Exhibit 10 (f)(1)
EXECUTIVE SEPARATION AGREEMENT
THIS AGREEMENT is made between The Quaker Oats Company, a New Jersey
corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Executive"), dated
this 18th day of November, 1996.
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;
b. during any period of 24 consecutive months (not including any period
prior to November 13, 1996), individuals, who at the beginning of
such period constitute the Board, and any new director (other than a
director designated by a Person who has entered into an agreement
with the Company to effect a transaction described in paragraph a., c.
(2) or d. of this Section) whose election by the Board, or whose
nomination for election by the Company's stockholders, was approved by
a vote of at least two-thirds (2/3) of the directors before the
beginning of the period cease for any reason to constitute at least a
majority thereof;
c. the stockholders of the Company approve (1) a plan of complete
liquidation of the Company or (2) the sale or disposition by the
Company of all or substantially all of the Company's assets unless the
acquirer of the assets or its directors shall meet the conditions for
a merger or consolidation in subparagraphs d. (1) or d. (2); or
d. the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(1) such a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
70% of the combined voting power of the Company's or such surviving
entity's outstanding voting securities immediately after such merger
or consolidation; or
(2) such a merger or consolidation which would result in the
directors of the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or consolidation.
In this paragraph d., "surviving entity" shall mean only an entity in
which all of the Company's stockholders immediately before such merger
or consolidation become stockholders by the terms of such merger or
consolidation, and the phrase "directors of the Company who were
directors immediately prior thereto" shall include only individuals who
were directors of the Company at the beginning of the 24 consecutive
month period preceding the date of such merger or consolidation, or who
were new directors (other than any director designated by a Person who
has entered into an agreement with the Company to effect a transaction
described in paragraph a., c. (2), d. (1) or d. (2) of this Section)
whose election by the Board, or whose nomination for election by the
Company's stockholders, was approved by a vote of at least two-thirds
(2/3) of the directors before the beginning of such period.
3. Employment Period. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the effective date of this Agreement
and ending on the earlier to occur of the third anniversary of such
effective date or the 65th birthday of the Executive (the "employment
period"), to exercise such authorities and powers, and perform such duties
and functions, as are commensurate with the authorities and powers being
exercised, and duties and functions being performed, by the Executive
immediately prior to the effective date of this Agreement, which services
shall be performed at the current location where the Executive was employed
immediately prior to the effective date of this Agreement or at such other
location within a 30-mile radius of such current location. The Executive
shall not be required to accept any other location. The Executive agrees
that during the employment period he shall devote his full business time
exclusively to his executive duties as described herein and perform such
duties faithfully and efficiently.
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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 7a. 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 paragraph 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 therefore 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 (a) March 31, 1998 or (b) when the Executive has been placed on
inactive service by the Company prior to a change in control of the
Company.
16. Successors to the Company. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company and
any successor of the Company.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
18. Prior Agreement. Any prior Executive Separation Agreement between the
Executive and the Company which has not yet terminated pursuant to its
terms, is 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
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Assistant Secretary Its: Senior Vice President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
EXECUTIVE