SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
[LOGO]
UNITED STATIONERS INC.
2200 East Golf Road
Des Plaines, Illinois 60016-1267
NOTICE AND PROXY STATEMENT
FOR
ACTION TO BE TAKEN BY WRITTEN CONSENT
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS
September 2, 1997
To Our Stockholders:
Attached is a Proxy Statement which solicits your written consent as
stockholders of United Stationers Inc. to certain amendments to the Company's
Management Equity Plan. The amendments have been adopted by the Board of
Directors of the Company, subject to stockholder approval.
This proposed action, and the procedure for indicating approval of these
amendments, are described in detail in the attached Proxy Statement.
We appreciate your interest in and support of United Stationers.
Sincerely,
Frederick B. Hegi, Jr.
Chairman of the Board of Directors
PRELIMINARY PROXY STATEMENT
[LOGO]
UNITED STATIONERS INC.
2200 East Golf Road
Des Plaines, Illinois 60016-1267
September 2, 1997
PROXY STATEMENT
FOR STOCKHOLDER ACTION BY WRITTEN CONSENT
_______________________________________________________________
This Proxy Statement has been prepared by the management of United Stationers
Inc. (the "Company"), and is being furnished in connection with the solicitation
by the Board of Directors of the written consent of stockholders in lieu of
holding a meeting. The Directors seek stockholder approval of certain
amendments to the Company's Management Equity Plan ("Amendments"). The proposed
Amendments are described in this Proxy Statement.
This Proxy Statement and the accompanying Consent Card are being mailed to
stockholders commencing on September 2, 1997.
The procedure for indicating approval of this action is described in detail in
this Proxy Statement.
GENERAL INFORMATION
VOTING RIGHTS
The matter that is being submitted for approval is to be acted upon by written
consent, without a meeting. The holders of the Company's common stock, $0.10
par value ("Common Stock"), are entitled to vote on the matter. Each
outstanding share of Common Stock is entitled to one vote.
Only holders of record of shares of the Company Common Stock at the close of
business on August 20, 1997 (the "Record Date") are entitled to execute the
Consent Cards. At the close of business on the Record Date, there were
11,619,755 shares of Common Stock issued and outstanding held by approximately
994 holders of record (the "Stockholders").
SOLICITATION OF WRITTEN CONSENTS
Under Delaware law, any action that may be taken at any annual or special
meeting of stockholders may be taken without a meeting, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Under the Company's Restated Certificate of Incorporation,
the written consent of 80% of the holders of outstanding Common Stock is
required to authorize or take action by written consent in lieu of holding a
meeting.
Attached to this Proxy Statement, as Appendix A is the text of the Amendments to
the Management Equity Plan being submitted for Stockholder approval by written
consent. The Amendments are more fully described under the caption "THE
PROPOSAL" below.
The execution of Consent Cards by the holders of 80% of the Common Stock is
required to approve the Amendments.
Written consents must be received by the Company on or before October 3, 1997.
The Amendments will be effective on October 3, 1997, if sufficient written
consents are received by that date (the "Effective Date").
Stockholders are requested to indicate approval of and consent to the Amendments
by signing the enclosed Consent Card and by checking the box that corresponds to
the action the Stockholder wishes to take. The text of the Amendments is not set
forth on the Consent Card because of space considerations. Nevertheless,
signing and indicating approval on the Consent Card will be deemed to be written
consent to the adoption of the Amendments.
FAILURE TO CHECK ANY OF THE BOXES WILL, IF THE CONSENT CARD HAS BEEN SIGNED,
CONSTITUTE APPROVAL OF AND CONSENT TO THE ADOPTION OF THE AMENDMENTS.
The Board of Directors requests that each Stockholder mark, sign and date the
enclosed Consent Card. An addressed envelope is enclosed for your convenience
in returning the Consent Card. The Consent Card should be returned as soon as
possible for receipt no later than October 3, 1997.
The Company will pay the entire cost of the preparation and mailing of this
Proxy Statement and all other costs of this solicitation. In addition to the
use of the mails, certain of the Company's directors, officers or regular
employees may also solicit written consents by telephone, telegraph or personal
interview, 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.
REVOCATION OF WRITTEN CONSENTS
Any Consent Card executed and delivered by a Stockholder may be revoked by
delivering written notice of such revocation prior to the Effective Date to the
Company at the address set forth below. Consent Cards may not be revoked after
the Effective Date.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning the Common Stock
ownership as of August 20, 1997 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:
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
------------------------------------ -------------------- --------
Wingate Partners, L.P. 6,045,823 (1) 49.6%
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
ASI Partners, L.P./Cumberland Capital Corporation 1,799,588 (2) 15.5%
9441 LBJ Freeway, Suite 300
Ft. Worth, Texas 75243
Chase Manhattan Investment Holdings, L.P. 1,235,061 (3) 9.6%
380 Madison Avenue
New York, NY 10017
Farallon Partners, LLC 868,508 (4) 7.5%
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
________
(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 of Common Stock (or shares of
non-voting 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 1,479,087 shares, or 12.4%. Other general partners,
including James T. Callier, Jr., Frederick B. Hegi, Jr. and James A. Johnson,
and their beneficial interests, are shown on page 4 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 August 20, 1997, 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 of Common Stock (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.
(4) Includes 180,413 shares owned indirectly by Farallon Capital Management,
LLC as investment advisor to certain discretionary accounts and 688,095
shares owned indirectly by Farallon Partners, LLC as general partner of the
following partnerships: (i) 307,228 shares owned by Farallon Capital
Partners, L.P., (ii) 240,466 shares owned by Farallon Capital Institutional
Partners, L.P., (iii) 71,632 shares owned by Farallon Capital
Institutional Partners II, L.P., (iv) 27,402 shares owned by Farallon
Capital Institutional Partners III, L.P., and (v) 41,367 shares owned by
Tinicum Partners, L.P.
3
VOTING TRUST
A total of 8,478,927 shares (73%) of the Common Stock, including the shares
owned by Wingate, ASI Partners/Cumberland, Good Capital Co., Inc. and other
shares, are held in a voting trust (the "Voting Trust"), pursuant to a Voting
Trust Agreement dated as of January 31, 1992, as amended March 30, 1995. The
trustees of the Voting Trust are Thomas W. Sturgess, Frederick B. Hegi, Jr.,
James A. Johnson, Daniel J. Good and Gary G. Miller. (All the trustees, except
Mr. Sturgess, are directors of the Company.) The trustees 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 as specified in the Voting Trust Agreement. The
trustees also agree to vote all shares in trust on all other matters in
accordance with written directions from the holders of Voting Trust Certificates
representing not less than two-thirds of the shares of Common Stock held in the
trust or, in the absence of such written direction, as the trustees determine in
their sole discretion.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's Common
Stock by each of the directors, 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 August 20, 1997:
Common Stock Exercisable Exercisable Percent of Common
Name Beneficially Owned Options(1) Warrants(1) Stock Outstanding(2)
---- ------------------ ----------- ----------- --------------------
James T. Callier, Jr. 4,342,671(3) - 226,450(3) 39.1%
Daniel J. Good 198,287(4) - 59,656(4) 2.2%
Frederick B. Hegi, Jr. 5,479,679(5) - 66,144(5) 50.3%
Jeffrey K. Hewson 2,076 9,765(6) - *
James A. Johnson (9) 1,156,180(7) - 339,694(7) 12.7%
Gary G. Miller (8) - - - -
Michael D. Rowsey (9) 84,557 214,506 - 2.6%
Joel D. Spungin 19,320 - - *
Randall W. Larrimore - - -
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) 5,823,980(10) 775,970 625,800 55.5%
___________
*Less than 1%
(1) Options and warrants exercisable within 60 days of the date of this Proxy
Statement. Except for certain of Mr. Hewson's options, and options granted
to Mr. Larrimore (none of which are exercisable within 60 days of the date
hereof) exercisability of options is subject to certain conditions, the
occurrence of which is assumed for this purpose, including the occurrence
of an Event - as described on page 12 of this Proxy Statement, although no
such Event is certain to occur within said 60 days.
(2) For purposes of calculating the beneficial ownership percentage of each
such stockholder, it was assumed that such stockholder exercised all
options, conversion rights and warrants by which the stockholder had the
right to acquire shares of Common Stock, within 60 days of the date of this
Proxy Statement.
4
(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.
(4) Includes 36,173 shares of Common Stock and 16,852 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.
(5) Includes all 5,479,679 shares beneficially owned by Wingate and 566,144
warrants held by Wingate. Messrs. Callier and Hegi 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.
Hegi and Johnson are trustees, other than the 5,479,679 shares beneficially
owned by Wingate.
(6) Does not include 4,883 shares issuable upon exercise of options that are
not exercisable within 60 days.
(7) Includes 1,117,375 shares owned by Wingate II, 19,634 shares owned by
Affiliates II, and 19,171 shares owned by Mr. Johnson. Warrants include
333,779 owned by Wingate II and 5,915 owned by Affiliates II.
(8) 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.
(9) Includes shares owned directly and by an individual retirement account for
the sole benefit of such individual.
(10) Of the 5,823,980 shares shown as owned by all current directors and
officers as a group, 19,590 shares are held with sole voting and investment
power and 5,804,390 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/Cumberland, or Good Capital
Co., Inc.
THE PROPOSAL
SUMMARY OF THE PROPOSAL
The Board of Directors, acting by unanimous written consent, has adopted certain
amendments ("Amendments") to the Company's stock option plan, called the
Management Equity Plan (the "MEP Plan"), subject to approval of the
Stockholders, and submits to the Stockholders a proposal to approve the
Amendments.
The MEP Plan provides for the issuance of shares of Common Stock through the
exercise of options, to key officers and management employees of the Company or
its subsidiary, United Stationers Supply Co. ("United"), either as incentive
stock options or as non-qualified stock options. The number of eligible
participants in the MEP Plan is approximately 200.
The Amendments (1) increase the number of shares authorized to be issued under
the MEP Plan from 2,605,924.28 to 4,100,000 shares; (2) authorize the granting
of options to non-employee directors of the Company, and (3) provide for
transferability of the options under certain circumstances. These Amendments are
explained in more detail below.
5
INCREASE IN NUMBER OF SHARES.
The number of shares which could be issued upon exercise of options under the
MEP Plan before adoption of the Amendments was 2,605,924.28 shares. Options for
almost all of the shares issuable under the MEP Plan were granted in connection
with the acquisition of Associated Stationers, Inc. ("ASI") in 1992 and in
connection with the merger of ASI with United in 1995 (the "Merger Incentive
Options"). These Merger Incentive Options were granted in order to provide
incentives to management with respect to the successful development of ASI and
the later integration of ASI with the Company. All of the Merger Incentive
Options will vest and become immediately exercisable upon the occurrence of a
liquidity event ("Event") as described on page 12 of this Proxy Statement.
On May 23, 1997, with the hiring of Randall W. Larrimore as President and Chief
Executive Officer of the Company, the Board of Directors granted options to Mr.
Larrimore to purchase up to 250,000 shares of Common Stock at $21.625 per share,
the fair market value of the shares as of that date. As of May 23, 1997, there
were presently available for grant 212,000 shares under the MEP Plan, all of
which were granted to Mr. Larrimore.
Therefore, the Board of Directors of the Company approved Amendments to the
Plan, subject to approval by the stockholders of the Company, among other
things, increasing the number of shares available under the MEP Plan, to cover
the additional 38,000 shares approved for grant to Mr. Larrimore, and
anticipating the need for additional options in connection with (1) the expected
recruitment and hiring of additional management personnel, (2) the recruitment
of additional or replacement directors, and (3) the need to provide additional
incentives to management in the future, after the Merger Incentive Options have
vested and been exercised following the occurrence of an Event.
INCLUSION OF NON-EMPLOYEE DIRECTORS AS PARTICIPANTS.
The Board of Directors recognizes the desirability and benefits of including
skilled and independent individuals as directors of the Company. Such
independent directors are beneficial not only for the independent perspectives
they bring to the board, but also because a Compensation Committee composed of
independent directors is required to ensure deductibility of certain executive
compensation (including compensation from exercise of stock options) under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The directors believe that such independent directors should be compensated for
their services as directors in a manner that aligns their interests closely with
those of all stockholders. Accordingly, the board of directors amended the MEP
Plan to provide that such independent directors may be granted stock options as
part of the compensation for their services as directors.
TRANSFERABILITY OF OPTIONS.
The Securities Exchange Commission has recently revised certain rules to permit
transferability of stock options by executives. Such transferability provides
executives with added estate planning opportunities. Accordingly, the
Amendments include provisions permitting transfers of options under limited
circumstances. Transfers may be made only to the spouse, children or
grandchildren of the optionee, or to trusts for the benefit of family members,
or to family partnerships. Incentive Stock Options will continue to be
transferable only by will or by the laws of descent.
6
The discussion and descriptions of the Amendments in this Proxy Statement are
qualified in their entirety by reference to the full text of the Amendments in
Appendix A. Appendix B to this Proxy Statement sets forth the MEP Plan with the
Amendments incorporated.
DESCRIPTION OF THE PLAN
The Plan, as amended, provides for the issuance of up to 4,100,000 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 key employees of the Company
and its subsidiaries 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 of the Company and its subsidiaries, 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").
ADMINISTRATION
The Plan is administered by a committee (the "Committee") appointed by the
Directors. 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: Gary G. Miller, Chairman, Jeffrey K. Hewson, James A. Johnson and
Frederick B. Hegi, Jr.
Subject to the provisions of the Plan, the Committee - and/or the Directors -
determine 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).
GRANT OF OPTIONS
Options may be granted under the Plan to such eligible employees or non-employee
directors as may from time to time be determined by the Committee or the Board
of Directors. Options
7
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
nonqualified stock options. The exercise price of each option granted under
the Plan is set by the Committee, and will normally be the fair market value
of the applicable share on the date of grant. 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.
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.
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 tax 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 or
an authorized transferee. 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 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 optionee's 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
8
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 income 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 is
deductible by the Company at the time of the disposition.
In addition, depending on the optionees overall tax situation, the optionee may
be subject to the alternative minimum tax at the applicable rate, on the amount
which would be realized as compensation pursuant to the rules applicable to
nonqualified options, discussed immediately below.
NONQUALIFIED OPTIONS
A participant who receives an option under the MEP Plan is not in receipt of
taxable income upon the grant thereof, but will realize ordinary income upon
exercise equal to the difference between the exercise price and the fair market
value of the shares on the date of exercise. The Company is entitled to a
corresponding deduction in the taxable year during which the optionee realizes
compensation income.
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 Merger Incentive Options granted pursuant to the Plan, and described on page
6 of this Proxy Statement, are subject to restriction on resale of the shares
for a period of six months after the Event.
9
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 1996 and the four
other highest-paid officers of the Company who were serving as executive
officers on December 31, 1996.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
---------------------------- ----------------------------------
Name and principal Fiscal Salary (1) Bonus Other Restricted Options LTIP All other
Position Year ($) ($) Annual Stock (#) Payouts Compen-
Ended Compen- Award(s) ($)(3) sation
12/31 sation ($) ($)(4)
($)(2)
- ---------------------------------------------------------------------------------------------------------------------------
Frederick B. Hegi, Jr. 1996(5)
CHAIRMAN OF THE BOARD, 1995(8)
PRESIDENT AND CEO 1994(8)
Thomas W. Sturgess 1996(7) 495,000 376,200 240,000(10) 6,324
CHAIRMAN OF THE BOARD, 1995(6) 0
PRESIDENT AND CEO 1994(8) 0
Daniel H. Bushell 1996 255,000 142,620 51,343 3,677
EXEC. VICE PRESIDENT 1995 213,076 249,569 120,000 2,579
AND CFO 1994(8) 0
Michael D. Rowsey 1996 255,000 142,620 50,000 4,034
EXEC. VICE PRESIDENT 1995 243,502 264,197 120,000 2,945
1994(8) 0
Steven R. Schwarz 1996 255,000 745,605(9) 0 4,108
EXEC. VICE PRESIDENT 1995 205,608 205,536 120,000 54,525 164,921
1994 185,000 15,818 14,000 9,677 945
Ergin Uskup 1996 188,370 275,688(9) 0 8,007
VICE PRESIDENT, MIS AND 1995 173,542 127,880 60,000 24,500 124,648
CIO 1994 153,574 27,500 16,000 4,194
__________
(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
401(k) Savings 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) Includes payments from the Company's former Executive Bonus Plan of awards
earned in 1995 and prior years payable in annual installments. The 1995
distribution was a final distribution as the Plan was terminated just prior
to the Merger.
(4) Includes:
(a) Company contributions to the Company's 401(k) Savings Plan for
Mr. Sturgess ($2,375); Mr. Bushell ($2,375); Mr. Rowsey ($2,375);
Mr. Schwarz ($2,368) and Mr. Uskup ($2,375);
(b) Premiums paid during 1996 for Split Dollar Life, Group Life and
Accidental Death insurance policies for Mr. Sturgess ($3,949);
Mr. Bushell ($1,302); Mr. Rowsey ($1,659) Mr. Schwarz ($1,740) and
Mr. Uskup ($5,632);
(5) Mr. Hegi became Chairman, President and CEO on November 18, 1996; Mr. Hegi
receives compensation from Wingate Partners, but no compensation from the
Company.
10
(6) 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 fees
from Wingate Partners, but no compensation from the Company.
(7) Mr. Sturgess resigned his position as Chairman, President and CEO effective
November 18, 1996; he continued as a director until the Annual Meeting on
May 14, 1997.
(8) Not employed by or an officer of the Company during the indicated year.
(9) Includes special stay bonuses earned during 1996 by Messrs. Schwarz
($602,985) and Uskup ($175,000) pursuant to employment agreements.
(10) Options for 360,000 shares were granted to Mr. Sturgess on January 1, 1996.
Effective November 18, 1996 options for 120,000 shares were canceled.
OPTION GRANTS DURING LAST FISCAL YEAR
Options were granted to certain of the executives named in the Summary
Compensation Table on October 2, 1995, subject to stockholder approval of
certain amendments to the Management Equity Plan ("MEP Plan".) The Plan
amendments were approved by the stockholders on May 8, 1996. Options were
granted during the year ended December 31, 1996 to certain of the officers named
in the Summary Compensation Table. The following table contains information
concerning such grants.
OPTION GRANTS DURING LAST FISCAL YEAR
Options Percent of Total
Granted Options Granted Exercise or Potential Realizable Value at Assumed
(Number of in fiscal year Base Price Expiration Annual Rates of Stock Price Appreciation
Name Shares) (3) (per Share) Date(7) for Option Term(1)(6)
---- ---------- ----------------- ----------- ---------- -----------------------------------------
0%(5) 5% 10%
----------- ---------- ----------
Thomas W. Sturgess(1) 360,000 55.3% $14.375(4) 9/26/02 $2,440,000 $1,567,868 $3,838,108
Michael D. Rowsey(2) 50,000 7.7% 1.45 1/31/02 1,077,500 1,468,610 1,964,795
Daniel H. Bushell(2) 51,343 7.9% 1.45 1/31/02 1,106,442 1,508,057 2,017,570
___________
(1) Options for 360,000 shares were granted to Mr. Sturgess on January 1, 1996.
Effective November 18, 1996 options for 120,000 shares exercisable at $5.12
per share were canceled, and as of March 31, 1997 options for 80,000 shares
expired. Accordingly, the potential value realizable for Mr. Sturgess'
options has been calculated based on only the remaining 160,000 options.
(2) Options were granted under the MEP Plan pursuant to an Executive Stock
Purchase Agreement dated January 31, 1992, as amended March 30, 1995
between the officer and the Company.
(3) Based on 650,772 options granted to employees during the year.
(4) Exercise price increases $0.625 per quarter on the first day of each
calendar quarter. Exercise price is shown as of December 31, 1996. Exercise
price as of September 1, 1997 is $16.25 per share.
(5) The amounts under the column labeled "0%" reflect the difference between
the exercise price and the market price at the date of grant. The amounts
are included pursuant to certain rules of the Securities and Exchange
Commission. Because the options were not then exercisable, the amounts
shown were not in fact realizable.
11
(6) The amounts under the columns labeled "5%" and "10%" are included pursuant
to certain rules of the Securities and Exchange Commission, and are not
intended to forecast future appreciation, if any, in the price of the
shares. The amounts are calculated assuming the options will expire at
their final expiration date rather than earlier, and assumes in the case of
Sturgess' options an exercise price of $28.75, the exercise price at the
expiration date. The actual value of the options, as well as the expiration
date, will vary in accordance with the market price of the shares and the
occurrence of an Event.
(7) The expiration date is the earlier of three years after an Event (as
defined on page 12) or the date shown.
________
Since the end of the last fiscal year, on May 23, 1997 options were granted to
Randall W. Larrimore to purchase 250,000 shares of Common Stock. The options
were granted at the fair market value on the day of grant, will vest in 20%
increments on each anniversary of the grant date, and will expire 10 years after
the grant. Options for 23,000 shares were granted as Incentive Stock Options,
and the remainder were granted as non-qualified options. In addition, options
for 100,000 of the shares further provide that they will not be exercisable
unless and until the market value of the Common Stock has been at least $40 per
share for 80 out of 100 consecutive trading days.
The following table contains information concerning option exercises during the
Company's year ended December 31, 1996 by each of the named executive officers
and the fiscal year end values:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Shares
Acquired on Value Number of Unexercised Value of Unexercised in-the-money
Name Exercised Realized Option at Fiscal Year End Options at Fiscal Year End(1)(3)
------- ------------ --------- ------------------------------- ---------------------------------
Exercisable(2) Unexercisable Exercisable(2) Unexercisable
-------------- ------------- -------------- ---------------
Thomas W. Sturgess 0 $0 0 160,000 0 $ 819,200
Michael D. Rowsey 0 0 0 214,506 0 2,459,133
Daniel H. Bushell 0 0 0 209,199 0 2,363,342
Steven R. Schwarz 0 0 0 120,000 0 753,300
Ergin Uskup 0 0 0 60,000 0 376,650
_______________
(1) The values given are based on the closing price of the Shares on
December 31, 1996, which was $19.50, less the applicable exercise price,
before payment of applicable taxes.
(2) DEFINITION OF AN "EVENT." The options described above are not
exercisable until after the occurrence of a transaction or group of
transactions (an "Event") that causes Wingate and its affiliates to
realize a return of liquid proceeds at least equal to their common stock
investment in the Company. 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.
(3) The above Table shows the values of the options as of December 31, 1996,
the end of the last fiscal year. Based on the closing price of $35.50
on the Record Date, August 20, 1997, the values of the unexercisable
options on the Record Date would be as follows:
Mr. Sturgess $ 3,080,000 Mr. Schwarz $ 2,476,950
Mr. Rowsey 5,694,879 Mr. Uskup 1,238,475
Mr. Bushell 5,514,176 Mr. Larrimore 3,468,750
12
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 then existing 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 The Chase Manhattan Bank. 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 is
being and will be reduced as provided in such waiver.
Payments from the Benefits Trust have been and/or are being made to the
following beneficiaries thereof, among others: Joel D. Spungin, the Chairman and
Chief Executive Officer of the Company prior to the Merger; Jeffrey K. Hewson,
the President and Chief Operating Officer of the Company prior to the Merger,
and the Chief Executive Officer from the time of the Merger until May 1995;
Steven R. Schwarz; and Ergin Uskup.
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
was 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 provided 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 10 of this Proxy
Statement.
Pursuant to an agreement dated November 18, 1996 between Mr. Sturgess and the
Company, Mr. Sturgess resigned his positions with the Company and subsidiaries
(except for his position as a director of the Company), his salary and bonus
participation ended as of December 31, 1996, and he continues in the Company's
medical plan until December 31, 1999. Options for Mr. Sturgess to purchase
120,000 shares of common stock were canceled effective November 18, 1996, and
options to purchase an additional 80,000 shares terminated effective March 31,
1997. Options to purchase 160,000 shares, at an exercise price which is
currently $16.25 per share, and which increases by $0.625 per share each
quarter, become exercisable upon the occurrence of an "Event" as described on
page 12, and will expire, if not sooner exercised, on the earlier of three years
after an Event or September 26, 2002.
OTHER EXECUTIVE EMPLOYMENT CONTRACTS. Effective October 1, 1995, new employment
agreements were made with each of Messrs. Rowsey, Bushell, Schwarz, Robert H.
Cornell and Albert Shaw. Effective November 1, 1995 a new employment agreement
was made with Otis H. Halleen. Each of the agreements with Rowsey, Bushell and
Schwarz provides for a two-year term of employment, until September 30, 1997;
the agreements with Cornell, Shaw and Halleen provide for a one-year term of
employment. Each agreement is renewable for additional one-year terms
13
unless terminated by either party. The agreements provide for a base salary
of not less than the amounts specified in each agreement, 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,
Shaw 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. 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. Because Schwarz and Cornell remained employed through March 30,
1996 they became entitled to receive certain stay bonuses provided in their
prior employment agreements. Mr. Cornell's position was terminated by the
Company during 1997; accordingly he is receiving the severance amounts to
which he became entitled as described above.
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 will be entitled to a severance payment equal to one
year's salary, payable in 12 monthly installments.
Shortly before the Merger, 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.
401(K) SAVINGS PLAN
The Company has a 401(k) Savings Plan (the "Profit Sharing Plan") in which all
salaried employees and certain hourly paid employees of the Company and its
subsidiaries are eligible to participate following completion of six consecutive
months of employment. The Profit Sharing Plan permits employees to have
contributions made as 401(k) salary deferrals on their behalf, or as voluntary
after-tax 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. For the year
ended December 31, 1996, the Company paid $923,034 in matching contributions.
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 entered the Pension Plan on July 1, 1996. The Pension Plan
provides for annual retirement benefits at age 65 equal to 1% percent 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
15
be the compensation earned by such employee during the twelve month period
ending 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 this plan is 65. The Pension Plan contribution accrued for the
fiscal year ended August 31, 1996 was $301,172.
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 8 (calculated on
the basis of estimated years of service at retirement age and current levels of
compensation, assuming 5.5% compounded annual increases):
NAME OF PARTICIPANT ESTIMATED ANNUAL PENSION
AT RETIREMENT
Frederick B. Hegi, Jr.* 0
Thomas W. Sturgess* 0
Daniel H. Bushell** $50,352
Michael D. Rowsey** $53,675
Steven R. Schwarz $78,953
Ergin Uskup $13,964
___________
* Messrs. Hegi and Sturgess are not eligible to participate in the Pension
Plan.
** Messrs. Bushell and Rowsey became eligible effective July 1, 1996, but
received credited years of service back to the date of the Merger.
As of December 31, 1996, the credited years of service under the Pension
Plan for the individuals named were as follows: Mr. Bushell, 2 years;
Mr. Rowsey, 2 years; Mr. Schwarz, 19 years; and Mr. Uskup, 3 years.
The Company's contributions to the Pension Plan are not allocated to the
accounts of the individual participants.
15
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors is appointed by the Board
from its membership. 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 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.
TARGETED COMPENSATION
Total compensation for officers and management individuals is targeted above the
median compensation of comparable companies when the Company's targeted
objectives are attained.
16
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 levels of responsibility,
performance, internal equity, and competitive base compensation practices when
determining salary adjustments.
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 performance 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 1997 are based solely on the earnings performance of the
Company. If the Company fails to produce minimum targeted results, no incentives
are paid to participants at any level.
In December 1996, the Board of Directors adopted a Special Bonus Plan for
key members of the United Stationers management team. The purpose of the Plan is
to encourage and reward management participants for creating the operational
foundation throughout the organization that ultimately results in a liquidity
Event. Approximately 177 management individuals are participants in the Special
Bonus Plan. Specified awards will be made in cash in equal amounts on the first
and second anniversaries subsequent to an Event to individuals who are regular
full-time employees of the Company at the time such awards are to be paid.
LONG-TERM INCENTIVE COMPENSATION
The Committee believes that grants of stock options 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. Most of the options granted to management under the
Company's MEP Plan 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 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 price. The
Committee contemplates that future options will be granted at fair market value.
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.
17
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 certain
other 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. The deductibility of some of the compensation will
depend, among other things, on the composition of the Committee, whether or not
an Event occurs making the MEP Plan options exercisable, when those options will
in fact be exercised, and the market value of the Common Stock at the time of
such exercises. Based on the current composition of the Compensation Committee,
performance-based compensation may not fall within the exception, and thus may
be subject to the $1 million limit on deductible compensation. 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
Jeffrey K. Hewson
Frederick B. Hegi, Jr.
James A. Johnson
18
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, 1991 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* And Value Line Peer Group** Index
(Performance results through 12/31/96)
1991 1992 1993 1994 1995 1996
------ ----- ------ ------ ------ ------
United Stationers (USTR) 100.00 197.23 181.68 163.57 690.11 484.94
*NASDAQ (U.S. Companies) 100.00 116.38 133.60 130.59 184.67 227.16
**Value Line Office 100.00 118.51 130.82 129.45 185.74 224.59
Eqpt/Supplies
Stockholder Proposals
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders to be held in May 1998, must be received by the Company no later
than December 5, 1997 in order to be considered for inclusion in the Company's
Proxy Statement and form of proxy relating to such meeting.
By Order of the Board of Directors
OTIS H. HALLEEN
SECRETARY
Des Plaines, Illinois
19
APPENDIX A
AMENDMENT NO. 4 TO
UNITED STATIONERS INC.
MANAGEMENT EQUITY PLAN
This Amendment No. 4 to the United Stationers Inc. Management Equity Plan (the
"Plan") is effective as of May 23, 1997. 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, the Plan was amended by Amendment No. 1 effective March 30, 1995, and
by Amendments No. 2 and 3 effective September 27, 1995;
WHEREAS, the Company desires to further amend the Plan in certain respects;
THEREFORE, the Plan is amended as follows:
1. INCREASE IN NUMBER OF AUTHORIZED SHARES. The first sentence of Section
3 of the Plan is amended by increasing the number of shares authorized to be
issued under the Plan by 1,494,075.72 shares, from 2,605,924.28 to 4,100,000
shares.
2. AMENDMENT OF SECTION 4. Section 4 of the Plan is amended by deleting the
following: "(but not to any officer and director who is not also an employee)",
and by adding, at the end of the last sentence thereof, the words: ",or who are
non-employee directors of the Company on the date of such grant".
3. AMENDMENT OF SECTION 6.
(a) Section 6 of the Plan is amended by deleting the caption thereof, and
substituting therefor the words: "GRANTS OF STOCK OPTIONS".
(b) Section 6.c of the Plan is amended by inserting therein, after the
words, "in the continuous employ of" the words, ",or as a director
of".
4. AMENDMENT OF SECTION 8. Section 8.a. is amended by substituting
therefor the following:
"a. ASSIGNMENT OR TRANSFER. The Committee may, in its discretion,
authorize all or a portion of the options, other than Incentive Stock
Options, to be granted to an optionee to be on terms which permit transfer
by such optionee to (i) the spouse, children or grandchildren of the
optionee ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members, or (iii) a partnership
in which such Immediate Family Members are the only partners, provided that
(x) there may be no consideration for any such transfer, (y) the stock
option agreement pursuant to which such options are granted must be
approved by the Committee and must expressly provide for transferability in
a manner consistent with this Section, and (z) subsequent transfers of
transferred options shall be prohibited except by will or the laws of
descent and distribution. Following transfer, any such options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer."
APPENDIX B
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 4,100,000 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.
1
4. ELIGIBILITY AND BASES OF PARTICIPATION
Grants under the Plan may be made, pursuant to Section 6, to key employees,
officers and directors 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"), or who are non-employee directors of the Company on the date of
such grant.
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-l(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
2
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
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. GRANTS OF STOCK OPTIONS
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 0ptions") (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
3
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 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 ,or as a director 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 optionee's 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.
4
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 that 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 the
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 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
5
calendar year under all plans of the Company, or any parent
corporation or subsidiary corporation thereof, shall not exceed
$100,000.
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 Incentive Option shall comply with the
rules of Section 424(a) of the Code, and (ii) in no event shall nay 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. The Committee may, in its discretion,
authorize all or a portion of the options, other than Incentive Stock
Options, to be granted to an optionee to be on terms which permit
transfer by such optionee to (i) the spouse, children or grandchildren
of the optionee ("Immediate Family Members"), (ii) a trust or trusts
for the exclusive benefit of such Immediate Family Members, or (iii) a
partnership in which such Immediate Family Members are the only
partners, provided that (x) there may be no consideration for any such
transfer, (y) the stock option agreement pursuant to which such
options are granted must be approved by the Committee and must
expressly provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred options shall be
prohibited except by will or the laws of descent and distribution.
Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to
transfer."
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
6
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.
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
7
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.
/X/ Please mark
vote as in
this example.
UNITED STATIONERS INC.
Consent Card
Solicited on Behalf of the Board of Directors
The undersigned hereby votes all the shares of Common stock of
UNITED STATIONERS INC., which the undersigned is entitled to vote:
FOR AGAINST ABSTAIN
/ / / / / / approval of the amendments to the United
Stationers Inc. Management Equity Plan.
The Board of Directors recommends a vote FOR approval of the Amendments.
NOTE: Please date and sign as your name appears hereon. Joint
owners should sign. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please
give full title as such.
Signature: ____________________________ Date: _____________
Signature: ______________________________ Date: ______________