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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
U.S. OFFICE PRODUCTS COMPANY
(Name of Issuer)
COMMON STOCK
$.001 PAR VALUE
(Title of Class of Securities)
91232-510
(CUSIP Number)
MR. E.J. WATSON
LEVEL 22, COOPERS & LYBRAND TOWER
ALBERT STREET
AUCKLAND, NEW ZEALAND
Tel. No.: 011-64-9-358-1945
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
July 8, 1996
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following: [ ].
Check the following box if a fee is being paid with this
statement: [X].
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SCHEDULE 13D
______________________________ ________________________________
| | | |
|CUSIP No. 91232-510 | | Page 2 of 7 Pages |
|____________________________| |______________________________|
___________________________________________________________________________
| 1 | NAME OF REPORTING PERSON |
| | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON |
| | |
| | ERIC JOHN WATSON |
|____|____________________________________________________________________|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* |
| | _ |
| | (a) |_| |
| | _ |
| | (b) | | |
| | |
|____|____________________________________________________________________|
| 3 | SEC USE ONLY |
| | |
|____|____________________________________________________________________|
| 4 | SOURCE OF FUNDS* |
| | The shares were issued as consideration for the sale of shares |
|____| in Blue Star Group Limited |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED _ |
| | PURSUANT TO ITEMS 2(d) or 2(e) |_| |
| | |
|____|____________________________________________________________________|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | NEW ZEALAND |
|-------------------------------------------------------------------------|
| | 7 | SOLE VOTING POWER |
| | | |
| NUMBER OF |____| 2,200,145 |
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | |
| OWNED BY |____| NIL |
| EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING | | |
| PERSON |____| 2,200,145 |
| WITH | 10 | SHARED DISPOSITIVE POWER |
| | | |
|____________________|____| NIL |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 2,200,145 |
|____|____________________________________________________________________|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES _ |
| | CERTAIN SHARES* |_| |
|____|____________________________________________________________________|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
|____| 7.59% |
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | IN |
|____|____________________________________________________________________|
*SEE INSTRUCTIONS BEFORE FILLING OUT
SEC 1746 (9-88) 2 of 7
Item 1. Security and Issuer.
-------------------
The class of equity securities to which this statement relates
is the common stock, $.001 par value per share (the "Shares"), of U.S. OFFICE
PRODUCTS COMPANY, a Delaware corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 1440 New York Avenue, N.W.,
Suite 310, Washington, D.C. 20005.
Item 2. Identity and Background.
------------------------
The name of the person filing this statement is Eric John
Watson ("Buyer").
The business address of Buyer is Level 22, Coopers & Lybrand
Tower, Albert Street, Auckland, New Zealand. The present principal occupation
or employment of Buyer is chief executive officer of Blue Star Group Ltd.
("BSGL"), which is a supplier of office products (such as office supplies,
office furniture, office machines and telecommunications equipment and
services). The address of BSGL is Level 22, Coopers & Lybrand Building,
Albert Street, Auckland, New Zealand.
During the last five years Buyer has not (a) been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors)
or (b) been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction as a result of which Buyer was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, U.S. federal or state securities laws or
finding any violation with respect to such laws. Buyer is a New Zealand
citizen.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
On 28 February 1996, Mr. Watson acquired 1,212,121 Shares in
exchange for the sale to the Issuer of shares of common stock of BSGL
representing 51% of the outstanding voting power of BSGL. On 27 June 1996,
the Buyer acquired a further 1,052,632 Shares in exchange for the sale to the
Issuer of shares of common stock of BSGL representing 49% of the outstanding
voting power of BSGL.
Item 4. Purpose of Transaction.
-----------------------
Buyer acquired the Shares that are the subject of this Schedule
(the "Subject Shares") in consideration for the sale of BSGL to USOP of shares
in BSGL. Buyer intends to sell some, if not all, of the Subject Shares over
time. Buyer intends to review from time to time the Issuer's business affairs
and financial position. Based on such evaluation and review, as well as
general economic and industry conditions existing at the time, Buyer will
determine whether to proceed with the sale of all or a portion of the Subject
Shares in the open market, in privately negotiated transactions, through a
public offering or otherwise. Buyer does not currently intend to acquire any
additional Shares, but depending on Buyer's reviews from time to time, as
discussed above, Buyer may acquire additional Shares through open market
purchases or privately negotiated transactions and has the right to acquire a
further 250,000 Shares under the Issuer's Long Term Incentive Plan. Buyer has
the right, pursuant to the agreement set out in Exhibit 1, to demand his
appointment to the Issuer's board of directors. Except as set forth herein,
Buyer has no plan or proposals which relate to or would result in any of the
transactions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
Item 5. Interest in Securities of the Issuer.
-------------------------------------
(a) Buyer has acquired and, for the purpose of Rule 13d-3
promulgated under the Exchange Act, beneficially owns 2,200,145 Shares,
representing approximately 7.59% of the outstanding Shares of the Issuer. In
addition, Buyer holds an option to acquire a further 250,000 Shares, at an
option price of $36.0625 under Issuer's 1994 long-term incentive plan pursuant
to the option grant certificate set out in Exhibit 2.
Except as set forth in this Item 5(a), Buyer does not own
beneficially any Shares.
(b) Buyer has sole power to vote and to dispose of 2,200,145
Shares.
(c) On 28 February 1996 Buyer acquired 1,212,121 Shares in the
Issuer, 42,871 of such Shares were immediately transferred to G.K. Baker, M.G.
Kidd and P.A. Smithies as consideration for the transfer to Buyer by those
persons of minority interests in BSGL, in order to enable Buyer to transfer
51% of the shares in BSGL to the Issuer. On 27 June 1996, at the time when
Buyer acquired 1,052,632 Shares in the Issuer, Buyer transferred to the
persons referred to in this clause an additional 21,797 Shares in the Issuer as
consideration for the acquisition of the balance of the minority interests in
BSGL held by those persons, in order for Buyer to transfer to the Issuer of
the balance of 49% of BSGL.
(d) Inapplicable.
(e) Inapplicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
-------------------------------------------------------------
There are no contracts, arrangements, understandings or
relationships (legal or otherwise) between Buyer and any other person with
respect to any securities of the Issuer, including, but not limited to,
transfer or voting of any of the securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies, other than (a) the
agreement between Issuer and Buyer dated as of 31 January 1996 for the sale
and purchase of 51% of the voting securities of BSGL, where part of the
consideration for the acquisition of such securities by Issuer was the
issuance of 1,212,121 Shares to Buyer and (b) the agreement between Issuer and
Buyer dated as of 20 June 1996 for the sale and purchase of 49% of the voting
securities of BSGL, where the consideration for the acquisition of such
securities by Issuer was the issuance of 1,052,632 Shares to Buyer; and (c)
the option grant dated as of 23 May 1996 pursuant to which Buyer may acquire a
further 250,000 Shares in the Issuer; and (d) a deed dated 38 June 1996
between Buyer, G.K. Baker, M.G. Kidd and P.A. Smithies relating to transfer
of shares and shareholder debt in BSGL.
Item 7. Material to be Filed as Exhibits.
---------------------------------
Exhibit 1: Sale and Purchase Agreement between Issuer and
Buyer dated as of 31 January 1996 for the sale of
51% of the voting securities of BSGL.
Exhibit 2: Option grant dated as of 23 May 1996 under which
Buyer may acquire 250,000 Shares in Issuer.
Exhibit 3: Sale and Purchase Agreement between Issuer
and Buyer dated as of 20 June 1996 for the
sale of 49% of the voting securities of BSGL.
Exhibit 4: Deed dated 28 June 1996 between Buyer, G.K. Baker,
M.G. Kidd and P.A. Smithies relating to transfer
of shares and shareholder debt in BSGL.
SIGNATURES
After reasonable inquiry and to the best knowledge and belief
of the undersigned, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
Date: 1/2, 1996
/s/ E.J. Watson
----------------------
Eric Watson
_________________________________________________________________
STOCK PURCHASE AGREEMENT
dated as of the 31st day of January, 1996
by and between
U.S. OFFICE PRODUCTS COMPANY,
a Delaware corporation
and
ERIC JOHN WATSON
_________________________________________________________________
TABLE OF CONTENTS
Page
1. SALE AND PURCHASE OF SHARES.......................................... 1
1.1 The Stock Sale................................................. 1
1.2 Certain Information With Respect to the Capital Stock of the
COMPANY and USOP.............................................. 2
2. CLOSING.............................................................. 2
2.1 Place and Date of Closing...................................... 2
2.2 Closing Deliveries............................................. 3
2.3 Post-Closing Adjustment to Consideration....................... 4
2.4 Elective Adjustment to Consideration........................... 6
2.5 Conversion of Stockholder Debt to Equity....................... 7
2.6 Default at Closing............................................. 7
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.................... 8
3.1 Due Organization............................................... 8
3.2 Authorization; Validity........................................ 9
3.3 Capital Stock of the COMPANY................................... 9
3.4 Transactions in Capital Stock, Accounting
Treatment.................................................... 9
3.5 No Bonus Shares................................................ 9
3.6 Subsidiaries................................................... 10
3.7 Financial Statements........................................... 10
3.8 Liabilities and Obligations.................................... 11
3.9 Accounts and Notes Receivable.................................. 12
3.10 Permits and Intangibles........................................ 12
3.11 Environmental Matters.......................................... 13
3.12 Real and Personal Property..................................... 14
3.13 Significant Customers; Material Contracts and
Commitments.................................................. 15
3.14 Title to Real Property......................................... 16
3.15 Insurance...................................................... 17
3.16 Compensation; Employment Agreements............................ 17
3.17 Employee Benefit Plans......................................... 17
3.18 Conformity with Law; Litigation................................ 18
3.19 Taxes.......................................................... 19
3.20 No Violations.................................................. 19
3.21 Government Contracts........................................... 20
3.22 Absence of Changes............................................. 20
3.23 Deposit Accounts; Powers of Attorney........................... 22
3.24 Relations with Governments..................................... 22
3.25 Disclosure..................................................... 22
3.26 USOP Prospectus................................................ 23
3.27 Absence of Claims Against...................................... 23
3.28 COMPANY Forecast............................................... 23
4. REPRESENTATIONS OF USOP.............................................. 23
4.1 Due Organization............................................... 23
4.2 USOP Stock..................................................... 24
4.3 Authorization; Validity of Obligations......................... 24
4.4 No Conflicts................................................... 24
4.5 Capitalization of USOP and Ownership of USOP................... 25
4.6 Conformity with Law............................................ 25
4.7 Financial Statements........................................... 26
4.8 Disclosure..................................................... 26
5. COVENANTS PRIOR TO CLOSING........................................... 27
5.1 Access and Cooperation; Due Diligence.......................... 27
5.2 Conduct of Business Pending Closing............................ 28
5.3 Prohibited Activities.......................................... 29
5.4 No Shop........................................................ 30
5.5 Notice to Bargaining Agents.................................... 31
5.6 Amendment of Schedules......................................... 31
5.7 Breach of Certain Covenants.................................... 31
5.8 Cooperation in Obtaining Required Consents and
Approvals.................................................... 32
5.9 Acquisition of Minority Stockholder COMPANY
Shares....................................................... 32
5.9 Capitalization of Stockholder Loans and Advances............... 32
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER............... 33
6.1 Representations and Warranties; Performance of
Obligations.................................................. 33
6.2 No Litigation.................................................. 33
6.3 No Material Adverse Change..................................... 33
6.4 Minority Stockholder Transactions.............................. 33
6.5 Consents and Approvals......................................... 34
6.6 Releases....................................................... 34
6.7 Certificates................................................... 34
6.8 Payment Instruction Letter..................................... 35
6.9 Due Diligence Review........................................... 35
6.10 COMPANY Articles............................................... 35
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP.......................... 35
7.1 Representations and Warranties; Performance of
Obligations.................................................. 35
7.2 No Litigation.................................................. 35
7.3 Due Diligence Review........................................... 36
7.4 No Material Adverse Change..................................... 36
7.5 Minority Stockholder Transactions.............................. 36
7.6 Consents and Approvals......................................... 36
7.7 Certificates................................................... 37
7.8 Insurance...................................................... 37
7.9 COMPANY Articles............................................... 37
7.10 Consolidation.................................................. 37
8. INDEMNIFICATION...................................................... 37
8.1 Indemnification by the STOCKHOLDER............................. 37
8.2 Indemnification by USOP........................................ 39
8.3 Survival of Representations and Warranties..................... 40
8.4 Third Person Claims............................................ 40
8.5 Indemnification Payments....................................... 43
8.6 Exclusive Remedy............................................... 44
8.7 Insurance Proceeds............................................. 44
9. NONCOMPETITION....................................................... 44
9.1 Prohibited Activities.......................................... 44
9.2 Damages........................................................ 45
9.3 Reasonable Restraint........................................... 46
9.4 Severability; Reformation...................................... 46
9.5 Independent Covenant........................................... 46
9.6 Materiality.................................................... 47
9.7 Early Termination of Covenant.................................. 47
9.8 Scope of Covenant in Certain Circumstances..................... 47
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................ 47
10.1 STOCKHOLDER.................................................... 47
10.2 USOP........................................................... 48
10.3 Damages........................................................ 49
10.4 Survival....................................................... 49
11. FEDERAL SECURITIES ACT REPRESENTATIONS............................... 49
11.1 Economic Risk; Sophistication.................................. 49
11.2 Sales of Stock................................................. 50
12. GENERAL.............................................................. 52
12.1 Accounts Receivable............................................ 52
12.2 Termination.................................................... 53
12.3 Cooperation.................................................... 53
12.4 Successors and Assigns......................................... 54
12.5 Entire Agreement............................................... 54
12.6 Counterparts................................................... 54
12.7 Brokers and Agents............................................. 54
12.8 Expenses....................................................... 55
12.9 Notices........................................................ 55
12.10 Governing Law................................................. 56
12.11 Exercise of Rights and Remedies............................... 57
12.12 Time.......................................................... 57
12.13 Reformation and Severability.................................. 57
12.14 Certain Post-Closing Matters............................ 57
12.15 Currency Conversion..................................... 61
12.16 Limitation on Certain Claims............................ 61
SCHEDULES and ANNEXES
Annex I - Stockholders and Stock Ownership of the COMPANY
Annex II - Form of Employment Agreement
Schedule 2.3 - Accounting Schedule
Schedule 3.1 - Qualifications to Do Business
Schedule 3.6 - Subsidiaries
Schedule 3.7 - Financial Statements
Schedule 3.8 - Liabilities and Obligations
Schedule 3.9 - Accounts and Notes Receivable
Schedule 3.10 - Licenses, Franchises, Permits and other Governmental
Authorizations
Schedule 3.12 - Real Property, Leases and Significant Personal Property
Schedule 3.13 - Significant Customers and Material Contracts
Schedule 3.15 - Insurance Policies and Claims
Schedule 3.16 - Stockholders, Officers, Directors and Key Employees;
Employment Agreements; Compensation
Schedule 3.17 - Employee Benefit Plans
Schedule 3.19 - Tax Returns and Examinations
Schedule 3.22 - Changes Since Balance Sheet Date
Schedule 3.23 - Deposit Accounts; Powers of Attorney
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 31st
day of January, 1996, by and between U.S. OFFICE PRODUCTS COMPANY, a Delaware
corporation ("USOP"), and ERIC JOHN WATSON (the "STOCKHOLDER"), the principal
stockholder of Blue Star Group Limited, a New Zealand corporation (the
"COMPANY"). There are four other stockholders of the COMPANY, BSI Investments
Limited, a New Zealand corporation, Grant Keith Baker, Maurice George Kidd and
Paul Anthony Smithies (all such other stockholders, the "Minority
Stockholders").
WHEREAS, the STOCKHOLDER and the Minority Stockholders own all of
the issued and outstanding shares of capital stock of the COMPANY.
Prior to the Closing of the transactions contemplated hereby, the
STOCKHOLDER intends to acquire certain of the shares of capital stock of
the COMPANY owned by the Minority Stockholders and certain of the
indebtedness obligations of the COMPANY to the Minority Stockholders;
WHEREAS, USOP desires to purchase from the STOCKHOLDER, and the
STOCKHOLDER desires to sell to USOP, 51% of the issued and outstanding
shares of capital stock of the COMPANY and 51% of the indebtedness
obligations of the COMPANY to its stockholders in accordance with the
provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. SALE AND PURCHASE OF SHARES
1.1 The Stock Sale. Subject to the terms and conditions of this
Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
hereinafter defined) the STOCKHOLDER shall sell to USOP and USOP shall
purchase from the STOCKHOLDER (a) 3,187,500 of the shares of COMPANY stock
owned by the STOCKHOLDER on such date (being 51% of all of the then issued and
outstanding shares of COMPANY stock) and (b) 51% of the indebtedness
obligations of the COMPANY to its stockholders on such date in exchange for
(X) US$10 million cash and (y)(i) if the Market Price on the Closing Date (as
defined below) of USOP Stock (as defined below) is above US$14.00 a share,
1,212,121 registered shares of common stock, US$.001 par value ("USOP Stock"),
of USOP, or (ii) if the Market Price on the Closing Date of USOP Stock is
US$14.00 a share or lower, 1,428,571 registered shares of USOP Stock. For
purposes of this Agreement, "Market Price on the Closing Date" means the
average of the closing prices (per share) of USOP Stock quoted on The Nasdaq
National Market of The Nasdaq Stock Market, Inc. (the "NASDAQ System") as of
the close of trading in New York City, averaged over a period of ten
consecutive business days consisting of the business day immediately preceding
the Closing Date and the nine consecutive business days prior to such day.
1.2 Certain Information With Respect to the Capital Stock of the
COMPANY and USOP. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
COMPANY and USOP as of the date of this Agreement are as follows:
(i) the authorized capital stock of the COMPANY consists of
6,250,000 ordinary shares of stock, NZ$.10 par value per share ("COMPANY
Stock"), all of which shares of COMPANY Stock are issued and
outstanding; and
(ii) the authorized capital stock of USOP is 25,000,000 shares of
USOP Stock (as increased to 100,000,000 shares of USOP Stock on February
2, 1996), of which on January 31, 1996 19,732,050 shares were issued and
outstanding, and 500,000 shares of preferred stock, US$.001 par value, of
which no shares are issued and outstanding.
2. CLOSING
2.1 Place and Date of Closing. The consummation of the sale and
purchase of shares referred to in Section 1 hereof and the other transactions
contemplated by this Agreement (hereinafter referred to as the "Closing")
shall take place at the offices of Russell McVeagh McKenzie Bartleet & Co, The
Shortland Centre, 51-53 Shortland Street, Auckland 1, New Zealand, on February
21, 1996, or as soon as practicable after all conditions to Closing shall have
been satisfied or waived, or at such other time and date as USOP and the
STOCKHOLDER may mutually agree, which date shall be referred to as the "Closing
Date".
2.2 Closing Deliveries. At the Closing:
(a) The STOCKHOLDER shall cause to be conveyed to USOP in
accordance with applicable law and free and clear of all pledges, liens,
transfer and stamp tax obligations, encumbrances, claims and other
charges thereon of every kind, 51% of the issued and outstanding shares
of COMPANY Stock and 51% of the indebtedness obligations of the COMPANY
to its stockholders on such date, in exchange for the delivery by USOP
to the STOCKHOLDER of:
(i) cash in the currency and amount to be delivered to the
STOCKHOLDER pursuant to Section 1.1 hereof (such delivery to be
made by wire or interbank transfer to such account at such bank as
the STOCKHOLDER may direct, or as the STOCKHOLDER may otherwise
direct, in a written notice delivered to USOP at least three
business days prior to the Closing); and
(ii) a certificate or certificates (as directed by the
STOCKHOLDER in a written notice delivered to USOP at least three
business days prior to the Closing) representing the number of
registered shares of USOP Stock to be delivered to the STOCKHOLDER
pursuant to Section 1.1 hereof.
(b) The STOCKHOLDER shall enter into an Employment Agreement
substantially in the form set forth in Annex II hereto (as so executed
and delivered, the "Employment Agreement"), which shall also have been
executed and delivered by the COMPANY.
(c) The STOCKHOLDER shall make available to USOP the written
resignations of all the directors and officers of the COMPANY and its
Subsidiaries (as hereinafter defined), except for the three directors of
the COMPANY to be designated by the STOCKHOLDER pursuant to Section
12.14(e) hereof and Subsidiary directors who hold minority interests in
Subsidiaries, such resignations to be effective as of the Closing, and
shall cause to be made available to the successor and any continuing
directors and officers of the COMPANY (the "post-Closing COMPANY
directors and officers") all minute books, stock record books, books of
account, corporate seals, leases, contracts, agreements, securities,
bank, checking and money market accounts, other investments, deposits,
customer and subscriber lists, files and other documents, instruments
and papers belonging to the COMPANY and shall cause full possession and
control of all of the assets and properties of every kind and nature,
tangible and intangible, of the COMPANY and of all other things and
matters pertaining to the operation of the business of the COMPANY to be
transferred and delivered to the post-Closing COMPANY directors and
officers. At the Closing, the STOCKHOLDER shall also deliver to USOP,
and USOP shall deliver to the STOCKHOLDER, the certificates, opinions and
other instruments and documents referred to in Sections 7 and 6 hereof,
respectively.
2.3 Post-Closing Adjustment to Consideration.
(a) The parties hereto acknowledge and agree that the
consideration to be paid to the STOCKHOLDER pursuant to Section 1.1
hereof is based upon the premise that as of the Closing Date the
COMPANY's consolidated net worth, as determined in accordance with New
Zealand generally accepted accounting principles ("Net Worth"), will be
equal to or greater than US$15 million. The parties hereto acknowledge
that New Zealand generally accepted accounting principles include loans
and advances to the COMPANY and its Subsidiaries from their stockholders
as equity. The STOCKHOLDER has attached hereto as Schedule 2.3 (the
"Accounting Schedule") showing the Net Worth as of September 30, 1995
(hereinafter referred to as the "Balance Sheet Date"), which Schedule
2.3 shall be updated by the STOCKHOLDER as of the Closing Date. USOP
shall cause Price Waterhouse LLP to review such updated Schedule as
promptly as practicable after the Closing Date to determine its accuracy
and, in the event that Price Waterhouse LLP does not agree with updated
Schedule 2.3, shall deliver a written notice to the STOCKHOLDER setting
forth Price Waterhouse LLP's determination of Net Worth as of the
Closing Date.
(b) In the event that Price Waterhouse LLP does not agree with
the updated Accounting Schedule, USOP and the STOCKHOLDER shall seek to
resolve the amount, if any, of the consideration adjustment to be made
pursuant to Section 2.3(c) hereof. In the event that USOP and the
STOCKHOLDER cannot resolve the amount of such adjustment, they shall
mutually agree on an independent accounting firm to review the updated
Accounting Schedule and determine the amount, if any, of the
consideration adjustment to be made, provided, that if the parties are
unable to agree on such an independent accounting firm, such firm shall
be a "big-six" accounting firm selected by the president of the New
Zealand Society of Accountants. The determination of such independent
accounting firm shall be final and binding on the parties hereto. The
costs of the independent accounting firm shall be borne by the party
(either USOP or the STOCKHOLDER) whose determination of Net Worth as of
the Closing Date was furthest from the determination of the independent
accounting firm, or equally by USOP and the STOCKHOLDER in the event
that the determination by the independent accounting firm is equidistant
between the determinations of the parties.
(c) In the event that Net Worth at the Closing Date is less than
US$15 million, the STOCKHOLDER shall pay to USOP (as a reduction in the
consideration paid to the STOCKHOLDER pursuant to Section 1.1 hereof) in
U.S. Dollars an amount equal to the product of 51% multiplied by the
difference between US$15 million and the Net Worth at the Closing Date;
provided that if USOP has previously been indemnified by the STOCKHOLDER
pursuant to Section 8 hereof with respect to a matter which results in
or contributes to a Net Worth deficiency, the amount to be paid by the
STOCKHOLDER to USOP pursuant to this Section 2.3(c) shall be reduced by
the amount of such indemnification payment attributable to the Net Worth
deficiency.
(d) Obligations of the STOCKHOLDER under this Section 2.3 will be
satisfied either by (i) the payment of immediately available funds to
USOP in the amount of such obligations in U.S. Dollars, or (ii) the
delivery of shares of USOP Stock to USOP, valued at Market Price on the
date of delivery, or (iii) any combination of USOP Stock or immediately
available funds in the amount of such obligations. "Market Price on the
date of delivery" means the average of the closing prices (per share) of
USOP Stock quoted in the NASDAQ System as of the close of trading in New
York City, averaged over a period of ten consecutive business days
consisting of the business day immediately preceding the date of
delivery and the nine consecutive business days prior to such day.
2.4 Elective Adjustment to Consideration. Promptly following the
Closing, USOP and the STOCKHOLDER shall cause the COMPANY's fiscal year to be
changed to coincide with USOP's fiscal year (which ends on April 30 of each
year). At USOP's election, written notice of which must be delivered to the
STOCKHOLDER on or before May 1, 1996 to be effective, the consideration to be
paid to the STOCKHOLDER pursuant to Section 1.1 hereof shall be further
adjusted as follows: (i) if 51% of seven times the COMPANY's consolidated
pre-tax earnings for its 1997 fiscal year (determined in accordance with New
Zealand generally accepted accounting principles) exceeds US$30 million, then
USOP shall pay the STOCKHOLDER in U.S. Dollars as additional consideration the
amount of such excess, and (ii) if 51% of seven times the COMPANY's
consolidated pre-tax earnings for its 1997 fiscal year (determined in
accordance with New Zealand generally accepted accounting principles) is less
than US$30 million, then the STOCKHOLDER shall pay USOP in U.S. Dollars the
amount of such deficiency; provided that if USOP has previously been
indemnified by the STOCKHOLDER pursuant to Section 8 hereof with respect to a
matter which results in or contributes to a deficiency in the COMPANY's
consolidated pre-tax earnings for its 1997 fiscal year, the amount to be paid
by the STOCKHOLDER to USOP pursuant to this Section 2.4 shall be reduced by
the amount of such indemnification payment attributable to such deficiency.
Obligations of the STOCKHOLDER under this Section 2.4 will be satisfied either
by (i) the payment of immediately available funds to USOP in the amount of
such obligations in U.S. Dollars, or (ii) the delivery of shares of USOP Stock
to USOP, valued at Market Price on the date of delivery (as defined above), or
(iii) any combination of USOP Stock or immediately available funds in the
amount of such obligations.
2.5 Conversion of Stockholder Debt to Equity. Immediately following
the Closing, USOP and the STOCKHOLDER shall cause all loans and advances to
the COMPANY and each Subsidiary from their stockholders (other than
inter-company loans and advances among the COMPANY and its Subsidiaries) to be
capitalized and converted from indebtedness interests to equity interests.
2.6 Default at Closing. Notwithstanding the provisions of Section 2.2
hereof, if the STOCKHOLDER shall fail or refuse to deliver any shares of
COMPANY Stock or any indebtedness obligations of the COMPANY to its
stockholders, as provided in Section 2.2, or, if the STOCKHOLDER shall fail or
refuse to consummate the transactions described in this Agreement on or prior
to the Closing Date, USOP may refuse to make such acquisition and thereby
terminate all of its obligations hereunder. The STOCKHOLDER acknowledges that
the shares of USOP Stock and the indebtedness obligations of the COMPANY to its
stockholders are unique and otherwise not available and agree that in addition
to any other remedies, USOP may invoke any remedies available under applicable
law to enforce delivery of such shares hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
(A) Representations and Warranties of the STOCKHOLDER
The STOCKHOLDER represents and warrants to USOP as follows:
3.1 Due Organization. Each of the COMPANY and the subsidiaries of the
COMPANY identified in Schedule 3.6 hereto (the "Subsidiaries") is a
corporation duly organized, validly existing and is in good standing under the
laws of its jurisdiction of incorporation, and is duly authorized and
qualified to do business under all applicable laws, regulations, ordinances
and orders of public authorities to carry on its business in the places and in
the manner as now conducted except where the failure to be so authorized or
qualified would not have a material adverse effect on the business,
operations, affairs, prospects, properties, assets, profits or condition
(financial or otherwise) of the COMPANY and the Subsidiaries taken as a whole
(a "Material Adverse Effect"). Schedule 3.1 hereto contains a list of all
jurisdictions in which the COMPANY and each Subsidiary is authorized or
qualified to do business. True, complete and correct copies of the
Certificate of Incorporation and By-laws, each as amended, of the COMPANY and
each Subsidiary are attached hereto as Schedule 3.1. Such Certificates of
Incorporation and By-laws are referred to herein as the "Charter Documents."
The minute books of the COMPANY and each Subsidiary as heretofore made
available to USOP are correct and complete in all material respects.
3.2 Authorization; Validity. The STOCKHOLDER has the full legal
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and
binding obligation of the STOCKHOLDER, enforceable in accordance with its
terms.
3.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.2(i) hereof. All of the issued and
outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable and (a) on the
date hereof, are owned of record and beneficially by the STOCKHOLDER and the
Minority Stockholders in the amounts set forth in the first table in Annex I
hereto, and (b) immediately prior to the Closing, will be owned of record and
beneficially by the STOCKHOLDER and certain of the Minority Stockholders in
the amounts set forth in the second table in Annex I hereto, and (c) in the
case of shares owned by the STOCKHOLDER, are free and clear of all liens,
encumbrances and claims of every kind. All of the issued and outstanding
shares of the capital stock of the COMPANY were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and national
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any stockholder.
3.4 Transactions in Capital Stock, Accounting Treatment. No option,
warrant, call, conversion right or commitment of any kind exists which may
obligate the COMPANY to issue any shares of capital stock. The COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend
or make any distribution in respect thereof.
3.5 No Bonus Shares. None of the shares of COMPANY Stock was issued
pursuant to awards, grants or bonuses.
3.6 Subsidiaries. The COMPANY has no subsidiaries other than those
listed on Schedule 3.6 hereto (previously defined as the Subsidiaries), and
does not presently own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity
(other than the Subsidiaries), nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other noncorporate entity.
Schedule 3.6 hereto lists the number of shares and class of authorized capital
stock of the Subsidiaries, all of which shares are owned by the Company, free
and clear of all liens, encumbrances and claims of every kind.
3.7 Financial Statements. The STOCKHOLDER (a) has delivered to USOP
(attached as Schedule 3.7 hereto) true, complete and correct copies of the
COMPANY's audited Consolidated Balance Sheets as of March 31, 1995 and 1994
(the end of each of its two most recent completed fiscal years), and audited
Consolidated Statements of Income, Cash Flows and Retained Earnings for each
of its two most recent completed fiscal years (collectively, the "Audited
Financials") and (b) has delivered to USOP (also attached as Schedule 3.7
hereto) true, complete and correct copies of the COMPANY's Balance Sheet (the
"September Balance Sheet") as of the Balance Sheet Date and Consolidated
Statements of Income, Cash Flows and Retained Earnings for the six-month
period then ended (collectively, the "Interim Financials"; and together with
the Audited Financials, the "COMPANY Financial Statements"). The COMPANY
Financial Statements have been prepared in accordance with New Zealand
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (such principles on such basis being referred
to herein as "NZGAAP"), subject, in the case of the Interim Financials to
normal year-end audit adjustments, which in the aggregate will not be
material, and to the omission of footnote information. Each of the
Consolidated Balance Sheets included in the COMPANY Financial Statements
presents fairly the consolidated financial condition of the COMPANY as of the
dates indicated thereon, and each of the Consolidated Statements of Income,
Cash Flows and Retained Earnings included in the COMPANY Financial Statements
presents fairly the results of its consolidated operations for the periods
indicated thereon.
3.8 Liabilities and Obligations.
(a) Except as disclosed on Schedule 3.8 attached hereto, neither
the COMPANY nor any Subsidiary is liable for or subject to any
liabilities except for:
(i) those liabilities reflected on the September Balance
Sheet and not heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course of
its business consistent with past practice under any contract,
commitment or agreement specifically disclosed on any Schedule to
this Agreement or not required to be disclosed thereon because of
the term or amount involved or otherwise; and
(iii) those liabilities incurred, consistent with past
practice, in the ordinary course of business and either not
required to be shown on the September Balance Sheet or arising
since the Balance Sheet Date, which liabilities in the aggregate
are of a character and magnitude consistent with past practice.
For purposes of this Section 3.8 and Section 8.1 hereof, the term
"liabilities" shall include without limitation any direct or indirect
liability, indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, either accrued,
absolute, contingent or otherwise and whether known or unknown, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured.
(b) The STOCKHOLDER has delivered to USOP, in the case of those
liabilities which are not fixed, a reasonable estimate of the maximum
amount which may be payable. For each such liability for which the
amount is not fixed or is contested, the STOCKHOLDER has provided to
USOP (i) a summary description of the liability together with (A) copies
of all relevant documentation relating thereto, (B) amounts claimed and
any other action or relief sought and (C) name of claimant, (ii) all
other parties to the claim, suit or proceeding and the name of each
court or agency before which such claim, suit or proceeding is pending
and (iii) the date such claim, suit or proceeding was instituted.
3.9 Accounts and Notes Receivable. The STOCKHOLDER has delivered to
USOP a summary (attached as Schedule 3.9 hereto) of the accounts and notes
receivable of the COMPANY and the Subsidiaries as of January 31, 1996
(including without limitation receivables from and advances to employees and
stockholders), which includes an aging of the summarized accounts and notes
receivable showing amounts due in 30-day aging categories.
3.10 Permits and Intangibles. Each of the COMPANY and the Subsidiaries
owns or holds all licenses, franchises, permits and other governmental
authorizations, including without limitation permits, titles (including
without limitation motor vehicle titles and current registrations), fuel
permits, licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights, the absence of any of which could have a
Material Adverse Effect (the "Material Permits"). The STOCKHOLDER has
delivered to USOP an accurate list and summary description (attached as
Schedule 3.10 hereto) of all Material Permits. To the knowledge of the
COMPANY the Material Permits are valid, and the COMPANY has not received any
notice that any governmental authority intends to modify, cancel, terminate or
not renew any Material Permit. The COMPANY and each Subsidiary has conducted
and is conducting its business in compliance with the requirements, standards,
criteria and conditions set forth in the Material Permits and other applicable
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing except where such non-compliance or violation would not
have a Material Adverse Effect. The transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the COMPANY or any
Subsidiary by, any Material Permit.
3.11 Environmental Matters. (i) Each of the COMPANY and the
Subsidiaries has complied with and is in compliance with all national, local
and foreign statutes (civil and criminal), common laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it and its properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws"), including
without limitation Environmental Laws relating to air, water, land and the
generation, storage, use, handling, transportation, treatment or disposal of
Contaminants (as such terms are currently defined in any applicable
Environmental Law), except to the extent that noncompliance with any
Environmental Law, either singly or in the aggregate, does not and would not
have a Material Adverse Effect; (ii) each of the COMPANY and the Subsidiaries
has obtained and adhered to all necessary permits and other approvals
necessary to treat, transport, store, dispose of and otherwise handle
Contaminants and has reported, to the extent required by all Environmental
Laws, all past and present sites owned and operated by the COMPANY or any
Subsidiary where Contaminants have been treated, stored, disposed of or
otherwise handled, except to the extent that a failure to do so, either singly
or in the aggregate, does not and would not have a Material Adverse Effect;
(iii) there have been no discharges of Contaminants or threats of discharges
of Contaminants (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the COMPANY or any Subsidiary except as
permitted by Environmental Laws or where such releases do not and would not
have a Material Adverse Effect; (iv) the COMPANY knows of no on-site or
off-site location to which the COMPANY or any Subsidiary has transported or
disposed of Contaminants or arranged for the transportation of Contaminants,
which site is the subject of any national, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
any Subsidiary or USOP for any clean-up cost, remedial work, damage to natural
resources or personal injury, including without limitation any claim under New
Zealand's Resource Management Act 1991, as amended; and (v) neither the
COMPANY nor any Subsidiary has or will have any liability in connection with
any discharge of any Contaminants into the environment, except to the extent
that such liability does not and would not have a Material Adverse Effect.
3.12 Real and Personal Property. The STOCKHOLDER has delivered to USOP
an accurate list (attached as Schedule 3.12 hereto) of all owned and leased
real property, all personal property included in "depreciable plant, property
and equipment" on the September Balance Sheet and all other personal property
owned or leased by the COMPANY or any Subsidiary with a value in excess of
US$50,000 individually (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, including in each case true, complete and
correct copies of leases for material equipment and all real properties on
which are situated buildings, warehouses, workshops, garages and other
structures used in the operation of the business of the COMPANY and the
Subsidiaries and also including an indication as to which assets are currently
owned by any stockholder of the COMPANY or business or personal affiliates of
the COMPANY or any stockholder of the COMPANY. All of the trucks and other
material machinery and equipment of the COMPANY and the Subsidiaries listed on
Schedule 3.12 are in good working order and condition, ordinary wear and tear
excepted. All leases set forth on Schedule 3.12 are in full force and effect
and constitute valid and binding agreements of the COMPANY or the Subsidiaries
and, to the knowledge of the COMPANY, the other parties thereto in accordance
with their respective terms. All fixed assets used by the COMPANY or any
Subsidiary that are material to the operation of their business are either
owned by the COMPANY or the Subsidiaries or leased under an agreement listed
on Schedule 3.10. Schedule 3.12 includes without limitation true, complete
and correct copies of all title reports and title insurance policies received
or owned by the COMPANY or any Subsidiary that are still in effect. Schedule
3.12 also includes a summary description of all plans or projects involving
the opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, to which management of
the COMPANY has made any material expenditure in the two-year period prior to
the date of this Agreement, which if pursued by the COMPANY or any Subsidiary
would require additional material expenditures of capital.
3.13 Significant Customers; Material Contracts and Commitments.
Schedule 3.13 hereto contains an accurate list of (i) all significant
customers of the COMPANY and the Subsidiaries (i.e. those customers
representing 5% or more of the COMPANY's consolidated revenues for the 12
months ending on the Balance Sheet Date, or who have paid to the COMPANY and
the Subsidiaries US$100,000 or more in any of the past four fiscal quarters)
and (ii) all material contracts, commitments, leases, instruments, agreements,
licenses or permits to which the COMPANY or any Subsidiary is a party or by
which it or its properties are bound (including without limitation contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, loan agreements, indemnity or guaranty
agreements, bonds, mortgages, options to purchase land, liens, pledges or
other security agreements) (a) as of the Balance Sheet Date and (b) entered
into since the Balance Sheet Date (collectively, the "Material Contracts").
Schedule 3.13 hereto includes true, complete and correct copies of the Material
Contracts. Except to the extent set forth on Schedule 3.13 hereto, (i) none
of the COMPANY's significant customers have canceled or substantially reduced
or, to the knowledge of the COMPANY, are currently attempting or threatening
to cancel or substantially reduce service, (ii) the COMPANY and the
Subsidiaries have complied with all of their respective material commitments
and obligations and are not in default under any of the Material Contracts and
no notice of default has been received with respect to any thereof and (iii)
there are no Material Contracts that were not negotiated at arm's length with
third parties not affiliated with the COMPANY or any officer, director or
stockholder of the COMPANY. Except to the extent set forth on Schedule 3.13
hereto, (x) the COMPANY is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement
with any labor union and (y) no employees of the COMPANY or any Subsidiary are
represented by any labor union, covered by any collective bargaining agreement
or the subject of any campaign to establish such representation. There is no
pending or, to the best of the COMPANY's knowledge, threatened labor dispute
involving the COMPANY or any Subsidiary and any group of its employees nor has
the COMPANY or any Subsidiary experienced any labor interruptions over the past
three years and the COMPANY considers its relationship with its employees to
be good.
3.14 Title to Real Property. The COMPANY and each Subsidiary has good
and insurable title to the real property owned and used in their respective
businesses, including without limitation those reflected on Schedule 3.12
hereto, subject to no mortgage, pledge, lien, conditional sales agreement,
encumbrance or charge, except for:
(i) liens reflected on Schedules 3.8 and 3.12 as securing
liabilities reflected on such Schedules (with respect to which
liabilities no default exists);
(ii) liens for current taxes not yet payable and assessments not
in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions
to title shown of record in the office of the Register of Deeds (or
comparable office) of each county in which the properties, assets and
leasehold estates are located which do not in the aggregate materially
adversely affect the current use of the property.
3.15 Insurance. The STOCKHOLDER has delivered to USOP an accurate list
(attached as Schedule 3.15 hereto) as of the Balance Sheet Date of all
insurance policies carried by the COMPANY and the Subsidiaries and all
insurance loss runs or workmen's compensation claims received for the past two
policy years. Also attached to Schedule 3.15 are true, complete and correct
copies of all current insurance policies, all of which are in full force and
effect
3.16 Compensation; Employment Agreements. The STOCKHOLDER has
delivered to USOP an accurate schedule (attached as Schedule 3.16 hereto)
showing all stockholders, officers, directors and key employees of the COMPANY
and the Subsidiaries, listing the investment interests of such stockholders
(including without limitation shareholdings and loans and advances) and
listing all employment agreements with such officers, directors and key
employees and the rate of compensation (and the portions thereof attributable
to salary, bonus and other compensation, respectively) of each of such persons
as of (i) the Balance Sheet Date and (ii) the date hereof, and, in the case of
Subsidiary stockholders, their investment interests in each Subsidiary
(including without limitation shareholdings and loans and advances). The
STOCKHOLDER has provided to USOP true, complete and correct copies of all
employment contracts, commitments and arrangements with persons listed on
Schedule 3.16.
3.17 Employee Benefit Plans. All employee benefit plans, programs and
policies (whether formal or informal, and whether maintained for the benefit
of a single individual or more than one individual) maintained or contributed
to by the COMPANY or any Subsidiary for the benefit of any current or former
employee of the COMPANY or any Subsidiary or in which such employees are
entitled to participate are listed in Schedule 3.17 (the "Benefit Plans"), and
copies of all such written plans and policies, written descriptions of all
such oral plans and policies, and all other documentation relating to such
plans and policies have been delivered or made available to USOP. Except as
disclosed on Schedule 3.17: (a) each Benefit Plan and the administration
thereof complies, and has at all times complied, in all material respects with
the requirements of all applicable laws; (b) no suit, actions or other
litigation (excluding claims for benefits incurred in the ordinary course of
plan activities) have been brought against or with respect to any Benefit
Plan; (c) all required contributions to Benefit Plans have been made, and all
benefits accrued under any unfunded Benefit Plan will have been paid, accrued
or otherwise adequately reserved in accordance with NZGAAP and the COMPANY and
the Subsidiaries have performed all material obligations required to be
performed under Benefit Plans; and (d) no employee of the COMPANY or any
Subsidiary is represented by a labor union or organization, no labor union or
organization has been certified or recognized as a representative of any such
employee, there are no pending or, to the knowledge of the COMPANY, threatened
representation campaigns concerning union representation involving any
employee or efforts of any labor union or organization (or representatives
thereof) to organize any employees.
3.18 Conformity with Law; Litigation. Neither the COMPANY nor any
Subsidiary has violated any law or regulation or any order of any court or
national, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it, which
violations in the aggregate would have a Material Adverse Effect; and except to
the extent set forth in Schedule 3.8, there are no material claims, actions,
suits or proceedings, pending or, to the knowledge of the COMPANY, threatened,
against or affecting the COMPANY or any Subsidiary, at law or in equity, or
before or by any national, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
it and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received.
3.19 Taxes. Except as set forth on Schedule 3.19, (i) there are no
examinations in progress or claims against the COMPANY or any Subsidiary for
Taxes (as defined below) for any period or periods and no notice of any claim
for Taxes, whether pending or threatened, has been received; (ii) the COMPANY
and each Subsidiary has timely filed or will timely file all requisite Tax
returns, reports and forms ("Returns") for all periods ended on or before the
Closing Date; (iii) the COMPANY and each Subsidiary has paid or has fully
accrued for all Taxes, whenever determined, with respect to prior periods; and
(iv) copies of (1) any Tax examinations, (2) extensions of statutory
limitations for the collection or assessment of Taxes and (3) the Returns of
the COMPANY and each Subsidiary for the last three fiscal years are included
as part of Schedule 3.19.
For purposes of this Agreement, the term "Tax" shall be understood
to include any tax or similar governmental charge, impost or levy (including
without limitation income taxes, franchise taxes, transfer taxes or fees,
sales taxes, use taxes, gross receipts taxes, value added taxes, employment
taxes, excise taxes, ad valorem taxes, property taxes, withholding taxes,
payroll taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest, imposed by New Zealand
or any other country or any state, county, local or foreign government or
subdivision or agency thereof.
3.20 No Violations. Neither the COMPANY, any Subsidiary nor, to the
knowledge of the COMPANY, any other party thereto is (i) in violation of any
Charter Document or (ii) in default under any Material Contract (the Material
Contracts, together with the Charter Documents, being referred to herein as
the "Material Documents"); and, except as set forth in the Schedules attached
to this Agreement, (a) the rights and benefits of the COMPANY and the
Subsidiaries under the Material Documents will not be materially and adversely
affected by the transactions contemplated hereby and (b) the execution of this
Agreement and the performance of the obligations hereunder and the consummation
of the transactions contemplated hereby will not result in any material
violation or breach or constitute a default under, any of the terms or
provisions of the Material Contracts or the Charter Documents. None of the
Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions
contemplated hereby to remain in full force and effect or give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit.
3.21 Government Contracts. Neither the COMPANY nor any Subsidiary is
a party to any material governmental contracts subject to price
redetermination or renegotiation.
3.22 Absence of Changes. Since the Balance Sheet Date, except as
contemplated hereby or as set forth on Schedule 3.22 there has not been:
(i) any changes that, in the aggregate, have had a Material
Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the COMPANY or any Subsidiary;
(iii) any change in the authorized capital of the COMPANY or any
Subsidiary or in its outstanding securities or any change in its
ownership interests or any grant of any options, warrants, calls,
conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the COMPANY
or any Subsidiary;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the COMPANY or any
Subsidiary to any of its officers, directors, stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, materially adversely
affecting the business or future prospects of the COMPANY or any
Subsidiary;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of COMPANY or any Subsidiary to
any person, including without limitation the STOCKHOLDER and his
affiliates, other than in the ordinary course of business of the COMPANY
and the Subsidiaries;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY or any Subsidiary, including
without limitation any indebtedness or obligation of the STOCKHOLDER or
any affiliate thereof, provided that the COMPANY and the Subsidiaries
may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of the COMPANY or any Subsidiary or requiring consent
of any party to the transfer and assignment of any such assets, property
or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of business of the COMPANY and the
Subsidiaries;
(xi) any waiver of any material rights or claims of the COMPANY
or any Subsidiary;
(xii) any material breach, amendment or termination of any
material contract, agreement, license, permit or other right to which
the COMPANY or any Subsidiary is a party; or
(xiii) any transaction by the COMPANY or any Subsidiary outside
the ordinary course of businesses.
3.23 Deposit Accounts; Powers of Attorney. The STOCKHOLDER has
delivered to USOP an accurate schedule (Schedule 3.23) as of the date of this
Agreement, of:
(i) the name of each financial institution in which the COMPANY
or any Subsidiary has any account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 3.23 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY
or any Subsidiary and a description of the terms of such power.
3.24 Relations with Governments. Neither the COMPANY nor any
Subsidiary has made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause the COMPANY or any
Subsidiary to be in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended or any law of similar effect.
3.25 Disclosure. No representation or warranty by the STOCKHOLDER
contained in this Agreement, and no representation, warranty or statement
contained in any list, certificate, Schedule or other instrument, document,
agreement or writing furnished or to be furnished to, or made with, USOP
pursuant hereto or in connection with the negotiation, execution or
performance hereof, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to
make any statement herein or therein not misleading.
3.26 USOP Prospectus. The STOCKHOLDER has received and reviewed a copy
of, and has made his investment decision in USOP on the basis of, the
prospectus contained in USOP's shelf registration statement on Form S-1 dated
January 5, 1996 (as supplemented on January 18, 1996) (the "USOP Prospectus")
and the representations, warranties, covenants and agreements of USOP set
forth in this Agreement.
3.27 Absence of Claims Against COMPANY. No stockholder or former
stockholder of the COMPANY has any claim against the COMPANY except for (i)
items specifically identified on Schedules 3.8 and 3.13 as being claims of or
obligations to a stockholder or former stockholder and (ii) continuing
obligations to stockholders relating to their employment by the COMPANY.
3.28 COMPANY Forecast. The STOCKHOLDER has previously provided USOP
with a true, correct and complete copy of the COMPANY's management forecast
dated February 2, 1996 (the "Forecast"). The Forecast was prepared in good
faith by the senior management of the COMPANY, and the COMPANY reasonably
believes that there is a reasonable basis for the projections contained
therein. The Forecast does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made
therein not misleading in light of the circumstances in which they were made.
4. REPRESENTATIONS OF USOP
USOP represents and warrants to the STOCKHOLDER as follows:
4.1 Due Organization. USOP is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except for where the
failure to be so authorized or qualified would not have a material adverse
effect on its business, taken as a whole. Copies of the charter documents
(collectively, the "USOP Charter Documents"), each, as amended, of USOP have
been delivered to the STOCKHOLDER. USOP is not in violation of any USOP
Charter Document.
4.2 USOP Stock. The USOP Stock to be delivered to the STOCKHOLDER at
the Closing Date will be duly authorized, validly issued shares of Common
Stock of USOP, credited as fully paid and nonassessable.
4.3 Authorization; Validity of Obligations. The representative of
USOP executing this Agreement has the corporate power and authority to enter
into and bind USOP to the terms of this Agreement. USOP has the full legal
right, power and corporate authority to enter into this Agreement and the
transactions contemplated hereby. The execution and delivery of this
Agreement by USOP and the performance by USOP of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
USOP, and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of USOP
enforceable in accordance with its terms.
4.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of the USOP
Charter Documents;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of
time or both) under any document, agreement or other instrument to which
USOP is a party, or result in the creation or imposition of any lien,
charge or encumbrance on any of USOP's properties pursuant to (A) any
law or regulation to which USOP or any of its property is subject, or
(B) any judgment, order or decree to which USOP is bound or any of its
property is subject;
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
USOP; or
(iv) violate, or require any filing, approval or consent under,
any law, order, judgment, rule or regulation that USOP is subject to or
bound by (except for filings and approvals under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, the New Zealand Overseas
Investment Act 1973 and the New Zealand Overseas Investment Regulations
1995, together with all rules and regulations promulgated thereunder).
4.5 Capitalization of USOP and Ownership of USOP Stock. The
authorized capital stock of USOP is as set forth in Section 1.2(ii). All of
the shares of USOP Stock to be issued to the STOCKHOLDER in accordance
herewith will be offered, issued, sold and delivered by USOP in compliance
with all applicable state and federal laws concerning the issuance of
securities and none of such shares were or will be issued in violation of the
preemptive rights of any stockholder.
4.6 Conformity with Law. USOP is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a material adverse
effect on the business of USOP and its subsidiaries, taken as a whole. There
are no claims, actions, suits or proceedings, pending or, to the knowledge of
USOP, threatened, against or affecting USOP, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received which, in any case, would have a material
adverse effect on the business of USOP and its subsidiaries, taken as a whole.
4.7 Financial Statements. USOP has delivered to the STOCKHOLDER true,
complete and correct copies of USOP's (i) Consolidated Balance Sheets as of
April 30, 1994 and 1995 (audited) and October 31, 1995 (unaudited), (ii) a Pro
Forma Balance Sheet as of October 31, 1995 (unaudited), (iii) Consolidated
Statements of Operations for the fiscal years ended April 30, 1993, 1994 and
1995 (audited) and for the six months ended October 31, 1995 (unaudited) and
(iv) Pro Forma Combined Statements of Operations for the fiscal year ended
April 30, 1995 (unaudited) and for the six months ended October 31, 1995
(unaudited) (collectively, the "USOP Financial Statements"). The USOP
Financial Statements have been prepared in accordance with United States
generally accepted accounting principles ("USGAAP"). The balance sheets
included in the USOP Financial Statements present fairly the financial
condition of USOP and its subsidiaries on a combined basis as of the dates
indicated thereon, and the Statements of Operations included in the USOP
Financial Statements present fairly the results of their respective operations
for the periods indicated thereon. There has been no material adverse change
in the financial condition or operations of USOP and its subsidiaries, taken
as a whole, since the date of the most recent USOP Financial Statements
delivered to the STOCKHOLDER through the date hereof.
4.8 Disclosure. No representation or warranty by USOP contained in
this Agreement, and no representation, warranty or statement contained in any
list, certificate, Schedule or other instrument, document, agreement or
writing furnished or to be furnished to, or made with, the STOCKHOLDER
pursuant hereto or in connection with the negotiation, execution or
performance hereof, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to
make any statement herein or therein not misleading.
5. COVENANTS PRIOR TO CLOSING
5.1 Access and Cooperation; Due Diligence.
(a) Between the date of this Agreement and the Closing Date, the
STOCKHOLDER will cause the COMPANY (after receipt of prior notice from
USOP) to afford to the officers and authorized representatives of USOP
access to all of the sites, properties, books and records of the COMPANY
and the Subsidiaries and he will also cause the COMPANY to furnish USOP
with such additional financial and operating data and other information
as to the business and properties of the COMPANY and the Subsidiaries as
USOP may from time to time reasonably request. The STOCKHOLDER will,
and will cause the COMPANY to, cooperate with USOP, its representatives,
engineers, auditors and counsel in the preparation of any documents or
other material which may be required in connection with this Agreement.
USOP will treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect hereto as confidential in
accordance with the provisions of Section 10 hereof.
(b) Between the date of this Agreement and the Closing Date, USOP
will afford to the STOCKHOLDER and his authorized representatives access
to all of USOP's sites, properties, books and records and will furnish
the STOCKHOLDER with such additional financial and operating data and
other information as to the business and properties of USOP as the
STOCKHOLDER may from time to time reasonably request. USOP will
cooperate with the STOCKHOLDER, his representatives, engineers, auditors
and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required
by this Agreement. The STOCKHOLDER will cause all information obtained
in connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section
10 hereof.
5.2 Conduct of Business Pending Closing. Between the date hereof and
the Closing Date, the STOCKHOLDER will cause the COMPANY and the Subsidiaries
to:
(i) carry on their respective businesses in substantially the
same manner as it has heretofore and not introduce any material new
method of management, operation or accounting;
(ii) maintain their respective properties and facilities,
including those held under leases, in as good working order and
condition as at present, ordinary wear and tear excepted;
(iii) perform in all material respects all of their respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) use reasonable efforts to maintain and preserve their
business organization intact, retain their respective present key
employees and maintain their respective relationships with material
suppliers, customers and others having business relations with the
COMPANY or the Subsidiaries;
(vi) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
(vii) maintain present material debt and lease instruments and
not enter into new or amended debt or lease instruments, without the
knowledge and consent of USOP (which consent shall not be unreasonably
withheld); and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents, except for ordinary
and customary bonuses and salary increases for employees (other than
employees who are also stockholders) in accordance with past practice.
5.3 Prohibited Activities. Between the Balance Sheet Date and the
date hereof the STOCKHOLDER represents and warrants that (except as set forth
on Schedule 3.22 hereto) each of the COMPANY and the Subsidiaries have not,
and from the date hereof to the Closing Date the STOCKHOLDER will cause each
of the COMPANY and the Subsidiaries to not without the prior written consent
of USOP (which consent shall not be unreasonably withheld):
(i) make any change in its Certificate of Incorporation or
By-laws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or
involves an amount not in excess of US$50,000, including contracts to
provide services to customers;
(v) increase the compensation payable or to become payable to any
officer, director, stockholder, employee or agent, or make any bonus or
management fee payment to any such person except ordinary and customary
bonuses and periodic salary increases to employees;
(vi) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, other than retention of title financing
arrangements with suppliers entered into in the ordinary course of
business of the COMPANY and the Subsidiaries;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the
start-up of any new business;
(ix) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(x) waive any material rights or claims of the COMPANY or the
Subsidiaries, provided that the COMPANY and the Subsidiaries may
negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(xi) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY or the
Subsidiaries; or
(xii) enter into any other transaction (1) that is not negotiated
at arm's length with a third party not affiliated with the COMPANY or
any officer, director or stockholder of the COMPANY or the Subsidiaries
or (2) outside the ordinary course of the COMPANY or the Subsidiaries
business or prohibited hereunder.
5.4 No Shop. The STOCKHOLDER, in his capacity as an officer, director
and stockholder of the COMPANY, shall not, during the period commencing on the
date of this Agreement and ending with the earlier to occur of the Closing or
the termination of this Agreement in accordance with its terms, directly or
indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than USOP
relating to,
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, the COMPANY or any Subsidiary or a merger,
consolidation or business combination of either of the COMPANY or any
Subsidiary.
5.5 Notice to Bargaining Agents. Prior to the Closing Date, the
STOCKHOLDER shall cause the COMPANY to satisfy any requirement for notice of
the transactions contemplated by this Agreement under applicable collective
bargaining agreements, and shall provide USOP with proof that any required
notice has been sent.
5.6 Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
to supplement or amend promptly the Schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in
the Schedules and promptly deliver the amended or supplemented Schedules to
the other party. Within five business days following receipt of amended or
supplemented Schedules, the receiving party may terminate this Agreement
pursuant to Section 12.2(iv) hereof; provided, however, that the failure to
terminate this Agreement within five business days following the receipt of
amended or supplemented Schedules shall operate as a waiver of any claim under
Section 8 or otherwise by the receiving party solely with respect to the item
or items set forth in such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether
the conditions set forth in Sections 6.1 and 7.1 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or
supplemented pursuant to this Section 5.6.
5.7 Breach of Certain Covenants. The STOCKHOLDER shall give prompt
written notice to USOP of each breach of Section 5.2 or 5.3 hereof, describing
in reasonable detail all material facts relating to each such breach. Within
five business days following receipt of each such written notice, USOP may
terminate this Agreement pursuant to Section 12.2(iv) hereof; provided,
however, that the failure to terminate this Agreement within five business
days following the receipt of such a notice shall operate as a waiver of any
claim under Section 8 or otherwise by USOP solely with respect to the item or
items set forth in such notice.
5.8 Cooperation in Obtaining Required Consents and Approvals. Each
party hereto shall cooperate in obtaining all consents and approvals required
by Sections 6.6 and 7.7. In connection therewith, if required, the
STOCKHOLDER shall (and shall cause the COMPANY to), and USOP shall, file as
promptly as practicable after the date hereof all notices and other
information and documents required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, the New Zealand Overseas Investment Act
1973 and the New Zealand Overseas Investment Regulations 1995.
5.9 Acquisition of Minority Stockholder COMPANY Shares. Between the
date of this Agreement and the Closing Date, the STOCKHOLDER shall use his
best efforts to acquire a portion of the shares of COMPANY stock owned by the
Minority Stockholders and a portion of the indebtedness obligations of the
COMPANY to the Minority Stockholders, so that the resulting investment
interests of the STOCKHOLDERS and the Minority Stockholders in the COMPANY
immediately prior to the Closing will be as set forth in the second table in
Annex I. USOP acknowledges that in connection with such acquisitions the
STOCKHOLDER will agree to deliver to certain Minority Stockholders a portion
of the shares of USOP Stock to be delivered by USOP at the Closing pursuant to
Section 2.2(a)(ii) hereof, and the number of shares of USOP Stock to be so
delivered to such Minority Stockholders is set forth in the third table in
Annex I hereto.
5.9 Capitalization of Stockholder Loans and Advances. All loans and
advances to the COMPANY from its stockholders shall be capitalized prior to or
immediately following the Closing in such a manner that upon completion of
such capitalization and consummation of the Closing USOP will own 51% of the
issued and outstanding shares of COMPANY Stock.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER
The obligation of the STOCKHOLDER to consummate the transactions
contemplated by Section 2.2 hereof are subject to satisfaction of the
following conditions:
6.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of USOP contained in Section 6 shall be true
and correct as of the Closing Date as though such representations and
warranties had been made as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by USOP on or
before the Closing Date shall have been duly complied with and performed; and
a certificate to the foregoing effect dated the Closing Date and signed by the
President or any Vice President of USOP shall have been delivered to the
STOCKHOLDER.
6.2 No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of any of the transactions contemplated
by this Agreement, and no action or proceeding shall have been instituted or
threatened to restrain or prohibit USOP's acquisition of COMPANY Stock or the
STOCKHOLDER's acquisition of USOP Stock and no governmental agency or body
shall have taken any other action or made any request of the COMPANY as a
result of which the STOCKHOLDER reasonably deems it inadvisable to proceed
with the transactions hereunder.
6.3 No Material Adverse Change. No material adverse change in the
business, operations, affairs, prospects, properties, assets, profits or
condition (financial or otherwise) of USOP and its subsidiaries, taken as a
whole, shall have occurred; and the STOCKHOLDER shall have received a
certificate signed by USOP dated the Closing Date to such effect.
6.4 Minority Stockholder Transactions. The STOCKHOLDER shall have
acquired a portion of the shares of COMPANY stock owned by the Minority
Stockholders and a portion of the indebtedness obligations of the COMPANY to
the Minority Stockholders, so that the resulting investment interests of the
STOCKHOLDERS and the Minority Stockholders in the COMPANY is as set forth in
the second table in Annex I.
6.5 Consents and Approvals. All necessary consents of, approvals by
and filings with any governmental authority or agency or third party relating
to the consummation by USOP of the transactions contemplated herein (which
USOP shall use its best efforts to obtain and make) shall have been obtained
and made, including without limitation consents, approvals and filings under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the New
Zealand Overseas Investment Act 1973 and the New Zealand Overseas Investment
Regulations 1995. With respect to Material Contracts, all necessary consents
of, approvals by and filings with any third party relating to the consummation
by the STOCKHOLDER of the transaction contemplated herein (which the
STOCKHOLDER shall use his commercially reasonable best efforts to obtain and
make) shall have been obtained and made.
6.6 Releases. USOP shall have caused the STOCKHOLDER to be released
from guaranties, indemnities, securities and like obligations of the
STOCKHOLDER as to all of the obligations of the COMPANY and the Subsidiaries.
6.7 Certificates. USOP shall have delivered to the STOCKHOLDER (i) a
copy of its Certificate of Incorporation, certified by the Secretary of State
of the State of Delaware, (ii) a copy of its By-laws, certified by the
Secretary of USOP, (iii) copies of all resolutions authorizing this Agreement
and the transactions contemplated hereby, certified by the Secretary of USOP,
(iv) a certificate of the Secretary of USOP as to the incumbency of the
officers of USOP executing this Agreement and any other document relating to
the transactions contemplated hereby, (v) a certificate, dated as of a date no
later than ten days prior to the Closing Date, duly issued by the Delaware
Secretary of State and in each state in which USOP is authorized to do
business, showing that USOP is in good standing and authorized to do business
and that all state franchise and/or income tax returns and taxes for USOP for
all periods prior to the Closing have been filed and paid.
6.8 Payment Instruction Letter. USOP shall have executed the
acknowledgement and agreement included in a payment instruction letter from
the STOCKHOLDER to USOP in substantially the form of the STOCKHOLDER's draft
dated December 13, 1995, and shall have delivered such executed document to
the STOCKHOLDER.
6.9 Due Diligence Review. The STOCKHOLDER shall be fully satisfied in
his sole discretion with the results of his review of, and his other due
diligence investigations with respect to, the business, operations, affairs,
prospects, properties, assets, existing and potential liabilities,
obligations, profits or condition (financial or otherwise) of USOP.
6.10 COMPANY Articles. The Articles of Association of the COMPANY
shall have been amended and shall be satisfactory to the STOCKHOLDER.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP
The obligation of USOP to consummate the transactions contemplated by
Section 2.2 hereof are subject to satisfaction of the following conditions:
7.1 Representations and Warranties; Performance of Obligations. All
the representations and warranties of the STOCKHOLDER contained in this
Agreement shall be true, correct and complete on and as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such date, each and all of the agreements of the STOCKHOLDER
to be performed on or before the Closing Date pursuant to the terms hereof
shall have been performed, and the STOCKHOLDER shall have delivered to USOP a
certificate dated the Closing Date and signed by him to both such effects.
7.2 No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of any of the transactions contemplated
by this Agreement, and no action or proceeding shall have been instituted or
threatened to restrain or prohibit USOP's acquisition of COMPANY Stock or the
STOCKHOLDER's acquisition of USOP Stock and no governmental agency or body
shall have taken any other action or made any request of USOP as a result of
which the management of USOP reasonably deems it inadvisable to proceed with
the transactions hereunder.
7.3 Due Diligence Review. USOP shall be fully satisfied in its sole
discretion with the results of its review of, and its other due diligence
investigations with respect to, the business, operations, affairs, prospects,
properties, assets, existing and potential liabilities, obligations, profits
or condition (financial or otherwise) of the COMPANY and the Subsidiaries.
7.4 No Material Adverse Change. No material adverse change in the
business, operations, affairs, prospects, properties, assets, profits or
condition (financial or otherwise) of the COMPANY and the Subsidiaries, taken
as a whole, shall have occurred; and USOP shall have received a certificate
signed by the STOCKHOLDER dated the Closing Date to such effect.
7.5 Minority Stockholder Transactions. The STOCKHOLDER shall have
acquired a portion of the shares of COMPANY stock owned by the Minority
Stockholders and a portion of the indebtedness obligations of the COMPANY to
the Minority Stockholders, so that the resulting investment interests of the
STOCKHOLDERS and the Minority Stockholders in the COMPANY is as set forth in
the second table in Annex I, and each Minority Stockholder, if any, acquiring
shares of USOP stock in connection therewith shall have (a) delivered a
representation letter to USOP relating to U.S. securities law matters in form
and substance reasonably satisfactory to USOP (b) entered into arrangements
reasonably satisfactory to USOP and the STOCKHOLDER relating to their
remaining investment in the COMPANY.
7.6 Consents and Approvals. All necessary consents of, approvals by
and filings with any governmental authority or agency or, with respect to
Material Contracts, third party relating to the consummation by the
STOCKHOLDER of the transaction contemplated herein (which the STOCKHOLDER
shall use his commercially reasonable best efforts to obtain and make) shall
have been obtained and made.
7.7 Certificates. The STOCKHOLDER shall have delivered to USOP (i) a
copy of the Articles of Association of the COMPANY and each Subsidiary
certified by the STOCKHOLDER and (ii) a copy of the Memorandum of Association
of the COMPANY and each Subsidiary certified by the STOCKHOLDER.
7.8 Insurance. The STOCKHOLDER shall have delivered to USOP evidence
that USOP has been added as an additional named insured on all liability
insurance policies of the COMPANY.
7.9 COMPANY Articles. The Articles of Association of the COMPANY
shall have been amended and shall be satisfactory to USOP.
7.10 Consolidation. USOP shall be reasonably satisfied that after the
Closing it will be entitled under USGAAP to include the COMPANY and all of its
Subsidiaries in USOP's consolidated financial statements.
8. INDEMNIFICATION
8.1 Indemnification by the STOCKHOLDER. The STOCKHOLDER covenants and
agrees that he will indemnify, defend, protect and hold harmless USOP from,
against and in respect of:
(a) (x) all liabilities, losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, settlement payments,
deficiencies, costs and expenses (including without limitation
reasonable attorneys' fees and expenses) (collectively, "Claims")
suffered, sustained, incurred or paid by USOP and (y), after the
Closing, 51% of all Claims suffered, sustained, incurred or paid by the
COMPANY, in either case in connection with, resulting from or arising
out of:
(i) any breach of any representation or warranty of the
STOCKHOLDER set forth in this Agreement (whether pursuant to
Section 3, 5.3 or otherwise) or any certificate or other writing
delivered by the STOCKHOLDER in connection herewith;
(ii) any nonfulfillment of any covenant or agreement on the
part of the STOCKHOLDER in this Agreement;
(iii) any claim by any former stockholder of the COMPANY
involving the transactions contemplated hereby or any prior
transaction involving any shares of capital stock of the COMPANY
or any predecessor corporation, including without limitation any
claim relating to any transaction between the STOCKHOLDER and any
Minority Stockholder referred to in Section 5.9 hereof;
(iv) the assertion against USOP or the COMPANY of any
liability or obligation relating to or arising out of the
business, operations or assets of the COMPANY or any Subsidiary
prior to the Closing Date or the actions or omissions of the
COMPANY's or any Subsidiary's directors, officers, stockholders,
employees or agents prior to the Closing Date, except in each case
to the extent reflected as a liability on the balance sheet
setting forth the finally agreed upon Net Worth of the COMPANY as
of the Closing Date; or
(v) any liability or obligation which relates to, or which
involves a claim, liability or obligation which arises out of or
is based upon, any Environmental Law to the extent that such
liability or obligation relates to or arises out of, in whole or
in part, any activity occurring, condition existing, omission to
act or other matter existing prior to the Closing Date, except in
each case to the extent reflected as a liability on the balance
sheet setting forth the finally agreed upon Net Worth of the
COMPANY as of the Closing Date; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including without limitation reasonable attorneys'
fees and expenses) incident to any of the foregoing or to the
enforcement of this Section 8.1;
provided (A) that the STOCKHOLDER shall not have any liability under
subsection 8.1(a)(i) unless, and solely to the extent that, the amount of the
aggregate indemnification obligations under such clause (a)(i) exceed
US$600,000 (the "Indemnification Threshold"), (B) the aggregate amount of the
STOCKHOLDER's liability under this Section 8.1 shall not exceed US$30,000,000
(reduced by the amount, if any, of any payments received by USOP from the
STOCKHOLDER pursuant to Section 2.3 or 2.4 hereof) and (C) USOP will not be
indemnified for losses resulting from a change in law after the Closing Date
other than changes proposed on or prior to such date. USOP acknowledges and
agrees that each representation and warranty of the STOCKHOLDER set forth in
this Agreement is modified by the Schedule relating thereto (and any Schedule
update), which in most cases sets forth exceptions to such representation and
warranty.
8.2 Indemnification by USOP. USOP covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDER from, against and
in respect of:
(a) all Claims suffered, sustained, incurred or paid by the
STOCKHOLDER in connection with, resulting from or arising out of:
(i) any breach of any representation or warranty of USOP
set forth in this Agreement or any certificate or other writing
delivered by USOP in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on the
part of USOP in this Agreement; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including without limitation reasonable attorneys'
fees and expenses) incident to any of the foregoing or to the
enforcement of this Section 8.2.
8.3 Survival of Representations and Warranties. The representations
and warranties given or made by the STOCKHOLDER or USOP in this Agreement or
in any certificate or other writing furnished in connection herewith shall
survive the Closing until the earlier of (a) the date of completion of the
first audit of financial statements containing combined operations for those
items that would be expected to be encountered in the audit process or (b) the
first anniversary of the Closing Date for other items (such earlier date being
referred to herein as the "Expiration Date") and shall thereafter terminate
and be of no further force or effect, except that (i) all representations and
warranties relating to Tax matters involving the COMPANY and any Subsidiary
shall survive the Closing for the period within which the Commissioner of
Inland Revenue can re-open tax assessments specified in the New Zealand Tax
Administration Act 1994 plus any extensions or waivers thereof, (ii) all
representations and warranties set forth in Sections 3.1, 3.2, 3.3, 3.4 and
3.27 hereof shall survive the Closing without limitation and (iii) any
representation or warranty as to which a claim (including without limitation a
contingent claim) shall have been asserted during the survival period shall
continue in effect with respect to such claim until such claim shall have been
finally resolved or settled. Notwithstanding any investigation or audit
conducted before or after the Closing Date or the decision of any party to
complete the Closing, each party shall be entitled to rely upon the
representations and warranties of the other party or parties set forth herein
(as modified by the Schedule relating thereto, including without limitation
Schedule updates).
8.4 Third Person Claims. Promptly after (i.e., within 30 days after)
any party hereto (hereinafter the "Indemnified Party") has received notice of
or has knowledge of any claim by a person not a party to this Agreement
("Third Person"), or the commencement of any action or proceeding by a Third
Person, the Indemnified Party shall, as a condition precedent to a claim with
respect thereto being made against any party obligated to provide
indemnification pursuant to Section 8.1 or 8.2 hereof (hereinafter the
"Indemnifying Party"), give the Indemnifying Party written notice of such
claim or the commencement of such action or proceeding (a "Claim Notice").
Such notice shall state the nature and the basis of such claim and a
reasonable estimate of the amount thereof. The Indemnifying Party shall have
the right to defend and settle, at its own expense and by its own counsel, any
such matter so long as the Indemnifying Party pursues the same in good faith
and diligently, provided that the Indemnifying Party shall not settle any
criminal proceeding without the consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party
shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that are
in the Indemnified Party's possession or control. All Indemnified Parties
shall use the same counsel, which shall be the counsel selected by
Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest that prevents counsel for the Indemnifying Party
from representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and
Indemnifying Party will reimburse the Indemnified Party for the expenses of
its counsel. After the Indemnifying Party has notified the Indemnified Party
of its intention to undertake to defend or settle any such asserted liability,
and for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is
requested by the Indemnifying Party, in which event the Indemnified Party
shall be reimbursed by the Indemnifying Party for reasonable additional legal
expenses and out-of-pocket expenses. If the Indemnifying Party desires to
accept a final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement by said Third Person
and the Indemnified Party shall reimburse the Indemnifying Party for any
additional costs of defense (including without limitation reasonable attorneys
fees) which it subsequently incurs with respect to such claim and all
additional costs of settlement or judgment. If the Indemnifying Party does
not undertake to defend such matter to which the Indemnified Party is entitled
to indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however that, except as otherwise provided herein, under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. All settlements hereunder shall effect a complete
release of the Indemnified Party, unless the Indemnified Party otherwise
agrees in writing. Notwithstanding any other provision of this Section 8.4,
in the case of a claim to which this Section 8.4 is applicable, and in which
the STOCKHOLDER could have an indemnification obligation under Section 8.1
hereof, USOP shall nonetheless have the right and the obligation to diligently
defend the claim as it reasonably deems advisable unless the amount of the
claim, together with the amount of all other claims to which this Section 8.4
is (or was) applicable which are then pending or which have previously been
resolved or paid, exceeds the Indemnification Threshold, and USOP may effect
a settlement of such claim without the consent of the STOCKHOLDER. Nothing
herein shall be deemed to prevent the Indemnified Party from making a claim
hereunder for potential or contingent claims or demands provided the Claim
Notice sets forth the specific basis for any such potential or contingent
claim or demand to the extent then feasible and the Indemnified Party has
reasonable grounds to believe that such a claim or demand may be made.
Subject to Section 8.3 hereof, the Indemnified Party's failure to promptly
deliver a Claim Notice to the Indemnifying Party shall not relieve the
Indemnifying Party of any liability which the Indemnifying Party may have to
the Indemnified Party unless the failure to give such prompt notice
significantly and adversely prejudiced the Indemnifying Party.
8.5 Indemnification Payments. Obligations of the STOCKHOLDER under
this Section 8 will be satisfied either by (a) the payment of immediately
available funds to USOP in the amount of such obligations in U.S. Dollars, or
(b) the delivery of shares of USOP Stock to USOP, valued at Market Price on
the date of delivery (as defined above), or (c) any combination of USOP Stock
or immediately available funds in the amount of such obligations. The parties
hereto will make appropriate adjustments for any Tax benefits, Tax detriments
or insurance proceeds in determining the amount of any indemnification
obligation under this Section 8. The STOCKHOLDER's obligation under to
Section 8.1 hereof to indemnify USOP for any particular matter shall be
reduced by an amount equal to any payment previously made by the STOCKHOLDER
pursuant to Section 2.3 or 2.4 for such matter. All indemnification payments
under this Section 8 shall be deemed adjustments to the consideration paid for
COMPANY Stock provided for herein.
8.6 Exclusive Remedy. The indemnification provided for in this
Section 8 shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement against
another party, provided that, nothing herein shall be construed to limit the
right of a party, in a proper case, to seek injunctive relief for a breach of
this Agreement. Notwithstanding the foregoing, nothing herein (including
without limitation nothing in Section 8.3 hereof) shall be deemed to limit or
restrict in any manner any rights or remedies which any party has, or might
have, at law, in equity or otherwise, against any other party based on any
fraudulent or intentional misrepresentation, fraudulent or intentional breach
of warranty or fraudulent or intentional failure to fulfill any covenant or
agreement set forth herein.
8.7 Insurance Proceeds. In the event that a loss for which USOP is
entitled to be indemnified is covered by USOP or COMPANY insurance, USOP will
(or it and the STOCKHOLDER will cause the COMPANY to) make a claim under the
applicable insurance policy and any indemnification payment made by the
STOCKHOLDER will be refunded to him by USOP up to the amount of any insurance
proceeds received by USOP (or the COMPANY, as the case may be) with respect to
such loss.
9. NONCOMPETITION
9.1 Prohibited Activities. The STOCKHOLDER will not, for a period of
four years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, stockholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with USOP or any of the subsidiaries thereof, within
100 miles of where the COMPANY conducted business prior to the Closing
Date (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of USOP (including without limitation the
subsidiaries thereof) in a managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
USOP (including the subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a customer of USOP
(including without limitation the subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services
in competition with USOP within the Territory;
(iv) call upon any prospective acquisition candidate, on the
STOCKHOLDER's own behalf or on behalf of any competitor, which candidate
was either called upon by USOP (including without limitation the
subsidiaries thereof) or for which USOP (or any subsidiary thereof) made
an acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the STOCKHOLDER from acquiring as a passive investment not more than
ten percent (10%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
9.2 Damages. Because of the difficulty of measuring economic losses
to USOP as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to USOP for which it
would have no other adequate remedy, the STOCKHOLDER agrees that the foregoing
covenant may be enforced by USOP in the event of breach by the STOCKHOLDER, by
injunctions and restraining orders.
9.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 9 impose a reasonable restraint on the
STOCKHOLDER in light of the activities and business of USOP (including without
limitation the subsidiaries thereof) on the date of the execution of this
Agreement and the current plans of USOP; but it is also the intent of USOP and
the STOCKHOLDER that such covenants be construed and enforced in accordance
with the changing activities and business of USOP (including without
limitation the subsidiaries thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that
the STOCKHOLDER shall cease to be employed under an employment agreement with
USOP and/or any subsidiary, and the STOCKHOLDER shall enter into a business or
pursue other activities not in competition with USOP and/or any subsidiary
thereof, or similar activities or business in locations the operation of
which, under such circumstances, does not violate clause (i) of this Section
9, and in any event such new business, activities or location are not in
violation of this Section 9 or of the STOCKHOLDER's obligations under this
Section 9, if any, the STOCKHOLDER shall not be chargeable with a violation of
this Section 9 if USOP and/or any subsidiary thereof shall thereafter enter
the same, similar or a competitive (i) business, (ii) course of activities or
(iii) location, as applicable.
9.4 Severability; Reformation. The covenants in this Section 9 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
9.5 Independent Covenant. All of the covenants in this Section 9
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the
STOCKHOLDER against USOP (including without limitation the subsidiaries
thereof), whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by USOP of such covenants. The
covenants contained in Section 9 shall not be affected by any breach of any
other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
9.6 Materiality. The STOCKHOLDER hereby agrees that this covenant is
a material and substantial part of this transaction.
9.7 Early Termination of Covenant. If the STOCKHOLDER shall be a
party to an employment agreement with USOP and/or any subsidiary thereof then,
notwithstanding the provisions of this Section 9, the term of the
non-competition agreement contained in this Section 9 shall not extend beyond
the term of the non-competition provision of such employment agreement.
9.8 Scope of Covenant in Certain Circumstances. In the event that the
STOCKHOLDER's employment with the COMPANY is terminated without cause, the
STOCKHOLDER terminates his employment for good reason or upon a change in
control (as such terms are defined in the Employment Agreement), then the
restrictions contained in Section 9.1(i) will apply only with respect to any
business selling any products or services in direct competition with the
COMPANY or any of the subsidiaries thereof within the Territory.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he
had in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Subsidiaries and/or USOP,
such as lists of customers, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the COMPANY's, the
Subsidiaries' and/or USOP's respective businesses. The STOCKHOLDER agrees
that he will not use or disclose confidential information with respect to the
COMPANY, the Subsidiaries and/or USOP to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever other than
the transactions contemplated by this Agreement, except to authorized
representatives of USOP and to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 10.1, unless (i) such information becomes known to the public generally
through no fault of the STOCKHOLDER, (ii) disclosure is required by law or the
order of any governmental authority under color of law, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant to clause (i),
(ii) or (iii) above, the STOCKHOLDER shall, if possible, give prior written
notice thereof to USOP and provide USOP with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the STOCKHOLDER
of the provisions of this Section, USOP shall be entitled to an injunction
restraining the STOCKHOLDER from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
USOP from pursuing any other available remedy for such breach or threatened
breach, including without limitation the recovery of damages.
10.2 USOP. USOP recognizes and acknowledges that it had in the past,
currently have, and in the future may possibly have, access to certain
confidential information of the COMPANY and/or the Subsidiaries, such as lists
of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's and/or the Subsidiaries'
respective businesses. USOP agrees that, prior to the Closing, or if there
shall not be a Closing, it will not disclose or use confidential information
with respect to the Company and/or the Subsidiaries to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever
other than the transactions contemplated by this Agreement, except to
authorized representatives of the Company and to counsel and other advisers,
provided that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 10.2, unless (i) such information becomes known to
the public generally through no fault of the USOP, (ii) disclosure is required
by law or the order of any governmental authority under color of law, or (iii)
the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant to clause (i),
(ii) or (iii) above, USOP shall, if possible, give prior written notice
thereof to the STOCKHOLDER and provide the STOCKHOLDER with the opportunity to
contest such disclosure. In the event of a breach or threatened breach by
USOP of the provisions of this Section, the STOCKHOLDER shall be entitled to
an injunction restraining USOP from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
the STOCKHOLDER from pursuing any other available remedy for such breach or
threatened breach, including without limitation the recovery of damages.
10.3 Damages. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 10.1 and
10.2, and because of the immediate and irreparable damage that would be caused
for which they would have no other adequate remedy, the parties hereto agree
that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against them by injunctions and restraining orders.
10.4 Survival. The obligations of the parties under this Article 10
shall survive the termination of this Agreement.
11. FEDERAL SECURITIES ACT REPRESENTATIONS
11.1 Economic Risk; Sophistication. The STOCKHOLDER represents and
warrants that the STOCKHOLDER has not relied on any purchaser representative
or USOP or any other person, in connection with the acquisition of shares of
USOP Stock hereunder. The STOCKHOLDER (A) has such knowledge, sophistication
and experience in business and financial matters that he is capable of
evaluating the merits and risks of an investment in the shares of USOP Stock,
(B) fully understands the nature, scope and duration of the limitations on
transfer contained in this Agreement and (C) can bear the economic risk of an
investment in the shares of USOP Stock and can afford a complete loss of such
investment. The STOCKHOLDER has had an adequate opportunity to ask questions
and receive answers from the officers of USOP concerning any and all matters
relating to the transactions described herein including without limitation the
background and experience of the officers and directors of USOP, the plans for
the operations of the business of USOP, the business, operations and financial
condition of USOP, and any plans for additional acquisitions and the like.
The STOCKHOLDER has asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to his satisfaction.
Nothing in this Section 11.1 shall constitute a waiver by the STOCKHOLDER of
any of USOP's representations and warranties set forth in this Agreement or
waive any claim that the STOCKHOLDER may have with respect to the USOP
Prospectus.
11.2 Sales of Stock.
(a) By his execution and delivery of this Agreement, the
STOCKHOLDER represents and warrants to USOP that he does not have any
contract, undertaking, agreement or arrangement, written or oral, with
any other person to sell, transfer or grant participations in any shares
of USOP Stock to be acquired by the STOCKHOLDER, except that the
STOCKHOLDER has agreed to convey to certain Minority Stockholders
contemporaneously with the Closing certain of the shares of USOP Stock
to be received by him at the Closing.
(b) The STOCKHOLDER will not, (i) during the period expiring June
5, 1996 with respect to all shares of USOP Stock owned by the
STOCKHOLDER, or (ii) during the period expiring January 31, 1998 as to
one-third of the shares of USOP Stock owned by the STOCKHOLDER, directly
or indirectly, offer to sell, contract to sell, sell short or otherwise
sell or dispose of any shares of USOP Stock owned by the STOCKHOLDER or
with respect to which the STOCKHOLDER has the power of disposition,
other than (x) as a gift or gifts, provided the donee or donees thereof
agree to be bound by this restriction, (y) with the prior written
consent of USOP and, if prior to June 5, 1996, the prior written consent
of the underwriters for the current underwritten public offering of USOP
or (z) transfers to USOP to meet the STOCKHOLDER's obligations under
this Agreement. The STOCKHOLDER agrees and consents to the entry of a
stop transfer instruction with USOP's transfer agent against the
transfer of shares of USOP Stock held by the STOCKHOLDER except in
compliance with the foregoing restriction.
(c) Until such time as Mr. Watson's obligation to contribute up
to US$10 million of additional equity capital to the Company in
accordance with Section 12.14(k) hereof is satisfied, one half of the
proceeds from any sale of shares of USOP stock owned by Mr. Watson
(other than sales to provide funds to meet the STOCKHOLDER's payment
obligations under Sections 2.3, 2.4 or 8 hereof) shall, at the option
and direction of USOP, either (i) be contributed to the COMPANY to
satisfy Mr. Watson's equity contribution obligation or (ii) be deposited
into an escrow account, bearing interest for the benefit of Mr. Watson,
to be available for future equity contributions to the Company in
accordance with Section 12.14(k) hereof.
(d) All sales of shares of USOP stock owned by Mr. Watson, other
than transfers (i) to Minority Stockholders on the Closing Date and (ii)
to USOP to meet the STOCKHOLDER's payment obligations under this
Agreement, shall be through Robertson, Stephens & Company, or another
broker approved by USOP.
(e) The STOCKHOLDER acknowledges that USOP will not provide the
STOCKHOLDER with a prospectus for the STOCKHOLDER's use in selling the
USOP Stock delivered to him at the Closing and agrees to sell such
shares only in accordance with the requirements of Rules 144 and 145(d)
promulgated under the Securities Act.
12. GENERAL
12.1 Accounts Receivable. In the event that all accounts and notes
receivable of the COMPANY and the Subsidiaries included in the finally agreed
upon Net Worth of the COMPANY as of the Closing Date are not collected in full
within 90 days after the Closing then, at the request of the COMPANY, the
STOCKHOLDER shall pay the COMPANY an amount equal to the receivables not so
collected, less an allowance for doubtful accounts equal to the allowance used
in the calculation of Net Worth pursuant to Section 2.3(a) hereof, and upon
receipt of such payment the Company and the appropriate Subsidiaries (as the
case may be) shall assign to the STOCKHOLDER all of their rights with respect
to the uncollected accounts and notes receivable giving rise to the payment
and shall also thereafter promptly remit any excess collections received by it
with respect to such assigned receivables. If and when the amount
subsequently collected by the STOCKHOLDER with respect to the assigned
receivables equals (i) the payment made therefor plus (ii) the costs and
expenses reasonably incurred by the STOCKHOLDER in the collection of such
assigned receivables, the STOCKHOLDER shall reassign to the Company all of
such assigned receivables as have not been collected in full by the
STOCKHOLDER and shall also thereafter promptly remit any excess collections
received by them. Upon the written request of the Company, the STOCKHOLDER
shall provide it with a status report concerning the collection of assigned
receivables.
12.2 Termination. This Agreement may be terminated at any time prior
to the Closing Date solely:
(i) by mutual consent of the board of directors of USOP and the
STOCKHOLDER;
(ii) by the STOCKHOLDER or by USOP (acting through its board of
directors) if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by March 31, 1996,
unless the failure of such transactions to be consummated is due to the
failure of the party seeking to terminate this Agreement to perform any
of its or his obligations under this Agreement to the extent required to
be performed by it or him prior to or on the Closing Date;
(iii) by the STOCKHOLDER or by USOP if a material breach or
default shall be made by the other party in the observance or in the due
and timely performance of any of the covenants, agreements or conditions
contained herein, written notice of such breach or default shall have
been given, and the curing of such breach or default shall not have been
made on or before the Closing Date; or
(iv) by the STOCKHOLDER or by USOP if the other party seeks to
amend or supplement a Schedule pursuant to Section 5.7 hereof, or by
USOP following receipt from the STOCKHOLDER of a notice of a breach of
Section 5.2 or 5.3 hereof, in which case neither party to this Agreement
shall have any further liability hereunder to the other party.
12.3 Cooperation. The STOCKHOLDER and USOP shall each deliver or cause
to be delivered to the other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
In connection therewith, if required, the STOCKHOLDER shall cause the
President or Chief Financial Officer of the COMPANY to execute any
documentation reasonably required by USOP's independent public accountants (in
connection with such accountant's audit of the COMPANY) or the Nasdaq National
Market. The STOCKHOLDER will also cause the COMPANY to cooperate and use its
reasonable efforts to have the present officers, directors and employees of
the COMPANY cooperate with USOP on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Return filing obligations, actions, proceedings, arrangements or disputes of
any nature with respect to matters pertaining to all periods prior to the
Closing Date.
12.4 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto and their
successors, permitted assigns, heirs and legal representatives.
12.5 Entire Agreement. This Agreement (which includes the Schedules
and Annexes hereto) and the documents delivered pursuant hereto constitute the
entire agreement and understanding between the STOCKHOLDER and USOP and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its
terms and may be modified or amended only by a written instrument executed by
the STOCKHOLDER and USOP (acting through its officers, duly authorized by its
Board of Directors).
12.6 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. This
Agreement shall be effective upon the exchange by telefax of executed signature
pages.
12.7 Brokers and Agents. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commission of brokers employed or alleged to have been
employed by such indemnifying party.
12.8 Expenses. (i) USOP has and will pay the fees, expenses and
disbursements of USOP and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement, including
without limitation the fees and expenses of Price Waterhouse LLP (incurred in
connection with activities on behalf of USOP) and Morgan, Lewis & Bockius LLP
and (ii) the STOCKHOLDER (and neither the COMPANY nor any Subsidiary) have and
will pay the fees, expenses and disbursements of the STOCKHOLDER, the COMPANY,
the Subsidiaries and their agents, representatives, financial advisors,
accountants and counsel incurred in connection with the subject matter of this
Agreement, including without limitation the fees and expenses of Russell
McVeagh McKenzie Bartleet & Co and Price Waterhouse (New Zealand) (incurred in
connection with activities on behalf of the STOCKHOLDER or the COMPANY). The
parties acknowledge that the COMPANY will pay the fees and expenses of Price
Waterhouse (New Zealand) incurred in connection with its due diligence
activities on behalf of USOP and its services in revising the COMPANY's
financial statements for inclusion in the prospectus for USOP's current public
offering.
12.9 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by telefax, by depositing the
same with a recognized overnight courier service (such as Federal Express)
addressed to the party to be notified, or by delivering the same in person to
an officer or agent of such party.
(a) If to USOP, or after the Closing the Company, addressed to
it at:
U.S. Office Products Company
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Mark D. Director
Telefax: 202-628-9509
with required copies to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Attn: F. Traynor Beck, Esq.
Telefax: 215-963-5299
and to:
Simpson Grierson
Simpson Grierson Building
92-96 Albert St
Private Bag 92518
Wellesley St,
Auckland, New Zealand
Attn: Susan G. M. Glazebrook, Esq.
Telefax: 011-64-9-307-0331
(b) If to the STOCKHOLDER, to him at:
Mr. Eric Watson
c/o Blue Star Group Limited
Level 22
Coopers & Lybrand Tower
Auckland 1, New Zealand
Telefax: 011-64-9-358-1946
with a required copy to:
Russell McVeagh McKenzie Bartleet & Co
The Shortland Centre
51-53 Shortland Street
Auckland 1, New Zealand
Attn: John Collings, Esq.
Telefax: 011-64-9-367-8596
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 12.9 from time to time.
12.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive law of New Zealand. The parties hereto
consent to the non-exclusive jurisdiction of the New Zealand courts for all
disputes arising under this Agreement. USOP hereby appoints Simpson Grierson
as its agent for receipt of summonses and other legal process in any lawsuit
arising under this Agreement, and agrees that service upon Simpson Grierson
shall constitute valid and effective service upon it so long as such service
is made in accordance with the provisions (and to the addressees) for notice
to USOP set forth in Section 12.9 hereof.
12.11 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall
it be construed as a waiver of or acquiescence in any such breach or default,
or of any similar breach or default occurring later; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
12.12 Time. Time is of the essence with respect to this Agreement.
12.13 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision, unless it relates to the
consideration to be received by each of the parties hereto, shall be severed
from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
12.14 Certain Post-Closing Matters.
(a) USOP and the STOCKHOLDER each agrees that, except as the
other party may otherwise agree in writing from time to time hereafter,
they will not sell, assign, transfer, option, pledge or otherwise in any
manner dispose of any interest in, or encumber, any of their shares of
COMPANY Stock; provided that USOP may pledge its COMPANY shares as
security for its obligations under its existing credit facility and any
successor facility providing debt financing to USOP and its subsidiaries.
(b) From and after the Closing Date, so long as the STOCKHOLDER
is an employee of USOP or any of its affiliates (including without
limitation the COMPANY), at the STOCKHOLDER's request USOP shall take
all necessary or appropriate action to assist in the appointment of the
STOCKHOLDER to the board of directors of USOP and/or nomination of the
STOCKHOLDER for election to the board of directors of USOP and, upon
such election, shall elect him as a member of the executive committee
thereof. If elected as a director of USOP, the STOCKHOLDER shall be
compensated by USOP for, and reimbursed for his expenses in connection
with, his activities as a director of USOP in accordance with USOP's
standard director compensation and expense reimbursement policies.
(c) On the Closing Date, Jonathan J. Ledecky, the Chief Executive
Officer of USOP, will be appointed the Chairman of the COMPANY, and the
STOCKHOLDER will be appointed the Chief Executive Officer of the COMPANY.
(d) USOP and the STOCKHOLDER shall be present, in person or by
proxy, at all meetings of stockholders of the COMPANY so that all issued
and outstanding shares of COMPANY Stock may be counted for the purpose
of determining the presence of a quorum at such meetings.
(e) From and after the Closing Date, the number of directors of
the COMPANY shall be established as six directors, consisting of three
individuals appointed by USOP and three individuals appointed by the
STOCKHOLDER.
(f) From and after the Closing Date, any increase or
restructuring of the capital of the COMPANY will require the approval of
USOP and the STOCKHOLDER (in his capacity as a stockholder of the
COMPANY), it being the intention of the parties (i) that USOP shall
remain a 51% stockholder of the COMPANY and (ii) that the STOCKHOLDER
and the Minority Stockholders listed in the second table in Annex I shall
remain 49% stockholders of the COMPANY. After the Closing (and except
for the contributions to capital referred to in Section 12.14(k)
hereof), no stockholder of the COMPANY shall be obligated to provide
additional debt or equity financing to the COMPANY.
(g) From and after the Closing Date, the COMPANY shall not,
without the approval of a majority of its board of directors, incur any
new indebtedness if such indebtedness will cause the ratio of all such
additional indebtedness to the aggregate amount of additional equity
contributed to the COMPANY after the Closing Date to exceed two to one.
(h) USOP and the STOCKHOLDER agree that they will use their
reasonable best efforts to have the COMPANY authorized for quotation on
the Nasdaq National Market of The Nasdaq Stock Market, Inc. within two
years after the Closing Date, such authorization to be in connection
with (i) a distribution by USOP to its stockholders of its equity
interest in the COMPANY, (ii) USOP's sponsorship of an initial public
offering of equity securities of the COMPANY or (iii) such other
arrangements as USOP and the STOCKHOLDER may mutually agree.
(i) Notwithstanding anything in this Agreement or the Employment
Agreement (as entered into on the Closing Date) to the contrary, in the
event of a termination by the Company without cause pursuant to
paragraph 5(d) of the Employment Agreement, or by the STOCKHOLDER for
good reason (which the parties acknowledge does not include a change in
control, as defined in the Employment Agreement) pursuant to paragraph
5(f) of the Employment Agreement, (i) USOP shall promptly offer to
purchase the STOCKHOLDER's equity and indebtedness interests in the
COMPANY on terms to be proposed by USOP, and (ii) the STOCKHOLDER shall
be required to sell such interests in the COMPANY to USOP on such terms
and conditions unless (iii) the STOCKHOLDER elects to require USOP to
sell its equity and indebtedness interests in the COMPANY to the
STOCKHOLDER on the same terms and conditions (proportionately adjusted
for any differences in equity ownership or indebtedness held), in which
latter case USOP shall be so required to sell such interests on such
adjusted terms and conditions.
(j) After the Closing, in the event of a change in control of
USOP (and not of the COMPANY), as defined in sections 17(b)(i) and
17(b)(iii) of the Employment Agreement, the STOCKHOLDER may require (by
written notice to USOP delivered within 90 days after such change in
control) USOP to purchase his shares of COMPANY Stock at a value
determined in a manner consistent with the determination of the
consideration paid in the USOP change of control transaction.
(k) After the Closing, if and when the COMPANY's board of
directors approves any future acquisitions by the COMPANY it shall in
connection therewith require USOP and the STOCKHOLDER to (and USOP and
the STOCKHOLDER shall) make additional investments in the COMPANY (in
each case in proportion to their equity and debt investment in the
COMPANY) to finance such acquisitions. Such additional investments
shall be in such form and amount as the COMPANY's board of directors
shall determine, provided that in all events neither USOP's nor the
STOCKHOLDER's additional investment obligation shall exceed US$10
million. If the STOCKHOLDER desires to sell USOP Stock to obtain funds
to satisfy such an additional investment obligation, but is prohibited
from doing so (i) under the U.S. securities laws and regulations or
(ii), prior to June 6, 1996, by Section 11.2(b) hereof (and USOP does
not waive such prohibition), in either such event USOP shall advance the
funds required to satisfy such obligation until such prohibition is
lifted or June 6, 1996, as the case may be (in addition to the advance
made by USOP on its own behalf). Any such advance shall be secured by
the STOCKHOLDER's pledge of an appropriate number of shares of USOP
Stock and shall be on such other terms and conditions as are mutually
acceptable.
(l) From and after the Closing Date, the management employees of
the COMPANY shall be eligible to participate in the USOP stock option
plan for management employees of USOP.
12.15 Currency Conversion. All amounts referred to herein to be
converted from N.Z. Dollars to U.S. Dollars and from U.S. Dollars to N.Z.
Dollars shall be converted at the prevailing rate reported on any index or
service that is reliable and reasonably accessible to both parties, to be
agreed upon by the parties prior to the Closing.
12.16 Limitation on Certain Claims. USOP, in its capacity as a
stockholder of the COMPANY, shall ensure, to the maximum extent permitted by
applicable law, that no claims are brought by the COMPANY against the
STOCKHOLDER, in his capacity as a director of the COMPANY, for matters
occurring prior to the Closing; provided that the foregoing shall not in any
way limit or otherwise modify any rights of USOP in connection with this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
U.S. OFFICE PRODUCTS COMPANY
By /s/ Jonathan J. Ledecky
------------------------------
Name: Jonathan J. Ledecky
Title: Chief Executive Officer
Witness:
/s/ Eric John Watson
------------------------------
ERIC JOHN WATSON
ANNEX I
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
The following is a list of all of the stockholders of the COMPANY, and
the number of shares of the Company Stock and the total amount of the
indebtedness obligations of the COMPANY held by each on the date of the
Agreement.
<TABLE>
<S> <C> <C>
Indebtedness of
Shares of the COMPANY to
Stockholder Stock Held Stockholders
- ----------------------- ---------------- ---------------
Eric John Watson 4,823,156 NZ$11,609,651
Grant Keith Baker 95,000 NZ$228,671
Maurice George Kidd 55,802 NZ$134,319
Paul Anthony Smithies 26,042 NZ$62,685
BSI Investments Limited 1,250,000 NZ$3,008,832
Total 6,250,000 Shares NZ$15,044,158
</TABLE>
The following is a list of the STOCKHOLDER, and certain of the Minority
Stockholders, showing the number of shares of the Company Stock and the total
amount of the indebtedness obligations of the COMPANY to be held by them
immediately prior to the Closing (and after the STOCKHOLDER's acquisition of
Company Stock and indebtedness from such Minority Stockholders).
<TABLE>
<S> <C> <C>
Indebtedness of
Shares of the COMPANY to
Stockholder Stock Held Stockholders
- ----------------------- ---------------- ---------------
Eric John Watson 6,146,015 NZ$14,793,859
Grant Keith Baker 55,860 NZ$134,459
Maurice George Kidd 32,812 NZ$79,981
Paul Anthony Smithies 15,313 NZ$36,859
Total 6,250,000 NZ$15,044,158
Shares
</TABLE>
The following is a list of the STOCKHOLDER and certain of the Minority
Stockholders and the number of shares of USOP Stock owned by them after giving
effect to USOP's transfer of 1,212,121 shares to the STOCKHOLDER, and the
STOCKHOLDER's transfer of 41,157 shares to certain of the Minority
Stockholders.
<TABLE>
<S> <C>
Shares of
Stockholder USOP Stock
- --------------------------------------- -------------------
Eric John Watson 1,170,964
Grant Keith Baker 22,109
Maurice George Kidd 12,987
Paul Anthony Smithies 6,061
Total 1,212,121 Shares
</TABLE>
ANNEX II
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between BLUE STAR GROUP
LIMITED, a New Zealand corporation (the "Company"), and Eric John Watson
("Employee") is hereby entered into and effective as of the __ day of _______,
1996. This Agreement hereby supersedes any other employment agreements or
understandings; written or oral, between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
office products supply business.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and
will continue to become familiar with and aware of information as to the
customers of the Company and its majority stockholder, U.S. Office Products
Company ("USOP"), specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company and USOP, and future
plans with respect thereto, all of which has been and will be established and
maintained at great expense to the Company and USOP; this information is a
trade secret and constitutes the valuable good will of the Company and USOP.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed
as follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Company hereby employs Employee as its Chief Executive
Officer. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Chief Executive Officer, including
without limitation the responsibilities, duties and authority set forth on
Appendix A hereto (and subject to the limitations also set forth on such
Appendix A). Employee will report directly to the Board of Directors of the
Company (the "Board"). Employee hereby accepts this employment upon the terms
and conditions herein contained and agrees to devote his time, attention and
efforts to promote and further the business of the Company.
(b) Employee shall not, during the Term of his employment hereunder,
be engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such
form or manner as will neither require his services in the operation or
affairs of the companies or enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.
2. Compensation. For all services rendered by Employee, the Company
shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary
payable to Employee shall be US$250,000 per year, payable on a regular basis
in accordance with the Company's standard payroll procedures but not less than
monthly. Employee's base salary shall be increased as and when the base
salary paid by USOP to Jonathan J. Ledecky, the Chief Executive Officer of USOP
(which is currently also US$250,000 per year), is increased.
(b) Bonus. From time to time the Company may pay Employee bonuses, as
determined by the Compensation Committee of USOP's Board of Directors in a
process that is consistent with such Committee's consideration of the awarding
of bonuses to management employees of other USOP subsidiaries (and which will
include factors such as the financial performance of the Company).
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Payment of all premiums (or such portion thereof as is
provided by the Company's or USOP's plans) for coverage for
Employee and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that the Company or USOP may have in effect
from time to time, benefits provided to Employee under this
clause to be at least equal to such benefits provided to
USOP executives.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in
the performance of his services pursuant to this Agreement.
All reimbursable expenses shall be appropriately documented
in reasonable detail by Employee upon submission of any
request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
(3) The Company shall pay for or reimburse Employee for expenses
incurred by Employee in connection with his use of one
automobile in connection with his employment hereunder, said
expenses not to exceed US$_______ per month.
(4) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and participation in all other
Company-wide and USOP-wide employee benefits as available
from time to time.
(5) Employee shall be eligible to receive options to acquire
USOP stock, as determined from time to time by the
Compensation Committee of USOP's Board of Directors in a
process that is consistent with such Committee's
consideration of the awarding of options to management
employees of other USOP subsidiaries.
3. Non-Competition Agreement.
(a) Employee will not, during the period of his employment by or with
the Company, and for a period equal to the longer of (i) two (2) years or (ii)
the period during which Employee is entitled to receive and is receiving any
payment pursuant to paragraph 5(d) hereof, immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of
whatever nature:
(i) engage, as an officer, director, stockholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in direct
competition with the Company or USOP, within 100 miles of the Company or
USOP or where any of the Company's or USOP's subsidiaries conducts
business, including any territory serviced by the Company or USOP or any of
such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or USOP (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company or USOP (including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company or USOP (including the respective subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USOP within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate was
either called upon by the Company or USOP (including the respective
subsidiaries thereof), or for which the Company or USOP made an acquisition
analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as a passive investment not more than ten
percent (10%) of the capital stock of a competing business, whose stock is
traded on a national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and USOP as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to the
Company and USOP for which they would have no other adequate remedy, Employee
agrees that the foregoing covenant may be enforced by USOP or the Company in
the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or USOP (including USOP's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of USOP (including USOP's other subsidiaries); but it is also the intent
of the Company and Employee that such covenants be construed and enforced in
accordance with the changing activities, business and locations of the Company
and USOP (including USOP's other subsidiaries) throughout the term of this
covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or USOP
(including USOP's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or USOP (including USOP's
other subsidiaries) shall thereafter enter the same, similar or a competitive
(i) business, (ii) course of activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions
of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USOP, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by USOP or the Company of such covenants,
provided, however, that upon the failure of the Company to make any payments
required under this Agreement, the Employee may, upon thirty days prior
written notice to the Company, waive his right to receive any additional
compensation pursuant to this Agreement and engage in any activity prohibited
by the covenants of this paragraph 3.
(f) Notwithstanding any of the foregoing, if any applicable law shall
reduce the time period during which Employee shall be prohibited from engaging
in any competitive activity described in paragraph 3(a) hereof, the period of
time for which Employee shall be prohibited pursuant to paragraph 3(a) hereof
shall be the maximum time permitted by law. However, in the event that the
time period specified by paragraph 3(a) shall be so reduced, then,
notwithstanding the provisions of paragraph 5(d) hereof, Employee shall be
entitled to receive from the Company his base salary at the rate then in
effect solely for the longer of (i) the time period during which the
provisions of paragraph 3(a) shall be enforceable under the provisions of such
applicable law, or (ii) the time period during which Employee is not engaging
in any competitive activity, but in no event longer than the term provided in
paragraph 5(d).
(g) In the event that the Employee's employment with the Company is
terminated without cause, or if the Employee terminates his employment for
Good Reason or upon a Change in Control then the restrictions contained in
Section 5(a)(i) will apply only with respect to any business selling any
products or services in direct competition with the Company or any of the
subsidiaries thereof within the Territory.
4. Place of Performance.
(a) Employee understands that he may be requested by the Board or USOP
to relocate from his present residence to another geographic location in order
to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase
of a comparable residence in the new location; and added income taxes that
Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use his best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Company and
the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board
to relocate and Employee refuses, such refusal shall not constitute "cause"
for termination of this Agreement under the terms of paragraph 5(c) and, in
the event that Employee is terminated for such refusal, Employee shall be
entitled to receive all payments under this Agreement as if he were terminated
by the Company without cause.
5. Term; Termination; Rights on Termination. The term of this
Agreement shall begin on the date hereof and continue for four years (the
"Initial Term"), and, unless terminated as herein provided, shall be extended
at the end of each year beginning at the end of the second year of the Initial
Term hereof for a period of one year on the same terms and conditions contained
herein, such that the term (the "Term") of this Agreement shall extend for a
period of three years from the date of each such extension. This Agreement
and Employee's employment may be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been absent from his full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
written notice to the Employee (which notice may occur before or after the end
of such four (4) month period, but which shall not be effective earlier than
the last day of such four (4) month period), the Company may terminate
Employee's employment hereunder provided Employee is unable to resume his
full-time duties at the conclusion of such notice period. Also, Employee may
terminate his employment hereunder if his health should become impaired to an
extent that makes the continued performance of his duties hereunder hazardous
to his physical or mental health or his life, provided that Employee shall
have furnished the Company with a written statement from a qualified doctor to
such effect and provided, further, that, at the Company's request made within
thirty (30) days of the date of such written statement, Employee shall submit
to an examination by a doctor selected by the Company who is reasonably
acceptable to Employee or Employee's doctor and such doctor shall have
concurred in the conclusion of Employee's doctor. Subject to paragraph 3(f)
hereof and the last paragraph of this paragraph 5, in the event this Agreement
is terminated as a result of Employee's disability, Employee shall receive
from the Company the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement, payable over such term.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement which
continues after receipt of ten (10) days prior written notice from the Company
to Employee; (2) Employee's gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice
of need to cure) of any of Employee's material duties and responsibilities
hereunder; (3) Employee's willful dishonesty, fraud or misconduct with respect
to the business or affairs of the Company or USOP which materially and
adversely affects the operations or reputation of the Company or USOP; (4)
Employee's conviction of a felony or other crime involving moral turpitude; or
(5) alcohol or illegal drug abuse by Employee. In the event of a termination
for good cause, as enumerated above, Employee shall have no right to any
severance compensation.
(d) Without Cause. At any time after the commencement of employment,
each of Employee and the Company may, without cause, terminate this Agreement
and Employee's employment, effective thirty (30) days after written notice is
provided to the other party. Should Employee be terminated by the Company
without cause, subject to paragraph 3(f) hereof and the last paragraph of this
paragraph 5, Employee shall receive from the Company the base salary at the
rate then in effect for whatever time period is remaining under the Term of
this Agreement, payable over the term of such payment. If Employee resigns or
otherwise terminates his employment for any reason other than Good Reason as
defined in paragraph 5(f), Employee shall receive no severance compensation.
(e) Change in Control of the Company or USOP. Refer to paragraph 17
below.
(f) Termination by Employee for Good Reason. The Employee may
terminate his employment hereunder for "Good Reason." As used herein, "Good
Reason" shall mean the continuance of any of the following after 10 days'
prior written notice by Employee to the Company and to USOP, specifying the
basis for such Employee's having Good Reason to terminate this Agreement:
(i) a material adverse change in Employee's status, title,
position or responsibilities;
(ii) the assignment to Employee of any duties materially and
adversely inconsistent with the Employee's position as specified in
paragraph 1 hereof (or such other position to which he may be promoted),
including status, offices, responsibilities or persons to whom the Employee
reports as contemplated under paragraph 1 of this Agreement, or any other
action by the Company which results in a material and adverse change in
such position, status, offices, titles or responsibilities;
(iii) Employee's removal from, or failure to be reappointed or
reelected to, Employee's position under this Agreement, except as
contemplated by paragraphs 5(a), (b), (c) and (e); or
(iv) any other material breach of this Agreement by the Company,
including the failure to pay Employee on a timely basis the amounts to
which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, the Company
shall pay all amounts and damages to which Employee may be entitled as a
result of such breach, including interest thereon and all reasonable legal
fees and expenses and other costs incurred by Employee to enforce his rights
hereunder.
(g) Payment Through Termination. Upon termination of this Agreement
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments
for accrued vacation and sick leave) due through the effective date of
termination. Additional compensation subsequent to termination, if any, will
be due and payable to Employee only to the extent and in the manner expressly
provided above. All other rights and obligations of USOP, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein
and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall
survive such termination in accordance with their terms.
In the event of any termination of Employee's employment under this Agreement,
the Employee shall have no obligation to seek other employment; provided,
however, that in the event that Employee secures employment during the period
that any payment is continuing pursuant to the provisions of this paragraph 5,
the amounts to be paid hereunder shall be reduced by the amount of Employee's
earnings from such other employment.
6. Return of Company Property. All records, designs, patents,
business plans, financial statements, manuals, memoranda, lists and other
property delivered to or compiled by Employee by or on behalf of the Company,
USOP or their representatives, vendors or customers which pertain to the
business of the Company or USOP shall be and remain the property of the
Company or USOP, as the case may be, and be subject at all times to their
discretion and control. Likewise, all correspondence, reports, records,
charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company or USOP which is collected
by Employee shall be delivered promptly to the Company without request by it
upon termination of Employee's employment.
7. Inventions. Employee shall disclose promptly to USOP and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the
period of employment or within six (6) months thereafter, and which are
directly related to the business or activities of the Company or USOP and
which Employee conceives as a result of his employment by the Company.
Employee hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
8. Trade Secrets. Employee agrees that he will not, during or after
the term of this Agreement with the Company, disclose the specific terms of
the Company's or USOP's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or USOP, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or USOP against Employee), by reason of the fact that he is or was performing
services under this Agreement or as an officer or director of the Company (and
whether or not the basis of such action is the Employee's action in such
official capacity), then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith and such indemnification shall continue as to the Employee even if
he has ceased to be an employee, officer or director of the Company and shall
inure to the benefit of his heirs and estate. The Company shall advance to
Employee all reasonable costs and expenses directly related to the defense of
such action, suit or proceeding within twenty days after written request
therefore by the Employee to the Company, provided that such request shall
include an undertaking by the Employee to repay such advances if it shall
ultimately be determined that Employee is or was not entitled to be
indemnified by the Company against such costs and expenses. In the event that
both Employee and the Company are made a party to the same third-party action,
complaint, suit or proceeding, the Company or USOP agrees to engage competent
legal representation, and Employee agrees to use the same representation,
provided that if counsel selected by USOP shall have a conflict of interest
that prevents such counsel from representing Employee, Employee may engage
separate counsel and the Company or USOP shall pay all attorneys' fees of such
separate counsel. Further, while Employee is expected at all times to use his
best efforts to faithfully discharge his duties under this Agreement, Employee
cannot be held liable to the Company or USOP for errors or omissions made in
good faith where Employee has not exhibited gross, willful or wanton
negligence or misconduct or performed criminal or fraudulent acts which
materially damage the business of the Company. The provisions of this Section
9 are in addition to, and not in derogation of, the indemnification provisions
of the Company's By-laws.
10. No Prior Agreements. Employee hereby represents and warrants to
the Company that the execution of this Agreement by Employee and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any agreement with a former employer, client or any
other person or entity. Further, Employee agrees to indemnify the Company for
any claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or
may hereafter come to have against the Company based upon or arising out of
any non-competition agreement, invention or secrecy agreement between Employee
and such third party which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company or USOP without
the prior written consent of Employee. Subject to the preceding two (2)
sentences, this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or
agreements with the Company or any of its officers, directors or
representatives covering the same subject matter as this Agreement. This
written Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
13. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: Blue Star Group Limited
Level 22
Coopers & Lybrand Tower
Auckland 1, New Zealand
Attention: Maurice Kidd
Telefax: 011-64-9-358-1946
with a required copy to:
U.S. Office Products Company
1440 New York Avenue, N.W.
Suite 310
Washington, D.C. 20005
Attn: Mark D. Director
Telefax: 202-628-9509
To Employee: Mr. Eric Watson
c/o Blue Star Group Limited
Level 22
Coopers & Lybrand Tower
Auckland 1, New Zealand
Telefax: 011-64-9-358-1946
Notice shall be deemed given and effective when telefaxed (with confirmation
of transmission) or, if delivered by overnight courier or other means, when
actually received. Either party may change the address for notice by
notifying the other party of such change in accordance with this paragraph 13.
14. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. Arbitration. Any unresolved dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration conducted in accordance with the Arbitration Act 1908 (or any Act
in amendment thereto or substitution therefor). A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on
the arbitrators' award in any court having jurisdiction. The direct expense
of any arbitration proceeding shall be borne by the Company. The arbitration
proceeding shall be held in the city where the Company is located. This
provision is in substitution for the personal clause in the New Zealand
Employment Contracts Act 1991.
16. Governing Law. This Agreement shall in all respects be construed
according to the laws of New Zealand.
17. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder.
In the event of a Change in Control, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to
the Company not later than five (5) business days after the closing of the
transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though the Company had
terminated the Agreement without cause; however, under such circumstances,
Employee shall be entitled to continue to receive his base salary at the rate
then in effect for whatever time period is remaining under the Term of this
Agreement or for two (2) years, whichever amount is greater, payable over the
term of such payment and the non-competition provisions of paragraph 3 shall
all apply for a period equal to the duration of such payment.
(b) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than USOP, an employee benefit plan of
USOP, Employee, any affiliate of USOP or Employee or any group including
USOP or Employee or any affiliate of USOP or Employee, acquires directly or
indirectly the Beneficial Ownership (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of any voting security of the
Company and immediately after such acquisition such Person is, directly or
indirectly, the Beneficial Owner of voting securities representing 50% or
more of the total voting power of all of the then-outstanding voting
securities of the Company;
(ii) the individuals (A) who, as of the closing date of USOP's
initial public offering, constitute the Board of Directors of USOP (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of USOP and whose election, or nomination for election, to the
Board of Directors of USOP was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election) or (C) who are elected to the Board of Directors of USOP and
whose election, or nomination for election, to the Board of Directors of
USOP was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election) (such individuals being the "Continuing
Directors"), cease for any reason to constitute a majority of the members
of the Board of Directors of USOP;
(iii) the stockholders of USOP or the Company shall approve a
merger, consolidation, recapitalization, or reorganization of USOP or the
Company, a reverse stock split of outstanding voting securities, or
consummation of any such transaction if stockholder approval is not sought
or obtained, other than any such transaction which would result in (A) the
acquisition of the Company by USOP, any affiliate of USOP or any group that
includes USOP or any affiliate of USOP or (B) at least 75% of the total
voting power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned by
at least 75% of the holders of outstanding voting securities of USOP or the
Company, as the case may be, immediately prior to the transaction, with the
voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction;
(iv) the stockholders of USOP or the Company shall approve a plan
of complete liquidation of USOP or the Company, as the case may be, or an
agreement for the sale or disposition by either USOP or the Company of all
or a substantial portion of its assets (i.e., 50% or more of the total
assets of USOP or the Company, as the case may be); or
(v) the resignation of Jonathan J. Ledecky as Chief Executive
Officer of USOP.
(c) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in
Control may take place.
(d) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under any relevant New Zealand tax laws,
as a result of any Change in Control. Such amount will be due and payable by
the Company or its successor within ten (10) days after Employee delivers a
written request for reimbursement accompanied by a copy of his tax return(s)
showing the excise tax actually incurred by Employee.
18. Third Party Beneficiary. USOP is intended to be a third party
beneficiary of (and shall be entitled to all rights arising as a result
thereof, including without limitation the right of specific performance and
other injunctive relief and the right to damages) the representations,
warranties, covenants and agreements of Employee set forth in this Agreement.
BLUE STAR GROUP LIMITED
By:___________________________
Title:
EMPLOYEE:
______________________________
ERIC JOHN WATSON
Appendix A to Employment Agreement
Responsibilities, Duties and Authority of Employee:
1. As Chief Executive Officer of the Company, Employee shall have general
supervision, authority and responsibility over the business and operations
of the Company and its Subsidiaries, subject to the policies and directives
of the board of directors of the Company, and shall supervise and direct all
officers and employees of the Company and its subsidiaries.
2. As Chief Executive Officer of the Company, Employee may incur new
indebtedness on behalf of the Company if new such indebtedness will not
cause the ratio of all such additional indebtedness to the aggregate amount
of additional equity contributed to the COMPANY after the Closing Date to
exceed two to one. The incurring of any other new indebtedness of the
Company will require the prior approval of a majority of its board of
directors.
3. Employee may not enter into any currency hedging, derivative or similar
financial arrangements without the prior approval of USOP.
Exhibit 2
U.S. OFFICE PRODUCTS COMPANY
1994 LONG-TERM INCENTIVE PLAN
Grant Certificate
This Grant Certificate evidences the grant of an option (this "Option") to
purchase the Common Stock, par value $.001 per share (the "Common Stock"), of
U.S. Office Products Company (the "Company") pursuant to the provisions of the
Company's 1994 Long-Term Incentive Plan (the "Plan") to the officer, director,
key employee or consultant whose name appears below, covering the specific
number of shares of Common Stock of the Company ("Stock") set forth below,
pursuant to the provisions of the Plan and on the following express terms and
conditions:
1. Name of grantee (the "Grantee") to whom Option granted:
Eric Watson
2. Number of shares of Common Stock of the Company which are subject to
this Option:
250,000
3. Purchase price of shares subject to this Option:
$36.0625 per share
4. Date of grant of this Option:
May 23, 1996
5. Vesting:
May 23, 1997 - 25% of the number of shares listed in paragraph 2
hereof.
May 23, 1998 - 25% of the number of shares listed in paragraph 2
hereof.
May 23, 1999 - 25% of the number of shares listed in paragraph 2
hereof.
May 23, 2000 - 25% of the number of shares listed in paragraph 2
hereof.
6. Termination date of this Option:
May 23, 2006.
The Grantee hereby acknowledges receipt of a copy of the Plan as presently in
effect. The text and all of the terms and provisions of the Plan are
incorporated herein by reference, and this Option is subject to these terms and
provisions in all respects.
At any time when the Grantee wishes to exercise this Option, in whole or in
part, the Grantee shall submit to the Company a written notice of exercise,
specifying the exercise date and the number of shares to be exercised. Upon
exercise, the Grantee shall remit to the Company the exercise price, plus an
amount sufficient to satisfy the Company's withholding tax obligation that
arises in connection with such exercise.
U.S. OFFICE PRODUCTS COMPANY
/s/ Martin S. Pinson
--------------------
Martin S. Pinson
Executive Vice President
Agreed to and accepted by:
_________________________
Eric Watson
Conformed Copy
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT, dated as of June 20, 1996
(the "Amendment"), is by and between U.S. OFFICE PRODUCTS COMPANY, a Delaware
corporation ("USOP") and a stockholder of Blue Star Group Limited, a New
Zealand corporation (the "COMPANY"), and ERIC JOHN WATSON (the "STOCKHOLDER"),
also a stockholder of the COMPANY. There are three other stockholders of the
COMPANY, Grant Keith Baker, Maurice George Kidd and Paul Anthony Smithies (all
such other stockholders, the "Management Stockholders").
This Amendment amends the Stock Purchase Agreement, dated as of January
31, 1996 (as amended by an Acknowledgement and Agreement (the
"Acknowledgement") dated as of February 28, 1996, the "Purchase Agreement"),
between USOP and the STOCKHOLDER. Terms used herein that are not defined
herein shall have the meanings ascribed thereto in the Purchase Agreement.
WHEREAS, at a Closing held on February 28, 1996 USOP and the
STOCKHOLDER consummated the transactions then contemplated by the
Purchase Agreement, including USOP's acquisition from the STOCKHOLDER of
51% of the issued and outstanding shares of COMPANY Stock, with the
STOCKHOLDER and the Management Stockholders owing the remaining 49% of
the issued and outstanding shares of COMPANY Stock;
WHEREAS, USOP desires to purchase from the STOCKHOLDER, and the
STOCKHOLDER desires to sell to USOP, all of the issued and outstanding
shares of COMPANY Stock not owned by USOP, and to facilitate this
transaction the STOCKHOLDER intends to acquire all of the shares of
COMPANY Stock owned by the Management Stockholders prior to the closing
of the transactions contemplated by this Amendment; and
WHEREAS, USOP and the STOCKHOLDER have determined that it is in
their respective best interests for the Purchase Agreement to be amended
in certain respects to provide for the foregoing purchase and sale and
certain related matters;
NOW, THEREFORE, in consideration of the premises the parties hereto
agree as follows:
1. The following shall be inserted after Section 1.2 of the Purchase
Agreement:
"1.3 Second Stock Sale. Subject to the terms and conditions of
this Agreement and on the basis of and in reliance upon the
representations, warranties, covenants and agreements set forth herein,
at a closing (the "Second Closing") to be held as soon as practicable
after the conditions set forth in Sections 6.4, 6.5, 7.5 and 7.6 hereof
have been satisfied or waived (the date of such Second Closing, the
"Second Closing Date"), the STOCKHOLDER shall sell to USOP and USOP shall
purchase from the STOCKHOLDER all of the shares of COMPANY Stock not then
owned by USOP (being 7,677,888 shares and constituting 49% of all of the
issued and outstanding shares of COMPANY Stock) in exchange for
1,052,632 shares of USOP Stock."
2. Section 2.4 of the Purchase Agreement shall be deleted and the
following shall be inserted in lieu thereof:
"2.4 Second Closing. At the Second Closing:
(a) The STOCKHOLDER shall deliver to USOP in accordance with
applicable law and free and clear of all pledges, liens, transfer and
stamp tax obligations, encumbrances, claims and other charges thereon of
every kind, all of the issued and outstanding shares of COMPANY Stock
not then owned by USOP, in exchange for the delivery by USOP to the
STOCKHOLDER of a certificate or certificates representing the number of
registered shares of USOP Stock to be delivered to the STOCKHOLDER
pursuant to Section 1.3 hereof.
(b) USOP shall cause the COMPANY to, and the STOCKHOLDER shall,
execute and deliver an Amendment to the Employment Agreement between the
COMPANY and the STOCKHOLDER dated as of February 28, 1996 substantially
in the form set forth in Exhibit A hereto.
(c) USOP and the STOCKHOLDER shall cause the charter documents and
boards of directors of the COMPANY and its Subsidiaries to be amended and
restructured to the satisfaction of USOP.
(d) The STOCKHOLDER shall also deliver to USOP, and USOP shall
deliver to the STOCKHOLDER, the certificates and other instruments and
documents referred to in Sections 7.1 and 7.4 hereof and Sections 6.1
and 6.3 and clauses (iii) and (iv) of Section 6.7 hereof, respectively."
3. The following shall be inserted after Section 2.6 of the Purchase
Agreement:
"2.7 Elective Adjustment to Consideration.
(a) At the STOCKHOLDER's election, written notice of which must be
delivered to USOP no later than 120 days after the end of USOP's 1999
fiscal year to be effective, the 2,264,753 shares of USOP Stock issued
by USOP pursuant to this Agreement shall be adjusted if the Value of BSG
(as hereinafter defined) is greater than the Value of USOP Stock (as
hereinafter defined).
(b) The "Value of BSG" shall mean seven times the consolidated
pre-tax earnings of Blue Star Group Limited and only its New Zealand
based subsidiaries for its 1999 fiscal year (determined in accordance
with NZGAAP).
(c) The "Value of USOP Stock" shall mean the product of (i)
2,264,753 (being the number of shares of USOP Stock issued by USOP
pursuant to this Agreement) multiplied by (ii) the average of the
closing prices (per share) of USOP Stock averaged over a period of the
ten consecutive trading days following the date of publication of USOP's
audited financial statements for its 1999 fiscal year (the "Adjustment
Price").
(d) If the Value of BSG is greater than the Value of USOP Stock,
then USOP shall issue and deliver to the STOCKHOLDER that number of
shares of USOP Stock equal to the amount of such excess divided by the
Adjustment Price, provided that the number of shares of USOP Stock so
issued and delivered shall not in any event exceed 2,000,000 shares (the
"Maximum Number of Shares").
(e) The Value of USOP Stock and the Maximum Number of Shares
shall be automatically adjusted in the event of any stock split, stock
dividend, subdivision, combination, reclassification, consolidation,
merger or amalgamation, capitalization of profits or reserves by way of
rights or other reorganization affecting USOP's stock (or any shares,
stock or securities derived from it) or other conveyance of
substantially all assets, or other similar corporate event of USOP. A
dispute between the parties with respect to the implementation of this
section shall be referred to an Expert for resolution if it is not
resolved within five business days of it arising, in which event the
following provision shall apply:
(i) The Expert shall be instructed to:
(A) decide the dispute within the shortest
practicable time; and
(B) deliver a report stating his or her opinion with
respect to the matters in dispute, setting out the reasons
for the decision.
(ii) The Expert shall decide the procedures to be followed
in order to resolve the dispute. The parties shall provide the
Expert with all information and assistance which he or she
reasonably requests for the purpose of resolving the dispute.
(iii) The Expert shall act as an independent expert, not an
arbitrator. The Expert's decision shall be conclusive and final
and binding on the parties (except in the case of manifest error).
(iv) Each party shall bear its own costs relating to the
resolution of a dispute under this clause. Each party shall bear
one half of the costs of the Expert.
For the purposes of this subclause (e), the expression "Expert" shall
mean a "big-six" independent public accountant chosen by agreement of
the parties or, failing prompt agreement, nominated at the request of
either party by USOP's independent public accountants.
(f) Until the end of USOP's 1999 fiscal year, all acquisitions by
USOP, if any, of companies or businesses based in New Zealand shall be
made through the COMPANY."
4. The following shall be inserted at the end of Section 3.3 of the
Purchase Agreement:
"Upon completion of the transactions to be consummated at the Second
Closing, all issued and outstanding shares of the capital stock of the
COMPANY will be owned of record and beneficially by USOP."
5. The definitions of Interim Financials and COMPANY Financial
Statements in Section 3.7 of the Purchase Agreement shall be amended to
include the COMPANY's consolidated balance sheet as of February 28, 1996 and
consolidated statements of income, cash flows and retained earnings for the
eleven-month period then ended.
6. Section 4.2 of the Purchase Agreement shall be amended to read as
follows
"4.2 USOP Stock. The USOP Stock to be delivered to the
STOCKHOLDER at the Closing Date and at the Second Closing Date will be
duly authorized, validly issued shares of Common Stock of USOP, credited
as fully paid and nonassessable."
7. Sections 5.1, 5.2, 5.3 and 5.6 shall not apply to the transaction
contemplated by this Amendment.
8. Between the date of this Amendment and the Second Closing, the
STOCKHOLDER shall use his best efforts to acquire all shares of COMPANY Stock
owned by the Management Stockholders. USOP acknowledges that in connection
with such acquisitions the STOCKHOLDER will agree to deliver to the Management
Stockholders a portion of the shares of USOP Stock to be delivered by USOP at
the Closing pursuant to new Section 2.4 of the Purchase Agreement,
resulting in the following allocation:
<TABLE>
<S> <C>
COMPANY Stockholder Shares of USOP Stock
- -------------------------------------- ----------------------
Eric John Watson 1,030,895
Grant Keith Baker 4,166
Maurice George Kidd 11,980
Paul Anthony Smithies 5,591
Total 1,052,632 Shares
</TABLE>
The reference to "Section 5.9" in Section 8.1(a)(iii) of the Purchase
Agreement shall also be deemed to include the matters referred to in this
section 8.
9. The reference to "Section 6" in Section 6.1 of the Purchase
Agreement shall be amended to read "Section 4".
10. The obligation of the STOCKHOLDER to consummate the transactions
contemplated by new Section 2.4 of the Purchase Agreement is subject to
satisfaction of the following conditions (and for such purpose the reference
to "Section 2.2" in the introductory paragraph to Section 6 of the Purchase
Agreement shall be deemed to be a reference to new Section 2.4 of the Purchase
Agreement):
(a) The conditions set forth in Sections 6.1 through 6.5, and in
clauses (iii) and (iv) of Section 6.7, of the Purchase Agreement;
provided that for this purpose only the reference to Closing Date in
Section 6.1 of the Purchase Agreement shall be deemed to refer to the
Second Closing Date and the references to the Purchase Agreement in
clauses (iii) and (iv) of Section 6.7 of the Purchase Agreement shall be
deemed to refer to this Amendment; and, provided further, that for this
purpose only Section 6.1 of the Purchase Agreement shall be revised to
read as follows:
"6.1 Representations and Warranties; Performance of
Obligations. All the representations and warranties of USOP
contained in Section 4 shall be true and correct as of the Second
Closing Date as though such representations and warranties had
been made on and as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by
USOP on or before the Second Closing Date shall have been duly
complied with and performed; and a certificate to the foregoing
effect dated the Closing Date and signed by the President or any
Vice President of USOP shall have been delivered to the
STOCKHOLDER."
(b) USOP shall have issued to STOCKHOLDER options under USOP's
1994 Long-Term Incentive Compensation Plan to acquire 250,000 shares of
USOP Stock at US$36.0625 per share and subject to USOP's standard
vesting provisions.
(c) USOP shall have released to STOCKHOLDER all of his shares of
USOP Stock held by USOP in connection with the COMPANY's UBIX
transaction and shall have terminated all pledge arrangements in
connection therewith.
11. For purposes of section 10(a) of this Amendment only the phrase
"6,250,000 ordinary shares of stock, NZ$.10 par value per share" in Section
1.2(i) of the Purchase Agreement shall be revised to read "15,669,158 ordinary
shares of stock, NZ$1.00 par value per share".
12. The obligation of USOP to consummate the transactions contemplated
by new Section 2.4 of the Purchase Agreement is subject to satisfaction of the
conditions set forth in Sections 7.1, 7.2, 7.4, 7.5 and 7.6 of the Purchase
Agreement (and for such purpose the reference to "Section 2.2" in the
introductory paragraph to Section 7 of the Purchase Agreement shall be deemed
to be a reference to new Section 2.4 of the Purchase Agreement); provided that
for this purpose only Section 7.1 of the Purchase Agreement shall be revised
to read as follows:
"7.1 Representations and Warranties; Performance of Obligations.
All the representations and warranties of the STOCKHOLDER contained in
Sections 3.6, 3.8(b), 3.9, 3.10, 3.12 through 3.21, 3.23 and 3.26 hereof
shall be true, correct and complete on and as of February 28, 1996, with
the same effect as though such representations and warranties had been
made on and as of such date. All the other representations and
warranties of the STOCKHOLDER contained in this Agreement shall be true,
correct and complete on and as of the Second Closing Date (with the
qualification that the reference to stockholders of the COMPANY in
Section 3.27 hereof shall not include USOP), with the same effect as
though such representations and warranties had been made on and as of
such date. Each and all of the agreements of the STOCKHOLDER to be
performed on or before the Second Closing Date pursuant to the terms
hereof shall have been performed. The STOCKHOLDER shall have delivered
to USOP a certificate dated the Second Closing Date and signed by him
to both such effects."
13. For purposes of section 12 of this Amendment only the phrase "on
January 31, 1996 19,732,050 shares were issued and outstanding" in Section
1.2(ii) of the Purchase Agreement shall be revised to read "on May 1, 1996
30,905,966 shares were issued and outstanding"."
14. The phrase "51% of all Claims" in clause (y) of Section 8.1(a) of
the Purchase Agreement shall be deleted and the phrase "100% of all Claims"
shall be inserted in lieu thereof.
15. The references to "Closing Date" in Sections 8.1(a)(iv) and
8.1(a)(v) of the Purchase Agreement shall be amended to refer to the Second
Closing Date; and the reference to a balance sheet at the end of each such
Section shall be amended to refer to the February 28, 1996 balance sheet
referred to in section 5 of this Amendment.
16. The references to "US$600,000" and "US$30,000,000" in the proviso
at the end of Section 8.1 of the Purchase Agreement shall be amended to read
"US$1,200,000" and "US$60,000,000", respectively.
17. Clauses (ii) and (z) of Section 11.2(b) of the Purchase Agreement
shall be deleted. Section 11.2(c) of the Purchase Agreement shall be deleted.
18. For purposes of the transactions contemplated by this Amendment
only, Section 11.2(e) of the Purchase Agreement shall be deleted and the
following shall be inserted in lieu thereof:
"(e) The STOCKHOLDER acknowledges that USOP will not provide the
STOCKHOLDER with a prospectus for the STOCKHOLDER's use in selling the
USOP Stock delivered to him at the Second Closing and agrees to sell
such shares only in accordance with the requirements of Regulation S
promulgated under the Securities Act of 1933, as amended. The
STOCKHOLDER further acknowledges that there will be placed on the
certificates representing such shares of USOP Stock, or any
substitutions therefor, a legend stating in substance as follows:
The shares of the Corporation represented by this certificate have
been issued pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and
have not been registered under the Securities Act. These shares
may not be transferred, offered or sold prior to the end of the
40-day period (the "Restricted Period") commencing on the issuance
of the shares by the Corporation, unless such transfer, offer or
sale is made in an "offshore transaction" and not to or for the
account or benefit of a "U.S. person" (as such terms are defined
in Regulation S) and is otherwise in accordance with the
requirements of Regulation S. Following expiration of the
Restricted Period, the shares may not be transferred, offered or
sold except pursuant to an effective and current registration
statement under the Securities Act or pursuant to an available
exemption from such registration."
19. This Amendment may be terminated in accordance with the provisions
set forth in Section 12.2 of the Purchase Agreement, provided (a) that for
this purpose references in such Section to "Closing", "Closing Date" and
"March 31, 1996" shall be deemed to be references to "Second Closing", "Second
Closing Date" and "July 31, 1996", and (b) that the effect of any such
termination shall be limited to this Amendment and the transactions
contemplated hereby.
20. The references to "Section 5.7" in Section 12.2(iv) of the Purchase
Agreement shall be amended to read "Section 5.6".
21. Section 12.14(a) of the Purchase Agreement shall be deleted and the
following shall be inserted in lieu thereof:
"(a) So long as the STOCKHOLDER is the Chief Executive officer of
the COMPANY, in connection with each acquisition by the COMPANY of a
business in Australia or New Zealand, USOP shall make available to the
COMPANY options to purchase a number of shares of USOP Stock equal to
6.25% (and up to 15%, in USOP's sole discretion) of the number of shares
of USOP Stock issued in such transaction. Grants of such options shall
be determined by the STOCKHOLDER (within any limitations that may be
imposed by the applicable stock option plan and law), and shall be
subject to standard USOP policies."
22. Sections 12.14(c) through 12.14(k) of the Purchase Agreement shall
be deleted and the following shall be inserted in lieu thereof:
"(c) If USOP determines to sell or transfer substantially all of
the business of the COMPANY and its subsidiaries (the "Blue Star
Business") to an unrelated third party, whether by sale of assets or
shares, it shall first offer to sell the Blue Star Business to the
STOCKHOLDER on such terms as it may select. If the STOCKHOLDER fails to
accept such offer within 60 days after it is made, or if he accepts such
an offer but fails to consummate the transaction with 30 days after
acceptance, USOP may during the subsequent six-month period offer and
sell or transfer the Blue Star Business to any person on terms no less
favorable to USOP than those offered to the STOCKHOLDER (or if the
initial offer was accepted by the STOCKHOLDER, no less favorable to USOP
than the terms accepted by the STOCKHOLDER). If USOP does not sell or
transfer the Blue Star Business on such terms during such six-month
period, USOP thereafter will again be required to comply with the
procedures of this Section 12.14(c) for any transaction covered hereby.
Notwithstanding anything to the contrary, the limitations on USOP set
forth in this Section 12.14(c) shall apply only to a sale of the Blue
Star Business on a stand-alone basis to an unrelated third party, and
shall not apply to any other transaction in which ownership of the
COMPANY or any of its subsidiaries is transferred directly or
indirectly, including without limitation by subdivision, combination,
reclassification, consolidation, merger, reorganization, spin-off,
split-off or sale of USOP, or any spin-off or split-off to stockholders
of the COMPANY, or any transaction involving USOP or any of its
subsidiaries other than the COMPANY and its subsidiaries, or any
transaction involving any Related Party. For purposes of this Section
12.14(c), 'Related Party' shall mean each of USOP and its subsidiaries
(and each other business entity in which it or they have a substantial
and active investment interest) and its and their officers, directors,
stockholders and principals, partners and other investors (in business
entities in which it or they have a substantial and active investment
interest), and each person that, directly or indirectly, controls, is
controlled by or is under common control with the any such person."
23. Paragraphs 5 and 6 of the Acknowledgement shall be deleted.
24. This Amendment includes the Exhibit hereto. This Amendment may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and the
same instrument. This Amendment shall be effective
upon the exchange by telefax of executed signature pages. Except as otherwise
expressly provided herein, all terms of the Purchase Agreement remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
U.S. OFFICE PRODUCTS COMPANY
By /s/ Mark D. Director
Name: Mark D. Director
Title: Executive Vice President
Witness:
/s/ Maurice George Kidd /s/ Eric John Watson
ERIC JOHN WATSON
Exhibit A
Form of Amendment to Employment Agreement
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of ________, 1996 (the
"Amendment"), is by and between BLUE STAR GROUP LIMITED, a New Zealand
corporation (the "Company"), and ERIC JOHN WATSON ("Employee").
This Amendment amends the Employment Agreement, dated as of February 28,
1996 (the "Employment Agreement"), between the Company and Employee. Terms
used herein that are not defined herein shall have the meanings ascribed
thereto in the Employment Agreement.
WHEREAS, the Employment Agreement was entered into in connection
with the sale by Employee to USOP of 51% of the issued and outstanding
shares of the Company pursuant to a Stock Purchase Agreement dated as of
January 31, 1996 between USOP and Employee (the "Purchase Agreement");
WHEREAS, as of June 20, 1996 USOP and Employee entered into an
amendment to the Purchase Agreement providing for Employee's sale to
USOP of the remaining 49% of the issued and outstanding shares of the
Company, and this Amendment is being entered into at the closing for
that transaction pursuant to section 2.4(c) of the amended Purchase
Agreement; and
WHEREAS, the Company and Employee have determined that it is in
their respective best interests for the Employment Agreement to be
amended in certain respects to provide for the foregoing purchase and
sale and certain related matters;
NOW, THEREFORE, in consideration of the premises the parties hereto
agree as follows:
1. The following shall be inserted after Section 1(b) of the Employment
Agreement:
"(c) Three of the six current members of the board of directors
of the Company were selected by USOP and three were selected by
Employee. If USOP determines not to support the continued holding
of office of an equal number of directors selected by Employee,
Employee shall have the right during the 60-day period after such
determination to terminate this Agreement. If he so exercises
such right he shall be entitled to the same benefits hereunder
that he would be entitled to receive in the event of a termination
without cause by the Company under Section 5(d) hereof."
2. The second and third paragraphs of Appendix A to the Employment
Agreement shall be deleted.
3. The second sentence of paragraph 2(a) in the Employment Agreement
shall be deleted.
4. Except as otherwise expressly provided herein, all terms of the
Employment Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
BLUE STAR GROUP LIMITED
By _______________________________
Name: ____________________________
Title: _____________________________
Witness:
_______________________________ __________________________________
ERIC JOHN WATSON
Exhibit 4
ERIC JOHN WATSON
GRANT KEITH BAKER, MAURICE GEORGE KIDD
and PAUL ANTHONY SMITHIES
___________________________________________
DEED RELATING TO TRANSFER OF
SHARES AND SHAREHOLDER DEBT
IN BLUE STAR GROUP LIMITED
___________________________________________
RUSSELL McVEAGH Mc KENZIE BARTLEET & CO
- ---------------------------------------------------------
BARRISTERS, SOLICITORS & NOTARIES PUBLIC
AUCKLAND & WELLINGTON, NEW ZEALAND
DEED dated the 20th day of June 1996
PARTIES
ERIC JOHN WATSON "(Watson")
GRANT KEITH BAKER, MAURICE GEORGE KIDD and
PAUL ANTHONY SMITHIES ("Shareholders")
INTRODUCTION
A. By a stock purchase agreement dated as of 31 January 1996
("Agreement") Watson sold and transferred to US Office Products
Company ("USOP") certain shares in Blue Star Group Limited
("Company") and certain indebtedness owing by the Company to Watson.
B. In order to give effect to the transactions recorded in the
Agreement, the Shareholders sold and transferred to Watson certain
shares in the Company and certain indebtedness owed by the Company to
the Shareholders, in consideration of Watson paying to the
Shareholders certain monies and transferring to them certain fully
paid shares in USOP.
C. Watson and USOP have entered into an agreement dated as of 20 June
1996 amending the Agreement ("Amending Agreement") pursuant to which
Watson has agreed to sell to USOP all of the shares in the Company
not already owned by USOP.
D. In order to give effect to the transactions recorded in the Amending
Agreement the Shareholders have agreed to transfer certain shares in
the Company to Watson in consideration of Watson transferring to each
of them certain fully paid shares in USOP.
E. The Agreement and the Amending Agreement contain provisions whereby:
(a) Watson may be required to make payments or otherwise indemnify
USOP or the Company in certain circumstances; and
(b) Watson may elect to require USOP to make an adjustment to the
number of USOP shares issued by USOP to Watson pursuant to the
Agreement and the Amending Agreement.
F. The parties wish to provide for an adjustment to the consideration
paid or transferred by Watson to each of the Shareholders in respect
of the shares in the Company transferred by them to Watson in
connection with the transactions recorded in the Agreement and the
Amending Agreement, in the event that Watson is required to make a
payment to, or indemnify, USOP or the Company, or makes and election
in relation to the USOP stock.
COVENANTS
1. Each of the Shareholders agrees that, if:
(a) Watson is required to make any payment to, or otherwise
indemnify, USOP or the Company (whether in cash or by way of
transfer of USOP shares) under the Agreement or the Amending
Agreement; or
(b) Watson exercised the election to require USOP to adjust the
number of USOP shares issued to Watson pursuant to the
Agreement and the Amending Agreement:
then the purchase consideration paid or transferred to the
Shareholders by Watson in respect of the Sale and transfer by the
Shareholders to Watson of shares and shareholder debt in the Company
shall be adjusted or refunded (by payment in cash or transfer of USOP
shares, as the case requires) in proportion to which the shares and
shareholder debt in the Company transferred by each of the
Shareholders to Watson bears to the shares and the shareholder debt
in the Company transferred by Watson to USOP.
EXECUTION
SIGNED by ERIC JOHN
WATSON in the presence of: /s/ E. Watson
-------------
E J Watson
Witness to signature:
/s/ M. Burkill
--------------
Signature of witness
Executive P. A.
Occupation
Auchland
City/town of residence
SIGNED by GRANT KEITH
BAKER in the presence of: /s/ G. Baker
------------
G K Baker
Witness to signature:
/s/ M. Burkill
--------------
Signature of witness
Executive P. A.
Occupation
Auchland
City/town of residence
SIGNED by MAURICE GEORGE
KIDD in the presence of: /s/ M. Kidd
-----------
M G Kidd
Witness to signature:
/s/ M. Burkill
--------------
Signature of witness
Executive P. A.
Occupation
Auchland
City/town of residence
SIGNED by PAUL ANTHONY
SMITHIES in the presence of: /s/ P.A. Smithies
-----------------
P A Smithies
Witness to signature:
/s/ M. Burkill
--------------
Signature of witness
Executive P. A.
Occupation
Auchland
City/town of residence
