1
STOCK AND ASSET PURCHASE AGREEMENT
AMONG
VIVENDI UNIVERSAL S.A.,
PERNOD RICARD S.A. AND
DIAGEO PLC
DATED AS OF DECEMBER 19, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.................................1
Section 1.1. Definitions................................................1
Section 1.2. Rules of Construction.....................................23
ARTICLE II PURCHASE, SALE AND ASSUMPTION OF LIABILITIES.....................23
Section 2.1. Purchase and Sale of the Transferred Shares, the
Transferred Minority Interests and the Transferred
Assets....................................................23
Section 2.2. Assumption of Liabilities.................................24
Section 2.3. Required Consents.........................................24
Section 2.4. Estimated Adjustment to Purchase Price....................25
Section 2.5. Serralles Right of First Refusal..........................25
Section 2.6. No Sale...................................................31
Section 2.7. Bianchi Right of First Refusal............................31
Section 2.8. Post-Closing Adjustment...................................32
ARTICLE III THE CLOSING.....................................................34
Section 3.1. Closing Date..............................................34
Section 3.2. Seller's Deliveries at Closing............................34
Section 3.3. Buyers' Deliveries at Closing.............................35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................35
Section 4.1. Due Organization, Good Standing and Power;
Subsidiaries..............................................35
Section 4.2. Organizational Documents..................................36
Section 4.3. Capitalization............................................36
Section 4.4. Authorization.............................................37
Section 4.5. Consents..................................................38
Section 4.6. Noncontravention..........................................38
Section 4.7. Title.....................................................39
Section 4.8. Financial Statements......................................39
Section 4.9. Litigation................................................39
Section 4.10. Compliance with Applicable Laws; Consents and Filings.....40
Section 4.11. Material Contracts........................................40
Section 4.12. Absence of Certain Changes or Events......................41
Section 4.13. Benefit Plans; Employees..................................41
Section 4.14. Environmental Matters.....................................43
Section 4.15. Intellectual Property.....................................43
Section 4.16. Brokers and Intermediaries................................44
Section 4.17. Real Property.............................................44
Section 4.18. Tax Matters...............................................44
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Section 4.19. Indebtedness..............................................44
Section 4.20. Business..................................................45
Section 4.21. Labor Matters.............................................45
Section 4.22. Vivendi Transaction.......................................45
Section 4.23. Product Recalls...........................................45
Section 4.24. Insurance.................................................45
Section 4.25. Residence of SCL..........................................45
Section 4.26. Maturing Stocks...........................................46
Section 4.27. No Other Representations..................................46
Section 4.28. Absence of Undisclosed Liabilities........................46
Section 4.29. DBC.......................................................46
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYERS......................46
Section 5.1. Due Organization, Good Standing and Power.................46
Section 5.2. Organizational Documents; Buyers..........................47
Section 5.3. Authorization.............................................47
Section 5.4. Consents..................................................47
Section 5.5. Noncontravention..........................................47
Section 5.6. Litigation................................................48
Section 5.7. Brokers and Intermediaries................................48
Section 5.8. Investment Intent.........................................48
Section 5.9. Financing.................................................48
Section 5.10. No Other Representations..................................48
ARTICLE VI COVENANTS........................................................48
Section 6.1. Conduct of the Business...................................48
Section 6.2. Access to Information.....................................51
Section 6.3. Further Action; Best Efforts..............................52
Section 6.4. Post-Closing Cooperation; Records.........................54
Section 6.5. Intercompany Accounts and Arrangements; Transition
Services..................................................55
Section 6.6. Agreement to Defend and Indemnify.........................56
Section 6.7. Public Announcements......................................56
Section 6.8. Dealings with Distributors and Brokers....................56
Section 6.9. Guarantees................................................56
Section 6.10. Indebtedness..............................................57
Section 6.11. Hedging Arrangements......................................58
Section 6.12. QUIDS and ACES............................................58
Section 6.13. Insurance.................................................59
Section 6.14. Retained Assets...........................................60
Section 6.15. Seagram Name..............................................60
Section 6.16. Chivas Entities...........................................61
Section 6.17. Further Assurances; Actions...............................61
Section 6.18. Payments..................................................62
Section 6.19. Resignations..............................................62
Section 6.20. GST/QST Registration......................................62
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ARTICLE VII TAX MATTERS.....................................................62
Section 7.1. Tax Indemnities...........................................62
Section 7.2. Refunds and Tax Benefits..................................64
Section 7.3. Contests..................................................64
Section 7.4. Preparation of Tax Returns................................65
Section 7.5. Cooperation and Exchange of Information...................66
Section 7.6. Tax Sharing Arrangements..................................66
Section 7.7. Indemnity Payments to be Treated as Purchase Price
Adjustments...............................................66
Section 7.8. Section 338(h)(10) Election...............................66
Section 7.9. Transfer Taxes and Sales Tax..............................67
Section 7.10. Accounts Receivable Election..............................69
Section 7.11. Remedy Exclusive..........................................69
ARTICLE VIII EMPLOYEE BENEFITS..............................................69
Section 8.1. Employees and Offers of Employment........................69
Section 8.2. Employment Agreements, Termination Agreements
Severance, and Repatriation/Relocation....................71
Section 8.3. Bonus; Retention Bonus....................................72
Section 8.4. Retiree Welfare Plans.....................................73
Section 8.5. Company Plans.............................................73
Section 8.6. 401(k) Plans..............................................74
Section 8.7. Defined Benefit Plans.....................................75
Section 8.8. International Pension Plans...............................76
Section 8.9. Non-Qualified Plans.......................................77
Section 8.10. WARN......................................................77
Section 8.11. COBRA.....................................................77
Section 8.12. Third Party Beneficiaries.................................78
Section 8.13. United Kingdom Employee Benefit Provisions................78
Section 8.14. Canadian Employee Benefit Provisions......................82
Section 8.15. Vivendi Options and Vivendi SARs..........................84
Section 8.16. Communications............................................84
ARTICLE IX CONDITIONS TO CLOSING............................................84
Section 9.1. Conditions Precedent to Obligations of the Parties........84
Section 9.2. Conditions Precedent to Obligation of the Buyers..........85
Section 9.3. Conditions Precedent to the Obligation of the Seller......86
ARTICLE X INDEMNIFICATION...................................................87
Section 10.1. Indemnification by the Seller.............................87
Section 10.2. Indemnification by the Buyers.............................88
Section 10.3. Indemnification Procedures................................88
Section 10.4. Remedies Exclusive........................................89
Section 10.5. Limitations Upon Remedies and Indemnification.............90
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Section 10.6. Indemnification Calculations..............................91
Section 10.7. Subrogation...............................................91
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER................................92
Section 11.1. Termination...............................................92
Section 11.2. Amendments and Waivers....................................93
ARTICLE XII MISCELLANEOUS...................................................93
Section 12.1. Notices...................................................93
Section 12.2. Schedules.................................................95
Section 12.3. Severability..............................................95
Section 12.4. Counterparts..............................................95
Section 12.5. Entire Agreement; No Third Party Beneficiaries............95
Section 12.6. Governing Law.............................................96
Section 12.7. Consent to Jurisdiction...................................96
Section 12.8. Assignment................................................96
Section 12.9. Expenses..................................................96
Section 12.10. Bulk Transfer Laws........................................97
Section 12.11. Breaches..................................................97
Section 12.12. Interest Act (Canada).....................................97
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SCHEDULES
SCHEDULE 1.1(a) Seller's Knowledge
SCHEDULE 1.1(b) Buyer A's Knowledge
SCHEDULE 1.1(c) Buyer B's Knowledge
SCHEDULE 1.1(d) Permitted Liens
SCHEDULE 1.1(e) Retained Assets
SCHEDULE 1.1(f) Assigned Contracts
SCHEDULE 1.1(g) Transferred Subsidiaries
SCHEDULE 2.1 Allocation of Purchase Price
SCHEDULE 2.5(b) Captain Morgan Trademarks
SCHEDULE 4.1(b) Exceptions to Due Organization, Good Standing and Power
SCHEDULE 4.1(c) Subsidiaries
SCHEDULE 4.1(d) Significant Subsidiaries
SCHEDULE 4.2 Organizational Documents
SCHEDULE 4.3(a) Transferred Shares
SCHEDULE 4.3(b) Subsidiary Shares
SCHEDULE 4.3(c) Other Equity Interests and Obligations of Spirits
Subsidiaries
SCHEDULE 4.3(d) Minority Interests
SCHEDULE 4.3(e) Indebtedness, Guarantees and Derivative Agreements
SCHEDULE 4.5 Seller Required Consents and Filings
SCHEDULE 4.6 Contraventions
SCHEDULE 4.8 Financial Statements
SCHEDULE 4.9 Litigation and Judgments
SCHEDULE 4.10(a) Non-Compliance
SCHEDULE 4.10(b) Consents and Filings
SCHEDULE 4.11(b) Non-Competition Provisions
SCHEDULE 4.11(c) Collective Bargaining Agreements
SCHEDULE 4.12 Certain Changes or Events
SCHEDULE 4.13(a) Company Plans
SCHEDULE 4.13(g) Pension Plan Liabilities
SCHEDULE 4.13(j)(i) Business Employees
SCHEDULE 4.13(j)(ii) Retained Employees
SCHEDULE 4.13(k) Unfunded Liabilities
SCHEDULE 4.15(a) Spirits IP
SCHEDULE 4.15(b) Restrictions on Use of Intellectual Property
SCHEDULE 4.17 Real Property
SCHEDULE 4.18 Tax Matters
SCHEDULE 4.19 JES Public Indebtedness
SCHEDULE 4.21 Labor Matters
SCHEDULE 4.23 Product Recalls
SCHEDULE 4.24 Insurance Policies
SCHEDULE 4.26 Bulk Scotch Maturing Stocks
SCHEDULE 4.29 Direct Brand Contributions
SCHEDULE 5.4 Buyers' Required Consents and Filings
SCHEDULE 6.1 Conduct of the Business
SCHEDULE 6.2 Brands
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SCHEDULE 6.9(a)(i) SCL Guarantees
SCHEDULE 6.9(c) Spirits Subsidiary Guarantees
SCHEDULE 6.10(a) Retained Indebtedness
SCHEDULE 7.8 Section 338 Subsidiaries
SCHEDULE 8.1 Transferred Employees
SCHEDULE 8.2(a) Employment Agreements and Termination Protection Agreements
SCHEDULE 8.2(c) Repatriation/Relocation
SCHEDULE 8.5(a) JES Company Plans Not Being Assumed by Seller
SCHEDULE 8.9 Top Hat Plans
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STOCK AND ASSET PURCHASE AGREEMENT dated as of December 19, 2000
(this "AGREEMENT"), among Vivendi Universal S.A., a French societe anonyme (the
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"SELLER"), Pernod Ricard S.A., a French societe anonyme ("BUYER A"), and Diageo
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Plc, a company incorporated under the laws of England and Wales ("BUYER B" and,
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together with Buyer A, the "BUYERS").
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WHEREAS, the Seller, the Asset Sale Subsidiaries (as defined herein)
and the Spirits Subsidiaries (as defined herein) are engaged in the Business (as
defined herein);
WHEREAS, the Buyers desire to purchase from the Seller and its
Affiliates and the Seller desires to sell and otherwise cause to be sold to the
Buyers the Business; and
WHEREAS, the Buyers and the Seller desire to make certain
representations, warranties and agreements in connection with the purchase and
sale of the Business and also to prescribe various conditions to the purchase
and sale of the Business.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein set forth and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
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SECTION 1.1 DEFINITIONS. As used in the Agreement, the following
terms shall have the following meanings:
"401(K) TRANSFER DATE" shall have the meaning set forth in
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Section 8.6(b)(ii).
"5-DAY AVERAGE SHARE PRICE" shall have the meaning set forth in
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Section 8.15(a).
"ACES" shall have the meaning set forth in Section 6.12(a).
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"AFFILIATE" shall mean, with respect to any Person, any other Person
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that directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person.
"AGREEMENT" shall have the meaning set forth in the heading of this
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Agreement.
"ALLIED" shall have the meaning set forth in Section 2.5(a).
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"ALLOCABLE NON-U.S. CAPTAIN MORGAN BRANDS AMOUNT" shall have the
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meaning set forth in Section 2.5(b)(i).
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"ALLOCABLE U.S. CAPTAIN MORGAN BRANDS AMOUNT" shall have the meaning
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set forth in Section 2.5(b)(i).
"APPLICABLE LAW" shall mean, with respect to any Person, any U.S.
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federal, state, local or foreign statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Entity, including common law,
applicable to such Person or any of its properties or assets.
"ASSET SALE SUBSIDIARIES" shall mean, collectively, SCL, Seagram
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SGPS, Sandeman, Seagram Distillers, House of Seagram UK, Seagram Australia and
Seagram N.Z.
"ASSIGNED CONTRACTS" shall have the meaning set forth in the
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definition of "Transferred Assets".
"ASSUMED EMPLOYEES" shall have the meaning set forth in Section
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8.1(b).
"ASSUMED LIABILITIES" shall mean, except as otherwise provided in
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this Agreement, all of the Liabilities (excluding for the avoidance of doubt the
Retained Liabilities), historical, current or future (to the extent related to
actions occurring prior to the Closing), known or unknown, of any Asset Sale
Subsidiary to the extent arising out of, resulting from or primarily related to
the Business or the Transferred Assets, including (and, as appropriately limited
by) the following:
(i) FINANCIAL STATEMENT LIABILITIES. All Liabilities of any Asset
---------------------------------
Sale Subsidiary reflected in the Financial Statements and all similar
Liabilities of any Asset Sale Subsidiary incurred, in the ordinary course of
business and not in violation of this Agreement, after June 30, 2000 in respect
of the Business that would have been reflected in the Financial Statements if in
existence on June 30, 2000;
(ii) LIABILITIES AFTER THE CLOSING DATE. All Liabilities of any
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Asset Sale Subsidiary to the extent arising out of, resulting from or relating
to the ownership by the Buyers of the Transferred Assets or the Spirits
Subsidiaries or the operation of the Business after the Closing Date;
(iii) ACTIONS. All Liabilities of any Asset Sale Subsidiary with
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respect to all actions, suits, proceedings, disputes, claims or investigations
to the extent arising out of, resulting from or primarily related to the
Business or the Transferred Assets, including all such Liabilities set forth on
Schedule 4.9;
(iv) TRANSFERRED LIABILITIES. All Liabilities of any Asset Sale
------------------------
Subsidiary to the extent arising out of, resulting from or primarily related to
any of the Transferred Assets;
(v) ENVIRONMENTAL LIABILITIES. All Liabilities of any Asset Sale
--------------------------
Subsidiary under Environmental Laws or with respect to Hazardous Materials to
the extent arising out of, resulting from or primarily related to the Business
or the Transferred Assets;
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(vi) ALCOHOL RELATED LIABILITIES. All Liabilities of any Asset Sale
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Subsidiary arising out of, resulting from or related to the production,
marketing, distribution and sale of alcoholic beverages, including product
liability actions or claims;
(vii) EMPLOYEE LIABILITIES. All Liabilities of any Asset Sale
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Subsidiary assumed by the Buyers pursuant to Article VIII in respect of employee
compensation and benefits for Business Employees assumed by the Buyers pursuant
to Article VIII;
(viii) RETURNED PRODUCTS. All Liabilities of any Asset Sale
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Subsidiary in respect of products of the Business returned for credit, refund or
replacement after the Closing Date; and
(ix) TAXES. All Liabilities of any Asset Sale Subsidiary relating to
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the Business in respect of Taxes other than to the extent the Seller is
obligated to indemnify Buyer under Section 7.1(a).
"AUS GST" means the goods and services tax as imposed by the AUS GST
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Law.
"AUS GST ACT" means A New Tax System (Goods and Services Tax) Act
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1999, or, if that Act does not exist for any reason, means any Act imposing or
relating to the imposition or administration of a goods and services tax in
Australia.
"AUS GST LAW" has the meaning given to that term in the AUS GST Act.
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"BASE PURCHASE PRICE" shall have the meaning set forth in Section
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2.1(b).
"BENEFITS CONTINUATION PERIOD" shall have the meaning set forth in
----------------------------
Section 8.1(b).
"BIANCHIS" shall have the meaning set forth in Section 2.7.
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"BIANCHI PURCHASE PRICE" shall have the meaning set forth in Section
----------------------
2.7.
"BIANCHI RIGHT OF FIRST REFUSAL" shall have the meaning set forth in
------------------------------
Section 2.7.
"BIANCHI SHAREHOLDERS AGREEMENT" shall have the meaning set forth in
------------------------------
Section 2.7.
"BIANCHI SHARES" shall have the meaning set forth in Section 2.7.
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"BULK CANADIAN MATURING STOCKS" shall mean unfinished and unblended
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and blended grain and malt whiskeys produced in Canada.
"BULK SCOTCH MATURING STOCKS" shall mean unfinished and unblended
---------------------------
and blended grain and malt whiskeys produced in Scotland.
"BUSINESS" shall mean the worldwide spirits, wines, spirit, wine and
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malt coolers, other malt beverages, fortified wines, non-alcoholic mixers and
other alcoholic and non-alcoholic beverages businesses (including the
production, marketing, promotion, distribution and
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sale of such mixers and beverages and operations (including retail operations)
in respect of such products) as conducted at the time in question by the Seller
and its Subsidiaries, including the Asset Sale Subsidiaries and the Spirits
Subsidiaries together with any activities reasonably and primarily ancillary
thereto, but excluding any such businesses or activities conducted by the Seller
prior to its acquisition of SCL.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday
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or other day on which commercial banks are required by law to be closed in
Montreal, Canada, New York, New York, Paris, France or London, England.
"BUSINESS EMPLOYEES" shall have the meaning set forth in Section
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4.13(a).
"BUYER A" shall have the meaning set forth in the heading of this
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Agreement.
"BUYER A CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
---------------------------------
agreement, dated as of September 8, 2000, between SCL and Buyer A.
"BUYER A PROPORTION" shall mean initially 38.6% and shall thereafter
------------------
be the percentage notified jointly in writing to the Seller by the Buyers;
provided that (i) at all times the sum of the Buyer A Proportion and the Buyer B
Proportion shall be equal to 100% and (ii) at no time shall the Buyer A
Proportion be less than 10%.
"BUYER B" shall have the meaning set forth in the heading of this
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Agreement.
"BUYER B CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
---------------------------------
agreement, dated as of September 8, 2000, between SCL and Buyer B.
"BUYER B PROPORTION" shall mean initially 61.4% and shall thereafter
------------------
be the percentage specified jointly in writing by the Buyers; provided that (i)
at all times the sum of the Buyer A Proportion and the Buyer B Proportion shall
be equal to 100% and (ii) at no time shall the Buyer B Proportion be less than
50%.
"BUYER COMMON SHARES" shall have the meaning set forth in Section
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8.15(a).
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in
-------------------------
Section 10.1(a).
"BUYER INTERNATIONAL PLANS" shall have the meaning set forth in
-------------------------
Section 8.8(a)(ii).
"BUYER MATERIAL ADVERSE EFFECT" shall mean any change or effect that
-----------------------------
is materially adverse to the ability of any Buyer to consummate the transactions
contemplated hereby.
"BUYERS" shall have the meaning set forth in the heading of this
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Agreement.
"BUYERS' ACTUARIES" shall mean the actuaries appointed by the Buyers
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and notified to the Seller for the purpose of Section 8.13.
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"BUYERS' BENEFIT PLANS" shall have the meaning set forth in Section
---------------------
8.1(c).
"BUYERS' CANADIAN PENSION PLANS" shall have the meaning set forth in
------------------------------
Section 8.14(b).
"CALCULATION" shall have the meaning set forth in Section 2.8(a).
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"CALIFORNIA GROWERS PENSION PLAN" shall have the meaning set forth
-------------------------------
in Section 8.7(b).
"CANADIAN DB PLANS" shall mean the following Canadian Pension
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Plans of SCL: the Retirement Plan for Salaried Employees of Joseph E.
Seagram & Sons, Limited and Affiliated Companies, the Pension Plan for
Certain Salaried Employees of Joseph E. Seagram & Sons, Limited and
Affiliated Companies, the Retirement Plan for Hourly-Rated Employees (C.A.W.)
of Joseph E. Seagram & Sons, Limited and Affiliated Companies, the Retirement
Plan for Certain Hourly-Rated Employees of Joseph E. Seagram & Sons, Limited
and Affiliated Companies, the Pension Plan for Hourly-Rated Employees of
Joseph E. Seagram & Sons, Limited and Affiliated Companies, and the Canadian
Supplemental Pension Plan of Joseph E. Seagram & Sons, Limited, as amended.
"CANADIAN PENSION PLANS" shall mean all Company Plans which are
----------------------
sponsored or maintained by SCL or any of the Spirits Subsidiaries for the
benefit of Business Employees and which are registered pension plans (as defined
in the Income Tax Act (Canada)) but, for greater certainty, excluding the Canada
Pension Plan, the Quebec Pension Plan and any similar plans, programs or
arrangements which are required to be maintained or contributed to by reason of
Applicable Laws.
"CAPTAIN MORGAN ASSETS" shall have the meaning set forth in Section
---------------------
2.5(g)(iii).
"CAPTAIN MORGAN DAMAGES" shall have the meaning set forth in Section
----------------------
2.5(c).
"CAPTAIN MORGAN LIABILITIES" shall have the meaning set forth in
--------------------------
Section 2.5(g)(vi).
"CAPTAIN MORGAN OPERATING AGREEMENT" shall have the meaning set
----------------------------------
forth in Section 2.5(b)(ii)(B)(II).
"CAPTAIN MORGAN RECORDS" shall have the meaning set forth in Section
----------------------
2.5(g)(i)(F).
"CASH EQUIVALENTS" shall mean, collectively, cash, bonds, notes and
----------------
commercial paper with a maturity of not more than six months which are rated at
least A1 by Standard & Poor's Corporation or at least P1 by Moody's Investor
Services Inc. and bonds, notes and commercial paper with a maturity of not more
than six months which are held and/or managed by financial institutions which
themselves are rated at least A1 by Standard & Poor's Corporation or at least P1
by Moody's Investors Services Inc. owned by the Seller and the Asset Sale
Subsidiaries.
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"CAUSE" shall have the meaning set forth in Section 8.15(a).
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"CHARTER DOCUMENTS" shall have the meaning set forth in Section 4.2.
-----------------
"CITRIC LITIGATION" shall have the meaning set forth in the
-----------------
definition of Retained Assets.
"CLAIM NOTICE" shall have the meaning set forth in 10.3(a).
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"CLOSING" shall have the meaning set forth in Section 3.1.
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"CLOSING DATE" shall have the meaning set forth in Section 3.1.
------------
"CLOSING NET INDEBTEDNESS" shall have the meaning set forth in
------------------------
Section 2.8(a).
"CLOSING NET WORKING CAPITAL" shall mean, as of the Closing, the
---------------------------
excess, if any, of all current assets over all current liabilities of (i) the
Spirits Subsidiaries and (ii) the Asset Sale Subsidiaries with respect to the
Business and which respectively constitute Transferred Assets and Assumed
Liabilities in each case in the following categories: inventories, receivables,
net of allowances, other current assets, accounts payable and accrued
liabilities determined in accordance with GAAP as modified by Schedule A and on
a basis consistent with the June 30 Balance Sheet and using the same foreign
currency exchange rates as used in the preparation of the June 30, 2000 Balance
Sheet.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
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"COMPANY PLANS" shall have the meaning set forth in Section 4.13(a).
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"COMPANY RETIREE WELFARE PLANS" shall have the meaning set forth in
-----------------------------
Section 8.4.
"COMPANY TOP HAT PLANS" shall have the meaning set forth in Section
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8.9.
"CONSENT" shall mean any waiver of a breach, consent, approval,
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qualification, license, permit, order or authorization.
"CONSENTING MEMBER" shall mean a person:
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(i) who is an Assumed Employee and a Member at the UK
Pension Transfer Date;
(ii) who begins to accrue retirement benefits as stated in
Section 8.13(b)(ii) under a New Plan as of the UK
Pension Transfer Date and who continues to accrue those
benefits at the Due Payment Date where the New Plan is
able to receive a transfer payment in respect of the
whole of the Member's benefits in the Seagram Distillers
Scheme; and
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(iii) from whom the Seagram Distillers Scheme receives a
signed request for a transfer payment in respect of his
past service rights to be made to a New Plan and who
does not, before the transfer payment is made, withdraw
his request or die or become entitled to the payment of
immediate benefits under the Seagram Distillers Scheme.
"CONTRACT" shall mean any contract, lease, permit, agreement, order
--------
or instrument, commitment or undertaking whether written or unwritten.
"CONTROL" (including its correlative meanings "controlled by" and
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"under common control with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or the policies
of any Person (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
"CONVERSION RATIO" shall have the meaning set forth in Section
----------------
8.15(a).
"CPA FIRM" shall have the meaning set forth in Section 2.8(d).
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"DEFAULT GST" means any additional AUS GST, penalty, interest or
-----------
other sum levied against the Seller under the AUS GST Law by reason of non or
late payment of the AUS GST payable in respect of the supply of any or all of
the assets of the Business.
"DE MINIMIS LOSSES" shall have the meaning set forth in Section
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10.5(a)(ii).
"DERIVATIVE TRANSACTIONS" shall mean any rate swap transactions,
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basis swap, forward rate transaction, commodity swap, commodity option, equity,
or equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or other similar transactions (including any option with respect
to any of the foregoing transactions) or any combination of the foregoing
transactions.
"DOJ" shall have the meaning set forth in Section 6.3(b).
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"DUE PAYMENT DATE" shall mean a date notified by the Seller to the
----------------
Buyers which is no later than one month after all the Transfer Conditions have
been satisfied, provided they then remain satisfied.
"ENVIRONMENTAL LAW" shall mean any Applicable Law in effect as of
-----------------
the date hereof relating to, or imposing standards regarding, the protection of
the environment or health and safety as affected by conditions in the
environment.
"ERISA" shall have the meaning set forth in Section 4.13(a).
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"ERISA AFFILIATES" shall have the meaning set forth in Section
----------------
8.6(b)(iii).
"ESTIMATED CLOSING NET INDEBTEDNESS" shall have the meaning set
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forth in Section 2.4.
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"ESTIMATED CLOSING NET INDEBTEDNESS SCHEDULE" shall have the meaning
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set forth in Section 2.4.
"EUROPEAN COMMUNITY MERGER CONTROL REGULATION" shall mean the
--------------------------------------------
European Union Council Regulation (EEC) No. 4064/89 of December 21, 1989 on the
control of concentrations between undertakings, as amended by the European
Council Regulation (EC) No. 1310/97 of June 30, 1997.
"FAIR MARKET VALUE" shall, for purposes of calculating Net
-----------------
Indebtedness, mean, as of a date of calculation, the value as determined based
where available on, quoted market prices in the most active trading market, or
otherwise calculated as the net present value of each obligation or Derivative
Transaction's future cash flows discounted at a rate equal to the prevailing
market rate of interest for instruments with substantially the same terms and
characteristics.
"FILING" shall mean any registration, declaration, notification or
------
filing.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section
--------------------
4.8.
"FORM S-8" shall have the meaning set forth in Section 8.15(d).
--------
"FTC" shall have the meaning set forth in Section 6.3(b).
---
"GAAP" shall mean those generally accepted accounting principles
----
used in the United States and recognized as such by the American Institute of
Certified Public Accountants or by the Financial Accounting Standards Board.
"GOVERNMENTAL ENTITY" shall mean any U.S. federal, state or local
-------------------
government or governmental entity or any foreign government or governmental
entity or any political or other subdivision, department or branch thereof or
any regulatory, administrative or other agency or any court or tribunal of any
of the foregoing.
"GST ACT" shall have the meaning set forth in Section 7.9(c).
-------
"GST AMOUNT" means in relation to an AUS Taxable Supply the amount
----------
of AUS GST for which the supplier is liable in respect of the AUS Taxable Supply
calculated on the basis that the value of the AUS Taxable Supply is the
consideration payable for the AUS Taxable Supply excluding any amount payable
pursuant to Section 7.9(d).
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic substance,
-------------------
material or waste defined, listed or classified as such in any Environmental
Law, including asbestos, petroleum, polychlorinated biphenyls and
urea-formaldehyde insulation.
"HOUSE OF SEAGRAM UK" shall mean The House of Seagram Limited, a
-------------------
U.K. limited company and an indirect wholly-owned Subsidiary of the Seller.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
-------
Act of 1976, as amended.
16
9
"ICA" shall mean the Investment Canada Act, R.S.C. 1985, C.28, as
---
amended.
"INCOME TAX" or "INCOME TAXES" shall mean any Tax based upon,
---------- ------------
measured by, or calculated with respect to income or profits (including any
capital gains Tax, minimum Tax and any Tax on items of Tax preference, but not
including sales, use, real or personal property, gross receipts, Transfer Taxes
or similar Taxes).
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
-----------------
10.3(a).
"INDEMNIFIED REPRESENTATIVE" shall have the meaning set forth in
--------------------------
Section 6.6(a).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
------------------
10.3(a).
"INDEMNITY AMOUNT" shall have the meaning set forth in Section
----------------
2.5(b)(i).
"INPUT TAX CREDIT" has the meaning given to that term by the AUS GST
----------------
Law.
"INSURED BUYER LOSS" shall have the meaning set forth in Section
------------------
6.13.
"INSURED SCL LOSS" shall have the meaning set forth in Section 6.13.
----------------
"INTELLECTUAL PROPERTY" shall mean (i) patents, (ii) trademarks,
---------------------
trade names, brand names, corporate names, domain names, logos, trade dress and
service marks, together with the goodwill of the business appurtenant thereto,
(iii) copyrights and copyright registrations, (iv) inventions, (v) rights
related to software, (vi) trade secrets and (vii) know-how, formulas and
processes, in each case, whether registered or unregistered and any
registrations and applications for registration thereof.
"INTERNATIONAL PENSION PLAN" shall have the meaning set forth in
--------------------------
Section 8.8(a).
"INVESTMENT CANADA UNDERTAKING" shall mean Schedule A attached to
------------------------------
the letter dated October 13, 2000 from Vivendi S.A., 3744531 Canada Inc. and
3045479 Nova Scotia Company addressed to the Minister Responsible for ICA
(Minister of Industry (Canada)).
"ITA" shall have the meaning set forth in Section 2.6.
---
"JES" shall mean Joseph E. Seagram & Sons, Inc., an Indiana
---
corporation and an indirect wholly-owned Subsidiary of the Seller.
"JES OFFERS TO PURCHASE" shall have the meaning set forth in Section
----------------------
4.19.
"JES PENSION PLAN" shall have the meaning set forth in Section
----------------
8.7(a).
"JES PUBLIC INDEBTEDNESS" shall have the meaning set forth in
-----------------------
Section 4.19.
"JUNE 30 BALANCE SHEET" shall have the meaning set forth in Section
---------------------
4.8.
"JUNE 30 NET WORKING CAPITAL" shall mean $2,141,000,000, subject to
---------------------------
adjustments as set forth on Schedule A.
17
10
"KIRIN MASTER AGREEMENT" shall have meaning set forth in Section
----------------------
6.1.
"KNOWLEDGE" shall mean (i) with respect to the Seller, the actual
---------
knowledge of the persons set forth on Schedule 1.1(a), (ii) with respect to
Buyer A, the actual knowledge of the persons set forth on Schedule 1.1(b) and
(iii) with respect to Buyer B, the actual knowledge of the persons set forth on
Schedule 1.1(c).
"LEASED PROPERTIES" shall have the meaning set forth in Section
-----------------
4.17.
"LIABILITIES" shall mean any and all debts, liabilities, commitments
-----------
and obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by GAAP or any
other accounting principles or standards to be reflected in financial statements
or disclosed in the notes thereto.
"LIBOR" shall mean the three-month London Inter Bank Offered Rate
-----
listed on the money tables in the Wall Street Journal, New York City edition.
"LIENS" shall mean, collectively, any liens, claims, security
-----
interests, options, rights of first refusal or first offer, charges or other
encumbrances.
"LOSSES" shall mean all losses, damages, liabilities (arising out
------
of, relating to or resulting from claims, charges, actions, suits, proceedings
or otherwise), costs and expenses, including interest, penalties, court costs
and reasonable attorneys' fees and expenses.
"MATERIAL ADVERSE EFFECT" shall mean any change or effect that is
-----------------------
materially adverse (i) to the ability of the Seller to consummate the
transactions contemplated hereby or (ii) to the financial condition, assets,
properties or results of operations of the Business, taken as a whole, other
than as a result of, arising from or relating to, directly or indirectly, (A)
changes in prevailing interest rates, (B) changes in general economic or market
conditions, (C) changes or developments in any industry in which the Business
operates, (D) compliance with any covenant set forth in this Agreement or any
Related Agreement (other than any covenant to act in the ordinary course of
business that restricts the conduct of the Business) and any actions required to
be taken pursuant to this Agreement to obtain any Consent under Applicable Law
for the consummation of the transactions contemplated by this Agreement or any
Related Agreement, (E) changes in customer demand, including seasonal changes
and (F) changes in Applicable Law or accounting regulations or principles or
interpretations thereof.
"MEMBER" shall mean, at any time or during any period specified in
------
Section 8.13, an active member of the Seagram Distillers Scheme (including a
member who is temporarily absent on maternity or paternal leave) excluding any
person who is a member for the purpose only of the lump sum death in service
benefit.
"MEMBER LIABILITIES" shall mean, in relation to a Canadian DB Plan,
------------------
the greater of going concern liabilities and solvency liabilities relating to
benefits accrued by Assumed Employees who are members of such Canadian DB Plan,
calculated as at the Closing Date using the actuarial methods and assumptions
used in preparing the last actuarial valuation report prepared in respect of
such Canadian DB Plan, except, where applicable, that an assumption of
18
11
future increases of 4%, or such other percentage as has been agreed upon through
collective bargaining, per annum from 2005 in the change in the Revenue Canada
maximum pension benefit should be added to reflect the corresponding plan
improvement that was made after the last valuation.
"MINORITY INTERESTS" shall have the meaning set forth in Section
------------------
4.3(d).
"MUMM" shall have the meaning set forth in the definition of
----
Retained Liabilities.
"NET INDEBTEDNESS" shall mean, as of any date, the amount equal to
----------------
(i) the sum of (A) the greater of the principal amount of or the Fair Market
Value of all outstanding indebtedness of the Spirits Subsidiaries for borrowed
money owed to third parties as of such date, including contractually required
prepayment costs (except to the extent that any such indebtedness has been
defeased), (B) the Fair Market Value of obligations in respect of all Derivative
Transactions of the Spirits Subsidiaries and Derivative Transactions included in
the Assumed Liabilities not discharged prior to the Closing in accordance with
Section 6.11 hereof, including any penalty and cancellation cost, (C) accrued
interest payable by the Spirits Subsidiaries, (D) all obligations of the Spirits
Subsidiaries and obligations included in the Assumed Liabilities under leases
capitalized in accordance with GAAP and (E) all intercompany indebtedness not
discharged prior to the Closing or purchased by the Buyers in accordance with
the terms of this Agreement owed by a Spirits Subsidiary to any Person other
than a Spirits Subsidiary or otherwise included in the Assumed Liabilities (to
the extent owed to any Person other than a Spirits Subsidiary) (other than
intercompany payables and loans for goods or services provided in the ordinary
course of business of the Business or for the services contemplated to continue
pursuant to the Transition Services Agreement) minus (ii) Cash Equivalents (but
shall exclude any proceeds in connection with the exercise of any rights of
first refusal, rights of first offer or similar rights, other than any proceeds
received in connection with the exercise of the Serralles ROFR, if any, or the
Bianchi Right of First Refusal) of the Spirits Subsidiaries; provided that Cash
Equivalents shall be net of any tax withholding or other costs and expenses
associated with the free distribution of such cash.
"NEW PLAN" shall mean the pension scheme or schemes described in
--------
Section 8.13(b) and, where the context permits, includes its or their trustees.
"NON-U.S. CAPTAIN MORGAN ASSETS" shall have the meaning set forth in
------------------------------
Section 2.5(g)(ii).
"NON-U.S. CAPTAIN MORGAN LIABILITIES" shall have the meaning set
-----------------------------------
forth in Section 2.5(g)(v).
"NORMAL BUSINESS HOURS" shall mean the hours Monday through
-----------------------
Friday between 9:00 a.m. and 5:00 p.m., local time, on any business day in
the place in question.
"NOTICE PERIOD" shall have the meaning set forth in Section 10.3(a).
-------------
"NZ GST" shall have the meaning set forth in Section 7.9(c).
------
19
12
"OTHER GOVERNMENTAL CONSENTS" shall have the meaning set forth in
---------------------------
Section 6.3(c).
"OWNED PROPERTIES" shall have the meaning set forth in Section 4.17.
----------------
"PATRON AGREEMENT" shall have the meaning set forth in the
----------------
definition of Retained Assets.
"PATRON GUARANTEE" shall have the meaning set forth in Section
----------------
6.17(b).
"PATRON MUTUAL RELEASE" shall have the meaning set forth in Section
---------------------
6.17(b).
"PAYMENT" means any amount payable under or in connection with this
-------
Agreement including any amount payable by way of indemnity, reimbursement or
otherwise and includes the provision of any non-monetary consideration.
"PENSION PLAN" shall have the meaning set forth in Section 4.13(f).
------------
"PERMITTED LIENS" shall mean, collectively, (i) any Liens disclosed
---------------
in the Financial Statements, (ii) Liens for Taxes, assessments and other
governmental charges not yet due and payable or, if due, not delinquent or being
contested in good faith by appropriate proceedings, (iii) mechanics', workmen's,
repairmen's, warehousemen's, landlord's, carriers' or other like Liens,
including all statutory Liens, arising or incurred in the ordinary course of
business, (iv) original purchase price conditional sales Contracts and equipment
leases with third parties entered into in the ordinary course of business, (v)
Liens in respect of pledges or deposits under worker's compensation laws or
similar legislation, unemployment insurance or other types of social security or
to secure the performance of statutory obligations, surety and appeal bonds,
bids, leases, government Contracts and similar obligations, (vi) Liens
attributable to the actions of the Buyers or their Affiliates, (vii) municipal
by-laws, development, facility cost sharing and servicing Contracts and zoning,
building or planning restrictions or regulations, (viii) Liens in respect of
easements, permits, licenses, rights-of-way and other similar restrictive
covenants or encroachments or irregularities in, or exceptions to, title and any
conditions with respect to real property are shown by a current survey or title
report or other public record, as of the date hereof, or that are not material
to the use or utility of the underlying asset, (ix) Liens disclosed on Schedule
1.1(d), (x) Liens and defects or irregularities in title or other encumbrances
that do not materially affect the value or use of the underlying asset and (xi)
restrictions on transfer arising under Applicable Law.
"PERSON" shall mean any individual, corporation, limited liability
------
company, partnership, joint venture, trust, estate, association, organization,
labor union, Governmental Entity or other entity.
"PREMIUM 401(K) PLAN" shall have the meaning set forth in Section
-------------------
8.6(a).
"PRE-CLOSING ENVIRONMENTAL CONDITION" shall mean any release of
-----------------------------------
Hazardous Materials or violation of, non-compliance with or liability under any
applicable Environmental Law prior to the Closing, but shall not include the
removal of any underground tank, electrical equipment containing polychlorinated
biphenyls or asbestos that complies with all applicable
20
13
Environmental Laws as of the Closing and has not otherwise released any
Hazardous Materials into the environment or any Transferred Asset or asset or
property of the Spirits Subsidiaries at or prior to the Closing.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.1(a).
--------------
"QUALIFIED RETIREE WELFARE BENEFIT EMPLOYEE" shall have the meaning
------------------------------------------
set forth in 8.4.
"QUIDS" shall have the meaning set forth in Section 6.12(b).
-----
"RECORDS" shall have the meaning set forth in Section 6.4(c).
-------
"REGULATORY AMOUNT" shall have the meaning set forth in Section
-----------------
8.14(d)(vii).
"RELATED AGREEMENTS" shall mean the following:
------------------
(i) ASSUMPTION AGREEMENT. An assumption agreement
------------------------
substantially in the form attached hereto as Exhibit I;
(ii) ASSIGNMENT AND BILL OF SALE. An assignment and bill of
------------------------------
sale substantially in the form attached hereto as Exhibit II;
(iii) TRADEMARK ASSIGNMENT. A trademark assignment substantially
--------------------
in the form attached hereto as Exhibit III;
(iv) PATENT ASSIGNMENT. A patent assignment substantially in
------------------
the form attached hereto as Exhibit IV;
(v) COPYRIGHT ASSIGNMENT. A copyright assignment substantially
--------------------
in the form attached hereto as Exhibit V;
(vi) TRANSITION SERVICES AGREEMENT. The Transition Services
-------------------------------
Agreement; and
(vii) CAPTAIN MORGAN OPERATING AGREEMENT. If applicable, the
-------------------------------------
Captain Morgan Operating Agreement.
"RESOLUTION PERIOD" shall have the meaning set forth in Section
-----------------
2.8(c).
"RESOLVED ITEMS" shall have the meaning set forth in Section 2.8(c).
--------------
"RETAINED ASSETS" shall mean (i) those assets listed on Schedule
---------------
1.1(e), including any and all of the Intellectual Property rights relating
solely thereto, (ii) all assets, properties, rights, privileges, claims and
agreements of every kind and nature, real and personal, tangible and intangible,
absolute or contingent which are held directly or indirectly by any Asset Sale
Subsidiary (other than the Transferred Shares, the Transferred Minority
Interests and any assets, properties, rights, privileges, claims and Contracts
of the Spirits Subsidiaries) not otherwise included in the definition of
Transferred Assets and (iii) the following:
21
14
(A) THIS AGREEMENT. The consideration delivered to the Seller
---------------
pursuant to this Agreement and all rights of the Seller, the Asset Sale
Subsidiaries and the Selling Subsidiaries, as applicable, under this Agreement
and the Related Agreements and any instruments delivered to any of them by the
Buyers pursuant to or in connection with this Agreement or any Related
Agreement;
(B) CASH EQUIVALENTS. All Cash Equivalents of any Asset Sale
-----------------
Subsidiary;
(C) TAX REFUNDS. Any refund of Taxes paid by the Seller or its
------------
Subsidiaries (including the Spirits Subsidiaries) other than refunds, if any, to
which the Buyers are entitled under Section 7.2(a);
(D) INSURANCE POLICIES. All insurance policies of SCL and its
-------------------
Subsidiaries (other than Seagram SGPS, Sandeman, Seagram Distillers, House of
Seagram UK, Seagram Australia, Seagram N.Z. and the Spirits Subsidiaries) and
all rights of the Seller and its Subsidiaries (other than Seagram SGPS,
Sandeman, Seagram Distillers, House of Seagram UK, Seagram Australia, Seagram
N.Z. and the Spirits Subsidiaries) of every nature and description under or
relating to such insurance policies;
(E) EMPLOYEE BENEFIT ASSETS. Those assets to be retained by SCL and
-----------------------
its Subsidiaries (other than Seagram SGPS, Sandeman, Seagram Distillers, House
of Seagram UK, Seagram Australia, Seagram N.Z. and the Spirits Subsidiaries) as
provided pursuant to Article VIII;
(F) SERRALLES RIGHT OF FIRST REFUSAL. All items deemed to be
-----------------------------------
Retained Assets pursuant to Section 2.5;
(G) OTHER THIRD PARTY RIGHTS. All items deemed to be Retained Assets
------------------------
pursuant to Section 2.6;
(H) INTERCOMPANY RECEIVABLES. All intercompany receivables due to
-------------------------
and loans from SCL or any of its Subsidiaries or Affiliates (other than the
Spirits Subsidiaries), on the one hand, from or to any Spirits Subsidiary or
Asset Sale Subsidiary, on the other hand, not settled on or prior to the Closing
or purchased by Buyers pursuant to Section 6.5(a);
(I) LITIGATION. (x) All payments or other compensation to be paid by
----------
St. Maarten Spirits Limited or St. Maarten Spirits, Ltd., to JES under the
Settlement and Forbearance Agreement, dated as of October 30, 2000, between JES,
SCL, JDC S.A. de C.V., JDC Services S.A. de C.V. and Tequila Don Julio S.A. de
C.V. d/b/a Tequila Tres Magueyes and Tequila Don Julio, on the one hand, and St.
Maarten Spirits Limited, St. Maarten Spirits, Ltd., International Spirit Company
Limited, Martin Crowley and John Paul Dejoria (the "PATRON AGREEMENT"), all
-----------------
rights and obligations of JES under the Patron Agreement (other than paragraph
13) and the related Judgment entered September 13, 2000 (including all rights to
sue and enforce such Judgment), all rights and obligations of SCL under the
Patron Agreement and all rights and obligations of JES under the Patron
Guarantee;
22
15
(y) All payments or other compensation to be received pursuant
to any distribution of the settlement funds established in the
litigation known as "In Re: Citric Acid Antitrust Litigation" pending
in the United States District Court for the Northern District of
California, MDL Docket No. 1092 and Master File No. C-95-2963 (CAL.)
("CITRIC LITIGATION"); and
-----------------
(J) U.S. TRADEMARK APPLICATION FOR THE EXPERIENCE IS EVERYTHING. Any
-----------------------------------------------------------
and all rights hereafter acquired, owned or controlled by JES, in United
States Trademark Application Serial No. 75/803703 THE EXPERIENCE IS
EVERYTHING.
"RETAINED EMPLOYEES" shall have the meaning set forth in Section
------------------
4.13(j).
"RETAINED LIABILITIES" shall mean, except as otherwise provided in
--------------------
this Agreement, the following:
(i) INDEBTEDNESS. All indebtedness for borrowed money and any
------------
guarantees and accrued interest in respect thereof of the Asset Sale
Subsidiaries, including indebtedness to SCL or any of its Subsidiaries or
Affiliates (other than indebtedness to a Spirits Subsidiary which shall be an
Assumed Liability);
(ii) RETAINED ASSETS. All Liabilities to the extent arising out of,
---------------
resulting from or related to the Retained Assets;
(iii) SERRALLES RIGHT OF FIRST REFUSAL. All items deemed to be
----------------------------------
Retained Liabilities pursuant to Section 2.5;
(iv) INTERCOMPANY PAYABLES AND LOANS. All intercompany payables due
--------------------------------
from and loans to SCL or any of its Subsidiaries or Affiliates (other than the
Spirits Subsidiaries), on the one hand, to or from any Spirits Subsidiary or
Asset Sale Subsidiary, on the other hand, not settled on or prior to the Closing
or taken into account in determining any net receivables or loans purchased by
the Buyers pursuant to Section 6.5(a);
(v) EMPLOYEE BENEFIT LIABILITIES. Those Liabilities to be retained
-----------------------------
by SCL and its Subsidiaries (other than the Spirits Subsidiaries) as provided
for by Article VIII;
(vi) All Liabilities to the extent arising out of, resulting from or
related to the Patron Agreement (other than paragraph 13 thereof with respect to
JES) and the Citric Litigation;
(vii) All Liabilities to the extent arising from, relating to or in
connection with the termination as a result of the Vivendi Transaction or the
transactions contemplated by this Agreement of the distribution relationship
between the Seller or any or its Affiliates, on the one hand, and (x) Vin &
Spirit Aktiebolag ("V&S") or its Affiliates, on the other hand, relating to the
---
ABSOLUT brand, and/or (y) G.H. Mumm et Cie, Societe Vinicole de Champagne
Successeur ("MUMM"), on the other hand, relating to the Mumm brand and
----
out-of-pocket expenses incurred pursuant to the requirements of Section 6.17(c),
except for any Liabilities to the extent arising from, relating to or in
connection with the failure of the Buyers and the Spirits Subsidiaries to comply
with Section 6.17(c) following the Closing; and
23
16
(viii) All Liabilities in respect of Taxes to the extent the Seller
is obligated to indemnify the Buyers under Section 7.1(a).
"RETIREE WELFARE BENEFITS" shall have the meaning set forth in
------------------------
Section 8.4.
"RETIREES" shall have the meaning set forth in Section 8.2(a).
--------
"SANDEMAN" shall mean Sandeman & Ca., S.A., a Portuguese limited
--------
liability joint stock company and an indirect wholly-owned Subsidiary of the
Seller.
"SCL" shall mean The Seagram Company Ltd., a Canadian corporation
---
and a wholly-owned Subsidiary of the Seller.
"SCL GUARANTEES" shall have the meaning set forth in Section 6.9(a).
--------------
"SCL INSURANCE POLICIES" shall have the meaning set forth in Section
----------------------
4.24.
"SEAGRAM 401(K) PLAN" shall have the meaning set forth in Section
-------------------
8.6(b)(i).
"SEAGRAM AUSTRALIA" shall mean Seagram Australia Holdings Pty.
-----------------
Limited, an Australian proprietary company limited by shares and an indirect
wholly-owned Subsidiary of the Seller.
"SEAGRAM DISTILLERS" shall mean Seagram Distillers Plc, a U.K.
-------------------
public limited company and an indirect wholly-owned Subsidiary of the Seller.
"SEAGRAM DISTILLERS SCHEME" shall mean the Seagram Distillers
-------------------------
Pension Scheme. Where the context requires, the "Seagram Distillers Scheme"
includes its trustees.
"SEAGRAM N.Z." shall mean Seagram (New Zealand) Limited, a New
------------
Zealand limited company and an indirect wholly-owned Subsidiary of the Seller.
"SEAGRAM SGPS" shall mean Seagram S.G.P.S., S.A., a Portuguese
-------------
limited liability joint stock company and an indirect wholly-owned Subsidiary
of the Seller.
"SEAGRAM UNION 401(K) PLAN" shall have the meaning set forth in
-------------------------
Section 8.6(a).
"SEC" shall mean the U.S. Securities and Exchange Commission.
---
"SEC REPORTS" shall mean all publicly available forms, reports,
-----------
statements and other documents filed with or submitted to the SEC on or after
January 1, 1999 and prior to the date hereof by SCL or JES, in each case,
excluding all exhibits except the financial statements set forth therein and
schedules related thereto and all financial statements incorporated by reference
therein.
"SECOND CLOSING" shall have the meaning set forth in Section
--------------
2.5(b)(ii).
"SECTION 338 ALLOCATION" shall have the meaning set forth in Section
----------------------
7.8(c).
24
17
"SECTION 338 ALLOCATION SCHEDULE" shall have the meaning set forth
-------------------------------
in Section 7.8(c).
"SECTION 338 ELECTIONS" shall have the meaning set forth in Section
---------------------
7.8(a).
"SECTION 338 FORMS" shall have the meaning set forth in Section
-----------------
7.8(b).
"SECTION 338 SUBSIDIARIES" shall have the meaning set forth in
------------------------
Section 7.8(a).
"SELLER" shall have the meaning set forth in the heading of this
------
Agreement.
"SELLER INTERNATIONAL PENSION PLAN" shall have the meaning set forth
---------------------------------
in Section 8.8(a)(ii).
"SELLER RETURNS" shall have the meaning set forth in Section 7.4(a).
--------------
"SELLING SUBSIDIARIES" shall have the meaning set forth in Section
--------------------
4.3(a).
"SERRALLES" shall have the meaning set forth in Section 2.5(a).
---------
"SERRALLES AGREEMENTS" shall mean: (i) the Supply Agreement, dated
--------------------
as of October 18, 1985, between Serralles and JES; (ii) the Letter Agreement,
dated as of April 30, 1986, between Serralles and JES; (iii) the Supplemental
Agreement to the Supply Agreement, dated as of April 30, 1986, between Serralles
and JES; (iv) the Amendment and Waiver to the Supply Agreement, dated as of
November 27, 1991, between Serralles and JES; (v) the Amendment to the Supply
Agreement, dated as of February 1, 1993, between Serralles and JES; (vi) the
Extension Agreement, dated as of November 9, 1999, between Serralles and JES;
(vii) the Bulk Rum Supply Agreement, dated as of November 9, 1999, between
Serralles and JES; (viii) the Confidentiality Agreement, dated as of May 31,
1985, between Serralles and SCL; (ix) the Asset Purchase Agreement, dated as of
October 1, 1985, between Puerto Rico Distillers, Inc. and Serralles; (x) the
Amendment to Asset Purchase Agreement, dated as of October 18, 1985, between
Puerto Rico Distillers, Inc. and Serralles; (xi) the Bottling Agreement, dated
as of October 18, 1985, between Serralles and JES; (xii) the Trademark License
Agreement, dated as of October 18, 1985, between Seagram United Kingdom Limited
(also trading as Captain Morgan Rum Distillers), Puerto Rico Distillers, Inc.,
JES and Serralles; (xiii) the Supplemental Agreement, dated as of October 1,
1985, between JES and Serralles; (xiv) the Supplemental Agreement, dated as of
October 1, 1985, between SCL and Serralles; (xv) the Release, dated as of
November 27, 1991, among Serralles, JES and Jim Beam Brands Co.; (xvi) the
Puerto Rico Distribution Agreement, dated as of October 18, 1985, between
Seagram Overseas Sales Company (a division of JES) and Serralles; (xvii) the
Trademark License Agreement, dated as of October 18, 1985, between JES, Puerto
Rico Distillers, Inc. and Serralles; (xviii) the Collection Agency Agreement,
dated as of October 18, 1985, between Puerto Rico Distillers, Inc. and
Serralles; (xix) the Letter Agreement, dated as of October 1, 1985, between JES
and Serralles; (xx) the Letter Agreement, dated as of October 1, 1985, between
Puerto Rico Distillers, Inc. and Serralles; and (xxi) the Agreement Concerning
Rum Bottling and Termination of U.S. Distribution Agreement and Bottling
Agreement, dated as of May 11, 1989, between JES and Serralles.
25
18
"SERRALLES ORDER" shall have the meaning set forth in Section
---------------
2.5(b)(i).
"SERRALLES ROFR" shall have the meaning set forth in Section 2.5(a).
--------------
"SERRALLES SELLER" shall have the meaning set forth in Section
----------------
2.5(b)(i).
"SERRALLES SUPPLY AGREEMENT" shall have the meaning set forth in
--------------------------
Section 2.5(a).
"SIGNIFICANT SUBSIDIARY" shall mean any direct or indirect
----------------------
Subsidiary (other than any Subsidiary which is not more than 50% directly or
indirectly owned by SCL) of SCL within the meaning of Rule 1-02 of Regulation
S-X of the SEC; provided that, for purposes of such definition, total assets and
income from continuing operations before income taxes, extraordinary items and
cumulative effect of change in accounting principle of SCL shall be deemed to be
the total assets and the income from continuing operations before income taxes,
extraordinary items and cumulative effect of change in accounting principle of
the Business as reflected in the Financial Statements.
"SHORTFALL" shall have the meaning set forth in Section 8.13(e)(iv).
---------
"SHORTFALL AMOUNT" shall have the meaning set forth in Section
----------------
2.5(c).
"SPIRITS IP" shall have the meaning set forth in Section 4.15(a).
----------
"SPIRITS PROPERTIES" shall have the meaning set forth in Section
------------------
4.17.
"SPIRITS SUBSIDIARIES" shall mean, collectively, the Transferred
--------------------
Subsidiaries and all Subsidiaries of the Transferred Subsidiaries as set forth
on Schedule 4.1(c).
"SPIRITS SUBSIDIARY GUARANTEES" shall have the meaning set forth in
-----------------------------
Section 6.9(c).
"SPIRITS SUBSIDIARY INSURANCE POLICIES" shall have the meaning set
-------------------------------------
forth in Section 4.24.
"ST. MAARTEN PARTIES" shall have the meaning set forth in Section
--------------------
6.17(b).
"STRADDLE RETURNS" shall have the meaning set forth in Section
----------------
7.4(a).
"STUB PERIOD" shall have the meaning set forth in Section 8.3(a).
-----------
"SUBSIDIARY" shall mean, as to any Person, any corporation,
----------
partnership or other entity of which shares of capital stock or other ownership
interests having ordinary voting power equal to more than 50% of all voting
power of such corporation, partnership or other entity or having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person or in which such Person has more
than 50% of the economic interest.
26
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"SUCCESSOR BUYER" shall have the meaning set forth in Section
---------------
8.1(b).
"SUCCESSOR DEFINED CONTRIBUTION PLAN" shall have the meaning set
-----------------------------------
forth in Section 8.6(b)(ii).
"TAX" or "TAXES" shall mean all federal, state, provincial, local,
--- -----
territorial and foreign income, profits, franchise, license, capital, capital
gains, transfer, ad valorem, wage, severance, occupation, import, custom, gross
receipts, payroll, sales, employment, use, property, real estate, excise, value
added, goods and services estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties, assessments or
governmental tax charges of any kind whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts.
"TAX AUTHORITY" shall mean any domestic, foreign, federal, national,
-------------
state, provincial, county or municipal or other local government, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
body exercising any taxing authority or any other authority exercising Tax
regulatory authority.
"TAX INVOICE" has the meaning given to that term by the AUS GST Law.
-----------
"TAX RETURN" shall mean all returns, declarations, reports, forms,
----------
claims for refund or information returns or statements relating to Taxes
(whether in tangible or electronic form), including any schedule or attachment
thereto, and including any amendment thereof filed or to be filed with any Tax
Authority in connection with the determination, assessment or collection of
Taxes.
"TAXABLE SUPPLY" has the meaning given to that term by the AUS GST
--------------
Law.
"TERMINEES" shall have the meaning set forth in Section 8.2(a).
---------
"THRESHOLD" shall have the meaning set forth in Section 10.5(a)(i).
---------
"TRANSFER CONDITIONS" shall mean all of the following:
-------------------
(i) The Buyer or the Successor Buyer has complied with the
requirements of Section 8.13(b) and the New Plan is as described in, and
complies with, Section 8.13(b)(ii);
(ii) The Board of Inland Revenue has given written approval to the
transfer of assets from the Seagram Distillers Scheme to the relevant New Plan
in respect of the Consenting Members and any condition to which that approval is
subject is satisfied;
(iii) The Seagram Distillers Scheme has received the signed requests
from the Consenting Members; and
(iv) The calculation of the UK Transfer Amount has become final and
binding as set out in Section 8.13.
27
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"TRANSFER TAXES" shall mean all sales, value added, goods and
--------------
services, excise, multi-stage, retail sales, use and land transfer taxes, stamp
duties, stamp duty reserve tax and any other similar taxes, duties, assessments
or governmental charges, together with all interest, penalties and additions
imposed with respect to such amounts.
"TRANSFERRED ASSETS" shall mean all of the right, title and interest
------------------
directly or indirectly held by the Asset Sale Subsidiaries in the assets,
properties, rights, privileges, goodwill, claims and agreements of every kind
and nature, real and personal, tangible and intangible, absolute or contingent,
known or unknown (other than any shares of capital stock or other equity
interests or voting securities, including the Transferred Shares, any
Transferred Minority Interests and any direct or indirect assets, properties,
rights, privileges, claims and agreements of the Transferred Subsidiaries or the
Transferred Minority Interests, and other than the Retained Assets) and which
primarily relate to, and form part of, the Business as of the Closing Date,
including the following:
(i) BALANCE SHEET ASSETS. The assets of the Asset Sale Subsidiaries
--------------------
reflected on the June 30 Balance Sheet (other than any such assets sold or
otherwise disposed of since June 30, 2000 in the ordinary course of business
consistent with past practice or as permitted by Section 6.1) and all similar
assets of the Asset Sale Subsidiaries acquired as part of the Business after
June 30, 2000, including:
(A) INVENTORY. (I) All finished goods inventory of the Business
---------
owned by the Asset Sale Subsidiaries (including any such inventory held by
their respective co-packers or brokers) wherever situated, (II) all
work-in-progress of the Business owned by the Asset Sale Subsidiaries
(including any such work-in-progress held by their respective co-packers),
(III) all raw materials of the Business of the Asset Sale Subsidiaries
(including any such materials held by their respective co-packers), (IV)
all unbranded alcohol or liquor products held for sale to third-party
bottlers or mixers of products similar to products sold by the Business of
the Asset Sale Subsidiaries; (V) all finished goods held by the Asset Sale
Subsidiaries for sale through retail establishments that are Transferred
Assets and (VI) all packaging and promotional materials of the Asset Sale
Subsidiaries to be used primarily in connection with the Business
(collectively, the "TRANSFERRED INVENTORY");
---------------------
(B) REAL PROPERTY. All real property and interests in real property
-------------
owned by the Asset Sale Subsidiaries (the "TRANSFERRED REAL PROPERTY") as
-------------------------
designated on Schedule 4.17, including all buildings, structures and other
improvements situated thereon (the "TRANSFERRED FACILITIES") and all
-----------------------
easements, privileges, rights-of-way and other rights pertaining to the
Transferred Real Property, to which any Asset Sale Subsidiary has title,
in each case, subject to Permitted Liens and those exceptions (i) set
forth on Schedule 4.17 or (ii) which would not have a Material Adverse
Effect;
(C) MACHINERY AND EQUIPMENT. All machinery, equipment and other
------------------------
items of personal property owned or leased by the Asset Sale Subsidiaries
which are used primarily in the Business or which are used in the Business
and are located at the Transferred Facilities or any real property or
facility leased primarily for the conduct of the Business as of the
Closing Date (the "TRANSFERRED MACHINERY") and all warranties
-----------------------
28
21
and guarantees, if any, express or implied, existing for the benefit of
the Asset Sale Subsidiaries in connection with the Transferred Machinery,
to the extent transferable; and
(D) INTELLECTUAL PROPERTY. All Intellectual Property which pertains
----------------------
to the "Seagram" name or is used primarily in the Business, including any
such Intellectual Property set forth on Schedule 4.15(a) (together with
the goodwill of the Business represented thereby), subject to (i) all
pre-existing licenses and other agreements concerning the same and (ii)
Section 6.15 (collectively, the "TRANSFERRED INTELLECTUAL PROPERTY");
---------------------------------
(ii) BUSINESS RECORDS. All Records in the possession of the Seller
-----------------
and the Asset Sale Subsidiaries relating to the Business, subject to the
provisions of Section 6.4 hereof;
(iii) CONTRACTS. All Contracts to which any Asset Sale Subsidiary is
---------
a party or by which any of them is bound that relate primarily to the Business,
including any confidentiality agreements that relate primarily to the Business,
including those agreements listed on Schedule 1.1(f) (collectively, the
"ASSIGNED CONTRACTS");
------------------
(iv) CONSENTS. To the extent transferable, all Consents issued to
--------
the Asset Sale Subsidiaries by any Governmental Entity which primarily relate to
the Business (collectively, the "TRANSFERRED CONSENTS");
--------------------
(v) EMPLOYEE BENEFIT ASSETS. Those assets to be transferred to the
------------------------
Buyers as provided for pursuant to Article VIII;
(vi) INSURANCE. All insurance proceeds and rights related to the
---------
Business with respect to events or occurrences prior to the Closing;
(vii) LITIGATION. The assets related to all causes of action,
----------
lawsuits, judgments, claims and demands of any nature that primarily relate to
the Business (other than any Retained Assets or Retained Liabilities); and
(viii) LICENSES. To the extent transferable, all licenses, permits
--------
and approvals of the Asset Sale Subsidiaries primarily relating to the Business.
"TRANSFERRED CONSENTS" shall have the meaning set forth in the
--------------------
definition of "Transferred Assets".
"TRANSFERRED EMPLOYEES" shall mean those Business Employees
---------------------
associated with the Transferred Assets or otherwise designated by the Buyers and
the Seller.
"TRANSFERRED FACILITIES" shall have the meaning set forth in the
----------------------
definition of "Transferred Assets".
"TRANSFERRED INTELLECTUAL PROPERTY" shall have the meaning set forth
---------------------------------
in the definition of "Transferred Assets".
29
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"TRANSFERRED INVENTORY" shall have the meaning set forth in the
---------------------
definition of "Transferred Assets".
"TRANSFERRED MACHINERY" shall have the meaning set forth in the
---------------------
definition of "Transferred Assets".
"TRANSFERRED MINORITY INTERESTS" shall have the meaning set forth in
------------------------------
Section 4.3(d).
"TRANSFERRED REAL PROPERTY" shall have the meaning set forth in the
-------------------------
definition of "Transferred Assets".
"TRANSFERRED SHARES" shall have the meaning set forth in Section
------------------
4.3(a).
"TRANSFERRED SUBSIDIARIES" shall mean those Subsidiaries of the
------------------------
applicable Selling Subsidiary as set forth on Schedule 1.1(g).
"TRANSITIONAL PERIOD" shall mean the period starting on the Closing
-------------------
Date and ending immediately before the UK Pension Transfer Date.
"UK PENSION TRANSFER DATE" shall mean in relation to any transfer to
------------------------
be made under Section 8.13 the date falling 12 months after the Closing Date or
any other date agreed by the Seller and the Buyers in writing.
"UK REORGANIZATION" shall mean the reorganization of certain of the
-----------------
United Kingdom companies owned by the Seller (including, without limitation,
Chivas Brothers Limited and Chivas 2000 Unlimited) occurring on or about October
27, 2000, details of which were disclosed in the data room.
"ULTRA AGREEMENTS" shall have the meaning set forth in Section
----------------
6.2(d).
"UNRESOLVED ITEMS" shall have the meaning set forth in Section
----------------
2.8(d).
"U.S. CAPTAIN MORGAN ASSETS" shall have the meaning set forth in
----------------------------
Section 2.5(g)(i).
"U.S. CAPTAIN MORGAN INTELLECTUAL PROPERTY" shall have the
----------------------------------------------
meaning set forth in Section 2.5(g)(i)(A).
"U.S. CAPTAIN MORGAN LIABILITIES" shall have the meaning set
----------------------------------
forth in Section 2.5(g)(iv).
"U.S. CAPTAIN MORGAN TRADEMARKS" shall have the meaning set forth
-------------------------------
in Section 2.5(g)(i)(A).
"V&S" shall have the meaning set forth in the definition of Retained
---
Liabilities.
"VALENTIN BIANCHI" shall have the meaning set forth in Section 2.7.
----------------
30
23
"VIVENDI TRANSACTION" shall have the meaning set forth in Section
-------------------
4.22.
"VIVENDI UNIVERSAL" shall mean Vivendi Universal S.A., a French
------------------
societe anonyme.
"V/U DESIGNEE" shall have the meaning set forth in Section 8.2(a).
------------
"WARN" shall have the meaning set forth in Section 8.10.
----
SECTION 1.2 RULES OF CONSTRUCTION. (a) References in this Agreement
---------------------
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
(b) Where an amount of money to be paid or calculated or used in
calculation under this Agreement is in or is calculated in a currency other than
U.S. Dollars, the amount shall be converted into U.S. Dollars on the basis of
the noon buying rate in New York City for cable transfers in foreign currencies
as certified for customs purposes by the Federal Reserve Bank of New York and
reported at the time such payment first becomes due or on the date of the
relevant calculation.
(c) For purposes of Article IV and Article VI hereof, the terms
"Retained Liabilities" and "Retained Assets" shall be deemed not to include
assets or liabilities deemed Retained Assets or Retained Liabilities, pursuant
to Article II hereof.
ARTICLE II
PURCHASE, SALE AND ASSUMPTION OF LIABILITIES
--------------------------------------------
SECTION 2.1 PURCHASE AND SALE OF THE TRANSFERRED SHARES, THE
------------------------------------------------------
TRANSFERRED MINORITY INTERESTS AND THE TRANSFERRED ASSETS. (a) Upon the terms
- ------------------------------------------------------------
and subject to the conditions of this Agreement, at the Closing, the Seller
shall or shall cause to be sold, conveyed, assigned, transferred and delivered
to the Buyers and the Buyers shall purchase and acquire all of the right, title
and interest of the Asset Sale Subsidiaries and the Selling Subsidiaries, as
applicable, in and to (i) the Transferred Shares, including all of the
outstanding capital stock of JES, (ii) the Transferred Minority Interests and
(iii) the Transferred Assets for an aggregate purchase price of U.S. Dollars
8,150,000,000, as such amount may be adjusted pursuant to Sections 2.4, 2.5,
2.6, 2.7 and/or 6.5 (the "PURCHASE PRICE") in the manner described herein. The
--------------
Purchase Price (plus the Assumed Liabilities) shall be allocated as set forth on
Schedule 2.1. Subject to any purchase price adjustment pursuant to Sections 2.4,
2.5, 2.6, 2.7 and/or 6.5, the Buyers and the Seller agree to report the purchase
and sale of the Transferred Shares, the
31
24
Transferred Minority Interests and the Transferred Assets on any Tax Returns in
accordance with the provisions of Schedule 2.1 as adjusted. Subject to the terms
hereof, at the Closing, Buyer A shall pay or cause to be paid to the Seller by
wire transfer of funds to an account of the Seller (being an account specified
by the Seller at least three Business Days prior to the Closing) an amount equal
to the product of (i) the Base Purchase Price and (ii) the Buyer A Proportion.
Subject to the terms hereof, at the Closing, Buyer B shall pay or cause to be
paid to the Seller by wire transfer of immediately available funds to an account
of the Seller (being an account specified by the Seller at least three Business
Days prior to the Closing) an amount equal to product of (i) the Base Purchase
Price and (ii) the Buyer B Proportion.
(b) The amount (the "BASE PURCHASE PRICE") to be paid at Closing by
--------------------
Buyer A and Buyer B in the aggregate shall be (i) an amount equal to the excess,
if any, of (A) U.S. Dollars 8,150,000,000 over (B) an amount equal to the
Estimated Closing Net Indebtedness and (ii) to the extent applicable, subject to
adjustment pursuant to Sections 2.5, 2.6 and/or 6.5.
SECTION 2.2 ASSUMPTION OF LIABILITIES. On the terms and subject to
-------------------------
the conditions of this Agreement, at the Closing, Buyer A and Buyer B in the
aggregate shall assume and undertake to pay, satisfy and discharge when due, all
of the Assumed Liabilities.
SECTION 2.3 REQUIRED CONSENTS. Except to the extent set forth in
------------------
Section 2.5, to the extent that the transactions contemplated hereby, including
the sale, conveyance, transfer, assignment or delivery or attempted sale,
conveyance, transfer, assignment or delivery to the Buyer of any Transferred
Shares, Transferred Minority Interests, Transferred Assets or any assets of the
Transferred Subsidiaries, (i) would require any Consent of any Governmental
Entity or other third party and such Consent shall not have been obtained prior
to the Closing and the receipt of such Consent is not required to satisfy any
condition precedent to the Closing set forth in Article IX or (ii) is subject to
any injunction, restraining order or decree of any nature of any Governmental
Entity which would not prevent any condition precedent to the Closing set forth
in Article IX from being satisfied, this Agreement shall not at Closing
constitute a sale, conveyance, transfer, assignment or delivery, or an attempted
sale, conveyance, transfer, assignment or delivery thereof, to such extent and
the applicable Transferred Shares, Transferred Minority Interests, Transferred
Assets and/or assets of the Transferred Subsidiaries shall be withheld from any
such sale, conveyance, transfer, assignment or delivery at the Closing without
any reduction in the Purchase Price and, if necessary and subject to the
provisions of this Section 2.3, shall be treated as a Retained Asset under this
Agreement. Following the Closing, the parties shall use their reasonable best
efforts, and shall cooperate with each other, to obtain promptly any such
Consent or to vacate, overturn or otherwise dissolve any such injunction, order
or decree. Pending or in the absence of any such Consent or the vacating,
overturning or other dissolution of any such injunction, order or decree, the
parties shall cooperate with each other in any reasonable and lawful
arrangements designed to provide to the Buyers all of the benefits and
Liabilities of any such Transferred Shares, Transferred Minority Interests,
Transferred Assets or assets of the Transferred Subsidiaries, including at the
direction of the Buyers, the disposition of any such Transferred Shares,
Transferred Minority Interests, Transferred Assets or assets of the Transferred
Subsidiaries to any other Person as if they had been conveyed at Closing and, to
the extent retaining assets, such assets shall be managed in all material
respects in the manner in which they have been historically managed. Following
the Closing, if any such Consent for the sale, conveyance, transfer, assignment
or delivery of any
32
25
such Transferred Shares, Transferred Minority Interests, Transferred Assets or
assets of the Transferred Subsidiaries is satisfied or obtained or if any such
injunction, order or decree is vacated, overturned or otherwise dissolved, the
Seller shall promptly cause to be conveyed, transferred, assigned and delivered
to the Buyers, or at the direction of the Buyers, such Transferred Shares,
Transferred Minority Interests, Transferred Assets or assets of the Transferred
Subsidiaries and the Seller agrees that it shall hold or shall cause to be held
any such Transferred Shares, Transferred Minority Interests, Transferred Assets
or assets of the Transferred Subsidiaries in accordance with the terms of this
Agreement (including all provisions that would otherwise expire as of the
Closing, including the provisions of Section 6.1).
SECTION 2.4 ESTIMATED ADJUSTMENT TO PURCHASE PRICE. At least five
----------------------------------------
Business Days prior to the Closing Date, the Seller shall deliver to the Buyer a
schedule (the "ESTIMATED CLOSING NET INDEBTEDNESS SCHEDULE") setting forth the
---------------------------------------------
amount reasonably estimated by the Seller to be the aggregate amount of the
Closing Net Indebtedness ("ESTIMATED CLOSING NET INDEBTEDNESS") certified by the
----------------------------------
Chief Financial Officer of the Seller. The Estimated Closing Net Indebtedness
Schedule shall also identify the obligor of each individual item of indebtedness
taken into account in the calculation.
SECTION 2.5 SERRALLES RIGHT OF FIRST REFUSAL. (a) The Seller hereby
--------------------------------
represents that the Supply Agreement dated as of October 18, 1985, as amended
through November 1999 and in effect on the date hereof (the "SERRALLES SUPPLY
-----------------
AGREEMENT"), between JES and Destileria Serralles, Inc. ("SERRALLES"), contains
- --------- ---------
a provision providing Serralles with a right of first refusal to purchase JES's
Captain Morgan rum trademarks under the circumstances set forth in the Serralles
Supply Agreement (the "SERRALLES ROFR"). Serralles and Allied Domecq Plc
---------------
("ALLIED") have made the following public statements with respect to the
------
Serralles ROFR:
"...they have concluded a strategic alliance regarding the acquisition of
Seagram's Captain Morgan rum brand. As part of its existing agreement to
supply rum to Seagram, Destileria Serralles has a right of first refusal
over any proposed transfer of the Captain Morgan brand, which is being
sold in connection with the sale of the Seagram spirits and wine business.
Destileria Serralles has undertaken to exercise this right in the event
that a party other than Allied Domecq gains control of the Seagram spirits
and wine business. In that event, the agreement between Allied Domecq and
Destileria Serralles provides Allied Domecq with the right to acquire the
Captain Morgan brand."
On December 4, 2000, Serralles filed a complaint in Puerto Rico against Seagram
and JES with respect to the Serralles ROFR. The Seller and the Buyers do not
agree that Serralles has the right to exercise the Serralles ROFR in connection
with the transactions contemplated by this Agreement and the Related Agreements.
In connection with such complaint or any other litigation or other adversary
proceeding which may result, the Buyers and the Seller wish (i) to provide
certainty and finality to the transactions contemplated by this Agreement and
the Related Agreements to the extent possible even in the event of an adverse
determination in any such litigation or other adversary proceeding addressing
the Serralles ROFR and (ii) to avoid the irreparable harm which the U.S. Captain
Morgan Assets would suffer if any of such assets, to the
33
26
extent independently identifiable, were disaggregated from JES and were required
to be retained by the Seller and operated on a stand-alone basis by the Seller
during the pendency of any such litigation or other adversary proceeding
(because the Captain Morgan Assets are not operated in a manner separate from
the Business and the Seller will no longer otherwise be in the alcohol beverage
business). The Buyers and the Seller have agreed that the provisions set forth
in this Section 2.5 shall apply in the event of the above litigation or other
adversary proceeding with respect to the Serralles ROFR.
(b) (i) Following the Closing, if a court or arbitrator issues a
final decision or order, subject to no further appellate review, granting
injunctive relief, specific performance or declaratory relief upholding the
right of Serralles to exercise the Serralles ROFR in connection with the
transactions contemplated by this Agreement and the Related Agreements (a
"SERRALLES ORDER"), and if Serralles exercises its rights and enters into a
----------------
binding agreement with the Seller, one of its Affiliates, Buyer B or one of its
Affiliates (a "SERRALLES SELLER") to purchase from the applicable Serralles
-----------------
Seller all or any portion of the applicable Captain Morgan Assets or otherwise
purchases from a Serralles Seller in accordance with the terms of any such final
decision or order, then the applicable Serralles Seller shall reasonably
promptly and in all events within the time required in the Serralles Order,
transfer or cause the transfer to Serralles (including, if appropriate, by first
transferring to the Seller or one of its Affiliates) of those Captain Morgan
Assets and Captain Morgan Liabilities and the Seller shall simultaneously pay to
Buyer B the Indemnity Amount (or, if the purchase amount is paid directly to
Buyer B, the amount by which the Indemnity Amount exceeds the amount so paid
subject to the dollar amount and percentage limitations in Section 2.5(c) or
Seller's obligation to assume any Shortfall Amount) together with 50% of any
amounts received by the Seller in excess of the Indemnity Amount, it being
understood that in connection with any such transfer by Buyer B or its
Affiliates they shall have no obligation to take any action, provide any
commitment, undertaking or indemnity, or make any representation or warranty,
other than the mere delivery of the applicable Captain Morgan Assets and Captain
Morgan Liabilities with a warranty that the Captain Morgan Assets are all of the
Captain Morgan Assets owned by the applicable Serralles Seller and they have
been operated in a manner consistent in all material respects with the manner in
which Seller operated the Captain Morgan Assets. The "INDEMNITY AMOUNT" shall
-----------------
mean that amount of the Purchase Price which Buyer B and the Seller have agreed
reflects (together with the assumption of the applicable Captain Morgan
Liabilities) the fair market value of the Captain Morgan Assets as of the date
hereof as follows: $1.638 Billion (the "ALLOCABLE U.S. CAPTAIN MORGAN BRANDS
--------------------------------------
AMOUNT") for the U.S. Captain Morgan Assets and the U.S. Captain Morgan
- ------
Liabilities and, to the extent applicable, $202 Million (the "ALLOCABLE NON-U.S.
------------------
CAPTAIN MORGAN BRANDS AMOUNT") for the non-U.S. Captain Morgan Assets and the
- ------------------------------
non-U.S. Captain Morgan Liabilities.
If for any reason Serralles does not enter into a binding agreement to purchase
the Captain Morgan Assets and Captain Morgan Liabilities subject to any
Serralles Order, or enters into such an agreement but does not consummate the
purchase of such Captain Morgan trademarks and other Captain Morgan Assets
pursuant to such agreement or does not otherwise consummate such a purchase,
then Buyer B shall not transfer or cause the transfer to Serralles, the Seller
or any of its Affiliates of the applicable Captain Morgan Assets and Captain
Morgan Liabilities and the Seller shall not make any of the Indemnity Amount or
other payments specified in this clause (b)(i) to Buyer B. If and to the extent
that a transaction between the applicable Serralles Seller
34
27
and Serralles does not provide for, or Serralles does not otherwise effect, the
assumption by Serralles of the Captain Morgan Liabilities, the applicable
Serralles Seller shall transfer to the Seller and the Seller shall assume such
Captain Morgan Liabilities. The Seller agrees to vigorously and in good faith
oppose any claim, order, decision or judgment which could lead to the imposition
of a Serralles Order and to use its best efforts to cause to be vacated,
overturned or reversed any such claim, order, decision or judgment.
(ii) At any time when the Closing would otherwise occur pursuant to
this Agreement but for the existence of an order of a court or arbitrator (A)
directly or indirectly preventing the Seller from transferring JES and/or other
Spirits Subsidiaries with all or part of the Captain Morgan Assets and Captain
Morgan Liabilities pursuant to this Agreement based on the Serralles ROFR or (B)
granting declaratory relief upholding the right of Serralles to exercise the
Serralles ROFR in connection with the transactions contemplated by this
Agreement and such right shall not have been waived by Serralles or the time
period in which such right may be exercised by Serralles shall not have expired,
then the parties shall, as promptly as reasonably practicable, take all steps
necessary to permit the Closing to occur as soon as reasonably practicable on
the terms and conditions herein, except as necessary to disaggregate from the
Business the relevant Captain Morgan Assets and Captain Morgan Liabilities as
set forth in such order. Such Captain Morgan Assets and Captain Morgan
Liabilities required to be disaggregated and not transferred shall, pending a
later second closing with Buyer B for the Captain Morgan Assets and Captain
Morgan Liabilities (a "SECOND CLOSING"), be retained by the Seller and shall be
--------------
treated as "Retained Assets" and "Retained Liabilities" hereunder, and the
Closing shall proceed as modified by this clause (ii), except that:
(I) the Base Purchase Price payable by Buyer B at the
Closing shall be reduced by the Allocable U.S. Captain Morgan
Brands Amount and, if the order provides that the Serralles ROFR
applies to the non-U.S. Captain Morgan trademarks, the Allocable
Non-U.S. Captain Morgan Brands Amount;
(II) in the case of clause (A), to the extent permitted if
there is a preliminary injunction, non-final order or non-final
permanent injunction and, in the case of clause (B), to prevent
irreparable harm to the Captain Morgan brands which would result
from any such brands being retained and operated by the Seller on a
stand-alone basis (because the Seller will no longer otherwise be in
the alcohol beverage business and the Captain Morgan Assets are not
operated in a manner separate from the Business), Buyer B, or its
applicable Affiliate, shall agree to operate and conduct the Captain
Morgan business (including all production, marketing and
distribution) and the Seller shall license the applicable Captain
Morgan trademarks to Buyer B, or its applicable Affiliate, pursuant
to an operating agreement providing that all of the profit relating
to the Captain Morgan Assets shall be for the account of Buyer B and
such other reasonable terms as Buyer B and the Seller shall agree
(the "CAPTAIN MORGAN OPERATING AGREEMENT") pending final disposition
----------------------------------
of any such litigation or other adversary proceeding or pending the
consummation of the purchase, if any, by Serralles or Buyer B of the
Captain Morgan Assets subject to any such order; and
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(III) in the case of clauses (A) and (B), if any such
preliminary injunction, non-final order or non-final permanent
injunction is subsequently vacated, overturned or otherwise
dissolved, and in the case of clause (B), if Serralles waives or
fails to exercise the Serralles ROFR, then as soon as reasonably
practicable thereafter a Second Closing shall occur at which the
Seller shall convey or cause to be conveyed to Buyer B the
applicable retained Captain Morgan Assets which were deemed in
accordance with this Section 2.5(b)(ii) to be "Retained Assets" and
Buyer B, or its applicable Affiliate, shall assume the applicable
Captain Morgan Liabilities which were deemed in accordance with this
Section 2.5(b)(ii) to be "Retained Liabilities", as the case may be,
and Buyer B, or its applicable Affiliate, shall pay to the Seller
the Allocable U.S. Captain Morgan Brands Amount and/or the Allocable
Non-U.S. Captain Morgan Brands Amount withheld from the original
Purchase Price in accordance with clause (I) above, as applicable.
In connection with any Closing as modified by this paragraph (ii) or any Second
Closing, the parties shall effect any such Closing or Second Closing and the
transactions contemplated hereby on terms and conditions and in a manner which
shall have as nearly as possible the equivalent effect as the transactions
otherwise provided for by this Agreement. It is understood and agreed that none
of the parties hereto shall be required to effect the Closing as modified in
this paragraph (ii), if an order of a court preventing Closing shall remain in
place following the mitigation efforts set forth in this paragraph (ii).
(iii) If (A) there is an order issued prior to the Closing
preventing Buyer B from acquiring all or part of the Captain Morgan trademarks
and other Captain Morgan Assets which is not vacated, overturned or otherwise
dissolved on or before June 30, 2002 or (B) there is any other litigation or
other adversary proceeding by Serralles or Allied seeking a decision or order
granting specific performance or declaratory relief upholding the right of
Serralles to exercise the Serralles ROFR in connection with the transactions
contemplated by this Agreement and the Related Agreements which continues or is
initiated after the Closing and which shall extend for a period ending on or
after June 30, 2002, then the Seller shall have the option in its sole
discretion to settle any such litigation or other adversary proceeding by
offering to sell to Serralles the Captain Morgan Assets and Captain Morgan
Liabilities upon such terms as the Seller may determine in its sole discretion
(and, for the avoidance of doubt, the Seller shall not be entitled to settle in
such manner or with similar effect prior to June 30, 2002); provided that the
Seller shall not be entitled to effect any such settlement if Buyer B notifies
the Seller that the Buyer Indemnified Parties have waived their right to
indemnification pursuant to Section 2.5(c) and if Buyer B agrees to indemnify
the Seller and its Affiliates for all Captain Morgan Damages which the Seller
and its Affiliates may incur and, in such case, Buyer B shall be entitled to
assume the direction of any such litigation or other adversary proceeding and
any settlement thereof. If Serralles accepts the Seller's offer to purchase the
Captain Morgan Assets and Captain Morgan Liabilities, as applicable, then (A)
the applicable Serralles Seller, shall transfer, or cause to be transferred, the
applicable Captain Morgan Assets to Serralles, (B) Serralles shall assume the
applicable Captain Morgan Liabilities and, if not, the Seller shall be
responsible for the Captain Morgan Liabilities, (C) any Captain Morgan Operating
Agreement between the Seller and Buyer B entered into pursuant to clause (II) of
paragraph (ii) above shall automatically terminate and (D) if any such transfer
is by Buyer B or any of its Affiliates (other than any
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transfer relating to the termination of the Operating Agreement pursuant to
clause (IV) of paragraph (ii) above), the Seller shall simultaneously refund to
Buyer B the Indemnity Amount together with 50% of any payment received by the
Seller for the Captain Morgan Assets and Captain Morgan Liabilities in excess of
the Indemnity Amount. If any such transfer to and assumption by Serralles in
settlement of any such litigation or other adversary proceeding is to occur
prior to the Closing, the Buyers shall nevertheless remain obligated to buy and
the Seller shall remain obligated to sell the Business on the terms and
conditions of this Agreement, except that (A) the applicable Captain Morgan
Assets to be purchased by Serralles shall be deemed to constitute and shall be
treated as "Retained Assets" hereunder and the applicable Captain Morgan
Liabilities to be assumed by Serralles shall be deemed to constitute and shall
be treated as "Retained Liabilities" hereunder and (B) the Purchase Price shall
be reduced by the Allocable U.S. Captain Morgan Brands Amount if the U.S.
Captain Morgan Assets are transferred to Serralles and shall be reduced by the
Allocable Non-U.S. Captain Morgan Brands Amount if the Non-U.S. Captain Morgan
Assets are also transferred to Serralles.
(c) LITIGATION AND INDEMNITY. The Seller shall be entitled to direct
------------------------
all litigation or other adversary proceedings, and, subject to Section
2.5(b)(iii), any settlement thereof, with respect to the Serralles ROFR, in
consultation with Buyer B and its counsel. Buyer B shall cooperate fully with
the Seller in any such litigation or other adversary proceedings, including
making the personnel and records of the Buyers and their Affiliates available as
needed for information or testimony and shall provide to Buyer A any written
material received in connection with such litigation that would not be
reasonably likely to have an adverse effect on attorney-client privilege. The
Seller shall indemnify the Buyer Indemnified Parties for all court costs and
reasonable attorneys' fees and expenses and all damages (including, penalties,
interest and lost profits, if any) awarded in litigation or other adversary
proceedings with Serralles and/or Allied or any other Person with respect to the
Serralles ROFR (collectively, "CAPTAIN MORGAN DAMAGES"), provided, however that
----------------------
Seller's liability for Captain Morgan Damages plus any Shortfall Amount shall
not exceed Two Hundred Fifty Million Dollars ($250,000,000). If the Captain
Morgan Damages and Shortfall Amount exceed Two Hundred Fifty Million Dollars
($250,000,000), Seller and Buyer B shall each be responsible for 50% of such
excess. The "SHORTFALL AMOUNT" shall mean the excess of (A) the Allocable U.S.
-----------------
Captain Morgan Brands Amount and/or Allocable Non-U.S. Captain Morgan Brands
Amount actually paid by Seller or deducted from the Base Purchase Price pursuant
to Section 2.5(b) in connection with a Serralles Order or other order in such
litigation over (B) the amount of consideration actually received by Seller upon
exercise of the Serralles ROFR in the event a court or arbitrator finally
determines, subject to no further appellate review, that the Serralles ROFR is
triggered by the transactions contemplated by this Agreement or the Related
Agreements. Notwithstanding any other provision of this Agreement or any Related
Agreement, the remedies set forth in this Section 2.5(c) shall be exclusive and
in lieu of any other remedies that may be available to the Buyer Indemnified
Parties under this Agreement or any other agreement or pursuant to any
statutory, common or civil law with respect to any Captain Morgan Damages or any
other Losses arising from or relating to, directly or indirectly, the Serralles
ROFR, any transfer of all or any Captain Morgan Assets and any assumption of
Captain Morgan Liabilities in connection with the Serralles ROFR or this Section
2.5 and any claim, litigation or other adversary proceeding in respect thereof.
The provisions of Sections 10.6 and 10.7 shall apply in connection with any
indemnification for Captain Morgan Damages.
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(d) Notwithstanding anything to the contrary herein, Seller shall
bear no indemnification responsibility or liability to the Buyers for any
actions taken by any of the Buyers or any of their Affiliates to cause JES or
any other Spirits Subsidiary to transfer any Captain Morgan Trademarks following
the Closing, except any transfer required in a Serralles Order or provided for
in Section 2.5.
(e) If a court or arbitrator issues a final order, subject to no
further appellate review, requiring a separate auction of the U.S. Captain
Morgan Assets or the Non-U.S. Captain Morgan Assets to effectuate the Serralles
ROFR, then so long as there has not been a material adverse change from the date
of this Agreement in the business, revenues or Liabilities of the U.S. Captain
Morgan Assets or the Non-U.S. Captain Morgan Assets, Buyer B agrees that it will
bid in such auction and agree to pay in cash at least U.S. Dollars 1,638,000,000
for the U.S. Captain Morgan Assets and at least U.S. Dollars 202,000,000 for the
Non-U.S. Captain Morgan Assets.
(f) To the extent any court issues any injunction or order with
respect to the Serralles ROFR which provides for the Serralles ROFR to apply to
a portion of the Captain Morgan Assets and Captain Morgan Liabilities not
otherwise specifically provided for in this Section 2.5, the provisions of this
Section 2.5 shall nevertheless continue to apply to the fullest extent possible
with such modifications, including to the amount of the Indemnity Amount, as the
Seller and Buyer B shall reasonably approve.
(g) (i) "U.S. CAPTAIN MORGAN ASSETS" shall mean all of the direct
-----------------------------
and indirect right, title and interest:
(A) in and to all United States trademarks, trade names, service
marks, brand names, corporate names and domain names (registered in the
generic top-level domains ".com", ".net" or ".org") containing the words
"Captain Morgan", or related U.S. marks listed under the "Captain Morgan"
trademarks on Schedule 2.5(c), either alone or in conjunction with other
words or any logos, trade dress or designs, whether registered or
unregistered, and any U.S. applications for registration thereof, together
with the goodwill of the Captain Morgan business in the United States
(including its territories) represented thereby (the "U.S. CAPTAIN MORGAN
-------------------
TRADEMARKS"), the formula for Captain Morgan rum which is distributed in
----------
the United States and any U.S. copyrights, whether registered or
unregistered, including any artwork and designs (including designs for
labels, packages and bottles) pertaining exclusively to the U.S. Captain
Morgan Trademarks (collectively, the "U.S. CAPTAIN MORGAN INTELLECTUAL
----------------------------------
PROPERTY");
--------
(B) all molds, dies, casts and advertising and promotional material
pertaining exclusively to U.S. Captain Morgan brands bearing the U.S.
Captain Morgan Trademarks and all materials used in connection with the
packaging of the U.S. Captain Morgan brands bearing the U.S. Captain
Morgan Trademarks;
(C) all finished goods inventories, work-in-progress, raw materials
and packaging materials bearing the U.S. Captain Morgan Trademarks or
which pertain exclusively to the U.S. Captain Morgan brands;
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(D) the Serralles Agreements;
(E) all Consents of Governmental Entities to the extent related to
the U.S. Captain Morgan Intellectual Property and U.S. Captain Morgan
brands; and
(F) all Records which primarily relate to the U.S. Captain Morgan
brands ("CAPTAIN MORGAN RECORDS").
----------------------
(ii) "NON-U.S. CAPTAIN MORGAN ASSETS" shall mean all assets of the
-------------------------------
type included within the categories of assets set forth in clauses (A), (B),
(C), (D) (E) and (F) of the definition of U.S. Captain Morgan Assets but which
do not pertain to the United States Captain Morgan trademarks or brands
distributed in the United States or with respect to all domain names registered
in country code top-level domains.
(iii) "CAPTAIN MORGAN ASSETS" shall mean, collectively, the U.S.
----------------------
Captain Morgan Assets and the Non-U.S. Captain Morgan Assets.
(iv) "U.S. CAPTAIN MORGAN LIABILITIES" shall mean all Liabilities
---------------------------------
which arise out of, result from or relate to the U.S. Captain Morgan Assets or
the distribution of Captain Morgan in the U.S.
(v) "NON-U.S. CAPTAIN MORGAN LIABILITIES" shall mean all Liabilities
-----------------------------------
which arise out of, result from or relate to the Non-U.S. Captain Morgan Assets.
(vi) "CAPTAIN MORGAN LIABILITIES" shall mean, collectively, the U.S.
--------------------------
Captain Morgan Liabilities and the Non-U.S. Captain Morgan Liabilities.
(vii) For purposes of this Section 2.5(g), "U.S." or "United States"
shall mean the United States, its territories (other than Puerto Rico and the
United States Virgin Islands) and its military or other governmental
installations throughout the world (other than in Puerto Rico.)
SECTION 2.6 NO SALE. If there is a sale of any property pursuant to
-------
Section 2.1 which is "taxable Canadian property" within the meaning of the
Income Tax Act (Canada) (the "ITA") by a Person who is a non-resident of Canada
---
for purposes of the ITA, such person will obtain a clearance certificate
pursuant to the provisions of Section 116 of the ITA in a form and with a
certificate limit acceptable to the Buyers acting reasonably.
SECTION 2.7 BIANCHI RIGHT OF FIRST REFUSAL. Pursuant to the
----------------------------------
Shareholders Agreement, dated as of July 28, 1980 (the "BIANCHI SHAREHOLDERS
---------------------
AGREEMENT"), among Joseph E. Seagram & Sons Limited, Enzo Arnaldo Bianchi,
- ---------
Alcides Jose Bianchi, Aurelio Stradella, Constanza Ana Bianchi de Stradella,
Maria del Carmen Cuarterola de Bianchi and Maria Delia Cesar de Bianchi (the
"BIANCHIS"), pursuant to which the joint venture company Valentin Bianchi y Cia
--------
S.A. ("VALENTIN BIANCHI") was formed, Joseph E. Seagram & Sons Limited, a
-----------------
Canadian corporation, has granted the Bianchis a right of first refusal (the
"BIANCHI RIGHT OF FIRST REFUSAL") with respect to any proposed sale of the
--------------------------------
Seller's 15% equity interest in Valentin Bianchi (the "BIANCHI SHARES").
---------------
Pursuant to the Bianchi Right of First Refusal, the Seller is required to notify
the Bianchis of its decision to sell the Bianchi Shares pursuant to this
Agreement, the name of the Buyer as the proposed purchaser and the conditions of
the proposed
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sale hereunder and the Bianchis are entitled to exercise their right to purchase
the Bianchi Shares within 30 days of the Seller's notice upon the same terms and
conditions that the Seller proposes to accept hereunder. The Seller agrees to
provide such notice within five days after the date hereof. The Seller and the
Buyers agree that the amount of the Purchase Price that is allocable to the
Bianchi Shares is, and, therefore, that the purchase price payable by the
Bianchis in connection with the exercise of the Bianchi Right of First Refusal
shall equal, U.S. Dollars 15,000,000 (the "BIANCHI PURCHASE PRICE"). The Seller
----------------------
shall promptly notify the Buyers of the waiver or exercise by the Bianchis of
the Bianchi Right of First Refusal or the expiration of the time period during
which the Bianchi Right of First Refusal may be exercised. If the Bianchis shall
have exercised the Bianchi Right of First Refusal, the parties hereto shall
nonetheless remain obligated to consummate the transactions contemplated hereby
on the terms and conditions set forth herein, except that (i) the Bianchi Shares
shall no longer constitute Transferred Shares and shall not be transferred to
the Buyers, (ii) the portion of the Purchase Price payable by Buyer B shall be
reduced by the amount of the Bianchi Purchase Price and (iii) the Bianchi
Purchase Price and the Bianchi Shares shall be deemed to constitute and shall be
treated as a "Retained Asset" hereunder.
SECTION 2.8 POST-CLOSING ADJUSTMENT. (a) As soon as practicable, but
-----------------------
in no event later than ninety (90) days following the Closing Date, the Buyers
(or any Affiliate of the Buyers) shall deliver to the Seller a calculation of
(i) the Net Indebtedness as of the Closing (the "CLOSING NET INDEBTEDNESS"),
-------------------------
(ii) the Closing Net Working Capital and (iii) the June 30 Net Working Capital
(together, the "CALCULATION").
-----------
(b) The Seller shall and shall cause its Affiliates to provide the
Buyers and their respective Affiliates and their authorized representatives
reasonable access during normal business hours and without significant
disruption of the business of the Seller, to all books, records and employees of
the Seller and its Affiliates having information that would assist the Buyers in
their preparation of the Calculation, including any external accountants of the
Seller and its Affiliates. In addition, the Seller shall use its reasonable best
efforts, and shall use its reasonable best efforts to cause its Affiliates, to
take all actions reasonably necessary to ensure that a full balance sheet
closing in respect of the Business can take place at the Closing Date as if such
date was a fiscal year end sufficient to allow financial statements to be
produced at that date similar, in all material respects, to those prepared for
SCL on a consolidated basis; provided that the Buyers shall reimburse the Seller
and its Affiliates for their reasonable out-of-pocket expenses incurred in
connection therewith.
(c) After receipt of the Calculation, the Seller shall have 45 days
to review the Calculation. During such period, the Buyers and their respective
Affiliates shall provide the Seller and its authorized representatives
reasonable access during normal business hours and without significant
disruption to the business of the Buyers and their respective Affiliates, to (i)
all books, records and employees of the Buyers and their respective Affiliates
having relevant information concerning the Calculation to the extent that such
information was used in the Calculation and (ii) each Buyer's accountants who
assisted the Buyers in preparing the Calculation. Unless the Seller delivers
written notice to the Buyers, on or prior to the 45th day after the delivery of
the Calculation stating that the Seller has objections to the Calculation and
describing any such objections, the Seller shall be deemed to have accepted and
agreed to the Calculation. In addition, any item included in the Calculation
which is not objected to by the
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Seller shall be deemed to be accepted by the Seller ("RESOLVED ITEMS") and any
---------------
amounts included within such item shall be deemed to be final, binding and
conclusive. If the Seller notifies the Buyers of its objections to the
Calculation, the Buyers and the Seller shall, within 10 days (or such longer
period as the parties may agree in writing) following such notice (the
"RESOLUTION PERIOD"), attempt to resolve their differences, and any written
------------------
resolution by them as to any disputed amounts shall be final, binding and
conclusive.
(d) Any amounts remaining in dispute at the conclusion of the
Resolution Period ("UNRESOLVED ITEMS") shall be submitted to Deloitte and Touche
----------------
LLP (such firm being referred to as the "CPA FIRM") or, if such firm shall be
---------
unable or unwilling to serve in such capacity or if the parties shall otherwise
mutually agree, such other nationally recognized firm of independent accountants
collectively agreed to by the Seller the Buyers (and, in such case, such firm
shall be deemed to be the CPA Firm), within 10 days after the expiration of the
Resolution Period. Each party agrees to execute, if requested by the CPA firm,
an engagement letter with the CPA Firm containing reasonably customary terms.
All fees and expenses relating to the work, if any, to be performed by the CPA
Firm shall be borne by the Seller and the Buyers based on the following
formulas, (i) the Seller shall pay a portion of such fees and expenses equal to
the total of such fees and expenses multiplied by a fraction, the numerator of
which is the dollar amount of Unresolved Items resolved in favor of the Buyers
and the denominator of which is the total dollar amount of Unresolved Items and
(ii) the Buyers shall pay a portion of such fees and expenses equal to the total
of such fees and expenses multiplied by a fraction, the numerator of which is
the dollar amount of Unresolved Items resolved in favor of the Seller and the
denominator of which is the total dollar amount of Unresolved Items. The CPA
Firm shall act as an arbitrator and not as an expert to determine, based on the
provisions of this Section 2.8, only the Unresolved Items. The CPA Firm's
determination of the Unresolved Items shall be made within 30 days after the
submission of the Unresolved Items to the CPA Firm and, together with a
calculation of the Closing Net Indebtedness and Closing Net Working Capital
based upon the amount of Resolved Items and the CPA Firm's determinations of the
Unresolved Items, shall be set forth in a written statement delivered to the
Seller and the Buyers by the CPA Firm and shall be final, binding and conclusive
on the parties unless there shall be manifest error. In no event shall the CPA
Firm's determination of the Unresolved Items be for an amount which is outside
the range of the Seller's and the Buyers' disagreement.
(e) Within five (5) Business Days following either (i) an agreement
or deemed agreement by the Buyers and the Seller as to the Closing Net
Indebtedness, the Closing Net Working Capital and the June 30 Net Working
Capital or (ii) the CPA Firm's determination of the Closing Net Indebtedness and
Closing Net Working Capital, (A) if the Estimated Closing Net Indebtedness is
greater than the Closing Net Indebtedness, then, the Buyers based on the Buyer A
Proportion and the Buyer B Proportion shall pay to the Seller the amount of any
such excess and, if the Closing Net Indebtedness is greater than the Estimated
Closing Net Indebtedness, then, the Seller shall pay to the Buyers based on the
Buyer A Proportion and the Buyer B Proportion the amount of any such excess and
(B) if the Closing Net Working Capital is greater than the June 30 Net Working
Capital, the Buyers based on the Buyer A Proportion and the Buyer B Proportion
shall pay the Seller the amount of any such excess and, if the Closing Net
Working Capital is less than the June 30 Net Working Capital, the Seller shall
pay the Buyers based on the Buyer A Proportion and the Buyer B Proportion the
amount of any such
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shortfall; provided that any amounts to be paid pursuant to clauses (A) and (B)
shall be offset against each other if applicable.
(f) Any payments made pursuant to this Section 2.8 shall be made by
wire transfer of immediately available funds in U.S. Dollars to an account
indicated by the party to receive such funds and shall be accompanied by
interest at the LIBOR Rate calculated on the basis of a year of 360 days for the
actual number of days elapsed, accrued from the Closing Date up to and including
the date of payment.
(g) Any payments made in respect of any adjustment pursuant to this
Section 2.8 shall be treated as adjustments to the Purchase Price.
ARTICLE III
THE CLOSING
SECTION 3.1 CLOSING DATE. The closing of the transactions
--------------
contemplated by this Agreement other than Sections 2.5 and 2.6 (the "CLOSING")
-------
shall take place at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York at 10:00 a.m., local time, on the fifth Business Day
following the satisfaction or due waiver of the conditions set forth in Article
IX, or at such other time, date and place as shall be fixed by agreement of the
Seller and the Buyers (the date on which the Closing actually occurs being
hereinafter referred to as the "CLOSING DATE") and the Closing shall be deemed
-------------
to have occurred at 11:59 p.m. on the Closing Date.
SECTION 3.2 SELLER'S DELIVERIES AT CLOSING. At the Closing, the
--------------------------------
Seller shall deliver, or cause to be delivered, to the Buyers the following
items:
(i) SHARE CERTIFICATES. Certificates representing the Transferred
-------------------
Shares and Transferred Minority Interests, duly endorsed in blank or accompanied
by stock powers duly executed in blank or in favor of the applicable Buyer or
such other assignments, transfer forms, endorsements or other instruments or
documents of transfer as required by the jurisdiction of organization of each
Transferred Subsidiary and Transferred Minority Interest in form and substance
reasonably acceptable to the Buyers;
(ii) CLOSING CONDITIONS. The documents specified in clauses (iii),
-------------------
(iv) and (v) of Section 9.2;
(iii) FIRPTA CERTIFICATE. To the extent available, a certificate
-------------------
claiming exemption from withholding tax under Section 1445 of the Internal
Revenue Code of 1986, as amended, with respect to the transfer of stock of any
U.S. corporation or any U.S. real property interest; and
(iv) ADDITIONAL TRANSFERS. Such additional instruments of transfer
--------------------
as the Seller and the Buyers shall reasonably agree.
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SECTION 3.3 BUYERS' DELIVERIES AT CLOSING. At the Closing, the
-------------------------------
Buyers, as applicable, shall deliver or cause to be delivered the following
items to the Seller:
(i) THE PURCHASE PRICE. The Base Purchase Price in the manner set
-------------------
forth in Section 2.1;
(ii) CLOSING CONDITIONS. The documents specified in clauses (iii),
-------------------
(iv) and (v) of Section 9.3; and
(iii) ADDITIONAL TRANSFERS. Such additional instruments of transfer
--------------------
as the Seller and the Buyers shall reasonably agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyers as of the
date hereof and as of the Closing, except (i) as disclosed in the SEC Reports,
(ii) as set forth on the applicable Schedule attached to this Agreement
(provided that the listing of an item on one Schedule shall be deemed to be a
listing on each other Schedule and to apply to any other representation and
warranty or covenant of the Seller in this Agreement or any Related Agreement to
the extent that it is reasonably apparent from a reading of such disclosure item
that it would also qualify or apply to such other representation and warranty or
covenant), (iii) as contemplated by this Agreement or any Related Agreement,
(iv) with respect to any Retained Assets or Retained Liabilities (other than in
connection with Section 4.7(c)) or (v) to the extent arising from or in
connection with the failure of the Buyers to approve entering into by December
31, 2000, those contracts contemplated by the Kirin Master Agreement,
substantially in the form previously delivered to the Buyers prior to the date
of this Agreement as follows:
SECTION 4.1. DUE ORGANIZATION, GOOD STANDING AND POWER;
---------------------------------------------------
SUBSIDIARIES. (a) SELLER, THE ASSET SALE SUBSIDIARIES AND SELLING SUBSIDIARIES.
- --------------------------------------------------------------------------------
The Seller and each of the Asset Sale Subsidiaries and the Selling Subsidiaries
is duly organized, validly existing and, to the extent applicable, in good
standing under the laws of its jurisdiction of organization and has all
corporate or other organizational power and authority necessary to own, lease
and operate its properties, to carry on the Business as currently conducted by
it and, to the extent applicable, to execute and deliver this Agreement and/or
any Related Agreements and to consummate the transactions contemplated hereby
and thereby. With respect to the Business, the Seller and each of the Asset Sale
Subsidiaries and the Selling Subsidiaries is duly qualified and in good standing
to do business in each jurisdiction in which the conduct of the Business by it
makes such qualification or good standing necessary, except for any failures to
be so qualified or in good standing which would not reasonably be likely to
have, individually or in the aggregate, a Material Adverse Effect. Each of the
Asset Sale Subsidiaries and the Selling Subsidiaries is a direct or indirect
Subsidiary of the Seller.
(b) SPIRITS SUBSIDIARIES. Except as set forth on Schedule 4.1(b),
---------------------
each of the Spirits Subsidiaries is duly organized, validly existing and, to the
extent applicable, in good
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standing under the laws of its jurisdiction of organization and has all
corporate or other organizational power and authority necessary to own, lease
and operate its properties and to carry on the Business as currently conducted
by it, except for any failures to possess any such power or authority which
would not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect. Each of the Spirits Subsidiaries is duly qualified and,
to the extent applicable, in good standing to do business in each jurisdiction
in which the conduct of the Business by it makes such qualification or good
standing necessary, except for any failures to be so qualified or in good
standing which would not reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect.
(c) SUBSIDIARIES OF THE TRANSFERRED SUBSIDIARIES. Schedule 4.1(c)
---------------------------------------------
sets forth a complete list of all Subsidiaries of the Transferred Subsidiaries.
(d) SIGNIFICANT SUBSIDIARIES. Schedule 4.1(d) sets forth a complete
------------------------
list of all Spirits Subsidiaries which constitute Significant Subsidiaries.
SECTION 4.2. ORGANIZATIONAL DOCUMENTS. Except as set forth on
-------------------------
Schedule 4.2, prior to the date hereof, the Seller has made available to the
Buyers or their representatives a complete and correct copy of the certificate
of incorporation and by-laws or other comparable charter and organizational
documents (collectively, "CHARTER DOCUMENTS") of each of the Spirits
-------------------
Subsidiaries, in each case, as in effect as of the date hereof. Such Charter
Documents are in full force and effect and none of the Spirits Subsidiaries is
in violation of any provision of its Charter Documents, except (i) as set forth
in Schedule 4.2 and (ii) for any failures to be in full force or effect or any
violation which would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 4.3. CAPITALIZATION. (a) TRANSFERRED SHARES. Schedule 4.3(a)
-------------- ------------------
sets forth for each of the Transferred Subsidiaries (i) its authorized capital
stock or other equity interests, (ii) the total number of its issued and
outstanding shares of capital stock or other equity interests and (iii) the
number of its issued and outstanding shares of capital stock or other equity
interests directly held by the applicable Subsidiary of the Seller
(collectively, the "SELLING SUBSIDIARIES") as set forth on Schedule 4.3(a)
---------------------
(collectively, the "TRANSFERRED SHARES"). Except as set forth on Schedule
-------------------
4.3(a), all of the Transferred Shares are, to the extent applicable under the
laws of the jurisdiction of organization of the applicable Transferred
Subsidiary, validly issued, fully paid and non-assessable and were issued free
of preemptive or similar rights. Except (i) for directors' qualifying shares or
other similar equity interests or (ii) for shares or other equity interests held
by nominees to the extent required under the laws of the jurisdiction of
organization of the applicable Transferred Subsidiary on, all of the Transferred
Shares are directly owned by the Seller or the applicable Selling Subsidiary as
set forth on Schedule 4.3(a) free and clear of all Liens.
(b) SUBSIDIARY SHARES. Except (i) for director qualifying shares or
-----------------
other equity interests, (ii) for shares or other equity interests held by
nominees to the extent required under the laws of the jurisdiction of
organization of the applicable Transferred Subsidiary or (iii) as set forth on
Schedule 4.3(b), all of the issued and outstanding shares of capital stock or
other equity interests of each Subsidiary of the Transferred Subsidiaries are
owned, directly or indirectly, by the Transferred Subsidiaries free and clear of
all Liens.
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(c) OTHER EQUITY INTERESTS AND OBLIGATIONS OF SPIRITS SUBSIDIARIES.
----------------------------------------------------------------
Except as set forth on Schedules 4.3(a), 4.3(b), 4.3(c) or 4.6, (i) there are no
outstanding or authorized (A) shares of capital stock or other equity interests
or voting securities of the Spirits Subsidiaries, (B) securities of the Spirits
Subsidiaries convertible into or exchangeable for shares of capital stock or
other equity interests or voting securities of the Spirits Subsidiaries or (C)
options, securities or other rights to acquire from the Seller, the Selling
Subsidiaries or the Spirits Subsidiaries, or obligations of the Seller, the
Selling Subsidiaries or the Spirits Subsidiaries to issue, any capital stock or
other equity interests or voting securities or securities convertible into or
exchangeable for capital stock or other equity interests or voting securities of
the Spirits Subsidiaries, (ii) there are no outstanding obligations of the
Spirits Subsidiaries to repurchase, redeem or otherwise acquire any capital
stock or other equity interests or voting securities of the Spirits
Subsidiaries, (iii) there are no other options, calls, puts, rights of first
refusal or first offer, preemptive rights, warrants or other similar rights,
agreements, arrangements or commitments specifically relating to the capital
stock or other equity interests or voting securities of the Spirits Subsidiaries
to which the Seller or any of its Subsidiaries is a party or is otherwise bound
and (iv) as of the date hereof, there are no outstanding capital calls on any of
the Transferred Minority Interests.
(d) MINORITY INTERESTS. Schedule 4.3(d) sets forth a complete list
-------------------
of all capital stock, membership interests, partnership interests, joint venture
interests or other equity interests in any Person (other than any Spirits
Subsidiary) owned, directly or indirectly, by the Seller or any of its
Affiliates which are engaged in businesses similar to the Business and which are
material to the Business taken as a whole (collectively, the "MINORITY
--------
INTERESTS"). Schedule 4.3(d) also indicates all such Minority Interests which
- ---------
are directly held by the Seller or any of its Affiliates (other than the Spirits
Subsidiaries) (collectively, the "TRANSFERRED MINORITY INTERESTS"). Except (i)
------------------------------
for director qualifying shares or other equity interests or (ii) for shares or
other equity interests held by nominees to the extent required under the laws of
the jurisdiction of organization of the entity in which the applicable Minority
Interests are held, all of the Minority Interests are owned, directly or
indirectly, by the Seller free and clear of all Liens.
(e) INDEBTEDNESS. Schedule 4.3(e) sets forth a complete list as of
------------
September 30, 2000 of (i) the principal amount of all indebtedness of the
Spirits Subsidiaries for borrowed money owed to third parties other than the JES
Public Indebtedness, the ACES and the QUIDS, (ii) all guarantees of the Spirits
Subsidiaries in respect of indebtedness for borrowed money owed to third parties
and (iii) all agreements with respect to interest rate swaps, foreign currency
hedges or other derivative or hedging agreements to which any Spirits Subsidiary
is a party or is otherwise bound.
SECTION 4.4. AUTHORIZATION. The execution, delivery and performance
-------------
of this Agreement by the Seller and the Related Agreements by the Seller, the
Asset Sale Subsidiaries and the Selling Subsidiaries, as applicable, and the
consummation by the Seller, the Asset Sale Subsidiaries and the Selling
Subsidiaries, as applicable, of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate or other organizational
action on the part of the Seller, the Asset Sale Subsidiaries and the Selling
Subsidiaries. This Agreement has been duly and validly executed and delivered by
the Seller and, as of the Closing, each of the Related Agreements will have been
duly and validly executed and delivered by the Seller and the Asset Sale
Subsidiaries, as applicable. Assuming the due authorization, execution
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and delivery of this Agreement and the Related Agreements by the Buyers or other
designated Affiliates of the Buyers, this Agreement constitutes, and each of the
Related Agreements upon execution and delivery will constitute, a legal, valid
and binding obligation of the Seller and the Asset Sale Subsidiaries, as
applicable, enforceable against the Seller and the Asset Sale Subsidiaries, as
applicable, in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 4.5. CONSENTS. No Consent of, or Filing with, any
--------
Governmental Entity which has not been obtained or made by the Seller or its
Affiliates is required for or in connection with the execution, delivery and
performance of this Agreement or any Related Agreement by the Seller, the Asset
Sale Subsidiaries and the Selling Subsidiaries, as applicable, and the
consummation by the Seller, the Asset Sale Subsidiaries and the Selling
Subsidiaries, as applicable, of the transactions contemplated hereby or thereby,
in each case, except (i) as set forth on Schedule 4.5, (ii) as may be required
solely by reason of the participation of the Buyers in the transactions
contemplated by this Agreement and the Related Agreements, (iii) Filings with
applicable trademark offices where necessary to consummate the transactions
contemplated by this Agreement or any Related Agreement, (iv) for any Consents
or Filings the failure of which to obtain or make would not be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect or prevent
or materially delay the consummation by the Seller, the Asset Sale Subsidiaries
and the Selling Subsidiaries of the transactions contemplated hereby or (v) as
may be required in connection with any transfer of any part of the Business or
any other action by Buyer A or Buyer B following the Closing.
SECTION 4.6. NONCONTRAVENTION. The execution, delivery and
----------------
performance by the Seller, the Asset Sale Subsidiaries and the Selling
Subsidiaries, as applicable, of this Agreement and the Related Agreements do
not, and the consummation by the Seller, the Asset Sale Subsidiaries and the
Selling Subsidiaries, as applicable of the transactions contemplated hereby and
thereby will not, (i) subject to obtaining or making the Consents and/or
Filings, as the case may be, referred to in Section 4.5, contravene, conflict
with or violate any Applicable Law, (ii) contravene, conflict with or violate
any provision of the Charter Documents of the Seller or any of the Asset Sales
Subsidiaries, Selling Subsidiaries or Spirits Subsidiaries or (iii) subject to
obtaining or making the Consents and/or Filings, as the case may be, referred to
in Section 4.5, contravene, conflict with or violate or constitute a default
under any provision of, or result in the termination or acceleration of, or
entitle any party to terminate or accelerate any obligation under, or entitle
any party to exercise any right of first offer, right of first refusal, option,
call right or other similar right to acquire the Transferred Shares, the
Transferred Minority Interests, the assets which, if owned on the Closing Date,
constitute a Transferred Assets or any assets of the Spirits Subsidiaries, or
result in the imposition of any Lien upon the Transferred Shares, the
Transferred Minority Interests, the Transferred Assets or any assets of the
Spirits Subsidiaries pursuant to, or give any person the right to cancel,
terminate, or modify any Contract relating to the Business to which the Seller
or any of the Asset Sale Subsidiaries, Selling Subsidiaries or Spirits
Subsidiaries is a party or by which the Seller or any of the Asset Sale
Subsidiaries, Selling Subsidiaries or Spirits Subsidiaries is bound, except (A)
in each case, as set forth on Schedule 4.6 and (B), in the case of clauses (ii)
and (iii), for any such contraventions, conflicts, violations defaults,
terminations, accelerations, exercises, Liens, cancellations or modifications
which
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would not be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect or prevent or materially delay the consummation by the
Seller, the Asset Sale Subsidiaries and the Selling Subsidiaries of the
transactions contemplated hereby.
SECTION 4.7.TITLE. (a) TRANSFERRED SHARES AND TRANSFERRED MINORITY
----- --------------------------------------------
INTERESTS. At the Closing, subject to Section 2.3, each of the Seller and the
- ---------
Selling Subsidiaries will have, and will transfer to Buyer A or Buyer B, as
applicable, good and valid title to the applicable Transferred Shares and
Transferred Minority Interests held by it, free and clear of any Liens (other
than (i) Liens attributable to the actions of the Buyers or any of their
respective Affiliates (except for Liens arising out of the execution of this
Agreement) and (ii) restrictions on transfer arising under Applicable Law).
(b) TRANSFERRED ASSETS. At the Closing, subject to Section 2.3, the
------------------
Seller and the Asset Sale Subsidiaries, as applicable, will have, and will
transfer to Buyer A or Buyer B, as applicable, good and valid title to the
Transferred Assets, free and clear of any Liens (other than Permitted Liens).
(c) BUSINESS ASSETS. Except (i) for the corporate services and
----------------
management information services currently provided to the Business by or at the
direction of the Seller or its Affiliates (other than the Spirits Subsidiaries)
(which services are customary for a corporate group similar to SCL and its
Spirits Subsidiaries) and for those services provided pursuant to the Transition
Services Agreement, (ii) as contemplated by Sections 2.3, 2.5 and 2.6 and (iii)
as set forth on Schedule 4.6, as of the Closing Date, Buyer A or Buyer B, as
applicable, and the Spirits Subsidiaries will have all right, title and interest
to the businesses, assets and properties (real and personal, tangible and
intangible) (subject to Permitted Liens) necessary to conduct in all material
respects the Business as currently conducted and as conducted as of the Closing.
SECTION 4.8.FINANCIAL STATEMENTS. Attached hereto as Schedule 4.8 is
--------------------
an accurate copy of the audited combined statements of income, cash flows and
buyer company's investment and advances and comprehensive income of the Business
for the fiscal years ended June 30, 1998, 1999 and 2000 and audited combined
balance sheets of the Business as of June 30, 1999 and 2000 (such balance sheet
as of June 30, 2000, the "JUNE 30 BALANCE SHEET"), including the notes thereto
----------------------
(all such documents, the "FINANCIAL STATEMENTS"). Except as disclosed in the
---------------------
Financial Statements, the Financial Statements fairly present in all material
respects the combined financial condition and the combined statements of income,
cash flows and buyer company's investment and advances and comprehensive income
of the Business as of the dates and for the periods indicated in the Financial
Statements, and have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved.
SECTION 4.9. LITIGATION. (a) There are no actions, proceedings,
----------
investigations or suits before any Governmental Entity or arbitration panel
against (i) the Seller or any of its Subsidiaries (other than the Spirits
Subsidiaries) specifically relating to the Business or the JES Offers to
Purchase or (ii) any of the Spirits Subsidiaries or Transferred Assets, in each
case, pending or, to the knowledge of the Seller, threatened, except (A) as set
forth on Schedule 4.9 or (B) for any such actions, proceedings, investigations
or suits which would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect. There are no judgments, decrees, orders or
litigation or other adversary proceeding settlements specifically
47
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against or binding upon the Seller or any of its Subsidiaries which prohibit or
restrict the Business as currently conducted, except (i) as set forth on
Schedule 4.9 or (ii) for any such judgments, decrees, orders or settlements
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect.
(b) There are no actions, proceedings, investigations or suits
against the Seller or its Subsidiaries pending or, to the knowledge of the
Seller, threatened, which seek to, and the Seller is not subject to any
judgments, decrees or orders which, enjoin, prevent or rescind or may be
reasonably likely to have the effect of enjoining, preventing or rescinding in
any material respect the transactions contemplated by this Agreement or any
Related Agreement.
SECTION 4.10. COMPLIANCE WITH APPLICABLE LAWS; CONSENTS AND FILINGS.
-----------------------------------------------------
(a) COMPLIANCE. Except (i) as set forth on Schedule 4.10(a) or (ii) as would not
----------
be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect, the Business is being conducted by the Seller and its Affiliates
in compliance with all Applicable Laws and none of the Spirits Subsidiaries is
in violation of any Applicable Law.
(b) CONSENTS AND FILINGS. Except (i) as set forth on Schedule
----------------------
4.10(b) or (ii) as would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect, the Asset Sale Subsidiaries, the
Selling Subsidiaries and the Spirits Subsidiaries have all Consents and have
made all Filings necessary to conduct the Business as currently conducted and
all of such Consents are in full force and effect. The Asset Sale Subsidiaries,
the Selling Subsidiaries and the Sprits Subsidiaries are not in breach of any
such Consent and have not received notice that any such Consent is to be
revoked, modified, cancelled or not renewed, except as would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect.
SECTION 4.11. MATERIAL CONTRACTS. (a) The Seller has previously made
------------------
available to the Buyers or their representatives all material written Contracts
to which (A) any Asset Sale Subsidiary is a party and which constitutes an
Assigned Contract or (B) any Spirits Subsidiary is a party, in each case, other
than those Contracts the failure of which to be in effect would not be
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect.
(b) NON-COMPETITION PROVISIONS. Schedule 4.11(b) sets forth a list
---------------------------
of all Contracts (other than those relating to Intellectual Property) to which
any Asset Sale Subsidiary or any Spirits Subsidiary is a party which contain
non-competition covenants restricting the conduct of the Business in any
material respect.
(c) COLLECTIVE BARGAINING AGREEMENTS. Schedule 4.11(c) sets forth a
--------------------------------
list of all collective bargaining or other labor agreements to which (i) any
Asset Sale Subsidiary is a party and which constitutes an Assigned Contract or
(ii) any Spirits Subsidiary is a party, in each case, which is material to the
Business.
(d) ENFORCEMENT AND BREACH. Each Contract to which any Spirits
------------------------
Subsidiary is a party or which constitutes an Assigned Contract and which is
valid, binding, in full force and effect and enforceable against the applicable
Asset Sale Subsidiary or Spirits Subsidiary and, to
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41
the knowledge of the Seller, against any other party thereto, in accordance with
its terms and the applicable Asset Sale Subsidiary or Spirits Subsidiary is not
in breach or default under any such Contract or Assigned Contract and no event
has occurred which, with notice or lapse of time or both, would constitute any
such breach or default or permit termination or modification or acceleration of
any provision in any aspect adverse to the applicable Asset Sale Subsidiary or
Spirits Subsidiary under any such Contract or Assigned Contract, except where
the failure to be so valid, binding, in full force and effect or enforceable, or
such breach or default, termination modification or acceleration, would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect or prevent or materially delay or materially impair the
transactions contemplated hereby.
SECTION 4.12. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
-------------------------------------
forth on Schedule 4.12(i), since June 30, 2000, there has not been any Material
Adverse Effect and no event has occurred or action has been taken or failed to
be taken which, individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect and the Business has been conducted in the
ordinary course of business in all material respects and, notwithstanding the
generality of the foregoing, (i) in the period which commences on the date of
this Agreement and ends on December 31, 2001, none of the Seller and the Asset
Sale Subsidiaries with respect to the Business and the Spirits Subsidiaries
shall have made bulk sales of Bulk Scotch Maturing Stocks in excess, in
aggregate, of 5,000,000 original liters of absolute alcohol, and as of the end
of such period may not have outstanding commitments to sell in excess of
2,500,000 original liters of absolute alcohol, (ii) since June 30, 2000, have
sold finished case goods to wholesalers, distributors and retailers in
quantities that resulted in a material increase in the level of stock of the
Spirits Subsidiaries and the Asset Sale Subsidiaries that was not consistent
with seasonal variations, or with past practices in the Business for the fiscal
years ended June 30, 1998, 1999 and 2000 or (iii) agreed to take any of the
actions specified in clauses (i) or (ii).
SECTION 4.13. BENEFIT PLANS; EMPLOYEES. (a) Schedule 4.13(a) sets
-------------------------
forth a list, as of the date hereof, of each material "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), including all material plans of a similar
-----
nature in jurisdictions outside of the United States and which are not subject
to ERISA and all material stock purchase, stock option, severance, employment,
fringe benefit, bonus, incentive, deferred compensation and all other employee
benefit plans, agreements or policies under which any employee of the Business
(the "BUSINESS EMPLOYEES") has any present or future right to benefits sponsored
------------------
or maintained by SCL or any of the Asset Sale Subsidiaries or Spirits
Subsidiaries. All such plans, agreements and policies shall be collectively
referred to as the "COMPANY PLANS".
-------------
(b) With respect to each Company Plan, the Seller has made available
to the Buyers or their representatives a current, accurate and complete copy
(or, where no document exists, a written description thereof) including all
existing or proposed amendments thereto, and, to the extent applicable and
existing as of the date hereof, (i) any related trust agreement or other funding
instrument, (ii) the most recent IRS favorable determination letter, (iii) any
summary plan description and (iv) the most current actuarial report (A) Form
5500 and attached schedules, (B) audited financial statements, (C) actuarial
valuation reports and (D) any other annual information returns or filings made
with a Governmental Entity.
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(c) Except as would not have a Material Adverse Effect, each Company
Plan has been administered in accordance with its terms and in compliance with
the applicable provisions of ERISA, the Code and other Applicable Laws. Each
Company Plan which is intended to be qualified within the meaning of Code
section 401(a) has received a favorable determination letter as to its
qualification and the Seller does not have knowledge of any circumstances likely
to result in revocation of any such favorable determination letter or the loss
of the qualification of such Company Plan. The Seller does not have knowledge of
any circumstances likely to result in the loss of favored tax status of a
Company Plan intended to have favorable tax status in a jurisdiction other than
the US and each Company Plan which is intended to be registered has been
accepted for registration by the applicable Governmental Entity.
(d) Except in each case as would not have a Material Adverse Effect,
no actions, suits or claims (other than routine claims for benefits in the
ordinary course) are pending or, to the knowledge of the Seller, threatened with
respect to any Company Plan.
(e) To the knowledge of Seller, none of the Asset Sale Subsidiaries
or the Spirits Subsidiaries has engaged in a transaction with respect to any
Company Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject the Seller or any of the Asset Sale Subsidiaries
or Spirits Subsidiaries to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would have a Material
Adverse Effect.
(f) No material liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by any of the Asset Sale Subsidiaries or
any of the Spirits Subsidiaries with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA. No Asset Sale Subsidiary or Spirits Subsidiary contributes to a
multiemployer plan described in subtitle E of Title IV of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
by any Asset Sale Subsidiary or Spirits Subsidiary for any "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("PENSION PLAN")
-------------
within the 12-month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this Agreement.
(g) To the knowledge of Seller, all contributions required to be
made under the terms of any material Company Plan have been timely made or have
been reflected in the Financial Statements. None of the Asset Sale Subsidiaries
or Spirits Subsidiaries has provided, or is required to provide, security to any
Pension Plan pursuant to Section 401(a)(29) of the Code. Except as set forth in
Schedule 4.13(g), with respect to any material Company Plan maintained outside
of the U.S., none of the Asset Sale Subsidiaries or Spirits Subsidiaries has (or
will have as a consequence of the transactions contemplated by this Agreement)
any liability to make payment to any pension plan as a result of any deficiency
or shortfall in the funding of such plan.
(h) Except as may be set forth in any Schedule hereto, there has
been no amendment to, announcement by the Seller or any of the Asset Sale
Subsidiaries or Spirits Subsidiaries relating to, or change in employee
participation of coverage under, any Company
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43
Plan which would increase materially the expense of maintaining such Company
Plan above the level of the expense incurred therefor for the most recent fiscal
year.
(i) To the knowledge of Seller, all Company Plans maintained outside
of the United States comply in all material respects with applicable local law.
(j) Schedule 4.13(j)(i) sets forth a complete list as of September
30, 2000 of the name of each Business Employee of the Asset Sale Subsidiaries
and the Spirits Subsidiaries, including each such Business Employee who, as of
such date, is on any approved leave of absence for any reason (including
short-term disability). Schedule 4.13(j)(ii) sets forth a complete list of those
employees of the Asset Sale Subsidiaries and the Spirits Subsidiaries who are
not primarily connected with the Business, and all of whom, unless otherwise
agreed between the Seller and the Buyers on or prior to the Closing Date, will
be transferred by the Seller to a designated subsidiary or Affiliate of the
Seller (other than the Spirits Subsidiaries) (the "RETAINED EMPLOYEES").
------------------
(k) Except as set forth on Schedule 4.13(k), none of the Seller, the
Asset Sale Subsidiaries or the Spirits Subsidiaries have any material unfunded
liabilities with respect to any Company Plan the liabilities of which will be
assumed by the Buyers hereunder, and all liabilities under any Company Plans are
funded in accordance with Applicable Laws and generally accepted actuarial
principles in the relevant jurisdiction.
SECTION 4.14. ENVIRONMENTAL MATTERS. Except in each case as would
----------------------
not be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect: (i) the Business (A) is being conducted, and has been conducted,
within all applicable statute of limitations periods, in compliance with all
applicable Environmental Laws and (B) possesses all Consents required under
applicable Environmental Laws to operate the Business as currently operated,
(ii) neither the Seller nor any of its Subsidiaries has received any written
notice of any actions, proceedings, investigations or suits before any
Governmental Entity or any judgment, decree or order against (A) the Seller or
any of its Subsidiaries (other than the Spirits Subsidiaries) relating to the
Business or (B) any of the Spirits Subsidiaries or Transferred Assets, in each
case, pending or, to the knowledge of the Seller, threatened which relate to
compliance with any Environmental Law or to investigation or cleanup of any
Hazardous Materials at any location, (iii) to the knowledge of the Seller, there
are no Hazardous Materials at any of the Spirits Properties or any property
formerly owned or leased by any of the Spirits Subsidiaries, which Hazardous
Materials are in concentrations and under such circumstances as violate, or as
would give rise to liability to the Buyers or any of the Spirits Subsidiaries or
require remediations under, any applicable Environmental Law and (iv) there are
no Pre-Closing Environmental Conditions that would reasonably be expected to
result in liability of any Spirits Subsidiary or of the Business.
SECTION 4.15. INTELLECTUAL PROPERTY. Schedule 4.15(a) includes a
----------------------
list of all material patent and trademark registrations and applications, as of
the date hereof, with respect to (i) the Transferred Intellectual Property and
(ii) the Intellectual Property owned by the Spirits Subsidiaries (collectively,
the "SPIRITS IP").
----------
51
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(b) Except as disclosed on Schedule 4.15(a) or 4.15(b), (i) the
Asset Sale Subsidiaries or the Spirits Subsidiaries own or have the right to
use, and have the right to transfer without giving rise to any material rights
in any third party, all material Intellectual Property necessary to conduct the
Business in all material respects as conducted as of the date hereof, (ii) to
the knowledge of the Seller, all of the material Spirits IP is unexpired, is
free of all Liens (other than Permitted Liens) and has not been abandoned or
cancelled, and (iii) to the knowledge of the Seller, the Spirits IP does not
infringe the Intellectual Property of any third party and is not being infringed
by any third party, except for any such infringement, which would not be
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect.
SECTION 4.16. BROKERS AND INTERMEDIARIES. None of the Seller or any
--------------------------
of its Subsidiaries have employed any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
or any Related Agreement which would be entitled to a broker's, finder's,
investment banker's or similar fee or commission in connection with such
transactions, except for any such fees or commissions which shall be the sole
responsibility of the Seller prior to and following the Closing.
SECTION 4.17. REAL PROPERTY. Schedule 4.17 sets forth, as of the
--------------
date hereof, (i) a list of all Transferred Real Property and all material real
property and material interests in real property owned by the Spirits
Subsidiaries (such property and interests in real property, together with the
Transferred Real Property, the "OWNED PROPERTIES") and (ii) a list of all
-----------------
Assigned Contracts to which any Asset Sale Subsidiary is a party as lessee and
which are leases of material real property or material interests in real
property and all leases of material real property or material interests in real
property to which any Spirits Subsidiary is a party as lessee (the "LEASED
------
PROPERTIES" and, together with the Owned Properties, the "SPIRITS PROPERTIES").
- ---------- ------------------
The Asset Sale Subsidiaries and the Spirits Subsidiaries, as applicable, hold
insurable title to all Owned Properties (or with respect to Owned Properties in
Scotland, good title to all Owned Properties), free and clear of all Liens
(other than Permitted Liens), and are in possession as lessees of all Leased
Properties, subject to the rights of sub-tenants, except (i) as set forth on
Schedule 4.17 or (ii) for any such failures to hold such title or have such
possession as would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 4.18. TAX MATTERS. Except (i) as set forth on Schedule 4.18
-----------
or (ii) as would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect, (A) all Tax Returns required to be filed
by, or with respect to any activities of, the Asset Sale Subsidiaries and the
Spirits Subsidiaries prior to the date hereof have been filed (except those
under valid extension), (B) as of the date hereof, all Taxes of the Asset Sale
Subsidiaries (in each case, with respect to the Business) and the Spirits
Subsidiaries have been paid or adequately provided for on the Financial
Statements (unless such Taxes are being contested in good faith) and (C) neither
the Seller nor any of its Subsidiaries has received written notice of any
action, suit, proceeding, investigation, claim or audit against, or with respect
to, any Asset Sale Subsidiary (in each case, with respect to the Business) or
any Spirits Subsidiary in respect of any Taxes (other than Income Taxes).
SECTION 4.19. INDEBTEDNESS. JES has completed offers to purchase
------------
(the "JES OFFERS TO PURCHASE") the outstanding indebtedness of JES listed on
----------------------
Schedule 4.19(a) (the "JES
---
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PUBLIC INDEBTEDNESS"). Also set forth on Schedule 4.19 are the principal amounts
- -------------------
of the JES Public Indebtedness which are outstanding as of the date hereof.
SECTION 4.20. BUSINESS. The Spirits Subsidiaries are engaged
--------
primarily in the Business and do not engage in any other business or activity in
any material respect (other than the Retained Assets and Retained Liabilities).
Other than the Asset Sale Subsidiaries and the Spirits Subsidiaries, no other
Affiliate of the Seller is engaged in the Business in any material respect.
SECTION 4.21. LABOR MATTERS. Except as set forth on Schedule 4.21,
-------------
neither (i) any Asset Sale Subsidiary with respect to the Business nor (ii) any
Spirits Subsidiary is the subject of any material proceeding asserting that any
Asset Sale Subsidiary or any Spirits Subsidiary has committed an unfair labor
practice nor is there pending, nor has there been for the past three years, any
material labor strike, dispute, walk-out, work stoppage, slow-down or lockout
involving the employees of the Business.
SECTION 4.22. VIVENDI TRANSACTION. The consummation of the
---------------------
transactions contemplated by the Merger Agreement dated as of June 19, 2000
between Vivendi S.A., Canal Plus S.A., Sofice S.A. and 3744531 Canada Inc. and
SCL (the "VIVENDI TRANSACTION") did not materially contravene, conflict with or
-------------------
violate or constitute a default under any provision of, or result in the
termination or acceleration of, or entitle any party to terminate or accelerate
any obligation under, or entitle any party to exercise any right of first offer,
right of first refusal, option or other similar right to acquire the Transferred
Shares, the Transferred Minority Interests, the Transferred Assets or any assets
of the Spirits Subsidiaries pursuant to, or give any person the right to cancel,
terminate or modify any Contract relating to the Business, except (i) as set
forth on Schedule 4.6 and (ii) as would not be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 4.23. PRODUCT RECALLS. Except as set forth on Schedule 4.23,
---------------
there have been no material product recalls, stop sales or withdrawals of
products prior to sale with respect to the Business since January 1, 1999. To
the knowledge of the Seller, there is no reason there would be a material
increase in the amount of products of the Business being returned for credit,
refund or replacement during the period from the date hereof to January 1, 2002.
SECTION 4.24. INSURANCE. Schedule 4.24 sets forth a complete list as
---------
of the date hereof of (i) all insurance policies of SCL and its Affiliates
(other than the Spirits Subsidiaries) which may operate to cover any loss or
liability relating to the Business (the "SCL INSURANCE POLICIES") and (ii) all
-----------------------
insurance policies of the Spirits Subsidiaries (the "SPIRITS SUBSIDIARY
-------------------
INSURANCE POLICIES"). All such policies are in full force and effect and no
- -------------------
premiums due and payable thereon are delinquent. There are no pending material
claims against such insurance by any Asset Sale Subsidiary or any Spirits
Subsidiary with respect to the Business as to which the insurers have denied
liability.
SECTION 4.25. RESIDENCE OF SCL. SCL is not a non-resident of Canada
----------------
within the meaning of the INCOME TAX ACT (Canada) and is a registrant for
purposes of any taxes imposed under Part IX of the EXCISE TAX ACT (Canada).
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SECTION 4.26. MATURING STOCKS. Schedule 4.26 sets forth a list of
----------------
the amount of the Bulk Canadian Maturing Stocks, as of November 30, 2000, and
Bulk Scotch Maturing Stocks, as of December 18, 2000 owned (i) by the Spirits
Subsidiaries and (ii) the Asset Sale Subsidiaries which, if the date hereof were
the Closing Date, would constitute Transferred Assets, setting forth the year of
distillation and type of whisky. As of the Closing, the Bulk Scotch Maturing
Stocks of the Seller and its Affiliates will not be subject to any Liens (other
than Permitted Liens).
SECTION 4.27. NO OTHER REPRESENTATIONS. Notwithstanding anything
-------------------------
contained in this Article IV or any other provision of this Agreement or any
Related Agreement, it is the explicit intent of each party hereto that the
Seller is making no express or implied representations or warranties whatsoever,
except those representations and warranties of the Seller set forth in this
Article IV.
SECTION 4.28. ABSENCE OF UNDISCLOSED LIABILITIES. Except (i) as set
----------------------------------
forth in or provided for (and reserved against in or disclosed in the footnotes
to) the June 30 Balance Sheet, (ii) as set forth on any Schedule to this
Agreement to the extent reasonably apparent or (iii) for Liabilities that have
arisen not in violation of this Agreement since June 30, 2000 in the ordinary
course of business, there are no Liabilities of a type that would be required to
be presented in a balance sheet prepared in accordance with GAAP (applied on a
consistent basis with the June 30 Balance Sheet) relating to the Business, the
Spirits Subsidiaries or included in the Assumed Liabilities, except as would not
be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 4.29. DBC. The amounts for direct brand contribution for the
---
fiscal year ended June 30, 2000 for those brands set forth on Schedule 4.29 were
prepared by the Seller in good faith based on the books and records of the
Business and have been prepared on a consistent basis for each brand in all
material respects and are the amounts used for management reporting and are
materially consistent with cost accounting and brand profitability guidelines
and procedures used for the Business as of the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
--------------------------------------------
Each Buyer (solely with respect to itself and not the other Buyer)
hereby severally represents and warrants to the Seller, except as contemplated
by this Agreement or any Related Agreement, as follows:
SECTION 5.1. DUE ORGANIZATION, GOOD STANDING AND POWER. Such Buyer
-------------------------------------------
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all power and authority necessary to
execute and deliver this Agreement and the Related Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby.
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SECTION 5.2. ORGANIZATIONAL DOCUMENTS; BUYERS. Prior to the date
----------------------------------
hereof, such Buyer has made available to the Seller or its representatives a
complete and correct copy of the Charter Documents of such Buyer as in effect as
of the date hereof and as shall be in effect as of the Closing and all other
agreements among the Buyers with respect to the transactions contemplated by
this Agreement and the Related Agreements as in effect as of the date hereof and
as shall be in effect as of the Closing. Such Charter Documents and other
agreements are in full force and effect and such Buyer is not in violation of
any provision of its Charter Documents. Such Buyer, if it is the purchaser of
the capital stock of JES is a corporation for U.S. tax purposes. Buyer B shall
acquire the capital stock of JES, Seagram United Kingdom Limited and Captain
Morgan Rum Distillers Limited (Canada) at the Closing.
SECTION 5.3. AUTHORIZATION. The execution, delivery and performance
-------------
of this Agreement and the Related Agreements to which it is a party by such
Buyer and the consummation by such Buyer of the transactions contemplated hereby
and thereby to which it is a party have been duly authorized by all necessary
corporate or other organizational action by such Buyer. This Agreement has been
duly and validly executed and delivered by such Buyer and, as of the Closing,
each of the Related Agreements to which it is a party will have been duly and
validly executed and delivered by such Buyer. Assuming the due authorization,
execution and delivery of this Agreement and the Related Agreements by the
Seller and the Asset Sale Subsidiaries, as applicable, this Agreement
constitutes, and each of the Related Agreements upon execution and delivery will
constitute, a legal, valid and binding obligation of such Buyer, enforceable
against such Buyer in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
SECTION 5.4. CONSENTS. No Consent of, or Filing with, any
--------
Governmental Entity which has not been obtained or made by the such Buyer is
required for or in connection with the execution, delivery and performance of
this Agreement or any Related Agreement by such Buyer and the consummation by
such Buyer of the transactions contemplated hereby or thereby, in each case,
except (i) as set forth on Schedule 5.4, (ii) as may be required solely by
reason of the participation of the Seller, the Asset Sale Subsidiaries and/or
the Selling Subsidiaries in the transactions contemplated by this Agreement and
the Related Agreements or (iii) for any Consents or Filings the failure of which
to obtain or make would not be reasonably likely to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
SECTION 5.5. NONCONTRAVENTION. The execution, delivery and
----------------
performance by such Buyer of this Agreement and the Related Agreements to which
it is a party do not, and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not, (i) subject to obtaining or making the
Consents and/or Filings, as the case may be, referred to in Section 5.4,
contravene, conflict with or violate any Applicable Law, (ii) contravene,
conflict with or violate any provision of the Charter Documents of such Buyer or
(iii) subject to obtaining or making the Consents and/or Filings, as the case
may be, referred to in Section 5.4, contravene, conflict with or violate or
constitute a default under any provision of, or result in the termination or
acceleration of, or entitle any party to terminate or accelerate any obligation
under, or result in the imposition of any Lien (other than a Permitted Lien)
upon the assets of such Buyer pursuant to, or give any person the right to
cancel, terminate or modify any Contract to which such Buyer
55
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or any of its Subsidiaries is a party or by which such Buyer or any of its
Subsidiaries is bound, except in the case of clauses (ii) and (iii), for any
such contraventions, conflicts, violations, defaults, terminations,
accelerations, exercises, Liens, cancellations or modifications which would not
be reasonably likely to have, individually or in the aggregate, a Buyer Material
Adverse Effect.
SECTION 5.6. LITIGATION. There are no actions or suits against such
----------
Buyer or any of its Subsidiaries pending or, to the knowledge of such Buyer,
threatened, which seek to, and such Buyer is not subject to any judgments,
decrees or orders which, enjoin, prevent or rescind or may be reasonably likely
to have the effect of enjoining, preventing or rescinding, in any material
respect the transactions contemplated by this Agreement or any Related
Agreement.
SECTION 5.7. BROKERS AND INTERMEDIARIES. None of such Buyer or its
---------------------------
Subsidiaries has employed any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
or any Related Agreement which would be entitled to a broker's, finder's,
investment banker's or similar fee or commission in connection with such
transactions, except for any such fees or commissions for which shall be the
sole responsibility of such Buyer or its Affiliates.
SECTION 5.8. INVESTMENT INTENT. Such Buyer will not distribute or
------------------
resell any of the Transferred Shares or Transferred Minority Interests in
violation of Applicable Law.
SECTION 5.9. FINANCING. At the Closing, the Buyers will have
---------
sufficient funds to pay the Purchase Price and all related fees and expenses and
to effect all other transactions contemplated by this Agreement and the Related
Agreement.
SECTION 5.10. NO OTHER REPRESENTATIONS. Notwithstanding anything
-------------------------
contained in this Article V or any other provision of this Agreement or any
Related Agreement, it is the explicit intent of each party hereto that such
Buyer is making no express or implied representations or warranties whatsoever,
except those representations and warranties of such Buyer set forth in this
Article V.
ARTICLE VI
COVENANTS
---------
SECTION 6.1. CONDUCT OF THE BUSINESS. From the date hereof until the
-----------------------
Closing Date, except (i) as otherwise required, permitted or contemplated by
this Agreement or any Related Agreement, (ii) as required by Applicable Law,
(iii) as set forth on Schedule 6.1 or (iv) with respect to any Retained Assets
or Retained Liabilities, (A) the Seller shall, and shall cause the Asset Sale
Subsidiaries and the Spirits Subsidiaries to, operate the Business in the
ordinary course of business in all material respects in the aggregate and to use
reasonable efforts consistent with past practices to preserve in all material
respects their relationships with customers, employees, suppliers and others
with whom they deal in connection with the Business, and (B) the Seller shall
not, and shall not permit any Asset Sale Subsidiary or Spirits
56
49
Subsidiary to, without the prior written consent of the Buyers (such consent not
to be unreasonably withheld or delayed):
(i) grant to any Business Employee any increase in compensation or
benefits, or enter into any termination protection agreements, golden parachutes
or other similar arrangements, except (x) as may be required under any Company
Plan or written agreement existing on the date hereof, (y) for increases and
bonuses in the ordinary course of business excluding any bonus relating to the
transactions contemplated by this Agreement and (z) for any increases or bonuses
for which the Buyers or any of their Affiliates or the Spirits Subsidiaries
shall not be obligated after the Closing;
(ii) in the case of any Spirits Subsidiary, amend its Charter
Documents in any material respect and, in the case of any of the Asset Sale
Subsidiaries, amend its Charter Documents in any manner adverse in any material
respect to the transactions contemplated by this Agreement or any Related
Agreement;
(iii) in the case of any Spirits Subsidiary, redeem or otherwise
acquire any shares of its capital stock or issue any capital stock or any
options, rights, warrants, instruments convertible into or exchanged for capital
stock or similar instruments relating to any capital stock;
(iv) in the case of any Spirits Subsidiary, acquire all or a
substantial portion of the assets or capital stock of any Person and, in the
case of any of the Asset Sale Subsidiaries, acquire all or a substantial portion
of the assets or capital stock of any Person which assets or capital stock would
constitute Transferred Assets hereunder, in each case, for consideration in any
individual case in excess of U.S. Dollars 5,000,000 or $25,000,000 in the
aggregate;
(v) in the case of any Spirits Subsidiary, incur any indebtedness
for borrowed money or any guarantee in respect thereof other than in the
ordinary course of business;
(vi) except for expenditures provided for under any written Contract
existing on the date hereof in the case of any Spirits Subsidiary, make or incur
any capital expenditure which is individually in excess of U.S. Dollars
5,000,000 or $25,000,000 in the aggregate;
(vii) in the case of any Spirits Subsidiary, pay, loan or advance
any amount to, or sell, transfer or lease any of its assets to, or enter into
any agreement or arrangement with, the Seller or any of its Affiliates (other
than the Spirits Subsidiaries), which are directly or indirectly wholly-owned by
the Seller except in the ordinary course of business;
(viii) adopt or amend in any material respect any Company Plan or
any collective bargaining agreement (unless currently in negotiation with the
union) applicable to Business Employees, except (x) for any Company Plan with
respect to which the Seller or its Affiliates (other than the Spirits
Subsidiaries) shall remain solely responsible after the Closing or (y) in the
ordinary course of business;
(ix) permit the Transferred Shares, the Transferred Minority
Interests, or any material Transferred Assets or any material assets of the
Spirits Subsidiaries to become subject to any Lien, except for any Permitted
Liens and Liens existing prior to the date of this Agreement;
57
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(x) except in the ordinary course of business, sell, lease or
dispose of any asset which if held on the Closing Date would be a Transferred
Asset or any asset of the Spirits Subsidiaries the fair market value of which
individually is in excess of U.S. Dollars 500,000 or U.S. Dollars $3,000,000 in
the aggregate;
(xi) except in the ordinary course of business, amend, modify, enter
into, renew, fail to renew or terminate any material Contract or enter into any
agreement which contains any non-competition or exclusivity provision
restricting the operation of the Business in any material respect;
(xii) make any change in accounting methods, practices or policies
in any material respect, except as required by GAAP or any official
interpretation thereof;
(xiii) with respect to any Spirits Subsidiary, enter into any
settlement of any litigation which restricts any portion of the Business in any
material respect;
(xiv) except in the ordinary course of business consistent with
seasonal variations, and the practice of the Business in the fiscal years ended
June 30, 1998, 1999 and 2000, sell the Spirits Subsidiaries' and the Asset Sale
Subsidiaries' finished case goods to wholesalers, distributors and retailers in
quantities that would result in a material increase in the level of stock of the
Spirits Subsidiaries' and the Asset Sale Subsidiaries' finished case goods
generally held by any such wholesalers, distributors and retailers;
(xv) make any bulk sale of spirits (including any contra, swap or
similar transaction) or enter into any securitization transactions relating to
Transferred Assets, including Bulk Scotch Maturing Stocks other than bulk sales
permitted by Section 4.12(i) and Bulk Canadian Maturing Stocks and Bulk Canadian
Whisky Stocks other than pursuant to Contractual commitments in effect on the
date hereof and additional sales which are, in the aggregate, immaterial. The
types, quantity and quality of the Bulk Scotch Maturing Stocks set forth on
Schedule 4.26 will be maintained in all material respects in a manner consistent
with past practices.
(xvi) amend, vary, terminate or restate any of (A) the Memorandum of
Agreement dated January 20, 1971 (or any related agreement or arrangement) made
between JES, Chivas Brothers Limited and Kirin Brewery Co., Limited relating to
Kirin Seagram Limited or (B) any Contract with Kirin Seagram Limited or Kirin
Brewery Co. Limited and related to the distribution of any product bearing the
label or mark "Chivas Regal" or (iii) the Master Agreement dated October 12,
2000 made between JES, Chivas Brothers Limited and Kirin Brewery Co. Limited
(the "KIRIN MASTER AGREEMENT");
----------------------
(xvii) agree finally, execute or enter into or otherwise bring into
force any of the documentation referred to in the Kirin Master Agreement; and
(xviii) make or declare any dividends or distributions, other than
cash distributions, distributions of Retained Assets or Retained Liabilities and
settlements of intercompany indebtedness; and
(xix) agree to do any of the foregoing.
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SECTION 6.2. ACCESS TO INFORMATION. (a) From the date of this
-----------------------
Agreement until the Closing Date, the Seller will, during Normal Business Hours
and upon reasonable prior notice, subject to Applicable Law, (i) provide to or
cause to be provided to the Buyers and their authorized representatives
reasonable access to the offices, properties, books and records related to the
Business, (ii) coordinated through an employee designated by the Seller and, if
requested by the Seller, in the presence of a designated officer of the Seller
or other representatives of the Seller, permit the Buyers and their
representatives to discuss the affairs, finances and accounts of the Business
with the officers, employees and independent public accountants of the Seller,
the Asset Sale Subsidiaries and the Spirits Subsidiaries, (iii) furnish to the
Buyers such financial and operating data and other information with respect to
the Business as the Buyers may reasonably request; provided that none of the
actions taken by the Buyers under clauses (i), (ii) or (iii) shall unreasonably
interfere with the normal operations of the Business, (iv) provide the Buyers
with monthly profit and loss statements as soon as reasonably practicable
following the end of each month consistent with the statements prepared during
calendar year 2000 and (v) provide as soon as reasonably practicable following
the end of each month sales and inventory reports with respect to the brands set
forth on Schedule 6.2 to the extent such reports are prepared in the ordinary
course consistent with past practice.
(b) In addition to the foregoing, to the extent not unreasonably
interfering with the operations of the Business, the Seller shall cooperate with
and provide such information to the Buyers as the Buyers shall reasonably
request in connection with the disposal of certain assets of the Spirits
Subsidiaries and certain of the Transferred Assets by the Buyers or their
Affiliates, including such cooperation and information as may be needed to
prepare materials to offer such assets to third parties and to discuss such
potential dispositions with third parties. In addition, to the extent not
interfering with the operations of the Business, the Seller shall permit access
to books, records, offices and properties related to the Business (including Tax
information) and the officers and employees of the Seller, the Asset Sale
Subsidiaries and the Spirits Subsidiaries for the purpose of determining the
manner in which the Buyers will allocate assets and liabilities at and following
the Closing.
(c) Any information heretofore or hereafter obtained from the Seller
or any of its Affiliates or representatives by Buyer A and Buyer B shall be
subject to the terms of the Buyer A Confidentiality Agreement or Buyer B
Confidentiality Agreement, respectively, and such information shall be held by
Buyer A and Buyer B and their respective representatives in accordance with the
terms of such Buyer A Confidentiality Agreement or Buyer B Confidentiality
Agreement, respectively. Each of the Buyers agrees that its representatives
shall constitute "Representatives" of such Buyer for purposes of the Buyer A
Confidentiality Agreement and Buyer B Confidentiality Agreement, as applicable.
Subject to the approval of the Seller (such approval not to be unreasonably
withheld), each of the Buyer A Confidentiality Agreement and the Buyer B
Confidentiality Agreement shall be deemed modified to the extent reasonably
necessary for the Buyers and their respective representatives to enter into
agreements or discussions with respect to dispositions of portions of the
Business to third parties. To the extent that either of the Buyer A
Confidentiality Agreement or the Buyer B Confidentiality Agreement shall be
deemed to be in conflict with this Agreement, the terms of this Agreement shall
prevail. Buyer B and the Seller agree that the paragraph numbered 13 in the
Buyer B Confidentiality Agreement is hereby terminated. Buyer A and the Seller
agree that the paragraph numbered 13 in the Buyer A Confidentiality Agreement is
hereby terminated.
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(d) At the Closing, to the extent permitted by the terms thereof,
any other confidentiality agreements executed by the Seller or its Affiliates,
on the one hand and third parties on the other hand, relating to the Seller's
seeking interest in purchasing the Business ("ULTRA AGREEMENTS") shall be
-----------------
assigned to the Buyers.
(e) The Buyers will be permitted to announce the execution of any
Contract with respect to the disposition of any of the assets of the Business
and information reasonably related thereto subject to the approval of the Seller
(such approval not to be unreasonably withheld).
(f) Within five Business Days after the date hereof, the Seller
shall require the immediate return or destruction of all copies of information
related to the Business provided to third parties which entered into Ultra
Agreements and shall take all reasonable actions necessary to enforce any such
rights under the Ultra Agreements, in each case, to the extent entitled pursuant
to the terms of the applicable Ultra Agreement.
SECTION 6.3. FURTHER ACTION; BEST EFFORTS. (a) Subject to the terms
----------------------------
and conditions of this Agreement, each party will use its best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement or any Related Agreement. In furtherance and not
in limitation of the foregoing, each party hereto agrees to make (i) an
appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated by this Agreement or any Related
Agreement as promptly as reasonably practicable and to supply as promptly as
reasonably practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and to take all other actions
necessary, proper or advisable to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as reasonably practicable,
(ii) appropriate filings with the European Commission in accordance with
applicable competition, merger control, antitrust, investment or similar laws as
promptly as reasonably practicable and to supply as promptly as reasonably
practicable any additional information and documentary material that may be
requested by the European Commission and to take all other actions necessary,
proper or advisable to cause the expiration or termination of any applicable
waiting periods instituted by the European Commission, (iii) appropriate filings
with the Government of Canada in accordance with applicable competition, merger
control, antitrust, investment or similar laws as promptly as reasonably
practicable and to supply as promptly as reasonably practicable any additional
information and documentary material that may be requested by the Government of
Canada and to take all other actions necessary, proper or advisable to cause the
expiration or termination of any applicable waiting periods and to obtain any
approval or notification required to be obtained from the Government of Canada
as may be required pursuant to the ICA or the Investment Canada Undertaking in
order to complete the transactions contemplated hereby and (iv) appropriate
filings with any other Governmental Entity in accordance with applicable
competition, merger control, antitrust, investment or similar laws as promptly
as practicable and to supply as promptly as practicable any additional
information and documentary material that may be requested by the appropriate
Governmental Entities and to take all other actions necessary, proper or
advisable to cause the expiration or termination of any applicable waiting
periods instituted under such laws. Each party shall use its best efforts to
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by the Stock
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and Asset Purchase Agreement or any Related Agreement under any applicable
competition, merger control, antitrust, investment or similar laws. In
connection with the foregoing, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by the
Stock and Asset Purchase Agreement or any Related Agreement as violative of any
competition, merger control, antitrust, investment or similar laws, each party
shall cooperate in all respects with each other and use its respective best
efforts to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by the Stock and Asset Purchase Agreement or any Related Agreement.
(b) Each party shall, in connection with the efforts referenced in
Section 6.3(a) to obtain all requisite approvals, notifications and
authorizations for the transactions contemplated by this Agreement or any
Related Agreement under the HSR Act or the European Community Merger Control
Regulation, the ICA or the Investment Canada Undertaking, use its reasonable
best efforts, subject to Applicable Laws relating to the exchange of information
to (i) cooperate in all respects with each other in connection with any filing
or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, (ii) keep the other
parties informed of any material communication received by such party from, or
given by such party to, the Federal Trade Commission (the "FTC"), the Antitrust
---
Division of the Department of Justice (the "DOJ"), the European Commission, or
---
the relevant Canadian Governmental Entity and any material communication
received or given in connection with any proceeding by a private party and (iii)
permit the other parties to review in advance any communication given by it to,
and consult with each other in advance of any meeting or material conference
with, the FTC, the DOJ, the European Commission or the relevant Canadian
Government Entity, or in connection with any material proceeding by a private
party, with any other person, and to the extent permitted by the FTC, the DOJ,
the European Commission or other Person or the relevant Canadian Government
Entity, give the other party the opportunity to attend and participate in such
meetings and conferences, in each case of clauses (i), (ii) or (iii) to the
extent relating to any of the transactions contemplated by this Agreement or any
Related Agreement.
(c) Other than to the extent applicable law expressly requires the
Seller or any of its Subsidiaries to obtain any consent of any other
Governmental Entity or to make any filing with any other Governmental Entity
(collectively, the "OTHER GOVERNMENTAL CONSENTS"), the Buyers shall be
-----------------------------
responsible for making such filings and otherwise pursuing all Other
Governmental Consents which are required to consummate the transactions
contemplated by the Stock and Asset Purchase Agreement or any Related Agreement
and shall provide a confirmation to the Seller of any filings or notices made or
other communications given or received in connection with such Other
Governmental Consents. The Seller shall cooperate with the Buyers in pursuing
the Other Governmental Consents.
(d) The Seller shall use its reasonable best efforts to obtain any
Consent or waiver of right of first refusal (other than the Serralles ROFR) or
right of first offer that would be triggered in connection with the consummation
of the transactions contemplated hereby under
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any Contract or Charter Document to which any of the Asset Sale Subsidiaries or
the Spirits Subsidiaries is a party or by which it or any of its assets,
properties or business is bound.
SECTION 6.4. POST-CLOSING COOPERATION; RECORDS. (a) The parties
-----------------------------------
shall use their reasonable best efforts to cooperate with each other, and shall
use their reasonable best efforts to cause their respective officers, employees,
agents, auditors and representatives to cooperate with each other, for a period
of not less than 180 days after the Closing Date to ensure the orderly
transition of the Business and Transferred Assets from the Seller to the Buyers
and other third parties, as applicable, and to minimize any disruption to the
respective businesses of the Seller and its Affiliates and the Buyers and their
Affiliates, including the Business, that might result from the transition of
ownership of the Business contemplated hereby.
(b) After the Closing, upon reasonable prior written notice, the
Buyers, on the one hand, and the Seller, on the other hand, shall furnish or
cause to be furnished to each other and their employees, counsel, auditors and
representatives access, during Normal Business Hours, to such information and
assistance relating to the Business as is reasonably necessary for financial
reporting and accounting matters (other than in connection with the
Calculation), it being understood that the Buyers shall be seeking to dispose of
portions of the Business. Each party shall reimburse the other parties for
reasonable out-of-pocket costs and expenses incurred in assisting such party
pursuant to this Section 6.4(b). No party shall be required by this Section
6.4(b) to take any action that would unreasonably interfere with the conduct of
its business or unreasonably disrupt its normal operations.
(c) As soon as reasonably practicable following the Closing, the
Seller shall deliver or cause to be delivered to the Buyers all agreements,
documents, books, records and files, including records and files stored on
computer disks or tapes or any other storage medium (collectively, "RECORDS"),
of the Seller and its Affiliates relating to the Business and in the Seller's or
such Affiliates possession, subject to the following exceptions:
(i) the Seller may retain all Records which relate to Subsidiaries
or divisions of the Seller other than those exclusively constituting part
of the Business and shall provide copies of the relevant portions thereof
which relate to the Business to the Buyers;
(ii) the Seller may retain all Records which exclusively relate to
any of the Retained Assets or Retained Liabilities and shall provide
copies of the relevant portions thereof which relate to the Business to
the Buyers;
(iii) the Seller may retain all Records maintained on information
technology hardware or software retained by the Seller and shall provide
copies of the relevant portions thereof which relate to the Business to
the Buyers, provided that nothing in this exception shall relieve the
Seller of its obligation to cooperate in transferring to Buyers any
computerized databases containing Records pertaining to Spirits IP;
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(iv) the Seller may retain all Records prepared primarily for the
purpose of the sale of the Business or any part thereof, including bids
received from other parties and analyses relating to the Business; and
(v) the Seller may retain any Tax Returns, reports or forms, and the
Buyers shall be provided with copies of such Tax Returns, reports or forms
only to the extent that they relate to separate Tax Returns or separate
Tax liability of the Business.
(d) The Buyers shall, and shall cause their respective Affiliates
and shall make adequate provision with respect to portions of the Business that
are sold to third parties to, preserve and keep the Records of the Business
actually delivered to the Buyers pursuant to this Agreement or held by the
Spirits Subsidiaries at or after the Closing for a period of seven years from
the Closing Date, or for any longer periods required by any Governmental Entity
or ongoing litigation, and the Buyers shall, or shall cause their respective
Affiliates to, make such Records held by the Buyers or their Affiliates or any
such third party available to the Seller and its Affiliates and representatives
as may be reasonably requested by the Seller for any purpose, including for
purposes of determining any liability or obligation under this Agreement or for
purposes of identifying any Records which the Seller is entitled to retain
pursuant to Section 6.4(c). If any Buyer wishes to destroy such Records after
that time, it shall give 90 days' prior written notice to the Seller and the
Seller shall have the right, at its option and expense, upon written notice
given to such Buyer within that 90-day period, to take possession of the Records
within 120 days after the date of the Seller's notice to such Buyer.
SECTION 6.5. INTERCOMPANY ACCOUNTS AND ARRANGEMENTS; TRANSITION
-----------------------------------------------------
SERVICES. (a) On or prior to the Closing, all intercompany receivables or
- --------
payables and loans then existing between SCL or any of its Subsidiaries or
Affiliates (other than the Spirits Subsidiaries), on the one hand, and any of
the Spirits Subsidiaries, on the other hand, other than intercompany receivables
and payables for goods or services provided in the ordinary course of business
of the Business or for the services contemplated to continue pursuant to the
Transition Services Agreement, shall be settled or, at the option of the Seller
after consultation with the Buyer (taking into account the capitalization of the
relevant Spirits Subsidiary), any net receivable or loan due from the Spirits
Subsidiaries to SCL or any of its Subsidiaries or Affiliates (other than the
Spirits Subsidiaries) shall be purchased by the Buyers at the Closing with the
aggregate amount of any such purchase price reducing the amount of the Base
Purchase Price payable by the Buyers to the Seller at the Closing pursuant to
Section 2.1. All intercompany receivables, payables and loans for goods or
services provided in the ordinary course of business of the Business and for the
services contemplated to continue pursuant to the Transition Services Agreement
shall remain outstanding after the Closing and shall be satisfied by the obligor
thereon in accordance with their terms, by wire transfer in immediately
available funds.
(b) Certain arrangements between SCL and its Subsidiaries (other
than the Spirits Subsidiaries), on the one hand, and the Spirits Subsidiaries,
on the other hand, shall continue after the Closing, to the extent provided for,
and on the terms and conditions set forth in, the Transition Services Agreement.
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SECTION 6.6. AGREEMENT TO DEFEND AND INDEMNIFY. (a) The Buyers shall
---------------------------------
cause all rights to indemnification by any of the Spirits Subsidiaries in effect
as of the Closing in favor of each present and former director, officer,
employee, agent or representative of each of the Spirits Subsidiaries
(hereinafter referred to in this Section 6.6 as an "INDEMNIFIED REPRESENTATIVE")
--------------------------
as provided in the Charter Documents of the Spirits Subsidiaries or pursuant to
other instruments or agreements of the Spirits Subsidiaries existing as of the
Closing to survive the Closing and to continue in full force and effect
following the Closing Date with respect to events occurring prior to the Closing
Date.
(b) The covenants contained in this Section 6.6 shall survive the
Closing Date until fully discharged and are intended to benefit each of the
Indemnified Representatives.
SECTION 6.7. PUBLIC ANNOUNCEMENTS. The parties agree that, from the
--------------------
date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the Seller and the Buyers (which consent shall not
be unreasonably withheld), except as such release or announcement may be
required by Applicable Law or the rules or regulations of any securities
exchange, in which case the party required to make the release or announcement
shall allow the Seller and the Buyers reasonable time to comment on such release
or announcement in advance of such issuance.
SECTION 6.8. DEALINGS WITH DISTRIBUTORS AND BROKERS. (a) The Buyers
--------------------------------------
shall be solely responsible for securing their own agreements or arrangements
with distributors and brokers with respect to the Business, and the Seller and
its Affiliates (other than the Spirits Subsidiaries) shall have no duties,
obligations or liabilities with respect to the agreements or arrangements of the
Buyers for the distribution and sale of the products of the Business, except as
otherwise provided for in this Section 6.8.
(b) The Seller shall make available or cause to be made available
prior to the Closing upon the reasonable prior written request of either of the
Buyers, employees or officers of the Seller and its Affiliates with business
relationships with distributors and brokers with respect to the Business for the
purpose of meeting with representatives of the Buyers and such distributors and
brokers in order to secure acceptable distribution and brokerage arrangements
for periods following the Closing and such employees or officers shall cooperate
to the extent reasonably requested with the Buyers in arranging for such
meetings.
(c) Immediately prior to Closing, the Seller shall take such actions
to terminate distributors of the transaction contemplated by this Agreement as
the Buyers may reasonably request; provided that the Buyers shall defend,
indemnify and hold harmless the Seller and its Affiliates from and against all
Losses incurred in connection with any such termination.
SECTION 6.9. GUARANTEES. (a) The Buyers shall use their reasonable
----------
best efforts to cause themselves or one or more of their respective Affiliates
to be substituted in all respects for SCL or its Affiliates (other than the
Spirits Subsidiaries), as applicable, and for SCL or its Affiliates (other than
the Spirits Subsidiaries), as applicable, to be otherwise removed or released,
effective as of the Closing, in respect of all obligations of SCL or its
Affiliates (other
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than Spirits Subsidiaries), as applicable, under each of the guarantees,
indemnities, surety bonds, letters of credit and letters of comfort given or
obtained by SCL or its Affiliates (other than the Spirits Subsidiaries), as
applicable, for the benefit of the Business or the Spirits Subsidiaries,
including the guarantees set forth on Schedule 6.9(a)(i), but excluding SCL's
guarantee of the JES Public Indebtedness, the QUIDS and the ACES (collectively,
the "SCL GUARANTEES"), and for all obligations of SCL or its Affiliates (other
---------------
than Spirits Subsidiaries), as applicable, in respect thereof to be terminated,
with, in each case, such substitution, removal, release and termination to be in
form and substance reasonably satisfactory to the Seller.
(b) If the Buyers and SCL have been unable to effect any such
substitution, removal, release and termination with respect to any such SCL
Guarantee effective as of the Closing, each of the Buyers agrees that after the
Closing it shall use its reasonable best efforts to effect such substitution,
removal and release and termination as soon as reasonably practicable. Each of
the Buyers agrees to indemnify, pro rata in proportion to the Buyer A Proportion
and the Buyer B Proportion, and hold the Seller and its Affiliates (other than
Spirits Subsidiaries), as applicable, harmless from and against and in respect
of any and all Losses and settlements incurred by the Seller and its Affiliates
(other than the Spirits Subsidiaries), as applicable, to the extent not caused
by or resulting from any actions of the Seller or its Affiliates, after the
Closing under or pursuant to any such SCL Guarantee or SCL's guarantee of any
JES Public Indebtedness, QUIDS and ACES which remain outstanding as of the
Closing.
(c) The Seller shall use its reasonable best efforts to cause itself
or one or more of its Affiliates (other than the Spirits Subsidiaries) to be
substituted in all respects for the Spirits Subsidiaries and for the Spirits
Subsidiaries to be otherwise removed or released, effective as of the Closing,
in respect of all obligations of the Spirits Subsidiaries under each of the
guarantees, indemnities, surety bonds, letters of credit and letters of comfort
obtained by the Spirits Subsidiaries for the benefit of the Seller or its
Affiliates (other than the Spirits Subsidiaries), including the guarantees set
forth on Schedule 6.9(c) (collectively, the "SPIRITS SUBSIDIARY GUARANTEES") and
-----------------------------
for all obligations of the Spirits Subsidiaries in respect thereof to be
terminated, with, in each case, such substitution, removal, release and
termination to be in form and substance reasonably satisfactory to the Buyers.
(d) If the Seller has been unable to effect any such substitution,
removal, release and termination with respect to any such Spirits Subsidiary
Guarantee effective as of the Closing, the Seller agrees that after the Closing
it shall use its reasonable best efforts to effect such substitution, removal
and release and termination as soon as possible. The Seller agrees to indemnify
and hold the Buyers and their respective Affiliates (including the Spirits
Subsidiaries), as applicable, harmless from and against and in respect of any
and all Losses, claims, judgments and settlements incurred by the Buyers and
their respective Affiliates (including the Spirits Subsidiaries), as applicable,
after the Closing under or pursuant to any such Spirits Subsidiary Guarantee.
(e) The parties shall cooperate with each other to effect the
substitutions referred to in this Section 6.9.
SECTION 6.10. INDEBTEDNESS. Except (i) as set forth on Schedule
------------
6.10(a) and (ii) with respect to the JES Public Indebtedness, the QUIDS and
ACES, the Seller shall use its
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reasonable best efforts to defease or repay or otherwise settle or to cause
itself or one or more of its Affiliates (other than the Spirits Subsidiaries) to
be substituted in all respects for the Spirits Subsidiaries and for the Spirits
Subsidiaries to be otherwise removed or released, prior to or effective as of
the Closing, in respect of all indebtedness of the Spirits Subsidiaries for
borrowed money owed to third parties and for all obligations of the Spirits
Subsidiaries in respect thereof to be terminated, with, in each case, such
substitution, removal, release and termination to be in form and substance
reasonably satisfactory to the Buyers.
(a) If the Seller has been unable to effect any such repayment or
substitution, removal and release and termination with respect to any such
indebtedness effective as of the Closing, the Seller agrees that such
indebtedness will result in a reduction in the Purchase Price to the extent
provided for by Section 2.4.
SECTION 6.11. HEDGING ARRANGEMENTS. (a) The Seller shall use its
---------------------
reasonable best efforts to terminate or otherwise settle or to cause itself or
one or more of its Affiliates (other than the Spirits Subsidiaries) to be
substituted in all respects for the Spirits Subsidiaries, and for the Spirits
Subsidiaries to be otherwise removed and released, effective as of the Closing,
in respect of all obligations of the Seller or its Affiliates (other than
Spirits Subsidiaries), as applicable, under any interest rate swaps, foreign
currency hedges or other hedging or derivative agreements to which any Spirits
Subsidiary is a party or otherwise bound, including those swaps, hedges and
derivative agreements listed on Schedule 4.3(e), and for all obligations of the
Spirits Subsidiaries in respect thereof to be terminated, with, in each case,
such substitution, removal, release and termination to be in form and substance
reasonably satisfactory to the Buyer.
(b) If the Seller has been unable to effect any such substitution,
removal, release and termination with respect to any such agreement effective as
of the Closing, the Seller agrees that after the Closing it shall use its
reasonable best efforts to effect such substitution, removal and release and
termination as soon as possible. The Seller agrees to indemnify and hold the
Buyers and their respective Affiliates (including the Spirits Subsidiaries), as
applicable, harmless from and against and in respect of any and all Losses,
claims, judgments and settlements incurred by the Buyers and their respective
Affiliates (including the Spirits Subsidiaries), as applicable, after the
Closing under or pursuant to any such agreement.
SECTION 6.12. QUIDS AND ACES. (a) The Seller shall use its
----------------
reasonable best efforts to commence or to cause one or more of its Affiliates
(other than a Spirits Subsidiary) to commence as soon as practicable after the
date hereof, and to consummate prior to the Closing, a tender or exchange offer
for the 7.50% Adjustable Conversion-rate Equity Security Units issued by JES and
SCL (the "ACES").
----
(b) The Seller shall use its reasonable best efforts to consummate
prior to Closing the tender offer to purchase the 8.00% Senior Quarterly Income
Debt Securities due 2038 issued by JES (the "QUIDS").
-----
(c) In connection with the tender or exchange offers for the QUIDS
and the ACES, the Seller shall or shall cause one of its Affiliates to seek
consents such that immediately prior to the Closing the provisions contained in
the indentures or any supplemental indentures with respect to the QUIDS and the
7.62% Subordinated Deferrable Notes due June 21, 2004
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issued by JES and comprising a part of the ACES restricting the merger,
consolidation or sale of all or substantially all of the assets of any of the
Spirits Subsidiaries or otherwise restricting the conduct of the business of any
Spirits Subsidiary in any material respect (other than payments of interest) or
requiring the provision of any reports to holders of the ACES and QUIDS shall
have no further force or effect.
(d) To the extent that the Seller is unable to complete a successful
tender offer for the QUIDS or a tender offer or exchange offer for the ACES
prior to the Closing, or to the extent any QUIDS or ACES remain outstanding
prior to the Closing after completion of a tender or exchange offer in which
less than 100% of the QUIDS or ACES, as the case may be, are tendered or
exchanged, the Seller agrees that the greater of the principal amount or the
Fair Market Value of any such QUIDS or the subordinated deferrable notes forming
part of the ACES, as the case may be, remaining outstanding as of the Closing
Date will result in a reduction in the Purchase Price to the extent provided by
Section 2.4.
(e) Prior to the Closing, the Seller shall use its reasonable best
efforts, to the extent permitted by Applicable Law, to have delisted from the
New York Stock Exchange the QUIDS and the ACES.
(f) To the extent permitted by Applicable Law, prior to the Closing,
the Seller shall file or cause JES to file with the SEC a Form 15 with respect
to all JES Public Indebtedness and, if delisted from the New York Stock
Exchange, the QUIDS and the ACES. In addition, prior to the Closing, the Seller
shall file or cause JES to file a post-effective amendment to the Registration
Statement on Form S-3 (filed on 9/2/99) to de-register and remove all of the
securities registered thereon and shall terminate such Registration Statement.
SECTION 6.13. INSURANCE. To the extent that (i) any of the SCL
---------
Insurance Policies cover any loss or liability relating to the Business and
arising out of an occurrence prior to the Closing (such loss or liability, an
"INSURED BUYER LOSS") and (ii) such SCL Insurance Policy continues after the
-------------------
Closing to permit claims to be made with respect to such Insured Buyer Losses,
the Seller agrees to cooperate and to cause SCL to cooperate with the Buyers,
the Spirits Subsidiaries and their respective Affiliates in submitting claims on
their behalf under such SCL Insurance Policies with respect to such Insured
Buyer Losses; provided that the Buyers agree to reimburse the Seller and its
Affiliates from all out of pocket costs and expenses actually incurred by them
as a result of any such claim. To the extent that (i) any of the Spirit
Subsidiary Insurance Policies or any other insurance policy of the Buyers or any
of their respective Affiliates covers any loss or liability relating to the
Business and arising out of an occurrence prior to the Closing (such loss or
liability, an "INSURED SCL LOSS") and (ii) such Spirit Subsidiary Insurance
-----------------
Policy or other insurance policy continues after the Closing to permit claims to
be made with respect to such Insured SCL Losses, the Buyers agree to cooperate
with the Seller, SCL and its Affiliates (other than the Spirits Subsidiaries) in
submitting claims on their behalf under such Spirit Subsidiary Insurance
Policies or other insurance policies with respect to such SCL Insured Losses;
provided that the Seller agrees to reimburse, indemnify and hold the Buyers and
their Affiliates, as applicable, harmless from all Liabilities, costs and
expenses actually incurred by them as a result of any such claim.
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SECTION 6.14. RETAINED ASSETS. Prior to the Closing, the Seller
----------------
shall use its reasonable best efforts to cause the Retained Assets held by the
Spirits Subsidiaries to be distributed or otherwise transferred by the
applicable Spirits Subsidiary to another Person (other than any other Spirits
Subsidiary); provided that there shall not be the imposition or assumption of
Liabilities on the Buyers or any of the Spirits Subsidiaries or any violation of
Applicable Law in connection therewith. Notwithstanding anything to the contrary
contained in this Agreement, to the extent that the distribution or transfer, or
attempted distribution or transfer, of any Retained Assets as provided for in
the preceding sentence would require any Consent of any third party and such
Consent shall not have been obtained prior to the Closing or for any other
reason any such distribution or transfer shall not have been completed prior to
the Closing, the parties shall use their reasonable efforts, and shall cooperate
with each other, to obtain promptly any such Consent or to effect any such
transfer or distribution following the Closing; provided that none of the Buyers
or any of their respective Affiliates shall be required to pay any
consideration, other amount or incur any expenses in connection thereto. Pending
the completion of any such distribution or transfer, the parties shall cooperate
with each other in any reasonable and lawful arrangements designed to provide to
the Seller the benefits and Liabilities of such Retained Assets.
SECTION 6.15. SEAGRAM NAME. (a) Effective as of the Closing, the
------------
Buyers shall grant to, or shall cause the grant to, the Seller, its Subsidiaries
(other than the Spirits Subsidiaries) and Affiliates a worldwide non-exclusive
royalty free right and license to use the "Seagram" name and the "Sandeman"
name, or any derivations thereof, as used by the Seller, its Subsidiaries (other
than the Spirits Subsidiaries) or its Affiliates (except in competition with the
Business) prior to the Closing, for a period of nine months after the Closing,
after which the Seller, its Subsidiaries (other than the Spirits Subsidiaries)
and Affiliates shall cease all use of the "Seagram" name and the "Sandeman"
name, except as set forth in Section 6.15(b).
(b) Effective as of the Closing, the Buyers hereby grant the Seller,
its Subsidiaries (other than the Spirits Subsidiaries) and Affiliates a
perpetual, non-terminable, transferable, worldwide, non-exclusive royalty free
right and license, with the right to sublicense the same, to use the "Seagram"
name and the Seagram Crest, or any derivations thereof, in connection with all
art, antiques, artifacts and archival materials owned or previously owned by the
Seller, its Subsidiaries or its Affiliates, including "The Seagram Company Ltd.
- - Bronfman Family Collections" at the Hagley Museum and Library, "The Seagram
Art Collection" and "The Seagram County Courthouse Collection" and in connection
with the name of the building located at 375 Park Avenue, New York, New York
10017. The Seller, its Subsidiaries (other than the Spirits Subsidiaries) and
Affiliates may transfer the right to use the "Seagram" name and the Seagram
Crest, or any derivations thereof, to a third-party or parties in connection
with the transfer of any such art, antiques, artifacts, archival materials or
building.
(c) The Seller agrees to maintain and preserve the quality of the
"Seagram" name and the "Sandeman" name, and to use them in good faith and in a
manner consistent with good trademark practice. The Seller agrees to use the
"Seagram" name and the "Sandeman" name, or any derivations thereof, only in the
manner permitted by Applicable Law.
(d) The Seller will use its reasonable best efforts to cause to be
furnished to the Buyers and any Successor Buyers access to all of the archives
relating to The Seagram
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Company Ltd.--Bronfman Family Collections at the Hagley Museum and Library upon
reasonable notice, including the rights to examine and borrow for reasonable
periods of time any archival materials and to make copies thereof and extract
excerpts therefrom.
SECTION 6.16. CHIVAS ENTITIES. For at least one year from the date
---------------
of the Closing, Buyer A agrees:
(i) that Chivas Brothers Limited shall have at least two owners,
each owning at least 1% of its outstanding shares, and no action shall be taken
that would result in Chivas Brothers Limited not being treated as a partnership
for United States Federal Income Tax purposes; and
(ii) that it will not liquidate, discontinue the operations of, or
sell the assets (other than inventory) of Chivas 2000.
SECTION 6.17. FURTHER ASSURANCES; ACTIONS. (a) At any time following
---------------------------
the Closing Date, the Seller and the Buyers shall and shall cause their
Affiliates to, promptly execute, acknowledge and deliver any other assurances or
documents necessary to vest more effectively in the proper party (or its
Affiliates) or to put the proper party (or its Affiliates) more fully in
possession of all of those assets (including the Retained Assets) to be
transferred to such party or its Affiliates pursuant to this Agreement.
(b) The Buyers agree to cause JES and Tequila Don Julio S.A. de C.V.
to comply with the terms of paragraph 13 of the Patron Agreement and to
indemnify and hold SCL and its Affiliates harmless for any breach of paragraph
13 of the Patron Agreement by JES or Tequila Don Julio S.A. de C.V. after the
Closing. The Buyers and the Seller agree that they will cooperate fully as
necessary to (i) enforce the releases contained in the Mutual Release, dated
October 30, 2000 (the "PATRON MUTUAL RELEASE"), between St. Maarten Spirits
-----------------------
Limited, St. Maarten Spirits, Ltd., International Spirit Company Limited, Martin
Crowley and John Paul Dejoria, et al. (the "ST. MAARTEN PARTIES"), on the one
--------------------
hand, and JES, SCL, JDC S.A. de C.V., JDC Services, S.A. de C.V. and Tequila Don
Julio S.A. de C.V. d/b/a Tequila Tres Magueyes and Tequila Don Julio, et al., on
the other hand, against any claims asserted by the St. Maarten Parties in
violation of the Mutual Release and (ii) enforce the payment and other
obligations of the St. Maarten Parties under the Patron Agreement and the
Guarantee, dated as of October 30, 2000, by John Paul Dejoria in favor of JES
and SCL (the "PATRON GUARANTEE").
----------------
(c) The Buyers shall cooperate with respect to any reasonable
requests received from the Seller for copies of any Business Records or other
information relating to the Citric Acid Litigation or any other matter listed as
a Retained Asset or Retained Liability.
(d) Following the Closing, the Buyers agree to comply and to cause
their respective Affiliates and successors to comply with any obligations of the
Spirits Subsidiaries or the Asset Sale Subsidiaries (for Assigned Contracts or
Transferred Assets) under each of the Contracts of the Spirits Subsidiaries and
the Asset Sale Subsidiaries with respect to the distribution of the ABSOLUT
brand and the Mumm brand; provided that the Seller shall reimburse the Buyers,
for any out-of-pocket expenses reasonably incurred in connection therewith. The
Seller shall be entitled to terminate or cause its Affiliates to terminate any
of the
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agreements governing the distribution of the ABSOLUT brand and the Mumm brand.
Following the Closing, to the extent applicable, the Buyers shall, upon the
written request of the Seller, terminate any of the agreements governing the
distribution of the ABSOLUT brand and the Mumm brand.
SECTION 6.18. PAYMENTS. From and after the Closing, (i) the Seller
--------
shall promptly cause to be paid to the Buyers or any designated Affiliates
thereof any funds received in settlement of any accounts receivable related to
the Business or otherwise related to the Business that the Seller or any of its
Affiliates receive after the Closing Date and (ii) the Buyers shall promptly
cause to be paid to the Seller or any designated Affiliate thereof any funds
received with respect to any Retained Assets or Retained Liabilities or any
business of the Seller (other than the Business) that any of such parties or any
of their respective Affiliates receive after the Closing.
SECTION 6.19. RESIGNATIONS. At or prior to the Closing, or as soon
------------
as reasonably practicable thereafter, the Seller shall deliver to the Buyers the
resignations of all directors or natural Persons of equivalent position from
such positions with each of the Spirits Subsidiaries.
SECTION 6.20. GST/QST REGISTRATION. At or prior to the Closing, the
--------------------
entity and/or entities to which Buyer A and/or Buyer B may assign their
respective rights, subject to Section 12.8, to purchase, subject to Section 2.1,
the Transferred Shares and Transferred Minority Interests, if applicable,
relating to any Canadian entities, as well as any Transferred Assets the supply
of which is made in Canada for purposes of the goods and services, including for
greater certainty real property, tax levied under the Excise Tax Act (Canada) or
in Quebec for purposes of the sales tax levied by Quebec Sales Tax Act, shall be
duly registered under subdivision (d) of Division V of Part IX of the Excise Tax
Act (Canada) with respect to the goods and services tax and harmonized sales tax
and under Division 1 of Chapter VIII of Title I of the Quebec Sales Tax Act with
respect to the Quebec sales tax and shall have such duly issued registration
numbers.
ARTICLE VII
TAX MATTERS
-----------
SECTION 7.1. TAX INDEMNITIES. (a) From and after the Closing Date,
----------------
without duplication, the Seller shall indemnify the Buyers and the Spirits
Subsidiaries against (i) all Income Taxes (including reasonable attorneys' and
accountants' fees and other reasonable out-of-pocket expenses incurred in
connection therewith, and determined on a tax-affected basis, as calculated
under Section 10.6(a)) imposed on or payable by any of the Asset Sale
Subsidiaries or the Spirits Subsidiaries (A) with respect to any taxable period
or portion thereof that ends on or before the Closing Date (including any Income
Taxes allocated to such period under Section 7.1(d) hereof), (B) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law) by
reason of any of the Spirits Subsidiaries being included in any consolidated,
affiliated, combined or unitary or other similar group for tax purposes with the
Seller or its Affiliates at any time on or before the Closing Date, (C) pursuant
to any contract or agreement
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with any third party for indemnification of Income Taxes entered into by any
Spirits Subsidiary prior to the Closing Date, and (D) without duplication, (I)
any Income Taxes payable as a result of elections referred to in Section 7.8,
(II) any Income Taxes for any taxable period or portion thereof that ends on or
before the Closing Date payable as a result of any Spirits Subsidiary ceasing to
be a member of a consolidated, affiliated, combined or unitary or other similar
group for Tax purposes with the Seller or its Affiliates, (III) any Income Taxes
for any taxable period or portion thereof that ends on or before the Closing
Date arising from the UK Reorganization, (IV) for clarification, any Income
Taxes for any taxable period or portion thereof that ends on or before the
Closing Date in respect of matters that are set forth on Schedule 4.18 and (ii)
any stamp duty or stamp duty reserve tax payable in relation to the UK
Reorganization. No indemnity shall be provided under this Section 7.1(a) for any
Income Taxes resulting from any transaction of any of the Spirits Subsidiaries
(A) occurring on the Closing Date after the Closing that is not in the ordinary
course of business or (B) occurring after the Closing Date.
(b) From and after the Closing Date, without duplication, and the
Buyers shall, and shall cause the Spirits Subsidiaries to, indemnify the Seller
and its Affiliates against all Taxes (including reasonable attorneys' and
accountants' fees and other reasonable out-of-pocket expenses incurred in
connection therewith, and determined on a tax-affected basis, as calculated
under Section 10.6(a)) imposed on the Spirits Subsidiaries which are not subject
to indemnification pursuant to Section 7.1(a), and all Taxes that are Assumed
Liabilities, including Taxes (i) resulting from any transaction (A) occurring on
the Closing Date after the Closing that is not in the ordinary course of
business or (B) occurring after the Closing Date or (ii) with respect to any
taxable period or portion thereof that begins after the Closing Date (including
any Income Taxes allocated to such period under Section 7.1(d) hereof).
(c) Payment by the indemnitor of any amount due under this Section
7.1 shall be made within ten days following written notice by the indemnitee
that payment of such amounts to the appropriate Tax Authority is due; provided
that the indemnitor shall not be required to make any payment earlier than five
days before it is due to the appropriate Tax Authority. If the Seller receives
an assessment or other notice of Taxes due with respect to any of the Spirits
Subsidiaries for any period for which the Seller is not responsible, in whole or
in part, pursuant to Section 7.1(a), then the Buyers shall pay such Tax, or if
the Seller pays such Tax, then the Buyers or the Spirits Subsidiary shall pay to
the Seller, in accordance with the first sentence of this Section 7.1(c), the
amount of such Tax for which the Seller is not responsible. In the case of a Tax
that is contested in accordance with the provisions of Section 7.3, payment of
the Tax to the appropriate Tax Authority will not be considered to be due for
purposes of this Section 7.1(c) earlier than the date a final determination to
such effect is made by the appropriate Tax Authority or court. Final
determination shall have the meaning set forth in Section 1313(a) of the Code
(or comparable provision of state, local or foreign law).
(d) The Seller and the Buyers shall, to the extent permitted by
Applicable Law and except as otherwise provided herein, elect with the relevant
Tax Authority to close the taxable period of the Spirits Subsidiaries on the
Closing Date provided that no election shall be made that would effect a change
in the accounting period of any of the Spirits Subsidiaries for statutory
accounting purposes. For purposes of this Agreement, in the case of any Income
Tax that is payable for a taxable period that begins before the Closing Date and
ends after the Closing Date, the portion of such Income Tax which is payable (or
credit or refund thereof) for the
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portion of such taxable period ending on the Closing Date shall be the amount
which would be payable (or credited or refunded) if the relevant taxable period
ended on the Closing Date.
SECTION 7.2. REFUNDS AND TAX BENEFITS. (a) The Buyers shall promptly
------------------------
pay to the Seller the amount of any refund, credit or offset (including any
interest paid, credited or any offset allowed with respect thereto but reduced
by any Taxes that the Buyer or any of the Spirits Subsidiaries shall be required
to pay with respect thereto) received or used, in the case of a credit or
offset, by the Buyers or any of the Spirits Subsidiaries of Taxes (i) relating
to taxable periods or portions thereof ending on or before the Closing Date
(including any Income Taxes allocated to such period under Section 7.1(d)
hereof), (ii) attributable to an amount paid by the Seller under Section 7.1
hereof or (iii) that are Retained Assets. The amount of any refunds, credits or
offsets (including any interest paid or credited with respect thereto) received
by the Buyers or any of the Spirits Subsidiaries shall be for the account of the
Buyers if the refund, credit or offset is of Taxes relating to taxable periods
or portions thereof that begin on or after the Closing Date (including any
Income Taxes allocated to such period under Section 7.1(d) hereof), including
any refund, credit or offset that results from the carry forward of a Tax
attribute from a period ending on or before the Closing Date to a post-Closing
taxable period. The Buyers shall, if the Seller so requests and at the Seller's
expense, cause the relevant entity to file for and use its reasonable best
efforts to obtain and expedite the receipt of any refund to which the Seller is
entitled under this Section 7.2.
(b) The Buyers shall, and shall cause the Spirits Subsidiaries to,
make any and all elections under section 172(b)(3) of the Code and under any
comparable provision of any state, local and foreign Tax law in any state,
locality or foreign jurisdiction within which any of the Spirits Subsidiaries
file a combined, unitary or similar return with the Seller or any of its
Affiliates to relinquish the entire carryback period with respect to any net
operating loss attributable to the Spirits Subsidiaries in any taxable period
beginning after the Closing Date that could be carried back to a taxable year
ending on or before the Closing Date. Neither the Seller nor any Affiliate
thereof shall be required to pay to the Buyers or any of the Spirits
Subsidiaries any refund or credit of Taxes that results from the carryback to
any taxable period ending on or before the Closing Date of any net operating
loss, capital loss or tax credit attributable to any of the Spirits Subsidiaries
in any taxable period beginning after the Closing Date, except that any of the
Spirits Subsidiaries that have not filed combined, unitary or similar returns
with the Seller or any of its Affiliates (other than the Spirits Subsidiaries)
shall be entitled to carry back losses or tax credits from any taxable period
beginning on or after the Closing Date to any taxable period of such Spirits
Subsidiary ending on or prior to the Closing Date, but only if such carryback
would not impose a material Tax cost or otherwise materially adversely effect
the Seller or any of its Affiliates.
SECTION 7.3. CONTESTS. (a) After the Closing Date, each of the
--------
Seller and the Buyers shall promptly notify the other party in writing upon
receipt of written notice of the commencement of any Tax audit or administrative
or judicial proceeding or of any demand or claim on the Seller, the Buyers or
the Spirits Subsidiaries which, if determined adversely to the taxpayer or after
the lapse of time, would be grounds for indemnification by the other party under
Section 7.1. Such notice shall contain factual information (to the extent known
to the notifying party) describing the asserted Tax liability in reasonable
detail and shall include copies of any notice or other document received from
any Taxing Authority in respect of any such
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asserted Tax liability. If the indemnitee under Section 7.1 fails to give the
indemnitor under Section 7.1 prompt notice of an asserted Tax liability as
required by this Section 7.3, then the indemnitor shall not have any obligation
to indemnify for any loss arising out of such asserted Tax liability, but only
to the extent that failure to give such notice results in a detriment to the
indemnitor.
(b) In the case of an audit or administrative or judicial proceeding
that relates to a period ending on or before the Closing Date and for which the
Seller may be obligated to indemnify the Buyers or the Spirits Subsidiaries
under Section 7.1(a) or with respect to which the Seller may be entitled to a
refund or credit under Section 7.2, the Seller shall have the sole right, at its
expense, to control the conduct of such audit or proceeding; provided, that the
Seller shall consult with the Buyers to the extent any proposed adjustment may
have a material effect on the Taxes of the Buyers or the Spirits Subsidiaries
for taxable periods beginning after the Closing Date. The Buyers shall control
the conduct of any other audit or proceeding; provided, that the Buyers shall
consult with the Seller to the extent any proposed adjustment may have a
material effect on the Taxes of the Seller (including the right to any refund or
credit) or its indemnification obligations hereunder for taxable periods
beginning before the Closing Date.
(c) With respect to Income Taxes for periods beginning before the
Closing Date and ending after the Closing Date, (i) each party may participate
at its expense in an audit or proceeding which relates to any such period and
(ii) such audit or proceeding shall be controlled (at the controlling party's
expense) by that party which would bear the burden of the greater portion of the
sum of the adjustment; provided that no party shall settle any such audit or
proceeding without the consent of the other parties, which consent shall not be
unreasonably withheld. The principle set forth in the preceding sentence shall
govern also for purposes of deciding any issue that must be decided jointly (in
particular, choice of judicial forum) in situations in which separate issues are
otherwise controlled hereunder by the Buyers, on the one hand, and the Seller,
on the other hand.
SECTION 7.4. PREPARATION OF TAX RETURNS. (a) The Seller shall at its
--------------------------
expense timely prepare and file any Income Tax Returns relating to the Spirits
Subsidiaries for any taxable periods that end on or prior to the Closing Date
(the "SELLER RETURNS") and timely pay when due all Taxes relating to such
---------------
Returns. The Seller Returns shall be prepared in a manner consistent with the
prior practice of the Spirits Subsidiaries (except to the extent the Seller
determines that there is no reasonable basis therefor). In the case of any
Income Tax Return for a period that includes, but does not end on, the Closing
Date (the "STRADDLE RETURNS"), the Buyers at their expense shall timely prepare
----------------
or cause the Spirits Subsidiaries to prepare such Straddle Returns in a manner
consistent with the prior practice of the Spirits Subsidiaries (except to the
extent the Buyers determine that there is no reasonable basis therefor) and the
Buyers shall deliver such Straddle Returns to the Seller at least 14 days before
such return is due to be filed (taking into account any extensions of time to
file such return that have been properly obtained) for the Seller's review and
comment. The Seller shall reimburse the Buyers for any Taxes on the Straddle
Return owed by the Seller pursuant to Sections 7.1(a) and 7.1(d). The Buyers
shall at their expense timely prepare and file, or cause the Spirits
Subsidiaries to prepare and file, any other Tax Returns due after the Closing
Date; provided that the Seller shall prepare and file any such Tax Returns with
respect to which the Seller may be entitled to a refund or credit under Section
7.2.
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(b) The Seller shall have the right to object to any items set forth
on the Straddle Returns within seven days of the delivery of a particular
return. In the event of such an objection, the parties shall attempt in good
faith to resolve the dispute. If the parties cannot resolve any such dispute,
the items remaining in dispute shall be submitted to an independent accounting
firm of international reputation selected by, and mutually acceptable to, the
Seller and the Buyers. The independent accounting firm so selected shall
determine the proper amounts for the items remaining in dispute and the Buyers
and the Seller shall be bound by the determination by the independent accounting
firm, absent manifest error. The independent accounting firm shall make any such
determination within seven days after submission of the remaining disputed
items. If a Tax Return is due before the date a disputed item is resolved
hereunder, it shall be filed as prepared, and resolved items shall be reflected
on an amended return.
SECTION 7.5. COOPERATION AND EXCHANGE OF INFORMATION. The Seller and
---------------------------------------
the Buyers will provide each other with such cooperation and information as any
of them reasonably may request of the other in respect of Taxes. Any information
obtained under this Section 7.5 shall be kept confidential, except as may be
otherwise necessary in connection with the filing of returns or claims for
refund or in conducting an audit or other proceeding.
SECTION 7.6. TAX SHARING ARRANGEMENTS. Any and all existing Tax
-------------------------
sharing, allocation, compensation or like agreements or arrangements, whether or
not written, that include any of the Spirits Subsidiaries (other than agreements
or arrangements with third parties), including any arrangement by which any of
the Spirits Subsidiaries makes compensating payments to another of the Spirits
Subsidiaries or any other member of any affiliated, consolidated, combined,
unitary or other similar Tax group for the use of certain tax attributes, shall
be terminated as of the day before the Closing Date and shall have no further
force or effect and no further payments shall be made under any such agreements
or arrangements.
SECTION 7.7. INDEMNITY PAYMENTS TO BE TREATED AS PURCHASE PRICE
-----------------------------------------------------
ADJUSTMENTS. The Seller and the Buyers agree that any payments pursuant to
- -----------
Sections 7.1 and 7.2 hereof shall be treated as adjustments to the Purchase
Price.
SECTION 7.8. SECTION 338(H)(10) ELECTION (a) With respect to the
-----------------------------
sale of the Transferred Shares listed on Schedule 7.8 and the deemed sale of the
shares of the Spirits Subsidiaries listed on Schedule 7.8 (the "SECTION 338
------------
SUBSIDIARIES"), the Seller and the Buyers shall jointly make timely and
- ------------
irrevocable elections under section 338(h)(10) of the Code (the "SECTION 338
-----------
ELECTIONS").
- ---------
(b) To the extent possible, the Seller and the Buyers agree to
execute at the Closing any and all forms necessary to effectuate the Section 338
Elections (including Internal Revenue Service Form 8023 (the "SECTION 338
------------
FORMS")). In the event, however, any completed Section 338 Forms are not
- -----
executed at the Closing, the Seller and the Buyers agree to prepare and complete
each such Section 338 Form no later than 15 days prior to the date such Section
338 Form is required to be filed. The Seller and the Buyers shall each cause the
Section 338 Forms to be duly executed by an authorized person, and shall duly
and timely file the Section 338 Forms in accordance with applicable tax laws and
the terms of this Agreement.
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(c) Using the allocation of the Purchase Price on Schedule 2.1
attributable to the Transferred Subsidiaries that are Section 338 Subsidiaries,
the Buyers shall reasonably determine the fair market value of the assets of the
Section 338 Subsidiaries and the allocation of that portion of the Purchase
Price (as required pursuant to section 338(h)(10) of the Code and regulations
promulgated thereunder), together with applicable liabilities, among such assets
(the "SECTION 338 ALLOCATION"). The Buyers shall deliver to the Seller a
------------------------
schedule setting forth the Section 338 Allocation as soon as practicable after
the Closing Date (the "SECTION 338 ALLOCATION SCHEDULE"). If the Section 338
---------------------------------
Allocation would have an adverse effect on the Seller, then the Seller shall be
entitled to have reasonable comments incorporated into the Section 338
Allocation Schedule. The Seller and the Buyers shall file all Tax Returns
consistently with the Section 338 Allocation Schedule, as adjusted by the
Seller's comments incorporated pursuant to the previous sentence.
(d) The Buyers shall not make any election under section 338(g) of
the Code with respect to any directly or indirectly owned foreign Subsidiary of
J.E. Seagram Corp., without the prior written consent of the Seller which
consent shall not be unreasonably withheld if Buyers compensate Seller for any
incremental cost incurred as a result of such election.
SECTION 7.9. TRANSFER TAXES AND SALES TAX. (a) The Buyers shall be
-----------------------------
responsible for the payment of all Transfer Taxes, if any, which may be payable
with respect to the consummation of the transactions contemplated by this
Agreement and the Related Agreements (including any such Transfer Taxes with
respect to any deemed sale of assets pursuant to any Section 338 Election). To
the extent any exemptions from such Transfer Taxes are available (including the
exemptions referred to in Section 7.9(b), (c) and (d) below), the Buyers and the
Seller shall cooperate to prepare any certificates or other documents necessary
to claim such exemptions.
(b) To the extent relevant conditions are met, the Seller and the
Buyers shall jointly elect under subsection 167(l) of Part IX of the Excise Tax
Act (Canada), Section 75 of the Quebec Sales Tax Act, and any other Canadian
provincial legislation imposing a similar value added or multi-staged tax, that
no tax be payable with respect to the sale and purchase of the Transferred
Assets pursuant to this Agreement. The Seller and the Buyers shall make such
election in the prescribed form containing prescribed information pursuant to
the Excise Tax Act (Canada), the Quebec Sales Tax Act and any other provincial
legislation imposing a similar value added or multi-staged tax, and the Buyers
shall file the joint election in compliance with the requirements of the Excise
Tax Act, the Quebec Sales Tax Act and any other Canadian provincial legislation
imposing a similar value added or multi-staged tax. The Buyers shall indemnify
and hold harmless the Seller and its Affiliates from and against any such tax
imposed on the Seller or any of its Affiliates as a result of any failure or
refusal by any Tax Authority to accept any such election.
(c) The Seller and the Buyers agree that the portion of the Business
located in New Zealand is being sold as a going concern, and that under the New
Zealand Goods and Services Tax Act 1985 (the "GST ACT") the sale is to be zero
-------
rated for GST purposes of New Zealand Good and Services Tax (the "NZ GST").
------
However, if any supply under this Agreement is a "Taxable Supply" as that term
is defined in the GST Act then:
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(i) the Buyers will pay to the Seller all NZ GST on any Taxable
Supply under this Agreement on the date which the supply is deemed to take place
by virtue of the GST Act; and
(ii) the Seller will provide a tax invoice for the relevant Taxable
Supply within two Business Days of the Buyers requesting one.
If the Buyers fail to pay on the due date any amount payable under
this clause then, without prejudice to the Seller's other remedies, the Buyers
will pay to the Seller, on demand, an amount equal to any additional tax that
shall have become chargeable under the GST Act.
As between the Seller and the Buyers, the Seller shall not be
obliged to pay NZ GST or additional tax until the corresponding payment is
received from the Buyers.
(d) (i) The Seller and the Buyers agree that the supply of the
assets of the Business pursuant to this Agreement is the supply of a going
concern for the purposes of subdivision 38-J of the AUS GST Act and that that
supply is "GST-free" for the purposes of the AUS GST Law.
(ii) Each of the Buyers warrants that in all respects it complies
with the requirements of the AUS GST giving rise to AUS GST-free status, and in
particular, that it is "registered" for the purposes of the AUS GST Law.
(iii) If the supply of any or all of the assets of the Business by
the Seller to the Buyers is classified as a Taxable Supply for AUS GST purposes,
the Buyers will pay to the Seller an additional amount equal to the sum of:
(A) the GST Amount in relation to that AUS Taxable Supply;
(B) any Default GST in relation to that AUS Taxable Supply; and
(C) any Default GST in relation to the AUS Taxable Supply multiplied
by the appropriate rate of AUS GST (currently 10%).
(iv) The amount payable under Section 7.9(d) must be paid by the
Buyers to the Seller within three Business Days of demand being made by the
Seller.
(v) Where the GST Amount or any Default GST is not so paid to the
Seller, the Buyers shall pay to the Seller Default Interest on the amount of the
GST Amount and any Default GST until the GST Amount and any Default GST is paid
by the Buyers to the Seller.
(vi) If the Seller makes claim against any of the Buyers in respect
of any Default GST payable under this Section 7.9(d), it will not be a defense
to that claim that the Seller has failed to mitigate the Seller's damages by
paying an amount of AUS GST when it fell due under the AUS GST Law.
(vii) The parties agree that:
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(A) all Payments, other than Payments for the supply by the Seller
of the assets of the Business to which this Section 7.9(d) applies, have
been calculated without regard to AUS GST;
(B) if the whole or any part of any Payment, other than a Payment
for the supply by the Seller of the assets of the Business to which this
Section 7.9(d) applies, is the consideration for an AUS Taxable Supply,
the payer must pay to the payee an additional amount equal to the GST
Amount. Unless otherwise agreed in writing, such additional amount is to
be paid within five Business Days of the payee issuing to the payer a
valid Tax Invoice for the AUS Taxable Supply;
(C) any reference to a cost or expense in this Agreement excludes
any amount in respect of AUS GST forming part of the relevant cost or
expense when incurred by the relevant part for which that party can claim
an Input Tax Credit; and
(D) if, in relation to an AUS Taxable Supply, an Adjustment Event
occurs that gives rise to an Adjustment then the GST Amount will be
adjusted accordingly and where necessary a payment will be made to
reflect that adjustment. If a payment is required it will be made within
five Business Days of the date on which the Adjustment Note is issued by
the supplier.
SECTION 7.10. ACCOUNTS RECEIVABLE ELECTION. To the extent relevant
-----------------------------
conditions are met, the Buyers and the Seller shall, with respect to any
accounts receivable transferred as part of the Transferred Assets, jointly
execute and file an election under Section 22 of the Income Tax Act (Canada),
and any equivalent Canadian provincial tax legislation, and shall designate
therein the portion of the Purchase Price allocated thereto in Schedule 2.1
hereof as the consideration paid by the Buyers to the Seller.
SECTION 7.11. REMEDY EXCLUSIVE. The right of each of the Buyers to
-----------------
indemnification from the Seller, and of the Seller and its Affiliates to
indemnification from the Buyers under this Article VII shall be its exclusive
remedy with respect to Taxes of the Business, and any limitations to
indemnification set forth in Article X shall not apply to this Article VII.
ARTICLE VIII
EMPLOYEE BENEFITS
SECTION 8.1. EMPLOYEES AND OFFERS OF EMPLOYMENT. (a) The Seller and
----------------------------------
the Buyers agree to cooperate reasonably during the period prior to the Closing
Date to ensure the continuity of the workforce of the Business, including
without limitation the Transferred Employees, and to preserve the human
resources of the Business, including without limitation the Transferred
Employees. In furtherance thereof, between the date of this Agreement and the
Closing Date, except where Applicable Law provides for an automatic transfer of
employees upon the transfer of a business as a going concern, Buyer A and Buyer
B or their Affiliates shall offer employment commencing as of the Closing Date
to each Transferred Employee listed on Schedule 8.1 who, on the Closing Date, is
actively employed or who is absent from work by
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reason of vacation, injury, sick leave, short-term disability or due to
authorized leave of absence or military service, or, solely with respect to any
Transferred Employee to whom U.K. or Canadian law applies, long-term disability.
(b) Until December 31, 2002 (or longer, if required by law) (the
"BENEFITS CONTINUATION PERIOD"), the Buyers or their Affiliates will provide
------------------------------
each Business Employee (including each Transferred Employee) who continues his
or her employment with one of the Buyers or their Affiliates ("ASSUMED
-------
EMPLOYEES"), and shall cause any individual or entity which becomes an employer
- ---------
of any Assumed Employee through the acquisition from the Buyers or any Affiliate
of the Buyers of any portion of the Business ("SUCCESSOR BUYER") to provide to
----------------
each such Assumed Employee (subject to such Assumed Employee's continued
employment with Buyer A, Buyer B, any Affiliate of either Buyer or any Successor
Buyer), base salary levels at least equal to that provided to such Assumed
Employee immediately prior to the Closing Date, and provide overall employee
benefits, including all defined contribution and defined benefit pension
benefits (but excluding for these purposes any plans that provide for equity or
equity-based compensation), to Assumed Employees that are no less favorable, in
the aggregate, than those provided immediately prior to the Closing Date to
Assumed Employees generally, except for any changes made to comply with
Applicable Law or Tax qualification nondiscrimination rules. After the end of
the Benefits Continuation Period, and subject to Applicable Laws, the Buyers
shall provide or shall cause to be provided, and shall cause any Successor Buyer
to thereafter provide, base salary and overall benefits (including retiree
benefits) to Assumed Employees that are no less favorable, in the aggregate,
than those then provided to similarly-situated employees of Buyer A or Buyer B
(or such Successor Buyer), as applicable.
(c) Each of the Buyers shall credit, and shall cause each of their
Affiliates to credit, Assumed Employees for service with the Seller, JES, and
their respective current and former Affiliates for all purposes (including,
without limitation, benefit accrual) under each employee benefit and fringe
benefit plan, program or arrangement of Buyer A or Buyer B and their respective
Affiliates (the "BUYERS' BENEFIT PLANS"), as applicable, in which such Assumed
---------------------
Employees are eligible to participate to the extent such service was credited
under a comparable plan of the Seller, JES or their respective Affiliates in
which the Assumed Employees participated, and shall cause any Successor Buyer
with respect to Assumed Employees to credit such Assumed Employees with service
with the Seller, JES, any of the Buyers and their respective current and former
Affiliates under any employee benefit and fringe benefit plan, program or
arrangement of such Successor Buyer (unless, in either case, such credit would
result in a duplication of benefits). Each of the Buyers shall waive, and shall
cause their respective Affiliates and Affiliates of any Successor Buyer to
waive, any and all service requirements with respect to eligibility of any
Assumed Employee to participate in any Buyers' Benefit Plan or similar plan or
arrangement of any such Successor Buyer, at which time the Buyers or the
Successor Buyer and their respective Affiliates shall cause such plan, program
or arrangement to (i) waive any preexisting condition limitations (to the extent
such limitations were inapplicable to an Assumed Employee immediately before
such arrangement was made available to such Assumed Employee) and (ii) honor any
deductible and out-of-pocket expenses incurred by the Assumed Employees and
their dependents under similar Company Plans during the portion of the plan year
prior to such participation. Nothing in this Agreement shall restrict, limit or
interfere with the ability (after the Closing Date) of the Seller, the Buyers,
any Successor Buyer or their respective Affiliates to terminate, amend or
replace any particular agreement, plan or
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program, or terminate the employment of any person; provided that the
requirements of this Article 8 otherwise are satisfied.
SECTION 8.2. EMPLOYMENT AGREEMENTS, TERMINATION AGREEMENTS
---------------------------------------------------
SEVERANCE, AND REPATRIATION/RELOCATION. (a) Prior to the Closing Date, the
- ----------------------------------------
Seller shall assume, or shall cause a designated Subsidiary or Affiliate of
Vivendi Universal (a "V/U DESIGNEE") to assume, all liability with respect to
-------------
employment agreements, post-termination consulting agreements, termination
protection agreements and all other employment related liabilities scheduled
herein with respect to all Retained Employees, as well as with respect to all
individuals who, as of the Closing Date, are terminated employees ("TERMINEES")
---------
or retired employees ("RETIREES") of the Seller, JES and their respective
--------
current and former Affiliates. Effective as of the Closing Date, each of the
Buyers expressly agrees to honor and maintain, and to cause any Successor Buyer
to assume, honor and maintain, the obligations and liabilities under the
employment agreements and termination protection agreements entered into between
the Seller, JES or any of their respective Affiliates and certain Assumed
Employees, as set forth on Schedule 8.2.
(b) Prior to the Closing Date, the Seller shall assume, or shall
cause a V/U Designee to assume, all Company Plans that provide cash severance or
other post-termination benefits continuation, if applicable, to Business
Employees, Retirees and Terminees. Effective as of the Closing Date and
continuing until the second anniversary of the Closing Date, each of the Buyers
shall adopt and maintain, and shall cause any Successor Buyer with respect to
any Assumed Employees to adopt and maintain, a severance plan with respect to
Assumed Employees, the provisions of which shall be no less favorable than the
severance provisions of the Company Plans and shall provide, and shall cause any
Successor Buyer to provide, cash severance and other post-termination benefits
continuation, if applicable, at no less than the current level required under
the Company Plans for at least two years following the Closing Date, reduced by
any severance payments otherwise required under any existing severance and
employment agreements assumed by the Buyers or any Successor Buyer or Applicable
Law (unless, with respect to the severance benefit, no such reduction is
permitted or provided for). Notwithstanding the foregoing, no Assumed Employee
who is offered a comparable employment opportunity in connection with any sale
of any portion of the Business by either of the Buyers will be eligible for
severance under these plans, but only as may otherwise be required by Applicable
Law. For purposes of this paragraph, a comparable employment opportunity shall
mean one which is not located more than 35 miles away from the Assumed
Employee's current job location and which provides base pay and aggregate
employee benefits equal to or greater than the Assumed Employee's current base
pay and aggregate employee benefits.
(c) REPATRIATION/RELOCATION. Effective as of the Closing Date, the
-----------------------
Buyers expressly agree to honor, and to cause any Successor Buyer to assume, the
repatriation and relocation programs, policies and agreements set forth in
Schedule 8.2(c) for the Benefits Continuation Period.
SECTION 8.3. BONUS; RETENTION BONUS. With respect to the second half
----------------------
of the SCL fiscal year ending June 30, 2001, each Assumed Employee who currently
participates in a Company Plan that is a bonus plan and who (except as provided
below), is still employed by Seller, one of the Buyers, a Successor Buyer, or
any of their Affiliates on such date shall be awarded a bonus for such period in
an amount no less than 50% of such Assumed Employee's
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annual SCL target bonus for the SCL fiscal year ending June 30, 2001 (the "2001
----
TARGET BONUS") pursuant to the existing terms and conditions of such plan on the
- ------------
date hereof; and with respect to the period from and including July 1, 2001 to
and including December 31, 2001 (the "STUB PERIOD"), each Assumed Employee who
-----------
currently participates in a Company Plan that is a bonus plan and who is still
employed by any of the Buyers, a Successor Buyer or any Affiliate of the
foregoing on December 31, 2001, shall be awarded a bonus in an amount no less
than 40% of such employee's 2001 Target Bonus under the Company Plan in which
such employee participates on the date hereof; provided, that Seller shall pay
to each such Assumed Employee the pro-rata portions of such bonus amounts
accrued through the Closing Date, based on the number of days in the applicable
period that such Assumed Employee was employed by the Seller or its Affiliates;
and provided, further, that if (i) any such Assumed Employee is terminated by
the Seller (at a Buyer's request) or by either of the Buyers or any of their
respective Affiliates without Cause (as defined below) or (ii) such Assumed
Employee terminates his or her employment by reason of either of the Buyers or
any of their respective Affiliates requiring such individual to relocate his or
her primary place of employment by more than 35 miles, then (A) if such
termination occurs on or after the Closing Date but before July, 2001, such
Assumed Employee will be entitled to receive an amount equal to 50% of his or
her 2001 Target Bonus as of the Closing Date, pro-rated based on the number of
days in 2001 prior to June 30, 2001 on which such Assumed Employee was employed
by Seller, Buyers, a Successor Buyer or any Affiliate of any of the foregoing,
with payment thereof prorated among the parties hereto as set forth above, and
(B) if such termination occurs on or after July 1, 2001, the Assumed Employee
will be entitled to receive an amount equal to 40% of his or her 2001 Target
Bonus, pro-rated based on the number of days between July 1, 2001 and December
31, 2001 during which such Assumed Employee was employed by Buyers, a Successor
Buyer or any Affiliate of any of the foregoing, plus, if the Assumed Employee
has not as yet been paid (or has not as yet elected to defer) the portion of his
bonus for the period ending June 30, 2001, an amount equal to the amount awarded
under clause (A) above, with payment of the entire amount payable prorated among
the parties hereto as set forth above. Without limiting the generality of the
foregoing, the amount of bonuses payable in the aggregate with respect to the
Stub Period to Assumed Employees who are continuously in covered employment with
Seller, Buyers, a Successor Buyer or any of their affiliates through such
period, shall not be less than the sum of 50% of the 2001 Target Bonus of such
Assumed Employees. "CAUSE" shall mean (I) the holder's conviction of, or plea of
no contest to, a felony or (II) the holder's willful malfeasance or willful
misconduct in connection with his or her duties to the Seller or JES, or the
holder's willful refusal to perform his or her duties which, in any case results
in demonstrable harm to the financial condition or business reputation of the
Buyer, the Seller, JES or any of their respective Affiliates.
(b) With respect to any Retention Bonuses or other special,
non-recurring bonuses, Seller shall retain all liabilities for and shall pay
those portions of any such bonus that accrue and are payable with respect to
periods ending on or prior to the Closing Date and Buyer A and Buyer B shall
assume all liabilities and obligations of the Seller or any Affiliate of Seller
with respect to those portions of any such bonus that accrue, in whole or in
part, and are payable after the Closing Date.
SECTION 8.4. RETIREE WELFARE PLANS. Prior to the Closing Date, the
---------------------
Seller shall assume, or shall cause a V/U Designee to assume, all North American
Company Plans currently
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being maintained or administered for the benefit of each current or former
Business Employee that provide retiree welfare (i.e., medical, dental and life
insurance) benefits ("COMPANY RETIREE WELFARE PLANS") (and none of the Buyers,
-----------------------------
Successor Buyers, or any of their Affiliates shall have any liability in respect
of such plans), and shall provide to each Qualified Retiree Welfare Benefit
Employee (as defined below) and his or her eligible beneficiaries and dependents
(if any) retiree welfare benefits ("RETIREE WELFARE BENEFITS") as if he or she
-------------------------
had retired from employment with Seller and its Affiliates on the date he or she
actually retires from service with Buyers and their Affiliates and shall treat
service with Buyers, any Successor Buyer, and their Affiliates as if it were
service with Seller and its Affiliates for purpose of eligibility and level of
benefits with respect to Retiree Welfare Benefits. A "QUALIFIED RETIREE WELFARE
-------------------------
BENEFIT EMPLOYEE" means an Assumed Employee who would be eligible for Retiree
- -----------------
Welfare Benefits either on the Closing Date or at any time prior to December 8,
2002 and who terminates employment with Buyers and their Affiliates prior to
December 8, 2002.
SECTION 8.5. COMPANY PLANS. (a) Prior to Closing Date, the Seller
--------------
shall adopt, or shall cause a V/U Designee to adopt, all Company Plans currently
sponsored by JES, except for those Company Plans listed on Schedule 8.5(a), and
shall amend each such Company Plan to reflect such change in sponsorship (and
none of the Buyers, Successor Buyers or any of their Affiliates shall have any
liability in respect of such plans). Except as otherwise provided in this
Article VIII or as required by Applicable Law, as of the Closing Date, the
Assumed Employees and their dependents and beneficiaries shall cease to accrue
further benefits and shall have no rights to further participation under the
Company Plans.
(b) With respect to each Assumed Employee, Terminee and Retiree
(including any beneficiary or dependent thereof), the Seller shall retain (i)
all liabilities and obligations arising under any Company Plan that is a group
life, accident, medical, dental or disability plan or similar arrangement
(whether or not insured) to the extent that such liability or obligation relates
to claims incurred (whether or not reported) on or prior to the Closing Date and
(ii) all liabilities and obligations arising under any worker's compensation
arrangement to the extent such liability or obligation relates to events
occurring (whether or not reported) during the period prior to the Closing Date,
including liability for any retroactive worker's compensation premiums
attributable to such period. For purposes of this Section 8.5, a claim shall be
deemed to be incurred when (A) with respect to medical or dental benefits, the
medical or dental services giving rise to such claim are performed and (B) with
respect to life, accident or disability benefits, when the event, condition or
illness giving rise to such claim occurs.
(c) With respect to any Business Employee who is in the hospital or
is on short-term disability under any Company Plan as of the Closing Date, the
Seller shall be responsible for all claims and expenses incurred both before and
after the Closing Date in connection with such Business Employee (or any
beneficiary or dependent thereof), to the extent that such claims and expenses
are covered by a Company Plan, until such time, if any, that such Business
Employee commences full-time employment with a Buyer.
SECTION 8.6. 401(K) PLANS. Effective as of the Closing Date (and
-------------
subject to Applicable Law), (i) all active participants shall be fully vested in
their account balances in the Retirement Savings and Investment Plan for Union
Employees of JES and its Subsidiaries and Affiliates (the "SEAGRAM UNION 401(K)
--------------------
PLAN") and (ii) all Business Employees who formerly
- ----
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participated in the Premium Beverage 401(k) Plan (the "PREMIUM 401(K) PLAN")
--------------------
shall be fully vested in their account balances.
(b) (i) Prior to the Closing Date, the Seller shall adopt, or shall
cause a V/U Designee to adopt, and become the sponsoring employer of The Seagram
401(k) Plan (the "SEAGRAM 401(K) PLAN") (and none of the Buyers, Successor
---------------------
Buyers or any of their Affiliates shall have any liability in respect of such
plan). As of the Closing Date (and subject to Applicable Law), all Assumed
Employees shall be fully vested in their account balances in the Seagram 401(k)
Plan, and the Seller shall cause the trustee of the Seagram 401(k) Plan to
segregate, in accordance with the spin-off provisions set forth under Section
414(l) of the Code, the assets of the Seagram 401(k) Plan representing the full
account balances of Assumed Employees for all periods of participation through
the Closing Date in accordance with the terms of Section 8.6(b)(ii). As soon as
practicable after the Closing Date, the Seller and/or such V/U Designee shall
make any and all filings and submissions to the appropriate Governmental
Entities arising in connection with such segregation and transfer of assets.
Prior to the Closing Date, the Seller shall cause to be made all necessary
amendments to the Seagram 401(k) Plan and its related trust agreement to provide
for such segregation of assets and the transfer of assets as described below.
The manner in which the account balances of each such Assumed Employee
participant under The Seagram 401(k) Plan are invested shall not be affected by
such segregation of assets. The Seagram 401(k) Plan shall be amended to provide
that contributions thereto with respect to Assumed Employees for periods after
the Closing Date shall cease as of the Closing Date.
(ii) As soon as practicable after the Closing Date, the Buyers shall
establish or designate a defined contribution plan for the benefit of Assumed
Employees (the "SUCCESSOR DEFINED CONTRIBUTION PLAN"), to take all necessary
--------------------------------------
action, if any, to qualify such plan under the applicable provisions of the
Code, and to make any and all filings and submissions to the appropriate
Governmental Entities required to be made by it in connection with the transfer
of assets described below. As soon as practicable following the earlier of the
delivery to the Seller of a favorable determination letter from the Internal
Revenue Service regarding the qualified status of the Successor Defined
Contribution Plan as amended to date of transfer, or the delivery of an opinion
of counsel to Buyers reasonably satisfactory to the Seller that the terms of the
Successor Defined Contribution Plan satisfy the applicable requirements of
Section 401 of the Code (the "401(K) TRANSFER DATE"), the Seller shall cause the
--------------------
trustee of the Seagram 401(k) Plan to transfer in the form of cash or, at the
Buyer's option, with the consent of the Seller, in kind (except with respect to
loans to Assumed Employees, which shall be transferred in kind) the full account
balances (inclusive of such loans) of all Assumed Employees, which account
balances shall have been credited with appropriate earnings and contributions,
if any, attributable to the period ending on the close of business of the day
preceding the 401(k) Transfer Date, reduced by any benefit or withdrawal
payments in respect of Assumed Employees prior to the 401(k) Transfer Date, to
the trustee of the Successor Defined Contribution Plan.
(iii) In consideration of the transfer of assets hereunder, the
Buyers shall, effective as of the 401(k) Transfer Date, assume all of the
obligations of Seller and any of its Affiliates, and the Buyers shall cause the
Successor Defined Contribution Plan, effective as of the 401(k) Transfer Date,
to assume all of the obligations of the Seagram 401(k) Plan, in each case, in
respect of account balances of Assumed Employees under the Seagram 401(k) Plan
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(exclusive of any portion of such account balances which are paid or otherwise
withdrawn prior to the 401(k) Transfer Date). The Buyers shall not assume any
other obligations or liabilities arising under or attributable to the Seagram
401(k) Plan.
SECTION 8.7. DEFINED BENEFIT PLANS. (a) JES PENSION PLAN. Prior to
--------------------- ----------------
the Closing Date, the Seller shall adopt, or shall cause a V/U Designee to
adopt, the Pension Plan for the Employees of JES and Subsidiaries (the "JES
---
PENSION PLAN") (and none of the Buyers, Successor Buyers or any of their
- -------------
Affiliates shall have any liability in respect of such plan). Effective as of
the Closing Date and subject to Applicable Law, all Assumed Employees shall be
fully vested in their accrued benefits under the JES Pension Plan. Prior to the
Closing Date, or as soon as practicable thereafter, the Seller shall cause the
trustee of the JES Pension Plan to segregate and transfer to a successor pension
plan in accordance with the spin off provisions set forth under Section 414(l)
of the Code, the assets allocable to those Assumed Employees who are covered by
a collective bargaining agreement, their beneficiaries and "Alternate Payees"
(within the meaning of Code Section 414(p)), and shall make any and all filings
and submissions to the appropriate Governmental Entities arising in connection
with such segregation and transfer of assets and all necessary amendments to the
JES Pension Plan and related trust agreement to provide for the segregation of
assets and the transfer of assets as described below. The assets of the JES
Pension Plan allocable to such Assumed Employees their beneficiaries and
"Alternate Payees" shall be segregated in the form of cash. As of the Closing
Date, the Buyers, or one or more of their designated Affiliates shall adopt one
or more Successor Pension Plans. From and after the Closing Date, the Assumed
Employees shall participate in the defined benefit plans of the Buyers or their
Affiliates, as applicable, and the benefits payable to an Assumed Employee
thereunder shall be offset by benefits payable to such Assumed Employee under
the JES Pension Plan with respect to periods of participation prior to the
Closing Date; PROVIDED, that this provision shall not have the effect of
reducing accruals of benefits that would have occurred if the Assumed Employees
had been granted past service credit for all purposes except benefit accrual
under the applicable plan of the Buyers, and no offset in respect of benefits
under the JES Pension Plan were applied.
(ii) The amount of such assets to be transferred in accordance with
paragraph (i) above (the "TRANSFER AMOUNT") shall be equal to the present value
----------------
as of the Closing Date of the benefits valued on a termination basis using the
assumptions and methodology under Section 4044 of the Employee Retirement Income
Security Act of 1974 and Regulations Sections 4044.51 through 4044.57
promulgated by the Pension Benefit Guaranty Corporation thereunder as in effect
on the Closing Date, brought forward from the Closing Date to the date of
transfer (the "PENSION TRANSFER DATE") using the prime rate published by
-----------------------
Citibank, N.A., for the first business day of each month with respect to any
time elapsing in such month from the Closing Date through the day preceding the
Pension Transfer Date.
(iii) In consideration for the transfer of assets described herein,
the Buyers shall, effective as of the date of transfer of such assets, assume
all of the obligations of the Seller and any Affiliate of Seller and the Buyers
shall cause the Successor Pension Plan, as of the date of transfer of the
assets, to assume all of the obligations of the JES Pension Plan, in each case,
in respect of benefits accrued by the Assumed Employees subject to collective
bargaining agreements under the JES Pension Plan on or prior to the Closing Date
(exclusive of benefits paid prior to date of transfer of the pension assets to
the Successor Pension Plan).
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(b) CALIFORNIA GROWERS PENSION PLAN. Effective as of the Closing
---------------------------------
Date and subject to Applicable Law, all Business Employees who are then active
participants therein shall be fully vested in their accrued benefits in the
Pension Plan for Agricultural Employees of Member Employers of the California
Growers Foundation (the "CALIFORNIA GROWERS PENSION PLAN"), a multiple employer
defined benefit pension plan.
SECTION 8.8. INTERNATIONAL PENSION PLANS. Subject to the other
-----------------------------
provisions of this Article VIII, the allocation of obligations and liabilities
arising under any non-US or international pension benefit plan (an
"INTERNATIONAL PENSION PLAN") and the transfer of any assets thereunder shall be
--------------------------
made subject to and in accordance with the following:
(i) Subject to applicable laws, Assumed Employees shall become 100%
vested in their benefits under each funded International Pension Plan as of the
Closing Date, and under each unfunded International Pension Plan in accordance
with the vesting provisions of such plan or upon the employee's earlier death,
disability, or termination without Cause.
(ii) With respect to any funded International Pension Plan sponsored
or maintained by the Seller or any Subsidiary of the Seller that is not a
Spirits Subsidiary ("SELLER INTERNATIONAL PENSION PLAN"), effective as of the
-----------------------------------
Closing Date, the Buyers shall designate or create funded pension benefit plans
("BUYER INTERNATIONAL PLANS") with respect to each country in which Assumed
---------------------------
Employees shall be working that are substantially identical to the funded Seller
International Pension Plans applicable to Business Employees in such countries
and which replicate the benefits, features and rights of such Seller
International Pension Plans.
(iii) All funded and unfunded International Pension Plans sponsored
or maintained by a Spirits Subsidiary in which Assumed Employees participate
shall continue to be so maintained after the Closing Date in accordance with
their terms. Alternatively, such International Pension Plan shall be treated as
a Seller International Pension Plan, and, in accordance with the provisions of
Section 8.8(v), the Buyers shall request from such trustee or independent
pension board that administers such International Pension Plan, a transfer of
assets and liabilities to a Buyer International Plan.
(iv) Effective as of the Closing Date, the Buyers shall assume all
liabilities under each non-funded Seller International Pension Plan with respect
to the Assumed Employees.
(v) With respect to each funded Seller International Pension Plan,
following the Closing Date, the Buyers will request from the trustee or
independent pension board that administers such plan a transfer to the
corresponding Buyer International Plan of assets and liabilities attributable to
the Assumed Employees participating therein, provided and to the extent the
Buyers have obtained from each such Assumed Employee any required consent and
furnished a copy of such consent to the Seller and to the appropriate trustee or
independent pension board.
(vi) Transfers of assets from Seller International Pension Plans to
Buyer International Plans shall be made in an amount substantially equivalent to
the net aggregate
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projected benefit obligations of such plans as of the Closing Date with respect
to the Assumed Employees, as agreed upon by actuaries of the Seller and the
Buyers.
(vii) Without limiting the generality of the provisions of subclause
(v) or (vi) of this Section 8.8, if the trustees (or their representatives) and
the actuaries of Seller and Buyers cannot agree on the transfer amount required
under subclause (vi) within 60 days following the Closing Date, each of the
trustees or the actuaries, as the case may be, shall set forth its proposed
actuarial assumptions for purposes of effecting such a transfer and submit such
assumptions to an independent actuary acceptable to each such party, which shall
select one of two presented sets of assumptions in its entirety to govern the
proposed transfer.
SECTION 8.9. NON-QUALIFIED PLANS. Prior to the Closing Date, the
--------------------
Seller shall assume, or shall cause a V/U Designee to assume, all non-qualified
or non-registered, supplemental, executive supplemental, and deferred
compensation Company Plans set forth on Schedule 8.9 ("COMPANY TOP HAT PLANS")
---------------------
(and none of the Buyers, Successor Buyers or any of their Affiliates shall have
any liability in respect of such plans). As of the Closing Date, all Assumed
Employees shall be fully vested with respect to their accrued benefits and/or
account balances under any Company Top Hat Plan; provided that, with respect to
accrued benefits under the JES Benefit Equalization Plan, except as provided on
Schedule 8.9, full vesting as of the Closing Date shall only be granted to
Assumed Employees who have attained age 55 as of such date. To the extent that,
from and after the Closing Date, the Assumed Employees shall be eligible to
participate in non-qualified supplemental, executive supplemental and deferred
compensation plans of Buyer A or Buyer B, as applicable, the benefits accrued by
an Assumed Employee thereunder shall be offset by the benefits, if any, accrued
by such Assumed Employee under a comparable Company Top Hat Plan; PROVIDED, that
this provision shall not have the effect of reducing accruals of benefits that
would have occurred if the Assumed Employees had been granted past service
credit for all purposes except benefit accrual under the applicable plan of the
Buyers, and no offset in respect of benefits under the Company Top Hat Plans
were applied.
SECTION 8.10. WARN. None of the Buyers or any of their
----
Affiliates shall on, or at any time prior to ninety (90) days after, the Closing
Date, effectuate a "plant closing" or "mass layoff", as those terms are defined
in the Worker Adjustment and Retraining Notification Act of 1988 ("WARN"),
----
affecting in whole or in part any site of employment, facility, operating unit
or employee, without notifying the Seller in advance and without complying with
the notice requirements and other provisions of WARN, as well as all
requirements of any applicable corresponding laws of any state.
SECTION 8.11. COBRA. The Seller shall be responsible for all
-----
legally mandated continuation of health care coverage for any former or current
Business Employee and his or her covered dependents who participated in a
Company Plan and who had or have a loss of health care coverage due to a
qualifying event occurring on or prior to the Closing Date. The Buyers shall be
responsible for all legally mandated continuation of health care coverage for
all Assumed Employees and any of their covered dependents who have a loss of
health care coverage due to a qualifying event occurring following the Closing
Date.
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SECTION 8.12. THIRD PARTY BENEFICIARIES. No provision of this
---------------------------
Article VIII shall create any third party beneficiary rights in any current or
former Business Employee, including Assumed Employees and Retained Employees
(including any beneficiary or dependent thereof), in respect of continued
employment or resumed employment, and no provision of this Article VIII shall
create any rights in any such persons in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan or
arrangement.
SECTION 8.13. UNITED KINGDOM EMPLOYEE BENEFIT PROVISIONS. (a)
----------------------------------------------
Continued participation in Seagram Distillers Scheme. (i) Subject to the consent
of the Board of Inland Revenue in the United Kingdom (which the Seller and the
Buyer agree to use all reasonable endeavours to obtain) and to the governing
documents of the Seagram Distillers Scheme, the Seller will use all reasonable
endeavours to procure that the Buyers and any Successor Buyer and any of their
Affiliates are permitted to participate, or to continue to participate, in the
Seagram Distillers Scheme during the Transitional Period in respect of Assumed
Employees who are Members at Closing Date or who have a right to join the
Seagram Distillers Scheme on the Closing Date and/or during the Transition
Period and who are employed by any of them.
(ii) The Seller will procure that in the Transitional Period the
Seagram Distillers Scheme will not be terminated, and no amendments to the
Seagram Distillers Scheme will be made or power exercised if the amendment or
power would materially affect the benefits of or in respect of any Assumed
Employee, or the rights or obligations of the employer of any Assumed Employee,
or the amount of the UK Transfer Amount, in any case without the consent of the
employer (not to be unreasonably withheld or delayed).
(iii) Neither the Seller nor the Buyers will do or omit to do any
thing during or in respect of the Transitional Period which would adversely
affect the tax or contracted-out status of the Seagram Distillers Scheme.
(iv) The Buyers each undertake that they will not, and that they
will procure that neither any of their Affiliates, nor any employer of an
Assumed Employee will, exercise any power or discretion under the Seagram
Distillers Scheme except on terms (including as to payment of additional
contributions) which the Seller agrees in writing (such agreement not to be
unreasonably withheld or delayed).
(v) The Buyers will procure the discharge by the employer of any
Assumed Employee of its obligations as a participating employer under the
Seagram Distillers Scheme and shall also procure the prompt payment to or to the
order of the Seagram Distillers Scheme of:
(A) contributions in respect of the Transitional Period by and in
respect of each Assumed Employee who is a Member, calculated in the
case of Members in accordance with the rules of the Seagram Distillers
Scheme and in the case of employers as the normal future service
contribution rate (ignoring any funding surplus or deficiency) by
reference to the funding assumptions set out in the most recent valuation
report disclosed to the Buyers, together with such reasonable amount as
may be required by the Seller as a contribution towards administrative
expenses;
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(B) such further contributions as the Seller requires being equal to
the cost to the Seller or the Seagram Distillers Scheme (such cost
being calculated consistently with the calculation of the UK Transfer
Amount, but ignoring the investment adjustment) of any increase in the
liabilities of the Seagram Distillers Scheme as a result of:
(I) the exercise of any power or discretion or the giving of any
consent by the Buyers, any of their Affiliates or any employer of an Assumed
Employee to early retirement or to the grant of any other benefit under the
Seagram Distillers Scheme not obtainable without consent; or
(II) any increase in the aggregate pensionable salaries of the
Assumed Employees who are Members in excess of 5 1/2% if the Transitional Period
is a year and so in proportion for a period other than a year.
(vi) The Buyers will procure the nomination of such person as the
Seller may direct for the purpose of any provision of or regulations made under
the Pension Schemes Act 1993 or the Pensions Act 1995 of the United Kingdom.
(b) BUYERS' UK PLAN. (i) NOTIFICATION TO THE SELLER. At least two
--------------- ---------------------------
months before the UK Pension Transfer Date, each Buyer (or any Successor Buyer)
may, but will not be obliged to provide to the Seller particulars of one or more
proposed occupational pension schemes (a "New Plan") which each Buyer or any
Successor Buyer intends to be the New Plan for the purposes of this section. The
scheme (or each such scheme) must be a scheme which as at the Due Payment Date
satisfies the terms of Section 8.13(b)(ii). The provisions of this Section 8.13
will apply separately to each New Plan.
(ii) PARTICULARS OF SCHEME. (A) GENERAL CONDITIONS. Each New Plan:
--------------------- -------------------
(I) must be established and administered in the United Kingdom;
(II) must be an exempt approved scheme within the meaning of section
592 of the Income and Corporation Taxes Act 1988 (or designed so as to be
capable of such approval); and
(III) must, on the basis of the minimum funding requirement (within
the meaning of section 56 of the Pensions Act 1995 of the United Kingdom) have
assets the value of which exceeds 100 percent of its liabilities or, if the
scheme first assumes pension liabilities as of the UK Pension Transfer Date, it
must have no liabilities immediately before the UK Pension Transfer Date (in
either case as certified by the Buyers' Actuaries to the Seller).
(B) PAST SERVICE BENEFITS. The Buyers will, and will procure that
----------------------
the New Plans will, for any Member who is offered membership of a New Plan,
make the offers described in this subparagraph (B) and, subject to
receipt of the part of the UK Transfer Amount due to that New Plan,
provide the benefits so described in respect of persons who accept the
offers. Each person who is an Assumed Employee in the United Kingdom and
a Member at the UK Pension Transfer Date will, if such a Member is offered
membership of a New Plan, be offered, in respect of his pensionable
service in the Seagram Distillers Scheme, benefits which are overall at
least equal in value to those
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applying for and in respect of him under the Seagram Distillers Scheme
immediately before the UK Pension Transfer Date, valuing benefits under
the New Plan and under the Seagram Distillers Scheme for this purpose
on the basis of the assumptions and methods relating to the Seagram
Distillers Scheme set out in subparagraph (c)(i) below.
(c) UK TRANSFER AMOUNT. (i) The Buyers will provide, and will
--------------------
procure that any employer of an Assumed Employee who is a Member will provide,
to the Seller any documents and information which are reasonably required for
the calculation of the UK Transfer Amount.
(ii) The UK Transfer Amount will be calculated by the Seller's
Actuary as being the value of the benefits prospectively payable under the
Seagram Distillers Scheme at the UK Pension Transfer Date to and in respect of
the Consenting Members. The calculation will be carried out on the basis of the
actuarial assumptions and methodology applicable to the calculation of the
projected benefit obligation under FAS 87 carried out by William M. Mercer for
the year commencing July 1, 2000 as evidenced in their report dated June 2000,
except that the interest rate for discounting liabilities shall be 6% per annum.
Any liability which there may be in respect of any difference as between a man
and a woman relating to the guaranteed minimum pension shall not be included in
the calculation.
(iii) The UK Transfer Amount will be adjusted (upwards or downwards)
by calculating the proportionate change over the period referred to below in a
model portfolio deemed to be invested on the UK Pension Transfer Date in the
following indices (in the stated proportions) with the net dividend / gross
interest reinvested (on a monthly basis) in the relevant index:
FT - Actuaries All Share Index 70%
FT - Actuaries Over 15 Year Gilts Index 30%
The period over which the change in the model portfolio is measured starts on
the UK Pension Transfer Date and ends on the day before actual payment of the UK
Transfer Amount.
(iv) As soon as reasonably practicable after the Seller's Actuary
has calculated the unadjusted UK Transfer Amount, the Seller will notify the
Buyers of the result of that calculation and provide sufficient particulars of
the calculation and the data on which it is based which the Buyers' Actuary
reasonably requires to enable him to check that the calculation is correct. The
Seller's Actuary must provide such further particulars or data which the Buyers'
Actuary reasonably requests within 21 days of receipt of the result of the
calculation from the Seller's Actuary. The Buyers' Actuary has one month from
the date on which those particulars and data have been supplied to him to raise
any objection that the calculation is incorrect. The calculation will be final
and binding on the Seller and the Buyer on the later of:
(A) if the Buyers' Actuary raises no objection within the terms
mentioned above, the expiry of the period mentioned above in which he may
raise an objection;
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(B) if the Buyers' Actuary raises an objection as mentioned above,
the date of a subsequent written agreement between the Seller's Actuary and
the Buyer's Actuary that the calculation (or revised calculation) is
correct;
(C) if a reference is made to an independent actuary under Section
8.13(g), the date of his determination of the disputed issue.
(d) PRESERVATION REGULATIONS. The parties acknowledge the
-------------------------
obligations of the Seagram Distillers Scheme under Regulation 27A of the
Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 and will
co-operate with each other and the Seagram Distillers Scheme with a view to
assisting the Seagram Distillers Scheme in complying with that Regulation.
(e) TRANSFER OF UK TRANSFER AMOUNT AND AVCS. (i) The Seller will use
---------------------------------------
all reasonable endeavours to procure that on the Due Payment Date the Seagram
Distillers Scheme transfers to each New Plan the relevant part of the UK
Transfer Amount and the assets representing, as at the date of transfer, the
additional voluntary contributions paid by the Consenting Members who joined the
New Plan in question.
(ii) The Seller and the Buyers will use all reasonable endeavours to
secure agreement between the Seagram Distillers Scheme and the relevant New Plan
respectively as to the particular assets to be transferred representing the UK
Transfer Amount. If agreement is not reached by the Due Payment Date, the
transfer will be in the form of assets of the Seagram Distillers Scheme listed
on The London Stock Exchange and selected by the Seagram Distillers Scheme as a
representative selection of such listed assets held by the Seagram Distillers
Scheme. Any securities to be transferred will be valued at the mid-market price
at the close of business on The London Stock Exchange on the day before the date
of transfer.
(iii) The Buyers or any Successor Buyer to, seek promptly from the
Board of Inland Revenue approval to the transfer of assets from the Seagram
Distillers Scheme to the New Plan in respect of the Consenting Members and, at
the Seagram Distillers request, will supply promptly to the Seller the documents
and information which the Seller reasonably requires to enable the Seagram
Distillers Scheme to obtain a corresponding approval.
(iv) If the total of the amount which has been actually transferred
(if any) by the Seagram Distillers Scheme to a New Plan on or before the Due
Payment Date in respect of Consenting Members, together with the value of any
benefits remaining payable under the Seagram Distillers Scheme to or in respect
of the Consenting Members transferring to that New Plan (valued in accordance
with consistently with the calculation of the UK Transfer Amount, but ignoring
the investment adjustment) and any amount due from the Buyer or any Successor
Buyer to the Seller or the Seagram Distillers Scheme under this Section is less
than the part of the UK Transfer Amount due to that New Plan, the Seller shall,
subject to (v) below, within 5 working days of receipt of a written demand from
the Buyers, pay to the Buyers or as it may direct, the amount of the
underpayment (the "SHORTFALL"), together with interest at 2% above the LIBOR
---------
Rate calculated on the basis of a year of 360 days for the actual number of days
elapsed accrued from the Due Payment Date up to and including the date of
payment.
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(v) No payment shall be due from the Seller pursuant to (iv) above
if the reason for the Shortfall is the failure of the New Plan to accept the
whole or any part of the UK Transfer Amount;
(vi) Immediately following any payment pursuant to (iv) above, the
Buyers shall procure that an amount equal to the payment is contributed to the
New Plan in question. The Buyers shall use, and shall procure that all its
Affiliates and any Successor Buyer and its Affiliates use, their best endeavours
to obtain a reduction in its tax liability (or a repayment of tax) in respect of
that contribution. Immediately on obtaining that reduction or repayment, Buyers
will, or will procure that one of its Affiliates or the Successor Buyer will,
pay to Seller an amount equal to that reduction or repayment.
(f) NO ASSISTANCE. The Buyers agree that they will not, and will
--------------
procure that each New Plan and any affiliate of any Buyer will not, take any
action or provide any assistance to any person (direct or indirect) which might
result in the Seagram Distillers Scheme transferring a larger amount than the UK
Transfer Amount (or, if greater, in the case of any individual his cash
equivalent under United Kingdom law) and the assets representing Consenting
Members' additional voluntary contributions to the New Plans.
(g) DISPUTES. Notwithstanding Sections 12.6 and 12.7, any dispute
--------
between the Seller and the Buyers or between the Seller's Actuary and the
Buyers' Actuary concerning any calculation or valuation of benefits under this
Section 8.13 shall, in the absence of agreement between them within one month of
the party concerned having notified the other in writing of the dispute, be
referred to an independent actuary chosen by agreement between the Seller and
the Buyers or, failing agreement, appointed by the President for the time being
of the Institute of Actuaries at the instance of either the Seller or the
Buyers. The independent actuary shall be instructed by the Seller and the Buyers
not to make a compromise determination, but to adopt the submission of either
the Seller (or the Seller's Actuary) or of the Buyers (or the Buyers' Actuary).
The independent actuary shall determine the disputed matter as an expert and not
as an arbitrator, and his decision shall be final and binding. The fees and
expenses of the independent actuary and of said President shall be borne equally
between the parties, except that the independent actuary shall have power to
determine, at the request of any party, that the fees and expenses shall be
borne exclusively by the other parties or in such proportions as the actuary may
determine and any such determination shall be final and binding.
SECTION 8.14. CANADIAN EMPLOYEE BENEFIT PROVISIONS. (a)
------------------------------------------
Notwithstanding any provisions in this of Article VIII to the contrary, the
provisions of this Section 8.14 shall apply in relation to all Canadian Pension
Plans.
(b) The Buyers, effective as of and from the start of business on
the Closing Date, shall establish or designate a registered pension plan or
plans to provide retirement benefits to Assumed Employees for service from and
after the Closing Date (the "BUYERS' CANADIAN PENSION PLANS") and the Buyers
---------------------------------
shall forthwith notify the Sellers of the registration or designation of any
such plan.
(c) Effective as of the Closing Date, each Assumed Employee who is a
member of a Canadian Pension Plan shall cease to actively participate in and
accrue benefits
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under such Canadian Pension Plan and shall commence participation in and accrue
benefits under the applicable Buyers' Canadian Pension Plan.
(d) CANADIAN DB PLANS. (i) All benefits accrued by an Assumed
------------------
Employee under a Canadian DB Plan up to the Closing Date shall be transferred
from that Canadian DB Plan to a Buyers' Canadian Pension Plan, subject to and
upon the completion of the transfer of assets from the pension fund of that
Canadian DB Plan to the pension fund of a Buyers' Canadian Pension Plan as
contemplated by Section 8.14(d)(viii) hereof.
(ii) Subject to and upon completion of the transfer of cash or
assets (or a combination thereof) from the pension fund of a Canadian DB Plan to
the pension fund of a Buyers' Canadian Pension Plan as contemplated by Section
8.14(d)(viii) hereof, such Buyers' Canadian Pension Plan shall, for the purposes
of calculating defined benefit entitlements under such plan, recognize the
period of service recognized under such Canadian DB Plan, for all purposes
relating to the determination of pension benefits under the Buyers' Canadian
Pension Plan as if such service had been with the Buyers.
(iii) The Seller shall appoint an actuary to determine the Member
Liabilities in relation to the Canadian DB Plans and as soon as is practicable
after the Closing Date, the Seller shall cause its actuary to determine the
amount of the Member Liabilities separately for each Canadian DB Plan and make
details of those calculations and the results available to the Buyers and their
actuary for review and confirmation. The Buyers shall, within thirty days of
receiving such information and data (or such later date as the parties may agree
to) notify the Seller as to its agreement or disagreement with the Seller's
calculation of the Member Liabilities.
(iv) If the Seller and the Buyers cannot reach agreement with
respect to the calculations under this section, such dispute shall be resolved
in accordance with Section 8.13(g) hereof, with appropriate changes in context.
(v) As soon as practicable but in any event within thirty days after
final agreement is reached between the Seller and the Buyers with respect to the
amount of the Member Liabilities in relation to a Canadian DB Plan, the Seller
shall make application to the applicable Governmental Entity for approval of the
transfer of assets equal to such Member Liabilities from the pension fund of the
applicable Canadian DB Plan to the pension fund of the applicable Buyers'
Canadian Pension Plan. In making such application the Seller shall use its best
efforts to have the Governmental Entities approve the transfers of assets in the
amounts determined between the parties pursuant to this Agreement. Written
confirmation of any and all such regulatory approvals shall be forwarded by the
Seller to the Buyers within five business days of receipt of such approvals.
(vi) From the Closing Date to the date upon which cash or assets (or
a combination thereof) are transferred from such Canadian DB Plan to a Buyer's
Canadian Pension Plan in accordance with Section 8.14(d)(viii) (the "CANADIAN
--------
PENSION TRANSFER DATE"), the Seller shall invest the assets of each pension fund
- ---------------------
under the Canadian DB Plans in accordance with the statement of investment
policies for such plan, the terms of the DB Pension Plan and Applicable Laws.
From the Closing Date to the Canadian Pension Transfer Date, the Seller shall
cause the funding agent of the Canadian DB Plan to accept and record, as
required,
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all benefit payments relating to members under the Canadian DB Plan and shall
remain responsible for all benefit calculations, communications and the
completion of all forms and reports under that Canadian DB Plan relating to the
Assumed Employees. All benefit payments payable between the Closing Date and the
Canadian Pension Transfer Date to Assumed Employees under the terms of a
Canadian DB Plan shall be paid out of the pension for that plan.
(vii) If any Governmental Entity refuses to permit a transfer of
assets from the pension fund of a Canadian DB Plan to the funding medium of a
Buyers' Canadian Pension Plan in an amount equal to the Member Liabilities, the
transfer shall be made from the applicable pension fund of Canadian DB Plan in
the amount that such Governmental Entity advises would be acceptable to it (the
"REGULATORY AMOUNT").
-----------------
(viii) Within thirty days of receipt of all required approvals from
the Governmental Entities in relation to a Canadian DB Plan, the Seller shall
transfer from the pension fund of the applicable Canadian DB Plan, in cash or by
transfer of assets in kind (or a combination thereof) to the pension fund of the
applicable Buyers Canadian Pension Plans, an amount equal to the Member Assets
or the Regulatory amount, as the case may, adjusted for investment returns
(positive or negative) between the Closing Date and the Canadian Pension
Transfer Date (except as may be required by a Governmental Entity), a
proportionate share of any proper and reasonable expenses of administration of
the Canadian DB Plan and any data corrections and benefit payments paid pursuant
to Section 8.14(d)(vi) hereof.
SECTION 8.15. VIVENDI OPTIONS AND VIVENDI SARS. The Seller shall,
---------------------------------
prior to the Closing Date, take such action as may be required to extend the
period during which any Assumed Employee may exercise his or her Vivendi Option
and Vivendi SAR to the expiration date thereof, determined without regard to any
termination of employment.
SECTION 8.16. COMMUNICATIONS. Prior to Seller's issuance of any
--------------
general communication to the Assumed Employees relating to the compensation and
benefits that are contemplated to be provided to such employees on and after the
Closing Date by the Buyers or their Affiliates, Seller shall provide the Buyers
with an opportunity to review and comment upon such communication.
ARTICLE IX
CONDITIONS TO CLOSING
---------------------
SECTION 9.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. The
--------------------------------------------------
respective obligations of the parties hereto to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or waiver by the
Seller and the Buyers), at or prior to the Closing, of each of the following
conditions:
(i) NO INJUNCTIONS. Except for an injunction relating solely to all
--------------
or any part of the Captain Morgan Assets and Captain Morgan Liabilities,
no preliminary or permanent injunction or other order, decree or ruling
issued by any Governmental Entity of any jurisdiction in which the
operations of the Business
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are material to the Business as a whole or which violation of such
injunction would subject any Buyer or any of their Affiliates to any
penalty material to the Business as a whole or to any Buyer's business
as a whole nor any statute, rule, regulation or executive order promulgated
or enacted by any Governmental Entity of any jurisdiction in which the
operations of this Business are material to the Business as a whole or
which violation of such statute, rule, regulation or executive order
would subject any Buyer or any of their Affiliates to any penalty material
to the Business as a whole or to any Buyer's business as a whole shall be
in effect and shall have the effect of enjoining or otherwise materially
impairing the consummation of the transactions contemplated by this
Agreement.
(ii) GOVERNMENTAL APPROVALS. (A) The waiting period applicable to
-----------------------
the transactions contemplated by this Agreement under the HSR Act shall
have been terminated or shall have expired, (B) any required approvals
pertaining to the transactions contemplated by this Agreement by the
European Commission pursuant to the EC Merger Regulation shall have been
obtained, (C) any waiting period applicable to the transactions
contemplated by this Agreement under the Canadian Competition Act shall
have been terminated or shall have expired and the Buyers shall have been
advised in writing by the Canadian Commissioner of Corporation that such
Commissioner has no present intention to make an application for an
order under Section 92 or 100 of the Canadian Competition Act in respect of
all or any material part of the transactions contemplated by this
Agreement, and if any terms or considerations are attached in the written
advice of such Commissioner, such terms and conditions shall be
acceptable to the Buyers acting reasonably and any required approval
regarding the transactions contemplated by this Agreement by the Minister
of Industry pursuant to the ICA and the ICA undertaking shall have been
obtained and (D) any other required approvals pertaining to the
transactions contemplated by this Agreement the failure of which to obtain
would have a Material Adverse Effect.
SECTION 9.2. CONDITIONS PRECEDENT TO OBLIGATION OF THE BUYERS. The
-------------------------------------------------
obligation of the Buyers to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (or waiver by the Buyers) at or prior
to the Closing of each of the following additional conditions:
(i) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
------------------------------------------
and warranties of the Seller set forth in Article IV which are qualified
as to materiality, Material Adverse Effect or any similar materiality
qualifier shall be true and correct, and the representations and warranties
of the Seller set forth in Article IV which are not so qualified shall be
true and correct in all material respects, in each case, as of the date
hereof and on and as of the Closing Date, with the same force and effect
as though made as of the date hereof and on and as of the Closing Date,
except to the extent that any representation or warranty is made as of
a specified date, in which case such representation or warranty shall
be so true and correct as of such date; provided that this paragraph
(i) shall be deemed satisfied so long as the failure of all such
representations and warranties to be so true and correct would not have a
Material Adverse Effect.
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(ii) PERFORMANCE OF AGREEMENTS. The Seller shall have performed in
-------------------------
all material respects all obligations and agreements set forth in this
Agreement required to be performed by it prior to or on the Closing Date.
(iii) CERTIFICATE. The Buyers shall have received a certificate of
-----------
the Seller, dated as of the Closing Date, executed on behalf of the Seller
by an authorized officer, to the effect that the conditions specified in
paragraphs (i) and (ii) above have been fulfilled.
(iv) RELATED AGREEMENTS. The Buyers shall have received duly
-------------------
executed counterparts by the Seller and the Asset Sale Subsidiaries,
as applicable, of each of the Related Agreements, and each of such
Related Agreements shall be in full force and effect.
(v) TRANSFER DEEDS. The Buyers shall have received deeds in form and
--------------
substance reasonably satisfactory to the Buyers with respect to the
Transferred Real Property.
(vi) INDEBTEDNESS. All provisions contained in the indentures or any
------------
supplemental indentures with respect to the QUIDS, the ACES and the JES
Public Indebtedness restricting the merger, consolidation or sale
of all or substantially all of the assets of any of the Spirits
Subsidiaries or otherwise restricting the conduct of the Spirits
Subsidiaries in any material respect (other than payment of interest) or
requiring the provision of any reports to holders of the ACES and QUIDS
shall have no further force or effect.
SECTION 9.3. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLER.
------------------------------------------------------
The obligation of the Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (or waiver by the Seller) at or prior
to the Closing of each of the following additional conditions:
(i) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Buyers set forth in Article V which are qualified as
to materiality, Material Adverse Effect or any similar materiality
qualifier shall be true and correct in all respects, and the
representations and warranties of the Buyers set forth in Article V which
are not so qualified shall be true and correct in all material respects,
in each case, as of the date hereof and on and as of the Closing Date,
with the same force and effect as though made as of the date hereof and on
and as of the Closing Date, except to the extent that any representation
or warranty is made as of a specified date, in which case such
representation or warranty shall be so true and correct as of such date;
provided that this paragraph (i) shall be deemed satisfied so long as the
failure of all such representations and warranties to be so true and
correct would not have a Buyer Material Adverse Effect.
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(ii) PERFORMANCE OF AGREEMENTS. The Buyers shall have performed in
-------------------------
all material respects all obligations and agreement set forth in this
Agreement required to be performed by them prior to or on the Closing
Date.
(iii) CERTIFICATE. The Seller shall have received a certificate of
-----------
each of the Buyers, dated as of the Closing Date, executed on behalf of
each of the Buyers by an authorized officer, to the effect that the
conditions specified in paragraphs (i) and (ii) above have been fulfilled
to the extent related to such party.
(iv) RELATED AGREEMENTS. The Seller shall have received duly
-------------------
executed counterparts by the Buyers and/or their designated Affiliates, as
applicable, of each of the Related Agreements, and each of such Related
Agreements shall be in full force and effect.
(v) INVESTMENT CANADA UNDERTAKING. The Buyers shall have advised the
-----------------------------
Seller in writing in form and substance satisfactory to the Seller that
they have complied with the requirements of paragraphs 10 and 11 of the
Investment Canada Undertaking as applicable relating to actions to be
taken by the Buyers thereunder.
ARTICLE X
INDEMNIFICATION
---------------
SECTION 10.1. INDEMNIFICATION BY THE SELLER. (a) Subject to the
-------------------------------
other provisions of this Article X, following the Closing, the Seller shall
indemnify the Buyers and their respective Affiliates and stockholders and their
officers, directors, employees, agents and representatives (collectively, the
"BUYER INDEMNIFIED PARTIES") against, and shall hold them harmless from, any
---------------------------
Losses for or on account of or arising from, in connection with or relating to
(i) any breach on the part of the Seller of any representation or warranty
(which for purposes of this Article X shall each be read without any reference
to materiality, Material Adverse Effect or any similar materiality qualifier,
except with respect to Sections 4.11 and 4.12 only with respect to Material
Adverse Effect (provided that the parties agree that no provision in this
Article X shall imply that such provision establishes any standard of
materiality for purposes of this Agreement), made by it contained herein (other
than Section 4.18), it being understood that such indemnification may be
available notwithstanding that any Loss results from or arises out of an Assumed
Liability, (ii) any breach on the part of the Seller of any covenant contained
in this Agreement, (iii) the Retained Assets and the Retained Liabilities, (iv)
the ABSOLUT brand and taking actions in accordance with Section 6.17(c) (other
than with respect to any Losses to the extent arising from, in connection with
or relating to any failure of the Buyers to comply with Section 6.17(c)) or (v)
the Mumm brand and taking actions in accordance with Section 6.17(c) (other than
with respect to any Losses to the extent arising from, in connection with or
relating to any failure of the Buyers to comply with Section 6.17(c)).
(b) The Buyers shall use their reasonable best efforts to mitigate any Losses
for which the Seller is required to provide indemnification under Section
10.1(a).
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SECTION 10.2. INDEMNIFICATION BY THE BUYERS. (a) Subject to the
-------------------------------
other provisions of this Article X, each of Buyer A and Buyer B, severally, pro
rata in proportion to the Buyer A Proportion and the Buyer B Proportion, shall
indemnify the Seller and its Affiliates and stockholders and their respective
officers, directors, employees, agents and representatives against, and shall
hold them harmless from, any Losses, including any Losses arising from any suit,
action or other proceeding (including any third-party claim), for or on account
of or arising from, in connection with or relating to (i) any breach on the part
of any of the Buyers of any representation or warranty made by them contained
herein, (ii) any breach on the part of any of the Buyers of any covenant
contained in this Agreement, (iii) the Assumed Liabilities and (iv) the
ownership or operation of the Business, the Spirits Subsidiaries or the
Transferred Assets on or after the Closing Date, including any portion of the
Business or any Transferred Shares, Transferred Minority Interests, Transferred
Assets or assets of the Transferred Subsidiaries not transferred at Closing in
accordance with Section 2.3 (except to the extent arising from any breach by the
Seller of Section 2.3) and including any product liability action or claim or
other action, claim, proceeding or litigation with respect to the Business or
any action or claim by any distributor or broker.
(b) The Seller shall use its reasonable best efforts to mitigate any
Losses for which any Buyer is required to provide indemnification under Section
10.2(a).
SECTION 10.3. INDEMNIFICATION PROCEDURES. (a) All claims for
----------------------------
indemnification by any party (the "INDEMNIFIED PARTY") under this Article X
------------------
shall be asserted and resolved as set forth in this Section 10.3. In the event
that any written claim or demand for which the party from whom indemnification
is sought (an "INDEMNIFYING PARTY") would be liable to any Indemnified Party
-------------------
hereunder is asserted against or sought to be collected from any Indemnified
Party by a third party, such Indemnified Party shall promptly, but in no event
more than 30 days following such Indemnified Party's receipt of such claim or
demand, notify the Indemnifying Party of such claim or demand and the estimated
amount thereof to the extent then reasonably feasible (which estimate shall not
be conclusive of the final amount of such claim and demand or provide a basis
upon which to deny indemnification) (the "CLAIM NOTICE"); provided that failure
------------
to give the Claim Notice shall not affect the indemnification provided hereunder
except to the extent the Indemnifying Party shall have been actually prejudiced
as a result of such failure (except the Indemnifying Party shall not be liable
for any Losses incurred during the period in which the Indemnified Party failed
to give the Claim Notice after such 30 day period). The Indemnifying Party shall
have 30 days from the personal delivery or mailing of the Claim Notice (the
"NOTICE PERIOD") to notify the Indemnified Party whether or not it desires to
--------------
defend the Indemnified Party against such claim or demand and shall immediately,
if assuming the defense, assume the defense
(b) Subject to Section 10.3(c), all reasonable costs and expenses
incurred by the Indemnified Party in defending such claim or demand shall be a
liability of, and shall be paid as incurred by, the Indemnifying Party. Except
as hereinafter provided, in the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such claim or demand, the Indemnifying Party shall
have the right to defend the Indemnified Party by appropriate proceedings and
shall have the sole power to direct and control such defense. In no event shall
the Indemnifying Party be permitted
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to assume the defense of any claim or demand, unless the counsel to be used by
such Indemnifying Party is reasonably acceptable to the Indemnified Party.
(c) If any Indemnified Party desires to participate in any such
defense by the Indemnifying Party it may do so at its sole cost and expense. The
Indemnified Party shall be entitled to participate in the defense of any claim
or demand and to have the Indemnifying Party pay and be liable for the fees and
expenses of its counsel in the event that the Indemnified Party shall be advised
by outside legal counsel that any potential or actual conflicts of interest
exist between it and the Indemnifying Party or one or more defenses would be
available to it that would not be available to the Indemnifying Party. The
Indemnified Party shall not settle a claim or demand for which it seeks or may
seek to be indemnified by the Indemnifying Party without the prior written
consent of the Indemnifying Party. If the Indemnifying Party elects not to
defend the Indemnified Party against such claim or demand, whether by giving the
Indemnified Party affirmative notice or by failing to give the Indemnified Party
timely notice as provided above or otherwise, then the amount of any such claim
or demand (so long as it is a claim or demand in respect of which
indemnification is available hereunder) or, if the same be contested by the
Indemnified Party, then that portion thereof as to which such defense is
unsuccessful (and the reasonable costs and expenses pertaining to such defense)
shall be the liability of the Indemnifying Party hereunder. To the extent the
Indemnifying Party shall direct, control or participate in the defense or
settlement of any third-party claim or demand, the Indemnified Party will give
the Indemnifying Party and its counsel reasonable access to the relevant
business records and other documents, and shall permit them to consult with the
employees and counsel of the Indemnified Party. The Indemnified Party shall use
its reasonable efforts in the defense of all such claims.
SECTION 10.4. REMEDIES EXCLUSIVE. The remedies set forth in this
-------------------
Article X and any other provision hereof providing for indemnification, the
assumption of Liabilities or payments by any party shall from and after the
Closing be exclusive and in lieu of any other remedies that may be available to
the Indemnified Parties with respect to any Losses of any kind or nature
incurred directly or indirectly resulting from or arising out of any breach of
this Agreement or any Related Agreements (including alleged breaches of any
representation, warranty or covenant or for any alleged misrepresentation but
excluding any claims for common law fraud), the transactions contemplated hereby
and thereby, the Business, the Spirits Subsidiaries, the Transferred Assets, the
Assumed Liabilities, the Retained Assets or the Retained Liabilities, except
that the parties hereto recognize that the Transferred Assets and the
Transferred Shares are unique and that specific performance will be available to
the Buyers with respect to delivery of the Transferred Assets and the
Transferred Shares in the event of a breach hereof by the Seller.
SECTION 10.5. LIMITATIONS UPON REMEDIES AND INDEMNIFICATION.
-----------------------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary:
(i) the Seller shall not be obligated to provide any indemnification
under Section 10.1 for breach of representations and warranties unless and
until the aggregate amount of Losses for which it is obligated to provide
such indemnification for breaches of representations and warranties
exceeds the sum of U.S. Dollars 81,500,000 (representing a one-time
threshold) (the "THRESHOLD"),
---------
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after which, subject to the other provisions of this Article X, the Seller
shall be obligated to pay the entire amount of any such excess above the
Threshold which is payable by it pursuant to the provisions of Section
10.1(a);
(ii) in calculating the Threshold, any individual Loss or series of
related Losses resulting from breaches of representations and warranties
totaling less than U.S. Dollars 10,000,000 ("DE MINIMIS LOSSES") shall be
-----------------
excluded in its or their entirety and in any event the Seller shall have
no liability hereunder for any such De Minimis Losses;
(iii) in no event shall the aggregate liability of the Seller under
Section 10.1(a) for breaches of representation and warranties exceed U.S.
Dollars 1,000,000,000;
(iv) Losses shall not include lost profits or consequential,
special, indirect, incidental or punitive damages;
(v) in no event shall any Buyer Indemnified Party be entitled to
indemnification pursuant to this Article X:
(A) with respect to any claim by or Liability to any Business
Employee on the Closing Date arising as a result of the termination
subsequent to the Closing Date of such employee's employment or any
other action by Buyer A or Buyer B or their respective Affiliates
(including the Spirits Subsidiaries) subsequent to the Closing Date;
(B) with respect to any obligation, Liability or matter,
including environmental remediation and clean-up, arising under
Applicable Law to the extent any such Applicable Law is enacted,
promulgated, amended or announced, or there is any change in the
interpretation or enforcement of any such Applicable Law, after the
Closing Date;
(C) any obligation, Liability or matter arising out of
information any Buyer Indemnified Party discloses to any
Governmental Entity, which disclosure is not required by Applicable
Law or for which disclosure would not otherwise be a reasonable
business practice in accordance with any such party's past
practices, without consideration of the indemnification provisions
of this Article X; and
(D) to the extent arising from or in connection with the
failure of SCL or its Subsidiaries to enter into any Contract
contemplated by the Kirin Master Agreement owing to the failure of
the Buyers to consent thereto; and
(vi) no indemnity payment shall be recoverable by any Buyer
Indemnified Party with respect to any matter to the extent such matter was
reflected in the final calculation of the Closing Net Working Capital or
the Closing Net Indebtedness.
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(b) The representations and warranties in this Agreement (other than
those representations and warranties contained in Section 4.7(a) and Section
4.7(b) which shall survive the Closing indefinitely) and any Related Agreement
and the indemnification provisions in this Agreement in respect thereof shall
survive the Closing for a period of eighteen months; provided that the
representations contained in Section 4.18 shall not survive the Closing and the
indemnification provisions in Article VII shall survive until 30 days after the
expiration of the relevant statue of limitations; and provided further that no
such termination shall affect any claim for breach of any representation or
warranty if written notice thereof, in reasonable detail, is given to the
breaching party prior to such expiration date.
SECTION 10.6. INDEMNIFICATION CALCULATIONS. (a) The amount of any
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payments, for which indemnification is provided under this Article X, shall be
computed net of any insurance proceeds received by the Indemnified Party in
connection with the Losses to which such payment relates and the Indemnified
Party shall use its reasonable best efforts to seek any available insurance
proceeds reasonably available from third party insurers. Payments under this
Article X or Article VII shall also be made on a tax-affected basis, which shall
mean that (i) payments will be increased to make the payee whole for any Income
Tax payable in such taxable year in respect of receipt of the payment and (ii)
payments will be reduced to reflect any Income Tax deduction actually realized
in such taxable year in respect of losses giving rise to the payment.
(b) The parties agree that any indemnification payments made
pursuant to this Agreement shall be treated for tax purposes as an adjustment to
the Purchase Price.
SECTION 10.7. SUBROGATION. In the event of any indemnification
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payment by or on behalf of any Indemnifying Party to any Indemnified Party in
connection with any third-party claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnified Party as to any
events or circumstances in respect of which such Indemnified Party may have any
right, defense or claim relating to such third-party claim against any claimant
or plaintiff asserting such third-party claim or against any other person to the
extent of the prior indemnification payment. Such Indemnified Party shall
cooperate with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated right,
defense or claim.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 11.1. TERMINATION. (a) Notwithstanding anything to the
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contrary in this Agreement, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of the Buyers and the Seller;
(ii) by the Seller, on the one hand, or the Buyers, on the
other hand, if the Closing does not occur on or prior to January 1,
2002; provided that the right
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to terminate this Agreement pursuant to this clause (ii) shall not
be available to the Seller if its failure to fulfill any obligation
under this Agreement, or its breach of any representation or
warranty set forth herein, has been the cause of, or resulted in,
the failure of the Closing to have occurred on or before such date
or the Buyers if the failure by the Buyers to fulfill any of their
respective obligations under this Agreement, or the breach by the
Buyers of any representation or warranty by any of them set forth
herein, has been the cause of, or resulted in, the failure of the
Closing to have occurred on or before such date;
(iii) by the Seller, by written notice to the Buyers if:
(A) any Buyer has (and the Seller shall not have) failed to
perform and comply with in all material respects all
material agreements and covenants hereby required to
have been performed or complied with by such party prior
to the time of such termination, and such failure shall
not have been cured within 20 days following written
notice of such failure from the Seller to the Buyers; or
(B) any event shall occur after the date hereof that shall
have made it impossible to satisfy a condition precedent
to the Seller's obligations to consummate the
transactions contemplated by this Agreement, unless the
occurrence of such event shall be due to the failure of
the Seller to perform or comply with any of the
agreements, covenants or conditions hereof to be
performed or complied with by the Seller prior to the
Closing; and
(iv) by the Buyers by written notice to the Seller if:
(A) the Seller has (and the Buyers shall not have) failed to
perform and comply with in all material respects all
material agreements and covenants hereby required to
have been performed or complied with by the Seller prior
to the time of such termination, and such failure shall
not have been cured within 20 days following written
notice of such failure from the Buyers to the Seller; or
(B) any event shall occur after the date hereof that shall
have made it impossible to satisfy a condition precedent
to the obligations of the Buyers to consummate the
transactions contemplated by this Agreement, unless the
occurrence of such event shall be due to the failure of
the Buyers to perform or comply with any of the
agreements, covenants or conditions hereof to be
performed or complied with by such party prior to the
Closing.
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(b) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 11.1, this
Agreement shall become null and void and shall have no further force and effect,
except for the provisions of this Section 11.1 and Sections 6.2(c) and 6.7 and
Article XII and provided that the Buyer A Confidentiality Agreement and the
Buyer B Confidentiality Agreement shall continue in full force and effect.
Nothing in this Section 11.1 shall be deemed to release any party from any
liability for any prior breach by such party of the terms and provisions of this
Agreement.
SECTION 11.2. AMENDMENTS AND WAIVERS. This Agreement may not be
-----------------------
amended except by an instrument in writing signed on behalf of each of the
parties hereto. Compliance by any party with any term or provision of this
Agreement that such party was or is obligated to comply with or perform may be
waived by an instrument in writing signed by the other parties hereto.
ARTICLE XII
MISCELLANEOUS
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SECTION 12.1. NOTICES. All notices, requests and other
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communications hereunder shall be in writing (including wire, telefax or similar
writing) and shall be sent, delivered or mailed, addressed, or telefaxed:
(a) if to Buyer A, to:
Pernod Ricard S.A.
142 boulevard Haussmann
75379 paris
France
Attention: LaurentLacassagne
Fax: +33-1-42-25-95-66
With a copy to:
Macfarlanes
10 Norwich Street
London EC4A 1BD
England
Attention: Tim Lewis
Fax: +44-20-7831-9607
(b) if to Buyer B, to:
Diageo Plc
8 Henrietta Place
London, W1A 9AG
England
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Attention: Nick Rose
Fax: +44-207-927-4600
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498
Attention: Frank Aquila, Esq.
Fax: 1-212-558-3588
(c) if to the Seller, to:
Vivendi Universal S.A.
c/o Seagram Enterprises, Inc.
375 Park Avenue
New York, New York 10152
Attention: John R. Preston
Fax: (212) 572-1215
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Sarah E. Cogan, Esq.
Fax: (212) 455-2502
and
Vivendi Universal S.A.
42, avenue de Friedland
75380 Paris Cedex 08
France
Attention: Guillaume Hannezo
Fax: 33-1-71-14-14
and
Watson, Farley & Williams
47, rue de Monceau
75008 Paris
France
Attention: David Syed, Esq.
Fax: 33-01-45-61-09-01
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Each such notice, request or other communication shall be given (i) by mail
(postage prepaid, registered or certified mail, return receipt requested), (ii)
by hand delivery, (iii) by nationally recognized courier service or (iv) by
telefax, receipt confirmed. Each such notice, request or communication shall be
effective (i) if mailed, ten days after mailing at the address specified in this
Section 12.1 (or in accordance with the latest unrevoked written direction from
such party), (ii) if delivered by hand or by nationally recognized courier
service, when delivered at the address specified in this Section 12.1 (or in
accordance with the latest unrevoked written direction from the receiving party)
and (iii) if given by telefax, when such telefax is transmitted to the telefax
number specified in this Section 12.1 (or in accordance with the latest
unrevoked written direction from the receiving party), and the appropriate
confirmation is received.
SECTION 12.2. SCHEDULES. Inclusion of any matter or item in any
---------
Schedule to this Agreement does not imply that such matter or item would, under
the provisions of this Agreement, have to be included in any Schedule to this
Agreement or that such matter or term is otherwise material.
SECTION 12.3. SEVERABILITY. The provisions of this Agreement and the
------------
Related Agreements shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement or any Related Agreement, or the application thereof to any Person or
any circumstance, is found to be invalid or unenforceable in any jurisdiction,
(i) a suitable and equitable provision shall be substituted therefor in order to
carry out, so far as may be valid or enforceable, such provision and (ii) the
remainder of this Agreement or such Related Agreement, as applicable, and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, except to the extent of the
mitigation provided for in clause (i)) nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 12.4. COUNTERPARTS. This Agreement may be executed in one or
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more counterparts, each of which shall be deemed an original and all of which
shall, taken together, be considered one and the same agreement.
SECTION 12.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except
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for any other agreements entered into by the parties or their representatives on
the date hereof, this Agreement, together with its Exhibits and Schedules, the
Related Agreements, the Buyer A Confidentiality Agreement (with respect to Buyer
A) and the Buyer B Confidentiality Agreement (with respect to Buyer B) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among all of the parties with respect to
the subject matter hereof and (ii) except as set forth in Section 6.6, Article
VIII and Article X, is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder. Except as expressly provided
herein, nothing herein shall be construed to modify or supersede the Buyer A
Confidentiality Agreement or the Buyer B Confidentiality Agreement, it being
understood that the Buyer A Confidentiality Agreement and the Buyer B
Confidentiality Agreement shall continue to be in full force and effect
notwithstanding the execution or termination of this Agreement.
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SECTION 12.6. GOVERNING LAW. This Agreement shall be governed by and
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construed in accordance with the laws of the State of New York.
SECTION 12.7. CONSENT TO JURISDICTION. Each of the parties hereto
------------------------
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York, or if such court does not have
jurisdiction, the Supreme Court of the State of New York, New York County, for
the purposes of any suit, action or other proceeding arising out of this
Agreement or any Related Agreement or any transaction contemplated hereby or
thereby. Each of the parties hereto further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth in Section 12.1 shall be effective service of process for any
action, suit or proceeding in New York with respect to any matters to which it
has submitted to jurisdiction as set forth above in the immediately preceding
sentence. Each of the parties hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or any Related Agreement or the transactions contemplated
hereby or thereby in (i) the United States District Court for the Southern
District of New York or (ii) the Supreme Court of the State of New York, New
York County, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 12.8. ASSIGNMENT. None of this Agreement or any Related
----------
Agreement or any of the rights or obligations hereunder or thereunder shall be
assigned by any of the parties hereto or thereto without the prior written
consent of the Seller, in the case of any assignment by the Buyers, or the
Buyers, in the case of any assignment by the Seller or any Asset Sale
Subsidiary, as applicable, except that the Buyers may assign rights and
obligation between themselves and to any of their respective Affiliates
following written notice to the Seller; provided that the Buyers shall remain
liable for the performance of any such Affiliate of its obligations hereunder.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and permitted assigns. Any attempted assignment in violation of the terms of
this Section 12.8 shall be null and void, ab initio.
SECTION 12.9. EXPENSES. Except as otherwise expressly specified
--------
elsewhere in this Agreement, all costs and expenses incurred in connection with
this Agreement and the Related Agreements and the transactions contemplated by
this Agreement and the Related Agreements shall be paid by the party incurring
such cost or expense.
SECTION 12.10. BULK TRANSFER LAWS. The parties hereby waive
--------------------
compliance with the provision of any bulk transfer laws applicable to the
transactions contemplated by this Agreement or any Related Agreement.
SECTION 12.11. BREACHES. No party hereunder shall be responsible for
--------
the breach hereof by any other party hereto, except as set forth in Section
12.8.
SECTION 12.12. INTEREST ACT (CANADA). Solely for the purposes of
----------------------
disclosure pursuant to the Interest Act (Canada) and without affecting any
calculation of interest required by this Agreement, whenever any interest under
this Agreement is calculated using a rate based
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on a year of 360 days, such rate, when expressed as an annual rate, is
equivalent to such rate multiplied by the number of days in the calendar year in
which interest is paid divided by 360.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
VIVENDI UNIVERSAL S.A.
By:/s/ GUILLAUME HANNEZO
---------------------------
Name: Guillaume Hannezo
Title: Chief Financial Officer
PERNOD RICARD S.A.
By:/s/ THIERRY JACQUILLAT
---------------------------
Name: Thierry Jacquillat
Title: Vice Chairman
DIAGEO PLC
By:/s/ NICK ROSE
---------------------------
Name: Nick Rose
Title: Finance Director