Exhibit 10(e)
EXECUTIVE SEPARATION AGREEMENT
THIS AGREEMENT is made between The Quaker Oats Company,
a New Jersey corporation (the "Company"), and Xxxxxxxx X. Xxxx
(the "Executive"), dated this 23rd day of August, 1998.
WITNESSETH THAT:
WHEREAS, the Company wishes to attract and retain well-
qualified executive 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 25% 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 May 13, 1998), individuals, who at
the beginning of such period constitute the Company's
Board of Directors (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) of this
Section; 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.
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 non-qualified 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 welfare
benefits (currently elected medical, dental 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:
(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.
For purposes of clarification, a mere transfer of the
Executive to an entity created in a Company initiated spin-
off or reorganization, without a subsequent Termination,
shall not be treated as a Termination of the employment of
the Executive with the Company for purposes of eligibility
under this Agreement. The Company shall cause the newly
created entity to provide to the Executive an Executive
Separation Agreement substantially similar to this
Agreement.
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.
The initial salary rate shall not be less than his annual
salary immediately prior to termination, or if greater,
not less than his annual salary immediately prior to the
change in control of the Company; such salary shall be
increased every March 1, thereafter, according to the
then current Xxxxxx Associate's projection for movement
in executive base salaries. The initial bonus amount
shall not be less than the annual equivalent of the
incentive bonus calculated under Section 4(a)(1) of the
Salaried Employees Compensation and Benefits Protection
Plan; such bonus amount shall be increased every January
1, thereafter, according to the then current Xxxxxx
Associates' projection for movement in executive total
cash compensation. The lump-sum severance allowance
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 non-
qualified supplemental benefit plan relating thereto,
maintained by the Company as 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) employee
welfare benefits (currently elected coverage under the
medical, dental and life insurance programs) to which he
would have been entitled under all such employee benefit
plans, programs or arrangements maintained by the Company
as 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
as specified in paragraph a. of this Section having an
effect on such benefits for such period. The lump-sum
benefit payment shall not be adjusted on a present value
basis (except for benefits accrued in a defined benefit
pension plan).
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
practicable.
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. Make-Whole Payments. If any amount payable to the
Executive by the Company or any subsidiary or affiliate
thereof, whether under this Agreement or otherwise (a
"Payment"), is subject to any tax under section 4999 of the
Internal Revenue Code of 1986, as amended, (the "Code"), or
any similar federal or state law (an "Excise Tax"), the
Company shall pay to the Executive an additional amount (the
"Make Whole-Amount")which is equal to (I) the amount of the
Excise Tax, plus (II) the aggregate amount of any interest,
penalties, fines or additions to any tax which are imposed
in connection with the imposition of such Excise Tax, plus
(III) all income, excise and other applicable taxes imposed
on the Executive under the laws of any Federal, state, or
local government or taxing authority by reason of the
payments required under clause (I) and clause (II) and this
clause (III).
a. For purposes of determining the Make-Whole Amount, the
Executive shall be deemed to be taxed at the highest
marginal rate under all applicable local, state, federal
and foreign income tax laws for the year in which the
Make-Whole Amount is paid. The Make-Whole Amount payable
with respect to an Excise Tax shall be paid by the
Company coincident with the Payment with respect to which
such Excise Tax relates.
b. All calculations under this Section 8 shall be made
initially by the Company and the Company shall provide
prompt written notice thereof to the Executive to timely
file all applicable tax returns. Upon request of the
Executive, the Company shall provide the Executive with
sufficient tax and compensation data to enable the
Executive or his tax advisor to independently make the
calculations described in subparagraph a. above and the
Company shall reimburse the Executive for reasonable fees
and expenses incurred for any such verification.
c. If the Executive gives written notice to the Company
of any objection to the results of the Company's
calculations within 60 days of the Executive's receipt of
written notice thereof, the dispute shall be referred for
determination to tax counsel selected by the independent
auditors of the Company ("Tax Counsel"). The Company
shall pay all fees and expenses of such Tax Counsel.
Pending such determination by Tax Counsel, the Company
shall pay the Executive the Make-Whole Amount as
determined by it in good faith. The Company shall pay
the Executive any additional amount determined by Tax
Counsel to be due under this Section 8 (together with
interest thereon at a rate equal to 120% of the Federal
short-term rate determined under section 1274(d) of the
Code) promptly after such determination.
d. The determination by Tax Counsel shall be conclusive
and binding upon all parties unless the Internal Revenue
Service, a court of competent jurisdiction, or such other
duly empowered governmental body or agency (a "Tax
Authority") determines that the Executive owes a greater
or lesser amount of Excise Tax with respect to any
Payment than the amount determine by Tax Counsel.
e. If a Tax Authority makes a claim against the Executive
which, if successful, would require the Company to make
a payment under this Section 8, the Executive agrees
to contest the claim on request of the Company subject
to the following conditions:
(1) The Executive shall notify the Company of any such
claim within 10 days of becoming aware thereof. In
the event that the Company desires the claim to be
contested, it shall promptly (but in no event more
than 30 days after the notice from the Executive or
such shorter time as the Tax Authority may specify
for responding to such claim) request the Executive
to contest the claim. The Executive shall not make
any payment of any tax which is the subject of the
claim before the Executive has given the notice or
during the 30-day period thereafter unless the
Executive receives written instructions from the
Company to make such payment together with an advance
of funds sufficient to make the requested payment
plus any amounts payable under this Section 8
determined as if such advance were an Excise Tax, in
which case the Executive will act promptly in
accordance with such instructions.
(2) If the Company so requests, the Executive will
contest the claim by either paying the tax claimed and
suing for a refund in the appropriate court or
contesting the claim in the United States Tax Court or
other appropriate court, as directed by the Company;
provided, however, that any request by the Company for
the Executive to pay the tax shall be accompanied by
an advance from the Company to the Executive of funds
sufficient to make the requested payment plus any
amounts payable under this Section 8 determined as if
such advance were an Excise Tax. If directed by the
Company in writing the Executive will take all action
necessary to compromise or settle the claim, but in no
event will the Executive compromise or settle the
claim or cease to contest claim without the written
consent of the Company; provided, however, that the
Executive may take any such action if the Executive
waives in writing his right to a payment under this
Section 8 for any amounts payable in connection with
such claim. The Executive agrees to cooperate in good
faith with the Company in contesting the claim and to
comply with any reasonable request from the Company
concerning the contest of the claim, including the
pursuit of administrative remedies, the appropriate
forum for any judicial proceedings, and the legal
basis for contesting the claim. Upon request of the
Company, the Executive shall take appropriate appeals
of any judgment or decision that would require the
Company to make a payment under this Section 8.
Provided that the Executive is in compliance with the
provisions of this section, the Company shall be liable
for and indemnify the Executive against any loss in
connection with, and all costs and expenses, including
attorney's fees, which may be incurred as a result of,
contesting the claim, and shall provide the Executive
within 30 days after each written request therefor by
the Executive cash advances or reimbursement for all
such costs and expenses actually incurred or reasonably
expected to beincurred by the Executive as a result of
contesting the claim.
f. Should a Tax Authority finally determine that an
additional Excise Tax is owed, then the Company shall pay
an additional Make-Up Amount to the Executive in a manner
consistent with this Section 8 with respect to any
additional Excise Tax and any assessed interest, fines,
or penalties. If any Excise Tax as calculated by the
Company or Tax Counsel, as the case may be, is finally
determined by a Tax Authority to exceed the amount
required to be paid under applicable law, then the
Executive shall repay such excess to the Company, but
such repayment shall be reduced by the amount of any
taxes paid by the Executive on such excess which are not
offset by the tax benefit attributable to the repayment.
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 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.
Judgment 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 canceled 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 declared this Agreement
effective, pursuant to Section 1 of this Agreement, this
Agreement shall terminate prior to a change in control of
the Company when the Executive has terminated employment or
been placed on inactive service by the Company, or, if
later, May 14, 2001.
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 canceled 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, 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.
ATTEST: THE QUAKER OATS COMPANY
/s/ Xxxxxx X. Xxxxxxxxx /s/ Xxxxxx X. Xxxxxx
Assistant Secretary Its Senior Vice President
EXECUTIVE
/s/ Xxxxxxxx X. Xxxx
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
Xxxxx X. Xxxx August 28, 1998
Xxxxxxxx X. Xxxxxxx August 18, 1998
Xxxxxx X. Xxxxxxxx August 23, 1998
Xxxxxxx X. Xxxxx August 23, 1998
Xxxxxx X. Xxxxxx August 23, 1998
Xxxx X. Xxxxx August 19, 1998
Xxxxx X. Xxxxxxx August 21, 1998
Xxxxx X. XxXxxx August 23, 1998
Xxxxxxx X. Xxxxxxxxxx August 25, 1998
I. Xxxxxxx Xxxxxxx August 18, 1998
Xxxxxxxx X. Xxxx August 23, 0000
Xxxxxxx X. Xxxxxx August 23, 1998
Xxxx X. Xxxxxxx September 8, 1998
Xxxxxx X. Xxxxxxx August 28, 1998
Xxxxxx X. Xxxxxxxx August 23, 1998
Xxxxx X. Xxxxxxxxxx August 23, 1998
Xxxxxxx X. Xxxxx August 24, 1998
