or on the application of trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of Section 43 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said Court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholder or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any
9
<PAGE> 10
reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and said reorganization shall,
if sanctioned by the Court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
TWELFTH. Both stockholders and directors shall have power, if
the by-laws so provide, to hold their meetings, and to have one or more offices
within or without the State of Delaware, and to keep the books of this
corporation (subject to the provisions of the statutes), outside of the State
of Delaware at such places as may be from time to time designated by the board
of directors.
THIRTEENTH. The corporation reserves the right to amend,
alter, change or repeal any provision contained in this certificate of
incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
FOURTEENTH. 1. The affirmative vote or consent of the holders
of ninety-five percent (95%) of all shares of stock of the Corporation entitled
to vote in elections of directors, considered for the purposes of this Article
FOURTEEN as one class, shall be required for the adoption or
10
<PAGE> 11
authorization of a business combination (as hereinafter defined) with any other
entity (as hereinafter defined) if, as of the record date for the determination
of stockholders entitled to notice thereof and to vote thereon or consent
thereto, such other entity is the beneficial owner, directly or indirectly, of
more than thirty percent (30%) of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors considered for the
purposes of this Article FOURTEEN as one class; provided that such ninety-five
per cent (95%) voting requirement shall not be applicable if:
(a) The cash, or fair market value of other consideration, to be
received per share by capital stockholders of the Corporation in such business
combination bears the same or a greater percentage relationship to the market
price of the Corporation's Capital Stock immediately prior to the announcement
of such business combination as the highest per share price (including
brokerage commissions and/or soliciting dealers fees) which such other entity
has theretofore paid for any of the shares of the Corporation's Capital Stock
already owned by it bears to the market price of the Capital Stock of the
Corporation immediately prior to the commencement of acquisition of the
Corporation's Capital Stock by such other entity;
(b) The cash, or fair market value of other consideration, to be
received per share by capital stockholders of the Corporation in such business
combination (i) is not less than the highest per share price (including
brokerage commissions and/or soliciting dealers' fees) paid by such other
entity in acquiring any of its holdings of the Corporation's Capital Stock, and
(ii) is not less than the earnings per share of Capital Stock of the
Corporation for the four full consecutive fiscal quarters immediately preceding
the record date for solicitation of votes on such business combination,
multiplied by the then price/earnings multiple (if any) of such other entity as
customarily computed and reported in the financial community;
(c) After such other entity has acquired a thirty per cent (30%)
interest and prior to the consummation of such business combination: (i) such
other entity shall have taken steps to ensure that the Corporation's Board of
Directors included at all times representation by continuing director(s) (as
hereinafter
11
<PAGE> 12
defined) proportionate to the stockholdings of the Corporation's
public capital stockholders not affiliated with such other entity (with a
continuing director to occupy any resulting fractional board position); (ii)
there shall have been no reduction in the rate of dividends payable on the
Corporation's Capital Stock except as necessary to insure that a quarterly
dividend payment does not exceed 12.5% of the net income of the Corporation for
the four full consecutive fiscal quarters immediately preceding the declaration
date of such dividend, or except as may have been approved by a unanimous vote
of the directors; (iii) such other entity shall not have acquired any newly
issued shares of stock, directly or indirectly, from the Corporation (except
upon conversion of convertible securities acquired by it prior to obtaining a
thirty per cent (30%) interest or as a result of a pro rata stock dividend or
stock split); and (iv) such other entity shall not have acquired any additional
shares of the Corporation's outstanding Capital Stock or securities convertible
into Capital Stock except as a part of the transaction which results in such
other entity acquiring its thirty percent (30%) interest;
(d) Such other entity shall not have (i) received the benefit,
directly or indirectly (except proportionately as a stockholder) of any loans,
advances, guarantees, pledges or other financial assistance or tax credits
provided by the Corporation, or (ii) made any major change in the Corporation's
business or equity capital structure without the unanimous approval of the
directors, in either case prior to the consummation of such business
combination; and
(e) A proxy statement responsive to the requirements of the Securities
Exchange Act of 1934 shall be mailed to public stockholders of the Corporation
for the purpose of soliciting stockholder approval of such business combination
and shall contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the business
combination which the continuing directors, or any of them, may choose to state
and, if deemed advisable by a majority of the continuing directors, an opinion
of a reputable investment banking firm as to the fairness (or not) of the terms
of such business combination, from the point of view of the remaining public
stockholders of the Corporation (such investment banking firm to be selected by
a majority of the continuing directors and to be paid a reasonable fee for
their services by the Corporation upon receipt of such opinion).
The provisions of this Article FOURTEENTH shall also apply to
a business combination with any other entity which at any time has been the
beneficial owner, directly or indirectly, of more than thirty percent (30%) of
the outstanding shares of stock of the Corporation entitled to vote in
elections of
12
<PAGE> 13
directors considered for the purposes of this Article FOURTEENTH as one class,
notwithstanding the fact that such other entity has reduced its shareholdings
below thirty percent (30%) if, as of the record date for the determination of
stockholders entitled to notice of and to vote on or consent to the business
combination, such other entity is an "affiliate" of the Corporation (as
hereinafter defined).
2. As used in this Article FOURTEENTH, (a) the term "other
entity" shall include any corporation, person or other entity and any other
entity with which it or its "affiliate" or "associate" (as defined below) has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of stock of the Corporation,
or which is its "affiliate" or "associate" as those terms are defined in Rule
12b-2 of the General Rules and Regulation sunder the Securities Exchange Act of
1934 as in effect on July 1, 1979, together with the successors and assigns of
such persons in any transaction or series of transactions not involving a
public offering of the Corporation's stock within the meaning of the Securities
Act of 1933; (b) another entity shall be deemed to be the beneficial owner of
any shares of stock of the Corporation which the other entity (as defined
above) has the right to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise; (c) the outstanding
shares of any class of stock of the Corporation shall include shares deemed
owned through application of clause (b)
13
<PAGE> 14
above but shall not include any other shares which may be issuable pursuant to
any agreement, or upon exercise of conversion rights, warrants or options, or
otherwise; (d) the term "business combination" shall include any merger or
consolidation of the Corporation with or into any other corporation, or the
sale or lease of all or any substantial part of the assets of the Corporation
to, or any sale or lease to the Corporation or any subsidiary thereof in
exchange for securities of the Corporation of any assets (except assets having
an aggregate fair market value of less than $5,000,000) of any other entity;
(e) the term "continuing director" shall mean a person who was a member of the
Board of Directors of the Corporation elected by the public stockholders prior
to the time that such other entity acquired in excess of ten percent (10%) of
the stock of the Corporation entitled to vote in the election of directors, or
a person recommended to succeed a continuing director by a majority of
continuing directors; and (f) for the purposes of subparagraphs 1(a) and (b) of
this Article FOURTEENTH the term "other consideration to be received" shall
mean Capital Stock of the Corporation retained by its existing public
stockholders in the event of a business combination with such other entity in
which the Corporation is the surviving corporation.
3. A majority of the continuing directors shall have the
power and duty to determine for the purposes of this Article FOURTEENTH on the
basis of information known to them whether (a) such other entity beneficially
owns more than thirty percent (30%) of the outstanding shares of stock of the
Corporation
14
<PAGE> 15
entitled to vote in election of directors, (b) an other entity is an
"affiliate" or "associate" (as defined above) of another, (c) an other entity
has an agreement, arrangement or understanding with another, or (d) the assets
being acquired by the Corporation, or any subsidiary thereof, have an aggregate
fair market value of less than $5,000,000.
4. No amendment to the Certificate of Incorporation of the
Corporation shall amend, alter, change or repeal any of the provisions of this
Article FOURTEENTH, unless the amendment effecting such amendment, alteration,
change or repeal shall receive the affirmative vote or consent of the holders
of ninety-five percent (95%) of all shares of stock of the Corporation entitled
to vote in election of directors, considered for the purposes of this Article
FOURTEENTH as one class; provided that this paragraph 4 shall not apply to, and
such ninety-five percent (95%) vote or consent shall not be required for, any
amendment, alteration, change or repeal unanimously recommended to the
stockholders by the Board of Directors of the Corporation if all of such
directors are persons who would be eligible to serve as "continuing directors"
within the meaning of paragraph 2 of this Article FOURTEENTH.
5. Northing contained in this Article FOURTEENTH shall be
construed to relieve any other entity from any fiduciary obligation imposed by
law.
15
<PAGE> 16
FIFTEENTH. 1. To the fullest extent that the law of the State
of Delaware, as the same exists or may hereafter be amended, permits
elimination of the personal liability of directors, no director of this
Corporation shall be personally liable to this Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
2. The provisions of this Article FIFTEENTH shall be deemed
to be a contract with each director of this Corporation who serves as such at
any time while this Article FIFTEENTH is in effect, and each such director
shall be deemed to be serving as such in reliance on the provisions of this
Article FIFTEENTH. Any amendment or repeal of this Article FIFTEENTH or
adoption of any By-Law of this Corporation or other provision of the
Certificate of Incorporation of this Corporation which has the effect of
increasing director liability shall operate prospectively only and shall not
affect any action taken, or any failure to act, by a director of this
Corporation prior to the effectiveness of such amendment, repeal, By-Law or
other provisions.
SIXTEENTH. 1. Right to Indemnification. Except as prohibited
by law, every director and officer of the Corporation shall be entitled as of
right to be indemnified by the Corporation against reasonable expenses and any
liability paid or incurred by such person in connection with any actual or
16
<PAGE> 17
threatened claim, action, suit or proceeding, civil, criminal, administrative,
investigative or other, whether brought by or in the right of the Corporation
or otherwise, in which he or she may be involved, as a party or otherwise, by
reason of such person being or having been a director or officer of the
Corporation or by reason of the fact that such person is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary or other
representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other entity (such claim, action, suit or proceeding
hereinafter being referred to as an "Action"); provided, however, that no such
right to indemnification shall exist with respect to an Action brought by an
indemnitee (as defined below) against the Corporation (an "Indemnitee Action")
except as provided in the last sentence of this Paragraph 1. Persons who are
not directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to another such entity at the request
of the Corporation to the extent the Board of Directors of the Corporation at
any time denominates any of such persons as entitled to the benefits of this
Article SIXTEENTH. As used in this Article SIXTEENTH, "indemnitee" shall
include each director and officer of the Corporation and each other person
denominated by the Board of Directors of the Corporation as entitled to the
benefits of this Paragraph 1; "expenses" shall include fees and expenses of
counsel selected by an indemnitee and "liability" shall include amounts of
judgments, excise taxes, fines, penalties and amounts paid in settlement. An
indemnitee shall be entitled to be indemnified pursuant to
17
<PAGE> 18
this Paragraph 1 against expenses incurred in connection with an Indemnitee
Action only if (i) the Indemnitee Action is instituted under Paragraph 3 of
this Article SIXTEENTH and the indemnitee is successful in whole or in part in
such Indemnitee Action, (ii) the indemnitee is successful in whole or in part
in another Indemnitee Action for which expenses are claimed or (iii) the
indemnification for expenses is included in a settlement of, or is awarded by a
court in, such other Indemnitee Action.
2. Right to Advancement of Expenses. Every indemnitee shall
be entitled as of right to have the expenses of the indemnitee in defending any
Action or in bringing and pursuing any Indemnitee Action under Paragraph 3 of
this Article SIXTEENTH paid in advance by the Corporation prior to final
disposition of the Action or Indemnitee Action provided that the Corporation
receives a written undertaking by or on behalf of the indemnitee to repay the
amount advanced if it should ultimately be determined that the indemnitee is
not entitled to be indemnified for the expenses.
3. Right of Indemnitee to Bring Action. If a written claim
for indemnification under Paragraph 1 of this Article SIXTEENTH or for
advancement of expenses under Paragraph 2 of this Article SIXTEENTH is not paid
in full by the Corporation within 30 days after the claim has been received by
the Corporation, the Indemnitee may at any time thereafter bring an
18
<PAGE> 19
Indemnitee Action to recover the unpaid amount of the claim and, if successful
in whole or in part, the indemnitee shall also be entitled to be paid the
expense of bringing and pursuing such Indemnitee Action. The only defense to an
Indemnitee Action to recover on a claim for indemnification under Paragraph 1
of this Article SIXTEENTH shall be that the conduct of the indemnitee was such
that under Delaware law the Corporation is prohibited from indemnifying the
indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel and stockholders) to have made a
determination prior to the commencement of such Indemnitee Action that
indemnification of the indemnitee is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or stockholders) that the conduct of the indemnitee was such that
indemnification is prohibited by Delaware law, shall be a defense to such
Indemnitee Action or create a presumption that the conduct of the indemnitee
was such that indemnification is prohibited by Delaware law. The only defense
to an Indemnitee Action to recover on a claim for advancement of expenses under
Paragraph 2 of this Article SIXTEENTH shall be failure by the indemnitee to
provide the undertaking required by Paragraph 2 of this Article SIXTEENTH.
4. Funding and Insurance. The Corporation may create a trust
fund, grant a security interest, cause a letter of credit to be issued or use
other
19
<PAGE> 20
means (whether or not similar to the foregoing) to ensure the payment of all
sums required to be paid by the Corporation to effect indemnification as
provided in this Article SIXTEENTH. The Corporation may purchase and maintain
insurance to protect itself and any indemnitee against any expenses or
liability incurred by the indemnitee in connection with any Action, whether or
not the Corporation would have the power to indemnify the indemnitee against
the expenses or liability by law or under the provisions of this Article
SIXTEENTH.
5. Non-Exclusivity; Nature and Extent of Rights. The rights
to indemnification and advancement of expenses provided for in this Article
SIXTEENTH shall (i) not be deemed exclusive of any other rights, whether now
existing or hereafter created, to which any indemnitee may be entitled under
any agreement, provision in the Certificate of Incorporation or By-laws of the
Corporation, vote of stockholders or disinterested directors or otherwise, (ii)
be deemed to create contractual rights in favor of each indemnitee who serves
the Corporation at any time while this Section 5 is in effect (and each such
indemnitee shall be deemed to be so serving in reliance on the provisions of
this Section 5), (iii) continue as to each indemnitee who has ceased to have
the status pursuant to which the indemnitee was entitled or was denominated as
entitled to indemnification under this Article SIXTEENTH and shall inure to the
benefit of the heirs and legal representatives of each indemnitee and (iv) be
applicable to Actions commenced after the effectiveness of this Article
SIXTEENTH, whether
20
<PAGE> 21
arising from acts or omissions occurring before or after the effectiveness of
this Article SIXTEENTH. Any amendment or repeal of this Article SIXTEENTH or
adoption of any By-Law of this Corporation or other provision of the
Certificate of Incorporation of this Corporation which has the effect of
limiting in any way the rights to indemnification or advancement of expenses
provided for in this Article SIXTEENTH shall operate prospectively only and
shall not affect any action taken, or any failure to act, by an indemnitee
prior to the effectiveness of any such amendment, repeal, By-law or other
provision.
6. Partial Indemnity. If an indemnitee is entitled under any
provision of this Article SIXTEENTH to indemnification by the Corporation for
some or a portion of the expenses or a liability paid or incurred by the
indemnitee in the preparation, investigation, defense, appeal or settlement of
any Action or Indemnitee Action but not, however, for the total amount thereof,
the Corporation shall indemnify the indemnitee for the portion of such expenses
or liability to which the indemnitee is entitled.
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named for the purpose of forming a corporation to do business both
within and without the State of Delaware, and in pursuance of the General
Corporation Law of the State of Delaware, being Chapter 65 of the Revised Code
of Delaware, and the acts amendatory thereof and supplemental thereto, do make
21
<PAGE> 22
this certificate, hereby declaring and certifying that the facts herein stated
are true, and accordingly have hereunto set our hands and seals this 23rd day
of June, A.D. 1931.
In presence of
Harold E. Grantland C.S. Peabbles (Seal)
H.H. Snow (Seal)
L.H. Herman (Seal)
STATE OF DELAWARE )
) SS
COUNTY OF NEW CASTLE )
BE IT REMEMBERED, that on this 23rd day of June, A.D. 1931,
personally came before me, Harold E. Grantland, a Notary Public for the State
of Delaware, C.S. Peabbles, H.H. Snow, L.H. Herman, all of the parties to the
foregoing certificate of incorporation, known to me personally to be such, and
severally acknowledged the said certificate to be the act and deed of the
signers respectively and that the facts therein stated are truly set forth.
22
<PAGE> 23
GIVEN under my hand and seal of office the day and year
aforesaid.
Harold E. Grantland
Notary Public
Appointed January 12, 1931
State of Delaware
Term Two Years
23
<PAGE> 1
EXHIBIT 4
EXECUTION COPY
$400,000,000
CREDIT AGREEMENT
dated as of
June 12, 1997
among
Quaker State Corporation,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
-----------------------
J.P. Morgan Securities Inc.,
Arranger
Bank of America National Trust and Savings Association,
NationsBank of Texas, N.A., Royal Bank of Canada
and Texas Commerce Bank National Association,
Co-Agents
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions......................................................................1
SECTION 1.02. Accounting Terms and Determinations.............................................13
SECTION 1.03. Types of Borrowings.............................................................13
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend.............................................................14
SECTION 2.02. Notice of Committed Borrowing...................................................14
SECTION 2.03. Money Market Borrowings.........................................................14
SECTION 2.04. Notice to Banks; Funding of Loans...............................................19
SECTION 2.05. Notes...........................................................................19
SECTION 2.06. Maturity of Loans...............................................................19
SECTION 2.07. Interest Rates..................................................................20
SECTION 2.08. Fees............................................................................23
SECTION 2.09. Optional Termination or Reduction of Commitments................................24
SECTION 2.10. Method of Electing Interest Rates...............................................24
SECTION 2.11. Scheduled Termination of Commitments............................................25
SECTION 2.12. Optional Prepayments............................................................26
SECTION 2.13. General Provisions as to Payments...............................................26
SECTION 2.14. Funding Losses..................................................................27
SECTION 2.15. Computation of Interest and Fees................................................27
SECTION 2.16. Change of Control...............................................................27
SECTION 2.17. Increased Commitments, Additional Banks.........................................28
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness...................................................................29
SECTION 3.02. Borrowings......................................................................30
SECTION 3.03. Outstanding "Money Market Loans"................................................31
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 4.01. Corporate Existence and Power...................................................31
SECTION 4.02. Corporate and Governmental Authorization; No Contravention......................31
SECTION 4.03. Binding Effect..................................................................31
SECTION 4.04. Financial Information...........................................................32
SECTION 4.05. Litigation......................................................................32
SECTION 4.06. Compliance with ERISA...........................................................32
SECTION 4.07. Environmental Matters...........................................................33
SECTION 4.08. Taxes...........................................................................33
SECTION 4.09. Subsidiaries....................................................................33
SECTION 4.10. Regulatory Restrictions on Borrowing............................................34
SECTION 4.11. Full Disclosure.................................................................34
ARTICLE 5
COVENANTS
SECTION 5.01. Information.....................................................................34
SECTION 5.02. Payment of Obligations..........................................................36
SECTION 5.03. Maintenance of Property; Insurance..............................................36
SECTION 5.04. Conduct of Business and Maintenance of Existence................................37
SECTION 5.05. Compliance with Laws............................................................37
SECTION 5.06. Inspection of Property, Books and Records.......................................37
SECTION 5.07. Mergers and Sales of Assets.....................................................37
SECTION 5.08. Use of Proceeds.................................................................38
SECTION 5.09. Negative Pledge.................................................................38
SECTION 5.10. Debt to Total Capital...........................................................39
SECTION 5.11. Debt of Subsidiaries............................................................39
SECTION 5.12. Fixed Charge Coverage Ratio.....................................................39
SECTION 5.13. Transactions with Affiliates....................................................39
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default...............................................................40
SECTION 6.02. Notice of Default...............................................................42
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 7
THE AGENT
<S> <C> <C>
SECTION 7.01. Appointment and Authorization...................................................42
SECTION 7.02. Agent and Affiliates............................................................42
SECTION 7.03. Action by Agent.................................................................42
SECTION 7.04. Consultation with Experts.......................................................43
SECTION 7.05. Liability of Agent..............................................................43
SECTION 7.06. Indemnification.................................................................43
SECTION 7.07. Credit Decision.................................................................43
SECTION 7.08. Successor Agent.................................................................44
SECTION 7.09. Agent's Fee.....................................................................44
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................44
SECTION 8.02. Illegality......................................................................45
SECTION 8.03. Increased Cost and Reduced Return...............................................45
SECTION 8.04. Taxes...........................................................................47
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................48
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices.........................................................................49
SECTION 9.02. No Waivers......................................................................50
SECTION 9.03. Expenses; Indemnification.......................................................50
SECTION 9.04. Sharing of Set-Offs.............................................................50
SECTION 9.05. Amendments and Waivers..........................................................51
SECTION 9.06. Successors and Assigns..........................................................51
SECTION 9.07. Collateral......................................................................53
SECTION 9.08. Governing Law; Submission to Jurisdiction.......................................53
SECTION 9.09. Counterparts; Integration; Effectiveness........................................53
SECTION 9.10. WAIVER OF JURY TRIAL............................................................53
SECTION 9.11. Confidentiality.................................................................53
</TABLE>
Commitment Schedule
Pricing Schedule
Schedule 4.6 - Certain ERISA Liabilities
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Borrower
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Assignment and Assumption Agreement
iii
<PAGE> 5
AGREEMENT dated as of June 12, 1997 among QUAKER STATE CORPORATION,
the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b).
"ADJUSTED LONDON INTERBANK OFFERED RATE" has the meaning set forth in
Section 2.07(c)
"ADDITIONAL BANK" means each Person which becomes a Bank pursuant to
Section 2.17.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"AFFILIATE" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled
by or is under common control with a Controlling Person. As used herein, the
term "control" means possession, directly or indirectly, of the power to vote
10% or more of any class of voting securities of a Person or to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
1
<PAGE> 6
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSIGNEE" has the meaning set forth in Section 9.06(b).
"BANK" means each bank listed on the signature pages hereof, each
Additional Bank or Assignee which becomes a Bank pursuant to Section 2.17 or
9.06(c), and their respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means (i) a Committed Loan which bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or the provisions of Article 8 or (ii) an
overdue amount which was a Base Rate Loan immediately before it became overdue.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"BORROWER" means Quaker State Corporation, a Delaware corporation, and
its successors.
"BORROWER'S 1996 FORM 10-K" means the Borrower's annual report on Form
10-K for 1996, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended March 31, 1997, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"BORROWING" has the meaning set forth in Section 1.03.
"CD BASE RATE" has the meaning set forth in Section 2.07(b).
"CD LOAN" means (i) a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of Interest
Rate Election or (ii) an overdue amount which was a CD Loan immediately before
it became overdue.
2
<PAGE> 7
"CD MARGIN" means a rate per annum determined in accordance with the
Pricing Schedule.
"CD RATE" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD REFERENCE BANKS" means Texas Commerce Bank National Association,
NationsBank of Texas, N.A. and Morgan Guaranty Trust Company of New York.
"COMMITMENT" means (i) with respect to each Bank listed on the
Commitment Schedule, the amount set forth opposite the name of such Bank on the
Commitment Schedule and (ii) with respect to each Additional Bank or Assignee
which becomes a Bank pursuant to Section 2.17 or 9.06(c), the amount of the
Commitment thereby assumed by it, in each case as such amount may be changed
from time to time pursuant to Section 2.09, 2.17 or 9.06(c).
"COMMITMENT SCHEDULE" means the Schedule attached hereto identified as
such.
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED EBITDA" means, for any fiscal period, Consolidated Net
Income for such period plus, to the extent deducted in determining Consolidated
Net Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) income tax expense and (iii) depreciation, amortization and other
similar non-cash charges.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis for such period.
"CONSOLIDATED NET INCOME" means, for any fiscal period, the net income
of the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period, exclusive of the effect of any extraordinary or other
non-recurring gain (but not loss).
3
<PAGE> 8
"CONSOLIDATED RENTAL EXPENSE" means, for any period, the aggregate
rental expense of the Borrower and its Consolidated Subsidiaries determined on
a consolidated basis for such period.
"CONSOLIDATED STOCKHOLDERS' EQUITY" means at any date consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries at such
date.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower
in its consolidated financial statements if such statements were prepared as of
such date.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations (and, for purposes of Section 5.09 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person and (vii) all Debt of others Guaranteed
by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at
4
<PAGE> 9
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"DOMESTIC LOANS" means CD Loans or Base Rate Loans or both.
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(b).
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 3.01.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate
5
<PAGE> 10
as its Euro-Dollar Lending Office by notice to the Borrower and the Agent.
"EURO-DOLLAR LOAN" means (i) a Committed Loan which bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.07(c) on the basis of an Adjusted London Interbank Offered Rate.
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of
Texas Commerce Bank National Association, NationsBank of Texas, N.A. and Morgan
Guaranty Trust Company of New York.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(c).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CREDIT AGREEMENTS" means (i) the Amended and Restated Credit
Agreement dated as of April 17, 1996 and amended and restated as of September
27, 1996, among the Borrower, the banks parties thereto and Morgan Guaranty
Trust Company of New York, as agent for such banks and (ii) the Credit
Agreement dated as of September 30, 1996 among the Borrower, the banks parties
thereto and Texas Commerce Bank National Association, as agent for such banks.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"FIXED CHARGE COVERAGE RATIO" means, at any date, the ratio of (i) the
sum of (A) Consolidated EBITDA plus (B) Consolidated Rental Expense, in each
case for the four consecutive fiscal quarters of the Borrower and its
Consolidated
6
<PAGE> 11
Subsidiaries ending on such date to (ii) the sum of Consolidated Interest
Expense and Consolidated Rental Expense for such period.
"FIXED RATE LOANS" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01) or any combination of the foregoing.
"GROUP OF LOANS" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time, (ii) all
Euro-Dollar Loans having the same Interest Period at such time or (iii) all CD
Loans having the same interest period at such time, provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it had not been
so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan,
the period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
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<PAGE> 12
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such whole number of months thereafter as the Borrower may
elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
8
<PAGE> 13
(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 30 days)
as the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or
otherwise (but not including any demand deposit).
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LOAN" means a Domestic Loan, a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans, Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(c).
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) an
adverse effect on the rights and remedies of the Agent and the Banks hereunder
or under any Note.
"MATERIAL DEBT" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated
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<PAGE> 14
transactions, in an aggregate principal or face amount exceeding $15,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$15,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $15,000,000.
"MATERIAL SUBSIDIARY" means, at any time, any Subsidiary of the
Borrower whose total revenues (or, in the case of a Subsidiary which has
subsidiaries, consolidated total revenues) as shown by the latest financial
statements delivered by the Borrower pursuant to Section 4.04(a), 5.01(a) or
5.01(b), as the case may be, are at least 15% of the consolidated total
revenues of the Borrower and its Consolidated Subsidiaries (as shown on such
financial statements) at such time.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.03(d).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time to time by notice
to the Borrower and the Agent designate separate Money Market Lending Offices
for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"MONEY MARKET MARGIN" has the meaning set forth in Section
2.03(d)(ii)(C).
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money
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<PAGE> 15
Market Loan in accordance with Section 2.03.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in
Section 2.10.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"PRICING SCHEDULE" means the Schedule attached hereto identified as
such.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
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<PAGE> 16
Prime Rate.
"QUARTERLY DATE" means each March 31, June 30, September 30 and
December 31.
"REFERENCE BANKS" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "REFERENCE BANK" means any one
of such Reference Banks.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock or (b) any option, warrant or other right to acquire shares of
the Borrower's capital stock (but not including payments of principal, premium
(if any) or interest made pursuant to the terms of convertible debt securities
prior to conversion).
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but not including the Termination Date.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"TERMINATION DATE" means June 12, 2002, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar Business Day.
"TOTAL CAPITAL" means, at any date, the sum of (x) Consolidated Debt
plus (y) Consolidated Stockholders Equity (including for this purpose any
amount attributable to stock which is required to be redeemed or is redeemable
at the option of the holder, if certain events or conditions occur or exist or
otherwise), in each case determined at such date.
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<PAGE> 17
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies
the Agent that the Borrower wishes to amend any covenant in Article 5 to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article 5 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.3. Types of Borrowing. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article 2 on the same date, all of which Loans are of the same type (subject
to Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period. Borrowings are classified for purposes of this Agreement
either by reference to the pricing of Loans comprising such Borrowing (e.g., a
"Fixed Rate Borrowing" is a Euro-Dollar Borrowing, a CD Borrowing or a Money
Market Borrowing (excluding any such Borrowing consisting of Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to Section 8.01), and a
"Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by
reference to the provisions of Article 2 under which participation therein is
determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in
which all Banks participate in proportion to their Commitments, while a "Money
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<PAGE> 18
Market Borrowing" is a Borrowing under Section 2.03 in which the Bank
participants are determined on the basis of their bids in accordance
therewith).
ARTICLE 2
THE CREDITS
SECTION 2.1. Commitments to Lend. During the Revolving Credit Period,
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank at any one time outstanding shall not exceed the amount of its
Commitment. Each Borrowing under this Section shall be in an aggregate
principal amount of $5,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.02) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, prepay Loans to the extent permitted by
Section 2.12 and reborrow at any time during the Revolving Credit Period under
this Section.
SECTION 2.2. Notice of Committed Borrowing. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the
second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate;
and
(iv) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
SECTION 2.3. Money Market Borrowings. In addition to Committed
Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this
Section, request the Banks during the Revolving Credit Period to make offers to
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<PAGE> 19
make Money Market Loans to the Borrower. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(a) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received not later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest
Period, and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(b) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance
with this Section.
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(c) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time)
on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or,
in either case, such other time or date as the Borrower and the Agent shall
have mutually agreed and shall have notified to the Banks not later than the
date of the Money Market Quote Request for the first LIBOR Auction or Absolute
Rate Auction for which such change is to be effective); provided that Money
Market Quotes submitted by the Agent (or any affiliate of the Agent) in the
capacity of a Bank may be submitted, and may only be submitted, if the Agent or
such affiliate notifies the Borrower of the terms of the offer or offers
contained therein not later than (x) one hour prior to the deadline for the
other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the
deadline for the other Banks, in the case of an Absolute Rate Auction. Subject
to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except
with the written consent of the Agent given on the instructions of the
Borrower.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan
for which each such offer is being made, which principal
amount (w) may be greater than or less than the Commitment of
the quoting Bank, (x) must be $5,000,000 or a larger multiple
of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z)
may be subject to an aggregate limitation as to the principal
amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate (the
"Money Market Margin") offered for each such Money Market
Loan, expressed as a percentage (specified to the nearest
1/10,000th of 1%) to be added to or subtracted from such base
rate,
(D) in the case of an Absolute Rate Auction, the
rate of
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<PAGE> 21
interest per annum (specified to the nearest 1/10,000th of
1%) (the "Money Market Absolute Rate") offered for each such
Money Market Loan, and
(E) the identity of the quoting Bank.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit
D hereto or does not specify all of the information required
by subsection (d)(ii) above;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money Market
Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(d) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless
such subsequent Money Market Quote is submitted solely to correct a manifest
error in such former Money Market Quote. The Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market Loans for
which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money Market Quote may be
accepted.
(e) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection
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<PAGE> 22
(e). In the case of acceptance, such notice (a "Notice of Money Market
Borrowing") shall specify the aggregate principal amount of offers for each
Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
(ii)C the principal amount of each Money Market Borrowing
must be $5,000,000 or a larger multiple of $1,000,000;
(iii)C acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be; and
(iv)C the Borrower may not accept any offer that is described
in subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(f) Allocation by Agent. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as possible (in multiples
of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the Agent of the
amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
SECTION 2.4. Notice to Banks; Funding of Loans. (a Upon receipt of a
Notice of Borrowing, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in Article 3 has not been
satisfied, the Agent will make the funds so received from the Banks available
to the Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to
the
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<PAGE> 23
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsections (b) and (c) of this Section and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
(i) in the case of the Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable thereto pursuant to Section
2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank
shall repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.5. Notes SECTION. (a The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account of
its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the
relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount and type of each Loan made by it and the date and amount of each payment
of principal made by the Borrower with respect thereto, and may, if such Bank
so elects in connection with any transfer or enforcement of its Note, endorse
on the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding; provided
that the failure of any Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Notes. Each
Bank is hereby irrevocably authorized by the Borrower so to endorse its Note
and to attach to and make a part of its Note a continuation of any such
schedule as and when required.
SECTION 2.6. Maturity of Loans. (a Each Committed Loan shall mature,
and the principal amount thereof shall be due and payable, on the Termination
Date.
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(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.7. Interest Rates. (a Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day. Such interest shall be payable quarterly in arrears on
each Quarterly Date and, with respect to the principal amount of any Base Rate
Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate
Loan is so converted. Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base
Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the higher of (i)
the rate applicable to Base Rate Loans for such day and (ii) the sum of the CD
Margin plus the Adjusted CD Rate applicable to such Loan at the date such
payment was due.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ----------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
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The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to such
Interest Period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if
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necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable
London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than three months as the
Agent may select) deposits in dollars in an amount approximately equal to such
overdue payment are offered to each of the Euro-Dollar Reference Banks in the
London interbank market for the applicable period determined as provided above
by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8 shall exist, at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such
day) and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus the
Adjusted London Interbank Offered Rate applicable to such Loan at the date such
payment was due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
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<PAGE> 27
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof. Any
overdue principal of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available
on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.8. Fees. (a) The Borrower shall pay to the Agent for the
account of the Banks ratably a facility fee at the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility fee
shall accrue (i) from and including the Effective Date to but excluding the
date of termination of the Commitments in their entirety, on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including such date of termination to but excluding the date the Loans shall be
repaid in their entirety, on the daily aggregate outstanding principal amount
of the Loans.
(b) If at the last day of any fiscal quarter, the ratio of
Consolidated Debt to Total Capital shall exceed .6:1, then the Borrower shall
pay to the Agent, for the account of the Banks ratably in proportion to their
Commitments, for each day during the immediately following fiscal quarter a
usage fee at the rate of .0625% per annum on the daily average aggregate
outstanding principal amount of the Committed Loans during such following
fiscal quarter.
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(c) Facility fees and usage fees shall be payable quarterly in arrears
on each Quarterly Date and on the date of termination of the Commitments in
their entirety (and, if later, the date the Loans shall be repaid in their
entirety).
(d) On the Effective Date the Borrower shall pay to the Agent for the
account of each Bank a participation fee in the amount heretofore mutually
agreed.
SECTION 2.9. Optional Termination or Reduction of Commitments. During
the Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Agent, (i) terminate the Commitments at any time,
if no Loans are outstanding at such time or (ii) ratably reduce from time to
time by an aggregate amount of $5,000,000 or a larger multiple of $1,000,000,
the aggregate amount of the Commitments in excess of the aggregate outstanding
principal amount of the Loans.
SECTION 2.10. Method of Electing Interest Rates. (a The Loans included
in each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of Article 8), as follows:
(i)C if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to CD Loans as of any Domestic Business Day or
to Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii)C if such Loans are CD Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.14 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans; and
(iii)C if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or CD Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest
Period, subject to Section 2.14 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent not later than 10:00 A.M. (New York City time) on
the third Euro-Dollar Business Day before the conversion or continuation
selected in
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such notice is to be effective (unless the relevant Loans are to be converted
to Domestic Loans of the other type or are CD Rate Loans to be continued as CD
Rate Loans for an additional Interest Period, in which case such notice shall
be delivered to the Agent not later than 10:00 A.M. (New York City time) on the
second Domestic Business Day before such conversion or continuation is to be
effective). A Notice of Interest Rate Election may, if it so specifies, apply
to only a portion of the aggregate principal amount of the relevant Group of
Loans; provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and
the remaining portion to which it does not apply, are each $5,000,000 or any
larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i)C the Group of Loans (or portion thereof) to which such
notice applies;
(ii)C the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of subsection (a) above;
(iii)C if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans being converted are to be
Fixed Rate Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv)C if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such notice shall not thereafter be revocable
by the Borrower.
(d) An election by the Borrower to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section shall not
constitute a "Borrowing" subject to the provisions of Section 3.02.
SECTION 2.11. Scheduled Termination of Commitments. The Commitments
shall terminate on the Termination Date and any Loans then
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outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.12. Optional Prepayments.
(a) The Borrower may, upon at least one Domestic Business Day's notice
to the Agent, prepay any Group of Base Rate Loans (or any Money Market LIBOR
Borrowing bearing interest at the Base Rate pursuant to Section 8.01), in whole
at any time, or from time to time in part in amounts aggregating $5,000,000 or
any larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Group.
(b) The Borrower may not prepay all or any portion of the principal
amount of any Fixed Rate Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.13. General Provisions as to Payments. (a The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior
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to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than
the last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails
to borrow, prepay, convert or continue any Fixed Rate Loans after notice has
been given to any Bank in accordance with Section 2.04(a), 2.12(c) or 2.10(c)
the Borrower shall reimburse each Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that
such Bank shall have delivered to the Borrower a certificate as to the amount
of such loss or expense, which certificate shall be conclusive in the absence
of manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day) (i.e. (interest rate
divided by 365 (or 366 days in a leap year)) times (actual number of days
elapsed). All other interest and fees shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed (including the first
day but excluding the last day) (i.e. (interest rate or fee rate divided by
360) times (actual number of days elapsed)).
SECTION 2.16. Change of Control. If a Change of Control shall occur
(i) the Borrower will, within ten days after the occurrence thereof, give each
Bank notice thereof and shall describe in reasonable detail the facts and
circumstances giving rise thereto and (ii) each Bank may, by three Domestic
Business Days' notice to the Borrower and the Agent given not later than 60
days after such Change of Control, terminate its Commitment, which shall
thereupon be terminated, and declare the Note held by it (together with accrued
interest thereon) and any other amounts payable hereunder for its account to
be, and such Note and
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<PAGE> 32
such other amounts shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
For purposes of this Section, the following terms have the following
meanings:
A "Change of Control" shall occur if (i) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under said Act) of 45% or more in voting power of the outstanding Voting Stock
of the Borrower or (ii) during any period of 12 consecutive calendar months,
individuals who were either (x) directors of the Borrower on the first day of
such period or (y) elected to fill vacancies caused by the ordinary course
resignation or retirement of any other director and whose nomination or
election was approved by a vote of at least a majority of the directors then
still in office who were directors of the Borrower on the first day of such
period, shall cease to constitute a majority of the board of directors of the
Borrower.
"Voting Stock" means capital stock of any class or classes (however
designated) having ordinary voting power for the election of directors of the
Borrower, other than stock having such power only by reason of the happening of
a contingency.
SECTION 2.17. Increased Commitments, Additional Banks. (a On a single
occasion, the Borrower may, upon at least 30 days' notice (which notice shall
be given not later than June 12, 1998) to the Agent (which shall promptly
provide a copy of such notice to the Banks), propose to increase the aggregate
amount of the Commitments by an amount not greater than $100,000,000 (the
amount of any such increase, the "Increased Commitments"). Each Bank party to
this Agreement at such time shall have the right (but no obligation), for a
period of 15 days following receipt of such notice to elect by notice to the
Borrower and the Agent to increase its Commitment by a principal amount which
bears the same ratio to the Increased Commitments as its then Commitment bears
to the aggregate Commitments then existing. Any Bank not responding within 15
days of receipt of such notice shall be deemed to have declined to increase its
Commitment.
(b) If any Bank party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may,
within 10 days of the Banks' response, designate one or more of the existing
Banks or other financial institutions acceptable to the Agent and the Borrower
(which consent of the Agent shall not be unreasonably withheld) which at the
time agree to (i) in the case of any such Person that is an existing Bank,
increase its
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Commitment and (ii) in the case of any other such Person (an "Additional
Bank"), become a party to this Agreement. The sum of the increases in the
Commitments of the existing Banks pursuant to this subsection (b) plus the
Commitments of the Additional Banks shall not in the aggregate exceed the
unsubscribed amount of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.17 shall become effective upon the receipt by the Agent of (i)
an agreement in form and substance satisfactory to the Agent signed by the
Borrower, by each Additional Bank and by each other Bank whose Commitment is to
be increased, setting forth the new Commitments of such Banks and setting forth
the agreement of each Additional Bank to become a party to this Agreement and
to be bound by all the terms and provisions hereof and (ii) such evidence of
appropriate corporate authorization on the part of the Borrower with respect to
the Increased Commitments and such opinions of counsel for the Borrower with
respect to the Increased Commitments as the Agent may reasonably request
(d) Upon any increase in the aggregate amount of the Commitments
pursuant to this Section 2.17, within five Domestic Business Days, in the case
of any Group of Base Rate Loans then outstanding, and at the end of the then
current Interest Period with respect thereto, in the case of any Group of
Committed Fixed Rate Loans then outstanding, the Borrower shall prepay such
Group in its entirety and, to the extent the Borrower elects to do so and
subject to the conditions specified in Article 3, the Borrower shall reborrow
Committed Loans from the Banks in proportion to their respective Commitments
after giving effect to such increase, until such time as all outstanding
Committed Loans are held by the Banks in such proportion.
ARTICLE 3
CONDITIONS
SECTION 3.1. Effectiveness. The Agreement shall become effective on
the date that the Agent shall have received (i) payment of all principal of and
interest on any loans outstanding under, and of all other amounts payable
under, the Existing Credit Agreements (subject to Section 3.03 below); (ii)
payment of all fees payable under Section 2.08(d); and (iii) each of the
following documents, each dated the Effective Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or
before the Effective Date complying with the provisions of Section 2.05;
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<PAGE> 34
(b) an opinion of the Director, Corporate Legal Services of the
Borrower, substantially in the form of Exhibit E hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request; and
(d) all documents the Agent may reasonably request relating to the
existence of the Borrower, the corporate authority for and the validity of this
Agreement and the Notes, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent provided that this Agreement shall not
become effective or be binding on any party hereto unless all of the foregoing
conditions are satisfied not later than June 30, 1997. The Agent shall promptly
notify the Borrower and the Banks of the Effective Date, and such notice shall
be conclusive and binding on all parties hereto. The Banks that are parties to
the Existing Credit Agreements, comprising the "Required Banks" as defined in
each Existing Credit Agreement, and the Borrower agree (i) that the commitments
under the Existing Credit Agreements shall terminate in their entirety
simultaneously with and subject to the effectiveness of this Agreement, (ii)
that the Borrower shall be obligated to pay the accrued facility fees
thereunder to but excluding the date of such effectiveness and (iii) that the
Borrower may prepay any outstanding "Money Market Loan" or "Competitive Bid
Loan" under the Existing Credit Agreements as contemplated by Section 3.03
below.
SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate amount
of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing.
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Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
SECTION 3.3. Outstanding "Money Market Loans". Each "Money Market
Loan" or "Competitive Bid Loan" outstanding under an Existing Credit Agreement
made by a Bank party to this Agreement shall be deemed prepaid in full on the
Effective Date and reloaned by such Bank as a Money Market Loan hereunder, with
a maturity and interest rate as determined under such Existing Credit
Agreement. No payments in respect of such loans pursuant to the break-funding
indemnification provisions of such Existing Credit Agreement shall be due or
payable as a result of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
SECTION 4.1. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 4.2. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the corporate powers of the Borrower, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.3. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms except
as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights generally and by
general principles of equity.
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SECTION 4.4. Financial Information. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of December 31, 1996 and
the related consolidated statements of income and cash flows for the fiscal
year then ended, reported on by Coopers & Lybrand L.L.P. and incorporated by
reference in the Borrower's 1996 Form 10-K, a copy of which has been delivered
to each of the Banks, fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of the Borrower and
its Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of March 31, 1997 and the related unaudited
consolidated statements of income and cash flows for the three months then
ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such three
month period (subject to normal year-end adjustments).
(c) Since March 31, 1997 there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole (including
without limitation any such material adverse change caused by any action, suit
or proceeding disclosed in the Borrower's periodic reports filed with the
Securities and Exchange Commission from time to time).
SECTION 4.5. Litigation. Except as set forth in the Borrower's
periodic reports filed with the Securities and Exchange Commission from time to
time, there is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole, or which in any manner
draws into question the validity or enforceability of this Agreement or the
Notes.
SECTION 4.6. Compliance with ERISA. To the best of the Borrower's
knowledge, each member of the ERISA Group has fulfilled its obligations under
the minimum funding standards of ERISA and the Internal Revenue Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Internal Revenue Code with
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respect to each Plan. To the best of the Borrower's knowledge, no member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) except as set forth in Schedule 4.6, incurred any
liability in excess of $15,000,000 under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.7. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.8. TaxesSECTION. The Borrower and its Subsidiaries have
filed (or have made timely requests for an extension to file) all United States
Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Subsidiary, other than any such taxes the non-payment of which, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.9. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all
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material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted (except for any governmental
licenses, authorizations, consents or approvals the absence of which could not
reasonably be expected to have a Material Adverse Effect).
SECTION 4.10. Regulatory Restrictions on Borrowing. The Borrower is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended, a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
SECTION 4.11. Full Disclosure. The information heretofore furnished by
the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby taken as a whole does
not, and the information hereafter so furnished, taken as a whole with all
information previously furnished will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.1. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner acceptable to the Securities
and Exchange Commission by Coopers & Lybrand L.L.P. or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of income
and cash flows for
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such quarter and for the portion of the Borrower's fiscal year ended at the end
of such quarter, setting forth in the case of such statements of income and
cash flows, in comparative form the figures for the corresponding quarter and
the corresponding portion of the Borrower's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
generally accepted accounting principles and consistency by the chief financial
officer or the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Sections 5.09 through 5.12,
inclusive, on the date of such financial statements and (ii) stating whether
any Default exists on the date of such certificate and, if any Default then
exists, setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i) whether
anything has come to their attention to cause them to believe that any Default
existed on the date of such statements and (ii) confirming the calculations set
forth in the officer's certificate delivered simultaneously therewith pursuant
to clause (c) above;
(e) within ten days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate of
the chief financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower is taking
or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which the Borrower reasonably
believes might constitute grounds for a termination of such Plan under Title IV
of ERISA, or knows that the plan administrator of any Plan has given or is
required to give
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notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Internal Revenue Code, a copy
of such application; (v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed
with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any
payment or contribution to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement
which has resulted or which the Borrower reasonably believes could result in
the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.2. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities (including,
without limitation, tax liabilities and claims of materialmen, warehousemen and
the like which if unpaid might by law give rise to a Lien), except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, and will cause each Subsidiary to maintain, in accordance with
generally accepted accounting principles, appropriate reserves for the accrual
of any of the same.
SECTION 5.3. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all material property useful and
necessary in its business in good working order and condition, ordinary wear
and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective material properties in at least such amounts, against at least
such risks and with such risk retention as are usually maintained, insured
against or retained,
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as the case may be, in the same general area by companies of established repute
engaged in the same or a similar business; and will furnish to the Banks, upon
request from the Agent, information presented in reasonable detail as to the
insurance so carried.
SECTION 5.4. Conduct of Business and Maintenance of Existence. The
Borrower will preserve, renew and keep in full force and effect, and will cause
each Subsidiary to preserve, renew and keep in full force and effect their
respective corporate existence and their respective material rights, privileges
and franchises necessary or desirable in the normal conduct of business (except
for any rights, privileges or franchises the non-maintenance of which could not
reasonably be expected to have a Material Adverse Effect); provided that
nothing in this Section 5.04 shall prohibit (i) the merger of a Subsidiary into
the Borrower or the merger or consolidation of a Subsidiary with or into
another Person if the corporation surviving such consolidation or merger is a
Subsidiary and if, in each case, after giving effect thereto, no Default shall
have occurred and be continuing or (ii) the termination of the corporate
existence of any Subsidiary if the Borrower in good faith determines that such
termination is in the best interest of the Borrower and is not materially
disadvantageous to the Banks.
SECTION 5.5. Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except (i) where the necessity of compliance therewith
is contested in good faith by appropriate proceedings or (ii) where
noncompliance could not reasonably be expected to have a Material Adverse
Effect.
SECTION 5.6. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 5.7. Mergers and Sales of Assets. The Borrower will not (i)
consolidate or merge with or into any other Person, (ii) sell, lease or
otherwise transfer, directly or indirectly, all or substantially all of the
assets of the Borrower to any other Person or Persons; provided that the
Borrower may merge with another Person if (x) the Borrower is the corporation
surviving such merger and
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(y) after giving effect to such merger, no Default shall have occurred and be
continuing.
SECTION 5.8. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower for general corporate purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any "margin
stock" within the meaning of Regulation U.
SECTION 5.9. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $26,000,000;
(b) any Lien existing on any asset of any person at the time such
person becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 180
days after the acquisition thereof;
(d) any Lien on any asset of any person existing at the time such
person is merged or consolidated with or into the Borrower or a Subsidiary and
not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens existing as of the date hereof or arising hereafter, in
each case arising in the ordinary course of its business and which (i) do not
secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an
amount exceeding $15,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in
the operation of its business;
(h) Liens on cash and cash equivalents securing Derivatives
Obligations,
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provided that the aggregate amount of cash and cash equivalents subject to such
Liens may at no time exceed $15,000,000; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any date not
to exceed 5% of Consolidated Stockholders' Equity at such date.
SECTION 5.10. Debt to Total Capital The ratio of Consolidated Debt to
Total Capital shall not exceed at any time .7:1.
SECTION 5.11. Debt of Subsidiaries. The Borrower will not permit any
of its Material Subsidiaries to incur or at any time be liable with respect to
any Debt except:
(a) Debt owed to the Borrower or to a wholly owned Subsidiary;
(b) Debt secured by a Lien permitted by Section 5.09(c) and any
refinancing, extension, renewal or refunding thereof;
(c) Debt of any Person existing at the time such Person is merged or
consolidated with or into any Material Subsidiary and not incurred in
contemplation of such merger or consolidation;
(d) Debt of any Person existing at the time such Person becomes a
Material Subsidiary, regardless of whether such Debt was incurred in
contemplation of such event;
(e) Debt of Quaker State Inc., a Canadian corporation, in an
aggregate principal or face amount not to exceed $20,000,000.
(f) Debt not otherwise permitted by the foregoing clauses in an
aggregate principal or face amount at any time outstanding not to exceed
$50,000,000.
SECTION 5.12. Fixed Charge Coverage Ratio. As of the last day of
each fiscal quarter of the Borrower, the Fixed Charge Ratio will not be less
than 1.4:1.
SECTION 5.13. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-
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length basis on terms at least as favorable to the Borrower or such Subsidiary
than could have been obtained from a third party who was not an Affiliate;
provided that the foregoing provisions of this Section shall not prohibit any
such Person from declaring or paying any lawful dividend or other payment
ratably in respect of all of its capital stock of the relevant class so long
as, after giving effect thereto, no Default shall have occurred and be
continuing.
ARTICLE 6
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan when due
or any interest, any fees or any other amount payable hereunder within 5 days
of the due date thereof;
(b) the Borrower shall fail to observe or perform any covenant
contained in Article 5, other than those contained in Sections 5.01 through
5.06;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a)
or (b) above) for 30 days after notice thereof has been given to the Borrower
by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Borrower or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law
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now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for
a period of 60 days; or an order for relief shall be entered against the
Borrower or any Material Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(i) except with respect to any liability disclosed in Schedule 4.6,
any member of the ERISA Group shall fail to pay when due an amount or amounts
aggregating in excess of $15,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to terminate a Material Plan under
Section 4041(c) of ERISA shall be filed under Title IV of ERISA by any member
of the ERISA Group, any plan administrator or any combination of the foregoing;
or the PBGC shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer any Material
Plan; or a condition shall exist under Section 4042(a) of ERISA by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could cause one
or more members of the ERISA Group to incur a current payment obligation in
excess of $15,000,000; or
(j) judgments or orders for the payment of money in excess of
$15,000,000 shall be rendered against the Borrower or any Subsidiary and such
judgments or orders shall continue unsatisfied and unstayed for a period of 10
days; then, and in every such event, the Agent shall (i) if requested by Banks
having more than 50% in aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon terminate, and (ii)
if requested by Banks holding more than 50% of the aggregate principal amount
of the Loans, by notice to the Borrower declare the Loans (together with
accrued interest thereon) to be, and the Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all
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of which are hereby waived by the Borrower; provided that in the case of any of
the Events of Default specified in clause 6.01(g) or 6.01(h) above with respect
to the Borrower, without any notice to the Borrower or any other act by the
Agent or the Banks, the Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
Notwithstanding anything contained in the foregoing paragraph, if at
any time within 60 days after the Notes have been declared due pursuant to the
preceding paragraph, the Borrower shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than by
acceleration and all Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
Section 9.05, then the Required Banks by written notice to the Borrower to be
delivered by the Agent, may at their option rescind and annul the acceleration
and its consequences; but such action shall not affect any subsequent Event of
Default or Default or impair any right of the Banks consequent thereon.
SECTION 6.2. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the Notes as are delegated
to the Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto.
SECTION 7.2. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any
other Bank and may exercise or refrain from exercising the same as though it
were not the Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent.
SECTION 7.3. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any
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Default, except as expressly provided in Article 6.
SECTION 7.4. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.5. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or (ii) in the
absence of its own gross negligence or willful misconduct. Neither the Agent
nor any of its affiliates nor any of their respective directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (ii) the performance
or observance of any of the covenants or agreements of the Borrower; (iii) the
satisfaction of any condition specified in Article 3, except receipt of items
required to be delivered to the Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex, facsimile transmission or similar
writing) believed by it to be genuine or to be signed by the proper party or
parties. Without limiting the generality of the foregoing, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine or any applicable law. Instead, such term is used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any action taken or
omitted by such indemnitees hereunder.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
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acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.8. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
SECTION 7.9. Agent's Fee. The Borrower shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon between
the Borrower and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise the Agent
that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the
case may be, as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the
case may be, for such Interest Period, the Agent shall forthwith give notice
thereof to
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the Borrower and the Banks, whereupon until the Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may
be, or to continue or convert outstanding Loans as or into CD Loans or
Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each
outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted
into a Base Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Agent at least two
Domestic Business Days before the date of any Fixed Rate Borrowing for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed
Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans
comprising such Borrowing shall bear interest for each day from and including
the first day to but excluding the last day of the Interest Period applicable
thereto at the Base Rate for such day.
SECTION 8.2. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
SECTION 8.3. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to
make Committed Loans or (y) the date of the related Money Market Quote, in the
case
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of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify
or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System,
but excluding (i) with respect to any CD Loan any such requirement included in
an applicable Domestic Reserve Percentage and (ii) with respect to any
Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar
Reserve Percentage), special deposit, insurance assessment (excluding, with
respect to any CD Loan, any such requirement reflected in an applicable
Assessment Rate) or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its Applicable Lending
Office) or shall impose on any Bank (or its Applicable Lending Office) or on
the United States market for certificates of deposit or the London interbank
market any other condition affecting its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans and the result of any of the foregoing is
to increase the cost to such Bank (or its Applicable Lending Office) of making
or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received
or receivable by such Bank (or its Applicable Lending Office) under this
Agreement or under its Note with respect thereto, by an amount deemed by such
Bank to be material, then, within 15 days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or
its Parent) for such reduction.
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<PAGE> 51
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.4. Taxes. (a) For the purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as the case may
be) is organized or in which its principal executive office is located or, in
the case of each Bank, in which its Applicable Lending Office is located and
(ii) in the case of each Bank, any United States withholding tax imposed on
such payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note.
(b) Any and all payments by the Borrower to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Borrower shall be required
by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the
Agent, at its address referred to in Section 9.01, the original or a certified
copy of a receipt evidencing payment thereof.
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<PAGE> 52
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be paid within 15 days after
such Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower and the Agent with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Bank or certifying that the income receivable pursuant
to this Agreement is effectively connected with the conduct of a trade or
business in the United States.
(e) For any period with respect to which a Bank has failed to provide
the Borrower or the Agent with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(b) or (c) with respect to Taxes imposed by the United States; provided
that if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will change
the jurisdiction of its Applicable Lending Office if, in the judgment of such
Bank, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank.
SECTION 8.5. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or convert outstanding Loans
to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank
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<PAGE> 53
has demanded compensation under Section 8.03 or 8.04 with respect to its CD
Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Agent, have elected that
the provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may
be, shall instead be Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks); and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party:
(a) in the case of the Borrower or the Agent, at its address, facsimile number
or telex number set forth on the signature pages hereof, (b) in the case of any
Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (c) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
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<PAGE> 54
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article 2 or Article 8 shall not be effective until received.
SECTION 9.2. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.3. Expenses. (a) The Borrower shall pay (i) all
out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Agent and each Bank, including (without duplication) the reasonable fees
and disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 9.4. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section
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shall impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to
the payment of indebtedness of the Borrower other than its indebtedness
hereunder. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Note, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.5. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided
that no such amendment or waiver shall, unless signed by all the Banks, (i)
increase or decrease the Commitment of any Bank (except (x) as contemplated by
Section 2.17 or (y) for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for any scheduled reduction or termination of any Commitment or
(iv) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which shall be required
for the Banks or any of them to take any action under this Section or any other
provision of this Agreement.
SECTION 9.6. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may
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<PAGE> 56
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in clause (i), (ii), or (iii) of Section 9.05
without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article 8 with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to
an initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit G hereto executed by such Assignee and
such transferor Bank, with (and subject to) the subscribed consent of the
Borrower, which shall not be unreasonably withheld, and the Agent; provided
that if an Assignee is an affiliate of such transferor Bank or was a Bank
immediately prior to such assignment, no such consent shall be required; and
provided further that such assignment may, but need not, include rights of the
transferor Bank in respect of outstanding Money Market Loans. Upon execution
and delivery of such instrument and payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, such Assignee shall be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank with a Commitment as
set forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the transferor Bank, the
Agent and the Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of any United States federal income taxes in
accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04
than such Bank would have been entitled to receive with respect to the rights
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<PAGE> 57
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.7. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.8. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.9. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of
any party as to which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. The Agent and each Bank agrees to keep
any information delivered or made available by the Borrower pursuant to this
Agreement confidential from anyone other than persons employed or retained by
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such Bank who are engaged in evaluating, approving, structuring or
administering the credit facility contemplated hereby; provided that nothing
herein shall prevent any Bank from disclosing such information (a) to any other
Bank or to the Agent, (b) subject to provisions substantially similar to those
contained in this Section, to any other Person if reasonably incidental to the
administration of the credit facility contemplated hereby, (c) upon the order
of any court or administrative agency, (d) upon the request or demand of any
regulatory agency or authority, (e) which had been publicly disclosed other
than as a result of a disclosure by the Agent or any Bank prohibited by this
Agreement, (f) in connection with any litigation to which the Agent, any Bank
or its subsidiaries or Parent may be a party, (g) to the extent necessary in
connection with the exercise of any remedy hereunder, (h) to such Bank's or
Agent's legal counsel and independent auditors and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed Participant or Assignee. The Agent or any Bank, as the case may be,
shall give prompt notice of any disclosure made by it pursuant to clauses (c)
or (f) of this Section; provided that the Agent or such Bank shall be required
to give such notice with respect to any disclosure made by it pursuant to
clause (f) solely to the extent that the interests of the Agent or such Bank,
as the case may be, and the Borrower in the relevant litigation are not adverse
in any material respect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
QUAKER STATE CORPORATION
By: /s/ Conrad A. Conrad
----------------------------------------
Title: Vice Chairman and CFO
Address:
225 E. John Carpenter Frwy
Irving, TX 75062
Telex:
Facsimile: 214-868-0440
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
--------------------------------------
Title:
54
<PAGE> 59
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
-------------------------------------------
Title:
NATIONSBANK OF TEXAS, N.A.
By:
-------------------------------------------
Title:
ROYAL BANK OF CANADA
By:
-------------------------------------------
Title:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
-------------------------------------------
Title:
THE ASAHI BANK, LTD.
By:
-------------------------------------------
Title:
55
<PAGE> 60
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
By:
-------------------------------------------
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
-------------------------------------------
Title:
THE SAKURA BANK, LIMITED
By:
-------------------------------------------
Title:
THE SANWA BANK, LIMITED
By:
-------------------------------------------
Title:
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By:
-------------------------------------------
Title:
By:
-------------------------------------------
Title:
56
<PAGE> 61
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
By:
-------------------------------------------
Title:
Address: 60 Wall Street
New York, NY 10260
Telex: 177615 MGT UT
Facsimile: 212-648-5014
57
<PAGE> 62
LIST OF OMITTED SCHEDULES AND EXHIBITS
1. Commitment Schedule
2. Pricing Schedule
3. Schedule 4.6 - Potential Liability Under Title IV of ERISA
4. Exhibit A - Note
5. Exhibit B - Money Market Quote Request
6. Exhibit C - Invitation for Money Market Quote
7. Exhibit D - Money Market Quote
8. Exhibit E - Opinion of Counsel for Borrower
9. Exhibit F - Opinion of Davis Polk & Wardwell
10. Exhibit G - Assignment and Assumption Agreement
58
<PAGE> 1
EXHIBIT 10(a)
QUAKER STATE CORPORATION
1994 STOCK INCENTIVE PLAN
As Approved by Stockholders on May 12, 1994
Amended and Restated Through May 16, 1997
<PAGE> 2
QUAKER STATE CORPORATION
1994 STOCK INCENTIVE PLAN
The purposes of the 1994 Stock Incentive Plan (the "Plan") are to
encourage eligible employees of Quaker State Corporation (the "Corporation")
and its Subsidiaries to increase their efforts to make the Corporation and each
Subsidiary more successful, to provide an additional inducement for such
employees to remain with the Corporation or a Subsidiary, to reward such
employees by providing an opportunity to acquire shares of the Capital Stock,
par value $1.00 per share, of the Corporation (the "Capital Stock") on
favorable terms and to provide a means through which the Corporation may
attract able persons to enter the employ of the Corporation or one of its
Subsidiaries. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the
Corporation, if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing at least fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee")
appointed by the Board of Directors of the Corporation (the "Board") and
consisting of not less than two members of the Board, each of whom at the time
of appointment to the Committee and at all times during service as a member of
the Committee shall be (i) a "non-employee director" as defined under Rule
16b-3(b)(3) under the Securities Exchange Act of 1934, as amended (the "1934
Act"), or any successor Rule and (ii) an "outside director" under Section
162(m)(4)(C) of the Internal Revenue Code of 1986 (the "Code"), or any
successor provision.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan, or as to grants or awards under the Plan, shall be
subject to the determination of the Committee, which shall be final and
binding.
The Committee shall keep records of action taken. A majority of the
Committee shall constitute a quorum at any meeting, and the acts of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by all the members of the Committee, shall be the acts of
the Committee.
2
<PAGE> 3
SECTION 2
ELIGIBILITY
Those key employees of the Corporation or any Subsidiary (including,
but not limited to, covered employees as defined in Section 162(m)(3) of the
Code, or any successor provision) who share responsibility for the management,
growth or protection of the business of the Corporation or any Subsidiary shall
be eligible to be granted stock options (with or without alternative stock
appreciation rights and/or cash payment rights) and to receive awards of
restricted, performance and other shares as described herein.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its discretion, to grant stock options (with or without
alternative stock appreciation rights and/or cash payment rights) and to award
restricted, performance and other shares as described herein and to determine
the employees to whom any such grant or award shall be made and the number of
shares to be covered thereby. In determining the eligibility of any employee,
as well as in determining the number of shares covered by each grant or award
and whether alternative stock appreciation rights and/or cash payment rights
shall be granted in conjunction with a stock option, the Committee shall
consider the position and the responsibilities of the employee being
considered, the nature and value to the Corporation or a Subsidiary of his or
her services, his or her present and/or potential contribution to the success
of the Corporation or a Subsidiary and such other factors as the Committee may
deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Capital Stock that may be issued
and as to which grants or awards may be made under the Plan is 4,862,978
shares, subject to adjustment and substitution as set forth in Section 7. If
any stock option granted under the Plan is cancelled by mutual consent or
terminates or expires for any reason without having been exercised in full, the
number of shares subject thereto shall again be available for purposes of the
Plan, except that to the extent that alternative stock appreciation rights
granted in conjunction with a stock option under the Plan are exercised and the
related stock option surrendered the number of shares available for purposes of
the Plan shall be reduced by the number of shares of Capital Stock issued upon
exercise of such alternative stock appreciation rights. If shares of Capital
Stock are forfeited to the Corporation pursuant to the restrictions applicable
to restricted shares awarded under the Plan, the shares so forfeited shall not
again be available for purposes of the Plan unless during the period such
shares were outstanding the
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grantee received no dividends or other benefits of ownership from such shares.
For the purpose of applying this standard, no benefit is deemed to be derived
by a grantee from voting rights or where dividends accumulate but due to
forfeiture are never realized. To the extent any performance shares are not
earned, the number of shares shall again be available for purposes of the Plan.
The shares which may be issued under the Plan may be either authorized
but unissued shares or treasury shares or partly each.
SECTION 4
GRANT OF STOCK OPTIONS, ALTERNATIVE
STOCK APPRECIATION RIGHTS AND CASH
PAYMENT RIGHTS AND AWARD OF RESTRICTED,
PERFORMANCE AND OTHER SHARES
The Committee shall have authority, in its discretion, (i) to grant
"incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem), (ii) to award restricted shares, (iii) to award performance
shares and (iv) to make other share awards, all as provided herein. The
Committee also shall have the authority, in its discretion, to grant
alternative stock appreciation rights in conjunction with incentive stock
options or nonstatutory stock options with the effect provided in Section 5(D)
and to grant cash payment rights in conjunction with nonstatutory stock options
with the effect provided in Section 5(E). Alternative stock appreciation rights
granted in conjunction with an incentive stock option may only be granted at
the time the incentive stock option is granted. Cash payment rights may not be
granted in conjunction with incentive stock options. Alternative stock
appreciation rights and/or cash payment rights granted in conjunction with a
nonstatutory stock option may be granted either at the time the stock option is
granted or at any time thereafter during the term of the stock option.
During the duration of the Plan, the maximum award under the Plan to
any one employee during any calendar year will be 350,000 shares and/or
$400,000 as cash payment rights, subject to adjustment and substitution as set
forth in Section 7. For the purposes of this limitation, any adjustment or
substitution made pursuant to Section 7 with respect to the maximum number of
shares set forth in the preceding sentence shall also be made with respect to
any shares subject to stock options or share awards previously granted under
the Plan to such employee during the same calendar year.
Notwithstanding any other provision contained in the Plan or in any
agreement referred to in Section 5(I), but subject to the possible exercise of
the Committee's discretion contemplated in the last sentence of this paragraph,
the aggregate fair market value, determined as provided in Section 5(J) on the
date of grant, of the shares
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with respect to which incentive stock options are exercisable for the first
time by an employee during any calendar year under all plans of the corporation
employing such employee, any parent or subsidiary corporation of such
corporation and any predecessor corporation of any such corporation shall not
exceed $100,000. If the date on which one or more of such incentive stock
options could first be exercised would be accelerated pursuant to any provision
of the Plan or any stock option agreement, and the acceleration of such
exercise date would result in a violation of the limitation set forth in the
preceding sentence, then, notwithstanding any such provision, but subject to
the provisions of the next succeeding sentence, the exercise dates of such
incentive stock options shall be accelerated only to the date or dates, if any,
that do not result in a violation of such limitation and, in such event, the
exercise dates of the incentive stock options with the lowest option prices
shall be accelerated to the earliest such dates. The Committee may, in its
discretion, authorize the acceleration of the exercise date of one or more
incentive stock options even if such acceleration would violate the $100,000
limitation set forth in the first sentence of this paragraph and even if such
incentive stock options are thereby converted in whole or in part to
nonstatutory stock options.
The Committee may accept the cancellation of outstanding stock options
or the contribution or surrender of restricted shares in return for the grant
of new stock options for the same or a different number of shares at the same
option exercise price or for restricted shares with different restrictions.
SECTION 5
STOCK OPTIONS, ALTERNATIVE STOCK APPRECIATION
RIGHTS AND CASH PAYMENT RIGHTS
Stock options, alternative stock appreciation rights and cash payment
rights granted under the Plan shall be subject to the following terms and
conditions:
(A) The purchase price at which each stock option may be
exercised (the "option price") shall be such price as the Committee,
in its discretion, shall determine but shall not be less than one
hundred percent (100%) of the fair market value per share of the
Capital Stock covered by the stock option on the date of grant, except
that in the case of an incentive stock option granted to an employee
who, immediately prior to such grant, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes
of stock of the Corporation or any Subsidiary (a "Ten Percent
Employee"), the option price shall not be less than one hundred ten
percent (110%) of such fair market value on the date of grant. For
purposes of this Section 5(A), the fair market value of the Capital
Stock shall be determined as provided in Section 5(J). For purposes of
this Section 5(A), an individual (i) shall be considered as owning not
only shares of stock owned individually but also all shares of stock
that are at the
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time owned, directly or indirectly, by or for the spouse, ancestors,
lineal descendants and brothers and sisters (whether by the whole or
half blood) of such individual and (ii) shall be considered as owning
proportionately any shares owned, directly or indirectly, by or for
any corporation, partnership, estate or trust in which such individual
is a stockholder, partner or beneficiary.
(B) The option price for each stock option shall be payable
in cash in United States dollars (including check, bank draft or money
order); provided, however, that in lieu of cash the person exercising
the stock option may (if authorized by the Committee at the time of
grant in the case of an incentive stock option, or at any time in the
case of a nonstatutory stock option) pay the option price in whole or
in part by delivering to the Corporation shares of the Capital Stock
having a fair market value on the date of exercise of the stock
option, determined as provided in Section 5(J), equal to the option
price for the shares being purchased, except that (i) any portion of
the option price representing a fraction of a share shall in any event
be paid in cash and (ii) no shares of the Capital Stock which have
been held for less than six months may be delivered in payment of the
option price of a stock option. Delivery of shares, if authorized, may
also be accomplished through the effective transfer to the Corporation
of shares held by a broker or other agent. The Corporation will also
cooperate with any person exercising a stock option who participates
in a cashless exercise program of a broker or other agent under which
all or part of the shares received upon exercise of the stock option
are sold through the broker or other agent or under which the broker
or other agent makes a loan to such person. Notwithstanding the
foregoing, unless the Committee, in its discretion, shall otherwise
determine at the time of grant in the case of an incentive stock
option, or at any time in the case of a nonstatutory stock option, the
exercise of the stock option shall not be deemed to occur and no
shares of Capital Stock will be issued by the Corporation upon
exercise of the stock option until the Corporation has received
payment of the option price in full. The date of exercise of a stock
option shall be determined under procedures established by the
Committee, and as of the date of exercise the person exercising the
stock option shall be considered for all purposes to be the owner of
the shares with respect to which the stock option has been exercised.
Payment of the option price with shares shall not increase the number
of shares of the Capital Stock which may be issued under the Plan as
provided in Section 3.
(C) Each stock option shall be exercisable at such time or
times as the Committee, in its discretion, shall determine, except
that no stock option shall be exercisable after the expiration of ten
years (five years in the case of an incentive stock option granted to
a Ten Percent Employee) from the date of grant. A stock option to the
extent exercisable at any time may be exercised in whole or in part.
(D) Alternative stock appreciation rights granted in
conjunction with a stock option shall entitle the person exercising
the alternative stock appreciation
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rights to surrender the related stock option, or any portion thereof,
and to receive from the Corporation in exchange therefor that number
of shares of the Capital Stock having an aggregate fair market value
on the date of exercise of the alternative stock appreciation rights
equal to the excess of the fair market value of one share of the
Capital Stock on such date of exercise over the option price per share
times the number of shares covered by the related stock option, or
portion thereof, which is surrendered. Alternative stock appreciation
rights shall be exercisable to the extent that the related stock
option is exercisable and only by the same person who is entitled to
exercise the related stock option; provided, however, that alternative
stock appreciation rights granted in conjunction with an incentive
stock option shall not be exercisable unless the then fair market
value of the Capital Stock exceeds the option price of the shares
subject to the incentive stock option. Cash shall be paid in lieu of
any fractional shares. The date of exercise of alternative stock
appreciation rights shall be determined under procedures established
by the Committee, and as of the date of exercise the person exercising
the alternative stock appreciation rights shall be considered for all
purposes to be the owner of the shares to be received. To the extent
that a stock option as to which alternative stock appreciation rights
have been granted is exercised, cancelled, terminates or expires, the
alternative stock appreciation rights shall be cancelled. For the
purposes of this Section 5(D), the fair market value of the Capital
Stock shall be determined as provided in Section 5(J).
(E) Cash payment rights granted in conjunction with a
nonstatutory stock option shall entitle the person who is entitled to
exercise the stock option, upon exercise of the stock option or any
portion thereof, to receive cash from the Corporation (in addition to
the shares to be received upon exercise of the stock option) equal to
such percentage as the Committee, in its discretion, shall determine
not greater than one hundred percent (100%) of the excess of the fair
market value of a share of the Capital Stock on the date of exercise
of the stock option over the option price per share of the stock
option times the number of shares covered by the stock option, or
portion thereof, which is exercised. Payment of the cash provided for
in this Section 5(E) shall be made by the Corporation as soon as
practicable after the time the amount payable is determined. For
purposes of this Section 5(E), the fair market value of the Capital
Stock shall be determined as provided in Section 5(J).
(F) Unless the Committee, in its discretion, shall otherwise
determine, (i) no stock option shall be transferable by the grantee
otherwise than by Will, or if the grantee dies intestate, by the laws
of descent and distribution of the state of domicile of the grantee at
the time of death and (ii) all stock options shall be exercisable
during the lifetime of the grantee only by the grantee.
(G) Subject to the provisions of Section 4 in the case of
incentive stock options, unless the Committee, in its discretion,
shall otherwise determine:
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(i) If the employment of a grantee is voluntarily
terminated with the consent of the Corporation or a Subsidiary,
the grantee becomes entitled to a severance benefit under the
Corporation's Severance Pay Plan for Salaried and Hourly
Non-Union Employees (the "Severance Plan") or a grantee retires
under any retirement plan of the Corporation or a Subsidiary, any
outstanding stock option held by such grantee shall be
exercisable by the grantee (but only to the extent exercisable by
the grantee immediately prior to the termination of employment)
at any time prior to the expiration date of such stock option or
within three years after the date of termination of employment of
the grantee, whichever is the shorter period, and to the extent
not exercisable shall terminate;
(ii) Following the death of a grantee during
employment, any outstanding stock option held by the grantee at
the time of death shall be exercisable in full (whether or not so
exercisable by the grantee immediately prior to the death of the
grantee) by the person entitled to do so under the Will of the
grantee, or, if the grantee shall fail to make testamentary
disposition of the stock option or shall die intestate, by the
legal representative of the grantee at any time prior to the
expiration date of such stock option or within three years after
the date of death of the grantee, whichever is the shorter
period;
(iii) Following the death of a grantee after
termination of employment during a period when a stock option is
exercisable, the stock option shall be exercisable by such person
entitled to do so under the Will of the grantee or by such legal
representative during the shorter of the following two periods:
(i) until the expiration date of the stock option or (ii) within
three years after the termination of employment of the grantee or
one year after the date of death of the grantee (whichever is
longer).
(iv) Unless Section 8(C) applies following
termination of employment, if the employment of a grantee
terminates for any reason other than voluntary termination with
the consent of the Corporation or a Subsidiary, severance under
the Severance Plan, retirement under any retirement plan of the
Corporation or a Subsidiary or death, all outstanding stock
options held by the grantee at the time of such termination of
employment shall automatically terminate.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the
Committee shall be final and binding.
(H) If a grantee of a stock option (i) engages in the
operation or
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management of a business (whether as owner, partner, officer,
director, employee or otherwise and whether during or after
termination of employment) which is in competition with the
Corporation or any of its Subsidiaries (provided, however, that this
clause shall not apply if Section 8(C) applies following termination
of employment), (ii) induces or attempts to induce any customer,
supplier, licensee or other individual, corporation or other business
organization having a business relationship with the Corporation or
any of its Subsidiaries to cease doing business with the Corporation
or any of its Subsidiaries or in any way interferes with the
relationship between any such customer, supplier, licensee or other
person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to
leave the employment thereof or in any way interferes with the
relationship of such employee with the Corporation or any of its
Subsidiaries, the Committee, in its discretion, may immediately
terminate all outstanding stock options held by the grantee. Whether a
grantee has engaged in any of the activities referred to the preceding
sentence which would cause the outstanding stock options to be
terminated shall be determined, in its discretion, by the Committee,
and any such determination by the Committee shall be final and
binding.
(I) All stock options, alternative stock appreciation rights
and cash payment rights shall be confirmed by an agreement which shall
be executed on behalf of the Corporation by the Chief Executive
Officer (if other than the President), the President or any Vice
President and by the grantee. The agreement confirming a stock option
shall specify whether the stock option is an incentive stock option or
a nonstatutory stock option. The provisions of such agreements need
not be identical.
(J) Fair market value of the Capital Stock shall be the mean
between the following prices, as applicable, for the date as of which
fair market value is to be determined as quoted in The Wall Street
Journal (or in such other reliable publication as the Committee, in
its discretion, may determine to rely upon): (i) if the Capital Stock
is listed on the New York Stock Exchange ("NYSE"), the highest and
lowest sales prices per share of the Capital Stock as quoted in the
NYSE-Composite Transactions listing for such date, (ii) if the Capital
Stock is not listed on such exchange, the highest and lowest sales
prices per share of Capital Stock for such date on (or on any
composite index including) the principal United States securities
exchange registered under the 1934 Act on which the Capital Stock is
listed or (iii) if the Capital Stock is not listed on any such
exchange, the highest and lowest sales prices per share of the Capital
Stock for such date on the National Association of Securities Dealers
Automated Quotations System or any successor system then in use
("NASDAQ"). If there are no such sale price quotations for the date as
of which fair market value is to be determined but there are such sale
price quotations within a reasonable period both before and after such
date, then fair market value shall be determined by taking a weighted
average of the means between the highest and lowest sales prices per
share of
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the Capital Stock as so quoted on the nearest date before and the
nearest date after the date as of which fair market value is to be
determined. The average should be weighted inversely by the respective
numbers of trading days between the selling dates and the date as of
which fair market value is to be determined. If there are no such sale
price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then
fair market value of the Capital Stock shall be the mean between the
bona fide bid and asked prices per share of Capital Stock as so quoted
for such date on NASDAQ, or if none, the weighted average of the means
between such bona fide bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which
fair market value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this Section 5 (J). If the fair market value of the
Capital Stock cannot be determined on any basis previously set forth
in this Section 5(J) for the date as of which fair market value is to
be determined, the Committee shall in good faith determine the fair
market value of the Capital Stock on such date. Fair market value
shall be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
(K) The obligation of the Corporation to issue shares of the
Capital Stock under the Plan shall be subject to (i) the effectiveness
of a registration statement under the Securities Act of 1933, as
amended, with respect to such shares, if deemed necessary or
appropriate by counsel for the Corporation, (ii) the condition that
the shares shall have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange, if any, on
which the Capital Stock may then be listed and (iii) all other
applicable laws, regulations, rules and orders which may then be in
effect.
Subject to the foregoing provisions of this Section 5 and the other
provisions of the Plan, stock options, alternative stock appreciation rights
and cash payment rights granted under the Plan shall be subject to such
restrictions and other terms and conditions, if any, as shall be determined, in
its discretion, by the Committee and set forth in the agreement referred to in
Section 5(l).
SECTION 6
RESTRICTED SHARES, PERFORMANCE SHARES AND
OTHER SHARE AWARDS
(A) RESTRICTED SHARES
Awards of restricted shares shall be confirmed by an agreement which
shall set forth the number of shares of the Capital Stock awarded, the
restrictions imposed
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thereon (including, without limitation, restrictions on the right of the
grantee to sell, assign, transfer or encumber such shares (except as provided
below) while such shares are subject to other restrictions imposed under this
Section 6(A)), the duration of such restrictions, events (which may, in the
discretion of the Committee, include termination of employment and/or
performance-based events) the occurrence of which would cause a forfeiture of
the restricted shares and such other terms and conditions as shall be
determined, in its discretion, by the Committee. The agreement shall be
executed on behalf of the Corporation by the Chief Executive Officer (if other
than the President), the President or any Vice President and by the grantee.
The provisions of such agreements need not be identical. Awards of restricted
shares shall be effective on the date determined, in its discretion, by the
Committee.
Following the award of restricted shares and prior to the lapse or
termination of the applicable restrictions, share certificates for the
restricted shares shall be issued in the name of the grantee and deposited with
the Corporation in escrow together with related stock powers signed by the
grantee. Except as provided in Section 7, the Committee, in its discretion, may
determine that dividends and other distributions on the shares held in escrow
shall not be paid to the grantee until the lapse or termination of the
applicable restrictions. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Upon the lapse or termination of the applicable restrictions (and not before
such time), the grantee shall receive the share certificates for the restricted
shares (subject to the provisions of Section 10) and unpaid dividends, if any.
From the date the award of restricted shares is effective, the grantee shall be
a stockholder with respect to all the shares represented by the share
certificates and shall have all the rights of a stockholder with respect to all
the restricted shares, including the right to vote such shares and to receive
all dividends and other distributions paid with respect to such shares, subject
only to the preceding provisions of this paragraph and the other restrictions
imposed by the Committee.
If a grantee of restricted shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment)
which is in competition with the Corporation or any of its Subsidiaries
(provided, however, that this clause shall not apply if Section 8(D) applies),
(ii) induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to leave
the employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed. Whether a grantee has engaged in
any of the activities referred to in the preceding sentence which would cause
the
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restricted shares to be forfeited shall be determined, in its discretion, by
the Committee, and any such determination by the Committee shall be final and
binding.
Neither this Section 6(A) nor any other provision of the Plan shall
preclude a grantee from transferring or assigning restricted shares to (i) the
trustee of a trust that is revocable by such grantee alone, both at the time of
the transfer or assignment and at all times thereafter prior to such grantee's
death or (ii) the trustee of any other trust to the extent approved in advance
by the Committee in writing. A transfer or assignment of restricted shares from
such trustee to any person other than such grantee shall be permitted only to
the extent approved in advance by the Committee in writing, and restricted
shares held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable agreement as if such
trustee were a party to such agreement.
Restricted Performance Shares. Specifically, the Committee, in its
discretion, may award restricted performance shares with three-year performance
cycles which will vest if three-year average return on average equity ("Average
ROE") and three-year cumulative earnings per share ("Cumulative EPS") goals
established by the Committee are achieved. The Average ROE percentage and the
Cumulative EPS figure will be calculated from the consolidated financial
statements of the Corporation and its Subsidiaries, excluding (i) the effect of
changes in Federal income tax rates, (ii) the effect of unusual and
extraordinary items as defined by Generally Accepted Accounting Principles
("GAAP") and (iii) the cumulative effect of changes in accounting principles in
accordance with GAAP. The Cumulative EPS figure will also be calculated using
primary net income per share, excluding the effect of share distributions for
which under GAAP net income per share is adjusted.
The restricted performance shares for a particular three-year
performance cycle and the performance goals to apply to these shares must be
established in the year prior to the first year of the three-year period,
except that the key employees designated to receive restricted performance
shares for the three-year period 1994-1996 and the performance goals to apply
to these shares were determined by the Committee on or prior to March 23, 1994.
Restricted performance shares as to which the restrictions do not lapse will be
forfeited. Awards of restricted performance shares need not be made every year.
Dividends and other distributions (except dividends or other
distributions payable in shares of the Corporation's Capital Stock) on the
restricted performance shares held in escrow shall be paid by the Corporation
to the grantees of the restricted performance shares at the time such dividends
or other distributions would be payable to stockholders, unless the Committee,
in its discretion, determines otherwise. It is intended that any compensation
received by grantees of restricted performance shares will qualify as
performance-based compensation under Section 162(m) of the Code and this
portion of Section 6(A) shall be interpreted consistently with that intention.
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(B) PERFORMANCE SHARES
An award of performance shares shall entitle the grantee to receive up
to the number of shares of Capital Stock covered by the award at the end of or
at a specified time or times during a specified award period contingent upon
the extent to which one or more predetermined performance targets have been met
during the award period. All the terms and conditions of an award of
performance shares shall be determined, in its discretion, by the Committee and
shall be confirmed by an agreement which shall be executed on behalf of the
Corporation by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the grantee.
The performance target or targets may be expressed in terms of
earnings per share, return on stockholder equity, operating profit, return on
capital employed or such other measures of accomplishment by the Corporation or
a Subsidiary, or any branch, department or other portion thereof, or the
grantee individually, as may be established, in its discretion, by the
Committee. The performance target or targets may vary for different award
periods and need not be the same for each grantee receiving an award for an
award period.
At any time prior to the end of an award period, the Committee may
adjust downward (but not upward) the performance target or targets as a result
of major events unforeseen at the time of the award, such as changes in the
economy, in the industry or laws affecting the operations of the Corporation or
a Subsidiary, or any branch, department or other portion thereof, or any other
event the Committee determines would have a significant impact upon the
probability of attaining the previously established performance target or
targets.
Payment of earned performance shares shall be made to grantees as soon
as practicable after the shares have been earned. The Committee, in its
discretion, may determine that grantees shall also be entitled to any dividends
or other distributions that would have been paid on earned performance shares
had the shares been outstanding during the period from the award to the payment
of the performance shares. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Unless otherwise provided in the agreement confirming the award of the
performance shares, if prior to the close of an award period, the employment of
a grantee of performance shares is voluntarily terminated with the consent of
the Corporation or a Subsidiary, the grantee becomes entitled to a severance
benefit under the Severance Plan, the grantee retires under any retirement plan
of the Corporation or a Subsidiary or the grantee dies during employment, the
Committee in its discretion, may determine to pay to the grantee all or part of
the performance shares based upon the extent to which the Committee determines
the performance target or targets have been achieved as of the date of
termination of employment, retirement or death, the period of time remaining
until the end of the award period and/or such other factors as
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the Committee may deem relevant. If the Committee, in its discretion,
determines that all or any part of the performance shares shall be paid,
payment shall be made to the grantee or the estate of the grantee as promptly
as practicable following such determination.
Except as otherwise provided in Section 8(E), if the employment of a
grantee of an award of performance shares terminates prior to the time the
performance shares have been earned for any reason other than voluntary
termination with the consent of the Corporation or a Subsidiary, severance
under the Severance Plan, retirement under any retirement plan of the
Corporation or a Subsidiary or death, the unearned performance shares shall be
deemed not to have been earned and such shares shall not be paid to the
grantee.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee shall
be final and binding.
If a grantee of performance shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment)
which is in competition with the Corporation or any of its Subsidiaries
(provided, however, that this clause shall not apply if Section 8(E) applies),
(ii) induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to leave
the employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately cancel the award. Whether a grantee has engaged in any of the
activities referred to the preceding sentence which would cause the award of
performance shares to be cancelled shall be determined, in its discretion, by
the Committee, and any such determination by the Committee shall be final and
binding.
(C) OTHER SHARE AWARDS
The Committee, in its discretion, may from time to time make other
awards of shares of Capital Stock under the Plan as an inducement to the
grantee to enter the employment of the Corporation or a Subsidiary, in
recognition of the contribution of the grantee to the performance of the
Corporation or a Subsidiary, or any branch, department or other portion
thereof, in recognition of the grantee's individual performance or on the basis
of such other factors as the Committee may deem relevant. Capital Stock issued
as a bonus pursuant to this Section 6(C) shall be issued for such consideration
as the Committee shall determine in its sole discretion.
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SECTION 7
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Capital
Stock payable in shares of the Capital Stock, the number of shares of the
Capital Stock subject to any outstanding stock options or performance share
awards, the number of shares of the Capital Stock which may be issued under the
Plan but are not subject to outstanding stock options or performance share
awards and the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the Plan to any employee
during any calendar year under Section 4 on the date fixed for determining the
stockholders entitled to receive such stock dividend or distribution shall be
adjusted by adding thereto the number of shares of the Capital Stock which
would have been distributable thereon if such shares had been outstanding on
such date. Shares of Capital Stock so distributed with respect to any
restricted shares held in escrow shall also be held by the Corporation in
escrow and shall be subject to the same restrictions as are applicable to the
restricted shares on which they were distributed.
If the outstanding shares of the Capital Stock shall be changed into
or exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Capital Stock subject to any then outstanding stock option or
performance share award, and for each share of the Capital Stock which may be
issued under the Plan but which is not then subject to any outstanding stock
option or performance share award, the number and kind of shares of stock or
other securities into which each outstanding share of the Capital Stock shall
be so changed or for which each such share shall be exchangeable. Unless
otherwise determined by the Committee, in its discretion, any such stock or
securities, as well as any cash or other property, into or for which any
restricted shares held in escrow shall be changed or exchangeable in any such
transaction shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was issued or
distributed.
In case of any adjustment or substitution as provided for in the first
two paragraphs of this Section 7, the aggregate option price for all shares
subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have been
adjusted or which shall have been substituted for such shares. Any new option
price per share shall be carried to at least three decimal places with the last
decimal place rounded upwards to the nearest whole number.
15
<PAGE> 16
If the outstanding shares of the Capital Stock shall be changed in
value by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Capital Stock, (i) the Committee shall make any adjustments
to any then outstanding stock option which it determines are equitably required
to prevent dilution or enlargement of the rights of grantees which would
otherwise result from any such transaction, and (ii) unless otherwise
determined by the Committee, in its discretion, any stock, securities, cash or
other property distributed with respect to any restricted shares held in escrow
or for which any restricted shares held in escrow shall be exchanged in any
such transaction shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was distributed
or exchanged.
In case of any adjustment or substitution as provided for in the first
two paragraphs of this Section 7, the exercise price for all shares subject to
each then outstanding stock option prior to such adjustment or substitution
shall be the exercise price for all shares of stock or other securities
(including any fraction) after the adjustment or substitution.
If the outstanding shares of the Capital Stock shall be changed in
value by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Capital Stock, (i) the Committee shall make any adjustments
to any then outstanding stock option which it determines are equitably required
to prevent dilution or enlargement of the rights of grantees which would
otherwise result from any such transaction, except that no such adjustment will
be made to the exercise price of any stock option and (ii) unless otherwise
determined by the Committee, in its discretion, any stock, securities, cash or
other property distributed with respect to any restricted shares held in escrow
or for which any restricted shares held in escrow shall be exchanged in any
such transaction shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was distributed
or exchanged.
Except as provided in this Section 7, a grantee shall have no rights
by reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
16
<PAGE> 17
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) DEFINITIONS.
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is
used in Sections 13(d) and 14(d) of the 1934 Act as in effect on the
effective date of the Plan.
(2) "Beneficial Ownership" shall be determined as provided in
Rule 13d-3 under the 1934 Act as in effect on the effective date of
the Plan.
(3) A specified percentage of "Voting Power" of a company
shall mean such number of the Voting Shares as shall enable the
holders thereof to cast such percentage of all the votes which could
be cast in an annual election of directors (without consideration of
the rights of any class of stock other than the common stock of the
company to elect directors by a separate class vote); and "Voting
Shares" shall mean all securities of a company entitling the holders
thereof to vote in an annual election of directors (without
consideration of the rights of any class of stock other than the
common stock of the company to elect directors by a separate class
vote).
(4) "Tender Offer" shall mean a tender offer or exchange
offer to acquire securities of the Corporation (other than such an
offer made by the Corporation or any Subsidiary), whether or not such
offer is approved or opposed by the Board.
(5) "Continuing Directors" shall mean a director of the
Corporation who either (a) was a director of the Corporation on the
effective date of the Plan or (b) is an individual whose election, or
nomination for election, as a director of the Corporation was approved
by a vote of at least two-thirds of the directors then still in office
who were Continuing Directors (other than an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the
Corporation which would be subject to Rule 14a-11 under the 1934 Act,
or any successor Rule).
(6) "Section 8 Event" shall mean the date upon which any
of the following events occurs:
(a) The Corporation acquires actual knowledge that
any Person other than the Corporation, a Subsidiary or any
employee benefit plan(s) sponsored by the Corporation or a
Subsidiary has acquired the Beneficial Ownership, directly or
indirectly, of securities of the Corporation entitling such
Person to 30% or more of the Voting Power of the Corporation;
(b) A Tender Offer is made to acquire securities of
the Corporation entitling the holders thereof to 30% or more
of the Voting Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the
1934 Act (or any successor Rule) relating to the election or
removal of 50% or more of the members of the Board or any
class of the Board shall be made by any
17
<PAGE> 18
person other than the Corporation or less than 51% of the
members of the Board shall be Continuing Directors; or
(d) The stockholders of the Corporation shall
approve a merger, consolidation, share exchange, division or
sale or other disposition of assets of the Corporation as a
result of which the stockholders of the Corporation
immediately prior to such transaction shall not hold,
directly or indirectly, immediately following such
transaction a majority of the Voting Power of (i) in the case
of a merger or consolidation, the surviving or resulting
corporation, (ii) in the case of a share exchange, the
acquiring corporation or (iii) in the case of a division or a
sale or other disposition of assets, each surviving,
resulting or acquiring corporation which, immediately
following the transaction, holds more than 10% of the
consolidated assets of the Corporation immediately prior to
the transaction;
provided, however, that (i) if securities beneficially owned by a
grantee are included in determining the Beneficial Ownership of a
Person referred to in paragraph 6(a), (ii) a grantee is required to be
named pursuant to Item 2 of the Schedule 14D-1 (or any similar
successor filing requirement) required to be filed by the bidder
making a Tender Offer referred to in paragraph 6(b) or (iii) if a
grantee is a 144 participant" as defined in Instruction 3 to Item 4 of
Schedule 14A under the 1934 Act (or any successor Rule) in a
solicitation (other than a solicitation by the Corporation) referred
to in paragraph 6(c), then no Section 8 Event with respect to such
grantee shall be deemed to have occurred by reason of such event.
(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, in case any
"Section 8 Event" occurs all outstanding stock options (other than those held
by a person referred to in the proviso to Section 8(A)(6)) shall become
immediately and fully exercisable whether or not otherwise exercisable by their
terms.
(C) EXTENSION OF THE EXPIRATION DATE OF STOCK OPTIONS.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, all
outstanding stock options held by a grantee (other than a grantee referred to
in the proviso to Section 8(A)(6)) whose employment with the Corporation or a
Subsidiary terminates within one year of any Section 8 Event for any reason
other than voluntary termination with the consent of the Corporation or a
Subsidiary, severance under the Severance Plan, retirement under
18
<PAGE> 19
any retirement plan of the Corporation or a Subsidiary or death which are
exercisable shall continue to be exercisable for a period of three years from
the date of such termination of employment, but in no event after the
expiration date of the stock option.
(D) LAPSE OF RESTRICTIONS ON RESTRICTED SHARE AWARDS.
Unless the agreement referred to in Section 6(A) shall otherwise
provide, notwithstanding any other provision contained in the Plan, if any
"Section 8 Event" occurs prior to the scheduled lapse of all restrictions
applicable to restricted share awards under the Plan (other than those held by
a person referred to in the proviso to Section 8(A)(6)), all such restrictions
shall lapse upon the occurrence of any such "Section 8 Event" regardless of the
scheduled lapse of such restrictions.
(E) PAYMENT OF PERFORMANCE SHARES.
Unless the agreement referred to in Section 6(B) shall otherwise
provide, notwithstanding any other provision contained in the Plan, if any
"Section 8 Event" occurs prior to the end of an award period with respect to an
award of performance shares to a grantee, the performance shares (unless the
grantee is a person referred to in the proviso to Section 8(A)(6)) shall be
deemed to have been fully earned as of the date of the Section 8 Event,
regardless of the attainment or nonattainment of any performance target and
shall be paid to the grantee as promptly as practicable after the Section 8
Event.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee any right
to be granted a stock option (with or without alternative stock appreciation
rights and/or cash payment rights) or an award under the Plan. Nothing in the
Plan, in any stock option, alternative stock appreciation rights or cash
payment rights granted under the Plan or in any award under the Plan or in any
agreement providing for any of the foregoing shall confer any right on any
employee to continue in the employ of the Corporation or any Subsidiary or
interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the employment of any employee at any time.
SECTION 10
WITHHOLDING
Income or employment taxes may be required to be withheld by the
Corporation
19
<PAGE> 20
or a Subsidiary in connection with the exercise of a stock option or
alternative stock appreciation rights, upon a "disqualifying disposition" of
the shares acquired upon exercise of an incentive stock option, at the time
restricted shares are granted or vest or performance shares are earned or upon
the receipt by the grantee of cash in payment of cash payment rights or
dividends on restricted stock which has not vested. Except as provided below,
the grantee shall pay the Corporation in cash the amount required to be
withheld.
A grantee may elect to have any withholding obligation at the time of
the exercise of a nonstatutory stock option or alternative stock appreciation
rights or at the time restricted shares vest or performance shares are earned
satisfied by the Corporation withholding from the shares of Capital Stock the
grantee would otherwise receive full shares of Capital Stock having a fair
market value, determined as provided in Section 5(J), on the date that the
amount of tax to be withheld is determined (the "Tax Date") equal to, or as
nearly equal as possible to but less than, the amount required to be withheld.
The Corporation will request that the grantee pay any additional amount
required to be withheld directly to the Corporation in cash. Any income or
employment taxes required to be withheld by the Corporation or any of its
Subsidiaries upon the receipt by the grantee of cash in payment of cash payment
rights or dividends will be satisfied by the Corporation by withholding the
taxes required to be withheld from the cash the grantee would otherwise
receive.
A grantee may also elect to have any withholding obligation in
connection with the exercise of a nonstatutory stock option or alternative
stock appreciation rights, upon a "disqualifying disposition" of the shares
acquired upon the exercise of an incentive stock option or at the time
restricted shares are granted or vest or performance shares are earned
satisfied in whole or in part by the grantee tendering to the Corporation a
number of previously owned shares of Capital Stock having a fair market value,
determined as provided in Section 5(J), on the Tax Date equal to or less than
the amount required to be withheld.
If a grantee does not pay any income or employment taxes required to
be withheld by the Corporation or any of its Subsidiaries within ten days after
a request for the payment of such taxes, the Corporation or such Subsidiary may
withhold such taxes from any other compensation to which the grantee is
entitled from the Corporation or any of its Subsidiaries.
SECTION 11
AMENDMENT
The right to alter and amend the Plan at any time and from time to
time and the right to revoke or terminate the Plan are hereby specifically
reserved to the Board; provided that no such alteration or amendment of the
Plan shall, without stockholder
20
<PAGE> 21
approval, (i) increase the number of shares which may be issued under the Plan
as set forth in Section 3, (ii) increase the maximum number of shares as to
which stock options may be granted and as to which shares may be awarded under
the Plan to any one employee during any one calendar year as set forth in
Section 4, (iii) materially increase the benefits accruing under the Plan to
persons subject to the provisions of Section 16(b) of the 1934 Act, (iv)
materially modify the requirements as to eligibility for participation in the
Plan by persons subject to the provisions of Section 16(b) of the 1934 Act, (v)
make any changes in the class of employees eligible to receive incentive stock
options under the Plan or (vi) extend the duration of the Plan. No alteration,
amendment, revocation or termination of the Plan shall, without the written
consent of the holder of an outstanding grant or award under the Plan,
adversely affect the rights of such holder with respect to such outstanding
grant or award.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be December
16, 1993, the date of adoption of the Plan by the Board, provided that such
adoption of the Plan by the Board is approved by the affirmative votes of the
holders of a majority of the Capital Stock present in person or by proxy and
entitled to vote at a meeting of stockholders duly called and held on or prior
to December 15, 1994. No stock option or alternative stock appreciation rights
granted under the Plan may be exercised and no restricted shares may be awarded
until after such approval. No stock option, alternative stock appreciation
rights or cash payment rights may be granted and no awards may be made under
the Plan subsequent to December 15, 2003.
The Plan was amended, by the Corporation's stockholders on May 16, 1996, to
increase the shares available for grant under the Plan. The Plan was amended by
the Board on October 24, 1996 to comply with certain changes made to the 1994
Act. The Plan was amended, by the Corporation's stockholders on May 16, 1997,
to eliminate the authorization to reprice stock options, to authorize the
issuance under the Plan of 3,500,000 additional shares of the Company's capital
stock and to set maximum limitations on awards to comply with the Code.
IN WITNESS WHEREOF, the Corporation has evidenced the adoption of this
Restated Plan by the signature of its duly authorized officer effective May 16,
1997.
QUAKER STATE CORPORATION
Attest:
By: /s/ Paul E. Konney
/s/ C Sherwood -----------------------------------
- --------------------------- Paul E. Konney
Assistant Secretary Senior Vice President, General
Counsel and Secretary
(SEAL)
21
<PAGE> 1
EXHIBIT 10(b)
QUAKER STATE CORPORATION
1996 DIRECTORS' FEE PLAN
(AS AMENDED EFFECTIVE MARCH 27, 1997)
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) DIRECTOR FEE PAYMENT ALTERNATIVES. For each calendar year
beginning January 1, 1997, a Director may elect any one of the following
alternatives for the payment of Director Fees:
(1) to receive current payment in cash, on the date on which the
Director Fees are payable, of all Director Fees for the calendar year;
(2) to receive current payment in shares of Capital Stock, on
the date on which the Director Fees are payable, of all Director Fees
for the calendar year (a "Current Stock Election");
(3) to defer payment of all or a portion of the Director Fees
for the calendar year for subsequent payment in cash (a "Cash Deferral
Election"); or
(4) to defer payment of all the Director Fees for the calendar
year for subsequent payment in shares of Capital Stock (a "Stock
Deferral Election").
(b) FILING AND EFFECTIVENESS OF ELECTIONS. The election by a Director to
receive
<PAGE> 2
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"). In order to be effective for any calendar year, an Election must
be received by the Secretary of the Corporation on or before December 31 of the
preceding calendar year, except that if a Director files a Notice of Election
on or before 30 days subsequent to the Director's initial election to the
office of Director, the Election shall be effective on the date of filing with
respect to Director Fees payable for any portion of the calendar year which
remains at the date of such filing. An Election may not be modified or
terminated after the beginning of a calendar year for which it is effective.
Unless modified or terminated by filing a new Notice of Election on or before
December 31 immediately preceding the calendar year for which such modification
or termination is effective, an Election shall be effective for and apply to
Director Fees payable for each subsequent calendar year. 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. Any Election shall terminate
on the date a Director ceases to be a member of the Board.
(c) CURRENT STOCK ELECTIONS. 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) Cash Deferral Elections. Director Fees deferred pursuant to a Cash
Deferral Election shall be deferred and paid as provided in Sections 4 and 6.
If only a portion of the Director Fees otherwise payable for a calendar year
are deferred pursuant to a Cash Deferral Election, the Director Fees deferred
shall be prorated from each payment of Director Fees earned during such year
after the Cash Deferral Election becomes effective and credited to the
Director's Deferred Cash Compensation Account.
(d) STOCK DEFERRAL ELECTIONS. Director Fees deferred pursuant to a Stock
Deferral Election shall be deferred and paid as provided in Sections 5 and 6. A
Stock Deferral Election shall apply to all Director Fees otherwise payable with
respect to a calendar year, or portion thereof, for which such Stock Deferral
Election is effective.
2
<PAGE> 3
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. 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 earnings, if any,
for the quarter. Earnings will be calculated on a Director's Deferred Cash
Compensation Account using the balance in the account on the last day of the
quarter and one quarter of the annual prime rate of interest, as reported in
the Wall Street Journal for the last business day of the quarter, plus one
percent. In addition to or in lieu of the investment option described above,
other investment options 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 option shall be made
available and communicated to all Directors on a uniform basis.
(b) Intentionally Omitted.
(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 earnings, if any, on a
quarterly basis as described in Section 4(a).
3
<PAGE> 4
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.
(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
4
<PAGE> 5
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 May 30 (or if May 30 is
not a business day, on the first preceding business day) of the calendar year
following the date on 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.
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
5
<PAGE> 6
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 such 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 such 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
6
<PAGE> 7
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 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. 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.
7
<PAGE> 8
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 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 and became
effective upon approval by the stockholders of the Corporation at its 1996
Annual Meeting held on May 16, 1996. On October 24, 1996, the Board amended the
Plan effective as of January 1, 1997. On March 27, 1997 the Board amended the
Plan effective as of March 31, 1997. The Board may further 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.
8
<PAGE> 1
EXHIBIT 10(c)
March 28, 1997
Excerpt From Board of Director's Meeting Minutes
Amendment of Directors' Retirement Program and Adjustment of Annual Retainer
RESOLVED, that the letter agreements between the Corporation and all current
non-employee directors providing for annual retirement benefits be terminated
effective immediately, and that the letter agreements with former directors who
are receiving or are entitled to receive retirement benefits remain in effect
unmodified;
RESOLVED, that the Chairman and Chief Executive Officer, the President and
Chief Operating Officer, the Vice Chairman and Chief Financial Officer and any
Vice President of the Corporation (the "Authorized Officers"), and each of
them, are hereby authorized and directed to take any actions and to execute and
deliver such agreements and other instruments as any of the Authorized Officers
may deem necessary or advisable to carry out the purposes of the foregoing
resolution; and
RESOLVED, that the annual retainer for non-employee directors for calendar year
1997 and subsequent years be increased to $24,000.
<PAGE> 1
COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
06/30/97 06/30/96 06/30/97 06/30/96
- ----------------------------------------------------------------------------------------------------------------------
(in thousands except per share data, unaudited)
<S> <C> <C> <C> <C> <C>
1. Net income $ 8,844 $ 7,173 $ 15,709 $ 12,879
======================================================================================================================
2. Average number of shares of capital
stock outstanding 35,104 32,899 34,992 32,859
3. Shares issuable upon exercise of dilutive stock
options outstanding during the period, based on
average market prices 226 113 164 114
4. Shares issuable upon exercise of dilutive stock
options outstanding during the period, based on
higher of average or period-end market prices 278 179 233 138
5. Average number of capital and capital equivalent
shares outstanding (2 + 3) 35,330 33,012 35,156 32,973
6. Average number of capital shares outstanding,
assuming full dilution (2 + 4) 35,382 33,078 35,225 32,997
7. Net income per capital and capital equivalent share
(1 divided by 5) $ 0.25 $ 0.22 $ 0.45 $ 0.39
======================================================================================================================
8. Net income per capital share assuming full dilution
(1 divided by 6) $ 0.25 $ 0.22 $ 0.45 $ 0.39
======================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 12
Statement re Computation of Ratio of Earnings to Fixed Charges
Quaker State Corporation and Subsidiaries
For the Six Months Ended June 30, 1997
(in thousands)
<TABLE>
<S> <C>
Interest expense $13,075
Interest factor of rental expense (1) 4,567
-------
Total fixed charges $17,642
=======
Income from continuing operations
before income taxes $26,509
Fixed charges 17,642
-------
Total earnings $44,151
=======
Ratio of earnings to fixed charges 2.5
=======
</TABLE>
(1) Interest factor of rental expense computed based on: (a) average interest
factor from a sample of leases for operations representing in excess of
50% of rentals from continuing operations, and (b) one-third factor of
rentals for other operations.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,057
<SECURITIES> 0
<RECEIVABLES> 212,504
<ALLOWANCES> 4,289
<INVENTORY> 122,300
<CURRENT-ASSETS> 363,051
<PP&E> 506,498
<DEPRECIATION> (257,004)
<TOTAL-ASSETS> 1,096,125
<CURRENT-LIABILITIES> 168,720
<BONDS> 0
0
0
<COMMON> 36,809
<OTHER-SE> 277,881
<TOTAL-LIABILITY-AND-EQUITY> 1,096,125
<SALES> 660,666
<TOTAL-REVENUES> 663,528
<CGS> 303,403
<TOTAL-COSTS> 428,376
<OTHER-EXPENSES> 194,547
<LOSS-PROVISION> 1,021
<INTEREST-EXPENSE> 13,075
<INCOME-PRETAX> 26,509
<INCOME-TAX> 10,800
<INCOME-CONTINUING> 15,709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,709
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
