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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ________________, 1997
REGISTRATION NO. 33-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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QUAKER STATE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 2992 25-0742820
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
225 E. John Carpenter Freeway, Irving, TX 75062 (972) 868-0400
(Address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive offices)
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PAUL E. KONNEY, ESQ.
QUAKER STATE CORPORATION
225 E. JOHN CARPENTER FREEWAY, IRVING, TX 75062 (972) 868-0400
(Name, address, including ZIP Code, and
telephone number, including area
code, of agent for service)
Copies to:
RICHARD WINKLER, ESQ. DANIEL F. ARCHER, ESQ.
QUAKER STATE CORPORATION FENTON & KELLER,
225 E. JOHN CARPENTER FREEWAY, IRVING, TEXAS 75062 A PROFESSIONAL CORPORATION
(972) 868-0400 2801 MONTEREY - SALINAS HWY.
MONTEREY, CA 93942-0791
(408) 373-1241
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Approximate date of commencement of proposed sale of the securities to the
public: Upon consummation of the transaction described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
/ /
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
Common Stock, par value
$1.00 per share 719,299 shares $14.25(1) $10,250,000 (1) $3,106.06(1)
Rights to Purchase Capital
Stock (2) (2) (2) (2)
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low
reported sales prices of the Registrant's Common Stock, par value $1.00
per share, as reported on the New York Stock Exchange Composite
Transactions Tape on January 28, 1997.
(2) Such number of Rights as are associated with the shares of common stock
registered hereby from time to time pursuant to the terms of the
Registrant's Stockholder Rights Plan. Initially, the Rights are
attached to and trade with the shares of common stock. Pursuant to Rule
457, no additional registration fee is required for the Rights.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 3(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SNAPPY LUBE, INC.
CONSENT SOLICITATION STATEMENT
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QUAKER STATE CORPORATION
CONSENT SOLICITATION STATEMENT/PROSPECTUS
This Consent Solicitation Statement/Prospectus is being furnished to
the stockholders of Snappy Lube, Inc., a Nevada corporation ("Snappy"), in
connection with the solicitation of written consents (the "Consent
Solicitation") by the Board of Directors of Snappy. In connection with the
Consent Solicitation, the stockholders of Snappy will be asked to consider and
vote on a proposal to approve an Agreement in which Snappy will merge with and
into (the "Merger") a newly-formed, wholly-owned subsidiary ("Merger Sub") of
Quaker State Corporation ("Quaker State"). Merger Sub will be the surviving
corporation from the Merger. See "The Merger".
Subject to provisions for payment of cash to dissenting shareholders,
upon consummation of the Merger, the Snappy stockholders will receive shares of
Quaker State Common Stock, $1.00 par value (the "Quaker State Common Stock"), of
a value equal to $10,250,000 less the amount of Snappy's liabilities at the time
of the Merger. The value of the Quaker State Common Stock will be determined
based on the closing price of Quaker State's Common Stock on the New York Stock
Exchange ("NYSE") on the date which is the last trading date before the
effective date of the Merger. This Prospectus also serves as the notice required
pursuant to Nevada Revised Statutes Section 92A.410 that Snappy stockholders are
or may be entitled to dissenters' rights under Sections 92A.300 to 92A.500 (See
"Dissenters' Rights").
This Consent Solicitation Statement/Prospectus and the accompanying
form of written consent are first being mailed to the Snappy stockholders on or
about _____________, 1997.
This Consent Solicitation Statement/Prospectus serves as a Prospectus
of Quaker State under the Securities Act of 1933, as amended, for the issuance
of shares of Quaker State Common Stock which shall be issued to or in the name
of the Snappy stockholders in connection with the Merger.
On January 28, 1997, the closing price on the NYSE Composite
Transactions Tape of Quaker State Common Stock was $14.125. See "Summary--
Market Price and Dividend Data."
THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS ARE AVAILABLE UPON REQUEST FROM CARRIE SHERWOOD, ASSISTANT
CORPORATE SECRETARY, QUAKER STATE CORPORATION, 225 E. JOHN CARPENTER
FREEWAY, IRVING, TEXAS 75062; TELEPHONE NUMBER 972/868-0433. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY A
DATE FIVE DAYS PRIOR TO THE DATE ON WHICH THE FINAL INVESTMENT DECISION
MUST BE MADE.
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THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE
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The date of this Consent Solicitation Statement/Prospectus is ____________, 1997
NO PERSON IS AUTHORIZED BY QUAKER STATE TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS CONSENT SOLICITATION
STATEMENT/PROSPECTUS, IN CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE
BY THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
THE SOLICITATION OF A PROXY OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH SOLICITATION OR
OFFERING MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF QUAKER STATE
CORPORATION SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Quaker State is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
with the Exchange Act, Quaker State files proxy statements, reports and other
information with the Securities and Exchange Commission (the "SEC"). This filed
material can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices in Chicago (Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, IL 60621-2511) and in New York
(Seven World Trade Center, 13th Floor, New York, NY 10048) and copies of such
material can be obtained by mail from the Public Reference Section of the SEC,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Quaker
State is an electronic filer, and the SEC maintains a Web site (address -
http://www.sec.gov) that contains reports, proxy and information statements and
other information concerning registrants that file electronically with the SEC.
Quaker State Common Stock is listed on the NYSE and the Pacific Stock Exchange.
Reports, proxy and information statements and other information concerning
Quaker State can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York and the Pacific Stock Exchange,
301 Pine Street, San Francisco, CA 94104.
Quaker State has filed with the SEC a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Quaker State Common Stock to be issued in connection with the Merger. This
Consent Solicitation Statement/Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits thereto, certain
portions of which have been omitted as permitted by the rules and regulations of
the SEC. Copies of the Registration Statement are available from the SEC, upon
payment of prescribed rates. For further information, reference is made to the
Registration Statement and the exhibits filed therewith. Statements contained in
this Consent Solicitation Statement/Prospectus or in any document incorporated
by reference in this Consent Solicitation Statement/Prospectus relating to the
contents of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
All information contained herein relating to Snappy has been provided
by Snappy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this Consent
Solicitation Statement/Prospectus: (i) Annual Report on Form 10-K for the year
ended December 31, 1995; (ii) Quarterly Report on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1996; (iii) Proxy Statement
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dated March 29, 1996; (iv) Quaker State's current reports on Form 8-K filed
June 27, 1996, July 12, 1996 (as amended by Form 8-K/A1 filed September 11,
1996) see Recent Events for further information in conjunction with the audited
financial statements of Blue Coral, Inc., October 10, 1996 (as amended by Form
8-K/A1 filed December 17, 1996), November 15, 1996, and December 20, 1996; (v)
the description of the Quaker State Common Stock set forth in a current report
on Form 8-K filed November 12, 1996. See "Recent Events" for further
information in conjunction with the audited financial statements of Blue Coral,
Inc. ("Blue Coral").
All reports and definitive proxy or information statements filed by
Quaker State pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Consent Solicitation Statement/Prospectus and
prior to the date of closing of the Merger shall be deemed to be incorporated by
reference into this Consent Solicitation Statement/Prospectus from the dates of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated in this Consent Solicitation Statement/Prospectus
shall be deemed to be modified or superseded for purposes of this Consent
Solicitation Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference modifies or supersedes such statement.
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TABLE OF CONTENTS
Page
SUMMARY ........................................................................................ 6
RISK FACTORS....................................................................................16
DISSENTERS' RIGHTS..............................................................................19
THE MERGER......................................................................................21
General Effects of the Merger..........................................................21
Background of and Reasons for the Merger...............................................21
Certain Federal Income Tax Consequences................................................22
Accounting Treatment...................................................................23
Effect on Exchange Act Requirements....................................................23
Operations Following The Merger........................................................23
The Merger Agreement...................................................................23
Closing.............................................................................24
Effective Time......................................................................24
Issuance and Exchange of Certificates; Distribution of Escrow Shares................24
Stock Exchange Listing..............................................................24
Expenses............................................................................24
Representations and Warranties......................................................24
Certain Covenants...................................................................25
No Solicitation of Transactions.....................................................25
Additional Agreements...............................................................25
Indemnification and Escrow..........................................................25
Conditions to Consummation of the Merger............................................25
Termination.........................................................................26
Amendment and Waiver................................................................26
Material Contacts......................................................................26
BUSINESS AND FINANCIAL INFORMATION REGARDING SNAPPY.............................................26
Ownership of Snappy Common Stock.......................................................28
Management's Discussion and Analysis of Financial Condition and Results of Operation
of Snappy...........................................................................28
Results of Operations...............................................................28
Liquidity and Working Capital Resources.............................................29
COMPARISON OF RIGHTS............................................................................30
EXPERTS ........................................................................................34
LEGAL MATTERS...................................................................................34
INDEX TO SNAPPY CONSOLIDATED FINANCIAL STATEMENTS..............................................F-1
ANNEX 1 - Agreement of Merger and Plan of Reorganization
ANNEX 2 - Nevada Revised Statutes Relating to Dissenters' Rights
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SUMMARY
The following is a summary of certain of the information contained
elsewhere in this Consent Solicitation Statement/Prospectus. Reference is made
to, and this summary is qualified in its entirety by, the more detailed
information contained elsewhere in this Consent Solicitation
Statement/Prospectus and the Annexes hereto which contain further information,
some of which is not summarized below. SNAPPY STOCKHOLDERS ARE URGED TO REVIEW
THE ENTIRE CONSENT SOLICITATION STATEMENT/PROSPECTUS CAREFULLY, INCLUDING THE
ANNEXES INCLUDED HEREIN, PARTICULARLY THE MATTERS REFERRED TO UNDER "RISK
FACTORS" AND "THE MERGER."
THE COMPANIES
Quaker State.
Quaker State Corporation ("Quaker State") is a leading producer and
marketer of branded and private label motor oils and other lubricants. Quaker
State through subsidiaries also operates fast lube centers throughout the United
States and Canada, markets automobile engine and fuel treatments, manufactures
and sells automobile polishes, car wash products, automotive air fresheners and
vehicular safety lighting equipment and operates a materials handling facility
in Canada.
The Quaker State Lubricant and Lubricant Services Division operates
fast lube centers which offer consumers quick and economical oil changes and
related services for passenger vehicles (primarily under the name "Q Lube") and
markets and distributes major national brand, private label and proprietary
brand lubricants and other automotive aftermarket products. The base oil stocks
used in the Company's lubricants are blended with additives and packaged at
manufacturing facilities operated by the Company in the United States and
Canada. The base oil stocks used by the Company are primarily purchased from
third parties and a portion of the base oil stocks used is currently produced
at its Congo refinery in West Virginia. The Lubricant and Lubricant Services
Division also provides collection, transportation and recycling services for
used oil, brake fluid, antifreeze and filters in certain regions of the United
States. During the first nine months of 1996, revenues from the Lubricant and
Lubricant Services Division comprised approximately 81.8% of the Company's total
sales and operating revenues from continuing operations.
Quaker State's subsidiary, Truck-Lite Co., Inc. ("Truck-Lite")
manufactures safety lighting equipment for trucks and automobiles, which is sold
to original equipment manufacturers and replacement parts distributors. During
the first nine months of 1996, revenues from Truck-Lite comprised approximately
7.5% of the Company's total sales and operating revenues from continuing
operations.
Quaker State also operates an iron ore pellet and potash terminal and a
bulk materials handling dock accessible to Lake Superior at Thunder Bay,
Ontario. During the first nine months of 1996, revenues from the materials
handling operations comprised less than .3% of the Company's total sales and
operating revenues from continuing operations.
Following the appointment of Herbert M. Baum as Chairman and Chief
Executive Officer in June 1993, the Company has taken initiatives to increase
its share of the branded motor oil market. These efforts have included
introducing new products and repositioning the Company's current product line,
extending the Company's existing brands, creating niche markets for the
Company's products, offering incentive programs and marketing allowances to
customers and independent distributors, and emphasizing the Quaker State name
through a new logo, contemporary packaging and increased advertising.
Quaker State's goal is to continue the growth of its Lubricant and
Lubricant Services Division and to strengthen further its position as a leading
North American motor oil company by capitalizing on the Company's brand name,
expanding its Q Lube operations, emphasizing its distribution, customer service
and technological capabilities and providing comprehensive lubricant products
and services, including the recycling of used oils and related materials.
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Consistent with the Company's focus on its core businesses, the Company
has opportunistically exited non-core businesses and made selective
acquisitions. The Company discontinued its coal operations in December 1992;
sold its insurance subsidiary, Heritage Insurance Group, Inc. ("Heritage"), in
August 1994; and sold the assets of its Natural Gas Exploration and Production
Division ("E&P") in the third and fourth quarters of 1995.
In September 1994, the Company acquired the Specialty Oil Companies
("Specialty") and Westland Oil Company, Inc. ("Westland"), which together have
provided the Company with a substantial private label motor oil business, two
additional blending and packaging facilities and a network of approximately 25
sales and distribution operations. This acquisition expanded the product range
and distribution capabilities of the Lubricant and Lubricant Services Division.
In July 1996, the Company formed a new Consumer Products Division,
which is comprised of Slick 50, Inc. ("Slick 50"), Blue Coral, Inc. ("Blue
Coral"), and Medo Industries, Inc. ("Medo"). In July 1995, the Company acquired
Slick 50, a producer of automotive engine treatments and related automotive
chemicals. In June 1996, the Company acquired Blue Coral, a manufacturer and
marketer of automobile polishes and other consumer car care products, commercial
and industrial cleaning products and commercial car wash products. Quaker State
acquired Medo in October 1996. Medo is engaged in the design, manufacture and
marketing of air fresheners, primarily for use in automobiles. The Company plans
to strengthen its Consumer Products Division by internal growth and by acquiring
new companies which capitalize on the Company's strong sales, distribution and
customer service abilities in the automotive aftermarket.
Quaker State believes that acquisitions will be an important aspect of
its corporate strategy. However, there can be no assurance that the Company will
be successful in finding other suitable acquisition or expansion opportunities.
Quaker State, a Delaware corporation formed in 1931, has its principal
executive offices at 225 E. John Carpenter Freeway, Irving, Texas 75062. Its
telephone number is (972) 868-0400.
Recent Events Regarding Quaker State
On October 31, 1996, the minority stockholder of NicSand, Inc.
("NicSand") exercised his option to purchase Blue Coral's interest in NicSand
for $7.2 million dollars. This transaction was contemplated by the Agreement and
Plan of Merger dated June 7, 1996 among Quaker State and the former Blue Coral
stockholders (the "Merger Agreement"). See the exhibits to Quaker State's
Current Report on Form 8-K, dated June 28, 1996, for a copy of the Merger
Agreement.
Effective November 14, 1996, Quaker State and the former shareholders
of Slick 50 Inc. 1 entered into an amendment (the "Amendment") to the Agreement
and Plan of Merger among Quaker State, Quaker State - Slick 50, Inc., Slick 50,
Inc. 1 and the Slick 50, Inc. 1 shareholders, dated May 26, 1995 (the "Slick 50
Agreement"). Pursuant to the Amendment, Quaker State, in December 1996, issued
354,374 additional shares of Quaker State Common Stock to the former Slick 50
Inc. 1 shareholders and to an escrow account in exchange for the extinguishment
of certain earnout rights under the Slick 50 Agreement. The escrow account
contains 59,060 shares which may be used to satisfy certain indemnification
obligations owed to Quaker State by the former Slick 50, Inc. 1 shareholders
pursuant to the Slick 50 Agreement. Any shares remaining in the escrow account
after January, 1998 will be distributed to the former Slick 50, Inc. 1
shareholders.
Quaker State and Sheldon G. Adelman ("Adelman") initialed an Outline of
Terms on November 20, 1996, providing, among other things, for Quaker State to
purchase 1,550,934 shares of Quaker State Common Stock ("Shares") from Adelman
and an affiliate of Adelman for $16.00 per share, subject to the execution of a
definitive agreement. On December 12, 1996, a definitive Purchase Agreement (the
"Agreement") was entered into among Quaker State, Blue Coral, Adelman, Joel
Adelman and the GST-Exempt Trust FBO Wendy Adelman, dated February 17, 1992,
Robert G. Markey and Michael G. Turk, Trustees (the "Trust"), pursuant to which
among other things: (i) Quaker State purchased 1,550,934 shares from Adelman and
the Trust at a purchase price of $16.00 per share, (ii) Quaker State and the
former Blue Coral stockholders agreed to reduce the maximum amount of certain
indemnification obligations under the Agreement and Plan of Merger, dated June
7, 1996, among Quaker State, Blue Coral and the former Blue Coral stockholders
from $15 million to $5 million; therefore, 680,272 shares were released from an
indemnification escrow account and delivered to the former Blue Coral
stockholders and (iii) Adelman and Joel Adelman resigned all positions with
Quaker State and its subsidiaries. Adelman will, however, serve as a consultant
to Quaker State until June 28, 2001. The closing under the Agreement occurred on
December 18, 1996. See Quaker State's Form 8-K dated December 12, 1996, which is
incorporated herein by reference, for further information.
On January 28, 1997, Quaker State announced that it had revenues and a
net loss of $309.6 million and $5.9 million ($0.16 per share) in the fourth
quarter of 1996. For the year ending December 31, 1996, Quaker State reported
revenues and net income of $1.2 billion and $13.7 million ($0.40 per share),
respectively. The fourth quarter loss included unusual charges of $8.7 million
($0.24 per share) related primarily to non-cash asset write-downs net of a cash
gain on the early settlement of a long-term receivable.
Snappy.
Snappy Lube, Inc. ("Snappy") is an owner-operator of fourteen quick oil
change centers located in the San Francisco Bay Area of California. Snappy, a
Nevada corporation formed in 1987, has its principal executive offices at 5
Harris Court, Bldg B-1, Monterey, California 93940. Its telephone number is
(408) 655-0180. Snappy offers quick, clean and reliable full service
lubrication, oil and filter changes. Snappy emphasizes the importance of
location in the success of its service centers and selects high-traffic, visible
sites in well-populated areas.
The majority of Snappy's sales and marketing efforts has been
concentrated on attracting the individual retail consumer, participating only
minimally in the fleet service market. A typical Snappy customer would initially
come to a service center for standard service, which includes the 14-Point Lube,
Oil, Filter Service. However, Snappy sells additional services, including
Automatic Transmission Service, Synthetic Oil Change, and Radiator Service,
which increase the average sales price of the services. For the fiscal year
ended 1996, 80.9% of Snappy's revenue was received from customers purchasing the
standard service and 19.1% was attributable to sales of additional services.
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Snappy currently consumes approximately 280,000 gallons of oil and
315,000 air and oil filters per year and is one of the largest independent
non-retail Pennzoil customers on the West Coast and one of the largest
independent lube service providers in California. In 1994, Snappy ranked #182 of
500 in Inc. Magazine's Fastest-Growing Private Companies Study.
Snappy has approximately 150 full-time employees and competes with
major quick-lube chains, smaller chains and full-service gas stations. Among
Snappy's primary competitors are Jiffy Lube, Minute Lube, Speedy Lube and Tune
and Pennzoil 10-minute Oil Change Centers.
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DESCRIPTION OF TRANSACTION
Quaker State and Snappy executed an Agreement of Merger and Plan of
Reorganization dated as of January 31, 1997 (the "Merger Agreement") pursuant to
which Snappy will merge with and into a newly formed, wholly-owned subsidiary of
Quaker State ("Merger Sub"), with the Merger subsidiary as the surviving
corporation. If the Merger is consummated, the stockholders of Snappy will
receive shares of Quaker State Common Stock equal to $10,250,000 less Snappy's
liabilities as of the date of the Merger, valued as hereafter described. The
shares of Quaker State Common Stock shall be valued at the closing price on the
New York Stock Exchange on the date of the Merger.
THE CONSENT SOLICITATION
The written consents of the stockholders of Snappy in favor of the
Merger is being solicited. Only holders of record of Snappy Common Stock at the
close of business on ____________, 1997 (the "Record Date") will be entitled to
act by written consent. Pursuant to the written consent solicitation, Snappy
stockholders entitled to vote will consider and vote upon the Merger Agreement
and the transactions contemplated thereby, including the Merger of Snappy with
and into Merger Sub (the "Merger"). A copy of the Merger Agreement is attached
to this Consent Solicitation Statement/ Prospectus as Annex 1 and is
incorporated herein by reference. See "The Meeting" and "The Merger."
VOTE REQUIRED; SHARE OWNERSHIP
The written consents of the holders of a majority of the Snappy Common
Stock are required to approve the Merger Agreement and the transaction
contemplated thereby. See "Business and Financial Information Regarding Snappy--
Ownership of Snappy Common Stock" for a description of the stock ownership of
Snappy.
EFFECTS OF THE MERGER
General Effects of the Merger. Upon consummation of the Merger, the
separate corporate existence of Snappy will cease, and the Snappy stockholders
at the Effective Time (defined below) (other than Snappy stockholders exercising
statutory dissenters' rights) will receive shares of Quaker State Common Stock.
A portion of the shares of Quaker State Common Stock deliverable to the Snappy
stockholders equal in value to $250,000, on a pro rata basis from all of the
Snappy stockholders, will be placed in escrow for a period of one year as
security for the obligations of the Snappy stockholders to indemnify Quaker
State for certain liabilities. See " The Merger Agreement--Issuance and Exchange
of Certificates; Distribution of Escrow Shares" and "The Merger Agreement--
Indemnification and Escrow."
After the Merger, Quaker State will hold 100% of the Snappy capital
stock then outstanding and the Snappy stockholders will be stockholders of
Quaker State. See "Comparison of Rights."
Background of and Reasons for the Merger. The Board of Directors of
Snappy has unanimously approved the Merger Agreement and believes that the
transactions contemplated thereby are fair and in the best interests of the
Snappy stockholders. For background information and a discussion of the reasons
for the Merger, see "The Merger--Background of and Reasons for the Merger."
Certain Federal Income Tax Consequences. The Merger is intended to
constitute a tax-free reorganization under Section 368 of the Internal Revenue
Code. For federal income tax purposes, no gain is expected to be recognized by
Snappy stockholders as a result of the Merger, to the extent that such
shareholders receive solely Quaker State Common Stock in the Merger and
provided certain other conditions are met. ALL SNAPPY STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM
OF THE MERGER. See "Risk Factors--Federal Income Tax Consequences" and "The
Merger--Certain Federal Income Tax Consequences."
Accounting Treatment. The Merger will be accounted for under the
purchase method of accounting. See "The Merger--Accounting Treatment."
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OPERATIONS FOLLOWING THE MERGER
Following the Merger, Quaker State intends to operate Snappy's assets
in substantially the same manner as operated by Snappy, through a management
arrangement with Pacific CarCare, L.L.C. Pacific CarCare L.L.C. is a joint
venture in which Quaker State holds a minority ownership interest.
TERMS OF THE MERGER AGREEMENT
Closing and Effective Time. The Closing will take place after the
conditions to Closing are met, including the effectiveness of the registration
statement on Form S-4 of which this Prospectus is a part and the obtaining of
written consents of the holders of a majority of the shares of Snappy Common
Stock as of the Record Date, provided that the Merger Agreement may be
terminated if the Closing has not occurred on or before February 28, 1997. The
Merger will become effective upon the filing of the Certificate of Merger with
the Secretaries of State of the State of Delaware and Nevada (the "Effective
Time"). The Certificate of Merger will be filed as soon as practicable after the
Closing. See "The Merger--The Merger Agreement--Closing" and "The Merger--The
Merger Agreement--Effective Time."
Merger Consideration. Pursuant to the Merger, the Snappy stockholders
will receive shares of Quaker State Common Stock (the "Closing Shares"). A
portion of the Closing Shares equal in value to $250,000 (the "Escrow Shares")
will be placed in escrow for a period of one year as security for the
obligations of the Snappy stockholders to indemnify Quaker State for certain
liabilities under the Merger Agreement. The number of shares of Quaker State
Common Stock issuable at the Effective Time to holders of Snappy Common Stock
shall be determined as follows:
(i) First, by subtracting from $10,250,000 the amount
of Snappy's balance sheet liabilities (other than certain excluded
liabilities to be assumed by a third party prior to closing), as of the
time of Closing (the "Net Consideration").
(ii) Second, by dividing the Net Consideration by the
closing price of Quaker State Common Stock on the NYSE on the closing
date.
Issuance and Exchange of Certificates; Distribution of Escrow Shares.
Promptly after the Effective Time, Quaker State shall issue the Closing Shares
(excluding the Escrow Shares) to the Snappy stockholders. A portion of the
Closing Shares will be placed in escrow for distribution to the Snappy
stockholders upon the conditions specified in the Merger Agreement and an Escrow
Agreement to be executed prior to the Closing. See "The Merger--The Merger
Agreement--Issuance and Exchange of Certificates; Distribution of Escrow Shares"
and "The Merger--The Merger Agreement--Indemnification and Escrow."
Conditions. The respective obligations of Snappy and Quaker State to
effect the Merger are subject to various conditions described herein, including
but not limited to: (i) the absence of any suit by any governmental agency
seeking a restraining order or injunction that would prevent the consummation of
the Merger; (ii) the performance by the other party of its obligations under the
Merger Agreement and the accuracy of the other party's representations and
warranties contained therein, (iii) the obtaining by Snappy of consents of the
landlords of leases held by Snappy (iv) the filing of a Certificate of Merger
with the Secretary of State of Delaware, (v) the effectiveness of the
Registration Statement and the filing of an application to list the Quaker State
Common Stock on the New York Stock Exchange, (vi) the approval of the Merger
Agreement by the Snappy stockholders, (vii) the cancellation of certain
agreements to which Snappy is a party, (viii) no material adverse change in the
financial condition or results of operations of Snappy shall have occurred from
September 30, 1996 to the date of closing, and (ix) the receipt by Quaker State
and Snappy of opinions from counsel to Quaker State and counsel to Snappy as to
certain legal matters. See "The Merger--The Merger Agreement--Conditions to
Consummation of the Merger."
Termination. The Merger Agreement is subject to termination at the
option of either Quaker State, on the one hand, or Snappy, on the other hand, if
the Merger is not consummated by February 28, 1997 and prior to that time upon
the occurrence of certain events. See " The Merger--The Merger Agreement--
Termination."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Following the Effective Time, the Board of Directors of the surviving
corporation will be John D. Barr, Conrad A. Conrad and Paul E. Konney until
their successors are duly elected and qualified.
COMPARISON OF RIGHTS
The Snappy stockholders will own common stock of Quaker State, a
Delaware corporation, as a result of the Merger. Their shares will therefore
have different rights than the shares of Snappy, which is a Nevada corporation,
under Nevada law and Snappy's Certificate of Incorporation and Bylaws. See
"Comparison of Rights."
DISSENTERS' RIGHTS
The Snappy stockholders will have certain dissenters' rights under
Nevada law. See "Dissenters' Rights."
RISK FACTORS
The Snappy stockholders should carefully review the matters set forth
under "Risk Factors."
MARKET PRICE AND DIVIDEND DATA
Quaker State Common Stock is listed on the New York Stock Exchange
under the symbol "KSF." The Snappy Common Stock is not traded on any securities
market or exchange.
The following table sets forth, for the periods indicated, the high and
low sales prices of the Quaker State Common Stock on the NYSE:
PER SHARE OF
QUAKER STATE COMMON STOCK
-------------------------
HIGH LOW
---- ---
Calendar Year 1994
First Quarter $14 3/8 $12 5/8
Second Quarter 16 1/8 12 3/4
Third Quarter 15 3/8 13 1/2
Fourth Quarter 14 1/2 13
Calendar Year 1995
First Quarter $15 1/8 $13 3/8
Second Quarter 15 1/8 13 1/2
Third Quarter 16 1/2 14 5/8
Fourth Quarter 14 3/4 12 1/8
Calendar Year 1996
First Quarter $14 5/8 $12 3/4
Second Quarter 16 1/8 13 7/8
Third Quarter 17 1/2 14
Fourth Quarter 18 1/4 14
The closing price for Quaker State Common Stock on the NYSE on January
28, 1997 was $14.125.
The declaration and payment of dividends on Quaker State Common Stock
are made at the discretion of the Quaker State Board of Directors. Quaker State
has paid a quarterly cash dividend of $0.10 per share to stockholders of record
for each quarter since the quarter ended September 30, 1993.
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Future dividends on Quaker State Common Stock, if any, will depend upon
earnings, capital needs and the financial condition of Quaker State, among other
factors.
Snappy has never paid any cash dividends on its capital stock. If the
Merger is not consummated, the Board of Directors of Snappy presently intends to
continue a policy of retaining all earnings to finance the expansion of its
business.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following information sets forth selected financial data with
respect to Quaker State. This information should be read in conjunction with
the separate consolidated financial statements and accompanying notes of Quaker
State incorporated by reference herein. Interim financial information for
Quaker State reflects all adjustments which are, in the opinion of Quaker
State's management, necessary to present fairly the consolidated financial
information of Quaker State.
SELECTED FINANCIAL INFORMATION
The following table sets forth summary financial information relating
to Quaker State. The summary financial data for the five years ended December
31, 1995 are derived from the Consolidated Financial Statements of Quaker State,
which have been audited by Coopers & Lybrand L.L.P., independent certified
public accountants to Quaker State. The financial data for the nine-month
periods ended September 30, 1996 and 1995 are derived from the unaudited
condensed consolidated financial statements of Quaker State. Operating results
for the nine months ended September 30, 1996 are not necessarily indicative of
the results for the full year ended December 31, 1996. The data should be read
in conjunction with the financial information, management's discussion and
analysis, and notes incorporated by reference into this Consent Solicitation
Statement/Prospectus.
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Selected Consolidated Financial Data of Quaker State
NINE MONTHS ENDED YEARS ENDED DECEMBER 31
SEPTEMBER 30
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AND
STATISTICAL DATA)
REVENUES
Sales and operating revenues $ 890,595 $ 774,340 $ 1,035,570 $732,634 $607,085 $592,650 $577,613
Other, net 5,790 6,723 9,894 6,923 5,595 4,063 4,450
- ------------------------------------------------------------------------------------------------------------------------------------
896,385 781,063 1,045,464 739,557 612,680 596,713 582,063
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales and operating costs 611,329 543,159 718,996 503,539 421,894 408,830 399,747
Selling, general and administrative 218,092 186,931 255,271 193,390 156,359 158,920 139,709
Depreciation, depletion and amortization 26,234 22,900 32,919 21,845 19,181 20,077 20,148
Interest 7,059 4,895 7,228 5,115 5,721 4,785 4,567
Unusual items (a) 938 17,004 27,000 -- -- 3,200 --
- ------------------------------------------------------------------------------------------------------------------------------------
863,652 774,889 1,041,414 723,889 603,155 595,812 564,171
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 32,733 6,174 4,050 15,668 9,525 901 17,892
PROVISION FOR INCOME TAXES 13,100 2,408 2,300 6,167 2,534 245 7,443
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM 19,633 3,766 1,750 9,501 6,991 656 10,449
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (b) -- 13,933 14,489 9,265 6,711 (31,904) 5,090
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING 19,633 17,699 16,239 18,766 13,702 (31,248) 15,539
CHANGES
EXTRAORDINARY ITEM (c) -- -- (4,139) -- -- -- --
CUMULATIVE EFFECT OF ACCOUNTING -- -- -- -- -- (62,600) 7,170
CHANGES (d)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 19,633 $ 17,699 $ 12,100 $ 18,766 $ 13,702 $(93,848) $ 22,709
====================================================================================================================================
Per share:
Income from continuing operations
before
extraordinary loss and cumulative
effect of accounting $ 0.58 $ 0.12 $ .06 $ .33 $ .25 $ .02 .39
changes
Income (loss) from discontinued -- 0.43 .45 .33 .25 (1.17) .19
operations
Extraordinary item -- -- (.13) -- -- -- --
Cumulative effect of accounting -- -- -- -- -- (2.30) .26
changes
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.58 $ 0.55 $ .38 $ .66 $ .50 $ (3.45) $ .84
====================================================================================================================================
Dividends:
Cash per share $ .30 $ .30 $ .40 $ .40 $ .60 $ .80 $ .80
Amount 10,159 9,583 12,867 11,358 16,310 21,720 21,704
Capital expenditures 40,429 26,066 45,130 36,444 29,760 25,706 32,037
Working capital 136,496 97,744 132,073 101,439 35,403 74,911 43,041
Total assets 861,579 701,205 717,023 630,018 783,677 792,820 751,496
Total debt 197,282 75,185 125,762 73,249 51,450 79,183 88,924
Stockholders' equity 326,620 279,738 272,155 251,850 188,750 191,194 307,790
Book value per share 9.09 8.53 8.29 8.00 6.93 7.04 11.34
- ------------------------------------------------------------------------------------------------------------------------------------
Number of stockholders of record 9,325 10,004 9,776 11,792 12,147 12,606 12,308
Weighted average capital and
equivalent shares outstanding 34,002,000 32,018,000 32,226,000 28,459,000 27,234,000 27,184,000 27,146,000
===================================================================================================================================
a. Quaker State recorded $22.6 million of restructuring charges, of which
$17 million was charged in the nine months ended September 30, 1995 and
$4.4 million for the settlement of a class-action lawsuit in 1995.
Quaker State recognized a charge in 1992 for assets to be replaced by
future conversion of Minit-Lube stores to Q Lube format.
b. Quaker State sold its exploration and production business in 1995, its
insurance business in 1994 and discontinued its coal business in 1992.
These businesses have been reported as discontinued operations.
c. Premium on early extinguishment of $50 million, 8.73% Senior Notes.
d. Cumulative effect of implementing Statement of Financial Accounting
Standard No. 106, "Employers' Accounting For Postretirement Benefits
Other Than Pensions" and Standard No. 109, "Accounting For Income
Taxes" in 1992 and Standard No. 96, "Accounting For Income Taxes" in
1991.
e. Certain items have been reclassified for comparative purposes.
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SELECTED CONSOLIDATED FINANCIAL DATA OF SNAPPY
Summary Consolidated Financial Data
The following information sets forth selected financial data with
respect to Snappy. The summary financial data for the five years ended December
31, 1996 are derived from the unaudited condensed consolidated financial
statements of Snappy. This information should be read in conjunction with
the Separate Consolidated financial Statements, Management's Discussion and
Analysis, and Notes of Snappy, included elsewhere herein.
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
--------- ---------- --------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Sales $ 8,162 $ 7,332 $ 6,641 $ 5,683 $ 4,346
COST OF SALES:
COST OF PRODUCTS 1,981 1,790 1,610 1,440 1,071
COST OF LABOR 2,359 2,129 2,043 1,666 1,327
--------- ---------- --------- --------- --------
4,340 4,037 3,653 3,106 2,398
--------- ---------- --------- --------- --------
GROSS PROFIT 3,822 3,413 2,988 2,577 1,948
OPERATING EXPENSES 3,314 2,647 2,295 1,932 1,438
--------- ---------- --------- --------- --------
INCOME FROM OPERATIONS 508 765 693 645 510
INTEREST EXPENSE (140) (139) (171) (174) (169)
DEPRECIATION & AMORTIZATION (187) (148) (157) (171) (139)
OTHER INCOME (EXPENSE), NET 41 26 (121) (77) 5
--------- ---------- --------- --------- --------
NET INCOME INCLUDING MINORITY INTEREST 222 504 244 223 207
MINORITY INTEREST(1) (113) (124) (118) (94) (83)
--------- ---------- --------- --------- --------
NET INCOME (2) $ 109 $ 380 $ 126 $ 129 $ 124
========= ========== ========= ========= ========
PER SHARE DATA:
NET INCOME $ 43.60 $ 152.00 $ 50.40 $ 51.60 $ 49.60
========= ========== ========= ========= ========
WEIGHTED AVERAGE COMMON SHARES 2,500 2,500 2,500 2,500 2,500
========= ========== ========= ========= ========
DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
--------- ---------- --------- --------- --------
BALANCE SHEET DATA:
CASH $ 1 $ 25 $ 27 $ 54 $ 33
TOTAL ASSETS 2,583 2,227 2,182 2,290 2,495
LONG TERM DEBT, LESS CURRENT
PORTION 1,296 1,206 1,250 1,346 1,371
MINORITY INTEREST 225 225 225 225 225
TOTAL STOCKHOLDERS' EQUITY -310 75 -156 -96 9
PER SHARE DATA:
BOOK VALUE $-124.00 $ 30.00 $ -62.4 $ -38.40 $ 3.60
- -------------------------------------
(1) THREE LUBE CENTER LOCATIONS OWNED IN LIMITED PARTNERSHIPS WITH SNAPPY LUBE
INC. AS GENERAL PARTNER AND IDENTICAL SINGLE LIMITED PARTNER WHO RECEIVES A
FIXED PERCENTAGE OF GROSS REVENUES FROM EACH LOCATION. SEE NOTES TO FINANCIAL
STATEMENTS FOR FURTHER EXPLANATION.
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(2) PRE-TAX NET INCOME. INTERNAL REVENUE CODE S ELECTION MADE BY SHAREHOLDERS AT
INCEPTION CAUSES INCOME TAXES TO BE BORNE BY SHAREHOLDERS PROPORTIONATELY ON
THEIR RESPECTIVE PERSONAL INCOME TAX RETURNS.
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QUAKER STATE AND SNAPPY COMPARATIVE PER SHARE DATA
The following table sets forth the net income per common share and the
historical book value per share data of Quaker State Common Stock, and the net
income per share and the book value per share data of the Snappy Common Stock.
The information presented in the table should be read in conjunction with the
separate consolidated financial statements and accompanying notes of Quaker
State, incorporated by reference herein, and the separate consolidated financial
statements and accompanying notes of Snappy, included elsewhere in this Consent
Solicitation Statement/Prospectus.
Net income Book value
per share per share
---------- ----------
QUAKER STATE
Year ended December 31, 1993 $ .50 $ 6.93
Year ended December 31, 1994 .66 8.00
Year ended December 31, 1995 .38 8.29
Nine months ended September 30, 1996 .58 9.09
SNAPPY
Year ended December 31, 1994 $ 50.40 $ 85.60
Year ended December 31, 1995 152.00 237.60
Year ended December 31, 1996 43.60 191.20
RISK FACTORS
In addition to the other information regarding Quaker State, Snappy and
the Merger contained in this Consent Solicitation Statement/Prospectus, the
following factors should be considered carefully by the Snappy stockholders.
These factors should be considered in conjunction with the other information
included in this Consent Solicitation Statement/Prospectus.
COMPETITION
All of Quaker State's businesses are involved in highly competitive
industries, and the future results of any of Quaker State's business segments
could be adversely affected by competitive conditions.
The branded motor oil business is highly competitive. In the United
States, the major competitors of Quaker State and their principal brands of
motor oil are Pennzoil Company (Pennzoil), Ashland, Inc. (Valvoline), Texaco
Inc. (Havoline) and Burmah Castrol PLC (Castrol). In foreign countries, Quaker
State competes with foreign manufacturers (including some that are
government-owned) and with its major U.S. competitors. The principal methods of
competition in the branded motor oil business are product quality, distribution
capability, advertising and sales promotion. Many of the competitors,
particularly the major integrated oil companies, have greater motor oil
production capacities and financial resources substantially greater than those
of Quaker State.
In the sale of private label lubricants, Quaker State competes with a
number of small blending and packaging companies. The principal methods of
competition are product quality and price. In the waste oil collection,
transportation, management and recycling business, Quaker State competes with
Safety-Kleen Corp., International Petroleum Corp., the First Recovery, Inc.
division of Ashland Inc. and a number of regional waste oil haulers. The
principal methods of competition are reliability and quality of service and
price.
The fast lube business is also highly competitive. The major
competitors of Quaker State are Jiffy Lube International, Inc. (a subsidiary of
Pennzoil Company) and Ashland Inc. through its Valvoline Instant Oil Change
centers. There are also a significant number of independent fast lube chains
operating on a local or regional basis.
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In addition to competing with other fast lube centers, Q Lube competes with
local automobile dealers, service stations and garages. The principal methods of
competition are quality of service, price and sales promotion.
The major competitors of Slick 50 and its principal brands of engine
additives and functional fluids are Ashland, Inc. (Valvoline TM8TM engine
treatment), Howe Laboratories (Dubalube(R) brand engine treatment and fuel
system cleaner), Turtle Wax (Lubricator 2001TM engine treatments and Sure FireTM
fuel treatment); Prestone Products Corporation (Prestone(R) brand functional
fluids), Nationwide Industries/Snap Products (Snap(R) products); Octane Boost
Corporation (104+ Octane Boost(R) fuel system cleaner), Chevron Corporation
(Pro-Gard(R) fuel system cleaner); Pennzoil Products Company (Gumout(R) fuel
system cleaner) and Castrol Limited (fuel treatment). The major competitors of
Blue Coral are Armor All Products Corporation (Armor All(R) brand products),
Turtle Wax, Inc. (Turtle Wax(R) products), First Brands (STP(R) Son of a Gun!(R)
cleaners, Simoniz(R) waxes and polishes). The major competitors of Medo are Car
Freshner Corporation (Car-Freshner(R) and Tree design(R), California Scents
Corporation (California Scents(R), Cool Jel(R) and Spritzers(R) brands), and New
Ideas International, Inc. (New Idea International(R), Filtermate(R), Scent
Clip(R)).
The market for vehicular safety lighting equipment is highly
competitive. Truck-Lite competes with other independent manufacturers including
Grote Industries, Inc., Peterson Manufacturing Co., Inc. and the Signal-Stat
Division of Federal-Mogul Corporation, as well as with companies owned by truck
and automobile manufacturers. The principal methods of competition are quality,
price, delivery and technical innovation.
SIGNIFICANT CUSTOMERS
Through the growth of certain national retail chain stores and certain
of the recent acquisitions made by Quaker State, the percentage of the total
sales made by Quaker State and its subsidiaries that is made to such customers
has been increasing. In 1995, sales to Wal-Mart Stores, Inc. and its affiliated
companies exceeded 10% of Quaker State's consolidated revenues and Quaker State
believes that sales in 1996 to Wal-Mart Stores, Inc. and its affiliated
companies likewise exceeded 10% of such revenues. Sales to such national retain
chain stores are generally made pursuant to short-term purchase orders and not
under ongoing purchase contracts. Loss of or a significant reduction in sales to
these customers could have a negative effect on Quaker State's operating
results.
GOVERNMENT REGULATION
Environmental. Quaker State and its subsidiaries are subject to
extensive federal, state and local laws and regulations governing, among other
things, air emissions, waste water discharges, hazardous materials, land use,
waste management and employee health and safety. In particular, these laws and
regulations affect motor oil refining and manufacturing operations, natural gas
and crude oil producing activities, used oil and other automotive fluids
collection and fast lube operations. In manufacturing and motor oil refining,
permits are required for, among other things, the discharge of waste water, air
emissions and for hazardous waste activities. Regulations govern the collection,
transportation and disposition of used motor oil and other automotive fluids.
Federal regulations impose standards for tanks and tank farms storing these
materials, recordkeeping and labeling requirements and management standards. In
the fast lube operations, waste management regulations apply to the handling and
disposition of used motor oil and filters, other petroleum products and
antifreeze. Certain of Medo's products are subject to the requirement that they
be registered with the United States Environmental Protection Agency ("EPA").
While Quaker State does not believe that current and anticipated future
environmental compliance requirements are likely to have a material adverse
effect upon its financial position, environmental laws and regulations are
subject to frequent change and have become more stringent in recent years so
that there can be no assurance that future environmental requirements would not
have a material adverse effect on Quaker State's future quarterly or annual
results of operations or cash flows.
Certain environmental laws, such as the federal Superfund law, can
impose joint and several liability for the cleanup of hazardous waste sites upon
certain statutorily defined categories of parties regardless of the lawfulness
of the original activity or disposal. Quaker State and certain of its
subsidiaries have received notices from the EPA and similar state agencies that
they may be responsible for response and cleanup costs with respect to certain
Superfund and state waste sites. Although Quaker State does not anticipate,
based on current information, that environmental liabilities associated with
third party waste sites or currently or formerly owned properties are likely to
have a material adverse effect upon its financial position, there can be no
assurance that new
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or changed remediation requirements, information regarding site conditions or
liability allocations would not have a material adverse effect upon Quaker
State's future quarterly or annual results of operations or cash flows.
Other. Truck-Lite's products are subject to regulations of the U.S.
Department of Transportation that govern the brightness, placement and physical
durability of vehicular lighting.
ACQUISITIONS AND DIVESTITURES
Quaker State has engaged in a strategy of acquiring businesses in the
automotive aftermarket, while strategically divesting businesses not involved in
its core motor oil business. In July 1995, Quaker State acquired Slick 50, Inc.,
a manufacturer and marketer of automotive engine and fuel treatments. In June
1996, Quaker State acquired Blue Coral, Inc., a manufacturer and marketer of
automotive appearance products and car wash equipment. Lastly, in October 1996,
Quaker State acquired Medo Industries, Inc., a manufacturer and marketer of
fragrance products, primarily used in automobiles.
In August 1994, Quaker State sold its subsidiary Heritage Insurance
Group, Inc., a company engaged in the sale of credit life insurance. In August
1995, Quaker State sold substantially all of the assets of its oil and natural
gas exploration and production division.
While Quaker State intends to maintain its acquisition and divestiture
strategy, there can be no assurance that Quaker State will complete further
transactions.
LEGAL PROCEEDINGS
Quaker State's subsidiary, Quaker State - Slick 50, Inc. ("Slick 50"),
and certain subsidiaries of Slick 50 are respondents in an administrative
proceeding brought by the Federal Trade Commission ("FTC"). The FTC complaint
alleges that certain advertising claims related to Slick 50 engine treatment
were untrue or not adequately substantiated. The Complaint seeks an order
barring the respondents from making certain product claims and from making other
product claims without adequate substantiation. Following the filing of the FTC
complaint, seven purported class action complaints were brought against Slick 50
and certain of its subsidiaries in the states of New York, Texas, Alabama, and
California. The purported class action complaints allege various claims related
to false advertising, fraud, deceit, and negligent misrepresentation, and
generally seek compensatory and punitive damages, restitution, attorneys' fees
and costs. An eighth lawsuit was filed in California against Slick 50 and
subsidiaries, seeking restitution for alleged false advertising on behalf of
consumers under a California statute. Slick 50 is defending all of the above
matters vigorously.
Quaker State and certain of its subsidiaries have received notices from
the EPA and a similar state agency that they may be responsible for response and
cleanup costs with respect to certain Superfund sites.
Quaker State has been named as a party or a potential responsible party
in a number of government and private actions based on environmental laws and
regulations. Quaker State anticipates future liability for long-term remediation
or reclamation at certain formerly owned facilities, including three refineries
and various sites of former coal operations that were discontinued in 1992 and
1993.
Quaker State sold its crude oil refinery in St. Mary's, West Virginia
in December 1987. The purchaser filed for bankruptcy in December 1988, and in
August 1991 the bankruptcy trustee sold the refinery to a second purchaser. In
connection with this transaction, Quaker State provided certain indemnities with
respect to the environmental conditions at the refinery. In April 1990, Quaker
State sold its crude oil refinery in Farmers Valley, Pennsylvania and a wax
plant (formerly also a crude oil refinery) in Emlenton, Pennsylvania and
provided the purchaser with similar indemnities. Quaker State expects that it
will incur some expenditures related to these indemnities and also expects that
it will incur some expenditures for environmental conditions associated with its
discontinued coal operations.
While it is impossible at this time to determine with certainty the
ultimate outcome of all current and potential environmental and legal matters
involving Quaker State, Quaker State has accrued reserves for all items which
are believed by Quaker State to be probable and can be reasonably estimated and
does not expect any
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material adverse effect on its financial position. However, not all of these
matters can be predicted with certainty so it is possible that one or more of
these matters could be decided against Quaker State and result in a material
adverse impact on future quarterly or annual results of operations or cash flows
when resolved.
MARKET VOLATILITY
The stock market in general and the market for Quaker State Common
Stock has from time to time experienced price and volume fluctuations, which may
at times be unrelated to the operating performance of particular companies. From
time to time, analysts and others have issued reports and articles which have
had a negative impact on stock prices. In addition, various factors and events,
including announcements by Quaker State or its competitors concerning operating
results, acquisitions and other events may contribute to the price volatility of
Quaker State Common Stock.
ANTI-TAKEOVER PROVISIONS
Quaker State's certificate of incorporation includes provisions
requiring that any entity which holds 30% more of Quaker State's Common Stock
which desires to enter into certain business combinations with Quaker State must
obtain the approval of the holders of at least 95% of Quaker State's stock or
must insure that the consideration received by the other Quaker State
stockholders is equivalent to the highest price paid by such entity in acquiring
its holdings of Quaker State Common Stock. Quaker State has also adopted a
stockholder rights plan. Both may have certain anti-takeover effects. Quaker
State is also subject to the provisions of the Delaware General Corporation Law,
which may make certain business combinations more difficult.
RIGHTS OF SNAPPY STOCKHOLDERS FOLLOWING THE MERGER
Following the Merger, holders of Snappy Common Stock will become
holders of Quaker State Common Stock. Certain differences exist between the
rights of the Snappy stockholders under the Snappy Certificate and the Snappy
Bylaws, and the rights of Quaker State stockholders under the Quaker State
Certificate and the Quaker State Bylaws. See "Comparison of Rights."
FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify for federal income tax purposes as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"). See "The Merger--Certain Federal Income Tax Consequences--Tax Free
Reorganization Treatment." If for any reason the Merger does not qualify as a
reorganization, then among other effects, the Snappy stockholders may recognize
gain or loss in such transaction. See "The Merger--Certain Federal Income Tax
Consequences--Failure of Merger Treatment." ACCORDINGLY, ALL SNAPPY STOCKHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING ALL TAX RAMIFICATIONS OF THE
MERGER.
DISSENTER'S RIGHTS
A Snappy stockholder who complies with the provisions of Chapter 92A of
the Nevada Revised Statutes ("NRS") has the right to receive payment for his
shares of Snappy Common Stock instead of receiving shares of Quaker State Common
Stock. The following summary of the provisions of Chapter 92A is not intended to
be a complete statement of such provisions and is qualified in its entirety by
reference to the full text of Chapter 92A, a copy of which is attached to this
Consent Solicitation Statement/Prospectus as Annex 2.
Stockholders of a Nevada corporation have the right, in certain
circumstances, to dissent from certain corporate actions, including the
consummation of a plan of merger by a Nevada corporation which requires the
approval of such corporation's stockholders. Stockholders who are entitled to
dissent are also entitled to obtain payment in the amount of the fair value of
their shares.
Pursuant to NRS Section 92A.410, the notice regarding the Consent
Solicitation must state that the Snappy stockholders are or may be entitled to
dissenters' rights under NRS Sections 92A.300 to 92A.500 and be accompanied by a
copy of those sections. This Consent Solicitation Statement/Prospectus
constitutes the
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required notice under this provision. A Snappy stockholder who wishes to assert
dissenters' rights must (i) deliver to Snappy, before the record date for
determining Snappy stockholders entitled to give consent to the Merger in
writing without a meeting, written notice of his intent to demand payment for
his shares of Snappy Common Stock if the Merger Agreement is effectuated, and
(ii) not vote his shares in favor of the Merger Agreement by executing the
written consent provided pursuant to the Consent Solicitation. A Snappy
stockholder failing to satisfy these requirements will not be entitled to
dissenters' rights under Chapter 92A. Quaker State (the "Subject Corporation")
must send a written dissenters' notice (the "Dissenters' Notice") within ten
days of effectuation of the Merger Agreement to all Snappy stockholders who
satisfied these requirements. The Dissenters' Notice must include (i) a
statement of where the demand for payment is to be sent and where and when
certificates for Snappy Common Stock are to be deposited; (ii) a statement
informing the holders of Snappy Common Stock not represented by certificates to
what extent the transfer of such shares will be restricted after the demand for
payment is received; (iii) a form for demanding payment that requires the Snappy
stockholder asserting the dissenters' rights to certify whether or not he
acquired beneficial ownership of the shares before the date when the terms of
the merger were announced to the news media or the stockholders (the
"Announcement Date"); (iv) a date by which the Subject Corporation must receive
the demand for payment, which may not be less than 30 or more than 60 days after
the date the Dissenter's Notice was delivered; and (v) a copy of NRS Sections
92A.300 to 92A.500.
A Snappy stockholder who wishes to obtain payment for his Snappy Common
Stock must demand payment, certify whether he acquired beneficial ownership of
his Snappy Common Stock before the Announcement Date, and deposit his
certificates, if any, in accordance with the terms of the Dissenter's Notice. A
Snappy stockholder for whom dissenters' rights are asserted as to shares not
represented by a certificate will retain all other rights of a Snappy
stockholder until those rights are canceled or modified by the Merger. The
Subject Corporation may restrict the transfer of any shares not represented by a
certificate from the date the demand for payment is received. Pursuant to NRS
Section 92A.440, a Snappy stockholder who fails to demand payment or deposit his
certificates where required by the dates set forth in the Dissenters' Notice
will not be entitled to payment for his shares as provided under Chapter 92A.
Pursuant to Section NRS 92A.460, within 30 days of receipt of a demand
for payment, the Subject Corporation will pay each dissenter who complied with
NRS Section 92A.440 the amount that the Subject Corporation estimates to be the
fair market value of his shares, plus accrued interest. The payment must be
accompanied by (i) copies of the Subject Corporation's balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of payment,
a statement of income for that year, a statement of changes in shareholder's
equity for that year and the latest interim financial statements, if any; (ii) a
statement of the Subject Corporation's estimate of the fair value of the shares;
(iii) an explanation of how the interest was calculated; (iv) a statement of the
dissenter's rights to demand payment under NRS Section 92A.480; and (v) a copy
of NRS Sections 92A.300 to 92A.500.
Pursuant to NRS Section 92A.470, the Subject Corporation may elect to
withhold payment from dissenters who became the beneficial owners of their
shares on or after the Announcement Date. After consummation of the Merger,
however, the Subject Corporation is required to estimate the fair value of such
shares, plus accrued interest, and offer to pay this amount to each dissenter in
full satisfaction of his demand. The Subject Corporation will send this offer
with a statement of its estimate of the fair value of the shares, an explanation
of how the interest was calculated and a statement of the dissenter's rights to
demand payment under NRS Section 92A.480.
Pursuant to NRS Section 92A.480, a dissenter who believes that the
amount paid pursuant to NRS Section 92A.460 or offered pursuant to NRS Section
92A.470 is less than the full value of his shares or that the interest due is
incorrectly calculated, may, within 30 days after the Subject Corporation made
or offered payment for his shares, either (i) notify the Subject Corporation in
writing of his own estimate of the fair value of his shares and the amount of
interest due and demand payment of his estimate less any payments made under NRS
Section 92A.460, or (ii) reject the offer for payment made by the Subject
Corporation under NRS Section 92A.470 and demand payment of the fair value of
his shares and interest due.
If a demand for payment remains unsettled, the Subject Corporation
shall commence a court proceeding within 60 days after receiving a demand and
petition the court to determine the fair value of the
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shares and accrued interest. All dissenters whose demands remain unsettled would
be made a party to such a proceeding. Each dissenter is entitled to a judgment
for the fair value of his shares, plus accrued interest, less any amount paid
pursuant to NRS Section 92A.460. The court would assess the costs of the
proceedings against the Subject Corporation unless the court finds that all or
some of the dissenters acted arbitrarily, vexatiously or not in good faith in
demanding payment, in which case the court may assess the costs in the amount
the court finds equitable against some or all of the dissenters. The court may
also assess the fees and expenses of the counsel and experts for the respective
parties, in the amount the court finds equitable, against the Subject
Corporation or the dissenters. If the Subject Corporation does not commence a
proceeding within the 60 day period, it must pay each dissenter whose demand
remains unsettled the amount demanded.
THE MERGER
GENERAL EFFECTS OF THE MERGER
Upon consummation of the Merger, the separate corporate existence of
Snappy will cease, and the Snappy stockholders at the time the Certificate of
Merger is filed with the applicable governmental authorities (the "Effective
Time") will receive shares of Quaker State Common Stock, as described below. A
portion of the Closing Shares (the "Escrow Shares") will be placed in escrow for
a period of one year as security for the obligations of the Snappy stockholders
to indemnify Quaker State for certain liabilities under the Merger Agreement.
Escrow Shares not applied for such purpose will be distributed to the Snappy
stockholders at the end of the escrow period. See "--The Merger Agreement--
Issuance and Exchange of Certificates; Distribution of Escrow Shares" and
"--The Merger Agreement--Indemnification and Escrow."
The number of shares of Quaker State Common Stock issuable at the
Effective Time to holders of Snappy Common Stock (the "Closing Shares") shall be
determined as follows:
(i) first by subtracting from $10,250,000 the total
of Snappy's balance sheet liabilities (other than certain excluded
liabilities to be assumed by a third party prior to closing) as of the
Closing Date ("Net Price"); and
(ii) then by dividing the Net Price by the closing
price of Quaker State Common Stock on the New York Stock Exchange on
the Closing Date.
Shares of Snappy Common Stock held by persons exercising statutory
dissenters' rights shall be treated as described in "Dissenters' Rights."
The Escrow Shares will be equal in number to $250,000 divided by the
Closing Price. The Escrow Shares will be held as security for the obligations
of the Snappy stockholders to indemnify Quaker State for certain liabilities.
See "--The Merger Agreement--Indemnification and Escrow."
Following the Closing, the Snappy stockholders will be stockholders of
Quaker State. See "Comparison of Rights."
BACKGROUND OF AND REASONS FOR THE MERGER
The Snappy Board of Directors believed that the company had achieved
its goals of becoming one of the most successful lubrication, oil and filter
change service centers in Central and Northern California and determined that a
merger with Quaker State would be a good opportunity to provide future liquidity
to the Snappy stockholders. After taking into account various factors, the Board
of Directors determined that the Merger Agreement and the consummation of the
Merger were fair to, and in the best interest of, Snappy and its stockholders
and that Snappy should proceed with the Merger and the Merger Agreement.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Quaker State and Snappy each intend for the Merger to qualify as a
"reorganization" within the meaning of section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). In order for reorganization treatment to
apply, certain requirements must be met, including:
(i) Merger Sub, as the surviving corporation of the
Merger, must acquire substantially all of the assets of Snappy (while
case law may support a lesser percentage, the "substantially all" test
will generally be met if 90 percent of the net assets and 70 percent of
the gross assets of Snappy are acquired); and
(ii) the individual stockholders of Snappy must
maintain continuity of proprietary interest through receipt in the
Merger and continued ownership of Quaker State Common Stock.
While case law may support a lesser percentage, the "continuity of interest"
test will generally be met as long as the individual Snappy stockholders do not
have a plan or intention to sell, exchange or otherwise dispose of a number of
shares of Quaker State Common Stock received in the Merger that would reduce the
number of shares of Quaker State Common Stock owned by such stockholders after
the Merger to a number of shares having a value as of the date of the Merger of
less than 50 percent of the value of all of the formerly outstanding shares of
Snappy held by such stockholders as of that date. Shares surrendered by
dissenting stockholders or exchanged or deemed exchanged for cash in the Merger
are treated as shares outstanding on the date of the Merger, and shares held by
Snappy stockholders and otherwise sold, redeemed or disposed of prior or
subsequent to the Merger are similarly considered.
Assuming the Merger qualifies as a reorganization under Section 368(a)
of the Code, the following consequences should apply to non-dissenting Snappy
stockholders. No gain or loss will be recognized by the Snappy stockholders upon
the exchange of Snappy Common Stock solely for shares of Quaker State Common
Stock as a result of the Merger (except to the extent of cash received in lieu
of a fractional share thereof). Cash received by the Snappy Stockholders in lieu
of fractional shares of Quaker State Common Stock will be treated as received as
a distribution in redemption of such fractional shares, subject to the
provisions of Section 302 of the Code, as if such fractional shares had been
issued in the Merger and then redeemed by Quaker State. The tax basis of the
shares of Quaker State Common Stock received by the Snappy Stockholders in the
Merger will be equal to the tax basis of the shares of Snappy Common Stock
exchanged therefor in the Merger, reduced by any basis allocable to a fractional
share of Quaker State Common Stock treated as sold or exchanged under Section
302 of the Code. The holding period for the shares of Quaker State Common Stock
received by the Snappy Stockholders will include the holding period for the
shares of Snappy Common Stock exchanged therefor in the Merger, provided that
the shares of Snappy Common Stock are held as capital assets at the Effective
Time.
Dissenters. Any Snappy Stockholder who perfects dissenters' rights and
receives payment for such stockholder's stock generally will be treated as if
such stock was redeemed. In general, if the Snappy Common Stock is held as a
capital asset at the Effective Time, a dissenting stockholder will recognize
capital gain or loss measured by the difference between the amount of cash
received and the basis in such stock. However, if such dissenting stockholder
owns, directly or constructively through application of section 318 of the Code,
any Snappy Common Stock as to which dissenters' rights are not exercised and
perfected and which are exchanged for Quaker State Common Stock in the Merger,
or otherwise holds Quaker State Common Stock, such stockholder may be treated as
having received a dividend in the amount of the cash paid to the stockholder in
exchange for the shares as to which dissenters' rights are perfected. Under
section 318 of the Code, an individual is deemed to own stock that is actually
owned (or deemed to be owned) by certain members of such individual's family
(spouse, children, grandchildren and parents, with certain exceptions) and other
related parties, including, for example, certain entities in which the
individual has a direct or indirect interest (such as partnerships, estates,
trusts and corporations), as well as stock that such individual (or a related
person) has the right to acquire upon exercise of an option or conversion right
held by such individual (or related person). Each stockholder who intends to
dissent from the Merger (see "Dissenters' Rights") should consult such
stockholder's own tax advisor with respect to the application of the stock
redemption and constructive ownership rules to the stockholder's particular
circumstances.
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Failure of Reorganization Treatment. If the Merger were not to qualify
as a reorganization under Section 368(a) of the Code, whether by virtue of
failure to meet the continuity of interest test or otherwise, then for federal
income tax purposes the Merger would be treated as a taxable event to Snappy
stockholders (as well as to Snappy). In that event, the tax consequences to the
Snappy stockholders would be:
(a) Each Snappy stockholder would generally recognize
gain or loss in the Merger in an amount equal to the difference between
such stockholder's adjusted basis in his or her Snappy stock and the
amount of money and the fair market value of other property (including
Quaker State Common Stock and Escrow Shares) received by such Snappy
stockholder in the Merger. Such gain or loss would generally be capital
gain if the surrendered stock were held as a capital asset at the time
of the Merger, and would be long-term gain if at the time of the Merger
the holding period for such stock exceeded one year;
(b) Each Snappy stockholder would have a basis in the
Quaker State Common Stock received in the Merger (including the Escrow
Shares) equal to the fair market value of such stock at the time of the
Merger; and
(c) Each Snappy stockholder's holding period for the
Quaker State Common Stock received in the Merger (including Escrow
Shares) would not include any period of time prior to the Merger.
THE FOREGOING IS NOT INTENDED TO BE A COMPREHENSIVE DISCUSSION OF ALL
POSSIBLE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. FURTHERMORE, THIS
CONSENT SOLICITATION STATEMENT/PROSPECTUS DOES NOT PROVIDE INFORMATION ABOUT THE
TAX CONSEQUENCES OF THE MERGER UNDER THE TAX LAWS OF ANY STATE OR OF ANY LOCAL
OR FOREIGN JURISDICTION. SNAPPY STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO ALL TAX CONSEQUENCES OF THE MERGER.
ACCOUNTING TREATMENT
The Merger is intended to be treated for financial accounting purposes
under the purchase method of accounting.
EFFECT ON EXCHANGE ACT REQUIREMENTS
The Merger will have no impact on Quaker State's requirements under the
Securities Exchange Act of 1934 (the "Exchange Act"). Quaker State Common Stock
is currently registered under the Exchange Act. Following the Merger, Quaker
State, so long as it is subject to Section 13(a) or 15(d) of the Exchange Act,
will have an obligation to file annual, quarterly and other periodic reports
with the Securities and Exchange Commission, SEC, which will include
consolidated financial and other information regarding Quaker State and its
subsidiaries. Directors, officers and 10% stockholders of Quaker State will
continue to be subject to the short-swing profit recovery provisions of Section
16(b) of the Exchange Act. All other applicable provisions of the federal and
state securities laws will continue to be in effect with respect to transactions
in Quaker State equity securities. Quaker State Common Stock will continue to be
listed on the NYSE and Pacific Stock Exchange.
OPERATIONS FOLLOWING THE MERGER
Following the Merger, Quaker State intends to continue the operation of
Snappy's business substantially in the manner previously operated. The business
will be managed by Pacific CarCare L.L.C., a joint venture of which Quaker State
is a part owner.
THE MERGER AGREEMENT
The terms and conditions of the Merger are set forth in the Agreement
of Merger and Plan of Reorganization (the "Merger Agreement") attached to this
Proxy Statement/Consent Solicitation Statement/Prospectus as Annex 1 and
incorporated herein by reference. The following summarizes the material terms
thereof, and the Snappy stockholders are urged to review the text of the Merger
Agreement.
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Closing
The closing of the Merger Agreement (the "Closing") shall occur as soon
as possible after all conditions set forth in the Merger Agreement have been
satisfied, but in no event later than the date the Merger is effective. Either
Quaker State or Snappy may terminate the Merger Agreement pursuant to the terms
described in "The Merger Agreement--Termination."
Effective Time
The Merger will become effective upon the filing of a Certificate of
Merger with the Secretary of States of the States of Delaware and Nevada, in
accordance with the requirements of the laws of such states.
Issuance and Exchange of Certificates; Distribution of Escrow Shares
On the Closing Date, Quaker State shall cause Quaker State stock to be
issued to each non-dissenting Snappy Stockholder in accordance with instructions
to be provided by the Snappy stockholders to Quaker State.
The Escrow Shares will be deposited for a one year period with an
escrow agent to be appointed in connection with provisions of the Merger
Agreement relating to indemnification (the "Escrow Agent"). The Escrow Agreement
will terminate one year following the Closing. Upon any such termination, all
remaining Escrow Shares held by the Escrow Agent will be delivered to the Snappy
stockholders, subject only to the establishment by the Escrow Agent of a reserve
of Escrow Shares necessary to compensate Quaker State for any outstanding claims
for indemnification which have not yet been resolved. The right of the Snappy
stockholders to receive the Escrow Shares is subject to the right of Quaker
State to receive Escrow Shares as compensation for certain indemnified
liabilities. See "--Indemnification and Escrow."
Stock Exchange Listing
The shares of Quaker State Common Stock to be issued in connection with
the Merger will be listed on the NYSE and Pacific Stock Exchange.
Expenses
The Merger Agreement provides that Quaker State shall pay its fees and
expenses incurred incident to the preparation and carrying out of the
transactions contemplated by the Merger Agreement, including legal, accounting
and brokerage. The expenses incurred by Snappy will reduce the purchase price
payable. The fees imposed by the Escrow Agent and the Exchange Agent will be
paid by Quaker State.
Representations and Warranties
The Merger Agreement contains customary representations and warranties
relating to, among other things, (i) each of Quaker State's, Merger Sub's and
Snappy's organization, qualification and similar corporate matters; (ii) the
capital structure of Quaker State, Merger Sub, and Snappy; (iii) equity
ownership interests of Snappy; (iv) the due authorization and valid issuance of
the shares of Quaker State Common Stock to be delivered to the Snappy
stockholders; (v) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (vi) third-party
consents required in connection with the Merger; (vii) the status of store
leases held by Snappy; (viii) the fair presentation of Snappy's financial
statements; (ix) the existence of good title to Snappy's assets and properties,
free and clear of liens; (x) the characteristics of the receivables of Snappy;
(xi) the due filing of tax returns and the payment of taxes by Snappy; (xii)
compliance with law; (xiii) the status of pending litigation and the absence of
threatened litigation; (xiv) business and certain customers of Snappy; (xv)
proprietary rights and insurance policies of Snappy; (xvi) employees of Snappy
and certain employee compensation, employee benefit and labor matters; (xvii)
certain matters related to environmental laws; and (xviii) the absence of
certain material changes or events relating to Snappy.
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Certain Covenants
Pursuant to the Merger Agreement, Snappy has agreed to carry on its
business diligently and in substantially the same manner as conducted prior to
the execution of the Merger Agreement and to use its best efforts to preserve
its present relationships with customers and suppliers.
No Solicitation of Transactions
The Merger Agreement provides that Snappy will not, directly or
indirectly through any officer, director, representatives or agent: solicit,
initiate or encourage any proposals related to the purchase of Snappy's assets
or stock or the merger of Snappy with any other entity.
Additional Agreements
The Merger Agreement contains additional covenants of Quaker State and
Snappy to (i) abstain from any communications with the public or their
respective stockholders without the prior approval of the other party; (ii) to
use reasonable best efforts in an attempt to satisfy all conditions precedent
prior to the Closing, including all regulatory approvals and (iii) to take
certain actions with respect to filing of the Form S-4 registration statement of
which this Consent Solicitation Statement/Prospectus is part. The Merger
Agreement also contains a covenant on the part of the Snappy stockholders not to
compete in Snappy's business in certain counties of California for five years
after the Closing. Snappy has also agreed to afford Quaker State and its
representatives reasonable access to its books, contracts, records and
properties.
Indemnification and Escrow
The Merger Agreement provides for indemnification of Quaker State (and,
after the Closing, Snappy) and their respective affiliates, directors, officers,
stockholders, successors and assigns against certain liabilities and losses
which an indemnified person may suffer or incur after the Closing by reason of
(i) the inaccuracy or breach of the representations, warranties and covenants of
Snappy contained in the Merger Agreement. The indemnification referred to above
is limited to the $250,000 in Escrow Shares deposited into escrow at the
Closing. Quaker State will be entitled to make claims against the escrow for the
"indemnifiable damages" described above until the one-year anniversary of the
Closing Date.
Conditions to Consummation of the Merger
The obligations of Quaker State and Snappy to effect the Merger are
subject to various conditions, unless waived, which include, in addition to
other customary closing conditions, the following:
(i) Snappy (in the case of Quaker State) and Quaker
State (in the case of Snappy) shall have performed in all material
respects all obligations required to be performed by each under the
Merger Agreement;
(ii) certain of Snappy's contracts shall have been
cancelled and terminated;
(iii) all consents or approvals required from third
parties relating to Snappy's leasehold interests shall have been
obtained; and
(iv) the Registration Statement shall have become
effective under the Securities Act.
The obligations of Quaker State to consummate the Merger are subject to
the following additional conditions:
(i) the representations and warranties of Snappy in the
Merger Agreement shall be true and correct in all material respects;
and
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(ii) since September 30, 1996 there shall have been
no material adverse change in the financial condition or results of
operations of Snappy.
The obligations of Snappy to consummate the Merger are also subject to
the following additional condition:
(i) the representations and warranties of Quaker
State in the Merger Agreement shall be true and correct in all material
respects.
Termination
The Merger Agreement may be terminated at any time prior to the Closing
(i) by mutual written consent of the parties; (ii) by either Quaker State, on
the one hand, or Snappy, on the other hand, if there has been a failure to
fulfill a condition in the Merger Agreement on the part of the other; and (iii)
by Quaker State or Snappy if the Merger shall not have been consummated on or
before February 28, 1997.
In the event of termination of the Merger Agreement by Quaker State or
Snappy, the Merger Agreement will become void, and there will be no liability or
obligation on the part of any party to the Merger Agreement or any of their
officers or directors other than under certain specified provisions of the
Merger Agreement dealing with confidentiality, the payment of expenses and other
liabilities or damages incurred or suffered by a party as a result of the
willful breach by the other party of any of its representations or warranties,
or the breach by a party of any of its covenants or agreements set forth in the
Merger Agreement.
Amendment and Waiver
The Merger Agreement may be amended at any time by an instrument in
writing signed by the parties thereto. At any time prior to the Closing, Quaker
State or Snappy, by appropriate corporate action, to the extent legally allowed,
may extend the time for performance of the obligations of the other parties to
the Merger Agreement, waive inaccuracies in representations and warranties and
waive compliance with any agreements or conditions for their respective benefit
contained in the Merger Agreement.
MATERIAL CONTACTS
There are no present or proposed material contracts, arrangements,
understandings, relationships, negotiations or transactions between Snappy and
Quaker State or any of its affiliates, other than those related to the Merger
Agreement.
BUSINESS AND FINANCIAL INFORMATION REGARDING SNAPPY
Snappy Lube, Inc. ("Snappy") is an owner-operator of fourteen quick oil
change centers located in the San Francisco Bay Area of California. Snappy, a
Nevada corporation formed in 1987, has its principal executive offices at 5
Harris Court, Bldg B-1, Monterey, California 93940. Snappy offers quick, clean
and reliable full service lubrication, oil and filter changes. Snappy emphasizes
the importance of location in the success of its service centers and selects
high-traffic, visible sites in well-populated areas.
The majority of Snappy's sales and marketing efforts have been
concentrated on attracting the individual retail consumer, participating only
minimally in the fleet service market. A typical Snappy customer would initially
come to a service center for standard service, which includes the 14-Point Lube,
Oil, Filter Service. However, Snappy sells additional services, including
Automatic Transmission Service, Synthetic Oil Change, and Radiator Service,
which increase the average sales price of the services. For the fiscal year
ended 1996, 80.9% of Snappy's revenue was received from customers purchasing the
standard service and 19.1% was attributable to sales of additional services.
Snappy currently consumes approximately 280,000 gallons of oil and
315,000 air and oil filters per year and is one of the largest independent
non-retail Pennzoil customers on the West Coast and one of the largest
independent lube service providers in California. In 1994, Snappy ranked #182 of
500 in Inc. Magazine's Fastest-Growing Private Companies Study.
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Snappy has approximately 150 full-time employees and competes with
major quick-lube chains, smaller chains and full-service gas stations. Among
Snappy's primary competitors are Jiffy Lube, Minute Lube, Speedy Lube and Tune
and Pennzoil 10-Minute Oil Change Centers.
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OWNERSHIP OF SNAPPY COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of Snappy's Common Stock as of December 31, 1996 by all
stockholders of record on such date. Unless otherwise indicated, each of the
stockholders listed below has sole voting and investment power with respect to
the shares beneficially owned. There are no outstanding options to purchase any
shares of Snappy's Common Stock.
Shares Beneficially
Owned Prior to the Merger
-------------------------
Stockholder Number Percent
----------- ----- -------
Ken Redelsperger and
Anne Redelsperger, as joint tenants 2,200 88%
Timothy W. Redelsperger 250 10%
Lawrence J. Davis 50 2%
Total 2,500 100%
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and Snappy's Financial Statements and Notes thereto
included elsewhere in this document. This Management's Discussion and Analysis
of Financial Condition and Results of Operations and other parts of the
document contain forward looking statements that involve risks and
uncertainties. Snappy's actual results could differ materially from the results
discussed herein. Factors that could cause such differences include, but are
not limited to, those discussed in "Risk Factors" and "Business" as well as
elsewhere in this document.
OVERVIEW:
Snappy designs, develops and operates centers that provide quick lubrication,
oil change and related services for passenger autos. Snappy operates a total
of fourteen (14) centers as of December 1996 in Northern and Central
California. Snappy's revenues and net income have grown steadily through
increasing volume at existing locations and expansion to new sites. Snappy is a
major independent competitor in the lube and oil change market in it's market
area.
Because the vast majority of Snappy's sales are from retail sales to the
public, Snappy carries only minor accounts receivable from selected fleet
accounts.
RESULTS OF OPERATIONS:
COMPARISON OF YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Revenue:
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Snappy's total revenue increased at approximately an 11% annual rate from 1994
through 1996. The increase in revenue was due to increased volume for same
store sales and the addition of 4 new stores during this period. Due to the
nature of the quick lube business, Snappy's revenue is broadly diversified.
Costs and Expenses:
Snappy's cost of products sold remained steady between 24% - 25% of sales over
this time period. This improvement is the result of better purchase terms
offered to Snappy as its operations have grown and incremental increases in
average ticket sales. The cost of direct labor and benefits remained constant
over this period as a percentage of total sales namely approximately 30%. Gross
profits have been consistent on a percentage basis over this period trending
slightly higher to end 1996 at approximately 46% of sales. This improvement in
gross margins is the result of improvements in labor efficiencies and some
economies of scale in operations.
Operating and administrative costs rose from an average of 35% during 1994 and
1995 to 40% in 1996 due to increased discretionary advertising spending and
occupancy costs in connection with three stores opened during 1996, more
professional fees incurred in 1996, and the additional occupancy costs
associated with the three new stores.
Interest expense remained relatively constant during 1995 and 1996 as maturing
financing on early locations was replaced by financing for the new 1996
locations.
Minority interests expense was $117,600, $124,500 and $113,300 in 1994, 1995
and 1996 respectively. The decrease in 1996 is due principally to the opening
of Monterey II, which has reduced the gross sales at the original Monterey lube
center, on which the minority partner is paid. The minority partner has the
obligation to abide by any decision made by Snappy relating to operations and
the sale of these locations.
Income taxes are not paid by Snappy directly except for a minor state income
tax because Snappy is treated as an S Corporation for federal and California
tax purposes. Snappy's taxable income is allocated to the shareholders annually
proportionally to their respective shareholdings. Each shareholder then reports
this income along with all other items on their personal income tax returns and
pays taxes thereon.
LIQUIDITY AND WORKING CAPITAL RESOURCES:
Since inception, Snappy has financed its operations through private sales of
capital stock, subordinated loans from shareholders, leasing arrangements for
its locations and service equipment, limited partnerships, bank lines of
credit, and retained earnings. As Snappy has grown, these sources of financing
have become more available.
Snappy's working capital increased by approximately $300,000 from December 31,
1994 to December 31, 1995, and then decreased by the end of 1996 by
approximately $890,000. This recent decrease in working capital is costs
associated with 1996 expansion funded out of retained earnings and advances to
shareholders of approximately $494,000 during 1996. During 1995 and 1996,
Snappy turned over its inventory an average of more than three times per month.
Net cash provided by operating activities has risen over the past three years
from $197,000 and $199,500 in 1994 and 1995 to $1,061,900 in 1996. The
increasing year to year amounts are principally the result of higher net income
and increasing accounts payable and accrued expense balances.
Investing activities included the purchase and construction of additional lube
facilities and related equipment totaling $88,400, $65,400 and $716,400 in 1994,
1995 and 1996 respectively.
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Financing activities included repayment of principal of $101,155, $29,387 and
$225,336 in 1994, 1995 and 1996 respectively. Additionally, $350,000 was
borrowed during 1996 to assist in the planned expansion and retire existing debt
and approximately $494,000 was advanced to shareholders.
Snappy continues to believe that there are a significant number of quality
sites available in its market area and plans to expand at a rate to 3 to 4
sites per year into the foreseeable future. Snappy intends to maintain the plan
it has previously used successfully in expanding to new locations: establish
long-term land and building leases with improvements financed by the lessor.
The remaining capital needed to complete non-structural improvements
(automotive equipment, signage, office equipment and inventory) will be
financed through working capital and contributions by suppliers. Using this
expansion strategy, Snappy believes that cash flow from operations, together
with other available resources, will be adequate to meet Snappy's cash
requirements for working capital and capital expenditures for the foreseeable
future.
COMPARISON OF RIGHTS
If the Merger is consummated, stockholders of Snappy, a Nevada
corporation, will become stockholders of Quaker State, a Delaware corporation,
and the rights of such stockholders will be governed by applicable Delaware law,
including the Delaware General Corporation Law (the "Delaware Law"), the Quaker
State Certificate of Incorporation (the "Quaker State Certificate") and the
Quaker State Bylaws, as amended and restated (the "Quaker State Bylaws"). The
following discussion summarizes certain important differences between the rights
of stockholders of Snappy under the Nevada General Corporation Law (the "Nevada
Law"), the Snappy Articles of Incorporation as amended (the "Snappy Articles")
and the Snappy Bylaws and the rights of stockholders of Quaker State under the
Delaware Law, the Quaker State Certificate and the Quaker State Bylaws.
AUTHORIZED CAPITAL STOCK
Under the Quaker State Certificate, Quaker State currently has
authority to issue 95,000,000 shares of capital stock, par value $1.00 per
share.
Under the Snappy Articles, Snappy currently has authority to issue
10,000 shares of common stock, no par value per share.
SHAREHOLDER ACTION BY WRITTEN CONSENT
Under Section 228(a) of the Delaware Law, unless otherwise provided in
a corporation's certificate of incorporation, any action required to be taken at
an annual or special meeting of the stockholders may be taken in the absence of
a meeting, without prior notice and without a vote. Such action may be taken by
the written consent of stockholders in lieu of a meeting setting forth the
action so taken and signed by the holders of outstanding stock representing the
number of shares necessary to take such action at a meeting at which all shares
entitled to vote were present and voted. Prompt notice of the taking of a
corporate action without a meeting by less than unanimous written consent must
be given to those stockholders who have not consented in writing.
Under Section 78.320 of the Nevada Law, unless otherwise provided in a
corporation's articles of incorporation or by-laws, any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if a written consent thereto is signed by stockholders holding at least
a majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting, then that proportion of
written consents is required.
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31
SPECIAL MEETINGS OF SHAREHOLDERS
Under Section 211(d) of the Delaware Law, special meetings of
stockholders may be called by the board of directors or by such other person or
persons as may be authorized to do so by the corporation's certificate of
incorporation or by-laws. The Quaker State By-Laws provide that a special
meeting of the stockholders may be called by the Chairman of the Board, by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors, by the President or by the Secretary. Under
Section 78.310 of the Nevada Law, special meetings may be held in the manner
provided by the by-laws of the corporation. The Snappy By-Laws provide that a
special meeting of the Stockholders may be called by the President, the Board of
Directors or by the President at the written request of 51% of the issued and
outstanding voting shares of the capital stock of Snappy.
SIZE OF BOARD OF DIRECTORS
Under the Quaker State By-Laws, the Quaker State Board of Directors is
composed of fourteen members, which number may be modified from time to time by
resolution of the Board of Directors, provided that the number of directors
shall never be less than one.
Under the Snappy By-Laws, the Snappy Board of Directors consists of at
least three members. If at any time the number of Snappy stockholders is less
than three, the Board of Directors may consist of fewer persons but shall not be
less than the number of Snappy stockholders.
RESTRICTIONS ON BUSINESS COMBINATIONS/CORPORATE CONTROL
Both the Delaware Law and the Nevada Law contain provisions restricting
the ability of a corporation to engage in business combinations with an
interested stockholder. Under the Delaware Law, except under certain
circumstances, a corporation is not permitted to engage in a business
combination with any "interested stockholder."
The Nevada Law and the Delaware Law do not permit business combinations
with interested stockholders for a period of three years following the time such
stockholder became an interested stockholder without board approval. The Nevada
Law defines an interested stockholder, generally, as a person who owns 10% or
more, rather than 15% or more under the Delaware Law, of the outstanding shares
of the corporation's voting stock.
In addition, the Nevada Law generally disallows the exercise of voting
rights with respect to "control shares" of an "issuing corporation" held by an
"acquiring person", unless such voting rights are conferred by a majority vote
of the disinterested stockholders. "Acquiring person" means (subject to certain
exceptions) any person who individually or in association with others, acquires
or offers to acquire, directly or indirectly, a controlling interest in the
issuing corporation. "Control shares" are the voting shares of an issuing
corporation acquired in connection with the acquisition of a "controlling
interest." "Controlling interest" is defined in terms of threshold levels of
voting share ownership of outstanding voting shares of an issuing corporation
sufficient to enable the acquiring person, individually or in association with
others, directly or indirectly, to exercise (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, (iii) a majority or
more of the voting power of the issuing corporation in the election of
directors, and voting rights must be conferred by a majority of the
disinterested shareholders as each threshold is reached and/or exceeded. The
Delaware Law does not contain a similar control shares statute.
Quaker State elected not to be governed by Section 203 of the Delaware
Law, as stated in the Quaker State Bylaws. Instead, the Quaker State Certificate
imposes a prohibition on business combinations on
-31-
32
beneficial owners of more than 30% of the outstanding shares of stock of Quaker
State entitled to vote in elections of directors considered for purposes of the
relevant article as one class ("Article Fourteenth Stock"). The provisions 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 30% of the Article
Fourteenth Stock, notwithstanding the fact that such other entity has reduced
its shareholdings below 30% if, as of the record date, such other entity is an
affiliate of Quaker State. Approval of such business combinations requires the
affirmative vote or consent of the holders of 95% of Article Fourteenth Stock,
with certain exceptions. In the event of a proposed business combination, a
proxy statement shall be mailed to Quaker State stockholders to solicit such
approval.
The Nevada business combination statutes do not apply to Snappy because
Snappy does not have a class of voting shares registered with the Securities and
Exchange Commission under Section 12 of the Exchange Act or a provision in the
Snappy Articles expressly applying the business combination statutes to Snappy.
APPRAISAL RIGHTS; DISSENTERS' RIGHTS
Both Section 262 of the Delaware Law and Sections 92A.380 and 92A.390
of the Nevada Law provide that stockholders have the right, in some
circumstances, to dissent from certain corporate reorganizations and to instead
demand payment of the fair cash value of their shares. Unless a corporation's
certificate of incorporation provides otherwise, dissenters do not have rights
of appraisal with respect to (i) a merger or consolidation by a corporation, the
shares of which are either listed on a national securities exchange, designated
as a national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc., or held by at least 2,000
stockholders, if the stockholders receive cash (in the case of the Nevada Law),
shares in the surviving corporation, shares of another corporation that are
publicly listed or held by more than 2,000 stockholders, cash in lieu of
fractional shares or any combination of the above or (ii) stockholders of a
corporation surviving a merger if no vote of the stockholders of the surviving
corporation is required to approve the merger.
PREEMPTIVE RIGHTS
Under Section 102(b)(3) of the Delaware Law, absent an express
provision in a corporation's certificate of incorporation, a stockholder does
not, by operation of law, possess preemptive rights to subscribe to an
additional issue of stock. Under Section 78.267 of the Nevada Law, Nevada
corporations organized after October 1, 1991 do not have preemptive rights
unless they include the same in their articles of incorporation, and under
Section 78.265 of the Nevada Law, stockholders in Nevada corporations organized
prior to October 1, 1991 have preemptive rights unless their articles expressly
exclude the same. The Quaker State Certificate states that Quaker State
stockholders have no preemptive rights except as authorized by the Quaker State
Board of Directors in its discretion. Holders of Snappy Common Stock are denied
preemptive rights under the Snappy Articles.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BY-LAWS
Section 242 of the Delaware Law and Sections 78.385 and 78.390 of the
Nevada Law permit a corporation to amend its certificate or articles of
incorporation in any respect provided the amendment contains only provisions
that would be lawful in an original certificate or articles of incorporation
filed at the time of amendment. To amend a certificate or articles of
incorporation, the board must adopt a resolution presenting the proposed
amendment. In addition, a majority of the shares entitled to vote, as well as a
majority of shares by class of each class entitled to vote, must approve the
amendment to make it effective. When the substantive rights of a class of shares
will be affected by an amendment, the holders of those shares are entitled to
vote as a class even if the shares are non-voting shares. When only one or more
series in a class of shares, and not the entire class, will be adversely
affected by an amendment, only the affected series may vote as a class. Under
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33
Section 242 (b)(2) of the Delaware Law, the right to vote as a class may be
limited in certain circumstances. Any provision in the certificate or articles
of incorporation which requires a greater vote than required by law cannot be
amended or repealed except by such greater vote. Section 242(c) of the Delaware
Law provides that, in its resolution proposing an amendment, the board may
insert a provision allowing the board to abandon the amendment, without
concurrence by stockholders, after the amendment has received stockholder
approval but before its filing with the Secretary of State.
Section 109 of the Delaware Law provides that the power to amend the
bylaws rests with the stockholders entitled to vote, although the certificate of
incorporation may confer the power to amend the by-laws upon the board of
directors. Section 109 further provides that the fact that the certificate of
incorporation confers such power upon the board of directors neither limits nor
divests the stockholders of the power to amend the by-laws. The Quaker State
Certificate authorizes the Quaker State Board to make and alter the Quaker State
By-Laws. Section 78.120 of the Nevada Law, on the other hand, provides that,
subject to the by-laws, if any, adopted by the stockholders, the directors may
make the by-laws of the corporation. STOCKHOLDER RIGHTS PLAN
The Quaker State Board of Directors adopted a stockholder rights plan
which provides for distribution of rights to holders of outstanding shares of
Quaker State Common Stock. The effect of such a plan may have the effect of
making it more difficult in certain circumstances to effect a takeover of Quaker
State that does not meet the approval of the Quaker State Board of Directors.
Snappy does not have similar rights. Therefore, after the Merger, the shares of
Quaker State Common Stock held by former Snappy stockholders will be subject to
the Quaker State stockholder rights plan.
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND ADVANCEMENT OF EXPENSES
Delaware and Nevada have nearly identical provisions regarding
indemnification by a corporation of its officers, directors, employees and
agents for claims against such persons as a result of their position. Delaware
and Nevada Law differ slightly in their provisions for advancement of expenses
incurred by an officer or director in defending a civil or criminal action, suit
or proceeding. The Delaware Law provides that expenses incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of the action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined that he is not entitled to be indemnified by the
corporation. Thus, a corporation has the discretion to decide whether or not to
advance expenses. The Quaker State Certificate, however, requires that Quaker
State make advance payment of expenses so long as the party seeking
indemnification undertakes to repay all such amounts if indemnification is not
granted.
The Nevada Law provides for similar advancement of expenses. In
addition, however, the articles of incorporation, bylaws or an agreement made by
the corporation may provide that the corporation must pay advancements of
expenses as they are incurred in advance of the final disposition of the action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that he
or she is not entitled to be indemnified by the corporation. The Snappy Articles
require advancement of expenses.
LIMITATION ON PERSONAL LIABILITY OF DIRECTORS
Delaware corporations are permitted to adopt charter provisions
limiting, or even eliminating, the liability of a director to a company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such liability does not arise from certain proscribed conduct,
including breach of the duty of loyalty, acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law or liability
to the corporation based on unlawful dividends or distributions or improper
personal
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benefit. The Quaker State Articles provide for the elimination and limitation of
the personal liability of directors of Quaker State for monetary damages to the
fullest extent permitted by the Delaware Law.
The Nevada Law provision permitting the adoption of provisions in the
articles of incorporation limiting personal liability is similar to Delaware's,
but differs in two respects. First, the Nevada provision applies to both
directors and officers. Second, while the Delaware provision excepts from
limitation on liability a breach of the duty of loyalty, the Nevada counterpart
does not contain this exception. The Snappy Articles provide for the elimination
of personal liability for the directors and officers of Snappy for damages for
breach of fiduciary duty except for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law or for the payment of dividends
in violation of Nevada Law.
Under the laws of either state, the charter provision will not have any
effect on the availability of equitable remedies such as an injunction or
rescission based upon a breach of the duty of care, or on liabilities which
arise under certain federal statutes such as the securities laws.
EXPERTS
The Consolidated Balance Sheets as of December 31, 1995 and 1994 and
the Consolidated Statements of Income, Cash Flows and Stockholders' Equity for
each of the three years in the period ended December 31, 1995 incorporated by
reference in this Registration Statement and the related financial statement
schedule included in Quaker State's Annual Report on Form 10-K which are
incorporated by reference into this Registration Statement have been
incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The Combined Balance Sheets of Blue Coral, Inc. and subsidiaries as of
October 31, 1995 and 1994 and the related Combined Statements of Income,
Stockholders' Equity and Cash Flows for each of the three years in the period
ended October 31, 1995, incorporated by reference in this Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the report of said firm and
upon the authority of said firm as experts in accounting and auditing.
Reference is made to said report, which includes an explanatory paragraph with
respect to the change in the method of accounting for income taxes effective
November 1, 1993, as discussed in Note 6 to the combined financial statements
noted above.
The Combined Financial Statements of Medo Industries, Inc., Medo
Manufacturing Corp. and Medo Industries Canada, Ltd. at December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
incorporated by reference herein and are incorporated by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
LEGAL MATTERS
The validity of the shares of Quaker State Common Stock offered hereby
and certain legal matters in connection with the Merger will be passed upon for
Quaker State by Pillsbury Madison & Sutro LLP, San Francisco, California. Fenton
& Keller, a Professional Corporation, Monterey, California, is acting as
counsel for Snappy in connection with certain legal matters relating to the
Merger and the transactions contemplated thereby.
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INDEX TO SNAPPY CONSOLIDATED FINANCIAL STATEMENTS
Page
------
Unaudited Balance sheet as of December 31, 1995 and 1996 F-2 to F-3
Unaudited Statement of Income and Retained Earnings
for the Years ended December 31, 1994, 1995 and 1996 F-4
Unaudited Cash Flow Statement
for the Years ended December 31, 1994, 1995 and 1996 F-5
Unaudited Supplementary Schedule of Operating Expenses
for the Years ended December 31, 1994, 1995 and 1996 F-6
Unaudited Notes to Financial Statements F-7 to F-14
F-1
36
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
BALANCE SHEET
As of December 31, 1995 and December 31, 1996
(See accompanying Notes)
A S S E T S
1995 1996
---- ----
Current Assets:
Cash $ 25,135 $ 1,257
Accounts receivable - net 145,552 52,694
Note receivable - Note G 95,000 0
Inventory 190,459 217,400
Prepaid expenses 70,756 19,671
------------- -----------
Total Current Assets 526,902 291,022
Property & Equipment - Note A:
Leasehold improvements:
Buildings 1,395,612 1,892,770
Other site improvements 204,111 181,642
Lease acquisition costs 44,413 77,951
Equipment:
Service equipment 488,626 759,146
Office equipment 123,420 144,524
------------- -----------
2,256,182 3,056,033
Less accumulated depreciation -691,294 -866,391
------------- -----------
1,564,888 2,189,642
Other Assets:
Advance rents & security deposits 135,148 102,680
------------- -----------
Total Assets $ 2,226,938 $2,583,344
============= ===========
F-2
37
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
BALANCE SHEET
AS OF DECEMBER 31, 1995 AND DECEMBER 31, 1996
(SEE ACCOMPANYING NOTES)
LIABILITIES & EQUITY
1995 1996
---- ----
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 461,142 $ 862,570
ACCRUED EXPENSES 73,069 288,432
BANK LINE OF CREDIT - NOTE C 50,000 50,000
LONG TERM DEBT-CURRENT PORTION 136,703 171,613
----------- ----------
TOTAL CURRENT LIABILITIES 720,914 1,372,615
LONG-TERM LIABILITIES - NOTE D:
NOTES PAYABLE-UNSECURED 117,000 300,888
NOTES PAYABLE-SECURED 811,659 676,255
NOTES PAYABLE-SUBORDINATED 392,112 378,955
CAPITAL LEASE OBLIGATIONS 22,230 111,567
----------- ----------
1,343,001 1,467,665
LESS CURRENT PORTION -136,703 -171,613
----------- ----------
1,206,298 1,296,052
----------- ----------
TOTAL LIABILITIES 1,927,212 2,668,667
COMMITMENTS & CONTINGENCIES - NOTE E
MINORITY INTERESTS - NOTE B 225,000 225,000
EQUITY:
CONTROLLING INTERESTS:
COMMON STOCK-10,000 SHARES AUTHORIZED, 2,500
ISSUED AND OUTSTANDING, NO PAR VALUE 30,000 30,000
ADDITIONAL PAID IN CAPITAL 370,061 370,061
RETAINED EARNINGS 193,827 302,825
LESS ADVANCES TO STOCKHOLDERS - NOTE G -519,162 -1,013,209
------------ ----------
74,726 -310,323
------------ ----------
TOTAL LIABILITIES AND EQUITY $ 2,226,938 $2,583,344
============ ==========
F-3
38
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(SEE ACCOMPANYING NOTES)
1994 1995 1996
---- ---- ----
INCOME:
SALES (NET OF DISCOUNTS) $ 6,641,256 $7,332,264 $8,161,729
COST OF SALES:
OIL, GREASE AND FILTERS 1,609,856 1,790,220 1,980,723
DIRECT LABOR AND BENEFITS 2,043,473 2,129,436 2,358,676
------------ ---------- -----------
3,653,329 3,919,656 4,339,399
------------ ---------- -----------
GROSS PROFIT 2,987,927 3,412,608 3,822,330
OPERATING COSTS (SEE ATTACHED SCHEDULE) 2,294,568 2,647,286 3,314,253
------------ ---------- -----------
NET OPERATING INCOME 693,359 765,322 508,077
OTHER INCOME AND EXPENSES:
MISCELLANEOUS INCOME 31,271 41,831 48,300
DEPRECIATION & AMORTIZATION -157,409 -148,074 -186,658
LOSS ON SALE OF ASSETS -152,434 0 -5,381
INTEREST EXPENSE -171,431 -138,511 -139,985
MISCELLANEOUS EXPENSE 0 -16,482 0
STATE INCOME TAXES 0 0 -2,100
------------ ---------- -----------
-450,003 -261,236 -285,824
------------ ---------- -----------
243,356 504,086 222,253
MINORITY INTERESTS IN NET INCOME - NOTE B 117,591 124,567 113,255
------------ ---------- -----------
NET INCOME 125,765 379,519 108,998
RETAINED EARNINGS- BEGINNING OF YEAR -311,457 -185,692 193,827
------------ ---------- -----------
RETAINED EARNINGS - END OF YEAR $ -185,692 $ 193,827 $ 302,825
============ ========== ===========
F-4
39
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
CASH FLOW STATEMENT
For the Years Ended December 31, 1994, 1995 and 1996
(See accompanying Notes)
1994 1995 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 125,765 $ 379,519 $ 108,998
NON-CASH ITEMS INCLUDED IN NET
INCOME:
DEPRECIATION & AMORTIZATION 157,409 148,074 186,658
DECREASE (INCREASE) IN ASSETS:
ACCOUNTS RECEIVABLE -25,018 -89,071 92,858
INVENTORIES -24,875 -11,682 -26,941
PREPAID EXPENSES -73,739 5,187 51,085
DEPOSITS -17,380 -32,879 32,468
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE 29,043 -160,121 401,428
ACCRUED EXPENSES 25,802 -39,520 215,363
----------- ----------- -----------
TOTAL ADJUSTMENTS 71,242 -180,012 952,919
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING 197,007 199,507 1,061,917
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE AND CONSTRUCTION OF ASSETS -88,376 -65,378 -716,412
SALE OF ASSETS 152,434 0 0
---------- ----------- -----------
64,058 -65,378 -716,412
---------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS MADE -101,155 -29,387 -225,336
NEW LOANS 0 0 350,000
INCREASE (DECREASE) IN LINE OF CREDIT -2,401 43,275 0
ADVANCES TO SHAREHOLDERS - NOTE G -184,537 -149,472 -494,047
----------- ----------- -----------
-288,093 -135,584 -369,383
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH -27,028 -1,455 -23,878
CASH - BEGINNING OF YEAR 53,618 26,590 25,135
----------- ----------- -----------
CASH - END OF YEAR $ 26,590 $ 25,135 $ 1,257
=========== =========== ===========
SUPPLEMENTARY DISCLOSURE - INTEREST PAID $ 171,431 $ 138,511 $ 139,985
=========== =========== ===========
F-5
40
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
SUPPLEMENTARY SCHEDULE OF OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(SEE ACCOMPANYING NOTES)
1994 1995 1996
---- ---- ----
OPERATING COSTS:
ADVERTISING $ 345,141 $ 487,477 $ 579,051
BAD DEBTS 0 0 61,494
BANK CHARGES & CREDIT CARD DISCOUNTS 76,519 83,359 105,468
CHARITY 6,516 4,665 5,436
COMPANY EVENTS 0 0 21,116
CORPORATE LABOR & BENEFITS 268,022 412,339 427,297
DUES AND SUBSCRIPTIONS 11,379 8,256 10,780
EQUIPMENT RENTAL 45,508 34,624 30,166
INDIRECT TOOLS & SUPPLIES 128,598 132,293 171,355
INSURANCE 46,418 47,903 52,037
PROFESSIONAL FEES 94,039 35,095 135,368
RENT - NOTE E 849,134 939,092 1,121,549
REPAIRS & MAINTENANCE 45,834 51,512 71,869
TAXES & LICENSES 101,894 96,854 127,486
TELEPHONE 34,368 39,356 45,905
TRAINING & EDUCATION 9,391 10,423 12,356
TRAVEL 32,494 36,708 54,634
UNIFORMS 79,967 84,323 111,880
UTILITIES 81,022 88,066 103,582
WARRANTY EXPENSE 38,324 54,941 65,424
------------ ---------- ----------
TOTAL OPERATING COSTS $ 2,294,568 $2,647,286 $3,314,253
============ ========== ==========
F-6
41
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Snappy
Lube, Inc., SL of Northern California - Monterey L.P., SL of
Northern California - Newark, L.P., SL of Northern California
- Lafayette, L.P. ("the Company") is presented to assist the
understanding of the Company's financial statements. The
financial statements and notes are representations of the
Company's management who is responsible for their integrity
and objectivity. These accounting policies conform to
generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
Business Activity: The Company operates a series of
quick lube service centers throughout Central and
Northern California. The vast majority of sales are
retail. Consequently, the Company generates only minor
accounts receivable balances.
Principles of Consolidation: The consolidated
financial statements include the accounts of Snappy
Lube, Inc. and three affiliated limited partnerships
which operate Snappy Lube centers in Monterey, Newark
and Lafayette, California. These partnerships are
owned and controlled by Snappy Lube, Inc. as general
partner. See Note B for details of the limited
partner's ownership interest.
Accounts receivable: Accounts receivable are reported at
their estimated net realizable value.
Inventories: Inventories consist primarily of oil, oil
filters and supplies used in the service centers.
These inventories are stated at cost (first in - first
out basis).
Property and Equipment: Property and equipment are
carried at cost. Depreciation and amortization of
property and equipment is provided using the straight
line method for financial reporting purposes based on
the following estimated useful lives:
Years
Buildings 31.5
Other site improvements 15
Service equipment 5-7
Office equipment 5
F-7
42
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
For federal income tax purposes, depreciation is
computed using the modified accelerated cost recovery
system. Expenditures for major renewals and betterments
that extend the useful lives of property and equipment
are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
Site Development Costs: The Company capitalizes all
direct costs of acquiring, planning and building new
locations. The Company transfers these costs to property
and equipment when the new location is ready for use.
Costs incurred on sites not built are expensed in the
year development efforts are abandoned.
Sales Discounts: Company sales are shown net of
discounts totaling $209,521, $357,176 and $381,302 for
1994, 1995 and 1996 respectively.
Income Taxes: Snappy Lube, Inc. has elected to be taxed
under the provisions of Subchapter S of the Internal
Revenue Code. Under these provisions, the Company does
not pay federal corporate income taxes on its taxable
income. Instead, the shareholders are liable for
individual federal income taxes on their respective
shares of the Company's taxable income. The Company does
pay a 1.5% S Corporation tax on it's state taxable
income. Snappy Lube, Inc.'s distributive share of net
income from the three affiliated partnerships is
included on a net basis in the Company's S Corporation
tax returns.
Estimated Returns: The Company does not accrue
estimated warranty costs or refunds for unsatisfied
customers, but charges these costs to expense as
incurred.
F-8
43
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
NOTE B - MINORITY INTERESTS IN AFFILIATES
Snappy Lube, Inc. operates three of its lube centers
(Monterey, Newark and Lafayette) in separate limited
partnerships. Each partnership is structured identically.
Snappy Lube, Inc. is the sole general partner. Snappy
Lube, Inc. receives all partnership profits ( or losses)
from operations, except for 5% of gross receipts, which is
due to the limited partner. On a sale or refinancing of
partnership assets the limited partner receives his capital
back with a preferred return and up to 20% of the net gain
on sale, based on time related formulas. In addition, the
limited partner has the right to be bought out, and Snappy
Lube, Inc. has the right to purchase his interests
according to pre-established formulas.
NOTE C - BANK LINE OF CREDIT
The Company has an unsecured line of credit with Wells Fargo
Bank in the amount of $50,000, renewable annually in January.
Terms include interest only monthly payments at prime plus 1%
annually. The prime rate was 8.25% on December 31, 1996.
NOTE D - LONG TERM DEBT
Unsecured long term debt consists of the following:
1995 1996
---- ----
Note payable to First National Bank of Central
California, payable in interest only monthly
payments at 9.75% per annum, final payment
due 7/31/01. $ 0 $ 189,473
Notes payable to Pennzoil in connection
with Lube Center Service Agreements at
Santa Cruz, Monterey II and Campbell,
amortized via product purchases over
five years, with interest imputed at
10% per annum. See Note E
- Leases for additional information. 0 24,415
Note payable to Newark C & C Associates,
payable in interest only monthly payments
at 10% per annum, due in January 1998. 27,000 27,000
F-9
44
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
1995 1996
---- ----
Note payable to Wells Fargo Bank, payable in
fully amortizing monthly payments at 9.5%
per annum due in December of 1998. 90,000 60,000
-------- -------
Totals $117,000 $ 300,888
Secured long term debt is as follows:
- ------------------------------------
Note payable to First Capital, payable in
fully amortizing monthly payments at
prime plus .5%, final payment due August
1998, collateralized by a pledge of
stock and and shareholders residence $ 85,722 $ 0
Note payable to First Capital, payable in
fully amortizing monthly installments
at prime plus 3%, final payment due May
2010, collateralized by first deed of
trust on Salinas store. 283,628 275,552
Note payable to First Capital, payable
in fully amortizing monthly installments
at prime plus 2.5%, final payment due
Sept. 2016, secured by first security
interest in machinery, fixtures and
equipment in Lafayette location. 379,304 374,222
Notes payable to Pennzoil Corp.,
payable in monthly installments including
interest at 8%, with final payments
due between Jan. 1996 and Sept. 1997,
collateralized by equipment. 63,005 26,481
-------- --------
Totals $811,659 $676,255
F-10
45
Subordinated long term debt is as follows:
1995 1996
---- ----
Note payable to The Country Place Inc.,
payable in interest only monthly payments at
9 % per year, due in January 1998, $ 108,796 $ 108,796
unsecured.
Note payable to The Country Place, Inc.
payable in fully amortizing monthly payments at
8% interest per annum over 7 years, due in
June 1998, unsecured. 66,494 53,337
Notes payable to JKP Trust, payable
in interest
only monthly payments at 9% per
annum, due
in January 1998, unsecured. 126,394 126,394
Note payable to Megan Redelsperger,
payable in interest only monthly
payments at 11% per
annum, due in July 1997. 12,500 12,500
Notes payable to stockholders,
payable in
interest only monthly payments at 9%
per
annum, due in January 1998. 20,000 20,000
Note payable to Paul Greenwood, non
interest
bearing, due in January of 1998 57,928 57,928
--------- ----------
Totals $ 392,112 $ 378,955
Maturities of Long Term Debt:
- ----------------------------
Year Ending
-----------
1997 $171,613
1998 370,000
1999 62,000
2000 0
2001 and thereafter 752,485
F-11
46
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
NOTE E- COMMITMENTS
As part of the consideration for extending equipment loans to
the company, Pennzoil requires the purchase of substantially
all of the Company's oil and grease from Pennzoil. The
agreements generally expire on a store by store basis either
as equipment notes to Pennzoil are paid in full, or a certain
volume of products have been purchased.
NOTE F -LEASES
Facilities:
The Company conducts its operations using facilities that are
leased for terms ranging from 20 years to 40 years including
renewal options, except for the Salinas location where the
Company owns the building and leases the land under a 40 year
ground lease. The leases are typically triple net with CPI
escalator clauses. The Company also leases its corporate
headquarters in Monterey, CA under similar terms. Rental
payments under these leases total approximately $804,000,
$973,000 and $1,353,000 per year as of December 31, 1994, 1995
and 1996 respectively.
The Company operates Snappy Lube service centers at each
location except in Modesto where the Company subleases its
interests to a third party. The terms of the sublease mirror
(in general) the terms of the underlying lease as of December
31, 1996 except that the sublessee is not entitled to exercise
an option to renew available to the Company in February 2009.
The Company receives parking fee income from an independent
parking lot operator for use of its San Francisco location
during non operating hours. This is included in miscellaneous
income on these financial statements.
Estimated Future Minimum Lease Payments
1997 $ 1,393,000
1998 1,435,000
1999 1,478,000
2000 1,523,000
2001 1,568,000
F-12
47
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
Equipment capital leases and associated promissory notes
With Pennzoil, the Company has financed the acquisition of
$50,000 in equipment at each of the following locations -
Campbell, Monterey II, and Santa Cruz. The complete 'Lube
Center Sales Agreement' for each location involves a
Promissory Note, Lube Center Sales Agreement, and Loaned
Equipment Agreement which together create an obligation on the
part of the Company to purchase at least 85% of all major
products used in operations from Pennzoil. The Promissory
Notes and Loaned Equipment Agreements are self liquidating
according to pre-negotiated quantities of products purchased
by the Company within a five year period. The five year period
expires in August 2000 for Santa Cruz, and June 2001 for
Monterey II and Campbell. The Loaned Equipment Agreements have
been categorized as capital leases on these financial
statements. They are being amortized according to Management's
estimate of product quantities purchased and an imputed
incremental borrowing rate of 10% per annum. The associated
promissory notes are listed as unsecured long term liabilities
amortized in a similar fashion. The amount reclassified from
cost of sales to principal amortization and interest expense
during 1996 on these financial statements is $36,125.
NOTE G - RELATED PARTY TRANSACTIONS
The Company has received loans from and is making payments to
entities which are controlled by the shareholders of the
Company and/or their family members. These loans total
$392,112 and $378,955 as of December 31, 1995 and 1996
respectively and are detailed on the accompanying financial
statement as subordinated long term debt.
The Company has made loans to shareholders on an unsecured
interest bearing basis. The cumulative unpaid advances at the
end of each fiscal year are listed on these financial
statements as a charge to shareholders equity.
F-13
48
(UNAUDITED)
SNAPPY LUBE, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1995 and 1996
During 1994, Snappy Lube sold its real property interests in
the Newark location to Larry Davis, a minority stockholder.
The Company leased back the property from Mr. Davis at a cost
of $8,000 per month. On December 31, 1996, Mr. Davis
negotiated a release of his obligation to pay $95,000 to
Snappy Lube in exchange for a return of the real property
assets to Snappy Lube. The Company earned $6,963 from Mr.
Davis as interest income in 1995 and 1996.
During 1996, the Company entered into licensing and management
services agreements with Snappy Lube Southern California Inc.,
a corporation owned by members of the Redelsperger family
providing the right to use Snappy Lube's trademark and certain
other proprietary information owned by the Company, for use in
Southern California.
F-14
49
ANNEX 1
AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
January __, 1997
BY AND AMONG
QUAKER STATE CORPORATION,
LUBE ACQUISITION CORPORATION,
SNAPPY LUBE, INC.
AND
THE SNAPPY LUBE SHAREHOLDERS
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TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS......................................1
1.1 "Accounts Payable"..........................................1
1.2 "Accounts Payable Certificate"..............................1
1.3 "Acquisition Fees"..........................................2
1.4 "Affiliate".................................................2
1.5 "Agreement".................................................2
1.6 "Agreement of Merger".......................................2
1.7 "Assets"....................................................2
1.8 "Balance Sheet Liabilities".................................2
1.9 "Balance Sheet Date"........................................2
1.10 "Brokers' Fees".............................................2
1.11 "business day"..............................................2
1.12 "CERCLA"....................................................2
1.13 "Certificate of Merger".....................................2
1.14 "Closing....................................................2
1.15 "Closing Date...............................................3
1.16 "Contracts".................................................3
1.17 "Code"......................................................3
1.18 "Conversion Ratio"..........................................3
1.19 "December Balance Sheet"....................................3
1.20 "Disclosure Schedule".......................................3
1.21 "Effective Time"............................................3
1.22 "ERISA".....................................................3
1.23 "Escrow Agent"..............................................3
1.24 "Escrow Agreement"..........................................3
1.25 "Excluded Assets"...........................................3
1.26 "Excluded Liabilities"......................................3
1.27 "Financial Statements"......................................3
1.28 "GAAP"......................................................4
1.29 "Greenwood Purchase Price"..................................4
1.30 "Indemnification Liabilities"...............................4
1.31 "Indemnifiable Claim".......................................4
1.32 "Legal Requirements"........................................4
1.33 "License Agreement".........................................4
1.34 "Major Indemnifiable Claim".................................4
1.35 "Merger"....................................................4
1.36 "Minor Indemnifiable Claim".................................4
1.37 "Notice of Claim"...........................................4
1.38 "PCC".......................................................4
1.39 "Partnerships"..............................................5
1.40 "Partnership Acquisition Agreement".........................5
1.41 "Partnership Assets"........................................5
1.42 "Pennzoil Agreements".......................................5
1.43 "Pennzoil Letter"...........................................5
1.44 "Pennzoil Termination Fee"..................................5
1.45 "Permits"...................................................5
1.46 "Permitted Liens"...........................................5
1.47 "Person"....................................................5
1.48 "Personal Property".........................................5
1.49 "Pledged Shares"............................................5
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1.50 "Quarterly Claim Report"....................................6
1.51 "QSC".......................................................6
1.52 "QSC Stock Consideration"...................................6
1.53 "QSC Sub"...................................................6
1.54 "QSC's Representative"......................................6
1.55 "QSC's Stock"...............................................6
1.56 "Real Property..............................................6
1.57 "Real Property Debt"........................................6
1.58 "Restricted Period".........................................6
1.59 "Restrictive Covenants".....................................6
1.60 "SEC".......................................................6
1.61 "September Balance Sheet"...................................6
1.62 "Shareholders"..............................................7
1.63 "Snappy Lube"...............................................7
1.64 "Snappy Lube's Business"....................................7
1.65 "Snappy Lube's Employees"...................................7
1.66 "Snappy Lube's Representative"..............................7
1.67 "Snappy Lube Stock"........................................7
1.68 "Stock Price"...............................................7
1.69 "Stock Price Determination Date"............................7
1.70 "Stock Purchase Price Notice"...............................7
1.71 "Store".....................................................7
1.72 "Store Leases"..............................................7
1.73 "Subordinated Debt".........................................8
1.74 "Surviving Corporation".....................................8
1.75 "tax" or "taxes"............................................8
1.76 "tax return"................................................8
1.77 "Total Merger Consideration"................................8
1.78 "Unfinished Projects".......................................8
ARTICLE TWO MERGER AND PLAN OF REORGANIZATION................8
2.1 The Merger and Plan of Reorganization.......................8
2.2 Consummation of Merger......................................9
2.3 Merger Consideration........................................9
2.4 Payment of Total Merger Consideration.......................9
2.5 Governance of Surviving Corporation....................... 10
2.6 Transfer Taxes, Etc....................................... 11
2.7 Escrow.................................................... 11
ARTICLE THREE SNAPPY LUBE'S AND SHAREHOLDERS'
REPRESENTATIONS AND WARRANTIES................. 12
3.1 Organization.............................................. 12
3.2 Authority and Enforceability.............................. 13
3.3 No Breach or Violation.................................... 13
3.4 Title to Assets........................................... 13
3.5 Authorized Shares and Share Ownership..................... 13
3.6 Subsidiaries or Partnerships.............................. 13
3.7 Financial Statements...................................... 14
3.8 Absence of Specified Changes.............................. 14
3.9 Tax Returns and Audits.................................... 15
3.10 Real Property............................................. 15
3.11 Hazardous Material........................................ 16
3.12 Inventory................................................. 18
3.13 Other Tangible Personal Property.......................... 18
I-3
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3.14 Accounts Receivable....................................... 18
3.15 Contracts................................................. 18
3.16 Tradenames, Trademarks and Copyrights..................... 19
3.17 Patents and Patent Rights................................. 19
3.18 Customers................................................. 19
3.19 Employment Contracts and Benefits......................... 19
3.20 ERISA..................................................... 19
3.21 Insurance Policies........................................ 22
3.22 Liabilities............................................... 22
3.23 Compliance With Laws...................................... 22
3.24 Litigation................................................ 22
3.25 Snappy Lube's Employees................................... 23
3.26 COBRA..................................................... 23
3.27 Unfinished Projects....................................... 23
3.28 Full Disclosure........................................... 23
3.29 No Other Representations or Warranties.................... 23
3.30 Disclosed Matters......................................... 23
3.31 Excluded Assets........................................... 24
ARTICLE FOUR QSC'S REPRESENTATIONS AND WARRANTIES........... 24
4.1 Organization.............................................. 24
4.2 Authority and Enforceability.............................. 24
4.3 No Breach or Violation.................................... 25
4.4 Capitalization............................................ 25
4.5 Excluded Assets........................................... 25
4.6 No Other Representations or Warranties.................... 25
4.7 Full Disclosure........................................... 25
ARTICLE FIVE SNAPPY LUBE'S COVENANTS.........................25
5.1 Access.....................................................26
5.2 Conduct of Business........................................26
5.3 Insurance..................................................26
5.4 Employees and Compensation.................................26
5.5 Consents...................................................26
5.6 Liabilities/Waivers........................................27
5.7 Employee Benefits..........................................27
5.8 Financial Statements.......................................27
5.9 Tax-Free Reorganization/Liquidation of Snappy Lube.........27
5.10 No Shop....................................................27
5.11 Reasonable Efforts.........................................27
5.12 Unfinished Projects........................................28
5.13 Representations True at Closing............................28
ARTICLE SIX QSC'S COVENANTS.................................28
6.1 Reasonable Efforts.........................................28
6.2 Confidentiality............................................28
6.3 QSC's Stock................................................28
6.4 Continuity of Business Enterprise..........................29
6.5 Insurance..................................................29
6.6 Representations True at Closing............................29
ARTICLE SEVEN CONDITIONS......................................29
7.1 QSC's Conditions to Closing................................29
7.2 Snappy Lube's Conditions to Closing........................31
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ARTICLE EIGHT THE CLOSING..................................... 32
8.1 Time and Place............................................. 32
8.2 Deliveries at Closing...................................... 33
ARTICLE NINE POST-CLOSING OBLIGATIONS........................ 35
9.1 License Agreement.......................................... 36
9.2 Indemnities................................................ 36
9.3 Product or Professional Liability.......................... 38
9.4 Procedure for Indemnification.............................. 39
9.5 Limitation on Claims....................................... 41
9.6 Access to Books and Records................................ 42
9.7 Unfinished Projects........................................ 42
9.8 Non-Compete................................................ 42
9.9 Other Filings.............................................. 44
9.10 Guaranty of Accounts Receivable............................ 44
9.11 Accrued Vacation Liability................................. 44
[9.12 Release of Liens........................................... 44
ARTICLE TEN ADDITIONAL MATTERS.............................. 44
10.1 Publicity.................................................. 44
10.2 Survival of Representations................................ 45
10.3 Brokers.................................................... 45
10.4 COBRA...................................................... 45
10.5 Termination by Mutual Consent; Material Breach............. 45
10.6 Effect of Termination...................................... 46
ARTICLE ELEVEN MISCELLANEOUS................................................ 46
11.1 Notices.................................................... 46
11.2 Modification and Waiver.................................... 48
11.3 Counterparts............................................... 48
11.4 Variations of Pronouns..................................... 48
11.5 Binding Effect; Assignment................................. 48
11.6 Specific Performance....................................... 49
11.7 Attorneys' Fees............................................ 49
11.8 Severability............................................... 49
11.9 Headings................................................... 49
11.10 Governing Law.............................................. 49
11.11 Interpretation of Agreement................................ 49
11.12 Further Documents or Actions............................... 50
11.13 Confidentiality............................................ 50
11.14 Time of the Essence........................................ 50
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54
List of Exhibits
Exhibit "A" Merger Agreement and Plan of Reorganization (Short Form)
Exhibit "B" Certificate of Merger
Exhibit "C" Stock Purchase Price Notice
Exhibit "D" Escrow Agreement
Exhibit "E" Assignment
Exhibit "F" Legal Opinion of F&K
Exhibit "G" License Agreement
Exhibit "H" Pennzoil Letter
Exhibit "I" Tax Opinion of GRM&S
Exhibit "J" Legal Opinion of QSC
List of Schedules
Schedule 3.4 Permitted Liens
Schedule 3.10 Real Property
Schedule 3.11 Environmental Matters
Schedule 3.13 Other Tangible Personal Property
Schedule 3.14 Accounts Receivable
Schedule 3.15 Assigned Contracts
Schedule 3.16 Tradenames, Trademarks and Copyrights
Schedule 3.18 List of Customers
Schedule 3.19 Employment Contracts and Benefits
Schedule 3.20 Employee Benefit Plans
Schedule 3.21 Insurance Policies
Schedule 3.22 Balance Sheet Liabilities
Schedule 3.24 Litigation
Schedule 3.25 Snappy Lube's Employees
Schedule 3.27 Unfinished Projects
Schedule 3.31 Excluded Assets
Schedule 7.1(g) List of Pennzoil Agreements
Schedule 7.1(p) Excluded Liabilities
Schedule 9.8 Non-Compete Area
I-6
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AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
This Agreement of Merger and Plan of Reorganization (the "Agreement")
is entered into this ________ day of January, 1997, by and among Snappy Lube,
Inc., a Nevada corporation ("Snappy Lube"), Quaker State Corporation, a Delaware
corporation ("QSC"), Lube Acquisition Corporation, a Delaware corporation ("QSC
Sub") and Snappy Lube's shareholders (the "Shareholders") set forth on the
signature page of this Agreement.
RECITALS
A. Snappy Lube is a privately held company engaged in the business of
servicing automobiles and selling certain related products. The Shareholders own
all of the issued and outstanding shares of common stock of Snappy Lube.
B. QSC is a publicly traded company that manufactures and sells
products such as motor oil, and also is engaged in business similar to Snappy
Lube's. QSC Sub is a wholly-owned subsidiary of QSC.
C. This Agreement contemplates a tax-free merger of Snappy Lube with
and into QSC Sub in a reorganization pursuant to Sec. 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE ONE
DEFINITIONS
For purposes of this Agreement, capitalized terms used herein shall
have the respective meanings set forth below:
1. "Accounts Payable" means all of Snappy Lube's accounts payable
reflected in the December Balance Sheet and the Pennzoil Termination Fee and the
Greenwood Purchase Price, or in the Accounts Payable Certificate.
2. "Accounts Payable Certificate" means the certificate executed by
Snappy Lube's Representative and delivered to QSC at least two (2) days before
the Closing Date describing the Accounts Payable.
3. "Acquisition Fees" means the legal and accounting fees incurred by
Snappy Lube in connection with the matters contemplated by this Agreement.
4. "Affiliate" means any Person controlling, controlled by, or under
common control with, another Person. For purposes of this Agreement, PCC is
deemed an Affiliate of QSC.
5. "Agreement" shall mean this Merger Agreement and Plan of
Reorganization, including the Exhibits and Schedules attached hereto, and any
amendments hereto in accordance with Section 11.2.
6. "Agreement of Merger" means the short-form agreement of merger
substantially in the form attached hereto as Exhibit "J."
7. "Assets" shall mean the assets owned by Snappy Lube and described in
the December Balance Sheet.
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56
8. "Balance Sheet Liabilities" shall mean the Accounts Payable,
Subordinated Debt, Brokers' Fees, Acquisition Fees, Real Property Debt and other
liabilities described in the December Balance Sheet and Accounts Payable
Certificate, except for the Excluded Liabilities.
9. "Balance Sheet Date" shall mean December 31, 1996.
10. "Brokers' Fees" means the fees and expenses Snappy Lube is
obligated to pay to Robertson, Stephens & Company in connection with the
consummation of transactions contemplated by this Agreement.
11. "business day" shall mean any day other than Saturday, Sunday or a
federal or State legal holiday pursuant to which banks in California are not
open to the public.
12. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601
et seq.
13. "Certificate of Merger" means the certificate of merger
substantially in the form attached hereto as Exhibit "B".
14. "Closing shall have the meaning described in Section 8.1.
15. "Closing Date shall mean the date stated in Section 8.1 for
Closing, as that date may be extended as provided in Section 8.1.
16. "Contracts" shall mean Snappy Lube's contracts, agreements and
instruments identified on Schedule 3.15 attached hereto.
17. "Code" shall mean the Internal Revenue Code of 1986, as amended,
together with any and all rules and regulations promulgated thereunder.
18. "Conversion Ratio" shall have the meaning provided in Section
2.4.2.
19. "December Balance Sheet" shall mean the unaudited consolidated
balance sheet, income statement and cash flow statement of Snappy Lube and its
Affiliates, prepared by Snappy Lube in accordance with GAAP, for the period
ending on December 31, 1996.
20. "Disclosure Schedule" means the schedule prepared by Snappy Lube
and the Shareholders which discloses exceptions to the representations and
warranties set forth in Article III.
21. "Effective Time" shall mean the time at which the Certificate of
Merger is filed with the Secretary of State of the State of Delaware.
22. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
23. "Escrow Agent" means Greene Radovsky Maloney & Share LLP.
24. "Escrow Agreement" means the escrow agreement by and among the
Shareholders, QSC, QSC Sub and Escrow Agent substantially in the form attached
hereto as Exhibit "D".
25. "Excluded Assets" shall mean Snappy Lube's assets described on
Schedule 3.31 which are not to be included in the Merger.
26. "Excluded Liabilities" means the liabilities listed on Schedule
7.1(p) which are to be assigned to and assumed by a third party prior to the
Closing Date.
-56-
57
27. "Financial Statements" shall mean Snappy Lube's unaudited
consolidated balance sheet, income statement, and cash flow statement for the
year ended December 31, 1995, prepared by Snappy Lube in accordance with GAAP.
28. "GAAP" means generally accepted accounting principles consistent
with prior years' presentations, which are substantially in accordance with the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants, and the Financial Accounting
Standards Board.
29. "Greenwood Purchase Price" means the purchase price of $591,223 to
be paid to Paul Greenwood at the Closing pursuant to the Partnership Acquisition
Agreement.
30. "Indemnification Liabilities" shall have the meaning described in
Section 9.2.1.
31. "Indemnifiable Claim" shall have the meaning set forth in Section
9.4.1(a).
32. "Legal Requirements" shall mean any and all applicable (a) federal,
state and local laws (statutory and administrative), ordinances, rules and
regulations and (b) judgments, orders, writs, injunctions and decrees, excluding
any Permits.
33. "License Agreement" means the license agreement by and between QSC
Sub and Kenneth Redelsperger, substantially in the form attached hereto as
"Exhibit "G".
34. "Major Indemnifiable Claim" shall mean a claim for indemnification
by QSC or QSC Sub made against the Shareholders which is equal to or in excess
of $25,000.
35. "Merger" means the merger of Snappy Lube with and into QSC Sub as
more completely described in this Agreement.
36. "Minor Indemnifiable Claim" shall mean a claim for indemnification
by QSC or QSC Sub made against the Shareholders other than a Major Indemnifiable
Claim.
37. "Notice of Claim" shall have the meaning set forth in Section
9.4.1(a).
38. "PCC" means Pacific CarCare LLC, a California limited liability
company whose members are QSC, Dale Radcliff and David Whitgob.
39. "Partnerships" means SL of Northern California-Monterey, L.P., a
California limited partnership ("SL-Monterey"), SL of Northern
California-Lafayette, L.P., a California limited partnership ("SL-Lafayette"),
and SL of Northern California-Newark, L.P., a California general partnership
("SL-Newark"), collectively.
40. "Partnership Acquisition Agreement" means the Agreement to Acquire
Partnership Interest by and between Paul Greenwood and Snappy Lube dated
December 31, 1996.
41. "Partnership Assets" means the assets owned by the Partnerships and
used in the operation of Snappy Lube's Business at the Monterey, Lafayette, and
Newark Stores.
42. "Pennzoil Agreements" means the agreements listed on Schedule
7.1(g).
43. "Pennzoil Release and Bill of Sale" means the Mutual Termination
and Relese Agreement and Bill of Sale substantially in the form attached hereto
as Exhibit "H".
44. "Pennzoil Termination Fee" means the fee Snappy Lube has agreed to
pay to Pennzoil at the Closing pursuant to the Pennzoil Letter.
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58
45. "Permits" shall mean any and all permits, authorizations,
approvals, registrations, certificates of completion, legal status, orders or
other approvals or licenses granted by any federal, state or local
administrative or governmental authority, bureau or agency under any Legal
Requirement.
46. "Permitted Liens" shall mean the liens, security interests, any and
all encumbrances and other title exceptions with respect to the Personal
Property described on Schedule 3.4 attached hereto.
47. "Person" shall mean any individual, corporation, general
partnership, limited partnership, limited liability company, joint venture,
association, trust, organization, other entity, government (or political
subdivision thereof) or governmental agency.
48. "Personal Property" shall mean any and all personal property,
rights and assets (whether tangible or intangible) of Snappy Lube, including,
without limitation, accounting records, production records and other records,
software, data bases and the like.
49. "Pledged Shares" shall have the meaning provided in Section 2.7.
50. "Quarterly Claim Report" shall have the meaning provided in Section
9.4.1(c).
51. "QSC" shall mean Quaker State Corporation, a Delaware corporation.
52. "QSC Stock Consideration" shall mean the number of shares of QSC
Stock with a value (issued in accordance with Section 2.4.1), equal to the
difference between the Total Merger Consideration and Balance Sheet Liabilities.
53. "QSC Sub" shall mean Lube Acquisition Corporation, a Delaware
corporation, a wholly-owned subsidiary of QSC.
54. "QSC's Representative" shall mean Conrad A. Conrad, Vice Chairman
and Chief Financial Officer of QSC, or such other person as QSC may designate by
notice to Snappy Lube.
55. "QSC's Stock" shall mean newly issued shares of QSC's common stock
which shall be registered with the SEC pursuant to a registration statement on
Form S-4 and subject to a listing application with the New York Stock Exchange.
56. "Real Property shall mean the real property owned or leased by
Snappy Lube, or subject to an option to purchase by Snappy Lube (including, but
not limited to, each Store), all as more particularly described on Schedule
3.10.
57. "Real Property Debt" means Snappy Lube's approximately Eight
Hundred Forty-Five Thousand Dollar ($845,000) mortgage debt in Real Property
commonly referred to by Snappy Lube as the "Salinas", "Lafayette", and "Monterey
II" Stores, all as more particularly described in the December Balance Sheet.
58. "Restricted Period" shall have the meaning provided in Section 9.8.
59. "Restrictive Covenants" shall have the meaning provided in Section
9.8.3.
60. "SEC" means the Securities and Exchange Commission.
61. "September Balance Sheet" means the unaudited consolidated balance
sheet, income statement and cash flow statement of Snappy Lube and its
Affiliates, prepared by Snappy Lube in accordance with GAAP, for the period
ending September 30, 1996.
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62. "Shareholders" mean, collectively, Kenneth K. Redelsperger, Anne E.
Redelsperger, Timothy W. Redelsperger and Lawrence J. Davis.
63. "Snappy Lube" shall mean Snappy Lube, Inc., a Nevada corporation.
64. "Snappy Lube's Business" shall mean the business of Snappy Lube
presently and as heretofore conducted by Snappy Lube in its individual capacity
or by Snappy Lube as general partner of the Partnerships.
65. "Snappy Lube's Employees" shall mean all current employees of
Snappy Lube whether on a full-time or part-time basis listed on Schedule 3.25
(as updated as of the Closing Date), and does not presently, nor will the update
as of the Closing Date, include, in any event, former employees of Snappy Lube
who were laid off prior to the date of the respective listings and those on
temporary or permanent disability leave.
66. "Snappy Lube's Representative" shall mean Kenneth Redelsperger,
President of Snappy Lube, or such other person as Snappy Lube may designate by
notice to QSC.
67. "Snappy Lube Stock" means all of the issued and outstanding shares
of capital stock of Snappy Lube.
68. "Stock Price" shall mean the closing price of QSC's Stock on the
Stock Price Determination Date.
69. "Stock Price Determination Date" shall mean the date which is the
Closing Date.
70. "Stock Purchase Price Notice" shall mean QSC's notice to Snappy
Lube of the price of each share of QSC's Stock on the Stock Price Determination
Date, and the number of shares of QSC's Stock to be delivered at the Closing as
constituting the QSC Stock Consideration, which notice shall be substantially in
the form attached hereto as Exhibit "C".
71. "Store" means each individual location of Snappy Lube's Business as
described in Schedule 3.10.
72. "Store Leases" means those certain written leases between Snappy
Lube and the owner(s) of the Real Property relating to the Stores used by Snappy
Lube in the operation of Snappy Lube's Business and as more particularly
described on Schedule 3.10 attached hereto.
73. "Subordinated Debt" means the subordinated debt of Snappy Lube as
described in the December Balance Sheet.
74. "Surviving Corporation" means QSC Sub after the Merger.
75. "tax" or "taxes" shall mean any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, custom duties, capital
stock, franchise, profits, withholding, social security (or similar)
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimums, estimated
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
76. "tax return" means any return, declaration, report, claim for
refund or information return or statement relating to taxes, including any
schedule or attachment thereto, and including any amendment thereof.
77. "Total Merger Consideration" means Ten Million Two Hundred Fifty
Thousand Dollars ($10,250,000).
78. "Unfinished Projects" shall mean any and all proposed or potential
locations of Stores pursued by Snappy Lube, as described on Schedule 3.27.
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ARTICLE TWO
MERGER AND
PLAN OF REORGANIZATION
1. The Merger and Plan of Reorganization. Subject to the terms
and conditions of this Agreement, at the Effective Time, Snappy Lube will merge
with and into QSC Sub, and QSC Sub will be the Surviving Corporation. QSC Sub's
corporate name, existence and all its purposes, powers, and objectives will
continue unaffected and unimpaired by the Merger, and as the Surviving
Corporation will be governed by the laws of the State of Delaware and, except
for the Excluded Assets listed on Schedule 3.31 and Excluded Liabilities listed
on Schedule 7.1(p), will succeed to all of Snappy Lube's rights, assets,
liabilities and obligations in accordance with the Delaware General Corporation
Law. The parties acknowledge and agree that the Merger is intended to be a
tax-free forward subsidiary merger described in Section 368(a)(2)(D) of the
Code. The Shareholders will receive capital stock in QSC in exchange for their
capital stock in Snappy Lube, all as more particularly described in the
Agreement of Merger and Plan of Reorganization (Short Form) attached hereto as
Exhibit "A."
2. Consummation of Merger. The Merger will become effective at
the time the Certificate of Merger, substantially in the form attached hereto as
Exhibit "B", is filed with the Secretary of State of the State of Delaware
("Effective Time"), but in no event later than the conversion/issuance of QSC's
Stock pursuant to the Merger.
3. Merger Consideration. The Total Merger Consideration shall
equal Ten Million Two Hundred Fifty Thousand Dollars ($10,250,000). The QSC
Stock Consideration shall be paid in accordance with Section 2.4.
4. Payment of Total Merger Consideration. The Total Merger
Consideration shall be paid on the Closing Date by QSC causing to be delivered
to Snappy Lube the QSC Stock Consideration, QSC's assumption of the Balance
Sheet Liabilities in accordance with Sections 2.4.1 and 2.4.3, respectively,
and the payment by QSC of the sums listed in Section 8.2(b).
1. Payment of Stock. On the Stock Price Determination
Date, QSC shall deliver to Snappy Lube the Stock Purchase Price Notice,
substantially in the form attached hereto as Exhibit "C", which shall describe
the Stock Price and the number of shares of QSC's Stock to be delivered on the
Closing Date or as soon as practicable thereafter. Promptly after receipt of
the Stock Purchase Price Notice, Snappy Lube shall deliver to QSC written
notice of the names in which QSC's Stock shall be issued. On the Closing Date
(or as soon as practicable thereafter), QSC shall cause QSC's Stock to be
issued in accordance with Snappy Lube's instructions and in accordance with the
Stock Purchase Price Notice. The aggregate number of shares of QSC's Stock
shall be determined by the following formula:
x = (a - b) , c
x = number of shares of QSC's Stock
a = Total Merger Consideration (i.e.
$10,250,000)
b = Balance Sheet Liabilities
c = Stock Price
(For purposes of the foregoing calculation, the parties acknowledge and agree
that the Snappy Lube accrued vacation liability for calendar year 1997, shall
not be included in the foregoing calculation.)
2. Conversion of Shares/Issuance of Shares. At and as of
the Effective Time, (a) each share of Snappy Lube Stock (other than any
dissenting shares) shall be converted into the right to receive a number of
shares of QSC's Stock determined by dividing the number of shares of QSC's Stock
(determined in accordance with Section 2.4.1) by 2,500, which is the total
issued and outstanding shares of Snappy Lube Stock (the resulting ratio of QSC's
Stock to one (1) share of Snappy Lube Stock is referred to as the "Conversion
Ratio"), (b) each dissenting share shall be converted into the right to receive
payment from the Surviving Corporation with respect
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thereto in accordance with the Delaware General Corporation Law, and (c) each
share of Snappy Lube Stock shall be cancelled after conversion. Any shares of
QSC's Stock issued and outstanding at and as of the Effective Time will remain
issued and outstanding. On the Closing Date, each Shareholder shall deliver to
QSC certificates evidencing their ownership of Snappy Lube Stock, which
certificates shall be endorsed in blank. Before the Effective Time, QSC will
designate an exchange agent. Upon QSC's instructions, the exchange agent shall
issue to the Shareholders (or their designees) certificates evidencing the
number of shares of QSC's stock issued to the Shareholder determined in
accordance with Section 2.4.1.
3. Assumption of Balance Sheet Liabilities. In addition to the
QSC Stock Consideration, QSC Sub shall assume the Balance Sheet Liabilities.
5. Governance of Surviving Corporation. The Certificate of
Incorporation of QSC Sub in effect at the Effective Time will become the
Certificate of Incorporation of the Surviving Corporation. From and after the
Effective Time of the Merger, such Certificate of Incorporation, as may be
amended from time to time as provided by law, will be, and may be separately
certified, as the Certificate of Incorporation of the Surviving Corporation. The
bylaws of QSC Sub in effect at the Effective Time of the Merger will be the
bylaws of the Surviving Corporation until they are thereafter duly altered,
amended or repealed. The directors of QSC Sub as of the Effective Time of the
Merger will be the directors of the Surviving Corporation. They will hold office
until their successors have been elected and qualified. The officers of QSC Sub
as of the Effective Time of the Merger will be the officers of Surviving
Corporation. Each will hold office subject to the bylaws and the pleasure of the
directors of Surviving Corporation.
Upon the Closing Date, the stock transfer books of Snappy Lube will be
closed, and thereafter no transfers of shares of Snappy Lube's Stock will be
made.
6. Transfer Taxes, Etc. Any sales tax required by any Legal
Requirement to be paid on behalf of Snappy Lube or QSC on or after the date
hereof as a result of the Merger shall be borne equally by QSC and Snappy Lube.
The parties acknowledge and covenant that, so long as reasonably necessary, no
return, report or other document relating to any such tax or fee shall be filed
with or submitted to any governmental authority by any of their Affiliates
without the prior approval of the parties hereto; provided, that such approval
shall not be unreasonably withheld. QSC shall not be required to bear any
portion of any federal or state income tax liabilities (including any income tax
liabilities arising from the recapture of investment tax credits) that may be
incurred by Snappy Lube as a result of the transactions referred to herein. All
premiums and related charges payable with respect to certificates or abstracts
of title or title insurance policies relating to the Assets, documentary
transfer taxes, escrow fees and all other fees and costs necessary to effect the
transfer of the Contracts, Store Leases, Assets and Balance Sheet Liabilities
shall be borne by QSC.
7. Escrow. The parties shall enter into an Escrow Agreement
substantially in the form attached hereto as Exhibit "D." The Escrow Agreement
will provide, among other things, that the number of shares of QSC's Stock
having a value equivalent to $250,000 as of the Stock Price Determination Date
(the "Pledged Shares") shall be deposited with the Escrow Agent on the Closing
Date as collateral for the Shareholders' indemnification obligations to QSC and
QSC Sub under this Agreement. The escrow shall commence as of the Closing Date
and shall terminate on the first anniversary of the Closing Date (except as
automatically extended as provided in Article Nine). Except as specifically
provided otherwise in Section 9.2, the escrow shall constitute QSC's and QSC
Sub's sole and exclusive remedy for Snappy Lube's and Shareholders'
indemnification obligations under this Agreement.
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ARTICLE THREE
SNAPPY LUBE'S AND SHAREHOLDERS'
REPRESENTATIONS AND WARRANTIES
Snappy Lube and Shareholders, jointly and severally represent and
warrant to QSC that, except as set out in the disclosure schedule delivered by
Snappy Lube to QSC concurrently with the execution and delivery of this
Agreement (the "Disclosure Schedule"), the statements set forth in this Article
Three are true and correct. Each item listed in the Disclosure Schedule will be
deemed a part of this Agreement and an exception to each applicable statement
set forth in this Article Three, to the extent relevant, and each document
referenced in the Disclosure Schedule will be deemed incorporated into the
Disclosure Schedule as if fully set forth therein. All representations and
warranties made by Snappy Lube and the Shareholders in this Agreement shall
survive the Closing only for a period of one (1) year after the Closing Date,
unless a Notice of Claim is delivered prior to expiration of such survival
period, and, if a Notice of Claim is so delivered, such indemnification
obligation shall continue with respect to such claim until the final disposition
of such claim. Notwithstanding the foregoing, the representations in Sections
3.9 and 3.11(a) shall not be subject to such 1-year limitation but shall instead
survive the Closing, with respect to the representations in Section 3.9, until
the applicable statute of limitations expires, and, with respect to the
representations in Section 3.11(a), for a period of five (5) years (subject to
extension by the timely filing of a Notice of Claim as described in the
preceding sentence).
As used in this Article Three, "knowledge" means the current actual
knowledge of each Shareholder and Snappy Lube's officers and directors. An
individual will be deemed to have "knowledge" of a particular fact or other
matter only if such individual is actually aware of such fact or other matter
after due inquiry. For purposes of this Agreement, "due inquiry" means the
review of Snappy Lube's records at its corporate headquarters (without any
obligation to expend any funds on third parties to conduct such reviews or
additional investigations) by Shareholders, and/or Snappy Lube's officers and/or
directors, and Kenneth K. Redelsperger's oral inquiry of each manager of each
Store of the matters described in Sections 3.8(g), (k) and (l), 3.11, 3.15,
3.23 and 3.24.
1. Organization. Snappy Lube is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Snappy Lube is authorized to transact business as a foreign corporation and is
in good standing in the State of California, and the State of California is the
only jurisdiction in which the nature of Snappy Lube's Business or of its
properties makes such qualification necessary.
2. Authority and Enforceability. The execution, delivery and
performance of this Agreement, and the agreements contemplated hereby, have been
duly authorized by the Board of Directors and Shareholders of Snappy Lube, and
constitutes the valid and legally binding obligation of Snappy Lube and each
Shareholder, enforceable against Snappy Lube and each Shareholder, in accordance
with the terms hereof, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and general principles of equity,
including the possible unavailability of specific performance or injunctive
relief, regard less of whether such enforceability is considered at law or in
equity.
3. No Breach or Violation. Neither the execution and delivery by
Snappy Lube and the Shareholders of this Agreement nor the consummation of the
transactions contemplated hereby will violate or conflict with (a) to Snappy
Lube's and the Shareholders' knowledge, any law to which Snappy Lube is subject,
(b) Snappy Lube's articles of incorporation or bylaws, or (c) any material
agreement, whether oral or written, to which Snappy Lube or any Shareholder is a
party.
4. Title to Assets. Snappy Lube has good and marketable title to,
or a valid leasehold interest in, the Personal Property free and clear of all
liens, security interests, encumbrances, easements, rights of way and other
restrictions or limitations other than the Permitted Liens described in
Schedule 3.4. The Assets are in good operating condition and repair, ordinary
wear and tear excepted. During the calendar year 1996, Snappy Lube did not
dispose of any of its assets, except in the ordinary course of business.
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5. Authorized Shares and Share Ownership. The authorized capital
stock of Snappy Lube consists of 10,000 shares of common stock, of which 2,500
shares are issued and outstanding. The persons defined as "Shareholders" in
Section 1.60 constitute all of the owners of the shares of Snappy Lube's
outstanding shares of common stock, beneficially and of record, free and clear
of all liens, encumbrances, security agreements, equities, options, claims,
charges and restrictions other than restrictions set forth in a permit issued by
the Nevada Commissioner of Corporations and contained in applicable federal and
state securities laws.
6. Subsidiaries or Partnerships. Snappy Lube does not own,
directly or indirectly, any interest or investment (whether equity or debt) in
any Person other than the Partnerships.
7. Financial Statements. Snappy Lube has delivered to QSC the
Financial Statements and the September Balance Sheet, which are true and correct
in all material respects. The Financial Statements and the September Balance
Sheet have been prepared (and the December Balance Sheet will be prepared) in
accordance with GAAP. The Financial Statements and the September Balance Sheet
accurately reflect and fairly present (and the December Balance Sheet, when
delivered in accordance with Section 5.8, will accurately reflect and fairly
present) the consolidated financial position of Snappy Lube and the Partnerships
as of the respective dates thereof.
8. Absence of Specified Changes. Since September 30, 1996, there
has not been any:
(a) transaction by Snappy Lube, except in the ordinary
course of business;
(b) capital expenditure by Snappy Lube exceeding Ten
Thousand Dollars ($10,000);
(c) material adverse change in the financial condition,
liabilities, assets, or business of Snappy Lube;
(d) change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) of Snappy Lube;
(e) increase in the salary or other compensation payable
or to become payable by Snappy Lube to any of Snappy Lube's Employees or
commitment or obligation of any kind for the payment, by Snappy Lube of a bonus
or other additional salary or compensation to any such person, except in the
ordinary course of Snappy Lube's Business and consistent with its past
practices;
(f) sale or transfer of any material asset of Snappy
Lube, except in the ordinary course of business;
(g) amendment to, or termination of, any Permit, material
contract or agreement, or license to which Snappy Lube is a party, except in the
ordinary course of business;
(h) loan by Snappy Lube to any person or entity, or
guaranty by Snappy Lube of any loan;
(i) mortgage, pledge, or other encumbrance of any asset
of Snappy Lube or amendment of any Store Lease in any material respect or
termination of any of the Store Leases;
(j) waiver or release of any right or claim of Snappy
Lube, except in the ordinary course of business;
(k) commencement, or notice of or threat of commencement,
of litigation or any governmental proceeding against or investigation of Snappy
Lube;
(l) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
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(m) agreement by Snappy Lube to do any of the foregoing
things described in sub-Sections 3.8(a) through (l); or
(n) any other change in condition that has had or might
reasonably be expected to have a material and adverse effect on Snappy Lube's
financial condition, business, assets or liabilities.
9. Tax Returns and Audits. Snappy Lube has filed all federal,
state and local tax returns required by law, which tax returns were complete
and correct in all material respects, and Snappy Lube has paid all taxes owing.
Snappy Lube's federal and state income tax returns have not been audited. There
are no present disputes of any nature as to taxes payable by or to Snappy Lube.
To Snappy Lube's and the Shareholders' knowledge, there is no lien or other
encumbrance on any Asset that arose in connection with any failure (or alleged
failure) to pay any tax.
10. Real Property. Schedule 3.10 lists all Real Property owned or
leased by, or subject to purchase by Snappy Lube, (including, but not limited
to, the location of each Store) and a general description of all buildings,
fixtures and other improvements located on the properties. To Snappy Lube's and
the Shareholders' knowledge, the zoning of each item of Real Property permits
the presently existing improvements and the continuation of the business
presently being conducted on such Real Property.
1. Status of Store Leases. Snappy Lube has delivered to
QSC complete and correct copies of the Store Leases. With respect to the Store
Leases:
(a) Each Store Lease is legal, valid, binding,
enforceable, and in full force and effect;
(b) No party to any Store Lease is in material
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a material breach or default or permit termination,
modification, or acceleration thereunder;
(c) Snappy Lube is not currently renegotiating
any Store Lease; and
(d) All rent due under the Store Leases will, as
of the Closing Date, have been paid through the Closing Date (all such rent
shall be prorated and apportioned as of the Closing Date such that Snappy Lube
and Shareholders (as tenants) shall bear all rent expenses of the Store Leases
through and including the period preceding the Closing Date and QSC shall bear
all rent expenses of the Store Leases on and after the Closing Date). No other
prepaid expense items (such as insurance premiums, software support, personal
property taxes, etc.) shall be prorated. Similarly, no other expense items paid
in the ordinary course of business in arrears shall be prorated.
11. Hazardous Material.
(a) No Hazardous Substance relating to the operation of
Snappy Lube's Business has been Released in violation of any applicable
Environmental Laws on or beneath real property currently or previously owned or
leased by Snappy Lube or its Affiliates. For purposes of this Section 3.11, (x)
"Hazardous substance" or "Hazardous substances" shall mean any substance or
substances that are hazardous, and shall include, without limitation: (A) those
substances included within the definitions of "Hazardous substances", "Hazardous
materials", "toxic substances", or "solid waste" in any of the Environmental
Laws, or so designated in accordance with any Environmental Laws; and (B) any
material, waste or substance which contains (1) any asbestos (friable or
non-friable), (2) any polychlorinated biphenyls in any concentration, (3) any
petroleum or petroleum product, (4) any explosives, (5) any radioactive
materials, (6) any infectious wastes, or (7) any material which must be removed
from real property currently or previously owned or leased by Snappy Lube or any
Affiliate of Snappy Lube during the period of occupation by Snappy Lube or any
Affiliate of Snappy Lube pursuant to any administrative order or enforcement
proceeding, and (y) "Environmental Laws" shall mean all Federal, state and local
environmental statutes and ordinances, and any rule or regulation promulgated
thereunder, and any order, standard, interim regulations, moratorium, policy or
guideline of any governmental body, and all state and local counterparts
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of related statutes, laws, regulations, and orders and treaties of the United
States (with any reference to any such Environmental Law or provision thereof,
either in this Section or elsewhere in this Agreement, being deemed to include
any amendment, extension or successor thereof). For purposes of this Section
3.11, the term "Release" shall mean releasing, spilling, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping.
(b) Neither Snappy Lube nor any Affiliate of Snappy Lube
has received any written notice that Snappy Lube or any Affiliate of Snappy Lube
is a potentially responsible party for a Federal or state environmental cleanup
site or for corrective action under CERCLA or any other applicable law. Neither
Snappy Lube nor any Affiliate of Snappy Lube has submitted nor has any of them
been required to submit any notice pursuant to Section 103(c) of CERCLA with
respect to real property currently or previously owned or leased by Snappy Lube
or any Affiliate of Snappy Lube. Neither Snappy Lube nor any Affiliate of Snappy
Lube has received any written request for information in connection with any
Federal or state environmental cleanup site. Neither Snappy Lube nor any
Affiliate of Snappy Lube has been requested in writing to nor has any of them
undertaken any response or remedial actions or clean-up actions of any kind at
the written request of any governmental body, or at the request of any other
Person.
(c) Neither Snappy Lube nor any Affiliate of Snappy Lube
uses, and none of them have ever used, any Underground Storage Tank. Except as
described in the Disclosure Schedule, to Snappy Lube's and Shareholders'
knowledge, there have not been any Underground Storage Tanks installed on real
property currently or previously owned or leased by Snappy Lube or any Affiliate
of Snappy Lube. For purposes of this Section 3.11, the term "Underground Storage
Tank" shall have the meaning given it in the Resource Conservation and Recovery
Act, as amended.
(d) To Snappy Lube's and the Shareholders' knowledge,
Snappy Lube has complied with all Legal Requirements that are required to be
complied with in connection with the operation of Snappy Lube's Business, and
Snappy Lube has obtained all Permits that are necessary to legally operate
Snappy Lube's Business. Schedule 3.11 identifies for the period Snappy Lube or
any Affiliate of Snappy Lube occupied real property leased or owned (i) all
environmental audits, assessments or occupational health studies undertaken by
governmental agencies or Snappy Lube, any Affiliate of Snappy Lube or any agents
of any of them; (ii) the results of any ground, water, soil, air or asbestos
monitoring undertaken by Snappy Lube or an Affiliate or any agents of any of
them; and (iii) all written citations to Snappy Lube or any Affiliate of Snappy
Lube issued within the past two years under the United States Occupational
Safety and Health Act, as amended.
12. Inventory. The inventories of raw materials, work in process,
and finished goods shown on the December Balance Sheet will consist of items of
a quality and quantity useable and saleable in the ordinary course of Snappy
Lube's Business. At the Closing, all items included in the inventories will be
the property of Snappy Lube, except for sales made in the ordinary course of
business since the Balance Sheet Date; for each of these sales, either QSC has
made full payment or QSC's liability to make payment is reflected in Snappy
Lube's books. No items included in the inventories have been pledged as
collateral. The inventories shown on the December Balance Sheet shall be based
on quantities determined by physical count or measurement, taken within the
preceding twelve months, and are valued at the lower of cost or market value
(determined on a first in, first out basis) and on a basis consistent with that
of prior years.
13. Other Tangible Personal Property. Schedule 3.13 is a complete
and accurate schedule describing, and specifying the location of, all trucks,
automobiles, machinery, equipment, and furniture owned by or used by Snappy Lube
in connection with Snappy Lube's Business, except inventories of raw materials,
work in process and finished goods. The property listed in Schedule 3.13
constitutes all material items of tangible Personal Property necessary for the
conduct of Snappy Lube's Business as now conducted. All personal property listed
in Schedule 3.13 is in good working order and condition, ordinary wear and tear
excepted. All the motor vehicles listed in Schedule 3.13 are in good condition
and repair and have current smog certifications.
14. Accounts Receivable. Schedule 3.14 is a complete and accurate
list of Snappy Lube's accounts receivable as of the date shown thereon, together
with an accurate aging of these accounts. The accounts
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receivable described in Schedule 3.14, and all accounts receivable created
thereafter, arose from valid sales in the ordinary course of business and, to
Snappy Lube's and Shareholders' knowledge, are collectible at their full
amounts.
15. Contracts. Schedule 3.15 is a complete and accurate list of
all of Snappy Lube's contracts and Permits (and all amendments thereto), whether
oral or written, and there is no material default or event that, with notice or
lapse of time or both, would constitute a material default by Snappy Lube and,
to Snappy Lube's and Shareholder's knowledge, by any other party to any of these
agreements. Snappy Lube has not received any notice that any party intends to
cancel or terminate any of these agreements. Schedule 3.15 also accurately
describes the Contracts which, to Snappy Lube's and the Shareholders' knowledge,
require the consent of third parties (including, but not limited to, the owners
of and lessors of the Real Property) in order for the Contracts to be assumed by
QSC Sub.
16. Tradenames, Trademarks and Copyrights. Schedule 3.16 is an
accurate and complete list of all tradenames, trademarks, service marks, and
copyrights and registrations owned by Snappy Lube or in which Snappy Lube has
any right or license, together with a brief description of each. The items
listed on Schedule 3.16 are subject to valid California State registrations that
are in full force and effect, and are not subject to any claim of infringement
or alleged infringement by others of any such tradename, trademark, service
mark, patent or copyright. To Snappy Lube's and Shareholders' knowledge, Snappy
Lube has not infringed, and is not infringing, on any tradename, trademark,
service mark, patent or copyright belonging to any Person.
17. Patents and Patent Rights. There are no patents, inventions,
industrial models, processes, designs, or applications for patents owned by
Snappy Lube or in which Snappy Lube has any rights, licenses or interests.
18. Customers. Schedule 3.18 is a complete and accurate list of
all Snappy Lube's fleet customers as of the Balance Sheet Date, together with
summaries of the sales made to each fleet customer during 1996. To Snappy Lube's
and the Shareholders' knowledge, no fleet customer intends to cease doing
business with Snappy Lube. For purposes of this Agreement, "fleet customers"
means any customer other than a retail customer seeking service or sales for a
single vehicle.
19. Employment Contracts and Benefits. Schedule 3.19 is a complete
and accurate list of all employment contracts and collective bargaining
agreements, and all pension, bonus, profit sharing, stock option or other
agreements or arrangements provided for employee remuneration or benefits to
which Snappy Lube is a party or is bound. All such agreements are in full force
and effect, and Snappy Lube is not in material default under any of these
agreements. There are no labor disputes pending or, to Snappy Lube's or the
Shareholders' knowledge, threatened against Snappy Lube.
20. ERISA.
(a) Schedule 3.20 sets forth a complete and correct list
of each Employee Benefit Plan, as defined in Section 3(2) of ERISA, which (i) is
subject to any provision of ERISA, and (ii) was at any time maintained,
administered or contributed to by Snappy Lube or any Affiliate of Snappy Lube
and covered any employee or former employee of Snappy Lube or any Affiliate of
Snappy Lube or under which Snappy Lube or any Affiliate has any liability.
Complete and correct copies of such plans (and, if applicable, related trust
agreements) and all amendments thereto have been furnished to QSC together with
the three most recent annual reports (Form 5500 including, if applicable,
Schedule B thereto) prepared in connection with any such plan. Such plans are
hereinafter referred to collectively as the "Employee Plans".
(b) Neither Snappy Lube nor any Affiliate of Snappy Lube
contributes to or otherwise participates in and has never contributed to or
otherwise participated in any Employee Plan that is or has been subject to Title
IV of ERISA. To Snappy Lube's and Shareholders' knowledge, neither Snappy Lube
nor any Affiliate of Snappy Lube has engaged in any "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code, nor has a
"prohibited transaction" occurred with respect to any Employee Plan or any
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other employee benefit plan or arrangement contributed to by Snappy Lube or any
Affiliate of Snappy Lube which is covered by Title I of ERISA, which could
reasonably be expected to have, in the aggregate, a material adverse effect on
Snappy Lube. Neither Snappy Lube nor any Affiliate of Snappy Lube has incurred
any liability under Title IV of ERISA which could become a liability of QSC Sub
after the Closing Date.
(c) Each of the Employee Plans which is intended to be
qualified under Section 401(a) of the Code (a "Qualified Plan") has either
received a determination letter from the Internal Revenue Service to the effect
that it meets the requirements of Code Section 401(a) or has applied to the
Internal Revenue Service for such a determination letter prior to the expiration
of the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination. QSC
has been furnished with copies of Internal Revenue Service determination letters
with respect to each such Employee Plan. Such determination letters cover the
requirements of all federal income tax laws, including the Tax Reform Act of
1986, the Unemployment Compensation Amendments Act of 1992, and the Omnibus
Budget Reconciliation Act of 1993. To Snappy Lube's and the Shareholders'
knowledge, each of the Employee Plans has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such Employee Plans and, to Snappy Lube's and the
Shareholders' knowledge, nothing has occurred since the adoption of the
Qualified Plans which resulted or, after due inquiry, could result in the
imposition of any penalties on such Qualified Plans or the sponsors, fiduciaries
or administrators thereof, including any actions taken pursuant to this
Agreement.
(d) There is no contract, agreement, plan or arrangement
covering any employee or former employee of Snappy Lube or any subsidiary or
Affiliate of Snappy Lube that, individually or collectively, could give rise to
the payment of any amount that would not be deductible by reason of Section 280G
or Section 162(a)(1) of the Code.
(e) Schedule 3.20 sets forth a complete and correct list
of each employment, severance or other similar contract, arrangement or policy
and each written plan or binding arrangement providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, medical benefits, dental benefits,
vacation benefits, retirement benefits or for deferred compensation, profit
sharing, bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (i) is
not an Employee Plan, (ii) is entered into, maintained or contributed to, as the
case may be, by Snappy Lube, or any Affiliate of Snappy Lube and (iii) covers
any employee or former employee by Snappy Lube, any Affiliate of Snappy Lube or
any predecessor of any of them. Such contracts, plans and arrangements are
hereinafter referred to collectively as the "Benefit Arrangements". Each of the
Benefit Arrangements has been maintained in material compliance with its terms
and comply in all material respects with the requirements prescribed by any and
all Legal Requirements which are applicable to such Benefit Arrangements.
(f) There is no liability in respect of post-retirement
health and medical benefits for any retired employees of Snappy Lube or any
Affiliate of Snappy Lube.
(g) (i) Snappy Lube and any Affiliate of Snappy Lube have
made or accrued all payments required by each Employee Plan and Benefit
Arrangement, any related trusts, any collective bargaining agreement or by Legal
Requirements to be made to each Employee Plan and Benefit Arrangement (including
all insurance premiums or intercompany charges with respect to each Employee
Plan and Benefit Arrangement) with respect to all periods through the Closing
Date, including, without limitation, payments for a pro rata share with respect
to any period prior to and including the Closing Date, based on the number of
days in such period to the total number of days in the plan year, and all
amounts properly accrued to date as liabilities of Snappy Lube, and any
Affiliates of Snappy Lube under or with respect to each Employee Plan or Benefit
Arrangement for the current plan years have been recorded on the books of Snappy
Lube, and any Affiliates of Snappy Lube, (ii) there are no actions, arbitrations
or claims pending (other than routine claims for benefits) or, to Snappy Lube's
or the Shareholders' knowledge, threatened, against any Employee Plan or Benefit
Arrangement, its administrators, trustees or other fiduciaries, or against the
Shareholders, Snappy Lube or any Affiliates of Snappy Lube or against the assets
of any
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Employee Plan or Benefit Arrangement; (iii) no Employee Plan providing
retirement benefits for employees or former employees of Snappy Lube and any
Affiliate of Snappy Lube has been terminated; (iv) to Snappy Lube's and the
Shareholders' knowledge, no Employee Plan is under audit by either the Internal
Revenue Service or the U.S. Department of Labor; and (v) consummation of the
transactions contemplated by this Agreement will not give rise to any liability
of Snappy Lube or any Affiliate of Snappy Lube for severance pay or termination
pay solely by reason of such transactions.
(h) There has not been, and prior to or on the Closing
Date there will not be, any amendment to, written interpretation or announcement
(whether or not written) by Snappy Lube or any Affiliates of Snappy Lube
relating to, or change in employee participation or coverage under, any Employee
Plans or Benefit Arrangements which would increase materially the expense of
maintaining such Employee Plans or Benefit Arrangements above the level of the
expense incurred in respect thereof for the period ending on the date hereof.
21. Insurance Policies. Schedule 3.21 contains a complete and
accurate list of all insurance policies held by Snappy Lube concerning Snappy
Lube's Business and the Assets. Such policies are in the respective policy
limits set forth in Schedule 3.21. Snappy Lube is not in default with respect to
payment of premiums for any such policy, and no claim is pending under any such
policy.
22. Liabilities. Schedule 3.22 contains a complete and accurate
estimate of the Balance Sheet Liabilities as of the date thereof.
23. Compliance With Laws. To Snappy Lube's and the Shareholders'
knowledge, Snappy Lube has complied with all federal, state and local laws to
which it is subject and has not received notice of any violation of any
applicable federal, state or local statute, law or regulation affecting Snappy
Lube's properties or Snappy Lube's Business.
24. Litigation. Except as set forth in Schedule 3.24, there is not
pending, or, to Snappy Lube's and the Shareholders' knowledge, threatened, any
suit, arbitration, legal, administrative, or other proceeding, or governmental
investigation against Snappy Lube or Snappy Lube's Business that could have a
material adverse effect on the financial condition of Snappy Lube or Snappy
Lube's Business. Snappy Lube is not presently engaged in any legal action to
recover monies due to Snappy Lube or damages sustained by Snappy Lube.
25. Snappy Lube's Employees. Schedule 3.25 is a complete and
accurate list of the names and social security numbers of all officers,
directors and employees, of Snappy Lube, and their respective salaries and each
material employee benefit which such employee is receiving.
26. COBRA. Snappy Lube has complied with all requirements and
obligations of COBRA (defined in Section 10.4).
27. Unfinished Projects. To the knowledge of Snappy Lube and
Shareholders, Schedule 3.27 is a complete and accurate list of the Unfinished
Projects.
28. Full Disclosure. None of Snappy Lube's representations or
warranties made herein contains or will contain any untrue statement of a
material fact, or omits a statement of material fact necessary to make the
statements made not misleading.
29. No Other Representations or Warranties. Except as otherwise
expressly provided in this Agreement, Snappy Lube and the Shareholders hereby
disclaim the making of any representations or warranties, express or implied,
regarding Snappy Lube or Snappy Lube's Business or matters affecting Snappy Lube
or Snappy Lube's Business. QSC agrees and acknowledges that, except as otherwise
expressly provided in this Agreement: (i) Snappy Lube shall not incur any cost
or liability with respect to the content or accuracy of any report, opinion, or
conclusion of any person who has examined Snappy Lube, Snappy Lube's Business or
the Assets, whether retained by Snappy Lube or not; (ii) QSC is a Person
experienced in businesses like that of Snappy Lube's Business and acquisition
transactions of the type contemplated in this Agreement, and has entered into
this
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Agreement with the intention of making and relying upon its own investigation of
the physical, environmental, and economic condition of Snappy Lube, Snappy
Lube's Business and the Assets; and (iii) QSC is not relying upon any
representations or warranties made by Snappy Lube or anyone acting or claiming
to act on Snappy Lube's behalf concerning Snappy Lube, Snappy Lube's Business or
the Assets, except as provided in this Article Three. QSC further acknowledges
that it has not received from Snappy Lube any accounting, tax, legal or other
advice with respect to this transaction and is relying solely upon the advice of
its own accounting, tax, legal and other advisors.
30. Disclosed Matters. If, after delivery of the Disclosure
Schedule pursuant to this Article Three and prior to Closing, a material breach
of Snappy Lube's representations and warranties pursuant to Article Three is
disclosed to QSC by Snappy Lube or otherwise discovered by QSC, then QSC's sole
and exclusive right under this Agreement, at its election, is either to (i)
proceed with the Closing, the effect of which is to waive such breach of the
representations and warranties and any right or claim arising therefrom; or (ii)
terminate this Agreement. Notwithstanding the foregoing, Snappy Lube's or the
Shareholders' violations of Sections 5.1, 5.2, 5.5, 5.8, 5.9, 5.10, 5.11 or 5.12
shall be subject to the remedies available to QSC pursuant to Section 10.6.
31. Excluded Assets. Snappy Lube and the Shareholders represent
and warrant that the fair market value of the Excluded Assets described in
Schedule 3.31 does not constitute more than thirty percent (30%) of the fair
market value of Snappy Lube's gross assets nor more than twenty percent (20%) of
the fair market value of Snappy Lube's net assets.
ARTICLE FOUR
QSC'S REPRESENTATIONS AND WARRANTIES
QSC and QSC Sub, jointly and severally represent and warrant to Snappy
Lube and Shareholders that the statements set forth in this Article Four are
true and correct. All representations and warranties made by QSC and QSC Sub in
this Agreement shall survive the Closing only for a period of one (1) year after
the Closing Date unless a Notice of Claim is delivered prior to expiration of
such survival period, and if a Notice of Claims is so delivered, such
indemnification obligations shall continue with respect to such claims until the
final disposition of such claim.
1. Organization. QSC and QSC Sub, respectively, are corporations
duly organized, validly existing and in good standing under the laws of the
State of Delaware and are duly authorized to carry on the businesses QSC and QSC
Sub, respectively, presently conduct.
2. Authority and Enforceability. The execution, delivery and
performance of this Agreement and the agreements contemplated hereby have been
duly authorized by the respective Boards of Directors of QSC and QSC Sub, this
Agreement and the agreements contemplated hereby constitute the valid and
legally binding obligations of QSC and QSC Sub, respectively, enforceable
against QSC and QSC Sub in accordance with the terms hereof and thereof, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally and general
principles of equity, including the possible unavailability of specific
performance or injunctive relief, regardless of whether such enforceability is
considered at law or in equity.
3. No Breach or Violation. Neither the execution and delivery by
QSC and QSC Sub of this Agreement nor the consummation of the transactions
contemplated hereby will violate or conflict with (a) any provision of QSC's or
QSC's certificate of incorporation or bylaws, or (b) any agreement, whether oral
or written, to which QSC or QSC Sub is a party.
4. Capitalization. All of QSC's Stock to be issued in connection
with the Merger has been duly authorized and, upon consummation of the Merger,
will be validly issued, fully paid and nonassessable.
5. Excluded Assets. To QSC's knowledge (in reliance on Snappy
Lube's and the Shareholders' representations), the fair market value of the
Excluded Assets described in Schedule 3.31 does not constitute more than thirty
(30%) of the fair market value of Snappy Lube's gross assets nor more than ten
percent (10%) of the fair market value of Snappy Lube's net assets.
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6. No Other Representations or Warranties. Except as otherwise
expressly provided in this Agreement, QSC and QSC Sub hereby disclaim the making
of any representations or warranties, express or implied. Snappy Lube and the
Shareholders agree and acknowledge that, except as otherwise expressly provided
in this Agreement: (i) QSC and QSC Sub shall not incur any cost or liability
whatsoever; (ii) the Shareholders are experienced in investing such that they
are "accredited investors" or they have relied on professional financial
advisors in evaluating QSC's Stock; and (iii) neither Snappy Lube nor any of the
Shareholders is relying upon any representations or warranties made by QSC, QSC
Sub or any one acting or claiming to act on QSC's or QSC Sub's behalf concerning
either of them. Snappy Lube and the Shareholders further acknowledge that they
have not received from QSC or QSC Sub any accounting, tax, legal or other advice
with respect to this transaction and are relying solely upon advice of their own
accounting, tax, legal and other advisors.
7. Full Disclosure. None of QSC's representations or warranties
made herein contains or will contain any untrue statement of a material fact, or
omits a statement of material fact necessary to make the statements made not
misleading.
ARTICLE FIVE
SNAPPY LUBE'S COVENANTS
Snappy Lube and each Shareholder, jointly and severally, covenant to
QSC and QSC Sub that from the date of this Agreement until the Closing Date (or
as reasonably required thereafter):
1. Access. Snappy Lube shall provide QSC and QSC Sub and their
counsel, accountants, and other representatives, reasonable access during normal
business hours to all properties, job sites, books, accounts, records, contracts
and documents of or relating to Snappy Lube and Snappy Lube's Business, and in a
manner so as not to interfere with the normal business operations of Snappy
Lube's Business. Snappy Lube shall furnish or cause to be furnished to QSC all
data and information concerning Snappy Lube's Business that QSC may reasonably
request.
2. Conduct of Business. Except as reasonably contemplated by this
Agreement and described in the Disclosure Schedule, Snappy Lube will carry on
Snappy Lube's Business and activities diligently and in substantially the same
manner as previously carried on, and shall not make or institute any unusual or
novel methods of manufacture, service, purchase, sale, lease, management,
accounting or operation that vary materially from those methods of Snappy Lube
as of the date of this Agreement. Snappy Lube will use its best efforts to
preserve its present relationships with suppliers, customers and others having
business relationships with Snappy Lube; and Snappy Lube will use its best
efforts to keep its organization intact.
3. Insurance. Except as reasonably contemplated by this
Agreement and described in the Disclosure Schedule, through and including the
Closing Date, Snappy Lube will continue to carry its existing insurance,
subject to variations required by the ordinary operations of Snappy Lube's
business.
4. Employees and Compensation. Except as reasonably contemplated
by this Agreement and described in the Disclosure Schedule, except as
contemplated in the Disclosure Schedule, Snappy Lube will not make any change
in compensation payable to or to become payable to any officer, employee, sales
agent or representative, or change any benefits payable to any such person, or
modify any relevant agreement, except in the ordinary course of business and
consistent with Snappy Lube's past practices. Snappy Lube shall pay to Paula
Miller and Nancy Polk, on or before the Closing Date, the severance payments
described in Paragraph 5 of the Disclosure Schedule.
5. Consents. As soon as reasonably practical after the execution
and delivery of this Agreement, and in any event on or before the Closing Date,
Snappy Lube will use its best efforts to diligently and timely obtain the
written consent of all persons whose consent is reasonably requested by QSC in
connection with this Agreement, including, but not limited to, the consents of
lessors of Store Leases described on Schedule 3.15.
6. Liabilities/Waivers. Except as reasonably contemplated by this
Agreement or set forth in the Disclosure Schedule, Snappy Lube will not (and
will not agree to) (a) pay any obligation or liability other than
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current liabilities in the ordinary course of business, (b) waive any right or
claim; or (c) cancel, without full payment, any obligation to Snappy Lube.
7. Employee Benefits. Except as set forth in the Disclosure
Schedule, Snappy Lube shall maintain the employee benefits without any change or
amendments thereto.
8. Financial Statements. Snappy Lube shall use its best efforts
to deliver to QSC, on or before January 31, 1997, the December Balance Sheet,
and, as soon as it is available (but no later than February 14, 1997), Snappy
Lube's unaudited consolidated financial statements for the year ended December
1996.
9. Tax-Free Reorganization/Liquidation of Snappy Lube. After the
Closing, no Shareholder will dispose of any of the QSC's Stock received in the
Merger in a manner that would cause the Merger to violate the continuity of
shareholder interest requirement set forth in Treas. Reg. Section 1.368-1.
10. No Shop. Snappy Lube and the Shareholders shall not, and shall
not permit Snappy Lube's officers, directors, employees or their respective
agents and/or representatives to, conduct any substantive discussions, solicit,
initiate or encourage the submission of any proposals relating to the purchase
of the Assets or Snappy Lube's outstanding stock, or the merger of Snappy Lube
with any Person other than as contemplated by this Agreement. This no shop
covenant shall expire on the Closing Date, at 5:00 p.m. (California time).
11. Reasonable Efforts. Snappy Lube and the Shareholders will use
its reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
including satisfaction, but not waiver, of the closing conditions set forth in
this Agreement (including obtaining any authorizations, consents, and approvals
necessary under this Agreement).
12. Unfinished Projects. The Shareholders have provided to QSC,
and will continue to provide to QSC for a period of one (1) year after the date
of this Agreement, all information in its possession (or it acquires) relating
to Unfinished Projects.
13. Release of Liens. QSC, QSC Sub and the Shareholders will use
their reasonable best efforts to cause Pennzoil to (a) release all liens and
security interests encumbering the Assets and (b) deliver to QSC Sub all
documents and instruments necessary to evidence QSC Sub's sole ownership of
Personal Property subject to the Pennzoil Agreements.
14. Representations True at Closing. Except as to matters set
forth on the Disclosure Schedule, all representations and warranties of Snappy
Lube and the Shareholders under this Agreement will also be true and correct as
of the Closing Date as if made on such date.
ARTICLE SIX
QSC'S COVENANTS
QSC and QSC Sub, jointly and severally, covenant to the Shareholders
and Snappy Lube that, from the date of this Agreement until the Closing Date (or
as reasonably required thereafter):
1. Reasonable Efforts. QSC will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement including satisfaction, but not
waiver, of the closing conditions set forth in this Agreement (including
obtaining any authorizations, consents, and approvals necessary under this
Agreement.
2. Confidentiality. Unless and until the Closing Date has
occurred, QSC and QSC Sub shall hold in confidence all data and information
received from Snappy Lube (whether prior to or after the date of this Agreement)
regarding Snappy Lube's Business, except as required by law to be disclosed, and
QSC and QSC Sub will not use any of such information except in connection with
this Agreement, and, if this Agreement is terminated for any reason whatsoever,
will return to Snappy Lube or destroy all tangible embodiments (and all copies)
of such information which are in its possession or control.
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3. QSC's Stock. QSC shall use its reasonable best efforts to (i)
file with the SEC a registration statement on Form S-4 covering QSC's Stock to
be issued in the Merger; (ii) obtain a declaration from the SEC that the
registration statement is effective; (iii) file with the New York Stock Exchange
an application for listing QSC's Stock on the New York Stock Exchange; and (iv)
obtain a determination that, subject to notice of issuance, the application is
effective.
4. Continuity of Business Enterprise.4Continuity of Business Enterprise.
After the Closing, QSC Sub will continue at least one significant historic
business line of Snappy Lube, or use at least a significant portion of Snappy
Lube's historic business assets in a business, in each case within the meaning
of Treas. Reg. Section 1.368-1(d) and shall not otherwise take any action which
would adversely affect the transaction's tax-free status under Section
368(a)(2)(D) of the Code.
5. Insurance. Snappy Lube acknowledges that QSC and QSC Sub may
elect to terminate the existing insurance if, in QSC's sole determination,
insurance may be obtained on substantially similar or preferable terms;
provided, however, that for the 1-year period after the Closing Date during
which Snappy Lube's and the Shareholders' representations and warranties
survive, QSC shall maintain, or cause QSC Sub to maintain, in effect insurance
with coverages, deductibles and limits of liability that are substantially
similar to or better than Snappy Lube's existing insurance. Notwithstanding
anything to the contrary in this Section 6.5, neither QSC nor QSC Sub shall be
required to maintain, in effect a Hazardous Materials pollution liability policy
of insurance.
6. Representations True at Closing. All representations and
warranties of QSC and QSC Sub under this Agreement will also be true and correct
as of the Closing Date as if made on such date.
ARTICLE SEVEN
CONDITIONS
1. QSC's Conditions to Closing. QSC's and QSC Sub's respective
obligation to consummate the Merger is subject to the satisfaction, or waiver,
of all the conditions set forth below at or before the Closing:
(a) Accuracy of Representations and Warranties. All of
Snappy Lube's and Shareholders' representations and warranties shall be true in
all material respects on and as of the Closing Date as though made at that time.
(b) Performance. Snappy Lube and the Shareholders shall
have performed, satisfied, and complied in all material respects with all
covenants and agreements, and satisfied all conditions required by this
Agreement to be performed or satisfied on or before the Closing.
(c) No Material Adverse Change. Except as contemplated in
this Agreement or as set forth in the Disclosure Schedule, during the period
from September 30, 1996, to and including the Closing Date, there shall not have
been any material adverse change in the financial condition or the results of
operations of Snappy Lube, and Snappy Lube shall not have sustained any material
loss or damage to its Assets that materially affects Snappy Lube's Business.
(d) Absence of Litigation. No action, suit, or proceeding
before any court or governmental body or authority, pertaining to the
transactions contemplated by this Agreement, shall have been instituted or
threatened on or before the Closing Date.
(e) Approval of Documentation. The form and substance of
all certificates, deeds, instruments, opinions, and other documents delivered to
QSC under this Agreement will be satisfactory in all reasonable respects to QSC
and its counsel.
(f) Escrow. The Escrow Agreement shall have been executed
and delivered by Snappy Lube, the Shareholders and the Escrow Agent, and,
concurrently with the Closing or as soon as practicable thereafter, the escrow
shall have been funded with the Pledged Shares.
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(g) Cancellation of Agreements. The Pennzoil agreements
listed on Schedule 7.1(g), and the shareholder agreements described in
paragraphs 6 and 7 of the Disclosure Schedule shall have been cancelled and
terminated on or before the Closing Date. With respect to the Pennzoil
agreements, QSC and QSC Sub shall have received a fully executed Pennzoil
Release and Bill of Sale, or such other evidence reasonably satisfactory to QSC
and QSC Sub that the Pennzoil Agreements have been cancelled and terminated.
(h) Compensation. Except as reasonably contemplated by
this Agreement or as set forth in the Disclosure Schedule, since the Balance
Sheet Date, no change shall have been made to any compensation arranged with any
employee.
(i) December Balance Sheet. Snappy Lube shall have
delivered to QSC the December Balance Sheet, which shall reflect items
substantially identical to those described in the September Balance Sheet,
including, but not limited to, (i) sufficient inventory and supplies for each
Store to conduct business in the ordinary course and (ii) Two Hundred Dollars
($200) in the cash register for each Store. The parties acknowledge and agree
that the December Balance Sheet may exclude the Excluded Assets, accounts
receivable from the Shareholders, cash in excess of Two Hundred Dollars ($200)
at each Store, and assets disposed of in the ordinary course of business.
(j) Closing Documents. Snappy Lube shall have delivered
(or caused to be delivered) to QSC all of the items described in Section 8.2(a).
(k) Due Diligence. On or before January 31, 1997, QSC
shall have conducted and completed its review of Snappy Lube's Business, and
notified Snappy Lube that QSC is satisfied with the results of such review. In
the event that, on or before January 31, 1997, QSC does not notify Snappy Lube
that QSC is satisfied with the results of such review, then this Agreement shall
terminate and be of no further force or effect; provided that Snappy Lube has
delivered to QSC all requested information and provided QSC a reasonable
opportunity to review such material.
(l) Consents. Receipt of all necessary consents by the
owners of the Real Property subject to the Store Leases, including estoppel
certificates (in form and substance approved by QSC in the exercise of
commercially reasonable judgment).
(m) Title Insurance. The receipt by QSC of CLTA Owner's
Policies of Title Insurance for each parcel of Real Property subject to Store
Leases, in such amounts as may be reasonably required by QSC showing title to
the leasehold vested of record in the name of QSC subject only to those
exceptions to title not disapproved by QSC pursuant to this Agreement and the
standard printed exceptions of the title policies.
(n) Certificate of Merger. A Certificate of Merger shall
have been filed with the Secretary of State for the State of Delaware.
(o) Excluded Assets. The Excluded Assets listed on
Schedule 3.31 shall have been transferred from Snappy Lube to a third party and
no longer reflected on the books and records of Snappy Lube as an Asset.
(p) Excluded Liabilities. The Excluded Liabilities listed
on Schedule 7.1(p) shall have been assigned to and assumed by a third party and
no longer reflected on the books and records of Snappy Lube as a liability.
(q) Modesto Site. The Store Lease for the Modesto
location shall have been assigned to Kenneth Redelsperger or a third party.
.2 Snappy Lube's Conditions to Closing. Snappy Lube's and the
Shareholders' respective obligations to consummate the Merger is subject to the
satisfaction, or waiver of all the following conditions at or before the
Closing:
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(a) Representations. All representations and warranties
by QSC and QSC Sub shall be true in all material respects on and as of the
Closing Date as though made on and as of such date.
(b) Performance. QSC and QSC Sub shall have performed and
complied in all material respects with all covenants and agreements and
satisfied all conditions required by this Agreement to be performed or satisfied
on or before the Closing.
(c) Registration of Stock. QSC shall have filed with the
SEC, and the SEC shall have declared effective, a registration statement of Form
S-4 covering the QSC's Stock.
(d) Listing of Stock. QSC shall have filed with the New
York Stock Exchange (and the listing shall have been declared effective subject
to notice of issuance) an application to list the QSC's Stock on the New York
Stock Exchange.
(e) Closing Documents. QSC shall have delivered (or
caused to be delivered) to Snappy Lube the items described in Section 8.2(b).
(f) Consents. Snappy Lube shall have received all
necessary consents by the owners of the Real Property subject to the Store
Leases, including estoppel certificates and the owners' releases of Kenneth
Redelsperger, Anne Redelsperger, and any other officer or director of Snappy
Lube from liability under the terms of any personal guaranty of any of the Store
Leases.
(g) Certificate of Merger. The Certificate of Merger
shall have been filed with the Secretary of State of the State of Delaware.
(h) Opinion of Counsel. Snappy Lube shall have received a
legal opinion of special tax counsel for Snappy Lube to the effect that the
Merger will constitute a tax-free reorganization pursuant to Code Sec. 368
(a)(2)(D).
(i) Approval of Documentation. The form and substance of
all certificates, opinions, instruments, and other documents delivered to Snappy
Lube under this Agreement will be satisfactory in all reasonable respects to
Snappy Lube and its counsel.
ARTICLE EIGHT
THE CLOSING
1. Time and Place. The consummation of the Merger (the "Closing")
shall take place at the offices of Greene Radovsky Maloney & Share LLP, Four
Embarcadero Center, Suite 4000, San Francisco, California at 10:00 a.m. local
time on January 31, 1997, or at such other time and place as the parties may
agree in writing (the "Closing Date"). If, on or before January 28, 1997, (1)
despite QSC's best efforts, the SEC shall not have declared effective the
registration statement covering the issuance of the QSC's Stock in the Merger,
or (2) despite QSC's and Snappy Lube's best efforts, the parties shall not have
received all necessary consents by the owners of the Real Property subject to
the Store Leases, including estoppel certificates, then, in either case, QSC
shall have the option to extend the Closing Date for a period of one (1) month
to February 28, 1997 by giving Snappy Lube written notice of QSC's election on
or before January 28, 1997.
2. Deliveries at Closing. The following items shall be delivered
at the Closing:
(a) Snappy Lube and Shareholders. Snappy Lube and
Shareholders shall have delivered or caused to be delivered, to QSC the
following:
(i) Executed counterparts of this Agreement;
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(ii) An executed counterpart of an assignment of
each Store Lease in substantially the form attached hereto as Exhibit "E";
(iii) A secretary's certificate certifying (A) the
incumbency of Snappy Lube's officers, (B) a copy of the resolutions of the
Snappy Lube's Board of Directors and Shareholders approving this Agreement and
directing that it be submitted to the Shareholders for a vote, (C) the articles
of incorporation and bylaws of Snappy Lube, (D) a resolution adopting this
Agreement, duly approved by the holders of at least a majority of the total
number of outstanding shares of Snappy Lube Stock;
(iv) A Closing certificate executed by Snappy
Lube's Representative certifying the accuracy of Snappy Lube's representations
and warranties;
(v) The legal opinion of Snappy Lube's counsel,
Fenton & Keller, dated as of the Closing Date in substantially the form attached
hereto as Exhibit "F";
(vi) Tax clearance certificates from the
Franchise Tax Board for California, California State Board of Equalization and
California Employment Development Department;
(vii) Good standing certificates of Snappy Lube
from the Secretaries of State of California and Nevada, respectively;
(viii) Executed copies of consents from the Persons
listed on Schedule 3.15;
(ix) An executed counterpart of the Escrow
Agreement;
(x) Executed counterparts of the License
Agreement signed by the third party or parties to whom the Snappy Lube service
mark is distributed pursuant to Section 7.1(o), substantially in the form
attached hereto as Exhibit "G";
(xi) A certificate regarding the December Balance
Sheet from Snappy Lube representing that, except as contemplated in this
Agreement or as set forth in the Disclosure Schedule, during the period from the
Balance Sheet Date to and including the Closing Date, there shall not have been
any material adverse change in the financial condition of Snappy Lube, or
specifying any such change;
(xii) Accounts Payable Certificate;
(xiii) A current and accurate list of Snappy Lube's
accounts receivable with an accurate aging of such accounts;
(xiv) Executed counterparts of the Pennzoil
Release and Bill of Sale in substantially the form attached hereto as Exhibit
"H" or such other evidence of termination of the Pennzoil Agreements reasonably
satisfactory to QSC and QSC Sub;
(xv) Certificates evidencing the Snappy Lube
Stock; and
(xvi) Such other documents and instruments as QSC
may reasonably request in order to effect the purpose of this Agreement.
(b) QSC/QSC Sub. QSC and QSC Sub, or either of them,
shall deliver or cause to be delivered to Snappy Lube the following:
(i) As soon as practicable, evidence of
delivery of QSC's Stock to the Escrow Agent in accordance with the Escrow
Agreement;
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(ii) As soon as practicable, delivery to
Shareholders of certificates evidencing QSC's Stock (excluding the Pledged
Shares delivered to the Escrow Agent);
(iii) Counterparts of this Agreement signed by QSC
and QSC Sub;
(iv) Executed Counterparts of the License
Agreement;
(v) Counterparts of the Escrow Agreement signed
by Escrow Agent, QSC and QSC Sub;
(vi) A secretary's certificate certifying a copy
of the resolutions of QSC's and QSC Sub's board of directors authorizing the
execution, delivery and performance of this Agreement and authorizing the
Merger, and a copy of a resolution duly adopted by QSC as sole shareholder of
QSC Sub adopting and approving the Merger;
(vii) A Closing certificate executed by QSC's
Representative certifying the accuracy of QSC's representations and warranties;
(viii) The tax opinion of Greene Radovsky Maloney &
Share, LLP in substantially the form attached hereto as Exhibit "I";
(ix) Wire transfer to Snappy Lube's Broker in an
amount equal to the Broker's Fees as set forth on the Accounts Payable
Certificate;
(x) Wire transfer to Snappy Lube's counsel
(legal and accounting) in an amount as set forth on the Accounts Payable
Certificate;
(xi) Wire transfer to the holders of the Real
Property Debt, the holders of Subordinated Debt, Paul Greenwood for the
Greenwood Purchase Price and Pennzoil Products Company, a Delaware corporation
for the Pennzoil Termination Fee in the amounts as set forth on the Accounts
Payable Certificate;
(xii) The legal opinion of in-house counsel of
QSC, substantially in the form attached hereto as Exhibit "J"; and
(xiii) Execution and delivery of an assignment of
each Store Lease; and
(xiv) Such other documents and instruments as
Snappy Lube may reasonably request in order to effect the purpose of this
Agreement.
ARTICLE NINE
POST-CLOSING OBLIGATIONS
1. License Agreement. Promptly after the Closing Date, the
License Agreement shall become effective, and shall grant QSC Sub (and its
assignees) the right to use the Snappy Lube tradenames set forth on Schedule
3.16, for a five (5) year period in the counties listed on Schedule 9.8;
provided that QSC and QSC Sub, or either of them, shall have the option to
extend the term of the License Agreement as it applies to the Yuba City Store
Lease for a period corresponding to the term of that Store Lease, as it may be
extended or renewed; such right to extend to be exercised by written notice to
Kenneth Redelsperger on or before the expiration of the initial 5-year term of
the License Agreement. The license shall be exclusive and granted on a royalty
free basis with no charges whatsoever.
2. Indemnities. All of the representations and warranties of
Snappy Lube contained in this Agreement shall survive the Closing (unless, as
provided in Section 3.30 a misrepresentation or breach of warranty of Snappy
Lube or Shareholders has been disclosed to, or otherwise discovered by, QSC or
QSC Sub before the time of Closing) and continue in full force and effect for a
period of one (1) year after the Closing Date unless a Notice of Claim is
delivered prior to expiration of such survival period, and if a Notice of Claim
is so delivered, such indemnification
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obligation shall continue with respect to such Claim until the final disposition
of such claim. Notwithstanding the foregoing, the representations in Sections
3.9 and 3.11(a) shall not be subject to such 1-year limitation but shall instead
survive the Closing, with respect to the representations in Section 3.9, until
the applicable statute of limitations expires, and, with respect to the
representations in Section 3.11(a), for a period of five (5) years (subject to
extension by the timely filing of a Notice of Claim as described in this Section
9.2). All of the representations and warranties of QSC and QSC Sub contained in
this Agreement shall also survive the Closing and continue in full force and
effect for a period of one (1) year thereafter (subject to extension by the
timely filing of a Notice of Claim as described in this Section 9.2).
1. Indemnification Provisions for the Benefit of QSC.
Provided that QSC or QSC Sub delivers to a Shareholder a Notice of Claim within
one year after the Closing Date (or within such other survival period applies
pursuant to Section 9.2 for the representations in Sections 3.9 and 3.11(a)),
the Shareholders shall, jointly and severally (as limited by the last sentence
of Section 9.2.1), indemnify, defend and hold QSC and QSC Sub harmless from and
against all liability, loss, cost, damage, penalties, judgments, actions and
expense (including, but not limited to, reasonable attorneys' fees)
(collectively, "Indemnification Liabilities") which they may sustain or incur
by reason or arising out of: (a) any inaccuracy of any representation or
warranty made by Snappy Lube or the Shareholders; (b) failure by Snappy Lube or
any Shareholder to perform any of its or their covenants or agreements
hereunder that are to be performed after the Closing; (c) claims which arise
after the Closing Date but relate to work performed or products sold or an
occurrence which arose prior to the Closing Date (unless QSC knew of any such
claim or occurrence prior to the Closing Date), (d) any Unfinished Project, (e)
claims for payment or reimbursement of the cost and expense of constructing
improvements commenced or contemplated prior to Closing, pursuant to any of the
Store Leases, including, without limitation, the cost of work or labor
performed, or materials or supplies furnished in connection with such
construction, or (f) any and all claims or causes of action against Snappy Lube
or the Shareholders, or liabilities of any kind, whether accrued, contingent or
otherwise, for which Snappy Lube or a Shareholder is responsible to QSC or QSC
Sub and which arise out of, result from, or in any way relate to this
Agreement. It is expressly agreed and acknowledged that the Shareholders shall
not have any obligations under this Section 9.2.1: (a) until QSC or QSC Sub has
suffered Indemnification Liabilities by reason of each such breach in excess of
a $250 per-claim deductible (after which point the Shareholders will be
obligated only to indemnify QSC and QSC Sub from and against all such further
Indemnification Liabilities arising out of the claim) or, thereafter (b) to the
extent the Indemnification Liabilities QSC and QSC Sub have suffered by reason
of all such breaches exceeds an aggregate amount of $250,000 (after which point
the Shareholders will have no obligation to indemnify QSC or QSC Sub from and
against further such Indemnification Liabilities); provided that such,
limitation shall not apply to claims by QSC or QSC Sub of: (i) intentional
misrepresentation; (ii) unpaid taxes; (iii) items 5, 11, (subject to the one
(1) year survival period in Section 9.2 above), 12, (subject to the one (1)
year survival period in Section 9.2 above), 21, 23, (provided, however, that
the Shareholders' liability for item 23 will be limited to increased taxes
attributable to the period prior to Closing), 29 and 35 in the Disclosure
Schedule; (iv) payment of deductibles for the litigation matters described in
Schedule 3.24; and (v) Indemnification Liabilities in favor of QSC and/or QSC
Sub arising out of the loss of the tax-free status of this transaction pursuant
to Section 368(a)(2)(D) of the Code that is finally determined to be solely
result of the action taken by one or more Shareholders; and all such excluded
claims (i.e., clauses (i) through (v)) shall be paid by Shareholders in cash
(and not in Pledged Shares); and, provided further, that, after the expiration
of the 1-year survival period and for the remainder of the 5-year survival
period with respect to the representations in Section 3.11(a), such aggregate
limit shall be reduced from $250,000 to $100,000. The joint and several
liability of the Shareholders shall be limited to Indemnification Liabilities
(a) within the $250,000 limiation described above, and (b) for matters pursuant
to Section 3.11(a) for the periods and amounts described in this Section 9.2.1;
and (c) except as noted in (a) and (b), Indemnification Liabilities for Larry
Davis and Timothy W. Redelsperger only shall not be joint and several for any
amounts shall be pro rata, but Kenneth K. Redelsperger and Anne L. Redelsperger
shall remain jointly and severally liable for all matters.
2. Indemnification Provisions for the Benefit of the
Shareholders. Provided that a Shareholder delivers to QSC a Notice of Claim
within one year after the Closing Date, QSC and QSC Sub shall, jointly and
severally, indemnify, defend and hold such Shareholder harmless from and
against all Indemnification Liabilities which such Shareholder may sustain or
incur by reason or arising out of (a) any inaccuracy of any representation or
warranty made by QSC or QSC Sub; (b) failure of QSC or QSC Sub to perform any
of their covenants or agreements hereunder that are to be performed after
Closing; and (c) any and all claims or causes of actions against QSC or QSC
Sub, or liabilities of any kind, whether accrued, contingent or otherwise, for
which QSC or QSC Sub is responsible and which arises out of, result from, or in
any way relate to this Agreement. It is expressly agreed and acknowledged that
QSC and QSC Sub shall not have any obligations under this Section 9.2.2: (a)
until the Shareholders have suffered Indemnification Liabilities by reason of
each such breach in excess of a $250.00 per-claim deductible (after which point
QSC and QSC Sub will be obligated only to indemnify the Shareholders from and
against all such further Indemnification Liabilities arising out of the claim)
or thereafter (b) to the extent the Indemnification Liabilities the
Shareholders have suffered by reason of all such breaches exceeds an aggregate
amount of $250,000 (after which point QSC and QSC Sub will have no obligation
to indemnify the Shareholders from and against further such Indemnification
Liabilities); provided, that such limitation shall not apply to claims by
Shareholders of intentional
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misrepresentations. Notwithstanding anything to the contrary in this Section
9.2.2, QSC and QSC Sub's Indemnification Liability for a violation of Section
6.4 shall not be limited to the $250,000 maximum amount; but, instead shall be
limited to $2,500,000 if, but only if, the loss of the tax-free nature of this
transaction pursuant to Section 368(a)(2)(D) of the Code is finally determined
to be solely a result of actions taken by QSC or QSC Sub, or both of them;
provided that neither QSC nor QSC Sub shall have any liability under Section 6.4
whatsoever if the loss of the tax-free status of this transaction is due, in
whole or in part, to the action of a Person other than QSC or QSC Sub.
Indemnification Liabilities in favor of the Shareholders arising out of the loss
of the tax-free status of this transaction pursuant to Section 368(a)(2)(D) of
the Code as a result of the actions, in whole or in part, of any Person other
than the Shareholders or Snappy Lube, shall be paid by QSC and QSC Sub.
Indemnification Liabilities in favor of the Shareholders arising out of the
loss of the tax-free status of this transaction pursuant to Section
368(a)(2)(D) of the Code solely as a result of the actions of QSC or QSC Sub,
shall be paid by QSC and QSC Sub.
3. Product or Professional Liability. If any product or
professional liability claim is asserted against a party which arises out of an
occurrence prior to the Closing and is covered under any of Snappy Lube's,
QSC's, QSC Sub's or PCC's insurance policies, then and in such event, if and to
the extent of such coverage, such claim shall be tendered to the issuer thereof.
The Shareholders and Snappy Lube, on the one hand, and QSC and QSC Sub, on the
other hand, shall use their best efforts to vest in and afford the other the
indemnity, defense and other benefits to which the other is entitled under any
such insurance policy relating to such claim. In addition, the Indemnitor
shall be responsible for any deductible or self-insured amount in connection
with such claim under any such policy and any litigation expense (including
reasonable attorneys' fees) incurred in connection with any dispute over such
coverage subject to the limitations described in Sections 9.2.1 and 9.2.2,
respectively. Further, any such claim which is determined to be outside the
limits or definition of applicable insurance policies shall be the
responsibility of the applicable party, subject to the per-claim deductible of
$250 and the aggregate limits provided in Section 9.2.1 and 9.2.2, respectively.
4. Procedure for Indemnification. In connection with any claim
for indemnification set forth above in Section 9.2 or 9.3, the procedure set
forth below shall be followed:
1. Non-Third Party Claims.
(a) Each party entitled to indemnification
hereunder (in such capacity, the "Indemnified Party") shall give written notice
(a "Notice of Claim") to each party subject to an indemnification obligation to
such Indemnified Party hereunder (in such capacity, the "Indemnifying Party")
within a reasonable period of time after becoming aware of (but, in any event,
no later than ten (10) business days thereafter), and shall provide to the
Indemnifying Party, as soon as practicable thereafter, all information and
documentation necessary to support and verify, any Indemnification Liability
that the Indemnified Party shall have determined has given rise to, or could
reasonably be expected to give rise to, a claim for indemnification hereunder
(each, an "Indemnifiable Claim"); provided, however, that the right of the
Indemnified Party to indemnification shall be reduced in the event of its
failure to give timely notice only to the extent the Indemnifying Party is
prejudiced thereby. The Indemnifying Party shall be given reasonable access to
all books and records in the possession or under the control of the Indemnified
Party which the Indemnifying Party reasonably determines to be related to such
claim.
(b) Any liability for indemnification under this
Section 9.4.1 shall be paid by the Indemnifying Party within ten (10) business
days after its receipt of a Notice of Claim therefor in (i) immediately
available funds in U.S. dollars in the case of payments by QSC or QSC Sub to the
Shareholders; and (ii) the number of Pledged Shares (valued at the then current
NYSE price per share) equal to the amount of such Major Indemnifiable Claim, in
the case of payments by the Shareholders to QSC or QSC Sub; provided that if a
contest notice is given to the Indemnified Party by the Indemnifying Party
within such ten-day period, such payment shall not be required until the dispute
is resolved, and either party may at any time thereafter commence a legal
proceeding in accordance with this Section 9.4.1 to resolve the contested
assertion of an Indemnifiable Claim. Any liability for indemnification under
this Section 9.4.1 shall be paid by the Indemnifying Party in immediately
available funds in U.S. dollars (or Pledged Shares, in the case of payments of
the Shareholders to QSC) within fifteen (15) days after such liability is
finally determined. Liability for an Indemnifiable Claim hereunder shall be
deemed to be a "finally determined" for purposes of this Article Nine when the
parties to such action have so determined by mutual agreement or when a final
non-appealable order of a court having competent jurisdiction shall have been
entered. Payment of Minor Indemnifiable Claims shall be made in accordance with
Section 9.4.3.
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(c) QSC shall deliver to Kenneth Redelsperger a
quarterly claim report (a "Quarterly Claim Report") no later than thirty (30)
days after the end of each preceding calendar quarter, commencing with the
quarter ending March 31, 1997, and, thereafter, June 30, 1997, September 30,
1997, and December 31, 1997, and March 31, 1998. The Quarterly Claim Report will
list the quarterly and year-do-date Major and Minor Indemnifiable Claims for
which indemnification has been sought.
2. Matters Involving Third Parties.
(a) If any third party shall commence an action
against any Indemnified Party with respect to any matter which may give rise to
an Indemnifiable Claim against any Indemnifying Party (a "Third Party Claim"),
the Indemnified Party shall given a Notice of Claim thereof to the Indemnifying
Party as soon as practicable, but in no event more than ten (10) business days
after the Indemnified Party shall have received notice thereof; provided,
however that the right of the Indemnified Party to indemnification shall be
reduced in the event of its failure to give timely notice only to the extent the
Indemnifying Party is prejudiced thereby.
(b) The Indemnifying Party shall have the right
to defend the Indemnified Party against the Third Party Claim with counsel of
his choice if the Indemnifying Party shall notify the Indemnified Party in
writing (within the ten (10) day period after its receipt of a Notice of Claim
specifying the Third Party Claim) that it will indemnify the Indemnified Party
from and against any Indemnification Liability the Indemnified Party may suffer
arising out of the Third Party Claim. If the Indemnifying Party does not so
notify the Indemnified Party, the Indemnified Party may defend against the Third
Party Claim, preserving its rights to indemnification hereunder, including
without limitation for the cost of such defense.
(c) If the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 9.4.2(b) above, (i)
the Indemnified Party may retain separate counsel, at its sole cost and expense,
and participate in the defense of the Third Party Claim, provided that the
Indemnifying Party shall have the right to conduct the defense of and, subject
to this Section 9.4.2(c), settle such Third Party Claim; (ii) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party; (iii) the Indemnified Party shall fully
cooperate with the Indemnifying Party in the investigation and defense of such
Third Party Claim, including without limitation providing required information
and documents and access to all employees or relevant individuals of the
Indemnified Party with knowledge of issues relevant to the claim or litigation
(any such activities required to discharge this obligation to cooperate shall be
incurred at the sole expense of he Indemnified Party; and (iv) the Indemnifying
Party shall not consent of the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed, unless such settlement includes as a term thereof a general
release of the Indemnified Party from such Third Party Claim. Shareholders
expressly agree and acknowledge that any Indemnification Liability relating to
Section 6.4 (including disputes before the IRS, the tax court or any appeals
thereof) shall be turned over to QSC and QSC shall be permitted to handle such
matter with counsel of its choice.
3. Payment of Minor Indemnifiable Claims. If any payment
of the Shareholders' indemnity obligations is required to be made, the
Shareholders may satisfy such payment for all Minor Indemnifiable Claims by
delivering to QSC on the first (1st) anniversary of the Closing Date (the
"Anniversary Date") the Pledged Share (or so many of such Pledged Shares as is
required to satisfy such obligations), which Pledged Shares, for such purpose,
shall be valued at the closing price of QSC's Stock on the Anniversary Date, as
reported in the Wall Street Journal. The sole and exclusive remedy of QSC for
any and all Minor Indemnifiable Claims shall be the indemnities set forth in
Sections 9.2.1 and 9.3. Neither QSC nor the Shareholder shall be able to avoid
the limitations expressly set forth in Section 9.2.1 and 9.2.2, respectively, by
electing to pursue some other remedy other than that of express contractual
indemnity as set forth therein. The remedies of QSC and QSC Sub, or either of
them, under this Article Nine shall be limited to its right to recover from the
indemnification escrow established pursuant to the Escrow Agreement; ; provided,
however, that the preceding clause shall not apply to Indemnification
Liabilities relating to (i) Snappy Lube's and the Shareholders' representations
and warranties set forth in Sections 3.9 and 3.11(a) and (ii) any intentional
misrepresentation by the Shareholders.
4. Exclusive Remedy. Except as otherwise provided in
this Agreement, the sole and exclusive remedy of QSC for any and all
Indemnifiable Claims shall be the indemnities set forth in Sections 9.2.1 and
9.3. Except as otherwise provided in this Agreement, neither QSC nor the
Shareholder shall be able to avoid the limitations expressly set forth in
Section 9.2.1 and 9.2.2, respectively, by electing to pursue some other remedy
other than that of express contractual indemnity as set forth therein. The
remedies of QSC and QSC Sub, or either of them, under this Article Nine shall
be limited to its right to recover from the indemnification escrow established
pursuant to the Escrow Agreement; provided, however, that the preceding clause
shall not apply to Indemnification Liabilities relating to (i) Snappy Lube's
and the Shareholders' representations and warranties set forth in Sections 3.9
and 3.11(a) and (ii) any intentional misrepresentation by the Shareholders.
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5. Limitation on Claims. If any event shall occur which would
otherwise entitle either party to assert a claim for indemnification hereunder,
no loss, damage or expense shall be deemed to have been sustained by such party
to the extent of (i) any net tax savings realized by such party with respect
thereto, or (ii) any proceeds received by such party from any insurance policy
with respect thereto. The parties hereby acknowledge and agree that, although
QSC may terminate the Hazardous Pollution policy referred to in Schedule 3.21
as Universal Underwriters Group Pollution Liability Policy No. 118852C, QSC
shall provide Shareholders with the equivalent benefit of such policy as if
such policy had not been terminated, but instead had been continued through
March 1, 2002. Further, an Indemnitor shall not be liable under this Article
Nine for a loss resulting from any event relating to a breach of any
representation, warranty or covenant if the Indemnitor can establish that the
misrepresentation, breach of covenant or warranty had been disclosed to or
discovered by the Indemnitee prior to the Closing Date of such event. The
preceding sentence does not apply to the covenants contained in Sections 5.9
and 6.4, respectively.
6. Access to Books and Records. QSC shall hold all of the books
and records of Snappy Lube's Business existing at the Closing Date and not
destroy or dispose of any thereof for a period of six (6) years after the
Closing Date or such longer time as may be required by law. Upon Shareholder's
request, QSC shall provide Shareholder with copies of Snappy Lube's books and
records.
7. Unfinished Projects. If QSC is subject to any Indemnification
Liabilities in connection with an Unfinished Project arising out of any act or
failure to act prior to Closing, then the Shareholders shall be responsible for
any and all Indemnification Liabilities relating to and consequences of such
act or falilure to act.
8. Non-Compete. Shareholders acknowledge that QSC and QSC Sub
would not consummate the Merger but for the covenant not to compete contained in
this Section 9.8. Accordingly, Shareholders covenant and agree that during the
period commencing with the Closing Date and ending on the fifth (5th)
anniversary thereafter (the "Restricted Period") they will not, directly or
indirectly: (i) engage in any business similar to Snappy Lube's Business within
the counties of the State of California as set forth in Schedule 9.8 attached
hereto and made a part hereof by this reference, (excluding, however, the
counties south of Monterey County); (ii) enter the employ of, or render any
services to, any Person (other than QSC, QSC Sub and their Affiliates) engaged
in such prohibited activities described in clause (i) above; or (iii) become
interested in any such Person described in clause (ii) above as an individual,
partner, shareholder, officer, director, principal, agent, employee, trustee,
consultant, or in any other relationship or capacity; provided, that each
Shareholder may own, directly or indirectly, solely as an investment,
securities of any Person which are traded on any national securities exchange
if such Shareholder does not, directly or indirectly, own 5% or more of any
class of securities of such Person.
1. Confidential Information. During and after the
Restricted Period, each Shareholder shall keep secret and retain in strictest
confidence, and shall not use for the benefit of himself or others, all
confidential matters relating to Snappy Lube's Business (including, without
limitation, the terms and provisions of this Agreement), including, without
limitation, trade secrets, "know-how", customer lists, pricing policies,
operational methods, marketing plans or strategies; product development
techniques or plans, methods of service or manufacture, technical processing,
designs and design projects, inventions and research projects and other business
affairs relating to Snappy Lube's Business and to QSC and its Affiliates learned
by the Shareholders prior to the Closing Date, and shall not disclose them to
anyone outside of QSC and its Affiliates. Notwithstanding anything to the
contrary herein, Shareholders are hereby expressly permitted and authorized to
use the above-mentioned confidential information in the operation of Snappy Lube
Southern California, Inc., a California corporation, or any other Affiliate of
the Shareholders, in the counties south of Monterey County (excluding customer
lists).
2. No Solicitation. During the Restricted Period, each
Shareholder shall not, directly or indirectly, solicit or encourage to leave the
employment of QSC, QSC Sub or any of their Affiliates, any individual heretofore
employed by Snappy Lube. For a period of six (6) months after the Closing Date,
the Shareholders shall not hire any employee who has left the employment of QSC,
QSC Sub or any of their Affiliates; however,
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after the expiration of such 6-month period, and although the Shareholders shall
not solicit any employee of QSC, QSC Sub or any of their Affiliates nor
encourage any such employee to leave their employment, the Shareholders, or any
of them, or their Affiliates may hire any such employee who has left the
employment of QSC, QSC Sub or any of their Affiliates and who approaches the
Shareholders, or any of them, or any of their Affiliates, and applies for
employment.
3. Remedies. Notwithstanding any other provisions
hereof, if any Shareholder breaches or threatens to commit a breach of, any of
the provisions of Section 9.8, including its subsections, (the "Restrictive
Covenants"), QSC shall have the right and remedy to have the Restrictive
Covenants specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to QSC and that money damages will not provide adequate
remedy to QSC. Such rights and remedies shall be in addition to, and not in lieu
of, any other rights and remedies available to QSC under law or in equity. If
any court determines that any of the Restrictive Covenants, or any part thereof,
is invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions. Without limiting the generality of the foregoing, in the event
any court refuses to enforce any of the Restrictive Covenants set forth in
Section 9.8 either because of the scope of geographical areas or the duration of
the restrictions, the Shareholders, Snappy Lube and QSC expressly confirm their
intention that the geographical areas and the time period covered by the
restrictions be deemed automatically reduced to the extent necessary to permit
enforcement.
9. Other Filings. QSC shall, promptly after the Closing, file in
the States of Nevada and California all documents required to be filed in
connection with the Merger, including, but not limited to, (i) notices of
merger, (ii) dissolution of Snappy Lube, (iii) qualification of QSC Sub to do
business in California, and (iv) the dissolution and winding up of the
Partnerships. The Shareholders shall use their reasonable best efforts to assist
QSC and QSC Sub in filing such documents.
10. Guaranty of Accounts Receivable. The Shareholders, jointly and
severally, guarantee to QSC and QSC Sub that the unpaid face amount of accounts
receivables on hand at the Closing Date will be fully paid within 180 days after
the Closing Date. Any account receivable not paid within such period shall be
delivered to Kenneth Redelsperger and the unpaid amount of such account
receivable shall be deemed an Indemnifiable Claim and paid in accordance with
Section 9.4.1(b). The Shareholders' obligations pursuant to this Section 9.10
shall be subject to the indemnification limitations and deductibles described
in Section 9.2.1.
11. Accrued Vacation Liability. The parties acknowledge and agree
that the accrued vacation liability set forth on the December Balance Sheet is a
Balance Sheet Liability and will be set-off against the Total Merger
Consideration in accordance with Section 2.4.1. The accrued vacation liability
of Snappy Lube arising after the Balance Sheet Date through and including the
Closing Date shall be assumed by QSC and will not be set-off against the Total
Merger Consideration.
12. Release of Liens. Promptly after the Closing, QSC, QSC Sub and
the Shareholders will use their reasonable best efforts to cause Pennzoil to (a)
release all liens and security interests encumbering the Assets and (b) deliver
to QSC Sub all documents and instruments necessary to evidence QSC Sub's sole
ownership of Personal Property subject to the Pennzoil Agreements.
ARTICLE TEN
ADDITIONAL MATTERS
1. Publicity. All notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by Snappy Lube and QSC. Neither Snappy Lube nor
QSC shall cause or authorize any such notice or publicity without the prior
approval of the other; provided, that in the case of an announcement which
Snappy Lube or QSC may be required to make by any Legal Requirement or by any
governmental agency, such action by such party without the prior approval by the
other parties shall not constitute a breach of this Section 10.1 provided that
the party making such announcement gives to the other parties a reasonable
opportunity to review such document. Any approval subject to this Section 10.1
shall not be unreasonably withheld.
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2. Survival of Representations. The representations and
warranties of the parties contained in this Agreement and other writings
provided for herein shall survive consummation of the transactions contemplated
in this Agreement as provided in Article Nine. Those covenants that contemplate
or may involve actions to be taken or obligations in effect after the date of
this Agreement shall survive in accordance with their terms.
3. Brokers. Snappy Lube has engaged an investment banker in
connection with this transaction and such investment banker's fees or
commissions due in this transaction shall be paid by QSC at the Closing. QSC has
not engaged a broker or finder and Snappy Lube acknowledges this fact.
4. COBRA. With respect to any health care continuation rights
under each welfare benefit plan that constitutes a group health plan subject to
Code Section 4980B ("COBRA"), Snappy Lube has provided all required notification
to all former employees of Snappy Lube whose employment terminated prior to the
Closing Date, including former employees of Snappy Lube laid off prior to the
Closing Date, and to all other parties who became "qualified beneficiaries"
under COBRA with respect to any such group health plan maintained for Snappy
Lube's Employees. Snappy Lube acknowledges that it is providing any required
COBRA coverage to all such former Snappy Lube's Employees and other qualified
beneficiaries of Snappy Lube who timely elected COBRA coverage. QSC shall be
responsible for all obligations under COBRA that arise with respect to any of
Snappy Lube's Employees who terminate employment with QSC, QSC Sub or any of
their Affiliates after the Closing Date.
5. Termination by Mutual Consent; Material Breach. This Agreement
may be terminated at any time prior to Closing, as follows:
(a) by written consent of the parties;
(b) by QSC if any condition contained herein requiring
fulfillment by Snappy Lube or the Shareholders shall not have been fulfilled
within the times set forth in this Agreement and shall not have been waived by
QSC;
(c) by Snappy Lube and Shareholders, acting unanimously,
if any condition contained herein requiring fulfillment by QSC and QSC Sub, or
either of them, shall not have been fulfilled by the Closing Date and shall not
have been waived by the Snappy Lube and Shareholders; or
(d) by QSC or Snappy Lube if the Effective Time of the
Merger shall not have occurred on the Closing Date, as it may be extended
pursuant to Section 8.1.
If any party becomes aware of facts or circumstances that would entitle such
party to terminate this Agreement pursuant to this Section 10.5, such parties
shall give immediate notice of such facts or circumstances to the other parties.
Notwithstanding any other provision in this Agreement, such party shall have ten
(10) business days in which to rectify such facts or circumstances and the
notifying party shall not be entitled to terminate this Agreement if such facts
or circumstances are so rectified.
6. Effect of Termination. In the event of termination by QSC in
accordance with Section 10.5(b) solely as a result of a willful breach by Snappy
Lube or Shareholders of their obligations hereunder, Snappy Lube and
Shareholders, jointly and severally, shall pay promptly to QSC any and all
reasonable out-of-pocket expenses (including, without limitation, attorneys' and
accounting fees) incurred by QSC in connection with the negotiation and
preparation of this Agreement and the anticipated consummation of the
transactions contemplated hereby. If this Agreement is terminated by Snappy Lube
or Shareholders in accordance with Section 10.5(c) solely as a result of a
willful breach by QSC, QSC Sub, or either of them, of its obligations hereunder,
QSC shall pay promptly to Snappy Lube any and all reasonable out-of-pocket
expenses (including, without limitation, attorneys' and accounting fees)
incurred by Snappy Lube in connection with the negotiation and preparation of
this Agreement and the anticipated consummation of the transactions contemplated
hereby. The foregoing rights and remedies shall be in addition to, and not in
lieu of, any other rights and remedies available to the parties hereto under law
or
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equity. If this Agreement is terminated as provided in Section 10.5 above, the
obligations set forth in this Agreement regarding confidential information shall
survive any such termination and continue in effect thereafter.
ARTICLE ELEVEN
MISCELLANEOUS
1. Notices. All notices, consents, approvals, requests, demands,
and other communications under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of delivery if personally delivered
to the party to whom notice is to be given, or three (3) business days after
mailing if mailed by first class mail, registered or certified, postage prepaid,
at the address set forth below or on the date of service if delivered by
facsimile to the facsimile number set forth below which facsimile is confirmed
by answerback (provided, that service by facsimile on a business day immediately
preceding a non-business day shall be deemed delivered two business days after
the date of facsimile) or on the next business day following delivery to a
recognized national courier, charges prepaid, addressed to the address set forth
below.
If to Snappy Lube
or Shareholders: Snappy Lube, Inc.
26056 Mesa Drive
Carmel, CA 93923
Telephone: (408) 655-0180
Facsimile: (408) 655-1102
Attn: Kenneth Redelsperger,
President
With a copy to: Fenton & Keller
2801 Monterey-Salinas Hwy.
P.O. Box 791
Monterey, CA 93942-0791
Telephone: (408) 373-1241
Facsimile: (408) 373-7219
Attn: Daniel F. Archer, Esq.
If to QSC
or QSC Sub: Quaker State Corporation
225 E. John Carpenter Freeway
Irving, TX 75062
Telephone: (972) 868-0400
Facsimile: (972) 868-0494
Attn: Conrad A. Conrad,
Vice Chairman & CFO
With Copies to: Greene Radovsky Maloney & Share LLP
Four Embarcadero Center, Suite 4000
San Francisco, CA 94111-4106
Telephone: (415) 543-1400
Facsimile: (415) 777-4961
Attn: Richard L. Greene, Esq.
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Pacific CarCare LLC
5776 Stoneridge Mall Road, Suite 260
Pleasanton, CA 94588
Telephone: (510) 467-1177
Facsimile: (510) 467-1178
Attn: Dale C. Radcliff, Co-Manage
David M. Whitgob, Co-Manager
Any party may change its address for purposes of this Section 11.1 by giving the
other parties written notice of the new address in the manner set forth above.
2. Modification and Waiver. This Agreement (including the
Disclosure Schedule, Exhibits and Schedules referenced herein) constitutes the
entire agreement between the parties hereto relating to the subject matter
hereof and supersedes all prior and contemporaneous agreements, representations,
and understandings of the parties. No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
3. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
4. Variations of Pronouns. Whenever required by the context
hereof, the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; and the neuter
gender shall include the masculine and feminine genders.
5. Binding Effect; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns, heirs, and personal and legal representatives
(as the context so requires). This Agreement may not be assigned without the
prior written consent of the parties.
6. Specific Performance. Each party's non-monetary obligations
under this Agreement are unique. If any party should default in any such
obligation under this Agreement, the parties each acknowledge that it would be
extremely impracticable to measure the resulting damages; accordingly, the
nondefaulting parties, in addition to any other available rights or remedies,
may sue in equity for specific performance, and the parties each expressly waive
the defense that a remedy in damages will be adequate.
7. Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
8. Severability. In the event that any provision of this
Agreement, or the application of such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful or unenforceable to
any extent, the remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to which it is
determined to be invalid, unlawful or unenforceable, shall not be affected and
shall continue to be enforceable to the fullest extent permitted by law. 9.
Headings.9Headings. The subject headings of the sections, paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by the laws of the State of California, without regard to its
conflict of laws doctrine.
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11. Interpretation of Agreement. Each party hereto acknowledges
that it has participated in drafting this Agreement and the other documents and
instruments delivered in connection herewith, and any applicable rules of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in connection with the construction or
interpretation of this Agreement or such other documents and instruments.
12. Further Documents or Actions. Snappy Lube, Shareholders, QSC
and QSC Sub, at any time before or after the Closing, will execute, acknowledge
and deliver to the other any further deeds, assignments or conveyances, and any
other assurances, documents, and instruments of transfer, reasonably requested
by the other for the purpose of assigning, transferring, granting, conveying and
confirming to QSC, or reducing to possession, any or all property to be conveyed
and transferred pursuant to this Agreement.
13. Confidentiality. Snappy Lube, Shareholders, QSC and QSC Sub
hereby acknowledge that the terms and conditions of this Agreement (and all
matters relating hereto) are confidential, and shall not be disclosed to any
Person without the written consent of Snappy Lube, Shareholders and QSC.
14. Time of the Essence. Time is of the essence with respect to
the performance or observance of each of the obligations, covenants and
agreements of each party to this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
this Agreement on the day and year first above written.
SNAPPY LUBE, INC.
By:___________________________
Kenneth K. Redelsperger
Its: President
QUAKER STATE CORPORATION
By:___________________________
Conrad A. Conrad
Its: Vice Chairman and Chief Financial
Officer
LUBE ACQUISITION CORPORATION
By:___________________________
Its:__________________________
SHAREHOLDERS:
______________________________
Kenneth K. Redelsperger
______________________________
Anne E. Redelsperger
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______________________________
Timothy W. Redelsperger
______________________________
Lawrence J. Davis
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SCHEDULE 9.8
NON-COMPETE AREA
Counties:
Monterey Tehama
San Benito Sacramento
Santa Clara El Dorado
San Francisco Lake
Kings Lassen
Merced Solano
Stanislaus Placer
Alameda Mendocino
Tulare Shasta
Madera Marin
Tuolumne Sutter
San Joaquin Glenn
Inyo Trinity
Mariposa Sonoma
Santa Cruz Yuba
Contra Costa Butte
Fresno Humboldt
Mono Del Norte
San Mateo Siskiyou
Calaveras Modoc
Alpine
Napa
Sierra
Plumas
Amador
Yolo
Colusa
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"EXHIBIT A"
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (SHORT FORM)
This Agreement of Merger and Plan of Reorganization (Short
Form ("Agreement") is entered into this January _____, 1997, by and among Snappy
Lube, Inc., a Nevada corporation ("Snappy Lube"), Quaker State Corporation, a
Delaware corporation ("QSC"), Lube Acquisition Corporation, a California
corporation ("QSC Sub"), and the shareholders of Snappy Lube listed on the
signature page hereto (the "Shareholders").
Snappy Lube, QSC, QSC Sub, and the Shareholders hereby agree
that on the Effective Date (defined below), Snappy Lube and QSC Sub will merge
into a single corporation on the following terms and conditions:
1. Merger. On the Effective Date, Snappy Lube will be
merged with and into QSC Sub. QSC Sub will be the surviving corporation (the
"Surviving Corporation"). On the Effective Date, the separate corporate
existence of Snappy Lube will cease, and Surviving Corporation will succeed to
the properties, rights, privileges, powers, immunities, and franchises of Snappy
Lube. All rights of creditors and all liens on the property of Snappy Lube will
be preserved, unimpaired, limited in lien to the property affected by such liens
immediately before the merger.
2. Effective Date. The merger provided for in this
Agreement will become effective on the filing by Surviving Corporation in the
office of the Delaware Secretary of State of an executed copy of the requisite
certificate of merger . The date and time of such filing is referred to in this
Agreement as the "Effective Date".
3. Corporate Governance.
1. Articles. QSC Sub's articles of
incorporation in effect immediately before the Effective Date will remain the
articles of incorporation of the Surviving Corporation without change or
amendment until altered, amended, or repealed as provided for in the articles or
by law.
2. Bylaws. QSC Sub's bylaws in effect
immediately before the Effective Date, will remain the bylaws of the Surviving
Corporation without change or amendment until altered, amended, or repealed as
provided for in the bylaws or bylaw.
3. Officers and Directors. On the Effective
Date, the directors and officers of QSC Sub in office immediately before the
Effective Date will become the directors and officers of the Surviving
Corporation, and will continue as directors and officers of Surviving
Corporation until such time as their successors have been elected and qualified
as provided for in the bylaws of Surviving Corporation.
4. Conversion of Shares. On the Effective Date, each
outstanding share of Snappy Lube's common stock [no par value] will, by virtue
of the merger and without any further action on the part of QSC, QSC Sub,
Surviving Corporation or the Shareholders, be converted into ____________ shares
of common stock [no par value] of QSC. [In addition, holders of certain
subordinated debt of Snappy Lube will receive shares of QSC stock in an amount
equal to the outstanding and unpaid principal of such subordinated debt.] From
and after the Effective Date, no transfer of Snappy Lube common stock
outstanding before the Effective Date will be made on the record books of Snappy
Lube.
5. Termination. This Agreement may be terminated at
anytime before the Effective Date (whether before or after approval) by action
of the Shareholders or by the mutual consent and action of the boards of
directors of Snappy Lube and QSC. This Agreement will automatically be void and
of no further force and effect if, before the Effective Date, that certain
Merger Agreement and Plan of Reorganization by and among
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Snappy Lube, QSC, QSC Sub and Shareholders dated January __, 1997, is terminated
in accordance with the terms of such agreement.
6. Choice of Law. The validity, interpretation, and
performance of this Agreement will be controlled by and construed under the laws
of the State of California.
7. Counterparts. This Agreement may be executed in
counterparts, each of which will be considered an original, but all of which,
when taken together, will constitute the same instrument.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
QUAKER STATE CORPORATION
By:______________________________
Conrad A. Conrad
Its: Vice Chairman and Chief Financial Officer
SNAPPY LUBE, INC.
By:______________________________
Kenneth Redelsperger
Its: President
LUBE ACQUISITION CORPORATION
By:______________________________
Dale C. Radcliff
Its:
_________________________________
Kenneth Redelsperger
_________________________________
Anne Redelsperger
_________________________________
Timothy Redelsperger
_________________________________
Lawrence Davis
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EXHIBIT "C"
[QUAKER STATE LETTERHEAD]
January __, 1997
Mr. Kenneth Redelesperger
President
Snappy Lube, Inc.
5 Harris Court, B-1
Monterey, CA 93940
Re: Stock Purchase Price Notice
Dear Mr. Redelesperger:
In accordance with Section 2.4.1 of the Merger Agreement and Plan of
Reorganization (the "Agreement") by and among Quaker State Corporation, Lube
Acquisition Corporation, Snappy Lube, Inc. and the Snappy Lube shareholders
dated January __, 1997, this letter constitutes the Stock Purchase Price Notice.
Capitalized terms shall have the meanings ascribed to them in the Agreement.
The closing price of Quaker State's common stock listed on the New York
Stock Exchange was $_______ per share on the Closing Date. Accordingly, in
accordance with the formula set forth in Section 2.4.1, _______ shares of QSC's
Stock shall be issued to the Snappy Lube Shareholders (or their designees) on
the Closing Date as calculated as follows:
Number of shares of QSC's Stock =
(Total Merger Consideration - Balance Sheet Liabilities) , Stock Price (i.e.,
$________)
In accordance with the Escrow Agreement, _____ shares (which shares
equal $250,000 based on the $_____ price/share) will be delivered to the Escrow
Agent at the Closing. The remaining _____ shares shall be issued in the names of
the Persons designated by Snappy Lube.
Please contact me if you have any questions or comments.
Very truly yours,
Conrad A. Conrad
Vice Chairman and CFO
Quaker State Corporation
cc: Mr. Dale C. Radcliff
Mr. David M. Whitgob
David F. Archer, Esq.
Richard L. Greene, Esq.
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EXHIBIT "H"
[PENNZOIL LETTERHEAD]
February 28, 1997
VIA HAND DELIVERY
Mr. Kenneth Redelsperger
President
Snappy Lube, Inc.
5 Harris Court, B-1
Monterey, CA 93940
Re: Cancellation of Snappy Lube Agreements
Dear Mr. Redelsperger:
As you know, Pennzoil has agreed to terminate the agreements between
Pennzoil and Snappy Lube listed on Exhibit "A" attached hereto (the "Pennzoil
Agreements") upon receipt of $__________________ (the "Termination Fees").
Pennzoil's wire transfer instructions for the payment of the Termination Fees
are as follows:
[ADD WIRE TRANSFER INSTRUCTIONS]
Upon confirmation of Pennzoil's receipt of the Transfer Fees, the
Pennzoil Agreements shall be hereby deemed terminated and cancelled without any
further obligations or additional amounts due and owing under the Pennzoil
Agreements. This letter shall serve as evidence of the termination of the
Pennzoil Agreements without any further action required by Pennzoil or Snappy
Lube.
The parties acknowledge that the termination of the Pennzoil Agreements
is by mutual agreement and neither party shall have any right, claim or cause of
action against the other as a result of the termination of the Pennzoil
Agreements. Each of the parties and their assigns hereby agrees, represents and
warrants that the matters and claims released herein are not limited to matters
which are known or disclosed, and hereby waive any and all rights confirmed upon
them by Section 1542 of the California Civil Code, or similar applicable law of
any other jurisdiction, which provide that:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR.
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If this letter accurately reflects our agreement, please sign
this letter where indicated below.
Very truly yours,
[Name]
[Title]
AGREED AND ACCEPTED BY
SNAPPY LUBE, INC. THIS
______ DAY OF FEBRUARY, 1997
By: _______________________
Kenneth K. Redelsperger
President
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EXHIBIT "G"
LICENSE AGREEMENT
This License Agreement (the "Agreement") is made as of February __,
1997, by and between Ken Redelsperger ("Licensor"), and Lube Acquisition
Corporation, a Delaware corporation ("Licensee").
RECITALS
A. Licensor is the former principal shareholder of Snappy Lube,
Inc., a Nevada corporation (the "Company"). The Company was formerly engaged in
the automobile maintenance and repair business in Northern California until
February 28, 1997, at which time it was merged into Licensee.
B. In connection with the merger, the Company assigned to
Licensor the service marks and registrations thereof listed on Exhibit "A"
hereto (the "Marks"), and, additionally, the rights to the trade name "Snappy
Lube" (the "Trade Name"), and certain training manuals for its employees and
certain written policies and procedures more particularly described in Exhibit
"B" hereto (the "Manuals").
C. Licensee desires an exclusive and royalty-free license to use
the Marks, the Trade Name and the Manuals (collectively referred to herein as
the "Property") in the counties of California set forth in Exhibit "C".
D. Licensor has consented to Licensee pursuing opportunities in
the automobile maintenance and repair business in the counties listed on Exhibit
"C" and has agreed to grant Licensee a license to the Property so that Licensee
may conduct such business using the Property.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants contained in this Agreement, the parties hereto agree
as follows:
1. Grant of License. Licensor hereby grants to Licensee,
and Licensee hereby accepts, and exclusive, royalty-free, license to use the
Property in connection with Licensee's automobile maintenance and repair
business in the counties of the State of California listed on Exhibit "C" hereto
(the "Territory"). The license hereby granted extends only to the automobile
maintenance and repair business. Licensee shall not use, or authorize the use
of, the Property in connection with any other services or any goods or
materials.
2. Use of Marks and Trade Name. Except as provided in
Section 1 and in this Section 2, during the term of this Agreement and
thereafter, Licensee shall not adopt, use, or register, whether as a corporate
name, trademark, service mark, or otherwise, the Trade Name or Marks, or any
word or mark confusingly similar to the Trade Name or Marks, in its own name in
any jurisdiction.
3. Use of Manuals. Licensor shall provide Licensee with
hard copies of the Manuals, and Licensee shall be entitled to reproduce and
distribute such manuals as Licensee deems necessary or advisable in connection
with the operation of Licensee's business.
4. Fee. In consideration for the rights to use the
Property as provided herein, Licensee agrees to pay Licensor a one-time fee of
Five Dollars ($5) upon the execution of this Agreement.
5. Term. The term of this Agreement shall commence upon
the signing of this Agreement, and shall extend for five (5) years, unless
terminated earlier pursuant to the provisions of Section 9 hereof. The term of
this Agreement may be renewed by Licensee with respect to the Yuba City Store
Lease for a term corresponding to the term of the Yuba City Store Lease, as such
lease may be extended or renewed; such right to extend to be exercised by notice
to Kenneth Redelsperger on or before the expiration of the initial 5 year term.
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6. Sole License in Territory. Licensor shall not grant
any other license for the use of the Property in the Territory in connection
with the maintenance and repair of automobiles. Licensor shall not use the
Property in connection with the automobile maintenance and repair business in
the Territory during the term of this Agreement.
7. Sole and Exclusive Ownership. Licensee acknowledges
that the Property is the exclusive property of Licensor and that nothing in this
Agreement grants Licensee or any other person right, title or interest therein,
except for the license expressly granted to use the Property for the period and
on the conditions stated in this Agreement.
8. Protection of Licensor's Rights; Litigation.
(a) Licensee represents, warrants, covenants and
agrees that it will conduct its business in a manner substantially similar to
Licensor's previous conduct of its automobile maintenance and repair business.
(b) Licensor may, in its discretion, file
applications for further service mark registration or take other action which it
deems necessary or desirable to protect its rights in the Marks and the Trade
Name. Such action shall be taken at Licensor's sole expense, and Licensee agrees
to cooperate with Licensor as required to obtain such protection.
(c) Licensee agrees to assist Licensor to the
extent necessary to protect any of Licensor's rights in the Marks and the Trade
Name. Licensor, if he so desires, may commence or prosecute any claims or suits
in his own name or in the name of Licensee or join Licensee as a party thereto
to protect Licensor's rights in the Marks and the Trade Name; provided that,
Licensor shall indemnify, defend and hold harmless Licensee from all costs and
expenses (including attorneys' fees) incurred in connection with such
litigation.
(d) If Licensee becomes aware that any third
party is or may be infringing the Marks or Trade Name, Licensee shall promptly
provide written notice thereof to Licensor. Licensee shall provide Licensor
written notice of any action taken by Licensee on account of any such
infringement, including the institution of any suit, but Licensee shall in no
way be obligated to take any such action or institute any such suit.
(e) Licensee shall promptly inform Licensor of
any actual or threatened litigation by or against Licensee which arises out of
its authorized use of the Marks and the Trade Name. Licensor shall defend,
indemnify, and hold Licensee harmless from and against any such claim of
trademark infringement or unfair competition arising from Licensee's use of the
Marks and the Trade Name pursuant to the provisions of this Agreement for a
period of one (1) year after the date of this Agreement; provided, however,
that Licensor's indemnification obligation shall be limited as described in
Article 9 of the Agreement of Merger and Plan of Reorganization dated January ,
1997, by and among Licensor, the Company, Licensee, et al.
(f) Licensee acknowledges that for Licensor to
maintain the validity of its Marks, it will be necessary for Licensee to
maintain records of its use of the Marks. Accordingly, during the term of this
Agreement and for a period of five (5) years following any expiration or
termination of this Agreement, Licensee shall maintain such records of its use
of the Marks as Licensor may reasonably request, including, but not limited to,
samples of advertising.
9. Termination.
(a) It shall be an event of default hereunder
and a breach of this Agreement if Licensee fails to substantially perform or
observe any of the material agreements, terms, covenants or conditions of this
Agreement if such non-performance or non-observance continues for a period of
thirty (30) days after written notice thereof by Licensor to Licensee or, if
such performance or observance cannot be had within such 30-day period, then if
Licensee has not in good faith commenced such performance within such 30-day
period and does not diligently and in good faith proceed therewith to
completion. If Licensee commits a default as defined above, Licensor shall have
the right to terminate this Agreement by notifying Licensee in writing that
Licensor elects to terminate this Agreement.
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(b) Upon expiration or termination of this
Agreement, all rights granted to Licensee hereunder shall revert to Licensor,
and Licensor shall be free to license others to use the marks and the Trade Name
for use in connection with automobile maintenance and repair in the Territory,
and Licensee shall refrain from further use of the Marks and the Trade Name.
10. Notices. All notices, requests, consents or other
communications required or permitted to be given hereunder shall be in writing
and delivered personally or sent by registered mail, postage prepaid, as
follows:
To Licensor:
Kenneth Redelsperger
26056 Mesa Drive
Carmel, CA 93923
To Licensee:
Dale C. Radcliff
Lube Acquisition Corporation
225 E. John Carpenter Freeway
16th Floor
Irving, Texas 75062
Any notice so given shall be deemed received when delivered personally,
or, if mailed, when deposited, postage prepaid, in the United States mails. Any
party may change the address to which notices are to be sent by giving written
notice of such change of address to the other party in the manner herein
provided for giving notice.
11. Assignment. Licensee may assign its rights and
obligations under this Agreement to any corporation or other entity controlled
by, or under common control with, Licensee, or to any entity which succeeds to
all or substantially all of the business and assets of Licensee. For purposes of
this Agreement, Pacific CarCare, LLC, a California limited liability company,
and Quaker State Corporation, a Delaware corporation, shall be deemed
permissible assignees of Licensee.
12. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
California applicable to agreements made and to be performed entirely within
California.
13. Headings. The section headings contained herein are
for reference purposes only and shall not in any way affect the meanings or
interpretation of this Agreement.
14. No Partnership. Nothing contained herein shall be
construed as placing the parties in the relationship of partners or joint
venturers. Licensee shall have no power to obligate or bind Licensor in any
manner whatsoever, and Licensor shall have no power to obligate or bid Licensee
in any manner whatsoever.
15. Integration. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings.
16. Amendment. This Agreement may be amended, modified,
superseded or cancelled, or the terms and covenants hereof may be waived, only
by a written instrument executed by all the parties hereto, or, in the case of
a waiver, by the party waiving compliance.
17. Attorneys' Fees. If any legal action is commenced by
either party to enforce or defend its rights under this Agreement, the
prevailing party in such action shall be entitled to recover its costs and
reasonable attorneys' fees and expenses in addition to any other relief granted.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LICENSOR:
By: ______________________________
Kenneth K. Redelsperger
LICENSEE:
LUBE ACQUISITION CORPORATION, a Delaware corporation
By: _____________________________
Its: President
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EXHIBIT "A"
SERVICE MARKS AND REGISTRATIONS
1. Secretary of State, State of California, Service Mark
Registration No. 044332 issued for "Snappy Lube" January 30, 1995 for use in
connection with automobile maintenance and repair, a copy of which is attached
hereto as Appendix I.
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EXHIBIT "B"
TRAINING MANUALS AND WRITTEN EMPLOYEE
POLICIES AND PROCEDURES
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EXHIBIT "C"
NON-COMPETE AREA
Counties:
Monterey Tehama
San Benito Sacramento
Santa Clara El Dorado
San Francisco Lake
Kings Lassen
Merced Solano
Stanislaus Placer
Alameda Mendocino
Tulare Shasta
Madera Marin
Tuolumne Sutter
San Joaquin Glenn
Inyo Trinity
Mariposa Sonoma
Santa Cruz Yuba
Contra Costa Butte
Fresno Humboldt
Mono Del Norte
San Mateo Siskiyou
Calaveras Modoc
Alpine Yuba City
Napa
Sierra
Plumas
Amador
Yolo
Colusa
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ANNEX 2
RIGHTS OF DISSENTING OWNERS
92A.300 DEFINITIONS.--As used in NRS 92A.300 to 92A.500, inclusive,
unless the context otherwise requires, the words and terms defined in NRS
92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those
sections.
92A.305 "BENEFICIAL STOCKHOLDER"DEFINED.--"Beneficial stockholder"
means a person who is a beneficial owner of shares held in a voting trust or by
a nominee as the stockholder of record.
92A.310 "CORPORATE ACTION" DEFINED--"Corporate action" means the action
of a domestic corporation.
92A.315 "DISSENTER" DEFINED--"Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.410 to
92A.480, inclusive.
92A.320 "FAIR VALUE" DEFINED--"Fair value," with respect to a
dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
92A.325 "STOCKHOLDER" DEFINED--"Stockholder" means a stockholder of
record or a beneficial stockholder of a domestic corporation.
92A.330 "STOCKHOLDER OF RECORD" DEFINED--"Stockholder of record" means
the person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
92A.335 "SUBJECT CORPORATION" DEFINED--"Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
92A.340 COMPUTATION OF INTEREST--Interest payable pursuant to NRS
92A.300 to 92A.500, inclusive, must be computed from the effective date of the
action until the date of payment, at the average rate currently paid by the
entity on its principal bank loans or, if it has no bank loans, at a rate that
is fair and equitable under all of the circumstances.
92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP--A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with any
merger or exchange in which the domestic limited partnership is a constituent
entity.
92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED LIABILITY
COMPANY--The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
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92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION--
1. Except as otherwise provided in subsection 2 and unless otherwise provided in
the articles or bylaws, any member of any constituent domestic nonprofit
corporation who voted against the merger may, without prior notice, but within
30 days after the effective date of the merger, resign from membership and is
thereby excused from all contractual obligations to the constituent or surviving
corporations which did not occur before his resignation and is thereby entitled
to those rights, if any, which would have existed if there had been no merger
and the membership had been terminated or the member had been expelled.
2. Unless otherwise provided in its articles of incorporation or
bylaws, no member of a domestic nonprofit corporation, including, but not
limited to, a cooperative corporation, which supplies services described in
chapter 704 of NRS to its members only, and no person who is a member of a
domestic nonprofit corporation as a condition of or by reason of the ownership
of an interest in real property, may resign and dissent pursuant to subsection
1.
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS
AND TO OBTAIN PAYMENT FOR SHARES--1. Except as otherwise provided in NRS 92A.370
to 92A.390, a stockholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for the merger by
NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation and he is
entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with
its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's interests will
be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles a incorporation, bylaws or a
resolution of the board of directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment
under NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN
CLASSES OR SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER--1.
There is no right of dissent with respect to a plan of merger or exchange in
favor of stockholders of any class or series which, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting at which the plan of merger or exchange is to be acted on, were either
listed on a national securities exchange, included in the national market system
by the National Association of Securities Dealers, Inc., or held by at least
2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the
shares provide otherwise; or
(b) The holders of the class or series are required under the plan
of merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu
of fractional owner's interests of:
(I) The surviving or acquiring entity; or
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(II) Any other entity which, at the effective date of the plan of
merger or exchange, were either listed on a national securities exchange,
included in the national market system by the National Association of Securities
Dealers, Inc., or held of record by a least 2,000 holders of owner's interests
of record; or
(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph
(b).
2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require action of
the stockholders of the surviving domestic corporation under NRS 92A.130.
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY
TO SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER--1. A
stockholder of record may assert dissenter's rights as to fewer than all of the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the subject corporation in
writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to
shares held on his behalf only if:
(a) He submits to the subject corporation the written consent of
the stockholder of record to the dissent not later than the time the beneficial
stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT--1. If
a proposed corporate action creating dissenters' rights is submitted to a vote
at a stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under NRS
92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken
without a vote of the stockholders, the domestic corporation shall notify in
writing all stockholders entitled to assert dissenters' rights that the action
was taken and send them the dissenter's notice described in NRS 92A.430.
92A.420 PREREQUISITE TO DEMAND FOR PAYMENT FOR SHARES--1. If a proposed
corporate action creating dissenters' rights is submitted to a vote at a
stockholders' meeting, a stockholder who wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is
taken, written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of
subsection 1 is not entitled to payment for his shares under this chapter.
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS; CONTENTS--1. If a proposed corporate action creating dissenters' rights
is authorized at a stockholders' meeting, the subject corporation shall deliver
a written dissenter's notice to all stockholders who satisfied the requirements
to assert those rights.
2. The dissenter's notice must be sent no later than 10 days
after the effectuation of the corporate action, and must:
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(a) State where the demand for payment must be sent and where and
when certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates
to what extent the transfer of the shares will be restricted after the demand
for payment is received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to the news media or to the stockholders of the terms of
the proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must receive the
demand for payment, which may not be less than 30 nor more than 60 days after
the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF
RIGHTS OF STOCKHOLDER--1. A stockholder to whom a dissenter's notice is sent
must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for this
certification; and
(c) Deposit his certificates, if any, in accordance with the terms
of the notice.
2. The stockholder who demands payment and deposits his
certificates, if any, retains all other rights of a stockholder until those
rights are canceled or modified by the taking of the proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER
DEMAND FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER--1. The subject
corporation may restrict the transfer of shares not represented by a certificate
from the date the demand for their payment is received.
2. The person for whom dissenter's rights are asserted as to
shares not represented by a certificate retains all other rights of a
stockholder until those rights are canceled or modified by the taking of the
proposed corporate action.
92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS--1. Except as
otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for
payment, the subject corporation shall pay each dissenter who complied with NRS
92A.440 the amount the subject corporation estimates to be the fair value of his
shares, plus accrued interest. The obligation of the subject corporation under
this subsection may be enforced by the district court:
(a) Of the county where the corporation's registered office is
located; or
(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the dissenter resides or
has its registered office. The court shall dispose of the complaint promptly.
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2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the stockholders'
equity for that year and the latest available interim financial statements, if
any;
(b) A statement of the subject corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under
NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF
DISSENTER'S NOTICE--1. A subject corporation may elect to withhold payment from
a dissenter unless he was the beneficial owner of the shares before the date set
forth in the dissenter's notice as the date of the first announcement to the
news media or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold
payment, after taking the proposed action, it shall estimate the fair value of
the shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenters' right to demand payment pursuant to NRS 92A.480.
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT
CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE--1. A dissenter may notify the
subject corporation in writing of his own estimate of the fair value of his
shares and the amount of interest due, and demand payment of his estimate, less
any payment pursuant to NRS 92A.460, or reject the offer pursuant to NRS 92A.470
and demand payment of the fair value of his shares and interest due, if he
believes that the amount paid pursuant to NRS 92A.460 or offered pursuant to NRS
92A.470 is less than the fair value of his shares or that the interest due is
incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to
this section unless he notifies the subject corporation of his demand in writing
within 30 days after the subject corporation made or offered payment for his
shares.
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT
CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER--1. If a demand for payment
remains unsettled, the subject corporation shall commence a proceeding within 60
days after receiving the demand and petition the court to determine the fair
value of the shares and accrued interest. If the subject corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the
district court of the county where its registered office is located. If the
subject corporation is a foreign entity without a resident agent in the state,
it shall commence the proceeding in the county where the registered office of
the domestic corporation merged with or whose shares were acquired by the
foreign entity was located.
3. The subject corporation shall make all dissenters, whether or
not residents of Nevada, whose demands remain unsettled, parties to the
proceeding as in an action against their shares. All parties must be served with
a copy of the petition. Nonresidents may be served by registered or certified
mail or by publication as provided by law.
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4. The jurisdiction of the court in which the proceeding is
commenced under subsection 2 is plenary and exclusive. The court may appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or any amendment thereto. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is
entitled to a judgment:
(a) For the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by the subject
corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the subject corporation elected to withhold
payment pursuant to NRS 92A.470.
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS
AND FEES--1. The court in a proceeding to determine fair value shall determine
all of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel
and experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters
if the court finds the subject corporation did not substantially comply with the
requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the subject
corporation, the court may award to those counsel reasonable fees to be paid out
of the amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court
may assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding
commenced pursuant to NRS 92A.460 or 92A.490 from applying the provisions of
N.R.C.P. 68 or NRS 17.115.
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Part II. Information not Required in Consent Solicitation Statement/Prospectus.
Item 20. Indemnification of Officers and Directors.
The Certificate of Incorporation of Quaker State provides that, 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 Quaker State shall be personally liable to Quaker
State or to its stockholders for monetary damages for beach of fiduciary duty as
a director. The Delaware General Corporation Law (the "DGCL") permits a
corporation's certificate of incorporation to provide that no director of the
corporation shall be personally liable to the corporation or its stockholders
for monetary damages for any breach of his or her fiduciary duty as a director;
provided that such provision shall not eliminate or limit the liability of a
director (1) for any breach of a director's duly of loyalty to the corporation
or its stockholders, (2) for acts or omissions that are not in good faith or
involve intentional misconduct or a transaction from which the director derived
an improper personal benefit.
The Certificate of Incorporation of Quaker State also provides, in
general, that Quaker State shall indemnify its officers and directors against
reasonable expenses and any liability paid or incurred by such person in
connection with any actual or threatened claim, action, suit or proceeding,
civil, criminal, administrative, investigative or other, whether brought by or
in the right of Quaker State 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 Quaker State as a director, officer, employee, fiduciary
or other representative of another corporation, partnership, joint venture,
trust, employee benefit plan or other entity, except as prohibited by law.
Section 145 of the DGCL provides, in general, that each director and officer of
a corporation may be indemnified against expenses (including attorney's fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which he or she is involved by reason of the
fact that he or she is or was a director or officer if he or she acted in good
faith and in a manner that he or she reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, if he or she had no reasonable cause to believe that his
or her conduct was unlawful. If the legal proceeding, however, is by or in the
right of the corporation, the director or officer may not be indemnified in
respect of any claim, issue or matter as to which he or she shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the corporation unless a court determines otherwise.
In addition, the Certificate of Incorporation of Quaker State provides
that Quaker State may purchase and maintain insurance to protect itself and any
director or officer entitled to indemnification pursuant to the Certificate of
Incorporation. Accordingly, Quaker State carries directors and officers
liability coverage which is subject to certain limitations and exclusions.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
2(a) Merger Agreement and Plan of Merger dated January 31,
1997 among Quaker State Corporation, Lube Acquisition
Corporation, and Snappy Lube, Inc., filed herewith as
Annex 1 to the Consent Solicitation
Statement/Prospectus.
2(b) Asset Purchase Agreement by and among the Company, BC
Acquisition Corporation, Blue Coral, Inc. and the
Blue Coral Stockholders dated as of June 7, 1996,
with list of omitted schedules and exhibits (filed as
Exhibit 2 to the Company's Current Report on Form 8-K
dated June 28, 1996 and incorporated herein by
reference).
2(c) Purchase Agreement dated December 12, 1996, among the
Company, Blue Coral, Adelman, Joel Adelman and the
Trust, with exhibits (filed as Exhibit 99.3 to the
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Company's Current Report on Form 8-K dated December
12, 1996 and incorporated herein by reference.)
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2(d) Stock Purchase Agreement by and among the Company,
and the Medo Shareholders dated as of August 30,
1996, with list of omitted schedules and exhibits
(filed as Exhibit 2(a) to the Company's Current
Report on Form 8-K dated October 2, 1996 and
incorporated herein by reference).
2(e) Amendment No. 1 to Stock Purchase Agreement dated as
of October 2, 1996 (filed as Exhibit 2(b) to the
Company's Current Report on Form 8-K dated October 2,
1996 and incorporated herein by reference).
3(i) Composite Certificate of Incorporation of the
registrant, filed as Exhibit 3(i) to Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference.
3(ii) Bylaws of the registrant, as amended July 28, 1996,
filed as Exhibit 3(ii) to Report on 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference.
4(a) Rights Agreement dated as of September 28, 1995,
between Quaker State and Mellon Securities Trust
Company as Rights Agent, filed as Exhibit 1 to report
on Form 8-K filed October 20, 1995 and incorporated
herein by reference.
4(b) Escrow Agreement among the Company and the Blue Coral
Stockholders, dated as of June 28, 1996 (filed as
Exhibit 4 to the Company's Current Report on Form 8-K
dated June 28, 1996 and incorporated herein by
reference).
4(c) Purchase Agreement dated December 12, 1996, among the
Company, Blue Coral, Adelman, Joel Adelman and the
Trust, with exhibits (filed as Exhibit 99.3 to the
Company's Current Report on Form 8-K dated December
12, 1996 and incorporated herein by reference).
4(d) Form of Indenture between Quaker State and Chemical
Bank, as Trustee, related to $100,000,000 of 6.25%
Notes due 2005 (filed as Exhibit 4.(a) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).
4(e) $90 million Credit Agreement dated as of April 17,
1996, among Quaker State Corporation, the Banks
listed therein and Morgan Guaranty Trust Company of
New York, as agent for the Banks (filed as Exhibit 10
to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 and incorporated
herein by reference).
4(f) Amended and restated $140 million Credit Agreement,
dated April 17, 1996 and amended and restated
September 27, 1996, between Quaker State and Morgan
Guaranty Trust Company of New York, as agent, with a
list of omitted schedules and exhibits (filed as
Exhibit 4(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996
and incorporated herein by reference).
4(g) $165 million Credit Agreement between Quaker State
and Texas Commerce Bank National Association, as
Agent, dated as of September 30, 1996, with a list of
omitted schedules and exhibits (filed as Exhibit 4(c)
to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 and incorporated
herein by reference).
5. Opinion of Pillsbury Madison & Sutro LLP, filed
herewith.
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10(a) 1986 Stock Option Plan, as amended through April 30,
1987 (filed as Exhibit 10(b) to Form 10-K for the
fiscal year ended December 31, 1987 and incorporated
herein by reference).*
10(b) Resolution, adopted on February 27, 1992 by the Board
of Directors of Quaker State, amending Section 5(D)
of the 1986 Stock Option Plan (filed as Exhibit 10(c)
to Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference).*
10(c) Third Amendment to the 1986 Stock Option Plan, dated
October 24, 1996 (filed as Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).
10(d) 1994 Non-Employee Directors' Stock Option Plan (filed
as Exhibit 10(d) to Form 10-K for the fiscal year
ended December 31, 1994 and incorporated herein by
reference).*
10(e) First Amendment to the 1994 Non-Employee Director's
Stock Option Plan, dated October 24, 1996 (filed as
Exhibit 10(d) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996
and incorporated herein by reference).*
10(f) 1994 Stock Incentive Plan (filed as Exhibit 10(e) to
Form 10-K for the fiscal year ended December 31, 1994
and incorporated herein by reference).*
10(g) First Amendment to the 1994 Stock Incentive Plan,
dated October 24, 1996 (filed as Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).*
10(h) 1996 Directors' Fee Plan, as amended and restated
October 24, 1996 to be effective January 1, 1997
(filed as Exhibit 10(e) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1996 and incorporated herein by reference).*
10(i) Forms of Split Dollar Life Insurance Agreement and
related Collateral Assignment Agreement (filed as
Exhibit 10(c) to Form 10-K for the fiscal year ended
December 31, 1987 and incorporated herein by
reference).*
10(j) First Amendment to Split Dollar Life Insurance
Agreement (filed as Exhibit 10(g) to Form 10-K for
the fiscal year ended December 31, 1994 and
incorporated herein by reference).*
10(k) Annual Incentive Bonus Plan, as amended and restated
effective January 1, 1995 (filed as Exhibit 10(a) to
Form 10-K for the fiscal year ended December 31, 1994
and incorporated herein by reference).*
10(l) Quaker State Amended and Restated Severance Plan,
effective September 30, 1988 (filed as Exhibit 28.1
to Form 8-K filed on October 17, 1988 and
incorporated herein by reference).*
10(m) Articles X and XI of the Quaker State Salaried
Pension Plan, as Amended and Restated effective July
1, 1989 for Quaker State and certain of its
subsidiaries (filed as Exhibit 28(b) to Form 10-K for
the fiscal year ended December 31, 1991 and
incorporated herein by reference).*
II-4
110
10(n) Articles X and XI of the Quaker State Hourly Pension
Plan, as Amended and Restated effective July 1, 1989
for Quaker State and certain of its subsidiaries
(filed as Exhibit 28(e) to Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference).*
10(o) Quaker State Supplemental Excess Retirement Plan
(filed as Exhibit 10(k) to Form 10-K for the fiscal
year ended December 31, 1992 and incorporated herein
by reference).*
10(p) Employment Agreement, dated as of August 1, 1994,
between Quaker State Corporation and Herbert M. Baum
(filed as Exhibit 10(a) to Form 10-Q for the fiscal
quarter ended September 30, 1994 and incorporated
herein by reference).* 10(q) Amendment to Employment
Agreement with Herbert M. Baum dated May 10, 1996
(filed as Exhibit 10(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1996 and incorporated herein by reference).*
10(r) Employment Agreement, dated as of September 30, 1994,
between Quaker State Corporation and L. David Myatt
(filed as Exhibit 10(b) to Form 10-Q for the quarter
ended September 30, 1994 and incorporated herein by
reference).*
10(s) Letter, dated as of June 5, 1995, between Quaker
State and John D. Barr (filed as Exhibit 10(m) to the
1995 Form 10-K and incorporated herein by
reference).*
10(t) Letter Agreement, dated February 28, 1996, between
Quaker State and John D. Barr (filed as Exhibit 10(n)
to the Form 10-K for the fiscal year ended December
31, 1995 and incorporated herein by reference).*
10(u) Letter Agreement, dated March 4, 1996, between Quaker
State and Charles F. Bechtel (filed as Exhibit 10(o)
to Form 10-K for the fiscal year ended December 31,
1995 and incorporated herein by reference).*
10(v) Employment contract dated June 28, 1996 between
Sheldon G. Adelman and Quaker State Corporation
(filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1996 and incorporated herein by reference).*
10(w) Form of Indemnification and Insurance Agreement
entered into between Quaker State and each of its
directors (filed as Exhibit 10(g) to Form 10-K for
the fiscal year ended December 31, 1987 and
incorporated herein by reference).
10(x) Form of letter agreement entered into between Quaker
State and each of its non-employee directors
regarding the retirement benefits provided by Quaker
State to its non-employee directors (filed as Exhibit
10(n) to Form 10-K for the fiscal year ended December
31, 1993 and incorporated herein by reference).
10(y) Outside Directors' Group Life Plan (filed as Exhibit
10(d) to Form 10-K for the fiscal year ended December
31, 1986 and incorporated herein by reference).
10(z) Form of Employment Continuation Agreement entered
into between Quaker State and certain of its
executive officers (filed as Exhibit 10(p) to the
Form 10-K for the fiscal year ended December 31, 1996
and incorporated herein by reference).*
11. Computation of Per Share Earnings, filed as Exhibit
11 to Form 10-Q for the quarter ended September 30,
1996 and incorporated herein by reference.
II-5
111
13. Report on Form 10-Q for the quarter ended September
30, 1996, incorporated herein by reference.
21. Subsidiaries of the Registrant, filed herewith.
23.1 Consent of Coopers & Lybrand L.L.P., filed herewith.
23.2 Consent of Arthur Andersen L.L.P., filed herewith.
23.3 Consent of Ernst & Young, L.L.P., filed herewith.
23.4 Consent of Pillsbury, Madison & Sutro, filed as part
of Exhibit 5.
24. Power of Attorney, included as part of the signature
page.
-------------
* Management contract or compensatory plan, contract or
arrangement required to be filed by Item 601(b)(10)(iii)
of Regulation S-K.
Item 22. Undertakings.
(a)(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c) the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(a)(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irving,
State of Texas, on January 29, 1997.
QUAKER STATE CORPORATION
By /s/ HERBERT M. BAUM
---------------------------------------
Title Chairman and Chief Executive Officer
------------------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Herbert M. Baum, Conrad A. Conrad and Paul E.
Konney, and each of them, his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments,
including post-effective amendments, to this Registration Statement, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ HERBERT M. BAUM Director, Chairman, and Chief January 29, 1997
--------------------------------------- Executive Officer (Principal
Herbert M. Baum Executive Officer)
/s/ CONRAD A. CONRAD Director, Vice Chairman and Chief January 29, 1997
--------------------------------------- Financial Officer (Principal Financial
Conrad A. Conrad Officer)
/s/ KEITH S. KRZEMINSKI Controller (Principal Accounting January 29, 1997
--------------------------------------- Officer)
Keith S. Krzeminski
/s/ JOHN D. BARR Director January 29, 1997
---------------------------------------
John D. Barr
II-7
113
/s/ LEONARD M. CARROLL Director January 29, 1997
----------------------------------------
Leonard M. Carroll
/s/ LAUREL CUTLER Director January 29, 1997
----------------------------------------
Laurel Cutler
/s/ C. FREDERICK FETTEROLF Director January 29, 1997
----------------------------------------
C. Frederick Fetterolf
/s/ THOMAS A. GARDNER Director January 29, 1997
----------------------------------------
Thomas A. Gardner
/s/ F. WILLIAM GRUBE Director January 29, 1997
----------------------------------------
F. William Grube
/s/ FORREST R. HASELTON Director January 29, 1997
----------------------------------------
Forrest R. Haselton
Director
----------------------------------------
Delbert J. McQuaide
/s/ L. DAVID MYATT Director January 29, 1997
----------------------------------------
L. David Myatt
/s/ RAYMOND A. ROSS, JR. Director January 29, 1997
----------------------------------------
Raymond A. Ross, Jr.
/s/ LORNE R. WAXLAX Director January 29, 1997
----------------------------------------
Lorne R. Waxlax
II-8
114
EXHIBIT INDEX
The following exhibits are filed with this Registration Statement on Form
S-4:
Exhibit No. Exhibit
- ----------- -------
2(a) Merger Agreement and Plan of Merger dated January 31, 1997
among Quaker State Corporation, Lube Acquisition Corporation,
and Snappy Lube, Inc., filed herewith as Annex 1 to the
Consent Solicitation Statement/Prospectus.
2(b) Asset Purchase Agreement by and among the Company, BC
Acquisition Corporation, Blue Coral, Inc. and the Blue Coral
Stockholders dated as of June 7, 1996, with list of omitted
schedules and exhibits (filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated June 28, 1996 and
incorporated herein by reference).
2(c) Purchase Agreement dated December 12, 1996, among the Company,
Blue Coral, Adelman, Joel Adelman and the Trust, with exhibits
(filed as Exhibit 99.3 to the Company's Current Report on Form
8- K dated December 12, 1996 and incorporated herein by
reference.)
2(d) Stock Purchase Agreement by and among the Company, and the
Medo Shareholders dated as of August 30, 1996, with list of
omitted schedules and exhibits (filed as Exhibit 2(a) to the
Company's Current Report on Form 8-K dated October 2, 1996 and
incorporated herein by reference).
2(e) Amendment No. 1 to Stock Purchase Agreement dated as of
October 2, 1996 (filed as Exhibit 2(b) to the Company's
Current Report on Form 8-K dated October 2, 1996 and
incorporated herein by reference).
3(i) Composite Certificate of Incorporation of the registrant,
filed as Exhibit 3(i) to Report on Form 10-Q for the quarter
ended June 30, 1995 and incorporated herein by reference.
3(ii) Bylaws of the registrant, as amended July 28, 1996, filed as
Exhibit 3(ii) to Report on 10-Q for the quarter ended
September 30, 1996 and incorporated herein by reference.
4(a) Rights Agreement dated as of September 28, 1995, between
Quaker State and Mellon Securities Trust Company as Rights
Agent, filed as Exhibit 1 to report on Form 8-K filed October
20, 1995 and incorporated herein by reference.
4(b) Escrow Agreement among the Company and the Blue Coral
Stockholders, dated as of June 28, 1996 (filed as Exhibit 4 to
the Company's Current Report on Form 8-K dated June 28, 1996
and incorporated herein by reference).
4(c) Purchase Agreement dated December 12, 1996, among the Company,
Blue Coral, Adelman, Joel Adelman and the Trust, with exhibits
(filed as Exhibit 99.3 to the Company's Current Report on Form
8- K dated December 12, 1996 and incorporated herein by
reference).
4(d) Form of Indenture between Quaker State and Chemical Bank, as
Trustee, related to $100,000,000 of 6.25% Notes due 2005
(filed as Exhibit 4.(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996 and
incorporated herein by reference).
115
4(e) $90 million Credit Agreement dated as of April 17, 1996, among
Quaker State Corporation, the Banks listed therein and Morgan
Guaranty Trust Company of New York, as agent for the Banks
(filed as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 and incorporated
herein by reference).
4(f) Amended and restated $140 million Credit Agreement, dated
April 17, 1996 and amended and restated September 27, 1996,
between Quaker State and Morgan Guaranty Trust Company of New
York, as agent, with a list of omitted schedules and exhibits
(filed as Exhibit 4(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996 and
incorporated herein by reference).
4(g) $165 million Credit Agreement between Quaker State and Texas
Commerce Bank National Association, as Agent, dated as of
September 30, 1996, with a list of omitted schedules and
exhibits (filed as Exhibit 4(c) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996
and incorporated herein by reference).
5. Opinion of Pillsbury Madison & Sutro LLP, filed herewith.
10(a) 1986 Stock Option Plan, as amended through April 30, 1987
(filed as Exhibit 10(b) to Form 10-K for the fiscal year ended
December 31, 1987 and incorporated herein by reference).*
10(b) Resolution, adopted on February 27, 1992 by the Board of
Directors of Quaker State, amending Section 5(D) of the 1986
Stock Option Plan (filed as Exhibit 10(c) to Form 10-K for the
fiscal year ended December 31, 1991 and incorporated herein by
reference).*
10(c) Third Amendment to the 1986 Stock Option Plan, dated October
24, 1996 (filed as Exhibit 10(c) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996
and incorporated herein by reference).*
10(d) 1994 Non-Employee Directors' Stock Option Plan (filed as
Exhibit 10(d) to Form 10-K for the fiscal year ended December
31, 1994 and incorporated herein by reference).*
10(e) First Amendment to the 1994 Non-Employee Director's Stock
Option Plan, dated October 24, 1996 (filed as Exhibit 10(d) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 and incorporated herein by
reference).*
10(f) 1994 Stock Incentive Plan (filed as Exhibit 10(e) to Form 10-K
for the fiscal year ended December 31, 1994 and incorporated
herein by reference).*
10(g) First Amendment to the 1994 Stock Incentive Plan, dated
October 24, 1996 (filed as Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1996 and incorporated herein by reference).*
10(h) 1996 Directors' Fee Plan, as amended and restated October 24,
1996 to be effective January 1, 1997 (filed as Exhibit 10(e)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 and incorporated herein by
reference).*
10(i) Forms of Split Dollar Life Insurance Agreement and related
Collateral Assignment Agreement (filed as Exhibit 10(c) to
Form 10-K for the fiscal year ended December 31, 1987 and
incorporated herein by reference).*
10(j) First Amendment to Split Dollar Life Insurance Agreement
(filed as Exhibit 10(g) to Form 10-K for the fiscal year ended
December 31, 1994 and incorporated herein by reference).*
Exhibit No. Exhibit
- ----------- -------
116
10(k) Annual Incentive Bonus Plan, as amended and restated effective
January 1, 1995 (filed as Exhibit 10(a) to Form 10-K for the
fiscal year ended December 31, 1994 and incorporated herein by
reference).*
10(l) Quaker State Amended and Restated Severance Plan, effective
September 30, 1988 (filed as Exhibit 28.1 to Form 8-K filed on
October 17, 1988 and incorporated herein by reference).*
10(m) Articles X and XI of the Quaker State Salaried Pension Plan,
as Amended and Restated effective July 1, 1989 for Quaker
State and certain of its subsidiaries (filed as Exhibit 28(b)
to Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference).*
10(n) Articles X and XI of the Quaker State Hourly Pension Plan, as
Amended and Restated effective July 1, 1989 for Quaker State
and certain of its subsidiaries (filed as Exhibit 28(e) to
Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference).*
10(o) Quaker State Supplemental Excess Retirement Plan (filed as
Exhibit 10(k) to Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference).*
10(p) Employment Agreement, dated as of August 1, 1994, between
Quaker State Corporation and Herbert M. Baum (filed as Exhibit
10(a) to Form 10-Q for the fiscal quarter ended September 30,
1994 and incorporated herein by reference).*
10(q) Amendment to Employment Agreement with Herbert M. Baum dated
May 10, 1996 (filed as Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1996).*
10(r) Employment Agreement, dated as of September 30, 1994, between
Quaker State Corporation and L. David Myatt (filed as Exhibit
10(b) to Form 10-Q for the quarter ended September 30, 1994
and incorporated herein by reference).*
10(s) Letter, dated as of June 5, 1995, between Quaker State and
John D. Barr (filed as Exhibit 10(m) to the 1995 Form 10-K and
incorporated herein by reference).*
10(t) Letter Agreement, dated February 28, 1996, between Quaker
State and John D. Barr (filed as Exhibit 10(n) to the Form
10-K for the fiscal year ended December 31, 1995 and
incorporated herein by reference).*
10(u) Letter Agreement, dated March 4, 1996, between Quaker State
and Charles F. Bechtel (filed as Exhibit 10(o) to Form 10-K
for the fiscal year ended December 31, 1995 and incorporated
herein by reference).*
10(v) Employment contract dated June 28, 1996 between Sheldon G.
Adelman and Quaker State Corporation (filed as Exhibit 10 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 and incorporated herein by reference).*
10(w) Form of Indemnification and Insurance Agreement entered into
between Quaker State and each of its directors (filed as
Exhibit 10(g) to Form 10-K for the fiscal year ended December
31, 1987 and incorporated herein by reference).
Exhibit No. Exhibit
- ----------- -------
117
10(x) Form of letter agreement entered into between Quaker State and
each of its non-employee directors regarding the retirement
benefits provided by Quaker State to its non-employee
directors (filed as Exhibit 10(n) to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated herein by
reference).
10(y) Outside Directors' Group Life Plan (filed as Exhibit 10(d) to
Form 10-K for the fiscal year ended December 31, 1986 and
incorporated herein by reference).
10(z) Form of Employment Continuation Agreement entered into between
Quaker State and certain of its executive officers (filed as
Exhibit 10(p) to the Form 10-K for the fiscal year ended
December 31, 1996 and incorporated herein by reference).*
11. Computation of Per Share Earnings, filed as Exhibit 11 to Form
10-Q for the quarter ended September 30, 1996 and incorporated
herein by reference.
13. Report on Form 10-Q for the quarter ended September 30, 1996,
incorporated herein by reference.
21. Subsidiaries of the Registrant, filed herewith.
23.1 Consent of Coopers & Lybrand L.L.P., filed herewith.
23.2 Consent of Arthur Andersen L.L.P., filed herewith.
23.3 Consent of Ernst & Young, L.L.P., filed herewith.
23.4 Consent of Pillsbury, Madison & Sutro, filed as part of
Exhibit 5.
24. Power of Attorney, included as part of the signature page.