[Quaker Logo]
The Quaker Oats
Company
Notice of
Annual Meeting
and
Proxy Statement
Fiscal Year Ended December 31, 1998
April 12, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
The Quaker Oats Company on Wednesday, May 12, 1999, at 9:30 a.m. (CDT) at the
Rosemont Conference Center, Second Floor Ballroom, which is located in the
Rosemont Convention Center, 5555 North River Road, Rosemont, Illinois.
The items of business to be acted on during the Meeting include: the election
of directors; the ratification of the appointment of Arthur Andersen LLP as
independent public accountants for the year ending December 31, 1999; the
adoption of a new incentive bonus plan to preserve the tax deductibility of
bonuses paid to certain executives; and such other business as may properly
come before the Meeting or any adjournment thereof, including two shareholder
proposals. The accompanying proxy statement contains complete details on the
proposals and other matters.
Your participation in the affairs of the Company is important, regardless of
the number of shares you hold. To insure your representation at the Meeting,
whether or not you are able to be present, please complete and return the
enclosed proxy card as soon as possible. If you do attend the Meeting, you may
then revoke your proxy and vote in person if you so desire.
I look forward to seeing you on May 12. Refreshments will be served after the
Meeting, when the members of the Board of Directors hope to visit with you.
Cordially,
/s/Robert S. Morrison
Robert S. Morrison
Chairman, President and Chief Executive Officer
THE QUAKER OATS COMPANY
321 North Clark Street
Chicago, Illinois 60610
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
FISCAL YEAR ENDED DECEMBER 31, 1998
T A B L E O F C O N T E N T S
PAGE
Notice of Annual Meeting of Shareholders 3
Proxy Statement 4
General Information 4
Election of Directors 5
Corporate Governance 8
Ownership of Company's Securities 12
Executive Compensation 14
Compensation Committee Report 20
Performance Graph 22
Directors' Proposals 22
Shareholders' Proposals 25
Shareholder Proposals for 2000 Annual Meeting 27
Other Business 27
THE QUAKER OATS COMPANY
321 North Clark Street
Chicago, Illinois 60610
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1999
April 12, 1999
To the Shareholders of The Quaker Oats Company:
Notice is hereby given that the Annual Meeting of Shareholders of The Quaker
Oats Company will be held at 9:30 a.m. (CDT), on Wednesday, May 12, 1999, at
the Rosemont Conference Center, Second Floor Ballroom, which is located in the
Rosemont Convention Center, 5555 North River Road, Rosemont, Illinois, for the
following purposes:
To elect two directors in Class I to serve for three-year terms expiring
in May, 2002 or until their successors are elected and qualified;
To ratify the Board of Directors' appointment of Arthur Andersen LLP as
independent public accountants for the Company for 1999;
To consider and take action on a proposal to adopt an Executive Incentive
Bonus Plan to preserve the tax deductibility of bonuses paid to certain
executives; and
To transact such other business as may properly come before the Meeting or
any adjournment thereof, including consideration of shareholder proposals
concerning: 1) annual election of directors; and 2) shareholder rights
plans.
By Board of Directors' resolution, only shareholders of record as of the close
of business on March 17, 1999 are entitled to notice of and to vote at the
Meeting. To insure your representation at the Meeting, whether or not you are
able to attend, please complete and return the enclosed proxy card as soon as
possible. If you do attend the Meeting, you may then revoke your proxy and
vote in person if you so desire.
To obtain an admittance card for the Meeting, please complete the enclosed
reservation form and return it with your proxy card. If your shares are held
by a bank or broker, you may obtain an admittance card by returning the
reservation form they forwarded to you. If you do not receive a reservation
form, you may obtain an admittance card by sending a written request,
accompanied by proof of share ownership (such as your brokerage statement) to
Shareholder Services, The Quaker Oats Company, P.O. Box 049001, Suite 25-9,
Chicago, Illinois 60604-9001. For your convenience, we recommend that you
bring your admittance card to the Meeting so you can avoid the registration
lines and proceed directly to the Meeting. However, if you do not have an
admittance card by the time of the Meeting, please bring proof of share
ownership to the registration area located on the second floor of the
Conference Center, where our staff will assist you.
By order of the Board of Directors,
/s/John G. Jartz
John G. Jartz
Corporate Secretary
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THE QUAKER OATS COMPANY
321 North Clark Street
Chicago, Illinois 60610
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1999
April 12, 1999
GENERAL INFORMATION
This proxy statement is being mailed to shareholders on or about April 12, 1999
and is furnished in connection with the solicitation of proxies by the Board of
Directors of The Quaker Oats Company (Board and Company) for use at the Annual
Meeting of Shareholders to be held on May 12, 1999, including any adjournment
thereof (Annual Meeting or Meeting).
The Meeting is called for the purposes stated in the accompanying Notice of
Annual Meeting. All holders of the Company's $5.00 par value common stock and
Series B ESOP Convertible Preferred Stock (ESOP Preferred Stock) as of the
close of business on March 17, 1999, are entitled to vote at the Meeting. As
of that date, there were 135,304,309 outstanding shares of common stock and
967,832 outstanding shares of ESOP Preferred Stock. Treasury shares are not
included in the totals. On each matter coming before the Meeting, a common
stock shareholder is entitled to one vote for each share of stock held as of
the record date and an ESOP Preferred Stock shareholder is entitled to 2.2
votes for each share held as of the record date.
Shares representing a majority of the eligible votes must be represented in
person or by proxy at the Meeting in order to constitute a quorum for the
transaction of business. A proxy marked "abstain" on a matter will be
considered to be represented at the Meeting, but not voted for purposes of the
election of directors and other matters put to a shareholder vote at the
Meeting, and therefore will have no effect on the vote. Shares registered in
the names of brokers or other "street name" nominees will be considered to be
voted only as to those matters actually voted, and will not be considered for
any purpose as to the matters with respect to which a beneficial holder has not
provided voting instructions (commonly referred to as "broker non-votes").
If a proxy is properly signed and is not revoked by the shareholder, the shares
it represents will be voted at the Meeting by the Proxy Committee in accordance
with the instructions of the shareholder. If no specific instructions are
designated, the shares will be voted as recommended by the Board.
A proxy may be revoked at any time before it is voted at the Meeting. Any
shareholder who attends the Meeting and wishes to vote in person may revoke his
or her proxy at that time. Otherwise, revocation of a proxy must be
communicated in writing to the Company's Corporate Secretary, P.O. Box 049001,
Suite 27-9, Chicago, Illinois 60604-9001.
If a shareholder is a participant in the Company's Salaried Employees' 401(k)
Plan, Hourly Employees' 401(k) Plan, or the Harris DOCS (Direct Ownership of
Corporate Shares) Program, the proxy card will represent the number of shares
registered in the participant's name and the number of whole and fractional
shares credited or allocated to the participant's account under the plans,
except that fractional shares will not be voted under the Harris DOCS Program.
For those shares held in the plans, the proxy card will serve as a direction to
the trustee or voting agent under the various plans as to how the shares in the
accounts are to be voted.
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Under the Company's Bylaws, for all matters submitted to the shareholders for a
vote, all proxies, ballots and voting tabulations that identify how
shareholders voted will be kept confidential and not be disclosed to any of the
Company's directors, officers or employees, except as follows: when disclosure
is mandated by law, when disclosure is expressly requested by a shareholder or
during a contested election for the Board.
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and other custodians, nominees and
fiduciaries for forwarding proxy materials to the beneficial owners of shares
of stock. Solicitations will be made primarily by mail, but certain directors,
officers or regular employees of the Company may solicit proxies in person or
by telephone or other means without special compensation. In addition, the
Company has retained Kissel-Blake Inc. to assist in soliciting proxies from
brokers, dealers, voting trustees, banks and other nominees and institutional
holders for a fee not to exceed $17,000 plus reimbursement of reasonable out-of-
pocket expenses.
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of the Company provides that the
members of the Board shall be divided into three classes with staggered three-
year terms. The terms of the directors in Class I expire this year. The Board
has nominated two persons for election as directors in Class I to serve for
three-year terms expiring in May, 2002, or until their successors are elected
and qualified. All nominees have consented to serve for the new term.
Biographical information (including principal occupations for the past five
years and ages as of April 12, 1999) follows for each person nominated and each
director whose term in office will continue after the Meeting.
It is the intention of those persons named in the accompanying proxy to vote in
favor of the nominees. Should any one or more of these nominees become
unavailable for election, the proxy will be voted for such other persons, if
any, as the Board may recommend.
The election of directors requires a plurality of the votes cast at the
Meeting. If all nominees are elected, the Board will consist of nine members,
including eight nonemployee directors and one director who is an officer of the
Company.
Nominees for Directors - Terms Expiring in 2002
J. Michael Losh
Director since July, 1998
Age 52
Executive Vice President and
Chief Financial Officer, General
Motors Corporation (automotive
manufacturing) since 1994;
formerly Vice President and Group
Executive of North American
Vehicle Sales, Service and
Marketing (1992 - 1994). Also a
director of Cardinal Health, Inc.
Walter J. Salmon
Director since 1971
Age 68
Stanley Roth, Sr. Professor of
Retailing, Emeritus, Harvard
Business School since 1997;
formerly Stanley Roth, Sr.
Professor of Retailing (1980-
1997) and Senior Associate Dean,
External Relations (1989-1994).
Also a director of Circuit City
Stores, Inc.; Cole National
Corp.; Hannaford Bros. Co.;
Harrah's Entertainment, Inc.;
Luby's Cafeterias, Inc.; Neiman-
Marcus Group, Inc.; and PetSmart
Corp.
<5>
Directors Continuing in Office - Terms Expiring in 2001
Frank C. Carlucci
Director 1983 - 1987 and then
since 1989
Age 68
Chairman, The Carlyle Group
(merchant banking). Also a
director of Ashland Inc.; IRI
International Corporation; Kaman
Corporation; Neurogen Corp.;
Northern Telecom Limited;
Pharmacia & Upjohn, Inc.; Sun
Resorts Ltd. N.V.; and Texas
Biotechnology Corporation.
Vernon R. Loucks, Jr.
Director since 1981
Age 64
Chairman, Baxter International
Inc. (health care products) since
January, 1999; formerly Chairman
and Chief Executive Officer (1987
- - December, 1998). Also a
director of Affymetrix, Inc.;
Anheuser-Busch Companies, Inc.;
Dun & Bradstreet Corporation; and
Emerson Electric Co.
Robert S. Morrison
Director since 1997
Age 57
Chairman, President and Chief
Executive Officer of the Company
since 1997; formerly Chairman and
Chief Executive Officer of Kraft
Foods, Inc., a division of Philip
Morris Companies, Inc. (1994-
1997); and President of General
Foods U.S.A. of Philip Morris
Companies, Inc. (1991-1994).
Directors Continuing in Office - Terms Expiring in 2000
William L. Weiss
Director since 1985
Age 69
Chairman Emeritus, Ameritech
Corporation (telecommunications)
since 1994; formerly Chairman and
Chief Executive Officer (1984 -
1994). Also a director of Abbott
Laboratories and Merrill Lynch &
Co., Inc.
<6>
Directors Continuing in Office - Terms Expiring in 2000
W. James Farrell
Director since March, 1998
Age 56
Chairman and Chief Executive
Officer, Illinois Tool Works Inc.
(engineering and industrial
components) since 1996; formerly
President and Chief Executive
Officer (1995-1996); and
Executive Vice President (1983-
1994). Also a director of Morton
International, Inc.; and Premark
International, Inc.
John H. Costello
Director since 1997
Age 51
President, Republic Industries
Inc. (automotive retailing and
rental) since January, 1999; and
Senior Executive Vice President -
Marketing, Sears, Roebuck and Co.
(1993- December, 1998).
Judy C. Lewent
Director since 1994
Age 50
Senior Vice President and Chief
Financial Officer, Merck & Co.,
Inc. (pharmaceuticals). Also a
director of Chugai MSD Co., Ltd;
Johnson & Johnson Merck Consumer
Pharmaceuticals Company; Merial
Limited; and Motorola, Inc.
<7>
CORPORATE GOVERNANCE
Board Affairs Guidelines and Policies
In July, 1998, following a thorough review of its own policies and procedures
and emerging corporate governance trends, the Board adopted comprehensive
written Board Affairs Guidelines. At the same time, the Board Affairs
Committee was established to oversee such Guidelines and to report periodically
and make recommendations to the Board concerning corporate governance matters.
Among the important principles set forth in the Guidelines are the following:
1. The Board shall be comprised of a majority of "independent directors" and
not more than three directors shall be Company employees. The term
"independent director" is defined as a director who: (i) is not and has not
been employed by the Company or its subsidiaries in an executive capacity
within the last five years; (ii) is not affiliated with a customer or
supplier of goods or services that has a material relationship with the
Company or its subsidiaries (material either to the Company or to such
customer or supplier); (iii) does not have a financially significant
personal services contract with the Company or its subsidiaries; (iv) is
not affiliated with a tax-exempt entity that receives more than 5% of its
annual contributions from the Company or its subsidiaries or employees;
(v) does not have a material business relationship with any senior
executives of the Company; and (vi) is not a spouse, parent, sibling or
child of any person described by (i) through (v).
2. The Board Affairs, Audit and Compensation Committees of the Board shall
consist entirely of independent directors.
3. Nonemployee directors are expected to retire at the first Annual Meeting of
Shareholders after attaining age 70. Employee directors shall retire at the
first Annual Meeting of Shareholders after attaining age 65 or upon their
earlier retirement, resignation or termination of employment.
4. Directors are expected to offer their resignation in the event of a change
in their primary employment responsibilities. Former Chairmen who have been
full-time employees and/or Chief Executive Officers of the Company are
expected to resign from the Board upon vacating those positions.
5. The Board Affairs Committee and the entire Board are responsible for
screening and selecting director candidates, typically with assistance from
an independent executive search firm.
6. In lieu of term limits, each director's continuation on the Board should
be reviewed by the Board Affairs Committee before re-nominating such
director for an additional term.
7. The Chairman and Chief Executive Officer should receive the approval of
the Board before accepting any outside directorships. As a general rule, the
Chairman and Chief Executive Officer and other employee directors should
serve on no more than three additional boards.
8. The Board shall periodically review its own structure, governance
principles and composition to consider whether it is functioning well in
view of its responsibilities and the evolving situation of the Company.
In furtherance of this objective, the Board shall conduct an annual
performance evaluation to solicit candid feedback from individual
directors. The collective results of such evaluation will be shared with
the entire Board.
9. The Chairman and Chief Executive Officer shall establish the agenda for
Board meetings. Nonemployee directors can suggest additional agenda items,
and the Board shall set aside time at every other Board meeting to
evaluate possible topics for future discussion. At least one Board meeting
per year shall include both a thorough review of the Company's strategic
long-range plan and the most important issues expected to affect the Company
in the future.
<8>
10.The nonemployee directors shall meet in executive session without the
Chairman and Chief Executive Officer at the end of every other regularly
scheduled Board meeting and at such other times as they deem appropriate.
The Chairman of the Board Affairs Committee will preside over such
executive sessions.
11.At the beginning of each fiscal year, the Chairman and Chief Executive
Officer must develop performance objectives for Board review and approval.
Such objectives should be based upon the specific position and needs of the
Company and should include criteria such as business performance,
accomplishment of long-term strategies and development of the management
team.
12.Following the end of each fiscal year, the Board shall formally evaluate
the Chairman and Chief Executive Officer's performance at a meeting of
nonemployee directors without the Chairman and Chief Executive Officer being
present. Such evaluation shall be based upon the objectives established by
the Board at the beginning of the fiscal year and such other factors as
the nonemployee directors deem appropriate. The results of the evaluation
shall be communicated to the Chairman and Chief Executive Officer by the
Chairman of the Compensation Committee. The performance evaluation will
also be used by the Compensation Committee and the nonemployee directors
when considering the Chairman and Chief Executive Officer's compensation.
13.The Chairman and Chief Executive Officer shall provide an annual report to
the full Board on succession planning and the development and performance of
the Company's management team. This report will include an emergency
operating plan that could be implemented in the event the Chairman and Chief
Executive Officer unexpectedly resigns, retires or becomes incapacitated.
14.Directors are expected to own and retain shares of the Company's common
stock and to increase their ownership of those shares over time. Individual
directors are expected to own at least 1,500 shares within one year of
election and 4,500 shares within three years of election. These ownership
targets have been adopted in the form of "guidelines" rather than "minimum
requirements" in order to recognize that the individual circumstances of
Board members and potential candidates may impact what is reasonable to
expect.
The foregoing summary is subject to and qualified in its entirety by the full
text of the Board Affairs Guidelines, which are available upon written request
to the Company's Corporate Secretary, P.O. Box 049001, Suite 27-9, Chicago,
Illinois 60604-9001.
Nonemployee Directors' Compensation and Benefits
Significant changes were made to the nonemployee directors' compensation and
benefits program, effective January 1, 1999, in order to more closely align the
interests of directors and shareholders. Under the revised program, the annual
cash retainer for nonemployee directors was reduced from $45,000 to $35,000.
In addition, meeting fees and unanimous consent fees (previously $1,000 for
each Board meeting, Committee meeting or written consent) were eliminated. In
lieu thereof, nonemployee directors will now receive annual stock option grants
with an estimated value of $35,000 under The Quaker Oats Company Stock Option
Plan for Outside Directors (Stock Option Plan) (see description below). Under
the revised program, nonemployee directors will also receive annual Common
Stock Unit awards valued at $35,000 under The Quaker Oats Company Stock
Compensation Plan for Outside Directors (Stock Compensation Plan) (see
description below), instead of the previously fixed annual award of 800 Common
Stock Units. Each Committee chairperson receives an additional $5,000 award
which, at the director's option, is credited under the Stock Option Plan or the
Stock Compensation Plan (prior to 1999, chair fees were paid in cash).
Nonemployee directors may elect to convert all or a portion of their cash
retainers and/or Common Stock Units received under the Stock Compensation Plan
into stock options under the Stock Option Plan. In addition to the
compensation and benefits described above, nonemployee directors are reimbursed
for appropriate travel and lodging expenses. Directors who are employees
receive no additional compensation or benefits for Board or Committee service.
Under the Deferred Compensation Plan for Directors of The Quaker Oats Company
(Deferred Compensation Plan), each nonemployee director may elect to defer the
receipt of all or a portion of his/her annual retainer until ceasing to be a
director. Prior to 1999, directors could elect to carry such deferred amounts
as Cash Units or Common Stock Units. Under the revised program, all deferred
amounts credited on or after January 1, 1999 must be carried as Common Stock
Units. Existing Cash Units are credited with interest on a monthly basis, at
the new issue 10-year "A" rated industrial bond rate. Amounts deferred as
stock units under the Deferred Compensation Plan are converted quarterly into
<9>
Common Stock Units by dividing the deferred amount by the fair market value of
the Company's common stock. Common Stock Units are also credited with dividend
equivalents which are converted into additional Common Stock Units. After a
director leaves the Board, deferred amounts may be distributed in a lump-sum or
in annual installments (not exceeding 15), as elected by the director. The
accumulated deferred amounts will be distributed in kind if held as Common
Stock Units or cash if held as Cash Units. If a director has not attained age
55 prior to leaving the Board, the distribution of deferred amounts will begin
following the director's attainment of age 55. Payment of deferred amounts may
be accelerated by the Compensation Committee for any reason following a change
in control (see "Pension Plans").
Each nonemployee director receives an annual grant valued at $35,000 under the
Stock Option Plan, based on the fair market value of the Company's common stock
on the date of grant. Committee chairpersons may also elect to receive their
annual $5,000 award as stock options under the Stock Option Plan. Furthermore,
nonemployee directors may elect to receive stock options in lieu of cash
retainers and/or Common Stock Unit awards under the Stock Compensation Plan.
For purposes of the above-described grants, the value of a stock option is
deemed to equal one-third of the value of the underlying shares of Company
common stock on the date of grant. All nonemployee director stock options are
granted at an exercise price equal to the fair market value of the Company's
common stock on the date of grant. The options vest when granted, but they may
not be exercised for at least one year. They remain exercisable until the
earlier of ten years from the date of grant or five years after a director
leaves the Board. Upon the occurrence of a change in control (see "Pension
Plans"), outstanding options are cancelled, and an immediate lump sum payment
will be paid to the director, equal to the product of: (1) the amount by which
the higher of (a) the closing price of the Company's common stock as reported
on the NYSE Composite Index on or nearest the date of payment (or, if not
listed on such exchange, on a nationally recognized exchange or quotation
system on which trading volume in the common stock is highest), or (b) the
highest per share price for the Company's common stock actually paid in
connection with the change in control, exceeds the purchase price of each such
option held, times (2) the number of shares covered by each such option
(whether or not then fully exercisable).
Under the Stock Compensation Plan, each nonemployee director receives annual
Common Stock Unit awards valued at $35,000, based on the fair market value of
the Company's common stock on the date of grant. Committee chairpersons may
also elect to receive their annual $5,000 award as Common Stock Units under the
Stock Compensation Plan. All such Common Stock Units are credited with
dividend equivalents which are converted into additional Common Stock Units.
After a director leaves the Board, Common Stock Units held under the Stock
Compensation Plan will be distributed in kind in a lump-sum or in annual
installments (not exceeding 15), as elected by the director. The Compensation
Committee may accelerate the distribution of Common Stock Units for any reason
following a change in control (see "Pension Plans").
Committees
The Board has appointed five standing committees from among its members to
assist it in carrying out its obligations. Committee assignments and chairs
are reviewed by the Board in May of each year. The principal responsibilities
of each committee are reviewed biannually and are described in the following
paragraphs.
The Audit Committee consists entirely of nonemployee directors and is primarily
concerned with the effectiveness of the Company's accounting policies and
practices, financial reporting and internal controls. Specifically, the
Committee recommends to the Board the firm to be appointed as the Company's
independent public accountants, subject to ratification by the shareholders;
reviews and approves the scope of the annual examination of the books and
records of the Company and its subsidiaries; reviews the audit findings and
recommendations of the independent public accountants; considers the
organization, scope and adequacy of the Company's internal auditing function;
monitors the extent to which the Company has implemented changes recommended by
the independent public accountants, the internal audit staff or the Committee;
reviews and monitors the Company's Compliance Program with regard to the areas
of Law, Quality, Health and Safety, and Environmental Programs, including its
Code of Ethics; and provides oversight with respect to accounting principles to
be employed in the Company's financial reporting. The Committee met three
times during 1998 and its members are Mr. Carlucci - Chairman, Mr. Kenneth I.
Chenault, Mr. Costello, Mr. Farrell, Ms. Lewent and Mr. Losh.
The Board Affairs Committee consists entirely of nonemployee directors and
develops and recommends to the Board guidelines with respect to the size and
composition of the Board and criteria for the selection of director candidates.
<10>
It recommends the slate of nominees to be considered at each annual meeting of
shareholders and recommends candidates to fill any vacancies that may occur,
including any vacancy created by an increase in the total number of directors.
It also administers and periodically reviews the programs and procedures set
forth in the Board Affairs Guidelines. The Committee met three times during
1998 and its members are Dr. Salmon - Chairman, Mr. Costello, Mr. Loucks, Mr.
Losh and Mr. Weiss. Mr. Morrison is an ex-officio member of the Committee.
The Committee will entertain nominees for directorships recommended by
shareholders. A shareholder recommendation should be sent to the Committee in
care of the Company's Corporate Secretary, accompanied by a statement of the
nominee indicating willingness to serve if elected. The nomination should also
state the shareholder's reasons for the recommendation, the principal
occupations the nominee has held over the past five years and a list of all
publicly held companies for which the nominee serves as a director.
The Compensation Committee consists entirely of nonemployee directors and
oversees the Company's compensation and benefit policies and programs,
including administration of the Management Incentive Bonus Plan, The Quaker
Long Term Incentive Plan of 1999 (1999 Plan) and The Quaker Long Term Incentive
Plan of 1990 (1990 Plan). It also recommends to the Board annual salaries for
elected officers. The Committee met six times during 1998 and its members are
Mr. Loucks - Chairman, Mr. Chenault, Mr. Farrell, Ms. Lewent and Mr. Weiss.
The Executive Committee consists of four nonemployee directors and Mr. Morrison
and exercises all the powers and authority of the Board in the management of
the business and affairs of the Company during the intervals between meetings
of the Board, subject to the restrictions set forth in the Bylaws. The
Committee met one time and acted by written consent two times during 1998 and
its members are Mr. Carlucci, Mr. Costello, Mr. Farrell, Mr. Morrison and Mr.
Weiss.
The Finance Committee consists entirely of nonemployee directors and reviews
the Company's annual financing plan, including its projected financial
condition and requirements for funds; approves certain long-term debt borrowing
arrangements; advises the Board on all financial recommendations requiring
Board approval, including dividend payments; and monitors the investment
performance of the Company's pension funds and participant-directed investment
accounts. The Committee met four times during 1998 and its members are Mr.
Weiss - Chairman, Mr. Carlucci, Ms. Lewent, Mr. Losh, Mr. Loucks and Dr.
Salmon.
Attendance
During 1998, the Board held six regular meetings and executed five actions by
unanimous written consent. In addition to Board membership, each nonemployee
director serves on one or more standing Board committees. Each director
attended 75% or more of the meetings of the Board and Board committees on
which they served, except for Mr. Chenault and Mr. Costello.
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OWNERSHIP OF COMPANY'S SECURITIES
Beneficial Owners of More Than 5 Percent
The following table sets forth information as of March 1, 1999, with respect to
each person or entity known to have beneficial ownership of more than 5% of the
Company's outstanding common stock based upon information furnished to the
Company.
Name and address of Amount and nature Percent of
beneficial owner of beneficial ownership class
Fidelity Management 11,588,474 (2) 8.43%
Trust Co.
82 Devonshire Ct.
Boston, MA 02109 (1)
FMR Corp. 11,269,824 8.27%
82 Devonshire Ct.
Boston, MA 02109
Putnam Investments, Inc. 7,962,729 5.80%
One Post Office Square
Boston, MA 02109
(1)In accordance with applicable rules of the Securities and Exchange
Commission ("SEC"), all shares beneficially owned by Fidelity Management
Trust Co., including those beneficially owned as Trustee of The Quaker Oats
Company 401(k) Plans Master Trust, are required to be disclosed.
(2)This amount includes 9,473,657 shares of common stock and 979,082 shares of
ESOP Preferred Stock (at the convertible rate of 2.16 shares of common
stock for each share of ESOP Preferred Stock and representing 100% of the
issued and outstanding stock of that class).
Directors and Management
As of March 1, 1999, each director, each nominee, each Named Executive (see
page 14) and all directors and executive officers of the Company as a group
beneficially owned the number of shares of the Company's common stock set forth
in the following table. Shares subject to acquisition within 60 days through
the exercise of stock options are included in the first column and are shown
separately in the second column.
Name of individual Amount and nature Shares subject to acquisition
or persons in group of beneficial ownership(a) within 60 days (a)
Frank C. Carlucci 29,483 (b)(c)(d) 0
Kenneth I. Chenault 7,781 (c)(d) 0
John H. Costello 3,550 (c)(d) 0
W. James Farrell 783 (c) 0
John G. Jartz 125,771 (e)(f) 104,918
Judy C. Lewent 3,870 (c) 0
J. Michael Losh 1,583 (c) 0
Vernon R. Loucks, Jr. 15,316 (c) 0
Robert S. Morrison 801,790 (e)(f) 659,000
Walter J. Salmon 21,898 (c) 0
Robert S. Thomason 279,034 (e)(f)(g) 261,000
William L. Weiss 24,051 (c)(d)(h) 0
Susan D. Wellington 63,236 (e)(f) 54,540
Bernardo Wolfson 120,491 (e)(f) 114,110
Russell A. Young 222,367 (e)(f) 193,960
All directors and
executive officers
as a group 2,467,386 (e)(f) 2,009,032
<12>
(a)Unless otherwise indicated, each named individual and each person in the
group has sole voting and investment power with respect to the shares
shown. Of the total shares outstanding (including shares subject to
acquisition within 60 days after March 1, 1999), each person beneficially
owns less than 1% of the total shares and the group in total beneficially
owns approximately 1.8% of the total shares.
(b)Of these shares, 300 are held in a custodial account for Mr. Carlucci's
daughter, through which he shares voting and investment power with his
wife.
(c)The figures shown for all directors include an aggregate of 64,176 common
stock units credited to them under The Quaker Oats Company Stock
Compensation Plan for Outside Directors.
(d)The figures shown for all directors include an aggregate of 33,557 common
stock units credited to them under the Deferred Compensation Plan for
Directors of The Quaker Oats Company.
(e)The figures shown for all executive officers include an aggregate of
105,791 shares allocated to them under The Quaker 401(k) Plan for Salaried
Employees, which includes 35,139 shares on the basis of the conversion of
16,268 shares of ESOP Preferred Stock at the conversion rate of 2.16.
The Named Executives hold the following numbers of shares under this Plan:
Mr. Morrison, 730; Mr. Thomason, 6,123; Mr. Young, 10,621; Mr.Jartz, 10,228;
and Ms. Wellington, 7,540.
(f)The figures shown for all executive officers include an aggregate of
117,643 shares and stock units granted to them under the Long Term
Incentive Plan for which the restricted period has not lapsed. The Named
Executives hold the following numbers of shares or stock units under this
Plan: Mr. Morrison, 76,000; Mr. Thomason, 2,454; Mr. Young, 4,562; Mr.
Wolfson, 1, 388; Mr. Jartz, 1,379; and Ms.Wellington, 5,000.
(g)Of these shares, 32 are held directly by Mr. Thomason's wife, and Mr.
Thomason and each of his two children own 800 jointly.
(h)Of these shares, 800 are held in a trust of which Mr. Weiss' wife is income
beneficiary.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who beneficially own more than 10% of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the SEC and the New York Stock Exchange
("NYSE"). To the best of the Company's knowledge, all such required reports
were timely filed.
<13>
EXECUTIVE COMPENSATION
The following table details annual and long-term compensation paid to the
Company's Chairman, President and Chief Executive Officer for 1998, the
Company's four other most highly compensated executive officers for 1998 who
were serving as executive officers as of the last day of 1998, and Robert S.
Thomason, whose last date of active employment was on December 15, 1998 (Named
Executives). Information is provided for each fiscal year the Named Executive
served as an executive officer of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Other Restricted Securities All
Annual Stock Underlying Other
Fiscal Salary Bonus Compensation Awards Options Compensation
Name Year ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. Morrison- 1998 $952,004 $1,400,000 $ 25,959 $ -0- 300,000 $118,131
Chairman, President 1997 $183,667 $ -0- $ -0- $5,715,570 1,000,000 $ -0-
and Chief Executive 1996 N/A N/A N/A N/A N/A N/A
Officer
Robert S. Thomason- 1998 $368,022 $ 411,800 $ -0- $ 75,292 -0- $165,370
Senior Vice President- 1997 $379,486 $ 451,700 $137,759 $ 27,714 50,000 $ 78,424
Finance and Chief 1996 $366,034 $ 207,800 $(20,499) $ -0- -0- $ 45,977
Financial Officer
Russell A. Young- 1998 $306,762 $ 323,400 $ -0- $ -0- 38,000 $188,905
Senior Vice President- 1997 N/A N/A N/A N/A N/A N/A
Supply Chain 1996 $266,514 $ 144,300 $ -0- $ 136,009 -0- $ 47,860
Bernardo Wolfson- 1998 $298,431 $ 298,400 $259,886 $ 31,003 27,000 $247,500
Vice President and 1997 N/A N/A N/A N/A N/A N/A
President- 1996 N/A N/A N/A N/A N/A N/A
Quaker Latin America
John G. Jartz- 1998 $269,750 $ 317,400 $ -0- $ 43,835 32,000 $ 93,783
Senior Vice President- 1997 $235,476 $ 263,000 $ -0- $ 12,740 19,000 $352,987
General Counsel, 1996 $183,918 $ 76,300 $ -0- $ 4,803 -0- $ 23,872
Business Development
and Corporate
Secretary
Susan D. Wellington- 1998 $234,014 $ 342,900 $ -0- $ 287,656 21,000 $ 65,276
Vice President and 1997 N/A N/A N/A N/A N/A N/A
President- 1996 N/A N/A N/A N/A N/A N/A
U.S. Beverages
</TABLE>
(1)Amounts include the cash awards that have been paid under the Management
Incentive Bonus Plan based on the Company's financial performance and the
Named Executive's personal performance for each Fiscal Year.
(2)Of the amount shown for Mr. Thomason for Fiscal Year 1997, $137,259
represents payments relating to his overseas assignment. Of the amount
shown for Mr. Thomason for Fiscal Year 1996, included are amounts recovered
by the Company pursuant to its tax equalization program relating to his
overseas assignment. The amount shown for Mr. Wolfson for Fiscal Year 1998
represents payments relating to his overseas assignment.
(3)Restricted stock and unit award values reflect the fair market value of the
Company's common stock on the date of each grant. Mr. Morrison was granted
119,000 restricted stock units effective October 22, 1997. Of this award,
43,000 such restricted units vested on October 22, 1998 and the remainder
will vest in equal installments of 38,000 units on October 22, 1999 and
2000. Dividends on restricted shares and units are paid on an on-going
<14>
basis at the same rate as paid to all shareholders of common stock. The
amount and value of restricted shares or units held by the Named Executives
as of December 31, 1998 were as follows: Mr. Morrison, 76,000 and
$4,522,000; Mr. Thomason, 2,454 and $146,013; Mr. Young, 4,562 and
$271,439; Mr. Wolfson, 1,388 and $82,586; Mr. Jartz, 1,379 and $82,050; and
Ms. Wellington, 5000 and $297,500.
(4)All stock option awards were granted with an exercise price that is equal
to the fair market value of the Company's common stock on the date of the
grant.
(5)Amounts shown are the total of the value of the stock allocations to the
Named Executives' employee stock ownership accounts and cash awards to the
Named Executives based on earnings in excess of the Internal Revenue Code
limits on the amount of earnings deemed eligible for purposes of the annual
stock allocations made directly under The Quaker 401(k) Plan for Salaried
Employees. Of the amounts shown for Mr. Young and Mr. Wolfson for 1998,
$80,345 and $247,500 respectively, are attributable to a special incentive
award. Of the amount shown for Mr. Jartz for 1997, $315,000 is
attributable to a special incentive award.
The following table contains information covering the grant of stock options to
the Named Executives during Fiscal Year 1998. The exercise price for all
options granted is equal to the fair market value of the Company's common stock
on the date of grant.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants (1) for Option Term (2)
% of Total
Number of Options
Securities Granted to
Underlying Employees
Options in Fiscal Exercise Expiration
Name Granted (#) Year Price ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert S. Morrison 300,000 12.5% $56.78 03/10/08 $10,712,820 $27,148,380
Robert S. Thomason -0- 0.0% N/A N/A N/A N/A
Russell A. Young 38,000 1.6% $56.78 03/10/08 $ 1,356,957 $ 3,438,796
Bernardo Wolfson 27,000 1.1% $56.78 03/10/08 $ 964,154 $ 2,443,354
John G. Jartz 32,000 1.3% $56.78 03/10/08 $ 1,142,701 $ 2,895,827
Susan D. Wellington 21,000 0.9% $56.78 03/10/08 $ 747,897 $ 1,900,387
</TABLE>
(1) All options were granted on March 11, 1998. One-third of the options
granted on March 11, 1998 will vest on each of the three anniversaries
following the date of grant. Upon the occurrence of a change in control,
all options would be cancelled and a lump sum cash payment paid for
realizable value (see "Pension Plans").
(2) Based on fair market value on the date of grant and an annual appreciation
at the rate stated (compounded annually) of such fair market value through
the expiration date of such options. The dollar amounts under these
columns are the result of calculations at the 5% and 10% stock price
appreciation rates set by the SEC and therefore do not forecast possible
future appreciation, if any, of the Company's stock price. However, the
total of the "Potential Realizable Value" for the Named Executives would
represent less than 0.3% of the incremental increase of approximately $5
billion and $12 billion respectively, in the Potential Realizable Value
that shareholders would realize under both the prescribed 5% and 10% stock
price appreciation rates.
<15>
The following table contains information covering the exercise of options by
the Named Executives during Fiscal Year 1998 and unexercised options held as of
the end of 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Value of Unexercised, In-the-
Unexercised Options Money Options at Fiscal Year
at Fiscal Year End (#) End ($) (2)
Shares
Acquired On Value
Name Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert S. Morrison -0- $ -0- 560,000 740,000 $6,353,200 $5,769,940
Robert S. Thomason 45,612 $1,511,391 244,500 33,500 $5,700,423 $ 741,188
Russell A. Young 17,376 $ 575,349 169,540 62,120 $4,073,342 $ 632,219
Bernardo Wolfson 2,000 $ 53,003 98,600 40,400 $2,282,865 $ 366,508
John G. Jartz 8,776 $ 325,522 88,088 44,730 $2,071,915 $ 364,653
Susan D. Wellington -0- $ -0- 43,155 30,045 $ 950,952 $ 254,590
</TABLE>
(1)Represents the difference between the option exercise price and the fair
market value of the Company's common stock on the date of exercise,
multiplied by the number of options exercised.
(2)Represents the difference between the option exercise price and the fair
market value of the Company's common stock on December 31, 1998, multiplied
by the number of options held on that date.
Pension Plans
The Company and its subsidiaries maintain several pension plans. The Quaker
Retirement Plan (Retirement Plan), which is the principal pension plan, is a
noncontributory, defined benefit plan covering eligible salaried and hourly
employees of the Company who have completed one year of service as defined by
the Retirement Plan.
Under the Retirement Plan, the participant accrues a benefit based upon the
greater of a Years-of-Service Formula and an Earnings/Service Formula. Under
the Years-of-Service Formula, participants accrue annual benefits equivalent to
credited years of service times $216. Under the Earnings/Service Formula, a
participant's benefit is the sum of two parts:
1.Past Service Accrual -- Benefits accrued through December 31, 1993, are
set at the greater of (a) those earned or (b) 1% of Five-Year Average
earnings to $22,700 plus 1.65% of earnings above $22,700, times credited
years of service; and
2.Future Service Accrual -- For each year beginning January 1, 1994, and
after, participants accrue benefits of 1.75% of annual earnings to 80% of the
Social Security wage base plus 2.5% of annual earnings above 80% of the
Social Security wage base.
Eligible earnings used to calculate retirement benefits include wages,
salaries, bonuses, contributions to The Quaker 401(k) Plan for Salaried
Employees (a 401(k) Plan) and allocations to the employee stock ownership
accounts. Normal retirement age under the Retirement Plan is age 65. The
Retirement Plan provides for early retirement benefits.
Benefit amounts payable under the Retirement Plan are limited to the extent
required by the Employee Retirement Income Security Act of 1974 ("ERISA"), as
amended, and the Internal Revenue Code of 1986, as amended. If the benefit
formula produces an amount in excess of those limitations, the excess will be
<16>
paid out of general corporate funds in accordance with the terms of The Quaker
415 Excess Benefit Plan and The Quaker Eligible Earnings Adjustment Plan. The
Quaker Eligible Earnings Adjustment Plan also provides for payment out of
general corporate funds, based upon benefit amounts which would otherwise have
been payable under the Retirement Plan and The Quaker 415 Excess Benefit Plan,
if the executive had not previously elected to defer compensation under the
Executive Deferred Compensation Plan.
The Quaker Supplemental Executive Retirement Program (Supplemental Executive
Retirement Program) may also provide retirement benefits for officers of the
Company designated as participants by the Compensation Committee. Benefit
amounts payable under the Supplemental Executive Retirement Program are
intended to provide a minimum base retirement benefit and are therefore offset
by the total of amounts payable under the Retirement Plan, The Quaker 415
Excess Benefit Plan and The Quaker Eligible Earnings Adjustment Plan (Basic
Benefit). The Supplemental Executive Retirement Program benefit is based upon
a participant's average annual earnings for the five consecutive calendar years
during which earnings were highest within the last ten years of service
multiplied by a percentage based upon the participant's age at his termination
date. This percentage ranges from 35% to 50% (based upon their ages at
termination).
The total estimated annual retirement benefits that the Named Executives would
receive are as follows: Robert S. Thomason, $263,290; Russell A. Young,
$424,176; Bernardo Wolfson, $167,436; John G. Jartz, $375,888; and Susan D.
Wellington, $344,769. Except for Mr. Thomason, the amounts assume that the
Named Executives will continue to work for the Company until their normal
retirement dates, that their earnings will remain the same as in calendar 1998
and that each will elect a straight-lifetime benefit without survivor benefits.
(Payment options such as a lump sum or other annuities are available.) Mr.
Morrison was not designated as a Supplemental Executive Retirement Program
participant by the Compensation Committee and will be provided supplemental
retirement benefits in accordance with his Employment Agreement as described on
page 19 of this proxy statement.
The Retirement Plan assures active and retired employees that, to the extent of
sufficient plan assets, it will continue in effect for a reasonable period
following a change in control of the Company without a reduction of anticipated
benefits, and under certain circumstances may provide increased benefits.
Generally, under the Retirement Plan, a change in control shall be deemed to
have occurred in any of the following circumstances:
(a) An acquisition of 25% or more of Quaker stock;
(b) A majority of the Board consists of persons who were not nominated by
the Board for election as directors;
(c) A plan of complete liquidation of the Company; or
(d) A merger, consolidation or sale of all or substantially all of the
Company's assets unless thereafter: (i) directors of Quaker immediately
prior thereto continue to constitute at least 50% of the directors of the
surviving entity or purchaser; or (ii) Quaker's securities continue to
represent, or are converted to securities which represent, more than 70% of
the combined voting power of the surviving entity or purchaser.
For a two-year period following a change in control, the accrued benefits of
members, who meet specified age and service requirements and who are
terminated, will be increased and no employees of the purchaser may become
members. For a five-year period following such a change in control of the
Company, the accrual of benefits for service during such period cannot be
decreased while there are excess assets (as defined in the Retirement Plan).
For so long as there are excess assets during that five-year period, if the
Retirement Plan is merged with any other plan, the accrued benefit of each
member and the amount payable to retired or deceased members shall be increased
until there are no excess assets. If during that five-year period the
Retirement Plan is terminated, to the extent that assets remain after
satisfaction of liabilities, the accrued benefits shall be increased such that
no assets of the Retirement Plan will directly or indirectly revert to the
Company.
Employment Agreements and Termination and Change in Control Benefits
The Company has entered into change in control agreements, known as Executive
Separation Agreements (Separation Agreements) with the Named Executives and
certain other officers. The Separation Agreements provide for separation pay
should a change in control of the Company occur (as described for the
Retirement Plan). The Separation Agreements were unanimously approved by the
nonemployee directors.
<17>
Under the Separation Agreements, the executive's employment must be terminated
involuntarily, without cause, whether actual or "constructive" (demotion,
relocation, loss of benefits, or other changes in the executive's terms of
employment short of actual termination) following a change in control, for
separation pay to be available. Under the Separation Agreement for Mr.
Morrison, separation pay is also available upon voluntary termination occurring
during the thirteenth month following a change in control.
Under the Separation Agreements, separation pay equals two years' annualized
base salary, bonuses under the Management Incentive Bonus Plan and the value of
life and health insurance coverage and pension credited service extended for
each executive for a period of two years. The Separation Agreements provide
that the amount of tax penalties paid under the Internal Revenue Code shall be
reimbursed to the executive officer by the Company, including the income tax on
such reimbursements. The Separation Agreements terminate three years from
their date of execution and are subject to renewal by the Board.
The officers of the Company also participate in The Quaker Salaried Employees
Compensation and Benefits Protection Plan (Protection Plan). Under the
Protection Plan, severance pay and benefits are provided should a change in
control occur (as described for the Retirement Plan) and an employee's
employment is terminated within two years thereafter for any reason other than
death, physical or mental incapacity, voluntary resignation, retirement or
gross misconduct. Severance payments may be paid in a lump sum or monthly
installments (as determined by the Protection Plan's Administrative Committee).
Severance payments are based on the amount of nine months pay, plus two weeks
pay for each year of service over 20 years. Pay is to be based on an
employee's current salary plus bonus, if any. Severance benefits are to be
continued for a minimum of nine months, plus two weeks for each year of service
over 20 years, and include all health and medical benefits, and life insurance
coverage at the time of termination.
The Board believes that the Separation Agreements and the Protection Plan
assure fair treatment of the covered employees following a change in control.
Furthermore, by assuring the executive of some financial security, the
Separation Agreements and the Protection Plan are intended to protect the
shareholders by neutralizing any bias of these employees in considering
proposals to acquire the Company. The Board believes that these advantages
outweigh the disadvantage of the cost of the benefits.
The officers of the Company also participate in the Quaker Officers Severance
Program (Program). Under the Program, severance benefits are payable if an
officer's employment is terminated for any reason other than death, physical or
mental incapacity, voluntary resignation, retirement or gross misconduct and
signs a waiver and release of claims against the Company and agrees to non-
compete, non-raiding and non-disclosure restrictions. Severance benefits will
continue for one year. Severance benefits to be continued are the executive's
base salary at the time of termination, the average bonus for the past two
years under the Management Incentive Bonus Plan, and medical and life insurance
coverage as in effect at the time of severance. Only the greater of the
severance payment and benefits to be provided under the Program or the
Protection Plan will be provided to an officer eligible under both, following a
change in control.
Under the Long Term Incentive Plan, upon the occurrence of a change in control
(as described for the Retirement Plan), options and restricted stock
outstanding on the date on which the change in control occurs shall be
cancelled, and an immediate lump sum cash payment shall be paid to the
participant equal to the product of: (1) the higher of (a) the closing price of
the Company's common stock as reported on the NYSE Composite Index on or
nearest the date of payment (or, if not listed on such exchange, on a
nationally recognized exchange or quotation system on which trading volume in
the Company's common stock is highest), or (b) the highest per share price for
the Company's common stock actually paid in connection with the change in
control (and with respect to options, reduced by the per share option price of
each such option held, whether or not then fully exercisable); and (2) the
number of shares covered by each such option or shares of restricted stock.
Upon the occurrence of a change in control, performance shares and other stock-
based awards provided for under the Long Term Incentive Plan, and still
outstanding, shall also be cancelled, and any profit and/or performance
objective with respect to performance shares shall be deemed to have been
attained to the full and maximum extent. An immediate lump sum cash payment
relating thereto shall be paid to the participant in an amount determined in
accordance with the terms and conditions set forth in the applicable agreement.
If making of payments pursuant to a change in control would subject the
participant to an excise tax under Section 4999 of the Internal Revenue Code or
would result in the Company's loss of a federal income tax deduction for those
<18>
payments (either of these consequences is referred to individually as a Tax
Penalty), then the Company shall reduce the number of benefits to be cancelled
to the extent necessary to avoid the imposition of such Tax Penalty. In
addition, the Company shall establish procedures necessary to maintain for the
participants a form of benefit which may be provided under the Long Term
Incentive Plan so that such participant will be in the same financial position
with respect to those benefits not cancelled as he would have been in the
ordinary course, absent a change in control and assuming his continued
employment, except that the foregoing with respect to the cancellation of
benefits shall not apply if such participant (a) is entitled to a tax
reimbursement for such Tax Penalty under any other agreement, plan or program
of the Company, or (b) disclaims any portion of, or all, payments to be made
pursuant to, or under, any other agreement, plan or program of the Company in
order to avoid such Tax Penalty. Disagreements as to whether such payments
would result in the imposition of a Tax Penalty shall be resolved by an opinion
of counsel chosen by the participant and reasonably satisfactory to the
Company.
The Company is party to a trust agreement, known as The Quaker Oats Company
Benefits Protection Trust (Trust or Trust Agreement). The Trust is to be used
to set aside funds necessary to satisfy the Company's obligations to present
and former executives and directors under deferred compensation programs and
agreements, and with respect to certain retirement and termination benefits, in
the event of a change in control (as described for the Retirement Plan).
Following a change in control, the Trust Agreement becomes irrevocable, and the
Trust shall be funded to provide for the payment of such obligations accrued at
the time of a change in control. The Trust may also be funded for the purpose
of paying legal expenses incurred by executives in pursuing benefit claims
under such programs and agreements following a change in control. The Trust is
currently funded only to a nominal extent. The Trust assets relating to
Company contributions are always subject to the claims of the general creditors
of the Company. No executive with any right or interest to any benefit or
future payment under the Trust Agreement shall have any right or security
interest in any specific asset of the Trust, nor shall he have any right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits
or rights which he may expect to receive from the Trust or otherwise.
The Company entered into an Employment Agreement with Mr. Morrison in 1997 that
provides that his initial employment term will continue through December 31,
2000. His Agreement also provides for aggregate annual retirement benefits on
a straight-lifetime annuity equal to the greater of: (i) 50% of his average
cash compensation for the highest five consecutive calendar years; or (ii)
$950,000, which are subject to reduction in certain cases of termination of
employment before reaching age 60. Mr. Morrison's Agreement also provided him
with restricted stock units and options as described in the Tables on pages 14
through 16 of this proxy statement and will provide option awards for 1999 and
2000 of 300,000 options each year subject to the general option terms then in
effect. The Employment Agreement also provides for severance benefits in the
event of specified terminations which shall consist of the compensation and
benefits remaining under the term of his Agreement and full vesting of all
options and restricted stock units on his last day of active service. Mr.
Morrison's Agreement also provides for his waiver and release of claims against
the Company and non-compete, non-raiding and non-disclosure restrictions upon
him if he is entitled to severance pay and benefits.
The Company also entered into an Agreement Upon Separation of Employment with
Mr. Thomason which became effective immediately following his last date of
active employment, December 15, 1998. Under the Agreement, Mr. Thomason is
eligible for severance pay and benefits under the Quaker Officers Severance
Program through December 15, 1999 and the Agreement provides for the
continuance of severance pay and benefits through December 15, 2000. The
Agreement provides for waiver and release, non-compete, non-raiding and non-
disclosure restrictions for Mr. Thomason during the term of the Agreement.
<19>
COMPENSATION COMMITTEE REPORT
The Company's executive compensation programs are administered by the
Compensation Committee of the Board (Committee). The Committee reviews and
considers the recommendations of management and compensation consultants, and
then determines the compensation of all executive officers, including the Named
Executives. The Committee's determinations are reviewed with all nonemployee
directors, who constitute a majority of the Board.
Overall Policy
The Company's compensation programs have long been tied to Company and/or
business unit performance. The Company's compensation programs are therefore
aimed at enabling it to attract and retain strong executive talent. By
linking executive compensation to Company stock, management's interests are
directly linked to that of shareholders.
At least once each year, the Committee conducts a comprehensive review of the
Company's executive compensation programs. The purpose of the review is to
ensure that the programs are meeting their objectives and that the Company's
executive compensation programs remain consistent with competitive practice.
In its review, the Committee considers data provided by management, and also by
leading compensation consultants.
The Company's policy with respect to qualifying compensation in excess of $1
million to its Named Executives for tax deductibility under Section 162(m) of
the Internal Revenue Code, is first to be competitive. However, it is the
Committee's intention to maximize the benefit of tax laws for the Company's
shareholders by seeking performance-based exemptions and the related
shareholder approval where consistent with the Company's compensation policies
and practices.
The Company's compensation programs consist of base salary, a short-term cash
incentive program (Management Incentive Bonus Plan), and a long-term incentive
program consisting primarily of a broad-based stock option program and
selective use of restricted stock. For executive officers, the mix of
compensation is weighted more toward the performance-based, and therefore
variable, elements of compensation (short-term and long-term incentive
programs) rather than the more fixed elements of compensation (salary and
benefits).
Base Salary
Salary guidelines for executive officers are established by comparing the
responsibilities of the individual's position to similar positions in other
comparable companies. Salary increases are determined by comparing the
person's actual performance to personal performance objectives, as well as the
Company's and/or business unit's performance versus its objectives.
Annual Incentive
The Company's key managers, including the executive officers, are eligible to
receive an annual award under the Management Incentive Bonus Plan. Under the
Management Incentive Bonus Plan, individual targets are established based on
position level. Participants may receive more, or less, than the targets
depending upon their performance.
The annual incentive award is based on a combination of business unit and
Company performance compared to financial and nonfinancial objectives, with
business unit performance weighted more than Company performance. Personal
objectives are also considered in judging total compensation.
The primary Company and business unit performance is Controllable Earnings,
which is calculated as operating income (adjusted for certain financial costs)
less a capital usage charge based on each business unit's invested capital.
With incentives tied to maximizing Controllable Earnings, managers focus on
generating greater profitable growth, investing in projects where returns
exceed our cost of capital and efficiently utilizing assets. These are the
drivers of long-term cash flow-ultimately the keys to building shareholder
value. The Committee also considers performance against other key financial
measures such as sales, earnings per share, return on assets, return on
invested capital, debt coverage ratios, generation of cash flow and operating
income. In order for the full financial portion of the target bonuses to be
<20>
paid, the Company must meet its internal financial targets both in the business
units and the entire Company and the Committee also considers how that
performance relates to other comparable companies.
Long Term Incentive
The Company has long believed in the importance of stock ownership by all
employees. Consequently, its long-term incentive plans are focused on stock-
based vehicles. The Company has adopted share ownership guidelines for all
vice presidents and above. Each is expected to hold Company stock commensurate
with their level in the organization.
The primary long-term incentive vehicle is a broad-based stock option program
for key managers, including the executive officers. Participants are
considered for annual awards of stock options, based upon an assessment of each
person's job level, performance, potential, past award history and competitive
practice. Most stock options currently become exercisable one-third per year
over three years, and all have a ten-year term, and are priced at or above the
stock's fair market value on the grant date.
A second broad-based long-term incentive program applying to the same group of
key managers is the Incentive Investment Program. Under the Incentive
Investment Program, participants may elect to invest a percentage of their
Management Incentive Bonus awards in Company stock. Amounts invested are
matched with either one or two shares of restricted stock for each three shares
of stock purchased by the participant, depending on the percent of the
Management Incentive Bonus award invested. The vesting of the restricted stock
occurs over a five-year period, contingent upon the participant's continued
employment and retaining the purchased shares.
Restricted stock and restricted stock units are also periodically used to
motivate and retain selected key employees.
Chief Executive Officer Compensation
In determining Chief Executive Officer compensation, the Committee considers
the Company's financial and nonfinancial performance, as well as an analysis of
total compensation in relation to that of Chief Executive Officers in
comparable companies.
The Company entered into an Employment Agreement with Mr. Morrison as part of
his employment process. In accordance with this Agreement, Mr. Morrison
received an annual base salary of $950,000 during 1998 and 300,000 stock
options under the Long Term Incentive Plan.
Mr. Morrison participates in the Management Incentive Bonus Plan along with
other key managers of the Company. During 1998, the first full year under Mr.
Morrison's leadership, Controllable Earnings (the Company's key internal
measure) increased by 73 percent, sales from ongoing businesses increased 4
percent, operating income increased by 11 percent, and diluted earnings per
share increased by 22 percent. As a result, the Company delivered returns to
shareholders in the top quartile of the food industry. Beyond the financial
results, Mr. Morrison led the Company in a series of actions to strengthen its
future returns. These actions included: simplifying the Company's structure,
incorporating a shared-services concept across its Foods and Gatorade
businesses, and reducing overhead/infrastructure costs in each region of the
world where the Company conducts business. On this basis, the Committee
determined that Mr. Morrison earned a bonus of $1.4 million for 1998
performance.
MEMBERS OF THE COMMITTEE
Vernon R. Loucks, Jr., Chairman
Kenneth I. Chenault
W. James Farrell
Judy C. Lewent
William L. Weiss
<21>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's common stock against the cumulative total return of the
Standard & Poor's (S&P) Foods Index and the S&P 500 Stock Index for the period
of five and one-half years commencing June 30, 1993, and ending December 31,
1998.
Comparison of Cumulative Total Return*
Quaker, S&P Foods, S&P 500
Transition
Period
Fiscal Year Ending Ending Calendar Year Ending
6/93 6/94 6/95 12/95 12/96 12/97 12/98
Quaker $100 $ 95 $ 92 $ 99 $113 $160 $184
S&P Foods $100 $100 $129 $146 $173 $248 $271
S&P 500 $100 $101 $128 $146 $180 $240 $308
*Assumes $100 invested on June 30, 1993 with reinvestment of dividends.
DIRECTORS' PROPOSALS
Ratification of Appointment of Independent Public Accountants
Upon the recommendation of the Audit Committee, the Board has appointed Arthur
Andersen LLP as independent public accountants for 1999 and is requesting
ratification by the shareholders. Arthur Andersen LLP has examined the
financial statements of the Company each fiscal year since 1970.
In the event the resolution is defeated, the adverse vote will be considered as
a direction to the Board to select other independent public accountants for the
next fiscal year. However, because of the difficulty and expense of making any
substitution of independent public accountants after the beginning of a fiscal
period, it is contemplated that the appointment for 1999 will be permitted to
stand unless the Board finds other reasons for making a change.
During 1998, Arthur Andersen LLP performed recurring audit services including
the examination of annual financial statements and pension plans and limited
reviews of quarterly financial information. Fees for these services aggregated
approximately $1.65 million. Arthur Andersen LLP also performed services for
the Company in other business areas during 1998, including tax and accounting
related services for which fees aggregated approximately $1.70 million.
Andersen Consulting LLP, the consulting arm of Arthur Andersen & Co., S.C.,
also performed various consulting services for the Company during 1998. Fees
for these services aggregated approximately $1.50 million.
<22>
Representatives of Arthur Andersen LLP will attend the Annual Meeting and will
have an opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions.
Ratification of the appointment of Arthur Andersen LLP as independent public
accountants requires the affirmative vote of a majority of votes cast thereon.
The Board unanimously recommends a vote FOR this proposal.
Approval of the Executive Incentive Bonus Plan
The executive compensation policy (which is described in the Compensation
Committee's report beginning on page 20) includes annual cash bonuses to
executive officers based upon various performance and other measures. Under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
it is necessary to obtain shareholder approval to ensure that such performance-
based compensation will be fully tax deductible by the Company. Accordingly,
the Board unanimously adopted, effective as of January 1, 1999, and subject to
shareholder approval, The Quaker Oats Company Executive Incentive Bonus Plan
(the "EIB"). The executive officers who are selected by the Compensation
Committee each year to participate will receive their annual bonus under the
EIB in lieu of the existing Management Incentive Bonus Plan.
Set forth below is a description of the essential features of the EIB. This
description is subject to and qualified in its entirety by the full text of the
EIB which is available upon written request to the Company's Corporate
Secretary, P.O. Box 049001, Suite 27-9, Chicago, Illinois 60604-9001.
Purpose of the EIB
The EIB has been established to ensure that amounts payable under the EIB are
deductible by the Company for Federal income tax purposes in accordance with
Code Section 162(m), which denies certain tax deductions for compensation paid
to the Company's Chief Executive Officer and the next four highest paid
executive officers in excess of $1 million in any year. By approving the EIB,
the shareholders also will be approving the material terms of the performance
measures, eligibility requirements and annual bonus limit contained in the EIB.
The EIB, like the Company's traditional bonus program, will provide annual
amounts of performance-based incentive compensation to certain participating
executive officers selected each year by the Compensation Committee. Granting
such persons incentive compensation based on the success of the Company is
intended to motivate them to achieve that success. The EIB is also intended to
encourage executive officers to remain in the employ of the Company and to
attract and motivate new executive officers.
Duration and Modification
The Plan does not have a predetermined period over which it will remain in
existence. The Board may at any time amend or terminate the EIB. However, no
amendment made after the date an executive officer is selected as a participant
for a calendar year may adversely affect the rights of the participant for that
year, and no amendment may increase the maximum award payable under the EIB
without shareholder approval or otherwise be effective without shareholder
approval, if such approval is necessary for awards to be "performance-based
compensation" under Code Section 162(m).
Administration
The EIB is administered by the Compensation Committee, which consists of not
less than two members of the Board who are "outside directors" within the
meaning of Code Section 162(m).
<23>
Eligibility
The Compensation Committee shall determine the "executive officers" eligible to
participate in the EIB each year. The "executive officers" of the Company are
the Company's chief executive officer and the other Company executives
considered executive officers for purposes of the Securities Exchange Act of
1934. The Company currently has 16 executive officers. There is currently one
executive officer, the Company's Chief Executive Officer, who has been
designated to participate in the EIB.
Performance Measures and Goals
The EIB provides for the payment of an annual cash incentive bonus to
participants, conditioned upon the attainment of pre-established performance
goals measured over the calendar year, commencing with the 1999 calendar year.
The performance goals must be established in writing by the Compensation
Committee within the first 90 days of each calendar year. Performance goals
are determined by reference to one or more of the following performance
measures, as defined by the EIB and selected by the Compensation Committee for
the calendar year: Adjusted Operating Income; Controllable Earnings; Earnings
Per Share; Net Sales; Operating Income; Return on Assets; and Total Shareholder
Return.
Adjustments
The Compensation Committee has the discretion to reduce or eliminate, but
cannot increase, any amounts otherwise payable under the EIB.
Payment of Incentive Compensation
The determination of awards payable under the EIB is made by the Compensation
Committee, which shall certify, in writing and before any amount under the EIB
is paid, the amount that is payable with respect to each participant for the
calendar year. All payments from the EIB shall be made in cash. The maximum
annual cash bonus payable under the EIB to any participant with respect to any
calendar year is $5.0 million.
New Plan Benefits
On March 10, l999, the Compensation Committee designated the Company's Chief
Executive Officer as a participant in the Plan. The Compensation Committee
established Controllable Earnings as the performance measure for 1999. The
Committee also established a performance goal for such performance measure and
the other items called for by the EIB.
Because participants are selected by the Compensation Committee each calendar
year and because amounts payable under the EIB are based on performance goals
determined by the Compensation Committee each calendar year, it cannot be
determined at this time what amounts, if any, will be received by or allocated
to any person or group of persons under the EIB if the EIB is approved, or what
amounts would have been received by or allocated to any person or group of
persons for the last fiscal year if the EIB had been in effect. However, if
the EIB had been in effect during the last fiscal year, it is likely that the
amount payable to any participant pursuant to the EIB would have approximated
the amount paid to such person for that year under the Company's traditional
bonus program.
Approval of the EIB requires the affirmative vote of a majority of the votes
cast therein.
The Board unanimously recommends a vote FOR this proposal.
<24>
SHAREHOLDERS' PROPOSALS
Annual Election of Directors
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.
Suite 215, Washington, D.C. 20037, record holder of 200 shares of common stock
of the Company, has given notice that she will introduce the following
resolution and supporting statement at the Meeting:
RESOLVED: "That the shareholders of The Quaker Oats Company recommend that the
Board of Directors take the necessary steps to reinstate the election of
directors ANNUALLY, instead of the stagger system which was recently adopted."
REASONS: "Until recently, directors of The Quaker Oats Company were elected
annually by all shareholders."
"The majority of New York Stock Exchange listed corporations elect all of their
directors each year."
"This insures that ALL directors will be more accountable to ALL shareholders
each year, and to a certain extent, prevents the self-perpetuation of the
Board."
"If you AGREE, please mark your proxy FOR this resolution."
The Board unanimously recommends a vote AGAINST the proposal for the following
reasons:
At the 1983 Annual Meeting, shareholders voted to amend the Certificate of
Incorporation to provide for the current classified Board with staggered three-
year terms. The proxy statement for that meeting contained a detailed
discussion recommending the classified Board. A portion of that discussion
follows:
"The Board of Directors believes that the adoption of this proposal is
advantageous to the Company and its shareholders because, by providing
that directors will serve three-year terms rather than one-year terms, it
will enhance the likelihood of continuity and stability in the composition
of the Company's Board of Directors and in the policies formulated by the
Board. The Board believes that this, in turn, will permit it more
effectively to represent the interests of all shareholders, including
responding to circumstances created by demands or actions by a minority
shareholder or group."
"..., there has been an increasing number of attempts by various
individuals and entities to acquire significant minority positions in
certain companies with the intent of obtaining control of the companies by
electing their own slate of directors, or by achieving some other goal,
such as the repurchase of their shares at a premium, by threatening to
obtain such control."
This shareholder proposal was presented at several Annual Meetings in the past
and has been consistently opposed by a majority of shares voted.
In the opinion of the Board, the reasons set forth above are still valid and
the election of directors by classes should be continued.
Under New Jersey law, the amendment contemplated by the shareholder proposal
must first be approved by the Board and then submitted to the shareholders for
a vote. The Board has not approved the shareholder proposal. Thus, a vote in
favor of the shareholder proposal is only an advisory recommendation to the
Board that it take steps consistent with such shareholder proposal.
Approval of the foregoing precatory shareholder resolution requires the
affirmative vote of a majority of the shares present in person or by proxy at
the meeting and entitled to vote thereon.
For the reasons set forth above, the Board recommends a vote AGAINST the
proposal.
<25>
Shareholder Rights Plans
The Amalgamated Bank of New York Long-View Collective Investment Fund, 11-15
Union Square, New York, NY 10003, record holder of 38,500 shares of common
stock of the Company, has given notice that it will introduce the following
resolution and supporting statement at the Meeting:
Shareholder Resolution
RESOLVED, that pursuant to section 2-9 of the New Jersey Business Corporation
Act, the shareholders of The Quaker Oats Company (the "Company") hereby amend
the Company's Bylaws to add the following Bylaw 40, which shall take effect
immediately upon approval by the shareholders, either in person or by proxy, at
the meeting of shareholders at which such resolution is proposed:
SHAREHOLDER RIGHTS PLANS
"Bylaw 40. The Company shall not adopt any shareholder rights plan, share
purchase rights plan or similar agreement, commonly referred to as a "poison
pill," which is designed to impede, or has the effect of impeding, the
acquisition of a block of stock in excess of a specified threshold and/or
merger or other transaction between a significant shareholder and the Company,
unless such plan or agreement has previously been approved by holders of a
majority of the outstanding shares of stock at a general or special meeting of
shareholders, and the Company shall redeem any such plan or agreement in effect
as of the date of adoption of this Bylaw, including without limitation the
shareholder rights plan that was adopted by the Company in 1996.
Notwithstanding any other provision of these Bylaws, this Bylaw may not be
amended, modified or repealed, except by holders of a majority of the
outstanding shares of stock."
Supporting Statement
At last year's meeting, shareholders owning a majority of the voting shares
supported a resolution recommending that the board of directors redeem Quaker
Oats' shareholder rights plan, or else put the continued existence of this
"poison pill" to vote of the shareholders.
Nonetheless, the board of directors did not follow this recommendation, a
stance that we believe dishonors shareholder views, particularly when one
considers that Quaker Oats' poison pill was adopted in 1996 without prior
shareholder approval.
We find this lack of concern for shareholder views to be troubling,
particularly since Quaker Oats' return in recent years has lagged behind that
of the S&P 500 index as well as Quaker Oats' peers in the food industry.
In our view, a poison pill can insulate management at the expense of
shareholders, and Quaker Oats' failure to act on the shareholders'
recommendation necessitates the step proposed here. We do not dispute that
management and the board should have appropriate tools to ensure that all
shareholders benefit from a takeover proposal, but a "poison pill" is such a
powerful tool that shareholders should be able to vote on whether it is
appropriate.
Accordingly, we submit this bylaw amendment, which would allow Quaker Oats to
adopt a poison pill, but only with the affirmative support of its shareholders.
The Board unanimously recommends a vote AGAINST this Proponent's proposal for
the following reasons:
In May 1996, the Board unanimously adopted a Shareholder Rights Plan (Rights
Plan) and declared a dividend distribution of one Right on each outstanding
share of the Company's Common Stock. The Rights Plan was established to
replace the Shareholder Rights Plan originally adopted in 1986, which expired
on July 30, 1996. The Rights Plan is designed to provide the Board with the
ability to take what the Board believes are the most effective steps to protect
and maximize the value of shareholders' investment in the Company. It is
designed to encourage potential acquirors to negotiate directly with the Board,
which the Company believes is in the best position to negotiate on behalf of
all shareholders, evaluate the adequacy of any potential offer, and protect
shareholders against potential abuses during the takeover process such as
partial and two-tiered tender offers and creeping stock accumulation programs,
<26>
which do not treat all shareholders fairly and equally. The Rights do not
affect any takeover proposal which the Board believes is in the best interests
of the Company's shareholders. The overriding objective of the Board in
adopting the Rights Plan was, and continues to be, the preservation and
maximization of the Company's value for all shareholders.
In light of the shareholder vote at the Company's 1998 Annual Meeting, the
Board specifically addressed the issue at its September 1998 meeting and, after
careful consideration of presentations by its financial advisors and outside
counsel, determined that, for the reasons set forth above, maintaining the
Rights Plan in effect is in the best interests of the Company's shareholders.
The Board also believes that the proposed Bylaw amendment is legally invalid.
The Company has received a written opinion of its New Jersey counsel to the
effect that under New Jersey law, the Board of Directors of a New Jersey
corporation is vested with the authority to adopt and implement a rights plan
in the valid exercise of its fiduciary duties to shareholders. Under Delaware
case law that our counsel believes would be followed by a New Jersey court, any
provision like the proposed Bylaw amendment that requires a board to act or not
to act in such a fashion as to limit the exercise of its fiduciary duties is
invalid and unenforceable.
Finally, the Board believes there is strong empirical evidence that the Rights
Plan better positions the Board to negotiate the most attractive and fair price
for all shareholders in the event there is a bid for the Company. Many
companies with rights plans have received unsolicited offers and have redeemed
their rights after their directors were satisfied that the offer, as negotiated
by the target company's board of directors, adequately reflected the underlying
value of the company and was fair and equitable to all shareholders. Thus,
experience indicates that rights plans neither prevent unsolicited offers from
occurring, nor prevent companies from being acquired at prices that are fair
and adequate to shareholders. Since the proposal requires redemption of the
Rights Plan and shareholder approval for any new plan, it is clear that the
Company would be unable to adopt a rights plan in time to be effective against
a hostile bid and, therefore, would be deprived of a proven and necessary tool
to maximize shareholder value.
If legally valid, approval of the foregoing proposed amendment to the Company's
Bylaws requires the affirmative vote of not less than two-thirds of the
outstanding shares entitled to vote thereon.
Because the Board believes the proposal is legally invalid and against the best
interest of shareholders, the Board recommends a vote AGAINST the proposal.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders may submit proposals appropriate for shareholder action at the
Company's annual meetings consistent with regulations adopted by the SEC. To
be considered for inclusion in the Company's proxy statement and proxy for the
2000 Annual Meeting a proposal must be received by the Company no later than
December 13, 1999. Proposals should be directed to John G. Jartz, Corporate
Secretary, The Quaker Oats Company, P.O. Box 049001, Suite 27-9, Chicago,
Illinois 60604-9001.
OTHER BUSINESS
The Board is not aware of any matters requiring shareholder action to be
presented at the Meeting other than those stated in the Notice of Annual
Meeting. Should other proper matters be introduced at the Meeting, those
persons named in the enclosed proxy have discretionary authority to act on such
matters and will vote the proxy in accordance with their best judgment.
By order of the Board of Directors,
/s/John G. Jartz
John G. Jartz
Corporate Secretary
<27>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
[Front Part]
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE, OR IF NO
CHOICES ARE INDICATED, FOR ITEMS 1, 2 AND 3 AND AGAINST ITEMS 4 AND 5.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
[Quaker logo and "1999 PROXY" appear down the left margin]
A vote FOR items 1, 2 and 3 is recommended
by the Board of Directors.
1. Election of Directors - Nominees: J. Michael Losh, Walter J. Salmon
For All [ ] Withheld All [ ] For All Except As Named Below [ ]
____________________
2. Ratification of Appointment of Independent Public Accountants
For [ ] Against [ ] Abstain [ ]
3. Adoption of Executive Incentive Bonus Plan
For [ ] Against [ ] Abstain [ ]
A vote AGAINST items 4 and 5 is recommended by the Board of Directors.
4. Shareholder Proposal - Annual Election of Directors
For [ ] Against [ ] Abstain [ ]
5. Shareholder Proposal - Shareholder Rights Plans
For [ ] Against [ ] Abstain [ ]
Dated___________________, 1999
x_________________________________
Signature
x_________________________________
Signature
NOTE: Please sign exactly as name appears hereon. For joint accounts, both
owners should sign. When signing as executor, administrator, attorney, trustee
or guardian, etc., please sign your full title.
[Back Part]
THE QUAKER OATS COMPANY
Proxy for Annual Meeting of May 12, 1999
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Frank C. Carlucci, W. James Farrell and Judy C.
Lewent proxies each with power to appoint his or her substitute to represent
and to vote all shares of stock of The Quaker Oats Company which the undersigned
is entitled to vote at the Annual Meeting of Shareholders of the Company to be
held at the Rosemont Conference Center, 5555 North River Road, Rosemont,
Illinois, on Wednesday, May 12, 1999 at 9:30 a.m. (CDT), and any adjournment
thereof, as indicated on the proposals described in the proxy statement and all
other matters properly coming before the meeting.
IMPORTANT - This proxy must be signed and dated on the reverse side.
