SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-69e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or Rule 14a-12
Quaker Chemical Corporation
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(Name of Registrant as Specified In Its Charter)
- ---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
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[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11: (Set forth the amount on which
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statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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QUAKER CHEMICAL CORPORATION
Elm and Lee Streets
Conshohocken, Pennsylvania 19428
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------
To the Shareholders of Quaker Chemical Corporation:
Notice is hereby given that the Annual Meeting of Shareholders of Quaker
Chemical Corporation (the "Company") will be held in Salons A and B,
Philadelphia Marriott West, Matson Ford at Front Street, 111 Crawford Avenue,
West Conshohocken, Pennsylvania 19428, on Wednesday, May 12, 1999, at 10:30
A.M., local time, for the following purposes:
1. To elect three (3) Class I Directors, each to serve for three
years and until his respective successor is elected and qualified;
2. To consider and act upon a proposal to approve the adoption of the
1999 Long-Term Performance Incentive Plan;
3. To consider and act upon ratifying the appointment of
PricewaterhouseCoopers LLP as the Company's independent
accountants for the year 1999; and
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 12, 1999 are
entitled to notice of and to vote at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY IN THE SELF-ADDRESSED ENVELOPE ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
/s/ D. Jeffry Benoliel
D. Jeffry Benoliel
Secretary
Dated: March 31, 1999
QUAKER CHEMICAL CORPORATION
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PROXY STATEMENT
-----------------------
The solicitation of the accompanying proxy is made by and on behalf of the
Board of Directors of Quaker Chemical Corporation, a Pennsylvania corporation
(the "Company"), whose principal executive offices are located at Elm and Lee
Streets, Conshohocken, Pennsylvania 19428, for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 12, 1999, and at any adjournments
thereof. The Meeting will be held in Salons A and B, Philadelphia Marriott West,
Matson Ford at Front Street, 111 Crawford Avenue, West Conshohocken,
Pennsylvania 19428 at 10:30 A.M., local time. The approximate date on which this
Proxy Statement and the accompanying form of proxy will first be sent or given
to shareholders is March 31, 1999. Any shareholder executing and delivering the
accompanying proxy has the power to revoke it at any time prior to its use by
giving notice of its revocation to the Secretary of the Company.
The Company will bear the cost of the solicitation of proxies. Proxies will
be solicited by mail, telephone, facsimile, electronic mail, and personal
contact by certain officers and regular employees of the Company. The Company
will, upon the request of record holders, pay reasonable expenses incurred by
record holders who are brokers, dealers, banks or voting trustees, or their
nominees, for mailing proxy material and the Company's Annual Report to
Shareholders to any beneficial holder of the Common Stock they hold of record.
Proxies in the accompanying form which are properly executed, returned to
the Company, and not revoked will be voted in accordance with the instructions
thereon, or, in the absence of specific instruction, will be voted for the
election of all three (3) of the nominees named therein, for approval of the
1999 Long-Term Performance Incentive Plan, and for ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants for the year 1999.
As of March 12, 1999, the outstanding voting securities of the Company
consisted of 8,902,377 shares of Common Stock, $1.00 par value ("Common Stock").
As more specifically provided in Article 5 of the Company's Articles of
Incorporation, shareholders who, as of March 12, 1999, held shares of the
Company's Common Stock beneficially owned since March 1, 1996 are entitled to
cast ten (10) votes for each such share. Holders of shares the beneficial
ownership of which was acquired after March 1, 1996 are entitled to cast one (1)
vote per share, subject to certain exceptions described in Exhibit A hereto.
Based on the information available to the Company on March 12, 1999, the holders
of 2,859,332 shares of Common Stock will be entitled to cast ten (10) votes with
respect to each such share, and the holders of 6,043,045 shares of Common Stock,
including but not limited to those shares held in "street" or "nominee" name or
by a broker, clearing agency, voting trustee, bank, trust company, or other
nominee which have been presumed to have been acquired by the beneficial owner
subsequent to March 1, 1996 in accordance with the terms and conditions of
Article 5 of the Company's Articles of Incorporation, will be entitled to cast
one (1) vote with respect to each such share, representing an aggregate of
34,636,365 votes. The aforementioned presumption that a share is entitled to one
(1) vote rather than ten (10) is rebuttable upon presentation to the Company of
written evidence to the contrary in accordance with the procedures established
by the Company and described in Exhibit A hereto. The effect of rebutting the
foregoing presumption will be to increase the number of votes that may be cast
at the Meeting. Depending on the number of shares with respect to which the
aforementioned presumption is rebutted, the total number of votes that may be
cast at the Meeting could be increased to as many as 89,023,770. The presence,
in person or by proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a particular matter will
constitute a quorum for the purpose of considering such matter. Abstentions, and
any shares as to which a broker or nominee has indicated that it does not have
discretionary authority to vote, will be counted only for purposes of
determining whether a quorum is present at the Meeting and, thus, will have the
effect of a vote to "Withhold Authority" in the election of directors or as an
"Against" vote on all other matters included in the proxy.
Only shareholders of record at the close of business on March 12, 1999 are
entitled to notice of and to vote at the Meeting or any adjournments thereof.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners
The following table sets forth information, as of March 12, 1999, with
respect to persons known to the Company to be the beneficial owners of more than
five percent of its Common Stock (its only class of outstanding equity
securities). Peter A. Benoliel, DePrince, Race & Zollo, Inc., and The TCW Group,
Inc. have sole voting and dispositive power over the outstanding Common Stock
listed opposite their names.
Number
of Shares Percent Number
Name and Address Owned (1) of Class(2) of Votes
---------------- --------- ----------- --------
Peter A. Benoliel 501,385(3) 5.6 4,713,580
130 Cornwall Lane
St. Davids, PA 19087
DePrince, Race & Zollo, Inc. 471,900(4) 5.3 471,900(4)
201 South Orange Street
Suite 850
Orlando, FL 32801
The TCW Group, Inc. 437,500(4) 5.0 437,500(4)
865 South Figueroa Street
Los Angeles, CA 90017
- --------------
(1) Based upon information contained in filings made by the named person with
the Securities and Exchange Commission.
(2) Based upon 8,902,377 shares outstanding.
(3) Includes 30,000 shares subject to options that are currently exercisable or
will become exercisable within sixty (60) days of the record date.
(4) These shares, which are held in street name, are presumed under Article 5
of the Company's Articles of Incorporation to be entitled to one (1) vote
per share.
2
Directors and Officers
The following table sets forth information, as of March 12, 1999, with
respect to beneficial ownership of the Company's Common Stock by each director,
each nominee for director, each executive officer named in the Summary
Compensation Table, and all directors and executive officers of the Company as a
group. Each director, nominee, and executive officer has sole voting and
dispositive power over the Common Stock listed opposite his/her name unless
otherwise noted.
Number
of Shares Percent Number of
Name Owned of Class (1) Votes
---- ----- ------------ -----
Joseph B. Anderson, Jr. 5,000(2) --- 8,600
Patricia C. Barron 11,487(3) --- 35,427
William L. Batchelor 181,082 2.0 1,810,820
Peter A. Benoliel 501,385(4)(5) 5.6 4,713,580
Lennox K. Black 9,452 --- 79,202
Donald R. Caldwell 5,482 --- 5,482
Robert E. Chappell 2,482 --- 2,482
Edwin J. Delattre 2,092(2) --- 6,142
Robert P. Hauptfuhrer 7,858 --- 72,658
Ronald J. Naples 455,186(2)(5) 4.9 596,186
Robert H. Rock 2,482 --- 2,482
Joseph W. Bauer 1,000 --- 1,000
Jose Luiz Bregolato 57,608(5) --- 608
Daniel S. Ma 38,023(5) --- 4,668
Marcus C. J. Meijer 102,450(5) 1.1 16,950
All directors and executive 1,429,652(5) 15.1 7,369,238(6)
officers as a group (19 persons)
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(1) Based upon 8,902,377 shares outstanding. The percentage is less than 1%,
except as otherwise indicated.
(2) Includes 500 shares in the case of Mr. Anderson, 2,092 shares in the case
of Dr. Delattre, and 2,186 shares in the case of Mr. Naples held jointly
with their spouse.
(3) Includes 10 shares held in an indirect trust account for child.
(4) Does not include 7,800 shares held of record by Mr. Benoliel's wife.
(5) Includes 30,000 shares in the case of Mr. Benoliel; 57,000 shares in the
case of Mr. Bregolato; 37,000 shares in the case of Mr. Ma; 99,450 shares
in the case of Mr. Meijer; 318,000 shares in the case of Mr. Naples; and
583,575 shares in the case of all directors and officers as a group subject
to options that are currently exercisable or will become exercisable within
sixty (60) days of the record date.
(6) Represents 21.3% of all votes entitled to be cast at the Meeting, based on
information available on March 12, 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely (i) on the Company's review of certain reports filed with the
Securities and Exchange Commission ("SEC") pursuant to Section 16(a) of the
Securities Exchange Act of 1934 (the "Act"), as amended, and (ii) written
representations of the Company's directors and officers, the Company believes
that all reports required to be filed pursuant to the 1934 Act with respect to
transactions in the Company's Common Stock through December 31, 1998 were filed
on a timely basis.
3
ELECTION OF DIRECTORS
The Articles of Incorporation, as amended, provide that the Company shall
have a Board of Directors that is divided into three (3) classes, each class to
consist, as nearly as may be possible, of one-third of the total number of
directors. One class shall be elected each year to serve as directors for a term
of three (3) years. Directors elected to fill vacancies and newly created
directorships will be elected to serve for the balance of the term of the class
to which they are elected. At the present time, there are eleven (11) directors
including three (3) Class I Directors, four (4) Class II Directors, and four (4)
Class III Directors. Mr. William L. Batchelor, a Class I Director, has chosen
not to stand for reelection. On January 20, 1999, the Board of Directors voted
to decrease the number of directors of the Company from eleven (11) to ten (10)
effective as of the Meeting date. In order to apportion the number of directors
in each of the classes so as to maintain the number of directors in each as
nearly equal as possible, as required under the Company's Articles of
Incorporation, Mr. Ronald J. Naples, a Class III Director, has agreed to be
nominated as a Class I Director. Therefore, three (3) Class I Directors are to
be elected at the Meeting with each member to serve a three (3) year term
expiring in 2002 or until his successor is duly elected and qualified. The three
(3) nominees receiving the greatest number of votes cast by the holders of the
Company's Common Stock present, in person or by proxy, at the Meeting will be
elected Class I Directors of the Company. If Mr. Naples is elected a Class I
Director at the Meeting, he will immediately resign as a Class III Director and
will serve, with the other nominees elected, for a term of three (3) years, and,
if not elected, he will continue to serve as a Class III Director for a term of
two (2) more years or, in either case, until his successor is duly elected and
qualified. Accordingly, Mr. Naples is listed below with the Class I Directors
even though he is currently a Class III Director.
The proxies will be voted in accordance with the instructions set forth
therein, and proxies for which no contrary instructions are given will be voted
for the Class I nominees, Peter A. Benoliel, Ronald J. Naples, and Robert H.
Rock, each of whom is presently serving as a director of the Company, having
been so elected by the shareholders at the Annual Meeting held on May 9, 1996
(except for Mr. Naples who was elected at the Annual Meeting held on May 6,
1998). If any nominee withdraws or otherwise becomes unable to serve, which is
not anticipated, the proxies will be voted for a substitute nominee who will be
designated by the Board of Directors. The following table sets forth information
concerning the nominees and the Company's directors who will continue to serve
in that capacity following the Meeting:
First Became Principal Occupation for
Name and (Age) a Director the Past Five Years
-------------- ---------- -------------------
Class I -- Directors nominated for election in 1999 to serve until the Annual
Meeting in 2002:
Peter A. Benoliel (67) 1961 Former Chairman of the Board and Chief
Executive Officer of the Company.
Ronald J. Naples (53) 1988 Chairman of the Board of the Company since
May 1997; Chief Executive Officer of the
Company since October 1995; and President
of the Company from October 1995 until
March 1998. Formerly Chairman of the Board
and Chief Executive Officer, Hunt
Corporation, a producer and distributor of
office and graphic display products.
Robert H. Rock (48) 1996 President, MLR Holdings, LLC, an investment
company with holdings in the publishing and
information businesses. Formerly Chairman
and majority owner of IDD Enterprises, a
publisher of magazines, newsletters, and a
provider of on-line data for financial
executives. Member of the Board of
Directors of Alberto-Culver Company, Hunt
Corporation, and The Penn Mutual Life
Insurance Company.
4
First Became Principal Occupation for
Name and (Age) a Director the Past Five Years
-------------- ---------- -------------------
Class II --Directors elected in 1997 to serve until the Annual Meeting in 2000:
Lennox K. Black (69) 1985 Chairman of the Board and former Chief
Executive Officer, Teleflex Incorporated, a
diversified, Fortune 1000 manufacturer of
products and services for the automotive,
marine, industrial, aerospace, and medical
markets worldwide; and Chairman of the
Board of Penn Virginia Corporation, an
energy company engaged primarily in leasing
of mineral rights, collection of royalties,
and development and production of oil and
natural gas. Member of the Board of
Directors of Pep Boys.
Donald R. Caldwell (52) 1997 Chief Executive Officer and Founder, North
Atlantic Technology Fund, a venture capital
fund with offices in the United States,
Ireland, and England. Formerly President
and Chief Operating Officer, Safeguard
Scientifics, Inc. from February 1996 to
March 1999 and its Executive Vice President
from 1993 to 1996. Member of the Board of
Directors of First Consulting Group, Inc.,
Diamond Technology Partners, Inc., and
Kanbay, LLC.
Robert E. Chappell (54) 1997 Chairman and Chief Executive Officer, The
Penn Mutual Life Insurance Company, being
Chairman since January 1997, Chief
Executive Officer since April 1995,
President from 1994 until 1996, and Chief
Operating Officer from 1994 until 1995.
Member of the Board of Directors of P. H.
Glatfelter Company.
Robert P. Hauptfuhrer (67) 1977 Former Chairman of the Board and Chief
Executive Officer, Oryx Energy Company, an
energy company. Trustee, 1838 Investment
Advisors Fund.
Class III --Directors elected in 1998 to serve until the Annual Meeting in 2001:
Joseph B. Anderson, 1992 Chairman and Chief Executive Officer, Chivas
Jr. (56) Industries LLC, an interior trim automotive
supplier and manufacturer. Formerly
President and Chief Executive Officer,
Composite Energy Management Systems Inc., a
manufacturer of bumpers for the automotive
industry. Member of the Board of Directors
of Meritor Automotive, Inc. and R. R.
Donnelly & Sons Co.
Patricia C. Barron (56) 1989 Executive-in-Residence and Senior Fellow,
Stern School of Business, New York
University. Formerly Corporate Vice
President, Business Operations Support, and
President, Xerox Engineering Systems
Division, Xerox Corporation. Member of the
Board of Directors of ARAMARK Corporation,
Frontier Corporation, Reynolds Metals
Company, and Teleflex Incorporated.
Edwin J. Delattre (57) 1984 Dean, School of Education and Professor of
Philosophy, College of Arts and Sciences,
Boston University.
There are no family relationships between any directors, executive
officers, or nominees for election as directors of the Company.
5
Committees of the Board of Directors
The Company has an Executive Committee whose principal functions are to act
for the Board of Directors in situations requiring prompt action when a meeting
of the full Board is not feasible; to make recommendations to the Board
concerning programs of external corporate development; and to establish
guidelines as to capital structure and deployment of capital resources. The
current members of the Committee, which met five times in 1998, are P. A.
Benoliel (Chairman), L. K. Black, R. P. Hauptfuhrer, and R. J. Naples.
The Company has an Audit Committee whose principal functions are to
recommend the selection of independent accountants; approve the scope of audit
and specification of non-audit services provided by such accountants and the
fees for such services; and review audit results, internal accounting
procedures, and programs to comply with applicable laws and regulations relating
to financial accountability. The current members of the Committee, which met
four times in 1998, are R. P. Hauptfuhrer (Chairman), J. B. Anderson, Jr., P. C.
Barron, and D. R. Caldwell.
The Company has a Compensation/Management Development Committee whose
principal functions are to review and recommend officers' compensation; review
the performance of officers and management development and succession; review
compensation levels throughout the Company; and administer the Company's
Long-Term Performance Incentive Plan. The current members of the Committee,
which met six times in 1998, are R. H. Rock (Chairman), D. R. Caldwell, R. E.
Chappell, and E. J. Delattre.
The Company has a Nominating Committee whose principal role is to ensure
that the Board of Directors has the depth and range of relevant experience to
provide optimal governance of the Company and growth in shareholder value. To
accomplish this, the Committee has responsibility to review Board membership,
provide leadership in the nomination of directors, and review shareholder
proposals. The current members of the Committee, which met once during 1998, are
E. J. Delattre (Chairman), P. A. Benoliel, R. P. Hauptfuhrer, R. J. Naples, and
R. H. Rock. The Committee will consider candidates recommended by shareholders
when submitted in writing not later than December 2, 1999 with a statement of
the candidate's business experience, business affiliations, and confirmation of
the candidate's willingness to serve as a nominee. Nominations should be
submitted to the Secretary of the Company.
During the year ended December 31, 1998, six regular meetings and three
special meetings of the Board of Directors were held. During 1998, each of the
directors was in attendance in person or by teleconference at no less than 75%
of the aggregate number of meetings of the Board of Directors and Committees of
the Board on which he or she then served, except for Mr. Batchelor, who is not a
member of any Committee and attended six of the nine meetings of the Board of
Directors. The reasons for his absences were known to and are satisfactory to
the Board of Directors.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries for the years
ended December 31, 1996, 1997, and 1998 as to Mr. Naples and each of the
Company's other four most highly compensated officers who served as executive
officers at December 31, 1998 (hereinafter referred to as the named executive
officers).
6
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Compensation Award(s) Options/ LTIP Compensation
Position Year Salary($) Bonus($) ($)(1) ($) SARs(#)(2) Payouts($) ($)(10)
-------- ---- --------- -------- ------ --- ---------- ---------- -------
Ronald J. Naples, 1998 575,938(3) 305,550(4) 0 0 14,000 614,625 3,712(6)
Chairman of the 1997 635,938(3) 331,406(4) 0 590,625(5) 0 0 950,763(6)
Board and Chief 1996 578,750(3) 126,892 0 0 111,000 0 0
Executive Officer
Joseph W. Bauer, 1998 202,731 132,886 0 0 30,000 75,000 174,190(7)
President and Chief
Operating Officer
(March 9, 1998 to
December 31, 1998)
Jose Luiz Bregolato, 1998 153,988(8) 77,501 15,350(9) 0 6,000 245,850 0
Vice President- 1997 142,242(8) 103,827 23,619(9) 0 0 0 0
South America 1996 145,000(8) 40,391 28,270(9) 0 14,000 0 0
Daniel S. Ma, 1998 171,703(8) 83,066 91,508(9) 0 6,000 245,850 0
Vice President- 1997 170,280(8) 70,020 90,086(9) 0 0 0 0
Asia/Pacific 1996 145,959(8) 67,778 89,890(9) 0 14,000 0 0
Marcus C. J. Meijer, 1998 237,046(8) 92,588 0 0 10,000 368,775 0
Vice President- 1997 202,302(8) 90,021 0 0 0 0 0
Europe 1996 217,207(8) 76,721 0 0 20,000 0 0
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(1) During the year ended December 31, 1998, certain of the individuals named in
column (a) received personal benefits not reflected in the amounts set forth
for such individual in column (e), the dollar value of which did not exceed
the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for such individual in columns (c) and (d).
(2) Options to purchase shares of the Company's Common Stock.
(3) Includes compensation earned by Mr. Naples pursuant to the 1995 Naples
Restricted Stock Plan and Agreement (i) for 1998, the fair market value of
15,000 shares of Common Stock awarded to Mr. Naples on October 2, 1998,
which shares had a fair market value of $225,937.50 (based on the last
reported sale price for the Common Stock on the New York Stock Exchange on
October 2, 1998 of $15.0625 per share); (ii) for 1997, the fair market value
of 15,000 shares of Common Stock delivered to Mr. Naples on October 2, 1997,
which shares had a fair market value of $285,937.50 (based on the last
reported sale price for the Common Stock on the New York Stock Exchange on
October 2, 1997 of $19.0625 per share); and (iii) for 1996, the fair market
value of 15,000 shares of Common Stock delivered to Mr. Naples on October 2,
1996, which shares had a fair market value of $228,750 (based on the last
reported sale price for the Common Stock on the New York Stock Exchange on
October 2, 1996 of $15.25 per share).
(4) Includes (i) for 1998, the fair market value (based on the last reported
sale price for the Common Stock on the New York Stock Exchange on December
31, 1998 of $18.00 per share of 16,975 shares of restricted Common Stock
($305,550) awarded to Mr. Naples in lieu of an annual cash incentive bonus
and (ii) for 1997, the fair market value (based on the last reported sale
price for the Common Stock on the New York Stock Exchange on December 31,
1997 of $18.9375 per share) of 17,500 shares of restricted Common Stock
($331,406.25) awarded to Mr. Naples in lieu of an annual cash incentive
bonus (see Note 5 and the Compensation/Management Development Committee
Report below).
(5) Includes for 1997, the fair market value (based on the last reported sale
price for the Common Stock on the New York Stock Exchange on May 7, 1997 of
$16.875 per share) of 35,000 shares of restricted Common Stock which Mr.
Naples was eligible to receive in 1997 and 1998 in lieu of an annual cash
bonus if pre-established financial criteria applicable to all
incentive-based employees were met, of which (see Note 4 above) 17,500
shares were earned in 1997 and 16,975 shares were earned in 1998.
(6) Includes (i) for 1998, $3,712 earned under the Company's Profit Sharing Plan
and (ii) for 1997, the fair market value (based on the last reported sale
price for the Common Stock on the New York Stock Exchange on December 31,
1997 of $18.9375 per share) of (a) 50,000 shares of restricted Common Stock
($946,875) earned by Mr. Naples in 1997 under the 1995 Naples Restricted
Stock Plan and Agreement at the rate of 1,000 shares for each $.01 increase
in the Company's net income per share of Common Stock in excess of $1.10
7
(after elimination of the effects of foreign currency fluctuations) and (b)
$3,888 earned under the Company's Profit Sharing Plan.
(7) Represents relocation expenses paid to Mr. Bauer in connection with his
employment by the Company which included reimbursement for temporary living
expenses, closing costs, and loss on sale of residence.
(8) Mr. Bregolato's, Mr. Ma's, and Mr. Meijer's compensation was paid in
Brazilian reales, Hong Kong dollars, and Dutch guilders, respectively. For
purposes of this presentation, Mr. Bregolato's, Mr. Ma's, and Mr. Meijer's
salary and bonus for each year have been translated into U.S. dollars using
the applicable exchange rates for the conversion of currencies into U.S.
dollars on December 31 of such year.
(9) Represents housing benefits paid to Mr. Bregolato and Mr. Ma in connection
with their assignment for the Company in Sao Paulo and Hong Kong,
respectively.
(10) Does not include discount on any Common Stock purchased by certain officers
pursuant to the Company's Employee Stock Purchase Plan.
Options/SAR Grants in the Last Fiscal Year
During 1998, the Company granted stock options (without any stock
appreciation rights) to the named executive officers as follows:
STOCK OPTION GRANTS LAST YEAR
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities
Underlying % of Total Exercise
Options Options Granted or Base
Granted to Employees Price Expiration
Name (#)(1) in 1998 ($/sh)(2) Date 5%($) 10%($)
---- ------ ------- --------- ---- ----- ------
Ronald J. Naples 14,000 9.0 16.9375 1/21/08 149,000 378,000
Joseph W. Bauer 30,000 19.3 18.75 3/9/08 354,000 897,000
Jose Luiz Bregolato 6,000 3.9 16.9375 1/21/08 64,000 162,000
Daniel S. Ma 6,000 3.9 16.9375 1/21/08 64,000 162,000
Marcus C. J. Meijer 10,000 6.4 16.9375 1/21/08 107,000 270,000
- ---------------
(1) All of the options listed above are non-qualified stock options. Of the
options granted to Messrs. Bregolato, Ma, Meijer, and Naples, 50% were
exercisable as of January 21, 1999, and the remaining 50% will become
exercisable on January 21, 2000. Of the 30,000 options granted to Mr. Bauer,
14,000 will become exercisable on March 9, 2000, and 16,000 will become
exercisable on March 9, 2001.
(2) The purchase price of a share of Common Stock is the fair market value of a
share of Common Stock on the date of grant.
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table provides information related to options to purchase the
Company's Common Stock held by the named executive officers during the year
ended December 31, 1998 and the number and value of such options held as of the
end of such year. The Company does not have any outstanding stock appreciation
rights.
AGGREGATE OPTION/SAR EXERCISES IN LAST YEAR
AND YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money Options
Shares Acquired Realized Options at Year End(#) at Year End($)
Name on Exercise(#) ($) Exercisable Unexercisable Exercisable/Unexercisable(1)
---- -------------- --- -------------------------- ----------------------------
Ronald J. Naples 0 0 311,000 14,000 495,500/14,875
Joseph W. Bauer 0 0 0 30,000 0/0
Jose Luiz Bregolato 0 0 54,000 6,000 42,000/6,375
Daniel S. Ma 0 0 34,000 6,000 42,000/6,375
Marcus C. J. Meijer 0 0 94,450 10,000 63,612/10,625
(1) Based on the last sale price on December 31, 1998 on the New York Stock
Exchange of $18.00 per share.
8
Long-Term Performance Incentive Plan Awards in Last Fiscal Year
During 1998, the Company granted performance incentive units pursuant to
the Company's Long-Term Performance Incentive Plan to the named executive
officers as follows:
LONG-TERM INCENTIVE PLAN -- AWARDS LAST YEAR
Estimated Future Payouts
Under Non-Stock Price-Based Plan
--------------------------------
(a) (b) (c) (d) (e) (f)
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation or Threshold Target Maximum
Name(1) Rights (#)(2) Payout ($ or #)(3) ($ or #)(3) ($ or #)(3)
------- ------------- ------ ----------- ----------- -----------
Ronald J. Naples 25,000 1997 through 2000 0.00 423,437 846,875
Joseph W. Bauer 11,000 1997 through 2000 0.00 186,312 372,625
Jose Luiz Bregolato 10,000 1997 through 2000 0.00 169,375 338,750
Daniel S. Ma 10,000 1997 through 2000 0.00 169,375 338,750
Marcus C. J. Meijer 15,000 1997 through 2000 0.00 254,062 508,125
- -------------
(1) On January 21, 1998, effective January 1, 1997, the Compensation/Management
Development Committee awarded performance incentive units to the named
executive officers, except in the case of Mr. Bauer who received his units
on March 9, 1998, the date he joined the Company.
(2) Performance incentive units.
(3) The value on maturation of a performance incentive unit is determined by
performance over a time period as plotted on a grid defined by two axes; one
axis sets forth average return on assets, and one axis sets forth average
earnings per share for the period 1997-2000. Each performance incentive unit
is issued at the value of the exercise price of stock options issued in
connection with the performance incentive unit ($16.9375), and the 1997
performance incentive unit grid results in a zero payout for performance of
less than 5% return on assets or less than an average earnings per share of
$1.40 over the performance period. A payout of $16.9375 per unit will be
made if performance reaches the target, and a payout of $33.875 per unit
will be made if performance reaches the maximum of the measurement scale.
Employment Agreements with Executive Officers
Chief Executive Officer
Ronald J. Naples assumed the position of President and Chief Executive
Officer of the Company on October 2, 1995. Effective that date, Mr. Naples
entered into an Employment Agreement with the Company for a term ending December
31, 1998. Effective January 1, 1999, the Company and Mr. Naples entered into a
new employment agreement for a five (5) year term ending on December 31, 2003
and continuing thereafter for successive terms of one (1) year unless timely
notice to terminate is given by either the Company or Mr. Naples. Mr. Naples'
base salary is at an annual rate of $425,000 which is to be reviewed annually
after January 1, 2000. Mr. Naples is eligible to participate in the Company's
Annual Incentive Compensation Plan and Long-Term Performance Incentive Plan.
The Employment Agreement further provides that upon the termination of Mr.
Naples' employment for reasons other than Mr. Naples' death or disability or by
the Company for "cause" or by Mr. Naples for other than "good reason" (each as
defined in the Employment Agreement), the Company will pay Mr. Naples
termination benefits ranging from 250% to 300% of his base salary and annual
bonus depending upon when such termination occurs. Furthermore, if Mr. Naples'
employment is terminated within three (3) years of a "Significant Transaction"
(as defined in the Employment Agreement) or if Mr. Naples resigns for any reason
between nine (9) and eighteen (18) months following a Significant Transaction,
the Company will pay Mr. Naples a termination benefit of 300% of his base salary
and annual bonus. In addition, subject to certain conditions, if Mr. Naples'
employment is terminated, his right to exercise his stock options may be
accelerated. Under Mr. Naples' prior Employment Agreement, the Company made
loans to cover withholding and additional taxes on stock awards previously made
in 1995 in the principal amount of $186,244. The loan has a ten-year term
ending November 2005 and bears interest at a rate of 6.4%.
All other executive officers of the Company are employed pursuant to
employment agreements, which agreements provide for each officer's salary and
the basis upon which his bonus (if any) is to be calculated. Salary and bonuses,
9
if any, are adjusted annually by the Compensation/Management Development
Committee. Except in the case of Mr. Meijer, each employment agreement is for an
initial term of one (1) year and thereafter is automatically renewed for
successive one (1) year terms unless either party gives written notice of
termination at least ninety (90) days prior to the expiration of the then
current term. Mr. Meijer's employment agreement of April 10, 1990 provides for
continued employment until either party gives the other party six (6) months'
notice of termination. Mr. Meijer's agreement provides for a payment equal to
two (2) years salary, bonus, and vacation if he elects to resign from his
position within twelve (12) months of a change in control. Also, if the Company
terminates Mr. Meijer's employment for other than cause, it shall pay to Mr.
Meijer an amount equal to two (2) months income (as defined in Mr. Meijer's
employment agreement) for each year of service up to a maximum of twenty-four
(24) months. In addition, Mr. Bauer is entitled to twenty-four (24) months
salary and bonus, and Messrs. Bregolato and Ma are each entitled to eighteen
(18) months salary and bonus if they are terminated (other than for cause)
within three (3) years of a change in control, and in all other cases, Messrs.
Bauer and Bregolato are entitled to severance equal to twelve (12) months and
ten (10) months of salary, respectively, if terminated by the Company (other
than for cause).
Pension and Death Benefits
Substantially all of the Company's U.S. employees are covered by a
noncontributory qualified defined benefit retirement plan (the "Pension Plan").
The method of funding the Pension Plan does not readily permit the calculation
of the required contribution, payment, or accrual applicable to any covered
individual. The formula for determining the annual pension benefit is based upon
two formulas, a past service formula for service through December 1, 1996 and a
future service formula for service beginning December 1, 1996, as follows: (a)
1.1% of the employee's Highest Average Earnings (HAE) (which means the average
of the employee's three highest consecutive years of pay including overtime,
shift differential, bonuses, and commissions) before December 1, 1996 plus .5%
of HAE over the employee's Covered Compensation as defined in the Pension Plan
(which depends on the employee's birth date and is determined from an Internal
Revenue Service table which is updated each year) times the employee's service
up to December 1, 1996; and (b)(i) for the employee's service after December 1,
1996 until past and future service total 35 years, 1.15% of annual pay plus .6%
of annual pay over the employee's Covered Compensation and (ii) for the
employee's service after December 1, 1996 beyond 35 years, 1.3% of annual pay.
Listed below for each of the persons named is the estimated annual pension
benefit payable to them and their credited service under the Pension Plan. The
estimate of the annual pension benefit was made by adding to the accrued
benefits as of November 30, 1998 an estimate of benefits that will be accrued
from December 1, 1998 to age 65 (except for Mr. Bregolato, for whom the
appropriate age is 60) based upon W-2 or other information.
Years
Credited
Estimated Annual Service as of
Name Pension Benefit 12/31/98
---- --------------- --------
Ronald J. Naples $29,594 2
Joseph W. Bauer 21,533 0
Jose Luiz Bregolato 35,940(1) 5
Daniel S. Ma 28,313 5
Marcus C. J. Meijer 84,760(2) 7
- --------------
(1) The pension benefit for Mr. Bregolato is provided under a defined
contribution program established in accordance with Brazilian law to which
the Company contributed $30,314 in 1998.
(2) The pension benefit for Mr. Meijer is provided by a policy funded through
premiums paid to an insurance company. The premiums are currently equal to
16.75% of Mr. Meijer's annual pensionable salary.
The Company also provides supplemental retirement income in accordance with
the provisions of a Supplemental Retirement Income Program (the "Program") which
became effective on November 6, 1984. The Program, which is a "non-qualified
plan" for federal income tax purposes, is intended to provide to officers of the
Company elected to office by the Board of Directors additional retirement income
in certain cases. Generally speaking, an officer who, as of age 65, has
completed at least 30 years of employment with the Company and/or its affiliated
companies will qualify for the maximum benefit under the Program which will
entitle him to receive annually from the date of retirement until death such
payments, if any, as are required to maintain his "net post-retirement income,"
as defined, at a level equal to 80% of his "net pre-retirement income," as
defined. For an officer who otherwise qualifies to participate in the Program
but, as of age 65, has completed less than 30 years of employment (15 years in
the case of Mr. Naples), the maximum benefit is reduced by 2% (2.667% in the
case of Mr. Naples) for each such full year of employment less than 30. Further,
under certain circumstances, Mr. Naples' benefit commencement date may be
10
reduced to age 60. Because the benefits payable under the Program depend on
various post-retirement factors (e.g., defined benefit pension calculation,
number of years employed less than 30, social security benefit at age 65,
federal, state, and local income taxes on pension and social security benefits),
it is impossible to determine in advance which officers might be eligible to
receive payments under the Program or the amount payable to any participant.
Payments were made pursuant to the Program during the year ended December 31,
1998 in the aggregate amount of $264,000.
Listed below for each named executive officer is the estimated annual
payment to be made under the Program assuming that (a) the named executive
officer retires at age 65; (b) the officer's compensation (salary plus
incentive) remains at its current level; (c) the estimated pension benefit is as
set forth above; (d) social security benefits remain unchanged and at the
current level; and (e) there is no change to the current federal, state, and
local income tax rates applicable to pension and social security benefits.
Estimated Payment
Name Under the Program
---- -----------------
Ronald J. Naples $229,374
Joseph W. Bauer 86,181
Jose Luiz Bregolato 0(1)
Daniel S. Ma 49,843
Marcus C. J. Meijer 0(1)
(1) Mr. Bregolato and Mr. Meijer do not participate in the Pension Plan and,
therefore, are not eligible for payments under the Program.
Certain of the Company's executive officers are entitled to a death benefit
if employed by the Company at the time of death. The benefit, equal to 1 1/3
times the deceased officer's then current annual salary plus $30,000, is payable
in installments at various times over a 40 month period after death. The
Company's policy is not to provide currently for this contingent future
liability.
Compensation of Directors
Employees of the Company and persons affiliated with the Company's General
Counsel are not paid any fees for services as a director of the Company.
Directors who are not employees of the Company are paid an annual retainer of
$18,000. Directors who are not current or former employees of the Company are
paid a fee of $1,000 for each Board and each Committee meeting attended.
Committee Chairmen are paid an annual retainer as follows: Audit Committee
$2,000; Nominating Committee and Compensation/Management Development Committee
$1,500; Executive Committee $48,000.
Each member of the Board is required to hold at least 5,000 shares of the
Company's Common Stock, and 75% of the Annual Retainer is paid in the form of
shares until 5,000 shares are accumulated.
Compensation Committee Interlocks and Insider Participation
Individual increases for officers are recommended by the Chief Executive
Officer other than for himself and acted upon by the Compensation/Management
Development Committee.
COMPENSATION/MANAGEMENT DEVELOPMENT COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Introduction
The purpose of the Company's executive remuneration program is to
compensate on the basis of performance. Accordingly, a considerable portion of
an executive officer's total compensation is incentive-based and tied directly
to the achievement of pre-established business goals. By relating executive
compensation to the results achieved, compensation is linked to the interests of
all shareholders. The program has three components: a base salary; an annual
incentive cash payment; and compensation realized from options and/or
performance incentive units issued under the Company's Long-Term Performance
Incentive Plan (the "Plan").
11
Competitive Reward Systems
In order to attract, motivate, and retain executives, the Company positions
its executive officer base pay levels at the median of a broad cross section of
both chemical and chemical specialty companies in the United States, using a
database (which may include companies that are part of the S&P Chemicals
(Specialty) Index) available through HayGroup, a compensation consulting
company. With respect to executive officers in other countries, the base pay is
determined based upon the regions in which they are located. While average base
pay is at the median of the companies surveyed according to recent data,
attainment of the maximum incentive portion would place total pay in the top
quarter of the survey group.
Compensation Components
Base salary is reviewed annually, and increases are based primarily on
performance against pre-established goals with major emphasis on the attainment
of financial objectives and the extent of the individual's penetration of
his/her salary range. Increases in salary in 1998 were determined by considering
market data, responsibilities of the position, job performance, and the
Company's overall financial results. In the case of some foreign-based executive
officers, salary increases may be mandated by the laws in the particular country
or region even when similar increases are not granted to officers residing in
the United States.
The incentive compensation component is paid on an annual basis in the form
of a cash bonus (except in the case of Mr. Naples in 1997 and 1998). The
incentive is designed to be a short-term award for specific results and
performance in a given year and to be competitive within the industry. In 1998,
the major portion of the incentive award was based on the attainment of a
previously established consolidated corporate Profit-Before-Tax ("PBT") target.
In the case of the regional vice presidents, there is also a management
discretionary award which is paid if certain regional financial objectives are
attained. The actual incentive award payout is based on the attainment of
corporate financial goals and, in certain cases, regional financial goals.
At the beginning of the year, the Chief Executive Officer ("CEO")
recommends bonus gates at three levels of consolidated corporate PBT performance
as follows: (1) Threshold -- the PBT level at which an entry bonus is earned;
(2) Mid -- the PBT level at which a mid-level bonus is earned; and (3) Maximum
- -- the PBT level at which the maximum bonus is earned. The maximum financial
bonus amount is determined by multiplying the compensation salary grade midpoint
of the position by a previously established incentive award percentage. The
greater the weight of the position and resultant impact on profitability of the
Company, the greater the percentage. In the case of the CEO, the maximum
financial award that might be paid is 80% of his salary grade midpoint. The
applicable maximum percentage for executive officers is lower and can range from
45% to 60% of salary grade midpoint. Depending upon the performance level
achieved, the bonus amount can be as high as the Maximum, or if performance is
below the Threshold level, no bonus will be paid.
The discretionary bonus award may be paid on the attainment of
pre-established goals and within pre-established boundaries. This amount is
awarded at the discretion of the manager and targeted to recognize individual
performance.
The PBT targets for 1998 were aggressive, and bonuses have been calculated
at slightly below the Maximum level.
For the years 1997 and 1998, the CEO did not participate in the annual
bonus program and did not receive cash bonus payments. Mr. Naples had been
awarded a grant of 35,000 shares of restricted Common Stock to vest over the two
years 1997 and 1998 at a maximum of 17,500 shares per year depending on the
level of the Company's pre-tax profit performance. In 1997, the Company's
pre-tax profits exceeded the Maximum level set for the annual bonus program,
and, accordingly, Mr. Naples received all 17,500 shares of Common Stock. In
1998, pre-tax profits were slightly below the Maximum level, and accordingly,
Mr. Naples received 16,975 shares of Common Stock.
The final component is compensation realized from the Long-Term Performance
Incentive Plan comprising a combination of grants of incentive stock options,
non-qualified options, and performance incentive units issued under the Plan.
Awards under the Plan play an important role in the Company's executive
compensation structure thereby making compensation more dependent upon the
long-term performance of the Company. With stock options, executive officers
receive gains only if the stock price improves over the fair market value at the
date of the grant. With performance incentive units, for the 1995-98 Plan, the
cash value of the award is based on average earnings per share growth rate and
average return on assets. In 1998, these applicable performance targets for the
1995-98 award period were exceeded resulting in a payout of $24.585 per each
performance unit granted. The purpose of issuing both stock options and
performance incentive units is to motivate executive officers to make the types
of long-term changes in the Company's business that will affect long-term total
return to shareholders. The amounts of the awards are based on the relative
12
position of each executive officer within the organizational structure of the
Company and past practice and performance factors independent of the terms and
amounts of awards previously granted. The Company's past practice has been to
grant stock options combined with performance incentive units to executive
officers every two years for rolling four-year performance periods. Under the
new Long-Term Performance Incentive Plan to be acted upon at the Meeting, the
performance period will be a rolling three-year period. On January 21, 1998,
effective January 1, 1997, the Committee awarded performance incentive units for
the 1997-2000 period to all of the named executive officers except in the case
of Mr. Bauer, President and Chief Operating Officer, who received his units on
March 9, 1998, the date he joined the Company.
Compensation of Chief Executive Officer
The compensation of the CEO, Ronald J. Naples, for the 1998 year was
established in 1995 by the Compensation/Management Development Committee (the
"Committee") and was incorporated in an Employment Agreement between the Company
and Mr. Naples at the time of his employment by the Company, as reported in
detail elsewhere in this Proxy Statement. The total compensation package for Mr.
Naples was established by the Committee at levels considered by the Committee to
be reasonable after having taken into account Mr. Naples' prior experience as
the chief executive officer of a successful corporation and his general
familiarity with the Company after having served as a director for over seven
years.
Deductibility of Compensation for Tax Purposes
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993,
generally imposes a $1,000,000 limit on the amount of compensation deductible by
the Company in regard to compensation paid to the Company's CEO and the four
most highly compensated executive officers. Although the reported compensation
of the Company's CEO set forth in the Summary Compensation Table above was in
excess of $1,000,000, the $1,000,000 threshold for Section 162(m) purposes was
not exceeded due to a variety of factors. Accordingly, all of the compensation
paid in 1998 to the Company's CEO and the other four most highly compensated
executive officers is expected to be fully deductible for tax purposes by the
Company. It is considered unlikely that the compensation of any of the CEO or
the other four most highly compensated executive officers will exceed the
Section 162(m) $1,000,000 threshold in the near future. Therefore, the Company
has not adopted any policy with respect to qualifying compensation paid to
executive officers for deductibility under Section 162(m) of the Code.
Compensation/Management Development Committee
Robert H. Rock, Chairman
Donald R. Caldwell
Robert E. Chappell
Edwin J. Delattre
13
Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S&P SmallCap 600 Stock Index, and the S&P
Chemicals (Specialty) Index for the period of five (5) fiscal years commencing
December 31, 1993 and ending December 31, 1998.
Comparison of Five-Year Cumulative Total Return*
Among Quaker Chemical Corporation, The S & P Smallcap 600 Index
and S & P Chemicals (Specialty) Index
[The following table was represented by a line graph in the
printed document.]
Quaker S&P SmallCap S&P Chemicals
Date Chemical Corp. 600 Index (Specialty) Index
- -----------------------------------------------------------
12/93 100 100 100
12/94 122 95 100
12/95 91 124 115
12/96 116 150 190
12/97 140 189 240
12/98 139 186 254
* $100 invested on 12/31/93 in stock or index--including reinvestment of
dividends. Fiscal year ending December 31.
14
APPROVAL OF THE 1999 LONG-TERM PERFORMANCE INCENTIVE PLAN
The Board of Directors is recommending to the shareholders that a new
Long-Term Performance Incentive Plan (the "Plan") with a term of ten (10) years
be approved. The Plan authorizes the granting of stock options, with or without
related stock appreciation rights, stock awards, and performance incentive units
to key employees for the purpose of rewarding them if long-term corporate
financial objectives are achieved, furthering the identity of their interests
with the interests of the shareholders of the Company and assisting in
recruiting and retaining employees of initiative and ability. Participation in
the Plan is limited to those employees of the Company whose efforts in the
judgment of the Compensation/Management Development Committee of the Board of
Directors (the "Committee"), have the greatest impact on the Company's long-term
financial performance. Under the terms of the Plan, the Committee shall consist
of at least two (2) members of the Board of Directors, each of whom must be a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 ("Rule 16b-3"). The current members of the Committee, each
of whom is a non-employee director within the meaning of Rule 16b-3, are D. R.
Caldwell, R. E. Chappell, E. J. Delattre, and R. H. Rock.
Stock Options and Stock Appreciation Rights
The Plan provides for options which are intended to qualify as "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and options intended not to so qualify ("non-qualified
options"). To the extent that the aggregate fair market value of stock, with
respect to which incentive stock options are exercisable for the first time by a
Participant, as defined in the Plan, during any calendar year under the Plan and
any other Plan of the Company or a Subsidiary exceeds $100,000, such stock
options are treated as non-qualified options rather than incentive stock
options. A description of other differences between incentive stock options and
non-qualified options arising from the tax consequences attendant to each is set
forth under the heading "Certain Federal Income Tax Consequences" at page 17.
The option price for all options granted under the Plan will be at least
100% of the fair market value of the Company's Common Stock on the date the
option is granted; however, the option price for incentive stock options granted
to a Participant who, at the time of the grant, owns stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company, will be at least 110% of the fair market value of the Company's Common
Stock on the date the option is granted. The option price must be paid in full
at the time of exercise in cash; however, the Committee, in its discretion, may
permit the option price to be paid in shares of the Company's Common Stock
having a fair market value equal to the option price or a combination of shares
and cash. No option may be exercised prior to the expiration of one (1) year
from the date such option is granted to employees whose employment is to be
terminated.
The last reported sale price for the Company's Common Stock on the New York
Stock Exchange was $14.0625 per share on March 12, 1999.
An employee may not exercise his or her option after his or her employment
has been terminated for cause, as determined by the Committee. An employee who
ceases to be an employee because of death or retirement may, to the extent his
or her option was otherwise exercisable after the date his or her employment
terminated, exercise his or her option any time after he or she has ceased to be
an employee for a period not to exceed the shorter of three (3) years from the
date of termination or the expiration of the term of the option. An employee who
ceases to be an employee for any other reason may, to the extent his or her
option was otherwise exercisable after the date his or her employment
terminated, exercise his or her option for a period not to exceed the shorter of
three (3) months after the termination of employment or the expiration of the
term of the option, except as and to the extent the Committee determines
otherwise with respect to non-qualified options. Under the Plan, the Committee
has the right in its discretion to accelerate the exercise date of options
previously granted to employees whose employment is to be terminated.
In addition, upon the occurrence of certain change-in-control events, all
outstanding options shall become immediately exercisable regardless of any terms
to the contrary. Such events include (i) a person acquiring 30% or more of the
combined voting power of the Company's then outstanding securities (or such
lesser percentage, but not less than 15% as the Board of Directors of the
Company shall determine); (ii) a change in the majority of the directors over a
two-year period the nomination of which was not approved by two-thirds of the
directors then currently in office; (iii) a merger or consolidation in which the
Company is not the survivor; or (iv) sale, lease, or other transfer of
substantially all of the assets of the Company.
No option granted under the Plan is transferable by the holder except by
will or the laws of descent and distribution.
15
The number of shares of Company Common Stock for which options may be
awarded to any eligible officer who is also a director, or to all eligible
officers who are also directors as a group, is not limited by the Plan and will
be determined by the Committee.
The Plan provides that the holder of a stock option may be granted related
stock appreciation rights which entitle the holder to surrender the stock
option, or any applicable portion thereof, to the extent unexercised and to
receive the amount by which the fair market value of the Company's Common Stock,
subject to the surrendered stock option at the time the stock appreciation
rights are exercised, exceeds the option price of the surrendered stock option.
The Company will pay the difference in cash and/or by delivery of shares of the
Company's Common Stock valued at their fair market value at the time of
delivery, as the Committee may determine; however, the number of shares of the
Company's Common Stock which may be issued to a holder of a stock appreciation
right upon the exercise thereof may not exceed the number of shares of Common
Stock subject to the stock option or portion thereof surrendered upon the
exercise of the stock appreciation right.
Stock appreciation rights may be exercised at such time or times and to the
extent, but only to the extent, that the related stock option may be exercised.
Stock Awards
The Plan authorizes the Committee to grant awards in the form of shares of
Common Stock ("Awards"). Such Awards will be subject to such terms, conditions,
restrictions, and/or limitations, if any, as the Committee deems appropriate
including, but not by limitation, restrictions on transferability and continued
employment. The Plan grants the Committee the discretion to accelerate the
delivery of an Award in certain cases.
Performance Incentive Units
The Committee may grant performance incentive units either in connection
with or separately from the grant of stock options under the Plan; however, no
more than one grant of performance incentive units may be made to any employee
with respect to a given performance award period.
Each performance award period is a three-calendar-year period.
At the beginning of each performance award period, the Committee will
establish performance targets (which may be expressed as increases in the
Company's earnings per share, return or average return on assets, or in terms of
any financial or other standard as the Committee may determine in its
discretion), the stated value (expressed in dollars) of performance incentive
units to be granted with respect to that performance award period and the
percentage of stated value to be earned per performance incentive unit upon the
achievement of various target levels. After the end of a performance award
period, the value of the performance incentive units will be paid to the
Participant in cash. Failure to achieve the minimum performance target
established will result in a zero valuation for a performance incentive unit;
the maximum value of a performance incentive unit cannot exceed 200% of stated
value.
A Participant must be employed by the Company at the date of payment for
all performance incentive units awarded for the applicable performance award
period, except that the Committee has authority to direct payment to any
Participant or his or her beneficiary in the event his or her employment
terminated by reason of retirement or death before the end of the performance
award period.
The Committee has authority, with the concurrence of the Board of
Directors, to modify established performance targets if, as a result of
unforeseen extraordinary and material changes during a performance award period
in the Company's business, operations, corporate structure, capital structure,
or manner in which it conducts its business, the Committee determines that the
established performance targets are no longer suitable.
Limitation on Number of Shares
The total number of shares of the Company's Common Stock that may be
delivered under the Plan cannot exceed 1,000,000 (subject to adjustment for
stock splits, stock dividends, and other events affecting the Company's Common
Stock).
If an option or an Award is terminated, in whole or in part, prior to
exercise or delivery, as applicable, the shares allocated to the option, the
Award, or portion thereof so terminated may be reallocated to another option or
Award to be granted under the Plan, except that shares allocated to stock
options surrendered upon exercise of related stock appreciation rights may not
be so reallocated.
16
Other Material Provisions of the Plan
It is contemplated that authorized but unissued shares of the Company's
Common Stock will be used under the Plan, but the Plan also permits the use of
treasury shares.
The Plan may be terminated or amended by the Board of Directors without
shareholder approval, except that no such amendment may become effective without
shareholder approval if the amendment would increase the number of shares of
Common Stock which may be subject to options granted under the Plan, extend the
term of the Plan, or increase the period during which an option may be exercised
beyond ten (10) years from the date of the grant, otherwise materially increase
the benefits accruing to Participants under the Plan, materially modify the
requirements as to eligibility for Participants in the Plan, or otherwise cause
the Plan to fail to meet the requirement of Rule 16b-3.
Amounts realized or received by a Participant under the Plan will not be
taken into account for the purposes of determining a Participant's benefits, if
any, under the Company's Pension Plan, and the cost of the Plan to the Company
will not be deducted for purposes of determining the Company's required
contribution to its Profit Sharing Plan.
Certain Federal Income Tax Consequences
Incentive Stock Options
Incentive stock options granted under the Plan are intended to qualify for
the favorable federal income tax treatment currently accorded "Incentive Stock
Options" as defined under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). No federal income tax is imposed at the time an incentive
stock option is granted or exercised, provided, generally, that such exercise
occurs not later than three (3) months after the termination of the optionee's
employment with the Company or a subsidiary.
While ordinarily no income is required to be recognized at the time an
incentive stock option is exercised, it should be noted that for purposes of the
alternative minimum tax imposed by Section 55 of the Code, an incentive stock
option is treated as a non-qualified option. Therefore, the excess of the fair
market value of the shares of Common Stock subject to the incentive stock
option, determined at the time of exercise, over the exercise price constitutes
ordinary income for purposes of the alternative minimum tax. For purposes of the
alternative minimum tax, the basis of stock acquired through the exercise of an
incentive stock option is equal to the fair market value taken into account in
determining the amount of ordinary income recognized for alternative minimum tax
purposes.
If the shares of Common Stock acquired upon the exercise of an incentive
stock option are not disposed of within (i) two (2) years from the date of grant
or (ii) one (1) year after the exercise of such incentive stock option, then any
gain or loss realized upon a disposition of such Common Stock ordinarily will be
treated as long-term capital gain or loss. Under such circumstances, the Company
is not entitled to a tax deduction with respect to the grant or exercise of the
incentive stock option or the disposition of the shares received upon its
exercise. The optionee's basis (for purposes of determining the amount of gain
or loss on such disposition) in the shares of Common Stock acquired upon the
exercise of an incentive stock option is equal to the exercise price paid for
such shares.
If an optionee disposes of shares of Common Stock acquired pursuant to an
incentive stock option before the expiration of either of the required holding
periods described above, then the lesser of (i) the excess of the fair market
value of the shares of Common Stock at the time of exercise over the exercise
price paid for such shares or (ii) the gain realized upon such disposition, will
be treated as ordinary income at the time of the disposition. Any gain in excess
of the amount so treated as ordinary income ordinarily will be treated as
capital gain. Such gain will be taxable as long-term capital gain if the shares
of Common Stock were held for more than one (1) year prior to the disposition.
In the event of such a disqualifying disposition (i.e., a disposition prior to
the satisfaction of the holding period requirements), the Company, subject to
any applicable limitations, is entitled to a compensation deduction in the year
the income is recognized by the optionee equal to the amount of ordinary income
recognized by the optionee.
Non-Qualified Options
Non-qualified options granted under the Plan are not intended to qualify
for the favorable federal income tax treatment accorded to incentive stock
options under the Plan or certain other types of stock acquisition programs. An
optionee should not recognize any income for federal income tax purposes at the
time of the grant of any non-qualified option under the Plan. When the
non-qualified option is exercised, however, the excess of the fair market value
of the shares of Common Stock acquired pursuant to such exercise, determined at
the time of exercise, over the option price constitutes ordinary income to the
optionee. Subject to applicable limitations, the Company is entitled to a
17
corresponding income tax deduction equal to the amount of such ordinary income
for the taxable year in which the optionee is required to include such income.
Stock Awards
The grant of an Award should not cause the recipient of an Award to
recognize any income for federal income tax purposes until such time as the
conditions, restrictions, or limitations ("Restrictions") to which the Award is
subject lapse. Upon the lapse of the Restrictions, the fair market value of the
stock subject to the Award, as of the date the Restrictions lapse, must be
recognized as ordinary income by the Participant. Subject to any applicable
limitations, the Company will be entitled to a deduction equal to the amount of
such ordinary income in the year in which the income is recognized by the
Participant. A Participant's basis in the stock acquired pursuant to an Award,
for purposes of determining his or her gain or loss on the subsequent
disposition of the stock, will generally be equal to the fair market value of
the stock on the date the Restrictions lapse.
Under the provisions of Section 83(b) of the Code, a Participant may,
within thirty (30) days after receipt of an Award, elect to include in taxable
income an amount equal to the fair market value of the stock subject to the
Award (determined without regard to the Restrictions thereon) at the time the
Award is granted. In such event, any subsequent appreciation in the value of the
stock will not be taxable to the Participant upon the lapse of the Restrictions.
However, if the stock is forfeited subsequent to such an election, the
Participant will not be entitled to a deduction. An election under Section 83(b)
may not be revoked without the consent of the Internal Revenue Service.
Participants should consult their personal tax advisors before making this
election.
Stock Appreciation Rights
The grant of stock appreciation rights does not result in the recognition
of income to the recipient for federal income tax purposes or in a tax deduction
for the Company. The exercise of stock appreciation rights will result in
ordinary income to the recipient and a potential tax deduction to the Company
equal to the amount of cash paid or the fair market value of any shares
transferred to the Participant upon such exercise. The basis of any shares so
received will be equal to the fair market value of such shares on the date of
the exercise of the stock appreciation right. Upon a subsequent disposition of
any such shares, any amount realized in excess of the Participant's basis in the
shares ordinarily will be treated as capital gain, which will be long-term
capital gain if the shares have been held for more than one (1) year prior to
the disposition.
Performance Incentive Units
The grant of performance incentive units should not cause the recipient of
such units to recognize any income for federal income tax purposes at the time
of grant. Similarly, the Company will not be entitled to any deduction at the
time of grant. A Participant will recognize ordinary income for federal income
tax purposes at the time that cash payments are made to him or her with respect
to such incentive performance units. Subject to any applicable limitations, the
Company will be entitled to a deduction equal to the amount of such ordinary
income in the year in which the income is recognized by the Participant.
Taxation of Capital Gains and Ordinary Income
Presently, the maximum federal income tax rate for individuals applicable
to long-term capital gains is 20%, whereas the maximum federal income tax rate
for individuals applicable to ordinary income is 39.6%. Capital losses generally
are only deductible against capital gains and, for individuals, a limited amount
($3,000 per year) of ordinary income.
Vote Required
Approval of adoption of the Plan requires the affirmative vote of the
holders of a majority of the shares of the Company's Common Stock present or
represented and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1999
LONG-TERM PERFORMANCE INCENTIVE PLAN.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed PricewaterhouseCoopers
LLP, independent accountants, to examine the accounts of the Company for the
year ending December 31, 1999 and to report on the Company's financial
statements for that period. The firm of PricewaterhouseCoopers LLP has acted as
independent accountants for the Company since 1968. Representatives of
PricewaterhouseCoopers LLP will be present at the Meeting to make a statement if
they desire to do so and to respond to appropriate questions.
18
There is no requirement that the appointment of PricewaterhouseCoopers LLP
as the Company's independent accountants be submitted to the shareholders for
their approval. However, the Board of Directors believes that shareholders
should be provided an opportunity to express their views on the subject. The
Board of Directors will not be bound by a negative vote but may take any
negative vote into consideration in future years.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
TO BE INCLUDED IN MANAGEMENT'S PROXY AND
PROXY STATEMENT FOR THE NEXT ANNUAL MEETING
OF SHAREHOLDERS
In order for a shareholder's proposal(s) to be considered for inclusion in
the Company's Proxy Statement and proxy for the 2000 Annual Meeting of
Shareholders, the shareholder must present his or her proposal(s) to the Company
not later than December 2, 1999.
DEADLINE FOR PROPOSALS AS TO WHICH MANAGEMENT
WILL NOT HAVE DISCRETIONARY AUTHORITY
At the 2000 Annual Meeting of Shareholders, Management of the Company will
have discretionary authority to act upon such matters as may be brought before
the Meeting or any adjournment thereof as to which written notice was not
received by the Company on or before February 15, 2000.
OTHER MATTERS
The Board of Directors does not know of any matters other than the matters
described herein and procedural matters to be presented at the Meeting. If any
other matters properly come before the Meeting, the persons named in the
accompanying proxy will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
/s/ D. Jeffry Benoliel
D. Jeffry Benoliel
Secretary
Dated: March 31, 1999
19
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20
EXHIBIT A
SHAREHOLDER VOTING ADMINISTRATIVE PROCEDURES
Voting Rights
At the Annual Meeting of Shareholders held May 6, 1987, shareholders
approved an amendment to the Articles of Incorporation, pursuant to which the
holders of the Company's $1.00 par value Common Stock on May 7, 1987 (the
"Effective Date") became entitled to 10 votes per share of Common Stock with
respect to such shares, and any shares of Common Stock acquired after the
Effective Date, subject to certain exceptions, shall only be entitled to 1 vote
per share until such shares have been owned beneficially for a period of at
least 36 consecutive calendar months, dating from the first day of the first
full calendar month on or after the date the holder acquires beneficial
ownership of such shares (the "Holding Period"). Each change in beneficial
ownership with respect to a particular share will begin a new "1 vote" Holding
Period for such share. A change in beneficial ownership will occur whenever any
change occurs in the person or group of persons having or sharing the voting
and/or investment power with respect to such shares within the meaning of Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act of
1934. Under the amendment, a share of Common Stock held of record on a record
date shall be presumed to be owned beneficially by the record holder and for the
period shown by the shareholder records of the Company. A share of Common Stock
held of record in "street" or "nominee" name by a broker, clearing agency,
voting trustee, bank, trust company, or other nominee shall be presumed to have
been held for a period of less than the required 36 month Holding Period. The
foregoing presumptions are rebuttable upon presentation to the Company of
satisfactory evidence to the contrary. Such evidence can include trade
confirmations and account statements indicating ownership through the required
holding period. Nevertheless, the Company, at its sole discretion, will
determine the adequacy of the evidence presented. The amendment also provides
that no change in beneficial ownership will be deemed to have occurred solely as
a result of any of the following:
(1) a transfer by any gift, devise, bequest, or otherwise through the laws
of inheritance or descent;
(2) a transfer by a trustee to a trust beneficiary under the terms of the
trust;
(3) the appointment of a successor trustee, guardian, or custodian with
respect to a share; or
(4) a transfer of record or a transfer of a beneficial interest in a share
where the circumstances surrounding such transfer clearly demonstrate
that no material change in beneficial ownership has occurred.
Maintaining Records
The Company's registrar and transfer agent, American Stock Transfer & Trust
Company, maintains the Company's register of shareholders. A single register is
maintained, but individual holdings are coded to indicate automatically the
number of votes that each shareholder is entitled to cast. Internal mechanisms
automatically convert the voting rights by a 10-to-1 ratio for those
shareholders who have held their shares for the required Holding Period.
Additionally, the register can be adjusted manually, in order to respond to
shareholders whose shares were held in "street" or "nominee" name if shares
acquired were held by the same party for the required Holding Period.
Proxy Administration
As indicated above, record ownership proxy administration is relatively
simple. The transfer agent will mail proxy cards to all shareholders, and each
proxy card will reflect the number of votes that the shareholder is entitled to
cast, not the number of shares held. If shareholders have deposited shares with
brokers, clearing agencies, voting trusts, banks, and other nominees, such
shareholders will normally be entitled to one vote per share. If they can
provide evidence that they have held their shares for the Holding Period, they
can increase the number of votes that may be cast to 10 votes per share by
proper notification to the Company. Equally, if a shareholder believes that he
or she is entitled to 10 votes per share by virtue of falling within one of the
exceptions set forth above, that can be accomplished through proper notification
to the Company. Acceptable substantiation will in most cases be a letter from
the shareholder explaining the circumstances and stating why he or she feels
that the common shares held by such shareholder are entitled to 10 votes per
share, either because the shares have been held for the required Holding Period
or because the shareholder falls within one of the exceptions set forth above.
The Company reserves the right to change what it deems to be acceptable
substantiation at any time if it appears from experience that the present
definition is inadequate or is being abused, and further reserves the right at
any time to require that a particular shareholder provide additional evidence
that one of the exceptions is applicable.
Where evidence is presented that is satisfactory, the shareholder records
will be manually adjusted as appropriate. The shareholder submitting the
evidence will be advised as to any action taken or not taken, which will be
posted by ordinary mail to the shareholder's registered address.
21
Special proxy cards are not used, and no special or unusual procedures are
required in order properly to execute and deliver the proxy card for tabulation
by the transfer agent.
Summary
The procedures set forth above have been reviewed with representatives of
various brokers and banks, as well as counsel to the Company. Those
representatives have made helpful and valuable suggestions, which have been
incorporated in the procedures.
The Company is confident that these procedures are efficient in addressing
the complications of multi-vote casting and tabulating, but the Company is
prepared to revise them if experience dictates the need for revision.
If a Shareholder has questions concerning the Shareholder Voting Procedures
or would like to present evidence of ownership through the required 36 month
holding period, please contact Irene Kisleiko, the Company's Assistant
Secretary, at (610) 832-4119.
22
EXHIBIT B
QUAKER CHEMICAL CORPORATION
1999 LONG-TERM PERFORMANCE INCENTIVE PLAN
1. PURPOSE OF THE PLAN
This Long-Term Performance Incentive Plan (the "Plan") has been
established to provide incentives and awards to those employees largely
responsible for the long-term success of Quaker Chemical Corporation (the
"Company") and its subsidiaries. In addition, the Plan is intended to enable the
Company to attract and retain executives in the future and to encourage key
employees to acquire a proprietary interest in the performance of the Company by
purchasing and owning shares of Common Stock of the Company.
2. GENERAL PROVISIONS
2.1 Definitions.
As used in the Plan:
(a) "Award" means a restricted stock award granted pursuant to
Section 5 of the Plan.
(b) "Act" means the Securities Exchange Act of 1934, as amended.
(c) "Board of Directors" means the Board of Directors of the
Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation/Management Development
Committee of the Board of Directors.
(f) "Common Stock" means the Common Stock, par value $1.00 per
share, of the Company.
(g) "Fair Market Value" means, with respect to the date a given
Stock Option or Stock Appreciation Right is granted or
exercised, the average of the lowest and highest sales price
for a share of Common Stock on the New York Stock Exchange
or, if not reported on the New York Stock Exchange, as
quoted on the principal exchange on which the Common Stock
is listed; provided, however, if no such sales are made on
such date, then on the next proceeding date on which there
are such sales. If for any day the Fair Market Value of a
share of Common Stock is not determinable by any of the
foregoing means, then the Fair Market Value for such day
shall be determined in good faith by the Committee on the
basis of such quotations and other considerations as the
Committee deems appropriate.
(h) "Incentive Stock Option" means an option granted under the
Plan, which is intended to qualify as an incentive stock
option under Section 422 of the Code.
(i) "Non-Qualified Stock Option" means an option granted
under the Plan which is not an Incentive Stock Option.
(j) "Option Event" means the date on which:
(i) any person (a "Person"), as such term is used in
Sections 13(d) and 14(d) of the Act, (other than (A)
the Company and/or its wholly owned subsidiaries; (B)
any ESOP or other employee benefit plan of the Company
and any trustee or other fiduciary in such capacity
holding securities under such plan; (C) any corporation
owned, directly or indirectly, by the shareholders of
the Company in substantially the same proportions as
their ownership of stock of the Company; or (D) any
other Person who is as of the date of this Agreement
presently an executive officer of the Company or any
group of Persons of which he voluntarily is a part) is
or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of
securities of the Company representing 30% or more of
the combined voting power of the Company's then
outstanding securities or such lesser percentage of
voting power, but not less than 15%, as the Board of
Directors of the Company shall determine; provided,
however, that an Option Event shall not be deemed to
have occurred under the provisions of this subsection
23
(i) by reason of the beneficial ownership of voting
securities by members of the Benoliel Family (as
defined below) unless and until the beneficial
ownership of all members of the Benoliel Family
(including any other individuals or entities who or
which, together with any member or members of the
Benoliel Family, are deemed under Sections 13(d) or
14(d) of the Act to constitute a single Person) exceeds
50% of the combined voting power of the Company's then
outstanding securities;
(ii) during any two-year period beginning on the effective
date of this Plan, Directors of the Company in office
at the beginning of such period plus any new Director
(other than a Director designated by a Person who has
entered into an agreement with the Company to effect a
transaction within the purview of subsections (i) or
(iii) hereof) whose election by the Board of Directors
or whose nomination for election by the Company's
shareholders was approved by a vote of at least
two-thirds of the Directors then still in office who
either were Directors at the beginning of the period or
whose election or nomination for election was
previously so approved shall cease for any reason to
constitute at least a majority of the Board of
Directors; or
(iii) the Company's shareholders or the Company's Board of
Directors shall approve (A) any consolidation or merger
of the Company in which the Company is not the
continuing or surviving corporation or pursuant to
which the Company's Common Stock would be converted
into cash, securities, and/or other property, other
than a merger of the Company in which holders of Common
Stock immediately prior to the merger have the same
proportionate ownership of Common Stock of the
surviving corporation immediately after the merger as
they had in the Common Stock immediately before; (B)
any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all
or substantially all the assets or earning power of the
Company; or (C) the liquidation or dissolution of the
Company.
As used in this Agreement, the "Benoliel Family" shall
mean Peter A. Benoliel, his wife and children and their
respective spouses and children, and all trusts created
by or for the benefit of any of them.
(k) "Participant" means an employee of the Company or one or
more of its Subsidiaries to whom a Stock Option, a Stock
Appreciation Right, an Award and/or a Performance Incentive
Unit has been granted under the Plan.
(l) "Performance Award Period" means a period of three (3)
consecutive calendar years, the first of which shall
commence on January 1, 1999, and the balance of which shall
commence on January 1 of every calendar year thereafter
through 2007.
(m) "Performance Incentive Unit" means a unit granted in
accordance with the provisions of Section 4.1 of the Plan.
(n) "Performance Program Target" means the performance program
targets fixed by the Committee for a particular Performance
Award Period.
(o) "Rule 16b-3" means Rule 16b-3 promulgated under the Act or
any successor Rule.
(p) "Stock Appreciation Right" means a right granted, pursuant
to Section 3.7 of the Plan, to a holder of a Stock Option.
(q) "Stock Option" means an Incentive Stock Option or
Non-Qualified Stock Option granted under the Plan.
(r) "Subsidiary" means any corporation whose outstanding voting
securities having ordinary voting power to elect directors
(other than securities having such power only by reason of
the happening of a contingency) shall at the time be 50% or
more owned, directly or indirectly, by the Company.
(s) "Total Disability" shall mean (i) a physical or mental
disability which, at least twenty-six (26) weeks after its
commencement, is determined to be total and permanent by a
physician selected by the Committee and reasonably
acceptable to the Participant or the Participant's legal
representative or (ii) if the Company then has in effect a
24
disability plan covering employees generally, including the
Participant, the definition of covered total and permanent
"disability" set forth in such plan.
2.2 Administration of the Plan.
(a) The Plan shall be administered by the Committee which shall
have the full power, subject to and within the limits of the
Plan, to: (i) interpret and administer the Plan and Stock
Options, Awards, Performance Incentive Units, and Stock
Appreciation Rights granted under it; and (ii) make and
interpret rules and regulations for the administration of
the Plan and to make changes in and revoke such rules and
regulations. The Committee, in the exercise of these powers,
shall (i) generally determine all questions of policy and
expediency that may arise and may correct any defect,
omission, or inconsistency in the Plan or any agreement
evidencing the grant of any Stock Option, Award, Performance
Incentive Unit, or Stock Appreciation Right in a manner and
to the extent it shall deem necessary to make the Plan fully
effective; (ii) determine those eligible employees to whom
Stock Options, Awards, Stock Appreciation Rights, and/or
Performance Incentive Units shall be granted and the number
of any thereof to be granted to any eligible employee,
consistent with the provisions of the Plan; (iii) determine
the terms of Stock Options, Awards, Stock Appreciation
Rights, and Performance Incentive Units granted consistent
with the provisions of the Plan; and (iv) generally,
exercise such powers and perform such acts in connection
with the Plan as are deemed necessary or expedient to
promote the best interests of the Company.
(b) The Committee shall consist of not less than two (2) members
of the Board of Directors, each of whom is a "disinterested
person" (as defined in Rule 16b-3) with respect to the Plan.
The Board may also select one or more directors who satisfy
the requirements in the preceding sentence as alternate
members of the Committee who may take the place of any
absent member or members of the Committee at any meeting of
the Committee. The Committee may act only by a majority of
its members then in office; the Committee may authorize any
one or more of its members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
2.3 Effective Date.
The Plan shall be effective as of January 1, 1999, provided that
the Plan is approved and ratified by the Company's shareholders
at the Company's 1999 Annual Meeting of Shareholders. If the Plan
is not so approved by the Company's shareholders, the Plan and
all awards previously granted thereunder become null and void.
2.4 Duration.
If approved by the shareholders of the Company, as provided in
Section 2.3, unless sooner terminated by the Board of Directors,
the Plan shall remain in effect until December 31, 2008.
2.5 Shares Subject to the Plan.
The maximum number of shares of Common Stock which may be subject
to Stock Options and Awards granted under the Plan shall be
1,000,000, subject to adjustment in accordance with Section 6.1,
which shares may be either authorized and unissued shares of
Common Stock or authorized and issued shares of Common Stock
purchased or acquired by the Company for any purpose. If a Stock
Option or portion thereof shall expire or be terminated,
cancelled, or surrendered for any reason without being exercised
in full, the unpurchased shares of Common Stock which were
subject to such Stock Option or portion thereof shall be
available for future grants of Stock Options or Awards under the
Plan. In the event any Award lapses prior to the realization
thereof, any shares of Common Stock allocable to such Award shall
again be available for future grants of Stock Options or Awards.
2.6 Amendments.
The Plan may be suspended, terminated, or reinstated, in whole or
in part, at any time by the Board of Directors. The Board of
Directors may from time to time make such amendments to the Plan
as it may deem advisable, including, with respect to Incentive
Stock Options, amendments deemed necessary or desirable to comply
with Section 422 of the Code and any regulations issued
thereunder; provided, however, that, without the approval of the
Company's shareholders, no amendment shall be made which:
25
(a) Increases the maximum number of shares of Common Stock which
may be subject to Stock Options or Awards granted under the
Plan (other than as provided in Section 6.1); or
(b) Extends the term of the Plan; or
(c) Increases the period during which a Stock Option may be
exercised beyond ten (10) years from the date of grant; or
(d) Otherwise materially increases the benefits accruing to
Participants under the Plan; or
(e) Materially modifies the requirements as to eligibility for
participation in the Plan; or
(f) Will cause Stock Options, Awards, Stock Appreciation Rights,
or Performance Incentive Units issued or granted under the
Plan to fail to meet the requirements of Rule 16b-3.
Termination or amendment of the Plan shall not, without the
consent of the Participant, affect such Participant's rights
under any Stock Option, Award, Stock Appreciation Right or
Performance Incentive Unit previously granted to such
Participant.
2.7 Participants and Grants.
Stock Options, Awards, Stock Appreciation Rights, and Performance
Incentive Units may be granted by the Committee to those
full-time salaried employees of the Company and its Subsidiaries
who the Committee determines hold positions which enable them to
have a significant impact on the Company's long-term financial
performance. The Committee may grant to eligible employees
Incentive Stock Options, Non-Qualified Stock Options, and Awards
with respect to such number of shares of Common Stock (subject to
the limitations of Section 2.5) and Stock Appreciation Rights
and/or such number of Performance Incentive Units as the
Committee may, in its sole discretion, determine. In determining
the number of shares of Common Stock subject to a Stock Option or
an Award and the number of Performance Incentive Units to be
granted to an eligible employee, the Committee shall consider the
employee's base salary, his or her expected contribution to the
long-term performance of the Company, and such other relevant
facts as the Committee shall deem appropriate. In granting Stock
Options, Awards, Stock Appreciation Rights, and Performance
Incentive Units under the Plan, the Committee may vary the number
of Incentive Stock Options, Non-Qualified Options, Awards, Stock
Appreciation Rights, and/or Performance Incentive Units to an
eligible employee in such amounts as the Committee may determine
in its discretion.
3. STOCK OPTIONS
3.1 General.
All Stock Options granted under the Plan shall be evidenced by
written agreements executed by the Company and the employee to
whom granted which agreement shall state the number of shares of
Common Stock which may be purchased upon the exercise thereof and
shall contain such investment representations and other terms and
conditions as the Committee may from time to time determine, or,
in the case of Incentive Stock Options, as may be required by
Section 422 of the Code, or any other applicable law.
3.2 Price.
Subject to the provisions of Sections 3.6(d) and 6.1, the
purchase price per share of Common Stock subject to a Stock
Option shall, in no case, be less than 100 percent (100%) of the
Fair Market Value of a share of Common Stock on the date the
Stock Option is granted.
3.3 Period.
The duration or term of each Stock Option granted under the Plan
shall be for such period as the Committee shall determine but in
no event more than ten (10) years from the date of grant thereof.
3.4 Exercise.
Subject to Sections 3.10 and 6.1, no Stock Option shall be
exercisable prior to the expiration of one (1) year from the date
it is granted. Once exercisable, a Stock Option shall be
exercisable, in whole or in part, by delivery of a written notice
of exercise to the Secretary of the Company at the principal
office of the Company specifying the number of shares of Common
Stock as to which the Stock Option is then being exercised
together with payment of the full purchase price for the shares
being purchased upon such exercise. Until the shares of Common
26
Stock as to which a Stock Option is exercised are paid for in
full and issued, the Participant shall have none of the rights of
a shareholder of the Company.
3.5 Payment.
The purchase price for shares of Common Stock as to which a Stock
Option has been exercised may be paid:
(a) In United States dollars in cash, or by check, bank draft,
or money order payable in United States dollars to the order
of the Company; or
(b) In the discretion of the Committee by note; or
(c) In the discretion of the Committee, by the delivery by the
Participant to the Company of whole shares of Common Stock
having an aggregate Fair Market Value on the date of payment
equal to the aggregate of the purchase price of Common Stock
as to which the Stock Option is then being exercised or by
the withholding of whole shares of Common Stock having such
Fair Market Value upon the exercise of such Stock Option; or
(d) In the discretion of the Committee, in United States dollars
in cash, or by check, bank draft, or money order payable in
United States dollars to the order of the Company delivered
to the Company by a broker in exchange for its receipt of
stock certificates from the Company in accordance with
instructions of the Participant to the broker pursuant to
which the broker is required to deliver to the Company the
amount of sale or loan proceeds required to pay the purchase
price; or
(e) In the discretion of the Committee, by a combination of any
number of the foregoing.
The Committee may, in its discretion, impose limitations,
conditions, and prohibitions on the use by a Participant of
shares of Common Stock to pay the purchase price payable by such
Participant upon the exercise of a Stock Option.
3.6 Special Rules for Incentive Stock Options.
Notwithstanding any other provision of the Plan, the following
provisions shall apply to Incentive Stock Options granted under
the Plan:
(a) Incentive Stock Options shall only be granted to
Participants who are employees of the Company or its
Subsidiaries.
(b) To the extent that the aggregate Fair Market Value of stock
with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under this Plan and any other Plan of the
Company or a Subsidiary exceeds $100,000, such Stock Options
shall be treated as Non-Qualified Stock Options.
(c) Any Participant who disposes of shares of Common Stock
acquired upon the exercise of an Incentive Stock Option by
sale or exchange either within two (2) years after the date
of the grant of the Incentive Stock Option under which the
shares were acquired or within one (1) year of the
acquisition of such shares, shall promptly notify the
Secretary of the Company at the principal office of the
Company of such disposition, the amount realized, the
purchase price per share paid upon exercise, and the date of
disposition.
(d) No Incentive Stock Option shall be granted to a Participant
who, at the time of the grant, owns stock representing more
than ten percent (10%) of the total combined voting power of
all classes of stock either of the Company or any parent or
Subsidiary of the Company, unless the purchase price of the
shares of Common Stock purchasable upon exercise of such
Incentive Stock Option is at least one hundred ten percent
(110%) of the Fair Market Value (at the time the Incentive
Stock Option is granted) of the Common Stock and the
Incentive Stock Option is not exercisable more than five (5)
years from the date it is granted.
27
3.7 Stock Appreciation Rights.
(a) Grant.
Stock Appreciation Rights may be granted under the Plan by
the Committee, but only in connection with all or any part
of a Stock Option granted under the Plan. Stock
Appreciation Rights may be granted either concurrently
with the grant of a Stock Option or at any time thereafter
during the term of the Stock Option. A Stock Appreciation
Right shall be exercisable only upon surrender of the
related Stock Option or portion thereof and shall entitle
the Participant to receive the excess of the Fair Market
Value of the shares of Common Stock for which the Stock
Appreciation Right is exercised on the date of such
exercise over the purchase price per share of Common Stock
under the related Stock Option. Such excess is hereafter
call the "Spread."
(b) Exercise of Stock Appreciation Right.
Stock Appreciation Rights shall be exercisable at such
time as and to the extent, but only to the extent, that
the Stock Option to which they relate shall be exercisable
and shall be subject to any other terms and conditions,
not inconsistent with the Plan, as may be fixed by the
Committee at the time the Stock Appreciation Right is
granted. No Stock Appreciation Right shall be exercisable
prior to the later of: (i) six (6) months and one (1) day
following the date on which such Stock Appreciation Right
was granted or (ii) the date on which the related Stock
Option or any portion thereof first becomes exercisable.
Shares of Common Stock subject to a Stock Option
surrendered by a Participant in connection with an
exercise of Stock Appreciation Rights may not again be
subjected to Stock Options under the Plan. Upon the
exercise of Stock Appreciation Rights, the Participant
shall be entitled to receive from the Company in exchange
for the surrendered Stock Option or portion thereof, an
amount equal to the Spread either in cash or in shares of
Common Stock having a Fair Market Value equal to the
Spread, or both, as the Committee may determine; provided,
however, that the number of shares of Common Stock which a
Participant may receive upon the exercise of Stock
Appreciation Rights may not exceed the number of shares of
Common Stock subject to the Stock Option or portion
thereof surrendered upon exercise of such Stock
Appreciation Rights. The shares of Common Stock issuable
upon exercise of Stock Appreciation Rights may consist
either in whole or in part of authorized and unissued
shares of Common Stock or authorized and issued shares of
Common Stock purchased or acquired by the Company for any
purpose. If shares of Common Stock are to be issued to a
Participant upon exercise by the Participant of Stock
Appreciation Rights, such Participant shall have none of
the rights of a shareholder of the Company until the
shares of Common Stock are issued.
3.8 Termination of Employment.
(a) In the event a Participant's employment by the Company or
its Subsidiaries shall be terminated for cause, as
determined by the Committee, while the Participant holds
Stock Options granted under the Plan, all Stock Options
held by the Participant shall expire immediately.
(b) If a Participant, while holding Stock Options, (i) retires
upon reaching his normal retirement date or having elected
early retirement under a formal plan or policy of the
Company or (ii) dies, then each Stock Option held by the
Participant shall be exercisable by the Participant (or,
in the case of death, by the executor or administrator of
the Participant's estate or by the person or persons to
whom the deceased Participant's rights thereunder shall
have passed by will or by the laws of descent or
distribution) until the earlier of (A) its stated
expiration date or (B) the date occurring three (3) years
after the date of such retirement or death, as the case
may be. If a Participant's employment by the Company or
its Subsidiaries shall terminate as a result of the
Participant's Total Disability, while such Participant is
holding Stock Options, then each Stock Option held by the
Participant shall be exercisable by the Participant until
its stated expiration date.
(c) If a Participant's employment by the Company or its
Subsidiaries shall terminate for any reason not specified
in Sections 3.8(a) or (b), the Participant shall, to the
extent otherwise exercisable, have the right to exercise
the Stock Options held by him or her at the date of
28
termination for a period of three (3) months or, in the
case of Stock Options which are not intended to be
Incentive Stock Options, such extended period as the
Committee may, in its sole discretion determine at or
after the date of grant; provided, however, that in no
event shall such Stock Options be exercisable after their
stated expiration date.
(d) Stock Options held by a Participant at the time of the
termination of his or her employment by the Company or its
Subsidiaries which, by their terms are not then
exercisable, shall, subject to, and except as otherwise
provided by, the provisions of (i) this Section 3.8
regarding expiration or lapse and (ii) Section 3.10
regarding acceleration and redemption become exercisable
(if at all) at the times, and otherwise in the manner, set
forth in connection with their original grant or on such
accelerated basis as the Committee may, in its sole
discretion, determine at or after grant.
3.9 Effect of Leaves of Absence.
It shall not be considered a termination of employment when a
Participant is on military or sick leave or such other type of
leave of absence which is considered as continuing intact the
employment relationship of the Participant with the Company or
its Subsidiaries. In case of such leave of absence, the
employment relationship shall be continued until the later of the
date when such leave equals ninety (90) days or the date when the
Participant's right to reemployment shall no longer be guaranteed
either by statute or contract.
3.10 Acceleration and Redemption.
Upon the occurrence of an Option Event, all Stock Options granted
and outstanding under the Plan shall become immediately
exercisable in full regardless of any terms of said Stock Option
to the contrary.
4. PERFORMANCE INCENTIVE UNITS
4.1 Grant.
From time to time during each Performance Award Period, the
Committee may grant Performance Incentive Units to eligible
employees in conjunction with or separately from a grant of Stock
Options; provided, however, that Performance Incentive Units
shall not be granted to any one eligible employee more often than
once with respect to a Performance Award Period.
4.2 Establishment of Stated Value and Performance Program Targets.
At the beginning of each Performance Award Period, the Committee
shall establish the Performance Program Targets applicable to
that Performance Award Period (which may be expressed as
increases in the Company's earnings per share, return or average
return on assets, or in terms of any financial or other standard,
or combinations thereof, as the Committee may determine in its
discretion), the Stated Value (which shall be expressed in
dollars) of Performance Incentive Units to be granted with
respect to such Performance Award Period, and shall fix the
percentage, if any, of the Stated Value to be earned upon the
achievement of the Performance Program Targets established for
the relevant Performance Award Period; provided, however, that
the percentage of Stated Value to be earned upon achievement of
the maximum Performance Program Target established with respect
to a Performance Award Period shall in no event exceed 200% of
Stated Value fixed for that Performance Award Period.
If the Committee determines that an unforeseen change during a
Performance Award Period in the Company's business operations,
corporate structure, capital structure, or manner in which it
conducts business is extraordinary and material and that the
Performance Program Targets established for the Performance Award
Period are no longer suitable, the Committee may, but only with
the concurrence of the Board of Directors, modify the Performance
Program Targets as it deems appropriate and equitable; provided,
however, that no such modification shall increase the Performance
Program Targets in effect for any Performance Award Period (i.e.,
establish a target that is more difficult to achieve than the
original Performance Program Target).
4.3 Payment.
As promptly as practicable after the end of each Performance
Award Period, the Committee shall, pursuant to Section 4.2 of the
Plan, determine the earned percentage of Stated Value of the
Performance Incentive Units granted with respect to such
completed Performance Award Period. The Company shall, as soon as
29
practicable after such determination has been made, pay to each
Participant holding Performance Incentive Units granted with
respect to such completed Performance Award Period, for each such
Performance Incentive Units held by him or her an amount equal to
the product obtained by multiplying Stated Value by the earned
percentage of Stated Value; provided, however, that no amounts
shall be due or payable with respect to any Performance Incentive
Units unless the Participant to whom such Performance Incentive
Units have been granted is employed by the Company on the date of
payment.
4.4 Termination of Employment.
If a Participant's employment by the Company and its Subsidiaries
terminates for any reason, the Performance Incentive Units held
by the Participant with respect to any Performance Award Period
which has not ended at the date of such termination shall become
null and void; provided, however, that the Committee, in its sole
discretion, shall have the right to authorize proportionate
payment in cases of death or retirement at the normal retirement
date or under a formal early retirement plan or policy of the
Company if the Committee in its discretion determines a payment
to be appropriate and equitable.
5. RESTRICTED STOCK
5.1 Grant
Common Stock may be granted from time to time under the Plan by
the Committee to eligible employees. An Award will consist of
Common Stock to be transferred to a Participant without other
payment therefor upon completion of any restriction period
relating to such Award ("Restriction Period") and satisfaction of
any performance criteria, each as may be established by the
Committee.
5.2 Restrictions
Except as otherwise provided in this Section 5, no Award or
shares of Common Stock relating to any Award may be sold,
exchanged, transferred, pledged, hypothecated, or otherwise
disposed of during the Restriction Period; provided, however, the
Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of the Common Stock subject to the
Award shall lapse upon the Participant's death, Total Disability,
the Participant's retirement after attaining his or her
retirement date under a formal plan or policy of the Company,
upon an event that would constitute an Option Event, or upon any
other date or event as may be determined by the Committee in its
sole discretion at or after grant of the Award.
5.3 Lapse
If a Participant terminates employment with the Company for any
reason other than as set forth in Section 5.2 before the
expiration of the Restriction Period, the Award shall lapse and
all shares of Common Stock still subject to restriction shall be
forfeited and shall be reacquired by the Company without further
consideration.
5.4 Custody of Shares
The Committee may require under such terms and conditions as it
deems appropriate or desirable that the certificates for Common
Stock subject to an Award be held in custody by a bank or other
institution or that the Company may itself hold such shares in
custody until the Restriction Period expires or until
restrictions thereon otherwise lapse and may require as a
condition of any Award that the Participant shall have delivered
to the Company a stock power endorsed in blank relating to the
shares of Common Stock subject to the Award. The shares of Common
Stock subject to an Award shall be issued promptly after the
conclusion of the Restriction Period and the satisfaction of any
applicable performance criteria.
5.5 Shareholder Rights
Each Participant who receives an Award shall have all of the
rights of a shareholder with respect to such shares of Common
Stock attributable thereto, including the right to vote the
shares and receive dividends and other distributions.
30
5.6 Agreement
Each Award granted under the Plan shall be evidenced by an Award
Agreement between the Company and the Participant which shall set
forth the number of shares of Common Stock subject to the Award,
the length of the Restriction Period, and such performance
criteria relating to the vesting of the shares of Common Stock to
which the Award is subject as the Committee may, in its sole
discretion, determine.
6. MISCELLANEOUS PROVISIONS
6.1 Adjustments Upon Changes in Capitalization.
In the event of changes to the outstanding shares of Common Stock
of the Company through reorganization, merger, consolidation,
recapitalization, reclassification, stock splits, stock dividend,
stock consolidation or otherwise, or in the event of a sale of
all or substantially all of the assets of the Company, an
appropriate and proportionate adjustment shall be made in the
number and kind of shares as to which Stock Options or Awards may
be granted. A corresponding adjustment changing the number or
kind of shares and/or the purchase price per share of unexercised
Stock Options or Awards or portions thereof which shall have been
granted prior to any such change shall likewise be made.
Notwithstanding the foregoing, in the case of a reorganization,
merger or consolidation, or sale of all or substantially all of
the assets of the Company, in lieu of adjustments as aforesaid,
the Committee may in is discretion accelerate the date after
which a Stock Option may or may not be exercised or the stated
expiration date thereof and may accelerate the termination date
of any Award or Performance Award Period then in effect.
Adjustments or changes under this Section shall be made by the
Committee, whose determination as to what adjustments or changes
shall be made, and the extent thereof, shall be final, binding,
and conclusive.
6.2 Non-Transferability.
No Stock Option, Stock Appreciation Right, Award, or Performance
Incentive Unit granted under the Plan shall be transferable by
the Participant except by will or the laws of descent and
distribution nor shall any Stock Option be exercisable during the
Participant's lifetime by any person other than the Participant
or his guardian or legal representative.
6.3 Withholding.
The Company's obligations in connection with this Plan shall be
subject to applicable federal, state, and local tax withholding
requirements. Federal, state, and local withholding tax due at
the time of a grant or upon the exercise of any Stock Option or
upon the lapse of restrictions on any shares of Common Stock
subject to an Award may, in the discretion of the Committee, be
paid in shares of Common Stock already owned by the Participant
or through the withholding of shares otherwise issuable to such
Participant upon such terms and conditions as the Committee shall
determine. If the Participant shall either fail to pay, or make
arrangements satisfactory to the Committee for the payment, to
the Company of all such federal, state, and local taxes required
to be withheld by the Company, then the Company shall, to the
extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to such Participant an amount
equal to any federal, state, or local taxes of any kind required
to be withheld by the Company.
6.4 Compliance with Law and Approval of Regulatory Bodies.
No Stock Option, Stock Appreciation Right, or Performance
Incentive Unit shall be exercisable and no shares will be
delivered under the Plan except in compliance with all applicable
federal and state laws and regulations including, without
limitation, compliance with all federal and state securities laws
and withholding tax requirements and with the rules of the New
York Stock Exchange and of all domestic stock exchanges on which
the Common Stock may be listed. Any share certificate issued to
evidence shares for which a Stock Option is exercised or for
which an Award has been granted may bear legends and statements
the Committee shall deem advisable to assure compliance with
federal and state laws and regulations. No Stock Option, Stock
Appreciation Right, or Performance Incentive Unit shall be
exercisable and no shares will be delivered under the Plan, until
the Company has obtained consent or approval from regulatory
bodies, federal or state, having jurisdiction over such matters
as the Committee may deem advisable. In the case of an Award or
the exercise of a Stock Option or Stock Appreciation Right by a
person or estate acquiring the right to the Award or the exercise
31
of a Stock Option or Stock Appreciation Right as a result of the
death of the Participant, the Committee may require reasonable
evidence as to the ownership of the Stock Option, Award, or Stock
Appreciation Right and may require consents and releases of
taxing authorities that it may deem advisable.
6.5 No Right to Employment.
Neither the adoption of the Plan nor its operation, nor any
document describing or referring to the Plan, or any part
thereof, nor the granting of any Stock Options, Stock
Appreciation Rights, Awards, or Performance Incentive Units
hereunder, shall confer upon any Participant under the Plan any
right to continue in the employ of the Company or any Subsidiary,
or shall in any way affect the right and power of the Company or
any Subsidiary to terminate the employment of any Participant at
any time with or without assigning a reason therefor, to the same
extent as might have been done if the Plan had not been adopted.
6.6 Exclusion from Pension Computations.
By acceptance of a grant of a Stock Option, Stock Appreciation
Right, Award, or Performance Incentive Unit under the Plan, the
recipient shall be deemed to agree that any income realized upon
the receipt, exercise, or vesting thereof or upon the disposition
of the shares received upon exercise will not be taken into
account as "base remuneration," "wages," "salary," or
"compensation" in determining the amount of any contribution to
or payment or any other benefit under any pension, retirement,
incentive, profit-sharing, or deferred compensation plan of the
Company or any Subsidiary.
6.7 Separability.
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3, then such terms or provisions shall
be deemed inoperative to the extent they so conflict with the
requirements of Rule 16b-3.
6.8 Interpretation of the Plan.
Headings are given to the Sections of the Plan solely as a
convenience to facilitate reference, such headings, numbering,
and paragraphing shall not in any case be deemed in any way
material or relevant to the construction of the Plan or any
provision hereof. The use of the masculine gender shall also
include within its meaning the feminine. The use of the singular
shall also include within its meaning the plural and vice versa.
6.9 Use of Proceeds.
Funds received by the Company upon the exercise of Stock Options
granted under the Plan shall be used for the general corporate
purposes of the Company.
6.10 Construction of Plan.
The place of administration of the Plan shall be in the
Commonwealth of Pennsylvania, and the validity, construction,
interpretation, administration, and effect of the Plan and of its
rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the Commonwealth
of Pennsylvania.
32
================================================================================
PROXY
QUAKER CHEMICAL CORPORATION
Elm and Lee Streets,
Conshohocken, PA 19428
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter A. Benoliel and Ronald J. Naples, and each
of them, proxies of the undersigned, to attend the Annual Meeting of
Shareholders of Quaker Chemical Corporation, a Pennsylvania corporation (the
"Company"), to be held at the Philadelphia Marriott West, West Conshohocken,
Pennsylvania, on May 12, 1999, or any adjournment thereof, and with all powers
the undersigned would possess if present, to vote:
1. ELECTION OF DIRECTORS
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the to vote for all nominees
contrary below) listed below
Peter A. Benoliel, Ronald J. Naples, and Robert H. Rock
(Instruction: to withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
-----------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE ADOPTION OF THE 1999 LONG-TERM PERFORMANCE
INCENTIVE PLAN.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(CONTINUED ON REVERSE SIDE)
================================================================================
(CONTINUED FROM REVERSE SIDE)
4. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF FOR WHICH NOTICE HAS NOT BEEN RECEIVED BY COMPANY ON
OR BEFORE FEBRUARY 13, 1999. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.
The undersigned hereby also acknowledges receipt of the Notice of Annual
Meeting of Shareholders, the Proxy Statement with respect to said Meeting, and
the Company's Annual Report for the year ended December 31, 1998.
DATED:___________________, 1999
_______________________________
(Signature)
(Signature should be exactly as
name or names appear on this
Proxy)
PLEASE DATE, SIGN, AND RETURN PROMPTLY
================================================================================
Quaker Chemical Corporation
Elm and Lee Streets
Conshohocken Pennsylvania 19428-8909 USA
Telephone: 610-832-4000 Facsimile: 610-832-8682
March 31, 1999
Dear Quaker Shareholder:
Your enclosed proxy card shows the number of votes you are entitled to cast
not the number of shares that you own.
This reflects the action taken at the Annual Meeting of Shareholders on
May 6, 1987 when shareholders approved an amendment to the Articles of
Incorporation by which holders of Common Stock became entitled to 10 votes
per share of Common Stock for shares which were held on that date. The
amended Articles also provide that with respect to shares acquired after
May 6, 1987, all shares are entitled to one vote per share until such
shares are held for 36 consecutive months. After 36 months, each share is
entitled to 10 votes.
There are some exceptions to the above and those exceptions are listed in
Exhibit A "Shareholder Voting Administrative Procedures" to the enclosed
Proxy Statement.
Because we have no means of tracking ownership of shares held in "street"
or "nominee" name, such shares are presumed to have been held for a period
of less than 36 consecutive months.
Please review the number of votes which are listed on the proxy card. For
all shares purchased by you before March 1, 1996 (36 months before the
record date), you are entitled to 10 votes per share. For all shares
purchased by you after March 1, 1996, you are entitled to one vote
per share.
If you feel that the votes listed do not accurately reflect the number of
votes you are entitled to cast, Exhibit A to the enclosed Proxy Statement
outlines procedures by which you may seek change. If you have any
questions, please call Irene M. Kisleiko, Assistant Corporate Secretary, at
610-832-4119.
To allow sufficient time to research your questions or act on your
requests, please call Ms. Kisleiko at Quaker Chemical as soon as possible.
Thank you.