EXHIBIT 2.3
18 January 2001
TranSwitch III Inc.
- and -
Xxxxxx Xxxxxxxx
Xxxxxxxx Xxxxx
WARRANTY AGREEMENT
in respect of
ADV Engineering
BETWEEN
TranSwitch III, Inc.,a company registered under the Laws of Delaware having its
principal place of business at 0 Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000, XXX
represented by Xxx Xxxx, (the "Beneficiary")
AND
Xx. Xxxxxx Xxxxxxxx, French citizen, born 28 February 1959 in Maison Carree
(Algeria), married to Xxxxxx Xxxxxxxx nee Benichou under the matrimonial regime
"communaute legale reduite aux acquets", and resident at 00 xxxxx xx Xxxx
x'Xxxxx, 00000Xxxxxxxx - Xxxxx, Xxxxxx
and
Xxx. Xxxxxxxx Xxxxx a Belgian citizen, married under the matrimonial regime of
the "separation de biens" born In Brussels Belgium on 19 February 1962 in
Brussels, Belgium and resident at 28, Xxxxxxxxxxxx, 0000 Xxxxxxxxx, Xxxxxxx
(together the "Warrantors")
WHEREAS
The Beneficiary and the Warrantors have signed on the date hereof a share
purchase agreement (the "Share Purchase Agreement") concerning 100 per cent. of
the share capital of ADV Engineering, a societe anonyme with a share capital of
FRF 500,000 having its registered office at Parc technologique du Canal, 16
Avenue de l'Europe, 31520 Ramonville Saint Agne, France, registered at the
Registry of Commerce and Companies of Toulouse under number B 417 950 854 (the
"Company").
The Warrantors have agreed to make certain representations and grant certain
warranties to the Beneficiary in relation to the Company.
The Warrantors shall act jointly hereunder.
IT IS AGREED AS FOLLOWS
1 Definitions/Interpretation
1.1 In this Agreement and its schedules (the "Schedules") the
expressions shall have the following meanings unless the context
otherwise requires:
"Accounts" means the accounts of the Company for the financial year
ending on 30 September 2000 attached in Schedule 2;
"Affiliate" means in relation to any party (i) a company or
entity which has a Controlling Interest in the said party and
(ii) a company or an entity in which the said party has a
Controlling Interest;
"Agreement" means this warranty agreement;
"Balance Sheet Date" means 30 September 2000;
"Business Day" means any day (other than Saturday) upon which
banks are open for business in Paris and New York;
"Controlling Interest" means the holding of an interest granting
to its holder(s) either directly or indirectly or as a result of
a concerted action as defined by Article 233-10 of the French
Commercial Code, the control of the capital and/or of the voting
rights of a company or any entity, as defined by Article 233-3
of the French Commercial Code, or the exclusive or joint
control, or a notable influence over the management of a company
as defined by Article 233-16 of the above-mentioned code;
"Security" includes for the purpose of this Agreement any
"surete" "reelle" or "personnelle", "droit reel accessoire",
"droit de retention", "reserve de propriete", "delegation",
"subrogation", "fiducie", "cession fiduciaire" "en propriete" or
"a titre de garantie" or any "mesure conservatoire" or "voie
d'execution", as well as agreement, option, undertaking, offer
or other real or personal right ("droit reel ou personnel") or
other obligation which has the purpose or effect of restricting
in any manner the ownership or the transferability of the
relevant asset or right;
"Shares" means the shares of the Company which are transferred
by the Vendors to the Beneficiary pursuant to the Share Purchase
Agreement;
"Vendors" has the meaning assigned to it in the Share Purchase
Agreement;
"Tax" means all taxes, impositions, duties, contributions,
charges, withholding taxes (whether in fiscal, social security,
customs or other matters) payable in conformity with the
legislation of all countries concerned whether State-controlled
or private, and all penalties, interest and other costs relating
thereto.
1.2 Any representation contained in this Agreement qualified by the
expression "so far as the Warrantors are aware" or "to the
knowledge of the Warrantors", or any similar expression shall be
deemed to contain an additional representation whereby the
former representation is made based upon the knowledge,
information and belief of the Warrantors, after having carried
out all reasonable investigations to make sure that the
representations and warranties are true and accurate.
1.3 The Schedules form part of this Agreement and any reference to
this Agreement shall include the Schedules.
1.4 The meanings of the defined terms are applicable to both the
singular and plural forms thereof.
1.5 The headings used in this Agreement have been adopted by the
parties for ease of reference only and the parties declare that
these headings are not to be comprised in this Agreement and
shall not in any event influence the meaning or interpretation
of this Agreement.
2 Representations
The Warrantors make the following representations in relation to the
Shares and the Company:
2.1 Representations in relation to the Shares
2.1.1 Ownership of Shares
The Vendors are the full owners of the Shares. They
have full power and capacity to transfer the full title
of the Shares and to sign this Agreement.
2.1.2 Freedom to dispose of Shares
The Shares of the Company are free from any Security
except for the approval right (clause d'agrement)
contained in the articles of association of the
Company. None of the Vendors are party to any
shareholders agreements or similar agreements with
respect to the Company.
2.2 Representations in relation to the Company
2.2.1 Constitution, existence and conformity
The Company was incorporated on 10 March 1998 and
registered in accordance with the laws of France.
The Company has never been unable to meet its debts as
it fall due, or been declared to be in redressement
judiciaire, liquidation judiciaire. No ad hoc
administrator has been appointed. They have never been
granted a suspension provisoire des poursuites, been
the subject of reglement amiable. The Company cannot,
by virtue of any act or omission as director, shadow
director or "de facto" manager of another entity, be
held liable to pay all or part of the debts of that
other entity.
The statutory registers, books and other corporate
records of the Company are up-to-date as at the date
hereof and have been properly
maintained. All legally required formalities, filings,
registrations of documents (including those with the
Registry of Commerce and Companies) and legal
publications have been duly and timely made.
The Company has full power and capacity to carry on its
activities. All permits, licences, authorisations,
certificates and consents necessary for the Company to
carry on their businesses and to sell their products
and services have been obtained, and, so far as the
Warrantors are aware are not likely to be suspended,
revoked, amended or not renewed (including as a result
of the change of control of the Company).
2.2.2 Share capital
All the shares of the Company have been validly issued
and are fully paid up and may be freely transferred
save for the approval right (clause d'agrement)
contained in the Company's articles of association. The
rights attached to each of the shares of the Company
are identical and free of any Security. The Company has
not issued nor is bound to issue any other share or
security of any kind. The share capital of the Company
has not been subject to any amortisation or repayment.
2.2.3 Restructurings
The Company has not been a party to a cession de fond
de commerce (sale of business), sale of shares, merger,
demerger or by a partial hive down of assets (apport
partiel d'actif)) since its creation, other than the
acquisition of the branch of ADV Technologies in
Toulouse on 17 February 1998 pursuant to which the
business carried out in Toulouse by ADV Technologies
was sold to the Company for the price of FRF 76,642.
ADV Technologies and the Company have had no
shareholder in common, whether directly or indirectly,
and have had no commercial relationship for the last
two years.
No restructuring is currently taking place, nor
envisaged, with the exception of the sale of Shares by
the Vendors to the Beneficiary. The acquisition of the
fond de commerce referred to above is valid and was
carried out in accordance with legal requirements and
in particular in relation to tax.
2.3 Representations in relation to the Accounts
The Accounts have been drawn up in accordance with the rules of
the French Plan Comptable General so that they are regular and
sincere (sincere et regulier) and give a true and fair view
(donnent une image fidele) of the assets and liabilities, the
financial situation and the results of the Company. The Accounts
have been drawn up using the same principles and methods as
those used during the last three financial years.
The results shown in the Accounts arise out of the normal course
of business and do not arise (except as disclosed in such
accounts) from the inclusion of abnormal, extraordinary,
exceptional or non-recurring items of income or expenditure.
2.4 Representations in relation to the Assets of the Company
2.4.1 Ownership/absence of Security
The Company is the full owner of the assets disclosed
in the Accounts, save for those disposed of since the
Balance Sheet Date. The assets acquired or disposed of
by the Company since the Balance Sheet Date have been
so acquired or disposed of in the ordinary course of
business. No asset is the subject of any Security,
except the Compass (Aventi) software listed in Schedule
3 which is subject to a pledge by the BNP for an amount
of FRF161.000.
2.4.2 Assets not owned by the Company
The Company has entered into a commercial lease (the
"Lease"), subject to the provisions of the Decree dated
30 September 1953, as amended, for their registered
office situated at Parc technologique du Canal, 00
xxxxxx xx x'Xxxxxx, 000000 Xxxxxxxxxx Saint Agne where
it carries on its business on the first floor and which
includes 10 parking spaces.
The Company is entitled to a right of tenure in
accordance with the Decree of 30 September 1953, as
amended, and they have received no termination notice.
The sale of the Shares to the Beneficiary does not
constitute a termination event or an event of default
under the Lease. The Company has complied with all the
terms and conditions of the Lease. No fact exists which
could give rise to either the refusal of the landlord
to renew the Lease without having to pay the indemnite
d'eviction or to the rent of the renewed lease not
being subject to a ceiling. The Lease can be terminated
every three years in accordance with the law.
The Company has not consented to either sub-let or
grant any other right of occupation over all or part of
the premises of which they are the tenant, in violation
of the terms and conditions of the Lease.
No works have been carried out on the leased premises
at the cost of the Company without the necessary
consents or approvals, and any such
works are not taken into account in the rent reviews
and will not have to be dismantled upon expiry of the
Lease.
There is no material breach nor any default under any
undertaking, condition or agreement (such as reglement
de copropriete, cahier des charges de ZAC, building
contract, building permit, etc.) relating to the leased
premises.
2.4.3 Properties owned by the Company
The Company does not own any buildings or real
property.
2.4.4 Quiet enjoyment/maintenance/conformity
Save as disclosed in relation to the Compass (Aventi)
software listed in Schedule 3 the assets of the Company
are used in the normal course of business and are not
subject to any procedure or action which may affect
their continued and quiet use. The movable properties
(including materials, vehicles, plant, equipment)
owned, rented or used by the Company are in a normal
state of use, maintenance and repair. They comply with
the applicable statutory, regulatory or contractual
requirements or standards with regard to the Company's
use of them. All authorisations and administrative
permits necessary have been validly obtained.
2.4.5 IT and communications
Without prejudice to paragraph 2.4.4 above and save as
disclosed in relation to the Compass (Aventi) software
listed in Schedule 3, IT and telecommunications systems
and equipment are adapted and satisfactory having
regard to the businesses of the Company and are subject
to appropriate maintenance and upgrading agreements.
These equipments, in their present state and as far as
the Warrantors are aware will not require investments
in the 12 month period following the date of this
Agreement which would be disproportionate as compared
to the average last two years' investments.
IT and telecommunication systems and equipments
(including software) are or have been fully adapted to
handle operations in Euro, convert any data as
necessary in connection with the introduction of Euro,
and comply with any applicable law or regulation in
connection therewith.
2.4.6 Fonds de commerce
The Company is not party to any contract, such as a
partnership or leasing contract, relating to the whole
or part of its Fonds de commerce.
2.4.7 Intellectual property
The Company has not made any filing with any
intellectual property protection office (such as the
Institut National de la Propriete Industrielle) with a
view to obtaining legal protection in respect of any
intellectual property right, whether under patent,
trademark, semi-conductors or other intellectual
property legislation. It does not own any such
registered or filed intellectual property rights.
The intellectual property rights (or contracts relating
thereto) used by the Company but not owned by it (other
than computer software which is publicly available) are
listed in Schedule 3 and a copy of the relevant
contract has been supplied to the Purchaser. These
contracts are in force and are not subject to any
amendment, novation, termination notice or dispute on
the part of any person.
All agreements entered into by the Company and referred
to in Decree 70- 441 of 26 May 1970 have been
registered with the Office for International Transfers
(Service de la Propriete Industrielle).
The restrictions and obligations described in the
licence agreements listed in Schedule 3 have not been
breached and the Warrantors are not aware of any
infringement of the intellectual property rights
described in such licences.
There is no action for infringement nor has any other
similar claim been brought nor is such likely to be
brought against the Company or against the other
parties to the agreements referred to in Schedule 3 and
in respect of the said rights; in particular, no
person, and in particular ADV Techologies, has any
right or has claimed rights over the ADV name.
The Company does not need or use any other intellectual
property right other than those resulting from the
licence agreements listed in Schedule 3 (other than
computer software which is publicly available).
2.4.8 Shareholdings and branches
The Company does not hold shares in any other company,
partnership, GIE, GEIE or other entity or business,
French or foreign, nor are they members of such
entities (including de facto companies, joint ventures,
etc.), other than in SICAV or FCP for the mere
management of its cash.
2.4.9 Stock
The Company does not hold any stock.
2.4.10 Debts
The debts included in the Accounts have been, or will
be, paid in full on their due date, taking into
account, where relevant, the provisions for bad and
doubtful debts made in the Accounts. For debts which
have arisen after the Balance Sheet Date, the level of
doubtful debts is equivalent to the average level for
the previous financial year taking into account the
turnover achieved.
No loans or advances have been granted by the Company
to third parties, other than standard advances or
deposits with suppliers and/or clients carried out in
normal conditions.
2.5 Representations in relation to Liabilities
2.5.1 Total liabilities
There are no liabilities outstanding on the Balance
Sheet Date other than those properly disclosed in the
Accounts.
2.5.2 Reserves
All reserves appearing in the Accounts, particularly
the reserve legale (legal reserve) and, reserve
statutaire (statutory reserve), have been properly
provided for.
2.5.3 Subsidies, support
Save as disclosed in Schedule 4 A, the sale of the
Shares will have no consequence on any support, subsidy
or financial assistance, or proposal of support,
subsidy, loan or financial assistance, which benefit or
may benefit to the Company.
Schedule 4 B contains the notification letters relating
to the agreements contained in Schedule 4 A.
2.5.4 Debts of the Company
All debts have been properly paid on the relevant due
date and the Company is not liable as a result for any
interest for late payment, penalty or indemnity of any
sort.
The Company has duly made all necessary declarations to
the relevant administrative body and all debts have
been paid on the relevant due date.
At the date hereof, the Vendors do not hold a current
account with the Company.
There are no financial agreements entered into by the
Company and currently in force (including loan
agreements, leasing agreements, overdrafts, and other
banking facilities granted to the Company, as well as
any loan or advance granted by their employees,
directors or indirect shareholders), as well as any
leasing or hire purchase agreement, guarantee, warranty
or indemnity, undertaking or other "off-balance sheet"
undertaking entered into on the date hereof, other than
those set out in a Schedule 5 to this Agreement.
2.5.5 Former shareholders and connected persons
The Vendors, the previous shareholders of the Company
and the companies controlled by these persons either
directly or indirectly, do not have and will not have
any claim or contractual right against the Company
resulting from their relations with the Company up to
the date hereof.
2.6 Representations in relation to the management of the Company
2.6.1 Resolutions
All resolutions taken at the shareholders' meetings, by
the boards of directors, by the chairmen and managers
of the Company since the creation of the Company are
valid and, where required, are duly reproduced in the
legal books of the Company up to the date hereof.
2.6.2 Proxies, Delegation of powers and Signatures
The only person able to represent the Company or sign
in its name is Xxxxxx Xxxxxxxx.
2.6.3 Banks
Schedule 6 contains the names and addresses of all
banks and other financial institutions in which the
Company has an account, deposit or safe deposit box,
with the names and addresses of all persons authorised
to draw on said accounts or deposits or who have access
to such safe deposit boxes.
2.6.4 Contracts
All contracts, agreements, undertakings or arrangements
(whether written or oral) to which the Company is a
party have been entered into in the normal course of
business.
The terms and conditions of such contracts entered into
by any of the Company are usual with regard to their
respective businesses; all these contracts, agreements,
undertakings or arrangements are valid and
binding and have been performed in accordance with
their terms and conditions (save for minor and
unrepeated breaches); so far as the Warrantors are
aware, no fact or event, including the sale of the
Shares, is likely to prevent the performance of the
contracts, to lead to their amendment or termination or
to give rise to any claim by or against the Company.
Copies of all contracts, other than the Lease and
employment agreements:
(i) which may be affected by the change of
shareholding in the Company
(ii) which are subject to the provisions of article
101 of the Law of 24 July 1966
(iii) which involve the company in paying annual
amounts (excluding tax) greater than or equal to
FRF 100,000, or which are of an unusual or
abnormal nature or not executed in the ordinary
and usual course of business or the carrying out
of which could prove to be abnormally expensive
to perform
(iv) which are of a length in excess of 12 months or
for which the termination or renewal requires
more than three months' notice
(v) which relate to joint ventures, (societe en
participation, groupement momentane
d'entreprises), to "GIE", or to profit sharing
and commission sharing in which the Company is
or has agreed to become a party
(vi) which restrict the Company's freedom to carry on
its business by preventing it from engaging or
competing with any third party in any business
in which it may engage
(vii) which contain extraordinary clauses in relation
to common legal practice
(viii) which do not relate to the normal and current
activity of the Company have been delivered to
the Beneficiary. A list of such contracts is set
at in Schedule 7.
The Company is not a party to any agreement or
commitment that can reasonably be expected to have a
material adverse effect on its assets, business or
financial condition. There are no agreements or
commitments not made in the ordinary course of business
or which are not of an arm's length nature other than
the agreement on the Software COMPASS (Aventi). As far
as the Warrantors are aware the transfer of
Shares or the signature of the Warranty Agreement will not result
in the termination or unilateral alteration of any of the
Company's agreements with third parties (clients, suppliers,
etc.).
2.6.5 Arrangements with connected persons
There are no contracts entered into by the Company up to the date
hereof, with any of their directors, executive directors,
managers, shareholders or any Affiliate or company in which any
such person is interested.
None of the above persons nor any member of their respective
families up to the second degree are directly or indirectly
interested in the business of the Company's competitors or
clients or in any other person with whom the Company does
business (other than investments representing less than 10% of
the issued shares of any listed company).
2.6.6 Warranties relating to insurance
Without prejudice to insurance required by Law, there is no
insurance contract other than the insurance policy referred to in
Schedule 8. The amounts and scope of cover of the policy referred
to in Schedule 8 are commercially reasonable and customary in
France for companies carrying on similar businesses or owning or
using assets or goods of an equivalent nature; all premiums
relating to such insurances have been duly paid.
As far as the warrantors are aware the Company has not received
any notice of cancellation of any such insurance policy nor has
knowledge that any cancellation is likely to take place.
No claim has been made during the last three years involving a
sum exceeding FRF 50,000 and no circumstances exist which are
likely to give rise to a claim, involving a sum exceeding FRF
50,000 under such insurance policies.
2.6.7 Warranties relating to personnel
Schedule 9 hereto contains a complete and accurate list of all
the employees of the Company indicating their length of
employment, job description, current annual remuneration and
details of any bonuses or benefits in kind. The list also
indicates the salaried employees on long-term leave, fixed term
contracts, part time, or temporary employees, and apprentices.
The applicable collective bargaining agreement is the SYNTEC
agreement.
No employee listed in Schedule 9 has indicated to the Company an
intention to terminate his contract, nor has given formal notice
to leave or is under notice of dismissal.
All of the Company's employees who are not EU citizens (if any)
have a valid work permit.
No former employee of the Company has any priorite de reembauche
as against the Company.
None of the Company's subcontractors or independent consultants
have any right against the Company to claim that they must be
categorised as actual employees of the Company as a result of
their past relations with the latter.
The Company has satisfied all their obligations relating to
labour and social security laws including those relating to (i)
the use of temporary personnel, (ii) employees' representation
and (iii) the application of collective bargaining agreement.
The Company has complied with all individual employment
agreements.
All remuneration and monies to be paid to the employees of the
Company have been calculated and paid in conformity with all
applicable legal and tax rules. All social security payments and
withholding tax payments have been made in due time.
The Company is not involved in any dispute with a salaried
employee or a trade union or negotiation regarding the dismissal,
suspension, disciplining or variation of the terms and conditions
of employment of any present or former salaried employee, and
there are no facts known which might indicate that there may be
any such dispute.
Save for the legal obligations of the Company, those arising as a
matter of law, those resulting from any applicable collective
bargaining agreement and from usual salary increases:
(i) the Company has not made any proposal nor undertaken any
obligation, present or future, to or in respect of its
previous or current legal representatives (mandataires
sociaux), employees, executives, independent assistants or
agents relating to their remuneration, termination of
services, retirement, sickness, death, disability or
insurance;
(ii) since the Balance Sheet Date, the Company has not incurred
any liability arising from breach of an employment, agency
or service agreement;
(iii) the Company has not adopted and do not intend to adopt a
profit sharing scheme for their respective legal
representatives or directors. The Company has not entered
into any agreement to allow its employees to acquire any
right whatsoever in the shares of the Company.
There has been no correspondence between the Company and the
labour authorities over the last 24 months giving rise to a
liability for the Company in excess of FRF 50.000.
No employment agreement entered into by the Company contains any
derogatory or exceptional clauses such as contractual redundancy
payments, golden parachutes or exceptional advantages with the
exception of 4 company cars provided to certain employees of the
Company.
There is no social or health insurance or cover, or complementary
pension schemes for any part of the personnel which is not
required by law.
2.6.8 Representations in relation to litigation
(i) Litigation
The Company is not a party to any litigation, proceedings,
action, arbitration (including investigations or public
enquiries), settlement of any nature whatsoever. The
Warrantors do not know of any fact which could give rise
to any litigation, proceedings, action, arbitration
(including investigations or public enquiries) or
settlement likely to be brought against the Company.
(ii) Controls
The Company is not the subject of any investigation,
inquiry, control or other procedure by the Administration
(particularly the tax, customs, competition, fraud or
health, social security and labour authorities) regarding
their operations and activities.
2.6.9 Compliance with laws
The Company has always carried on its businesses in accordance
with applicable laws, regulations and practices applicable in
France or abroad, particularly those relating to company law,
accountancy, tax, social security, employment law, competition
law, products and services, environment, health and safety with
the exception of breaches and violations which are minor and non-
repetitive both as to their nature and consequences. No agreement
or understanding in this respect has been
entered into with any competent authorities. The Company has no
criminal records.
2.6.10 Services and Products
All services and products supplied or sold by the Company during
the three years prior to the date of this Agreement comply with
requirements or standards applicable for their normal use by
customers. The Warrantors are not aware of any defects in such
services or products. The Company has not received from its
clients in the year prior to the date of this Agreement any
claim indicating that the services or products were defective or
inappropriate for normal usage and were likely to bring about
the Company's liability.
2.6.11 Taxes
(i) All returns, notices and information which are or have
been requested from or given by the Company for the
purpose of any Tax (i) have been given within the
requisite periods and are up-to-date and correct and (ii)
none of them is, or to the knowledge of the Warrantors
should be, the object of any dispute with the French tax
or social authorities or other Tax authorities.
(ii) All Taxes which the Company were liable to pay prior to
the date hereof have been paid.
(iii) The Company has not entered into or is not party to any
contract, plan or agreement which could be categorised as
an abuse of law, abnormal act of management or fraud or
any other process to avoid a Tax in any jurisdiction.
2.6.12 Management of the Company since Balance Sheet Date
From Balance Sheet Date to the date of this Agreement, the
Company has been managed in the usual manner, and no particular
or notable event has occurred which might alter their positions.
In particular there has been:
(i) no change to the situation of the Company which has or
might have adverse consequences for its financial
positions or their turnover;
(ii) no decision to distribute or to pay dividends and no
distribution relating to the capital of the Company;
(iii) no liability or debt to any third party other than those
incurred in the ordinary course of business of the
Company;
(iv) no decision likely to modify the financial structure or
the borrowing capacity of the Company;
(v) no contract entered into, amended or terminated other
than those arising out of the ordinary course of business
of the Company;
(vi) no increase in remuneration for any legal representatives
(mandataires sociaux) or employees (executives,
employees, manual workers or agents) other than a bonus
paid to employees, the aggregate amount of which is in
line with the bonus paid at the same period in 1999;
(vii) no change of principle, method or presentation in the
accounts of each of the Company; all operations of the
Company have been duly accounted for;
(viii) no alteration of investment or inventory purchase policy
and no repayment or discharge of any obligation or
liabilities to trade creditor or demand or collect
payment of trade receivable other than in the ordinary
course of business.
2.7 True, precise, accurate nature of information and warranties
All warranties and information contained in this Agreement are true,
precise and accurate at the date of this Agreement.
The Warrantors are not aware of any documents, facts or events not
disclosed to the Beneficiary pursuant to this Agreement and its
Schedules (i) which could render any such warranties and information
untrue, inaccurate or misleading or (ii) which would be likely to
adversely affect the financial position or prospects of the Company,
(iii) which, given their impact on the present and futures situation
of the Company would have inclined the Beneficiary not to enter into
the transaction or to enter the transaction under different condition.
2.8 Conclusive nature of information and warranties
The Warrantors acknowledge that the representations and indemnities
given under this Agreement were relied upon by the Beneficiary when
determining and accepting the price of the Shares.
3 Indemnity
The Warrantors undertake to indemnify the Beneficiary or, if the
Beneficiary so chooses, the Company, up to the full amount of:
(a) all liabilities, undertakings or debts (of whatever nature) of
the Company having a cause or origin prior to the Balance Sheet
Date, whether known
or unknown to the Warrantors at that date, and which have not
been accounted or provided for, or sufficiently accounted for,
in the Accounts;
(b) any Tax which would be borne by the Company and of any tax
advantage (such as deficits which may be carried forward,
depreciations which may be known to have been postponed or other
regulations allowing deferral or reprieve) which could be
questioned or postponed, following any reassessment or other act
carried out by the tax authority relating to a period prior to
the date of this Agreement and notably due to the fact that
either the amounts had not been paid when due, or the tax
returns were not made on the appropriate date or were incorrect
for whatever reason;
(c) any damage (including connected expenses), loss, debt, penalty
or payment borne or made by the Company or the Beneficiary,
which would not have been borne, made or incurred by them if
every representation contained in Clause 2 above had been true,
precise, complete and accurate or if there had been no ground
for claiming under paragraph (a) or (b) above.
(d) any amount of subsidy (including, but not limited to, those
described in Schedule 4) which the Company would have to repay
as a result of the change of control of the Company.
3.1 Calculation
No amounts payable in respect of Taxes shall entitle the Beneficiary
to indemnification hereunder if it corresponds to a mere change in the
time when such Tax should have been paid, provided that in such case
the Beneficiary shall be entitled to indemnification for any resulting
interest charges or penalties for late payment.
The amount of the loss is to be calculated without taking into account
any tax saving as a result of the deductibility of the loss involved
except where this saving actually becomes effective for by the
Company. A saving will only be treated as effective on the day on
which it would have reduced the amount of tax which should have been
paid by the Company.
If the tax saving becomes effective after compensation for the loss
has been paid, the Beneficiary shall reimburse the Warrantors the
amount of this tax saving as recorded over the two year period in
which the loss arose.
The amount of any indemnity paid by the Warrantors will be increased
by any tax liability actually borne by the Company, or as the case may
be, the Beneficiary as a result of the receipt of the indemnification
payment.
When calculating the amount of the loss relating to a specific claim,
there shall be deducted the amount of any reserve or provision in the
Accounts in respect of the event or matter having given rise to such
claim.
3.2 Threshold
The Beneficiary may not request payment under this Agreement unless
the total amount of claims made exceeds USD 30,000. If such a
threshold is reached, the Beneficiary shall be entitled to demand the
payment of all amounts due under this Agreement. This threshold shall
not apply to claims made under Clause 2.5.5 above (for the avoidance
of doubt, any claim under Clause 2.5.5 shall be taken into account for
the purpose of computing whether the threshold has been reached).
3.3 Ceiling
The aggregate amount of the sums payable by the Warrantors under this
Agreement shall not exceed USD 1,000,000.
4 Duration
In order validly to request the performance of this Agreement, any request
for payment under the terms of this Agreement shall be notified by the
Beneficiary to the Warrantors:
4.1 at the latest, 7 Business Days after the expiry of the relevant
statute of limitation for any event or matter relating to Tax;
4.2 no limitation period shall apply with respect to claims made under
Clause 2.5.5;
4.3 at the latest, on the date which is 30 days after the first
anniversary date of this Agreement for any other event or matter,
provided that such event or matter arose prior to such first
anniversary date.
5 Information - Parties
5.1 Any event which might give rise to a claim by the Beneficiary under
this Agreement shall be notified in writing to the Warrantors and
shall specify the basis, acts or event on which it is based,
indicating the amounts claimed in respect of the loss (if such amount
is known), and be submitted together with documents which enable the
existence of the loss to be established (hereafter referred to as a
"Notified Claim"). All Notified Claims submitted to the Warrantors
shall be subject to the following procedure.
5.2 The Beneficiary agrees to notify any Notified Claimwithin 10 Business
Days of the Beneficiary having actual knowledge of an event as
referred to in clause 5.1, provided, however, that failure to do so
shall not affect the Beneficiary's right to
indemnification hereunder except to the extent that the Warrantors is
proved to be actually prejudiced by the delay in such notification,
and then the Beneficiary's right to indemnification shall be reduced
only to the extent of such loss.
5.3 If the Warrantors contest the merits or the amount of a Notified Claim
under this Agreement, they shall, within 30 days following the date on
which the Notified Claim has been notified by the Beneficiary, notify
the Beneficiary in writing of the reasons for which the Warrantor
contests the claim (the "Contest Notice"). If no Contest Notice is
received within this time limit, the Warrantor shall be deemed to have
accepted the Notified Claim.
5.4 If the Warrantors have served a Contest Notice on the Beneficiary
within the time limit, the Warrantors and the Beneficiary shall meet
together between the fifth and the fifteenth Business Days following
the date of the Contest Notice, on one of the Business Day proposed by
the Warrantors to the Beneficiary in the Contest Notice.
In the absence of an agreement with the Beneficiary within 30 calendar
days following the date of this meeting or if the Warrantors do not
propose a date for the meeting as set out above or do not attend the
meeting, the Notified Claim shall be deemed to have been accepted,
unless the Warrantors or the Beneficiary have notified a request for
arbitration under the terms of this Agreement and within this 30 days
period. If the Beneficiary fails to attend such meeting, the meeting
shall be rescheduled for a date no later than 15 calendar days
following the proposed date unless such failure is unreasonable in
which case the Notified Claim shall be deemed to lapse.
5.5 Where one of the Warrantors, due to his position in relation to the
Company, or for any other reason, is or becomes aware of a fact or
event which may give rise to a Notified Claim under this Agreement, he
shall inform the Beneficiary without delay. For the avoidance of
doubt, the timing for notifying a Notified Claims referred to in
Clause 5.2 above shall not be applicable in such case.
5.6 In the event of a claim, audit notice, summons, or of any litigation
matter which has or which could give rise to a Notified Claim under
this Agreement, the Beneficiary shall allow the Warrantors to make
their observations on the conduct of the proceedings; the Beneficiary
will ensure that these observations are taken into account by the
Company in as far as such observations are reasonable and made in its
interest. Moreover, at the request of the Warrantors, the Beneficiary
shall from time to time inform the Warrantors of the progress of the
proceedings. No settlement agreement relating to a claim, audit
notice, summons and, more generally any litigation, capable of giving
rise or having given rise to a Notified Claim under this Agreement
shall be concluded without the prior agreement of
the Warrantors, provided however that such agreement cannot be
unreasonably withheld.
6 Payment of Claims
Any Notified Claim accepted or deemed to have been accepted by the
Warrantors on a certain date under the terms of Clause 5 above shall imply
that the amount so claimed is due and payable (liquide et exigible) from
that date. Where this is not the case, and without prejudice to the law, an
amount shall be deemed to be due and payable under this Agreement following
an agreement between the parties on the Notified Claim, or a settlement
agreement in accordance with article 2044 of the Civil Code being entered
into between the parties, or a judicial decision whether final or by way of
"execution provisoire" demanding payment by the Warrantors as a result of
the Notified Claim.
Any delay in payment (starting from the due date) by the Warrantors of sums
due under the present Agreement will result in the Warrantors having to pay
interest at the legal rate of interest (taux de l'interet legal) at the
relevant date plus 2 per cent.
Any payment under this Agreement may, at the Beneficiary's option, be
deducted from the amount of the Payment 2 (as defined in the Share Purchase
Agreement) or paid out of the assets in escrow (pursuant to Clause 4 of the
Share Purchase Agreement).
7 Agent
The Warrantors hereby irrevocably appoint Xx Xxxxxx Xxxxxxxx, who accepts
this appointment, as agent to give and receive all notices, to give all
consents, to exercise the rights and fulfil all obligations of the
Warrantors on their behalf under this Agreement and that any decision of
such agent shall bind the Warrantors. It is expressly agreed that the
expression "the Warrantors" shall be construed as meaning "the
representative of the Warrantors" for any notice to be given or received
and any communication under this Agreement.
In the event that Xx Xxxxxx Xxxxxxxx should for any reason become incapable
of fulfilling his duties as agent of the Warrantors under this Agreement
while this Agreement is still in force, the Warrantors or their successors
agree to appoint another agent with the same powers and responsibilities as
provided herein within 30 Business Days of such event and promptly give
written notice thereof to the Beneficiary.
8 Miscellaneous
8.1 Restructuring
The rights and undertakings of the parties to this Agreement shall in
no way be affected by any merger, demerger or transfer of business (in
full or in part), winding-up or liquidation or any restructuring of
the Beneficiary and/or of the Company.
8.2 Notices
Any notices or communications relating to this Agreement or any
disputes arising out of it shall be made or notified in writing and
delivered in person, by registered letter with notification of
receipt, or sent by facsimile (confirmed by a letter delivered in
person, or a registered letter with notification of receipt) to the
Beneficiary's registered office or to the Warrantors' residences (or
to any other address notified by registered letter with notification
of receipt by any one of the parties).
8.3 Successors and assignees
8.3.1 All rights and obligations of each party shall be binding upon
and inure to the benefit of their respective successors,
indivisibly (de facon indivisble) with the party concerned and
among themselves.
8.3.2 The Beneficiary may assign the benefit of its rights and
obligations under this Agreement to any person if such person
has acquired, alone or together with its Affiliates, all or
substantially all the share capital of the Company.
8.4 Governing Law
This Agreement is governed by and shall be construed in accordance
with French law.
8.5 Arbitration
All disputes arising out of or connected with this Agreement,
including a dispute as to the validity or existence of the agreement,
shall be resolved by arbitration in Brussels conducted in English by a
sole arbitrator of Belgian nationality pursuant to the rules of the
United Nations Commission or International Trade Law ("UNCITRAL"). The
appointing authority for the purposes of the UNCITRAL rules shall be
the International Chamber of Commerce ("ICC") acting in accordance
with the rules adopted by the ICC for that purpose.
The decision of the sole arbitrator will be final, the parties hereby
formally waiving their right to appeal the decision. The sole
arbitrator is authorised to carry out whatever investigation they deem
necessary. The sole arbitrator will decide as to how expenses, legal
fees and other costs arising out of the arbitration will be borne by
the parties.
Unless otherwise agreed by both parties, the arbitrators' decision
shall be made within 6 months of the date of appointment of the
arbitrator.
Signed in Paris
On 19 January 2001
In 3 originals
THE BENEFICIARY
TRANSWITCH III, Inc.
Represented by Xx Xxx Xxxx
/s/ Xxxxxx Xxxx
--------------------------
Name: Xxxxxx Xxxx
Title: Attorney-in-fact
THE WARRANTORS
/s/ Xxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxx Xxxxxxxx
Represented by: Xxxxxx Xxxxxxxx,
as Attorney-in-fact
/s/ Xxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxxxx Xxxxx
Represented by: Xxxxxx Xxxxxxxx,
as Attorney-in-fact
