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EXHIBIT 10(k)(ii)
SECOND AMENDMENT
TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement ("Second Amendment") is made
and entered into effective as of January 1, 1997, by and between Quaker State
Corporation (hereinafter called the "Corporation"), a Delaware corporation, and
Xxxxxxx X. Xxxx, an individual currently residing in Dallas, Texas (hereinafter
called the "Executive").
WHEREAS, the Executive is employed by the Corporation as its Chairman and
Chief Executive Officer under an Employment Agreement dated as of August 1,
1994, which was previously amended by an Amendment to Employment Agreement
dated as of May 10, 1996 (which agreement, as amended, is referred to herein as
the "Employment Agreement"); and
WHEREAS, the parties desire by this Second Amendment to modify the terms
of the Employment Agreement in certain respects as hereinafter set forth;
NOW, THEREFORE, the Corporation and the Executive covenant and agree as
follows, intending to be legally bound:
1. Paragraph 3(a) of the Employment Agreement ("Base Salary") is hereby
amended by adding the following provisions at the end of the first
sentence thereof:
For services performed by the Executive for the Corporation
pursuant to this Agreement during calendar years 1997 and
1998 while the Executive holds the position of Chief
Executive Officer of the Corporation, the Corporation shall
pay the Executive a base salary at the rates of at least
$700,000 for calendar year 1997 and at least $750,000 for
calendar year 1998, payable each year in substantially equal
installments in accordance with the Corporation's regular
payroll practices.
2. Paragraph 4 of the Employment Agreement ("Annual Bonuses") is hereby
amended by adding the following provisions at the end of the fourth
sentence thereof:
For calendar years 1997 and 1998, the Executive shall be
eligible under the Corporation's cash bonus and incentive
plan for executive officers to receive a cash bonus based on
the Corporation's achievement of certain operating and/or
financial goals established at the beginning of each such
year by the Organization and Compensation Committee of the
Board. Such bonus shall equal sixty percent (60%) of the
Executive's base salary as in effect during such year
(prorated for a partial year of employment), payable upon
the Corporation's obtaining or exceeding the targeted
performance goals.
3. Paragraph 5 of the Employment Agreement ("Other Benefits") is hereby
amended by restating subparagraph 5(b) thereof in its entirety to provide
as follows:
(b) Additional Restricted Share Award. As of August 1, 1994,
the Corporation shall award to the Executive pursuant to
the Corporation's 1994 Stock Incentive Plan (the "1994
Plan") 60,000 restricted shares of Capital Stock. Such
60,000 restricted shares (the "Basic Restricted Stock
Award") shall be subject to transferability and
forfeiture restrictions which shall expire with respect
to 20,000 such shares on each of July 31, 1995, July 31,
1996 and July 31,
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1997. In addition, as of August 1, 1994, the
Corporation shall award to the Executive
pursuant to the 1994 Plan 100,000 restricted
shares of Capital Stock (the "Performance
Restricted Stock Award"), and as of January 30,
1996, the Corporation shall award to the
Executive pursuant to the 1994 Plan 25,000
restricted shares of Capital Stock (the "Second
Performance Restricted Stock Award"). Such
125,000 restricted shares shall be subject to
transferability and forfeiture restrictions
which shall expire as to the number of shares
set forth below if, prior to the applicable
dates provided below, the average closing price
of the Capital Stock for any ten (10)
consecutive trading days equals or exceeds the
following levels:
Average Closing Price No. of Shares Vesting Date
--------------------- --------------------- ----
$18.00 per share 25,000 January 30, 2001
$20.00 per share 33,333 August 1, 1999
$25.00 per share 33,333 August 1, 2000
$30.00 per share 33,334 August 1, 2001
The foregoing target prices shall be appropriately
adjusted, as determined in the discretion of the
Organization and Compensation Committee of the Board, to
reflect any material stock split, stock dividend,
recapitalization or similar transaction with respect to
the Capital Stock. All transfer and forfeiture
restrictions with respect to the shares of Capital Stock
under the Basic Restricted Stock Award, the Performance
Restricted Stock Award and the Second Performance
Restricted Stock Award shall lapse in their entirety in
the event that (i) the Executive is discharged without
Cause (as hereinafter defined in Paragraph 7(d)(ii)),
(ii) the Executive resigns with Good Reason (as
hereinafter defined in Paragraph 7(d)(v)) or (iii) a
Section 8 Event (as defined in Section 8 of the 1994
Plan) occurs. The Basic Restricted Stock Award, the
Performance Restricted Stock Award and the Second
Performance Restricted Stock Award shall also be subject
to the other terms and conditions set forth in the
applicable award agreement.
Promptly after execution of this Second Amendment, the Executive and the
Corporation shall execute a mutually acceptable amendment to the 1994
Performance Restricted Share Award Agreement dated August 1, 1994 to
confirm the above modifications.
4. Paragraph 5 of the Employment Agreement ("Other Benefits") is hereby
further amended by adding a new subparagraph 5(g) to provide as follows:
(g) Stock Option Awards. The Corporation shall, subject
to stockholder approval of an amendment to the 1994 Plan
to increase the number of shares of the Corporation's
Capital Stock available for issuance thereunder, grant
to the Executive under the 1994 Plan:
(i) as of January 2, 1997, non-statutory stock options
in respect of 100,000 shares of the Corporation's
Capital at an exercise price equal to the fair
market value of the
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Corporation's Stock on January 2, 1997,
with a term of ten years from the date of
grant; and
(ii) as of January 2, 1998, non-statutory stock options
in respect of 100,000 shares of the Corporation's
Capital Stock at an exercise price equal to the
fair market value of the Corporation's capital
stock on January 2, 1998, with a term of ten years
from the date of grant.
Both of the above stock option grants shall be
subject to the terms of the 1994 Plan and shall
be evidenced by written stock option agreements
between the Corporation and the Executive in
form and substance reasonably satisfactory to
the Corporation and the Executive.
5. Paragraph 7 of the Employment Agreement ("Termination") is hereby amended
by adding the following provisions immediately after subparagraph
7(d)(vi):
(vii) "Person" shall have the meaning provided
for such term in Section 3(a)(9) of the Exchange Act,
as supplemented by Section 13(d)(3) of the Exchange
Act; provided, however, that Person shall not include
(A) the Corporation or any subsidiary of the
Corporation or (B) any employee benefit plan sponsored
by the Corporation or any subsidiary of the
Corporation.
(viii) "Potential Change in Control" shall mean the
occurrence of any of the following events:
(a) a Person commences a tender offer (with adequate
financing) for securities representing at least 20% of
the Voting Power of the Corporation's securities;
(b) the Corporation enters into an agreement, the
consummation of which would constitute a Change in
Control;
(c) proxies for the election of a majority of the directors
of the Corporation are solicited by anyone other than
the Corporation; or
(d) any other event occurs which is deemed to be a Potential
Change in Control by the Board.
(ix) "Potential Change in Control Period"
shall mean the period commencing on the date that a
Potential Change in Control has occurred and ending
upon:
(a) the date any tender offer described in Paragraph
7(d)(viii)(A) above is abandoned;
(b) the acquisition of twenty percent (20%) of the Voting
Power of the Corporation's outstanding securities by any
Person if such acquisition does not constitute a
Potential Change in Control as defined in Paragraph
7(d)(viii);
(c) the date when any Person described in Paragraph
7(d)(viii), (x) shall own less than twenty percent (20%)
of the voting power of the Corporation's outstanding
securities, (y) shall have abandoned the
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tender or exchange offer, or (z) shall not have elected
a member of the Board as the case may be; or
(d) the date a Change in Control occurs.
(x) "Voting Power." A specified percentage
of "Voting Power" of a company shall mean such number
of the Voting Securities 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 capital stock of the company to
elect directors by a separate class vote); and Voting
Securities 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).
6. Paragraph 8 of the Employment Agreement ("Obligations of the Corporation
Upon Termination") is hereby amended by restating subparagraph 8(b)(iv) in
its entirety to provide as follows:
(iv) in the case of the resignation or
retirement of the Executive (but not his disability or
discharge without cause):
(A) during any period in which the Executive's spouse is
provided medical benefit coverage under the medical
benefit plan of Executive's prior employer at the
Executive's expense, the Corporation shall reimburse the
Executive for such expense upon proper accounting;
(B) in the event the Executive and/or the Executive's spouse
should no longer be entitled to coverage under the
medical benefit plan of Executive's prior employer, the
Corporation shall provide at its expense comparable
coverage for the Executive and his spouse for the
duration of their lives under the Corporation's medical
benefit plan or by such other method as may be selected
by the Corporation; and
(C) in the event the Executive should be required to pay for
his own coverage under his prior employer's medical
benefit plan, the Corporation shall reimburse the
Executive for such expense upon proper accounting.
7. Paragraph 8 of the Agreement ("Obligations of the Corporation Upon
Termination") is hereby further amended by restating subparagraph 8(c)
thereof in its entirety to provide as follows:
(c) Termination after Change in Control. In the event that
the Executive is discharged without Cause or resigns
with Good Reason at any time within two years following
the date that a Change in Control occurs, then, in
addition to any other amounts due to be paid to the
Executive under the foregoing provisions of this
Paragraph 8, the Executive shall be entitled to receive
from the Corporation for a period of three (3) years
from the Date of Termination (the "Supplemental
Period"): (i) the Executive's annual base salary for the
calendar year in which the Date of Termination occurs;
(ii) an annual bonus equal to the Executive's target
bonus for the calendar year in which the Date of
Termination occurs; and (iii) within 30 days of the Date
of Termination a cash amount (the "Incremental
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Retirement Benefit") equal to the present value,
calculated using a discount rate equal to the then
applicable Federal rate as determined under Section
1274(d) of the Internal Revenue Code, of the additional
retirement benefits (including, without limitation, any
pension, retiree life or retiree medical benefits) that
would have been payable or available to the Executive
under any employee benefit plan qualified under Section
401(a) of the Internal Revenue Code and under any
supplemental retirement plan based on (x) the age and
service the Executive would have attained or completed
had the Executive continued in the Corporation's employ
through the Supplemental Period and (y) where
compensation is a relevant factor, his pensionable
compensation at the Date of Termination.
Notwithstanding the foregoing or any other provision of
this Agreement to the contrary, if tax counsel to the
Corporation determines that any portion of any payment
under this Agreement, or under any other agreement with
or plan of the Corporation (in the aggregate "Total
Payments"), would constitute an "excess parachute
payment," then the payments to be made to the Executive
under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive
is entitled to receive shall be one dollar ($1) less
than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section
4999 of the Internal Revenue Code, or which the
Corporation may pay without loss of deduction under
Section 280G(a) of the Internal Revenue Code; provided,
however, that the foregoing limitation on Total Payments
shall not apply in the event that such tax counsel
determines that the benefits to the Executive under this
Agreement on an after-tax basis (i.e., after federal,
state and local income and excise taxes) if such
limitation is not applied would exceed the after-tax
benefits to the Executive if such limitation is applied.
In the event of a termination pursuant to this Paragraph
8(c), the Executive (and, to the extent applicable, his
dependents) shall be entitled after the Date of
Termination, until the earlier of the end of the
Supplemental Period or the date the Executive becomes
eligible for comparable benefits under a similar plan,
policy or program of a subsequent employer, to continue
to participate in all of the Corporation's employee and
executive welfare, pension and fringe benefit plans (the
"Benefit Plans"). To the extent any such benefits
cannot be provided under the terms of the applicable
plan, policy or program, the Corporation shall provide a
comparable benefit under another plan or from the
Corporation's general assets. The Executive's
participation in the Benefit Plans shall be on the same
terms and conditions that would have applied had the
Executive continued to be employed by the Corporation
through the Supplemental Period.
8. Paragraph 8 of the Employment Agreement is hereby further amended by
adding new subparagraphs 8(d) and 8(e) thereto, to provide as follows:
(d) Termination of Employment Following a Potential Change
in Control. Notwithstanding Section 8(c), if the
Executive's employment is terminated by the Corporation
without Cause during a Potential Change in Control
Period, the Executive shall be deemed,
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solely for the purpose of determining his rights under
this Agreement, to have been terminated by the
Corporation without Cause immediately after a Change in
Control.
(e) Funding of Payments. In the event a Potential Change in
Control occurs, the Corporation shall, in accordance
with the terms of the Quaker State Corporation Benefits
Protection Trust Agreement dated July 25, 1996 (the
"Trust Agreement"), deposit into the trust established
pursuant to the Trust Agreement an amount sufficient to
fund the present value of the Severance/Retirement
Benefit as of the date of funding.
9. All capitalized terms used herein but not otherwise defined herein shall
have the meanings assigned to them in the Employment Agreement.
10. Except as specifically modified by this Amendment, all terms and
conditions of the Employment Agreement shall remain in full force and
effect, unmodified.
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
the day and year first above set forth.
QUAKER STATE CORPORATION
By: /s/ XXXXXX X. XXXXXX
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Its: Vice Chairman and
Chief Financial Officer
EXECUTIVE
/s/ XXXXXXX X. XXXX
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Xxxxxxx X. Xxxx
