UNITED STATIONERS INC.
2200 EAST GOLF ROAD [LOGO]
DES PLAINES, ILLINOIS 60016-1267
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
MAY 8, 1996
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TO THE STOCKHOLDERS OF
UNITED STATIONERS INC.
The Annual Meeting of Stockholders of United Stationers Inc. will be held on
Wednesday,
May 8, 1996 at 2:00 p.m., Chicago time, at the offices of the Company, 2200 East
Golf Road, Des Plaines, Illinois, for the following purposes:
1. To elect three directors to serve for a three-year term expiring in 1999;
2. To approve amendments to the United Stationers Inc. Management Stock Option
Plan; and
3. To transact such other business as may properly come before the meeting.
The stock transfer books of the Company will not be closed but only stockholders
of record at the close of business on March 11, 1996 will be entitled to notice
of, and to vote at, the meeting.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1995 is enclosed.
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE MEETING, PLEASE MARK,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
OTIS H. HALLEEN
SECRETARY
April 5, 1996
Des Plaines, Illinois
UNITED STATIONERS INC.
Executive Offices [LOGO]
2200 EAST GOLF ROAD
DES PLAINES, ILLINOIS 60016-1267
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April 5, 1996
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1996
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This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of United Stationers Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on May 8, 1996. This statement and
the accompanying form of proxy are being mailed to stockholders commencing on or
about April 5, 1996.
If the enclosed proxy is properly executed and returned to the Company in time
for the annual meeting, the shares represented thereby will be voted in
accordance with the instructions of the stockholder giving the proxy. A
stockholder giving a proxy may revoke it at any time prior to its exercise by
written notice of revocation to the Secretary of the Company or by the execution
of a proxy bearing a later date or by attending the meeting and voting in
person.
The cost of this solicitation of proxies will be paid by the Company. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone or telegram by directors, officers and regular employees of
the Company, without special compensation therefor. The Company will also
reimburse banks, brokers and other persons holding stock in their names, or in
the names of their nominees, for their expenses in sending proxy materials to
their principals.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The close of business on March 11, 1996 has been fixed by the Board of Directors
as the record date for determining the stockholders entitled to vote at the
annual meeting. As of that date, there were 11,446,306 shares of the Company's
Common Stock, $0.10 par value, issued and outstanding (the "Common Stock"). Each
share of Common Stock is entitled to one vote. A majority of the outstanding
shares of Common Stock must be represented in person or by proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning the Common Stock
ownership as of March 11, 1996 of each person who is known to the Company to be
the beneficial owner of more than five percent of the Company's Common Stock:
Percent
Amount and Nature of of
Name and Address of Beneficial Owner Beneficial Ownership Class
- ---------------------------------------------------------------------- -------------------- -------
Wingate Partners, L.P. 6,045,823(1) 50.3%
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
ASI Partners, L.P. 1,799,588(2) 15.7%
9441 LBJ Freeway, Suite 300
Ft. Worth, Texas 75243
Cumberland Capital Corporation 1,799,588(2) 15.7%
9441 LBJ Freeway, Suite 300
Ft. Worth, Texas 75243
Chase Manhattan Investment Holdings, Inc. 1,235,061(3) 9.7%
1 Chase Manhattan Plaza
New York, NY 10081
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(1) Includes (i) 4,268,577 shares owned by Wingate Partners, L.P. ("Wingate
Partners"), (ii) 1,117,374 shares owned by Wingate Partners II, L.P.
("Wingate II"), (iii) 74,094 shares owned by Wingate Affiliates, L.P.
("Affiliates") and (iv) 19,634 shares owned by Wingate Affiliates II, L.P.
("Affiliates II") (collectively, "Wingate"). Also includes warrants which
are exercisable for an aggregate of 566,144 shares (or shares of nonvoting
common stock) at the holder's option. Edward Easterling is a general partner
of Wingate II and Affiliates II and thus may be deemed the beneficial owner
of 1,479,037 shares or 12.5%. Other general partners; including Thomas W.
Sturgess, James T. Callier, Jr., Frederick B. Hegi, Jr. and James A.
Johnson, and their beneficial interests are shown on page 3 of this Proxy
Statement.
(2) Includes (i) 1,430,401 shares owned by ASI Partners, L.P., (ii) 156,304
shares owned by ASI Partners II, L.P., (iii) 40,084 shares owned by ASI
Partners III, L.P. (collectively, "ASI Partners"), and (iv) 154,125 shares
owned by Cumberland Capital Corporation ("Cumberland"). Cumberland serves as
the general partner of ASI Partners. Also includes warrants exercisable for
an aggregate of 18,674 shares, at the holder's option.
(3) As of March 11, 1996, and currently, no Common Stock is owned by such
holder. Includes (i) 758,994 shares of nonvoting common stock, and (ii)
warrants exercisable for an aggregate of 476,067 shares (or shares of
nonvoting common stock), at the holder's option. Subject to certain
restrictions, the nonvoting common stock is convertible at any time at the
option of the holder into shares of Common Stock.
VOTING TRUST
A total of 8,478,927 shares (74.1%) of the Common Stock, including the shares
owned by Wingate, ASI Partners and Cumberland, and other shares, are held in a
voting trust (the "Voting Trust"), pursuant to a Voting Trust Agreement dated as
of January 31, 1992, the trustees of which are
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Thomas W. Sturgess, Frederick B. Hegi, Jr., James A. Johnson, Daniel J. Good and
Gary G. Miller. The trustees of the Voting Trust hold all voting power to vote
the shares held in the Voting Trust and may act by a majority vote of the
trustees. The trustees agree to vote all shares in trust to elect a board of
directors of the Company with (1) at least one representative designated by Good
Capital Co. Inc., (2) at least one representative designated by ASI Partners,
(3) at least one representative designated by Messrs. Michael Rowsey, Robert
Eberspacher, Daniel Schleppe and Larry Miller (each of whom is an employee of
the Company's subsidiary), and (4) such number of directors designated by
Wingate Partners as will represent a majority of the total number of directors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's Common
Stock by each of the directors and nominees, each of the executive officers
named in the Summary Compensation Table, and all of the Company's directors and
executive officers as a group as of March 11, 1996.
Percent of
Common Stock
Common Stock Exercisable Exercisable Outstanding
Name Beneficially Owned Options (1) Warrants (1) (2)
- -------------------------------------------------- ------------------ ------------- ------------- ------------
James T. Callier, Jr. 4,342,671(3) -- 226,450(3) 39.1%
Daniel J. Good 198,287(5) -- 59,656(5) 2.2%
Frederick B. Hegi, Jr. 5,479,679(4) -- 566,144 50.3%
Jeffrey K. Hewson 2,076 4,882(6) -- *
James A. Johnson (9) 1,156,180(11) -- 339,694(11) 12.7%
Gary G. Miller (6) -- -- -- --
Michael D. Rowsey (9) 84,557 214,506 -- 2.6%
Joel D. Spungin 33,004(8) -- -- *
Thomas W. Sturgess 4,342,671(3) 200,000(12) 226,450(3) 40.2%
Daniel H. Bushell 19,538 209,199 -- 2.0%
Steven R. Schwarz 628 120,000 -- 1.0%
Ergin Uskup 126 60,000 -- *
All current directors and executive
officers as a group (17 persons) 5,839,454(10) 1,068,243 625,800 57.3%
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*Less than 1%
(1) Options and warrants exercisable within 60 days of the date of this Proxy
Statement. Except for Mr. Hewson's options, exercisability of options is
subject to certain conditions, the occurrence of which is assumed for this
purpose, including (a) the occurrence of an Event - as described on page 9
of this Proxy Statement, and (b) the approval at the annual meeting of
certain amendments to the stock option plan as described on pages 9-10 of
this Proxy Statement.
(2) For purposes of calculating the beneficial ownership percentage of each such
stockholder, it was assumed that such stockholder exercised all options,
conversion rights or warrants by which the stockholder had the right to
acquire shares of Common Stock, within 60 days of the date of this Proxy
Statement.
(3) Includes 4,268,577 shares owned by Wingate Partners, 74,094 shares owned by
Affiliates, 222,587 warrants held by Wingate Partners and 3,863 warrants
held by Affiliates.
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(4) Includes all 5,479,679 shares beneficially owned by Wingate. Messrs.
Callier, Hegi and Sturgess serve as general partners of Wingate Partners and
various Wingate entities. Does not include any of the 8,478,927 shares held
in the Voting Trust, of which Messrs. Sturgess, Hegi and Johnson are
trustees, other than the 5,479,679 shares beneficially owned by Wingate.
(5) Includes 36,173 shares of Common Stock and 16,852 exercisable warrants held
by trusts for which Mr. Good serves as trustee. Does not include 363,899
shares owned by Good Capital Co., Inc., of which Mr. Good is Chairman and a
controlling stockholder; accordingly Mr. Good may be deemed to beneficially
own the shares owned of record by Good Capital Co., Inc.
(6) Does not include 9,766 shares issuable upon exercise of options that are not
exercisable within 60 days.
(7) Does not include shares owned by ASI Partners or Cumberland. Mr. Miller is
President and a stockholder of Cumberland and, accordingly, may be deemed to
beneficially own the shares owned of record by ASI Partners and Cumberland.
(8) Includes 9,678 shares of Common Stock owned by Mr. Spungin which are subject
to certain restrictions against sale or other disposition, and are subject
to forfeiture if Mr. Spungin resigns as a director prior to March 31, 1997.
(9) Includes shares owned directly and by an individual retirement account for
the sole benefit of such individual.
(10) Of the 5,839,454 shares shown as owned by all current directors and
officers as a group, 19,550 shares are held with sole voting and investment
power and 5,819,904 shares are held with shared voting and investment power,
including 5,801,232 of the shares in the Voting Trust. Does not include any
of the 2,677,695 shares in the Voting Trust held for the benefit of persons
other than current directors and executive officers. Does not include shares
owned by ASI Partners or Cumberland.
(11) Includes 1,117,375 shares owned by Wingate II, 19,634 shares owned by
Affiliates II, and 19,171 shares owned by Mr. Johnson. Exercisable warrants
include 333,779 owned by Wingate II and 5,915 owned by Affiliates II.
(12) Includes (i) 120,000 shares issuable upon exercise of options which are,
subject to certain restrictions, exercisable at $5.12 per share, and (ii)
80,000 shares issuable upon exercise of options which are, subject to
certain restrictions, exercisable at $13.125 per share. Does not include
160,000 shares issuable upon exercise of options that are not exercisable
within 60 days.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board of
Directors shall be divided into three classes, each class as nearly equal in
number as possible, and each term consisting of three years.
The Board of Directors presently consists of nine members, three in each class.
Three members, the Class I directors, have terms expiring at, and are nominees
for election at, the May 8, 1996 Annual Meeting of Stockholders. The persons
named as proxies intend to vote for the election of the nominees as directors,
unless such authority is withheld by the stockholder giving the proxy. If
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any nominee becomes unavailable for election for any reason, the shares
represented by the proxies will be voted for any substitute nominee designated
by the Board of Directors. The nominees and certain information furnished or
confirmed by them are as follows:
DANIEL J. GOOD (56)
Mr. Good was elected to the Board of Directors on March 30, 1995, upon
consummation of the merger (the "Merger") between the Company and Associated
Holdings, Inc. ("Associated"). Prior to the Merger, he had been a director of
Associated since 1992. Mr. Good is Chairman of Good Capital Co., Inc., an
investment firm in Lake Forest, Illinois. Until June 1995, Mr. Good was Vice
Chairman of Golden Cat Corp., the largest producer of cat litter in the United
States, and prior thereto he was Managing Director of Merchant Banking for
Shearson Lehman Bros. and President of A.G. Becker Paribas, Inc. Mr. Good serves
as a director of Supercuts, Inc.
JAMES A. JOHNSON (42)
Mr. Johnson was elected to the Board of Directors upon consummation of the
Merger on March 30, 1995. Prior to the Merger he had been a director of
Associated since 1992. Mr. Johnson is a general partner of various Wingate
entities, including the indirect general partner of Wingate II. From 1980 until
he joined Wingate Partners in 1990, Mr. Johnson served as a Principal of Booz-
Allen & Hamilton, an international management consulting firm. Mr. Johnson
currently serves as a director of Century Products Company, a manufacturer and
distributor of baby seats and other juvenile products ("Century Products").
JEFFREY K. HEWSON (52)
Mr. Hewson has been a director since 1991. Mr. Hewson is President and Chief
Executive Officer of Beckley-Cardy Group, a distributor of school supplies to
the educational market. Mr. Hewson served as President and Chief Executive
Officer of the Company from consummation of the Merger until May 31, 1995, and
as an executive consultant through August 31, 1995. Prior thereto, he was
President and Chief Operating Officer of the Company since April 1991. He had
been Executive Vice President of the Company since March 1990. Prior to that he
had been President of ACCO International's U.S. Division since 1989 and
President of its Canadian Division since 1987. ACCO International is a
manufacturer of traditional office products and a subsidiary of American Brands,
Inc., which is a global consumer products holding company.
5
OTHER DIRECTORS
The other directors, whose terms of office as a director will continue after the
Annual Meeting, and certain information concerning them are as follows:
Served as
a
Director
of the
Principal Occupation and Company
Name (Age) Positions with the Company Since
- ----------------------- ---------------------------------------------------------------------- ---------
CLASS II DIRECTORS--TERMS EXPIRING IN MAY 1997
Thomas W. Sturgess (45) Chairman of the Board, President and Chief Executive Officer of the 3/30/95
Company
Frederick B. Hegi, Jr. Partner, various Wingate entities 3/30/95
(52)
Michael D. Rowsey (43) Executive Vice President of the Company 3/30/95
CLASS III DIRECTORS--TERMS EXPIRING IN MAY 1998
Gary G. Miller (45) President of Cumberland Capital Corporation 3/30/95
James T. Callier, Jr. General Partner, Wingate Partners 3/30/95
(61)
Joel D. Spungin (58) Formerly Chairman of the Board and Chief Executive Officer of the 8/18/81
Company
Mr. Sturgess became Chairman of the Board of the Company on March 30, 1995 and
President and Chief Executive Officer of the Company on May 31, 1995. Since
1987, Mr. Sturgess has served as a general partner of various Wingate entities,
including the indirect general partner of each of Wingate Partners and Wingate
II. Mr. Sturgess currently serves as a non-executive Chairman of the Board of
Redman Industries, Inc., a manufactured housing producer, as well as RBPI
Holding Corporation, a manufacturer and distributor of aluminum and vinyl
windows. He is a director of Loomis Armored Inc., a provider of armored cars and
related services.
Mr. Hegi is a general partner of various Wingate entities, including the
indirect general partner of each of Wingate Partners and Wingate II. He is
President of Valley View Capital Corporation, a private investment firm. He also
serves as Chairman of the Board of Loomis Holding Corporation, ITCO Holding
Company, Inc., Tahoka First Bancorp, Inc., a bank holding company, and Cedar
Creek Bancshares, Inc., a bank holding company, and as a director of Century
Products, Lone Star Technologies, Inc., a diversified company engaged in the
manufacture of steel pipe, Cattle Resources, Inc., a manufacturer of animal
feeds and operator of commercial cattle feedlots, and various funds managed by
InterWest Partners.
Mr. Rowsey has been Executive Vice President of the Company since the Merger.
Prior to the Merger he was President and a director of Associated since 1992.
From 1979 to January 1992, Mr. Rowsey served in various capacities with Boise
Cascade Office Products Corporation, most recently as the North Regional
Manager.
6
Mr. Miller is President of Cumberland Capital Corporation, a private investment
firm. He is also Chairman of the Board of CFData Corp., a nationwide provider of
check collection and check verification services, and Fore Star Golf, Inc.,
which was formed in 1993 to own and operate golf course facilities.
Mr. Callier is a general partner of Callier Interests, an investment firm, and
is President of Callier Consulting, Inc., an operating management firm. He is an
indirect general partner of Wingate Partners, and an advisory director of
Wingate II. He serves as Chairman of the Board of Century Products, and as a
director of Redman Industries, Inc. and Loomis Armored, Inc.
Mr. Spungin was Chairman of the Board of Directors and Chief Executive Officer
of the Company since 1988 until March 1995, and from October 1989 until April
1991, he was also President of the Company. Mr. Spungin serves as a general
partner of DMS Enterprises, L.P., a management advisory and investment
partnership, and as a director of AAR Corp.
CONCERNING THE BOARD OF DIRECTORS AND BOARD COMMITTEES
During the year ended December 31, 1995, the Board of Directors held nine
meetings and took action by unanimous written consent in lieu of meeting on
eleven occasions. Each director attended all of (1) the meetings of the Board of
Directors held during the last full fiscal year and (2) the meetings held by all
committees of the board on which he served (during the periods that he served)
during the last fiscal year.
Except for Messrs. Hewson and Spungin, since the Merger, directors who are not
officers or employees of the Company received no compensation for their services
as a director. On November 29, 1995 the Company granted options exercisable for
an aggregate of 14,648 shares of Common Stock at an exercise price of $5.12 per
share to Jeffrey K. Hewson, and a restricted stock award of 9,678 shares of
Common Stock to Joel D. Spungin, in consideration for their services on the
Board of Directors in lieu of directors' compensation for a three-year period.
One-third of Mr. Hewson's options are immediately exercisable, and the remainder
are exercisable in two installments on the anniversaries of the grant date. Mr.
Spungin's stock is subject to forfeiture in the event he resigns as a director
before March 30, 1997. Directors are reimbursed for travel expenses incurred in
attending meetings.
The Board of Directors has an Audit Committee and a Compensation Committee.
During the year from the Merger until December 31, 1995, the Audit Committee
consisted of
Gary G. Miller (Chairman), and Daniel J. Good. The Audit Committee met two times
during the last fiscal year, since the Merger. The functions of the Audit
Committee are to recommend the independent auditors to the Board of Directors;
review the scope of the independent auditors' examination; review the
compensation of the independent auditors; consider the results of the
independent auditors' review of internal accounting controls and suggestions for
improvements; discuss matters of concern to the independent auditors resulting
from the audit; review changes in accounting principles in the financial
statements; and review nonauditing services performed for the Company by the
independent auditors.
During the year from the Merger until December 31, 1995, the Compensation
Committee consisted of Gary G. Miller and James T. Callier, Jr. The Compensation
Committee met two times during the last fiscal year since the Merger. The
Compensation Committee reviews and makes recommendations upon proposals by
management as to compensation, bonuses, employment agreements and
7
other benefits, and policies respecting such matters, for the officers of the
Company and its subsidiaries. The members of the Compensation Committee also
serve as the Administrative Committee for the Company's Management Equity Plan,
and as the Administrative Committee for the Management Incentive Plan.
NOMINATIONS FOR DIRECTORS FOR 1997
Any stockholder wishing to submit recommendations for directors of the Company
for the next annual meeting in 1997 should send a signed letter of
recommendation to United Stationers Inc., 2200 East Golf Road, Des Plaines, IL
60016-1267, Attention: Otis H. Halleen, Secretary. Recommendation letters should
state the full name and address of each proposed nominee, a brief resume, a
brief biographical history including past and current directorships and
employment, and the reasons for recommendation. Nominations for election at the
Company's Annual Meeting to be held in May 1997 must be submitted no later than
December 7, 1996.
PROPOSAL TO APPROVE AMENDMENTS TO THE MANAGEMENT STOCK OPTION PLAN
Effective January 31, 1992, Associated Holdings, Inc. adopted, and its
stockholders approved, the Associated Holdings, Inc. 1992 Management Stock
Option Plan (the "Plan"). As of March 30, 1995, upon the merger of Associated
Holdings, Inc. with and into United Stationers Inc. (the "Merger"), the Plan was
amended. The amendment, among other things, changed the name of the plan to the
United Stationers Inc. Management Stock Option Plan and, in order to reflect the
effects of the merger, adjusted the number of shares available under the Plan to
202,962.14 shares, subject to recapitalization adjustments. A copy of the March
30, 1995 amendments is attached as Appendix A to this Proxy Statement.*
It was the desire of the Directors to make available under the Plan sufficient
shares to permit participation by key management employees of the combined
entity, many of whom were not previously participants in the Plan. Therefore, on
September 27, 1995 the Board of Directors of the Company approved certain
amendments to the Plan, subject to approval by the stockholders of the Company.
By those amendments, among other things, the name of the Plan was changed to
United Stationers Inc. Management Equity Plan (the "MEP Plan"), and the number
of shares authorized to be issued under the MEP Plan was increased by 1,100,000
shares to 1,302,962.14, subject to recapitalization adjustments.
The Board also appointed an administrative committee, as provided in the MEP
Plan, consisting of two directors of the Company, James T. Callier, Jr. and Gary
G. Miller, neither of whom is eligible to participate in the Plan.
A copy of these amendments is attached as Appendix B to this Proxy Statement.
As of September 27, 1995, there were approximately 193 employees eligible to
participate in the MEP Plan. Options for 105,042 shares were outstanding under
the Plan as of that date, pursuant to option grants made by Associated Holdings,
Inc. prior to the Merger.
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* Prior to the Merger, United Stationers Inc. had a Stock Incentive Award Plan
and a Directors' Stock Option Plan. All in-the-money options issued under those
plans were cashed out immediately prior to the Merger, and the plans were
canceled upon consummation of the Merger.
8
A 100% stock dividend was paid on November 9, 1995, the effect of which doubled
the number of shares referred to in the prior paragraphs.
As of March 5, 1996 the Board of Directors adopted an additional amendment to
the MEP Plan. The amendment established the maximum number of shares for which
options could be granted to any individual optionee in any year. A copy of such
amendment is attached as Appendix C to this Proxy Statement.
The MEP Plan as amended is described in this Proxy Statement. A copy of the MEP
Plan as amended is attached as Appendix D.
OPTION GRANTS SINCE BOARD ADOPTION OF AMENDMENTS*
Since adoption of the amendments to the MEP Plan by the Board of Directors on
September 27, 1995, in October 1995 options for 198,750 shares were granted to
46 employees at an exercise price of $5.12 per share and options for 1,641,250
shares were granted to 188 employees, including the same 46 employees, at an
initial exercise price of $12.50 per share. The $12.50 option exercise price
increases by $0.625 at the beginning of each calendar quarter commencing April
1, 1996, until an Event (as described below) occurs. The number of options
granted to each of the executive officers of the Company named in the Summary
Compensation Table is shown on page 14 of this Proxy Statement.
None of the options are exercisable until (1) the amendments to the MEP Plan are
approved by the stockholders and (2) after the occurrence of a transaction or
group of transactions (an "Event") that cause certain of the "Sponsor" investors
to have realized a return of liquid proceeds at least equal to their common
stock investment in the Company. The "Sponsors" are, collectively, Wingate
Partners, L.P., Wingate Partners II, L.P., Wingate Affiliates, L.P., Wingate
Affiliates II, L.P., and their affiliates. No shares acquired pursuant to
exercise of such options may be sold prior to six months after the Event. An
Event has not occurred as of the date of this Proxy Statement.
In January 1996, options were granted to Thomas W. Sturgess, Chairman of the
Board, President and Chief Executive Officer, for 120,000 shares at an exercise
price of $5.12 per share, and for 240,000 shares at an exercise price of $12.50
per share, increasing $0.625 per share quarterly commencing April 1, 1996 until
an Event occurs. Provided specified profitability tests are met, the grant of
options for 120,000 shares to Mr. Sturgess will be exercisable after an Event,
and the grant of options for 240,000 shares to Mr. Sturgess will be exercisable
80,000 after an Event, 80,000 upon the later of an Event or December 31, 1996,
and 80,000 upon the later of an Event or March 31, 1997.
DESCRIPTION OF THE AMENDMENTS TO THE PLAN
The amendments to the MEP Plan, attached as Appendices B and C to this Proxy
Statement (and giving effect to the 100% stock dividend),are as follows:
1. The name of the Plan is changed to the United Stationers Inc. Management
Equity Plan.
- --------
* On October 12, 1995 the directors declared a 100% common stock dividend
effective November 9, 1995. Accordingly, references to the number of options
outstanding and granted reflect the effects of the stock dividend.
9
2. The number of shares authorized to be issued under the Plan is increased
by 2,200,000 shares, from 405,924.28 to 2,605,924.28 shares.
3. The Committee was given authority to require, as a condition of the
granting of an option, that the optionee hold the stock for a period which may
exceed 6 months. Prior to the amendment, the maximum holding period which the
Committee could require was 6 months.
4. The Committee was given discretion, at the time of a grant, to permit
estates of deceased optionees a period of at least 6 months in which to exercise
options. The Plan previously provided that the period in which options could be
exercised by the estate of a deceased optionee could not exceed 6 months.
5. In the event of the disability or retirement of an optionee, the
Committee is given authority, at the time of grant, to specify a period of time
which may be longer than 6 months, but not less in which to exercise options.
6. The number of shares for which options may be granted to any individual
optionee in any year is limited to 400,000.
DESCRIPTION OF THE PLAN
The Plan, as amended, provides for the issuance of up to 2,605,924.28 shares
through the exercise of options. The Board of Directors ("Directors") may at any
time amend or terminate the Plan, except that certain amendments may not be made
by the Directors without the approval of the stockholders, and no such action by
the Directors may materially and adversely affect any option previously granted
without the consent of the optionee.
The number of shares available for issuance under the Plan, and the number of
shares subject to outstanding options are subject to adjustment in the event of
certain stock dividends, recapitalizations or other similar changes affecting
the number of outstanding shares. Either authorized but unissued shares or
reacquired shares held in the Company's treasury may be used to fulfill options
granted under the Plan.
The purpose of the Plan is to afford certain of the Company's key employees who
are responsible for the continued success of the Company an opportunity to
acquire an ownership interest in the Company, and thus to create in such persons
an increased interest in and a greater concern for the welfare of the Company.
The eligible participants in the Plan are the key employees, officers and
directors (but not directors who are not also employees) of the Company, who are
regularly employed on a salaried basis on the date of a grant. The maximum
number of shares for which options may be granted in any year to any individual
is 400,000.
The Plan is not qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
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ADMINISTRATION
The Plan is administered by a committee (the "Committee") appointed by the
Directors, none of the members of which are eligible to receive options under
the Plan. The following directors of the Company, who also serve as the members
of the Compensation Committee of the Board of Directors, are members of the
Committee: James T. Callier, Jr. and Gary G. Miller.
Subject to the provisions of the Plan, the Committee determines the optionees,
option exercise prices, dates of grant, number of options, and vesting periods
and conditions. In addition, the Committee is authorized to interpret the Plan,
to adopt rules relating thereto, to determine the terms and provisions of the
participants options, and procedures for exercise of options (which need not be
identical for all participants). The Committee's determinations as to the
foregoing matters are conclusive and binding and are not subject to approval by
the Directors.
GRANT OF OPTIONS
Options may be granted under the Plan to such eligible employees as may from
time to time be determined by the Committee. Options may be granted either as
Incentive Stock Options ("ISO"), that is - options which qualify as incentive
stock options under Section 422 of the Code, or as non-qualified stock options.
The exercise price of each option granted under the Plan is set by the
Committee. The exercise price of each ISO may not be less than 100% of the Fair
Market Value of the applicable share on the date of grant. The Fair Market Value
is defined in the Plan as the average of the high and low prices of the Common
Stock as reported on a national stock exchange or as listed for quotation on the
NASDAQ Market System on the date of the grant.
EXERCISE OF OPTIONS
Options granted under the Plan are exercisable at such times and/or in such
number of cumulative installments as the Committee may establish. Options will
expire at such times, and on such conditions as the Committee shall determine at
the time of grant, but in any event no option may be exercised more than 10
years following the date of grant, and no option that is an ISO may be exercised
after the expiration of 5 years from the date such option is granted.
In the event of a Change in Control or a merger between the Company and another
corporation in which the Company is not the surviving entity, any options which
have not been exercised shall be canceled and replaced by options issued by the
surviving entity in accordance with Rule 16b-3(f)(1) under the Securities
Exchange Act of 1934, as amended.
Options may be exercised by delivering written notice to the Treasurer of the
Company accompanied by payment in full for the shares being purchased. Payment
may be made in cash or in Shares, or, if determined by the Committee at the time
of grant, may be made by deducting from the Shares being exercised, a number of
shares having a Fair Market Value which shall equal the option price. To satisfy
withholding obligations, shares may be withheld or delivered pursuant to the
terms of the option agreements, or pursuant to certain elections made by
optionees or beneficiaries by a specified period prior to the date the amount of
tax to be withheld is determined.
Options are exercisable during the optionee's lifetime only by the optionee.
Except as indicated below, an option may be exercised only during continuous
employment. Each option will require that the optionee remain in the continuous
employ of the Company for at least 6 months (or 3 months in the case of an ISO)
from the date of grant before the right to exercise any part of the option will
accrue. If an optionee's employment is terminated without substantial cause, the
optionee will have a period designated by the Committee at the time of grant to
exercise the
11
options which shall be no less than 30 days (or 3 months in the case of an ISO).
If the optionee dies, becomes disabled, or retires, the optionee or the
optionees successors-in-interest will have a period of time, as determined by
the Committee at the time of grant, which shall be no less than 6 months, after
the date of death, or after the termination of employment as the result of
disability or retirement. In each case, the option may be exercised only to the
extent the optionee could have exercised the option at the date of termination
of employment and may not be exercised later than the expiration of the option.
FEDERAL INCOME TAX ASPECTS
INCENTIVE STOCK OPTIONS
Neither the grant nor lapse of an ISO is a taxable event to either the Company
or the optionee. Under the Code, if the optionee holds the shares acquired upon
exercise of the option for more than one year after transfer of the shares to
the optionee and more than two years from the date of the grant of the option,
and if certain other conditions are met: (a) no regular income tax is imposed on
the optionee at the time of exercise of the option; (b) the difference between
the option exercise price and the amount realized upon disposition of the shares
is treated as long-term capital gain or loss; and (c) the Company is not allowed
an income tax deduction in connection with the grant or exercise of the option.
If the one year/two year holding period requirements discussed above are not
met, then, generally, taxable compensation will result in an amount equal to the
excess, at the time of exercise, of the value of the shares over the exercise
price. This amount will be includable as ordinary income to the optionee and
will be deductible by the Company at the time of disposition.
In addition, depending on the optionees overall tax situation, the optionee may
be subject to the alternative minimum tax at a rate generally equal to 26%, on
the amount which would be realized as compensation pursuant to the rules
applicable to nonqualified options, discussed immediately below.
No options have been granted as ISOs and it is not presently anticipated that
any options will be so granted.
NONQUALIFIED OPTIONS
Generally, if a nonqualified option is exercised the optionee will realize
compensation (subject to withholding for employees) in the taxable year in which
the shares are transferred. The Company will have a corresponding deduction in
the taxable year during which the optionee realizes compensation income. The
amount of compensation realized is the excess of the value of the shares at
transfer over the option exercise price.
If the shares acquired pursuant to the exercise of a nonqualified option are
nontransferable and subject to a substantial risk of forfeiture, such shares are
treated as having been transferred when they become transferable or not subject
to a substantial risk of forfeiture. At that time the amount of taxable
compensation deemed to be paid by the Company will be equal to the fair market
value of the shares at the time they become transferable or no longer subject to
a substantial risk of forfeiture, less the exercise price of the option. The
optionee in the taxable year on which the shares are deemed transferred will
realize compensation (subject to withholding for employees) and the Company will
be entitled to a corresponding deduction in the taxable year during which the
optionee realized compensation income.
12
The Company will comply with the obligations imposed upon it under applicable
tax withholding laws, if any, with respect to options granted, and is entitled
to do anything to effectuate such compliance, including, without limitation,
withholding from the optionee at the time of exercise a number of shares to be
issued upon exercise to meet the withholding obligation. The shares withheld
will be valued at their Fair Market Value as determined in accordance with the
Plan.
RESTRICTIONS ON RESALE OF SHARES
Shares acquired under the Plan upon exercise of options will be subject to any
condition restricting transfer then required by state or federal securities
laws. The Committee may impose additional restrictions on resale or disposition
of such shares. There may also be restrictions on resale of shares to
participants who at the time of distribution are "affiliates" of the Company.
The options granted pursuant to the Plan as amended, and described on page 9 of
this Proxy Statement, are subject to restriction on resale of the shares for a
period of six months after the Event.
Of the 202,962.14 shares previously covered by the Plan as of September 27,
1995, options were outstanding for a total of 105,042 shares (210,084 shares
post-split) at an exercise price of $2.90 ($1.45 post-split). Subject to
stockholder approval of the Plan amendments, as of January 31, 1996, options
were outstanding for a total of 385,120 shares at an exercise price of $1.45 per
share; for a total of 318,750 shares at an exercise price of $5.12 per share,
and for a total of 1,871,250 shares at an initial exercise price of $12.50 per
share. A total of 20,804 shares have been issued upon the exercise of options,
and 10,000 shares remain available for grant of additional awards. Although
other shares may become available for grant in the event any outstanding options
expire or are canceled, the Company believes that the shares available and to
become available will be insufficient to cover the remaining term of the Plan
(until 2002). The options which have been granted under the Plan were intended
to be one-time grants rather than part of a program of annual grants.
Nevertheless, it may be necessary and appropriate either to seek further
increases in the number of shares available for grant under the MEP Plan or to
adopt a new option plan in the future.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND RATIFICATION OF THE
AMENDMENTS TO THE MANAGEMENT STOCK OPTION PLAN.
The affirmative vote of the holders of not less than a majority of the
outstanding common stock present in person or represented by proxy and entitled
to vote at the meeting is required to adopt the proposal. For this purpose,
abstentions will be included, but broker non-votes will not be included, in the
calculation of the number of stockholders who are considered present and voting
at the Annual Meeting. The proposed resolution reads as follows:
"RESOLVED: that the amendments to the United Stationers Inc. Management
Equity Plan, as adopted by the Board of Directors, are hereby approved
and ratified."
13
EXECUTIVE COMPENSATION
The table and notes below show the compensation paid to each person who has
served as the Chief Executive Officer of the Company during 1995 and the four
other highest-paid officers of the Company who were serving as executive
officers on December 31, 1995.
SUMMARY COMPENSATION TABLE
Long-term Compensation
Annual Compensation Awards
Other Restricted
Year annual stock LTIP All other
Name and principal ended Salary (1) Bonus compensation Award(s) Options payouts compensation
Position 12/31 ($) ($) ($) ($) (#) ($) (7) ($) (8)
Thomas W. Sturgess 1995(3)
CHAIRMAN OF THE BOARD, 1994(11)
PRESIDENT AND CEO 1993(11)
Joel D. Spungin 1995(4) 91,667 234,438 (2 ) 220,175(9) -- 280,112 7,620,214
FORMER CHAIRMAN 1994 433,583 -- (2 ) -- 20,000 41,198 11,388
AND CEO 1993 426,250 201,344 (2 ) -- 25,000 37,683 13,483
Jeffrey K. Hewson 1995(5) 234,134 929,587(6) (2 ) -- 14,648 10) 160,783 1,975,601
FORMER PRESIDENT 1994 315,333 -- (2 ) -- 19,500 23,169 5,126
AND CEO 1993 292,500 119,074 (2 ) -- 20,000 14,283 7,077
Daniel H. Bushell 1995 213,076 249,569 (2 ) -- 120,000 -- 2,579
EXEC. VICE PRESIDENT 1994(11)
AND CFO 1993(11)
Michael D. Rowsey 1995 243,502 264,197 (2 ) -- 120,000 -- 2,945
EXEC. VICE PRESIDENT 1994(11)
1993(11)
Steven R. Schwarz 1995 205,608 205,536 (2 ) -- 120,000 54,525 164,921
EXEC. VICE PRESIDENT 1994 185,000 15,818 (2 ) -- 14,000 9,677 945
1993 172,890 57,279 (2 ) -- 12,000 8,226 2,859
Ergin Uskup 1995 173,542 127,880 (2 ) -- 60,000 24,500 124,648
VICE PRESIDENT, MIS 1994 153,574 27,500 (2 ) -- 16,000 -- 4,194
and CIO 1993(11)
- --------
(1) Includes compensation amounts earned during the fiscal year but deferred
pursuant to Section 401(k) of the Internal Revenue Code under the Company's
Profit Sharing Plan.
(2) No amounts of "Other annual compensation" were paid to any named executive
officer except for perquisites and other personal benefits which for each
executive officer did not exceed the lesser of $50,000 or 10% of such
individual's salary plus bonus.
(3) Mr. Sturgess became Chairman of the Board on March 30, 1995, and President
and CEO on May 31, 1995. For calendar year 1995, Mr. Sturgess received
compensation from Wingate Partners, but no compensation from the Company.
(4) Mr. Spungin resigned his position as Chairman and CEO effective March 20,
1995; he continues as a director.
14
(5) Mr. Hewson resigned his position as President and CEO effective May 31,
1995; he continues as a director.
(6) Includes a special stay bonus of $875,000 paid to Mr. Hewson pursuant to his
employment contract.
(7) Includes payments from the Company's Executive Bonus Plan of awards earned
in prior years payable in three annual installments. Under the Plan, awards
were partly (30%) in cash and partly (70%) in Share Units which were
converted to and paid out in common stock. Cash payments included earnings
on the cash amounts based on the greater of the Company's return on its
equity or the treasury bill rate. Stock payments were valued at the stock
price as of the date of the award of Share Units. The 1995 distribution was
a final distribution as the Plan was terminated just prior to the Merger.
Spungin Hewson Bushell Rowsey Schwarz Uskup
------- ------- -------- ------ ------- -------
1995:
Cash $280,112 $160,783 -- -- $54,525 $24,500
1994:
Cash $15,789 $ 8,885 -- -- $ 3,730 --
Stock $25,409 $14,284 -- -- $ 5,947 --
1993:
Cash $13,224 $ 4,478 -- -- $ 2,687 --
Stock $24,460 $ 9,805 -- -- $ 5,539 --
(8) Includes:
(a) amounts accrued under employment contracts and payable under the USI
Employee Benefits Trust for Mr. Spungin ($6,640,000) and Mr. Hewson
($1,248,000);
(b) Company contributions to the Company's Profit Sharing PluSavings Plan
for Mr. Spungin ($2,412); Mr. Hewson ($3,814); Mr. Bushell ($2,579); Mr.
Rowsey ($2,945); Mr. Schwarz ($3,814) and Mr. Uskup ($5,407);
(c) premiums paid during 1995 for Split Dollar Life, Group Life and
Accidental Death insurance policies for Mr. Spungin ($8,738); Mr. Hewson
($4,484); Mr. Schwarz ($1,443) and Mr. Uskup ($5,320);
(d) cash-outs of pre-merger in-the-money stock options for Mr. Spungin
($265,779); Mr. Hewson ($373,600); Mr. Schwarz ($156,124) and Mr. Uskup
($69,000);
(e) payouts of accrued benefits under the Company's Supplemental Benefits
Plan, which was terminated just prior to the Merger, to Mr. Spungin
($703,285); Mr. Hewson ($51,569) and Mr. Schwarz ($3,540);
(f) payouts of special employee retirement benefits under employment
contracts to Mr. Hewson ($294,134) and Mr. Uskup ($44,921).
(9) Effective November 29, 1995, Mr. Spungin was granted 9,678 shares of
restricted Common Stock in lieu of director's fees for three years.
(10) Effective November 29, 1995, Mr. Hewson was granted options to purchase
14,648 shares of Common Stock at an exercise price of $5.12 per share,
vesting one-third immediately and one-third on each anniversary of the
grant. The grant was in lieu of director's fees for a three-year period.
(11) Not employed by the Company during the indicated year.
15
LONG-TERM INCENTIVE PLAN
Prior to the Merger, the Company had an Executive Bonus Plan ("EBP Plan") which
is described on page 18 of this Proxy Statement. The Table below represents the
awards earned in Fiscal 1995 under the EBP Plan. The awards under the Plan
generally were to be paid in three annual installments, and were to be paid
partly in cash and partly in Share Units. For Fiscal 1995, because of the
Merger, the bonuses earned for 1995 under the EBP Plan were accrued as cash
balances, and the accrued balances in the Plan, including those earned for 1995,
were distributed immediately prior to the Merger, and the Plan was terminated.
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL YEAR 1995
3/30/95 TOTAL
NAME* AWARD DISTRIBUTION
- --------------------------------------------------------------------------------------- ----------- ------------
Joel D. Spungin $ 192,500 $ 280,112
Jeffrey K. Hewson $ 112,000 $ 160,783
Steven R. Schwarz $ 35,613 $ 54,525
Ergin Uskup $ 24,500 $ 24,500
* The other executive officers named in the Summary Compensation Table, Thomas
W. Sturgess, Daniel H. Bushell, and Michael D. Rowsey, were not executive
officers of the Company prior to the Merger and did not participate in the EBP
Plan.
16
OPTION GRANTS DURING LAST FISCAL YEAR
Options were granted during the year ended December 31, 1995 to certain of the
executives named in the Summary Compensation Table, on October 2, 1995, subject
to stockholder approval of the Plan amendments referred to in this Proxy
Statement. The following table contains information concerning such grants.
OPTION GRANTS DURING LAST YEAR
Potential Realizable
Individual Grants Value at Assumed Annual
------------------------------------------------------------- Rates of Stock Price
Options Percent of Total Appreciation for Option
Granted Options Granted to Exercise or Term (5)
(Number of Employees in fiscal Base Price Expiration ------------------------
Name Shares)(1) year (3) (per Share) Date 5% 10%
- -------------------------- ----------- ------------------- ------------ ------------- ----------- -----------
Michael D. Rowsey 15,000 0.8% $ 5.12 10/1/02(4) $ 223,968 $ 339,738
105,000 6.0% 13.125(2) 10/1/02(4) 727,249 1,537,643
Daniel H. Bushell 15,000 0.8% 5.12 10/1/02(4) 223,968 339,738
105,000 6.0% 13.125(2) 10/1/02(4) 727,249 1,537,643
Steven R. Schwarz 15,000 0.8% 5.12 10/1/02(4) 223,968 339,738
105,000 6.0% 13.125(2) 10/1/02(4) 727,249 1,537,643
Ergin Uskup 7,500 0.4% 5.12 10/1/02(4) 111,984 169,869
52,500 3.0% 13.125(2) 10/1/02(4) 363,625 768,821
- --------
(1) Options were granted under the MEP Plan subject to stockholder approval of
the Plan amendments. All options are exercisable after the occurrence of an
Event.
(2) Exercise price increases $0.625 per quarter on the first day of each quarter
commencing 4/1/96. Exercise price shown reflects 4/1/96 increase.
(3) Based on 1,840,000 options granted to employees during the year.
(4) The expiration of the options is the earlier of three years after the Event
or 10/1/02.
(5) The amounts under the columns labeled "5%" and "10%" are included pursuant
to certain rules of the Commission, and are not intended to forecast future
appreciation, if any, in the price of the Shares. The amounts shown do not
include the calculation of the quarterly increases in the $12.50 options.
The amounts are calculated assuming the options will expire on 10/1/02
rather than earlier. The actual value of the options will vary in accordance
with the market price of the Shares.
17
The following table contains information concerning option exercises during the
Company's year ended December 31, 1995 by each of the named executive officers
and the fiscal year end values:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised
in-the-money
Number of Unexercised Options at Fiscal Year
Shares Options at Fiscal Year End End (1)
Acquired on Value --------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------- --------------- -------- ----------- ------------- ----------- -------------
Michael D. Rowsey 0 0 0 164,506 0 3,1$11,208
Daniel H. Bushell 0 0 0 157,856 0 2,936,313
Steven R. Schwarz 0 156$,124(2) 0 120,000 0 1,940,700
Ergin Uskup 0 69,$000(2) 0 60,000 0 970,350
- --------
(1) The values given are based on the closing price of the Shares on December
29, 1995, which was $27.75, less the exercise price, before payment of
applicable income taxes.
(2) Reflects cash-out of prior in-the-money options described in the footnote on
page 8 of this Proxy Statement.
BONUS PLANS. Prior to the Merger, a Management Incentive Plan ("MIP") provided
annual incentive compensation opportunities to officers and other upper
management level participants based on the Company's performance, region or
division performance, and personal performance. Under the MIP, annual targets
were set by the Board of Directors and bonuses were awarded under a formula
based on percentage attainment of the targets.
The Company's Executive Bonus Plan ("EBP") applied to the Company's officers
prior to the Merger. While the EBP provided annual incentive opportunity, it
also focused on long-term results. Annual targets were established by the
Compensation Committee measured by return on equity ("ROE"). Bonus awards were
made annually, if earned, based on the percentage achievement of targets set,
with 50% of the awards deferred and paid over a three-year period. Of the
deferred amounts, approximately 30% was in cash to be paid in three annual
installments. The deferred cash portion was to increase based on the subsequent
ROE performance. The other 70% of the deferred award was converted to "Share
Units" having a value equal to the market price of one share of Common Stock.
Thus the value of the Share Units rose and fell in response to market
fluctuations. The Share Units were converted into Shares upon distribution in
three annual increments. Immediately prior to the Merger, all accrued Plan's
balances in the EBP were distributed to the participants.
Based on amendments to the MIP and the EBP completed shortly before the
execution of the Merger Agreement, amounts accrued under the EBP in respect of
Messrs. Spungin, Hewson, Schwarz and Uskup and other participants (collectively,
the "Protected Employees") were paid out based on the Company's performance
through the date of the consummation of the Merger for the portion of the plan
year through the last day of the month in which the Merger occurred. Amounts
accrued under the MIP in respect of the Protected Employees for the portion of
the plan year
18
through the date of the Merger, and for the portion of the plan year from the
date of the Merger through August 31, 1995 were paid in October 1995, and for
the named executive officers are shown in the Summary Compensation Table on page
14 of this Proxy Statement.
ONE-TIME MERGER INTEGRATION BONUS PLAN. A special incentive plan was adopted to
reward key management personnel for accomplishing specific integration
objectives of the Merger. The objectives include achieving, by September 30,
1996, (1) specified annualized earnings before interest, taxes, depreciation and
amortization ("EBITDA") and (2) specified debt reduction goals. If the goals are
met, a pool of $5 million will be shared among the participants. There are 175
eligible participants. If the goals are achieved the following executives named
in the Summary Compensation Table on page 14 will each be eligible to receive
$100,000: Messrs. Bushell, Rowsey, Schwarz and Uskup.
MANAGEMENT INCENTIVE PLAN FOR 1995. The Management Incentive Plan for the
period from April 1, 1995, immediately following the Merger, through December
31, 1995, provided incentive compensation opportunities for approximately 180
eligible participants based on the Company's performance. Bonuses are determined
as a percentage of annual base pay for each participant based on achievement of
a specified EBITDA goal for the balance of the calendar year. Messrs. Bushell,
Rowsey, Schwarz and Uskup, among others, are participants in this plan.
MANAGEMENT INCENTIVE PLAN FOR 1996. The Management Incentive Plan for 1996
provides incentive compensation opportunities based on attainment of preapproved
Company, region and division goals, all measured by EBITDA performance.
Participants, key management employees, may be given incentive awards stated as
a percentage of base salary and the attainment of the predetermined goals.
Participants include, among others, Messrs. Sturgess, Bushell, Rowsey, Schwarz
and Uskup.
EMPLOYMENT AGREEMENTS
Prior to the Merger, the Company, as settlor, entered into an irrevocable trust
agreement (the "Benefits Trust Agreement") with American National Bank and Trust
Company of Chicago, as trustee (the "Benefits Trustee"). The Benefits Trust
Agreement secures the payment of all amounts owed to certain employees under
their amended employment contracts, certain obligations of the Company to
provide post-employment medical benefits, certain severance benefits to former
employees, and related costs. Under the terms of the Benefits Trust Agreement
and the Merger Agreement, the Company has caused an irrevocable letter of credit
in the initial amount of $24.0 million to be furnished to the Benefits Trustee
by Chase Manhattan Bank, N.A. Each compensation or benefit payment by the
Benefits Trustee reduces the amount of the letter of credit. To the extent that
the Company makes payments of compensation and benefits covered by the Benefits
Trust Agreement or otherwise satisfies its obligation to these current and
former employees (or, in some cases, their eligible dependents or surviving
beneficiaries) and obtains a waiver from such persons, the letter of credit will
be reduced as provided in such waiver.
SPUNGIN EMPLOYMENT CONTRACT. Prior to the execution and delivery of the Merger
Agreement, Joel D. Spungin had an employment and consulting agreement under
which Mr. Spungin was to be employed as Chief Executive Officer at a salary of
not less than $425,000, plus participation in all bonus, stock options and other
benefit plans generally available to executive officers of the Company.
19
The Company amended the employment agreement with Mr. Spungin, effective as of
the Merger. On March 20, 1995, Mr. Spungin resigned his offices with the Company
and was relieved of all duties thereto, except that he remained an employee of
the Company until August 31, 1995, and he will, subject to nomination and
election, serve as a member of the Board of Directors of the Company. On
September 1, 1995, Mr. Spungin became an executive consultant to the Company for
a period of 11 years in accordance with the terms of his amended employment
agreement. The Company paid the sum of $2,276,209 to Mr. Spungin on September 1,
1995, and for the period from September 1, 1995 through August 31, 1996, the
Company will pay Mr. Spungin in total $530,000 in equal or nearly equal monthly
installments. Beginning on September 1, 1996 and continuing until the end of the
consulting term, the Company will make a monthly payment of approximately
$34,269.63 to Mr. Spungin, amounting to a total of $6,918,565.
Mr. Spungin and his spouse will receive coverage under the Company's present
medical plan for their lives, subject to a $1,000,000 lifetime maximum payment
limit in the aggregate for each of them. If Mr. Spungin or his spouse lose their
medical coverage on account of a termination of the Company's medical plan or
the Company's failure to provide such medical coverage, (i) the Company will pay
premiums not to exceed, in the aggregate, $242,701 (such amount shall not be
applied against the $1,000,000 per person lifetime maximum) for individual
insurance coverage until Mr. Spungin and his spouse become eligible for
Medicare, (ii) the Company will pay premiums for Medicare supplemental policies
for the remainder of their lives (such amount shall not be applied against the
$1,000,000 per person lifetime maximum) and (iii) at any time Mr. Spungin and
his spouse are not reimbursed for medical expenses under such individual
insurance policies, the Company will pay or reimburse such medical expenses
incurred by Mr. Spungin and his spouse up to a $1,000,000 lifetime maximum
payment for each of them. If the Company fails to obtain an individual insurance
policy within 30 days after termination of the Company's medical plan, it shall
then pay Mr. Spungin the sum of $242,701 in addition to expenses which may be
paid under his $1,000,000 million lifetime maximum benefit referred to in clause
(iii) above.
A failure by Mr. Spungin to render services to the Company or his disability
shall not constitute a breach causing a forfeiture of his entitlement to any
amount or benefit under his employment agreement. Upon Mr. Spungin's death, his
spouse shall receive the remainder of the salary and consulting payments due.
The agreement also includes provisions restricting the disclosure of proprietary
or confidential information, and restricts Mr. Spungin from being employed by or
consulting with any competing firm.
If the Company fails to make any payment to which Mr. Spungin is entitled when
due, all the unpaid consulting payments and fringe benefits shall become payable
immediately. Substantially all of the Company's obligations are secured by the
Benefits Trust Agreement.
HEWSON EMPLOYMENT CONTRACT. Mr. Hewson resigned as President and Chief
Executive Officer of the Company on May 31, 1995. Effective as of the Merger,
the Company amended the employment agreement with Mr. Hewson to, among other
matters, reduce his term of employment to not more than one year, eliminate his
consulting term and provide for additional bonuses. In recognition of Mr.
Hewson's efforts prior to the consummation of the Merger and his expected
responsibilities following the Merger, the Company agreed to make, and has made
a bonus payment of $875,000 to Mr. Hewson as of September 26, 1995. On the
expiration of Mr. Hewson's term of employment, he became entitled to receive an
aggregate amount equal to $1,575,000, with an initial payment of $650,370 and
the remainder payable monthly in equal installments of $26,418. The payments are
secured by the Benefits Trust Agreement.
20
Mr. Hewson and his spouse (and their eligible dependent children) became
entitled, upon the termination of Mr. Hewson's employment, to post-employment
medical coverage under the Company's medical plan until he reaches age 65 and
his spouse will also continue to be covered until she reaches age 65, subject to
a $1,000,000 maximum benefit payment limit, in the aggregate. The Company is not
permitted to terminate such coverage without also terminating the Company's
medical plan. If such plan is terminated, Mr. Hewson will be entitled to receive
until age 65 (but for not more than 18 months) (i) monthly payments equal to the
conversion premium under such plan and (ii) reimbursements for medical expenses
not covered by any medical insurance policy up to an aggregate of $300,000 for
Mr. Hewson and his eligible dependents, subject to an aggregate limit of
$700,000 for all officers referred to as "contract officers" under the medical
plan.
STURGESS EMPLOYMENT AGREEMENT. Effective January 1, 1996, an employment
agreement was entered into between the Company and Thomas W. Sturgess, to serve
as Chairman of the Board, President and Chief Executive Officer. The agreement
provides for a base salary of $495,000, plus participation in all bonus, stock
option and other benefit plans generally available to executive officers of the
Company. The agreement is for a three-year term, until December 31, 1998, and is
renewable for one-year terms thereafter unless terminated by either party. Upon
termination of the agreement, unless for cause or voluntarily by Sturgess,
Sturgess shall be entitled to receive an amount equal to two times his base
salary plus bonuses. The agreement also provides for the grant of options to
purchase 360,000 shares of Common Stock which options were granted effective as
of January 1, 1996, and are described more fully on page 9 of this Proxy
Statement.
OTHER EXECUTIVE EMPLOYMENT CONTRACTS. Prior to the Merger, employment and
consulting agreements were also entered into with Steven R. Schwarz, Robert H.
Cornell, Otis H. Halleen, Jerold A. Hecktman and Ted S. Rzeszuto. The agreements
generally provided for annual compensation of not less than the officers salary
at the time the employment agreement was made, plus participation in all bonus,
stock option and other benefit plans generally available to executive officers
of the Company. The employment agreements with Messrs. Schwarz, Cornell,
Halleen, Hecktman and Rzeszuto were amended or restated, effective as of the
Merger to, among other matters, reduce the term for which the Company is
obligated to employ these officers and to encourage these officers not to
voluntarily resign during the transitional period following the Merger.
Each amendment provided that the term of employment shall be limited to one year
following the Merger unless, within 30 days after the Merger, the Company
notifies the officer of an earlier date of termination. Upon completion of the
term of employment, each such officer shall be entitled to a bonus (the "Stay
Bonus") equal to two times his highest annual compensation (including salary,
retirement benefit accruals and incentive compensation) paid or accrued during
the preceding five years, except the officer shall not be entitled to such Stay
Bonus if he voluntarily resigns without good reason (as defined in the
employment agreement, as amended) or is terminated by the Company for breach of
a fiduciary duty to the Company.
The Stay Bonuses are secured as an obligation of the trust under the Benefits
Trust Agreement. Effective August 30, 1995, the amounts of the Stay Bonuses for
Messrs. Schwarz and Rzeszuto were reduced to amounts which would not exceed the
"golden parachute" amounts under the Code. Jeffrey K. Hewson, Steven R. Schwarz,
Robert H. Cornell, Otis H. Halleen, Ted S. Rzeszuto, Jerold A. Hecktman and
Ergin Uskup were entitled to receive stay bonuses of $1,575,000, $624,734,
$602,985, $449,210, $501,192, $492,050 and $175,000, respectively. The terms of
21
employment of Messrs. Hewson, Halleen and Hecktman were terminated; therefore,
they began receiving their Stay Bonuses from the trustee of the Benefits Trust
Agreement. Mr. Halleen has since been reemployed, effective November 1, 1995.
As to certain current and former officers, amendments preclude the Company from
eliminating their eligibility for retiree medical coverage under the Company's
medical plan so long as the Company maintains such plan. In the event such
medical plan is terminated, the Company shall provide each officer with a
monthly amount equivalent to the current monthly premium under the Company's
group medical plan to convert to an individual medical policy for a period not
to exceed 18 months. This transition medical coverage also applies to James A.
Pribel, Treasurer, and to certain former employees currently entitled to retiree
medical coverage. In addition, for not more than 18 months, the covered officers
and their eligible dependents would be entitled to reimbursement of medical
expenses which are not covered by any medical insurance, up to an aggregate of
$300,000 for each such officer and his dependents, subject to an aggregate limit
of $700,000 for all of the covered officers and their dependents.
Effective October 1, 1995, new employment agreements were entered into with each
of Messrs. Rowsey, Bushell, Schwarz, Cornell, and Rzeszuto. Effective November
1, 1995 a new employment agreement was entered into with Mr. Halleen. Each of
those agreements with Rowsey, Bushell and Schwarz provides for a two-year term
of employment, until September 30, 1997; the agreements with Cornell, Rzeszuto
and Halleen provide for a one-year term of employment. Each agreement is
renewable for additional one-year terms unless terminated by either party. The
agreements provide for a base salary of not less than the amounts specified in
each contract, plus participation in all bonus, stock option and other benefit
plans generally available to executive officers of the Company. The officer may
terminate employment for good reason (reduction of salary, exclusion from
benefit plans, material reduction in title or duties, relocation outside the
Chicago metropolitan area, or breach by the Company of any provisions of the
agreement. In the event of termination for good reason, Bushell, Rowsey and
Schwarz shall be entitled to two times their respective base salary plus
bonuses; and Cornell, Rzeszuto and Halleen shall be entitled to an amount equal
to their respective base salary plus bonuses. If the agreement is not renewed by
the Company upon its expiration, the officer shall be entitled to a severance
amount equal to his base salary plus bonuses. Because Schwarz, Cornell and
Rzeszuto remained employed through March 30, 1996 they became entitled to
receive their Stay Bonuses as provided in their prior agreements. Each agreement
also contains provisions restricting the disclosure of proprietary materials and
confidential information, and restricts the officer from being employed by or
consulting with any competing firm during the employment term and for two years
thereafter.
Ergin Uskup has an employment agreement dated as of February 13, 1995 which was
intended, among other things, to encourage Mr. Uskup not to resign for the
one-year period following the Merger. Upon completion of the one-year period
following the Merger, Mr. Uskup became entitled to payment of a Stay Bonus in
the amount of $175,000, payable in 12 monthly installments. Upon completion of
his employment, Mr. Uskup shall be entitled to a severance payment of $175,000,
payable in 12 monthly installments.
Shortly before the execution of the Merger Agreement, the Company adopted a
severance plan for officers of the Company or its subsidiary who do not have
employment contracts. The severance plan provides a severance payment of one
year's base salary if an officer is terminated without cause.
22
PROFIT SHARING PLANS
The Company has had a Profit Sharing PluSavings Plan (the "Profit Sharing Plan")
in which all salaried employees and certain hourly paid employees of the Company
and its subsidiaries were eligible to participate following completion of six
consecutive months of employment. The Profit Sharing Plan provide for
contributions by the Company in amounts determined by the Board of Directors of
the Company. The contribution was allocated based on the ratio of each
participants' earnings to the earnings of all participants for the year. The
Company contribution is immediately fully vested in the participants' account.
The plan also permits employees to have contributions made as 401(k) salary
deferrals on their behalf and to make after-tax voluntary contributions.
Prior to the Merger, the Directors authorized a contribution to the Profit
Sharing Plan in the amount of 1% of participants' earnings; the contribution
totaled $500,000.
The Profit Sharing Plan also provided that the Company may match employee
contributions made as 401(k) salary deferrals up to specified limits. For the
year ended December 31, 1995, the Company paid $353,537 in matching
contributions.
Associated Stationers, Inc. had a Profit Sharing and Savings Plan (the "ASI
Plan") which was assumed by the Company upon the merger. The ASI Plan permits
eligible employees to have contributions made as 401(k) salary deferrals on
their behalf, and provides for matching contributions by the Company. For the
year ended December 31, 1995, the Company paid $259,387 in matching
contributions under the ASI Plan.
Effective March 1, 1996, the two profit sharing plans were merged. The merged
plan, called the UNITED STATIONERS INC. 401(K) SAVINGS PLAN (The "USI Plan")
permits employees to have contributions made as 401(k) salary deferrals on their
behalf, or as voluntary after-tax contributions, and provides for Company
contributions, or contributions matching employee salary deferral contributions,
at the discretion of the Board of Directors. The Company has no present
intention to make Company contributions other than matching contributions. The
Company is currently contributing $0.25 for each $1.00 of employee salary
deferral contributions up to 6% of eligible wages.
PENSION PLANS
The Company and its subsidiary maintain noncontributory pension plans covering
substantially all employees. Employees are eligible to participate following the
conclusion of twelve consecutive months of employment and the attainment of age
21. Prior to the Merger, Associated did not have a pension plan. Former
Associated employees will enter the Pension Plan on July 1, 1996. The Pension
Plan provides for annual retirement benefits at age 65 equal to 1% of an
employee's career-average annual compensation (as reported to the Internal
Revenue Service) multiplied by the number of years of credited service up to a
maximum of 40 years; however, an employee's annual compensation for each year of
service prior to September 1989 is deemed to be the compensation earned by such
employee during the twelve month period ended on August 31, 1989. Employees'
pension rights fully vest after five years of service. These benefits are in
addition to normal Social Security retirement benefits. Alternative benefit
options of early retirement, joint and survivor annuity, and disability are also
available. All such options are of actuarially equivalent value to the basic
pension. The normal retirement age under the Pension Plan is 65. The Pension
Plan contribution accrued for the fiscal year ended August 31, 1995 was
$1,741,384.
23
In connection with the Merger, the Pension Plan was amended to provide that the
actuarial factors employed by the plan may not be adjusted in a manner that
would reduce lump sum benefits payable under the Pension Plan. The Company's
operating subsidiary also maintains a number of retirement benefit plans for its
employees who are covered under collective bargaining agreements.
The following table sets forth the estimated annual benefits upon retirement at
age 65 under the pension plan to the executive officers individually named in
the Summary Compensation Table on page 14 (calculated, except for Messrs.
Spungin and Hewson, on the basis of estimated years of service at retirement age
and current levels of compensation, assuming 5.5% compounded annual increases;
and for Messrs. Spungin and Hewson, the accrued benefits as of their respective
dates of termination of employment):
ESTIMATED ANNUAL PENSION
NAME OF PARTICIPANT AT RETIREMENT
- ------------------------------------------------------------------ --------------------------
Joel D. Spungin $ 109,785
Jeffrey K. Hewson $ 11,804
Thomas W. Sturgess* $ 45,886
Daniel H. Bushell* $ 52,483
Michael D. Rowsey* $ 55,955
Steven R. Schwarz $ 81,432
Ergin Uskup $ 14,389
* Mr. Sturgess will become eligible under the Plan effective January 1, 1997;
Messrs. Bushell and Rowsey will become eligible effective July 1, 1996.
As of December 31, 1995, the credited years of service under the Pension Plan
for the individuals named were as follows: Mr. Spungin, 38 years; Mr. Hewson, 6
years; Mr. Sturgess, 0 years; Mr. Bushell, 0 years; Mr. Rowsey, 0 years; Mr.
Schwarz, 18 years; and Mr. Uskup, 2 years.
The Company's contributions to the Pension Plan are not allocated to the
accounts of the individual participants.
SUPPLEMENTAL BENEFITS PLAN
Prior to the Merger, the Company had a nonqualified unfunded program
("Supplemental Benefits Plan") to provide for the payment to individuals of
benefits which would otherwise be payable under the Company's Pension Plan and
Profit Sharing PluSavings Plan but which may not be paid under such plans due to
limits imposed by Sections 401(a)(17) and 415 of the Internal Revenue Code.
Immediately prior to the Merger all sums accrued under the Supplemental Benefits
Plan were distributed to the participants, including the following executive
officers named in the Summary Compensation Table: Mr. Spungin, $703,285; Mr.
Hewson, $51,569; and Mr. Schwarz, $3,540.
AMENDMENTS TO MEDICAL PLAN
The Company amended its medical plan shortly before the Merger. The medical plan
was amended to generally provide that: (i) the plan cannot be changed or
terminated with respect to certain designated officers or early retirees; and
(ii) certain designated officers (upon termination of employment) and early
retirees and their spouses can continue to participate in the medical plan until
age 65 under the same general terms and conditions applicable to active
employees, subject to an aggregate maximum benefit limit of $250,000 for each
early retiree and $1,000,000 for certain designated officers. The medical plan
was also amended to provide that, in the event of its termination, the Company
will provide certain funds to designated individuals for a specified period of
time for the purpose of (i) obtaining health insurance; and (ii) reimbursing
such individuals for medical expenses in the event of their uninsurability or
catastrophic illness.
24
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is made up entirely of
outside Directors. The Committee is responsible for recommending to the Board of
Directors annual competitive base compensation structures, and appropriate
performance criteria for bonus payouts for officers and senior management, and
grants under the Company's Management Equity Plan to align long-term executive
compensation with the interests of stockholders.
PHILOSOPHY
The Compensation Committee is guided by the following principles:
- Compensation programs are designed to provide average base
salaries, and better than average annual incentives, and other
long-term rewards when the Company's maximum objectives are met
or exceeded.
- Compensation programs are designed simply, whenever possible.
Participants are fully informed about what the possible rewards
are, and what they must do to earn them.
COMPONENTS OF OVERALL COMPENSATION
The Compensation Committee considers several factors when determining
compensation of executives, other officers, and senior managers.
- Company Performance -- The Committee sets, in conjunction with
the Board of Directors, annual earnings, return to
shareholders' equity targets, which are used in determining the
level of incentive awards.
- Competitive Practice -- The Committee periodically receives
reports from Hewitt Associates, a nationally recognized
compensation practice consulting firm, which summarize and
evaluate United Stationers' compensation practices against a
group of approximately forty comparative companies extracted
from the Hewitt Total Compensation Data Base and from recent
proxy statements. Comparative companies are for the most part,
from the office products and wholesale trade industries. The
comparative companies include: (1) companies included in the
Value Line Peer Group Index shown in the Comparative Five-Year
Total Returns graph shown in the Company's Proxy Statement; (2)
selected Chicago area and wholesale non-durable goods companies
and (3) companies with market capitalizations comparable to the
Company's. The companies in the sample are representative of
companies with which United Stationers generally competes for
management and executive talent. The comparisons review base
salary, annual bonus, and long-term incentive awards for the
CEO and other officer positions.
In particular, the Company annually requests Hewitt Associates to determine the
elements and mix of compensation within the total compensation package provided
to the Chairman and CEO. Hewitt's most recent survey was completed and delivered
to the Company during November 1995 containing supporting data and
recommendations for the Chairman's compensation package which became effective
during January 1996.
The data compiled by Hewitt was produced from its databases of: (a) comparisons
to Chief Executive Officers not also Chairman of the Board in companies with
sales between $850 million
25
and $3.4 billion; (b) comparisons to Chief Executive Officers who are also
Chairman of the Board in companies with sales between $930 million and $3.5
billion; and (c) Executive Compensation Services Total Management Report, with
no distinction between retailers and wholesalers nor whether or not the CEO was
also Chairman, in companies with average sales of $2.5 billion; and (d) Hewitt's
review of proxy statements of approximately 24 wholesale companies, making no
distinction as to whether the CEO was also Chairman, with sales between $1
billion and $3.2 billion.
The compensation levels were determined by Hewitt using regression analysis.
Data (other than proxy data) was adjusted 3.2% to January 1, 1996 from April 1,
1995 (the date the data was collected) to reflect an annualized salary trend of
4.2%.
Based on the above analysis and Hewitt recommendations, the Compensation
Committee recommended a base salary of $495,000 for Mr. Sturgess in his capacity
as Chairman, President and CEO.
Similarly, comparisons were made with the database companies to determine an
appropriate annual incentive bonus opportunity for Mr. Sturgess. Based on those
comparisons, the CEO's potential incentive bonus was established at 100% of his
base pay compensation when specific pre-determined Compensation Committee
approved goals are met. At this level, based on the data, Mr. Sturgess' total
direct compensation compares at approximately 86% of current competitive
practice. Mr. Sturgess' maximum incentive bonus opportunity based on maximum
achieved performance criteria is 150% of base compensation.
The Compensation Committee also granted nonqualified stock options for a total
of 360,000 shares of Common Stock, at exercise prices of $12.50 per share and
$5.12 per share, similar to the exercise prices established for the other
executive officers. The Compensation Committee views the grant of such options
to Mr. Sturgess as a "mega-grant" covering a several year period rather than
annual grants, and made the exercise of such options dependent (1) upon the
occurrence of an Event (as previously defined for the other option grants), (2)
the profitability of the Company between the date of approval of the grant and
the Annual Meeting at which the amendments to the option plan will be submitted
for approval, and (3) the passage of certain time periods. According to Hewitt's
data comparative annual option grants for CEO's generally average 2.75 times
annual base pay. Mega-grants typically range up to eight times base compensation
at award. Mr. Sturgess' aggregate award is valued at slightly over seven times
his base compensation.
TARGETED COMPENSATION
Total compensation for officers and management individuals is targeted above the
median compensation of comparable companies when the Company's EBITDA objectives
are attained.
SALARY
A salary range for each position is developed based on average base pay for
similar positions at Hewitt's comparative companies. The salaries of executives,
officers, and senior managers are reviewed annually against these ranges with
adjustments in base compensation normally becoming effective on January 1.
The Compensation Committee generally considers level of responsibility,
performance, internal equity, and competitive base compensation practices when
determining salary adjustments.
26
BONUS PLANS
A Management Incentive Plan provides annual incentive compensation opportunities
to officers and other upper management level participants based on the Company
achieving its EBITDA goals established by the Compensation Committee and
approved by the Board of Directors. Under this Plan, annual targets are set by
the Compensation Committee and approved by the Board of Directors and bonuses
are awarded under a formula based on percentage attainment of the targets. The
incentive awards for the CEO, other officers and corporate staff are based
solely on the earnings performance of the Company. If the Company fails to
produce minimum targeted results, no incentives are paid.
A special merger integration bonus plan was adopted to reward top management if
the integration of the two companies following the Merger could be accomplished
such that certain EBITDA rates could be achieved by September 30, 1996. If such
rates are achieved, bonuses totaling $5.0 million may be awarded under the
special plan. Mr. Sturgess is not a participant in the special bonus plan.
More than half of Mr. Sturgess' total potential compensation is dependent upon
Company performance.
LONG-TERM INCENTIVE COMPENSATION
The Committee believes that grants of stock options and other forms of long-term
compensation linked directly to Company performance provide significant
incentive opportunity to senior executives and key employees who are responsible
for the management, growth and financial success of the Company. Options granted
to management under the Company's MEP Plan, subject to stockholder approval,
were priced partly at a price comparable to the investment costs of the sponsor
investors; the majority of the options were priced at the approximate market
value of the Common Stock at the time of grant. Pursuant to the grants, the
economic value of the options to recipients depends upon the amount by which the
price of the Company's stock exceeds the grant price, at the time they become
exercisable, which will not be until the Company's non-public investors have
realized a full return of their investment (an "Event"). In this way, the
participants are motivated to manage the business in ways that over the long
term will benefit stockholders through increases in the stock prices.
As a general rule, the Compensation Committee considers the level of job
responsibility and the participant's potential impact on the Company's
performance in arriving at the number of shares to be granted under the MEP
Plan.
27
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the Company's tax deduction
to $1 million for compensation paid to the chief executive officer and other
named executive officers, unless certain requirements are met. The limit does
not apply to performance-based compensation paid under a plan which meets the
requirements of the Code. The Company's MEP Plan and other incentive
compensation plans are designed to meet Code requirements and the Committee
intends to continue to use performance-based compensation to the extent that
compliance with Code requirements does not conflict with the Company's
compensation strategy. All compensation paid to each of the named executive
officers in 1995 is believed to be deductible by the Company. The deductibility
of some of the 1996 compensation will depend, among other things, on the
composition of the Committee following the annual meeting, whether or not an
Event occurs making the MEP Plan options exercisable, when those options may in
fact be exercised, and the market value of the Common Stock at the time of such
exercises. Some compensation expense resulting from option exercises by certain
of the named executive officers may not be deductible by the Company.
Respectfully submitted:
COMPENSATION COMMITTEE
Gary G. Miller, Chairman
James T. Callier, Jr.
28
STOCK PERFORMANCE GRAPH
The following graph sets forth the annual percentage change in the cumulative
total shareholder return on the Company's Common Stock during the preceding five
years, compared with the cumulative total returns of the NASDAQ Stock market
(U.S. Companies) and a peer group comprised of companies included within the
Value Line's Office Equipment and Supplies Industry. The comparison assumes $100
was invested on December 31, 1990 in the Company's Common Stock and in each of
the foregoing indices and assumes reinvestment of dividends. Because of the
substantial changes in the capitalization of the Company at the time of the
Merger, the Company believes that the comparisons in the graph for the periods
preceding the Merger are not meaningful.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
UNITED STATIONERS (USTR), NASDAQ STOCK MARKET, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/95)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
UNITED STATIONERS NASDAQ 1 PEER GROUP 2
1990 100 100 100
1991 104.1 160.6 160.3
1992 205.2 186.9 188.9
1993 189.2 214.5 207.7
1994 170.3 209.7 205.5
1995 718.2 296.3 294.2
(1) Nasdaq Stock Market (U.S. Companies)
(2) Value Line Office Equipment and Supplies Industry
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has management advisory services agreements with three investor
groups. These investor groups provide certain advisory services to the Company.
Pursuant to an agreement, Wingate Partners has agreed to provide certain
oversight and monitoring services to the Company in exchange for an annual fee
of up to $725,000, payment (but not accrual) of which is subject to restrictions
under the Company's Credit Agreement. At the Merger, the Company paid aggregate
fees to Wingate Partners of $2.3 million for services rendered
29
in connection with the Merger. Wingate Partners earned an aggregate of $210,000,
$350,000 and $603,000 with respect to each of the fiscal years ended 1993, 1994
and 1995, respectively, for such oversight and monitoring services. Under the
agreement, the Company is obligated to reimburse Wingate Partners for its
out-of-pocket expenses and indemnify Wingate Partners and its affiliates from
loss in connection with these services. The agreement expires on January 31,
2002, provided that the agreement continues in effect on a year to year basis
thereafter unless terminated in writing by one of the parties at least 180 days
before the expiration of the primary term or any subsequent yearly term.
Pursuant to an agreement, Cumberland has agreed to provide certain oversight and
monitoring services to the Company in exchange for (i) an annual fee of up to
$137,500 payment (but not accrual) of which is subject to restrictions under the
Company's Credit Agreement related to certain Company performance criteria and
(ii) previously issued shares of Associated common stock that converted in the
Merger into 154,126 shares of common stock. Subject to certain exceptions, the
issuance of such shares is subject to rescission if the agreement is terminated
before January 31, 2002. At the Merger, the Company paid aggregate fees to
Cumberland of $100,000 for services rendered in connection with the Merger.
Pursuant to the agreement, Cumberland earned $45,000, $75,000 and $129,000 with
respect to the fiscal years ended 1993, 1994 and 1995, respectively, for such
oversight and monitoring services. The Company is also obligated to reimburse
Cumberland for its out-of-pocket expenses and indemnify Cumberland and its
affiliates from loss in connection with these services. The agreement expires on
January 31, 2002, provided that the agreement continues in effect on a year to
year basis thereafter unless terminated in writing by one of the parties at
least 180 days before the expiration of the primary term for any subsequent
yearly term.
Pursuant to an agreement, Good Capital has agreed to provide certain oversight
and monitoring services to the Company in exchange for (i) an annual fee of up
to $137,500, payment (but not accrual) of which is subject to restrictions under
the Company's Credit Agreement and (ii) previously issued shares of Associated
Common Stock that converted in the Merger into 154,126 shares of Common Stock.
Subject to certain exceptions, the issuance of such shares is subject to
rescission if the agreement is terminated before January 31, 2002. At the
Merger, the Company paid aggregate fees to Good Capital of $100,000 for services
rendered in connection with the Acquisition. Pursuant to the agreement, Good
Capital earned an aggregate $45,000, $75,000 and $129,000 in each of the fiscal
years ended 1993, 1994 and 1995, respectively, for such oversight and monitoring
services. The Company is also obligated to reimburse Good Capital for its
out-of-pocket expenses and indemnify Good Capital and its affiliates from loss
in connection with these services. The agreement expires on January 31, 2002,
provided that the agreement continues in effect thereafter on a year to year
basis unless terminated in writing by one of the parties at least 180 days
before the expiration of the primary term or any subsequent yearly term.
FILINGS UNDER SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires the Company's
directors and officers to file reports of holdings and transactions in the
Company's Common Stock with the Securities and Exchange Commission. Based on
Company records and other information, the Company believes that with respect to
the fiscal year ended December 31, 1995 all Section 16(a) filing requirements
applicable to its directors and officers were in compliance.
30
INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as
independent auditors for the Company for the fiscal year ending December 31,
1996. Ernst & Young LLP has served as the Company's independent auditors since
the Merger in March 1995.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and are expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders to be held in May 1997, must be received by the Company no later
than December 7, 1996 in order to be considered for inclusion in the Company's
Proxy Statement and form of proxy relating to such meeting.
OTHER MATTERS
Management does not know of any other matter to be presented for action by the
stockholders at the Annual Meeting. The persons named in the accompanying proxy
will vote such proxy as determined by a majority of the Board of Directors with
respect to any other matter not now known which is properly brought before the
meeting.
By Order of the Board of Directors
PASTEUP SIG
OTIS H. HALLEEN
SECRETARY
Des Plaines, Illinois
31
APPENDIX A
AMENDMENT NO. 1 TO
ASSOCIATED HOLDINGS, INC.
1992 MANAGEMENT STOCK OPTION PLAN
This Amendment No. 1 to Associated Holdings, Inc. 1992 Management Stock Option
Plan (the "AMENDMENT"), dated as of March 30, 1995, amends the Associated
Holdings, Inc. 1992 Management Stock Option Plan, dated as of January 31, 1992
(the "PLAN"). Unless otherwise defined herein, capitalized terms used herein
shall have the meanings given them in the Plan.
RECITALS
WHEREAS, Associated Holdings, Inc., a Delaware corporation ("ASSOCIATED"),
created and adopted the Plan effective as of January 31, 1992;
WHEREAS, on the date hereof, Associated has merged (the "MERGER") with and into
United Stationers Inc., a Delaware corporation and majority owned subsidiary of
Associated (the "COMPANY"), with the Company surviving; and
WHEREAS, the Company, as successor-in-interest to Associated, deems it desirable
to amend the Plan, effective as of the effective time of the Merger (the
"EFFECTIVE TIME"), pursuant to Section 10 thereof as set forth herein;
NOW, THEREFORE, the Plan is amended as of the Effective Time as follows:
1. AMENDMENT OF NAME OF PLAN.
(a) The name of the Plan shall be "United Stationers Stock Option Plan."
2. AMENDMENT OF SECTION 1.
(a) The first sentence of Section 1 of the Plan shall be amended to read in
its entirety as follows:
United Stationers Inc., a Delaware corporation (the "Company"), by
means of this Management Stock Option Plan (the "Plan), desires to afford
certain of its directors, key employees and the key employees of any
parent corporation or subsidiary corporation thereof now existing or
hereafter formed or acquired who are responsible for the continued growth
of the Company, an opportunity to acquire a proprietary interest in the
Company, and thus to create in such persons an increased interest in and
a greater concern for the welfare of the Company and any parent
corporation or subsidiary corporation thereof.
3. AMENDMENT OF SECTION 3.
(a) The first sentence of Section 3 of the Plan shall be amended to read in
its entirety as follows:
"Subject to the adjustments provided in Section 7, the maximum
aggregate number of shares of common stock of the Company which may be
granted for all purposes under the Plan shall be 202,962.14 shares."
4. ADOPTION OF THE PLAN. The Company hereby expressly adopts and assumes all
of the rights, liabilities and obligations of Associated under the Plan.
5. EFFECT ON THE PLAN. All references in the Plan to "this Plan" and the
"Plan" and all phrases of like import shall refer to the Plan as amended by
this Amendment. The terms "hereof," "herein," "hereby" and phrases of like
import, as used in the Plan, shall refer to the Plan as amended by this
Amendment. Except as amended hereby, the Plan shall remain in full force and
effect.
A-2
APPENDIX B
AMENDMENT NO. 2 TO
UNITED STATIONERS INC.
MANAGEMENT STOCK OPTION PLAN
This Amendment No. 2 to United Stationers Inc. Management Stock Option Plan (the
"Plan") is dated as of September 27, 1995. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings given them in the Plan.
WHEREAS, Associated Holdings, Inc. created and adopted the Plan as of January
31, 1992;
WHEREAS, upon the merger of Associated Holdings, Inc. with United Stationers
Inc. on March 30, 1995, the Plan was amended, by Amendment No. 1, changing the
name of the Plan, and increasing the maximum number of shares of common stock
for which options could be granted under the Plan;
WHEREAS, the Company desires to amend the Plan in certain further respects;
THEREFORE, the Plan is amended as follows:
1. AMENDMENT OF NAME OF PLAN. The name of the Plan shall be "United Stationers
Inc. Management Equity Plan".
2. AMENDMENT OF SECTION 1. The first sentence of Section 1 is amended by
deleting the words "Management Stock Option Plan" and substituting therefor
the words "Management Equity Plan".
3. AMENDMENT OF SECTION 3. The first sentence of Section 3 is amended by
deleting the number "202,962.14" and substituting therefor "1,302,962.14".
4. AMENDMENT OF SECTION 5. Section 5(b) is amended by inserting the words "at
least" before the words "six (6) months".
5. AMENDMENTS OF SECTION 6.
(a) Section 6(e) is amended (i) by inserting, before the words "within six
(6) months," the following: "within the period designated by the
Committee at the time of grant, which shall in no event be less than",
and (ii) by inserting at the end of said section the following: ", or
will become entitled to purchase during the period of exercise."
(b) Section 6(f) is amended in its entirety to read as follows:
"f. DISABILITY OR RETIREMENT. If the employment of any optionee is
terminated because of Disability (as defined in Section 9), or
because of retirement, such optionee shall have the right, within the
period designated by the Committee at the time of grant, which shall
in no event be less than within six (6) months after the date of
termination (or within one (1) year after the date of such
termination in the case of an Incentive Option) (but in no case after
the expiration of the Option), to exercise the Option with respect to
all or any part of the shares of stock which such optionee was
entitled to purchase immediately prior to the time of such
termination, or will become entitled to purchase during the period of
exercise."
6. EFFECT ON THE PLAN. Except as amended hereby, the Plan shall remain in full
force and effect. All references to the "Plan" shall refer to the Plan as
amended by this Amendment.
7. STOCKHOLDER APPROVAL. The amendments made hereby shall be subject to
approval by the stockholders of the Company no later than the next annual
meeting of stockholders.
APPENDIX C
AMENDMENT NO. 3 TO
UNITED STATIONERS INC.
MANAGEMENT EQUITY PLAN
This Amendment No. 3 to the United Stationers Inc. Management Equity Plan (the
"Plan") is effective as of September 27, 1995. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings given them in the Plan.
WHEREAS, Associated Holdings, Inc. adopted the Plan as of January 31, 1992;
WHEREAS, upon the merger of Associated Holdings, Inc. with United Stationers
Inc. on March 30, 1995, the Plan was amended by Amendment No. 1; and on
September 27, 1995 was further amended by Amendment No. 2, subject to
stockholder approval of the amendment;
WHEREAS, the Company desires to further amend the Plan, to meet the requirements
of Section 162(m) of the Internal Revenue Code of 1986, as amended;
THEREFORE, the Plan is amended as follows:
1. Section 6 of the Plan is amended by adding thereto the following as
subsection 6(i):
"(i) LIMIT ON INDIVIDUAL GRANTS. In any calendar year, the maximum
number of shares for which options may be granted under the Plan to any
one optionee is 400,000 shares of common stock (subject to adjustment in
accordance with Section 7 of the Plan)."
2. Except as amended hereby, the Plan shall remain in full force and effect.
All references to the "Plan" shall refer to the Plan as amended by this
amendment.
3. The amendment made hereby shall be subject to approval by the stockholders
of the Company no later than the next annual meeting of stockholders.
APPENDIX D
UNITED STATIONERS INC.
MANAGEMENT EQUITY PLAN
1. PURPOSE
United Stationers Inc., a Delaware corporation (the "Company"), by means of this
Management Equity Plan (the "Plan") desires to afford certain of its directors,
key employees and the key employees of any parent corporation or subsidiary
corporation thereof now existing or hereafter formed or acquired who are
responsible for the continued growth of the Company an opportunity to acquire a
proprietary interest in the Company, and thus to create in such persons an
increased interest in and a greater concern for the welfare of the company and
any parent corporation or subsidiary corporation thereof. As used in the Plan,
the terms "parent corporation" and "subsidiary corporation" shall mean,
respectively, a corporation within the definition of such terms contained in
Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
The stock options described in Section 6 (the "Options") and the shares of
common stock of the Company acquired pursuant to the exercise of such Options
are a matter of separate inducement and are not in lieu of any salary or other
compensation for services.
2. ADMINISTRATION
The Plan shall be administered by the Option Committee, or any successor
thereto, of the Board of Directors of the Company or by such other committee, as
determined by the Board (the "Committee"). The Committee shall consist of not
less than two members of the Board of Directors of the Company, each of whom
shall qualify as a "disinterested person" to administer the Plan within the
meaning of Rule 16b-3, as amended, or other applicable Rules under Section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall administer the Plan so as to comply at all times with the
Exchange Act. A majority of the Committee shall constitute a quorum, and subject
to the provisions of Section 5, the acts of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by a
majority of the Committee, shall be the acts of the Committee.
3. SHARES AVAILABLE
Subject to the adjustments provided in Section 7, the maximum aggregate number
of shares of common stock of the Company which may be granted for all purposes
under the Plan shall be 2,605,924.28 shares. If, for any reason, any shares as
to which Options have been granted cease to be subject to purchase thereunder,
including, without limitation, the expiration of such Option, the termination of
such option prior to exercise or the forfeiture of such Option, such shares
shall thereafter be available for grants to such individual or other individuals
under the Plan. Options granted under the Plan may be fulfilled in accordance
with the terms of the Plan with either authorized and unissued shares of the
common stock of the Company or issued shares of such common stock held in the
Company's treasury.
4. ELIGIBILITY AND BASES OF PARTICIPATION
Grants under the Plan may be made, pursuant to Section 6, to key employees,
officers and directors (but not to any officer and director who is not also an
employee) of the Company, or any
parent corporation or subsidiary corporation thereof, who are regularly employed
on a salaried basis and who are so employed on the date of such grant (the
"Officer and Key Employee Participants").
5. AUTHORITY OF COMMITTEE
Subject to and not inconsistent with the express provisions of the Plan and the
Code, the Committee shall have plenary authority, in its sole discretion, to:
a. determine the persons to whom Options shall be granted, the time when
such Options shall be granted, the number of Options, the purchase price
or exercise price of each Option, the period(s) during which such Option
shall be exercisable (whether in whole or in part), the restrictions to
be applicable to Options and the other terms and provisions thereof
(which need not be identical);
b. require, as a condition to the granting of any Option, that the person
receiving such Option agree not to sell or otherwise dispose of such
Option, any common stock acquired pursuant to such Option or any other
"derivative security" (as defined by Rule 16a-1(c) under the Exchange
Act) for a period of at least six (6) months following the later of (i)
the date of the grant of such Option or (ii) the date when the exercise
price of such Option is fixed if such exercise price is not fixed at the
date of grant of such Option;
c. provide an arrangement through registered broker-dealers whereby
temporary financing may be made available to an optionee by the
broker-dealer, under the rules and regulations of the Federal Reserve
Board, for the purpose of assisting the optionee in the exercise of an
Option, such authority to include the payment by the Company of the
commissions of the broker-dealer;
d. provide the establishment of procedures for an optionee (1) to have
withheld from the total number of shares to be acquired upon the exercise
of an Option that number of Shares having a Fair Market Value (as defined
in Section 9) which, together with such cash as shall be paid in respect
of fractional Shares, shall equal the Option exercise price, and (2) to
exercise a portion of an Option by delivering that number of shares
already owned by such optionee having a Fair Market Value which shall
equal the partial Option exercise price and to deliver the shares thus
acquired by such optionee in payment of shares to be received pursuant to
the exercise of additional portions of such Option, the effect of which
shall be that such optionee can in sequence utilize such newly acquired
shares in payment of the exercise price of the entire Option, together
with such cash as shall be paid in respect of fractional shares;
e. provide the establishment of a procedure whereby a number of shares of
common stock or other securities may be withheld from the total number of
shares of common stock or other securities to be issued upon exercise of
an Option to meet the obligation of withholding for taxes incurred by an
optionee upon such exercise;
f. prescribe, amend, modify and rescind rules and regulations relating to
the Plan;
g. make all determinations specified in or permitted by the Plan or deemed
necessary or desirable for its administration or for the conduct of the
Committee's business; and
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h. establish any procedures determined to be appropriate in discharging its
responsibilities under the Plan.
The Committee may delegate to one or more of its members, or to one or more
agents, such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan; PROVIDED, HOWEVER, that the Committee
may not delegate any duties to a member of the Board of Directors of the Company
who, if elected to serve on the Committee, would not qualify as a "disinterested
person" to administer the Plan as contemplated by Rule 16b-3, as amended, or
other applicable rules under the Exchange Act. The Committee may employ
attorneys, consultants, accountants, or other persons and the committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all persons who have received grants under the Plan, the
company and all other interested persons. No member or agent of the Committee
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan and all members and agents of the
Committee shall be fully protected by the Company in respect of any such action,
determination or interpretation.
6. STOCK OPTIONS FOR OFFICERS AND KEY EMPLOYEE PARTICIPANTS
The Committee shall have the authority, in its sole discretion, to grant
incentive stock options ("Incentive Options") pursuant to Section 422 of the
Code, or to grant non-qualified stock options ("Non-Qualified Options") (options
which do not qualify under Section 422 of the Code) or to grant both types of
Options. No option shall be granted for a term of more than ten (10) years.
Notwithstanding anything contained herein to the contrary, an Incentive Option
may be granted only to Officer and key employee participants. The terms and
conditions of the Options shall be determined from time to time by the
Committee: PROVIDED, HOWEVER, that the Options granted under the Plan shall be
subject to the following:
a. OPTION PRICE. The Committee shall establish the option price at the
time any Option is granted at such amount as the Committee shall
determine. The option price for each share purchasable under any
Incentive Option granted hereunder shall be such amount as the Committee
shall, in its best judgment, determine to be not less than one hundred
percent (100%) of the Fair Market Value per share at the date the Option
is granted; PROVIDED, HOWEVER, that in the case of an Incentive Option
granted to a person who, at the time such Incentive Option is granted,
owns shares of the Company, or any parent corporation or subsidiary
corporation thereof, which possess more than ten percent (10%) of the
total combined voting power of all classes of shares of the Company or of
any subsidiary corporation or parent corporation of the Company, the
purchase price for each share shall be such amount as the Committee, in
its best judgment, shall determine to be not less than one hundred ten
percent (110%) of the Fair Market Value per share at the date the Option
is granted. The Option price will be subject to adjustment in accordance
with the provisions of Section 7 of the Plan.
b. PAYMENT. The price per share of common stock of the Company with
respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in
D-3
cash, which may be paid by wire transfer in immediately available funds,
by check or by any other instrument acceptable to the Company or, in the
discretion of the Committee, by delivery to the Company of shares or
common stock of the Company owned by the optionee or by the Company
withholding from the total number of shares to be acquired pursuant to
the Option a portion of such shares. Shares delivered to or withheld by
the Company in payment of the option price shall be valued at the Fair
Market Value of the common stock of the Company on the day preceding the
date of the exercise of the option.
c. CONTINUATION OF EMPLOYMENT. Notwithstanding anything else contained
herein, each Option by its terms shall require the optionee to remain in
the continuous employ of the Company, or any parent corporation or
subsidiary corporation thereof, for at least six (6) months (or three (3)
months in the case of an Incentive Option) from the date of grant of the
Option before the right to exercise any part of the Option will accrue.
d. EXERCISABILITY OF STOCK OPTION. Each Option shall be exercisable in
such installments as may be determined by the Committee at the time of
the grant. The right to purchase shares shall be cumulative so that when
the right to purchase any shares has accrued such shares or any part
thereof may be purchased at any time thereafter until the expiration or
termination of the Option. No Option by its terms shall be exercisable
after the expiration of ten (10) years from the date of the grant of the
Option; PROVIDED, HOWEVER, in the case of an Incentive Option granted to
a person who, at the time such Option is granted, owns stock of the
Company, or any parent corporation or subsidiary corporation thereof,
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, or any corporation or subsidiary
corporation thereof, such Option shall not be exercisable after the
expiration of five (5) years from the date such Option is granted.
e. DEATH. In the event of the death of any optionee, the estate of such
optionee shall have the right, within the period designated by the
Committee at the time of grant, which shall in no event be less than
within six (6) months after the date of death (but not after the
expiration date of the Option), to exercise such optionees Option with
respect to all or any part of the shares of stock which such optionee was
entitled to purchase immediately prior to the time of his death, or will
become entitled to purchase during the period of exercise.
f. DISABILITY OR RETIREMENT. If the employment of any optionee is
terminated because of Disability (as defined in Section 9), or because of
retirement, such optionee shall have the right, within the period
designated by the Committee at the time of grant, which shall in no event
be less than within six (6) months after the date of termination (or
within one (1) year after the date of such termination in the case of an
Incentive Option) (but in no case after the expiration of the Option), to
exercise the Option with respect to all or any part of the shares of
stock which such optionee was entitled to purchase immediately prior to
the time of such termination, or will become entitled to purchase during
the period of exercise.
g. OTHER TERMINATION OR FOR CAUSE. If the employment of an optionee is
terminated for any reason other than those specified in subsections 6(e)
and (f) above, such optionee shall have the right, within the period
designated by the Committee which shall in no event be less than thirty
(30) days (or three (3) months in the case of an Incentive Option) after
the
D-4
date of such termination (but not after the expiration date of the
Option), to exercise his Option with respect to all or any part of the
shares of stock which such optionee was entitled to purchase immediately
prior to the time of such termination, except that, if such optionee's
employment was terminated by the Company, or any parent corporation or
subsidiary corporation thereof, for good cause, or if the optionee
voluntarily terminates employment without the consent of the Company, or
any parent corporation or subsidiary corporation thereof (of which fact
the Committee shall be the sole judge), such optionee shall immediately
forfeit all rights under his Option except as to the shares of stock
already purchased. Termination for "good cause" shall mean (unless
another definition is agreed to in writing by the Company and the
optionee) termination by action of the Board of Directors because of: (A)
the optionee's theft or embezzlement, or attempted theft or embezzlement,
of money or tangible or intangible assets or property of the Company or
any parent corporation or subsidiary corporation thereof, (B) any act or
acts of moral turpitude by optionee, (C) other than as a result of a
Disability, optionee's failure to devote adequate time to the Company's
or such parent corporation's or such subsidiary corporation's business as
determined in the reasonable judgment of the Board of Directors, after
having given notice of the asserted problem and a reasonable opportunity
to cure, (D) any intentional acts by optionee which establish optionee's
loyalty to a business entity or person other than the Company, (E) gross
negligence or willful misconduct in the performance of optionee's duties,
(F) conviction of a felony, (G) conviction of a crime, the conviction of
which results in a material injury to the Company or any parent
corporation or subsidiary corporation thereof, or (H) a willful material
breach of any employment agreement entered into between optionee and the
Company or any parent corporation or subsidiary corporation thereof. The
determination that there exists "good cause" for termination shall be
made by the Option Committee (unless otherwise agreed to in writing by
the Company and the optionee) and such determination shall be conclusive.
h. MAXIMUM EXERCISE. The aggregate Fair Market Value of stock (determined
at the time of the grant of the Option) with respect to which Incentive
Options are exercisable for the first time by an optionee during any
calendar year under all plans of the Company, or any parent corporation
or subsidiary corporation thereof, shall not exceed $100,000.
i. LIMIT ON INDIVIDUAL GRANTS. In any calendar year, the maximum number
of shares for which options may be granted under the Plan to any one
optionee is 400,000 shares of common stock (subject to adjustment in
accordance with Section 7 of the Plan).
7. ADJUSTMENT OF SHARES
In the event there is any change in the common stock of the Company by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in the capital structure of the
Company, the number or kind of shares or interests subject to an Option and the
per share price or value thereof shall be appropriately adjusted by the
Committee at the time of such event, provided that each optionee's position with
respect to the Option and the per share price or value thereof shall not, as a
result of such adjustment, be worse than it had been immediately prior to such
event. Any fractional shares or interests resulting from such adjustment shall
be eliminated. Notwithstanding the foregoing, (i) each such adjustment with
respect to an
D-5
Incentive Option shall comply with the rules of Section 424(a) of the Code, and
(ii) in no event shall any adjustment be made which would render any Incentive
Option granted hereunder other than an "incentive stock option" for purposes of
Section 422 of the Code.
In the event of a Change of Control or a merger between the Company and another
corporation in which the Company is not the surviving entity and where any
optionee holds Options issued pursuant to this Plan which have not been
exercised, such Options shall be canceled and replacement Options shall be
issued by the surviving entity in accordance with Rule 16b-3(f)(1) under the
Exchange Act.
8. MISCELLANEOUS PROVISIONS
A. ASSIGNMENT OR TRANSFER. No grant of any "derivative security" (as
defined by Rule 16a-1(c) under the Exchange Act) made under the Plan or
any rights or interests therein shall be assignable or transferable by an
optionee except by will or the laws of descent and distribution. During
the lifetime of an optionee, Options granted hereunder shall be
exercisable only by the optionee.
b. INVESTMENT REPRESENTATION. If a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect
to the common stock issuable upon exercise of an Option, is not in effect
at the time such Option is exercised, the Company may require, for the
sole purpose of complying with the Securities Act, that prior to
delivering such common stock to the exercising optionee, such optionee
must deliver to the Secretary of the Company a written statement (i)
representing and warranting that such common stock is being acquired for
investment only and not with a view to the resale or distribution
thereof, (ii) acknowledging and confirming that such common stock may not
be sold unless registered for sale under the Securities Act or pursuant
to an exemption from such registration and (iii) agreeing that the
certificates representing such common stock shall bear a legend to the
effect of the foregoing.
If subsequent to the delivery by an optionee of the written statement
described in the preceding paragraph, the common stock issuable upon
exercise of an Option is registered under the Securities Act, the Company
may release such optionee from such written statement without effecting a
"modification" of the Plan within the meaning of Section 424(h)(3) of the
Code.
c. WITHHOLDING TAXES. In the case of distributions of common stock or
other securities hereunder, the Company, as a condition of such
distribution, may require the payment (through withholding from the
optionee's salary, reduction of the number of shares of common stock or
other securities to be issued, or otherwise) of any federal, state, local
or foreign taxes required by law to be withheld with respect to such
distribution.
d. COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Company and shall not be charged against any Option
nor to any employee receiving an Option.
e. FUNDING OF PLAN. The Plan shall be unfunded. The Company shall not be
required to make any segregation of assets to assure the payment of any
Option under the Plan.
D-6
f. OTHER INCENTIVE PLANS. The adoption of the Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees.
g. EFFECT ON EMPLOYMENT. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Officer and Key Employee
Participants except to the extent specifically provided herein shall
impose, or be construed as imposing, an obligation on (i) the Company, or
any parent corporation or subsidiary corporation thereof, to continue the
employment of any Officer and Key Employee Participant, and (ii) any
Officer and Key Employee Participant to remain in the employ of the
Company, or any parent corporation or subsidiary corporation thereof.
9. DEFINITIONS
a. "Fair Market Value" shall, as it relates to the common stock of the
Company, mean the average of the high and low prices of such common stock
as reported on a national stock exchange or as listed for quotation on
the NASDAQ National Market System on the date specified herein, or if
there were no sales on such date, on the next preceding day on which
there were sales, or if such common stock is not listed on a national
stock exchange or is not listed for quotation on the NASDAQ National
Market System, the value of such common stock on such date as determined
by the Board of Directors of the Company in good faith.
b. "Disability" means optionee's inability, due to illness, accident,
injury, physical or mental incapacity or other disability effectively to
carry out his duties and obligations as an employee of the Company or to
participate effectively and actively as an employee of the Company for 90
consecutive days or shorter periods aggregating at least 180 days
(whether or not consecutive) during any twelve-month period.
10. AMENDMENT OF PLAN
The Board of Directors of the Company shall have the right to amend, modify,
suspend or terminate the Plan at any time, provided that no amendment shall be
made which shall increase the total number of shares of the common stock of the
Company which may be issued and sold pursuant to Options granted under the Plan
or decrease the minimum option price in the case of an Incentive Option, or
modify the provisions of the Plan relating to eligibility with respect to
Incentive Options unless such amendment is made by or with the approval of the
stockholders. The Board of Directors shall be authorized to amend the Plan and
the Options granted thereunder (i) to qualify as "incentive stock options"
within the meaning of Section 422 of the Code or (ii) to comply with Rule 16b-3
(or any successor rule) under the Exchange Act. No amendment, modification,
suspension or termination of the Plan shall alter or impair any Options
previously granted under the Plan, without the consent of the holder thereof.
11. EFFECTIVE DATE
The Plan shall become effective January 31, 1992, the date as of which the Plan
was adopted by the Board of Directors (the "Effective Date"); PROVIDED, HOWEVER,
that if the Plan is not approved by a vote of the stockholders of the Company at
an annual meeting or by written consent within twelve (12) months before or
after the Effective Date, the Plan and any Options granted thereunder shall
terminate.
D-7
UNITED STATIONERS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 8, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[PROXY-LOGO]
The undersigned hereby appoints THOMAS W. STURGESS, MICHAEL D. ROWSEY AND
DANIEL H. BUSHELL, or any of them, proxies, with full power of substitution, to
vote all the shares of common stock of UNITED STATIONERS INC. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at United Stationers Inc., 2200 East Golf Road, Des Plaines, Illinois on
Wednesday, May 8, 1996 at 2:00 p.m., local time, and at any adjournment thereof,
with all powers the undersigned would possess if present.
THIS PROXY IS TO BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED ON THE REVERSE
SIDE, AND IN THEIR DISCRETION THE PROXIES MAY VOTE UPON ANY OTHER BUSINESS THAT
PROPERLY COMES BEFORE THE MEETING.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. Election of three directors to serve for a three-year term expiring in
1999.
NOMINEES: Daniel J. Good, Jeffrey K. Hewson, James A. Johnson
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES
/ / / /
For all except the following nominees:
- --------------------------------------------------
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided above.
2. To approve amendments to the Management Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
NOTE: Please date and sign as your name appears hereof. Joint owners should
all sign. When signing as attorney executor, administrator, trustee, guardian
or corporate officer, please give full title as such.
Signature: Date
----------------------------- ------------------------------
Signature: Date
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