2008 Registration Document - Rexel

4. Risk factors4.3 LEGAL AND REGULATORY RISKS4.3.1 Risks relating to pending litigationThe Rexel Group is involved in tax, commercial andenvironmental disputes. In particular, some of the RexelGroup’s subsidiaries are involved in tax audits andreassessments, in particular in France, Germany and theUnited States (see paragraph 14.6 of this Document deRéférence). In addition, two of the Rexel Group’s NorthAmerican subsidiaries are involved in asbestos-relatedlitigation in the United States.The tax claims linked to events prior to the Rexel Acquisitionare covered by a capped indemnity granted by the PPRgroup. The other tax claims are related to periods notcovered by the PPR indemnity. In addition, certain taxaudits have not resulted in any tax adjustments or litigationproceedings as of the date of this Document de Référence.Finally, considering the status of the ongoing proceedings,the Rexel Group cannot predict the outcome of thesecases with certainty or assess potential tax adjustments.Consequently, although the Rexel Group considers thatsuch proceedings will not have any material effect, theRexel Group is not in a position to predict whether theseproceedings will have a material effect on its financialcondition or results of operations.The Rexel Group believes that its exposure to asbestosrelatedlitigation in the United States is limited, becausethe existing claims of which it is aware either relate toquestions of product liability, which concern principally themanufacturers, or are principally attributable to other parties,including the owners and lessors of premises involved,as well as to the manufacturers of structures installed insuch premises. Nevertheless, given the nature and statusof the proceedings, the Rexel Group’s involvement insuch proceedings and the number of claimants, the RexelGroup is not in a position to provide a quantitative estimateof the amount of the claims made. Moreover, given thecurrent procedural status and nature of the proceedings,the Rexel Group cannot predict the outcome of theseproceedings or their financial consequences on the RexelGroup. Consequently, although the Rexel Group considersthat such disputes will not have any material effect, theRexel Group is not in a position to predict the outcomeof these proceedings or whether these proceedings willhave a material effect on its financial condition or results ofoperations.The Rexel Group is involved in a number of other legalproceedings, some of which, if adversely concluded, couldrequire the payment of substantial amounts, which couldhave a material adverse effect on the financial condition andoperating results of the Rexel Group. Although the RexelGroup believes that it has sound legal grounds to defeat allof these claims, Hagemeyer has established provisions fora limited number of these claims, which, as the outcome ofthese claims cannot be predicted, might prove insufficientto cover them. These disputes are described in paragraph14.6 of this Document de Référence.Lastly, the Rexel Group cannot rule out the possibilitythat new claims or suits may arise as a result of facts orcircumstances that are not yet known or the risks of whichcannot currently be ascertained or quantified. Such claimsmay have an adverse effect on its financial condition orresults of operations.4.3.2 Risks relating to legaland regulatory developmentsThe products that the Rexel Group distributes are subjectto numerous legal and regulatory requirements, particularlycommercial, customs and tax regulations applicablein each of the jurisdictions in which the Rexel Groupoperates. Changes in such laws and regulations andtheir implementation could cause a decrease in the RexelGroup’s sales or an increase in its distribution expenses.These products are also subject to quality and safetyregulations and inspections resulting from national andinternational standards. In particular, these regulationsinvolve European Union directives and standards adoptedby international organizations, such as the EuropeanCommittee for Electrotechnical Standardization and theInternational Electrotechnical Commission.The Rexel Group believes that its business does not representany major environmental risks, as it does not involve the use ofmanufacturing processes that are likely to seriously damagenon-renewable resources, natural resources (air, water) orbiodiversity. However, the Rexel Group must comply withlaws and regulations relating to asbestos, health, safety andsecurity, as well as the use, handling, disposal and recyclingof waste or hazardous materials.The Rexel Group cannot give any assurance that it hasbeen, is or will be, in all circumstances in compliance withsuch standards, laws and regulations, or that it will not incursignificant expenses to comply with such standards, lawsand regulations, which may have an adverse effect on itsfinancial condition or results of operations.4.3.3 Risks relating to pension plansRexel is engaged in approximately fifty defined-benefitpension plans (15 of which result from the integration ofHagemeyer) across 15 countries, mainly in The Netherlands,the United Kingdom and in Canada.PAGE 44 | REXEL 2008