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EXHIBIT 10.6
1998 INCENTIVE PLAN
OF
PENNZOIL - QUAKER STATE COMPANY
1. Plan. This 1998 Incentive Plan of Pennzoil - Quaker
State Company ("Plan") was adopted by the Company to reward certain corporate
officers and key employees of the Company.
2. Objectives. This Plan is designed to attract and
retain key employees of the Company and its Subsidiaries, to encourage a sense
of proprietorship and to stimulate the active interest of such persons in the
development and financial success of the Company and its Subsidiaries. These
objectives are to be accomplished by making Awards under this Plan. This Plan
is also designed to provide for substitute awards issued to employees of the
Company in exchange for awards they previously held under a similar plan of the
Company's parent, formerly PennzEnergy Company, a Delaware corporation.
3. Definitions. As used herein, the terms set forth
below shall have the following respective meanings:
"Authorized Officer" means the Chairman of the Board or the
Chief Executive Officer of the Company (or any other senior officer of the
Company to whom either the Chairman or the Chief Executive Officer shall
delegate the authority to execute any Award Agreement).
"Award" means the grant of any Option, SAR, Stock Award, Cash
Award or Performance Award, whether granted singly, in combination or in
tandem, to a Participant pursuant to such applicable terms, conditions and
limitations as the Committee may establish in order to fulfill the objectives
of the Plan, and includes any award made in substitution for awards previously
granted to an employee of the Company by the Company's former parent,
PennzEnergy Company, when such awards are issued in connection with the
separation of the Company from PennzEnergy Company.
"Award Agreement" means a written agreement between the
Company and a Participant setting forth the terms, conditions and limitations
applicable to an Award.
"Board" means the Board of Directors of the Company.
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"Cash Award" means an award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the Compensation Committee of the Board or
such other committee of the Board as is designated by the Board to administer
the Plan.
"Common Stock" means the Common Stock, par value $0.10 per
share, of the Company.
"Company" means Pennzoil - Quaker State Company, a Delaware
corporation.
"Director" means an individual serving as a member of the
Board.
"Dividend Equivalents" means, with respect to shares of
Restricted Stock that are to be issued at the end of the Restriction Period
(including conditional stock), an amount equal to all dividends and other
distributions (or the economic equivalent thereof) that are payable to
stockholders of record during the Restriction Period on a like number of shares
of Common Stock.
"Employee" means an employee of the Company or any of its
Subsidiaries.
"Fair Market Value" of a share of Common Stock means, as of a
particular date, (i) if shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price per
share of Common Stock reported on the consolidated transaction reporting system
for the principal national securities exchange on which shares of Common Stock
are listed on that date, or, if there shall have been no such sale so reported
on that date, on the last preceding date on which such a sale was so reported,
(ii) if shares of Common Stock are not so listed but are quoted on the Nasdaq
National Market, the mean between the highest and lowest sales price per share
of Common Stock reported by the Nasdaq National Market on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (iii) if the Common Stock
is not so listed or quoted, the mean between the closing bid and asked price on
that date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations are available, as reported by the
Nasdaq Stock Market, or, if not reported by the Nasdaq Stock Market, by the
National Quotation Bureau Incorporated or (iv) if shares of Common Stock are
not publicly traded, the most recent value determined by an independent
appraiser appointed by the Company for such purpose.
"Incentive Option" means an Option that is intended to comply
with the requirements set forth in Section 422 of the Code.
"Nonqualified Stock Option" means an Option that is not an
Incentive Option.
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"Option" means a right to purchase a specified number of
shares of Common Stock at a specified price.
"Participant" means an individual to whom an Award has been
made under this Plan.
"Performance Award" means an Award made to a Participant
pursuant to this Plan that is subject to the attainment of one or more
Performance Goals.
"Performance Goal" means a standard established by the
Committee to determine in whole or in part whether a Performance Award shall be
earned.
"Plan" means this 1998 Incentive Plan of Pennzoil - Quaker
State Company, as amended from time to time.
"Restricted Stock" means any Common Stock that is restricted
or subject to forfeiture provisions.
"Restriction Period" means a period of time beginning as of
the date upon which an Award of Restricted Stock is made pursuant to this Plan
and ending as of the date upon which the Common Stock subject to such Award is
no longer restricted or subject to forfeiture provisions.
"SAR" means a right to receive a payment, in cash or Common
Stock, equal to the excess of the Fair Market Value (or other specified
valuation) of a specified number of shares of Common Stock on the date the
right is exercised over a specified strike price, in each case, as determined
by the Committee.
"Stock Award" means an award in the form of shares of Common
Stock or units denominated in shares of Common Stock.
"Stock Based Awards Limitations" shall have the meaning set
forth in Section 8(b)(ii).
"Subsidiary" means (i) in the case of a corporation, any
corporation of which the Company directly or indirectly owns shares
representing more than 50% of the combined voting power of the shares of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the stockholders of such
corporation and (ii) in the case of a partnership or other business entity not
organized as a corporation, any such business entity of which the Company
directly or indirectly owns more than 50% of the voting, capital or profits
interests (whether in the form of partnership interests, membership interests
or otherwise).
4. Eligibility. Individuals eligible for Awards under
this Plan are (i) those key Employees who hold positions of responsibility and
whose performance, in the judgment of the Committee, can have a significant
effect on the success of the Company and its Subsidiaries, and
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(ii) individuals who are expected to become such Employees within six months of
the date of the Award.
5. Common Stock Available for Awards. Subject to the
provisions of Sections 8(c) and 14 hereof, there shall be available for Awards
under this Plan granted wholly or partly in Common Stock (including rights or
options that may be exercised for or settled in Common Stock) an aggregate of
1,000,000 [__________] shares of Common Stock. All 1,000,000 [__________]
shares of Common Stock shall be available for Incentive Options. The number of
shares of Common Stock that are the subject of Awards under this Plan, if
forfeited or terminated, unexercised upon expiration, are settled in cash in
lieu of Common Stock or in a manner such that all or some of the shares covered
by an Award are not issued to a Participant, or if exchanged for Awards that do
not involve Common Stock, shall again immediately become available for Awards
hereunder. The Committee may from time to time adopt and observe such
procedures concerning the counting of shares against the Plan maximum as it may
deem appropriate. The Board and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that shares of Common Stock are available for
issuance pursuant to Awards.
6. Administration.
(a) This Plan shall be administered by the Committee.
The Committee shall consist of at least two members of the Board.
(b) Subject to the provisions hereof, the Committee shall
have full and exclusive power and authority to administer this Plan
and to take all actions that are specifically contemplated hereby or
are necessary or appropriate in connection with the administration
hereof. The Committee shall also have full and exclusive power to
interpret this Plan and to adopt such rules, regulations and
guidelines for carrying out this Plan as it may deem necessary or
proper, all of which powers shall be exercised in the best interests
of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability
of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of
this Plan or an Award or otherwise amend or modify an Award in any
manner that is either (i) not adverse to the Participant to whom such
Award was granted or (ii) consented to by such Participant. The
Committee may make an award to an individual who it expects to become
an Employee within the next six months, provided that such award shall
be subject to the individual actually becoming an Employee within such
time period. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Plan or in any Award
in the manner and to the extent the Committee deems necessary or
desirable to further the Plan purposes. Any decision of the Committee
in the interpretation and administration of this Plan shall lie within
its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned.
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(c) No member of the Committee or officer of the Company
to whom the Committee has delegated authority in accordance with the
provisions of Section 7 of this Plan shall be liable for anything done
or omitted to be done by him or her, by any member of the Committee or
by any officer of the Company in connection with the performance of
any duties under this Plan, except for his or her own willful
misconduct or as expressly provided by statute.
7. Delegation of Authority. The Committee may delegate
to the Chief Executive Officer and to other senior officers of the Company its
duties under this Plan pursuant to such conditions or limitations as the
Committee may establish.
8. Awards.
(a) The Committee shall determine the type or types of
Awards to be made under this Plan and shall designate from time to
time the individuals who are to be the recipients of Awards. Each
Award may be embodied in an Award Agreement, which shall contain such
terms, conditions and limitations as shall be determined by the
Committee in its sole discretion and shall be signed by the
Participant to whom the Award is made and by an Authorized Officer for
and on behalf of the Company. Awards may consist of those listed in
this Section 8(a) and may be granted singly, in combination or in
tandem. Awards may also be made in combination or in tandem with, in
replacement of, or as alternatives to, grants or rights under this
Plan or any other employee plan of the Company or any of its
Subsidiaries, including the plan of any acquired entity. An Award may
provide for the grant or issuance of additional, replacement or
alternative Awards upon the occurrence of specified events, including
the exercise of the original Award granted to a Participant. All or
part of an Award may be subject to conditions established by the
Committee, which may include, but are not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attainment of
specified growth rates and other comparable measurements of
performance. Upon the termination of employment by a Participant who
is an Employee, any unexercised, deferred, unvested or unpaid Awards
shall be treated as set forth in the applicable Award Agreement.
(i) Option. An Award may be in the form of an
Option. An Option awarded pursuant to this Plan may consist
of an Incentive Option or a Nonqualified Stock Option. The
price at which shares of Common Stock may be purchased upon
the exercise of an Option shall be not less than the Fair
Market Value of the Common Stock on the date of grant.
Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Option awarded pursuant to this
Plan, including the term of any Option and the date or dates
upon which it becomes exercisable, shall be determined by the
Committee.
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(ii) SAR. An Award may be in the form of an SAR.
The terms, conditions and limitations applicable to any SAR
awarded pursuant to this Plan, including the term of any SAR
and the date or dates upon which it becomes exercisable, shall
be determined by the Committee.
(iii) Stock Award. An Award may be in the form of
a Stock Award, including the award of Restricted Stock or
conditional stock units. The terms, conditions and
limitations applicable to any Stock Award granted pursuant to
this Plan shall be determined by the Committee.
(iv) Cash Award. An Award may be in the form of a
Cash Award. The terms, conditions and limitations applicable
to any Cash Award granted pursuant to this Plan shall be
determined by the Committee.
(v) Performance Award. Without limiting the type
or number of Awards that may be made under the other
provisions of this Plan, an Award may be in the form of a
Performance Award. A Performance Award shall be paid, vested
or otherwise deliverable solely on account of the attainment
of one or more pre-established, objective Performance Goals
established by the Committee prior to the earlier to occur of
(x) 90 days after the commencement of such period of service
to which the Performance Goal relates and (y) the lapse of 25%
of such period of service (as scheduled in good faith at the
time the goal is established), and in any event while the
outcome is substantially uncertain. A Performance Goal is
objective if a third party having knowledge of the relevant
facts could determine whether the goal is met. Such a
Performance Goal may be based on one or more business criteria
that apply to the individual, one or more business units of
the Company, or the Company as a whole, and may include one or
more of the following: increased revenue; net income; earnings
before interest, taxes, depreciation and amortization; other
earnings measures; economic value added; cash flow measures;
stock price; market share; return on equity or capital; return
on revenue measures; costs; oil and gas volumes; petroleum
reserve measures and safety and environmental performance
measures. Unless otherwise stated, such a Performance Goal
need not be based upon an increase or positive result under a
particular business criterion and could include, for example,
maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business
criteria). In interpreting Plan provisions applicable to
Performance Goals and Performance Awards, it is the intent of
the Plan to conform with the standards of Section 162(m) of
the Code and Treasury Regulation Section 1.162- 27(e)(2)(i),
and the Committee in establishing such goals and interpreting
the Plan shall be guided by such provisions. Prior to the
payment of any compensation based on the achievement of
Performance Goals, the Committee must certify in writing that
applicable Performance Goals and any of the material terms
thereof were, in fact, satisfied. Subject to the foregoing
provisions, the terms,
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conditions and limitations applicable to any Performance
Awards made pursuant to this Plan shall be determined by the
Committee.
(b) The following limitations shall apply to any
Award made hereunder:
(i) no Participant may be granted, during any one
calendar year period, Awards consisting of Options or SARs
that are exercisable for more than 250,000 shares of Common
Stock;
(ii) no Participant may be granted, during any one
calendar year period, Stock Awards covering or relating to
more than 10,000 [__________] shares of Common Stock (the
limitation set forth in this clause (ii), together with the
limitation set forth in clause (i) above, being hereinafter
collectively referred to as the "Stock Based Awards
Limitations"); and
(iii) no Participant may be granted Awards
consisting of cash or in any other form permitted under this
Plan (other than Awards consisting of Options or SARs or
otherwise consisting of shares of Common Stock or units
denominated in such shares) in respect of any one calendar
year period having a value determined on the date of grant in
excess of $2,000,000 [__________].
(c) Awards that are issued in substitution for an award
previously held by a Company employee by reason of his employment by
PennzEnergy Company, the Company's former parent, when such Awards are
issued in connection with the separation of the Company from
PennzEnergy Company, shall not be subject to the limitations in
Section 8(b), nor shall such Awards count against the limitations on
Common Stock available for Awards set forth in Section 5. Any such
Awards issued in substitution for prior awards held under any
PennzEnergy Company plan, program or practice shall be subject to such
terms and conditions as the Committee may establish, but shall in all
events comply with the applicable provisions of that certain Agreement
and Plan of Merger dated as of ___________, 1998 among _____________,
_____________ and _______________ and shall in all respects comply
with the provisions of Exhibit ___ thereto (Employee Benefits
Agreement).
9. Payment of Awards.
(a) General. Payment of Awards may be made in the form
of cash or Common Stock, or a combination thereof, and may include
such restrictions as the Committee shall determine, including, in the
case of Common Stock, restrictions on transfer and forfeiture
provisions. If payment of an Award is made in the form of Restricted
Stock, the applicable Award Agreement relating to such shares shall
specify whether they are to be issued at the beginning or end of the
Restriction Period. In the event that shares of Restricted Stock are
to be issued at the beginning of the Restriction Period, the
certificates evidencing such shares
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(to the extent that such shares are so evidenced) shall contain
appropriate legends and restrictions that describe the terms and
conditions of the restrictions applicable thereto. In the event that
shares of Restricted Stock are to be issued at the end of the
Restricted Period, the right to receive such shares shall be evidenced
by book entry registration or in such other manner as the Committee
may determine.
(b) Deferral. With the approval of the Committee,
amounts payable in respect of Awards may be deferred and paid either
in the form of installments or as a lump-sum payment. The Committee
may permit selected Participants to elect to defer payments of some or
all types of Awards in accordance with procedures established by the
Committee. Any deferred payment of an Award, whether elected by the
Participant or specified by the Award Agreement or by the Committee,
may be forfeited if and to the extent that the Award Agreement so
provides.
(c) Dividends, Earnings and Interest. Rights to
dividends or Dividend Equivalents may be extended to and made part of
any Award consisting of shares of Common Stock or units denominated in
shares of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest and other
earnings on deferred cash payments and on Dividend Equivalents for
Awards consisting of shares of Common Stock or units denominated in
shares of Common Stock.
(d) Substitution of Awards. At the discretion of the
Committee, a Participant may be offered an election to substitute an
Award for another Award or Awards of the same or different type.
10. Option Exercise. The price at which shares of
Common Stock may be purchased under an Option shall be paid in full at the time
of exercise in cash or, if elected by the optionee, the optionee may purchase
such shares by means of tendering Common Stock or surrendering another Award,
including Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine acceptable
methods for Participants to tender Common Stock or other Awards; provided that
any Common Stock that is or was the subject of an Award may be so tendered only
if it has been held by the Participant for six months. The Committee may
provide for procedures to permit the exercise or purchase of such Awards by use
of the proceeds to be received from the sale of Common Stock issuable pursuant
to an Award. Unless otherwise provided in the applicable Award Agreement, in
the event shares of Restricted Stock are tendered as consideration for the
exercise of an Option, a number of the shares issued upon the exercise of the
Option, equal to the number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the Restricted Stock so
submitted
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as well as any additional restrictions that may be imposed by the Committee.
The Committee may adopt additional rules and procedures regarding the exercise
of Options from time to time, provided that such rules and procedures are not
inconsistent with the provisions of this paragraph.
11. Taxes. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of delivery
or vesting of cash or shares of Common Stock under this Plan, an appropriate
amount of cash or number of shares of Common Stock or a combination thereof for
payment of taxes required by law or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Award with respect to which withholding is required.
If shares of Common Stock are used to satisfy tax withholding, such shares
shall be valued based on the Fair Market Value when the tax withholding is
required to be made. The Committee may provide for loans, on either a short
term or demand basis, from the Company to a Participant to permit the payment
of taxes required by law.
12. Amendment, Modification, Suspension or Termination.
The Board may amend, modify, suspend or terminate this Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other
purpose permitted by law, except that (i) no amendment or alteration that would
adversely affect the rights of any Participant under any Award previously
granted to such Participant shall be made without the consent of such
Participant and (ii) no amendment or alteration shall be effective prior to its
approval by the stockholders of the Company to the extent such approval is
required by applicable legal requirements.
13. Assignability. Unless otherwise determined by the
Committee and provided in the Award Agreement, no Award or any other benefit
under this Plan shall be assignable or otherwise transferable, except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. The Committee may prescribe and
include in applicable Award Agreements other restrictions on transfer. Any
attempted assignment of an Award or any other benefit under this Plan in
violation of this Section 13 shall be null and void.
14. Adjustments.
(a) The existence of outstanding Awards shall not affect
in any manner the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the capital stock of the Company
or its business or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock
(whether or not such issue is prior to, on a parity with or junior to
the Common Stock) or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding of any kind, whether or not of a
character similar to that of the acts or proceedings enumerated above.
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(b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock, declaration of a dividend payable
in shares of Common Stock or other stock split, then (i) the number of
shares of Common Stock reserved under this Plan, (ii) the number of
shares of Common Stock covered by outstanding Awards in the form of
Common Stock or units denominated in Common Stock, (iii) the exercise
or other price in respect of such Awards, (iv) the appropriate Fair
Market Value and other price determinations for such Awards and (v)
the Stock Based Awards Limitations shall each be proportionately
adjusted by the Board to reflect such transaction. In the event of
any other recapitalization or capital reorganization of the Company,
any consolidation or merger of the Company with another corporation or
entity, the adoption by the Company of any plan of exchange affecting
the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends
payable in Common Stock), then (i) the number of shares of Common
Stock covered by outstanding Awards in the form of Common Stock or
units denominated in Common Stock, (ii) the exercise or other price in
respect of such Awards, (iii) the appropriate Fair Market Value and
other price determinations for such Awards and (iv) the Stock Based
Awards Limitations shall each be proportionately adjusted by the Board
to reflect such transaction; provided that such adjustments shall only
be such as are necessary to maintain the proportionate interest of the
holders of the Awards and preserve, without exceeding, the value of
such Awards. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board shall be authorized (i) to issue or assume
Awards by means of substitution of new substitute Awards, as
appropriate, for previously issued Awards or to assume previously
issued Awards as part of such adjustment or (ii) to cancel the Awards
that are Options or SARs by giving the holder notice and opportunity
to exercise for 30 days prior to such cancellation. Any substitute
Awards shall not be subject to the limitations on Common Stock
available for Awards under paragraph 5, nor the limitations of Section
8(b).
15. Restrictions. No Common Stock or other form of
payment shall be issued with respect to any Award unless the Company shall be
satisfied based on the advice of its counsel that such issuance will be in
compliance with applicable federal and state securities laws. Certificates
evidencing shares of Common Stock delivered under this Plan (to the extent that
such shares are so evidenced) may be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any securities exchange or transaction reporting system upon which the Common
Stock is then listed or to which it is admitted for quotation and any
applicable federal or state securities law. The Committee may cause a legend
or legends to be placed upon such certificates (if any) to make appropriate
reference to such restrictions.
16. Unfunded Plan. Insofar as it provides for Awards of
cash, Common Stock or rights thereto, this Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants who are
entitled to cash, Common Stock or rights thereto under this Plan, any such
accounts shall be used merely as a bookkeeping convenience. The Company shall
not be required to segregate any assets that may at any time be represented by
cash, Common Stock or
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rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company, the Board or the Committee be deemed to be
a trustee of any cash, Common Stock or rights thereto to be granted under this
Plan. Any liability or obligation of the Company to any Participant with
respect to an Award of cash, Common Stock or rights thereto under this Plan
shall be based solely upon any contractual obligations that may be created by
this Plan and any Award Agreement, and no such liability or obligation of the
Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the performance of any
obligation that may be created by this Plan.
17. Governing Law. This Plan and all determinations made
and actions taken pursuant hereto, to the extent not otherwise governed by
mandatory provisions of the Code or the securities laws of the United States,
shall be governed by and construed in accordance with the laws of the State of
Delaware.
18. Effectiveness. This Plan shall be effective on
______________, 1998. This Plan and all Awards made hereunder prior to the
next meeting of the Company's stockholders are conditioned upon the approval of
this Plan by the stockholders of the Company at such meeting. If the
stockholders of the Company should fail to so approve this Plan, this Plan
shall terminate and cease to be of any further force or effect and all grants
of Awards hereunder shall be null and void.
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