1
================================================================================
-----------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
-----------------------------------------------------------------------
BY AND BETWEEN
COMPAGNIE GENERALE DE GEOPHYSIQUE,
ON THE ONE HAND,
AND
PARADIGM GEOPHYSICAL LTD.
AND
PARADIGM GEOPHYSICAL CORP.
ON THE OTHER HAND,
WITH RESPECT TO
FLAGSHIP S.A.
AND
FLAGSHIP GEOSCIENCES LLC
-----------------------------------------------
Dated: October 4, 2000
-----------------------------------------------
================================================================================
2
Table of Contents
Page
ARTICLE I INTERPRETATION.................................................................2
1.1 Definitions..........................................................................2
1.2 Construction.........................................................................6
ARTICLE II SALE AND PURCHASE.............................................................7
2.1 Sale and Purchase....................................................................7
2.2 Purchase Consideration...............................................................7
2.3 Adjustment of Purchase Price.........................................................7
2.4 Closing..............................................................................8
2.5 Closing Balance Sheet; Computation of Adjustment Amount..............................9
2.6 Transfer Taxes......................................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CGG.......................................14
3.1 Representations and Warranties......................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............................23
4.1 Representations and Warranties of the Purchasers....................................23
4.2 Purchasers' Acknowledgment..........................................................27
ARTICLE V COVENANTS OF CGG..............................................................27
5.1 Geovecteur Accounts Receivable......................................................27
5.2 CGG Flagship Accounts Receivable....................................................27
5.3 Covenant Not to Compete.............................................................27
5.4 Lock-up.............................................................................28
5.5 Recommended Third Party Offer.......................................................28
5.6 Retention of Records................................................................29
ARTICLE VI COVENANTS OF PARADIGM........................................................29
6.1 Guaranteed Obligations..............................................................29
3
Table of Contents
(continued)
Page
6.2 Retention of Records................................................................30
6.3 Paradigm Board Representation.......................................................30
6.4 Special Preferred Shares............................................................31
ARTICLE VII SURVIVAL AND INDEMNIFICATION................................................31
7.1 Survival of CGG's Representations and Warranties....................................31
7.2 Survival of Purchasers' Representations and Warranties..............................31
7.3 Survival of Covenants...............................................................32
7.4 Indemnification.....................................................................32
7.5 Procedure for Indemnification.......................................................33
7.6 Calculation of Damages..............................................................36
7.7 Additional Rules and Procedures.....................................................37
7.8 Treatment of CGG's Indemnification Payments.........................................38
ARTICLE VIII GENERAL....................................................................39
8.1 Brokers and Finders.................................................................39
8.2 Recourse............................................................................39
8.3 Notice..............................................................................39
8.4 Costs...............................................................................40
8.5 Time of the Essence.................................................................40
8.6 Further Acts........................................................................41
8.7 Arbitration and Governing Law.......................................................41
8.8 Amendment...........................................................................41
8.9 Waiver..............................................................................41
8.10 Entire Agreement...................................................................41
8.11 Severability.......................................................................42
8.12 Counterparts.......................................................................42
8.13 Assignment.........................................................................42
8.14 Benefit............................................................................42
- 2 -
4
SECURITIES PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT, dated October 4, 2000 (as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
its terms, this "Agreement"), is by and between:
- COMPAGNIE GENERALE DE GEOPHYSIQUE, a company incorporated under the
laws of France (hereinafter "CGG"), on the one hand; and
- PARADIGM GEOPHYSICAL LTD., a company incorporated under the laws of
Israel (hereinafter "Paradigm"); and
- PARADIGM GEOPHYSICAL CORP., a company incorporated under the laws of
Delaware and a wholly-owned Subsidiary of Paradigm (hereinafter "Paradigm USA"
and together with Paradigm, the "Purchasers"), on the other hand.
RECITALS:
WHEREAS:
(A) CGG is the registered and beneficial owner of all the shares, nominal
value FF 100 per share (the "Shares"), issued by Flagship S.A. a company
(societe anonyme) organized under the laws of France ("Flagship SA");
(B) CGG is the beneficial owner, directly or indirectly, of all the
outstanding shares of CGG Americas, Inc., a company organized under the laws of
the State of Texas ("CGG Americas"), which is in turn the holder of all the
membership interests (the "LLC Interests"; and together with the Shares, the
"Securities") in Flagship GeoSciences LLC, a limited liability company organized
under the laws of the State of Texas ("Flagship LLC");
(C) Flagship SA and Flagship LLC (together, the "Companies" and,
individually, a "Company") are engaged in the Flagship Business (as such term is
defined below), which business is conducted in certain instances through or with
the assistance of certain Affiliates (as such term is defined below) of CGG;
(D) Upon the terms herein set forth, the Purchasers wish to purchase the
Securities, and CGG is willing to sell the Shares, and to procure that CGG
Americas sells the LLC Interests, to the Purchasers;
(E) A portion of the consideration to be received by CGG will consist of
newly-issued shares in the capital of Paradigm, the offering of which to CGG has
taken place outside the United States;
(F) Paradigm is organizing Paradigm Geophysical Holdings EURL as a company
(entreprise unipersonnelle ' responsabilit' limit'e) for the purpose of
acquiring the Shares from Paradigm as soon as practicable after the date hereof;
and
(G) CGG, Paradigm and the Companies are concurrently herewith entering into
certain arrangements with respect to various transitional services to be
provided on an on-going basis
5
by the Affiliates of CGG through which a portion of the Flagship Business is
being conducted (the "CGG Flagship Affiliates").
NOW, THEREFORE, the parties hereto do hereby agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, except as otherwise expressly provided, capitalized
words or expressions shall have the meanings set out below:
"Affiliate" means, with respect to any Person, any Person which, directly
or indirectly, controls, is controlled by, or is under common control with that
Person. For purposes of this definition "control" (including, with correlative
meaning, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise. For the purposes of this Agreement, Flagship SA and Flagship LLC
shall not be considered Affiliates of CGG;
"Agreed Form" means a form agreed between the parties and for the
purposes of identification, initialed by or on behalf of the parties;
"Business Day" means a day on which banks are opened for ordinary
business in both France and Israel;
"CGG Flagship Accounts Receivable" means all accounts receivable of the
Companies owed by CGG or any of its Affiliates which (i) have arisen out of the
Flagship Business, (ii) are outstanding and unpaid as of September 30, 2000, and
(iii) are reflected in the Final Closing Balance Sheet;
"Closing Date" or "Date of Closing" means the date of this Agreement;
"Company Intellectual Property Right" means any Intellectual Property
Right owned or jointly owned by a Company and which relates to the Flagship
Business (it being agreed that in the case of copyrights, a copyright shall be
deemed to be owned by a Company if it was developed or authored by an employee
of the Company and the Company possesses by law the right to exploit such
copyright);
"Contract" means any contract, agreement, obligation, promise, commitment
or other undertaking (written or oral), which is legally binding;
"Dollars" or "U.S. Dollars" means dollars of the United States of
America;
"Eligible Accounting Firm" means an internationally recognized
independent accounting firm active in France and the United States;
- 2 -
6
"Encumbrance" means any mortgage, lien, pledge, charge, security interest
or similar encumbrance;
"Excess Geovecteur Liabilities" means any Geovecteur Liabilities
exceeding the amount of Geovecteur Liabilities reflected in the Final Closing
Balance Sheet;
"Flagship Business" means the development, maintenance and commercial
sale (i.e., through the granting of licenses) of the Integral Plus, Stratimagic,
Seisfacies, GEM, Nexmodel and StratQC software programs whether currently sold
or under development, and all activities related thereto;
"Geovecteur Accounts Receivable" means all accounts receivable and
intercompany receivables of the Companies which (i) have arisen out of the
Geovecteur Business, (ii) are outstanding and unpaid as of September 30, 2000,
and (iii) are reflected in the Final Closing Balance Sheet;
"Geovecteur Business" means the development, maintenance and commercial
sale (i.e., through the granting of licenses) by the Companies prior to the date
hereof of the Geovecteur and/or the Petrovision software programs;
"Geovecteur Liabilities" means any and all liabilities of the Companies
which (i) relate directly and primarily to the Geovecteur Business, (ii) are
outstanding and unpaid as of September 30, 2000, and (iii) are reflected in the
Final Closing Balance Sheet;
"Governmental Authority" means any governmental, quasi-governmental or
regulatory authority, body, agency or department, whether governmental,
provincial, municipal or foreign;
"Governmental Authorization" means any approval, consent, permit, ruling,
waiver, exemption or other authorization (including the lapse, without
objection, of a prescribed time under a statute or regulation that states a
transaction may be implemented if a prescribed time lapses following the giving
of notice without an objection being made) issued, granted, given or otherwise
made available by or under the authority of any Governmental Authority or
pursuant to any Law;
"Intellectual Property Right" means any of the following:
(A) trademarks and service marks (registered or unregistered), trade
dress, and all applications and registrations in any jurisdiction pertaining to
the foregoing and all goodwill associated therewith;
(B) patentable inventions, discoveries, improvements, ideas, know-how,
formula methodology, processes, technology, computer programs and software
(including, except where otherwise indicated, the Source code and Object code),
and all applications and patents in any jurisdiction pertaining to the
foregoing;
(C) trade secrets, including confidential and other non-public
information;
(D) copyrights in writings, designs, mask works or other works, and
all applications and registrations in any jurisdiction for the foregoing;
- 3 -
7
(E) internet web sites, domain names, and all applications and
registrations pertaining thereto;
(F) licenses, covenants not to xxx and similar terms relating to the
foregoing; and
(G) claims or causes of action arising out of or related to
infringement or misappropriation of the foregoing;
"Intercompany Payables" means all intercompany payables arising on or
prior to September 30, 2000, of (x) CGG or any of its Affiliates to the
Companies, and (y) the Companies to CGG or any of its Affiliates (other than (i)
the CGG Flagship Accounts Receivable, and (ii) any Geovecteur Accounts
Receivable owed by CGG or any of its Affiliates);
"Judgment" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Authority or by any arbitrator;
"knowledge of CGG", or words to similar effect, means the actual
knowledge of the members of (x) the board of directors (conseil
d'administration) and executive committee (comit' ex'cutif) of CGG and (y) the
board of directors and executive officers of CGG Americas, in each case, after
due inquiry of the persons listed on Schedule 1.1;
"Laws" means all applicable national, provincial, municipal, local or
foreign laws, statutes, regulations, ordinances, rules, guidelines, orders,
directives or other requirements of any Governmental Authority;
"Material Adverse Effect" when used with respect to any change,
situation, development or other event, means any such change, situation,
development or other event which, individually or in the aggregate, has a
material adverse effect on the business, financial condition or results of the
Companies (taken as a whole) or of Paradigm and its Subsidiaries (taken as a
whole), as the case may be, other than those relating to or affecting the
economy generally or the business sector in which any of the relevant entities
operates;
"Net Assets" means Total Assets less Total Current and Long-term
Liabilities, determined in accordance with U.S. GAAP, as appearing in the
relevant financial statements of the Companies (it being understood that in the
case of determination of Total Assets by reference to the Final Closing Balance
Sheet, no value shall be reflected therein for any of the assets referenced in
Section 3.1.21(A) which were transferred by CGG and its Affiliates to either of
the Companies after June 30, 2000);
"Ordinary Course of Business" any action taken by the Companies or by
Paradigm and its Subsidiaries, as the case may be, shall not be deemed to have
been taken in the "Ordinary Course of Business" unless:
(A) such action is recurring in nature, is consistent with the
Companies' or Paradigm's, as the case may be, past practices, and is taken in
the ordinary course of the Companies' or Paradigm's, as the case may be, normal
day-to-day operations; and
- 4 -
8
(B) such action is not required to be authorized by the stockholders,
the board of directors (or any committee thereof) of the Companies or of
Paradigm or any of its Subsidiaries, as the case may be, and does not require
any other separate or special authorization of any nature;
"Organizational Documents" when used with respect to (x) any company or
other incorporated entity, means the memorandum and articles of association
(statuts), charter or similar constitutive document of such company or other
incorporated entity, as filed with the relevant commercial registry, company
registrar or other Governmental Authority, as the same may be amended,
supplemented or otherwise modified from time to time, and (y) any partnership or
other unincorporated entity, means its certificate of formation, partnership
agreement, governing agreement and/or similar constitutive document, as the same
may be amended, supplemented or otherwise modified from time to time;
"Permitted Encumbrances" means (i) any Encumbrances for Taxes or other
governmental charges that are not yet delinquent, (ii) any retention of title
provisions applicable to any machinery, equipment or inventory purchased by any
of the Companies, (iii) any Encumbrances on any of the assets of the Companies
arising solely by operation of law, and (iv) any other Encumbrances incurred or
arising in the normal course of business which do not materially impair the
transferability or the use of the relevant asset;
"Person" includes an individual, corporation, partnership, trustee,
trust, unincorporated association, organization, syndicate, executor,
administrator or other legal or personal representative and pronouns have a
similarly extended meaning;
"Proceeding" shall mean any action, arbitration, dispute, hearing,
investigation, litigation or suit commenced, brought, conducted, or heard by or
before any Governmental Authority or arbitrator;
"Schedules" means the schedules referenced in the representations and
warranties of the parties hereto which schedules have been bound together by
notarial process and for the purposes of identification, initialed by or on
behalf of the parties;
"Social Charge" means all social security, welfare, retirement,
unemployment, health, housing, family and similar charges, taxes and
payroll-related assessments payable to any Governmental Authority;
"Subsidiary" when used with reference to a specified Person, means any
company of which shares having ordinary voting power (other than shares having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such company are at the time
owned, or the management of which is otherwise controlled (as such term is used
in the definition of "Affiliate" above), directly or indirectly through one or
more intermediaries, or both, by such Person;
"Tax" or "Taxation" means all forms of taxation, duty, levy, impost,
charge, national insurance or other similar contribution or rates, created or
imposed by any Governmental Authority, whether in France or anywhere else,
including any payment which a party hereto may be or become bound to make or
obliged to account for to any person in respect of Taxation and also including
any related penalty, interest, fine or surcharge; and
- 5 -
9
"U.S. GAAP" means generally accepted accounting principles in the United
States.
1.2 CONSTRUCTION
1.2.1 Headings are for convenience only and do not affect
interpretation.
1.2.2 The following rules of interpretation apply unless the context
requires otherwise:
(A) The singular includes the plural and conversely.
(B) A gender includes all genders.
(C) Where a word or phrase is defined, its other grammatical forms
have a corresponding meaning.
(D) A reference to a clause or schedule is to a clause of or schedule
to this Agreement.
(E) A reference to any party to this Agreement or any other agreement
or document includes the party's successors and permitted assigns.
(F) A reference to any agreement or document is to that agreement or
document as amended, novated, supplemented, varied or replaced from time to
time, except to the extent prohibited by this Agreement.
(G) A reference to any legislation or to any provision of any
legislation includes any modification or re-enactment of it, any legislative
provision substituted for it, and all regulations and statutory instruments
issued under it.
(H) A reference to currency is to U.S. Dollars unless otherwise
specifically stated herein.
(I) A reference to conduct includes any omission, representation,
statement or undertaking, whether or not in writing.
(J) A provision in this Agreement will not be construed against a
party merely because that party was responsible for the preparation of that
provision or because it may have been inserted for that party's benefit.
(K) When calculating the period of time within which or following
which any act is to be done or step taken, the date which is the reference day
in calculating such period shall be excluded. If the last day of such period is
not a Business Day, the period shall end on the next Business Day.
- 6 -
10
ARTICLE II
SALE AND PURCHASE
2.1 SALE AND PURCHASE
On the date hereof and upon the terms herein set forth, and in reliance
upon the representations, warranties and agreements of the respective parties
contained herein, at the Closing (as such term is defined in Section 2.4 below):
(A) CGG shall sell, assign and convey to Paradigm, and Paradigm shall
purchase and accept from CGG, the Shares; and
(B) CGG shall procure that CGG Americas shall sell, assign and convey
to Paradigm USA, and Paradigm USA shall purchase and accept from CGG Americas,
the LLC Interests;
in each such case, free and clear of any Encumbrances.
2.2 PURCHASE CONSIDERATION
The aggregate consideration to be paid by the Purchasers for the
Securities (the "Base Purchase Price") shall consist of (x) U.S.$4,000,000 in
cash, and (y) 1,500,000 newly-issued, fully paid and non-assessable Ordinary
Shares of Paradigm, par value NIS 0.5 each (the "Paradigm Shares"). The Base
Purchase Price shall be subject to adjustment after the date hereof in
accordance with Section 2.3 below. The Base Purchase Price shall be allocated
and paid as follows:
(A) for the Shares, CGG shall be paid and receive (i) U.S.$3,885,000
in cash, and (ii) the Paradigm Shares; and
(B) for the LLC Interests, CGG Americas shall be paid U.S.$115,000 in
cash.
2.3 ADJUSTMENT OF PURCHASE PRICE
2.3.1 ADJUSTMENT OF THE BASE PURCHASE PRICE. The Base Purchase Price
shall be increased (or decreased) by the U.S. Dollar equivalent of the amount
(if any) by which the amount of the Net Assets, as determined on the basis of
the Final Closing Balance Sheet (as such term is defined in Section 2.5 below),
exceeds (or is less than) FF 16,277,000 (which the parties acknowledge is the
amount of the Net Assets determined on the basis of the June Balance Sheet) (the
Base Purchase Price, as so adjusted, being referred to herein as the "Purchase
Price"). For such purpose, the "U.S. Dollar Equivalent" shall mean the number of
U.S. Dollars determined by reference to the US$/Euro rate at the close of
business in New York on the date hereof as published by Reuters for transactions
of comparable amounts (the French franc figure to be converted into Euros on the
basis of the fixed French franc/Euro rate of 6.55957 FF = 1 Euro).
2.3.2 REPAYMENT OF PURCHASE PRICE. The Purchase Price shall be reduced
by any amount due to the Purchasers by CGG pursuant to the provisions of Article
VII hereof.
- 7 -
11
2.4 CLOSING
2.4.1 SIMULTANEOUS SIGNING AND CLOSING. The closing of the sale and
purchase of the Securities shall be held at the offices of Xxxxxxx Xxxx &
Xxxxxxxxx, 00-00 xxx xx xx Xxxxx l'Eveque, 00000 Xxxxx, Xxxxxx, immediately upon
signature of this Agreement (the "Closing").
2.4.2 CLOSING MECHANICS. At the Closing:
(A) CGG shall cause to be delivered to the Purchasers (in Agreed
Form):
(i) to Paradigm, a duly signed transfer form (ordre de
mouvement) for all the Shares, together with the share registers of Flagship SA;
(ii) to Paradigm USA, a duly signed instrument of assignment for
all the LLC Interests;
(iii) letters of resignation of all the current members of the
board of directors of Flagship SA;
(iv) Releases signed by CGG and CGG Americas;
(v) an approval, by Elf Exploration Production ("Elf EP") in
accordance with Article 9 of the contract known as EEP No. 8211 between Elf EP
and Petrosystems dated May 1, 1997;
(vi) evidence of the removal of Flagship SA from the Amended and
Restated Multi-Currency Revolving Credit Agreement dated August 31, 2000;
(vii) evidence of amendment of the Organizational Documents of
Flagship LLC;
(viii) legal opinions of counsel to CGG.
(B) the Purchasers shall:
(i) pay the Base Purchase Price as follows:
(a) the Purchasers shall pay the cash portion of the
Base Purchase Price to CGG (for itself and on behalf of CGG Americas) by wire
transfer of immediately available funds to such account as previously specified
in writing by CGG; and
(b) Paradigm shall issue and deliver the Paradigm Shares
to CGG, free and clear of any Encumbrances (except as created by this
Agreement), and shall cause its transfer agent to deliver to CGG a share
certificate representing the Paradigm Shares, and shall deliver to CGG: (x) a
copy of the related "Issuance Report Form", as completed and signed, to be filed
with the Israeli Registrar of Companies; and (y) a certificate of Paradigm's
secretary confirming the inscription of CGG in Paradigm's shareholders register
as the owner of the Paradigm Shares; and
- 8 -
12
(ii) cause to be delivered to CGG a legal opinion of counsel to
the Purchasers (in Agreed Form).
(C) CGG and Paradigm and/or the Companies (as appropriate) shall enter
into (in Agreed Form):
(i) a Registration Rights Agreement (the "Registration Rights
Agreement");
(ii) an Umbrella Services Agreement (the "Umbrella Services
Agreement");
(iii) an Employee Services Agreement;
(iv) two Corporate License Agreements; and
(v) a Support Agreement (the "Support Agreement").
All matters at the Closing will be considered to take place simultaneously, and
no delivery of any document will be deemed complete until all transactions and
deliveries of documents required by this Agreement are completed, and title to
the Securities shall not be transferred and the Purchasers shall have no
property rights or interest in such Securities unless and until the Closing
actually takes place and the payments and deliveries referenced in subsection
(B) above are effectively received by the payees thereof.
2.5 CLOSING BALANCE SHEET; COMPUTATION OF ADJUSTMENT AMOUNT
2.5.1 JUNE BALANCE SHEET. The parties acknowledge that:
(i) set forth as ANNEX A hereto is a true and complete copy of
the unaudited interim combined balance sheet of Flagship SA and Flagship LLC as
at June 30, 2000 (the "June Balance Sheet").
(ii) the June Balance Sheet:
(a) was prepared in accordance with U.S. GAAP;
(b) has been prepared in the course of due diligence
review, under the supervision of Ernst & Young, with the knowledge and
participation of the senior staff of both Paradigm and CGG;
(c) has been reviewed by the parties; and
(d) forms the agreed basis for comparison purposes to
the Closing Balance Sheet for determining adjustments to the Base Purchase
Price, in accordance with Section 2.3.1.
2.5.2 PREPARATION AND DELIVERY OF CLOSING FINANCIAL STATEMENTS. The
parties shall use their reasonable endeavors to cause the Companies to prepare,
as soon as reasonably practicable and by no later than sixty (60) days after the
date hereof, (x) a balance sheet of each of the Companies as at September 30,
2000, together with the related statement of profit
- 9 -
13
and loss of each of the Companies for the period ended on such date, and (y) a
combined balance sheet of the Companies as at September 30, 2000 (the "Closing
Balance Sheet"), together with the related combined statement of profit and loss
of the Companies for the period ended on such date, in accordance with U.S. GAAP
and in the case of the Closing Balance Sheet, in substantially the same format
as the balance sheet included June Financial Statements (collectively, the
"Closing Financial Statements"). The Closing Balance Sheet shall reflect all
assets and liabilities required to be reflected therein in accordance with U.S.
GAAP, except that no value shall be reflected therein for any of the assets
referenced in Section 3.1.21(A) which were transferred by CGG and its Affiliates
to either of the Companies after June 30, 2000. As soon as reasonably
practicable after receipt of the Closing Balance Sheet, CGG shall:
(i) procure that Xxxxxx Xxxxxxxx (the "Appointed Auditors")
audit the Closing Financial Statements; and
(ii) deliver to the Purchasers:
(a) a copy of Closing Financial Statements, as audited
by the Appointed Auditors (the "Audited Closing Financial Statements", and the
Closing Balance Sheet, as so audited, the "Audited Closing Balance Sheet"),
together with a copy of the related audit opinion of the Appointed Auditors; and
(b) a certificate (the "Adjustment Certificate"),
setting forth in reasonable detail CGG's computation of:
(x) the amount of the required adjustment, if
any, required by Section 2.3.1 (the "Adjustment Amount"), together with an
indication as to which party it shall be paid; and
(y) the amount of the Geovecteur Accounts
Receivable, the Geovecteur Liabilities and the CGG Flagship Accounts Receivable,
in each case, based on the information set forth in the Audited Closing Balance
Sheet.
The cost of auditing the Closing Financial Statements will be shared
equally between Paradigm and CGG.
The Purchasers shall ensure that the Appointed Auditors are provided with
all reasonable access to the premises of the Companies and to the accounting and
other relevant books and records of the Companies as needed in connection with
the preparation and audit of the Closing Financial Statements and will provide
explanations and assistance to the Appointed Auditors as required.
CGG shall ensure that the Appointed Auditors are provided with all
reasonable access to the relevant premises of CGG and its Affiliates and to the
accounting and other relevant books and records of CGG and its Affiliates as
needed in connection with the preparation and audit of the Closing Financial
Statements and will provide explanations and assistance to the Appointed
Auditors as required.
- 10 -
14
2.5.3 REVIEW OF THE AUDITED CLOSING FINANCIAL STATEMENTS. As from the
date of the receipt by the Purchasers of the Audited Closing Financial
Statements and the Adjustment Certificate (the "Delivery Date"), Paradigm and
Ernst & Young (the "Purchasers' Auditors") may proceed at the Purchasers'
expense with a review of the Audited Closing Financial Statements and the
Adjustment Certificate. Such review shall be finally completed by no later than
forty-five (45) days after the Delivery Date. The Purchasers' Auditors shall
have all reasonable access to the accounting and other relevant books and
records used in the preparation of the Audited Closing Financial Statements and
the Adjustment Certificate.
2.5.4 DISPUTED ITEMS NOTICE. The Purchasers may deliver written notice
(the "Disputed Items Notice") to CGG within forty-five (45) days after the
Delivery Date, stating that the Purchasers object to the Adjustment Amount set
forth in the Adjustment Certificate, specifying in reasonable detail the basis
for such objections and setting forth the Purchasers' assessment of changes
required to be made to the Adjustment Amount (such assessed changes, the
"Disputed Items"). Such assessment shall be accompanied by the related report of
the Purchasers' Auditors confirming such objections and computations of the
Disputed Items. Upon delivery of the Disputed Items Notice, the Purchasers and
CGG shall use all reasonable endeavors to meet and discuss the objections of the
Purchasers and to resolve the Disputed Items, draw up an agreed adjustments to
the Audited Closing Balance Sheet and finally determine the Adjustment Amount
(if any), as promptly as practicable.
The Purchasers shall procure that the Appointed Auditors are provided
with all reasonable access to the premises of the Companies and to the
accounting and other relevant books and records of the Companies as needed in
connection with their review of the Disputed Items.
2.5.5 DISPUTE RESOLUTION
(i) If the Purchasers and CGG do not agree upon the Adjustment
Amount (if any) within twenty (20) days after delivery of the Disputed Items
Notice (or such longer period as the Purchasers and CGG may agree in writing),
the Purchasers and CGG shall each have the right to request that KPMG,
PriceWaterHouseCoopers or Deloitte, Touch Tomatsu (the "Independent Expert"),
resolve the Disputed Items and make a final determination of the Adjustment
Amount (if any), based on its resolution of such Disputed Items; provided,
however, that, when so requested, the Independent Expert and any related Entity
shall not so act if they are in a position of conflict of interest with any of
the parties hereto and the partner in charge of the matter at the selected
Independent Expert shall be a qualified US CPA.
(ii) The Independent Expert shall be selected jointly by the
Appointed Auditors (acting as CGG's agent) and the Purchasers' Auditors (acting
as the Purchasers' agent) from among Eligible Accounting Firms.
(iii) If the Appointed Auditors and the Purchasers' Auditors have
not agreed upon the selection of the Independent Expert within thirty (30) days
after notice to the parties from, or a determination by, the selected
Independent Expert that it is unwilling or unable to act as the Independent
Expert, the Independent Expert shall be appointed by the President of the Courts
of Paris (Tribunal de Grande Instance de Paris) acting in summary proceedings
(statuant comme en mati're de r'f'r') at the request of the first party to make
such request, with each party having the opportunity to be heard, from among
Eligible Accounting Firms
- 11 -
15
(other than the Appointed Auditors and the Purchasers' Auditors or any other
accounting firm which may be in a conflict of interest position with any of the
parties hereto).
2.5.6 FINAL DETERMINATION. The Independent Expert shall apply the
directives and principles set forth in this Agreement to resolve the Disputed
Items as to which CGG and the Purchasers have not agreed and to complete the
final determination of the Adjustment Amount (if any). The Independent Expert
shall not review any item other than those required to resolve the Disputed
Items which CGG has not accepted in writing nor proceed with any further
investigations, but shall base its decision exclusively on the materials and
arguments presented by the parties and their respective Auditors (which
materials shall not include any materials not referred to previously in the
preparation of the notices contemplated by this Section 2.5). The parties shall,
and the Purchasers shall procure that the Companies shall, cooperate with the
Independent Expert in all reasonable respects.
The parties shall instruct the Independent Expert to simultaneously deliver to
CGG and to the Purchasers a letter (the "Independent Expert's Letter") setting
forth its final determination of the Adjustment Amount (which shall in no event
be more favorable to the Purchasers than that set forth in the Disputed Items
Notice or more favorable to CGG than that set forth in the Adjustment
Certificate) within the shortest practicable time and shall use its reasonable
efforts to do so within thirty (30) days after its appointment and delivery of
all relevant information. Such final determination shall, except in the case of
manifest error, be final and binding on the parties hereto, and shall be given
by the Independent Expert as an expert and not as an arbitrator.
The fees, costs and expenses of the Independent Expert so selected will be
borne, in the manner determined by the Independent Expert and if no
determination is made, equally between CGG, on the one hand, and the Purchasers,
on the other hand.
For the purposes hereof, either (i) the definitive Audited Closing Balance Sheet
agreed upon by CGG and the Purchasers pursuant to Section 2.5.4 above, or (ii)
in the absence of an agreement between CGG and the Purchasers, the Audited
Closing Balance Sheet read in light of the Independent Expert's Letter delivered
by the Independent Expert pursuant to this Section 2.5.6, is referred to herein
as the "Final Closing Balance Sheet".
2.5.7 CONCLUSIVE PRESUMPTIONS
(A) If the Purchasers shall not have delivered the Disputed Items
Notice (together with the related report of the Purchasers' Auditors) to CGG
within forty-five (45) days after the Delivery Date, the Adjustment Amount, if
any, set forth in the Adjustment Certificate shall be conclusively presumed to
be true and correct in all respects and shall be binding on the parties and may
not be disputed by them in any forum.
(B) If the Purchasers shall have delivered a Disputed Items Notice
(together with the related report of the Purchasers' Auditors) to CGG within
forty-five (45) days after the Delivery Date, and if CGG does not notify the
Purchasers in writing within ten (10) days after its receipt of the Disputed
Items Notice that CGG do not agree with the Purchasers' determination of the
Adjustment Amount set forth in the Disputed Items Notice, the Adjustment Amount
set forth in the Disputed Items Notice shall be conclusively presumed to be true
and correct in all respects and shall be binding on the parties and may not be
disputed by them in any forum.
- 12 -
16
2.5.8 NOTICE BY PURCHASERS. For the purposes of determining the date of
the final determination of the Adjustment Amount pursuant to Sections 2.5.1.
through 2.5.7 above, if the Purchasers shall deliver a written notice to CGG at
any time after the delivery of the Adjustment Certificate to the effect that
they agree with the computation of the Adjustment Amount set forth in the
Adjustment Certificate, then the final determination of the Adjustment Amounts
shall be deemed to have occurred on the date of the receipt by CGG of such
written notice of agreement.
2.5.9 FINAL PAYMENTS. The parties shall (x) settle any amounts due in
respect of the Adjustment Amount, and (y) pay or cause to be paid (by the
Companies, in the case of the Purchaser, and by its relevant Affiliates, in the
case of CGG) any Intercompany Payables reflected in the Final Closing Balance
Sheet (to the extent then outstanding), within five (5) Business Days after the
final determination of the Adjustment Amount in accordance with the procedures
herein set forth.
2.5.10 OTHER FINANCIAL STATEMENTS
(A) The parties acknowledge that the Closing Financial Statements are
being prepared and audited solely for the purposes of determining the Adjustment
Amount and the amount of certain payments to be made in accordance with the
terms of this Agreement, and their preparation for the purposes of this
Agreement shall not in any respect limit or prejudice the right of the
Purchasers to cause the Companies to prepare historical or future periodic
financial statements in any other manner or format.
(B) The parties further acknowledge that pursuant to the requirements
of the U.S. federal securities laws currently applicable to Paradigm, Paradigm
may be required to prepare certain pro-forma financial statements for the
Companies. In such connection, to assist Paradigm in the preparation of such
financial statements, CGG shall provide Paradigm's auditors with all reasonable
access to the accounting and other relevant books and records of CGG and its
Affiliates as may be reasonably required for the preparation of any such
financial statements and will provide explanations and assistance to such
auditors to the extent reasonably requested. CGG acknowledges that such
financial statements may be filed by Paradigm with various regulatory
authorities to which it is subject and become public, and may vary from
financial statements and information previously prepared by the Companies.
2.6 TRANSFER TAXES
Any transfer or stamp taxes (including any droits d'enregistrement) or
similar levies that may become payable as a result of the signing of this
Agreement, the transfer of the Securities or the issuance of the Paradigm Shares
shall be borne by the Purchasers and shall be paid on a timely basis in
compliance with all statutory requirements.
- 13 -
17
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CGG
3.1 REPRESENTATIONS AND WARRANTIES
CGG makes the following representations and warranties to the Purchasers:
3.1.1 ORGANIZATION AND AUTHORITY OF CGG
(A) CGG is a company (societe anonyme) duly incorporated and organized
and is validly existing under the Laws of France and has not been dissolved. CGG
has the requisite corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The entering into of this Agreement and
the performance by CGG of its obligations hereunder have been duly authorized by
all necessary action by the board of directors (conseil d'administration) of CGG
and no other corporate proceeding on the part of CGG are necessary to authorize
CGG's entering into this Agreement or the performance of its obligations
hereunder. This Agreement has been duly executed by CGG and, assuming the due
authorization and execution of this Agreement by the Purchasers, constitutes a
legal, valid and binding obligation of CGG, enforceable against it in accordance
with its terms.
(B) CGG Americas is a corporation duly incorporated and organized and
is validly existing under the Laws of the State of Texas and has not been
dissolved. CGG Americas has the requisite corporate power and authority to sell
the LLC Interests on the terms herein contemplated. The sale of the LLC
Interests on the terms contemplated by this Agreement has been duly authorized
by all necessary action by the board of directors of CGG Americas and no other
corporate proceeding on the part of CGG Americas are necessary to authorize the
sale of the LLC Interests on the terms contemplated by this Agreement.
3.1.2 CORPORATE MATTERS
(A) Flagship SA is a company (soci't'anonyme) duly incorporated and
validly existing under the Laws of France and has not been dissolved. Schedule
3.1.2(A) sets forth a true, accurate and complete copy of the Organizational
Documents of Flagship SA. On September 20, 1999, Flagship SA changed its name
from Petrosystems SA. to its current name. Flagship SA has all requisite
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it currently purports
to own or use.
(B) Flagship LLC is a limited liability company duly incorporated and
validly existing under the laws of Texas. Schedule 3.1.2(B) sets forth a true,
accurate and complete copy of the Organizational Documents of Flagship LLC.
Flagship LLC has all requisite corporate power and authority to conduct its
business as it is now being conducted and to own or use the properties and
assets that it currently purports to own or use.
(C) The registered share capital of Flagship SA is FF 250,000 divided
into 2,500 ordinary shares of nominal value FF 100 each. The Shares are the only
shares outstanding and are held beneficially and of record by CGG, free and
clear of any Encumbrances.
- 14 -
18
(D) The entire membership interest in the LLC is represented by
300,000 "Class A Voting Units" and 7,937,000 "Class B Voting Units", all of
which are held by CGG Americas, free and clear of any Encumbrances.
(E) The Companies have no Subsidiaries and do not hold securities or
investments in any company, organization (whether incorporated or not) or any
other entity (other than any liquid securities held for cash management
purposes).
(F) There are no rights or agreements to subscribe for, or to
purchase, any shares or other securities of the Companies, nor are there
outstanding any warrants, options, convertible instruments, or any other rights,
agreements, undertakings, promises or commitments, written or oral, to sell or
acquire shares from the Companies.
3.1.3 NO CONFLICT OR VIOLATION
Neither the execution and delivery of this Agreement by CGG, nor the
consummation of the transactions contemplated hereby nor the fulfillment by CGG
of the terms, conditions and provisions hereof will (with or without the giving
of notice or lapse of time, or both):
(A) contravene or violate the Organizational Documents or any
resolutions of CGG, CGG Americas or either of the Companies or any amendments
thereto or restatements thereof;
(B) contravene or violate any Laws or Judgments applicable to CGG, CGG
Americas or either of the Companies or require any Governmental Authorizations
(other than filings to be made after the Closing under the provisions of the
U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
French securities laws).
(C) contravene, violate or result in the breach of, or give any other
party the right to declare a default under, accelerate the performance of, or
cancel, modify or terminate its obligations under, any material Contract to
which either of the Companies is a party or by which it is bound; or
(D) result in the creation or imposition of any Encumbrance on any of
the assets of the Companies.
3.1.4 FINANCIAL STATEMENTS
(A) The June Balance Sheet was prepared in accordance with U.S. GAAP
on the basis of the financial records of the Companies, and in all material
respects fairly presents the combined financial position of Flagship SA and
Flagship LLC as at June 30, 2000, subject to normal audit adjustments.
(B) Since June 30, 2000, there has been no material adverse change in
the business, financial condition or results of the Companies, taken as a whole.
(C) Except as disclosed in this Agreement, since June 30, 2000, each
of the Companies has conducted its operations in all material respects in the
Ordinary Course of Business.
- 15 -
19
3.1.5 TAXES
(A) Except as disclosed on Schedule 3.1.5:
(i) all returns, reports and declarations in respect of any
Taxes ("Tax Returns") that were required to be filed by or on behalf of either
of the Companies (either separately or as part of a consolidated group) on or
before the date hereof have properly and timely filed with the appropriate
Governmental Authorities, and each such Tax Return was complete and correct in
all material respects;
(ii) all Taxes required to be paid by either of the Companies on
account of any period up to September 30, 2000, have either been paid or will be
fully reflected as a liability and reserved against in the Final Closing Balance
Sheet; and
(iii) no claim for assessment or collection of Taxes relating to
either of the Companies that is or may become payable by either any of them has
been notified in writing to the Companies or to CGG by any Governmental
Authority, and neither CGG nor either of the Companies has caused the period for
assessment or collection of any Taxes for which either of the Companies may be
liable to be extended.
(B) Schedule 3.1.5 sets forth the notifications received by CGG or the
Companies in respect of the most recent years for which the Tax Return
pertaining to income Taxes (impots sur les societes or the equivalent in
jurisdictions other than France) owed by or on behalf of each of the Companies
has been audited by the relevant Tax authorities.
(C) Without derogating from the representations and warranties
contained in this Article III, the Purchasers acknowledge that Flagship SA has
opted previously for tax consolidation with CGG as the parent company of the tax
consolidated group, and that Flagship SA will leave such group as a result of
the transactions contemplated hereby.
(D) No election pursuant to U.S. Treasury Regulation 301.7701-3(c) has
been filed by Flagship LLC.
3.1.6 PROPERTY AND ASSETS
(A) Neither of the Companies owns any real property or is bound under
any agreement to purchase any real property.
(B) Schedule 3.1.6(B) sets forth an accurate and complete list of all
real properties leased by either of the Companies (the "Leased Real
Properties").
(C) Except as set forth in Schedule 3.1.6(C), each of the Companies
owns or has a valid lease for all material items of machinery, equipment and
other tangible personal property which are required in order to conduct the
Flagship Business as presently conducted. All such items which are material to
the respective businesses of the Companies are in good condition, repair and
(where applicable) proper working order, having due regard to the use and age
thereof, reasonable wear and tear excepted. Each of the Companies has good and
marketable title to each such material item of machinery, equipment and other
tangible personal property purported to be owned by it, free and clear of any
Encumbrances other than Permitted Encumbrances.
- 16 -
20
3.1.7 MATERIAL CONTRACTS. Schedule 3.1.7 sets forth a complete and
accurate list of all the following Contracts (other than any such Contracts
identified in other Schedules) in effect to which either of the Companies is a
party and under which such Company has any material obligations or liabilities
continuing as of the date hereof (including, in the case of (B), and as far as
it relates to the Flagship Business, any Contracts to which CGG or a CGG
Flagship Affiliate is a party and under which such CGG Flagship Affiliate has
any material obligations or liabilities continuing as of the date hereof) :
(A) loan agreements, security agreements and other written
arrangements relating to the borrowing of money or for lines of credit (other
than intercompany loans and indebtedness);
(B) agreements and other arrangements with customers providing for (x)
the installation, configuration and maintenance during standard warranty periods
of any computer software products licensed to third parties ("Licensing
Agreements"), or (y) the servicing or maintenance of any computer software
products licensed to a third party pursuant to a Licensing Agreement following
the expiration of the standard warranty period (it being agreed that a Contract
shall be deemed to be a Licensing Agreement hereunder only if a Company has any
continuing obligations thereunder to deliver, install, configure or maintain
during standard warranty periods any computer software products licensed to
third parties);
(C) agreements and other arrangements for the sale of any assets or
properties (other than inventory) and for a sale price in excess of US$ 100,000
in any one case or for the grant of any options or preferential rights to
purchase any assets (other than inventory);
(D) guarantees or similar written arrangements pursuant to which
either of the Companies guarantees the obligations of any third party;
(E) contracts or commitments restricting either of the Companies from
engaging in or competing in any line of business or with any other Person;
(F) partnership or joint venture agreements;
(G) lease agreements in respect of the Leased Real Properties;
(H) research and development agreements;
(I) distribution agreements;
(J) agreements with Governmental Authorities;
(K) agency agreements; and
(L) any other contract or agreement material to the businesses of the
Companies (taken as a whole) made other than in the Ordinary Course of Business
pursuant to which annual payments in excess of US$ 100,000 may reasonably be
expected to be made by or to the Companies;
- 17 -
21
(the foregoing Contracts being referred to collectively as the "Material
Contracts" and individually as a "Material Contract"). Except as disclosed in
Schedule 3.1.7, none of the Material Contracts by its terms entitles the
counterparty to terminate, or to modify or accelerate any obligations or rights
under, such Material Contract solely by reason of a change of control of either
of the Companies, and neither CGG nor either of the Companies has received or
given written notice that a Company or any co-contractant is in material default
under any Material Contract, which default remains unremedied as at the date
hereof.
3.1.8 INTELLECTUAL PROPERTY
(A) Schedule 3.1.8(A)(I) identifies the Company Intellectual Property
Rights, which is registered with any Governmental Authority or for which an
application has been filed with a Governmental Authority. Schedule 3.1.8(A)(II)
identifies all other Company Intellectual Property Rights, excluding trade
secrets. Schedule 3.1.8(A)(III) identifies each Intellectual Property Right
licensed to either of the Companies by any Person (except for any Intellectual
Property Right that is licensed to either of the Companies under any third party
license generally available to the public at a cost of less than US$ 25,000),
and includes a copy of the license agreement under which such Intellectual
Property Right is being licensed to the relevant Company (the "Licensed
Intellectual Property Rights"). Except as disclosed in Schedule 3.1.8(A)(I) or
(II), the Companies are the sole and exclusive owners of all of the Company
Intellectual Property Rights identified in such Schedules, free and clear of all
Encumbrances (it being agreed that any licenses granted to third parties for the
non-exclusive use of any Company Intellectual Property Rights shall not be
deemed to constitute Encumbrances), and has a valid right to use all
Intellectual Property Rights identified in Schedule 3.1.8(A)(III). Except as
disclosed in Schedule 3.1.8(A)(I) or (II), neither of the Companies is obligated
to make any payment to any Person for the use of any Company Intellectual
Property Right. Except as disclosed on Schedule 3.1.8(A)(I) or (II), neither of
the Companies has developed jointly with any other Person any Company
Intellectual Property Right with respect to which such other Person has any
material rights. The Company Intellectual Property Rights and, to the knowledge
of CGG, the Licensed Intellectual Property Rights are subsisting, valid and
enforceable and have not been adjudged invalid or unenforceable in whole or in
part.
(B) The Companies have taken all reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Intellectual Property Rights (except Company Intellectual Property Rights whose
value would not be materially impaired by public disclosure) and otherwise to
maintain and protect the value of all Company Intellectual Property Rights. The
Companies have not (other than (x) as disclosed on Schedule 3.1.8(B), (y)
pursuant to a Licensing Agreement identified in Schedule 3.1.7(B) or (z)
otherwise under a customary license, escrow, maintenance, support,
non-disclosure, research and development or similar agreement in the Ordinary
Course of Business) disclosed or delivered to any third party, or permitted the
disclosure or delivery to any third party, of (i) the source code, or any
portion or aspect of the source code, of any Company Intellectual Property
Right, (ii) the object code, or any portion or aspect of the object code, of any
Company Intellectual Property Right, or (iii) any trade or financial secrets or
confidential lists of customers.
(C) All software applications and software assets are properly
documented and include all the required related documentation and user manuals,
API manuals, information
- 18 -
22
relating to the software programs, printed listings of code, detailed
description of all libraries and software and any patches, bug fixes,
workarounds and upgrades.
(D) To the knowledge of CGG, none of the Company Intellectual Property
Rights infringes or conflicts with any Intellectual Property Rights owned, used
or claimed by any other Person. To the knowledge of CGG, the Companies are not
infringing, misappropriating or making any unlawful use of, and the Companies
have not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Intellectual Property Right owned, used or claimed by any
other Person. To the knowledge of CGG, no other Person is infringing,
misappropriating or making any unlawful use of, and no Intellectual Property
Right owned or used by any other Person infringes or conflicts with, any Company
Intellectual Property Right.
(E) The Company Intellectual Property Rights and the Licensed
Intellectual Property Rights collectively constitute all the Intellectual
Property Rights reasonably required to enable the Companies to conduct the
Flagship Business as presently conducted.
3.1.9 INSURANCE. The insurance policies insuring the properties, assets
and operations of the Companies through the Closing were provided primarily
through CGG and its Affiliates and with respect to the Companies such group
coverage will terminate as at the Closing. Schedule 3.1.9 provides a list of the
material insurance policies maintained by or for the benefit of the Companies
and in effect immediately prior to the Closing. To the extent that with respect
to the Companies, any of such policies provide coverage after the date hereof in
relation to events occurring or periods prior to the date hereof, upon the
request of a Company, CGG shall use its reasonable commercial endeavors to
obtain indemnification under such policies for (and shall pay the obtained
indemnification to) the relevant Company (net of any costs to CGG or any of its
Affiliates).
3.1.10 RECORDS. The books of account, share transfer and account records,
minute books and similar records of the Companies have been duly maintained in
all material respects in accordance with all applicable legal requirements and
contain sufficient records of all matters required to be dealt with in such
records and are in the possession of the Companies. All material financial
transactions relating to the Companies have been recorded in the books and
records of the Companies to the extent required by, and in accordance with,
applicable generally accepted accounting principles and are in the possession of
the Companies.
3.1.11 CUSTOMER LISTS. Neither CGG nor, to the knowledge of CGG, any
previous shareholders or directors or any of their respective Affiliates is in
possession of a copy of the current customer lists developed and used by the
Companies in their respective businesses or the electronic data or other means
to generate a copy of any such lists after the date hereof (it being understood
and agreed that in relation to their own businesses, CGG and its Affiliates may
have customers in common with the Companies and may therefore have substantially
identical customer lists).
3.1.12 COMPUTER SYSTEMS. Except as disclosed on Schedule 3.1.12: (i) the
Companies own, license or have the right to use all of the computer systems
reasonably
- 19 -
23
required for the ongoing operation and conduct of their businesses as presently
conducted; (ii) the computer systems of the Companies, including, but not
limited to, mainframes, mini-computers and special purpose systems, are in
reasonable operating condition and have adequate documentation describing, among
other things, the operation of the hardware, required maintenance required
operational procedures, all operating systems, applications and utilities; (iii)
the documentation matches the implementation of the hardware and software in use
as of the date hereof; and (iv) all installed software is fully licensed for use
by the Companies.
3.1.13 BANK ACCOUNTS. Schedule 3.1.13 sets out a list of all bank
accounts opened in the name of either of the Companies, and the names of each
person authorized to operate each such account.
3.1.14 COMPLIANCE WITH LAWS. The Companies have complied with all
applicable Laws and Judgments except where the failure to so comply could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Neither of the Companies has received written notice which
remains outstanding of any material violation of any such Law or of any default
with respect to any Judgment applicable to the Companies or any of their
respective assets, properties or operations. The Companies have all material
Governmental Authorizations required for the conduct of their respective
businesses as presently conducted, and all such Governmental Authorizations are
in full force and effect, except where failure to obtain or maintain any such
Governmental Authorizations could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.1.15 LITIGATION. There is no Proceeding pending or, to the knowledge of
CGG, threatened in writing against (x) the Companies or (y) CGG or any of its
Affiliates in relation to the Flagship Business. There is not presently any
Judgment outstanding against the Companies which has not been satisfied or
complied with in full. To the knowledge of CGG, there is no basis for a claim
against the Companies which is reasonably likely to be asserted and which could
reasonably be expected to have a Material Adverse Effect on the Companies.
3.1.16 CONTRACTS WITH CERTAIN RELATED PARTIES. Except as disclosed in
Schedule 3.1.16, neither of the Companies is a party to any material Contract in
which any director, or to the knowledge of CGG, any former director,
shareholder, officer or former officer of CGG or the Companies, or any family
member thereof, has a material interest, directly or indirectly, including
arrangements for the payment of management or consulting fees of any kind
whatsoever.
3.1.17 ENVIRONMENTAL LIABILITIES
(A) (a) The Companies are in material compliance with all applicable
Laws relating to the pollution or the protection of the environment
("Environmental Laws") except where failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(b) CGG and, to the knowledge of CGG, the Companies have not received any
written communication that alleges that the Companies are not in material
compliance with all applicable Environmental Laws; (c) the Companies have all
material Governmental Authorizations required to be obtained by them pursuant to
Environmental Laws (the "Environmental Permits") for the conduct of their
respective
- 20 -
24
businesses as presently conducted, and all such Environmental Permits are in
full force and effect, except where failure to obtain or maintain any such
Environmental Permit could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(B) There is no claim or Proceeding based on an alleged violation of
the Environmental Laws (an "Environmental Claim") pending or, to the knowledge
of CGG, threatened in writing against or involving the Companies or against any
person or entity whose liability for any Environmental Claim the Companies have
retained or assumed either contractually or by operation of law which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(C) No work, repair or capital expenditure is planned nor, to the
knowledge of CGG, is any work, repair or capital expenditure required in respect
of the properties and assets (including real property) of the Companies pursuant
to or to comply with any Environmental Law, where the failure to undertake such
work, repair or capital expenditure could reasonably be expected to result in an
Environmental Claim having a Material Adverse Effect.
3.1.18 EMPLOYMENT AND LABOR MATTERS
(A) Schedule 3.1.18(A) sets forth (a) an accurate and complete list
of all the directors of Flagship SA and all the managers of Flagship LLC, and
(b) an accurate and complete list of the collective bargaining agreements
(conventions collectives and accords d'entreprise or their equivalent in
jurisdictions other than France) applicable to any of the Companies' employees.
(B) Schedule 3.1.18(B) sets forth: (i) a complete list of the names of
the employees of each of the Companies on the date hereof, and (ii) the salary,
benefits and other compensation payable to each such employee, together with a
copy of any written employment agreement with any of such employees.
(C) Since December 30, 1999, except to the extent disclosed in
Schedule 3.1.18(C), neither of the Companies has (a) paid or agreed to pay any
bonuses or made or agreed to make any increase in the rate of wages, salaries or
other remuneration of any of its employees generally other than in the Ordinary
Course of Business or as dictated by applicable Law or the applicable collective
bargaining agreement, or (b) changed its hiring or termination policies or
practices in any material respect.
(D) Except as disclosed on Schedule 3.1.18(D), there are no severance
or similar undertakings providing for compensation in case of termination of
employment and no pensions or retirement benefits, bonus, profit sharing, stock
purchase or stock option plans, company saving plans or employee funds or
similar employee benefit plans or arrangements (such plans, funds or
arrangements, the "Benefit Plans") sponsored or maintained by either of the
Companies and providing benefits of economic value to employees which (x) in the
case of Flagship SA, provide for any individual or collective terms and
conditions of employment that are, in any material respect, more favorable to
employees than the applicable collective bargaining agreement or the applicable
requirements of Law, or (y) in the case of Flagship LLC, which provide for any
individual or collective terms and conditions of employment that are, in any
material respect, more favorable to employees than either (a) the applicable
collective
- 21 -
25
bargaining agreement or the applicable requirements of Law, or (b) if no such
agreement or legal requirements apply, than such terms and conditions as are
reasonably customary for employees of similarly situated companies carrying on
similar businesses.
(E) CGG has made (or has caused the Companies to make) such
notifications to and effected such consultations with, the workers councils
(comites d'entreprise) or equivalent bodies of the Companies as are required by
applicable Law in connection with the sale of the Securities contemplated
hereby.
3.1.19 ACCOUNTS RECEIVABLE. All accounts receivable reflected in the
Final Closing Balance Sheet will represent valid obligations, and, to the
knowledge of CGG, will be collectible (subject to diligent prosecution of
deliquent payors and net of reserves for doubtful accounts included in the Final
Closing Balance Sheet) for their full value in the Ordinary Course of Business
of the Companies (it being understood and agreed that the foregoing warranty
does not apply to the CGG Flagship Accounts Receivable or to the Geovecteur
Accounts Receivable).
3.1.20 FSH. Schedule 3.1.20 sets forth a description of the Companies
obligations to FSH.
3.1.21 MATTERS PERTAINING TO CGG AND ITS AFFILIATES
(A) Set forth on Schedule 3.1.21(A) is a copy of the documentation
pursuant to which CGG and its Affiliates have conveyed to the Companies, prior
to September 30, 2000, all material items of tangible personal property used
directly in the Flagship Business which were owned by CGG or one of its
Affiliates as of June 30, 2000.
(B) Set forth on Schedule 3.1.21(B) is a copy of the documentation
pursuant to which CGG Canada has assigned to Flagship SA, prior to September 30,
2000, all of its right, title and interest to Nexmodel and the other rights
acquired by CGG Canada from Geonexus Corp. under an agreement dated July 29,
1998.
(C) Set forth on Schedule 3.1.21(C) is a copy of the documentation
pursuant to which CGG and its Affiliates have purchased from the Companies,
prior to September 30, 2000, all material items of tangible personal property
used directly in the Geovecteur Business which were owned by the Companies as of
June 30, 2000 and reflected in the June Financial Statements.
(D) Except as contemplated by this Agreement or by the Umbrella
Services Agreement or as disclosed on Schedule 3.1.21(D), after the Closing,
neither CGG (or any of its Affiliates) nor either of the Companies will be bound
by any contractual obligation or commitment in favor of, respectively, the
Companies or CGG (or any of its Affiliates).
(E) All Intercompany Payables identified with reasonable certainty as
to their amount by CGG as of September 25, 2000 have been settled in full on or
prior to September 30, 2000 (other than amounts relating to corporate tax
advance payments previously made by Flagship SA to CGG), and no material amount
of Intercompany Payables have been incurred since September 25, 2000.
- 22 -
26
(F) Since June 30, 2000, no professional fees or expenses (including
legal and accounting fees) relating to the sale of the Securities have been
invoiced to either of the Companies.
3.1.22 DISCLOSURE. To the knowledge of CGG, there is no fact or facts
peculiar to the Companies which CGG has not disclosed to Paradigm in writing
which could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.1.23 SECURITIES ACT MATTERS. CGG is acquiring the Paradigm Shares for
its own account, for investment purposes only, and not with a view to the resale
or distribution of any part thereof in violation of any applicable securities
law. CGG understands that the Paradigm Shares have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of the various states of the United States, by reason of an
exemption from the registration provisions thereunder. CGG acknowledges that its
representations and warranties contained in this Section are being relied upon
by Paradigm as a basis for the exemption of the issuance of the Paradigm Shares
hereunder from the registration requirements of the Securities Act and any
applicable state securities laws. CGG understands that all certificates for the
Paradigm Shares issued to CGG shall bear a legend in substantially the following
form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE
ISSUER OF AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER, OR
OTHER EVIDENCE REASONABLY ACCEPTABLE TO THE ISSUER, THAT SUCH DISPOSITION
WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers make the following representations and warranties to CGG:
4.1.1 ORGANIZATION AND AUTHORITY OF THE PURCHASERS.
(A) Paradigm is a company duly incorporated and organized and is
validly existing under the Laws of the State of Israel and has not been
dissolved. Schedule 4.1.1 sets forth a true, accurate and complete copy of the
Organizational Documents of Paradigm. Paradigm has the requisite corporate power
and authority to enter into this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder. The entering into of
this Agreement and the Registration Rights Agreement and the performance by
Paradigm of its obligations hereunder and thereunder have been duly authorized
by all necessary action by the board of directors of Paradigm and no other
corporate proceeding on
- 23 -
27
the part of Paradigm are necessary to authorize Paradigm's entering into this
Agreement or the Registration Rights Agreement or the performance of its
obligations hereunder or thereunder, including the issuance to CGG of the
Paradigm Shares. This Agreement and the Registration Rights Agreement have been
duly executed by Paradigm and, assuming the due authorization and execution of
this Agreement and the Registration Rights Agreement by CGG, constitute the
legal, valid and binding obligations of Paradigm, enforceable against it in
accordance with their respective terms.
(B) Paradigm USA is a corporation duly incorporated and organized and
is validly existing under the Laws of Delaware and has not been dissolved.
Paradigm USA has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The entering into of this
Agreement and the performance by Paradigm USA of its obligations hereunder have
been duly authorized by all necessary action by the board of directors of
Paradigm USA and no other corporate proceeding on the part of Paradigm USA are
necessary to authorize Paradigm USA's entering into this Agreement or the
performance of its obligations hereunder. This Agreement has been duly executed
by Paradigm USA and, assuming the due authorization and execution of this
Agreement by CGG, constitutes a legal, valid and binding obligation of Paradigm
USA, enforceable against it in accordance with its terms.
4.1.2 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement and the Registration Rights Agreement by the relevant Purchasers,
nor the consummation of the transactions contemplated hereby or thereby nor the
fulfillment by the relevant Purchasers of the terms, conditions and provisions
hereof and thereof will (with or without the giving of notice or lapse of time,
or both):
(A) contravene or violate the Organizational Documents or any
resolutions of any of the Purchasers or any amendments thereto or restatements
thereof;
(B) contravene or violate any Laws or Judgments applicable to any of
the Purchasers or require any Governmental Authorizations (other than filings to
be made after the Closing under the provisions of the Exchange Act, as amended
and with the Israeli Registrar of Companies);
(C) contravene, violate or result in the breach of, or give any other
party the right to declare a default under, accelerate the performance of, or
cancel, modify or terminate its obligations under, any material Contract to
which any of the Purchasers is a party or by which it is bound; or
(D) result in the creation or imposition of any Encumbrance on any of
the assets of any of the Purchasers.
4.1.3 ISSUANCE OF PARADIGM SHARES. The Paradigm Shares to be sold and
issued to CGG in accordance with the terms of this Agreement have been duly
authorized and, when issued as contemplated hereby, will be validly issued in
compliance with all applicable Laws, fully paid and non-assessable, and no other
Person has any preemptive right, option, warrant, subscription agreement or
other right with respect to such Shares. Upon the issuance of the Paradigm
Shares, CGG will acquire good and marketable title to the Paradigm Shares free
- 24 -
28
and clear of any and all Encumbrances, except such Encumbrances as may be
created pursuant to this Agreement or by CGG.
4.1.4 COMMISSION REPORTS. Paradigm has filed with the United States
Securities and Exchange Commission (the "Commission") all forms, reports,
filings, proxy materials, registration statements and other documents required
to be filed by it under the U.S. federal securities laws (the "Commission
Filings"). The Commission Filings (as of their respective filing dates, mailing
dates or effective dates, as the case may be) complied in all material respects
with the applicable requirements of the U.S. federal securities laws and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets (including the related
notes) included in the Commission Filings fairly presents in all material
respects the financial position of Paradigm and its consolidated Subsidiaries as
of the respective date thereof, and each of the other related statements
(including the related notes) included therein fairly presents in all material
respects the results of operations and cash flows of Paradigm and its
consolidated Subsidiaries for the respective period or as of the respective date
set forth therein. Each of the consolidated balance sheets and statements of
operations and cash flows (including the related notes) included in the
Commission Filings has been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the period involved,
except as otherwise noted therein, and subject, in the case of unaudited interim
financial statements, to normal year-end adjustments. Paradigm has fully
complied in all material respects with the Israeli Securities Law of 1968 and
with the applicable term of any exemption granted thereunder. Paradigm
acknowledges that CGG is relying on the Commission Filings with respect to its
purchase of the Paradigm Shares pursuant to this Agreement. Since June 30, 2000,
there has been no material adverse change in the business, financial condition
or results of Paradigm and its Subsidiaries, taken as a whole, other than
changes prevailing in the business sector in which Paradigm operates, and
Paradigm and its Subsidiaries have not entered into any material transactions
(other than in the Ordinary Course of Business) other than as reflected in the
Commission Filings.
4.1.5 LISTING OF ORDINARY SHARES. The outstanding Ordinary Shares of
Paradigm are listed on the Nasdaq National Market, and Paradigm's listing
agreement with respect thereto is in full force and effect. No action has been
taken or threatened by Nasdaq with respect to the delisting or suspension from
trading of the Ordinary Shares. The Paradigm Shares to be issued to CGG have
been approved for listing on the Nasdaq National Market (subject to notice of
issuance).
4.1.6 FOREIGN PRIVATE ISSUER. Paradigm is a "foreign private issuer," as
defined in Rule 3b-4 of the Exchange Act.
4.1.7 SHARE CAPITAL. The authorized share capital of Paradigm consists
in its entirety of 18,000,000 Ordinary Shares, of which, as of August 30, 2000,
13,191,902 are issued and outstanding and 2,000,000 Special Preferred Shares,
none of which are issued and outstanding. In addition, as of August 30, 2000 (a)
an aggregate of 2,239,814 Ordinary Shares are reserved for issuance pursuant to
Paradigm's 1994 Stock Option Plan for key employees, the May 1994 Stock Option
Plan, the 1994 General Stock Option Plan, the 1997 Stock Option Plan for
Qualifying Israel Employees, the 1997 Executive Stock Option Plan
- 25 -
29
and the 1997 Stock Option Plan for U.S. Employees (collectively, the "1994 and
1997 Stock Option Plans"), of which options to purchase 1,891,406 Ordinary
Shares were outstanding as of August 30, 2000; and (b) 612,861 Ordinary Shares
are reserved for issuance in connection with the exercise of certain outstanding
warrants. All of the above outstanding shares have been duly authorized and
validly issued, are fully paid and non-assessable, are not subject to preemptive
rights, and are owned by Paradigm's shareholders free and clear of any
Encumbrances imposed or created by Paradigm. Except as set forth in Schedule
4.1.7, none of the outstanding capital shares of Paradigm are subject to any
co-sale right, registration right, right of first refusal or other similar right
to purchase any shares pursuant to any agreement to which Paradigm is a party or
otherwise imposed or created by Paradigm or imposed by Israeli law. Other than
as described above, there are no outstanding options, warrants or other rights
calling for the issuance of, and no commitments, plans or arrangements to issue,
any capital shares of Paradigm or any security convertible into or exchangeable
for share capital of Paradigm. All shares to be issued upon the exercise of
outstanding warrants or options or upon the conversion of any security shall be,
when issued or sold in accordance with the terms of the applicable agreements,
validly issued, fully paid and non-assessable. An "Initial Public Offering", as
such term is used in Paradigm's Articles of Association, has occurred.
4.1.8 LITIGATION. Except as disclosed in Commission Filings, there is no
claim or Proceeding pending or, to the knowledge of Paradigm, threatened in
writing against or affecting Paradigm or any of its Subsidiaries or the assets
of any of them which could have, individually or in the aggregate, a Material
Adverse Effect on Paradigm and its Subsidiaries (taken as a whole), or a
material adverse effect on Paradigm's ability to perform or observe any
obligation or condition under this Agreement. To the knowledge of Paradigm,
there is no basis for a claim against Paradigm or any of its Subsidiaries which
is reasonably likely to be asserted and which could reasonably be expected to
have a Material Adverse Effect on Paradigm and its Subsidiaries (taken as a
whole).
4.1.9 INDUSTRIAL COMPANY. Paradigm is qualified as an "Industrial
Company" within the definition of the Law for the Encouragement of Industry
(Taxes), 1969. To the knowledge of Paradigm, there is no reason for
disqualifying Paradigm from being an Industrial Company, nor would such reason
arise through the conduct and performance of Paradigm's business and operations
in accordance with its plans and projections (including as a result of the
transactions contemplated hereby).
4.1.10 COMPLIANCE WITH LAWS. Each of Paradigm and its Subsidiaries is in
compliance with all Laws and Judgments applicable to it, except where the
failure to so comply could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, including without limitation, the
provisions of the Law for Encouragement of Capital Investments, 1959, applicable
to Paradigm and the terms of any "Approval Letter" issued to Paradigm thereunder
and its extensions, amendments and supplements, if any.
4.1.11 DISCLOSURE. To the knowledge of Paradigm, there is no fact or
facts peculiar to Paradigm or any of its Subsidiaries which Paradigm has not
disclosed to CGG in writing or in the Commission Filings which could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
- 26 -
30
4.2 PURCHASERS' ACKNOWLEDGMENT
The Purchasers acknowledge that they and their advisors have been given
access to a data room organized by CGG and have reviewed to their reasonable
satisfaction the documents and information listed on Schedule 4.2 (the "Data
Room Documentation" (copies of which are attached to such Schedule except to the
extent appearing at other Schedules)), and in entering into this Agreement, have
taken into account their own review and analysis of the Data Room Documentation
(it being understood that in relation to any matter covered by a representation
or warranty of CGG expressly set forth in this Agreement, the Purchasers shall
be entitled to rely solely upon such representation or warranty).
ARTICLE V
COVENANTS OF CGG
5.1 GEOVECTEUR ACCOUNTS RECEIVABLE
CGG shall, and shall procure that its Affiliates shall, promptly upon
their receipt from third parties of payment of amounts due to them under
accounts receivable outstanding on September 30, 2000 and related to the
Geovecteur Business, pay the amount thereof to Flagship on account of the
corresponding Geovecteur Account Receivable. On December 29, 2000 (or if such
date is not a Business Day, on the immediately preceding Business Day), CGG will
pay to the Companies, without any set-off or reduction, the unpaid balance of
the Geovecteur Accounts Receivable (net of reserves for doubtful accounts
included in the Final Closing Balance Sheet), whereupon the Purchasers shall
cause the Companies to assign all such unpaid Geovecteur Accounts Receivable to
CGG.
5.2 CGG FLAGSHIP ACCOUNTS RECEIVABLE
CGG shall, and shall procure that its Affiliates shall, promptly upon
their receipt from third parties of payment of amounts due to them under
accounts receivable outstanding on September 30, 2000 and related to the
Flagship Business, pay the amount thereof to Flagship on account of the
corresponding CGG Flagship Account Receivable. On March 31, 2001 (or if such
date is not a Business Day, on the immediately preceding Business Day), CGG will
pay to the Companies, without any set-off or reduction, the unpaid balance of
the CGG Flagship Accounts Receivable (net of reserves for doubtful accounts
included in the Final Closing Balance Sheet).
5.3 COVENANT NOT TO COMPETE
Except as contemplated by the Umbrella Services Agreement or the Support
Agreement:
(i) for a period of thirty-six (36) months following the date
hereof, CGG shall not, and shall procure that all of its Affiliates which it
controls do not, directly or indirectly, engage in the commercial sale (i.e.,
through the granting of licensee) anywhere in the world of any products the same
or similar to those currently included in the Flagship Business; and
- 27 -
31
(ii) CGG shall not, and shall procure that all of its Affiliates
which it controls do not, use commercially the names "Flagship", "Petrosystems",
"Stratimagic", "Seisfacies", "GEM", "Integral Plus", "Nexmodel" and "StratQC" or
otherwise simulate any of the foregoing names.
CGG and the Purchasers acknowledge the fact that a part of Stratimagic (the
"propagator") is included in some of the tools used by CGG or its Affiliates
centers in the course of their service activity to the clients. Should any of
the tools making use of the "propagator" be sold to a client (commercial sale
through the granting of license) by CGG or any of its Affiliates, a royalty of
U.S.$ 12,000 shall be paid to the Purchasers by CGG. It is specified that the
use of the "propagator" by CGG or its Affiliates is made on an "as is" basis and
that neither CGG nor any of its Affiliates will be entitled to claim support or
the supply of updates to such products. CGG further undertakes to pay all third
party royalties payments if and when due upon written notification by the
Purchasers or the Companies.
Furthermore, CGG and the Purchasers (for themselves and on behalf of the
Companies) recognize that a "software development toolbox" (i.e., a set of
software components; libraries, re-usables and modules which are not
applications) related to and derived from GEM exists within the CGG or its
Affiliates software development teams and that this software development toolbox
has independently evolved during the past two years and is now significantly
different. The parties nevertheless acknowledge that some similarities still
exist at the level of the non-geoscience common tools (particularly drag and
drop and base map).
The parties expressly agree that CGG and its Affiliates will retain the entire
and non restricted ownership of this software development toolbox and will
therefore be entitled to further use, develop and maintain such tool box. CGG
agrees not to, and shall procure that its Affiliates do not use the name "GEM"
any longer in any external communication. In consequence therefore, the parties
agree that any amount that may be due to the FSH will be shared equally between
CGG and Flagship SA and therefore CGG will reimburse as promptly as practicable,
upon presentation of appropriate documentation, half of any amount paid by
Flagship S.A. to the FSH with respect to the GEM project.
5.4 LOCK-UP
During the twelve-month period commencing on the date hereof, CGG and its
Affiliates shall not sell or otherwise dispose of, or enter into any agreement
to sell or dispose of, any of the Paradigm Shares without the authorization of
the Paradigm Board, except for (i) such sales or other dispositions as may be
permitted by the terms of the Registration Rights Agreement, and (ii) transfers
of Paradigm Shares to Affiliates.
5.5 RECOMMENDED THIRD PARTY OFFER
In the event that an third party which is not an Affiliate of Paradigm (a
"Third Party") makes an offer to purchase all or substantially all of the
outstanding shares of Paradigm (the "Third Party Offer"), which Third Party
Offer has been approved and recommended by the board of directors of Paradigm
(the "Paradigm Board"), and shareholders holding at least 75% of the outstanding
Ordinary Shares of Paradigm have accepted the Third Party Offer, CGG irrevocably
agrees, on behalf of itself and all of its Affiliates which it controls, to sell
their Ordinary Shares to the Third Party on the terms of the Third Party Offer,
provided that:
- 28 -
32
(i) pursuant to the terms of the Third Party Offer, CGG and its
selling Affiliates will receive cash or securities traded on a major
internationally recognized stock exchange or regulated electronic trading market
which are of a number and character such that they may be disposed of by CGG and
its selling Affiliates on such stock exchange or regulated electronic trading
market without any legal or contractual limitations within twelve (12) months of
the date of receipt; and
(ii) the sale of any such Ordinary Shares and/or the acceptance
or receipt of any such securities would not violate any Laws or any material
Contracts to which CGG or any of its selling Affiliates is subject.
5.6 RETENTION OF RECORDS
CGG agrees that for a period of not less than four (4) years following
the date hereof, it shall not destroy or otherwise dispose of any of the books
and records of the Companies existing as of the date hereof except with the
prior written consent of Purchasers, which consent shall not be unreasonably
withheld. CGG agrees that it shall make available to Purchasers and their
representatives and agents all such books and records, and permit Purchasers and
their representatives and agents to examine, make extracts from and, at their
expense, copy such books and records at any time during normal business hours
for any proper business purpose.
ARTICLE VI
COVENANTS OF PARADIGM
6.1 GUARANTEED OBLIGATIONS
The Purchasers shall cause the Companies fully to perform and observe all
the obligations required to be performed and observed by the Companies under
each agreement or other obligation of either of them identified on Schedule 6.1
and with respect to which CGG or any of its Affiliates is obligated as a
guarantor or assignor or identified as a party thereto, and shall promptly
reimburse CGG and its Affiliates for any payments made or other liabilities
incurred by any of them in respect of any such obligations; provided, however,
that the Purchasers shall use their best efforts to obtain the complete release
and discharge of the CGG and such Affiliates from such obligations by duly
executed instruments in form reasonably satisfactory to the CGG within sixty
(60) days of the date hereof and, if after using such best efforts, the
Purchasers are unable to obtain such release and discharge with respect to any
of such obligations, the Purchasers shall thereafter cause the Companies to take
all action necessary to terminate such obligation as soon as possible, including
but not limited to exercising any option to prepay or purchase contained
therein. Pending such complete release and discharge or termination, the
Purchasers shall not permit the Companies or any of their successors to default
under or amend or modify the terms of any such obligation for which CGG or any
of its Affiliates could still be liable, directly or indirectly, or exercise any
right to, or agree to, extend the terms of such obligation or assign or
subcontract any agreement or arrangement containing any such obligation to any
party.
- 29 -
33
6.2 RETENTION OF RECORDS
The Purchasers agree that for a period of not less than four (4) years
following the date hereof, they shall not, and shall not permit any of the
Companies to, destroy or otherwise dispose of any of the books and records of
the Companies existing as of the date hereof except with the prior written
consent of CGG, which consent shall not be unreasonably withheld. The Purchasers
agree that they shall, and they shall cause the Companies to, make available to
CGG and its representatives and agents all such books and records, and permit
CGG and its representatives and agents to examine, make extracts from and, at
their expense, copy such books and records at any time during normal business
hours for any proper business purpose.
6.3 PARADIGM BOARD REPRESENTATION
6.3.1 As long as CGG and its Affiliates hold in the aggregate more than
5% of the outstanding Ordinary Shares of Paradigm, Paradigm will recommend to
the shareholders of Paradigm prior to any general meeting of shareholders of
Paradigm, at which directors may be proposed to be elected, to elect a
representative of CGG (the "CGG Representative") to the board of directors of
Paradigm (the "Paradigm Board"), and will take all lawful actions to solicit
such election provided that:
(i) the CGG Representative is not directly involved in any
business in competition with any material businesses of Paradigm viz.:
Geoscience software and data processing and interpretation; and
(ii) prior to the third anniversary date of this Agreement,
without the approval of the Paradigm Board, CGG and its Affiliates have not
acquired additional Ordinary Shares causing them to then hold in the aggregate a
percentage of the outstanding Ordinary Shares in excess of the percentage held
by CGG immediately after issuance of the Paradigm Shares.
6.3.2 Paradigm will give CGG written notice reasonably in advance of the
preparation of proxy materials for each shareholders meeting at which directors
are proposed to be elected to permit CGG to designate a CGG Representative to be
included therein as a nominee for election as a director.
6.3.3 Paradigm agrees, both for the benefit of CGG and the benefit of
any CGG Representative elected to the Paradigm Board (as an express third party
beneficiary of this undertaking):
(i) to ensure that any CGG Representative elected to the
Paradigm Board is covered by and benefits from Directors and Officers insurance
to the fullest extent then applicable to any other member of the Paradigm Board;
(ii) to use its best efforts to comply with the requirements of
the Israeli Companies Law, 1999 with respect to the election of external
directors and the appointment of a qualifying Audit Committee by no later than
the shareholders' meeting at which the CGG Representative is nominated for
election;
(iii) to use its best efforts to amend its Articles of
Association by no later than the shareholders' meeting at which the CGG
Representative is nominated for election, to
- 30 -
34
authorize exculpation, indemnification and insurance of its directors to the
fullest extent permitted by the Israeli Companies Law, 1999; and
(iv) to in all cases ensure that any CGG Representative elected
to the Paradigm Board is indemnified by Paradigm for his acts or omissions as a
director to the fullest extent permitted by applicable Law (it being understood
that if Paradigm enters into any indemnification arrangements with any of its
officers or directors, it shall be required to enter into indemnification
arrangements with the CGG Representative equivalent to the most favorable
treatment accorded any of its officers or directors). Paradigm shall indemnify
each of CGG and any CGG Representatives for and against any Damages suffered or
incurred by CGG and/or the CGG Representative as a result of any breach of
Paradigm's undertakings in this Section without reference to any of the
limitations set forth in Section 7.7 hereof.
6.4 SPECIAL PREFERRED SHARES
Paradigm will not issue any Special Preferred Shares which currently
exist in Paradigm's registered share capital, without issuing at the same time
to CGG a portion of such shares issued which portion corresponds to CGG's then
portion of the outstanding Ordinary Shares of Paradigm.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL OF CGG'S REPRESENTATIONS AND WARRANTIES
The representations and warranties of CGG contained in this Agreement
shall survive the Closing for the benefit of the Purchasers until the second
anniversary of the date hereof, except that the representations and warranties
of CGG set forth in Section 3.1.5 (Taxes) and Section 3.1.17 (Employment and
Labor Matters) to the extent that they relate to Taxes and Social Charges,
respectively, shall survive the Closing for the benefit of the Purchasers until
the third anniversary of the date hereof. If at any time prior to the relevant
expiration date a Claim Notice (setting forth a factual basis sufficient to
demonstrate the validity of the claim of a material inaccuracy or breach of a
representation or warranty) shall have been properly delivered in accordance
with the terms of this Agreement, the corresponding Claim shall survive until
the time of its final determination or settlement.
7.2 SURVIVAL OF PURCHASERS' REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Purchasers contained in this
Agreement shall survive the Closing for the benefit of CGG until the second
anniversary of the date hereof. If at any time prior to the second anniversary
date, a Claim Notice (setting forth a factual basis sufficient to demonstrate
the validity of the claim of a material inaccuracy or breach of a representation
or warranty) shall have been properly delivered in accordance with the terms of
this Agreement, the corresponding Claim shall survive until the time of its
final determination or settlement.
- 31 -
35
7.3 SURVIVAL OF COVENANTS
Except as otherwise provided in this Agreement, all covenants of CGG and
the Purchasers, as the case may be, contained in this Agreement shall survive
the Closing for the benefit of the Purchasers or CGG, as the case may be,
indefinitely or for the period specifically specified therefor.
7.4 INDEMNIFICATION
7.4.1 OBLIGATION OF CGG
From and after the Closing and subject to the provisions of this
Article VII, CGG will indemnify and hold the Purchasers harmless for, and will
pay to the appropriate Purchaser (as a partial repayment of the Purchase Price)
the amount of, any claims, demands, actions, cause of action, damages, losses,
cost, liability or expense (including reasonable legal fees, but excluding lost
profits and any consequential, incidental or indirect damages) (collectively,
"Damages"), which the Purchasers or the Companies may actually suffer or incur
directly as a result or arising out of:
(A) any non-fulfillment of any covenant on the part of CGG contained
in this Agreement;
(B) any inaccuracies in or breach of any of CGG's representations or
warranties contained in this Agreement; or
(C) any Excess Geovecteur Liabilities.
From and after the Closing, the right to indemnification provided for in this
Section 7.4.1 shall be the Purchasers' exclusive remedy for monetary damages for
any such non-fulfillment of a covenant or inaccuracy in or breach of any
representation or warranty or specific indemnity, and the Purchaser waives any
other remedies that it may have (excluding specific performance).
7.4.2 OBLIGATION OF THE PURCHASERS
From and after the Closing and subject to the provisions of this
Article VII, the Purchasers will indemnify and hold CGG harmless for, and will
pay to CGG the amount of, any Damages which CGG or CGG Americas may actually
suffer or incur directly as a result or arising out of:
(A) any non-fulfillment of any covenant on the part of the Purchasers
contained in this Agreement; and
(B) any inaccuracies in or breach of any of the Purchasers'
representations or warranties contained in this Agreement.
From and after the Closing, the right to indemnification provided for in this
Section 7.4.2 shall be CGG's exclusive remedy for monetary damages for any such
non-fulfillment of a covenant or inaccuracy in or breach of any representation
or warranty, and CGG waives any other remedies that it may have (excluding
specific performance).
- 32 -
36
7.5 PROCEDURE FOR INDEMNIFICATION
The party making a claim for indemnification under this Article VII
shall, for the purposes of this Agreement, be referred to as the "Indemnified
Party" and the party or parties against whom such claims are asserted under this
Article VII shall, for the purposes of this Agreement, be referred to as the
"Indemnifying Party". All claims by any Indemnified Party under this Article VII
shall be asserted and resolved as follows:
7.5.1 CLAIM NOTICES
In the event that (A) any claim, demand or Proceeding is asserted
or instituted by any Person other than the parties hereto and their respective
Affiliates (a "Third Party") which, if successful, could give rise to Damages
for which an Indemnifying Party would be liable to an Indemnified Party
hereunder (any such claim, demand or Proceeding, a "Third Party Claim"), or (B)
any Indemnified Party hereunder shall have a claim to be indemnified by any
Indemnifying Party hereunder which does not involve a Third Party Claim (any
such claim, a "Direct Claim"), the Indemnified Party shall send to the
Indemnifying Party a written notice (a "Claim Notice") specifying in reasonable
detail the factual basis of such claim or demand and the amount or a good faith
estimated amount of related Damages (which estimate shall not be conclusive of
the final amount of such claim and demand) and such available supporting
evidence as may reasonably be required by the Indemnifying Party to assess the
merits of the claim and the computation or estimate of Damages.
7.5.2 TIME FOR CLAIM NOTICE
The Indemnified Party shall send a Claim Notice (x) in the case of
a Third Party Claim, within thirty (30) days of receipt of actual notice of such
Third Party Claim (or such shorter period as may be warranted under the
circumstances); and (y) in the case of a Direct Claim, with reasonable
promptness in view of the circumstances (but in no event later than sixty (60)
days after the Indemnified Party (including the Companies in the case of the
Purchasers) first becomes aware of the facts upon which the Direct Claim is
based).
7.5.3 DIRECT CLAIMS
In the event of a Direct Claim, the Indemnifying Party shall have
thirty (30) days following its receipt of the relevant Claim Notice (or if the
amount of the Claim was not determined at the time of the Claim Notice, the date
on which amount of the Claim has been notified by the Indemnified Party) (the
"Direct Claim Review Period") to make such investigation of the Claim as
reasonably necessary to determine the validity of the Claim. For the purpose of
such investigation, the Indemnified Party shall make available to the
Indemnifying Party the information relied upon by the Indemnified Party to
substantiate the Claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of the Direct Claim Review Period (or any
mutually agreed upon extension thereof) to the validity and amount of the claim,
the Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim, in the event that only part of the amount of
the Claim is in dispute, the Indemnifying Party shall immediately pay the full
amount which is not in dispute. If the Indemnified Party and the Indemnifying
Party do not reach agreement on or prior to the date of the expiration of the
Direct Claim Review Period or if the Indemnifying Party notifies the Indemnified
Party during the Direct Claim Review Period
- 33 -
37
that it disputes its liability to the Indemnified Party in respect of the
underlying Claim, setting forth the reasons for such objection, the Indemnified
Party shall have one hundred eighty (180) days after the first to occur of (x)
the expiration of the Direct Claim Review Period, and (y) the date it receives
any such notification from the Indemnifying Party, to commence arbitration
proceedings against the Indemnifying Party as provided by Section 8.7 of this
Agreement. If the Indemnified Party fails for any reason (other than
impossibility at law) to so commence arbitration proceedings within such one
hundred eighty (180) day period, such Direct Claim will be barred and the
Indemnified Party shall be deemed to have irrevocably waived its rights to
pursue any other claim against the Indemnifying Party based on the same facts,
events or circumstances.
7.5.4 THIRD PARTY CLAIMS
(A) THIRD PARTY CLAIM REVIEW PERIOD. In the event of a Third Party
Claim, the Indemnifying Party shall have thirty (30) days following its receipt
of the relevant Claim Notice (the "Third Party Claim Review Period") to make
such investigation of the underlying claim as it considers necessary or
desirable and to notify the Indemnified Party whether or not it disputes its
liability to the Indemnified Party in respect of such Third Party Claim. If the
Indemnifying Party does not notify the Indemnified Party during the Third Party
Claim Review Period that it disputes its liability to the Indemnified Party in
respect of the relevant Third Party Claim, the Indemnifying Party shall be
deemed to have acknowledged its liability to the Indemnified Party in respect of
such Third Party Claim. If the Indemnifying Party notifies the Indemnified Party
during the Third Party Claim Review Period that it disputes its liability to the
Indemnified Party in respect of the relevant Third Party Claim, setting forth
the reasons for such objection, the Indemnified Party shall have one hundred
eighty (180) days after the date it receives any such notification from the
Indemnifying Party to commence arbitration proceedings against the Indemnifying
Party as provided by Section 8.7 of this Agreement. If the Indemnified Party
fails for any reason (other than impossibility at law) to commence arbitration
proceedings within such one hundred eighty (180) day period, the Indemnified
Party's claim in respect of such Third Party Claim shall be barred and the
Indemnified Party shall be deemed to have irrevocably waived any rights to
pursue any other claims against the Indemnifying Party in respect of such Third
Party Claim.
(B) DEFENSE OF THIRD PARTY CLAIM. Until such time, if any, as it is
determined or agreed that the Indemnifying Party has no liability to the
Indemnified Party in respect of a particular Third Party Claim, the Indemnifying
Party shall have the right to elect, by written notice delivered to the
Indemnified Party within fifteen (15) Business Days of receipt by the
Indemnifying Party of the Claim Notice from the Indemnified Party in respect of
the relevant Third Party Claim, at the sole expense of the Indemnifying Party,
to participate in or assume control of the negotiation, settlement or defense of
the Third Party Claim, provided that:
(i) such will be done at all times in a diligent and bona fide
matter;
(ii) the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party (upon any eventual determination
of its liability) in accordance with, and subject to, the terms contained in
this Agreement in respect of that Third Party Claim; and
- 34 -
38
(iii) the Indemnifying Party shall pay all reasonable
out-of-pocket expenses incurred by the Indemnified Party as a result of such
participation or assumption.
If the Indemnifying Party elects to assume such control, the Indemnified Party
shall co-operate with the Indemnifying Party and its counsel in the defense of
such Third Party Claim and shall refrain from taking any actions which might
jeopardize or interfere with its defense. The Indemnified Party shall have the
right to participate in the negotiation, settlement or defense of any such Third
Party Claim at its own expense. If the Indemnifying Party does not so elect or,
having elected to assume such control, thereafter fails to proceed with the
settlement or defense of any such Third Party Claim, the Indemnified Party shall
be entitled to assume such control. In such case, the Indemnifying Party shall
co-operate where necessary with the Indemnified Party and its counsel in
connection with such Third Party Claim and, subject to subsection (D) below, the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party with respect to such Third Party Claim.
(C) COUNTERCLAIM AND CROSS-CLAIM. If so requested by an Indemnifying
Party and related to the claim in question, the Indemnified Party shall make (or
in the case of the Purchasers, shall cause the relevant Companies to make) any
counterclaim against any Person asserting such Third Party Claim or any
cross-claim against any other Person which may be liable. The Indemnifying Party
shall bear the cost of any such counterclaim or cross-claim, which shall not be
settled without the prior written consent of the Indemnifying Party.
(D) SETTLEMENT OF THIRD PARTY CLAIMS. The Indemnifying Party shall not
be liable for any Third Party Claim which is settled or otherwise compromised or
in respect of which any admission of liability is made without its prior written
consent. In such connection, if the Indemnified Party shall receive from a Third
Party or if the Indemnified Party shall propose to make to a Third Party an
offer of settlement of such Third Party Claim (a "Settlement Offer"), the
Indemnified Party shall notify the Indemnifying Party of such Settlement Offer
promptly upon receipt thereof from the Third Party and reasonably in advance of
responding thereto, or reasonably in advance of making such Settlement Offer,
and shall provide with such notice all related supporting documentation
reasonably required to enable the Indemnifying Party to assess the relative
merits of the Settlement Offer. At the reasonable request of either of the
parties, the parties will consult in good faith with respect to any such
Settlement Offer. The Indemnifying Party shall then determine in the exercise of
its own reasonable business judgment whether or not to consent to the Settlement
Offer. If a Settlement Offer is received, which the Indemnifying Party, but not
the Indemnified Party, is willing to accept, the Indemnified Party may elect to
continue the defense of such claim at its own expense, in which case the
liability of the Indemnifying Party shall be limited to the lesser of: (i)
Damages calculated as if the Third Party Claim were settled in accordance with
the proposed Settlement Offer, and (ii) the Damages actually suffered by the
Indemnified Party taking into account the final determination of the Third Party
Claim. The failure by the Indemnifying Party to respond in writing to a written
request for consent to a Settlement Offer for a period of more than ten (10)
Business Days after receipt of such request by the Indemnifying Party shall be
deemed a consent by the Indemnifying Party to such request.
7.5.5 COOPERATION
From and after the delivery of a Claim Notice hereunder, at the
reasonable request of the Indemnifying Party, the Indemnified Party shall grant
the Indemnifying Party and
- 35 -
39
its representatives (including professional advisors) reasonable access to the
books, records, computerized systems, employees and properties of the
Indemnified Party (or of the Companies, if CGG is the Indemnifying Party) to the
extent reasonably related to the matters to which the Claim Notice relates.
7.5.6 MITIGATION
The Indemnified Party shall use its commercially reasonable
efforts (and if the Purchasers are the Indemnified Party, they shall cause the
Companies to use their commercially reasonable efforts) to mitigate any Damages
resulting from any matters giving rise to a claim for indemnification under this
Article VII.
7.5.7 PAYMENT
No amount shall become due and payable by an Indemnifying Party to
an Indemnified Party in respect of any Third Party Claim unless and to the
extent that the Indemnified Party is under the obligation to immediately pay the
relevant Damages to the relevant Third Party as a result of a final
non-appealable judgment of a court of competent jurisdiction, a final
non-appealable decision of an arbitral tribunal or a binding settlement or other
agreement among the relevant parties.
7.5.8 SUBROGATION
No amount shall become due and payable by an Indemnifying Party to
an Indemnified Party in respect of any Claim unless the Indemnified Party shall
have effectively subrogated the Indemnifying Party in all its (and the
Companies', if the Purchasers are the Indemnified Party) rights against third
parties in respect of such Claim.
7.6 CALCULATION OF DAMAGES
7.6.1 In calculating the amount of any Damages claimed by the Purchasers
under Section 7.4.1, there shall be deducted: (i) the amount of any
indemnification or other recoveries (including insurance proceeds) payable to
the Purchasers or any of the Companies by any third party with respect to such
Damages payment of which is not disputed by such third party, (ii) the amount of
any reserve or provision included in the Final Closing Balance Sheet for Damages
to which such Claim relates, and (iii) the amount of any corresponding Tax
savings or benefit (including any Tax reduction, credit, or loss carry-back or
carry-forward) (a "Tax Benefit") which is or will be available to the Purchasers
or any of the Companies in respect of any taxable period.
7.6.2 For purposes of computing the amount of any Damages which an
Indemnifying Party may be required to pay hereunder, only the Damages actually
sustained by CGG, the Purchasers or the relevant Company shall be taken into
account, to the exclusion of any price/earnings or similar multiplier implicit
in the Purchase Price.
7.6.3 If at the time that a Claim is made by a Purchaser or a payment is
required to be made by CGG in respect of any Damages suffered or incurred by the
Companies, the availability or the amount of any corresponding Tax Benefit
cannot be determined with reasonable certainty, the potential Tax Benefit shall
not then be taken into account in the computation of the amount of Damages
payable by CGG and any required payment shall not
- 36 -
40
be delayed. Thereafter, the Purchasers shall cause the Companies to notify CGG
with reasonable promptness whenever a Tax Benefit is claimed by or on behalf of
the Companies (or their tax group) or its availability becomes reasonably
certain as a result of the Damages suffered or incurred by the Companies
relating to such Claim, which notice shall indicate the amount of such Tax
Benefit. CGG shall also have the right, at any time after a Claim is made in
respect of which the availability of the Tax Benefit of the corresponding
Damages cannot be determined with reasonable certainty, to require that its
auditors be given reasonable access to the relevant accounting and tax records
of the Companies to determine the availability and amount of any such Tax
Benefit.
7.6.4 In the event that the amount of any deduction referred to in this
Section 7.6 is determined only after payment by CGG of the amount otherwise
required pursuant to this Article VII, Paradigm shall repay to CGG promptly
after such determination any such payments that CGG would not have had to make
pursuant to this Article VII had such determination been made at or prior to the
time of such payment.
7.6.5 In calculating the amount of Damages claimed by CGG under Section
7.4.2, there shall be deducted therefrom the amount of any Tax Benefit which is
or will be available to CGG in respect of any taxable period (following the same
principles and procedures set forth in Section 7.6.3 as if CGG were the
Purchaser and the Purchaser were CGG), provided that the payment made in respect
of the corresponding Claim is not taxable to CGG.
7.7 ADDITIONAL RULES AND PROCEDURES
The obligations of CGG and the Purchasers to indemnify each other
pursuant to this Article VII shall also be subject to the following limitations
and exclusions:
7.7.1 An Indemnified Party shall only be entitled to make a Claim
pursuant to this Article VII in respect of a representation or warranty
contained in this Agreement if a Claim Notice is properly given within the time
periods provided for in Sections 7.1 and 7.2, as the case may be;
7.7.2 No Claim may be made by the Purchasers or CGG, and no amount shall
be due by CGG or the Purchasers in respect of any such Claim, unless and only to
the extent that after application of the provisions of this Article VII:
(A) the amount of Damages in respect of which the relevant party is
entitled to be indemnified as a result of any individual claim exceeds $50,000;
and
(B) the cumulative and aggregate amount of all Damages in respect of
which the relevant party is obligated to indemnify the other party under the
preceding clause (A) exceeds $250,000.
Notwithstanding the foregoing, as between the parties, the foregoing limitations
constitute deductibles and CGG, on the one hand, and the Purchasers, on the
other hand, shall be liable to indemnify each other only for Damages in excess
of such amounts.
7.7.3 (A) Except for those circumstances where CGG has made any
fraudulent or intentional misrepresentation or breach with respect to any of its
representations, warranties, agreements or covenants contained in this
Agreement, and notwithstanding any
- 37 -
41
other provision in this Agreement, in no event shall the aggregate amount of
Damages for which the Purchasers (collectively) may claim hereunder, and for
which CGG may be liable, exceed Seven Million US Dollars (US$7,000,000).
(B) Except for those circumstances where any of the Purchasers
has made any fraudulent or intentional misrepresentation or breach with respect
to any of its respective representations, warranties, agreements or covenants
contained in this Agreement, and notwithstanding any other provision in this
Agreement, in no event shall the aggregate amount of Damages for which CGG may
claim hereunder, and for which the Purchasers (collectively) may be liable,
exceed Five Million US Dollars (US$5,000,000).
7.7.4 No claim in respect of Taxes shall entitle the Purchasers to
indemnification if it corresponds to a mere change in the time when a Tax should
have been paid or if such Tax can effectively be deducted or recovered by the
relevant Company (except that the Purchasers shall be entitled to be indemnified
in accordance herewith for any resulting interest charges or penalties for late
payment).
7.7.5 CGG shall have no liability to the Purchasers for Damages which
arise as a direct result of: (w) any act or omission of the Purchasers or the
Companies having as its purpose the precipitation of a claim for indemnification
hereunder, (x) any changes in accounting methods or policies, (y) the granting
of any extensions or waivers with respect to any statute of limitations
applicable to claims which might be made against the Purchasers or the
Companies, or (z) the passing of, or any change in, after the Closing, any Law
or administrative practice of any Governmental Authority in any such case not
actually in force at the date of this Agreement (even if retroactive in effect),
including, but not limited, to any increase in the Tax rates in effect on the
date hereof or imposition of any Tax not in effect on the date hereof.
7.7.6 Notwithstanding anything in this Agreement to the contrary, a
claim for Damages resulting from an inaccuracy or breach of the representations
and warranties of CGG set forth in Sections 3.1.14 and 3.1.17 (even if such
inaccuracy or breach could also constitute an inaccuracy or breach of any other
representations and warranties of CGG set forth in this Agreement) shall give
rise to an indemnification obligation under this Article VII only if it is based
on a successful Third Party Claim duly and timely notified to CGG.
7.7.7 Neither CGG, on the one hand, nor the Purchasers, on the other
hand, shall be required to indemnify any other more than once on account of the
same facts, matters or circumstances, and neither CGG, on the one hand, nor the
Purchasers, on the other hand, shall be entitled to make any claim for
indemnification in connection with Damages arising out of or resulting from
facts or circumstances of which it was aware at the time of Closing.
7.8 TREATMENT OF CGG'S INDEMNIFICATION PAYMENTS. Notwithstanding the use of
the term "indemnification" herein with respect to CGG's obligations under this
Article VII, the parties agree that any payments made by CGG or received by the
Purchasers pursuant to this Article VII shall be deemed to constitute a partial
repayment and adjustment of the Purchase Price, and agree to treat (and to cause
their Affiliates to treat) any such payments as a partial repayment of the
Purchase Price for all tax, accounting and financial reporting purposes.
- 38 -
42
ARTICLE VIII
GENERAL
8.1 BROKERS AND FINDERS
8.1.1 CGG represents and warrants to the Purchasers that neither it nor
either of the Companies has employed the services of an investment banker,
financial advisor, broker or finder in connection with this Agreement or any of
the transactions contemplated hereby. CGG indemnifies and agrees to defend and
hold the Purchasers and each of the Companies harmless against and in respect of
all claims, losses, liabilities and expenses which may be asserted against the
Purchasers (or any Affiliate of the Purchasers) by any Person who claims to be
entitled to an investment banker's, financial advisor's, broker's, finder's or
similar fee or commission in respect of the entering into of this Agreement, or
the consummation of the transactions contemplated hereby, by reason of his
acting at the request of CGG or either of the Companies.
8.1.2 The Purchasers represent and warrant to CGG that they have not
employed the services of an investment banker, financial advisor, broker or
finder in connection with this Agreement or any of the transactions contemplated
hereby. The Purchasers indemnify and agree to save and hold CGG harmless against
and in respect of all claims, losses, liabilities, fees, costs and expenses
which may be asserted against it by any Person who claims to be entitled to an
investment banker's, financial advisor's, broker's, finder's or similar fee or
commission in respect of the entering into of this Agreement or the consummation
of the transactions contemplated hereby, by reason of his acting at the request
of the Purchasers.
8.2 RECOURSE
8.2.1 No past, present or future director, officer, employee,
shareholder or Affiliate, as such, of CGG or either of the Purchasers shall have
any liability under this Agreement for any of the obligations of CGG or the
Purchasers, respectively, under this Agreement or for any claim based on, in
respect of or by reason of such obligation.
8.2.2 The Purchasers shall be jointly and severally liable for all
representations, warranties, covenants, undertakings and other obligations of
any of the Purchasers set forth in this Agreement.
8.3 NOTICE
All notices required or permitted by this Agreement shall be in writing
and delivered by hand or sent by telecopier to:
The Purchasers: Paradigm Geophysical Ltd.
Gav-Yam Center Xx. 0
0, Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx B 00000, Xxxxxx
Fax Number: (00) 000-0000
ATT: Chief Executive Officer
- 39 -
43
With a copy (which will not be considered notice)
to:
Efrati, Galili & Co., Law Xxxxxxx
0 Xxxxxxxxx Xx., Xxx Xxxx 00000
Fax Number: (972) (00) 000 0000
ATT: Xxx Xxxxxxxxx, Adv.
and with a copy (which will not be considered
notice) to:
Phillipe Ginestie, Adv.
Ginestie, Xxxxx-Xxxxxxx & Partners
00 Xxxxx xxx Xxxxx-Xxxx
00000, Xxxxx, Xxxxxx
Fax Number: (00) 0 00 00 00 00
CGG: Compagnie Generale de Geophysique
0 xxx X'xx Xxxxxx
00000 Xxxxx Xxxxx, Xxxxxx
Fax Number: (00) 0 00 00 00 00
ATTN: Directeur G'n'ral Adjoint-Produits
and with a copy (which will not be considered
notice) to:
Compagnie G'n'rale de G'ophysique
Tour Xxxxxxxxxxxx
00, xxxxxx xx Xxxxx
X.X. 191
75755 Xxxxx Xxxxx 00, Xxxxxx
Fax Number: (00) 0 00 00 00 00
ATTN: Legal Division
or at such other address or fax number of which the addressee may from time to
time have notified the addressor. A notice shall be deemed to have been sent and
received on the day of actual receipt. If such day is not a Business Day, or if
the notice is received after ordinary office hours (time and place of receipt),
the notice shall be deemed to have been sent and received on the next Business
Day.
8.4 COSTS
Except as otherwise provided in this Agreement, each party shall be
responsible for its own fees, expenses, and other costs incurred in connection
with the purchase and sale of the Securities and the other transactions
contemplated hereby.
8.5 TIME OF THE ESSENCE
Time is of the essence to every provision of this Agreement. Extension,
waiver or variation of any provision of this Agreement shall not be deemed to
affect this provision and there shall be no implied waiver of this provision.
- 40 -
44
8.6 FURTHER ACTS
The parties shall use its reasonable commercial endeavors to take, or to
cause to be taken, all such further actions and to do, or to cause to be done,
all such additional things as may be necessary or desirable, consistent with
applicable Laws, to give full effect to this Agreement.
8.7 ARBITRATION AND GOVERNING LAW
8.7.1 Except as provided in Section 2.5, all disputes, controversies and
claims (whether legal or equitable) arising out of or in connection with this
Agreement shall be finally settled by arbitration under the new Rules of
Arbitration of the International Chamber of Commerce as set forth in the ICC
Publication no. 581, by one or three arbitrators having experience in commercial
matters and appointed in accordance with said Rules. The arbitrator shall not be
a French or Israeli national. The exclusive forum and venue to resolve all
disputes, controversies and claims shall be Paris, France. The proceedings shall
be conducted in the English language. The costs of the arbitration shall be
borne as directed by the arbitrators. The arbitrators will give written reasons
for any decision issued by the panel. The parties shall have recourse to the
courts of any jurisdiction only to enforce the arbitral decision and to enforce
this exclusive forum provision.
8.7.2 This Agreement shall be governed and construed in accordance with
the laws of the State of New York, without regard to conflicts of law rules.
8.8 AMENDMENT
This Agreement may be amended only by the express written agreement of
the parties.
8.9 WAIVER
No waiver of any provision of this Agreement shall be binding unless it
is in writing. No indulgence or forbearance by a party shall constitute a waiver
of such party's right to insist on performance in full and in a timely manner of
all covenants in this Agreement. Waiver of any provision shall not be deemed to
waive the same provision thereafter, or any other provision of this Agreement at
any time.
8.10 ENTIRE AGREEMENT
8.10.1 This Agreement and the documents referred to in it contain the
whole agreement between the parties relating to the transactions contemplated by
this Agreement and the documents referred to in it. This Agreement supersedes
all prior negotiations, discussions, correspondence, communications,
understandings and agreements between the parties relating to the subject matter
of this Agreement and all prior drafts of this Agreement. No prior drafts of
this Agreement and no words or phrases from any such prior drafts shall be
admissible into evidence in any dispute or Proceeding involving this Agreement.
8.10.2 Each of the parties acknowledges that in agreeing to enter into
this Agreement and the documents referred to in it, it has not relied on any
representation, warranty, collateral
- 41 -
45
contract or other assurance except those set out in this Agreement provided that
nothing in this Agreement shall limit or exclude any liability for fraud.
8.10.3 All Schedules are part of the present Agreement, and any matter
disclosed in any Schedule shall be deemed disclosed for all purposes of this
Agreement (notwithstanding the absence of any specific cross-references in the
Schedule or Section in question).
8.11 SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, such
provision shall be severed and the remainder of this Agreement shall be
unaffected thereby and shall continue to be valid and enforceable to the fullest
extent permitted by law.
8.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts (by original
or facsimile signature) which, together, shall constitute one and the same
Agreement. This Agreement shall not be binding upon any party until it has been
executed by each of the parties and delivered to all other parties.
8.13 ASSIGNMENT
8.13.1 Neither this Agreement nor any rights or obligations hereunder may
be assigned, directly or indirectly, by any party without the prior written
consent of the other parties. Any unauthorized assignment without such consent
shall be null and void.
8.13.2 Notwithstanding the foregoing, the Purchasers may assign all or
part of their rights under this Agreement to an Affiliate which remains at all
times controlled by Paradigm, provided that: (x) the Purchasers shall remain
fully liable for the performance of all of their respective obligations
hereunder in the manner prescribed by this Agreement, (y) no such assignment
shall be valid unless and until duly notified to CGG by an instrument of
assignment signed by the Purchasers and the beneficiary of the assignment and
(z) under no circumstances shall the obligations or liabilities of CGG be
increased as a result of such assignment.
8.13.3 Upon any merger, or any conveyance or transfer of the properties
and assets of a party substantially as an entirety , the successor corporation
into which a party is merged or to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise the rights of, such
party under this Agreement with the same effect as if such successor corporation
had been named as the party herein; provided, however, that no such conveyance
or transfer shall have the effect of releasing any party or any successor
corporation which shall theretofore have become such in the manner prescribed in
above from any of its obligations or liabilities hereunder or increasing the
obligations or liabilities of any other party.
8.14 BENEFIT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Except as
expressly provided herein, this Agreement and all of its provisions and
conditions are for the sole and exclusive benefit
- 42 -
46
of the parties to this Agreement and their successors and permitted assigns, and
nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any right, remedy or claim under
or with respect to this Agreement or any provision of this Agreement.
- 43 -
47
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
COMPAGNIE GENERALE DE GEOPHYSIQUE
By: /s/ Xxxxxx Xxxxxx
----------------------------
Name: Xxxxxx Xxxxxx
Title:
PARADIGM GEOPHYSICAL LTD.
By: /s/ Xxxxx Xxxxx
----------------------------
Name: Xxxxx Xxxxx
Title: C.E.O.
PARADIGM GEOPHYSICAL CORP.
By: /s/ Xxxxx Xxxxx
----------------------------
Name: Xxxxx Xxxxx
Title: C.E.O.
- 44 -
