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Agreement And Plan of Merger

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Exhibit 10.1


CONFORMED COPY


AGREEMENT AND PLAN OF MERGER


Dated as of July 16, 2000


BY AND AMONG


GENERAL MILLS, INC.,


GENERAL MILLS NORTH AMERICAN BUSINESSES, INC.,


DIAGEO PLC


and


THE PILLSBURY COMPANY


TABLE OF CONTENTS


Page


ARTICLE I


Certain Definitions............................................................2


ARTICLE II


The Merger; Closing...........................................................10


Section 2.1. Time and Place of Closing...................................10 Section 2.2. The Merger..................................................10 Section 2.3. Effective Time..............................................10 Section 2.4. Effects of the Merger.......................................11 Section 2.5. Certificate of Incorporation................................11 Section 2.6. By-Laws.....................................................11 Section 2.7. Officers and Directors of Surviving Corporation.............11 Section 2.8. Effect on Capital Stock.....................................11 Section 2.9. Subsidiary Purchases........................................11 Section 2.10. Aggregate Consideration.....................................11 Section 2.11. Deliveries by Diageo and the Selling Affiliates.............12 Section 2.12. Deliveries by General Mills and the Buying Affiliates.......12 Section 2.13. Contingent Purchase Price Adjustment........................13 Section 2.14. Operating Working Capital Purchase Price Adjustment.........15


ARTICLE III


Representations and Warranties of Diageo and Pillsbury........................16


Section 3.1. Incorporation; Authorization; etc...........................17 Section 3.2. Capitalization; Structure...................................18 Section 3.3. Financial Statements........................................19 Section 3.4. No Undisclosed Liabilities..................................19 Section 3.5. Properties; Sufficiency.....................................19 Section 3.6. Absence of Certain Changes..................................20 Section 3.7. Litigation; Orders..........................................20 Section 3.8. Intellectual Property.......................................21 Section 3.9. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc..............................................21 Section 3.10. Labor Matters...............................................21 Section 3.11. Compliance with Laws........................................22 Section 3.12. Insurance...................................................22 Section 3.13. Material Contracts..........................................22 Section 3.14. Brokers, Finders, etc.......................................22


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Section 3.15. Opinion of Diageo Financial Advisor.........................23 Section 3.16. Board Approval..............................................23 Section 3.17. Required Vote...............................................23 Section 3.18. Environmental Compliance....................................23 Section 3.19. Employee Benefit Plans......................................24 Section 3.20. Acquisition of Shares for Investment........................27 Section 3.21. Products....................................................27


ARTICLE IV


Representations and Warranties of General Mills and Merger Sub................27


Section 4.1. Incorporation; Authorization; etc...........................28 Section 4.2. Capitalization; Structure...................................29 Section 4.3. Financial Statements........................................30 Section 4.4. No Undisclosed Liabilities..................................30 Section 4.5. Properties..................................................30 Section 4.6. Absence of Certain Changes..................................31 Section 4.7. Litigation; Orders..........................................31 Section 4.8. Intellectual Property.......................................31 Section 4.9. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc..............................................32 Section 4.10. Labor Matters...............................................32 Section 4.11. Compliance with Laws........................................32 Section 4.12. Insurance...................................................32 Section 4.13. Material Contracts..........................................32 Section 4.14. Brokers, Finders, etc.......................................33 Section 4.15. Opinions of General Mills Financial Advisors................33 Section 4.16. Board Approval; Rights Plan.................................33 Section 4.17. Required Vote...............................................33 Section 4.18. Antitakeover Statute........................................34


ARTICLE V


Covenants of the Parties......................................................34


Section 5.1. Investigation of Business; Access to Properties and
Records...................................................34 Section 5.2. Filings; Other Actions; Notification........................35 Section 5.3. Further Assurances..........................................37 Section 5.4. Conduct of Business.........................................37 Section 5.5. Public Announcements........................................42 Section 5.6. Intercompany Accounts; Guaranties...........................42 Section 5.7. Subsidiary Purchase Agreements..............................43 Section 5.8. Allocation; Structure of Subsidiary Purchases...............43 Section 5.9. No Solicitation.............................................43 Section 5.10. Proxy Statement; Diageo Circular............................44


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Section 5.11. Stockholder Meetings; Board Recommendations.................45 Section 5.12. General Mills Board of Directors............................45 Section 5.13. Stock Exchange Listing......................................46 Section 5.14. Delivery of Financial Statements and Other Information......46 Section 5.15. Closing Date Indebtedness...................................46 Section 5.16. Insurance...................................................46


ARTICLE VI


Post-Closing Employee Benefits Matters........................................48


Section 6.1 Employee Benefits Matters...................................48


ARTICLE VII


Tax Matters...................................................................51


Section 7.1. Tax Representations of Diageo...............................51 Section 7.2. General Mills Reorganization-Related Representations........52 Section 7.3. Tax Indemnification.........................................53 Section 7.4. Section 338(g) Elections for Food Subsidiaries..............54 Section 7.5. Allocation of Certain Taxes.................................54 Section 7.6. Carryovers, Refunds and Related Matters.....................55 Section 7.7. Preparation and Filing of Tax Returns.......................56 Section 7.8. Tax Contests................................................57 Section 7.9. Cooperation.................................................58 Section 7.10. Termination of Tax Sharing Agreements.......................59 Section 7.11. General Mills Consolidated Returns..........................59 Section 7.12. Diageo Consolidated Returns.................................59 Section 7.13. Definitions.................................................59 Section 7.14. Survival....................................................61 Section 7.15. Adjustments.................................................61 Section 7.16. Tax Transactions............................................61


ARTICLE VIII


Conditions Precedent..........................................................61


Section 8.1. Conditions to Each Party's Obligation.......................61 Section 8.2. Additional Conditions to General Mills's and Merger Sub's
Obligations..............................................62 Section 8.3. Additional Conditions to Pillsbury's Obligation.............63


ARTICLE IX


Survival; Indemnification.....................................................63


Section 9.1. Survival....................................................63


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Section 9.2. Indemnification by Diageo...................................64 Section 9.3. Indemnification by General Mills............................64 Section 9.4. Indemnification Procedures..................................65 Section 9.5. Limitations on Indemnification..............................67 Section 9.6. Exclusive Tax Indemnification...............................67


ARTICLE X


Termination...................................................................67


Section 10.1. Termination.................................................67 Section 10.2. Procedure and Effect of Termination.........................68 Section 10.3. Termination Fees............................................69


ARTICLE XI


Miscellaneous.................................................................69


Section 11.1. Counterparts................................................69 Section 11.2. Governing Law; Jurisdiction and Forum; Waiver of Jury
Trial.....................................................69 Section 11.3. Entire Agreement............................................70 Section 11.4. Expenses....................................................70 Section 11.5. Notices.....................................................70 Section 11.6. Successors and Assigns......................................71 Section 11.7. Headings; Definitions.......................................71 Section 11.8. Amendments and Waivers......................................72 Section 11.9. Specific Performance........................................72


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AGREEMENT AND PLAN OF MERGER


THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of July 16, 2000, is by and among General Mills, Inc., a Delaware corporation ("General Mills"), General Mills North American Businesses, Inc., a Delaware corporation and wholly owned subsidiary of General Mills ("Merger Sub"), Diageo plc, a public limited company incorporated under the laws of England and Wales ("Diageo"), and The Pillsbury Company, a Delaware corporation and indirect wholly owned subsidiary of Diageo ("Pillsbury"). Unless otherwise specified, capitalized terms herein shall have the meaning ascribed to them in Article I.


WHEREAS, Pillsbury, its Subsidiaries, certain other Subsidiaries of Diageo and other Persons in which Diageo or its Affiliates own equity interests listed in Exhibit A1 hereto (such Subsidiaries and Persons listed on Exhibit A1, the "Food Subsidiaries") and certain other Persons in which Diageo or its Affiliates own equity interests listed in Exhibit A2 hereto (the Persons listed on Exhibit A2 hereto, the "Non-Controlled Foreign Entities"), together with their respective Subsidiaries, conduct the entire food business (other than the fast food business) of Diageo. (The Food Subsidiaries and the Non-Controlled Foreign Entities collectively are referred to herein as the "Purchased Entities");


WHEREAS, General Mills and Diageo desire to combine the businesses of General Mills with the food business (other than the fast food business) of Diageo through (a) the merger (the "Merger") of Merger Sub with and into Pillsbury, with Pillsbury as the surviving corporation in the Merger as a wholly owned subsidiary of General Mills upon the terms and subject to the conditions set forth in this Agreement and (b) the purchase by certain indirect Subsidiaries of General Mills (the "Buying Affiliates") from the Selling Affiliates of all of the outstanding shares of capital stock or other equity interests of the Purchased Entities owned by the Selling Affiliates (the "Purchased Interests") and/or the assets and liabilities of the Purchased Entities, upon the terms and subject to the conditions set forth herein and in the agreements relating to such purchases (collectively, the "Subsidiary Purchases" and such agreements, collectively, the "Subsidiary Purchase Agreements");


WHEREAS, it is intended that, for U.S. federal income tax purposes, the Merger will qualify as a reorganization under Section 368 of the Code and the Subsidiary Purchases will not so qualify;


WHEREAS, (a) the respective Boards of Directors of Pillsbury and Merger Sub have each determined that this Agreement is advisable, fair to and in the best interests of their respective stockholders and have approved and adopted this Agreement, (b) General Mills, as sole stockholder of Merger Sub, and Gramet Holdings Corporation (the "Pillsbury Stockholder"), as sole stockholder of Pillsbury, have each approved this Agreement and (c) the respective Boards of Directors of General Mills and Diageo have each approved this Agreement and the Subsidiary Purchases; and


WHEREAS, in connection with the closing of the transactions contemplated by this Agreement, it is contemplated that General Mills, Diageo, the Pillsbury Stockholder and the Selling Affiliates will enter into a Stockholders Agreement (the "Stockholders Agreement" and


collectively with the Subsidiary Purchase Agreements, the "Ancillary Agreements") in the form set forth as Exhibit C to this Agreement.


NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:


ARTICLE I


Certain Definitions
-------------------


(a) As used in this Agreement the following terms shall have the following respective meanings:


"Action" shall mean any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission.


"Additional Shares" shall mean the shares of General Mills Common Stock, if any, issued pursuant to Section 2.14 hereof, and the shares of General Mills Common Stock, if any, issued pursuant to Section 9.4(d)(ii) hereof.


"Affiliate" shall mean, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person, it being understood that Diageo and the Continuing Affiliates shall not be considered to be Affiliates of General Mills and its Subsidiaries after the Effective Time for purposes of Articles VII and IX. As used in this definition, "control" (including, with correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).


"Anniversary Date" means the first anniversary of the Effective Time (or if such date is not a Business Day, the next Business Day).


"Benefit Arrangement" means any employment, severance or similar contract, plan, policy, fund or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock option, or other stock-related rights or other forms of incentive or deferred compensation, perquisites, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, worker's compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits) that (i) is not an Employee Plan, (ii) is entered into, participated in, maintained, administered or contributed to, as the case may be, by any Business Entity and (iii) covers any U.S. employee or former U.S. employee of any Business Entity employed in the United States.


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"Books and Records" shall mean all of the books and records primarily related to the operations of the Business Entities, including, without limitation, (i) corporate minute books, (ii) books and records relating to employees, the purchase of materials, supplies and services, research and development, manufacture and sale of products and services, advertising, packaging, promotional materials and dealings with customers of the Business Entities, and (iii) historical and archival data.


"Business Combination Proposal" shall mean, with respect to any Person, (i) any merger, consolidation or other business combination as a result of which the stockholders of such Person prior to such transaction would cease to hold at least 80% of the voting securities of the entity surviving or resulting from such transaction (or the ultimate parent entity thereof), (ii) the acquisition by another Person at least 20% of the outstanding voting securities of such Person, (iii) the sale, lease, exchange or other disposition of at least 20% of the assets of such Person and its Subsidiaries taken as a whole, or (iv) any transaction as a result of which the directors of such Person immediately prior to such transaction would cease to represent at least two-thirds of the members of the board of directors of such Person or the entity surviving or resulting from such transaction (or the ultimate parent entity thereof).


"Business Day" shall mean any day that is not a Saturday, Sunday or other day on which the commercial banks in New York City or London are authorized or required by Law to remain closed.


"Business Entities" shall mean Pillsbury, the Food Subsidiaries and their respective Subsidiaries.


"Business Intellectual Property Rights" means all material Intellectual Property Rights owned or licensed and used or held for use by any Business Entity.


"Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto.


"Contingent Share Value" means the lesser of (i) the amount by which the Target Price exceeds the Market Value as of the Anniversary Date and (ii) the Maximum Contingent Share Value.


"Continuing Affiliate" shall mean any Affiliate of Diageo, other than a Business Entity.


"Controlled Group Liability" means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code and (v) under corresponding or similar provisions of foreign laws or regulations, other than such liabilities that arise solely out of, or relate solely to, the Employee Arrangements.


"Covered Losses" shall mean any and all losses, liabilities, claims, fines, deficiencies, damages, obligations, payments (including, without limitation, those arising out of any settlement, judgment or compromise relating to any Action), reasonable costs and expenses (in-


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cluding, without limitation, interest and penalties due and payable with respect thereto and reasonable attorneys' and accountants' fees and any other reasonable out-of-pocket expenses incurred in investigating, preparing, defending, avoiding or settling any Action), including, without limitation, any of the foregoing arising under, out of or in connection with any Action, order or consent decree of any Governmental Authority or award of any arbitrator of any kind, or any law, rule, regulation, contract, commitment or undertaking.


"DGCL" shall mean the Delaware General Corporation Law.


"Diageo Director" shall mean a member of the Board of Directors of Diageo or of the Executive Committee of Diageo.


"Diageo Financial Advisors" means UBS Warburg and Greenhill & Co. LLC.


"Diageo Shareholders Approval" shall mean the approval of the Transactions by the shareholders of Diageo by the Required Diageo Vote.


"Disposition" means a merger, consolidation or other business combination involving General Mills as a result of which no shares of General Mills Common Stock shall remain outstanding and the stockholders of General Mills immediately prior to the merger, consolidation or other business combination shall not own a majority of the voting power of the common equity securities received in such merger, consolidation or other business combination, or a sale, transfer or other disposition of all or substantially all of the assets of General Mills.


"Disposition Value" means the lesser of (i) the Maximum Contingent Share Value and (ii) the amount, if any, by which the Target Price exceeds the lesser of (A) where the consideration to be received for each share of General Mills Common Stock by the holder thereof as a result of such Disposition is only cash, the amount of such cash per share (calculated as of the Stockholder Approval Date), or where any of the consideration to be received for each share of General Mills Common Stock by the holder thereof as a result of such Disposition (and assuming that such holder did not exercise any right of appraisal or right of election with respect to such Disposition) is other than cash, the fair market value of the consideration to be received for each such share (as determined in good faith by the Board of Directors of General Mills as of the Stockholder Approval Date) and (B) the Market Value as of the Stockholder Approval Date.


"Employee Arrangement" means any Benefit Arrangement, Employee Plan or International Plan.


"Employee Plan" means any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is entered into, participated in, maintained, administered or contributed to by any Business Entity and (iii) covers any employee or former employee of any Business Entity.


"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.


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"ERISA Affiliate" of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code or Section 4001(b)(1) or 4001(a)(14) of ERISA.


"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.


"General Mills Common Stock" shall mean the Common Stock, par value $.10 per share, of General Mills, and the associated Rights issued pursuant to the General Mills Rights Agreement.


"General Mills Financial Advisors" shall mean Evercore Partners Inc. and Merrill, Lynch & Co. Incorporated.


"General Mills Intellectual Property Rights" means all material Intellectual Property Rights owned or licensed and used or held for use by General Mills or any of its Subsidiaries.


"General Mills Rights Agreement" shall mean the Rights Agreement, dated as of December 11, 1995, between General Mills and Norwest Bank Minnesota, as Rights Agent.


"General Mills Shares Held" means the number of shares of General Mills Common Stock issued to the Pillsbury Stockholder or the Selling Affiliates pursuant to this Agreement or the Subsidiary Purchase Agreements, as the case may be, and continued to be held by the Pillsbury Stockholder or the Selling Affiliates or their Permitted Transferees as of the Anniversary Date or the Disposition, as the case may be.


"General Mills Stockholders Approval" shall mean the approval of the General Mills Share Issuance and the Charter Amendment by the stockholders of General Mills by the Required General Mills Votes.


"Governmental Authority" shall mean any United States federal, state or local, or any foreign, government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.


"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.


"Intellectual Property Right" means any trademark, service mark, trade name, mask work, invention, trade secret, copyright, know-how or proprietary information contained on any website, processes, formulae, products, technologies, discoveries, apparatus, Internet domain names, trade dress and general intangibles of like nature (together with goodwill), customer lists, confidential information, licenses, software, databases and compilations including any and all collections of data and all documentation thereof (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right.


"International Plan" means any employment, severance or similar contract, plan, policy, fund or arrangement (whether or not written) providing for compensation, bonus, profit-


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sharing, stock option, or other stock-related rights or other forms of incentive or deferred compensation, perquisites, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, worker's compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits) that (i) is not an Employee Plan or a Benefit Arrangement, (ii) is entered into, participated in, maintained, administered or contributed to by any Business Entity and (iii) covers any employee or former employee of any Business Entity.


"knowledge" of any Person shall mean the actual knowledge of such Person's executive officers, without the conduct by any such Person of any independent investigation with respect to the facts or matters specified.


"Law" shall mean any United States federal, state or local, or any foreign, order, writ, injunction, judgment, award, decree, statute, law, rule or regulation.


"Lien" shall mean any imperfection of title, easement, encroachment, security interest, pledge, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, proxy, voting trust or voting agreement.


"Market Value" shall mean, as of any date, the average of the daily high and low sales prices per
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