Exhibit 10.17

FIRST AMENDMENT

TO THE

QUAKER LONG TERM INCENTIVE PLAN OF 1999

 

 

WHEREAS, The Quaker Long Term Incentive Plan of 1999 (the “Plan”), was
established by The Quaker Oats Company (the “Company”) for the benefit of its
eligible employees; and

 

WHEREAS, amendment of the Plan is desirable to eliminate the cancellation and
payment of cash in connection with any change in control transaction which would
preclude pooling of interests accounting, if such treatment would otherwise
apply to the transaction, but otherwise retain the full effect and benefit of
the plan provisions, including the elimination of further service requirements
as a condition of the options or restricted stock;

 

NOW, THEREFORE, pursuant to the authority delegated to the undersigned by
resolution of the Board of Directors of the Company, the Plan is hereby amended
as of the 21st day of November, 2000, by adding a new paragraph 9.1(f)
immediately following paragraph 9.1(e) as follows:

 

(f)    Pooling of Interests. Notwithstanding any other provision of the Plan,
Options outstanding on the date of a Change in Control which is intended to
qualify as a pooling of interests transaction which would otherwise be cancelled
and cashed out in accordance with paragraph (a) above, after application of the
limitations set forth in paragraph (e) above, shall not be subject to any
additional service requirement as a condition of exercise but otherwise shall
not be subject to the provisions of such paragraph (a), and the Restricted
Period with respect to Restricted Stock, which would otherwise be cancelled and
cashed out in accordance with paragraph (b) above, after application of the
limitations of paragraph (e) above, shall lapse on the date of any such Change
in Control but such Restricted Stock shall not otherwise be subject to the
provisions of such paragraph (b).

 

IN WITNESS WHEREOF, this Amendment is executed below by a duly authorized
officer of the Company.

 

 

 

The Quaker Oats Company

By:

 

/S/    ROBERT S. MORRISON

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Its:

 

Chairman of the Board, President

and Chief Executive Officer

 

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THE QUAKER LONG TERM INCENTIVE PLAN OF 1999

 

 

ARTICLE I

NAME AND PURPOSE

 

1.1    Name.  The Quaker Long Term Incentive Plan of 1999 (the “Plan”) is
established by The Quaker Oats Company (the “Company”).

 

1.2    Purpose.  The Company has established the Plan to promote the interests
of the Company and its shareholders by providing designated employees of the
Company and its related affiliates with additional incentive and the
opportunity, through stock ownership, to increase their proprietary interest in
the Company and their personal interest in its continued success and progress.

 

ARTICLE II

DEFINITIONS

 

2.1    General Definitions.  The following words and phrases, when used herein,
unless otherwise specifically defined or unless the context clearly indicates
otherwise, shall have the following meanings:

 

(a)  Affiliate.  Any trade or business entity, or a predecessor of such entity,
if any, which is a member of a controlled group of business entities of which
the Company is also a member.

 

(b)  Agreement.  The document which evidences the grant of any Benefit under the
Plan and which sets forth the Benefit and the terms, conditions and provisions
of, and restrictions relating to, such Benefit.

 

(c)  Benefit.  Any benefit granted to a Participant under the Plan.

 

(d)  Board.  The Board of Directors of the Company.

 

(e)  Change in Control.  Occurrence upon events describe in Section 9.2.

 

(f)   Code.  The Internal Revenue Code of 1986, as amended, and including the
regulations promulgated pursuant thereto.

 

(g)  Committee.  The Committee described in Section 5.1.

 

(h)  Common Stock.  The Company’s $5.00 par value common stock.

 

(i)   Company.  The Quaker Oats Company.

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(j)   Effective Date. The date that the Plan is approved by the shareholders of
the Company, which must occur within one year before or after original adoption
by the Board. Any grants of Benefits prior to the approval by the shareholders
of the Company shall be void if such approval is not obtained.

 

(k)  Employee. Any person employed by the Employer.

 

(l)   Employer. The Company and all Affiliates.

 

(m)   Exchange Act. The Securities Exchange Act of 1934, as amended.

 

(n)  Fair Market Value. The average of the high and low sales price of shares on
the New York Stock Exchange (composite transactions) on a given date, or, in the
absence of sales on a given date, the closing price (as so reported) on the New
York Stock Exchange on the last previous day on which a sale occurred prior to
such date.

 

(o)  ISO. An Option that meets the requirements of Section 422 of the Code.

 

(p)  NSO. An Option that does not qualify as an ISO.

 

(q)  Option. An option to purchase Shares granted under ARTICLE XIII of the
Plan.

 

(r)   Other Stock Based Award. An award under ARTICLE XVI that is valued in
whole or in part by reference to, or is otherwise based on, Common Stock.

 

(s)  Participant. An individual who is granted a Benefit under the Plan.
Benefits may be granted only to Employees.

 

(t)   Performance Goals. The goals described under Article XVII of the Plan that
may be applied by the Committee with respect to Performance Shares and Other
Stock Based Awards.

 

(u)  Performance Share. A Share awarded to a Participant under ARTICLE XV of the
Plan.

 

(v)  Plan. The Quaker Long Term Incentive Plan of 1999 and all amendments and
supplements thereto.

 

(w)   1990 Plan. The Quaker Long Term Incentive Plan of 1990 and all amendments
and supplements thereto.

 

(x)  Restricted Stock. Shares issued under ARTICLE XIV of the Plan.

 

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(y)    Rule 16b-3. Rule 16b-3 promulgated by the SEC, as amended, or any
successor rule in effect from time to time.

 

(z)    SEC. The Securities and Exchange Commission.

 

(aa)  Share. A share of Common Stock.

 

2.2    Other Definitions.  In addition to the above definitions, certain words
and phrases used in the Plan and any Agreement may be defined elsewhere in the
Plan or in such Agreement.

 

ARTICLE III

COMMON STOCK

 

3.1    Number of Shares. The maximum number of Shares that may be delivered to
Participants under the Plan shall be equal to the sum of: (a) 8,000,000 Shares;
(b) any Shares available for future awards under the 1990 Plan as of the
Effective Date; and (c) any Shares represented by awards granted under the 1990
Plan, which are forfeited, expire, or are canceled without delivery of the
Shares after the Effective Date or which result in the forfeiture of Shares back
to the Company, subject to the provisions of Sections 3.2 and 3.3. Such Shares
may be authorized but unissued Shares, Shares held in the treasury, or both.

 

3.2    Reusage. If an Option expires or is terminated, surrendered, or canceled
without having been fully exercised; if Restricted Stock or Performance Shares
are forfeited; or if any other grant results in any Shares not being issued, the
Shares covered by such Option, grant of Restricted Stock, Performance Shares or
other grant, as the case may be, shall again be available for use under the
Plan. If an Option is exercised by tendering Shares to the Company as full or
partial payment in connection with the exercise of an Option, only the number of
Shares issued net of the Shares tendered shall be deemed delivered for purposes
of determining the maximum number of Shares available for delivery under the
Plan.

 

3.3    Adjustments. If there is any change in the Common Stock by reason of any
stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination or exchange of Shares, the
limitations on the number of Shares specified under Section 3.4, the number of
Shares then available under Section 3.1 of the Plan for Options and grants of
Restricted Stock, Performance Shares and Other Stock Based Awards, the number of
Shares subject to outstanding Options, Restricted Stock, Performance Shares and
Other Stock Based Awards, and the price thereof, as applicable, shall be
appropriately adjusted by the Committee. Shares issued under the Plan through
the settlement, assumption or substitution of outstanding awards or obligations
to grant future awards as a condition of the Company acquiring another entity
shall not reduce the maximum number of Shares available for delivery under the
Plan.

 

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3.4    Limitations.

 

(a)  Options. The total number of Options (ISOs and NSOs combined) which may be
granted to a single Participant shall not exceed 1,000,000 during any calendar
year, subject to the adjustments provided under Section 3.3.

 

(b)  ISOs. The total number of Shares for which ISOs may be granted on or after
the Effective Date shall not exceed 8,000,000 Shares, subject to the
limitations, reusage and adjustments provided in ARTICLE III of the Plan.

 

(c)  Restricted Stock, Performance Shares and Other Stock Based Awards. The
total number of Shares which may be granted as Restricted Stock, Performance
Shares and Other Stock Based Awards shall not exceed 3,000,000 during the term
of the Plan, subject to the adjustments provided in Section 3.3. The total
number of Shares which may be granted as Performance Shares to a single
Participant shall not exceed 350,000 during any calendar year, subject to the
adjustments under Section 3.3. The total number of Shares which may be granted
as Other Stock Based Awards to a single Participant shall not exceed 350,000
during any calendar year, subject to the adjustments under Section 3.3.

 

ARTICLE IV

ELIGIBILITY

 

The Participants and the Benefits they receive under the Plan shall be
determined solely by the Committee. In making its determinations, the Committee
shall consider past, present and expected future contributions of Employees and
Participants to the Employer.

 

ARTICLE V

ADMINISTRATION

 

5.1    Committee. The Plan shall be administered by the Committee (also known as
the Compensation Committee of the Board). The Committee shall consist of no less
than three members of the Board, all of whom shall not be (nor formerly have
been) employees of the Company and who shall not be eligible to participate in
the Plan. The members of the Committee shall be appointed by and shall serve at
the pleasure of the Board, which may from time to time appoint members in
substitution for members previously appointed and fill vacancies, however
caused, in the Committee.

 

5.2    Authority. Subject to the terms of the Plan, the Committee shall have
complete authority to:

 

(a)  determine the Employees to whom Benefits are granted, the type and amounts
of Benefits to be granted and the time of all such grants;

 

(b)  determine the terms, conditions and provisions of, and restrictions
relating to, each Benefit granted;

 

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(c)  interpret and construe the Plan and all Agreements;

 

(d)  prescribe, amend and rescind rules and regulations relating to the Plan;

 

(e)  determine the content and form of all Agreements;

 

(f)  determine all questions relating to Benefits under the Plan;

 

(g)  maintain accounts, records and ledgers relating to Benefits;

 

(h)  maintain records concerning its decisions and proceedings;

 

(i)  employ agents, attorneys, accountants or other persons for such purposes as
the Committee considers necessary or desirable;

 

(j)  take, at anytime, any action permitted by Section 9.1 irrespective of
whether any Change in Control has occurred or is imminent; and

 

(k)  do and perform all acts which it may deem necessary or appropriate for the
administration of the Plan and carry out the purposes of the Plan.

 

5.3    Determinations. All determinations of the Committee shall be final.

 

5.4    Delegation. Except as required by Rule 16b-3 with respect to Benefits to
individuals who are subject to Section 16 of the Exchange Act or as otherwise
required for compliance with Rule 16b-3 or other applicable law, the Committee
may delegate all or any part of its authority under the Plan to any Employee,
Employees or committee.

 

ARTICLE VI

AMENDMENT

 

6.1    Power of Board. Except as hereinafter provided, the Board shall have the
sole right and power to amend the Plan at any time and from time to time.

 

6.2    Limitation. The Board may not amend the Plan without approval of the
shareholders of the Company:

 

(a)  in a manner which would increase the number of Shares which may be issued
or sold or for which Options, Performance Shares, or Other Stock Based awards
may be granted under the plan; or

 

(b)  in a manner which would violate applicable law.

 

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ARTICLE VII

TERM AND TERMINATION

 

7.1    Term. The Plan shall commence as of the Effective Date and, subject to
the terms of the Plan, including those requiring approval by the shareholders of
the Company and those limiting the period over ISOs or any other Benefits may be
granted, shall continue in full force and effect until December 31, 2007.

 

7.2    Termination. The Plan may be terminated at any time by the Board.

 

ARTICLE VIII

MODIFICATION OR TERMINATION OF BENEFITS

 

8.1    General. Subject to the provisions of Section 8.2, the amendment or
termination of the Plan shall not adversely affect a Participant’s right to any
Benefit granted prior to such amendment or termination.

8.2    Committee’s Right. Except as hereinafter provided, any Benefit granted
may be converted, modified, forfeited or canceled, in whole or in part, by the
Committee if and to the extent permitted in the Plan or applicable Agreement or
with the consent of the Participant to whom such Benefit was granted. The
Committee may not cancel or permit the surrender of Options and reissue new
Options, or reprice Options, at a lower purchase price.

 

ARTICLE IX

CHANGE IN CONTROL

 

9.1    Benefit Cancellation and Payment.

 

(a)  Options. Upon the occurrence of a Change in Control, Options outstanding on
the date on which the Change in Control occurs shall be canceled, and an
immediate lump sum cash payment shall be paid to the Participant equal to the
product of (1) the higher of (i) the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Index on or nearest the date
of payment (or, if not listed on such exchange, on a nationally recognized
exchange or quotation system on which trading volume in the Common Stock is
highest), or (ii) the highest per Share price for the Common Stock actually paid
in connection with the Change in Control, over the per Share Option price of
each such Option held (whether or not then fully exercisable), and (2) the
number of Shares covered by each such Option.

 

(b)  Restricted Stock. Upon the occurrence of a Change in Control, Restricted
Stock outstanding on the date on which the Change in Control occurs shall be
canceled and an immediate lump sum cash payment shall be paid to the Participant
equal to the product of (1) the higher (i) the closing price of Common Stock as
reported on the New York Stock Exchange Composite Index on or nearest the date
of payment (or, if not listed

 

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on such exchange, on a nationally recognized exchange or quotation system on
which trading volume in the Common Stock is highest) or (ii) the highest per
share price for Common Stock actually paid in connection with the Change in
Control and (2) the number of Shares of such Restricted Stock; plus the value of
any related Cash Award relating to such Restricted Stock.

 

(c)  Performance Shares. Upon the occurrence of a Change in Control, any
Performance Shares previously granted, but still considered outstanding (as a
right to received Shares or cash equal to the Fair Market Value of such Shares
at a future date), shall be canceled and any profit and/or performance
objectives with respect to such Performance Shares shall be deemed to have been
attained to the full and maximum extent; and an immediate lump sum cash payment
shall be paid to the Participant in an amount determined in accordance with the
terms and conditions set forth in the applicable Agreement.

 

(d)  Other Stock Based Awards. Upon the occurrence of a Change in Control, Other
Stock Based Awards previously granted under the Plan, but still considered
outstanding, shall be canceled and an immediate lump sum cash payment shall be
paid to the Participant in an amount determined in accordance with the terms and
conditions set forth in the applicable Agreement.

 

(e)  Tax Penalties. If the making of payments pursuant to the foregoing
paragraphs of this Section 9.1 would subject the Participant to an excise tax
under Section 4999 of the Code, or would result in the Company’s loss of a
federal income tax deduction for those payments (either of these consequences is
referred to individually herein as a “Tax Penalty”), then the Company shall
reduce the amount of Benefits to be canceled to the extent necessary to avoid
the imposition of such Tax Penalty, and shall establish procedures necessary to
maintain for the Participants any form of benefit which may be provided under
the Plan so that such Participant will be in the same financial position with
respect to those Benefits not canceled as he would have been in the ordinary
course, absent a Change in Control and assuming his continued employment; except
that the foregoing provisions of this paragraph (e), with respect to the
cancellation of Benefits, shall not apply if such Participant (i) is entitled to
a tax reimbursement for such Tax Penalty under any other agreement, plan or
program of the Company, or (ii) may disclaim any portion of or all payments to
be made pursuant to or under any other agreement, plan or program of the Company
in order to avoid such Tax Penalty. Disagreements as to whether payments
pursuant to the foregoing would result in the imposition of a Tax Penalty shall
be resolved by an opinion of counsel chosen by the Participant and reasonably
satisfactory to the Company.

 

9.2    Change in Control. A Change in Control 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 Exchange Act (other than the Company, any trustee or

 

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other fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the shareholders 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; provided, however, that in determining whether
any Person owns 25% or more of such voting power, shares owned by such Person
which were acquired by that Person directly from the Company shall be treated as
not owned by such Person;

 

(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 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 shareholders, 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 shareholders 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 shareholders 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 shareholders 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

 

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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 shareholders, was
approved by a vote of at least two-thirds (2/3) of the directors before the
beginning of such period.

 

ARTICLE X

AGREEMENTS AND CERTAIN BENEFITS

 

10.1    Grant Evidenced by Agreement. The grant of any Benefit under the Plan
may be evidenced by an Agreement which shall describe the specific Benefit
granted and the terms and conditions of the Benefit. The granting of any Benefit
may be subject to, and conditioned upon, the recipient’s execution of any
Agreement required by the Committee. Except as otherwise provided in an
Agreement, all capitalized terms used in the Agreement shall have the same
meaning as in the Plan, and the Agreement shall be subject to all of the terms
of the Plan.

 

10.2    Provisions of Agreement. Each Agreement shall contain such provisions
that the Committee shall determine to be necessary, desirable and appropriate
for the Benefit granted. Each Agreement may include, but shall not be limited
to, the following with respect to any Benefit: description of the type of
Benefit; the Benefit’s duration; its transferability; if an Option, the exercise
price, the exercise period and the person or persons who may exercise the
Option; the effect upon such Benefit of the Participant’s death or termination
of employment; the Benefit’s conditions; when, if and how any Benefit may be
forfeited, converted into another Benefit, modified, exchanged for another
Benefit, or replaced; and the restrictions on any Shares purchased or granted
under the Plan.

 

ARTICLE XI

REPLACEMENT AND TANDEM AWARDS

 

11.1    Replacement. Subject to Section 8.2, the Committee may permit a
Participant to elect to surrender a Benefit in exchange for a new Benefit.

 

11.2    Tandem Awards. Benefits may be granted by the Committee in tandem.
However, no Benefit may be granted in tandem with an ISO.

 

ARTICLE XII

PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING

 

12.1    Payment. Upon the exercise of an Option or in the case of any other
Benefit that requires a payment to the Company, the amount due the Company is to
be paid:

 

(a)  in cash;

 

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(b) by the tender to the Company of Shares owned by the Participant and
registered his name having a Fair Market Value equal to the amount due to the
Company;

 

(c) in other property, rights and credits, including the Participant’s
promissory note; or

 

(d) by any combination of the payment methods specified in (a), (b) and (c)
above.

 

Notwithstanding the foregoing, any method of payment other than (a) may be used
only with the consent of the Committee, or if and to the extent so provided in
the applicable Agreement.

 

12.2     Dividend Equivalents. Grants of Benefits in Shares or Share equivalents
may include dividend equivalent payments or dividend credit rights.

 

12.3     Deferral. The right to receive any Benefit under the Plan may, at the
request of the Participant, be deferred for such period and upon such terms as
the Committee shall determine, which may include crediting of interest on
deferrals of cash and crediting of dividends on deferrals denominated in Shares.

 

12.4     Withholding. The Company, at the time any distribution is made under
the Plan, whether in cash or in Shares, may withhold from such distribution any
amount necessary to satisfy federal, state and local tax withholding
requirements with respect to such distribution. Such withholding may be in cash
or in Shares.

 

ARTICLE XIII

OPTIONS

 

13.1     Types of Options. It is intended that both ISOs and NSOs may be granted
by the Committee under the Plan.

 

13.2     Grant of Options and Option Price. Each Option may not have a term that
exceeds 10 years from the date of grant, must be granted to an Employee and must
be granted no later than December 31, 2007. The purchase price for Shares under
any Option shall be no less than the Fair Market Value of the Shares at the time
the Option is granted.

 

13.3     Early Termination of Option.

 

(a) Termination of Employment. All rights to exercise an Option terminate when
the Participant’s employment terminates for any reason other than his death or
retirement. Transfer from the Company to an Affiliate, or vice versa, or from
one Affiliate to another, shall not be deemed termination of employment. The
Committee shall have the authority to determine in each case whether an
authorized leave of absence or absence on military or government service shall
be deemed a termination of employment for purpose of this paragraph (a).

 

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(b) Death or Retirement. If a Participant dies while an Employee or his
employment is terminated because of retirement, his Option shall terminate
within a period not exceeding five years following his death or retirement, but
not later than the date the Option expires pursuant to its terms. The terms of
Options outstanding, except for those Options intended to qualify as an ISO, may
also be amended at anytime by the Committee or the Board to extend the Option’s
duration period following a Participant’s death or retirement, subject to the
limitations stated in the preceding sentence. In the meantime, subject to the
limitations in the applicable Agreement, it may be exercised by the Participant,
the executors or administrators of his estate, or by his legatee or heirs.
“Retirement” shall mean termination of employment at age 55 for older for
reasons other than death.

 

13.4     Other Requirements. The terms of each Option which is intended to
qualify as an ISO shall meet all requirements of Section 422 of the Code. The
terms of each NSO shall provide that such Option will not be treated as an ISO.

 

13.5     Determination by Committee. Except as otherwise provided in Section
13.2 through Section 13.4, the terms of all Options shall be determined by the
Committee.

 

ARTICLE XIV

RESTRICTED STOCK

 

14.1     Description. The Committee may grant Benefits in Shares available under
ARTICLE III of the Plan as Restricted Stock. Shares of Restricted Stock shall be
issued at the time of the grant but shall be subject to forfeiture until
provided otherwise in the applicable Agreement or the Plan.

 

14.2     Terms and Conditions of Restricted Stock Awards. All Shares of
Restricted Stock shall be subject to the following terms and conditions, and to
such other terms and conditions as may be provided under the Agreements
described in paragraph (f) next below:

 

(a) Payment of Par Value. The Committee, in its discretion, may condition any
grant of Shares of Restricted Stock on payment by the Participant to the Company
of an amount not in excess of the par value of such Shares. If any such shares
are subsequently forfeited by the Participant, the Company shall pay an
equivalent amount to the Participant as soon as practicable after the
forfeiture.

 

(b) Restricted Period. Shares of Restricted Stock granted to a Participant may
not be sold, assigned, transferred, pledged or otherwise encumbered during a
“Restricted Period” commencing on the date of the grant and ending on such date
as the Committee may designate, subject to the following:

 

(1) The Committee may, at any time and in its sole discretion, reduce or
terminate the Restricted Period with respect to any outstanding Shares of

 

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Restricted Stock and any accrued dividends in accordance with paragraph (g)
below.

 

(2) The Restricted Period applicable to any Participant’s Shares of Restricted
Stock shall end as of the date on which the Participant’s employment with the
Company and its Affiliates is terminated by reason of the Participant’s death,
physical or mental disability (as determined by the Committee), or for such
other reasons as the Committee may provide.

 

(3) The Committee may, at any time, and in its sole discretion, allow a
Participant to use his Restricted Stock during the Restricted Period as payment
of the Option purchase price (in accordance with Section 12.1) for Options which
he has been granted. In such an event, a number of the Shares issued upon the
exercise of the Option, equal to the number of Shares of Restricted Stock used
as payment therefore, shall be subject to the same restrictions as the
Restricted Stock so used, plus any additional restrictions that may be imposed
by the Committee. Such terms and conditions relating to such use of Restricted
Stock shall be provided under the Agreements described in paragraph (f) of this
Section.

 

(c) Transfer of Restricted Stock. At the end of the Restricted Period applicable
to any Restricted Stock, such Shares, and any accrued dividends will be
transferred free of all restrictions to the Participant (or, to the
Participant’s legal representative, beneficiary or heir).

 

(d) Forfeitures. Subject to paragraph (b) of this Section 14.2, a Participant
whose employment with the Company and its Affiliates is terminated prior to the
last day of the applicable Restricted Period shall forfeit all shares of
Restricted Stock and any accrued dividends.

 

(e) Certificate Deposited With Company. Each certificate issued in respect of
Shares of Restricted Stock granted to a Participant under the Plan shall be
registered in the name of the Participant and deposited, together with a stock
power endorsed in blank, with the Company. At the discretion of the Committee,
any such certificates may be deposited in a bank designated by the Committee.
Each such certificate shall bear the following (or a similar) legend:

 

“The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeitures) contained
in The Quaker Long Term Incentive Plan of 1999 and an Agreement entered into
between the registered owner and The Quaker Oats Company. A copy of the Plan and
Agreement is on file in the office of the Secretary of The Quaker Oats Company,
321 North Clark Street, Chicago, Illinois 60610.”

 

 

 

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(f) Restricted Stock Agreement. The Participant shall enter into an Agreement
with the Company in a form specified by the Committee and containing such
additional terms and conditions, if any, as the Committee in its sole discretion
shall determine, which are not inconsistent with the provisions of the Plan.

 

(g) Dividends. Regular cash dividends payable with respect to shares of
Restricted Stock shall, in accordance with the terms of the applicable
Agreement, be paid to the Participant currently or accrued. If dividends are
accrued, interest may be payable on such dividends at such rate, if any, as is
established from time to time by the Committee.

 

(h) Substitution of Rights. Prior to the end of the Restricted Period with
respect to any Shares of Restricted Stock awarded to a Participant, the
Committee may, with the consent of the Participant, substitute an unsecured
obligation of the Company to pay cash or stock (on such reasonable terms and
conditions as the Committee may, in its sole discretion, determine) in lieu of
its obligations under this ARTICLE XIV to deliver unrestricted Shares plus
accrued dividends.

 

(i) Shareholder Rights. Subject to the foregoing restrictions, each Participant
shall have all the rights of a shareholder with respect to Shares of Restricted
Stock including, but not limited to, the right to vote such Shares.

 

ARTICLE XV

PERFORMANCE SHARES

 

15.1     Description. Performance Shares are the right of an individual to whom
a grant of such Shares is made to receive Shares or cash equal to the Fair
Market Value of such Shares at a future date in accordance with the terms of
such grant.

 

15.2     Grant. The Committee may grant an award of Performance Shares. The
number of Performance Shares and the terms and conditions of the grant shall be
set forth in the applicable Agreement, which may include Performance Goals as
described in Article XVII.

 

ARTICLE XVI

OTHER STOCK BASED AWARDS

 

16.1     Description. The Committee shall have the right to provide any other
form of stock based awards under the Plan, if the Committee believes that such
Other Stock Based Award would further the purposes for which the Plan was
established.

 

16.2     Grant. The Committee may grant an award of Other Stock Based Awards
which may include, without limitation, the grant of Shares based on certain
conditions, or the grant of securities convertible into Shares. The number of
Other Stock Based Awards and the terms and

 

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conditions of the grant shall be set forth in the applicable Agreement, which
may include Performance Goals as described in Article XVII.

 

ARTICLE XVII

PERFORMANCE GOALS

 

Performance Shares and Other Stock Based Awards may be governed by the
achievement of Performance Goals as the Committee shall determine. Performance
Goals that may be used by the Committee for such grants shall consist of:
operating profits (which may include a determination based upon earnings before
income taxes, depreciation and amortization), net profits, earnings per share,
profit returns and margins, revenues, controllable earnings, shareholder return
and/or value, stock price and working capital. Performance Goals may be measured
solely on a corporate, subsidiary or business unit basis, or a combination
thereof and may reflect absolute entity performance or a relative comparison of
entity performance to the performance of a peer group of entities or other
external measure of the selected performance criteria. Profits, earnings and
revenues used for any Performance Goal measurement may exclude: gains or loses
on operating asset sales or dispositions; asset write-downs; litigation or claim
judgments or settlements; accruals for historic environmental obligations;
effect of changes in tax law or rate on deferred tax liabilities; accruals for
reorganization and restructuring programs; uninsured catastrophic property
losses; the cumulative effect of changes in accounting principles; and any
extraordinary non-recurring items as described in Accounting Principles Board
Opinion No. 30 and/or in management’s discussion and analysis of financial
performance appearing in the Company’s annual report to shareholders for the
applicable year.

 

ARTICLE XVIII

MISCELLANEOUS PROVISIONS

 

17.1     Underscored References. The underscored references contained in the
Plan are included only for convenience, and they shall not be construed as a
part of the Plan or in any respect affecting or modifying its provisions.

 

17.2     Number and Gender. The masculine and neuter, wherever used in the Plan,
shall refer to either the masculine, neuter or feminine; and, unless the context
otherwise requires, the singular shall include the plural and the plural the
singular.

 

17.3     Governing Law. This Plan shall be construed and administered in
accordance with the laws of the State of Illinois.

 

17.4     Purchase for Investment. The Committee may require each person
purchasing Shares pursuant to an Option or other award under the Plan to
represent to and agree with the Company in writing that such person is acquiring
the Shares for investment and without a view to distribution or resale. The
certificates for such Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer. All certificates for Shares
delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as

 

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the Committee may deem advisable under all applicable laws, rules and
regulations, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

 

17.5     No Employment Contract. The adoption of the Plan or the granting of a
Benefit shall not confer upon any Employee any right to continued employment nor
shall it interfere in any way with the right of the Employer to terminate the
employment of any of its Employees at any time.

 

17.6     No Effect on Other Benefits. The receipt of Benefits under the Plan
shall have no effect on any benefits to which a Participant may be entitled from
the Employer, under another plan or otherwise, or preclude a Participant from
receiving any such benefits.

 

IN WITNESS WHEREOF, this Plan is executed by a duly authorized officer of the
Company.

 

       

THE QUAKER OATS COMPANY

Dated: April 19, 1999

     

By:

 

/s/ Pamela S. Hewitt

               

Its Senior Vice President

 

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