Document:

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                       STOCK AND ASSET PURCHASE AGREEMENT

                                      AMONG

                             VIVENDI UNIVERSAL S.A.,

                             PERNOD RICARD S.A. AND

                                   DIAGEO PLC

                          DATED AS OF DECEMBER 19, 2000

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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.................................1

   Section 1.1.   Definitions................................................1
   Section 1.2.   Rules of Construction.....................................23

ARTICLE II PURCHASE, SALE AND ASSUMPTION OF LIABILITIES.....................23

   Section 2.1.   Purchase and Sale of the Transferred Shares, the
                  Transferred Minority Interests and the Transferred
                  Assets....................................................23
   Section 2.2.   Assumption of Liabilities.................................24
   Section 2.3.   Required Consents.........................................24
   Section 2.4.   Estimated Adjustment to Purchase Price....................25
   Section 2.5.   Serralles Right of First Refusal..........................25
   Section 2.6.   No Sale...................................................31
   Section 2.7.   Bianchi Right of First Refusal............................31
   Section 2.8.   Post-Closing Adjustment...................................32

ARTICLE III THE CLOSING.....................................................34

   Section 3.1.   Closing Date..............................................34
   Section 3.2.   Seller's Deliveries at Closing............................34
   Section 3.3.   Buyers' Deliveries at Closing.............................35

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................35

   Section 4.1.   Due Organization, Good Standing and Power;
                  Subsidiaries..............................................35
   Section 4.2.   Organizational Documents..................................36
   Section 4.3.   Capitalization............................................36
   Section 4.4.   Authorization.............................................37
   Section 4.5.   Consents..................................................38
   Section 4.6.   Noncontravention..........................................38
   Section 4.7.   Title.....................................................39
   Section 4.8.   Financial Statements......................................39
   Section 4.9.   Litigation................................................39
   Section 4.10.  Compliance with Applicable Laws; Consents and Filings.....40
   Section 4.11.  Material Contracts........................................40
   Section 4.12.  Absence of Certain Changes or Events......................41
   Section 4.13.  Benefit Plans; Employees..................................41
   Section 4.14.  Environmental Matters.....................................43
   Section 4.15.  Intellectual Property.....................................43
   Section 4.16.  Brokers and Intermediaries................................44
   Section 4.17.  Real Property.............................................44
   Section 4.18.  Tax Matters...............................................44

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   Section 4.19.  Indebtedness..............................................44
   Section 4.20.  Business..................................................45
   Section 4.21.  Labor Matters.............................................45
   Section 4.22.  Vivendi Transaction.......................................45
   Section 4.23.  Product Recalls...........................................45
   Section 4.24.  Insurance.................................................45
   Section 4.25.  Residence of SCL..........................................45
   Section 4.26.  Maturing Stocks...........................................46
   Section 4.27.  No Other Representations..................................46
   Section 4.28.  Absence of Undisclosed Liabilities........................46
   Section 4.29.  DBC.......................................................46

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYERS......................46

   Section 5.1.   Due Organization, Good Standing and Power.................46
   Section 5.2.   Organizational Documents; Buyers..........................47
   Section 5.3.   Authorization.............................................47
   Section 5.4.   Consents..................................................47
   Section 5.5.   Noncontravention..........................................47
   Section 5.6.   Litigation................................................48
   Section 5.7.   Brokers and Intermediaries................................48
   Section 5.8.   Investment Intent.........................................48
   Section 5.9.   Financing.................................................48
   Section 5.10.  No Other Representations..................................48

ARTICLE VI COVENANTS........................................................48

   Section 6.1.   Conduct of the Business...................................48
   Section 6.2.   Access to Information.....................................51
   Section 6.3.   Further Action; Best Efforts..............................52
   Section 6.4.   Post-Closing Cooperation; Records.........................54
   Section 6.5.   Intercompany Accounts and Arrangements; Transition
                  Services..................................................55
   Section 6.6.   Agreement to Defend and Indemnify.........................56
   Section 6.7.   Public Announcements......................................56
   Section 6.8.   Dealings with Distributors and Brokers....................56
   Section 6.9.   Guarantees................................................56
   Section 6.10.  Indebtedness..............................................57
   Section 6.11.  Hedging Arrangements......................................58
   Section 6.12.  QUIDS and ACES............................................58
   Section 6.13.  Insurance.................................................59
   Section 6.14.  Retained Assets...........................................60
   Section 6.15.  Seagram Name..............................................60
   Section 6.16.  Chivas Entities...........................................61
   Section 6.17.  Further Assurances; Actions...............................61
   Section 6.18.  Payments..................................................62
   Section 6.19.  Resignations..............................................62
   Section 6.20.  GST/QST Registration......................................62

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ARTICLE VII TAX MATTERS.....................................................62

   Section 7.1.   Tax Indemnities...........................................62
   Section 7.2.   Refunds and Tax Benefits..................................64
   Section 7.3.   Contests..................................................64
   Section 7.4.   Preparation of Tax Returns................................65
   Section 7.5.   Cooperation and Exchange of Information...................66
   Section 7.6.   Tax Sharing Arrangements..................................66
   Section 7.7.   Indemnity Payments to be Treated as Purchase Price
                  Adjustments...............................................66
   Section 7.8.   Section 338(h)(10) Election...............................66
   Section 7.9.   Transfer Taxes and Sales Tax..............................67
   Section 7.10.  Accounts Receivable Election..............................69
   Section 7.11.  Remedy Exclusive..........................................69

ARTICLE VIII EMPLOYEE BENEFITS..............................................69

   Section 8.1.   Employees and Offers of Employment........................69
   Section 8.2.   Employment Agreements, Termination Agreements
                  Severance, and Repatriation/Relocation....................71
   Section 8.3.   Bonus; Retention Bonus....................................72
   Section 8.4.   Retiree Welfare Plans.....................................73
   Section 8.5.   Company Plans.............................................73
   Section 8.6.   401(k) Plans..............................................74
   Section 8.7.   Defined Benefit Plans.....................................75
   Section 8.8.   International Pension Plans...............................76
   Section 8.9.   Non-Qualified Plans.......................................77
   Section 8.10.  WARN......................................................77
   Section 8.11.  COBRA.....................................................77
   Section 8.12.  Third Party Beneficiaries.................................78
   Section 8.13.  United Kingdom Employee Benefit Provisions................78
   Section 8.14.  Canadian Employee Benefit Provisions......................82
   Section 8.15.  Vivendi Options and Vivendi SARs..........................84
   Section 8.16.  Communications............................................84

ARTICLE IX CONDITIONS TO CLOSING............................................84

   Section 9.1.   Conditions Precedent to Obligations of the Parties........84
   Section 9.2.   Conditions Precedent to Obligation of the Buyers..........85
   Section 9.3.   Conditions Precedent to the Obligation of the Seller......86

ARTICLE X INDEMNIFICATION...................................................87

   Section 10.1.  Indemnification by the Seller.............................87
   Section 10.2.  Indemnification by the Buyers.............................88
   Section 10.3.  Indemnification Procedures................................88
   Section 10.4.  Remedies Exclusive........................................89
   Section 10.5.  Limitations Upon Remedies and Indemnification.............90

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   Section 10.6.  Indemnification Calculations..............................91
   Section 10.7.  Subrogation...............................................91

ARTICLE XI TERMINATION, AMENDMENT AND WAIVER................................92

   Section 11.1.  Termination...............................................92
   Section 11.2.  Amendments and Waivers....................................93

ARTICLE XII MISCELLANEOUS...................................................93

   Section 12.1.  Notices...................................................93
   Section 12.2.  Schedules.................................................95
   Section 12.3.  Severability..............................................95
   Section 12.4.  Counterparts..............................................95
   Section 12.5.  Entire Agreement; No Third Party Beneficiaries............95
   Section 12.6.  Governing Law.............................................96
   Section 12.7.  Consent to Jurisdiction...................................96
   Section 12.8.  Assignment................................................96
   Section 12.9.  Expenses..................................................96
   Section 12.10. Bulk Transfer Laws........................................97
   Section 12.11. Breaches..................................................97
   Section 12.12. Interest Act (Canada).....................................97

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                                    SCHEDULES

SCHEDULE 1.1(a)      Seller's Knowledge
SCHEDULE 1.1(b)      Buyer A's Knowledge
SCHEDULE 1.1(c)      Buyer B's Knowledge
SCHEDULE 1.1(d)      Permitted Liens
SCHEDULE 1.1(e)      Retained Assets
SCHEDULE 1.1(f)      Assigned Contracts
SCHEDULE 1.1(g)      Transferred Subsidiaries
SCHEDULE 2.1         Allocation of Purchase Price
SCHEDULE 2.5(b)      Captain Morgan Trademarks
SCHEDULE 4.1(b)      Exceptions to Due Organization, Good Standing and Power
SCHEDULE 4.1(c)      Subsidiaries
SCHEDULE 4.1(d)      Significant Subsidiaries
SCHEDULE 4.2         Organizational Documents
SCHEDULE 4.3(a)      Transferred Shares
SCHEDULE 4.3(b)      Subsidiary Shares
SCHEDULE 4.3(c)      Other  Equity   Interests  and   Obligations  of  Spirits
                     Subsidiaries
SCHEDULE 4.3(d)      Minority Interests
SCHEDULE 4.3(e)      Indebtedness, Guarantees and Derivative Agreements
SCHEDULE 4.5         Seller Required Consents and Filings
SCHEDULE 4.6         Contraventions
SCHEDULE 4.8         Financial Statements
SCHEDULE 4.9         Litigation and Judgments
SCHEDULE 4.10(a)     Non-Compliance
SCHEDULE 4.10(b)     Consents and Filings
SCHEDULE 4.11(b)     Non-Competition Provisions
SCHEDULE 4.11(c)     Collective Bargaining Agreements
SCHEDULE 4.12        Certain Changes or Events
SCHEDULE 4.13(a)     Company Plans
SCHEDULE 4.13(g)     Pension Plan Liabilities
SCHEDULE 4.13(j)(i)  Business Employees
SCHEDULE 4.13(j)(ii) Retained Employees
SCHEDULE 4.13(k)     Unfunded Liabilities
SCHEDULE 4.15(a)     Spirits IP
SCHEDULE 4.15(b)     Restrictions on Use of Intellectual Property
SCHEDULE 4.17        Real Property
SCHEDULE 4.18        Tax Matters
SCHEDULE 4.19        JES Public Indebtedness
SCHEDULE 4.21        Labor Matters
SCHEDULE 4.23        Product Recalls
SCHEDULE 4.24        Insurance Policies
SCHEDULE 4.26        Bulk Scotch Maturing Stocks
SCHEDULE 4.29        Direct Brand Contributions
SCHEDULE 5.4         Buyers' Required Consents and Filings
SCHEDULE 6.1         Conduct of the Business
SCHEDULE 6.2         Brands

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SCHEDULE 6.9(a)(i)   SCL Guarantees
SCHEDULE 6.9(c)      Spirits Subsidiary Guarantees
SCHEDULE 6.10(a)     Retained Indebtedness
SCHEDULE 7.8         Section 338 Subsidiaries
SCHEDULE 8.1         Transferred Employees
SCHEDULE 8.2(a)      Employment Agreements and Termination Protection Agreements
SCHEDULE 8.2(c)      Repatriation/Relocation
SCHEDULE 8.5(a)      JES Company Plans Not Being Assumed by Seller
SCHEDULE 8.9         Top Hat Plans

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                                                                               1

            STOCK AND ASSET PURCHASE AGREEMENT dated as of December 19, 2000
(this "AGREEMENT"), among Vivendi Universal S.A., a French societe anonyme (the
       ---------
"SELLER"), Pernod Ricard S.A., a French societe anonyme ("BUYER A"), and Diageo
 ------                                                   -------
Plc, a company incorporated under the laws of England and Wales ("BUYER B" and,
                                                                  -------
together with Buyer A, the "BUYERS").
                            ------

            WHEREAS, the Seller, the Asset Sale Subsidiaries (as defined herein)
and the Spirits Subsidiaries (as defined herein) are engaged in the Business (as
defined herein);

            WHEREAS, the Buyers desire to purchase from the Seller and its
Affiliates and the Seller desires to sell and otherwise cause to be sold to the
Buyers the Business; and

            WHEREAS, the Buyers and the Seller desire to make certain
representations, warranties and agreements in connection with the purchase and
sale of the Business and also to prescribe various conditions to the purchase
and sale of the Business.

            NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein set forth and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

                                   ARTICLE I

                       DEFINITIONS; RULES OF CONSTRUCTION
                       ----------------------------------

            SECTION 1.1  DEFINITIONS. As used in the Agreement, the following
terms shall have the following meanings:

            "401(K)  TRANSFER  DATE"  shall  have  the  meaning  set  forth in
             ----------------------
Section 8.6(b)(ii).

            "5-DAY AVERAGE SHARE PRICE" shall have the meaning set forth in
             -------------------------
Section 8.15(a).

            "ACES" shall have the meaning set forth in Section 6.12(a).
             ----

            "AFFILIATE" shall mean, with respect to any Person, any other Person
             ---------
that directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person.

            "AGREEMENT" shall have the meaning set forth in the heading of this
             ---------
Agreement.

            "ALLIED" shall have the meaning set forth in Section 2.5(a).
             ------

            "ALLOCABLE NON-U.S. CAPTAIN MORGAN BRANDS AMOUNT" shall have the
             -----------------------------------------------
meaning set forth in Section 2.5(b)(i).

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                                                                               2

            "ALLOCABLE U.S. CAPTAIN MORGAN BRANDS AMOUNT" shall have the meaning
             -------------------------------------------
set forth in Section 2.5(b)(i).

            "APPLICABLE LAW" shall mean, with respect to any Person, any U.S.
             --------------
federal, state, local or foreign statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Entity, including common law,
applicable to such Person or any of its properties or assets.

            "ASSET SALE SUBSIDIARIES" shall mean, collectively, SCL, Seagram
             -----------------------
SGPS, Sandeman, Seagram Distillers, House of Seagram UK, Seagram Australia and
Seagram N.Z.

            "ASSIGNED CONTRACTS" shall have the meaning set forth in the
             ------------------
definition of "Transferred Assets".

            "ASSUMED EMPLOYEES" shall have the meaning set forth in Section
             -----------------
8.1(b).

            "ASSUMED LIABILITIES" shall mean, except as otherwise provided in
             -------------------
this Agreement, all of the Liabilities (excluding for the avoidance of doubt the
Retained Liabilities), historical, current or future (to the extent related to
actions occurring prior to the Closing), known or unknown, of any Asset Sale
Subsidiary to the extent arising out of, resulting from or primarily related to
the Business or the Transferred Assets, including (and, as appropriately limited
by) the following:

            (i) FINANCIAL  STATEMENT  LIABILITIES.  All Liabilities of any Asset
                ---------------------------------
Sale  Subsidiary   reflected  in  the  Financial   Statements  and  all  similar
Liabilities of any Asset Sale  Subsidiary  incurred,  in the ordinary  course of
business and not in violation of this Agreement,  after June 30, 2000 in respect
of the Business that would have been reflected in the Financial Statements if in
existence on June 30, 2000;

            (ii)  LIABILITIES  AFTER THE CLOSING DATE.  All  Liabilities  of any
                  -----------------------------------
Asset Sale  Subsidiary to the extent arising out of,  resulting from or relating
to the  ownership  by  the  Buyers  of the  Transferred  Assets  or the  Spirits
Subsidiaries or the operation of the Business after the Closing Date;

            (iii) ACTIONS.  All  Liabilities of any Asset Sale  Subsidiary  with
                  -------
respect to all actions, suits,  proceedings,  disputes, claims or investigations
to the  extent  arising  out of,  resulting  from or  primarily  related  to the
Business or the Transferred Assets,  including all such Liabilities set forth on
Schedule 4.9;

            (iv)  TRANSFERRED  LIABILITIES.  All  Liabilities  of any Asset Sale
                  ------------------------
Subsidiary to the extent arising out of, resulting from or primarily  related to
any of the Transferred Assets;

            (v)  ENVIRONMENTAL  LIABILITIES.  All  Liabilities of any Asset Sale
                 --------------------------
Subsidiary under  Environmental  Laws or with respect to Hazardous  Materials to
the extent arising out of,  resulting from or primarily  related to the Business
or the Transferred Assets;

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                                                                               3

            (vi) ALCOHOL RELATED LIABILITIES.  All Liabilities of any Asset Sale
                 ---------------------------
Subsidiary  arising  out  of,  resulting  from  or  related  to the  production,
marketing,  distribution  and sale of  alcoholic  beverages,  including  product
liability actions or claims;

            (vii)  EMPLOYEE  LIABILITIES.  All  Liabilities  of any  Asset  Sale
                   ---------------------
Subsidiary assumed by the Buyers pursuant to Article VIII in respect of employee
compensation and benefits for Business  Employees assumed by the Buyers pursuant
to Article VIII;

            (viii)  RETURNED  PRODUCTS.   All  Liabilities  of  any  Asset  Sale
                    ------------------
Subsidiary in respect of products of the Business returned for credit, refund or
replacement after the Closing Date; and

            (ix) TAXES. All Liabilities of any Asset Sale Subsidiary relating to
                 -----
the  Business  in  respect  of Taxes  other  than to the  extent  the  Seller is
obligated to indemnify Buyer under Section 7.1(a).

            "AUS GST" means the goods and services tax as imposed by the AUS GST
             -------
Law.

            "AUS GST ACT" means A New Tax System (Goods and Services Tax) Act
             -----------
1999, or, if that Act does not exist for any reason, means any Act imposing or
relating to the imposition or administration of a goods and services tax in
Australia.

            "AUS GST LAW" has the meaning given to that term in the AUS GST Act.
             -----------

            "BASE PURCHASE PRICE" shall have the meaning set forth in Section
             -------------------
2.1(b).

            "BENEFITS CONTINUATION PERIOD" shall have the meaning set forth in
             ----------------------------
Section 8.1(b).

            "BIANCHIS" shall have the meaning set forth in Section 2.7.
             --------

            "BIANCHI PURCHASE PRICE" shall have the meaning set forth in Section
             ----------------------
2.7.

            "BIANCHI RIGHT OF FIRST REFUSAL" shall have the meaning set forth in
             ------------------------------
Section 2.7.

            "BIANCHI SHAREHOLDERS AGREEMENT" shall have the meaning set forth in
             ------------------------------
Section 2.7.

            "BIANCHI SHARES" shall have the meaning set forth in Section 2.7.
             --------------

            "BULK CANADIAN MATURING STOCKS" shall mean unfinished and unblended
             -----------------------------
and blended grain and malt whiskeys produced in Canada.

            "BULK SCOTCH MATURING STOCKS" shall mean unfinished and unblended
             ---------------------------
and blended grain and malt whiskeys produced in Scotland.

            "BUSINESS" shall mean the worldwide spirits, wines, spirit, wine and
             --------
malt coolers, other malt beverages, fortified wines, non-alcoholic mixers and
other alcoholic and non-alcoholic beverages businesses (including the
production, marketing, promotion, distribution and

<PAGE>   11

                                                                               4

sale of such mixers and beverages and operations  (including retail  operations)
in respect of such  products) as conducted at the time in question by the Seller
and its  Subsidiaries,  including  the Asset Sale  Subsidiaries  and the Spirits
Subsidiaries  together with any activities  reasonably  and primarily  ancillary
thereto, but excluding any such businesses or activities conducted by the Seller
prior to its acquisition of SCL.

            "BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday
             ------------
or other day on which commercial banks are required by law to be closed in
Montreal, Canada, New York, New York, Paris, France or London, England.

            "BUSINESS EMPLOYEES" shall have the meaning set forth in Section
             ------------------
4.13(a).

            "BUYER A" shall have the meaning set forth in the heading of this
             -------
Agreement.

            "BUYER A CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
             ---------------------------------
agreement, dated as of September 8, 2000, between SCL and Buyer A.

            "BUYER A PROPORTION" shall mean initially 38.6% and shall thereafter
             ------------------
be the percentage notified jointly in writing to the Seller by the Buyers;
provided that (i) at all times the sum of the Buyer A Proportion and the Buyer B
Proportion shall be equal to 100% and (ii) at no time shall the Buyer A
Proportion be less than 10%.

            "BUYER B" shall have the meaning set forth in the heading of this
             -------
Agreement.

            "BUYER B CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
             ---------------------------------
agreement, dated as of September 8, 2000, between SCL and Buyer B.

            "BUYER B PROPORTION" shall mean initially 61.4% and shall thereafter
             ------------------
be the percentage specified jointly in writing by the Buyers; provided that (i)
at all times the sum of the Buyer A Proportion and the Buyer B Proportion shall
be equal to 100% and (ii) at no time shall the Buyer B Proportion be less than
50%.

            "BUYER COMMON SHARES" shall have the meaning set forth in Section
             -------------------
8.15(a).

            "BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in
             -------------------------
Section 10.1(a).

            "BUYER INTERNATIONAL PLANS" shall have the meaning set forth in
             -------------------------
Section 8.8(a)(ii).

            "BUYER MATERIAL ADVERSE EFFECT" shall mean any change or effect that
             -----------------------------
is materially adverse to the ability of any Buyer to consummate the transactions
contemplated hereby.

            "BUYERS" shall have the meaning set forth in the heading of this
             ------
Agreement.

            "BUYERS' ACTUARIES" shall mean the actuaries appointed by the Buyers
             -----------------
and notified to the Seller for the purpose of Section 8.13.

<PAGE>   12

                                                                               5

            "BUYERS' BENEFIT PLANS" shall have the meaning set forth in Section
             ---------------------
8.1(c).

            "BUYERS' CANADIAN PENSION PLANS" shall have the meaning set forth in
             ------------------------------
Section 8.14(b).

            "CALCULATION" shall have the meaning set forth in Section 2.8(a).
             -----------

            "CALIFORNIA GROWERS PENSION PLAN" shall have the meaning set forth
             -------------------------------
in Section 8.7(b).

            "CANADIAN  DB PLANS"  shall mean the  following  Canadian  Pension
             ------------------
Plans of SCL:  the  Retirement  Plan  for  Salaried  Employees  of  Joseph  E.
Seagram  & Sons,  Limited  and  Affiliated  Companies,  the  Pension  Plan for
Certain  Salaried   Employees  of  Joseph  E.  Seagram  &  Sons,  Limited  and
Affiliated Companies,  the Retirement Plan for Hourly-Rated Employees (C.A.W.)
of Joseph E. Seagram & Sons, Limited and Affiliated Companies,  the Retirement
Plan for Certain  Hourly-Rated  Employees of Joseph E. Seagram & Sons, Limited
and  Affiliated  Companies,  the Pension  Plan for  Hourly-Rated  Employees of
Joseph E. Seagram & Sons, Limited and Affiliated  Companies,  and the Canadian
Supplemental Pension Plan of Joseph E. Seagram & Sons, Limited, as amended.

            "CANADIAN PENSION PLANS" shall mean all Company Plans which are
             ----------------------
sponsored or maintained by SCL or any of the Spirits Subsidiaries for the
benefit of Business Employees and which are registered pension plans (as defined
in the Income Tax Act (Canada)) but, for greater certainty, excluding the Canada
Pension Plan, the Quebec Pension Plan and any similar plans, programs or
arrangements which are required to be maintained or contributed to by reason of
Applicable Laws.

            "CAPTAIN MORGAN ASSETS" shall have the meaning set forth in Section
             ---------------------
2.5(g)(iii).

            "CAPTAIN MORGAN DAMAGES" shall have the meaning set forth in Section
             ----------------------
2.5(c).

            "CAPTAIN MORGAN LIABILITIES" shall have the meaning set forth in
             --------------------------
Section 2.5(g)(vi).

            "CAPTAIN MORGAN OPERATING AGREEMENT" shall have the meaning set
             ----------------------------------
forth in Section 2.5(b)(ii)(B)(II).

            "CAPTAIN MORGAN RECORDS" shall have the meaning set forth in Section
             ----------------------
2.5(g)(i)(F).

            "CASH EQUIVALENTS" shall mean, collectively, cash, bonds, notes and
             ----------------
commercial paper with a maturity of not more than six months which are rated at
least A1 by Standard & Poor's Corporation or at least P1 by Moody's Investor
Services Inc. and bonds, notes and commercial paper with a maturity of not more
than six months which are held and/or managed by financial institutions which
themselves are rated at least A1 by Standard & Poor's Corporation or at least P1
by Moody's Investors Services Inc. owned by the Seller and the Asset Sale
Subsidiaries.

<PAGE>   13

                                                                               6

            "CAUSE" shall have the meaning set forth in Section 8.15(a).
             -----

            "CHARTER DOCUMENTS" shall have the meaning set forth in Section 4.2.
             -----------------

            "CITRIC LITIGATION" shall have the meaning set forth in the
             -----------------
definition of Retained Assets.

            "CLAIM NOTICE" shall have the meaning set forth in 10.3(a).
             ------------

            "CLOSING" shall have the meaning set forth in Section 3.1.
             -------

            "CLOSING DATE" shall have the meaning set forth in Section 3.1.
             ------------

            "CLOSING NET INDEBTEDNESS" shall have the meaning set forth in
             ------------------------
Section 2.8(a).

            "CLOSING NET WORKING CAPITAL" shall mean, as of the Closing, the
             ---------------------------
excess, if any, of all current assets over all current liabilities of (i) the
Spirits Subsidiaries and (ii) the Asset Sale Subsidiaries with respect to the
Business and which respectively constitute Transferred Assets and Assumed
Liabilities in each case in the following categories: inventories, receivables,
net of allowances, other current assets, accounts payable and accrued
liabilities determined in accordance with GAAP as modified by Schedule A and on
a basis consistent with the June 30 Balance Sheet and using the same foreign
currency exchange rates as used in the preparation of the June 30, 2000 Balance
Sheet.

            "CODE" shall mean the Internal Revenue Code of 1986, as amended.
             ----

            "COMPANY PLANS" shall have the meaning set forth in Section 4.13(a).
             -------------

            "COMPANY RETIREE WELFARE PLANS" shall have the meaning set forth in
             -----------------------------
Section 8.4.

            "COMPANY TOP HAT PLANS" shall have the meaning set forth in Section
             ---------------------
8.9.

            "CONSENT" shall mean any waiver of a breach, consent, approval,
             -------
qualification, license, permit, order or authorization.

            "CONSENTING MEMBER" shall mean a person:
             -----------------

                  (i)   who is an  Assumed  Employee  and a  Member  at the UK
                        Pension Transfer Date;

                  (ii)  who begins to accrue retirement benefits as stated in
                        Section 8.13(b)(ii) under a New Plan as of the UK
                        Pension Transfer Date and who continues to accrue those
                        benefits at the Due Payment Date where the New Plan is
                        able to receive a transfer payment in respect of the
                        whole of the Member's benefits in the Seagram Distillers
                        Scheme; and

<PAGE>   14

                                                                               7

                  (iii) from whom the Seagram Distillers Scheme receives a
                        signed request for a transfer payment in respect of his
                        past service rights to be made to a New Plan and who
                        does not, before the transfer payment is made, withdraw
                        his request or die or become entitled to the payment of
                        immediate benefits under the Seagram Distillers Scheme.

            "CONTRACT" shall mean any contract, lease, permit, agreement, order
             --------
or instrument, commitment or undertaking whether written or unwritten.

            "CONTROL" (including its correlative meanings "controlled by" and
             -------
"under common control with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or the policies
of any Person (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).

            "CONVERSION RATIO" shall have the meaning set forth in Section
             ----------------
8.15(a).

            "CPA FIRM" shall have the meaning set forth in Section 2.8(d).
             --------

            "DEFAULT GST" means any additional AUS GST, penalty, interest or
             -----------
other sum levied against the Seller under the AUS GST Law by reason of non or
late payment of the AUS GST payable in respect of the supply of any or all of
the assets of the Business.

            "DE MINIMIS LOSSES" shall have the meaning set forth in Section
             -----------------
10.5(a)(ii).

            "DERIVATIVE TRANSACTIONS" shall mean any rate swap transactions,
             -----------------------
basis swap, forward rate transaction, commodity swap, commodity option, equity,
or equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or other similar transactions (including any option with respect
to any of the foregoing transactions) or any combination of the foregoing
transactions.

            "DOJ" shall have the meaning set forth in Section 6.3(b).
             ---

            "DUE PAYMENT DATE" shall mean a date notified by the Seller to the
             ----------------
Buyers which is no later than one month after all the Transfer Conditions have
been satisfied, provided they then remain satisfied.

            "ENVIRONMENTAL LAW" shall mean any Applicable Law in effect as of
             -----------------
the date hereof relating to, or imposing standards regarding, the protection of
the environment or health and safety as affected by conditions in the
environment.

            "ERISA" shall have the meaning set forth in Section 4.13(a).
             -----

            "ERISA AFFILIATES" shall have the meaning set forth in Section
             ----------------
8.6(b)(iii).

            "ESTIMATED CLOSING NET INDEBTEDNESS" shall have the meaning set
             ----------------------------------
forth in Section 2.4.

<PAGE>   15

                                                                               8

            "ESTIMATED CLOSING NET INDEBTEDNESS SCHEDULE" shall have the meaning
             -------------------------------------------
set forth in Section 2.4.

            "EUROPEAN COMMUNITY MERGER CONTROL REGULATION" shall mean the
             --------------------------------------------
European Union Council Regulation (EEC) No. 4064/89 of December 21, 1989 on the
control of concentrations between undertakings, as amended by the European
Council Regulation (EC) No. 1310/97 of June 30, 1997.

            "FAIR MARKET VALUE" shall, for purposes of calculating Net
             -----------------
Indebtedness, mean, as of a date of calculation, the value as determined based
where available on, quoted market prices in the most active trading market, or
otherwise calculated as the net present value of each obligation or Derivative
Transaction's future cash flows discounted at a rate equal to the prevailing
market rate of interest for instruments with substantially the same terms and
characteristics.

            "FILING" shall mean any registration, declaration, notification or
             ------
filing.

            "FINANCIAL STATEMENTS" shall have the meaning set forth in Section
             --------------------
4.8.

            "FORM S-8" shall have the meaning set forth in Section 8.15(d).
             --------

            "FTC" shall have the meaning set forth in Section 6.3(b).
             ---

            "GAAP" shall mean those generally accepted accounting principles
             ----
used in the United States and recognized as such by the American Institute of
Certified Public Accountants or by the Financial Accounting Standards Board.

            "GOVERNMENTAL ENTITY" shall mean any U.S. federal, state or local
             -------------------
government or governmental entity or any foreign government or governmental
entity or any political or other subdivision, department or branch thereof or
any regulatory, administrative or other agency or any court or tribunal of any
of the foregoing.

            "GST ACT" shall have the meaning set forth in Section 7.9(c).
             -------

            "GST AMOUNT" means in relation to an AUS Taxable Supply the amount
             ----------
of AUS GST for which the supplier is liable in respect of the AUS Taxable Supply
calculated on the basis that the value of the AUS Taxable Supply is the
consideration payable for the AUS Taxable Supply excluding any amount payable
pursuant to Section 7.9(d).

            "HAZARDOUS MATERIALS" shall mean any hazardous or toxic substance,
             -------------------
material or waste defined, listed or classified as such in any Environmental
Law, including asbestos, petroleum, polychlorinated biphenyls and
urea-formaldehyde insulation.

            "HOUSE OF SEAGRAM UK" shall mean The House of Seagram Limited, a
             -------------------
U.K. limited company and an indirect wholly-owned Subsidiary of the Seller.

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

<PAGE>   16

                                                                               9

            "ICA" shall mean the Investment Canada Act, R.S.C.  1985, C.28, as
             ---
amended.

            "INCOME TAX" or "INCOME TAXES" shall mean any Tax based upon,
             ----------      ------------
measured by, or calculated with respect to income or profits (including any
capital gains Tax, minimum Tax and any Tax on items of Tax preference, but not
including sales, use, real or personal property, gross receipts, Transfer Taxes
or similar Taxes).

            "INDEMNIFIED PARTY" shall have the meaning set forth in Section
             -----------------
10.3(a).

            "INDEMNIFIED REPRESENTATIVE" shall have the meaning set forth in
             --------------------------
Section 6.6(a).

            "INDEMNIFYING PARTY" shall have the meaning set forth in Section
             ------------------
10.3(a).

            "INDEMNITY AMOUNT" shall have the meaning set forth in Section
             ----------------
2.5(b)(i).

            "INPUT TAX CREDIT" has the meaning given to that term by the AUS GST
             ----------------
Law.

            "INSURED BUYER LOSS" shall have the meaning set forth in Section
             ------------------
6.13.

            "INSURED SCL LOSS" shall have the meaning set forth in Section 6.13.
             ----------------

            "INTELLECTUAL PROPERTY" shall mean (i) patents, (ii) trademarks,
             ---------------------
trade names, brand names, corporate names, domain names, logos, trade dress and
service marks, together with the goodwill of the business appurtenant thereto,
(iii) copyrights and copyright registrations, (iv) inventions, (v) rights
related to software, (vi) trade secrets and (vii) know-how, formulas and
processes, in each case, whether registered or unregistered and any
registrations and applications for registration thereof.

            "INTERNATIONAL PENSION PLAN" shall have the meaning set forth in
             --------------------------
Section 8.8(a).

            "INVESTMENT CANADA  UNDERTAKING" shall mean Schedule A attached to
             ------------------------------
the letter dated October 13, 2000 from Vivendi S.A.,  3744531  Canada Inc. and
3045479 Nova Scotia  Company  addressed to the  Minister  Responsible  for ICA
(Minister of Industry (Canada)).

            "ITA" shall have the meaning set forth in Section 2.6.
             ---

            "JES"  shall  mean  Joseph E.  Seagram & Sons,  Inc.,  an  Indiana
             ---
corporation and an indirect wholly-owned Subsidiary of the Seller.

            "JES OFFERS TO PURCHASE" shall have the meaning set forth in Section
             ----------------------
4.19.

            "JES PENSION PLAN" shall have the meaning set forth in Section
             ----------------
8.7(a).

            "JES PUBLIC INDEBTEDNESS" shall have the meaning set forth in
             -----------------------
Section 4.19.

            "JUNE 30 BALANCE SHEET" shall have the meaning set forth in Section
             ---------------------
4.8.

            "JUNE 30 NET WORKING CAPITAL" shall mean $2,141,000,000, subject to
             ---------------------------
adjustments as set forth on Schedule A.

<PAGE>   17

                                                                              10

            "KIRIN MASTER AGREEMENT" shall have meaning set forth in Section
             ----------------------
6.1.

            "KNOWLEDGE" shall mean (i) with respect to the Seller, the actual
             ---------
knowledge of the persons set forth on Schedule 1.1(a), (ii) with respect to
Buyer A, the actual knowledge of the persons set forth on Schedule 1.1(b) and
(iii) with respect to Buyer B, the actual knowledge of the persons set forth on
Schedule 1.1(c).

            "LEASED PROPERTIES" shall have the meaning set forth in Section
             -----------------
4.17.

            "LIABILITIES" shall mean any and all debts, liabilities, commitments
             -----------
and obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by GAAP or any
other accounting principles or standards to be reflected in financial statements
or disclosed in the notes thereto.

            "LIBOR" shall mean the three-month London Inter Bank Offered Rate
             -----
listed on the money tables in the Wall Street Journal, New York City edition.

            "LIENS" shall mean, collectively, any liens, claims, security
             -----
interests, options, rights of first refusal or first offer, charges or other
encumbrances.

            "LOSSES" shall mean all losses, damages, liabilities (arising out
             ------
of, relating to or resulting from claims, charges, actions, suits, proceedings
or otherwise), costs and expenses, including interest, penalties, court costs
and reasonable attorneys' fees and expenses.

            "MATERIAL ADVERSE EFFECT" shall mean any change or effect that is
             -----------------------
materially adverse (i) to the ability of the Seller to consummate the
transactions contemplated hereby or (ii) to the financial condition, assets,
properties or results of operations of the Business, taken as a whole, other
than as a result of, arising from or relating to, directly or indirectly, (A)
changes in prevailing interest rates, (B) changes in general economic or market
conditions, (C) changes or developments in any industry in which the Business
operates, (D) compliance with any covenant set forth in this Agreement or any
Related Agreement (other than any covenant to act in the ordinary course of
business that restricts the conduct of the Business) and any actions required to
be taken pursuant to this Agreement to obtain any Consent under Applicable Law
for the consummation of the transactions contemplated by this Agreement or any
Related Agreement, (E) changes in customer demand, including seasonal changes
and (F) changes in Applicable Law or accounting regulations or principles or
interpretations thereof.

            "MEMBER" shall mean, at any time or during any period specified in
             ------
Section 8.13, an active member of the Seagram Distillers Scheme (including a
member who is temporarily absent on maternity or paternal leave) excluding any
person who is a member for the purpose only of the lump sum death in service
benefit.

            "MEMBER LIABILITIES" shall mean, in relation to a Canadian DB Plan,
             ------------------
the greater of going concern liabilities and solvency liabilities relating to
benefits accrued by Assumed Employees who are members of such Canadian DB Plan,
calculated as at the Closing Date using the actuarial methods and assumptions
used in preparing the last actuarial valuation report prepared in respect of
such Canadian DB Plan, except, where applicable, that an assumption of

<PAGE>   18

                                                                              11

future increases of 4%, or such other percentage as has been agreed upon through
collective  bargaining,  per annum from 2005 in the change in the Revenue Canada
maximum  pension  benefit  should be added to  reflect  the  corresponding  plan
improvement that was made after the last valuation.

            "MINORITY INTERESTS" shall have the meaning set forth in Section
             ------------------
4.3(d).

            "MUMM" shall have the meaning set forth in the definition of
             ----
Retained Liabilities.

            "NET INDEBTEDNESS" shall mean, as of any date, the amount equal to
             ----------------
(i) the sum of (A) the greater of the principal amount of or the Fair Market
Value of all outstanding indebtedness of the Spirits Subsidiaries for borrowed
money owed to third parties as of such date, including contractually required
prepayment costs (except to the extent that any such indebtedness has been
defeased), (B) the Fair Market Value of obligations in respect of all Derivative
Transactions of the Spirits Subsidiaries and Derivative Transactions included in
the Assumed Liabilities not discharged prior to the Closing in accordance with
Section 6.11 hereof, including any penalty and cancellation cost, (C) accrued
interest payable by the Spirits Subsidiaries, (D) all obligations of the Spirits
Subsidiaries and obligations included in the Assumed Liabilities under leases
capitalized in accordance with GAAP and (E) all intercompany indebtedness not
discharged prior to the Closing or purchased by the Buyers in accordance with
the terms of this Agreement owed by a Spirits Subsidiary to any Person other
than a Spirits Subsidiary or otherwise included in the Assumed Liabilities (to
the extent owed to any Person other than a Spirits Subsidiary) (other than
intercompany payables and loans for goods or services provided in the ordinary
course of business of the Business or for the services contemplated to continue
pursuant to the Transition Services Agreement) minus (ii) Cash Equivalents (but
shall exclude any proceeds in connection with the exercise of any rights of
first refusal, rights of first offer or similar rights, other than any proceeds
received in connection with the exercise of the Serralles ROFR, if any, or the
Bianchi Right of First Refusal) of the Spirits Subsidiaries; provided that Cash
Equivalents shall be net of any tax withholding or other costs and expenses
associated with the free distribution of such cash.

            "NEW PLAN" shall mean the pension scheme or schemes described in
             --------
Section 8.13(b) and, where the context permits, includes its or their trustees.

            "NON-U.S. CAPTAIN MORGAN ASSETS" shall have the meaning set forth in
             ------------------------------
Section 2.5(g)(ii).

            "NON-U.S. CAPTAIN MORGAN LIABILITIES" shall have the meaning set
             -----------------------------------
forth in Section 2.5(g)(v).

            "NORMAL  BUSINESS  HOURS"  shall  mean the  hours  Monday  through
             -----------------------
Friday  between  9:00 a.m. and 5:00 p.m.,  local time,  on any business day in
the place in question.

            "NOTICE PERIOD" shall have the meaning set forth in Section 10.3(a).
             -------------

            "NZ GST" shall have the meaning set forth in Section 7.9(c).
             ------

<PAGE>   19

                                                                              12

            "OTHER GOVERNMENTAL CONSENTS" shall have the meaning set forth in
             ---------------------------
Section 6.3(c).

            "OWNED PROPERTIES" shall have the meaning set forth in Section 4.17.
             ----------------

            "PATRON AGREEMENT" shall have the meaning set forth in the
             ----------------
definition of Retained Assets.

            "PATRON GUARANTEE" shall have the meaning set forth in Section
             ----------------
6.17(b).

            "PATRON MUTUAL RELEASE" shall have the meaning set forth in Section
             ---------------------
6.17(b).

            "PAYMENT" means any amount payable under or in connection with this
             -------
Agreement including any amount payable by way of indemnity, reimbursement or
otherwise and includes the provision of any non-monetary consideration.

            "PENSION PLAN" shall have the meaning set forth in Section 4.13(f).
             ------------

            "PERMITTED LIENS" shall mean, collectively, (i) any Liens disclosed
             ---------------
in the Financial Statements, (ii) Liens for Taxes, assessments and other
governmental charges not yet due and payable or, if due, not delinquent or being
contested in good faith by appropriate proceedings, (iii) mechanics', workmen's,
repairmen's, warehousemen's, landlord's, carriers' or other like Liens,
including all statutory Liens, arising or incurred in the ordinary course of
business, (iv) original purchase price conditional sales Contracts and equipment
leases with third parties entered into in the ordinary course of business, (v)
Liens in respect of pledges or deposits under worker's compensation laws or
similar legislation, unemployment insurance or other types of social security or
to secure the performance of statutory obligations, surety and appeal bonds,
bids, leases, government Contracts and similar obligations, (vi) Liens
attributable to the actions of the Buyers or their Affiliates, (vii) municipal
by-laws, development, facility cost sharing and servicing Contracts and zoning,
building or planning restrictions or regulations, (viii) Liens in respect of
easements, permits, licenses, rights-of-way and other similar restrictive
covenants or encroachments or irregularities in, or exceptions to, title and any
conditions with respect to real property are shown by a current survey or title
report or other public record, as of the date hereof, or that are not material
to the use or utility of the underlying asset, (ix) Liens disclosed on Schedule
1.1(d), (x) Liens and defects or irregularities in title or other encumbrances
that do not materially affect the value or use of the underlying asset and (xi)
restrictions on transfer arising under Applicable Law.

            "PERSON" shall mean any individual, corporation, limited liability
             ------
company, partnership, joint venture, trust, estate, association, organization,
labor union, Governmental Entity or other entity.

            "PREMIUM 401(K) PLAN" shall have the meaning set forth in Section
             -------------------
8.6(a).

            "PRE-CLOSING ENVIRONMENTAL CONDITION" shall mean any release of
             -----------------------------------
Hazardous Materials or violation of, non-compliance with or liability under any
applicable Environmental Law prior to the Closing, but shall not include the
removal of any underground tank, electrical equipment containing polychlorinated
biphenyls or asbestos that complies with all applicable

<PAGE>   20

                                                                              13

Environmental  Laws  as of the  Closing  and  has  not  otherwise  released  any
Hazardous  Materials into the environment or any  Transferred  Asset or asset or
property of the Spirits Subsidiaries at or prior to the Closing.

            "PURCHASE PRICE" shall have the meaning set forth in Section 2.1(a).
             --------------

            "QUALIFIED RETIREE WELFARE BENEFIT EMPLOYEE" shall have the meaning
             ------------------------------------------
set forth in 8.4.

            "QUIDS" shall have the meaning set forth in Section 6.12(b).
             -----

            "RECORDS" shall have the meaning set forth in Section 6.4(c).
             -------

            "REGULATORY AMOUNT" shall have the meaning set forth in Section
             -----------------
8.14(d)(vii).

            "RELATED AGREEMENTS" shall mean the following:
             ------------------

            (i)   ASSUMPTION     AGREEMENT.     An    assumption     agreement
                  ------------------------
substantially in the form attached hereto as Exhibit I;

            (ii)  ASSIGNMENT  AND  BILL OF  SALE.  An  assignment  and bill of
                  ------------------------------
sale substantially in the form attached hereto as Exhibit II;

            (iii) TRADEMARK ASSIGNMENT.  A trademark assignment  substantially
                  --------------------
in the form attached hereto as Exhibit III;

            (iv)  PATENT  ASSIGNMENT.  A patent  assignment  substantially  in
                  ------------------
the form attached hereto as Exhibit IV;

            (v)   COPYRIGHT ASSIGNMENT.  A copyright assignment  substantially
                  --------------------
in the form attached hereto as Exhibit V;

            (vi)  TRANSITION  SERVICES  AGREEMENT.   The  Transition  Services
                  -------------------------------
Agreement; and

            (vii) CAPTAIN  MORGAN  OPERATING  AGREEMENT.  If  applicable,  the
                  -------------------------------------
Captain Morgan Operating Agreement.

            "RESOLUTION PERIOD" shall have the meaning set forth in Section
             -----------------
2.8(c).

            "RESOLVED ITEMS" shall have the meaning set forth in Section 2.8(c).
             --------------

            "RETAINED ASSETS" shall mean (i) those assets listed on Schedule
             ---------------
1.1(e), including any and all of the Intellectual Property rights relating
solely thereto, (ii) all assets, properties, rights, privileges, claims and
agreements of every kind and nature, real and personal, tangible and intangible,
absolute or contingent which are held directly or indirectly by any Asset Sale
Subsidiary (other than the Transferred Shares, the Transferred Minority
Interests and any assets, properties, rights, privileges, claims and Contracts
of the Spirits Subsidiaries) not otherwise included in the definition of
Transferred Assets and (iii) the following:

<PAGE>   21

                                                                              14

            (A)  THIS  AGREEMENT.  The  consideration  delivered  to the  Seller
                 ---------------
pursuant  to this  Agreement  and all  rights  of the  Seller,  the  Asset  Sale
Subsidiaries and the Selling Subsidiaries,  as applicable,  under this Agreement
and the Related  Agreements and any instruments  delivered to any of them by the
Buyers  pursuant  to or  in  connection  with  this  Agreement  or  any  Related
Agreement;

            (B)  CASH  EQUIVALENTS.  All  Cash  Equivalents  of any  Asset  Sale
                 -----------------
Subsidiary;

            (C) TAX  REFUNDS.  Any  refund  of Taxes  paid by the  Seller or its
                ------------
Subsidiaries (including the Spirits Subsidiaries) other than refunds, if any, to
which the Buyers are entitled under Section 7.2(a);

            (D)  INSURANCE  POLICIES.  All  insurance  policies  of SCL  and its
                 -------------------
Subsidiaries (other than Seagram SGPS,  Sandeman,  Seagram Distillers,  House of
Seagram UK, Seagram  Australia,  Seagram N.Z. and the Spirits  Subsidiaries) and
all  rights  of the  Seller  and its  Subsidiaries  (other  than  Seagram  SGPS,
Sandeman,  Seagram Distillers,  House of Seagram UK, Seagram Australia,  Seagram
N.Z.  and the Spirits  Subsidiaries)  of every nature and  description  under or
relating to such insurance policies;

            (E) EMPLOYEE BENEFIT ASSETS.  Those assets to be retained by SCL and
                -----------------------
its Subsidiaries (other than Seagram SGPS, Sandeman,  Seagram Distillers,  House
of Seagram UK, Seagram Australia,  Seagram N.Z. and the Spirits Subsidiaries) as
provided pursuant to Article VIII;

            (F)  SERRALLES  RIGHT OF  FIRST  REFUSAL.  All  items  deemed  to be
                 -----------------------------------
Retained Assets pursuant to Section 2.5;

            (G) OTHER THIRD PARTY RIGHTS. All items deemed to be Retained Assets
                ------------------------
pursuant to Section 2.6;

            (H) INTERCOMPANY  RECEIVABLES.  All intercompany  receivables due to
                -------------------------
and loans from SCL or any of its  Subsidiaries  or  Affiliates  (other  than the
Spirits  Subsidiaries),  on the one hand,  from or to any Spirits  Subsidiary or
Asset Sale Subsidiary, on the other hand, not settled on or prior to the Closing
or purchased by Buyers pursuant to Section 6.5(a);

            (I) LITIGATION. (x) All payments or other compensation to be paid by
                ----------
St.  Maarten  Spirits  Limited or St.  Maarten  Spirits,  Ltd., to JES under the
Settlement and Forbearance Agreement, dated as of October 30, 2000, between JES,
SCL, JDC S.A. de C.V.,  JDC Services  S.A. de C.V. and Tequila Don Julio S.A. de
C.V. d/b/a Tequila Tres Magueyes and Tequila Don Julio, on the one hand, and St.
Maarten Spirits Limited, St. Maarten Spirits, Ltd., International Spirit Company
Limited,  Martin  Crowley and John Paul Dejoria (the  "PATRON  AGREEMENT"),  all
                                                       -----------------
rights and obligations of JES under the Patron  Agreement  (other than paragraph
13) and the related Judgment entered September 13, 2000 (including all rights to
sue and enforce  such  Judgment),  all rights and  obligations  of SCL under the
Patron  Agreement  and all  rights  and  obligations  of JES  under  the  Patron
Guarantee;

<PAGE>   22

                                                                              15

            (y)   All payments or other  compensation to be received  pursuant
      to  any  distribution  of  the  settlement  funds   established  in  the
      litigation  known as "In Re: Citric Acid Antitrust  Litigation"  pending
      in the  United  States  District  Court  for the  Northern  District  of
      California,  MDL Docket No.  1092 and Master File No.  C-95-2963  (CAL.)
      ("CITRIC LITIGATION"); and
        -----------------

            (J) U.S. TRADEMARK APPLICATION FOR THE EXPERIENCE IS EVERYTHING. Any
                -----------------------------------------------------------
      and all rights hereafter  acquired,  owned or controlled by JES, in United
      States  Trademark  Application  Serial No.  75/803703  THE  EXPERIENCE  IS
      EVERYTHING.

            "RETAINED EMPLOYEES" shall have the meaning set forth in Section
             ------------------
4.13(j).

            "RETAINED LIABILITIES" shall mean, except as otherwise provided in
             --------------------
this Agreement, the following:

            (i)  INDEBTEDNESS.  All  indebtedness  for  borrowed  money  and any
                 ------------
guarantees  and  accrued   interest  in  respect   thereof  of  the  Asset  Sale
Subsidiaries,  including  indebtedness  to SCL or  any  of its  Subsidiaries  or
Affiliates  (other than  indebtedness to a Spirits  Subsidiary which shall be an
Assumed Liability);

            (ii) RETAINED ASSETS.  All Liabilities to the extent arising out of,
                 ---------------
resulting from or related to the Retained Assets;

            (iii)  SERRALLES  RIGHT OF FIRST  REFUSAL.  All  items  deemed to be
                   ----------------------------------
Retained Liabilities pursuant to Section 2.5;

            (iv) INTERCOMPANY  PAYABLES AND LOANS. All intercompany payables due
                 --------------------------------
from and loans to SCL or any of its  Subsidiaries or Affiliates  (other than the
Spirits  Subsidiaries),  on the one hand,  to or from any Spirits  Subsidiary or
Asset Sale Subsidiary, on the other hand, not settled on or prior to the Closing
or taken into account in determining  any net  receivables or loans purchased by
the Buyers pursuant to Section 6.5(a);

            (v) EMPLOYEE BENEFIT  LIABILITIES.  Those Liabilities to be retained
                -----------------------------
by SCL and its  Subsidiaries  (other than the Spirits  Subsidiaries) as provided
for by Article VIII;

            (vi) All Liabilities to the extent arising out of, resulting from or
related to the Patron Agreement (other than paragraph 13 thereof with respect to
JES) and the Citric Litigation;

            (vii) All Liabilities to the extent arising from,  relating to or in
connection  with the  termination as a result of the Vivendi  Transaction or the
transactions  contemplated  by this Agreement of the  distribution  relationship
between  the  Seller or any or its  Affiliates,  on the one hand,  and (x) Vin &
Spirit Aktiebolag ("V&S") or its Affiliates,  on the other hand, relating to the
                    ---
ABSOLUT  brand,  and/or (y) G.H.  Mumm et Cie,  Societe  Vinicole  de  Champagne
Successeur  ("MUMM"),  on the  other  hand,  relating  to  the  Mumm  brand  and
              ----
out-of-pocket expenses incurred pursuant to the requirements of Section 6.17(c),
except  for any  Liabilities  to the  extent  arising  from,  relating  to or in
connection with the failure of the Buyers and the Spirits Subsidiaries to comply
with Section 6.17(c) following the Closing; and

<PAGE>   23

                                                                              16

            (viii) All  Liabilities in respect of Taxes to the extent the Seller
is obligated to indemnify the Buyers under Section 7.1(a).

            "RETIREE WELFARE BENEFITS" shall have the meaning set forth in
             ------------------------
Section 8.4.

            "RETIREES" shall have the meaning set forth in Section 8.2(a).
             --------

            "SANDEMAN"  shall mean Sandeman & Ca., S.A., a Portuguese  limited
             --------
liability joint stock company and an indirect  wholly-owned  Subsidiary of the
Seller.

            "SCL" shall mean The Seagram Company Ltd., a Canadian  corporation
             ---
and a wholly-owned Subsidiary of the Seller.

            "SCL GUARANTEES" shall have the meaning set forth in Section 6.9(a).
             --------------

            "SCL INSURANCE POLICIES" shall have the meaning set forth in Section
             ----------------------
4.24.

            "SEAGRAM 401(K) PLAN" shall have the meaning set forth in Section
             -------------------
8.6(b)(i).

            "SEAGRAM AUSTRALIA" shall mean Seagram Australia Holdings Pty.
             -----------------
Limited, an Australian proprietary company limited by shares and an indirect
wholly-owned Subsidiary of the Seller.

            "SEAGRAM  DISTILLERS"  shall mean Seagram  Distillers  Plc, a U.K.
             -------------------
public limited company and an indirect wholly-owned Subsidiary of the Seller.

            "SEAGRAM DISTILLERS SCHEME" shall mean the Seagram Distillers
             -------------------------
Pension Scheme. Where the context requires, the "Seagram Distillers Scheme"
includes its trustees.

            "SEAGRAM N.Z." shall mean Seagram (New Zealand) Limited, a New
             ------------
Zealand limited company and an indirect wholly-owned Subsidiary of the Seller.

            "SEAGRAM  SGPS" shall mean  Seagram  S.G.P.S.,  S.A., a Portuguese
             -------------
limited liability joint stock company and an indirect wholly-owned  Subsidiary
of the Seller.

            "SEAGRAM UNION 401(K) PLAN" shall have the meaning set forth in
             -------------------------
Section 8.6(a).

            "SEC" shall mean the U.S. Securities and Exchange Commission.
             ---

            "SEC REPORTS" shall mean all publicly available forms, reports,
             -----------
statements and other documents filed with or submitted to the SEC on or after
January 1, 1999 and prior to the date hereof by SCL or JES, in each case,
excluding all exhibits except the financial statements set forth therein and
schedules related thereto and all financial statements incorporated by reference
therein.

            "SECOND CLOSING" shall have the meaning set forth in Section
             --------------
2.5(b)(ii).

            "SECTION 338 ALLOCATION" shall have the meaning set forth in Section
             ----------------------
7.8(c).

<PAGE>   24

                                                                              17

            "SECTION 338 ALLOCATION SCHEDULE" shall have the meaning set forth
             -------------------------------
in Section 7.8(c).

            "SECTION 338 ELECTIONS" shall have the meaning set forth in Section
             ---------------------
7.8(a).

            "SECTION 338 FORMS" shall have the meaning set forth in Section
             -----------------
7.8(b).

            "SECTION 338 SUBSIDIARIES" shall have the meaning set forth in
             ------------------------
Section 7.8(a).

            "SELLER" shall have the meaning set forth in the heading of this
             ------
Agreement.

            "SELLER INTERNATIONAL PENSION PLAN" shall have the meaning set forth
             ---------------------------------
in Section 8.8(a)(ii).

            "SELLER RETURNS" shall have the meaning set forth in Section 7.4(a).
             --------------

            "SELLING SUBSIDIARIES" shall have the meaning set forth in Section
             --------------------
4.3(a).

            "SERRALLES" shall have the meaning set forth in Section 2.5(a).
             ---------

            "SERRALLES AGREEMENTS" shall mean: (i) the Supply Agreement, dated
             --------------------
as of October 18, 1985, between Serralles and JES; (ii) the Letter Agreement,
dated as of April 30, 1986, between Serralles and JES; (iii) the Supplemental
Agreement to the Supply Agreement, dated as of April 30, 1986, between Serralles
and JES; (iv) the Amendment and Waiver to the Supply Agreement, dated as of
November 27, 1991, between Serralles and JES; (v) the Amendment to the Supply
Agreement, dated as of February 1, 1993, between Serralles and JES; (vi) the
Extension Agreement, dated as of November 9, 1999, between Serralles and JES;
(vii) the Bulk Rum Supply Agreement, dated as of November 9, 1999, between
Serralles and JES; (viii) the Confidentiality Agreement, dated as of May 31,
1985, between Serralles and SCL; (ix) the Asset Purchase Agreement, dated as of
October 1, 1985, between Puerto Rico Distillers, Inc. and Serralles; (x) the
Amendment to Asset Purchase Agreement, dated as of October 18, 1985, between
Puerto Rico Distillers, Inc. and Serralles; (xi) the Bottling Agreement, dated
as of October 18, 1985, between Serralles and JES; (xii) the Trademark License
Agreement, dated as of October 18, 1985, between Seagram United Kingdom Limited
(also trading as Captain Morgan Rum Distillers), Puerto Rico Distillers, Inc.,
JES and Serralles; (xiii) the Supplemental Agreement, dated as of October 1,
1985, between JES and Serralles; (xiv) the Supplemental Agreement, dated as of
October 1, 1985, between SCL and Serralles; (xv) the Release, dated as of
November 27, 1991, among Serralles, JES and Jim Beam Brands Co.; (xvi) the
Puerto Rico Distribution Agreement, dated as of October 18, 1985, between
Seagram Overseas Sales Company (a division of JES) and Serralles; (xvii) the
Trademark License Agreement, dated as of October 18, 1985, between JES, Puerto
Rico Distillers, Inc. and Serralles; (xviii) the Collection Agency Agreement,
dated as of October 18, 1985, between Puerto Rico Distillers, Inc. and
Serralles; (xix) the Letter Agreement, dated as of October 1, 1985, between JES
and Serralles; (xx) the Letter Agreement, dated as of October 1, 1985, between
Puerto Rico Distillers, Inc. and Serralles; and (xxi) the Agreement Concerning
Rum Bottling and Termination of U.S. Distribution Agreement and Bottling
Agreement, dated as of May 11, 1989, between JES and Serralles.

<PAGE>   25

                                                                              18

            "SERRALLES ORDER" shall have the meaning set forth in Section
             ---------------
2.5(b)(i).

            "SERRALLES ROFR" shall have the meaning set forth in Section 2.5(a).
             --------------

            "SERRALLES SELLER" shall have the meaning set forth in Section
             ----------------
2.5(b)(i).

            "SERRALLES SUPPLY AGREEMENT" shall have the meaning set forth in
             --------------------------
Section 2.5(a).

            "SIGNIFICANT SUBSIDIARY" shall mean any direct or indirect
             ----------------------
Subsidiary (other than any Subsidiary which is not more than 50% directly or
indirectly owned by SCL) of SCL within the meaning of Rule 1-02 of Regulation
S-X of the SEC; provided that, for purposes of such definition, total assets and
income from continuing operations before income taxes, extraordinary items and
cumulative effect of change in accounting principle of SCL shall be deemed to be
the total assets and the income from continuing operations before income taxes,
extraordinary items and cumulative effect of change in accounting principle of
the Business as reflected in the Financial Statements.

            "SHORTFALL" shall have the meaning set forth in Section 8.13(e)(iv).
             ---------

            "SHORTFALL AMOUNT" shall have the meaning set forth in Section
             ----------------
2.5(c).

            "SPIRITS IP" shall have the meaning set forth in Section 4.15(a).
             ----------

            "SPIRITS PROPERTIES" shall have the meaning set forth in Section
             ------------------
4.17.

            "SPIRITS SUBSIDIARIES" shall mean, collectively, the Transferred
             --------------------
Subsidiaries and all Subsidiaries of the Transferred Subsidiaries as set forth
on Schedule 4.1(c).

            "SPIRITS SUBSIDIARY GUARANTEES" shall have the meaning set forth in
             -----------------------------
Section 6.9(c).

            "SPIRITS SUBSIDIARY INSURANCE POLICIES" shall have the meaning set
             -------------------------------------
forth in Section 4.24.

            "ST.  MAARTEN PARTIES" shall have the meaning set forth in Section
             --------------------
6.17(b).

            "STRADDLE RETURNS" shall have the meaning set forth in Section
             ----------------
7.4(a).

            "STUB PERIOD" shall have the meaning set forth in Section 8.3(a).
             -----------

            "SUBSIDIARY" shall mean, as to any Person, any corporation,
             ----------
partnership or other entity of which shares of capital stock or other ownership
interests having ordinary voting power equal to more than 50% of all voting
power of such corporation, partnership or other entity or having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person or in which such Person has more
than 50% of the economic interest.

<PAGE>   26

                                                                              19

            "SUCCESSOR BUYER" shall have the meaning set forth in Section
             ---------------
8.1(b).

            "SUCCESSOR DEFINED CONTRIBUTION PLAN" shall have the meaning set
             -----------------------------------
forth in Section 8.6(b)(ii).

            "TAX" or "TAXES" shall mean all federal, state, provincial, local,
             ---      -----
territorial and foreign income, profits, franchise, license, capital, capital
gains, transfer, ad valorem, wage, severance, occupation, import, custom, gross
receipts, payroll, sales, employment, use, property, real estate, excise, value
added, goods and services estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties, assessments or
governmental tax charges of any kind whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts.

            "TAX AUTHORITY" shall mean any domestic, foreign, federal, national,
             -------------
state, provincial, county or municipal or other local government, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
body exercising any taxing authority or any other authority exercising Tax
regulatory authority.

            "TAX INVOICE" has the meaning given to that term by the AUS GST Law.
             -----------

            "TAX RETURN" shall mean all returns, declarations, reports, forms,
             ----------
claims for refund or information returns or statements relating to Taxes
(whether in tangible or electronic form), including any schedule or attachment
thereto, and including any amendment thereof filed or to be filed with any Tax
Authority in connection with the determination, assessment or collection of
Taxes.

            "TAXABLE SUPPLY" has the meaning given to that term by the AUS GST
             --------------
Law.

            "TERMINEES" shall have the meaning set forth in Section 8.2(a).
             ---------

            "THRESHOLD" shall have the meaning set forth in Section 10.5(a)(i).
             ---------

            "TRANSFER CONDITIONS" shall mean all of the following:
             -------------------

            (i)  The  Buyer  or  the  Successor  Buyer  has  complied  with  the
requirements  of  Section  8.13(b)  and the New  Plan is as  described  in,  and
complies with, Section 8.13(b)(ii);

            (ii) The Board of Inland  Revenue has given written  approval to the
transfer of assets from the Seagram  Distillers  Scheme to the relevant New Plan
in respect of the Consenting Members and any condition to which that approval is
subject is satisfied;

            (iii) The Seagram Distillers Scheme has received the signed requests
from the Consenting Members; and

            (iv) The  calculation of the UK Transfer Amount has become final and
binding as set out in Section 8.13.

<PAGE>   27

                                                                              20

            "TRANSFER TAXES" shall mean all sales, value added, goods and
             --------------
services, excise, multi-stage, retail sales, use and land transfer taxes, stamp
duties, stamp duty reserve tax and any other similar taxes, duties, assessments
or governmental charges, together with all interest, penalties and additions
imposed with respect to such amounts.

            "TRANSFERRED ASSETS" shall mean all of the right, title and interest
             ------------------
directly or indirectly held by the Asset Sale Subsidiaries in the assets,
properties, rights, privileges, goodwill, claims and agreements of every kind
and nature, real and personal, tangible and intangible, absolute or contingent,
known or unknown (other than any shares of capital stock or other equity
interests or voting securities, including the Transferred Shares, any
Transferred Minority Interests and any direct or indirect assets, properties,
rights, privileges, claims and agreements of the Transferred Subsidiaries or the
Transferred Minority Interests, and other than the Retained Assets) and which
primarily relate to, and form part of, the Business as of the Closing Date,
including the following:

            (i) BALANCE SHEET ASSETS.  The assets of the Asset Sale Subsidiaries
                --------------------
reflected  on the June 30 Balance  Sheet  (other  than any such  assets  sold or
otherwise  disposed  of since June 30, 2000 in the  ordinary  course of business
consistent  with past  practice or as  permitted by Section 6.1) and all similar
assets of the Asset Sale  Subsidiaries  acquired as part of the  Business  after
June 30, 2000, including:

            (A)  INVENTORY.  (I) All  finished  goods  inventory of the Business
                 ---------
      owned by the Asset Sale Subsidiaries (including any such inventory held by
      their  respective  co-packers  or  brokers)  wherever  situated,  (II) all
      work-in-progress  of the  Business  owned by the Asset  Sale  Subsidiaries
      (including any such work-in-progress held by their respective co-packers),
      (III) all raw  materials  of the  Business of the Asset Sale  Subsidiaries
      (including any such materials held by their respective  co-packers),  (IV)
      all  unbranded  alcohol or liquor  products  held for sale to  third-party
      bottlers or mixers of products similar to products sold by the Business of
      the Asset Sale Subsidiaries; (V) all finished goods held by the Asset Sale
      Subsidiaries for sale through retail  establishments  that are Transferred
      Assets and (VI) all packaging and promotional  materials of the Asset Sale
      Subsidiaries  to  be  used  primarily  in  connection  with  the  Business
      (collectively, the "TRANSFERRED INVENTORY");
                          ---------------------

            (B) REAL PROPERTY.  All real property and interests in real property
                -------------
      owned by the Asset Sale  Subsidiaries (the "TRANSFERRED REAL PROPERTY") as
                                                  -------------------------
      designated on Schedule 4.17, including all buildings, structures and other
      improvements  situated  thereon  (the  "TRANSFERRED  FACILITIES")  and all
                                              -----------------------
      easements,  privileges,  rights-of-way  and other rights pertaining to the
      Transferred  Real Property,  to which any Asset Sale Subsidiary has title,
      in each case,  subject to  Permitted  Liens and those  exceptions  (i) set
      forth on  Schedule  4.17 or (ii) which  would not have a Material  Adverse
      Effect;

            (C)  MACHINERY AND  EQUIPMENT.  All  machinery,  equipment and other
                 ------------------------
      items of personal  property owned or leased by the Asset Sale Subsidiaries
      which are used primarily in the Business or which are used in the Business
      and are  located at the  Transferred  Facilities  or any real  property or
      facility  leased  primarily  for the  conduct  of the  Business  as of the
      Closing  Date  (the  "TRANSFERRED   MACHINERY")  and  all  warranties
                            -----------------------

<PAGE>   28

                                                                              21

      and guarantees,  if any,  express or implied,  existing for the benefit of
      the Asset Sale Subsidiaries in connection with the Transferred  Machinery,
      to the extent transferable; and

            (D) INTELLECTUAL  PROPERTY. All Intellectual Property which pertains
                ----------------------
      to the "Seagram" name or is used primarily in the Business,  including any
      such  Intellectual  Property set forth on Schedule 4.15(a)  (together with
      the  goodwill of the  Business  represented  thereby),  subject to (i) all
      pre-existing  licenses and other  agreements  concerning the same and (ii)
      Section 6.15 (collectively, the "TRANSFERRED INTELLECTUAL PROPERTY");
                                       ---------------------------------

            (ii) BUSINESS  RECORDS.  All Records in the possession of the Seller
                 -----------------
and the  Asset  Sale  Subsidiaries  relating  to the  Business,  subject  to the
provisions of Section 6.4 hereof;

            (iii) CONTRACTS. All Contracts to which any Asset Sale Subsidiary is
                  ---------
a party or by which any of them is bound that relate  primarily to the Business,
including any confidentiality  agreements that relate primarily to the Business,
including  those  agreements  listed  on  Schedule  1.1(f)  (collectively,   the
"ASSIGNED CONTRACTS");
 ------------------

            (iv) CONSENTS.  To the extent  transferable,  all Consents issued to
                 --------
the Asset Sale Subsidiaries by any Governmental Entity which primarily relate to
the Business (collectively, the "TRANSFERRED CONSENTS");
                                 --------------------

            (v) EMPLOYEE  BENEFIT ASSETS.  Those assets to be transferred to the
                ------------------------
Buyers as provided for pursuant to Article VIII;

            (vi)  INSURANCE.  All insurance  proceeds and rights  related to the
                  ---------
Business with respect to events or occurrences prior to the Closing;

            (vii)  LITIGATION.  The  assets  related  to all  causes of  action,
                   ----------
lawsuits,  judgments,  claims and demands of any nature that primarily relate to
the Business (other than any Retained Assets or Retained Liabilities); and

            (viii) LICENSES. To the extent transferable,  all licenses,  permits
                   --------
and approvals of the Asset Sale Subsidiaries primarily relating to the Business.

            "TRANSFERRED CONSENTS" shall have the meaning set forth in the
             --------------------
definition of "Transferred Assets".

            "TRANSFERRED EMPLOYEES" shall mean those Business Employees
             ---------------------
associated with the Transferred Assets or otherwise designated by the Buyers and
the Seller.

            "TRANSFERRED FACILITIES" shall have the meaning set forth in the
             ----------------------
definition of "Transferred Assets".

            "TRANSFERRED INTELLECTUAL PROPERTY" shall have the meaning set forth
             ---------------------------------
in the definition of "Transferred Assets".

<PAGE>   29

                                                                              22

            "TRANSFERRED INVENTORY" shall have the meaning set forth in the
             ---------------------
definition of "Transferred Assets".

            "TRANSFERRED MACHINERY" shall have the meaning set forth in the
             ---------------------
definition of "Transferred Assets".

            "TRANSFERRED MINORITY INTERESTS" shall have the meaning set forth in
             ------------------------------
Section 4.3(d).

            "TRANSFERRED REAL PROPERTY" shall have the meaning set forth in the
             -------------------------
definition of "Transferred Assets".

            "TRANSFERRED SHARES" shall have the meaning set forth in Section
             ------------------
4.3(a).

            "TRANSFERRED SUBSIDIARIES" shall mean those Subsidiaries of the
             ------------------------
applicable Selling Subsidiary as set forth on Schedule 1.1(g).

            "TRANSITIONAL PERIOD" shall mean the period starting on the Closing
             -------------------
Date and ending immediately before the UK Pension Transfer Date.

            "UK PENSION TRANSFER DATE" shall mean in relation to any transfer to
             ------------------------
be made under Section 8.13 the date falling 12 months after the Closing Date or
any other date agreed by the Seller and the Buyers in writing.

             "UK REORGANIZATION" shall mean the reorganization of certain of the
              -----------------
United Kingdom companies owned by the Seller (including, without limitation,
Chivas Brothers Limited and Chivas 2000 Unlimited) occurring on or about October
27, 2000, details of which were disclosed in the data room.

            "ULTRA AGREEMENTS" shall have the meaning set forth in Section
             ----------------
6.2(d).

            "UNRESOLVED ITEMS" shall have the meaning set forth in Section
             ----------------
2.8(d).

            "U.S.  CAPTAIN  MORGAN ASSETS" shall have the meaning set forth in
             ----------------------------
Section 2.5(g)(i).

            "U.S.  CAPTAIN  MORGAN  INTELLECTUAL   PROPERTY"  shall  have  the
             ----------------------------------------------
meaning set forth in Section 2.5(g)(i)(A).

            "U.S.  CAPTAIN  MORGAN  LIABILITIES"  shall have the  meaning  set
             ----------------------------------
forth in Section 2.5(g)(iv).

            "U.S.  CAPTAIN MORGAN TRADEMARKS" shall have the meaning set forth
             -------------------------------
in Section 2.5(g)(i)(A).

            "V&S" shall have the meaning set forth in the definition of Retained
             ---
Liabilities.

            "VALENTIN BIANCHI" shall have the meaning set forth in Section 2.7.
             ----------------

<PAGE>   30

                                                                              23

            "VIVENDI TRANSACTION" shall have the meaning set forth in Section
             -------------------
4.22.

            "VIVENDI  UNIVERSAL"  shall mean Vivendi  Universal S.A., a French
             ------------------
societe anonyme.

            "V/U DESIGNEE" shall have the meaning set forth in Section 8.2(a).
             ------------

            "WARN" shall have the meaning set forth in Section 8.10.
             ----

            SECTION 1.2 RULES OF CONSTRUCTION.  (a) References in this Agreement
                        ---------------------
to any gender include references to all genders,  and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and  "including"  when used in this Agreement  shall be deemed to be followed by
the  phrase  "without  limitation".   Unless  the  context  otherwise  requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
this  Agreement.  Unless the context  otherwise  requires,  the words  "hereof",
"hereby" and "herein" and words of similar  meaning when used in this  Agreement
refer to this  Agreement  in its  entirety  and not to any  particular  Article,
Section or provision of this Agreement.

            (b)  Where an amount  of money to be paid or  calculated  or used in
calculation under this Agreement is in or is calculated in a currency other than
U.S.  Dollars,  the amount shall be converted into U.S.  Dollars on the basis of
the noon buying rate in New York City for cable transfers in foreign  currencies
as certified  for customs  purposes by the Federal  Reserve Bank of New York and
reported  at the  time  such  payment  first  becomes  due or on the date of the
relevant calculation.

            (c) For  purposes  of  Article IV and  Article VI hereof,  the terms
"Retained  Liabilities"  and  "Retained  Assets"  shall be deemed not to include
assets or liabilities deemed Retained Assets or Retained  Liabilities,  pursuant
to Article II hereof.

                                   ARTICLE II

                  PURCHASE, SALE AND ASSUMPTION OF LIABILITIES
                  --------------------------------------------

            SECTION  2.1  PURCHASE  AND  SALE  OF THE  TRANSFERRED  SHARES,  THE
                          ------------------------------------------------------
TRANSFERRED  MINORITY  INTERESTS AND THE TRANSFERRED  ASSETS. (a) Upon the terms
------------------------------------------------------------
and subject to the  conditions  of this  Agreement,  at the Closing,  the Seller
shall or shall cause to be sold, conveyed,  assigned,  transferred and delivered
to the Buyers and the Buyers shall purchase and acquire all of the right,  title
and interest of the Asset Sale  Subsidiaries  and the Selling  Subsidiaries,  as
applicable,  in  and  to  (i)  the  Transferred  Shares,  including  all  of the
outstanding  capital stock of JES, (ii) the Transferred  Minority  Interests and
(iii) the  Transferred  Assets for an aggregate  purchase price of U.S.  Dollars
8,150,000,000,  as such amount may be adjusted  pursuant to Sections  2.4,  2.5,
2.6, 2.7 and/or 6.5 (the "PURCHASE PRICE") in the manner described  herein.  The
                          --------------
Purchase Price (plus the Assumed Liabilities) shall be allocated as set forth on
Schedule 2.1. Subject to any purchase price adjustment pursuant to Sections 2.4,
2.5, 2.6, 2.7 and/or 6.5, the Buyers and the Seller agree to report the purchase
and sale of the Transferred  Shares, the

<PAGE>   31

                                                                              24

Transferred  Minority Interests and the Transferred Assets on any Tax Returns in
accordance with the provisions of Schedule 2.1 as adjusted. Subject to the terms
hereof,  at the Closing,  Buyer A shall pay or cause to be paid to the Seller by
wire transfer of funds to an account of the Seller  (being an account  specified
by the Seller at least three Business Days prior to the Closing) an amount equal
to the product of (i) the Base  Purchase  Price and (ii) the Buyer A Proportion.
Subject to the terms  hereof,  at the Closing,  Buyer B shall pay or cause to be
paid to the Seller by wire transfer of immediately available funds to an account
of the Seller (being an account  specified by the Seller at least three Business
Days prior to the Closing) an amount  equal to product of (i) the Base  Purchase
Price and (ii) the Buyer B Proportion.

            (b) The amount (the "BASE PURCHASE  PRICE") to be paid at Closing by
                                 --------------------
Buyer A and Buyer B in the aggregate shall be (i) an amount equal to the excess,
if any,  of (A)  U.S.  Dollars  8,150,000,000  over (B) an  amount  equal to the
Estimated Closing Net Indebtedness and (ii) to the extent applicable, subject to
adjustment pursuant to Sections 2.5, 2.6 and/or 6.5.

            SECTION 2.2 ASSUMPTION OF LIABILITIES. On the terms and subject to
                        -------------------------
the  conditions of this  Agreement,  at the Closing,  Buyer A and Buyer B in the
aggregate shall assume and undertake to pay, satisfy and discharge when due, all
of the Assumed Liabilities.

            SECTION  2.3  REQUIRED  CONSENTS.  Except to the extent set forth in
                          ------------------
Section 2.5, to the extent that the transactions  contemplated hereby, including
the sale,  conveyance,  transfer,  assignment  or  delivery or  attempted  sale,
conveyance,  transfer,  assignment  or delivery to the Buyer of any  Transferred
Shares, Transferred Minority Interests,  Transferred Assets or any assets of the
Transferred  Subsidiaries,  (i) would  require any  Consent of any  Governmental
Entity or other third party and such Consent shall not have been obtained  prior
to the Closing and the  receipt of such  Consent is not  required to satisfy any
condition precedent to the Closing set forth in Article IX or (ii) is subject to
any injunction,  restraining  order or decree of any nature of any  Governmental
Entity which would not prevent any condition  precedent to the Closing set forth
in  Article  IX from  being  satisfied,  this  Agreement  shall  not at  Closing
constitute a sale, conveyance, transfer, assignment or delivery, or an attempted
sale, conveyance,  transfer,  assignment or delivery thereof, to such extent and
the applicable Transferred Shares,  Transferred Minority Interests,  Transferred
Assets and/or assets of the Transferred  Subsidiaries shall be withheld from any
such sale, conveyance,  transfer,  assignment or delivery at the Closing without
any  reduction  in the  Purchase  Price and,  if  necessary  and  subject to the
provisions of this Section 2.3,  shall be treated as a Retained Asset under this
Agreement.  Following the Closing,  the parties shall use their  reasonable best
efforts,  and shall  cooperate  with each  other,  to obtain  promptly  any such
Consent or to vacate, overturn or otherwise dissolve any such injunction,  order
or decree.  Pending  or in the  absence  of any such  Consent  or the  vacating,
overturning or other  dissolution of any such injunction,  order or decree,  the
parties  shall   cooperate   with  each  other  in  any  reasonable  and  lawful
arrangements  designed  to  provide  to  the  Buyers  all of  the  benefits  and
Liabilities of any such  Transferred  Shares,  Transferred  Minority  Interests,
Transferred Assets or assets of the Transferred  Subsidiaries,  including at the
direction  of the  Buyers,  the  disposition  of any  such  Transferred  Shares,
Transferred Minority Interests,  Transferred Assets or assets of the Transferred
Subsidiaries to any other Person as if they had been conveyed at Closing and, to
the extent  retaining  assets,  such  assets  shall be  managed in all  material
respects in the manner in which they have been historically  managed.  Following
the Closing, if any such Consent for the sale, conveyance,  transfer, assignment
or delivery of any

<PAGE>   32

                                                                              25

such Transferred Shares,  Transferred Minority Interests,  Transferred Assets or
assets of the  Transferred  Subsidiaries is satisfied or obtained or if any such
injunction,  order or decree is vacated,  overturned or otherwise dissolved, the
Seller shall promptly cause to be conveyed, transferred,  assigned and delivered
to the Buyers,  or at the  direction  of the Buyers,  such  Transferred  Shares,
Transferred Minority Interests,  Transferred Assets or assets of the Transferred
Subsidiaries  and the Seller agrees that it shall hold or shall cause to be held
any such Transferred Shares, Transferred Minority Interests,  Transferred Assets
or assets of the  Transferred  Subsidiaries in accordance with the terms of this
Agreement  (including  all  provisions  that  would  otherwise  expire as of the
Closing, including the provisions of Section 6.1).

            SECTION 2.4 ESTIMATED  ADJUSTMENT TO PURCHASE  PRICE.  At least five
                        ----------------------------------------
Business Days prior to the Closing Date, the Seller shall deliver to the Buyer a
schedule (the "ESTIMATED  CLOSING NET INDEBTEDNESS  SCHEDULE") setting forth the
               ---------------------------------------------
amount  reasonably  estimated  by the Seller to be the  aggregate  amount of the
Closing Net Indebtedness ("ESTIMATED CLOSING NET INDEBTEDNESS") certified by the
                           ----------------------------------
Chief Financial  Officer of the Seller.  The Estimated  Closing Net Indebtedness
Schedule shall also identify the obligor of each individual item of indebtedness
taken into account in the calculation.

            SECTION 2.5 SERRALLES RIGHT OF FIRST REFUSAL.  (a) The Seller hereby
                        --------------------------------
represents  that the Supply  Agreement  dated as of October 18, 1985, as amended
through  November 1999 and in effect on the date hereof (the  "SERRALLES  SUPPLY
                                                               -----------------
AGREEMENT"), between JES and Destileria Serralles, Inc. ("SERRALLES"),  contains
---------                                                 ---------
a provision  providing Serralles with a right of first refusal to purchase JES's
Captain Morgan rum trademarks under the circumstances set forth in the Serralles
Supply  Agreement  (the  "SERRALLES  ROFR").  Serralles  and  Allied  Domecq Plc
                          ---------------
("ALLIED")  have  made the  following  public  statements  with  respect  to the
  ------
Serralles ROFR:

      "...they have concluded a strategic alliance regarding the acquisition of
      Seagram's Captain Morgan rum brand. As part of its existing agreement to
      supply rum to Seagram, Destileria Serralles has a right of first refusal
      over any proposed transfer of the Captain Morgan brand, which is being
      sold in connection with the sale of the Seagram spirits and wine business.
      Destileria Serralles has undertaken to exercise this right in the event
      that a party other than Allied Domecq gains control of the Seagram spirits
      and wine business. In that event, the agreement between Allied Domecq and
      Destileria Serralles provides Allied Domecq with the right to acquire the
      Captain Morgan brand."

On December 4, 2000, Serralles filed a complaint in Puerto Rico against Seagram
and JES with respect to the Serralles ROFR. The Seller and the Buyers do not
agree that Serralles has the right to exercise the Serralles ROFR in connection
with the transactions contemplated by this Agreement and the Related Agreements.
In connection with such complaint or any other litigation or other adversary
proceeding which may result, the Buyers and the Seller wish (i) to provide
certainty and finality to the transactions contemplated by this Agreement and
the Related Agreements to the extent possible even in the event of an adverse
determination in any such litigation or other adversary proceeding addressing
the Serralles ROFR and (ii) to avoid the irreparable harm which the U.S. Captain
Morgan Assets would suffer if any of such assets, to the

<PAGE>   33

                                                                              26

extent independently identifiable, were disaggregated from JES and were required
to be retained by the Seller and operated on a  stand-alone  basis by the Seller
during  the  pendency  of any  such  litigation  or other  adversary  proceeding
(because the Captain  Morgan  Assets are not operated in a manner  separate from
the Business and the Seller will no longer  otherwise be in the alcohol beverage
business).  The Buyers and the Seller have agreed that the  provisions set forth
in this  Section 2.5 shall apply in the event of the above  litigation  or other
adversary proceeding with respect to the Serralles ROFR.

            (b) (i)  Following the Closing,  if a court or  arbitrator  issues a
final  decision  or order,  subject to no  further  appellate  review,  granting
injunctive  relief,  specific  performance or declaratory  relief  upholding the
right of  Serralles  to  exercise  the  Serralles  ROFR in  connection  with the
transactions  contemplated  by this  Agreement  and the  Related  Agreements  (a
"SERRALLES  ORDER"),  and if  Serralles  exercises  its rights and enters into a
 ----------------
binding agreement with the Seller, one of its Affiliates,  Buyer B or one of its
Affiliates (a  "SERRALLES  SELLER") to purchase  from the  applicable  Serralles
                -----------------
Seller all or any portion of the  applicable  Captain Morgan Assets or otherwise
purchases from a Serralles Seller in accordance with the terms of any such final
decision  or  order,  then the  applicable  Serralles  Seller  shall  reasonably
promptly  and in all events  within the time  required in the  Serralles  Order,
transfer or cause the transfer to Serralles (including, if appropriate, by first
transferring  to the Seller or one of its  Affiliates)  of those Captain  Morgan
Assets and Captain Morgan Liabilities and the Seller shall simultaneously pay to
Buyer B the  Indemnity  Amount (or, if the purchase  amount is paid  directly to
Buyer B, the amount by which the  Indemnity  Amount  exceeds  the amount so paid
subject to the dollar amount and  percentage  limitations  in Section  2.5(c) or
Seller's  obligation  to assume any Shortfall  Amount)  together with 50% of any
amounts  received  by the  Seller in excess of the  Indemnity  Amount,  it being
understood  that  in  connection  with  any  such  transfer  by  Buyer  B or its
Affiliates  they  shall  have no  obligation  to take any  action,  provide  any
commitment,  undertaking or indemnity,  or make any  representation or warranty,
other than the mere delivery of the applicable Captain Morgan Assets and Captain
Morgan Liabilities with a warranty that the Captain Morgan Assets are all of the
Captain  Morgan Assets owned by the  applicable  Serralles  Seller and they have
been operated in a manner consistent in all material respects with the manner in
which Seller  operated the Captain Morgan Assets.  The "INDEMNITY  AMOUNT" shall
                                                        -----------------
mean that amount of the Purchase  Price which Buyer B and the Seller have agreed
reflects  (together  with  the  assumption  of  the  applicable  Captain  Morgan
Liabilities)  the fair market value of the Captain  Morgan Assets as of the date
hereof as follows:  $1.638 Billion (the  "ALLOCABLE  U.S.  CAPTAIN MORGAN BRANDS
                                          --------------------------------------
AMOUNT")  for the  U.S.  Captain  Morgan  Assets  and the  U.S.  Captain  Morgan
------
Liabilities and, to the extent applicable, $202 Million (the "ALLOCABLE NON-U.S.
                                                              ------------------
CAPTAIN  MORGAN BRANDS  AMOUNT") for the non-U.S.  Captain Morgan Assets and the
------------------------------
non-U.S. Captain Morgan Liabilities.

If for any reason Serralles does not enter into a binding  agreement to purchase
the  Captain  Morgan  Assets  and  Captain  Morgan  Liabilities  subject  to any
Serralles  Order,  or enters into such an agreement but does not  consummate the
purchase of such Captain  Morgan  trademarks  and other  Captain  Morgan  Assets
pursuant to such  agreement or does not  otherwise  consummate  such a purchase,
then Buyer B shall not transfer or cause the transfer to  Serralles,  the Seller
or any of its  Affiliates of the  applicable  Captain  Morgan Assets and Captain
Morgan  Liabilities and the Seller shall not make any of the Indemnity Amount or
other payments  specified in this clause (b)(i) to Buyer B. If and to the extent
that a transaction between the applicable Serralles Seller

<PAGE>   34

                                                                              27

and Serralles does not provide for, or Serralles does not otherwise effect,  the
assumption  by  Serralles  of the Captain  Morgan  Liabilities,  the  applicable
Serralles  Seller shall  transfer to the Seller and the Seller shall assume such
Captain  Morgan  Liabilities.  The Seller agrees to vigorously and in good faith
oppose any claim, order, decision or judgment which could lead to the imposition
of a  Serralles  Order  and to use its best  efforts  to  cause  to be  vacated,
overturned or reversed any such claim, order, decision or judgment.

            (ii) At any time when the Closing would  otherwise occur pursuant to
this  Agreement but for the  existence of an order of a court or arbitrator  (A)
directly or indirectly  preventing the Seller from transferring JES and/or other
Spirits  Subsidiaries  with all or part of the Captain Morgan Assets and Captain
Morgan Liabilities pursuant to this Agreement based on the Serralles ROFR or (B)
granting  declaratory  relief  upholding  the right of Serralles to exercise the
Serralles  ROFR  in  connection  with  the  transactions  contemplated  by  this
Agreement  and such right  shall not have been waived by  Serralles  or the time
period in which such right may be exercised by Serralles shall not have expired,
then the parties shall,  as promptly as reasonably  practicable,  take all steps
necessary to permit the Closing to occur as soon as  reasonably  practicable  on
the terms and conditions  herein,  except as necessary to disaggregate  from the
Business the relevant  Captain Morgan Assets and Captain  Morgan  Liabilities as
set  forth  in such  order.  Such  Captain  Morgan  Assets  and  Captain  Morgan
Liabilities  required to be disaggregated and not transferred  shall,  pending a
later  second  closing  with Buyer B for the Captain  Morgan  Assets and Captain
Morgan Liabilities (a "SECOND CLOSING"),  be retained by the Seller and shall be
                       --------------
treated as  "Retained  Assets" and  "Retained  Liabilities"  hereunder,  and the
Closing shall proceed as modified by this clause (ii), except that:

                  (I)   the  Base  Purchase  Price  payable  by Buyer B at the
            Closing  shall be reduced by the  Allocable  U.S.  Captain  Morgan
            Brands Amount and, if the order  provides that the Serralles  ROFR
            applies to the non-U.S.  Captain Morgan trademarks,  the Allocable
            Non-U.S. Captain Morgan Brands Amount;

                  (II) in the case of clause (A), to the extent permitted if
            there is a preliminary injunction, non-final order or non-final
            permanent injunction and, in the case of clause (B), to prevent
            irreparable harm to the Captain Morgan brands which would result
            from any such brands being retained and operated by the Seller on a
            stand-alone basis (because the Seller will no longer otherwise be in
            the alcohol beverage business and the Captain Morgan Assets are not
            operated in a manner separate from the Business), Buyer B, or its
            applicable Affiliate, shall agree to operate and conduct the Captain
            Morgan business (including all production, marketing and
            distribution) and the Seller shall license the applicable Captain
            Morgan trademarks to Buyer B, or its applicable Affiliate, pursuant
            to an operating agreement providing that all of the profit relating
            to the Captain Morgan Assets shall be for the account of Buyer B and
            such other reasonable terms as Buyer B and the Seller shall agree
            (the "CAPTAIN MORGAN OPERATING AGREEMENT") pending final disposition
                  ----------------------------------
            of any such litigation or other adversary proceeding or pending the
            consummation of the purchase, if any, by Serralles or Buyer B of the
            Captain Morgan Assets subject to any such order; and

<PAGE>   35

                                                                              28

                  (III) in the case of clauses (A) and (B), if any such
            preliminary injunction, non-final order or non-final permanent
            injunction is subsequently vacated, overturned or otherwise
            dissolved, and in the case of clause (B), if Serralles waives or
            fails to exercise the Serralles ROFR, then as soon as reasonably
            practicable thereafter a Second Closing shall occur at which the
            Seller shall convey or cause to be conveyed to Buyer B the
            applicable retained Captain Morgan Assets which were deemed in
            accordance with this Section 2.5(b)(ii) to be "Retained Assets" and
            Buyer B, or its applicable Affiliate, shall assume the applicable
            Captain Morgan Liabilities which were deemed in accordance with this
            Section 2.5(b)(ii) to be "Retained Liabilities", as the case may be,
            and Buyer B, or its applicable Affiliate, shall pay to the Seller
            the Allocable U.S. Captain Morgan Brands Amount and/or the Allocable
            Non-U.S. Captain Morgan Brands Amount withheld from the original
            Purchase Price in accordance with clause (I) above, as applicable.

In connection  with any Closing as modified by this paragraph (ii) or any Second
Closing,  the parties  shall effect any such  Closing or Second  Closing and the
transactions  contemplated  hereby on terms and conditions and in a manner which
shall  have as nearly as  possible  the  equivalent  effect as the  transactions
otherwise provided for by this Agreement.  It is understood and agreed that none
of the  parties  hereto  shall be  required to effect the Closing as modified in
this paragraph (ii), if an order of a court  preventing  Closing shall remain in
place following the mitigation efforts set forth in this paragraph (ii).

            (iii)  If  (A)  there  is an  order  issued  prior  to  the  Closing
preventing  Buyer B from acquiring all or part of the Captain Morgan  trademarks
and other Captain  Morgan  Assets which is not vacated,  overturned or otherwise
dissolved  on or before  June 30, 2002 or (B) there is any other  litigation  or
other  adversary  proceeding by Serralles or Allied  seeking a decision or order
granting  specific  performance  or  declaratory  relief  upholding the right of
Serralles to exercise the  Serralles  ROFR in connection  with the  transactions
contemplated by this Agreement and the Related  Agreements which continues or is
initiated  after the Closing and which  shall  extend for a period  ending on or
after  June 30,  2002,  then  the  Seller  shall  have  the  option  in its sole
discretion  to settle  any such  litigation  or other  adversary  proceeding  by
offering to sell to  Serralles  the  Captain  Morgan  Assets and Captain  Morgan
Liabilities  upon such terms as the Seller may determine in its sole  discretion
(and, for the avoidance of doubt,  the Seller shall not be entitled to settle in
such manner or with similar  effect prior to June 30,  2002);  provided that the
Seller shall not be entitled to effect any such  settlement  if Buyer B notifies
the  Seller  that the Buyer  Indemnified  Parties  have  waived  their  right to
indemnification  pursuant to Section  2.5(c) and if Buyer B agrees to  indemnify
the Seller and its  Affiliates  for all Captain  Morgan Damages which the Seller
and its  Affiliates  may incur and,  in such case,  Buyer B shall be entitled to
assume the direction of any such  litigation or other  adversary  proceeding and
any settlement  thereof. If Serralles accepts the Seller's offer to purchase the
Captain Morgan Assets and Captain Morgan  Liabilities,  as applicable,  then (A)
the applicable Serralles Seller, shall transfer, or cause to be transferred, the
applicable  Captain Morgan Assets to Serralles,  (B) Serralles  shall assume the
applicable  Captain  Morgan  Liabilities  and,  if  not,  the  Seller  shall  be
responsible for the Captain Morgan Liabilities, (C) any Captain Morgan Operating
Agreement between the Seller and Buyer B entered into pursuant to clause (II) of
paragraph (ii) above shall automatically  terminate and (D) if any such transfer
is by Buyer B or any of its Affiliates  (other than any

<PAGE>   36

                                                                              29

transfer  relating to the  termination  of the Operating  Agreement  pursuant to
clause (IV) of paragraph (ii) above), the Seller shall simultaneously  refund to
Buyer B the Indemnity  Amount  together with 50% of any payment  received by the
Seller for the Captain Morgan Assets and Captain Morgan Liabilities in excess of
the Indemnity  Amount.  If any such  transfer to and  assumption by Serralles in
settlement  of any such  litigation  or other  adversary  proceeding is to occur
prior to the Closing,  the Buyers shall nevertheless remain obligated to buy and
the  Seller  shall  remain  obligated  to sell the  Business  on the  terms  and
conditions of this  Agreement,  except that (A) the  applicable  Captain  Morgan
Assets to be purchased by Serralles  shall be deemed to constitute  and shall be
treated  as  "Retained  Assets"  hereunder  and the  applicable  Captain  Morgan
Liabilities  to be assumed by Serralles  shall be deemed to constitute and shall
be treated as "Retained  Liabilities" hereunder and (B) the Purchase Price shall
be  reduced by the  Allocable  U.S.  Captain  Morgan  Brands  Amount if the U.S.
Captain  Morgan Assets are  transferred to Serralles and shall be reduced by the
Allocable Non-U.S.  Captain Morgan Brands Amount if the Non-U.S.  Captain Morgan
Assets are also transferred to Serralles.

            (c) LITIGATION AND INDEMNITY. The Seller shall be entitled to direct
                ------------------------
all  litigation  or  other  adversary  proceedings,   and,  subject  to  Section
2.5(b)(iii),  any  settlement  thereof,  with respect to the Serralles  ROFR, in
consultation  with Buyer B and its counsel.  Buyer B shall  cooperate fully with
the Seller in any such  litigation  or other  adversary  proceedings,  including
making the personnel and records of the Buyers and their Affiliates available as
needed for  information  or testimony  and shall  provide to Buyer A any written
material  received  in  connection  with  such  litigation  that  would  not  be
reasonably likely to have an adverse effect on  attorney-client  privilege.  The
Seller shall  indemnify  the Buyer  Indemnified  Parties for all court costs and
reasonable  attorneys' fees and expenses and all damages (including,  penalties,
interest and lost  profits,  if any) awarded in  litigation  or other  adversary
proceedings with Serralles and/or Allied or any other Person with respect to the
Serralles ROFR (collectively,  "CAPTAIN MORGAN DAMAGES"), provided, however that
                                ----------------------
Seller's  liability for Captain Morgan  Damages plus any Shortfall  Amount shall
not exceed Two Hundred  Fifty  Million  Dollars  ($250,000,000).  If the Captain
Morgan  Damages and Shortfall  Amount  exceed Two Hundred Fifty Million  Dollars
($250,000,000),  Seller  and Buyer B shall each be  responsible  for 50% of such
excess.  The "SHORTFALL  AMOUNT" shall mean the excess of (A) the Allocable U.S.
              -----------------
Captain  Morgan Brands Amount and/or  Allocable  Non-U.S.  Captain Morgan Brands
Amount actually paid by Seller or deducted from the Base Purchase Price pursuant
to Section  2.5(b) in connection  with a Serralles  Order or other order in such
litigation over (B) the amount of consideration actually received by Seller upon
exercise  of the  Serralles  ROFR in the  event a court  or  arbitrator  finally
determines,  subject to no further appellate review,  that the Serralles ROFR is
triggered  by the  transactions  contemplated  by this  Agreement or the Related
Agreements. Notwithstanding any other provision of this Agreement or any Related
Agreement,  the remedies set forth in this Section 2.5(c) shall be exclusive and
in lieu of any other  remedies  that may be available  to the Buyer  Indemnified
Parties  under  this  Agreement  or  any  other  agreement  or  pursuant  to any
statutory, common or civil law with respect to any Captain Morgan Damages or any
other Losses arising from or relating to, directly or indirectly,  the Serralles
ROFR,  any transfer of all or any Captain  Morgan  Assets and any  assumption of
Captain Morgan Liabilities in connection with the Serralles ROFR or this Section
2.5 and any claim,  litigation or other adversary proceeding in respect thereof.
The  provisions  of Sections  10.6 and 10.7 shall apply in  connection  with any
indemnification for Captain Morgan Damages.

<PAGE>   37

                                                                              30

            (d)  Notwithstanding  anything to the contrary herein,  Seller shall
bear no  indemnification  responsibility  or  liability  to the  Buyers  for any
actions  taken by any of the Buyers or any of their  Affiliates  to cause JES or
any other Spirits Subsidiary to transfer any Captain Morgan Trademarks following
the Closing,  except any transfer  required in a Serralles Order or provided for
in Section 2.5.

            (e) If a court or  arbitrator  issues a final  order,  subject to no
further  appellate  review,  requiring  a separate  auction of the U.S.  Captain
Morgan Assets or the Non-U.S.  Captain Morgan Assets to effectuate the Serralles
ROFR, then so long as there has not been a material adverse change from the date
of this Agreement in the business,  revenues or Liabilities of the U.S.  Captain
Morgan Assets or the Non-U.S. Captain Morgan Assets, Buyer B agrees that it will
bid in such auction and agree to pay in cash at least U.S. Dollars 1,638,000,000
for the U.S. Captain Morgan Assets and at least U.S. Dollars 202,000,000 for the
Non-U.S. Captain Morgan Assets.

            (f) To the extent  any court  issues  any  injunction  or order with
respect to the Serralles  ROFR which provides for the Serralles ROFR to apply to
a portion of the  Captain  Morgan  Assets and  Captain  Morgan  Liabilities  not
otherwise  specifically provided for in this Section 2.5, the provisions of this
Section 2.5 shall nevertheless  continue to apply to the fullest extent possible
with such modifications, including to the amount of the Indemnity Amount, as the
Seller and Buyer B shall reasonably approve.

            (g) (i) "U.S.  CAPTAIN  MORGAN  ASSETS" shall mean all of the direct
                     -----------------------------
and indirect right, title and interest:

            (A) in and to all United  States  trademarks,  trade names,  service
      marks,  brand names,  corporate names and domain names  (registered in the
      generic top-level  domains ".com",  ".net" or ".org") containing the words
      "Captain Morgan",  or related U.S. marks listed under the "Captain Morgan"
      trademarks on Schedule  2.5(c),  either alone or in conjunction with other
      words  or any  logos,  trade  dress  or  designs,  whether  registered  or
      unregistered, and any U.S. applications for registration thereof, together
      with the  goodwill of the  Captain  Morgan  business in the United  States
      (including its territories)  represented thereby (the "U.S. CAPTAIN MORGAN
                                                             -------------------
      TRADEMARKS"),  the formula for Captain  Morgan rum which is distributed in
      ----------
      the  United  States  and  any  U.S.  copyrights,   whether  registered  or
      unregistered,  including  any artwork and designs  (including  designs for
      labels,  packages and bottles) pertaining  exclusively to the U.S. Captain
      Morgan Trademarks  (collectively,  the "U.S.  CAPTAIN MORGAN  INTELLECTUAL
                                              ----------------------------------
      PROPERTY");
      --------

            (B) all molds, dies, casts and advertising and promotional  material
      pertaining  exclusively  to U.S.  Captain  Morgan brands  bearing the U.S.
      Captain Morgan  Trademarks  and all materials used in connection  with the
      packaging  of the U.S.  Captain  Morgan  brands  bearing the U.S.  Captain
      Morgan Trademarks;

            (C) all finished goods inventories,  work-in-progress, raw materials
      and packaging  materials  bearing the U.S.  Captain  Morgan  Trademarks or
      which pertain exclusively to the U.S. Captain Morgan brands;

<PAGE>   38

                                                                              31

            (D) the Serralles Agreements;

            (E) all Consents of  Governmental  Entities to the extent related to
      the U.S.  Captain  Morgan  Intellectual  Property and U.S.  Captain Morgan
      brands; and

            (F) all Records which  primarily  relate to the U.S.  Captain Morgan
      brands ("CAPTAIN MORGAN RECORDS").
               ----------------------

            (ii)  "NON-U.S.  CAPTAIN MORGAN ASSETS" shall mean all assets of the
                   -------------------------------
type  included  within the  categories  of assets set forth in clauses (A), (B),
(C), (D) (E) and (F) of the  definition of U.S.  Captain Morgan Assets but which
do not  pertain  to the  United  States  Captain  Morgan  trademarks  or  brands
distributed in the United States or with respect to all domain names  registered
in country code top-level domains.

            (iii)  "CAPTAIN  MORGAN ASSETS" shall mean,  collectively,  the U.S.
                    ----------------------
Captain Morgan Assets and the Non-U.S. Captain Morgan Assets.

            (iv) "U.S.  CAPTAIN MORGAN  LIABILITIES"  shall mean all Liabilities
                  ---------------------------------
which arise out of, result from or relate to the U.S.  Captain  Morgan Assets or
the distribution of Captain Morgan in the U.S.

            (v) "NON-U.S. CAPTAIN MORGAN LIABILITIES" shall mean all Liabilities
                 -----------------------------------
which arise out of, result from or relate to the Non-U.S. Captain Morgan Assets.

            (vi) "CAPTAIN MORGAN LIABILITIES" shall mean, collectively, the U.S.
                  --------------------------
Captain Morgan Liabilities and the Non-U.S. Captain Morgan Liabilities.

            (vii) For purposes of this Section 2.5(g), "U.S." or "United States"
shall mean the United States,  its  territories  (other than Puerto Rico and the
United   States  Virgin   Islands)  and  its  military  or  other   governmental
installations throughout the world (other than in Puerto Rico.)

            SECTION 2.6 NO SALE. If there is a sale of any property  pursuant to
                        -------
Section  2.1 which is  "taxable  Canadian  property"  within the  meaning of the
Income Tax Act (Canada) (the "ITA") by a Person who is a non-resident  of Canada
                              ---
for  purposes  of the ITA,  such  person  will  obtain a  clearance  certificate
pursuant  to the  provisions  of  Section  116 of the ITA in a form  and  with a
certificate limit acceptable to the Buyers acting reasonably.

            SECTION  2.7  BIANCHI  RIGHT  OF  FIRST  REFUSAL.  Pursuant  to  the
                          ----------------------------------
Shareholders  Agreement,  dated as of July 28, 1980 (the  "BIANCHI  SHAREHOLDERS
                                                           ---------------------
AGREEMENT"),  among Joseph E.  Seagram & Sons  Limited,  Enzo  Arnaldo  Bianchi,
---------
Alcides Jose  Bianchi,  Aurelio  Stradella,  Constanza Ana Bianchi de Stradella,
Maria del Carmen  Cuarterola  de Bianchi and Maria  Delia Cesar de Bianchi  (the
"BIANCHIS"),  pursuant to which the joint venture company Valentin Bianchi y Cia
 --------
S.A.  ("VALENTIN  BIANCHI")  was formed,  Joseph E.  Seagram & Sons  Limited,  a
        -----------------
Canadian  corporation,  has granted the  Bianchis a right of first  refusal (the
"BIANCHI  RIGHT OF FIRST  REFUSAL")  with  respect to any  proposed  sale of the
 --------------------------------
Seller's  15% equity  interest  in  Valentin  Bianchi  (the  "BIANCHI  SHARES").
                                                              ---------------
Pursuant to the Bianchi Right of First Refusal, the Seller is required to notify
the  Bianchis  of its  decision  to sell the  Bianchi  Shares  pursuant  to this
Agreement, the name of the Buyer as the proposed purchaser and the conditions of
the proposed

<PAGE>   39

                                                                              32

sale hereunder and the Bianchis are entitled to exercise their right to purchase
the Bianchi Shares within 30 days of the Seller's notice upon the same terms and
conditions  that the Seller proposes to accept  hereunder.  The Seller agrees to
provide such notice  within five days after the date hereof.  The Seller and the
Buyers  agree that the amount of the  Purchase  Price that is  allocable  to the
Bianchi  Shares is,  and,  therefore,  that the  purchase  price  payable by the
Bianchis in  connection  with the exercise of the Bianchi Right of First Refusal
shall equal, U.S. Dollars 15,000,000 (the "BIANCHI PURCHASE PRICE").  The Seller
                                           ----------------------
shall  promptly  notify the Buyers of the waiver or exercise by the  Bianchis of
the Bianchi Right of First  Refusal or the  expiration of the time period during
which the Bianchi Right of First Refusal may be exercised. If the Bianchis shall
have  exercised the Bianchi  Right of First  Refusal,  the parties  hereto shall
nonetheless remain obligated to consummate the transactions  contemplated hereby
on the terms and conditions set forth herein, except that (i) the Bianchi Shares
shall no longer  constitute  Transferred  Shares and shall not be transferred to
the Buyers,  (ii) the portion of the Purchase  Price payable by Buyer B shall be
reduced  by the  amount of the  Bianchi  Purchase  Price  and (iii) the  Bianchi
Purchase Price and the Bianchi Shares shall be deemed to constitute and shall be
treated as a "Retained Asset" hereunder.

            SECTION 2.8 POST-CLOSING ADJUSTMENT. (a) As soon as practicable, but
                        -----------------------
in no event later than ninety (90) days  following the Closing Date,  the Buyers
(or any Affiliate of the Buyers)  shall  deliver to the Seller a calculation  of
(i) the Net  Indebtedness  as of the Closing (the  "CLOSING NET  INDEBTEDNESS"),
                                                    -------------------------
(ii) the Closing Net Working  Capital and (iii) the June 30 Net Working  Capital
(together, the "CALCULATION").
                -----------

            (b) The Seller shall and shall cause its  Affiliates  to provide the
Buyers and their  respective  Affiliates  and their  authorized  representatives
reasonable   access  during  normal  business  hours  and  without   significant
disruption of the business of the Seller, to all books, records and employees of
the Seller and its Affiliates having information that would assist the Buyers in
their preparation of the Calculation,  including any external accountants of the
Seller and its Affiliates. In addition, the Seller shall use its reasonable best
efforts,  and shall use its reasonable best efforts to cause its Affiliates,  to
take all  actions  reasonably  necessary  to ensure  that a full  balance  sheet
closing in respect of the Business can take place at the Closing Date as if such
date was a fiscal  year end  sufficient  to  allow  financial  statements  to be
produced at that date similar,  in all material respects,  to those prepared for
SCL on a consolidated basis; provided that the Buyers shall reimburse the Seller
and its  Affiliates  for their  reasonable  out-of-pocket  expenses  incurred in
connection therewith.

            (c) After receipt of the Calculation,  the Seller shall have 45 days
to review the Calculation.  During such period,  the Buyers and their respective
Affiliates   shall  provide  the  Seller  and  its  authorized   representatives
reasonable   access  during  normal  business  hours  and  without   significant
disruption to the business of the Buyers and their respective Affiliates, to (i)
all books,  records and employees of the Buyers and their respective  Affiliates
having relevant  information  concerning the Calculation to the extent that such
information was used in the  Calculation  and (ii) each Buyer's  accountants who
assisted the Buyers in preparing  the  Calculation.  Unless the Seller  delivers
written notice to the Buyers,  on or prior to the 45th day after the delivery of
the  Calculation  stating that the Seller has objections to the  Calculation and
describing any such objections,  the Seller shall be deemed to have accepted and
agreed to the  Calculation.  In addition,  any item included in the  Calculation
which is not  objected  to by the

<PAGE>   40

                                                                              33

Seller shall be deemed to be accepted by the Seller  ("RESOLVED  ITEMS") and any
                                                       ---------------
amounts  included  within  such item  shall be deemed to be final,  binding  and
conclusive.  If  the  Seller  notifies  the  Buyers  of  its  objections  to the
Calculation,  the Buyers and the Seller  shall,  within 10 days (or such  longer
period  as the  parties  may  agree  in  writing)  following  such  notice  (the
"RESOLUTION  PERIOD"),  attempt to resolve  their  differences,  and any written
 ------------------
resolution  by them as to any  disputed  amounts  shall be  final,  binding  and
conclusive.

            (d) Any  amounts  remaining  in  dispute  at the  conclusion  of the
Resolution Period ("UNRESOLVED ITEMS") shall be submitted to Deloitte and Touche
                    ----------------
LLP (such firm being  referred  to as the "CPA  FIRM") or, if such firm shall be
                                           ---------
unable or unwilling to serve in such capacity or if the parties shall  otherwise
mutually agree, such other nationally recognized firm of independent accountants
collectively  agreed to by the Seller the Buyers (and,  in such case,  such firm
shall be deemed to be the CPA Firm),  within 10 days after the expiration of the
Resolution Period.  Each party agrees to execute,  if requested by the CPA firm,
an engagement  letter with the CPA Firm containing  reasonably  customary terms.
All fees and expenses  relating to the work,  if any, to be performed by the CPA
Firm  shall  be borne  by the  Seller  and the  Buyers  based  on the  following
formulas,  (i) the Seller shall pay a portion of such fees and expenses equal to
the total of such fees and expenses  multiplied by a fraction,  the numerator of
which is the dollar amount of Unresolved  Items  resolved in favor of the Buyers
and the denominator of which is the total dollar amount of Unresolved  Items and
(ii) the Buyers shall pay a portion of such fees and expenses equal to the total
of such fees and expenses  multiplied  by a fraction,  the numerator of which is
the dollar  amount of Unresolved  Items  resolved in favor of the Seller and the
denominator  of which is the total dollar  amount of Unresolved  Items.  The CPA
Firm shall act as an arbitrator and not as an expert to determine,  based on the
provisions  of this  Section  2.8,  only the  Unresolved  Items.  The CPA Firm's
determination  of the  Unresolved  Items  shall be made within 30 days after the
submission  of the  Unresolved  Items  to the  CPA  Firm  and,  together  with a
calculation  of the Closing  Net  Indebtedness  and Closing Net Working  Capital
based upon the amount of Resolved Items and the CPA Firm's determinations of the
Unresolved  Items,  shall be set forth in a written  statement  delivered to the
Seller and the Buyers by the CPA Firm and shall be final, binding and conclusive
on the parties unless there shall be manifest  error.  In no event shall the CPA
Firm's  determination  of the Unresolved Items be for an amount which is outside
the range of the Seller's and the Buyers' disagreement.

            (e) Within five (5) Business Days following  either (i) an agreement
or  deemed  agreement  by the  Buyers  and  the  Seller  as to the  Closing  Net
Indebtedness,  the  Closing  Net  Working  Capital  and the June 30 Net  Working
Capital or (ii) the CPA Firm's determination of the Closing Net Indebtedness and
Closing Net Working  Capital,  (A) if the Estimated  Closing Net Indebtedness is
greater than the Closing Net Indebtedness, then, the Buyers based on the Buyer A
Proportion and the Buyer B Proportion  shall pay to the Seller the amount of any
such excess and, if the Closing Net  Indebtedness  is greater than the Estimated
Closing Net Indebtedness,  then, the Seller shall pay to the Buyers based on the
Buyer A Proportion  and the Buyer B Proportion the amount of any such excess and
(B) if the Closing Net Working  Capital is greater  than the June 30 Net Working
Capital,  the Buyers based on the Buyer A Proportion  and the Buyer B Proportion
shall pay the Seller the  amount of any such  excess  and,  if the  Closing  Net
Working Capital is less than the June 30 Net Working  Capital,  the Seller shall
pay the Buyers  based on the Buyer A Proportion  and the Buyer B Proportion  the
amount of any such

<PAGE>   41

                                                                              34

shortfall;  provided that any amounts to be paid pursuant to clauses (A) and (B)
shall be offset against each other if applicable.

            (f) Any payments  made pursuant to this Section 2.8 shall be made by
wire  transfer  of  immediately  available  funds in U.S.  Dollars to an account
indicated  by the  party to  receive  such  funds and  shall be  accompanied  by
interest at the LIBOR Rate calculated on the basis of a year of 360 days for the
actual number of days elapsed, accrued from the Closing Date up to and including
the date of payment.

            (g) Any payments made in respect of any adjustment  pursuant to this
Section 2.8 shall be treated as adjustments to the Purchase Price.

                                  ARTICLE III

                                   THE CLOSING

            SECTION  3.1  CLOSING   DATE.   The  closing  of  the   transactions
                          --------------
contemplated  by this Agreement  other than Sections 2.5 and 2.6 (the "CLOSING")
                                                                       -------
shall take place at the  offices of Simpson  Thacher & Bartlett,  425  Lexington
Avenue,  New York, New York at 10:00 a.m., local time, on the fifth Business Day
following the  satisfaction or due waiver of the conditions set forth in Article
IX, or at such other time,  date and place as shall be fixed by agreement of the
Seller and the  Buyers  (the date on which the  Closing  actually  occurs  being
hereinafter  referred to as the "CLOSING  DATE") and the Closing shall be deemed
                                 -------------
to have occurred at 11:59 p.m. on the Closing Date.

            SECTION 3.2 SELLER'S  DELIVERIES  AT CLOSING.  At the  Closing,  the
                        --------------------------------
Seller shall  deliver,  or cause to be  delivered,  to the Buyers the  following
items:

            (i) SHARE  CERTIFICATES.  Certificates  representing the Transferred
                -------------------
Shares and Transferred Minority Interests, duly endorsed in blank or accompanied
by stock powers duly  executed in blank or in favor of the  applicable  Buyer or
such other  assignments,  transfer forms,  endorsements or other  instruments or
documents of transfer as required by the  jurisdiction  of  organization of each
Transferred  Subsidiary and Transferred  Minority Interest in form and substance
reasonably acceptable to the Buyers;

            (ii) CLOSING  CONDITIONS.  The documents specified in clauses (iii),
                 -------------------
(iv) and (v) of Section 9.2;

            (iii) FIRPTA  CERTIFICATE.  To the extent  available,  a certificate
                  -------------------
claiming  exemption  from  withholding  tax under  Section  1445 of the Internal
Revenue Code of 1986,  as amended,  with respect to the transfer of stock of any
U.S. corporation or any U.S. real property interest; and

            (iv) ADDITIONAL TRANSFERS.  Such additional  instruments of transfer
                 --------------------
as the Seller and the Buyers shall reasonably agree.

<PAGE>   42

                                                                              35

            SECTION  3.3 BUYERS'  DELIVERIES  AT CLOSING.  At the  Closing,  the
                         -------------------------------
Buyers,  as  applicable,  shall  deliver or cause to be delivered  the following
items to the Seller:

            (i) THE PURCHASE  PRICE.  The Base Purchase  Price in the manner set
                -------------------
forth in Section 2.1;

            (ii) CLOSING  CONDITIONS.  The documents specified in clauses (iii),
                 -------------------
(iv) and (v) of Section 9.3; and

            (iii) ADDITIONAL TRANSFERS.  Such additional instruments of transfer
                  --------------------
as the Seller and the Buyers shall reasonably agree.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

            The Seller  hereby  represents  and warrants to the Buyers as of the
date hereof and as of the  Closing,  except (i) as disclosed in the SEC Reports,
(ii)  as set  forth  on the  applicable  Schedule  attached  to  this  Agreement
(provided  that the listing of an item on one  Schedule  shall be deemed to be a
listing  on each other  Schedule  and to apply to any other  representation  and
warranty or covenant of the Seller in this Agreement or any Related Agreement to
the extent that it is reasonably apparent from a reading of such disclosure item
that it would also qualify or apply to such other representation and warranty or
covenant),  (iii) as  contemplated  by this Agreement or any Related  Agreement,
(iv) with respect to any Retained Assets or Retained  Liabilities (other than in
connection  with  Section  4.7(c))  or (v)  to the  extent  arising  from  or in
connection  with the failure of the Buyers to approve  entering into by December
31,  2000,  those  contracts   contemplated  by  the  Kirin  Master   Agreement,
substantially  in the form previously  delivered to the Buyers prior to the date
of this Agreement as follows:

            SECTION   4.1.   DUE   ORGANIZATION,   GOOD   STANDING   AND  POWER;
                             ---------------------------------------------------
SUBSIDIARIES.  (a) SELLER, THE ASSET SALE SUBSIDIARIES AND SELLING SUBSIDIARIES.
--------------------------------------------------------------------------------
The Seller and each of the Asset Sale Subsidiaries and the Selling  Subsidiaries
is duly  organized,  validly  existing  and, to the extent  applicable,  in good
standing  under  the  laws  of its  jurisdiction  of  organization  and  has all
corporate or other  organizational  power and authority  necessary to own, lease
and operate its properties,  to carry on the Business as currently  conducted by
it and, to the extent  applicable,  to execute and deliver this Agreement and/or
any Related  Agreements and to consummate the transactions  contemplated  hereby
and thereby. With respect to the Business, the Seller and each of the Asset Sale
Subsidiaries and the Selling Subsidiaries is duly qualified and in good standing
to do business in each  jurisdiction  in which the conduct of the Business by it
makes such qualification or good standing necessary,  except for any failures to
be so  qualified or in good  standing  which would not  reasonably  be likely to
have,  individually or in the aggregate,  a Material Adverse Effect. Each of the
Asset Sale  Subsidiaries  and the Selling  Subsidiaries  is a direct or indirect
Subsidiary of the Seller.

            (b) SPIRITS  SUBSIDIARIES.  Except as set forth on Schedule  4.1(b),
                ---------------------
each of the Spirits Subsidiaries is duly organized, validly existing and, to the
extent  applicable,  in good

<PAGE>   43

                                                                              36

standing  under  the  laws  of its  jurisdiction  of  organization  and  has all
corporate or other  organizational  power and authority  necessary to own, lease
and operate its properties  and to carry on the Business as currently  conducted
by it,  except for any  failures  to possess any such power or  authority  which
would not  reasonably be likely to have,  individually  or in the  aggregate,  a
Material Adverse Effect. Each of the Spirits Subsidiaries is duly qualified and,
to the extent  applicable,  in good standing to do business in each jurisdiction
in which the  conduct of the  Business  by it makes such  qualification  or good
standing  necessary,  except  for any  failures  to be so  qualified  or in good
standing  which would not reasonably be likely to have,  individually  or in the
aggregate, a Material Adverse Effect.

            (c)  SUBSIDIARIES OF THE TRANSFERRED  SUBSIDIARIES.  Schedule 4.1(c)
                 ---------------------------------------------
sets forth a complete list of all Subsidiaries of the Transferred Subsidiaries.

            (d) SIGNIFICANT SUBSIDIARIES.  Schedule 4.1(d) sets forth a complete
                ------------------------
list of all Spirits Subsidiaries which constitute Significant Subsidiaries.

            SECTION  4.2.  ORGANIZATIONAL  DOCUMENTS.  Except  as  set  forth on
                          -------------------------
Schedule  4.2,  prior to the date hereof,  the Seller has made  available to the
Buyers or their  representatives  a complete and correct copy of the certificate
of  incorporation  and by-laws or other  comparable  charter and  organizational
documents   (collectively,   "CHARTER   DOCUMENTS")   of  each  of  the  Spirits
                              -------------------
Subsidiaries,  in each case,  as in effect as of the date  hereof.  Such Charter
Documents are in full force and effect and none of the Spirits  Subsidiaries  is
in violation of any provision of its Charter Documents,  except (i) as set forth
in Schedule  4.2 and (ii) for any  failures to be in full force or effect or any
violation which would not be reasonably  likely to have,  individually or in the
aggregate, a Material Adverse Effect.

            SECTION 4.3. CAPITALIZATION. (a) TRANSFERRED SHARES. Schedule 4.3(a)
                         --------------      ------------------
sets forth for each of the Transferred  Subsidiaries (i) its authorized  capital
stock or other  equity  interests,  (ii) the  total  number  of its  issued  and
outstanding  shares of capital  stock or other  equity  interests  and (iii) the
number of its issued and  outstanding  shares of capital  stock or other  equity
interests   directly   held  by  the   applicable   Subsidiary   of  the  Seller
(collectively,  the  "SELLING  SUBSIDIARIES")  as set forth on  Schedule  4.3(a)
                      ---------------------
(collectively,  the  "TRANSFERRED  SHARES").  Except  as set  forth on  Schedule
                      -------------------
4.3(a),  all of the Transferred  Shares are, to the extent  applicable under the
laws  of  the  jurisdiction  of  organization  of  the  applicable   Transferred
Subsidiary,  validly issued,  fully paid and non-assessable and were issued free
of preemptive or similar rights.  Except (i) for directors' qualifying shares or
other similar equity interests or (ii) for shares or other equity interests held
by  nominees  to the  extent  required  under  the laws of the  jurisdiction  of
organization of the applicable Transferred Subsidiary on, all of the Transferred
Shares are directly owned by the Seller or the applicable  Selling Subsidiary as
set forth on Schedule 4.3(a) free and clear of all Liens.

            (b) SUBSIDIARY SHARES.  Except (i) for director qualifying shares or
                -----------------
other  equity  interests,  (ii) for  shares or other  equity  interests  held by
nominees  to  the  extent  required  under  the  laws  of  the  jurisdiction  of
organization of the applicable  Transferred  Subsidiary or (iii) as set forth on
Schedule  4.3(b),  all of the issued and outstanding  shares of capital stock or
other equity  interests of each Subsidiary of the Transferred  Subsidiaries  are
owned, directly or indirectly, by the Transferred Subsidiaries free and clear of
all Liens.

<PAGE>   44

                                                                              37

            (c) OTHER EQUITY INTERESTS AND OBLIGATIONS OF SPIRITS  SUBSIDIARIES.
                ----------------------------------------------------------------
Except as set forth on Schedules 4.3(a), 4.3(b), 4.3(c) or 4.6, (i) there are no
outstanding or authorized (A) shares of capital stock or other equity  interests
or voting securities of the Spirits Subsidiaries,  (B) securities of the Spirits
Subsidiaries  convertible  into or  exchangeable  for shares of capital stock or
other equity interests or voting  securities of the Spirits  Subsidiaries or (C)
options,  securities  or other  rights to acquire  from the Seller,  the Selling
Subsidiaries  or the Spirits  Subsidiaries,  or obligations  of the Seller,  the
Selling  Subsidiaries or the Spirits Subsidiaries to issue, any capital stock or
other equity  interests or voting  securities or securities  convertible into or
exchangeable for capital stock or other equity interests or voting securities of
the  Spirits  Subsidiaries,  (ii) there are no  outstanding  obligations  of the
Spirits  Subsidiaries  to  repurchase,  redeem or otherwise  acquire any capital
stock  or  other  equity   interests  or  voting   securities   of  the  Spirits
Subsidiaries,  (iii) there are no other options,  calls,  puts,  rights of first
refusal or first offer,  preemptive  rights,  warrants or other similar  rights,
agreements,  arrangements  or commitments  specifically  relating to the capital
stock or other equity interests or voting securities of the Spirits Subsidiaries
to which the Seller or any of its  Subsidiaries is a party or is otherwise bound
and (iv) as of the date hereof, there are no outstanding capital calls on any of
the Transferred Minority Interests.

            (d) MINORITY  INTERESTS.  Schedule 4.3(d) sets forth a complete list
                -------------------
of all capital stock, membership interests, partnership interests, joint venture
interests  or other  equity  interests  in any Person  (other  than any  Spirits
Subsidiary)  owned,  directly  or  indirectly,  by  the  Seller  or  any  of its
Affiliates which are engaged in businesses similar to the Business and which are
material  to  the  Business  taken  as  a  whole  (collectively,  the  "MINORITY
                                                                        --------
INTERESTS").  Schedule  4.3(d) also indicates all such Minority  Interests which
---------
are directly held by the Seller or any of its Affiliates (other than the Spirits
Subsidiaries) (collectively,  the "TRANSFERRED MINORITY INTERESTS").  Except (i)
                                   ------------------------------
for director  qualifying  shares or other equity interests or (ii) for shares or
other equity interests held by nominees to the extent required under the laws of
the jurisdiction of organization of the entity in which the applicable  Minority
Interests  are held,  all of the  Minority  Interests  are  owned,  directly  or
indirectly, by the Seller free and clear of all Liens.

            (e)  INDEBTEDNESS.  Schedule 4.3(e) sets forth a complete list as of
                 ------------
September  30,  2000 of (i) the  principal  amount  of all  indebtedness  of the
Spirits Subsidiaries for borrowed money owed to third parties other than the JES
Public Indebtedness,  the ACES and the QUIDS, (ii) all guarantees of the Spirits
Subsidiaries in respect of indebtedness for borrowed money owed to third parties
and (iii) all agreements with respect to interest rate swaps,  foreign  currency
hedges or other derivative or hedging agreements to which any Spirits Subsidiary
is a party or is otherwise bound.

            SECTION 4.4. AUTHORIZATION.  The execution, delivery and performance
                         -------------
of this  Agreement by the Seller and the Related  Agreements by the Seller,  the
Asset Sale  Subsidiaries and the Selling  Subsidiaries,  as applicable,  and the
consummation  by the  Seller,  the  Asset  Sale  Subsidiaries  and  the  Selling
Subsidiaries, as applicable, of the transactions contemplated hereby and thereby
have been duly  authorized  by all necessary  corporate or other  organizational
action on the part of the Seller,  the Asset Sale  Subsidiaries  and the Selling
Subsidiaries. This Agreement has been duly and validly executed and delivered by
the Seller and, as of the Closing, each of the Related Agreements will have been
duly and  validly  executed  and  delivered  by the  Seller  and the Asset  Sale
Subsidiaries,  as  applicable.  Assuming the due  authorization,  execution

<PAGE>   45

                                                                              38

and delivery of this Agreement and the Related Agreements by the Buyers or other
designated Affiliates of the Buyers, this Agreement constitutes, and each of the
Related  Agreements upon execution and delivery will constitute,  a legal, valid
and  binding  obligation  of the  Seller  and the Asset  Sale  Subsidiaries,  as
applicable,  enforceable against the Seller and the Asset Sale Subsidiaries,  as
applicable,  in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization,  moratorium and other similar
laws relating to or affecting  creditors'  rights  generally,  general equitable
principles  (whether  considered  in a  proceeding  in  equity or at law) and an
implied covenant of good faith and fair dealing.

            SECTION  4.5.   CONSENTS.   No  Consent  of,  or  Filing  with,  any
                            --------
Governmental  Entity  which has not been  obtained  or made by the Seller or its
Affiliates is required for or in  connection  with the  execution,  delivery and
performance of this Agreement or any Related Agreement by the Seller,  the Asset
Sale  Subsidiaries  and  the  Selling  Subsidiaries,   as  applicable,  and  the
consummation  by the  Seller,  the  Asset  Sale  Subsidiaries  and  the  Selling
Subsidiaries, as applicable, of the transactions contemplated hereby or thereby,
in each case,  except (i) as set forth on Schedule  4.5, (ii) as may be required
solely  by  reason  of the  participation  of  the  Buyers  in the  transactions
contemplated  by this Agreement and the Related  Agreements,  (iii) Filings with
applicable  trademark  offices where  necessary to consummate  the  transactions
contemplated by this Agreement or any Related  Agreement,  (iv) for any Consents
or Filings the failure of which to obtain or make would not be reasonably likely
to have,  individually or in the aggregate, a Material Adverse Effect or prevent
or materially delay the consummation by the Seller,  the Asset Sale Subsidiaries
and the Selling  Subsidiaries of the transactions  contemplated hereby or (v) as
may be required in  connection  with any transfer of any part of the Business or
any other action by Buyer A or Buyer B following the Closing.

            SECTION  4.6.   NONCONTRAVENTION.   The   execution,   delivery  and
                            ----------------
performance  by  the  Seller,  the  Asset  Sale  Subsidiaries  and  the  Selling
Subsidiaries,  as applicable,  of this  Agreement and the Related  Agreements do
not, and the  consummation by the Seller,  the Asset Sale  Subsidiaries  and the
Selling Subsidiaries,  as applicable of the transactions contemplated hereby and
thereby  will not,  (i)  subject  to  obtaining  or making the  Consents  and/or
Filings,  as the case may be, referred to in Section 4.5,  contravene,  conflict
with or violate any Applicable  Law, (ii)  contravene,  conflict with or violate
any  provision of the Charter  Documents of the Seller or any of the Asset Sales
Subsidiaries,  Selling  Subsidiaries or Spirits Subsidiaries or (iii) subject to
obtaining or making the Consents and/or Filings, as the case may be, referred to
in Section 4.5,  contravene,  conflict  with or violate or  constitute a default
under any  provision of, or result in the  termination  or  acceleration  of, or
entitle any party to terminate or accelerate  any obligation  under,  or entitle
any party to exercise any right of first offer, right of first refusal,  option,
call  right or other  similar  right to  acquire  the  Transferred  Shares,  the
Transferred Minority Interests,  the assets which, if owned on the Closing Date,
constitute a Transferred  Assets or any assets of the Spirits  Subsidiaries,  or
result  in  the  imposition  of  any  Lien  upon  the  Transferred  Shares,  the
Transferred  Minority  Interests,  the  Transferred  Assets or any assets of the
Spirits  Subsidiaries  pursuant  to, or give any  person  the  right to  cancel,
terminate,  or modify any Contract  relating to the Business to which the Seller
or  any  of  the  Asset  Sale  Subsidiaries,  Selling  Subsidiaries  or  Spirits
Subsidiaries  is a  party  or by  which  the  Seller  or any of the  Asset  Sale
Subsidiaries,  Selling Subsidiaries or Spirits Subsidiaries is bound, except (A)
in each case,  as set forth on Schedule 4.6 and (B), in the case of clauses (ii)
and  (iii),  for  any  such  contraventions,   conflicts,  violations  defaults,
terminations,  accelerations,  exercises,  Liens, cancellations or modifications
which

<PAGE>   46

                                                                              39

would not be reasonably  likely to have,  individually  or in the  aggregate,  a
Material  Adverse Effect or prevent or materially  delay the consummation by the
Seller,  the  Asset  Sale  Subsidiaries  and  the  Selling  Subsidiaries  of the
transactions contemplated hereby.

            SECTION 4.7.TITLE.  (a) TRANSFERRED SHARES AND TRANSFERRED  MINORITY
                        -----       --------------------------------------------
INTERESTS.  At the Closing,  subject to Section 2.3,  each of the Seller and the
---------
Selling  Subsidiaries  will have,  and will  transfer  to Buyer A or Buyer B, as
applicable,  good and  valid  title to the  applicable  Transferred  Shares  and
Transferred  Minority  Interests  held by it, free and clear of any Liens (other
than  (i)  Liens  attributable  to the  actions  of the  Buyers  or any of their
respective  Affiliates  (except for Liens  arising out of the  execution of this
Agreement) and (ii) restrictions on transfer arising under Applicable Law).

            (b) TRANSFERRED ASSETS. At the Closing,  subject to Section 2.3, the
                ------------------
Seller and the Asset  Sale  Subsidiaries,  as  applicable,  will have,  and will
transfer  to Buyer A or  Buyer B, as  applicable,  good and  valid  title to the
Transferred Assets, free and clear of any Liens (other than Permitted Liens).

            (c)  BUSINESS  ASSETS.  Except (i) for the  corporate  services  and
                 ----------------
management  information services currently provided to the Business by or at the
direction of the Seller or its Affiliates (other than the Spirits  Subsidiaries)
(which  services  are  customary  for a corporate  group  similar to SCL and its
Spirits Subsidiaries) and for those services provided pursuant to the Transition
Services Agreement,  (ii) as contemplated by Sections 2.3, 2.5 and 2.6 and (iii)
as set forth on Schedule  4.6, as of the  Closing  Date,  Buyer A or Buyer B, as
applicable, and the Spirits Subsidiaries will have all right, title and interest
to the  businesses,  assets and  properties  (real and  personal,  tangible  and
intangible)  (subject to Permitted  Liens)  necessary to conduct in all material
respects the Business as currently conducted and as conducted as of the Closing.

            SECTION 4.8.FINANCIAL STATEMENTS. Attached hereto as Schedule 4.8 is
                        --------------------
an accurate copy of the audited  combined  statements of income,  cash flows and
buyer company's investment and advances and comprehensive income of the Business
for the fiscal  years ended June 30,  1998,  1999 and 2000 and audited  combined
balance  sheets of the Business as of June 30, 1999 and 2000 (such balance sheet
as of June 30, 2000, the "JUNE 30 BALANCE  SHEET"),  including the notes thereto
                          ----------------------
(all such  documents,  the "FINANCIAL  STATEMENTS").  Except as disclosed in the
                            ---------------------
Financial  Statements,  the Financial  Statements fairly present in all material
respects the combined financial condition and the combined statements of income,
cash flows and buyer company's  investment and advances and comprehensive income
of the Business as of the dates and for the periods  indicated in the  Financial
Statements,  and have  been  prepared  in  accordance  with  GAAP  applied  on a
consistent basis throughout the periods involved.

            SECTION  4.9.  LITIGATION.  (a) There are no  actions,  proceedings,
                           ----------
investigations  or suits before any  Governmental  Entity or  arbitration  panel
against  (i) the  Seller  or any of its  Subsidiaries  (other  than the  Spirits
Subsidiaries)  specifically  relating  to the  Business  or the  JES  Offers  to
Purchase or (ii) any of the Spirits  Subsidiaries or Transferred Assets, in each
case, pending or, to the knowledge of the Seller, threatened,  except (A) as set
forth on Schedule 4.9 or (B) for any such actions,  proceedings,  investigations
or suits which would not be reasonably  likely to have,  individually  or in the
aggregate, a Material Adverse Effect. There are no judgments, decrees, orders or
litigation or other adversary  proceeding  settlements  specifically

<PAGE>   47

                                                                              40

against or binding upon the Seller or any of its Subsidiaries  which prohibit or
restrict  the  Business  as  currently  conducted,  except  (i) as set  forth on
Schedule  4.9 or (ii) for any such  judgments,  decrees,  orders or  settlements
which would not be reasonably likely to have,  individually or in the aggregate,
a Material Adverse Effect.

            (b)  There  are no  actions,  proceedings,  investigations  or suits
against  the Seller or its  Subsidiaries  pending  or, to the  knowledge  of the
Seller,  threatened,  which  seek  to,  and the  Seller  is not  subject  to any
judgments,  decrees  or orders  which,  enjoin,  prevent  or  rescind  or may be
reasonably  likely to have the effect of enjoining,  preventing or rescinding in
any material  respect the  transactions  contemplated  by this  Agreement or any
Related Agreement.

            SECTION 4.10. COMPLIANCE WITH APPLICABLE LAWS; CONSENTS AND FILINGS.
                          -----------------------------------------------------
(a) COMPLIANCE. Except (i) as set forth on Schedule 4.10(a) or (ii) as would not
    ----------
be  reasonably  likely to have,  individually  or in the  aggregate,  a Material
Adverse Effect, the Business is being conducted by the Seller and its Affiliates
in compliance with all Applicable  Laws and none of the Spirits  Subsidiaries is
in violation of any Applicable Law.

            (b)  CONSENTS  AND  FILINGS.  Except  (i) as set  forth on  Schedule
                 ----------------------
4.10(b) or (ii) as would not be reasonably  likely to have,  individually  or in
the aggregate,  a Material  Adverse  Effect,  the Asset Sale  Subsidiaries,  the
Selling  Subsidiaries  and the Spirits  Subsidiaries  have all Consents and have
made all Filings  necessary to conduct the Business as currently  conducted  and
all of such Consents are in full force and effect.  The Asset Sale Subsidiaries,
the Selling  Subsidiaries  and the Sprits  Subsidiaries are not in breach of any
such  Consent  and have not  received  notice  that  any such  Consent  is to be
revoked,  modified,  cancelled or not renewed, except as would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect.

            SECTION 4.11. MATERIAL CONTRACTS. (a) The Seller has previously made
                          ------------------
available to the Buyers or their  representatives all material written Contracts
to which (A) any Asset  Sale  Subsidiary  is a party  and which  constitutes  an
Assigned Contract or (B) any Spirits  Subsidiary is a party, in each case, other
than  those  Contracts  the  failure  of  which  to be in  effect  would  not be
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect.

            (b) NON-COMPETITION  PROVISIONS.  Schedule 4.11(b) sets forth a list
                ---------------------------
of all Contracts  (other than those relating to Intellectual  Property) to which
any Asset Sale  Subsidiary  or any Spirits  Subsidiary  is a party which contain
non-competition  covenants  restricting  the  conduct  of  the  Business  in any
material respect.

            (c) COLLECTIVE BARGAINING AGREEMENTS.  Schedule 4.11(c) sets forth a
                --------------------------------
list of all  collective  bargaining  or other labor  agreements to which (i) any
Asset Sale Subsidiary is a party and which  constitutes an Assigned  Contract or
(ii) any Spirits  Subsidiary is a party, in each case,  which is material to the
Business.

            (d)  ENFORCEMENT  AND  BREACH.  Each  Contract  to which any Spirits
                 ------------------------
Subsidiary  is a party or which  constitutes  an Assigned  Contract and which is
valid,  binding, in full force and effect and enforceable against the applicable
Asset Sale Subsidiary or Spirits Subsidiary and, to

<PAGE>   48

                                                                              41

the knowledge of the Seller, against any other party thereto, in accordance with
its terms and the applicable Asset Sale Subsidiary or Spirits  Subsidiary is not
in breach or default under any such  Contract or Assigned  Contract and no event
has occurred which,  with notice or lapse of time or both,  would constitute any
such breach or default or permit  termination or modification or acceleration of
any provision in any aspect adverse to the applicable  Asset Sale  Subsidiary or
Spirits  Subsidiary under any such Contract or Assigned  Contract,  except where
the failure to be so valid, binding, in full force and effect or enforceable, or
such breach or default,  termination  modification or  acceleration,  would not,
individually  or in the  aggregate,  be  reasonably  likely  to have a  Material
Adverse  Effect  or  prevent  or  materially  delay  or  materially  impair  the
transactions contemplated hereby.

            SECTION 4.12.  ABSENCE OF CERTAIN  CHANGES OR EVENTS.  Except as set
                           -------------------------------------
forth on Schedule 4.12(i),  since June 30, 2000, there has not been any Material
Adverse  Effect and no event has  occurred or action has been taken or failed to
be taken which, individually or in the aggregate,  would be reasonably likely to
have a  Material  Adverse  Effect and the  Business  has been  conducted  in the
ordinary course of business in all material  respects and,  notwithstanding  the
generality of the  foregoing,  (i) in the period which  commences on the date of
this  Agreement and ends on December 31, 2001,  none of the Seller and the Asset
Sale  Subsidiaries  with respect to the  Business  and the Spirits  Subsidiaries
shall  have  made bulk  sales of Bulk  Scotch  Maturing  Stocks  in  excess,  in
aggregate,  of 5,000,000 original liters of absolute alcohol,  and as of the end
of such  period  may not  have  outstanding  commitments  to sell in  excess  of
2,500,000  original liters of absolute  alcohol,  (ii) since June 30, 2000, have
sold  finished  case  goods  to  wholesalers,   distributors  and  retailers  in
quantities  that  resulted  in a material  increase in the level of stock of the
Spirits  Subsidiaries  and the Asset Sale  Subsidiaries  that was not consistent
with seasonal variations,  or with past practices in the Business for the fiscal
years  ended  June 30,  1998,  1999 and 2000 or (iii)  agreed to take any of the
actions specified in clauses (i) or (ii).

            SECTION 4.13.  BENEFIT PLANS;  EMPLOYEES.  (a) Schedule 4.13(a) sets
                           -------------------------
forth a list, as of the date hereof,  of each material  "employee  benefit plan"
(within the meaning of section 3(3) of the Employee  Retirement  Income Security
Act of 1974, as amended  ("ERISA")),  including all material  plans of a similar
                           -----
nature in  jurisdictions  outside of the United States and which are not subject
to ERISA and all material stock purchase, stock option,  severance,  employment,
fringe benefit, bonus,  incentive,  deferred compensation and all other employee
benefit  plans,  agreements or policies under which any employee of the Business
(the "BUSINESS EMPLOYEES") has any present or future right to benefits sponsored
      ------------------
or  maintained  by  SCL  or  any  of the  Asset  Sale  Subsidiaries  or  Spirits
Subsidiaries.  All such plans,  agreements  and policies  shall be  collectively
referred to as the "COMPANY PLANS".
                    -------------

            (b) With respect to each Company Plan, the Seller has made available
to the Buyers or their  representatives  a current,  accurate and complete  copy
(or, where no document  exists,  a written  description  thereof)  including all
existing or proposed  amendments  thereto,  and,  to the extent  applicable  and
existing as of the date hereof, (i) any related trust agreement or other funding
instrument,  (ii) the most recent IRS favorable  determination letter, (iii) any
summary plan  description  and (iv) the most current  actuarial  report (A) Form
5500 and attached  schedules,  (B) audited financial  statements,  (C) actuarial
valuation reports and (D) any other annual  information  returns or filings made
with a Governmental Entity.

<PAGE>   49

                                                                              42

            (c) Except as would not have a Material Adverse Effect, each Company
Plan has been  administered  in accordance with its terms and in compliance with
the applicable  provisions of ERISA,  the Code and other  Applicable  Laws. Each
Company  Plan which is  intended  to be  qualified  within  the  meaning of Code
section  401(a)  has  received  a  favorable  determination  letter  as  to  its
qualification and the Seller does not have knowledge of any circumstances likely
to result in revocation of any such favorable  determination  letter or the loss
of the qualification of such Company Plan. The Seller does not have knowledge of
any  circumstances  likely  to  result in the loss of  favored  tax  status of a
Company Plan intended to have favorable tax status in a jurisdiction  other than
the US and  each  Company  Plan  which is  intended  to be  registered  has been
accepted for registration by the applicable Governmental Entity.

            (d) Except in each case as would not have a Material Adverse Effect,
no actions,  suits or claims  (other  than  routine  claims for  benefits in the
ordinary course) are pending or, to the knowledge of the Seller, threatened with
respect to any Company Plan.

            (e) To the knowledge of Seller,  none of the Asset Sale Subsidiaries
or the Spirits  Subsidiaries  has engaged in a  transaction  with respect to any
Company Plan that, assuming the taxable period of such transaction expired as of
the date hereof,  could subject the Seller or any of the Asset Sale Subsidiaries
or Spirits  Subsidiaries  to a tax or penalty  imposed by either Section 4975 of
the Code or  Section  502(i) of ERISA in an amount  which  would have a Material
Adverse Effect.

            (f) No material liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by any of the Asset Sale  Subsidiaries or
any  of  the  Spirits  Subsidiaries  with  respect  to any  ongoing,  frozen  or
terminated  "single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA.  No  Asset  Sale  Subsidiary  or  Spirits  Subsidiary  contributes  to  a
multiemployer  plan described in subtitle E of Title IV of ERISA. No notice of a
"reportable  event",  within the meaning of Section  4043 of ERISA for which the
30-day reporting  requirement has not been waived, has been required to be filed
by any Asset Sale  Subsidiary or Spirits  Subsidiary  for any "employee  pension
benefit  plan"  within the  meaning of Section  3(2) of ERISA  ("PENSION  PLAN")
                                                                 -------------
within the 12-month  period  ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this Agreement.

            (g) To the  knowledge of Seller,  all  contributions  required to be
made under the terms of any material  Company Plan have been timely made or have
been reflected in the Financial Statements.  None of the Asset Sale Subsidiaries
or Spirits Subsidiaries has provided, or is required to provide, security to any
Pension Plan pursuant to Section  401(a)(29) of the Code. Except as set forth in
Schedule 4.13(g),  with respect to any material Company Plan maintained  outside
of the U.S., none of the Asset Sale Subsidiaries or Spirits Subsidiaries has (or
will have as a consequence of the  transactions  contemplated by this Agreement)
any liability to make payment to any pension plan as a result of any  deficiency
or shortfall in the funding of such plan.

            (h)  Except as may be set forth in any  Schedule  hereto,  there has
been no  amendment  to,  announcement  by the  Seller or any of the  Asset  Sale
Subsidiaries  or  Spirits  Subsidiaries  relating  to,  or  change  in  employee
participation   of  coverage  under,  any  Company

<PAGE>   50

                                                                              43

Plan which would increase  materially  the expense of  maintaining  such Company
Plan above the level of the expense incurred therefor for the most recent fiscal
year.

            (i) To the knowledge of Seller, all Company Plans maintained outside
of the United States comply in all material respects with applicable local law.

            (j) Schedule  4.13(j)(i)  sets forth a complete list as of September
30, 2000 of the name of each  Business  Employee of the Asset Sale  Subsidiaries
and the Spirits  Subsidiaries,  including each such Business Employee who, as of
such  date,  is on any  approved  leave of  absence  for any  reason  (including
short-term disability). Schedule 4.13(j)(ii) sets forth a complete list of those
employees of the Asset Sale  Subsidiaries  and the Spirits  Subsidiaries who are
not primarily  connected with the Business,  and all of whom,  unless  otherwise
agreed  between the Seller and the Buyers on or prior to the Closing Date,  will
be  transferred  by the Seller to a  designated  subsidiary  or Affiliate of the
Seller (other than the Spirits Subsidiaries) (the "RETAINED EMPLOYEES").
                                                   ------------------

            (k) Except as set forth on Schedule 4.13(k), none of the Seller, the
Asset Sale  Subsidiaries or the Spirits  Subsidiaries have any material unfunded
liabilities  with respect to any Company Plan the  liabilities  of which will be
assumed by the Buyers hereunder, and all liabilities under any Company Plans are
funded in  accordance  with  Applicable  Laws and generally  accepted  actuarial
principles in the relevant jurisdiction.

            SECTION 4.14.  ENVIRONMENTAL  MATTERS.  Except in each case as would
                           ----------------------
not be reasonably likely to have,  individually or in the aggregate,  a Material
Adverse Effect: (i) the Business (A) is being conducted, and has been conducted,
within all applicable  statute of limitations  periods,  in compliance  with all
applicable  Environmental  Laws and (B)  possesses all Consents  required  under
applicable  Environmental  Laws to operate the Business as  currently  operated,
(ii)  neither the Seller nor any of its  Subsidiaries  has  received any written
notice  of  any  actions,  proceedings,   investigations  or  suits  before  any
Governmental  Entity or any judgment,  decree or order against (A) the Seller or
any of its Subsidiaries  (other than the Spirits  Subsidiaries)  relating to the
Business or (B) any of the Spirits  Subsidiaries or Transferred  Assets, in each
case,  pending or, to the  knowledge of the Seller,  threatened  which relate to
compliance  with any  Environmental  Law or to  investigation  or cleanup of any
Hazardous Materials at any location, (iii) to the knowledge of the Seller, there
are no  Hazardous  Materials  at any of the Spirits  Properties  or any property
formerly  owned or leased by any of the Spirits  Subsidiaries,  which  Hazardous
Materials are in concentrations and under such  circumstances as violate,  or as
would give rise to liability to the Buyers or any of the Spirits Subsidiaries or
require remediations under, any applicable  Environmental Law and (iv) there are
no Pre-Closing  Environmental  Conditions  that would  reasonably be expected to
result in liability of any Spirits Subsidiary or of the Business.

            SECTION 4.15.  INTELLECTUAL  PROPERTY.  Schedule  4.15(a) includes a
                           ----------------------
list of all material patent and trademark registrations and applications,  as of
the date hereof, with respect to (i) the Transferred  Intellectual  Property and
(ii) the Intellectual Property owned by the Spirits Subsidiaries  (collectively,
the "SPIRITS IP").
     ----------

<PAGE>   51

                                                                              44

            (b) Except as  disclosed  on Schedule  4.15(a) or  4.15(b),  (i) the
Asset Sale  Subsidiaries  or the Spirits  Subsidiaries  own or have the right to
use, and have the right to transfer  without giving rise to any material  rights
in any third party, all material  Intellectual Property necessary to conduct the
Business in all material  respects as  conducted as of the date hereof,  (ii) to
the knowledge of the Seller,  all of the material  Spirits IP is  unexpired,  is
free of all Liens  (other than  Permitted  Liens) and has not been  abandoned or
cancelled,  and (iii) to the  knowledge  of the Seller,  the Spirits IP does not
infringe the Intellectual Property of any third party and is not being infringed
by any  third  party,  except  for any such  infringement,  which  would  not be
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect.

            SECTION 4.16. BROKERS AND INTERMEDIARIES.  None of the Seller or any
                          --------------------------
of its Subsidiaries have employed any broker, finder, investment banker or other
intermediary in connection with the transactions  contemplated by this Agreement
or any Related  Agreement  which  would be  entitled  to a  broker's,  finder's,
investment  banker's  or  similar  fee or  commission  in  connection  with such
transactions,  except for any such fees or  commissions  which shall be the sole
responsibility of the Seller prior to and following the Closing.

            SECTION 4.17.  REAL  PROPERTY.  Schedule 4.17 sets forth,  as of the
                           --------------
date hereof,  (i) a list of all Transferred  Real Property and all material real
property  and  material   interests  in  real  property  owned  by  the  Spirits
Subsidiaries  (such property and interests in real  property,  together with the
Transferred  Real  Property,  the  "OWNED  PROPERTIES")  and  (ii) a list of all
                                    -----------------
Assigned  Contracts to which any Asset Sale  Subsidiary is a party as lessee and
which are  leases of  material  real  property  or  material  interests  in real
property and all leases of material real property or material  interests in real
property  to which any  Spirits  Subsidiary  is a party as lessee  (the  "LEASED
                                                                          ------
PROPERTIES" and, together with the Owned Properties,  the "SPIRITS PROPERTIES").
----------                                                 ------------------
The Asset Sale Subsidiaries and the Spirits  Subsidiaries,  as applicable,  hold
insurable title to all Owned  Properties (or with respect to Owned Properties in
Scotland,  good  title to all  Owned  Properties),  free and  clear of all Liens
(other than  Permitted  Liens),  and are in  possession as lessees of all Leased
Properties,  subject  to the rights of  sub-tenants,  except (i) as set forth on
Schedule  4.17 or (ii) for any such  failures  to hold  such  title or have such
possession as would not be  reasonably  likely to have,  individually  or in the
aggregate, a Material Adverse Effect.

            SECTION 4.18. TAX MATTERS.  Except (i) as set forth on Schedule 4.18
                          -----------
or (ii) as  would  not be  reasonably  likely  to have,  individually  or in the
aggregate,  a Material Adverse Effect,  (A) all Tax Returns required to be filed
by, or with respect to any  activities of, the Asset Sale  Subsidiaries  and the
Spirits  Subsidiaries  prior to the date  hereof have been filed  (except  those
under valid extension),  (B) as of the date hereof,  all Taxes of the Asset Sale
Subsidiaries  (in each case,  with  respect  to the  Business)  and the  Spirits
Subsidiaries  have  been  paid  or  adequately  provided  for on  the  Financial
Statements (unless such Taxes are being contested in good faith) and (C) neither
the  Seller  nor any of its  Subsidiaries  has  received  written  notice of any
action, suit, proceeding, investigation, claim or audit against, or with respect
to, any Asset Sale  Subsidiary  (in each case,  with respect to the Business) or
any Spirits Subsidiary in respect of any Taxes (other than Income Taxes).

            SECTION 4.19.  INDEBTEDNESS.  JES has  completed  offers to purchase
                           ------------
(the "JES OFFERS TO PURCHASE")  the  outstanding  indebtedness  of JES listed on
      ----------------------
Schedule  4.19(a)  (the "JES
                         ---

<PAGE>   52

                                                                              45

PUBLIC INDEBTEDNESS"). Also set forth on Schedule 4.19 are the principal amounts
-------------------
of the JES Public Indebtedness which are outstanding as of the date hereof.

            SECTION  4.20.  BUSINESS.   The  Spirits  Subsidiaries  are  engaged
                            --------
primarily in the Business and do not engage in any other business or activity in
any material respect (other than the Retained Assets and Retained  Liabilities).
Other than the Asset Sale  Subsidiaries and the Spirits  Subsidiaries,  no other
Affiliate of the Seller is engaged in the Business in any material respect.

            SECTION 4.21.  LABOR MATTERS.  Except as set forth on Schedule 4.21,
                           -------------
neither (i) any Asset Sale  Subsidiary with respect to the Business nor (ii) any
Spirits Subsidiary is the subject of any material proceeding  asserting that any
Asset Sale  Subsidiary or any Spirits  Subsidiary  has committed an unfair labor
practice nor is there pending,  nor has there been for the past three years, any
material labor strike, dispute,  walk-out,  work stoppage,  slow-down or lockout
involving the employees of the Business.

            SECTION  4.22.   VIVENDI   TRANSACTION.   The  consummation  of  the
                             ---------------------
transactions  contemplated  by the Merger  Agreement  dated as of June 19,  2000
between Vivendi S.A.,  Canal Plus S.A.,  Sofice S.A. and 3744531 Canada Inc. and
SCL (the "VIVENDI TRANSACTION") did not materially contravene,  conflict with or
          -------------------
violate  or  constitute  a  default  under  any  provision  of, or result in the
termination or acceleration  of, or entitle any party to terminate or accelerate
any obligation under, or entitle any party to exercise any right of first offer,
right of first refusal, option or other similar right to acquire the Transferred
Shares, the Transferred Minority Interests, the Transferred Assets or any assets
of the Spirits Subsidiaries pursuant to, or give any person the right to cancel,
terminate or modify any  Contract  relating to the  Business,  except (i) as set
forth on  Schedule  4.6 and  (ii) as would  not be  reasonably  likely  to have,
individually or in the aggregate, a Material Adverse Effect.

            SECTION 4.23. PRODUCT RECALLS. Except as set forth on Schedule 4.23,
                          ---------------
there  have been no  material  product  recalls,  stop sales or  withdrawals  of
products  prior to sale with respect to the Business  since  January 1, 1999. To
the  knowledge  of the  Seller,  there is no reason  there  would be a  material
increase in the amount of products of the  Business  being  returned for credit,
refund or replacement during the period from the date hereof to January 1, 2002.

            SECTION 4.24. INSURANCE. Schedule 4.24 sets forth a complete list as
                          ---------
of the date  hereof  of (i) all  insurance  policies  of SCL and its  Affiliates
(other  than the  Spirits  Subsidiaries)  which may operate to cover any loss or
liability  relating to the Business (the "SCL INSURANCE  POLICIES") and (ii) all
                                          -----------------------
insurance  policies  of  the  Spirits   Subsidiaries  (the  "SPIRITS  SUBSIDIARY
                                                             -------------------
INSURANCE  POLICIES").  All such  policies  are in full  force and effect and no
-------------------
premiums due and payable thereon are delinquent.  There are no pending  material
claims  against  such  insurance  by any Asset Sale  Subsidiary  or any  Spirits
Subsidiary  with respect to the  Business as to which the  insurers  have denied
liability.

            SECTION 4.25.  RESIDENCE OF SCL. SCL is not a non-resident of Canada
                           ----------------
within  the  meaning  of the INCOME TAX ACT  (Canada)  and is a  registrant  for
purposes of any taxes imposed under Part IX of the EXCISE TAX ACT (Canada).

<PAGE>   53

                                                                              46

            SECTION 4.26.  MATURING  STOCKS.  Schedule 4.26 sets forth a list of
                           ----------------
the amount of the Bulk Canadian  Maturing  Stocks,  as of November 30, 2000, and
Bulk Scotch  Maturing  Stocks,  as of December 18, 2000 owned (i) by the Spirits
Subsidiaries and (ii) the Asset Sale Subsidiaries which, if the date hereof were
the Closing Date, would constitute Transferred Assets, setting forth the year of
distillation  and type of whisky.  As of the Closing,  the Bulk Scotch  Maturing
Stocks of the Seller and its Affiliates  will not be subject to any Liens (other
than Permitted Liens).

            SECTION 4.27.  NO OTHER  REPRESENTATIONS.  Notwithstanding  anything
                           -------------------------
contained  in this Article IV or any other  provision  of this  Agreement or any
Related  Agreement,  it is the  explicit  intent of each party  hereto  that the
Seller is making no express or implied representations or warranties whatsoever,
except  those  representations  and  warranties  of the Seller set forth in this
Article IV.

            SECTION 4.28. ABSENCE OF UNDISCLOSED LIABILITIES.  Except (i) as set
                          ----------------------------------
forth in or provided for (and reserved  against in or disclosed in the footnotes
to) the  June 30  Balance  Sheet,  (ii) as set  forth  on any  Schedule  to this
Agreement to the extent  reasonably  apparent or (iii) for Liabilities that have
arisen not in  violation of this  Agreement  since June 30, 2000 in the ordinary
course of business, there are no Liabilities of a type that would be required to
be presented in a balance sheet  prepared in accordance  with GAAP (applied on a
consistent  basis with the June 30 Balance Sheet) relating to the Business,  the
Spirits Subsidiaries or included in the Assumed Liabilities, except as would not
be  reasonably  likely to have,  individually  or in the  aggregate,  a Material
Adverse Effect.

            SECTION 4.29. DBC. The amounts for direct brand contribution for the
                          ---
fiscal year ended June 30, 2000 for those brands set forth on Schedule 4.29 were
prepared  by the  Seller in good  faith  based on the books and  records  of the
Business  and have been  prepared  on a  consistent  basis for each brand in all
material  respects and are the amounts  used for  management  reporting  and are
materially  consistent with cost accounting and brand  profitability  guidelines
and procedures used for the Business as of the date hereof.

                                   ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE BUYERS
                  --------------------------------------------

            Each Buyer (solely with respect to itself and not the other Buyer)
hereby severally represents and warrants to the Seller, except as contemplated
by this Agreement or any Related Agreement, as follows:

            SECTION 5.1. DUE  ORGANIZATION,  GOOD STANDING AND POWER. Such Buyer
                         -------------------------------------------
is duly organized,  validly  existing and in good standing under the laws of the
jurisdiction of its  organization  and has all power and authority  necessary to
execute and deliver this  Agreement and the Related  Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby.

<PAGE>   54

                                                                              47

            SECTION 5.2.  ORGANIZATIONAL  DOCUMENTS;  BUYERS.  Prior to the date
                          ----------------------------------
hereof,  such Buyer has made  available to the Seller or its  representatives  a
complete and correct copy of the Charter Documents of such Buyer as in effect as
of the date  hereof  and as shall be in effect as of the  Closing  and all other
agreements  among the Buyers with respect to the  transactions  contemplated  by
this Agreement and the Related Agreements as in effect as of the date hereof and
as shall be in  effect  as of the  Closing.  Such  Charter  Documents  and other
agreements  are in full force and effect and such Buyer is not in  violation  of
any provision of its Charter  Documents.  Such Buyer,  if it is the purchaser of
the capital stock of JES is a corporation  for U.S. tax purposes.  Buyer B shall
acquire the capital stock of JES,  Seagram  United  Kingdom  Limited and Captain
Morgan Rum Distillers Limited (Canada) at the Closing.

            SECTION 5.3. AUTHORIZATION.  The execution, delivery and performance
                         -------------
of this  Agreement  and the  Related  Agreements  to which it is a party by such
Buyer and the consummation by such Buyer of the transactions contemplated hereby
and thereby to which it is a party have been duly  authorized  by all  necessary
corporate or other organizational  action by such Buyer. This Agreement has been
duly and validly  executed  and  delivered by such Buyer and, as of the Closing,
each of the  Related  Agreements  to which it is a party will have been duly and
validly  executed and delivered by such Buyer.  Assuming the due  authorization,
execution  and  delivery of this  Agreement  and the Related  Agreements  by the
Seller  and  the  Asset  Sale  Subsidiaries,   as  applicable,   this  Agreement
constitutes, and each of the Related Agreements upon execution and delivery will
constitute,  a legal,  valid and binding  obligation of such Buyer,  enforceable
against  such  Buyer in  accordance  with its terms,  subject to the  effects of
bankruptcy,  insolvency, fraudulent conveyance,  reorganization,  moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable  principles  (whether  considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.

            SECTION  5.4.   CONSENTS.   No  Consent  of,  or  Filing  with,  any
                            --------
Governmental  Entity  which has not been  obtained  or made by the such Buyer is
required for or in connection  with the execution,  delivery and  performance of
this Agreement or any Related  Agreement by such Buyer and the  consummation  by
such Buyer of the  transactions  contemplated  hereby or thereby,  in each case,
except  (i) as set forth on  Schedule  5.4,  (ii) as may be  required  solely by
reason of the participation of the Seller,  the Asset Sale  Subsidiaries  and/or
the Selling Subsidiaries in the transactions  contemplated by this Agreement and
the Related Agreements or (iii) for any Consents or Filings the failure of which
to obtain or make would not be reasonably likely to have, individually or in the
aggregate, a Buyer Material Adverse Effect.

            SECTION  5.5.   NONCONTRAVENTION.   The   execution,   delivery  and
                            ----------------
performance by such Buyer of this Agreement and the Related  Agreements to which
it is a party do not,  and the  consummation  by such Buyer of the  transactions
contemplated hereby and thereby will not, (i) subject to obtaining or making the
Consents  and/or  Filings,  as the  case may be,  referred  to in  Section  5.4,
contravene,  conflict  with or violate  any  Applicable  Law,  (ii)  contravene,
conflict with or violate any provision of the Charter Documents of such Buyer or
(iii) subject to obtaining or making the Consents  and/or  Filings,  as the case
may be,  referred to in Section  5.4,  contravene,  conflict  with or violate or
constitute a default  under any provision  of, or result in the  termination  or
acceleration  of, or entitle any party to terminate or accelerate any obligation
under,  or result in the  imposition  of any Lien (other than a Permitted  Lien)
upon the  assets of such  Buyer  pursuant  to, or give any  person  the right to
cancel,  terminate  or modify  any  Contract  to which  such Buyer

<PAGE>   55

                                                                              48

or any of its  Subsidiaries  is a party  or by  which  such  Buyer or any of its
Subsidiaries  is bound,  except in the case of clauses  (ii) and (iii),  for any
such   contraventions,    conflicts,    violations,    defaults,   terminations,
accelerations,  exercises, Liens, cancellations or modifications which would not
be reasonably likely to have, individually or in the aggregate, a Buyer Material
Adverse Effect.

            SECTION 5.6. LITIGATION.  There are no actions or suits against such
                         ----------
Buyer or any of its  Subsidiaries  pending or, to the  knowledge  of such Buyer,
threatened,  which  seek to, and such  Buyer is not  subject  to any  judgments,
decrees or orders which, enjoin,  prevent or rescind or may be reasonably likely
to have the effect of  enjoining,  preventing  or  rescinding,  in any  material
respect  the  transactions   contemplated  by  this  Agreement  or  any  Related
Agreement.

            SECTION 5.7. BROKERS AND  INTERMEDIARIES.  None of such Buyer or its
                         ---------------------------
Subsidiaries  has  employed  any  broker,  finder,  investment  banker  or other
intermediary in connection with the transactions  contemplated by this Agreement
or any Related  Agreement  which  would be  entitled  to a  broker's,  finder's,
investment  banker's  or  similar  fee or  commission  in  connection  with such
transactions,  except for any such fees or  commissions  for which  shall be the
sole responsibility of such Buyer or its Affiliates.

            SECTION 5.8.  INVESTMENT  INTENT.  Such Buyer will not distribute or
                          ------------------
resell  any of the  Transferred  Shares or  Transferred  Minority  Interests  in
violation of Applicable Law.

            SECTION  5.9.  FINANCING.  At the  Closing,  the  Buyers  will  have
                           ---------
sufficient funds to pay the Purchase Price and all related fees and expenses and
to effect all other transactions  contemplated by this Agreement and the Related
Agreement.

            SECTION 5.10.  NO OTHER  REPRESENTATIONS.  Notwithstanding  anything
                           -------------------------
contained  in this  Article V or any other  provision  of this  Agreement or any
Related  Agreement,  it is the  explicit  intent of each party  hereto that such
Buyer is making no express or implied  representations or warranties whatsoever,
except  those  representations  and  warranties  of such Buyer set forth in this
Article V.

                                   ARTICLE VI

                                    COVENANTS
                                    ---------

            SECTION 6.1. CONDUCT OF THE BUSINESS. From the date hereof until the
                         -----------------------
Closing Date,  except (i) as otherwise  required,  permitted or  contemplated by
this  Agreement or any Related  Agreement,  (ii) as required by Applicable  Law,
(iii) as set forth on Schedule 6.1 or (iv) with  respect to any Retained  Assets
or Retained  Liabilities,  (A) the Seller shall,  and shall cause the Asset Sale
Subsidiaries  and the  Spirits  Subsidiaries  to,  operate  the  Business in the
ordinary course of business in all material respects in the aggregate and to use
reasonable  efforts  consistent  with past practices to preserve in all material
respects their  relationships  with customers,  employees,  suppliers and others
with whom they deal in connection  with the  Business,  and (B) the Seller shall
not, and shall not permit any Asset Sale  Subsidiary or Spirits

<PAGE>   56

                                                                              49

Subsidiary to, without the prior written consent of the Buyers (such consent not
to be unreasonably withheld or delayed):

            (i) grant to any Business  Employee any increase in  compensation or
benefits, or enter into any termination protection agreements, golden parachutes
or other similar  arrangements,  except (x) as may be required under any Company
Plan or written  agreement  existing on the date hereof,  (y) for  increases and
bonuses in the ordinary  course of business  excluding any bonus relating to the
transactions contemplated by this Agreement and (z) for any increases or bonuses
for which the  Buyers or any of their  Affiliates  or the  Spirits  Subsidiaries
shall not be obligated after the Closing;

            (ii) in the  case  of any  Spirits  Subsidiary,  amend  its  Charter
Documents  in any  material  respect  and,  in the case of any of the Asset Sale
Subsidiaries,  amend its Charter Documents in any manner adverse in any material
respect  to the  transactions  contemplated  by this  Agreement  or any  Related
Agreement;

            (iii) in the case of any  Spirits  Subsidiary,  redeem or  otherwise
acquire  any  shares  of its  capital  stock or issue any  capital  stock or any
options, rights, warrants, instruments convertible into or exchanged for capital
stock or similar instruments relating to any capital stock;

            (iv)  in  the  case  of any  Spirits  Subsidiary,  acquire  all or a
substantial  portion of the assets or capital  stock of any Person  and,  in the
case of any of the Asset Sale Subsidiaries, acquire all or a substantial portion
of the assets or capital stock of any Person which assets or capital stock would
constitute Transferred Assets hereunder,  in each case, for consideration in any
individual  case in excess  of U.S.  Dollars  5,000,000  or  $25,000,000  in the
aggregate;

            (v) in the case of any Spirits  Subsidiary,  incur any  indebtedness
for  borrowed  money or any  guarantee  in  respect  thereof  other  than in the
ordinary course of business;

            (vi) except for expenditures provided for under any written Contract
existing on the date hereof in the case of any Spirits Subsidiary, make or incur
any  capital  expenditure  which  is  individually  in  excess  of U.S.  Dollars
5,000,000 or $25,000,000 in the aggregate;

            (vii) in the case of any Spirits  Subsidiary,  pay,  loan or advance
any  amount to, or sell,  transfer  or lease any of its assets to, or enter into
any agreement or arrangement  with,  the Seller or any of its Affiliates  (other
than the Spirits Subsidiaries), which are directly or indirectly wholly-owned by
the Seller except in the ordinary course of business;

            (viii)  adopt or amend in any  material  respect any Company Plan or
any collective  bargaining  agreement  (unless currently in negotiation with the
union)  applicable to Business  Employees,  except (x) for any Company Plan with
respect  to  which  the  Seller  or  its  Affiliates  (other  than  the  Spirits
Subsidiaries)  shall remain solely  responsible  after the Closing or (y) in the
ordinary course of business;

            (ix)  permit  the  Transferred  Shares,  the  Transferred   Minority
Interests,  or any material  Transferred  Assets or any  material  assets of the
Spirits  Subsidiaries  to become  subject to any Lien,  except for any Permitted
Liens and Liens existing prior to the date of this Agreement;

<PAGE>   57

                                                                              50

            (x)  except in the  ordinary  course  of  business,  sell,  lease or
dispose of any asset  which if held on the Closing  Date would be a  Transferred
Asset or any asset of the Spirits  Subsidiaries  the fair market  value of which
individually is in excess of U.S. Dollars 500,000 or U.S. Dollars  $3,000,000 in
the aggregate;

            (xi) except in the ordinary course of business, amend, modify, enter
into,  renew, fail to renew or terminate any material Contract or enter into any
agreement   which  contains  any   non-competition   or  exclusivity   provision
restricting the operation of the Business in any material respect;

            (xii) make any change in accounting  methods,  practices or policies
in  any  material   respect,   except  as  required  by  GAAP  or  any  official
interpretation thereof;

            (xiii)  with  respect  to any  Spirits  Subsidiary,  enter  into any
settlement of any litigation  which restricts any portion of the Business in any
material respect;

            (xiv)  except in the  ordinary  course of business  consistent  with
seasonal variations,  and the practice of the Business in the fiscal years ended
June 30, 1998, 1999 and 2000, sell the Spirits  Subsidiaries' and the Asset Sale
Subsidiaries' finished case goods to wholesalers,  distributors and retailers in
quantities that would result in a material increase in the level of stock of the
Spirits  Subsidiaries'  and the Asset  Sale  Subsidiaries'  finished  case goods
generally held by any such  wholesalers,  distributors and retailers;

            (xv) make any bulk sale of spirits  (including  any contra,  swap or
similar transaction) or enter into any securitization  transactions  relating to
Transferred Assets,  including Bulk Scotch Maturing Stocks other than bulk sales
permitted by Section 4.12(i) and Bulk Canadian Maturing Stocks and Bulk Canadian
Whisky Stocks other than pursuant to  Contractual  commitments  in effect on the
date hereof and additional  sales which are, in the aggregate,  immaterial.  The
types,  quantity  and  quality of the Bulk Scotch  Maturing  Stocks set forth on
Schedule 4.26 will be maintained in all material respects in a manner consistent
with past practices.

            (xvi) amend, vary, terminate or restate any of (A) the Memorandum of
Agreement dated January 20, 1971 (or any related  agreement or arrangement) made
between JES, Chivas Brothers  Limited and Kirin Brewery Co., Limited relating to
Kirin Seagram  Limited or (B) any Contract  with Kirin Seagram  Limited or Kirin
Brewery Co. Limited and related to the  distribution  of any product bearing the
label or mark "Chivas  Regal" or (iii) the Master  Agreement  dated  October 12,
2000 made between JES,  Chivas  Brothers  Limited and Kirin Brewery Co.  Limited
(the "KIRIN MASTER AGREEMENT");
      ----------------------

            (xvii) agree finally,  execute or enter into or otherwise bring into
force any of the documentation referred to in the Kirin Master Agreement; and

            (xviii) make or declare any dividends or  distributions,  other than
cash distributions, distributions of Retained Assets or Retained Liabilities and
settlements of intercompany indebtedness; and

            (xix) agree to do any of the foregoing.

<PAGE>   58

                                                                              51

            SECTION  6.2.  ACCESS  TO  INFORMATION.  (a)  From  the date of this
                           -----------------------
Agreement until the Closing Date, the Seller will,  during Normal Business Hours
and upon reasonable  prior notice,  subject to Applicable Law, (i) provide to or
cause  to be  provided  to  the  Buyers  and  their  authorized  representatives
reasonable access to the offices,  properties,  books and records related to the
Business,  (ii) coordinated through an employee designated by the Seller and, if
requested by the Seller,  in the presence of a designated  officer of the Seller
or  other   representatives   of  the  Seller,   permit  the  Buyers  and  their
representatives  to discuss the  affairs,  finances and accounts of the Business
with the officers,  employees and independent  public accountants of the Seller,
the Asset Sale Subsidiaries and the Spirits  Subsidiaries,  (iii) furnish to the
Buyers such financial and operating data and other  information  with respect to
the Business as the Buyers may  reasonably  request;  provided  that none of the
actions taken by the Buyers under clauses (i), (ii) or (iii) shall  unreasonably
interfere  with the normal  operations of the Business,  (iv) provide the Buyers
with  monthly  profit  and loss  statements  as soon as  reasonably  practicable
following the end of each month  consistent with the statements  prepared during
calendar year 2000 and (v) provide as soon as reasonably  practicable  following
the end of each month sales and inventory reports with respect to the brands set
forth on Schedule  6.2 to the extent such  reports are  prepared in the ordinary
course consistent with past practice.

            (b) In addition  to the  foregoing,  to the extent not  unreasonably
interfering with the operations of the Business, the Seller shall cooperate with
and  provide  such  information  to the  Buyers as the Buyers  shall  reasonably
request  in  connection  with the  disposal  of  certain  assets of the  Spirits
Subsidiaries  and  certain  of the  Transferred  Assets  by the  Buyers or their
Affiliates,  including  such  cooperation  and  information  as may be needed to
prepare  materials  to offer such assets to third  parties  and to discuss  such
potential  dispositions  with  third  parties.  In  addition,  to the extent not
interfering with the operations of the Business,  the Seller shall permit access
to books, records, offices and properties related to the Business (including Tax
information)  and the  officers  and  employees  of the  Seller,  the Asset Sale
Subsidiaries  and the Spirits  Subsidiaries  for the purpose of determining  the
manner in which the Buyers will allocate assets and liabilities at and following
the Closing.

            (c) Any information heretofore or hereafter obtained from the Seller
or any of its  Affiliates  or  representatives  by Buyer A and  Buyer B shall be
subject  to the  terms  of the  Buyer A  Confidentiality  Agreement  or  Buyer B
Confidentiality Agreement,  respectively,  and such information shall be held by
Buyer A and Buyer B and their respective  representatives in accordance with the
terms of such  Buyer A  Confidentiality  Agreement  or  Buyer B  Confidentiality
Agreement,  respectively.  Each of the Buyers  agrees  that its  representatives
shall  constitute  "Representatives"  of such Buyer for  purposes of the Buyer A
Confidentiality Agreement and Buyer B Confidentiality  Agreement, as applicable.
Subject to the  approval of the Seller  (such  approval  not to be  unreasonably
withheld),  each  of the  Buyer A  Confidentiality  Agreement  and  the  Buyer B
Confidentiality  Agreement  shall be deemed  modified  to the extent  reasonably
necessary  for the Buyers  and their  respective  representatives  to enter into
agreements  or  discussions  with  respect to  dispositions  of  portions of the
Business  to  third  parties.   To  the  extent  that  either  of  the  Buyer  A
Confidentiality  Agreement  or the Buyer B  Confidentiality  Agreement  shall be
deemed to be in conflict with this Agreement,  the terms of this Agreement shall
prevail.  Buyer B and the Seller  agree that the  paragraph  numbered  13 in the
Buyer B Confidentiality  Agreement is hereby terminated.  Buyer A and the Seller
agree that the paragraph numbered 13 in the Buyer A Confidentiality Agreement is
hereby terminated.

<PAGE>   59

                                                                              52

            (d) At the Closing,  to the extent  permitted by the terms  thereof,
any other  confidentiality  agreements executed by the Seller or its Affiliates,
on the one hand and third  parties on the other hand,  relating to the  Seller's
seeking  interest in  purchasing  the  Business  ("ULTRA  AGREEMENTS")  shall be
                                                   -----------------
assigned to the Buyers.

            (e) The Buyers will be permitted  to announce  the  execution of any
Contract  with respect to the  disposition  of any of the assets of the Business
and information reasonably related thereto subject to the approval of the Seller
(such approval not to be unreasonably withheld).

            (f) Within  five  Business  Days after the date  hereof,  the Seller
shall require the immediate  return or  destruction of all copies of information
related to the  Business  provided to third  parties  which  entered  into Ultra
Agreements and shall take all reasonable  actions  necessary to enforce any such
rights under the Ultra Agreements, in each case, to the extent entitled pursuant
to the terms of the applicable Ultra Agreement.

            SECTION 6.3. FURTHER ACTION; BEST EFFORTS.  (a) Subject to the terms
                         ----------------------------
and conditions of this Agreement,  each party will use its best efforts to take,
or cause to be taken,  all  actions  and to do, or cause to be done,  all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement or any Related Agreement.  In furtherance and not
in  limitation  of the  foregoing,  each  party  hereto  agrees  to make  (i) an
appropriate  filing of a  Notification  and Report Form  pursuant to the HSR Act
with respect to the  transactions  contemplated by this Agreement or any Related
Agreement  as promptly as  reasonably  practicable  and to supply as promptly as
reasonably  practicable any additional information and documentary material that
may be  requested  pursuant  to the  HSR  Act  and to  take  all  other  actions
necessary,  proper or advisable to cause the  expiration or  termination  of the
applicable waiting periods under the HSR Act as soon as reasonably  practicable,
(ii)  appropriate  filings  with the  European  Commission  in  accordance  with
applicable competition, merger control, antitrust, investment or similar laws as
promptly as  reasonably  practicable  and to supply as  promptly  as  reasonably
practicable  any additional  information  and  documentary  material that may be
requested by the European  Commission  and to take all other actions  necessary,
proper or advisable to cause the  expiration or  termination  of any  applicable
waiting periods instituted by the European Commission, (iii) appropriate filings
with the Government of Canada in accordance with applicable competition,  merger
control,  antitrust,  investment  or  similar  laws as  promptly  as  reasonably
practicable  and to supply as promptly as reasonably  practicable any additional
information and documentary  material that may be requested by the Government of
Canada and to take all other actions necessary, proper or advisable to cause the
expiration or termination of any  applicable  waiting  periods and to obtain any
approval or  notification  required to be obtained from the Government of Canada
as may be required pursuant to the ICA or the Investment  Canada  Undertaking in
order to complete  the  transactions  contemplated  hereby and (iv)  appropriate
filings  with any  other  Governmental  Entity  in  accordance  with  applicable
competition,  merger control, antitrust,  investment or similar laws as promptly
as  practicable  and  to  supply  as  promptly  as  practicable  any  additional
information  and  documentary  material that may be requested by the appropriate
Governmental  Entities  and to take  all  other  actions  necessary,  proper  or
advisable to cause the  expiration  or  termination  of any  applicable  waiting
periods  instituted  under such laws.  Each party shall use its best  efforts to
resolve  such  objections,  if  any,  as may be  asserted  with  respect  to the
transactions  contemplated  by the  Stock

<PAGE>   60

                                                                              53

and Asset  Purchase  Agreement  or any Related  Agreement  under any  applicable
competition,   merger  control,  antitrust,   investment  or  similar  laws.  In
connection  with the  foregoing,  if any  administrative  or judicial  action or
proceeding,  including any  proceeding  by a private  party,  is instituted  (or
threatened to be instituted)  challenging  any  transaction  contemplated by the
Stock and Asset Purchase  Agreement or any Related Agreement as violative of any
competition,  merger control, antitrust,  investment or similar laws, each party
shall  cooperate in all  respects  with each other and use its  respective  best
efforts to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment,  injunction or other order,
whether  temporary,  preliminary  or  permanent,  that  is in  effect  and  that
prohibits,  prevents or restricts consummation of the transactions  contemplated
by the Stock and Asset Purchase Agreement or any Related Agreement.

            (b) Each party shall, in connection  with the efforts  referenced in
Section   6.3(a)  to  obtain  all   requisite   approvals,   notifications   and
authorizations  for  the  transactions  contemplated  by this  Agreement  or any
Related  Agreement  under the HSR Act or the European  Community  Merger Control
Regulation,  the ICA or the Investment  Canada  Undertaking,  use its reasonable
best efforts, subject to Applicable Laws relating to the exchange of information
to (i) cooperate in all respects  with each other in connection  with any filing
or  submission  and in  connection  with any  investigation  or  other  inquiry,
including  any  proceeding  initiated  by a private  party,  (ii) keep the other
parties informed of any material  communication  received by such party from, or
given by such party to, the Federal Trade Commission (the "FTC"),  the Antitrust
                                                           ---
Division of the Department of Justice (the "DOJ"), the European  Commission,  or
                                            ---
the  relevant  Canadian  Governmental  Entity  and  any  material  communication
received or given in connection with any proceeding by a private party and (iii)
permit the other parties to review in advance any communication  given by it to,
and consult  with each other in advance of any  meeting or  material  conference
with,  the FTC,  the DOJ,  the  European  Commission  or the  relevant  Canadian
Government  Entity,  or in connection with any material  proceeding by a private
party,  with any other person,  and to the extent permitted by the FTC, the DOJ,
the European  Commission  or other Person or the  relevant  Canadian  Government
Entity,  give the other party the  opportunity to attend and participate in such
meetings  and  conferences,  in each case of clauses  (i),  (ii) or (iii) to the
extent relating to any of the transactions contemplated by this Agreement or any
Related Agreement.

            (c) Other than to the extent  applicable law expressly  requires the
Seller  or  any  of  its  Subsidiaries  to  obtain  any  consent  of  any  other
Governmental  Entity or to make any filing  with any other  Governmental  Entity
(collectively,   the  "OTHER  GOVERNMENTAL  CONSENTS"),   the  Buyers  shall  be
                       -----------------------------
responsible   for  making  such  filings  and   otherwise   pursuing  all  Other
Governmental   Consents  which  are  required  to  consummate  the  transactions
contemplated by the Stock and Asset Purchase  Agreement or any Related Agreement
and shall provide a confirmation to the Seller of any filings or notices made or
other   communications   given  or  received  in  connection   with  such  Other
Governmental  Consents.  The Seller shall  cooperate with the Buyers in pursuing
the Other Governmental Consents.

            (d) The Seller shall use its  reasonable  best efforts to obtain any
Consent or waiver of right of first refusal  (other than the Serralles  ROFR) or
right of first offer that would be triggered in connection with the consummation
of the transactions  contemplated  hereby under

<PAGE>   61

                                                                              54

any Contract or Charter Document to which any of the Asset Sale  Subsidiaries or
the  Spirits  Subsidiaries  is a  party  or by  which  it or any of its  assets,
properties or business is bound.

            SECTION  6.4.  POST-CLOSING  COOPERATION;  RECORDS.  (a) The parties
                           -----------------------------------
shall use their  reasonable best efforts to cooperate with each other, and shall
use their reasonable best efforts to cause their respective officers, employees,
agents,  auditors and representatives to cooperate with each other, for a period
of not less  than  180  days  after  the  Closing  Date to  ensure  the  orderly
transition of the Business and Transferred  Assets from the Seller to the Buyers
and other third parties,  as  applicable,  and to minimize any disruption to the
respective  businesses of the Seller and its Affiliates and the Buyers and their
Affiliates,  including  the Business,  that might result from the  transition of
ownership of the Business contemplated hereby.

            (b) After the Closing,  upon reasonable  prior written  notice,  the
Buyers,  on the one hand,  and the Seller,  on the other hand,  shall furnish or
cause to be furnished to each other and their employees,  counsel,  auditors and
representatives  access,  during Normal Business Hours, to such  information and
assistance  relating to the Business as is  reasonably  necessary  for financial
reporting  and   accounting   matters   (other  than  in  connection   with  the
Calculation), it being understood that the Buyers shall be seeking to dispose of
portions of the  Business.  Each party  shall  reimburse  the other  parties for
reasonable  out-of-pocket  costs and expenses  incurred in assisting  such party
pursuant to this  Section  6.4(b).  No party  shall be required by this  Section
6.4(b) to take any action that would unreasonably  interfere with the conduct of
its business or unreasonably disrupt its normal operations.

            (c) As soon as reasonably  practicable  following  the Closing,  the
Seller  shall  deliver or cause to be  delivered  to the Buyers all  agreements,
documents,  books,  records and files,  including  records  and files  stored on
computer disks or tapes or any other storage medium  (collectively,  "RECORDS"),
of the Seller and its Affiliates relating to the Business and in the Seller's or
such Affiliates possession, subject to the following exceptions:

            (i) the Seller may retain all Records  which relate to  Subsidiaries
      or divisions of the Seller other than those exclusively  constituting part
      of the Business and shall provide copies of the relevant  portions thereof
      which relate to the Business to the Buyers;

            (ii) the Seller may retain all Records which  exclusively  relate to
      any of the  Retained  Assets or  Retained  Liabilities  and shall  provide
      copies of the relevant  portions  thereof  which relate to the Business to
      the Buyers;

            (iii) the Seller may retain all Records  maintained  on  information
      technology  hardware or software  retained by the Seller and shall provide
      copies of the relevant  portions  thereof  which relate to the Business to
      the Buyers,  provided  that nothing in this  exception  shall  relieve the
      Seller of its  obligation  to  cooperate  in  transferring  to Buyers  any
      computerized databases containing Records pertaining to Spirits IP;

<PAGE>   62

                                                                              55

            (iv) the Seller may retain all Records  prepared  primarily  for the
      purpose of the sale of the Business or any part  thereof,  including  bids
      received from other parties and analyses relating to the Business; and

            (v) the Seller may retain any Tax Returns, reports or forms, and the
      Buyers shall be provided with copies of such Tax Returns, reports or forms
      only to the extent that they  relate to  separate  Tax Returns or separate
      Tax liability of the Business.

            (d) The Buyers shall,  and shall cause their  respective  Affiliates
and shall make adequate  provision with respect to portions of the Business that
are sold to third  parties to,  preserve  and keep the  Records of the  Business
actually  delivered  to the Buyers  pursuant  to this  Agreement  or held by the
Spirits  Subsidiaries  at or after the  Closing for a period of seven years from
the Closing Date, or for any longer periods required by any Governmental  Entity
or ongoing  litigation,  and the Buyers shall,  or shall cause their  respective
Affiliates  to, make such Records held by the Buyers or their  Affiliates or any
such third party available to the Seller and its Affiliates and  representatives
as may be  reasonably  requested  by the Seller for any purpose,  including  for
purposes of determining any liability or obligation  under this Agreement or for
purposes  of  identifying  any  Records  which the Seller is  entitled to retain
pursuant to Section  6.4(c).  If any Buyer wishes to destroy such Records  after
that time,  it shall give 90 days'  prior  written  notice to the Seller and the
Seller  shall have the right,  at its option and expense,  upon  written  notice
given to such Buyer within that 90-day period, to take possession of the Records
within 120 days after the date of the Seller's notice to such Buyer.

            SECTION  6.5.  INTERCOMPANY  ACCOUNTS AND  ARRANGEMENTS;  TRANSITION
                           -----------------------------------------------------
SERVICES.  (a) On or prior  to the  Closing,  all  intercompany  receivables  or
--------
payables  and loans then  existing  between  SCL or any of its  Subsidiaries  or
Affiliates  (other than the Spirits  Subsidiaries),  on the one hand, and any of
the Spirits Subsidiaries, on the other hand, other than intercompany receivables
and payables for goods or services  provided in the ordinary  course of business
of the Business or for the  services  contemplated  to continue  pursuant to the
Transition Services Agreement,  shall be settled or, at the option of the Seller
after consultation with the Buyer (taking into account the capitalization of the
relevant  Spirits  Subsidiary),  any net receivable or loan due from the Spirits
Subsidiaries  to SCL or any of its  Subsidiaries  or Affiliates  (other than the
Spirits  Subsidiaries)  shall be purchased by the Buyers at the Closing with the
aggregate  amount of any such  purchase  price  reducing  the amount of the Base
Purchase  Price  payable by the Buyers to the Seller at the Closing  pursuant to
Section  2.1.  All  intercompany  receivables,  payables  and loans for goods or
services provided in the ordinary course of business of the Business and for the
services  contemplated to continue pursuant to the Transition Services Agreement
shall remain outstanding after the Closing and shall be satisfied by the obligor
thereon  in  accordance  with  their  terms,  by wire  transfer  in  immediately
available funds.

            (b) Certain  arrangements  between SCL and its  Subsidiaries  (other
than the Spirits  Subsidiaries),  on the one hand, and the Spirits Subsidiaries,
on the other hand, shall continue after the Closing, to the extent provided for,
and on the terms and conditions set forth in, the Transition Services Agreement.

<PAGE>   63

                                                                              56

            SECTION 6.6. AGREEMENT TO DEFEND AND INDEMNIFY. (a) The Buyers shall
                         ---------------------------------
cause all rights to indemnification by any of the Spirits Subsidiaries in effect
as of the  Closing  in favor  of each  present  and  former  director,  officer,
employee,   agent  or  representative  of  each  of  the  Spirits   Subsidiaries
(hereinafter referred to in this Section 6.6 as an "INDEMNIFIED REPRESENTATIVE")
                                                    --------------------------
as provided in the Charter Documents of the Spirits  Subsidiaries or pursuant to
other instruments or agreements of the Spirits  Subsidiaries  existing as of the
Closing  to  survive  the  Closing  and to  continue  in full  force and  effect
following the Closing Date with respect to events occurring prior to the Closing
Date.

            (b) The  covenants  contained in this Section 6.6 shall  survive the
Closing  Date until fully  discharged  and are  intended to benefit  each of the
Indemnified Representatives.

            SECTION 6.7. PUBLIC ANNOUNCEMENTS.  The parties agree that, from the
                         --------------------
date  hereof  through  the  Closing  Date,  no public  release  or  announcement
concerning  the  transactions  contemplated  hereby shall be issued by any party
without the prior consent of the Seller and the Buyers (which  consent shall not
be  unreasonably  withheld),  except  as such  release  or  announcement  may be
required  by  Applicable  Law or the  rules  or  regulations  of any  securities
exchange,  in which case the party required to make the release or  announcement
shall allow the Seller and the Buyers reasonable time to comment on such release
or announcement in advance of such issuance.

            SECTION 6.8. DEALINGS WITH DISTRIBUTORS AND BROKERS.  (a) The Buyers
                         --------------------------------------
shall be solely  responsible  for securing their own agreements or  arrangements
with  distributors and brokers with respect to the Business,  and the Seller and
its  Affiliates  (other  than the  Spirits  Subsidiaries)  shall have no duties,
obligations or liabilities with respect to the agreements or arrangements of the
Buyers for the distribution and sale of the products of the Business,  except as
otherwise provided for in this Section 6.8.

            (b) The Seller shall make  available  or cause to be made  available
prior to the Closing upon the reasonable  prior written request of either of the
Buyers,  employees or officers of the Seller and its  Affiliates  with  business
relationships with distributors and brokers with respect to the Business for the
purpose of meeting with  representatives of the Buyers and such distributors and
brokers in order to secure  acceptable  distribution and brokerage  arrangements
for periods following the Closing and such employees or officers shall cooperate
to the  extent  reasonably  requested  with the  Buyers  in  arranging  for such
meetings.

            (c) Immediately prior to Closing, the Seller shall take such actions
to terminate  distributors of the transaction  contemplated by this Agreement as
the Buyers may  reasonably  request;  provided  that the  Buyers  shall  defend,
indemnify and hold harmless the Seller and its  Affiliates  from and against all
Losses incurred in connection with any such termination.

            SECTION 6.9.  GUARANTEES.  (a) The Buyers shall use their reasonable
                          ----------
best efforts to cause themselves or one or more of their  respective  Affiliates
to be  substituted  in all  respects for SCL or its  Affiliates  (other than the
Spirits Subsidiaries),  as applicable, and for SCL or its Affiliates (other than
the Spirits Subsidiaries),  as applicable,  to be otherwise removed or released,
effective  as of  the  Closing,  in  respect  of all  obligations  of SCL or its
Affiliates (other

<PAGE>   64

                                                                              57

than  Spirits  Subsidiaries),  as  applicable,  under  each  of the  guarantees,
indemnities,  surety  bonds,  letters of credit and letters of comfort  given or
obtained by SCL or its  Affiliates  (other than the  Spirits  Subsidiaries),  as
applicable,  for  the  benefit  of the  Business  or the  Spirits  Subsidiaries,
including the guarantees set forth on Schedule  6.9(a)(i),  but excluding  SCL's
guarantee of the JES Public Indebtedness,  the QUIDS and the ACES (collectively,
the "SCL  GUARANTEES"),  and for all obligations of SCL or its Affiliates (other
     ---------------
than Spirits Subsidiaries),  as applicable, in respect thereof to be terminated,
with, in each case, such substitution, removal, release and termination to be in
form and substance reasonably satisfactory to the Seller.

            (b) If the  Buyers  and SCL have  been  unable  to  effect  any such
substitution,  removal,  release and  termination  with  respect to any such SCL
Guarantee effective as of the Closing,  each of the Buyers agrees that after the
Closing it shall use its  reasonable  best efforts to effect such  substitution,
removal and release and termination as soon as reasonably  practicable.  Each of
the Buyers agrees to indemnify, pro rata in proportion to the Buyer A Proportion
and the Buyer B Proportion,  and hold the Seller and its Affiliates  (other than
Spirits Subsidiaries),  as applicable,  harmless from and against and in respect
of any and all Losses and settlements  incurred by the Seller and its Affiliates
(other than the Spirits Subsidiaries),  as applicable,  to the extent not caused
by or  resulting  from any  actions of the Seller or its  Affiliates,  after the
Closing  under or pursuant to any such SCL  Guarantee or SCL's  guarantee of any
JES Public  Indebtedness,  QUIDS and ACES  which  remain  outstanding  as of the
Closing.

            (c) The Seller shall use its reasonable best efforts to cause itself
or one or more of its  Affiliates  (other than the Spirits  Subsidiaries)  to be
substituted  in all  respects for the Spirits  Subsidiaries  and for the Spirits
Subsidiaries to be otherwise  removed or released,  effective as of the Closing,
in respect of all  obligations  of the  Spirits  Subsidiaries  under each of the
guarantees,  indemnities, surety bonds, letters of credit and letters of comfort
obtained  by the  Spirits  Subsidiaries  for the  benefit  of the  Seller or its
Affiliates (other than the Spirits  Subsidiaries),  including the guarantees set
forth on Schedule 6.9(c) (collectively, the "SPIRITS SUBSIDIARY GUARANTEES") and
                                             -----------------------------
for all  obligations  of the  Spirits  Subsidiaries  in  respect  thereof  to be
terminated,  with,  in  each  case,  such  substitution,  removal,  release  and
termination to be in form and substance reasonably satisfactory to the Buyers.

            (d) If the Seller has been  unable to effect any such  substitution,
removal,  release and  termination  with respect to any such Spirits  Subsidiary
Guarantee effective as of the Closing,  the Seller agrees that after the Closing
it shall use its reasonable  best efforts to effect such  substitution,  removal
and release and termination as soon as possible.  The Seller agrees to indemnify
and hold the Buyers  and their  respective  Affiliates  (including  the  Spirits
Subsidiaries),  as  applicable,  harmless from and against and in respect of any
and all Losses,  claims,  judgments and  settlements  incurred by the Buyers and
their respective Affiliates (including the Spirits Subsidiaries), as applicable,
after the Closing under or pursuant to any such Spirits Subsidiary Guarantee.

            (e) The  parties  shall  cooperate  with each  other to  effect  the
substitutions referred to in this Section 6.9.

            SECTION  6.10.  INDEBTEDNESS.  Except  (i) as set forth on  Schedule
                            ------------
6.10(a)  and (ii) with  respect  to the JES Public  Indebtedness,  the QUIDS and
ACES,  the Seller shall use its

<PAGE>   65

                                                                              58

reasonable  best  efforts to defease  or repay or  otherwise  settle or to cause
itself or one or more of its Affiliates (other than the Spirits Subsidiaries) to
be substituted in all respects for the Spirits  Subsidiaries and for the Spirits
Subsidiaries  to be otherwise  removed or released,  prior to or effective as of
the Closing,  in respect of all  indebtedness  of the Spirits  Subsidiaries  for
borrowed  money owed to third  parties  and for all  obligations  of the Spirits
Subsidiaries  in respect  thereof to be  terminated,  with,  in each case,  such
substitution,  removal,  release  and  termination  to be in form and  substance
reasonably satisfactory to the Buyers.

            (a) If the Seller has been  unable to effect any such  repayment  or
substitution,  removal  and  release and  termination  with  respect to any such
indebtedness   effective  as  of  the  Closing,  the  Seller  agrees  that  such
indebtedness  will result in a  reduction  in the  Purchase  Price to the extent
provided for by Section 2.4.

            SECTION  6.11.  HEDGING  ARRANGEMENTS.  (a) The Seller shall use its
                            ---------------------
reasonable  best efforts to terminate or otherwise  settle or to cause itself or
one or more of its  Affiliates  (other  than  the  Spirits  Subsidiaries)  to be
substituted  in all respects for the Spirits  Subsidiaries,  and for the Spirits
Subsidiaries to be otherwise removed and released,  effective as of the Closing,
in  respect  of all  obligations  of the Seller or its  Affiliates  (other  than
Spirits  Subsidiaries),  as applicable,  under any interest rate swaps,  foreign
currency  hedges or other hedging or derivative  agreements to which any Spirits
Subsidiary  is a party or otherwise  bound,  including  those swaps,  hedges and
derivative  agreements listed on Schedule 4.3(e), and for all obligations of the
Spirits  Subsidiaries in respect  thereof to be terminated,  with, in each case,
such substitution,  removal, release and termination to be in form and substance
reasonably satisfactory to the Buyer.

            (b) If the Seller has been  unable to effect any such  substitution,
removal, release and termination with respect to any such agreement effective as
of the  Closing,  the  Seller  agrees  that  after the  Closing it shall use its
reasonable  best  efforts to effect such  substitution,  removal and release and
termination  as soon as possible.  The Seller  agrees to indemnify  and hold the
Buyers and their respective Affiliates (including the Spirits Subsidiaries),  as
applicable,  harmless  from and  against  and in respect of any and all  Losses,
claims,  judgments and settlements  incurred by the Buyers and their  respective
Affiliates  (including  the  Spirits  Subsidiaries),  as  applicable,  after the
Closing under or pursuant to any such agreement.

            SECTION  6.12.  QUIDS  AND  ACES.  (a)  The  Seller  shall  use  its
                            ----------------
reasonable  best  efforts to commence or to cause one or more of its  Affiliates
(other than a Spirits  Subsidiary) to commence as soon as practicable  after the
date hereof,  and to consummate prior to the Closing, a tender or exchange offer
for the 7.50% Adjustable Conversion-rate Equity Security Units issued by JES and
SCL (the "ACES").
          ----

            (b) The Seller shall use its  reasonable  best efforts to consummate
prior to Closing the tender offer to purchase the 8.00% Senior  Quarterly Income
Debt Securities due 2038 issued by JES (the "QUIDS").
                                             -----

            (c) In connection  with the tender or exchange  offers for the QUIDS
and the ACES,  the Seller  shall or shall  cause one of its  Affiliates  to seek
consents such that immediately prior to the Closing the provisions  contained in
the indentures or any supplemental  indentures with respect to the QUIDS and the
7.62%  Subordinated  Deferrable  Notes  due  June  21,  2004

<PAGE>   66

                                                                              59

issued  by JES  and  comprising  a part  of the  ACES  restricting  the  merger,
consolidation  or sale of all or  substantially  all of the assets of any of the
Spirits Subsidiaries or otherwise restricting the conduct of the business of any
Spirits  Subsidiary in any material respect (other than payments of interest) or
requiring  the  provision  of any reports to holders of the ACES and QUIDS shall
have no further force or effect.

            (d) To the extent that the Seller is unable to complete a successful
tender  offer for the  QUIDS or a tender  offer or  exchange  offer for the ACES
prior to the  Closing,  or to the  extent any QUIDS or ACES  remain  outstanding
prior to the Closing  after  completion  of a tender or exchange  offer in which
less  than  100% of the  QUIDS or ACES,  as the case  may be,  are  tendered  or
exchanged,  the Seller  agrees that the greater of the  principal  amount or the
Fair Market Value of any such QUIDS or the subordinated deferrable notes forming
part of the ACES, as the case may be,  remaining  outstanding  as of the Closing
Date will result in a reduction in the Purchase Price to the extent  provided by
Section 2.4.

            (e) Prior to the Closing,  the Seller shall use its reasonable  best
efforts,  to the extent  permitted by Applicable  Law, to have delisted from the
New York Stock Exchange the QUIDS and the ACES.

            (f) To the extent permitted by Applicable Law, prior to the Closing,
the Seller  shall file or cause JES to file with the SEC a Form 15 with  respect
to all JES  Public  Indebtedness  and,  if  delisted  from  the New  York  Stock
Exchange, the QUIDS and the ACES. In addition,  prior to the Closing, the Seller
shall file or cause JES to file a  post-effective  amendment to the Registration
Statement  on Form S-3 (filed on 9/2/99)  to  de-register  and remove all of the
securities registered thereon and shall terminate such Registration Statement.

            SECTION  6.13.  INSURANCE.  To the  extent  that  (i) any of the SCL
                            ---------
Insurance  Policies  cover any loss or  liability  relating to the  Business and
arising out of an occurrence  prior to the Closing  (such loss or liability,  an
"INSURED  BUYER LOSS") and (ii) such SCL Insurance  Policy  continues  after the
 -------------------
Closing to permit  claims to be made with respect to such Insured  Buyer Losses,
the Seller  agrees to cooperate  and to cause SCL to cooperate  with the Buyers,
the Spirits Subsidiaries and their respective Affiliates in submitting claims on
their  behalf  under such SCL  Insurance  Policies  with respect to such Insured
Buyer  Losses;  provided  that the Buyers agree to reimburse  the Seller and its
Affiliates from all out of pocket costs and expenses  actually  incurred by them
as a  result  of any  such  claim.  To the  extent  that  (i) any of the  Spirit
Subsidiary Insurance Policies or any other insurance policy of the Buyers or any
of their  respective  Affiliates  covers any loss or  liability  relating to the
Business  and arising out of an  occurrence  prior to the Closing  (such loss or
liability,  an  "INSURED  SCL LOSS") and (ii) such Spirit  Subsidiary  Insurance
                 -----------------
Policy or other insurance policy continues after the Closing to permit claims to
be made with respect to such  Insured SCL Losses,  the Buyers agree to cooperate
with the Seller, SCL and its Affiliates (other than the Spirits Subsidiaries) in
submitting  claims  on their  behalf  under  such  Spirit  Subsidiary  Insurance
Policies or other  insurance  policies with respect to such SCL Insured  Losses;
provided that the Seller agrees to reimburse,  indemnify and hold the Buyers and
their  Affiliates,  as  applicable,  harmless  from all  Liabilities,  costs and
expenses actually incurred by them as a result of any such claim.

<PAGE>   67

                                                                              60

            SECTION  6.14.  RETAINED  ASSETS.  Prior to the Closing,  the Seller
                            ----------------
shall use its reasonable  best efforts to cause the Retained  Assets held by the
Spirits  Subsidiaries  to  be  distributed  or  otherwise   transferred  by  the
applicable  Spirits  Subsidiary to another  Person (other than any other Spirits
Subsidiary);  provided  that there shall not be the  imposition or assumption of
Liabilities on the Buyers or any of the Spirits Subsidiaries or any violation of
Applicable Law in connection therewith. Notwithstanding anything to the contrary
contained in this Agreement, to the extent that the distribution or transfer, or
attempted  distribution  or transfer,  of any Retained Assets as provided for in
the  preceding  sentence  would  require any Consent of any third party and such
Consent  shall  not have been  obtained  prior to the  Closing  or for any other
reason any such  distribution or transfer shall not have been completed prior to
the Closing, the parties shall use their reasonable efforts, and shall cooperate
with each  other,  to obtain  promptly  any such  Consent  or to effect any such
transfer or distribution following the Closing; provided that none of the Buyers
or  any  of  their   respective   Affiliates   shall  be  required  to  pay  any
consideration, other amount or incur any expenses in connection thereto. Pending
the completion of any such distribution or transfer, the parties shall cooperate
with each other in any reasonable and lawful arrangements designed to provide to
the Seller the benefits and Liabilities of such Retained Assets.

            SECTION  6.15.  SEAGRAM NAME.  (a) Effective as of the Closing,  the
                            ------------
Buyers shall grant to, or shall cause the grant to, the Seller, its Subsidiaries
(other than the Spirits  Subsidiaries) and Affiliates a worldwide  non-exclusive
royalty  free right and  license to use the  "Seagram"  name and the  "Sandeman"
name, or any derivations thereof, as used by the Seller, its Subsidiaries (other
than the Spirits Subsidiaries) or its Affiliates (except in competition with the
Business)  prior to the Closing,  for a period of nine months after the Closing,
after which the Seller, its Subsidiaries  (other than the Spirits  Subsidiaries)
and  Affiliates  shall cease all use of the  "Seagram"  name and the  "Sandeman"
name, except as set forth in Section 6.15(b).

            (b) Effective as of the Closing, the Buyers hereby grant the Seller,
its  Subsidiaries  (other  than  the  Spirits  Subsidiaries)  and  Affiliates  a
perpetual, non-terminable,  transferable,  worldwide, non-exclusive royalty free
right and license,  with the right to sublicense  the same, to use the "Seagram"
name and the Seagram Crest, or any derivations  thereof,  in connection with all
art, antiques, artifacts and archival materials owned or previously owned by the
Seller, its Subsidiaries or its Affiliates,  including "The Seagram Company Ltd.
- Bronfman Family  Collections"  at the Hagley Museum and Library,  "The Seagram
Art Collection" and "The Seagram County Courthouse Collection" and in connection
with the name of the  building  located at 375 Park Avenue,  New York,  New York
10017. The Seller,  its Subsidiaries  (other than the Spirits  Subsidiaries) and
Affiliates  may  transfer  the right to use the  "Seagram"  name and the Seagram
Crest,  or any  derivations  thereof,  to a third-party or parties in connection
with the transfer of any such art,  antiques,  artifacts,  archival materials or
building.

            (c) The Seller  agrees to maintain  and  preserve the quality of the
"Seagram" name and the  "Sandeman"  name, and to use them in good faith and in a
manner  consistent  with good trademark  practice.  The Seller agrees to use the
"Seagram" name and the "Sandeman" name, or any derivations thereof,  only in the
manner permitted by Applicable Law.

            (d) The Seller will use its  reasonable  best efforts to cause to be
furnished to the Buyers and any  Successor  Buyers access to all of the archives
relating to The Seagram

<PAGE>   68

                                                                              61

Company  Ltd.--Bronfman Family Collections at the Hagley Museum and Library upon
reasonable  notice,  including  the rights to examine and borrow for  reasonable
periods of time any archival  materials  and to make copies  thereof and extract
excerpts therefrom.

            SECTION 6.16.  CHIVAS ENTITIES.  For at least one year from the date
                           ---------------
of the Closing, Buyer A agrees:

            (i) that  Chivas  Brothers  Limited  shall have at least two owners,
each owning at least 1% of its outstanding  shares, and no action shall be taken
that would result in Chivas Brothers  Limited not being treated as a partnership
for United States Federal Income Tax purposes; and

            (ii) that it will not liquidate,  discontinue  the operations of, or
sell the assets (other than inventory) of Chivas 2000.

            SECTION 6.17. FURTHER ASSURANCES; ACTIONS. (a) At any time following
                          ---------------------------
the  Closing  Date,  the  Seller  and the  Buyers  shall and shall  cause  their
Affiliates to, promptly execute, acknowledge and deliver any other assurances or
documents  necessary  to vest  more  effectively  in the  proper  party  (or its
Affiliates)  or to put the  proper  party  (or its  Affiliates)  more  fully  in
possession  of all  of  those  assets  (including  the  Retained  Assets)  to be
transferred to such party or its Affiliates pursuant to this Agreement.

            (b) The Buyers agree to cause JES and Tequila Don Julio S.A. de C.V.
to  comply  with the  terms  of  paragraph  13 of the  Patron  Agreement  and to
indemnify and hold SCL and its  Affiliates  harmless for any breach of paragraph
13 of the Patron  Agreement  by JES or Tequila Don Julio S.A. de C.V.  after the
Closing.  The  Buyers and the Seller  agree  that they will  cooperate  fully as
necessary to (i) enforce the releases  contained  in the Mutual  Release,  dated
October 30, 2000 (the "PATRON  MUTUAL  RELEASE"),  between St.  Maarten  Spirits
                       -----------------------
Limited, St. Maarten Spirits, Ltd., International Spirit Company Limited, Martin
Crowley and John Paul Dejoria,  et al. (the "ST. MAARTEN  PARTIES"),  on the one
                                             --------------------
hand, and JES, SCL, JDC S.A. de C.V., JDC Services, S.A. de C.V. and Tequila Don
Julio S.A. de C.V. d/b/a Tequila Tres Magueyes and Tequila Don Julio, et al., on
the other  hand,  against  any claims  asserted  by the St.  Maarten  Parties in
violation  of the  Mutual  Release  and  (ii)  enforce  the  payment  and  other
obligations  of the St.  Maarten  Parties  under the  Patron  Agreement  and the
Guarantee,  dated as of October 30,  2000,  by John Paul Dejoria in favor of JES
and SCL (the "PATRON GUARANTEE").
              ----------------

            (c) The  Buyers  shall  cooperate  with  respect  to any  reasonable
requests  received  from the Seller for copies of any Business  Records or other
information relating to the Citric Acid Litigation or any other matter listed as
a Retained Asset or Retained Liability.

            (d) Following  the Closing,  the Buyers agree to comply and to cause
their respective Affiliates and successors to comply with any obligations of the
Spirits  Subsidiaries or the Asset Sale Subsidiaries (for Assigned  Contracts or
Transferred Assets) under each of the Contracts of the Spirits  Subsidiaries and
the Asset Sale  Subsidiaries  with  respect to the  distribution  of the ABSOLUT
brand and the Mumm brand;  provided that the Seller shall  reimburse the Buyers,
for any out-of-pocket expenses reasonably incurred in connection therewith.  The
Seller shall be entitled to terminate or cause its  Affiliates  to terminate any
of the

<PAGE>   69

                                                                              62

agreements  governing the  distribution of the ABSOLUT brand and the Mumm brand.
Following the Closing,  to the extent  applicable,  the Buyers  shall,  upon the
written  request of the Seller,  terminate any of the  agreements  governing the
distribution of the ABSOLUT brand and the Mumm brand.

            SECTION 6.18.  PAYMENTS.  From and after the Closing, (i) the Seller
                           --------
shall  promptly  cause to be paid to the  Buyers  or any  designated  Affiliates
thereof any funds received in settlement of any accounts  receivable  related to
the Business or otherwise  related to the Business that the Seller or any of its
Affiliates  receive  after the Closing Date and (ii) the Buyers  shall  promptly
cause to be paid to the Seller or any  designated  Affiliate  thereof  any funds
received  with respect to any  Retained  Assets or Retained  Liabilities  or any
business of the Seller (other than the Business) that any of such parties or any
of their respective Affiliates receive after the Closing.

            SECTION 6.19.  RESIGNATIONS.  At or prior to the Closing, or as soon
                           ------------
as reasonably practicable thereafter, the Seller shall deliver to the Buyers the
resignations  of all directors or natural  Persons of  equivalent  position from
such positions with each of the Spirits Subsidiaries.

            SECTION 6.20. GST/QST REGISTRATION.  At or prior to the Closing, the
                          --------------------
entity  and/or  entities  to  which  Buyer A  and/or  Buyer B may  assign  their
respective rights, subject to Section 12.8, to purchase, subject to Section 2.1,
the  Transferred  Shares and  Transferred  Minority  Interests,  if  applicable,
relating to any Canadian entities,  as well as any Transferred Assets the supply
of which is made in Canada for purposes of the goods and services, including for
greater certainty real property, tax levied under the Excise Tax Act (Canada) or
in Quebec for purposes of the sales tax levied by Quebec Sales Tax Act, shall be
duly registered under subdivision (d) of Division V of Part IX of the Excise Tax
Act (Canada) with respect to the goods and services tax and harmonized sales tax
and under Division 1 of Chapter VIII of Title I of the Quebec Sales Tax Act with
respect to the Quebec  sales tax and shall  have such duly  issued  registration
numbers.

                                   ARTICLE VII

                                   TAX MATTERS
                                   -----------

            SECTION 7.1. TAX  INDEMNITIES.  (a) From and after the Closing Date,
                         ----------------
without  duplication,  the Seller  shall  indemnify  the Buyers and the  Spirits
Subsidiaries against (i) all Income Taxes (including  reasonable  attorneys' and
accountants'  fees and  other  reasonable  out-of-pocket  expenses  incurred  in
connection  therewith,  and  determined on a tax-affected  basis,  as calculated
under  Section  10.6(a))  imposed  on or  payable  by  any  of  the  Asset  Sale
Subsidiaries or the Spirits  Subsidiaries (A) with respect to any taxable period
or portion thereof that ends on or before the Closing Date (including any Income
Taxes allocated to such period under Section 7.1(d) hereof),  (B) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law) by
reason of any of the Spirits  Subsidiaries  being included in any  consolidated,
affiliated, combined or unitary or other similar group for tax purposes with the
Seller or its Affiliates at any time on or before the Closing Date, (C) pursuant
to any contract or agreement

<PAGE>   70

                                                                              63

with any third party for  indemnification  of Income  Taxes  entered into by any
Spirits Subsidiary prior to the Closing Date, and (D) without  duplication,  (I)
any Income Taxes  payable as a result of  elections  referred to in Section 7.8,
(II) any Income Taxes for any taxable period or portion  thereof that ends on or
before the Closing Date payable as a result of any Spirits Subsidiary ceasing to
be a member of a consolidated,  affiliated, combined or unitary or other similar
group for Tax purposes with the Seller or its Affiliates, (III) any Income Taxes
for any  taxable  period or portion  thereof  that ends on or before the Closing
Date  arising from the UK  Reorganization,  (IV) for  clarification,  any Income
Taxes for any  taxable  period or  portion  thereof  that ends on or before  the
Closing Date in respect of matters that are set forth on Schedule  4.18 and (ii)
any  stamp  duty or  stamp  duty  reserve  tax  payable  in  relation  to the UK
Reorganization. No indemnity shall be provided under this Section 7.1(a) for any
Income Taxes resulting from any  transaction of any of the Spirits  Subsidiaries
(A)  occurring on the Closing Date after the Closing that is not in the ordinary
course of business or (B) occurring after the Closing Date.

            (b) From and after the Closing Date,  without  duplication,  and the
Buyers shall, and shall cause the Spirits  Subsidiaries to, indemnify the Seller
and its  Affiliates  against  all Taxes  (including  reasonable  attorneys'  and
accountants'  fees and  other  reasonable  out-of-pocket  expenses  incurred  in
connection  therewith,  and  determined on a tax-affected  basis,  as calculated
under Section 10.6(a)) imposed on the Spirits Subsidiaries which are not subject
to  indemnification  pursuant to Section 7.1(a),  and all Taxes that are Assumed
Liabilities, including Taxes (i) resulting from any transaction (A) occurring on
the  Closing  Date  after  the  Closing  that is not in the  ordinary  course of
business or (B)  occurring  after the Closing  Date or (ii) with  respect to any
taxable period or portion  thereof that begins after the Closing Date (including
any Income Taxes allocated to such period under Section 7.1(d) hereof).

            (c) Payment by the  indemnitor  of any amount due under this Section
7.1 shall be made within ten days  following  written  notice by the  indemnitee
that payment of such amounts to the appropriate  Tax Authority is due;  provided
that the indemnitor  shall not be required to make any payment earlier than five
days before it is due to the appropriate  Tax Authority.  If the Seller receives
an  assessment  or other  notice of Taxes due with respect to any of the Spirits
Subsidiaries for any period for which the Seller is not responsible, in whole or
in part,  pursuant to Section 7.1(a),  then the Buyers shall pay such Tax, or if
the Seller pays such Tax, then the Buyers or the Spirits Subsidiary shall pay to
the Seller,  in accordance with the first sentence of this Section  7.1(c),  the
amount of such Tax for which the Seller is not responsible. In the case of a Tax
that is contested in accordance  with the provisions of Section 7.3,  payment of
the Tax to the  appropriate  Tax Authority  will not be considered to be due for
purposes of this Section 7.1(c) earlier than the date a final  determination  to
such  effect  is  made  by  the  appropriate  Tax  Authority  or  court.   Final
determination  shall have the meaning  set forth in Section  1313(a) of the Code
(or comparable provision of state, local or foreign law).

            (d) The Seller  and the Buyers  shall,  to the extent  permitted  by
Applicable Law and except as otherwise provided herein,  elect with the relevant
Tax  Authority to close the taxable  period of the Spirits  Subsidiaries  on the
Closing Date provided that no election  shall be made that would effect a change
in the  accounting  period  of any of the  Spirits  Subsidiaries  for  statutory
accounting purposes.  For purposes of this Agreement,  in the case of any Income
Tax that is payable for a taxable period that begins before the Closing Date and
ends after the Closing Date, the portion of such Income Tax which is payable (or
credit or refund  thereof) for the

<PAGE>   71

                                                                              64

portion of such  taxable  period  ending on the Closing Date shall be the amount
which would be payable (or credited or refunded) if the relevant  taxable period
ended on the Closing Date.

            SECTION 7.2. REFUNDS AND TAX BENEFITS. (a) The Buyers shall promptly
                         ------------------------
pay to the Seller  the amount of any  refund,  credit or offset  (including  any
interest paid,  credited or any offset allowed with respect  thereto but reduced
by any Taxes that the Buyer or any of the Spirits Subsidiaries shall be required
to pay  with  respect  thereto)  received  or used,  in the case of a credit  or
offset,  by the Buyers or any of the Spirits  Subsidiaries of Taxes (i) relating
to taxable  periods or portions  thereof  ending on or before the  Closing  Date
(including  any Income  Taxes  allocated  to such period  under  Section  7.1(d)
hereof),  (ii)  attributable  to an amount paid by the Seller under  Section 7.1
hereof or (iii) that are Retained Assets. The amount of any refunds,  credits or
offsets  (including any interest paid or credited with respect thereto) received
by the Buyers or any of the Spirits Subsidiaries shall be for the account of the
Buyers if the refund,  credit or offset is of Taxes relating to taxable  periods
or portions  thereof  that begin on or after the  Closing  Date  (including  any
Income Taxes  allocated to such period under Section 7.1(d)  hereof),  including
any  refund,  credit or offset  that  results  from the carry  forward  of a Tax
attribute  from a period ending on or before the Closing Date to a  post-Closing
taxable period.  The Buyers shall, if the Seller so requests and at the Seller's
expense,  cause  the  relevant  entity to file for and use its  reasonable  best
efforts to obtain and  expedite the receipt of any refund to which the Seller is
entitled under this Section 7.2.

            (b) The Buyers shall,  and shall cause the Spirits  Subsidiaries to,
make any and all  elections  under  section  172(b)(3) of the Code and under any
comparable  provision  of any  state,  local and  foreign  Tax law in any state,
locality or foreign  jurisdiction  within which any of the Spirits  Subsidiaries
file a  combined,  unitary  or  similar  return  with the  Seller  or any of its
Affiliates to  relinquish  the entire  carryback  period with respect to any net
operating loss  attributable  to the Spirits  Subsidiaries in any taxable period
beginning  after the Closing  Date that could be carried  back to a taxable year
ending on or before the  Closing  Date.  Neither  the  Seller nor any  Affiliate
thereof  shall  be  required  to  pay  to the  Buyers  or  any  of  the  Spirits
Subsidiaries  any refund or credit of Taxes that results  from the  carryback to
any taxable  period  ending on or before the Closing  Date of any net  operating
loss, capital loss or tax credit attributable to any of the Spirits Subsidiaries
in any taxable period  beginning after the Closing Date,  except that any of the
Spirits  Subsidiaries  that have not filed combined,  unitary or similar returns
with the Seller or any of its Affiliates  (other than the Spirits  Subsidiaries)
shall be entitled to carry back  losses or tax credits  from any taxable  period
beginning  on or after the Closing  Date to any taxable  period of such  Spirits
Subsidiary  ending on or prior to the Closing Date,  but only if such  carryback
would not impose a material Tax cost or otherwise  materially  adversely  effect
the Seller or any of its Affiliates.

            SECTION  7.3.  CONTESTS.  (a) After the  Closing  Date,  each of the
                           --------
Seller and the Buyers  shall  promptly  notify the other  party in writing  upon
receipt of written notice of the commencement of any Tax audit or administrative
or judicial  proceeding  or of any demand or claim on the Seller,  the Buyers or
the Spirits Subsidiaries which, if determined adversely to the taxpayer or after
the lapse of time, would be grounds for indemnification by the other party under
Section 7.1. Such notice shall contain factual  information (to the extent known
to the  notifying  party)  describing  the asserted Tax  liability in reasonable
detail and shall include  copies of any notice or other  document  received from
any Taxing  Authority  in respect of any such

<PAGE>   72

                                                                              65

asserted Tax liability.  If the  indemnitee  under Section 7.1 fails to give the
indemnitor  under  Section 7.1 prompt  notice of an asserted  Tax  liability  as
required by this Section 7.3, then the indemnitor  shall not have any obligation
to indemnify for any loss arising out of such asserted Tax  liability,  but only
to the extent  that  failure to give such notice  results in a detriment  to the
indemnitor.

            (b) In the case of an audit or administrative or judicial proceeding
that relates to a period  ending on or before the Closing Date and for which the
Seller may be  obligated  to  indemnify  the Buyers or the Spirits  Subsidiaries
under  Section  7.1(a) or with  respect to which the Seller may be entitled to a
refund or credit under Section 7.2, the Seller shall have the sole right, at its
expense, to control the conduct of such audit or proceeding;  provided, that the
Seller shall consult with the Buyers to the extent any proposed  adjustment  may
have a material  effect on the Taxes of the Buyers or the  Spirits  Subsidiaries
for taxable  periods  beginning after the Closing Date. The Buyers shall control
the conduct of any other audit or  proceeding;  provided,  that the Buyers shall
consult  with the  Seller  to the  extent  any  proposed  adjustment  may have a
material effect on the Taxes of the Seller (including the right to any refund or
credit)  or  its  indemnification  obligations  hereunder  for  taxable  periods
beginning before the Closing Date.

            (c) With  respect to Income Taxes for periods  beginning  before the
Closing Date and ending after the Closing Date,  (i) each party may  participate
at its expense in an audit or  proceeding  which  relates to any such period and
(ii) such audit or proceeding  shall be controlled (at the  controlling  party's
expense) by that party which would bear the burden of the greater portion of the
sum of the  adjustment;  provided  that no party shall  settle any such audit or
proceeding without the consent of the other parties,  which consent shall not be
unreasonably  withheld.  The principle set forth in the preceding sentence shall
govern also for purposes of deciding any issue that must be decided  jointly (in
particular, choice of judicial forum) in situations in which separate issues are
otherwise  controlled  hereunder by the Buyers, on the one hand, and the Seller,
on the other hand.

            SECTION 7.4. PREPARATION OF TAX RETURNS. (a) The Seller shall at its
                         --------------------------
expense timely  prepare and file any Income Tax Returns  relating to the Spirits
Subsidiaries  for any taxable  periods  that end on or prior to the Closing Date
(the  "SELLER  RETURNS")  and  timely  pay when due all Taxes  relating  to such
       ---------------
Returns.  The Seller Returns shall be prepared in a manner  consistent  with the
prior  practice  of the  Spirits  Subsidiaries  (except to the extent the Seller
determines  that  there is no  reasonable  basis  therefor).  In the case of any
Income Tax Return for a period that  includes,  but does not end on, the Closing
Date (the "STRADDLE RETURNS"),  the Buyers at their expense shall timely prepare
           ----------------
or cause the Spirits  Subsidiaries to prepare such Straddle  Returns in a manner
consistent  with the prior practice of the Spirits  Subsidiaries  (except to the
extent the Buyers  determine that there is no reasonable basis therefor) and the
Buyers shall deliver such Straddle Returns to the Seller at least 14 days before
such return is due to be filed  (taking into account any  extensions  of time to
file such return that have been properly  obtained) for the Seller's  review and
comment.  The Seller  shall  reimburse  the Buyers for any Taxes on the Straddle
Return owed by the Seller  pursuant to  Sections  7.1(a) and 7.1(d).  The Buyers
shall  at  their  expense   timely  prepare  and  file,  or  cause  the  Spirits
Subsidiaries  to prepare  and file,  any other Tax Returns due after the Closing
Date;  provided that the Seller shall prepare and file any such Tax Returns with
respect to which the Seller may be entitled to a refund or credit under  Section
7.2.

<PAGE>   73

                                                                              66

            (b) The Seller shall have the right to object to any items set forth
on the  Straddle  Returns  within  seven days of the  delivery  of a  particular
return.  In the event of such an  objection,  the parties  shall attempt in good
faith to resolve the dispute.  If the parties  cannot  resolve any such dispute,
the items  remaining in dispute shall be submitted to an independent  accounting
firm of international  reputation  selected by, and mutually  acceptable to, the
Seller  and the  Buyers.  The  independent  accounting  firm so  selected  shall
determine the proper  amounts for the items  remaining in dispute and the Buyers
and the Seller shall be bound by the determination by the independent accounting
firm, absent manifest error. The independent accounting firm shall make any such
determination  within  seven days after  submission  of the  remaining  disputed
items.  If a Tax  Return is due  before  the date a  disputed  item is  resolved
hereunder,  it shall be filed as prepared, and resolved items shall be reflected
on an amended return.

            SECTION 7.5. COOPERATION AND EXCHANGE OF INFORMATION. The Seller and
                         ---------------------------------------
the Buyers will provide each other with such  cooperation and information as any
of them reasonably may request of the other in respect of Taxes. Any information
obtained  under this  Section 7.5 shall be kept  confidential,  except as may be
otherwise  necessary  in  connection  with the  filing of  returns or claims for
refund or in conducting an audit or other proceeding.

            SECTION  7.6.  TAX SHARING  ARRANGEMENTS.  Any and all  existing Tax
                           -------------------------
sharing, allocation, compensation or like agreements or arrangements, whether or
not written, that include any of the Spirits Subsidiaries (other than agreements
or arrangements  with third parties),  including any arrangement by which any of
the Spirits  Subsidiaries makes compensating  payments to another of the Spirits
Subsidiaries  or any other  member of any  affiliated,  consolidated,  combined,
unitary or other similar Tax group for the use of certain tax attributes,  shall
be  terminated  as of the day before the Closing  Date and shall have no further
force or effect and no further  payments shall be made under any such agreements
or arrangements.

            SECTION  7.7.  INDEMNITY  PAYMENTS TO BE TREATED AS  PURCHASE  PRICE
                           -----------------------------------------------------
ADJUSTMENTS.  The Seller and the Buyers  agree  that any  payments  pursuant  to
-----------
Sections  7.1 and 7.2 hereof  shall be treated as  adjustments  to the  Purchase
Price.

            SECTION  7.8.  SECTION  338(H)(10)  ELECTION (a) With respect to the
                           -----------------------------
sale of the Transferred Shares listed on Schedule 7.8 and the deemed sale of the
shares of the Spirits  Subsidiaries  listed on Schedule  7.8 (the  "SECTION  338
                                                                    ------------
SUBSIDIARIES"),  the  Seller  and the  Buyers  shall  jointly  make  timely  and
------------
irrevocable  elections  under  section  338(h)(10) of the Code (the "SECTION 338
                                                                     -----------
ELECTIONS").
---------

            (b) To the extent  possible,  the  Seller  and the  Buyers  agree to
execute at the Closing any and all forms necessary to effectuate the Section 338
Elections  (including  Internal  Revenue  Service  Form 8023 (the  "SECTION  338
                                                                    ------------
FORMS")).  In the  event,  however,  any  completed  Section  338  Forms are not
-----
executed at the Closing, the Seller and the Buyers agree to prepare and complete
each such  Section 338 Form no later than 15 days prior to the date such Section
338 Form is required to be filed. The Seller and the Buyers shall each cause the
Section 338 Forms to be duly  executed by an authorized  person,  and shall duly
and timely file the Section 338 Forms in accordance with applicable tax laws and
the terms of this Agreement.

<PAGE>   74

                                                                              67

            (c) Using the  allocation  of the  Purchase  Price on  Schedule  2.1
attributable to the Transferred  Subsidiaries that are Section 338 Subsidiaries,
the Buyers shall reasonably determine the fair market value of the assets of the
Section 338  Subsidiaries  and the  allocation  of that  portion of the Purchase
Price (as required  pursuant to section  338(h)(10) of the Code and  regulations
promulgated thereunder), together with applicable liabilities, among such assets
(the  "SECTION  338  ALLOCATION").  The  Buyers  shall  deliver  to the Seller a
       ------------------------
schedule  setting forth the Section 338 Allocation as soon as practicable  after
the Closing Date (the  "SECTION 338  ALLOCATION  SCHEDULE").  If the Section 338
                        ---------------------------------
Allocation would have an adverse effect on the Seller,  then the Seller shall be
entitled  to  have  reasonable  comments   incorporated  into  the  Section  338
Allocation  Schedule.  The  Seller and the  Buyers  shall  file all Tax  Returns
consistently  with the  Section  338  Allocation  Schedule,  as  adjusted by the
Seller's comments incorporated pursuant to the previous sentence.

            (d) The Buyers shall not make any election  under section  338(g) of
the Code with respect to any directly or indirectly owned foreign  Subsidiary of
J.E.  Seagram  Corp.,  without  the prior  written  consent of the Seller  which
consent shall not be unreasonably  withheld if Buyers  compensate Seller for any
incremental cost incurred as a result of such election.

            SECTION 7.9.  TRANSFER  TAXES AND SALES TAX. (a) The Buyers shall be
                          -----------------------------
responsible  for the payment of all Transfer Taxes, if any, which may be payable
with  respect  to the  consummation  of the  transactions  contemplated  by this
Agreement and the Related  Agreements  (including  any such Transfer  Taxes with
respect to any deemed sale of assets  pursuant to any Section 338 Election).  To
the extent any exemptions from such Transfer Taxes are available  (including the
exemptions referred to in Section 7.9(b), (c) and (d) below), the Buyers and the
Seller shall cooperate to prepare any certificates or other documents  necessary
to claim such exemptions.

            (b) To the extent  relevant  conditions  are met, the Seller and the
Buyers shall jointly elect under subsection  167(l) of Part IX of the Excise Tax
Act  (Canada),  Section 75 of the Quebec Sales Tax Act,  and any other  Canadian
provincial  legislation imposing a similar value added or multi-staged tax, that
no tax be payable  with  respect  to the sale and  purchase  of the  Transferred
Assets  pursuant to this  Agreement.  The Seller and the Buyers  shall make such
election in the prescribed form containing  prescribed  information  pursuant to
the Excise Tax Act (Canada),  the Quebec Sales Tax Act and any other  provincial
legislation  imposing a similar value added or multi-staged  tax, and the Buyers
shall file the joint election in compliance with the  requirements of the Excise
Tax Act, the Quebec Sales Tax Act and any other Canadian provincial  legislation
imposing a similar value added or  multi-staged  tax. The Buyers shall indemnify
and hold  harmless the Seller and its  Affiliates  from and against any such tax
imposed on the  Seller or any of its  Affiliates  as a result of any  failure or
refusal by any Tax Authority to accept any such election.

            (c) The Seller and the Buyers agree that the portion of the Business
located in New Zealand is being sold as a going concern,  and that under the New
Zealand  Goods and  Services Tax Act 1985 (the "GST ACT") the sale is to be zero
                                                -------
rated for GST  purposes of New  Zealand  Good and  Services  Tax (the "NZ GST").
                                                                       ------
However,  if any supply under this Agreement is a "Taxable  Supply" as that term
is defined in the GST Act then:

<PAGE>   75

                                                                              68

            (i) the  Buyers  will pay to the  Seller  all NZ GST on any  Taxable
Supply under this Agreement on the date which the supply is deemed to take place
by virtue of the GST Act; and

            (ii) the Seller will provide a tax invoice for the relevant  Taxable
Supply within two Business Days of the Buyers requesting one.

            If the Buyers fail to pay on the due date any amount  payable  under
this clause then,  without prejudice to the Seller's other remedies,  the Buyers
will pay to the Seller,  on demand,  an amount equal to any  additional tax that
shall have become chargeable under the GST Act.

            As  between  the  Seller and the  Buyers,  the  Seller  shall not be
obliged  to pay NZ GST or  additional  tax until the  corresponding  payment  is
received from the Buyers.

            (d) (i) The  Seller  and the  Buyers  agree  that the  supply of the
assets of the  Business  pursuant  to this  Agreement  is the  supply of a going
concern for the  purposes of  subdivision  38-J of the AUS GST Act and that that
supply is "GST-free" for the purposes of the AUS GST Law.

            (ii) Each of the Buyers  warrants  that in all  respects it complies
with the requirements of the AUS GST giving rise to AUS GST-free status,  and in
particular, that it is "registered" for the purposes of the AUS GST Law.

            (iii) If the supply of any or all of the assets of the  Business  by
the Seller to the Buyers is classified as a Taxable Supply for AUS GST purposes,
the Buyers will pay to the Seller an additional amount equal to the sum of:

            (A) the GST Amount in relation to that AUS Taxable Supply;

            (B) any Default GST in relation to that AUS Taxable Supply; and

            (C) any Default GST in relation to the AUS Taxable Supply multiplied
       by the appropriate rate of AUS GST (currently 10%).

            (iv) The amount  payable  under  Section  7.9(d) must be paid by the
Buyers to the Seller  within  three  Business  Days of demand  being made by the
Seller.

            (v) Where the GST  Amount or any  Default  GST is not so paid to the
Seller, the Buyers shall pay to the Seller Default Interest on the amount of the
GST Amount and any  Default GST until the GST Amount and any Default GST is paid
by the Buyers to the Seller.

            (vi) If the Seller makes claim  against any of the Buyers in respect
of any Default GST payable under this Section  7.9(d),  it will not be a defense
to that claim that the Seller has failed to  mitigate  the  Seller's  damages by
paying an amount of AUS GST when it fell due under the AUS GST Law.

            (vii) The parties agree that:

<PAGE>   76

                                                                              69

            (A) all  Payments,  other than Payments for the supply by the Seller
       of the assets of the Business to which this Section 7.9(d) applies,  have
       been calculated without regard to AUS GST;

            (B) if the whole or any part of any  Payment,  other  than a Payment
       for the supply by the Seller of the assets of the  Business to which this
       Section 7.9(d) applies,  is the  consideration for an AUS Taxable Supply,
       the payer  must pay to the payee an  additional  amount  equal to the GST
       Amount.  Unless otherwise agreed in writing, such additional amount is to
       be paid within  five  Business  Days of the payee  issuing to the payer a
       valid Tax Invoice for the AUS Taxable Supply;

            (C) any  reference to a cost or expense in this  Agreement  excludes
       any amount in respect of AUS GST  forming  part of the  relevant  cost or
       expense when incurred by the relevant part for which that party can claim
       an Input Tax Credit; and

            (D) if, in relation to an AUS Taxable  Supply,  an Adjustment  Event
       occurs  that gives  rise to an  Adjustment  then the GST  Amount  will be
       adjusted  accordingly  and  where  necessary  a  payment  will be made to
       reflect that adjustment.  If a payment is required it will be made within
       five Business Days of the date on which the Adjustment  Note is issued by
       the supplier.

            SECTION 7.10. ACCOUNTS RECEIVABLE  ELECTION.  To the extent relevant
                          -----------------------------
conditions  are met,  the  Buyers  and the  Seller  shall,  with  respect to any
accounts  receivable  transferred  as part of the  Transferred  Assets,  jointly
execute and file an election  under  Section 22 of the Income Tax Act  (Canada),
and any equivalent  Canadian  provincial tax  legislation,  and shall  designate
therein the portion of the  Purchase  Price  allocated  thereto in Schedule  2.1
hereof as the consideration paid by the Buyers to the Seller.

            SECTION 7.11. REMEDY  EXCLUSIVE.  The right of each of the Buyers to
                          -----------------
indemnification  from  the  Seller,  and of the  Seller  and its  Affiliates  to
indemnification  from the Buyers under this  Article VII shall be its  exclusive
remedy  with  respect  to  Taxes  of  the  Business,   and  any  limitations  to
indemnification set forth in Article X shall not apply to this Article VII.

                                  ARTICLE VIII

                                EMPLOYEE BENEFITS

            SECTION 8.1. EMPLOYEES AND OFFERS OF EMPLOYMENT.  (a) The Seller and
                         ----------------------------------
the Buyers agree to cooperate  reasonably during the period prior to the Closing
Date to ensure  the  continuity  of the  workforce  of the  Business,  including
without  limitation  the  Transferred  Employees,  and  to  preserve  the  human
resources  of  the  Business,   including  without  limitation  the  Transferred
Employees.  In furtherance  thereof,  between the date of this Agreement and the
Closing Date, except where Applicable Law provides for an automatic  transfer of
employees upon the transfer of a business as a going concern,  Buyer A and Buyer
B or their Affiliates  shall offer employment  commencing as of the Closing Date
to each Transferred Employee listed on Schedule 8.1 who, on the Closing Date, is
actively employed or who is absent from work by

<PAGE>   77

                                                                              70

reason  of  vacation,  injury,  sick  leave,  short-term  disability  or  due to
authorized leave of absence or military service,  or, solely with respect to any
Transferred Employee to whom U.K. or Canadian law applies, long-term disability.

            (b) Until  December  31, 2002 (or  longer,  if required by law) (the
"BENEFITS  CONTINUATION  PERIOD"),  the Buyers or their  Affiliates will provide
 ------------------------------
each Business Employee  (including each Transferred  Employee) who continues his
or  her  employment  with  one of  the  Buyers  or  their  Affiliates  ("ASSUMED
                                                                         -------
EMPLOYEES"),  and shall cause any individual or entity which becomes an employer
---------
of any Assumed Employee through the acquisition from the Buyers or any Affiliate
of the Buyers of any portion of the Business  ("SUCCESSOR  BUYER") to provide to
                                                ----------------
each  such  Assumed  Employee  (subject  to such  Assumed  Employee's  continued
employment with Buyer A, Buyer B, any Affiliate of either Buyer or any Successor
Buyer),  base  salary  levels at least equal to that  provided  to such  Assumed
Employee  immediately  prior to the Closing Date, and provide  overall  employee
benefits,  including  all  defined  contribution  and  defined  benefit  pension
benefits (but  excluding for these purposes any plans that provide for equity or
equity-based compensation),  to Assumed Employees that are no less favorable, in
the  aggregate,  than those  provided  immediately  prior to the Closing Date to
Assumed  Employees  generally,  except  for  any  changes  made to  comply  with
Applicable Law or Tax qualification  nondiscrimination  rules.  After the end of
the Benefits  Continuation  Period,  and subject to Applicable  Laws, the Buyers
shall provide or shall cause to be provided, and shall cause any Successor Buyer
to  thereafter  provide,  base salary and overall  benefits  (including  retiree
benefits) to Assumed  Employees  that are no less  favorable,  in the aggregate,
than those then provided to  similarly-situated  employees of Buyer A or Buyer B
(or such Successor Buyer), as applicable.

            (c) Each of the Buyers shall  credit,  and shall cause each of their
Affiliates to credit,  Assumed  Employees for service with the Seller,  JES, and
their  respective  current and former  Affiliates  for all purposes  (including,
without  limitation,  benefit  accrual)  under each employee  benefit and fringe
benefit plan,  program or arrangement of Buyer A or Buyer B and their respective
Affiliates (the "BUYERS' BENEFIT PLANS"),  as applicable,  in which such Assumed
                 ---------------------
Employees  are eligible to  participate  to the extent such service was credited
under a comparable  plan of the Seller,  JES or their  respective  Affiliates in
which the Assumed  Employees  participated,  and shall cause any Successor Buyer
with respect to Assumed  Employees to credit such Assumed Employees with service
with the Seller,  JES, any of the Buyers and their respective current and former
Affiliates  under any  employee  benefit  and fringe  benefit  plan,  program or
arrangement of such Successor  Buyer (unless,  in either case, such credit would
result in a duplication of benefits).  Each of the Buyers shall waive, and shall
cause their  respective  Affiliates  and  Affiliates of any  Successor  Buyer to
waive,  any and all service  requirements  with  respect to  eligibility  of any
Assumed  Employee to participate in any Buyers'  Benefit Plan or similar plan or
arrangement  of any such  Successor  Buyer,  at which  time  the  Buyers  or the
Successor Buyer and their respective  Affiliates shall cause such plan,  program
or arrangement to (i) waive any preexisting condition limitations (to the extent
such limitations were  inapplicable to an Assumed  Employee  immediately  before
such arrangement was made available to such Assumed Employee) and (ii) honor any
deductible  and  out-of-pocket  expenses  incurred by the Assumed  Employees and
their dependents under similar Company Plans during the portion of the plan year
prior to such participation.  Nothing in this Agreement shall restrict, limit or
interfere with the ability  (after the Closing Date) of the Seller,  the Buyers,
any  Successor  Buyer or their  respective  Affiliates  to  terminate,  amend or
replace any particular  agreement,  plan or

<PAGE>   78

                                                                              71

program,  or  terminate  the  employment  of  any  person;   provided  that  the
requirements of this Article 8 otherwise are satisfied.

            SECTION   8.2.   EMPLOYMENT   AGREEMENTS,   TERMINATION   AGREEMENTS
                             ---------------------------------------------------
SEVERANCE,  AND  REPATRIATION/RELOCATION.  (a) Prior to the  Closing  Date,  the
----------------------------------------
Seller  shall  assume,  or shall cause a designated  Subsidiary  or Affiliate of
Vivendi  Universal (a "V/U  DESIGNEE") to assume,  all liability with respect to
                       -------------
employment  agreements,   post-termination  consulting  agreements,  termination
protection  agreements and all other employment  related  liabilities  scheduled
herein with  respect to all Retained  Employees,  as well as with respect to all
individuals who, as of the Closing Date, are terminated employees  ("TERMINEES")
                                                                     ---------
or  retired  employees  ("RETIREES")  of the  Seller,  JES and their  respective
                          --------
current and former  Affiliates.  Effective as of the Closing  Date,  each of the
Buyers expressly agrees to honor and maintain,  and to cause any Successor Buyer
to  assume,  honor and  maintain,  the  obligations  and  liabilities  under the
employment agreements and termination protection agreements entered into between
the  Seller,  JES or any of their  respective  Affiliates  and  certain  Assumed
Employees, as set forth on Schedule 8.2.

            (b) Prior to the Closing  Date,  the Seller shall  assume,  or shall
cause a V/U Designee to assume, all Company Plans that provide cash severance or
other  post-termination  benefits  continuation,   if  applicable,  to  Business
Employees,  Retirees  and  Terminees.  Effective  as of  the  Closing  Date  and
continuing until the second  anniversary of the Closing Date, each of the Buyers
shall adopt and maintain,  and shall cause any  Successor  Buyer with respect to
any Assumed  Employees to adopt and maintain,  a severance  plan with respect to
Assumed  Employees,  the provisions of which shall be no less favorable than the
severance provisions of the Company Plans and shall provide, and shall cause any
Successor Buyer to provide, cash severance and other  post-termination  benefits
continuation,  if  applicable,  at no less than the current level required under
the Company Plans for at least two years following the Closing Date,  reduced by
any  severance  payments  otherwise  required  under any existing  severance and
employment agreements assumed by the Buyers or any Successor Buyer or Applicable
Law  (unless,  with  respect to the  severance  benefit,  no such  reduction  is
permitted or provided for).  Notwithstanding the foregoing,  no Assumed Employee
who is offered a comparable  employment  opportunity in connection with any sale
of any portion of the  Business  by either of the Buyers  will be  eligible  for
severance under these plans, but only as may otherwise be required by Applicable
Law. For purposes of this paragraph,  a comparable employment  opportunity shall
mean  one  which  is not  located  more  than 35 miles  away  from  the  Assumed
Employee's  current  job  location  and which  provides  base pay and  aggregate
employee benefits equal to or greater than the Assumed  Employee's  current base
pay and aggregate employee benefits.

            (c)  REPATRIATION/RELOCATION.  Effective as of the Closing Date, the
                 -----------------------
Buyers expressly agree to honor, and to cause any Successor Buyer to assume, the
repatriation  and  relocation  programs,  policies and  agreements  set forth in
Schedule 8.2(c) for the Benefits Continuation Period.

            SECTION 8.3. BONUS; RETENTION BONUS. With respect to the second half
                         ----------------------
of the SCL fiscal year ending June 30, 2001, each Assumed Employee who currently
participates  in a Company Plan that is a bonus plan and who (except as provided
below),  is still employed by Seller,  one of the Buyers,  a Successor Buyer, or
any of their Affiliates on such date shall be awarded a bonus for such period in
an amount no less than 50% of such  Assumed  Employee's

<PAGE>   79

                                                                              72

annual SCL target  bonus for the SCL fiscal year ending June 30, 2001 (the "2001
                                                                            ----
TARGET BONUS") pursuant to the existing terms and conditions of such plan on the
------------
date hereof;  and with respect to the period from and including  July 1, 2001 to
and including  December 31, 2001 (the "STUB PERIOD"),  each Assumed Employee who
                                       -----------
currently  participates  in a Company Plan that is a bonus plan and who is still
employed  by any of the  Buyers,  a  Successor  Buyer  or any  Affiliate  of the
foregoing on December  31,  2001,  shall be awarded a bonus in an amount no less
than 40% of such  employee's  2001 Target  Bonus under the Company Plan in which
such employee participates on the date hereof;  provided,  that Seller shall pay
to each such  Assumed  Employee  the  pro-rata  portions  of such bonus  amounts
accrued through the Closing Date,  based on the number of days in the applicable
period that such Assumed  Employee was employed by the Seller or its Affiliates;
and provided,  further,  that if (i) any such Assumed  Employee is terminated by
the  Seller  (at a Buyer's  request)  or by either of the Buyers or any of their
respective  Affiliates  without  Cause (as defined  below) or (ii) such  Assumed
Employee  terminates  his or her employment by reason of either of the Buyers or
any of their respective  Affiliates requiring such individual to relocate his or
her  primary  place  of  employment  by more  than 35  miles,  then  (A) if such
termination  occurs on or after the Closing  Date but before  July,  2001,  such
Assumed  Employee  will be entitled to receive an amount  equal to 50% of his or
her 2001 Target Bonus as of the Closing Date,  pro-rated  based on the number of
days in 2001 prior to June 30, 2001 on which such Assumed  Employee was employed
by Seller,  Buyers,  a Successor Buyer or any Affiliate of any of the foregoing,
with payment thereof  prorated among the parties hereto as set forth above,  and
(B) if such  termination  occurs on or after July 1, 2001, the Assumed  Employee
will be  entitled  to receive an amount  equal to 40% of his or her 2001  Target
Bonus,  pro-rated  based on the number of days between July 1, 2001 and December
31, 2001 during which such Assumed  Employee was employed by Buyers, a Successor
Buyer or any Affiliate of any of the  foregoing,  plus, if the Assumed  Employee
has not as yet been paid (or has not as yet elected to defer) the portion of his
bonus for the period ending June 30, 2001, an amount equal to the amount awarded
under clause (A) above, with payment of the entire amount payable prorated among
the parties  hereto as set forth above.  Without  limiting the generality of the
foregoing,  the amount of bonuses  payable in the aggregate  with respect to the
Stub Period to Assumed Employees who are continuously in covered employment with
Seller,  Buyers,  a  Successor  Buyer or any of their  affiliates  through  such
period,  shall not be less than the sum of 50% of the 2001 Target  Bonus of such
Assumed Employees. "CAUSE" shall mean (I) the holder's conviction of, or plea of
no contest  to, a felony or (II) the  holder's  willful  malfeasance  or willful
misconduct  in  connection  with his or her duties to the Seller or JES,  or the
holder's willful refusal to perform his or her duties which, in any case results
in demonstrable  harm to the financial  condition or business  reputation of the
Buyer, the Seller, JES or any of their respective Affiliates.

            (b)  With  respect  to  any  Retention  Bonuses  or  other  special,
non-recurring  bonuses,  Seller shall retain all  liabilities  for and shall pay
those  portions of any such bonus that accrue and are  payable  with  respect to
periods  ending  on or prior to the  Closing  Date and Buyer A and Buyer B shall
assume all  liabilities and obligations of the Seller or any Affiliate of Seller
with  respect to those  portions of any such bonus that  accrue,  in whole or in
part, and are payable after the Closing Date.

            SECTION 8.4.  RETIREE WELFARE PLANS.  Prior to the Closing Date, the
                          ---------------------
Seller shall assume, or shall cause a V/U Designee to assume, all North American
Company Plans currently

<PAGE>   80

                                                                              73

being  maintained  or  administered  for the  benefit of each  current or former
Business Employee that provide retiree welfare (i.e.,  medical,  dental and life
insurance)  benefits  ("COMPANY RETIREE WELFARE PLANS") (and none of the Buyers,
                        -----------------------------
Successor Buyers, or any of their Affiliates shall have any liability in respect
of such plans),  and shall provide to each  Qualified  Retiree  Welfare  Benefit
Employee (as defined below) and his or her eligible beneficiaries and dependents
(if any) retiree welfare benefits  ("RETIREE WELFARE  BENEFITS") as if he or she
                                     -------------------------
had retired from employment with Seller and its Affiliates on the date he or she
actually  retires from service with Buyers and their  Affiliates and shall treat
service with Buyers,  any Successor  Buyer,  and their  Affiliates as if it were
service with Seller and its Affiliates  for purpose of eligibility  and level of
benefits with respect to Retiree Welfare Benefits.  A "QUALIFIED RETIREE WELFARE
                                                       -------------------------
BENEFIT  EMPLOYEE"  means an Assumed  Employee who would be eligible for Retiree
-----------------
Welfare  Benefits either on the Closing Date or at any time prior to December 8,
2002 and who terminates  employment  with Buyers and their  Affiliates  prior to
December 8, 2002.

            SECTION 8.5.  COMPANY  PLANS.  (a) Prior to Closing Date, the Seller
                          --------------
shall adopt, or shall cause a V/U Designee to adopt, all Company Plans currently
sponsored by JES, except for those Company Plans listed on Schedule 8.5(a),  and
shall amend each such Company Plan to reflect  such change in  sponsorship  (and
none of the Buyers,  Successor  Buyers or any of their Affiliates shall have any
liability  in respect  of such  plans).  Except as  otherwise  provided  in this
Article  VIII or as required by  Applicable  Law,  as of the Closing  Date,  the
Assumed Employees and their dependents and  beneficiaries  shall cease to accrue
further  benefits  and shall have no rights to further  participation  under the
Company Plans.

            (b) With  respect to each  Assumed  Employee,  Terminee  and Retiree
(including any  beneficiary or dependent  thereof),  the Seller shall retain (i)
all liabilities  and obligations  arising under any Company Plan that is a group
life,  accident,  medical,  dental or  disability  plan or  similar  arrangement
(whether or not insured) to the extent that such liability or obligation relates
to claims incurred (whether or not reported) on or prior to the Closing Date and
(ii) all  liabilities and  obligations  arising under any worker's  compensation
arrangement  to the  extent  such  liability  or  obligation  relates  to events
occurring (whether or not reported) during the period prior to the Closing Date,
including  liability  for  any  retroactive   worker's   compensation   premiums
attributable to such period.  For purposes of this Section 8.5, a claim shall be
deemed to be incurred when (A) with respect to medical or dental  benefits,  the
medical or dental  services giving rise to such claim are performed and (B) with
respect to life, accident or disability benefits,  when the event,  condition or
illness giving rise to such claim occurs.

            (c) With respect to any Business  Employee who is in the hospital or
is on short-term  disability  under any Company Plan as of the Closing Date, the
Seller shall be responsible for all claims and expenses incurred both before and
after the  Closing  Date in  connection  with  such  Business  Employee  (or any
beneficiary or dependent  thereof),  to the extent that such claims and expenses
are  covered by a Company  Plan,  until such time,  if any,  that such  Business
Employee commences full-time employment with a Buyer.

            SECTION  8.6.  401(K)  PLANS.  Effective as of the Closing Date (and
                           -------------
subject to Applicable Law), (i) all active participants shall be fully vested in
their account  balances in the Retirement  Savings and Investment Plan for Union
Employees of JES and its  Subsidiaries and Affiliates (the "SEAGRAM UNION 401(K)
                                                            --------------------
PLAN") and (ii) all Business Employees who formerly
----

<PAGE>   81

                                                                              74

participated  in the Premium  Beverage  401(k) Plan (the "PREMIUM  401(K) PLAN")
                                                          --------------------
shall be fully vested in their account balances.

            (b) (i) Prior to the Closing Date, the Seller shall adopt,  or shall
cause a V/U Designee to adopt, and become the sponsoring employer of The Seagram
401(k) Plan (the  "SEAGRAM  401(K)  PLAN")  (and none of the  Buyers,  Successor
                   ---------------------
Buyers or any of their  Affiliates  shall have any  liability in respect of such
plan).  As of the Closing  Date (and  subject to  Applicable  Law),  all Assumed
Employees shall be fully vested in their account  balances in the Seagram 401(k)
Plan,  and the Seller  shall  cause the  trustee of the  Seagram  401(k) Plan to
segregate,  in accordance  with the spin-off  provisions set forth under Section
414(l) of the Code, the assets of the Seagram 401(k) Plan  representing the full
account balances of Assumed  Employees for all periods of participation  through
the Closing Date in accordance with the terms of Section 8.6(b)(ii).  As soon as
practicable  after the Closing Date,  the Seller and/or such V/U Designee  shall
make  any  and all  filings  and  submissions  to the  appropriate  Governmental
Entities  arising in connection  with such  segregation  and transfer of assets.
Prior to the  Closing  Date,  the Seller  shall  cause to be made all  necessary
amendments to the Seagram 401(k) Plan and its related trust agreement to provide
for such  segregation  of assets and the transfer of assets as described  below.
The  manner  in  which  the  account  balances  of each  such  Assumed  Employee
participant  under The Seagram 401(k) Plan are invested shall not be affected by
such segregation of assets.  The Seagram 401(k) Plan shall be amended to provide
that  contributions  thereto with respect to Assumed Employees for periods after
the Closing Date shall cease as of the Closing Date.

            (ii) As soon as practicable after the Closing Date, the Buyers shall
establish  or designate a defined  contribution  plan for the benefit of Assumed
Employees (the "SUCCESSOR  DEFINED  CONTRIBUTION  PLAN"),  to take all necessary
                --------------------------------------
action,  if any, to qualify  such plan under the  applicable  provisions  of the
Code,  and to make  any and  all  filings  and  submissions  to the  appropriate
Governmental  Entities required to be made by it in connection with the transfer
of assets described  below. As soon as practicable  following the earlier of the
delivery to the Seller of a  favorable  determination  letter from the  Internal
Revenue  Service  regarding  the  qualified  status  of  the  Successor  Defined
Contribution Plan as amended to date of transfer,  or the delivery of an opinion
of counsel to Buyers reasonably satisfactory to the Seller that the terms of the
Successor  Defined  Contribution  Plan satisfy the  applicable  requirements  of
Section 401 of the Code (the "401(K) TRANSFER DATE"), the Seller shall cause the
                              --------------------
trustee of the  Seagram  401(k)  Plan to transfer in the form of cash or, at the
Buyer's option,  with the consent of the Seller, in kind (except with respect to
loans to Assumed Employees, which shall be transferred in kind) the full account
balances  (inclusive  of such loans) of all  Assumed  Employees,  which  account
balances shall have been credited with appropriate  earnings and  contributions,
if any,  attributable  to the period  ending on the close of business of the day
preceding  the  401(k)  Transfer  Date,  reduced by any  benefit  or  withdrawal
payments in respect of Assumed  Employees  prior to the 401(k) Transfer Date, to
the trustee of the Successor Defined Contribution Plan.

            (iii) In  consideration  of the  transfer of assets  hereunder,  the
Buyers  shall,  effective  as of the  401(k)  Transfer  Date,  assume all of the
obligations of Seller and any of its Affiliates,  and the Buyers shall cause the
Successor Defined  Contribution Plan,  effective as of the 401(k) Transfer Date,
to assume all of the  obligations  of the Seagram  401(k) Plan, in each case, in
respect of account  balances of Assumed  Employees under the Seagram 401(k) Plan

<PAGE>   82

                                                                              75

(exclusive of any portion of such account  balances  which are paid or otherwise
withdrawn prior to the 401(k)  Transfer  Date).  The Buyers shall not assume any
other  obligations or liabilities  arising under or  attributable to the Seagram
401(k) Plan.

            SECTION 8.7.  DEFINED BENEFIT PLANS.  (a) JES PENSION PLAN. Prior to
                          ---------------------       ----------------
the Closing  Date,  the Seller  shall  adopt,  or shall cause a V/U  Designee to
adopt,  the Pension  Plan for the  Employees of JES and  Subsidiaries  (the "JES
                                                                             ---
PENSION  PLAN")  (and  none of the  Buyers,  Successor  Buyers  or any of  their
-------------
Affiliates  shall have any  liability in respect of such plan).  Effective as of
the Closing Date and subject to Applicable  Law, all Assumed  Employees shall be
fully vested in their accrued  benefits under the JES Pension Plan. Prior to the
Closing Date, or as soon as practicable  thereafter,  the Seller shall cause the
trustee of the JES Pension Plan to segregate and transfer to a successor pension
plan in accordance  with the spin off  provisions set forth under Section 414(l)
of the Code, the assets allocable to those Assumed  Employees who are covered by
a collective  bargaining  agreement,  their beneficiaries and "Alternate Payees"
(within the meaning of Code Section 414(p)),  and shall make any and all filings
and submissions to the appropriate  Governmental  Entities arising in connection
with such segregation and transfer of assets and all necessary amendments to the
JES Pension Plan and related trust  agreement to provide for the  segregation of
assets and the  transfer  of assets as  described  below.  The assets of the JES
Pension  Plan  allocable  to such  Assumed  Employees  their  beneficiaries  and
"Alternate  Payees"  shall be  segregated in the form of cash. As of the Closing
Date, the Buyers, or one or more of their designated  Affiliates shall adopt one
or more Successor  Pension  Plans.  From and after the Closing Date, the Assumed
Employees shall  participate in the defined benefit plans of the Buyers or their
Affiliates,  as  applicable,  and the  benefits  payable to an Assumed  Employee
thereunder  shall be offset by benefits  payable to such Assumed  Employee under
the JES  Pension  Plan with  respect to periods  of  participation  prior to the
Closing  Date;  PROVIDED,  that  this  provision  shall  not have the  effect of
reducing  accruals of benefits that would have occurred if the Assumed Employees
had been granted past service  credit for all purposes  except  benefit  accrual
under the  applicable  plan of the Buyers,  and no offset in respect of benefits
under the JES Pension Plan were applied.

            (ii) The amount of such assets to be transferred in accordance  with
paragraph (i) above (the "TRANSFER  AMOUNT") shall be equal to the present value
                          ----------------
as of the Closing Date of the benefits  valued on a termination  basis using the
assumptions and methodology under Section 4044 of the Employee Retirement Income
Security  Act  of  1974  and  Regulations   Sections   4044.51  through  4044.57
promulgated by the Pension Benefit Guaranty Corporation  thereunder as in effect
on the  Closing  Date,  brought  forward  from the  Closing  Date to the date of
transfer  (the  "PENSION  TRANSFER  DATE")  using the prime  rate  published  by
                 -----------------------
Citibank,  N.A.,  for the first  business  day of each month with respect to any
time  elapsing in such month from the Closing Date through the day preceding the
Pension Transfer Date.

            (iii) In consideration  for the transfer of assets described herein,
the Buyers  shall,  effective as of the date of transfer of such assets,  assume
all of the  obligations of the Seller and any Affiliate of Seller and the Buyers
shall  cause the  Successor  Pension  Plan,  as of the date of  transfer  of the
assets,  to assume all of the obligations of the JES Pension Plan, in each case,
in respect of benefits  accrued by the Assumed  Employees  subject to collective
bargaining agreements under the JES Pension Plan on or prior to the Closing Date
(exclusive of benefits  paid prior to date of transfer of the pension  assets to
the Successor Pension Plan).

<PAGE>   83

                                                                              76

            (b)  CALIFORNIA  GROWERS  PENSION PLAN.  Effective as of the Closing
                 ---------------------------------
Date and subject to Applicable  Law, all Business  Employees who are then active
participants  therein  shall be fully  vested in their  accrued  benefits in the
Pension Plan for  Agricultural  Employees of Member  Employers of the California
Growers Foundation (the "CALIFORNIA  GROWERS PENSION PLAN"), a multiple employer
defined benefit pension plan.

            SECTION  8.8.  INTERNATIONAL  PENSION  PLANS.  Subject  to the other
                           -----------------------------
provisions of this Article VIII, the allocation of obligations  and  liabilities
arising   under  any  non-US  or   international   pension   benefit   plan  (an
"INTERNATIONAL PENSION PLAN") and the transfer of any assets thereunder shall be
 --------------------------
made subject to and in accordance with the following:

            (i) Subject to applicable laws,  Assumed Employees shall become 100%
vested in their benefits under each funded International  Pension Plan as of the
Closing Date, and under each unfunded  International  Pension Plan in accordance
with the vesting  provisions of such plan or upon the employee's  earlier death,
disability, or termination without Cause.

            (ii) With respect to any funded International Pension Plan sponsored
or  maintained  by the  Seller or any  Subsidiary  of the  Seller  that is not a
Spirits Subsidiary ("SELLER  INTERNATIONAL  PENSION PLAN"),  effective as of the
                     -----------------------------------
Closing Date, the Buyers shall  designate or create funded pension benefit plans
("BUYER  INTERNATIONAL  PLANS") with  respect to each  country in which  Assumed
  ---------------------------
Employees shall be working that are substantially identical to the funded Seller
International  Pension Plans applicable to Business  Employees in such countries
and  which   replicate  the  benefits,   features  and  rights  of  such  Seller
International Pension Plans.

            (iii) All funded and unfunded  International Pension Plans sponsored
or maintained by a Spirits  Subsidiary  in which Assumed  Employees  participate
shall  continue to be so maintained  after the Closing Date in  accordance  with
their terms. Alternatively,  such International Pension Plan shall be treated as
a Seller  International  Pension Plan, and, in accordance with the provisions of
Section  8.8(v),  the Buyers  shall  request  from such  trustee or  independent
pension board that  administers such  International  Pension Plan, a transfer of
assets and liabilities to a Buyer International Plan.

            (iv)  Effective as of the Closing Date,  the Buyers shall assume all
liabilities under each non-funded Seller International Pension Plan with respect
to the Assumed Employees.

            (v) With respect to each funded Seller  International  Pension Plan,
following  the  Closing  Date,  the  Buyers  will  request  from the  trustee or
independent  pension  board  that  administers  such  plan  a  transfer  to  the
corresponding Buyer International Plan of assets and liabilities attributable to
the Assumed  Employees  participating  therein,  provided  and to the extent the
Buyers have  obtained from each such Assumed  Employee any required  consent and
furnished a copy of such consent to the Seller and to the appropriate trustee or
independent pension board.

            (vi) Transfers of assets from Seller International  Pension Plans to
Buyer International Plans shall be made in an amount substantially equivalent to
the net aggregate

<PAGE>   84

                                                                              77

projected benefit obligations of such plans as of the Closing Date with respect
to the Assumed Employees, as agreed upon by actuaries of the Seller and the
Buyers.

            (vii) Without limiting the generality of the provisions of subclause
(v) or (vi) of this Section 8.8, if the trustees (or their  representatives) and
the actuaries of Seller and Buyers cannot agree on the transfer  amount required
under  subclause  (vi) within 60 days  following the Closing  Date,  each of the
trustees  or the  actuaries,  as the case may be,  shall set forth its  proposed
actuarial  assumptions for purposes of effecting such a transfer and submit such
assumptions to an independent actuary acceptable to each such party, which shall
select one of two presented  sets of  assumptions  in its entirety to govern the
proposed transfer.

            SECTION 8.9.  NON-QUALIFIED  PLANS.  Prior to the Closing Date,  the
                          --------------------
Seller shall assume, or shall cause a V/U Designee to assume,  all non-qualified
or   non-registered,   supplemental,   executive   supplemental,   and  deferred
compensation  Company  Plans set forth on Schedule 8.9 ("COMPANY TOP HAT PLANS")
                                                         ---------------------
(and none of the Buyers,  Successor Buyers or any of their Affiliates shall have
any  liability in respect of such plans).  As of the Closing  Date,  all Assumed
Employees  shall be fully vested with respect to their accrued  benefits  and/or
account balances under any Company Top Hat Plan;  provided that, with respect to
accrued benefits under the JES Benefit  Equalization Plan, except as provided on
Schedule  8.9,  full  vesting  as of the  Closing  Date shall only be granted to
Assumed  Employees who have attained age 55 as of such date. To the extent that,
from and after the  Closing  Date,  the Assumed  Employees  shall be eligible to
participate in non-qualified  supplemental,  executive supplemental and deferred
compensation plans of Buyer A or Buyer B, as applicable, the benefits accrued by
an Assumed Employee thereunder shall be offset by the benefits,  if any, accrued
by such Assumed Employee under a comparable Company Top Hat Plan; PROVIDED, that
this provision  shall not have the effect of reducing  accruals of benefits that
would have  occurred if the Assumed  Employees  had been  granted  past  service
credit for all purposes  except benefit accrual under the applicable plan of the
Buyers,  and no offset in respect of  benefits  under the  Company Top Hat Plans
were applied.

            SECTION  8.10.  WARN.   None  of  the  Buyers  or  any  of  their
                            ----
Affiliates shall on, or at any time prior to ninety (90) days after, the Closing
Date,  effectuate a "plant closing" or "mass layoff", as those terms are defined
in the Worker  Adjustment  and  Retraining  Notification  Act of 1988  ("WARN"),
                                                                         ----
affecting in whole or in part any site of employment,  facility,  operating unit
or employee,  without notifying the Seller in advance and without complying with
the  notice   requirements  and  other  provisions  of  WARN,  as  well  as  all
requirements of any applicable corresponding laws of any state.

            SECTION  8.11.  COBRA.  The Seller shall be  responsible  for all
                            -----
legally mandated  continuation of health care coverage for any former or current
Business  Employee  and his or her  covered  dependents  who  participated  in a
Company  Plan  and  who  had or have a loss of  health  care  coverage  due to a
qualifying  event occurring on or prior to the Closing Date. The Buyers shall be
responsible  for all legally  mandated  continuation of health care coverage for
all Assumed  Employees  and any of their covered  dependents  who have a loss of
health care coverage due to a qualifying  event occurring  following the Closing
Date.

<PAGE>   85

                                                                              78

            SECTION  8.12.  THIRD  PARTY  BENEFICIARIES.  No  provision  of this
                            ---------------------------
Article VIII shall create any third party  beneficiary  rights in any current or
former Business  Employee,  including Assumed  Employees and Retained  Employees
(including  any  beneficiary  or  dependent  thereof),  in respect of  continued
employment  or resumed  employment,  and no provision of this Article VIII shall
create any rights in any such  persons  in respect of any  benefits  that may be
provided,   directly  or  indirectly,   under  any  employee   benefit  plan  or
arrangement.

            SECTION  8.13.  UNITED  KINGDOM  EMPLOYEE  BENEFIT  PROVISIONS.  (a)
                            ----------------------------------------------
Continued participation in Seagram Distillers Scheme. (i) Subject to the consent
of the Board of Inland  Revenue in the United  Kingdom (which the Seller and the
Buyer agree to use all  reasonable  endeavours  to obtain) and to the  governing
documents of the Seagram  Distillers  Scheme, the Seller will use all reasonable
endeavours to procure that the Buyers and any  Successor  Buyer and any of their
Affiliates are permitted to participate,  or to continue to participate,  in the
Seagram  Distillers Scheme during the Transitional  Period in respect of Assumed
Employees  who are  Members  at  Closing  Date or who  have a right  to join the
Seagram  Distillers  Scheme on the  Closing  Date and/or  during the  Transition
Period and who are employed by any of them.

            (ii) The Seller will  procure  that in the  Transitional  Period the
Seagram  Distillers  Scheme will not be  terminated,  and no  amendments  to the
Seagram  Distillers  Scheme will be made or power  exercised if the amendment or
power  would  materially  affect the  benefits  of or in respect of any  Assumed
Employee,  or the rights or obligations of the employer of any Assumed Employee,
or the amount of the UK Transfer Amount,  in any case without the consent of the
employer (not to be unreasonably withheld or delayed).

            (iii)  Neither  the Seller nor the Buyers  will do or omit to do any
thing  during or in respect of the  Transitional  Period  which would  adversely
affect the tax or contracted-out status of the Seagram Distillers Scheme.

            (iv) The Buyers  each  undertake  that they will not,  and that they
will  procure  that  neither  any of their  Affiliates,  nor any  employer of an
Assumed  Employee  will,  exercise  any power or  discretion  under the  Seagram
Distillers  Scheme  except  on terms  (including  as to  payment  of  additional
contributions)  which the Seller  agrees in writing  (such  agreement  not to be
unreasonably withheld or delayed).

            (v) The Buyers will  procure the  discharge  by the  employer of any
Assumed  Employee  of its  obligations  as a  participating  employer  under the
Seagram Distillers Scheme and shall also procure the prompt payment to or to the
order of the Seagram Distillers Scheme of:

            (A)  contributions in respect of the  Transitional  Period by and in
     respect of each  Assumed  Employee  who is a Member,  calculated  in the
     case of Members in accordance with the rules of the Seagram Distillers
     Scheme and in the case of employers as the normal future service
     contribution  rate (ignoring any funding  surplus or deficiency) by
     reference to the funding  assumptions set out in the most recent valuation
     report disclosed to the Buyers,  together with such reasonable  amount as
     may be  required by the Seller as a  contribution  towards administrative
     expenses;

<PAGE>   86

                                                                              79

            (B) such further contributions as the Seller requires being equal to
     the cost to the  Seller  or the  Seagram  Distillers  Scheme  (such  cost
     being calculated  consistently  with the  calculation of the UK Transfer
     Amount,  but ignoring the investment  adjustment)  of any increase in the
     liabilities of the Seagram Distillers Scheme as a result of:

            (I) the  exercise  of any power or  discretion  or the giving of any
consent by the Buyers,  any of their  Affiliates  or any  employer of an Assumed
Employee  to early  retirement  or to the grant of any other  benefit  under the
Seagram Distillers Scheme not obtainable without consent; or

            (II) any  increase  in the  aggregate  pensionable  salaries  of the
Assumed Employees who are Members in excess of 5 1/2% if the Transitional Period
is a year and so in proportion for a period other than a year.

            (vi) The Buyers will  procure the  nomination  of such person as the
Seller may direct for the purpose of any provision of or regulations  made under
the Pension Schemes Act 1993 or the Pensions Act 1995 of the United Kingdom.

            (b) BUYERS' UK PLAN. (i)  NOTIFICATION  TO THE SELLER.  At least two
                ---------------       ---------------------------
months before the UK Pension  Transfer Date, each Buyer (or any Successor Buyer)
may, but will not be obliged to provide to the Seller particulars of one or more
proposed  occupational  pension  schemes (a "New Plan")  which each Buyer or any
Successor Buyer intends to be the New Plan for the purposes of this section. The
scheme (or each such  scheme)  must be a scheme which as at the Due Payment Date
satisfies the terms of Section 8.13(b)(ii).  The provisions of this Section 8.13
will apply separately to each New Plan.

            (ii) PARTICULARS OF SCHEME. (A) GENERAL  CONDITIONS.  Each New Plan:
                 ---------------------      -------------------

            (I) must be established and administered in the United Kingdom;

            (II) must be an exempt approved scheme within the meaning of section
592 of the  Income  and  Corporation  Taxes  Act 1988 (or  designed  so as to be
capable of such approval); and

            (III) must, on the basis of the minimum funding  requirement (within
the meaning of section 56 of the Pensions Act 1995 of the United  Kingdom)  have
assets the value of which  exceeds  100  percent of its  liabilities  or, if the
scheme first assumes pension  liabilities as of the UK Pension Transfer Date, it
must have no  liabilities  immediately  before the UK Pension  Transfer Date (in
either case as certified by the Buyers' Actuaries to the Seller).

            (B) PAST SERVICE  BENEFITS.  The Buyers will,  and will procure that
                ----------------------
     the New Plans will, for any Member who is offered membership of a New Plan,
     make the offers  described in this  subparagraph  (B) and,  subject to
     receipt of the part of the UK Transfer  Amount due to that New Plan,
     provide  the  benefits so described  in respect of persons  who accept the
     offers.  Each person who is an Assumed  Employee in the United Kingdom and
     a Member at the UK Pension  Transfer Date will, if such a Member is offered
     membership of a New Plan, be offered,  in respect of his pensionable
     service in the Seagram Distillers  Scheme,  benefits which are overall at
     least equal in value to those

<PAGE>   87

                                                                              80

     applying  for and in respect of him under the Seagram  Distillers  Scheme
     immediately before the UK Pension Transfer  Date,  valuing  benefits  under
     the New Plan and  under  the  Seagram Distillers  Scheme for this purpose
     on the basis of the  assumptions and methods relating to the Seagram
     Distillers Scheme set out in subparagraph (c)(i) below.

            (c) UK  TRANSFER  AMOUNT.  (i) The  Buyers  will  provide,  and will
                --------------------
procure that any employer of an Assumed  Employee who is a Member will  provide,
to the Seller any documents and  information  which are reasonably  required for
the calculation of the UK Transfer Amount.

            (ii) The UK  Transfer  Amount  will be  calculated  by the  Seller's
Actuary  as being  the value of the  benefits  prospectively  payable  under the
Seagram  Distillers  Scheme at the UK Pension Transfer Date to and in respect of
the Consenting Members.  The calculation will be carried out on the basis of the
actuarial  assumptions  and  methodology  applicable to the  calculation  of the
projected  benefit  obligation under FAS 87 carried out by William M. Mercer for
the year  commencing  July 1, 2000 as evidenced in their report dated June 2000,
except that the interest rate for discounting liabilities shall be 6% per annum.
Any liability  which there may be in respect of any  difference as between a man
and a woman relating to the guaranteed  minimum pension shall not be included in
the calculation.

            (iii) The UK Transfer Amount will be adjusted (upwards or downwards)
by calculating the  proportionate  change over the period referred to below in a
model  portfolio  deemed to be invested on the UK Pension  Transfer  Date in the
following  indices  (in the stated  proportions)  with the net  dividend / gross
interest reinvested (on a monthly basis) in the relevant index:

                  FT - Actuaries All Share Index            70%

                  FT - Actuaries Over 15 Year Gilts Index   30%

The period over which the change in the model portfolio is measured starts on
the UK Pension Transfer Date and ends on the day before actual payment of the UK
Transfer Amount.

            (iv) As soon as reasonably  practicable  after the Seller's  Actuary
has  calculated the  unadjusted UK Transfer  Amount,  the Seller will notify the
Buyers of the result of that calculation and provide  sufficient  particulars of
the  calculation  and the data on which it is based  which the  Buyers'  Actuary
reasonably requires to enable him to check that the calculation is correct.  The
Seller's Actuary must provide such further particulars or data which the Buyers'
Actuary  reasonably  requests  within 21 days of  receipt  of the  result of the
calculation  from the Seller's  Actuary.  The Buyers' Actuary has one month from
the date on which those  particulars and data have been supplied to him to raise
any objection that the calculation is incorrect.  The calculation  will be final
and binding on the Seller and the Buyer on the later of:

            (A) if the  Buyers'  Actuary  raises no  objection  within the terms
     mentioned  above, the expiry of the period mentioned above in which he may
     raise an objection;

<PAGE>   88

                                                                              81

            (B) if the Buyers'  Actuary raises an objection as mentioned  above,
     the date of a subsequent written agreement between the Seller's Actuary and
     the Buyer's Actuary that the calculation (or revised calculation) is
     correct;

            (C) if a reference is made to an  independent  actuary under Section
     8.13(g), the date of his determination of the disputed issue.

            (d)   PRESERVATION  REGULATIONS.   The  parties   acknowledge   the
                  -------------------------
obligations  of  the  Seagram  Distillers  Scheme  under  Regulation  27A of the
Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 and will
co-operate  with each other and the  Seagram  Distillers  Scheme  with a view to
assisting the Seagram Distillers Scheme in complying with that Regulation.

            (e) TRANSFER OF UK TRANSFER AMOUNT AND AVCS. (i) The Seller will use
                ---------------------------------------
all  reasonable  endeavours  to procure that on the Due Payment Date the Seagram
Distillers  Scheme  transfers  to each  New  Plan  the  relevant  part of the UK
Transfer  Amount and the assets  representing,  as at the date of transfer,  the
additional voluntary contributions paid by the Consenting Members who joined the
New Plan in question.

            (ii) The Seller and the Buyers will use all reasonable endeavours to
secure agreement between the Seagram Distillers Scheme and the relevant New Plan
respectively as to the particular  assets to be transferred  representing the UK
Transfer  Amount.  If  agreement  is not  reached by the Due Payment  Date,  the
transfer will be in the form of assets of the Seagram  Distillers  Scheme listed
on The London Stock Exchange and selected by the Seagram  Distillers Scheme as a
representative  selection of such listed  assets held by the Seagram  Distillers
Scheme.  Any securities to be transferred will be valued at the mid-market price
at the close of business on The London Stock Exchange on the day before the date
of transfer.

            (iii) The Buyers or any  Successor  Buyer to, seek promptly from the
Board of Inland  Revenue  approval  to the  transfer  of assets from the Seagram
Distillers  Scheme to the New Plan in respect of the Consenting  Members and, at
the Seagram Distillers request, will supply promptly to the Seller the documents
and  information  which the Seller  reasonably  requires  to enable the  Seagram
Distillers Scheme to obtain a corresponding approval.

            (iv) If the total of the amount which has been actually  transferred
(if any) by the  Seagram  Distillers  Scheme to a New Plan on or before  the Due
Payment Date in respect of  Consenting  Members,  together with the value of any
benefits  remaining payable under the Seagram Distillers Scheme to or in respect
of the Consenting  Members  transferring  to that New Plan (valued in accordance
with consistently  with the calculation of the UK Transfer Amount,  but ignoring
the  investment  adjustment)  and any amount due from the Buyer or any Successor
Buyer to the Seller or the Seagram  Distillers Scheme under this Section is less
than the part of the UK Transfer  Amount due to that New Plan, the Seller shall,
subject to (v) below,  within 5 working days of receipt of a written demand from
the  Buyers,  pay  to  the  Buyers  or as it  may  direct,  the  amount  of  the
underpayment  (the  "SHORTFALL"),  together  with interest at 2% above the LIBOR
                     ---------
Rate calculated on the basis of a year of 360 days for the actual number of days
elapsed  accrued  from  the Due  Payment  Date up to and  including  the date of
payment.

<PAGE>   89

                                                                              82

            (v) No payment  shall be due from the Seller  pursuant to (iv) above
if the reason  for the  Shortfall  is the  failure of the New Plan to accept the
whole or any part of the UK Transfer Amount;

            (vi)  Immediately  following any payment pursuant to (iv) above, the
Buyers shall procure that an amount equal to the payment is  contributed  to the
New Plan in  question.  The Buyers  shall use,  and shall  procure  that all its
Affiliates and any Successor Buyer and its Affiliates use, their best endeavours
to obtain a reduction in its tax liability (or a repayment of tax) in respect of
that contribution.  Immediately on obtaining that reduction or repayment, Buyers
will, or will procure that one of its  Affiliates  or the Successor  Buyer will,
pay to Seller an amount equal to that reduction or repayment.

            (f) NO  ASSISTANCE.  The Buyers  agree that they will not,  and will
                --------------
procure  that each New Plan and any  affiliate  of any Buyer will not,  take any
action or provide any assistance to any person (direct or indirect)  which might
result in the Seagram Distillers Scheme transferring a larger amount than the UK
Transfer  Amount  (or,  if  greater,  in the  case of any  individual  his  cash
equivalent  under  United  Kingdom law) and the assets  representing  Consenting
Members' additional voluntary contributions to the New Plans.

            (g) DISPUTES.  Notwithstanding  Sections 12.6 and 12.7,  any dispute
                --------
between  the  Seller  and the Buyers or between  the  Seller's  Actuary  and the
Buyers'  Actuary  concerning any calculation or valuation of benefits under this
Section 8.13 shall, in the absence of agreement between them within one month of
the party  concerned  having  notified the other in writing of the  dispute,  be
referred to an independent  actuary  chosen by agreement  between the Seller and
the Buyers or, failing agreement,  appointed by the President for the time being
of the  Institute  of  Actuaries  at the  instance  of either  the Seller or the
Buyers. The independent actuary shall be instructed by the Seller and the Buyers
not to make a compromise  determination,  but to adopt the  submission of either
the Seller (or the Seller's  Actuary) or of the Buyers (or the Buyers' Actuary).
The independent actuary shall determine the disputed matter as an expert and not
as an  arbitrator,  and his decision  shall be final and  binding.  The fees and
expenses of the independent actuary and of said President shall be borne equally
between the parties,  except that the  independent  actuary  shall have power to
determine,  at the  request of any party,  that the fees and  expenses  shall be
borne exclusively by the other parties or in such proportions as the actuary may
determine and any such determination shall be final and binding.

            SECTION   8.14.   CANADIAN   EMPLOYEE   BENEFIT   PROVISIONS.    (a)
                              ------------------------------------------
Notwithstanding  any  provisions  in this of Article VIII to the  contrary,  the
provisions of this Section 8.14 shall apply in relation to all Canadian  Pension
Plans.

            (b) The  Buyers,  effective  as of and from the start of business on
the Closing  Date,  shall  establish or  designate a registered  pension plan or
plans to provide  retirement  benefits to Assumed Employees for service from and
after the Closing Date (the  "BUYERS'  CANADIAN  PENSION  PLANS") and the Buyers
                              ---------------------------------
shall  forthwith  notify the Sellers of the  registration  or designation of any
such plan.

            (c) Effective as of the Closing Date, each Assumed Employee who is a
member of a Canadian  Pension  Plan shall cease to actively  participate  in and
accrue   benefits

<PAGE>   90

                                                                              83

under such Canadian Pension Plan and shall commence participation in and accrue
benefits  under the  applicable  Buyers'  Canadian Pension Plan.

            (d)  CANADIAN  DB PLANS.  (i) All  benefits  accrued  by an  Assumed
                 ------------------
Employee  under a Canadian DB Plan up to the Closing  Date shall be  transferred
from that Canadian DB Plan to a Buyers'  Canadian  Pension Plan,  subject to and
upon the  completion  of the  transfer of assets  from the pension  fund of that
Canadian  DB Plan to the  pension  fund of a Buyers'  Canadian  Pension  Plan as
contemplated by Section 8.14(d)(viii) hereof.

            (ii)  Subject  to and upon  completion  of the  transfer  of cash or
assets (or a combination thereof) from the pension fund of a Canadian DB Plan to
the pension fund of a Buyers'  Canadian  Pension Plan as contemplated by Section
8.14(d)(viii) hereof, such Buyers' Canadian Pension Plan shall, for the purposes
of  calculating  defined  benefit  entitlements  under such plan,  recognize the
period of service  recognized  under such  Canadian  DB Plan,  for all  purposes
relating to the  determination  of pension  benefits under the Buyers'  Canadian
Pension Plan as if such service had been with the Buyers.

            (iii) The Seller shall  appoint an actuary to  determine  the Member
Liabilities  in relation to the Canadian DB Plans and as soon as is  practicable
after the Closing  Date,  the Seller  shall cause its actuary to  determine  the
amount of the Member  Liabilities  separately for each Canadian DB Plan and make
details of those  calculations and the results available to the Buyers and their
actuary for review and  confirmation.  The Buyers  shall,  within thirty days of
receiving such information and data (or such later date as the parties may agree
to) notify the Seller as to its  agreement  or  disagreement  with the  Seller's
calculation of the Member Liabilities.

            (iv) If the  Seller  and the  Buyers  cannot  reach  agreement  with
respect to the calculations  under this section,  such dispute shall be resolved
in accordance with Section 8.13(g) hereof, with appropriate changes in context.

            (v) As soon as practicable but in any event within thirty days after
final agreement is reached between the Seller and the Buyers with respect to the
amount of the Member  Liabilities  in relation to a Canadian DB Plan, the Seller
shall make application to the applicable Governmental Entity for approval of the
transfer of assets equal to such Member Liabilities from the pension fund of the
applicable  Canadian  DB Plan to the  pension  fund  of the  applicable  Buyers'
Canadian  Pension Plan. In making such application the Seller shall use its best
efforts to have the Governmental Entities approve the transfers of assets in the
amounts  determined  between the parties  pursuant  to this  Agreement.  Written
confirmation of any and all such regulatory  approvals shall be forwarded by the
Seller to the Buyers within five business days of receipt of such approvals.

            (vi) From the Closing Date to the date upon which cash or assets (or
a combination  thereof) are transferred  from such Canadian DB Plan to a Buyer's
Canadian  Pension Plan in accordance with Section  8.14(d)(viii)  (the "CANADIAN
                                                                        --------
PENSION TRANSFER DATE"), the Seller shall invest the assets of each pension fund
---------------------
under the  Canadian DB Plans in  accordance  with the  statement  of  investment
policies for such plan,  the terms of the DB Pension Plan and  Applicable  Laws.
From the Closing Date to the Canadian  Pension  Transfer  Date, the Seller shall
cause the  funding  agent of the  Canadian  DB Plan to  accept  and  record,  as
required,

<PAGE>   91

                                                                              84

all benefit  payments  relating to members under the Canadian DB Plan and shall
remain  responsible for all benefit  calculations,  communications and the
completion of all forms and reports under that Canadian DB Plan relating to the
Assumed Employees. All benefit payments payable between the Closing Date and the
Canadian  Pension  Transfer Date to Assumed  Employees  under the terms of a
Canadian DB Plan shall be paid out of the pension for that plan.

            (vii) If any  Governmental  Entity  refuses to permit a transfer  of
assets  from the pension  fund of a Canadian DB Plan to the funding  medium of a
Buyers' Canadian Pension Plan in an amount equal to the Member Liabilities,  the
transfer shall be made from the  applicable  pension fund of Canadian DB Plan in
the amount that such Governmental  Entity advises would be acceptable to it (the
"REGULATORY AMOUNT").
 -----------------

            (viii) Within thirty days of receipt of all required  approvals from
the  Governmental  Entities in relation to a Canadian DB Plan,  the Seller shall
transfer from the pension fund of the applicable Canadian DB Plan, in cash or by
transfer of assets in kind (or a combination thereof) to the pension fund of the
applicable  Buyers Canadian  Pension Plans, an amount equal to the Member Assets
or the  Regulatory  amount,  as the case may,  adjusted for  investment  returns
(positive  or  negative)  between  the  Closing  Date and the  Canadian  Pension
Transfer  Date  (except  as  may  be  required  by  a  Governmental  Entity),  a
proportionate  share of any proper and reasonable  expenses of administration of
the Canadian DB Plan and any data corrections and benefit payments paid pursuant
to Section 8.14(d)(vi) hereof.

            SECTION 8.15.  VIVENDI  OPTIONS AND VIVENDI SARS.  The Seller shall,
                           ---------------------------------
prior to the  Closing  Date,  take such  action as may be required to extend the
period during which any Assumed  Employee may exercise his or her Vivendi Option
and Vivendi SAR to the expiration date thereof, determined without regard to any
termination of employment.

            SECTION  8.16.  COMMUNICATIONS.  Prior to  Seller's  issuance of any
                            --------------
general  communication to the Assumed Employees relating to the compensation and
benefits that are contemplated to be provided to such employees on and after the
Closing Date by the Buyers or their Affiliates,  Seller shall provide the Buyers
with an opportunity to review and comment upon such communication.

                                   ARTICLE IX

                              CONDITIONS TO CLOSING
                              ---------------------

            SECTION 9.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. The
                         --------------------------------------------------
respective  obligations  of the parties  hereto to consummate  the  transactions
contemplated by this Agreement are subject to the satisfaction (or waiver by the
Seller and the  Buyers),  at or prior to the Closing,  of each of the  following
conditions:

            (i) NO INJUNCTIONS.  Except for an injunction relating solely to all
                --------------
     or any part of the Captain  Morgan Assets and Captain  Morgan  Liabilities,
     no preliminary or permanent  injunction or other order,  decree or ruling
     issued by any  Governmental  Entity of any  jurisdiction  in which the
     operations  of the Business

<PAGE>   92

                                                                              85

     are  material to the  Business as a whole or which  violation  of such
     injunction  would  subject any Buyer or any of their  Affiliates  to any
     penalty material to the  Business  as a whole or to any Buyer's  business
     as a whole nor any statute, rule, regulation or executive order promulgated
     or enacted by any Governmental Entity of any jurisdiction in which the
     operations of this Business are  material to the  Business as a whole or
     which  violation  of such  statute, rule,  regulation  or  executive  order
     would subject any Buyer or any of their Affiliates to any penalty  material
     to the Business as a whole or to any Buyer's business as a whole shall be
     in effect and shall have the effect of enjoining or otherwise materially
     impairing the consummation of the transactions contemplated by this
     Agreement.

            (ii)  GOVERNMENTAL  APPROVALS.  (A) The waiting period applicable to
                  -----------------------
     the  transactions  contemplated  by this Agreement  under the HSR Act shall
     have been terminated or shall have expired,  (B) any required approvals
     pertaining to the  transactions  contemplated  by this  Agreement by the
     European  Commission pursuant to the EC Merger  Regulation shall have been
     obtained,  (C) any waiting period  applicable to the transactions
     contemplated by this Agreement under the Canadian  Competition  Act shall
     have been  terminated or shall have expired and the Buyers shall have been
     advised in writing by the  Canadian  Commissioner  of Corporation that such
     Commissioner  has  no  present  intention  to  make  an application for an
     order under Section 92 or 100 of the Canadian Competition Act in respect of
     all or any material part of the transactions  contemplated by this
     Agreement, and if any terms or considerations are attached in the written
     advice of such  Commissioner,  such terms and  conditions  shall be
     acceptable  to the Buyers acting  reasonably and any required  approval
     regarding the transactions contemplated  by this Agreement by the Minister
     of Industry  pursuant to the ICA and the ICA  undertaking  shall have been
     obtained  and (D) any other  required approvals  pertaining to the
     transactions contemplated by this Agreement the failure of which to obtain
     would have a Material Adverse Effect.

            SECTION 9.2.  CONDITIONS  PRECEDENT TO OBLIGATION OF THE BUYERS. The
                          -------------------------------------------------
obligation of the Buyers to consummate  the  transactions  contemplated  by this
Agreement is subject to the  satisfaction  (or waiver by the Buyers) at or prior
to the Closing of each of the following additional conditions:

            (i) ACCURACY OF REPRESENTATIONS AND WARRANTIES.  The representations
                ------------------------------------------
     and  warranties  of the Seller set forth in Article IV which are qualified
     as to materiality,  Material Adverse Effect or any similar materiality
     qualifier shall be true and correct, and the representations and warranties
     of the Seller set forth in Article IV which are not so qualified  shall be
     true and correct in all material  respects,  in each  case,  as of the date
     hereof and on and as of the Closing  Date,  with the same  force and effect
     as though  made as of the date hereof  and on and as of the  Closing  Date,
     except  to the  extent  that  any representation  or warranty is made as of
     a specified  date,  in which case such representation  or  warranty  shall
     be so true  and  correct  as of such  date; provided  that  this  paragraph
     (i) shall be  deemed  satisfied  so long as the failure of all such
     representations  and  warranties to be so true and correct would not have a
     Material Adverse Effect.

<PAGE>   93

                                                                              86

            (ii)  PERFORMANCE OF AGREEMENTS.  The Seller shall have performed in
                  -------------------------
     all material respects all obligations and agreements set forth in this
     Agreement required to be performed by it prior to or on the Closing Date.

            (iii)  CERTIFICATE.  The Buyers shall have received a certificate of
                   -----------
     the Seller, dated as of the Closing Date, executed on behalf of the Seller
     by an authorized  officer,  to the effect that the conditions  specified in
     paragraphs (i) and (ii) above have been fulfilled.

            (iv)  RELATED  AGREEMENTS.  The  Buyers  shall  have  received  duly
                  -------------------
     executed  counterparts  by the  Seller and  the  Asset Sale Subsidiaries,
     as applicable,  of each  of the  Related  Agreements,  and  each  of  such
     Related Agreements shall be in full force and effect.

            (v) TRANSFER DEEDS. The Buyers shall have received deeds in form and
                --------------
     substance reasonably  satisfactory  to the Buyers with respect to the
     Transferred  Real Property.

            (vi) INDEBTEDNESS. All provisions contained in the indentures or any
                 ------------
     supplemental  indentures with respect to the QUIDS,  the ACES and the JES
     Public Indebtedness   restricting  the  merger,   consolidation   or  sale
     of  all  or substantially all of the assets of any of the Spirits
     Subsidiaries or otherwise restricting  the conduct of the Spirits
     Subsidiaries  in any  material  respect (other than payment of interest) or
     requiring  the  provision of any reports to holders of the ACES and QUIDS
     shall have no further force or effect.

            SECTION 9.3.  CONDITIONS  PRECEDENT TO THE OBLIGATION OF THE SELLER.
                         ------------------------------------------------------
The obligation of the Seller to consummate the transactions contemplated by this
Agreement is subject to the  satisfaction  (or waiver by the Seller) at or prior
to the Closing of each of the following additional conditions:

            (i) ACCURACY OF REPRESENTATIONS AND WARRANTIES.  The representations
      and warranties of the Buyers set forth in Article V which are qualified as
      to  materiality,  Material  Adverse  Effect  or  any  similar  materiality
      qualifier   shall  be  true  and   correct  in  all   respects,   and  the
      representations  and warranties of the Buyers set forth in Article V which
      are not so qualified  shall be true and correct in all material  respects,
      in each case,  as of the date  hereof and on and as of the  Closing  Date,
      with the same force and effect as though made as of the date hereof and on
      and as of the Closing Date,  except to the extent that any  representation
      or  warranty  is  made  as  of  a  specified  date,  in  which  case  such
      representation  or warranty  shall be so true and correct as of such date;
      provided that this paragraph (i) shall be deemed  satisfied so long as the
      failure  of all  such  representations  and  warranties  to be so true and
      correct would not have a Buyer Material Adverse Effect.

<PAGE>   94

                                                                              87

            (ii)  PERFORMANCE OF AGREEMENTS.  The Buyers shall have performed in
                  -------------------------
      all material  respects all  obligations  and  agreement  set forth in this
      Agreement  required  to be  performed  by them prior to or on the  Closing
      Date.

            (iii)  CERTIFICATE.  The Seller shall have received a certificate of
                   -----------
      each of the Buyers,  dated as of the Closing  Date,  executed on behalf of
      each of the  Buyers  by an  authorized  officer,  to the  effect  that the
      conditions  specified in paragraphs (i) and (ii) above have been fulfilled
      to the extent related to such party.

            (iv)  RELATED  AGREEMENTS.  The  Seller  shall  have  received  duly
                  -------------------
      executed counterparts by the Buyers and/or their designated Affiliates, as
      applicable,  of each of the Related  Agreements,  and each of such Related
      Agreements shall be in full force and effect.

            (v) INVESTMENT CANADA UNDERTAKING. The Buyers shall have advised the
                -----------------------------
      Seller in writing in form and  substance  satisfactory  to the Seller that
      they have  complied with the  requirements  of paragraphs 10 and 11 of the
      Investment  Canada  Undertaking  as  applicable  relating to actions to be
      taken by the Buyers thereunder.

                                    ARTICLE X

                                 INDEMNIFICATION
                                 ---------------

            SECTION  10.1.  INDEMNIFICATION  BY THE  SELLER.  (a) Subject to the
                            -------------------------------
other  provisions  of this Article X,  following  the Closing,  the Seller shall
indemnify the Buyers and their respective  Affiliates and stockholders and their
officers, directors,  employees, agents and representatives  (collectively,  the
"BUYER  INDEMNIFIED  PARTIES")  against,  and shall hold them harmless from, any
 ---------------------------
Losses for or on account of or arising from,  in connection  with or relating to
(i) any  breach on the part of the  Seller  of any  representation  or  warranty
(which for purposes of this  Article X shall each be read without any  reference
to materiality,  Material Adverse Effect or any similar  materiality  qualifier,
except  with  respect to  Sections  4.11 and 4.12 only with  respect to Material
Adverse  Effect  (provided  that the  parties  agree that no  provision  in this
Article  X  shall  imply  that  such  provision   establishes  any  standard  of
materiality for purposes of this Agreement),  made by it contained herein (other
than  Section  4.18),  it being  understood  that  such  indemnification  may be
available notwithstanding that any Loss results from or arises out of an Assumed
Liability,  (ii) any breach on the part of the Seller of any covenant  contained
in this Agreement, (iii) the Retained Assets and the Retained Liabilities,  (iv)
the ABSOLUT brand and taking actions in accordance  with Section  6.17(c) (other
than with respect to any Losses to the extent  arising from, in connection  with
or relating to any failure of the Buyers to comply with Section  6.17(c)) or (v)
the Mumm brand and taking actions in accordance with Section 6.17(c) (other than
with respect to any Losses to the extent  arising from,  in  connection  with or
relating to any failure of the Buyers to comply with Section 6.17(c)).

(b) The Buyers shall use their reasonable best efforts to mitigate any Losses
for which the Seller is required to provide indemnification under Section
10.1(a).

<PAGE>   95

                                                                              88

            SECTION  10.2.  INDEMNIFICATION  BY THE  BUYERS.  (a) Subject to the
                            -------------------------------
other provisions of this Article X, each of Buyer A and Buyer B, severally,  pro
rata in proportion to the Buyer A Proportion  and the Buyer B Proportion,  shall
indemnify the Seller and its Affiliates and  stockholders  and their  respective
officers,  directors,  employees,  agents and representatives against, and shall
hold them harmless from, any Losses, including any Losses arising from any suit,
action or other proceeding  (including any third-party claim), for or on account
of or arising from, in connection with or relating to (i) any breach on the part
of any of the Buyers of any  representation  or warranty made by them  contained
herein,  (ii)  any  breach  on the  part of any of the  Buyers  of any  covenant
contained  in this  Agreement,  (iii)  the  Assumed  Liabilities  and  (iv)  the
ownership  or  operation  of  the  Business,  the  Spirits  Subsidiaries  or the
Transferred  Assets on or after the Closing  Date,  including any portion of the
Business or any Transferred Shares, Transferred Minority Interests,  Transferred
Assets or assets of the Transferred  Subsidiaries  not transferred at Closing in
accordance with Section 2.3 (except to the extent arising from any breach by the
Seller of Section 2.3) and  including any product  liability  action or claim or
other action,  claim,  proceeding or litigation  with respect to the Business or
any action or claim by any distributor or broker.

            (b) The Seller shall use its reasonable best efforts to mitigate any
Losses for which any Buyer is required to provide  indemnification under Section
10.2(a).

            SECTION  10.3.  INDEMNIFICATION   PROCEDURES.  (a)  All  claims  for
                            ----------------------------
indemnification  by any party (the  "INDEMNIFIED  PARTY")  under this  Article X
                                     ------------------
shall be asserted and resolved as set forth in this Section  10.3.  In the event
that any written  claim or demand for which the party from whom  indemnification
is sought (an  "INDEMNIFYING  PARTY") would be liable to any  Indemnified  Party
                -------------------
hereunder  is asserted  against or sought to be collected  from any  Indemnified
Party by a third party, such Indemnified  Party shall promptly,  but in no event
more than 30 days following such  Indemnified  Party's  receipt of such claim or
demand,  notify the Indemnifying Party of such claim or demand and the estimated
amount thereof to the extent then reasonably  feasible (which estimate shall not
be  conclusive  of the final  amount of such claim and demand or provide a basis
upon which to deny indemnification) (the "CLAIM NOTICE");  provided that failure
                                          ------------
to give the Claim Notice shall not affect the indemnification provided hereunder
except to the extent the Indemnifying Party shall have been actually  prejudiced
as a result of such failure (except the  Indemnifying  Party shall not be liable
for any Losses incurred during the period in which the Indemnified  Party failed
to give the Claim Notice after such 30 day period). The Indemnifying Party shall
have 30 days from the  personal  delivery  or mailing of the Claim  Notice  (the
"NOTICE  PERIOD") to notify the  Indemnified  Party whether or not it desires to
 --------------
defend the Indemnified Party against such claim or demand and shall immediately,
if assuming the defense, assume the defense

            (b) Subject to Section  10.3(c),  all reasonable  costs and expenses
incurred by the  Indemnified  Party in defending such claim or demand shall be a
liability of, and shall be paid as incurred by, the Indemnifying  Party.  Except
as hereinafter  provided,  in the event that the Indemnifying Party notifies the
Indemnified  Party  within  the  Notice  Period  that it  desires  to defend the
Indemnified  Party against such claim or demand,  the  Indemnifying  Party shall
have the right to defend the  Indemnified  Party by appropriate  proceedings and
shall have the sole power to direct and control such defense.  In no event shall
the  Indemnifying  Party be  permitted

<PAGE>   96

                                                                              89

to assume the  defense of any claim or demand,  unless the counsel to be used by
such Indemnifying Party is reasonably acceptable to the Indemnified Party.

            (c) If any  Indemnified  Party  desires to  participate  in any such
defense by the Indemnifying Party it may do so at its sole cost and expense. The
Indemnified  Party shall be entitled to  participate in the defense of any claim
or demand and to have the Indemnifying  Party pay and be liable for the fees and
expenses of its counsel in the event that the Indemnified Party shall be advised
by outside  legal  counsel that any  potential  or actual  conflicts of interest
exist between it and the  Indemnifying  Party or one or more  defenses  would be
available  to it that would not be  available  to the  Indemnifying  Party.  The
Indemnified  Party  shall not settle a claim or demand for which it seeks or may
seek to be  indemnified  by the  Indemnifying  Party  without the prior  written
consent of the  Indemnifying  Party.  If the  Indemnifying  Party  elects not to
defend the Indemnified Party against such claim or demand, whether by giving the
Indemnified Party affirmative notice or by failing to give the Indemnified Party
timely notice as provided above or otherwise,  then the amount of any such claim
or  demand   (so  long  as  it  is  a  claim  or  demand  in  respect  of  which
indemnification  is  available  hereunder)  or, if the same be  contested by the
Indemnified  Party,  then that  portion  thereof  as to which  such  defense  is
unsuccessful (and the reasonable costs and expenses  pertaining to such defense)
shall be the liability of the Indemnifying  Party  hereunder.  To the extent the
Indemnifying  Party  shall  direct,  control or  participate  in the  defense or
settlement of any third-party  claim or demand,  the Indemnified Party will give
the  Indemnifying  Party  and its  counsel  reasonable  access  to the  relevant
business records and other documents,  and shall permit them to consult with the
employees and counsel of the Indemnified  Party. The Indemnified Party shall use
its reasonable efforts in the defense of all such claims.

            SECTION  10.4.  REMEDIES  EXCLUSIVE.  The remedies set forth in this
                            -------------------
Article X and any other  provision  hereof  providing for  indemnification,  the
assumption  of  Liabilities  or  payments  by any party shall from and after the
Closing be exclusive and in lieu of any other  remedies that may be available to
the  Indemnified  Parties  with  respect  to any  Losses  of any kind or  nature
incurred  directly or indirectly  resulting from or arising out of any breach of
this  Agreement or any Related  Agreements  (including  alleged  breaches of any
representation,  warranty or covenant or for any alleged  misrepresentation  but
excluding any claims for common law fraud), the transactions contemplated hereby
and thereby, the Business, the Spirits Subsidiaries, the Transferred Assets, the
Assumed  Liabilities,  the Retained Assets or the Retained  Liabilities,  except
that  the  parties  hereto  recognize  that  the  Transferred   Assets  and  the
Transferred Shares are unique and that specific performance will be available to
the  Buyers  with  respect  to  delivery  of  the  Transferred  Assets  and  the
Transferred Shares in the event of a breach hereof by the Seller.

SECTION 10.5.     LIMITATIONS     UPON    REMEDIES    AND     INDEMNIFICATION.
                  -----------------------------------------------------------
(a)  Notwithstanding anything in this Agreement to the contrary:

            (i) the Seller shall not be obligated to provide any indemnification
      under Section 10.1 for breach of representations and warranties unless and
      until the aggregate  amount of Losses for which it is obligated to provide
      such  indemnification  for  breaches  of  representations  and  warranties
      exceeds  the sum of  U.S.  Dollars  81,500,000  (representing  a  one-time
      threshold) (the "THRESHOLD"),
                       ---------

<PAGE>   97

                                                                              90

      after which, subject to the other provisions of this Article X, the Seller
      shall be obligated  to pay the entire  amount of any such excess above the
      Threshold  which is payable by it  pursuant to the  provisions  of Section
      10.1(a);

            (ii) in calculating the Threshold,  any individual Loss or series of
      related Losses resulting from breaches of  representations  and warranties
      totaling less than U.S. Dollars  10,000,000 ("DE MINIMIS LOSSES") shall be
                                                    -----------------
      excluded in its or their  entirety  and in any event the Seller shall have
      no liability hereunder for any such De Minimis Losses;

            (iii) in no event shall the aggregate  liability of the Seller under
      Section 10.1(a) for breaches of representation  and warranties exceed U.S.
      Dollars 1,000,000,000;

            (iv)  Losses  shall  not  include  lost  profits  or  consequential,
      special, indirect, incidental or punitive damages;

            (v) in no event  shall any Buyer  Indemnified  Party be  entitled to
      indemnification pursuant to this Article X:

                  (A) with  respect to any claim by or Liability to any Business
            Employee on the Closing Date arising as a result of the  termination
            subsequent to the Closing Date of such employee's  employment or any
            other  action by Buyer A or Buyer B or their  respective  Affiliates
            (including the Spirits Subsidiaries) subsequent to the Closing Date;

                  (B) with  respect  to any  obligation,  Liability  or  matter,
            including  environmental  remediation  and  clean-up,  arising under
            Applicable  Law to the extent any such  Applicable  Law is  enacted,
            promulgated,  amended  or  announced,  or there is any change in the
            interpretation  or enforcement of any such Applicable Law, after the
            Closing Date;

                  (C)  any  obligation,  Liability  or  matter  arising  out  of
            information   any  Buyer   Indemnified   Party   discloses   to  any
            Governmental  Entity, which disclosure is not required by Applicable
            Law or for which  disclosure  would not  otherwise  be a  reasonable
            business   practice  in  accordance   with  any  such  party's  past
            practices,  without consideration of the indemnification  provisions
            of this Article X; and

                  (D) to the  extent  arising  from or in  connection  with  the
            failure  of SCL or its  Subsidiaries  to  enter  into  any  Contract
            contemplated  by the Kirin Master  Agreement owing to the failure of
            the Buyers to consent thereto; and

            (vi)  no  indemnity  payment  shall  be  recoverable  by  any  Buyer
      Indemnified Party with respect to any matter to the extent such matter was
      reflected in the final  calculation of the Closing Net Working  Capital or
      the Closing Net Indebtedness.

<PAGE>   98

                                                                              91

            (b) The representations and warranties in this Agreement (other than
those  representations  and  warranties  contained in Section 4.7(a) and Section
4.7(b) which shall survive the Closing  indefinitely)  and any Related Agreement
and the  indemnification  provisions in this Agreement in respect  thereof shall
survive  the  Closing  for a  period  of  eighteen  months;  provided  that  the
representations  contained in Section 4.18 shall not survive the Closing and the
indemnification  provisions in Article VII shall survive until 30 days after the
expiration of the relevant statue of limitations;  and provided  further that no
such  termination  shall  affect any claim for breach of any  representation  or
warranty  if written  notice  thereof,  in  reasonable  detail,  is given to the
breaching party prior to such expiration date.

            SECTION 10.6.  INDEMNIFICATION  CALCULATIONS.  (a) The amount of any
                           -----------------------------
payments,  for which  indemnification is provided under this Article X, shall be
computed net of any  insurance  proceeds  received by the  Indemnified  Party in
connection  with the Losses to which such  payment  relates and the  Indemnified
Party shall use its  reasonable  best  efforts to seek any  available  insurance
proceeds  reasonably  available from third party  insurers.  Payments under this
Article X or Article VII shall also be made on a tax-affected basis, which shall
mean that (i) payments  will be increased to make the payee whole for any Income
Tax payable in such  taxable  year in respect of receipt of the payment and (ii)
payments will be reduced to reflect any Income Tax deduction  actually  realized
in such taxable year in respect of losses giving rise to the payment.

            (b)  The  parties  agree  that  any  indemnification  payments  made
pursuant to this Agreement shall be treated for tax purposes as an adjustment to
the Purchase Price.

            SECTION  10.7.  SUBROGATION.  In the  event  of any  indemnification
                            -----------
payment by or on behalf of any  Indemnifying  Party to any Indemnified  Party in
connection  with  any  third-party  claim,  such  Indemnifying  Party  shall  be
subrogated to and shall stand in the place of such  Indemnified  Party as to any
events or circumstances in respect of which such Indemnified  Party may have any
right,  defense or claim relating to such third-party claim against any claimant
or plaintiff asserting such third-party claim or against any other person to the
extent  of the prior  indemnification  payment.  Such  Indemnified  Party  shall
cooperate with such Indemnifying  Party in a reasonable  manner, and at the cost
and expense of such  Indemnifying  Party, in prosecuting  any subrogated  right,
defense or claim.

                                   ARTICLE XI

                        TERMINATION, AMENDMENT AND WAIVER
                        ---------------------------------

            SECTION  11.1.  TERMINATION.  (a)  Notwithstanding  anything  to the
                            -----------
contrary  in  this   Agreement,   this  Agreement  may  be  terminated  and  the
transactions contemplated hereby abandoned at any time prior to the Closing:

                  (i) by mutual written consent of the Buyers and the Seller;

                  (ii) by the Seller,  on the one hand,  or the  Buyers,  on the
            other hand,  if the Closing does not occur on or prior to January 1,
            2002;  provided that the right

<PAGE>   99

                                                                              92

            to terminate this  Agreement  pursuant to this clause (ii) shall not
            be available to the Seller if its failure to fulfill any  obligation
            under  this  Agreement,  or  its  breach  of any  representation  or
            warranty  set forth  herein,  has been the cause of, or resulted in,
            the failure of the  Closing to have  occurred on or before such date
            or the Buyers if the  failure by the Buyers to fulfill  any of their
            respective  obligations  under this Agreement,  or the breach by the
            Buyers of any  representation  or  warranty by any of them set forth
            herein,  has been the cause of, or  resulted  in, the failure of the
            Closing to have occurred on or before such date;

                  (iii) by the Seller, by written notice to the Buyers if:

                    (A) any Buyer has (and the Seller  shall not have) failed to
                        perform and comply  with in all  material  respects  all
                        material  agreements  and covenants  hereby  required to
                        have been performed or complied with by such party prior
                        to the time of such termination,  and such failure shall
                        not have been  cured  within 20 days  following  written
                        notice of such failure from the Seller to the Buyers; or

                    (B) any event  shall  occur after the date hereof that shall
                        have made it impossible to satisfy a condition precedent
                        to  the   Seller's   obligations   to   consummate   the
                        transactions contemplated by this Agreement,  unless the
                        occurrence  of such event shall be due to the failure of
                        the  Seller  to  perform  or  comply  with  any  of  the
                        agreements,   covenants  or  conditions   hereof  to  be
                        performed  or complied  with by the Seller  prior to the
                        Closing; and

                  (iv)  by the Buyers by written notice to the Seller if:

                    (A) the Seller has (and the Buyers shall not have) failed to
                        perform and comply  with in all  material  respects  all
                        material  agreements  and covenants  hereby  required to
                        have been performed or complied with by the Seller prior
                        to the time of such termination,  and such failure shall
                        not have been  cured  within 20 days  following  written
                        notice of such failure from the Buyers to the Seller; or

                  (B)   any event  shall  occur after the date hereof that shall
                        have made it impossible to satisfy a condition precedent
                        to the  obligations  of the  Buyers  to  consummate  the
                        transactions contemplated by this Agreement,  unless the
                        occurrence  of such event shall be due to the failure of
                        the  Buyers  to  perform  or  comply  with  any  of  the
                        agreements,   covenants  or  conditions   hereof  to  be
                        performed  or  complied  with by such party prior to the
                        Closing.

<PAGE>   100

                                                                              93

            (b)  If  this   Agreement  is   terminated   and  the   transactions
contemplated  hereby are  abandoned  as described  in this  Section  11.1,  this
Agreement shall become null and void and shall have no further force and effect,
except for the  provisions of this Section 11.1 and Sections  6.2(c) and 6.7 and
Article XII and  provided  that the Buyer A  Confidentiality  Agreement  and the
Buyer B  Confidentiality  Agreement  shall  continue  in full force and  effect.
Nothing  in this  Section  11.1  shall be deemed to  release  any party from any
liability for any prior breach by such party of the terms and provisions of this
Agreement.

            SECTION  11.2.  AMENDMENTS  AND WAIVERS.  This  Agreement may not be
                            -----------------------
amended  except  by an  instrument  in  writing  signed on behalf of each of the
parties  hereto.  Compliance  by any party  with any term or  provision  of this
Agreement  that such party was or is  obligated to comply with or perform may be
waived by an instrument in writing signed by the other parties hereto.

                                   ARTICLE XII

                                  MISCELLANEOUS
                                  -------------

            SECTION   12.1.   NOTICES.   All   notices,   requests   and   other
                              -------
communications hereunder shall be in writing (including wire, telefax or similar
writing) and shall be sent, delivered or mailed, addressed, or telefaxed:

                  (a) if to Buyer A, to:

                  Pernod Ricard S.A.
                  142 boulevard Haussmann
                  75379 paris
                  France
                  Attention:  LaurentLacassagne
                  Fax:  +33-1-42-25-95-66

                  With a copy to:

                  Macfarlanes
                  10 Norwich Street
                  London EC4A 1BD
                  England
                  Attention:  Tim Lewis
                  Fax:  +44-20-7831-9607

                  (b) if to Buyer B, to:

                  Diageo Plc
                  8 Henrietta Place
                  London, W1A 9AG
                  England

<PAGE>   101

                                                                              94

                  Attention: Nick Rose
                  Fax: +44-207-927-4600

                  with a copy to:

                  Sullivan & Cromwell
                  125 Broad Street
                  New York, New York 10004-2498
                  Attention:  Frank Aquila, Esq.
                  Fax:  1-212-558-3588

                  (c) if to the Seller, to:

                  Vivendi Universal S.A.
                  c/o Seagram Enterprises, Inc.
                  375 Park Avenue
                  New York, New York  10152
                  Attention:  John R. Preston
                  Fax:  (212) 572-1215

                  with a copy to:

                  Simpson Thacher & Bartlett
                  425 Lexington Avenue
                  New York, NY  10017
                  Attention:  Sarah E. Cogan, Esq.
                  Fax: (212) 455-2502

                  and

                  Vivendi Universal S.A.
                  42, avenue de Friedland
                  75380 Paris Cedex 08
                  France
                  Attention:  Guillaume Hannezo
                  Fax:  33-1-71-14-14

                  and

                  Watson, Farley & Williams
                  47, rue de Monceau
                  75008 Paris
                  France
                  Attention:  David Syed, Esq.
                  Fax:  33-01-45-61-09-01

<PAGE>   102

                                                                              95

Each such notice, request or other communication shall be given (i) by mail
(postage prepaid, registered or certified mail, return receipt requested), (ii)
by hand delivery, (iii) by nationally recognized courier service or (iv) by
telefax, receipt confirmed. Each such notice, request or communication shall be
effective (i) if mailed, ten days after mailing at the address specified in this
Section 12.1 (or in accordance with the latest unrevoked written direction from
such party), (ii) if delivered by hand or by nationally recognized courier
service, when delivered at the address specified in this Section 12.1 (or in
accordance with the latest unrevoked written direction from the receiving party)
and (iii) if given by telefax, when such telefax is transmitted to the telefax
number specified in this Section 12.1 (or in accordance with the latest
unrevoked written direction from the receiving party), and the appropriate
confirmation is received.

            SECTION  12.2.  SCHEDULES.  Inclusion  of any  matter or item in any
                            ---------
Schedule to this Agreement does not imply that such matter or item would,  under
the  provisions of this  Agreement,  have to be included in any Schedule to this
Agreement or that such matter or term is otherwise material.

            SECTION 12.3. SEVERABILITY. The provisions of this Agreement and the
                          ------------
Related   Agreements   shall  be  deemed   severable   and  the   invalidity  or
unenforceability   of  any   provision   shall  not  affect  the   validity   or
enforceability  of the  other  provisions  hereof.  If  any  provision  of  this
Agreement or any Related Agreement,  or the application thereof to any Person or
any  circumstance,  is found to be invalid or unenforceable in any jurisdiction,
(i) a suitable and equitable provision shall be substituted therefor in order to
carry out, so far as may be valid or  enforceable,  such  provision and (ii) the
remainder of this Agreement or such Related  Agreement,  as applicable,  and the
application  of such  provision to other Persons or  circumstances  shall not be
affected by such  invalidity  or  unenforceability,  except to the extent of the
mitigation   provided  for  in  clause  (i))  nor  shall  such   invalidity   or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.

            SECTION 12.4. COUNTERPARTS. This Agreement may be executed in one or
                          ------------
more  counterparts,  each of which shall be deemed an original  and all of which
shall, taken together, be considered one and the same agreement.

            SECTION 12.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except
                          ----------------------------------------------
for any other agreements entered into by the parties or their representatives on
the date hereof, this Agreement,  together with its Exhibits and Schedules,  the
Related Agreements, the Buyer A Confidentiality Agreement (with respect to Buyer
A) and the  Buyer B  Confidentiality  Agreement  (with  respect  to Buyer B) (i)
constitutes  the  entire  agreement  and  supersedes  all prior  agreements  and
understandings,  both written and oral, among all of the parties with respect to
the subject  matter hereof and (ii) except as set forth in Section 6.6,  Article
VIII and Article X, is not  intended  to confer  upon any Person  other than the
parties hereto any rights or remedies  hereunder.  Except as expressly  provided
herein,  nothing  herein shall be  construed to modify or supersede  the Buyer A
Confidentiality  Agreement or the Buyer B  Confidentiality  Agreement,  it being
understood  that  the  Buyer  A  Confidentiality   Agreement  and  the  Buyer  B
Confidentiality  Agreement  shall  continue  to  be in  full  force  and  effect
notwithstanding the execution or termination of this Agreement.

<PAGE>   103

                                                                              96

            SECTION 12.6. GOVERNING LAW. This Agreement shall be governed by and
                          -------------
construed in accordance with the laws of the State of New York.

            SECTION 12.7.  CONSENT TO  JURISDICTION.  Each of the parties hereto
                           ------------------------
irrevocably submits to the exclusive  jurisdiction of the United States District
Court for the  Southern  District  of New York,  or if such  court does not have
jurisdiction,  the Supreme Court of the State of New York, New York County,  for
the  purposes  of any  suit,  action  or other  proceeding  arising  out of this
Agreement or any Related  Agreement or any  transaction  contemplated  hereby or
thereby.  Each of the parties hereto further agrees that service of any process,
summons,  notice or document by U.S.  registered mail to such party's respective
address set forth in Section 12.1 shall be effective  service of process for any
action,  suit or  proceeding in New York with respect to any matters to which it
has submitted to jurisdiction  as set forth above in the  immediately  preceding
sentence.  Each of the parties hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action,  suit or proceeding  arising out
of this  Agreement  or any Related  Agreement or the  transactions  contemplated
hereby or thereby  in (i) the  United  States  District  Court for the  Southern
District  of New York or (ii) the  Supreme  Court of the State of New York,  New
York County,  and hereby  further  irrevocably  and  unconditionally  waives and
agrees  not to plead or claim in any such court  that any such  action,  suit or
proceeding brought in any such court has been brought in an inconvenient forum.

            SECTION  12.8.  ASSIGNMENT.  None of this  Agreement  or any Related
                            ----------
Agreement or any of the rights or obligations  hereunder or thereunder  shall be
assigned  by any of the  parties  hereto or thereto  without  the prior  written
consent of the  Seller,  in the case of any  assignment  by the  Buyers,  or the
Buyers,  in the  case  of  any  assignment  by the  Seller  or  any  Asset  Sale
Subsidiary,  as  applicable,  except  that the  Buyers  may  assign  rights  and
obligation  between  themselves  and  to  any  of  their  respective  Affiliates
following  written  notice to the Seller;  provided that the Buyers shall remain
liable for the performance of any such Affiliate of its  obligations  hereunder.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and permitted  assigns.  Any  attempted  assignment in violation of the terms of
this Section 12.8 shall be null and void, ab initio.

            SECTION  12.9.  EXPENSES.  Except as otherwise  expressly  specified
                            --------
elsewhere in this Agreement,  all costs and expenses incurred in connection with
this Agreement and the Related  Agreements and the transactions  contemplated by
this Agreement and the Related  Agreements  shall be paid by the party incurring
such cost or expense.

            SECTION  12.10.   BULK  TRANSFER  LAWS.  The  parties  hereby  waive
                              --------------------
compliance  with the  provision  of any bulk  transfer  laws  applicable  to the
transactions contemplated by this Agreement or any Related Agreement.

            SECTION 12.11. BREACHES. No party hereunder shall be responsible for
                           --------
the  breach  hereof by any other  party  hereto,  except as set forth in Section
12.8.

            SECTION  12.12.  INTEREST ACT  (CANADA).  Solely for the purposes of
                             ----------------------
disclosure  pursuant to the  Interest Act  (Canada)  and without  affecting  any
calculation of interest required by this Agreement,  whenever any interest under
this  Agreement  is  calculated  using a rate based

<PAGE>   104

                                                                              97

on a year  of 360  days,  such  rate,  when  expressed  as an  annual  rate,  is
equivalent to such rate multiplied by the number of days in the calendar year in
which interest is paid divided by 360.

<PAGE>   105

                                                                              98

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.

                                    VIVENDI UNIVERSAL S.A.

                                    By:/s/ GUILLAUME HANNEZO
                                       ---------------------------
                                       Name: Guillaume Hannezo
                                       Title:  Chief Financial Officer

                                    PERNOD RICARD S.A.

                                    By:/s/ THIERRY JACQUILLAT
                                       ---------------------------
                                       Name:  Thierry Jacquillat
                                       Title:  Vice Chairman

                                    DIAGEO PLC

                                    By:/s/ NICK ROSE
                                       ---------------------------
                                        Name:  Nick Rose
                                        Title:  Finance Director<PAGE>   1

                                                                   EXHIBIT 10.18

                              KPMG CONSULTING, INC.

                          2000 LONG-TERM INCENTIVE PLAN

                      (AS AMENDED THROUGH JANUARY 17, 2001)

                                 I. INTRODUCTION

         1.1  PURPOSES. The purposes of the 2000 Long-Term Incentive Plan (this
"Plan") of KPMG Consulting, Inc., a Delaware corporation (the "Company"), are
(i) to align the interests of the Company's stockholders and the recipients of
awards under this Plan by providing a means to increase the proprietary interest
of such recipients in the Company's growth and success, (ii) to advance the
interests of the Company by increasing its ability to attract and retain highly
competent officers, other employees, non-employee directors and consultants and
(iii) to motivate such persons to act in the long-term best interests of the
Company and its stockholders.

         1.2  CERTAIN DEFINITIONS.

         "AFFILIATE" shall mean (i) any subsidiary corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, as
described in Section 424(f) of the Code and (ii) any other entity in which the
Company has an equity interest or with which the Company has a significant
business relationship.

         "AGREEMENT" shall mean the written agreement evidencing an award
hereunder between the Company and the recipient of such award.

         "BOARD" shall mean the Board of Directors of the Company.

         "BONUS STOCK" shall mean shares of Common Stock which are not subject
to a Restriction Period or Performance Measures.

         "BONUS STOCK AWARD" shall mean an award of Bonus Stock under this Plan.

         "CHANGE IN CONTROL" shall have the meaning set forth in Section 6.8(b).

         "CODE" shall mean the Internal Revenue Code of 1986, as amended.

         "COMMITTEE" shall mean the committee designated by the Board which,
following an IPO, shall consist of two or more members of the Board, each of
whom may be a "Non-Employee Director" within the meaning of Rule 16b-3 under the
Exchange Act.

         "COMMON STOCK" shall mean the common stock, $0.01 par value, of the
Company.

         "COMPANY" shall have the meaning set forth in Section 1.1.

<PAGE>   2

         "DISABILITY" shall mean the inability of the recipient of an award to
perform substantially such recipient's duties and responsibilities for a
continuous period of at least six months, as determined solely by the Committee.

         "DISCRETIONARY DIRECTOR OPTIONS" shall have the meaning set forth in
Section 5.4.

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

         "FAIR MARKET VALUE" shall mean the last sale price of a share of Common
Stock as reported on the Nasdaq National Market on the date as of which such
value is being determined or, if there shall be no reported transactions on such
date, on the next preceding date for which a transaction was reported; provided,
however, that if the Common Stock is not traded on the Nasdaq National Market,
Fair Market Value may be determined by the Committee by whatever means or method
as the Committee, in the good faith exercise of its discretion, shall at such
time deem appropriate.

         "FREE-STANDING SAR" shall mean an SAR which is not issued in tandem
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.

         "INCENTIVE STOCK OPTION" shall mean an option to purchase shares of
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.

         "INCUMBENT BOARD" shall have the meaning set forth in Section
6.8(b)(3).

         "IPO" shall mean an initial public offering of Common Stock pursuant to
an effective registration statement under the Securities Act of 1933, as
amended.

         "MATURE SHARES" shall mean previously-acquired shares of Common Stock
for which the holder thereof has good title, free and clear of all liens and
encumbrances and which such holder either (i) has held for at least six months
or (ii) has purchased on the open market.

         "NON-EMPLOYEE DIRECTOR" shall mean any director of the Company who is
not an officer or employee of the Company or any subsidiary of the Company and
who is not a partner, principal or employee of KPMG LLP.

         "NON-STATUTORY STOCK OPTION" shall mean an option to purchase shares of
Common Stock which is not an Incentive Stock Option.

         "PERFORMANCE MEASURES" shall mean the criteria and objectives,
established by the Committee, which shall be satisfied or met (i) as a condition
to the exercisability of all or a portion of an option or SAR, (ii) as a
condition to the grant of a Stock Award or (iii) during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or, in

                                       2

<PAGE>   3

the case of a Performance Share Award, of the shares of Common Stock subject to
such award and/or of payment with respect to such award. Such criteria and
objectives may include one or more of the following: the attainment by a share
of Common Stock of a specified Fair Market Value for a specified period of time,
earnings per share, return to stockholders (including dividends), return on
equity, earnings of the Company, revenues, market share, cash flow or cost
reduction goals, or any combination of the foregoing. In the sole discretion of
the Committee, the Committee may amend or adjust the Performance Measures or
other terms and conditions of an outstanding award in recognition of unusual or
nonrecurring events affecting the Company or its financial statements or changes
in law or accounting principles.

         "PERFORMANCE PERIOD" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.

         "PERFORMANCE SHARE" shall mean a right, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock or, in lieu of
all or a portion thereof, the Fair Market Value of such share of Common Stock in
cash.

         "PERFORMANCE SHARE AWARD" shall mean an award of Performance Shares
under this Plan.

         "PERSON" shall have the meaning set forth in Section 6.8(b)(3).

         "RESTRICTED STOCK" shall mean shares of Common Stock which are subject
to a Restriction Period.

         "RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under
this Plan.

         "RESTRICTION PERIOD" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.

         "RETIREMENT" shall mean termination of employment with or service to
the Company by reason of retirement on or after age 65.

         "SAR" shall mean a stock appreciation right which may be a
Free-Standing SAR or a Tandem SAR.

         "STOCK AWARD" shall mean a Restricted Stock Award or a Bonus Stock
Award.

         "TANDEM SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price

                                       3
<PAGE>   4

of such SAR, multiplied by the number of shares of Common Stock subject to such
option, or portion thereof, which is surrendered.

         "TAX DATE" shall have the meaning set forth in Section 6.5.

         "TEN PERCENT HOLDER" shall have the meaning set forth in Section
2.1(a).

         1.3  ADMINISTRATION. This Plan shall be administered by the Committee.
Any one or a combination of the following awards may be made under this Plan to
eligible persons: (i) options to purchase shares of Common Stock in the form of
Incentive Stock Options or Non-Statutory Stock Options, (ii) SARs in the form of
Tandem SARs or Free-Standing SARs, (iii) Stock Awards in the form of Restricted
Stock or Bonus Stock and (iv) Performance Shares. The Committee shall, subject
to the terms of this Plan, select eligible persons for participation in this
Plan and determine the form, amount and timing of each award to such persons
and, if applicable, the number of shares of Common Stock, the number of SARs and
the number of Performance Shares subject to such an award, the exercise price or
base price associated with the award, the time and conditions of exercise or
settlement of the award and all other terms and conditions of the award,
including, without limitation, the form of the Agreement evidencing the award.
The Committee may, in its sole discretion and for any reason at any time, take
action such that (i) any or all outstanding options and SARs shall become
exercisable in part or in full, (ii) all or a portion of the Restriction Period
applicable to any outstanding Restricted Stock Award shall lapse, (iii) all or a
portion of the Performance Period applicable to any outstanding Performance
Share Award shall lapse and (iv) the Performance Measures applicable to any
outstanding award (if any) shall be deemed to be satisfied at the maximum or any
other level. The Committee shall, subject to the terms of this Plan, interpret
this Plan and the application thereof, establish rules and regulations it deems
necessary or desirable for the administration of this Plan and may impose,
incidental to the grant of an award, conditions with respect to the award, such
as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive.

         The Committee may delegate some or all of its power and authority
hereunder to the Board or either of the Co-Chief Executive Officers or other
executive officer of the Company as the Committee deems appropriate; provided,
however, that the Committee may not delegate its power and authority to either
of the Co-Chief Executive Officers or other executive officer of the Company
with regard to the selection for participation in this Plan of an officer or
other person subject to Section 16 of the Exchange Act or decisions concerning
the timing, pricing or amount of an award to such an officer or other person.

         No member of the Board or Committee, and neither a Co-Chief Executive
Officer nor any other executive officer to whom the Committee delegates any of
its power and authority hereunder, shall be liable for any act, omission,
interpretation, construction or determination made in connection with this Plan
in good faith, and the members of the Board and the Committee and the Co-Chief
Executive Officers or other executive officer shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including attorneys' fees) arising therefrom to the full
extent permitted by law, except as otherwise may be provided in the Company's
Certificate of Incorporation and/or By-laws, and under any directors' and
officers' liability insurance that may be in effect from time to time.

                                       4
<PAGE>   5

         A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.

         1.4  ELIGIBILITY. Participants in this Plan shall consist of such
officers, other employees and consultants, and persons expected to become
officers, other employees and consultants, of the Company and its Affiliates, as
the Committee in its sole discretion may select from time to time, and such
other persons designated by the Committee pursuant to Section 6.13. For purposes
of this Plan, references to employment also shall mean a consulting relationship
and references to employment by the Company also shall mean employment by an
Affiliate. The Committee's selection of a person to participate in this Plan at
any time shall not require the Committee to select such person to participate in
this Plan at any other time. Non-Employee Directors of the Company shall be
eligible to participate in this Plan in accordance with Article V.

1.5      SHARES AVAILABLE.

         (a) Shares Available. The number of shares of Common Stock that are
authorized for grants or awards under this Plan (the "Authorized Shares") shall
at all times be equal to the greater of (i) subject to adjustment as provided in
Section 6.7, 177,000,000 shares and (ii) 25% of the sum of (x) the number of
issued and outstanding shares of Common Stock of the Company plus (y) the
Authorized Shares, provided, however, that the number of Authorized Shares shall
never be reduced below the number of shares that are then issuable under all
outstanding grants or awards. The number of shares of Common Stock that shall be
available for grants or awards under this Plan (the "Available Shares") shall be
equal to the number of Authorized Shares reduced by the sum of the aggregate
number of shares of Common Stock, adjusted as provided in Section 6.7, which
become subject to outstanding options, including Discretionary Director Options,
outstanding Free-Standing SARs, outstanding Stock Awards and outstanding
Performance Share Awards.

         (b) Maximum Grants of Incentive Stock Options. Subject to adjustment as
provided in Section 6.7, the maximum number of shares that may be granted as
Incentive Stock Options shall be 177,000,000.

         (c) Restoration of Available Shares. To the extent that shares of
Common Stock subject to an outstanding option (except to the extent shares of
Common Stock are issued or delivered by the Company in connection with the
exercise of a Tandem SAR), Free-Standing SAR, Stock Award or Performance Share
Award are not issued or delivered by reason of the expiration, termination,
cancellation or forfeiture of such award or by reason of the delivery or
withholding

                                       5
<PAGE>   6

of shares of Common Stock to pay all or a portion of the purchase price of an
award, if any, or to satisfy all or a portion of the tax withholding obligations
relating to an award, then such shares of Common Stock shall again be available
under this Plan.

         (e) Available Common Stock. Shares of Common Stock shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.

                 II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

         2.1  STOCK OPTIONS. The Committee may, in its discretion, grant options
to purchase shares of Common Stock to such eligible persons as may be selected
by the Committee. Each option, or portion thereof, that is not an Incentive
Stock Option shall be a Non-Statutory Stock Option. An Incentive Stock Option
may not be granted to any person who is not an employee of the Company or any
parent or subsidiary (as defined in Section 424 of the Code). Each Incentive
Stock Option shall be granted within ten years of the date this Plan is adopted
by the Board. To the extent that the aggregate Fair Market Value (determined as
of the date of grant) of shares of Common Stock with respect to which options
designated as Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company or any parent or subsidiary as defined in Section 424 of the Code)
exceeds the amount (currently $100,000) established by the Code, such options
shall constitute Non-Statutory Stock Options.

         Options shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:

         (a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of the option shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such option; and provided
further, that if an Incentive Stock Option shall be granted to any person who,
at the time such option is granted, owns capital stock possessing more than ten
percent of the total combined voting power of all classes of capital stock of
the Company (or of any parent or subsidiary as defined in Section 424 of the
Code) (a "Ten Percent Holder"), the purchase price per share of Common Stock
shall not be less than the price (currently 110% of Fair Market Value) required
by the Code in order to constitute an Incentive Stock Option.

         (b) Exercise Period and Exercisability. The period during which an
option may be exercised shall be determined by the Committee; provided, however,
that no Incentive Stock Option shall be exercised later than ten years after its
date of grant; and provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such option shall not be exercised later than
five years after its date of grant. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a condition to
the grant of an option or to the exercisability of all or a portion of an
option. The Committee shall determine whether an option shall become exercisable
in cumulative or non-cumulative installments and in

                                       6
<PAGE>   7

part or in full at any time. An exercisable option, or portion thereof, may be
exercised only with respect to whole shares of Common Stock.

         (c) Method of Exercise. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and by accompanying such notice with payment therefor in
full (or by arranging for such payment to the Company's satisfaction) either (A)
in cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of Mature Shares having an aggregate Fair Market
Value, determined as of the date of exercise, equal to the aggregate purchase
price payable by reason of such exercise, (C) in cash by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (D) a combination of (A) and (B), in each case to the
extent set forth in the Agreement relating to the option, (ii) if applicable, by
surrendering to the Company any Tandem SARs which are cancelled by reason of the
exercise of the option and (iii) by executing such documents as the Company may
reasonably request. The Company shall have sole discretion to disapprove of an
election pursuant to any of clauses (i)(B)-(D). Any fraction of a share of
Common Stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the optionee.
No certificate representing Common Stock shall be delivered until the full
purchase price therefor and any withholding taxes thereon, as described in
Section 6.5, have been paid (or arrangement made for such payment to the
Company's satisfaction).

         2.2  STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
grant SARs to such eligible persons as may be selected by the Committee. The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.

         SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:

         (a) Number of SARs and Base Price. The number of SARs subject to an
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the exercise
price per share of Common Stock of the related option. The base price of a
Free-Standing SAR shall be determined by the Committee; provided, however, that
such base price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such SAR.

         (b) Exercise Period and Exercisability. The Agreement relating to an
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
the expiration, cancellation, forfeiture or other termination of the related
option. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a Tandem SAR, only with respect to whole shares of
Common Stock

                                       7
<PAGE>   8

and, in the case of a Free-Standing SAR, only with respect to a whole number of
SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or
certificates representing such Restricted Stock shall be issued in accordance
with Section 3.2(c) and the holder of such Restricted Stock shall have such
rights of a stockholder of the Company as determined pursuant to Section 3.2(d).
Prior to the exercise of an SAR for shares of Common Stock, including Restricted
Stock, the holder of such SAR shall have no rights as a stockholder of the
Company with respect to the shares of Common Stock subject to such SAR.

         (c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by executing
such documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such documents as
the Company may reasonably request.

         2.3  TERMINATION OF EMPLOYMENT OR SERVICE. Subject to the requirements
of the Code, all of the terms relating to the exercise, cancellation or other
disposition of an option or SAR upon a termination of employment with or service
to the Company of the recipient of such option or SAR, as the case may be,
whether by reason of Disability, Retirement, death or any other reason, shall be
determined by the Committee.

                                III. STOCK AWARDS

         3.1  STOCK AWARDS. The Committee may, in its discretion, grant Stock
Awards to such eligible persons as may be selected by the Committee. The
Agreement relating to a Stock Award shall specify whether the Stock Award is a
Restricted Stock Award or Bonus Stock Award.

         3.2  TERMS OF STOCK AWARDS. Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.

         (a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee. Bonus Stock Awards shall not
be subject to any Performance Measures or Restriction Periods.

         (b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of or service to
the Company during the specified Restriction Period and for the forfeiture of
all or a portion of the shares of Common Stock subject to such award (x) if
specified Performance Measures are not satisfied or met during the specified
Restriction Period or (y) if the holder of such award does not

                                       8
<PAGE>   9

remain continuously in the employment of or service to the Company during the
specified Restriction Period.

         (c) Share Certificates. During the Restriction Period, a certificate or
certificates representing a Restricted Stock Award may be registered in the
holder's name or a nominee name at the discretion of the Company and may bear a
legend, in addition to any legend which may be required pursuant to Section 6.6,
indicating that the ownership of the shares of Common Stock represented by such
certificate is subject to the restrictions, terms and conditions of this Plan
and the Agreement relating to the Restricted Stock Award. As determined by the
Committee, all certificates registered in the holder's name shall be deposited
with the Company, together with stock powers or other instruments of assignment
(including a power of attorney), each endorsed in blank with a guarantee of
signature if deemed necessary or appropriate by the Company, which would permit
transfer to the Company of all or a portion of the shares of Common Stock
subject to the Restricted Stock Award in the event such award is forfeited in
whole or in part. Upon termination of any applicable Restriction Period (and the
satisfaction or attainment of applicable Performance Measures), or upon the
grant of a Bonus Stock Award, in each case subject to the Company's right to
require payment of any taxes in accordance with Section 6.5, a certificate or
certificates evidencing ownership of the requisite number of shares of Common
Stock shall be delivered to the holder of such award.

         (d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of the Agreement relating to a Restricted Stock Award,
the holder of such award shall have all rights as a stockholder of the Company,
including, but not limited to, voting rights, the right to receive dividends and
the right to participate in any capital adjustment applicable to all holders of
Common Stock; provided, however, that a distribution with respect to shares of
Common Stock, other than a regular cash dividend, shall be deposited with the
Company and shall be subject to the same restrictions as the shares of Common
Stock with respect to which such distribution was made.

         3.3  TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms relating to
the satisfaction of Performance Measures and the termination of the Restriction
Period relating to a Restricted Stock Award, or any forfeiture and cancellation
of such award upon a termination of employment with or service to the Company of
the recipient of such award, whether by reason of Disability, Retirement, death
or any other reason, shall be determined by the Committee.

                          IV. PERFORMANCE SHARE AWARDS

         4.1  PERFORMANCE SHARE AWARDS. The Committee may, in its discretion,
grant Performance Share Awards to such eligible persons as may be selected by
the Committee.

         4.2  TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable.

                                       9
<PAGE>   10

         (a) Number of Performance Shares and Performance Measures. The number
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.

         (b) Vesting and Forfeiture. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of all or a portion of such
award, if specified Performance Measures are not satisfied or met during the
specified Performance Period.

         (c) Settlement of Vested Performance Share Awards. The Agreement
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on or the deemed
reinvestment of any deferred dividend equivalents, with respect to the number of
shares of Common Stock subject to such award. If a Performance Share Award is
settled in shares of Restricted Stock, a certificate or certificates
representing such Restricted Stock shall be issued in accordance with Section
3.2(c) and the holder of such Restricted Stock shall have such rights of a
stockholder of the Company as determined pursuant to Section 3.2(d). Prior to
the settlement of a Performance Share Award in shares of Common Stock, including
Restricted Stock, the holder of such award shall have no rights as a stockholder
of the Company with respect to the shares of Common Stock subject to such award.

         4.3  TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms relating to
the satisfaction of Performance Measures and the termination of the Performance
Period relating to a Performance Share Award, or any forfeiture and cancellation
of such award upon a termination of employment with or service to the Company of
the recipient of such award, whether by reason of Disability, Retirement, death
or other termination, shall be determined by the Committee.

                V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS

         5.1  ELIGIBILITY. Each Non-Employee Director shall be granted options
to purchase shares of Common Stock in accordance with this Article V. All
options granted under this Article V shall constitute Non-Statutory Stock
Options.

         5.2  AUTOMATIC GRANTS OF STOCK OPTIONS.  Each Non-Employee Director
shall automatically be granted Non-Statutory Stock Options as follows:

         (a) Time of Grant. Automatic grants of Non-Statutory Stock Options
shall be made on the dates specified below:

         (1) Each person who is serving as a Non-Employee Director as of January
31, 2000 shall automatically be granted, on such date, an option to purchase
40,000 shares of Common Stock.

                                       10
<PAGE>   11

         (2) Each person who is first elected or first begins to serve as a
Non-Employee Director after January 31, 2000 other than by reason of termination
of employment shall automatically be granted, on the date of such initial
election or service, an option to purchase 40,000 shares of Common Stock.

         (3) Each person who is a Non-Employee Director immediately following
any annual meeting of stockholders of the Company held after 2000 shall
automatically be granted, on the date of such meeting, an option to purchase
10,000 shares of Common Stock.

         (b) Purchase Price. The purchase price per share of Common Stock
purchasable upon exercise of an option granted under this Section 5.2 shall be
100% of the Fair Market Value of a share of Common Stock on the date of grant of
such option.

         (c) Exercise Period and Exercisability. Each option granted under
Section 5.2(a)(1) or Section 5.2(a)(2) shall be fully exercisable on and after
the one year anniversary of its date of grant and each option granted under
Section 5.2(a)(3) shall be fully exercisable on and after the day preceding the
day of the next annual meeting of stockholders of the Company following its date
of grant. Each option granted under this Section 5.2 shall expire 10 years after
its date of grant. An exercisable option, or portion thereof, may be exercised
in whole or in part only with respect to whole shares of Common Stock. Options
granted under this Section 5.2 shall be exercisable in accordance with Section
2.1(c).

         5.3  TERMINATION OF DIRECTORSHIP. (a) Disability. If the recipient of
an option granted under Section 5.2 ceases to be a director of the Company by
reason of Disability, each such option held by the holder thereof shall be
exercisable only to the extent such option is exercisable on the effective date
of such recipient's ceasing to be a director and may thereafter be exercised by
such holder (or such holder's legal representative or similar person) until and
including the earlier to occur of the (i) date which is one year after the
effective date of such recipient's ceasing to be a director and (ii) the
expiration date of the term of such option.

         (b) Retirement. If the recipient of an option granted under Section 5.2
ceases to be a director of the Company by reason of Retirement, each such option
held by the holder thereof shall be exercisable only to the extent such option
is exercisable on the effective date of such recipient's ceasing to be a
director and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earlier to occur of
the (i) date which is three months after the effective date of such recipient's
ceasing to be a director and (ii) the expiration date of the term of such
option.

         (c) Death. If the recipient of an option granted under Section 5.2
ceases to be a director of the Company by reason of death, each such option held
by the holder thereof shall be exercisable only to the extent such option is
exercisable on the effective date of such recipient's ceasing to be a director
and may thereafter be exercised by such holder's executor, administrator, legal
representative, beneficiary or similar person until and including the earlier to
occur of the (i) date which is one year after the date of such recipient's death
and (ii) the expiration date of the term of such option.

                                       11
<PAGE>   12

         (d) Other Termination. If the recipient of an option granted under
Section 5.2 ceases to be a director of the Company for any reason other than
Disability, Retirement or death, each such option held by the holder thereof
shall be exercisable only to the extent such option is exercisable on the
effective date of such recipient's ceasing to be a director and may thereafter
be exercised by such holder (or such holder's legal representative or similar
person) until and including the earlier to occur of the (i) date which is three
months after the effective date of such recipient's ceasing to be a director and
(ii) the expiration date of the term of such option.

         (e) Death Following Termination of Directorship. If the recipient of an
option granted under Section 5.2 dies during the period set forth in Section
5.3(a) following such recipient's ceasing to be a director of the Company by
reason of Disability, or if such recipient dies during the period set forth in
Section 5.3(b) following such recipient's Retirement, or if such a recipient
dies during the period set forth in Section 5.3(d) following such recipient's
ceasing to be a director for any reason other than by reason of Disability or
Retirement, each such option held by the holder thereof shall be exercisable
only to the extent that such option is exercisable on the date of the
recipient's death and may thereafter be exercised by such holder's executor,
administrator, legal representative, beneficiary or similar person until and
including the earlier to occur of the

(i) date which is one year after the date of such recipient's death and (ii) the
expiration date of the term of such option.

         5.4  DISCRETIONARY GRANTS OF STOCK OPTIONS. The Committee may, in its
discretion, grant additional options to purchase shares of Common Stock
("Discretionary Director Options") to all Non-Employee Directors or to any one
or more of them. Each Discretionary Director Option shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:

         (a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to a Discretionary Director Option and the purchase price per
share of Common Stock purchasable upon exercise of the option shall be
determined by the Committee; provided, however, that the purchase price per
share of Common Stock purchasable upon exercise of the option shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date of
grant of such option.

         (b) Exercise Period and Exercisability. The period during which a
Discretionary Director Option may be exercised shall be determined by the
Committee. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the grant of a Discretionary
Director Option or to the exercisability of all or a portion of a Discretionary
Director Option. The Committee shall determine whether a Discretionary Director
Option shall become exercisable in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable Director Discretionary Option, or
portion thereof, may be exercised only with respect to whole shares of Common
Stock. Each Discretionary Director Option shall be exercisable in accordance
with Section 2.1(c).

                                       12
<PAGE>   13

         (c) Termination of Directorship. All of the terms relating to the
exercise, cancellation or other disposition of a Discretionary Director Option
upon a termination of service as a director of the Company of the recipient of a
Discretionary Director Option, whether by reason of Disability, Retirement,
death or any other reason, shall be determined by the Committee.

                                   VI. GENERAL

         6.1  EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to
the stockholders of the Company for approval within 12 months following its
adoption by the Board and, if approved, shall become effective as of the date of
such adoption by the Board. No option may be exercised prior to the date of such
stockholder approval. This Plan shall terminate 10 years after its effective
date, unless terminated earlier by the Board. Termination of this Plan shall not
affect the terms or conditions of any award granted prior to such termination.

         6.2  AMENDMENTS. The Board or the Committee may amend this Plan as it
shall deem advisable, subject to any requirement of stockholder approval
required by applicable law, rule or regulation, including Section 422 of the
Code; provided, however, that no amendment shall be made without stockholder
approval if such amendment would (a) increase the maximum number of shares of
Common Stock available under this Plan (subject to Section 6.7), (b) effect any
change inconsistent with Section 422 of the Code or (c) extend the term of this
Plan. No amendment may impair the rights of a holder of an outstanding award
without the consent of such holder.

         6.3  AGREEMENT. No award shall be valid until an Agreement is executed
by the Company and the recipient of such award and, upon execution by each party
and delivery of the Agreement to the Company, such award shall be effective as
of the effective date set forth in the Agreement.

         6.4  NON-TRANSFERABILITY OF AWARDS. Unless the Committee provides for
the transferability of a particular award and such transferability is specified
in the Agreement relating to such award, no award shall be transferable other
than by will, the laws of descent and distribution or pursuant to beneficiary
designation procedures stated in Section 6.11 or otherwise approved by the
Company. Except to the extent permitted by the foregoing sentence or the
Agreement relating to the Award, each award may be exercised or settled during
the recipient's lifetime only by the recipient or the recipient's legal
representative or similar person. Except to the extent permitted by the second
preceding sentence or the Agreement relating to the Award, no award may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any such award, such award
and all rights thereunder shall immediately become null and void.

         6.5  TAX WITHHOLDING. The Company shall have the right to require,
prior to the issuance or delivery of any shares of Common Stock or the payment
of any cash pursuant to an award made hereunder, payment by the holder of such
award of any federal, state, local or other taxes which may be required to be
withheld or paid in connection with such award. An

                                       13
<PAGE>   14

Agreement may provide that (i) the Company shall withhold whole shares of Common
Stock which would otherwise be delivered to a holder, having an aggregate Fair
Market Value determined as of the date the obligation to withhold or pay taxes
arises in connection with an award (the "Tax Date"), or withhold an amount of
cash which would otherwise be payable to a holder, in the amount necessary to
satisfy any such obligation or (ii) the holder may satisfy any such obligation
by any of the following means: (A) a cash payment to the Company, (B) delivery
(either actual delivery or by attestation procedures established by the Company)
to the Company of Mature Shares having an aggregate Fair Market Value,
determined as of the Tax Date, equal to the amount necessary to satisfy any such
obligation, (C) authorizing the Company to withhold whole shares of Common Stock
which would otherwise be delivered having an aggregate Fair Market Value,
determined as of the Tax Date, or withhold an amount of cash which would
otherwise be payable to a holder, equal to the amount necessary to satisfy any
such obligation, (D) in the case of the exercise of an option, a cash payment by
a broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in
each case to the extent set forth in the Agreement relating to the award;
provided, however, that the Company shall have sole discretion to disapprove of
an election pursuant to any of clauses (ii)(B)-(E). Any fraction of a share of
Common Stock which would be required to satisfy such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the holder.

         6.6  RESTRICTIONS ON SHARES. Each award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise or settlement
of such award or the delivery of shares thereunder, such award shall not be
exercised or settled and such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Committee may provide for such restrictions upon the transferability of shares
of Common Stock delivered pursuant to any award made hereunder as it deems
appropriate and such restrictions shall be specified in the Agreement relating
to such award. The Company may require that certificates evidencing shares of
Common Stock delivered pursuant to any award made hereunder bear a legend
indicating that the sale, transfer or other disposition thereof by the holder is
prohibited except in compliance with the Securities Act of 1933, as amended, and
the rules and regulations thereunder and such other restrictions, if any,
specified in the Agreement relating to the award pursuant to which such shares
were delivered.

         6.7  ADJUSTMENT. In the event of any stock split, reverse stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change
in capitalization or event, or any distribution to holders of Common Stock other
than a regular cash dividend, the class of securities available under this Plan,
the number and class of securities subject to each outstanding option and the
purchase price per security, the number and class of securities subject to each
option to be granted to Non-Employee Directors pursuant to Section 5.2, the
terms of each outstanding SAR, the number and class of securities subject to
each outstanding Stock Award or Performance Share Award, and the terms of each
outstanding Restricted Stock Award or Performance Share Award shall be
appropriately adjusted by the Committee, such adjustments to be made in the

                                       14
<PAGE>   15

case of outstanding options and SARs without an increase in the aggregate
purchase price or base price. The decision of the Committee regarding any such
adjustment shall be final, binding and conclusive. If any such adjustment would
result in a fractional security being (a) available under this Plan, such
fractional security shall be disregarded, or (b) subject to an award under this
Plan, the Company shall pay the holder of such award, in connection with the
first vesting, exercise or settlement of such award in whole or in part
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the vesting, exercise or
settlement date over (B) the exercise or base price, if any, of such award.

         6.8  CHANGE IN CONTROL.

         (a) (1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control in connection with which the holders of Common
Stock receive shares of common stock that are registered under Section 12 of the
Exchange Act, (i) all outstanding options and SARS shall immediately become
exercisable in full, (ii) the Restriction Period applicable to any outstanding
Restricted Stock Award shall lapse, (iii) the Performance Period applicable to
any outstanding Performance Share Award shall lapse, (iv) the Performance
Measures applicable to any outstanding award shall be deemed to be satisfied at
the maximum level and (v) there shall be substituted for each share of Common
Stock available under this Plan, whether or not then subject to an outstanding
award, the number and class of shares into which each outstanding share of
Common Stock shall be converted pursuant to such Change in Control. In the event
of any such substitution, the purchase price per share in the case of an option
and the base price in the case of an SAR shall be appropriately adjusted by the
Committee (whose determination shall be final, binding and conclusive), such
adjustments to be made in the case of outstanding options and SARs without an
increase in the aggregate purchase price or base price.

         (2) Notwithstanding any provision in this Plan or any Agreement, in the
event of any Change in Control other than a Change in Control in connection with
which the holders of Common Stock receive shares of common stock that are
registered under Section 12 of the Exchange Act, each outstanding award shall be
surrendered to the Company by the holder thereof, and each such award shall
immediately be cancelled by the Company, and the holder shall receive, within
ten days of the occurrence of a Change in Control, a cash payment from the
Company in an amount equal to (i) in the case of an option, the number of shares
of Common Stock then subject to such option, multiplied by the excess, if any,
of the greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the purchase price per share of Common Stock subject to
the option, (ii) in the case of a Free-Standing SAR, the number of shares of
Common Stock then subject to such SAR, multiplied by the excess, if any, of the
greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the base price of the SAR, (iii) in the case of a
Restricted Stock Award or Performance Share Award, the number of shares of
Common Stock or the number of Performance Shares, as the case may be, then
subject to such award, multiplied by the greater of (A) the highest per share
price offered to stockholders of the Company in any

                                       15
<PAGE>   16

transaction whereby the Change in Control takes place or (B) the Fair Market
Value of a share of Common Stock on the date of occurrence of the Change in
Control. In the event of such a Change in Control, each Tandem SAR shall be
surrendered by the holder thereof and shall be cancelled simultaneously with the
cancellation of the related option. The Company may, but is not required to,
cooperate with any person who is subject to Section 16 of the Exchange Act to
assure that any cash payment in accordance with the foregoing to such person is
made in compliance with Section 16 and the rules and regulations thereunder.

         (b)      "Change in Control" shall mean:

         (1) a sale or transfer of all or substantially all of the assets of the
Company on a consolidated basis in any transaction or series of related
transactions;

         (2) any merger, consolidation or reorganization to which the Company is
a party, except for a merger, consolidation or reorganization in which the
Company is the surviving corporation and, after giving effect to such merger,
consolidation or reorganization, the holders of the Company's outstanding equity
(on a fully diluted basis) immediately prior to the merger, consolidation or
reorganization will own in the aggregate immediately following the merger,
consolidation or reorganization the Company's outstanding equity (on a fully
diluted basis) either (i) having the ordinary voting power to elect a majority
of the members of the Company's board of directors to be elected by the holders
of Common Stock and any other class which votes together with the Common Stock
as a single class or (ii) representing at least 50% of the equity value of the
Company as reasonably determined by the Board;

         (3) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of the
Company subsequent to the date hereof whose election, or nomination for election
by the holders of the Company's equity, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed to
have been a member of the Incumbent Board; and provided further, that no
individual who was initially elected as a director of the Company as a result of
an actual or threatened solicitation by any individual, entity or group (a
"Person") other than the Board, including any "person" within the meaning of
Section 13(d) of the Exchange Act, for the purpose of opposing a solicitation by
any other Person with respect to the election or removal of directors, or any
other actual or threatened solicitation of proxies or consents by or on behalf
of any Person other than the Board shall be deemed to have been a member of the
Incumbent Board; or

         (4) any Person other than KPMG LLP or its affiliates, acquires
beneficial ownership of 30% or more of the outstanding equity of the Company
generally entitled to vote on the election of directors.

         6.9  NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any
right to participate in this Plan. Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment by the
Company or any Affiliate of the Company or affect in any manner the right of the
Company or any Affiliate of the Company to terminate the employment of any
person at any time without liability hereunder.

                                       16
<PAGE>   17

         6.10  RIGHTS AS STOCKHOLDER. No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock or other
equity security of the Company which is subject to an award hereunder unless and
until such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.

         6.11  DESIGNATION OF BENEFICIARY. If permitted by the Company, a holder
of an award may file with the Committee a written designation of one or more
persons as such holder's beneficiary or beneficiaries (both primary and
contingent) in the event of the holder's death. To the extent an outstanding
option or SAR granted hereunder is exercisable, such beneficiary or
beneficiaries shall be entitled to exercise such option or SAR. Each beneficiary
designation shall become effective only when filed in writing with the Committee
during the holder's lifetime on a form prescribed by the Committee. The spouse
of a married holder domiciled in a community property jurisdiction shall join in
any designation of a beneficiary other than such spouse. The filing with the
Committee of a new beneficiary designation shall cancel all previously filed
beneficiary designations. If a holder fails to designate a beneficiary, or if
all designated beneficiaries of a holder predecease the holder, then each
outstanding option and SAR hereunder held by such holder, to the extent
exercisable, may be exercised by such holder's executor, administrator, legal
representative or similar person.

         6.12  GOVERNING LAW. This Plan, each award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

         6.13  GRANTING AWARDS TO FOREIGN PERSONS. Without the amendment of this
Plan, the Committee may grant awards to persons designated by the Committee from
time to time, who otherwise are eligible persons under Section 1.4 and who are
subject to the laws of foreign countries or jurisdictions. The Committee may
grant awards to such persons on such terms and conditions different from those
specified in this Plan as may in the judgment of the Committee be necessary or
desirable to foster and promote achievement of the purposes of this Plan and, in
furtherance of such purposes, the Committee may make such modifications,
amendments, procedures, subplans and the like as may be necessary or advisable
to comply with provisions of the laws of other countries or jurisdictions in
which the Company or its Affiliates operate or have employees or other persons
who are eligible persons under Section 1.4.

         6.14 ADDITIONAL PROVISIONS APPLICABLE TO OPTIONS GRANTED PRIOR TO IPO.
In order to comply with certain requirements of the California Corporate
Securities Law of 1968, as amended, this Section shall apply to options granted
under this Plan prior to an IPO (a "Pre-IPO Option"). The terms set forth in the
Agreements pursuant to which Pre-IPO Options are granted on January 31, 2000
(the "January 31, 2000 Options") relating to (i) the period during which an
option may be exercised, (ii) the exercise, cancellation or other disposition of
an option upon a termination of employment with the Company of the recipient of
such option, whether by reason of Disability, Retirement, death or any other
reason, (iii) restrictions on the transferability of an option and (iv) the
providing of annual financial statements to the holder of an option are hereby
incorporated into this Plan by reference as if set forth herein verbatim and
shall apply in all respects only to all Pre-IPO Options granted to eligible
persons; provided, however, that Pre-IPO Options may be granted under this Plan
having exercise periods different from those of the January 31, 2000 Options so
long as each such Pre-IPO Option becomes exercisable at a rate of at least 20%
per year during the five-year period commencing on the date of grant of such
Pre-IPO Option.

                                       17

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