Accolade Wines Australia Limited v Pernod Ricard Winemakers Pty Ltd

[2025] NSWSC 55

Supreme Court

New South Wales

Medium Neutral Citation:

Accolade Wines Australia Limited v Pernod Ricard Winemakers Pty Ltd [2025] NSWSC 55

Hearing dates:

11 February 2025

Date of orders:

17 February 2025

Decision date:

17 February 2025

Jurisdiction:

Equity - Commercial List

Before:

Hammerschlag CJ in Eq

Decision:

Declarations that:

(1)   The first and second plaintiffs and Amphora Finance Limited (as “Suppliers” within the meaning of Schedule 6 of the BASA) are permitted, but are not required, to notify in writing that New Zealand is one of the “Territories” that shall apply to the period defined as “Phase 1” in Schedule 6 to the BASA;

(2)   The written notice dated 4 December 2024 issued by the first and second plaintiffs and Amphora Finance Limited (as the “Suppliers” within the meaning of Schedule 6 of the BASA) to the defendants (the Notice) was valid and issued pursuant to terms and requirements of Schedule 6 of the BASA; and

(3)   The transitional distribution agreement to be procured between Pernod Ricard SA and the “Suppliers” (within the meaning of Schedule 6 of the BASA) on the “Closing Date” (as that term is defined in the BASA) is to include New Zealand as one of the “Territories” for “Phase 1” by reason of the valid giving of the Notice.

Catchwords:

CONTRACT – Construction – Where the terms of a written Business and Asset Sale Agreement for a wine distribution business including in New Zealand make provision for the defendants or an affiliate to provide transitional distribution in Territories which must be identified in written notification given by the plaintiffs to the defendants – Whether, on the proper construction of the provision, New Zealand can be included in such a notice – HELD: it can

Cases Cited:

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99

Electricity Generation Corporation Ltd v Woodside Energy Ltd (2014) 251 CLR 640

McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522

Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530

Category:

Principal judgment

Parties:

Accolade Wines Australia Limited (First Plaintiff)
Accolade Wine New Zealand Limited (Second Plaintiff)
Australian Wine Topco Limited (Third Plaintiff)
Pernod Ricard Winemakers Pty Ltd (First Defendant)
Pernod Ricard Winemakers New Zealand Limited (Second Defendant)

Representation:

Counsel:
R Yezerski SC / C Tran (Plaintiffs)
SG Finch SC / NA Wootton (Defendants)

Solicitors:
Allens (Plaintiffs)
Ashurst (Defendants)

File Number(s):

2024/00472203

Publication restriction:

N/A

JUDGMENT

1. The Court is called on to determine a narrow question of construction of a commercial agreement.

2. On 17 July 2024, the first plaintiff (AUS Purchaser) and the second plaintiff (NZ Purchaser) (collectively, Purchasers) entered into a written Business and Asset Sale Agreement (BASA) with the first defendant (AUS Seller) and the second defendant (NZ Seller) (collectively, Sellers) under which the AUS Seller sold to the AUS Purchaser and the NZ Seller sold to the NZ Purchaser, respectively, wine distribution businesses in Australia and New Zealand.

3. The Purchasers are part of a group of companies, headquartered in Adelaide, South Australia, which operates a global wine business known as Accolade Wines. Accolade Wines is a substantial business in the Australian and United Kingdom wine markets. Its operations overseas are smaller.

4. The Sellers are companies related to Pernod Ricard SA (Pernod Ricard), an international wine and spirits producer and wholesaler which owns wine brands through subsidiaries including the Sellers.

5. Pernod Ricard has a substantially larger business than Accolade Wines in New Zealand and outside Australia generally.

6. The BASA makes provision for a transitional distribution arrangement, potentially until 31 December 2025, under which Pernod Ricard will distribute wine products for the Purchasers in specific Territories where the Sellers have been distributing their wine products. The provisions are contained in Schedule 6 to the BASA which is headed “Transitional Distribution Agreement Principal Terms” (Schedule 6). Schedule 6 is reproduced as Annexure A to this judgment (with figures redacted).

7. References to clauses are, unless otherwise stated or the context indicates differently, to clauses in the BASA. The paragraphs or clauses of Schedule 6 are not numbered.

8. In summary, Schedule 6 provides for the appointment of Pernod Ricard as distributor in three phases covering different periods, referred to as “Phase 1”, “Phase 2” and “Phase 3” respectively.

9. Relevantly, Phase 1 is the four months after the “Closing Date”, defined in clause 1.1 to be the day which is 30 days after a series of “Conditions” set out in clause 4 are fulfilled. The present anticipation is that the Closing Date will be 31 March 2025.

10. Under the heading “Territories”, Schedule 6 provides:

Phase 1 - By no later than 31 December 2024, the Suppliers shall notify Pernod Ricard in writing of the Territories that shall apply to Phase 1, which must include all of the territories in which Pernod Ricard Affiliates distribute (directly or indirectly) Products on the date of this Agreement, other than New Zealand and any other Territory where the Suppliers are unable to appoint Pernod Ricard or any Pernod Ricard Affiliate as the Distributor in that Territory for regulatory reasons or otherwise because of restrictions that apply under any other contractual arrangements to which that Supplier is a party as at the date of this Agreement.

Phase 2 - Thailand, Sweden, Norway, Finland, Japan, China (excluding Church Road), Ireland, Germany, Persian Gulf and the global-travel-retail business (GTR).

Phase 3 - Thailand, Japan, China (ex Church Road), Ireland, Germany and GTR.

If any Supplier wishes to include distribution services in respect of New Zealand for Phase 2 and/or Phase 3, the parties will enter into negotiations (acting reasonably and in good faith) and use reasonable endeavours to separately agree the terms of (including consideration for) such services.

11. The reference to “the Suppliers” is a reference relevantly to the Purchasers and Amphora Finance Limited, which is not a party to the BASA or these proceedings but is contemplated to be a Supplier.

12. The BASA includes Schedule 22, which is entitled “Incentive Contingent Consideration”. It identifies a series of Territories and specifies target net sales (in euros) for each of them as 95% of a figure specified as net sales. Paragraph 2 of Schedule 22 is headed “Determination of Incentive Contingent Consideration”. It provides that if the total actual net sales for the financial year ending on June 30, 2025 is equal to at least 95% of the total target net sales, the Purchasers shall pay to the Sellers a specific (and not insubstantial) amount in euros. Paragraph 2.2 of Schedule 22 provides:

2.2 For the purpose of calculating the Incentive Contingent Consideration Amount, if in the period between Closing and June 30, 2025:

(a) the relevant Pernod Ricard Affiliate is not appointed as the Distributor in respect of a Territory (including New Zealand) under the Transitional Distribution Agreement, Total Actual Net Sales for the financial year ending June 30, 2025 shall be deemed to be 100% of the Total Target Net Sales in respect of such Territory; … (emphasis added)

13. The effect is that Pernod Ricard gets the benefit of a presumption, for Territories where it is not appointed a distributor, that 100% of the total target net sales has been met. This is no doubt to ensure that Pernod Ricard is not deprived of the benefit of the Incentive Contingent Consideration by not being appointed distributor for a particular territory.

14. On 4 December 2024, the Purchasers gave Pernod Ricard the following notice:

TRANSITIONAL DISTRIBUTION AGREEMENT - NOTICE REGARDING PHASE 1

TERRITORIES

1. BACKGROUND

1.1 This document refers to the AUS/NZ Business and Asset Sale Agreement dated 17 July 2024 (the BASA) between, among others, Pernod Ricard Winemakers Pty Ltd, Pernod Ricard Winemakers New Zealand Limited, Accolade Wines Australia Limited and Accolade Wines New Zealand Limited.

1.2 Unless otherwise defined in this document, capitalised terms used in this document have the same meaning given to them in the BASA.

1.3 Schedule 6 (Transitional Distribution Agreement Principal Terms) of the BASA provides that the Suppliers must by no later than 31 December 2024, notify Pernod Ricard in writing of the Territories that shall apply to the Phase 1 Distribution Period.

2. NOTIFICATION

2.1 In accordance with Schedule 6 of the BASA, the Suppliers hereby notify Pernod Ricard that all of the territories in which Pernod Ricard Affiliates distributed (directly or indirectly) Products (as defined in Schedule 6 of the BASA) on the date of the BASA, including New Zealand, shall apply for the purposes of Phase 1.

2.2 The Suppliers request that Pernod Ricard kindly confirm receipt of this notification by return email.

15. On 12 December 2024, Pernod Ricard gave written notice to the Purchasers that it rejected the notice, because it includes New Zealand in the Territories that shall apply to the Phase 1 distribution period.

16. Clause 21 of the BASA is headed “Employment” and makes provision for the Sellers to give information about people employed by the Sellers in New Zealand and for the Purchasers to offer those employees individual employment on certain conditions including that the employment offer must commence on the Closing Date and the terms must not be materially less favourable overall than the current terms applicable to the relevant employee.

17. Some years before the entry into the BASA, in 2015, the Purchasers entered into a Distribution Agreement (Distribution Agreement) with an entity now called Hancocks Wine, Spirits and Beer Merchants Limited (Hancocks) for the distribution in New Zealand of the Purchasers’ beverage products. The Distribution Agreement was on foot at the time of the BASA.

18. The Distribution Agreement gives Hancocks a right of first refusal to distribute all the Suppliers’ additional products proposed to be distributed in New Zealand and provides for the parties to negotiate in good faith the terms of distribution and a marketing plan.

19. It is not in dispute that as at the date of the BASA, New Zealand was a Territory in which Pernod Ricard (or affiliates) distributed products.

20. The question for determination is whether under Schedule 6, the notification for Phase 1 can (as the Purchasers contend) include New Zealand as one of the Territories to which the transitional distribution arrangements apply or cannot (as the Sellers contend) include New Zealand.

21. Put another way, is it at the Purchasers’ option to include New Zealand or not in the Phase 1 interim distribution arrangements?

22. By their Summons filed 19 December 2024, the plaintiffs seek declarations that on the proper construction of the BASA:

1. the first and second plaintiffs and Amphora Finance Limited (as “Suppliers” within the meaning of Schedule 6 of the BASA) are permitted, but are not required, to notify in writing that New Zealand is one of the “Territories” that shall apply to the period defined as “Phase 1” in Schedule 6 to the BASA;

2. the written notice dated 4 December 2024 issued by the first and second plaintiffs and Amphora Finance Limited (as the “Suppliers” within the meaning of Schedule 6 of the BASA) to the defendants (the Notice) was valid and issued pursuant to terms and requirements of Schedule 6 of the BASA; and

3. the transitional distribution agreement to be procured between Pernod Ricard SA and the “Suppliers” (within the meaning of Schedule 6 of the BASA) on the “Closing Date” (as that term is defined in the BASA) is to include New Zealand as one of the “Territories” for “Phase 1” by reason of the valid giving of the Notice.

23. The BASA is a commercial contract which is to be given a business-like interpretation. Interpreting it requires attention to the language used by the parties, the commercial circumstances which it addresses, and the objects which it is intended to secure. The meaning of the words chosen is determined objectively by reference to its text, context, and purpose, the question being what a reasonable businessperson would have understood them to mean. Preference is given to a construction supplying a congruent operation to the various components of the whole, so as to avoid commercial inconvenience. Where language is open to more than one construction, the Court will prefer a construction which avoids consequences which are capricious, unreasonable, inconvenient or unjust (see Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22]; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 at [82]; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at [15]; Electricity Generation Corporation Ltd v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]-[51]).

24. The Sellers argue that where Schedule 6 says certain Territories must be included (subject to stated exceptions), this means only those Territories can be included. They argue that because the notice “must” include certain Territories, it can only include them. They argue that the provision should not be construed as giving the Purchasers any option because it does not include option terminology. I interpolate that they sought, in my view, contrary to orthodox canons of construction, to pray in aid provisions in earlier drafts of the BASA not ultimately agreed in the BASA in an endeavour to demonstrate the development of the provision and motivate an argument that where the parties intended to give an option, they clearly said so.

25. Both sides led evidence of pre-BASA negotiations in relation to the terms ultimately agreed as Schedule 6, in particular as to discussions concerning the Purchasers’ arrangements with Hancocks and whether the Sellers were told that because of those arrangements, Pernod Ricard could not be appointed distributor for New Zealand. Ultimately, neither party (correctly in my view) seriously pressed a suggestion that this evidence has any relevance, let alone material relevance, to the construction of the BASA. It is not in issue that the Sellers did not know of the actual terms of the Distribution Agreement. Their evidence rose no higher than to an assertion that they were told that Pernod Ricard could not be appointed for New Zealand.

26. The Sellers argue that the Phase 1 provisions in effect “incorporates its own definition” of inability to appoint Pernod Ricard by referring to regulatory reasons or restrictions that apply under any other contractual arrangements to which the Purchasers are party as at the date of the BASA. The effect is, they argue, that any restriction on the appointment of Pernod Ricard is to be equated with an inability to appoint it, and there was such a restriction by virtue of the Distribution Agreement.

27. This submission has a number of difficulties in its way.

28. The words in the Phase 1 provision after the words “New Zealand” are not a reference back to New Zealand. New Zealand is excepted in its own right. As a matter of simple language, inability is not a synonym for “any restriction”. The Distribution Agreement provided only for a right of first refusal, which Hancocks might never have taken up even if they had been made an offer and, notwithstanding the parties’ obligation to negotiate in good faith, an agreement might never have been reached on the terms. It is far from clear that the existence of the Distribution Agreement rendered the Purchasers unable to appoint Pernod Ricard as distributor for New Zealand.

29. Finally, the Sellers argue that the inclusion in the BASA of provisions enabling the Purchasers to employ the Sellers’ employees in New Zealand is inconsistent with a right in the Purchasers to require Pernod Ricard to provide distribution services because there is a potential for it to have no (or not enough) employees to do so if the Purchasers employ them. This argument is unsustainable. The same considerations would apply to Phases 2 and 3, and the BASA makes express provision for the possibility that Pernod Ricard would provide distribution services long after the Closing Date. It also assumes the unlikely scenario that the Purchasers will act economically irrationally by requiring Pernod Ricard to do the distribution services in New Zealand with the Purchasers employing staff there at the same time. The provision is as much for the benefit of Sellers as it is for the Purchasers because it will take the employees off the Sellers’ hands, effectively at the Purchasers’ expense.

30. For the following reasons, the Sellers’ construction is unsustainable and the Purchasers’ one correct.

31. First and foremost, the words concerned, on their plain English meaning, do not say what the Sellers would have them say. The words require the inclusion of certain Territories but do not require the Territories the subject of the exceptions to be excluded. Missing are any words requiring such exclusion. The word “must” is directed to what the notice must include. It is not directed to what the notice cannot include. The words neither say nor imply that the exceptions to the mandatory inclusions are mandatory exclusions.

32. Second, if the exclusions are mandatory, there is no rational reason for the requirement to give any notification of what they are. The exclusions would operate without more.

33. Third, by not saying or implying that the exclusions cannot be inclusions, the words convey the clear implication that the exclusions are not intended to be mandatory.

34. Fourth, Schedule 6 expressly contemplates the possibility of distribution services in New Zealand for Phase 2 and/or Phase 3 if any Supplier wishes to include it. Adopting the Sellers’ construction would have the illogical outcome that New Zealand cannot be included for Phase 1 but might be for Phases 2 and 3.

35. Fifth, Schedule 22 includes the words “(including New Zealand)”. This brings with it the clear and obvious implication that Pernod Ricard might be appointed as the distributor there. The period for calculating the Incentive Contingent Consideration is the financial year ending 30 June 2025 which would include at least part of Phase 1. To construe Schedule 6 as excluding New Zealand from Phase 1 arrangements would render its operation incongruent with Schedule 22.

36. Finally, from a commercial perspective, it is for the Suppliers to determine whether they wish to take any commercial or regulatory risk in including New Zealand or a Territory where there is a regulatory or contractual problem in Phase 1. Either way, such a problem is the Purchasers’ rather than the Sellers’. The clause operates to give the Purchasers an election to include New Zealand by including it in the notice. That the word “option” is not used is of no moment.

37. It follows that the plaintiffs are entitled to the declarations they seek. The parties are to bring in short minutes of order.

38. I provisionally order that the defendants are to pay the plaintiffs’ costs of the proceedings. This order will solidify after seven days unless either party informs the others and my Associate in writing that some other order is sought, specifies the order and provides brief reasons for it, in which event this order will not take effect and I will make directions for the resolution of the issue of costs.

Annexure A

SCHEDULE 6

TRANSITIONAL DISTRIBUTION AGREEMENT PRINCIPAL TERMS

The following terms are the principal terms of a transitional distribution agreement that will be entered into between the AUS Purchaser, the NZ Purchaser and Spain Purchaser ( or one or more Affiliates nominated by such entity/ies) (collectively the Suppliers and individually a Supplier) and Pernod Ricard S.A. (Pernod Ricard) for the distribution of the Products in the Territories (Territory/ies), for the relevant Distribution Period (as defined below) (Transitional Distribution Agreement).

For purposes of this Schedule, Products means:

1. the Wine Products; and

2. all wine products acquired, owned and/or produced by the Target Group Companies (as that term is defined in the Spanish Sale Agreement) (Spanish Products),

in each case, which are being distributed by Pernod Ricard’s Affiliates or any third party distributors engaged by any Pernod Ricard Affiliate (as applicable) in the relevant Territory at the date of this Agreement, including under the Retained Third Party Distribution Contract.

The Transitional Distribution Agreement will not apply to the Dedicated Third Party Distribution Contracts or the Shared Third Party Distribution Contracts.

The Transitional Distribution Agreement shall be on terms materially similar to those set out in the Long Term Distribution Term Sheet other than any alterations arising as a consequence of the terms set out below.

Nature of Distributor Appointment

The Suppliers will appoint the relevant Affiliate of Pernod Ricard ( or any third parties to which the applicable Supplier has consented), as notified by Pernod Ricard no later than 20 Business Days prior to the Closing Date (Distributor) as the Suppliers’ exclusive Distributor of the relevant Products in the relevant Territory for the import, resale and marketing by the relevant Distributor in its own name and on its own account, and Pernod Ricard will procure that each Distributor will accept that appointment as if such party were bound by this Schedule, subject to and on the terms of the Transitional Distribution Agreement. The Distributor’s exclusivity shall be subject to the same qualifications as the distributor under the Long Term Distribution Term Sheet, including to allow Suppliers to transition to replacement distributors as required.

The only Products to be distributed in a Territory under the Transitional Distribution Agreement will be those distributed by or on behalf of the relevant Pernod Ricard Affiliate (including by a third party distributor engaged by a Pernod Ricard Affiliate) in that Territory at the date of this Agreement. In respect of a Territory, the services to be provided by a Distributor will apply to all Products distributed by or on behalf of the relevant Pernod Ricard Affiliate in that Territory at the date of this Agreement (i.e. the Suppliers cannot select only certain Products in a Territory).

Interpretation

Capitalised terms not otherwise defined in this Schedule shall have the meaning given to them in the binding term sheet for the long term Distribution Agreements to be entered into by certain Pernod Ricard Affiliates and the Suppliers for the distribution of Products in Spain, India and China, dated on or about the date of this Agreement (Long Term Distribution Term Sheet).

Term

The appointment of the relevant Distributor (dependant on whether the Phase applies to such Distributor) will be in phases as follows (Distribution Period):

a. Phase 1 - means:

i. a period of 4 months which starts on the later of:

A. the Closing Date; and

B. if systems which are material to route-to-market/distribution services are not transitioned to the control of the Purchasers on the Closing Date due to an Implementation Issue caused by the Sellers or Spain Seller or one of their Affiliates, the date the last such system transitions to the Purchasers control;

(the Phase 1 Start Date); or

ii. the period from the Phase 1 Start Date until 31 December 2025, whichever period is shorter (Phase 1).

b. Phase 2 -a period of 3 months from the end of Phase 1 or the period from the end of Phase 1 until 31 December 2025, whichever period is shorter (Phase 2).

c. Phase 3 - a period of 3 months after the end of Phase 2 or the period from the end of Phase 2 until 31 December 2025, whichever period is shorter (Phase 3).

Phase 1, Phase 2 and Phase 3 collectively referred to as the Phases and generically as a Phase.

In relation to a Territory, the term of the Transitional Distribution Agreement in respect of that Territory is the period from the start of Phase 1 until the date on which the appointment of the Distributor for that Territory ceases or terminates for any reason (Term).

Termination

Suppliers may terminate the provision of services in any one or more Territories under the Transitional Distribution Agreement on at least one month’s notice to Pernod Ricard, which notice must end on the last day of a calendar month, provided that during Phase 1 the Suppliers may not terminate the provision of services for any of the Territories in Phase 1 before 30 June 2025.

Territories

Phase 1 - By no later than 31 December 2024, the Suppliers shall notify Pernod Ricard in writing of the Territories that shall apply to Phase 1, which must include all of the territories in which Pernod Ricard Affiliates distribute (directly or indirectly) Products on the date of this Agreement, other than New Zealand and any other Territory where the Suppliers are unable to appoint Pernod Ricard or any Pernod Ricard Affiliate as the Distributor in that Territory for regulatory reasons or otherwise because of restrictions that apply under any other contractual arrangements to which that Supplier is a party as at the date of this Agreement.

Phase 2 - Thailand, Sweden, Norway, Finland, Japan, China (excluding Church Road), Ireland, Germany, Persian Gulf and the global-travel-retail business (GTR).

Phase 3 - Thailand, Japan, China (ex Church Road), Ireland, Germany and GTR.

If any Supplier wishes to include distribution services in respect of New Zealand for Phase 2 and/or Phase 3, the parties will enter into negotiations (acting reasonably and in good faith) and use reasonable endeavours to separately agree the terms of (including consideration for) such services.

Phase 1 - Additional Distribution Logistical Support - AUS Seller and NZ Seller

AUS Seller and NZ Seller will provide transitional services to the Suppliers (“Distribution Logistical Support”) in relation to warehouse management, export and invoicing of the Wine Products, acting as an intermediary between the Suppliers and the Distributors in the Territories applicable to Phase 1, whereby:

•   AUS Seller would purchase the Australian Products from the Supplier and arrange sale and shipment to all Distributors in the Territories in the scope of Phase 1 who require such Products; and

•   NZ Seller would purchase New Zealand Products from the Supplier and arrange sale and shipment to all Distributors in the Territories in the scope of Phase 1 who require such Products,

on the terms and conditions set out in item 8 of Schedule 4.

During Phase 1 for Spanish Products and Phases 2 and 3 for all Products, the relevant Distributor will place orders and liaise directly with the relevant Supplier, including in respect of the budgeting process in respect of Phase 2 and 3 to be concluded no later than 15 June 2025.

Excluded Transitional Distribution Products

If no later than 31 December 2024, any Supplier advises Pernod Ricard that it cannot appoint the relevant Pernod Ricard Affiliate as the Distributor in respect of a Territory under the Transitional Distribution Agreement (for regulatory reasons or existing contractual restrictions), then no Transitional Distribution Agreement will be entered into for that particular Supplier in that particular territory (and that territory will not be considered a ‘Territory’ for that particular Supplier) and at Closing either: (a) the Suppliers or Suppliers’ incoming distributor must purchase any stock of relevant Products (i.e. those Products which will not be subject to a distribution arrangement between the parties) then owned by that Pernod Ricard Affiliate that are not required to fulfil any existing orders at book value, other than any Products which are unfit for human consumption, obsolete, unmerchantable, or damaged beyond use, for which any buy back shall be at Suppliers’ sole discretion, or (b) the relevant Pernod Ricard Affiliate will be entitled ( directly or indirectly) to sell and deplete such stock in such manner and on such terms as it chooses during the 12 month period from the Closing Date.

Price and Payment

Phase 1

The price payable to the Suppliers for the Products (other than in respect of the Products distributed under the Retained Third Party Distribution Contract) during Phase 1 until 30 June 2025 shall be the same as the price for such Products stipulated in the relevant systems of Pernod Ricard at Closing (which must be calculated in a manner consistent with past practice) with a view to Pernod Ricard or its relevant Affiliate achieving a CAAP margin on the Net Sales of [redacted].

To the extent Phase 1 continues after 30 June 2025, the price payable to Suppliers for the relevant Products during the remainder of Phase 1 will be determined pursuant to the Phase 1 Tail Budget (as described below).

The price payable to the Suppliers for the Products distributed under the Retained Third Party Distribution Contract will be the price payable by the Distributor or the relevant customer in the Territory (as applicable), under the terms and conditions of the Retained Third Party Distribution Contract. From the date of this Agreement until the expiry of Phase 1, Pernod Ricard shall not amend the relevant parts of the Retained Third Party Distribution Contract which relate to the Wine Products in any material respect, unless required as a result of, or to comply with, applicable Law.

Phase 2 and Phase 3

The price payable to Suppliers for the relevant Products in respect of Phase 2 and Phase 3 (if applicable) will be agreed between the relevant Distributor and the Suppliers prior to the commencement of Phase 2 (acting reasonably and in good faith) as part of the Budget setting process, with a view to Pernod Ricard or its relevant Affiliate achieving a CAAP margin on the Net Sales in each Territory of [redacted].

General

Pernod Ricard will provide Suppliers with reasonable supporting information in relation to the calculation of proposed prices to achieve the applicable CAAP margin.

For clarity, no reconciliation or true up payments will be made in the event Pernod Ricard or its relevant Affiliate does not actually achieve the CAAP margins specified above in a particular Phase.

The parties acknowledge and agree that:

•   all costs arising in respect of the Transitional Services Agreement shall be excluded for the purposes of calculating CAAP margin other than the costs incurred by Pernod Ricard for ‘Domestic Market Activities’ in respect of the Transitional Service entitled ‘Distribution Logistical Support’; and

•   there shall be no double recovery of any costs already recovered by Pernod Ricard (or its relevant Affiliate) as part of calculating the applicable CAAP margin.

Budget and marketing plan:

No later than 15 June 2025, each relevant Distributor and the Suppliers shall negotiate and seek to agree (in good faith) on the budget and marketing plan (the Budget) for Phase 2 and Phase 3 (as applicable) (the Relevant Period) for each relevant Territory.

The Budget for the period between Closing and 30 June 2025 shall be the relevant Pernod Ricard Affiliate’s existing Budget in each Territory as set at the date of this Agreement (FY25 Budget). To the extent Phase 1 continues after 30 June 2025, the parties agree to continue for the remainder of Phase 1 on the same basis as the FY25 Budget, as updated for actual costs (incurred consistent with past practice), with a view to Pernod Ricard or its relevant Affiliates maintaining an average CAAP margin on the Net Sales (with drivers from Gross Sales) in each Territory of [redacted] for the remainder of Phase 1 (Phase 1 Tail Budget).

The Budget for Phase 2 and 3 will notably identify, for that Relevant Period and for the relevant Products:

•   the anticipated volume to be sold by the relevant Distributor (sell-in), the anticipated sell-through volume (to the extent different from sell-in volumes), the level of inventory of the Distributor at the beginning and end of the Relevant Period, as well as indicative volumes to be shipped by the relevant Supplier;

•   the anticipated generated revenues (Gross Sales, Net Sales (with drivers from Gross Sales), and pricing policy in general);

•   details of the brand plan for the relevant Territory, including planned advertising, promotional, sales and marketing activities (which includes both the nature of the advertising and promotion costs to be spent on the relevant Territory and the promotion strategy) as well as any innovation that should be introduced on the relevant Territory;

•   advertising and promotional budget (including an allocation of advertising and promotional expenses as between the relevant Supplier and Distributor); and

•   any other information relevant to achieving Product sales.

Nothing shall prevent Suppliers from agreeing incentive arrangements directly with Distributor management.

Standard of Performance

The Distributor shall perform the distribution services under the Transitional Distribution Agreement to a standard and in a manner which is substantially the same as the standard and manner in which the services were performed prior to Closing ( other than changes to the manner of performance necessitated by the fact the Distributor and Suppliers are not part of the same corporate group).

In Australia, for the 8 week period during and after the cutover of key IT systems relating to route to market and distribution services, the AUS Seller must: (i) maintain an additional 2 weeks’ short term ‘safety stock’ increase (at the AUS Seller’s cost) and (ii) maintain DIFOT levels consistent with the prior 12 months.

Reporting

Monthly reporting

Within 20 Business Days of the end of each month, each Distributor must give the Suppliers on a Territory-by-Territory basis, a written summary (which can be provided in excel format) with respect to the preceding month (Monthly Report) of:

•   All Territories: Volumes, Gross Sales, Net Sales (with drivers from Gross Sales) and down to CAAP breakdown (including COGS, Distribution costs, A&P), with a breakdown by sub-brand by Territory;

•   DIFOT levels, or if this is not available, any available equivalent.

Other reporting

For the Top 10 Territories only and to the extent the information is available and relevant, information such as other in-market level of inventory or volumes (e.g., trade inventory, sell out volumes or depletion volumes). The information will come directly from the Territories concerned and be in a format and frequency to be agreed.

The Suppliers acknowledge and agree that in relation to the Retained Third Party Distribution Contract, Pernod Ricard will provide such information to the Suppliers as PRW Australia and PRW New Zealand receive from the Distributor under that Retained Third Party Distribution Contract, such information to be materially similar to the format and content received by Pernod Ricard as at the date of this Agreement, and that this may be different to the reporting and information provided for above.

Pre-Closing Stocktake by Suppliers

If requested to do so by the Suppliers, a Distributor shall provide reasonable access on reasonable notice to the Suppliers to conduct a stocktake in respect of the relevant Territories that will be the subject of the Transitional Distribution Agreement prior to the Closing Date, on the condition that the Suppliers shall promptly reimburse Pernod Ricard and any Distributor for all reasonable and documented direct and indirect costs (including all internal costs) incurred by any of them in providing such access.

Actions at the end of the Term

At the end of the Term for a Territory (including as a result of termination) (and unless otherwise agreed by the relevant Distributor and the Suppliers), to the extent the Distributor holds any remaining Products in respect of that Territory following the satisfaction of any outstanding orders, either: (a) the relevant Supplier or its incoming distributor shall buy back any such Products or other material relating to the Products (including marketing materials) at their book value from the Distributor, other than any Products which are unfit for human consumption, obsolete, unmerchantable, or damaged beyond use, for which any buy back shall be at Supplier’s sole discretion; or (b) the relevant Pernod Ricard Affiliate will be entitled (directly or indirectly) to sell and deplete such stock during the 12 month period from the end of the Term in that Territory.

The Distributor will provide Transition Assistance as contemplated under the Long Term Distribution Term Sheet if requested by Suppliers, however, such assistance shall, unless otherwise agreed, be provided for up to 4 weeks immediately prior to termination of the services in a Territory and up to a further 2 weeks immediately following the end of the relevant Term.

For the Retained Third Party Distribution Contract, Pernod Ricard will use reasonable endeavours to procure that the Distributor provides the above Transitional Assistance to the Suppliers.

Limitation of Liability

For the avoidance of doubt, the Transitional Distribution Agreement shall include a liability regime and a limitation of liability regime on the same terms and conditions as that set out in the Long Term Distribution Term Sheet, including exceptions. The liability limitation for all losses or claims arising under or connected with the Transitional Distribution Agreement will be A$20,000,000.

Inconsistencies between the Transitional Distribution Agreement and the Long Term Distribution Term Sheet

Without in any way limiting the other inconsistencies that will naturally arise between the Transitional Distribution Agreement and the Long Term Distribution Term Sheet as a result of the differing commercial objectives underlying each agreement, the Transitional Distribution Agreement shall not contain:

•   a regime for changes to products and new products as contemplated in clause 4 of the Long Term Distribution Term Sheet; or

•   reporting or other governance principles other than as set out in this Schedule.

The Parties acknowledge and agree that, in relation to the Retained Third Party Distribution Contract, the terms of the Transitional Distribution Agreement which relate to the distribution of the relevant Products in the relevant Territory under that Retained Third Party Distribution Contract may need to be different to that set out in this Schedule 6, to reflect the terms of the Retained Third Party Distribution Contract.

Governing Law

The governing law of the of the Transitional Distribution Agreement shall be the laws of New South Wales and the parties thereto shall irrevocably submit to the non-exclusive jurisdiction of the Courts of New South Wales.

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Decision last updated: 17 February 2025