Exhibit 10.3

 

Note: Portions of this exhibit indicated by “[***]” are subject to a
confidential treatment request, and have been omitted from this exhibit.
Complete, unredacted copies of this exhibit have been filed with the Securities
and Exchange Commission as part of the Company’s confidential treatment request.

 

DATE 21 APRIL 2005

 

PERNOD RICARD S.A.

 

FORTUNE BRANDS, INC.

 

AMENDED AND RESTATED FRAMEWORK

AGREEMENT

(as amended by a Deed of Variation dated 24 July 2005)

 

Relating to certain of the business

and assets of Allied Domecq plc

 

Macfarlanes

10 Norwich Street

London EC4A 1BD

 

DPM/585366/2705563.9

21 April 2005

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CONTENTS

 

          Page

--------------------------------------------------------------------------------

Clause

          1   

Definitions, interpretation and third party rights

   1 2   

Bidco 2 financing

   20 3   

Implementation principles

   24 4   

Wrong pocket assets

   39 5   

Employees

   41 6   

Pensions

   43 7   

Liabilities

   43 8   

Contracts

   50 9   

Price Adjustment Mechanics

   55 10   

Period from the Effective Date to completion

   57 11   

Continuing obligations

   66 12   

Transitional Arrangements

   68 13   

Period after Completion

   71 14   

Co-operation and further assurances

   71 15   

Announcements

   72 16   

Confidentiality

   73 17   

Warranties

   73 18   

Guarantee of obligations under the Planned Transactions

   74 19   

Assignment

   74 20   

General

   75 21   

Notices

   76 22   

Dispute Resolution

   78 23   

Governing law

   80

 

Schedules

     1    FB Brands – Allocation of Global Consideration 2    Planned
Transactions 3    Intentionally Blank 4    Part 1:    Components of Spirits and
Wines Working Capital      Part 2:    Components of Transferred Subsidiary
Working Capital      Part 3:    Completion Accounts Process 5    Part 1:   
Calculation of DBC      Part 2:    Determination of DBC      Part 3   
Determination of Earnings 6    Pensions 7    Tax 8    Callaway Intellectual
Property 9    “B” Share Rights 10    Key Members of the AD Group 11    Certain
US and Mexican Members of the AD Group 12    Part 1:    Calculation of Operating
DBC      Part 2:    Calculation of Operating DBC for Distribution      Part 3:
   Calculation of Operating DBC for Production      Part 4:    Determination of
Operating DBC 13    Part 1:    Calculation of Inventory and Stocks Value     
Part 2:    Determination of Inventory and Stocks Value 14    Part 1:   
Calculation of Transferred Net Debt      Part 2:    Determination of Transferred
Net Debt 15    FB Facilities 16    Examples of Possible Netting Structures

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17    Theoretical DBC 18    FB Brands – Multiples for Price Allocation

 

Agreed Form Documents

 

A    Pro-forma Transitional Services Agreement B    Pro-forma Co-Packing
Agreement C    Pro-forma IP Licence D    Bidco 2 Articles E    Larios Sale and
Purchase Agreement F    Deed of Adherence (AD) G    Escrow Appointment Letter H
   Deed of Adherence (Bidco 1) I    ADSAS Transfer Agreement

--------------------------------------------------------------------------------

 

FRAMEWORK AGREEMENT

 

DATE 21 April 2005

 

PARTIES

 

1. PERNOD RICARD S.A., a company incorporated in France, whose registered office
is at 12, place des États-Unis, 75783 Paris Cedex 16 (“PR”); and

 

2. FORTUNE BRANDS, INC., a corporation incorporated in the state of Delaware,
whose principal place of business is at 300 Tower Parkway, Lincolnshire,
Illinois, IL 60069 (“FB”).

 

INTRODUCTION

 

A PR intends to acquire the entire issued, and to be issued, share capital of AD
by means of the Scheme.

 

B The Parties wish to agree a framework for the transfer by members of the Bidco
2 Group to members of the FB Group of certain assets and liabilities comprising
the FB Businesses.

 

AGREEMENT

 

1 Definitions, interpretation and third party rights

 

1.1 The Introduction and Schedules form part of this Agreement and have the same
force and effect as if set out in the body of this Agreement. Any reference to
this Agreement includes the Introduction and Schedules.

 

1.2 In this Agreement, the following words and expressions have the following
meanings:-

 

the Additional Tracker Shares: the 6,599,360 Tracker Shares to be allotted to FB
pursuant to Clause 2.4.4;

 

Accounting Principles: the accounting principles, bases, conventions, rules and
estimation techniques used in the preparation of the annual report and accounts
of AD for the year ended August 2004 provided such principles, bases,
conventions, rules and estimation techniques are consistent with UK Generally
Accepted Accounting Principles as at 31 August 2004 and to the extent that the
annual report and accounts of AD for the year ended August 2004 are not
consistent with UK Generally Accepted Accounting Principles as at 31 August 2004
or do not deal with a particular principle, base, convention, rule or estimation
technique, UK Generally Accepted Accounting Principles as at 31 August 2004
shall apply;

 

the Acquisition: the acquisition of the entire issued, and to be issued, share
capital of AD;

 

Adjusted Global Consideration: the Global Consideration as adjusted in
accordance with Clauses 3.9.2 and 3.9.3;

 

Affiliates: in relation to any person, at any given time, any other person which
directly, or indirectly through one or more intermediaries, controls, or is

 

1

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“controlled by”, or is “under common control with”, that first person, and as
used in this definition, control (including, with corresponding meanings,
controlled by and under common control with) shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise) but under no circumstances shall a member
of the AD Group be an Affiliate of FB;

 

the Agreed Form: the form agreed between and signed by or on behalf of PR and
FB;

 

AD: Allied Domecq plc (a company registered in England and Wales with number
03771147);

 

AD Group: AD and each subsidiary of AD from time to time;

 

ADLH: Allied Domecq Luxembourg Holdings Sarl;

 

AD Name Licence: an intellectual property licence in respect of the “AD” name in
the Agreed Form marked ‘C’;

 

ADSAS: Allied Domecq S.A.S.;

 

ADSAS Transfer Agreement: the agreement in the Agreed Form marked “I” to be
dated on or about 27 July 2005 between ADLH, ADSWE and FB Acquisition pursuant
to which ADLH and ADSWE agree to transfer the entire issued share capital of
ADSAS to FB Acquisition;

 

ADSWE: Allied Domecq Spirits & Wine (Europe) BV;

 

the Announcement: the meaning ascribed to it in the Transaction Co-operation
Agreement;

 

Announcement Date: the date on which Bidco 2 announces the Proposed Offer;

 

Assurance: means any guarantee, indemnity or similar commitment;

 

Bank: The Royal Bank of Scotland plc;

 

Bidco 1: Goal Acquisitions (Holdings) Limited (a private company registered in
England and Wales with registered number 5421315);

 

Bidco 2: Goal Acquisitions Limited (a company registered in Guernsey with
registered number 43045);

 

Bidco 2 Articles: the articles of association of Bidco 2 in the Agreed Form
marked ‘D’ to be adopted by Bidco 2 on or prior to the Announcement Date;

 

Bidco 2 Group: Bidco 2 and each subsidiary of Bidco 2 from time to time;

 

Bid Structure Transaction Costs: all transfer taxes, stamp or registration
duties, issuance taxes, capital duties, registration or notarial fees relating
to the transfer or issue of shares in AD (or any security or depositary receipt
or interest representing shares in AD) or any transaction in shares in or loan
capital of Bidco 1 or Bidco 2 (or any security or depositary receipt or interest
representing

 

2

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shares in or loan capital of Bidco 1 or Bidco 2) which, in either case, is
undertaken either:

 

  (i) pursuant to the Scheme or as part of the arrangements forming part of the
Scheme or any associated transaction (including any transaction or series of
transactions pursuant to which consideration is provided to the former holders
of shares in AD and any transaction or series of transactions whereby shares in
AD acquired by PR, any Affiliate of PR, Bidco 1 or Bidco 2 pursuant to the
Scheme are transferred to a single holding company); or

 

  (ii) as part of the provision or repayment directly or indirectly of any
financing provided by PR or FB to Bidco 1 or Bidco 2 in respect of the
Acquisition;

 

“B” Shares: shares or membership interests having the rights set out in Schedule
9 when issued to FB Acquisition, and having the rights set out in paragraphs 1
and 2 of Schedule 9 as if all references to “FB” were references to “PR” and
vice versa when issued to PR;

 

Business: any business operated by any member or members of the AD Group;

 

Business Day: means a day (other than a Saturday or Sunday) on which banks
generally are open in each of Paris, New York and London for the transaction of
normal banking business;

 

Cash Equivalents: the meaning given in Part 1 of Schedule 14;

 

Clearance: the meaning given in Clause 3.22.1;

 

Clearance Date: the meaning given in Clause 3.22.1;

 

the Companies Acts: the Companies Act 1985, the Companies Consolidation
(Consequential Provisions) Act 1985, the Companies Act 1989 and Part V of the
Criminal Justice Act 1993;

 

the Completion Date: in respect of each FB Asset, the date on which the Planned
Transaction relating to it completes;

 

Conducting Party: means, in the case of certain Third Party Proceedings, the
party which has conduct of such proceedings or, as the case may be, the relevant
part thereof in accordance with Clause 7.4.6.1 or Clause 7.4.6.3;

 

Contract Party: the meaning given in Clause 8.1;

 

Courvoisier Consideration: the meaning given in Clause 2.3.3;

 

Credit Agreement: the credit agreement made between, among others, PR and Bidco
1 (as original borrowers and original guarantors) (1), JP Morgan plc and the
other financial institutions listed therein as arrangers (2) and the financial
institutions named therein as lenders (3) and dated 21 April 2005, as amended at
the date of the restatement of this Agreement;

 

Current Tax Assets: the meaning given in Schedule 4;

 

3

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Current Tax Liabilities: the meaning given in Schedule 4;

 

DBC: in respect of a brand, the amount in pounds sterling of direct brand
contribution as calculated in accordance with Part 1 of Schedule 5;

 

DBC Adjustment: the amount calculated as such in accordance with Clause 3.9.1;

 

Deed of Adherence: the deed in the Agreed Form marked “F” to be executed by AD
in accordance with Clause 3.1.2;

 

Earnings: the amount calculated as such in accordance with Clause 3.21;

 

the Effective Date: the effective date of the Scheme (being the date on which
the Scheme becomes effective as described in Clause 2.4.1), save that it shall
mean 31 July 2005 for the purposes of calculating: DBC; Spirits and Wines
Working Capital; Transferred Subsidiary Working Capital; and Transferred Net
Debt;

 

Elected Assets: the meaning given in the Transaction Co-operation Agreement;

 

the End Date: the date being six months after the Effective Date or if such date
shall not be a Business Day, the next following Business Day;

 

Equipment and Vehicles: all the loose plant, machinery, tools, moulds, office
equipment (including all computer hardware, software and networks), motor
vehicles, furnishings, general equipment and other articles in each case owned
by members of the AD Group but excluding Fixed Plant;

 

Escrow Account: the meaning in Clause 2.3;

 

Escrow Agent: Macfarlanes of 10 Norwich Street, London EC4A 1BD and Herbert
Smith of Exchange House, Primrose Street, London EC2A 2HS jointly;

 

Escrow Appointment Letter: the letter in the Agreed Form marked “G”;

 

Escrow Conditions: the meaning in Clause 2.4;

 

Escrow Monies: the meaning in Clause 2.3;

 

Final Step Transaction Costs: all transfer taxes, stamp or registration duties,
registration or notarial fees payable on the transfer of or agreement to
transfer FB Assets or shares in a Transferred Subsidiary to FB or an Affiliate
of FB;

 

Financial Debt: the meaning given in Part 1 of Schedule 14;

 

Financial Investments: all investments of a financial nature but excluding any
Cash Equivalents;

 

Fixed Plant: the fixed plant, equipment, machinery and leasehold improvements
together with fixtures and fittings which are annexed to or form part of a
facility or of any other real property;

 

4

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FB Acquisition: Fulham Acquisition Corp., a corporation incorporated in the
state of Delaware, whose principal place of business is c/o Fortune Brands, Inc.
at 300 Tower Parkway, Lincolnshire, Illinois, IL 60069;

 

the FB Assets: the property and assets agreed to be purchased by FB or its
Affiliates in accordance with this Agreement comprising:-

 

  (i) the benefit (subject to the burden) of the FB Contracts;

 

  (ii) the FB Goodwill;

 

  (iii) the FB Facilities;

 

  (iv) the FB Records;

 

  (v) the FB Inventory;

 

  (vi) the FB Third Party Rights;

 

  (vii) the FB Stocks;

 

  (viii) the FB Promotional Assets;

 

  (ix) the FB Know-how;

 

  (x) the FB Investments;

 

  (xi) the FB IP;

 

  (xii) the FB Brand Equipment;

 

  (xiii)

the assets acquired by FB Businesses (whether by reason of ordinary course
trading or otherwise) after the Effective Date including any value received
(whether in cash, Cash Equivalents or otherwise but net of all Tax and other
costs of sale, provided that where such value consists of the proceeds of sale
of Elected Assets pursuant to clause 5 of the Transaction Co-operation Agreement
or the proceeds of sale of FB Assets required to be sold as a consequence of PR
being unable (by reason of some third party or similar right existing as at the
Effective Date) to procure the transfer of those FB Assets to members of the FB
Group on or before the End Date, Tax costs shall be deducted from the value
received only to the extent that actual Tax costs exceed the Planned Transaction
Tax Costs which would have been incurred had the relevant Elected Assets or
other FB Assets been transferred to FB or an Affiliate of FB pursuant to a
Planned Transaction) on the sale of the assets included in this definition of FB
Assets after the Effective Date other than where such value is reflected in the
calculation of FB Operating DBC of members of the PR Group which are not
Transferred Subsidiaries as referred to in Clause 9.6. (For the avoidance of
doubt, the assets included in this paragraph (xiii) shall include the proceeds
of any sale of any of the assets included in this definition of FB Assets
required to be sold either (a) as a consequence of PR being unable (by reason of
some third party or similar right existing as at the Effective Date) to procure
the transfer of those FB Assets to members of the FB Group on

 

5

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or before the End Date or (b) pursuant to clause 5 of the Transaction
Co-operation Agreement);

 

  (xiv) together with any other assets owned by a member of the AD Group which
are predominantly used in and required for the operation of the FB Businesses
and which are not expressly excluded from any of the categories of assets
referred to in this definition of FB Assets,

 

  (xv) the proceeds of sale of MM Non-Cleared Assets pursuant to Clause 3.22,
from which Tax costs shall be deducted from the value received only to the
extent that such Tax costs exceed an amount equal to the Planned Transaction Tax
Costs which would have been incurred had the relevant MM Non-Cleared Assets or
other FB Assets been transferred to FB or an Affiliate of FB pursuant to a
Planned Transaction (on the basis that the relevant Part Consideration is
calculated in accordance with this Agreement ignoring any adjustment in respect
of Earnings pursuant to Clause 3.23);

 

provided that:

 

  (a) component parts of FB Operating DBC of members of the AD Group which are
not Transferred Subsidiaries referred to in Clause 9.6;

 

  (b) component parts of Spirits and Wines Working Capital, Transferred
Subsidiary Working Capital and all Cash Equivalents taken into account in the
calculation of Transferred Net Debt;

 

  (c) assets received on the sale of any FB Asset to FB or its Affiliates after
the Effective Date where that sale is a Planned Transaction;

 

  (d) any assets sold after the Effective Date in respect of which the value
received on that sale falls within paragraph (xiii) of this definition of FB
Assets; and

 

  (e) the benefit of any Tax relief which is, in accordance with Schedule 7, for
the account of PR,

 

shall not be FB Assets;

 

and provided that:

 

  (f) any MM Assets shall not be FB Assets until immediately prior to the time
that such assets are transferred to FB or its Affiliate or to a third party
pursuant to Clause 3.22 of this Agreement.

 

FB Brand Equipment: all loose plant, machinery, tools, moulds, office equipment,
furnishings, general equipment including all computer software, hardware and
networks and other articles which are not Fixed Plant and which are only capable
of being used in connection with the FB Brands;

 

FB Brands: subject to Clause 3.14, the brands set out in Schedule 1 and each of
them shall be a FB Brand, save that until immediately prior to the time that
Maker’s Mark is transferred to FB or its Affiliate, or a third party pursuant to
Clause 3.17 or 3.22 of this Agreement, Maker’s Mark shall not be a FB Brand;

 

6

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the FB Businesses: (i) all Businesses (other than businesses relating to the
distribution of finished goods to customers of the AD Group) relating to the FB
Brands and (ii) all FB Distribution Businesses;

 

the FB Contracts: all the contracts, undertakings, understandings, agreements,
arrangements and obligations of, and rights, benefits and licences enjoyed by,
members of the AD Group entered into prior to the Effective Date to the extent
that they relate predominantly to the FB Businesses in each case to the extent
that on the Effective Date the same remain to be completed or performed
including, without limitation, supply and distribution agreements, management
agreements, franchise agreements, joint-venture agreements, customer and
supplier (including peat, grapes, agave, cork, herbs, wood, corn, grain, yeast
and water) contracts, warehousing contracts, logistics and transportation
contracts, marketing, sponsorship, promotional, product endorsement and product
placement contracts, licences of Intellectual Property, leases and hire purchase
agreements, other licensing contracts, information technology and business
process outsourcing agreements and agreements with third parties for the supply
of computer maintenance and support services, and other information technology
and telecommunications services, the benefit of insurance contracts relating to
periods prior to the Effective Date, product research, category research,
consumer research, product development and line extension contracts, recreation
and leisure contracts, contracts for fishing or hunting rights, but excluding
(i) employment contracts, (ii) any contracts relating to Financial Debt, (iii)
any contracts of insurance, and (iv) any Financial Investments save where
acquired by FB Businesses after the Effective Date;

 

the FB DBC Percentage:

 

100 x

   the aggregate DBC of the FB Brands        
the aggregate DBC of the FB Brands and the PR Brands     

 

provided that, for the purpose of this definition, Maker’s Mark shall be treated
as a FB Brand;

 

FB Distribution Businesses: the distribution businesses located in the United
Kingdom, Germany and Spain of members of the AD Group which comprise the
distribution of spirits and/or wines finished goods including without limitation
administrative services, supporting sales, local and trade marketing, logistics,
back office support (including billing and information technology) but excluding
all parts of any Business which relates to Stolichnaya or any other agency
brands;

 

FB Employees: those individuals who are, as at the Announcement Date, employed
by members of the AD Group and who:

 

  (i) work at the FB Facilities (save in an AD Group regional or head office
capacity);

 

  (ii) are predominantly dedicated to the FB Businesses;

 

  (iii) are members of the US sales force of the AD Group and are solely
dedicated to the sale of wine finished goods to customers of the AD Group; or

 

7

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  (iv) were recruited into one of the above categories (i) to (iii) in the
Ordinary Course of Business after the Announcement Date,

 

but excluding in each case all members of the Spanish sales force of the AD
Group who are solely dedicated to the sale of wine finished goods to customers
of the AD Group.

 

FB Facilities: the facilities of the AD Group set out in, or determined in
accordance with, Schedule 15 and any other real property or facility owned by a
member of the AD Group and predominantly dedicated to a FB Business together
with all Fixed Plant located, and Equipment and Vehicles based, at those
facilities or real property and (to the extent that the same are transferable)
any related easement rights, rights of access, rights of use and planning
consents but excluding all PR Brand Equipment;

 

FB Facilities Inventory: all Inventory manufactured at a FB Facility other than:

 

  (i) any Inventory relating solely to the PR Brands; and

 

  (ii) all PR Reserved Inventory;

 

FB Funding Percentage:

 

100 x

   the Adjusted Global Consideration         the AD Consideration     

 

FB Group: FB and each subsidiary of FB from time to time but excluding any
member of the AD Group;

 

the FB Goodwill: the goodwill of the members of the AD Group in connection with
the FB Businesses and the exclusive right (to the extent to which the members of
the AD Group can grant the same) for FB or its Affiliates to use the FB Brands
and to represent themselves as carrying on the FB Businesses in succession to
the members of the AD Group provided that goodwill relating predominantly to PR
Brands shall not be FB Goodwill;

 

FB Inventory: all Inventory relating solely to the FB Brands together with all
FB Facilities Inventory and all FB Reserved Inventory;

 

FB Inventory and Stocks Value: the amount determined in accordance with Schedule
13 to be the value at the Effective Date of the relevant FB Inventory and FB
Stocks not transferred to FB or its Affiliates through a Planned Transaction
(either directly or as an asset of a Transferred Subsidiary);

 

FB Investments: the investments (whether by way of equity or debt and including
all interests in joint ventures or similar undertakings) owned by members of the
AD Group and which relate solely or predominantly to the FB Businesses, but
excluding however any such investments which are made predominantly for
investment purposes and not for the benefit of the operation of the FB
Businesses provided that where the investment consists of shares or membership
interests in a body corporate, and assets held by that body corporate are FB
Assets, the investment itself shall not be a FB Asset;

 

8

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FB IP: the Intellectual Property owned by members of the AD Group and which
relates solely or predominantly to the FB Brands or solely or predominantly to
the FB Distribution Businesses. A non-exclusive schedule of Intellectual
Property owned by the AD Group (which for the avoidance of doubt includes PR IP)
has been identified and initialled on behalf of the Parties;

 

FB Know-how: all Know-how which relates solely or predominantly to the FB
Businesses;

 

FB Liability: any liability to the extent that it relates to a FB Asset, FB
Brand or FB Business and any other liability expressed in this Agreement or
agreed between the Parties to be a FB Liability, provided that in all
circumstances:-

 

  (i) all Financial Debt (unless a component part taken into account in the
calculation of Transferred Net Debt);

 

  (ii) all liabilities predominantly relating to a PR Facility;

 

  (iii) all liabilities relating to employees (including pensions liabilities)
to the extent that they do not relate to FB Employees;

 

  (iv) all Tax liabilities other than those Tax liabilities which are for the
account of FB pursuant to Schedule 7 or are taken into account in the
determination of FB Working Capital; and

 

  (v) liabilities taken into account in the calculation or determination of FB
Operating DBC as contemplated by Clause 9.6,

 

shall not be FB Liabilities, and

 

  (i) all liabilities predominantly relating to a FB Facility;

 

  (ii) all liabilities (including pensions liabilities) to the extent that they
relate to FB Employees;

 

  (iii) obligations under operating leases relating to FB Assets; and

 

  (iv) all Tax liabilities expressed to be for the account of FB pursuant to
Schedule 7;

 

  (v) all liabilities arising out of or in connection with any sale to a third
party of any FB Assets or Elected Assets required either pursuant to clause 5 of
the Transaction Co-Operation Agreement or as a consequence of PR being unable
(by reason of some third party or similar right existing at the Effective Date)
to procure the transfer of any FB Assets to members of the FB Group on or before
the End Date; and

 

  (vi) Financial Debt taken into account in the calculation of Transferred Net
Debt and all liabilities and payables which are taken into account in the
calculation of Transferred Subsidiary Working Capital,

 

shall be FB Liabilities, and

 

9

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for the avoidance of doubt:-

 

  (a) whether or not a liability would have been expected to have been incurred
if the relevant FB Business had been operated independently of the remainder of
the AD Group or was incurred as a result of any direction, instruction or policy
made or given by the AD Group as a whole or by AD (which the Parties had
referred to as a corporate action or inaction) shall not be relevant in
determining whether, or the extent to which, a liability is a FB Liability or a
PR Liability;

 

  (b) whether or not a liability is known or provided for in the accounts of any
member of the AD Group shall not be relevant in determining whether, or the
extent to which, a liability is a FB Liability or a PR Liability;

 

  (c) for the purpose of this definition, FB Assets which are “Elected Assets”
in accordance with clause 5 of the Transaction Co-operation Agreement shall
continue to be regarded as FB Assets;

 

  (d) where a liability is in part a FB Liability and in part a PR Liability,
allocation of such liability between the Parties shall be in accordance with
Clause 7.3; and

 

  (e) provided that MM Liabilities shall not be FB Liabilities until immediately
prior to the time that such liabilities are transferred to FB or an Affiliate,
or to a third party pursuant to Clause 3.17 or Clause 3.22 of this Agreement,
but, for the avoidance of doubt, shall be FB Liabilities after such time
irrespective of when such MM Liabilities or the circumstances in respect of such
MM Liabilities actually arose, and

 

FB Licences: all regulatory licences, permissions and consents (including
bonding licences, distilling licences, health and safety licences, quality
assurance licences, environmental licences) held by the AD Group which relate
solely or predominantly to the FB Businesses or (so far as they are held by
members of the AD Group) are necessary to operate the FB Businesses (excluding
any licences of Intellectual Property or Know-how);

 

FB Operating DBC: the direct brand contribution attributable to the relevant FB
Assets after the Effective Date as agreed or determined in accordance with
Schedule 12;

 

FB Promotional Assets: all promotional, marketing, corporate entertainment
(including sports tickets and rights concerning corporate boxes and similar
items), point of sale material (including trade booths) and similar assets
solely or predominantly related to the FB Businesses at the Effective Date or
acquired by them after the Effective Date but before the End Date;

 

FB Records: all books, information and records owned by members of the AD Group
and which relate solely or predominantly to the FB Businesses including books of
account, payroll records, tax records, stock and other records, price lists,
lists of customers and suppliers of the FB Brands, all other information,
correspondence and literature, all documents and other media embodying or
relating to either FB IP (including documents relating to ownership of FB IP) or
Intellectual Property licensed to the AD Group under a FB Contract, including
software, data and website content in which such FB IP or Intellectual Property
subsists and the original FB Contracts, in each case in whatever form or medium
it is held or recorded (but excluding in all circumstances (so far as they are

 

10

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required to be kept by law) statutory books (or equivalent documents) of members
of the AD Group which are not Transferred Subsidiaries);

 

FB Reserved Inventory: all Inventory manufactured at a PR Facility and owned by
any members of the AD Group as at the Effective Date as, together with other FB
Inventory, is reasonably required to produce the FB Brands to the same standard
and quality as they are produced prior to the Effective Date assuming reasonable
continued growth (or decline) of sales volumes of each such brand in accordance
with those sales volumes actually achieved by each such brand over the period of
3 years preceding the Effective Date;

 

the FB Stocks: the stock of raw materials, consumable stores, dry goods
(including bottles, labels, caps, pallets, cases, cartons and similar items)
cooperage, partly finished stocks and work-in-progress of the AD Group which:-

 

  (i) relate predominantly to FB Businesses; or

 

  (ii) are situated at a FB Facility, or are in transit to a FB Facility or from
a FB Facility to a facility owned by a person who is not a member of the AD
Group,

 

but excluding:-

 

  (i) all Inventory;

 

  (ii) all raw materials, consumable stores, dry goods (including bottles,
labels, caps, pallets, cases, cartons and similar items) cooperage, partly
finished stocks and work-in-progress which relate predominantly to a PR
Business; and

 

  (iii) such proportion of raw materials, consumable stores, dry goods
(including bottles, labels, caps, pallets, cases, cartons and similar items)
cooperage, partly finished stocks and work-in-progress which relate to both a PR
Business and a FB Business as relate to a PR Business;

 

the FB Third Party Rights: (to the extent to which members of the AD Group are
legally entitled to assign them, provided that the relevant member of the AD
Group has used all reasonable endeavours to obtain any consent required in order
to assign them) and subject to Clause 8.10, means the rights of members of the
AD Group against third parties (including rights under or in respect of
warranties, representations, guarantees and indemnities and the benefit of any
insurance or insurance claim attributable to any event occurring before the
Effective Date and which relate to the FB Assets or to the FB Liabilities) in
respect of the FB Businesses or any of the FB Assets but excluding (save where
acquired by FB Businesses after the Effective Date) any Financial Investments in
each case as at the Effective Date, together with all such rights arising in the
ordinary course of the FB Businesses between the Effective Date and the End
Date;

 

FB Working Capital: the FB DBC Percentage of the Spirits and Wines Working
Capital;

 

Global Consideration: the meaning given in Clause 3.8;

 

Historic Tax Liabilities: the meaning given in paragraph 1 of Schedule 7;

 

11

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Hosting Rate: £6.60 per 9 litre case;

 

Included FB Assets Value: the total amount paid by the relevant Transferred
Subsidiary to members of the AD Group pursuant to Planned Transactions in
respect of the transfer to such Transferred Subsidiary of FB Assets (being the
amount determined by PR in accordance with paragraph 1.1.2 of Schedule 2);

 

the Initial Tracker Shares: the Tracker Shares to be allotted to FB pursuant to
Clause 2.3.1;

 

Intellectual Property: patents, petty patents, registered designs, design right,
copyright, database right, trade marks, service marks, trade or business names,
domain names, logos, get-up or trade dress, inventions or utility models,
Know-how and all rights or forms of protection of a similar nature or effect
subsisting anywhere in the world, including applications or registrations for
any such right;

 

Inter-Company Creditor Current Account: any creditor current account owing to or
by a member of the PR Group and included in the Transferred Net Debt of a
Transferred Subsidiary;

 

Interim DBC: the meaning given in Clause 3.21;

 

Inventory: maturing spirits and wines and finished goods inventory owned by
members of the AD Group at the Effective Date;

 

Know-how: means all know-how, trade secrets and confidential information, in any
form (including paper, electronically stored data, magnetic media, film and
microfilm) including without limitation financial and technical information,
drawings, formulae, test results or reports, project reports and testing
procedures, information relating to the working of any product, process,
invention, improvement or development, instruction and training manuals, tables
of operating conditions, information concerning intellectual property portfolio
and strategy, market forecasts, lists or particulars of customers and suppliers,
sales targets, sales statistics, prices, discounts, margins, future business
strategy, tenders, price sensitive information, market research reports,
information relating to research and development and business development and
planning reports, database and any information derived from any of them;

 

Larios Sale and Purchase Agreement: the agreement in the Agreed Form marked ‘E’
to be entered into between FB, PR and Larios Pernod Ricard S.A. in relation to
the business and assets relating to the Larios brand;

 

MM Assets: without prejudice to proviso (f) in the definition of FB Assets and
the saving provision in the definition of FB Brands, assets which would be FB
Assets if Maker’s Mark was a FB Brand;

 

MM Borrower: the meaning given in Clause 2.14;

 

MM Business: the Business relating predominantly to the Maker’s Mark brand
(other than business relating to the distribution of finished goods to customers
of the AD Group) including all MM Assets and MM Liabilities;

 

MM Interim Period: the period beginning on the Effective Date and ending on the
date upon which either (i) FB (or an Affiliate) acquires legal title to the MM
Business together with the MM Assets and MM Liabilities pursuant to this

 

12

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Agreement or (ii) the MM Business is sold as MM Non-Cleared Assets to a third
party pursuant to Clause 3.17;

 

MM Liabilities: without prejudice to the further proviso (e) in the definition
of FB Liabilities and the saving proviso in the definition of FB Brands,
liabilities which would be FB Liabilities if Maker’s Mark was a FB Brand;

 

MM Loan: the meaning given in Clause 2.14;

 

MM Non-Cleared Assets: the meaning in Clause 3.17.2;

 

MM Ordinary Course of Business: in relation to the MM Business, the ordinary
course of that business (which for the avoidance of doubt includes insuring such
business);

 

MM Nominal Tax Rate: the official corporate income tax rate (including, without
limitation, federal, state and local taxes) applicable to the MM Business;

 

Nominal Tax Rate: the official corporate income tax rate (including, without
limitation, federal, state and local taxes) in the relevant market;

 

Non-Cleared Sale: the meaning given in Clause 3.22.3.2;

 

Non-Cleared Sale Date: the meaning given in Clause 3.22.3.2;

 

Non-Conducting Party: means, in relation to any Third Party Proceedings, the
Party to this Agreement who does not have conduct of the proceedings or the
relevant part thereof;

 

Notified Party: the meaning given in Clause 7.4.5;

 

Notifying Party: the meaning given in Clause 7.4.5;

 

Ordinary Course of Business: in relation to each member of the AD Group and/or
each FB Business or PR Business, the ordinary course business of that member
and/or the ordinary course of that FB Business or PR Business as the case may
be;

 

Part Consideration: the meaning given in Clause 3.11;

 

the Parties: FB on the one hand and PR on the other;

 

Planned Transaction Tax Costs: the meaning given in paragraph 1 of Schedule 7;

 

the Planned Transactions: the meaning given in Clause 3.6;

 

PR Assets: the assets (including contracts) of the AD Group at the Effective
Date save to the extent that they are (i) FB Assets or (ii) MM Assets;

 

PR Brand Equipment: all loose plant, machinery, tools, moulds, office equipment,
furnishings, general equipment and other articles which are not Fixed Plant and
are only capable of being used in connection with the PR Brands;

 

13

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PR Brands: the brands used in any of the Businesses other than the FB Brands
(and for the purposes of this definition, FB Brands shall at all times include
Maker’s Mark) and including, for the avoidance of doubt, Stolichnaya and all
other agency brands;

 

PR Businesses: each Business which is not a FB Business (and for the purposes of
this definition, FB Business shall at all times include the MM Business);

 

PR Contracts: all the contracts, undertakings, understandings, agreements,
arrangements and obligations of, and rights, benefits and licences enjoyed by,
members of the AD Group entered into prior to the Effective Date to the extent
that they are not FB Contracts in each case to the extent that on the Effective
Date the same remain to be completed or performed including, without limitation
supply and distribution agreements, management agreements, franchise agreements,
joint-venture agreements, customer and supplier (including peat, grapes, agave,
cork, herbs, wood, corn, grain, yeast and water) contracts, warehousing
contracts, logistics and transportation contracts, marketing, sponsorship,
promotional, product endorsement and product placement contracts, licences of
Intellectual Property, leases and hire purchase agreements, other licensing
contracts, information technology and business process outsourcing agreements
and agreements with third parties for the supply of computer maintenance and
support services and other information technology and telecommunications
services, the benefit of insurance contracts, product research, category
research, consumer research, product development and line extension contracts,
recreation and leisure contracts, contracts for fishing or hunting rights;

 

PR DBC Percentage: 100 less the FB DBC Percentage;

 

PR Employees: all employees of the AD Group other than the FB Employees;

 

PR Facility: all facilities and real properties of the AD Group other than the
FB Facilities together with all Fixed Plant located, and Equipment and Vehicles
based, at those facilities or real property, but excluding FB Brand Equipment;

 

PR Funding Percentage: 100 less the FB Funding Percentage;

 

PR Group: PR, each subsidiary of PR from time to time (including, after the
Effective Date, each member of the AD Group);

 

PR Inventory: all Inventory which is not FB Inventory;

 

PR Inventory and Stocks Value: the amount determined in accordance with Schedule
13 to be the value at the Effective Date of the relevant PR Inventory and PR
Stocks;

 

PR IP: the Intellectual Property owned by members of the AD Group and which
relates solely or predominantly to the PR Brands;

 

PR Liability: any liability of any member of the AD Group to the extent that it
is not a FB Liability, a MM Liability, a component part of Transferred Net Debt
or Transferred Subsidiary Working Capital, or a liability taken into account in
the calculation or determination of PR Operating DBC as contemplated by Clause
9.5.3;

 

14

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PR Operating DBC: the direct brand contribution of the relevant Transferred
Subsidiary after the Effective Date and relating to PR Businesses, as agreed or
determined in accordance with Schedule 12;

 

PR Reserved Inventory: all Inventory manufactured at a FB Facility and owned by
any members of the AD Group as at the Effective Date as, together with other PR
Inventory, is reasonably required to produce the PR Brands to the same standard
and quality as they are produced prior to the Effective Date assuming reasonable
continued growth (or decline) of sales volumes of each such brand in accordance
with those sales volumes actually achieved by each such brand over the period of
3 years preceding the Effective Date;

 

PR Stocks: the stocks of raw materials, consumable stores, dry goods (including
bottles, labels, caps, pallets, cases, cartons and similar items) cooperage,
partly finished stocks and work-in-progress of the AD Group which:-

 

  (i) relate predominantly to the PR Businesses; or

 

  (ii) are situated at a PR Facility, or in transit to a PR Facility or from a
PR Facility to a facility owned by a person who is not a member of the AD Group,

 

but excluding:-

 

  (i) all Inventory;

 

  (ii) all raw materials, consumable stores, dry goods (including bottles,
labels, caps, pallets, cases, cartons and similar items) cooperage, partly
finished stocks and work-in-progress which relate predominantly to a FB
Business; and

 

  (iii) such proportion of raw materials, consumable stores, dry goods
(including bottles, labels, caps, pallets, cases, cartons and similar items)
cooperage, partly finished stocks and work-in-progress which relate to both a PR
Business and a FB Business as relate to a FB Business;

 

the Proposed Offer: the offer to be made by or on behalf of Bidco 2 for the
entire issued and to be issued share capital of AD;

 

Proposed Transfers: the meaning given in Clause 3.4.1;

 

Providing Party: the Party providing transitional services (other than the
Transitional Arrangements) pursuant to Clause 12.8;

 

Relevant Encumbrances: mortgages, charges, equities, encumbrances and security
rights to the extent that they relate to any Financial Debt but not to the
extent that they relate to FB Liabilities or component parts of Transferred Net
Debt;

 

Requesting Party: the Party requesting transitional services (other than the
Transitional Arrangements) pursuant to Clause 12.8;

 

Sensitive Information: commercially sensitive or confidential information
relating to any Business and that is not in the public domain, including prices,
volumes, sales and marketing data, budgets, advertising and marketing plans;

 

15

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Shared Brands IP: means any Shared IP which is a trade mark (whether registered
or unregistered) or which is copyright material used in conjunction with a trade
mark;

 

Shared Hard IP: means any Shared IP other than Shared Brands IP;

 

Shared IP: means Intellectual Property or Know-how which under this Agreement
(i) is allocated as a FB Asset but which is required to be used after the
Effective Date by any PR Business, or (ii) is allocated as a PR Asset but which
is required to be used after the Effective Date by any FB Business;

 

the Scheme: means the proposed scheme of arrangement of AD under Section 425 of
the Companies Act 1985 to effect the Acquisition, as referred to in the
Announcement;

 

Spirits and Wines Working Capital: the amount of the working capital shown on
the Working Capital Statements prepared on the AD Group in accordance with Parts
1 and 3 of Schedule 4;

 

Split Claim: the meaning given in Clause 7.4.5;

 

Split Claim Notice: the meaning given in Clause 7.4.5;

 

Supervisory Committee: the meaning given in Clause 22.2.1;

 

Tax or Taxes: all forms of taxes, imposts, duties, levies, charges or
withholdings (whether local or national) including, without limitation, customs
and excise duties, together with any interest or penalties relating to any of
them and regardless of whether any such taxes, levies, duties, imposts, charges,
withholdings, penalties and interest are chargeable directly or primarily
against or attributable directly or primarily to that or any other person and of
whether any amount in respect of any of them is recoverable from any other
person;

 

Taxes Act 1988: Income and Corporation Taxes Act 1988;

 

Theoretical DBC: in respect of each FB Brand, the amount set against it in
column 2 of Schedule 17;

 

a third party: any person other than the Parties or any Affiliate of any of the
Parties;

 

Third Party Proceedings: means any claim, demand, action or other proceedings
which are threatened, made or instituted by any person other than FB or PR or
any of their respective Affiliates;

 

Tracker Shares: the tracker shares of €0.05 each in the capital of Bidco 2
denominated as such in the Bidco 2 Articles to be allotted and issued to FB
pursuant to Clause 2;

 

Transaction Co-operation Agreement: the transaction co-operation agreement
entered into between FB, PR and Bidco 2 on the same date as this Agreement and
relating to the Proposed Offer;

 

16

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Transferred Net Debt: in respect of each Transferred Subsidiary, the amount
determined as such in accordance with Part 2 of Schedule 14.

 

Transferred PR Assets Value: the total amount paid by members of the PR Group to
the relevant Transferred Subsidiary pursuant to Planned Transactions in respect
of the transfer to such members of the PR Group of PR Assets (being the amount
determined by PR in accordance with paragraph 1.1.2 of Schedule 2);

 

Transferred PR Inventory and Stocks Value: the amount determined in accordance
with Schedule 13 to be the value at the Effective Date of the relevant PR
Inventory and PR Stocks transferred to FB as assets of a Transferred Subsidiary;

 

the Transferred Subsidiaries: the companies, other than the PR Subsidiaries (as
defined in the ADSAS Transfer Agreement), which it is agreed or determined in
accordance with Clause 3 and Schedule 2 are either (i) to be transferred to FB
in accordance with the Planned Transactions or (ii) transferred to any third
party or third parties pursuant to clause 5 of the Transaction Co-operation
Agreement or as a consequence of PR being unable (by reason of some third party
or similar right) to procure the transfer of FB Assets to members of the FB
Group on or before the End Date, and each of them shall be a Transferred
Subsidiary;

 

Transferred Subsidiary Working Capital: the aggregate amount of the working
capital shown on the Working Capital Statements, prepared as at the Effective
Date, relating to all of the Transferred Subsidiaries as determined in
accordance with Parts 2 and 3 of Schedule 4 (provided that, for this purpose,
Transferred Subsidiaries shall include any company that carries on the MM
Business or holds MM Assets that is transferred to a third party in accordance
with Clause 3.17 in connection with a sale of the MM Business);

 

Transitional Arrangements: the provision of services, use of facilities,
equipment and/or resources and access to and/or use of information and
Intellectual Property in each case as may be necessary to allow the objective
set out in Clause 12.1 to be met; and

 

Working Capital Statement: a statement agreed or determined in accordance with
Part 3 of Schedule 4.

 

1.3 In this Agreement (unless the context requires otherwise):-

 

1.3.1 words and expressions which are defined in the Companies Acts have the
same meanings as are given to them in the Companies Acts;

 

1.3.2 any question as to whether a person is connected with any other person
shall be determined in accordance with the provisions of section 839 Taxes Act
1988 excluding the provisions of sub-section 7 of that section 839;

 

1.3.3 any reference to a statute, statutory provision or subordinate legislation
(“legislation”) shall (except where the context requires otherwise) be construed
as referring to:-

 

  1.3.3.1 such legislation as amended and in force from time to time and to any
legislation which (either with or without modification) re-enacts, consolidates
or enacts in rewritten form any such legislation; and

 

17

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  1.3.3.2 any former legislation which it re-enacts, consolidates or enacts in
rewritten form

 

provided that in the case of those matters which fall within sub-Clause 1.3.3.1
above, as between the Parties, no such amendment or modification shall apply for
the purposes of this Agreement to the extent that it would impose any new or
extended obligation, liability or restriction on, or otherwise adversely affect
the rights of, any Party;

 

1.3.4 any gender includes a reference to the other genders;

 

1.3.5 any reference to a “company” shall be construed so as to include any
company, corporation or other body corporate, wherever and howsoever
incorporated or established;

 

1.3.6 any reference to a “person” includes a natural person, partnership,
company, body corporate, association, organisation, government, state,
foundation and trust (in each case whether or not having separate legal
personality);

 

1.3.7 any reference to the Introduction, a Clause or Schedule is to the
introduction, a Clause or schedule (as the case may be) of or to this Agreement;

 

1.3.8 any reference to any other document is a reference to that other document
as amended, varied, supplemented, or novated (in each case, other than in breach
of the provisions of this Agreement) at any time;

 

1.3.9 “directly or indirectly” means (without limitation) either alone or
jointly with any other person and whether on his own account or in partnership
with another or others or as the holder of any interest in or as an officer,
employee or agent of or consultant to any other person;

 

1.3.10 any reference to indemnifying any person against any circumstances
includes indemnifying and keeping him harmless (on an after tax basis such that
the amount of the indemnity shall take into account the benefit of any tax
deductions available to him in respect of the cost or expense which gave rise to
the indemnity) from all actions, claims, demands and proceedings from time to
time made against that person and all losses, damages, payments, awards, costs
or expenses made or incurred by that person as a consequence of, or which would
not have arisen but for, that circumstance (including all interest, penalties
and reasonable legal and other professional costs and expenses);

 

1.3.11 any phrase introduced by the terms “including”, “include”, “in
particular” or any similar expression shall be construed as illustrative and
shall not limit the sense of the words preceding those terms;

 

1.3.12 any reference to “in writing” or “written” shall (except where otherwise
stated) not include in electronic form;

 

1.3.13 references to time of the day are (save where otherwise stated) to London
time;

 

1.3.14

subject to the express provisions of Schedule 5 and Schedule 12, where it is
necessary to determine (i) whether a monetary limit or threshold set out in this
Agreement has been reached or exceeded (as the case may be) or (ii) any amount
under this Agreement, and the value of the relevant claim or any of the relevant

 

18

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claims or amount is expressed in a currency other than pounds sterling, the
value of each such claim or amount shall be translated into pounds sterling at
the prevailing exchange rate applicable to that amount of that non- pounds
sterling currency by reference to middle-market rates quoted by Bank immediately
before close of business in London on the relevant date, or if such day is not a
Business Day, on the Business Day immediately preceding such day;

 

1.3.15 any reference to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any legal
concept or thing shall, in respect of any jurisdiction other than England, be
deemed to include what most nearly approximates in that jurisdiction to the
English legal term;

 

1.3.16 the rule known as the ejusdem generis rule shall not apply and
accordingly general words introduced by the word “other” shall not be given a
restrictive meaning by reason of the fact that they are preceded by words
indicating a particular class of acts, matters or things;

 

1.3.17 general words shall not be given a restrictive meaning by reason of the
fact that they are followed by particular examples intended to be embraced by
the general words;

 

1.3.18 any reference to a “brand” shall include a reference to all variations
and derivatives of that brand and all brand extensions linked to that brand,
variation or derivative;

 

1.3.19 words in the singular shall include the plural and vice versa;

 

1.3.20 save where an alternative formula or set of principles is set out, or
referred to, in this Agreement, all accounts required to be prepared under this
Agreement shall be prepared in accordance with the Accounting Principles; and

 

1.3.21 the word “predominantly” shall mean in excess of 50 per cent. and, where
relevant, shall be tested in relation only to the AD Group’s interest in the
relevant asset, liability or matter.

 

1.4 This Clause is left intentionally blank.

 

1.5 The index and Clause headings in this Agreement are included for convenience
only and do not affect the interpretation of this Agreement.

 

1.6 No term of this Agreement shall be enforceable under the Contracts (Rights
of Third Parties) Act 1999 by a person who is not a party to this Agreement,
save in relation to any rights conferred upon any members of the PR Group or the
FB Group in this Agreement, and any rights conferred by Schedule 6 of this
Agreement upon any Affiliates of either of the Parties, enforcement of which
under such Act shall not be excluded by this Clause 1.6.

 

1.7 Notwithstanding that any term of this Agreement may be or become enforceable
by a third party, the terms of this Agreement or any of them may be varied,
amended or modified or this Agreement may be suspended, cancelled, rescinded or
terminated by agreement in writing between the Parties without the consent of
any such third party.

 

19

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2 Bidco 2 financing

 

2.1 PR shall procure that within 7 days after the date of this Agreement the
articles of association of Bidco 2 are in the form of the Bidco 2 Articles.

 

2.2 This Clause is left intentionally blank.

 

2.3 On the date on which the order or, if more than one, the last of the orders
of the High Court of Justice sanctioning the Scheme under section 425 of the
Companies Act 1985 and/or confirming the reduction of share capital provided for
by the Scheme under section 137 of the Companies Act 1985 is granted (or, if not
reasonably practicable on that date, on the next following Business Day), and
notwithstanding any other provision of this Agreement or of any other agreement
between the parties, FB shall transfer to an interest bearing account (the
“Escrow Account”) in the name of the Escrow Agent:

 

2.3.1 the cash sum of £2,095,798,384, being the amount agreed to be subscribed
by FB Acquisition for 30,179,497 Initial Tracker Shares (the “Tracker Shares
Monies”);

 

2.3.2 the cash sum of £167,533,950, being the amount agreed to be lent pursuant
to the MM Loan (the “MM Loan Monies”); and

 

2.3.3 the cash sum of £458,288,883, being the amount agreed (subject to later
adjustment) to be paid in consideration for ADSAS (the “Courvoisier
Consideration”) such amount being deposited on behalf of FB Acquisition and
thereafter either (i) on behalf of ADLSNC and ADSWE, by way of advance of part
of the purchase price payable under the ADSAS Transfer Agreement and thereafter
on behalf of Bidco 2, by way of advance of monies owed by ADLSNC and ADSWE under
a loan agreement dated on or about 27 July 2005 or (ii) failing the satisfaction
of the condition in Clause 2.4.4.2, on behalf of Bidco 2 by way of subscription
for the Additional Tracker Shares pursuant to Clause 2.4.4.1,

 

(such sums together being the “Escrow Monies”). The Escrow Monies shall be held
to the joint order of PR and FB upon the terms of Clauses 2.3, 2.4, 2.7, 2.8,
2.9 and 2.10.

 

2.4 Each of PR and FB shall jointly instruct the Escrow Agent to (i) transfer
the Tracker Shares Monies to Bidco 2; (ii) transfer the MM Loan Monies to the MM
Borrower or as it shall direct and (iii) transfer the Courvoisier Consideration
to Bidco 2 on the third Business Day following the satisfaction of the following
conditions (the “Escrow Conditions”):

 

2.4.1 the Scheme becoming effective in full by registration of the order(s)
referred to in Clause 2.3 confirming the reduction in capital by the registrar
of companies and the issue by the registrar of companies of a certificate under
section 137 of the Companies Act 1985 in relation to the reduction of capital
provided for by the Scheme;

 

2.4.2 AD becoming a wholly owned subsidiary of Bidco 2;

 

2.4.3 the allotment to FB Acquisition of the Initial Tracker Shares, conditional
only upon the payment of the subscription monies for them; and

 

20

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2.4.4 either:

 

  2.4.4.1 the allotment to FB Acquisition of the Additional Tracker Shares
conditional only upon:

 

  (i) the payment of an amount equal to the Courvoisier Consideration by FB; and

 

  (ii) the failure of PR to deliver to FB by 9 a.m. on 1 August 2005 the ADSAS
Transfer Agreement in the Agreed Form marked “I”, duly executed by ADLHF and
ADSWE; or

 

  2.4.4.2 the delivery by PR to Herbert Smith on behalf of FB of the ADSAS
Transfer Agreement in the Agreed Form marked “I”, duly executed by ADLH and
ADSWE; and

 

2.4.5 the issue by PR to Herbert Smith on behalf of FB of a certificate
confirming that all the conditions to draw-down under the Credit Agreement have
been met save for any condition relating to FB’s subscription for the Tracker
Shares and/or the making of the MM Loan and/or the payment of the Courvoisier
Consideration and payment therefor; and

 

2.4.6 the execution by the MM Borrower of a deed of adherence to this Agreement
in the Agreed Form H, under which the relevant party agrees to be bound by the
terms of Clauses 2 and 3,

 

and PR shall procure that:

 

  (a) Bidco 2 shall accept the Tracker Shares Monies as the subscription
consideration for the Initial Tracker Shares and shall as soon as reasonably
practicable and in any event on the same Business Day issue the Initial Tracker
Shares and deliver to FB Acquisition a certificate for them and a certified copy
of the register of members; and

 

  (b) the MM Borrower shall accept the MM Loan on the terms set out in Clause
2.14; and

 

  (c) the MM Borrower shall use the entire MM Loan to put Bidco 2 in funds
(whether by way of subscription for ordinary shares in Bidco 2 or by way of
debt) to pay part of the cash consideration payable under the Scheme; and

 

  (d) either (i) Bidco 2 shall borrow an amount equal to the Courvoisier
Consideration from ADLH and ADSWE received by them as full discharge of
£458,288,883 of the price payable under the ADSAS Transfer Agreement; or (ii)
Bidco 2 shall accept an amount equal to the Courvoisier Consideration as the
subscription consideration for the Additional Tracker Shares and shall, as soon
as reasonably practicable and in any event on the same Business Day, issue the
Additional Tracker Shares and deliver to FB Acquisition a certificate for them
and a certified copy of the register of members.

 

2.5

As soon as reasonably practicable following the release of the Tracker Shares
Monies to Bidco 2, the MM Loan Monies to the MM Borrower pursuant to

 

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Clause 2.4 and an amount equal to the Courvoisier Consideration to Bidco 2 and
in any event on the same Business Day:

 

2.5.1 PR shall deliver to FB a copy of each Loan Request (as defined in the
Credit Agreement) made under the Credit Agreement; and

 

2.5.2 PR shall procure that Bidco 1 shall subscribe for such number of ordinary
shares in Bidco 2 (and pay for such shares in cash) as will be required to put
Bidco 2 in funds to pay (when taken together with the Escrow Monies) the cash
consideration payable under the Scheme.

 

2.6 PR shall procure the satisfaction of the Escrow Conditions as soon as
reasonably practicable after (and in any event by no later than the second
Business Day following) the payment by FB of the Escrow Monies to the Escrow
Account.

 

2.7 If for any reason the Escrow Conditions shall not have been satisfied by the
fourth Business Day following the payment by FB of the Escrow Monies to the
Escrow Account, each of PR and FB shall jointly instruct the Escrow Agent to
transfer the Escrow Monies to FB.

 

2.8 All interest accruing on the Escrow Monies while in the Escrow Account shall
accrue and be payable to FB other than interest accrued on the amount of the
Courvoisier Consideration after the completion of the ADSA Transfer Agreement
which shall accrue and be payable to Bidco 2 and each of PR and FB shall jointly
instruct the Escrow Agent to transfer such interest to FB and Bidco 2 as
applicable.

 

2.9 For the avoidance of doubt without prejudice to PR’s and FB’s obligations
under this Clause 2, the Escrow Agent shall not be required to make payments
from the Escrow Account other than on receipt of joint instructions from PR and
FB.

 

2.10 The Escrow Agent shall be appointed on the terms comprised in the Escrow
Appointment Letter.

 

2.11 PR shall procure that Bidco 2 shall from receipt deposit the Tracker Shares
Monies and the Courvoisier Consideration in an interest bearing account and pay
to FB an amount equal to the interest accrued:

 

2.11.1 on the Tracker Shares Monies between the receipt of such monies by Bidco
2 in accordance with Clause 2.4 and the application of such monies towards
payment of the consideration to the former shareholders of AD pursuant to the
Scheme; and

 

2.11.2 on the Courvoisier Consideration pending (i) completion of the ADSAS
Transfer Agreement or (ii) the receipt by Bidco 2 of an amount equal to the
Courvoisier Consideration as the subscription monies for the Additional Tracker
Shares.

 

2.12

(Without prejudice to FB’s obligation to make the payment referred to in Clause
2.3) PR, FB and AD shall procure that any “B” Shares to be issued in accordance
with this Agreement by any company incorporated in England and Wales are
allotted and issued on the Effective Date, and (FB and PR having undertaken, so
far as reasonably practicable, the relevant preparatory work, including
instructing local counsel and preparing and executing documents conditional on
the Effective Date, prior to the Effective Date) shall use reasonable endeavours
to procure that any such “B” Shares to be issued in accordance with this
Agreement in any other

 

22

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jurisdictions where their issue is reasonably practicable on the Effective Date
are so issued on the Effective Date and otherwise as soon as practicable
thereafter.

 

2.13 Provided that FB exercises its votes and/or consent rights in respect of
its Tracker Shares in accordance with the terms of this Agreement and the Bidco
2 Articles, at any time when Tracker Shares in Bidco 2 are held by both FB and
any member of the PR Group, PR shall, and shall procure that any such member of
the PR Group shall, exercise its votes and/or consent rights in respect of such
Tracker Shares in the same way as the Tracker Shares held by FB are voted in
respect of any given resolution.

 

2.14 FB agrees to lend to Bidco 1 (the “MM Borrower”) the sum of £167,533,950
(the “MM Loan”). The MM Loan shall be made by FB on the following terms:

 

2.14.1 the MM Loan shall be made at the time of the transfer of the MM Loan
Monies from the Escrow Account to the MM Borrower pursuant to Clause 2.4;

 

2.14.2 the MM Loan shall be unsecured;

 

2.14.3 the MM Loan will bear interest at a rate equal to 5% per annum, from the
date of the transfer of the MM Loan Monies from the Escrow Account to the MM
Borrower pursuant to Clause 2.4. All interest is calculated on the basis of a
365 day year and for the actual number of days elapsed, and shall be simple, not
compound, interest;

 

2.14.4 the accrued interest on the relevant proportion of the MM Loan shall be
payable by the MM Borrower on the day that such proportion of the MM Loan is
repaid. The Parties shall make appropriate applications (as are lawful) under
any relevant double tax treaty to enable any payment of interest to be made
without withholding tax or at the lowest applicable rate of withholding tax;

 

2.14.5 the MM Loan shall be repayable (together with accrued interest) by the MM
Borrower:

 

  2.14.5.1 on the terms set out in Clauses 3.22 and 3.23; and

 

  2.14.5.2 following an Event of Default under the Credit Agreement in respect
of PR and/or Bidco 1 as a result of which the Lenders declare all or part of the
Loans immediately due and payable (where such capitalised terms shall have the
meanings given to them in the Credit Agreement) but in such case repayment shall
only be effected by delivery of the MM Assets or be made out of the proceeds
received from a subsequent disposal of the MM Business;

 

2.14.6 the MM Borrower shall only utilise the proceeds of the MM Loan in
indirectly making payment of consideration due to the former shareholders of AD
pursuant to the Scheme, and FB acknowledges this will be done by way of equity
subscription in Bidco 2 or loan to Bidco 2, provided that the MM Borrower shall
in all circumstances be entitled to retain any interest earned on such proceeds.

 

23

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2.15 The Parties acknowledge that, after the Planned Transaction under which
ADSAS is transferred to FB or its Affiliate, it is proposed that the following
transfers will occur as soon as reasonably practicable:

 

2.15.1 ADSAS sells the issued share capital which it holds in Financière Moulins
de Champagne SA to an Affiliate of PR;

 

2.15.2 Subject to and in accordance with the provisions of the ADSA Transfer
Agreement Courvoisier SAS sells the entire issued share capital in Louis de
Salignac & Cie SAS or certain of the assets of such company which relate to the
Salignac and Martineau brands to an Affiliate of PR;

 

2.15.3 ADSAS sells the entire issued share capital in Les Gouttes d’Or SAS and
any other PR Assets to an Affiliate of PR; and

 

2.15.4 ADSAS sells the entire issued share capital in Ballantine’s Mumm
Distribution SAS to an Affiliate of PR.

 

and the Parties agree for the avoidance of doubt that such transfers are Planned
Transactions for the purposes of this Agreement.

 

2.16 The Parties acknowledge that on completion of the ADSAS Transfer Agreement
certain undertakings in the Agreed Form will be entered into by Ballantine’s
Mumm Distribution SAS and Louis de Salignac & Cie SAS and by the shareholders of
these companies.

 

2.17 PR shall procure that, prior to the Effective Date, the Credit Agreement
shall be amended to include the following provision in clause 25.13(d):

 

“Until the later of (A) the Fortune Brands End Date, and (B) the date upon which
all of the MM Assets (as such term is defined in the Framework Agreement) have
been transferred to Fortune Brands (or to Affiliates of Fortune Brands) in
accordance with the Framework Agreement:

 

  (i) notwithstanding any other provision of the Finance Documents, the Lenders
confirm that:

 

  (X) no member of the Group which owns MM Assets shall be or become a Guarantor
or otherwise grant any guarantee or security in respect of the Obligor’s
obligations under the Finance Documents; and

 

  (Y) they shall not make a claim (directly or indirectly) against any MM Asset
(or accept any such assets (directly or indirectly) in satisfaction of any
claim)”

 

and shall provide a copy of the relevant amendment to FB prior to the Effective
Date.

 

3 Implementation principles

 

3.1.1 PR and FB agree that the rights and obligations of AD set out in this
Agreement shall subsist only from the date on which AD adheres to this Agreement
in accordance with Clause 3.1.2.

 

3.1.2

PR shall procure, and FB will provide such assistance as it can in connection
with PR procuring, that AD so far as is lawful adheres to this Agreement with
effect

 

24

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from the Scheme becoming effective by executing the Deed of Adherence on or
before the Effective Date.

 

Proposed Transfers

 

3.2 The Parties intend that, conditional upon the Scheme becoming effective, FB
or Affiliates of FB shall without prejudice to Clause 3.22 acquire the benefit
of the FB Assets and bear the burden of the FB Liabilities with effect from the
Effective Date.

 

3.2.1 Accordingly, conditional only upon the Scheme becoming effective and
subject to paragraph 1.6 of Schedule 2, PR and AD shall upon the terms of this
Agreement procure that by no later than the End Date (or in the case of the MM
Business the date referred to in Clause 3.2.1.1) the FB Assets are transferred
to FB or its Affiliates subject to the assumption by them of the FB Liabilities
and FB shall, or shall procure that its nominated Affiliates shall, upon the
terms of this Agreement and subject to Clause 3.19 purchase the FB Assets and
assume the FB Liabilities. Time shall be of the essence of this Clause 3.2.1. In
relation to the MM Assets and MM Business:

 

  3.2.1.1 if Clearance is obtained, the MM Business shall respectively be
transferred to FB or its Affiliates in any event by the later of the End Date
and the date seven Business Days following the Clearance Date; or

 

  3.2.1.2 if Clearance is not obtained the proceeds of the sale (whether cash or
specie) of the relevant MM Non-Cleared Assets (together with any interest
accruing on such proceeds between the Non-Cleared Sale Date and the date of
payment to FB or its Affiliates) shall be transferred to FB or its Affiliates in
any event by the later of the End Date and the date seven Business Days
following the Non-Cleared Sale Date pursuant to Clauses 3.22.4 or 3.22.5.

 

3.2.2 For the avoidance of doubt, FB shall bear all risks relating to
deficiencies as to title in any of the FB Assets and shall only be entitled to
acquire such title to the FB Assets as is possessed by members of the AD Group
at the Completion Date of the relevant FB Asset and as is transferable to FB or
its Affiliates. If and to the extent that any FB Asset (other than a FB Contract
or a FB Third Party Right, to which Clause 8 shall apply) is not transferable to
FB or its Affiliates, PR shall, at the request and cost of FB or its Affiliates,
use its reasonable endeavours to obtain any consent required for such transfer,
and if it is not possible to obtain such consent within six months after the End
Date, the Parties shall co-operate in good faith with a view to finding a
mutually acceptable manner of enabling FB to obtain the benefit of such FB
Asset.

 

3.2.3

Notwithstanding the provisions of Clause 3.2.2, neither PR nor AD shall (and PR
shall procure that no member of the PR Group shall), in respect of any FB
Assets, or MM Assets and FB shall not (and shall procure that no member of the
FB Group shall) in respect of any PR Assets, between the Effective Date and the
Completion Date relevant to those FB Assets, MM Assets or PR Assets (as the case
may be), knowingly take any action or omit to take any action which would result
in such title to those FB Assets, MM Assets or PR Assets (as the case may be) as
is possessed by members of the AD Group at the Effective Date being sold,
encumbered or damaged (excluding as a result of any liens arising in the
Ordinary Course of the Businesses) provided, however, that neither PR nor AD
shall be in

 

25

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breach of this Clause 3.2.3 to the extent that such sale, encumbrance or damage
arises as a result of any exercise by FB or any of its Affiliates of any rights
under Clause 10 or attaching to the Tracker Shares or any “B” Shares.

 

3.2.4 Without prejudice to the specific terms of this Agreement, PR and AD shall
have no right to set-off, counterclaim or withhold against, deduct from or
otherwise qualify or delay the performance of their obligations under Clause
3.2.1 except as required by law to withhold or deduct tax from interest on the
MM Loan. The provisions of Clause 20.11 shall apply in respect of any breach of
this Agreement.

 

3.2.5 The FB Assets shall be transferred to FB or its Affiliates upon the terms
of this Agreement free from all Relevant Encumbrances.

 

3.3 The Parties agree that it is not their intention that FB or Affiliates of FB
shall acquire any interest in any FB Assets which are “Elected Assets” in
accordance with clause 5 of the Transaction Co-operation Agreement unless and
until such FB Assets have, in accordance with such clause 5, reverted to being
FB Assets.

 

3.4 Subject as provided in Schedule 2, each of the Parties and AD agrees to do
all such things as are reasonably necessary to give effect to the intentions set
out in Clause 3.2.1. The intentions set out in Clause 3.2.1 will not be carried
out on the Effective Date and accordingly, subject to the terms and conditions
of this Agreement, the Parties have agreed:

 

3.4.1 a mechanism for achieving the intentions of the Parties as set out above,
including the transfer of the FB Assets, subject to the assumption of the FB
Liabilities, to FB or any Affiliate of FB nominated by FB (“the Proposed
Transfers”) as soon as reasonably practicable following the Effective Date;

 

3.4.2 the manner in which the AD Assets shall be managed prior to such
intentions being achieved;

 

3.4.3 to establish the Supervisory Committee for the purposes set out in Clause
22; and

 

3.4.4 that, subject as provided in Schedule 2 and Clause 3.4.5, they will
exercise their rights and act reasonably having regard to the Parties’
objectives as set out in this Agreement:

 

  3.4.4.1 to allow each Party to manage the respective assets and liabilities
allocated to it in accordance with this Agreement, to the extent practicable, as
if it were the sole owner of such assets; and

 

  3.4.4.2 to achieve the separation of FB Assets and FB Liabilities.

 

3.4.5 Prior to (i) the date of legal transfer of the MM Business to FB or its
Affiliate or (ii) the relevant Non-Cleared Sale Date, PR shall manage the MM
Business in the MM Ordinary Course of Business.

 

3.5 The Parties shall, from the execution of this Agreement, (and AD shall) seek
to determine the following:-

 

3.5.1 the identity and owner or owners of the specific assets comprising the FB
Assets and, prior to the Clearance Date, the MM Assets; and

 

26

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3.5.2 the identity of, and person or persons responsible for, the specific FB
Liabilities and, prior to the Clearance Date, the MM Liabilities,

 

in accordance with the provisions of, and principles set out in, Schedule 2.

 

3.6 From the date of this Agreement:

 

3.6.1 PR shall seek to identify the nature and terms of the transactions
required in order (i) to reorganize the AD Group (and/or any assets held by the
AD Group) in order to separate the FB Businesses, FB Assets and FB Liabilities
from the remainder of the AD Group, (ii) to give effect to the Proposed
Transfers and (iii) to implement the terms of this Agreement (the “Planned
Transactions”) in accordance with the provisions of, and principles set out in,
Schedule 2 and having regard to its proper Tax obligations consequential on the
Planned Transactions; and

 

3.6.2 as soon as reasonably practicable following a determination by PR acting
reasonably that a Planned Transaction in respect of Maker’s Mark is likely to
occur, PR shall seek to identify the nature and terms of the transactions
required in order (i) to reorganise the AD Group (and/or any assets held by the
AD Group) in order to separate the MM Business, MM Assets and MM Liabilities
from the remainder of the AD Group, (ii) to give effect to the Proposed
Transfers and (iii) to implement the terms of this Agreement (which shall be
Planned Transactions notwithstanding that MM Assets are not FB Assets until
immediately prior to the time of transfer to FB, its Affiliates or a third
party) in accordance with the provisions of, and principles set out in, Schedule
2 and having regard to its proper Tax obligations consequential on the Planned
Transactions.

 

3.7 It is acknowledged:-

 

3.7.1 that the Proposed Transfers shall be carried out (as determined in
accordance with Clause 3.6) either (i) by way of a sale and purchase of the FB
Assets, (ii) by way of a sale and purchase of shares in companies (whether
existing at the date of this Agreement or subsequently incorporated) which own
the FB Assets, (iii) by way of a sale and purchase of some of the FB Assets
together with shares in companies (whether existing at the date of this
Agreement or subsequently incorporated) holding the remainder of the FB Assets
or (iv) by way of a reorganisation whereby the FB Assets are transferred to a
newly incorporated company and shares in that new company are transferred to FB;

 

3.7.2 subject to the provisions of Schedule 2 and other provisions of this
Agreement, PR shall use reasonable endeavours to procure that no PR Liabilities
(other than those which form a component part of Transferred Net Debt) shall be
liabilities of Transferred Subsidiaries at the relevant Completion Date or
otherwise novated or assigned to the FB Group; and

 

3.7.3 that the Proposed Transfers may not occur simultaneously.

 

Global Consideration

 

3.8 The aggregate global consideration for the sale of the FB Businesses and the
FB Assets shall be the sum of £2,721,621,217 (the “Global Consideration”) which
amount is allocated between the FB Brands and FB Distribution Businesses on the
basis set out in Schedule 1.

 

27

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Adjustments to Consideration

 

3.9 After the Effective Date, the Global Consideration will be adjusted as
follows:

 

3.9.1 In respect of each FB Brand, the “DBC Adjustment” shall be calculated as
(A) multiplied by (B) where (A) is the DBC for that FB Brand over the twelve
month period ending on 31 August 2004 (as agreed or determined in accordance
with Part 2 of Schedule 5) less the Theoretical DBC for that FB Brand and (B) is
the figure set against that FB Brand in the second column of Schedule 18.

 

3.9.2 The Global Consideration shall then be adjusted to reflect the DBC
Adjustment as follows:

 

  3.9.2.1 where the DBC Adjustment in respect of a FB Brand is a positive
number, the part of the Global Consideration allocated to that FB Brand in
accordance with Schedule 1 shall be increased by the amount of the DBC
Adjustment in respect of that FB Brand; and

 

  3.9.2.2 where the DBC Adjustment in respect of a FB Brand is a negative
number, the Global Consideration allocated to that FB Brand in accordance with
Schedule 1 shall be reduced by the amount of the DBC Adjustment in respect of
that FB Brand (having no regard to the fact that it is a negative number),

 

and either FB (or Affiliates of FB which have acquired the relevant FB Brand)
shall pay to PR (or Affiliates of PR disposing of the relevant FB Brand) (where
the adjustment is made pursuant to Clause 3.9.2.1) or PR (or such Affiliates of
PR) shall pay to FB (or such Affiliates of FB) (where the adjustment is made
pursuant to Clause 3.9.2.2), within 7 Business Days of determination of the DBC
Adjustment, an amount equal to the DBC Adjustment (provided however that if, at
the date of such determination, the Planned Transactions relating to the
transfer of the relevant FB Brand have not occurred (or have occurred but the
Part Consideration remains outstanding in accordance with Clause 3.19), no such
payment shall be made but the DBC Adjustment shall be taken into account in
determining or adjusting the relevant Part Consideration).

 

3.9.3 The Global Consideration shall also be adjusted as follows:

 

  3.9.3.1 it shall be increased by the amount by which the Transferred
Subsidiary Working Capital exceeds the FB Working Capital; and

 

  3.9.3.2 it shall be reduced by the amount by which the Transferred Subsidiary
Working Capital is less than the FB Working Capital,

 

and either FB (or its Affiliates) shall pay to PR (or its Affiliates) (where the
adjustment is made pursuant to Clause 3.9.3.1) or PR (or its Affiliates) shall
pay to FB (or its Affiliates) (where the adjustment is made pursuant to Clause
3.9.3.2). Payments shall be made on account of the adjustment required by this
Clause, determined by reference to the Estimated Working Capital Statement (as
defined in part 3 of Schedule 4), within 7 Business Days of the Agreement of the
Estimated Working Capital Statement insofar as such adjustment is allocated to
FB Assets and FB Businesses transferred to FB on or before the date 90 days
after the Effective Date. Further payments shall be made in respect of the
adjustment required by this Clause, determined by reference to the Working

 

28

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Capital Statement, within 7 Business Days of the agreement of the Working
Capital Statement such that, following such payments (and taking into account
any payments made on account), the aggregate adjustment made reflects the
Working Capital Statement and the appropriate allocation of such adjustment
between relevant FB Assets and FB Businesses. Arrangements will be made between
the Parties to measure the appropriate level of working capital in any
Transferred Subsidiary (whether in existence at the Effective Date or not) into
which additional working capital has been transferred after the Effective Date
pursuant to a Planned Transaction, and such measurement shall be made as at the
Effective Date in accordance with the principles of this Agreement and the
principle that working capital will not be compensated/paid for twice and, if
appropriate, adjustment may be made to the Global Consideration to represent
such working capital.

 

3.9.4 In the event that there is any working capital in any Transferred
Subsidiary (whether in existence at the Effective Date or not) which is not
Transferred Subsidiary Working Capital by virtue of the fact that it is
comprised of items which do not relate to the spirits and/or wines businesses of
the AD Group, arrangements will be made between the Parties to measure such
working capital and such measurements shall be made as at the Effective Date in
accordance with the principles of this Agreement and the principles that (i)
working capital will not be compensated/paid for twice and (ii) such non-spirits
and wines working capital shall be for the benefit of PR and, if appropriate,
adjustment may be made to the Global Consideration to represent such working
capital.

 

3.10 The Parties acknowledge that the Adjusted Global Consideration is intended
to produce a global price for the FB Businesses and following the date of this
Agreement, an allocation of the Adjusted Global Consideration (as adjusted in
accordance with the terms of this Agreement) between the assets comprised in the
FB Businesses and the shares in companies which own FB Assets that are to be
transferred to members of the FB Group pursuant to the Proposed Transfers shall
be made in accordance with the provisions of, and principles set out in,
Schedule 2.

 

3.11 On the completion of each Planned Transaction which results in FB Assets
being transferred (directly or indirectly) to FB or Affiliates of FB, FB will
(subject to Clause 3.19) discharge the relevant proportion of the Adjusted
Global Consideration (the “Part Consideration”) which relates to such FB Assets
as is determined in accordance with the provisions of, and principles set out
in, Schedule 2. If agreed between the relevant parties, payment of such Part
Consideration may be left outstanding.

 

Adjustments to Part Consideration

 

3.12 The Parties acknowledge that the Adjusted Global Consideration (together
with the assumption of any FB Liabilities) is the price for the FB Businesses on
the assumption that:-

 

3.12.1 without prejudice to Clause 3.2.3, the relevant assets and liabilities
are transferred to members of the FB Group on the Effective Date;

 

3.12.2 the Transferred Net Debt in each Transferred Subsidiary at the Effective
Date (but taking into account interest and other amounts accruing on Financial
Debt and/or Cash Equivalents after the Effective Date as stated in the
definition of Transferred Net Debt) is zero; and

 

29

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3.12.3 such agreed price is exclusive of all value added, goods and services,
excise or sales taxes and any other similar Taxes,

 

and accordingly, adjustments will be made to the Adjusted Global Consideration
(and the final allocation thereof) to reflect any variance from these
assumptions at the Effective Date.

 

3.13 The provisions of Schedule 7 shall apply in respect of adjustments required
in relation to Tax.

 

Callaway Brand

 

3.14 In the event that PR is unable to procure the transfer of all or
substantially all of the FB Assets relating to the Callaway brand, including all
of the Intellectual Property relating to the Callaway brand set out in Schedule
8, to members of the FB Group on or before the End Date, the FB Assets relating
to the Callaway brand shall for all purposes of this Agreement be excluded from
the FB Brands and the Adjusted Global Consideration shall be reduced
accordingly. If PR acting reasonably determines that it is unable to procure the
transfer of all or substantially all of the FB Assets relating to the Callaway
Brand, PR shall use its reasonable endeavours to procure that an appropriate
number of Tracker Shares for a sum equal in pounds sterling to the adjusted
Global Consideration attributed to Callaway shall be acquired or lawfully
redeemed as soon as reasonably practicable.

 

Larios business

 

3.15 Upon the execution of this Agreement, the Parties shall, and shall procure
that their relevant Affiliates shall, enter into the Larios Sale and Purchase
Agreement.

 

Transitional Operational Matters

 

3.16 In order to facilitate the separation of the FB Businesses and the MM
Business from the operations of the AD Group and the PR Group, the Parties will,
subject to applicable anti-trust laws and regulation and restrictions on
confidentiality (whether imposed by law, regulation or contract), consult with
each other in relation to the preparation of plans for the separation of the
operational assets of the relevant Businesses in each geographical market and in
particular, but subject to the other provisions of this Agreement, to the
separation of the FB Businesses, the MM Businesses and the PR Businesses.

 

3.17 Elected Assets and MM Non-Cleared Assets

 

3.17.1 It is acknowledged by PR and FB that:

 

  3.17.1.1 FB wishes to secure a period of not less than 12 months from the
Effective Date for Clearance to be obtained in respect of the MM Business;

 

  3.17.1.2 the ability to secure such a period may be limited by any commitments
given by PR or members of the PR Group referred to in Clause 3.17.3.2; and

 

30

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  3.17.1.3 PR wishes, in connection with its Credit Agreement, to secure that
any Planned Transactions relating to the MM Assets and MM Liabilities are
implemented so as to enable the MM Loan to be repaid in full within the period
of 12 months from the Effective Date.

 

3.17.2 In the event that the Federal Trade Commission does not within the
Specified Period grant Clearance for the MM Business (in respect of such assets
for which Clearance has not been granted, the “MM Non-Cleared Assets”) PR shall
appoint a trustee who shall be instructed to sell within a period of no longer
than three months (such period of three months or shorter period arising from
the application of Clause 3.17.3.3 being the “Non-Cleared Sale Period”) the
relevant MM Non-Cleared Assets to a third party on the best terms reasonably
available (for the avoidance of doubt, PR shall be entitled to sell the relevant
MM Non-Cleared Assets for cash payable in full at completion) (no confidential
information relating to the MM Business having been disclosed to potential third
party purchasers prior to such appointment). For the purpose of this Clause, a
decision by the Federal Trade Commission to not grant Clearance shall not
entitle PR to appoint a trustee prior to the end of the Specified Period to the
extent that prior to that date FB is entitled to commence or has commenced and
has not waived the right to commence or terminated any relevant regulatory or
court proceedings in respect of such decision (and for the avoidance of doubt,
notwithstanding any FB entitlement to commence or the commencement of any such
regulatory or court proceedings, PR shall be entitled to appoint a trustee
pursuant to this Clause after the expiry of the Specified Period).

 

3.17.3 For the purposes of Clause 3.17.2, the Specified Period shall be the sum
of:

 

  3.17.3.1 three months from the Effective Date; plus

 

  3.17.3.2 such additional period of time, not exceeding six months, as would
not result in a breach by PR (or any member of the PR Group) of any commitments
to dispose of the MM Business given or reasonably required to be given by PR (or
any member of the PR Group) to any regulatory authority, which commitments have
been notified in writing pursuant to this Clause 3.17.3.2 by PR to FB or Herbert
Smith on or before the Effective Date. For these purposes PR shall, when and to
the extent reasonably requested by FB, make all reasonable efforts to obtain any
necessary extensions of time (provided that all such extensions when aggregated
with the three month period set out in Clause 3.17.3.1 shall not exceed nine
months) from the relevant regulatory authority or authorities, keeping FB
reasonably informed of the progress of such efforts; plus

 

  3.17.3.3 to the extent that PR has reasonable grounds to believe (after giving
due and proper consideration to any proposals of FB) that the completion of the
disposal of the relevant MM Non-Cleared Assets by the trustee so appointed by PR
is achievable within a period of less than 3 months, such part of such period of
three months that PR reasonably believes would not be required in order to
complete such disposal.

 

3.17.4

For the avoidance of doubt, if Clearance is obtained in respect of the MM
Business during the Non-Cleared Sale Period but before signature and exchange

 

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of any legally binding agreement to sell the relevant Non-Cleared Assets to any
third party purchaser, then if requested by FB the trustee shall (subject to
such trustee and any relevant member of the PR Group being indemnified by FB on
terms reasonably acceptable to such persons against any costs which they notify
FB in advance of such termination will be incurred as a result of such
termination) be instructed by PR to terminate all discussions, negotiations and
processes relating to the sale of such assets and the MM Business, MM Assets and
MM Liabilities shall be transferred to FB or its Affiliate under a Planned
Transaction in accordance with this Agreement.

 

3.17.5 FB shall have the right to require PR to instruct the trustee:

 

  3.17.5.1 subject to such right not:

 

  (i) being, in the reasonable opinion of PR, likely to prevent PR from
fulfilling its commitments to regulatory authorities referred to in Clause
3.17.3.2 and;

 

  (ii) being unacceptable to the Federal Trade Commission,

 

to use all reasonable endeavours to include, in any legally binding agreement to
sell the relevant MM Non-Cleared Assets to a third party which does not provide
for simultaneous exchange and completion, a right for the trustee or selling PR
Group company to terminate such agreement if Clearance is obtained in respect of
the MM Business at any time prior to completion; provided that the exercise of
such right of termination shall be at no cost to the trustee or selling PR Group
company or, alternatively, FB shall have agreed to indemnify the trustee or
selling PR Group company on terms reasonably acceptable to such person against
any such cost; and to exercise such right of termination if Clearance is so
obtained prior to completion, such that the MM Business, MM Assets and MM
Liabilities would fall to be transferred to FB or its Affiliate under a Planned
Transaction in accordance with this Agreement. For the avoidance of doubt, if
and to the extent that the inclusion of any such right of termination adversely
affects the terms reasonably available for the sale of the MM Business, PR shall
be deemed not, as a result thereof, to be in breach of its obligation under
Clause 3.17.2 to obtain the best terms reasonably available for the relevant MM
Non-Cleared Assets (for the avoidance of doubt, PR shall be entitled to sell the
relevant MM Non-Cleared Assets for a cash payment payable in full at
completion);

 

  3.17.5.2

subject to such sale being consistent with PR’s commitments to regulatory
authorities referred to in Clause 3.17.3.2 and not being unacceptable to the
Federal Trade Commission, if FB shall propose that the relevant MM Non-Cleared
Assets shall be sold to a bank or other third party willing to own and operate
the MM Business for such temporary period and on such terms as that third party
may have agreed with FB such as to allow FB a further period during which to
seek to obtain Clearance, to sell the relevant MM Non-Cleared Assets to that
bank or third party (irrespective of whether the price offered by that bank or
other

 

32

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third party is higher or lower than any price which may be offered by any other
person). For the avoidance of doubt, any such sale to a bank or other third
party shall be treated as a sale of the relevant MM Non-Cleared Assets to a
third party as contemplated by Clause 3.17.2 and the proceeds of such sale shall
be transferred to FB or its Affiliates in accordance with Clause 3.2.1.2

 

3.17.6 In the event that PR or any member of the PR Group has to sell any of the
MM Non-Cleared Assets to a third party in accordance with this Clause 3.17, or
sell any of the Elected Assets to a third party in accordance with clause 5 of
the Transaction Co-operation Agreement, FB shall reimburse to PR or the relevant
member of the PR Group all costs incurred by PR or members of the PR Group and
associated with such sale including, but not limited to, costs of holding the MM
Non-Cleared Assets or Elected Assets separate from PR’s existing businesses
and/or the payment of any trustee fees to ensure that MM Non-Cleared Asses or
Elected Assets are kept separate from PR’s existing businesses pending such
sale.

 

3.17.7 For the avoidance of doubt, if the price obtained by PR for any or all of
the Elected Assets or MM Non-Cleared Assets on a sale to a third party pursuant
to the Clause 5 of the Transaction Co-operation Agreement or this Clause 3.17 is
less or more than the relevant adjusted Part Consideration allocated to the
relevant MM Non-Cleared Assets or Elected Assets in accordance with this
Agreement, PR shall be under no obligation to reimburse FB for any shortfall and
any amount in excess of the relevant adjusted Part Consideration shall be for
the account of FB.

 

3.17.8 This Clause is intentionally left blank.

 

3.17.9 The Parties shall use their reasonable endeavours to procure that the
proposed acquisition of the MM Business by FB is approved by any relevant
antitrust authority as soon as reasonably practicable including (if necessary)
making all relevant refilings, for example under the Hart-Scott Rodino Antitrust
Improvements Act of 1976 (as amended), and in the case of FB but not PR,
commencing or contesting any applicable court or regulatory proceedings in
respect of or for the proposed separate acquisition of the MM Business, it being
recognised that such reasonable endeavours may need to continue after the
Effective Date.

 

3.17.10 In respect of any disposal of a MM Non-Cleared Asset PR shall not, and
no member of the PR Group shall, be required to give to any person any
warranties or indemnities.

 

3.18 Negative Transferred Net Debt

 

If the Transferred Net Debt of any Transferred Subsidiary shall be a negative
amount (i.e. net cash) in excess of (A) the Cash Equivalents in the relevant
Transferred Subsidiary at the Effective Date plus (B) any increase in such Cash
Equivalents resulting from the continuing activities of that Transferred
Subsidiary in the Ordinary Course of Business between the Effective Date and the
relevant Completion Date, PR shall indemnify FB and its Affiliates against all
losses, damages, costs, charges and expenses (including Tax and reasonable legal
costs) incurred by FB in lawfully distributing (within 12 months of the relevant
Completion Date) such excess on a without recourse basis to the member of the

 

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FB Group which acquired such Transferred Subsidiary in accordance with the
Planned Transactions. FB shall mitigate all such losses, damages, costs, charges
and expenses in respect of which it is entitled to be indemnified in accordance
with this Clause 3.18.

 

3.19 Netting

 

3.19.1 For so long as Tracker Shares are held by FB or an Affiliate of FB, in
respect of each Planned Transaction under which FB Assets or shares in
Transferred Subsidiaries are transferred to FB or an Affiliate of FB, PR shall
procure that:

 

  3.19.1.1 where the Part Consideration payable on the relevant Planned
Transaction is paid in cash, an appropriate number of Tracker Shares held by FB
or its Affiliates are acquired or lawfully redeemed for a sum equal in pounds
sterling to the relevant Part Consideration; or

 

  3.19.1.2 where the Part Consideration payable on the relevant Planned
Transaction is left outstanding, the receivable in respect of such Part
Consideration is by some lawful means set off against (so as to discharge the
obligations of FB or its Affiliate to pay such Part Consideration) the cost of
acquiring or redeeming for a sum equal to the relevant Part Consideration an
appropriate number of Tracker Shares in pounds sterling held by FB or its
Affiliates.

 

3.19.2 PR shall procure that in respect of each Planned Transaction under which
FB Assets or shares in Transferred Subsidiaries are transferred to FB or an
Affiliate of FB, the matters referred to in Clause 3.19.1 are completed no later
than 7 Business Days after the relevant Completion Date. The time limit on PR’s
obligation under this Clause 3.19.2 may be extended with FB’s consent, which
consent shall not be unreasonably withheld or delayed (it being agreed that in
reaching its decision as to whether or not to withhold, delay or grant such
consent, the matters that FB shall have proper regard to shall include, but not
be limited to the relative cost likely to be suffered and the relative risks
likely to be borne by PR or any Affiliate of PR on the one hand and FB or any
Affiliate of FB on the other hand consequent upon FB’s decision and any
proposals made by PR to commute or reduce any such risks or costs).

 

3.19.3 The Parties acknowledge that it is intended that, as at the End Date and
following the satisfaction by PR of its obligations under this Clause 3.19, the
Tracker Shares shall have been acquired or lawfully redeemed for an aggregate
sum equal to £2,095,798,384 (or, if Additional Tracker Shares are issued
pursuant to Clause 2.4.6, £2,554,087,267). If and to the extent that, at the End
Date, any Tracker Shares remain held by FB or its Affiliates, PR shall procure
that such Tracker Shares are acquired or lawfully redeemed for a sum equal to
£2,095,798,384 (or, if Additional Tracker Shares are issued pursuant to Clause
2.4.6, £2,554,087,267) less the aggregate amount already paid in pounds sterling
to acquire or redeem the Tracker Shares or Additional Tracker Shares pursuant to
this Clause 3.19.3.

 

3.19.4 In any event, PR shall procure that in respect of each Planned
Transaction under which FB Assets or shares in Transferred Subsidiaries are
transferred to FB or an Affiliate of FB, the matters referred to in Clause
3.19.1 are completed by no later than the End Date, and time shall be of the
essence of this Clause 3.19.4.

 

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3.19.5 The Parties acknowledge there are a number of methods by which PR could
satisfy its obligations in Clauses 3.19.1, 3.19.2 and 3.19.3. For the avoidance
of doubt and without limitation, Schedule 16 sets out some structural options
which may be adopted by PR (it being acknowledged that such structural options
remain conceptual and that FB expresses no view as to whether such options meet
the requirements of this Clause 3.19 and the remainder of this Agreement).

 

3.19.6 PR acknowledges that if and to the extent that, under any Planned
Transaction, FB or its Affiliate is required to pay in cash the consideration
for the relevant FB Asset or Transferred Subsidiary before PR has complied with
its obligations under Clause 3.19.1.1, an amount equal to such payment in cash
shall be provided to FB or its Affiliate by PR, Bidco 1 or Bidco 2 or a bank on
behalf of any of them by way of loan at no cost (including no interest cost) to
FB or its Affiliates (but otherwise on normal commercial terms including a
condition to drawdown that the loan shall be applied solely towards satisfaction
of such consideration, but excluding security) and the Parties shall procure
that lawful steps shall be taken to arrange repayment of such loan
simultaneously with PR’s compliance with its obligations under Clause 3.19.1.

 

3.19.7 Save as envisaged by this Clause 3.19 or by Schedule 16, PR shall have no
right to set off, counterclaim or withhold against, deduct from or otherwise
qualify or delay the performance of its obligations under this Clause 3.19.

 

3.20 PR shall procure that each of the Planned Transactions is implemented so as
not to give rise to any material risk that any such transaction is likely to be
avoided by any member of the PR Group or by any liquidator, administrator or
similar insolvency practitioner acting on behalf of any such member. This Clause
3.20 shall not permit FB to prevent PR from proceeding with any Planned
Transaction if in advance of proceeding with that Planned Transaction PR puts in
place reasonable measures to reduce any such material risk to a risk which is
less than material.

 

3.21 Earnings in respect of the MM Business

 

3.21.1 In respect of the MM Business (the “Earnings”) for the MM Interim Period
shall be (a) the DBC in respect of the MM Business as calculated for the MM
Interim Period in accordance with Part 1 of Schedule 5 (as agreed or determined
in accordance with Part 3 of Schedule 5) but excluding the amount of any such
(positive or negative) DBC the benefit or burden of which is not transferred to
FB or its Affiliates pursuant to a Planned Transaction but, rather, is retained
by PR Group Companies which are not Transferred Subsidiaries less (b) an amount
equal to the MM Nominal Tax rate on such DBC.

 

3.21.2 The Earnings attributable to the MM Business for the MM Interim Period
shall be for the account of PR, pursuant to Clause 3.23.

 

3.22 Maker’s Mark

 

3.22.1

Notwithstanding anything else in this Agreement, FB shall have no interest or
management or control rights in relation to the MM Business and shall not
acquire any interest in MM Assets, MM Liabilities or MM Business prior to the
date FB (or an Affiliate) acquires legal title to the relevant assets or
liabilities pursuant to this Agreement. If the Federal Trade Commission grants
clearance of FB’s acquisition of the MM Business (the “Clearance” and the date
of the Clearance being the “Clearance Date”) then the provisions of Clause
3.22.2 shall

 

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apply. For the avoidance of doubt, FB shall not acquire legal title in any of
the MM Assets, MM Liabilities or MM Business until Clearance is granted by the
Federal Trade Commission.

 

Clearance granted to the MM Business

 

3.22.2 If Clearance is granted for the MM Business, in respect of each Planned
Transaction relating to the MM Assets, MM Liabilities or the MM Business, the
Parties agree that:

 

  3.22.2.1 PR shall procure that where the Part Consideration payable on the
relevant Planned Transaction is paid in cash, an equivalent amount of the MM
Loan together with all accrued interest on such amount shall be repaid to FB;

 

  3.22.2.2 PR shall procure that where the Part Consideration payable on the
relevant Planned Transaction is left outstanding, the receivable in respect of
such Part Consideration is by some lawful means set off against (so as to reduce
by the amount of such receivable which together with any cash payable pursuant
to Clause 3.22.2.1 shall discharge the obligations of FB or its Affiliate to pay
such Part Consideration) the receivable owing to FB pursuant to the MM Loan such
that the net effect of such set off is that the amount of the MM Loan
outstanding is reduced by an amount equivalent to such Part Consideration and PR
shall procure that all accrued interest on such amount shall be repaid to FB;

 

  3.22.2.3 FB shall procure that on the completion of the relevant Planned
Transaction or in the case of any adjustment relating to Earnings within 7 days
of the date on which the Earnings are agreed or determined in accordance with
Clause 3.21, FB or the relevant Affiliate of FB will pay to PR or the relevant
Affiliate of PR the adjusted Part Consideration for the MM Business, as adjusted
in accordance with Clause 3.23.2.1; and

 

  3.22.2.4 In any event, PR shall procure that the MM Loan (together with all
accrued interest on such amount) shall be repaid in full by the later of the End
Date and seven Business Days following the Clearance Date provided that under no
circumstances shall the MM Borrower be required to repay (nor shall PR be
required to procure repayment of) any part of the MM Loan until PR or its
Affiliate has received the Part Consideration in respect of the MM Business.

 

Clearance not granted for MM Business

 

3.22.3 To the extent that Clearance is not granted within the Specified Period
(as defined in Clause 3.17) for the MM Business, and subject to all relevant
regulatory and court proceedings being completed or waived, or on such earlier
date as may be agreed in writing between PR and FB:

 

  3.22.3.1 the MM Business shall be treated as an MM Non-Cleared Asset pursuant
to Clause 3.17.1;

 

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  3.22.3.2 PR shall procure the MM Loan (together with all accrued interest on
such amount) be repaid in full by the later of the End Date and seven Business
Days following the date that the legal title to the MM Business is transferred
to a third party (the “Non-Cleared Sale”) pursuant to Clause 3.17 (the
“Non-Cleared Sale Date”) provided that under no circumstances shall the MM
Borrower be required to repay (nor shall PR be required to procure repayment of)
any part of the MM Loan until PR or its Affiliate has received the Part
Consideration in respect of the MM Business;

 

  3.22.3.3 regardless of whether the price obtained by PR for any or all of the
MM Non-Cleared Assets related to the MM Business in accordance with Clause
3.17.1 is greater or less than the relevant adjusted Part Consideration
allocated to such MM Non-Cleared Assets in accordance with this Agreement (on
the assumption that any company that carries on the MM Business or holds MM
Assets and is transferred to a third party in connection with that Non-Cleared
Sale is treated as a Transferred Subsidiary), FB shall pay to PR the relevant
adjusted Part Consideration for such MM Non-Cleared Assets on the date such MM
Non-Cleared Assets are sold to a third party;

 

  3.22.3.4 immediately prior to any sale to a third party pursuant to Clause
3.17, the MM Non-Cleared Assets will be deemed to be FB Assets and FB
Liabilities as appropriate and accordingly, the relevant adjusted Part
Consideration to be allocated to such MM Non-Cleared Assets under Clause
3.23.1.1 shall be calculated in accordance with Clause 3.

 

  3.22.3.5 PR shall transfer pursuant to a Planned Transaction to FB the
consideration (together with all interest accrued on such consideration on the
basis specified in part (xiii) of the definition of FB Assets and as specified
in Clause 3.17.8) received for the sale of the MM Business as soon as reasonably
practicable and in any event by the later of the End Date and the date seven
Business Days following the Non-Cleared Sale Date, provided that to the extent
that any of the proceeds of sale are deferred, PR or the relevant PR Affiliate
shall transfer such proceeds (together with accrued interest accruing on such
proceeds between the date that they are paid to PR or the relevant PR Affiliate
and transferred to FB) as soon as practicable and in any event within seven
Business Days of the date that they are transferred to PR or the relevant PR
Affiliate.

 

3.23 Allocation of Consideration for MM Business

 

3.23.1 MM Non-Cleared Assets

 

  3.23.1.1 The relevant adjusted Part Consideration to be allocated to such MM
Non-Cleared Assets under Clause 3.22.4.4 shall be adjusted as follows:

 

  3.23.1.1(A)

where the Earnings in respect of the MM Business is a positive number, the Part
Consideration allocated to the MM Business

 

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shall be increased by the amount of Earnings in respect of the MM Business; and

 

  3.23.1.1(B) where the Earnings in respect of the MM Business is a negative
number, the Part Consideration allocated to the MM Business shall be reduced by
the amount of Earnings in respect of the MM Business (without regard to the fact
that such amount is a negative number);

 

and either FB (or its Affiliates) shall pay to PR (or the Affiliate of PR
disposing of the MM Business) (where the adjustment is made pursuant to Clause
3.23.1.1(A)) or PR (or the Affiliate of PR disposing of the MM Business) shall
pay to FB (or its Affiliates) (where the adjustment is made pursuant to Clause
3.21.1.1(B)) on the date of completion of the relevant Planned Transaction or
within 7 Business Days of the date on which the Earnings are agreed or
determined in accordance with Clause 3.21, an amount equal to the Earnings by
way of part payment in respect of the relevant Part Consideration.

 

3.23.2 MM Business for which Clearance has been granted

 

  3.23.2.1 The relevant adjusted Part Consideration to be allocated to the MM
Business under Clause 3.22.2.3 shall be adjusted as follows:

 

  3.23.2.1(A) where the Earnings in respect of the MM Business is a positive
number, the Part Consideration allocated to the MM Business shall be increased
by the amount of Earnings in respect of the MM Business; and

 

  3.23.2.1(B) where the Earnings in respect of the MM Business is a negative
number, the Part Consideration allocated to the MM Business shall be reduced by
the amount of Earnings in respect of the MM Business (without regard to the fact
that such amount is a negative number);

 

and either FB (or its Affiliates) shall pay to PR (or the Affiliate of PR
transferring the MM Business) (where the adjustment is made pursuant to Clause
3.23.2.1(A)) or PR (or the Affiliate of PR transferring the MM Business) shall
pay to FB (or its Affiliates) (where the adjustment is made pursuant to Clause
3.23.2.1(B)) on the date of completion of the relevant Planned Transaction or
within 7 Business Days of the date on which the Earnings are agreed or
determined in accordance with Clause 3.21, an amount equal to the Earnings by
way of part payment in respect of the relevant Part Consideration.

 

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3.24 Capital Expenditure

 

3.24.1 In respect of the MM Business any monies provided to the relevant
business in accordance with Clause 10.3.7.3, whether by way of debt or equity,
by PR shall be repaid by the relevant business or PR shall be reimbursed as part
of the relevant Planned Transaction provided that the assets purchased or
created with such monies are transferred to FB or a FB Affiliate or the relevant
third party pursuant to a Non-Cleared Sale.

 

3.25 Allocation of Tax on disposal of MM Business

 

3.25.1 The aggregate Tax Liability incurred by PR or any Affiliate of PR arising
either:

 

  3.25.1.1 in a case where Clearance is granted, on the disposal of the MM
Business to FB or an Affiliate of FB pursuant to a Planned Transaction; or

 

  3.25.1.2 in a case where Clearance is not granted, on the disposal of the MM
Business to a third party pursuant to Clause 3.17, the payment of the relevant
adjusted Part Consideration pursuant to Clause 3.22.3.3, and on the transfer to
FB of the consideration received for the sale of FB Business pursuant to Clause
3.22.3.5;

 

shall be split between PR and FB so that PR shall bear such tax liability up to
an amount equal to the amount of the Planned Transaction Tax Costs (and for the
purposes of this Clause 3.25, the definition of Planned Transaction Tax Costs
shall be deemed to exclude paragraph (d) (any Tax liability referred to in
Clause 3.25.1)) which would have been incurred had the relevant MM Non-Cleared
Assets been transferred to FB or an Affiliate of FB pursuant to a Planned
Transaction (on the basis that the relevant Part Consideration is calculated in
accordance with this Agreement ignoring any adjustment in respect of Earnings
pursuant to Clause 3.23) and FB shall bear the balance of any such Tax
liability.

 

3.26 Ordinary Course of Business

 

The Parties acknowledge and agree that, for reasons of accounting convenience,
price adjustments under this Agreement relating to DBC, Inventory, Transferred
Net Debt and Transferred Subsidiary Working Capital shall be calculated as if
the Effective Date were 31 July 2005 for the purposes of this Agreement (and not
26 July 2005 as stated in this Agreement as signed and exchanged on 21 April
2005).

 

The Parties further acknowledge and agree that they do not intend there should
be any material effect on the value of the Businesses or on the result of such
price adjustments as a result of such amendment, and accordingly, agree that the
Businesses shall be carried on in the Ordinary Course of Business (and for the
purposes of this Clause 3.26, Ordinary Course of Business shall be based on the
conduct and practices and policies of the Businesses as carried on in the six
months prior to 21 April 2005) up to and including 31 July 2005.

 

4 Wrong pocket assets

 

4.1

The Parties intend that the following provisions of this Clause 4 shall apply in
respect of the FB Assets and the PR Assets on an ongoing basis after the

 

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Effective Date, and such provisions will be included in transfer agreements to
be entered into for the purposes of effecting the Planned Transactions.

 

4.2 Upon either of PR or FB notifying the other of a specific identified asset
to which it reasonably believes that this Clause 4 might apply, the other party
shall use its reasonable endeavours to locate such asset or assets with a view
to allowing both parties to determine whether or not this Clause 4 applies to
such asset.

 

4.3 If after the relevant Completion Date (i) it is found that any right, title
or interest in any FB Asset (other than FB Inventory or FB Stocks taken into
account in the determination of FB Inventory and Stocks Value) is held by PR or
one of its Affiliates by reason of a failure to transfer such asset through the
Planned Transactions relating to that FB Asset and (ii) the relevant transferors
referred to in Clause 3.11 have, between them, received the entire Part
Consideration attributed in accordance with this Agreement to those FB Assets
(as adjusted to take into account the matters referred to in Clause 3.12), then,
save where PR or its Affiliate (as the case may be) (“the transferor”) has
acquired title to such asset after the Completion Date as a direct or indirect
consequence of a sale for value by FB or one of its Affiliates:-

 

4.3.1 PR shall notify FB in writing as soon as practicable after such matters
come to its knowledge and transfer or procure that the transferor shall as soon
as practicable transfer such right, title or interest in the relevant asset to
FB or its nominee for no additional consideration (although it is acknowledged
that mechanisms may need to be adopted to ensure that the relevant member of the
PR Group receives adequate compensation whilst ensuring that the transfer is
economically neutral as between PR and FB);

 

4.3.2 PR shall procure that the transferor shall do all such further acts and
things and shall execute such documents as may be necessary to effect validly
the transfer and vest the asset or the relevant interest in FB (or its nominee);

 

4.3.3 PR shall procure that the transferor shall hold the asset, or relevant
interest in the asset, on trust for FB (or its nominee) (to the extent permitted
by any relevant law) until such time as the transfer is validly effected to vest
the asset or relevant interest in the asset in FB (or its nominee);

 

4.3.4 FB shall do, or shall procure that its nominee shall do, all such further
acts and things and shall execute such documents as may be necessary to effect
validly the transfer and vest the asset or the relevant interest in the asset in
FB (or its nominee); and

 

4.3.5 in the case of any transfer of FB IP under this Clause 4.3, FB or one of
its Affiliates shall be responsible for preparing and recording with the
relevant government entity or entities any documentation relating to such
transfer at its sole expense.

 

4.4

If at any time after the Effective Date it is found that any right, title or
interest in any PR Asset (other than (i) PR Inventory or PR Stocks taken into
account in the calculation of PR Inventory and Stocks Value, (ii) Cash
Equivalents taken into account in the calculation of Transferred Net Debt and
(iii) any asset taken into account in the calculation of Transferred Subsidiary
Working Capital) is held by FB or one of its Affiliates, then, save where such
person (in this Clause 4.4 “the transferor”) has acquired title to such asset
after the Completion Date as a direct

 

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or indirect consequence of a sale for value, otherwise than in connection with
this Agreement, by PR or one of its Affiliates:-

 

4.4.1 FB shall notify PR in writing as soon as practicable after such matter
comes to its knowledge and transfer or procure that the transferor shall as soon
as practicable transfer such right, title or interest in the relevant asset to
PR or its nominee for no additional consideration (although it is acknowledged
that mechanisms may need to be adopted to ensure that the relevant member of the
FB Group receives adequate compensation whilst ensuring that the transfer is
economically neutral as between PR and FB);

 

4.4.2 FB shall procure that the transferor shall do all such further acts and
things and shall execute such documents as may be necessary to effect validly
the transfer and vest the asset or the relevant interest in PR (or its nominee);

 

4.4.3 FB shall procure that the transferor shall hold the asset, or relevant
interest in the asset, on trust for PR (or its nominee) (to the extent permitted
by any relevant law) until such time as the transfer is validly effected to vest
the asset or relevant interest in the asset in PR (or its nominee);

 

4.4.4 PR shall do, or shall procure that its nominee shall do, all such further
acts and things as may be necessary to effect validly the transfer and vest the
asset or the relevant interest in the asset in PR (or its nominee); and

 

4.4.5 in the case of any transfer of PR IP under this Clause 4.4, PR or one of
its Affiliates shall be responsible for preparing and recording with the
relevant government entity or entities any documentation relating to such
transfer at its sole expense.

 

4.5 If and to the extent that, within a reasonable period of time (having regard
to the nature of the relevant asset and the legal and/or technical requirements
for its transfer) following notification in accordance with Clause 4.3.1 or
Clause 4.4.1 (as the case may be), PR shall have failed to transfer, or procure
the transfer of, a FB Asset to FB or its nominee in accordance with Clause 4.3
or FB shall have failed to transfer, or procure the transfer of, a PR Asset to
PR or its nominee in accordance with Clause 4.4, PR shall indemnify FB (where PR
has so failed) and FB shall indemnify PR (where FB has so failed), in each case
against all losses, damages, costs, charges and expenses (including reasonably
incurred legal costs) which may be suffered or reasonably incurred by FB or PR
(as the case may be) or any of their respective Affiliates by reason of such
failure.

 

4.6 Subject to Clause 4.5, all costs (other than legal and other professional
fees, which shall be borne by the person incurring such fees) incurred directly
as a result of implementing the provisions of this Clause 4 shall be borne by FB
and PR in the respective proportions represented by the FB Funding Percentage
and the PR Funding Percentage.

 

5 Employees

 

5.1 General Principles

 

5.1.1 The Parties anticipate and accept that the execution of the Planned
Transactions may, in some jurisdictions, attract the operation of statutory
employment protection provisions in relation to employees.

 

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5.1.2 The intentions of the Parties regarding the FB Employees and the PR
Employees are as follows:

 

  5.1.2.1 FB and its Affiliates shall have a first right to employ the FB
Employees;

 

  5.1.2.2 PR and its Affiliates shall have a first right to employ the PR
Employees; and

 

  5.1.2.3 if either FB and its Affiliates or PR and its Affiliates does not wish
to employ an employee in accordance with Clause 5.1.2.1 or Clause 5.1.2.2 or an
employee refuses an offer of employment made to give effect to this Clause 5.1.2
the other party or its Affiliates shall then have a right to employ that
employee, prior to the employment of that employee being terminated.

 

5.1.3 Where the provisions of Clause 5.1.2.3 apply:-

 

  5.1.3.1 such that a FB Employee is to be employed by PR or one of its
Affiliates, such employee shall be treated for all purposes of this Agreement as
a PR Employee;

 

  5.1.3.2 such that a PR Employee is to be employed by FB or one of its
Affiliates, such employee shall be treated for all purposes of this Agreement as
a FB Employee.

 

5.2 Ongoing and termination costs

 

5.2.1 The ongoing employment and termination costs and liabilities in respect
of:-

 

  5.2.1.1 any FB Employee shall (subject to Clause 5.1.2.3) be borne by FB; and

 

  5.2.1.2 any PR Employee shall (subject to Clause 5.1.2.3) be borne by PR.

 

5.3 Non-solicitation

 

5.3.1 During the period between 24 July 2005 and the End Date, neither party
shall, and shall procure that none of its Affiliates shall (and from such time
as it has adhered to this Agreement AD shall not and shall procure that none of
its Affiliates shall), without the prior consent of the employing party:

 

  5.3.1.1 subsequent to the Effective Date, solicit or otherwise seek to entice
away any FB Employee or PR Employee from the employment of any person in a
manner inconsistent with the provisions of Clause 5.1; or

 

  5.3.1.2 prior to the Effective Date, solicit or otherwise seek to entice away
any employee of FB, employee of PR or employee of AD.

 

5.3.2 The provisions of Clause 5.3.1 shall not apply in connection with any
recruitment directly resulting from a general recruitment programme or general
advertisement.

 

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5.3.3 The Parties agree (and from such time as it has adhered to this Agreement
AD agrees) Clause 5.3 shall be deemed to replace in entirety the following:

 

  5.3.3.1 clause 12 of the Transaction Co-operation Agreement as between PR and
FB;

 

  5.3.3.2 clause 11 of the Confidentiality Agreement entered into by FB and AD
on 1 April 2005; and

 

  5.3.3.3 clause 6.1 of the Confidentiality Agreement entered into by FB and PR
on 12 January 2005.

 

6 Pensions

 

6.1 The provisions of Schedule 6 shall have effect.

 

7 Liabilities

 

7.1 FB shall be responsible for each FB Liability.

 

7.2 PR shall be responsible for each PR Liability.

 

7.3 Where a circumstance or event gives rise to a liability which is in part a
FB Liability and in part a PR Liability, the extent to which such liability is a
FB Liability and the extent to which it is a PR Liability shall be determined:

 

7.3.1 as an equitable apportionment of liability having regard to all of the
relevant circumstances, the matter giving rise to the liability and the extent
to which the circumstance or event is a FB Liability; and

 

7.3.2 by referral to the Supervisory Committee for determination in accordance
with Clause 22 (including, for the avoidance of doubt, the provisions of Clause
22.6).

 

7.4 To give effect to the principles described in Clauses 5 and 7.1 to 7.3, the
Parties intend that the following provisions of Clauses 7.4 to 7.6 shall apply
in respect of the FB Liabilities and the PR Liabilities after the Effective
Date, and for that purpose such provisions will be included in the transfer
agreements to be entered into for the purposes of effecting the Planned
Transactions.

 

7.4.1 Upon FB becoming aware of any Third Party Proceedings against it or any of
its Affiliates which relate solely to a PR Liability, or which solely give rise
to a PR Liability, FB shall:-

 

  7.4.1.1 as soon as reasonably practicable (and in any event prior to making
any admission of liability, agreement, settlement, payment or compromise with or
to any third party in relation to such Third Party Proceedings), notify PR in
writing, such notice (so far as reasonably practicable at that time) to contain
reasonable details regarding such Third Party Proceedings;

 

  7.4.1.2

take such action and give such information and assistance as PR may reasonably
request in order to avoid, dispute, resist, mitigate, settle, compromise or
defend the Third Party

 

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Proceedings PROVIDED THAT PR shall indemnify FB (for itself and on behalf of its
Affiliates) against any liability, cost, damage or expense which may be incurred
thereby by FB and/or any of its Affiliates;

 

  7.4.1.3 at the request of PR (which request may be made at any time), allow PR
to take the sole conduct (any such taking of sole conduct being irrevocable
unless otherwise agreed) of the Third Party Proceedings and, where PR has
elected to take sole conduct, to take such action as PR thereby instructs FB to
undertake PROVIDED THAT PR shall indemnify FB (for itself and on behalf of its
Affiliates) against any liability, cost, damage or expense which may be incurred
thereby by FB and/or its Affiliates AND PROVIDED FURTHER THAT FB and/or its
Affiliates shall be entitled to retain the sole conduct of any such Third Party
Proceedings which, in FB’s reasonable view (to be set out in writing), could be
materially detrimental to the business of FB or any Affiliate, as the case may
be; if PR takes sole conduct of the Third Party Proceedings, but fails to give
FB and/or its Affiliates any or any adequate instructions when requested by FB
and/or its Affiliates in connection with any aspect of the Third Party
Proceedings, FB and/or its Affiliates may take such step in the Third Party
Proceedings as they consider to be reasonably necessary, and such steps will be
subject to the indemnity contained in this Clause 7.4.1;

 

  7.4.1.4 make (or, as appropriate, procure that its Affiliates make) no
admission of liability, agreement, settlement, payment or compromise with or to
any third party in relation to any such Third Party Proceedings without the
prior consent of PR, which shall not be unreasonably withheld or delayed,
PROVIDED THAT FB and/or each of its relevant Affiliates shall be entitled in
FB’s sole discretion on the giving of at least 7 Business Days notice to PR (i)
to make such an admission, agreement, settlement or compromise in circumstances
where PR has not requested to take sole conduct of the relevant Third Party
Proceedings pursuant to Clause 7.4.1.3 above within 20 Business Days following
notification of such Third Party Proceedings to PR being made pursuant to Clause
7.4.1.1 above; and/or (ii) to make such an agreement, settlement or compromise
(but not an admission of liability) at its own cost and expense and on the basis
that neither it nor the person(s) with whom such agreement, settlement or
compromise is made will have any recourse to PR or any of its Affiliates in
respect of the subject matter of the relevant Third Party Proceedings; and/or
(iii) to discharge any award against it or them of damages, costs or any other
amount which is the subject of a final, binding and non-appealable decision from
a court or arbitration panel of competent jurisdiction.

 

7.4.2

If either PR takes, or FB (or one of its Affiliates) retains, sole conduct of
any Third Party Proceedings pursuant to Clause 7.4.1.3 above, it shall do so at
its own cost and expense (but without prejudice to its rights to recover any
amount settled or paid under Clause 7.5) and shall provide the other party with
such information

 

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as such other party may reasonably require from time to time regarding the
progress of and developments in relation to such Third Party Proceedings.

 

7.4.3 Upon PR becoming aware of any Third Party Proceedings against it or any of
its Affiliates which relate solely to a FB Liability, or which solely give rise
to a FB Liability, PR shall:-

 

  7.4.3.1 as soon as reasonably practicable (and in any event prior to making
any admission of liability, agreement, settlement, payment or compromise with or
to any third party in relation to any such Third Party Proceedings), notify FB
in writing, such notice (so far as reasonably practicable at that time) to
contain reasonable details regarding the Third Party Proceedings;

 

  7.4.3.2 take (or, as appropriate, procure that its Affiliates take) such
action and give such information and assistance as FB may reasonably request in
order to avoid, dispute, resist, mitigate, settle, compromise or defend the
Third Party Proceedings PROVIDED THAT FB shall indemnify PR (for itself and on
behalf of its Affiliates) against any liability, cost, damage or expense which
may be incurred thereby by PR and/or any of its Affiliates;

 

  7.4.3.3 at the request of FB, (which request may be made at any time), allow
FB to take the sole conduct (any such taking of sole conduct being irrevocable
unless otherwise agreed) of the Third Party Proceedings and, where FB has
elected to take sole conduct, to take such action as FB thereby instructs PR to
undertake PROVIDED THAT FB shall indemnify PR (for itself and on behalf of its
Affiliates) against any liability, cost, damage or expense which may be incurred
thereby by PR and/or its Affiliates AND PROVIDED FURTHER THAT PR and/or its
Affiliates shall be entitled to retain the sole conduct of any such Third Party
Proceedings which, in PR’s reasonable view (to be set out in writing), could be
materially detrimental to the business of PR or any such Affiliate, as the case
may be; if FB takes sole conduct of the Third Party Proceedings, but fails to
give PR and/or its Affiliates any or any adequate instructions when requested by
PR and/or its Affiliates in connection with any aspect of the Third Party
Proceedings, PR and/or its Affiliates may take such step in the Third Party
Proceedings as they consider to be reasonably necessary, and such steps will be
subject to the indemnity contained in this Clause 7.4.3;

 

  7.4.3.4

make (or, as appropriate, procure that its Affiliates make) no admission of
liability, agreement, settlement or compromise with or to any third party in
relation to any such Third Party Proceedings without the prior consent of FB,
which shall not be unreasonably withheld or delayed, PROVIDED THAT PR and/or
each of its relevant Affiliates shall be entitled in PR’s sole discretion on the
giving of at least 7 Business Days notice to FB (i) to make such an admission,
agreement, settlement or compromise in circumstances where FB has not requested
to take sole conduct of the relevant Third Party Proceedings pursuant to Clause
7.4.3.3 above within 20 Business Days following

 

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notification of such Third Party Proceedings to FB being made pursuant to Clause
7.4.3.1 above; and/or (ii) to make such an agreement, settlement or compromise
(but not an admission of liability) at its own cost and expense and on the basis
that neither it nor the person(s) with whom such admission, agreement,
settlement or compromise is made will have any recourse to FB or any of its
Affiliates in respect of the subject matter of the relevant Third Party
Proceedings; and/or (iii) to discharge any award against it or them of damages,
costs or any other amount which is the subject of a final, binding and
non-appealable decision from a court or arbitration panel of competent
jurisdiction.

 

7.4.4 If either FB takes, or PR (or one of its Affiliates) retains, sole conduct
of any Third Party Proceedings pursuant to Clause 7.4.3.3 above, it shall do so
at its own cost and expense (but without prejudice to its rights to recover any
amount settled or paid under Clause 7.5) and shall provide the other party with
such information as such other party may reasonably require from time to time
regarding the progress of and developments in relation to such Third Party
Proceedings.

 

7.4.5 Upon either party (the “Notifying Party”) becoming aware of any Third
Party Proceedings against it or any of its Affiliates in relation to, or which
may give rise to, a FB Liability and a PR Liability (a “Split Claim”) it shall
as soon as reasonably practicable give notice (a “Split Claim Notice”) to the
other party (the “Notified Party”) in accordance with Clause 7.4.7. For the
avoidance of doubt, Clauses 7.4.1 and 7.4.3 shall not apply to any such Third
Party Proceedings.

 

7.4.6 Subject to Clause 7.4.9, following service of a Split Claim Notice under
Clause 7.4.5:-

 

  7.4.6.1 FB shall have conduct (at its own cost and expense) of the relevant
Third Party Proceedings insofar as they relate to the FB Liability, PR shall
have conduct (at its own cost and expense) of such proceedings insofar as they
relate to the PR Liability (and FB shall be the Conducting Party in relation to
such proceedings insofar as they relate to the FB Liability and PR shall be the
Conducting Party in relation to such proceedings insofar as they relate to the
PR Liability);

 

  7.4.6.2 the Parties shall take such procedural steps as may be necessary in
the relevant jurisdiction to facilitate conduct of the Third Party Proceedings
by both of them in the manner contemplated by Clause 7.4.6.1, and shall, in any
event, co-operate with one another in good faith in relation to such conduct;

 

  7.4.6.3

the Parties acknowledge that it is possible that a Split Claim may have
characteristics which prevent the conduct of that Split Claim being divided as
envisaged by Clauses 7.4.6.1 and 7.4.6.2, and in such circumstances the Parties
shall co-operate with one another in good faith in relation to managing the
conduct (and payment of related ongoing costs) of such Split Claim on the
understanding that if no alternative agreement can be reached each named
defendant of the relevant Third Party Proceedings will conduct the defence of
those Third Party Proceedings as regards itself (and the Party of which such
defendant is an

 

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Affiliate shall be the Conducting Party in relation to such proceedings insofar
as they relate to that defendant) but provided that it shall and the Party of
which it is an Affiliate shall procure that it shall, take into account all
reasonable requests of the other Party as regards the conduct of such Third
Party Proceedings by it insofar as such conduct may give rise to a liability
which is, in accordance with Clauses 7.1 and 7.2, the responsibility of such
other Party;

 

  7.4.6.4 at the conclusion (whether by judgment, settlement or otherwise) of a
Split Claim coming within Clause 7.4.6.3, the total costs and expenses and any
liability (whether arising through a judgment, settlement or otherwise) will be
apportioned between the Conducting Party and the Non-Conducting Party in the
proportions according to their respective liabilities as determined under Clause
7.3;

 

  7.4.6.5 the Conducting Party shall keep the Non-Conducting Party promptly
informed of all material developments regarding the Third Party Proceedings (or
the relevant part thereof) and provide the Non-Conducting Party with such
information as it may reasonably request from time to time regarding the Third
Party Proceedings (or the relevant part thereof), save where to provide such
information would result in the loss of legal privilege in that information or
might result in a breach of any applicable anti-trust or competition law, in
which case (to the extent possible) disclosure shall be on an external counsel
basis or to an independent third party who shall undertake not to disclose
privileged or anti-trust sensitive information received to the Non-Conducting
Party;

 

  7.4.6.6 the Conducting Party shall, where reasonably practicable, consult the
Non-Conducting Party and have reasonable regard to the interests of the
Non-Conducting Party and its Affiliates before taking any significant step in
relation to the Third Party Proceedings (or the relevant part thereof);

 

  7.4.6.7 the Non-Conducting Party shall take (or, as appropriate, procure that
its Affiliates take) such action and give such information and assistance as the
Conducting Party may reasonably request in order to avoid, dispute, resist,
mitigate, settle, compromise or defend the Third Party Proceedings (to the
extent such proceedings relate to a liability of the Conducting Party) PROVIDED
THAT the Conducting Party shall indemnify the Non-Conducting Party (for itself
and on behalf of its Affiliates) against any liability, cost, damage or expense
which may be incurred thereby by the Non-Conducting Party and/or its Affiliates
AND FURTHER PROVIDED THAT the Non-Conducting Party shall be entitled to refuse
to take or procure such action, or give such information and assistance if, in
the reasonable view of the Non-Conducting Party (to be set out in writing), such
action, information or assistance could be materially detrimental to the
business of the Non-Conducting Party or to the defence of any part of the Third
Party Proceedings in respect of which it is the Conducting Party;

 

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  7.4.6.8 the Non-Conducting Party shall not make (and shall procure that none
of its Affiliates shall make) any admission of liability, agreement, settlement
or compromise with any third party in relation to any such Third Party
Proceedings (insofar as such proceedings relate to the liability of the
Conducting Party) except (i) with the prior consent of the Conducting Party,
which shall not be unreasonably withheld or delayed; or (ii) in order to
discharge any award of damages, costs or other amount which is the subject of a
final, binding and non-appealable decision from a court or arbitration panel of
competent jurisdiction; and

 

  7.4.6.9 save as expressly provided in this Clause 7.4.6, any costs or expenses
incurred by the Non-Conducting Party or any of its Affiliates in connection with
the relevant Third Party Proceedings (or relevant part thereof) shall be for the
account of such Non-Conducting Party.

 

7.4.7 Any Split Claim Notice given pursuant to Clause 7.4.5 shall be in writing,
shall identify itself as a Split Claim Notice for the purposes of this Agreement
and shall specify in reasonable detail:-

 

  7.4.7.1 the party on whose behalf the notification is being made;

 

  7.4.7.2 a description of the Third Party Proceedings to which the notice
relates; and

 

  7.4.7.3 (insofar as it is reasonably practicable to do so at the time of the
Split Claim Notice) the expected currency and the amount of the FB Liability and
PR Liability to which it relates.

 

7.4.8 The giving of a notice under Clause 7.4.1 or 7.4.3, or a Split Claim
Notice under Clause 7.4.5, shall be without prejudice to the entitlement of the
party giving the notice to give one or more subsequent notices to the other
party for the purposes of this Agreement or for the purposes of making any such
amendments to a notice as it reasonably considers to be necessary or appropriate
to reflect further information in relation to the relevant Third Party
Proceedings. References under Clauses 7.4.1, 7.4.3 and 7.4.5 to a notice or (as
the case may be) to a Split Claim Notice shall be deemed to include a reference
to any such subsequent notice.

 

7.4.9 If, following service of a Split Claim Notice pursuant to Clause 7.4.5,
the parties agree that one or the other of them (but not both of them) should
have sole conduct of the relevant Third Party Proceedings, the parties shall
agree the basis on which such Third Party Proceedings shall be conducted.

 

7.5 Payment of PR Liabilities and FB Liabilities

 

7.5.1 Subject to Clause 7.5.3 below and subject to proviso (ii) of Clause
7.4.3.4 and to the extent that relevant payments have not already been made
pursuant to the agreements referred to in Clause 7.4, where, on or after the End
Date, PR or any of its Affiliates discharges any FB Liability or any part
thereof, then FB shall, within 10 Business Days of receipt of notice from PR to
pay the same, pay to PR an amount equal to the amount so discharged.

 

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For the purposes of this Clause 7.5.1 and Clause 7.5.3, where PR or any of its
Affiliates incurs any liability, cost, damage or expense which is the subject of
an indemnity from FB under Clause 7.4.3.2 or Clause 7.4.3.3, such liability,
cost, damage or expense shall (save as provided in Clause 7.4.2 or Clause 7.4.4)
be treated as a FB Liability that has been discharged by PR or one of its
Affiliates.

 

7.5.2 Subject to Clause 7.5.3 below and subject to proviso (ii) of Clause
7.4.1.4 and to the extent that relevant payments have not already been made
pursuant to the agreements referred to in Clause 7.4, where, on or after the End
Date, FB or any of its Affiliates discharges any PR Liability or any part
thereof, then PR shall, within 10 Business Days of receipt of notice from FB to
pay the same, pay to FB an amount equal to the amount so discharged.

 

For the purposes of this Clause 7.5.2 and Clause 7.5.3, where FB or any of its
Affiliates incurs any liability, cost, damage or expense which is the subject of
an indemnity from PR under Clause 7.4.1.2 or Clause 7.4.1.3, such liability,
cost, damage or expense shall (save as provided in Clause 7.4.2 or Clause 7.4.4)
be treated as a PR Liability that has been discharged by FB or one of its
Affiliates.

 

7.5.3 FB shall not be required to make any payment to PR pursuant to Clause
7.5.1 or 7.6 and PR shall not be required to make any payment to FB pursuant to
Clause 7.5.2 or 7.6 in connection with any liability (or series of connected
liabilities relating to or arising out of the same circumstances) unless, in
each case, (i) the amount of such payment would exceed £100,000 (and, for the
avoidance of doubt, if the amount of such payment would exceed £100,000 the
whole amount shall be payable and not just the excess) and (ii) (without
limitation of the provisions of Clauses 7.1 to 7.4) notice in writing has been
given to the other at least 7 Business Days prior to the party giving the notice
making any admission of liability, agreement, settlement, payment or compromise
with or to any third party in relation to the relevant Third Party Proceedings.
The limitation set out in this Clause 7.5.3 shall not apply in respect of
payments under the indemnities contained in Clauses 7.4.1.2, 7.4.1.3, 7.4.3.2 or
7.4.3.3.

 

7.6 Subject, in each case, to Clause 7.5.3 and only to the extent that relevant
payments have not already been made pursuant to the agreements referred to in
Clause 7.4, FB shall indemnify PR to the extent that FB fails to pay any FB
Liability for which it is responsible pursuant to Clause 7.1, and PR shall
indemnify FB to the extent that PR fails to pay any PR Liability for which it is
responsible pursuant to Clause 7.2, in each case against all losses, damages,
costs, charges and expenses (including reasonable legal costs) which may be
suffered or reasonably incurred by PR or FB (as the case may be) or any of their
respective Affiliates as a direct consequence of such failure.

 

7.7 Consideration Adjustment

 

Any payments made under Clause 7 from one Party to another shall be treated as
an adjustment to the Adjusted Global Consideration and the relevant Part
Consideration.

 

7.8 Conduct of Claims in relation to Tax

 

This Clause 7 shall not apply in relation to any Tax liabilities, save to the
extent provided for in Schedule 7.

 

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8 Contracts

 

8.1 The Parties wish to ensure (so far as possible) that FB receives the benefit
(subject to the burden) of, and the ability to perform, any agreements or
arrangements with third parties relating to the FB Assets regardless of the
legal entity which has the benefit of the relevant agreement or arrangement.
Accordingly, where after the Effective Date a FB Contract to which a member of
the AD Group which is not a Transferred Subsidiary is a party confers a benefit
on that member (in this Clause 8.1, the “Contract Party”), and in order to carry
on the FB Businesses in the same manner as they were carried on immediately
prior to the Effective Date, FB requires the benefit of the FB Contract or to be
subject to the burden of the FB Contract,

 

then if:

 

8.1.1 no consent or agreement of any third party is required to enable FB to
perform the FB Contract (or, in respect of those FB Contracts which relate in
part only to a FB Business, the relevant part thereof) or to enable the Contract
Party to transfer the benefit or burden of that FB Contract (or the relevant
part thereof) to FB or one of its Affiliates, then the assignment, novation or
transfer by the Contract Party of the benefit (subject to the burden) of such FB
Contract (or the relevant part thereof) to FB or one of its Affiliates shall be
effected by means of a Planned Transaction; and

 

8.1.2 in any other case, the following provisions shall apply:

 

  8.1.2.1 each party shall (each at is own expense) use its reasonable
endeavours to obtain the consent or agreement of the third party to whatever
assignment, transfer or novation is necessary to enable FB to perform such FB
Contract (or the relevant part thereof) or as the case may be to transfer the
benefit and burden of such FB Contract (or the relevant part thereof) to FB or
one of its Affiliates. Any payment necessary to procure such consent or
agreement shall be borne in accordance with Clause 8.2. PROVIDED THAT the
parties shall use their reasonable endeavours to minimise the amount of such
payment and shall adopt alternative arrangements if those are economically more
advantageous (taking into account the disruption to the business caused by
adopting such arrangements);

 

  8.1.2.2 until the consent or agreement referred to in Clause 8.1.2.1 is
obtained, the Parties shall (so far as each is able to do so) procure that FB
shall, unless the relevant FB Contract prohibits it, perform all the obligations
of the Contract Party under such FB Contract in relation to the FB Businesses as
agent for or sub-contractor to the Contract Party or, if the relevant FB
Contract does prohibit FB from so acting as agent and sub-contractor, PR shall
procure that the Contract Party shall, at the cost of FB do all such acts and
things as FB may reasonably require to enable due performance of the FB Contract
and to provide for FB the benefits, subject to the burdens of the FB Contract
(for this purpose, it shall not be reasonable to require the Contract Party to
make any payment unless FB has first put the Contract Party in cleared funds
sufficient to make such payment); and

 

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  8.1.2.3 if by the End Date, any FB Contract falling into this Clause 8.1.2 has
not been assigned, transferred or novated to enable FB to perform and benefit
from such FB Contract (or the relevant part thereof) or as the case may be the
burden of that FB Contract has not been assumed by FB or one of its affiliates,
subject to Clause 10.5 PR and FB shall negotiate with each other in good faith
to reach agreement on a back-to-back arrangement on reasonable commercial terms
which shall provide that, subject to any restrictions contained in, or other
terms of, such FB Contract and only for so long as such FB Contract remains in
effect (it being agreed (i) that PR shall be under no obligation to renew or
otherwise prevent the expiry or termination of such FB Contract and (ii) that PR
may, provided that it has first given FB reasonable notice (having regard to all
the circumstances) terminate such FB Contract at any time):

 

  (i) PR will provide to FB, or procure that there is provided to FB, the same
benefits (or any other benefits as the Parties may agree) as FB would have
enjoyed under the relevant FB Contract;

 

  (ii) FB shall pay to PR or the relevant Contract Party the relevant proportion
(calculated on the basis of the principle set out in Clause 8.2) of the total
consideration payable to the relevant counterparty under the relevant FB
Contract from time to time; and

 

  (iii) any discounts, benefits or rebates receivable under the FB Contract
shall be fairly allocated between PR and FB on such proportions as may be
determined in accordance with the principle set out in Clause 8.2,

 

and in the event that PR and FB are not able to agree (in each of their
respective opinions) reasonable commercial terms for such back-to-back
arrangement within a period of 6 months after the End Date PR shall be entitled
to terminate the relevant FB Contract and any payments or penalties resulting
from that termination shall be borne in accordance with Clause 8.2.

 

8.2 The payments referred to in Clause 8.1.2.1 and 8.1.2.3 shall be borne as
follows:

 

8.2.1 where the relevant contract is entirely a FB Contract, by FB; and

 

8.2.2 where the relevant contract is in part a FB Contract and in part a PR
Contract, by both PR and FB in such proportions as shall be determined:-

 

  8.2.2.1 as an equitable apportionment having regard to all of the relevant
circumstances and the subject matter of the contract; and

 

  8.2.2.2 by referral to the Supervisory Committee for determination in
accordance with Clause 22 (including, for the avoidance of doubt, the provisions
of Clause 22.6).

 

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8.3 If a third party to a FB Contract imposes any condition to the novation or
assignment of a FB Contract or as a term of giving its consent to FB or one of
its Affiliates for such novation or assignment, the Parties shall co-operate in
good faith with a view to finding a mutually acceptable means of satisfying the
requirements of that third party without varying (otherwise than in any minor
terms) the terms of such FB Contract or this Agreement relating to the rights
and obligations to be assumed by FB or one of its Affiliates.

 

8.4 The Parties wish to ensure (so far as possible) that PR receives the benefit
(subject to the burden) of, and the ability to perform, any PR Contracts
regardless of the legal entity which has the benefit of the relevant agreement
or arrangement after the relevant Completion Date. Accordingly, where after the
Effective Date a PR Contract to which a Transferred Subsidiary is a party
confers a benefit on that Transferred Subsidiary (in this Clause 8.4, the
“Contract Party”), and in order to carry on the PR Businesses in the same manner
as they were carried on immediately prior to the Effective Date, PR requires the
benefit of the PR Contract or to be subject to the burden of the PR Contract,

 

then if:

 

8.4.1 no consent or agreement of any third party is required to enable PR to
perform the PR Contract (or, in respect of those PR Contracts which relate in
part only to a PR Business, the relevant part thereof) or to enable the Contract
Party to transfer the benefit or burden of that PR Contract (or the relevant
part thereof) to PR or one of its Affiliates, then the assignment, novation or
transfer by the Contract Party of the benefit (subject to the burden) of such PR
Contract (or the relevant part thereof) to PR or one of its Affiliates shall be
effected by means of a Planned Transaction; and

 

8.4.2 in any other case, the following provisions shall apply:

 

  8.4.2.1 each party shall (each at is own expense) use its reasonable
endeavours to obtain the consent or agreement of the third party to whatever
assignment, transfer or novation is necessary to enable PR to perform such PR
Contract (or the relevant part thereof) or as the case may be to transfer the
benefit and burden of such PR Contract (or the relevant part thereof) to PR or
one of its Affiliates. Any payment necessary to procure such consent or
agreement shall be borne in accordance with Clause 8.5. PROVIDED THAT the
parties shall use their reasonable endeavours to minimise the amount of such
payment and shall adopt alternative arrangements if those are economically more
advantageous (taking into account the disruption to the business caused by
adopting such arrangements);

 

  8.4.2.2

until the consent or agreement referred to in Clause 8.4.2.1 is obtained, the
parties shall (so far as each is able to do so) procure that PR shall, unless
the relevant PR Contract prohibits it, perform all the obligations of the
Contract Party under such PR Contract in relation to the PR Businesses as agent
for or sub-contractor to the Contract Party or, if the relevant PR Contract does
prohibit PR from so acting as agent and sub-contractor, FB shall procure that
the Contract Party shall, at the cost of PR do all such acts and things as PR
may reasonably require to enable due performance of the PR Contract and to
provide for PR the

 

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benefits, subject to the burdens of the PR Contract. For this purpose, it shall
not be reasonable to require the Contract Party to make any payment unless PR
has first put the Contract Party in cleared funds sufficient to make such
payment.

 

  8.4.2.3 if by the End Date, any PR Contract falling into this Clause 8.4.2 has
not been assigned, transferred or novated to enable PR to perform and benefit
from such PR Contract (or the relevant part thereof) or as the case may be the
burden of that PR Contract has not been assumed by PR or one of its Affiliates,
subject to Clause 10.5 FB and PR shall negotiate with each other in good faith
to reach agreement on a back-to-back arrangement on reasonable commercial terms
which shall provide that, subject to any restrictions contained in, or other
terms of, such PR Contract and only for so long as such PR Contract remains in
effect (it being agreed (i) that FB shall be under no obligation to renew or
otherwise prevent the expiry or termination of such PR Contract and (ii) that FB
may, provided that it has first given PR reasonable notice (having regard to all
the circumstances) terminate such PR Contract at any time):

 

  (i) FB will provide to PR, or procure that there is provided to PR, the same
benefits (or any other benefits as the Parties may agree) as PR would have
enjoyed under the relevant PR Contract;

 

  (ii) PR shall pay to FB or the relevant Contract Party the relevant proportion
(calculated on the basis of the principle set out in Clause 8.2) of the total
consideration payable to the relevant counterparty under the relevant PR
Contract from time to time; and

 

  (iii) any discounts, benefits or rebates receivable under the PR Contract
shall be fairly allocated between PR and FB on such proportions as may be
determined in accordance with the principle set out in Clause 8.5,

 

and in the event that PR and FB are not able to agree (in each of their
respective opinions) reasonable commercial terms for such back-to-back
arrangement within a period of 6 months after the End Date FB shall be entitled
to terminate the relevant PR Contract and any payments or penalties resulting
from that termination shall be borne in accordance with Clause 8.5.

 

8.5 The payments referred to in Clause 8.4.2.1 and Clause 8.4.2.3 shall be borne
as follows:

 

8.5.1 where the relevant contract is entirely a PR Contract, by PR; and

 

8.5.2 where the relevant contract is in part a FB Contract and in part a PR
Contract, by both PR and FB in such proportions as shall be determined:-

 

  8.5.2.1 as an equitable apportionment having regard to all of the relevant
circumstances and the subject matter of the contract; and

 

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  8.5.2.2 by referral to the Supervisory Committee for determination in
accordance with Clause 22 (including, for the avoidance of doubt, the provisions
of Clause 22.6).

 

8.6 If a third party to a PR Contract imposes any condition to the novation or
assignment of a PR Contract or as a term of giving its consent to PR or one of
its Affiliates for such novation or assignment, the Parties shall co-operate in
good faith with a view to finding a mutually acceptable means of satisfying the
requirements of that third party without varying (otherwise than in any minor
terms) the terms of such PR Contract or this Agreement relating to the rights
and obligations to be assumed by PR or one of its Affiliates.

 

8.7 The provisions of this Clause 8 shall be subject to any provision of this
Agreement which expressly deals with the settlement of working capital or debt.

 

8.8 Where a Transferred Subsidiary is a party to a FB Contract which is
expressed to be terminable on a change of control of such Transferred
Subsidiary, and in order to carry on the FB Businesses in the same manner as
they were carried on immediately prior to the Effective Date FB requires the
benefit of the FB Contract or to be subject to the burden of the FB Contract,
the Parties shall co-operate in good faith with a view to finding a mutually
acceptable means of satisfying any condition imposed by any counter-party to the
FB Contract capable of terminating the FB Contract on a change of control of
such Transferred Subsidiary, to the transfer of such Transferred Subsidiary to
FB or one of its Affiliates in circumstances in which the relevant FB Contract
will not be terminated, without varying (otherwise than in any minor terms) the
terms of such FB Contract or this Agreement relating to the rights and
obligations to be assumed by FB or one of its Affiliates. Any payment necessary
to satisfy any such condition shall be borne by FB PROVIDED THAT the Parties
shall use their reasonable endeavours to minimise the amount of such payment and
shall adopt alternative arrangements if those are economically more advantageous
(taking into account the disruption to the business caused by adopting such
arrangements).

 

8.9 In respect of any FB Licence which is required by FB in order to carry on
the FB Businesses in the same manner as they were carried on immediately prior
to the Effective Date, PR undertakes to FB that it shall, and shall procure that
its Affiliates shall, in each case at FB’s cost either do such acts and things
as may be reasonably necessary to procure the transfer of such FB Licence to FB
or one of its Affiliates or, where this is either not possible or not
practicable, provide reasonable assistance to enable FB or one of its Affiliates
to obtain an appropriate replacement for such FB Licence.

 

8.10 If and to the extent that members of the AD Group are not legally entitled
to assign FB Third Party Rights to FB or its Affiliates:

 

8.10.1 PR shall, and shall procure that the relevant member of the AD Group
shall, use its reasonable endeavours to obtain any consent required in order to
assign them; and

 

8.10.2 if any such consent cannot be obtained, PR shall, at the request and cost
of FB or its Affiliates, use its reasonable endeavours to pursue and enforce
such rights and shall hold any proceeds of such pursuit and enforcement (net of
costs and Tax) on trust for FB or its relevant Affiliate.

 

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8.11 If and to the extent that any Transferred Subsidiary holds rights against
third parties (including rights under or in warranties, representations,
guarantees and indemnities and the benefit of any insurance or insurance claim
attributable to any event occurring before the Completion Date relating to that
Transferred Subsidiary and which relate to the PR Assets or to the PR
Liabilities) in respect of the PR Businesses or any of the PR Assets, and such
Transferred Subsidiary is not legally entitled to assign such rights to PR or
its Affiliates:

 

8.11.1 FB shall, and shall procure that the relevant Transferred Subsidiary
shall, use its reasonable endeavours to obtain any consent required in order to
assign them; and

 

8.11.2 if any such consent cannot be obtained, FB shall, at the request and cost
of PR or its Affiliates, use its reasonable endeavours to pursue and enforce
such rights and hold any proceeds of such pursuance and enforcement (net of
costs and Tax) on trust for PR or its relevant Affiliate.

 

9 Price Adjustment Mechanics

 

Price adjustments relating to the Effective Date

 

9.1 In order to give effect to the intentions of the Parties described in Clause
3.12 above, where in accordance with the Planned Transactions shares or
membership interests in a Transferred Subsidiary are transferred to FB or one of
its Affiliates, the Part Consideration payable in respect of such shares or
membership interests shall be:

 

9.1.1 reduced by the amount of the Transferred Net Debt of the relevant
Transferred Subsidiary at the Effective Date (but taking into account interest
and other amounts accruing on Financial Debt and/or Cash Equivalents after the
Effective Date as stated in the definition of Transferred Net Debt) (where such
Transferred Net Debt is a positive amount) and shall be increased by the amount
of Transferred Net Debt of the relevant Transferred Subsidiary at the Effective
Date (but taking into account interest and other amounts accruing on Financial
Debt and/or Cash Equivalents after the Effective Date as stated in the
definition of Transferred Net Debt) (where such Transferred Net Debt is a
negative amount);

 

9.1.2 increased by the Transferred PR Inventory and Stocks Value relating to
that Transferred Subsidiary; and

 

9.1.3 arrangements will be made between the Parties to measure the appropriate
level of net debt in any Transferred Subsidiary (whether in existence at the
Effective Date or not) into which additional net debt has been transferred after
the Effective Date pursuant to a Planned Transaction, and such measurement shall
be made at the Effective Date in accordance with the principles of this
Agreement and the principle that net debt will not be compensated for twice and,
if appropriate, adjustment may be made to the Adjusted Global Consideration to
represent such net debt.

 

9.2

Save as in connection with the transactions referred to in Clauses 2.15 and
2.16, FB shall procure that any Inter-Company Creditor Current Account comprised
in any Transferred Net Debt and owing by the relevant Transferred Subsidiary is
settled by the relevant Transferred Subsidiary in cash on the relevant
Completion Date. PR shall procure that any Inter-company Creditor Current
Account comprised in any Transferred Net Debt and owing by a member of the AD
Group

 

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is settled by the relevant member of the AD Group in cash on the Completion Date
relating to the Transferred Subsidiary to whom such Inter-company Creditor
Current Account is owing.

 

9.3 In order to give effect to the intentions of the Parties, described in
Clause 3.12 above, where in accordance with the Planned Transactions, the trade
marks relating to a FB Brand (or shares in a Transferred Subsidiary holding
them) are transferred to FB or one of its Affiliates, the Part Consideration
payable in respect of such FB Assets (or shares) shall be reduced by the amount
of the FB Inventory and Stocks Value attributable to such FB Brand.

 

9.4 In order to give effect to the intentions of the Parties described in Clause
3.12 above, where in accordance with the Planned Transactions any FB Asset
described in paragraph (xiii) of the definition of FB Assets in Clause 1.2 is
transferred to FB or one of its Affiliates, the Part Consideration payable in
respect of such FB Asset shall be reduced by the amount of the Transferred Net
Debt at the Effective Date of any Transferred Subsidiary in respect of the sale
of which the FB Asset was received (where such Transferred Net Debt is a
positive amount) and shall be increased by the amount of Transferred Net Debt of
such Transferred Subsidiary at the Effective Date (where such Transferred Net
Debt is a negative amount).

 

Price adjustments relating to the period between the Effective Date and the
Completion Date

 

9.5 In order to give effect to the intentions of the Parties described in Clause
3.12, where in accordance with the Planned Transactions shares or membership
interests in a Transferred Subsidiary are transferred to FB or one of its
Affiliates, the Part Consideration payable in respect of such shares or
membership interests shall be:

 

9.5.1 increased by the amount (if any) of the Transferred PR Assets Value
relating to that Transferred Subsidiary;

 

9.5.2 reduced by the amount (if any) of the Included FB Assets Value relating to
that Transferred Subsidiary; and

 

9.5.3 increased by the amount (if any) of the PR Operating DBC of the relevant
Transferred Subsidiary less the applicable Hosting Rate on such PR Operating DBC
and less the Nominal Tax Rate on such amount.

 

9.6 In order to give effect to the intentions of the Parties, described in
Clause 3.12, where in accordance with the Planned Transactions, the trade marks
relating to a FB Brand (or shares in a Transferred Subsidiary holding them) are
transferred to FB or one of its Affiliates, the Part Consideration payable in
respect of such FB Assets (or shares) shall be reduced by the amount (if any) of
the FB Operating DBC of the members of the PR Group which are not Transferred
Subsidiaries earned on the relevant FB Brand less the relevant Hosting Rate on
such FB Operating DBC and less the Nominal Tax Rate on such amount.

 

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10 Period from the Effective Date to completion

 

10.1 Brand Management and Distribution

 

10.1.1 From the Effective Date, the principle is that FB shall have day to day
control of the management of the FB Assets and the FB Businesses. For the
avoidance of doubt, the Parties acknowledge and agree that FB shall not have day
to day control of the management of the MM Business during the MM Interim
Period. Further, the Parties acknowledge and agree that during the MM Interim
Period:

 

  10.1.1.1 PR shall have day to day control of the management of the MM
Business; and

 

  10.1.1.2 PR shall procure that the MM Business is managed in the MM Ordinary
Course of Business;

 

  10.1.1.3 PR shall procure that none of the following events shall occur in
relation to the MM Business:

 

  (i) any charging or encumbering of any MM Assets other than in the ordinary
course of business;

 

  (ii) any triggering of any change of control rights which are contained within
any material (in the context of the relevant MM Business or MM Asset) contract
to which the MM Business is a party unless the same has been triggered as part
of a Planned Transaction provided that to the extent that PR takes any action to
avoid the triggering of any change of control rights referred to above, PR shall
not be deemed to be in breach of PR’s obligation to operate the MM Business in
the MM Ordinary Course of Business;

 

  (iii) any entering into by the MM Business of any transaction which is
reasonably likely to endanger the solvency of any member of the AD Group which
will continue to hold material (in the context of the MM Business) MM Assets for
a material period following the completion of such transaction;

 

  (iv) any entering into by the MM Business of any Assurance in respect of any
obligation or liability of any of PR, Bidco 1 and Bidco 2;

 

  (v) any distribution, payment or return to shareholders of a capital nature in
respect of profits or assets relating to the MM Business;

 

  (vi) the declaration or payment of any dividend; or the making of any
distribution in specie in each case in respect of profits or assets relating to
the MM Business;

 

  (vii)

the implementation of any compromise or arrangement within the meaning of
section 425 of the Act or any

 

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arrangement pursuant to which the MM Business is to make a distribution in
respect of profits or assets relating to the MM Business of the kind described
in section 213 of the Income and Corporation Taxes Act 1988;

 

  (viii) the passing of any resolution to wind up a company which conducts the
MM Business;

 

  (ix) any arrangement whereby the control of the management of a company which
conducts the MM Business shall pass from the directors thereof to any third
party or body, save for the appointment by PR or a member of the PR Group of an
external third party to independently manage such business as contemplated in
this Agreement;

 

  (x) any transaction concerning the MM Assets with any person otherwise than at
arms length and for full value or any transaction with any shareholder of a
company which conducts the MM Business other than: (a) a Planned Transaction; or
(b) the continuing provision of intra-group services provided prior to the
Effective Date, or (c) such other intra-group services as are required to be
provided otherwise than at arms length and for full value so that the MM
Business, is operated in the MM Ordinary Course of Business;

 

  (xi) the paying up of any share capital or debenture or debenture stock of a
company which conducts the MM Business by way of capitalisation or application
of any profits or reserves (including share premium account and capital
redemption reserve) arising in respect of profits or assets relating to the MM
Business;

 

  (xii) other than in the Ordinary Course of Business, any loan to any member of
the AD Group that does not predominantly conduct the MM Business;

 

10.1.1.4 So far as is reasonably practicable, PR will carry on the MM Business
separately from the remainder of the PR Group, provided that nothing in this
Clause 10.1.1.4 shall restrict PR from:

 

  (i) distributing Maker’s Mark pursuant to Clause 10.5 through members of the
PR Group and their distribution structures;

 

  (ii) providing services to the MM Business from other PR Group Companies; or

 

  (iii) taking any action as is required or requested by or reasonably deemed
necessary in the opinion of PR to give effect in any part of the world to the
requirements and requests of any regulatory authority in any part of the world.

 

10.1.2

As soon as possible following the Effective Date (and subject always to any
legal limitations or constraints in any relevant jurisdiction) PR and AD shall
procure

 

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that FB or its Affiliates have access to the FB Businesses to enable FB to have
day to day control of the management of the FB Businesses. Where and to the
extent that the exercise of such day to day control would be reasonably likely
to cause a breach of any anti-trust law or regulation in any jurisdiction, FB
and its Affiliates shall not, to that extent, have access to any relevant FB
Business, but instead PR and AD shall procure that the FB Businesses are managed
in accordance with FB’s reasonable directions (so far as lawfully possible). If
and to the extent such procurement would itself be reasonably likely to cause
such a breach, FB shall not have such procurement rights but PR and AD shall
procure that the FB Businesses are managed in the Ordinary Course of Business.
The provisions of this Clause 10.1.2 shall not allow FB or its Affiliates to
exercise, or to request that AD exercises, any management rights in respect of
corporate actions including, without limitation, corporate restructuring or any
transfer of assets into or out of a member of the AD Group other than in the
Ordinary Course of the FB Businesses. FB will indemnify, keep indemnified and
hold harmless PR and each of its Affiliates and each of its and their employees,
officers and directors from and against all costs, claims, demands, liabilities,
expenses, damages or losses (including without limitation all interest,
penalties and reasonable legal and other professional costs and expenses but not
consequential losses, loss of profit and loss of reputation or Tax liabilities)
arising out of or in connection with FB’s exercise of its management rights
under this Clause 10.1.2. The scope of this indemnity is not to embrace PR or
any of its Affiliates suffering any impact on its day to day trading activities
as a consequence of the day to day trading activities of the FB Businesses.

 

10.1.3 As soon as possible (having taken all preparatory steps as are reasonably
practicable before the Effective Date) following the Effective Date (and subject
always to any legal limitations or constraints in any relevant jurisdiction), PR
and AD shall procure that FB Acquisition is issued with a “B” Share in the
capital of each of the members of the AD Group listed or referred to in Schedule
10. For the avoidance of doubt, no “B” Shares in the capital of Bidco 2 shall be
created or issued, and no “B” Shares in the capital of any company holding or
holding any part of) the MM Business shall be created or issued during the MM
Interim Period.

 

10.1.4 To give effect to this Clause 10.1, and where permitted by law, FB shall
be entitled to appoint and/or remove directors to or from the boards of
directors of the members of the AD Group referred to in Schedule 10 provided
that:

 

  10.1.4.1 where all the directors of any such member of the AD Group who were
appointed by, or represent, PR are removed, PR shall be entitled to appoint
observers who may attend, but not vote at, and shall be entitled to notice of
all meetings of such board of directors;

 

  10.1.4.2 where at the relevant time the relevant member of the AD Group
operates any PR Businesses or holds any PR Assets, FB shall not be entitled to
appoint, or have appointed, more than half of the board of directors of the
relevant member of the AD Group at any given time; and

 

  10.1.4.3

FB shall not be entitled to appoint and/or remove directors to or from boards of
directors of any member of the AD Group referred to in Schedule 10 if such
member predominantly conducts the MM Business and the Parties agree to use their

 

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reasonable endeavours to identify such entities as soon as practicable following
the Effective Date.

 

10.1.5 FB shall procure that any director appointed by it pursuant to Clause
10.1.4 shall abstain:

 

  (i) from voting on any matter raised at a meeting of the board of directors of
the relevant member of the AD Group, and

 

  (ii) from taking any other action,

 

in either case, in relation to matters which do not directly relate to the
conduct of the FB Businesses in the Ordinary Course of those FB Businesses.

 

10.1.6 PR shall procure that any director appointed by it shall abstain:

 

  (i) from voting on any matter raised at a meeting of the board of directors of
the relevant member of the AD Group, and

 

  (ii) from taking any other action,

 

in either case, in relation to matters which directly relate to the conduct of
the FB Businesses in the Ordinary Course of those FB Businesses.

 

10.1.7 In the event that legal limitations or constraints in any relevant
jurisdiction prevent the issue to FB Acquisition of any “B” Share or restrict or
inhibit the rights attaching to such share, the issue of which PR would
otherwise be obliged to procure pursuant to Clause 10.1.3 above, the Parties
shall investigate and shall take such reasonable measures as may be available in
such jurisdiction to achieve the same legal and commercial effect (including
having constitutional rights) as the rights which would have attached to the “B”
Share. For the avoidance of doubt, this Clause 10.1.7 does not apply to the MM
Business.

 

10.1.8 As soon as possible following the Effective Date (and subject always to
any legal limitations or constraints in any relevant jurisdiction), PR and AD
shall procure that FB is granted appropriate security (in respect of the
obligation to transfer the FB Assets held by the relevant member of the AD Group
(directly or indirectly) to FB or Affiliates of FB upon the terms of this
Agreement) over the shares in the members of the AD Group listed in Schedule 11
and over the material intellectual property rights relating to FB Brands,
provided always, in respect of each such member of the AD Group and all such
intellectual property rights, that the Planned Transaction, which will result in
FB Assets being transferred (directly or indirectly) to FB or Affiliates of FB,
relating to that company or those intellectual property rights is not expected
to be completed within four weeks following the Effective Date and provided
further that no security shall be granted over the shares in a member of the AD
Group listed in Schedule 11 which predominantly conducts the MM Business (and
the Parties agree to use their reasonable endeavours to identify such entities
as soon as practicable following the Effective Date) or over a material
intellectual property right relating to the MM Business.

 

10.1.9

The Parties acknowledge that the Planned Transactions may include a step (or
steps) which require(s) that FB Assets located in, or owned by a body corporate
or other entity incorporated or tax resident in, the United States be
transferred to one or more entities comprised in the PR Group (but not the AD
Group) prior to their delivery to FB; in such an event, PR acknowledges that it
shall be necessary

 

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to grant or implement safeguards comparable to those referred to in this Clause
10 and appropriate for the circumstances (provided that this Clause 10.1.9 shall
not apply in respect of the MM Business or any holding company of such
business), which may include: direct contractual rights, guarantees,
indemnities, security over FB Assets (notwithstanding that they might be owned
by members of the PR Group), “B” Shares, Tracker Shares and which enable FB
(acting reasonably) to be satisfied that such FB Assets will be delivered to FB
without adverse impact on their value or their operation save as in the ordinary
course of business and further acknowledges that such transfers shall not be
carried out until such safeguards (other than the issue of any Tracker Shares
unless such issue is necessary to ensure continued consolidation for accounting
purposes, but without prejudice to the foregoing obligation to grant or issue
comparable safeguards) have been granted or implemented and have become
effective as a matter of applicable law.

 

10.1.10 The security interests and shares referred to in this Clause 10.1 shall
be granted and/or issued, where appropriate, to FB only to the extent lawful and
(where necessary) subject to AD’s co-operation prior to the Effective Date.
Accordingly, such security interests and shares may not be in place at the
Effective Date.

 

10.1.11 In the event that FB or Affiliates of FB own, manage or control any body
corporate which operates a material PR Business, FB shall if so requested by PR
procure that PR is issued with a “B” Share in the capital of each such body
corporate and if legal limitations or constraints in any relevant jurisdiction
prevent the issue to PR of any such “B” Share or restrict or inhibit the rights
attaching to such share, the Parties shall investigate and shall take such
reasonable measures as may be available in such jurisdiction to achieve the same
legal and commercial effect (including having constitutional rights) as the
rights which would have attached to the “B” Share. PR will indemnify, keep
indemnified and hold harmless FB and each of its Affiliates and each of its and
their employees, officers and directors from and against all costs, claims,
demands, liabilities, expenses, damages or losses (including without limitation
all interest, penalties and reasonable legal and other professional costs and
expenses but not consequential losses, loss of profit and loss of reputation or
Tax Liabilities) arising out of or in connection with PR’s exercise of its
management rights pursuant to this Clause 10.1.11. The scope of this indemnity
is not to embrace FB or any of its Affiliates suffering any impact on its day to
day trading activities as a consequence of the day to day trading activities of
the PR Businesses.

 

10.1.12 As FB will have day to day control of the management of the FB Assets
and the FB Businesses (save for in relation to the MM Business) from the
Effective Date, and since the boards of directors of relevant members of the AD
Group may be populated by FB representatives who are not FB Employees, FB agrees
(so far as lawfully permitted) to indemnify and keep indemnified each employee
and officer of each member of the PR Group from and against all costs, claims,
demands, liabilities, expenses, damages or losses (including without limitation
all interest, penalties and reasonable legal and other professional costs and
expenses but not consequential losses, loss of profit and loss of reputation)
arising directly out of or in connection with (i) their having breached any
fiduciary duty owed by them and (ii) any wrongful acts or omissions of FB in
each case in connection with FB’s control of the management of the FB Assets and
the FB Businesses.

 

10.1.13

As PR will have day to day control of the management of the PR Assets and the PR
Businesses from the Effective Date, and since the boards of directors of

 

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relevant members of the AD Group may be populated by PR Employees, PR agrees (so
far as lawfully permitted) to indemnify and keep indemnified each employee and
officer of each member of the FB Group and each FB Employee from and against all
costs, claims, demands, liabilities, expenses, damages or losses (including
without limitation all interest, penalties and reasonable legal and other
professional costs and expenses but not consequential losses, loss of profit and
loss of reputation) arising directly out of or in connection with (i) their
having after the Effective Date breached any fiduciary duty owed by them and
(ii) any wrongful acts committed or omissions made by PR after the Effective
Date in each case in connection with PR’s control of the management of the PR
Assets and the PR Businesses.

 

10.1.14 From such time as any body corporate which has issued a “B” Share to:

 

  10.1.14.1 FB, has ceased to hold any material (in the context of the relevant
body corporate) FB Assets, PR, or any Affiliate of PR, shall be entitled to
purchase any such “B” Share issued by that member of the AD Group for
consideration equal to the nominal value of such “B” Share or, in the event that
such “B” Share has no nominal value, £1 and FB Acquisition shall sell such “B”
Share to PR or such Affiliate of PR; and

 

  10.1.14.2 PR, has ceased to hold any material (in the context of the relevant
body corporate) PR Assets, FB, or any Affiliate of FB, shall be entitled to
purchase any such “B” Share issued by that company for consideration equal to
the nominal value of such “B” Share or, in the event that such “B” Share has no
nominal value, £1 and PR shall sell such “B” Share to FB or such Affiliate of
FB.

 

10.1.15 From such time as:

 

  10.1.15.1 any member of the AD Group has ceased to hold any material (in the
context of the relevant body corporate) FB Assets, FB shall procure that any
director appointed to the board of directors of that member of the AD Group
pursuant to Clause 10.1.4 shall resign from such board of directors and in doing
so shall confirm in writing that he has no outstanding claims against such
member of the AD Group.

 

  10.1.15.2 any member of the FB Group has ceased to hold any material (in the
context of the relevant body corporate) PR Assets, PR shall procure that any
director appointed to the board of directors of that member of the FB Group by
PR shall resign from such board of directors and in doing so shall confirm in
writing that he has no outstanding claims against such member of the FB Group.

 

10.2 Insurance

 

10.2.1 It is the intention of the Parties that FB will be responsible for the
insurance of the FB Assets (excluding the MM Business during the MM Interim
Period) at its own expense.

 

10.2.2

Subject to Clause 10.2.3 PR shall insure the FB Assets (excluding the MM
Business during the MM Interim Period) from the Effective Date until the
relevant Completion Date as reasonably directed by FB and FB shall reimburse to

 

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PR or its Affiliates the cost (to PR and its Affiliates) of insuring such
assets. In the event of a claim under such insurance, FB shall have conduct of
the claim, (subject to applicable anti-trust restrictions) PR shall provide (and
procure that AD provides), in each case at FB’s cost, all information and
assistance as FB shall reasonably request in making such claim and PR shall
account to FB in respect of any proceeds of such claim.

 

10.2.3 At any time after the Effective Date, FB may by notice in writing to PR
request that PR cease to insure any or all of the FB Assets as are identified by
FB in such written notice (with sufficient detail to enable PR to revise its
insurance arrangements) and PR shall in such circumstances cancel the relevant
contracts of insurance as soon as reasonably practicable to the extent that they
relate to such FB Assets provided that until such contracts of insurance have
been cancelled, FB shall remain responsible for the cost (to PR and its
Affiliates) of insuring the FB Assets.

 

10.3 Funding of the FB Businesses

 

10.3.1 PR shall be under no obligation to provide funding to the FB Businesses
(save for the MM Business as set out in Clause 10.3.7 below) after the Effective
Date.

 

10.3.2 FB shall not exercise any management or other rights (including under the
Tracker Shares or any “B” Shares) to require or procure that any member of the
PR Group borrows any money other than in accordance with this Clause 10.3
without the prior written consent of PR, such consent not to be unreasonably
withheld.

 

10.3.3 FB shall ensure that from the Effective Date to the relevant Completion
Date the FB Businesses (save for the MM Business) are adequately funded at all
times to meet their ongoing cash requirements (in respect of working capital,
capital expenditure, funding otherwise required to satisfy FB Liabilities or
otherwise) by means of unsecured loans from FB or its Affiliates or (where such
loan is funded only by cash generated on the operation of such FB Businesses
after the Effective Date) members of the AD Group (on such reasonable arm’s
length terms as FB deems appropriate, provided that in the event of any default
under such loans, the lender or lenders shall have recourse only to FB Assets
(save for the MM Business) and provided further that any such loan made by a
member of the AD Group (as opposed to a member of the FB Group) that it shall be
on terms reasonably acceptable to PR).

 

10.3.4 In circumstances where PR reasonably believes that a FB Business (save
for the MM Business) is inadequately funded (in respect of working capital,
funding otherwise required to satisfy FB Liabilities or otherwise), and such
inadequate funding might harm any of the PR Businesses or any member of the PR
Group, PR shall notify FB in writing of such under funding (a “funding notice”).
In the event that FB does not itself make sufficient funding available to the
relevant FB Business within 5 Business Days of receipt by FB of a funding
notice, PR or one of its Affiliates may itself provide funding to the relevant
FB Business.

 

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10.3.5 Where any member of the PR Group or any of PR’s Affiliates has made
funding available to a FB Business in accordance with Clause 10.3.3 or Clause
10.3.4, FB shall, notwithstanding the provisions of Clause 10.3.3 but without
prejudice to Clause 10.3.4:

 

  10.3.5.1 purchase from PR and/or its relevant Affiliate(s) the receivable in
respect of such funding, for consideration equal to the cost (to PR and its
Affiliates) of providing such funding; or

 

  10.3.5.2 repay, or procure the repayment of, such funding within 5 Business
Days of receipt of written request from PR.

 

10.3.6 Where a FB Business (save for the MM Business) and PR Business are
operated by the same member of the AD Group, PR shall not be entitled to use
working capital generated by the relevant FB Business to fund the relevant PR
Business and FB shall not be entitled to use working capital generated by the
relevant PR Business to fund the relevant FB Business.

 

10.3.7 The following shall apply in relation to the MM Business:

 

10.3.7.1 PR shall be entitled to use working capital generated by the MM
Business to fund the MM Business;

 

10.3.7.2 PR shall not provide funding to the MM Business to the extent that such
funding is not required or reasonably necessary in relation to carrying on the
relevant Business in the MM Ordinary Course of Business save that PR shall be
entitled to provide funding to the MM Business if PR reasonably determines such
funding is reasonably necessary capital expenditure that any prudent operator of
the relevant business would make; and

 

10.3.7.3 PR shall not use working capital generated by the MM Business to fund
any other business of the PR Group.

 

10.4 Sensitive Information

 

10.4.1 The Parties recognise the importance of ensuring that Sensitive
Information about any Business that one Party shall acquire is not made
available to the other Party. As such the implementation of this Agreement shall
be effected in such a way as to prevent each Party from having access to
Sensitive Information relating, where that Party is PR, to the FB Assets and,
where that Party is FB, to the PR Assets except where:

 

  10.4.1.1 PR requires certain Sensitive Information relating to the FB Assets
and MM Assets in order to implement the Planned Transactions (in which case such
Sensitive Information shall only be disclosed to personnel within PR (and
external advisers) responsible for implementing the Planned Transactions (and
who are not otherwise currently and directly involved in the sales and marketing
of any brands that compete with the FB Assets or FB Businesses)); or

 

  10.4.1.2 to the extent that specific provision is otherwise made between the
Parties.

 

provided that in either case all applicable antitrust laws and principles shall
be observed.

 

10.4.2 FB shall not be entitled to Sensitive Information regarding the MM
Business before the Clearance Date in respect of the MM Business.

 

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10.4.3 In particular, and subject always to no relevant antitrust authority not
permitting the same, in order to give effect to the principle set out in Clause
10.4.1 the Parties agree that in the period between the Effective Date and the
relevant Completion Date:

 

  10.4.3.1 FB shall have the benefit of its rights under Clause 10.1 in respect
of the conduct of the relevant FB Businesses so far as the adoption of strategic
decisions relating to the pricing, sale, marketing and, more generally, the
commercial policy in relation to those FB Assets is concerned; and

 

  10.4.3.2 appropriate safeguards and firewall measures and procedures shall be
established to control the flow of Sensitive Information to each of PR and FB in
respect of any Business to be acquired by the other Party. These procedures
shall be devised to ensure that Sensitive Information relating to FB Assets
that, at the Effective Date, is not held separately by any member of the AD
Group from Sensitive Information relating to PR Assets is not disclosed to any
PR personnel who have current and direct involvement with the sales and
marketing of any brands that compete with the FB Assets or FB Businesses. (By
way of example, the measures contemplated by this Clause 10.4.2.2 are to ensure
that Sensitive Information about “Courvoisier” is not disclosed to PR personnel
with current and direct involvement in the sales and marketing of Martell).

 

10.4.4 The Parties shall procure that the provisions of this Clause 10.4 shall
apply mutatis mutandis as between their respective Affiliates.

 

10.5 Distribution End Date

 

10.5.1 Subject to Clauses 10.5.2 and 10.5.3, after the End Date, no member of
the PR Group shall be under any obligation to distribute any FB Brands and no
member of the FB Group shall be under any obligation to distribute any PR Brands
in each case under this Agreement or any other agreements existing at the
Effective Date.

 

10.5.2 The FB Distribution Businesses shall distribute for the MM Business in
the UK, Germany and Spain during the MM Interim Period. The PR Group shall
distribute for the MM Business in all other territories from the Effective Date
to the later of the End Date and the date three months following the end of the
MM Interim Period, provided that:

 

  10.5.2.1 no member of the PR Group shall be under any obligation to distribute
for the MM Business after the later of the End Date or the period three months
following the MM Interim Period; and

 

  10.5.2.2 PR shall be paid the Hosting Rate in respect of any distribution
pursuant to this Clause 10.5.2 for the MM Business after the End Date.

 

10.6 [***]

 

10.6.1

In order to avoid any possibility of FB or any Affiliate of FB being an
“Affiliate” (as defined in the [***])

 

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of Allied Domecq International Holdings BV, Allied Domecq Spirits & Wine USA,
Inc., Allied Domecq Canada Limited, Allied Domecq Spirits & Wines Americas, Inc.
and/or Hiram Walker Gooderham & Worts Limited, and notwithstanding any other
provision of this Agreement (including for the avoidance of doubt any rights
attaching to any “B” Shares or the Tracker Shares), neither FB nor any Affiliate
of FB shall, without the prior written consent of PR, have any right or power,
directly or indirectly, to direct or cause the direction of the management and
policies of Allied Domecq International Holdings BV, Allied Domecq Spirits &
Wine USA, Inc., Allied Domecq Canada Limited, Allied Domecq Spirits & Wines
Americas, Inc. and/or Hiram Walker Gooderham & Worts Limited. For the avoidance
of doubt, this Clause 10.6.1 shall not affect the rights to receive income and
capital attaching to the Tracker Shares.

 

10.6.2 PR shall, as soon as reasonably practicable following the Effective Date
procure that (i) Allied Domecq Spirits & Wine USA, Inc.’s rights to distribute
Canadian Club in the United States of America and (ii) the FB Assets held by
Allied Domecq Spirits & Wine USA, Inc. and which relate to Canadian Club are
transferred to a new company incorporated in Delaware and wholly-owned by the AD
Group, provided that such transfer is tax neutral for PR.

 

10.7 PR shall procure that neither Bidco 2 nor any member of the AD Group which
is listed or referred to in Schedule 10 shall, prior to the End Date, enter into
any Assurance in respect of any obligation or liability of any of PR, Bidco 1
and Bidco 2.

 

11 Continuing obligations

 

11.1 As soon as reasonably practicable after the Completion Date for the
relevant FB Assets, PR shall:

 

11.1.1 subject to the provisions of Clause 12 below, cease, and procure that its
Affiliates cease, all use of:

 

  11.1.1.1 the FB Brands transferred on that Completion Date;

 

  11.1.1.2 the FB IP, transferred on that Completion Date; and

 

  11.1.1.3 the FB Know-how transferred on that Completion Date

 

which in either case relate to the relevant FB Assets for any and all purposes
whatsoever; and

 

11.1.2 without prejudice to the generality of Clause 11.1.1, change, or cause
its relevant Affiliate to change, each of it, and its Affiliates’, corporate
names so as not to include any of the FB Brands and not to a name which might
reasonably cause a third party to believe that PR or any member of PR’s Group is
interested in any FB Business.

 

11.2

Subject to Clause 12, save as may be permitted under the provisions of the AD
Name Licence, as soon as reasonably practicable after the Completion Date for
the relevant FB Business and FB Assets, FB shall, and shall procure that its

 

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Affiliates shall, cease all use of any Intellectual Property owned by or
licensed to the AD Group which is not a FB Brand or FB IP.

 

11.3 Provision of financial information

 

11.3.1 Subject to all applicable laws, and to the extent not already provided
under this Agreement, from the Effective Date each Party shall provide to the
other Party on a timely basis all such information within its possession and
control as is reasonably required by that other Party for the purposes of the
statutory and other financial reporting requirements and for the purposes of
complying with the requirements of any taxation authority or necessary for any
tax filing or computation of that Party and/or its Affiliates.

 

11.3.2 Any information a Party receives pursuant to Clause 11.3.1 shall be used
solely for the purposes of complying with statutory, regulatory and other
financial reporting requirements or for complying with the requirements of any
taxation authority; the Parties undertake that such information will not under
any circumstances be passed to any employee of the Parties who has current and
direct involvement with the selling or marketing of that Party’s products.

 

11.4 Guarantees and other assurances

 

11.4.1 This Clause 11.4 shall apply where any person (the “Guaranteeing Party”)
has given any Assurance to any other person in respect of any obligation or
liability in relation to:-

 

  11.4.1.1 (where the Guaranteeing Party is an Affiliate of FB) any PR
Liability;

 

  11.4.1.2 (where the Guaranteeing Party is an Affiliate of PR) any FB
Liability.

 

  11.4.1.3 and for the purposes of this Clause 11.4, to the extent a FB
Liability relates to the MM Business, it shall be treated as a PR Liability
during the MM Interim Period.

 

11.4.2 Where the Assurance relates:

 

  11.4.2.1 to a FB Liability, the “Releasing Party” shall mean FB;

 

  11.4.2.2 to a PR Liability, the “Releasing Party” shall mean PR.

 

11.4.3 The Releasing Party covenants that, at any time and from time to time, it
will execute and deliver all such instruments of assumption and acknowledgements
or take such other action as the Guaranteeing Party may reasonably request in
order to effect the release and discharge in full of those Assurances in respect
of which it is a Releasing Party, and the substitution of the Releasing Party or
any of its Affiliates as the primary obligor in respect of, each such Assurance
in each case on a non-recourse basis to the Guaranteeing Party or any of its
Affiliates. Pending such release and discharge, the Releasing Party hereby
agrees with the Guaranteeing Party (on behalf of itself and each of its
Affiliates from time to time) that it will assume and pay and discharge when
due, and indemnify on an after-tax basis the Guaranteeing Party and its
Affiliates against, all such Assurances.

 

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11.4.4 If any action, claim, demand or proceedings are brought or alleged
against a Guaranteeing Party or any of its Affiliates in respect of which an
indemnity is to be sought from the Releasing Party pursuant to this Clause 11.4,
the Guaranteeing Party shall forthwith notify the Releasing Party in writing
(such notification to contain, so far as reasonably practicable at the time,
reasonable details regarding the nature of the potential liability and the
amount likely to be claimed in respect of it) thereof and the Releasing Party
shall have the option to assume the defence thereof. If the Releasing Party
fails to assume such defence, it will be liable to the Guaranteeing Party for
any legal or other expenses subsequently and reasonably incurred by the
Guaranteeing Party or any of its Affiliates in connection with such defence.

 

12 Transitional Arrangements

 

12.1 Overriding Objective

 

The Parties’ overriding objective in relation to the Transitional Arrangements
is to allow (i) FB to achieve business continuity in respect of the FB
Businesses and (ii) PR to achieve business continuity in respect of the PR
Businesses, in each case in the period between the Effective Date and the time
at which the operational aspects of FB Businesses and the PR Businesses are
fully separated.

 

12.2 FB shall use its reasonable endeavours to ensure that the FB Businesses
cease to require each Transitional Arrangement as soon as reasonably
practicable.

 

12.3 PR shall use its reasonable endeavours to ensure that the PR Businesses
cease to require each Transitional Arrangement as soon as reasonably
practicable.

 

12.4 The Parties acknowledge that, notwithstanding their obligations under
Clauses 12.2 or 12.3, they shall require to use Shared Hard IP indefinitely and
the Transitional Arrangements in relation to Shared Hard IP shall reflect their
long term nature.

 

12.5 The Parties’ obligations under Clauses 12.2 or 12.3 (as appropriate) shall,
in relation to Shared Brands IP, allow them to continue to sell existing
products or use existing dry goods which bear Shared Brands IP and to use up
existing stocks of labels which bear Shared Brands IP but shall require them not
to print any new labels bearing Shared Brands IP. The rights granted under the
relevant Transitional Arrangements shall continue only as long as may be
reasonably necessary to comply with the relevant Party’s obligations under this
Clause 12.5 and under Clause 12.2 or 12.3 (as appropriate) and shall be subject
to a maximum term of twelve (12) months from the Effective Date.

 

12.6 Negotiation of individual Transitional Arrangements

 

To the extent that the Transitional Arrangements require the provision of:-

 

12.6.1 co-packing services;

 

12.6.2 (subject to Clause 10.5) distribution, logistics and/or back office
services; or

 

12.6.3

(save in relation to the AD name) the licensing of Intellectual Property;

 

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the Parties shall negotiate in good faith such Transitional Arrangements on a
case by case basis on the basis of the Agreed Form documents ‘A’, ‘B’ and ‘C’
respectively.

 

12.7 To the extent that other Transitional Arrangements not relating to the
Agreed Form documents “A”, “B” or “C” are identified as being required to
achieve the objective set out in Clause 12.1, the Parties shall negotiate in
good faith such Transitional Arrangements on a case by case basis, taking into
account the terms contained in the Agreed Form documents “A”, “B” and “C” and
shall agree on substantially similar terms as contained in the most relevant or
applicable Agreed Form document.

 

12.8 Principles of provision of Transitional Arrangements

 

When negotiating the provision of Transitional Arrangements pursuant to Clauses
12.7 and 12.8, the Parties shall abide by the following principles:-

 

12.8.1 Transitional Arrangements shall be provided to the same standard and
otherwise in the same manner as previously provided to the relevant FB
Business(es) or PR Business(es);

 

12.8.2 during the period of up to twenty four (24) months from the Effective
Date, Transitional Arrangements shall, subject to Clause 12.8.4, be provided at
cost (including an equitable apportionment of all relevant overhead costs). The
costs to be charged shall include the reasonable costs of terminating the
provision of the Transitional Arrangement. The Parties intend that, following
the cessation of a Transitional Arrangement, the contracts of employment,
together with any associated liabilities, of any person wholly or mainly engaged
in the provision of the Transitional Arrangement shall transfer to the Party
which had been receiving the Transitional Arrangement. To the extent that this
cannot be achieved, the reasonable costs of terminating the employment of such
persons and/or of discharging such liabilities shall be borne by the Party which
had been receiving the Transitional Arrangement.

 

12.8.3 Subject to Clause 12.8.4, to the extent that either Party, having first
complied with its obligations under Clause 12.2 or 12.3 (as appropriate) wishes
the other Party to continue to provide any Transitional Arrangement beyond the
period set out in Clause 12.8.2, it shall notify the other Party in writing and
the Parties shall then negotiate in good faith as to whether it is possible for
such Transitional Arrangement to continue and, if so, the terms (which shall be
arms length market terms) on which such Transitional Arrangement shall be
provided.

 

12.8.4 Intellectual Property proprietary to either Party or its Affiliates or
licenced to either Party or its Affiliates shall be provided free of charge, “as
is” without the benefit of any warranties as to its validity or the right of the
licensed Party to use it and (in the case of licenced Intellectual Property)
subject to the terms of any such licence.

 

12.9 Transitional Licensing Arrangements in relation to the AD Name

 

From the Effective Date, PR shall procure that the members of the AD Group which
own Intellectual Property relating to the AD name grant to FB and those of its
Affiliates which require to use such Intellectual Property a non-exclusive
licence to use such Intellectual Property on the terms of the AD Name Licence.
The AD Name Licence shall allow FB to continue to sell existing products

 

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relating to the AD name and use labels bearing the AD name for a period of up to
twelve (12) months from the Effective Date.

 

12.10 Period from Effective Date until entry into Transitional Arrangements

 

FB, PR and (from such time as it has adhered to this Agreement) AD agree to use
their respective reasonable endeavours to establish such stand alone services
and procedures which may be necessary to ensure that as from the Effective Date
all the services which PR and FB require can be provided by AD and its
Affiliates.

 

12.11 In relation to transitional services not specifically identified the
following procedure will apply:

 

12.11.1 the Requesting Party will notify the Providing Party of the area and
nature of support required;

 

12.11.2 the Providing Party will review whether it is able to provide the
support requested;

 

12.11.3 the Providing Party will be obliged to use reasonable efforts to
accommodate all reasonable requests (provided such requests are necessary for
the continuity of similar services as provided immediately prior to the
Effective Date);

 

12.11.4 assuming that the Providing Party agrees to provide the support, the
Requesting Party and the Providing Party will jointly clarify the nature of the
support, the appropriate employees to offer it and the approximate timetable and
the relevant costs (which shall be dealt with in the same way as costs for
Transitional Arrangements under Clause 12.8.2); and

 

12.11.5 the Providing Party will arrange for the appropriate resources to be
provided to the Requesting Party for the support to be undertaken.

 

12.12 If any Party is dissatisfied with the level, quality or timing of support
provided or the prioritisation given to a request, the issue shall be referred
to the Supervisory Committee.

 

Miscellaneous

 

12.13 Each Party will maintain such books and records relating to costs
recharged to the other as to enable the other Party (or its nominated auditor)
to ensure the accuracy of billing in respect of those costs.

 

12.14 No Party is required to offer support to any other Party in relation to
assets other than assets originally forming part of the AD Group.

 

MM Business

 

12.15 For the avoidance of doubt, PR will in accordance with Clause 10.1.1.3
procure that the MM Business is managed in the MM Ordinary Course of Business
during the MM Interim Period and to the extent that the MM Business requires
Transitional Arrangements during the MM Interim Period, these arrangements shall
be provided by the PR Group in the MM Ordinary Course of Business and not on the
basis of this Clause 12.

 

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13 Period after Completion

 

13.1 On receiving, on or after the Effective Date, any notices, correspondence,
information, orders or enquiries relating to the FB Businesses (save for the MM
Business prior to the date on which such business is legally transferred to FB),
PR will immediately pass them to FB.

 

13.2 On receiving, on or after the Effective Date, any notices, correspondence,
information, orders or enquiries relating to the PR Businesses (which shall
include the MM Business prior to the date on which such business is legally
transferred to FB or prior to the Non-Clearance Sale Date), FB will immediately
pass them to PR.

 

13.3 For a period of six years from Completion or longer if, prior to the expiry
of such six year period, the Parties should mutually agree or the Party not in
possession of the relevant information should notify the party in possession of
such information that such information will be required for reporting by law or
regulatory authority:-

 

13.3.1 FB will make the FB Records (so far as these contain information which
might reasonably be required by law (including for the purposes of financial
reporting in any relevant jurisdiction) or regulatory authority (including any
tax authority), available for inspection by representatives of PR at all
reasonable times during business hours on reasonable advance notice being given.
FB will allow PR’s representatives to take copies, at PR’s expense, of any of
the FB Records (if necessary, redacted to exclude information not forming part
of the FB Records) reasonably required by them;

 

13.3.2 PR will make available any books and records not delivered to FB which
contain information which relates to the FB Businesses (save for the MM
Business) or Transferred Subsidiaries which might reasonably be required by law
(including for the purposes of financial reporting in any relevant jurisdiction)
or regulatory authority (including any tax authority) or reasonably required for
any tax filing or computation for inspection by representatives of FB during
business hours on reasonable advance notice being given. PR will allow FB’s
representatives to take copies, at FB’s expense, of any of those books and
records (if necessary, redacted to exclude information not relating to FB Assets
and Businesses or Transferred Subsidiaries) reasonably required by them.

 

14 Co-operation and further assurances

 

14.1 Each of the Parties undertakes to co-operate in good faith to ensure that
it and its Affiliates do such acts and things as may be reasonably necessary to
give effect to this Agreement.

 

14.2 PR shall provide reasonable assistance (at FB’s cost) to FB in connection
with the necessary forms and consents to enable the utility services provided in
respect of the premises and facilities to be transferred to FB, including those
telephone, facsimile and other communication services (with the benefit of the
same numbers and electronic addresses which relate to the FB Brands) and
electricity, gas, water and heating services requested by FB, to be transferred
to FB with effect from the Effective Date without interruption.

 

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15 Announcements

 

15.1 For the period to the Effective Date and subject to the provisions of this
Clause 15, no Party shall issue any press release or advertisement or publish
any circular or any other public document or make any statement or disclosure to
any other person (other than to any professional adviser retained by that Party
or an Affiliate of that Party in connection with the transactions contemplated
by this Agreement or to any director, employee or consultant of such Party or an
Affiliate of that Party, in either case on a need-to-know basis) including,
without limitation, any document, statement or disclosure published, issued or
made by a Party to any supplier to or customer of that Party or any Affiliate of
that Party) in each case relating to or connected with or arising out of the
Proposed Offer (including FB’s interest in the Proposed Offer) or this
Agreement, without obtaining the previous written approval of the other Parties
to its contents and the manner of its presentation and publication or disclosure
(such approval not to be unreasonably withheld or delayed).

 

15.2 The provisions of Clause 15.1 do not apply to any announcement relating to
or connected with or arising out of the Proposed Offer (including FB’s interest
in the Proposed Offer) or this Agreement required to be made by virtue of the
regulations of London Stock Exchange plc or the City Code on Takeovers and
Mergers or the requirements of the Panel on Takeovers and Mergers, London Stock
Exchange plc, Euronext Paris S.A., the New York Stock Exchange, the Autorité des
Marchés Financiers, the US Securities and Exchange Commission, the High Court of
Justice in England and Wales or applicable law or regulation.

 

15.3 Neither Party shall issue any press release or advertisement or publish any
circular or any other public document or make any statement which is adverse to
the other Party’s interests in the Proposed Offer or in any of the transactions
contemplated by this Agreement or inconsistent with any press release,
advertisement, circular, public document or other statement made by the other
Party in accordance with the provisions of this Clause 15 or clause 11 of the
Transaction Co-operation Agreement.

 

15.4 In the event that a Party is required to issue any press release or
advertisement or publish any circular or any other public document or make any
statement or disclosure to any person who is not a Party as permitted by Clause
15.2, so far as practicable, it shall first consult with, and take account of
the comments of, the other Parties as to the nature, contents and timing of such
press release, advertisement, publication, disclosure or statement.

 

15.5 Nothing in this Clause 15 shall prevent FB from issuing any press release
or advertisement or making any statement or disclosure, after the Effective
Date, to any other person concerning operational matters relating to the FB
Businesses.

 

15.6 Subject to Clause 15.1 above, FB shall not be prevented from explaining the
transaction contemplated by this Agreement to its shareholders and stakeholders
and in such manner as it may be entitled to do under relevant law and regulation
or from detailing its future business intentions and expectations for the FB
Assets.

 

15.7 The provisions of this Clause 15 shall cease to apply on the End Date.

 

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16 Confidentiality

 

16.1 In addition to Clause 15, PR for itself and on behalf of each of its
Affiliates covenants with FB (for itself and on behalf of each of its
Affiliates) that until the expiration of 3 years from the Effective Date, it
shall not disclose or use, for its own benefit or that of any other person, any
Know-how which it possesses relating to the FB Businesses except any such
Know-how which is in the public domain other than by reason of any breach by PR
of any of its obligations under this Agreement or any breach by any person of
any duty of confidentiality in relation to the FB Businesses or if such
disclosure is required by law or regulation.

 

16.2 In addition to Clause 15, FB for itself and on behalf of each of its
Affiliates covenants with PR (for itself and on behalf of each of its
Affiliates) that:

 

16.2.1 until the expiration of 3 years from the Effective Date, it shall not
disclose or use, for its own benefit or that of any other person, any Know-how
relating to the PR Businesses;

 

16.2.2 until the earlier of (a) the date on which FB legally acquires the MM
Business it shall not disclose or use for its own benefit or that of any other
person, any Know-how relating to the MM Business or (b) the expiry of three
years from the Effective Date, it shall not disclose or use for its own benefit
or that of any other person, any Know-how relating to the MM Business which it
possesses, except any such Know-how which is in the public domain other than by
reason of any breach by FB of any of its obligations under this Agreement or any
breach by any person of any duty of confidentiality in relation to the PR
Businesses or if such disclosure is required by law or regulation.

 

16.3 The expiration of the rights of confidentiality contained in this Clause 16
shall, for the avoidance of doubt, be without prejudice to any other similar or
overlapping rights (including common law confidentiality rights and intellectual
property rights) held by the Parties or their Affiliates.

 

16.4 At the request and cost of the other, FB and PR shall respectively use
reasonable endeavours to enforce, and shall procure that their Affiliates use
reasonable endeavours to enforce, any contractual or other legal rights held by
them to prevent any unauthorised or improper disclosure or use by any third
party of (respectively) Know-how relating to the PR Businesses and Know-how
relating to the FB Businesses.

 

17 Warranties

 

17.1 Each of the Parties to this Agreement warrants to the other Party as
follows:

 

17.1.1 it has the requisite power and authority to enter into and perform its
obligations under this Agreement;

 

17.1.2 this Agreement constitutes binding obligations on it in accordance with
its terms;

 

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17.1.3 save as set out in the Announcement, the execution and delivery of, and
the performance by it of its obligations under, this Agreement will not:-

 

  17.1.3.1 result in a breach of any provision of its memorandum or articles of
association or like constitutional documents; or

 

  17.1.3.2 require the consent of any third party or parties; and

 

17.1.4 neither it nor any of its Affiliates is party to any agreement,
arrangement or understanding pursuant to which any third party has or might have
the right to prevent, inhibit or delay (i) the completion of the Proposed Offer
and the Scheme or (ii) the implementation of each of the provisions this
Agreement or the completion of the Planned Transactions.

 

18 Guarantee of obligations under the Planned Transactions

 

18.1 PR hereby guarantees to FB (for itself and on behalf of its Affiliates) the
performance by its Affiliates of their respective obligations to FB and its
Affiliates under the Planned Transactions.

 

18.2 FB hereby guarantees to PR (for itself and on behalf of its Affiliates) the
performance by its Affiliates of their respective obligations to PR and its
Affiliates under the Planned Transactions.

 

18.3 The guarantees contained in Clauses 18.1 and 18.2 are continuing guarantees
and shall remain in force until all obligations of the relevant guarantor and
its Affiliates under the Planned Transactions have been fully performed and all
sums payable under them have been fully paid.

 

18.4 The obligations of a Party as guarantor under this Clause 18 shall not be
affected by any act, omission, matter or thing which, but for this provision,
might operate to release or otherwise exonerate them from their obligations or
affect such obligations including, without limitation and whether or not known
to either of them:-

 

18.4.1 any time, indulgence, waiver or consent at any time given to the other of
them or any other person;

 

18.4.2 any compromise or release of, or abstention from perfecting or enforcing,
any rights or remedies against the other of them or any other person;

 

18.4.3 any legal limitation, disability, incapacity or other circumstance
relating to the other of them or any other person or any amendment to or
variation of the terms of any of the Planned Transactions; and

 

18.4.4 any irregularity, unenforceability or invalidity of any obligations of
the other of them.

 

18.5 The guarantees contained in Clauses 18.1 and 18.2 may be enforced by either
of FB or PR without any steps or proceedings having first been taken against the
relevant Affiliate(s) in default.

 

19 Assignment

 

19.1

Subject to this Clause 19, this Agreement shall be binding upon and enure for
the benefit of the successors and assignees of the Parties and, subject to any
succession or assignment permitted by this Agreement, any such successor or

 

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assignee of the Parties shall in its own right be able to enforce any term of
this Agreement.

 

19.2 Neither Party, nor its successors and assignees, shall be entitled to
assign its respective rights or obligations under this Agreement without the
prior written consent of the other Party, save that no such consent shall be
required to an assignment of rights only to a member of the FB Group or PR Group
and provided always that if such assignee shall cease to be a member of the FB
Group or the PR Group (as the case may be) it shall no longer be entitled to the
benefit of such rights.

 

20 General

 

20.1 This Agreement, the documents in the Agreed Form, the Bid Co-operation
Agreement, the mutual confidentiality agreement made between PR and FB and dated
12 January 2005, the Larios Sale and Purchase Agreement and the other documents
referred to in them constitute the entire agreement between, and understanding
of, the Parties with respect to the subject matter of this Agreement and such
documents and supersede any prior written or oral agreement(s) or arrangement(s)
between the Parties in relation thereto.

 

20.2 Each of FB, PR and AD acknowledges and agrees that in entering into this
Agreement, and the documents referred to in it, they do not rely on, and shall
have no remedy in respect of, any statement, representation, warranty or
understanding (whether negligently or innocently made) of any person (whether
party to this Agreement or not) other than as expressly set out in this
Agreement or the documents referred to in it. Without prejudice to Clause 20.11,
the only remedy available to them shall be for breach of contract under the
terms of this Agreement or the documents referred to in it. Nothing in this
Clause 20.2 shall, however, operate to limit or exclude any liability for fraud.

 

20.3 The failure or delay of either Party at any time or times to require
performance of any provision of this Agreement shall not affect such Party’s
right to enforce such provision at a later time.

 

20.4 No waiver by either Party of any condition or of the breach of any term,
covenant, representation, warranty or undertaking contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or of the breach of any other term,
covenant, representation, warranty or undertaking in this Agreement.

 

20.5 This Agreement or any of the documents referred to in it may be amended,
modified, superseded or cancelled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may be waived only by
an instrument in writing signed by (or by some person duly authorised by) both
the Parties or, in the case of a waiver, by the Party waiving compliance.

 

20.6 Save as otherwise stated in this Agreement, each Party shall pay its own
costs and expenses of and incidental to the negotiation, preparation, execution
and implementation by it of this Agreement of each document referred to in it
and to the sale and purchase of the FB Businesses and FB Assets.

 

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20.7 If any provision of this Agreement shall be found by any court or
administrative body of competent jurisdiction to be invalid or unenforceable,
such invalidity or unenforceability shall not affect the other provisions of
this Agreement which shall remain in full force and effect.

 

20.8 This Agreement is drawn up in the English language. If this Agreement is
translated into another language, the English language text shall in any event
prevail.

 

20.9 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be an original and all the
counterparts together shall constitute one and the same instrument.

 

20.10 Nothing in this Agreement is intended to or shall operate to create a
partnership or joint venture of any kind between the Parties or any of them.

 

20.11 Without prejudice to any other rights or remedies that the Parties may
have, the Parties acknowledge and agree that damages would not be an adequate
remedy for any breach by them of the provisions of this Agreement and that the
remedies of injunction and specific performance as well as any other equitable
relief for any threatened or actual breach of the provisions of this Agreement
by either Party may be more appropriate remedies and that no proof of special
damages shall be necessary for the enforcement of the provisions of this
Agreement.

 

20.12 Nothing in this Agreement is intended to or shall operate to require any
person to take any action which would or would be reasonably likely to cause
that person to breach any anti-trust law or regulation in any jurisdiction.

 

20.13 In the event of any breach of this Agreement or in any other
circumstances, neither Party shall be entitled to rescind or otherwise terminate
this Agreement and without limitation in respect of the other terms of this
Agreement FB shall remain in all circumstances obliged to make the payment
referred to in Clause 2.3 on the Effective Date in accordance with the
provisions of Clause 2.3.

 

20.14 The Parties agree to take all reasonable steps to ensure that payments
made pursuant to this Agreement shall be treated as adjustments or payments of
the Adjusted Global Consideration and/or the relevant Part Consideration.

 

20.15 The Parties agree that this Agreement is intended to remain in full force
and effect beyond the End Date.

 

21 Notices

 

21.1 Any notice or other communication given under this Agreement shall be in
writing and shall be served by delivering it personally or sending it by
pre-paid recorded delivery or registered post or fax to the address and for the
attention of the relevant Party set out in sub-Clause 21.2 (or as otherwise
notified by that Party under this Agreement). Any such notice shall be deemed to
have been received:-

 

21.1.1 if delivered personally, at the time of delivery;

 

21.1.2 in the case of pre-paid recorded delivery or registered airmail, 72 hours
from the date of posting;

 

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21.1.3 in the case of fax, at the time of transmission

 

PROVIDED that if deemed receipt (but for this proviso) would have occurred
before 9 a.m. on a Business Day the notice shall be deemed to have been received
at 9 a.m. on that day, and if deemed receipt (but for this proviso) would have
occurred after 5 p.m. on a Business Day, or on a day which is not a Business
Day, the notice shall be deemed to have been received at 9 a.m. on the next
Business Day. For the purpose of this Clause, “Business Day” means any day which
is not a Saturday, a Sunday or a public holiday in the place at or to which the
notice is left or sent.

 

21.2 The addresses and fax numbers of the Parties for the purposes of sub-Clause
21.1 are:-

 

PR      Address:    12 Place des États-Unis      75783 Paris Cedex 16     
France For the attention of:    Emmanuel Babeau/Ian FitzSimons Fax number:   
+331 4100 4222 And with a copy to:      Macfarlanes:      Fax Number:    +44(0)
20 7831 9607 For the attention of:    Robert Sutton/Tim Lewis FB      Address:
   300 Tower Parkway      Lincolnshire      IL60069      USA For the attention
of:    Chris Klein/Mark Roche Fax number:    +1 847 484 4490 And with a copy to:
     Herbert Smith:      Fax number:    +44(0) 20 7374 0888 For the attention
of:    Richard Fleck/Malcolm Lombers

 

or such other address or fax number as may be notified in writing from time to
time by the relevant Party to the other Parties for the purposes of this Clause.

 

21.3

In proving such service it shall be sufficient to prove that the envelope
containing such notice was addressed to the address of the relevant Party set
out in Clause 21.2 (or as otherwise notified by that Party under this Agreement)
and delivered

 

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either to that address or into the custody of the postal authorities as a
pre-paid recorded delivery, or that the notice was transmitted by fax to the fax
number of the relevant Party set out in Clause 21.2 (or as otherwise notified by
that Party under this Agreement) .

 

21.4 For the avoidance of doubt notice given under this Agreement shall not be
validly served if sent by e-mail.

 

22 Dispute Resolution

 

22.1 Without prejudice to the specific provisions of Schedules 4, 5, 12, 13 and
14 all disputes arising out of or in connection with this Agreement (whether
relating to an alleged breach of the terms of this Agreement or otherwise) shall
be resolved in accordance with the provisions of this Clause 22.

 

22.2 Supervisory Committee

 

22.2.1 In order to ensure orderly processes in the relationship between the
Parties and to avoid disputes with respect to the FB Assets, the FB Liabilities
and the Planned Transactions, to the extent allowed by law, each of FB (on
behalf of itself and FB) and PR shall delegate to a committee comprising 3
representatives of PR and 3 representatives of FB, being the persons which each
of FB and PR may from time to time notify to the other in accordance with Clause
21 (the “Supervisory Committee”), all powers, discretions and authorities
necessary for the purposes of this Clause 22, shall exercise all voting and
other rights necessary for these purposes and shall enter into such agreements
or arrangements as may be approved by, and shall comply with and be bound by any
resolution of, the Supervisory Committee.

 

22.2.2 The Supervisory Committee shall have all powers, discretions and
authorities necessary to:-

 

  22.2.2.1 monitor the operation and implementation of this Agreement; and

 

  22.2.2.2 discuss and resolve any disputes arising in connection with this
Agreement.

 

22.3 Convening Supervisory Committee Meetings

 

22.3.1 FB may, at any time, call a meeting of the Supervisory Committee for any
purpose in connection with this Agreement by giving notice to Emmanuel Babeau
(or such other person as PR may notify FB from time to time in accordance with
Clause 21).

 

22.3.2 PR (on behalf of itself and AD) may, at any time, call a meeting of the
Supervisory Committee for any purpose in connection with this Agreement by
giving notice to Christopher Klein (or such other person as FB may notify PR
from time to time in accordance with Clause 21).

 

22.3.3

Notwithstanding the provisions of Clause 21, any notice given in accordance with
Clause 22.3.1 or Clause 22.3.2 may be given in writing (whether by letter or
fax) or by telephone (but not by way of voicemail message) and shall only be
deemed

 

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to have been received when actually received by the individual to whom it is
addressed.

 

22.3.4 Wherever practicable, at least five Business Days’ notice of each meeting
of the Supervisory Committee shall be given in accordance with Clause 22.3.1 or
Clause 22.3.2. Breach of this Clause 22.3.4 shall not affect the validity of any
meeting of the Supervisory Committee which has otherwise been validly convened.

 

22.3.5 Each of the Party’s representatives may participate in and vote at the
Supervisory Committee. Meetings may be held by means of a telephone or any other
communication equipment which allows all persons participating in the meeting to
hear each other (and, for the avoidance of doubt, the representatives are not
required to be physically present in the same place in order to constitute a
meeting).

 

22.4 Meeting, responsibilities and duties of the Supervisory Committee

 

22.4.1 The Parties shall procure (so far as each is able to do so) that the
Supervisory Committee shall:-

 

  22.4.1.1 meet within 14 days of a request for such a meeting having been given
(in accordance with Clause 22.3) by one Party to the other in such location as
may reasonably be proposed by the Party requesting such meeting; and

 

  22.4.1.2 use its reasonable endeavours to settle any disputes and/or agree the
course of action to be followed in relation to the subject matter of the
meeting.

 

22.5 Resolutions of the Supervisory Committee

 

22.5.1 Resolutions of the Supervisory Committee shall be decided by the
unanimous resolution of all members of the Supervisory Committee present at the
relevant meeting and voting.

 

22.5.2 A resolution passed by the Supervisory Committee shall be minuted in
English.

 

22.5.3 A resolution passed by the Supervisory Committee in connection with
resolving any dispute between the Parties in connection with the Agreement shall
be binding upon the Parties.

 

22.6 Deadlock situation

 

22.6.1 If a proposal is made by a representative at a meeting of the Supervisory
Committee but is not passed by a resolution of the Supervisory Committee, either
party may give written notice to the other that it regards a deadlock situation
as having arisen (“Deadlock Notice”). Only one Deadlock Notice may be served in
respect of any one proposal.

 

22.6.2 If a Deadlock Notice is served then the matter shall be referred to
arbitration (or, in respect of Tax, to expert determination) in accordance with
Clause 22.7.

 

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22.7 Arbitration

 

22.7.1 Save in respect of Tax, any dispute or difference to be referred to
arbitration in accordance with Clause 22.6.2 shall be referred to and finally
settled by arbitration under the rules of the London Court of International
Arbitration (the “Rules”), which Rules are deemed to be incorporated by
reference in this Clause.

 

22.7.2 It is agreed that:

 

  22.7.2.1 The arbitral tribunal shall be composed of three arbitrators
appointed as follows:

 

  (a) each party shall nominate one arbitrator for appointment by the London
Court of International Arbitration (“LCIA”), and the two arbitrators so
appointed shall appoint a third arbitrator who shall act as chairman of the
tribunal;

 

  (b) if either party fails to nominate an arbitrator within 30 days of
receiving a Request for Arbitration, such arbitrator shall be appointed by the
LCIA;

 

  (c) if the two arbitrators to be nominated by the parties fail to agree upon a
third arbitrator within 30 days of the appointment of the second arbitrator, the
third arbitrator shall be appointed by the LCIA.

 

  22.7.2.2 The place of the arbitration shall be London.

 

  22.7.2.3 The language of the arbitration shall be English and all documents
not in English must be submitted accompanied by an English translation.

 

22.7.3 If a claim or dispute in respect of Tax is to be referred to expert
determination in accordance with Clause 22.6.2, the Parties will refer the
dispute to an expert to be appointed by the President of the Institute of
Chartered Accountants in England and Wales. Such person shall act as an expert
and not as an arbitrator and his or her determination shall be binding on the
Parties.

 

22.7.4 The fees of the expert shall be paid by FB on the one hand and/or by PR
on the other hand in the proportions determined by the expert.

 

23 Governing law

 

This Agreement shall be governed by and construed in accordance with the laws of
England.

 

Executed as a deed and delivered on the date set out at the head of this
Agreement.

 

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SCHEDULE 1

Part 1

FB Brands – Allocation of Global Consideration

 

1

Brand

--------------------------------------------------------------------------------

  

2

Allocation

--------------------------------------------------------------------------------

FB Brands

      

Sauza

   £ [***]

Maker’s Mark

   £ 167,533,950

Laphroaig

   £ [***]

Courvoisier

   £ 458,288,883

Canadian Club

   £ [***]

Castellana

   £ [***]

Centenario

   £ [***]

DYC

   £ [***]

Fundador

   £ [***]

Teachers

   £ [***]

Cockburn

   £ [***]

Harvey’s

   £ [***]

Kuemmerling

   £ [***]

Jacobi

   £ [***]

Clos du Bois

   £ [***]

Other US Wines (except Mumm Cuvée Napa)

   £ [***]

Callaway

   £ [***]

FB Distribution Businesses

      

United Kingdom

   £ [***]

Spain

   £ [***]

Germany

   £ [***]

Total

   £ 2,721,621,217

--------------------------------------------------------------------------------

 

Part 2

 

FB Brands – multiples for price adjustment

 

1

Brand

--------------------------------------------------------------------------------

   2
Multiple

--------------------------------------------------------------------------------

FB Brands

      

Sauza

     [***]

Maker’s Mark

     [***]

Laphroaig

     [***]

Courvoisier

     [***]

Canadian Club

     [***]

Castellana

     [***]

Centenario

     [***]

DYC

     [***]

Fundador

     [***]

Teachers

     [***]

Cockburn

     [***]

Harvey’s

     [***]

Kuemmerling

     [***]

Jacobi

     [***]

Clos du Bois

     [***]

Other US Wines (except Mumm Cuvée Napa)

     [***]

Callaway

     [***]

--------------------------------------------------------------------------------

 

SCHEDULE 2

Planned Transactions

 

1 General Principles

 

1.1 PR shall have control over the structuring, including timing, terms and
mechanism, of the delivery of FB Assets to FB in accordance with this Schedule 2
and in particular:

 

1.1.1 the allocation of prices to the FB Assets shall be made in accordance with
Schedule 1 and the principles set out in this Agreement and this Schedule 2; and

 

1.1.2 any other consideration payable under the Planned Transactions which
consideration is not Part Consideration shall be determined in accordance with
Schedule 1 and the principles set out in this Agreement and this Schedule 2.

 

1.2 FB shall take all reasonable steps to give effect to PR’s proposals in
relation to the Planned Transactions to the extent that such proposals satisfy
the principles in this Schedule 2.

 

1.3 FB may make proposals (including as to mechanisms and timing for the
delivery of assets to FB) to PR regarding the Planned Transactions and the
delivery of FB Assets to FB. PR will consider, and discuss with FB, such
proposals in good faith but shall have no obligation to agree to such proposals.
PR may impose such conditions (including, without limitation, as to the sharing
or burden of any consequent tax or other costs) upon its agreement as it shall,
in its absolute discretion, determine.

 

1.4 FB will take all lawful steps as PR shall direct to give effect to PR’s
proposals in relation to the Planned Transactions.

 

1.5 Subject to paragraph 1.10 of this Schedule 2, FB will agree and implement
(including taking all necessary steps, exercising votes at board and shareholder
level and giving all required consents) all such transactions, steps and other
matters as PR shall propose in order to give effect to PR’s proposals in
relation to the Planned Transactions provided that such transactions, steps and
matters are (i) lawful and (ii) (unless FB shall otherwise agree) not such as to
involve distributions in specie to companies which are members of the FB Group
at the time at which the distribution in specie is made or require long-term
co-ownership (through a partnership or body corporate or other entity) of assets
by PR and FB and/or any of their Affiliates. FB shall not, and shall procure
that none of its Affiliates shall:

 

1.5.1 exercise any rights attaching to any “B” Shares; or

 

1.5.2 exercise any right pursuant to Article 4.6.1.3 of the Bidco 2 Articles,

 

so as to inhibit, delay or frustrate any Planned Transaction.

 

1.6

To the extent that any failure or delay by PR in implementing the Planned
Transactions is caused by FB or any of its Affiliates (including, but not
limited to, any of them having (i) exercised any rights under this Agreement or
any agreement or arrangement entered into pursuant to this Agreement, (ii)
exercised any rights attaching to the Tracker Shares, or (iii) exercised any
rights attaching

--------------------------------------------------------------------------------

 

to any “B” Shares) PR shall not be in breach of its obligation under this
Agreement to deliver the FB Assets to FB or its Affiliates by the End Date
provided that in such circumstances PR shall continue to have a contractual
obligation to implement the Planned Transactions as soon as reasonably
practicable after the End Date having regard to the action or actions taken by
FB and/or its Affiliates and falling within (i) to (iii) of this paragraph 1.6.

 

1.7 All Planned Transactions shall be effected in such a way as to comply with
all applicable laws.

 

1.8 The Planned Transactions shall not be arranged with the intent that any of
the Planned Tax Costs which would ordinarily be met by a member of the PR Group
shall be transferred to FB or any of its Affiliates without FB’s consent.

 

1.9 Subject to paragraph 1.10 of this Schedule 2, FB shall, and shall procure
that its Affiliates shall, take all necessary steps, including exercising any
votes at any meeting of the board of directors (or equivalent) of any member of
the AD Group and exercising all votes attaching to any shares (including the
Tracker Shares and any “B” Shares issued pursuant to Clause 10.1.3), and shall
give all consents required or desirable to implement and give effect to any
Planned Transaction.

 

1.10 FB shall not be prevented from exercising any of the veto rights attaching
to “B” Shares and set out in paragraph 2.1, 2.2, 2.4, 2.5 or 2.5A of Schedule 9
in relation to any Planned Transaction.

 

1.11 PR shall give FB reasonable notice (having regard to the Planned
Transaction in respect of which notice is given), in advance of the
implementation of each Planned Transaction and PR shall inform FB of the details
of such proposed Planned Transaction.

 

2 Specific considerations

 

In determining the Planned Transactions in accordance with this Schedule 2 and
the terms of this Agreement, and save where triggering a material change of
control provision cannot be avoided, PR shall take into account the impact of
any particular transaction or transactions on any change in control provisions
contained in any FB Contract which is material in the context of the relevant FB
Business and shall procure that its representatives on the Supervisory Committee
discuss such impact with FB’s representatives on the Supervisory Committee. If,
following that discussion, the Planned Transactions to be adopted cannot be
agreed between PR and FB the Planned Transactions to be adopted in respect of
the relevant matters shall be those which avoid triggering the relevant change
of control provision and any Planned Tax Costs and Bid Structure Transaction
Costs relating to such Planned Transaction together with any other economic
implications directly arising from those Planned Transactions will be shared
between and paid by PR and FB in the PR Funding Percentage and the FB Funding
Percentage respectively. The provisions of this paragraph shall not apply in
circumstances where a triggering of the relevant change of control provision
cannot be avoided if transactions necessary to realise the intentions of the
Parties set out in Clause 3 are to be entered into. For the purpose of this
paragraph 2, the expression “change of control provision” shall include a
pre-emption right which would entitle a third party to buy FB Assets which are
intended to be transferred to FB or an Affiliate of FB in a Planned Transaction.

--------------------------------------------------------------------------------

3 Terms of Planned Transactions

 

The terms of the Planned Transactions to be entered into between the Parties or
their Affiliates to give effect to the intentions of the Parties set out in
Clause 3 shall be as determined by PR in accordance with the provisions of this
Agreement.

 

4 This Agreement to govern transactions

 

The terms of this Agreement shall govern the arrangements between the Parties
and their Affiliates regarding any Planned Transactions to give effect to
general principles set out in paragraph 1 above and the intentions of the
parties set out in Clause 3 with the intention that the Parties and their
Affiliates will be bound by the terms of this Agreement in relation to those
transactions.

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SCHEDULE 3

 

This Schedule left intentionally blank.

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SCHEDULE 4

Part 1

Components of Spirits and Wines Working Capital

 

Spirits and Wines Working Capital shall be determined as follows, based on UK
GAAP balances and at consolidation level at the Effective Date:

 

Working Capital = (A) – (B)

 

(A) = TRADE RECEIVABLES + OTHER RECEIVABLES + CURRENT TAX ASSETS

 

Trade Receivables include the following:

 

1. Trade notes and account receivables;

 

2. Receivables / sale of goods or rendering of services;

 

3. Receivables / payment withheld as guaranty;

 

4. Not-matured notes receivables;

 

5. Receivables / unbilled receivables;

 

6. Less provision for doubtful clients related to Trade Receivables;

 

7. Less creditor receivables (down-payments from clients, overpayments, credit
notes, returns or allowances, claims).

 

Other Receivables include the following:

 

1. Receivables on sale of market securities (less provision for doubtful
clients);

 

2. Other accrued income;

 

3. Non-contingent subsidies receivables (investment subsidies, operating
subsidies, net loss compensating subsidies);

 

4. Not matured notes;

 

5. Deferred expenses;

 

6. Prepaid expenses; and

 

7. Receivables in respect of overpaid customs duties and excise duties.

 

Current Tax Assets

 

Any receivable relating to Tax due to any member of the AD Group arising in
respect of any period ending on or before the Effective Date, provided that a
receivable shall not constitute a Current Tax Asset to the extent that the
amount of the receivable is subject to a dispute.

 

(B) = TRADE PAYABLES + OTHER PAYABLES + EMPLOYEE PAYABLES AND SOCIAL SECURITY +
CURRENT TAX LIABILITIES

 

Trade Payables include the following items:

 

1. Trade payables relating to purchase of (i) raw materials, (ii) goods and
(iii) rendering of services,

 

2. Trade payables relating to payments withheld as a guaranty;

 

3. Trade payables on invoices to be received;

 

4. Notes payable on trade receivables, bills payable;

 

5. Payables to fixed assets suppliers, notes payable on payables to fixed assets
suppliers;

 

6. Payables on operating leases;

 

7. Less debtors payables (down-payments to suppliers; overpayments, credit
notes, returns or allowances, claims);

--------------------------------------------------------------------------------

Other Payables include the following items:

 

1. Accrued payables;

 

2. Deferred income;

 

3. Customs duties and excise duties.

 

The following items are not included in ‘other payables’ nor in the definition
of the Working Capital:

 

  •   Any payable related to litigation with competitors;

 

  •   Any payable related to IP litigation;

 

  •   Any payable related to product facility litigation;

 

  •   Any payable related to environmental litigation;

 

  •   Any payable related to class action litigation;

 

  •   Any payable related to product claims;

 

  •   Any payable related to breaches of law/regulation litigation;

 

  •   Any payable related to breaches of contract litigation;

 

  •   Any payable related to warranty/indemnity claims on previous transactions;

 

  •   Any payable related to health and safety claims;

 

Employee payables and Social Security payables include the following items:

 

1. Wages and salaries payable;

 

2. Prepayments to employees;

 

3. Third party liens on employee wages;

 

4. Accrued vacation expenses;

 

5. Accrued personnel expenses;

 

6. Social Security;

 

7. Other social security agencies;

 

8. Accrued Social Security on unpaid vacation;

 

9. Less accrued Social Security;

 

Current Tax Liabilities

 

Any payable relating to any Tax liability of a member of the AD Group arising in
respect of any period ending or any event occurring on or before the Effective
Date where the payment date in respect of that Tax liability has not arisen
before the Effective Date provided that a payable shall not constitute a Current
Tax Liability to the extent that the amount of the payable is subject to a
dispute.

 

Any payables related to pension liabilities and employee claims are not included
in Employee payables and Social Security payables.

 

Exclusions

 

The following items are not included in the definition of Working Capital:

 

  •   Financial current accounts (debtors and creditors) with AD Group companies
should be excluded from the definition of Working Capital (and considered as
part of net debt);

 

  •   Dividends to pay or to receive (considered as part of net debt);

 

  •   Non-current provision for contingencies and losses;

 

  •   Finance lease obligations;

 

  •   Items which do not relate to the spirits and/or wines businesses of the AD
Group;

 

  •   Deferred tax assets and deferred tax liabilities; and

 

  •   Financial Debt and Cash Equivalents.

 

The calculation of Working Capital shall take into account any accrued discounts
payable to customers or receivable from suppliers.

--------------------------------------------------------------------------------

For the avoidance of doubt, in all circumstances receivables, payables, Current
Tax Assets and Current Tax Liabilities falling due in more than one year shall
also be included in the calculation of Spirits and Wines Working Capital.

 

Where for the purposes of the calculation referred to in this Part of Schedule 4
it is necessary to determine an amount of money and any of the component parts
of that sum of money are expressed in a currency other than pounds sterling,
such component part shall be translated into pounds sterling at the exchange
rate for such currency immediately before close of business in London on the
Effective Date as quoted by the Bank.

 

For the purposes of the definitions of Current Tax Liability and Current Tax
Asset, the payment date in respect of any payable shall mean the last date by
which the relevant payable can be paid or discharged under the law of the
relevant jurisdiction without incurring a charge to interest or penalties.

--------------------------------------------------------------------------------

Part 2

Components of Transferred Subsidiary Working Capital

 

Transferred Subsidiary Working Capital shall be determined at each FB
Transferred Subsidiary level, on the basis of individual accounts before
consolidation entries as at the Effective Date. For this purpose, any reference
to a “Transferred Subsidiary” shall include any company that carries on the MM
Business or that holds MM Assets that is transferred to a third party in
accordance with Clause 3.17 in connection with a sale of the MM Business.

 

Working Capital = (A) – (B)

 

(A) = TRADE RECEIVABLES + OTHER RECEIVABLES + CURRENT TAX ASSETS

 

Trade Receivables include the following:

 

1. Trade notes and account receivables;

 

2. Receivables / sale of goods or rendering of services;

 

3. Receivables / payment withheld as guaranty;

 

4. Not-matured notes receivables;

 

5. Receivables / unbilled receivables;

 

6. Less provision for doubtful clients related to Trade Receivables;

 

7. Less creditor receivables (down-payments from clients, overpayments, credit
notes, returns or allowances, claims).

 

Other Receivables include the following:

 

1. Receivables on sale of market securities (less provision for doubtful
clients);

 

2. Other accrued income;

 

3. Non-contingent subsidies receivables (investment subsidies, operating
subsidies, net loss compensating subsidies);

 

4. Not matured notes;

 

5. Deferred expenses;

 

6. Prepaid expenses; and

 

7. Receivables in respect of overpaid customs duties and excise duties.

 

Current Tax Assets

 

Any receivable relating to Tax due to any Transferred Subsidiary arising in
respect of any period ending on or before the Effective Date provided that a
receivable shall not constitute a Current Tax Asset to the extent that the
amount of the receivable is subject to a dispute.

 

(B) = TRADE PAYABLES + OTHER PAYABLES + EMPLOYEE PAYABLES AND SOCIAL SECURITY +
CURRENT TAX LIABILITIES

 

Trade Payables include the following items:

 

1. Trade payables relating to purchase of (i) raw materials, (ii) goods and
(iii) rendering of services,

 

2. Trade payables relating to payments withheld as a guaranty;

 

3. Trade payables on invoices to be received;

 

4. Notes payable on trade receivables, bills payable;

 

5. Payables to fixed assets suppliers, notes payable on payables to fixed assets
suppliers;

 

6. Payables on operating leases;

 

7. Less debtors payables (down-payments to suppliers; overpayments, credit
notes, returns or allowances, claims);

--------------------------------------------------------------------------------

Other Payables include the following items:

 

1. Accrued payables;

 

2. Deferred income;

 

3. Customs duties and excise duties.

 

The following items are not included in ‘other payables’ nor in the definition
of the Working Capital:

 

  •   Any payable related to litigation with competitors;

 

  •   Any payable related to IP litigation;

 

  •   Any payable related to product facility litigation;

 

  •   Any payable related to environmental litigation;

 

  •   Any payable related to class action litigation;

 

  •   Any payable related to product claims;

 

  •   Any payable related to breaches of law/regulation litigation;

 

  •   Any payable related to breaches of contract litigation;

 

  •   Any payable related to warranty/indemnity claims on previous transactions;

 

  •   Any payable related to health and safety claims;

 

Employee payables and Social Security payables include the following items:

 

1. Wages and salaries payable;

 

2. Prepayments to employees;

 

3. Third party liens on employee wages;

 

4. Accrued vacation expenses;

 

5. Accrued personnel expenses;

 

6. Social Security;

 

7. Other social security agencies;

 

8. Accrued Social Security on unpaid vacation;

 

9. Less accrued Social Security;

 

Current Tax Liabilities

 

Any payable relating to any Tax liability of a Transferred Subsidiary arising in
respect of any period ending or any event occurring on or before the Effective
Date where the payment date in respect of that payable has not arisen before the
Effective Date provided that a payable shall not constitute a Current Tax
Liability to the extent that the amount of the payable is subject to a dispute.

 

Any payables related to pension liabilities and employee claims are not included
in Employee payables and Social Security payables.

 

Exclusions

 

The following items are not included in the definition of Working Capital:

 

  •   Financial current accounts (debtors and creditors) with AD Group companies
should be excluded from the definition of Working Capital (and considered as
part of net debt);

 

  •   Dividends to pay or to receive (considered as part of net debt);

 

  •   Non-current provision for contingencies and losses;

 

  •   Finance lease obligations;

 

  •   Items which do not relate to the spirits and/or wines businesses of the AD
Group;

 

  •   Deferred tax assets and deferred tax liabilities; and

 

  •   Financial Debt and Cash Equivalents.

 

The calculation of Working Capital shall take into account any accrued discounts
payable to customers or receivable from suppliers.

--------------------------------------------------------------------------------

Where for the purposes of the calculation referred to in this Part of Schedule 4
it is necessary to determine an amount of money and any of the component parts
of that sum of money are expressed in a currency other than pounds sterling,
such component part shall be translated into pounds sterling at the exchange
rates for such currency immediately before close of business in London on the
Effective Date as quoted by the Bank.

 

For the avoidance of doubt, in all circumstances receivables, payables, Current
Tax Assets and Current Tax Liabilities falling due in more than one year shall
also be included in the calculation of Spirits and Wine Working Capital.

 

For the purposes of the definitions of Current Tax Liability and Current Tax
Asset, the payment date in respect of any payable shall mean the last date by
which the relevant payable can be paid or discharged under the law of the
relevant jurisdiction without incurring a charge to interest or penalties.

--------------------------------------------------------------------------------

Part 3

Completion Accounts Process

Estimated Working Capital Statement and Working Capital Statement

 

1 PR shall prepare drafts of working capital statements in respect of each
member of the AD Group in accordance with the provisions of this Schedule:

 

1.1 within 7 Business Days of the date 90 days after the Effective Date based on
its reasonable assumptions at that time as to which companies will be
Transferred Subsidiaries; and

 

1.2 within 7 Business Days of the End Date or, if later, the transfer of the
last Transferred Subsidiary to be transferred pursuant to a Planned Transaction;

 

which, subject to agreement in accordance with this part of this Schedule shall
be the Estimated Working Capital Statement (in the case of the statement
referred to in paragraph 1.1) and the Working Capital Statement (in the case of
the statement referred to in paragraph 1.2).

 

2 PR shall submit to FB drafts of the Estimated Working Capital Statement and
the Working Capital Statement (the “Draft Statements”) on the date referred to
in paragraph 1. The Draft Statements shall be prepared in accordance with Parts
1 and 2 of this Schedule 4 and shall respectively give a figure for the Spirits
and Wines Working Capital and a figure for the Working Capital of the relevant
member of the AD Group. FB shall procure that PR is given all such assistance
and access to all such information in FB or its Affiliates possession or control
as it may reasonably require in order to enable it to prepare the Draft
Statements.

 

3 FB shall, within 20 Business Days after receipt of the Draft Statements, give
written notice to PR stating whether or not it proposes any amendments to the
Draft Statements. PR shall procure that FB is given all such assistance and
access to all such information in PR or its Affiliates’ possession or control
(other than, for the avoidance of doubt, its or their accountants’ working
papers) as it may reasonably require in order to enable it to review the Draft
Statements.

 

4 If FB gives notice that it has no proposed amendments to the Draft Statements,
then the Draft Statements shall respectively constitute the Estimated Working
Capital Statement or the Working Capital Statement relating to Spirits and Wines
Working Capital and to the relevant member of the AD Group for the purposes of
this Agreement. If it gives notice that it does have proposed amendments to the
Draft Statements, it shall within such notice inform PR of its proposed
amendments and FB and PR shall, within the period of 10 Business Days after
receipt of such notice, seek to agree the proposed amendments.

 

5 In the event of:-

 

5.1 a failure by PR to submit the Draft Statements to FB within the period of 90
days referred to in paragraph 1; or

 

5.2 a failure by FB to give written notice to PR, within the period of 20
Business Days referred to in paragraph 2, stating whether or not it has any
suggested amendments to the Draft Statements; or

--------------------------------------------------------------------------------

5.3 any dispute between FB and PR, as to any matter relevant to the Draft
Statements or the Estimated Working Capital Statement or the Working Capital
Statement remaining unresolved at the expiry of the period of 10 Business Days
referred to in paragraph 3;

 

such failure or dispute shall be referred to an independent firm of chartered
accountants agreed by FB and PR within five business days of such failure or
notification of dispute or, in the event of a failure to agree within 5 Business
Days, by an independent firm of chartered accountants appointed by the President
for the time being of the Institute of Chartered Accountants in England and
Wales on the application of either FB or PR. Such independent firm of chartered
accountants shall determine the Estimated Working Capital Statement or the
Working Capital Statement relating to the Spirits and Wines Working Capital
and/or the relevant member of the AD Group. The fees of any such firm of
independent accountants shall be paid by FB and/or PR in the proportions
determined by the independent accountant. FB and PR shall procure that such firm
of independent accountants is given all such assistance and access to all such
information in FB’s or (as the case may be) PR’s possession or control as such
firm may reasonably require in order to determine the Estimated Working Capital
Statement or the Working Capital Statement. Any firm appointed under this
Schedule 4 shall act as experts and not as arbitrators and their determination
shall be binding on the Parties.

--------------------------------------------------------------------------------

SCHEDULE 5

Part 1:

Calculation of DBC

 

DBC in respect of a brand shall be calculated as follows:

 

     Notes

--------------------------------------------------------------------------------

Gross sales (excluding taxes and duties)

   1     

--------------------------------------------------------------------------------

-Discounts and allowances

   2     

--------------------------------------------------------------------------------

Net sales (excluding taxes and duties)

   3     

--------------------------------------------------------------------------------

-COGS

   4

-Production costs

   5

-Manufacturing variances

   6     

--------------------------------------------------------------------------------

Gross Profit

   7     

--------------------------------------------------------------------------------

-Trade A&P expenses

   8

-Media expenses

   9

-Other Consumer A&P expenses

   10     

--------------------------------------------------------------------------------

Direct Brand Contribution

   11     

--------------------------------------------------------------------------------

 

GENERAL PRINCIPLES

 

All costs included in the DBC calculation must be actual costs where available
and if not then standard/budgeted costs.

 

NOTE 1 – GROSS SALES (EXCLUDING TAXES AND DUTIES)

 

1.1 Gross sales

 

Gross sales correspond to the total amount billed to third party customers. It
represents invoice prices before reduction to sales (discounts & allowances) and
excluding duties and taxes on sales (when collected on behalf of tax
authorities, i.e. VAT).

 

Gross sales mainly comprise the following revenues:

 

•   Sales of finished, intermediary or residual products;

 

•   Sales of goods;

 

•   Commissions received from commission sales;

 

•   Services rendered (i.e. co-packing).

 

1.2 Taxes & Duties

 

Taxes and duties concern those arising from the sale of the product, and are
generally set based on the alcohol content or product price (i.e. excise,
stamps, etc.).

 

Taxes and duties are always directly deducted from Gross Sales in calculating
Gross Sales excluding T&D.

 

Taxes and Duties to be excluded from gross sales do not include ‘import duties’.

 

NB: There are two types of free bottle giveaways:

 

•   “Free bottles on invoice”: bottles given to distributors for promotions such
as “buy 12 bottles, get one free”. These bottles are valued at cost price and
are reported in ‘Cost of Goods Sold’.

--------------------------------------------------------------------------------

•   “Promotional free bottles”: bottles used in point-of-sale promotions
(product tasting), public relation events or on-pack promotions (e.g.: 5cl
sample attached to a 1L. bottle). These bottles are valued at cost price and are
reported in ‘Other A&P expenses’.

 

NOTE 2 – DISCOUNTS AND ALLOWANCES

 

Discounts and allowances include:

 

•   Promotional rebates, whether they appear as a reduction on an invoice or an
invoice credit note.

 

•   Year-end rebates (grouping, etc.).

 

•   Commissions paid or payable pursuant to commission sales.

 

•   Quantity discounts: Accrued discounts based upon quantity purchased with no
identifiable price reductions to the consumer.

 

•   Long term discounts: Any discount longer than one year designed to stimulate
trade activity. In this case, the related cost should be accrued over the
corresponding period of time.

 

•   Price reductions: Short term discounts offered to the trade which either
increase trade profits or are identified as price reductions to the trade
customer.

 

•   Display discount: conditional (service related) allowances/payments to the
customer for display space incremental to existing shelf space (usually on an
annual basis at per case rate).

 

•   Logistics discounts: allowances offered to the trade relating to product
distribution as an incentive to logistics costs (e.g. backhauling, central
delivery, direct delivery).

 

•   Central office discounts: other allowances for reduced administrative costs
such as centralized orders, invoice control for franchises, etc.

 

•   Feature discount: conditional allowances /payments to the customer to
‘feature’ certain brands in special events. Negotiated centrally usually on an
annual basis at a per case rate.

 

In addition, credit to customers for goods returned, damaged goods or incomplete
shipments must also come as a reduction of net sales (based on actual figures).

 

NOTE 3 – NET SALES

 

Net sales correspond to the sum of ‘Gross Sales (excluding T&D) minus ‘Discounts
and Allowances’.

 

NOTE 4 – COGS (‘COST OF GOODS SOLD’)

 

Cost of goods sold includes:

 

•   Raw materials (net of all vendor rebates/discounts), used in the production
of finished products;

 

•   Raw materials at purchase price/cost that are used in the production of free
bottles on invoice;

 

•   Finished products at purchase cost within the framework of distribution
agreements (+ import duties).

 

Write offs on raw materials and finished products must be excluded from the
calculation of the COGS and, consequently the DBC.

 

The following raw materials are included for production activities:

 

•   The content (liquid drink);

 

•   The container (bottle, cap, label, plastic film, carton, etc.),

 

to which may be added all related procurement, transportation, labour and
handling expenses, as well as evaporation and spillage quantity losses.

 

Regarding financial expenses associated to maturing inventories, the two parties
agree to adopt AD’s methodology in calculating a ‘Spirits and Wines Net Brand
Contribution (‘NBC’) of 1011M£ (as stated in page 26 of AD Annual Report for the
year ended 31 August 2004).

--------------------------------------------------------------------------------

All consumables required for production but which are not incorporated in the
products themselves (grease, soap, etc.) are considered as ‘Production Costs’.

 

NOTE 5 – PRODUCTION COSTS

 

Production costs include:

 

•   Depreciation on fixed assets used in the production process (excluding any
impact of impairment);

 

•   Personnel costs relating to direct production staff, including fringe
benefits, paid vacations, profit sharing, profit participation, payroll taxes,
training costs, performance bonuses;

 

•   Warehousing costs for raw materials and warehousing and maturing costs for
ageing stocks;

 

•   Outsourced production costs;

 

•   Plant consumable costs;

 

•   Production costs variances included in finished goods and WIP inventory.

 

Regarding the incorporation of ‘production overheads’ in ‘Production Costs’
(‘i.e. in the calculation of the DBC’), the two parties agree to adopt AD’s
methodology that leads to calculating a ‘Spirits and Wines Net Brand
Contribution (‘NBC’) of 1011M£ (as stated in page 26 of AD Annual Report for the
year ended 31 August 2004).

 

NOTE 6 – MANUFACTURING VARIANCES

 

Manufacturing variances correspond to the differences between standard costs and
actual costs of products for actual volumes.

 

Manufacturing variances include:

 

•   Wet goods variances,

 

•   Dry goods variances (bottling materials variances, other
material/consumables variances),

 

•   Direct Labor variances,

 

•   Other Production variances (Consumables variances, Outsourcing variances,
Energy variances, Other Direct costs variances),

 

No idle capacity impact should be included either in these variances or in the
calculation of the DBC.

 

NOTE 7 – GROSS PROFIT

 

Gross Profit is calculated from the sum of the following lines:

 

•   Net sales

 

•   COGS

 

•   Production costs

 

•   Manufacturing variances

--------------------------------------------------------------------------------

NOTE 8 – TRADE A&P EXPENSES

 

Trade A&P expenses correspond to all expenses (net of all related
rebates/discounts) paid for promoting products to retailers, wholesalers, bars,
etc., such as Branded POS Material, in store advertising, trade public relations
events, sponsorship of trade events, wine lists, markets tests, trade samples,
tastings, trade trainings, advertising in trade publications.

 

Overpriced services are assimilated to price reductions and should be presented
as such.

 

Trade A&P expenses must be calculated as a % of sales or directly attributable
to a brand. Fixed Trade A&P expenses can not be allocated to a brand through
allocation keys.

 

Trade A&P expenses exclude employee costs.

 

Write offs on Branded POS Material must be excluded from the calculation of the
Trade A&P and, consequently the DBC.

 

NOTE 9 – MEDIA EXPENSES

 

Media expenses correspond to all purchases of advertising space/time for all
media (TV, radio, publications, billboards, caddy, etc.) net of all related
rebates/discounts, excluding all ad agency fees and ad creation expenses.

 

Advertising space/time purchases comprise:

 

•   Traditional media advertising for the brand: TV, Radio, Outdoors,
Billboards, Publications, and Cinema;

 

•   Specific brand advertising for a sponsorship or a special event (excluding
the sponsorship cost itself);

 

•   Internet advertising (Production, Webmedia, Fees);

 

•   Showcasing of product in TV programmes/movies and in Cinemas.

 

•   Media partnerships with TV networks, radio stations, magazines, so long as
they involve a specific billing by the media (and not simply an exchange in the
framework of a partnership).

 

Media expenses must be directly attributable to a brand.

 

Media expenses exclude employee costs.

 

NB: in the case of a media campaign occurring from August N to October N+1; the
purchase of ad time/space corresponding to August must be reported in August N,
even if the media campaign is invoiced in full in N+1.

 

NOTE 10 – OTHER CONSUMER A&P EXPENSES

 

Other consumer A&P expenses are expenses that are not considered as Trade A&P
expenses or Media expenses, including:

 

•   Advertising creation expenses, that is:

 

  •   Technical expenses (design and production) of advertising productions
(films, billboards, spots, radio, etc.).

 

  •   Printing costs for billboards and publication inserts.

 

•   Ad agency fees (creation, production, media, other agency costs), even if,
in some instances, the amount represents a deposit);

 

•   Technical expenses and fees relating to the development of new products,
packaging, promotions, and sponsorship events;

 

•   Products consumed at point of advertising;

 

•   Promotional materials for consumers;

 

•   Sponsoring, sampling and public relations events;

 

•   Products given away in sampling promotions, valued at cost plus duties;

--------------------------------------------------------------------------------

Consumer promotions (coupons, cash refunds, on-pack price reductions, loyalty
cards, in store lotteries, on-pack premiums);.

 

Write offs on promotional materials (e.g. samples) must be excluded from the
calculation of the Trade A&P and, consequently the DBC.

 

Other consumer A&P expenses must be directly attributable to a brand.

 

Other consumer A&P expenses exclude employee costs.

 

NOTE 11 – DIRECT BRAND CONTRIBUTION

 

DBC is the sum of ‘Gross Profit’ minus ‘Trade A&P expenses’ minus ‘Media
expenses’ and minus ‘Other consumer A&P expenses’.

 

In calculating DBC in respect of a brand, the methodology referred to in the
boxes in notes 4 and 5 to this part 1 of Schedule 5 shall apply.

 

Where for the purposes of the calculation referred to in paragraph 1 of this
Schedule 5 it is necessary to determine an amount of money and any of the
component parts of that sum of money are expressed in a currency other than
pounds sterling, such component parts shall be translated into pounds sterling
at the mean of the exchange rates for such currency used by AD in the
preparation of its statutory accounts for the period from 1 September 2003 to 31
August 2004 or where no such exchange rate is available the mean of the
middle-market exchange rates (immediately before close of business in London)
for such currency quoted by Bank during that period.

--------------------------------------------------------------------------------

Part 2

Determination of DBC

 

1 As soon as reasonably practicable after the Effective Date and in any event
within 90 days of the Effective Date, PR shall prepare and submit to FB a draft
statement setting out the DBC in respect of each PR Brand and each FB Brand (the
“Draft DBC Statement”). The Draft DBC Statement shall be prepared in accordance
with Part 1 of this Schedule 5. FB shall procure that PR is given all such
assistance and access to all such information in FB or its Affiliates possession
or control as it may reasonably require in order to enable it to prepare the
Draft DBC Statement.

 

2 FB shall, within 20 Business Days after receipt of the Draft DBC Statement,
give written notice to PR stating whether or not it proposes any amendments to
the Draft DBC Statement. PR shall procure that FB is given all such assistance
and access to all such information in PR or its Affiliates’ possession or
control (other than, for the avoidance of doubt, its or their accountants’
working papers) as it may reasonably require in order to enable it to review the
Draft DBC Statement.

 

3 If FB gives notice that it has no proposed amendments to the Draft DBC
Statement, then the figures for the DBC of each PR Brand and each FB Brand set
out in the Draft DBC Statement shall constitute the DBC for each such Brand for
the purposes of this Agreement. If it gives notice that it does have proposed
amendments to the Draft DBC Statement, it shall within such notice inform PR of
its proposed amendments and FB and PR shall, within the period of 10 Business
Days after receipt of such notice, seek to agree the proposed amendments.

 

4 In the event of:-

 

4.1 a failure by PR to submit the Draft DBC Statement to FB within the period of
90 days referred to in paragraph 1; or

 

4.2 a failure by FB to give written notice to PR, within the period of 20
Business Days referred to in paragraph 2, stating whether or not it has any
suggested amendments to the Draft DBC Statement; or

 

4.3 any dispute between FB and PR, as to any matter relevant to the Draft DBC
Statement or the DBC of each PR Brand and each FB Brand remaining unresolved at
the expiry of the period of 10 Business Days referred to in paragraph 3;

 

such failure or dispute shall be referred to an independent firm of chartered
accountants agreed by FB and PR within five business days of such failure or
notification of dispute or, in the event of a failure to agree within 5 Business
Days, by an independent firm of chartered accountants appointed by the President
for the time being of the Institute of Chartered Accountants in England and
Wales on the application of either FB or PR. Such independent firm of chartered
accountants shall determine the DBC for each PR Brand and each FB Brand for the
purposes of this Agreement. The fees of any such firm of independent accountants
shall be paid by FB and/or PR in the proportions determined by the independent
accountant. FB and PR shall procure that such firm of independent accountants is
given all such assistance and access to all such information in FB’s or (as the
case may be) PR’s possession or control as such firm may reasonably require in
order to determine the DBC for each PR Brand and each FB Brand for the purposes
of this Agreement. Any firm appointed under this Schedule 5 shall act as experts
and not as arbitrators and their determination shall be binding on the Parties.

--------------------------------------------------------------------------------

Part 3

Determination of Interim DBC

 

1 As soon as reasonably practicable after the Clearance Date or the Non-Cleared
Sale Date (either date being the “Relevant Date”) and in any event within 90
days of the Relevant Date, PR shall prepare and submit to FB a draft statement
setting out the Interim DBC in respect of the MM Business (as appropriate the
“Draft Interim DBC Statement”) for the MM Interim Period. The Draft Interim DBC
Statement shall be prepared in accordance with Part 1 of this Schedule 5. FB
shall procure that PR is given all such assistance and access to all such
information in FB or its Affiliates’ possession or control as it may reasonably
require in order to enable it to prepare the Draft Interim DBC Statement.

 

2 FB shall, within 20 Business Days after receipt of the Draft Interim DBC
Statement, give written notice to PR stating whether or not it proposes any
amendments to the Draft Interim DBC Statement. PR shall procure that FB is given
all such assistance and access to all such information in PR or its Affiliates’
possession or control (other than, for the avoidance of doubt, its or their
accountants’ working papers) as it may reasonably require in order to enable it
to review the Draft Interim DBC Statement.

 

3 If FB gives notice that it has no proposed amendments to the Draft Interim DBC
Statement, then the figures set out in the Draft Interim DBC Statement shall
constitute the Interim DBC for the MM Business for the purposes of this
Agreement. If it gives notice that it does have proposed amendments to the Draft
Interim DBC Statement, it shall within such notice inform PR of its proposed
amendments and FB and PR shall, within the period of 10 Business Days after
receipt of such notice, seek to agree the proposed amendments.

 

4 In the event of:-

 

4.1 a failure by PR to submit the Draft Interim DBC Statement to FB within the
period of 90 days referred to in paragraph 1; or

 

4.2 a failure by FB to give written notice to PR, within the period of 20
Business Days referred to in paragraph 2, stating whether or not it has any
suggested amendments to the Draft Interim DBC Statement; or

 

4.3 any dispute between FB and PR, as to any matter relevant to the Draft
Interim DBC Statement or the Interim DBC of each Business remaining unresolved
at the expiry of the period of 10 Business Days referred to in paragraph 3;

 

such failure or dispute shall be referred to an independent firm of chartered
accountants agreed by FB and PR within five business days of such failure or
notification of dispute or, in the event of a failure to agree within 5 Business
Days, by an independent firm of chartered accountants appointed by the President
for the time being of the Institute of Chartered Accountants in England and
Wales on the application of either FB or PR. Such independent firm of chartered
accountants shall determine the Interim DBC for the MM Business for the purposes
of this Agreement. The fees of any such firm of independent accountants shall be
paid by FB and/or PR in the proportions determined by the independent
accountant. FB and PR shall procure that such firm of independent accountants is
given all such assistance and access to all such information in FB’s or (as the
case may be) PR’s possession or control as such firm may reasonably require in
order to determine the Interim DBC for each PR Brand and each FB Brand for the
purposes of this Agreement. Any firm appointed under this Schedule 5 shall act
as experts and not as arbitrators and their determination shall be binding on
the Parties.

--------------------------------------------------------------------------------

SCHEDULE 6

Pensions

 

Part A

 

1. Definitions & interpretation

 

1.1 In this Part A, the following expressions shall have the following
meanings:-

 

Actuarial Assumptions: means the actuarial methods and assumptions set out in
the Valuation as applicable to the ongoing scheme valuation (as opposed to any
other valuations, such as statutory valuations, to the extent that they may
differ from the ongoing scheme valuation, or any termination valuations which
may have been conducted alongside such valuation), as updated as the AD UK
Pension Schemes’ Actuary and the AD Trustees may consider appropriate for the
purposes of the operation of this Schedule 6.

 

Actuary: means a fellow of the Institute of Actuaries or of the Faculty of
Actuaries in Scotland or a firm of such fellows or a company or partnership
which makes available the services of such a fellow whether as an employee,
director or partner.

 

AD Trustees: means the trustee or trustees for the time being of the relevant AD
UK Pension Scheme.

 

AD UK Pension Schemes: means the AD Pension Fund and the AD Executive Pension
Fund, but so that where the context so permits, reference to the AD UK Pension
Schemes means each of such schemes individually, so that this Schedule 6 shall
operate independently in relation to each of the AD UK Pension Schemes (and
likewise in relation to each of the two AD Trustees or (where applicable)
trustee boards.

 

AD UK Pension Schemes’ Actuary: means the Actuary appointed by the AD Trustees
who will carry out the calculations envisaged to be performed by that Actuary
under the terms of this Part of this Schedule.

 

Consent Form: means, (where applicable) in respect of each FB Transferring UK
Member, a form completed and signed by him requesting the transfer of his
accrued rights under the relevant AD UK Pension Scheme to the FB UK Pension
Scheme and discharging the relevant AD UK Pension Scheme from all liability in
respect of such FB Transferring UK Member and which is in a form reasonably
acceptable to PR.

 

Employing FB Company: means (in relation to a FB Pensionable UK Employee) FB or
such of its Affiliates, as the case may be, by which that FB Pensionable UK
Employee becomes employed (whether or not, immediately before the relevant
individual satisfies this description, the individual concerned was already
employed by that employer, but at that time that employer was not an Affiliate
in relation to FB) by operation of the Agreement of which this Schedule forms
part. Where more than one entity satisfies this definition, for the purposes of
this Part A of Schedule 6 the term ‘the Employing FB Company’ refers to such
entity by which the relevant FB Pensionable UK Employee is employed at the
relevant time, according to the context.

 

FB Actuary: means Alan Pentland of PricewaterhouseCoopers, or such other Actuary
as may be appointed by FB for the purpose of this Agreement and notified to PR.

 

FB Pensionable UK Employees: means such of the FB Employees as are at the
Effective Date active members of an AD UK Pension Scheme.

 

FB Pension Liabilities: means any liabilities under the AD UK Pension Schemes to
or in respect of FB Pensionable UK Employees.

 

FB Transferring UK Members: means those FB Pensionable UK Employees who are
still in the employment of an Employing FB Company and who complete (and do not
withdraw) Consent Forms before the Transfer Date.

--------------------------------------------------------------------------------

FB UK Pension Scheme: means a retirement benefits scheme or schemes to be
established or nominated in accordance with paragraph 3.1, and shall where the
context requires mean the trustees of the FB UK Pension Scheme.

 

Funding Percentage: means the ongoing funding level of the AD UK Pension Scheme,
expressed as a percentage, as determined in the Valuation.

 

Interest: means interest at 1% above the base rate from time to time of Lloyds
TSB Bank plc compounded on a monthly basis.

 

Joint Actuaries: means PR’s Actuary and the FB Actuary.

 

Payment Date: means the date falling 30 days after the later of:-

 

  •   agreement by or notification to the Joint Actuaries of the Transfer Amount
in accordance with paragraph 4; and

 

  •   receipt by the AD UK Pension Scheme of the Transfer Documents.

 

Pensions Settlement Amount: means, subject to paragraph 9.5 of this Part A of
Schedule 6, such amount as is agreed between the Joint Actuaries to be equal to
the difference between (a) the FB Pension Liabilities under the AD UK Pension
Schemes calculated on the basis of the Actuarial Assumptions at the calculation
date, which shall be within one month of the date on which the Pensions
Settlement Amount is to be paid (assuming, if the relevant FB Pensionable UK
Employee had not ceased to be an active member under the relevant AD UK Pension
Scheme before the Transfer Date, that the relevant FB Pensionable UK Employee
left service under the relevant AD UK Pension Scheme on the Transfer Date) and
(b) the amount of (a) multiplied by the Funding Percentage LESS any amount
already paid under the Support Arrangements with Interest since the date of
payment.

 

PR’s Actuary: means Andrew Vaughan of Mercer Human Resource Consulting Limited
or such other Actuary as may be appointed by PR for the purpose of this
Agreement and notified to FB.

 

Protected Rights: has the same meaning as in section 9(3) Pension Schemes Act
1993.

 

Support Arrangements: means arrangements under which, subject to paragraph 9.5
of this Part A of Schedule 6, in respect of such FB Pension Liabilities (if any)
as are retained under the AD UK Pension Schemes, FB pays to PR or as PR may
direct, such amounts at such times as are agreed between FB and PR, based on the
Actuarial Assumptions (but subject to the intent that FB discharges its
liabilities in relation to the FB Pensions Liabilities on a basis which is pari
passu with the basis upon which AD and its Affiliates discharge their
liabilities in relation to the balance of the liabilities under the AD Pension
Schemes) until FB’s payment to PR (or as PR may direct) of the Pensions
Settlement Amount, which FB agrees to pay on or before the fifth anniversary of
the Effective Date (or on such later date as PR and FB may agree). PR and FB may
agree to waive the implementation of the Support Arrangements in the event that
they together agree (acting reasonably) that the Pensions Settlement Amount is
likely to be immaterial. Any failure by PR and FB to agree the necessary
arrangements envisaged by this definition will be referred for resolution on the
same basis as any failure to agree the Transfer Amount is to be resolved under
paragraph 4.5 of this Part A of Schedule 6.

 

Transfer Amount: means such sum as the Allied UK Pension Schemes shall make
available in respect of the FB Pensionable UK Employees for transfer to another
pension scheme in respect of the pensions and other benefits prospectively and
contingently payable under the Allied UK Pension Schemes to and in respect of
the FB Transferring UK Members by reference to pensionable service thereunder up
to the Transfer Date, subject to the desired mutual objective of PR and FB that
the Transfer Amount shall be calculated on the basis described in paragraph 4.9
of this Part A of Schedule 6.

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Transfer Date: means 6 April 2006, or such earlier date as may be agreed in
writing between PR and FB.

 

Transfer Documents: means:

 

  •   a copy of a letter from the Inland Revenue confirming that the FB UK
Pension Scheme is an exempt approved scheme (or, if the Transfer Date falls
after 5 April 2006, a registered scheme) or the written consent of the Inland
Revenue referred to in paragraph 5.2 of this Part A of Schedule 6;

 

  •   a Consent Form in relation to each of the FB Transferring UK Members;

 

  •   evidence that the FB UK Pension Scheme is able to accept the transfer of
Protected Rights.

 

Transitional Period: means the period beginning at the Effective Date and ending
on the day before the Transfer Date.

 

Valuation: means the actuarial valuation of each of the AD UK Pension Schemes
carried out as at 6 April 2003.

 

1.2 Words and expressions used in Chapter I of Part XIV of the Taxes Act 1988,
the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004
shall have the same meanings when used in this Schedule.

 

2. Approach to AD Trustees

 

2.1 At the earliest practicable opportunity consistent with market constraints
governing the Acquisition, PR and FB will approach the AD Trustees with a view
to obtaining from them agreement in principle (to the extent such agreement is
necessary given the powers in the rules of the AD UK Pension Schemes) to:-

 

  2.1.1 the value of the AD UK Pension Schemes assets to be transferred to the
FB UK Pension Scheme to be determined in accordance with paragraph 4.9 of this
Part A of Schedule 6;

 

  2.1.2 subject to paragraph 5.2 of this Part A of Schedule 6, the actual assets
to be transferred to represent a corresponding pro rata proportion of each main
asset class applicable to the AD UK Pension Schemes assets (subject to de
minimis provisions), or as may otherwise be agreed between PR, FB and the AD
Trustees; and

 

  2.1.3 the availability to FB of a Transitional Period (for participation in
the AD UK Pension Schemes) as described below.

 

2.2 Subject to any necessary approval of the Inland Revenue (which PR and FB
shall use their respective best endeavours to obtain) and to any necessary
agreement of the AD Trustees, PR shall:-

 

  2.2.1 permit the Employing FB Company to participate in or to continue to
participate in the AD UK Pension Schemes in relation to FB Pensionable UK
Employees throughout the Transitional Period, and for this purpose PR and FB
shall each use their reasonable endeavours to procure that the AD Trustees shall
execute any documents necessary to permit such participation in the AD UK
Pension Schemes; and

 

  2.2.2 maintain the AD UK Pension Schemes in relation to the FB Pensionable UK
Employees in full force and effect until after the Transfer Date (except to the
extent that the AD Trustees or the Pensions Regulator has power to decide
otherwise).

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2.3 FB undertakes that it shall or (if it is not the Employing FB Company) FB
undertakes that it shall procure that the Employing FB Company shall:-

 

  2.3.1 promptly, on the due date in each month, pay to the AD UK Pension
Schemes the contributions due and payable in respect of the Transitional Period
by or in respect of the FB Pensionable UK Employees at the full future service
contribution rate applicable for a participating employer under the terms of the
AD UK Pension Schemes (ignoring, for the avoidance of doubt, any additional
deficit contributions which may be due from the participating employer) plus the
part of the deficit contributions charged to participating employers which the
AD UK Pension Schemes’ Actuary certifies relates to FB Pensionable UK Employees
plus, if payment is not made within 7 days of the due date in each month for
payment of contributions, Interest on the unpaid contributions for the period
from the due date for payment to the date of actual payment or the Transfer Date
if earlier (without prejudice to any such higher rate as may be enforceable by
the AD UK Pension Schemes);

 

  2.3.2 comply during the Transitional Period in all respects with all other
provisions of the AD UK Pension Schemes;

 

  2.3.3 not do, or omit to do, any act or thing during the Transitional Period
whereby the approval of the AD UK Pension Schemes as exempt approved schemes, or
their status as contracted out schemes, or (after 5 April 2006) their status as
registered schemes would or might be prejudiced; and

 

  2.3.4 not exercise any power, right or discretion conferred on the Employing
FB Company by the AD UK Pension Schemes during the Transitional Period other
than on such terms (whether as to the payment of additional contributions or
otherwise) as PR may reasonably agree, except that where the Actuarial
Assumptions make an allowance for the exercise of such powers by such
participating companies in the AD UK Pension Schemes, this provision shall not
operate to prevent such exercise to the extent that any consequential additional
cost to the AD UK Pension Schemes falls within the normal parameters assumed for
the purposes of the relevant valuation to which the Actuarial Assumptions apply.

 

2.4 PR and FB shall comply with such formalities as shall be necessary to ensure
that a contracting out certificate is retained by or (as the case may be) issued
to the Employing FB Company in respect of its participation in the AD UK Pension
Schemes during the Transitional Period and, in particular, shall arrange for the
issue to the FB Pensionable UK Employees of any appropriate statutory notices of
explanation.

 

2.5 PR shall ensure that contributions equal to the difference between the
amounts specified in paragraph 2.3.1 of this Part A of Schedule 6 and the
amounts required from participating employers under the Schedule of
Contributions of the relevant AD UK Pension Scheme are made to the trustees of
the relevant AD UK Pension Scheme (on behalf of the relevant FB Employing
Company) by the due dates under that Schedule of Contributions.

 

3. FB UK Pension Scheme

 

3.1 FB shall, or (if it is not the Employing FB Company) FB shall procure that
the Employing FB Company shall on or before the Transfer Date establish,
nominate or become a party to a retirement benefits scheme which:-

 

  3.1.1 is approved or capable of approval as an exempt approved scheme under
Chapter I of Part XIV of the Taxes Act 1988 or (in relation to the period after
5 April 2006) as a registered scheme; and

 

  3.1.2 shall contain such provisions as are necessary to enable it to accept
from the AD UK Pension Schemes amounts in respect of the accrued rights of the
FB Transferring UK Members to guaranteed minimum pensions and Protected Rights
in respect of their period of membership of the AD UK Pension Schemes if so
applicable to them;

--------------------------------------------------------------------------------

3.2 FB shall, or (if it is not the Employing FB Company) FB shall procure that
the Employing FB Company shall procure that such of the FB Pensionable UK
Employees as have not ceased to be in the employment of the Employing FB
Company, or to accrue benefits under the AD UK Pension Schemes on or before the
end of the Transitional Period, will be offered membership of the FB UK Pension
Scheme with effect on and from the Transfer Date and will be offered the
opportunity to transfer their accrued rights from the AD UK Pension Schemes to
the FB UK Pension Scheme, in each case on the basis described in paragraph 3.2
of this Part A of Schedule 6.

 

3.3 Subject to receipt of the Transfer Amount, FB shall (or, if it is not the
Employing FB Company, FB shall procure that the Employing FB Company shall)
procure that the FB UK Pension Scheme will provide in respect of each FB
Transferring UK Member, in respect of pensionable service before the Transfer
Date, benefits which are no less favourable (on the basis of the Actuarial
Assumptions) than the benefits accruing in respect of them under the AD UK
Pension Schemes (with linkage to eventual final pensionable pay retained in
respect of such completed pensionable service) except to the extent that changes
are necessary due to the effect of any loss of transitional relief (due to the
transfer) under the pensions provisions of the Finance Act 2004.

 

3.4 PR and FB hereby agree to co-operate with regard to the provisions of the
Pension Schemes Act 1993 so that, in respect of such of the FB Transferring UK
Members as are contracted out, contracted out service as between the AD UK
Pension Schemes and the FB UK Pension Scheme is continuous.

 

4. Computation of Transfer Amount

 

4.1 FB shall, not later than 60 days after the Transfer Date, arrange for the AD
UK Pension Schemes’ Actuary to receive the names of the FB Transferring UK
Members.

 

4.2 FB shall procure that all such data and other information as the AD UK
Pension Schemes’ Actuary may reasonably request, for the purpose of computing
the Transfer Amount, shall be made available promptly to such Actuary.

 

4.3 FB shall procure that all data and information shall be true, complete and
accurate in all material respects and shall not omit anything which the AD UK
Pension Schemes’ Actuary notifies FB is material to the calculation of the
Transfer Amount.

 

4.4 PR shall use its reasonable endeavours to procure that the Transfer Amount
is calculated within 90 days after receipt of all information requested pursuant
to paragraph 4.2 of this Part A of Schedule 6. FB acknowledges that PR’s powers
in this respect are likely to be limited to be making one or more requests to
the AD UK Pension Schemes’ Actuary to complete the calculation within this
timescale.

 

4.5 The FB Actuary and PR’s Actuary shall, within 60 days after receipt of
notification by the AD UK Pension Schemes’ Actuary of the amount of the Transfer
Amount together with any such additional data which the FB Actuary or PR’s
Actuary reasonably request, separately inform the AD UK Pension Schemes’ Actuary
in writing whether or not they agree that no mathematical errors have been made
in the calculation of the Transfer Amount, and failing such agreement the Joint
Actuaries shall consult with a view to, firstly, agreeing such calculation
within a further 30 days, and secondly, persuading the AD UK Pension Schemes’
Actuary to make the necessary adjustment to the Transfer Amount.

 

4.6 In the event that the Joint Actuaries are unable to agree the calculation of
the Transfer Amount within the time limits set out in this paragraph 4, they
shall continue to try to reach agreement but either PR or FB may require that an
independent Actuary is appointed jointly and, failing agreement on such
appointment, an independent Actuary shall be nominated by the president for the
time being of the Institute of Actuaries (at the instance of the party first
applying to him) who shall determine whether the computation is mathematically
correct and who shall notify his determination to the Joint Actuaries and to the
AD UK Pension Schemes’ Actuary in writing.

--------------------------------------------------------------------------------

4.7 The Actuary referred to in paragraph 4.6 of this Part A of Schedule 6 shall
act as an expert and not as an arbitrator and his costs shall be borne equally
by PR and FB.

 

4.8 Once the above process has been completed, PR and FB shall each use their
respective reasonable endeavours to procure that the AD UK Pension Scheme makes
available the Transfer Amount so determined, Provided that neither PR nor FB
shall be under any obligation to make any payment to or in respect of the AD UK
Pension Schemes to increase the amount otherwise made available for transfer.

 

4.9 It is the intention of both parties that the Transfer Amount will be
calculated by assessing the value of the relevant liabilities, using the
Actuarial Assumptions and based on pensionable service up to, and pensionable
pay at, the Transfer Date, with the resulting figure being multiplied by the
Funding Percentage to produce the Transfer Amount. PR shall cause the principal
company of the relevant AD UK Pension Scheme to give such directions to the
trustees of the AD UK Pension Schemes as (a) may be required under the trust
deed and rules of the relevant AD UK Pension Scheme to give effect to the mutual
intention of the parties; and (b) are in the power of that principal company
under those trust deeds and rules.

 

5. Payment of the Transfer Amount

 

5.1 PR’s obligations under this paragraph are conditional upon FB’s obligations
in this Part A of this Schedule having been duly performed.

 

5.2 Subject to paragraph 5.1 of this Part A of Schedule 6 and to the written
consent of the Inland Revenue where necessary (which FB undertakes to use its
reasonable endeavours to obtain), PR shall (subject to the Proviso to paragraph
4.8 of this Part A of Schedule 6) use its reasonable endeavours to procure that
on the Payment Date the AD UK Pension Schemes shall pay to the FB UK Pension
Scheme such assets of mid-market value as the AD UK Pension Schemes may select
or a combination of assets and cash, or solely cash, equal to the value of the
Transfer Amount as reasonably adjusted in respect of investment performance
(positive or negative) for the period from the Transfer Date to the day before
the Payment Date.

 

6. Voluntary Fund

 

6.1 Notwithstanding the preceding provisions of this Schedule, if within the AD
UK Pension Schemes there is a fund comprising additional voluntary
contributions, or investments or money representing the same, and any income
derived from them in respect of which the entitlements of the members who have
paid them are not related to final pensionable earnings (however defined), but
are based on the respective parts of such fund which are attributable to them,
then such fund and the benefits payable from it, and the contributions payable
to it, and any transfer payments made from it, shall be disregarded for all the
preceding provisions of this Part A of Schedule 6, except paragraph 2.3.1.

 

6.2 PR shall nevertheless use all reasonable endeavours to procure that the part
of such fund, which is attributable to the FB Transferring UK Members in
accordance with the provisions of the AD UK Pension Schemes, is transferred to
the FB UK Pension Scheme.

 

7. Non-transferring FB Pensionable UK Employees

 

7.1 In respect of any FB Pensionable UK Employees in relation to whom no
transfer of past service entitlements under the AD UK Pension Schemes in fact
takes place to the FB UK Pension Scheme on or before the Payment Date, the
Support Arrangements shall be implemented in respect of each such FB Pensionable
UK Employee.

 

8. Variations

 

8.1

The provisions of paragraphs 2 to 7 inclusive of this Part A of Schedule 6
describe the arrangements which the parties regard as their preferred mechanism
for implementing a split of the AD UK Pension Schemes. The Parties shall use
their respective best endeavours

--------------------------------------------------------------------------------

 

to ensure that that mechanism is implemented. The Parties recognise, however,
that one other situation may arise or may otherwise be available, as follows:-

 

  8.1.1. The No-Participation Period Situation

 

This situation arises if the AD Trustees, or the Inland Revenue, do not permit
an Employing FB Company to participate in the AD UK Pension Schemes during the
Transitional Period (and in the event that, where there is more than one
Employing FB Company, such absence of permission means that the majority (by
number) of FB Pensionable UK Employees are unable to continue to participate as
active members under the AD UK Pension Schemes, the Parties shall not, unless
they agree otherwise, seek to operate continued participation in relation to any
other Employing FB Companies).

 

8.2 In the event that the No-Participation Period Situation occurs (for which
purpose the failure of the AD Trustees to have agreed on the relevant
participation within 90 days of the Effective Date shall be deemed to constitute
non-agreement to such participation), this Part A of this Schedule 6 (including
the Support Arrangements and the provisions of paragraph 9.2) shall have effect
in relation to the FB UK Pensionable Employees employed by the relevant
Employing FB Company as if the Transfer Date was the same as the Effective Date,
but so that for the purposes of paragraph 9.2 it shall be assumed (if not a
fact) that each such Employing FB Company had ceased to participate in the AD UK
Pension Schemes at the Effective Date.

 

9. Indemnities

 

9.1 FB shall indemnify PR, its Affiliates and the AD UK Pension Schemes
respectively (but so that there shall be no double indemnity whereby PR or its
Affiliates and the AD UK Pension Schemes shall each make a recovery in relation
to the same economic loss unless the aggregate of such recoveries shall not
exceed the amount of such economic loss) in respect of all actions, proceedings,
claims and demands (and all related costs and expenses) arising out of FB’s
failure to comply with the provisions of this Part A of this Schedule or which
may be brought or made by any FB Pensionable UK Employee against PR, any of its
Affiliates or the AD UK Pension Schemes, in respect of such parts of that FB
Pensionable UK Employee’s contract of employment as relate to an occupational
pension scheme, or in respect of any such right, powers and duties and
liabilities as are mentioned in Regulation 7 of the Transfer of Undertakings
(Protection of Employment) Regulations 1981.

 

9.2

It is noted that the cessation of participation of the Employing FB Companies in
the AD UK Pension Schemes as regards continued accrual of pensionable service by
their employees, or the cessation of such participation by PR or any of its
Affiliates as a result of such company ceasing to employ FB Employees by reason
of their transfer to an Employing FB Company, may cause one or more termination
debts to arise under section 75 of the Pensions Act 1995 (as from time to time
amended) or under any other statutory provision or regulation governing the
cessation of participation of an employer under an occupational pension scheme
(a “Termination Debt”). Subject as follows, without prejudice to the obligations
of any such companies to the AD UK Pension Schemes, FB shall pay and shall
indemnify PR and its Affiliates against such part of that Termination Debt as
relates to the FB Pensionable UK Employees and PR shall pay and shall indemnify
FB and its Affiliates against that part of the Termination Debt as relates to
members of the AD UK Pension Schemes who are not FB Pensionable UK Employees.
For the purpose of FB’s indemnity in favour of PR and its Affiliates, it shall
be assumed (if not a fact) that where any termination of participation (and any
assumed termination of participation under paragraph 8.2 of this Part A of
Schedule 6) gives rise to a Termination Debt, that Termination Debt will be
calculated on the ‘buy-out’ basis proposed by the UK Government, the debt being
assessed (in the absence of a statutory formula being available) on the basis of
the cost which would arise if all of the liabilities under the AD UK Pension
Schemes attributable to the FB Employing Company’s obligations to the FB
Pensionable UK Employees which are not

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transferred to the FB UK Pension Scheme or to any other pension arrangement
immediately after the date of such termination, were required to be secured at
that time by the purchase of annuities from one or more reputable UK insurers
offering a market in such business at the relevant time. PR shall take such
steps (including, where appropriate, a commitment to absorb such liabilities
under the AD UK Pension Schemes) as may be required (but as would not on any
reasonable basis be considered as likely to give rise to the possibility of a
contribution notice being issued under section 38 of the Pensions Act 2004) in
order to ensure that neither FB nor its Affiliates bear the financial burden of
any part of such actual or assumed Termination Debt which may relate to
liabilities in respect of persons who are not FB Pensionable UK Employees, with
a view to causing any such part of such Termination Debt to be reduced to zero
to the extent practicable, and any such reduction shall reduce the amount which
PR needs to pay or indemnify under this paragraph. To the extent that any such
Termination Debt is not an actual debt which is discharged by payment to the AD
UK Pension Schemes for the purposes of the indemnity described in the second
sentence of this paragraph 9.2, PR shall be deemed (if not a fact) to have
suffered financial loss to that extent. Any payments to PR or its Affiliates by
operation of such indemnity shall be made subject to paragraph 9.5 of this Part
A of Schedule 6. This paragraph 9.2 shall not give the AD Trustees any rights to
enforce any debt not available to them by law.

 

9.3 In the event that the AD UK Pension Schemes enter into wind-up before the
Transfer Date (which shall include the situation in which there has been a
cessation of pension accrual under the AD UK Pension Schemes in circumstances in
which the AD Trustees have the power to commence the winding-up of the AD UK
Pension Schemes but they have resolved to defer, or have otherwise deferred, the
commencement of such winding-up but only if a Termination Debt is thereby
triggered), FB shall pay to the trustees of the relevant AD UK Pension Scheme
(within 90 days of such time as the trustees crystallise the Termination Debt
and serve a notice of the Termination Debt on the relevant participating
company) that part of the Termination Debt (calculated on the basis specified in
paragraph 9.2) as relates to the FB Pensionable UK Employees and PR shall
indemnify FB and its Affiliates including the Employing FB Companies against any
additional amounts due from FB and its Affiliates including the Employing FB
Companies to the relevant AD UK Pension Scheme arising as a result of such
winding-up.

 

9.4 PR shall indemnify FB and its Affiliates (including the Employing FB
Companies) against any liabilities for members of the AD UK Pension Schemes, and
employees and former employees of any company within or formerly within the AD
Group who are not FB Pensionable UK Employees.

 

9.5 Where any payment in this Part A of Schedule 6 is expressed as being subject
to paragraph 9.5, the payment shall be made on a gross basis, but PR or the
relevant Affiliate of PR which receives the payment shall promptly account to FB
(by way of repayment) for any corporation tax relief which PR or that Affiliate
is confirmed by the Inland Revenue as being entitled to receive in respect of
the on-payment of that sum into the AD UK Pension Schemes, as and when PR or its
Affiliates as applicable is entitled to receive the economic benefit of such
relief (which PR or the Affiliate as applicable undertakes to use all reasonable
endeavours to obtain).

 

10. Clearances and assurance

 

10.1

The Parties shall use their respective reasonable endeavours to obtain one or
more clearance notices from the Pensions Regulator in relation to the pension
arrangements contemplated by this Agreement, to the extent that the Pensions
Regulator indicates that it has power or that it is necessary to issue such a
notice in relation to all or any part of the arrangements. The arrangements
proposed are conditional upon such clearance notices being obtained, but so that
the absence of a clearance notice in relation to one particular aspect of the
arrangements shall not cause the other aspects of the arrangements to be
prejudiced to the extent practicable. Such clearance must, (to the extent
aforesaid, but without prejudice to the generality of the foregoing), include
confirmation that in relation to the participation of

--------------------------------------------------------------------------------

 

the Employing FB Companies under the AD UK Pension Schemes, and generally in
relation to the proposals, no contribution notice or financial support direction
will be issued to FB or PR or to any of their Affiliates, which would require FB
or PR or any of their Affiliates to make any payment to the AD UK Pension
Schemes, to the extent that such a payment or contribution would exceed the
contributions which would reasonably be expected to have been required at the
relevant time to have been made by AD or their Affiliates in the event that the
transaction (including for this purpose the triggering of a section 75 debt in
the circumstances envisaged by paragraph 9.2 of this Part A of Schedule 6) did
not occur. In relation to the arrangements contemplated in relation to the
cessation of participation of the Employing FB Companies in the AD UK Pension
Schemes, PR and FB shall co-operate with a view to determining if it is
necessary or desirable to apply at or near the relevant time to seek clearance
in relation to any contribution notice which might otherwise be imposed on
either of them or on any of their Affiliates (including the relevant Employing
FB Companies) in relation to the arrangements so contemplated by this Schedule
6. If they do so determine, then they shall co-operate with a view to obtaining
such clearance.

 

10.2 PR reserves the right to require the securing of appropriate assurances
from the AD Trustees to the like effect as in paragraph 10.1 of this Part A of
Schedule 6 as a pre-condition to the transaction proceeding.

 

10.3 PR reserves the right to waive the condition referred to in paragraphs 10.1
and 10.2 of this Part A of Schedule 6, provided that such waiver would not have
an adverse financial effect on FB or any of its Affiliates.

 

11. Other situations

 

11.1 The foregoing provisions of this Part A of Schedule 6 set out the Parties’
intentions regarding the treatment of pensions issues relating to the AD UK
Pension Schemes, based on their mutual best assessment of the range of possible
situations which might arise. In the event that any situation arises in relation
to the AD UK Pension Schemes as a result of the matters dealt with by this
Agreement, or in particular as a direct or indirect consequence of the Effective
Date having occurred, and which has, or may have, a material adverse financial
impact on either or both Parties, the Parties shall co-operate to such extent as
may be reasonably practicable with a view to agreeing a course of action which
mitigates or removes such adverse impact, subject always to the provisions of
Clause 8 of the Agreement.

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Part B

 

UK Non-Main-Scheme Pension Arrangements and Non-UK Pension Arrangements

 

To the extent practicable, and subject to any information discovered prior to
announcement of the acquisition of AD by Bidco 2, the approach in Part A of this
Schedule shall be replicated in terms of the principles to be applied to the
treatment of liabilities associated with other defined benefit (i.e. non-defined
contribution) pension schemes relating to FB operations. To the extent that
practical or legal difficulties prevent such an outcome in relation to any such
schemes, PR and FB shall make financial adjustments between themselves to
reflect as closely as possible the same financial outcome as would have been
available had the intended “UK” solution been available.

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SCHEDULE 7

 

Part 1

Definitions and introduction

 

1 Definitions

 

In this Schedule, unless the context requires otherwise, the following words and
expressions have the following meanings and in the event of conflict the
definitions in this Schedule shall prevail over the definitions in Clause 1 of
this Agreement:

 

1.1 event: any event, act, omission or transaction and any reference to an event
occurring on or before a particular date shall include a reference to any event
which for tax purposes is deemed to have, or is treated or regarded as having,
occurred on or before that date;

 

1.2 Effective Date relief: means any relief of a Transferred Subsidiary arising
in respect of a FB Business as a consequence of an event occurring after the
Effective Date or in respect of a period commencing after the Effective Date;

 

1.3 Historic Tax Asset: any relief (other than a Current Tax Asset taken into
account in the calculation of Spirits and Wines Working Capital and other than
in respect of customs and excise duties) arising in respect of any period
ending, or as a consequence of an event occurring, on or before the Effective
Date;

 

1.4 Historic Tax Loss: any (i) loss; or (ii) other net deficit; or (iii) credit;
or (iv) repayment of Tax, which is available for set-off, deduction or credit
against income, profits or gains or against any Tax liability; (other than a
Current Tax Asset taken into account in the calculation of Spirits and Wines
Working Capital and other than in respect of customs and excise duties) arising
in respect of any period ending, or as a consequence of an event occurring, on
or before the Effective Date;

 

1.5 Historic Tax Liability: any Tax liability (other than a Current Tax
Liability taken into account in the calculation of Spirits and Wines Working
Capital) of a member of the AD Group arising in respect of any period ending or
any event occurring on or before the Effective Date other than in respect of
customs and excise duties;

 

1.6 local SPA: means a sale and purchase agreement entered into between PR or an
Affiliate of PR and FB or an Affiliate of FB in relation to the transfer of FB
Assets or shares in Transferred Subsidiaries pursuant to a Planned Transaction;

 

1.7 Planned Transaction Tax Costs: means:

 

  (i) any Tax liability of any member of the AD Group or any member of the PR
Group incurred directly in connection with the implementation and completion of
the Planned Transactions including, for the avoidance of doubt, any such Tax
liability of a Transferred Subsidiary incurred whilst it was a member of the AD
Group or the PR Group and any such Tax liability arising as a consequence of any
Transferred Subsidiary leaving a tax or fiscal group pursuant to a Proposed
Transfer;

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but excluding:

 

  (a) any Final Step Transaction Costs

 

  (b) any Bid Structure Transaction Costs

 

  (c) any Tax liability arising as a result of any disposal of FB Assets or
Transferred Subsidiaries after a relevant Completion Date;

 

  (d) any Tax liability referred to in Clause 3.25.1;

 

  (e) for the avoidance of doubt, any Tax liability arising from any elimination
of or reduction in the amount of reliefs or the tax basis in any asset which
are, or would otherwise have been, available after a relevant Completion Date;
and

 

  (f) for the avoidance of doubt, any Tax liability of FB or any Affiliate of FB
(including any such liability arising from any transaction within Clause 3.19)
but not including any Tax liability of a Transferred Subsidiary incurred whilst
it was a member of the AD Group or the PR Group and any such Tax liability
arising as a consequence of any Transferred Subsidiary leaving a tax or fiscal
group pursuant to a Proposed Transfer.

 

  (ii) any liability to Tax incurred directly in connection with the transfer of
wrong pocket assets pursuant to Clause 4;

 

1.8 PR Effective Date relief: means any relief arising in respect of a PR
Business as a consequence of an event occurring after the Effective Date or in
respect of a period commencing after the Effective Date;

 

1.9 relief: includes any relief, loss, allowance, exemption, set-off, deduction
or credit in respect of any Tax or relevant to the computation of any income,
profits or gains for the purposes of any Tax, and any right to a payment or
repayment of Tax;

 

1.10 tax authority: any taxing or other authority competent to impose any Tax
liability;

 

1.11 Tax Loss: any (i) loss; or (ii) other net deficit; or (iii) credit; or (iv)
repayment of Tax, which is available for set-off, deduction or credit against
income, profits or gains or against any Tax liability; (other than a Current Tax
Asset taken into account in the calculation of Spirits and Wines Working Capital
and other than in respect of customs and excise duties);

 

1.12 transitional period: means the period beginning immediately after the
Effective Date and ending on a Completion Date;

 

1.13 References in this Schedule to payments shall be construed as payments to
give effect to the principles in this Schedule including payments that may be
made pursuant to local SPAs.

 

1.14 References to income, profits or gains earned, accrued or received include
income, profits or gains deemed to have been or treated or regarded as earned,
accrued or received for Tax purposes.

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1.15 Unless otherwise provided, any reference in this Schedule to a paragraph is
to a paragraph of this Schedule.

 

2 Local SPAs

 

2.1 The provisions of this Schedule apply to allocate Tax liabilities and Tax
assets arising in relation to the business and assets of AD between FB and PR.

 

2.2 In so far as this Schedule provides for a Tax liability to be for the
account of PR, that liability shall be treated as a PR Liability for the
purposes of this Agreement and in so far as this Schedule provides for a Tax
liability to be for the account of FB, that liability shall be treated as a FB
Liability for the purposes of this Agreement.

 

2.3 Clause 7.5.3 of this Agreement shall apply to limit the liability of PR or
FB (as the case may be) in respect of any Tax liability falling with paragraphs
3.1 or 3.2 of this Schedule.

 

2.4 The Parties agree that local SPAs shall contain provisions drafted in such
terms as are appropriate to the relevant jurisdiction and the local tax rules
and provisions for payments to be made to give effect to the principles set out
in the Schedule between PR or an Affiliate of PR, as vendor, and FB or an
Affiliate of FB, as purchaser by way of adjustment, to the maximum extent
permitted by law, to the purchase price for FB Assets or shares in Transferred
Subsidiaries.

 

2.5 In the event that, in respect of any Transferred Subsidiary, a local SPA
including provisions intended to reflect the principles set out in this Schedule
is not executed, PR shall indemnify FB (on the basis set out in Clause 1.3.10 of
this Agreement and taking into account the provisions of paragraph 9.2 of this
Schedule) in respect of any Tax liability or other payments that are for the
account of PR pursuant to this Schedule and FB shall indemnify PR (on the basis
set out in Clause 1.3.10 of this Agreement and taking into account the
provisions of paragraph 9.2 of this Schedule) in respect of any Tax liability or
other payments that are for the account of FB pursuant to this Schedule.

 

2.6 The local SPAs shall also contain provisions dealing with other tax
separation and other relevant issues as appropriate for each relevant
jurisdiction, including in particular:

 

2.6.1 provision for PR, FB and their respective Affiliates to take all necessary
steps to remove any Transferred Subsidiary from the vendor’s Tax group or any
relevant AD Group tax group or relevant PR Group tax group so as to ensure,
inter alia, that any Transferred Subsidiary ceases to have any joint liability
for any Tax liability of any other company;

 

2.6.2 provision for any Transferred Subsidiary to cease to have any liability to
make a payment or repayment to any member of the AD Group or the PR Group in
respect of any surrender of reliefs, save where the relevant reliefs are used in
respect of any Tax liability which is, or would otherwise be, a FB Liability.

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Part 2

Allocation of Tax Liabilities and Tax Assets

 

3 Historic Tax Liabilities

 

3.1 Subject to paragraphs 3.3 to 3.5 below, Historic Tax Liabilities shall be
for the account of PR.

 

3.2 Subject to paragraph 3.8 below, Historic Tax Liabilities of the FB
Distribution Businesses shall be for the account of FB.

 

3.3 For the purposes of this Schedule the amount of any payment required to be
made in respect of any Tax liability shall, where the Tax liability is an actual
payment of tax, be equal to the relevant amount of Tax and, where the liability
to make a payment arises from the use or set-off of any relief, the amount of
any Tax liability saved as a result of the use or set-off of that liability and
in calculating the amount of any payment, where the business of a Transferred
Subsidiary comprises both a PR Business and a FB Business, or where the
Effective Date is not the end of an accounting period, an equitable
apportionment of liabilities having regard to all of the relevant circumstances,
the matter giving rise to the liability and the extent to which the circumstance
or event giving rise to the Tax liability relates to a PR Business or to a FB
Business shall be made to calculate Historic Tax Liabilities for the account of
PR pursuant to paragraph 3.1 above and Historic Tax Liabilities for the account
of FB pursuant to paragraph 3.2 above.

 

3.4 Subject to paragraph 9.3 below, the due date for the making of any payment
in respect of any Tax liability shall be: (i) the date seven Business Days prior
to the latest date on which the relevant Tax can be paid to the relevant tax
authority in order to avoid a liability to interest or penalties accruing; or
(ii) in the case of an unpaid Tax liability which is the subject of a dispute
with any relevant tax authority, provided that PR has indemnified FB against any
interest and penalties which will or may become due to any relevant tax
authority in the event of late payment of such Tax liability, the date seven
Business Days following the date on which the amount of such Tax liability is
finally settled or otherwise determined or, if later, the date until which
payment is, with the agreement of any relevant tax authority, deferred. If any
payment is not made by the relevant due date stated above, then the amount of
the relevant indemnity payment shall be increased to include interest on such
payment from that due date until the date when the payment is actually made
calculated on a daily basis at one per cent. above the base rate of Lloyds TSB
Bank plc.

 

3.5 PR shall not be liable to make any payment pursuant to paragraph 3.1 in
respect of any Historic Tax Liability:

 

3.5.1 to the extent that the Tax liability would not have arisen but for a
voluntary act, omission or transaction (other than an act, omission, or
transaction made in the Ordinary Course of Business or entered into pursuant to
a legally binding commitment created on or before the Effective Date or carried
out pursuant to an obligation imposed by any law or requirement having the force
of law or which takes place in accordance with the terms of this Agreement or
any document executed pursuant to this Agreement) on the part of or carried out
by FB or any Affiliate of FB after the relevant Completion Date;

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3.5.2 to the extent that the Tax liability arises or is increased as a result of
any Transferred Subsidiary failing to submit returns and computations required
to be made by it or not submitting such returns and computations within the
appropriate time limits or submitting such returns and computations otherwise
then on a proper basis, in each case, after the relevant Completion Date
provided that this limitation shall not apply where FB diligently attends to the
tax compliance obligations of the Transferred Subsidiary, or procures that the
Transferred Subsidiary does so, but due to insufficient Tax records relating to
the relevant Transferred Subsidiary, does not know and could not reasonably have
known that any such failure or omission could impact on the relevant Historic
Tax Liability;

 

3.5.3 to the extent that any relief which is for the account of PR pursuant to
paragraph 7 below or is a relief of a member of the PR Group (which is not for
the account of FB pursuant to paragraph 7) and, in either case, is available or
is for no consideration made available to the Transferred Subsidiary to set
against or otherwise mitigate the Tax liability or would have been so available
but for a breach by FB or any Affiliate of FB of its obligations under paragraph
7 or any other provision of this Agreement;

 

3.5.4 to the extent that the Tax liability would not have arisen but for:

 

  3.5.4.1 the making of a claim, election, surrender or disclaimer, the giving
of a notice or consent, or the doing of any other act or thing under the
provisions of any enactment or regulation relating to Tax, after the relevant
Completion Date by FB or any Affiliate of FB;

 

  3.5.4.2 the failure or omission on the part of FB or any Affiliate of FB to
make any such claim, election, surrender or disclaimer after the relevant
Completion Date;

 

provided that this limitation shall not apply where FB diligently attends to the
tax compliance obligations of the Transferred Subsidiary, or procures that the
Transferred Subsidiary does so, but due to insufficient Tax records relating to
the relevant Transferred Subsidiary does not know and could not reasonably have
known that any such action or failure or omission could impact on the relevant
Historic Tax Liability;

 

3.5.5 to the extent that the Tax liability arises or is increased as a result of
a failure by FB or any Affiliate of FB to comply with its obligations pursuant
to Schedule 2 in respect of the implementation of any of the Planned
Transactions;

 

3.5.6 to the extent that FB or any Affiliate of FB has recovered any amount
(less the amount of any costs or expenses incurred in obtaining it) in respect
of that Tax liability from any person other than FB or an Affiliate of FB or any
Transferred Subsidiary.

 

3.6 The limitations in paragraph 3.5 above shall also apply to any liability of
PR pursuant to paragraph 6.3 in respect of any Planned Transaction Tax Costs
arising in a Transferred Subsidiary provided that the provisions of the relevant
sub-paragraph of paragraph 3.5 shall not apply to restrict PR’s liability in
respect of any Planned Transaction Tax Costs to the extent that PR is relying
for the purposes of the relevant sub-paragraph:

 

3.6.1 on the failure by FB or any Affiliate of FB to take any action which is
unlawful;

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3.6.2 on the failure by FB or any Affiliate of FB to take any action in relation
to the conduct of the Tax affairs of any Transferred Subsidiary (including the
failure to make any claim, election, surrender or disclaimer) the relevance of
which FB could not reasonably have been expected to be aware unless PR has
provided to FB in writing within a reasonable time period reasonable details of
such action;

 

3.6.3 on any action taken by FB or any Affiliate of FB at the request of PR or
any Affiliate of PR in relation to the conduct of the Tax affairs of any
Transferred Subsidiary which is not on the proper basis;

 

3.6.4 on any action taken by FB or any Affiliate of FB in the ordinary course of
the conduct of the Tax affairs of any Transferred Subsidiary (including the
making of any claim, election, surrender or disclaimer) the relevance of which
FB could not reasonably have been expected to be aware unless PR has notified FB
in writing within a reasonable time period that such action may give rise to a
Planned Transaction Tax Cost.

 

3.7 Where payment has been made by PR or any member of the PR Group pursuant to
this Schedule in respect of any liability to Tax and FB or any Affiliate of FB
is entitled to recover or recovers an amount in respect of that liability to Tax
from any person other than FB or an Affiliate of FB or any Transferred
Subsidiary, then FB shall as soon as reasonably practicable notify PR of such
entitlement or recovery and, where recovery has not been effected at the date of
notification, shall (if requested by PR and at PR’s cost and expense) take, or
cause the relevant Affiliate to take, such actions as PR shall reasonably
request to enforce such recovery against the person in question (keeping PR
fully informed of the progress of any action taken). If FB subsequently recovers
any such amount then FB shall, as soon as reasonably practicable, inform PR and
shall pay to PR the amount of any payments so received, after deduction from it
of an amount equal to any costs and expenses incurred in obtaining it.

 

3.8 Paragraphs 3.5 and 3.7 above shall apply mutatis mutandis to FB’s liability
pursuant to paragraph 3.2 above in respect of any Tax liability.

 

3.9 PR shall not be liable in respect of a Planned Transaction Tax Cost arising
in a Transferred Subsidiary to the extent that:

 

3.9.1 PR provided, prior to the implementation of the Planned Transaction,
details of the steps proposed to be taken in the implementation of the proposed
Planned Transaction, including details of the Planned Transaction Tax Costs
which PR reasonably anticipates, having taken appropriate and competent advice
in all relevant jurisdictions, will or may arise as a result of the proposed
Planned Transaction; and

 

3.9.2 a material Planned Transaction Tax Cost is incurred which was not
identified by PR and which arises as a result of: (i) the tax position of FB or
any Affiliate of FB (other than the relevant Transferred Subsidiary), or (ii)
the impact on the tax position of the Transferred Subsidiary of any association
with FB or any Affiliate of FB arising from the tax position of FB or any
Affiliate of FB (“the Additional Tax”); and

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3.9.3 FB ought reasonably to have anticipated, on the basis of the information
provided by PR pursuant to paragraph 3.9.1 above and in the time available to it
that there was a material risk that the Additional Tax would arise; and

 

3.9.4 FB omitted to inform PR that it anticipated that there was a material risk
that the Additional Tax would arise; and

 

3.9.5 PR would not, acting reasonably, have undertaken the proposed Planned
Transaction or would, acting reasonably, have undertaken the proposed Planned
Transaction in a different form had it been aware of the Additional Tax.

 

4 Current Tax Liabilities and Current Tax Assets

 

4.1 No payment shall be made pursuant to this Schedule in respect of Current Tax
Liabilities or Current Tax Assets.

 

5 Tax Liabilities after the Effective Date

 

5.1 Subject to the provisions of this paragraph, Tax liabilities arising in
respect of FB Businesses (other than Planned Transaction Tax Costs) after the
Effective Date are for the account of FB and Tax Liabilities arising in respect
of PR Businesses after the Effective Date are for the account of PR.

 

5.2 Subject to paragraph 5.3, no payment shall be made pursuant to this Schedule
in respect of corporate income taxes on transactions in the ordinary course of
business whether of a FB Business or a PR Business for any transitional period
(whether in respect of an actual payment of Tax or the use of an Effective Date
relief or a PR Effective Date relief otherwise) where the profits of that
business are taken into account for purposes of any adjustment made pursuant to
Clause 9.5.3 or Clause 9.6 of this Agreement.

 

5.3 FB shall account to PR for any Tax liability that is borne by a member of
the PR Group (for example where FB or an Affiliate of FB fails to discharge a
liability for which it is primarily responsible) and that Tax liability is or
relates to corporate income taxes on transactions in the ordinary course of
business in any transitional period of a PR Business, the profits of which are
taken into account for purposes of any adjustment made pursuant to Clause 9.5.3
of this Agreement.

 

5.4 PR shall account to FB for any Tax liability that is borne by a member of
the FB Group (for example where PR or an Affiliate of PR fails to discharge a
liability for which it is primarily responsible) and that Tax liability is or
relates to corporate income taxes on transactions in the ordinary course of
business in any transitional period of a FB Business, the profits of which are
taken into account for purposes of any adjustment made pursuant to Clause 9.6 of
this Agreement.

 

5.5 No payment shall be made pursuant to this Schedule in respect of any
liability to tax arising on any interest, discount or premium taken into account
in the calculation of Transferred Net Debt.

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6 Other Tax Liabilities

 

6.1 Customs and excise duty liabilities whenever arising are for the account of
PR where they relate to PR Assets and for the account of FB where they relate to
FB Assets.

 

6.2 All Final Step Transaction Costs are for the account of FB.

 

6.3 All Planned Transaction Tax Costs are for the account of PR.

 

6.4 All Bid Structure Transaction Costs shall be split between FB and PR as
follows:

 

6.4.1 FB shall pay the FB Funding Percentage of the Bid Structure Transaction
Costs; and

 

6.4.2 PR shall pay the PR Funding Percentage of the Bid Structure Transaction
Costs.

 

6.5 Any Tax liability arising on the disposal of an Elected Asset pursuant to
the Transaction Cooperation Agreement shall be split between PR and FB so that
PR shall bear such tax liability up to the amount of the Planned Transaction Tax
Costs which would have been incurred had the relevant Elected Assets been
transferred to FB or an Affiliate of FB pursuant to a Planned Transaction and FB
shall bear the balance of any such Tax liability.

 

7 Other Tax Assets

 

7.1 All Historic Tax Losses (other than Historic Tax Losses that form part of
the assets of the FB Distribution Businesses) that form part of the assets of
any Transferred Subsidiary as at the relevant Completion Date or which are
transferred to FB or any Affiliate of FB pursuant to any Planned Transaction are
for the account of PR. FB shall pay PR in respect of any such Historic Tax
Losses in accordance with paragraph 7.3 below.

 

7.2 To the extent that: (i) financing costs that accrue after the Effective Date
in respect of debt incurred by PR or any Affiliate of PR (and where the cost is
not borne by FB or any Affiliate of FB or any Transferred Subsidiary) give rise
to a tax benefit to FB or any Affiliate of FB or any Transferred Subsidiary; or
(ii) reliefs arising from any Planned Transaction; give rise to Tax Losses that
form part of the assets of any Transferred Subsidiary as at the relevant
Completion Date or which are transferred to FB or any Affiliate of FB pursuant
to any Planned Transaction, such Tax Losses shall be for the account of PR. FB
shall pay PR in respect of any such Tax Losses in accordance with paragraph 7.3
below. Subject to PR’s rights under Schedule 2, for the avoidance of doubt, FB
shall not be prevented from using financing costs in respect of debt advanced by
FB to shelter profits of the FB Businesses as it sees fit. For the avoidance of
doubt, no payment shall be made pursuant to this Schedule in respect of
financing costs that are taken into account in the calculation of Transferred
Net Debt.

 

7.3

Where any liability to make a payment of Tax of any Transferred Subsidiary or
any other member of the FB Group is reduced as a result of the utilisation of
any Historic Tax Losses which are for the account of PR pursuant to paragraph
7.1 above or any Tax Losses which are for the account of PR pursuant to
paragraph 7.2 above, FB shall make a payment to PR in an amount equal to the
relevant reduction in tax within seven business days of the date of the payment
of tax

--------------------------------------------------------------------------------

 

which was reduced and if any payment is not made by the due date stated above,
then the amount of the relevant payment shall be increased to include interest
on such payment from that due date until the date when the payment is actually
made calculated on a daily basis at the rate of one per cent. above the base
rate of Lloyds TSB Bank plc. The Parties agree to discuss in due course whether,
as an alternative to the provisions of the first sentence of this paragraph, to
deal with payments contemplated by paragraphs 7.1 and 7.2 above by a single
payment calculated by reference to the net present value of such Historic Tax
Assets and reliefs on the Completion Date or other appropriate date to be
agreed.

 

7.4 PR shall be entitled to use all: (i) Historic Tax Assets (other than
Historic Tax Assets that form part of the assets of the FB Distribution
Businesses and save to the extent that such Historic Tax Assets comprise
Historic Tax Losses which have been the subject of payment made pursuant to
paragraph 7.3); and (ii) Tax Losses which are for the account of PR pursuant to
paragraph 7.2 above save to the extent that they comprise Tax Losses which have
been the subject of payment made pursuant to paragraph 7.3; to the maximum
extent possible (and including, without limitation, by way of group relief,
consortium relief or tax consolidation) to reduce or eliminate: (i) any
liability to Tax for which PR would otherwise be for the account of PR pursuant
to this Schedule (in which case no payment shall be due in respect of the
utilisation of such Historic Tax Assets or Tax Losses); or (ii) any other
liabilities to Tax of any member of the PR Group. FB shall and shall procure
that each Affiliate of FB shall, enter into any claims, elections, surrenders or
notices that may be necessary to give effect to this paragraph.

 

7.5 PR shall be entitled to: (i) all repayments of Tax arising in respect of the
PR Businesses; and (ii) all repayments of Tax arising in respect of the FB
Businesses: (a) in respect of any period ending on or before the Effective Date
save to the extent that such repayment arises from the utilisation of Historic
Tax Assets which have been the subject of payment made pursuant to paragraph 7.3
or Effective Date Reliefs; and (b) which arise as a result of the utilisation of
Tax Losses which are for the account of PR pursuant to paragraph 7.2 above, save
to the extent that they have been the subject of payment made pursuant to
paragraph 7.3. FB shall account to PR for all such repayments of Tax received by
FB or any Affiliate of FB. If and to the extent that any right to repayment of
Tax is set off against any liability to Tax which is for the account of FB
pursuant to this Schedule, FB shall account to PR in respect of that repayment
of Tax in the same manner as if the repayment had been received by FB or any
Affiliate of FB.

 

7.6 If and to the extent that a liability to Tax which would otherwise be for
the account of PR pursuant to this Schedule is reduced or eliminated by the
utilisation of an Effective Date relief, PR shall account to FB in respect of
that Tax liability in the same manner as if FB or an Affiliate of FB had paid
that liability.

 

7.7 If and to the extent that a liability to Tax which would otherwise be for
the account of FB pursuant to this Schedule is reduced or eliminated by the
utilisation of an Historic Tax Asset (other than an Historic Tax Asset that
forms part of the assets of the FB Distribution Businesses or has been used by
PR pursuant to paragraph 7.4 and save to the extent that such Historic Tax Asset
comprises Historic Tax Losses which have been the subject of payment made
pursuant to paragraph 7.3) or a PR Effective Date relief, FB shall account to PR
in respect of that Tax liability in the same manner as if PR or an Affiliate of
PR had paid that liability.

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8 Tax Affairs and Tax Contests

 

8.1 Following the relevant Completion Date, FB shall, subject to the provisions
of this paragraph, be responsible for all the outstanding compliance matters
relating to Tax affairs of the Transferred Subsidiary.

 

8.2 Subject to PR’s rights under Schedule 2 and paragraph 8.3 below and FB’s
rights under paragraph 8.6 below, PR and FB agree to appoint an international
firm of tax accountants to handle compliance matters relating to the Tax affairs
of any Transferred Subsidiary for any period that includes all or part of a
transitional period. The terms of appointment of the firm of accountants shall
be agreed by the Supervisory Committee.

 

8.3 PR shall, and shall procure that the AD Group, give FB or their agents all
reasonable assistance to enable FB to conduct the outstanding Tax affairs of any
Transferred Subsidiary as set out in paragraph 8.1 above.

 

8.4 Upon FB or any Affiliate of FB becoming aware of any claim by any Tax
authority or other person which may give rise to a PR Liability under this
Schedule, FB shall procure that the relevant Transferred Subsidiary will as soon
as reasonably practicable give notice of the claim to PR. FB shall and shall
procure that an Affiliate of FB shall at all times act reasonably in relation to
such claim and will not admit, compromise or settle such claim without PR’s
express written consent and shall keep PR reasonably informed of the progress of
any claim and provide PR with copies of all material correspondence in relation
to such claim. FB shall procure, at PR’s cost and expense, that the relevant
Transferred Subsidiary will take such action as PR may direct to avoid, resist,
appeal or compromise the claim. At any time PR may undertake, at PR’s own cost
and expense, the conduct of matters arising from the claim provided that such
action is lawful.

 

8.5 If PR does take over conduct of matters arising from any claim pursuant to
paragraph 8.4 above, then PR shall not take any action in relation to such
conduct which is unlawful or where any potential adverse impact on the business
of the Transferred Subsidiary is disproportionate having regard to the amount of
Tax at stake.

 

8.6 Paragraphs 8.3 and 8.4 shall apply, mutatis mutandis, to any claim by any
tax authority in respect of any member of the PR Group which may give rise to a
FB Liability under this Schedule in respect of any FB Distribution Business.

 

8.7 PR agrees, so far as is lawful:

 

8.7.1 to procure that Bidco 2 makes within relevant time limits an election
under section 338 of the US IRS Code of 1986 (the “Code”) to treat the
acquisition of AD pursuant to the Scheme as a deemed acquisition of assets (such
election to exclude any US companies within the AD Group); and

 

8.7.2 in relation to any Transferred Subsidiary that is a US company, to make a
joint election within section 338(h)(10) of the Code to treat the acquisition as
a deemed acquisition of assets,

 

provided, in either case, that PR shall not be required to make any such
election or procure the making of any such election that may, in its reasonable
opinion,

--------------------------------------------------------------------------------

give rise to a material tax cost to PR or any Affiliate of PR or otherwise be
prejudicial to its interests.

 

8.8 PR agrees to consider, in good faith, any request by FB that the relevant
vendor and any other relevant entity shall enter into any tax election required
by FB in relation to the transfer of any FB Asset or shares in any Transferred
Subsidiary provided that PR shall be under no obligation to accede to such
request.

 

9 Payments

 

9.1 Any payments (including payments in respect of non-tax items) pursuant to
this Agreement will to the maximum extent permitted by law be made by way of
adjustment to purchase prices under local SPAs.

 

9.2 This paragraph is subject to the provisions of Clause 20.14 of the
Agreement. In the event that any relevant tax authority contends that any
payment pursuant to any of Clauses 3.17, 3.18, 4.5, 7.4.1.2, 7.4.1.3, 7.4.3.2,
7.4.3.3, 7.4.6.7, 7.5.1, 7.5.2, 7.6, 10.1.2, 10.1.11, 10.1.12, 10.1.13 and
11.4.3 of this Agreement or paragraphs 9.1, 9.2 (subject to the prior
application of paragraph 9.5) or 9.4 of Schedule 6 or any of the provisions of
this Schedule, or any claim for breach of warranty pursuant to Clause 17 of this
Agreement or pursuant to any guarantee given in Clause 18 of this Agreement is
subject to any deduction of or withholding of, or in respect of, Tax, or that
any payment is subject to tax in the hands of the recipient or would be so
subject but for the utilisation of any tax relief which, in FB’s case, is an
Effective Date relief or which, in PR’s case, is either (i) a Historic Tax Asset
or other Tax Losses referred to in paragraph 7.4; or (ii) a PR Effective Date
relief; the recipient of such payment (the “Recipient”) shall notify the other
party (the “Payer”) without delay. The Recipient and the Payer will, to the
extent permitted by law, take the position that such payment is neither subject
to deduction or withholding nor subject to Tax in the hands of the Recipient and
will co-operate in making representations as to that position to the relevant
tax authority. In the event that the relevant tax authority finally determines
that it is so subject, the Payer shall be liable to pay to the Recipient such
further sums as shall be required to ensure that (after taking into account the
benefit of any deduction available to the Recipient in respect of any liability,
cost or expense which gave rise to the obligation to make a payment under this
Agreement) the net amount received by the Recipient will equal the full amount
which would have been received under the relevant provisions of this Schedule in
the absence of any such deduction, withholding or Tax liability (together with
any relevant amount in respect of interest pursuant to paragraph 3.4 to reflect
any delay in the payment of such amount).

 

9.3 If the right to receive any payment pursuant to any of the provisions
referred to in paragraph 9.2 above has been assigned to the Recipient pursuant
to Clause 19 of this Agreement, the Payer shall not be liable to pay any further
sums pursuant to paragraph 9.2 to the extent that such further sums would not
have been payable if the payment had been made to the person originally entitled
to receive it pursuant to the relevant provision of this Agreement.

 

9.4

Notwithstanding paragraph 3.4 above, other than in relation to any individual
payments under this Schedule which are more than $1m, PR shall be entitled to
require that the payments that are made pursuant to any local SPA shall be
determined by calculating a single net payment to be made at six monthly
intervals in respect of each fiscal period, on the sixth and twelve month

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anniversaries of the Effective Date (so as to include interest as provided for
in paragraphs 3.4 and 7.3).

 

9.5 If a Tax liability in respect of which any payment has been made pursuant to
this Schedule gives rise to a relief which has reduced or eliminated an actual
Tax liability of the recipient or any of its Affiliates whenever arising (other
than one for which the Payer is liable to make payment under this Schedule), the
Recipient will notify the Payer without delay and the amount of the actual
taxation liability which is eliminated or the amount by which it is reduced (in
either case a “Relevant Amount”) shall be dealt with as follows. The Relevant
Amount shall first be set-off against any payment then due from the Payer under
this Schedule; to the extent there is an excess, a refund shall be made to the
Payer of any previous payment or payments made by it under this Schedule and not
previously refunded under this sub-paragraph up to the amount of such excess;
and any remainder of such excess shall be carried forward and set-off against
any future payments which may become due from the Payer under this Schedule.

 

9.6 The Parties agree to discuss in due course a process for verifying that
appropriate payments have been made under this Schedule in respect of Tax
liabilities and reliefs.

--------------------------------------------------------------------------------

SCHEDULE 8

Callaway Intellectual Property

 

INTELLECTUAL PROPERTY – GROUP TRADEMARKS PORTFOLIO – CALLAWAY

 

Registered
Owner

--------------------------------------------------------------------------------

   Country

--------------------------------------------------------------------------------

   Trademark

--------------------------------------------------------------------------------

   Classes

--------------------------------------------------------------------------------

   App No/
App Date

--------------------------------------------------------------------------------

   Reg No/ Reg
Date

--------------------------------------------------------------------------------

   Status

--------------------------------------------------------------------------------

   Next Renewal

--------------------------------------------------------------------------------

AD Wines, USA    Global    callawaycoastal.biz    —      —      02955909-Biz
22.04.2002    REG    21.04.2009 AD Wines, USA    Global    callawaycoastal.com
   —      —      N/A
16.02.2000    REG    16.02.2009 AD Wines, USA    Global    callawaycoastal.info
   —      12.03.2002    D1547189-
LRMS
12.03.2002    REG    12.03.2010 AD Wines, USA    Global   
CALLAWAYCOASTALWINE.COM    —      —      N/A
24.02.2000    REG    24.02.2009 AD Wines, USA    Global   
CALLAWAYCOASTALWINES.COM    —      —      N/A
16.02.2000    REG    16.02.2009 AD Wines, USA    Global    CALLAWAYWINE.COM   
—      —      N/A
13.12.1995    REG    12.12.2005 AD Wines, USA    USA    callawaywine.us    —  
   23.04.2002    D1787248-US
23.04.2002    REG    23.04.2010 AD Wines, USA    USA    callaway-wine.us    —  
   23.04.2002    D1835930-US
24.04.2002    REG    23.04.2010 Callaway Vineyard & Winery    Argentina   
CALLAWAY    33    2419284
24.03.2003         PEN     

--------------------------------------------------------------------------------

INTELLECTUAL PROPERTY – GROUP TRADEMARKS PORTFOLIO – CALLAWAY

 

Registered
Owner

--------------------------------------------------------------------------------

   Country

--------------------------------------------------------------------------------

   Trademark

--------------------------------------------------------------------------------

   Classes

--------------------------------------------------------------------------------

   App No/App Date

--------------------------------------------------------------------------------

   Reg No/ Reg
Date

--------------------------------------------------------------------------------

   Status

--------------------------------------------------------------------------------

   Next Renewal

--------------------------------------------------------------------------------

Callaway Vineyard &
Winery    Bahamas    CALLAWAY    33    20939
11.09.1998    20939
11.09.1998    REG    11.09.2012 Callaway
Vineyard &
Winery    Brazil    CALLAWAY    33    823524701
19.01.2001         PEN      Callaway
Vineyard &
Winery    Canada    CALLAWAY    33    0508689
30.08.1983    TMA 325
428
03.04.1987    REG    03.04.2017 Callaway
Vineyard &
Winery    Canada    CALLAWAY VINEYARD DEVICE    33    0508691
30.08.1983    TMA 296
227
19.10.1984    REG    19.10.2014 Callaway
Vineyard &
Winery    Croatia    CALLAWAY    33    Z 200 304
50A
02.04.2003    Z 200 304
50
22.03.2004    REG    02.04.2013 Callaway
Vineyard &
Winery    Czech
Republic    CALLAWAY    33    189751
18.03.2003    259217
27.11.2003    REG    18.03.2013 Callaway
Vineyard &
Winery    Finland    CALLAWAY    33    T 200 300 695
17.03.2003         PEN      Callaway
Vineyard &
Winery    France    CALLAWAY    33    1239678
28.06.1983    1239678
28.06.1983    REG    27.06.2013 Callaway
Vineyard &
Winery    Germany    CALLAWAY    33    C32175/33WZ
04.06.1983    1061413
04.06.1983    REG    30.06.2013

--------------------------------------------------------------------------------

INTELLECTUAL PROPERTY – GROUP TRADEMARKS PORTFOLIO – CALLAWAY

 

Registered
Owner

--------------------------------------------------------------------------------

   Country

--------------------------------------------------------------------------------

  

Trademark

--------------------------------------------------------------------------------

   Classes

--------------------------------------------------------------------------------

   App No/App Date

--------------------------------------------------------------------------------

   Reg No/ Reg
Date

--------------------------------------------------------------------------------

   Status

--------------------------------------------------------------------------------

   Next Renewal

--------------------------------------------------------------------------------

Callaway
Vineyard &
Winery    Global    callawaywinestore.com              N/A
21.12.1999    REG    21.12.2006 Callaway
Vineyard &
Winery    Japan    CALLAWAY    33    9-178126
19.11.1997    4253118
19.03.1999    REG    19.03.2009 Callaway
Vineyard &
Winery    Singapore    CALLAWAY    33    T030349F
17.03.2003    TO30/03494F
17.03.2003    REG    17.03.2013 Callaway
Vineyard &
Winery    Slovenia    CALLAWAY    33    Z200370442
31.03.2003         PEN      Callaway
Vineyard &
Winery    Sweden    CALLAWAY    33    200301862
20.03.2003    363007
19.09.2003    REG    19.09.2013 Callaway
Vineyard &
Winery    UK    CALLAWAY    33    2177389
17.09.1998    2177389
17.09.1998    REG    17.09.2008 Callaway
Vineyard &
Winery    UK    CALLAWAY & VINEYARD LABEL    33    1235205
06.02.1985    1235205
06.02.1985    REG    06.02.2006 Callaway
Vineyard &
Winery    USA    CALLA-LEES    33    73/608731
10.07.1986    1439442
12.05.1987    REG    12.05.2007 Callaway
Vineyard &
Winery    USA    CALLAWAY    33    76/380910
12.03.2002    2734129
08.07.2003    REG    08.07.2013

--------------------------------------------------------------------------------

INTELLECTUAL PROPERTY – GROUP TRADEMARKS PORTFOLIO – CALLAWAY

 

Registered
Owner

--------------------------------------------------------------------------------

   Country

--------------------------------------------------------------------------------

   Trademark

--------------------------------------------------------------------------------

  Classes

--------------------------------------------------------------------------------

   App No/App Date

--------------------------------------------------------------------------------

   Reg No/ Reg
Date

--------------------------------------------------------------------------------

   Status

--------------------------------------------------------------------------------

   Next Renewal

--------------------------------------------------------------------------------

Callaway
Vineyard &
Winery    USA    CALLAWAY COASTAL   33    76/068959
14.06.2000    2511244
20.11.2001    REG    20.11.2011 Callaway
Vineyard &
Winery    USA    CALLAWAY COASTAL (WORDS AND DEVICE)   33    76/077240
23.06.2000    2574420
28.05.2002    REG    28.05.2012 Callaway
Vineyard &
Winery    USA    CALLAWAY STYLISED   33    73/069766
21.11.1975    1062412
29.03.1977    REG    29.03.2007

--------------------------------------------------------------------------------

SCHEDULE 9

“B” Share Rights

 

The Articles of Association of each member of the AD Group listed in Schedule 10
of the Framework Agreement and any other company in the AD Group which holds or
controls any material FB Asset or Business (referred to below as the “Company”)
will, subject to any legal limitations or constraints in the country of
incorporation of that Company, contain all of the rights to manage/operate the
FB Businesses/Assets as are set out in this Agreement and all of the rights to
veto actions/refuse consent to actions affecting the FB Assets/Businesses as are
set out in this Agreement, including (without limitation) the matters set out
below, and each of these rights will be set out in the articles of association
of the relevant Company. This is subject to the proviso that no ‘B’ Share shall
be issued in the capital of any Company in the AD Group which predominantly
conducts the MM Business during the MM Interim Period.

 

1 General Rights

 

1.1 Directors: FB Acquisition will have the right to appoint and remove
directors of the Company (the “FB Directors”).

 

1.2 Management: the FB Directors shall have the right to the exclusion of PR and
other Directors of the Company to manage and control the FB Businesses and FB
Assets to the extent that these are contained in the Company.

 

1.3 Capital: no rights on a return of assets on liquidation or otherwise other
than to repayment of nominal value of £1 per Company.

 

1.4 Income: no right to participate in the profits of the Company, or any other
economic rights.

 

1.5 Separate Class: the B Shares shall constitute a separate class of shares in
the capital of the relevant Company (no variation of class rights so as to
interfere with the enjoyment of the rights attaching to the B Shares shall be
permitted).

 

2 B Shareholder and B Director Veto Rights

 

For so long as FB Assets are held by the Company, FB Acquisition shall be
entitled to exercise the management and control of the FB Businesses to the
extent they are operated by the Company and in particular none of the following
events shall occur without the consent of the B Shareholder:

 

2.1 subject to paragraphs 2.2, 2.3, 2.4 and 2.5 below, any sale of any FB Assets
held by the Company (or any subsidiary of the Company which owns material (in
the context of the FB Businesses as a whole) FB Assets) other than (i) pursuant
to a Planned Transaction or (ii) pursuant to clause 5 of the Transaction
Co-operation Agreement;

 

2.2 any charging or encumbering of any FB Assets held by the Company (or any
subsidiary of the Company which owns material (in the context of the FB
Businesses as a whole) FB Assets) other than in the ordinary course of the
relevant FB Business;

 

2.3

any triggering of any change of control rights which are contained within any
material (in the context of the relevant FB Business or FB Asset) FB Contract to
which the Company (or any subsidiary of the Company which owns material (in

--------------------------------------------------------------------------------

 

the context of the FB Businesses as a whole) FB Assets) is a party unless the
same has been triggered as part of a Planned Transaction;

 

2.4 any entering into by the Company of any transaction which is reasonably
likely to endanger the solvency of any member of the AD Group which will
continue to hold material (in the context of the relevant FB Business) FB Assets
for a material period following the completion of such transaction;

 

2.5 any act that would have a material and adverse effect on the capacity of the
Company to operate the business substantially as operated at the Effective Date;

 

2.5A any entering into by the Company of any Assurance in respect of any
obligation or liability of any of PR, Bidco 1 and Bidco 2;

 

2.6 any alteration to the numbers of directors or classes of directors, or the
removal from office of a FB Director;

 

2.7 any consolidation, re-denomination, or sub-division of any B Shares of the
Company;

 

2.8 the issue of any B Shares in the Company (including by way of bonus, rights
or otherwise) and/or the grant of any option or right to acquire or call for the
issue of the same whether by conversion, subscription or otherwise;

 

2.9 the redemption or purchase by the Company of any B Shares or the reduction
of the share capital of the Company in any way;

 

2.10 any distribution, payment or return to shareholders of a capital nature;

 

2.11 the declaration or payment of any dividend or the making of any
distribution in specie;

 

2.12 the implementation of any compromise or arrangement within the meaning of
section 425 of the Act or any arrangement pursuant to which the Company is to
make a distribution of the kind described in section 213 of the Income and
Corporation Taxes Act 1988;

 

2.13 the passing of any resolution to wind up the Company;

 

2.14 any arrangement whereby the control of the management of the Company shall
pass from the directors thereof to any third party or body;

 

2.15 any transaction concerning the FB Assets with any person otherwise than at
arms length and for full value or any transaction with any shareholder of the
Company other than a Planned Transaction; or

 

2.16 the paying up of any share capital or debenture or debenture stock of the
Company by way of capitalisation or application of any profits or reserves
(including share premium account and capital redemption reserve).

--------------------------------------------------------------------------------

SCHEDULE 10

Key Members of the AD Group

 

At FB’s election, B Shares will be issued in the following companies in
accordance with the provisions of this Agreement:

 

  •   Clos du Bois Wines, Inc., California

 

  •   Makers Mark Distillery, Inc., USA

 

  •   Tequila Sauza SA de CV, Mexico

 

  •   Pedro Domecq Mexico SA de CV, Mexico

 

  •   Productora y Distribuidora de Agave, S de RL de CV

 

  •   Promoción y Fometo de Agave S de RL de CV

 

  •   Servicios Corparativos Salsa SA de CV

 

  •   Courvoisier SAS

 

  •   Allied Domecq Espana SA, Spain

 

  •   Hiram Walker & Sons Limited, Ontario

 

  •   Allied Domecq Spirits and Wine Limited

 

  •   Allied Distillers Limited

 

  •   Wm Teacher & Sons Ltd

 

  •   Cockburn Smithes Cia SA, Portugal

 

  •   Allied Domecq Operations Deutschland GmbH

 

  •   Kuemmerling GmbH

 

  •   Privat Weinbrennerei JACoBI GmbH, Germany

 

  •   Spain Alecq B.V. Netherlands

 

  •   Allied Domecq SA, France

 

  •   Wine Alliance, Inc.*

 

  •   Allied Domecq Netherlands B.V.*

 

Together with all other members of the AD Group which own material (in the
context of the FB Business as a whole) FB Assets.

 

* If PR considers that the issue of B Shares in any company listed in this
Schedule 10 and marked with an asterisk (*) would have the consequence of
triggering either a more than de minimis tax charge or a more than de minimis
adverse tax effect (including on the Allied Domecq US tax consolidation), PR may
submit to FB proposals to provide FB with lawful equivalent protection as would
be provided by such B Shares in relation to the relevant FB Assets. If such
proposals are acceptable to FB (acting reasonably) and are implemented by PR, no
B Shares shall be required to be issued in such company.

--------------------------------------------------------------------------------

SCHEDULE 11

Certain US and Mexican Members of the AD Group

 

US

 

  •   Allied Domecq Spirits & Wine Americas, Inc.

 

  •   Allied Domecq Spirits & Wine USA, Inc.

 

  •   Maker’s Mark Distillery, Inc.

 

  •   Wine Alliance, Inc.

 

  •   Buena Vista Winery, Inc.

 

  •   Gary Farrell Wines, Inc.

 

  •   Callaway Vineyard & Winery

 

  •   Clos de Bois Wines, Inc.

 

  •   William Hill Napa, Inc.

 

  •   Atlas Peak Vineyard, Inc.

 

Mexico

 

  •   Tequila Sauza SA de CV

 

  •   Promoción y Fomento de Agave S de RL de DV

 

  •   Servicios Corporativos Salsa SA de CV

 

  •   Productora y Distribuidora de Agave, S de RL de CV

 

Together with any other US and Mexican subsidiaries of AD which own FB Brands
where the value of the shares of such subsidiaries or of the underlying FB IP is
material in the context of the relevant FB Business.

--------------------------------------------------------------------------------

SCHEDULE 12

DBC

Part 1:

 

PR Operating DBC and FB Operating DBC shall be calculated in accordance with
Parts 2, 3 and 4 of this Schedule 12. In that regard, the formula and principles
set out in Part 2 of this Schedule 12 shall apply where the FB Operating DBC or
PR Operating DBC (as the case may be) has been earned on distribution operations
and the formula and principles set out in Part 3 of this Schedule 12 shall apply
where the FB Operating DBC or PR Operating DBC (as the case may be) has been
earned on production operations.

--------------------------------------------------------------------------------

Part 2:

Calculation of FB Operating DBC and PR Operating DBC for Distribution

 

Operating DBC in respect of a FB Brand or Transferred Subsidiary (as the case
may be) shall be calculated based on individual management accounts as follows:

 

     Notes

--------------------------------------------------------------------------------

Gross sales (excluding taxes and duties)

   1     

--------------------------------------------------------------------------------

-Discounts and allowances

   2     

--------------------------------------------------------------------------------

Net sales (excluding taxes and duties)

   3     

--------------------------------------------------------------------------------

-COGS

   4

-Production costs

   5

-Manufacturing variances

   6     

--------------------------------------------------------------------------------

Gross Profit

   7     

--------------------------------------------------------------------------------

-Trade A&P expenses

   8

-Media expenses

   9

-Other Consumer A&P expenses

   10     

--------------------------------------------------------------------------------

Direct Brand Contribution

   11     

--------------------------------------------------------------------------------

 

GENERAL PRINCIPLES

 

All costs included in the DBC calculation must be actual costs where available
and if not then standard/budgeted costs.

 

NOTE 1 – GROSS SALES (EXCLUDING TAXES AND DUTIES)

 

1.1 Gross sales

 

Gross sales correspond to the total amount billed to third party customers. It
represents invoice prices before reduction to sales (discounts & allowances) and
excluding duties and taxes on sales (when collected on behalf of tax
authorities, i.e. VAT).

 

Gross sales mainly comprise the following revenues:

 

•   Sales of finished, intermediary or residual products;

 

•   Sales of goods;

 

•   Commissions received from commission sales;

 

•   Services rendered (i.e. co-packing);

 

1.2 Taxes & Duties

 

Taxes and duties concern those arising from the sale of the product, and are
generally set based on the alcohol content or product price (i.e. excise,
stamps, etc.).

 

Taxes and duties are always directly deducted from Gross Sales in calculating
Gross Sales excluding T&D.

 

Taxes and Duties to be excluded from gross sales do not include ‘import duties’.

 

NB: There are two types of free bottle giveaways:

 

•   “Free bottles on invoice”: bottles given to distributors for promotions such
as “buy 12 bottles, get one free”. These bottles are valued at cost price and
are reported in ‘Cost of Goods Sold’.

--------------------------------------------------------------------------------

•   “Promotional free bottles”: bottles used in point-of-sale promotions
(product tasting), public relation events or on-pack promotions (e.g.: 5cl
sample attached to a 1L. bottle). These bottles are valued at cost price and are
reported in ‘Other A&P expenses’.

 

NOTE 2 – DISCOUNTS AND ALLOWANCES

 

Discounts and allowances include:

 

•   Promotional rebates, whether they appear as a reduction on an invoice or an
invoice credit note.

 

•   Year-end rebates (grouping, etc.).

 

•   Commissions paid or payable pursuant to commission sales.

 

•   Quantity discounts: Accrued discounts based upon quantity purchased with no
identifiable price reductions to the consumer.

 

•   Long term discounts: Any discount longer than one year designed to stimulate
trade activity. In this case, the related cost should be accrued over the
corresponding period of time.

 

•   Price reductions: Short term discounts offered to the trade which either
increase trade profits or are identified as price reductions to the trade
customer.

 

•   Display discount: conditional (service related) allowances/payments to the
customer for display space incremental to existing shelf space (usually on an
annual basis at per case rate).

 

•   Logistics discounts: allowances offered to the trade relating to product
distribution as an incentive to logistics costs (e.g. backhauling, central
delivery, direct delivery).

 

•   Central office discounts: other allowances for reduced administrative costs
such as centralized orders, invoice control for franchises, etc.

 

•   Feature discount: conditional allowances /payments to the customer to
‘feature’ certain brands in special events. Negotiated centrally usually on an
annual basis at a per case rate.

 

In addition, credit to customers for goods returned, damaged goods or incomplete
shipments must also come as a reduction of net sales (based on actual figures).

 

NOTE 3 – NET SALES

 

Net sales correspond to the sum of ‘Gross Sales (excluding T&D) minus ‘Discounts
and Allowances’.

 

NOTE 4 – COGS (‘COST OF GOODS SOLD’)

 

Cost of goods sold includes:

 

•   Raw materials (net of all vendor rebates/discounts), used in the production
of finished products;

 

•   Raw materials at purchase price/cost that are used in the production of free
bottles on invoice;

 

•   Finished products at purchase cost within the framework of distribution
agreements (+ import duties).

 

Write offs on raw materials and finished products must be excluded from the
calculation of the COGS and, consequently the DBC.

 

The following raw materials are included for production activities:

 

•   The content (liquid drink);

 

•   The container (bottle, cap, label, plastic film, carton, etc.),

 

to which may be added all related procurement, transportation, labour and
handling expenses, as well as evaporation and spillage quantity losses.

 

Regarding financial expenses associated to maturing inventories, the two parties
agree to adopt AD’s methodology in calculating a ‘Spirits and Wines Net Brand
Contribution (‘NBC’) of 1011M£ (as stated in page 26 of AD Annual Report for the
year ended 31 August 2004).

--------------------------------------------------------------------------------

All consumables required for production but which are not incorporated in the
products themselves (grease, soap, etc.) are considered as ‘Production Costs’.

 

NOTE 5 – PRODUCTION COSTS

 

Production costs include:

 

•   Depreciation on fixed assets used in the production process (excluding any
impact of impairment);

 

•   Personnel costs relating to direct production staff, including fringe
benefits, paid vacations, profit sharing, profit participation, payroll taxes,
training costs, performance bonuses;

 

•   Warehousing costs for raw materials and warehousing and maturing costs for
ageing stocks;

 

•   Outsourced production costs;

 

•   Plant consumable costs;

 

•   Production costs variances included in finished goods and WIP inventory.

 

Regarding the incorporation of ‘production overheads’ in ‘Production Costs’
(‘i.e. in the calculation of the DBC’), the two parties agree to adopt AD’s
methodology that leads to calculating a ‘Spirits and Wines Net Brand
Contribution (‘NBC’) of 1011M£ (as stated in page 26 of AD Annual Report for the
year ended 31 August 2004).

 

NOTE 6 – MANUFACTURING VARIANCES

 

Manufacturing variances correspond to the differences between standard costs and
actual costs of products for actual volumes.

 

Manufacturing variances include:

 

•   Wet goods variances,

 

•   Dry goods variances (bottling materials variances, other
material/consumables variances),

 

•   Direct Labor variances,

 

•   Other Production variances (Consumables variances, Outsourcing variances,
Energy variances, Other Direct costs variances),

 

No idle capacity impact should be included either in these variances or in the
calculation of the DBC.

 

NOTE 7 – GROSS PROFIT

 

Gross Profit is calculated from the sum of the following lines:

 

•   Net sales

 

•   COGS

 

•   Production costs

 

•   Manufacturing variances

 

NOTE 8 – TRADE A&P EXPENSES

 

Trade A&P expenses correspond to all expenses (net of all related
rebates/discounts) paid for promoting products to retailers, wholesalers, bars,
etc., such as Branded POS Material, in store advertising, trade public relations
events, sponsorship of trade events, wine lists, markets tests, trade samples,
tastings, trade trainings, advertising in trade publications.

 

Overpriced services are assimilated to price reductions and should be presented
as such.

 

Trade A&P expenses must be calculated as a % of sales or directly attributable
to a brand. Fixed Trade A&P expenses can not be allocated to a brand through
allocation keys.

 

Trade A&P expenses exclude employee costs.

--------------------------------------------------------------------------------

Write offs on Branded POS Material must be excluded from the calculation of the
Trade A&P and, consequently the DBC.

 

NOTE 9 – MEDIA EXPENSES

 

Media expenses correspond to all purchases of advertising space/time for all
media (TV, radio, publications, billboards, caddy, etc.) net of all related
rebates/discounts, excluding all ad agency fees and ad creation expenses.

 

Advertising space/time purchases comprise:

 

•   Traditional media advertising for the brand: TV, Radio, Outdoors,
Billboards, Publications, and Cinema;

 

•   Specific brand advertising for a sponsorship or a special event (excluding
the sponsorship cost itself);

 

•   Internet advertising (Production, Webmedia, Fees);

 

•   Showcasing of product in TV programmes/movies and in Cinemas.

 

•   Media partnerships with TV networks, radio stations, magazines, so long as
they involve a specific billing by the media (and not simply an exchange in the
framework of a partnership).

 

Media expenses must be directly attributable to a brand.

 

Media expenses exclude employee costs.

 

NB: in the case of a media campaign occurring from August N to October N+1; the
purchase of ad time/space corresponding to August must be reported in August N,
even if the media campaign is invoiced in full in N+1.

 

NOTE 10 – OTHER CONSUMER A&P EXPENSES

 

Other consumer A&P expenses are expenses that are not considered as Trade A&P
expenses or Media expenses, including:

 

•   Advertising creation expenses, that is:

 

  •   Technical expenses (design and production) of advertising productions
(films, billboards, spots, radio, etc.).

 

  •   Printing costs for billboards and publication inserts.

 

•   Ad agency fees (creation, production, media, other agency costs), even if,
in some instances, the amount represents a deposit);

 

•   Technical expenses and fees relating to the development of new products,
packaging, promotions, and sponsorship events;

 

•   Products consumed at point of advertising;

 

•   Promotional materials for consumers;

 

•   Sponsoring, sampling and public relations events;

 

•   Products given away in sampling promotions, valued at cost plus duties;

 

Consumer promotions (coupons, cash refunds, on-pack price reductions, loyalty
cards, in store lotteries, on-pack premiums);.

 

Write offs on promotional materials (e.g. samples) must be excluded from the
calculation of the Trade A&P and, consequently the DBC.

 

Other consumer A&P expenses must be directly attributable to a brand.

 

Other consumer A&P expenses exclude employee costs.

 

NOTE 11 – DIRECT BRAND CONTRIBUTION

 

DBC is the sum of ‘Gross Profit’ minus ‘Trade A&P expenses’ minus ‘Media
expenses’ and minus ‘Other consumer A&P expenses’.

--------------------------------------------------------------------------------

In calculating Operating DBC, the methodology referred to in the boxes in notes
4 and 5 to this part 2 of Schedule 12 shall apply.

 

Where for the purposes of the calculation referred to in paragraph 1 of this
Schedule 12 it is necessary to determine an amount of money and any of the
component parts of that sum of money are expressed in a currency other than
pounds sterling, such component parts shall be translated into pounds sterling
at the mean of the middle-market exchange rate for such currency (immediately
before close of business in London) for the period from the Effective Date to
the date on which the relevant distribution activity ceased.

--------------------------------------------------------------------------------

Part 3:

Calculation of FB Operating DBC and PR Operating DBC for Production

 

Operating DBC in respect of a FB Brand or a Transferred Subsidiary (as the case
may be) shall be calculated based on individual management accounts, as follows:

 

     Notes

--------------------------------------------------------------------------------

Gross sales (excluding taxes and duties)

   1     

--------------------------------------------------------------------------------

-Discounts and allowances

   2     

--------------------------------------------------------------------------------

Net sales (excluding taxes and duties)

   3     

--------------------------------------------------------------------------------

-COGS

   4

-Production costs

   5

-Manufacturing variances

   6     

--------------------------------------------------------------------------------

Gross Profit

   7     

--------------------------------------------------------------------------------

Direct Brand Contribution

   8     

--------------------------------------------------------------------------------

 

GENERAL PRINCIPLES

 

All costs included in the DBC calculation must be actual costs where available
and if not then standard/budgeted costs.

 

NOTE 1 – GROSS SALES (EXCLUDING TAXES AND DUTIES)

 

1.1 Gross sales

 

Gross sales correspond to the total amount billed to third party customers. It
represents invoice prices before reduction to sales (discounts & allowances) and
excluding duties and taxes on sales (when collected on behalf of tax
authorities, i.e. VAT).

 

Gross sales mainly comprise the following revenues:

 

•   Sales of finished, intermediary or residual products;

 

•   Sales of goods;

 

•   Commissions received from commission sales;

 

•   Services rendered (i.e. co-packing).

 

1.2 Taxes & Duties

 

Taxes and duties concern those arising from the sale of the product, and are
generally set based on the alcohol content or product price (i.e. excise,
stamps, etc.).

 

Taxes and duties are always directly deducted from Gross Sales in calculating
Gross Sales excluding T&D.

 

Taxes and Duties to be excluded from gross sales do not include ‘import duties’.

 

NB: There are two types of free bottle giveaways:

 

•   “Free bottles on invoice”: bottles given to distributors for promotions such
as “buy 12 bottles, get one free”. These bottles are valued at cost price and
are reported in ‘Cost of Goods Sold’.

--------------------------------------------------------------------------------

•   “Promotional free bottles”: bottles used in point-of-sale promotions
(product tasting), public relation events or on-pack promotions (e.g.: 5cl
sample attached to a 1L. bottle). These bottles are valued at cost price and are
reported in ‘Other A&P expenses’.

 

NOTE 2 – DISCOUNTS AND ALLOWANCES

 

Discounts and allowances include:

 

•   Promotional rebates, whether they appear as a reduction on an invoice or an
invoice credit note.

 

•   Year-end rebates (grouping, etc.).

 

•   Commissions paid or payable pursuant to commission sales.

 

•   Quantity discounts: Accrued discounts based upon quantity purchased with no
identifiable price reductions to the consumer.

 

•   Long term discounts: Any discount longer than one year designed to stimulate
trade activity. In this case, the related cost should be accrued over the
corresponding period of time.

 

•   Logistics discounts: allowances offered to the trade relating to product
distribution as an incentive to logistics costs (e.g. backhauling, central
delivery, direct delivery).

 

•   Feature discount: conditional allowances /payments to the customer to
‘feature’ certain brands in special events. Negotiated centrally usually on an
annual basis at a per case rate.

 

In addition, credit to customers for goods returned, damaged goods or incomplete
shipments must also come as a reduction of net sales (based on actual figures).

 

NOTE 3 – NET SALES

 

Net sales correspond to the sum of ‘Gross Sales (excluding T&D) minus ‘Discounts
and Allowances’.

 

NOTE 4 – COGS (‘COST OF GOODS SOLD’)

 

Cost of goods sold includes:

 

•   Raw materials (net of all vendor rebates/discounts), used in the production
of finished products;

 

•   Raw materials at purchase price/cost that are used in the production of free
bottles on invoice;

 

•   Finished products at purchase cost within the framework of distribution
agreements (+ import duties).

 

Write offs on raw materials and finished products must be excluded from the
calculation of the COGS and, consequently the DBC.

 

The following raw materials are included for production activities:

 

•   The content (liquid drink);

 

•   The container (bottle, cap, label, plastic film, carton, etc.),

 

to which may be added all related procurement, transportation, labour and
handling expenses, as well as evaporation and spillage quantity losses.

 

Regarding financial expenses associated to maturing inventories, the two parties
agree to adopt AD’s methodology in calculating a ‘Spirits and Wines Net Brand
Contribution (‘NBC’) of 1011M£ (as stated in page 26 of AD Annual Report for the
year ended 31 August 2004).

 

All consumables required for production but which are not incorporated in the
products themselves (grease, soap, etc.) are considered as ‘Production Costs’.

--------------------------------------------------------------------------------

NOTE 5 – PRODUCTION COSTS

 

Production costs include:

 

•   Depreciation on fixed assets used in the production process (excluding any
impact of impairment);

 

•   Personnel costs relating to direct production staff, including fringe
benefits, paid vacations, profit sharing, profit participation, payroll taxes,
training costs, performance bonuses;

 

•   Warehousing costs for raw materials and warehousing and maturing costs for
ageing stocks;

 

•   Outsourced production costs;

 

•   Plant consumable costs;

 

•   Production costs variances included in finished goods and WIP inventory.

 

Regarding the incorporation of ‘production overheads’ in ‘Production Costs’
(‘i.e. in the calculation of the DBC’), the two parties agree to adopt AD’s
methodology that leads to calculating a ‘Spirits and Wines Net Brand
Contribution (‘NBC’) of 1011M£ (as stated in page 26 of AD Annual Report for the
year ended 31 August 2004).

 

NOTE 6 – MANUFACTURING VARIANCES

 

Manufacturing variances correspond to the differences between standard costs and
actual costs of products for actual volumes.

 

Manufacturing variances include:

 

•   Wet goods variances,

 

•   Dry goods variances (bottling materials variances, other
material/consumables variances),

 

•   Direct Labor variances,

 

•   Other Production variances (Consumables variances, Outsourcing variances,
Energy variances, Other Direct costs variances),

 

No idle capacity impact should be included either in these variances or in the
calculation of the DBC.

 

NOTE 7 – GROSS PROFIT

 

Gross Profit is calculated from the sum of the following lines:

 

•   Net sales

 

•   COGS

 

•   Production costs

 

•   Manufacturing variances

 

NOTE 8 – DIRECT BRAND CONTRIBUTION

 

DBC shall be equal to ‘Gross Profit’.

 

In calculating Operating DBC, the methodology referred to in the boxes in notes
4 and 5 to this part 3 of Schedule 12 shall apply.

 

Where for the purposes of the calculation referred to in paragraph 1 of this
Schedule 12 it is necessary to determine an amount of money and any of the
component parts of that sum of money are expressed in a currency other than
pounds sterling, such component parts shall be translated into pounds sterling
at the mean of the middle-market exchange rates for such currency (immediately
before close of business in London) for the period from the Effective Date to
the date on which the relevant production activity ceased.

--------------------------------------------------------------------------------

Part 4

Determination of Operating DBC

 

1 As soon as reasonably practicable after the relevant Completion Date and in
any event within 90 days of the relevant Completion Date, PR shall prepare and
submit to FB a draft statement setting out the Operating DBC in respect of each
relevant asset (the “Draft Operating DBC Statement”). The Draft Operating DBC
Statement shall be prepared in accordance with Part 1 of this Schedule 12. FB
shall procure that PR is given all such assistance and access to all such
information in FB or its Affiliates possession or control as it may reasonably
require in order to enable it to prepare the Draft Operating DBC Statement.

 

2 FB shall, within 20 Business Days after receipt of the Draft Operating DBC
Statement, give written notice to PR stating whether or not it proposes any
amendments to the Draft Operating DBC Statement. PR shall procure that FB is
given all such assistance and access to all such information in PR or its
Affiliates’ possession or control (other than, for the avoidance of doubt, its
or their accountants’ working papers) as it may reasonably require in order for
it to review the Draft Operating DBC Statement.

 

3 If FB gives notice that it has no proposed amendments to the Draft Operating
DBC Statement, then the figures for the Operating DBC of each relevant asset set
out in the Draft Operating DBC Statement shall constitute the Operating DBC for
each such asset for the purposes of this Agreement. If it gives notice that it
does have proposed amendments to the Draft Operating DBC Statement, it shall
within such notice inform PR of its proposed amendments and FB and PR shall,
within the period of 10 Business Days after receipt of such notice, seek to
agree the proposed amendments.

 

4 In the event of:-

 

4.1 a failure by PR to submit the Draft Operating DBC Statement to FB within the
period of 90 days referred to in paragraph 1; or

 

4.2 a failure by FB to give written notice to PR, within the period of 20
Business Days referred to in paragraph 2, stating whether or not it has any
suggested amendments to the Draft Operating DBC Statement; or

 

4.3 any dispute between FB and PR, as to any matter relevant to the Draft
Operating DBC Statement or the Operating DBC of each relevant asset remaining
unresolved at the expiry of the period of 10 Business Days referred to in
paragraph 3;

 

such failure or dispute shall be referred to an independent firm of chartered
accountants agreed by FB and PR within five business days of such failure or
notification of dispute or, in the event of a failure to agree within 5 Business
Days, by an independent firm of chartered accountants appointed by the President
for the time being of the Institute of Chartered Accountants in England and
Wales on the application of either FB or PR. Such independent firm of chartered
accountants shall determine the Operating DBC for each relevant asset for the
purposes of this Agreement. The fees of any such firm of independent accountants
shall be paid by FB and/or PR in the proportions determined by the independent
accountant. FB and PR shall procure that such firm of independent accountants is
given all such assistance and access to all such information in FB’s or (as the
case may be) PR’s possession or control as such firm may reasonably require in
order to determine the Operating DBC for each relevant asset for the purposes of
this Agreement. Any firm appointed under this Schedule 12 shall act as experts
and not as arbitrators and their determination shall be binding on the Parties.

--------------------------------------------------------------------------------

SCHEDULE 13

Inventory and Stocks

Part 1

Calculation of Inventory and Stocks Value

 

1 The value of Inventory and FB Stocks or PR Stocks (as the case may be) shall
be calculated as the net book value of such inventory or stock as set out in the
management accounts of the relevant member of the AD Group but excluding any
financial charges, in respect of such quantity of stock and inventory as is
determined in accordance with a physical stock check of all relevant members of
the AD Group as at the Effective Date.

 

2 Where for the purposes of the calculation referred to in paragraph 1 of this
Schedule 13 it is necessary to determine an amount of money and any of the
component parts of that sum of money are expressed in a currency other than
pounds sterling, such component parts shall be translated into pounds sterling
at the middle-market exchange rate (immediately before close of business in
London) for such currency as quoted by Bank for the Effective Date.

--------------------------------------------------------------------------------

Part 2

Determination of Inventory and Stocks Value

 

1 As soon as reasonably practicable after the relevant Completion Date and in
any event within 90 days of the relevant Completion Date, PR shall prepare and
submit to FB a draft statement setting out the value of the relevant Inventory
and PR Stocks or FB Stocks (as the case may be) (the “Draft Valuation
Statement”). The Draft Valuation Statement shall be prepared in accordance with
Part 1 of this Schedule 13. FB shall procure that PR is given all such
assistance and access to all such information in FB or its Affiliates possession
or control as it may reasonably require in order to enable it to prepare the
Draft Valuation Statement.

 

2 FB shall, within 20 Business Days after receipt of the Draft Valuation
Statement, give written notice to PR stating whether or not it proposes any
amendments to the Draft Valuation Statement. PR shall procure that FB is given
all such assistance and access to all such information in PR or its Affiliates’
possession or control (other than, for the avoidance of doubt, its or their
accountants’ working papers) as it may reasonably require in order for it to
review the Draft Valuation Statement.

 

3 If FB gives notice that it has no proposed amendments to the Draft Valuation
Statement, then the figures for the value of the relevant Inventory and PR
Stocks or FB Stocks (as the case may be) set out in the Draft Valuation
Statement shall constitute the value of the relevant Inventory and PR Stocks or
FB Stocks (as the case may be) for the purposes of this Agreement. If it gives
notice that it does have proposed amendments to the Draft Valuation Statement,
it shall within such notice inform PR of its proposed amendments and FB and PR
shall, within the period of 10 Business Days after receipt of such notice, seek
to agree the proposed amendments.

 

4 In the event of:-

 

4.1 a failure by PR to submit the Draft Valuation Statement to FB within the
period of 90 days referred to in paragraph 1; or

 

4.2 a failure by FB to give written notice to PR, within the period of 20
Business Days referred to in paragraph 2, stating whether or not it has any
suggested amendments to the Draft Valuation Statement; or

 

4.3 any dispute between FB and PR, as to any matter relevant to the Draft
Valuation Statement or the value of the relevant Inventory and PR Stocks or FB
Stocks (as the case may be) remaining unresolved at the expiry of the period of
10 Business Days referred to in paragraph 3;

 

such failure or dispute shall be referred to an independent firm of chartered
accountants agreed by FB and PR within five business days of such failure or
notification of dispute or, in the event of a failure to agree within 5 Business
Days, by an independent firm of chartered accountants appointed by the President
for the time being of the Institute of Chartered Accountants in England and
Wales on the application of either FB or PR. Such independent firm of chartered
accountants shall determine the value of the relevant Inventory and PR Stocks or
FB Stocks (as the case may be) for the purposes of this Agreement. The fees of
any such firm of independent accountants shall be paid by FB and/or PR in the
proportions determined by the independent accountant. FB and PR shall procure
that such firm of independent accountants is given all such assistance and
access to all such information in FB’s or (as the case may be) PR’s possession
or control as such firm may reasonably require in order to determine the value
of the relevant Inventory and PR Stocks or FB Stocks (as the case may be) for
the purposes of this Agreement. Any firm appointed under this Schedule 13 shall
act as experts and not as arbitrators and their determination shall be binding
on the Parties.

--------------------------------------------------------------------------------

SCHEDULE 14

Transferred Net Debt

Part 1

Calculation of Transferred Net Debt

 

The Transferred Net Debt of a Transferred Subsidiary shall be calculated as
follows:-

 

Transferred Net Debt will be based on the balance sheet of the relevant
Transferred Subsidiary at the Effective Date (but taking into account certain
amounts accruing up to the relevant Completion Date as set out in this
Schedule).

 

Transferred Net Debt = Financial Debt – Cash Equivalents

 

A. “Financial Debt” shall consist of:

 

All indebtedness for borrowed money, including:

 

1. Convertible bonds (including accrued interests, fees and penalties and the
amount of any penalties payable on an immediate repayment of such indebtedness
at the relevant Completion Date)

 

2. Other debenture bonds (including accrued interests, fees and penalties and
the amount of any penalties payable on an immediate repayment of such
indebtedness at the relevant Completion Date);

 

3. Borrowings from financial institutions (including accrued interests, fees and
penalties and the amount of any penalties payable on an immediate repayment of
such indebtedness at the relevant Completion Date);

 

4. Security deposits received (including accrued interests, fees and penalties
and the amount of any penalties payable on an immediate repayment of such
indebtedness at the relevant Completion Date);

 

5. Issue of equity loans (including accrued interests, fees and penalties and
the amount of any penalties payable on an immediate repayment of such
indebtedness at the relevant Completion Date);

 

6. Equity loans (including accrued interests, fees and penalties and the amount
of any penalties payable on an immediate repayment of such indebtedness at the
relevant Completion Date);

 

7. Bank overdrafts (including accrued interests, fees and penalties and the
amount of any penalties payable on an immediate repayment of such indebtedness
at the relevant Completion Date);

 

8. Dividends to pay;

 

9. Current accounts (creditor) between AD Group companies (loans or advances)
must be considered as part of the financial debt (for their net amount);

 

10. obligations under hedging transactions, and

 

11. Finance lease obligations.

 

but excluding all operating lease obligations.

 

For this purpose, the amount of accrued interest, fees and penalties shall be
determined after taking account of any tax deduction or relief available in
respect of them.

 

B. “Cash Equivalents” shall consist of all:

 

1. Cash on hand:

 

2. Cash equivalents including:

 

  a. Notes deposited at banks for discounting,

 

  b. Notes deposited at banks for payment,

--------------------------------------------------------------------------------

  c. Matured coupons to cash,

 

  d. Undeposited checks,

 

  e. Any other cash equivalent;

 

3. Loans to employees;

 

4. Deposits;

 

5. Dividends to receive;

 

6. Marketable securities 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
Investors Services Inc. and marketable securities 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. Marketable securities shall include, without
limitation:

 

  a. Bonds,

 

  b. Notes and commercial paper,

 

  c. Treasury obligation,

 

  d. Any other securities.

 

7. Current accounts (debtor) between AD Group companies (loans or advances) must
be considered as cash equivalent (for their net amount).

 

8. Interest accrued on all components of Cash Equivalents by the relevant
Completion Date (whether or not actually paid) less the amount of any tax
payable on receipt of such interest.

 

Where for the purposes of the calculation referred to in paragraph 1 of this
Schedule 14 it is necessary to determine an amount of money and any of the
component parts of that sum of money are expressed in a currency other than
pounds sterling, such component parts shall be translated into pounds sterling
at the middle-market exchange rate for such currency immediately before close of
business in London on the Effective Date as quoted by Bank.

--------------------------------------------------------------------------------

Part 2

Determination of Transferred Net Debt

 

1 As soon as reasonably practicable after the relevant Completion Date and in
any event within 90 days of the relevant Completion Date, PR shall prepare and
submit to FB a draft statement setting out the Transferred Net Debt at the
Effective Date (but taking into account interest and other amounts accruing on
Financial Debt and/or Cash Equivalents after the Effective Date as stated in
Part 1 of this Schedule 14 and references to “Transferred Net Debt at the
Effective Date” in this Schedule 14 shall be interpreted accordingly) in respect
of each Transferred Subsidiary (the “Draft Transferred Net Debt Statement”). The
Draft Transferred Net Debt Statement shall be prepared in accordance with Part 1
of this Schedule 14. FB shall procure that PR is given all such assistance and
access to all such information in FB or its Affiliates possession or control as
it may reasonably require in order to enable it to prepare the Draft Transferred
Net Debt Statement.

 

2 FB shall, within 20 Business Days after receipt of the Draft Transferred Net
Debt Statement, give written notice to PR stating whether or not it proposes any
amendments to the Draft Transferred Net Debt Statement. PR shall procure that FB
is given all such assistance and access to all such information in PR or its
Affiliates’ possession or control (other than, for the avoidance of doubt, its
or their accountants’ working papers) as it may reasonably require in order for
it to review the Draft Transferred Net Debt Statement.

 

3 If FB gives notice that it has no proposed amendments to the Draft Transferred
Net Debt Statement, then the figures for the Transferred Net Debt at the
Effective Date of each Transferred Subsidiary set out in the Draft Transferred
Net Debt Statement shall constitute the Transferred Net Debt at the Effective
Date for each such Transferred Subsidiary for the purposes of this Agreement. If
it gives notice that it does have proposed amendments to the Draft Transferred
Net Debt Statement, it shall within such notice inform PR of its proposed
amendments and FB and PR shall, within the period of 10 Business Days after
receipt of such notice, seek to agree the proposed amendments.

 

4 In the event of:-

 

4.1 a failure by PR to submit the Draft Transferred Net Debt Statement to FB
within the period of 90 days referred to in paragraph 1; or

 

4.2 a failure by FB to give written notice to PR within the period of 20
Business Days referred to in paragraph 2, stating whether or not it has any
suggested amendments to the Draft Transferred Net Debt Statement; or

 

4.3 any dispute between FB and PR as to any matter relevant to the Draft
Transferred Net Debt Statement or the Transferred Net Debt at the Effective Date
of each Transferred Subsidiary remaining unresolved at the expiry of the period
of 10 Business Days referred to in paragraph 3;

 

such failure or dispute shall be referred to an independent firm of chartered
accountants agreed by FB and PR within five business days of such failure or
notification of dispute or, in the event of a failure to agree within 5 Business
Days, by an independent firm of chartered accountants appointed by the President
for the time being of the Institute of Chartered Accountants in England and
Wales on the application of either FB or PR. Such independent firm of chartered

--------------------------------------------------------------------------------

accountants shall determine the Transferred Net Debt at the Effective Date for
each Transferred Subsidiary for the purposes of this Agreement. The fees of any
such firm of independent accountants shall be paid by FB and/or PR in the
proportions determined by the independent accountant. FB and PR shall procure
that such firm of independent accountants is given all such assistance and
access to all such information in FB’s or (as the case may be) PR’s possession
or control as such firm may reasonably require in order to determine the
Transferred Net Debt at the Effective Date for each Transferred Subsidiary for
the purposes of this Agreement. Any firm appointed under this Schedule 14 shall
act as experts and not as arbitrators and their determination shall be binding
on the Parties.

--------------------------------------------------------------------------------

SCHEDULE 15

FB Facilities

 

To be agreed between the Parties in accordance with the definition of FB
Facilities contained in Clause 1.2 and the following principles:

 

1 to include the Laphroaig Distillery, Islay; and

 

2 to include such number of scotch malt whisky distilleries as (when added to
the Laphroaig distillery referred to in paragraph 1 above) have the capacity to
produce malt whisky required to produce that proportion of all of the AD Group’s
scotch whisky volumes as is currently represented by the Teacher’s and Laphroaig
brands (“FB’s Distillery Capacity”), and the specific distillery or distilleries
falling into this category shall be allocated with the intention that (i) scotch
malt whisky distilleries having, in aggregate, the capacity to produce FB’s
Distillery Capacity (or as near as may be to FB’s Distillery Capacity) shall be
designated FB Facilities under this paragraph 2, and (ii) subject to (i), those
scotch malt whisky distilleries where the proportion of the aggregate production
capacity which is currently allocated to Teacher’s is the highest shall be
designated FB Facilities under this paragraph 2.

 

3 Arrangements (which may include long term co-packing arrangements in
accordance with Clause 12 but will not include the transfer of assets) will be
made to ensure that an appropriate whisky bottling capacity is available to FB.

 

4 Arrangements will be made (which may include long term supply arrangements in
accordance with Clause 12) to ensure that FB has an appropriate grain whisky
supply.

--------------------------------------------------------------------------------

SCHEDULE 16

Examples of Possible Netting Structures

 

1 Set-off of FB receivables

 

1.1 A relevant member of the PR Group (a “Selling Entity”) transfers FB Assets
or shares in Transferred Subsidiaries to FB or an Affiliate of FB (a “Purchasing
Entity”) for consideration as adjusted in accordance with the terms of this
Agreement. The consideration is left outstanding on inter-company account.

 

1.2 The receivable due to the Selling Entity from the Purchasing Entity is
novated to Bidco 1 for consideration left outstanding on inter-company account.

 

1.3 PR would exercise a call option in relation to (or otherwise agrees to
purchase) an appropriate number of the Tracker Shares or arrange a repayment of
an appropriate amount of the Bidco 2 Loan.

 

1.4 The receivable due from the Selling Entity, is then set-off against the
liability of Bidco 1 to pay the purchase price for such Tracker Shares, pursuant
to the exercise of the call option or the liability of Bidco 2 to repay the
relevant part of the loan.

 

1.5 Following the transfer of FB Assets to the Purchasing Entity, it is likely
that Bidco 1 will owe various debts to subsidiaries within the AD Group. The
most significant amounts are likely to be due to the Dutch holding company. Set
out below, in the context of liabilities due to the Dutch holding company; the
following is a series of steps by which the relevant receivables and payables
might be resolved.

 

  •   The shares in the Dutch company are sold to PR S.A. (or one of its French
affiliates);

 

  •   The Dutch holding company is put into liquidation or dissolved and the
receivable due from Bidco 1 is transferred to PR (France) in the liquidation or
dissolution of the Luxembourg company and immediately contributed to Bidco 1;

 

  •   In this way, all of the relevant inter-company debts are eliminated.

 

2 Bridge financing

 

2.1 A Selling Entity transfers FB Assets to a Purchasing Entity for
consideration as adjusted in accordance with the terms of the Framework
Agreement. The consideration is left outstanding on inter-company account.

 

2.2 Bidco 1 obtains bridge financing from a third party bank.

 

2.3 Bidco 1 exercises a call option in relation to (or otherwise agrees to
purchase) an appropriate number of Tracker Shares or arrange to repay an
appropriate amount of the Bidco 2 Loan.

 

2.4 Bidco 1 pays the purchase price for the Tracker Shares or arranges such
repayments of the Bidco 2 Loan.

--------------------------------------------------------------------------------

2.5 FB uses the proceeds to discharge the Part Consideration for the relevant FB
Assets or shares in Transferred Subsidiaries.

 

2.6 Steps similar to those at paragraph 1.5 above would then be taken to permit
the extraction of cash from the relevant subsidiaries and its contribution to
Bidco 1 to repay the bridge financing.

 

3 Deferred settlement

 

3.1 A Selling Entity transfers FB Assets or shares in a Transferred Subsidiary
to a Purchasing Entity for consideration as adjusted in accordance with the
terms of this Agreement. The consideration is left outstanding on inter-company
account.

 

3.2 PR exercises a call option in relation to (or otherwise agrees to purchase)
Tracker Shares in Bidco 2.

 

3.3 No immediate repayment is made of the purchase price pursuant to the
exercise of the call option. In addition, the purchase price for the relevant FB
Assets or shares in Transferred Subsidiaries is left outstanding on
inter-company account without bearing interest. The effect will be that the
Selling Entity will remain a creditor of the Purchasing Entity for, say, 3 to 5
months.

 

3.4 Following the transfer of FB Assets to the Purchasing Entity, steps are
taken to settle the receivables and payables. By way of example, in relation to
the Dutch holding company:

 

  •   The shares in the Dutch holding company are transferred to PR (or one of
its French affiliates);

 

  •   The Dutch holding company is put into liquidation or dissolved and the
receivables due from FB are distributed in the liquidation/dissolution to PR and
immediately contributed to Bidco 1;

 

  •   The receivables are then set-off against the purchase price for Bidco 2
Tracker Shares pursuant to the exercise of the call option.

 

4 Acquisition of shares in Bidco 2

 

4.1 A Selling Entity transfers FB Assets or shares in a Transferred Subsidiary
to a Purchasing Entity for consideration as adjusted in accordance with the
terms of this Agreement. The consideration is left outstanding on inter-company
account.

 

4.2 The Dutch holding company acquires shares in Bidco 2 from FB in
consideration for the assumption of the obligation to pay the purchase price
pursuant to the exercise of the call option. The liability to pay the purchase
price pursuant to the exercise of the call option is set-off against the
receivable due from FB or an affiliate of FB in respect of the sale of FB Assets
or companies holding FB Assets.

 

4.3 Following the transfer of FB Assets to a Purchasing Entity, steps are taken
to extract the Bidco 2 shares from the relevant subsidiaries. By way of example,
in relation to the Dutch holding company:

 

  •   The shares in the Dutch holding company are transferred to PR; or

--------------------------------------------------------------------------------

  •   The Dutch holding company is put into liquidation or dissolved and the
shares in Bidco 2 are distributed in the liquidation/dissolution to PR and
immediately contributed to Bidco 1.

--------------------------------------------------------------------------------

SCHEDULE 17

Theoretical DBC

 

1

     2

Brand

     Theoretical DBC

FB Brands

      

Sauza

   £ [***]

Maker’s Mark

   £ [***]

Laphroaig

   £ [***]

Courvoisier

   £ [***]

Canadian Club

   £ [***]

Castellana

   £ [***]

Centenario

   £ [***]

DYC

   £ [***]

Fundador

   £ [***]

Teachers

   £ [***]

Cockburn

   £ [***]

Harvey’s

   £ [***]

Kuemmerling

   £ [***]

Jacobi

   £ [***]

Clos du Bois

   £ [***]

Other US Wines (except Mumm Cuvée Napa)

   £ [***]

Callaway

   £ [***]

--------------------------------------------------------------------------------

EXECUTED as a deed by

  )     

by PERNOD RICARD S.A.

  )     

acting by

  )     

EXECUTED as a deed

  )     

by FORTUNE BRANDS INC.

  )     

acting by

  )