Document:

Exhibit 4.12

 

THE
RULES OF THE

DIAGEO
PLC 1998 UNITED STATES

EMPLOYEE
STOCK PURCHASE PLAN

 

Amended
in June 1999

 

Amended
by the Remuneration Committee on 26 August 2008

 

 

DIAGEO PLC

 

Diageo 1998 United States
Employee Stock Purchase Plan

 

(Amended June 1999)

 

1.                                 Purpose

 

The purpose of the Diageo 1998 United
States Employee Stock Purchase Plan (“the Plan”), is to provide employees of
the Participating Subsidiaries of Diageo plc (“Diageo”) (Diageo and the
Participating Subsidiaries are collectively referred to herein as “the Company”)
an opportunity to own an equity interest in Diageo and, through such ownership,
to promote their identification with the interests of shareholders of Diageo,
to stimulate their commitment to the business objectives of the Company and to
maintain their motivation through the opportunity to share in the growth of the
Company.  It is intended that options
issued pursuant to the Plan (“the Options”) shall constitute options issued
pursuant to an “employee stock purchase plan” within the meaning of Section 423
of the United States Internal Revenue Code of 1986, as amended (the “Code”).

 

2.                                 Definitions

 

As used herein, the terms set forth below
have the meanings assigned to them in this Section 2 and shall include the
plural as well as the singular.

 

ADRs shall have the meaning set forth in Section 3.

 

ADSs shall have the meaning set forth in Section 3.

 

Board shall have the meaning set forth in Section 3.

 

Brokerage Account shall have the meaning set forth in Section 11(j).

 

Cessation Notice shall have the meaning set forth in Section 11(1).

 

Change of Control shall have the meaning set forth in Section 11(g).

 

Change in Control ADS Price shall have the meaning set forth in Section 11(g).

 

Change in Control Date shall have the meaning set forth in Section 11(g).

 

Code shall mean the United States Internal Revenue Code of 1986, as
amended.

 

Committee shall have the meaning set forth in Section 3(a).

 

Companies Act shall mean the United Kingdom Companies Act 1985.

 

Company shall have the meaning set forth in Section 1.

 

Compromise shall have the meaning set forth in Section 11(g)(ii).

 

Control shall have the meaning set forth in Section 11(g).

 

Deposit Amount shall have the meaning set forth in Section 11(d).

 

 

Deposit Commencement Date shall have the meaning set forth in Section 11(d).

 

Depositary shall have the meaning set forth in Section 3.

 

Deposited ADSs shall have the meaning set forth in Section 11(j).

 

Discounted ADS Price shall have the meaning set forth in Section 11(a).

 

Elected ADSs shall have the meaning set forth in Section 9(b).

 

Elected Amount shall have the meaning set forth in Section 9(b).

 

Election Date shall have the meaning set forth in Section 9(b).

 

Fair Market Value shall have the meaning set forth in Section 11(a).

 

Diageo shall mean Diageo plc, which is a “parent corporation” within the
meaning of Section 424(e) of the Code.

 

Grant Date shall have the meaning set forth in Section 9(a).

 

Notice of Grant shall have the meaning set forth in Section 9(a)

 

Offering shall have the meaning set forth in Section 7(a).

 

Offering Period shall have the meaning set forth in Section 11(d).

 

Optionees shall have the meaning set forth in Section 6(a).

 

Options shall have the meaning set forth in Section 1.

 

Ordinary Shares shall have the meaning set forth in Section 3.

 

Participation Form shall have the meaning set forth in Section 9(b).

 

Participating Subsidiaries shall have the meaning set forth in Section 5.

 

Plan shall mean the Diageo 1998 United States Employee Stock Purchase
Plan.

 

Plan Administrator shall have the meaning set forth in Section 6(c).

 

Plan Limitation shall have the meaning set forth in Section 8(a).

 

Purchase Account shall have the meaning set forth in Section 10.

 

Purchase Date shall have the meaning set forth in Section 11(c).

 

Purchase Price shall have the meaning set forth in Section 11(a).

 

Purchased ADSs shall have the meaning set forth in Section 11(c).

 

Restricted Period shall have the meaning set forth in Section 11(j).

 

Section 429 Notice shall have the meaning set forth in Section 11(g)(iii).

 

Settlement Amount shall have the meaning set forth in Section 11(g).

 

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Takeover Offer shall have the meaning set forth in Schedule 11(g)(i).

 

Trading Day shall have the meaning set forth in Section 11(a).

 

Withdrawal Notice shall have the meaning set forth in Section 11(e).

 

3.                                 Stock
to be Issued under the Plan

 

(a)                            Diageo ADSs

 

The stock subject to Options shall be
ordinary shares nominal value 28 and 101/108 pence per share of Diageo (the “Ordinary
Shares”), as traded on the London Stock Exchange, which shall be represented by
American Depositary Shares (“ADSs”), as traded on the New York Stock
Exchange.  Upon exercise of an Option,
Diageo shall make arrangements either to procure the issue by the applicable
United States depositary (“the Depositary”) of the appropriate number of ADSs,
being evidenced by American Depositary Receipts (the “ADRs”) or procure the
transfer of the appropriate number of ADSs. 
References in this Plan to Options to purchase ADSs shall be construed
accordingly.  At the time of adoption of
the Plan by the Board of Directors of Diageo (“the Board”), each ADS represents
four Ordinary Shares, but such number may increase or decrease from time to
time upon decision by the Board or a duly authorised committee of the Board (“the
Committee”); in the event of any such increase or decrease, the Board or the
Committee shall make the appropriate adjustments to the terms of outstanding
Options.

 

(b)                           Limits upon Number of Ordinary Shares Issuable

 

(i)                                         The aggregate maximum number of Ordinary Shares issuable upon the
exercise of Options shall not exceed 71,500,000, which represents approximately
two per cent of the number of Ordinary Shares issued and outstanding on 18
June, 1998.

 

(ii)                                      In addition to the requirement in subparagraph (i) above,

 

(1)                     No Option shall be granted on any date if the number of Ordinary
Shares falling to be issued on the exercise  thereof when aggregated with:

 

(a)                                    the number of Ordinary Shares issued during the ten years ended
prior to that date under any employee share scheme operated by Diageo (other
than an employee share option scheme); and

 

(b)                                   the number of Ordinary Shares issued or remaining capable of being
issued pursuant to options granted during the ten years ended on the day prior
to that date under any employee share option scheme (including the Plan)
operated by Diageo.

 

would exceed ten percent of the ordinary
share capital of Diageo for the time being; and

 

3

 

(2)                     No Option shall be granted on any date if the number of Ordinary
Shares falling to be issued on the exercise  thereof when aggregated with:

 

(a)                                                 the number of Ordinary Shares issued during the period of five years
ended on the day prior to that date under any employee share scheme operated by
Diageo (other than an employee share option scheme); and

 

(b)                                                the number of Ordinary shares issued or remaining capable of being
issued pursuant to options granted during the period of five years ending on
the day prior to that date under any employee share option scheme (including
the Plan) operated by Diageo

 

would exceed five percent of the issued
ordinary share capital of Diageo on that date.

 

4.                                 Approval
by Shareholders

 

The Plan was approved by the Board on June 18,
1998 and was adopted by the shareholders of Diageo on August 11, 1998.

 

5.                                 Participating
Subsidiaries

 

The Board shall from time to time designate
direct and indirect United States subsidiaries (within the meaning of Section 736
of the United Kingdom Companies Act 1985 (the “Companies Act”)) of Diageo (the “Participating
Subsidiaries”), the employees of which will be eligible to participate in the
Plan.

 

6.                                 Administration

 

(a)                            Powers and Duties of Committee

 

The Plan shall be administered, in
accordance with the provisions hereof, by the Board which may delegate some or
all of its powers and duties to the Committee. 
Subject to the provisions of the Plan and Section 423 of the Code,
the Board or the Committee shall have the authority, in its discretion, to
determine the time and frequency of granting Options, the terms and conditions
of the Options and the number of Ordinary Shares subject to each Option; provided, however, that an Offering may only be made within
the six weeks following the announcement to the London Stock Exchange by Diageo
of its results for any financial year or other period.  The Board or the Committee shall have the
authority to do everything necessary and appropriate to administer the Plan,
including, without limitation, interpreting the provisions of the Plan (but any
such interpretation shall not be inconsistent with the provisions of Section 423
of the Code).  All actions, decisions and
determinations of, and interpretation by the Board or the Committee with
respect to the Plan shall be final and binding upon all employees granted
Options under the Plan (the “Optionees”) and upon their executors,
administrators, personal representatives, heirs and legatees unless otherwise
determined by the Board or the Committee. 
No member of the Board or the Committee shall be liable for any action,
decision, determination or interpretation made in good faith with respect to
the Plan or any Option granted hereunder.

 

4

 

(b)                           Group Compensation and Benefits Director

 

The Board or the Committee may authorise
the Group Compensation and Benefits Director of Diageo to exercise certain of
the powers and duties of the Board or the Committee under Paragraph (a) of
Section 6 hereof in accordance with the Memorandum and Articles of
Association of Diageo.

 

(c)                            Plan Administrator.

 

Diageo, any of the Participating
Subsidiaries, or the common U.S. parent corporation of the Participating
Subsidiaries may engage the services of a financial institution (the “Plan
Administrator”) to perform certain ministerial and procedural duties under the
Plan including, but not limited to, mailing and receiving notices contemplated
under the Plan, determining the number of Elected ADSs and Purchased ADSs for
each Optionee, maintaining or causing to be maintained the Purchase Account and
the Brokerage Account, disbursing funds maintained in the Purchase Account or
proceeds from the sale of ADSs through the Brokerage Account, and filing with
the appropriate tax authorities proper tax returns and forms (including
information returns) and providing to each Optionee statements as required by
law or regulation.

 

7.                                 Eligibility

 

(a)                            Employees Only: Non-Discrimination

 

Only employees of the Participating
Subsidiaries shall be eligible to be granted Options under the Plan.  Every employee of a Participating Subsidiary
who was actively employed or on leave of absence on the Grant Date shall be
eligible to receive Options granted on such date.  For purposes of the Plan, the term “employee”
does not include:

 

(i)                                         any person whose customary employment is less than 20 hours per
week;

 

(ii)                                      any person whose scheduled employment is five months or less in any
calendar year; or

 

(iii)                                   any person who is on a leave of absence for more than 90 days and
such person’s employment with the Company is  not guaranteed by contract
or statute.

 

All employees eligible to be granted
Options under the Plan shall have the same rights and privileges with respect
to Options granted at the same time (each such grant of Options is referred to
herein as an “Offering”).

 

(b)                           5% Shareholders Excluded

 

In no event may an employee be granted an
Option if such employee, immediately after the Option is granted, owns stock
possessing 5% or more of the total combined voting power or value of all
classes of stock of Diageo or of its parent or subsidiary corporation.  For purposes of determining such stock
ownership, the rules of Section 424(d) of the Code shall apply,
and stock which the employee may purchase under outstanding options (whether
issued pursuant to this Plan or otherwise) shall be treated as stock owned by
the employee.

 

5

 

8.                                 Limitations
of Number of ADSs to be Purchased

 

(a)                            Maximum

 

No Optionee shall be granted an Option
affording such Optionee the right under the Plan to purchase ADSs in excess of
the Elected ADSs.  In no event shall an
Optionee be granted an Option which would permit such Optionee’s rights to
purchase ADSs under all employee stock purchase plans (within the meaning of Section 423
of the Code) of his employing Participating Subsidiary and its parent and
subsidiary corporations (as defined in Section 424 of the Code) to accrue
at a rate which exceeds $20,000 of such ADSs (based on the Discounted ADS
Price) for each calendar year in which any such Options is outstanding at any
time (such limitation is referred to herein as the “Plan Limitation”).  The Plan Limitation applies only to Options
granted under “employee stock purchase plans” within the meaning of Section 423
of the Code and does not limit the amount of ADSs or other stock of Diageo
which an employee may purchase under any other stock or bonus plans then in
effect.  If, for any reason, the Elected
ADSs exceed the number of ADSs permitted to be elected by an Optionee under the
Plan Limitation, such Optionee shall be deemed to have elected the greatest
number of ADSs permitted to be elected by him under the Plan Limitation.  If the number of shares permitted to be
purchased is increased pursuant to an amendment of the Code, the Board or the
Committee is hereby authorised upon the effective date of such amendment or
thereafter to increase or decrease the Plan Limitation in accordance with such
amendment.  Notwithstanding the above,
the Board or the Committee must authorise prior to the Grant Date the number of
ADSs permitted to be purchased by an Optionee in an Offering; provided that such limitation is applicable to all Optionees
under the Plan.

 

(b)                           Minimum

 

If an election is made by an Optionee under
Paragraph (b) of Section 9 hereof to purchase ADSs pursuant to
Options granted in an Offering, the dollar amount of the Optionee’s Deposit
Amount ADSs for such Offering shall not be less than $250.  An Optionee who elects to a Deposit Amount
that is less than the minimum dollar required under this Paragraph shall, for
purposes of Paragraph (b) of Section 9 hereof and Paragraph (d) of
Section 11 hereof, be deemed to have elected such minimum Deposit Amount,
and such provision shall be clearly set forth in the Notice of Grant.

 

9.                                 Grant
of Options: Election to Purchase

 

(a)                            Notice of Grant

 

Options granted hereunder shall be deemed
to have been granted 30 days prior to the date the Notice of Grant is sent (the
“Grant Date”).  Within 30 days following
the Grant Date, a written notice (the “Notice of Grant”) shall be mailed to
each Optionee, which Notice of Grant shall:

 

(i)                                         inform the Optionee of his entitlement to purchase ADSs pursuant to
the terms of the Plan at the applicable Discounted ADS Price on the applicable
Purchase Date;

 

(ii)                                      incorporate by reference the provisions of this Plan;

 

6

 

(iii)                                   be in such form as the Committee shall determine.

 

(b)                           Election to Purchase

 

On or prior to 30 days (or, with respect to
any particular Offering, a greater number of days as determined to be necessary
or appropriate by the Plan Administrator) after the Notice of Grant is sent to
Optionees (the “Election Date”), each Optionee shall have notified the Plan
Administrator, in the manner set forth in Section 17 hereof, of the
Optionee’s intention to purchase ADSs by returning the form (the “Participation
Form”) attached to the Notice of Grant and indicating the amount of such Optionee’s
fixed base pay as of the Grant Date (the “Elected Amount”) which such Optionee
elects to have withheld pursuant to Paragraph (d) of Section 11
hereof; provided that the Elected Amount is subject to the Plan
Limitation.  In the event that the Plan
Administrator shall not have received the Participation form properly completed
by the Election Date, such Optionee shall be deemed to have elected not to
participate in the Offering.  Upon timely
receipt of the Participation Form, the Plan Administrator shall determine the
maximum whole number of ADSs (by rounding up, if necessary) that can be
purchased on the Purchase Date by applying such Optionee’s share of the funds
that shall have accumulated in the Purchase Account as of the Purchase Date
pursuant to the provisions of Paragraph (d) of Section 11 hereof
(such maximum number of ADSs is referred to herein as the “Elected ADSs”).

 

10.                           Purchase
Account

 

An account shall be established on the
books of each Participating Subsidiary (the “Purchase Account”) for the purpose
of purchasing ADSs by Optionees under the Plan. 
ADSs purchased under the Plan shall be purchased with funds accumulated
in the Purchase Account in accordance with the terms and conditions of Options
set forth in Section 11 hereof.  The
amounts credited to a Purchase Account shall be subject to the claims of the
general creditors of the Participating Subsidiary that maintains the Purchase
Account.

 

11.                           Terms
and Conditions of Options

 

Options granted hereunder shall be subject
to the following terms and conditions:

 

(a)                                      Purchase Price

 

The purchase price of each ADS subject to
an Option under the Plan shall be 85 percent of the average of the Fair Market
Value of an ADS, expressed in U.S. dollars, on the three Trading Days
immediately preceding the Grant Date of such Option (the “Discounted ADS Price”);
provided that the purchase price of an
ADS may never be less than the pounds sterling equivalent on the Purchase Date
of the nominal value of the Ordinary Shares represented by such ADS.  For purposes of the Plan, “Fair Market Value”
shall be the closing sale price of an ADS as reported on the New York Stock
Exchange Composite Tape, and “Trading Day” shall mean any day on which the ADSs
are traded on the New York Stock Exchange or, if the ADSs are no longer traded
on the New York Stock Exchange, any other exchange on which the ADSs are
traded.  The 

 

7

 

product of the Discounted ADS Price and the
Purchased ADSs is referred to herein as the “Purchase Price”.

 

(b)                                     Term of Options

 

An Option granted hereunder shall expire
after the Purchase Date.

 

(c)                                      Exercise

 

Each Option shall only be exercisable on
the last trading day of the calendar year following the year in which the Grant
Date occurs.  The Plan Administrator will
determine the actual number of ADSs (including fractional shares) that an
Optionee may purchase (the “Purchased ADSs”) by dividing such Optionee’s share
of funds accumulated in the Purchase Account in respect of Options by the
Discounted ADS Price; provided, however,
that the number of Purchased ADSs shall in no event exceed the number of
Elected ADSs.  An Optionee who elects to
purchase ADSs pursuant to an Option granted under the Plan shall be deemed on
the Purchase Date to have exercised the Option for the Purchased ADSs, unless,
prior to such Purchase Date, such Optionee has terminated such Optionee’s
Option pursuant to Paragraph (e) of Section 11 hereof; provided, however, that if:

 

	
  (i)

  	
   

  	
  a written
  notice is given by the Optionee, in the manner set forth in Section 17
  hereof, not to exercise his Option, which notice shall be received by the
  Plan Administrator no later than the day 20 days prior to the Purchase Date
  and no sooner than the day 40 days prior to the Purchase Date or

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  the product
  of the Fair Market Value of an ADS on the Purchase Date (or on the Trading
  Day immediately preceding the Purchase Date if the Purchase Date is not a
  Trading Day) and the Purchased ADSs is less than the Purchase Price, the
  Optionee shall be deemed not to have exercised such Option and shall receive,
  as soon as administratively feasible after the Purchase Date, his share of
  the funds in the Purchase Account in respect of such Option as of the
  Purchase Date.

  

 

Nothing in this Paragraph (c) or in
any other provisions of this Plan shall be construed to give an Optionee the
right to purchase any ADSs pursuant to an Option prior to the Purchase Date to
which such Option relates, except as provided in Paragraphs (f) and (g) of
this Section 11.

 

(d)                                     Payroll Deductions

 

An Optionee who elects to purchase ADSs
pursuant to Paragraph (b) of Section 9 hereof shall be deemed to have
authorised the Participating Subsidiary which employs such Optionee to withhold
from the periodic payment of his after-tax wages an amount (the “Deposit Amount”)
equal to the Elected Amount divided by the number of pay periods in the
calendar year following the year in which the Grant Date occurs (the “Offering
Period”).  Such Participating Subsidiary
shall withhold the Deposit Amount from each payment of wages, commencing 

 

8

 

with the first pay period in the Offering
Period (the “Deposit Commencement Date”) and continuing thereafter throughout
the Offering Period and ending on the Purchase Date.  Such Optionee shall be deemed to have given
instruction to the employing Participating Subsidiary to deposit the Deposit
Account in the Purchase Account.  The
funds so accumulated in the Purchase Amount may only be applied toward the
purchase of ADSs pursuant to Options, unless such funds are returned to the
Optionee pursuant to the provisions of the Plan; provided,
however, that the funds accumulated in the Purchase Account will in
all cases be subject to the claims of the general creditors of the
Participating Subsidiary that maintains the Purchase Account

 

(e)                                      Termination of Option: Early Withdrawal

 

An Optionee may terminate such Optionee’s
Option granted in an Offering in its entirety by written notice of such
termination (the “Withdrawal Notice”) delivered in the manner set forth in Section 17
hereof.  The Withdrawal Notice must be
received by the Plan Administrator no later than the 20 days prior to the
Purchase Date and no sooner than the day 40 days prior to the Purchase Date.  Such Optionee may not terminate an Option in
part, but only in its entirety.  Upon
such termination, such Optionee’s share of funds on deposit in the Purchase
Account in respect of the terminated Option as of the Withdrawal Date shall be
paid to such Optionee as soon as administratively feasible after timely receipt
by the Plan Administrator of the Withdrawal Notice, and all rights and
privileges of the Optionee with respect to such Option shall terminate.  Such termination shall not affect the
Optionee’s rights and privileges with respect to other options granted in any
other Offering that are not otherwise terminated.

 

(f)                                        Termination of Employment

 

Except for the circumstances set forth
below, in the event that an Optionee’s employment shall terminate during the
term of any Option (and he is not re-employed by any other Participating
Subsidiary,), an outstanding Option shall terminate immediately, and as soon as
administratively feasible thereafter, the Optionee shall receive such Optionee’s
share of the funds then on deposit in the Purchase Account;  provided, however
that, subject to the Plan Limitation:

 

(i)                        If any termination of employment is due to retirement (under his
employing Participating Subsidiary’s retirement plan), death or disability
during employment, the Optionee (or, as the case may be, his executor,
administrator, personal representative, heir or legatee) shall have the right
within three months after such retirement, death or disability (unless the
Purchase Date shall first occur, in which event such right may be exercised
only on the Purchase Date) to exercise any Option to purchase a number of ADSs
(including fractional shares) that can be purchased by applying such Optionee’s
share of the funds in the Purchase Account in respect of such Option as of the
date of such purchase;  for purposes of
this subparagraph (i), an Optionee is deemed to 
be terminated due to disability if and at the time such Optionee is not
actively employed by his 

 

9

 

employing Participating Subsidiary after
six continuous months of absence from employment due to disability;

 

(ii)                     If any involuntary termination of employment by the Participating
Subsidiary is due to work force reduction or job elimination, the Optionee
shall have the right within three months after such termination (unless the
Purchase Date shall first occur, in which event such right may be exercised
only on the Purchase Date) to exercise any Option to purchase a number of ADSs
(including fractional shares) that can be purchased by applying such Optionee’s
share of the funds in the Purchase Account in respect of such Option as of the
date of such purchase; or

 

(iii)                  If any Optionee’s employment with the Company is terminated as a
result of a change in control of a Participating Subsidiary, such Optionee
shall have the right within three months after such change in control (unless
the Purchase Date shall first occur, in which event such right may be exercised
only on the Purchase Date) to exercise any Option to purchase a number of ADSs
(including fractional shares) that can be purchased by applying such Optionee’s
share of the funds in the Purchase Account in respect of such Option as of the
date of such change in control;  for
purposes of this subparagraph (iii), a change in control is deemed to have
occurred if there is a sale by Diageo of its interest in such Participating
Subsidiary where Diageo does not retain more than 50% of the voting power of
such Participating Subsidiary or Diageo (or any subsidiary of Diageo) sells all
or substantially all of the assets of such Participating Subsidiary and the
Optionee, as a result of such sale, does not continue in employment with the
Company;

 

provided further, that if an Optionee does not exercise an Option under any of the
foregoing subparagraphs (i), (ii), or (iii), as the case may be, such Option
shall terminate upon the expiry of the applicable three month period and the
Optionee shall receive, as soon as administratively feasible after the expiry
of the three month period, such Optionee’s share of the funds in the Purchase
Account in respect of such Option.

 

(g)                                     Change in Control or Liquidation of Diageo

 

In any of the events set out below (the
occurrence of any such event shall be referred to herein as a “Change in Control”),
an Optionee shall elect, within 10 days after the Change in Control Date (as
defined below) whether to continue the Optionee’s Deposit Amount or to receive
the Settlement Amount (as defined below). 
If the Optionee elects to continue the Optionee’s Deposit Amount, the
Option shall be converted into the right to receive for each ADS subject to the
Option the securities cash and/or property which the holder of one ADS would be
entitled to receive upon the Change in Control.

 

If the Optionee elects to receive the
Settlement Amount, the Optionee shall within 30 days after the Change in
Control Date receive the Settlement Amount in cash in respect of each Option
held by such Optionee;  provided that upon 

 

10

 

receipt of the Settlement Amount the option
shall terminate and the Optionee shall no longer have any claim to any funds in
the Purchase Account in respect of such Option; 
provided, further,
that if, in respect of an Option, the relevant Change in Control ADS Price (as
defined below) is less than the Discounted ADS Price, the Optionee shall
receive within 30 days after the Change in Control Date, in lieu of the
Settlement Amount, the Optionee’s share of the funds on deposit in the Purchase
Account in respect of such Option as of the Change in Control Date and such
Option shall terminate upon such receipt. 
The term “Settlement Amount” means, with respect to an Option, the
amount that would be realised by an Optionee if such Optionee exercised the
Option to purchase a number of ADSs (including fractional shares) that can be
purchased by applying the Optionee’s share of the funds in the Purchase Account
in respect of such Option as of the Change in Control Date and sold all such
ADSs immediately thereafter at the Change in Control ADS Price.

 

For purposes of this Paragraph (g), a
Change in Control shall be deemed to have occurred if:

 

	
  (i)

  	
   

  	
  any person
  obtains Control (as defined below) of Diageo as a result of making a general
  offer to acquire all the shares of Diageo of the same class as the Ordinary
  Shares or a general offer to acquire the whole of the issued share capital of
  Diageo which is made on a condition such that if it is satisfied the person
  making the offer will have Control of Diageo (a “Takeover Offer”);

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  a compromise
  or arrangement sanctioned by the court becomes effective under section 425 of
  the Companies Act (a “Compromise”); or

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  any person
  serves a notice on the shareholders of Diageo under section 429 of the
  Companies Act (relating to rights of 90% shareholders to buy out minority
  shareholders) (a “Section 429 Notice”);

  

 

for purposes of this sentence, the term “Control”
means, with respect to Diageo, the power of a person to secure that the affairs
of Diageo are conducted in accordance with the wishes of that person by means
of direct or indirect ownership of shares or possession of voting power of
Diageo, by virtue of powers conferred by the Memorandum and Articles of
Association of Diageo or any other document regulating Diageo or any other
corporation or otherwise.  For purposes
of this Paragraph (g), the term “Change in Control ADS Price” means the higher
of (i) the Fair Market Value of an ADS on the Change in Control Date (or,
if the Change in Control Date is not a Trading Day, on the Trading Day
immediately prior to such Change in Control Date), or (ii) the price per
share paid or proposed to be paid for the Ordinary Shares of Diageo by a person
making a Takeover Offer, by a person (if any) who obtains Control of Diageo
under a Compromise, or by a person serving a Section 429 Notice, as the
case may be, translated in to the US dollar price per ADS by reference to the
spot exchange rate on the Change in Control Date and as adjusted for the then 

 

11

 

existing ratio between an ADS and the
number of Ordinary Shares represented thereby; 
the term “Change in Control Date” means:

 

	
  (i)

  	
   

  	
  with respect
  to a Takeover Offer, the date on which the person making the Takeover Offer
  has obtained Control of Diageo;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  with respect
  to a Compromise, the date on which the Compromise becomes effective; or

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  with respect
  to a Section 429 Notice, the date that is the first day of the period
  during which the person serving the Section 429 Notice is entitled and
  bound to acquire shares on the terms of the offer contained in such Section 429
  Notice.

  

 

If an effective resolution is passed for
the voluntary winding up, or an order is made for the compulsory winding up, of
Diageo, the Board or the Committee shall give notice thereof to all Optionees
as soon as reasonably practicable and thereupon each such Optionee shall
forthwith and until 30 days thereafter have the right (unless the Purchase Date
shall first Occur, in which event such right may be exercised only on the
Purchase Date) to exercise any Option to purchase a number of ADSs (including
fractional shares) that can be purchased by applying his share of the funds in
the Purchase Account in respect of such Option as of the date such notice by
the Board or the Committee is given; provided that
all unexercised Options shall terminate upon the expiry of such 30-day period
and the Optionee shall, as soon as administratively feasible after the expiry
of such 30-day period, receive his share of the funds in the Purchase Account
in respect of such unexercised Option.

 

For Options granted after 26 August 2008,
in the event that an offer (as referred to in paragraph (i) above) is made
or a compromise or arrangement (as referred to in paragraph (ii) above) is
proposed which is expected to result in the Company becoming controlled by a
new company (the “New Company”), at least 75% of the shares in the New Company
are expected to be held by substantially the same persons who immediately before
the offer or proposal was made were shareholders in the Company and the Board
and the New Company agree that this Rule should apply, then the offer or
proposal shall not be a Change of Control for the purposes of this paragraph (g) and
an Option shall be automatically converted into an Option which the Board
determines is equivalent to the Option it replaces except that it will be over
shares in the New Company or some other company and shall be converted in such
a manner as to ensure continued compliance with Section 423 of the Code
and to ensure that such Option shall continue to be exempt from Section 409A
of the Code.  The rules will apply
to any new Option granted under this paragraph as if references to shares were
references to shares over which the new Option is granted and references to the
Company were references to the company whose shares are subject to the new
Option.

 

12

 

(h)            Assignability of Options

 

No Option
granted hereunder shall be assignable or transferable except by will or by the
laws of descent and distribution, and shall be exercisable, during the lifetime
of the Optionee, only by the Optionee.

 

(i)              Excess Funds

 

In the event
the Optionee (or his executor, administrator, personal representative, heir or
legatee) exercises an Option and there remains any excess of such Optionee’s
share of the funds in the Purchase Account in respect of such Option over the
amount applied to the purchase of ADSs pursuant to such exercise, such excess
shall be paid to the Optionee as soon as administratively feasible after the
date of such purchase.

 

(j)              Restricted Period

 

Upon exercise
of an Option, the Optionee shall be deemed to have consented to the deposit of
all of the ADSs purchased pursuant to such exercise (the “Deposited ADSs”) with
a designated brokerage account maintained by the Plan Administrator for such
Optionee’s benefit (the “Brokerage Account”) for a one year period after the
relevant Purchase Date (the “Restricted Period”).  The Deposited ADSs will be held in book-entry
form in the name of the Plan Administrator as nominee.  Except as set forth in Section 11(k) below,
and Optionee (including any Optionee whose employment has been terminated) will
not be permitted to withdraw such Optionee’s Deposited ADSs during the
Restricted Period:

 

(i)        if a subsequent disposition of the withdrawn ADSs by the Optionee can
be made without effecting such disposition through the Brokerage Account;

 

(ii)       if such withdrawal resulted from an exchange of the Deposited ADSs for
property in a transaction to which Section 354, 355, 356, or 1036 (or so
much of Section 1031 as relates to Section 1036) of the Code applies;

 

(iii)      if such withdrawal resulted from a transfer of the Deposited ADSs by
the Optionee out of the Brokerage Account into an account which is jointly
owned by such Optionee and any other person with the right of survivorship;

 

(iv)      if such withdrawal resulted from a transfer of the Deposited ADSs to
the Optionee’s spouse, or to a former spouse where such transfer is incidental
to a divorce; or

 

(v)       if such withdrawal resulted from any other transfer of the Deposited
ADSs out of the Brokerage Account that would not be treated as a “disposition”
as defined in Section 424(c) of the Code.

 

(k)             Sale of Deposited ADSs: 
Termination of Employment

 

An Optionee
may by written notice instruct the Plan Administrator to (i) sell such
Optionee’s Deposited ADSs through the Brokerage Account at any time 

 

13

 

and (ii) pay
over to such Optionee the proceeds (less any expenses and any applicable
withholding taxes, including, without limitation, wage and employment
withholding taxes) of such sale.  If the
employment of an Optionee is terminated (for any reason) and such termination
occurs subsequent to the Restricted Period with respect to any Deposited ADSs,
the Plan Administrator may require such Optionee to withdraw such Deposited
ADSs from the Brokerage Account at such Optionee’s own expense.

 

(l)              Cessation of Payroll Deductions

 

Notwithstanding
paragraph (d) of this Section 11, if the Plan Administrator is
notified by irrevocable written request from an Optionee (a “Cessation Notice”)
to stop making the payroll deductions provided for in such paragraph, then the
relevant Participating Subsidiary shall cease to make payroll deductions with
respect to the specified Option as soon as administratively feasible following
the receipt of the Cessation Notice, which Notice shall specify the name of the
Optionee and the Option or Options with respect to which the cessation of
payroll deductions relates.  An Optionee
shall not have the right to resume payroll deductions with respect to any
Option subject to the Cessation Notice and shall otherwise be subject to the
terms and conditions of this Plan with respect to such Option (other than
paragraph (b) of Section 8).

 

(m)            Tax Deductions

 

In any case
where the Company is obliged to account:

 

(i)        for any tax (or similar liabilities) in any jurisdiction for which the
Optionee in question is liable by virtue of the exercise of an Option; or

 

(ii)       for any social security or other contributions recoverable from the
Optionee in question;

 

(together, the
“Tax Liability”) the Company may recover the tax from the Optionee in question
in such manner as the Board or the Committee shall think fit and (without
prejudice to the generality of the foregoing) no ADSs shall be issued or
transferred to that Optionee unless he has either:

 

(i)        made a payment to the Company of an amount equal to the Tax Liability;
or

 

(ii)       entered into arrangements with the Company to secure that such a
payment is made (whether by authorising the Company to procure the sale of some
or all of the ADSs on his behalf and authorising the payment to the Company of
the relevant amount of the proceeds of sale or otherwise).

 

12.         Adjustment of
Number of ADSs Subject to Options

 

In the event
of any capitalisation or rights issue by Diageo or any consolidation,
subdivision, reduction or other variation of the share capital of Diageo, the
Committee may make such adjustment, if any, as they may deem appropriate in the
number, kind 

 

14

 

and price of
ADSs available for purchase under the Plan; provided
however that Options granted pursuant to the Plan shall not be
adjusted in a manner that causes the Options to fail to qualify as options
issued pursuant to an “employee stock purchase plan” within the meaning of Section 423
of the Code; and provided further, any adjustment
made pursuant to this Section 12 shall be made on the basis that the
Purchase Price shall not be materially altered.

 

In addition,
no adjustment shall be made under this Section 12: (i) to the extent
that it would result in an ADS being issued at less than the aggregate of the
nominal value of the Ordinary Shares which it represents or (ii) without
the prior confirmation in writing by the auditors of Diageo (acting as experts
and not as arbitrators) that such adjustment is, in their opinion, fair and
reasonable.

 

13.         Rights as a
Shareholder

 

No Optionee
shall have any rights as a shareholder of Diageo except as through and upon the
terms and conditions of the applicable depository agreement between Diageo and
the Depositary and until full payment has been made for ADSs purchased by such
Optionee hereunder.  Ordinary Shares
issued pursuant to the Plan shall rank pari passu in
all respects with all other Ordinary Shares then in issue, except as regards any
rights and dividends attaching by reference to a record date prior to the date
on which such ordinary shares are allotted, which shall be the Purchase Date
(or date of purchase pursuant to subparagraph (iii) of Paragraph (f), or
the last sentence of Paragraph (g), of Section 11 hereof, as the case may
be).

 

14.         Other
Regulatory Actions

 

Prior to the
offering of any ADSs under the Plan, Diageo shall effect a registration of the
offering of the Ordinary Shares of Diageo reserved under the Plan in accordance
with the requirements of the United States Securities Act of 1933 and the rules and
regulations thereunder.  The expense of
such registration will be borne by Diageo.

 

Diageo shall
apply to the London stock Exchange for the admission to the Official List of
all Ordinary Shares allotted pursuant to the exercise of an Option; provided that Ordinary Shares are listed on the London Stock
Exchange at the time of allotment.

 

Diageo shall
keep available sufficient unissued Ordinary Share capital to satisfy the outstanding
Options in respect of which Diageo intends to issue Ordinary Shares and shall
procure that sufficient ADSs are available for transfer to satisfy the
outstanding Options in respect of which Diageo does not intend to issue
Ordinary Shares.

 

15.         Amendments:  Termination of the Plan

 

The Board may
from time to time amend, modify, suspend, discontinue or terminate the Plan at
any time without notice;  provided that no Optionee’s existing rights in respect of
existing Options are adversely affected thereby; provided,
further upon any such amendment or modification, all Optionees shall
continue to have the same rights and privileges in respect of existing Options;
provided further that no such amendment
of the Plan shall, except as provided in Section 12 hereof: (i) increase
the total number of Ordinary Shares issuable under the Plan; (ii) increase
the maximum number of ADSs 

 

15

 

which any
Optionee may purchase under the Plan (other than an increase in the Plan
Limitation under the circumstances permitted by Paragraph (a) of Section 8
hereof); or (iii) increase, enlarge or improve the rights of existing or
future Optionees under the Plan unless either such amendment shall have been
approved by Diageo in general meeting prior to the implementation of such
amendment or such amendment is in the opinion of the Board a minor amendment to
benefit the administration of the Plan, to take account of a change in
legislation or maintain favourable tax, exchange control or regulatory
treatment for participants in the Plan or for Diageo or for members of its
group.  In no event may Options be
granted after the tenth anniversary of the adoption of the Plan.

 

16.         No Other
Obligations

 

The receipt of
an Option pursuant to the Plan shall impose no obligation upon the Optionee to
purchase any ADSs covered by such Option. 
Nor shall the granting of an Option pursuant to the Plan constitute an
agreement or an understanding, express or implied, on the part of Diageo or any
Participating Subsidiary to employ the Optionee for any specified period.

 

17.         Notices

 

Any notice
which Diageo or any Optionee may be required or permitted to give to the other
shall be in writing and may be delivered personally or by mail, postage
prepaid, addressed: if to Diageo (or to the Plan Administrator), to such
address as Diageo, by notice to such Optionee, may designate in writing from
time to time; and, if to the Optionee, at his address as shown on the payroll
records of his employing Participating Subsidiary.

 

18.         Interpretation
of Certain Terms

 

Where the
context so requires, reference herein to the masculine gender shall include the
feminine; and the meaning of terms in Paragraph (b) of Section 3,
Paragraph (g) of Section 11 and Section 12 shall be construed in
accordance with the United Kingdom meaning of such terms.

 

19.         Governing Law

 

The Plan and
all Options granted hereunder shall be construed in accordance with and
governed by the laws of the State of New york without reference to choice of
law principles and subject in all cases to Sections 423 and 424 of the Code and
the regulations thereunder.

 

16Exhibit 4.13

 

THE RULES OF THE

DIAGEO PLC 2007 UNITED STATES

EMPLOYEE STOCK PURCHASE PLAN

 

Approved by the Company 16 October 2007

 

Adopted by the Board 23 October 2007

 

Amended by the Remuneration Committee 26 August 2008

 

 

DIAGEO
PLC

 

Diageo 2007 United States
Employee Stock Purchase Plan

 

1.                                 Purpose

 

The purpose of
the Diageo 2007 United States Employee Stock Purchase Plan (“the Plan”), is to
provide employees of the Participating Subsidiaries of Diageo plc (“Diageo”)
(Diageo and the Participating Subsidiaries are collectively referred to herein
as “the Company”) an opportunity to own an equity interest in Diageo and,
through such ownership, to promote their identification with the interests of
shareholders of Diageo, to stimulate their commitment to the business
objectives of the Company and to maintain their motivation through the
opportunity to share in the growth of the Company.  It is intended that options issued pursuant
to the Plan (“the Options”) shall constitute options issued pursuant to an “employee
stock purchase plan” within the meaning of Section 423 of the United
States Internal Revenue Code of 1986, as amended (the “Code”).

 

2.                                 Definitions

 

As used
herein, the terms set forth below have the meanings assigned to them in this Section 2
and shall include the plural as well as the singular.

 

ADRs shall have the meaning set forth in Section 3.

 

ADSs shall have the meaning set forth in Section 3.

 

Board shall have the meaning set forth in Section 3.

 

Brokerage Account shall have the meaning set forth in Section 11(j).

 

Cessation Notice shall have the meaning set forth in Section 11(1).

 

Change of Control shall have the meaning set forth in Section 11(g).

 

Change in Control ADS
Price shall have the meaning set forth in Section 11(g).

 

Change in Control Date shall have the meaning set forth in Section 11(g).

 

Code shall mean the United States Internal Revenue Code of 1986, as
amended.

 

Committee shall have the meaning set forth in Section 3(a).

 

Companies Act  1985 shall mean the
United Kingdom Companies Act 1985.

 

Companies Act 2006 shall mean the United Kingdom
Companies Act 2006.

 

Company shall have the meaning set forth in Section 1.

 

Compromise shall have the meaning set forth in Section 11(g)(ii).

 

Control shall have the meaning set forth in Section 11(g).

 

 

Deposit Amount shall have the meaning set forth in Section 11(d).

 

Deposit Commencement Date shall have the meaning set forth in Section 11(d).

 

Depositary shall have the meaning set forth in Section 3.

 

Deposited ADSs shall have the meaning set forth in Section 11(j).

 

Discounted ADS Price shall have the meaning set forth in Section 11(a).

 

Elected ADSs shall have the meaning set forth in Section 9(b).

 

Elected Amount shall have the meaning set forth in Section 9(b).

 

Election Date shall have the meaning set forth in Section 9(b).

 

Fair Market Value shall have the meaning set forth in Section 11(a).

 

Diageo shall mean Diageo plc, which is a “parent corporation” within the
meaning of Section 424(e) of the Code.

 

Grant Date shall have the meaning set forth in Section 9(a).

 

Notice of Grant shall have the meaning set forth in Section 9(a).

 

Offering shall have the meaning set forth in Section 7(a).

 

Offering Period shall have the meaning set forth in Section 11(d).

 

Optionees shall have the meaning set forth in Section 6(a).

 

Options shall have the meaning set forth in Section 1.

 

Ordinary Shares shall have the meaning set forth in Section 3.

 

Participation Form shall have the meaning set forth in Section 9(b).

 

Participating Subsidiaries
shall have the meaning set forth in Section 5.

 

Plan shall mean the Diageo 2007 United States Employee Stock Purchase
Plan.

 

Plan Administrator shall have the meaning set forth in Section 6(c).

 

Plan Limitation shall have the meaning set forth in Section 8(a).

 

Purchase Account shall have the meaning set forth in Section 10.

 

Purchase Date shall have the meaning set forth in Section 11(c).

 

Purchase Price shall have the meaning set forth in Section 11(a).

 

Purchased ADSs shall have the meaning set forth in Section 11(c).

 

Restricted Period shall have the meaning set forth in Section 11(j).

 

Section 979 Notice shall have the meaning set forth in Section 11(g)(iii).

 

2

 

Settlement Amount shall have the meaning set forth in Section 11(g).

 

Takeover Offer shall have the meaning set forth in Schedule 11(g)(i).

 

Trading Day shall have the meaning set forth in Section 11(a).

 

Withdrawal Notice shall have the meaning set forth in Section 11(e).

 

3.                                 Stock
to be Issued under the Plan

 

(a)                            Diageo ADSs

 

The stock
subject to Options shall be ordinary shares nominal value 28 and 101/108 pence
per share of Diageo (the “Ordinary Shares”), as traded on the London Stock
Exchange, which shall be represented by American Depositary Shares (“ADSs”), as
traded on the New York Stock Exchange. 
Upon exercise of an Option, Diageo shall make arrangements either to
procure the issue by the applicable United States depositary (“the Depositary”)
of the appropriate number of ADSs, being evidenced by American Depositary
Receipts (the “ADRs”) or procure the transfer of the appropriate number of
ADSs.  References in this Plan to Options
to purchase ADSs shall be construed accordingly.  At the time of adoption of the Plan by the
Board of Directors of Diageo (“the Board”), each ADS represents four Ordinary
Shares, but such number may increase or decrease from time to time upon
decision by the Board or a duly authorised committee of the Board (“the
Committee”); in the event of any such increase or decrease, the Board or the
Committee shall make the appropriate adjustments to the terms of outstanding
Options.

 

(b)                           Limits upon Number of Ordinary Shares Issuable

 

(i)                                         The aggregate maximum number of Ordinary Shares issuable upon the
exercise of Options shall not exceed 71,500,000, which represents approximately
three per cent of the number of Ordinary Shares issued and outstanding on 16 October 2007.

 

(ii)                                      In addition to the requirement in subparagraph (i) above,

 

(1)                     no Option shall be granted on any date if the number of Ordinary
Shares falling to be issued on the exercise thereof when aggregated with:

 

(a)                                    the number of Ordinary Shares issued during the ten years ended
prior to that date under any employee share scheme operated by Diageo (other
than an employee share option scheme); and

 

(b)                                   the number of Ordinary Shares issued or remaining capable of being
issued pursuant to options granted during the ten years ended on the day prior
to that date under any employee share option scheme (including the Plan) operated
by Diageo.

 

would exceed
ten percent of the ordinary share capital of Diageo for the time being.

 

3

 

For the
avoidance of doubt, any treasury shares which are or may be transferred to
satisfy options or awards under any other employees’ share scheme adopted by
Diageo shall be treated as issued for these purposes unless institutional
guidelines cease to require treasury shares to be so treated.

 

4.                                 Approval
by Shareholders

 

The Plan was
approved by the shareholders of Diageo on 16 October 2007 and was adopted
by the Board on 23 October 2007.

 

5.                                 Participating
Subsidiaries

 

The Board
shall from time to time designate direct and indirect United States
subsidiaries (within the meaning of Section 736 of the Companies Act 1985
of Diageo (the “Participating Subsidiaries”), the employees of which will be
eligible to participate in the Plan.

 

6.                                 Administration

 

(a)                            Powers and Duties of Committee

 

The Plan shall
be administered, in accordance with the provisions hereof, by the Board which
may delegate some or all of its powers and duties to the Committee.  Subject to the provisions of the Plan and Section 423
of the Code, the Board or the Committee shall have the authority, in its
discretion, to determine the time and frequency of granting Options, the terms
and conditions of the Options and the number of Ordinary Shares subject to each
Option; provided, however, that an Offering may
only be made within the six weeks following (i) the day on which the Plan
is approved by Diageo shareholders, (ii) the announcement to the London
Stock Exchange by Diageo of its results for any financial year or other period
or (iii) at any other time when the circumstances are considered
exceptional by the Board. Options may not be granted after [15 October] 2017
(the expiry of the period of 10 years beginning with the date on which the Plan
is approved by Diageo shareholders). The Board or the Committee shall have the
authority to do everything necessary and appropriate to administer the Plan,
including, without limitation, interpreting the provisions of the Plan (but any
such interpretation shall not be inconsistent with the provisions of Section 423
of the Code).  All actions, decisions and
determinations of, and interpretation by the Board or the Committee with
respect to the Plan shall be final and binding upon all employees granted
Options under the Plan (the “Optionees”) and upon their executors,
administrators, personal representatives, heirs and legatees unless otherwise
determined by the Board or the Committee. 
No member of the Board or the Committee shall be liable for any action,
decision, determination or interpretation made in good faith with respect to
the Plan or any Option granted hereunder.

 

(b)                           Group Compensation and Benefits Director

 

The Board or
the Committee may authorise the Group Compensation and Benefits Director of
Diageo to exercise certain of the powers and duties of the Board or the
Committee under Paragraph (a) of Section 6 hereof in accordance with
the Memorandum and Articles of Association of Diageo.

 

4

 

(c)                            Plan Administrator

 

Diageo, any of
the Participating Subsidiaries, or the common U.S. parent corporation of the
Participating Subsidiaries may engage the services of a financial institution
(the “Plan Administrator”) to perform certain ministerial and procedural duties
under the Plan including, but not limited to, mailing and receiving notices
contemplated under the Plan, determining the number of Elected ADSs and
Purchased ADSs for each Optionee, maintaining or causing to be maintained the
Purchase Account and the Brokerage Account, disbursing funds maintained in the
Purchase Account or proceeds from the sale of ADSs through the Brokerage
Account, and filing with the appropriate tax authorities proper tax returns and
forms (including information returns) and providing to each Optionee statements
as required by law or regulation.

 

7.                                 Eligibility

 

(a)                            Employees Only: Non-Discrimination

 

Only employees
of the Participating Subsidiaries (including employees of Participating
Subsidiaries who are non-resident aliens, on International Assignment in the
United States) shall be eligible to be granted Options under the Plan.  Every employee of a Participating Subsidiary
who was actively employed or on leave of absence on the Grant Date shall be
eligible to receive Options granted on such date.  For purposes of the Plan, the term “employee”
does not include:

 

(i)                                         any person whose customary employment is less than 20 hours per week;
or

 

(ii)                                      any person whose customary employment is five months or less in any
calendar year.

 

All employees
eligible to be granted Options under the Plan shall have the same rights and
privileges with respect to Options granted at the same time (each such grant of
Options is referred to herein as an “Offering”).

 

(b)                           5% Shareholders Excluded

 

In no event
may an employee be granted an Option if such employee, immediately after the
Option is granted, owns stock possessing 5% or more of the total combined
voting power or value of all classes of stock of Diageo or of its parent or
subsidiary corporation.  For purposes of
determining such stock ownership, the rules of Section 424(d) of
the Code shall apply, and stock which the employee may purchase under outstanding
options (whether issued pursuant to this Plan or otherwise) shall be treated as
stock owned by the employee.

 

8.                                 Limitations
of Number of ADSs to be Purchased

 

(a)                            Maximum

 

No Optionee
shall be granted an Option affording such Optionee the right under the Plan to
purchase ADSs in excess of the Elected ADSs. 
In no event shall an Optionee be granted an Option which would permit
such Optionee’s rights to purchase ADSs under all employee stock purchase plans
(within the meaning of Section 423 of the Code) of his 

 

5

 

employing
Participating Subsidiary and its parent and subsidiary corporations (as defined
in Section 424 of the Code) to accrue at a rate which exceeds $20,000 of
such ADSs (based on the Discounted ADS Price) for each calendar year in which
any such Option is outstanding at any time (such limitation is referred to
herein as the “Plan Limitation”).  The
Plan Limitation applies only to Options granted under “employee stock purchase
plans” within the meaning of Section 423 of the Code and does not limit
the amount of ADSs or other stock of Diageo which an employee may purchase
under any other stock or bonus plans then in effect.  If, for any reason, the Elected ADSs exceed
the number of ADSs permitted to be elected by an Optionee under the Plan
Limitation, such Optionee shall be deemed to have elected the greatest number
of ADSs permitted to be elected by him under the Plan Limitation.  If the number of shares permitted to be
purchased is increased pursuant to an amendment of the Code, the Board or the
Committee is hereby authorised upon the effective date of such amendment or
thereafter to increase or decrease the Plan Limitation in accordance with such
amendment.  Notwithstanding the above,
the Board or the Committee must authorise prior to the Grant Date the number of
ADSs permitted to be purchased by an Optionee in an Offering; provided that such limitation is applicable to all Optionees
under the Plan.

 

(b)                           Minimum

 

If an election
is made by an Optionee under Paragraph (b) of Section 9 hereof to
purchase ADSs pursuant to Options granted in an Offering, the dollar amount of
the Optionee’s Deposit Amount ADSs for such Offering shall not be less than
$250.  An Optionee who elects to a
Deposit Amount that is less than the minimum dollar required under this
Paragraph shall, for purposes of Paragraph (b) of Section 9 hereof
and Paragraph (d) of Section 11 hereof, be deemed to have elected
such minimum Deposit Amount, and such provision shall be clearly set forth in
the Notice of Grant.

 

9.                                 Grant
of Options: Election to Purchase

 

(a)                            Notice of Grant

 

Options
granted hereunder shall be deemed to have been granted at the time the
Committee completes the corporate action constituting an offer of stock for sale
(the “Grant Date”).  Within 30 days
following the Grant Date, a written notice (the “Notice of Grant”) shall be
mailed to each Optionee, which Notice of Grant shall:

 

(i)                                         inform the Optionee of his entitlement to purchase ADSs pursuant to
the terms of the Plan at the applicable Discounted ADS Price on the applicable
Purchase Date;

 

(ii)                                      incorporate by reference the provisions of this Plan;

 

(iii)                                   be in such form as the Committee shall determine.

 

(b)                           Election to Purchase

 

On or prior to
30 days (or, with respect to any particular Offering, a greater number of days
as determined to be necessary or appropriate by the Plan Administrator) after
the Notice of Grant is sent to Optionees (the “Election Date”), each Optionee
shall have 

 

6

 

notified the
Plan Administrator, in the manner set forth in Section 17 hereof, of the
Optionee’s intention to purchase ADSs by returning the form (the “Participation
Form”) attached to the Notice of Grant and indicating the amount of such
Optionee’s fixed base pay as of the Grant Date (the “Elected Amount”) which
such Optionee elects to have withheld pursuant to Paragraph (d) of Section 11
hereof; provided that the Elected Amount is subject to the Plan
Limitation.  In the event that the Plan
Administrator shall not have received (whether electronically or otherwise) the
Participation form properly completed by the Election Date, such Optionee shall
be deemed to have elected not to participate in the Offering.  Upon timely receipt of the Participation
Form, the Plan Administrator shall determine the maximum whole number of ADSs
(by rounding down, if necessary) that can be purchased on the Purchase Date by
applying such Optionee’s share of the funds that shall have accumulated in the
Purchase Account as of the Purchase Date pursuant to the provisions of
Paragraph (d) of Section 11 hereof (such maximum number of ADSs is
referred to herein as the “Elected ADSs”).

 

10.                           Purchase
Account

 

An account
shall be established on the books of each Participating Subsidiary (the “Purchase
Account”) for the purpose of purchasing ADSs by Optionees under the Plan.  ADSs purchased under the Plan shall be
purchased with funds accumulated in the Purchase Account in accordance with the
terms and conditions of Options set forth in Section 11 hereof.  The amounts credited to a Purchase Account
shall be subject to the claims of the general creditors of the Participating
Subsidiary that maintains the Purchase Account.

 

11.                           Terms
and Conditions of Options

 

Options
granted hereunder shall be subject to the following terms and conditions:

 

(a)                                      Purchase Price

 

The purchase
price of each ADS subject to an Option under the Plan shall be 85 percent of
the average of the Fair Market Value of an ADS, expressed in U.S. dollars, on
the three Trading Days immediately preceding the Grant Date of such Option (the
“Discounted ADS Price”); provided that
the purchase price of an ADS may never be less than the pounds sterling
equivalent on the Purchase Date of the nominal value of the Ordinary Shares
represented by such ADS.  For purposes of
the Plan, “Fair Market Value” shall be the closing sale price of an ADS as
reported on the New York Stock Exchange Composite Tape, and “Trading Day” shall
mean any day on which the ADSs are traded on the New York Stock Exchange or, if
the ADSs are no longer traded on the New York Stock Exchange, any other
exchange on which the ADSs are traded. 
The product of the Discounted ADS Price and the Purchased ADSs is
referred to herein as the “Purchase Price”.

 

(b)                                     Term of Options

 

An Option
granted hereunder shall expire after the Purchase Date.

 

7

 

(c)                                      Exercise

 

Each Option
shall only be exercisable on the last trading day of the calendar year
following the year in which the Grant Date occurs.  The Plan Administrator will determine the
actual number of ADSs (including fractional shares) that an Optionee may
purchase (the “Purchased ADSs”) by dividing such Optionee’s share of funds
accumulated in the Purchase Account in respect of Options by the Discounted ADS
Price; provided, however, that the number of
Purchased ADSs shall in no event exceed the number of Elected ADSs.  An Optionee who elects to purchase ADSs
pursuant to an Option granted under the Plan shall be deemed on the Purchase
Date to have exercised the Option for the Purchased ADSs, unless, prior to such
Purchase Date, such Optionee has terminated such Optionee’s Option pursuant to
Paragraph (e) of Section 11 hereof; provided,
however, that if:

 

(i)                       a written notice is given by the Optionee, in the manner set forth
in Section 17 hereof, not to exercise his Option, which notice shall be
received by the Plan Administrator no later than the day 20 days prior to the
Purchase Date and no sooner than the day 40 days prior to the Purchase Date; or

 

(ii)                   the product of the Fair Market Value of an ADS on the Purchase Date
(or on the Trading Day immediately preceding the Purchase Date if the Purchase
Date is not a Trading Day) and the Purchased ADSs is less than the Purchase
Price, the Optionee shall be deemed not to have exercised such Option and shall
receive, as soon as administratively feasible after the Purchase Date, his
share of the funds in the Purchase Account in respect of such Option as of the
Purchase Date.

 

Nothing in
this Paragraph (c) or in any other provisions of this Plan shall be
construed to give an Optionee the right to purchase any ADSs pursuant to an
Option prior to the Purchase Date to which such Option relates, except as
provided in Paragraphs (f) and (g) of this Section 11.

 

(d)                                     Payroll Deductions

 

An Optionee
who elects to purchase ADSs pursuant to Paragraph (b) of Section 9
hereof shall be deemed to have authorised the Participating Subsidiary which
employs such Optionee to withhold from the periodic payment of his after-tax
wages an amount (the “Deposit Amount”) equal to the Elected Amount divided by
the number of pay periods in the calendar year following the year in which the
Grant Date occurs (the “Offering Period”). 
Such Participating Subsidiary shall withhold the Deposit Amount from
each payment of wages, commencing with the first pay period in the Offering
Period (the “Deposit Commencement Date”) and continuing thereafter throughout
the Offering Period and ending on the Purchase Date.  Such Optionee shall be deemed to have given
instruction to the employing Participating Subsidiary to deposit the Deposit
Amount in the Purchase Account.  The
funds so accumulated in the Purchase Account may only be applied toward the
purchase of ADSs pursuant to Options, unless such 

 

8

 

funds are
returned to the Optionee pursuant to the provisions of the Plan; provided, however, that the funds accumulated in the
Purchase Account will in all cases be subject to the claims of the general
creditors of the Participating Subsidiary that maintains the Purchase Account.

 

(e)                                      Termination of Option: Early Withdrawal

 

An Optionee
may terminate such Optionee’s Option granted in an Offering in its entirety by
written notice of such termination (the “Withdrawal Notice”) delivered in the
manner set forth in Section 17 hereof. 
The Withdrawal Notice must be received by the Plan Administrator no
later than the 20 days prior to the Purchase Date (or, if such day is not a business
day, the immediately preceding day that was business day; such date the “Lock-In
Date”) and no sooner than the day 40 days prior to the Purchase Date.  Such Optionee may not terminate an Option in
part, but only in its entirety.  Upon
such termination, such Optionee’s share of funds on deposit in the Purchase
Account in respect of the terminated Option as of the Withdrawal Date shall be
paid to such Optionee as soon as administratively feasible after timely receipt
by the Plan Administrator of the Withdrawal Notice, and all rights and
privileges of the Optionee with respect to such Option shall terminate.  Such termination shall not affect the
Optionee’s rights and privileges with respect to other options granted in any
other Offering that are not otherwise terminated.

 

(f)                                        Termination of Employment

 

Except for the
circumstances set forth below, in the event that an Optionee’s employment shall
terminate during the term of any Option (and he is not re-employed by any other
Participating Subsidiary), an outstanding Option shall terminate immediately,
and as soon as administratively feasible thereafter, the Optionee shall receive
such Optionee’s share of the funds then on deposit in the Purchase Account;
provided, however that, subject to the Plan
Limitation:

 

(i)                        If any termination of employment is due to retirement (under his
employing Participating Subsidiary’s retirement plan), death or disability
during employment, the Optionee (or, as the case may be, his executor,
administrator, personal representative, heir or legatee) shall have the right
within three months after such retirement, death or disability (unless the
Lock-In Date shall first occur, in which event such right may not be exercised
the Lock-In Date) to exercise any Option to purchase a number of ADSs
(including fractional shares) that can be purchased by applying such Optionee’s
share of the funds in the Purchase Account in respect of such Option as of the
date of such purchase;  for purposes of
this subparagraph (i), an Optionee is not deemed to  have terminated employment if he is on a bona
fide leave of absence that does not exceed 3 months or, if such leave of
absence exceeds 3 months, the Optionee’s right to reemployment is provided by
statute or contract;

 

(ii)                     If any involuntary termination of employment by the Participating
Subsidiary is due to work force reduction or job elimination, the Optionee 

 

9

 

shall have the
right within three months after such termination (unless the Lock-In Date shall
first occur, in which event such right may not be exercised after the Lock-In
Date) to exercise any Option to purchase a number of ADSs (including fractional
shares) that can be purchased by applying such Optionee’s share of the funds in
the Purchase Account in respect of such Option as of the date of such purchase;
or

 

(iii)                  If any Optionee’s employment with the Company is terminated as a
result of a change in control of a Participating Subsidiary, such Optionee
shall have the right within three months after such change in control (unless
the Purchase Date shall first occur, in which event such right may be exercised
only on the Purchase Date) to exercise any Option to purchase a number of ADSs
(including fractional shares) that can be purchased by applying such Optionee’s
share of the funds in the Purchase Account in respect of such Option as of the
date of such change in control;  for
purposes of this subparagraph (iii), a change in control is deemed to have
occurred if there is a sale by Diageo of its interest in such Participating
Subsidiary where Diageo does not retain more than 50% of the voting power of
such Participating Subsidiary or Diageo (or any subsidiary of Diageo) sells all
or substantially all of the assets of such Participating Subsidiary and the
Optionee, as a result of such sale, does not continue in employment with the
Company;

 

provided further, that if an Optionee does not exercise an Option under any of the
foregoing subparagraphs (i), (ii), or (iii), as the case may be, such Option
shall (x) terminate upon the expiry of the applicable three month period
and the Optionee shall receive, as soon as administratively feasible after the
expiry of the three month period, such Optionee’s share of the funds in the
Purchase Account in respect of such Option or (y) in the event the Lock-In
Date occurs prior to the expiry of the applicable period, be exercised on the
Purchase Date in accordance with the terms of the Plan and the ADSs purchased
pursuant to such exercise shall be distributed to the Optionee in accordance
with the terms of this Plan.

 

(g)                                     Change in Control or Liquidation of Diageo

 

In any of the
events set out below (the occurrence of any such event shall be referred to
herein as a “Change in Control”), the Board may decide whether to continue
Optionees’ Deposit Amounts or to grant Optionees their respective  Settlement Amounts (as defined below).  If the Board elects to continue Optionees’
Deposit Amounts, Options shall be converted into rights to receive for each ADS
subject to the Option the securities, cash and/or property which the holder of
one ADS would be entitled to receive upon the Change in Control.

 

If the Board
elects to grant Optionees their respective Settlement Amounts, each Optionee
shall within 30 days after the Change in Control Date receive the Settlement
Amount in cash in respect of each Option held by such Optionee; provided that
upon receipt of the Settlement Amount the Option shall terminate 

 

10

 

and the
Optionee shall no longer have any claim to any funds in the Purchase Account in
respect of such Option; provided, further, that
if, in respect of an Option, the relevant Change in Control ADS Price (as
defined below) is less than the Discounted ADS Price, the Optionee shall
receive within 30 days after the Change in Control Date, in lieu of the
Settlement Amount, the Optionee’s share of the funds on deposit in the Purchase
Account in respect of such Option as of the Change in Control Date and such
Option shall terminate upon such receipt. 
The term “Settlement Amount” means, with respect to an Option, the
amount that would be realised by an Optionee if such Optionee exercised the
Option to purchase a number of ADSs (including fractional shares) that can be
purchased by applying the Optionee’s share of the funds in the Purchase Account
in respect of such Option as of the Change in Control Date and sold all such
ADSs immediately thereafter at the Change in Control ADS Price.

 

For purposes
of this Paragraph (g), a Change in Control shall be deemed to have occurred if:

 

(i)                       any person obtains Control (as defined below) of Diageo as a result
of making a general offer to acquire all the shares of Diageo of the same class
as the Ordinary Shares or a general offer to acquire the whole of the issued
share capital of Diageo which is made on a condition such that if it is
satisfied the person making the offer will have Control of Diageo (a “Takeover
Offer”);

 

(ii)                    a compromise or arrangement sanctioned by the court becomes effective
under section 425 of the Companies Act 1985 (a “Compromise”); or

 

(iii)                any
person serves a notice on the shareholders of Diageo under section 979 of the
Companies Act 2006 (relating to rights of 90% shareholders to buy out minority
shareholders) (a “Section 979 Notice”);

 

for purposes
of this sentence, the term “Control” means, with respect to Diageo, the power
of a person to secure that the affairs of Diageo are conducted in accordance
with the wishes of that person by means of direct or indirect ownership of
shares or possession of voting power of Diageo, by virtue of powers conferred
by the Memorandum and Articles of Association of Diageo or any other document
regulating Diageo or any other corporation or otherwise.  For purposes of this Paragraph (g), the term “Change
in Control ADS Price” means the higher of (i) the Fair Market Value of an
ADS on the Change in Control Date (or, if the Change in Control Date is not a
Trading Day, on the Trading Day immediately prior to such Change in Control
Date), or (ii) the price per share paid or proposed to be paid for the
Ordinary Shares of Diageo by a person making a Takeover Offer, by a person (if
any) who obtains Control of Diageo under a Compromise, or by a person serving a
Section 979 Notice, as the case may be, translated in to the US dollar
price per ADS by reference to the spot exchange rate on the Change in Control
Date and as adjusted for the then existing ratio between an ADS and the number
of Ordinary Shares represented thereby; 
the term “Change in Control Date” means:

 

11

 

(i)                      with respect to a Takeover Offer, the date on which the person
making the Takeover Offer has obtained Control of Diageo;

 

(ii)                  with respect to a Compromise, the date on which the Compromise
becomes effective; or

 

(iii)               with
respect to a Section 979 Notice, the date that is the first day of the
period during which the person serving the Section 979 Notice is entitled
and bound to acquire shares on the terms of the offer contained in such Section 979
Notice.

 

If an
effective resolution is passed for the voluntary winding up, or an order is
made for the compulsory winding up, of Diageo, the Board or the Committee shall
give notice thereof to all Optionees as soon as reasonably practicable and
thereupon each such Optionee shall forthwith and until 30 days thereafter have
the right (unless the Purchase Date shall first Occur, in which event such
right may be exercised only on the Purchase Date) to exercise any Option to
purchase a number of ADSs (including fractional shares) that can be purchased
by applying his share of the funds in the Purchase Account in respect of such
Option as of the date such notice by the Board or the Committee is given; provided that all unexercised Options shall terminate upon
the expiry of such 30-day period and the Optionee shall, as soon as
administratively feasible after the expiry of such 30-day period, receive his
share of the funds in the Purchase Account in respect of such unexercised
Option.

 

For Options
granted after 26 August 2008, in the event that an offer (as referred to
in paragraph (i) above) is made or a compromise or arrangement (as
referred to in paragraph (ii) above) is proposed which is expected to
result in the Company becoming controlled by a new company (the “New Company”),
at least 75% of the shares in the New Company are expected to be held by
substantially the same persons who immediately before the offer or proposal was
made were shareholders in the Company and the Board and the New Company agree
that this Rule should apply, then the offer or proposal shall not be a
Change of Control for the purposes of this paragraph (g) and an Option
shall be automatically converted into an Option which the Board determines is
equivalent to the Option it replaces except that it will be over shares in the
New Company or some other company and shall be converted in such a manner as to
ensure continued compliance with Section 423 of the Code and to ensure
that such Option shall continue to be exempt from Section 409A of the
Code.  The rules will apply to any
new Option granted under this paragraph as if references to shares were
references to shares over which the new Option is granted and references to the
Company were references to the company whose shares are subject to the new
Option.

 

(h)                                     Assignability of Options

 

No Option
granted hereunder shall be assignable or transferable except by will or by the
laws of descent and distribution, and shall be exercisable, during the lifetime
of the Optionee, only by the Optionee.

 

12

 

(i)              Excess Funds

 

In the event
the Optionee (or his executor, administrator, personal representative, heir or
legatee) exercises an Option and there remains any excess of such Optionee’s
share of the funds in the Purchase Account in respect of such Option over the
amount applied to the purchase of ADSs pursuant to such exercise, such excess
shall be paid to the Optionee as soon as administratively feasible after the
date of such purchase.

 

(j)              Restricted
Period

 

Upon exercise
of an Option, the Optionee shall be deemed to have consented to the deposit of
all of the ADSs purchased pursuant to such exercise (the “Deposited ADSs”) with
a designated brokerage account maintained by the Plan Administrator for such
Optionee’s benefit (the “Brokerage Account”) for a one year period after the
relevant Purchase Date (the “Restricted Period”).  The Deposited ADSs will be held in book-entry
form in the name of the Plan Administrator as nominee.  Except as set forth in Section 11(k) below,
an Optionee (including any Optionee whose employment has been terminated) will
not be permitted to withdraw such Optionee’s Deposited ADSs during the
Restricted Period:

 

(i)        if a subsequent disposition of
the withdrawn ADSs by the Optionee can be made without effecting such
disposition through the Brokerage Account;

 

(ii)       if such withdrawal resulted
from an exchange of the Deposited ADSs for property in a transaction to which Section 354,
355, 356, or 1036 (or so much of Section 1031 as relates to Section 1036)
of the Code applies;

 

(iii)      if such withdrawal resulted from
a transfer of the Deposited ADSs by the Optionee out of the Brokerage Account
into an account which is jointly owned by such Optionee and any other person
with the right of survivorship;

 

(iv)      if such withdrawal resulted from
a transfer of the Deposited ADSs to the Optionee’s spouse, or to a former
spouse where such transfer is incidental to a divorce; or

 

(v)       if such withdrawal resulted
from any other transfer of the Deposited ADSs out of the Brokerage Account that
would not be treated as a “disposition” as defined in Section 424(c) of
the Code.

 

(k)             Sale of
Deposited ADSs:  Termination of
Employment

 

An Optionee
may by written notice instruct the Plan Administrator to (i) sell such
Optionee’s Deposited ADSs through the Brokerage Account at any time and (ii) pay
over to such Optionee the proceeds (less any expenses and any applicable
withholding taxes, including, without limitation, wage and employment
withholding taxes) of such sale.  If the
employment of an Optionee is terminated (for any reason) and such termination
occurs subsequent to the 

 

13

 

Restricted
Period with respect to any Deposited ADSs, the Plan Administrator may require
such Optionee to withdraw such Deposited ADSs from the Brokerage Account at
such Optionee’s own expense.

 

(l)              Cessation of
Payroll Deductions

 

Notwithstanding
paragraph (d) of this Section 11, if the Plan Administrator is
notified by irrevocable written request from an Optionee (a “Cessation Notice”)
to stop making the payroll deductions provided for in such paragraph, then the
relevant Participating Subsidiary shall cease to make payroll deductions with
respect to the specified Option as soon as administratively feasible following
the receipt of the Cessation Notice, which Notice shall specify the name of the
Optionee and the Option or Options with respect to which the cessation of
payroll deductions relates.  An Optionee
shall not have the right to resume payroll deductions with respect to any
Option subject to the Cessation Notice and shall otherwise be subject to the
terms and conditions of this Plan with respect to such Option (other than
paragraph (b) of Section 8).

 

(m)            Tax Deductions

 

In any case
where the Company is obliged to account:

 

(i)        for any tax (or similar
liabilities) in any jurisdiction for which the Optionee in question is liable
by virtue of the exercise of an Option; or

 

(ii)       for any social security or
other contributions recoverable from the Optionee in question;

 

(together, the
“Tax Liability”) the Company may recover the tax from the Optionee in question
in such manner as the Board or the Committee shall think fit and (without
prejudice to the generality of the foregoing) no ADSs shall be issued or
transferred to that Optionee unless he has either:

 

(i)        made a payment to the Company
of an amount equal to the Tax Liability; or

 

(ii)       entered into arrangements with
the Company to secure that such a payment is made (whether by authorising the
Company to procure the sale of some or all of the ADSs on his behalf and
authorising the payment to the Company of the relevant amount of the proceeds
of sale or otherwise).

 

12.         Adjustment of Number of ADSs Subject to
Options

 

In the event
of any capitalisation or rights issue by Diageo or any consolidation,
subdivision, reduction or other variation of the share capital of Diageo, the
Committee shall make such adjustment, if any, as they may deem appropriate in
the number, kind and price of ADSs available for purchase under the Plan; provided however that Options granted pursuant to the Plan
shall not be adjusted in a manner that causes the Options to fail to qualify as
options issued pursuant to an “employee stock purchase plan” within the meaning
of Section 423 of the Code; and provided further,
any 

 

14

 

adjustment
made pursuant to this Section 12 shall be made on the basis that the
Purchase Price shall not be materially altered.

 

In addition,
no adjustment shall be made under this Section 12 to the extent that it
would result in an ADS being issued at less than the aggregate of the nominal
value of the Ordinary Shares which it represents.

 

13.         Rights as a Shareholder

 

No Optionee
shall have any rights as a shareholder of Diageo except as through and upon the
terms and conditions of the applicable depository agreement between Diageo and
the Depositary and until full payment has been made for ADSs purchased by such
Optionee hereunder.  Ordinary Shares
issued pursuant to the Plan shall rank pari passu in
all respects with all other Ordinary Shares then in issue, except as regards
any rights and dividends attaching by reference to a record date prior to the
date on which such ordinary shares are allotted, which shall be the Purchase
Date (or date of purchase pursuant to subparagraph (iii) of Paragraph (f),
or the last sentence of Paragraph (g), of Section 11 hereof, as the case
may be).

 

14.         Other Regulatory Actions

 

Prior to the
offering of any ADSs under the Plan, Diageo shall effect a registration of the
offering of the Ordinary Shares of Diageo reserved under the Plan in accordance
with the requirements of the United States Securities Act of 1933 and the rules and
regulations thereunder.  The expense of
such registration will be borne by Diageo.

 

Diageo shall
apply to the London Stock Exchange for the admission to the Official List of
all Ordinary Shares allotted pursuant to the exercise of an Option; provided that Ordinary Shares are listed on the London Stock
Exchange at the time of allotment.

 

Diageo shall
keep available sufficient unissued Ordinary Share capital to satisfy the
outstanding Options in respect of which Diageo intends to issue Ordinary Shares
and shall procure that sufficient ADSs are available for transfer to satisfy
the outstanding Options in respect of which Diageo does not intend to issue
Ordinary Shares.

 

15.         Amendments:  Termination of the Plan

 

The Board may
from time to time amend, modify, suspend, discontinue or terminate the Plan at
any time without notice; provided  that no
Optionee’s existing rights in respect of existing Options are adversely
affected thereby; provided, further
upon any such amendment or modification, all Optionees shall continue to have
the same rights and privileges in respect of existing Options; provided further that no amendment of the Plan shall be made
to the advantage of an Optionee to the provisions concerning eligibility,
individual or overall limits on participation, the basis for determining an
Optionees’ entitlement to and the terms of ADSs provided, adjustments to be
made in the event of a variation of share capital or the terms of this Section 15
unless such amendments shall have been approved by Diageo in general meeting
prior to the implementation of such amendment or such amendment is in the
opinion of the Board a minor amendment to benefit the administration of the
Plan, to take account of a change in legislation or maintain favourable tax,
exchange control or regulatory treatment for 

 

15

 

participants
in the Plan or for Diageo or for members of its group.  Upon termination of the Plan, if there remain
any funds in an Optionee’s Purchase Account, such amounts shall either be
refunded to such Optionee as soon as administratively feasible or equitably
applied to the purchase of whole ADSs (with any remaining funds refunded to the
Optionees as soon as administratively practicable).

 

16.         No Other Obligations

 

The receipt of
an Option pursuant to the Plan shall impose no obligation upon the Optionee to
purchase any ADSs covered by such Option. 
Nor shall the granting of an Option pursuant to the Plan constitute an
agreement or an understanding, express or implied, on the part of Diageo or any
Participating Subsidiary to employ the Optionee for any specified period.

 

17.         Notices

 

Any notice
which Diageo or any Optionee may be required or permitted to give to the other
shall be in writing and may be delivered personally or by mail, postage
prepaid, addressed: if to Diageo (or to the Plan Administrator), to such
address as Diageo, by notice to such Optionee, may designate in writing from
time to time; and, if to the Optionee, at his address as shown on the payroll
records of his employing Participating Subsidiary.

 

18.         Interpretation of Certain Terms

 

Where the
context so requires, reference herein to the masculine gender shall include the
feminine; and the meaning of terms in Paragraph (b) of Section 3,
Paragraph (g) of Section 11 and Section 12 shall be construed in
accordance with the United Kingdom meaning of such terms.

 

19.         Governing Law

 

The Plan and
all Options granted hereunder shall be construed in accordance with and
governed by the laws of the State of New York without reference to choice of
law principles and subject in all cases to Sections 423 and 424 of the Code and
the regulations thereunder.

 

16

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