EXHIBIT 2.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of December 2, 2000 (the "Agreement")
between PepsiCo, Inc., a North Carolina corporation ("Parent"), and The Quaker
Oats Company, a New Jersey corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Parent and the Company are concurrently with the execution
and delivery of this Agreement entering into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which, among other things, Merger Sub will
merge with and into the Company on the terms and subject to the conditions
stated therein; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement,
the Company has granted to Parent the Stock Option (as hereinafter defined), on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and in the Merger Agreement, and for other good and
valuable consideration, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Merger Agreement.
SECTION 2. Grant of Stock Option. (a) The Company hereby grants to
Parent an irrevocable option (the "Stock Option") to purchase, on the terms and
subject to the conditions hereof, for $95.00 per share (the "Exercise Price")
in cash up to 26,129,000 fully paid and non-assessable shares (the "Option
Shares") of the Company's common stock, $5.00 par value per share (including
the Company Rights issued pursuant to the Company Rights Agreement, the "Common
Stock"). The Exercise Price and number of Option Shares shall be subject to
adjustment as provided in Sections 2(b) and 6 below.
(b) In the event that any (i) additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) shares of Common Stock are redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of the
Agreement, the number of shares of Common Stock subject to the Stock Option
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shall be increased or decreased, as appropriate, so that after such issuance or
redemption, such number equals 19.9% of the number of shares of Common Stock
then issued and outstanding (without giving effect to any shares subject or
issued pursuant to the Stock Option). Nothing contained in this Section 2(b) or
elsewhere in this Agreement shall be deemed to authorize Parent or the Company
to breach any provision of the Merger Agreement.
SECTION 3. Exercise of Stock Option. (a) Parent may, subject to the
provisions of this Section, exercise the Stock Option, in whole or in part, at
any time or from time to time, after the occurrence of a Trigger Event (as
defined below) and prior to the Termination Date. "Termination Date" shall mean
the earliest of (i) the Effective Time of the Merger, (ii) 90 days after the
date full payment is made by the Company to Parent under Section 7.2(b) of the
Merger Agreement or (iii) thirty days after the date of the termination of the
Merger Agreement so long as, in the case of this clause (iii), no Trigger Event
has occurred or could still occur under Section 7.2(b) of the Merger Agreement.
Subject to the proviso in the last sentence of Section 3(c), notwithstanding
the occurrence of the Termination Date, Parent shall be entitled to purchase
Option Shares pursuant to any exercise of the Stock Option, on the terms and
subject to the conditions hereof, to the extent Parent exercised the Stock
Option prior to the occurrence of the Termination Date. A "Trigger Event" shall
mean an event the result of which is that the Company becomes obligated to pay
a fee to Parent pursuant to Section 7.2(b) of the Merger Agreement.
(b) Parent may purchase Option Shares pursuant to the Stock Option
only if all of the following conditions are satisfied: (i) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States shall be in effect prohibiting
delivery of the Option Shares, (ii) any applicable waiting period under the HSR
Act shall have expired or been terminated, and (iii) any prior notification to
or approval of any other regulatory authority in the U.S. or elsewhere required
in connection with such purchase shall have been made or obtained other than
those which if not made or obtained would not reasonably be expected to result
in a Material Adverse Effect on the Company.
(c) If Parent shall be entitled to and wishes to exercise the Stock
Option, it shall do so by giving the Company written notice (the "Stock
Exercise Notice") to such effect, specifying the number of Option Shares to be
purchased and a place and closing date not earlier than three Business Days nor
later than 10 Business Days from the date of such Stock Exercise Notice. If the
closing cannot be consummated on such date because any condition to the
purchase of Option Shares has not been satisfied or as a result of any
restriction arising under any applicable law or regulation, the closing shall
occur five days (or such earlier time
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as Parent may specify) after satisfaction of all such conditions and the
cessation of all such restrictions; provided that in no event shall the closing
of the purchase be postponed by more than nine months after the Termination
Date as a result of this clause (c).
(d) So long as the Stock Option is exercisable pursuant to the terms
of Section 3(a) hereof, Parent may elect, in lieu of exercising the Stock
Option as provided in Section 3(c) hereof, to send a written notice to the
Company (the "Cash Exercise Notice") specifying a date not later than 20
Business Days and not earlier than 10 Business Days following the date such
notice is given on which date the Company shall pay to Parent in exchange for
the cancellation of the relevant portion of the Stock Option an amount in cash
equal to the Spread (as hereinafter defined) multiplied by all or such portion
of the Option Shares subject to the Stock Option as Parent shall specify. As
used herein "Spread" shall mean the excess, if any, over the Exercise Price of
the higher of (x) if applicable, the highest price per share of Common Stock
paid or proposed to be paid by any Person pursuant to any Acquisition Proposal
(the "Alternative Exercise Price") or (y) the average of the closing price of
the shares of Common Stock on the NYSE at the end of the regular session, as
reported on the Consolidated Tape, Network A for the five consecutive trading
days ending on and including the trading date immediately preceding the date of
the Cash Exercise Notice (the "Average Market Price"). If the Alternative
Exercise Price includes any property other than cash, the Alternative Exercise
Price shall be the sum of (i) the fixed cash amount, if any, included in the
Alternative Exercise Price plus (ii) the fair market value of such other
property. If such other property consists of securities with an existing public
trading market, the average of the closing prices (or the average of the
closing bid and asked prices if closing prices are unavailable) for such
securities in their principal public trading market on the five trading days
ending five days prior to the date of the Cash Exercise Notice shall be deemed
to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Exercise
Price shall be deemed to equal the Average Market Price. Upon exercise of its
right pursuant to this Section 3(d) and the receipt by Parent of the applicable
cash amount with respect to the Option Shares or the applicable portion
thereof, the obligations of the Company to deliver Option Shares pursuant to
Section 3(e) shall be terminated with respect to the number of Option Shares
for which Parent shall have elected to be paid the Spread. The Spread shall be
appropriately adjusted, if applicable, to give effect to Section 6.
(e) (i) At any closing pursuant to Section 3(c) hereof, Parent shall
make payment to the Company of the aggregate purchase price for the Option
Shares to
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be purchased and the Company shall deliver to Parent a certificate representing
the purchased Option Shares, registered in the name of Parent or its designee
and (ii) at any closing pursuant to Section 3(d) hereof, the Company will
deliver to Parent cash in an amount determined pursuant to Section 3(d) hereof.
Any payment made by Parent to the Company, or by the Company to Parent,
pursuant to this Agreement shall be made by certified or official bank check or
by wire transfer of federal funds to a bank designated by the party receiving
such funds.
(f) Certificates for Common Stock delivered at the closing described
in Section 3(c) hereof shall be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference (i) if Parent
shall have delivered to the Company a copy of a no-action letter from the staff
of the Securities and Exchange Commission, or a written opinion of counsel, in
form and substance reasonably satisfactory to the Company, to the effect that
such legend is not required for purposes of, or resale may be effected pursuant
to an exemption from registration under, the Securities Act or (ii) in
connection with any sale registered under the Securities Act. In addition, such
certificates shall bear any other legend as may be required by applicable law.
SECTION 4. Representations and Warranties of The Company. The
Company hereby represents and warrants to Parent as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New Jersey. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby (i) are within the Company's corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
require no action by or in respect of, or filing with, any governmental body,
agency or official, except for any filings required to be made under the HSR
Act, the EC Merger Regulation, the Exchange Act or other filings, the failure
of which to make would not materially impair the ability of the Company to
perform its obligations hereunder, (iv) do not contravene, or constitute a
violation of, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Company or of any judgment,
injunction, order or decree binding upon the Company or any of its
Subsidiaries, (v) do not and will not constitute a default under or give rise
to a right of termination, cancellation or acceleration of any right or
obligation of the Company
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or any of its Subsidiaries or to a loss of any benefit to which the Company or
any of its Subsidiaries is entitled under any provision of any agreement,
contract or other instrument binding upon the Company or any of its
Subsidiaries or any license, franchise, permit or other similar authorization
held by the Company or any of its Subsidiaries, and (vi) do not and will not
result in the creation or imposition of any Lien on any asset of the Company or
any of its Subsidiaries, except for such contraventions, conflicts or
violations referred to in clause (iv) or defaults, rights of termination,
cancellation or acceleration, or losses or Liens referred to in clauses (v) and
(vi) that would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding agreement of the Company.
(b) The Company has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
until such time as the obligation to deliver Option Shares upon the exercise of
the Stock Option terminates, will have reserved for issuance upon any exercise
of the Stock Option, the number of Option Shares subject to the Stock Option
(less the number of Option Shares previously issued upon any partial exercise
of the Stock Option). All of the Option Shares to be issued pursuant to the
Stock Option have been duly authorized and, upon issuance and delivery thereof
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, and shall be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those created by this
Agreement). Option Shares issued upon exercise of the Stock Option will not be
subject to any preemptive or similar rights. The Board of Directors of the
Company has resolved to, and the Company promptly after the execution hereof
will, take all necessary action to render the Company Rights Agreement
inapplicable to the grant or exercise of the Stock Option and the transactions
contemplated hereby.
(c) The Board of Directors of the Company has taken the necessary
action to make inapplicable the application of Sections 14A:10A-1 to 14A:10A-6
of the NJBCA, or any other applicable antitakeover statute or similar statute
or regulation, to this Agreement and the acquisition of the Option Shares
pursuant hereto.
(d) The Board of Directors of the Company has taken the necessary
action to render Article 8 of the Company's amended and restated certificate of
incorporation inapplicable to this Agreement and the acquisition of Option
Shares pursuant hereto.
SECTION 5. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company as follows: Parent is a corporation duly
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incorporated, validly existing and in good standing under the laws of the State
of North Carolina. The execution, delivery and performance by Parent of this
Agreement and the consummation of the transactions contemplated hereby (i) are
within Parent's corporate powers and (ii) have been duly authorized by all
necessary corporate action. The Option Shares acquired by Parent upon the
exercise of the Stock Options will not be, and the Stock Option is not being,
acquired by Parent with the intention of making a public distribution thereof.
Neither the Stock Option nor the Option Shares acquired upon exercise of the
Stock Option will be sold or otherwise disposed of by Parent except in
compliance with the Securities Act. This agreement has been duly executed and
delivered by Parent and constitutes a valid and binding agreement of Parent.
SECTION 6. Adjustment upon Changes in Capitalization or Merger. (a) In
the event of any change in the outstanding shares of Common Stock by reason of
a stock dividend, stock split, split-up, merger, consolidation,
recapitalization, combination, conversion, exchange of shares, extraordinary or
liquidating dividend or similar transaction which would have the effect of
diluting Parent's rights hereunder, the type and number of shares or securities
purchasable upon the exercise of the Stock Option and the Exercise Price shall
be adjusted appropriately, and proper provision will be made in the agreements
governing such transaction, so that Parent will receive upon exercise of the
Stock Option the number and class of shares or other securities or property
that Parent would have received in respect of the Option Shares had the Stock
Option been exercised immediately prior to such event or the record date
therefor, as applicable. In no event shall the number of shares of Common Stock
subject to the Stock Option exceed 19.9% of the number of shares of Common
Stock issued and outstanding at the time of exercise (without giving effect to
any shares subject to or issued pursuant to the Stock Option).
(b) Without limiting the foregoing, whenever the number of Option
Shares purchasable upon exercise of the Stock Option is adjusted as provided in
this Section 6, the Exercise Price shall be adjusted by multiplying the
Exercise Price by a fraction, the numerator of which is equal to the number of
Option Shares purchasable prior to the adjustment and the denominator of which
is equal to the number of Option Shares purchasable after the adjustment.
(c) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that the Company enters into an
agreement (i) to consolidate with or merge into any Person, other than Parent
or one of its Subsidiaries, and the Company will not be the continuing or
surviving corporation in such consolidation or merger, (ii) to permit any
Person, other than Parent or one of its Subsidiaries, to merge into the Company
and the Company will be the continuing or surviving corporation, but in
connection with such merger, the
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shares of Common Stock outstanding immediately prior to the consummation of
such merger will be changed into or exchanged for stock or other securities of
the Company or any other person or cash or any other property, or the shares of
Common Stock outstanding immediately prior to the consummation of such merger
will, after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any Person, other than Parent or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Stock Option will, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option with identical
terms appropriately adjusted to acquire the number and class of shares or other
securities or property that Parent would have received in respect of Option
Shares had the Stock Option been exercised immediately prior to such
consolidation, merger, sale or transfer or the record date therefor, as
applicable, and will make any other necessary adjustments. The Company shall
take such steps in connection with such consolidation, merger, liquidation or
other such transaction as may be reasonably necessary to assure that the
provisions hereof shall thereafter apply as nearly as possible to any
securities or property thereafter deliverable upon exercise of the Stock
Option.
SECTION 7. Further Assurances; Remedies. (a) The Company agrees to
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Stock Option may be fully exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Common Stock from the Company, and to issue the
appropriate number of shares of Common Stock pursuant to the terms of this
Agreement.
(b) The Company agrees not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by the Company.
(c) The Company agrees that promptly after the date hereof it shall
take all actions as may from time to time be required (including (i) complying
with all applicable premerger notification, reporting and waiting period
requirements under the HSR Act and (ii) in the event that prior notification to
or approval of any other regulatory authority in the U.S. or elsewhere is
necessary before the Stock Option may be exercised, cooperating with Parent in
preparing and processing the required notices or applications) in order to
permit Parent to
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exercise the Stock Option and purchase Option Shares pursuant to such exercise
and to take all reasonable action necessary to protect the rights of Parent
against dilution.
(d) The parties agree that Parent would be irreparably damaged if for
any reason the Company failed to issue any of the Option Shares (or other
securities or property deliverable pursuant to Section 6 hereof) upon exercise
of the Stock Option or to perform any of its other obligations under this
Agreement, and that Parent would not have an adequate remedy at law for money
damages in such event. Accordingly, Parent shall be entitled to specific
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Company. Accordingly, if Parent should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Company hereby waives the claim or defense that Parent
has an adequate remedy at law and hereby agrees not to assert in any such
action or proceeding the claim or defense that such a remedy at law exists. The
Company further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This provision
is without prejudice to any other rights that Parent may have against the
Company for any failure to perform its obligations under this Agreement.
SECTION 8. Listing of Option Shares. Promptly after the occurrence of
a Trigger Event, and from time to time thereafter if necessary, the Company
will apply to list all of the Option Shares subject to the Stock Option on the
NYSE and will use its reasonable best efforts to obtain approval of such
listing as soon as practicable.
SECTION 9. Registration of the Option Shares. (a) If Parent requests
the Company in writing, within two years of the exercise of the Stock Option,
to register under the Securities Act any of the Option Shares purchased by
Parent hereunder, the Company will use its reasonable best efforts to cause the
offering of the Option Shares so specified in such request to be registered as
soon as practicable so as to permit the sale or other distribution by Parent of
the Option Shares specified in its request (and to keep such registration in
effect for a period of at least 90 days), and in connection therewith the
Company will prepare and file as promptly as reasonably possible (but in no
event later than 60 days from receipt of Parent's request) a registration
statement under the Securities Act to effect such registration on an
appropriate form, which would permit the sale of the Option Shares by Parent in
accordance with the plan of disposition specified by Parent in its request. The
Company shall not be obligated to make effective more than two registration
statements pursuant to the foregoing sentence; provided, however, that the
Company may postpone the filing of a registration statement relating to a
registration request by Parent under this Section 9 for a period of time
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(not in excess of 90 days) if in the Company's reasonable, good faith judgment
such filing would require the disclosure of material information that the
Company has a bona fide business purpose for preserving as confidential (but in
no event shall the Company exercise such postponement right more than once in
any twelve-month period).
(b) The Company shall notify Parent in writing not less than 10 days
prior to filing a registration statement under the Securities Act (other than a
filing on Form S-4 or S-8 or any successor form) with respect to any Common
Stock. If Parent wishes to have any portion of its Option Shares included in
such registration statement, it shall advise the Company in writing to that
effect within two business days following receipt of such notice, and the
Company will thereupon include the number of Option Shares indicated by Parent
under such Registration Statement; provided that if the managing underwriter(s)
of the offering pursuant to such registration statement advise the Company that
in their opinion the number of shares of Common Stock requested to be included
in such registration exceeds the number which can be sold in such offering, the
Company shall only include in such registration such number or dollar amount of
Option Shares which, in the good faith opinion of the managing underwriter(s),
can be sold without materially and adversely affecting such offering.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 9 and the transactions contemplated thereby
(including all filing, printing, reasonable professional and other fees and
expenses relating thereto) will be at the Company's expense except for
underwriting discounts or commissions and brokers' fees. The Company and Parent
agree to enter into a customary underwriting agreement with underwriters upon
such terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions. The Company shall indemnify
Parent, its officers, directors, agents, other controlling persons and any
underwriters retained by Parent in connection with such sale of such Option
Shares in the customary way, and shall agree to customary contribution
provisions with such persons, with respect to claims, damages, losses and
liabilities (and any expenses relating thereto) arising (or to which Parent,
its officers, directors, agents, other controlling persons or underwriters may
be subject) in connection with any such offer or sale under the federal
securities laws or otherwise, except for information furnished in writing by
Parent or its underwriters to the Company. Parent and its underwriters,
respectively, shall indemnify the Company to the same extent with respect to
information furnished in writing to the Company by Parent and such
underwriters, respectively.
SECTION 10. Miscellaneous. (a) Extension of Exercise Periods. The
periods for exercise of certain rights under Sections 2 and 3 hereof shall be
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extended in each such case at the request of Parent to the extent necessary to
avoid liability by Parent under Section 16(b) of the Exchange Act by reason of
such exercise.
(b) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
if to Parent, to:
PepsiCo, Inc.
700 Anderson Hill Road
Purchase, New York 10577
Facsimile No.: (914) 249-8166
Attention: Robert Sharpe
Senior Vice President,
General Counsel and Secretary
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-4800
Attention: Winthrop B. Conrad, Jr.
if to the Company, to:
The Quaker Oats Company
321 North Clark Street
Chicago, Illinois 60610
Facsimile No: (310) 222-7696
Attention: John G. Jartz
Senior Vice President - General Counsel,
Business Development and Corporate Secretary
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with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Facsimile No.: (212)504-6666
Attention: Dennis J. Block
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received or (ii) if given
by any other means, when delivered at the address specified in this Section.
(d) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically provided
herein and without limiting anything contained in the Merger Agreement.
(e) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
(f) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of law. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in the United States District Court for the Southern District of New
York or any New York state court sitting in the City of New York, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 10(c)
hereof shall be deemed effective service of process on such party.
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(g) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(i) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(j) Assignment. This Agreement shall be binding upon each party
hereto and such party's successors and assigns. This Agreement shall not be
assignable by the Company, but may be assigned by Parent in whole or in part to
any direct or indirect wholly-owned subsidiary of Parent, provided that Parent
shall remain liable for any obligations so assigned.
(k) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Public Announcement. Unless otherwise required by applicable law
or by obligations pursuant to any listing agreement with or rules of any
securities exchange, Parent and the Company shall use their reasonable best
efforts to consult with each other before issuing any press release or, to the
extent practical, otherwise making any public statement with respect to this
Agreement and the transactions contemplated hereby. Parent and the Company
shall use their reasonable best efforts to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with any joint communications plan developed by the parties
pursuant to Section 5.8 of the Merger Agreement.
SECTION 11. Profit Limitation. (a) Notwithstanding any other provision
of this Agreement or the Merger Agreement, in no event shall Parent's Total
Profit (as defined below) exceed $460,000,000 (the "Maximum Amount") and, if it
otherwise would exceed such Maximum Amount, Parent at its sole election may (i)
pay cash to the Company, (ii) deliver to the Company for cancellation Option
Shares previously purchased by Parent, or (iii) any combination thereof, so
that Parent's actually realized Total Profit (as defined below) shall not
exceed the Maximum Amount after taking into account the foregoing actions.
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(b) Notwithstanding any other provision of this Agreement, the Stock
Option may not be exercised for a number of Option Shares as would, as of the
date of the Stock Exercise Notice or Cash Exercise Notice, as applicable,
result in a Notional Total Profit (as defined below) of more than the Maximum
Amount and, if exercise of the Stock Option otherwise would result in the
Notional Total Profit exceeding such amount, Parent, at its discretion, may (in
addition to any of the actions specified in Section 11(a) above) increase the
Exercise Price for that number of Option Shares set forth in the Stock Exercise
Notice or Cash Exercise Notice, as applicable, so that the Notional Total
Profit shall not exceed the Maximum Amount; provided, that nothing in this
sentence shall restrict any exercise of the Stock Option permitted hereby on
any subsequent date at the Exercise Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the cash amount actually received
by Parent pursuant to Section 7.2(b) of the Merger Agreement, (ii) (x) the net
cash amounts or the fair market value of any property received by Parent
pursuant to the sale of Option Shares (or of any other securities into or for
which such Option Shares are converted or exchanged), less (y) Parent's
purchase price for such Option Shares (or other securities) plus (iii) the
aggregate amounts received by Parent pursuant to Section 3(d).
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Parent may propose to exercise the
Stock Option shall be the Total Profit determined as of the date of the Stock
Exercise Notice or Cash Exercise Notice, as applicable, assuming that the Stock
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Stock Option and held by Parent and its
affiliates as of such date, were sold for cash at the closing price for the
Common Stock on the NYSE at the end of the regular session on the preceding
trading day (less customary brokerage commissions).
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<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement
to be duly executed as of the day and year first above written.
PEPSICO, INC.
By: /s/ Roger A. Enrico
--------------------------------
Name: Roger A. Enrico
Title: Chairman & CEO
THE QUAKER OATS COMPANY
By: /s/ Robert S. Morrison
--------------------------------
Name: Robert S. Morrison
Title: Chairman, President & CEO
14
