Exhibit 10(h)(4)
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 Agreement for the executive employee listed
below and which has been omitted from this filing:
Name Execution Date
Xxxxxxx X. Xxxxxx December 31, 1998
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 6th day of January, 1999.
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 November 11, 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.
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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, which,
notwithstanding anything else herein to the contrary, may only 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"
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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
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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
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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
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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
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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.
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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/ Xxxxxx X. Xxxxxxxx
