Exhibit (h)
---------------------------------
CALL OPTION AGREEMENT
Dated as of October 28, 2002
by and between
DIAGEO MIDWEST B.V.
and
GENERAL ▇▇▇▇▇, INC.
---------------------------------
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.........................................................3
ARTICLE II CALL OPTION........................................................3
Section 2.1 Grant; Premium.................................................3
Section 2.2 Exercise of Call Option; Call Option Price.....................4
Section 2.3 Exercise Mechanics.............................................4
Section 2.4 Rights Prior to Exercise.......................................5
Section 2.5 Prohibition on Transfer of the Option Shares...................5
Section 2.6 Representations................................................5
Section 2.7 Indemnity......................................................6
ARTICLE III MISCELLANEOUS PROVISIONS..........................................7
Section 3.1 Notices........................................................7
Section 3.2 Binding Effect; No Third-Party Beneficiaries...................8
Section 3.3 Assignment.....................................................8
Section 3.4 Governing Law..................................................8
Section 3.5 Payments and Deliveries........................................9
Section 3.6 Specific Performance...........................................9
Section 3.7 Miscellaneous..................................................9
Section 3.8 Partial Invalidity.............................................9
Section 3.9 Entire Agreement...............................................9
Section 3.10 Counterparts...................................................9
-2-
CALL OPTION AGREEMENT
This CALL OPTION AGREEMENT (this "Agreement") is dated as of October
28, 2002 and is between DIAGEO MIDWEST B.V., a company organized under the laws
of the Netherlands ("DMWBV"), and GENERAL ▇▇▇▇▇, INC., a Delaware corporation
(the "Issuer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Diageo plc, a public limited company incorporated under the
laws of England and Wales ("Diageo"), entered into an Agreement and Plan of
Merger, dated as of July 16, 2000, as subsequently amended (as amended, the
"Merger Agreement"), with the Issuer, General ▇▇▇▇▇ North American Businesses,
Inc., a Delaware corporation and wholly-owned subsidiary of the Issuer, and The
Pillsbury Company, a Delaware corporation and indirect wholly owned subsidiary
of Diageo ("Pillsbury"), pursuant to which the Issuer acquired on October 31,
2001 the food business (other than the quick service restaurant business) of
Diageo and paid as part of the consideration ordinary shares of the Issuer, par
value $0.10 per share (the "Ordinary Shares");
WHEREAS, Diageo, Gramet Holdings Corp., an indirectly wholly owned
subsidiary of Diageo ("Gramet") and the Issuer also entered into a Stockholders
Agreement, dated October 31, 2001 (the "Stockholders Agreement");
WHEREAS, DMWBV, an indirect wholly owned subsidiary of Diageo, is the
record holder of 79,000,000 Ordinary Shares; and
WHEREAS, the Issuer wishes to acquire options to purchase an aggregate
of 2,909,232 Ordinary Shares (as defined in Annex I, the "Option Shares") from
DMWBV and DMWBV is willing to grant such options to the Issuer on the terms
specified herein.
NOW, THEREFORE, the parties, intending to be bound, hereby agree as
follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in Annex I to this Agreement.
ARTICLE II
CALL OPTION
Section 2.1 Grant; Premium.
(a) DMWBV hereby grants to the Issuer an irrevocable option (the "Call
Option") to purchase Ordinary Shares from DMWBV which shall cover the Option
-3-
Shares and shall be exercisable within the Effective Period in the circumstances
and on the terms set forth below.
(b) The Call Option shall become effective against payment from the
Issuer to DMWBV as of the date hereof of a per Option Share premium of $3.07
(for an aggregate premium in the amount of $8,931,342.24), payable by wire
transfer of immediately available funds to the account of DMWBV set forth in
Schedule B hereto.
Section 2.2 Exercise of Call Option; Call Option Price.
(a) The Call Options shall be exercisable in the manner described in
Section 2.3 hereof.
(b) The price payable by the Issuer for each Option Share upon the
exercise of the Call Options (the "Call Option Price") shall be $51.56.
Section 2.3 Exercise Mechanics.
(a) Subject to Section 2.2(a) hereof, the Issuer may exercise the Call
Option, in whole or in part (subject to the mandatory exercise requirement
during the period beginning September 29, 2005 and ending on October 28, 2005
described below), on any Business Day within the Effective Period by giving
three Business Days' prior written notice (a "Call Notice") of exercise in the
form of Schedule A to this Agreement, which Call Notice shall be irrevocable and
in accordance with the requirements of Section 3.1 hereof, provided, however
that (i) prior to September 28, 2005, the Issuer may only exercise the Call
Option in respect of a current obligation to issue Ordinary Shares pursuant to
the conversion of convertible debt securities issued by the Issuer within 24
days of the date of this Agreement and (ii) the exercise of the Call Option or
the October 23rd Call Option during the period beginning on September 29, 2005
and ending on October 28, 2005 shall obligate the Issuer to purchase all Option
Shares not previously purchased. Each Call Notice will specify a date for
settlement (a "Settlement Date") which shall be three Business Days after the
date of the Call Notice, and the number of Option Shares to be delivered on such
Settlement Date; provided however, (i) there shall be no more than one
Settlement Date in any 30 day period in respect of exercises of the Call Option
and the October 23rd Call Option prior to September 29, 2005 and (ii) the
minimum number of Option Shares to be delivered with respect to a Call Notice
exercised during the period beginning September 29, 2005 shall be for 100% of
the remaining Option Shares.
(b) On each Settlement Date:
(i) The Issuer shall pay DMWBV the Call Option Price in respect
of each Option Share to be delivered in United States dollars in
immediately available funds by wire transfer to the account of DMWBV
specified in writing to the Issuer two Business Days prior to the
relevant Settlement Date or, if not so specified, to the account of
DMWBV specified in Schedule B hereto; and
-4-
(ii) Upon and subject to receipt by DMWBV of such Call Option
Price, DMWBV shall deliver to the Issuer a certificate representing
the number of Option Shares to be delivered, together with a share
transfer form in respect of such Option Shares duly completed in favor
of the Issuer, an incumbency certificate with respect to the execution
and delivery of the share transfer form and such other share transfer
documentation as the Issuer and its transfer agent shall reasonably
request.
(c) DMWBV covenants and agrees that upon transfer of the Option Shares
to the Issuer pursuant to a Call Option and payment therefor as provided in this
Section 2.3(b), the Issuer shall receive the Option Shares free and clear of any
claims, pledges, liens, charges and encumbrances arising by, through or under
DMWBV or any Affiliate of DMWBV. For the avoidance of doubt, DMWBV assumes no
responsibility for effecting the transfer of the Option Shares on the books and
records of the Issuer, and DMWBV will be deemed to have satisfied in full its
obligations under this Agreement upon delivery to the Issuer of the certificate,
share transfer form and any other documentation as required by this Section
2.3(b).
Section 2.4 Rights Prior to Exercise. For the avoidance of doubt, the
Issuer hereby acknowledges that DMWBV shall have, until such time, if any, as
DMWBV consummates the sale of the Option Shares as provided in Section 2.3 or
otherwise sells or transfers such Option Shares, all voting rights assigned to
such Option Shares, all rights to Dividends when, as and if declared with
respect to such Option Shares, and all other rights with respect to such Option
Shares, including any rights that Diageo or any of its Affiliates may have with
respect to such Option Shares under the Merger Agreement and the Stockholders
Agreement (which include, without limitation, the right to receive a contingent
price adjustment with respect to such Option Shares pursuant to Section 2.13 of
the Merger Agreement), and that DMWBV will remain the registered holder and
beneficial owner of such Option Shares.
Section 2.5 Prohibition on Transfer of the Option Shares. DMWBV shall
not transfer, sell, pledge, hypothecate, gift or place in trust (voting or
otherwise) or transfer by operation of law (other than by way of a transfer to,
or merger into, a directly or indirectly wholly owned subsidiary of Diageo),
create a security interest in or a lien on, or in any other way encumber or
dispose (directly or indirectly), any Option Shares from the date of this
Agreement up to and including the final date of the Effective Period, provided,
however that nothing in this Section 2.5 shall prohibit Diageo from tendering
the Option Shares into or otherwise participating in a Merger Event to the
extent permitted by the Stockholders Agreement.
Section 2.6 Representations.
(a) Each party represents to the other party (which representations
will be deemed to be repeated by each party on each Settlement Date) that:
-5-
(i) It is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation;
(ii) It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and has taken all
necessary action to authorize such execution, delivery and
performance;
(iii) Such execution, delivery and performance do not violate or
conflict with any law applicable to it, any provision of its
constitutional documents, any order judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its
assets;
(iv) All governmental and other consents that are required to
have been obtained by it with respect to this Agreement have been
complied with;
(v) Its obligations under this Agreement constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles
of general application (regardless of whether enforcement is sought in
a proceeding in equity or at law) and as rights to indemnity hereunder
may be limited by United States federal and state securities laws);
and
(vi) There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body,
agency or official or any arbitrator that is likely to affect the
legality, validity or enforceability against it of this Agreement or
its ability to perform its obligations under this Agreement.
(b) In addition, the Issuer represents to each of Diageo and DMWBV
that this Agreement and all transactions involving the Option Shares
contemplated in connection therewith have been approved by the Issuer's board of
directors for the purpose of applicable laws, including, without limitation,
exemption from Section 16 under the Securities Exchange Act of 1934.
Section 2.7 Indemnity.
(a) In the event that DMWBV, Diageo or any of their Affiliates becomes
involved in any capacity in any action, proceeding or investigation brought by
or against any person, including holders of securities of the Issuer, in
connection with or as a result of any matter related to this Agreement or the
offering and sale of any securities that may be convertible into the Option
Shares, the Issuer periodically will reimburse DMWBV or
-6-
Diageo for its legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith. Any such reimbursement made
in respect of a direct action by the Issuer against DMWBV or Diageo to enforce
this Agreement or for breach of this Agreement shall be repaid to the Issuer by
DMWBV or Diageo if it is determined that DMWBV breached its obligations under
this Agreement. The Issuer also will indemnify and hold DMWBV and Diageo
harmless against any and all losses, claims, damages or liabilities ("Losses")
to any such person in connection with or as a result of any matter referred to
in this Agreement or the offering and sale of any securities that may be
convertible into the Option Shares. Such indemnity shall not apply in respect of
a direct action by the Issuer against DMWBV or Diageo to the extent it is
determined that such Losses resulted from DMWBV's breach of its obligations
under this Agreement. The reimbursement and indemnity obligations of the Issuer
under this Section 2.6 shall be in addition to any liability which the Issuer
may otherwise have and shall extend upon the same terms and conditions to any
Affiliate of DMWBV or Diageo and the directors, agents, employees and
controlling persons (if any), as the case may be, of DMWBV or Diageo and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representative of the Issuer, DMWBV,
Diageo, any such Affiliate and any such person. The Issuer also agrees that
neither DMWBV, Diageo nor any of such Affiliates, directors, agents, employees
or controlling persons shall have any liability to the Issuer or any person
asserting claims on behalf of or in right of the Issuer in connection with or as
a result any matter referred to in this Agreement or the offering and sale of
any securities that may be convertible into the Option Shares except to the
extent that any Losses or expenses incurred by the Issuer resulted from DMWBV's
breach of its obligations under this Agreement.
(b) The provisions of this Section 2.6 shall survive the last
Settlement Date or any termination of this Agreement.
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.1 Notices. All notices pursuant to this Agreement shall be
in writing and shall be deemed to have been duly given when delivered by hand,
when delivered personally or by courier, three days after being deposited in the
U.S. mail (registered or certified mail, postage prepaid, return receipt
requested), or when received by facsimile transmission if promptly confirmed by
telephone, as follows:
If to DMWBV:
Diageo Midwest B.V.
▇▇▇▇▇▇▇▇▇ ▇▇-▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: The Board of Directors
Fax: ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
-7-
with copies to:
Diageo plc
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: General Counsel
Fax: ▇▇▇-▇▇▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇) ▇▇▇▇-▇▇▇▇
If to the Issuer:
General ▇▇▇▇▇, Inc.
Number ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Whitney
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇ ▇▇▇▇
Section 3.2 Binding Effect; No Third-Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors, legal representatives and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto, and their respective successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 3.3 Assignment. Neither party may assign or transfer its
rights and/or its obligations hereunder without the prior written consent of the
other party and any attempted assignment or transfer without such consent shall
be void.
Section 3.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
-8-
Section 3.5 Payments and Deliveries. If any payment or delivery
pursuant to this Agreement is to be made on any date that is not a Business Day,
such payment or delivery shall be made on the first following date that is a
Business Day and shall not be deemed to be delayed. All payments under this
Agreement shall be made without any deduction or withholding for or on account
of any taxes.
Section 3.6 Specific Performance. DMWBV acknowledges that the Issuer
will have no adequate remedy at law if DMWBV fails to perform its obligation
under this Agreement to deliver the Option Shares upon and subject to receipt by
DMWBV of the full amount of the Call Option Price in accordance with Section
2.3(b). DMWBV agrees that, in such event, to the fullest extent permitted by
law, (i) the Issuer shall have the right, in addition to any other rights it may
have, to specific performance of such obligation and (ii) it will not take any
action to impede the Issuer's efforts to enforce such right of specific
performance.
Section 3.7 Miscellaneous. Each party acknowledges that, in entering
into this Agreement to which it is a party, it is relying upon the advice of its
own advisers and that no party makes any representations, express or implied, as
to the treatment for accounting, legal or tax purposes of the transactions
contemplated by this Agreement.
Section 3.8 Partial Invalidity. If, at any time, any provision hereof
is or becomes illegal, invalid or unenforceable in any respect under the law of
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions hereof nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be affected
or impaired thereby.
Section 3.9 Entire Agreement. This Agreement constitutes the entire
agreement between the parties relating to the matters covered hereby and
supersede and extinguish any prior drafts, agreements, undertakings,
representations, warranties and arrangements of any nature whatsoever, whether
or not in writing, relating thereto. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
Section 3.10 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-9-
IN WITNESS WHEREOF, the parties have hereunto signed their names in
the space provided below.
DIAGEO MIDWEST B.V.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director, Treasurer
GENERAL ▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President, Treasurer
ANNEX I
DEFINITIONS
"Adjustment Event" means any of the following: (i) a subdivision, combination or
reclassification of the Ordinary Shares (unless a Merger Event), or a free
distribution or dividend of any such Ordinary Shares to existing holders by way
of bonus, capitalization or similar issue; (ii) a distribution or dividend to
existing holders of the Ordinary Shares of (A) such Ordinary Shares, or (B)
other share capital or securities granting the right to payment of dividends
and/or the proceeds of liquidation of the Issuer equally or proportionately with
such payments to holders of such Ordinary Shares, or (C) any other type of
securities, rights or warrants or other assets, in any case for payment (cash or
other) at less than the prevailing market price; or (iii) an extraordinary
dividend; provided that no event will be considered an "Adjustment Event" unless
such event has been consummated or completed prior to the relevant Settlement
Date.
"Affiliate" means in relation to any person, any entity controlled, directly or
indirectly, by the person, any entity that controls, directly or indirectly, the
person or any entity directly or indirectly under common control with the
person. For this purpose, "control" of any entity or person means ownership of a
majority of the voting power of the entity or person.
"Agreement" means this Call Option Agreement.
"Associate Accounting Exercise Date" means the date that Diageo (i) determines
in consultation with its independent public auditors that it is no longer able
to account for its equity interest in the Issuer as an associate based on its
investment in Ordinary Shares, including Option Shares or (ii) elects not to
account for its equity investment in the Issuer as an associate.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which the commercial banks in New York City, Amsterdam or London are authorized
or required by law to remain closed.
"Call Notice" has the meaning specified in Section 2.3 of this Agreement.
"Call Option" has the meaning specified in Section 2.1 of this Agreement.
"Call Option Price" has the meaning specified in Section 2.2 of this Agreement.
"CVR Exercise Date" means (i) May 1, 2003 in the event Diageo receives no
payment in relation to the CVR or (ii) November 1, 2003, in the event that
Diageo receives payment in relation to the CVR.
"CVR" means the contingent value right granted under the Merger Agreement.
"Dividends" means all dividends paid by the Issuer on the Ordinary Shares,
except dividends paid pursuant to an Adjustment Event or a Merger Event.
-1-
"DMWBV" has the meaning specified in the recitals to this Agreement.
"Effective Period" means the period beginning on the earlier of the (i)
Associate Accounting Exercise Date and (ii) September 29, 2005 and ending on
October 28, 2005. In no event shall the Effective Period begin prior to the CVR
Exercise Date.
"Insolvency" means that, by reason of the voluntary liquidation, bankruptcy or
insolvency of or an analogous proceeding affecting the Issuer, (i) all the
Ordinary Shares are required to be transferred to a trustee, liquidator or other
similar official or (ii) holders of the Ordinary Shares become legally
prohibited from transferring them.
"Issuer" has the meaning specified in the recitals to this Agreement.
"Merger Agreement" has the meaning specified in the recitals to this Agreement.
"Merger Event" means (i) any consolidation, amalgamation, binding share exchange
or merger of the Issuer with or into another entity (other than the
consolidation, amalgamation, binding share exchange or merger in which the
Issuer is the continuing corporation and which does not result in
reclassification or change of the Issuer's securities); (ii) any other takeover
offer for the Ordinary Shares that results in a transfer of or an irrevocable
commitment to transfer all such Ordinary Shares; or (iii) any reclassification
or change of the Ordinary Shares that results in a transfer of or an irrevocable
commitment to transfer all the Ordinary Shares; provided that no event shall
constitute a Merger Event unless such event has been consummated or completed
prior to the relevant Settlement Date.
"October 23rd Call Option" means the call options granted to the Issuer by DMWBV
pursuant to a Call Option Agreement by and between DMWBV and the Issuer dated as
of October 23, 2002.
"Option Shares" means the Option Shares, provided that if an Adjustment Event, a
Merger Event or Insolvency has been consummated or completed after the date
hereof but prior to the relevant Settlement Date, Option Shares shall mean
instead of or in addition to such Ordinary Shares (i) the number of Ordinary
Shares received by DMWBV in respect of the Option Shares and/or any cash,
securities or other property or assets received by DMWBV in respect of such
Option Shares upon the consummation or completion of an Adjustment Event; (ii)
the kind and amount of securities and other property or assets received by DMWBV
in respect of the Option Shares upon or in connection with the consummation or
completion of a Merger Event; and (iii) any cash or other property or assets
distributed in respect of the Option Shares upon the Insolvency of the Issuer.
"Ordinary Shares" has the meaning assigned in the recitals to this Agreement.
"Settlement Date" has the meaning specified in Section 2.3 of this Agreement.
-2-
"Stockholders Agreement" has the meaning specified in the recitals to this
Agreement.
-3-
Schedule A
FORM OF NOTICE OF EXERCISE OF CALL OPTION1
[LETTERHEAD OF GENERAL ▇▇▇▇▇]
[DATE]
Diageo Midwest B.V.
Re: Notice of Exercise of the Call Option pursuant to the Call
Option Agreement dated as of October 28, 2002, as amended from time to
time (the "Call Option Agreement") between DIAGEO MIDWEST B.V. and
GENERAL ▇▇▇▇▇, INC.
Ladies and Gentlemen:
This notice is being sent to you pursuant to Section 2.3(a) of the Call
Option Agreement. This is to advise you of our exercise of the Call Option. The
number of Option Shares to be delivered pursuant to this Call Notice shall be [
]. The Settlement Date shall occur on [ ]2 and payment for such Option Shares
will be made to [the account of Diageo Midwest B.V. set forth in Schedule B to
the Call Option Agreement] [any new account information provided in writing at
least two Business Days prior to the Settlement Date.]
Very truly yours,
GENERAL ▇▇▇▇▇, INC.
By:
--------------------------------
Name:
Title:
----------
1 In the case of exercise during the period beginning September 29, 2005
and ending on October 28, 2005, this notice must be for 100% of the
remaining Option Shares. If an initial Call Notice is exercised in the
period beginning September 29, 2005 and ending on October 28, 2005 with
respect to the October 23 Option, General ▇▇▇▇▇ is required to provide
an additional Call Notice providing for the delivery of all remaining
Option Shares.
2 The Settlement Date must be three (3) Business Days after the date of the
Call Notice.