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