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Exhibit 4.4
QUAKER STATE CORPORATION
1994 STOCK INCENTIVE PLAN
As Approved by Stockholders on May 12, 1994
Amended and Restated Through May 16, 1997
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QUAKER STATE CORPORATION
1994 STOCK INCENTIVE PLAN
The purposes of the 1994 Stock Incentive Plan (the "Plan") are to encourage
eligible employees of Quaker State Corporation (the "Corporation") and its
Subsidiaries to increase their efforts to make the Corporation and each
Subsidiary more successful, to provide an additional inducement for such
employees to remain with the Corporation or a Subsidiary, to reward such
employees by providing an opportunity to acquire shares of the Capital Stock,
par value $1.00 per share, of the Corporation (the "Capital Stock") on
favorable terms and to provide a means through which the Corporation may
attract able persons to enter the employ of the Corporation or one of its
Subsidiaries. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the
Corporation, if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing at least fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Corporation (the "Board") and consisting of
not less than two members of the Board, each of whom at the time of appointment
to the Committee and at all times during service as a member of the Committee
shall be (i) a "non-employee director" as defined under Rule 16b-3(b)(3) under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), or any
successor Rule and (ii) an "outside director" under Section 162(m)(4)(C) of the
Internal Revenue Code of 1986 (the "Code"), or any successor provision.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan, or as to grants or awards under the Plan, shall be
subject to the determination of the Committee, which shall be final and
binding.
The Committee shall keep records of action taken. A majority of the
Committee shall constitute a quorum at any meeting, and the acts of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by all the members of the Committee, shall be the acts of
the Committee.
SECTION 2
ELIGIBILITY
Those key employees of the Corporation or any Subsidiary (including, but
not limited to, covered employees as defined in Section 162(m)(3) of the Code,
or any successor provision) who share responsibility for the management, growth
or protection of
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the business of the Corporation or any Subsidiary shall be eligible to be
granted stock options (with or without alternative stock appreciation rights
and/or cash payment rights) and to receive awards of restricted, performance
and other shares as described herein.
Subject to the provisions of the Plan, the Committee shall have full and
final authority, in its discretion, to grant stock options (with or without
alternative stock appreciation rights and/or cash payment rights) and to award
restricted, performance and other shares as described herein and to determine
the employees to whom any such grant or award shall be made and the number of
shares to be covered thereby. In determining the eligibility of any employee,
as well as in determining the number of shares covered by each grant or award
and whether alternative stock appreciation rights and/or cash payment rights
shall be granted in conjunction with a stock option, the Committee shall
consider the position and the responsibilities of the employee being
considered, the nature and value to the Corporation or a Subsidiary of his or
her services, his or her present and/or potential contribution to the success
of the Corporation or a Subsidiary and such other factors as the Committee may
deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Capital Stock that may be issued and
as to which grants or awards may be made under the Plan is 4,862,978 shares,
subject to adjustment and substitution as set forth in Section 7. If any stock
option granted under the Plan is cancelled by mutual consent or terminates or
expires for any reason without having been exercised in full, the number of
shares subject thereto shall again be available for purposes of the Plan,
except that to the extent that alternative stock appreciation rights granted in
conjunction with a stock option under the Plan are exercised and the related
stock option surrendered the number of shares available for purposes of the
Plan shall be reduced by the number of shares of Capital Stock issued upon
exercise of such alternative stock appreciation rights. If shares of Capital
Stock are forfeited to the Corporation pursuant to the restrictions applicable
to restricted shares awarded under the Plan, the shares so forfeited shall not
again be available for purposes of the Plan unless during the period such
shares were outstanding the grantee received no dividends or other benefits of
ownership from such shares. For the purpose of applying this standard, no
benefit is deemed to be derived by a grantee from voting rights or where
dividends accumulate but due to forfeiture are never realized. To the extent
any performance shares are not earned, the number of shares shall again be
available for purposes of the Plan.
The shares which may be issued under the Plan may be either authorized but
unissued shares or treasury shares or partly each.
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SECTION 4
GRANT OF STOCK OPTIONS, ALTERNATIVE
STOCK APPRECIATION RIGHTS AND CASH
PAYMENT RIGHTS AND AWARD OF RESTRICTED,
PERFORMANCE AND OTHER SHARES
The Committee shall have authority, in its discretion, (i) to grant
"incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem), (ii) to award restricted shares, (iii) to award performance
shares and (iv) to make other share awards, all as provided herein. The
Committee also shall have the authority, in its discretion, to grant
alternative stock appreciation rights in conjunction with incentive stock
options or nonstatutory stock options with the effect provided in Section 5(D)
and to grant cash payment rights in conjunction with nonstatutory stock options
with the effect provided in Section 5(E). Alternative stock appreciation
rights granted in conjunction with an incentive stock option may only be
granted at the time the incentive stock option is granted. Cash payment rights
may not be granted in conjunction with incentive stock options. Alternative
stock appreciation rights and/or cash payment rights granted in conjunction
with a nonstatutory stock option may be granted either at the time the stock
option is granted or at any time thereafter during the term of the stock
option.
During the duration of the Plan, the maximum award under the Plan to any
one employee during any calendar year will be 350,000 shares and/or $400,000 as
cash payment rights, subject to adjustment and substitution as set forth in
Section 7. For the purposes of this limitation, any adjustment or substitution
made pursuant to Section 7 with respect to the maximum number of shares set
forth in the preceding sentence shall also be made with respect to any shares
subject to stock options or share awards previously granted under the Plan to
such employee during the same calendar year.
Notwithstanding any other provision contained in the Plan or in any
agreement referred to in Section 5(I), but subject to the possible exercise of
the Committee's discretion contemplated in the last sentence of this paragraph,
the aggregate fair market value, determined as provided in Section 5(J) on the
date of grant, of the shares with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year under
all plans of the corporation employing such employee, any parent or subsidiary
corporation of such corporation and any predecessor corporation of any such
corporation shall not exceed $100,000. If the date on which one or more of
such incentive stock options could first be exercised would be accelerated
pursuant to any provision of the Plan or any stock option agreement, and the
acceleration of such exercise date would result in a violation of the
limitation set forth in the preceding sentence, then, notwithstanding any such
provision, but subject to the provisions of the next succeeding sentence, the
exercise dates of such incentive stock options shall be accelerated only to the
date or dates, if any, that do not result in a violation of such limitation
and, in such event, the exercise dates of the incentive stock options with the
lowest option prices shall be accelerated to the earliest such dates. The
Committee may, in its discretion, authorize the acceleration of the exercise
date of one or more incentive stock options even if such acceleration would
violate the $100,000 limitation set forth in the first sentence of this
paragraph and even if such incentive stock options are thereby converted in
whole or in part to nonstatutory stock options.
The Committee may accept the cancellation of outstanding stock options or
the contribution or surrender of restricted shares in return for the grant of
new stock options for the same or a different number of shares at the same
option exercise price or for restricted shares with different restrictions.
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SECTION 5
STOCK OPTIONS, ALTERNATIVE STOCK APPRECIATION
RIGHTS AND CASH PAYMENT RIGHTS
Stock options, alternative stock appreciation rights and cash payment
rights granted under the Plan shall be subject to the following terms and
conditions:
(A) The purchase price at which each stock option may be exercised
(the "option price") shall be such price as the Committee, in its
discretion, shall determine but shall not be less than one hundred percent
(100%) of the fair market value per share of the Capital Stock covered by
the stock option on the date of grant, except that in the case of an
incentive stock option granted to an employee who, immediately prior to
such grant, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or any
Subsidiary (a "Ten Percent Employee"), the option price shall not be less
than one hundred ten percent (110%) of such fair market value on the date
of grant. For purposes of this Section 5(A), the fair market value of the
Capital Stock shall be determined as provided in Section 5(J). For
purposes of this Section 5(A), an individual (i) shall be considered as
owning not only shares of stock owned individually but also all shares of
stock that are at the time owned, directly or indirectly, by or for the
spouse, ancestors, lineal descendants and brothers and sisters (whether by
the whole or half blood) of such individual and (ii) shall be considered as
owning proportionately any shares owned, directly or indirectly, by or for
any corporation, partnership, estate or trust in which such individual is a
stockholder, partner or beneficiary.
(B) The option price for each stock option shall be payable in cash in
United States dollars (including check, bank draft or money order);
provided, however, that in lieu of cash the person exercising the stock
option may (if authorized by the Committee at the time of grant in the case
of an incentive stock option, or at any time in the case of a nonstatutory
stock option) pay the option price in whole or in part by delivering to the
Corporation shares of the Capital Stock having a fair market value on the
date of exercise of the stock option, determined as provided in Section
5(J), equal to the option price for the shares being purchased, except that
(i) any portion of the option price representing a fraction of a share
shall in any event be paid in cash and (ii) no shares of the Capital Stock
which have been held for less than six months may be delivered in payment
of the option price of a stock option. Delivery of shares, if authorized,
may also be accomplished through the effective transfer to the Corporation
of shares held by a broker or other agent. The Corporation will also
cooperate with any person exercising a stock option who participates in a
cashless exercise program of a broker or other agent under which all or
part of the shares received upon exercise of the stock option are sold
through the broker or other agent or under which the broker or other agent
makes a loan to such person. Notwithstanding the foregoing, unless the
Committee, in its discretion, shall otherwise determine at the time of
grant in the case of an incentive stock option, or at any time in the case
of a nonstatutory stock option, the exercise of the stock option shall not
be deemed to occur and no shares of Capital Stock will be issued by the
Corporation upon exercise of the stock option until the Corporation has
received payment of the option price in full. The date of exercise of a
stock option shall be determined under procedures established by the
Committee, and as of the date of exercise the person exercising the stock
option shall be considered
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for all purposes to be the owner of the shares with respect to which the
stock option has been exercised. Payment of the option price with shares
shall not increase the number of shares of the Capital Stock which may be
issued under the Plan as provided in Section 3.
(C) Each stock option shall be exercisable at such time or times as
the Committee, in its discretion, shall determine, except that no stock
option shall be exercisable after the expiration of ten years (five years
in the case of an incentive stock option granted to a Ten Percent Employee)
from the date of grant. A stock option to the extent exercisable at any
time may be exercised in whole or in part.
(D) Alternative stock appreciation rights granted in conjunction with
a stock option shall entitle the person exercising the alternative stock
appreciation rights to surrender the related stock option, or any portion
thereof, and to receive from the Corporation in exchange therefor that
number of shares of the Capital Stock having an aggregate fair market value
on the date of exercise of the alternative stock appreciation rights equal
to the excess of the fair market value of one share of the Capital Stock on
such date of exercise over the option price per share times the number of
shares covered by the related stock option, or portion thereof, which is
surrendered. Alternative stock appreciation rights shall be exercisable to
the extent that the related stock option is exercisable and only by the
same person who is entitled to exercise the related stock option; provided,
however, that alternative stock appreciation rights granted in conjunction
with an incentive stock option shall not be exercisable unless the then
fair market value of the Capital Stock exceeds the option price of the
shares subject to the incentive stock option. Cash shall be paid in lieu
of any fractional shares. The date of exercise of alternative stock
appreciation rights shall be determined under procedures established by the
Committee, and as of the date of exercise the person exercising the
alternative stock appreciation rights shall be considered for all purposes
to be the owner of the shares to be received. To the extent that a stock
option as to which alternative stock appreciation rights have been granted
is exercised, cancelled, terminates or expires, the alternative stock
appreciation rights shall be cancelled. For the purposes of this Section
5(D), the fair market value of the Capital Stock shall be determined as
provided in Section 5(J).
(E) Cash payment rights granted in conjunction with a nonstatutory
stock option shall entitle the person who is entitled to exercise the stock
option, upon exercise of the stock option or any portion thereof, to
receive cash from the Corporation (in addition to the shares to be received
upon exercise of the stock option) equal to such percentage as the
Committee, in its discretion, shall determine not greater than one hundred
percent (100%) of the excess of the fair market value of a share of the
Capital Stock on the date of exercise of the stock option over the option
price per share of the stock option times the number of shares covered by
the stock option, or portion thereof, which is exercised. Payment of the
cash provided for in this Section 5(E) shall be made by the Corporation as
soon as practicable after the time the amount payable is determined. For
purposes of this Section 5(E), the fair market value of the Capital Stock
shall be determined as provided in Section 5(J).
(F) Unless the Committee, in its discretion, shall otherwise
determine, (i) no stock option shall be transferable by the grantee
otherwise than by Will, or if the
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grantee dies intestate, by the laws of descent and distribution of the
state of domicile of the grantee at the time of death and (ii) all stock
options shall be exercisable during the lifetime of the grantee only by the
grantee.
(G) Subject to the provisions of Section 4 in the case of incentive
stock options, unless the Committee, in its discretion, shall otherwise
determine:
(i) If the employment of a grantee is voluntarily
terminated with the consent of the Corporation or a Subsidiary, the
grantee becomes entitled to a severance benefit under the
Corporation's Severance Pay Plan for Salaried and Hourly Non-Union
Employees (the "Severance Plan") or a grantee retires under any
retirement plan of the Corporation or a Subsidiary, any outstanding
stock option held by such grantee shall be exercisable by the grantee
(but only to the extent exercisable by the grantee immediately prior
to the termination of employment) at any time prior to the expiration
date of such stock option or within three years after the date of
termination of employment of the grantee, whichever is the shorter
period, and to the extent not exercisable shall terminate;
(ii) Following the death of a grantee during employment,
any outstanding stock option held by the grantee at the time of death
shall be exercisable in full (whether or not so exercisable by the
grantee immediately prior to the death of the grantee) by the person
entitled to do so under the Will of the grantee, or, if the grantee
shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or within three
years after the date of death of the grantee, whichever is the shorter
period;
(iii) Following the death of a grantee after termination of
employment during a period when a stock option is exercisable, the
stock option shall be exercisable by such person entitled to do so
under the Will of the grantee or by such legal representative during
the shorter of the following two periods: (i) until the expiration
date of the stock option or (ii) within three years after the
termination of employment of the grantee or one year after the date of
death of the grantee (whichever is longer).
(iv) Unless Section 8(C) applies following termination of
employment, if the employment of a grantee terminates for any reason
other than voluntary termination with the consent of the Corporation
or a Subsidiary, severance under the Severance Plan, retirement under
any retirement plan of the Corporation or a Subsidiary or death, all
outstanding stock options held by the grantee at the time of such
termination of employment shall automatically terminate.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee
shall be final and binding.
(H) If a grantee of a stock option (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of
employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that
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this clause shall not apply if Section 8(C) applies following termination
of employment), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization
having a business relationship with the Corporation or any of its
Subsidiaries to cease doing business with the Corporation or any of its
Subsidiaries or in any way interferes with the relationship between any
such customer, supplier, licensee or other person and the Corporation or
any of its Subsidiaries or (iii) solicits any employee of the Corporation
or any of its Subsidiaries to leave the employment thereof or in any way
interferes with the relationship of such employee with the Corporation or
any of its Subsidiaries, the Committee, in its discretion, may immediately
terminate all outstanding stock options held by the grantee. Whether a
grantee has engaged in any of the activities referred to the preceding
sentence which would cause the outstanding stock options to be terminated
shall be determined, in its discretion, by the Committee, and any such
determination by the Committee shall be final and binding.
(I) All stock options, alternative stock appreciation rights and cash
payment rights shall be confirmed by an agreement which shall be executed
on behalf of the Corporation by the Chief Executive Officer (if other than
the President), the President or any Vice President and by the grantee.
The agreement confirming a stock option shall specify whether the stock
option is an incentive stock option or a nonstatutory stock option. The
provisions of such agreements need not be identical.
(J) Fair market value of the Capital Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Capital Stock is listed on the New York
Stock Exchange ("NYSE"), the highest and lowest sales prices per share of
the Capital Stock as quoted in the NYSE-Composite Transactions listing for
such date, (ii) if the Capital Stock is not listed on such exchange, the
highest and lowest sales prices per share of Capital Stock for such date on
(or on any composite index including) the principal United States
securities exchange registered under the 1934 Act on which the Capital
Stock is listed or (iii) if the Capital Stock is not listed on any such
exchange, the highest and lowest sales prices per share of the Capital
Stock for such date on the National Association of Securities Dealers
Automated Quotations System or any successor system then in use ("NASDAQ").
If there are no such sale price quotations for the date as of which fair
market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair
market value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of the Capital Stock
as so quoted on the nearest date before and the nearest date after the date
as of which fair market value is to be determined. The average should be
weighted inversely by the respective numbers of trading days between the
selling dates and the date as of which fair market value is to be
determined. If there are no such sale price quotations on or within a
reasonable period both before and after the date as of which fair market
value is to be determined, then fair market value of the Capital Stock
shall be the mean between the bona fide bid and asked prices per share of
Capital Stock as so quoted for such date on NASDAQ, or if none, the
weighted average of the means between such bona fide bid and asked prices
on the nearest
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trading date before and the nearest trading date after the date as of which
fair market value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner described
above in this Section 5 (J). If the fair market value of the Capital Stock
cannot be determined on any basis previously set forth in this Section 5(J)
for the date as of which fair market value is to be determined, the
Committee shall in good faith determine the fair market value of the
Capital Stock on such date. Fair market value shall be determined without
regard to any restriction other than a restriction which, by its terms,
will never lapse.
(K) The obligation of the Corporation to issue shares of the Capital
Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Corporation, (ii) the condition that the shares shall have been listed
(or authorized for listing upon official notice of issuance) upon each
stock exchange, if any, on which the Capital Stock may then be listed and
(iii) all other applicable laws, regulations, rules and orders which may
then be in effect.
Subject to the foregoing provisions of this Section 5 and the other
provisions of the Plan, stock options, alternative stock appreciation rights
and cash payment rights granted under the Plan shall be subject to such
restrictions and other terms and conditions, if any, as shall be determined, in
its discretion, by the Committee and set forth in the agreement referred to in
Section 5(l).
SECTION 6
RESTRICTED SHARES, PERFORMANCE SHARES AND
OTHER SHARE AWARDS
(A) RESTRICTED SHARES
Awards of restricted shares shall be confirmed by an agreement which shall
set forth the number of shares of the Capital Stock awarded, the restrictions
imposed thereon (including, without limitation, restrictions on the right of
the grantee to sell, assign, transfer or encumber such shares (except as
provided below) while such shares are subject to other restrictions imposed
under this Section 6(A)), the duration of such restrictions, events (which may,
in the discretion of the Committee, include termination of employment and/or
performance-based events) the occurrence of which would cause a forfeiture of
the restricted shares and such other terms and conditions as shall be
determined, in its discretion, by the Committee. The agreement shall be
executed on behalf of the Corporation by the Chief Executive Officer (if other
than the President), the President or any Vice President and by the grantee.
The provisions of such agreements need not be identical. Awards of restricted
shares shall be effective on the date determined, in its discretion, by the
Committee.
Following the award of restricted shares and prior to the lapse or
termination of the applicable restrictions, share certificates for the
restricted shares shall be issued in the name of the grantee and deposited with
the Corporation in escrow together with related stock powers signed by the
grantee. Except as provided in Section 7, the Committee, in its discretion,
may determine that dividends and other distributions on the shares held in
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escrow shall not be paid to the grantee until the lapse or termination of the
applicable restrictions. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Upon the lapse or termination of the applicable restrictions (and not before
such time), the grantee shall receive the share certificates for the restricted
shares (subject to the provisions of Section 10) and unpaid dividends, if any.
From the date the award of restricted shares is effective, the grantee shall be
a stockholder with respect to all the shares represented by the share
certificates and shall have all the rights of a stockholder with respect to all
the restricted shares, including the right to vote such shares and to receive
all dividends and other distributions paid with respect to such shares, subject
only to the preceding provisions of this paragraph and the other restrictions
imposed by the Committee.
If a grantee of restricted shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment)
which is in competition with the Corporation or any of its Subsidiaries
(provided, however, that this clause shall not apply if Section 8(D) applies),
(ii) induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to leave
the employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed. Whether a grantee has engaged in
any of the activities referred to in the preceding sentence which would cause
the restricted shares to be forfeited shall be determined, in its discretion,
by the Committee, and any such determination by the Committee shall be final
and binding.
Neither this Section 6(A) nor any other provision of the Plan shall
preclude a grantee from transferring or assigning restricted shares to (i) the
trustee of a trust that is revocable by such grantee alone, both at the time of
the transfer or assignment and at all times thereafter prior to such grantee's
death or (ii) the trustee of any other trust to the extent approved in advance
by the Committee in writing. A transfer or assignment of restricted shares
from such trustee to any person other than such grantee shall be permitted only
to the extent approved in advance by the Committee in writing, and restricted
shares held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable agreement as if such
trustee were a party to such agreement.
Restricted Performance Shares. Specifically, the Committee, in its
discretion, may award restricted performance shares with three-year performance
cycles which will vest if three-year average return on average equity ("Average
ROE") and three-year cumulative earnings per share ("Cumulative EPS") goals
established by the Committee are achieved. The Average ROE percentage and the
Cumulative EPS figure will be calculated from the consolidated financial
statements of the Corporation and its Subsidiaries, excluding (i) the effect of
changes in Federal income tax rates, (ii) the effect of unusual and
extraordinary items as defined by Generally Accepted Accounting Principles
("GAAP") and (iii) the cumulative effect of changes in accounting principles in
accordance with GAAP. The Cumulative EPS figure will also be calculated using
primary net income per share,
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excluding the effect of share distributions for which under GAAP net income per
share is adjusted.
The restricted performance shares for a particular three-year performance
cycle and the performance goals to apply to these shares must be established in
the year prior to the first year of the three-year period, except that the key
employees designated to receive restricted performance shares for the
three-year period 1994-1996 and the performance goals to apply to these shares
were determined by the Committee on or prior to March 23, 1994. Restricted
performance shares as to which the restrictions do not lapse will be forfeited.
Awards of restricted performance shares need not be made every year.
Dividends and other distributions (except dividends or other distributions
payable in shares of the Corporation's Capital Stock) on the restricted
performance shares held in escrow shall be paid by the Corporation to the
grantees of the restricted performance shares at the time such dividends or
other distributions would be payable to stockholders, unless the Committee, in
its discretion, determines otherwise. It is intended that any compensation
received by grantees of restricted performance shares will qualify as
performance-based compensation under Section 162(m) of the Code and this
portion of Section 6(A) shall be interpreted consistently with that intention.
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(B) PERFORMANCE SHARES
An award of performance shares shall entitle the grantee to receive up to
the number of shares of Capital Stock covered by the award at the end of or at
a specified time or times during a specified award period contingent upon the
extent to which one or more predetermined performance targets have been met
during the award period. All the terms and conditions of an award of
performance shares shall be determined, in its discretion, by the Committee and
shall be confirmed by an agreement which shall be executed on behalf of the
Corporation by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the grantee.
The performance target or targets may be expressed in terms of earnings per
share, return on stockholder equity, operating profit, return on capital
employed or such other measures of accomplishment by the Corporation or a
Subsidiary, or any branch, department or other portion thereof, or the grantee
individually, as may be established, in its discretion, by the Committee. The
performance target or targets may vary for different award periods and need not
be the same for each grantee receiving an award for an award period.
At any time prior to the end of an award period, the Committee may adjust
downward (but not upward) the performance target or targets as a result of
major events unforeseen at the time of the award, such as changes in the
economy, in the industry or laws affecting the operations of the Corporation or
a Subsidiary, or any branch, department or other portion thereof, or any other
event the Committee determines would have a significant impact upon the
probability of attaining the previously established performance target or
targets.
Payment of earned performance shares shall be made to grantees as soon as
practicable after the shares have been earned. The Committee, in its
discretion, may determine that grantees shall also be entitled to any dividends
or other distributions that would have been paid on earned performance shares
had the shares been outstanding during the period from the award to the payment
of the performance shares. Unless otherwise provided, in its discretion, by
the Committee, any such dividends or other distributions shall not bear
interest.
Unless otherwise provided in the agreement confirming the award of the
performance shares, if prior to the close of an award period, the employment of
a grantee of performance shares is voluntarily terminated with the consent of
the Corporation or a Subsidiary, the grantee becomes entitled to a severance
benefit under the Severance Plan, the grantee retires under any retirement plan
of the Corporation or a Subsidiary or the grantee dies during employment, the
Committee in its discretion, may determine to pay to the grantee all or part of
the performance shares based upon the extent to which the Committee determines
the performance target or targets have been achieved as of the date of
termination of employment, retirement or death, the period of time remaining
until the end of the award period and/or such other factors as the Committee
may deem relevant. If the Committee, in its discretion, determines that all or
any part of the performance shares shall be paid, payment shall be made to the
grantee or the estate of the grantee as promptly as practicable following such
determination.
Except as otherwise provided in Section 8(E), if the employment of a
grantee of an award of performance shares terminates prior to the time the
performance shares have
13
been earned for any reason other than voluntary termination with the consent of
the Corporation or a Subsidiary, severance under the Severance Plan, retirement
under any retirement plan of the Corporation or a Subsidiary or death, the
unearned performance shares shall be deemed not to have been earned and such
shares shall not be paid to the grantee.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee shall
be final and binding.
If a grantee of performance shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment)
which is in competition with the Corporation or any of its Subsidiaries
(provided, however, that this clause shall not apply if Section 8(E) applies),
(ii) induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii)
solicits any employee of the Corporation or any of its Subsidiaries to leave
the employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately cancel the award. Whether a grantee has engaged in any of the
activities referred to the preceding sentence which would cause the award of
performance shares to be cancelled shall be determined, in its discretion, by
the Committee, and any such determination by the Committee shall be final and
binding.
(C) OTHER SHARE AWARDS
The Committee, in its discretion, may from time to time make other awards
of shares of Capital Stock under the Plan as an inducement to the grantee to
enter the employment of the Corporation or a Subsidiary, in recognition of the
contribution of the grantee to the performance of the Corporation or a
Subsidiary, or any branch, department or other portion thereof, in recognition
of the grantee's individual performance or on the basis of such other factors
as the Committee may deem relevant. Capital Stock issued as a bonus pursuant
to this Section 6(C) shall be issued for such consideration as the Committee
shall determine in its sole discretion.
SECTION 7
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Capital
Stock payable in shares of the Capital Stock, the number of shares of the
Capital Stock subject to any outstanding stock options or performance share
awards, the number of shares of the Capital Stock which may be issued under the
Plan but are not subject to outstanding stock options or performance share
awards and the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the Plan to any employee
during any calendar year under Section 4 on the date fixed for determining the
stockholders entitled to receive such stock dividend or distribution shall be
adjusted by
14
adding thereto the number of shares of the Capital Stock which would have been
distributable thereon if such shares had been outstanding on such date. Shares
of Capital Stock so distributed with respect to any restricted shares held in
escrow shall also be held by the Corporation in escrow and shall be subject to
the same restrictions as are applicable to the restricted shares on which they
were distributed.
If the outstanding shares of the Capital Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Capital Stock subject to any then outstanding stock option or
performance share award, and for each share of the Capital Stock which may be
issued under the Plan but which is not then subject to any outstanding stock
option or performance share award, the number and kind of shares of stock or
other securities into which each outstanding share of the Capital Stock shall
be so changed or for which each such share shall be exchangeable. Unless
otherwise determined by the Committee, in its discretion, any such stock or
securities, as well as any cash or other property, into or for which any
restricted shares held in escrow shall be changed or exchangeable in any such
transaction shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was issued or
distributed.
In case of any adjustment or substitution as provided for in the first two
paragraphs of this Section 7, the aggregate option price for all shares subject
to each then outstanding stock option prior to such adjustment or substitution
shall be the aggregate option price for all shares of stock or other securities
(including any fraction) to which such shares shall have been adjusted or which
shall have been substituted for such shares. Any new option price per share
shall be carried to at least three decimal places with the last decimal place
rounded upwards to the nearest whole number.
If the outstanding shares of the Capital Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Capital Stock, (i) the Committee shall make any adjustments
to any then outstanding stock option which it determines are equitably required
to prevent dilution or enlargement of the rights of grantees which would
otherwise result from any such transaction, and (ii) unless otherwise
determined by the Committee, in its discretion, any stock, securities, cash or
other property distributed with respect to any restricted shares held in escrow
or for which any restricted shares held in escrow shall be exchanged in any
such transaction shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was distributed
or exchanged.
In case of any adjustment or substitution as provided for in the first two
paragraphs of this Section 7, the exercise price for all shares subject to each
then outstanding stock option prior to such adjustment or substitution shall be
the exercise price for all shares of stock or other securities (including any
fraction) after the adjustment or substitution.
If the outstanding shares of the Capital Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Capital Stock, (i) the
15
Committee shall make any adjustments to any then outstanding stock option which
it determines are equitably required to prevent dilution or enlargement of the
rights of grantees which would otherwise result from any such transaction,
except that no such adjustment will be made to the exercise price of any stock
option and (ii) unless otherwise determined by the Committee, in its
discretion, any stock, securities, cash or other property distributed with
respect to any restricted shares held in escrow or for which any restricted
shares held in escrow shall be exchanged in any such transaction shall also be
held by the Corporation in escrow and shall be subject to the same restrictions
as are applicable to the restricted shares in respect of which such stock,
securities, cash or other property was distributed or exchanged.
Except as provided in this Section 7, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) DEFINITIONS.
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act as in effect on the effective date of the
Plan.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) A specified percentage of "Voting Power" of a company shall mean
such number of the Voting Shares as shall enable the holders thereof to
cast such percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of any class of
stock other than the common stock of the company to elect directors by a
separate class vote); and "Voting Shares" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate class
vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or
opposed by the Board.
(5) "Continuing Directors" shall mean a director of the Corporation
who either (a) was a director of the Corporation on the effective date of
the Plan or (b) is an individual whose election, or nomination for
election, as a director of the Corporation was approved by a vote of at
least two-thirds of the directors then still
16
in office who were Continuing Directors (other than an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Corporation
which would be subject to Rule 14a-11 under the 1934 Act, or any successor
Rule).
(6) "Section 8 Event" shall mean the date upon which any of the
following events occurs:
(a) The Corporation acquires actual knowledge that any Person
other than the Corporation, a Subsidiary or any employee benefit
plan(s) sponsored by the Corporation or a Subsidiary has acquired the
Beneficial Ownership, directly or indirectly, of securities of the
Corporation entitling such Person to 30% or more of the Voting Power
of the Corporation;
(b) A Tender Offer is made to acquire securities of the
Corporation entitling the holders thereof to 30% or more of the Voting
Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act (or
any successor Rule) relating to the election or removal of 50% or more
of the members of the Board or any class of the Board shall be made by
any person other than the Corporation or less than 51% of the members
of the Board shall be Continuing Directors; or
(d) The stockholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other disposition
of assets of the Corporation as a result of which the stockholders of
the Corporation immediately prior to such transaction shall not hold,
directly or indirectly, immediately following such transaction a
majority of the Voting Power of (i) in the case of a merger or
consolidation, the surviving or resulting corporation, (ii) in the
case of a share exchange, the acquiring corporation or (iii) in the
case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately
following the transaction, holds more than 10% of the consolidated
assets of the Corporation immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a grantee
are included in determining the Beneficial Ownership of a Person referred
to in paragraph 6(a), (ii) a grantee is required to be named pursuant to
Item 2 of the Schedule 14D-1 (or any similar successor filing requirement)
required to be filed by the bidder making a Tender Offer referred to in
paragraph 6(b) or (iii) if a grantee is a 144 participant" as defined
in Instruction 3 to Item 4 of Schedule 14A under the 1934 Act (or any
successor Rule) in a solicitation (other than a solicitation by the
Corporation) referred to in paragraph 6(c), then no Section 8 Event with
respect to such grantee shall be deemed to have occurred by reason of such
event.
(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, in case any
"Section 8 Event" occurs all outstanding
17
stock options (other than those held by a person referred to in the proviso to
Section 8(A)(6)) shall become immediately and fully exercisable whether or not
otherwise exercisable by their terms.
(C) EXTENSION OF THE EXPIRATION DATE OF STOCK OPTIONS.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, all
outstanding stock options held by a grantee (other than a grantee referred to
in the proviso to Section 8(A)(6)) whose employment with the Corporation or a
Subsidiary terminates within one year of any Section 8 Event for any reason
other than voluntary termination with the consent of the Corporation or a
Subsidiary, severance under the Severance Plan, retirement under any retirement
plan of the Corporation or a Subsidiary or death which are exercisable shall
continue to be exercisable for a period of three years from the date of such
termination of employment, but in no event after the expiration date of the
stock option.
(D) LAPSE OF RESTRICTIONS ON RESTRICTED SHARE AWARDS.
Unless the agreement referred to in Section 6(A) shall otherwise provide,
notwithstanding any other provision contained in the Plan, if any "Section 8
Event" occurs prior to the scheduled lapse of all restrictions applicable to
restricted share awards under the Plan (other than those held by a person
referred to in the proviso to Section 8(A)(6)), all such restrictions shall
lapse upon the occurrence of any such "Section 8 Event" regardless of the
scheduled lapse of such restrictions.
(E) PAYMENT OF PERFORMANCE SHARES.
Unless the agreement referred to in Section 6(B) shall otherwise provide,
notwithstanding any other provision contained in the Plan, if any "Section 8
Event" occurs prior to the end of an award period with respect to an award of
performance shares to a grantee, the performance shares (unless the grantee is
a person referred to in the proviso to Section 8(A)(6)) shall be deemed to have
been fully earned as of the date of the Section 8 Event, regardless of the
attainment or nonattainment of any performance target and shall be paid to the
grantee as promptly as practicable after the Section 8 Event.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee any right
to be granted a stock option (with or without alternative stock appreciation
rights and/or cash payment rights) or an award under the Plan. Nothing in the
Plan, in any stock option, alternative stock appreciation rights or cash
payment rights granted under the Plan or in any award under the Plan or in any
agreement providing for any of the foregoing shall confer any right on any
employee to continue in the employ of the Corporation or any Subsidiary or
interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the employment of any employee at any time.
18
SECTION 10
WITHHOLDING
Income or employment taxes may be required to be withheld by the
Corporation or a Subsidiary in connection with the exercise of a stock option
or alternative stock appreciation rights, upon a "disqualifying disposition" of
the shares acquired upon exercise of an incentive stock option, at the time
restricted shares are granted or vest or performance shares are earned or upon
the receipt by the grantee of cash in payment of cash payment rights or
dividends on restricted stock which has not vested. Except as provided below,
the grantee shall pay the Corporation in cash the amount required to be
withheld.
A grantee may elect to have any withholding obligation at the time of the
exercise of a nonstatutory stock option or alternative stock appreciation
rights or at the time restricted shares vest or performance shares are earned
satisfied by the Corporation withholding from the shares of Capital Stock the
grantee would otherwise receive full shares of Capital Stock having a fair
market value, determined as provided in Section 5(J), on the date that the
amount of tax to be withheld is determined (the "Tax Date") equal to, or as
nearly equal as possible to but less than, the amount required to be withheld.
The Corporation will request that the grantee pay any additional amount
required to be withheld directly to the Corporation in cash. Any income or
employment taxes required to be withheld by the Corporation or any of its
Subsidiaries upon the receipt by the grantee of cash in payment of cash payment
rights or dividends will be satisfied by the Corporation by withholding the
taxes required to be withheld from the cash the grantee would otherwise
receive.
A grantee may also elect to have any withholding obligation in connection
with the exercise of a nonstatutory stock option or alternative stock
appreciation rights, upon a "disqualifying disposition" of the shares acquired
upon the exercise of an incentive stock option or at the time restricted shares
are granted or vest or performance shares are earned satisfied in whole or in
part by the grantee tendering to the Corporation a number of previously owned
shares of Capital Stock having a fair market value, determined as provided in
Section 5(J), on the Tax Date equal to or less than the amount required to be
withheld.
If a grantee does not pay any income or employment taxes required to be
withheld by the Corporation or any of its Subsidiaries within ten days after a
request for the payment of such taxes, the Corporation or such Subsidiary may
withhold such taxes from any other compensation to which the grantee is
entitled from the Corporation or any of its Subsidiaries.
SECTION 11
AMENDMENT
The right to alter and amend the Plan at any time and from time to time and
the right to revoke or terminate the Plan are hereby specifically reserved to
the Board; provided that no such alteration or amendment of the Plan shall,
without stockholder approval, (i) increase the number of shares which may be
issued under the Plan as set forth in Section
19
3, (ii) increase the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the Plan to any one
employee during any one calendar year as set forth in Section 4, (iii)
materially increase the benefits accruing under the Plan to persons subject to
the provisions of Section 16(b) of the 1934 Act, (iv) materially modify the
requirements as to eligibility for participation in the Plan by persons subject
to the provisions of Section 16(b) of the 1934 Act, (v) make any changes in
the class of employees eligible to receive incentive stock options under the
Plan or (vi) extend the duration of the Plan. No alteration, amendment,
revocation or termination of the Plan shall, without the written consent of the
holder of an outstanding grant or award under the Plan, adversely affect the
rights of such holder with respect to such outstanding grant or award.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be December 16,
1993, the date of adoption of the Plan by the Board, provided that such
adoption of the Plan by the Board is approved by the affirmative votes of the
holders of a majority of the Capital Stock present in person or by proxy and
entitled to vote at a meeting of stockholders duly called and held on or prior
to December 15, 1994. No stock option or alternative stock appreciation rights
granted under the Plan may be exercised and no restricted shares may be awarded
until after such approval. No stock option, alternative stock appreciation
rights or cash payment rights may be granted and no awards may be made under
the Plan subsequent to December 15, 2003.
The Plan was amended, by the Corporation's stockholders on May 16, 1996, to
increase the shares available for grant under the Plan. The Plan was amended
by the Board on October 24, 1996 to comply with certain changes made to the
1994 Act. The Plan was amended, by the Corporation's stockholders on May 16,
1997, to eliminate the authorization to reprice stock options, to authorize the
issuance under the Plan of 3,500,000 additional shares of the Company's capital
stock and to set maximum limitations on awards to comply with the Code.
IN WITNESS WHEREOF, the Corporation has evidenced the adoption of this
Restated Plan by the signature of its duly authorized officer effective May 16,
1997.
QUAKER STATE CORPORATION
Attest:
By: /s/ Paul E. Konney
/s/ C Sherwood ---------------------------------------
- ---------------------- Paul E. Konney
Assistant Secretary Senior Vice President, General
Counsel and Secretary
(SEAL)