1
EXHIBIT 99
DESCRIPTION OF QUAKER STATE CAPITAL STOCK
The Capital Stock, par value $1.00 per share, of Quaker State
(hereinafter referred to as the "Capital Stock") is the only class of capital
stock authorized to be issued by Quaker State. Holders of Capital Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors of Quaker State (hereinafter referred to as the "Board of Directors")
out of any funds legally available therefor and are entitled to one vote per
share held on all matters voted upon by stockholders. Holders of the Capital
Stock are entitled upon liquidation to share ratably in net assets and have no
preemptive or other rights to subscribe for any other shares or securities.
The Capital Stock is not convertible into any other class of stock, and there
are no redemption or sinking fund provisions with respect to the Capital Stock.
SUPER-MAJORITY VOTE PROVISION
Quaker State's Certificate of Incorporation provides that, except as
provided below, the affirmative vote of the holders of 95% of all shares of
stock entitled to be voted in an election of Directors is required to authorize
a business combination with any other entity which has become the beneficial
owner, directly or indirectly, of more than 30% of the outstanding shares of
such stock. The term "business combination" includes (i) any merger or
consolidation of Quaker State with or into such other entity, (ii) any sale or
lease of all or any substantial part of the assets of Quaker State to such
other entity or (iii) any sale or lease by such other entity to Quaker State or
any subsidiary in exchange for securities of Quaker State of assets having an
aggregate fair market value of $5,000,000 or more. The term "other entity"
includes any person, any "affiliate" or "associate" of such person (as these
terms are defined by a rule of the Securities and Exchange Commission) and any
other person with which such person or any "affiliate" or "associate" of such
person has any agreement, arrangement or understanding, directly or indirectly,
for the purpose of acquiring, holding, voting or disposing of Quaker State
stock. Except as provided below, the 95% stockholder vote is required even if
the other entity ceases to be a 30% beneficial owner so long as the other
entity continues to be an "affiliate" of Quaker State.
The 95% stockholder vote for a business combination with such other
entity is not required if certain minimum price and other requirements are
satisfied. The minimum price provisions require that the consideration per
share received by the Quaker State stockholders in the business combination (i)
bear the same or a greater percentage relationship to the market price of the
Capital Stock immediately prior to the announcement of the business combination
as the highest per share price which such other entity paid for any shares of
the Capital Stock already owned by it bears to the market price of the Capital
Stock immediately prior to the commencement of acquisition of the Capital Stock
by such other entity, (ii) be not less than the highest per share price paid
for any shares of the Capital Stock by such other entity and (iii) be not less
than the earnings per share of the Capital Stock for the four prior fiscal
quarters multiplied by the then price/earnings multiple (if any) of such other
entity as customarily computed and reported in the financial community. In the
event Quaker State is the surviving corporation in the business combination,
the consideration per share received by the stockholders in the business
combination is considered to be the market price of the Capital Stock.
The other requirements that must be satisfied to avoid the 95%
stockholder vote are as follows: First, the other entity must not have
received the benefit, directly or indirectly, of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by
Quaker State or, without the unanimous approval of the Board of Directors, must
not have made any major change in Quaker State's business or equity capital
structure. Second, after having acquired a 30% interest, the other entity (i)
must have taken steps to ensure continued representation on the Board of
Directors by "Continuing Directors" (as defined below) proportionate to the
stockholdings of Quaker State's public stockholders not affiliated with the
other entity, (ii) must have made no reduction in the rate of dividends payable
on the Capital Stock, except as necessary to insure that a quarterly dividend
payment does not exceed 12.5% of Quaker State's net income for the four prior
fiscal quarters or except as may have been approved by a unanimous vote of the
Board of Directors, (iii) must not have acquired any newly issued shares of
stock, directly or indirectly, from Quaker State (except upon conversion of
convertible securities
2
acquired by it prior to obtaining a 30% interest or as a result of a pro rata
stock dividend or stock split) and (iv) must not have acquired any additional
shares of outstanding Capital Stock or securities convertible into Capital
Stock except as part of the transaction which results in such other entity
acquiring its 30% interest. Third, the business combination must be approved
at a meeting of the Quaker State stockholders from whom proxies are solicited
in accordance with the rules of the Securities and Exchange Commission.
If the minimum price and other requirements are satisfied, the vote
required for authorization of the business combination would be the affirmative
vote of the holders of a majority of the outstanding shares of Capital Stock or
of a majority of the shares of Capital Stock represented at the meeting,
depending upon the nature of the particular business combination and the
requirements of Delaware law applicable to the business combination. No
amendment of the Certificate of Incorporation may change or repeal the
super-majority vote provision without a 95% stockholder vote unless such
amendment would be unanimously recommended to the Quaker State stockholders by
the Board of Directors all the members of which are "Continuing Directors", in
which event the amendment could be adopted upon the affirmative vote of the
holders of a majority of the outstanding shares of the Capital Stock.
"Continuing Directors" are those persons who are Directors who were elected by
the public stockholders prior to the time the other entity became a 10%
beneficial owner or who were recommended to succeed a Continuing Director by a
majority of Continuing Directors.
The super-majority vote provision described above is contained in
Article Fourteenth of Quaker State's Certificate of Incorporation. The
description is subject in all respects to the provisions of Article Fourteenth.
STOCKHOLDER RIGHTS PLAN
On September 28, 1995, the Board of Directors declared a dividend
distribution of one Capital Stock Purchase Right (a "Right") for each
outstanding share of Capital Stock. The Rights were issued on October 18, 1995
to stockholders of record on that date. When exercisable, each Right entitles
the registered holder to purchase from Quaker State one share of Capital Stock
at a price of $50 per share of Capital Stock, subject to adjustment in certain
circumstances (the "Purchase Price"). The description and terms of the Rights
are set forth in a Rights Agreement, dated as of September 28, 1995 (the
"Rights Agreement"), between the Company and Mellon Securities Trust Company,
as Rights Agent (the "Rights Agent"). The following summary is subject in all
respects to the provisions of the Rights Agreement.
Transfer and Detachment. Until the "Distribution Date", which is the
earlier to occur of (i) ten business days following the time (the "Stock
Acquisition Time") of a public announcement or notice to Quaker State that a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership (as defined in
the Rights Agreement) of 15% or more of the outstanding shares of Capital
Stock, and (ii) ten business days, or such later date as may be determined by
the Board of Directors, after the date of the commencement or announcement by a
person of an intention to make a tender offer or exchange offer for an amount
of Capital Stock which, together with the shares of such stock already owned by
such person, constitutes 15% or more of the outstanding shares of the Capital
Stock, the Rights will be evidenced, with respect to any Capital Stock
certificate outstanding as of October 18, 1995, by such Capital Stock
certificate with a copy of a Summary of Rights attached thereto. The Rights
Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the Capital Stock. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Capital Stock
certificates issued after October 18, 1995, upon the transfer or issuance of
new shares of Capital Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any of the Capital
Stock certificates outstanding as of October 18, 1995, even without a copy of
-2-
3
the Summary of Rights attached thereto, will also constitute the transfer of
the Rights associated with the shares of Capital Stock represented by such
certificate. As long as the Rights are attached to the shares of Capital
Stock, Quaker State will issue one Right with each share of Capital Stock it
issues so that all shares have attached Rights.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Capital Stock as of the close of business on the
Distribution Date, and such separate Right Certificates alone will evidence the
Rights.
Exercisability. The Rights are not exercisable until the
Distribution Date. The Rights will expire on September 28, 2005 unless earlier
redeemed by Quaker State.
Right to Acquire Stock at Half Price. In the event that after the
Stock Acquisition Time, Quaker State is acquired in a merger or other business
combination transaction or 50% or more of Quaker State's assets, cash flow or
earning power are sold or otherwise transferred, the Rights Agreement provides
that proper provision shall be made so that each holder of a Right, upon the
exercise thereof at the then current exercise price of the Right, shall
thereafter be entitled to receive that number of shares of common stock of the
acquiring company which at the time of such transaction would have a market
value (as defined in the Rights Agreement) of two times the exercise price of
the Right. In the event that Quaker State is the surviving corporation of a
merger and the Capital Stock is changed or exchanged, proper provision shall be
made so that each holder of a Right will thereafter have the right to receive
upon exercise that number of shares of common stock of the other party to the
transaction having a market value of two times the exercise price of the Right.
In the event that a person or group becomes an Acquiring Person
(otherwise than pursuant to a tender offer or exchange offer for all
outstanding shares of the Capital Stock at a price and on terms which are
determined to be fair and in the best interests of Quaker State and its
stockholders by a majority of the members of the Board of Directors of Quaker
State who are not Acquiring Persons or representatives or nominees of or
affiliated or associated with an Acquiring Person), proper provision shall be
made so that each holder of a Right, other than Rights that were beneficially
owned by the Acquiring Person, which will thereafter be void, will thereafter
have the right to receive upon exercise that number of shares of Capital Stock
having a market value (as defined in the Rights Agreement) of two times the
exercise price of the Right. A person or group will not be deemed to be an
Acquiring Person if the Board of Directors determines that such person or group
became an Acquiring Person inadvertently and such person or group promptly
divests itself of a sufficient number of shares of Capital Stock so that such
person or group is no longer an Acquiring Person.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Quaker State, including, without limitation, the
right to vote or to receive dividends.
Adjustments. The Purchase Price payable and the number of shares of
Capital Stock or other securities or property issuable upon the exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on or a subdivision, combination or
reclassification of the shares of Capital Stock, (ii) upon the fixing of a
record date for the issuance to holders of Capital Stock of certain rights,
options or warrants to subscribe for shares of Capital Stock or convertible
securities at less than the current market price of shares of Capital Stock or
(iii) upon the fixing of a record date for the making of a distribution to
holders of shares of Capital Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends not exceeding 125% of the last
regular periodic cash dividend or dividends payable in shares of Capital Stock)
or of subscription rights or warrants (other than those referred to above).
The number of Rights and the number of shares of Capital
-3-
4
Stock issuable upon exercise of each Right are also subject to adjustment in
the case of a stock split, combination or stock dividend on the shares of
Capital Stock prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional shares of Capital Stock will be issued and,
in lieu thereof, an adjustment in cash will be made based on the market value
of shares of Capital Stock on the last trading date prior to the date of
exercise.
Redemption or Exchange. At any time prior to the earlier of (i) the
Stock Acquisition Time and (ii) September 28, 2005, Quaker State by resolution
of the Board of Directors may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (the "Redemption Price"). Immediately upon the action
of the Board of Directors electing to redeem the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
At any time after a person becomes an Acquiring Person and prior to
the acquisition by such person of 50% or more of the outstanding Capital Stock,
the Board of Directors may exchange the Rights (other than Rights beneficially
owned by such person which have become void), in whole or in part, for Capital
Stock at an exchange ratio of one share of Capital Stock per Right (subject to
adjustment). Quaker State may at its option substitute shares of any
substantially similar equity security of Quaker State for some or all of the
shares of Capital Stock exchangeable for Rights, at an exchange ratio of one
share of such equity security for each share of Capital Stock to be exchanged.
Amendment. The Rights and the Rights Agreement can be amended by the
Board of Directors in any respect (including, without limitation, any extension
of the period in which the Right Certificates may be redeemed) at any time
prior to the Stock Acquisition Time. From and after such time, without the
approval of the stockholders of Quaker State or the holders of the Rights, the
Board of Directors may only supplement or amend the Rights Agreement in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision
contained in the Rights Agreement which may be defective or inconsistent with
any other provision in the Rights Agreement, (iii) to shorten or lengthen any
time period under the Rights Agreement or (iv) to make any changes or
supplements which Quaker State may deem necessary or desirable which shall not
adversely affect the interests of the holders of Right Certificates (other than
an Acquiring Person or an affiliate or associate of any such person), provided
that any such action by the Board of Directors must have the concurrence of a
majority of the Continuing Directors (as defined in the Rights Agreement) and
provided that the Continuing Directors constitute a majority of directors then
in office, and provided that the Rights Agreement may not be supplemented or
amended to lengthen (A) a time period relating to when the Rights may be
redeemed or to modify the ability (or inability) of the Board of Directors to
redeem the Rights, in either case at such time as the Rights are not then
redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of or the benefits to
the holders of Rights (other than an Acquiring Person or an affiliate or
associate of any such person).
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
The super-majority vote provision and the stockholder rights plan
described above may be considered as having an antitakeover effect. Effective
February 2, 1988, a new Section 203 of the Delaware General Corporation Law
entitled "Business Combinations with Interested Stockholders" was enacted which
also could be considered as having such an effect. However, Quaker State, by
an amendment to Quaker State's Bylaws adopted by its Board of Directors on
March 31, 1988, elected not to be governed by the new Section 203.
-4-