SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
[ ]TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____.
Commission file number 1-12
THE QUAKER OATS COMPANY
(Exact name of registrant as specified in its charter.)
NEW JERSEY 36-1655315
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
QUAKER TOWER 60604-9001
P.O. Box 049001 Chicago, Illinois
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 222-7111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock ($5.00 Par Value) New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
The Stock Exchange, London
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates
of the Registrant as of the close of business on August 31,
1995 was $4,683,271,226.63. The liquidation value of Series B ESOP
Convertible Preferred Stock, all of which is held in The Quaker Employee
Stock Ownership Plan, at the close of business on August 31, 1995 totaled
$92,725,230 plus related dividends. The number of shares of Common
Stock, $5.00 par value, outstanding as of the close of business on
August 31, 1995 was 134,287,347.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of The Quaker Oats Company Annual Report to
Shareholders for the fiscal year ended June 30, 1995 (Parts I,
II and III of Form 10-K)
2. Portions of The Quaker Oats Company Notice of Annual
Meeting and Proxy Statement dated October 2, 1995
(Part III of Form 10-K)
CROSS-REFERENCE TABLE OF CONTENTS
The 1995 Annual Report to Shareholders and the 1995 Proxy Statement
include all information required in Parts I, II and III of Form 10-K,
except as otherwise indicated in the following Cross-Reference
Table. The Cross-Reference Table identifies the source of information for
each of the Form 10-K items included in Parts I, II and III. Only those
sections of the Annual Report to Shareholders and the Proxy Statement
cited in the Cross-Reference Table of Contents are incorporated in the Form
10-K and filed with the Securities and Exchange Commission.
10-K Item No. Source of Information
PART I.
Item 1. Business
(a) General Development of Business Annual Report to Shareholders,
pages 46-47, 64
(b) Financial Information About Annual Report to Shareholders,
Industry Segments pages 42-44
(c) Narrative Description of Business Annual Report to Shareholders,
pages 27-31, 34-35, 53, 57, 59
(d) Financial Information About Foreign and Annual Report to Shareholders,
Domestic Operations and Export Sales pages 42-44
(e) Executive Officers of Registrant Annual Report to Shareholders,
pages 60-61
Item 2. Properties Annual Report to Shareholders,
page 59
Item 3. Legal Proceedings Annual Report to Shareholders,
pages 56-57
Item 4. Submission of Matters to a Vote (Not Applicable)
of Security-Holders
PART II.
Item 5. Market for the Registrant's Common Annual Report to Shareholders,
Equity and Related Stockholder Matters pages 34-35, 57, 64-65
Item 6. Selected Financial Data Annual Report to Shareholders,
pages 32-35
Item 7. Management's Discussion and Analysis of Annual Report to Shareholders,
Financial Condition and pages 27-31
Results of Operations
Item 8. Financial Statements and Annual Report to Shareholders,
Supplementary Data pages 36-58
Item 9. Disagreements with Accountants on (Not Applicable)
Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers Notice of Annual Meeting and
of the Registrant and Proxy Statement, pages 5-8;
Annual Report to Shareholders,
pages 60-61
Item 11. Executive Compensation Notice of Annual Meeting and
Proxy Statement, pages 13-21
Item 12. Security Ownership of Certain Notice of Annual Meeting and
Beneficial Owners and Management Proxy Statement, pages 11-12
Item 13. Certain Relationships and (Not Applicable)
Related Transactions
PART IV.
Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
Consolidated financial statements of The Quaker Oats Company and its
subsidiaries are incorporated under Item 8 of this Form 10-K.
(a)(2)& (d) Financial Statement Schedules
All required financial statement schedules are included in the consolidated
financial statements or notes thereto as incorporated under Item 8 of this
Form 10-K.
(a)(3)& (c) Exhibits
3(a) Restated Certificate of Incorporation (as of November 9, 1994)
3(b) Bylaws of The Quaker Oats Company (as amended January 11, 1995)
4 Registrant undertakes to furnish to the Commission, upon request, a
copy of any instrument defining the rights of holders of long-term debt
of the Registrant and all of its subsidiaries for which consolidated or
unconsolidated financial statements are required to be filed.
10(a)(1) 1984 Long-Term Incentive Plan (incorporated by reference to
Exhibit B of the Company's 1983 Proxy Statement, file number 1-12)
10(a)(2) First Amendment to 1984 Long-Term Incentive Plan (incorporated by
reference to the Company's Form 10-K for the fiscal year ended June 30,
1992, file number 1-12)
10(b)(1) Deferred Compensation Plan for Directors of The Quaker Oats Company
as restated effective January 1, 1989 (incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30, 1989, file number 1-12)
10(b)(2) First Amendment to the Deferred Compensation Plan for Directors of
The Quaker Oats Company (incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1992, file number 1-12)
10(c) Deferred Compensation Plan for Executives of The Quaker Oats Company
as restated effective January 1, 1989 (incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30, 1989, file number 1-12)
10(d) Management Incentive Bonus Plan of The Quaker Oats Company as
amended September 8, 1993 (incorporated by reference to the Company's Form 10-
K for the fiscal year ended June 30, 1994, file number 1-12)
10(e)(1) Directors' Stock Retirement Plan (incorporated by reference
to the Company's Form 10-K for the fiscal year ended June 30,
1985, file number 1-12)
10(e)(2) First Amendment to Directors' Stock Retirement Plan (incorporated by
reference to the Company's Form 10-K for the fiscal year ended June 30,
1992, file number 1-12)
10(e)(3) Second Amendment to Directors' Stock Retirement Plan
10(f)(1) Termination Benefits Agreement with William D. Smithburg, first
effective in the fiscal year ended June 30, 1995
10(f)(2) Termination Benefits Agreement with Philip A. Marineau, first
effective in the fiscal year ended June 30, 1995
10(f)(3) Termination Benefits Agreements with certain Executive Officers,
first effective in the fiscal year ended June 30, 1995 or first effective by
filing date
10(g)(1) The Quaker Supplemental Executive Retirement Program (incorporated
by reference to the Company's Form 10-K for the fiscal year ended June 30,
1989, file number 1-12)
10(g)(2) First Amendment to The Quaker Supplemental Executive Retirement
Program (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(g)(3) Second Amendment to The Quaker Supplemental Executive Retirement
Program (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(g)(4) Third Amendment to The Quaker Supplemental Executive Retirement
Program (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(g)(5) Fourth Amendment to The Quaker Supplemental Executive Retirement
Program (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(g)(6) Fifth Amendment to The Quaker Supplemental Executive Retirement
Program (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1993, file number 1-12)
10(g)(7) Sixth Amendment to The Quaker Supplemental Executive Retirement
Program (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1993, file number 1-12)
10(g)(8) Seventh Amendment to The Quaker Supplemental Executive Retirement
Program
10(g)(9) Eighth Amendment to The Quaker Supplemental Executive Retirement
Program
10(g)(10) Ninth Amendment to The Quaker Supplemental Executive Retirement
Program
10(h)(1) The Quaker Oats Company Benefits Protection Trust (incorporated
by reference to the Company's Form 10-K for the fiscal year ended June 30,
1989, file number 1-12)
10(h)(2) First Amendment to The Quaker Oats Company Benefits Protection Trust
(incorporated by reference to the Company's Form 10-K for the fiscal year
ended June 30, 1992, file number 1-12)
10(h)(3) Second Amendment to The Quaker Oats Company Benefits Protection
Trust (incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(i) The Quaker Eligible Earnings Adjustment Plan (incorporated
by reference to the Company's Form 10-K for the fiscal year ended June 30,
1992, file number 1-12)
10(j) The Quaker Officers Severance Program, effective March 8, 1995
10(k)(1) The Quaker Long Term Incentive Plan of 1990 (incorporated by
reference to the Company's Form 10-K for the fiscal year ended June 30,
1990, file number 1-12)
10(k)(2) First Amendment to The Quaker Long Term Incentive Plan of 1990
(incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(k)(3) Second Amendment to The Quaker Long Term Incentive Plan of 1990
(incorporated by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1993, file number 1-12)
10(k)(4) Third Amendment to The Quaker Long Term Incentive Plan of 1990
(incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994, file number 1-12)
10(k)(5) Fourth Amendment to The Quaker Long Term Incentive Plan of 1990
10(k)(6) Fifth Amendment to The Quaker Long Term Incentive Plan of 1990
10(l) The Quaker 415 Excess Benefit Plan (incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30, 1990, file number 1-12)
10(m) Quaker Salaried Employees Compensation and Benefits Protection Plan
(incorporated by reference to the Company's Form 10-K for the fiscal year
ended June 30, 1990, file number 1-12)
11 Statement re Computation of Per Share Earnings
12 Statement re Computation of Ratios
13 Annual Report to Shareholders of The Quaker Oats Company for the fiscal
year ended June 30, 1995
21 List of Subsidiaries of the Registrant
23 Consent of Auditors
(b) Reports on Form 8-K
(b)(1) On April 18, 1995, the Company filed an 8-K (Item 5) dated April 18,
1995 disclosing unaudited pro forma combined financial information related to
significant acquisitions and divestitures that had either closed during
fiscal 1995 or were pending.
(b)(2) On May 4, 1995, the Company filed an 8-K (Item 2 and Item 7) dated
April 24, 1995 disclosing unaudited pro forma combined financial information
and sale agreements related to the sale of the European pet foods business.
(b)(3) On June 30, 1995, the Company filed an 8-K (Item 5) dated June 8,
1995 disclosing unaudited pro forma combined financial information related
to significant acquisitions and divestitures that closed during fiscal
1995.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE QUAKER OATS COMPANY
By /s/ WILLIAM D. SMITHBURG
William D. Smithburg, Chairman and Chief Executive Officer
Date: September 13, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on the 13th day of September
1995, by the following persons on behalf of the Registrant and in
the capacities indicated.
Signature
Title
/s/ WILLIAM D. SMITHBURG
William D. Smithburg
Chairman and Chief Executive Officer and Director
/s/ ROBERT S. THOMASON
Robert S. Thomason
Senior Vice President and Chief Financial Officer
/s/ THOMAS L. GETTINGS
Thomas L. Gettings
Vice President and Corporate Controller
/s/ FRANK C. CARLUCCI
Frank C. Carlucci
Director
/s/ SILAS S. CATHCART
Silas S. Cathcart
Director
/s/ KENNETH I. CHENAULT
Kenneth I. Chenault
Director
/s/ JUDY C. LEWENT
Judy C. Lewent
Director
/s/ VERNON R. LOUCKS, JR.
Vernon R. Loucks, Jr.
Director
/s/ THOMAS C. MacAVOY
Thomas C. MacAvoy
Director
/s/ PHILIP A. MARINEAU
Philip A. Marineau
Director
/s/ LUTHER C. McKINNEY
Luther C. McKinney
Director
/s/ GERTRUDE G. MICHELSON
Gertrude G. Michelson
Director
/s/ WALTER J. SALMON
Walter J. Salmon
Director
/s/ WILLIAM L. WEISS
William L. Weiss
Director
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAPER (P),ELECTRONIC (E)
OR INCORPORATED BY
REFERENCE (IBRF)
3(a) Restated Certificate of Incorporation E
(as of November 9, 1994)
3(b) Bylaws of The Quaker Oats Company (as E
amended January 11, 1995)
4 Registrant undertakes to furnish to the Commission, IBRF
upon request, a copy of any instrument defining the
rights of holders of long-term debt of the Registrant
and all of its subsidiaries for which consolidated or
unconsolidated financial statements are required to
be filed.
10(a)(1) 1984 Long-Term Incentive Plan (incorporated by IBRF
reference to Exhibit B of the Company's 1983 Proxy
Statement, file number 1-12)
10(a)(2) First Amendment to 1984 Long-Term Incentive Plan IBRF
(incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1992, file
number 1-12)
10(b)(1) Deferred Compensation Plan for Directors of The IBRF
Quaker Oats Company as restated effective January 1,
1989 (incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1989, file
number 1-12)
10(b)(2) First Amendment to the Deferred Compensation Plan IBRF
for Directors of The Quaker Oats Company (incorporated
by reference to the Company's Form 10-K for the fiscal
year ended June 30, 1992, file number 1-12)
10(c) Deferred Compensation Plan for Executives of The IBRF
Quaker Oats Company as restated effective January 1,
1989 (incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1989, file
number 1-12)
10(d) Management Incentive Bonus Plan of The Quaker Oats IBRF
Company as amended September 8, 1993 (incorporated by
reference to the Company's Form 10-K for the fiscal year
ended June 30, 1994, file number 1-12)
10(e)(1) Directors' Stock Retirement Plan (incorporated by IBRF
reference to the Company's Form 10-K for the fiscal
year ended June 30, 1985, file number 1-12)
10(e)(2) First Amendment to Directors' Stock Retirement Plan IBRF
(incorporated by reference to the Company's Form 10-K
for the fiscal year ended June 30, 1992, file number
1-12)
10(e)(3) Second Amendment to Directors' Stock Retirement Plan E
10(f)(1) Termination Benefits Agreement with William D. E
Smithburg, first effective in the fiscal year ended June
30, 1995
10(f)(2) Termination Benefits Agreement with Philip A. Marineau, E
first effective in the fiscal year ended June 30, 1995
10(f)(3) Termination Benefits Agreements with certain Executive E
Officers, first effective in the fiscal year ended
June 30, 1995 or effective by filing date
10(g)(1) The Quaker Supplemental Executive Retirement Program IBRF
(incorporated by reference to the Company's Form 10-K
for the fiscal year ended June 30, 1989, file number
1-12)
10(g)(2) First Amendment to The Quaker Supplemental Executive IBRF
Retirement Program (incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30,
1992, file number 1-12)
10(g)(3) Second Amendment to The Quaker Supplemental IBRF
Executive Retirement Program (incorporated by reference
to the Company's Form 10-K for the fiscal year ended
June 30, 1992, file number 1-12)
10(g)(4) Third Amendment to The Quaker Supplemental IBRF
Executive Retirement Program (incorporated by reference
to the Company's Form 10-K for the fiscal year ended
June 30, 1992, file number 1-12)
10(g)(5) Fourth Amendment to The Quaker Supplemental IBRF
Executive Retirement Program (incorporated by reference
to the Company's Form 10-K for the fiscal year ended
June 30, 1992, file number 1-12)
10(g)(6) Fifth Amendment to The Quaker Supplemental IBRF
Executive Retirement Program (incorporated by reference
to the Company's Form 10-K for the fiscal year ended
June 30, 1993, file number 1-12)
10(g)(7) Sixth Amendment to The Quaker Supplemental IBRF
Executive Retirement Program (incorporated by reference
to the Company's Form 10-K for the fiscal year ended
June 30, 1993, file number 1-12)
10(g)(8) Seventh Amendment to The Quaker Supplemental E
Executive Retirement Program
10(g)(9) Eighth Amendment to The Quaker Supplemental E
Executive Retirement Program
10(g)(10) Ninth Amendment to The Quaker Supplemental E
Executive Retirement Program
10(h)(1) The Quaker Oats Company Benefits Protection IBRF
Trust (incorporated by reference to the Company's
Form 10-K for the fiscal year ended June 30, 1989,
file number 1-12)
10(h)(2) First Amendment to The Quaker Oats Company IBRF
Benefits Protection Trust (incorporated by reference
to the Company's Form 10-K for the fiscal year ended
June 30, 1992, file number 1-12)
10(h)(3) Second Amendment to The Quaker Oats Company IBRF
Benefits Protection Trust (incorporated by reference to
the Company's Form 10-K for the fiscal year ended
June 30, 1992, file number 1-12)
10(i) The Quaker Eligible Earnings Adjustment Plan IBRF
(incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1992,
file number 1-12)
10(j) The Quaker Officers Severance Program, effective E
March 8, 1995
10(k)(1) The Quaker Long Term Incentive Plan of 1990 IBRF
(incorporated by reference to the Company's Form
10-K for the fiscal year ended June 30, 1990, file
number 1-12)
10(k)(2) First Amendment to The Quaker Long Term Incentive IBRF
Plan of 1990 (incorporated by reference to the
Company's Form 10-K for the fiscal year ended
June 30, 1992, file number 1-12)
10(k)(3) Second Amendment to The Quaker Long Term IBRF
Incentive Plan of 1990 (incorporated by reference
to the Company's Form 10-K for the fiscal year
ended June 30, 1993, file number 1-12)
10(k)(4) Third Amendment to The Quaker Long Term Incentive Plan IBRF
of 1990 (incorporated by reference to the Company's
Form 10-K for the fiscal year ended June 30, 1994,
file number 1-12)
10(k)(5) Fourth Amendment to The Quaker Long Term Incentive Plan E
of 1990
10(k)(6) Fifth Amendment to The Quaker Long Term Incentive Plan E
of 1990
10(l) The Quaker 415 Excess Benefit Plan (incorporated by IBRF
reference to the Company's Form 10-K for the fiscal
year ended June 30, 1990, file number 1-12)
10(m) Quaker Salaried Employees Compensation and IBRF
Benefits Protection Plan (incorporated by reference
to the Company's Form 10-K for the fiscal year
ended June 30, 1990, file number 1-12)
11 Statement re Computation of Per Share Earnings E
12 Statement re Computation of Ratios E
13 Annual Report to Shareholders of The Quaker Oats E
Company for the fiscal year ended June 30, 1995
21 List of Subsidiaries of the Registrant E
23 Consent of Auditors E
(b) Reports on Form 8-K
(b)(1) 8-K filed April 18, 1995 IBRF
(b)(2) 8-K filed May 4, 1995 IBRF
(b)(3) 8-K filed June 30, 1995 IBRF
Exhibit 3(a)
AMENDED
AND
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE QUAKER OATS COMPANY
NOVEMBER 9, 1994
THE QUAKER OATS COMPANY
Certificate of Incorporation
Organized Under the Laws of the State of New Jersey
Authorized Capital Stock
Preference, without par value, 1,000,000 shares
Preferred, without par value, 10,000,000 shares
Common, $5 par value 200,000,000 shares
Original Certificate Filed September 21, 1901
Amendment Filed March 31, 1906
Increasing preferred capital stock from $8,000,000 to
$9,000,000
and common capital stock from $4,000,000 to $4,500,000
Amendment Filed April 25, 1910
Increasing common capital stock from $4,500,000 to $5,500,000
Amendment Filed November 25, 1912
Increasing common capital stock from $5,500,000 to $10,000,000
Amendment Filed April 7, 1917
Increasing preferred capital stock from $9,000,000 to
$15,000,000
and common capital stock from $10,000,000 to $15,000,000
Amendment Filed July 14, 1919
Increasing preferred capital stock from $15,000,000 to
$25,000,000
and common capital stock from $15,000,000 to $25,000,000
Amendment Filed March 14, 1925
No change in preferred capital stock. Changing common capital
stock to 600,000 shares without par value.
Amendment Filed March 20, 1930
No change in preferred capital stock. Increasing common
capital
stock to 800,000 shares without par value.
Amendment Filed January 19, 1951
No change in preferred capital stock. Changing Common
Stock to 4,000,000 shares, $5 par value.
Amendment Filed November 14, 1958
No change in preferred capital stock. Changing Common Stock to
6,000,000 shares, $5 par value.
Amendment Filed November 3, 1967
No change in preferred capital stock. Changing Common
Stock to 12,000,000 shares, $5 par value.
Amendment Filed November 1, 1968
Eliminating 6% Preferred Capital Stock, $100 par value.
Authorizing
169,022 shares of $3 Cumulative Convertible Preferred Stock,
$50
par value. Authorizing 1,500,000 shares Preference Stock
without par
value. Changing Common Stock to 15,000,000 shares, $5 par
value.
Amendment Filed November 7, 1969
No change in Preferred or Preference Stock. Changing Common
Stock to 22,500,000 shares, $5 par value.
Amendment Filed December 10, 1971
No change in Preferred or Preference Stock. Elimination of
preemptive rights on Common Stock.
Amendment Filed November 16, 1972
No change in Preferred or Preference Stock. Changing Common
Stock to 35,000,000 shares, $5 par value.
Amendment Filed May 21, 1975
No change in Common or Preferred Stock. Providing for issue
of a series of Preference Stock without par value, designated
"$9.56 preference stock," consisting of 500,000 shares.
Amended and Restated November 28, 1978
No change in Common or Preference Stock.
Elimination of $3 Preferred Stock.
Amendment Filed November 22, 1983
No change in Common or Preference Stock. Amended
Article Sixth of, and added Article Seventh to, the Certificate.
Amendments Filed November 15, 1984
No change in Preference Stock.
Changing Common Stock to 100,000,000 shares, $5 par value,
and authorizing 10,000,000 shares of Preferred Stock
without par value.
Added Article Eighth to the Certificate.
Principal Office in New Jersey:
The Corporation Trust Company
28 West State Street
Trenton, New Jersey 08608
General Offices:
321 N. Clark Street, Chicago, Illinois 60610
Amendment Filed May 5, 1986
No Change in Common or Preferred Stock.
Elimination of $9.56 Preference Stock.
Amendment Filed September 18, 1986
No change in Common or Preference Stock.
Provided for series of Preferred Stock without par value
designated "Series A Junior Participating Preferred Stock."
Amendment Filed November 12, 1986
No change in Preference or Preferred Stock.
Changing Common Stock to 200,000,000 shares, $5 par value.
Amendment Filed November 11, 1987
No change in Common, Preference or Preferred Stock.
Amended Certificate to add a new Article Ninth.
Amendment Filed November 9, 1988
No change in Common, Preference or Preferred Stock. Amended
Certificate to add a new Article Fourth, Paragraph C.
Amendment Filed June 19, 1989
No change in Common, Preference or Preferred Stock. Amended
Certificate to add a New Series B ESOP Convertible Preferred
Stock.
Amendment Filed January 13, 1993
No change in Common, Preference or Preferred Stock.
Amended Certificate to amend Article Eighth.
Amendment Filed November 9, 1994
No change in Preference or Preferred Stock.
Changing Common Stock to 400,000,000 shares, $5 par value.
AMENDED
AND
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE QUAKER OATS COMPANY
NOVEMBER 9, 1994
Pursuant to the provisions of Section 14A:9-5 of the New
Jersey Business Corporation Act, The Quaker Oats Company, a
corporation organized and existing under the laws of the State of
New Jersey, restates and integrates its Certificate of
Incorporation, as amended, to read in full as herein set forth:
First. The name of the Corporation is: The Quaker Oats
Company.
Second. The address of the Corporation's current
registered office is Mountain View Park, 820 Bear Tavern Road,
3rd. Floor, West Trenton, New Jersey 08628. The name of the
Corporation's current registered agent at such address, upon whom
process against the Corporation may be served, is The Corporation
Trust Company.
Third. The purposes for which the Corporation is
organized are to engage in any or all activities within the
purposes for which corporations now or at any time hereafter may
be organized under the New Jersey Business Corporation Act
and under all amendments and supplements thereto, or any revision
thereof or any statute enacted to take the place thereof.
Fourth. The aggregate number of shares which the
Corporation shall have authority to issue is 411,000,000 shares
divided into 400,000,000 shares of common stock of the par value
of $5.00 per share, 1,000,000 shares of preference stock without
par value and 10,000,000 shares of preferred stock without par
value.
The designations, rights, preferences, privileges and
limitations of the shares of common stock, shares of preference
stock and shares of preferred stock, and the manner of
determining the designations, and number of series of preference
stock and preferred stock and the relative voting, dividend,
liquidation and other rights, preferences and limitations of each
such series are as follows:
A. Preference Stock
(1) The Board of Directors is hereby empowered to cause the
preference stock to be issued from time to time for such
consideration as it may from time to time fix, and to cause such
preference stock to be issued in series with variations as to:
(a) the rates of dividends payable thereon,
(b) the terms on which the same may be redeemed,
(c) the amount which may be paid to the holders thereof
in case of dissolution or any distribution of assets,
(d) the terms or amount of any sinking fund provided for
the purchase or redemption thereof, and
(e) the terms upon which the holders thereof may convert
the same into stock of any other class or classes or of any one
or more series of the same class or of another class or
classes.
All shares of preference stock shall be identical in all
respects except as above provided; and shares of preference stock
of any one series shall be identical in all respects. If the
stated dividends or the amounts payable in any other distribution
of assets on all shares of preference stock are not paid in full,
the holders of shares of all series of preference stock shall
share ratably in the payment of dividends, including arrearages,
if any, and in any amounts payable in any other distribution of
assets in accordance with the sums that would be payable on such
shares if all dividends and distributions were paid in full. The
holders of each series of preference stock shall be entitled to
receive, when and as declared by the Board of Directors,
dividends, payable quarterly, at the rate designated by the Board
of Directors in the resolution providing for the issue of such
series, and no more. Such dividends on each series of preference
stock shall be cumulative whether or not earned. No dividends
(other than dividends payable in common stock) shall be declared
or paid or set apart for payment on the common or preferred stock
unless and until dividends payable for all past quarterly
dividend periods on the outstanding shares of each series of
preference stock shall have been paid, or declared and set apart
for payment, in full. The holders of each series of preference
stock shall be entitled to receive, in case of dissolution or any
distribution of assets in liquidation, the amount specified for
payment in such case, as fixed by the Board of Directors in the
resolution providing for the issue of such series, and no more.
No payment or distribution shall be made in respect of the common
or preferred stock, in case of dissolution or any distribution of
assets in liquidation, unless and until the amount specified for
payment in such case to the holder of each series of preference
stock shall have been paid in full.
(2) The shares of each series of preference stock may be
made subject to redemption in whole or in part, at the option of
the Corporation, at such time or times and at such price or
prices and upon such terms as may be prescribed by the Board of
Directors in the resolution providing for the issue of such
series. If less that all of the outstanding shares of any series
of preference stock are to be redeemed at a particular time, the
shares of such series to be so redeemed shall be chosen by lot or
pro rata in such manner as the Board of Directors may determine.
The Corporation may create a sinking fund for the purchase,
redemption or retirement of any series of preference stock of such amount
or proportion of net profit and upon such terms as may be prescribed by
the Board of Directors in the resolution providing for the issue of such
series. Preference shares redeemed by the Corporation shall be
retired by resolution of the Board of Directors and shall not be
reissued, and the authorized stock and capital represented by
such preference shares shall be deemed to be reduced accordingly.
(3) The Board of Directors, with respect to each series of
preference stock, shall decide whether the stock of such series
shall be convertible, and if so shall designate in the resolution
providing for the issue of such series the terms upon which such
stock may be converted into stock of any other series of
preference stock or into stock of any other class or classes.
Upon the conversion of shares of preference stock, the preference
shares so converted shall be deemed to be retired and shall not
be reissued, and the authorized stock and capital represented by
such preference shares shall be deemed to be reduced accordingly.
(4) Subject to the provisions of law and of this
Certificate of Incorporation as in effect from time to time,
every holder of preference stock of any series shall be
entitled to one vote in person or by proxy for each share of such
stock held by him. If at any time the Corporation shall have
failed to pay, or declare and set apart for payment, dividends on
all outstanding shares of preference stock in an amount equal to
six quarterly dividends upon such shares, the number of directors
of the Corporation shall be increased by two at the first annual
meeting of the shareholders of the Corporation held thereafter;
and at such meeting and at each subsequent annual meeting until
dividends payable for all past quarterly dividends periods on all
outstanding shares of preference stock shall have been paid, or
declared and set apart for payment, in full, the holders of the
shares of preference stock shall have the right, voting as a
class, to elect such two additional members of the Board of
Directors to hold office for a term of one year and until their
successors are elected and qualified; provided, that the right to
vote as a class upon the election of such two additional
directors shall not limit the right of holders of preference
stock to vote upon other matters when permitted by other
provisions of this Certificate. Upon such payment, or such
declaration and setting apart for payment, in full, the terms of
the two additional directors so elected shall forthwith
terminate, and the number of directors of the Corporation shall
be reduced by two and such additional voting right of the holders
of shares of preference stock shall cease, subject to increase in
the number of directors as aforesaid and to revesting of such
voting right in the event of each and every additional failure in
the payment of dividends in an amount equal to six quarterly
dividends as aforesaid. So long as any shares of the preference
stock shall be outstanding, the Corporation shall not, without
the affirmative vote of the holders of at least two-thirds of the
aggregate number of share of preference stock then outstanding,
amend this Certificate to: (a) increase the authorized preference
stock of the Corporation; (b) authorize any new class of stock
ranking equal to or prior to the preference stock, either as to
payment of dividends or distribution of assets; (c) adversely
change the rights, preferences or powers of the preference stock
with respect to dividends, voting, conversion, liquidation or
redemption.
(5) Shares of preference stock of any series shall not
entitle any holder thereof to any preemptive right to purchase or
subscribe for any shares of that or any other class.
B. Preferred Stock
(1) The Board of Directors is hereby empowered to cause the
preferred stock to be issued from time to time for such
consideration as it may from time to time fix, and to cause such
preferred stock to be issued in series with variations as to
rights, preferences, privileges and limitations as designated by
the Board of Directors in the resolution providing for the issue
of such series, except that no series of preferred stock shall
rank equal to or prior to any of the preference stock, either as
to payment of dividends or distribution of assets. Shares of
preferred stock of any one series shall be identical in all
respects.
(2) Subject to the priority of holders of the preference stock,
the holders of each series of preferred stock shall be entitled
to receive cumulative, noncumulative or partially cumulative
dividends at the rate and on the terms designated by the Board of
Directors in the resolution providing for the issue of such
series, and no more. No dividends (other than dividends payable
in common stock) shall be declared or paid or set apart for
payment on the common stock unless and until all dividends
payable on the outstanding shares of each series of preferred
stock shall have been paid, or declared and set apart for
payment, in full. Subject to the priority of holders of the
preference stock, the holders of each series of preferred stock
shall be entitled to receive, in case of dissolution or any
distribution of assets in liquidation, the amount specified for
payment in such case, as fixed by the Board of Directors in the
resolution providing for the issue of such series, and no more.
No payment or distribution shall be made in respect of the common
stock, in case of dissolution or any distribution of assets in
liquidation, unless and until the amount specified for payment in
such case to the holder of each series of preferred stock shall
have been paid in full.
(3) The shares of each series of preferred stock may be
made subject to redemption in whole or in part, at the option of
the Corporation, at such time or times and at such price or
prices and upon such terms as may be prescribed by the Board of
Directors in the resolution providing for the issue of such
series. The Corporation may create a sinking fund for the
purchase, redemption or retirement of any series of preferred
stock of such amount or proportion of net profits and upon such
terms as may be prescribed by the Board of Directors in the
resolution providing for the issue of such series. Preferred
shares redeemed by the Corporation shall be restored to the
status of authorized but unissued shares of preferred stock not
constituting part of any series thereof, unless the Board of
Directors elects to retain such redeemed shares as Treasury
shares.
(4) The Board of Directors, with respect to each series of
preferred stock, shall decide whether the stock of such series
shall be convertible, and if so shall designate in the resolution
providing for the issue of such series the terms upon which such
stock may be converted into stock of any other series of
preferred stock or into stock of any other class or classes. Upon
the conversion of shares of preferred stock, the preferred share
so converted shall be restored to the status of authorized but
unissued shares.
(5) Subject to the provisions of law and of this
Certificate of Incorporation as in effect from time to time, the
holders of preferred stock of any series shall be entitled to
such voting rights, limited voting rights, or special or multiple
voting rights as may be prescribed by the Board of
Directors in the resolution providing for the issue of such
series.
(6) Shares of preferred stock of any series shall not
entitle any holder thereof to any preemptive right to purchase or
subscribe for any shares of that or any other class.
(7) The Board of Directors shall have all other powers and
rights with respect to the preferred stock which are not
inconsistent with the New Jersey Business Corporation Act or this
Certificate of Incorporation as in effect from time to time.
(8) The relative voting, dividend, liquidation and other
rights, preferences and limitations of the share of the series of
preferred stock designated "Series A Junior Participating
Preferred Stock" are as set forth in the resolution of the Board
of Directors contained in the document filed in the office of the
Secretary of State of New Jersey pursuant to which such series
was created, which resolution, marked "Exhibit A," is attached to
this Certificate of Incorporation and made a part hereof as if
set forth in full.
(9) The relative voting, dividend liquidation and other
rights, preferences and limitations of the shares of the series
of preferred stock designated "Series B ESOP Convertible
Preferred Stock" are as set forth in this Paragraph Fourth B
and in Exhibit B to this Restated Certificate of Incorporation,
which document has been filed with the Secretary of State of New
Jersey together with the resolution pursuant to which the series
was created, and which are both made a part hereof as if set
forth in full.
C. Common Stock
The common stock shall be subject to the prior rights of the
holders of the preference stock and preferred stock as above
declared. Subject to such prior rights, the Board of Directors
may declare and pay dividends out of funds legally available
therefor. In the event of the dissolution of the Corporation or
of a distribution of the assets or any portion thereof by way of
return of capital, the holders of the common stock shall, after
the holders of the preference stock and preferred stock have
received the preferential amounts to which they are entitled, be
entitled to receive the balance of the assets of the Corporation
so distributed. Shares of common stock shall not entitle the
holder thereof to any preemptive right to purchase or subscribe
of the shares of that or any other class.
Fifth. The number of Directors constituting the
Corporation's current Board of Directors is 12. The names and
business addresses of the persons currently serving as said
Directors are:
The Honorable Frank C. Carlucci
Chairman
The Carlyle Group
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2505
Mr. Silas S. Cathcart
Retired Chairman
Illinois Tool Works, Inc.
125 S. Wacker Drive
Suite 3000
Chicago, IL 60606
Mr. Kenneth I. Chenault
President
USA American Express Travel
Related Services Company, Inc.
American Express Tower, 40th Floor
World Financial Center
200 Vesey Street
New York, NY 10285-3900
Ms. Judy C. Lewent
Senior Vice President
& Chief Financial Officer
Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Mr. Vernon R. Loucks, Jr.
Chairman and Chief Executive Officer
Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015
Dr. Thomas C. Mac Avoy
Paul M. Hammaker
Professor of Business Administration
Colgate Darden Graduate
School of Business Administration
University of Virginia
Charlottesville, VA 22906
Mr. Philip A. Marineau
President and Chief
Operating Officer
The Quaker Oats Company
Quaker Tower, 27-9
P.O. Box 049001
Chicago, IL 60604-9001
Mr. Luther C. McKinney
Senior Vice President - Law
and Corporate Affairs
The Quaker Oats Company
Quaker Tower, 27-10
P.O. Box 049001
Chicago, IL 60604-9001
Mrs. Gertrude G. Michelson
Senior Advisor to
R.H. Macy & Co. Inc.
151 West 34th Street
New York, NY 10001
Dr. Walter J. Salmon
Stanley Roth Sr.
Professor of Retailing
Harvard Business School
Morgan Hall - Room 177
Soldiers Field Road
Boston, MA 02163
Mr. William D. Smithburg
Chairman and Chief Executive Officer
The Quaker Oats Company
Quaker Tower, 27-13
P.O. Box 049001
Chicago, IL 60604-9001
Mr. William L. Weiss
Chairman Emeritus
Ameritech Corporation
One First National Plaza
21 S. Clark Street
Suite 2530 C
Chicago, IL 60603-2006
Sixth. The business and affairs of the Corporation shall
be managed by a Board of Directors. The number of directors
(exclusive of directors, if any, elected by the holders of one or
more classes of preference stock, voting separately as a class
pursuant to the provisions of the Certificate of Incorporation
applicable thereto) shall be not less than 6 or more than 24
directors, the exact number of directors to be determined from
time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall
be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as possible, of
one-third of the total number of directors constituting the
entire Board of Directors. At the 1983 Annual Meeting of
Shareholders, Class I directors shall be elected for a one-year
term, Class II for a two-year term and Class III directors for a
three-year term. At each succeeding annual meeting of
shareholders beginning in 1984, successors to directors whose
terms expire at that annual meeting shall be of the same class as
the directors they succeed, and shall be elected for three-year
terms. If the number of directors is changed by resolution of
the Board of Directors pursuant to this Article Sixth, any
increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal
as possible, but in no case shall a decrease in the number of
directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement, or removal from office.
Any newly created directorship resulting from an increase in the
number of directors and any other vacancy on the Board of
Directors, however caused, may be filled by a majority of the
directors then in office, although less than a quorum, or by a
sole remaining director; provided that if the number of directors
is increased, not more than two such newly created directorships
may be filled by the directors in any period between annual
meetings of shareholders. Any director so elected to fill a
vacancy shall, without regard to the class in which such vacancy
occurred, hold office until the next succeeding annual meeting of
shareholders and until his or her successor shall have been
elected and qualified. The term of a director elected by
shareholders to fill a newly created directorship or other
vacancy shall expire at the same time as the terms of the other
directors of the class in which the vacancy occurred.
Exclusive of directors, if any, elected by the holders of
one or more classes of preference stock, one or more or all the
directors of the Corporation may be removed for cause by the
shareholders by the affirmative vote of two-thirds of the votes
cast by the holders of shares entitled to vote at a meeting of
shareholders for which proper notice of such proposed removal has
been given.
No person shall be eligible for election as a director at
any annual or special meeting of shareholders unless a written
request that his or her name be placed in nomination is received
from a shareholder of record by the Secretary of the Corporation
not less than 30 days prior to the date fixed for the meeting,
together with the written consent of such person to serve as a
director. Where such a request for nomination and such consent
have been timely received, but such nominee is unable or declines
to serve, the person who placed the individual's name in
nomination may request that an alternate name be placed in
nomination at the meeting.
Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of preference stock issued by the
Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of
shareholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto.
Directors so elected shall not be divided into classes unless
expressly provided by such terms, and during the prescribed terms
of office of such directors, the Board of Directors shall consist
of such directors in addition to the number of directors
determined as provided in the first paragraph of this Article
Sixth.
Seventh. Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws of the Corporation
(and notwithstanding the fact that some lesser percentage may be
specified by law), the Bylaws may be amended, altered or
repealed, and new Bylaws may be enacted, only by the affirmative
vote of the holders of not less that two-thirds of the
outstanding shares of capital stock of the Corporation or by a
vote of not less than two-thirds of the entire Board of
Directors.
Eighth. The affirmative vote of the holders of two-thirds
of all Voting Shares (as defined herein) of the Corporation
considered for the purposes of this Article Eighth as one class,
shall be required for the adoption or authorization of any
Combination as defined herein with any person if, as of the
record date for the determination of shareholders entitled to
notice thereof and to vote thereon, such person is an Interested
Shareholder or an affiliate of an Interested Shareholder;
provided, that such two-thirds voting requirement shall
not be applicable if all of the conditions specified in either of
the following paragraphs (1) or (2) are met:
(1) If the Combination shall have been approved by a
majority of the Disinterested Directors (as defined herein) who
were directors prior to the time that such person became an
Interested Shareholder, but only if the Disinterested Directors
were a majority of the Board of Directors before such person
became an Interested Shareholder.
(2) (a) The cash, or fair market value of other
consideration (determined by the experts provided for in
Subparagraph (iii) below of this Article Eighth), to be received
per share in the Combination by holders of common stock of the
Corporation is not less than the greatest of:
(i) the highest per-share price (including brokerage
commissions, transfer taxes, and soliciting dealer's fees) paid
during the preceding twelve months by the Interested Shareholder
in acquiring the beneficial ownership, directly or indirectly, of
any of its holdings of the common stock of the Corporation. (In
making this computation, appropriate adjustments shall be made
for any stock splits, stock dividends, stock combinations and
other similar events.);
(ii) the closing price per share of the common stock of the
Corporation as listed on the New York Stock Exchange on the
business day immediately preceding the date that the meeting of
the shareholders of the Corporation is held for the purpose of
voting on the Combination;
(iii) a price that is approved as being fair to the holders
of outstanding common stock of the Corporation not owned by such
Interested Shareholder, as determined by at least two independent
experts selected by at least three Disinterested Directors.
(This determination shall be based on the value of the total
Corporation in an arm's-length sale.) The Corporation shall pay
the reasonable fees and expenses associated with the retention of
these experts; and
(b) A proxy statement which complies with the requirements
of the Securities Exchange Act of 1934, as amended, shall be
mailed to the holders of common stock for the purpose of
soliciting shareholder approval of such Combination. The proxy
statement shall contain (as exhibits or otherwise) the entire
opinions of the independent experts required by this Article
Eighth.
The requirements of this Article Eighth are in addition to, and
do not supersede, amend, alter, change or eliminate any board
approval, shareholder vote or consent or other conditions
required by the laws of New Jersey in effect at the time a
Combination is proposed.
The following definitions shall apply for the purposes of this
Article Eighth:
A. "Combination" means a merger or consolidation of the
Corporation or any subsidiary of the Corporation with any other
corporation, or the sale or lease of all or a substantial part of
the assets of the Corporation or any subsidiary of the
Corporation to any other person, or any other transaction which
has achieved substantially the same effect.
B. An "Interested Shareholder" is any person who owns ten
percent or more of the outstanding Voting Shares of the
Corporation.
C. A "person" includes a natural person, corporation,
partnership, association, joint stock company, trust,
unincorporated association or other entity. When two or more
persons act as a partnership, limited partnership, syndicate, or
other group for the purpose of acquiring, holding, voting, or
disposing of Voting Shares, they shall be deemed a single person
for purposes of this Article Eighth.
D. "Voting Shares" means the issued and outstanding
shares of any class of stock of the Corporation which is entitled
to vote generally in the election of directors.
E. Ownership of Voting Shares includes beneficial
ownership. A beneficial owner of Voting Shares includes any
person who, directly or indirectly, through any contract,
options, warrants, covertible securities or other contract rights
to acquire Voting Shares, arrangement, understanding,
relationship or otherwise, has or shares (i) voting power, which
includes the power to vote, or to direct the voting of, the
Voting Shares, or (ii) investment power, which includes the power
to dispose of, or to direct the disposition of, the Voting
Shares.
F. A "subsidiary" of the Corporation is any company a
majority or more of the voting securities of which is owned by
the Corporation.
G. A "Disinterested Director" is a director of the
Corporation who (i) is not and never has been an officer or
director of an Interested Shareholder or any affiliate or
associate of such Interested Shareholder and is not and has not
been for the past five years an employee of an Interested
Shareholder or any affiliate or associate of such Interested
Shareholder; (ii) does not own more than one percent or 10,000
shares, whichever is the lesser of any class of equity securities
of an Interested Shareholder or any affiliate or associate of
such Interested Shareholder; (iii) is not the settlor of any
trust, and does not serve as the trustee, executor or in a
similar capacity for any trust or estate, which owns more than
one percent or 10,000 shares, whichever is the lesser, of any
class of equity securities of any Interested Shareholder or any
affiliate or associate of such Interested Shareholder; (iv) is
not the relative of any person or of the spouse of such person
who could not be a Disinterested Director because of any of the
provisions of the clauses (i), (ii), or (iii) above who has the
same home as such person; (v) is not the spouse, brother, sister,
son, daughter, father or mother of any person who could not be a
Disinterested Director because of any of the provisions of
clauses (i), (ii), or (iii) above; and (vi) is not otherwise by
reason of past, present or anticipated circumstances unable to
act solely in the interest of the Corporation with respect to the
Combination, provided that no officer or employee of the
Corporation shall be disqualified from being a Disinterested
Director solely by reason of being an officer or employee of the
Corporation.
H. An "affiliate" of a specified person is a person who
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
such specified person.
I. An "associate" of a specified person is (i) any person
of which such specified person is an officer or partner or is the
owner of ten percent or more of any class of equity securities,
(ii) any trust or other estate in which such specified person
owns ten percent or more of the total beneficial interest or as
to which such specified person serves as trustee or in a similar
fiduciary capacity, (iii) any relative or spouse of such
specified person, or any relative of such spouse, who has the
same home as such specified person, (iv) any person who is a
director or officer of such specified person or any corporation
which controls or is controlled by such specified person, or (v)
any other member or partner in a partnership, limited
partnership, syndicate or other group, formal or informal, of
which such specified person is a member or partner and which is
acting together for the purpose of acquiring, holding or
disposing of securities of the Corporation.
Enforcement. The Board of Directors is specifically
authorized to seek equitable relief, including an injunction, to
enforce the provisions of this Article Eighth.
Amendment. No amendment to this Certificate of
Incorporation shall amend, alter, change or repeal any of the
provisions of this Article Eighth unless such amendment, in
addition to receiving any shareholder vote or consent required by
the laws of the State of New Jersey in effect at the time, shall
receive the affirmative vote of the holders of two-thirds of all
Voting Shares.
Ninth. Limitation of Liability. To the full extent from
time to time permitted by New Jersey law, no director or officer
of the Company shall be personally liable to the Company or its
shareholders for damages for breach of any duty owed to the
Company or its shareholders. Neither the amendment or repeal of
this Article, nor the adoption of any provision of this
certificate of incorporation inconsistent with this Article,
shall eliminate or reduce the protection afforded by this Article
to a director or officer of the Company with respect to any
matter which occurred, or any cause of action, suit or claim
which, but for this Article, would have accrued or arisen, prior
to such amendment, repeal or adoption.
Indemnification.
(a) The Company shall indemnify any person who is or was a
director, officer, employee or agent of the Company or of any
constituent corporation absorbed by the Company in a
consolidation or merger, and any person who is or was a
director, officer, trustee, employee or agent of any other
corporation (domestic or foreign) or of any partnership, joint
venture, sole proprietorship, trust, employee benefit plan or
other enterprise (whether or not for profit), serving as such at
the request of the Company or at the request of any such
constituent corporation, or the legal representative of any such
director, officer, trustee, employee or agent, against such
person's reasonable costs, disbursements and counsel fees and
amounts paid or incurred in satisfaction of settlements,
judgments, fines and penalties in connection with any pending,
threatened or completed civil, criminal, administrative or
arbitrative action, suit or proceeding, whether brought in the
right of the Company or otherwise, and any appeal therein and any
inquiry or investigation which could lead to such action, suit or
proceeding, to the fullest extent now or hereafter permitted by
New Jersey law. (b) The Company shall pay expenses as they are
incurred by any person covered by this Article in connection with
any proceeding, as defined above, in advance of the final
disposition of the proceeding to the fullest extent now or
hereafter permitted by New Jersey law.
(c) The foregoing indemnification and advancement of
expenses shall not be deemed exclusive of any other rights to
which any person indemnified may be entitled.
(d) The rights provided to any person under this Article
Ninth shall be enforceable against the Company by such person,
who shall be presumed to have relied upon it in serving or
continuing to serve as a director or in any of the other
capacities set forth in this Article Ninth. No elimination of or
amendment to this Article Ninth shall deprive any person of
rights hereunder arising out of alleged or actual occurrences,
acts or failures to act occurring prior to notice to such person
of such elimination or amendment.
Dated this 9th day of November, 1994
THE QUAKER OATS COMPANY
By S/R. Thomas Howell, Jr.
Vice President
(Name and full title)
Exhibit A
By resolution of the Board of Directors of The Quaker Oats
Company there is created a series of Preferred Stock designated
"Series A Junior Participating Preferred Stock" which shall be
identical in all respects to the preferred stock described in
Paragraph Fourth B of the Corporation's Certificate of
Incorporation, with such variations as may be contained in the
following description:
Section 1. Designation. The series of Preferred Stock
created by this Resolution is hereby designated as "Series A
Junior Participating Preferred Stock."
Section 2. Number of Shares, The number of shares which
shall constitute the Series A Junior Participating Preferred
Stock shall be initially 1,000,000, which number of shares may be
increased or decreased (but not below the number of shares then
outstanding) from time to time by action of the Board of
Directors.
Section 3. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of the Corporation's Preference Stock or
of any shares of any series of the Corporation's Preferred Stock
ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock, the
holders of shares of Series A Junior Participating Preferred Stock
shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the fifteenth day of
January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $35 or (b) subject to
the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common
Stock by reclassification or otherwise), declared on the
Common Stock, par value $5.00 per share, of the Corporation (the
"Common Stock") since the immediately preceding Quarterly Dividend
Payment Date, or with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of
a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after
July 9, 1986 (the "Rights Dividend Declaration Date") (i) declare
any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which
holders of shares of Series A Junior Participating Preferred Stock
were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock
as provided in paragraph (A) above immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $35 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred
Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series A Junior Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin
to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series
A Junior Participating Preferred Stock shall have the following
voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating
Preferred Stock shall entitle the holder thereof to 100 votes on
all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time
after the Rights Dividend Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of
shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Junior Participating Preferred
Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(c) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on
all shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred
Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2)
Directors.
(ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual
meeting of shareholders, and thereafter at annual meetings of
shareholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if
any, to increase, in certain cases, the authorized number of
Directors shall be exercised unless the holders of ten percent
(10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the
holders of Common Stock shall not affect the exercise by the
holders of Preferred Stock of such voting right. At any meeting
at which the holders of Preferred Stock shall exercise
such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors
to fill such vacancies, if any, in the Board of Directors as may
then exist up to two (2) Directors or, if such right is exercised
at an annual meeting, to elect two (2) Directors. If the number
which may be so elected at any
special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right
to elect Directors in any default period and during the
continuance of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of Preferred
Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A
Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised
their right to elect Directors, the Board of Directors may order,
or any shareholder or shareholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request,
the calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the President,
a Vice-President or the Secretary of
the Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C) (iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a
time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such
meeting within 60 days after such order or request, such meeting
may be called on similar notice by any shareholder or
shareholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph
(C) (iii), no such special meeting shall be called during the
period within 60 days immediately preceding the date fixed for
the next annual meeting of the shareholders.
(iv) In any default period, the holders of Common Stock,
and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of
Directors until the holders of Preferred Stock shall have
exercised their right to elect two (2) Directors voting as a
class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a
majority of the remaining Directors theretofore elected by the
holders of the class of stock which elected the Director whose
office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the
holders of Preferred Stock as a class shall terminate, and (z) the
number of Directors shall be such number as may be provided for in
the certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of
this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of
incorporation or by-laws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating
Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been
paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, provided
that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with
the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in
such manner.
Section 6. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on
issuance set forth herein.
Section 7. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $100 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be
made to the holders of shares of Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph C below to reflect such
events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii), the
"Adjustment Number"). Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Junior Participating
Preferred Stock and Common Stock, respectively, holders of Series
A Junior Participating Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share
of the remaining assets to be distributed in the ratio of the
Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other
series of stock, if any, which rank on a parity with the Series A
Junior Participating Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares
in proportion to their respective liquidation preferences. In the
event, however, that there are
not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Dividend Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Consolidation Merger. etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable
in kind), as the case may be, into which or for which each share
of Common Stock is changed or exchanged. In the event
the Corporation shall at any time after the Rights Dividend
Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 9. Redemption. The shares of Series A Junior
Participating Preferred Stock may be called for redemption by the
Corporation, at its option, by vote of the Board of Directors, in
whole but not in part, at any time, by paying therefor in cash an
amount per share equal to the product of (a) the current market
price of the Common Stock and (b) the Adjustment Number.
Section 10. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the
Corporation's Preferred Stock and Preference Stock as to the
payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 11. Amendment. The Amended Restated Certificate of
Incorporation of the Corporation shall not be further amended in
any manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of
two-thirds or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series A Junior
Participating Preferred Stock may be issued in fractions of a
share which shall entitle the holder, in proportion to such
holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of
all other rights of holders of Series A Junior Participating
Preferred Stock.
CERTI-1
EXHIBIT B
By unanimous written consent of the Board of Directors of
The Quaker Oats Company dated June 16, 1989, there is created
a series of Preferred Stock designated "Series B ESOP Convertible
Preferred Stock" which shall be identical in all respects to the
preferred stock described in Paragraph Fourth 3 of the Corporation's
Restated Certificate of Incorporation, with such variations as may be
contained in the following description:
Section 1. Designation and Amount; Special Purpose
Restricted Transfer Issue.
(A) The shares of such series shall be designated as
"Series B ESOP Convertible Preferred Stock"("Series B Preferred
Stock") and the number of shares constituting such series shall be
1,750,000
(B) Shares of Series B Preferred Stock shall be issued
only to The Northern Trust Company, as trustee (the "Trustee") of The
1989 Quaker Employee Stock Ownership Trust under the Quaker Employee
Stock Ownership Plan, as amended through the fifth amendment thereto,
dated June 16, 1989 (the "Plan") All references to the holder of shares of
Series B Preferred Stock shall mean the Trustee or any successor trustee
under the Plan. In the event of any transfer of record ownership of shares
of Series B Preferred Stock to any person other than any successor trustee
under the Plan, the shares of Series B Preferred Stock so
transferred, upon such transfer and without any further action by the
Corporation or the holder thereof, shall be automatically
converted into shares of common stock of the Corporation (the
"Common Stock") pursuant to Section 5 hereof and no such transferee
shall have any of the voting powers, preferences and relative,
participating, optional or special rights ascribed to shares of
Series B Preferred Stock hereunder but, rather, only the powers and
rights pertaining to the Common Stock into which such shares of
Series B Preferred Stock shall be so converted. In the event of
such a conversion, the transferee of the shares of Series B
Preferred Stock shall be treated for all purposes as the record
holder of the shares of Common Stock into which such shares of
Series B Preferred Stock have been automatically converted as of
the date of such transfer. Certificates representing shares of
Series B Preferred Stock shall bear a legend to reflect the
foregoing provisions. Notwithstanding the foregoing provisions of
this paragraph (B) of Section 1, shares of Series B Preferred Stock
(i) may be converted into shares of Common Stock as provided by
Section 5 hereof and the shares of Common Stock issued upon such
conversion may be transferred by the holder thereof as permitted by
law and (ii) shall be redeemable by the Corporation upon the terms
and conditions provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any stock of
the Corporation ranking senior to the Series B Preferred Stock in
respect of dividends and subject to the provisions for
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adjustment hereinafter set forth, the holders of shares of Series B
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available
therefor, cumulative cash dividends ("Preferred Dividends") in an
amount per share equal to $5.46 per share per annum, and no more,
payable quarterly in arrears, one-fourth on each fifteenth day of
January, April, July and October of each year (each a "Dividend
Payment Date") commencing on July 15, 1989, to holders of record at
the start of business on such Dividend Payment Date. In the event
that any Dividend Payment Date shall fall on any day other than a
"Business Day" (as hereinafter defined), the dividend payment due on
such dividend Payment Date shall be paid on the Business Day
immediately succeeding such Dividend Payment Date. Preferred
Dividends shall begin to accrue on outstanding shares of Series B
Preferred Stock from the date of issuance of such shares of Series B
Preferred Stock. Preferred Dividends shall accrue on a daily basis,
but Preferred Dividends accrued after issuance on the shares of
Series B Preferred Stock for any period less than a full quarterly
period between Dividend Payment Dates shall be computed on the basis
of a 360-day year of 30-day months. Accrued but unpaid Preferred
Dividends shall cumulate as of the Dividend Payment Date on which
they first became payable, but no interest shall accrue on
accumulated but unpaid Preferred Dividends.
-3-
(B) So long as any shares of Series B Preferred Stock shall
be outstanding, no dividend shall be declared or paid or set
apart for payment on any other series of stock ranking on a
parity with the Series B Preferred Stock as to dividends, unless
there shall also be or have been declared and paid or set apart
for payment on the Series B Preferred Stock dividends for all
dividend payment periods of the Series B Preferred Stock ending
on or before the dividend payment date of such parity stock,
ratably in proportion to the respective amounts of dividends
accumulated and unpaid through such dividend period on the Series
B Preferred Stock and accumulated and unpaid on such parity stock
through the dividend payment period on such parity stock next
preceding such dividend payment date. In the event that full
cumulative dividends on the Series B Preferred Stock have not
been declared and paid or set apart for payment when due, the
Corporation shall not declare or pay or set apart for payment any
dividends or make any other distributions on, or make any payment
on account of the purchase, redemption or other retirement of any
other class of stock or series thereof of the Corporation
ranking, as to dividends or as to distributions in the event of a
liquidation, dissolution or winding-up of the Corporation, junior
to the Series B Preferred Stock until full cumulative dividends
on the Series B Preferred Stock shall have been paid or declared
and set part for payment; provided, however, that the foregoing
shall not apply to (i) any dividend payable solely in any shares
-4-
of any stock ranking, as to dividends and as to distributions in
the event of a liquidation, dissolution or winding-up of the
Corporation, junior to the Series B Preferred Stock or (ii) the
acquisition of shares of any stock ranking, as to dividends or as
to distributions in the event of a liquidation, dissolution or
winding-up of the Corporation, junior to the Series B Preferred
Stock in exchange solely for shares of any other stock ranking, as
to dividends and as to distributions in the event of a liquidation,
dissolution or winding-up of the Corporation junior to the Series B
Preferred Stock.
Section 3. Voting Rights. The holders of shares of Series
B Preferred Stock shall have the following voting rights:
(A) The holders of Series B Preferred Stock shall be
entitled to vote on all matters submitted to a vote of the
stockholders of the Corporation, voting together with the holders of
Common Stock as one class. The holder of each share of Series B
Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which such share of Series B
Preferred Stock could be converted on the record date for
determining the stockholders entitled to vote, rounded to the
nearest one-tenth of a vote; it being understood that whenever the
"Conversion Price" (as defined in Section 5 hereof) is adjusted as
provided in Section 9 hereof, the voting rights of the Series B
Preferred Stock shall also be similarly adjusted.
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(B) Except as otherwise required by law or set forth
herein, holders of Series B Preferred Stock shall have no special
voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock
as set forth herein) for the taking of any corporate action;
provided, however, that the vote of at least 66-2/3% of the
outstanding shares of Series B Preferred Stock, voting separately
as a series, shall be necessary to adopt any alteration, amendment
or repeal of any provision of the Restated Certificate of
Incorporation of the Corporation (including any such alteration,
amendment or repeal effected by any merger or consolidation in
which the Corporation is the surviving or resulting corporation),
if such amendment, alteration or repeal would alter or change the
powers, preferences, or special rights of the shares of Series B
Preferred stock so as to affect them adversely.
Section 4. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Series
B Preferred Stock shall be entitled to receive out of assets of the
Corporation which remain after satisfaction in full of all valid
claims of creditors of the Corporation and which are available for
payment to stockholders, and subject to the rights of the holders of
any stock of the Corporation ranking senior to or on a parity with
the Series B Preferred Stock in respect of
-6-
distribution upon liquidation, dissolution or winding up of the
Corporation, before any amount shall be paid or distributed among
the holders of Common Stock or any other shares ranking junior to
the Series B Preferred Stock in respect of distributions upon
liquidation, dissolution or winding up of the Corporation,
liquidating distributions in the amount of $78.00 per share (the
"Liquidation Preference"), plus an amount equal to all accrued and
unpaid dividends thereon to the date fixed for distribution, and no
more. If upon any liquidation, dissolution or winding up of the
Corporation, the amounts payable with respect to the Series B
Preferred Stock and any other Stock ranking as to any such
distribution on a parity with the Series B Preferred Stock are not
paid in full, the holders of the Series B Preferred Stock and such
other stock shall share ratably in any distribution of assets in
proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount to which they are
entitled as provided by the foregoing provisions of this Section
4(A), the holders of shares of Series B Preferred Stock shall not be
entitled to any further right or claim to any of the remaining
assets of the Corporation.
(B) Neither the merger or consolidation of the
Corporation with or into any other corporation, nor the merger or
consolidation of any other corporation with or into the
Corporation, nor the sale, lease, exchange or other transfer of all
or any portion of the assets of the Corporation, shall be deemed to
be a dissolution, liquidation or winding up of the
-7-
affairs of the Corporation for purposes of this Section 4, but the
holders of Series B Preferred Stock shall nevertheless be entitled
in the event of any such merger or consolidation to the rights
provided by Section 8 hereof.
(c) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, stating
the payment date or dates when, and the place or places where, the
amounts distributable to holders of Series B Preferred Stock in
such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than twenty (20) days prior
to any payment date stated therein, to the holders Series B
Preferred Stock, at the address shown on the books of the
Corporation or any transfer agent for the Series B Preferred Stock.
Section 5. Conversion into Common Stock.
(A) A holder of shares of Series B Preferred Stock shall
be entitled, at any time prior to the close of business on the date
fixed for redemption of such shares pursuant to Sections 6, 7 and 8
hereof, to cause any or all of such shares to be converted Into
shares of Common Stock, initially at a conversion rate equal to the
ratio of:
(i) 578.00; to
(ii) the amount which initially shall be
$78.00, and which shall be adjusted as hereinafter provided (and, as
so adjusted, rounded to the nearest ten-thousandth, is hereinafter
sometimes referred to as the "Conversion Price")
-8-
(that is, a conversion rate initially equivalent to one share of
Common Stock for each share of Series B Preferred Stock so
converted, which is subject to adjustment as the Conversion Price
is adjusted as hereinafter provided).
(B) Any holder of shares of Series B Preferred Stock
desiring to convert such shares into shares of Common Stock shall
surrender the certificate or certificates representing the shares of
Series B Preferred Stock being converted, duly assigned or endorsed
for transfer to the Corporation (or accompanied by duly executed
stock powers relating thereto), at the principal executive office of
the Corporation or the offices of the transfer agent for the Series
B Preferred stock or such office or offices in the continental
United States of an agent for conversion as may from time to time be
designated by notice to the holders of the Series B Preferred Stock
by the Corporation or the transfer agent for the Series B Preferred
Stock, accompanied by written notice of conversion. Such notice of
conversion shall specify (i) the number of shares of Series B
Preferred Stock to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Stock and
for any shares of Series B Preferred Stock not to be so converted to
be issued and (ii) the address to which such holder wishes delivery
to be made of such new certificates to be issued upon such
conversion.
(C) Upon surrender of a certificate representing a share
or shares of Series 2 Preferred Stock for conversion, the
-9-
Corporation shall issue and send by hand delivery (With receipt to
be acknowledged) or by first class mail, postage prepaid, to the
holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be
entitled upon conversion. In the event that there shall have
been surrendered a certificate or certificates representing shares
of Series B Preferred Stock, only part of which are to be
converted, the Corporation shall issue and deliver to such holder
or such holder's designee a new certificate or certificates
representing the number of shares of Series B Preferred Stock which
shall not have been converted.
(D) The issuance by the Corporation of shares of
Common Stock upon a conversion of shares of Series B Preferred
Stock into shares of Common Stock made at the option of the holder
thereof shall be effective as of the earlier of (i) the delivery to
such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion
thereof or (ii) the commencement of business on the second business
day after the surrender of the certificate or certificates for the
shares of Series B Preferred Stock to be converted, duly assigned
or endorsed for transfer to the Corporation (or accompanied by duly
executed stock powers relating thereto) as provided by this
Resolution. On and after the effective day of conversion, the
person or persons entitled to
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receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock, but no allowance or adjustment shall be
made in respect of dividends payable to holders of Common Stock in
respect of any period prior to such effective date. The
Corporation shall not be obligated to pay any dividends which shall
have been declared and shall be payable to holders of shares of
Series B Preferred Stock on a Dividend Payment Date if such
Dividend Payment Date for such dividend is subsequent to the
effective date of conversion of such shares.
(E) The Corporation shall not be obligated to deliver to
holders of Series B Preferred Stock any fractional share of a share
of Common Stock issuable upon any conversion of such shares of
Series B Preferred Stock, but in lieu thereof may make a cash
payment in respect thereof in any manner permitted by law.
(F) The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely
for issuance upon the conversion of shares of Series B Preferred
Stock as herein provided, free from any preemptive rights, such
number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series B
Preferred Stock then outstanding. Nothing contained herein shall
preclude the Corporation from issuing shares of Common Stock held
in its treasury upon the conversion of shares of Series B Preferred
Stock into Common Stock pursuant to the
-11-
terms hereof. The Corporation shall prepare and shall use its best
efforts to obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law, and shall
comply with all requirements as to registration or qualification of
the Common Stock, in order to enable the Corporation lawfully to
issue and deliver to each holder of record of Series B Preferred
Stock such number of shares of its Common Stock as shall from time
to time be sufficient to effect the conversion of all shares of
Series B Preferred Stock then outstanding and convertible into
shares of Common Stock.
Section 6. Redemption At the Option of the
Corporation.
(A) The Series B Preferred Stock shall be redeemable, in
whole or in part, at any time after the date of issuance, to the
extent permitted by paragraphs 6(D) and 8(C), at the
following percentages of the Liquidation Preference:
During the Twelve Percentage of
Month Period Liquidation
Beginning June 15 Preference
1989 107.0%
1990 106.3%
1991 105.6%
1992 104.9%
1993 104.2%
1994 103.5%
1995 102.8%
1996 102.1%
1997 101.4%
1998 100.7%
and thereafter at the Liquidation Preference, plus, in each case, an
amount equal to all accrued and unpaid dividends thereon to
-12-
the date fixed for redemption. Payment of the redemption price
shall be. made by the Corporation in cash or shares of Common
Stocks or a combination thereof, as permitted by paragraph (E) of
this Section. 6. From and after the date fixed for redemption,
dividends on shares of Series B Preferred Stock called for
redemption will cease to accrue, such shares will no longer be
deemed to be outstanding and all rights in respect of such shares
of the Corporation shall cease, except the right to receive the
redemption price. If less than all of the outstanding shares of
Series B Preferred Stock are to be redeemed, the Corporation shall
either redeem a portion of the shares of each holder determined pro
rata based on the number of shares held by each holder or shall
select the shares to be redeemed by lot, as may be determined by
the Board of Directors of the Corporation.
(B) Unless otherwise required by law, notice of any
redemption effected pursuant to Sections 6 or 7 hereof will be
sent to the holders of Series B Preferred Stock at the address
shown on the books of the Corporation or any transfer agent for
the Series B Preferred Stock by first class mail, postage
prepaid, mailed not less than thirty (30) days nor more than
sixty (60) days prior to the redemption date. Each such notice shall
state: (i) the redemption date; (ii) the total number of shares of
the Series B Preferred stock to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; (iii)
-13-
the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for conversion or payment of
the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date; and (vi) the
conversion rights of the shares to be redeemed, the period within
which conversion rights may be exercised, and the Conversion Price
and number of shares of Common Stock issuable upon conversion of a
share of Series B Preferred Stock at the time. Upon surrender of the
certificate for any shares so called for redemption and not
previously converted (properly endorsed or assigned for transfer, if
the Board of Directors of the Corporation shall so require and the
notice shall so state), such shares shall be redeemed by the
Corporation at the date fixed for redemption and at the redemption
price set forth in paragraph (A) of this Section 6.
(C) In the event of a change in the federal tax law of
the United States of America which has the effect of precluding the
Corporation from claiming any of the tax deductions for dividends
paid on the Series B Preferred Stock when such dividends are used as
provided under Section 404(k)(2) of the Internal Revenue Code of
1986, as amended, as in effect on the date shares of Series B
Preferred Stock are initially issued, or if the Plan is determined
by the Internal Revenue Service not to be initially qualified within
the meaning of Sections 401(a) and 4975(e)(7) of the Internal
Revenue Code of 1986, as amended, the
-14-
Corporation may, in its sole discretion, and notwithstanding
anything to the contrary in paragraph (A) of this Section 6, within
60 days of such event, elect to redeem any or all of such shares
for the greater of (A) the Fair Market Value of the shares of
Series B Preferred Stock to be so redeemed or (B) the amount
payable in respect of the shares upon liquidation of the
Corporation pursuant to Section 4 hereof.
(D) In. the event that the Plan is terminated in
accordance with its terms, and notwithstanding anything to the
contrary in paragraph (A) of this Section 6, the Corporation shall,
as soon thereafter as practicable, call for redemption all then
outstanding shares of Series B Preferred Stock for an amount equal
to the greater of the Fair Market Value or the redemption price, as
calculated pursuant to Section 6(A). The Corporation shall give 30
Business Days' notice to all record holders of Preferred Stock
prior to any such termination, provided, however, that the failure
to give any such notice shall not affect the validity of such
corporate action.
(E) The Corporation, at its option, may make payment of
the redemption price required upon redemption of shares of Series B
Preferred Stock in cash or in shares of Common Stock or in a
combination of such shares and cash, any such shares of Common
Stock to be valued for such purposes at their Fair Market Value (as
defined in paragraph (G) of Section 9 hereof).
-15-
Section 7. Other Redemption Rights.
Shares of Series B Preferred Stock shall be redeemed by the
Corporation for cash or, if the Corporation so elects, in shares of
Common Stock, or a combination of such shares and Cash, any such
shares of Common Stock to be valued for such purpose as provided by
paragraph (E) of Section 6, at the redemption price as set forth in
the following sentence, at the option of the holder at any time and
from time to time upon notice to the Corporation given not less than
five (5) Business Days prior to the date fixed by the holder in such
notice for such redemption, upon certification by such holder to the
Corporation of the following events: (i) when and to the extent
necessary for such holder to provide for distributions required to be
made to participants under, or to satisfy an investment election
provided to participants in accordance with, the Plan, or any
successor plan; (ii) when and to the extent necessary for such holder
to make any payments of principal, interest or premium due and
payable (whether as scheduled or upon acceleration) under (a) the
Loan Agreement between the Trustee and the lenders, (b) any
refinancing of or substitution for either of the foregoing; or (c)
any other indebtedness incurred by the holder for the benefit of the
Plan; or ( iii ) in the event that the Plan is not initially
determined by the Internal Revenue Service to be qualified within the
meaning of Sections 401(a) and 4975(e) (7) of the Internal Revenue
Code of 1986, as amended. The redemption price for
-16-
shares of Series B Preferred Stock to be redeemed under this
Section 7 shall be equal to: (I) in the case of clause (i) next
above, the Fair Market Value of the shares of Series B Preferred
Stock to be so redeemed; (II) in the case of clause (ii) next
above, the greater of (A) the Fair Market Value of the shares of
Series B Preferred Stock to be so redeemed or (B) the redemption
price set forth in paragraph (A) of Section 6 hereof; or (III) in
the case of clause (iii) next above, the greater of (A) the Fair
Market Value of the shares of Series B Preferred Stock to be so
redeemed or (B) the amount payable in respect of the shares upon
liquidation of the Corporation pursuant to Section 4 hereof.
Section 8. Consolidation, Merger, etc.
(A) In the event that the Corporation shall consummate
any consolidation or merger or similar business combination,
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged solely for or changed, reclassified or
converted solely into stock of any successor or resulting
corporation (including the Corporation) that constitutes "employer
securities" with respect to a holder of Series B Preferred Stock
within the meaning of Section 409(1) of the Internal Revenue Code
of 1986, as amended. and "qualifying employer securities" within
the meaning of Section 407(d)(5) of the Employee Retirement Income
Security Act of 1974, as amended, or any successor provisions of
law, and, if applicable, for a cash payment in lieu of fractional
shares, if any, the shares of
-17-
Series B Preferred Stock of such holder shall, in connection with
such consolidation, merger or similar business combination, be
converted into and exchanged for preferred stock of such successor
or resulting corporation, having in respect of such corporation,
insofar as possible, the same powers, preferences and relative,
participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7 and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the
Series B Preferred Stock had immediately prior to such transaction,
except that after such transaction each share of the Series B
Preferred Stock shall be convertible, otherwise on the terms and
conditions provided by Section 5 hereof, into the number and kind
of qualifying employer securities so receivable by a holder of the
number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted immediately prior to such
transaction; provided, however, that if by virtue of the structure
of such transaction, a holder of Common Stock is required to make
an election with respect to the nature and kind of consideration to
be received in such transaction, which election cannot practicably
be made by the holders of the Series B Preferred Stock, then the
shares of Series B Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of
stock, securities, cash or other property
-18-
(payable in kind) receivable by a holder of the number of shares of
Common Stock into which such shares of Series B Preferred Stock
could have been converted immediately prior to such transaction if
such holder of Common Stock failed to exercise any rights of
election to receive any kind or amount of stock, securities, cash
or other property (other than such qualifying employer securities
and a cash payment, if applicable, in lieu of fractional shares)
receivable upon such transaction (provided that, if the kind or
amount of qualifying employer securities receivable upon such
transaction is not the same for each nonelecting share, then the
kind and amount so receivable upon such transaction for each non-
electing share shall be the kind and amount so receivable per share
by the plurality of the nonelecting shares). The rights of the
Series B Preferred Stock as preferred stock of such successor or
resulting corporation shall successively be subject to adjustments
pursuant to Section 9 hereof after any such transaction as nearly
equivalent as practicable to the adjustment provided for by such
section prior to such transaction. The Corporation shall not
consummate any such merger, consolidation or similar transaction
unless the successor or resulting corporation shall have agreed to
recognize and honor the rights of the holders of shares of Series B
Preferred Stock as set forth in this paragraph (A).
(B) In the event that the Corporation shall consummate
any consolidation or merger or similar business combination,
-19-
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged for or changed, reclassified or
converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such
consideration which is constituted solely of qualifying employer
securities (as referred to in paragraph (A) of this Section 8) and
cash payments, if applicable, in lieu of fractional shares,
outstanding shares of Series B Preferred Stock shall, without any
action on the part of the Corporation or any holder thereof (but
subject to paragraph (C) of this Section 8), be deemed to have been
automatically converted immediately prior to the consummation of
such merger, consolidation or similar transaction into the number
of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted at such time so that each
share of Series B Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of
stock, securities, cash or other property (payable in like kind)
receivable by a holder of the number of shares of Common Stock into
which such shares of Series B Preferred Stock could have been
converted immediately prior to such transaction; provided, however,
that if by virtue of the structure of such transaction, a holder of
Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such
transaction, which
-20-
election cannot practicably be made by the holders of the Series B
Preferred Stock, then the shares of Series B Preferred Stock shall,
by virtue of such transaction and on the same terms as apply to the
holders of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of shares of
Common Stock into which such shares of Series B Preferred Stock
could have been converted immediately prior to such transaction if
such holder of Common Stock failed to exercise any rights of
election as to the kind or amount of stock, securities, cash or
other property receivable upon such transaction (provided that, if
the kind or amount of stock, securities, cash or other property
receivable upon such transaction is not the same for each non-
electing share, then the kind and amount of stock, securities, cash
or other property receivable upon such transaction for each non-
electing share shall be the kind and amount so receivable per share
by a plurality of the non-electing shares).
(C) In the event the Corporation shall enter into any
agreement providing for any consolidation or merger or similar
business combination described in paragraph (3) of this Section 8,
then the Corporation shall as soon as practicable thereafter (and in
any event at least 10 Business Days before the closing of such
transaction) give notice of such agreement and the material terms
thereof to each holder of Series B Preferred Stock and each
-21-
such holder shall have the right to elect, by written notice to the
Corporation, to receive, upon consummation of such transaction (if
and when such transaction is consummated), from the Corporation or
the successor of the Corporation, in redemption and retirement of
such Series B Preferred Stock, a cash payment equal to the higher
of the redemption price as determined in accordance with paragraph
6(A) or the Fair Market Value of shares of Series R Preferred
Stock. No such notice of redemption shall be effective unless given
to the Corporation prior to the close of business on the second
business Day prior to the closing of such transaction, unless the
Corporation or the successor of the Corporation shall waive such
prior notice, but any notice of redemption so given prior to such
time may be withdrawn by notice of withdrawal given to the
Corporation prior to the close of business on the second Business
Day prior to the closing of such transaction.
Section 9. Anti-dilution Adjustments.
(A) In the event the Corporation shall, at any time or
from time to time while any of the shares of the Series B Preferred
Stock are outstanding, (i) pay a dividend or make a distribution in
respect of the Common Stock in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of
shares, in each case whether by reclassification of shares,
recapitalization of the Corporation
-22-
(including a recapitalization effected by a merger or consolidation
to which Section B hereof does not apply) or otherwise, the
Conversion Price in effect immediately prior to such action shall
be adjusted by multiplying such Conversion Price by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately before such event, and the denominator of
which is the number of shares of Common Stock outstanding
immediately after such event. An adjustment made pursuant to this
paragraph 9(A) shall be given effect, upon payment of such a
dividend or distribution, as of the record date for the
determination of stockholders entitled to receive such dividend or
distribution (on a retroactive basis) and in the case of a
subdivision or combination shall become effective immediately as of
the effective date thereof
(B) In the event that the Corporation shall, at any time
or from time to time while any of the shares of Series B Preferred
Stock are outstanding, issue to holders of shares of Common Stock as
a dividend or distribution, including by way of a reclassification of
shares or a recapitalization of the Corporation, any right or warrant
to purchase shares of Common Stock (but not including as such a right
or warrant (i) any security convertible into or exchangeable for
shares of Common Stock and (ii) any rights issued pursuant to the
Rights Agreement dated as of July 9, 198S between the Corporation and
Harris Trust & Savings Bank, as the same may be amended from time to
time) at
-23-
a purchase price per share less than the Fair Market Value (as
hereinafter defined) of a share of Common Stock on the date of
issuance of such right or warrant, then, subject to the provisions
of paragraphs (E) and (F) of this Section 9, the Conversion Price
shall be adjusted by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights
or warrants plus the number of shares of Common Stock which could
be purchased at the Fair Market Value of a share of Common Stock at
the time of such issuance for the maximum aggregate consideration
payable upon exercise in full of all such rights or warrants, and
the denominator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock that
could be acquired upon exercise in full of all such rights and
warrants.
(C) In the event the Corporation shall, at any time or
from time to time while any of the shares of Series B Preferred
Stock are outstanding, issue, sell or exchange shares of Common
Stock (other than pursuant to (i) any right or warrant to purchase
or acquire shares of Common Stock for which adjustment has been made
pursuant to paragraph (B) of this Section 9 (including as such a
right or warrant any security convertible into or exchangeable for
shares of Common Stock) and (ii) any employee or director incentive
or benefit plan or arrangement,
-24-
including any employment, severance or consulting agreement, of the
Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted) for a consideration having a Fair Market Value,
on the date of such issuance, sale or exchange, less than the Fair
Market Value of such shares on the date of issuance, sale or
exchange, then, subject to the provisions of paragraphs (E) and (F)
of this Section 9, the Conversion Price shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator of
which shall be the sum of (i) the Fair Market Value of all the
shares of Common Stock outstanding on the day immediately preceding
the first public announcement of such issuance, sale or exchange
plus (ii) the Fair Market Value of the consideration received by the
Corporation in respect of such issuance, sale or exchange of shares
of Common Stock, and the denominator of which shall be the product
of (a) the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (b) the sum of the number
of shares of Common Stock outstanding on such day plus the number of
shares of Common Stock so issued, sold or exchanged by the
Corporation. In the event the Corporation shall, at any time or
from time to time while any shares of Series 8 Preferred Stock are
outstanding, issue, sell or exchange any right or warrant to
purchase or acquire shares of Common Stock (including as such a
right or warrant any security convertible into or exchangeable for
shares of Common Stock),
-25-
other than any such issuance to holders of shares of Common Stock as
a dividend or distribution (including by way of a reclassification
of shares or a recapitalization of the corporation) and other than
pursuant to any employee or director incentive or benefit plan or
arrangement (including any employment, severance or consulting
agreement) of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted, for a consideration having a Fair
Market Value, on the date of such issuance, sale or exchange, less
than the Non-Dilutive Amount (as hereinafter defined), then, subject
to the provisions of paragraphs (E) and (F) of this Section 9, the
Conversion Price shall be adjusted by multiplying such Conversion
Price by a fraction the numerator of which shall be the sum of (I)
the Fair Market Value of all the shares of Common Stock outstanding
on the day immediately preceding the first public announcement of
such issuance, sale or exchange plus (II) the Fair Market Value of
the consideration received by the Corporation in respect of such
issuance, sale or exchange of such right or warrant plus (III) the
Fair Market Value at the time of such issuance of the consideration
which the Corporation would receive upon exercise in full of all
such rights or warrants, and the denominator of which shall be the
product of (i) the Fair Market Value of a share of Common Stock on
the day immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (ii) the sum of the number
of shares of Common Stock
-26-
outstanding on such day plus the maximum number of shares of
Common Stock which could be acquired pursuant to such right or
warrant at the time of the issuance, sale or exchange of such
right or warrant (assuming shares of Common Stock could be
acquired pursuant. to such right or warrant at such time)
(D) In the event the Corporation shall, at any time or
from time to time while any of the shares of Series B Preferred
Stock are outstanding, make an Extraordinary Distribution (as
hereinafter defined) in respect of the Common Stock, whether by
dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including a recapitalization or
reclassification effected by a merger or consolidation to which
Section 8 hereof does not apply) or effect a Pro Rata Repurchase (as
hereinafter defined) of Common Stock, the Conversion Price in effect
immediately prior to such Extraordinary Distribution or Pro Rata
Repurchase shall, subject to paragraphs (E) and (F) of this Section
9, be adjusted by multiplying such Conversion Price by the fraction
the numerator of which is (i) the Fair Market Value of all the
shares of Common Stock outstanding on the day before the ex-dividend
date with respect to an Extraordinary Distribution which is paid in
cash and on the distribution date with respect to an Extraordinary
Distribution which is paid other than in cash, or on the applicable
expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase, or on the date
-27-
of purchase with respect to any Pro Rata Repurchase which is not a
tender offer, as the case may be, minus (ii) the Fair Market Value
of the Extraordinary Distribution or the aggregate purchase price of
the Pro Rata Repurchase, as the case may be, and the denominator of
which shall be the product of (a) the number of shares of Common
Stock outstanding immediately before such Extraordinary Distribution
or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase,
the number of shares of Common Stock repurchased by the Corporation
multiplied by (b) the Fair Market Value of a share of Common Stock
on the day before the ex-dividend date with respect to an
Extraordinary Distribution which is paid in cash and on the
distribution date with respect to an Extraordinary Distribution
which is paid other than in cash, or on the applicable expiration
date (including all extensions thereof) of any tender offer which is
a Pro Rata Repurchase or on the date of purchase with respect to any
Pro Rata Repurchase which is not a tender offer, as the case may be.
The Corporation shall send each holder of Series B Preferred Stock
(i) notice of its intent to make any dividend or distribution and
(ii) notice of any offer by the Corporation to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated (including by
announcement of a record date in accordance with the rules of any
stock exchange on which the Common Stock is listed or admitted to
trading) to holders of Common Stock. Such notice shall indicate the
intended
-28-
record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a
Pro Rata Repurchase and the purchase price payable by the
Corporation pursuant to such offer, as well as the Conversion Price
and the number of shares of Common Stock into which a share of
Series B Preferred Stock may be converted at such time.
(E) Notwithstanding any other provisions of this Section
9, the Corporation shall not be required to make any adjustment to
the Conversion Price unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Conversion
Price. Any lesser adjustment shall be carried forward and shall be
made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) in the Conversion Price.
(F) If the Corporation shall make any dividend or
distribution on the Common Stock or issue any Common Stock, other
capital stock or other security of the Corporation or any rights or
warrants to purchase or acquire any such security, which transaction
does not result in an adjustment to the Conversion Price pursuant to
the foregoing provisions of this Section 9, the Board of Directors
of the Corporation shall consider whether such action is of such a
nature that an adjustment to the Conversion Price should equitably
be made in respect of such transaction.
-29-
If in such case the Board of Directors of the Corporation
determines that an adjustment to the Conversion Price should be
made, an adjustment shall be made effective as of such date, as
determined by the Board of Directors of the Corporation (which
adjustment shall in no event adversely affect the powers,
preferences, or special rights of this Series B Preferred Stock as
set forth herein). The determination of the Board of Directors of
the Corporation as to whether an adjustment to the Conversion
Price should be made pursuant to the foregoing provisions of this
paragraph 9(F), and, if so, as to what adjustment should be made
and when, shall be final and binding on the Corporation and all
stockholders of the Corporation. The Corporation shall be
entitled to make such additional adjustments in the Conversion
Price, in addition to those required by the foregoing provisions
of this Section 9, as shall be necessary in order that any
dividend or distribution in shares of capital stock of the
Corporation, subdivision, reclassification or combination of
shares of stock of the Corporation or any recapitalization of the
Corporation shall not be taxable to the holders of the Common
Stock.
(G) For purposes of this Resolution, the following
definitions shall apply:
"Business Day" shall mean each day that is not a
Saturday, Sunday or a day on which state or federally chartered
banking institutions in Chicago, Illinois or New York, New York
are not required to be open.
-30-
"Current Market Price" of publicly traded shares of Common
Stock or any other class of capital stock or other
security of the Corporation or any other issuer for any day shall
mean the last reported sales price, regular way, or, in the event
that no sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in either case as reported
on the New York Stock Exchange Composite Tape or, if
such security is not listed or admitted to trading on the New
York Stock Exchange on the principal national securities
exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national
securities exchange, on the NASDAQ National Market System or, if such
security is not quoted on such National Market System, the average of
the closing bid and asked prices on each such day in
the over-the counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have
been reported through NASDAQ, the average of the bid and asked prices
for such. day as furnished by any New York Stock Exchange member firm
regularly making a market in such security selected
for such purpose by the Board of Directors of the Corporation or
a committee thereof, in each case, on each trading day during the
Adjustment Period. "Adjustment Period" shall mean the period of five
(5) consecutive trading days preceding, and including, the date as of
which the Fair Market Value of-a security is to be determined.
-31-
"Extraordinary Distribution" shall mean any dividend or other
distribution to holders of Common Stock (effected while any of the
shares of Series B Preferred Stock are outstanding) (i) of cash,
where the aggregate amount of such cash dividend or distribution
together with the amount of all cash dividends and distributions
made during the preceding period of 12 months, when combined with
the aggregate amount of all Pro Rata Repurchases (for this purpose,
including only that portion of the aggregate purchase price of such
Pro Rata Repurchase which is in excess of the Fair Market Value of
the Common Stock repurchased as determined on the applicable
expiration date (including all extensions thereof) of any tender
offer or exchange offer which is a Pro Rata Repurchase, or the date
of purchase with respect to any other Pro Rata Repurchase which is
not a tender offer or exchange offer made during such period),
exceeds 12 1/2% of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the day before the ex-dividend date with
respect to such Extraordinary Distribution which is paid in cash and
on the distribution date with respect to an Extraordinary
Distribution which is paid other than in cash, and/or (ii) of any
shares of capital stock of the Corporation (other than shares of
Common Stock), other securities of the Corporation (other than the
securities of the type referred to in paragraph (B) or (C) of this
Section 9), evidences of indebtedness of the Corporation or any
other person or any other property (including shares of any
-32-
subsidiary of the Corporation) or any combination thereof. The
Fair Market Value of an Extraordinary Distribution for purposes of
paragraph (D) of this Section 9 shall be equal to the sum of the
Fair Market Value of such Extraordinary Distribution plus the
amount of any cash dividends which are not Extraordinary
Distributions made during such 12-month period and not previously
included in the calculation of an adjustment pursuant to paragraph
(D) of this Section 9.
"Fair Market Value" shall mean the amount of cash
received or, as to shares of Common Stock or any other class of
capital stock or securities of the Corporation or any other issuer
which are publicly traded, the average of the Current Market Prices
of such shares or securities for each day of the Adjustment Period.
The "Fair Market Value" of any security which is not publicly
traded or of any other property shall mean the fair value thereof
as determined by an independent commercial or investment banking or
appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the
Corporation or a committee thereof, or, if no such commercial} or
investment banking or appraisal firm is in the good faith judgment
of the Board of Directors or such committee available to make such
determination, as determined in good faith by the Board of
Directors of the Corporation or such committee.
"Non-Dilutive Amount" in respect of an issuance, sale
or exchange by the Corporation of any right or warrant to
-33-
purchase or acquire shares of Common Stock (including any security
convertible into or exchangeable for shares of Common Stock) shall
mean the remainder of (i) the product of the Fair Market Value of a
share of Common Stock on the day preceding the first public
announcement of such issuance, sale or exchange multiplied by the
maximum number of shares of Common Stock which could be acquired on
such date upon the exercise in full of such rights and warrants
(including upon the conversion or exchange of all such convertible
or exchangeable securities), whether or not exercisable (or
convertible or exchangeable) at such date, minus (ii) the aggregate
amount payable pursuant to such right or warrant to purchase or
acquire such maximum number of shares of Common Stock; provided,
however, that in no event shall the Non-Dilutive Amount be less
than zero. For purposes of the foregoing sentence, in the case of a
security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to
purchase or acquire shares of Common Stock shall be the Fair Market
Value of such security on the date of the issuance, sale or
exchange of such security by the Corporation.
"Pro Rata Repurchase" shall mean any purchase of shares of
Common Stock by the Corporation or any subsidiary thereof, whether
for cash, shares of capital stock of the Corporation, other
securities of the Corporation, evidences of indebtedness of the
Corporation or any other person or any other property
-34-
(including shares of a subsidiary of the Corporation), or any
combination thereof, effected while any of the shares of Series B
Preferred Stock are outstanding, pursuant to any tender offer or
exchange offer subject to Section 13(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that
no purchase of shares by the Corporation, or any subsidiary thereof
made in open market transactions shall be deemed a Pro Rata
Repurchase. For purposes of this paragraph 9(G), shares shall
be deemed to have been purchased by the Corporation or any
subsidiary thereof "in open market transactions" if they have
been purchased substantially in accordance with the
requirements of Rule lOb-18 as such rule is in effect under the
Exchange Act on the date shares of Series B Preferred Stock
are initially issued by the Corporation, or on such
other terms and conditions as the Board of Directors of the
Corporation or a committee thereof shall have determined are
reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.
(E) Whenever an adjustment to the Conversion Price and
the related voting rights of the Series B Preferred Stock is
required, the Corporation shall forthwith place on file with the
transfer agent(s) for the Common Stock and for the Series B
Preferred Stock, if any, and with the Secretary of the
-35-
Corporation, a statement signed by two officers of the
Corporation stating the adjusted Conversion Price determined as
provided herein, and the resulting conversion ratio, and the
voting rights (as appropriately adjusted), of the Series B
Preferred Stock. Such statement shall set forth in reasonable
detail such facts as shall be necessary to show the reason for
and the manner of computing such adjustment, including any
determination of Fair Market Value involved in such computation.
Promptly after each adjustment to the Conversion Price and the
related voting rights of the Series B Preferred Stock, the
Corporation shall mail a notice thereof and of the then
prevailing conversion rate to each holder of shares of the Series
B Preferred Stock.
Section 10. Ranking; Retirement of Shares.
(A) The Series B Preferred Stock shall rank senior to the
Series A Junior Participating Preferred Stock and the Common Stock
as to the payment of dividends and the distribution of assets on
liquidation, dissolution and winding up of the Corporation, and,
unless otherwise provided in the Restated Certificate of
Incorporation of the Corporation, as the same may be amended, the
Series B Preferred Stock shall rank pari passu with all future
series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets on liquidation,
dissolution or winding up.
-36-
(B) Any shares of Series B Preferred Stock acquired by
the Corporation by reason of the conversion or redemption of such
shares, or otherwise so acquired, shall be restored to the status of
authorized but unissued shares of Preferred Stock, with no par value
per share, of the Corporation, undesignated as to series, and may
thereafter be reissued as part of a new or existing
series of such Preferred Stock as permitted by law.
Section 11. Miscellaneous.
(A) All notices referred to herein shall be in writing,
and all notices hereunder shall be deemed to have been given upon
the earlier of receipt thereof or three (3) Business Days after the
mailing thereof if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice elsewhere herein)
with postage prepaid, addressed: (i) if to the Corporation, to its
office at P.O. Box 9001, Chicago, Illinois 60604-9001 (Attention:
Secretary), or to the transfer agent for the Series B Preferred
Stock, or other agent of the Corporation designated as permitted
herein or (ii) if to any holder of the Series B Preferred Stock or
Common Stock, as the case may be, to such holder at the address of
such holder as listed in the stock record books of the Corporation
(which may include the records of any transfer agent for the Series
B Preferred Stock or Common Stock, as the case may be) or (iii) to
such other address as the Corporation or any such holder, as the
case may be, shall have designated by notice similarly given.
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(B) The Corporation shall give 15 Business Days' notice
to all record holders of Series B ESOP Convertible Preferred Stock
prior to the record date to be established with respect to any
Extraordinary Event, setting forth the material provisions relating
to such Extraordinary Event, Provided, however, that the failure to
give any such notice shall not affect the validity of any such
corporate action.
"Extraordinary Event" as used in herein means (i) any non-
cash dividend payable with respect to the Common Stock, (ii; any cash
dividend in an amount exceeding 10% of the Conversion Price on the
date the dividend is declared, ((iii)) any recapitalization,
reclassification, consolidation, merger or similar event as a result
of which shares of Common Stock are converted into or exchanged for
any other securities or property, (iv) any sale of all or
substantially all of the assets of the Corporation, or (v) the
adoption of any repurchase program under which the Corporation may
purchase more than 15% of the Corporation's then outstanding Common
Stock.
(C) The term "Common Stock" as used in this Resolution
means the Corporation's Common Stock, par value $5.00 per share (as
the same exists at the date of amendment of the Restated Certificate
of Incorporation of the Corporation in respect of the Series B
Preferred Stock), or any other class of stock resulting from
successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to
-38-
no par value, or from no par value to par value. In the event
that, at any time as a result of an adjustment made pursuant to
Section 9 hereof, the holder of any share of the Series B Preferred
Stock upon thereafter surrendering such shares for conversion,
shall become entitled to receive any shares or other securities of
the Corporation other than shares of Common Stock, the Conversion
Prize in respect of such other shares or securities so receivable
upon conversion of shares of Series B Preferred Stock shall
thereafter be adjusted, and shall be subject to further adjustment
from time to time, in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock
contained in Section 9 hereof, and the provisions of Sections 1
through 8, 10 and 11 hereof with respect to the Common Stock shall
apply on like or similar terms to any such other shares or
securities.
(D) The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Series B Preferred Stock or
shares of Common Stock or other securities issued on account of
Series B Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Corporation shall not,
however, be required to pay any such tax which may be payable in
respect of any transfer involved in the issuance or delivery of
shares of Series B Preferred Stock or Common Stock or other
securities in a name other than that in
-39-
which the shares of Series B Preferred Stock with respect to which
such shares or other securities are issued or delivered were
registered, or in respect of any payment to any person with respect
to any such shares or securities other than a payment to the
registered holder thereof, and shall not be required to make any
such issuance, delivery or payment unless and until the person
otherwise entitled to such issuance, delivery or payment has paid
to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been paid
or is not payable.
(E) In the event that a holder of shares of Series B
Preferred Stock shall not by written notice designate the name in
which shares of Common Stock to be issued upon conversion of such
shares should be registered or to whom payment upon redemption of
shares of Series B Preferred Stock should be made or the address to
which the certificate or certificates representing such
shares, or such payment, should be sent, the Corporation shall be
entitled to register such shares, and make such payment, in the name
of the holder of such Series B Preferred Stock as shown on the
records of the Corporation and to send the certificate or
certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Corporation.
(F) Unless otherwise provided in the Restated Certificate of
Incorporation, as the same may be amended, of the Corporation, all
payments in the form of dividends, distributions
-40-
on voluntary or involuntary dissolution, liquidation or winding up or
otherwise made upon the shares of Series B Preferred Stock and any
other stock ranking on a parity with the Series B
Preferred Stock with respect to such dividend or distribution shall
be pro rata, so that amounts paid per share on the Series B Preferred
Stock and such other stock shall in all cases bear to each other the
same ratio that the required dividends, distributions or payments, as
the case may be, then payable per share on the shares of the Series B
Preferred Stock and such
other stock bear to each other.
(G) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series B Preferred
Stock. Upon any such appointment or discharge of a transfer
agent, the Corporation shall send notice thereof by first-class mail,
postage prepaid, to each holder of record of Series B Preferred
Stock.
-41-
Exhibit 3(b)
B Y L A W S
OF
THE QUAKER OATS COMPANY
AS AMENDED - JANUARY 11, 1995
B Y L A W S
OF
THE QUAKER OATS COMPANY
CORPORATE OFFICES AND SEAL
Bylaw 1 - The principal and registered office of this
Corporation shall be at 820 Bear Tavern Road, West Trenton,
Mercer County, New Jersey.
Bylaw 2 - The Corporation shall also have and maintain a
general office and place of business at the City of Chicago in
the State of Illinois, where it may keep all books, records,
documents, and papers; it may also establish offices in such
other states and foreign countries as the board shall from time
to time determine.
Bylaw 3 - The Corporate Seal shall have inscribed thereon
the name of the Corporation, the state of its organization, and
the words "Corporate Seal."
CAPITAL STOCK AND TRANSFERS THEREOF
Bylaw 4 - Certificates of stock in the Corporation shall be
in the form adopted by the board, and be consecutively numbered;
they shall be signed by the Chairman of the Board of Directors,
the President or a Vice President and either the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary,
whose signatures may be facsimiles. The names of the owners of
such shares, the dates of issue, and the certificate numbers
thereof shall be entered upon the Corporation's books. The board
shall appoint one or more transfer agents, and also one or more
registrars of transfers, outside of the State of New Jersey, and
shall require all valid certificates of stock in the Corporation
to bear the countersignatures of one such agent, which may be a
facsimile, and one such registrar. The same bank or trust
company may act as both transfer agent and registrar.
Bylaw 5 - Transfers of shares of stock in the Corporation
upon the books of the Corporation shall be made only by the
holders thereof in person or by attorney thereunto duly
authorized in writing. Outstanding certificates for a like
number of shares shall be surrendered and cancelled at the time
of such transfers, except as provided in Bylaw 8.
-2-
Bylaw 6 - For the purpose of determining the shareholders
entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or for the purpose of determining
shareholders entitled to receive payment of any dividend or
allotment of any right, or for the purpose of any other action,
the board may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more
than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to any other action.
Bylaw 7 - The Corporation shall be entitled to treat the
record holder of any share or shares of stock, as shown by its
books, as the sole legal and equitable owner and holder thereof,
and shall not be bound to recognize any interest or claim on the
part of others, whether it shall have notice thereof or not, save
as expressly provided otherwise by the laws of New Jersey.
Bylaw 8 - The board may issue or cause to be issued new
certificates of stock to replace certificates of stock alleged to
have been lost or destroyed, upon such reasonable terms and
conditions as may be prescribed by the board to protect the
interests of the Corporation.
SHAREHOLDERS
Bylaw 9 - Meetings of the shareholders of the Corporation
shall be held at such place, within or without the State of New
Jersey, as may be fixed by the board from time to time.
Bylaw 10 - The annual meeting of the shareholders for
election of directors and transaction of other business shall be
held on the second Wednesday of November in each year at the hour
of nine-thirty o'clock in the forenoon, or at such other time as
may be fixed by the board. Directors shall be elected by ballot
and a plurality vote. Written notice of the time, place, and
purpose or purposes of every regular meeting of shareholders
shall be given not less than 10 nor more than 60 days before the
date of the meeting, either personally or by mail, to each
shareholder of record entitled to vote at the meeting.
Bylaw 11 - Special meetings of the shareholders for purposes
allowed by law may be held at any time when called by the
Chairman of the Board or President, or upon resolution or written
request of a majority of the board or of a majority of the
executive committee. Written notice of the time, place, and
purposes of every special meeting of shareholders shall be
-3-
given not less than 10 nor more than 60 days before the date of
the meeting, either personally or by mail, to each shareholder of
record entitled to vote at the meeting.
Bylaw 12 - Unless otherwise provided in the certificate of
incorporation or the laws of New Jersey, the holders of shares
entitled to cast a majority of the votes at a meeting shall
constitute quorum at such meeting. The shareholders present in
person or by proxy at a duly organized meeting may continue to do
business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Less than a
quorum may adjourn the meeting. Whenever the holders of any
class or series of shares are entitled to vote separately on a
specified item of business, the provisions of this section shall
apply in determining the presence of a quorum of such class or
series for the transaction of such specified item of business.
Bylaw 13 - The Chairman of the Board shall act as chairman
of each shareholders' meeting. If he is absent, the President or
a Vice President shall so act. If all of the foregoing are
absent, then the meeting itself by a majority vote in interest
may select some shareholder present to preside, which vote shall
be recorded in the minutes. The Secretary of the Corporation, if
present, shall act as secretary of each shareholders' meeting.
If the Secretary of the Corporation is absent, an Assistant
Secretary shall so act. If all of the foregoing are absent, then
the chairman of the meeting shall designate a person to act as
secretary. A declaration by the chairman that any resolution has
been duly carried, and an entry to that effect in the minutes of
the meeting, shall, in all cases where a poll in not demanded, be
competent and sufficient evidence of the fact and legality of
adoption of such resolution.
Bylaw 14 - (a) At all elections of directors by the
shareholders, two independent inspectors of election shall be
chosen by the presiding officer of the meeting; they need not be
shareholders, but in no case shall they be either employees of
the Corporation or candidates for the office of director. Each
inspector shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and
according to the best of his ability, and shall perform such
duties as are provided by the laws of New Jersey.
(b) At all elections of directors by the shareholders, all
proxies, ballots, and voting tabulations that identify how
shareholders voted will be kept confidential and not be disclosed
to any of the directors, officers or employees of the Corporation
except when disclosure is mandated by law, expressly requested by
a shareholder, or during a contested election for the board.
-4-
(c) The same voting procedure shall be followed with regard
to other matters submitted to shareholders for their vote.
Bylaw 15 - The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make and
certify a complete list of the shareholders entitled to vote at a
shareholders' meeting or any adjournment thereof. Such list
shall
(a) be arranged alphabetically within each class and
series, with the address of, and the number of shares
held by, each shareholder;
(b) be produced at the time and place of the meeting;
(c) be subject to the inspection of any shareholder during
the whole time of the meeting; and
(d) be prima facie evidence as to who are the shareholders
entitled to examine such list or to vote at any
meeting.
BOARD OF DIRECTORS
Bylaw 16 - The property, affairs, and business of the
Corporation shall be managed and controlled by a board of
directors. The number of directors shall be determined in
accordance with the provisions of the certificate of
incorporation. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as possible, of one-third of the total
number of directors constituting the entire board of directors.
At each annual meeting of shareholders beginning in 1984,
successors to directors whose terms expire at that annual meeting
shall be of the same class as the directors they succeed, and
shall be elected for three-year terms.
Bylaw 17 - A director shall hold office until the annual
meeting for the year in which his or her term expires and until
his or her successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, or removal from
office. Any newly created directorship resulting from an
increase in the number of directors and any other vacancy on the
board of directors, however caused, may be filled by a majority
of the directors then in office, although less than a quorum, or
by a sole remaining director; provided that if the number of
directors is increased, not more than two such newly created
directorships may be filled by the directors in any period
-5-
between annual meetings of shareholders. Any director so elected
to fill a vacancy shall, without regard to the class in which
such vacancy occurred, hold office until the next succeeding
annual meeting of shareholders and until his or her successor
shall have been elected and qualified. The term of a director
elected by shareholders to fill a newly created directorship or
other vacancy shall expire at the same time as the terms of the
other directors of the class in which the vacancy occurred.
Bylaw 18 - Regular meetings of the board shall be held six
times each year at such time and place as the board may
determine, subject to the right of the Chairman of the Board, the
President, or the executive committee, by notice required for a
special meeting of the board, to change the time or place of a
regular meeting. Except as aforesaid, no notice of a regular
meeting is required.
Bylaw 19 - Special meetings of the board may be held at any
time and place whenever called by the Chairman of the Board, the
President, or any three of the directors. Notice to each
director of the time and place of the meeting shall be mailed not
less than three calendar days before the meeting, or telegraphed
or telephoned or delivered to his office not less than 24 hours
before the meeting.
Bylaw 20 - A majority of the board shall constitute a quorum
for the transaction of business, but any less number present may
adjourn the meeting from time to time.
Bylaw 21 - In addition to the powers specifically enumerated
in these Bylaws, the board shall also have, and may exercise, all
other and further powers, privileges, and authority expressly or
impliedly conferred upon them by the Statues of New Jersey and
the articles of incorporation of the Corporation.
EXECUTIVE COMMITTEE
Bylaw 22 - The board shall appoint from among its members an
executive committee of not less than four and not more than 10
regular members. The board may also designate one or more of its
members as alternates to serve as members of the executive
committee in the absence of a quorum of that committee at any
regular or special meeting.
(a) The executive committee shall have the powers of the
board in the management of the business, affairs, and
property of the Corporation during the intervals
between the meetings of the board, except that the
executive committee shall not:
-6-
(i) make, alter or repeal any Bylaw of the
Corporation;
(ii) elect or appoint any director, or remove
any officer or director;
(iii) submit to shareholders any action that
requires shareholders' approval; or
(iv) amend or repeal any resolution theretofore
adopted by the board which by its terms
is amendable or repealable only by the board.
(b) Regular meetings of the executive committee may be
held without notice at such time and place as shall
from time to time be determined by the executive
committee or by the board.
(c) Special meetings of the executive committee may be
called by the President, or the Chairman of the Board,
or by any two regular members of the committee by
causing 24 hours' notice of the time and place thereof
to be given to each regular member by mail or by
telegram or by telephone, or by delivery to his
office, but any regular member may waive such notice.
The purpose of the meeting need not be stated in the
notice or waiver of notice.
(d) Whenever it appears that a quorum of regular members
will not present at a meeting, the Secretary may
request the attendance of an alternate member, who,
if he attends, and if his attendance is necessary
to obtain quorum, shall be deemed a regular member
of the executive committee for the purposes of such
meeting.
(e) Any regular or special meeting of the executive
committee may be adjourned and no notice need be
given of the adjourned meeting whether or not a
quorum shall be present.
(f) A majority of members of the executive committee shall
constitute a quorum. Actions taken at a meeting of
the executive committee shall be reported to the board
at its next meeting following such executive committee
meeting; except that, when the meeting of the board is
held within two days after the executive committee
meeting,such report shall, if not made at the first
meeting, be made to the board at its second meeting
following such executive committee meeting.
-7-
OTHER COMMITTEES
Bylaw 23 - The board by resolution adopted by a majority of
the entire board may appoint from among its members one or more
other committees, each of which shall have one or more members.
MEETINGS AND ACTION OF DIRECTORS WITHOUT A MEETING
Bylaw 24 - Any or all directors may participate in a meeting
of the board or executive committee by means of conference
telephone or any means of communication by which all persons
participating in the meeting are able to hear each other.
Any action required or permitted to be taken pursuant to
authorization voted at a meeting of the board or executive
committee may be taken without a meeting if, prior or subsequent
to such action, all members of the board or of the executive
committee, as the case may be, consent thereto in writing and
such written consents are filed with the minutes of the
proceedings of the board or executive committee.
OFFICERS
Bylaw 25 - The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents,
a Treasurer, and a Secretary, and such additional officers and
such assistant officers as may be deemed necessary from time to
time by the board or the executive committee. One or more Vice
Presidents may be designated as Executive Vice Presidents or as
Senior Vice Presidents or as other types of Vice Presidents. The
Chairman of the Board, President, Treasurer, Secretary and any
Vice President designated as a Senior or Executive Vice President
shall be elected by the board. Any other officers shall be
elected by the board or the executive committee. Each officer
shall hold office for a term expiring at the first board meeting
following the annual meeting of the shareholders and until his
successor is elected, but subject to removal by the board at any
time. Salaries of officers elected by the board or who are
directors shall be fixed by the board. Salaries of other
officers and assistant officers shall be fixed by the board or
the executive committee.
-8-
Bylaw 26 - The Chairman of the Board shall be the Chief
Executive Officer of the Corporation and shall have general
supervision of its business and affairs, subject, however, to
control of the board and the executive committee. He shall be a
regular member of the executive committee and shall preside at
all meetings of the shareholders, the board, and the executive
committee.
Bylaw 27 - The President shall serve as a regular member of
the executive committee and shall have such other powers and
duties as shall be assigned to him by the board or the executive
committee or the Chairman of the Board. In the absence of the
Chairman of the Board, he shall preside at meetings of the board
and of the executive committee.
Bylaw 28 - The Vice Presidents shall have such powers and
duties as shall be assigned to them by the board, the executive
committee, or the Chairman of the Board. The President or the
Senior or Executive Vice President with the longest service with
the Corporation who is a member of the executive committee and
who is present and able to act shall have the powers and duties
of the Chairman of the Board during his absence or inability to
act.
Bylaw 29 - The Treasurer shall have custody of the corporate
funds and securities. He shall keep full and accurate accounts
of all receipts and disbursements and generally shall perform all
the duties usually incident to the office of Treasurer and shall
have such other powers and duties as shall be assigned to him by
the board, the executive committee or the Chairman of the Board.
Each Assistant Treasurer shall have power to act in the
place and stead of the Treasurer in case of his absence or
inability to act, and shall have such other powers and duties as
shall be assigned to him by the board, the executive committee or
the Chairman of the Board.
Bylaw 30 - The Secretary shall have custody of the corporate
seal and shall be present at and make a true record of the votes
and proceedings of all meetings of the shareholders, the board,
and the executive committee. He shall supervise the giving and
mailing of all notices of shareholders' and directors' meetings;
shall have charge of the certificate books, transfer books, and
capital stock ledgers; and generally shall perform all the duties
and have charge of all other books and papers usually incident to
the office of Secretary. He shall have such other powers and
duties as shall be assigned to him by the board, the executive
committee or the Chairman of the Board.
-9-
Each Assistant Secretary shall have power to act in the
place and stead of the Secretary in case of his absence or
inability to act, and shall have such other powers and duties as
shall be assigned to him by the board, the executive committee or
the Chairman of the Board.
Bylaw 31 - Unless otherwise ordered by the board or the
executive committee, the Secretary, and in case of his absence or
inability to act an Assistant Secretary, shall have the power,
and it shall be his duty, to vote in the name and behalf of the
Corporation all stock held by it in other companies; and the
Chairman of the Board, President, or a Vice President, and the
Secretary or an Assistant Secretary, shall have the power to
execute an deliver proxies for the purpose of voting such stock;
but the board or the executive committee may by resolution confer
such power to vote and to execute proxies upon any other person
or persons, and in all cases may instruct how such stock shall be
voted at any meeting or election.
Bylaw 32 - The board or the executive committee shall by
resolution designate one or more banks as authorized principal
depositories of the funds and securities of the Corporation and
appoint and authorize officers of other persons to sign checks
thereon and otherwise control and dispose of such funds and
securities. The Treasurer or any two other elected officers of
the Corporation may designate other banks as secondary
depositories in connection with the business of the Corporation,
and appoint and authorize officers or other persons to sign
checks thereon or otherwise control and dispose of funds therein.
All notes payable issued by the Corporation shall be signed
in its behalf by such officer or officers of the Corporation
authorized for that purpose by the board or the executive
committee.
FISCAL YEAR AND DIVIDENDS
Bylaw 33 - The fiscal year of the Corporation shall begin on
the first day of July in each year.
Bylaw 34 - Dividends may be declared by the board, from the
profits, at any regular or special meeting of the board, whenever
in their judgment it shall be consistent with the best interests
of the Corporation. The executive committee shall also have
power, between sessions of the board, to declare the usual
quarterly dividends on all classes of stock.
-10-
AMENDMENTS
Bylaw 35 - These Bylaws may be amended, altered or repealed,
and new Bylaws may be enacted, only by the affirmative vote of
the holders of not less than two-thirds of the outstanding shares
of capital stock of the Corporation or by a vote of not less than
two-thirds of the entire board of directors.
INDEMNIFICATION
Bylaw 36 - The Corporation shall indemnify any person who is
or was a director, officer, employee or agent of the Corporation
or of any constituent corporation absorbed by the Corporation in
a consolidation or merger, and any person who is or was a
director, officer, trustee, employee or agent of any other
domestic or foreign corporation and any partnership, joint
venture, sole proprietorship, trust or other enterprise, whether
or not for profit, served by a person covered by this Bylaw,
serving at the request of the Corporation, or of any such
constituent corporation, or the legal representative of any such
director, officer, trustee, employee or agent, against his
reasonable costs, disbursements and counsel fees and amounts paid
or incurred in satisfaction of settlements, judgments, fines and
penalties in connection with any pending, threatened or completed
civil, criminal administrative or arbitrative action, suit or
proceeding, and any appeal therein and any inquiry, or
investigation which could lead to such action, suit or
proceeding, to the fullest extent now or hereafter permitted by
New Jersey law.
The Corporation shall pay expenses as they are incurred by
any person covered by this Bylaw in connection with any
proceeding covered by this Bylaw in advance of the final
disposition of the proceeding to the fullest extent now or
hereafter permitted by New Jersey law.
Any determination required to be made pursuant to Section
14A3-5(5) of the New Jersey Business Corporation Act shall be
made only by either (a) the Board or a committee thereof, acting
by a majority vote of a quorum consisting of directors who were
not parties to or otherwise involved in the proceeding, or (b) if
such a quorum is not obtainable, or even if obtainable and such
quorum of the Board or committee by a majority vote of the
disinterested directors so directs, by independent legal counsel
in a written opinion, such counsel to be designated by the Board
and reasonably satisfactory to the person who is being
indemnified.
-11-
MANAGEMENT COMMITTEE
Bylaw 37 - The Chairman of the Board shall appoint such
officers of the Corporation who, together with the Chairman of
the Board, shall constitute the Management Committee of the
Corporation. Members of the Management Committee shall serve at
the discretion of the Chairman of the Board and shall advise
regarding management of the Corporation and otherwise assist the
Chairman as requested. The Management Committee shall meet at
such places and times as are designated by the Chairman of the
Board.
Exhibit 10(e)(3)
SECOND AMENDMENT
TO THE
QUAKER OATS COMPANY
STOCK RETIREMENT PLAN
FOR OUTSIDE DIRECTORS
WHEREAS, The Quaker Oats Company Stock Retirement Plan
for Outside Directors (the "Plan") was previously adopted,
effective September 12, 1984 by The Quaker Oats Company (the
"Company"); and
WHEREAS, the Plan provides that the Board of Directors
of the Company (the "Board") has the power to amend the Plan; and
WHEREAS, it is desirable to amend the Plan, and the
Board has authorized adoption of this Second Amendment to the
Plan and authorized the officers of the Company to execute any
documents in connection herewith;
NOW, THEREFORE, the Plan is hereby amended by
substituting the following for Section 2 of the Plan, effective
January 1, 1996:
"2. Common Stock Units. In addition to the cash
compensation otherwise payable to its outside directors, the
Company shall establish and maintain a Deferred Stock Account in
the name of each outside director. Subject to the provisions of
Section 9, as of the first day of each fiscal year or period, the
Company shall credit 800 Common Stock Units to the Deferred Stock
Account of each person who was an outside director of the Company
on the last day of the immediately preceding fiscal year or
period or who ceased to be a director during such preceding
fiscal year or period by reason of his retirement, disability or
death. In the event such immediately preceding fiscal period is
less than twelve months, the number of Common Stock Units to be
credited as stated above shall be pro rated based upon the number
of months in such fiscal period."
IN WITNESS WHEREOF, this Amendment is executed by a
duly authorized officer of the Company.
THE QUAKER OATS COMPANY
September 14, 1995 By: S/DOUGLAS J. RALSTON
Its: SENIOR VICE PRESIDENT
Exhibit 10(f)(1)
EXECUTIVE SEPARATION AGREEMENT
THIS AGREEMENT is made between The Quaker Oats Company, a
New Jersey corporation (the "Company"), and William D. Smithburg
(the "Executive"), dated this 1st day of May, 1995.
WITNESSETH THAT:
WHEREAS, the Company wishes to attract and retain well-
qualified executive and key personnel and to assure both itself and
the Executive of continuity of management in the event of any actual
or threatened change in control of the Company;
NOW, THEREFORE, it is hereby agreed by and between the
parties as follows:
1. Operation of Agreement. The "effective date of this Agreement"
shall be the date on which the Executive declares it effective,
by notice to the Company in writing, but only if a change in
control of the Company (as defined in Section 2) has occurred
on or before the date of the notice.
2. Change in Control. A "change in control of the Company" shall
be deemed to have occurred if:
a. any "Person," which shall mean a "person" as such
term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company),
is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
voting securities; provided, however, that this paragraph
a. shall not apply to any Person who becomes such a
beneficial owner of such Company securities pursuant to an
agreement with the Company approved by the Company's Board
of Directors (the "Board"), entered into before such
Person has become such a beneficial owner of Company
securities representing 5% or more of the combined voting
power of the Company's then outstanding voting securities;
b. during any period of 24 consecutive months (not
including any period prior to the execution of this
Agreement), individuals, who at the beginning of such
period constitute the Board, and any new director (other
than a director designated by a Person who has entered
into an agreement with the Company to effect a transaction
described in paragraph a., c.(2) or d. of this Section)
whose election by the Board, or whose nomination for
election by the Company's stockholders, was approved by a
vote of at least two-thirds (2/3) of the directors before
the beginning of the period cease for any reason to
constitute at least a majority thereof;
c. the stockholders of the Company approve (1) a plan of
complete liquidation of the Company or (2) the sale or
disposition by the Company of all or substantially all of
the Company's assets unless the acquirer of the assets or
its directors shall meet the conditions for a merger or
consolidation in subparagraphs d.(1) or d.(2); or
d. the stockholders of the Company approve a merger or
consolidation of the Company with any other company other
than:
(1) such a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 70% of the
combined voting power of the Company's or such surviving
entity's outstanding voting securities immediately after
such merger or consolidation; or
(2) such a merger or consolidation which would result
in the directors of the Company who were directors
immediately prior thereto continuing to constitute at
least 50% of the directors of the surviving entity
immediately after such merger or consolidation.
In this paragraph d., "surviving entity" shall mean only an
entity in which all of the Company's stockholders immediately
before such merger or consolidation become stockholders by the
terms of such merger or consolidation, and the phrase
"directors of the Company who were directors immediately prior
thereto" shall include only individuals who were directors of
the Company at the beginning of the 24 consecutive month period
preceding the date of such merger or consolidation, or who were
new directors (other than any director designated by a Person
who has entered into an agreement with the Company to effect a
transaction described in paragraph a., c.(2), d.(1) or d.(2) of
this Section) whose election by the Board, or whose nomination
for election by the Company's stockholders, was approved by a
vote of at least two-thirds (2/3) of the directors before the
beginning of such period.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, for the period commencing
on the effective date of this Agreement and ending on the
earlier to occur of the third anniversary of such effective
date or the 65th birthday of the Executive (the "employment
period"), to exercise such authorities and powers, and perform
such duties and functions, as are commensurate with the
authorities and powers being exercised, and duties and
functions being performed, by the Executive immediately prior
to the effective date of this Agreement, which services shall
be performed at the current location where the Executive was
employed immediately prior to the effective date of this
Agreement or at such other location within a 30-mile radius of
such current location. The Executive shall not be required to
accept any other location. The Executive agrees that during
the employment period he shall devote his full business time
exclusively to his executive duties as described herein and
perform such duties faithfully and efficiently.
2
4. Compensation, Compensation Plans, Benefit Plans, Perquisites.
During the employment period and prior to termination (as
defined in Section 5) of the Executive, the Executive shall be
compensated as follows:
a. He shall receive an annual salary which is not less
than his annual salary immediately prior to the effective
date of this Agreement, with the opportunity for
increases, from time to time thereafter, which are in
accordance with the Company's regular practices.
b. He shall be eligible to participate on a reasonable
basis in bonus, stock option, restricted stock and other
incentive compensation plans, which shall provide benefits
comparable to those to which he was provided immediately
prior to the effective date of this Agreement.
c. He shall be eligible to participate on a reasonable
basis in tax-qualified employee benefit plans (including
but not limited to pension, profit sharing and employee
stock ownership plans), and supplemental nonqualified
employee benefit plans relating thereto, which shall
provide benefits comparable to those to which he was
provided immediately prior to the effective date of this
Agreement.
d. He shall be entitled to receive employee benefits
(including, but not limited to, medical and life insurance
benefits) and perquisites which are comparable to those to
which he was provided immediately prior to the effective
date of this Agreement.
5. Termination. "Termination" shall mean either (a) termination
by the Company of the employment of the Executive with the
Company for any reason other than death, physical or mental
incapacity, or cause (as defined below); (b) resignation of the
Executive, which, notwithstanding anything else herein to the
contrary, may be declared by the executive during the 30-day
period following the first anniversary of the effective date of
this Agreement; or (c) resignation of the Executive upon the
occurrence of any of the following events:
(1) a significant change in the nature or scope of the
Executive's authorities, powers, functions, or duties
from those described in Section 3;
(2) a reduction in total compensation from that provided
in Section 4;
(3) the breach by the Company of any other provision of
this Agreement; or
(4) a reasonable determination by the Executive that, as
a result of a change in control of the Company his
position is significantly affected so that he is unable
to exercise the authorities, powers, functions or duties
attached to his position as described in Section 3.
3
"Cause" means gross misconduct or willful and material breach
of this Agreement by the Executive. No act, or failure to act,
on the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith and
without reasonable belief that the action or omission was in
the best interest of the Company.
6. Confidentiality. The Executive agrees that during and after
the employment period, he will not divulge or appropriate to
his own use or the use of others any secret or confidential
information or knowledge pertaining to the business of the
Company, or any of its subsidiaries, obtained during his
employment by the Company or any of its subsidiaries.
7. Severance and Benefit Payments.
a. In the event of termination of the Executive during
the employment period, the Company shall pay the Executive
a lump-sum severance allowance equal to salary and bonus
payments for the following 24 calendar months at the rate
which he would have been entitled to receive in accordance
with Section 4. Such a severance allowance shall be
adjusted to include expected increases to the Executive's
salary and bonus for such period, but shall not be
adjusted on a present value basis.
b. In the event of termination of the Executive during
the employment period, the Company shall also pay the
Executive a lump-sum benefit payment in an amount
equivalent to (1) the benefits he would have accrued or
been allocated under any tax-qualified employee benefit
plan (including but not limited to pension, profit sharing
and employee stock ownership plans) and any nonqualified
supplemental benefit plan relating thereto, maintained by
the Company if he had remained in the employ of the
Company for 24 calendar months after his termination,
which benefits will be paid in addition to the benefits
provided under such plans, and (2) any other employee
benefits (including, but not limited to, coverage under
any medical and life insurance arrangements or programs)
to which he would have been entitled under all such
employee benefit plans, programs or arrangements
maintained by the Company if he had remained in the employ
of the Company for 24 calendar months after his
termination. Such a benefit payment shall be adjusted to
include expected increases to the Executive's salary,
bonus and other compensation having an effect on such
benefits for such period, but shall not be adjusted on a
present value basis.
c. The amount of the severance allowance and benefit
payment described in this Section shall be determined and
such payment shall be made as soon as it is reasonably
possible.
4
d. The severance allowance and benefit payment to be
provided pursuant to this Section 7 shall be in addition
to, and shall not be reduced by, any other amounts or
benefits provided by separate agreement with the
Executive, or plan or arrangement of the Company or its
subsidiaries, unless specifically stipulated in an
agreement which constitutes an amendment to this Agreement
as provided in Section 14.
8. Tax Reimbursement. If any payment to the Executive under this
Agreement or under any other compensation agreement, plan or
arrangement of the Company or its subsidiaries is subject to an
excise tax under section 4999 of the Internal Revenue Code of
1986, as amended, (the "Code"), the Company shall pay the
Executive an additional amount which is equal to the amount of
such excise tax. The Company will provide complete
compensation and tax data on a timely basis to the Executive
and to an accounting firm or law firm designated by the
Executive in order to enable the Executive to determine the
extent to which any payments under this Agreement or under any
other compensation agreement, plan or arrangement of the
Company or its subsidiaries constitute "parachute payments" or
"excess parachute payments" under section 280G of the Code.
Any additional amount payable under this Section 8 shall be due
and paid no later than ten business days after the other
payment to which such additional payment relates; provided,
however, that if suchadditional amount cannot be determined on
or before such due date, the Company shall pay an amount on the
due date which it in good faith estimates to be payable and
shall pay the remainder of such additional amount (together
with interest at a rate equal to 120% of the applicable Federal
rate determined under Section 1274(d) of the Code) as soon as
such amount can be determined, but no later than 30 days after
the date on which Executive becomes subject to the payment of
the excise tax.
9. Mitigation and Set Off. The Executive shall not be required
to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off against the amounts
payable to the Executive under this Agreement any amounts owed
to the Company by the Executive, any amounts earned by the
Executive in other employment after termination of his
employment with the Company, or any amounts which might have
been earned by the Executive in other employment had he sought
such other employment.
10. Arbitration of All Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof,
except with respect to Section 8, shall be settled by
arbitration in the City of Chicago in accordance with the laws
of the State of Illinois by three arbitrators appointed by the
parties. If the parties cannot agree on the appointment, one
arbitrator shall be appointed by the Company and one by the
Executive, and the third shall be appointed by the first two
arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator
shall be appointed by the Chief Judge of the United States
Court of Appeals for the Seventh Circuit. The arbitration
5
shall be conducted in accordance with the rules of the
American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this
Section 10. Judgement upon the award rendered by the
arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable
for the Executive to retain legal counsel or incur other costs
and expenses in connection with enforcement of his rights
under this Agreement, Executive shall be entitled to recover
from the Company his reasonable attorneys' fees and costs and
expenses in connection with enforcement of his rights
(including the enforcement of any arbitration award in court).
Payment shall be made to the Executive by the Company at the
time these attorneys' fees and costs and expenses are incurred
by the Executive. If, however, the arbitrators should later
determine that under the circumstances the Executive could
have had no reasonable expectation of prevailing on the merits
at the time he initiated the arbitration based on the
information then available to him, he shall repay any such
payments to the Company in accordance with the order of the
arbitrators. Any award of the arbitrators shall include
interest at a rate or rates considered just under the
circumstances by the arbitrators.
11. Notices. Any notices, requests, demands, and other
communications provided for by this Agreement shall be
sufficient if in writing and if sent by registered or
certified mail to the Executive at the last address he has
filed in writing with the Company or, in the case of the
Company, at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to
pledge, hypothecate, anticipate or in any way create a lien
upon any amounts provided under this Agreement; and no
benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary
acts, or by operation of law. Nothing in this paragraph
shall limit the Executive's rights or powers which his
executor or administrator would otherwise have.
13. Governing Law. The Agreement shall be construed and enforced
according to the Employee Retirement Income Security Act of
1974 ("ERISA"), and the laws of the State of Illinois, other
than its laws respecting choice of law, to the extent not pre-
empted by ERISA.
14. Amendment. This Agreement may be amended or cancelled by
mutual agreement of the parties in writing without the
consent of any other person and, so long as the Executive
lives, no person, other than the parties hereto, shall have
any rights under or interest in this Agreement or the subject
matter hereof.
15. Term. Unless the Executive has theretofore declared this
Agreement effective, pursuant to Section 1 of this Agreement,
this Agreement shall terminate (a) March 31, 1998 or (b) when
the Executive has been placed on inactive service by the
Company prior to a change in control of the Company.
6
16. Successors to the Company. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company.
17. Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain
in full force and effect.
18. Prior Agreement. Any prior Executive Separation Agreement
between the Executive and the Company which has not yet
terminated pursuant to its terms, is cancelled by mutual
consent of the Executive and the Company pursuant to
execution of this Agreement, effective as of the day and year
first above written.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on
its behalf, and its corporate seal to be hereunto affixed and
attested by its Assistant Secretary, all as of the day and year
first above written.
S/WILLIAM D. SMITHBURG
WILLIAM D. SMITHBURG
THE QUAKER OATS COMPANY
By S/Douglas J. Ralston
ATTEST:
S/Marcia S. Laz
Assistant Secretary
7
Exhibit 10(f)(2)
EXECUTIVE SEPARATION AGREEMENT
THIS AGREEMENT is made between The Quaker Oats Company, a
New Jersey corporation (the "Company"), and Philip A. Marineau (the
"Executive"), dated this 5th day of May, 1995.
WITNESSETH THAT:
WHEREAS, the Company wishes to attract and retain well-
qualified executive and key personnel and to assure both itself and
the Executive of continuity of management in the event of any actual
or threatened change in control of the Company;
NOW, THEREFORE, it is hereby agreed by and between the
parties as follows:
1. Operation of Agreement. The "effective date of this Agreement"
shall be the date on which the Executive declares it effective,
by notice to the Company in writing, but only if a change in
control of the Company (as defined in Section 2) has occurred
on or before the date of the notice.
2. Change in Control. A "change in control of the Company" shall
be deemed to have occurred if:
a. any "Person," which shall mean a "person" as such
term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company),
is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
voting securities; provided, however, that this paragraph
a. shall not apply to any Person who becomes such a
beneficial owner of such Company securities pursuant to an
agreement with the Company approved by the Company's Board
of Directors (the "Board"), entered into before such
Person has become such a beneficial owner of Company
securities representing 5% or more of the combined voting
power of the Company's then outstanding voting securities;
b. during any period of 24 consecutive months (not
including any period prior to the execution of this
Agreement), individuals, who at the beginning of such
period constitute the Board, and any new director (other
than a director designated by a Person who has entered
into an agreement with the Company to effect a transaction
described in paragraph a., c.(2) or d. of this Section)
whose election by the Board, or whose nomination for
election by the Company's stockholders, was approved by a
vote of at least two-thirds (2/3) of the directors before
the beginning of the period cease for any reason to
constitute at least a majority thereof;
c. the stockholders of the Company approve (1) a plan of
complete liquidation of the Company or (2) the sale or
disposition by the Company of all or substantially all of
the Company's assets unless the acquirer of the assets or
its directors shall meet the conditions for a merger or
consolidation in subparagraphs d.(1) or d.(2); or
d. the stockholders of the Company approve a merger or
consolidation of the Company with any other company other
than:
(1) such a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 70% of the
combined voting power of the Company's or such surviving
entity's outstanding voting securities immediately after
such merger or consolidation; or
(2) such a merger or consolidation which would result
in the directors of the Company who were directors
immediately prior thereto continuing to constitute at
least 50% of the directors of the surviving entity
immediately after such merger or consolidation.
In this paragraph d., "surviving entity" shall mean only an
entity in which all of the Company's stockholders immediately
before such merger or consolidation become stockholders by the
terms of such merger or consolidation, and the phrase
"directors of the Company who were directors immediately prior
thereto" shall include only individuals who were directors of
the Company at the beginning of the 24 consecutive month period
preceding the date of such merger or consolidation, or who were
new directors (other than any director designated by a Person
who has entered into an agreement with the Company to effect a
transaction described in paragraph a., c.(2), d.(1) or d.(2) of
this Section) whose election by the Board, or whose nomination
for election by the Company's stockholders, was approved by a
vote of at least two-thirds (2/3) of the directors before the
beginning of such period.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, for the period commencing
on the effective date of this Agreement and ending on the
earlier to occur of the third anniversary of such effective
date or the 65th birthday of the Executive (the "employment
period"), to exercise such authorities and powers, and perform
such duties and functions, as are commensurate with the
authorities and powers being exercised, and duties and
functions being performed, by the Executive immediately prior
to the effective date of this Agreement, which services shall
be performed at the current location where the Executive was
employed immediately prior to the effective date of this
Agreement or at such other location within a 30-mile radius of
such current location. The Executive shall not be required to
accept any other location. The Executive agrees that during
the employment period he shall devote his full business time
exclusively to his executive duties as described herein and
perform such duties faithfully and efficiently.
2
4. Compensation, Compensation Plans, Benefit Plans, Perquisites.
During the employment period and prior to termination (as
defined in Section 5) of the Executive, the Executive shall be
compensated as follows:
a. He shall receive an annual salary which is not less
than his annual salary immediately prior to the effective
date of this Agreement, with the opportunity for
increases, from time to time thereafter, which are in
accordance with the Company's regular practices.
b. He shall be eligible to participate on a reasonable
basis in bonus, stock option, restricted stock and other
incentive compensation plans, which shall provide benefits
comparable to those to which he was provided immediately
prior to the effective date of this Agreement.
c. He shall be eligible to participate on a reasonable
basis in tax-qualified employee benefit plans (including
but not limited to pension, profit sharing and employee
stock ownership plans), and supplemental nonqualified
employee benefit plans relating thereto, which shall
provide benefits comparable to those to which he was
provided immediately prior to the effective date of this
Agreement.
d. He shall be entitled to receive employee benefits
(including, but not limited to, medical and life insurance
benefits) and perquisites which are comparable to those to
which he was provided immediately prior to the effective
date of this Agreement.
5. Termination. "Termination" shall mean either (a) termination
by the Company of the employment of the Executive with the
Company for any reason other than death, physical or mental
incapacity, or cause (as defined below); (b) resignation of the
Executive, which, notwithstanding anything else herein to the
contrary, may be declared by the executive during the 30-day
period following the first anniversary of the effective date of
this Agreement; or (c) resignation of the Executive upon the
occurrence of any of the following events:
(1) a significant change in the nature or scope of the
Executive's authorities, powers, functions, or duties
from those described in Section 3;
(2) a reduction in total compensation from that provided
in Section 4;
(3) the breach by the Company of any other provision of
this Agreement; or
(4) a reasonable determination by the Executive that, as
a result of a change in control of the Company his
position is significantly affected so that he is unable
to exercise the authorities, powers, functions or duties
attached to his position as described in Section 3.
3
"Cause" means gross misconduct or willful and material breach
of this Agreement by the Executive. No act, or failure to act,
on the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith and
without reasonable belief that the action or omission was in
the best interest of the Company.
6. Confidentiality. The Executive agrees that during and after
the employment period, he will not divulge or appropriate to
his own use or the use of others any secret or confidential
information or knowledge pertaining to the business of the
Company, or any of its subsidiaries, obtained during his
employment by the Company or any of its subsidiaries.
7. Severance and Benefit Payments.
a. In the event of termination of the Executive during
the employment period, the Company shall pay the Executive
a lump-sum severance allowance equal to salary and bonus
payments for the following 24 calendar months at the rate
which he would have been entitled to receive in accordance
with Section 4. Such a severance allowance shall be
adjusted to include expected increases to the Executive's
salary and bonus for such period, but shall not be
adjusted on a present value basis.
b. In the event of termination of the Executive during
the employment period, the Company shall also pay the
Executive a lump-sum benefit payment in an amount
equivalent to (1) the benefits he would have accrued or
been allocated under any tax-qualified employee benefit
plan (including but not limited to pension, profit sharing
and employee stock ownership plans) and any nonqualified
supplemental benefit plan relating thereto, maintained by
the Company if he had remained in the employ of the
Company for 24 calendar months after his termination,
which benefits will be paid in addition to the benefits
provided under such plans, and (2) any other employee
benefits (including, but not limited to, coverage under
any medical and life insurance arrangements or programs)
to which he would have been entitled under all such
employee benefit plans, programs or arrangements
maintained by the Company if he had remained in the employ
of the Company for 24 calendar months after his
termination. Such a benefit payment shall be adjusted to
include expected increases to the Executive's salary,
bonus and other compensation having an effect on such
benefits for such period, but shall not be adjusted on a
present value basis.
c. The amount of the severance allowance and benefit
payment described in this Section shall be determined and
such payment shall be made as soon as it is reasonably
possible.
4
d. The severance allowance and benefit payment to be
provided pursuant to this Section 7 shall be in addition
to, and shall not be reduced by, any other amounts or
benefits provided by separate agreement with the
Executive, or plan or arrangement of the Company or its
subsidiaries, unless specifically stipulated in an
agreement which constitutes an amendment to this Agreement
as provided in Section 14.
8. Tax Reimbursement. If any payment to the Executive under this
Agreement or under any other compensation agreement, plan or
arrangement of the Company or its subsidiaries is subject to an
excise tax under section 4999 of the Internal Revenue Code of
1986, as amended, (the "Code"), the Company shall pay the
Executive an additional amount which is equal to the amount of
such excise tax. The Company will provide complete
compensation and tax data on a timely basis to the Executive
and to an accounting firm or law firm designated by the
Executive in order to enable the Executive to determine the
extent to which any payments under this Agreement or under any
other compensation agreement, plan or arrangement of the
Company or its subsidiaries constitute "parachute payments" or
"excess parachute payments" under section 280G of the Code.
Any additional amount payable under this Section 8 shall be due
and paid no later than ten business days after the other
payment to which such additional payment relates; provided,
however, that if suchadditional amount cannot be determined on
or before such due date, the Company shall pay an amount on the
due date which it in good faith estimates to be payable and
shall pay the remainder of such additional amount (together
with interest at a rate equal to 120% of the applicable Federal
rate determined under Section 1274(d) of the Code) as soon as
such amount can be determined, but no later than 30 days after
the date on which Executive becomes subject to the payment of
the excise tax.
9. Mitigation and Set Off. The Executive shall not be required
to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off against the amounts
payable to the Executive under this Agreement any amounts owed
to the Company by the Executive, any amounts earned by the
Executive in other employment after termination of his
employment with the Company, or any amounts which might have
been earned by the Executive in other employment had he sought
such other employment.
10. Arbitration of All Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof,
except with respect to Section 8, shall be settled by
arbitration in the City of Chicago in accordance with the laws
of the State of Illinois by three arbitrators appointed by the
parties. If the parties cannot agree on the appointment, one
arbitrator shall be appointed by the Company and one by the
Executive, and the third shall be appointed by the first two
arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator
shall be appointed by the Chief Judge of the United States
Court of Appeals for the Seventh Circuit. The arbitration
5
shall be conducted in accordance with the rules of the
American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this
Section 10. Judgement upon the award rendered by the
arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable
for the Executive to retain legal counsel or incur other costs
and expenses in connection with enforcement of his rights
under this Agreement, Executive shall be entitled to recover
from the Company his reasonable attorneys' fees and costs and
expenses in connection with enforcement of his rights
(including the enforcement of any arbitration award in court).
Payment shall be made to the Executive by the Company at the
time these attorneys' fees and costs and expenses are incurred
by the Executive. If, however, the arbitrators should later
determine that under the circumstances the Executive could
have had no reasonable expectation of prevailing on the merits
at the time he initiated the arbitration based on the
information then available to him, he shall repay any such
payments to the Company in accordance with the order of the
arbitrators. Any award of the arbitrators shall include
interest at a rate or rates considered just under the
circumstances by the arbitrators.
11. Notices. Any notices, requests, demands, and other
communications provided for by this Agreement shall be
sufficient if in writing and if sent by registered or
certified mail to the Executive at the last address he has
filed in writing with the Company or, in the case of the
Company, at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to
pledge, hypothecate, anticipate or in any way create a lien
upon any amounts provided under this Agreement; and no
benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary
acts, or by operation of law. Nothing in this paragraph
shall limit the Executive's rights or powers which his
executor or administrator would otherwise have.
13. Governing Law. The Agreement shall be construed and enforced
according to the Employee Retirement Income Security Act of
1974 ("ERISA"), and the laws of the State of Illinois, other
than its laws respecting choice of law, to the extent not pre-
empted by ERISA.
14. Amendment. This Agreement may be amended or cancelled by
mutual agreement of the parties in writing without the
consent of any other person and, so long as the Executive
lives, no person, other than the parties hereto, shall have
any rights under or interest in this Agreement or the subject
matter hereof.
15. Term. Unless the Executive has theretofore declared this
Agreement effective, pursuant to Section 1 of this Agreement,
this Agreement shall terminate (a) March 31, 1998 or (b) when
the Executive has been placed on inactive service by the
Company prior to a change in control of the Company.
6
16. Successors to the Company. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company.
17. Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain
in full force and effect.
18. Prior Agreement. Any prior Executive Separation Agreement
between the Executive and the Company which has not yet
terminated pursuant to its terms, is cancelled by mutual
consent of the Executive and the Company pursuant to
execution of this Agreement, effective as of the day and year
first above written.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on
its behalf, and its corporate seal to be hereunto affixed and
attested by its Assistant Secretary, all as of the day and year
first above written.
S/PHILIP A. MARINEAU
PHILIP A. MARINEAU
THE QUAKER OATS COMPANY
By S/Douglas J. Ralston
ATTEST:
S/Marcia S. Laz
Assistant Secretary
7
Exhibit 10 (f)(3)
Schedule of Termination Benefit Agreements with Certain Executive Officers
The attached Termination Benefit Agreement is identical in all
material respects to the executive Termination Benefit Agreements
for those executive employees listed below and which have been
omitted from this filing:
Name Execution Date
John A. Boynton May 5, 1995
John H. Calhoun May 1, 1995
Penelope C. Cate April 27, 1995
Michael L. Cohen September 20, 1995
Janet K. Cooper April 27, 1995
James F. Doyle May 5, 1995
Margaret M. Eichman April 28, 1995
Thomas L. Gettings April 28, 1995
R. Thomas Howell, Jr. May 1, 1995
John G. Jartz April 28, 1995
Mart C. Matthews May 1, 1995
Luther C. McKinney May 5, 1995
Douglas W. Mills May 5, 1995
Kenneth W. Murray May 8, 1995
W. Stephan Perry April 28, 1995
Douglas J. Ralston May 1, 1995
Arthur R. Skantz April 27, 1995
Robert S. Thomason April 27, 1995
Russell A. Young May 5, 1995
Exhibit 10(f)(3)
EXECUTIVE SEPARATION AGREEMENT
THIS AGREEMENT is made between The Quaker Oats Company, a
New Jersey corporation (the "Company"), and Barbara R. Allen (the
"Executive"), dated this 1st day of May, 1995.
WITNESSETH THAT:
WHEREAS, the Company wishes to attract and retain well-
qualified executive and key personnel and to assure both itself
and the Executive of continuity of management in the event of any
actual or threatened change in control of the Company;
NOW, THEREFORE, it is hereby agreed by and between the
parties as follows:
1. Operation of Agreement. The "effective date of this
Agreement" shall be the date on which the Executive declares
it effective, by notice to the Company in writing, but only
if a change in control of the Company (as defined in Section
2) has occurred on or before the date of the notice.
2. Change in Control. A "change in control of the Company"
shall be deemed to have occurred if:
a. any "Person," which shall mean a "person" as such
term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company),
is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
voting securities; provided, however, that this paragraph
a. shall not apply to any Person who becomes such a
beneficial owner of such Company securities pursuant to an
agreement with the Company approved by the Company's Board
of Directors (the "Board"), entered into before such
Person has become such a beneficial owner of Company
securities representing 5% or more of the combined
voting power of the Company's then outstanding voting
securities;
b. during any period of 24 consecutive months (not
including any period prior to the execution of this
Agreement), individuals, who at the beginning of such
period constitute the Board, and any new director (other
than a director designated by a Person who has entered
into an agreement with the Company to effect a transaction
described in paragraph a., c.(2) or d. of this Section)
whose election by the Board, or whose nomination for
election by the Company's stockholders, was approved by a
vote of at least two-thirds (2/3) of the directors before
the beginning of the period cease for any reason to
constitute at least a majority thereof;
c. the stockholders of the Company approve (1) a plan of
complete liquidation of the Company or (2) the sale or
disposition by the Company of all or substantially all of
the Company's assets unless the acquirer of the assets or
its directors shall meet the conditions for a merger or
consolidation in subparagraphs d.(1) or d.(2); or
d. the stockholders of the Company approve a merger or
consolidation of the Company with any other company other
than:
(1) such a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 70% of the
combined voting power of the Company's or such surviving
entity's outstanding voting securities immediately after
such merger or consolidation; or
(2) such a merger or consolidation which would
result in the directors of the Company who were directors
immediately prior thereto continuing to constitute at
least 50% of the directors of the surviving entity
immediately after such merger or consolidation.
In this paragraph d., "surviving entity" shall mean only an
entity in which all of the Company's stockholders immediately
before such merger or consolidation become stockholders by
the terms of such merger or consolidation, and the phrase
"directors of the Company who were directors immediately
prior thereto" shall include only individuals who were
directors of the Company at the beginning of the 24
consecutive month period preceding the date of such merger or
consolidation, or who were new directors (other than any
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in paragraph a., c.(2), d.(1) or d.(2) of this Section) whose
election by the Board, or whose nomination for election by
the Company's stockholders, was approved by a vote of at
least two-thirds (2/3) of the directors before the beginning
of such period.
2
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, for the period
commencing on the effective date of this Agreement and ending
on the earlier to occur of the third anniversary of such
effective date or the 65th birthday of the Executive (the
"employment period"), to exercise such authorities and
powers, and perform such duties and functions, as are
commensurate with the authorities and powers being exercised,
and duties and functions being performed, by the Executive
immediately prior to the effective date of this Agreement,
which services shall be performed at the current location
where the Executive was employed immediately prior to the
effective date of this Agreement or at such other location
within a 30-mile radius of such current location. The
Executive shall not be required to accept any other location.
The Executive agrees that during the employment period he
shall devote his full business time exclusively to his
executive duties as described herein and perform such duties
faithfully and efficiently.
4. Compensation, Compensation Plans, Benefit Plans, Perquisites.
During the employment period and prior to termination
(as defined in Section 5) of the Executive, the Executive
shall be compensated as follows:
a. He shall receive an annual salary which is not less
than his annual salary immediately prior to the effective
date of this Agreement, with the opportunity for
increases, from time to time thereafter, which are in
accordance with the Company's regular practices.
b. He shall be eligible to participate on a reasonable
basis in bonus, stock option, restricted stock and other
incentive compensation plans, which shall provide benefits
comparable to those to which he was provided immediately
prior to the effective date of this Agreement.
c. He shall be eligible to participate on a reasonable
basis in tax-qualified employee benefit plans (including
but not limited to pension, profit sharing and employee
stock ownership plans), and supplemental nonqualified
employee benefit plans relating thereto, which shall
provide benefits comparable to those to which he was
provided immediately prior to the effective date of this
Agreement.
d. He shall be entitled to receive employee benefits
(including, but not limited to, medical and life insurance
benefits) and perquisites which are comparable to those to
which he was provided immediately prior to the effective
date of this Agreement.
5. Termination. "Termination" shall mean either (a) termination
by the Company of the employment of the Executive with the
Company for any reason other than death, physical or mental
incapacity, or cause (as defined below), or (b) resignation
of the Executive upon the occurrence of any of the following
events:
3
(1) a significant change in the nature or scope of the
Executive's authorities, powers, functions, or duties
from those described in Section 3;
(2) a reduction in total compensation from that provided
in Section 4;
(3) the breach by the Company of any other provision of
this Agreement; or
(4) a reasonable determination by the Executive that, as
a result of a change in control of the Company his
position is significantly affected so that he is unable
to exercise the authorities, powers, functions or duties
attached to his position as described in Section 3.
"Cause" means gross misconduct or willful and material breach
of this Agreement by the Executive. No act, or failure to
act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the action or
omission was in the best interest of the Company.
6. Confidentiality. The Executive agrees that during and after
the employment period, he will not divulge or appropriate to
his own use or the use of others any secret or confidential
information or knowledge pertaining to the business of the
Company, or any of its subsidiaries, obtained during his
employment by the Company or any of its subsidiaries.
7. Severance and Benefit Payments.
a. In the event of termination of the Executive during
the employment period, the Company shall pay the Executive
a lump-sum severance allowance equal to salary and bonus
payments for the following 24 calendar months at the rate
which he would have been entitled to receive in accordance
with Section 4. Such a severance allowance shall be
adjusted to include expected increases to the Executive's
salary and bonus for such period, but shall not be
adjusted on a present value basis.
b. In the event of termination of the Executive during
the employment period, the Company shall also pay the
Executive a lump-sum benefit payment in an amount
equivalent to (1) the benefits he would have accrued or
been allocated under any tax-qualified employee benefit
plan (including but not limited to pension, profit sharing
and employee stock ownership plans) and any nonqualified
supplemental benefit plan relating thereto, maintained by
the Company if he had remained in the employ of the
Company for 24 calendar months after his termination,
which benefits will be paid in addition to the benefits
provided under such plans, and (2) any other employee
benefits (including, but not limited to, coverage under
any medical and life insurance arrangements or programs)
4
to which he would have been entitled under all such
employee benefit plans, programs or arrangements
maintained by the Company if he had remained in the employ
of the Company for 24 calendar months after his
termination. Such a benefit payment shall be adjusted to
include expected increases to the Executive's salary,
bonus and other compensation having an effect on such
benefits for such period, but shall not be adjusted on a
present value basis.
c. The amount of the severance allowance and benefit
payment described in this Section shall be determined and
such payment shall be made as soon as it is reasonably
possible.
d. The severance allowance and benefit payment to be
provided pursuant to this Section 7 shall be in addition
to, and shall not be reduced by, any other amounts or
benefits provided by separate agreement with the
Executive, or plan or arrangement of the Company or its
subsidiaries, unless specifically stipulated in an
agreement which constitutes an amendment to this Agreement
as provided in Section 14.
8. Tax Reimbursement. If any payment to the Executive under
this Agreement or under any other compensation agreement,
plan or arrangement of the Company or its subsidiaries is
subject to an excise tax under section 4999 of the Internal
Revenue Code of 1986, as amended, (the "Code"), the Company
shall pay the Executive an additional amount which is equal
to the amount of such excise tax. The Company will provide
complete compensation and tax data on a timely basis to the
Executive and to an accounting firm or law firm designated by
the Executive in order to enable the Executive to determine
the extent to which any payments under this Agreement or
under any other compensation agreement, plan or arrangement
of the Company or its subsidiaries constitute "parachute
payments" or "excess parachute payments" under section 280G
of the Code. Any additional amount payable under this
Section 8 shall be due and paid no later than ten business
days after the other payment to which such additional payment
relates; provided, however, that if such additional amount
cannot be determined on or before such due date, the Company
shall pay an amount on the due date which it in good faith
estimates to be payable and shall pay the remainder of such
additional amount (together with interest at a rate equal to
120% of the applicable Federal rate determined under Section
1274(d) of the Code) as soon as such amount can be
determined, but no later than 30 days after the date on which
Executive becomes subject to the payment of the excise tax.
9. Mitigation and Set Off. The Executive shall not be required
to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off against the amounts
payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by
the Executive in other employment after termination of his
employment with the Company, or any amounts which might have
been earned by the Executive in other employment had he
sought such other employment.
5
10. Arbitration of All Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach
thereof, except with respect to Section 8, shall be settled
by arbitration in the City of Chicago in accordance with the
laws of the State of Illinois by three arbitrators appointed
by the parties. If the parties cannot agree on the
appointment, one arbitrator shall be appointed by the Company
and one by the Executive, and the third shall be appointed by
the first two arbitrators. If the first two arbitrators
cannot agree on the appointment of a third arbitrator, then
the third arbitrator shall be appointed by the Chief Judge of
the United States Court of Appeals for the Seventh Circuit.
The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as
provided in this Section 10. Judgement upon the award
rendered by the arbitrators may be entered in any court
having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal
counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, Executive
shall be entitled to recover from the Company his reasonable
attorneys' fees and costs and expenses in connection with
enforcement of his rights (including the enforcement of any
arbitration award in court). Payment shall be made to the
Executive by the Company at the time these attorneys' fees
and costs and expenses are incurred by the Executive. If,
however, the arbitrators should later determine that under
the circumstances the Executive could have had no reasonable
expectation of prevailing on the merits at the time he
initiated the arbitration based on the information then
available to him, he shall repay any such payments to the
Company in accordance with the order of the arbitrators. Any
award of the arbitrators shall include interest at a rate or
rates considered just under the circumstances by the
arbitrators.
11. Notices. Any notices, requests, demands, and other
communications provided for by this Agreement shall be
sufficient if in writing and if sent by registered or
certified mail to the Executive at the last address he has
filed in writing with the Company or, in the case of the
Company, at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to
pledge, hypothecate, anticipate or in any way create a lien
upon any amounts provided under this Agreement; and no
benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary
acts, or by operation of law. Nothing in this paragraph
shall limit the Executive's rights or powers which his
executor or administrator would otherwise have.
13. Governing Law. The Agreement shall be construed and enforced
according to the Employee Retirement Income Security Act of
1974 ("ERISA"), and the laws of the State of Illinois, other
than its laws respecting choice of law, to the extent not pre-
empted by ERISA.
6
14. Amendment. This Agreement may be amended or cancelled by
mutual agreement of the parties in writing without the
consent of any other person and, so long as the Executive
lives, no person, other than the parties hereto, shall have
any rights under or interest in this Agreement or the subject
matter hereof.
15. Term. Unless the Executive has theretofore declared this
Agreement effective, pursuant to Section 1 of this Agreement,
this Agreement shall terminate (a) March 31, 1998 or (b) when
the Executive has been placed on inactive service by the
Company prior to a change in control of the Company.
16. Successors to the Company. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company.
17. Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain
in full force and effect.
18. Prior Agreement. Any prior Executive Separation Agreement
between the Executive and the Company which has not yet
terminated pursuant to its terms, is cancelled by mutual
consent of the Executive and the Company pursuant to
execution of this Agreement, effective as of the day and year
first above written.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed
in its name on its behalf, and its corporate seal to be hereunto
affixed and attested by its Assistant Secretary, all as of the
day and year first above written.
S/BARBARA R. ALLEN
BARBARA R. ALLEN
THE QUAKER OATS COMPANY
By S/DOUGLAS J. RALSTON
ATTEST:
S/MARCIA S. LAZ
Assistant Secretary
7
Exhibit 10(g)(8)
SEVENTH AMENDMENT
TO THE
QUAKER SUPPLEMENTAL
EXECUTIVE RETIREMENT PROGRAM
WHEREAS, The Quaker Supplemental Executive
Retirement Program (the "Program") was previously
adopted, effective August 1, 1989 by The Quaker Oats
Company (the "Company"); and
WHEREAS, the Program provides that the
Compensation Committee of the Board of Directors of the
Company (the "Committee") has the power to amend the
Program; and
WHEREAS, it is desirable to amend the Program,
and the Committee has authorized adoption of this
Seventh Amendment to the Program and authorized the
officers of the Company to execute any documents in
connection herewith;
NOW, THEREFORE, the Program is hereby amended
as follows, effective as of January 11, 1995, by
substituting "-2-" for "-0-" in the Additional Years of
Service column for Terry G. Westbrook where it appears
in Schedule A of the Program.
IN WITNESS WHEREOF, this Amendment is executed
by a duly authorized officer of the Company.
THE QUAKER OATS COMPANY
July 21, 1995 By: S/Douglas J. Ralston
Its: Senior Vice President
Exhibit 10(g)(9)
1
EIGHTH AMENDMENT
TO THE
QUAKER SUPPLEMENTAL
EXECUTIVE RETIREMENT PROGRAM
WHEREAS, The Quaker Supplemental Executive Retirement
Program (the "Program") was adopted effective as of August 1,
1989 by The Quaker Oats Company (the "Company") for the benefit
of its eligible senior executives; and
WHEREAS, the Program already states that it is an
unfunded plan maintained primarily to provide deferred
compensation for a select group of highly compensated employees
within the meaning of Sections 201(2), 301(3) and 401(a)(1) of
the Employee Retirement Income Security Act of 1974 ("ERISA");
i.e., it is an ERISA "top hat" plan; and
WHEREAS, amendment of the Program is desirable to
clarify and reflect the intent of the Program since its
inception, and the Compensation Committee has authorized adoption
of the Eighth Amendment to the Program and authorized the
officers of the Company to execute any documents in connection
herewith;
NOW, THEREFORE, the Program is amended effective as of
July 21, 1995, by substituting the following for Section 6.8 of
the Program:
"6.8 Applicable Law. The Program is
established under ERISA and will be construed
according to the federal law that governs ERISA
`top hat' plans."
THE QUAKER OATS COMPANY
July 21, 1995 By: S/Douglas J. Ralston
Its: Senior Vice President
Exhibit 10(g)(10)
1
NINTH AMENDMENT
TO THE
QUAKER SUPPLEMENTAL
EXECUTIVE RETIREMENT PROGRAM
WHEREAS, The Quaker Supplemental Executive Retirement
Program (the "Program") was previously adopted, effective August
1, 1989 by The Quaker Oats Company (the "Company"); and
WHEREAS, the Program provides that the Compensation
Committee of the Board of Directors of the Company (the
"Committee") has the power to amend the Program; and
WHEREAS, it is desirable to amend the Program, and the
Committee has authorized adoption of this Ninth Amendment to the
Program, subject to the discretion of the Senior Vice President -
Human Resources, and authorized the officers of the Company to
execute any documents in connection herewith;
NOW, THEREFORE, the Program is hereby amended as
follows, effective as of September 18, 1995, by substituting "-1-
" for "-0-" in the Additional Years of Service column for Walter
G. VanBenthuysen where it appears in Schedule A of the Program.
IN WITNESS WHEREOF, this Amendment is executed by a
duly authorized officer of the Company.
THE QUAKER OATS COMPANY
September 18, 1995 By: Douglas J. Ralston
Its: Senior Vice President
Exhibit 10(j)
QUAKER OFFICERS
SEVERANCE PROGRAM
1. EFFECTIVE DATE AND PURPOSE. The Quaker Officers
Severance Program (the "Program") is established and maintained
by The Quaker Oats Company ("Quaker"), effective as of March 8,
1995, and is a renewal of the Program as adopted by Quaker's
Board of Directors (the "Board") on March 8, 1989. The purpose
of the Program is to promote the interests of Quaker, its
divisions and subsidiaries (the "Company"), and its shareholders,
by attracting and retaining officers of the Company through
assurances of continued compensation and benefits when their
employment with the Company is terminated due to certain
circumstances beyond their control.
2. ADMINISTRATION.
(a) The Program shall be administered by the Severance
Program Committee (the "Committee"), which shall initially
consist of Quaker's Senior Vice President Human Resources, and
Vice President Human Resources Worldwide Beverages. The Chief
Executive Officer of Quaker shall have the authority to expand or
reduce the number of Committee members, and to designate, remove
or replace the Committee members.
(b) The Committee shall have the sole responsibility
for the administration of the Program, and may adopt such rules
and procedures as it deems necessary, desirable, or appropriate.
(c) The Committee shall have such powers as may be
necessary to discharge its responsibility to administer the
Program, including but not limited to the following:
(1) To construe and interpret the Program, decide
all questions of eligibility, and determine
the amount, manner and time of any severance
benefit hereunder.
(2) To prescribe procedures for employees to
apply for Program benefits, including written
applications and forms, if any, and other
requests for information. If no procedures
are prescribed, then the Company or the
Committee may initiate consideration of a
claim for severance benefits, or any employee
may initiate a claim by providing notice, in
writing, to either designated Committee
member. The Committee may reasonably rely
upon all information furnished to it in such
applications, forms or notices.
(3) To receive from the Company such information
as shall be necessary for the proper
administration of the Program. The Committee
may reasonably rely upon all such information
so furnished.
(4) To appoint individuals to assist in the
administration of the Program as the
Committee deems necessary, including but not
limited to, Company employees, agents,
attorneys, and accountants. The Committee
may reasonably rely upon all information and
advice furnished by such individuals.
(5) To receive, review, and maintain, as it deems
appropriate, benefit payment and
administrative expense reports.
(6) To issue directions to the Company concerning
all benefits which are to be paid from the
Company's general assets pursuant to the
Program provisions.
(7) To prepare and distribute to Company
employees, information describing the
Program, in such manner as the Committee
determines to be required or appropriate.
(d) The Committee shall make all determinations as to
the right of any person to a benefit under the Program. Any
denial by the Committee of the claim for benefits under the
Program by an employee shall be stated in writing by the
Committee and delivered or mailed to the employee; and such
notice shall set forth the specific reasons for the denial. In
addition, the Committee shall afford a reasonable opportunity to
any employee whose claim for benefits has been denied for a
review of the decision denying the claim.
(e) The Committee shall be indemnified by Quaker to
the full extent allowed by law. This indemnity shall extend to
all individuals appointed to assist in the administration of the
Program, as described in subparagraph (c) (4) above.
3. ELIGIBILITY.
(a) An officer (as defined below) is eligible for
severance benefits under the Program (determined in accordance
with paragraph 4) if his employment with the Company is
terminated under any of the following conditions:
(1) At any time, termination of employment with
the Company, other than death, physical or
mental incapacity, voluntary resignation,
retirement, gross misconduct, or due to the
sale, spin-off or other disposition of a
plant, profit center, division or subsidiary
of Quaker as an ongoing entity if the
affected employee is hired by, or is offered
continued employment by, the successor or
purchasing entity.
2
(2) Notwithstanding anything in subparagraph (a)
above to the contrary, within two years
following a Change in Control of Quaker (as
defined below), any termination of employment
with the Company, in lieu of the officer
accepting continued employment with the
Company which involves a significant change
in the officer's terms and conditions of
employment (as defined below). A
"significant change in the officer's terms
and conditions of employment" shall be deemed
to have occurred when during such two year
period:
(i) the total of the officer's salary
and incentive bonus is to be
reduced, based upon the amounts
equal to the officer's salary
immediately prior to the Change in
Control of Quaker, and the most
recent incentive bonus paid, or
fully accrued and payable, to the
employee immediately prior to the
Change in Control of Quaker;
(ii) the location of continued
employment is beyond a 30-mile
radius of the officer's location of
employment immediately prior to the
Change in Control of Quaker;
(iii) the officer is to be paid on an
hourly basis;
(iv) there is a significant change in
the nature or scope of any of the
authorities and powers, which the
officer may exercise or is
exercising, and duties and
functions which the officer may
perform or is performing,
immediately prior to the Change in
Control of Quaker; or
(v) a reasonable determination by the
officer that, as a result of the
Change in Control of Quaker, his
position is significantly affected
so that he is unable to exercise
any authorities and powers, or
perform any duties and functions
described in subparagraph (iv)
above.
3
(3) "Change in Control of Quaker" shall be deemed
to have occurred if:
(i) any "Person," which shall mean a
"person" as such term is used in
Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other
than Quaker, any trustee or other
fiduciary holding securities under an
employee benefit plan of Quaker, or
any company owned, directly or
indirectly, by the stockholders of
Quaker in substantially the same
proportions as their ownership of
stock of Quaker), is or becomes the
"beneficial owner" (as defined in Rule
13d-3 under the Exchange Act),
directly or indirectly, of securities
of Quaker representing 30% or more of
the combined voting power of Quaker's
then outstanding voting securities;
provided, however, that this
subparagraph (i) shall not apply to
any Person who becomes such a
beneficial owner of such Quaker
securities pursuant to an agreement
with Quaker approved by Quaker's Board
of Directors (the "Board"), entered
into before such Person has become
such a beneficial owner of Quaker
securities representing 5% or more of
the combined voting power of Quaker's
then outstanding voting securities;
(ii) during any period of 24 consecutive
months (not including any period prior
to March 8, 1995), individuals, who at
the beginning of such period
constitute the Board, and any new
director (other than a director
designated by a Person who has entered
into an agreement with Quaker to
effect a transaction described in
subparagraph (i), (iii)(B) or (iv))
whose election by the Board, or whose
nomination for election by Quaker's
stockholders, was approved by a vote
of at least two-thirds (2/3) of the
directors before the beginning of the
period cease for any reason to
constitute at least a majority
thereof;
4
(iii) the stockholders of Quaker approve (A)
a plan of complete liquidation of
Quaker or (B) the sale or disposition
by Quaker of all or substantially all
of Quaker's assets unless the acquirer
of the assets or its directors shall
meet the conditions for a merger or
consolidation in subparagraphs (iv)(A)
or (iv)(B); or
(iv) the stockholders of Quaker approve a
merger or consolidation of Quaker with
any other company other than:
(A) such a merger or consolidation
which would result in the voting
securities of Quaker outstanding
immediately prior thereto continuing
to represent (either by remaining
outstanding or by being converted into
voting securities of the surviving
entity) more than 70% of the combined
voting power of Quaker's or such
surviving entity's outstanding voting
securities immediately after such
merger or consolidation; or
(B) such a merger or consolidation
which would result in the directors of
Quaker who were directors immediately
prior thereto continuing to constitute
at least 50% of the directors of the
surviving entity immediately after
such merger or consolidation.
In this subparagraph (iv), "surviving
entity" shall mean only an entity in
which all of Quaker's stockholders
immediately before such merger or
consolidation become stockholders by
the terms of such merger or
consolidation, and the phrase
"directors of Quaker who were
directors immediately prior thereto"
shall include only individuals who
were directors of Quaker at the
beginning of the 24 consecutive month
period preceding the date of such
merger or consolidation, or who were
new directors (other than any director
designated by a Person who has entered
into an agreement with Quaker to
effect a transaction described in
subparagraph (i), (iii)(B), (iv)(A) or
(iv)(B)) whose election by the Board,
or whose nomination for election by
Quaker's stockholders, was approved by
a vote of at least two-thirds (2/3) of
the directors before the beginning of
such period.
5
(b) An "officer" shall mean any employee of the
Company who is a Chief Executive Officer, President or Vice
President (including Senior and Executive Vice Presidents) of
Quaker, and any other Company employees designated by the
Committee as an officer for purposes of the Program. Prior to a
Change in Control of Quaker an officer shall be considered
eligible under the Program for so long as he holds such office
while the Program is in effect. After a Change in Control of
Quaker, an officer shall always be considered eligible under the
Program.
4. SEVERANCE BENEFITS.
(a) An eligible officer pursuant to paragraph 3 will
be provided the following severance benefits:
(1) Compensation - Payment to an officer shall be
made in the form of a single lump sum, or
equal monthly installments over the Severance
Period (as defined below), at the Committee's
sole discretion. With respect to an officer
with less than 10 years of service with the
Company (as defined below), the total amount
payable in either form shall equal: (i) 75%
of the officer's current annualized salary at
the time of termination (or, if greater, the
officer's annualized salary in effect
immediately prior to a Change in Control of
Quaker), plus (ii) the average of the
officer's two most recently fully paid
incentive bonuses (on an annualized basis, if
necessary) at the time of termination (or, if
greater, such bonuses paid prior to a Change
in Control of Quaker); and the Officer's
severance period shall be the nine month
period commencing with the date following
termination of employment (the "Severance
Period"). With respect to an officer with
ten or more years of service with the Company
(as defined below) the total amount payable
in either form shall equal: (A) 100% of the
officer's current annualized salary at the
time of termination (or, if greater, the
officer's annualized salary in effect
immediately prior to a Change in Control of
Quaker, plus (B) the average of the officer's
two most recent years' fully paid incentive
bonus at the time of termination (or, if
greater, such bonuses paid prior to a Change
in Control of Quaker); and the officer's
severance period shall be the one year period
commencing with the date following
termination of employment (the "Severance
Period"). The single sum payment shall be
made, or the monthly installments shall
commence, at the officer's usual payroll date
next following his date of termination.
6
"Years of service with the Company" shall
mean the employee's number of completed years
of service with the Company; including
service as a full time hourly employee, and
service rendered to an entity or organization
that was acquired by the Company.
(2) Welfare Benefits - During the officer's
Severance Period the officer shall be
entitled to continued eligibility for health,
medical, dental, life insurance, and
accidental death and dismemberment benefits
equivalent to those to which he was entitled
prior to his termination of employment
(regardless of the form of compensation
benefit to be provided under subparagraph
(1)). The officer shall not be required to
contribute more than the normal cost
(including those attributable to changes in
levels of benefits) for such benefits as
existed immediately prior to his termination
of employment. The Severance Period for
purposes of this subparagraph (2) shall not
be applied to reduce the benefit extension
period required by the Consolidated Omnibus
Budget Reconciliation Act of 1985 or any
amendment thereto.
(b) All benefits to be paid or provided pursuant to
subparagraph 4(a) shall be in addition to, and shall not be
reduced by, any other benefits payable or provided by separate
agreement with the officer, or plan or arrangement of the
Company, except as follows. If an officer is also eligible for
severance benefits to be paid and provided pursuant to the Quaker
Salaried Employees Compensation and Benefits Protection Plan,
(the "Plan"), the greater amount or longer severance period with
respect to compensation and welfare benefits, respectively, shall
be provided in accordance with and pursuant to the terms of the
Plan or Program as the case may be. In no event will an officer
be entitled to duplicative benefits under the Plan and the
Program.
(c) Any severance benefits payable under the Plan to
an officer who dies prior to full payment of such benefits shall
be paid to the officer's estate.
7
(d) Notwithstanding any other provision of the Plan,
severance benefits furnished hereunder shall be subject to the
following terms and conditions:
(1) If the making of severance benefit payments
pursuant to subparagraph 4(a) would subject
the officer to an excise tax under Section
4999 of the Internal Revenue Code of 1986, as
amended, or would result in the Company's
loss of a federal income tax deduction for
those payments (either of these consequences
is referred to individually herein as a "Tax
Penalty"), then such severance benefit
payments shall be reduced to the extent
necessary to avoid the imposition of such Tax
Penalty. The preceding sentence shall not
apply if such officer: (i) is entitled to a
tax reimbursement for such Tax Penalty under
any other agreement, plan or program of the
Company, or (ii) may disclaim any portion of
or all benefits payable under this or any
other agreement, plan or program of the
Company in order to avoid such Tax Penalty.
(2) If the officer and the Company shall disagree
as to whether the furnishing of a benefit
under the Plan would result in the imposition
of a Tax Penalty, the matter shall be
resolved by an opinion of counsel chosen by
the employee and reasonably satisfactory to
the Company. The Company shall pay the fees
and expenses of such counsel, and shall make
available to counsel such information as may
be reasonably necessary to prepare the
opinion.
5. NONASSIGNMENT. No benefits payable under the Plan shall
be subject in any manner to assignment, anticipation, alienation,
sale, transfer, pledge, encumbrance, or charge, and any such
attempted action shall be void and no such benefit shall be in
any manner liable for or subject to debts, contracts,
liabilities, engagements, or torts of any officer. If any
officer shall become bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge any
amount or benefit payable under the plan, then the Committee in
its discretion may hold or apply such benefit or any part thereof
to or for the benefit of such officer or his beneficiary, his
spouse, children, blood relatives, or other dependents, in such
manner and in such proportions as the administrator may consider
proper.
8
6. AMENDMENT AND TERMINATION. Quaker, by action of its
Board, or the Compensation Committee thereof, shall have the
right to amend or terminate this Plan; provided, however, that no
such amendment shall alter, modify, or rescind coverage or
benefits under the Program; and in no event shall the Plan be
amended or terminated during the five-year period following a
Change in Control of Quaker in a manner which would reduce
payments or benefit extension periods.
7. CONTINUED EMPLOYMENT. Neither the Program nor any of
its provisions shall be construed as giving any officer of the
Company a right to continue in the employ of the Company, or as a
limitation of the Company's right to discharge any of its
employees, with or without cause.
8. SUCCESSORS. The Program shall be binding upon any
successor of the Company whether by merger, consolidation, or
sale of all or substantially all of the Company's assets.
9. GOVERNING LAW. The Program shall be construed and
enforced according to the Employee Retirement Income Security Act
of 1974 ("ERISA"), and the laws of the State of Illinois, other
than its laws respecting choice of law, to the extent not pre-
empted by ERISA.
IN WITNESS WHEREOF, this Program is executed by a duly
authorized officer of Quaker.
THE QUAKER OATS COMPANY
August 18, 1995 By: S/Douglas J. Ralston
Its: Senior Vice President
9
Exhibit 10(k)(5)
FOURTH AMENDMENT
TO
THE QUAKER LONG TERM INCENTIVE PLAN OF 1990
WHEREAS, on November 8, 1989, the shareholders of The
Quaker Oats Company (the "Company") approved the adoption of The
Quaker Long Term Incentive Plan of 1990 (the "Plan"); and
WHEREAS, the Plan has previously been amended and it is
desirable to amend the Plan to provide additional flexibility for
Plan Participants in the timing of Option exercise during the
period following death or retirement; and
WHEREAS, the Board has authorized adoption of this
Fourth Amendment to the Plan, the shareholders of the Company
have approved this Amendment to the Plan and authorized the
officers of the Company to execute any documents in connection
therewith;
NOW THEREFORE, the Plan is hereby amended effective as
of November 9, 1994 by substituting the following sentence for
the first sentence of Section 13.4(b) thereof:
"If a Participant dies while an employee or
his employment is terminated because of
retirement, his Option shall terminate within a
period not exceeding five years following his
death or retirement, but not later than the date
the Option expires pursuant to its terms."
IN WITNESS WHEREOF, this Amendment is executed by a
duly authorized officer of the Company.
THE QUAKER OATS COMPANY
November 14, 1994 By: S/DOUGLAS J. RALSTON
Its Senior Vice President
Exhibit 10(k)(6)
FIFTH AMENDMENT
TO
THE QUAKER LONG TERM INCENTIVE PLAN OF 1990
WHEREAS, on November 9, 1994, the shareholders of The
Quaker Oats Company (the "Company") approved the adoption of The
Quaker Long Term Incentive Plan of 1990 (the "Plan"); and
WHEREAS, the Plan has been previously amended and it is
desirable to further amend the Plan to provide for additional
shares of the Company's common stock which may be issued or sold,
or for which options, stock appreciation rights or performance
shares may be granted under the Plan; and
WHEREAS, the Board has authorized adoption of this
Amendment to the Plan, the shareholders of the Company have
approved this Amendment to the Plan, and the Board has authorized
the officers of the Company to execute any documents in
connection therewith upon such approval;
NOW THEREFORE, the Plan is hereby amended effective as
of November 9, 1994 by substituting "13,000,000" for "9,000,000"
where it appears in amended Section 3.1 thereof.
IN WITNESS WHEREOF, this Amendment is executed by a
duly authorized officer of the Company.
THE QUAKER OATS COMPANY
By: S/DOUGLAS J. RALSTON
Its Senior Vice President
January 24, 1995
EXHIBIT 11
THE QUAKER OATS COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Calculation of Fully Diluted Earnings Per Share
June 30, June 30, June 30,
Dollars in Millions (Except Per Share Data) 1995 1994 1993
Income Before Cumulative Effect of
Accounting Changes $ 806.1 $ 231.5 $ 286.8
Less: Adjustments attributable to
conversion of ESOP
Convertible Preferred Stock (1.1) (1.5) (1.9)
Income Before Cumulative Effect of
Accounting Changes Used for
Fully Diluted Calculation 805.0 230.0 284.9
Cumulative Effect of Accounting
Changes-net of tax (4.1) --- (115.5)
Net Income Used for Fully
Diluted Calculation $ 800.9 $ 230.0 $ 169.4
Shares in Thousands
Average Number of Common
Shares Outstanding 133,763 135,236 143,948
Plus Dilutive Securities:
Stock Options 1,575 1,716 2,138
ESOP Convertible Preferred Stock 2,631 2,676 2,708
Average Shares Outstanding Used for
Fully Diluted Calculation 137,969 139,628 148,794
Fully Diluted Earnings Per Share
Before Cumulative Effect
Accounting Changes $ 5.83 $ 1.65 $ 1.91
Fully Diluted Cumulative Effect of
Accounting Changes (0.03) --- (0.77)
Fully Diluted Earnings Per Share $ 5.80 $ 1.65 $ 1.14
Exhibit 12
THE QUAKER OATS COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions) Year Ended June 30
1995 1994 1993
Earnings:
Income Before Income Taxes
and Cumulative Effect of
Accounting Changes $ 1,359.9 $ 378.7 $ 467.6
Add Fixed Charges, excluding
amount capitalized 132.4 109.9 80.3
Earnings $ 1,492.3 $ 488.6 $ 547.9
Fixed Charges (including amount
capitalized):
Interest on Indebtedness $ 122.7 $ 100.2 $ 68.9
Portion of rents representative
of the interest factor 11.7 11.0 11.4
Fixed Charges $ 134.4 $ 111.2 $ 80.3
Ratio of Earnings to Fixed Charges (a) 11.10 4.39 6.82
(a) For purposes of computing the ratio of earnings to fixed
charges, earnings represent income from continuing operations
before income taxes and cumulative effect of accounting changes
plus fixed charges (net of capitalized interest). Fixed charges
represent interest (whether expensed or capitalized) and one-
third (the portion deemed representative of the interest factor)
of rents.
Exhibit 13.1
Management's Discussion and Analysis
Fiscal 1995 Highlights
Fiscal 1995 was a year when the
Company significantly changed its
portfolio of businesses through
acquisitions and divestitures, a process
which is substantially complete.
Significant portfolio changes in fiscal
1995 included:
Acquisitions Effective Dates
Arnie's bagels 8/94
Adria pasta 11/94
Snapple beverages 12/94
Australian oat mill 12/94
Nile Spice variety meals-in-a-cup 1/95
Divestitures
Dutch honey 2/95
North American pet food 3/95
European pet food 4/95
Mexican chocolate 5/95
U.S. bean and chili 6/95
See Note 2 for further discussion of
businesses acquired and divested
during fiscal 1995.
The portfolio changes increase the
seasonality of the Company's earnings,
putting a higher proportion of earnings
in the April through September period
when the consumption of beverage
products is greatest. To capture the
results of a full beverage season in a
single fiscal-year period, the Company
will change its fiscal year to align with
the calendar year, beginning January 1,
1996.
While sales growth was strong across
many of the ongoing U.S. businesses in
fiscal 1995, operating results were
significantly weaker than anticipated. To
address this problem, the Company
realigned its management and simplified
its organizational structure to drive
profitable growth. To address the
immediate business challenges facing
our beverage business, Philip A.
Marineau, President and Chief
Operating Officer, is concentrating his
attention on that segment of our
portfolio. Major initiatives have also
been launched to improve the
effectiveness of trade and
merchandising spending and the
efficiency of the Company's supply
chain.
The acquisition of Snapple beverages is
the largest in the Company's history. Its
performance to date has fallen short of
expectations. Since the December
acquisition, the Company has worked to
upgrade Snapple beverage
manufacturing standards, integrate
order-entry and accounting systems and
is currently working on improving the
efficiency and effectiveness of
advertising and merchandising (A&M)
programs and distributor
communications. These activities were
neither sufficient nor quick enough to
allow Snapple beverages to make a
strong start in the calendar 1995
beverage season. Snapple beverages
had an operating loss (which includes
intangible amortization) in the seven
months since its acquisition.
The Company continues to believe that
Snapple is a strong brand and is
currently focusing on strengthening
Snapple beverage business results.
The Company is trying to improve the
distribution network by building stronger
communication links with distributors, a
number of whom have exclusive
distribution rights and long-term
contracts. The Company is expanding
product availability by investing in
additional cold-channel merchandising
equipment and adding to the innovation
of the brand by introducing more
convenient packaging and new flavors
while rationalizing the line of flavors.
With the Company's more focused
portfolio and as a result of the
divestitures, the size of the Company's
international division is greatly reduced
with European operations now
representing a smaller portion of the
Company's overall business. The
Company, however, is continuing to
expand its beverage and grain-based
products in the Latin America and
Asia/Pacific regions to create long-term
opportunities for profitable growth. In
the short term, this expansion negatively
affects profitability.
Fiscal 1995 Compared with Fiscal 1994
Operating Results
Consolidated net sales for fiscal 1995
were $6.37 billion, up 7 percent from
fiscal 1994. The increase in net sales
reflects a 10 percent worldwide increase
in volume, including acquisitions and
divestitures, and a favorable impact of
translating European currencies into
U.S. dollars. Sales for fiscal 1995 would
have been $96.7 million lower if
European exchange rates had remained
stable with the prior year. Price
increases did not have a significant
impact on sales. Businesses divested
during the year contributed $1.32 billion
in sales.
U.S. and Canadian Grocery Products
sales increased 9 percent to $4.62
billion on a volume increase of 12
percent. Sales and volume growth were
driven mainly by the acquisition of
Snapple beverages in December 1994
and by increases in Gatorade thirst
quencher, food service and grain-based
snacks, partly reduced by decreases in
hot cereals and the divestitures of the
pet food and bean and chili businesses,
which were completed in March 1995
and in June 1995, respectively.
Gatorade thirst quencher volume grew 7
percent despite the fact that two major
soft drink competitors broadened the
distribution of their sports beverages
throughout the United States, which is
currently Gatorade thirst quencher's
largest market.
27
Hot cereals sales were 10 percent lower than
in the prior year primarily due to continued
volume weakness caused by warm winter
weather and increased competition from
private-label products. The Company is
implementing marketing plans for the
upcoming hot cereal season to improve
profitability.
International Grocery Products sales
increased 2 percent to $1.74 billion.
Volume increased 6 percent, primarily in
Gatorade thirst quencher throughout the
Pacific and Latin America. Volume also
increased in Brazil due to the November
1994 acquisition of the Adria pasta
business and the positive effects of the
new economic plan in that country.
These increases more than offset
declines due to the divestitures of the
European pet food and Mexican
chocolate businesses in the fourth
quarter of fiscal 1995.
Gross profit margins decreased to 46.9
percent from 50.9 percent in the prior
year primarily due to the inclusion of the
Snapple beverage business. Because of
its use of external manufacturing and
distribution networks, Snapple
beverages gross profit margin is
inherently lower than the Company's
historical average. In addition,
packaging costs in the United States
reduced Gatorade thirst quencher gross
profit margin while raw coffee bean
price and manufacturing cost increases
reduced the gross profit margin in the
food service business.
Selling, general and administrative
(SG&A) expenses rose 7 percent to
$2.60 billion due mainly to a 6 percent
increase in A&M expenses. A&M
expenses were 26.3 percent of net
sales in fiscal 1995, down slightly from
26.6 percent in fiscal 1994.
Significant spending increases occurred
within the U.S. Gatorade thirst quencher
business as the Company focused on
growing in a highly competitive market,
and in the cereals, Aunt Jemima,
Golden Grain and Celeste businesses
where merchandising spending
increased. As a result, profits declined
in each of these product lines. The
Company is taking steps to improve the
efficiency and effectiveness of
merchandising spending across its U.S.
businesses. SG&A expenses for fiscal
1995 included a provision of $29.0
million for estimated costs related to a
1984 trademark lawsuit involving
Gatorade thirst quencher advertising.
See Note 18 to the consolidated
financial statements for a detailed
discussion of this litigation.
Consolidated operating income was
$1.55 billion compared to $537.2 million
last year. Excluding gains on
divestitures and restructuring charges in
both years, operating income was
$456.0 million compared to $645.8
million. On that same basis, U.S. and
Canadian Grocery Products operating
income was $417.6 million versus
$543.8 million in fiscal 1994. The
decrease of 23 percent reflects
significant profit declines due to the
divestitures of the pet food and bean
and chili businesses and due to
significant spending increases as
discussed above. These profit declines
were partially offset by the increase in
operating income in the grain-based
snacks business.
International Grocery Products
operating income was $575.6 million
compared to $106.3 million last year.
Excluding gains on divestitures and
restructuring charges in both years,
operating income decreased to $38.4
million from $102.0 million in the prior
year. The decrease was mainly due to
lower operating income in Brazil, which
was primarily caused by the effects of
reduced inflation and currency changes.
However, net financing costs in that
country declined to a level that more
than offset the decline in operating
income. In addition, operating income
declined due to the divestitures of the
European pet food and Mexican
chocolate businesses as well as due to
declines in the Italian oils business and
in the Pacific region where the
Company is expanding Gatorade thirst
quencher and grain-based products.
Operating losses decreased significantly
in European Gatorade thirst quencher
compared to the prior year as funding
increased for expansion of that business
into the Asia/Pacific region.
Gains on Divestitures
In fiscal 1995, the Company realized
gains on divestitures of: $513.0 million
on the sale of the North American pet
food business; $487.2 million on the
sale of the European pet food business;
$91.2 million on the sale of the bean
and chili businesses; $74.5 million on
the sale of the Mexican chocolate
business; and $4.9 million on the sale of
the Dutch honey business.
See the Fiscal 1994 Compared with
Fiscal 1993 section for discussion of
fiscal 1994 gains on divestitures.
28
Restructuring Charges
In fiscal 1995, the Company announced
cost-reduction and realignment activities
in order to address the changes in its
portfolio and to allow it to quickly and
effectively respond to the needs of trade
customers and consumers. As
described in Note 3 to the consolidated
financial statements, these changes
primarily include the realignment of the
corporate, shared services and
business unit structures, the European
cereals business and the U.S.
distribution center network. As a result,
the Company recorded a restructuring
charge of $76.5 million in the fourth
quarter. The restructuring charge
associated with the cost-reduction and
realignment activities includes $41.0
million in cash expenses for severance
and termination benefits for the
elimination of approximately 850
positions. Non-cash asset write-offs
related to European cereals
manufacturing, the U.S. distribution
center network and other assets are
$19.0 million. Cash expenses for losses
on headquarters and distribution center
leases and other associated costs are
$16.5 million. Estimated savings from
the fiscal 1995 cost-reduction and
realignment activities are expected to be
about $50 million annually beginning in
calendar 1996. Approximately 90
percent of the annual savings will be in
cash.
See the Fiscal 1994 Compared with
Fiscal 1993 section for discussion of
fiscal 1994 restructuring charges.
Interest, Foreign Exchange and Income Taxes
Net financing costs (interest and foreign
exchange) were $114.9 million, a
decrease of $1.0 million versus the prior
year. This reduction resulted mainly
from lower net financing costs in Brazil
compared to the prior year, which more
than offset the increase in interest
expense resulting from borrowing
related to the Company's significant
acquisition activities. Through various
hedging strategies, the Company will
continue to try to mitigate the effects of
foreign currency exchange fluctuations
on its operating results, except in areas
like Brazil where hedging opportunities
are limited and costly. See Note 17 to
the consolidated financial statements for
further discussion of foreign currency
hedging.
The effective tax rate for fiscal 1995 was
40.7 percent compared to 38.9 percent
in fiscal 1994. Excluding the effects of
certain gains on divestitures and
restructuring charges from the prior
year, the effective tax rate for fiscal
1994 was 39.4 percent. The increase
resulted mainly from non-deductible
amortization of intangibles. The
Company's effective tax rate will
increase in the future as it will incur a
full period's effect of non-deductible
intangible asset amortization from the
acquisition of Snapple beverages. The
Company has evaluated its deferred tax
assets and believes that future taxable
income will be sufficient to realize a
majority of these assets. A valuation
allowance has been provided for that
portion of the deferred tax assets that is
not expected to be realized.
Fiscal 1994 Compared with Fiscal 1993
Operating Results
Consolidated net sales for fiscal 1994
were $5.95 billion, up 4 percent from
fiscal 1993. The increase in net sales
reflects a 4 percent worldwide increase
in volume and an improved product mix.
Significantly offsetting higher sales was
the negative impact of translating
European sales into U.S. dollars. Sales
for fiscal 1994 would have been $140.1
million higher if European exchange
rates had remained stable with the prior
year. Price increases did not have a
significant impact on sales.
U.S. and Canadian Grocery Products
sales increased 8 percent to $4.25
billion on a volume increase of 6
percent. Volume growth for Gatorade
thirst quencher, ready-to-eat cereals,
grain-based snacks and Golden Grain
products more than offset decreases in
food service volume. International
Grocery Products sales decreased 5
percent to $1.70 billion, although overall
volume increased 1 percent. Weaker
European currencies and lower volume
of European pet foods, cereals and oils
contributed to the decline.
Gross profit margins increased to 50.9
percent from 49.9 percent in the prior
year primarily due to an improved
product mix and cost-containment
initiatives in the United States, which
more than offset commodity and
distribution cost increases. SG&A
expenses rose 5 percent to $2.43 billion
due mainly to an 8 percent increase in
A&M expenses. A&M expenses were
26.6 percent of net sales in fiscal 1994,
up from 25.7 percent in fiscal 1993.
Consolidated operating income was
$537.2 million in fiscal 1994 versus
$575.2 million in fiscal 1993. Excluding
gains on divestitures and restructuring
charges in both years, operating income
was $645.8 million versus $595.7
million. On that same basis, U.S. and
Canadian Grocery Products fiscal 1994
operating income was $543.8 million
versus $485.6 million in fiscal 1993.
The 12 percent increase reflected
increases from the Gatorade thirst
quencher, ready-to-eat cereals and Aunt
Jemima businesses, partially offset by
decreases in food service.
International Grocery Products fiscal
1994 operating income decreased to
$102.0 million versus $110.1 million in
fiscal 1993, excluding gains on
divestitures and restructuring charges in
both years. European operating income
declined $14.9 million due mainly to
volume declines in the pet food and
cereals businesses.
29
Latin American and Pacific operating income
increased $6.8 million primarily due to volume
increases in Mexico and the hyper-
inflationary effects of translating Brazil's
results into U.S. dollars. The operating
income improvement in Brazil was more
than offset by higher net financing costs
in that country.
Gains on Divestitures
In fiscal 1994, the Company realized a
$9.8 million gain on the sale of a
Venezuelan detergent additive
business. In fiscal 1993, the Company
realized a $17.4 million gain on the sale
of two Italian businesses and a $10.4
million gain on the sale of a business in
the United Kingdom.
Restructuring Charges
In fiscal 1994, the Company recorded a
restructuring charge of $118.4 million to
eliminate positions at its headquarters
and research and development facilities,
to realign its U.S. sales force, to
consolidate manufacturing in its bean
and chili, rice cake and Aunt Jemima
syrup product lines and to close a
Canadian pet food facility, as well as to
pursue other cost-reduction initiatives.
These changes eliminated
approximately 1,500 positions, resulting
in severance and termination benefits
totaling $44.7 million. Charges
associated with plant consolidations and
sales office closures totaled $38.3
million, of which 80 percent represents
asset write-offs. Product-line
discontinuations resulted in charges of
$35.4 million, of which 90 percent
represents asset write-offs. Cash
outlays related to severance,
termination benefits and other expenses
occurred mostly in fiscal 1995 and were
funded through operating cash flows.
Savings realized were consistent with
expectations and cash outlays and
asset write-offs have been consistent
with amounts originally provided.
In fiscal 1993, operating income
included a charge of $38.6 million for
the consolidation of production facilities
at a U.S. pet food plant and a charge of
$9.7 million for European cost-reduction
programs. With the divestitures of the
North American and European pet food
businesses during fiscal 1995, there are
no remaining reserves and no recurring
savings to be realized from these
restructuring activities.
See Note 3 to the consolidated financial
statements for further discussion of
restructuring charges.
Interest, Foreign Exchange and Income Taxes
Net interest expense of $89.7 million
increased $34.6 million versus the prior
year. An increase of $22.1 million came
from higher levels of local currency
borrowing in Brazil at significantly higher
interest rates. In addition, the Company
issued $200.0 million of medium-term
notes and increased commercial paper
borrowings during the year, which
accounted for most of the remaining
increase in interest expense. The
foreign exchange loss increased $11.1
million from the prior year, primarily
reflecting small losses on European
currency hedges in fiscal 1994 versus
gains in fiscal 1993.
The effective tax rate for fiscal 1994 was
38.9 percent compared to 38.7 percent
in fiscal 1993. Excluding the effects of
certain gains on divestitures and
restructuring charges in both years, the
effective tax rate increased to 39.4
percent from 38.4 percent. The higher
U.S. statutory tax rate, including the
legislated retroactive adjustment to
January 1, 1993, caused the overall rate
to increase.
Liquidity and Capital Resources
Short-term and long-term debt (total
debt) increased $635.8 million to $1.65
billion from June 30, 1994 to June 30,
1995 and increased $206.7 million to
$1.02 billion from June 30, 1993 to
June 30, 1994. On December 6, 1994, the
Company acquired Snapple Beverage Corp. for
a tender offer price of $1.7 billion. The
acquisition was initially financed with
commercial paper borrowings. During
fiscal 1995, the Company divested
businesses for approximately $1.7
billion. The after-tax proceeds on the
fiscal 1995 divestitures of $1.25 billion
were used to reduce the commercial
paper borrowings. The total debt-to-total
capitalization ratio was 59.0 percent,
68.8 percent and 59.0 percent as of
June 30, 1995, 1994 and 1993,
respectively.
The Company's revolving credit facilities
now consist of a $600.0 million annually
extendible revolving credit facility
expiring November 1999 and a $900.0
million 364-day annually extendible
revolving credit facility which may, at the
Company's option, be converted into a
two-year term loan. The Company has
determined that the aggregate amount
of revolving credit facilities is in excess
of anticipated short-term financing
needs. The Company expects to
reduce the aggregate amount when the
facilities are renewed and extended in
November 1995.
30
The increase in debt, substantial
change in the mix of the Company's
portfolio to businesses with greater
seasonality, and disappointing operating
income from ongoing businesses
reduced the Company's free cash flow.
As a result, the Company's debt ratings
were lowered during fiscal 1995. The
credit rating agencies cited reduced
financial flexibility, lower profitability and
cash flow, and greater business risk.
The Company's long-term debt and
commercial paper ratings (which are
currently under review) are as follows:
Standard & Poor's, A and A1; Moody's,
A3 and P2; and Fitch's A and F1,
respectively. All three credit rating
agencies placed the Company's credit
rating on "watch" or "review" in July
1995 following the preliminary
announcement of lower than expected
fiscal 1995 operating results.
Net cash provided by operating
activities was $475.5 million, $450.8
million and $558.2 million during fiscal
1995, 1994 and 1993, respectively. The
decrease in net cash provided by
operating activities in fiscal 1994
compared to fiscal 1993 resulted mainly
from changes in working capital items,
primarily accounts receivable and
inventories. The Company utilized cash
flow from operating activities, cash
proceeds from the divestitures and debt
financing to cover fiscal 1995 capital
expenditures, cash dividends and the
purchase of Snapple Beverage Corp.
Capital expenditures for fiscal 1995,
1994 and 1993 were $275.5 million,
$175.1 million and $172.3 million. The
Company expects that its future capital
expenditures and cash dividends will be
financed through a combination of cash
flow from operating activities and debt
financing. Capital expenditures are
expected to increase in the near term as
the Company has plans to invest in the
worldwide expansion of production
capacity for beverages, particularly in
China, and for grain-based products in
the United States and Canada.
In April 1995, the Company filed a
prospectus supplement with the
Securities and Exchange Commission
(SEC) for the intended issuance of
$400.0 million of medium-term notes,
under a shelf registration covering
$600.0 million of debt securities filed in
fiscal 1990. As of June 30, 1995, the
Company has issued $212.0 million in
medium-term notes. The consolidated
balance sheet as of June 30, 1995
includes the reclassification of $188.0
million of short-term debt to long-term
debt, reflecting the Company's intent
and ability to issue the additional
medium-term notes in the near future.
During the first quarter of fiscal 1995,
0.6 million shares of the Company's
outstanding common stock were
repurchased for $22.5 million under a
10 million share repurchase program
announced in August 1993. The
Company has not been active in its
share repurchase program since August
1994.
Accounting and Fiscal Year-end Changes
Effective July 1, 1994, the Company
adopted Financial Accounting
Standards Board (FASB) Statement
#112, "Employers' Accounting for
Postemployment Benefits." The
cumulative effect of adoption was a $4.1
million after-tax charge in the first
quarter of fiscal 1995. The adoption of
this statement did not have a material
effect on operating results or cash flows
in fiscal 1995, nor is it expected to have
a material effect in future years.
Included in the net income of fiscal 1993
was the cumulative effect of adopting
FASB Statement #106, "Employers'
Accounting for Postretirement Benefits
Other Than Pensions" and FASB
Statement #109, "Accounting for Income
Taxes." The combined cumulative
effect of adoption was an after-tax
charge of $115.5 million. See Notes 12
and 16 to the consolidated financial
statements for further discussion.
Effective the calendar year beginning
January 1, 1996, the Company will
change from a fiscal year end of June
30 to December 31. A six-month fiscal
transition period from July 1, 1995
through December 31, 1995 will
precede the start of the new calendar-
year cycle.
31
Exhibit 13.2
<TABLE>
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Eleven-Year Selected
Financial Data Year Ended June 30 1995 1994
<S> <C> <C>
Operating Results(a)(b)(c)(d)(e)(f)
Net sales $6,365.2 $5,955.0
Gross profit 2,983.7 3,028.8
Income from continuing operations before
income taxes and cumulative effect
of accounting changes 1,359.9 378.7
Provision for income taxes 553.8 147.2
Income from continuing operations before
cumulative effect of accounting changes 806.1 231.5
(Loss) income from discontinued operations-net of tax - -
Income from the disposal of discontinued
operations-net of tax - -
Cumulative effect of accounting changes-net of tax (4.1) -
Net income $ 802.0 $ 231.5
Per common share:
Income from continuing operations before cumulative
effect of accounting changes $ 6.00 $ 1.68
(Loss) income from discontinued operations - -
Income from the disposal of discontinued operations - -
Cumulative effect of accounting changes (0.03) -
Net income $ 5.97 $ 1.68
Dividends declared:
Common stock $ 150.8 $ 140.6
Per common share $ 1.14 $ 1.06
Convertible preferred and redeemable preference stock $ 4.0 $ 4.0
Average number of common shares
outstanding (in thousands) 133,763 135,236
<FN>
(a)Fiscal 1995 results include pretax gains of $1.17 billion, or $5.20 per
share, for business divestitures and a pretax restructuring charge of $76.5
million, or $.35 per share, for cost-reduction and realignment activities.
(b)Fiscal 1994 results include a pretax restructuring charge of
$118.4 million, or $.55 per share, for workforce reductions,
plant consolidations and product discontinuations and a pretax gain of
$9.8 million, or $.07 per share, for the sale of a business in Venezuela.
(c)See Management's Discussion and Analysis for further discussion of fiscal
1993 through 1995 gains on divestitures and restructuring charges.
32
<CAPTION>
Dollars in Millions (Except Per Share Data)
1993 1992 1991 1990 1989 1988 1987 1986 1985
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$5,730.6 $5,576.4 $5,491.2 $ 5,030.6 $4,879.4 $4,508.0 $3,823.9 $2,968.6 $2,925.6
2,860.6 2,745.3 2,652.7 2,350.3 2,229.0 2,114.6 1,750.7 1,298.7 1,174.7
467.6 421.5 411.5 382.4 239.1 314.6 295.9 255.8 238.8
180.8 173.9 175.7 153.5 90.2 118.1 141.3 113.4 110.3
286.8 247.6 235.8 228.9 148.9 196.5 154.6 142.4 128.5
- - (30.0) (59.9) 54.1 59.2 33.5 37.2 28.1
- - - - - - 55.8 - -
(115.5) - - - - - - - -
$ 171.3 $ 247.6 $ 205.8 $ 169.0 $ 203.0 $ 255.7 $ 243.9 $ 179.6 $ 156.6
$ 1.96 $ 1.63 $ 1.53 $ 1.47 $ 0.94 $ 1.23 $ 0.98 $ 0.89 $ 0.77
- - (0.20) (0.40) 0.34 0.37 0.22 0.23 0.17
- - - - - - 0.35 - -
(0.79) - - - - - - - -
$ 1.17 $ 1.63 $ 1.33 $ 1.07 $ 1.28 $ 1.60 $ 1.55 $ 1.12 $ 0.94
$ 136.1 $ 128.6 $ 118.7 $ 106.9 $ 95.2 $ 79.9 $ 63.2 $ 55.3 $ 50.5
$ 0.96 $ 0.86 $ 0.78 $ 0.70 $ 0.60 $ 0.50 $ 0.40 $ 0.35 $ 0.31
$ 4.2 $ 4.2 $ 4.3 $ 3.6 - - - $ 2.3 $ 3.6
143,948 149,762 151,808 153,074 158,614 159,670 157,624 158,120 162,984
<FN>
(d)See Notes 12 and 16 to the consolidated financial statements for discussion of fiscal 1993 and 1995
accounting changes.
(e)Fiscal 1989 results include a pretax restructuring charge of $124.3 million, or $.50 per share, for
plant consolidations and overhead reductions and a pretax charge of $25.6 million, or $.10 per share,
for a change to the LIFO method of accounting for the majority of U.S. Grocery Products inventories.
(f)Per share data and average number of common shares outstanding reflect the fiscal 1995 two-for-one
stock split-up.
33
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Eleven-Year Selected
Financial Data Year Ended June 30 1995 1994
<S> <C> <C>
Financial Statistics(a)(b)
Current ratio 0.7 1.0
Working capital $ (496.3) $ (5.5)
Property, plant and equipment-net $ 1,113.4 $ 1,214.2
Depreciation expense $ 125.4 $ 133.3
Total assets $ 4,826.9 $ 3,043.3
Long-term debt $ 1,103.1 $ 759.5
Convertible preferred stock (net of deferred
compensation) and redeemable preference stock $ 18.8 $ 15.3
Common shareholders' equity $ 1,128.8 $ 445.8
Net cash provided by operating activities $ 475.5 $ 450.8
Operating return on assets(c) 42.3% 19.9%
Gross profit as a percentage of sales 46.9% 50.9%
Advertising and merchandising as a percentage of sales 26.3% 26.6%
Income from continuing operations before cumulative
effect of accounting changes as a percentage of sales 12.7% 3.9%
Total debt-to-total capitalization ratio(d) 59.0% 68.8%
Common dividends as a percentage of income available
for common shares (excluding cumulative effect of
accounting changes) 19.0% 63.1%
Number of common shareholders 29,148 28,197
Number of employees worldwide 17,300 20,000
Market price range of common stock-High(e) $ 42 1/2 $ 41
-Low(e) $ 29 3/4 $30 15/16
<FN>
(a)Income-related statistics exclude the results of businesses reported as
discontinued operations. Balance sheet amounts and related statistics have not
been restated for discontinued operations, other than Fisher-Price, due to
materiality.
(b)Effective fiscal 1991, common shareholders' equity and number of employees
worldwide were reduced as a result of the Fisher-Price spin-off.
34
<CAPTION>
Dollars in Millions (Except Per Share Data)
1993 1992 1991 1990 1989 1988 1987 1986 1985
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1.0 1.2 1.3 1.3 1.8 1.4 1.4 1.4 1.7
$ (37.5) $ 168.7 $ 317.8 $ 342.8 $ 695.8 $ 417.5 $ 507.9 $ 296.8 $ 400.7
$ 1,228.2 $ 1,273.3 $ 1,232.7 $ 1,154.1 $ 959.6 $ 922.5 $ 898.6 $ 691.0 $ 616.5
$ 129.9 $ 129.7 $ 125.2 $ 103.5 $ 94.2 $ 88.3 $ 81.6 $ 59.1 $ 56.3
$ 2,815.9 $ 3,039.9 $ 3,060.5 $ 3,377.4 $ 3,125.9 $ 2,886.1 $ 3,136.5 $ 1,944.5 $ 1,760.3
$ 632.6 $ 688.7 $ 701.2 $ 740.3 $ 766.8 $ 299.1 $ 527.7 $ 160.9 $ 168.2
$ 11.4 $ 7.9 $ 4.8 $ 1.8 - - - - $ 37.9
$ 551.1 $ 842.1 $ 901.0 $ 1,017.5 $ 1,137.1 $ 1,251.1 $ 1,087.5 $ 831.7 $ 786.9
$ 558.2 $ 581.3 $ 543.2 $ 460.0 $ 408.3 $ 320.8 $ 375.1 $ 266.9 $ 295.5
21.1% 18.9% 18.8% 20.4% 14.4% 18.3% 22.1% 25.8% 24.5%
49.9% 49.2% 48.3% 46.7% 45.7% 46.9% 45.8% 43.7% 40.2%
25.7% 26.0% 25.6% 23.8% 23.4% 24.9% 22.9% 21.7% 19.4%
5.0% 4.4% 4.3% 4.6% 3.1% 4.4% 4.0% 4.8% 4.4%
59.0% 48.7% 47.4% 52.3% 44.2% 33.8% 50.2% 35.7% 28.9%
48.9% 52.9% 58.9% 65.1% 46.9% 31.3% 25.9% 31.2% 33.0%
33,154 33,580 33,603 33,859 34,347 34,231 32,358 27,068 26,670
20,200 21,100 20,900 28,200 31,700 31,300 30,800 29,500 28,700
$ 38 1/2 $ 37 7/8 $ 32 7/16 $ 34 7/16 $ 33 1/8 $28 11/16 $28 13/16 $ 19 7/8 $ 13 1/16
$ 28 1/16 $ 25 1/8 $ 20 7/8 $ 22 9/16 $ 21 5/16 $ 15 1/2 $ 16 5/16 $ 11 3/4 $ 7 3/8
<FN>
(c)Operating income divided by average identifiable assets of U.S. and Canadian and International Grocery
Products.
(d)Total debt divided by total debt plus total shareholders' equity including convertible preferred stock
(net of deferred compensation) and redeemable preference stock.
(e)Per share data reflect the fiscal 1995 two-for-one stock split-up.
35
THE QUAKER OATS COMPANY AND SUBSIDIARIES
Dollars in Millions (Except Per Share Data)
Consolidated
Statements of Income Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Net Sales $6,365.2 $5,955.0 $5,730.6
Cost of goods sold 3,381.5 2,926.2 2,870.0
Gross profit 2,983.7 3,028.8 2,860.6
Selling, general and administrative expenses 2,603.2 2,425.6 2,302.3
Gains on divestitures and restructuring charges-net (1,094.3) 108.6 20.5
Interest expense-net of $6.3, $8.9 and $10.5
interest income, respectively 110.7 89.7 55.1
Foreign exchange loss-net 4.2 26.2 15.1
Income Before Income Taxes
and Cumulative Effect of Accounting Changes 1,359.9 378.7 467.6
Provision for income taxes 553.8 147.2 180.8
Income Before Cumulative Effect of Accounting
Changes 806.1 231.5 286.8
Cumulative effect of accounting changes-net of tax (4.1) - (115.5)
Net Income 802.0 231.5 171.3
Preferred dividends-net of tax 4.0 4.0 4.2
Net Income Available for Common $ 798.0 $ 227.5 $ 167.1
Per Common Share:
Income Before Cumulative Effect of Accounting
Changes $ 6.00 $ 1.68 $ 1.96
Cumulative effect of accounting changes (0.03) - (0.79)
Net Income $ 5.97 $ 1.68 $ 1.17
Dividends declared $ 1.14 $ 1.06 $ 0.96
Average Number of Common Shares Outstanding (in
thousands) 133,763 135,236 143,948
<FN>
See accompanying notes to the consolidated financial statements.
36
Dollars in Millions
<CAPTION>
Consolidated
Statements of
Cash Flow Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 802.0 $ 231.5 $ 171.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting changes 4.1 - 115.5
Depreciation and amortization 191.4 171.2 156.9
Deferred income taxes 17.8 (7.7) (46.4)
Gains on divestitures-net of tax of
$476.2 in 1995 (694.6) (9.8) (27.8)
Restructuring charges 76.5 118.4 48.3
Loss on disposition of property and
equipment 22.0 15.0 23.8
(Increase) decrease in trade accounts
receivable (70.8) (77.7) 59.1
(Increase) decrease in inventories (56.5) (67.6) 41.9
(Increase) in other current assets (53.4) (56.3) (25.8)
Increase (decrease) in trade accounts
payable 83.9 44.1 (7.6)
Increase (decrease) in other current
liabilities 52.1 6.6 (6.4)
Change in deferred compensation 17.2 15.6 11.0
Other items 83.8 67.5 44.4
Net Cash Provided by Operating Activities 475.5 450.8 558.2
Cash Flows from Investing Activities:
Additions to property, plant and equipment (275.5) (175.1) (172.3)
Business acquisitions (1,876.5) (96.3) (40.4)
Businesses divestitures-net of tax of
$476.2 in 1995 1,253.4 14.2 41.6
Change in other assets (4.0) (6.4) (25.6)
Net Cash Used in Investing Activities (902.6) (263.6) (196.7)
Cash Flows from Financing Activities:
Cash dividends (154.8) (144.6) (140.3)
Change in short-term debt 216.4 83.3 67.0
Proceeds from long-term debt 213.3 222.2 0.5
Reduction of long-term debt (89.3) (100.6) (59.0)
Proceeds from short-term debt to be refinanced 188.0 - -
Issuance of common treasury stock 23.0 11.8 23.3
Repurchases of common stock (22.5) (214.9) (323.1)
Repurchases of preferred stock (2.4) (1.2) (1.1)
Net Cash Provided by (Used) in
Financing Activities 371.7 (144.0) (432.7)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 16.8 36.2 37.0
Net (Decrease) Increase in Cash and Cash
Equivalents (38.6) 79.4 (34.2)
Cash and Cash Equivalents-Beginning of Year 140.4 61.0 95.2
Cash and Cash Equivalents-End of Year $ 101.8 $ 140.4 $ 61.0
<FN>
See accompanying notes to the consolidated financial statements.
37
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Consolidated
Balance Sheets June 30 1995 1994 1993
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 101.8 $ 140.4 $ 61.0
Trade accounts receivable-net of allowances 546.8 509.4 478.9
Inventories
Finished goods 267.4 266.5 241.5
Grains and raw materials 94.4 78.8 73.1
Packaging materials and supplies 44.2 40.2 39.4
Total inventories 406.0 385.5 354.0
Other current assets 262.0 218.3 173.7
Total Current Assets 1,316.6 1,253.6 1,067.6
Property, Plant and Equipment
Land 25.0 30.6 28.7
Buildings and improvements 376.0 455.0 441.5
Machinery and equipment 1,442.7 1,640.3 1,589.0
Property, plant and equipment 1,843.7 2,125.9 2,059.2
Less accumulated depreciation 730.3 911.7 831.0
Property-Net 1,113.4 1,214.2 1,228.2
Intangible Assets-Net of Amortization 2,311.1 493.4 431.3
Other Assets 85.8 82.1 88.8
Total Assets $4,826.9 $3,043.3 $2,815.9
<FN>
See accompanying notes to the consolidated financial statements.
38
<CAPTION> Dollars in Millions
June 30 1995 1994 1993
<S> <C> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 510.1 $ 211.3 $ 128.0
Current portion of long-term debt 38.8 45.4 48.9
Trade accounts payable 423.8 406.3 391.6
Accrued payroll, pension and bonus 123.8 158.9 161.3
Accrued advertising and merchandising 165.0 149.6 130.6
Income taxes payable 180.1 40.6 33.7
Other accrued liabilities 371.3 247.0 211.0
Total Current Liabilities 1,812.9 1,259.1 1,105.1
Long-term Debt 1,103.1 759.5 632.6
Other Liabilities 530.0 481.4 426.2
Deferred Income Taxes 233.3 82.2 89.5
Preferred Stock, Series B, no par value,
authorized 1,750,000 shares; issued
1,282,051 of $5.46 cumulative convertible
shares (liquidating preference of $78
per share) 100.0 100.0 100.0
Deferred Compensation (74.9) (80.8) (85.9)
Treasury Preferred Stock, at cost, 81,194
shares, 47,817 shares, and 34,447
shares, respectively (6.3) (3.9) (2.7)
Common Shareholders' Equity
Common stock, $5 par value, authorized 400
million, 200 million and 200 million
shares, respectively 840.0 420.0 420.0
Reinvested earnings 1,499.3 1,273.6 1,190.1
Cumulative translation adjustment (61.4) (75.4) (65.4)
Deferred compensation (132.2) (143.5) (154.0)
Treasury common stock, at cost (1,016.9) (1,028.9) (839.6)
Total Common Shareholders' Equity 1,128.8 445.8 551.1
Total Liabilities and Shareholders' Equity $4,826.9 $3,043.3 $2,815.9
39
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Consolidated Statements
of Common Common Stock Issued
Shareholders' Shares Amount
Equity <S> <C> <C>
Balance as of June 30, 1992 83,989,396 420.0
Net Income
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Common stock issued for stock purchase and incentive plans
Repurchases of common stock
Foreign currency adjustments (net of allocated
income tax provisions of $(12.6))
Deferred compensation
Other
Balance as of June 30, 1993 83,989,396 420.0
Net Income
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Common stock issued for stock purchase and incentive plans
Repurchases of common stock
Foreign currency adjustments (net of allocated income
tax benefits of $1.4)
Deferred compensation
Other
Balance as of June 30, 1994 83,989,396 420.0
Net income
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Common stock issued for stock purchase and incentive plans
Repurchases of common stock
Two-for-one stock split-up 83,989,396 420.0
Foreign currency adjustments (net of allocated income
tax benefits of $3.8)
Deferred compensation
Other
Balance as of June 30, 1995 167,978,792 $840.0
<FN>
See accompanying notes to the consolidated financial statements.
40
<CAPTION>
Dollars in Millions
Common Additional Cumulative
Shares Paid-In Reinvested Translation Deferred Treasury Common Stock
Outstanding Capital Earnings Adjustment Compensation Shares Amount Total
<C> <C> <C> <C> <C> <C> <C> <C>
73,403,305 $ 2.9 $ 1,162.3 $ (24.5) $ (160.4) 10,586,091 $ (558.2) $ 842.1
171.3 171.3
(136.1) (136.1)
(4.2) (4.2)
805,434 (8.4) (3.2) (805,434) 41.7 30.1
(4,752,500) 4,752,500 (323.1) (323.1)
(40.9) (40.9)
6.4 6.4
5.5 5.5
69,456,239 - 1,190.1 (65.4) (154.0) 14,533,157 (839.6) 551.1
231.5 231.5
(140.6) (140.6)
(4.0) (4.0)
439,142 (1.3) (3.4) (439,142) 25.6 20.9
(3,091,085) 3,091,085 (214.9) (214.9)
(10.0) (10.0)
10.5 10.5
1.3 1.3
66,804,296 - 1,273.6 (75.4) (143.5) 17,185,100 (1,028.9) 445.8
802.0 802.0
(150.8) (150.8)
(4.0) (4.0)
1,151,137 (2.2) (1.5) (1,151,137) 34.5 30.8
(578,000) 578,000 (22.5) (22.5)
66,804,296 (420.0) 17,185,100 -
14.0 14.0
11.3 11.3
2.2 2.2
134,181,729 $ - $ 1,499.3 $ (61.4) $ (132.2) 33,797,063 $(1,016.9) $1,128.8
41
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Geographic Segment Net Sales
Information Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
U.S. and Canadian Grocery Products $4,624.2 $4,252.7 $3,930.3
Europe 1,106.1 1,164.3 1,335.8
Latin America and Pacific 634.9 538.0 464.5
International Grocery Products 1,741.0 1,702.3 1,800.3
Net Sales and Operating Income from
Continuing Operations $6,365.2 $5,955.0 $5,730.6
Less: General corporate expenses(d)
Interest expense-net
Foreign exchange loss (gain)-net
Income from continuing operations before
income taxes and cumulative effect
of accounting changes
Provision for income taxes
Income from continuing operations before
cumulative effect of accounting changes
Income from continuing operations per common share
before cumulative effect of accounting changes(e)
<FN>
(a)Fiscal 1995 results include: pretax gains of $604.2 million, or $2.81 per share, for the
sale of U.S. and Canadian businesses; $492.1 million, or $2.06 per share,
for the sale of European businesses; and $74.5 million, or $.33 per share, for the sale of
a Latin American business. Fiscal 1995 results also include a pretax restructuring charge
of $76.5 million, or $.35 per share, for cost-reduction and realignment activities. The
restructuring charge was included in operating income as follows: $47.1 million in the
United States and Canada; $25.3 million in Europe; and $4.1 million in Latin America and
Pacific.
(b)Fiscal 1994 results include a pretax restructuring charge of $118.4 million, or $.55 per
share, for workforce reductions, plant consolidations and product discontinuations and a
pretax gain of $9.8 million, or $.07 per share, for the sale of a business in Venezuela.
The restructuring charge was included in operating income as follows: $112.9 million
in the United States and Canada; $1.7 million in Europe; and $3.8 million in Latin America
and Pacific.
42
Dollars in Millions (Except Per Share Data)
Operating Income(a)(b)(c)
1992 1991 1990 1995 1994 1993 1992 1991 1990
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$3,842.3 $3,860.2 $3,610.0 $ 974.7 $430.9 $447.0 $435.0 $429.0 $372.5
1,354.5 1,326.4 1,084.6 482.7 17.5 52.2 41.2 68.3 88.6
379.6 304.6 336.0 92.9 88.8 76.0 64.0 35.7 83.1
1,734.1 1,631.0 1,420.6 575.6 106.3 128.2 105.2 104.0 171.7
$5,576.4 $5,491.2 $5,030.6 1,550.3 537.2 575.2 540.2 533.0 544.2
75.5 42.6 37.4 38.2 40.4 34.3
110.7 89.7 55.1 67.4 86.2 101.8
4.2 26.2 15.1 13.1 (5.1) 25.7
1,359.9 378.7 467.6 421.5 411.5 382.4
553.8 147.2 180.8 173.9 175.7 153.5
$ 806.1 $231.5 $286.8 $247.6 $235.8 $228.9
$ 6.00 $ 1.68 $ 1.96 $ 1.63 $ 1.53 $ 1.47
<FN>
(c)See Management's Discussion and Analysis for further discussion of fiscal 1993 through 1995
gains on divestitures and restructuring charges.
(d)Fiscal 1995 general corporate expenses include a provision of $29.0 million, or $.13 per share,
for estimated litigation costs.
(e)Per share data reflect the fiscal 1995 two-for-one stock split-up.
43
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Dollars in Millions
Geographic Segment
Information Year Ended June 30 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Identifiable Assets
U.S. and Canadian Grocery Products $3,917.5 $1,999.4 $1,877.3 $1,997.9 $2,228.7
Europe 255.0 576.5 562.9 687.5 533.5
Latin America and Pacific 369.9 209.4 182.4 154.4 122.5
International Grocery
Products 624.9 785.9 745.3 841.9 656.0
Total Operating Businesses 4,542.4 2,785.3 2,622.6 2,839.8 2,884.7
Corporate(a) 284.5 258.0 193.3 200.1 175.8
Total Assets $4,826.9 $3,043.3 $2,815.9 $3,039.9 $3,060.5
Capital Expenditures
U.S. and Canadian Grocery Products $ 193.1 $ 123.9 $ 107.2 $ 110.7 $ 167.0
International Grocery Products 69.6 51.2 65.1 65.7 73.6
Total Operating Businesses 262.7 175.1 172.3 176.4 240.6
Corporate 12.8 - - - -
Total Capital Expenditures $ 275.5 $ 175.1 $ 172.3 $ 176.4 $ 240.6
Depreciation and Amortization
U.S. and Canadian Grocery Products $ 155.3 $ 131.6 $ 117.6 $ 116.6 $ 112.9
International Grocery Products 35.0 38.5 38.2 38.2 36.4
Total Operating Businesses 190.3 170.1 155.8 154.8 149.3
Corporate 1.1 1.1 1.1 1.1 1.0
Total Depreciation and Amortization $ 191.4 $ 171.2 $ 156.9 $ 155.9 $ 150.3
<FN>
(a)Includes corporate cash and cash equivalents, certain other current assets, property and
miscellaneous other assets.
</TABLE>
44
Exhibit 13.3
Notes to the Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies
Consolidation - The consolidated financial statements include The
Quaker Oats Company and all of its subsidiaries (the Company). All
significant intercompany transactions have been eliminated.
Businesses acquired are included in the results of operations since their
acquisition dates. Businesses divested are included in the results of
operations until their divestiture dates.
Foreign Currency Translation - Assets and liabilities of the
Company's foreign subsidiaries, other than those located in highly
inflationary countries, are translated at current exchange rates, while
income and expenses are translated at average rates for the period. For
entities in highly inflationary countries, a combination of current and
historical rates is used to determine foreign currency gains and losses
resulting from financial statement translation. Translation gains and
losses are reported as a component of common shareholders' equity,
except for those associated with highly inflationary countries, which
are reported directly in the consolidated income statements.
Futures, Swaps, Options, Caps and Forward Contracts - The
Company enters into a variety of futures, swaps, options, caps and
forward contracts in its management of foreign currency, interest rate
and commodity price exposures. Realized and unrealized gains and
losses on purchased foreign currency options, currency swaps and
foreign exchange forward contracts that are effective as net investment
hedges are recognized in a component of common shareholders' equity.
Realized and unrealized gains and losses on purchased foreign
currency options that hedge exchange rate exposure on future raw
material purchases are deferred in inventory and subsequently included
in cost of goods sold as the inventory is sold. Expenses associated with
interest rate cap and swap agreements that hedge interest rate exposure
are deferred and recognized as a component of interest expense over
the term of each agreement. Realized and unrealized gains and losses
on commodity options and futures contracts that hedge commodity
price exposure are deferred in inventory and subsequently included in
cost of goods sold as the inventory is sold. Other realized and
unrealized gains and losses on financial instruments are recognized
currently in the consolidated income statements.
Cash and Cash Equivalents - Cash equivalents are composed of all
highly liquid investments with an original maturity of three months or
less. As a result of the Company's cash management system, checks
issued but not presented to the banks for payment may create negative
book cash balances. Such negative balances are included in trade
accounts payable and amounted to $102.6 million, $53.0 million and
$45.9 million as of June 30, 1995, 1994 and 1993, respectively.
Inventories - Inventories are valued at the lower of cost or market,
using various cost methods, and include the cost of raw materials, labor
and overhead. The percentages of year-end inventories valued using
each of the methods were as follows:
June 30 1995 1994 1993
Last-in, first-out (LIFO) 46% 60% 53%
Average quarterly cost 47% 30% 35%
First-in, first-out (LIFO) 7% 10% 12%
If the LIFO method of valuing these inventories was not used, total
inventories would have been $10.5 million, $19.6 million and $17.2
million higher than reported as of June 30, 1995, 1994 and 1993,
respectively.
Property and Depreciation - Property, plant and equipment are
carried at cost and depreciated on a straight-line basis over their
estimated useful lives. Useful lives range from five to 50 years for
buildings and improvements and from three to 17 years for machinery
and equipment.
Intangibles - Intangible assets consist principally of excess purchase
price over net tangible assets of businesses acquired (goodwill) and
trademarks. Goodwill is amortized on a straight-line basis over periods
not exceeding 40 years. The Company continually evaluates whether
events or circumstances have occurred indicating that the remaining
estimated useful life of goodwill may not be appropriate. When factors
indicate that goodwill should be evaluated for possible impairment, the
Company uses an estimate of the acquired business' undiscounted
future cash flows compared to the carrying value of goodwill to
determine if a write-off is necessary. Gross goodwill as of June 30,
1995, 1994 and 1993 was $1.87 billion, $615.2 million and $528.0
million, respectively. Accumulated goodwill amortization as of June
30, 1995, 1994 and 1993 was $122.1 million, $128.0 million and
$113.3 million, respectively. Trademarks are amortized on a straight-
line basis over periods not exceeding 40 years. Gross trademark cost
and accumulated trademark amortization as of June 30, 1995 were
$452.2 million and $8.0 million, respectively. Trademark cost as of
June 30, 1994 and 1993 was not material. See Note 2 to the
consolidated financial statements for further discussion of intangibles
and amortization periods.
45
THE QUAKER OATS COMPANY AND SUBSIDIARIES
Software Costs - The Company defers significant software
development project costs. Software costs of $0.8 million, $5.3 million
and $5.0 million were deferred during fiscal 1995, 1994 and 1993,
respectively. Amounts deferred are amortized over a three-year period
beginning with a project's completion. Net deferred software costs as
of June 30, 1995 were $9.4 million.
Income Taxes - The Company uses an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income
taxes are provided when tax laws and financial accounting standards
differ with respect to the amount of income for a year and the bases of
assets and liabilities. Federal income taxes have been provided on
$167.2 million of the $282.7 million of unremitted earnings from
foreign subsidiaries. Taxes are not provided on earnings expected to
be indefinitely reinvested.
Fiscal-Year Change - In May 1995, the Board of Directors approved a
change in the Company's fiscal year end from June 30 to December 31,
effective the calendar year beginning January 1, 1996. A six-month
fiscal transition period from July 1, 1995 through December 31, 1995
will precede the start of the new calendar-year cycle. Fiscal years
presented and referred to in these consolidated financial statements and
notes thereto are on a June 30 fiscal-year basis unless otherwise
indicated.
Note 2
Acquisitions and Divestitures
The Company has realigned its business portfolio through the
acquisition and divestiture of a number of businesses.
On December 6, 1994, the Company purchased Snapple Beverage
Corp. for a tender-offer price of $1.7 billion. The acquisition was
accounted for as a purchase and the results of Snapple beverages are
included in the consolidated financial statements since the date of
acquisition. The acquisition was initially financed with commercial
paper borrowings. The after-tax proceeds on the fiscal 1995
divestitures of $1.25 billion were used to reduce the commercial paper
borrowings.
The allocation of the purchase price included the following intangible
assets along with the related amortization periods. Amortization is on a
straight-line basis.
Amortization
Amount Periods (in years)
Dollars in Millions
Goodwill $1,300.7 40
Trademark - Snapple 440.0 40
Trademark - Made From the Best Stuff 6.0 7
on Earth
Proprietary formulas 75.0 15
Distribution rights 30.0 30
Distribution network 7.0 10
Total $1,858.7
The following table presents unaudited pro forma combined historical
results as if Snapple Beverage Corp. was acquired at the beginning of
fiscal 1994. The pro forma results are not necessarily indicative of
what actually would have occurred if the acquisition had been
completed as of the beginning of fiscal 1994, nor are they necessarily
indicative of future consolidated results.
Pro Forma Results (Unaudited)
Dollars in Millions (Except Per Share Data) 1995 1994
Net sales $ 6,636.8 $ 6,652.6
Income before cumulative effect of $ 767.4 $ 208.1
accounting change
Income per common share before $ 5.71 $ 1.51
cumulative effect of accounting change
In fiscal 1995, the Company also purchased the Adria pasta business in
Brazil, the Southern Foods oat milling business in Australia, and the
Nile Spice variety meals-in-a-cup and Arnie's bagels businesses in the
United States. In fiscal 1994, the Company purchased the Near East
flavored rice business and three small food service businesses. In fiscal
1993, the Company purchased the Chico-San rice cakes business. Pro
forma information for all these acquisitions was not material in the
aggregate.
On March 14, 1995, the Company completed the sale of its North
American pet food business to H.J. Heinz Company for $725.0 million
and realized a gain of $513.0 million. On April 24, 1995, the
Company completed the sale of its European pet food business to
Dalgety PLC for $700.0 million and realized a gain of $487.2 million.
Other divestitures in fiscal 1995 included the Dutch honey business in
February 1995, the Mexican chocolate business in May 1995 and the
U.S. bean and chili businesses in June 1995. The Company realized
gains on these divestitures of $4.9 million, $74.5 million and $91.2
million, respectively.
46
The following table presents sales and operating income from the
businesses divested in fiscal 1995 through the sale dates. Operating
income includes certain allocations of overhead expenses and excludes
gains on divestitures and restructuring charges in all fiscal years.
Dollars in Millions 1995 1994 1993
Sales:
U.S. and Canadian Grocery Products $ 554.6 $ 757.3 $ 720.8
International Grocery Products 760.4 876.0 969.8
Sales from divested businesses $ 1,315.0 $ 1,633.3 $ 1,690.6
Operating income:
U.S. and Canadian Grocery $ 39.3 $ 54.2 $ 55.6
Products
International Grocery Products 34.1 50.6 63.7
Operating income from divested $ 73.4 $ 104.8 $ 119.3
businesses
In fiscal 1994, the Company realized a $9.8 million gain on the sale of
a business in Venezuela. In fiscal 1993, the Company realized a $17.4
million gain on the sale of two Italian businesses and a $10.4 million
gain on the sale of a business in the United Kingdom. Sales and
operating income from these businesses were not material.
Note 3
Restructuring Charges
In fiscal 1995, the Company recorded a restructuring charge of $76.5
million for cost-reduction and realignment activities in order to address
the changes in its business portfolio and to allow it to quickly and
effectively respond to the needs of trade customers and consumers.
These changes result in the elimination of approximately 850 positions
and primarily include the realignment of the corporate, shared services
and business unit structures, the European cereals business and the U.S.
distribution center network. Savings from these activities are expected
to be about $50 million annually beginning in calendar 1996.
Approximately 90 percent of the annual savings will be in cash.
In fiscal 1994, the Company recorded a restructuring charge of $118.4
million for the elimination of positions at the headquarters and research
and development facilities, a combination and realignment of the U.S.
sales force, manufacturing consolidations for the bean and chili, rice
cakes and Aunt Jemima syrup businesses and the closing of a Canadian
pet food facility and refocusing of the Canadian business, as well as
other cost-reduction initiatives. Approximately 1,500 positions are
being eliminated as a result of these initiatives. In fiscal 1993, the
Company recorded a restructuring charge of $48.3 million to
consolidate production facilities at a U.S. pet food plant and to
implement European cost-reduction programs. Savings realized from
fiscal 1994 and 1993 restructuring activities have been in line with
expectations and reserve balances are adequate to cover committed
restructuring actions.
<TABLE>
The restructuring charges and utilization to date were as follows:
<CAPTION>
Dollars in Millions
As of June 30, 1995
Amounts Charged Amounts Remaining
Cash Non-Cash Total Utilized Reserve
<S> <C> <C> <C> <C> <C>
1995
Severance and termination benefits $ 41.0 $ - $ 41.0 $ 3.3 $ 37.7
Asset write-offs to consolidate facilities - 19.0 19.0 12.5 6.5
Loss on leases and other 16.5 - 16.5 - 16.5
Subtotal 57.5 19.0 76.5 15.8 60.7
1994
Severance and termination benefits 44.7 - 44.7 30.7 14.0
Asset write-offs and loss on leases 7.6 30.7 38.3 29.6 8.7
Product-line discontinuations 3.3 32.1 35.4 35.4 -
Subtotal 55.6 62.8 118.4 95.7 22.7
1993
Severance and termination benefits 27.6 - 27.6 27.6 -
Asset write-offs to consolidate facilities - 20.7 20.7 20.7 -
Subtotal 27.6 20.7 48.3 48.3 -
Totals $140.7 $102.5 $243.2 $159.8 $ 83.4
<CAPTION>
Operating income excluding restructuring charges and gains on
divestitures in all fiscal years was as follows:
Dollars in Millions 1995 1994 1993
<S> <C> <C> <C>
Operating income as reported $1,550.3 $ 537.2 $ 575.2
Restructuring charges:
U.S. and Canadian Grocery Products 47.1 112.9 38.6
International Grocery Products 29.4 5.5 9.7
Subtotal 76.5 118.4 48.3
Gains on divestitures:
U.S. and Canadian Grocery Products (604.2) - -
International Grocery Products (566.6) (9.8) (27.8)
Subtotal (1,170.8) (9.8) (27.8)
Operating income excluding
charges and gains $456.0 $ 645.8 $ 595.7
</TABLE>
47
THE QUAKER OATS COMPANY AND SUBSIDIARIES
Note 4
Trade Accounts Receivable Allowances
Dollars in Millions 1995 1994 1993
Balance at beginning of year $17.5 $15.0 $16.6
Provision for doubtful accounts 11.2 7.5 5.7
Provision for discounts and allowances 19.4 16.6 13.8
Write-offs of doubtful
accounts net of recoveries (6.1) (5.2) (4.4)
Discounts and allowances taken (15.6) (13.9) (13.9)
Effect of acquisitions and divestitures 1.4 - -
Effect of exchange rate changes (1.0) (2.5) (2.8)
Balance at end of year $26.8 $17.5 $15.0
Note 5
Revolving Credit Facilities, Short-term Debt and Lines of Credit
The Company has revolving credit facilities totaling $1.5 billion with
various banks that support its commercial paper borrowings and are
also available for direct borrowings. The facilities consist of a $600.0
million annually extendible revolving credit facility expiring
November 1999 and a $900.0 million 364-day annually extendible
revolving credit facility which may, at the Company's option, be
converted into a two-year term loan. As of June 30, 1995, no direct
borrowings were outstanding. Under the revolving credit facilities, the
Company and certain domestic subsidiaries must maintain certain
financial ratios.
The Company has an Adjusted Principal Revolving Credit Agreement
(Agreement). Each quarter, the Company may borrow a predetermined
amount from $4.0 million up to $22.0 million. The amount borrowed
may be repaid based upon certain foreign currency rates. The
Agreement is in effect through June 1996 and bears interest at market
rates in effect at the time of each borrowing. The Company borrowed
the predetermined amount available each quarter in fiscal 1995.
Short-term debt consists primarily of commercial paper borrowings in
the United States and notes payable to banks in foreign countries.
Commercial paper borrowings outstanding as of June 30, 1995, 1994
and 1993 were $676.9 million, $78.4 million and $142.4 million,
respectively. Notes payable to banks were $21.2 million, $132.9
million and $35.6 million as of June 30, 1995, 1994 and 1993,
respectively. (See Note 6 for discussion of reclassification of short-
term debt to long-term debt). Weighted average interest rates on all
short-term debt outstanding as of June 30, 1995, 1994 and 1993 were
6.7 percent, 6.1 percent and 4.4 percent, respectively. Nominal interest
rates in highly inflationary countries have been adjusted for currency
devaluation to express interest rates in U.S. dollar terms.
The Company's foreign subsidiaries have additional committed lines of
credit of $30.6 million, none of which was utilized as of June 30, 1995.
<TABLE>
Note 6
Long-term Debt
<CAPTION>
Dollars in Millions 1995 1994 1993
<S> <C> <C> <C>
7.76% Senior ESOP Notes due through 2002 $ 74.9 $ 80.8 $ 85.9
8.0% Senior ESOP Notes due through 2002 125.7 133.9 140.3
8.75% ESOP installment loan due through 1996 2.9 5.5 7.9
7.4%-7.9% Series A Medium-term Notes
due through 2000 56.7 71.8 86.8
8.15%-9.34% Series B Medium-term Notes
due through 2020 216.4 229.6 248.0
6.5%-7.48% Series C Medium-term Notes
due through 2024 200.0 200.0 -
6.45%-7.77% Series D Medium-term Notes
due through 2025 212.0 - -
6.63% deutsche mark swap due 1998 20.2 17.5 16.3
5.7%-10.75% Industrial Revenue Bonds
due through 2010, tax-exempt 34.4 34.4 35.6
Non-interest bearing installment note due 2014 5.1 4.5 4.0
Short-term debt to be refinanced 188.0 - 50.0
Other 5.6 26.9 6.7
Subtotal 1,141.9 804.9 681.5
Less: Current portion of long-term debt 38.8 45.4 48.9
Long-term debt $1,103.1 $759.5 $632.6
All maturity dates presented refer to fiscal years.
48
<CAPTION>
Aggregate required payments of maturities of long-term debt for the
next five fiscal years are as follows:
Dollars in Millions 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Required payments $38.8 $53.9 $131.5 $50.9 $113.7
</TABLE>
During fiscal 1994, the Company issued $200.0 million of Series C
Medium-term Notes bearing interest rates ranging from 6.5 percent to
7.48 percent per annum with maturities from 10 to 30 years. The debt
was issued under a $600.0 million shelf registration filed with the SEC
in January 1990. In April 1995, the Company filed a prospectus
supplement with the SEC for the issuance of an additional $400.0
million of medium-term notes under the 1990 shelf registration. As of
June 30, 1995, the Company has issued $212.0 million of Series D
Medium-term Notes bearing interest ranging from 6.45 percent to 7.77
percent per annum with maturities from three to 30 years. The
Company intends to issue the remaining $188.0 million of medium-
term notes by December 31, 1995. As a result, the consolidated
balance sheet as of June 30, 1995 included the reclassification of
$188.0 million of short-term debt to long-term debt.
The consolidated balance sheet as of June 30, 1993 included the
reclassification of $50.0 million of short-term debt to long-term debt,
reflecting the Company's intent and ability to refinance this debt on a
long-term basis.
The non-interest bearing installment note for $55.5 million has an
unamortized discount of $50.4 million, $51.0 million and $51.5 million
as of June 30, 1995, 1994 and 1993, respectively, based on an imputed
interest rate of 13 percent.
Note 7
Capital Stock
In fiscal 1995, shareholders of record received an additional share of
common stock for each share held, pursuant to a two-for-one stock
split-up approved by the Board of Directors. Per share data and
average number of common shares outstanding have been retroactively
restated. As a result of the increase in issued shares, common stock has
been increased and reinvested earnings has been decreased by $420.0
million. In November 1994, shareholders approved an increase in
authorized shares from 200 million to 400 million.
During fiscal 1995, 0.6 million shares of the Company's outstanding
common stock were repurchased for $22.5 million under a 10 million
share repurchase program announced in August 1993.
The Company is authorized to issue 10 million shares of preferred
stock in series, with terms fixed by resolution of the Board of
Directors. One million shares of Series A Junior Participating
Preferred Stock have been reserved for issuance in connection with the
Shareholder Rights Plan (see Note 10).
An additional 1,750,000 shares of Series B ESOP Convertible
Preferred Stock (Series B Stock) have been reserved for issuance in
connection with the Company's ESOP. As of June 30, 1995, 1,282,051
shares of the Series B Stock had been issued and are each convertible
into 2.1576 shares of the Company's common stock. The Series B
Stock will be issued only for the ESOP and will not be traded on the
open market.
The Company is also authorized to issue one million shares of
redeemable preference stock, none of which had been issued as of June
30, 1995.
49
THE QUAKER OATS COMPANY AND SUBSIDIARIES
Note 8
Deferred Compensation
The ESOP was established to issue debt and to use the proceeds of such
debt to acquire shares of the Company's stock for future allocation to
ESOP participants. The ESOP borrowings are included as long-term
debt on the Company's consolidated balance sheets. See Note 6 for
further detail on the ESOP notes.
Deferred compensation of $207.1 million as of June 30, 1995 primarily
represents the Company's payment of future compensation expense
related to the ESOP. As the Company makes annual contributions to
the ESOP, these contributions, along with the dividends accumulated
on the common and preferred stock held by the ESOP, are used to
repay the outstanding loans. As the loans are repaid, common and
preferred stock are allocated to ESOP participants and deferred
compensation is reduced by the amount of the principal payments on
the loans.
The following table presents the ESOP loan payments:
Dollars in Millions 1995 1994 1993
Principal payments $ 16.7 $ 13.9 $ 11.6
Interest payments 16.9 18.4 19.4
Total ESOP payments $ 33.6 $ 32.3 $ 31.0
As of June 30, 1995, 5,081,987 shares of common stock and 464,047
shares of preferred stock were held in the accounts of ESOP
participants.
Note 9
Employee Stock Option and Award Plans
In fiscal 1990, the Company's shareholders approved the adoption of
The Quaker Long Term Incentive Plan of 1990 (Plan). The purpose of
the Plan is to promote the interests of the Company and its shareholders
by providing the officers and other key employees with additional
incentive and the opportunity through stock ownership to increase their
proprietary interest in the Company and their personal interest in its
continued success. The Plan provides for benefits to be awarded in a
variety of ways, with stock options being used most frequently.
Twenty-six million shares of common stock have been authorized for
grant under the Plan. Previously, stock options were issued under the
1984 Long-Term Incentive Plan, which expired by its terms on
December 31, 1990.
Stock options may be granted for the purchase of common stock at a
price not less than the fair market value on the date of grant. Portions
of the fiscal 1992 and 1993 option awards were granted at exercise
prices higher than the fair market value on the date of grant. Options
are generally exercisable after one or more years and expire no later
than 10 years from the date of grant. As of June 30, 1995, 693 persons
held such options. Changes in stock options outstanding are
summarized as follows:
Shares Option Price (Per Share)
Balance as of June 30, 1992 4,557,528 $ 9.83-88.36
Granted 1,602,646 $ 63.56-79.45
Exercised (780,724) $ 9.83-70.69
Expired or terminated (83,303) $ 9.83-88.36
Balance as of June 30, 1993 5,296,147 $ 14.03-88.36
Granted 1,448,265 $ 68.88-69.06
Exercised (312,042) $ 14.03-70.69
Expired or terminated (141,635) $ 26.42-88.36
Balance as of June 30, 1994 6,290,735 $ 17.53-88.36
Adjustment due to two-for-one
stock split-up 6,290,735 $ 8.77 - 44.18
Granted 2,978,450 $33.53 - 40.35
Exercised (906,714) $ 8.77 - 39.73
Expired or terminated (1,083,665) $ 8.77 - 44.18
Balance as of June 30, 1995 13,569,541 $13.21 - 44.18
As of June 30, 1995, options for 8,214,202 shares were exercisable and
the average per share option price of unexercised options expiring
during the period January 1996 to November 2004 was $33.89.
50
Under the Plan, restricted stock awards grant shares of the Company's
common stock to key officers and employees. These shares are subject
to a restriction period from the date of grant, during which they may
not be sold, assigned, pledged or otherwise encumbered. The number
of shares of the Company's common stock awarded was 49,000, 23,200
and 70,800 in fiscal 1995, 1994 and 1993, respectively. The fiscal
1995 awards reflect the fiscal 1995 two-for-one stock split-up.
Restrictions on these awards lapse after a period of time designated by
the Compensation Committee of the Board of Directors.
Note 10
Shareholder Rights Plan
The Company's Shareholder Rights Plan, adopted July 9, 1986 and
amended July 12, 1989, is designed to deter coercive or unfair takeover
tactics and to prevent a person or group from gaining control of the
Company without offering a fair price to all shareholders.
Under the terms of the Shareholder Rights Plan, all common
shareholders own one-quarter of a "Right" entitling them to purchase
from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $300. The Rights
become exercisable: (1) 10 days after a public announcement that a
person or group has acquired shares representing 20 percent or more of
the voting power of the Company's capital stock; (2) 10 business days
following commencement of a tender offer for more than 20 percent of
such voting power; or (3) 10 business days after a holder of at least 15
percent of such voting power is determined to be an adverse person by
the Board of Directors. The time periods can be extended by the
Company.
Unless the Board of Directors has made a determination that any
person is an adverse person, the Company can redeem the Rights for
$.05 per Right at any time prior to their becoming exercisable. The
Rights will expire on July 30, 1996, unless redeemed earlier by the
Company.
If after the Rights become exercisable the Company is involved in a
merger or other business combination at any time when there is a
holder of 20 percent or more of the Company's stock, the Rights will
then entitle holders, upon exercise of the Rights, to receive shares of
common stock of the acquiring company with a market value equal to
twice the exercise price of each Right. Alternatively, if a 20 percent
holder acquires the Company by means of a reverse merger in which
the Company and its stock survive, or if any person acquires 20 percent
or more of the Company's voting power or acquires 15 percent of the
Company's voting power and is determined by the Board of Directors
to be an adverse person, each Right not owned by such 20 percent
shareholder or adverse person would, upon exercise of the Right,
entitle the holder to common stock of the Company (or in certain
circumstances other consideration) having a market value equal to
twice the exercise price of the Right. The Rights described in this
paragraph shall not apply to an acquisition, merger or consolidation
which is determined by a majority of the Company's independent
directors, after consulting one or more investment banking firms, to be
fair and otherwise in the best interest of the Company and its
shareholders.
Note 11
Pension Plans
The Company has various pension plans covering substantially all U.S.
employees and certain foreign employees. Plan benefits are based on
compensation paid to employees and their years of service. Company
policy is to make contributions to its U.S. plans within the maximum
amount deductible for Federal income tax purposes. Plan assets consist
primarily of equity securities and government, corporate and other
fixed-income obligations.
The components of net pension costs for defined plans were as follows:
Dollars in Millions 1995 1994 1993
Service cost (benefits earned
during the year) $53.8 $46.0 $41.5
Interest cost on projected
benefit obligation 59.5 55.6 51.9
Actual return on plan assets (65.8) (64.2) (64.8)
Net amortization and deferral (7.4) (8.8) (8.5)
Multi-employer plans 0.4 0.3 0.2
Net pension costs $40.5 $28.9 $20.3
51
<TABLE>
THE QUAKER OATS COMPANY AND SUBSIDIARIES
<CAPTION>
Reconciliations of the funded status of the Company's U.S. defined
plans to the (accrued) prepaid pension costs were as follows:
Overfunded Underfunded
Dollars in Millions 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Vested benefits $ 551.4 $ 505.9 $ 459.5 $ 52.5 $ 52.0 $ 47.3
Non-vested benefits 11.8 10.8 10.1 1.2 1.1 0.2
Accumulated benefit 563.2 516.7 469.6 53.7 53.1 47.5
obligation
Effect of projected
future salary increases 56.7 64.0 62.0 12.7 4.7 8.9
Projected benefit
obligation 619.9 580.7 531.6 66.4 57.8 56.4
Plan assets at
market value 673.0 640.9 637.5 24.7 22.0 23.3
Projected benefit
obligation less
(greater) than
plan assets 53.1 60.2 105.9 (41.7) (35.8) (33.1)
Unrecognized net (gain) (69.5) (40.6) (59.6) (2.6) (4.0) (4.2)
Unrecognized prior
service cost 20.4 6.9 8.1 5.7 4.9 5.6
Unrecognized net (asset)
liability at
transition (28.1) (40.7) (52.9) 1.8 3.5 4.2
(Accrued) prepaid
pension costs $ (24.1) $ (14.2) $ 1.5 $ (36.8) $ (31.4) $ (27.5)
<FN>
Assumptions (reflecting averages across all plans): Weighted average discount rate: 8.25%.
Rate of future compensation increases: 4.5%. Long-term rate of return on plan assets: 8.75%.
<CAPTION>
Reconciliations of the funded status of the Company's foreign defined
plans to the prepaid (accrued) pension costs were as follows:
Overfunded Underfunded
Dollars in Millions 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Vested benefits $83.9 $79.7 $89.8 $ 18.6 $ 19.6 $ 18.7
Non-vested benefits 0.4 14.5 - 3.1 4.8 4.5
Accumulated benefit obligation 84.3 94.2 89.8 21.7 24.4 23.2
Effect of projected future
salary increases 25.5 18.9 18.8 1.4 3.6 3.4
Projected benefit obligation 109.8 113.1 108.6 23.1 28.0 26.6
Plan assets at market value 120.0 127.6 113.0 - - -
Projected benefit obligation
less (greater) than
plan assets 10.2 14.5 4.4 (23.1) (28.0) (26.6)
Unrecognized net loss (gain) 1.3 (4.3) 13.4 (0.2) (0.3) (0.2)
Unrecognized prior service cost 2.1 2.8 3.1 0.8 0.8 0.8
Unrecognized net (asset)
at transition (8.6) (4.2) (13.5) (0.2) - (0.2)
Prepaid (accrued)
pension costs $ 5.0 $ 8.8 $ 7.4 $ (22.7) $ (27.5) $ (26.2) $(26.2)
<FN>
Assumptions (reflecting averages across all plans): Weighted average discount rate: 8.0%.
Rate of future compensation increases: 5.8%. Long-term rate of return on plan assets: 8.1%.
Unrecognized prior service cost is being amortized over periods ranging from 10 to 18 years.
The foreign pension plans included unfunded termination indemnity
reserves of $14.0 million, $14.1 million and $14.1 million as of June
30, 1995, 1994 and 1993, respectively.
</TABLE>
Note 12
Postretirement Benefits Other Than Pensions and
Other Postemployment Benefits
The Company has various postretirement health care plans covering
substantially all U.S. employees and certain foreign employees. The
plans provide for the payment of certain health care and life insurance
benefits for retired employees who meet certain service-related
eligibility requirements. The Company funds only the plans' annual
cash requirements.
Effective July 1, 1992, the Company adopted FASB Statement #106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement requires that the expected cost of these
benefits be charged to expense during the years that the employees
render service. The statement was adopted through a cumulative
pretax charge of $205.5 million, or $125.4 million after-tax, which
represents the accumulated postretirement benefit obligation for years
prior to fiscal 1993. Cash expenditures are not affected by this
accounting change.
The components of postretirement benefit costs were as follows:
Dollars in Millions 1995 1994 1993
Service cost (benefits
earned during the year) $ 7.2 $ 7.0 $ 6.2
Interest cost on projected
benefit obligation 19.6 18.4 18.3
Amortization of prior
service cost 0.1 0.1 -
Total postretirement
benefit costs $26.9 $25.5 $24.5
52
The Company's unfunded accumulated postretirement benefit
obligations and accrued postretirement benefit costs were as follows:
Dollars in Millions 1995 1994 1993
Current retirees $ 132.0 $122.1 $122.5
Current active employees-
fully eligible 13.4 12.5 12.0
Current active employees-
not fully eligible 94.4 115.2 100.0
Accumulated postretirement
benefit obligation 239.8 249.8 234.5
Unrecognized net gain (loss) 7.7 (12.5) (11.1)
Unrecognized prior service cost (1.9) (2.0) -
Accrued postretirement
benefit costs $ 245.6 $235.3 $223.4
Assumptions:
Weighted average discount rate: 8.25%
Health care trend rates (varies by plan): 1996 2006 and Beyond
Pre-age 65 10-13% 4-6%
Age 65 and over 10-13% 5-6%
If the health care trend rates were increased one percentage point, the
current-year postretirement benefit costs would have been $4.2 million
higher and the accumulated postretirement benefit obligation as of June
30, 1995 would have been $30.8 million higher.
Effective July 1, 1994, the Company adopted FASB Statement #112,
"Employers' Accounting for Postemployment Benefits." This
statement requires that the expected cost of other postemployment
benefits be charged to expense during the years that employees render
services. The cumulative effect of adoption was a $6.8 million pretax
charge, or $4.1 million after-tax, in the first quarter of fiscal 1995. The
adoption of this statement did not have a material effect on operating
results or cash flows in fiscal 1995, nor is it expected to have a material
effect in future years.
Note 13
Lease and Other Commitments
Certain equipment and operating properties are rented under non-
cancelable operating leases. Total rental expense under operating
leases was $35.2 million, $33.1 million and $34.3 million in fiscal
1995, 1994 and 1993, respectively. The following is a schedule of
future minimum annual rentals on non-cancelable operating leases,
primarily for sales offices, distribution centers and corporate
headquarters, in effect as of June 30, 1995.
Dollars in Millions 1996 1997 1998 1999 2000 Later Total
Total payments $24.5 $22.6 $20.5 $19.3 $18.4 $72.0 $177.3
The Company enters into executory contracts to promote various
products. As of June 30, 1995, future commitments under these
contracts amounted to $57.9 million.
<TABLE>
<CAPTION>
Note 14
Supplementary Income Statement Information
Dollars in Millions 1995 1994 1993
<S> <C> <C> <C>
Advertising, media and production $ 292.9 $ 295.3 $ 282.0
Merchandising 1,382.7 1,291.5 1,193.0
Total advertising and merchandising $ 1,675.6 $ 1,586.8 $ 1,475.0
Depreciation expense $ 125.4 $ 133.3 $ 129.9
Amortization of intangibles $ 63.8 $ 33.9 $ 26.3
Research and development $ 52.2 $ 56.3 $ 52.4
</TABLE>
Note 15
Interest Expense
Dollars in Millions 1995 1994 1993
Interest expense $ 119.0 $ 99.9 $ 66.1
Interest expense capitalized-net (2.0) (1.3) (0.5)
Subtotal 117.0 98.6 65.6
Interest income (6.3) (8.9) (10.5)
Interest expense-net $ 110.7 $ 89.7 $ 55.1
Interest paid in fiscal 1995, 1994 and 1993 was $115.9 million, $72.0
million and $74.3 million, respectively.
53
THE QUAKER OATS COMPANY AND SUBSIDIARIES
Note 16
Income Taxes
The Company uses an asset and liability approach to financial
accounting and reporting for income taxes in accordance with FASB
Statement #109, "Accounting for Income Taxes." FASB Statement
#109 was adopted effective July 1, 1992 and the cumulative effect of
adoption was to increase fiscal 1993 net income by $9.9 million.
Provisions for income taxes on income before cumulative effect of
accounting changes were as follows:
Dollars in Millions 1995 1994 1993
Currently payable:
Federal $382.4 $140.1 $129.2
Foreign 122.3 23.4 25.0
State 64.7 30.3 29.7
Total currently payable 569.4 193.8 183.9
Deferred-net:
Federal (26.3) (34.0) (6.7)
Foreign 13.0 (13.3) 2.7
State (2.3) 0.7 0.9
Total deferred-net (15.6) (46.6) (3.1)
Provision for income taxes $553.8 $147.2 $180.8
The components of the deferred income tax benefit were as follows:
Dollars in Millions 1995 1994 1993
Accelerated tax depreciation $(26.0) $11.2 $15.0
Postretirement benefits (2.2) (8.2) (5.8)
Accrued expenses including (1.8) (36.9) (8.6)
restructuring charges
Loss carryforwards 0.5 (8.3) (2.2)
Foreign gain deferral 24.3 - -
Other (10.4) (4.4) (1.5)
Benefit for deferred income $(15.6) $(46.6) $(3.1)
taxes
Total income tax provisions (benefits) were allocated as follows:
Dollars in Millions 1995 1994 1993
Continuing operations $553.8 $ 147.2 $ 180.8
Cumulative effect of
accounting changes $ (2.7) $ - $ (90.0)
Items charged directly to
common shareholders' equity $ (9.8) $ (8.1) $ 2.6
The sources of pretax income before cumulative effect of accounting
changes were as follows:
Dollars in Millions 1995 1994 1993
U.S. sources $1,029.4 $365.8 $389.3
Foreign sources 330.5 12.9 78.3
Income before income taxes
and cumulative effect
of accounting changes $1,359.9 $378.7 $467.6
<TABLE>
Reconciliations of the statutory Federal income tax rates to the
effective income tax rates were as follows:
<CAPTION>
Dollars in Millions 1995 1994 1993
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Tax provision based
on the Federal
statuory rate $476.0 35.0% $132.5 35.0% $159.0 34.0%
State and local income
taxes-net of Federal
income tax benefit 40.6 3.0 18.4 4.8 19.7 4.2
Repatriation of
foreign earnings 7.9 0.6 (9.6) (2.5) (2.4) (0.5)
Foreign tax rate
differential 19.6 1.4 9.0 2.4 1.7 0.4
Miscellaneous items 9.7 0.7 (3.1) (0.8) 2.8 0.6
Provision for income taxes $553.8 40.7% $147.2 38.9% $180.8 38.7%
<CAPTION>
Deferred tax assets and deferred tax liabilities were as follows:
Dollars in 1995 1994 1993
Millions
Assets Liabilities Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C> <C> <C>
Depreciation and
amortization $ 59.7 $ 395.2 $ 21.1 $ 219.3 $ 14.5 $ 211.0
Postretirement
benefits 97.2 - 94.1 - 85.9 -
Other benefit plans 54.9 15.6 52.4 11.5 42.0 13.5
Accrued expenses
including
restructuring charges 155.1 17.7 112.9 21.7 59.1 4.1
Loss carryforwards 8.7 - 24.3 - 20.8 -
Other 15.2 48.5 18.1 33.5 21.8 34.6
Subtotal 390.8 477.0 322.9 286.0 244.1 263.2
Valuation allowance (18.7) - (28.1) - (18.1) -
Total $ 372.1 $ 477.0 $ 294.8 $ 286.0 $ 226.0 $ 263.2
</TABLE>
54
As of June 30, 1995, the Company had $35.3 million of operating and
capital loss carryforwards available to reduce future taxable income of
certain international subsidiaries. These loss carryforwards must be
utilized within the carryforward periods of these international
jurisdictions. The majority of loss carryforwards expire in five years.
A valuation allowance has been provided for a portion of the deferred
tax assets related to the loss carryforwards.
Included in other current assets were deferred tax assets of $128.4
million, $91.0 million and $52.3 million as of June 30, 1995, 1994 and
1993, respectively. Income taxes paid in fiscal 1995, 1994 and 1993
were $367.1 million, $163.9 million and $213.3 million, respectively.
Note 17
Financial Instruments
Financial instruments are primarily used to fund working capital
requirements and to reduce the impact of foreign currency rate, interest
rate and commodity price fluctuations. The main financial instruments
used are short-term and long-term debt instruments, foreign exchange
forward contracts, purchased foreign currency options, interest rate cap
and swap agreements and commodity options and futures contracts.
The foreign currency hedge instruments are used to reduce the risk that
the U.S. dollar value of the net investment and cash flows of foreign
operations will be reduced as exchange rates decline. Similarly,
interest rate cap and swap agreements are used to reduce the risk that
interest expense will be increased from interest rate changes and
commodity hedge instruments are used to reduce the risk that raw
material purchases will be adversely affected as commodity prices
change. While the hedge instruments are subject to the risk of loss
from exchange or interest rate movement or changing commodity
prices, the losses would generally be offset by expected gains on
translation of the net investments, lower interest expense or lower costs
of the purchases being hedged. The Company uses financial
instruments for purposes other than trading and does not use these
instruments with the objective of earning financial gains on the
exchange or interest rate or commodity price fluctuations alone, nor
does it utilize instruments in currencies or commodities for which there
are no underlying exposures. Management believes that its use of
financial instruments to reduce risk is in the Company's best interest.
The Company's significant net investments, net hedges and net
exposures in foreign currencies subject to the hedging program as of
June 30, 1995 were as follows:
Dollars in Millions
Currency Net Investment Hedge Exposure
British pound $ 26.9 $ 4.9 $ 22.0
Canadian dollar $ 46.2 $ 11.8 $ 34.4
Dutch guilder $ 47.2 $ 47.2 $ -
German mark $ 45.0 $ 41.7 $ 3.3
Italian lire $ 56.5 $ 45.3 $ 11.2
The Company actively monitors the net exposures and adjusts the
hedge amounts as appropriate. The net hedges are stated above on an
after-tax basis as the Company manages the exposures on an economic
basis. The net exposures are subject to gain or loss if foreign currency
exchange rates fluctuate. On a consolidated basis, the gain or loss
would be recognized as an increase or decrease in the cumulative
translation adjustment account on the consolidated balance sheet, but
future reported income would not be affected. In some countries,
mainly in Latin America, foreign currency hedge instruments are not
available or are cost prohibitive. The exposures in these countries are
addressed through managing net asset positions and borrowing or
investing in a combination of local currency and U.S. dollars.
As of June 30, 1995, 1994 and 1993, the Company had net foreign
exchange forward contracts to sell $72.2 million, $142.5 million and
$225.5 million, respectively, of primarily European and Canadian
currencies to hedge its net investments. These contracts generally
mature in less than two years, except for contracts to sell $8.0 million
in British pounds in fiscal 1998. Unrealized (losses) gains as of June
30, 1995, 1994 and 1993 were $(9.9) million, $(4.0) million and $10.3
million, respectively. The carrying value of these contracts
approximates fair value.
In fiscal 1988, the Company swapped $15.0 million of long-term debt
for 27.9 million in deutsche mark (DM) denominated long-term debt,
effectively hedging its German net investment. The DM swap
agreement requires the Company to re-exchange 27.9 million DM for
$15.0 million in August 1997 and to make semiannual interest
payments of 0.9 million DM through August 1997. The DM swap was
included in long-term debt as of June 30, 1995, 1994 and 1993 for
$20.2 million, $17.5 million and $16.3 million, respectively. The long-
term debt is marked to market as the U.S. dollar/DM exchange rate
changes. Because of the sale of the European pet food business, the net
investment in Germany has been reduced to the point where the DM
swap is no longer effective as a net investment hedge, requiring any
mark to market adjustment to be charged or credited to the
consolidated income statement.
55
THE QUAKER OATS COMPANY AND SUBSIDIARIES
To offset this charge or credit, the Company entered into a foreign
exchange forward contract and the net effect on the consolidated
income statement for fiscal 1995 was not material. The interest
payments are subject to exchange rate fluctuations, but the effect on the
Company's consolidated income statements has not been material.
The Company uses options to hedge currency fluctuations on certain
anticipated purchases denominated in foreign currencies. As of June
30, 1995, 1994 and 1993, the Company had options to sell Italian lire
and purchase U.S. dollars for $57.9 million, $77.0 million and $91.2
million, respectively. In the event of unfavorable currency
fluctuations, the options are exercised resulting in a gain which offsets
the higher cost of the purchases. Deferred unrecognized losses related
to these options were $6.3 million, $9.0 million and $6.9 million as of
June 30, 1995, 1994 and 1993, respectively. The fair values of
outstanding purchased foreign currency options as of June 30, 1995,
1994 and 1993, based on broker quotes, were $2.0 million, $2.7 million
and $3.3 million, respectively.
Included in the consolidated income statements were (losses) gains of
$(2.8) million, $1.1 million and $6.2 million in fiscal 1995, 1994 and
1993, respectively, from foreign currency hedge instruments.
The Company actively monitors its interest rate exposure. In fiscal
1995, the Company entered into interest rate cap agreements with a
notional value of $600.0 million. The cap agreements were used to
hedge floating interest rate risk. As of June 30, 1995, there were no
interest rate cap agreements in place. The Company also entered into
interest rate swap agreements with a notional value of $150.0 million.
The swap agreements were used to hedge fixed interest rate risk.
Included in the consolidated balance sheet as of June 30, 1995 was
$9.9 million of prepaid interest expense as settlement of $136.0 million
of interest rate swap agreements. Prepaid interest expense will be
recognized in the consolidated income statement on a straight-line basis
over the life of the swap agreements, which range from three to 10
years. The carrying value of the settled interest rate swap agreements
approximates fair value. The fair value of the interest rate swap
agreements which are not yet settled was $1.7 million. Included in
interest expense was $1.1 million related to the interest rate cap and
swap agreements.
The Company uses commodity options and futures contracts to reduce
its exposure to commodity price changes. The Company regularly
hedges purchases of oats, corn, wheat, coffee beans and orange juice
concentrate. Of the $3.38 billion in cost of goods sold, approximately
$250 million to $300 million is in commodities that may be hedged.
The Company's strategy is to typically hedge certain production
requirements for various periods up to twelve months. As of June 30,
1995, approximately 33 percent of hedgeable production requirements
for the next twelve months were hedged. Deferred unrecognized
(losses) gains related to commodity options and futures contracts as of
June 30, 1995, 1994 and 1993 were $(0.1) million, $(4.4) million and
$0.4 million, respectively. Realized losses charged to cost of goods
sold in fiscal 1995, 1994 and 1993 were $5.9 million, $0.2 million and
$1.9 million, respectively. The fair values of these commodity
instruments as of June 30, 1995, 1994 and 1993, based on quotes from
brokers, were net losses of $4.3 million, net gains of $7.3 million and
net losses of $1.0 million, respectively.
The carrying value of cash and cash equivalents and short-term debt
approximates fair value because of the short-term maturity of the
instruments. The fair value of long-term debt was $1.16 billion, $779.7
million and $730.7 million as of June 30, 1995, 1994 and 1993,
respectively, which was based on market prices for the same or similar
issues or on the current rates offered to the Company for similar debt of
the same maturities. The carrying value of long-term debt as of June
30, 1995, 1994 and 1993 was $1.10 billion, $759.5 million and $632.6
million, respectively.
The counterparties to the Company's financial instruments are major
financial institutions. The Company continually evaluates the
creditworthiness of the counterparties and has never experienced, nor
does it anticipate nonperformance by any of its counterparties.
Note 18
Litigation
On December 18, 1990, Judge Prentice H. Marshall of the United
States District Court for the Northern District of Illinois entered
judgment against the Company in favor of Sands, Taylor & Wood Co.,
holding that the use of the words "thirst aid" in advertising Gatorade
thirst quencher infringed the Plaintiff's rights in the trademark
THIRST-AID. On July 9, 1991, Judge Marshall entered a judgment of
$42.6 million, composed of $31.4 million in principal, prejudgment
interest of $10.6 million, and fees, expenses and costs of $0.6 million.
The order enjoined use of the phrase "THIRST-AID" in connection
with the advertising or sale of Gatorade thirst quencher in the United
States. The Company appealed the judgment. On September 2, 1992,
the Court of Appeals for the Seventh Circuit affirmed the finding of
infringement, but found that the monetary award was an inequitable
"windfall" to the Plaintiff, and it therefore remanded the case to the
District Court. On June 7, 1993, Judge Marshall issued a judgment on
remand of $26.5 million, composed of $20.7 million in principal,
prejudgment interest of $5.4 million, and fees, expenses and costs of
$0.4 million. The Company appealed this
56
judgment. On September 13, 1994, the Court of Appeals
affirmed the lower court's award of a reasonable royalty
and prejudgment interest, but again remanded the
case to allow the District Court to explain the enhancement of the
royalty award. On April 11, 1995, Judge Marshall affirmed his prior
ruling and the Company filed another appeal. Management, with advice
from outside legal counsel, has determined that the Court of Appeals'
opinion appears to indicate a range of exposure between $18 million
and $30 million. The Company recorded a provision of $29.0 million
for this litigation in fiscal 1995.
The Company is not a party to any other pending legal proceedings or
environmental clean-up actions that it believes will have a material
adverse effect on its financial position or results of operations.
<TABLE>
Note 19
Quarterly Financial Data (Unaudited)
<CAPTION>
Dollars in Millions (Except Per Share Data)
First Second Third Fourth
1995 Quarter(a) Quarter Quarter(b) Quarter(c)
<S> <C> <C> <C> <C>
Net sales $1,636.4 $1,507.9 $1,633.5 $1,587.4
Cost of goods sold 825.2 791.2 871.0 894.1
Gross profit $ 811.2 $ 716.7 $ 762.5 $ 693.3
Income before cumulative
effect of accounting
change $ 61.4 $ 34.4 $ 366.1 $ 344.2
Net income $ 57.3 $ 34.4 $ 366.1 $ 344.2
Per common share:
Income before cumulative
effect of accounting
change $ 0.45 $ 0.25 $ 2.73 $ 2.57
Net income $ 0.42 $ 0.25 $ 2.73 $ 2.57
Cash dividends declared $ 0.285 $ 0.285 $ 0.285 $ 0.285
Market price range:
High $ 42 1/2 $ 38 3/4 $ 36 1/2 $ 37 1/2
Low $35 3/16 $ 29 3/4 $ 30 1/4 $ 32 1/8
<FN>
(a)Includes an $18.4 million pretax provision ($11.0 million after-tax or $.08
per share) for estimated litigation costs. First quarter per share data have
been restated to reflect the fiscal 1995 two-for-one stock split-up.
(b)Includes a $513.0 million pretax gain ($322.2 million after-tax or $2.41 per
share) for the sale of the North American pet food business and a $4.9 million
pretax gain ($2.8 million after-tax or $.02 per share) for the sale of the Dutch
honey business.
(c)Includes a $487.2 million pretax gain ($272.6 million after-tax or $2.04 per
share) for the sale of the European pet food business; a $74.5 million pretax
gain ($43.9 million after-tax or $.33 per share) for the sale of the Mexican
chocolate business; a $91.2 million pretax gain ($53.1 million after-tax or $.40
per share) for the sale of the U.S. bean and chili businesses; a $76.5 million
pretax charge ($46.1 million after-tax or $.35 per share) for cost-reduction and
realignment activities; and an additional $10.6 million pretax provision ($6.2
million after-tax or $.05 per share) for estimated litigation costs.
Dollars in Millions (Except Per Share Data)
<CAPTION>
1994 (a) First Second Third Fourth
Quarter Quarter Quarter Quarter(b)
<S> <C> <C> <C> <C>
Net sales $ 1,534.3 $1,353.9 $ 1,449.2 $ 1,617.6
Cost of goods sold 749.8 670.1 701.5 804.8
Gross profit $ 784.5 $ 683.8 $ 747.7 $ 812.8
Net income $ 91.4 $ 42.8 $ 73.8 $ 23.5
Per common share:
Net income $ 0.66 $ 0.31 $ 0.54 $ 0.17
Cash dividends declared $ 0.265 $ 0.265 $ 0.265 $ .0265
Market price range:
High $37 15/16 $ 38 1/8 $ 35 9/16 $ 41
Low $ 31 1/4 $33 1/16 $30 15/16 $ 31
<FN>
(a) Per share data reflect the fiscal 1995 two-for-one stock split-up.
(b)Includes a $118.4 million pretax restructuring charge ($72.8 million after-
tax or $.55 per share) for workforce reductions, plant consolidations and
product discontinuations and a $9.8 million pretax gain (or $.07 per share) for
the sale of a business in Venezuela.
</TABLE>
57
Report of Independent Public Accountants
To the Shareholders of The Quaker Oats Company:
We have audited the accompanying consolidated balance sheets of The
Quaker Oats Company (a New Jersey corporation) and subsidiaries as
of June 30, 1995, 1994 and 1993, and the related consolidated
statements of income, common shareholders' equity and cash flows for
the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Quaker Oats
Company and subsidiaries as of June 30, 1995, 1994 and 1993, and the
results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
As indicated in Note 12, effective July 1, 1992, the Company changed
their accounting for postretirement benefits other than pensions and
effective July 1, 1994, the Company changed their accounting for
postemployment benefits. As indicated in Note 16, effective July 1,
1992, the Company changed their accounting for income taxes.
Chicago, Illinois,
August 1, 1995
Report of Management
Management is responsible for the preparation and integrity of the
Company's financial statements. The financial statements have been
prepared in accordance with generally accepted accounting principles
and necessarily include some amounts that are based on management's
estimates and judgment.
To fulfill its responsibility, management's goal is to maintain strong
systems of internal controls, supported by formal policies and
procedures that are communicated throughout the Company.
Management regularly evaluates its systems of internal controls with an
eye toward improvement. In addition, during audits conducted by the
independent accountants and the internal auditors, management
regularly receives recommendations to strengthen or modify internal
controls. This year, as a result of its major business portfolio and
organizational changes, some of the Company's internal control
systems did not operate as effectively as before the changes. While no
material control weaknesses have been brought to management's
attention, the Company is taking action to improve its internal control
systems.
Our independent public accountants, Arthur Andersen LLP, have
audited the financial statements and have rendered an opinion as to the
statements' fairness in all material respects. During the audit, they
obtain an understanding of the Company's internal control systems and
perform tests and other procedures to the extent required by generally
accepted auditing standards.
The Board of Directors pursues its oversight role with respect to the
Company's financial statements through the Audit Committee, which is
composed solely of non-management directors. The Audit Committee
meets periodically with the independent public accountants, internal
auditors and management to assure that all are properly discharging
their responsibilities. The Audit Committee approves the scope of the
annual audit and reviews the recommendations the independent public
accountants have for improving internal accounting controls. The
Board of Directors, on recommendation of the Audit Committee,
engages the independent public accountants, subject to shareholder
approval.
Both Arthur Andersen LLP and the internal auditors have unrestricted
access to the Audit Committee.
58
Additional 10-K Information
<TABLE>
Description of Property
As of June 30, 1995, the Company operated 53 manufacturing plants
in 18 states and 12 foreign countries and owned or leased distribution
centers and sales offices in 22 states and 24 foreign countries. The
number of locations utilized by each segment of the business was as
follows:
<CAPTION>
Owned and Leased Owned and Leased Owned and Leased
Mfg. Locations Distribution Centers Sales Offices
Geographic Segment U.S. Foreign U.S. Foreign U.S. Foreign
<S> <C> <C> <C> <C> <C> <C>
U.S. and Canadian
Grocery Products 30 3 12 - 42 5
International Grocery
Products - 20 - 20 - 45
Total 30 23 12 20 42 50
</TABLE>
The Company owns a research and development laboratory in
Barrington, Illinois. The corporate offices are maintained in leased
space in downtown Chicago, Illinois. Management believes
manufacturing, distribution and office space owned and leased are
suitable and adequate for the business and productive capacity is
appropriately utilized.
Trademarks
The Company and its subsidiaries own a number of trademarks and are
not aware of any circumstances that could adversely affect the
continued use of these trademarks. Among the most important of the
domestic trademarks owned by the Company are Quaker, Cap'n
Crunch, Quaker Toasted Oatmeal, Life, Quaker 100% Natural and
Quaker Oatmeal Squares for breakfast cereals; Gatorade for thirst-
quenching beverages; Snapple and Made From the Best Stuff on Earth
for teas and juice drinks; Quaker and Quaker Chewy for grain-based
snacks; Rice-A-Roni and Near East for value-added rice and grain
products, Pasta Roni for value-added pasta; Nile Spice for variety
meals-in-a-cup; Golden Grain and Mission for pasta; Quaker and Aunt
Jemima for mixes, syrups and corn goods; Aunt Jemima and Celeste for
frozen foods; Ardmore Farms for citrus and fruit juices; Continental,
Maryland Club and Continental WB for coffee; and Mrs. Richardson's
for ice cream toppings. Many of the grocery product trademarks
owned by the Company in the United States are registered in foreign
countries in which the Company does substantial business.
Internationally, key trademarks owned include: Quaker, Cruesli, Honey
Monster, Sugar Puffs and Scott's for breakfast cereals, Cuore for edible
oils; Coqueiro for fish; Toddy and ToddYnho for chocolate beverages;
and Adria for pasta products.
U.S. and Canadian Grocery Products Description
The Company is a major participant in the competitive packaged
food and beverage industry in the United States and Canada and is a
leading manufacturer of sports beverages, premium iced tea and
single-serve juice drinks, hot cereals, pancake mixes, grain-based
snacks, cornmeal, hominy grits and value-added rice products. In
addition, the Company is the second-largest manufacturer of syrups
and value-added pasta products and is among the five largest
manufacturers of ready-to-eat cereals and dry pasta products. The
Company competes with a significant number of both large and
small companies on the basis of price, value, quality and
convenience, among other attributes. The Company's grocery
products are purchased by consumers through a wide range of food
distributors. The Company utilizes both its own and broker sales
forces and has distribution centers throughout the country, each of
which carries an inventory of most of the Company's grocery
products. In addition, the Company markets a line of over 400 items
for the food service market, including Quaker hot and ready-to-eat
cereals; Aunt Jemima frozen breakfast products and mixes;
Continental coffee; Ardmore Farms single-serve frozen fruit juices;
Gatorade thirst quencher; a specialty line of custom-blended dry
baking mixes; ready-to-bake biscuits; Arnie's Bagelicious bagels and
Petrofsky's bagels; Burry cookies and crackers; and Mrs.
Richardson's syrups, ice cream toppings and condiments.
International Grocery Products Description
The Company is broadly diversified in the packaged food and beverage
industry, both geographically and by product line. Competitive
conditions vary by country. The Company manufacturers and markets
its products in many countries throughout Europe, Latin America and
the Asia/Pacific region. It is the leading hot cereals producer in many
countries and has other leading market positions for products in a
number of countries, including the following: the leading pasta
manufacturer in Brazil; the leading producer of edible seed oils in Italy;
the leading canned fish processor in Brazil; and the leading sports
beverage distributor in Mexico, Korea, Italy, Argentina, Australia,
Brazil, Venezuela, Colombia and the Philippine Islands.
Raw Materials
The raw materials used in manufacturing include oats, wheat, corn, rice,
sweeteners, tea, orange and other juice concentrate, almonds, coffee beans,
raisins, beef, chicken, corn oil, shortening and fish, as well as a variety of
packaging materials. These products are purchased mainly in the open
market. Supplies of all raw materials have been adequate and continuous.
59
Directors
Members of the
Board of Directors
Frank C. Carlucci 1*,5,6
Chairman
The Carlyle Group
(Banking)
Washington, D.C.
Silas S. Cathcart 2*,5
Retired Chairman
Illinois Tool Works
(Diversified Products)
Chicago, Illinois
Kenneth I. Chenault 1,4,5,6
Vice Chairman
American Express
Company
(Financial and Travel
Services)
New York, New York
Judy C. Lewent 1,4,5,6
Senior Vice President and
Chief Financial Officer
Merck & Co., Inc.
(Pharmaceuticals)
Whitehouse Station,
New Jersey
Vernon R. Loucks, Jr. 2,3,5*
Chairman and Chief
Executive Officer
Baxter International Inc.
(Medical Care Products)
Deerfield, Illinois
Thomas C. MacAvoy 1,5,6
Paul M. Hammaker
Professor of Business
Administration
Darden Graduate
School of Business
Administration
University of Virginia
Charlottesville, Virginia
Philip A. Marineau 3
President and
Chief Operating Officer
Luther C. Mckinney 3
Senior Vice President
Law and Corporate Affairs
Gertrude G. Michelson 2,4,5,6*
Federated Department
Stores, Inc.
(Retail Merchandising)
New York, New York
Walter J. Salmon 4,5
Stanley Roth, Sr.
Professor of Retailing
Harvard Business School
Boston, Massachusetts
William D. Smithburg 3,5
Chairman and
Chief Executive Officer
William L. Weiss 2,3,4*,5
Chairman Emeritus
Ameritech Corporation
(Telecommunications)
Chicago, Illinois
Board Committees
1 Audit
2 Compensation
3 Executive
4 Finance
5 Nominating
(William D. Smithburg
Ex Officio member)
6 Public Responsibility
* Denotes Committee Chairman
Officers
Senior Officers
William D. Smithburg +
Age 57
Chairman and
Chief Executive Officer
Joined Quaker in 1966.
Elected to present office
in 1983.
Philip A. Marineau +
Age 48
President
and Chief Operating
Officer
Joined Quaker in 1972.
Elected to present office
in 1993.
Luther C. McKinney +
Age 64
Senior Vice President
Law and Corporate
Affairs
Joined Quaker in 1974.
Elected to present office
in 1994.
Douglas J. Ralston +
Age 50
Senior Vice President
Human Resources
Joined Quaker in 1981
Elected to present
office in 1992.
Robert S. Thomason +
Age 50
Senior Vice President
Finance and Chief
Financial Officer
Joined Quaker in 1971.
Elected to present office
in March 1995.
Corporate Staff
Officers
Jeffrey A. Atkins +
Age 46
Vice President
Corporate Planning
Joined Quaker in 1977.
Elected to present
office in April 1995.
John H. Calhoun
Vice President
International Law
Penelope C. Cate
Vice President
Government Relations
Janet K. Cooper +
Age 42
Vice President and
Treasurer
Joined Quaker in 1978.
Elected to present office
in 1992.
Margaret M. Eichman
Vice President
Investor Relations and
Corporate
Communications
Thomas L. Gettings +
Age 38
Vice President and
Corporate Controller
Joined Quaker in 1987.
Elected to present office
in 1992.
Mary M. Hoskins
Assistant Treasurer
R. Thomas Howell, Jr. +
Age 53
Vice President
General Corporate
Counsel
and Corporate Secretary
Joined Quaker in 1971.
Elected to present
office in 1994.
60
John G. Jartz
Vice President
Business Development
James G. LeGere
Vice President
Information Services
Mart C. Matthews
Vice President and
Associate General
Corporate Counsel
Kenneth W. Murray
Vice President
Internal Auditing
W. Stephen Perry +
Age 53
Vice President
Corporate Tax
Joined Quaker in 1994.
Elected to present
office in 1994.
Arthur R. Skantz
Vice President
Corporate Growth
U.S. and Canadian
Quaker
Food Products
Douglas W. Mills +
Age 49
Executive Vice President
Joined Quaker in 1969.
Elected to present office
in 1994.
John A. Boynton +
Age 41
Vice President and
Chief Customer Officer
Joined Quaker in 1981.
Elected to present
office in 1994.
Polly B. Kawalek
President - Snacks
David L. Morton
President and
Chief Executive Officer
The Quaker Oats
Company
of Canada Limited
Russell A. Young +
Age 47
Vice President
Supply Chain
Joined Quaker in 1971.
Elected to present office
in March 1995.
Worldwide Beverages
James F. Doyle +
Age 43
Executive Vice President
Joined Quaker in 1981.
Elected to present
office in 1994.
Donald R. Uzzi
President - Beverages,
North America
A.J. Brown
President - Beverages,
Europe
Michael T. Tay
President - Beverages,
North Asia
Bernardo Wolfson
President - Beverages,
Latin America
John S. Breuer
President - Beverages,
South Asia
Worldwide Quaker
Food Service
A. Stephen Diamond
Vice President -
President
Paul V. Baron
Vice President and
Business Leader
North American Food
Service and In-Store Bake
Dale W. Tremblay
Vice President and
Business Leader
McDonald's
Business Unit
International Quaker
Food Products
Barbara R. Allen +
Age 42
Executive Vice President
Joined Quaker in 1977.
Elected to present
office in March 1995.
Europe
Franco Cianci
President
Italian Products
George F. Sewell
President
Cereals, Europe
Latin America
Mark A. Shapiro
Vice President -
President, Latin American
Quaker Food Products
Pacific
William C. Trotter
Vice President -
President
Quaker Pacific
+ also Executive Officers as
defined by Securities and Exchange
Commission regulations. Such
Executive Officers serve at the
pleasure of the Board of Directors.
All Executive Officers (except
W. Stephen Perry, who joined the
Company in January 1994 and
was formerly a tax partner of
Coopers & Lybrand) have been
employed by The Quaker Oats
Company in an executive capacity
for five years or more.
61
Shareholder Information
Dividend Reinvestment and Stock Purchase Plan
Owners of Quaker Oats common stock may use the Company's Dividend
Reinvestment and Stock Purchase Plan to purchase additional shares,
commission-free, through automatic dividend reinvestment and/or optional
cash investments. A booklet describing the Plan and enrollment procedures
is available on request from the Harris Bank.
Dividends
Cash dividends on Quaker common stock have been paid for 90 consecutive years.
Dividends are generally declared on a quarterly basis, with holders as of the
record
date being entitled to receive the cash dividend on the payable date.
Shareholder Services
Harris Trust and Savings Bank acts as transfer agent and registrar for the
Company stock and maintains all primary shareholder records. Shareholders
may obtain information relating to their share positions, dividends, stock
transfer requirements, lost certificates, dividend reinvestment accounts
and other related matters by telephoning the Shareholder Hotline toll-free
at 1-800-344-1198.
Form 10-K
This Annual Report includes all financial statements required by Form 10-K.
If you request a Form 10-K, you will receive the annual report, proxy
statement, and the Form 10-K cover page, exhibit list and conformed
signature page.
Annual Meeting
Shareholders are cordially invited to attend the Annual Meeting, which will be
held at the Hotel Nikko Chicago, 320 North Dearborn Street, Chicago, Illinois
on Wednesday, November 8, 1995, at 9:30 a.m. (CST).
Investor Relations
Security analysts, investment professionals, and shareholders should direct
their business-related inquiries to:
Investor Relations - Suite 27-7
or call (312) 222-7818
Media Relations
Copies of press releases are available at no charge through PR Newswire's
Company News On-Call fax service.
1-800-758-5804, extension 103689.
Press and media related inquiries should be addressed to:
Media Relations - Suite 27-6
or call (312) 222-7388
Consumer Affairs
Inquiries regarding our products should be
addressed to:
Consumer Affairs
The Quaker Oats Company
P.O. Box 049003
Chicago, Illinois 60604-9003
or call 1-800-494-7843
64
Corporate Headquarters Mailing Address: Street Address:
The Quaker Oats Quaker Tower
Company 321 North Clark Street
P.O. Box 049001 Chicago, Illinois 60610-4714
Chicago, Illinois (312) 222-7111
60604-9001
Transfer Agent, Harris Trust and Savings Bank, Shareholder Services
Registrar and Dividend Division
Disbursing Agent P.O. Box 755, 311 West Monroe - 14th Floor
Chicago, Illinois 60690-0755
1-800-344-1198
Dividend Reinvestment Harris Trust and Savings Bank, Dividend Reinvestment
and and Stock Purchase Plan
Stock Purchase Plan P.O. Box 95894
Chicago, Illinois 60690-9938
1-800-344-1198
Independent Public Arthur Andersen LLP
Accountants 33 West Monroe
Chicago, Illinois 60603
(312) 580-0033
Shares Listed New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
The Stock Exchange, London
The Quaker Oats Company
was incorporated in 1901 under the
laws of the state of New Jersey.
Ticker Symbol: OAT
65
EXHIBIT 21
State of
Subsidiary Incorporation
THE QUAKER OATS COMPANY
ACTIVE DOMESTIC SUBSIDIARIES AS OF 7/1/95
State of
Subsidiary Incorporation
Ardmore Farms, Inc. Pennsylvania
Arnie's Bagelicious Bagels, Inc. Nebraska
Bob's Farms, Inc. Delaware
Continental Coffee Products Company Delaware
The Gatorade Company Delaware
Gatorade Puerto Rico Company Delaware
Golden Grain Company California
Grocery International Holdings, Inc. Delaware
Liqui-Dri Foods, Inc. Kentucky
Mr. Natural, Inc. Delaware
Q-Bear Company Delaware
Q-Ketchikan Company Delaware
QO Acquisition Corp. Delaware
QO Coffee Holdings, Inc. Delaware
Quaker Leasing Corp. Delaware
Quaker Oats Asia, Inc. Delaware
Quaker Oats Europe, Inc. Illinois
Quaker Oats Foreign Sales Corporation Barbados
Quaker Oats Holdings, Inc. Delaware
Quaker Oats Music, Inc. Delaware
Richardson Foods Corporation New York
Rockford Farms, Inc. Delaware
Snapple Beverage Corp. Delaware
Snapple Caribbean Corp. Delaware
Snapple Distributors of Orange County, Inc. Delaware
Snapple Distribution Corp. Delaware
Snapple Finance Corp. Delaware
Snapple International Corp. Delaware
Snapple-Tetley Tea Ventures Corp. Delaware
Snapple-Tetley Tea Ventures, L.P. Delaware
Snapple Worldwide Corp. Delaware
Southwest Snapple Holdings Corp. Delaware
Stokely-Van Camp, Inc. Indiana
ACTIVE FOREIGN SUBSIDIARIES AS OF 7/1/95
Subsidiary Country
Elaboradora Argentina de Cereales, S.A. Argentina
Quaker Oats Australia Limited Australia
The Gatorade Company of Australia Pty. Ltd. Australia
EH (Holdings) Limited Bermuda
QUIC Ltd. Bermuda
Quaker Brasil Ltda. Brazil
The Quaker Oats Company of Canada Limited Canada
Beverages Gatorade (Chile) Ltda. Chile
Productos Quaker, S.A. Colombia
Snapple Beverage (Europe) Limited England
Quaker Oats Limited England
The Quaker Beverages GmbH Germany
Quaker-Chiari & Forti S.p.A. Italy
Quaker Oats Japan, Ltd. Japan
Quaker Products (Malaysia) Sdn. Bhd. Malaysia
Quaker de Mexico, S.A. de C.V. Mexico
Snapple Beverages de Mexico, S.A. de C.V. Mexico
Snapple Beverages Services de Mexico, S.A. de C.V. Mexico
Subsidiary Country
Quaker Oats B.V. The Netherlands
Gatorade Portugal-Services de Marketing S.A. Portugal
QO Puerto Rico, Inc. Puerto Rico
Quaker Oats Iberia, S.A. Spain
Nevex, C.A. Venezuela
Productos Quaker, C.A. Venezuela
DOMESTIC JOINT VENTURES
Rhone Poulenc The Quaker Oats Company 50%
Rhone Poulenc 50%
FOREIGN JOINT VENTURES
Standard Foods Singapore Pte. Ltd. The Quaker Oats Company 51%
(holding company for Chinese company Standard Foods Taiwan 49%
- - Suzhou Standard Foods Co.)
Beverages Gatorade (Chile) Limitada Stokely-Van Camp, Inc. 99.9%
The Quaker Oats Company 0.1%
Shanghai Quaker Oats Beverages Co. Ltd. The Quaker Oats Company 80%
Shanghai Bomy Foodstuffs
Co. Ltd. 10%
Chou Chin Industrial
(H.K.) Ltd. 10%
P.T. AdeS Alfindo Putrasetia The Quaker Oats Company 90%
Indonesia Alfi Gunawan 10%
(President/Director)
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated August 1, 1995, included in The Quaker
Oats Company annual report to shareholders for the year ended June 30, 1995,
into this form 10-K and into the Company's previously filed Registration
Statement File Nos. 33-13980, 33-13981, 33-32970, 2-79503 and 33-33253.
/s/ Arthur Andersen LLP
Chicago, Illinois
September 25, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995 JUN-30-1995 JUN-30-1995
<PERIOD-END> SEP-30-1994 DEC-31-1994 MAR-31-1995 JUN-30-1995
<CASH> 185 103 106 102
<SECURITIES> 0 0 0 0
<RECEIVABLES> 537 568 591 574
<ALLOWANCES> 23 22 27 27
<INVENTORY> 398 481 478 406
<CURRENT-ASSETS> 1326 1357 1400 1317
<PP&E> 2158 2283 2195 1843
<DEPRECIATION> 934 950 909 730
<TOTAL-ASSETS> 3133 5061 4964 4827
<CURRENT-LIABILITIES> 1348 2974 2496 1813
<BONDS> 722 1026 1107 1103
<COMMON> 420 840 840 840
0 0 0 0
100 100 100 100
<OTHER-SE> (35) (470) (135) 208
<TOTAL-LIABILITY-AND-EQUITY> 3133 5061 4964 4827
<SALES> 1636 3144 4778 6365
<TOTAL-REVENUES> 1636 3144 4778 6365
<CGS> 825 1616 2487 3382
<TOTAL-COSTS> 825 1616 2487 3382
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 2 4 6 11
<INTEREST-EXPENSE> 18 44 92 119
<INCOME-PRETAX> 102 165 751 1360
<INCOME-TAX> 41 69 289 554
<INCOME-CONTINUING> 61 96 462 806
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 4 4 4 4
<NET-INCOME> 57 92 458 802
<EPS-PRIMARY> .84 .67 3.40 5.97
<EPS-DILUTED> .82 .66 3.31 5.80
</TABLE>
