WARRANTY AGREEMENT
THIS WARRANTY AGREEMENT is made on 7 October 1997.
BETWEEN:
(1) THE PROFIT RECOVERY GROUP INTERNATIONAL, INC, a Georgia corporation
("PRG"), Xxxxxxx XxXxxxxx, Xx, acting as Agent (mandataire) in the name
and on behalf of PRG France SA, a French corporation in the process of
formation ("AGENT") (which expression shall on formation of PRG France
SA mean PRG France SA), PRG France SA ("PRG FRANCE SHAREHOLDER"), PRG
Agent and PRG France SA being called together the "PURCHASER" which
expression includes each or any of them;
(2) XXXX XXXXXXXXX of 00, xxx Xxxxxxxxxxx, 00000 Xxxxx and XXXX XXXXXXXXX of
0, xxx Xxxxxxxx Xxxxxxx, 00000 Xxxxx (together the "PRINCIPALS").
RECITALS:
(A) PRG is in the business of auditing accounts payable, paid xxxx files,
promotional and demonstrator agreements, personal property, real estate,
sales and use tax and other taxes, common area maintenance charges,
telephone and other utilities, sales promotion, advertising and cosmetic
wage/commission agreements of its clients, to identify and document for
subsequent charge back or credit over-payments and/or under-deductions
and rendering management consulting services associated with such
activities.
(B) Xxxx Group (as defined below) is in the business of providing management
consulting services primarily on a success fee basis, involving research
and recovery of various French indirect taxes (e.g. fiscal taxes,
foncier taxes and VAT taxes) and social charges; providing general
expense reduction in various areas including building services and
surveillance; assisting its clients in obtaining grants or subsidies;
and operating buying clubs for small business.
(C) The Purchaser has today purchased for US $ 24,601,758 in cash and US $
858,827 in Stock of PRG all the shares of Financiere Xxxx SA ("FA") and
39.42 per cent of all the shares of Xxxx Intervention SA ("AI"), the
remaining shares of AI being owned by FA. Such purchases have been made
persuant to the various sale agreements made today between the Purchaser
and respectively (1) Xxxx Xxxxxxxxx and Xxxx Xxxxxxxxx, (2) Epargne
Capitalisation Intermediaire and Epargne Developpement, (3) Xxxxxx
Xxxxx, (4) the individuals who are employees of AI and (5) Banque
Internationale a Luxembourg. The Purchaser has also today agreed to
purchase from certain other employees of AI their 206 shares in AI to be
paid as to US $ 398,244 in cash and as to 13 900 in Stock of PRG. Copies
of all such agreements are attached hereto.
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IT IS THEREFORE AGREED AS FOLLOWS:
1. DEFINITIONS
1.1 The following words and expressions and abbreviations shall, unless the
context otherwise requires, have the following meanings in this
Agreement:
"ALL THE VENDORS" means all the vendors persuant to All the Share Sale
Agreements;
"ALL THE SHARE SALE AGREEMENTS" means all the share sale agreements
referred to in Recital (C) above;
"AI" means Xxxx Intervention SA registered at Evreux under number B 339
602 195;
"AI SHARES" means all the shares in the capital of AI as set out in
Annex 1;
"XXXX GROUP" or the "COMPANY" means FA, and the Subsidiaries, all of
them or each of them as the context admits;
"ACCOUNTS 1996" means the audited consolidated financial statements of
FA and Subsidiaries, comprising the consolidated balance sheet and
related consolidated statements of earnings, shareholders' equity and
cash flows, prepared in accordance with US GAAP, as of and for the year
ended December 31, 1996 attached hereto at Annex 3;
"ACCOUNTS 1995" means the audited consolidated financial statements of
FA and Subsidiaries, comprising the consolidated balance sheet and
related consolidated statements of earnings, shareholders' equity and
cash flows, prepared in accordance with US GAAP, as of and for the year
ended December 31, 1995 attached hereto at Annex 4;
"JUNE ACCOUNTS" means the audited consolidated financial statements of
FA and Subsidiaries, comprising the consolidated balance sheet and
related consolidated statements of earnings, shareholders' equity and
cash flows, prepared in accordance with US GAAP, as of and for the
six-month period ended June 30, 1997 attached hereto at Annex 5;
"CHANGE OF CONTROL" means the acquisition, directly or indirectly, by
any person or entity other than a current shareholder of PRG, of 35% or
more of the voting power of PRG. For the purposes of this paragraph,
"voting power" of PRG means the total number of votes which may be cast
by the holders of the total number of outstanding shares of stock of
any class or classes of PRG in any election of directors of PRG;
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"CLAIM" means any claim asserted by Purchaser against the Principals
pursuant to this Agreement and the date of any Claim shall be the first
date that either of the Principals is first notified in writing of such
Claim;
"CLAIM AMOUNT" means the amount of any Claim before reduction for any
applicable Deductible;
"CLAIMS FOR TAXES SUR LES SALAIRES ET ORGANIC" means the list of
specific claims filed by AI with the appropriate tax authorities on
behalf of AI's customers prior to the Completion Date as set out in
Annex 7 hereto;
"COMPANY" means FA and the Subsidiaries, all of them or each of them as
the context admits;
"COMPLETION" means the date hereof;
"COMPLETION DATE" means the date hereof;
"DEDUCTIBLE" means with respect to any Claim, in respect of which a
Deductible applies, US $ 400,000, (i) increased by the sum of (a) the
amount by which the cumulative amounts actually collected at the end of
a financial year with respect to the Receivables at Completion exceeds
the amount of the Net Receivables and (b) the amount by which any
specific reserve established by Xxxx Group for a particular litigation
as reflected in the June Accounts to the extent that such reserve
remained in place at Completion exceeds the liability incurred by Xxxx
Group as a result of reduction of such litigation reserve made in the
financial statements of Xxxx Group prepared under US GAAP as determined
by the Conseil de Surveillance of AI at the end of a financial year and
(ii) reduced (but not below zero) by the aggregate Deductibles for all
previous Claims. In no event shall a Deductible exceed the Claim to
which it relates;
"DISCLOSURES" means the matters set out in the Warranty Schedules
referred to below;
"DORMANT COMPANIES" means Almatel SARL, Xxxx Sud SARL and Cabinet
Brossard SARL;
"ENCUMBRANCE" means any mortgage, charge, pledge, lien, security
interest or other third party right or interest, or option or
restriction of any nature over or in respect of the relevant asset,
security or right;
"ESCROW AGENT" means Arnall Golden & Xxxxxxx, LLP;
"ESCROW STOCK" means the Stock pledged and deposited with the Escrow
Agent persuant to the Indemnity Escrow and Stock Pledge Agreement;
"FA" means Financiere Xxxx SA registered at Evreux under number B 393
066 055;
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"FA SHARES" means all the shares in the capital of FA as set out in
Annex 2;
"FINANCIAL STATEMENTS" means the Accounts 1995 and the Accounts 1996;
"FRENCH GAAP" means French Generally Accepted Accounting Principles;
"INDEMNITY ESCROW AND STOCK PLEDGE AGREEMENT" means an agreement to be
entered into on Completion between the Purchaser, the Escrow Agent and
the Principals and Banque Internationale a Luxembourg in the form of
Annex 8 hereto;
"NACC SA" means Negociation Achat Creances Contentieuses SA;
"NET CLAIM AMOUNT" means the Claim Amount, less any applicable
Deductible;
"NET RECEIVABLES" means the Receivables at Completion less any
allowance for doubtful receivables at Completion (excluding any
allowance for doubtful receivables for claims relating to "Taxe sur les
salaires et organic");
"OPQCM" means Office Professionnel de Qualification des Conseils en
Management of 0, xxx Xxxxx Xxxxxxx, XX 000, 00000 Xxxxxxxx Billancourt;
"PRG GROUP" means PRG and its subsidiaries as the same may exist from
time to time;
"THE PRINCIPALS" means Xx Xxxx Xxxxxxxxx of 00, xxx Xxxxxxxxxxx, 00000
Xxxxx and Mr. Xxxx Xxxxxxxxx of 0, xxx Xxxxxxxx Xxxxxxx, 00000 Xxxxx;
"PROPERTIES" means the properties described in the Warranty Agreement,
or any part or parts thereof and
"PROPERTY" means any of the Properties;
"RECEIVABLES AT COMPLETION" means the gross trade and other receivables
(excluding receivables for claims relating to "Taxe sur les salaires et
organic", of FA, AI and the Subsidiaries as at the Completion Date as
attached hereto at Annex 9;
"REORGANISATION" means the reorganisation of the Xxxx Group to be
effected by the Vendors and the Company and the Subsidiaries, described
in Annex 10 hereof;
"REORGANISATION POST COMPLETION" means the actions to be taken after
Completion necessary to complete the Reorganisation including
completion of the Reorganisation referred to in Annex 10 hereof;
"STOCK" means shares of the common stock of PRG of no par value per
share to be held persuant to the Indemnity Escrow and Stock Pledge
Agreement;
"SUBSIDIARY" or "SUBSIDIARIES" means the subsidiaries of FA, details of
which are set out in schedule 3, all of them or each of them as the
context admits being AI, STEP SA, Club Affaires SA, Meridian Club
France SARL, B & F & Associes SARL;
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"UNDERLYING ACCOUNTS" means the Financial Statements excluding any
adjustments necessary to convert the Financial Statements from French
GAAP to US GAAP which US GAAP adjustments are attached thereto attached
hereto at Annex 6.
2. REPRESENTATIONS AND WARRANTIES
The Puchaser has only agreed to purchase the FA Shares and the AI
Shares sold or to be sold persuant to All the Share Sale Agreements on
the basis of the undertakings representations and warranties contained
in this Warranty Agreement (the "WARRANTIES") by the Principals, and
the entering into of the Indemnity Escrow and Stock Pledge Agreement.
The Principals therefore represent and warrant that the Warranties
(together with the Disclosures) are true and accurate at the date
hereof.
Where Warranties are qualified by the words "To the best of the
Principals knowledge" or any other similar expression, this
qualification will be valid against the Purchaser from such time as the
Principals are able to show that they checked reasonably the accuracy
of the representations and warranties so qualified.
2.1 Any information supplied by or on behalf of the Company to the
Principals or their agents or accountants, lawyers or other advisers in
connection with the Warranties, the Disclosures or otherwise in
relation to the business and affairs of the Company shall not
constitute a representation or warranty or guarantee to the Principals
as to the accuracy thereof by the Company and the Principals hereby
waive any and all claims which they might otherwise have against the
Company or any of their respective agents or employees in respect
thereof.
2.2 Each of the Warranties shall be construed as an independent and
separate representation, warranty, covenant or undertaking (as the case
may be) and (save as expressly provided to the contrary) shall not be
limited by the terms of any of the other Warranties or by any other
term of this Warranty Agreement.
2.3 No information relating to the company of which the purchaser has
knowledge (actual or constructive) other than that contained in or
referred to in this warranty agreement and/or included in the
disclosures and no investigation by or on behalf of the purchaser shall
prejudice any claim by the purchaser under the warranties or operate to
reduce any amount recoverable hereunder.
The principals shall give to the purchaser and its representatives (so
long as either one of them is in a managerial position with the xxxx
group enabling them to do so) after completion all such information and
documentation relating to the company as the purchaser shall reasonably
require to enable it to satisfy itself as to the accuracy and
observance of the warranties.
Where in the warranties, the word "material" qualifies any event, this
qualification will mean that such event would have a significant
adverse effect on the financial position the assets, or business
(patrimoine) the functioning, the structure or prospects of the xxxx
group.
On each occasion on which any of the warranties contains a
qualification or exclusion, such qualification and exclusion is set out
in a warranty schedule to this warranty agreement with the same
reference number as the representations and warranties concerned. Only
those facts or events which are expressly referred to in this warranty
agreement or in the warranty schedules hereto shall be admitted as
limiting the obligations of the principals under this warranty
agreement and then only to the extent indicated.
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3. WARRANTIES BY THE PRINCIPALS
3.1 The principals hereby represent warrant covenant and undertake to the
purchaser as set out in this clause 3.
3.2 AUTHORITY AND POWER
All the vendors have all the powers, rights, authorities and the
capacity required to transfer the FA shares and the AI shares to the
purchaser and in particular, to initial, execute and perform all the
share sale agreements as well as to carry out all other acts relating
thereto or envisaged therein, which constitute firm and validly binding
obligations between the parties thereto.
None of all the vendors is the subject of any bankruptcy or any
proceedings instituted within the context of the prevention or
treatment of business difficulties or a decision to wind-up, and there
is no reason suggesting that any of all the vendors will be the subject
of such proceedings or such a decision. None of all the vendors is
within a doubtful period (periode suspecte) in the sense of the law
relating to collective procedure (procedure collective).
3.3 SALE OF SHARES
The FA Shares represent 100% of the share capital and voting rights in
FA and the number of FA Shares owned by each owner of FA Shares are set
out in Annex 3.3 (a). The AI Shares represent 100% of the share capital
and voting rights in AI and the beneficial and legal owners of the AI
Shares and the number of AI Shares owned by each such owner are set out
in Annex 3.3 (b). All the Vendors being the owners of the FA Shares and
the owners of the AI Shares and have full rights of disposal and
enjoyment and can sell such shares to Purchaser pursuant to All Share
Sale Agreements without any restriction.
The various operations necessary for the successful completion of the
sale of the FA Shares and the AI Shares by All the Sale Agreements have
been carried out in accordance with the regulations in force and have
validly transferred title to the FA Shares and the AI Shares to the
Purchaser at Completion.
The transfer of title to the FA Shares and the AI Shares to the
Purchaser persuant to All the Sale Agreements and does not breach and
transfer of titles to the FA Shares and the AI Shares and will not
breach, any of FA or AI's or All the Vendors contractual or other
obligations and is not contrary to any laws or regulations applicable
to FA or AI or All the Vendors
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3.4 CONSTITUTION AND BUSINESS
3.4.1 The company has been duly incorporated in accordance with the laws and
regulations in force at the date of incorporation and continues to
exist legitimately. Its statuts and the functioning of the corporate
bodies within the company are in accordance with the laws and
regulations in force.
The extraits k-bis (french company searches) and the statuts of the
company are attached at Warranty Schedule 3.4.1 And within 7 days will
be accurate, complete and fully up to date.
3.4.2 The share capital of the company is fully paid up except for the share
capital of step sa as indicated in Warranty Schedule 3.4.2.
3.4.3 The list of directors and statutory auditors of the company is set out
in Warranty Schedule 3.4.1 And within 7 days will be accurate and fully
up to date.
3.4.4 All decisions taken and undertakings given by the corporate bodies
within the company and/or its directors and managers were validly
taken, duly authorised or ratified by the competent corporate bodies in
accordance with law and regulations and with the statuts of the company
and, where necessary, validly recorded in the company registers, in
particular any agreements referred to in article 101 and following of
the law of 24 july 1966 were duly authorised;
3.4.5 THe minute books and the registers and records of attendance of the
company's corporate bodies comply with the regulations in force and all
the signatures and initials relating to the decisions of the company's
corporate bodies have been placed thereon. These registers are up to
date and faithfully reflect the operations referred to therein.
3.4.6 All of the necessary formalities of publicity arising from the
decisions taken by the company's corporate bodies have been observed,
by way of advertisements placed in the legal press and at the register
of commerce in accordance with the applicable laws and regulations.
3.4.7 All of the accounting books, documents, registers and files required by
the applicable regulations have been kept by the company, and are in
its possession, and contain information which is accurate, up to date
and has been established in accordance with applicable laws and
regulations.
All agreements and other documents proving title to the company's
assets and the originals of all the contracts in force entered into by
the company which should be in its possession are actually in its
possession.
3.4.8 The businesses of the company do not require the obtaining of any
permits, consents or authorisations other than in the case of AI
membership of OPQCM. AI is a member in goodstanding of opqcm..
Morever, the principals warrant represent and undertake to the
purchaser that at the date hereof the principal activity of AI is the
lawful business of management consultancy in the field of finance and
management ("Finance et Gestion"). In particular the principal activity
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of AI is not that of giving legal advice or consultations ("Des
Consultations Juridiques") or drafting or issuing private acts ("actes
sous seing prive") and in any event any activities of AI which could be
considered as those of giving legal advice or consultations relate
directly to such principal activity and any activities of AI which
could consist of drafting or issuing private acts would constitute a
necessary accessory of such principal activity and as a member of opqcm
AI lawfully carries on its activities within the scope of the law
n(degree) 71 113089, 31 december 1971 as modified by the law n(degree)
90 12599, 31 december 1990.
In the context of the debate about giving legal advice or consultations
or drafting or issuing private acts and of the conflict which has been
going on in france for several years between lawyers and the other
professions who give legal advice or consultations or draft private
acts, several disputes have taken place between lawyers and audit or
accounting firms or management consultancy firms, of the kind similar
to ai, and the press have widely reported some of these disputes.
The purchaser acknowledges that the principals have advised them that
AI has received since 1993 claims or inquires coming from lawyers or
professional organisations of lawyers and in particular, from the
"ordres des avocats" of paris and of hauts-de seine, from the "institut
des avocats et conseils specialises en droit fiscal" and from
fidal-kpmg.
The principals warrant, represent and undertake to the purchaser (i)
That AI answered these claims or inquiries by giving all appropriate
explanations and justifications and that as at the date hereof they
have never given rise to any legal procedure or action and (ii) that
all material correspondence in respect of such claims and inquiries is
contained in warranty schedule 3.4.8 And (iii) these claims and
inquiries are the only claims or inquiries of material significance,
and (iv) except as disclosed in warranty schedule 3.4.8 There have been
no claims or inquiries of any nature since 1 January 1997.
3.4.9 The company has not made and is not making any call for public
investment (xxxxx public a l'epargne).
3.4.10 No resolution to dissolve or liquidate the company has been taken by
its shareholders.
No demand or declaration has been made with a view to the legal redress
(redressement judiciaire) or liquidation of the company and it is not
and is not likely to enter into a state of ceasing to make payments or
be the subject of any collective procedure (procedure collective) or of
any warning procedure (procedure d'alerte) or other similar procedure.
No legal administrator has been appointed to manage all or any part of
the assets or business (fonds de commerce) of the company.
3.5 REORGANISATION
The vendors have completed or initiated the reorganisation of the xxxx
group as follows:
(i) the shares of the subsidiaries other than ai, not previously
owned by ai, have been transferred to AI on the terms and
conditions set out in warranty schedule 3.5. Ai is now
therefore the legal owner of 100% of the share capital of the
subsidiaries;
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(ii) any special or priority rights attaching to any shares in ai
have been removed with no cost including tax cost to ai;
(iii) the annual shareholders meeting of xxxx held on 28 august 1997
has approved the principle of the absorption of FA and step SA
by AI, by way of a merger. AI's works council has been
consulted on the merger and has given a positive opinion
thereon;
(iv) all of the shares of nacc sa have been transferred by FA to Mr
Marc Eisenbergfor their net value in the books of FA which has
been paid by Xx Xxxx Xxxxxxxxx to FA and any guarantees and
security given by the company in respect of NACC SA has been
released at no cost to the company.
The principals represent that all of the costs for the company arising
out of resulting from or relating directly to the reorganisation
whether incurred before or after completion, including the mergers
described in (iii) above, including the costs of statutory and special
auditors (commissaires a la fusion et aux apports), the registration
and publication costs, transfer taxes (droits de mutation) lawyers fees
and tax cost shall not exceed $ 70,000 and that the principals will be
Responsible for any such costs in excess of US $ 70,000.
3.6 SHARES
3.6.1 Each of the shares in the company gives the same rights over the
profits of the company and the same voting rights at general meetings
of the company as all the other shares.
3.6.2 The shares in the company comprise one class only. No preference shares
exist nor more generally do any shares granting special rights or
subject to special restrictions exist, whether such special rights or
restrictions be in respect of the shares themselves, their holders, the
duration of holding of the shares or any other matter.
3.6.3 The shares of the company have been validly issued, fully paid-up
(except for the share capital of step sa), are freely transferable and
negotiable and are free from any encumbrances and are not the subject
of any dispute.
In particular, except as specified in warranty schedule 3.4.1, The
statuts of the company contain no clauses of consent, pre-emption, or
any other provision of such a nature as to restrict in any manner the
freely transferable and negotiable nature of the shares of the company
and any such clauses or provisions have been lawfully waived or
surrendered to enable the sale of the FA shares and the AI shares to
the purchaser pursuant to the sale agreement and the other sale
agreements to lawfully take place.
3.6.4 All of the shares or other corporate rights that the company holds in
any legal person or entity are set out in warranty schedule 3.6.4 Along
with the form and nationality of such legal person or entity. Such
shares and corporate rights are free from any encumbrances.
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The company does not possess or hold, directly or indirectly any
securities or other corporate rights, other than the shareholdings in
the dormant companies, any shareholding in another company, legal
person or company de jure or de facto (whatsoever it may be), or other
entity with or without legal personality (including societes civiles
immobilieres, economic interest groups (groupements d'interet
economique) or societes en participation), and nor is the company party
to any agreement or shareholders' agreement, including "joint
ventures", societe en participation, or agreements for the holding of
shares in the place of the original owner (convention de croupier). The
company does not hold the position of director, de jure or de facto, in
any company or entity having legal personality or not, and will not be
pursued for any liability jointly and severally and/or indefinitely.
3.6.5 The company has not issued any shares or corporate rights other than
that set out in Warranty Schedule 3.6.4 And the company has no
obligation, in particular legal obligations and obligations resulting
from a decision of the company to issue suchshares or corporate rights,
and no authorisation has been given or delegation made to the company's
corporate bodies to go ahead with any modifications, even if deferred,
to the share capital of the company or to issue any shares or corporate
rights whatsoever, and no restriction has been Placed on voting rights
attaching to the company's shares or corporate rights and nor is the
placing of any such restriction in progress.
3.6.6 The company has not granted any option conferring a right to purchase,
acquire, sell, exchange or subscribe for securities or loan stock and
more generally, there is no shareholders' agreement or other agreement
existing, as distinct from the statuts (engagement extra-statutaire) in
place which affects the company and or the company's shares.
3.6.7 The up to date list of the company's shareholders, which specifies the
number of shares held by each shareholder, is set out in warranty
schedule 3.6.4. The dormant companies are dormant and have no liability
whatsoever and their liquidation will not cause any cost (including tax
cost) whatsoever exceeding in total frf 50,000 (and the principals will
be responsible for any costs in excess of frf 50,000) and apart from
those companies mentioned in the financial statements and in warranty
schedule 3.6.4 There are no other companies or entities of whatever
description in the xxxx group.
3.6.8 The company's shareholder accounts and the register of share movements
have been kept up to date and are in accordance with the regulations in
force
3.7 EFFECT OF THE SALE OF THE FA SHARES AND THE AI SHARES
Except as disclosed in Warranty Schedule 3.7 the sale of the FA Shares
and the AI Shares to the Purchaser persuant to: All the Sale Agreements
will not, to the best of the Principals knowledge, have any effect upon
the legal position of the Company nor its rights and obligations in
respect of third parties and in particular will not give rise to, to
the best of the Principals knowledge inter alia:
(i) any breach of a legal, regulatory or statutory provision, or
of any agreement, obligation or decision, whether legal or
otherwise;
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(ii) the challenging of any grant, premium, exemption from
liability, tax relief, interest rebate loan or other benefit;
(iii) any early termination of or variation to contracts, in
particular contracts with clients or customers of the Company,
leases, equipment and building financing agreements (contrats
credit-bail), and supply agreements;
(iv) the early repayment of any loan or financing granted to the
Company;
(v) any obligation to pay a bonus or compensation to any of the
employees or directors or managers of the Company;
(vi) any preferential tax or employment regime, whether or not such
an action results from any consent;
(vii) liability for taxes, fees or other charges other than the
registration fees of 1% of value due, up to a limit of twenty
thousand French francs (FRF 20,000) per sale by reason of the
sale of the Shares and the AI Shares;
(viii) any fee whatsoever for the removal of a guarantee, security,
comfort letter or any other document of a similar nature
issued as security or as support for the Company's
commitments;
(ix) the registration or creation of any pledge or security
whatsoever over the assets of the Company; and
(x) any effect or restraint or restriction on the ability of the
Company to carry on its businesses and to provide its
services.
3.8 FINANCIAL STATEMENTS
3.8.1 The Underlying Accounts have been drawn up in accordance with French
GAAP in a manner coherent and consistent with previous financial years.
3.8.2 The Underlying Accounts and the June Accounts are consistent and
genuine and give a faithful and genuine picture of the financial,
contractual and commercial situation of the Company, its businesses
(assets and liabilities) and the consolidated results of operations of
FA and Subsidiaries at their respective dates.
Except as set out in Warranty Schedule 3.15, the Underlying Accounts
and the June Accounts show the whole of the liabilities and obligations
of FA and its Subsidiaries, owing or due in the future, as at their
respective dates.
3.8.3 No writing down period in respect of any part of the assets in the
Underlying Accounts or the June Accounts is longer that the expected
life span of the assets in question. No depreciation carried out by the
Company is greater that the amount permitted by the tax authorities in
respect of the calculation of corporation tax.
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All potential risks and charges of any nature burdening or likely to
burden the Company have been provided for in the Underlying Accounts
and the June Accounts in accordance with the laws and regulations and
French GAAP, which in the case of French GAAP have been applied
consistently in previous years.
All the transactions carried out by the Company have been properly
recorded in its accounting books and registers and are reflected in the
Underlying Accounts and the June Accounts at their respective dates.
3.8.4 Ownership of goods and assets
Except as specified in Warranty Schedule 3.8.4, the Company holds the
valid and incontestable right of ownership over all of the goods and
assets which it uses, whether movable or immovable, tangible or
intangible, whether or not included in the Financial Statements and
those acquired subsequent to the respective dates of the Financial
Statements.
Except as specified in Warranty Schedule 3.8.4, the Company holds the
title to all of the goods and assets and none of such title nor any of
the goods and assets are subject to any Encumbrances or preferential
rights nor has any contract or undertaking to agree to any preferential
rights been entered into.
Except as specified in Warranty Schedule 3.8.4, none of the goods and
assets used or leased by the Company is the property of the Principals
or affiliates of the Principals, or as the case may be, members of
their families.
The goods and assets which have become obsolete by reason of
technological advances, or any other reason, have been provided for in
the accounts at their real value.
The Principals and the Company have not been informed of any claim
allowing anybody to take an Encumbrance or preferential right over the
goods and assets of the Company.
3.8.5 Except as specified in Warranty Schedule 3.8.4 (b) and in respect of
salaries fees and commissions in respect of services rendered to the
Company,the Company has no indebtedness or obligation whatsoever to any
of All the Vendors.
3.9 INTELLECTUAL PROPERTY
3.9.1 The company is the legitimate owner of its company name, the use of
which to the best of the principals knowledge is not open to any claim
or objection of any sort.
For the purposes of this article 3.9, the intellectual and industrial
property rights means inventions, patents and patent applications,
trademarks, whatever the stage of their registration, trading names,
company names, designs and forms whether published or not, moulds,
copyright, software, know-how and technology or other intellectual or
industrial property rights (the "intellectual property rights").
3.9.2 The Company owns or uses the Intellectual Property Rights in accordance
with valid licences, the software and know-how and computer technology
which it uses in its business.
- 12 -
3.9.3 The Company does not need any Intellectual Property Rights other than
those which are set out in Warranty Schedule 3.9.3 in order to carry
out their business.
3.9.4 To the best of the Principals knowledge, the Company has not breached,
in particular by way of infringement, any third party Intellectual
Property Rights nor is of the Company responsible for any act of unfair
competition in respect of any such rights and no claim, proceedings or
action has been brought or is about to be brought the Company in
relation to any of the Intellectual Property Rights set out at 3.9.3
above.
3.10 RECEIVABLE DEBTS
Except as stated in the financial statements and the june accounts, the
commercial and other receivable debts of the company contained in the
financial statements and the june accounts, together with those
contracted after the date of the financial statements and the june
accounts, are valid and recoverable and have been received or, as
appropriate, will be received in full for the nominal amount due,
within the usual period for payment from the date of billing granted by
the company.
Attached as warranty schedule 3.10 Is a true, correct and complete
listing of the net receivables at completion, such net receivables at
completion are valid and recoverable and will be received in full for
the nominal amount due, within the usual period for payment from the
date of billing granted by the company.
The company has not entered into any factoring agreement in respect of
its receivable debts or otherwise.
The purchaser acknowledges that the principals have advised the
purchaser that it is the company's policy and the company's obligation
(as disclosed in Warranty Schedule 3.15) To reimburse fees received
from customers if the savings made by such customers following the
company's involvement is subsequently challenged by any relevant
authority and the client is required to refund or repay the savings.
3.11 COMMERCIAL LEASES - PROPERTIES
3.11.1 Warranty Schedule 3.11.1 contains copies of contracts in respect of all
buildings occupied by the company by virtue of (i) commercial leases
governed by the law of 30th september 1953 (the "Leases"), (ii)
construction leases governed by the law of 31 may 1978 (the
"Construction Leases"), (iii) finance lease contracts (contrats de
credit-bail) governed by the law of 2nd july 1966 (the "finance
leases"), (iv) business management contracts (contrats de location
gerance) and (v) all other agreements for occupation, of whatever
nature (together the "Property Contracts").
3.11.2 To the best of the Principals knowledge, the Company materially
complies with the provisions of the Property Contract, the Property
Contracts are valid andare not likely to be cancelled or annulled
except in accordance with their terms. The amount of rent in respect of
each of the Property Contracts is set out in Warranty Schedule 3.11.2.
- 13 -
3.11.3 As at the date of this Agreement, the Company has not been informed of
any increase in the rent or charges due in respect of the Leases or the
rates of interest relating to the Finance Leases.
3.11.4 The Company has given proper and lawful notice to leave and has no
liability in respect of any building or premises which it leased in the
past but does not now use or occupy.
3.11.5 Except as specified in Warranty Schedule 3.11.5, the Company has not
granted any sub-lease or right of residency, in whole or in part, or
any other right to any third party whatsoever, of the premises which
are the subject of the Property Contracts.
3.11.6 The Company owns no immovable property or real estate and has no
commitments in respect of any such.
3.11.7 To the best of the Principals knowledge, all the properties leased by
the Company (the "PROPERTIES") are occupied in accordance with the use
for which they are intended. To the best of the Principals knowledge,
their construction, occupation and use by the Company is all in
accordance with law and regulations, including without limitation, in
the areas of planning, health and safety and the environment.
The Properties are not and will not be the subject of any planning or
construction order or any other order which might reduce their value.
No notice is currently in force against the Company from any competent
authority which gives notice of a breach of any provision of the
Town-Planning Code (Code d'Urbanisme) or the Construction and Housing
Code (Code de la Construction et de l'Habitation) or any other
legislation or regulation relating to the Property or the use thereof,
including any local and municipal regulations or any orders.
None of the Properties is situated in an insanitary housing block, or
is the subject of a hazard order or of any measure forbidding
occupation or ordering the eviction of its occupiers. None of the
Properties is situated in a ZAD (zone d'amenagement differe), ZUP (zone
a urbaniser en priorite), ZAC (zone d'amenagement concerte) or other
zone of land, whatever its legal nature, which is governed by a
specific legal regime which derogates from the common law.
All of the Properties are in a good state of repair, in a stable
condition and fit for the purposes for which they are used.
3.12 MOVABLE PROPERTY NOT BELONGING TO THE COMPANIES
Subject to the contents of warranty schedule 3.8.4 (B), the company
does not rent any movable property with a value greater than frf
100.000, In particular, within the context of finance lease contracts
(contrats de credit-bail) or contracts for long-term occupation, and
the company has not entered into any other contracts of occupation
granting an option to acquire the ownership of the movable property
leased to the company at the end of a certain
time period.
None of the goods and assets referred to in warranty schedule 3.8.4 (B)
has been repossessed by its owner and the company is not in breach of
any contractual, statutory or other provision which would allow the
owner of the goods and assets referred to above to
repossess such goods and assets.
- 14 -
3.13 CONTRACTS
3.13.1 The company is validly bound to all of the contracts and undertakings
to which it is party or of which it has the benefit (the "Contracts").
As at the date hereof the principals are not aware that the company has
breached any of its contractual obligations.
Warranty Schedule 3.13.1 contains copies of the standard business
service forms used by the Company.
3.13.2 To the best of the Principals knowledge, there is no event likely to
(i) lead to the nullification or early termination of the Contracts, or
(ii) permit a third party to such contract to demand early payment, or
such third party make the Company liable in respect of the Contracts.
3.13.3 In particular, and subject to what is stated in Warranty Schedule 3.8.4
(b) and Warranty Schedule 3.13.3, the Company has not entered into nor
is bound to enter into any contract or agreement:
- which binds them in an unusual or abnormal manner, having
regard to their normal course of business purpose;
- which could make it indefinitely or severally liable;
- with the Principals or the Affiliates of the Principals or
with the family members of the Principals;
- conferring exclusivity; or
- under the terms of which the Company is obliged not to carry
out certain activities or not to compete.
3.14 BANK ACCOUNTS AND SIGNATURES
The operating conditions of the bank accounts opened in the name of the
Company and a list of the persons authorised to use them is attached at
Warranty Schedule 3.14.
A list of the persons with powers of attorney and holders or users of
credit cards with amounts authorised, for each member of the Xxxx Group
is also attached at Warranty Schedule 3.14 (b).
3.15 OFF-BALANCE SHEET COMMITMENTS
With the exception of those stated in the financial statements or the
june accounts or Warranty Schedule 3.15 (Bank guarantees), or as
disclosed in Warranty 3.18, The company
has no off-balance sheet commitments.
In particular subject to warranty schedule 3.15, The company has not
granted any surety, signature backing a xxxx (aval) or guarantee or
provided any letters of comfort or patronage for the carrying out of
any commitments of any third parties (including those of shareholders,
directors, managers or employees of the company).
- 15 -
3.16 BORROWINGS
Except as set out in warranty schedule 3.16, The company has no
borrowings and subject to the provisions of warranty schedule 3.7, The
company has not breached any of its obligations in respect of its
borrowings and there is no circumstance which could lead to a failure
to carry out any of its obligations in respect of such borrowings.
3.17 LITIGATION - DISPUTES
The company is not involved in and to the best of the principals
knowledge is not threatened with involvement in any legal, penal,
administrative or arbitration proceedings, or any investigation by any
professional body either as the person bringing or defending the
complaint, including counter-claims, subject to what is set out in
warranty schedule 3.17.
Moreover, no fact exists and no event has occurred likely to give rise
to any kind of proceedings or investigation whatsoever (civil, penal,
administrative or arbitration) involving the company as claimant or
defendant, the financial risk of which is greater than a figure of
100.000 Francs or involving directors, managers, employees or former
directors or managers or employees and for which the company would be
civilly or penally liable, or against or involving any person whose
acts would be likely to involve the company in liability.
Subject to the contents of warranty schedule 3.17 And normal client
debt recovery in the course of business, the company has not itself
commenced any proceedings of any nature whatsoever against an
administrative body or a third party and no fact exists and no event
has occurred which could serve as the basis for such proceedings.
3.18 CUSTOMERS - SUPPLIERS
No contract has been entered into by the company on the one part, on
its suppliers, customers or clients on the other part, other than in
the normal course of business.
Except for the contracts disclosed in warranty schedule 3.7 Hereto, no
agreement exists which could result in any restriction whatsoever in
the company business and no agreement exists which could result in the
company being obliged in the future to accept conditions
which are less favourable than those currently in force.
The company has not received any information according to which any
customer, client or supplier who contributes in a significant manner
either to their profits or to their operational needs, has the
intention of substantially ceasing or reducing operations with the
company, either immediately or to the best of the principals knowledge
in the future.
The company has no distributors, agents or franchisees nor does it acts
as such.
- 16 -
3.19 EMPLOYEES AND SALARIES
3.19.1 Warranty Schedule 3.19.1 (A) contains copies of contracts of all of the
employees or directors or managers of the company, whose annual gross
salary is paid in one or more parts and in whatever form this may be
(by way of salary, benefits, fees (except mandators legal benefit) or
other remuneration for services supplied) exceeding 600,000 french
francs for each beneficiary. This list contains the position and length
of service for each of the employees, directors or managers and full
details of their remuneration or benefits of whatever nature. Warranty
Schedule 3.19.1 (B) includes french tax "das 2" forms of the company
filed with the french tax authorities for years 1995 and 1996 all of
which are true and accurate in every respect.
3.19.2 All salaries, commissions, other direct and indirect remuneration
(including in particular supplementary terms) and benefits of whatever
nature except for retirement bonus indemnities (indemnite de demande de
retraite) and reimbursements of charges payable in cash and in kind due
to the employees, directors or managers of the company of such
contracts have been duly and fully paid or provided for, and are
tax-deductible and any retirement bonus indemnities will be fully
tax-deductible.
Except as disclosed in Warranty Schedule 3.19.1 (A), no sum of any
nature is due to any current or former employees or directors or
managers of the company other than remuneration due but not yet
payable, reimbursement of professional fees and debt or as recorded in
the financial statements. No undertaking to employ a person not
previously employed by the company has been given by the company.
3.19.3 None of the senior employees, directors or managers has retired or
voluntary terminated or been dismissed from his functions in the
company in the last two years and nor has any such executive made known
his intention of resigning.
The company has not granted any loans other than advances on
remuneration recorded in the financial statements to the employees or
the directors or managers.
3.19.4 There are no claims or actions brought against the company on behalf of
any employees, directors or managers, trade unions or employees'
representative bodies.
There is no employee unrest or strike action.
The company voluntarily applies to its employees the provisions of the
collective bargaining agreement of syntecis.
3.19.5 Except in respect of consideration to be paid to them by the purchaser
under the sale agreement or in respect of the remuneration arrangement
contemplated for the principals in the sale agreement, no employee or
director or manager will gain any benefits by reason of the completion
of the sale of the shares or the AI shares.
3.20 PENSIONS
All contributions due and payable by the Company in respect of pensions
(whether legal or contractual) and miscellaneous social benefits (such
as shareholdings and profit-sharing) and all future undertakings given
by the Company in this respect have been duly paid or provided for. and
are fully set out and described in Warranty Schedule 3.20, or are the
minimum required by the law in France.
- 17 -
3.21 COMMERCIAL AGENTS
The Company has not ever had and has no Commercial Agents.
3.22 SOCIAL SECURITY AND EMPLOYMENT REGULATION
3.22.1 The company has complied with all legal and regulatory requirements
relating to employment and social security law, including, without
limitation, in the areas of the establishment and functioning of
employee representative or trade union bodies and in the area of health
and safety at work.
The company has filed all the notifications required of it in the form
and within such a period as is in required under the laws and
regulations in force, and all the information contained in such
notifications as well as all other information provided by the company
was full and accurate.
3.22.2 The company has respected the instructions given by the competent
authorities regarding employment law, social security law and health
and safety regulations, and has obtained all necessary consents.
3.22.3 The company has paid or provided for all its contributions in respect
of the various social bodies, for contingency funds (prevoyance),
welfare (including but not limited to the basic, supplementary and
further supplementary contingency funds (prevoyance) and pension
schemes) and these contributions have been made by them in the form and
within such a period as is required under the laws and regulations in
force.
3.22.4 Except as disclosed in warranty schedule 3.22.4, There are no
negotiations in progress, either with the employees or with the social
bodies, with a view to changing the employment terms and social costs
currently borne.
3.22.5 The company has informed and consulted the employee representative
bodies of AI in accordance with the laws and regulations in force,
regarding the sale of the FA shares and the AI shares to the purchaser.
3.22.6 Except as disclosed in Warranty Schedule 3.22.6, The company has not
since 1995 been subject to investigation, supervision or redress
(redressement) by any social authority.
3.23 TAX REGULATION
3.23.1 Except as disclosed in Warranty Schedule 3.23.1, The company has
regularly completed in a complete and exact manner and filed in the
form and within the periods required all tax, parafiscal and customs
forms required by the laws and the regulations in force.
3.23.2 The company is up to date, up to the date hereof, with the payment, or
has provided in the financial statements for all taxes due or to become
due for all periods to the date hereof. Taxes means in this warranty
agreement all payment of whatever form of a nature or effect which is
fiscal, parafiscal or customs duty including without this list being
exhaustive, taxe, impot, droit, contribution, cotisation, charge,
prelevement including all precompte, retenue or prelevement a la
source. Taxes includes all demand or redressment for tax either in
principal or in interest as well as related increase or penalty.
- 18 -
3.23.3 Except as provided in warranty schedule 3.23.1, The company is not now
and has not previously been the subject of any enquiry or control by
the tax administration and has not received any notification or demand
for information or contestation on the part of the tax administration.
No control nor enquiry of such a nature is envisaged.
3.23.4 No engagement sanctioned by restitution or otherwise has been
contracted by the company in any manner, fiscally "social" or otherwise
by virtue of or on the occasion of the receipt of any grants, subsidies
or any particular regimes. The company has respected all conditions of
such grants or subsidies to ensure that they have a final character.
3.23.5 The company will not lose any right or tax advantage by reason of sale
of the FA shares or the AI shares (including in particular all
depreciation deemed to be deferred and ordinary loss appearing in the
financial statements).
3.23.6 The company has complied with its obligations relating to the periods
and the form in which it must retain records release to tax
authorities.
3.23.7 The company has all the necessary documents, complete and exact in
order to justify the existence and the amount and the good use of all
deficits, deemed deferred depreciation, tax credit, avoir fiscal or
debt on the state (including in particular carry back debts) and
generally all tax advantages which it has used or obtained or which it
could on fulfilment of such condition, use or obtain reimbursement for.
3.23.8 The company has not entered into any form of credit-bail operation
which has not complied with all fiscal formalities applicable any the
payment of all taxes due.
3.24 ENVIRONMENTAL MATTERS
In relation to the protection and preservation of the environment, the
company and all its representatives, agents, directors, managers and
employees have at all times complied with all applicable laws,
regulations, codes of custom and practice and any recommendations made
by the competent authorities (together the "Environmental Laws").
The activities of the Company and the installations that it uses are
not and have not in the past been the cause of any pollution, and nor
have they had any effect on human health or the environment.
No material investment is necessary in order to avoid any liability in
relation to the Environmental Laws or any breach of the Environmental
Laws, or to obtain the benefits of any permits, licences, declarations
or any other authorisations regarding environmental matters.
The Company has not received notice of nor been informed of any actions
or proceedings (procedure/instance) relating to any events or to their
activities which could be directly or indirectly attributable to the
Company and to the best of the Principals knowledge likely to lead to
liability on their part in respect of the Environmental Laws.
- 19 -
3.25 BUSINESS LIABILITY
Except as specified in Warranty Schedule 3.17, No claim of any sort
whatsoever exists against the company whether for loss, damage or
injury caused to persons or things, as a result of the businesses
carried on by and services provided by the company and neither the
principals nor the company have been informed of any such action which
might be brought against the company.
3.26 INSURANCE
3.26.1 A copy of the insurance policies taken out by the company or on its
behalf is set out in Warranty Schedule 3.26.1.
3.26.2 The company has paid all premiums owed under such insurance policies to
date.
3.26.3 The company has not breached any provision of such policies and has
carried out all necessary formalities and declarations properly and in
good time in accordance with the terms of the policies and of the law,
and as a result is indemnified against all loss or injury which has or
might be incurred or suffered.
3.26.4 There is no litigation or dispute in progress regarding any claim under
such insurance policies and no event has taken place likely to lead to
such a dispute or litigation.
The company has not since 1995 made any claim under such insurance
policies of such a nature as to hinder or hold up the continued pursuit
of its normal activities, or so as to lead to a significant increase in
the premiums or the excess relating to such policies.
3.26.5 The continuity and the cost of the policies set out in warranty
schedule 3.26.1 Will not be affected by the sale of the FA shares or
the AI shares to the purchaser.
3.27 RELATIONS WITH THE PRINCIPALS
Neither the principals nor any affiliate of the principals, nor any
member of the families of the principals:
(a) Are except as disclosed in warranty schedule 3.8.4, The
holders of any asset or right whatsoever that the company must
use or have the benefit of in order to carry out its
activities;
(b) Except for salary or fees for their services to the company
are the creditors or debtors of the company by reason of any
obligation whatsoever, and more generally, except as
aforesaid, do not have any present or future right to exercise
any right against any of the company;
(c) Have guaranteed any of the company's obligations, and nor has
the company guaranteed any of the obligations of the
principals, the affiliates of the principals, or any member of
the families of the principals.
- 20 -
3.28 EVENTS OCCURRING IN THE COMPANY SINCE 30 JUNE 1997
In respect of the period between 30 June 1997 and the Completion Date,
the management of the Company has been carried out using the same
methods as, and in manner consistent with the former management
thereof, so as to ensure the continuity of the running of the business.
Moreover, the Company has not entered into any agreement or made any
decision outside the normal course of business or the reasonable and
prudent management (gestion en bon pere de famille) of the Company.
In particular, since the 30 June 1997:
(i) except as disclosed in Warranty Schedule 3.28, no general
meetings (assemblee generale) of any of the Companies have
been held;
(ii) there has been no change in the Company's' accounting methods
and practices;
(iii) except as disclosed in Warranty Schedule 3.28, no distribution
has been made or decision taken in relation to a distribution
of a dividend, interim dividend or other remuneration of
capital.
- 21 -
3.29 INTERMEDIARIES
None of the negotiations relative to this warranty agreement or to the
operations provided for herein could provide grounds for a claim by the
principals against the company or the purchaser for any brokerage,
commission, fee or other payment of a similar nature.
3.30 INFORMATION AND DOCUMENTS
All information and documents in the warranty schedules hereto are
authentic, true and accurate.
4. INDEMNITIES
4.1 The principals undertake, in their own names and in the names of their
successors and assigns (ayants-droit), to indemnify the purchaser, or,
as the purchaser shall choose, the company, against the whole of any
loss as a result of:
(A) Either (i) any inaccuracy, omission or breach whatsoever of
any of the warranties or (ii) which results from facts or
circumstances whose origin is prior to the completion date and
has not been expressly disclosed to the purchaser in this
warranty agreement or the warranty schedules;
(B) The claims in respect of begin, xxxx atlantique and actor
specifically identified by the list in warranty schedule 3.17
To the extent that they have not been specifically provided
for in the june accounts which provisions the principals
represent as being:
Begin Frf 1,450,000
Xxxx Atlantique Frf 2,842,028;
Actor - None.
- 22 -
(C) Any claims arising out of the conflicts or disputes or claims
or enquiries referred to in clause 3.4.8Which go beyond and do
not only relate to the mere fact of such conflicts or disputes
existing or such claims or enquiries having been made and
dealt with as indicated in clause 3.4.8;
(D) Any claims against the purchaser and/or the companies by any
previous or current shareholder of fa, AI or of any of the
subsidiaries (other than the principals) arising out of
resulting from or relating to the transactions contemplated by
all the sale agreements, any claims arising out of any of
powers of attorney persuant to which any of all the sale
agreements are made, being invalid or the subject of any
challenge;
(E) Any reimbursement in whatever manner by the company for any
reason whatsoever of any fees or remuneration paid to the
company prior to completion except as reserved for in the net
receivables;
(F) Any liability of any of the dormant companies referred to in
warranty schedule 3.6.7, Or any cost including tax cost of
their liquidation exceeding in total frf 50,000;
(G) Any liability in respect of NACC SA;
(H) Any cost including any tax cost of the reorganisation as
described in clause 3.5 Including the absorption of FA and
step by way of merger, exceeding the amount of us $ 70,000;
(I) (i) the purchaser not having full valid ownership free from
encumbrances of all the FA shares or all the AI shares
(directly or indirectly through fa) or of all the shares in
the subsidiaries other than AI (directly or indirectly through
ai) as set out in warranty annex 3.6.7, Or (ii) such shares
not being freely transferable without restrictions or (iii)
such shares not representing 100% of the share capital and
voting rights of FA and the subsidiaries or (iv) there being
any other right or interest in FA and the subsidiaries or such
shares which is not directly or indirectly owned by the
purchaser.
In respect of calculation of any loss, it is hereby further agreed as
follows:
- There shall be included in any loss, all expenses including
legal expenses of obtaining indemnification;
- Any reassessment to tax involving a simple transfer of profit
from one accounting period to the next and any reassessment,
in particular in respect of value added tax (taxe sur la
valeur ajoutee) which does not impose an overall charge on the
company, shall not be included in the calculation of the loss,
- 23 -
except in respect of any fine, interest, compensation or
indemnity which such reassessment may bring about;
- There shall be deducted the amount of any sum paid to the
company under any insurance policies and relating to such
loss.
4.2 Notwithstanding that the principals have sold 28.28 Per cent of the fa
shares and 10.44 Per cent of the AI shares persuant to the sale
agreement referred to in recital (c) of this warranty agreement, the
liability of the principals hereunder shall be calculated as if the
principals had sold to the purchaser all the FA shares and all the ai
shares sold or agreed to be sold to the purchaser persuant to all of
the sale agreements.
4.3 The liability of the principals hereunder shall be limited to the
amount of (i) us $ 10,000,000 for all cumulative claims hereunder
relating to a reduction in the value of assets or an increase in
liabilities by reference to the accounting values in the june accounts
or the receivables at the completion and (ii) us $ 6,000,000 for
matters arising in respect of all cumulative claims hereunder not
within (i) above. Notwithstanding anything to the contrary, the
foregoing limitations shall not apply to claims in respect of clauses
4.1 (D), 4.1 (F), 4.1 (G) and 4.1 (I). Any claim amount shall be
reduced by any applicable deductible but not in respect of matters
arising in respect of any claims relating to 4.1.(B), 4.1 (D), 4.1 (F),
4.1 (G) 4.1 (H) and 4.1 (I) above the indemnification ceilings set
forth in (i) and (ii) of this clause 4.3 Shall not be cumulative of one
and other and for the avoidance of doubt the maximum aggregate,
liability of the principals hereunder shall be limited to us $
10,000,000.
4.4 The purchaser shall have the right to set-off against the escrow stock
in accordance with the indemnity escrow and stock pledge agreement any
amounts payable by the principals to the purchaser pursuant to the
indemnification provisions in this clause 4.
5. Liability under the warranty agreement by the principals
5.1 Notification - conduct of disputes and litigation
5.1.1 Any claim made under the warranties or indemnities above must be
notified to the principals within a reasonable period of time from the
moment the purchaser becomes aware of the fact or event of such a
nature as to justify a claim under the warranties or indemnities. Any
claim made under the warranties or indemnities must be founded upon and
accompanied by information and details useful for this purpose, subject
to the provisions of clause 6.2.
5.1.2 In the event that a fact comes to light or an event occurs which is
likely to give rise to an indemnity under this warranty agreement
involving a third party claim, the purchaser will at all times conduct
the defence of such a claim in good faith and will invite the
principals to take part at their own expense and with their own
advisors in the negotiation and possible dispute or litigation relating
to such a claim. In such a case the conduct of the dispute or
litigation will be assumed jointly by the principals and the purchaser
and the purchaser will not be entitled to settle any such claim without
the prior consent of the principals which consent cannot be refused
without good reason particularly where the third party is a client of
the company and having regard to the commercial relationship of the
company with such client.
If the principals do not inform the purchaser that they wish to
exercise their rights under the preceding paragraph within 30 days of
receiving the notice referred to above, the principals will be deemed
to have waived their rights in this respect.
- 24 -
5.2 PAYMENT
Any sums due from the principals in respect of any indemnified loss
calculated in accordance with this warranty agreement shall be paid
within a period of 30 days from the first written demand from the
purchaser or any of the company, and, at the choice of the purchaser,
shall be made to the purchaser or any of the company.
If the principals pay any sum to the purchaser for an indemnified loss,
and the purchaser ultimately recovers a further sum for the same
indemnified loss from a third party (including any tax authority), the
purchaser will promptly pay such sum paid by the third party to the
principals , subject to the total amount paid to the principals not
exceeding the sums recovered from such third party, less all costs,
charges and expenses reasonably incurred and justified by the purchaser
in order to obtain such a payment and to recover such sums from the
third party in question.
Without prejudice to the right of the purchaser, if necessary, to
enforce its rights under the last paragraph (alinea) of article 1153 of
the civil code, if the payments have not been made by the due date, the
sum outstanding will bear interest immediately and without prior
notice, at the paris inter-bank rate (taux interbancaire offert a paris
- tiop) (3 months) plus two per cent (2%). This provision should not be
considered as authorising the principals to make late payments.
For any claim that is subject to reduction by a deductible, the
deductible shall be finally recalculated at and as of january 1, 2000
to take into account any collections of receivables at completion and
any reduction in any reserve for litigation reserved in the june
accounts (to the extent that such reserve remained in place at
completion), which is made in the financial statements prepared under
us gaap as determined by the conseil de surveillance of ai, and that
occured after the date of the claim and before january 1, 2000, to the
extent such collections or settlements or adjudications have not been
not previously taken into account in reducing any other claim. If as a
result of this final recalculation of such claims, the amount of any
net claim is reduced below the net amount received by purchasers with
respect to such claim, then purchasers shall repay promptly such
difference to the principals jointly.
6. PERIOD FOR CLAIMS
6.1 Any claim under this warranty agreement must be notified to the
principals by the purchaser:
- regarding matters of taxation and social security during the
applicable limitation period increased by a further 30 days;
and
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- regarding other matters by 31 december 1999; and
- except that there shall be no time limitation for notification
for matters arising in respect of claims under clauses 4.1.
(B), 4.1 (D), 4.1 (F), 4.1 (G), 4.1 (H) or 4.1 (I) above.
6.2 For the avoidance of doubt, any notification to the principals
regarding an indemnified loss may be made by the purchaser up until the
last day of the applicable period, and this is so even when the sums
potentially due are not precisely known or determinable before or on
such date, provided that the purchaser notifies the principals of the
existence of such in accordance with the provisions of this warranty
agreement.
The principals may not avoid their obligations under the warranties
contained in this warranty agreement or the financial liability
resulting therefrom by pleading ignorance of any facts capable of
giving rise to a claim under this warranty agreement or by relying upon
facts and information not contained expressly in this warranty
agreement.
7. INDEMNITY AND ESCROW AGREEMENT
The Principals have deposited into escrow with Escrow Agent and pledged
pursuant to the Indemnity Escrow and Stock Pledge Agreement 532 049
Stock of PRG, which Stock together with Stock pledged with Escrow Agent
by Banque Internationale a Luxembourg persuant to the Indemnity Escrow
and Pledge Agreement shall be held by Escrow Agent as a non exclusive
source of claims for indemnification persuant to the terms of the
Indemnity Escrow and Stock Pledge Agreement.
8. BENEFIT OF THE AGREEMENT
This Agreement is made in favour of the Purchaser and/or any physical
or legal person who may join with or be substituted for the Purchaser
in respect of the purchase of the FA Shares and the AI Shares under any
of All the Sale Agreements. However, in the event of a subsequent sale
transfer (or contribution) of all or part of the FA Shares and the AI
Shares, the Purchaser may transfer to the purchaser (or recipient) the
benefit of this Agreement in whole or pro rata to the rights in the
share capital of the FA or AI which have been acquired by such
purchaser (or recipient).
In the same way, the parties agree that the Purchaser may by any means
(including by the pledging or transfer of the right to receive the
benefit of the contract (creance) within the context of law 81- 1 of 2
January 1981) use the benefit of this Agreement as security to any
French or foreign credit establishments or financial institutions.
9. TRANSFER BY THE PRINCIPALS
The Principals may not substitute any third party for themselves in any
way whatsoever in respect of the performance of their obligations
hereunder.
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10. SUCCESSORS AND ASSIGNS OF THE PRINCIPALS
The obligations set out in this Agreement shall bind the inheritors,
successors and assigns of the Principals who shall be jointly and
severally and indivisibly bound in respect of the performance of the
obligations hereunder.
11. WAIVER
The non-exercise by the Purchaser or the Vendors of any of their
respective rights pursuant to this Agreement shall not in any way
whatsoever be construed as a waiver of that right and shall not affect
in any way whatsoever the right of such party to exercise such right.
No waiver of any representation or contractual or legal warranty will
be effective without a written and signed declaration of the person
giving the waiver notifying the other party of its waiver.
12. SEVERABILITY OF CLAUSES
In the event that any of the clauses hereof becomes void,
unenforceable, invalid, illegal or inapplicable, this shall not
jeopardise the validity, legality or applicability of the other
provisions of this Agreement and shall not release the Principals from
the performance of this Agreement.
13. ANNOUNCEMENTS
Neither the making of this Agreement nor its terms shall be disclosed
by any party hereto without the prior consent of the other parties
unless disclosure is required by law or the rules of any regulatory or
governmental body, including the SEC.
14. COSTS
All of the expenses incurred by PRG in connection with and incidental
to the negotiation, preparation, authorisation, execution and
performance of this agreement and All the Sale Agreements and
transaction contemplated herein, including, without limitation, all
legal and accounting expenses, shall be paid by PRG. All expenses
incurred by Xxxx Group and All the Vendors and the Principals in
connection with the negotiation, preparation, authorisation, execution
and performance of this agreement and All the Sale Agreements and
transactions contemplated herein, including, without limitation, all
legal, accounting and investment banking expenses, costs incurred in
negotiating this Warranty Agreement, preparation of the Disclosures and
costs incurred in responding to PRG's requests for information (but
excluding up to US $ 70,000 of the Reorganisation Costs and costs of
Xxxx Group within the normal remuneration of employees of Xxxx Group in
presentation of Disclosures and answering diligence requests) will be
paid by the Principals at the Principals sole cost and responsibility
(the "PRINCIPALS EXPENSES"). The Principals shall promptly reimburse
Xxxx Group for such Principals Expenses.
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15. ENTIRE AGREEMENT
This Warranty Agreement and All the Sale Agreements (together with any
agreements or documents referred to in this Agreement or All the Sale
Agreements) constitute the entire agreement between the parties hereto
in connection with the subject matter of this Agreement and All the
Sale Agreements or any agreement or document referred to in this
Warranty Agreement or All the Sale Agreements. No party has relied upon
any warranty or representation save for the those expressly set out in
this Warranty Agreement or All the Sale Agreements (or any document
referred to in this Warranty Agreement or in All the Sale Agreements).
16. WAIVER, AMENDMENT
16.1 No waiver of any term, provision or condition of this Agreement shall
be effective unless such waiver is evidenced in writing and signed by
the waiving party.
16.2 No omission or delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or of any
other right, power or privilege. The rights and remedies herein
provided are cumulative with and not exclusive of any rights or
remedies provided by law.
16.3 No variation to this Agreement shall be effective unless made in
writing and signed by all the parties.
17. NOTICES
Save as specifically otherwise provided in this Warranty Agreement any
notice, demand or other communication to be served under this Warranty
Agreement may be served upon any party hereto only by posting by first
class post or sending the same by an international recognised courier
service which guarantees at least second business day delivery or
sending the same by facsimile transmission to the party to be served at
its address given below, or facsimile number given below or at such
other address or number in France on the United States as he or it may
from time to time notify in writing to the other parties hereto:-
If to the Principals: Xx Xxxx Xxxxxxxxx
00, xxx Xxxxxxxxxxx
00000 Xxxxx
in either case,
with a copy to: Xxxxxxxx et Xxxxxx
00, xxx Xxxxxxx
00000 Xxxxx
Attention: Xxxxx Xxxxxxxx
Telefax: 01 53 57 97 98
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If to the Purchaser: The Profit Recovery Group International, Inc.
0000 Xxxxx Xxxxx Xxxxxxx
Xxxxx 000 Xxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx XxXxxxxx, Xx,
Senior Vice President and General Counsel
Telefax: (000) 000-0000
with a copy to: Ashurst Xxxxxx Xxxxx
00, xxx xx Xxxxxxxx
00000 Xxxxx
Attention: Xxxxxxxxxxx Xxxxxxxxxxx, Xxxxxx Xxxxxxxxxx
Telefax: 01 53 53 53 54
or at such other address as any party hereto notifies the other parties
hereof in writing. The parties hereto agree that notices or other
communications that are sent in accordance herewith (i) by personal
delivery or telefax, will be deemed received on the day sent or on the
first business day thereafter if not sent on a business day, (ii) by
courier delivery, will be deemed received on the second business day
immediately following the date sent, and (iii) by certified mail, will
be deemed received seven (7) business days immediately following the
date sent. For purposes of this Agreement, a "BUSINESS DAY" is a day on
which PRG and FA or AI is open for business and shall not include a
Saturday or Sunday or legal holiday in France or the United States.
Notwithstanding anything to the contrary in this Agreement, no action
shall be required of the parties hereto except on a business day and in
the event an action is required on a day which is not a business day,
such action shall be required to be performed on the next succeeding
day which is a business day.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
19. GOVERNING LAW AND RULING VERSION
19.1 This Agreement (and any dispute, controversy, proceedings or claim of
whatever nature arising out of or in any way relating to this agreement
or its formation) shall be governed by and construed in accordance with
French law.
19.2 Any dispute arising from the execution of this Agreement shall be
finally resolved in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by three
arbitrators nominated in accordance with their rules unless the parties
can agree on a sole arbitrator. The arbitration shall take place in
Paris. The language of the arbitration shall be English.
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MADE AND SIGNED IN TWO (2) EXAMPLES AT XXXXXXXXX
XXXXX, 0 XXXXXX XXXXX, XXXXXX XX0X 0XX ON THE FIRST
ABOVE DATE WRITTEN
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC
By: /s/ Xxxxxxx XxXxxxxx, Xx.
_________________________________________
Xxxxxxx XxXxxxxx, Xx.,
Senior Vice President and
General Counsel
XXXXXXX XXXXXXXX, XX, AS "MANDATAIRE" FOR THE
SHAREHOLDERS OF PRG FRANCE SA IN FORMATION
By:/s/ Xxxxxxx XxXxxxxx, Xx.
_______________________________________
Xxxxxxx XxXxxxxx, Xx.
By: /s/ Xxxx Xxxxxxxxx
_______________________________________
Xxxx Xxxxxxxxx
By: /s/ Xxxx Xxxxxxxxx
______________________________________
Xxxx Xxxxxxxxx
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