Exhibit 10(f)(3)
EXECUTIVE SEPARATION AGREEMENT
THIS AGREEMENT is made between The Quaker Oats Company, a New Jersey
corporation (the "Company"), and Xxxxxx X. Xxxxxxxx (the "Executive"), dated
this 13th day of January, 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 30% or more of the combined voting power of the
Company's then outstanding voting securities; provided, however,
that this paragraph (a) shall not apply to any Person who
becomes such a beneficial owner of such Company securities
pursuant to an agreement with the Company approved by the Company's
Board of Directors (the "Board"), entered into before such Person
has become such a beneficial owner of Company securities
representing 5% or more of the combined voting power of the
Company's then outstanding voting securities; or
b. during any period of 24 consecutive months (not including any
period prior to October 22, 1997), individuals, who at the beginning
of such period constitute the Board, and any new director (other
than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in
paragraph a., c. (2) or d. of this Section) whose election by the
Board, or whose nomination for election by the Company's stockholders,
was approved by a vote of at least two-thirds (2/3) of the directors
before the beginning of the period cease for any reason to constitute
at least a majority thereof; or
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); (b) resignation of the Executive, which, notwithstanding anything
else herein to the contrary, may be declared by the executive during the
30-day period following the first anniversary of the effective date of
this Agreement; or (c) resignation of the Executive upon the occurrence of
any of the following events:
(1) a significant change in the nature or scope of the Executive's
authorities, powers, functions, or duties from those described in Section
3;
(2) a reduction in total compensation from that provided in Section 4;
(3) the breach by the Company of any other provision of this Agreement; or
(4) a reasonable determination by the Executive that, as a result of a
change in control of the Company his position is significantly
affected so that he is unable to exercise the authorities, powers,
functions or duties attached to his position as described in Section 3.
"Cause" means gross misconduct or willful and material breach of this
Agreement by the Executive. No act, or failure to act, on the Executive's
part shall be deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the action
or omission was in the best interest of the Company.
6. Confidentiality. The Executive agrees that during and after the
employment period, he will not divulge or appropriate to his own use or
the use of others any secret or confidential information or knowledge
pertaining to the business of the Company, or any of its subsidiaries,
obtained during his employment by the Company or any of its subsidiaries.
7. Severance and Benefit Payments.
a. In the event of termination of the Executive during the employment
period, the Company shall pay the Executive a lump-sum severance
allowance equal to salary and bonus payments for the following 24
calendar months. 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 be incurred 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 theretofore 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, March 31, 2000.
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/Xxxxxxx X. Xxxxxxx
Assistant Secretary Its Senior Vice President
/s/Xxxxxx X. Xxxxxxxx
EXECUTIVE
