8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 23, 2004

Q.E.P. CO., INC.

(Exact Name of Registrant as Specified in Charter)

FLORIDA	0-21161	13-2983807
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1081 Holland Drive

Boca Raton, Florida 33487

(Address of Principal Executive Offices; Zip Code)

561-994-5550

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a–12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 — Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

On September 23, 2004, Q.E.P. Co., Inc. (the “Company”) entered into an agreement (the “Agreement”) to purchase all of the shares of P.R.C.I. SA (“PRCI”), a company formed under the laws of France, a distributor of flooring and specialty tools to wholesale and retail markets from its shareholders which include Valfin, SA (“Valfin”), a company formed under the laws of France. For its last completed fiscal year PRCI had total sales of approximately $3.2 million. The sellers are all unaffiliated third parties with no relationship to the Company. The purchase price for the shares of PRCI, 40% of which will be paid in cash at closing and the remaining balance payable over a period of four years, is subject to adjustment. Closing under the Agreement is subject to various conditions, but is expected to be consummated prior to the end of October 2004.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

10.1	Agreement between the Company and Valfin, SA dated September 23, 2004.
10.2	Liability and Asset Guarantee between the Company and Valfin, SA dated September 23, 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Q.E.P. Co., Inc.
Date: September 27, 2004	By:	/s/    MARC APPLEBAUM
	Name:	Marc Applebaum
	Title:	Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Agreement between the Company and Valfin, SA dated September 23, 2004.
10.2	Liability and Asset Guarantee between the Company and Valfin, SA dated September 23, 2004.

EX-10.1

AGREEMENT

Exhibit 10.1

Between the undersigned:

- The Company VALFIN, SA (“Valfin”)

A French Public Limited Company with a capital of €500,000

Whose registered office is at 24 Rue des Teinturiers, 84000 Avignon (France)

On the Avignon Trade and Companies Register under No 385 386 834

Represented by Mr Jean Patrice Daire,

ON THE ONE HAND.

AND

- The Company Q.E.P. Co. INC (“QEP”)

A Delaware company

Whose registered office is at 1081 Holland Drive, Boca Raton, Florida 33487 (USA)

Represented by its Chairman, Mr Lewis Gould

ON THE OTHER HAND.

PRELIMINARY STATEMENT

Both Mr Lewis Gould and Mr Jean Patrice Daire have the requisite, adequate legal and contractual powers to enter into contracts on behalf of the companies they represent in the transaction.

This agreement has, to better ensure its comprehension, been drawn up in the languages used in the countries of the persons concerned, but that the document in French shall prevail in event of any dispute and/or difficulty in interpreting the agreement.

THE PARTIES THEN PRESENTED THE FOLLOWING PREAMBLE

This agreement establishes the bases for and the terms and conditions governing the transfer of 8,200 shares of the 8,200 shares in existence comprising the share capital of PRCI (“the Shares”), hereinafter called PRCI or the Company, of which a brief description and the main characteristics are given hereafter by Valfin.

As it consists of the transfer of shares in a French company, QEP states that it is fully informed that a change in shareholder does not in any way change PRCI’s obligations concerning both its assets and liabilities, which justifies the need for a Liability and Asset Guarantee which is the purpose of another document.

HISTORY AND MAIN CHARACTERISTICS OF THE COMPANY PRCI

PRCI was founded as a limited company (SARL) by private contract dated 3 October 1984 in Serignan (France). A Special Meeting of shareholders on 15 December 1990 voted to transform it into a Public Limited Company (SA). PRCI is on the Montpellier Trade and Companies Register under No 330 813 726.

The objects of the company are to buy and sell all types of electrical equipment, all types of equipment used in masonry and any articles relating thereon, the importation and exportation of any equipment relating to the manufacture of electrical equipment, the design engineering and the exploitation of commercial patents.

Its main activity is the purchase and sale of tools for laying tiles and for use in plumbing, and any articles related thereto.

The company’s registered office is at 111 Rue du Mas de Poraly, Zone Industrielle, 34000 Montpellier. The Company does not own the premises it occupies but is a lessee on a commercial lease a copy of which is annexed to the Liability and Asset Guarantee.

The Company’s capital, at present €410,000.00, was increased on several occasions, summarised on page 4 of the latest Articles of Incorporation approved at the Mixed General Meeting of shareholders on 28 May 2004 and annexed to the Liability and Asset Guarantee.

The capital is split into 8,200 fully paid up shares of a nominal value of €50.00 (the “Shares”), held as follows:

-   Mr Jean Patrice Daire	12 shares
-   Mr Jean Christophe Condomines	12 shares
-   Mr Laurent Condominies	12 shares
-   The company VALFIN	8,152 shares
-   Mr Rene Condomines	11 shares
-   Mrs Marie Claude Condomines	1 share
Its Board of Directors consists of:
-   Mr Jean Patrice Daire
-   Mr Rene Condomines
-   Mr Jean Christophe Condomines
-   Mr Laurent Condomines
-   Mr Jean Paul Roosli

The Company’s financial year ends on 31 December each year and the Financial Statements for the 12 months ending 31 December 2003 (“the Accounts”) were approved by the AGM on 28 May 2004. It shows:

ð  Sales excluding tax of	€	2,742,348
ð  Net book income of	€	83,276
ð  A new financial position of	€	827,008

PRCI’s most important customer, the company Leroy Merlin, represents 70% of its sales

The Company’s Balance Sheet drawn up to the same date shown assets of €88,146.00 under the item Other holdings. This was made up of shares in its subsidiary COMETEL. COMETEL was dissolved without being wound up following the transfer of all its assets and liabilities to PRCI, approved by its shareholder on 30 June 2004, and completed without any objection of any third party.

THE PARTIES THEN AGREED AS FOLLOWS:

On the terms and subject to the conditions set out in this Agreement, QEP undertakes to acquire the 8,200 shares in PRCI.

VALFIN undertakes to sell to QEP the 8,152 shares it owns and guarantees the transfer of the remaining 48 shares held by minor shareholders, all shares being transferred cum rights and free of all charges, liens and encumbrances.

PRICE

The price for all the shares in the Company is ONE MILLION FOUR HUNDRED THOUSAND EUROS (€1,400,000.00), i.e. ONE HUNDRED AND SEVENTY EUROS, SEVENTY-THREE EUROCENTS (€170.73) per share based on the Balance Sheet as of 31 December 2003 and approved by the Annual General

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Meeting of shareholders on 28 May 2004 and on the situation shown in the accounts drawn up on 30 June 2004 in the form of a Balance Sheet, duly certified by the Statutory Auditor, showing net assets of at least EIGHT HUNDRED AND TWENTY-SEVEN THOUSAND AND EIGHT EUROS (€827,008).

These accounts were prepared in accordance with accounting principles and standards used to date. It takes account of the entries concerning the transfer of all COMETEL’s assets and liabilities. It shall not give rise to any increase in the price agreed above notwithstanding any rise in the Company’s net assets as compared with the reference situation, i.e. €827,008.00. However, a fall in net assets as at 30 June 2004 would have required that the price of ONE MILLION FOUR HUNDRED THOUSAND EUROS (€1,400,000.00) be adjusted by one euro for every one euro by which the net assets would have been below €827,008.

The share transfers are made cum rights, i.e. QEP shall have the sole right to all dividends distributed after the sale even when they are based on results for periods prior to the transfer. In this respect it is duly noted that the Company has received grants and/or subsidies from the State and/or local authorities on condition that it does not distribute profits in the year it receives the said grants or subsidies.

PAYMENT ON ACCOUNT OF THE PRICE

On signature of this document, a payment on account of 5% of the PRICE SHALL BE MADE AND HELD IN A BLOCKED ACCOUNT BY Mr Chavanne, who prepared this document, i.e. an amount of SEVENTY THOUSAND EUROS (€70,000). This shall be credited against the 40% to be paid cash below.

PAYMENT

Some 40% of the price shall be paid in cash on Completion, and payment of the balance shall be spread over the four following years as follows:

FOUR HUNDRED AND NINETY THOUSAND EUROS (€490,000.00) shall be paid by QEP on the day the share transfer orders or any equivalent documents are signed which together with the €70,000 paid directly to Master Philippe CHAVANNE (which he shall release to the sellers) constitute 40% of the initial price, i.e. €560,000.

Given VALFIN’s dominant majority shareholding, as well as its role as sole guarantor of PRCI’s liabilities, the minority shareholders shall be paid in full out of the first payment and shall thus receive the following amounts:

-   Mr Jean Patrice Daire	€	2,048.76
-   Mr Jean Christophe Condomines	€	2,048.76
-   Mr Laurent Condomines	€	2,048.76
-   Mr Rene Condomines	€	1,873.03
-   Mrs Marie Claud Condomines	€	170.73

The balance, i.e. FIVE HUNDRED AND FIFTY-ONE THOUSAND, EIGHT HUNDRED AND NINE EUROS AND NINETY-SIX EUROCENTS (€551,809.96) shall be paid to VALFIN (i) up to FOUR HUNDRED AND EIGHTY-ONE THOUSAND, EIGHT HUNDRED AND NINE EUROS AND NINETY-SIX EUROCENTS (€481,809.96) by QEP by certified cheque issued on a European financial establishment regularly represented and installed on French territory and (ii) up to SEVENTY THOUSAND EUROS (€70,000) by Master Philippe CHAVANNE, as agreed above.

The remaining part of the price (EIGHT HUNDRED AND FORTY THOUSAND EUROS (€840,000.00)) shall be paid to VALFIN in four equal annual instalments on the anniversary date of completion of this agreement each year and for the first time in 2005. It is expressly agreed and accepted that the balance shall bear interest at the EURIBOR 3 month rate.

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Any payment not made on any of the dates the instalments are due shall bear interest on the outstanding balance by right at the rate at which partners’ current accounts in French companies may be remunerated as authorised by the tax authorities plus two points.

As a guarantee that the price will be paid in full, the Shares less 10 shares (i.e. 8,190 shares) will be allotted to an escrow account, on Completion, in accordance with the terms and conditions of the instruction letter handed over by QEP to VALFIN and set out in Schedule 3 (the “Escrow Letter”).

LIABILITY AND ASSET WARRANTY AND GUARANTEE

At the same time as it signs this Agreement VALFIN undertakes to sign a Liability and Asset Guarantee, identical to that annexed to this Agreement (Schedule 1).

The maximum possible financial consequences of this Liability Guarantee shall, by express agreement between the parties, be limited to the price paid or payable to VALFIN. On each date payments are due, the June 2004 accounts will be updated, and the balance paid. All amounts duly claimed by QEP under the Liability Guarantee in accordance with the procedures described therein, may be deducted from the instalment due by QEP, either wholly or in part, on its own sole initiative and held in a blocked account until full and final settlement of the dispute and/or any related litigation.

SHAREHOLDER’S CURRENT ACCOUNT

Valfin holds a shareholders’ current account with the Company with a balance of TWO HUNDRED THOUSAND EUROS (€200,000).

Payment of this current account shall be paid back to VALFIN as to SEVENTY THOUSAND EUROS (€70,000) on Completion . The balance (€130,000) will be paid under the same conditions as the balance of the price of the shares. It shall bear interest in the same way, i.e. EURIBOR 3 months.

MANAGEMENT BODIES

PRCI is a French Public Limited Company with a Board of Directors. The existing directors have already agreed to respect the directives issued by QEP. All the directors undertake to resign without delay on first request from the majority shareholder.

SELLERS’ OBLIGATIONS

Between the date of this agreement and the Date of Completion, VALFIN undertakes, for itself and on behalf of the other sellers, to allow the accountants appointed by QEP to carry out a financial review of the financial situation of PRCI at 30 September 2004, available by 5 October 2004, and in this respect to have access to the financial information, the employees of PRCI and the working papers of the auditors in relation to PRCI.

COMPLETION

Completion shall occur no later than 29 October 2004, or otherwise with a prior written consent of the parties, when:

(a) VALFIN shall hand over to QEP or its representative:

(i) the share transfer forms for the Shares executed and signed by each shareholder and the tax forms no 2759;

(ii) the share register of the Company and the shareholders’ accounts;

(iii) the register of the minutes of the shareholders’ and board of directors’ meetings and the board attendance book of the Company and the register of the minutes of the shareholders’ meetings of Cometel;

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(iv) the letters of resignation of all the directors of the Company other than those requested by QEP to continue, and resignation letters of the statutory auditors of the Company;

(v) a certified copy of the minutes of the board of directors’ meeting of the Company convening the shareholders of the Company in an ordinary shareholders’ meeting which is to meet on the Date of Completion;

(vi) a release of any and all charges over the Shares or any asset of the Company or Cometel;

(vii) a release of any and all guarantees given by the Company or Cometel to any other person for the liabilities or performance of VALFIN or any company in the group of companies of which VALFIN is a member;

(viii) a non competition covenant signed by each shareholder, pursuant to the attached model (Schedule 2);

(ix) a waiver, given by Mr Norbert Warrau, of his right to subscribe for shares on an increase in share capital of PRCI as provided by an amendment to his employment contract dated 2 January 2003, in a satisfactory form to QEP;

(b) QEP shall pay that part of the price payable on Completion and shall hand over to VALFIN the escrow instruction letter, in accordance with the attached model (Schedule 3), and

(c) VALFIN will have complied with its obligations set out in the above paragraph “Sellers’ obligations”. The financial situation of PRCI on Completion will not be materially and adversely different to the position disclosed by the June 2004 accounts.

If any obligation at Completion is not fulfilled VALFIN shall remain obliged to satisfy that obligation.

If the provisions of the c) above are not fully complied with, QEP shall not be obliged to complete the sale and purchase of the Shares and shall be entitled to elect (i) to rescind this agreement, without liability on the part of QEP, the amount of €70,000 paid to Philippe Chavanne by QEP being released to QEP, or (ii) defer the Date of Completion, or (iii) to proceed to the acquisition of the Shares, without prejudice to its rights under this agreement.

COSTS

Each party shall bear its own costs, fees and expenses in relation to its counsel or advisers. The registration fees shall be paid by QEP.

ELECTION OF DOMICILE

For the execution of this agreement and what may arise therefrom, the parties elect domicile at their respective addresses given above.

LANGUAGE AND APPLICABLE LAW

Given that there are two agreements, one in the language of each of the parties, it is agreed that the document in French shall prevail in event of difficulty in its interpretation or implementation the parties declare that this Agreement is governed by and is to be interpreted in accordance with French law and that only French courts applying French law shall be deemed competent in event of any litigation between them.

Sign in

On

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EX-10.2

Exhibit 10.2

LIABILITY AND ASSET GUARANTEE

Between the undersigned

VALFIN SA

A Business Corporation under French Law, with a capital of 500 000 Euros

Whose registered office is at 24 Rue des Teinturiers, 84000 Avignon (France)

On the Avignon Trade and Companies Register under No 385 386 834

Represented by Mr Jean Patrice DAIRE

Hereinafter called the Assignor or the Guarantor, the first party

AND

Q.E.P. Co. INC

A Delaware company

Whose registered office is at 1081 Holland Drive, Boca Raton, Florida 33487

Represented by its Chairman, Mr Lewis GOULD

Hereinafter called the Assignee, the second party

The following was set out and agreed:

PREAMBLE

In terms of the agreement dated             of the                      (“the Agreement”) the two parties signing below agreed to assign all 8,200 shares in PRCI for a mutually agreed price based on the Company’s Balance Sheet as of 31 December 2003 (“the Balance Sheet”).

The price was confirmed in the light of the Company’s financial situation as shown in the Balance Sheet as of 30 June 2004, provided this shows shareholders’ equity of the same or a greater amount than that shown on the Balance Sheet of 31 December 2003.

The transfer taking place in accordance with the agreement shall be covered by a guarantee of the Company’s assets and liabilities, as at the date of this Guarantee and as at the date of transfer of the shares in PRCI.

The Guarantor declares and acknowledges that the accounting documents handed to the Assignee were drawn up in accordance with the generally accepted accounting standards and practices allowed in France, and that the tax forms used are those required by the tax authorities.

GIVEN THE ABOVE PREAMBLE THE PARTIES AGREED AS FOLLOWS:

The Assignor hereby declares and certifies, warrants and represents as at the date of this agreement and as at the date of transfer of the shares in PRCI (the “Completion”):

a) The Articles of Incorporation of the Company (which expression throughout this document shall include both PRCI and COMETEL) are up-to-date and in full compliance with current legislation, that the general meetings of shareholders and board of directors’ meetings are held regularly, and that the minutes of these meetings are recorded in a numbered, dated and signed minute books. The Shares are the only shares of the Company in issue and no agreement exists whereby any person may call for or receive additional shares of the Company.

b) The Company is the sole owner, not subject to any restriction or reserve, of all tangible and intangible assets shown on the Balance Sheet and of all assets acquired in the interval, the said assets not having been pledged or otherwise given as security. The Company does not have any subsidiary; the Company does not hold shares in any other company and is not a partner in any Partnership or a participant in any joint venture. None of the debts owed to the Company will remain uncollected.

c) The Company has not entered into any agreement that might affect its activities in a significant way. It is also not bound by any contract or undertaking, with the exception of insurance policies, whose termination without compensation requires notice of more than three months. In addition, none of the Company’s customers or suppliers have expressed any desire to or intention of termination any existing contract or of refusing to renew existing contracts when they expire. There are no arrangements with customers which in accordance with their terms are or may be terminable on a change of control of the Company.

The premises occupied by the Company for the exercise of its function are not the Company’s property, but are rented under a commercial lease in accordance with French legislation. The afore-mentioned lease is annexed to this Guarantee (Schedule 1). However in order for the Assignee to have a complete understanding, it should be noted that commercial leases have specific conditions, namely regarding the duration of contracts and compulsory notices which are in excess of the three months above-mentioned. In particular the current commercial lease, which PRCI is bound to, has a duration of three years and can only be terminated, except with the lessor’s agreement, at the end of this period and only with six months’ prior notice. The Company does not own or lease any other real estate.

d) The property and equipment, comprising the Company’s assets are sufficient for PRCI to operate its business as it has done since 1 January 2003 and is in a state of normal wear and tear for its age. All the Company’s assets are insured under policies currently in force. To date, all requisite action has been taken to ensure that these policies are valid, and in particular that their premiums have been paid on the due dates. The Company owns or is licensed for all intellectual property rights used in its business.

e) As part of its business activities, the Company has never prejudiced the rights of any third party and has duly respected its contractual and other obligations. The Company is not involved in, or been forewarned of any legal process, action, appeal, dispute, claim or administrative enquiry, and is not subject to any legal judgment or sentence. The only

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exception to the above is the 1993 lawsuit brought against the company by Mr Franze; however by utilising the principle of prudence, the Company has made provisions for this, up to and including the budget drawn up at the closing of the financial year 2003. Furthermore, should the lawsuit be held up in court, it should not have any financial consequences on the Company due to the third party liability insurance policy held by the Company.

f) The Company is not currently and is not likely to be involved in any dispute before the industrial arbitration.

No employee has any special contract and the Company’s arrangements with its employees are in compliance with current legislation and regulations. Only Mr Rene Condomines has an individual agreement which he has explained to the Buyer who acknowledges.

As of this day, the Company has 10 in situ, 11 sales representatives, 5 of which have a statute of REP Multicard, and 6 of which are non-salaried sales agents. A list of employees showing their length of service, the gross salaries in 2003 and 2004 other benefits (e.g. pension) and the bonus paid in 2003, the commission rates and commissions paid in 2003, is annexed together with details of bonus and commission arrangements for 2004 (Schedule 2).

g) Since 1 January 2004, the Company has pursued its normal, current operations only, it has not transferred or yielded up any asset, reached any composition with creditors, or made any unusual investment or failed to pay its creditors in accordance with normal practice.

The Company has not distributed dividends. The transfers to the Assignee are realized inclusive of dividends, i.e. all the Company’s earning remain acquired to the Assignee. All monies due to the Company have been paid into its own bank accounts.

h) The Company has duly filed all statements, forms and declarations required by law in connection with all taxes and social security charges. All taxes and social security contributions due have been paid and there is no previous deduction due on payments of dividends. The Company has in its own possession all its books and records.

i) Since the Company’s creation, its annual Financial Statements have been drawn up in accordance with the accounting procedures set out in the general accounting plan; they are true and correct and give a fair presentation of the Company’s exact financial situation.

j) All plant and equipment has been build and/or installed in accordance with current regulations. PRCI has received no notice in writing whatsoever from any authority requiring the modification or replacement of any property or installation, or required that such property be brought into compliance with the regulations. All property and installations are fit for use, duly maintained and repaired, without prejudice to normal wear and tear.

k) The Company is in compliance with all applicable regulations as of this day, in particular concerning health and safety. It has never taken any action that has resulted in its employees being in contact with asbestos whilst in the premises of the Company.

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l) The Company’s stock, subject to the provisions made in the Balance Sheet, consists of usable products likely to be sold during its normal business activities at the prices at which they were valued in the Balance Sheet less provisions.

m) PRCI, in its business activities, has always and still respects all applicable regulations and standards under French legislation. The information regarding PRCI contained in the Agreement is correct. Except as set out in Schedule 3, PRCI does not borrow monies from its bankers or other persons (except the Assignor).

No administrative or legal prohibition, injunction, restriction or limitation of any kind exists concerning its right to freely dispose of the Company’s assets. No fact or circumstance exists that could provide grounds for any such an action.

n) The fixed assets are shown on the Company’s books at their purchase price, that all allocations to amortization and provisions for depreciations have been entered in the accounts in accordance with the normal rules.

o) In drawing up the Balance Sheet as of 30 June 2004, duly certified by the Assignor and the statutory auditors and accepted by the Assignee, provisions have been made for all possible liabilities in accordance with the usual rules, and that all debts, other than bad debts, can be recovered in full and that adequate provisions have been made for bad debts. PRCI has no capital commitments which are unpaid. The Company complies with any obligations under the agreements relating to subsidies which have been granted to it.

p) As of this day, the Company has not stood surety, endorsed bills or otherwise guaranteed credit for third parties, that no claim has been assigned in guarantee, that it has not entered into any real estate lease or other leasing agreement or off balance sheet items with the exception of those set out in the list annexed to this Guarantee (Schedule 4).

q) The Guarantor or any other member of its group does not conduct business which is or might be competitive with the business of PRCI.

r) 70% of the Company’s sales are with a single customer, namely the company Leroy Merlin. A copy of the agreement with Leroy Merlin is annexed to this Guarantee (Schedule 5). The Guarantor is not aware of any reason why Leroy Merlin would cease to deal with the Company in a manner and to an extent consistent in all material respects with recent past practice. No other customer accounts for more than 5% of PRCI’s sales.

HAVING MADE THE ABOVE DECLARATION

The Assignor hereby gives the following formal and irrevocable undertaking:

Should any of the following be found:

• Should any additional amount, whose origin or cause predates the transfer of the shares to the Assignee, whether such liabilities be due to tax authorities or to others, appear under liabilities to third parties;

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• Should the net amount of the various credits listed under the Company’s assets on the transfer date not be recuperable in full from debtors in spite of all necessary action without due effect;

• and more generally, should the value of any asset be reduced for any reason before the transfer;

• should any of these declarations be untrue in any material respect,

the Assignor accepts liability for any reduction in the Company’s net assets and for any direct prejudice, damage, loss, interest or penalties (including reasonable legal fees and expenses) which arises as a result of any of the declarations being untrue or of any expense or cost incurred in putting the Company into the position it would have been in if the declarations were true in all material respects.

The Assignor thus undertakes that if the net assets stated prove incorrect on account of any undisclosed liability or on account of the depreciation of any current asset, it will repay any shortfall in assets to the Assignee, payment of such amounts being made as a priority in the month following their discovery (assets not recovered) or payment by the Company (new liabilities), or by offsetting these amounts against amounts that may be due from the Assignee to the Assignor:

However, it is formally agreed that the change in the amount of any tax due by the Company as a result of such new liabilities, i.e. if the new liability is tax-deductible and the Company has made sufficient profits against which the liability can be offset, the said liability shall only be claimable after deduction of the corresponding corporate income tax credit;

It is expressly agreed that should a credit balance remain after any such compensation has been deducted, this shall not under any circumstances constitute an additional part of the price.

If a creditor make a claim, or should notice of a tax audit/reassessment be received from a tax or tax-related or social security authority, or any other such as the DGCCRF (competition and consumption and fraud department services) concerning the Company’s accounts or declarations for period predating the transfer, the Assignor shall be advised of the above claim or audit/reassessment by registered letter with proof of receipt within twenty days of its receipt and subject to indemnifying the Assignee and the Company to their reasonable satisfaction shall thus be in a position to contest the grounds or amounts of the claims. Any delay by the Assignee in informing the Assignor shall allow the Assignor to claim damages for breach of contract (which may be set against the Assignee’s claim) in compliance with this clause but shall not be a condition to the effectiveness of this Guarantee in relation to the particular matter.

To ensure that this clause can be duly executed, the Assignor undertakes to inform the Assignee of any change in its address without delay, or by default dispatch of the above (registered) letter to its last known address shall be deemed due service, and shall mark the start of any notice period required.

To this end, and to enable the Assignor to verify that the grounds on which possible claims against the Company have been made are actually justified, it is expressly agreed that its legal adviser may defend its interests in conjunction with the Company’s legal adviser under such time as a settlement is reached or a judgment or arbitrator’s decision rendered and the matter deemed res judicata, each party paying their own legal advisers’ fees.

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Consequently, if any fresh liability is accepted, or if any increase in existing debt, or any tax, tax-related or social security reassessment relating to periods predating the transfer, is accepted by the Company without the Assignor ‘s agreement, the guarantee in this agreement shall not be applicable, unless the Assignor default in any way. Should the Assignor fails to reply within fifteen days of having effectively been advised of the claim, this shall be deemed agreement by them to pay their share of additional liabilities disclosed.

It is expressly agreed that any new item that may increase the value of the real assets (fixed assets and realizable assets) shall not increase the price and shall not be deducted from any amount that may be claimed under the above guarantee clauses.

The parties agree that in spite of this guarantee, no amount may be claimed on account of tax reassessments that simply reflect a transfer of a payment from one tax year to another or from one period to another in every case prior to the date of this Guarantee, with the exception of interest on late payments and/or tax penalties claimed under this heading.

The Guarantee shall terminate on 30 September 2008 except in relation to the registration duties and other matters for which the limitation period for claims is ten years or more.

Nevertheless, as concerns events covered by this Guarantee, revealed within the times allowed in this agreement but whose financial consequences have not been finally settled on its expiry date, the said events shall still be covered by the Guarantee until their financial consequences are fully and finally settled.

THRESHOLD

The Guarantor shall not be required to pay any amount whatsoever under this guarantee unless the total amount claimed exceeds three thousand euros (3 000€). When the cumulative total of the claims exceeds this figure, the Guarantor shall pay the Assignee the amount by which all the claims made exceeds this threshold.

The total indemnity for which the Assignor may be liable under this Guarantee shall not exceed a total amount of 1,400,000 Euros.

LANGUAGE AND LEGISLATION APPLICABLE

Given that there are two agreements in the respective languages of the two parties, it is agreed that the document drawn up in French shall prevail in the event of any difficulty in interpreting the Guarantee or enforcing its provisions. It is also agreed that this Guarantee shall be governed by and interpreted in accordance with French law and that in any event of any dispute between the parties, the parties attribute exclusive competence to the French courts ruling in accordance with French legislation.

Signed in

On

In three copies

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