<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
----------------
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
----------------
UNDER THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATIONERS INC.
(NAME OF SUBJECT COMPANY)
ASSOCIATED HOLDINGS, INC.
(BIDDER)
COMMON STOCK, $0.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
913004 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS W. STURGESS
CHAIRMAN OF THE BOARD
750 NORTH ST. PAUL STREET, SUITE 1200
DALLAS, TEXAS 75201
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE BIDDER)
COPY TO:
LAWRENCE D. STUART, JR., ESQ.
WEIL, GOTSHAL & MANGES
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201-6950
FEBRUARY 13, 1995
(DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 13D)
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
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<S> <C>
$266,628,505 $53,326
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</TABLE>
* Estimated for purposes of calculating the amount of the filing fee only. The
amount assumes the purchase of 17,201,839 shares of the common stock, $0.10
par value (the "Shares"), of United Stationers Inc., a Delaware corporation
(the "Company"), at a purchase price of $15.50 per share, net to the seller
in cash. Such number of Shares represents 92.5% of all the Shares
outstanding as of February 10, 1995, and assumes the buy-out of all existing
options to acquire Shares from the Company.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: NONE FILING PARTY: NOT APPLICABLE
FORM OR REGISTRATION NO.: NOT APPLICABLE DATE FILED: NOT APPLICABLE
Page 1 of Pages
Exhibit Index is located on Page 7
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<PAGE>
CUSIP NO. 913004 10 7 14D-1 Page 2 of 6 Pages
<TABLE>
<C> <S>
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
- --------------------------------------------------------------------------------Associated Holdings, Inc.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
BK, AF
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<CAPTION>
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) or 2(f). [_]
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<C> <S>
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,025,688 Shares*
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES [_]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
25.3%*
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10 TYPE OF REPORTING PERSON
CO, HC
</TABLE>
* On February 13, 1995, Associated Holdings, Inc., a Delaware corporation
("Associated"), entered into an Agreement to Tender (the "Tender Agreement")
with certain stockholders (collectively, the "Seller Stockholders") of the
Company, pursuant to which, among other things, the Seller Stockholders have
agreed to tender pursuant to the Offer, upon the terms and subject to the
conditions set forth in the Tender Agreement, 5,025,688 Shares (representing
approximately 25.3% of the Shares outstanding on a fully diluted basis and
27.0% of the Shares outstanding as of February 10, 1995 at a purchase price
of $15.50 per share, net to the Seller Stockholders in cash). The Tender
Agreement is described more fully in "The Merger -- The Tender Agreement" in
the Offer to Purchase dated February 21, 1995.
2
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 is filed by Associated
Holdings, Inc., a Delaware corporation ("Associated"), relating to the offer by
Associated to purchase up to 17,201,839 shares of the common stock, $0.10 par
value (the "Shares"), of the Company, at a purchase price of $15.50 per share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated February 21, 1995 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, together with the
Offer to Purchase and any amendments or supplements thereto, collectively
constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively.
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement on
Schedule 13D with respect to the acquisition by Associated of beneficial
ownership of Shares held by persons who have agreed, subject to certain
conditions, to tender their Shares in the Offer. The item numbers and responses
thereto below are in accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is United Stationers Inc., a Delaware
corporation. The address of the Company's principal executive offices is 2200
East Golf Road, Des Plaines, Illinois 60016-1267.
(b) The information set forth on the cover page and under "Introduction" in
the Offer to Purchase is incorporated herein by reference.
(c) The information set forth under "Price Range of the Shares and Dividends"
in the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) This Statement is filed by Associated. The information set forth
on the cover page of the Offer to Purchase and under "Introduction" and
"Certain Information Concerning Associated -- Management" in the Offer to
Purchase is incorporated herein by reference.
(e)-(f) During the last five years, neither Associated nor, to its knowledge,
any of the persons listed under "Certain Information Concerning Associated --
Management" in the Offer to Purchase, (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) None.
(b) The information set forth under "Introduction," "Certain Information
Concerning Associated -- Management," "Background of the Offer" and "The
Merger" in the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCES AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth under "Introduction" and "Source and Amount
of Funds" in the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
3
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS
(a)-(e) The information set forth under "Introduction," "Certain Information
Concerning Associated-- Management," "Operations After the Offer and the
Merger," "Background of the Offer" and "The Merger" in the Offer to Purchase is
incorporated herein by reference.
(f)-(g) The information set forth under "Effect of the Offer on the Market
for the Shares, NASDAQ Listing, Exchange Act Registration and Margin
Securities" in the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) The information set forth under "Introduction" and "The Merger" in the
Offer to Purchase is incorporated herein by reference.
(b) The information set forth under "Introduction," "Certain Information
Concerning Associated -- Management," "Background of the Offer" and "The
Merger" in the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth under "Introduction," "Certain Information
Concerning Associated -- Management," "Background of the Offer" and "The
Merger" in the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth under "Introduction," "Source and Amount of Funds,"
"The Merger" and "Fees and Expenses" in the Offer to Purchase is incorporated
herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth under "Consolidated Financial Statements" and
"Certain Information Concerning Associated -- Selected Financial Information"
in the Offer to Purchase is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth under "Certain Information Concerning
Associated -- Management," "-- Certain Transactions" and "Operations After the
Offer and the Merger" in the Offer to Purchase is incorporated herein by
reference.
(b)-(e) The information set forth under "The Merger" and "Certain Legal
Matters" in the Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
4
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase, dated February 21, 1995.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated February 21, 1995.
(a)(8) Text of Press Release, dated February 14, 1995.
(b) Commitment Letter, dated February 13, 1995, from the Chase Manhattan
Bank, N.A. to Associated and Associated Stationers, Inc. ("ASI"), a
Delaware corporation and wholly owned subsidiary of Associated.
(c)(1) Agreement and Plan of Merger, dated as of February 13, 1995, between
Associated and the Company.
(c)(2) Agreement to Tender, dated as of February 13, 1995, among Associated
and certain stockholders of the Company.
(c)(3) Letter of Intent, dated December 21, 1994 among Associated and the
Company.
(c)(4) No-Hire Letter, dated November 16, 1994 among Associated, Wingate
Partners and the Company.
(c)(5) Confidentiality Agreement, dated November 16, 1994 among Associated,
Wingate Partners and the Company.
(d) None.
(e) Not applicable.
(f) None.
5
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, the undersigned
certifies that the information set forth in this statement is true, complete
and correct.
Dated: February 21, 1995
ASSOCIATED HOLDINGS, INC.
By: /s/ Thomas W. Sturgess
---------------------------------------
Thomas W. Sturgess,
Chairman of the Board and Chief
Executive Officer
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBIT NO.
------- ----
<C> <S> <C>
(a)(1) Offer to Purchase, dated February 21, 1995.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute
Form W-9.
(a)(7) Form of Summary Advertisement, dated February 21, 1995.
(a)(8) Text of Press Release, dated February 14, 1995.
(b) Commitment Letter, dated February 13, 1995, from The Chase
Manhattan Bank (National Association) to Associated and ASI.
(c)(1) Agreement and Plan of Merger, dated as of February 13, 1995,
between Associated and the Company.
(c)(2) Agreement to Tender, dated as of February 13, 1995, among
Associated and the certain stockholders of the Company.
(c)(3) Letter of Intent, dated December 21, 1994 among Associated and
the Company.
(c)(4) No-Hire Letter, dated November 16, 1994 among Associated,
Wingate Partners and the Company.
(c)(5) Confidentiality Agreement, dated November 16, 1994 among
Associated, Wingate Partners and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE>
EXHIBIT 99(A)1
OFFER TO PURCHASE FOR CASH
UP TO 17,201,839 SHARES OF COMMON STOCK
OF
UNITED STATIONERS INC.
AT
$15.50 NET PER SHARE
BY
ASSOCIATED HOLDINGS, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES WHICH WOULD CONSTITUTE, WHEN ADDED TO THE SHARES THEN
BENEFICIALLY OWNED BY ASSOCIATED HOLDINGS, INC. ("ASSOCIATED"), AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS (OR, IF A LESSER
NUMBER, AT THE OPTION OF ASSOCIATED, ON AN ISSUED AND OUTSTANDING BASIS). THE
OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO
PURCHASE. SEE "GENERAL TERMS OF THE OFFER" AND "CERTAIN CONDITIONS OF THE
OFFER."
---------------
THE BOARD OF DIRECTORS OF UNITED STATIONERS INC. (THE "COMPANY") HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER (AS HEREINAFTER DEFINED), TAKEN AS
A WHOLE, ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER, THE TENDER AGREEMENT (AS HEREINAFTER DEFINED)
AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER, TENDER THEIR SHARES THEREUNDER TO ASSOCIATED AND, IF REQUIRED BY
APPLICABLE LAW, APPROVE AND ADOPT THE MERGER AND THE MERGER AGREEMENT.
---------------
ASSOCIATED HAS ENTERED INTO AN AGREEMENT TO TENDER WITH THE SELLER
STOCKHOLDERS (AS HEREINAFTER DEFINED) PURSUANT TO WHICH, AMONG OTHER THINGS,
SUCH SELLER STOCKHOLDERS HAVE AGREED TO TENDER, IN THE OFFER, UPON THE TERMS
AND SUBJECT TO THE CONDITIONS SET FORTH IN THE TENDER AGREEMENT, 5,025,688
SHARES (REPRESENTING APPROXIMATELY 25.3% OF THE SHARES ON A FULLY DILUTED
BASIS AND 27.0% OF THE SHARES OUTSTANDING AS OF FEBRUARY 10, 1995) AT THE
OFFER PRICE.
---------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR A PORTION OF SUCH STOCKHOLDER'S
SHARES SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
MANUALLY SIGNED FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE
LETTER OF TRANSMITTAL, MAIL OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO
THE DEPOSITARY AND EITHER DELIVER THE CERTIFICATES FOR SUCH SHARES TO THE
DEPOSITARY ALONG WITH THE LETTER OF TRANSMITTAL OR TENDER SUCH SHARES PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH HEREIN UNDER "PROCEDURE
FOR TENDERING SHARES" OR (2) REQUEST ITS BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR IT. ANY
STOCKHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR THEIR NOMINEE MUST CONTACT SUCH BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF SUCH STOCKHOLDER
DESIRES TO TENDER SUCH SHARES.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer on a timely basis should tender
such Shares by following the procedures for guaranteed delivery set forth
herein under "Procedure for Tendering Shares -- Guaranteed Delivery."
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers as set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other related materials may be directed to
the Information Agent or to brokers, dealers, commercial banks and trust
companies.
---------------
The Dealer Manager for the Offer is:
CHASE SECURITIES, INC.
February 21, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
I. INTRODUCTION...................................................... 1
II. GENERAL TERMS OF THE OFFER........................................ 3
III. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES..................... 6
IV. PROCEDURE FOR TENDERING SHARES.................................... 7
V. WITHDRAWAL RIGHTS................................................. 10
VI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE
MERGER........................................................... 11
VII. PRICE RANGE OF THE SHARES AND DIVIDENDS........................... 13
VIII. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ LISTING,
EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES.................. 14
IX. CERTAIN INFORMATION CONCERNING THE COMPANY........................ 15
X. CERTAIN INFORMATION CONCERNING ASSOCIATED......................... 17
XI. OPERATIONS AFTER THE OFFER AND THE MERGER......................... 36
XII. SOURCE AND AMOUNT OF FUNDS........................................ 47
XIII. BACKGROUND OF THE OFFER........................................... 54
XIV. THE MERGER........................................................ 55
XV. DIVIDENDS AND DISTRIBUTIONS....................................... 72
XVI. CERTAIN CONDITIONS OF THE OFFER................................... 73
XVII. CERTAIN LEGAL MATTERS............................................. 74
XVIII. FEES AND EXPENSES................................................. 76
XIX. MISCELLANEOUS..................................................... 76
XX. CONSOLIDATED FINANCIAL STATEMENTS................................. F-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
United Stationers Inc.
I. INTRODUCTION
Associated Holdings, Inc., a Delaware corporation ("Associated"), hereby
offers to purchase up to 17,201,839 shares of the common stock, $0.10 par
value (the "Shares"), of United Stationers Inc., a Delaware corporation (the
"Company"), which Shares represent 92.5% of the Shares outstanding as of
February 10, 1995 (such number of shares being the "Maximum Number"), at a
purchase price of $15.50 per share (the "Offer Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of February 13, 1995 (the "Merger Agreement") between Associated and the
Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Associated and further provides that, subject to
the satisfaction or waiver of certain conditions, Associated will be merged
with and into the Company (the "Merger"), with the Company surviving the
Merger (as such, the "Surviving Corporation"), and Associated Stationers, Inc.
("ASI"), a Delaware corporation and wholly owned subsidiary of Associated,
immediately following the Merger will be merged with and into United
Stationers Supply Co. ("USSC"), an Illinois corporation and wholly owned
subsidiary of the Company (the "Subsidiary Merger" and, collectively with the
Merger, the "Mergers"), with USSC surviving the Subsidiary Merger (as such,
the "Surviving Subsidiary"). After giving effect to the Mergers, the pre-
Merger holders of common stock, $0.01 par value, of Associated ("Associated
Common Stock"), and options and warrants exercisable for Associated Common
Stock will own or have the right to acquire an aggregate of 80.0% of the
common stock of the Surviving Corporation on a fully diluted basis, the pre-
Merger holders of Shares who did not tender or, by virtue of the total number
of Shares tendered, have a remaining residual equity position (excluding
Associated and its affiliates, the Company, any subsidiaries of the Company
and any holders of Dissenting Shares (as hereinafter defined)), will own an
aggregate of 20.0% of the outstanding common stock of the Surviving
Corporation on a fully diluted basis and the Surviving Corporation will own
all of the outstanding common stock of the Surviving Subsidiary. As part of
the Merger, pre-Merger holders of Shares (excluding Associated and its
affiliates, the Company, any subsidiaries of the Company and any holders of
Dissenting Shares) will also receive an aggregate amount of cash equal to the
difference between $266,628,495 (the aggregate amount of cash that would be
paid to holders of Shares if the Maximum Number of Shares were validly
tendered and not withdrawn in the Offer) and the actual amount of cash paid by
Associated to purchase Shares in the Offer. Thus, assuming that all options
and other rights exercisable for Shares are terminated prior to the Expiration
Date (as hereinafter defined), if only the Minimum Number of Shares (as
hereinafter defined) is purchased by Associated in the Offer, an aggregate of
$122,504,969 will be paid for the Cash Portion (as hereinafter defined) of
Shares in the Merger, and if the Maximum Number of Shares are purchased by
Associated in the Offer, no cash will be paid in the Merger. The Merger will
become effective (the "Effective Time") upon the filing of a certificate of
merger effecting the Merger with the Secretary of State of the State of
Delaware, and the Subsidiary Merger will become effective upon the filing of a
certificate of merger effecting the Subsidiary Merger with the Secretary of
State of the State of Delaware and articles of merger effecting the Subsidiary
Merger with the Secretary of State of the State of Illinois and the issuance
of an Illinois Certificate of Merger (the date on which the Mergers occur is
referred to herein as the "Merger Date"). For a detailed description of the
Merger and the merger consideration to be paid in respect of each Share
pursuant thereto, see "The Merger."
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND
THE MERGER, TAKEN AS A WHOLE, ARE FAIR TO AND IN THE BEST INTERESTS
1
<PAGE>
OF THE STOCKHOLDERS OF THE COMPANY, HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER, THE TENDER AGREEMENT
(AS HEREINAFTER DEFINED) AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS
OF THE COMPANY ACCEPT THE OFFER, TENDER THEIR SHARES THEREUNDER TO ASSOCIATED
AND, IF REQUIRED BY APPLICABLE LAW, APPROVE AND ADOPT THE MERGER AND THE MERGER
AGREEMENT.
Concurrently with the execution of the Merger Agreement, Associated entered
into an Agreement to Tender (the "Tender Agreement") with certain stockholders
of the Company (the "Seller Stockholders"), including certain members of the
Company's management, owning, in the aggregate, 5,025,688 Shares (representing
approximately 25.3% of the outstanding Shares on a fully diluted basis and
27.0% of the Shares outstanding as of February 10, 1995). Pursuant to the
Tender Agreement, the Seller Stockholders have agreed, subject to the
conditions set forth in the Tender Agreement, to validly tender pursuant to the
Offer and not withdraw all Shares which are owned of record or beneficially by
them prior to the Expiration Date. See "The Merger -- The Tender Agreement."
Each of William Blair & Company ("William Blair") and Lazard Freres & Co.
("Lazard Freres"), the Company's financial advisors, has delivered to the
Company its written opinion, dated the date of the Merger Agreement, that the
consideration to be received in the Offer and the Merger, taken as a whole, is,
in its opinion, fair to the holders of Shares (other than Associated) from a
financial point of view. A copy of each of the opinions of William Blair and
Lazard Freres is contained in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities
and Exchange Commission (the "Commission") in connection with the Offer, a copy
of which is being furnished to the stockholders concurrently herewith.
The Company's second fiscal quarter ends February 28, 1995. Associated has
been informed that the Company does not normally announce its quarterly results
until the end of March. However, the Company has informed Associated that the
Company believes that it is appropriate under the circumstances to state its
present view as to the anticipated results for the second fiscal quarter based
on results to a recent date. Associated has been informed that the Company
anticipates that for the second quarter it will report earnings per share of
approximately $0.40, compared with $0.21 for the second fiscal quarter of
fiscal 1994, an increase of 90.5%. If the anticipated second quarter results
are realized, earnings per share for the first six months of fiscal 1995 will
be approximately $0.77 per share compared to $0.53 per share for the first six
months of fiscal 1994, an increase of 45.3%. Associated believes that this
information was available to William Blair and Lazard Freres at the time that
each entity rendered its opinion.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF
SHARES (THE "MINIMUM NUMBER OF SHARES") WHICH WOULD CONSTITUTE, WHEN ADDED TO
THE SHARES THEN BENEFICIALLY OWNED BY ASSOCIATED, AT LEAST A MAJORITY OF THE
SHARES OUTSTANDING ON A FULLY DILUTED BASIS (OR, IF A LESSER NUMBER, AT THE
OPTION OF ASSOCIATED, ON AN ISSUED AND OUTSTANDING BASIS) (THE "MINIMUM TENDER
CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN
THIS OFFER TO PURCHASE. SEE "GENERAL TERMS OF THE OFFER" AND "CERTAIN
CONDITIONS OF THE OFFER."
The Company has informed Associated that, as of February 10, 1995, 18,596,582
Shares were outstanding and 1,263,610 Shares were reserved for issuance upon
the exercise of outstanding stock options granted by the Company. As of the
date hereof, Associated did not own any Shares. Based upon the foregoing and
assuming that no additional options, warrants or other rights exercisable for
Shares are issued after February 10, 1995 and prior to the Expiration Date, the
Minimum Number of Shares would be 9,930,097. Pursuant to the Merger Agreement,
the Company has agreed to use its
2
<PAGE>
reasonable best efforts to cause each outstanding option to be converted, as of
the Effective Time, into an amount of cash equal to the difference between the
exercise price of such option and $15.50, multiplied by the number of Shares
into which such option is exercisable.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required by applicable law, the approval of
the Merger by the requisite vote or consent of the stockholders of the Company.
Under the General Corporation Law of the State of Delaware (the "Delaware
Code"), the vote necessary to approve the Merger will be the affirmative vote
of at least a majority of the outstanding Shares, including Shares held by
Associated and its affiliates. SO LONG AS THE MINIMUM TENDER CONDITION IS
SATISFIED, ASSOCIATED WILL BE ABLE TO CONSUMMATE THE MERGER WITHOUT THE CONSENT
OF ANY OTHER HOLDERS OF SHARES. If Associated acquires at least a majority but
less than 80.0% of the outstanding Shares pursuant to the Offer or otherwise,
the Company shall be required to hold a stockholders meeting to approve the
Merger Agreement (and thereby effect the Merger). Pursuant to its restated
certificate of incorporation, the Company is required to provide its
stockholders with at least 50 days' prior written notice of such meeting. If
Associated acquires at least 80.0% of the outstanding Shares pursuant to the
Offer or otherwise, Associated will be permitted, pursuant to the terms of the
Company's restated certificate of incorporation and the Delaware Code, to
approve the Merger Agreement (and thereby effect the Merger) by written consent
without the necessity of holding a meeting of the Company's stockholders
(although the Company would be required, pursuant to its restated certificate
of incorporation, to provide its stockholders with at least 30 days prior
written notice of the Merger). Further, if Associated acquires at least 90.0%
of the outstanding Shares pursuant to the Offer or otherwise, Associated will
be able to effect a short-form merger pursuant to Section 253 of the Delaware
Code without prior notice to, or any action by, any other stockholder of the
Company. ASSOCIATED HAS AGREED IN THE MERGER AGREEMENT TO VOTE ALL SHARES
ACQUIRED BY IT IN THE OFFER IN FAVOR OF THE MERGER AGREEMENT AND THE MERGER.
The Merger Agreement and the Tender Agreement are more fully described herein
under "The Merger." Certain federal income tax consequences of the sale of
Shares pursuant to the Offer and the exchange of Shares pursuant to the Merger
are described herein under "Certain Federal Income Tax Consequences of the
Offer and the Merger."
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer or
the Merger. Associated will pay all charges and expenses of Chase Securities,
Inc. ("Chase Securities"), as the dealer manager (the "Dealer Manager"), The
Chase Manhattan Bank (National Association) ("Chase Bank"), as the depositary
(in such capacity, the "Depositary"), and Georgeson & Company Inc., as the
information agent (the "Information Agent"), incurred in connection with the
Offer. See "Fees and Expenses."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
II. GENERAL TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including the
Minimum Tender Condition and, if the Offer is extended or amended, the terms
and conditions of any such extension or amendment), Associated will accept for
payment (and thereby purchase) all Shares validly tendered and not withdrawn
(as provided below under "Withdrawal Rights") prior to the Expiration Date,
provided that Associated will not be obligated to purchase more than the
Maximum Number of Shares. As used in the Offer, the term "Expiration Date"
shall mean 5:00 p.m., New York City time, on Tuesday, March 21, 1995, unless
and until Associated, in accordance with the terms of applicable law, the Offer
and the
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Merger Agreement, shall have extended the period of time during which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by Associated, shall expire. As
used in this Offer to Purchase, "business day" has the meaning set forth in
Rule 14d-1(c)(6) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
In the event that the Offer is not consummated, Associated may seek to
acquire additional Shares through open market purchases, privately negotiated
transactions or otherwise, upon such terms and conditions and at such prices as
it shall determine, which may be more or less than the Offer Price and could be
for cash or other consideration.
Upon the terms and subject to the conditions of the Offer, if more than the
Maximum Number of Shares shall be validly tendered and not withdrawn prior to
the Expiration Date, Associated will, upon the terms and subject to the
conditions of the Offer, purchase the Maximum Number of Shares on a pro rata
basis (with adjustments to avoid purchases of fractional shares) based upon the
number of Shares validly tendered and not withdrawn prior to the Expiration
Date.
Because of the difficulty of determining the precise number of Shares
properly tendered and not withdrawn, if proration is required, Associated does
not expect to be able to announce the final proration factor until
approximately seven Nasdaq National Market ("NASDAQ") trading days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Stockholders may
obtain such preliminary information from the Information Agent and may not be
able to obtain such information from their brokers. In the event that proration
is required, Associated will not pay for any Shares accepted for payment
pursuant to the Offer until the final proration factor is known.
The Offer is conditioned upon satisfaction of the Minimum Tender Condition
and certain other conditions described below under "Certain Conditions of the
Offer." Pursuant to the terms of the Merger Agreement, without the prior
written consent of the Company, or except as required by law, Associated will
not (i) increase or decrease the number of Shares being sought in the Offer,
(ii) change the form of consideration payable in the Offer, (iii) add
additional conditions to the Offer, (iv) extend the time of original expiration
of the Offer if all of the Offer conditions are then satisfied or waived or (v)
otherwise amend the Offer without the prior written or oral consent of the
Company, which consent shall not be unreasonably withheld, and, in any event,
will be deemed given if the Company does not deliver to Associated an objection
in writing within 24 hours after receipt of Associated's written request for
consent describing the proposed amendment (other than amendments which increase
the amount of cash consideration payable for the purchase of Shares pursuant to
the Offer).
In addition, if by the Expiration Date any or all of the conditions of the
Offer are not satisfied or waived, Associated reserves the right, subject to
the terms of the Merger Agreement (but shall not be obligated), to (i) extend
the period during which the Offer is to remain open until 5:00 p.m., New York
City time, on May 15, 1995 (or such later date, but not beyond 5:00 p.m., New
York City time on June 30, 1995, to which the financing commitment contained in
the Commitment Letter (as defined under "Source and Amount of Funds --
Financing Commitment Letter") may be extended (the "Deadline Time")) and,
subject to the rights of tendering stockholders to withdraw their Shares,
retain all tendered Shares until the Expiration Date, (ii) waive any or all of
the conditions of the Offer (including, with the consent of the Company and
Chase Bank, the Minimum Tender Condition) and, subject to complying with
applicable rules and regulations of the Commission, accept for payment and
purchase all validly tendered Shares and not extend the Offer or (iii)
terminate the Offer and not accept for payment any Shares and return promptly
all tendered Shares to tendering stockholders. Under no circumstances will
interest on the Offer Price be paid by Associated, regardless of any delay in
making such payment.
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Subject to the terms of the Merger Agreement described above, Associated
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to the Depositary and by making a
public announcement of such extension. There can be no assurance that
Associated will exercise its right to extend the Offer. Associated also
expressly reserves the right, subject to applicable laws (including applicable
regulations of the Commission promulgated under the Exchange Act) and to the
terms of the Merger Agreement, at any time or from time to time, (i) to delay
acceptance for payment of or payment for any Shares, regardless of whether the
Shares were theretofore accepted for payment, or to terminate the Offer and not
accept for payment or pay for any Shares not theretofore accepted for payment
or paid for, upon the occurrence of any of the conditions specified below under
"Certain Conditions to the Offer," by giving oral or written notice of such
delay in payment or termination to the Depositary, and (ii) to amend the Offer
in any respect, by giving oral or written notice to the Depositary. Any
extension, delay in payment, termination or amendment will be followed as
promptly as practicable by public announcement, the announcement in the case of
an extension to be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which Associated may choose to make any public
announcement, Associated will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a press
release to the Dow Jones News Service or as otherwise may be required by law or
applicable regulation or practice. The reservation by Associated of the right
to delay acceptance for payment of or payment for Shares is subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that
Associated pay the consideration offered or return the Shares deposited by or
on behalf of stockholders promptly after the termination or withdrawal of the
Offer. Any delay in acceptance for payment or payment beyond the time permitted
by applicable law will be effectuated by an extension of the period of time
during which the Offer is open.
The Commission has announced that, under its interpretation of Rules 14d-4(c)
and 14d-6(d) under the Exchange Act, material changes in the terms of a tender
offer or information concerning a tender offer may require that such tender
offer be extended so that it remains open for a sufficient period of time to
allow security holders to consider such material changes or information in
deciding whether or not to tender or withdraw their securities. The minimum
period during which an offer must remain open following material changes in the
terms of the Offer or information concerning the Offer, other than a change in
price or a change in percentage of securities sought, will depend upon the
facts and circumstances, including the relative materiality of the terms or
information. If Associated decides, subject to the consent of the Company and
Chase Bank, as appropriate, to increase or decrease the consideration in the
Offer, to make a change in the percentage of Shares sought or to change or
waive the Minimum Tender Condition and, if at the time that notice of any such
change is first published, sent or given to stockholders, the Offer is
scheduled to expire at any time earlier than the tenth business day after (and
including) the date of such notice, then the Offer will be extended at least
until the expiration of such period of ten business days.
The Company has provided Associated with its stockholder list and security
position listings for the purpose of disseminating the Offer to stockholders.
This Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares by Associated.
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III. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including the
Minimum Tender Condition and, if the Offer is extended or amended, the terms
and conditions of any such extension or amendment), Associated will accept for
payment (and thereby purchase) and, under the terms of the Offer, pay for up to
the Maximum Number of Shares validly tendered and not properly withdrawn on or
prior to the Expiration Date, as soon as practicable after the later of (i) the
Expiration Date and (ii) the date of satisfaction or waiver of all of the
conditions to the Offer set forth below under "Certain Conditions of the
Offer." Any determination concerning the satisfaction of such terms and
conditions shall be within the sole discretion of Associated, and any such
determination will be final and binding on all tendering stockholders. See
"Certain Conditions of the Offer." Associated expressly reserves the right, in
its sole discretion, subject to applicable laws and regulations, to delay
acceptance for payment of or payment for Shares in order to comply, in whole or
in part, with any applicable law, government regulation or condition contained
herein. See "Certain Conditions of the Offer."
In all cases, payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates for such Shares
(or a timely Book-Entry Confirmation (as defined below under "Procedure for
Tendering Shares -- Book-Entry Transfer") with respect to such Shares) and (ii)
the Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed with all required signature guarantees, and all
other documents required by the Letter of Transmittal. See "Procedure for
Tendering Shares." Payment for Shares accepted for payment pursuant to the
Offer may be delayed in the event of proration due to the difficulty of
determining the number of Shares validly tendered and not withdrawn. See
"General Terms of the Offer."
For purposes of the Offer, Associated will be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when Associated
gives oral or written notice to the Depositary of Associated's acceptance of
such Shares for payment. In all cases, payment for Shares purchased pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from Associated and transmitting payment to tendering
stockholders whose Shares have theretofore been accepted for payment. If, for
any reason, acceptance for payment of any Shares tendered pursuant to the Offer
is delayed, or Associated is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to Associated's rights described
below under "Certain Conditions of the Offer," the Depositary may,
nevertheless, on behalf of Associated, retain tendered Shares, and such Shares
may not be withdrawn, except to the extent that the tendering stockholders are
entitled to withdrawal rights as described below under "Withdrawal Rights" and
as otherwise required by Rule 14e-1(c) under the Exchange Act. Under no
circumstances will interest on the Offer Price be paid by Associated,
regardless of any delay in making such payment. Upon deposit of funds with the
Depositary for the purpose of making payments to tendering stockholders,
Associated's obligation to make such payments shall be satisfied and tendering
stockholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares pursuant
to the Offer. Associated will pay any stock transfer taxes incident to the
transfer to it of validly tendered Shares, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, as well as any charges and expenses
of the Dealer Manager, the Depositary and the Information Agent.
If any tendered Shares are not purchased for any reason pursuant to the terms
and conditions of the Offer (including proration due to the tender of Shares
pursuant to the Offer in excess of the Maximum Number of Shares), or if
certificates are submitted for more Shares than are tendered, certificates for
such Shares not purchased or tendered will be returned pursuant to the
instructions of the tendering stockholder without expense to the tendering
stockholder (or, in the case of Shares delivered by book-entry transfer into
the Depositary's account at a Book-Entry Transfer Facility (as defined below
under "Procedure for Tendering Shares -- Book-Entry Transfer") pursuant to the
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procedures described below under "Procedures for Tendering Shares," such
Shares will be credited to an account maintained at the appropriate Book-Entry
Transfer Facility) as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Associated increases the consideration to
be paid per Share pursuant to the Offer, Associated will pay such increased
consideration for all Shares purchased pursuant to the Offer, whether or not
such Shares were tendered prior to such increase in consideration.
Associated reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer; provided, however, that no such transfer or
assignment will release Associated from its obligations under the Offer or
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
IV. PROCEDURE FOR TENDERING SHARES
VALID TENDERS
For Shares to be validly tendered pursuant to the Offer, either (i) a Letter
of Transmittal (or a manually signed facsimile thereof), properly completed
and duly executed, with any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date and either (a) certificates
representing Shares must be received by the Depositary at any such address
prior to the Expiration Date or (b) such Shares must be delivered pursuant to
the procedures for book-entry transfer set forth below and a Book-Entry
Confirmation must be received by the Depositary prior to the Expiration Date
or (ii) the tendering stockholder must comply with the guaranteed delivery
procedures set forth below. No alternative, conditional or contingent tenders
will be accepted.
IN ALL CASES, SHARES SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE THEREOF) IS RECEIVED BY THE DEPOSITARY.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company, the Midwest Securities Trust Company and the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at such Book-Entry Transfer Facility in accordance with that Book-Entry
Transfer Facility's procedure for such transfer. However, although delivery of
Shares may be effected through book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility, the Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must, in
any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
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delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at a Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation." DELIVERY
OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-
ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
SIGNATURE GUARANTEES
Signatures on Letters of Transmittal must be guaranteed by a member firm of a
registered national securities exchange (registered under Section 6 of the
Exchange Act) or of the National Association of Securities Dealers, Inc. (the
"NASD") or by a commercial bank or trust company having an office or
correspondent in the United States or by any other "Eligible Guarantor
Institution" (as defined in Rule 17Ad-15 under the Exchange Act) (each of the
foregoing constituting an "Eligible Institution"), unless the Shares tendered
thereby are tendered (i) by a registered holder of Shares who has not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If the certificates representing Shares are registered in the name
of a person other than the signer of the Letter of Transmittal or if payment is
to be made or certificates for Shares not accepted for payment or not tendered
are to be returned to a person other than the registered holder(s), then the
certificates representing such Shares must be endorsed or accompanied by
appropriate stock powers, in each case signed exactly as the name or names of
the registered holder or holders appear on the certificates, with the
signature(s) on the certificates or stock powers guaranteed as described above
and as provided in the Letter of Transmittal. See Instructions 1 and 5 of the
Letter of Transmittal.
GUARANTEED DELIVERY
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such Shares may nevertheless be tendered if all of the following
guaranteed delivery procedures are complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Associated herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof) and any other documents required
by the Letter of Transmittal, are received by the Depositary within five
NASDAQ trading days after the date of execution of such Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mailed to the Depositary and must include
an endorsement by an Eligible Institution in the form set forth in such Notice
of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted
pursuant to the Offer in all cases will be made only after timely receipt by
the Depositary of certificates for (or Book-Entry Confirmation with respect to)
such Shares, a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees
and all other documents required by the Letter of Transmittal.
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BACKUP FEDERAL INCOME TAX WITHHOLDING
To prevent backup federal income tax withholding with respect to payments
made to stockholders with respect to the purchase price of Shares purchased
pursuant to the Offer, each such stockholder must provide the Depositary with
his correct taxpayer identification number and certify that he is not subject
to backup federal income tax withholding by completing the substitute Form W-9
included in the Letter of Transmittal. See "Certain Federal Income Tax
Consequences of the Offer and the Merger" and Instruction 10 of the Letter of
Transmittal. See "Certain Federal Income Tax Consequences of the Offer and the
Merger."
DETERMINATION OF VALIDITY
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
pursuant to any of the procedures described above will be determined by
Associated in its sole discretion, but within the guidelines of applicable law,
which determination shall be final and binding on all parties. Associated
reserves the absolute right to reject any or all tenders of Shares determined
not to be in proper form or the acceptance of or payment for which may, in the
opinion of counsel, be unlawful and reserves the absolute right to waive any
defect or irregularity in any tender of Shares. Subject to the terms of the
Merger Agreement, Associated also reserves the absolute right to waive or to
amend any of the conditions of the Offer. Associated's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding on all parties. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Associated, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or incur any liability for failure to give any such notification.
OTHER REQUIREMENTS
By executing a Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of Associated as such stockholder's attorneys-in-fact and
proxies, with full power of substitution, in the manner set forth in the Letter
of Transmittal, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and purchased by Associated and with
respect to any and all other Shares or other securities issued or issuable in
respect of such Shares (other than the shares of common stock of the Surviving
Corporation issuable pursuant to the Merger), on or after the date of the
Offer. All such powers of attorney and proxies shall be considered coupled with
an interest in the tendered Shares. Such appointment will be effective when,
and only to the extent that, Associated accepts such Shares for payment. Upon
such acceptance for payment, all prior powers of attorney and proxies given by
such stockholder with respect to such Shares (and any other Shares or other
securities so issued in respect of such purchased Shares) will be revoked,
without further action, and no subsequent powers of attorney and proxies may be
given (and, if given, will not be deemed effective) by such stockholder. The
designees of Associated will be empowered to exercise all voting and other
rights of such stockholder with respect to such Shares (and any other Shares or
securities so issued in respect of such purchased Shares) as they in their sole
discretion may deem proper, including, without limitation, in respect of any
annual or special meeting of the Company's stockholders, or any adjournment or
postponement thereof, or in connection with any action by written consent in
lieu of any such meeting or otherwise (including any such meeting or action by
written consent to approve the Merger). Associated reserves the absolute right
to require that, in order for Shares to be validly tendered, immediately upon
Associated's acceptance for payment of such Shares, Associated must be able to
exercise full voting and other rights with respect to such Shares, including
voting at any meeting of stockholders then scheduled.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering stockholder's acceptance of the terms and conditions
of the Offer, as well as the tendering
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stockholder's representation and warranty to Associated that (i) such
stockholder has a net long position in the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act and (ii) the tender of such Shares
complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person,
directly or indirectly, to tender Shares for such person's own account unless,
at the time of tender, the person so tendering (a) has a net long position
equal to or greater than the amount of (1) Shares tendered or (2) other
securities immediately convertible into or exchangeable or exercisable for the
Shares tendered and such person will acquire such Shares for tender by
conversion, exchange or exercise and (b) will cause such Shares to be delivered
in accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. Associated's acceptance for payment of Shares tendered pursuant
to the Offer will constitute a binding agreement between the tendering
stockholder and Associated upon the terms and conditions of the Offer.
V. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided herein. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Associated as provided herein, may also be withdrawn at
any time after April 21, 1995, or at such later time as may apply if the Offer
is extended. If Associated extends the Offer, is delayed in its purchase of or
payment for Shares or is unable to purchase or pay for Shares for any reason,
then, without prejudice to the rights of Associated hereunder, tendered Shares
may be retained by the Depositary on behalf of Associated and may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth herein.
This reservation by Associated of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires Associated to pay the consideration
offered or return Shares deposited by or on behalf of stockholders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be received by the Depositary in a
timely manner at one of its addresses set forth on the back cover of this Offer
to Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder, if different from that of the person who
tendered such Shares. If certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then (except in the
case of Shares tendered for the account of an Eligible Institution), prior to
the physical release of such certificates, the tendering stockholder must also
submit the serial numbers shown on the particular certificates evidencing the
Shares to be withdrawn, and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer set forth under "Procedure for Tendering
Shares -- Book-Entry Transfer," the notice of withdrawal must specify the name
and number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by
Associated, in its sole discretion, whose determination shall be final and
binding on all parties. No withdrawal of Shares shall be deemed to have been
properly made until all defects and irregularities have been cured or waived.
None of Associated, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for
failing to give such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered again at any subsequent time prior
to the Expiration Date by following any of the procedures described above under
"Procedure for Tendering Shares."
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VI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following summary addresses the material federal income tax consequences
of the Offer and the Merger to the stockholders of the Company. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury regulations, administrative pronouncements and judicial
decisions now in effect, all of which are subject to change (possibly on a
retroactive basis). The summary does not address foreign, state or local tax
consequences or estate or gift tax considerations. Furthermore, the summary
does not address all aspects of federal income taxation that may be relevant to
stockholders in light of their particular circumstances or to certain types of
investors subject to special treatment under the federal income tax laws (such
as dealers in securities, tax-exempt organizations, life insurance companies,
other financial institutions, pass-through entities, regulated investment
companies and foreign taxpayers).
The following discussion assumes that each existing owner of the Shares holds
such stock as a capital asset within the meaning of Section 1221 of the Code.
Associated has not sought and will not seek any rulings from the Internal
Revenue Service (the "IRS") with respect to any of the matters discussed
herein. The discussion is not binding on the IRS or the courts, and there can
be no assurance that the IRS will not take one or more contrary positions.
TAX CONSEQUENCES TO EXISTING STOCKHOLDERS OF THE COMPANY
Receipt of Cash in Tender Offer and the Merger. For federal income tax
purposes, stockholders of the Company receiving cash in exchange for Shares
pursuant to the Offer and the Merger should be treated as having transferred
Shares back to the Company in exchange for cash (the "Redeemed Shares"), except
to the extent that the cash received is allocable to equity contributed to
Associated in exchange for stock of Associated in conjunction with the Offer
and the Merger, which Shares should be treated as purchased by Associated (the
"Purchased Shares"). Capital gain or loss will be recognized by a stockholder
of the Company with respect to the Purchased Shares. Capital gain or loss will
be recognized by a stockholder of the Company with respect to the Redeemed
Shares only if the purchase of such Shares qualifies for sale or exchange
treatment under Section 302 of the Code. Under Section 302(b)(2) of the Code
(the "substantially disproportionate test"), sale or exchange treatment will be
available with respect to Redeemed Shares for each Company stockholder who will
not own after completion of the Offer and Merger, either actually or under the
constructive ownership rules of Section 318 of the Code, Shares constituting
80.0% or more of the percentage of the Shares actually or constructively owned
by such stockholder immediately before the consummation of the Offer, provided
that such stockholder owns (actually or constructively) less than 50.0% of the
shares of common stock of the Surviving Corporation outstanding after the
Merger. If the requirements of Section 302(b)(2) are not satisfied, a
stockholder may nonetheless be entitled to sale or exchange treatment with
respect to Redeemed Shares in the event that the redemption of such Shares is
"not essentially equivalent to a dividend" within the meaning of Section
302(b)(1) of the Code by reason of being a "meaningful reduction" in the
stockholder's interest in the Company. The IRS has indicated in published
rulings that even a small reduction in the proportionate interest of a small
minority stockholder in a publicly-held corporation who owns only a nominal
percentage of the corporation's stock and exercises no control over corporate
affairs may constitute such a "meaningful reduction." For purposes of Section
302(b) of the Code, stock is constructively owned under Section 318 of the Code
if the stockholder has an option or other right to purchase the stock or if the
stockholder bears a specified relationship to the owner of the stock (such as a
stockholder owning 50.0% or more in value of the stock of a corporation that
owns, actually or constructively, Shares or an individual stockholder that is a
member of the family of another stockholder). In the case of any stockholder
who does not tender Shares in the Offer, such stockholder will not be entitled
to sale or exchange treatment under Section 302 of the Code if such
stockholder's percentage ownership of common stock of the Surviving Corporation
after the Merger is not less than such stockholder's percentage ownership of
Shares before the consummation of the
11
<PAGE>
Offer, taking into account actual and constructive stock ownership. Each
existing stockholder of the Company should consult his own personal tax advisor
to determine whether he will qualify for sale or exchange treatment under
Section 302 of the Code with respect to Shares purchased in the Offer and the
Merger.
Each Company stockholder the sale of whose Shares qualifies for sale or
exchange treatment under Section 302 of the Code will recognize capital gain or
loss with respect to such Shares in an amount equal to the difference between
the cash received in exchange for such Shares (less any directly-related
selling expenses) and the adjusted tax basis of such Shares. Capital gain or
loss recognized by a Company stockholder in connection with the purchase of his
Shares will be long-term capital gain or loss if the stockholder has held such
shares for more than 12 months as of the date the Offer is completed (in the
case of Shares sold in the Offer) or as of the Merger Date (in the case of
Shares cancelled in the Merger). Ordinary income of non-corporate taxpayers is
subject to taxation at a maximum, marginal federal income tax rate of 39.6%,
whereas long-term capital gains of such taxpayers are subject to federal income
taxation at a maximum rate of 28.0%. Both ordinary income and long-term capital
gains of corporate taxpayers are subject to federal income taxation at a
maximum, marginal rate of 35.0%. Capital losses of corporate and non-corporate
taxpayers may only be used to offset capital gains, subject to a de minimis
exception for non-corporate taxpayers that permits capital losses to offset
$3,000 of ordinary income each year. Capital losses of non-corporate taxpayers
in excess of the amount usable in any taxable year may be carried forward
indefinitely to succeeding taxable years; capital losses of corporations
generally may be carried back three years and forward five years. Legislation
has been proposed in Congress that would, if enacted into law, reduce the
maximum, marginal federal income tax rate on long-term capital gains to 19.8%
in the case of individuals and 17.5% in the case of corporations, generally
effective for sales and exchanges of capital assets after December 31, 1994.
There can be no assurance, however, that such proposed legislation will be
enacted or, if enacted, of the final form of such legislation.
If a Company stockholder is not entitled to sale or exchange treatment with
respect to his sale of Redeemed Shares in the Offer and the Merger, then the
cash received by such stockholder in exchange for such Shares will be taxable
as a dividend (i.e., as ordinary income) to the extent of the Company's current
and accumulated earnings and profits. Any such cash in excess of the Company's
earnings and profits will be treated as a return of capital to the extent of
the stockholder's adjusted tax basis in all of his Shares (including his
Redeemed Shares and any Remaining Shares), and the balance of such cash would
be treated as capital gain. Corporate stockholders may be entitled to a
dividends-received deduction under Section 243 of the Code with respect to that
portion (if any) of the cash received in the Offer or the Merger that is
taxable as a dividend, subject to potential limitations under the holding
period and debt-financed rules of Sections 246(c) and 246A of the Code and to a
potential basis reduction under Section 1059 of the Code for the nontaxed
portion of the dividend. Each stockholder of the Company that is a corporation
is urged to consult its own tax advisor to determine whether a dividends-
received deduction will be available to such stockholder and the tax
consequences of that deduction.
The Remaining Shares. No gain or loss will be recognized by the stockholders
of the Company with respect to the Remaining Shares (as defined in "The
Merger -- The Merger Agreement -- Effect of Merger").
Backup Withholding. Payments in connection with the Offer or the Merger may
be subject to "backup withholding" at a 31.0% rate, unless the stockholder (a)
is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. Any amount paid as backup withholding will be
creditable against the holder's federal income tax liability.
12
<PAGE>
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS NOT
TAX ADVICE. ACCORDINGLY, EACH PERSON CONSIDERING THE OFFER AND MERGER SHOULD
CONSULT WITH HIS, HER OR ITS OWN ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES
OF THE OFFER AND MERGER, INCLUDING THE APPLICABILITY OF STATE, LOCAL AND
FOREIGN TAX LAWS AND THE POSSIBILITY OF CHANGES IN APPLICABLE TAX LAWS.
VII. PRICE RANGE OF THE SHARES AND DIVIDENDS
The Shares are listed on NASDAQ under the symbol "USTR." The following table
sets forth, for the fiscal quarters indicated, the high and low bid prices per
Share on NASDAQ based upon public sources.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended August 31, 1992:
Quarter Ended November 30, 1991........................ $10 $ 8 1/8
Quarter Ended February 29, 1992........................ 12 3/8 8 1/4
Quarter Ended May 31, 1992............................. 13 3/4 12 1/8
Quarter Ended August 31, 1992.......................... 13 3/4 12
Fiscal Year Ended August 31, 1993:
Quarter Ended November 30, 1992........................ $15 3/4 $12 1/4
Quarter Ended February 28, 1993........................ 19 3/4 15 1/4
Quarter Ended May 31, 1993............................. 18 3/4 16 1/4
Quarter Ended August 31, 1993.......................... 16 3/4 12 3/4
Fiscal Year Ended August 31, 1994:
Quarter Ended November 30, 1993........................ $15 3/4 $13
Quarter Ended February 28, 1994........................ 15 1/4 12
Quarter Ended May 31, 1994............................. 15 1/2 10 1/2
Quarter Ended August 31, 1994.......................... 10 3/4 8 3/4
Fiscal Year Ended August 31, 1995:
Quarter Ended November 30, 1994........................ $10 1/4 $ 9 1/8
December 1, 1994 through February 16, 1995............. 15 1/4 9 3/4
</TABLE>
Based upon information from public sources, the Company paid aggregate
annual cash dividends for each of the fiscal years ended August 31, 1992, 1993
and 1994 in the amount of forty cents ($0.40) per Share. The Company intends
to pay a quarterly dividend in the amount of ten cents ($0.10) per Share for
the quarter ending February 28, 1995 and, if the Merger is not consummated
prior to June 15, 1995, to the extent approved by the Company Board of
Directors (prior to the Expiration Date) or the Continuing Directors (as
hereinafter defined) (after the Expiration Date), the Company intends to pay a
quarterly dividend in the amount of ten cents ($0.10) per share for the
quarter ending May 31, 1995. The Surviving Corporation does not intend to pay
dividends on shares of its common stock in the foreseeable future. See
"Dividends and Distributions."
On November 18, 1994, the day on which the Company initially provided
Associated with Projections (as discussed under "Background of the Offer" and
"Certain Information Concerning the Company -- Certain Company Projections"),
the closing bid per Share on NASDAQ was $9 7/8. On January 6, 1995, the last
full trading day before the public announcement by the Company of the
initiation of merger discussions with Associated, the closing bid per Share on
NASDAQ was $13 3/4. On February 13, 1995, the last full trading day before the
public announcement of Associated's intention to acquire the Shares, the
closing bid per Share on NASDAQ was $13 3/4. On February 17, 1995, the last
full trading day before the commencement of the Offer, the closing bid per
Share on NASDAQ was $15 1/8.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
13
<PAGE>
VIII. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ
LISTING, EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES
The purchase of Shares pursuant to the Offer will likely decrease both the
number of holders of Shares and the number of Shares that might otherwise trade
publicly and could adversely affect the liquidity and market value of the
remaining Shares held by the public.
The extent of the public market for the Shares and, according to the
published guidelines of the NASD, the continued trading of the Shares on
NASDAQ, after consummation of the Offer and the Merger, will depend upon
(i) the interest in maintaining a market in such Shares on the part of
securities firms, (ii) the possible termination of registration of such Shares
under the Exchange Act, as described below, (iii) there being at least 200,000
publicly held Shares with a market value of at least $1,000,000 held by a
minimum of 300 holders and (iv) certain other factors.
The Company has informed Associated that, as of February 10, 1995, 18,596,582
Shares were outstanding and 1,263,610 Shares were reserved for issuance upon
the exercise of outstanding stock options granted by the Company. If, as a
result of the purchase of Shares pursuant to the Offer or otherwise, trading of
the Shares on NASDAQ is discontinued, the liquidity of any market for the
Shares could be adversely affected. Associated cannot predict whether or to
what extent the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future prices to be
greater or less than the Offer Price.
The Shares are currently registered under Section 12(g) of the Exchange Act.
Although Associated does not currently intend to seek to cause the Company or
the Surviving Corporation, as applicable, to terminate the registration of the
Shares under the Exchange Act after the completion of the Offer or the Merger,
registration of the Shares under the Exchange Act may be terminated upon
application by the Company to the Commission if the Shares are neither listed
on a national securities exchange nor held by more than 300 holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the Commission and would make certain provisions of the
Exchange Act no longer applicable to the Company (such as the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions). Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the loan value of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Merger, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulation of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities" or be eligible for trading on NASDAQ.
14
<PAGE>
IX. CERTAIN INFORMATION CONCERNING THE COMPANY
GENERAL
The Company is a Delaware corporation with its principal executive offices at
2200 East Golf Road, Des Plaines, Illinois 60016-1267. According to the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994
(the "Company 10-K"), the Company, through its direct wholly owned subsidiary
USSC, is engaged in the wholesale distribution of a broad line of business
products to more than 14,000 resellers. According to the Company 10-K, USSC was
formed in 1922 under the name Utility Supply Co. and has operated under its
present name since 1960.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted from the Company 10-K and
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
November 30, 1994. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such reports and
other documents and all of the financial information (including any related
notes) contained therein. Such reports and other documents are available for
inspection and copies thereof are obtainable in the manner set forth below
under "-- Available Information."
15
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
AUGUST 31, NOVEMBER 30,
-------------------------------- ---------------------
1992 1993 1994 1993 1994
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales............... $1,094,275 $1,470,115 $1,473,024 $ 370,597 $ 402,198
Gross Profit on Sales... 245,687 344,519 322,901 84,774 84,957
Total Operating
Expenses............... 219,285 298,405 286,607 72,401 70,278
Income from Operations.. 26,402 46,114 36,294 12,373 14,679
Interest Expense........ 6,980 9,849 10,722 N.A. N.A.
Income Taxes............ 8,899 15,559 10,309 4,289 4,743
Income before Income
Taxes.................. 20,263 36,919 26,058 10,213 11,686
Net Income.............. $ 11,364 $ 21,360 $ 15,749 $ 5,924 $ 6,943
Weighted Average Number
of Common Shares
Outstanding............ 16,088,450 18,559,600 18,587,282 18,582,939 18,590,672
Net Income Per Common
Share.................. $ 0.71 $ 1.15 $ 0.85 $ 0.32 $ 0.37
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT AUGUST 31, AT NOVEMBER 30,
----------------- ---------------
1993 1994 1994
-------- -------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets................................ $416,919 $404,498 $450,734
Total Assets.................................. 609,234 587,257 630,143
Total Current Liabilities..................... 200,845 164,671 199,712
Total Long-term Obligations................... 156,208 159,149 162,215
Stockholders' Investment...................... 237,697 246,010 251,074
</TABLE>
CERTAIN COMPANY PROJECTIONS
The Company does not as a matter of course make public any projections as to
its future performance or earnings. However, during the course of discussions
initiated in November 1994 between Associated and the Company leading to the
Merger Agreement, the Company provided Associated with certain non-public
business and financial information about the Company. See "Background of the
Offer." The financial information provided to Associated included certain
projected financial information with respect to the Company's fiscal year
ending August 31, 1995 (the "Projections") showing potential results of
operations for such fiscal year based in part on the achievement of the
strategic goals, objectives and targets outlined therein. Such Projections
forecasted Net Sales of $1,556.5 million, Total Gross Margin of $327.5 million,
Total Operating Expenses of $278.5 million, Operating Results of $49.0 million
and Net Income of $21.8 million. Revised Projections for the fiscal year ending
August 31, 1995 were subsequently provided by the Company to Associated in
January 1995 containing two sets of estimates. See "Background of the Offer."
The higher of such revised Projections forecast Net Sales of $1,640.5 million,
Total Gross Margin of $346.6 million, Total Operating Expenses of $290.9
million, Operating Income of $55.8 million and Net Income of $26.0 million for
such year. The items herein correspond directly to the information provided in
the Projections provided to Associated. The Projections were prepared based
upon numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, which are inherently
uncertain and involve numerous factors beyond the Company's control.
Accordingly, the foregoing projections are not necessarily indicative of future
performance of the Company, which may be significantly more favorable or less
favorable than as set forth above.
16
<PAGE>
PROJECTIONS AND ESTIMATED FINANCIAL RESULTS OF THE TYPES SET FORTH ABOVE ARE
BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
DIFFICULT TO PREDICT, AND MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE PROJECTED AND ESTIMATED
RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS WOULD NOT BE SIGNIFICANTLY
HIGHER OR LOWER THAN THOSE PROJECTED AND ESTIMATED. IN ADDITION, THESE
PROJECTIONS AND ESTIMATES WERE NOT PREPARED WITH A VIEW TO COMPLIANCE WITH THE
PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND
FORECASTS AND ARE INCLUDED ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO
ASSOCIATED DURING ITS DISCUSSIONS WITH THE COMPANY. NONE OF THE COMPANY,
ASSOCIATED OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR
VALIDITY OF THE FOREGOING PROJECTIONS AND ESTIMATES.
AVAILABLE INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act. In accordance therewith, the Company files periodic reports,
proxy statements and other information with the Commission under the Exchange
Act relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons
in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected at the Commission's office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the Commission located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies may be obtained
upon payment of the Commission's prescribed fees by writing to its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Surviving Corporation may not be subject to such informational requirements.
See "Effect of the Offer on the Market for the Shares, Nasdaq Listing,
Exchange Act Registration and Margin Securities."
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or is based upon
publicly available documents on file with the Commission and other publicly
available information. Although Associated does not have any knowledge that
any such information is untrue, Associated does not take any responsibility
for the accuracy or completeness of such information or for any failure by the
Company to disclose events that may have occurred and may affect the
significance or accuracy of any such information.
X. CERTAIN INFORMATION CONCERNING ASSOCIATED
GENERAL
Associated, through its wholly owned subsidiary ASI, is engaged in the
wholesale distribution of a broad line of office products. Associated, a
Delaware corporation, is a privately owned holding company. Associated and ASI
were formed in January 1992 and August 1991, respectively, by an investor
group led by Wingate Partners, L.P., a private investment firm located in
Dallas, Texas ("Wingate Partners"). Wingate Partners acquired, for
approximately $90.0 million, certain of the assets and assumed certain of the
liabilities of the Wholesale Division of Boise Cascade Office Products
Corporation ("BCOP") in a transaction that was consummated on January 31, 1992
(the "Boise Transaction"). In October 1992, Associated expanded into the
California market with the acquisition of all the stock of Lynn-Edwards Corp.
("Lynn-Edwards") for approximately $2.4 million, plus assumed liabilities of
approximately $6.3
17
<PAGE>
million. Prior to the acquisition, Lynn-Edwards was a privately held company
headquartered in Sacramento, California, with distribution centers in Los
Angeles and Sacramento. Associated currently maintains 17 distribution centers
located primarily in the Midwest, Southeast and California. The principal
executive offices of Associated are located at 1075 Hawthorn Drive, Itasca,
Illinois 60143.
SELECTED FINANCIAL INFORMATION
As a private company, Associated is not subject to the informational filing
requirements of the Exchange Act and, accordingly, information relating to
Associated's business, financial condition and operating results and related
matters has not been generally available to the public. Set forth below is
certain summary combined financial information relating to Associated for the
eleven months ended December 31, 1992 and the fiscal years ended December 31,
1993 and 1994, in each case, derived from the audited financial statements
provided under "Consolidated Financial Statements." Such summary financial
information is qualified in its entirety by reference to such audited financial
statements and should be considered in connection with the more comprehensive
financial information provided under "Consolidated Financial Statements."
Associated and ASI accounted for the Boise Transaction as a purchase and, as a
result, recorded assets at fair market value at the date of acquisition.
Therefore, information about the predecessor company is not relevant and is not
presented herein.
ASSOCIATED HOLDINGS, INC.
AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
FEBRUARY 1,
TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------ -----------------
1992 1993 1994
------------ -------- --------
<S> <C> <C> <C>
Net Sales..................................... $365,944 $462,531 $477,445
Gross Profit.................................. 89,398 112,280 120,169
Operating Expenses............................ 79,889 102,274 103,020
Income from Operations........................ 9,509 10,006 17,149
Interest Expense.............................. 4,782 6,263 6,753
Income before Income Taxes.................... 4,727 3,743 10,396
Income Taxes.................................. 1,777 781 3,993
Net Income.................................... 2,950 2,962 6,403
BALANCE SHEET DATA:
<CAPTION>
AT DECEMBER 31,
------------------------------
1992 1993 1994
------------ -------- --------
<S> <C> <C> <C>
Total Current Assets.......................... $118,850 $131,673 $138,980
Total Assets.................................. 179,069 190,979 192,479
Total Current Liabilities..................... 72,454 74,371 82,526
Total Long-term Obligations................... 75,765 82,755 60,339
Total Stockholders' Equity.................... 11,901 12,857 26,425
OTHER FINANCIAL DATA:
<CAPTION>
FEBRUARY 1,
TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------ -----------------
1992 1993 1994
------------ -------- --------
<S> <C> <C> <C>
Preferred Dividends........................... $ 1,449 $ 2,047 $ 2,193
Net Income Available to Common Stockholders... 1,501 915 4,210
</TABLE>
18
<PAGE>
BUSINESS
General. Associated markets a broad line of approximately 20,000 office
products (sometimes referred to herein as stockkeeping units or "SKUs") to its
customers (office products resellers), which consist primarily of independent
commercial and retail dealers, local and national contract stationers, mail
order companies and superstores. Based upon industry sources, Associated
currently is the nation's third largest broad line office products wholesaler
as measured by revenue, number of distribution centers, volume of items shipped
and product catalogs distributed. Associated, by means of its 17 computer-
linked distribution facilities, provides a high level of service by delivering
substantially all of its products to its customers on a next day basis.
Business Strategy. Associated's business strategy has been to seek to improve
its competitive position, revenues and profitability through (i) a high level
of customer focus, (ii) differentiation from competitors, (iii) an emphasis on
cost reduction and (iv) growth, both internally and through selective
acquisitions.
Customer focus has been a key factor in Associated's business strategy in the
increasingly competitive office products industry. In addition, because
resellers sell directly to end users, Associated has also focused on the needs
of the end user by designing catalogs as well as providing training and
marketing programs to assist the reseller's marketing efforts.
Associated seeks to differentiate itself from its competitors by providing
its customers with a broad product selection, a high degree of product
availability, expeditious distribution and a variety of customer services.
Associated markets approximately 20,000 SKUs, one of the broadest product
selections available in the industry. It also has achieved a high fill rate (or
percentage of orders that are filled in accordance with the reseller's order
specifications) of 95.0% in order to assure availability of product to its
resellers. With the growing demand for rapid, on-time delivery, Associated has
targeted next day delivery on all of its orders. In order to assist its
customers, Associated provides numerous support services such as pricing
software programs, business management and marketing training programs and
electronic order entry systems. Associated continually reviews additional
support services which might be helpful to its customers.
Associated has continued to actively seek cost reductions at both the
corporate and operating expense levels. Examples of such cost reductions
include (i) reduced merchandise costs through suppliers' incentives, (ii)
reduced payroll and benefits costs through improved labor allocation and (iii)
reduced freight costs through ongoing refinements to delivery systems.
In order to help establish a national wholesale presence, Associated has
expanded its marketing and distribution capabilities through internal growth,
as well as an acquisition. For example, since January 1992, Associated has
opened new distribution facilities in Chicago and Baltimore and acquired Lynn-
Edwards to service the northern and southern California regions.
Customers. Associated sells to resellers of office products, consisting
primarily of independent commercial and retail dealers, local and national
contract stationers, mail order companies and superstores. In 1994, no single
reseller accounted for more than 7.3% of Associated's consolidated Net Sales.
Marketing. Associated concentrates its marketing efforts on providing value-
added services to resellers. Currently, substantially all of Associated's
products are sold through its comprehensive office product catalogs. Associated
distributes products that are generally available at similar prices from
multiple sources, and most of its customers purchase their products from more
than one source. As a result, Associated differentiates itself through broad
product offerings, a high degree of product availability, a variety of customer
services and expeditious distribution capabilities. Associated's
19
<PAGE>
significant inventories and its widespread distribution system enable each of
Associated's customers to provide a high level of service to end users while
minimizing the reseller's own inventory requirements.
Associated produces numerous catalogs and promotional flyers to assist its
marketing effort. These materials include a full line catalog with
approximately 20,000 SKUs, promotional pieces and specialty catalogs for the
legal, financial, healthcare, office furniture, facilities management and
advertising markets. Custom designed catalogs also are provided for a variety
of end user markets. Since office products resellers typically distribute only
one wholesaler's catalogs in order to streamline order entry, Associated
attempts to maximize the distribution of its catalogs by offering advertising
credits to resellers, based on the volume of products purchased, that can be
used to offset the cost of catalogs. In addition to its catalogs and other
promotional pieces, Associated offers a variety of dealer support and marketing
programs that are designed to aid the reseller in differentiating itself from
its competitors by addressing the steps in the consumer's procurement process.
To assist its resellers with pricing, Associated offers a matrix pricing
software program. Traditionally, resellers have priced products on a discount
from list price basis. With the advent of the superstore, pricing has shifted
towards a net pricing approach, whereby the superstore sells certain products
at significant discounts, assuming that it can recapture the discounts through
the sale of other higher margin products. Associated's matrix pricing program
provides the reseller with a tool to assist it in identifying the optimum
pricing mix between high and low margin items and, as a result, enables the
reseller to enhance its operating margins.
Associated provides sales representatives and managers of selected resellers
the opportunity to participate in marketing training programs sponsored by it.
Similar to its matrix pricing software, Associated's training programs are
designed to instruct the resellers in how to market to the end user based upon
a total cost of procurement approach, and thereby to minimize the focus on
specific product prices. Since the inception of Associated's program, over
3,000 individuals have attended such training programs.
Associated offers to its resellers a variety of electronic order entry
systems. For instance, Associated maintains electronic data interchange ("EDI")
systems that link Associated to selected resellers, and multifaceted
interactive order systems that link Associated to selected resellers and such
resellers to the ultimate end user. Associated estimates that over 90.0% of its
orders are placed by resellers through EDI or another of its interactive order
systems.
Associated also offers to its resellers a variety of business management and
marketing programs which enhance the reseller's ability to manage its business
profitably. For example, Associated offers certain of its resellers its "Pro-
Image" program which enables resellers with no previous expertise to provide
high end furniture and office design services to the end user. Associated also
offers its "Signature Image" program, which provides traditional office
products resellers with access into the advertising products market (such as
imprinted and logo items). Another business management system offered by
Associated is its "Desk Top Marketing" software program, which enables the
reseller to identify potential customers in a given market based upon
parameters selected by the reseller. Associated also offers, on an exclusive
basis, the Associated Customer Self-Service program, which allows the reseller
to provide end users with on-line access to such reseller's computer for
ordering, product inquiries and promotion information.
Distribution. Associated has a network of 17 distribution facilities, most of
which carry Associated's full line of inventory.
Associated's distribution capabilities are augmented by its proprietary,
computer-based MIPAL system. If a reseller places an order for an item that is
out of stock at the Associated location which
20
<PAGE>
usually serves the particular reseller, Associated's MIPAL system will
automatically search for the item at two alternative Associated locations. If
the item is available at an alternative location, MIPAL will automatically
forward the order to the alternate location, which will coordinate shipping
with the primary facility and provide a single on-time delivery to the
reseller. MIPAL effectively provides Associated with added inventory backup,
which enables it to provide higher service levels to the reseller, to reduce
back orders and to minimize time spent searching for merchandise substitutes,
all of which contribute to Associated's fill rate of 95.0%.
Another service offered by Associated to selected resellers is its "wrap and
pack" program, which allows resellers the option to receive orders in
accordance with the specifications of particular end users. For example, when a
reseller receives orders from a number of separate end users, Associated groups
and wraps the items separately by end user so that the reseller need only
deliver the package. The "wrap and pack" program is attractive to resellers
because it eliminates the need to break down case shipments and to repackage
the orders before delivering them to the end user.
Merchandising and Purchasing. Associated utilizes over 250 suppliers of its
products. As a centralized corporate function, Associated's merchandising
department interviews and selects suppliers and products for inclusion in the
catalogs. Selection is based upon end user acceptance and demand for the
product and the manufacturer's total service, price and product quality
offering. No supplier accounted for more than 7.0% of Associated's aggregate
purchases during fiscal 1994.
Associated, like many other wholesalers, has a centrally controlled,
computerized forward buying program under which Associated, from time to time,
purchases items of inventory in advance of its specific needs when favorable
purchasing opportunities present themselves.
Competition. Associated competes with office products manufacturers as well
as other wholesale distributors of business products. Most wholesale
distributors of office products conduct operations regionally and locally,
sometimes with limited product lines such as writing instruments or computer
products. Other wholesalers, including Associated, carry a full line of
business products. Manufacturers typically sell their products through a
variety of distribution channels, including business products wholesalers and
resellers.
Competition between Associated and manufacturers is based primarily upon net
pricing, minimum order quantity and product availability. Although
manufacturers may provide lower prices to dealers than Associated does,
Associated's marketing and catalog programs, combined with speed of delivery
and its ability to offer dealers a broad line of business products with lower
minimum order quantities, are important factors in enabling Associated to
compete effectively. Competition between Associated and other wholesalers
(including the Company) is based primarily on net pricing to dealers, breadth
of product lines, availability of products, speed of delivery to dealers, fill
rates and the quality of its marketing and other services. Associated believes
it is competitive in each of these areas.
21
<PAGE>
Properties. Associated currently operates 17 distribution facilities in 12
states. The following table sets forth information regarding the principal
leased and owned properties.
<TABLE>
<CAPTION>
APPROXIMATE DATE OF
STATE CITY OWNED/LEASED SQUARE FEET EXPIRATION
----- ---- ------------ ----------- ----------
<S> <C> <C> <C> <C>
California City of Industry Leased 99,999 4/30/95
California Sacramento Leased 150,207 5/30/03(1)
Colorado Denver Owned 104,244 --
Florida Hialeah Leased 94,080 12/31/99
Florida Jacksonville Owned 95,500 --
Florida Tampa Owned 128,000 --
Georgia Smyrna Owned 129,396 --
Illinois Carol Stream Leased 139,444 6/30/97
Indiana Indianapolis Owned 128,000 --
Maryland Elkridge Leased 84,000 7/15/04
Minnesota Brooklyn Park Owned 127,480 --
North Carolina Charlotte Owned 104,000 --
Ohio Cincinnati Owned 108,778 --
Ohio Columbus Leased 126,665 8/31/99
Ohio Valley View Owned 233,508 --
Tennessee Nashville Leased 66,000 4/30/98
Wisconsin Milwaukee Owned 67,300 --
</TABLE>
- --------
(1) A portion of the lease covering 30,947 square feet of such property expires
on March 31, 1996.
In addition to its distribution facilities described above, Associated leases
20,568 square feet of office space in Itasca, Illinois as its corporate
headquarters and 7,095 square feet of office space in Pittsburgh, Pennsylvania
as a sales office. Associated also leases 54,500 square feet of warehouse space
in Jacksonville Florida, which it subleases to a third party.
Employees. At February 1, 1995, Associated employed approximately 1,180
persons, consisting of approximately 215 salaried and approximately 965 hourly
employees. None of Associated's facilities is covered by a collective
bargaining agreement. Associated considers its relationships with its employees
to be satisfactory.
Litigation. Associated is party to various lawsuits arising out of the
ordinary conduct of its business, none of which, Associated believes, would
have a material adverse effect upon the business of Associated if it were to be
adversely determined.
22
<PAGE>
MANAGEMENT
Executive Officers and Directors. Set forth below are the names, ages and
positions of the directors, executive officers and certain key employees of
Associated and ASI, as indicated. Each director of Associated also serves as a
director of ASI. Each director has served as such since January 1992. Unless
otherwise noted, the business address of each of the following persons is 1075
Hawthorn Drive, Itasca, Illinois 60143, and each such person is a citizen of
the United States.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas W. Sturgess 44 Director, Chairman of the Board and
Chief Executive Officer of Associated
and ASI
Michael D. Rowsey 42 Director, President and Chief Operating
Officer of Associated and ASI
Daniel J. Schleppe 53 Vice President of Associated; Executive
Vice President and Southern Regional
Manager of ASI
Daniel H. Bushell 43 Chief Administrative Officer, Chief
Financial Officer and Treasurer of
Associated and ASI
Robert W. Eberspacher 42 Vice President of Associated; Vice
President and Northern Regional Manager
of ASI
Lawrence E. Miller 38 Vice President of Associated; Vice
President of Marketing of ASI
Duane J. Ratay 42 Vice President, Corporate Operations of
ASI
John D. Kennedy 40 Vice President, Western Operations
of ASI
Gary G. Miller 44 Director, Vice President and Secretary
of Associated and ASI
Frederick B. Hegi, Jr. 51 Director and Assistant Secretary of
Associated and ASI
James A. Johnson 40 Director and Assistant Secretary of
Associated and ASI
James T. Callier, Jr. 59 Director
Daniel J. Good 54 Director
</TABLE>
Set forth below is a description of the backgrounds of the directors and
executive officers of Associated and ASI. There is no family relationship
between any directors or executive officers of Associated or ASI.
THOMAS W. STURGESS has served as Chairman of the Board and Chief Executive
Officer of Associated since January 1992 and was elected Chairman of the Board
and Chief Executive Officer of ASI in December 1994. Mr. Sturgess has served
since 1987 as a general partner of various Wingate entities, including the
indirect general partner of each of Wingate Partners and Wingate Partners II,
L.P., a Delaware limited partnership ("Wingate II"). Mr. Sturgess currently
serves as Chairman of the Board of Redman Industries, Inc., a manufactured
housing producer ("Redman"), as well as RBPI Holding Corporation, a
manufacturer and distributor of aluminum and vinyl windows ("RBPI"). He is a
director of Loomis Armored Inc., a provider of armored car and related services
("Loomis"), AmeriStat Mobile Medical Services, Inc., a provider of ambulance
services ("AmeriStat"), and Century Products Company, a manufacturer and
distributor of baby seats and other juvenile products ("Century Products").
23
<PAGE>
MICHAEL D. ROWSEY joined Associated in his present position in January 1992.
From 1979 to January 1992, Mr. Rowsey served in various capacities with BCOP,
most recently as the North Regional Manager.
DANIEL J. SCHLEPPE joined Associated in his present position in January 1992.
Mr. Schleppe held various positions with BCOP from 1965 until he joined
Associated, most recently serving as the General Manager of the Atlanta
facility.
DANIEL H. BUSHELL joined Associated in his present position in January 1992.
From 1978 to January 1992, Mr. Bushell served in various capacities with ACE
Hardware Corporation, most recently as Vice President of Finance.
ROBERT W. EBERSPACHER joined Associated in his present position in January
1992. From 1969 to January 1992, Mr. Eberspacher served in various capacities
with BCOP, most recently as General Manager of the Charlotte facility.
LAWRENCE E. MILLER joined Associated in his present position in January 1992.
From 1979 to January 1992, Mr. Miller served in various capacities with BCOP,
most recently as the Manager of Total Quality.
DUANE J. RATAY joined Associated in his present position in September 1992.
Prior to joining Associated, he served as Vice President Midwest Region for the
Company from 1991 to September 1992 and as Executive Vice President of The
Reliable Corporation from 1987 to 1990.
JOHN D. KENNEDY joined ASI in December 1991 as General Manager of the Atlanta
Distribution Center. In December 1993 he was transferred to Sacramento as
General Manager and in July 1994, was promoted to his current position of Vice
President, Western Operations. Prior to joining ASI, Kennedy was Vice President
of Marketing for Basicnet, Inc., a Boston based dealer marketing/buying group.
GARY G. MILLER joined Associated in his present position in January 1992. Mr.
Miller also currently serves as President of Cumberland Capital Corp., a
private investment firm located in Fort Worth, Texas ("Cumberland"). In
addition, from 1977 to December 1993, Mr. Miller served as Executive Vice
President, Chief Financial Officer and a director of AFG Industries, Inc., and
its parent company Clarity Holdings Corp. He is Chairman of the Board of CFData
Corp., a nationwide provider of check collection and check verification
services and is Vice President, Finance and Administration of Fore Star Golf,
Inc., which was formed in 1993 to own and operate golf facilities.
JAMES T. CALLIER, JR. is an indirect general partner of Wingate Partners, and
has served as President of Callier Consulting, Inc., an investment management
firm, since 1985. Mr. Callier currently serves as Chairman of the Board of
Century Products, as a director of Redman, RBPI and Loomis and as an advisory
director of Wingate II.
DANIEL J. GOOD is Vice Chairman of Golden Cat Corporation, a producer and
distributor of cat care products and a producer of industrial absorbent
materials. In addition, Mr. Good is Chairman of Good Capital Co. ("Good
Capital"), a private investment firm and investment advisory firm founded in
1989 and located in Lake Forest, Illinois. Mr. Good serves on the Board of
Directors of Supercuts, Inc. Prior to founding Good Capital, Mr. Good was
managing director of the Merchant Banking Group of Shearson Lehman Hutton, Inc.
FREDERICK B. HEGI, JR. is a general partner of various Wingate entities,
including the indirect general partner of each of Wingate Partners and Wingate
II. Since May 1982, Mr. Hegi has served as President of Valley View Capital
Corporation, a private investment firm. Mr. Hegi also currently serves as
Chairman
24
<PAGE>
of the Board of Loomis Holding Corporation, the parent corporation of Loomis,
Tahoka First Bancorp, Inc., a bank holding company, and Cedar Creek Bancshares,
Inc., a bank holding company, and as a director of RBPI, Century Products, Lone
Star Technologies, Inc., a diversified company engaged in the manufacturing of
steel pipe and in commercial banking services, Cattle Resources, Inc., a
manufacturer of animal feeds and operator of commercial cattle feedlots and
various funds managed by InterWest Partners.
JAMES A. JOHNSON is a general partner of various Wingate entities, including
the indirect general partner of each of Wingate Partners and 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 and
AmeriStat.
During the last five years, none of Associated, ASI or, to the best knowledge
of Associated or ASI, any of the persons listed under "-- Management --
Executive Officers and Directors" above has been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors) or was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was, or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
Except as otherwise stated in this Offer to Purchase, (i) none of Associated
or ASI or, to the best knowledge of Associated or ASI, any of the persons
listed under "-- Management -- Executive Officers and Directors" above has any
contract, arrangement, understanding or relationship (whether or not legally
enforceable) with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees of profit, division of profit or loss or
the giving or withholding of proxies and (ii) there have been no contacts,
negotiations or transactions between Associated, ASI or any of their respective
subsidiaries or, to the best knowledge of Associated or ASI, any of the persons
listed under "-- Management -- Executive Officers and Directors" above on the
one hand, and the Company or any of its directors, officers or affiliates, on
the other hand, that are required to be disclosed pursuant to the rules and
regulations of the Commission.
Executive Compensation. The following table sets forth all cash compensation
paid by ASI, as well as certain other compensation paid as accrued, during
Associated's last three fiscal years to the Chief Executive Officer and each of
the four most highly compensated officers of Associated in all capacities in
which they served.
25
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(1)
- ------------------------- ------ -------- ------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Thomas W. Sturgess(2)....
Chairman of the Board
and 1994 $ 0 $ 0 $ 0 $ 0
Chief Executive 1993 0 0 0 0
Officer 1992 0 0 0 0
Edward R. Simon, Jr.(3)..
Former Chairman of the
Board 1994 171,358 0 --(4) 1,750
and Chief Executive 1993 291,684 0 100,744(5) 4,290
Officer of ASI 1992 0 0 0 0
Michael D. Rowsey........ 1994 211,752 85,000 --(4) 3,220
President and Chief 1993 209,748 0 --(4) 4,447
Operating Officer 1992 186,758 15,000 51,310(5) 2,537
Daniel J. Schleppe....... 1994 184,848 36,969 --(4) 2,812
Vice President 1993 183,318 0 0 3,883
1992 163,834 7,500 0 2,221
Daniel H. Bushell........
Chief Administrative
Officer and 1994 181,728 80,000 --(4) 2,764
Chief Financial 1993 179,730 0 0 3,803
Officer 1992 155,848 15,000 0 2,156
Robert W. Eberspacher.... 1994 169,074 42,585 21,997(6) 2,572
Vice President 1993 163,668 0 0 3,460
1992 145,608 9,000 55,048(5) 1,967
</TABLE>
- --------
(1) Reflects (a) term life insurance premiums paid by Associated on behalf of
such individuals and (b) amounts contributed on behalf of such individuals
to the Associated Profit Sharing and Savings Plan.
(2) Mr. Sturgess was elected Chairman of the Board and Chief Executive Officer
of Associated effective January 1992. Although Mr. Sturgess does not
receive a salary for his services to Associated, he serves as a general
partner of various Wingate entities, including the indirect general partner
of Wingate Partners. Wingate Partners earned annual management fees from
Associated of $350,000, $210,000 and $320,833 with respect to fiscal years
1994, 1993 and 1992, respectively, for providing management services to
Associated pursuant to an Investment Banking Fee and Management Agreement
described below under "-- Certain Transactions -- Management Agreements."
None of the compensation received by Mr. Sturgess from Wingate Partners is
specifically allocated based upon services provided by him to Associated.
(3) Mr. Simon resigned as Chairman of the Board and Chief Executive Officer of
Associated effective December 18, 1994.
(4) Amounts do not exceed the lesser of $50,000 or 10.0% of the individual's
salary and bonus for the indicated fiscal year.
(5) Amounts represent relocation expenses paid by Associated on behalf of such
executives.
(6) Includes $1,997 and $20,000 paid by Associated as reimbursement for spousal
travel expenses and club membership dues on behalf of Mr. Eberspacher.
26
<PAGE>
Employment Agreements. Associated has entered into employment agreements with
the following executive officers pursuant to which such executives have agreed
to serve in the capacities and for the salaries listed below:
<TABLE>
<CAPTION>
EMPLOYEE POSITION SALARY
-------- -------- ------
<C> <S> <C>
Michael D. Rowsey President and Chief Operating $200,000
Officer of Associated and ASI
Daniel J. Schleppe Executive Vice President of Associated 175,000
and ASI
Daniel H. Bushell Chief Administrative and Chief Financial 170,000
Officer of Associated and ASI
Robert W. Eberspacher Vice President -- Northern Operations of 155,000
ASI
Duane J. Ratay Vice President -- Corporate Operations of 125,112
ASI
Lawrence E. Miller Vice President of Marketing of ASI 125,000
</TABLE>
Such salaries are subject to increase at the discretion of Associated's Board
of Directors. In addition, the agreements provide for payment of an annual
bonus to such executives, based on the performance of Associated and such
executive's performance, in such amount, if any, as determined in good faith by
the Board of Directors of Associated. The agreements were initially scheduled
to terminate on January 31, 1995, but by their terms have been extended on a
year to year basis until terminated in writing by either party at least sixty
(60) days prior to the end of such term. If, prior to expiration, such
employee's employment is terminated by Associated other than for cause, such
executive will be entitled to a continuation of base salary and benefits for
one year after termination.
1992 Stock Option Plan. Associated has adopted the Associated Holdings, Inc.
1992 Management Stock Option Plan (the "1992 Stock Option Plan") pursuant to
which incentive and non-qualified stock options can be issued to certain of its
officers, key employees and directors. A total of 86,735 shares of Associated
Common Stock have been reserved for issuance under the 1992 Stock Option Plan.
The 1992 Stock Option Plan is currently administered by the Board of Directors
of Associated, although the plan provides that the Board of Directors may
designate an option committee to administer the plan. The 1992 Stock Option
Plan will be terminated effective as of the Merger Date, except as to options
outstanding under the 1992 Stock Option Plan as of the Merger Date, which will
become exercisable for shares of common stock of the Surviving Corporation in
the manner specified under "The Merger -- The Merger Agreement -- Effect of the
Merger."
Under the 1992 Stock Option Plan, certain executive officers, key employees
and directors are eligible to receive incentive and non-qualified options to
purchase shares of Associated Common Stock. Subject to restrictions contained
in the 1992 Stock Option Plan, stock options are exercisable at such time and
on such terms as the Board of Directors of Associated determines. The exercise
price of any option granted pursuant to the 1992 Stock Option Plan may not be
less than the fair market value per share of the Associated Common Stock on the
date of grant, as determined by the Board of Directors of Associated. Pursuant
to the terms of the 1992 Stock Option Plan, no incentive options may be granted
after January 31, 2002. Subject to certain additional limitations, no option by
its terms is exercisable after the expiration of ten years from the date of
grant, or such other period (in the case of non-qualified options) or such
shorter period (in the case of incentive options) as the board of directors of
Associated in its sole discretion may determine. Stock options are not
transferable, except by legal will and by the laws of descent and distribution.
An optionee under the 1992 Stock Option Plan must pay the full option price
upon exercise of an option (i) in cash, (ii) with the consent of the board of
directors of Associated, by delivering shares of Associated Common Stock
already owned by such optionee (including shares to be received upon
27
<PAGE>
exercise of the option) and having a fair market value at least equal to the
exercise price or (iii) in any combination of the foregoing. Associated may
require the optionee to satisfy Associated's federal tax withholding
obligations with respect to the exercise of options by (i) additional
withholding from the employee's salary, (ii) requiring the optionee to pay in
cash or (iii) reducing the number of shares of Associated Common Stock to be
issued (except in the case of incentive options).
As of the date hereof, options to purchase an aggregate of 31,528 shares of
Associated Common Stock subject to the terms and conditions of the 1992 Stock
Option Plan were outstanding. The outstanding options have an exercise price of
$10.00 per share and vest in four equal annual installments beginning on the
first anniversary of the date of grant. Of the options granted to date under
the 1992 Stock Option Plan, options representing an aggregate of 23,202 shares
of Associated Common Stock have been granted to the named executive officers of
Associated, as follows:
<TABLE>
<CAPTION>
EMPLOYEE STOCK OPTIONS
NAME (NUMBER OF SHARES)
---- ----------------------
<S> <C>
Michael D. Rowsey................................. 6,679
Daniel J. Schleppe................................ 5,681
Daniel H. Bushell................................. 5,681(1)
Robert W. Eberspacher............................. 5,161
</TABLE>
- --------
(1) Does not include the additional option approved by the Board of Directors
of Associated described below.
The above options were granted effective January 31, 1992. The number of
shares subject to such options are subject to reduction to the extent Wingate
Partners and its affiliates do not achieve certain internal rates of return on
their investment in Associated, such options automatically terminate (and any
shares of Associated Common Stock previously acquired on exercise of such
options are deemed cancelled). Such options terminate in any event on January
31, 1999. The Board of Directors of Associated has approved (i) the grant of an
additional option exercisable for an aggregate of 5,681 shares of Associated
Common Stock to Mr. Bushell and (ii) the establishment of a bonus pool
consisting of an aggregate of up to $150,000 which may be awarded to Messrs.
Rowsey and Bushell in connection with the consummation of the Offer.
In addition, in accordance with the terms of Executive Stock Purchase
Agreements ("Executive Purchase Agreements") pursuant to which Messrs. Rowsey,
Schleppe, Eberspacher and L. Miller purchased shares of Associated Common Stock
and Associated Class A Preferred Stock (as hereinafter defined), Associated is
obligated to issue options exercisable for an aggregate of 21,684 shares of
Associated Common Stock to such executives by January 31, 1996. Accordingly,
Associated has reserved an additional 21,684 shares of Associated Common Stock
for issuance upon exercise of options to be granted in accordance with the
Executive Purchase Agreements.
At the Effective Time, each outstanding option, warrant or other right to
acquire Associated Common Stock, including the rights to receive additional
options under the Executive Purchase Agreements described above, will be
assumed by the Surviving Corporation, and shall thereafter be deemed an option
to acquire, on the same terms and conditions as were applicable under such
option, warrant or right, a number of shares of common stock of the Surviving
Corporation equal to the number of such shares that would have been received in
respect of such option, warrant or right if it had been exercised immediately
prior to the Effective Time. See "The Merger -- The Merger Agreement -- Effect
of the Merger."
Compensation Committee Interlocks and Insider Participation. During
Associated's fiscal year ended December 31, 1994, Associated had no
Compensation Committee or other committee of the Board of Directors performing
similar functions. Decisions concerning compensation of executive officers were
made during such fiscal year by the Board of Directors, which included Thomas
W. Sturgess and Michael D. Rowsey, each of whom is an executive officer of
Associated.
28
<PAGE>
PRINCIPAL STOCKHOLDERS OF ASSOCIATED
The following table sets forth as of February 13, 1995 certain information
regarding the beneficial ownership of the Associated Common Stock, Associated's
class A preferred stock, par value $0.01 per share ("Associated Class A
Preferred Stock"), Associated's class B preferred stock, par value $0.01 per
share ("Associated Class B Preferred Stock"), and Associated's class C
preferred stock, par value $0.01 per share ("Associated Class C Preferred
Stock"), by (i) each person who is known to Associated to beneficially own more
than 5.0% of any class of Associated's capital stock, (ii) by each of the
directors and each named executive officer identified under "Management --
Executive Compensation" and (iii) by all directors and officers as a group. It
is contemplated that Wingate Partners, Wingate II and/or certain of the other
existing stockholders of Associated will acquire an aggregate of 329,392 shares
of Associated Common Stock for an aggregate price of $12.0 million to fund a
portion of the amounts required to consummate the Offer. See "Source and Amount
of Funds."
<TABLE>
<CAPTION>
ASSOCIATED ASSOCIATED ASSOCIATED ASSOCIATED
COMMON(1) CLASS A PREFERRED (2) CLASS B PREFERRED (2) CLASS C PREFERRED (2)
DIRECTORS, ----------------------- --------------------------- ----------------------- -----------------------
OFFICERS AND NUMBER PERCENT NUMBER PERCENT PERCENT PERCENT
5.0% OF OF OF OF NUMBER OF NUMBER OF
STOCKHOLDERS SHARES CLASS(4) SHARES CLASS(4) OF SHARES CLASS(4) OF SHARES CLASS(4)
------------ ---------- -------- ------------ ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wingate 535,156.20(5) 56.04% 3,148.20(6) 62.96% -- --% -- --%
Partners, L.P..
750 N. St. Paul
Street
Suite 1200
Dallas, Texas
75201
ASI Partners, 228,987.80(8) 23.98 1,211.80(9) 24.24 -- -- -- --
L.P............
301 Commerce
Street
Suite 3300
Fort Worth,
Texas 76102
Cumberland 228,987.80(8) 23.98 1,211.80(9) 24.24 -- -- -- --
Capital
Corporation....
301 Commerce
Street
Suite 3300
Fort Worth,
Texas 76102
Good Capital 54,609.00 5.72 185.00 3.70 -- -- -- --
Co., Inc.......
1211 Lake Road
Lake Forest,
Illinois 60045
Boise Cascade 81,782.00(11) 8.36 -- -- 6,724.44 100.00 -- --
Corporation....
One Jefferson
Square
Boise, Idaho
83702
Chase Manhattan 71,355.84(13) 6.95 -- -- -- -- -- --
Investment
Holdings, Inc..
1 Chase
Manhattan Plaza
New York, New
York 10081
Whirlpool 69,290.23(13) 6.77 -- -- -- -- -- --
Financial
Corporation....
25 Tri-State
International
Suite 200
Lincolnshire,
Illinois 60069
Affiliated -- -- -- -- -- -- 10,086.67 100.00
Computer
Services.......
2828 North
Haskell Avenue
Dallas, Texas
75204
Thomas W. -- -- -- -- -- -- -- --
Sturgess (14)..
Gary G. Miller -- -- -- -- -- -- -- --
(15)...........
James T. -- -- -- -- -- -- -- --
Callier, Jr.
(14)...........
Daniel J. Good -- -- -- -- -- -- -- --
(16)...........
Frederick B. -- -- -- -- -- -- -- --
Hegi, Jr. (14).
James A. Johnson 2,519.00 * 15.00 * -- -- -- --
(14)...........
Michael D. 14,297.25(18) 1.49 54.50 1.09 -- -- -- --
Rowsey (17)....
Daniel J. 13,548.75(20) 1.41 54.50 1.09 -- -- -- --
Schleppe (17)..
Daniel H. 4,260.75(22) * -- -- -- -- -- --
Bushell........
Robert W. 13,158.75(24) 1.37 54.50 1.09 -- -- -- --
Eberspacher(17).
All directors
and executive
officers as a
group (12
persons)
(14)-(25)...... 63,317.00(26) 6.47 233.00 4.66 -- -- -- --
<CAPTION>
SURVIVING
CORPORATION
COMMON STOCK
(POST-MERGER) (1)(3)
DIRECTORS, -----------------------------
OFFICERS AND PERCENT
5.0% NUMBER OF
STOCKHOLDERS OF SHARES CLASS(4)
------------ ---------------- ------------
<S> <C> <C>
Wingate 1,844,301(7) 31.48%
Partners, L.P..
750 N. St. Paul
Street
Suite 1200
Dallas, Texas
75201
ASI Partners, 789,157(10) 23.98
L.P............
301 Commerce
Street
Suite 3300
Fort Worth,
Texas 76102
Cumberland 789,157(10) 23.98
Capital
Corporation....
301 Commerce
Street
Suite 3300
Fort Worth,
Texas 76102
Good Capital 188,198 3.21
Co., Inc.......
1211 Lake Road
Lake Forest,
Illinois 60045
Boise Cascade 281,844(12) 4.75
Corporation....
One Jefferson
Square
Boise, Idaho
83702
Chase Manhattan 245,913(13) 4.03
Investment
Holdings, Inc..
1 Chase
Manhattan Plaza
New York, New
York 10081
Whirlpool 238,794(13) 3.92
Financial
Corporation....
25 Tri-State
International
Suite 200
Lincolnshire,
Illinois 60069
Affiliated -- --
Computer
Services.......
2828 North
Haskell Avenue
Dallas, Texas
75204
Thomas W.
Sturgess (14).. -- --
Gary G. Miller
(15)........... -- --
James T.
Callier, Jr.
(14)........... -- --
Daniel J. Good
(16)........... -- --
Frederick B.
Hegi, Jr. (14). -- --
James A. Johnson
(14)........... 8,681 *
Michael D.
Rowsey (17).... 49,272(19) *
Daniel J.
Schleppe (17).. 46,693(21) *
Daniel H.
Bushell........ 14,684(23) *
Robert W.
Eberspacher(17). 45,349(25) *
All directors
and executive
officers as a
group (12
persons)
(14)-(25)...... 209,527(27) 3.53
</TABLE>
29
<PAGE>
- --------
* Represents less than 1.0%.
(1) All shares of Associated Common Stock are held in the Voting Trust (as
hereinafter defined) pursuant to the Voting Trust Agreement. See "--
Management -- Certain Transactions -- Certain Agreements Regarding
Associated Common Stock." The trustees of the Voting Trust are Messrs.
Sturgess, Hegi, Johnson, Good and G. Miller. It is intended that the
Voting Trust apply following the Merger to shares of common stock of the
Surviving Corporation.
(2) Except under limited circumstances, the holders of the Associated Class A
Preferred Stock, Associated Class B Preferred Stock and Associated Class C
Preferred Stock are not entitled to vote.
(3) Each outstanding share (or fraction thereof) of preferred stock of
Associated will be converted as of the Effective Time into one share (and
corresponding fraction thereof) of the appropriate series of preferred
stock of the Surviving Corporation. See "The Merger -- The Merger
Agreement -- Effect of Merger."
(4) For purposes of calculating the beneficial ownership of each stockholder,
it was assumed (in accordance with the Commission's definition of
"beneficial ownership") that such stockholder had exercised all options
and/or warrants by which such stockholder had the right, within 60 days
following February 13, 1995, to acquire shares of such class of stock.
(5) Includes (i) 526,025.20 shares owned by Wingate Partners and (ii) 9,131.00
shares owned by Wingate Affiliates, L.P., an affiliate of Wingate Partners
("Wingate Affiliates").
(6) Includes (i) 3,094.20 shares owned by Wingate Partners and (ii) 54.00
shares owned by Wingate Affiliates.
(7) Includes (i) 1,812,833.00 shares owned by Wingate Partners and (ii)
31,468.00 shares owned by Wingate Affiliates.
(8) Includes (i) 205,858.80 shares owned by ASI Partners, L.P. and (ii)
23,129.00 shares owned by Cumberland, which serves as general partner of
ASI Partners, L.P.
(9) Includes 1,211.80 shares of Associated Class A Preferred Stock owned by
ASI Partners, L.P., as to which Cumberland serves as general partner.
(10) Includes (i) 709,448.00 shares owned by ASI Partners, L.P. and (ii)
79,709.00 shares owned by Cumberland.
(11) Includes (i) 58,653.00 shares owned by Boise and (ii) 23,129.00 shares
subject to a Boise Warrant (as hereinafter defined) which are immediately
exercisable at $1.00 per share. Such warrant is subject to repurchase by
Associated if certain conditions are met. See "-- Certain Transactions --
Boise Warrants."
(12) Includes (i) 202,135.00 shares owned by Boise and (ii) 79,709.00 shares
issuable upon exercise of a Boise Warrant.
(13) Consists of shares issuable upon exercise of Lender Warrants (as
hereinafter defined) which are immediately exercisable at $0.01 per share.
At the option of the holder, Lender Warrants may be exercised for shares
of Associated's class B common stock, par value $0.01 per share (the
"Associated Nonvoting Common Stock"), in lieu of Associated Common Stock.
The Associated Nonvoting Common Stock, if issued, is convertible at any
time at the option of the holder into Associated Common Stock for no
additional consideration. See "-- Certain Transactions --Certain
Agreements Regarding Associated Common Stock."
(14) Does not include shares owned by Wingate Partners and/or Wingate
Affiliates. Each of Messrs. Sturgess, Hegi, Callier and Johnson is a
general partner of Wingate Affiliates, and an indirect general partner of
Wingate Partners and, accordingly, may be deemed to beneficially own the
shares owned of record by Wingate Partners and Wingate Affiliates.
(15) Does not include shares owned by ASI Partners, L.P. 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,
L.P. and Cumberland.
(16) Does not include shares owned by Good Capital. Mr. Good is Chairman and a
controlling stockholder of Good Capital and, accordingly, may be deemed to
beneficially own the shares owned of record by Good Capital.
30
<PAGE>
(17) Includes shares owned directly and by an individual retirement account
for the sole benefit of such individual.
(18) Includes (i) 9,288.00 shares owned by Mr. Rowsey and (ii) 5,009.25 shares
issuable upon exercise of options which are, subject to certain
restrictions described under "-- Management -- Executive Compensation --
1992 Stock Option Plan," immediately exercisable at $10.00 per share.
(19) Includes (i) 32,009.00 shares owned by or for the benefit of Mr. Rowsey
and (ii) 17,263.00 shares issuable upon exercise of options which are,
subject to certain restrictions described under""-- Management --
Executive Compensation -- 1992 Stock Option Plan," immediately
exercisable at $10.00 per share.
(20) Includes (i) 9,288.00 shares owned by Mr. Schleppe and (ii) 4,260.75
shares issuable upon exercise of options which are, subject to certain
restrictions described under "-- Management -- Executive Compensation --
1992 Stock Option Plan," immediately exercisable at $10.00 per share.
(21) Includes (i) 32,009.00 shares owned by or for the benefit of Mr. Schleppe
and (ii) 14,684.00 shares issuable upon exercise of options which are,
subject to certain restrictions described under""-- Management --
Executive Compensation -- 1992 Stock Option Plan," immediately
exercisable at $10.00 per share.
(22) Includes 4,260.75 shares issuable upon exercise of options which are,
subject to certain restrictions described under "-- Management --
Executive Compensation -- 1992 Stock Option Plan," immediately
exercisable at $10.00 per share.
(23) Includes 14,684.00 shares issuable upon exercise of options which are,
subject to certain restrictions described under "-- Management --
Executive Compensation -- 1992 Stock Option Plan," immediately
exercisable at $10.00 per share.
(24) Includes (i) 9,288.00 shares of stock owned by or for the benefit of Mr.
Eberspacher and (ii) 5,161.00 shares issuable upon exercise of options
which are, subject to certain restrictions described under "--
Management -- Executive Compensation -- 1992 Stock Option Plan,"
immediately exercisable at $10.00 per share.
(25) Includes (i) 32,009.00 shares of stock owned by or for the benefit of Mr.
Eberspacher and (ii) 13,340.00 shares issuable upon exercise of options
which are, subject to certain restrictions described under "--
Management -- Executive Compensation -- 1992 Stock Option Plan,"
immediately exercisable at $10.00 per share.
(26) Includes an aggregate of 23,646.00 shares issuable upon exercise of
options which are, subject to certain restrictions described under "--
Management -- Executive Compensation -- 1992 Stock Option Plan,"
immediately exercisable at $10.00 per share.
(27) Includes an aggregate of (i) 128,036.00 shares owned by the directors and
executive officers of Associated and (ii) 81,491.00 shares issuable upon
exercise of options which are, subject to certain restrictions described
under "-- Management -- Executive Compensation -- 1992 Stock Option
Plan," immediately exercisable at $10.00 per share.
CERTAIN TRANSACTIONS
Certain Agreements Regarding Associated Common Stock. In connection with the
Boise Transaction, Messrs. Rowsey, Schleppe, Eberspacher and L. Miller
purchased shares of Associated Common Stock pursuant to the Executive Purchase
Agreements, which agreements (i) require, under certain circumstances, that
Associated issue options exercisable for an aggregate of 21,684 shares of
Associated Common Stock by January 31, 1996 to such executives (see "--
Management -- 1992 Stock Option Plan"), (ii) allow each executive to cause
Associated to repurchase (subject to cash availability and lending
restrictions) such executive's shares of Associated Common Stock in the event
of such executive's death, retirement or disability at the fair market value
thereof at the time of repurchase and (iii) enable Associated to repurchase an
executive's shares of Associated Common Stock upon such executive's death,
retirement, disability or termination of employment at the net book value
thereof at the date of such termination.
31
<PAGE>
Associated, Wingate Partners, Cumberland, ASI Partners, L.P., Good Capital,
Boise and certain other holders of Associated Common Stock (including Messrs.
Rowsey, Schleppe, Eberspacher and L. Miller) entered into the Associated
Holdings, Inc. Stockholders Agreement, dated as of January 31, 1992 (the
"Stockholders Agreement"), which provides for, among other things, certain
restrictions on transfer of shares of Associated Common Stock held by the
parties to the agreement and preemptive rights with respect to certain
issuances by Associated of shares of its Associated Common Stock. Pursuant to
the Stockholders Agreement, parties thereto will be entitled to purchase
Associated Common Stock offered in connection with the Offer. See "Source and
Amount of Funds -- Equity Investment." The Stockholders Agreement will by its
terms govern shares of common stock of the Surviving Corporation held by the
parties thereto in the same manner as it currently governs shares of Associated
Common Stock held by such parties. Associated intends to seek to appropriately
amend such agreements prior to the Merger Date.
Also in connection with the Boise Transaction, Associated, on January 31,
1992, entered into a registration rights agreement (the "Stockholders
Registration Rights Agreement") with Wingate Partners, Cumberland, ASI
Partners, L.P., Good Capital, Boise and certain other holders of Associated
Common Stock (including Messrs. Rowsey, Schleppe, Eberspacher and L. Miller)
pursuant to which it granted to such stockholders certain rights with respect
to registration under the Securities Act of shares of Associated Common Stock
held by them. Under this agreement, the holders of 20.0% of the shares of
Associated Common Stock subject to the agreement will be able to require
Associated, after the consummation of an initial public offering of Associated
Common Stock meeting certain specified criteria, to effect up to five
registrations of the Associated Common Stock held by them. Registrations
effected at the request of the holders will be at the expense of Associated
(excluding underwriting discounts and commissions). In addition, all
stockholders of Associated who are party to the Stockholders Registration
Rights Agreement will have the right to participate, under certain
circumstances, in registrations under the Securities Act with respect to shares
of Associated Common Stock held by them. In connection with the Merger, the
Surviving Corporation will assume the obligation of Associated under the
Stockholders Registration Rights Agreement by operation of law. Associated
intends to seek to appropriately amend such agreements prior to the Merger
Date.
All shares of the class A common stock, par value $0.01 per share, of
Associated ("Associated Common Stock") are held in a voting trust (the "Voting
Trust") pursuant to a Voting Trust Agreement dated as of January 31, 1992 (the
"Voting Trust Agreement"). The trustees of the Voting Trust are 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 of Associated Common Stock held in the Voting Trust, and may act by a
majority vote of the trustees. The trustees agree to vote all Associated Common
Stock held in trust to elect a board of directors of Associated with (i) a
least one representative designated by Mr. Good, (ii) at least one
representative designated by ASI Partners, (iii) at least one representative
designated by certain key executives (consisting of Messrs. Rowsey,
Eberspacher, Schleppe and L. Miller) of Associated and (iv) such number of
directors that will represent a majority of the total number of directors
designated by Wingate Partners. The Voting Trust terminates on January 31, 2002
or upon the consummation of an underwritten public offering of Associated
Common Stock which meets certain criteria specified in the Voting Trust
Agreement. The Voting Trust Agreement does not apply to the election of
directors of ASI, although the composition of the board of directors of ASI has
historically been, and currently is, identical to that of Associated. Officers
of Associated and ASI are elected by their respective boards of directors and
hold office until their respective successors are duly elected and qualified.
The Voting Trust Agreement will be amended, as of the Effective Time, to be
applicable to an appropriate number and class of shares of common stock of the
Surviving Corporation (based on the exchange ratio of such shares for
Associated Common Stock described under "The Merger -- The Merger Agreement --
Effect of the Merger") in lieu of the shares of Associated Common Stock or
Associated Nonvoting Common Stock subject thereof immediately prior to the
Effective Time.
32
<PAGE>
Boise Warrants. In connection with the Boise Transaction, Associated entered
into a warrant agreement with Boise Cascade Corporation ("Boise Cascade")
pursuant to which it issued to Boise Cascade warrants (the "Boise Warrants")
entitling the holders thereof to acquire an aggregate of 23,129 shares of
Associated Common Stock for an exercise price of $1.00 per share. The following
is a summary of the material terms of the Boise Warrants:
The Boise Warrants contain customary antidilution provisions and are
exercisable through January 31, 2002. In addition, Associated is entitled to
repurchase the Boise Warrants at any time after the repurchase or redemption of
all outstanding shares of Associated Class B Preferred at an aggregate purchase
price which would provide Boise with a yield from issue of at least 15.0% on
its Associated Class B Preferred investment, giving effect to dividends
received by Boise.
The Boise Warrants provide the holders with certain "tag along rights" which
entitle such holders to participate, on a pro rata basis, in certain sales of
Associated Common Stock by Wingate Partners, Cumberland, Good Capital or any
other controlling stockholder of Associated. Pursuant to the Boise Warrants,
Wingate Partners has been granted certain "go along rights" which are triggered
(subject to certain exceptions) in the event (i) Wingate Partners sells 100.0%
of its equity interest in Associated in a private offering, (ii) all or
substantially all of the assets of Associated are sold and the proceeds of such
sale are distributed to the stockholders of Associated or (iii) Associated
participates in a merger or consolidation. In the event Wingate Partners
exercises its "go along rights" in connection with the occurrence of one of the
events described above, each holder of Boise Warrants would become obligated to
sell all Boise Warrants and Associated Common Stock held by such holders in the
applicable transaction and to vote all shares of Associated Common Stock in
favor of such transaction.
The holders of the Boise Warrants are entitled, pursuant to the terms of the
Boise Warrants, to preemptive rights with respect to certain issuances by
Associated of shares of Associated Common Stock. The Boise Warrants also
contain certain covenants and agreements with respect to, among other things,
(i) transactions with affiliates (other than certain specified transactions
with Wingate Partners, Cumberland and Good Capital), (ii) certain mergers,
reorganizations, recapitalization and other events with respect to the
Associated Common Stock, (iii) the repurchase or redemption of shares of
Associated Common Stock, (iv) changes of the fiscal year of Associated, (v) the
taking of actions that would cause Associated or any subsidiary of Associated
to own less than 80.0% of any subsidiary of Associated, (vi) delivery of
financial statements of Associated, (vii) board observation rights for meetings
of the boards of directors of Associated and its subsidiaries and (viii)
indemnification. Associated has obtained the consent of Boise to the
consummation of the Offer, the Merger and the transactions contemplated
thereby.
In connection with the issuance of the Boise Warrants, Associated, on January
31, 1992, entered into a registration rights agreement (the "Boise Registration
Rights Agreement") with the holders of the Boise Warrants pursuant to which it
granted to such holders certain rights with respect to registration under the
Securities Act of shares of Associated Common Stock issuable to them upon
exercise of the Boise Warrants. Under the agreement, the holders of 20.0% of
the shares of Associated Common Stock issuable or issued upon exercise of the
Boise Warrants and subject to the agreement will be able to require Associated,
after consummation of an initial public offering of Associated Common Stock
meeting certain specified criteria, to effect up to five registrations of
Associated Common Stock held by them. Registrations effected at the request of
the holders will be at the expense of Associated (excluding underwriting
discounts and commission). In addition, all holders of the Boise Warrants will
have the right to participate, under certain circumstances specified in the
Boise Registration Rights Agreement, in registrations under the Securities Act
with respect to shares of Associated Common Stock held by them. In connection
with the Merger, the Surviving Corporation will assume the obligation of
Associated under the Boise Registration Rights Agreement by operation of law.
33
<PAGE>
Lender Warrants. In connection with the Boise Transaction, Associated entered
into a warrant agreement with Chase Manhattan Investment Holdings, Inc.
("CMIHI") (the "Lender Warrant Agreement") pursuant to which it issued to CMIHI
and certain of Associated's senior lenders' warrants (the "Lender Warrants")
entitling the holders thereof to acquire an aggregate of 150,340 shares of
Associated Common Stock (or, at such holder's option, Associated Nonvoting
Stock) for an exercise price of $0.01 per share. The Lender Warrants were
issued in two tranches representing an aggregate of 34,694 shares of Associated
Common Stock (the "Tranche A Warrants") and 115,646 shares of Associated Common
Stock (the "Tranche B Warrants"), respectively.
In connection with the purchase by Associated of Lynn-Edwards in 1992, the
Tranche B Warrant holders received additional Tranche B Warrants exercisable
for an aggregate of 39,878 shares of Associated Common Stock. In addition, an
adjustment mechanism in the Lender Warrant Agreement caused the holders of the
Tranche A and Tranche B Warrants to receive an additional 2,016.69 and 9,040.31
shares of Associated Common Stock, respectively, on a pro rata basis as an
adjustment relating to the issuance of shares of Associated Common Stock to
Boise.
The Tranche A and Tranche B Warrants allow the holders thereof to acquire an
aggregate of 36,710.69 and 164,564.31 shares of Associated Common Stock,
respectively. Wingate, Wingate II and other holders of Associated Common Stock
have offered to purchase all Tranche A and Tranche B Warrants for an aggregate
of $0.9 million and $3.9 million, respectively.
The following is a summary of the material terms of the Lender Warrants:
The Lender Warrants contain customary antidilution provisions and are
exercisable through January 31, 2001. In addition, Associated is entitled to
repurchase the Lender Warrants at any time after January 31, 1999 at the
greater of the then fair market value of the Associated Common Stock (less the
applicable exercise price for the Lender Warrants) or the Equity Value (which
generally is defined as (i) five times Associated's and its consolidated
subsidiaries' earnings before interest, taxes and depreciation and amortization
minus (ii) non-convertible debt of Associated and its consolidated subsidiaries
minus (iii) preferred stock of Associated plus (iv) cash and cash equivalents).
In the event Associated repurchases Lender Warrants or shares of Associated
Common Stock pursuant to the call option granted under the Lender Warrants and,
within twelve months after the date of such repurchase, Associated, any
subsidiary of Associated, or any stockholder of Associated has entered into any
contract relating to a merger of Associated or sale of all or substantially all
of the assets of Associated or any subsidiary of Associated (a "Look Back
Event"), then Associated is required to make a payment to each holder whose
Lender Warrants or Associated Common Stock was repurchased in an amount
generally equal to (i) the excess of the fair market value of the consideration
received by Associated, the subsidiaries and the stockholders of Associated (on
a per share basis) in connection with the Look Back Event over (ii) the sum of
(a) the amount paid to such holder pursuant to the exercise by Associated of
its call option plus (b) imputed interest on such amount through the date of
repurchase at the base rate under Associated's existing senior credit
agreement.
The Lender Warrants also contain certain put rights which require Associated
to repurchase such Lender Warrants upon the earlier of January 31, 1997 or the
occurrence of certain extraordinary corporate events (including the repayment
in full of the tranche B term loan under Associated's existing senior credit
agreement). The purchase price payable by Associated or ASI upon the exercise
of the put rights is the greater of the then fair market value of the
Associated Common Stock (less the applicable exercise price of the Lender
Warrants) or the Equity Value. Because Associated intends to refinance all of
its existing indebtedness in connection with the Offer and the Merger
(including its indebtedness under the tranche B term loans), the Lender
Warrants have been amended to provide that no put rights may be exercised
thereunder until February 10, 1996.
34
<PAGE>
The Lender Warrants provide the holders with certain "tag along rights" which
entitle such holders to participate, on a pro rata basis, in certain sales of
Associated Common Stock by Wingate Partners, Cumberland, Good Capital or any
other controlling stockholder of Associated. Pursuant to the Lender Warrants,
Wingate Partners has been granted certain "go along rights" which are triggered
(subject to certain exceptions) in the event (i) Wingate Partners sells 100.0%
of its equity interest in Associated in a private offering, (ii) all or
substantially all of the assets of Associated are sold and the proceeds of such
sale are distributed to the stockholders of Associated or (iii) Associated
participates in a merger or consolidation. In the event Wingate Partners
exercises its "go along rights" in connection with the occurrence of one of the
events described above, each holder of Lender Warrants would become obligated
to sell all Lender Warrants and Associated Common Stock held by such holders in
the applicable transaction and to vote all shares of Associated Common Stock in
favor of such transaction.
The holders of the Lender Warrants are entitled, pursuant to the terms of the
Lender Warrants, to preemptive rights with respect to certain issuances by
Associated of shares of Associated Common Stock. The Lender Warrants also
contain certain covenants and agreements with respect to, among other things,
(i) transactions with affiliates (other than the payment of a limited amount of
management fees to Wingate Partners, Cumberland and Good Capital), (ii) certain
mergers, reorganizations, recapitalization and other events with respect to the
Associated Common Stock, (iii) the repurchase or redemption of shares of
Associated Common Stock, (iv) changes of the fiscal year of Associated, (v) the
taking of actions that would cause Associated or any subsidiary of Associated
to own less than 80.0% of any subsidiary of Associated, (vi) delivery of
financial statements of Associated, (vii) board observation rights for meetings
of the boards of directors of Associated and its subsidiaries and (viii)
indemnification.
In connection with the issuance of the Lender Warrants, Associated, on
January 31, 1992, entered into a registration rights agreement (the "Lender
Registration Rights Agreement") with the holders of the Lender Warrants
pursuant to which it granted to such holders certain rights with respect to
registration under the Securities Act of shares of Associated Common Stock
issuable to them upon exercise of the Lender Warrants. Under the agreement, the
holders of 20.0% of the shares of Associated Common Stock issuable or issued
upon exercise of the Lender Warrants and subject to the agreement will be able
to require Associated, after consummation of an initial public offering of
Associated Common Stock meeting certain specified criteria, to effect up to
five registrations of Associated Common Stock held by them. Registrations
effected at the request of the holders will be at the expense of Associated
(excluding underwriting discounts and commissions). In addition, all holders of
the Lender Warrants will have the right to participate, under certain
circumstances specified in the Lender Registration Rights Agreement, in
registrations under the Securities Act with respect to shares of Associated
Common Stock held by them. In connection with the Merger, the Surviving
Corporation will assume Associated's obligation under the Lender Warrants and
the Lender Registration Rights Agreement upon the closing of the Merger.
Management Agreements. Pursuant to an Investment Banking Fee and Management
Agreement dated as of January 31, 1992 among Associated, ASI and Wingate
Partners, Wingate Partners provided certain financial advisory services to
Associated and ASI in connection with the Boise Transaction, in exchange for a
one-time fee of $500,000 (which was paid in January 1992 upon the consummation
of the Boise Transaction). In addition, pursuant to the agreement Wingate
Partners agreed to provide certain oversight and monitoring services to
Associated and ASI and their subsidiaries, in exchange for an annual fee of up
to $350,000 contingent upon certain performance criteria, subject to an
automatic annual increase in an amount to be determined by Associated's and
ASI's respective boards of directors. Pursuant to such agreement, Wingate
Partners earned an aggregate of $350,000, $210,000 and $320,833 with respect to
each of Associated's fiscal years ended 1994, 1993 and 1992, respectively, for
such oversight and monitoring services. Under the agreement, Associated is
obligated to reimburse Wingate Partners for its out-of-pocket expenses and
indemnify Wingate Partners and its
35
<PAGE>
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 Investment Banking Fee and Management Agreement dated as of
January 31, 1992 among Associated, ASI and Cumberland, Cumberland provided
certain financial advisory services to Associated and ASI in connection with
the Boise Transaction, in exchange for a one-time fee of $500,000 (which was
paid in January 1992 upon consummation of the Boise Transaction). In addition,
Cumberland agreed to provide certain oversight and monitoring services to
Associated, ASI and their subsidiaries, in exchange for (i) an annual fee of up
to $75,000 contingent upon certain performance criteria, subject to an
automatic annual increase in an amount to be determined by Associated's and
ASI's Boards of Directors, and (ii) 23,129 shares of Associated Common Stock.
Subject to certain exceptions, the issuance of Associated Common Stock is
subject to rescission if the agreement is terminated before January 31, 2002.
Pursuant to such agreement, Cumberland earned $75,000, $45,000 and $68,750 with
respect to each of Associated's fiscal years ended 1994, 1993 and 1992,
respectively, for such oversight and monitoring services. Associated 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 or
any subsequent yearly term.
Pursuant to an Investment Banking Fee and Management Agreement dated as of
January 31, 1992 among Associated, ASI and Good Capital, Good Capital provided
financial advisory services to Associated and ASI in connection with the Boise
Transaction in exchange for 31,480 shares of Associated Common Stock and 185
shares of Associated Class A Preferred Stock. In addition, Good Capital agreed
to provide certain oversight and monitoring services to Associated, ASI and
their subsidiaries, in exchange for (i) an annual fee of up to $75,000
contingent upon certain performance criteria, subject to an automatic annual
increase in an amount to be determined by Associated's and ASI's Boards of
Directors and (ii) 23,129 shares of Associated Common Stock. Subject to certain
exceptions, the issuances of Associated Common Stock are subject to rescission
if the agreement is terminated before January 31, 2002. Pursuant to such
agreement, Good Capital earned an aggregate of $75,000, $45,000 and $68,750
with respect to each of Associated's fiscal years ended 1994, 1993 and 1992,
respectively, for such oversight and monitoring services. Associated 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.
XI. OPERATIONS AFTER THE OFFER AND THE MERGER
PLANS FOR THE SURVIVING CORPORATION
General. Management of Associated has developed a strategy designed to, among
other things, consolidate the businesses of Associated and the Company in a
manner that would enable the Surviving Corporation to offer its customers
better service and selection, thereby improving its competitive position,
through the integration of distribution facilities and product lines and to
achieve cost savings and other benefits from the elimination of redundant or
overlapping functions and facilities and the elimination of overlapping
products. See "Consolidation, Strategy and Benefits of the Merger."
Consistent with management's business strategy, another critical objective of
management after the Merger will be to maintain and enhance customer
relationships, service and marketing programs of the combined businesses.
Management believes that the Company's experience integrating the 1992
36
<PAGE>
acquisition of Stationers Distributing Company, together with Associated's
experience integrating the 1992 acquisition of Lynn-Edwards, will enhance the
Surviving Corporation's ability to implement its strategy methodically and
effectively for the Surviving Corporation while maintaining competitive levels
of customer service.
Although management believes that the Merger will ultimately result in
increased revenues, the Surviving Corporation may suffer a decline in sales for
some period following the Merger.
In addition to management's specific plans outlined herein, management
intends, from time to time after completion of the Offer and the Merger, to
evaluate and review the Surviving Corporation's assets, operations, management
and personnel and consider what, if any, changes would be desirable in light
of circumstances which may then exist. Management reserves the right to take
such actions or effect such changes as it deems advisable, including those to
best combine Associated's and the Company's businesses.
Except as noted herein, management has no present plans or proposals that
would result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation or sale or transfer of a material amount of assets
(other than the sale of redundant fixed assets), involving the Company, the
Surviving Corporation or any subsidiary or any other material changes in the
Company's or the Surviving Corporation's capitalization, corporate structure,
business or composition of its management or Board of Directors.
Management currently does not intend to pay dividends on the common stock of
the Surviving Corporation, but does intend to continue to declare and pay
quarterly dividends on the Surviving Corporation Preferred Stock in additional
shares of Surviving Corporation Preferred Stock in the foreseeable future. See
"Price Range of Shares and Dividends" and "Dividends and Distributions."
CONSOLIDATION STRATEGY AND BENEFITS OF THE MERGER
Management anticipates that the implementation of its consolidation strategy
following the Merger will result in significant cost savings and synergies
which will enhance the Surviving Corporation's financial and operational
performance. Management estimates that the Surviving Corporation expects to
realize approximately $26.0 million per year (phased in over a 12 month period
following the Merger) in savings as a result of the successful implementation
of its consolidation strategy. Elements of the consolidation strategy are as
follows:
Consolidate Number of Product Offerings and Increase Volume. Management plans
to consolidate its product offerings by eliminating approximately 10,000
overlapping items from the catalogs that management expects will be distributed
in the fourth calendar quarter of 1995. At the same time, management expects to
add more diverse products, including more specialty items. In addition,
following the Merger, the Surviving Corporation is expected to have
substantially greater sales volume than either Associated or the Company
separately. Management believes that the Surviving Corporation will benefit by
being able to (i) negotiate improved financial terms with vendors as a result
of placing higher volume purchases among fewer suppliers, (ii) offer a more
diverse product line, thereby enhancing end user purchasing options and (iii)
achieve higher fill rates as a result of greater inventory and warehousing
capacity.
Consolidate Distribution Centers. Management has identified eight overlapping
distribution centers between Associated and the Company and plans to close such
overlapping facilities within 12 months of the Merger. Management believes that
the Surviving Corporation will benefit by achieving cost reductions arising
from the elimination of such facilities. After the elimination of such
overlapping distribution centers, the aggregate number of distribution centers
will be 39, which is greater than the number of distribution centers operated
by either company separately. Management believes that such
37
<PAGE>
increased number of the Surviving Corporation's distribution centers and, in
some markets, the proximity of distribution centers to each other, ultimately
will improve service levels and make additional inventory available through
the Surviving Corporation's automated inventory management system and, as a
result, improve the delivery services of the Surviving Corporation. However,
certain markets will continue to benefit from more than one distribution
center where demand is sufficient to support multiple facilities.
Reduce Corporate Overhead. Management has identified a number of corporate
positions which it believes can be eliminated in the Surviving Corporation and
plans to eliminate such positions and to close Associated's corporate
headquarters. Management believes that the Surviving Corporation will benefit
by realizing savings (phased in over a 12-month period) from reduced payroll,
benefits and other related expenses derived from (i) the elimination of such
positions, (ii) the closing of Associated's corporate headquarters and (iii)
the consolidation of legal, audit and tax consulting functions of Associated
and the Company.
Reduce Sales Representatives. Management has reviewed the geographic
coverage of sales representatives currently employed by Associated and the
Company and plans to eliminate certain sales positions. Within three months
after the Merger, management believes that the Surviving Corporation will
benefit by savings from reduced payroll, benefits and other related expenses
derived from the elimination of such positions.
Expand Private Label Programs and Off-Shore Sourcing. Because of the
popularity of private label programs, management plans to use the combined
volume of Associated and the Company to enhance the Surviving Corporation's
ability, when appropriate, to introduce new private label products and, as
appropriate, to source certain products off-shore. Management believes that
the Surviving Corporation will benefit from such strategy by increasing sales
of private label and off-shore products, which should provide higher profit
margins to both the reseller and the Surviving Corporation.
PRO FORMA INFORMATION
The accompanying unaudited Pro Forma Combined Financial Statements are based
on the historical financial statements of Associated and the Company after
giving effect to the purchase accounting and other merger related adjustments
relating to the Offer and Merger as described in Notes to Pro Forma Combined
Financial Information. The Pro Forma Combined Balance Sheet is presented
giving effect to the Offer and Merger as if they had been consummated on
December 31, 1994. The Pro Forma Combined Income Statement for the year ended
December 31, 1994 is presented giving effect to the Offer and Merger as if
they had been consummated on January 1, 1994.
Although the Company (the current Registrant) will be the Surviving
Corporation as a result of the Merger, the transaction will be treated as a
reverse acquisition for accounting purposes with Associated as the acquiring
corporation. Accordingly, the Pro Forma Combined Balance Sheet combines
Associated as of December 31, 1994 with the Company as of November 30, 1994
(the date of its most recent fiscal quarter) and the Pro Forma Combined Income
Statement combines Associated for its fiscal year ended December 31, 1994 with
the Company for its twelve month period ended November 30, 1994. The Company's
historical statement of income previously reported on a fiscal year ended
August 31, 1994 has been adjusted to reflect the twelve month period ended
November 30, 1994.
The unaudited Pro Forma Combined Financial Statements are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the Surviving
Corporation, or of the financial position or results of operations of the
Surviving Corporation that would have actually occurred had the Merger been in
effect as of the date or the period presented.
38
<PAGE>
Pro forma interest expense included in the Pro Forma Combined Income
Statement is based on historical interest rates in effect during the year ended
December 31, 1994 in calculating the bases for variable rates. Average monthly
LIBOR in effect for the year ended December 31, 1994 ranged from 3.15% to
6.09%. The average prime rate during the three months ended March 31, 1994 was
6.02%. In comparison, at February 12, 1995, LIBOR was approximately 6.125% and
the prime rate was approximately 9.0%. If the February 12, 1995 interest rates
were used as base interest rates instead of the historical rates, interest
expense would amount to $55.5 million instead of $47.4 million. Each 1/8 of 1%
change in the base interest rate for variable rate debt has a $561 thousand
effect on annual pro forma interest expense for the Surviving Corporation.
The Pro Forma Combined Income Statement excludes (i) the extraordinary non-
recurring write-off of approximately $1.3 million (net of tax benefit of $0.9
million) of financing costs and original issue discount relating to debt which
will be retired and (ii) a non-recurring charge for restructuring of
approximately $5.9 million (net of tax benefit of $3.9 million), for costs
expected to be incurred in connection with integration and transition (e.g.,
severance and the cost of closing certain facilities operated by Associated
prior to the Merger). Approximately $14.2 million of additional integration and
transition costs (e.g., severance and the cost of closing facilities operated
by the Company prior to the Merger) will be recorded as additional costs of the
Merger, in accordance with the purchase method of accounting. All integration
and transition expenses are reflected as a reserve in the Pro Forma Combined
Balance Sheet.
The Pro Forma Combined Income Statement excludes the effect of certain cost
savings that management expects to be realized as a result of actions the
Surviving Corporation plans to take following the Merger pursuant to a
transition plan approved by the Board of Directors of Associated (see Notes to
Pro Forma Combined Financial Information). Such costs are estimated to be
approximately $26.0 million and include expected savings from a reduction in
employees and facilities following the Merger and an expected increase in
vendor credits as a result of increased product volumes purchased from those
vendors.
The unaudited Pro Forma Combined Financial Statements and the accompanying
notes should be read in conjunction with, and are qualified in their entirety
by, the historical consolidated financial statements of Associated and the
Company, including the related notes thereto, included or incorporated by
reference elsewhere herein.
39
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
ASSOCIATED UNITED PRO FORMA FORMA
HOLDINGS, INC. STATIONERS INC. ADJUSTMENTS COMBINED
-------------- --------------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 1,849 $ 5,142 $ -- $ 6,991
Accounts receivable... 45,139 158,582 -- 203,721
Inventories........... 88,197 271,857 19,600 (a) 379,654
Other current assets.. 3,795 15,153 5,980 (b) 24,928
-------- -------- --------- --------
Total current
assets............. 138,980 450,734 25,580 615,294
Property, plant and
equipment.............. 45,447 126,919 51,086 (a) 223,452
Goodwill................ 4,948 42,091 28,985 (c) 76,024
Other assets............ 3,104 10,399 25,958 (d) 39,461
-------- -------- --------- --------
$192,479 $630,143 $ 131,609 $954,231
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 54,351 $120,425 $ -- $174,776
Accrued and other
current liabilities.. 22,274 42,986 34,119 (e) 99,379
Short-term debt and
current maturities of
long-term debt....... 5,901 36,301 (25,206)(f) 16,996
-------- -------- --------- --------
Total current
liabilities........ 82,526 199,712 8,913 291,151
Deferred income taxes... 2,060 17,142 13,857 (b) 33,059
Other liabilities....... -- 5,870 10,557 (g) 16,427
Long-term debt.......... 58,279 156,345 318,612 (f) 533,236
Redeemable preferred
stock.................. 23,189 -- -- (h) 23,189
Stockholders' equity:
Common stock.......... 10 1,860 (1,269)(i) 601
Additional paid in
capital.............. 17,879 91,894 (54,543)(i) 55,230
Warrants.............. 1,910 -- -- 1,910
Retained earnings..... 6,626 157,463 (164,661)(j) (572)
Treasury stock........ -- (143) 143 (k) --
-------- -------- --------- --------
Total stockholders'
equity............. 26,425 251,074 (220,330) 57,169
-------- -------- --------- --------
$192,479 $630,143 $ 131,609 $954,231
======== ======== ========= ========
</TABLE>
See accompanying notes to Pro Forma Combined Financial Statements
40
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ASSOCIATED UNITED PRO FORMA PRO FORMA
HOLDINGS, INC. STATIONERS INC. ADJUSTMENTS COMBINED
-------------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales............... $477,445 $1,504,625 $ -- $1,982,070
Cost of sales........... 357,276 1,181,541 830 (l) 1,539,647
-------- ---------- -------- ----------
Gross profit............ 120,169 323,084 (830) 442,423
Warehouse, distribution,
selling, general and
administrative
expenses............... 103,020 284,484 5,771 (m) 393,275
-------- ---------- -------- ----------
Income from operations.. 17,149 38,600 (6,601) 49,148
Interest expense........ 6,753 11,440 29,184 (n) 47,377
Other (income) expense,
net.................... -- (371) -- (371)
-------- ---------- -------- ----------
Income before income
taxes.................. 10,396 27,531 (35,785) 2,142
Income taxes............ 3,993 10,763 (14,314)(o) 442
-------- ---------- -------- ----------
Net income.............. $ 6,403 $ 16,768 $(21,471) $ 1,700
======== ========== ======== ==========
Per share net loss to
common shareholders.... $ (0.08)
==========
Weighted average number
of common shares....... 6,013,122
==========
</TABLE>
See accompanying notes to Pro Forma Combined Financial Statements
41
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
Pro forma combined earnings before interest, taxes, depreciation, and
amortization (EBITDA)* for the year ended December 31, 1994 is $83.1 million.
Pro forma EBITDA and combined net income does not include the effects of
estimated cost savings aggregating approximately $26.0 million that management
expects to be realized as a result of the Merger (see "Operations After the
Offer and the Merger -- Consolidation Strategy and Benefits of the Merger").
Estimated cost savings resulting from the actions that the Surviving
Corporation expects to undertake pursuant to a plan that has been approved by
the Board of Directors of Associated are as follows (in thousands):
<TABLE>
<S> <C>
Decrease in cost of sales due to increase in credits received
from vendors as a result of increased purchase volumes with such
vendors......................................................... $ 3,208
Decrease in selling expenses due to reductions in combined sales
force........................................................... 3,840
Decrease in warehouse and distribution expenses due to closing of
duplicate facilities............................................ 8,873
Decrease in general and administrative expenses due to
elimination of duplicate corporate overhead..................... 10,045
-------
Total cost savings........................................... $25,966
=======
</TABLE>
- --------
* EBITDA should not be construed as a substitute for income from operations,
net income, or cash flow from operating activities (as all determined in
accordance with generally accepted accounting principles), for the purpose
of analyzing the Surviving Corporation's operating performance, financial
position and cash flows. EBITDA has been presented, however, because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance and to determine a
company's ability to service and incur debt.
The Pro Forma Combined Financial Statements have been prepared using the
following assumptions:
(1) Associated acquires 92.5% of the Company's outstanding common stock for
$15.50 per share or approximately $266.6 million.
(2) Outstanding options to purchase the Company's common stock are retired
for $15.50 per share less the exercise price or approximately $3.0
million.
(3) Certain shareholders of the pre-Merger Associated purchase 340,158 new
shares of Associated common stock for $12.0 million.
(4) As a result of the Offer and Merger, shareholders of the Company whose
shares are not acquired for cash hold a 20.0% ownership interest in the
Surviving Corporation on a fully diluted basis. CMIHI, which is
entitled to common shares of the Surviving Corporation representing an
ownership interest of between 2.0% and 4.0%, is assumed to receive a
4.0% ownership interest. The remaining number of common shares of the
Surviving Corporation on a fully diluted basis are allocated pro rata
to holders of Associated common stock, options, and warrants. Common
shares of Associated are assumed to be converted into common shares of
the Surviving Corporation.
42
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION--(CONTINUED)
(UNAUDITED)
(5) The total purchase price for the Company, including the ownership
interest held by the pre-Merger shareholders of the Company, based on
the per share price of $15.50, plus transaction costs of $6.2 million
is approximately $294.5 million. The purchase price has been
preliminarily allocated to the net assets of the Company based on
estimated fair values at the date of acquisition with the excess of
cost over fair value allocated to goodwill. The purchase price
allocation to property, plant and equipment is amortized over the
estimated useful lives ranging from 3 to 40 years. Goodwill is
amortized over 40 years.
(6) Terms and conditions of the Company's long-term debt may require that
it be refinanced. The Pro Forma Combined Financial Statements assume
that all of the Company's long-term debt is refinanced.
(7) Pro forma interest expense has been calculated based upon pro forma
debt levels and the applicable interest rates. The Subordinated Bridge
Facility, which carries a variable interest rate based on the prime
rate, is assumed to be outstanding for the first 3 months after the
Merger Date. Pro forma interest expense on the Subordinated Bridge
Facility was calculated using an average prime rate of 6.02%. Three
months after the closing date, the Subordinated Bridge Facility is
assumed to have been refinanced with Subordinated Notes carrying a
fixed interest rate of 12.5%. For the Term Loan Facilities and the
Revolving Credit Facility, pro forma interest expense was calculated on
a monthly basis using as a base interest rate the average historical
LIBOR in effect for the month. Average monthly LIBOR in effect for the
year ended December 31, 1994 ranged from 3.15% to 6.09%. Using 30 day
LIBOR and the prime rate each as of February 12, 1995 (6.125% and 9.0%,
respectively) as the base interest rates would increase pro forma
interest expense by $8.1 million. Each 1/8 of 1% change in the base
interest rate for variable rate debt has a $561 thousand effect on
annual pro forma interest expense.
(8) Income taxes have been provided for all adjustments at an assumed rate
of 40.0%.
(9) In computing per share information, dividends on preferred stock are
assumed to have been paid in preferred shares at the rate of 13.0% per
annum for Class A Preferred Stock and 10.0% per annum for Class B and C
Preferred Stock. The preferred stock dividends reduce the net income
available to common shareholders by $2.2 million, resulting in a net
loss to common shareholders of $493 thousand. Common stock equivalents
are excluded from the calculation of the net loss per share as they
would be anti-dilutive.
Pro forma adjustments reflect estimates which will be refined as additional
information is obtained, particularly in the areas of fair value of plant,
property and equipment, liabilities for closed facilities, and other
transitional matters.
Pro forma adjustments have been made to the Pro Forma Combined Balance Sheet
to reflect the following (in thousands):
(a) Adjusts inventory and plant, property and equipment to fair value.
(b) Records deferred taxes relating to the pro forma adjustments.
(c) Eliminates the Company's historical goodwill and records goodwill
originating from Associated's acquisition of the Company.
<TABLE>
<S> <C>
The Company's historical goodwill.............................. $(42,091)
Goodwill originating from Associated's acquisition of the
Company....................................................... 71,076
--------
$ 28,985
========
</TABLE>
43
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION--(CONTINUED)
(UNAUDITED)
(d) Reflects (i) adjustment of prepaid pension cost to the amount by
which plan assets exceed the projected benefits obligations for the
Company's pension plans, (ii) write-off (extraordinary) of financing costs
for Associated's current debt which will be retired, and (iii) financing
costs related to Associated's acquisition of the Company.
<TABLE>
<S> <C>
Adjustment to prepaid pension cost.............................. $(1,146)
Write-off (extraordinary) of unamortized financing costs........ (1,795)
Financing costs relating to the acquisition of the Company...... 28,899
-------
$25,958
=======
</TABLE>
(e) Reflects (i) current portion of severance payments to be made to the
Company's management personnel under existing employment contracts, (ii)
bank fees for letters of credit relating to the aforementioned severance
payments, (iii) cost of closing certain facilities and termination benefits
for certain employees, (iv) prepayment penalty (extraordinary) on debt of
the Company to be retired, and (v) adjustment to income taxes payable for
the write off of financing costs and original issue discount.
<TABLE>
<S> <C>
Severance payments (current portion)............................. $ 9,549
Bank fees........................................................ 561
Closing of facilities and termination benefits................... 24,438
Prepayment penalty (extraordinary)............................... 481
Income taxes payable............................................. (910)
-------
$34,119
=======
</TABLE>
(f) Reflects retirement of historical debt and issuance of new debt.
<TABLE>
<S> <C>
Associated's current debt retired.............................. $ (5,000)
The Company's current debt retired............................. (36,206)
New debt issued (current portion).............................. 16,000
--------
Adjustment to current maturities of long-term debt........... $(25,206)
========
Associated's long-term debt retired............................ $(55,910)
The Company's long-term debt retired........................... (156,111)
New debt issued (less current portion)......................... 530,190
Write-off (extraordinary) of original issue discount relating
to retired debt............................................... 443
--------
$318,612
========
</TABLE>
(g) Reflects (i) the non-current portion of severance payments to be made
to the Company's management personnel under existing employment contracts,
(ii) the projected benefits obligation relating to the Company's
Supplemental Benefit Plans, and (iii) the accumulated postretirement
benefit obligation of the Company.
<TABLE>
<S> <C>
Severance payments (non-current portion)......................... $ 8,326
Projected benefits obligation.................................... 410
Accumulated postretirement benefit obligation.................... 1,821
-------
$10,557
=======
</TABLE>
44
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION--(CONTINUED)
(UNAUDITED)
(h) Reflects exchange of Associated's redeemable preferred stock for
redeemable preferred stock of the Surviving Corporation.
<TABLE>
<S> <C>
Associated's redeemable preferred stock........................ $(23,189)
Issuance of redeemable preferred stock in the Surviving
Corporation................................................... 23,189
--------
$ --
========
</TABLE>
(i) Reflects (i) purchase of additional shares of Associated's common
stock, (ii) exchange of Associated's common stock for common stock of the
Surviving Corporation, (iii) adjustment for capital stock of the Surviving
Corporation not acquired for cash, and (iv) adjustment to additional paid
in capital.
<TABLE>
<S> <C>
Purchase of Associated's common stock......................... $ 3
Elimination of Associated's common stock...................... (13)
Elimination of the Company's common stock..................... (1,860)
Common stock of the Surviving Corporation (shares purchased by
Associated).................................................. 434
Common Stock of the Surviving Corporation (shares issued to
CMIHI)....................................................... 28
Common stock of the Surviving Corporation (representing shares
not acquired for cash)....................................... 139
--------
Adjustment to common stock.................................. $ (1,269)
========
Purchase of Associated's common stock......................... $ 11,997
Elimination of the Company's additional paid in capital....... (91,894)
Additional paid in capital (adjustment for par value of common
stock of the Surviving Corporation purchased by Associated).. (421)
Additional paid in capital (representing shares issued to
CMIHI)....................................................... 4,296
Additional paid in capital (representing shares not acquired
for cash).................................................... 21,479
--------
$(54,543)
========
</TABLE>
(j) Reflects (i) elimination of the Company's retained earnings; (ii)
expense (net of tax) relating to the write-off of financing costs and
original issue discount for Associated's debt which will be retired, and
(iii) estimated expense (net of tax) relating to the restructuring reserve.
<TABLE>
<S> <C>
Elimination of the Company's retained earnings................ $(157,463)
Write-off (extraordinary) of financing costs relating to debt
to be retired (net of tax effect of $718).................... (1,077)
Write-off (extraordinary) of original issue discount relating
to debt to be retired (net of tax effect of $177)............ (266)
Restructuring reserve (net of tax effect of $3,904)........... (5,855)
---------
$(164,661)
=========
</TABLE>
(k) Reflects retirement of the Company's treasury stock.
Pro forma adjustments have been made to the Pro Forma Combined Income
Statement to reflect the following (in thousands);
(l) Eliminates effect of liquidations of certain lower cost prior year
LIFO inventories experienced by the Company during fiscal 1994.
45
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION--(CONCLUDED)
(UNAUDITED)
(m) Adjusts depreciation and amortization for the following:
<TABLE>
<S> <C>
Incremental amortization of goodwill.............................. $ 662
Incremental depreciation of plant, property and equipment......... 5,109
------
$5,771
======
</TABLE>
(n) Adjusts interest expense for the following:
<TABLE>
<S> <C>
Incremental interest expense on debt............................ $27,416
Amortization of financing costs and original issue discount
relating to retired debt....................................... (1,277)
Amortization of financing costs................................. 2,181
Accretion of interest on liability recorded relating to
severance payments to be made to the Company's management
personnel under existing employment contracts.................. 864
-------
$29,184
=======
</TABLE>
(o) Reflects income tax effect of the pro forma adjustments.
46
<PAGE>
MANAGEMENT OF THE SURVIVING CORPORATION
Upon completion of the Merger, Thomas W. Sturgess, currently Chairman of the
Board and Chief Executive Officer of Associated and ASI, will continue as
Chairman of the Board of the Surviving Corporation, Jeffrey K. Hewson,
currently President and Chief Operating Officer of the Company, will continue
as a director and as President and Chief Executive Officer of the Surviving
Corporation, Michael D. Rowsey, currently President of Associated, will
continue as an Executive Vice President of the Surviving Corporation, Daniel
H. Bushell, currently Chief Financial Officer of Associated, will continue as
Chief Financial Officer of the Surviving Corporation, Steven R. Schwarz,
currently Senior Vice President of the Company, will continue as an Executive
Vice President of the Surviving Corporation, Gary G. Miller, currently Vice
President and Secretary of Associated, will continue as Vice President and
Secretary of the Surviving Corporation, and Messrs. Callier, Good, Hegi,
Johnson, G. Miler, Rowsey, Spungin and Sturgess will continue as the directors
of the Surviving Corporation.
XII. SOURCE AND AMOUNT OF FUNDS
GENERAL
Associated estimates that the total amount of funds required by Associated
to consummate the Offer and the Merger, buy-out Company stock options,
refinance certain existing indebtedness of the Company and Associated, and pay
related fees and expenses will be approximately $571.8 million. Associated
expects to secure financing for (i) the purchase of Shares pursuant to the
Offer and (ii) the refinancing of approximately $268.6 million of indebtedness
of Associated, the Company and their subsidiaries upon the consummation of the
Offer in an aggregate amount of up to $500.0 million to be obtained under the
Tender Offer Loan Facilities (as hereinafter defined), up to $130.0 million to
be obtained under the Subordinated Bridge Facility (as hereinafter defined),
and $12.0 million to be obtained by Associated from the sale of shares of
Associated Common Stock to Wingate Partners, Wingate II, certain affiliates
thereof, CMIHI, Good Capital, Cumberland and other holders of Associated
Common Stock. See "-- Equity Investments." Upon consummation of the Merger,
Associated expects that the Surviving Corporation will have available bank
financing in the amount of up to $500.0 million (which includes up to $300.0
million available under the Revolving Credit Facility (as defined below)), the
proceeds of which will be used to refinance the Tender Offer Loan Facilities
(as hereinafter defined), to pay the Cash Portion (as defined in "The
Merger -- The Merger Agreement -- Effect of the Merger"), if any, of Shares in
the Merger, to pay related fees and expenses and to provide working capital
needs of the Surviving Corporation.
47
<PAGE>
The following tables have been prepared by Associated after discussions with
management of the Company and set forth the approximate amounts and proposed
sources and uses of funds necessary to consummate the Offer and the Merger,
assuming that the Offer and the Merger close on March 31, 1995:
THE OFFER
(IN THOUSANDS)
<TABLE>
<S> <C>
Sources:
Tender Offer Loan Facilities.............................. $ 426,726
Subordinated Bridge Facility.............................. 130,000
Equity Investment......................................... 12,000
---------
Total Sources........................................... $ 568,726
=========
Uses:
Purchase Shares........................................... $ 266,629(1)
Other Liabilities Paid at Offer Closing................... 1,469
Refinance Existing Company Debt........................... 209,300
Refinance Existing Associated Debt........................ 59,330
Estimated Fees and Expenses............................... 31,998(2)
---------
Total Uses.............................................. $ 568,726
=========
</TABLE>
THE MERGER
(IN THOUSANDS)
<TABLE>
<S> <C>
Sources:
Term Loan Facilities........................................ $200,000
Revolving Credit Facility................................... 229,761
--------
Total Sources............................................. $429,761
========
Uses:
Refinance Tender Offer Loan Facilities...................... $426,726
Pay Cash Portion of Shares in Merger........................ 0(1)
Terminate Company Stock Options............................. 3,035
Estimated Costs and Expenses................................ 0(2)
--------
Total Uses................................................ $429,761
========
</TABLE>
- --------
(1) Assumes that (i) the Maximum Number of Shares is tendered in the Offer and
(ii) all options to purchase Shares outstanding as of February 10, 1995 are
terminated as of the Effective Time.
(2) Aggregate estimated fees and costs for the Offer and the Merger are
$31,998. See "Source and Amount of Funds -- General -- The Offer."
48
<PAGE>
FINANCING COMMITMENT LETTER
General. Associated has received commitment letters, dated October 27, 1994,
January 6, 1995 and February 13, 1995 (the last of which is referred to herein
as "Commitment Letter"), from Chase Bank to provide to ASI (i) a senior tender
offer term loan facility (the "Tender Term Facility") in an aggregate principal
amount of up to $420,000,000, and a tender offer revolving credit facility (the
"Tender Revolving Facility" and, collectively with the Tender Term Facility,
the "Tender Offer Loan Facilities") in an aggregate principal amount of up to
$80,000,000; (ii) upon the consummation of the Merger and the repayment in full
of all amounts owing under the Tender Offer Loan Facilities, (a) a tranche A
term loan facility (the "Tranche A Facility") in an aggregate principal amount
of $125,000,000, (b) a tranche B term loan facility (the "Tranche B Facility"
and, collectively with the Tranche A Facility, the "Term Loan Facilities") in
an aggregate principal amount of $75,000,000 and (c) a revolving credit
facility (the "Revolving Credit Facility") in an aggregate principal amount of
up to $300,000,000, including a $40,000,000 sublimit available for issuance of
letters of credit; and (iii) a senior subordinated bridge facility in an
aggregate principal amount of $130,000,000 (the "Subordinated Bridge
Facility"). The Tender Offer Loan Facilities, the Term Loan Facilities and the
Revolving Credit Facility are referred to herein as the "Senior Facilities."
Although Chase Bank has committed to provide the Senior Facilities and the
Subordinated Bridge Facility, subject to the terms and conditions set forth in
the Commitment Letter, Chase Bank has advised Associated and ASI that Chase
Bank may, at its option, syndicate (i) all or a portion of the Senior
Facilities to a group of banks and financial institutions acceptable to Chase
Bank (including Chase Bank, the "Senior Lenders") and (ii) all or a portion of
the Subordinated Bridge Facility to a group of banks and financial institutions
acceptable to Chase Bank (including Chase Bank, the "Senior Subordinated
Lenders").
Associated and ASI have agreed to pay the costs and expenses arising in
connection with the preparation, execution, and delivery of the Commitment
Letter and the definitive agreements relating thereto and to indemnify the
Senior Lenders (and their respective officers, directors, employees and
affiliates) against certain liabilities in connection with the Merger, the
Commitment Letter or the financings contemplated thereby.
In connection with the issuance of the Commitment Letter and the consummation
of the Offer and the Merger, Associated has agreed to pay to Chase Bank and
certain of its affiliates customary fees. See "Operations After the Offer and
the Merger -- Pro Forma Information" and "Fees and Expenses."
At the closing of the Offer (the "Offer Closing"), warrants to purchase
Associated Common Stock for a nominal exercise price will be issued to CMIHI
(the "Senior Facility Warrants"). The Senior Facility Warrants will enable the
holders thereof to purchase, after giving effect to the Merger, not less than
2.0% and up to 4.0% of the common stock of the Surviving Corporation. In no
event will the common stock issued upon exercise of the Senior Facility
Warrants serve to dilute the ownership interest of the pre-Merger holders of
the Common Stock of the Company (excluding Associated, the Company, any
subsidiaries of the Company and any holders of Dissenting Shares) below 20.0%
of the shares of common stock of the Surviving Corporation (on a fully diluted
basis) (subject to future adjustments of the number of shares of Surviving
Corporation common stock into which such warrants are exercisable in accordance
with customary antidilution provisions contained in such warrants).
Under the terms of the Commitment Letter, Associated has agreed to effect the
Merger (i) not more than 24 hours after the Offer Closing (in the event that at
least 90.0% of the Shares outstanding as of the Expiration Date are purchased
by Associated in the Offer), (ii) not more than 30 days after the Offer Closing
if at least 80.0% of the Shares outstanding as of the Expiration Date are
purchased by Associated in the Offer and (iii) in any event and whether or not
at least 80.0% of the Shares are acquired in the Offer, by the earlier of 60
days after the closing of the Offer or May 15, 1995. Chase Bank's commitment
under the Commitment Letter will terminate if the initial borrowings under the
Senior Facilities and the Subordinated Bridge Facility have not occurred on or
before May 15, 1995.
49
<PAGE>
Set forth below is a summary description of the terms of the Senior
Facilities and the Subordinated Bridge Facility. Such description is qualified
in its entirety by reference to the Commitment Letter, which has been filed as
an exhibit to the Schedule 14D-1.
Senior Facilities. The Tender Offer Loan Facilities will be used by ASI to
(i) make a loan to Associated to finance the purchase of Shares pursuant to the
Offer, (ii) refinance certain existing indebtedness of and to finance or fund
ongoing working capital requirements of ASI, (iii) make loans to USSC to
refinance existing indebtedness of and to finance or fund ongoing working
capital requirements of USSC and (iv) pay certain of the fees, expenses, and
financing costs relating to the Offer. The Tender Offer Loan Facilities will
mature on the earlier of (a) the first date by which the Merger and the
Subsidiary Merger have become effective (the "Merger Date"), (b) the date 60
days after the closing of the Offer, or (c) May 15, 1995. The Tender Offer Loan
Facilities will bear interest at the higher of (1) the prime commercial lending
rate of Chase Bank and (2) the federal funds rate plus 1/2 of 1% (the higher of
such amounts is referred to as the "Base Rate"), plus, in either case, the
applicable margin. The applicable margin for the Tender Offer Loan Facilities
is 2.0%.
Upon consummation of the Merger and subject to the terms of the Commitment
Letter, Chase Bank has committed to make the Term Loan Facilities and the
Revolving Credit Facility available to the Surviving Subsidiary. The proceeds
from the Term Loan Facilities, together with the proceeds of amounts drawn
under the Revolving Credit Facility on the Merger Date, will be used by the
Surviving Subsidiary to (i) refinance all outstanding loans under the Tender
Offer Loan Facilities and (ii) fund other costs of the Offer and the Merger
payable on the Merger Date. The proceeds from the Revolving Credit Facility
will also be used to finance part of the ongoing working capital requirements
and other general corporate purposes of the Surviving Corporation.
Amounts outstanding under the Tranche A Facility will be repaid in 20
quarterly installments, the first four of which (each in the aggregate
principal amount of $3,750,000) to be due on the last day of each of the first
four quarters ending after the Merger Date. Subsequent quarterly payments under
the Tranche A Facility are each in the aggregate principal amount of $6,250,000
for quarters ending during the second and third years after the Merger Date and
$7,500,000 for quarters ending during the fourth and fifth years after the
Merger Date. Amounts outstanding under the Tranche B Facility will be repaid in
28 quarterly installments, the first twenty of which (in the principal amount
of $250,000 each) to be due on the last day of each of the first twenty
quarters ending after the Merger Date. The remaining eight installments in the
aggregate principal amount of $8,750,000 each will be due on the last day of
each quarter ending during the sixth and seventh years after the Merger Date.
The Revolving Credit Facility will mature on the fifth anniversary of the
Merger Date.
The Tender Revolving Facility and the Revolving Credit Facility will each be
subject to a borrowing base equal to 80.0% of Eligible Receivables (as defined
in the credit agreement to be entered into relating to the Senior Facilities
(the "Credit Agreement")), plus a percentage (not over 50.0%) of Eligible
Inventory (as defined in the Credit Agreement).
Loans under the Term Loan Facilities and the Revolving Credit Facilities will
be subject to certain mandatory prepayments out of (i) net proceeds in excess
of $15,000,000 received from the issuance of equity by the Surviving
Corporation or any of its subsidiaries after the Merger Date (other than
proceeds applied to refinance the Subordinated Bridge Facility), (ii) net
proceeds from certain asset sales in excess of $15,000,000 and (iii) 75.0% of
the Surviving Corporation's Excess Cash Flow. Mandatory prepayments will be
applied first, pro rata to loans outstanding under the Tranche A Facility and
the Tranche B Facility (in the inverse order of maturity), and second, to the
payment of loans outstanding under, and to the permanent reduction of
commitments under, the Revolving Credit Facility.
The loans outstanding under the Term Loan Facilities and the Revolving Credit
Facility will bear interest, at the Surviving Corporation's option, equal to
(i) the Base Rate plus 2.25% (if the Tranche B
50
<PAGE>
Facility) or 1.75% (if either the Tranche A Facility or the Revolving Credit
Facility) or (ii) LIBOR (as defined), based on one, two, three or six month
periods, provided that until the date 90 days after the Merger Date, each
interest period shall be one month and shall be coterminous with other
outstanding LIBOR loans, plus 3.25% (if the Tranche B Facility) or 2.75% (if
the Tranche A Facility or the Revolving Credit Facility) with the applicable
margins for all but the Tranche B Facility being subject to reductions based on
a debt to cash flow ratio test.
A portion of the proceeds of the Tender Term Facility, and from time to time,
a portion of the proceeds of the Tender Revolving Facility, will be loaned by
ASI to USSC and applied to the repayment of existing indebtedness of USSC or,
in the case of such proceeds of the Tender Revolving Facility, to finance
ongoing working capital requirements of USSC. USSC will issue one or more
promissory notes to ASI (collectively, the "USSC Notes") in the amount of such
proceeds, which will contain covenants and other terms satisfactory to the
Senior Lenders. The USSC Notes will be secured by a perfected first priority
security interest in and lien upon the accounts receivable, inventory, contract
rights and other personal and real property of USSC. The USSC Notes will be
guaranteed by the Company and such guarantee will be secured by a perfected
first priority pledge of all of the shares of USSC.
The Tender Offer Loan Facilities will be guaranteed by Associated. The Term
Loan Facilities and the Revolving Credit Facility will be guaranteed, on a
joint and several basis, and pursuant to guarantees in form and substance
satisfactory to the Senior Banks, by the Surviving Corporation and all of the
direct and indirect subsidiaries of the Surviving Subsidiary.
Prior to the Merger, outstanding loans under the Tender Offer Loan Facilities
will be secured by perfected first-priority securing interests in and liens
upon all accounts receivable, inventory, contract rights and other personal and
real property of ASI and by the USSC Notes. The guarantee by Associated of the
Tender Offer Loan Facilities will be secured by a perfected first priority
pledge of all shares of ASI held by Associated, but will not be directly or
indirectly secured by the Shares, except to the extent required by Chase Bank
and as permitted by Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System. Upon and following the Merger, the Term Loan Facilities
and the Revolving Credit Facility will be secured by perfected first priority
pledges of the stock of Surviving Subsidiary and all of the direct and indirect
subsidiaries of Surviving Subsidiary and security interests in and liens upon
all accounts receivable, inventory, contract rights and other personal and real
property of Surviving Subsidiary and such subsidiaries.
Chase Bank's obligation to lend under the Senior Facilities will be
contingent upon a number of conditions, including, but not limited to, (i) the
Senior Lenders' review of and satisfaction with the terms and conditions of,
and the documentation relating to, the Tender Offer and the Mergers (other than
the Merger Agreement as originally in effect) and the Subordinated Bridge
Facility, (ii) the Senior Lenders' review of and satisfaction with all filings
with the Commission in connection with the Offer and the Mergers, (iii) the
Senior Lenders' continuing satisfaction with the condition, operations
(including compliance with law), assets, liabilities and prospects of
Associated, the Company, and their respective subsidiaries, (iv) the Senior
Lenders' review of and satisfaction with (a) Associated's tax assumptions
which, if not true, could have a material adverse effect on the assets,
liabilities and prospects of Associated, the Company and their respective
subsidiaries and (b) the material contracts of the Company and its
subsidiaries, (v) the Merger Agreement shall have been approved by the
respective boards of directors of Associated, ASI, the Company and USSC, and
such approval shall not have been withdrawn or qualified in a manner adverse to
Associated or the Senior Lenders, (vi) simultaneously with the closing of the
Offer, Associated shall have received proceeds from the Subordinated Bridge
Facility in an aggregate principal amount at least equal to $130,000,000, (vii)
simultaneously with the closing of the Offer, Associated shall have received at
least $12,000,000 of proceeds from the issuance of new equity on terms
satisfactory to the Senior Lenders, (viii) all fees, commissions and expenses
payable by Associated, the Company and their respective subsidiaries in
connection with the Offer, the Merger and the other transactions contemplated
thereby shall not exceed $35,000,000 in the
51
<PAGE>
aggregate, (ix) no severance payments or fees or other amounts in excess of
current compensation shall be payable to any of the management or directors of
the Company in connection with or as a result of the Offer or Mergers except to
the extent agreed to by the Senior Lenders (provided that up to $25,000,000 of
such payments and fees may be supported by letters of credit issued under the
Revolving Credit Facility), (x) all conditions to the Offer and the Merger
Agreement shall have been met or waived with the concurrence of the Senior
Lenders, (xi) Associated shall have acquired not less than a sufficient number
of Shares that would enable Associated, voting without any of the other holders
of shares, to approve the Merger no later than May 15, 1995, (xii) if less than
90.0% of the issued and outstanding Shares shall have been tendered and
accepted for payment pursuant to the Offer, then (a) the Company shall have
filed with the Commission an information statement relating to the Merger and
shall have responded to any comments or requests of the Commission relating
thereto and (b) the Commission shall have indicated that it has no further
comments or requests relating thereto, (xiii) the Senior Lenders' review of and
satisfaction with opinions of value and other appropriate factual information
and expert advice from persons acceptable to the Senior Lenders supporting the
conclusion that, after giving effect to the Mergers, the borrowings under the
Senior Facilities and the Subordinated Bridge Facility, and the other
transactions contemplated by the Merger, neither Associated, ASI, the Surviving
Corporation nor any of their respective subsidiaries is insolvent nor will be
rendered insolvent thereby, (xiv) the Senior Lenders' satisfaction that the
borrowings under the Senior Facilities, and the Subordinated Bridge Facility,
and other funding for the purchase of the Shares shall be in full compliance
with all legal requirements, including without limitation Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System, (xv) evidence
satisfactory to the Senior Lenders that after giving effect to all borrowings
on the date of the Offer Closing and the Merger Date, not more than
$295,000,000 of revolving credit loans will be outstanding under the Revolving
Credit Facility, (xvi) the Senior Lenders shall have received evidence that all
necessary governmental and third party consents, licenses, permits, and
approvals have been obtained and remain in full force and effect, (xvii) the
Senior Lenders' review of and satisfaction with an environmental risk
assessment made by a person or persons acceptable to the Senior Lenders with
respect to Associated, the Company and their respective subsidiaries, (xix)
receipt of favorable legal opinions customary for transactions of this type,
(xx) evidence that all indebtedness of the Company and its subsidiaries shall,
subject to agreed upon exceptions, be repaid with the proceeds of the Supply
Notes and all liens securing such indebtedness shall be released and (xxi) the
Senior Lenders shall be satisfied with (a) any litigation or other proceedings
with respect to the Merger or the other transactions contemplated hereby and
not heretofore disclosed to Chase Bank, as agent for the Senior Lenders, (b)
any other litigation or proceedings deemed material by the Senior Lenders and
not heretofore disclosed to or discovered by Chase Bank and (c) any
developments, disclosed to or discovered by Chase Bank after the date hereof,
in any litigation or proceedings with respect to the Merger or any other
transactions contemplated hereby or any other litigation or proceedings deemed
material by the Senior Lenders.
The documentation relating to the Senior Facilities will include
representations and warranties, affirmative and negative covenants and events
of default customary for financings of this type and other terms deemed
appropriate by the Senior Lenders. It is anticipated that amounts borrowed
under the Tender Offer Loan Facilities will be repaid with the proceeds of the
Term Loan Facilities and the Revolving Loan Facility. Associated expects that
the Surviving Subsidiary will repay amounts outstanding under the Term Loan
Facilities and the Revolving Loan Facility out of the cash flow from the
Surviving Subsidiary's operations.
Subordinated Bridge Facility. The Subordinated Bridge Facility will be used
by ASI to (i) provide a portion of the financing necessary to consummate the
Offer and the Merger and (ii) pay related fees, commissions and expenses. The
Subordinated Bridge Facility will mature on the first anniversary of the Offer
Closing. The Subordinated Bridge Facility will bear interest at the Base Rate
plus in any case the applicable margin per annum. The applicable margin for the
Subordinated Bridge Facility is 4.0% initially, increasing by 1/2 of 1% at the
end of each quarter ending after the Offer Closing. Interest will be payable
quarterly in arrears.
52
<PAGE>
Consistent with the Senior Facilities, loans under the Subordinated Bridge
Facility will be subject to certain mandatory prepayments out of (i) net
proceeds from the issuance of subordinated debt or equity securities by the
Surviving Corporation or any of its subsidiaries and (ii) net proceeds from
asset sales (subject to exceptions), in each case in excess of the amount
thereof required to be paid to the Senior Lenders or to reduce commitments
under the Senior Facilities.
The Subordinated Bridge Facility will not be secured and will be subordinated
in right of payment to the Senior Facilities. The Subordinated Bridge Facility
will be guaranteed by Associated or, after the Merger, the Surviving
Corporation, subject to the same subordination provisions described above.
Chase Bank's obligation to lend under the Subordinated Bridge Facility will be
contingent upon substantially the same conditions as those applicable to the
Senior Facilities described above.
The definitive documentation relating to the Subordinated Bridge Facility
will include representations and warranties, affirmative and negative
covenants, and events of default customary for financings of this type and
other terms deemed appropriate by Chase Bank and the other Subordinated Bridge
Lenders.
Associated currently contemplates that the Subordinated Bridge Facility will
be refinanced in full from the proceeds of the sale by the Surviving Subsidiary
of an aggregate of $130,000,000 Senior Subordinated Notes after the Merger
Date. Pursuant to the Merger Agreement, Associated has agreed that, in
connection with the Chase Bank financings, no shares of capital stock or rights
to acquire capital stock of the Surviving Corporation will dilute the
percentage ownership in the Surviving Corporation of the pre-Merger holders of
Shares (excluding Associated and its affiliates, the Company, any subsidiaries
of the Company and any holders of Dissenting Shares).
In the event that any portion of the Subordinated Bridge Facility is not
refinanced prior to the maturity thereof, such unpaid amounts will
automatically be converted on the maturity date into the rollover loan
described in the Commitment Letter (the "Rollover Loan"). One-half of the
Rollover Loan will be due and payable on the ninth anniversary of the closing
of the Offer, and the remaining one-half of such amount will be due and payable
on the tenth anniversary of the closing of the Offer. The Rollover Loan will
bear interest at the Base Rate plus the applicable margin per annum. The
applicable margin for the Rollover Loan is 6.0% initially, increasing by 1/2 of
1% at the end of each quarter ending after the Offer Closing, up to a maximum
of 20.0% per annum; provided that, to the extent that interest accrues on the
Rollover Loan at a rate per annum in excess of 15.0%, such interest over 15.0%
will be added to the principal amount of the Rollover Loan and will thereafter
bear interest as described above. Interest on the Rollover Loan will be payable
quarterly in arrears.
Upon demand by lenders who hold in excess of 66 2/3% of the Rollover Loans,
such lenders will have the right (i) to require that the Surviving Corporation
register the notes evidencing the Rollover Loans and any related guaranties
under the Securities Act and (ii) to have an indenture prepared and qualified
under the Trust Indenture Act of 1939, as amended. Upon such demand, the
Surviving Corporation will be required to use its best efforts to cause such
registration and qualification to occur as soon as practicable, but in no event
later than 90 days following such request.
The remaining terms and conditions applicable to the Rollover Loans will be
substantially similar to those described above with respect to the Subordinated
Bridge Facility.
EQUITY INVESTMENT
Associated expects to obtain $12,000,000 from the sale of additional shares
of Associated Common Stock prior to the Expiration Date. Such shares are being
offered to Wingate Partners, Wingate II, certain affiliates thereof, CMIHI,
Good Capital, Cumberland and other holders of Associated Common Stock, although
it is anticipated that one or more of the other current stockholders of
Associated will provide a portion of such investment.
53
<PAGE>
XIII. BACKGROUND OF THE OFFER
In December 1993, representatives of Wingate Partners contacted the Company
concerning a possible merger between ASI and the Company. After discussions
between the Company and ASI and several meetings among representatives of the
Company and ASI, the Company informed Wingate Partners that it did not intend
to pursue a merger with ASI.
In late October 1994, Thomas W. Sturgess, Chairman of the Board and Chief
Executive Officer of Associated, contacted Joel D. Spungin, Chairman of the
Board and Chief Executive Officer of the Company, to inquire whether the
Company would entertain a proposal from ASI. On November 14, 1994, Mr. Sturgess
contacted Mr. Spungin and proposed that ASI purchase all of the Shares at a
price of $13.50 per share and suggested a meeting to discuss the proposal.
On November 18, 1994, Mr. Sturgess met with Mr. Spungin and other
representatives of the Company, at which time the Company (i) declined the ASI
offer and (ii) delivered to Associated the first of two sets of Projections.
On December 8, 1994, Mr. Sturgess met with representatives of the Company and
suggested that ASI would be willing to pay $15.00 per share for the Company,
but that financing to acquire more than 92.5% of the Shares was incomplete. He
suggested that, as an alternative to a $15.00 per share all cash offer for all
the Shares, ASI acquire 92.5% of the Shares, with the 7.5% balance to remain in
the hands of the Company stockholders and represent 7.5% of the outstanding
shares of the combined company holding all the businesses and assets of the
Company and ASI.
Representatives of the Company suggested on behalf of the Company that ASI
should attempt to put together an all cash bid, or that, alternatively, the
Company stockholders should be permitted to retain more than the proposed 7.5%
interest in the combined company.
On December 12, 1994 Mr. Sturgess contacted William Blair, the Company's
financial advisor, to state that he was prepared to increase the percentage of
the combined company which the Company stockholders would retain. After
discussions, Mr. Sturgess stated that he was prepared to make an offer pursuant
to which a 19.0% interest in the combined company would be retained by the
Company's stockholders.
On December 21, 1994, the Company and ASI executed a non-binding letter of
intent providing for a price of $15.00 per share for 92.5% of the Shares and a
19.0% interest in the combined company to be retained by the Company
stockholders. The letter of intent was included in the HSR Act filing made on
December 30, 1994.
On December 29, 1994, the Company issued a press release announcing its
earnings for the first fiscal quarter, ended November 30, 1994.
Commencing in the first week of January 1995, the parties commenced their due
diligence investigations of the proposed transaction. Discussions concerning
the transaction continued between the parties and their representatives.
Pursuant to the letter of intent, as amended on January 6, 1995, the Company
agreed to reimburse ASI for its expenses of up to $1,500,000 if the Company
entered into a transaction regarding the acquisition of the Company of
substantially all of its assets with another party not affiliated with ASI
before March 31, 1995. On January 7, 1995, ASI informed the Company that it had
obtained a financing commitment for funds sufficient to complete the proposed
transaction. On January 9, 1995, the Company issued a press release stating
that it had entered into a non-binding letter of intent. On January 20, 1995,
the Company retained Lazard Freres & Co. as a financial advisor in connection
with the Offer.
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<PAGE>
On January 26, 1995, on behalf of the Company, William Blair requested that
ASI increase the consideration payable in the transaction. After several
discussions between William Blair and ASI, ASI agreed to increase the
consideration to $15.50 per share for 92.5% of the Shares and to increase the
interest in Shares to be retained by the holders of Shares to a 20.0% interest
in the Surviving Corporation (on a fully diluted basis).
During the period from mid-January to February 13, 1995, extensive
negotiations on the terms of the transaction continued. On February 13, 1995,
Associated and the Company executed the Merger Agreement, and the Seller
Stockholders executed the Tender Agreement. On February 14, 1995, Associated
and the Company issued a joint press release announcing the execution of the
Merger Agreement. On February 21, 1995, Associated commenced the Offer.
XIV. THE MERGER
PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is to enable Associated to acquire,
in one or more transactions, control of the Board of Directors and the Company.
The Offer is intended to increase the likelihood that the Merger will be
completed promptly. Associated regards the acquisition of the Company as an
attractive opportunity to acquire a significant and well-established business.
Associated believes that the increased scale of the combined business will
enable the Surviving Corporation to compete more efficiently in the wholesale
business products industry. See "-- Operations After the Offer and the Merger."
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
thereof, which is incorporated herein by reference and a copy of which has been
filed with the Commission as an exhibit to the Schedule 14D-1. The Merger
Agreement may be examined, and copies thereof may be obtained, as set forth
above under "Certain Information Concerning the Company -- Available
Information."
The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which Associated has expressly reserved the right to waive
certain conditions of the Offer, but except as required by law and except for
certain extensions, Associated is not permitted to (i) increase or decrease the
number of shares being sought in the Offer, (ii) change the form of
consideration payable in the Offer, (iii) add additional conditions to the
Offer, (iv) extend the time of original expiration of the Offer if all of the
Offer Conditions (as defined below) are then satisfied or waived or (v)
otherwise amend the Offer without the prior written consent of the Company
which consent shall not be unreasonably withheld and, in any event, will be
deemed given if the Company does not object in writing within 24 hours after
receipt of Associated's written request for consent describing the proposed
amendment (other than amendments which increase the amount of cash
consideration payable for the purchase of Shares pursuant to the Offer). In
addition, Associated reserves the right (but shall not be obligated) to extend
the period during which the Offer is to remain open (but not beyond the
Deadline Time (as defined below under"-- Termination")) and, subject to the
rights of tendering stockholders to withdraw their Shares, retain all tendered
Shares until the Expiration Date (i) if, as of any then scheduled expiration
time of the Offer, any condition of the Offer ("Offer Condition") described
below under "Certain Conditions of the Offer" (other than the Minimum Tender
Condition) has not been satisfied; provided, however, that in no event shall
Associated be permitted to extend the expiration time of the Offer if the
failure of any Offer Condition to occur was caused by the material action or
material failure to act of Associated; and provided, further, that Associated
shall not be permitted to extend the
55
<PAGE>
expiration time of the Offer beyond 5:00 p.m., New York City time, on the date
which is ten business days after Associated publicly has announced that it has
entered into definitive documentation with respect to the financing of the
Offer and the Merger unless the Minimum Condition shall have been satisfied on
or before such tenth business day; or (ii) only for up to an additional five
business days, if, as of any then scheduled expiration time of the Offer, all
of the Offer Conditions have been satisfied or waived and at least 80.0% but
less than 90.0% of the outstanding Shares have been validly tendered and not
properly withdrawn pursuant to the Offer.
Board Representation. The Merger Agreement provides that, if requested by
Associated, the Company shall, promptly following the acceptance for payment of
a majority of the outstanding Shares pursuant to the Offer and from time to
time thereafter, use reasonable efforts to take all actions necessary to cause
a number (but not more than six) of members of the Board of Directors of the
Company (and a majority of the members of each committee of the Board of
Directors of the Company and the members of the Board of Directors of each
Subsidiary of the Company), rounded up to the nearest whole number, equal to
the percentage of outstanding Shares held by Associated, to consist of persons
designated by Associated (whether, at the request of Associated, by means of
increasing the size of the Board of Directors of the Company or seeking
resignation of directors and causing Associated's designees to be elected).
Notwithstanding the foregoing, until the Effective Time at least one member of
the Board of Directors of the Company and the board of directors of each
Subsidiary on the date of the Merger Agreement who is not an employee of the
Company and at least two members of the Board of Directors on the date of the
Merger Agreement who are also employees of the Company shall remain members of
the Board of Directors until such person's death, disability or resignation,
(such members, including replacements appointed in accordance with the Merger
Agreement are referred to herein as the "Continuing Directors"); provided that
if the number of Continuing Directors shall be reduced below three because of
death, disability or resignation, such Continuing Directors (or Continuing
Director if there be only one remaining) shall be entitled to designate persons
to fill such vacancies. In addition, simultaneous with the execution of the
Merger Agreement, the Company has (i) furnished Associated copies of written
resignations of six of the present members of the Board of Directors of the
Company to be effective upon the acceptance for payment of at least a majority
of the outstanding Shares pursuant to the Offer and receipt by the Company from
Chase Bank of advice that Chase Bank is ready, willing and able to fund payment
for purchase of such Shares; provided that if less than two-thirds of the
outstanding Shares are purchased by Associated in the Offer, the Company will
accept only five resignations selected by it; and (ii) adopted a resolution
appointing certain designees of Associated as directors of the Company
contingent upon the acceptance for payment by Associated of a majority of the
outstanding Shares and receipt by the Company from Chase Bank of advice that
Chase Bank is ready, willing and able to fund the payment for the purchase of
such Shares. The Company's obligation to cause designees of Associated to be
elected or appointed to the Board of Directors of the Company will be subject
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Stockholders Meeting. The Merger Agreement provides that the Company will
prepare and file, as promptly as practicable, but in any event by February 23,
1995 a preliminary information statement with the Commission. In addition, if
required by applicable law in order to consummate the Merger, the Company will
promptly, following the date which the Offer is consummated, call a meeting of
its stockholders for the purpose of approving the Merger and related matters
and will cause the information statement to be mailed to the stockholders for
such purpose at the earliest practicable time. The Company, through its Board
of Directors, has recommended to its stockholders approval of the Merger
Agreement and the Merger (and will not withdraw or modify such recommendation
unless the Board of Directors determines in good faith after consultation with
legal counsel that to not do so would be inconsistent with its fiduciary duties
under applicable law) , and will otherwise use its reasonable efforts to obtain
stockholder approval of the Merger Agreement and all related matters. If
Associated acquires at least 90.0% of the outstanding Shares in the Offer, the
Merger may be effected as a short form
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merger without the vote or consent of the stockholders in accordance with the
provisions of the Delaware Code. If Associated acquires at least 80.0% but
less than 90.0% of the outstanding Shares in the Offer, Associated will
execute and deliver a written consent approving the Merger Agreement and the
Merger, and the Company will provide 30 days notice to stockholders as
required by the Company's restated certificate of incorporation.
Effect of Mergers. As a result of the Merger, Associated will be merged with
and into the Company, with the Company surviving the Merger as the Surviving
Corporation, and as a result of the Subsidiary Merger, immediately thereafter
ASI will be merged with and into USSC, with USSC surviving the Subsidiary
Merger as the Surviving Subsidiary. After giving effect to the Merger, the
pre-Merger holders of Associated Common Stock and warrants and options
exercisable therefor and for Associated Nonvoting Common Stock will own an
aggregate of 80.0% of the common stock of the Surviving Corporation on a fully
diluted basis and the pre-Merger holders of Shares (excluding Associated, the
Company, any subsidiaries of the Company and any holders of shares with
respect to which appraisal rights pursuant to Section 262 of the Delaware Code
are validly exercised and perfected in respect of the Merger and not withdrawn
("Dissenting Shares")) will own an aggregate of 20.0% of the common stock of
the Surviving Corporation on a fully diluted basis. The Merger will become
effective upon the filing of a certificate of merger effecting the Merger with
the Secretary of State of the State of Delaware and the Subsidiary Merger will
become effective upon the filing of a certificate of merger effecting the
Subsidiary Merger with the Secretary of State of the State of Delaware and
articles of merger with the Secretary of State of Illinois and the issuance of
an Illinois Certificate of Merger.
As of the Effective Time, by virtue of the Merger:
(i) Each Share outstanding immediately prior to the Effective Time (other
than Shares owned by Associated or any of its respective subsidiaries
immediately prior to the Effective Time ("AHI Owned Shares") and Shares
then held in treasury of the Company or any of the Company's subsidiaries
("Treasury Shares") will be converted as follows:
(a) the Cash Portion (as hereinafter defined) of each such Share
shall be converted into and represent the right to receive cash in an
amount determined by subtracting (A) the product of $15.50 (or such
higher price per Share as may be paid in the Offer) multiplied by the
number of AHI Owned Shares from (B) $266,628,495 (or, if higher, the
product of the highest price per Share paid in the Offer multiplied by
the product of 92.5% multiplied by the lesser of the number of Shares
outstanding immediately prior to the Effective Time and 19,860,192
Shares) and dividing the result so obtained by the number of Old Shares
(as hereinafter defined); and
(b) the balance of each such Share shall remain outstanding and be
unaffected by the Merger (such Shares remaining outstanding being
referred to as the "Remaining Shares");
(ii) each AHI Owned Share and each Treasury Share will be cancelled and
retired and cease to exist without any payment therefor;
(iii) each share of Associated Common Stock outstanding immediately prior
to the Effective Time shall be converted into a number of shares of Common
Stock determined by (((x divided by .20) minus x) divided by y), where "x"
equals the number of Remaining Shares (including for such purpose
Dissenting Shares) and "y" equals the number of shares of Associated Common
Stock outstanding on a fully diluted basis including treating for purposes
of this calculation all outstanding options, warrants and other rights
(including conversion rights and antidilution rights) to acquire Associated
Common Stock or shares of Associated Nonvoting Common Stock and rights to
receive options under certain executive purchase agreements as having been
exercised and given effect;
(iv) each outstanding share (and fraction thereof) of Associated Class A
Preferred Stock shall be converted into one share (and corresponding
fraction thereof) of newly created series A preferred stock of the
Surviving Corporation (the "Series A Preferred Stock");
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(v) each outstanding share (and fraction thereof) of Associated Class B
Preferred Stock shall be converted into one share (and corresponding
fraction thereof) of newly created series B preferred stock of the
Surviving Corporation (the "Series B Preferred Stock"); and
(vi) each outstanding share (and fraction thereof) of Associated Class C
Preferred Stock shall be converted into one share (and corresponding
fraction thereof) of newly created series C preferred stock of the
Surviving Corporation (the "Series C Preferred Stock"). For a description
of the Series A, Series B and Series C Preferred Stock, see "-- Preferred
Stock."
For purposes of the foregoing, the term (i) "Old Shares" means the number of
Shares outstanding (other than AHI Owned Shares and Treasury Shares)
immediately prior to the Effective Time and (ii) the term "Cash Portion" shall
mean a percentage equal to a fraction expressed as a percentage (rounded to
four decimal places) the numerator of which is the result of subtracting the
product of 7.5% multiplied by the number of Shares outstanding immediately
prior to the Effective Time from the number of Old Shares and the denominator
of which is the number of Old Shares (it being understood that if the
numerator is zero, the "Cash Portion" shall be zero).
In addition, at the Effective Time and by virtue of the Merger, (i) the
certificate of incorporation of the Company as amended by the Merger Agreement
and otherwise as in effect immediately prior to the Merger will continue to be
the certificate of incorporation of the Surviving Corporation, (ii) the bylaws
of the Company as in effect immediately prior to the Effective Time shall be
the bylaws of the Surviving Corporation and (iii) the directors of Associated
immediately prior to the Effective Time of the Merger shall be the directors
of the Surviving Corporation, to serve as such until their successors are duly
elected and qualified, or their earlier death, resignation or removal.
Fractional Shares. No certificates representing fractional shares of Common
Stock will be issued upon the surrender for exchange of certificates
representing Shares pursuant to the Merger. In lieu of any fractional shares,
each holder of a certificate representing Shares who would otherwise have been
entitled to retain a fraction of a share of Common Stock upon surrender
thereof will have such fractional share rounded to the nearest whole share and
will receive the appropriate new certificate therefor.
Outstanding Options and Warrants of Associated. At the Effective Time, each
outstanding option, warrant or other right to acquire shares of Associated
Common Stock will become the right to purchase, in lieu of Associated Common
Stock, the number of shares of Common Stock of the Company which would have
been received in respect of such option or warrant pursuant to the Merger, if
such option or warrant had been exercised in full immediately prior to the
Merger.
Outstanding Options of the Company. The Merger Agreement provides that the
Company will (subject to the approval of the holders thereof) make such
adjustments to all of the outstanding options to purchase Shares as may be
necessary to provide that at the Effective Time each such option, whether or
not then exercisable (the "Company Options") will, in settlement, be converted
into the right to receive a cash payment in an amount equal to the difference,
if any, between $15.50 (or such higher price as may be paid in the Offer or
the Merger) and the per share exercise price of such Company Option multiplied
by the number of Shares subject to such Company Option. The Company has
represented to Associated that, as of February 10, 1995, the Company had
outstanding options entitling the holders thereof to acquire an aggregate of
1,263,610 shares of Common Stock. Associated currently estimates that such
buy-out of options will cost up to $3.0 million. See "Source and Amount of
Funds."
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and power, capital structure, corporate authorization, Commission
filings, information supplied, compliance with applicable laws, litigation,
title to properties, leased properties, taxes, certain agreements, ERISA
compliance, intellectual property, absence of changes and other matters.
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Associated has also made certain representations and warranties with respect
to corporate existence and power, corporate authorization, information
supplied, solvency, financing, Offer documents, financial statements,
compliance with applicable laws, litigation, liabilities, title to properties,
leased properties, taxes, certain agreements, ERISA compliance, absence of
changes and other matters.
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement to the Effective Time, except
as otherwise expressly permitted by the Merger Agreement or consented to by
Associated, (a) the Company and its subsidiaries will carry on their respective
businesses in the usual, regular and ordinary course; (b) the Company will not,
and will not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock (other than regular
quarterly dividends of $0.10 per Share including, if the Merger is not
consummated by June 15, 1995, (if approved by the Company Board (prior to the
Expiration Date) or the Continuing Directors (after the Expiration Date), the
fiscal quarter ending May 31, 1995), (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock of the Company or (iii) repurchase or otherwise acquire, or permit any
subsidiary of the Company to purchase or otherwise acquire, any shares of its
capital stock (other than in accordance with the Company's existing stock
option plans) or Company options (except as contemplated by the Merger
Agreement as described above under "Outstanding Options of the Company"); and
(c) the Company will not, and will not permit any subsidiary to, (i) issue,
deliver or sell, or authorize or propose the issuance, or delivery or sale of,
any shares of its capital stock of any class, any Voting Debt (as defined in
the Merger Agreement) or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, Voting Debt or convertible
securities (other than the issuance of no more than 10,000 Shares upon the
exercise of stock options granted under the Company stock option plans that
were in effect on the date of the Merger Agreement in accordance with their
present terms), (ii) amend or propose to amend its Certificate of Incorporation
or By-laws (except as contemplated by the Merger Agreement), (iii) acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the Company, purchase assets
(other than inventory and capital expenditures) with an aggregate purchase
price of more than $5,000,000 in the aggregate, (iv) sell, lease or otherwise
dispose of, or agree to sell, lease or otherwise dispose of assets with a fair
market value in excess of $5,000,000 (individually or in the aggregate), except
for inventory, accounts receivable, obsolete or damaged assets and salvage
items and excluding dispositions of assets which are or will be replaced with a
similar type of asset, (v) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or any subsidiary of the Company or guarantee any debt securities of
others other than in accordance with the disclosure schedule (the "Company
Disclosure Schedule") provided by the Company to Associated in connection with
the Merger Agreement or for working capital purposes in the ordinary course of
business or capital expenditures permitted under the Merger Agreement and
refinancings of existing bank indebtedness with the consent of Associated,
which consent will not be unreasonably withheld, (vi) other than as provided in
the Company Disclosure Schedule adopt or amend in any material respect any
collective bargaining agreement or material employee benefit plan, stock option
plan, phantom stock plan or material vacation plan other than in the ordinary
course of business consistent with past practice except for certain
transactions described in the next paragraph, (vii) increase the aggregate
amounts payable under or otherwise change in a manner materially (in reference
to all Executive Contracts (as defined in the Merger Agreement)) adverse to the
Company any other material term of the Executive Contracts or any other
agreement with its executive officers except as and to the extent disclosed in
the Company Disclosure Schedule and except for increases in the ordinary course
of business consistent with past practice of the Company, or enter into any
employment agreement with any executive officer except with respect to
prospective executive officers or with the prior written consent of Associated
which shall not be unreasonably withheld or delayed, (viii) make any capital
expenditures or any commitments
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therefor which exceed 120.0% of the amount set forth in the Company Disclosure
Schedule, or (ix) take any action that would or might result in any of the
representations and warranties of the Company set forth in the Merger Agreement
becoming untrue or in any of the conditions to the Merger set forth therein not
being satisfied.
Notwithstanding clause (vi) of the preceding paragraph, the Company (a) may
(and after the Expiration Date, to the extent not already paid, shall) pay to
plan participants the following employee benefit obligations on a date selected
by it preceding the first date on which Associated purchases Shares pursuant to
the Offer (i) so-called "top-hat" or supplemental retirement benefits for the
benefit of present or past employees and directors of the Company and (ii)
deferred compensation owing to present or past employees and directors, each as
disclosed in the Company Disclosure Schedule, with the amounts payable being
computed by the Company in accordance with its past practices and in amounts
which shall not exceed the amounts accrued on the Company's books through the
end of the month preceding the date on which Associated first purchases Shares
pursuant to the Offer, plus amounts which the Company estimates would be
accrued through the Effective Time; and (b) the Company may (and after the
Expiration Date, to the extent not already paid, shall) prior to the first date
on which Associated purchases Shares in the Offer, make contributions
(calculated in accordance with past practices) to its profit sharing plan for
that portion of the fiscal year ending August 31, 1995 which it estimates will
have elapsed through the Effective Time.
Other Agreements. The Company and Associated have agreed to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by the Merger Agreement, subject, if applicable, to the
appropriate approval of stockholders of the Company required to so approve,
and, subject in the case of the Company to the exercise by the Board of
Directors of the Company prior to the Expiration Date of its fiduciary duties
under applicable law, as advised in writing by counsel to the Company. If at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of the Merger Agreement or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals,
immunities and franchises of either the constituent corporations, the proper
officers and directors of each of Associated and the Company will take all such
necessary action. Associated and the Company have also made certain agreements
regarding access to information and holding in confidence information furnished
to them.
No Solicitation. The Company has agreed that it will not, nor will it permit
any of its subsidiaries to, nor will it authorize or permit any officer,
director or employee of or any investment banker, attorney, accountant or other
representative retained by the Company or any of its subsidiaries to, solicit,
initiate or encourage submission of any proposal or offer (including by way of
furnishing nonpublic information about the Company) from any person which
constitutes, or may reasonably be expected to lead to, any Takeover Proposal
(as hereinafter defined); provided, however, that, if determined by the Board
of Directors of the Company in good faith after consultation by its legal
counsel that the failure to do so would be inconsistent with the fiduciary
duties of such Board of Directors,the Company and such other persons shall be
entitled to furnish information to any third party (and enter into agreements
with respect to confidentiality and related matters with such third party) in
response to an unsolicited inquiry and to clarify and refine any details of any
offers that may result. The Company will not waive any rights, or release any
such third party from any of its obligations, under any such confidentiality
agreement relating to the confidentiality provisions and will use its best
efforts to fully enforce any rights it may have relating to the confidentiality
provisions under any such confidentiality agreement. The Company will promptly
communicate to Associated the terms of any proposal, discussion or negotiation,
and the identity of the party making such proposal (unless such party has
required that its identity remain confidential), which it may receive in
respect of any actual or potential Takeover Proposal. The term "Takeover
Proposal" means any proposal for a merger or other business combination
involving the
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Company or any of its subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in the Company or any of its subsidiaries
or a substantial portion of the assets of the Company or any of its
subsidiaries. If the Company shall enter into any agreement with a third party
(a "TPC Agreement") with respect to the same or substantially similar matter
set forth in that certain Confidentiality Agreement dated as of November 16,
1994, among the Company, ASI, and Wingate Partners, as supplemented by letter
agreement dated as of November 16, 1994 (the "Confidentiality Agreement") and
the material terms or condition of any TPC Agreement are less restrictive on
the third party than the corresponding terms and conditions (excluding the no
hire provisions) of the Confidentiality Agreement, the Confidentiality
Agreement shall automatically be amended to such less restrictive terms and
conditions.
Fees and Expenses. The Merger Agreement provides that all expenses incurred
in connection therewith and the transactions contemplated thereby will be paid
by the party incurring such expenses and, for the purposes of such
determination, expenses to be paid by the Company will include expenses
incurred in connection with the preparation and mailing of the Information
Statement; provided, however, that each party will pay one-half of all fees
and expenses of any consultants retained by mutual agreement of the parties
(other than their respective attorneys, which will be paid by their retaining
party) in connection with obtaining, or seeking to obtain, necessary approvals
under the HSR Act; and, provided further that the Company agrees that
aggregate third party expenses (other than legal and accounting fees and
expenses) incurred by the Company in connection with the Merger Agreement and
the transactions contemplated thereby prior to the Expiration Date will not
exceed $2.75 million (subject to an increase by the amount by which certain
fees payable by the Company disclosed prior to the date of the Merger
Agreement to Associated increase if the price paid in the Offer increases),
and that all such third party expenses will be paid or accrued in full prior
to the Closing Date.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction
prior to the Effective Time of the following conditions: (i) the Merger
Agreement will have been approved and adopted by the requisite vote or consent
of the stockholders of the Company, if such vote or consent is required by
applicable law; (ii) all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any governmental entity necessary for the consummation of the transactions
contemplated by the Merger Agreement will have been filed, occurred or been
obtained; (iii) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
will be in effect; and (iv) no action will have been taken nor any statute,
rule or regulation shall have been enacted by any government (or any
governmental body or agency) of the United States or any state thereof or any
foreign country that makes the consummation of the Merger illegal.
If no Shares have been purchased in the Offer, the obligations of Associated
to effect the Merger are subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by
Associated: (i) the representations and warranties of the Company set forth in
the Merger Agreement shall be true and correct in all material respects as of
the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Merger
Date as though made on and as of the Merger Date and (ii) the Company shall
have performed all obligations required to be performed by it under the Merger
Agreement at or prior to the Merger Date.
If no Shares have been purchased in the Offer, the obligation of the Company
to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company: (i) the representations and warranties of Associated set forth in the
Merger Agreement shall be true and correct in all material respects as of the
date of the Merger Agreement and as of the Merger Date as though made on and
as of the Merger Date, except as otherwise contemplated by the Merger
Agreement; and (ii) Associated shall have performed in all material respects
all obligations required to be performed by it under the Merger Agreement at
or prior to the Merger Date.
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Termination. The Merger Agreement may be terminated and the Merger may be
abandoned, at any time prior to the Effective Time, (i) by mutual written
consent of the Company and Associated provided that following the purchase of
any Shares pursuant to the Offer such consent by the Company must be approved
by a majority of the Continuing Directors, (ii) by either the Company or
Associated if the Merger shall not have been consummated on or before 5:00
p.m., New York City time, on May 15, 1995 (or such later date, but not beyond
June 30, 1995, to which the Chase Commitment may be extended (the "Deadline
Time")); provided, however, that the right to terminate the Merger Agreement
upon the occurrence of this contingency shall not be available to any party
whose failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date and provided further that the right to terminate the Merger
Agreement upon the occurrence of this contingency shall not be available to
Associated if Associated acquires any Shares pursuant to the Offer, (iii) by
either the Company or Associated if any court or governmental authority of
competent jurisdiction shall have issued a final and nonappealable order,
decree or ruling or taken other action, permanently restraining, enjoining or
otherwise prohibiting the making and consummation of the Offer or consummation
of the Merger, (iv) by Associated if the Offer is not commenced, or terminates
or expires without Associated having purchased any Shares thereunder; because
of the recurrence and remaining in effect of the events and conditions set
forth in paragraphs (a) through (h) of the Offer Conditions set forth under
"Certain Conditions of the Offer", (v) by the Company if the Offer is not
commenced in accordance with the Merger Agreement or if the Offer shall expire
or terminate without any Shares being purchased thereunder; provided, however,
that the Company shall have no right to terminate if the Offer is not commenced
due to a failure of the Company to fulfill any obligation under the Merger
Agreement, (vi) by Associated if no Shares have been purchased pursuant to the
Offer and there has been (a) a material breach of any material agreement on the
part of the Company which, if curable has not been cured or adequate (in the
reasonable judgment of Associated) assurance of cure given, in either case
within five (5) business days following notice of such breach from Associated
or if less, the time remaining to the then scheduled Expiration Date or (b) a
breach of a representation or warranty of the Company (assuming that such
representation or warranty were remade as of the date of notice from
Associated) which (individually or, together with other such breaches, in the
aggregate) has or would reasonably be expected to have a material adverse
effect on the Company and which has not been cured within five (5) business
days (or, if less, the time remaining to the then scheduled Expiration Date)
following notice of such breach from Associated, (vii) by the Company, so long
as Associated has not purchased any Shares pursuant to the Offer, if there has
been (a) a material breach of any material agreement on the part of Associated
which if curable has not been cured or adequate (in the reasonable judgment of
the Company) assurance of cure given, in either case within five (5) business
days following notice of such breach from the Company or, if less, the time
remaining to the then scheduled Expiration Date or (b) a breach of a
representation or warranty of Associated (assuming that such representation or
warranty were remade as of the date of notice of breach by the Company) which
(individually or, together with other such breaches, in the aggregate) has or
would reasonably be expected to have a material adverse effect on Associated or
the Surviving Corporation and which has not been cured within five (5) business
days (or, if less, the time remaining to the then scheduled Expiration Date)
after notice from the Company, (viii) by the Company, so long as Associated has
not purchased any Shares pursuant to the Offer, if the Company determines to
accept a Superior Takeover Proposal, provided, that the Company shall not be
permitted to terminate the Merger Agreement under the circumstance described
under this clause (viii) unless the Company has provided Associated with
twenty-four hours' (or if less, the period then remaining to 4:59 p.m., New
York City time on the then scheduled Expiration Date) prior written notice of
its intent to so terminate the Merger Agreement (together with a summary of the
material terms of such Superior Takeover Proposal), and (ix) by Associated if
(a) the Company shall enter into a definitive agreement or agreements related
to or providing for any Takeover Proposal, or (b) any person shall announce its
intention to commence a tender offer for all or any portion of the outstanding
Shares or make a Takeover Proposal and the Offer has remained open for at least
20 business days and at least a majority of the outstanding shares shall not
have been properly tendered and "unwithdrawn" prior to the expiration of the
Offer, (c) the Board of Directors of the Company shall withdraw, modify or
change in a manner adverse to Associated its recommendation of the Offer or the
Merger Agreement, unless simultaneously with such adverse change in
recommendation the Company shall deliver to Associated
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notice of termination of the Merger Agreement pursuant to clause (viii) above
and shall publicly announce that it has done so; or (d) any person (within the
meaning of Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) acquires beneficial ownership of 40.0% of the
outstanding Shares. Notwithstanding the immediately preceding sentence,
Associated may not terminate the Merger Agreement pursuant to clause (ix)(c)
if at the time of such adverse change in recommendation and at all times
thereafter the Minimum Condition is and remains satisfied; provided, however,
that even if the Minimum Condition is and remains satisfied, Associated may
terminate the Merger Agreement pursuant to clause (ix)(c), (A) at any time
after an adverse change in recommendation if Associated has been advised in
writing by Chase Bank that the financing of the Offer and the Merger will not
be made available, or (B) at the opening of business on the scheduled
Expiration Date (as it may be extended by Associated in accordance with the
Merger Agreement) if any of the events or circumstances described in clauses
(a) through (i), inclusive, of the Offer Conditions set forth under "Certain
Conditions of the Offer" shall have occurred and be continuing. "Superior
Takeover Proposal" is defined to mean a Takeover Proposal which the Board of
Directors of the Company determines in good faith (A) is on terms more
favorable to the stockholders of the Company than the Offer and Merger taken
as a whole and (B) has a reasonable prospect of being consummated in
accordance with its terms.
Fees and Expenses Payable upon Termination. If the Merger Agreement is
terminated by the Company pursuant to clause (viii) or by Associated pursuant
to clause (ix)(a) of the preceding paragraph, the Company is required to pay
Associated or its designee $5,000,000 plus Associated's expenses relating to
the Offer and Merger up to $2,500,000. If the Merger Agreement is terminated
by Associated pursuant to clause (ix)(b) or (ix)(d) of the preceding paragraph
and the Company within 135 days thereafter enters into a letter of intent,
memorandum of understanding or similar agreement or definitive transaction
agreement with the person or group acquiring 40.0% beneficial ownership (if
clause (ix)(d)) or the person making the Takeover Proposal (if clause
(ix)(b)), the Company is required to pay Associated upon consummation of the
transaction contemplated by such letter of intent, memorandum, similar
agreement or definitive transaction agreement $5,000,000 plus Associated's
expenses relating to the Offer and Merger up to $2,500,000. If the Merger
Agreement is terminated by Associated pursuant to clause (ix)(c) of the
preceding paragraph, then the Company shall pay to Associated the sum of
$7,500,000 plus the amount of its expenses up to $2,500,000.
Indemnification. Associated (from and after the purchase of Shares in the
Offer) and the Surviving Corporation (and the Company prior to the Effective
Time) have agreed that, until June 30, 2000, Associated, the Company (prior to
the Effective Time) and the Surviving Corporation (after the Effective Time)
shall provide officers' and directors' liability insurance covering each
present and former director, officer, employee, and agent of the Company and
each present and former director, officer, employee, agent or trustee of any
employee benefit plan for employees of the Company (the "Indemnified
Persons"), who is currently covered by the Company's officers' and directors'
liability insurance or will be so covered on the Merger Date with respect to
actions and omissions occurring on or prior to the Merger Date, which
liability insurance is no less favorable than such insurance maintained in
effect by the Company on the date of the Merger Agreement in terms of coverage
and amount, subject to certain limits based on the size of annual premiums
therefor. In addition, Associated and the Surviving Corporation (and the
Company prior to the Effective Time) have agreed that, until at least June 30,
2000, the provisions of the certificate of incorporation and bylaws of the
Surviving Corporation shall provide indemnification to the Indemnified Persons
on terms, in a manner, and with respect to matters, which are no less
favorable than the certificate of incorporation and bylaws of the Company and
its subsidiary, USSC, as in effect on the date of the Merger Agreement.
Amendment. The Merger Agreement may be amended by Associated and the Company
by action taken by their respective boards of directors, at any time before or
after any required approval of matters presented in connection with the Merger
by the stockholders of the Company but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval.
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Timing. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Associated pursuant to the Offer. However, under the terms of the
Commitment Letter, Associated has agreed to effect the Merger (i) not more than
24 hours after the closing of the Offer if at least 90.0% of the Shares are
acquired in the Offer, (ii) not more than 30 days after the closing of the
Offer if at least 80.0% of the Shares are acquired in the Offer and (iii) in
any event, by the earlier of (a) the date 60 days after the closing of the
Offer and (b) May 15, 1995.
Certain Employee Benefits Matters. Associated, the Company, and the Surviving
Corporation have agreed to maintain and honor, from and after the earlier of
the purchase of Shares by Associated pursuant to the Offer and the Effective
Time and for a period of not less than one year after the Effective Time, the
severance policy of the Company and USSC for terminated non-officer employees
as in effect on the Closing Date, or, in the alternative, will replace such
policies, and keep in effect, a policy providing to the employees a severance
policy which equals or has more favorable terms, compensation, and benefits
than the severance policy for the Company or USSC.
The Merger Agreement provides that, prior to the acceptance for payment of
Shares pursuant to the Offer, (i) the Company will execute and deliver the
benefits trust agreement substantially in the form attached as Exhibit E to the
Merger Agreement and the Bonus Plan Trust Agreement substantially in the form
attached as Exhibit F to the Merger Agreement, to establish respective trusts
(the "Employee Benefits Trust" and the "Bonus Plan Trust," respectively) to
secure the Company's obligations to make certain employee compensation and
benefit payments to current and former employees, and (ii) Associated will give
its written consent to the Employee Benefits Trust and Bonus Plan Trust.
Simultaneous with the payment for Shares accepted for payment, Associated will
deposit with the trustee under the Employee Benefits Trust a letter of credit
issued by Chase Bank in the face amount of $24.0 million and as trustee under
the Bonus Plan Trust a letter of credit issued by Chase Bank in a face amount
equal to the dollar amount reasonably determined by the Company to have accrued
under the Company's Executive Bonus Plan and Management Incentive Plan (each as
defined in the Merger Agreement) as of the Effective Date but not to exceed
$6.0 million.
MANAGEMENT FEES
At the Effective Time, the Surviving Corporation will pay aggregate fees to
Wingate Partners and its affiliates, Cumberland and Good Capital of $2.3
million, $0.1 million and $0.1 million, respectively, for services rendered in
connection with the Offer and the Merger. In addition, the Investment Banking
Fee and Management Agreements between such parties will be amended to increase
the annual management fees payable thereunder to Wingate Partners, Cumberland
and Good Capital to up to $725,000 (of which $108,750 is contingent upon the
Surviving Corporation's performance), $137,500 (of which $20,625 is so
contingent) and $137,500 (of which $20,625 is so contingent), respectively.
EMPLOYMENT ARRANGEMENTS
In addition, from and after the earlier of the purchase of Shares by
Associated pursuant to the Offer and the Effective Time, Associated, the
Company and the Surviving Corporation have agreed to perform all obligations of
the Company and its subsidiaries under all of their existing agreements with
directors, officers, employees and former employees, including the following:
Spungin Employment Contract. The Company has amended the employment agreement
with Joel D. Spungin, effective as of the Merger, on which date Mr. Spungin
will resign his offices with the Company and be relieved of all duties thereto,
except that he shall continue as an employee of the Company, and shall, subject
to nomination and election, serve as a member of the Company's Board of
Directors. His term of employment will continue until August 31, 1996, unless
terminated by either Mr. Spungin or the Company. Mr. Spungin will continue to
be paid his current salary ($440,000.00) and
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employee benefits until his termination of employment. On September 1, 1996,
Mr. Spungin shall become an executive consultant to the Company for a period of
10 years in accordance with the terms of his employment agreement prior to
amendment. The Company shall pay the sum of $2,290,406.00 to Mr. Spungin on
September 1, 1995, and a monthly payment of $26,746 beginning on September 1,
1996 and continuing until the end of the consulting term.
Mr. Spungin and his spouse and other eligible dependents will receive
coverage under the Company's medical plan in the same manner as active
employees through August 31, 2005, and thereafter will receive retiree medical
coverage applicable to retired senior officers of the Company. If Mr. Spungin,
his spouse or dependent children lose their medical coverage for any reason,
the Company will pay premiums not to exceed in the aggregate $242,701 for
individual insurance coverage. Also, if they incur medical claims exceeding the
lifetime maximum payment level (at present $250,000) under the Company's
medical plan, the Company will reimburse medical expenses up to $2,000,000 in
the aggregate.
On and after the date of the Merger, a failure by Mr. Spungin to render
services to the Company or his disability shall not cause 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.
If the Company breaches any of its obligations to Mr. Spungin, he may resign
and remain entitled to the amounts under his employment agreement. Further, 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. All of the Company's obligations are secured by the
Employee Benefits Trust (as defined below).
Hewson Employment Contract. The Company has amended the employment agreement
with Jeffrey K. Hewson, effective as of the Merger, among other matters, to
reduce his term of employment to one year, eliminate his consulting term and
provide for additional bonuses to encourage him not to resign for at least a
period of six months following the Merger. In recognition of Mr. Hewson's
efforts prior to the Merger and his expected responsibilities following the
Merger, the Company agreed to make a single payment of $875,000 to Mr. Hewson
upon the 180th day after the Merger. On the expiration of Mr. Hewson's one-year
term of employment, he shall also be entitled to receive an aggregate amount
equal to $1,575,000, which, except in limited circumstances, will commence with
an initial payment of $650,370 and the remainder payable monthly in equal
installments of $26,418.
Mr. Hewson and his eligible dependents will also be entitled, when his
employment terminates, to post-employment medical coverage under the Company's
medical plan until he reaches age 65 and, if he dies prior to age 65, his
spouse will continue to be covered until she reaches age 65. 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 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 insurance policy up to an aggregate of $1,000,000 for Mr.
Hewson and his eligible dependents.
The amendment sets forth a procedure for Mr. Hewson to exercise his right to
resign for good reason (as defined in the employment agreement, as amended) or
for the Company to terminate his employment for a breach of his fiduciary duty.
Other Executive Employment Contracts. The existing employment agreements with
certain other officers have been amended, effective as of the Merger, among
other matters, to reduce the term for which the Company is obligated to employ
these officers and to encourage these officers not to
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voluntarily resign during the transitional period following the Merger. The
officers covered by these amendments are Robert H. Cornell, Otis H. Halleen,
Jerold A. Hecktman, Steven R. Schwarz and Ted S. Rzeszuto.
Each amendment provides 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. Further, each amendment
eliminates the two-year consulting term previously included in the employment
agreements. Upon completion of the term of employment, an officer shall be
entitled to a 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 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 bonus is to be
secured as an obligation of the Employee Benefits Trust. The aggregate amount
of stay bonuses under all amendments to the employment agreements is
$5,652,606.
As to each officer who is currently 55 years of age, the amendments preclude
the Company from eliminating their eligibility to retiree medical coverage
under the Company's existing 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 Melvin L. Hecktman, James Pribel and 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 such individual
medical policy or other medical insurance, up to an aggregate of $1,000,000 for
each such officer.
The amendments also update the employment agreements to reflect the salary
and employee benefits to which the officers are currently entitled. The
amendments also set forth a procedure for an officer to exercise his right to
resign for good reason (as defined in the employment agreement, as amended) or
for the Company to terminate his employment for a breach of his fiduciary duty.
BENEFITS TRUST AGREEMENT
The Benefits Trust Agreement secures the payment of amounts owed to certain
employees under their employment contracts, as may be amended as of the merger,
certain obligations of the Company to provide post-employment medical benefits,
certain severance benefits to former employees and related costs. Each
compensation or benefit payment by the trustee reduces the amount of the letter
of credit. Further, the letter of credit is reduced as of December 31, 2001 to
$3.0 million plus the amount of any outstanding reservations on the letter of
credit. To the extent the Company makes payments of compensation and benefits
covered by the Benefits Trust 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.
The Bonus Plan Trust secures the amount reasonably estimated by the Company
to be owed to certain employees of the Company with respect to the Executive
Bonus Plan and Management Incentive Plan with respect to the current fiscal
year. The amount of the bonus under the Management Incentive Plan for the post-
Merger remainder of the current fiscal year has been established at 100.0% of
the bonus opportunity for each covered executive. The amount of the bonus to
which each covered executive is entitled for the pre-Merger portion of the
current fiscal year has been established, in accordance with the terms of the
Management Incentive Plan, at 150.0% of the bonus opportunity under such plan.
These bonus payments are expected to be made by the trustee of the Bonus Trust
on or about October 1995. Following the payment of all bonuses, the Bonus Trust
shall terminate.
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PREFERRED STOCK
Authorization of Company Preferred Stock. The Merger Agreement provides that,
prior to the Merger, the Company will designate out of its authorized but
unissued shares of preferred stock, par value $0.01 per share, (i) 15,000
shares of Series A Preferred Stock, (ii) 15,000 shares of Series B Preferred
Stock and (iii) 15,000 shares of Series C Preferred Stock (the Series A, Series
B and Series C Preferred Stock collectively referred to herein as the "Merger
Preferred Stock"). All shares of each class of preferred stock of Associated
outstanding at the Effective Time will be converted into such shares of the
appropriate series of preferred stock of the Surviving Corporation. See "The
Merger -- Effect of the Merger." Set forth below is a description of the
material terms of the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock.
Dividends. The holders of Series A Preferred Stock will be entitled to
receive dividends at a rate of 10.0% per annum applied to a dividend base per
share of $1,000 (the "Dividend Base") payable on April 30, July 31, October 31
and January 31 (each a "Dividend Payment Date") of each year. If the Company
fails to pay a dividend on any Dividend Payment Date or fails to make any
redemption payment when due, the dividend rate shall be retroactively increased
to 13.0% per annum and shall remain at such rate until the failure is cured.
The holders of Series B Preferred Stock and Series C Preferred Stock are
entitled to receive dividends at a rate of 9.0% per annum applied to the
Dividend Base, payable on each Dividend Payment Date. In the event the Company
fails to pay a dividend on the Series B or Series C Preferred Stock on any
Dividend Payment Date or fails to make any redemption payment in respect of the
Series B or Series C Preferred Stock when due, the dividend rate thereon shall
retroactively be increased to 10.0% per annum and shall remain at such rate
until such failure is cured.
The dividends on the Merger Preferred Stock are cumulative and shall accrue,
whether or not declared or restricted by the terms of any loan agreements and
regardless of whether there are funds legally available for payment of the
dividends. In the discretion of the Board of Directors, the dividends may be
payable in cash or in additional shares of the same class of Merger Preferred
Stock. Dividends on the Series C Preferred Stock may be payable in additional
shares of Series C Preferred Stock only for Dividend Payment Dates occurring on
or prior to January 31, 1999.
If at any time the Company fails to pay any dividends on the Dividend Payment
Date or the Company fails to redeem the requisite number of shares of a series
of Merger Preferred Stock (the "Defaulted Series"), the Company shall not (i)
declare or pay any dividend on any Junior Shares (as defined below) or make any
payment on account of, or set apart money for, a sinking or other analogous
fund, for the purchase, redemption or other retirement of any Junior Shares or
make any distribution with respect thereto (other than in Junior Shares); (ii)
purchase any shares of a Defaulted Series (except for a consideration payable
in Junior Shares) or redeem fewer than all of the shares of the Defaulted
Series outstanding; or (iii) permit any subsidiary of the Company to purchase
any Junior Shares or permit any subsidiary to purchase fewer than all of the
shares of the Defaulted Series then outstanding, unless, at the time of such
dividend, payment, distribution, purchase or redemption, all accrued and unpaid
dividends on shares of the Defaulted Series are contemporaneously paid in full
in cash or additional shares of the Defaulted Series and all shares of the
Defaulted Series which the Company so failed to redeem are contemporaneously
redeemed.
The Company may also not take any of the actions specified in (i), (ii) or
(iii) in the previous paragraph in respect of the Series B or Series C
Preferred Stock in excess of $1.0 million for all such actions unless at the
time such action is taken; (a) the Company has redeemed for cash all shares of
Series B and Series C Preferred Stock, if any, which have been issued to the
holders of Series B and Series C Preferred Stock, respectively, as in-kind
dividends; (b) the Company and its wholly-owned subsidiaries, on a consolidated
basis, have common equity computed in accordance with generally
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accepted accounting principles after giving effect to any purchases,
redemptions, payments, distributions or disbursements under (i), (ii) or (iii)
above, of at least $26.0 million; (c) if any such purchases, redemptions,
payments, distributions or disbursements specified in (i), (ii) or (iii) above
are to be made after July 31, 1999, then all shares of Series B Preferred Stock
shall have been redeemed or otherwise retired; and (d) if any such purchases,
redemptions, payments, distributions or disbursements specified in (i), (ii) or
(iii) above are to be made on or after the dates required for redemptions of
shares of Series C Preferred Stock specified below, then that portion of such
Series C Preferred Stock so required to be redeemed as of such dates shall have
been redeemed or otherwise retired. Notwithstanding the previous sentence,
nothing in this paragraph limits the Company's obligation to make payments or
disbursements for any amount it is obligated to pay under or pursuant to the
Lender Warrants; and nothing in this paragraph limits the Company or its
subsidiaries from re-purchasing Shares or options to purchase Shares held by
any employee of the Company or its subsidiaries in connection with the
termination of such employee's employment.
Redemption. The Company will be required to redeem all shares of the Series A
Preferred Stock and Series B Preferred Stock on July 31, 1999 and to redeem the
Series C Preferred Stock on January 31, 2002 each for the sum of $1,000 per
share plus the aggregate of accrued and unpaid dividends to such date, subject
to appropriate adjustments in the event of a stock split, reverse stock split
or similar transaction (the "Redemption Price"). The Series C Preferred Stock
redemptions will be required to be made in four quarterly installments of
principal on April 30, 2001, July 31, 2001, October 31, 2001 and January 31,
2002.
In the event of a Cash-Out Event (as defined below) and, in such event, at
the request of a holder of Merger Preferred Stock, the Company will be required
to redeem all of such holder's shares of preferred stock then outstanding at
the Redemption Price. If pursuant to the sale or Change in Control (as
hereinafter defined) of the Company, the holders of Shares receive cash, Shares
or common stock or other securities of any corporation that is the successor to
substantially all of the business or assets of the Company or the ultimate
parent of such successor which is (or will, upon distribution thereof, be)
listed on the New York Stock Exchange or the American Stock Exchange, or
approved for quotation on the NASDAQ ("Marketable Securities") or a combination
thereof, then, the Company may at its option and in lieu of the cash redemption
described in the previous sentence, redeem the Merger Preferred Stock by
converting each share into the cash, Marketable Securities or a combination
thereof, in the same proportions received by the holders of Shares, the value
of which shall equal the Redemption Price. "Cash-Out Event" means the
occurrence of a Business Sale, a Change in Control, a Qualified Public Offering
or a Recapitalization. In the case of the Series C Preferred Stock, "Cash-Out
Event" shall also include the expiration of the agreement between Associated
and Affiliated Computer Services, Inc. providing for the furnishing of
information systems services for Associated, or the early termination of such
agreement for any reason other than termination of such agreement by Affiliated
Computer Services, Inc. For purposes of the foregoing, "Business Sale" means a
transaction or a series of transactions, whether effected by sale or exchange
of securities or assets, merger or consolidation, or otherwise, that results in
the sale of the Company or its business to any person (i) who, immediately
prior to the contemplated transaction, does not own in excess of 5.0% of the
Shares on a fully diluted and converted basis (a "5.0% Owner"), (ii) who is not
controlling, controlled by or under common control with the Company or any such
5.0% Owner and (iii) who is not the spouse or descendant of any such 5.0% Owner
or a trust for the benefit of such 5.0% Owner or such other persons
("Independent Third Party") or group of Independent Third Parties, pursuant to
which such Independent Third Party or group of Independent Third Parties would
acquire (a) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board or (b) all or
substantially all of the Company's assets determined on a consolidated basis;
"Change in Control" means an occurrence by which Wingate Partners and its
affiliates and Cumberland Capital Corporation and its affiliates shall have
collectively sold or otherwise disposed of and received the pecuniary benefit
of 33 1/3% of the Shares legally or beneficially owned by them collectively as
of January 31, 1992,
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subject to appropriate adjustment in the event of a stock split, reverse stock
split or similar transaction and excluding any sales or other dispositions made
by any of them to employees of the Corporation or of any of its Subsidiaries of
up to 10.0% of such holdings; "Qualified Public Offering" means a sale in a
public offering or series of public offerings, registered under the Securities
Act of 1933 of Shares; provided, however, that such offering or series of
offerings shall not be deemed to be a Qualified Public Offering unless such
offering or offerings shall have resulted in (A)(i) public ownership of not
less than 20.0% of the Shares of the Company on a fully-diluted basis (which
such Shares are listed upon the New York Stock Exchange, the American Stock
Exchange or are approved for quotation on the NASDAQ), and (ii) such offering
or offerings shall have resulted in receipt by the Company of aggregate cash
proceeds (after deduction of underwriter discounts and the costs associated
with such offering or offerings) of at least $37.5 million, or (B) the holders
of Shares of the Company receive, as a result of such offering or offerings,
cash, Marketable Securities or a combination thereof valued at not less than
$1.0 million; and "Recapitalization" means a recapitalization of the Company
pursuant to which the holders of Shares receive cash, securities (other than
shares junior to the Series B or Series C Preferred Stock), property or other
assets and such consideration is valued at not less than $1.0 million.
The Company may, at its option, redeem any portion or all of any series of
the Merger Preferred Stock outstanding at the Redemption Price. Any such
redemption of shares of Series A Preferred Stock must be made ratably among the
holders of Series A Preferred Stock, and any redemption of shares of Series B
Preferred Stock or Series C Preferred Stock must be made ratably among the
holders of both Series B and Series C Preferred Stock.
Exchange Notes. Provided the Company has paid all accrued dividends on the
outstanding shares of Series A Preferred Stock, the Company may redeem all
shares of Series A Preferred Stock then outstanding in exchange for
subordinated notes that shall have a maturity date of July 31, 1999 and shall
bear interest at the rate of 10.0% for interest paid in cash or 13.0% for
interest paid in kind ("Series A Exchange Notes"). The Series A Exchange Notes
issued to each holder shall be in an aggregate principal amount equal to the
Redemption Price.
Provided the Company has redeemed any outstanding shares of Series A
Preferred Stock and has paid all accrued dividends on the outstanding shares of
Series B and Series C Preferred Stock, the Company may redeem all shares of
Series B and Series C Preferred Stock in exchange for respective subordinated
notes (the "Series B Exchange Notes" and the "Series C Exchange Notes",
respectively). The Series B Exchange Notes will have a maturity date of July
31, 1999 and the Series C Exchange Notes will mature on January 31, 2002, with
any payments on the Series C Exchange Notes to be in four equal installments on
April 30, 2001, July 31, 2001, October 31, 2001 and January 31, 2002. Both
Series B and Series C Exchange Notes shall bear interest at the rate of 11.0%
for interest paid in cash or 12.0% for interest paid-in-kind. The Series B and
Series C Exchange Notes issued to each holder shall be in an aggregate
principal amount equal to the Redemption Price of the redeemed shares.
Payments on the Series A, Series B and Series C Exchange Notes will be
subordinated to any obligations of the Company for borrowed money and, the
Series B and Series C Exchange Notes will be subordinated to the Series A
Exchange Notes.
Voting Rights. Holders of shares of Merger Preferred Stock generally will
have no voting rights. However, the Company shall not, without the affirmative
vote or written consent of the holders of at least 51.0% of all outstanding
shares of a series of Merger Preferred Stock voting separately as a series (the
"Affected Series") (i) amend any provision of the certificate of incorporation
or by-laws of the Company in any manner which adversely (and, in the case of
the Series A Preferred Stock only, materially) affects the relative rights,
preferences, qualifications, powers, limitations or restrictions of the
Affected Series; (ii) either (a) in the case of Series A Preferred Stock,
increase the authorized number of shares of Preferred Stock, or authorize,
issue or otherwise create securities convertible into any shares of capital
stock of the Company other than Junior Shares, or (b) in the case of Series B
or Series
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C Preferred Stock, increase the authorized number of shares of capital stock of
the Company, or authorize, issue or otherwise create securities convertible
into any shares of capital stock of the corporation other than Series A (only
for purposes of paying dividends in-kind on Series A Preferred Stock), Series B
or Series C Preferred Stock, Common Stock or Junior Shares; or (iii)
voluntarily effect any reclassification of the Affected Series.
Whenever dividends on any series of Merger Preferred Stock are in arrears in
an amount equal to at least six quarterly dividends (an "Impaired Series"), (i)
the number of members of the Board of Directors of the Company shall be
increased by one for each Impaired Series and (ii) the holders of each Impaired
Series (voting separately as a series) will have the exclusive right to vote
for and elect one additional director of the Company. The right of the Impaired
Series to vote for an additional director shall terminate when all accrued and
unpaid dividends on the Impaired Series have been declared and paid in cash or
in-kind or set apart for payment.
Liquidation Preferences. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of the
Merger Preferred Stock shall be entitled to receive an amount equal to the
Redemption Price of such shares held by them in preference to and in priority
over any distributions upon Junior Shares. If the assets of the Company are not
sufficient to pay in full the Redemption Price to holders of Series A Stock,
the holders of all such shares shall share ratably (to the exclusion of any
other holders of capital stock) in such distribution of assets. If the assets
of the Company are not sufficient to pay in full the Redemption Price to
holders of Series B and Series C Stock, after payment in full of the Redemption
Price of the Series A Stock, the holders of all such shares shall share ratably
(to the exclusion of any other holders of capital stock) in such distribution
of assets.
"Junior Shares" means with respect to the priority of any class or series of
Preferred Stock, shares of Common Stock or shares of any other series or class
of Preferred Stock of the Corporation which are designated as junior to such
series in the Company's certificate of incorporation or any amendment thereto,
or in the resolution designating the class or series of such Preferred Stock
and any warrants, options or other rights to acquire or purchase such
securities. The shares of Series B and Series C Preferred Stock are Junior
Shares in relation to the Series A Preferred Stock. Any shares of additional
Preferred Stock, regardless of designation, shall be deemed Junior Shares in
relation to the Series A, Series B and Series C Preferred Stock.
Delaware Law. The Board of Directors of the Company has approved the Merger
Agreement and the transactions contemplated thereby, including the Offer, the
Merger, and the Tender Agreement, and the entry by Associated into the Tender
Agreement for purposes of Section 203 ("Section 203") of the Delaware Code.
Accordingly, the restrictions of Section 203 do not apply to the transactions
contemplated by the Offer, the Merger Agreement or the Tender Agreement.
Section 203 prevents an "interested stockholder" (generally, a stockholder
owning 15.0% or more of a corporation's outstanding voting stock or an
affiliate or associate thereof) from engaging in a "business combination"
(defined to include a merger and certain other transactions) with a Delaware
corporation for a period of three years following the date on which such
stockholder became an interested stockholder unless (i) prior to such date, the
corporation's board of directors approved either the business combination or
the transaction which resulted in such stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in such
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85.0% of the corporation's voting stock outstanding at the time
the transaction commenced (excluding shares owned by certain employee stock
plans and persons who are directors and also officers of the corporation) or
(iii) on or subsequent to such date the business combination is approved by the
corporation's board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock not owned by the interested
stockholder. As described above, the foregoing description of Section 203 does
not apply to the Offer or the Merger (or the transactions contemplated
thereby).
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Company Charter Restrictions. A majority of the "Disinterested Directors" (as
such term is used in the Company's restated certificate of incorporation) has
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer, the Merger and the Tender Agreement, and the entry by
Associated into the Tender Agreement for purposes of Article Seventh ("Article
Seventh") of the Company's restated certificate of incorporation. Accordingly,
the restrictions of Article Seventh do not apply to the transactions
contemplated by the Offer, the Merger Agreement or the Tender Agreement.
Article Seventh provides that, in addition to any affirmative vote required by
law or the Company's restated certificate of incorporation, a merger of the
Company with an "Interested Stockholder" (which term includes any person
beneficially owning 20.0% or more of the Shares) requires the affirmative vote
of the holders of at least 80.0% of the voting power of the then outstanding
Shares. Such requirement, however, does not apply where such transaction has
been approved by a majority of the "Disinterested Directors." As described
above, the restrictions imposed by Article Seventh therefore do not apply to
the Offer or the Merger (or the transactions contemplated thereby).
THE TENDER AGREEMENT
The following is a summary of the material terms of the Tender Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof which is
incorporated herein by reference and a copy of which has been filed with the
Commission as an exhibit to the Schedule 14D-1. The Tender Agreement may be
examined, and copies thereof may be obtained, as set forth above under "Certain
Information Concerning the Company -- Additional Information."
Tender of Shares. Simultaneously with the execution of the Merger Agreement,
Associated and each of the Seller Stockholders entered into the Tender
Agreement. Upon the terms and subject to the conditions of such agreement, the
Seller Stockholders have severally agreed to validly tender and not to withdraw
pursuant to and in accordance with the terms of the Offer, the respective
number of Shares owned beneficially by them. Each Seller Stockholder further
agreed that the transfer to Associated in the Offer of its Shares will pass to
and unconditionally vest in Associated good and valid title to such Shares.
Voting. Each Seller Stockholder has agreed that, subject to certain
termination provisions set forth below, at any meeting of the Company's
stockholders or in connection with any written consent of the Company's
stockholders, such Seller Stockholder will vote (or cause to be voted) the
Shares held of record or beneficially by such stockholder in favor of the
Merger, the Merger Agreement and all transactions arising out of the Merger
Agreement which require Stockholder approval.
Representations, Warranties and Covenants. In connection with the Tender
Agreement, the Seller Stockholders have made certain customary representations,
warranties and covenants, including with respect to (i) their ownership of the
Shares, (ii) their authority to enter into and perform their obligations under
the Tender Agreement, (iii) the receipt of requisite governmental consents and
approvals, (iv) the absence of liens and encumbrances on and in respect of
their Shares and (v) restrictions on the transfer of their Shares.
Restrictions on Transfer. The Seller Stockholders have agreed not to sell or
transfer their Shares prior to the termination of the Tender Agreement except
to a person, partnership, trust or other entity so long as such person or
entity agrees in writing to be bound by the terms, provisions and conditions of
the Tender Agreement.
Termination. The Tender Agreement terminates upon the occurrence of (i) the
Effective Time, (ii) the termination of the Merger Agreement in accordance with
its terms, (iii) any time following the public announcement by any person of
any offer to acquire at least a majority of the outstanding Shares which the
Seller Stockholder reasonably believes is likely to be consummated and offers a
higher economic
71
<PAGE>
value to the Seller Stockholder than the Offer and where the Seller Stockholder
gives notice to Associated of such termination or (iv) the Company's Board of
Directors (the "Company Board") shall withdraw, modify or change in a manner
adverse to Associated, its recommendation set forth in the Merger Agreement,
provided that the Company Board shall have received an opinion of counsel that
the Company Board is required to so withdraw, modify or change such
recommendation in the exercise of its fiduciary duties.
ADDITIONAL AGREEMENTS
Lock-Up Agreements. Holders of Associated Common Stock will, on the Merger
Date, enter into lock-up agreements with the Surviving Corporation, pursuant to
which such stockholders will agree to not transfer any shares of the Surviving
Corporation received by them as a result of the Merger for a period of 180
days.
OTHER MATTERS
Appraisal Rights. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Section 262 of the Delaware Code to
dissent and demand appraisal of, and payment in cash for the fair value of,
their Shares. Such rights, if the statutory procedures are complied with, could
lead to a judicial determination of the fair value (excluding any element of
value arising from accomplishment or expectation of the Merger) required to be
paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the Offer Price and the market value of the
Shares, including asset values and the investment value of the Shares. The
value so determined could be more or less than the Offer Price or the
consideration to be received in the Merger.
If any holder of Shares who demands appraisal under Section 262 of the
Delaware Code fails to perfect, or effectively withdraws or loses his right to
appraisal, as provided in the Delaware Code, the Shares of such holder will
entitle such holder to receive the consideration provided for in the Merger
Agreement. A stockholder may withdraw his demand for appraisal by delivery to
Associated of a written withdrawal of his demand for appraisal and acceptance
of the Merger.
Failure to follow the steps required by Section 262 of the Delaware Code for
perfecting appraisal rights may result in the loss of such rights.
Going Private Transactions. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. Associated does not believe that Rule
13e-3 will be applicable to the Merger unless, among other things, the Merger
is completed more than one year after termination of the Offer. If applicable,
Rule 13e-3 would require, among other things, that certain financial
information regarding the Company and certain information regarding the
fairness of the Merger and the consideration offered to stockholders be filed
with the Commission and disclosed to stockholders prior to consummation of the
Merger.
XV. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date of the Merger Agreement and prior to the Effective
Time, the Company should (i) split, combine or otherwise change the Shares or
its capitalization, (ii) acquire currently outstanding Shares or otherwise
cause a reduction in the number of outstanding Shares or (iii) issue or sell
additional Shares, shares of any other class of capital stock, other voting
securities or any securities convertible into, or rights, warrants or options,
conditional or otherwise, to acquire any of the foregoing then, subject to the
provisions described below under "Certain Conditions of the Offer," Associated,
in
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<PAGE>
its sole discretion, may make such adjustments as it deems appropriate in the
Offer Price and other terms of the Offer, including, without limitation, the
number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement and prior to the Effective
Time, the Company should declare or pay any cash dividend on the Shares or make
other distributions on the Shares or issue, with respect to the Shares, any
additional shares, shares of any other class of capital stock, other voting
securities or any securities convertible into, or rights, warrants or options,
conditional or otherwise, to acquire, any of the foregoing, payable or
distributable to stockholders of record on a date prior to the transfer of the
Shares purchased pursuant to the Offer to Associated or its nominee or
transferee on the Company's stock transfer records, then, subject to the
provisions described below under "Certain Conditions of the Offer," (i) the
Offer Price may, in the sole discretion of Associated, be reduced by the amount
of any such cash dividend or cash distribution and (ii) the whole of any such
noncash dividend, distribution or issuance to be received by the tendering
stockholders will (a) be received and held by the tendering stockholders for
the account of Associated and will be required to be promptly remitted and
transferred by each tendering stockholder to the Depositary for the account of
Associated, accompanied by appropriate documentation of transfer, or (b) at the
direction of Associated, be exercised for the benefit of Associated, in which
case the proceeds of such exercise will promptly be remitted to Associated.
Pending such remittance and subject to applicable law, Associated will be
entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by
Associated in its sole discretion. Notwithstanding the foregoing, the Company
shall declare and pay to holders of Shares a $0.10 cash dividend per Share in
respect of the quarter ending February 28, 1995 and, if the Merger is not
consummated on or before June 15, 1995, the Company will declare, on or about
June 16, 1995, and thereafter promptly pay to holders of Shares as of a date no
later than one day prior to the Effective Time a cash dividend of $0.10 per
Share. The Surviving Corporation does not intend to declare or pay dividends on
its common stock in the foreseeable future.
Pursuant to the terms of the Merger Agreement, the Company is prohibited from
taking any of the actions described in the two preceding paragraphs and nothing
herein shall constitute a waiver by Associated of any of its rights under the
Merger Agreement or a limitation of remedies available to Associated for any
breach of the Merger Agreement, including termination thereof.
XVI. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Associated shall not be
required to accept for payment, purchase or pay for any Shares tendered, and
may postpone the acceptance for payment, the purchase of, or payment for,
Shares, and, subject to the terms of the Merger Agreement, may amend, extend or
terminate the Offer if (i) the Minimum Tender Condition has not been met, or
(ii) at any time on or after February 13, 1995 and prior to acceptance for
payment of any Company Shares tendered pursuant to the Offer, any of the
following events shall occur or circumstances exist:
(a) there shall be in effect any temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the Offer
or the Merger, which shall remain in effect as of the Expiration Date;
(b) there shall be any action taken or any statute, rule or regulation
enacted, applicable to the Offer or the Merger by any government (or any
governmental body or agency) of the United States or any state thereof or
any foreign country that makes illegal the consummation of the Offer or the
Merger;
(c) any authorization, consent, order or approval of, or declaration or
filing with, or expiration of waiting period imposed by, any court,
administrative agency or commission or other
73
<PAGE>
governmental authority or instrumentality, domestic or foreign, necessary
for the consummation of the Offer shall not have been filed, occurred or
been obtained;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange or NASDAQ, (ii) a declaration of a banking moratorium or any
limitation or suspension of payments by any U.S. governmental authority on
the extension of credit by lending institutions, (iii) a commencement of
war or armed hostilities directly involving the United States, (iv) any
limitation (whether or not mandated) by any governmental authority which
will materially adversely affect the extension of credit by banks or other
lending institutions in the United States, or (v) in the case of any of the
foregoing existing on or before February 13, 1995, a material acceleration
or worsening thereof;
(e) the Merger Agreement shall have been terminated by the Company, on
the one hand, or Associated, on the other hand, in accordance with its
terms or Associated and the Company shall have reached an agreement
providing for the termination of the Offer;
(f) Associated shall have failed to obtain the proceeds of Financing;
(g) the representations and warranties of the Company set forth in the
Merger Agreement shall be untrue in any material respect and the facts or
events causing the representation or warranty to be untrue shall have or
would reasonably be expected to have a material adverse effect on the
Company;
(h) the Company shall have failed to perform in all material respects its
material obligations under the Merger Agreement to be performed by it on or
prior to the Expiration Date; or
(i) the Company shall not have obtained the Material Consents on or prior
to the Expiration Date.
The foregoing conditions may be asserted by Associated regardless of the
circumstances (including any action or inaction by Associated or any of its
affiliates) giving rise to such condition and are for the sole benefit of
Associated and its affiliates. The foregoing conditions, other than the Minimum
Tender Condition, may be waived by Associated in whole or in part at any time
and from time to time in its sole discretion. The failure by Associated at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
other rights and each such right will be deemed an ongoing right which may be
asserted at any time and from time to time.
XVII. CERTAIN LEGAL MATTERS
Except as described herein, based on a review of publicly available filings
made by the Company with the Commission and other publicly available
information concerning the Company, but without any independent investigation
thereof, Associated is not aware of any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by Associated's acquisition
of Shares as contemplated herein or of any approval or other action by any
governmental authority that would be required for the acquisition or ownership
of Shares by Associated as contemplated herein. Should any such approval or
other action be required, Associated currently contemplates that such approval
or other action will be sought, except as described below under "-- State
Takeover Laws." While, except as otherwise expressly described herein,
Associated does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts of the Company's business might not have to be disposed of if such
approvals were not obtained or such other actions were not
74
<PAGE>
taken or in order to obtain any such approval or other action. If certain types
of adverse action are taken with respect to the matters discussed below,
Associated could decline to accept for payment or pay for any Shares tendered.
See "General Terms of the Offer" and "Certain Conditions of the Offer" for a
description of certain conditions to the Offer.
STATE TAKEOVER LAWS
A number of states throughout the United States have enacted takeover
statutes that purport, in varying degrees, to be applicable to attempts to
acquire securities of corporations that are incorporated or have assets,
stockholders, executive offices or places of business in such states. In Edgar
v. MITE Corp., the Supreme Court of the United States held that the Illinois
Business Takeover Act, which involved state securities laws that made the
takeover of certain corporations more difficult, imposed a substantial burden
on interstate commerce and therefore was unconstitutional. In CTS Corp. v.
Dynamics Corp. of America, however, the Supreme Court of the United States held
that a state may, as a matter of corporate law and, in particular, those laws
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
Section 203 of the Delaware Code limits the ability of a Delaware corporation
to engage in business combinations with "interested stockholders" (defined as
any beneficial owner of 15.0% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly approved, among other things, the Offer and the Merger for purposes of
Section 203 of the Delaware Code.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Associated does not believe that any
state takeover statutes apply to the Offer or the Merger. Associated has not
currently complied with any state takeover statute or regulation. Associated
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a wavier of such right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Associated might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and Associated might be
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
or be delayed in consummating the Offer or the Merger. In such case, Associated
may not be obligated to accept for payment or pay for any Shares tendered
pursuant to the Offer.
ANTITRUST
Under the HSR Act and rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied. The acquisition of
Shares by Associated and the Merger are subject to these requirements.
Pursuant to the HSR Act, Wingate Partners, the ultimate parent of Associated
for the purposes of the HSR Act, and the Company filed a Notification and
Report Form with respect to the acquisition of Shares pursuant to the Offer and
the Merger with the Antitrust Division and the FTC on December 30, 1994. Under
the provisions of the HSR Act applicable to the Offer, the purchase of Shares
under the Offer may not be consummated until the expiration of a 30-calendar-
day waiting period following the
75
<PAGE>
filing by Wingate Partners and the Company. Accordingly, the waiting period
under the HSR Act expired at 11:59 p.m., New York City time, on January 30,
1995.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Associated's proposed acquisition of
the Company. At any time before or after Associated's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by Associated or the divestiture of substantial assets of Associated
or its subsidiaries, or the Company or its subsidiaries. Private parties may
also bring legal action under the antitrust laws under certain circumstances.
There can be no assurance that a challenge to the Offer on antitrust grounds
will not be made or, if such a challenge is made, of the result thereof.
XVIII. FEES AND EXPENSES
Chase Securities is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services in connection with the
acquisition of the Company. Associated has agreed to pay Chase Securities a fee
of $3.9 million for such services. In addition, Associated has agreed to
reimburse Chase Securities for all out-of-pocket expenses incurred by it,
including the reasonable fees of its counsel, and to indemnify Chase Securities
and certain related persons against certain liabilities and expenses, including
certain liabilities under the federal securities laws. In addition, it is
anticipated that an aggregate of approximately $28.4 million of fees and
expenses (including the fees of the Dealer Manager) will be incurred by
Associated and approximately $3.6 million will be incurred by the Company in
connection with the Offer and the Merger. Such amounts include usual and
customary fees for accounting, lending, legal, printing, appraisal, consulting,
and related services, including fees payable to Chase Bank.
Associated has retained Georgeson & Company Inc. to act as the Information
Agent and Chase Bank to act as the Depositary. In connection with the Offer,
the Information Agent and the Depositary each will receive reasonable and
customary compensation for its services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the federal securities laws.
Except as set forth above, Associated will not pay any fees or commissions to
any broker or dealer or other person for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Associated for customary mailing and handling expenses incurred
by them in forwarding the offering materials to their customers.
XIX. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Associated
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Associated by Chase Securities or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
Associated has filed with the Commission the Schedule 14D-1 pursuant to Rule
14d-1 under the Exchange Act containing certain additional information with
respect to the Offer. Such Schedule 14D-1 and any amendments thereto, including
exhibits, may be examined and copies may be obtained from
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<PAGE>
the principal office of the Commission in the manner described above under
"Certain Information Concerning the Company -- Available Information" (except
that such information will not be available at the regional offices of the
Commission).
No person has been authorized to give any information or make any
representation on behalf of Associated not contained in this Offer to Purchase
or in the Letter of Transmittal and, if given or made, such information or
representations must not be relied upon as having been authorized.
Associated Holdings, Inc.
February 21, 1995
77
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1993............... F-3
Consolidated Statements of Income for the Years Ended December 31, 1994 and
1993 and for the Period from Inception, January 31, 1992, through December
31, 1992.................................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1994 and 1993 and for the Period from Inception, January 31,
1992, through December 31, 1992........................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994
and 1993 and for the Period from Inception, January 31, 1992, through
December 31, 1992......................................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Associated Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of ASSOCIATED
HOLDINGS, INC. (a Delaware corporation) AND SUBSIDIARY as of December 31, 1994
and 1993, and the related consolidated statements of income, stockholders'
equity and cash flows for the years ended December 31, 1994 and 1993, and from
inception, January 31, 1992, through December 31, 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Associated
Holdings, Inc. and subsidiary as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for the years ended December 31, 1994
and 1993, and from inception, January 31, 1992, through December 31, 1992, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois,
January 23, 1995 (except with
respect to the matters discussed
in Note 13 as to which the date
is February 13, 1995)
F-2
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
ASSETS 1994 1993
------ -------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash................................................... $ 1,849 $ 991
Accounts receivable, less allowance for doubtful
accounts of $4,036 and $4,058, respectively........... 35,180 35,320
Vendor and other receivables........................... 9,959 9,691
Inventories............................................ 88,197 82,618
Other current assets................................... 3,795 3,053
-------- --------
Total current assets................................. 138,980 131,673
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land................................................... 7,315 7,327
Buildings.............................................. 27,976 27,990
Machinery and equipment................................ 18,875 18,829
Furniture and fixtures................................. 4,111 4,226
-------- --------
58,277 58,372
Less--Accumulated depreciation and amortization........ 12,830 8,747
-------- --------
Net property, plant and equipment.................... 45,447 49,625
-------- --------
OTHER LONG-TERM ASSETS................................... 8,052 9,681
-------- --------
$192,479 $190,979
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Cash overdrafts........................................ $ 9,597 $ 9,145
Current maturities of long-term debt................... 5,901 4,828
Accounts payable....................................... 44,754 41,400
Accrued liabilities.................................... 18,994 16,734
Other current liabilities.............................. 3,280 2,264
-------- --------
Total current liabilities............................ 82,526 74,371
-------- --------
LONG-TERM OBLIGATIONS:
Long-term debt, less current maturities................ 58,279 71,940
Deferred obligations and other long-term liabilities... 2,060 10,815
-------- --------
Total long-term obligations.......................... 60,339 82,755
-------- --------
REDEEMABLE PREFERRED STOCK (Note 7):
Preferred Stock A, $0.01 par value; 15,000 authorized;
5,000 issued and outstanding; 1,788 and 1,138,
respectively, accrued................................. 6,788 6,138
Preferred Stock B, $0.01 par value; 15,000 authorized;
6,560 and 5,943, respectively, issued and outstanding. 6,560 5,943
Preferred Stock C, $0.01 par value; 15,000 authorized;
9,841 and 8,915, respectively, issued and outstanding. 9,841 8,915
-------- --------
23,189 20,996
-------- --------
STOCKHOLDERS' EQUITY (Note 8):
Additional preferred stock, $0.01 par value; 200,000
authorized; 0 issued and outstanding.................. -- --
Common Stock Class A, $0.01 par value; 5,000,000
authorized; 954,911 and 896,258, respectively, issued
and outstanding; 5,435 and 0, respectively, accrued... 10 9
Common Nonvoting Stock Class B, $0.01 par value;
5,000,000 authorized; 0 issued and outstanding........ -- --
Capital in excess of par............................... 17,879 8,766
Warrants outstanding and accrued....................... 1,910 1,666
Retained earnings...................................... 6,626 2,416
-------- --------
Total stockholders' equity........................... 26,425 12,857
-------- --------
$192,479 $190,979
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-3
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED INCEPTION
DECEMBER 31, THROUGH
----------------- DECEMBER 31,
1994 1993 1992
-------- -------- ------------
<S> <C> <C> <C>
NET SALES....................................... $477,445 $462,531 $365,944
COST OF GOODS SOLD.............................. 357,276 350,251 276,546
-------- -------- --------
Gross profit................................ 120,169 112,280 89,398
-------- -------- --------
OPERATING EXPENSES:
Warehouse and distribution expenses........... 77,859 78,482 60,593
Selling, general and administrative expenses.. 25,161 23,792 19,296
-------- -------- --------
103,020 102,274 79,889
-------- -------- --------
Income from operations...................... 17,149 10,006 9,509
INTEREST EXPENSE................................ 6,753 6,263 4,782
-------- -------- --------
Income before income taxes.................. 10,396 3,743 4,727
INCOME TAXES.................................... 3,993 781 1,777
-------- -------- --------
Net income.................................. $ 6,403 $ 2,962 $ 2,950
======== ======== ========
EARNINGS PER COMMON AND DILUTIVE COMMON
EQUIVALENT SHARE............................... $ 3.51 $ 0.78 $ 1.32
======== ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING FULL
DILUTION....................................... $ 3.49 $ 0.78 $ 1.32
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REDEEMABLE NUMBER CAPITAL
PREFERRED STOCK OF IN TOTAL
-------------------- COMMON COMMON EXCESS WARRANTS RETAINED STOCKHOLDERS'
A B C TOTAL SHARES STOCK OF PAR OUTSTANDING EARNINGS EQUITY
------ ------ ------ ------- ------- ------ ------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 31, 1992........ $5,000 $5,000 $7,500 $17,500 896,258 $ 9 $ 7,778 $1,231 $ -- $ 9,018
Net income............. -- -- -- -- -- -- -- -- 2,950 2,950
Stock dividends issued. -- 384 577 961 -- -- -- -- (961) (961)
Stock dividends
accrued............... 488 -- -- 488 -- -- -- -- (488) (488)
Payment on notes
receivable from
stockholders.......... -- -- -- -- -- -- 947 -- -- 947
Issuance of warrants... -- -- -- -- -- -- -- 435 -- 435
------ ------ ------ ------- ------- --- ------- ------ ------ -------
DECEMBER 31, 1992....... 5,488 5,384 8,077 18,949 896,258 9 8,725 1,666 1,501 11,901
Net income............. -- -- -- -- -- -- -- -- 2,962 2,962
Stock dividends issued. -- 559 838 1,397 -- -- -- -- (1,397) (1,397)
Stock dividends
accrued............... 650 -- -- 650 -- -- -- -- (650) (650)
Payment on notes
receivable from
stockholders.......... -- -- -- -- -- -- 41 -- -- 41
------ ------ ------ ------- ------- --- ------- ------ ------ -------
DECEMBER 31, 1993....... 6,138 5,943 8,915 20,996 896,258 9 8,766 1,666 2,416 12,857
Net income............. -- -- -- -- -- -- -- -- 6,403 6,403
Stock dividends issued. -- 617 926 1,543 -- -- -- -- (1,543) (1,543)
Stock dividends
accrued............... 650 -- -- 650 -- -- -- -- (650) (650)
Payment on notes
receivable from
stockholders.......... -- -- -- -- -- -- 51 -- -- 51
Issuance of common
shares................ -- -- -- -- 58,653 1 8,999 -- -- 9,000
Common shares accrued.. -- -- -- -- 5,435 -- 63 -- -- 63
Warrants accrued....... -- -- -- -- -- -- -- 244 -- 244
------ ------ ------ ------- ------- --- ------- ------ ------ -------
DECEMBER 31, 1994....... $6,788 $6,560 $9,841 $23,189 960,346 $10 $17,879 $1,910 $6,626 $26,425
====== ====== ====== ======= ======= === ======= ====== ====== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED INCEPTION
DECEMBER 31, THROUGH
---------------- DECEMBER 31,
1994 1993 1992
------- ------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 6,403 $ 2,962 $ 2,950
------- ------- -------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities--
Depreciation and amortization............... 6,356 6,475 5,366
Services provided under transition services
agreement.................................. -- -- 9,000
Provision for noncurrent taxes.............. 250 167 1,605
Common shares accrued....................... 63 -- --
Warrants accrued............................ 244 -- --
Changes in assets and liabilities, net of
effects from purchase of Lynn-Edwards for
the eleven months ended December 31, 1992--
(Increase) decrease in accounts
receivable............................... 140 (879) 7,582
Increase in vendor and other receivables.. (268) (2,368) (6,322)
Increase in inventory..................... (5,579) (14,998) (11,111)
Increase in other assets.................. (598) (3,990) (616)
Increase (decrease) in accounts payable... 3,354 (5,493) 10,988
Increase in accrued liabilities........... 2,260 1,381 4,740
Increase (decrease) in other liabilities.. 1,011 (1,449) (4,423)
------- ------- -------
Total adjustments....................... 7,233 (21,154) 16,809
------- ------- -------
Net cash provided by (used in) operating
activities............................. 13,636 (18,192) 19,759
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of net assets of BCOP (Note 1).... -- -- (82,122)
Acquisition of net assets of Lynn-Edwards
(Note 1)..................................... -- 313 (2,673)
Acquisition costs............................. -- (67) (7,712)
Capital expenditures.......................... (554) (3,273) (4,289)
Other......................................... -- (249) --
------- ------- -------
Net cash used in investing activities... (554) (3,276) (96,796)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial capitalization--
Revolver.................................... -- -- 36,081
Long-term debt.............................. -- -- 30,000
Issuance of common and preferred stock...... -- -- 19,325
Net borrowings (repayment) under revolver..... (7,900) 9,500 2,230
Increase in cash overdrafts................... 452 6,108 1,787
Principal payments on debt.................... (4,827) (3,446) (8,067)
Borrowings under financing agreements......... -- 2,000 2,987
Collections from stockholders................. 51 41 947
------- ------- -------
Net cash provided by (used in) financing
activities............................. (12,224) 14,203 85,290
------- ------- -------
NET CHANGE IN CASH.............................. 858 (7,265) 8,253
CASH, beginning of period....................... 991 8,256 3
------- ------- -------
CASH, end of period............................. $ 1,849 $ 991 $ 8,256
======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA )
1. BASIS OF PRESENTATION:
Associated Holdings, Inc. ("AHI") and Associated Stationers, Inc. ("ASI"), a
wholly owned subsidiary of AHI, both Delaware corporations (collectively the
"Company"), were formed to acquire certain assets and assume certain
liabilities (the "Acquisition") of the Wholesale Division of Boise Cascade
Office Products Corporation ("BCOP").
The Acquisition was consummated effective January 31, 1992, for approximately
$87,122, of which $82,122 was paid in cash and $5,000 was paid in preferred
stock. The transaction was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to acquired assets
and liabilities based on their fair market values as of January 31, 1992, as
follows:
<TABLE>
<S> <C>
Cash and accounts receivable..................................... $36,774
Inventory........................................................ 50,324
Other current assets............................................. 277
Property, plant and equipment.................................... 49,150
Accounts payable................................................. (30,624)
Accrued expenses and other liabilities........................... (18,779)
-------
$87,122
=======
</TABLE>
On October 27, 1992, L. E. Acquisition Corp., a wholly owned subsidiary of
ASI and a Delaware corporation, acquired all of the outstanding capital stock
of Lynn-Edwards Corp. ("Lynn-Edwards"), a privately held office products
wholesaler, for approximately $2,360. Lynn-Edwards was headquartered in
Sacramento, California, and operated distribution centers in Sacramento and Los
Angeles, California. On October 28, 1992, the L. E. Acquisition Corp. name was
relinquished and the Lynn-Edwards Corp. name was assumed.
The acquisition of Lynn-Edwards was effective as of September 30, 1992. The
acquisition has been accounted for as a purchase transaction and, accordingly,
the purchase price was allocated to assets and liabilities based on their
estimated fair market values as of the effective date of the transaction. At
October 1, 1992, the allocation was based on preliminary estimates of the fair
value of the net assets. In July, 1993, agreement was reached with the selling
shareholders of Lynn-Edwards regarding the final purchase price. The excess of
the purchase price over the estimated fair value of net tangible assets
acquired of $5,242 is being amortized on a straight-line basis over 40 years.
On March 23, 1994, Lynn-Edwards was merged into ASI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include AHI and its wholly owned
subsidiary, ASI. The consolidated financial statements include Lynn-Edwards in
the results of operations since its acquisition date. All significant
intercompany accounts and transactions have been eliminated. Certain prior-year
amounts have been reclassified to conform to the current-year presentation.
Cash and Cash Equivalents
Cash equivalents are composed of highly liquid investments with an original
maturity of three months or less. As a result of the Company's cash management
system, checks issued but not
F-7
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
presented to the banks for payment may create negative book cash balances. Such
negative balances are classified as bank overdrafts.
Inventory
All inventory is purchased in a state ready for resale to customers and is
considered finished goods. Inventory is stated at the lower of cost or market.
Cost is determined using the first-in, first-out ("FIFO") method for all
inventory.
Property, Plant and Equipment
Property and equipment purchased by the Company through the acquisitions
referred to in Note 1 are stated at fair market value on the date of
acquisition as prescribed by the purchase method of accounting. Subsequent
purchases of property and equipment are stated at cost.
Depreciation and amortization are determined by using the straight-line
method over the estimated useful lives of the fixed assets. The following
useful lives are used for recording depreciation for financial reporting
purposes:
<TABLE>
<S> <C>
Buildings......................... 40 years
Machinery and equipment........... 3-15 years
Furniture and fixtures............ 3-10 years
Assets held under capital lease... Lesser of useful lives or term of lease
</TABLE>
Repairs and maintenance are charged to expense as incurred.
Software Capitalization
Significant system development costs determined to have benefits for future
periods are capitalized at cost. Software costs and software development costs
of $780, $767 and $513 as of December 31, 1994, 1993 and 1992, respectively,
were capitalized and subject to amortization. Amortization expense is
recognized over the periods in which benefits are realized, generally not to
exceed five years. Amortization expense for the years ended December 31, 1994
and 1993, and for the eleven months ended December 31, 1992, was $157, $128 and
$88, respectively. Capitalized software, net of accumulated amortization, as of
December 31, 1994 and 1993, was $407 and $551, respectively.
Intangibles
Intangible assets, included in other long-term assets on the accompanying
consolidated balance sheets, consist principally of excess purchase price over
net tangible assets of businesses acquired ("goodwill"). Goodwill is amortized
on a straight-line basis over periods not exceeding 40 years. The Company
continually evaluates whether events or circumstances have occurred indicating
that the remaining estimated useful life of goodwill may not be appropriate.
When factors indicate that goodwill should be evaluated for possible
impairment, the Company uses an estimate of the acquired business' undiscounted
future operating income compared to the carrying value of goodwill to determine
if a write-off is necessary. Gross goodwill as of December 31, 1994 and 1993
was $5,242. Accumulated goodwill amortization as of December 31, 1994 and 1993,
was $295 and $164, respectively.
The Company incurred legal and other direct costs in connection with the
issuance of its outstanding debt. These transaction costs of $2,945 and $4,217
at December 31, 1994 and 1993, respectively, net of accumulated amortization,
are included in other long-term assets. Accumulated transaction cost
amortization as of December 31, 1994 and 1993, was $3,306 and $2,034,
respectively. These costs are being amortized over the weighted average term of
the related outstanding debt.
F-8
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Effective January 31, 1992, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes." Accordingly, the
Company records a provision for income taxes using the "liability" method of
accounting for income taxes. Deferred tax assets and liabilities, less an
appropriate valuation allowance, are recorded for all temporary differences
between financial and tax reporting and are the result of differences in the
timing of recognition of certain income and expense items for financial and tax
accounting purposes. Deferred tax expense (benefit) results from the net
changes during the year in the deferred tax assets and liabilities and the
valuation allowance.
3. DEBT:
Long-term debt consists of the following as of December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Revolver................................................. $39,910 $47,810
Term loan--
Tranche A, due in installments until December, 1996.... 11,000 15,000
Tranche B, due in installments from January, 1997
until December, 1998.................................. 10,000 10,000
Original issue discount--tranche B....................... (443) (582)
Capital lease obligation, 8.87% interest rate............ 2,052 2,540
Equipment loan, 7.99% interest rate...................... 1,661 2,000
------- -------
64,180 76,768
Less--Current maturities................................. (5,901) (4,828)
------- -------
$58,279 $71,940
======= =======
</TABLE>
In connection with the Acquisition, and as amended in connection with the
acquisition of Lynn-Edwards, the Company entered into a $95,000 Second Amended
and Restated Credit Agreement ("Credit Agreement"). The Credit Agreement
consists of a $65,000 revolving credit facility ("Revolver"), a $20,000 term
loan, Tranche A, and a $10,000 term loan, Tranche B ("Term Loan"). The proceeds
of the Revolver and the Term Loan were used to fund the Acquisition, to fund
the purchase of the outstanding capital stock of Lynn-Edwards, to pay off
certain indebtedness of Lynn-Edwards at the acquisition date and to pay
expenses related to these two transactions. In addition, proceeds were used to
finance the working capital requirements of the combined companies.
The Revolver provides for revolving credit loans up to the amount of the
commitment based on eligible receivables and inventory, as defined in the
Credit Agreement. Interest is payable at a rate per annum of 1 3/4% plus the
higher of either the prime rate or 1/2% plus the federal funds rate, as
defined. The Revolver terminates on January 31, 1997. Prepayments are required
when cash flow, as defined, exceeds specified levels. The Revolver interest
rates and outstanding amounts during the year and at the end of the year are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED INCEPTION
DECEMBER 31, THROUGH
---------------- DECEMBER 31,
1994 1993 1992
------- ------- --------
<S> <C> <C> <C> <C>
Interest rate at end of year........... 10.25% 7.75% 7.75%
Weighted average interest rate during
year.................................. 8.90% 7.75% 8.00%
Average amount outstanding during year. $39,556 $46,864 $26,811
Maximum month-end balance during year.. 53,810 58,510 36,081
======= ======= ========
</TABLE>
F-9
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Term loan tranche A is payable in 57 monthly installments which commenced on
April 30, 1992. Interest is payable at a rate per annum of 2% plus the higher
of either the prime rate or 1/2% plus the federal funds rate, as defined. The
weighted average interest rate was 9.15%, 8.00% and 8.25% during the years 1994
and 1993, and the eleven months ended December 31, 1992, respectively. The
interest rate was 10.50% and 8.00% at December 31, 1994 and 1993, respectively.
Term loan tranche B is payable in 24 monthly installments, commencing on
January 31, 1997. Interest is payable at a rate per annum of 5% plus the higher
of either the prime rate or 1/2% plus the federal funds rate, as defined. The
weighted average interest rate was 12.15%, 11.00% and 11.25% during the years
1994 and 1993, and the eleven months ended December 31, 1992, respectively. The
interest rate was 13.50% and 11.00% at December 31, 1994 and 1993,
respectively.
The Credit Agreement contains certain covenants and provisions which, among
others, include restrictions on dividend payments, required levels of total
capital, required ratio of current assets to current liabilities and
restrictions on capital expenditures. Borrowings under the Credit Agreement are
collateralized by substantially all of the real and personal property of the
Company.
The Company entered into a capital lease in December, 1992, for substantially
all of the equipment at the Carol Stream warehouse facility. As of December 31,
1994 and 1993, assets recorded under this capital lease were approximately
$3,002 with related accumulated amortization of $726 and $425, respectively. As
of December 31, 1994 and 1993, total obligations under this capital lease were
$2,052 and $2,540, respectively, of which $534 and $488 is recorded as a
current liability, respectively. The lease agreement contains certain financial
covenants and provisions, including a maximum level of debt to tangible net
worth, a required level of tangible net worth, and a ratio of cash flow, as
defined, to the current portion of long-term debt.
In 1993, Lynn-Edwards entered into a $2,000 term loan to finance the purchase
of capital equipment. The loan agreement contains certain financial covenants
and provisions, including a maximum level of debt to tangible net worth, a
required level of tangible net worth and a ratio of cash flow, as defined, to
current portion of long-term debt. The loan is amortized over 60 equal
installments.
Debt maturities, excluding the original issue discount, for the five years
following the period ended December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995...................................... $ 5,901
1996...................................... 6,980
1997...................................... 46,276
1998...................................... 5,466
1999...................................... --
-------
$64,623
=======
</TABLE>
Maturities of long-term debt in 1997 include a balance under the Revolver of
$39,910.
Fair Market Value of Financial Instruments
The carrying value of cash and cash equivalents and short-term debt
approximates fair value because of the short-term maturity of the instruments.
Management believes that the fair value of the Revolver and Term Loan
approximates its carrying value as of December 31, 1994 and 1993, respectively,
because the interest rate on the debt is a floating rate tied to the prime
rate.
F-10
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LEASE OBLIGATIONS:
The Company leases certain facilities under noncancelable operating leases
expiring through July, 2004, with various renewal options.
The following table shows future minimum annual lease commitments on
noncancelable operating leases. The table excludes real estate taxes,
insurance, maintenance and other costs related to the properties which are paid
by the Company.
<TABLE>
<S> <C>
1995........................................................... $ 2,696
1996........................................................... 2,498
1997........................................................... 1,940
1998........................................................... 1,568
1999........................................................... 1,449
Thereafter..................................................... 3,804
-------
Total minimum lease payments................................... $13,955
=======
</TABLE>
Rent expense for operating leases was approximately $2,952 and $2,711 for the
years ended December 31, 1994 and 1993, respectively, and $1,590 for the eleven
months ended December 31, 1992.
5. RETIREMENT BENEFITS:
Defined Contribution Plan
The ASI Profit Sharing and Savings Plan ("the Plan") is a Section 401(k) plan
with a discretionary profit sharing component which commenced on April 1, 1992.
The Plan and the trust established pursuant to the Plan are intended to meet
the requirements of the Employee Retirement Income Security Act of 1974
("ERISA") and qualify under Sections 401(a) and 501(a) of the Internal Revenue
Code of 1986, as amended. The Plan covers substantially all full-time employees
of the Company. Pursuant to the Plan, the Company matched employee
contributions in the amount of $.50 for each $1.00 contributed through July,
1993, and $.25 for each $1.00 contributed subsequently, up to an employee
contribution maximum of 6% of compensation, as defined. The expense under the
above plan was $277 and $435 for the years ended December 31, 1994 and 1993,
respectively, and $256 for the eleven months ended December 31, 1992.
Postretirement Benefits
In December, 1990, the Financial Accounting Standards Board ("FASB") issued
Standard No. 106, "Accounting for Postretirement Benefits Other Than Pensions."
This standard requires that the expected cost of these postemployment benefits
be charged to expense during the years that the employees render service. The
Company does not offer postretirement benefits to its employees.
F-11
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES:
At January 31, 1992, the date of the Acquisition, the Company had a net
deferred tax asset primarily due to the higher tax basis allocated to the net
assets acquired, including intangible assets and certain reserves. A valuation
allowance was established at the date of the Acquisition for the entire amount
of the net deferred tax asset.
For the years ended December 31, 1994 and 1993, and the eleven months ended
December 31, 1992, components of the provision for income taxes were as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEARS ENDED INCEPTION
DECEMBER 31, THROUGH
--------------- DECEMBER 31,
1994 1993 1992
------ ------- ------------
<S> <C> <C> <C>
Currently payable--
Federal...................................... $3,090 $ 227 $ 1,584
State........................................ 903 554 193
------ ------- -------
Total currently payable.................... 3,993 781 1,777
------ ------- -------
Deferred, net--
Federal...................................... 166 1,012 1,107
State........................................ 24 148 163
Valuation allowance reduction................ (190) (1,160) (1,270)
------ ------- -------
Total deferred, net........................ -- -- --
------ ------- -------
Provision for income taxes..................... $3,993 $ 781 $ 1,777
====== ======= =======
</TABLE>
The components of the deferred income tax provision (benefit) were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Accelerated tax depreciation...................... $ (266) $ (42) $ 308
Amortization of intangible assets................. 897 897 822
Acquisition accruals.............................. 297 415 1,130
Sales discounts and deferred revenue.............. (1,014) (297) (119)
Other............................................. 276 187 (871)
Valuation allowance reduction..................... (190) (1,160) (1,270)
------- ------- -------
Provision (benefit) for deferred income taxes..... $ -- $ -- $ --
======= ======= =======
</TABLE>
F-12
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reconciliations of the statutory federal income tax rates to the effective
income tax rates were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THROUGH
YEARS ENDED DECEMBER 31, DECEMBER 31,
------------------------------ ---------------
1994 1993 1992
-------------- --------------- ---------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Tax provision based on the
federal statutory rate......... $3,535 34.0% $ 1,273 34.0% $ 1,607 34.0%
State and local income taxes--
net of federal income tax
benefit........................ 607 5.8 492 13.2 197 4.2
Reserves........................ 41 .4 176 4.7 1,243 26.3
Valuation allowance reduction... (190) (1.8) (1,160) (31.0) (1,270) (26.9)
------ ---- ------- ----- ------- -----
Provision for income taxes...... $3,993 38.4% $ 781 20.9% $ 1,777 37.6%
====== ==== ======= ===== ======= =====
</TABLE>
The amounts of deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1994 1993
-------------------- --------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Depreciation and amortization.... $ -- $390 $ -- $ 603
Intangible assets................ 1,869 -- 2,766 --
Allowance for doubtful accounts.. 1,664 -- 1,598 --
Inventory reserves and
adjustments..................... 1,264 -- 1,433 --
Accrued expenses................. 4,566 -- 4,577 608
------- ---- ------- ------
9,363 390 10,374 1,211
Valuation allowance.............. (8,973) -- (9,163) --
------- ---- ------- ------
Total.......................... $ 390 $390 $ 1,211 $1,211
======= ==== ======= ======
</TABLE>
7. REDEEMABLE PREFERRED STOCK:
AHI has 245,000 authorized shares of preferred stock (nonvoting), consisting
of 15,000 shares of $0.01 par value Class A preferred stock, 15,000 shares of
$0.01 par value Class B preferred stock, 15,000 shares of $0.01 par value Class
C preferred stock, and 200,000 shares of $0.01 par value Additional preferred
stock. As of December 31, 1994 and 1993, there were 5,000 shares of Class A
preferred stock issued and outstanding, and 1,788 and 1,138 shares which have
been accrued as dividends but not issued, respectively. As of December 31, 1994
and 1993, there were 6,560 and 5,943 shares of Class B preferred stock and
9,841 and 8,915 shares of Class C preferred stock issued and outstanding,
respectively. There were no shares of Additional preferred stock issued and
outstanding as of December 31, 1994 or 1993. These shares are senior in
preference to the common stock of the Company.
Class A preferred stock must be redeemed by the Company on July 31, 1999.
Dividends are cumulative at a rate of 10% per annum, payable quarterly on April
30, July 31, October 31 and January 31. In the event that the Company does not
pay dividends in cash, the dividend rate increases to 13%
F-13
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
per annum and is payable in stock. Class B and C preferred stock are junior in
relation to the Class A preferred stock. During each of the years ended
December 31, 1994 and 1993, 650 shares of Class A preferred stock were accrued
but not issued. During the eleven months ended December 31, 1992, 488 shares of
Class A preferred stock were accrued but not issued.
Class B preferred stock must be redeemed by the Company on July 31, 1999.
Class C preferred stock is redeemable in four equal quarterly installments on
April 30, 2001, July 31, 2001, October 31, 2001, and January 31, 2002.
Dividends for both Class B and C are cumulative at a rate of 9% per annum.
Dividends are payable quarterly on April 30, July 31, October 31 and January
31. In the event that the Company does not pay dividends in cash, the dividend
rate increases to 10% per annum and is payable in stock. During the year ended
December 31, 1994, noncash dividends were declared and issued for both Class B
and C preferred stock in the amount of 617 and 926 shares, respectively. During
the year ended December 31, 1993, noncash dividends were declared and issued
for both Class B and C preferred stock in the amount of 559 and 838 shares,
respectively. During the eleven months ended December 31, 1992, noncash
dividends were declared and issued for both Class B and C preferred stock in
the amount of 384 and 577 shares, respectively.
Redemption of preferred stock, for the five years following the period ended
December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995............................. --
1996............................. --
1997............................. --
1998............................. --
1999............................. $13,348
</TABLE>
All classes of preferred stock may be redeemed at the option of the issuer at
any time. All classes of preferred stock have a redemption and liquidation
value of $1,000 per share plus the aggregate of accrued and unpaid dividends on
such shares to date.
8. STOCKHOLDERS' EQUITY:
Common Stock and Warrants
AHI has 10,000,000 authorized shares of common stock, consisting of 5,000,000
shares of $0.01 par value Class A voting common stock and 5,000,000 shares of
$0.01 par value Class B nonvoting common stock. Each holder of Class A common
stock is entitled to one vote for each share of common stock held of record by
such holder.
As of December 31, 1994 and 1993, the Company has 23,129 warrants outstanding
which allow the holders to buy shares of AHI common stock at an exercise price
of $1 per share. In addition, 2,506 warrants have been accrued but not issued,
as of December 31, 1994. The exercise period expires January 31, 2002.
The Company also has 190,218 warrants outstanding as of December 31, 1994 and
1993, which allow the holders to buy shares of AHI common stock at an exercise
price of $0.01 per share. In addition, 18,821 warrants have been accrued but
not issued, as of December 31, 1994. The exercise period expires January 31,
2002.
F-14
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings Per Share
The Company presents earnings per share on both a primary and fully diluted
basis. Earnings per common and dilutive common equivalent share amounts were
computed by dividing net income, after deducting dividends on preferred stock,
by the weighted average number of common and dilutive common equivalent shares
outstanding during the period. The weighted average number of shares includes
the dilutive effect of warrants computed using the treasury stock method, as
well as the common shares that would result from the conversion of the deferred
obligation related to the TS Agreement.
Earnings per common share assuming full dilution amounts were computed by
dividing net income, after deducting dividends on preferred stock, by the
weighted average number of fully diluted common shares outstanding during the
period. The weighted average number of shares includes the dilutive effect of
warrants computed using the treasury stock method, as well as the common shares
that would result from the conversion of the deferred obligation related to the
TS Agreement.
For the year ended December 31, 1993 and the eleven months ended December 31,
1992, employee stock options (discussed in Note 9) were not included in either
the weighted average number of common and dilutive common equivalent shares or
the weighted average shares on a fully diluted basis, as they would have an
anti-dilutive result. For the year ended December 31, 1994, the stock options
of one employee were included in the weighted average share computations, as
they had a dilutive result. The remainder of the employee stock options were
not included in the weighted average share computations for the year ended
December 31, 1994, as they would have an anti-dilutive effect.
The net income, preferred stock dividends and shares used to compute primary
and fully diluted earnings per share are presented in the following table.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED INCEPTION
DECEMBER 31, THROUGH
------------- DECEMBER 31,
1994 1993 1992
------ ------ ------------
<S> <C> <C> <C>
PRIMARY
Net Income........................................ $6,403 $2,962 $2,950
Preferred stock dividends issued and accrued...... 2,193 2,047 1,449
------ ------ ------
Net income attributable to common stockholders'
equity........................................... $4,210 $ 915 $1,501
====== ====== ======
Average number of common and dilutive common
equivalent shares................................ 1,199 1,171 1,139
FULLY DILUTED
Net income........................................ $6,403 $2,962 $2,950
Preferred stock dividends issued and accrued...... 2,193 2,047 1,449
------ ------ ------
Net income attributable to common stockholders'
equity........................................... $4,210 $ 915 $1,501
====== ====== ======
Average number of shares, assuming full dilution.. 1,205 1,171 1,139
</TABLE>
F-15
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE STOCK OPTION AND AWARD PLANS:
On January 31, 1992, the stockholders of AHI approved the adoption of the AHI
1992 Management Stock Option Plan (the "Plan"). The purpose of the Plan is to
promote the interests of the Company and its shareholders by providing the
officers and other key employees with additional incentive and the opportunity
through stock ownership to increase their proprietary interest in the Company
and their personal interest in its continued success. As of December 31, 1994,
86,735 shares of common stock have been authorized for grant under the Plan.
Under the terms of the Plan, the option price at the time any option is
granted will not be less than the fair market value per share. The shares
granted to date have an exercise price of $10 per share and vest at a rate of
25% annually, subject to certain internal rate of return hurdles. As of
December 31, 1994, six persons held such options. No options were exercisable
as of December 31, 1994. Changes in stock options outstanding were as follows:
<TABLE>
<CAPTION>
SHARES
-------
<S> <C>
Granted as of December 31, 1992.................................. 53,269
Granted........................................................ --
Exercised...................................................... --
Expired or terminated.......................................... --
-------
Granted as of December 31, 1993.................................. 53,269
Granted........................................................ 4,163
Exercised...................................................... --
Expired or terminated.......................................... (25,904)
-------
Granted as of December 31, 1994.................................. 31,528
=======
</TABLE>
10. SUPPLEMENTAL CASH FLOW DISCLOSURES:
In addition to the information provided in the statement of cash flows, the
following are supplemental disclosures of cash flow information for the twelve
months ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for--
Interest.......................................... $6,588 $6,119 $4,694
Income taxes...................................... 2,118 630 135
====== ====== ======
</TABLE>
The following are supplemental disclosures of noncash investing and financing
activities for the twelve months ended December 31, 1994 and 1993 and the
eleven months ended December 31, 1992:
. In 1994, the Company issued $9,000 of common stock to retire a $9,000
deferred obligation related to a Transition Services Agreement ("TS
Agreement").
. In 1994, the Company accrued $63 for common stock shares to be issued at
less than fair market value.
. In 1994, the Company accrued $244 for warrants which have an exercise
price less than the fair market value of the common stock.
. In 1992, the Company issued common stock warrants, valued at $435, in
connection with the acquisition of Lynn-Edwards.
F-16
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
. On January 31, 1992, the Company issued common stock warrants valued at
$1,231 for services rendered in connection with the Acquisition.
. On January 31, 1992, the Company issued common stock valued at $462 for
services to be rendered to ASI through 2002.
. On January 31, 1992, the Company issued common stock valued at $315 for
services rendered in connection with the Acquisition.
. On January 31, 1992, the Company issued Class A preferred stock valued at
$185 for services rendered in connection with the Acquisition.
. On January 31, 1992, the Company issued Class B preferred stock valued at
$5,000 as partial payment for the Acquisition.
11. TRANSACTIONS WITH RELATED PARTIES:
The Company has management and advisory services agreements with three
investor groups which own the majority of AHI's Class A Common and Class A
preferred stock. These investor groups provided certain financial advisory
services to the Company in connection with the Acquisition, in exchange for an
aggregate of $1,000, 31,480 shares of AHI common stock, and 185 shares of Class
A preferred stock. These fees were paid and stock was issued in January 1992
upon consummation of the Acquisition.
In addition, these same investor groups provide certain oversight and
monitoring services to the Company, in exchange for management fees and out-of-
pocket expenses. The expense related to the above agreements was $500 and $68
of out-of-pocket expenses for the year ended December 31, 1994, $283 and $47 of
out-of-pocket expenses for the year ended December 31, 1993 and $475 and $90 of
out-of-pocket expenses for the eleven months ended December 31, 1992. Pursuant
to the Credit Agreement, the aggregate payments under these agreements cannot
exceed $500 per year plus reasonable out-of-pocket expenses.
In addition, on January 31, 1992, two of these same investor groups received
an aggregate of 46,258 shares of AHI common stock (shares can be rescinded if
the agreement is terminated prior to January 31, 2002) as deferred compensation
for future services.
On January 31, 1992, the Company entered into the TS Agreement with the
holder of the Class B preferred stock (nonvoting). The TS Agreement stipulated
that the Company receive certain services for between two months and two years
from January 31, 1992. The services included dual facility services (including
inventory purchases), information systems services and freight consolidation
services. In return, the Company made monthly payments, as defined. Under this
agreement, the Company purchased services of $825 and $1,980 during the twelve
months ended December 31, 1994 and 1993, respectively, and $21,000 (including
inventory purchases of $13,175) during the eleven months ended December 31,
1992. The TS Agreement also allowed for deferment of up to $9,000 in payments.
During the eleven months ended December 31, 1992, the Company deferred $9,000
in payments. This deferred obligation is recorded in deferred obligations and
other long-term liabilities on the balance sheet at December 31, 1993.
During 1994, per the TS Agreement, the Company settled the obligation by
issuing 58,653 shares of AHI Class A common stock to the holder of the Class B
preferred stock.
F-17
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The holder of the Class B preferred stock is also a supplier to the Company.
The total inventory purchases from this supplier were $26,728 and $21,903
during the twelve months ended December 31, 1994 and 1993, respectively, and
$17,963 during the eleven months ended December 31, 1992. As of December 31,
1994 and 1993, $2,293 and $1,413 were due to this supplier and recorded in
trade accounts payable.
The holder of the Class B preferred stock is also a customer of the Company.
Net sales to this customer were $33,447 and $19,153 during the twelve months
ended December 31, 1994 and 1993, respectively, and $11,860 during the eleven
months ended December 31, 1992. Accounts receivable from this customer were
$299 and $145 as of December 31, 1994 and 1993, respectively.
On January 31, 1992, the Company entered into a data processing facilities
management agreement with the holder of the Class C preferred stock
(nonvoting). The agreement expires in July, 2002, and has minimum monthly
payments which began in August, 1992, ranging from $522 to $689. Payments
pursuant to the above agreement were $10,630 and $10,336 for the twelve months
ended December 31, 1994 and 1993, respectively, and $3,023 for the eleven
months ended December 31, 1992. The Company had prepaid $1,934 and $956 as of
December 31, 1994 and 1993, respectively, for future services. In addition,
$1,931 and $1,755 was accrued as of December 31, 1994 and 1993, respectively,
for services provided which had not yet been billed. At December 31, 1994, the
remaining aggregate minimum monthly payments over the term of the agreement
were $50,078.
Per the agreement, in the event the agreement is terminated for cause by the
holder of the Class C preferred stock prior to expiration, the Company agrees
to pay 80% of the remaining minimum monthly charges. In the event the agreement
is terminated by the Company, the Company agrees to pay the lesser of $11,000
or 80% of the remaining minimum monthly charges, as well as the redemption or
purchase of the Class C preferred stock as discussed in Note 7.
12. CONCENTRATION OF CREDIT RISK:
The Company's principal customers are in the retail office supply industry.
Their financial position has been considered in determining the Company's
allowance for doubtful accounts.
13. SUBSEQUENT EVENT:
On February 13, 1995, AHI and United Stationers Inc. ("USI") entered into a
Merger Agreement. Under the terms of the Merger Agreement, the current
shareholders of USI would receive $15.50 per share for 92.5% of their shares
and the remaining 7.5% of their shares would represent (in aggregate) 20% of
the common stock of the combined entity, which will continue to be publicly
traded.
In connection with the possible merger, ASI paid commitment fees to a lender
subsequent to December 31, 1994.
F-18
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By Mail: By Overnight Delivery: By Hand:
Box 3032 c/o Chase Securities (9:00 a.m.-5:00 p.m.
4 Chase Metrotech Center Processing Corp. New York City Time)
Brooklyn, NY 11245 Ft. Lee Executive Park 1 Chase Manhattan Plaza
1 Executive Drive Floor 1-B
(6th Floor) Nassau and Liberty
Ft. Lee, NJ 07024 Streets
New York, NY 10081
By Facsimile Transmission:
(201) 592-1674
Confirm by Telephone:
(201) 592-4672
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below and will be furnished promptly at
Associated's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
LOGO
Wall Street Plaza
New York, NY 10005
Banks and Brokers call collect (212) 440-9800
CALL TOLL FREE: (800) 223-2064
The Dealer Manager for the Offer is:
CHASE SECURITIES, INC.
1 Chase Manhattan Plaza
New York, NY 10081
Call (212) 552-3239
<PAGE>
EXHIBIT 99(A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
UNITED STATIONERS INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 21, 1995
BY
ASSOCIATED HOLDINGS, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By Mail: By Overnight Delivery: By Hand:
Box 3032 c/o Chase Securities (9:00 a.m.-5:00 p.m.
4 Chase Metrotech Processing Corp. New York City Time)
Center Ft. Lee Executive Park 1 Chase Manhattan Plaza,
Brooklyn, NY 11245 1 Executive Drive Floor 1-B
(6th Floor) Nassau and Liberty
Ft. Lee, NJ 07024 Streets
New York, NY 10081
By Facsimile Transmission:
(201) 592-1674
Confirm by Telephone:
(201) 592-4672
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of United Stationers Inc., a Delaware corporation (the
"Company"), if certificates evidencing Shares ("Certificates") are to be
forwarded herewith or if delivery of Shares is to be made by book-entry
transfer to an account maintained by The Chase Manhattan Bank (National
Association) (the "Depositary") at The Depositary Trust Company ("DTC"), the
Midwest Securities Trust Company ("MSTC") or the Philadelphia Depositary Trust
Company ("PDTC") (each a "Book-Entry Transfer Facility") pursuant to the
procedures set forth under "Procedure for Tendering Shares -- Book-Entry
Transfer" in the Offer to Purchase (as defined below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as defined
under "Procedure for Tendering Shares -- Book-Entry Transfer" in the Offer to
Purchase) with respect to, their Shares and all other required documents to the
Depositary prior to the Expiration Date (as defined under "General Terms of the
Offer" in the Offer to Purchase) may tender their Shares according to the
guaranteed delivery procedure set forth under "Procedure for Tendering
Shares -- Guaranteed Delivery" in the Offer to Purchase. See Instruction 2
hereof. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<PAGE>
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution: _________________________________________________
Check Box of Book-Entry Transfer Facility:
[_] DTC[_] MSTC[_] PDTC
Account Number: ________________________________________________________________
Transaction Code Number: _______________________________________________________
[_] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): _______________________________________________
Window Ticket Number (if any): _________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________________
Name of Institution that Guaranteed Delivery: __________________________________
If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
[_] DTC[_] MSTC[_] PDTC
Account Number: ________________________________________________________________
Transaction Code Number: _______________________________________________________
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) Shares Number of Shares Number of
(Please fill in, if blank, exactly as name(s) Certificate Represented by Shares
appear(s) on the Certificate(s)) Number(s)(1) Certificate(s)(1) Tendered(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by holders of Shares delivering Shares by Book-
Entry Transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Certificates delivered to the Depositary are being
tendered. See Instruction 4.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if
Certificates for Shares not
tendered or not accepted for
payment and/or the check for the
purchase price of Shares accepted
for payment are to be issued in the
name of someone other than the
undersigned, or if Shares delivered
by book-entry transfer that are not
accepted for payment are to be
returned by credit to an account
maintained at a Book-Entry Transfer
Facility, other than to the account
indicated above.
Issue (check appropriate box(es)):
[_] Check to:
[_] Certificate to:
Name: ______________________________
(Please Type or Print)
Address: ___________________________
------------------------------------
------------------------------------
------------------------------------
(Include Zip Code)
------------------------------------
(Tax Identification or Social
Security No.)
(See Substitute Form W-9)
Credit unpurchased Shares
delivered by book-entry transfer to
the Book-Entry Transfer Facility
account set forth below:
[_] DTC[_] MSTC[_] PDTC
(CHECK ONE)
------------------------------------
(DTC/MSTC/PDTC Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if
Certificates for Shares not
tendered or not accepted for
payment and/or the check for the
purchase price of Shares accepted
for payment are to be sent to
someone other than the undersigned
or to the undersigned at an address
other than that shown above.
Mail (check appropriate box(es)):
[_] Check to:
[_] Certificate to:
Name: ______________________________
(Please Type or Print)
Address: ___________________________
------------------------------------
------------------------------------
(Include Zip Code)
------------------------------------
(Tax Identification or Social
Security No.)
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Associated Holdings, Inc., a Delaware
corporation ("Associated"), the above-described shares of the common stock,
$0.10 par value (the "Shares"), of United Stationers Inc., a Delaware
corporation (the "Company"), for $15.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated February 21, 1995 (the "Offer to Purchase"), receipt of which
is hereby acknowledged, and in this Letter of Transmittal (which, together with
the Offer to Purchase and any amendments or supplements hereto or thereto,
collectively constitute the "Offer"). The undersigned understands that
Associated reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve Associated of its obligations under the Offer or
prejudice the rights of tendering holders of the Shares to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns and transfers
to, or upon the order of, Associated all right, title and interest in and to
all of the Shares that are being tendered hereby and any and all other Shares
or other securities issued or issuable in respect of such Shares on or after
February 21, 1995 (a "Distribution") and irrevocably constitutes and appoints
the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any Distributions), with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to (i) deliver Certificates evidencing such
Shares (and any Distributions), or transfer ownership of such Shares (and any
Distributions) on the account books maintained by a Book-Entry Transfer
Facility together, in any such case, with all accompanying evidences of
transfer and authenticity to, or upon the order of, Associated upon receipt by
the Depositary, as the undersigned's agent, of the purchase price with respect
to such Shares, (ii) present such Shares (and any Distributions) for transfer
on the books of the Company and (iii) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any
Distributions), all in accordance with the terms and subject to the conditions
of the Offer. Unless waived by the Company on behalf of its stockholders, the
undersigned's tender of Shares is expressly subject to (i) the satisfaction by
Associated of its obligations under Section 6.10(d) of the Agreement and Plan
of Merger dated as of February 13, 1995 (the "Merger Agreement") between
Associated and the Company (excluding clause 6.10(d)(i) thereof) and (ii) the
receipt by the Company of the Financial Condition Certificate and Solvency
Opinion (each as defined in Section 6.11 of the Merger Agreement).
<PAGE>
The undersigned hereby irrevocably appoints each designee of Associated as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to
all Shares (and any Distributions) tendered hereby, including, without
limitation, the right to vote such Shares (and any Distributions) in such
manner as each such attorney and proxy or his substitute shall, in his sole
discretion, deem proper. All such powers of attorney and proxies, being deemed
to be irrevocable, shall be considered coupled with an interest in the Shares
tendered herewith. Such appointment will be effective when, and only to the
extent that, Associated accepts such Shares for payment. Upon such acceptance
for payment, all prior powers of attorney and proxies given by the undersigned
with respect to such Shares (and any Distributions) will be revoked, without
further action, and no subsequent powers of attorneys and proxies may be given
with respect thereto (and, if given, will be deemed ineffective). The designees
of Associated will, with respect to the Shares (and any Distributions) for
which such appointment is effective, be empowered to exercise all voting and
other rights of the undersigned with respect to such Shares (and any
Distributions) as they in their sole discretion may deem proper, including,
without limitation, in respect of any annual or special meeting of the
Company's stockholders, or any adjournment or postponement thereof, or in
connection with any action by written consent in lieu of any such meeting or
otherwise (including any such meeting or action by written consent to approve
the Merger). Associated reserves the absolute right to require that, in order
for Shares to be deemed validly tendered, immediately upon the acceptance for
payment of such Shares, Associated or its designees must be able to exercise
full voting rights with respect to such Shares (and any Distributions),
including voting at any meeting of stockholders then present.
The undersigned hereby represents and warrants that (i) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distributions) tendered hereby, (ii) the undersigned own(s) the Shares (and
any Distributions) tendered hereby within the meaning of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(iii) such tender of Shares (and any Distributions) complies with Rule 14e-4
under the Exchange Act and (iv) when such Shares (and any Distributions) are
accepted for payment and paid for by Associated, Associated will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances, and that the Shares (and any
Distributions) tendered hereby will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or Associated to be necessary or desirable to complete
the sale, assignment and transfer of Shares (and any Distributions) tendered
hereby. In addition, the undersigned shall promptly remit and transfer to the
Depositary for the account of Associated any and all Distributions issued to
the undersigned on or after February 21, 1995 in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, Associated shall be
entitled to all rights and privileges as owner of any such Distributions and
may withhold the entire purchase price or deduct from the purchase price the
amount of value thereof, as determined by Associated in its sole discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in "Procedure for Tendering Shares" in the
Offer to Purchase and in the instructions hereto will constitute a binding
agreement between the undersigned and Associated with respect to such Shares
upon the terms and subject to the conditions of the Offer. The undersigned
recognizes that, under certain circumstances set forth in the Offer to
Purchase, Associated may not be required to accept for payment any of the
Shares tendered hereby or may accept for payment fewer than all of the Shares
tendered hereby.
Upon deposit of funds with the Depositary for the purpose of making payments
to tendering stockholders, Associated's obligation to make such payments shall
be satisfied and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Shares pursuant to the Offer. See "Acceptance for Payment and
Payment for Shares" in the Offer to Purchase.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment in the name(s) of
the registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Shares Tendered." In the event that both the
"Special Payment Instructions" and the "Special Delivery Instructions" are
completed, please issue the check for the purchase price and/or return any such
Certificates evidencing Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to, the person(s) so indicated. Unless
otherwise indicated herein under "Special Payment Instructions," in the case of
a book-entry delivery of Shares, please credit the account maintained at the
Book-Entry Transfer Facility indicated above with respect to any Shares not
accepted for payment. The undersigned recognizes that Associated has no
obligation pursuant to the "Special Payment Instructions" to transfer any
Shares from the name of the registered holder thereof if Associated does not
accept for payment any of the Shares tendered hereby.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures on
this Letter of Transmittal must be guaranteed by a member firm of a registered
national securities exchange registered under Section 6 of the Exchange Act, by
a member firm of the National Association of Securities Dealers, Inc., by a
commercial bank or trust company having an office or correspondent in the
United States or by any other "Eligible Guarantor Institution" (bank, savings
and loan association or credit union with membership approved signature
guarantee medallion program) as defined in Rule 17Ad-15 under the Exchange Act
(each of the foregoing constituting an "Eligible Institution"), unless the
Shares tendered hereby are tendered (i) by the registered holder (which term,
for purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of Shares) of such Shares who has completed neither the box entitled
"Special Payment Instructions" nor the box entitled "Special Delivery
Instructions" herein or (ii) for the account of an Eligible Institution. See
Instruction 5. If the Certificates are registered in the name of a person other
than the signer of this Letter of Transmittal, or if payment is to be made or
delivered to, or Certificates evidencing unpurchased Shares are to be issued or
returned to, a person other than the registered owner, then the tendered
Certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the Certificates, with the signatures on the Certificates or
stock powers guaranteed by an Eligible Institution as provided herein. See
Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders if Certificates evidencing Shares are to be forwarded herewith or
if delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth under "Procedure for Tendering Shares -- Book-Entry
Transfer" in the Offer to Purchase. For a stockholder to validly tender Shares
pursuant to the Offer, either (i) a properly completed and duly executed Letter
of Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees and any other required documents, must be received by the
Depositary at one of its addresses set forth herein on or prior to the
Expiration Date and either (a) Certificates for tendered Shares must be
received by the Depositary at one of such addresses on or prior to the
Expiration Date or (b) Shares must be delivered pursuant to the procedures for
book-entry transfer set forth under "Procedure for Tendering Shares -- Book-
Entry Transfer" in the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary on or prior to the Expiration Date or (ii) the
tendering stockholder must comply with the guaranteed delivery procedures set
forth below and under "Procedure for Tendering Shares -- Guaranteed Delivery"
in the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary
or complete the procedures for book-entry transfer on or prior to the
Expiration Date may tender their Shares by properly completing and duly
executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in "Procedure for Tendering Shares -- Guaranteed Delivery"
in the Offer to Purchase. Pursuant to such procedures (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made
available by Associated, must be received by the Depositary prior to the
Expiration Date and (iii) the Certificates representing all tendered Shares in
proper form for transfer, or a Book-Entry Confirmation with respect to all
tendered Shares, together with a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within five Nasdaq National
Market trading days after the date of such Notice of Guaranteed Delivery. If
Certificates are forwarded separately to the Depositary, a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or a facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
information required under "Description of Shares Tendered" should be listed on
a separate signed schedule attached hereto.
<PAGE>
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Certificates delivered to the Depositary herewith are to be tendered hereby,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, a new Certificate for the remainder
of the Shares that were evidenced by your old certificate(s) will be sent,
without expense, and payment for Shares purchased as a result of partial
tenders will be sent, to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the box entitled "Special Delivery Instructions"
or the box entitled "Special Payment Instructions" on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by Certificate(s) delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Associated of each person's authority to so act
must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on such Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of the Shares evidenced by the Certificate(s) listed and transmitted
hereby, the Certificate(s) must be endorsed or accompanied by appropriate
instruments of transfer, in either case signed exactly as the name(s) of the
registered holder(s) appear on the Certificate(s). Signatures on such
Certificate(s) or instruments of transfer must be guaranteed by an Eligible
Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, Associated will
pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Shares to it or its order pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or (in the circumstances permitted
hereby) if Certificates for Shares not tendered or not purchased are to be
registered in the name of, any person other than the registered holder(s), or
if tendered Certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any transfer
taxes (whether imposed on the registered holder(s) or such person) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter
of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or Certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent and/or such
Certificates are to be returned to someone other than the signer of this Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal must be completed. If any tendered Shares
are not purchased for any reason and such Shares are delivered by Book-Entry
Transfer Facility, such shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses or telephone numbers set forth below and requests
for additional copies of the Offer to Purchase, this Letter of Transmittal and
the Notice of Guaranteed Delivery may be directed to the Information Agent or
brokers, dealers, commercial banks and trust companies and such materials will
be furnished at Associated's expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Associated, in whole or in part, at any time or from time to time, in
Associated's sole discretion.
<PAGE>
10. BACKUP WITHHOLDING TAX. Each tendering Stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided under "Important Tax Information" below,
and to certify that the stockholder is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
tendering Stockholder to 31.0% federal income tax backup withholding on the
payment of the purchase price for the Shares. The tendering Stockholder should
indicate in the box in Part III of the Substitute Form W-9 if the tendering
Stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the Stockholder has indicated in the box
in Part III that a TIN has been applied for and the Depositary is not provided
with a TIN by the time of payment, the Depositary will withhold 31.0% of all
payments of the purchase price, if any, made thereafter pursuant to the Offer
until a TIN is provided to the Depositary.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing Shares
has been lost or destroyed, the holders should promptly notify the Company's
transfer agent, The First National Bank of Boston. The holders will then be
instructed as to the procedure to be followed in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Certificates
have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his social security number. If the tendering
stockholder has not been issued a TIN and has applied for a number or intends
to apply for a number in the near future, such stockholder should so indicate
on the Substitute Form W-9. See Instruction 10. If the Depositary is not
provided with the correct TIN, the stockholder may be subject to a $50 penalty
imposed by the Internal Revenue Service (the "IRS"). In addition, payments that
are made to such stockholders with respect to Shares purchased pursuant to the
Offer may be subject to backup federal income tax withholding.
Certain stockholders (including, among others, all corporations) are not
subject to these backup withholding and reporting requirements. In order for a
foreign individual to qualify as an exempt recipient, that stockholder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Forms for such statements can be obtained from the
Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31.0%
of any payments made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
Unless the Company determines that a reduced rate of withholding is
applicable pursuant to a tax treaty or that an exemption from withholding is
applicable because gross proceeds paid pursuant to the Offer are effectively
connected with the conduct of a trade or business within the United States, the
Company will be required to withhold federal income tax at a rate of 30.0% from
such gross proceeds paid to a foreign stockholder or his agent. For this
purpose, a foreign stockholder is any stockholder that is not (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States, or (iii) any
estate or trust the income of which is subject to United States federal income
taxation regardless of its source. The Company will determine the applicable
rate of withholding by reference to a stockholder's address, except if facts
and circumstances indicate such reliance is not warranted or if applicable law
(for example, an applicable tax treaty or Treasury regulations thereunder)
requires some other method for determining a stockholder's residence. A foreign
stockholder may be eligible to file for a refund of such tax or a portion of
such tax if such stockholder meets the "substantially disproportionate" or "not
essentially equivalent to a dividend" tests described in the Offer to Purchase
under the caption "Certain Federal Income Tax Consequences of the Offer and the
Merger" or if such stockholder is entitled to a reduced rate of withholding
pursuant to a treaty and the Company withheld at a higher rate. In order to
claim an exemption from withholding on the grounds that gross proceeds paid
pursuant to the Offer are effectively connected with the conduct of a trade or
business within the United States, a foreign stockholder must deliver to the
Depositary a properly executed Form 4224 claiming an exemption before payment
with respect to its shares. Such Forms can be obtained from the Depositary.
Foreign
<PAGE>
stockholders are urged to consult their own tax advisors regarding the
application of federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedure.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, a stockholder
must provide the Depositary with his correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN) and that (i) such
stockholder has not been notified by the IRS that he is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the stockholder that he is not longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security number
or employer identification number of the record holder of the Shares tendered
hereby. If the Shares are registered in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance
on which number to report.
<PAGE>
IMPORTANT
STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9 ON REVERSE
----------------------------------------------------------------------
(Signature(s) of Stockholder(s))
Dated: _______________________, 1995
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on the Certificate or on a security position listing or by
person(s) authorized to become registered holder(s) by Certificates
and documents transmitted herewith. If signature is by trustees,
executors, administrators, guardians, attorneys-in-fact, agents,
officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information.
See Instruction 5.)
Name(s): _____________________________________________________________
----------------------------------------------------------------------
(Please Type or Print)
Capacity (Full Title): _______________________________________________
(See Instruction 5)
Address: _____________________________________________________________
----------------------------------------------------------------------
(Include Zip Code)
Area Codes and Telephone Numbers: ____________________________________
(Home)
---------------------------------------------
(Business)
Taxpayer Identification or Social Security No. _______________________
(Complete Substitute Form W-9 on Reverse)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
----------------------------------------------------------------------
Authorized Signature(s)
----------------------------------------------------------------------
(Name)
----------------------------------------------------------------------
(Name of Firm)
----------------------------------------------------------------------
----------------------------------------------------------------------
(Address Including Zip Code)
----------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: ________________, 1995
LOGO
LOGO
<PAGE>
NAME:_________________________________________________
BUSINESS NAME:________________________________________
CHECK AS APPROPRIATE: INDIVIDUAL/SOLE PROPRIETOR
CORPORATION
PARTNERSHIP OTHER:______________________________
ADDRESS: _____________________________________________
______________________________________________________
- --------------------------------------------------------------------------------
Part I--PLEASE PROVIDE Part III--Social
YOUR TIN IN THE BOX AT Security Number OR
RIGHT AND CERTIFY BY Employer Identification
SIGNING AND DATING Number
BELOW
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE ---------------------------
(If awaiting TIN, write
"Applied For")
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
-------------------------------------------------------
Part II--For Payees exempt from backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-
9 and complete as instructed therein.
- --------------------------------------------------------------------------------
Certification--Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends or (c) the IRS has notified
me that I am no longer subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- --------------------------------------------------------------------------------
Signature _______________________________ Date ______________, 1995
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31.0% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
INSTRUCTIONS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN
PART III OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31.0% of all payments of the Offer Price made to me
thereafter will be withheld until I provide a number.
Signature _______________________________ Date ______________, 1995
The Information Agent for the Offer The Dealer Manager for the Offer is:
is:
CHASE SECURITIES, INC.
LOGO 1 Chase Manhattan Plaza
Wall Street Plaza New York, NY 10081
New York, NY 10005 Call (212) 552-3239
Banks and Brokers call collect (212)
440-9800
CALL TOLL FREE: (800) 223-2064
<PAGE>
EXHIBIT 99(A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
UNITED STATIONERS INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates
representing shares of the common stock, $0.10 par value (the "Shares"), of
United Stationers Inc., a Delaware corporation, are not immediately available
or the procedures for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach The Chase Manhattan
Bank (National Association) (the "Depositary") prior to the Expiration Date (as
defined in the Offer to Purchase (as hereinafter defined)). This Notice of
Guaranteed Delivery may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Depositary. See "Procedure for Tendering
Shares -- Guaranteed Delivery" in the Offer to Purchase.
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By Mail: By Overnight Delivery: By Hand:
Box 3032 c/o Chase Securities (9:00 a.m.-5:00 p.m.
4 Chase Metrotech Center Processing Corp. New York City Time)
Brooklyn, NY 11245 Ft. Lee Executive Park 1 Chase Manhattan Plaza
1 Executive Drive Floor 1-B
(6th Floor) Nassau and Liberty
Ft. Lee, NJ 07024 Streets
New York, NY 10081
By Facsimile Transmission:
(201) 592-1674
Confirm by Telephone:
(201) 592-4672
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures.
If a signature on a Letter of Transmittal is required to be guaranteed by an
"Eligible Institution" under the instructions thereto, such signature guarantee
must appear in the applicable space provided in the signature box on the Letter
of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Associated Holdings, Inc., a Delaware
corporation ("Associated"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated February 21, 1995 (the "Offer to
Purchase"), and related Letter of Transmittal (which, together with the Offer
to Purchase and any amendments or supplements thereto, collectively, constitute
the "Offer"), receipt of each of which is hereby acknowledged, the number of
Shares indicated below pursuant to the guaranteed delivery procedures set forth
under "Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase.
Number of Shares: __________________ Name(s) of Record Holder(s):
Certificate Nos. (if available): ___ ------------------------------------
- ------------------------------------ ------------------------------------
Check ONE box if Shares will be (Please Type or Print)
tendered by
book-entry transfer: Address(es): _______________________
[_] The Depositary Trust Company ------------------------------------
(Zip Code)
[_] Midwest Securities Trust
Company
Area Code and Tel. No.: ____________
[_] Philadelphia Depository Trust Signature(s): ______________________
Company
Account Number: ____________________
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
Dated: _______________________, 1995
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as such term is defined under
"Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase), hereby guarantees to deliver to the Depositary the certificates
representing the Shares tendered hereby, in proper form for transfer, or a
Book-Entry Confirmation (as defined under "Procedure for Tendering Shares --
Book-Entry Transfer" in the Offer to Purchase) with respect to such Shares, in
either case together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, all within five NASDAQ trading days after the date hereof.
Name of Firm: ______________________ ------------------------------------
(Authorized Signature)
Address: ___________________________
Name: ______________________________
- ------------------------------------ (Please Type or Print)
(Zip Code)
Title: _____________________________
Area Code and Tel. No.: ____________
Date: ________________________, 1995
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT ONLY TOGETHER WITH YOUR
LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99(A)(4)
CHASE SECURITIES, INC.
1 CHASE MANHATTAN PLAZA
NEW YORK, NY 10081
OFFER TO PURCHASE FOR CASH
UP TO 17,201,839 SHARES OF COMMON STOCK
OF
UNITED STATIONERS INC.
AT
$15.50 NET PER SHARE
BY
ASSOCIATED HOLDINGS, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
February 21, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Associated Holdings, Inc., a Delaware corporation
("Associated"), to act as Dealer Manager in connection with Associated's offer
to purchase up to 17,201,839 shares of the common stock, $0.10 par value (the
"Shares"), of United Stationers Inc., a Delaware corporation (the "Company"),
at a purchase price of $15.50 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
February 21, 1995 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with the Offer to Purchase and any amendments or
supplements thereto, collectively constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. Offer to Purchase, dated February 21, 1995.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. A letter to stockholders of the Company from Joel D. Spungin, Chairman
of the Company, together with a Solicitation/Recommendation Statement on
Schedule 14D-9 filed with the Securities and Exchange Commission by the
Company and mailed to stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth under
"Procedure for Tendering Shares" in the Offer to Purchase can be completed
on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
<PAGE>
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. A return envelope addressed to The Chase Manhattan Bank (National
Association) ("the Depositary").
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON TUESDAY,
MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $15.50 per Share, net to the seller in cash.
2. The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
number of Shares which would constitute, when added to the Shares then
beneficially owned by Associated, at least a majority of the Shares
outstanding on a fully diluted basis (or, if a lesser number, at the option
of Associated, on an issued and outstanding basis). The Offer is also
subject to certain other conditions contained in the Offer to Purchase. See
"General Terms of the Offer" and "Certain Conditions of the Offer" in the
Offer to Purchase.
3. The Offer is being made for up to 17,201,839 Shares. If more than
17,201,839 Shares are validly tendered prior to the Expiration Date (as
defined in the Offer to Purchase) and not withdrawn, Associated will, upon
the terms and subject to the conditions of the Offer, accept such Shares on
a pro rata basis, based upon the number of Shares validly tendered prior to
the Expiration Date and not withdrawn.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Associated
pursuant to the Offer. However, federal income tax backup withholding at a
rate of 31.0% may be required, unless an exemption is provided or unless
the required taxpayer identification information is provided. See
Instruction 10 of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on Tuesday, March 21, 1995, unless the Offer is extended.
6. The Board of Directors of the Company (the "Board") has determined
that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger (as defined in the Offer to Purchase),
taken as a whole, are fair to and in the best interests of the stockholders
of the Company, has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer, the Tender Agreement (as defined
in the Offer to Purchase) and the Merger, and recommends that the
stockholders of the Company accept the Offer and tender their Shares
thereunder to Associated and, if required by applicable law, approve and
adopt the Merger Agreement and the Merger.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (i) Certificates pursuant to the
procedures set forth under "Procedure for Tendering Shares" in the Offer to
Purchase, or a timely Book-Entry Confirmation (as defined under "Procedure
for Tendering Shares -- Book-Entry Transfer" in the Offer to Purchase) with
respect to such Shares, (ii) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, with any
required signature guarantee, and (iii) any other document required by the
Letter of Transmittal. Accordingly, payment may not be made to all
tendering stockholders at the same time depending upon when Certificates
are actually received by the Depositary.
2
<PAGE>
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and
any required guarantees or other required documents should be sent to the
Depositary and (ii) Certificates representing the tendered Shares or a timely
Book-Entry Confirmation should be delivered to the Depositary in accordance
with the Offer to Purchase and the instructions set forth in the Letter of
Transmittal.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified under
"Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase.
Associated will not pay any fees or commissions to any broker, dealer or
other persons for soliciting tenders of Shares pursuant to the Offer (other
than the Dealer Manager, Depositary and the Information Agent as described in
the Offer to Purchase). Associated will, however, upon request, reimburse you
for customary mailing and handling expenses incurred by you in forwarding any
of the enclosed materials to your clients. Associated will pay or cause to be
paid any transfer taxes payable on the transfer of Shares to it, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Chase Securities, Inc., the Dealer Manager for the Offer, at One Chase
Manhattan Plaza, New York, NY 10081 ((212) 552-3239), or Georgeson & Company
Inc., the Information Agent for the Offer, at Wall Street Plaza, New York, NY
10005 ((800) 223-2064).
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
CHASE SECURITIES, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF ASSOCIATED, THE COMPANY, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
EXHIBIT 99(A)(5)
OFFER TO PURCHASE FOR CASH
UP TO 17,201,839 SHARES OF COMMON STOCK
OF
UNITED STATIONERS INC.
AT
$15.50 NET PER SHARE
BY
ASSOCIATED HOLDINGS, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
February 21, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated February 21,
1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with the Offer to Purchase and any amendments or supplements thereto,
collectively constitute the "Offer") relating to the offer by Associated
Holdings, Inc., a Delaware corporation ("Associated"), to purchase up to
17,201,839 shares of the common stock, $0.10 par value (the "Shares"), of
United Stationers Inc., a Delaware corporation (the "Company"), at a purchase
price of $15.50 per share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer. Holders of Shares whose
certificates for such Shares (the "Certificates") are not immediately available
or who cannot deliver their Certificates and all other required documents to
the depositary (the "Depositary") or complete the procedures for book-entry
transfer prior to the Expiration Date (as defined in the Offer to Purchase)
must tender their Shares according to the guaranteed delivery procedures set
forth under "Procedure of Tendering Shares -- Guaranteed Delivery" in the Offer
to Purchase.
We are (or our nominee is) the holder of record of Shares held by us for your
account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO
YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us tender
on your behalf any or all Shares held by us for your account pursuant to the
terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $15.50 per Share, net to the seller in cash.
2. The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
number of Shares which would constitute, when added to the Shares then
beneficially owned by Associated, at least a majority of the Shares
outstanding on a fully diluted basis (or, if a lesser number, at the option
of Associated, on an issued and outstanding basis). The Offer is also
subject to certain other conditions contained in the Offer to Purchase. See
"General Terms of the Offer" and "Certain Conditions of the Offer" in the
Offer to Purchase.
3. The Offer is being made for up to 17,201,839 Shares. If more than
17,201,839 Shares are validly tendered prior to the Expiration Date (as
defined in the Offer to Purchase) and not
<PAGE>
withdrawn, Purchaser will, upon the terms and subject to the conditions of
the Offer, accept such Shares on a pro rata basis, based upon the number of
Shares validly tendered prior to the Expiration Date and not withdrawn.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Associated
pursuant to the Offer. However, federal income tax backup withholding at a
rate of 31.0% may be required, unless an exemption is provided or unless
the required taxpayer identification number is provided. See Instruction 10
of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on Tuesday, March 21, 1995, unless the Offer is extended.
6. The Board of Directors of the Company (the "Board") has determined
that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger (as defined in the Offer to Purchase),
taken as a whole, are fair to and in the best interests of the stockholders
of the Company, has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer, the Tender Agreement and the
Merger, and recommends that the stockholders of the Company accept the
Offer and tender their Shares thereunder to Associated and, if required by
applicable law, approve and adopt the Merger Agreement and the Merger.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (i) Certificates pursuant to the
procedures set forth under "Procedure of Tendering Shares" in the Offer to
Purchase, or a timely Book-Entry Confirmation (as defined under "Procedure
of Tendering Shares -- Book-Entry Transfer" in the Offer to Purchase) with
respect to such Shares, (ii) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, with any
required signature guarantee, and (iii) any other document required by the
Letter of Transmittal. Accordingly, payment may not be made to all
tendering stockholders at the same time depending upon when Certificates
are actually received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth below. If you authorize the
tender of your Shares, all such Shares will be tendered unless otherwise
specified below. An envelope to return your instructions to us is enclosed.
Your instructions should be forwarded to us in ample time to permit us to
submit a tender on your behalf prior to the expiration of the Offer.
THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL AND IS BEING MADE TO ALL HOLDERS OF SHARES.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Associated
may, in its discretion, take such actions as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of Associated by Chase Securities, Inc. or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
UP TO 17,201,839 SHARES OF
COMMON STOCK
OF
UNITED STATIONERS INC.
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase dated February 21, 1995 and the related Letter of Transmittal (which,
together with the Offer to Purchase and any supplements or amendments thereto,
collectively constitute the "Offer") in connection with the offer by Associated
Holdings, Inc., a Delaware corporation ("Associated"), to purchase up to
17,201,839 shares of the common stock, $0.10 par value (the "Shares"), of
United Stationers Inc., a Delaware corporation, at a purchase price of $15.50
per share, net to the seller in cash.
This will instruct you to tender to Associated the number of Shares indicated
below (or if no number is indicated below, all Shares) which are held by you
for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares of be Tendered:*
Date: , 1995
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s) ________________________________________________________________
Print or Type Name(s): ______________________________________________________
Print or Type Address(es): __________________________________________________
Area Code and Telephone Number(s): __________________________________________
Taxpayer Identification or Social Security Number(s): _______________________
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT 99(A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security Numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer Identification Numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
type of number to give the payer.
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -----------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one of
the
individuals(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if
joint funds,
either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee for a or incompetent
designated ward, minor, or person(3)
incompetent person
7. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
8. Sole proprietorship The owner(4)
account
</TABLE>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
-----------------------------------------------
[C] [C]
9. A valid trust, estate, or The legal entity
pension trust (Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
---------------------------------------
- ---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business" name. You may use either your Social Security Number or
Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service (the
"IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
.A corporation.
.A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
.A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
.A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not pro-
vided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends un-
der section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN THE FORM
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or pat-
ronage dividends in gross income, such failure will be treated as being due to
negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing evi-
dence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99(a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated February
21, 1995 (the "Offer to Purchase") and the related Letter of Transmittal, and is
being made to all holders of Shares. The Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Shares in any jurisdiction
in which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by the licensed
broker or dealer, the Offer shall be deemed to be made on behalf of Associated
Holdings, Inc. by Chase Securities, Inc., or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
Up to 17,201,839 Shares of Common Stock
of
United Stationers Inc.
at
$15.50 Net Per Share
by
Associated Holdings, Inc.
Associated Holdings, Inc., a Delaware corporation ("Associated"), is offering
to purchase up to 17,201,839 shares of the common stock, $0.10 par value (the
"Shares"), of United Stationers Inc., a Delaware corporation (the "Company"),
which shares represent 92.5% of the Shares outstanding as of February 10, 1995
(such number of shares being the "Maximum Number"), at a purchase price of
$15.50 per share (the "Offer Price"), net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated February
21, 1995 and in the related Letter of Transmittal (which, together with the
Offer to Purchase and any amendments or supplements thereto, collectively
constitute the "Offer"). Following the Offer, Associated intends to effect the
Merger described below.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, MARCH 21, 1995, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the Expiration Date (as defined
below) a number of Shares (the "Minimum Number of Shares") which would
constitute, when added to the Shares then beneficially owned by Associated, at
least a majority of the Shares outstanding on a fully diluted basis (or, if a
lesser number, at the option of Associated, on an issued and outstanding basis).
The Offer is also subject to certain other conditions contained in the Offer to
Purchase. See "General Terms of the Offer" and "Certain Conditions of the
Offer."
The purpose of the Offer and the Merger is for the stockholders of Associated
to acquire an 80% equity interest in the Company. The Offer is being made
pursuant to an Agreement and Plan of Merger, dated as of February 13, 1995 (the
"Merger Agreement"), between Associated and the Company. The Merger Agreement
provides, among other things, for the commencement of the Offer by Associated
and further provides that, subject to the satisfaction or waiver of certain
conditions, Associated will be merged with and into the Company (the "Merger"),
with the Company surviving the Merger (as such, the "Surviving Corporation"),
and Associated Stationers, Inc. ("ASI"), a Delaware corporation and wholly owned
subsidiary of Associated, immediately following the Merger will be merged with
and into United Stationers Supply Co. ("USSC"), an Illinois corporation and
wholly owned subsidiary of the Company (the "Subsidiary Merger" and collectively
with the Merger, the "Mergers"), with USSC surviving the Subsidiary Merger (as
such, the "Surviving Subsidiary"). After giving effect to the Mergers, the pre-
Merger holders of common stock, $0.01 par value, of Associated ("Associated
Common Stock") and options and warrants exercisable for Associated Common Stock
will own or have the right to acquire an aggregate of 80.0% of the common stock
of the Surviving Corporation on a fully diluted basis, and the pre-Merger
holders of Shares who did not tender or, by virtue of the total number of Shares
tendered, have a remaining residual equity position (excluding Associated and
its affiliates, the Company, any subsidiaries of the Company and any holders of
Dissenting Shares (as defined in the Offer to Purchase)), will own an aggregate
of 20.0% of the outstanding common stock of the Surviving Corporation on a fully
diluted basis, and the Surviving Corporation will own all of the outstanding
common stock of the Surviving Subsidiary. As part of the Merger, pre-Merger
holders of Shares (excluding Associated and its affiliates, the Company, any
subsidiaries of the Company and any holders of Dissenting Shares) will also
receive an aggregate amount of cash equal to the difference between $266,628,495
(the aggregate amount of cash that would be paid to holders of Shares if the
Maximum Number of Shares were validly tendered and not withdrawn in the
Offer)and the actual amount of cash paid by Associated to purchase Shares in the
Offer.
The Board of Directors of the Company has determined that the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
taken as a whole, are fair to and in the best interests of the stockholders of
the Company, has approved the Merger Agreement and the transactions contemplated
thereby, including the Offer, the Tender Agreement (as hereinafter defined) and
the Merger, and recommends that the stockholders of the Company accept the
Offer, tender their Shares thereunder to Associated and, if required by
applicable law, approve and adopt the Merger and the Merger Agreement.
Concurrently with the execution of the Merger Agreement, Associated entered
into an Agreement to Tender (the "Tender Agreement") with certain stockholders
of the Company (the "Seller Stockholders"), including certain members of the
Company's management, owning, in the aggregate, 5,025,688 Shares (representing
approximately 25.3% of the Shares on a fully diluted basis and 27.0% of the
Shares outstanding as of February 10, 1995). Pursuant to the Tender Agreement,
the Seller Stockholders have agreed, subject to the conditions set forth in the
Tender Agreement, to validly tender pursuant to the Offer and not withdraw all
Shares which are owned of record or beneficially by them prior to the Expiration
Date.
For purposes of the Offer, Associated will be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when Associated gives
oral or written notice to The Chase Manhattan Bank (National Association), as
the Depositary (in such capacity, the "Depositary") of Associated's acceptance
of such Shares for payment. In all cases, payment for Shares purchased pursuant
to the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purposes
of receiving payment from Associated and transmitting payment to tendering
stockholders whose Shares have theretofore been accepted for payment. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares (or a
timely Book-Entry Confirmation (as defined under "Procedure for Tendering
Shares--Book-Entry Transfer" in the Offer to Purchase) with respect to such
Shares), (ii) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed with all required signature
guarantees, and (iii) all other documents required by the Letter of Transmittal.
Under no circumstances will interest on the Offer Price be paid by Associated,
regardless of any delay in making such payment.
<PAGE>
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
Tuesday, March 21, 1995, unless and until Associated, in accordance with the
terms of applicable law, the Offer and the Merger Agreement, shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Associated, shall expire. Subject to the terms of the Merger
Agreement, Associated expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement thereof by no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. Without
limiting the manner in which Associated may choose to make any public
announcement, Associated will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a press
release to the Dow Jones News Service or as otherwise may be required by law or
applicable regulation or practice.
Upon the terms and subject to the conditions of the Offer, if more than the
Maximum Number of Shares shall be validly tendered and not withdrawn prior to
the Expiration Date, Associated will, upon the terms and conditions of the
Offer, purchase the Maximum Number of Shares on a pro rata basis (with
adjustments to avoid purchases of fractional shares) based upon the number of
Shares validly tendered and not withdrawn prior to the Expiration Date.
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
any time prior to the Expiration Date and, unless theretofore accepted for
payment by Associated, may also be withdrawn at any time after April 21, 1995.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be received on a timely basis by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of shares to be withdrawn, and
the name of the registered holder, if different from that of the person who
tendered such Shares. If certificates evidencing Shares have been delivered or
otherwise identified to the Depositary, then (except in the case of Shares
tendered for the account of an Eligible Institution, as defined under "Procedure
for Tendering Shares" in the Offer to Purchase) prior to the physical release of
such certificates, the tendering stockholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn, and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been tendered pursuant to the procedure for book
entry transfer set forth under "Procedure for Tendering Shares--Book-Entry
Transfer" in the Offer to Purchase, the notice of withdrawal must specify the
name and number of the account at the applicable Book-Entry Transfer Facility
(as defined under "Procedure for Tendering Shares--Book-Entry Transfer" in the
Offer to Purchase) to be credited with the withdrawn Shares. All questions as to
the form and validity (including time of receipt) of notices of withdrawal will
be determined by Associated, in its sole discretion, whose determination shall
be final and binding on all parties. No withdrawal of Shares shall be deemed to
have been properly made until all defects and irregularities have been cured or
waived. None of Associated, the Dealer Manager (as set forth below), the
Depositary, the Information Agent (as set forth below), or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failing to give such
notification. Any Shares properly withdrawn will be deemed not validly tendered
for purposes of the Offer, but may be tendered again at any subsequent time
prior to the Expiration Date by following any of the procedures described under
"Procedure for Tendering Shares" in the Offer to Purchase.
The Company has provided Associated with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
stockholders. The Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares by Associated.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Offer to Purchase and the related Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
other tender offer documents may be directed to the Information Agent, and
copies will be furnished promptly at Associated's expense. Questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager.
Except as set forth under "Fees and Expenses" in the Offer to Purchase,
Associated will not pay any fees or commissions to any broker or dealer or other
person (other than the Dealer Manager, the Depositary and the Information Agent)
in connection with the solicitation of tenders of shares pursuant to the Offer.
The Information Agent for the Offer is:
GEORGESON
& COMPANY INC.
--------------
Wall Street Plaza
New York, NY 10005
Banks and Brokers call collect (212)440-9800
Call Toll Free:(800) 223-2064
The Depositary for the Offer is:
The Chase Manhattan Bank
(National Association)
By Mail: By Overnight Delivery: By Hand:
Box 3032 c/o Chase Securities (9:00 a.m.-5:00 p.m.
4 Chase Metrotech Processing Corp. New York City Time)
Center Ft. Lee Executive Park 1 Chase Manhattan Plaza,
Brooklyn, NY 11245 1 Executive Drive (6th Floor) Floor 1-B
Ft. Lee, NJ 07024 Nassau and Liberty Streets
New York, NY 10081
By Facsimile Transmission: (201)592-1674
Confirm by Telephone: (201)592-4672
The Dealer Manager for the Offer is:
Chase Securities, Inc.
1 Chase Manhattan Plaza
New York, NY 10081
Call (212)552-3239
February 21, 1995
<PAGE>
EXHIBIT 99(A)(8)
Joel D. Spungin Thomas W. Sturgess
Chairman of the Board and Chairman of the Board
Chief Executive Officer Associated Holdings, Inc.
or (214) 720-1313
Kathleen S. Dvorak
Director, Investor Relations
United Stationers Inc.
(708) 699-5000
FOR IMMEDIATE RELEASE
UNITED STATIONERS INC. AND ASSOCIATED HOLDINGS, INC.
----------------------------------------------------
ANNOUNCE MERGER AGREEMENT
-------------------------
Des Plaines, Ill. Feb. 14, 1995 -- United Stationers Inc. (NASDAQ: USTR) and
Associated Holdings, Inc., parent company of Associated Stationers Inc.,
announced the signing of a definitive Merger Agreement under which Associated
Holdings would acquire United Stationers Inc. Associated Holdings will commence
a tender offer no later than Feb. 21, 1995 for up to 92.5% of the outstanding
shares of United Stationers at a price of $15.50 per share in cash, or
approximately $266.6 million in the aggregate for such interest.
The tender offer will be followed by a merger of Associated Holdings into
United Stationers, with United Stationers Inc. being the surviving legal entity.
In the Merger, shares representing a total of 7.5% of the currently outstanding
stock will remain outstanding as shares of the surviving company and will
represent, in the aggregate, a 20% common stock interest, on a fully diluted
basis, in the surviving company which will remain public. Holders of shares not
purchased in the tender offer will receive in the aggregate cash equal to the
portion, if any, of the $266.6 million not paid to shareholders in the tender
offer as well as their proportionate interest in the combined company.
As a result of the merger, the owners of Associated Holdings will control 80%
of the combined company on a fully diluted basis. The proposed tender offer is
subject to various
<PAGE>
United Stationers Inc. and Associated Holdings, Inc.
Announce Merger Agreement
Page 2
conditions, including the closing by Associated of its financing and the tender
of a majority of the fully-diluted United Stationers shares in the tender offer.
Assoicated Holdings has informed United Stationers that Associated has obtained
a financing commitment from The Chase Manhattan Bank, N.A. for amounts
sufficient to complete the transaction.
The directors and certain stockholders of United Stationers have agreed,
subject to certain conditions, to tender all of their shares, representing in
total 27.1% of United Stationers outstanding shares.
The execution of the Merger Agreement was jointly announced by Joel D.
Spungin, Chairman of the Board and Chief Executive Officer of United Stationers
Inc., and Thomas W. Sturgess, Chairman and Chief Executive Officer of
Associated: "We are delighted to announce the agreement for the combination of
United Stationers and Associated Stationers. The combined company will be
capable of achieving greater efficiencies in meeting the needs of our customers
and suppliers and will be well positioned to respond to the opportunities and
challenges facing our industry. This transaction brings together two outstanding
management teams with complementary operating philosophies."
As previously announced, Mr. Sturgess will be Chairman of the combined
company and Jeffrey K. Hewson, currently President of United Stationers, will
serve as Chief Executive Officer of the combined entity, with Michael Rowsey of
Associated Stationers and Steven Schwarz of United Stationers reporting to him.
Mr. Spungin and Mr. Hewson are expected to continue as directors of the combined
company.
- more -
<PAGE>
United Stationers Inc. and Associated Holdings, Inc.
Announce Merger Agreement
Page 3
William Blair & Company and Lazard Freres & Co. acted as financial advisors
to United Stationers in connection with this transaction. Chase Securities, Inc.
has been retained to act as financial advisor to Associated.
United Stationers Inc. is North America's largest wholesaler of business
products to resellers. Through its computer-based physical distribution system,
more than 25,000 items are available substantially within 24 hours through
distribution points in 58 major hub cities. Associated Stationers, headquartered
in Itasca, Ill., has 17 facilities located throughout the continental United
States and is the third largest wholesaler of business products to resellers in
the United States. Associated is controlled by Wingate Partners, a Dallas-based
private investment firm.
The common stock of United Stationers is traded on the NASDAQ Stock Market
(SYMBOL: USTR) and is quoted in its national market system listings.
<PAGE>
EXHIBIT 99(B)
The Chase Manhattan Bank, N.A.
1 Chase Plaza, 5th Floor
New York, New York 10081
Chase Manhattan Bank Logo February 13, 1995
Associated Holdings, Inc.
Associated Stationers, Inc.
1075 Hawthorn Drive
Itasca, IL 60143
Attention: Mr. Thomas Sturgess
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank (National Association) ("Chase"
and, together with its affiliates, the "Chase Entities") that Associated
Holdings, Inc., a Delaware corporation ("Holdings"), proposes to make a tender
offer (the "Tender Offer") for up to 92.5% of the issued and outstanding shares
of common stock (the "Target Shares") of United Stationers Inc., a Delaware
corporation (the "Target") and thereafter merge with and into the Target (the
"Target Merger") pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of February 13, 1995, between Holdings and Target (the
company surviving such merger, "United"). Immediately after the Target Merger,
Associated Stationers, Inc., a Delaware corporation ("ASI") and a wholly-owned
subsidiary of Holdings, shall merge with and into United Stationers Supply Co.,
an Illinois corporation ("Supply") and a wholly-owned subsidiary of the Target
(the company surviving such merger, the "Borrower") in accordance with the
Merger Agreement (such merger, the "ASI Merger" and, together with the Target
Merger, the "Mergers"). The Tender Offer and the Mergers are herein referred to
as the "Acquisition". The Acquisition will be approved by the board of directors
of each of Holdings and the Target and such approval shall not have been
withdrawn or qualified in a manner adverse to Holdings. The price at which the
Target Shares are to be acquired by Holdings will not exceed $15.50 per share.
The Tender Offer will be conditioned upon the receipt of a sufficient number of
the Target Shares that would enable Holdings, voting without any of the other
shareholders of the Target, to approve and effect the Target Merger.
We understand that total funds of up to $642,000,000 are required to
finance the consummation of the Acquisition, including the refinancing of
certain existing indebtedness of the Target, Holdings and their respective
subsidiaries and payment of fees, commissions and expenses payable in connection
therewith. No external financing will be required for such purposes other
<PAGE>
2
than as reflected in the Senior Facilities Term Sheet annexed hereto as Exhibit
A (the "Senior Facilities Term Sheet"), in the Senior Subordinated Bridge
Facility Term Sheet annexed hereto as Exhibit B (the "Senior Subordinated Bridge
Facility Term Sheet") and the issuance of equity by Holdings for approximately
$12,000,000 of proceeds.
It is anticipated that senior bank financing of up to $500,000,000 and
senior subordinated bridge financing of up to $130,000,000 will be required to
provide a portion of such funds, as well as to provide financing for working
capital and other general corporate purposes of the Borrower.
Chase is pleased to offer to commit to provide (i) the entire amount of the
required senior bank financing in the form of the credit facilities (the "Senior
Facilities") described in the Senior Facilities Term Sheet and (ii) the entire
amount of the required senior subordinated bridge financing in the form of the
credit facility (the "Senior Subordinated Bridge Facility") described in the
Senior Subordinated Bridge Facility Term Sheet, in each case on the terms and
conditions set forth herein, in the Senior Facilities Term Sheet or the Senior
Subordinated Bridge Facility Term Sheet, as the case may be, and in the letter
of even date herewith addressed by Chase to you providing, among other things,
for certain fees and other considerations relating to the Senior Facilities and
the Senior Subordinated Bridge Facility (the "Fee Letter"). Chase reserves the
right to syndicate, directly or indirectly through one or more of its affiliates
(including Chase Securities, Inc.), (i) all or a portion of the Senior
Facilities to a group of banks and/or other financial institutions acceptable to
Chase (including Chase, the "Senior Banks") and (ii) all or a portion of the
Senior Subordinated Bridge Facility to a group of banks and/or other financial
institutions (including, without limitation, The Roebling Fund, a Delaware
statutory business trust ("Roebling")) acceptable to Chase (including Chase,
the "Senior Subordinated Bridge Lenders"). Chase shall be relieved of its
obligation to provide the Senior Facilities or the Senior Subordinated Bridge
Facility to the extent that the Borrower accepts the offers of Senior Banks
other than Chase to provide the Senior Facilities or the offers of Senior
Subordinated Bridge Lenders (other than Chase) to provide the Senior
Subordinated Bridge Facility, as the case may be.
Chase has reviewed certain historical financial information relating to the
Target provided to Chase by you. Chase may terminate its obligations under the
preceding paragraph to provide the Senior Facilities and the Senior Subordinated
Bridge Facility: (i) if the terms of the proposed transaction are materially
changed or if any information submitted to any of
<PAGE>
3
the Chase Entities proves to have been materially inaccurate or if any adverse
change occurs, or any additional information is disclosed to or discovered by
Chase, that Chase deems materially adverse in respect of the condition
(financial or otherwise), business, operations, assets, nature of assets,
liabilities or prospects of Holdings or the Target or any of their respective
subsidiaries; (ii) if any of the fees or other compensation provided for by the
Fee Letter are not paid when due; or (iii) if any material adverse change shall
occur in capital market conditions generally.
You hereby indemnify and hold harmless, jointly and severally, each of the
Chase Entities and the other Senior Banks and the Senior Subordinated Bridge
Lenders and each director, officer, employee and affiliate thereof (each, an
"indemnified person") from and against any and all losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) and expenses that arise out of, result from or in any way relate to
this letter, the Senior Facilities Term Sheet, the Senior Subordinated Bridge
Facility Term Sheet or the Fee Letter, or in connection with the Acquisition or
the other transactions contemplated hereby or the provision or syndication of
the Senior Facilities or the Senior Subordinated Bridge Facility, and to
reimburse each indemnified person, upon its demand, for any reasonable legal or
other expenses incurred in connection with investigating, defending or
participating in any such loss, claim, damage, liability or action or other
proceeding (whether or not such indemnified person is a party to any action or
proceeding out of which any such expenses arise), other than any of the
foregoing claimed by any indemnified person to the extent incurred by reason of
the gross negligence or willful misconduct of such person. No Chase Entity and
no other Senior Bank or Senior Subordinated Bridge Lender shall be responsible
or liable to Holdings, the Borrower, or any other person for any consequential
damages that may be alleged as a result of this letter. In addition, you hereby
agree to reimburse Chase from time to time upon Chase's demand for Chase's
reasonable out-of-pocket costs and expenses (including, without limitation,
legal fees and expenses, appraisal fees and printing, reproduction, document
delivery, communication and publicity costs) incurred in connection with the
syndication of the Senior Facilities or the Senior Subordinated Bridge Facility
and the preparation, review, negotiation, execution and delivery of this letter,
the Senior Facility Term Sheet, the Senior Subordinated Bridge Facility, the Fee
Letter, the definitive financing agreements and the other documents relating to
the Acquisition. Your obligations under this paragraph shall survive any
termination of this letter and shall be effective regardless of whether the
definitive financing agreements are executed. The foregoing provisions of this
<PAGE>
4
paragraph shall be in addition to any rights that the Chase Entities or any
other indemnified person may have at common law or otherwise.
You agree that, so long as this commitment from Chase is in effect, you
will not accept or solicit any offer or commitment from, or execute any
agreement with, any other potential source of the financing for the Acquisition
(other than the Senior Facilities, the Senior Subordinated Bridge Facility and
the equity referred to above), without Chase's prior written consent.
This letter is delivered to you upon the condition that, prior to your
acceptance of this offer, neither the existence of this letter, the Senior
Facility Term Sheet, the Senior Subordinated Bridge Facility Term Sheet or the
Fee Letter nor any of their contents shall be disclosed by you except (i) to
the Target and its advisors, (ii) as may be compelled to be disclosed in a
judicial or administrative proceeding or as otherwise required by law or (iii)
on a confidential and "need to know" basis, to your directors, officers,
employees, advisors and agents. If you make or permit any such disclosure in
violation of this paragraph, you shall be deemed to have accepted and agreed
to this letter and the Fee Letter and be obligated to Chase as provided herein
and therein.
Chase shall have the right to review and approve all public announcements
and filings relating to the Acquisition that refer to Chase or the other Senior
Banks or the other Senior Subordinated Bridge Lenders before they are made
(such approval not to be unreasonably withheld). Chase shall have a right of
access to all facilities owned by the Target and its subsidiaries and used in
their wholesale operations.
Chase's offer set forth in this letter will terminate at 6:00 p.m. (New
York City time) on February 13, 1995 unless you accept this letter and the Fee
Letter at or prior to that time by signing and returning to Chase counterparts
of this letter and the Fee Letter. Chase's commitment under this letter, if
accepted by you, will in any event terminate at 5:00 p.m. (New York City time)
on May 15, 1995 if the initial borrowings under the Senior Facilities and the
Senior Subordinated Bridge Facility shall not have occurred on or prior to
such date.
This letter and the Fee Letter may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement, and this letter, the Senior Facilities
Term Sheet, the Senior Subordinated Bridge Facility Term Sheet and the Fee
Letter may not be assigned by you without the prior written consent of
<PAGE>
5
Chase and may not be amended or any provision hereof or thereof waived or
modified except by an instrument in writing signed by each of the parties
hereto. No person or entity (including, without limitation, Target and its
affiliates) other than the parties hereto shall have any rights under or
be entitled to rely upon this letter, the Term Sheets or the Fee Letter.
This letter, the Senior Facility Term Sheet, the Senior Subordinated Bridge
Facility Term Sheet and the Fee Letter shall be governed by and construed
in accordance with the internal laws of the State of New York.
We hereby acknowledge that this letter supersedes our letter to you
dated January 6, 1995 pursuant to which we agreed, subject to the terms and
conditions thereof, to provide the Senior Facilities and Senior Subordinated
Bridge Facility described therein; provided that the obligations of Holdings
and ASI set forth in the sixth paragraph of such letter shall survive.
We look forward to working with you to complete this transaction.
Very truly yours,
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By /s/ John J. Coyle
------------------------------------
Title: Vice President
ACCEPTED AND AGREED:
ASSOCIATED HOLDINGS, INC.
By /s/ Thomas W. Sturgess
------------------------------
Title: Chairman
Date: February 13, 1995
---------------------------
<PAGE>
6
ASSOCIATED STATIONERS, INC.
By /s/ Thomas W. Sturgess
------------------------------
Title: Chairman
Date: February 13, 1995
---------------------------
<PAGE>
EXHIBIT A
SENIOR FACILITIES TERM SHEET
Capitalized terms used herein and not defined herein have the
meanings set forth in the letter (the "Commitment Letter")to which
this Senior Facilities Term Sheet is annexed.
Borrowers: Associated Stationers, Inc. and, after the ASI Merger,
United Stationers Supply Co.
Purpose: To provide part of the financing required to
consummate the Acquisition, to refinance certain existing
indebtedness of Holdings and its subsidiaries and Target
and its subsidiaries and to pay related fees, commissions
and expenses, and to finance the ongoing working capital
requirements and other general corporate purposes of the
Borrower.
Types and Amounts
of Senior
Facilities
(not exceeding
$500,000,000 at
any one time
outstanding): Tender Offer Term Loan Facility:
$420,000,000 term loan facility.
Tender Offer Revolving Credit Facility:
$80,000,000 revolving credit facility.
The Tender Offer Term Loan Facility and Tender Offer
Revolving Credit Facility are collectively referred to
herein as the "Tender Offer Loan Facilities."
Tranche A Term Loan Facility:
$125,000,000 term loan facility.
Tranche B Term Loan Facility:
$75,000,000 term loan facility.
Revolving Credit Facility:
$300,000,000 revolving credit facility, including a
$40,000,000 sublimit available for the issuance of letters
of credit.
<PAGE>
2
Final Maturity Tender Offer Loan Facilities:
The date of the earliest of (i) the first date by which
both Mergers shall have become effective (the "Merger
Date"), (ii) the date 60 days after the closing of the
Tender Offer (the "Tender Offer Closing") and (iii) May
15, 1995.
Tranche A Term Loan Facility:
5 years from the Merger Date.
Tranche B Term Loan Facility:
7 years from the Merger Date.
Revolving Credit Facility:
5 years from the Merger Date.
Amortization: Tranche A Term Loan Facility:
The Tranche A Term Loans shall be repaid in the following
aggregate amounts on the following dates:
<TABLE>
<CAPTION>
The Last Day of each
Quarterly Period
Occurring during the
Following Years after
the Mergers Amount
--------------------- -----------
<S> <C>
1st $3,750,000
2nd $6,250,000
3rd $6,250,000
4th $7,500,000
5th $7,500,000
</TABLE>
Tranche B Term Loan Facility:
The Tranche B Term Loans shall be repaid in the following
aggregate amounts on the following dates:
<TABLE>
<CAPTION>
The Last Day of each
Quarterly Period
Occurring during the
Following Years after
the Mergers Amount
--------------------- ----------
<S> <C>
1st $ 250,000
2nd $ 250,000
3rd $ 250,000
4th $ 250,000
5th $ 250,000
6th $8,750,000
7th $8,750,000
</TABLE>
<PAGE>
Revolving Credit
Facility
Clean-up: For a period of not less than 30 consecutive days in each
fiscal year of the Borrower, the aggregate outstanding
principal amount of the revolving credit loans shall not
exceed an amount to be agreed upon by the Borrower and
the Senior Banks.
Availability: Tender Offer Term Loan Facility:
Drawings may be made at any time from and including the
Tender Offer Closing to but excluding the Merger Date for
the purpose of funding the purchase of Target Shares,
refinancing existing indebtedness of Holdings and its
subsidiaries and Target and its subsidiaries and paying
certain transaction fees and expenses, but no later than
May 15, 1995. That portion of the Tender Offer Term Loan
Facility used to purchase Target Shares shall be loaned
by ASI to Holdings and (as discussed below) that portion
of the Tender Offer Term Loan Facility used to refinance
existing indebtedness of Supply shall be loaned by ASI to
Supply .
Tender Offer Revolving Credit Facility:
Drawings may be made at any time from and including the
Tender Offer Closing to but excluding the Merger Date. In
addition, at no time shall the aggregate principal amount
of loans outstanding under this Facility exceed the
Borrowing Base referred to below.
Tranche A and Tranche B Term Loan Facilities:
A single drawing under each of the Tranche A and Tranche
B Term Loan Facility may be made on the Merger Date, the
proceeds of which, together with the proceeds of
revolving credit loans made on the Merger Date, will be
applied to refinance all outstanding loans under the
Tender Offer Loan Facilities and to fund other costs of
the Acquisition payable on the Merger Date.
Revolving Credit Facility:
Drawings may be made at any time from the Merger Date to
but excluding the date occurring five years after the
Merger Date. In addition, at no time shall the aggregate
principal amount of loans outstanding under
<PAGE>
4
this Facility exceed the Borrowing Base referred to
below.
Borrowing Base: An amount equal to 80% of Eligible Receivables (to be
defined) plus a percentage to be determined (but in no
event in excess of 50%) of all Eligible Inventory (to be
defined).
Early Termination: All outstanding drawings under the Tender Offer Loan
Facilities shall be repaid in full (and all unused
commitments shall terminate) if the Mergers do not occur
by the close of business (New York time) on the earlier
of (i) May 15, 1995 or (ii) the date 60 days after the
Tender Offer Closing.
Interest: At the Borrower's option, Base Rate and (except in the
case of the Tender Offer Loan Facilities) LIBOR loans
will be available as follows:
A. Base Rate Option
Interest shall be at the Base Rate (as defined
below) of Chase plus the applicable interest margin,
calculated on the basis of the actual number of days
elapsed in a year of 365 days (or, for any day on
which the Base Rate is calculated by reference to
the Federal Funds Rate referred to below, 360 days),
payable quarterly in arrears. The Base Rate is
defined as the higher of (i) the Federal Funds Rate,
as published by the Federal Reserve Bank of New
York, plus 1/2 of 1%, and (ii) the prime commercial
lending rate of Chase, as announced from time to
time at its head office. Base Rate drawings shall be
made available on a same-day basis if requested
prior to 1:00 P.M. New York time and shall be in
minimum amounts to be negotiated.
B. LIBOR Option
Interest shall be determined for periods ("Interest
Periods") of one, two, three or six months (as
selected by the Borrower) and shall be at an annual
rate equal to the London Interbank Offered
<PAGE>
5
Rate ("LIBOR") for the corresponding deposits of
U.S. Dollars plus the applicable interest margin;
provided that until the date 90 days after the
Merger Date, each Interest Period shall be one month
and shall be coterminous with other outstanding
LIBOR loans. LIBOR will be determined by the
Reference Banks (as defined below) at the start of
each Interest Period. Interest will be paid at the
end of each Interest Period or quarterly, whichever
is earlier, and will be calculated on the basis of
the actual number of days elapsed in a year of 360
days. LIBOR will be adjusted for Regulation D
reserve requirements. LIBOR drawings shall require
three business days' prior notice and shall be in
minimum amounts to be negotiated.
Interest on any amount not paid when due will accrue at a
rate of 2% in excess of the rate otherwise applicable to
the related loan (or, if not related to a loan, 2%
above the Base Rate plus the Interest Margin (as defined
below) on Base Rate Loans) and will be payable on demand.
Reference Banks: A representative sample of mutually acceptable Senior
Banks will be selected by the Borrower and Chase as
Reference Banks to establish LIBOR Rates.
Interest Margins: The applicable interest margins shall be as follows:
<PAGE>
6
<TABLE>
<CAPTION>
Base Rate Loans LIBOR Loans
<S> <C> <C>
Tender Offer
Loan Facility: 2.00% Not applicable
Tranche A
Term Loan
Facility: 1.75% 2.75%
Tranche B
Term Loan
Facility: 2.25% 3.25%
Revolving
Credit
Facility: 1.75% 2.75%
</TABLE>
The interest margins for the Tranche A Term Loan Facility
and Revolving Credit Facility shall be subject to
reductions based on a debt to cash flow ratio test.
Letter of Credit
Fee: 2.75% on undrawn amounts (subject to performance
reductions to be determined).
Commitment Fees: Commitment fees of 1/2 of 1% per annum on the unused
amounts of the commitments under the Senior Facilities
shall be payable to the Agent, for account of the Senior
Banks, from the date of execution of the definitive
credit agreement. Accrued commitment fees will be payable
monthly in arrears.
Mandatory
Prepayments: An amount equal to (i) 100% of the net proceeds in
excess of $15,000,000 received from the issuance of
equity by Holdings or any of its subsidiaries after the
Merger Date (other than the proceeds of any such equity
applied to the refinancing of the Senior Subordinated
Bridge Loan Facility), (ii) 100% of the net proceeds in
excess of $15,000,000 received from asset sales (subject
to exceptions to be determined) and (iii) 75% of Excess
Cash Flow (to be defined) of the Borrower, computed on
the basis of its audited annual financial statements,
shall be applied without penalty or premium (except for
LIBOR breakage costs, if any) to repay, first,
outstanding loans under the Tranche A
<PAGE>
7
Term Loan Facility and Tranche B Term Loan Facility, pro
rata between each such facility and in inverse order of
maturity, and, thereafter, outstanding loans (and to the
permanent reduction of commitments) under the Revolving
Credit Facility. In addition, if the aggregate principal
amount of the loans outstanding under the Revolving
Credit Facility shall at any time exceed the Borrowing
Base, the Borrower shall repay such loans in an amount
equal to the amount of such excess.
Voluntary
Prepayments: Permitted in whole or in part, with prior notice but
without premium or penalty, subject to limitations as to
minimum amounts of prepayments. Partial prepayments of
loans shall be applied to outstanding loans (if any)
under the Tranche A Term Loan Facility and Tranche B Term
Loan Facility, pro rata between each such facility and in
inverse order of maturity. LIBOR loans may only be
prepaid on the last days of Interest Periods.
Supply Note: A portion of the proceeds of the Tender Offer Term
Loan Facility, and from time to time, a portion of the
proceeds of the Tender Offer Revolving Credit Facility,
will be loaned by ASI to Supply and applied to the
repayment of existing indebtedness of Supply or, in the
case of such proceeds of the Tender Offer Revolving
Credit Facility, to finance ongoing working capital
requirements of Supply. Supply will issue one or more
promissory notes to ASI (collectively, the "Supply
Notes") in the amount of such proceeds, which will
contain covenants and other terms satisfactory to the
Senior Banks. The Supply Notes will be secured by a
perfected first priority security interest in and lien
upon the accounts receivable, inventory, contract rights
and other personal and real property of Supply. The
Supply Notes will be guaranteed by the Target and such
guarantee will be secured by a perfected first priority
pledge of all of the shares of Supply.
Security: Prior to the Merger, the Tender Offer Loan Facilities
will be secured by a perfected first priority security
interest in and lien
<PAGE>
8
upon the accounts receivable, inventory, contract rights
and other personal and real property of ASI and by the
Supply Notes. The guarantee by Holdings of the Tender
Offer Loan Facility will be secured by a perfected first
priority pledge of all of the stock of ASI but will not
be directly or indirectly secured by Target Shares,
except to the extent required by Chase and as permitted
by Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System. The Term Loan Facilities and
the Revolving Credit Facility will be secured by
perfected first priority pledges of the stock of the
Borrower and all of the direct and indirect subsidiaries
of United and security interests in and liens upon all
accounts receivable, inventory, contract rights and other
personal and real property of the Borrower and such
subsidiaries.
Guarantees: The Tender Offer Loan Facilities will be guaranteed by
Holdings. The Term Loan Facilities and the Revolving
Credit Facility will be guaranteed, on a joint and
several basis, and pursuant to guarantees in form and
substance satisfactory to the Senior Banks, by United and
all of the direct and indirect subsidiaries of the
Borrower.
Documentation: The Senior Facilities will be subject to the negotiation,
execution and delivery of a definitive credit agreement
(including schedules, exhibits and ancillary
documentation) and related security agreements,
guarantees and other support documentation satisfactory
to the Senior Banks. Such credit agreement will contain
representations and warranties, funding and yield
protection provisions (including, without limitation, a
requirement for compensation for the cost of compliance
by the Senior Banks with capital adequacy and similar
requirements), conditions precedent, covenants, events of
default and other provisions appropriate for transactions
of this type and others reasonably determined by the
Senior Banks to be appropriate, including (without
limitation) the following:
<PAGE>
9
A. Conditions
Precedent: Conditions precedent to the initial borrowing under the
Senior Facilities will include (without limitation):
1. The Senior Banks' review of and satisfaction with
the terms and conditions of, and the documentation
relating to, the Tender Offer and the Mergers (other
than the Merger Agreement as originally in effect)
and the Senior Subordinated Bridge Loan Facility.
2. The Senior Banks' review of and satisfaction with
all filings with the Securities and Exchange
Commission (the "SEC") in connection with the Tender
Offer and the Mergers.
3. The Senior Banks' continuing satisfaction with the
condition (financial and other), operations
(including compliance with law), assets, nature of
assets, liabilities and prospects of Holdings,
Target and their respective subsidiaries.
4. The Senior Banks' review of and satisfaction with
(a) the Borrower's tax assumptions which, if not
true, could have a material adverse effect on the
assets, liabilities and prospects of Holdings,
Target and their respective subsidiaries and (b) the
material contracts of the Target and its
subsidiaries not heretofore delivered to the Agent,
including, without limitation, all material supply
and purchase contracts of the Target and its
subsidiaries involving more than 5% of the supplies
to or purchases of such entities and any litigation
or proceeding with respect to the transactions
contemplated hereby or
<PAGE>
10
deemed material by the Senior Banks.
5. The Merger Agreement shall have been duly approved
by the board of directors of Holdings and the
Target, such approval shall not have been withdrawn
or qualified in a manner adverse to Holdings or the
Senior Banks and the Merger Agreement shall have
been duly executed and delivered by the parties
thereto and shall be in full force and effect.
6. Simultaneously with the Tender Offer Closing,
Holdings shall have received proceeds of the Senior
Subordinated Bridge Loan Facility or a suitable
replacement therefor in an aggregate principal
amount at least equal to $130,000,000.
7. Simultaneously with the Tender Offer Closing,
Holdings shall have received not less than
$12,000,000 of proceeds from the issuance of new
equity on terms satisfactory to the Senior Banks and
such proceeds shall be available to consummate the
Acquisition.
8. All fees, commissions and expenses payable by
Holdings, the Target and their respective
subsidiaries in connection with the Acquisition and
the refinancing of the Senior Subordinated Bridge
Loan Facility and the other transactions
contemplated hereby shall not exceed $33,000,000 in
the aggregate.
9. No severance payments or fees or other amounts in
excess of current compensation shall be payable to
any of the management or directors of the Target in
connection with or as a result, directly or
indirectly, of the Acquisition or the Mergers except
on a schedule
<PAGE>
11
satisfactory to the Senior Banks; provided that up
to $25,000,000 of such payments and costs may be
supported by letters of credit issued under the
Revolving Credit Facility.
10. All conditions to the Tender Offer and the Merger
Agreement (any such conditions requiring the
satisfaction of any person or entity other than the
Senior Banks to be deemed for this purpose to
require the satisfaction of the Senior Banks) shall
have been met or waived with the concurrence of the
Senior Banks.
11. Holdings shall have acquired not less than a
sufficient number of the Target Shares that would
enable Holdings, voting without any of the other
shareholders of the Target, to approve the Target
Merger no later than May 15, 1995.
12. If less than 90% of the issued and outstanding
Target Shares shall have been tendered and accepted
for payment pursuant to the Tender Offer, than (a)
the Target shall have filed with the SEC a proxy or
information statement on Schedule A or Schedule C
relating to the Mergers and shall have responded to
any comments or requests of the SEC relating thereto
and (b) the SEC shall have indicated that it has no
further comments or requests relating thereto.
13. The Senior Banks' review of and satisfaction with
opinions of value and other appropriate factual
information and expert advice from Valuation
Research Corporation, together with certificates of
officers of Holdings, ASI, the Target and Supply,
supporting the conclusions that, after giving effect
to the Mergers, the
<PAGE>
12
borrowings under the Senior Facilities and the
Senior Subordinated Bridge Loan Facility (and any
indebtedness refinancing or replacing the Senior
Subordinated Bridge Loan Facility), and the other
transactions contemplated hereby, none of the
entities liable to the Senior Banks in respect of
the Senior Facilities is insolvent or will be
rendered insolvent thereby, will be left with
unreasonably small capital with which to engage in
its business or will have incurred debts beyond its
ability to pay such debts as they mature.
14. The Senior Banks' satisfaction that the borrowings
under the Senior Facilities and the Senior
Subordinated Bridge Loan Facility, and other funding
for the purchase of Target Shares shall be in full
compliance with all legal requirements, including
without limitation Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System.
15. Evidence satisfactory to the Senior Banks that after
giving effect to all borrowings on the date of the
Tender Offer Closing and the Merger Date and the
refinancing of all indebtedness of Holdings and the
Target and their respective subsidiaries, not more
than $230,000,000 of revolving credit loans will be
outstanding under the Revolving Credit Facility.
16. Evidence that all necessary governmental and third
party consents, licenses, permits and approvals have
been obtained and remain in full force and effect.
17. The Senior Banks' review of and satisfaction with an
environmental risk assessment made by a person or
<PAGE>
13
persons acceptable to the Senior Banks (including
the potential levels of material environmental
liability set forth therein) with respect to
Holdings, the Target and their respective
subsidiaries.
18. Receipt of favorable legal opinions customary for
transactions of this type, including, with
limitation, an opinion as to the effectiveness of
consummating the merger.
19. Evidence that all indebtedness of the Target and its
subsidiaries shall, subject to agreed upon
exceptions, be repaid with the proceeds of the
Supply Notes and all liens securing such
indebtedness shall be released.
20. The Senior Banks' satisfaction with (a) any
litigation or other proceedings with respect to the
Acquisition or the other transactions contemplated
hereby and not heretofore disclosed to the Agent,
(b) any other litigation or proceedings deemed
material by the Senior Banks and not heretofore
disclosed to the Agent and (c) any developments,
disclosed to or discovered by the Agent after the
date hereof, in any litigation or proceedings with
respect to the Acquisition or other transactions
contemplated hereby or any other litigation or
proceedings deemed material by the Senior Banks.
Conditions precedent to each subsequent borrowing under
the Senior Facilities will be customary for a transaction
of this type and others determined by the Senior Banks to
be appropriate, including, without limitation, the
absence of (i) any continuing default or event of default
or (ii) any continuing default or event of default or
(ii) any material adverse change in the condition
(financial and other), operations, assets, nature of
assets, liabilities
<PAGE>
14
(including, without limitation, tax, ERISA and
environmental liabilities) and prospects of the Borrower
and its subsidiaries.
B. Covenants: Will apply to Holdings and all of its subsidiaries
(including, prior to the Mergers, the Target and its
subsidiaries) and will include (without limitation):
1. Financial and other information: certified monthly
and quarterly and audited annual financial
statements, SEC filings, reports to shareholders,
budgets, weekly and monthly borrowing base
certificates, weekly receivable aging reports,
weekly sales activity reports, monthly business
plans, quarterly reports of an independent
collateral auditor and other information requested
by the Senior Banks.
2. Limitation on dispositions of assets and changes of
business, management and ownership.
3. Maintenance of insurance.
4. No mergers or acquisitions (except for the
Acquisition and the Mergers).
5. Limitations on dividends or other restricted
payments, including, without limitation, any
prepayments, repurchases, redemptions or defeasance
in respect of any Senior Subordinated Bridge Loan or
Replacement therefor ("Subordinated Debt").
6. No indebtedness (including guarantees and other
contingent obligations) except as contemplated
hereby (subject to customary exceptions).
<PAGE>
15
7. Limitation on loans and investments.
8. Negative pledge.
9. Limitation on transactions with affiliates.
10. Limitations on management fees.
11. Certain financial covenants to be determined,
including, without limitation, a minimum net worth
covenant, a maximum debt to cash flow ratio, a
minimum fixed charges coverage ratio, a minimum
interest coverage ratio, limitations on capital
expenditures (including lease obligations) and
limitations on rolling stock lease obligations.
12. Limitation on modifications of Tender Offer
documents, Merger Agreement, agreements and
indentures relating to the Subordinated Debt,
charter documents of Holdings, the Borrower, the
Target and Supply and other material documents.
13. Upon closing of the Tender Offer, Holdings shall
cause the Mergers to be effected (a) not more than
twenty-four hours after the closing of the Tender
Offer if at least 90% of the Target Shares are
acquired by the Borrower, (b) not more than 30 days
after the closing of the Tender Offer if at least
80% of the Target Shares are acquired by the
Borrower and (c) in any event, by the earlier of (x)
the date 60 days after the closing of the Tender
Offer and (y) May 15, 1995.
14. An interest rate protection program acceptable to
the Agent shall be in place not later than 30 days
after the Merger Date.
<PAGE>
16
15. United shall implement the business plan previously
adopted by the Board of Directors of Holdings and
disclosed to the Agent and shall have its
independent public accountants present the pro forma
financials contained in such plan to the SEC, in
each case by the earlier of the date occurring six
weeks after the Merger Date and June 30, 1995.
C. Events of
Default: Will include (without limitation) payment,
misrepresentation, covenant, bankruptcy, ERISA,
judgments, change of ownership or control and cross-
defaults.
Assignments and
Participations: Each Senior Bank may assign all or a portion of its loans
and commitments under the Senior Facilities, or sell
participations therein, to another person or persons
provided that (i) each such assignment of a loan or
commitment of any tranche shall be of a ratable interest
in such Senior Bank's loans and commitments of such
tranche, (ii) each such assignment shall be in a minimum
amount equal to $5,000,000 and (iii) no purchaser of a
participation shall have the right to exercise or to
cause the selling Senior Bank to exercise voting rights
in respect of the Senior Facilities (except as to certain
basic issues).
Expenses and
Indemnification: As specified in the Commitment Letter (with appropriate
additions and other modifications for inclusion in the
definitive financing agreements).
Majority Banks: The holders of at least 51% of the aggregate loans and
unused commitments, subject to certain issues requiring
class voting.
Agent: Chase
Letter of Credit
Issuing Bank: Chase
Governing Law: Laws of the State of New York
<PAGE>
17
Chase's New York
Counsel: Milbank, Tweed, Hadley & McCloy
In accordance with market practice, an information package containing
relevant information concerning the Senior Facilities, Holdings, the Target and
their respective subsidiaries will be provided, on a confidential basis, to
potential lenders. Holdings will prepare this package with the assistance of the
Target. Chase will be pleased to assist in the preparation of this package. The
management of Holdings, and the Target will cooperate with Chase in effecting
the syndication of the Senior Facilities (including participation in any group
bank meetings held in connection with the syndication).
<PAGE>
EXHIBIT B
SENIOR SUBORDINATED BRIDGE FACILITY TERM SHEET
Capitalized terms used herein and not defined herein have the meanings
set forth in the letter (the "Commitment Letter") to which this Senior
Subordinated Bridge Facility Term sheet is annexed.
Borrower: Associated Stationers, Inc. and after the ASI Merger,
United Stationers Supply Co.
Purpose: To provide part of the financing required to consummate
the Tender Offer and the Acquisition and to pay related
fees, commissions and expenses.
Type and Amount $130,000,000 Senior Subordinated Bridge Facility.
of Facility:
Agent and Arranger: The Chase Manhattan Bank (National Association) or an
affiliate ("Chase").
Final Maturity: One year from the date of the Tender Offer Closing. If
any of the Senior Subordinated Bridge Facility is
outstanding at Final Maturity, the same shall be
automatically converted on such date into the Rollover
Loan (the "Rollover Loan") described in Senior
Subordinated Rollover Term Sheet attached hereto as Annex
I (the "Senior Subordinated Rollover Loan Term Sheet").
Availability: In a single drawdown on the date of the Tender Offer
Closing.
Interest Rate: Interest shall be at a per annum rate equal to the Base
Rate of Chase plus the Applicable Interest Margin (see
below), calculated on the basis of actual days elapsed in
a year of 360 days, payable quarterly in arrears. The
Base Rate is defined as the higher of (i) the Federal
Funds Rate, as published by the Federal Reserve Bank of
New York, plus 1/2 of 1% and (ii) the prime commercial
lending rate of Chase, as announced from time to time at
its head office.
<PAGE>
-2-
Applicable Interest
Margin: Initially, 4%; provided that at the end of each quarterly
period after the Tender Offer Closing, the Applicable
Interest Margin will increase by .50%.
Default Interest: Interest on any amount not paid when due will accrue at a
rate of 2% in excess of the Base Rate plus the Applicable
Interest Margin.
Mandatory
Prepayments: Consistent with the Senior Facilities, prepayment of the
Senior Subordinated Bridge Facility will be required from
100% of (i) the net proceeds from the issuance of
subordinated debt or equity securities by United or any
of its subsidiaries and (ii) the net proceeds from asset
sales (subject to exceptions to be determined), in each
case, in excess of the amount thereof required to be paid
to the Senior Banks or to reduce commitments under the
Senior Facilities.
Voluntary
Prepayments: Permitted in whole or in part without premium or penalty
(except for broken funding costs determined by the
Lenders) subject to minimum amounts of $5,000,000.
Subordination: The Senior Subordinated Bridge Facility will be
subordinated in right of payment to the Senior Facilities
pursuant to subordination provisions to be determined by
the Senior Lenders and the Senior Subordinated Bridge
Lenders.
Subordinated
Guarantees: The Senior Subordinated Bridge Facility will be
guaranteed by guaranteed by United and by each subsidiary
of the Borrower that guarantees the Senior Facilities,
subject to the same subordination provisions applicable
to the Senior Subordinated Bridge Facility.
Loan Documentation: A Senior Subordinated Bridge Loan Agreement and related
documentation satisfactory to the Senior Subordinated
Bridge Lenders (and, if Roebling is a Senior Subordinated
Bridge Lender, the holders of beneficial interests (the
"Beneficial Owners") in Roebling participating in the
Senior Subordinated
<PAGE>
-3-
Bridge Facility (including, without limitation,
promissory notes payable to Roebling that separately
evidence the respective amounts of the beneficial
ownership interests in the loans held by the Beneficial
Owners)). Such documentation will include such
conditions, representations, warranties, affirmative and
negative covenants, events of default, capital adequacy
provisions and other provisions as are described herein,
as may be generally consistent with the current practice
of the Senior Subordinated Bridge Lenders for facilities
of this type and as the Senior Subordinated Bridge
Lenders (and, if Roebling is a Senior Subordinated Bridge
Lender, the Beneficial Owners) may reasonably determine
to be appropriate for the Senior Subordinated Bridge
Facility. Prior to the execution and delivery of the
Senior Subordinated Bridge Loan Agreement, the Borrower
shall have retained an underwriter and/or placement agent
in connection with the refinancing in full of the Senior
Subordinated Bridge Facility prior to Final Maturity.
Conditions
Precedent: Substantially the same as for the Senior Facilities.
Covenants: To be determined but shall apply to Holdings and all
of its subsidiaries (including, until consummation of
the Mergers, the Target and its subsidiaries).
Representations Substantially the same as for the Senior Facilities.
and Warranties:
Events of Default: Will include, without limitation, nonpayment (with a 10-
day grace period with respect to interest and fees),
misrepresentation, covenant default (with a 30-day grace
period), bankruptcy, material ERISA events, material
judgments, a change in control, cross-acceleration and
other customary and appropriate defaults, with
appropriate grace periods with respect to certain of such
events of default.
<PAGE>
- 4 -
Assignments and
Participations: Each Senior Subordinated Bridge Lender may assign all or
a portion of its loans, and may grant participations with
the transferability of voting rights limited to changes
in principal, rate, fees and term. Assignments, which
must be in amounts of at least $5,000,000, shall result
in an administrative fee of $3,500 payable to the Agent
upon execution.
If Roebling is a Senior Subordinated Bridge Lender, it
will have the right to (a) to distribute the loans to the
Beneficial Owners if (i) a principal or interest payment
default shall occur, (ii) the Borrower shall become
insolvent or bankrupt or (iii) in the judgment of (x)
Chase, as manager of Roebling, or (y) a majority-in-
interest of the Beneficial Owners (A) the fair market
value of such loans has substantially decreased, or is
likely to substantially decrease, as a result of an
adverse change in the business or financial condition of
the Borrower or (B) a material Event of Default has
occurred and (b) to distribute to the Beneficial Owners
(pro rata in accordance with their respective interests)
any notes, securities or other property received by
Roebling in exchange for, or in satisfaction of, the
promissory notes evidencing such loans (including,
without limitation, any notes evidencing the Rollover
Loan or the Replacement).
Expenses and
Indemnification: Customary and usual.
Majority Lenders: Senior Subordinated Bridge Lenders holding at least
66-2/3% of the outstanding principal amount of the Senior
Subordinated Bridge Loan Facility.
Governing Law: Internal laws of the State of New York.
Counsel: Milbank, Tweed, Hadley & McCloy
<PAGE>
ANNEX I
SENIOR SUBORDINATED ROLLOVER LOAN TERM SHEET
(Terms used but not defined herein have the
respective meanings given to such terms in
the Senior Subordinated Bridge Loan Term
Sheet delivered herewith)
Borrower: The Borrower
Type and Amount $130,000,000 Senior Subordinated
of Facility: Rollover Loan (the "Rollover Loan").
Agent and Arranger: Chase
Purpose: To refinance the Senior Subordinated Bridge Facility
outstanding on the Final Maturity of the Senior
Subordinated Bridge Facility.
Availability: By converting the Senior Subordinated Bridge Facility
outstanding on the Final Maturity of the Senior
Subordinated Bridge Facility into a Rollover Loan of the
same principal amount.
Final Maturity: The date ten years after the date of the Tender Offer
Closing.
Amortization: 50% of the Rollover Loan will be due and payable on the
date nine years after the date of the Tender Offer
Closing, and the balance of the Rollover Loan will be due
and payable on the date ten years after the date of the
Tender Offer Closing.
Interest Rate: Interest shall be at a per annum rate equal to the Base
Rate of Chase plus the Applicable Interest Margin (see
below), calculated on the basis of actual days elapsed in
a year of 360 days, payable quarterly in arrears. The
Base Rate is defined as the higher of (i) the Federal
Funds Rate, as published by the Federal Reserve Bank of
New York, plus 1/2 of 1% and (ii) the prime commercial
lending rate of Chase, as announced from time to time at
its head office.
<PAGE>
- 2 -
Applicable Interest
Margin: Initially, 6%; provided that, at the end of each
quarterly period after the date on which the Rollover
Loan is made, the Applicable Interest Margin will
increase by 0.50%, up to a maximum interest rate of 20%
per annum; provided that, to the extent interest accrues
on the Rollover Loan at a rate per annum in excess of
15%, such interest will be added to the principal amount
of the Rollover Loan and shall thereafter bear interest
as set forth herein.
Default Interest: Interest on any amount not paid when due will accrue at a
rate of 2% in excess of the Base Rate plus the Applicable
Interest Margin.
Mandatory
Prepayments: Same as Senior Subordinated Bridge Facility.
Voluntary Permitted in whole or in part without premium or penalty
Prepayments: (except for broken funding costs determined by the
Lenders) subject to minimum amounts of $5,000,000.
Subordination: The Rollover Loan will be subordinated in right of
payment to the Senior Facilities pursuant to
subordination provisions to be determined by the Senior
Lenders and the Senior Subordinated Bridge Lenders.
Subordinated
Guarantees: The Rollover Loan will be guaranteed by United and by
each subsidiary of the Borrower that guarantees the
Senior Facilities, subject to the same subordination
provisions applicable to the Rollover Loan.
Registration Rights: Upon demand of the Majority Lenders at the expense of the
Borrower, the Lenders will have the right (i) to require
the Borrower to register the notes evidencing the
Rollover Loans and any related guaranties under the
Securities Act of 1933, as amended, and (ii) to have an
indenture prepare and qualified under the Trust Indenture
Act of 1939, as amended. The Borrower will use its best
efforts to cause such registration and qualification to
occur as soon as practicable but in no
<PAGE>
- 3 -
event later than 90 days after the request therefor.
Loan The Rollover Loan will be governed by documentation
Documentation: to be determined.
Conditions
Precedent: Absence of any default, accuracy of representations,
payment of all fees and expenses.
Assignments and
Participations: Each Senior Subordinated Lender may assign all or a
portion of its loans, and may grant participations with
the transferability of voting rights limited to changes
in principal, rate, fees and term. Assignments, which
must be in amounts of at least $5,000,000, shall result
in an administrative fee of $3,500 payable to the Agent
upon execution.
Expenses and
Indemnification: Customary and usual.
Majority Lenders: Senior Subordinated Lenders holding at least 66-2/3% of
the outstanding principal amount of the Rollover Loan.
Governing Law: Internal laws of the State of New York.
Counsel to Chase: Milbank, Tweed, Hadley & McCloy
<PAGE>
EXHIBIT 99(C)(1)
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
BETWEEN
ASSOCIATED HOLDINGS, INC.
AND
UNITED STATIONERS INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE 1 THE MERGER.......................................... 1
1.1 The Merger.......................................... 1
1.2 Effective Time of the Merger........................ 2
1.3 Closing............................................. 2
ARTICLE 2 THE OFFER........................................... 2
2.1 The Offer........................................... 2
2.2 Company Action...................................... 5
2.3 Company Board of Directors.......................... 6
ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES.. 8
3.1 Effect on Capital Stock............................. 8
3.2 Adjustment of Merger Consideration.................. 10
3.3 Shares of Dissenting Stockholders................... 10
3.4 Exchange of Company Common Stock Certificates....... 11
3.5 Exchange of AHI Stock............................... 12
3.6 Company Stock Options............................... 13
3.7 AHI Stock Options................................... 13
3.8 Short-Form Merger................................... 13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES...................... 14
4.1 Representations and Warranties of the Company....... 14
4.2 Representations and Warranties of AHI............... 21
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS........... 30
5.1 Covenants of the Company............................ 30
5.2 Covenants of AHI.................................... 34
ARTICLE 6 ADDITIONAL AGREEMENTS............................... 36
6.1 Information Statements; Offering Documents.......... 36
6.2 Access to Information............................... 37
6.3 Stockholder Approval................................ 37
6.4 Legal Conditions to Merger.......................... 38
6.5 Financing........................................... 38
6.6 Expenses............................................ 39
6.7 Brokers or Finders.................................. 39
6.8 Indemnification and Insurance....................... 40
6.9 Additional Agreements............................... 43
6.10 Employee Contracts and Employee Benefit Plans....... 43
6.11 Financial Condition................................. 45
6.12 Compliance Certificates............................. 45
6.13 Company Dividends................................... 45
6.14 AHI Stockholder Agreements.......................... 46
6.15 Agreements to be Assumed by the Company............. 46
6.16 Subsidiary Merger................................... 46
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE 7 CONDITIONS PRECEDENT........................... 47
7.1 Conditions to Each Party's Obligations......... 47
7.2 Conditions to Obligations of AHI............... 48
7.3 Conditions to Obligations of the Company....... 48
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.............. 49
8.1 Termination.................................... 49
8.2 Effect of Termination.......................... 51
8.3 Amendment...................................... 53
8.4 Extension; Waiver.............................. 54
ARTICLE 9 GENERAL PROVISIONS............................. 54
9.1 Nonsurvival of Representations and Warranties.. 54
9.2 Notices........................................ 54
9.3 Interpretation................................. 55
9.4 Counterparts................................... 55
9.5 Entire Agreement; Third Party Beneficiaries.... 55
9.6 Governing Law.................................. 56
9.7 Publicity...................................... 56
9.8 Assignment 56
</TABLE>
Annex A Offer Conditions
Exhibit A Amendment to Company
Certificate of Incorporation
Exhibit B Form of Tender Agreement
Exhibit C Form of Certificates of Designations, Preferences
and Rights for Company Preferred Stock
Exhibit D-1 Company Material Consents
Exhibit D-2 AHI Material Consents
Exhibit E Form of Benefits Trust Agreement
Exhibit F Form of Bonus Plan Trust
Exhibit G Form of Benefits Letter of Credit
Exhibit H Form of Bonus Trust Letter of Credit
Exhibit I Solvency Opinion
(ii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 13, 1995, between
Associated Holdings, Inc., a Delaware corporation ("AHI"), and United Stationers
Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of AHI and the Company
each has approved the merger of AHI into the Company (the "Merger"), pursuant to
which the Company will be the surviving corporation;
WHEREAS, the stockholders of AHI have adopted this Agreement and
approved the Merger in accordance with the General Corporation Law of the State
of Delaware (the "DGCL");
WHEREAS, AHI shall commence a tender offer to purchase up to 92.5% of
the issued and outstanding shares of common stock, par value $.10 per share, of
the Company (the "Company Shares" or "Company Common Stock") at a price of
$15.50 per share, net to the seller in cash, in accordance with the terms
hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE 1
THE MERGER
----------
1.1 The Merger.
----------
(a) Effective Time. On the terms and subject to the conditions
of this Agreement, and in accordance with the DGCL at the Effective Time (as
defined in Section 1.2 hereof): (i) AHI will merge with and into the Company;
(ii) the separate existence of AHI shall cease and the Company shall continue as
the surviving corporation (the Company, in its capacity as the surviving
corporation in the Merger, is sometimes referred to herein as the "Surviving
Corporation"); (iii) the Restated Certificate of Incorporation of the Company as
amended as set forth on Exhibit A hereto shall as so amended, be the Certificate
of Incorporation of the Surviving Corporation; (iv) the By-laws of the Company
as in effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation; and (v) the directors of AHI immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, to serve in accordance with the by-laws thereof, until their
successors are duly elected and qualified, or their earlier death, resignation
or removal.
<PAGE>
(b) Effects of Merger. At and after the Effective Time, the
Merger shall have all the effects provided in this Agreement and by applicable
law.
1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger") shall be duly
prepared and executed by AHI and the Company and thereafter delivered to the
Secretary of State of the State of Delaware for filing, as provided in the DGCL,
as soon as practicable on the Closing Date (as hereinafter defined). The Merger
shall become effective upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (the "Effective Time").
1.3 Closing. Unless this Agreement shall have been terminated
pursuant to Section 8.1 and subject to the satisfaction or waiver of all
conditions to the consummation of the transactions contemplated hereby, the
closing of the Merger (the "Closing") will take place at the offices of Weil,
Gotshal & Manges, 767 Fifth Avenue, New York, New York, at 10:00 a.m., Local
Time, on a date specified by AHI which is no more than five business days after
the first date on which each of the conditions to Closing set forth in Section
7.1 shall have been satisfied or waived or such other time and date, and such
other place as is agreed to in writing by the parties hereto. The date on which
the Closing is scheduled to occur is herein referred to as the "Closing Date."
ARTICLE 2
THE OFFER
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2.1 The Offer.
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(a) Making the Offer. Provided that none of the events set
forth in clauses (a) through (d) of Annex A shall have occurred and be
continuing, AHI shall, (i) not later than the first business day following the
date of this Agreement, publicly announce its intention to commence a tender
offer for up to 17,201,839 shares of Company Common Stock representing 92.5% of
the outstanding shares of Company Common Stock as of the date hereof at a price
of $15.50 per Share, net to the seller in cash and (ii) commence (within the
meaning of Rule 14d-2(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), the tender offer, as promptly as practicable following such
public announcement, but in any event not later than the end of the fifth
business day following such public announcement (such tender offer, as it may be
amended from time to time in accordance with this Agreement, being referred to
herein as the "Offer"). The Offer will be subject only to the conditions set
forth in Annex A (the "Offer Conditions"). Any Offer Condition
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(other than the Minimum Condition (as defined in Annex A) which may not be
waived or changed) may be waived by AHI in its sole discretion. The Offer shall
be made by means of an offer to purchase and related letter of transmittal (the
"Letter of Transmittal" and, together with the offer to purchase, the "Offer to
Purchase"). Subject only to the Offer Conditions, AHI shall accept for payment
all Company Shares which are validly tendered on or prior to the expiration of
the Offer and not withdrawn as soon as legally permissible and pay for all such
Company Shares as promptly as practicable thereafter; provided, however, that if
more than 17,201,839 Company Shares are so tendered, then AHI shall purchase
17,201,839 Company Shares pro rata from each tendering holder in proportion to
the Shares tendered by such holders. Notwithstanding the foregoing or anything
herein to the contrary, the tender of Company Shares by a stockholder of the
Company is expressly conditioned on, and the Letter of Transmittal will so
provide, that each tender of Company Shares is expressly subject to prompt
satisfaction by AHI of its obligations under Section 6.10(d) hereof (excluding
clause (i) thereof) and the receipt by the Company of the Financial Condition
Certificate and Solvency Opinion (each as defined in Section 6.11 of this
Agreement) unless waived by the Company on behalf of the stockholders of the
Company. The Offer shall expire at 5:00 p.m., New York City time, on the
twentieth business day following commencement thereof; provided, however, that
(i) AHI may, in its sole discretion, extend the expiration time of the Offer to
5:00 p.m., New York City time, on any business day (but not beyond the Deadline
Time (as defined in Section 8.1(b))) at any time and from time to time if, as of
any scheduled expiration time of the Offer (as originally scheduled or as
extended as permitted or required by this paragraph (a)), any Offer Condition
(other than the Minimum Condition) shall not have been satisfied; provided,
however, that in no event shall AHI be permitted to extend the expiration time
of the Offer if the failure of any Offer Condition to occur was caused by the
material action or material failure to act of AHI; and provided, further, AHI
shall not be permitted to extend the expiration time of the Offer beyond 5:00
p.m., New York City time, on the date which is ten business days after AHI has
publicly announced that it has entered into definitive documentation with
respect to the Financing (as herein defined) unless the Minimum Condition shall
have been satisfied on or before such tenth business day; and (ii) if as of any
scheduled expiration time of the Offer (as originally scheduled or as extended
as required or permitted by this paragraph (a)), all of the conditions thereto
have been satisfied or waived and at least 80% but less than 90% of the
outstanding Company Shares have been validly tendered and not properly withdrawn
pursuant to the Offer AHI may, in its sole discretion, extend the expiration
time of the Offer but not beyond the Deadline Time, for up to an additional
period of five business days. The date on which the Offer (as extended as
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permitted hereunder) shall expire is herein referred to as the "Expiration
Date". Except as required by law and except for extensions permitted above in
this Section 2.1(a), AHI shall not (v) increase or decrease the number of
Company Shares being sought in the Offer, (w) change the form of consideration
payable in the Offer, (x) add additional conditions to the Offer, (y) extend the
time of original expiration of the Offer if all of the Offer Conditions are then
satisfied or waived or (z) otherwise amend the Offer without the prior written
or oral consent of the Company which consent shall not be unreasonably withheld
and, in any event, will be deemed given if the Company does not deliver to AHI
an objection in writing within 24 hours after receipt of AHI's written request
for consent describing the proposed amendment (other than amendments which
increase the amount of cash consideration payable for the purchase of Company
Shares pursuant to the Offer).
(b) Schedule 14D-1. As soon as practicable on the date the Offer is
commenced, AHI shall file with the Securities and Exchange Commission (the
"Commission") a tender offer statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "Schedule 14D-1") with respect to the
Offer. The Schedule 14D-1 shall include or shall incorporate by reference the
Offer to Purchase (or portions thereof) and forms of the related letter of
transmittal and summary advertisement, as well as all other information and
exhibits required by law (the Schedule 14D-1, Offer to Purchase and such other
documents, together with any supplements or amendments thereto, are herein
referred to as the "Offer Documents"). The Offer Documents shall comply with
the provisions of applicable law. AHI shall promptly correct any information in
the Offer Documents that shall be or have become false or misleading in any
material respect and shall take all steps necessary to cause the Schedule 14D-1
as so corrected to be filed with the Commission and the other Offer Documents as
so corrected to be disseminated to holders of shares of Company Common Stock, in
each case as and to the extent required by applicable federal securities law.
AHI shall conduct the Offer in accordance with all applicable requirements of
the Exchange Act and rules and regulations promulgated thereunder and all other
applicable laws. AHI shall give the Company and its counsel an opportunity to
review and comment on the Schedule 14D-1 prior to its being filed with the
Commission. AHI shall provide the Company and its counsel with any written
comments AHI may receive from the Commission with respect to the Offer Documents
promptly after the receipt of such comments.
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2.2 Company Action.
(a) Company Approvals. The Company hereby approves of and consents to
the Offer and represents and warrants that (i) its Board of Directors (the
"Company Board"), at a meeting duly called and held, has (A) determined that
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, taken as a whole, are fair to and in the best interests of the
stockholders of the Company, and resolved to recommend that the holders of
Company Common Stock accept the Offer, tender their shares of Company Common
Stock thereunder to AHI, and, if required by applicable law, approve and adopt
the Merger and this Agreement, and (B) approved this Agreement and the
transactions contemplated hereby, including the Offer, the Tender Agreements (as
herein defined) and the Merger, for purposes of Section 203 of the DGCL, (ii) it
has received the opinion of William Blair & Co. ("Blair"), and the opinion of
Lazard Freres & Co. ("Lazard"), in each case that the consideration to be paid
in the Offer and the Merger, taken as a whole and taking into account the
interest retained by the holders of Company Common Stock is, in the opinion of
each of Blair and Lazard, fair to the holders of Company Common Stock (other
than AHI and its subsidiaries and affiliates) from a financial point of view
(the "Fairness Opinions") and (iii) a majority of the Disinterested Directors
(as defined in the Company's certificate of incorporation) have approved this
Agreement and the transactions contemplated hereby, including the Offer and
Merger, in satisfaction of the conditions specified in Section 2(a) of Article
VII of the Company's Restated Certificate of Incorporation. The Company Board
will not withdraw or modify its approval or recommendation of the Offer, the
Merger or this Agreement unless it shall determine in good faith after
consultation with legal counsel that to not do so would be inconsistent with its
fiduciary duties under applicable law. The Company hereby consents to the
inclusion in the Offer Documents of the recommendations referred to in this
Section 2.2(a), subject to the immediately preceding sentence.
(b) Tender Agreements. The Company has delivered, simultaneously with
the execution of this Agreement, a Tender Agreement, in substantially the form
attached hereto as Exhibit B, executed by each director of the Company and their
respective affiliates and certain other individuals and trusts identified on
Exhibit B.
(c) Schedule 14D-9. The Company hereby agrees to file with the
Commission contemporaneously with the commencement of the Offer, and promptly to
mail to its stockholders, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-
9") containing the recommendations contained in Section 2.2(a), subject to the
conditions stated therein. AHI and its counsel
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shall be given an opportunity to review and comment on the Schedule 14D-9 prior
to its being filed with the Commission. The Schedule 14D-9 will comply with the
provisions of applicable law.
(d) Labels, etc. In connection with the Offer, if requested by AHI,
the Company shall promptly furnish AHI with mailing labels, security position
listings, and any available listing or computer file containing the names and
addresses of the record and, to the extent available, beneficial, holders of
Shares as of a recent date (including without limitation updated lists of
stockholders, mailing labels, and lists of security positions) as AHI or its
agents may reasonably request in communicating the Offer to the record and
beneficial owners of Shares. Subject to the requirements of law, and except for
such steps as are necessary to disseminate the Offer Documents, AHI will hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request deliver to the Company all such information
(whether in written or computer tape or disk form) and any copies or extracts
therefrom in its possession or under its control. If any such information has
been electronically stored, such information shall be deleted from such storage
and AHI shall deliver a certificate to the Company to such effect.
2.3 Company Board of Directors.
(a) Designation by AHI. Promptly following the acceptance for payment
by AHI of a majority of the outstanding Company Shares pursuant to the Offer,
and from time to time thereafter, the Company shall take all actions necessary
to cause a number (but not more than six) of directors of the Company Board (and
a majority of the members of each committee of the Company Board and the members
of the Board of Directors of each Subsidiary (as defined in Section 4.1(a)) of
the Company) rounded up to the nearest whole number, equal to the percentage of
outstanding Company Shares held by AHI, to consist of persons designated by AHI
(whether, at the request of AHI, by means of increasing the size of the Company
Board or seeking resignation of directors and causing AHI's designees to be
elected). This Section 2.3(a) shall not constitute an implied waiver of the
Minimum Condition by the Company, or any commitment by the Company to agree to
such a waiver. Notwithstanding the foregoing, until the Effective Time at least
one member of the Company Board and the board of directors of each Subsidiary on
the date hereof who is not an employee of the Company and at least two members
of the Company Board who are also employees of the Company on the date hereof
shall remain members of the Company Board until death, disability or resignation
(such members, including replacements appointed or herein provided are referred
to herein as the "Continuing Directors"); provided that
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if the number of Continuing Directors shall be reduced below three because of
death, disability or resignation, such remaining Continuing Directors (or
Continuing Director, if there be only one remaining) shall be entitled to
designate persons to fill such vacancies. Simultaneous with the execution
hereof, the Company has (i) furnished to AHI copies of the written resignations
of six of the directors of the Company which resignation shall in each case be
subject to the acceptance for payment by AHI of at least a majority of the
outstanding Company Shares pursuant to the Offer and receipt by the Company of
written advice from The Chase Manhattan Bank (National Association) ("Chase")
that Chase is ready, willing and able to fund the payment of the purchase price
for the Company Shares accepted for payment by AHI in the Offer (the "Chase
Advice"); provided that if less than two-thirds of the outstanding Company
shares are purchased by AHI in the Offer, the Company will accept only five
resignations selected by it; and (ii) adopted a resolution appointing certain
designees of AHI as directors of the Company contingent upon the acceptance for
payment by AHI of a majority of the outstanding Company Shares and receipt by
the Company of the Chase Advice. AHI agrees not to seek any greater
representation on the Company Board, the board of directors of any Subsidiary of
the Company or any committee thereof prior to the Effective Time.
(b) Section 14(f). The Company's obligations to cause designees of
AHI to be elected or appointed to the Board of Directors of the Company shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 2.3(b), and shall include in the Schedule 14D-9 such information with
respect to AHI and its officers and directors as is required under Section 14(f)
and Rule 14f-1. AHI will supply to the Company and be solely responsible for
any information with respect to AHI and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) Special Director Approval. Following the election or appointment
of AHI's designees pursuant to this Section 2.3 and prior to the Effective Time,
any amendment of the Certificate of Incorporation or By-laws of the Company, any
amendment or termination of this Agreement, extension of the time for the
performance of, waiver of the obligations or other acts of AHI or waiver of the
Company's rights or condition to the Company's obligation hereunder, or any
other action which would materially affect any rights of the Company or the
stockholders of the Company requires the concurrence of a majority of the
Continuing Directors.
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ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
--------------------------------------------------
3.1 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof:
(a) Each share of Company Common Stock outstanding immediately prior
to the Effective Time (other than AHI-owned Shares (as herein defined) and
Company Treasury Shares (as herein defined)) shall be converted as follows:
(i) the Cash Portion (as herein defined) of each Share shall
be converted into and represent the right to receive cash in an
amount determined by subtracting (A) the product of $15.50 (or
such higher price per Company Share paid in the Offer) multiplied
by the number of AHI-owned Shares from (B) $266,628,495 (or, if
higher, the product of the highest price per Company Share paid
in the Offer multiplied by the product of 92.5% multiplied by the
lesser of the number of Company Shares outstanding immediately
prior to the Effective Time and 19,860,192 Company Shares) and
dividing the result so obtained by the number of Old Shares (as
herein defined);
(ii) the balance of each Company Share shall remain
outstanding and be unaffected by the Merger (the total number of
Shares to remain outstanding is referred to as the "Remaining
Shares");
The Cash Portion is a percentage equal to a fraction expressed as a percentage
(rounded to four decimal places), the numerator of which is the result of
subtracting (y) the product of 7.5% multiplied by the number of Company Shares
outstanding immediately prior to the Effective Time from (z) the number of
Shares outstanding (other than AHI-owned Shares and Treasury Shares) immediately
prior to the Effective Time (the "Old Shares") and the denominator of which is
the number of Old Shares (it being understood that if the numerator is zero, the
Cash Portion shall be zero);
(b) each share of Company Common Stock held by AHI or any of its
respective Subsidiaries or affiliates immediately prior to the Effective Time
("AHI-owned Shares") and each share of Company Common Stock then held in the
treasury of the Company or any of its subsidiaries ("Company Treasury Shares")
shall be cancelled and retired and cease to exist without any payment therefor;
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(c) each share of common stock Class A, par value $0.01 per share, of
AHI ("AHI Common") outstanding immediately prior to the Effective Time shall be
converted into a number of shares of Company Common Stock determined by [((x
divided by .20) minus x) divided by y] where "x" equals the number of Remaining
Shares (including for this purpose Dissenting Shares as herein defined) and "y"
equals the number of shares of AHI Common outstanding on a fully diluted basis
including treating for purposes of this calculation all outstanding options
(including AHI Options (as herein defined)), warrants and other rights
(including conversion rights and anti-dilution rights) to acquire AHI Common or
shares of Class B non voting common stock, $.01 par value of AHI ("AHI Class B
Common") and rights to receive options under the Executive Purchase Agreements
(as herein defined) as having been exercised and given effect; and
(d) each share (and fraction thereof) of Class A Preferred Stock, par
value $0.01 per share, of AHI (the "AHI Class A Preferred Stock") shall be
converted into one share (and corresponding fraction thereof) of Series A
Preferred Stock, par value $0.01 per share of the Company (the "Company Series A
Preferred Stock"); each share (and fraction thereof) of Class B Preferred Stock,
par value $0.01 per share, of AHI (the "AHI Class B Preferred Stock") shall be
converted into one share (and corresponding fraction thereof) of Series B
Preferred Stock, par value $0.01 per share, of the Company (the "Company Series
B Preferred Stock"); and each share (and fraction thereof) of Class C Preferred
Stock, par value $0.01 per share, of AHI (the "AHI Class C Preferred Stock" and,
together with the AHI Class A Preferred Stock and the AHI Class B Preferred
Stock, the "AHI Preferred Stock") shall be converted into one share (and
corresponding fraction thereof) of Series C Preferred Stock, par value $0.01 per
share, of the Company (the "Company Series C Preferred Stock" and, together with
the Company Series A Preferred Stock and the Company Series B Preferred Stock,
the "Company Preferred Stock"). The Company Series A Preferred Stock, the
Company Series B Preferred Stock and the Company Series C Preferred Stock shall
have the terms substantially as set forth in the form of the Certificate of
Designations, Preferences and Rights attached hereto as composite Exhibit C. At
the Effective Time all shares of AHI Preferred Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such shares of AHI
Preferred Stock shall thereafter represent the right to receive the shares of
Company Series A Preferred Stock, Company Series B Preferred Stock or Company
Series C Preferred Stock, as the case may be, into which such AHI Preferred
Stock has been converted pursuant to Section 3.1(d). Certificates previously
representing shares of AHI Preferred Stock shall be exchanged for certificates
representing shares of Company Preferred Stock to be issued in consideration
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therefor upon the surrender of such certificates in accordance with Section 3.5.
3.2 Adjustment of Merger Consideration. If, between the date of this
Agreement and the Effective Time, the outstanding shares of Company Common Stock
shall have been changed into a different number of shares or a different class
by reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within such period, the consideration to be received
in respect of each Share or Company Option (as herein defined) shall be
appropriately and equitably adjusted.
3.3 Shares of Dissenting Stockholders.
(a) Company Stockholders. Notwithstanding Section 3.1(a), each
outstanding Share as to which appraisal rights pursuant to Section 262 of the
DGCL are exercised, perfected and not withdrawn or lost ("Dissenting Shares")
shall not be converted pursuant to Section 3.1(a), but shall represent only the
right to receive such consideration as may be determined to be due to the holder
thereof (a "Company Dissenting Stockholder") pursuant to Section 262 of the
DGCL; provided, however, that shares of Company Common Stock outstanding at the
Effective Time and held by a Dissenting Stockholder who shall, after the
Effective Time, withdraw his or her demand for appraisal or lose his or her
right of appraisal as provided under Delaware law, shall be deemed to be
converted and outstanding, as of the Effective Time of the Merger, as provided
in Section 3.1(a). The Company shall give AHI (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to the DGCL received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company will not voluntarily make any payment
with respect to any demands for appraisal and will not, except with the prior
written consent of AHI, settle or offer to settle any such demands. Each
Company Dissenting Stockholder who becomes entitled, pursuant to the DGCL, to
payment for his, her or its Company Common Stock shall receive payment therefor
from the Surviving Corporation and such Shares shall be cancelled upon such
payment.
(b) AHI Stockholders. Notwithstanding Section 3.1(c) and (d), each
outstanding share of AHI Common and AHI Preferred Stock as to which appraisal
rights pursuant to Section 262 of the DGCL are available as a matter of law to
the holder of such shares and which are validly exercised, perfected and not
withdrawn or lost shall not be converted pursuant to Section 3.1(c) or (d), as
the case may be, but shall represent only the right to receive such
consideration as may be due to the holder
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("AHI Dissenting Stockholder") thereof pursuant to Section 262 of the DGCL.
Each AHI Dissenting Stockholder who becomes entitled, pursuant to the DGCL, to
payment for his, her or its shares of AHI Common or AHI Preferred Stock shall
receive payment therefor from the Surviving Corporation and such shares of AHI
Common or AHI Preferred Stock, shall be cancelled upon such payment.
3.4 Exchange of Company Common Stock Certificates.
(a) Paying Agent. Prior to the Closing Date, AHI and the Company
shall jointly select a bank or trust company with capital and surplus of at
least $500 million and offices in the Borough of Manhattan, New York, to act as
paying agent (the "Paying Agent") for the payment of the cash consideration
specified in Section 3.1(a)(i), and the exchange of certificates representing
Shares not converted in the Merger pursuant to Section 3.1(a)(ii) upon surrender
of certificates representing Company Common Stock to be converted into the right
to receive cash pursuant to the Merger.
(b) Surviving Corporation to Provide Funds. Unless the Cash Portion
shall be equal to zero, immediately prior to or simultaneously with the
Effective Time AHI will take all steps necessary to enable and cause the
Surviving Corporation to provide to the Paying Agent on a timely basis
immediately available funds necessary to pay the aggregate cash amount required
pursuant to Section 3.1(a).
(c) Exchange Procedures. Unless the Cash Portion shall be equal to
zero, as soon as practicable after the Effective Time, the Paying Agent shall
mail to each holder of record, other than the Company, AHI and their respective
affiliates and Subsidiaries, of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock (the "Old Certificates"), (i) a letter of transmittal in appropriate and
customary form and (ii) instructions for use in effecting the surrender of the
Old Certificates in exchange for the amount of cash and retained Company Common
Stock specified in Section 3.1(a). Upon surrender of an Old Certificate for
cancellation as provided herein to the Paying Agent, together with such letter
of transmittal, duly executed, and such other customary documents as may be
required by the Paying Agent, the holder of such Old Certificate shall be
entitled to receive in exchange therefor the amount of cash into which the
shares of Company Common Stock theretofore represented by the Old Certificate so
surrendered shall have been converted pursuant to the provisions of Section
3.1(a), less any amounts required to be withheld under applicable federal,
state, local or foreign income tax regulations, and a new stock certificate
evidencing the number of shares of Company Common Stock retained by such holder,
and the Company Shares to the extent so converted and represented by the Old
Certificate so
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surrendered shall forthwith be canceled. No interest will be paid or will
accrue on the cash payable upon the surrender of any Old Certificate. In the
event of a transfer of ownership of Company Common Stock which is not registered
in the transfer records of the Company, a check in payment of the proper amount
of cash and a new stock certificate evidencing the proper amount of retained
Company Common Stock may be issued to a transferee if the Old Certificate
representing such Company Common Stock is presented to the Paying Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 3.4, each Old Certificate shall be
deemed at any time after the Effective Time of the Merger to represent only the
right to receive upon such surrender the amount of cash and retained Company
Common Stock specified in Section 3.1(a) and the rights specified in this
Section 3.4. Any funds deposited with the Paying Agent that remain unclaimed by
the stockholders of the Company for one year after the Effective Time shall be
paid to the Surviving Corporation upon demand and any stockholders of the
Company who have not theretofore complied with the instructions for exchanging
their Old Certificates shall thereafter look only to the Surviving Corporation
for payment.
(d) Old Stock Certificates. If, after the Effective Time, Old
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as and to the extent provided in this Article
3, subject to applicable law in the case of shares of Company Common Stock held
by Company Dissenting Stockholders.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no certificates or scrip representing fractional shares of Company
Common Stock shall be issued upon the surrender for exchange of an Old
Certificate (taking into account all Old Certificates surrendered for exchange
by a particular stockholder) pursuant to Section 3.4(a). In the event a
fractional share would be retained pursuant to Section 3.1(a)(ii), each holder
of an Old Certificate (taking into account all Old Certificates surrendered for
exchange by a particular stockholder) who would otherwise have been entitled to
retain a fraction of a share of Company Common Stock upon surrender of such
Certificates for exchange pursuant to Section 3.2 will have such fractional
share rounded to the nearest whole Share and will receive the appropriate new
certificate therefor.
3.5 Exchange of AHI Stock. After the Effective Time, each holder of
a certificate formerly representing AHI Common or AHI Preferred Stock who
surrenders or has surrendered such certificate (or customary affidavits and
indemnification regarding the loss or destruction of such certificate), together
with duly executed transmittal materials, to the Paying Agent
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shall be entitled to a certificate representing shares of Company Common Stock
or Company Preferred Stock (including fractional shares) into which the shares
of AHI Common or AHI Preferred Stock, as the case may be, shall have been
converted pursuant hereto. Notwithstanding any other provision of this
Agreement, no certificates or scrip representing fractional shares of Company
Common Stock shall be issued upon the surrender for exchange of a certificate
("AHI Common Certificate") representing AHI Common (taking into account all AHI
Common Certificates surrendered by a particular holder of AHI Common). In lieu
thereof, each holder of an AHI Common Certificate (taking into account all AHI
Common Certificates held by a particular stockholder) who would otherwise have
been entitled to receive a fraction of a share of Company Common Stock upon
surrender of an AHI Common Certificate for exchange will have such fractional
share rounded to the nearest whole share and will receive the appropriate new
certificate therefor.
3.6 Company Stock Options. The Company shall (subject to the
approval of the holders thereof) make such adjustments to all the outstanding
options to purchase shares of Company Common Stock as may be necessary to
provide that at the Effective Time each such option whether or not then
exercisable (the "Company Options") shall, in settlement, be converted into the
right to receive a cash payment in an amount equal to the difference, if any,
between $15.50 or such higher price paid in the Offer or Merger and the per
share exercise price of such Company Option multiplied by the number of shares
of Company Common Stock subject to such Company Option. The Company shall adopt
such amendments to its plans under which such Company Options were granted, and
shall use its reasonable best efforts to obtain prior to the Closing Date such
consents of the holders of such Company Options, as shall be necessary to
effectuate the foregoing.
3.7 AHI Stock Options. At the Effective Time, each outstanding
option, warrant or other right to acquire AHI Common shall be assumed by the
Company as provided in Section 6.15 hereof.
3.8 Short-Form Merger. If AHI shall acquire at least 90% of the
outstanding shares of each class of capital stock of the Company, the parties
agree, at the request of AHI, to take all necessary and appropriate action to
cause the Merger to become effective without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
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4.1 Representations and Warranties of the Company. Subject to the
qualifications and exceptions, if any, set forth in the disclosure letter of
even date herewith from the Company to AHI (the "Company Disclosure Schedule"),
the Company represents and warrants to AHI as follows as of the date hereof:
(a) Organization, Standing and Power. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify would not have a
material adverse effect (as herein defined) on the Company. As used in this
Agreement, "material adverse effect" means, with respect to any entity, a
materially adverse effect on the condition (financial or otherwise), assets,
liabilities, business or results of operations of such entity and its
Subsidiaries taken as a whole; and "Subsidiary" of an entity means a corporation
more than 50% of whose voting securities ordinarily entitled to elect at least a
majority of its Board of Directors or other persons performing similar functions
is owned or controlled directly or indirectly by such entity.
(b) Capital Structure. The authorized capital stock of the Company
consists of 40,000,000 shares of Company Common Stock and 1,500,000 shares of
preferred stock, no par value ("Preferred Stock"). At the close of business on
February 10, 1995, 18,596,582 shares of Company Common Stock were outstanding,
1,263,610 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding stock options, no shares of Preferred Stock were
outstanding, and no bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which stockholders may vote ("Voting Debt") were
issued or outstanding. Since February 10, 1995, no shares of Company Common
Stock have been issued except pursuant to the Company Option Plans. All
outstanding shares of the Company capital stock are validly issued, fully paid
and nonassessable and were not issued in violation of any preemptive rights.
Except for options to purchase 1,263,610 shares of Company Common Stock issued
pursuant to the Company's 1981 Stock Incentive Award Plan, 1985 Nonqualified
Stock Option Plan and Director's Stock Option Plan, each as amended (the "the
Company Option Plans"), there are no outstanding options, warrants, calls,
rights, commitments or agreements of any character to
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which the Company or any Subsidiary of the Company is a party or by which it is
bound obligating the Company or any Subsidiary of the Company to issue, deliver
or sell, or cause to be issued, delivered or sold shares of capital stock or any
Voting Debt of the Company or of any Subsidiary of the Company or obligating the
Company or any Subsidiary of the Company to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
(c) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement by the stockholders of the Company as required by law, to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to such approval by the stockholders of the
Company as may be required by law. This Agreement has been duly executed and
delivered by the Company and, subject to such approval by the stockholders of
the Company as may be required by law, constitutes a valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
defaults (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any material
obligation or to loss of any material benefit under any provision of the
Certificate of Incorporation or By-laws of the Company or any Subsidiary of the
Company or any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise, license or any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any Subsidiary of the Company or their respective properties
or assets, other than any such conflicts, violations, defaults or terminations,
cancellations or acceleration under any such loan or other agreement or
obligation which will be extinguished or satisfied on or before the Effective
Time or which individually or in the aggregate do not and would not have a
material adverse effect on the Company. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a
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"Governmental Entity"), is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions
contemplated hereby, except for (i) the filing with the Commission of (A) a
proxy or information statement relating to the adoption by the Company's
stockholders of, or the required notice of the adoption of, this Agreement (the
"Information Statement") and (B) the Schedule 14D-9 and such reports under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, and (ii) the filing with the appropriate
authorities of the Certificate of Merger and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business. Notwithstanding anything to the contrary herein contained and except
for the representations and warranties of the Company in this Agreement, the
Company is not making and shall not be deemed to make any representation or
warranty with respect to the offer or issuance of shares of Company Common Stock
or Company Preferred Stock to AHI stockholders in the Merger.
(d) SEC Documents. Each report, schedule, registration statement and
definitive proxy statement filed by the Company with the Commission since
September 1, 1991 (the "SEC Documents"), as of its respective filing date, (i)
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act and the respective
rules and regulations of the Commission thereunder applicable to such SEC
Documents and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The Company has timely
filed all documents that it was required to file with the Commission since
September 1, 1991, except where the failure to file did not and would not
reasonably be expected to have a material adverse effect on the Company. The
Company has not filed any Reports on Form 8-K since November 30, 1994 and prior
to the date hereof. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended except as may be as otherwise stated therein and, in the
case of unaudited statements, as permitted by Form 10-Q or for normal,
recurring, year-end audit adjustments that would not be material in the
aggregate.
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(e) Information Supplied. The information supplied by the Company to
AHI in writing expressly for inclusion in the Offer Documents at the date the
Offer Documents are first mailed to the stockholders of the Company will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) Compliance with Applicable Laws. Except as disclosed in the SEC
Documents filed prior to the date hereof, the businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, judgment, decree, injunction, rule or order of any Governmental
Entity, except for violations which individually or in the aggregate do not and
would not reasonably be expected to have a material adverse effect on the
Company. No investigation or proceeding before any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, other than those which are disclosed in
the SEC Documents or those the outcome of which would not reasonably be expected
to have a material adverse effect on the Company.
(g) Litigation. Except as disclosed in the SEC Documents filed prior
to the date hereof, there is no suit, action or proceeding pending, or, to the
knowledge of the Company and its Subsidiaries, threatened against the Company or
any Subsidiary of the Company which has a reasonable probability of being
decided adversely to the Company or its Subsidiaries and which, if adversely
determined, would reasonably be expected to have a material adverse effect on
the Company, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any
Subsidiary of the Company having, or which would have, any such effect.
(h) Title to Properties. Except as disclosed in the SEC Documents
filed prior to the date hereof, the Company or one of its Subsidiaries has good
and indefeasible title to all properties purported to be owned by it or acquired
after the date thereof (except properties sold or otherwise disposed of since
the date thereof in the ordinary course of business), free and clear of all
claims, liens, charges, security interests or encumbrances of any nature
whatsoever except (i) statutory liens securing payments (including taxes) not
yet due, (ii) such imperfections or irregularities of title, claims, liens,
charges, security interests or encumbrances as do not materially affect the use
of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (iii) such
encumbrances as do not have a material adverse effect on the Company.
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(i) Leased Properties. Except as disclosed in the SEC Documents filed
prior to the date hereof, the Company or one of its Subsidiaries is the lessee
of all leasehold estates reflected in the latest audited financial statements
included in such SEC Documents or acquired after the date thereof (except for
leases that have expired by their terms since the date thereof) and is in
possession of the properties purported to be leased thereunder and each lease is
valid without material default thereunder by the lessee or, to the Company's
knowledge, the lessor, except for such leases the invalidity of which or the
material default under which in the future would not reasonably be expected to
have a material adverse effect on the Company.
(j) Taxes. Each of the Company and its Subsidiaries has filed, or has
timely applied for extensions to file, all tax returns, reports, statements and
other documents ("the Company Tax Returns") required to be filed, distributed,
or prepared by any of them relating to any material taxes. Each of the Company
and its Subsidiaries has paid (or the Company has paid on its behalf), or has
set up a reserve reasonably believed by the Company, after consultation with its
independent accountants, to be adequate for the payment of, all material taxes
required to be paid, withheld, or deducted in respect of the periods covered by
such the Company Tax Returns, and the most recent financial statements contained
in the SEC Documents filed prior to the date hereof reflect an adequate reserve
for all taxes payable, or required to be withheld and remitted, by the Company
and its Subsidiaries accrued through the date of such financial statements.
Neither the Company nor any Subsidiary of the Company is delinquent in the
payment of any material tax, assessment or governmental charge, except those
which are being contested in good faith and for which adequate reserves have
been established or which would not reasonably be expected to have a material
adverse effect on the Company. No deficiencies material to the Company and its
Subsidiaries taken as a whole for any taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries, and no requests for
waivers of the time to assess any such tax, the granting of which would have a
material adverse effect on the Company and its Subsidiaries taken as a whole,
are pending. The federal income tax returns of the Company and each of its
Subsidiaries consolidated in such returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1985. For the
purposes of this Agreement, the term "taxes" shall include all federal, state,
local and foreign income, property, sales, excise withholding, unemployment
compensation, social security, and other taxes.
(k) Certain Agreements. (i) The Company Disclosure Schedule contains
true and correct copies of all agreements between the Company and its executive
officers whose salary and bonus for the fiscal year ended August 31, 1994
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exceeded $150,000 (the "Executive Contracts"). Except as disclosed in the SEC
Documents filed prior to the date hereof, as set forth in the Executive
Contracts or as permitted pursuant to Section 5.1(j), neither the Company nor
any of its Subsidiaries is a party to any written or oral agreement, plan or
arrangement with any officer, director or employee of the Company or any
Subsidiary (other than the Company Option Plans) (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company or any Subsidiary of the Company of the
nature of any of the transactions contemplated by this Agreement, (B) providing
severance benefits or other benefits after the termination of employment
regardless of the reason for such termination of employment, or (C) any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. The Company
Disclosure Schedule contains a true and correct copy of the United Stationers
Severance Plan dated February 10, 1995 as in effect on the date hereof.
(ii) Except as disclosed in the SEC Documents filed prior to the date
hereof, neither the Company nor any of its Subsidiaries is a party to any oral
or written (A) agreement, contract, indenture or other instrument relating to
the borrowing of money or the guarantee of any obligation for the borrowing of
money material to the Company and its Subsidiaries taken as a whole or (B) other
contract, agreement or commitment of the Company or its Subsidiaries material to
the Company and its Subsidiaries taken as a whole (except those entered into in
the ordinary course of business).
(l) ERISA Compliance. Except as disclosed in the SEC Documents filed
prior to the date hereof, the present value of all accrued benefits (vested and
unvested) under all the "employee pension benefit plans" as such term is defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which are subject to Title IV of ERISA and which the Company
or any Subsidiary of the Company maintains, or to which the Company or any
Subsidiary of the Company is obligated to contribute (the "Company Pension
Plans"), did not, as of the respective last annual valuation dates for such
Company Pension Plans, exceed the value of the assets of such Company Pension
Plans allocable to such benefits. Except as disclosed in the SEC Documents
filed prior to the date hereof, none of the Company Pension Plans subject to
Section 302 of ERISA has incurred any "accumulated funding deficiency", as such
term is defined in Section 302 of ERISA (whether or not waived), since the
effective date of such Section 302. None of the Company, any Subsidiary of the
Company, any officer of the Company or a
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Subsidiary of the Company or any of the employee benefit plans of the Company
and the Subsidiaries of the Company which are subject to ERISA, including the
Company Pension Plans, or any trusts created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction", as such term
is defined in Section 4975 of the Code, which would subject the Company, any
Subsidiary of the Company, any officer of the Company or a Subsidiary of the
Company, any of such plans or any trust to any material tax or penalty on
prohibited transactions imposed by such Section 4975 and would reasonably be
expected to have a material adverse effect on the Company. Neither any of such
Company Pension Plans subject to Title IV of ERISA nor any of their related
trusts have been terminated, nor has there been any material "reportable event",
as that term is defined in Section 4043 of ERISA, for which the 30 day reported
request event have not been waived with respect thereto, which in any case would
have a material adverse effect on the Company. The Company is not a
contributing employer to any "multiemployer plan" as such term is defined in
Section 3(37) or Section 4001 (a)(3) of ERISA.
(m) Patents, Trademarks, Etc. The Company and its Subsidiaries own or
have the right to use all material patents, trademarks, trade names, service
marks, trade secrets, copyrights and other proprietary intellectual property
rights used in connection with the businesses of the Company and its
Subsidiaries, the lack of which would have a material adverse effect on the
Company. The Company does not have any knowledge of any conflict with the
rights of the Company and its Subsidiaries therein or any knowledge of any
conflict by them with the rights of others therein which in either case would
have a material adverse effect on the Company. Notwithstanding anything to the
contrary set forth in this Agreement, the representations and warranties
contained in this Section 4.1(m) that the Company does not have knowledge of a
fact shall not be breached by the existence of facts of which the Company could
have been informed by conducting searches of records contained in filing
offices, court records or other public or private records or databases.
(n) Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents, since November 30, 1994, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary course, and there has
not been (i) any damage, destruction or loss to any property of the Company or
its Subsidiaries, whether covered by insurance or not, which has or in the
future would have a material adverse effect on the Company or the Surviving
Corporation; (ii) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) with respect to any of the Company's
capital stock (other than regular quarterly dividends of $.10 per share); (iii)
except for the Executive Contracts and the United Stationers Severance Plan
dated as of February 10, 1995, the
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execution of any agreement with any executive officer of the Company providing
for his employment, or any increase in compensation or in severance or
termination benefits payable or to become payable by the Company and its
Subsidiaries to their officers or key employees, or any material increase in
benefits under any collective bargaining agreement or in benefits under any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, insurance or
other plan or arrangement or understanding (whether or not legally binding)
providing benefits to any present or former employee of the Company
(collectively, "the Company Employee Benefit Plans"), except in any case in the
ordinary course of business consistent with prior practice; or (iv) any
transaction, commitment, dispute or other event or condition of any character
individually or in the aggregate having or which in the future would reasonably
be expected to have a material adverse effect on the Company or the Surviving
Corporation.
(o) Certain Information. With respect to agreements with customers or
suppliers which the Company has not disclosed to AHI prior to date hereof for
competitive reasons, (i) such agreements were entered into in the ordinary
course of the Company's business, (ii) the Company reasonably believes that such
agreements are in the aggregate not materially adverse to the Company and its
Subsidiaries taken as a whole and (iii) such agreements (A) do not contain terms
permitting cancellation or termination thereof upon the consummation of the
transactions contemplated hereby where such cancellation or termination would
reasonably be expected to have individually or in the aggregate a material
adverse effect on the Company and (B) if breached by the Company by reason of
the consummation of this Agreement would result in damages against the Company
which would reasonably be expected to have a material adverse effect on the
Company.
(p) Definition of Knowledge. For purposes of the Agreement, "to the
knowledge of the Company" and words of similar import shall be limited to the
actual knowledge of the executive officers of the Company and its Subsidiaries.
4.2 Representations and Warranties of AHI. Subject to the
qualifications and exceptions, if any, set forth in the disclosure letter from
AHI (the "AHI Disclosure Schedule") to the Company of even date herewith, AHI
represents and warrants to the Company as follows:
(a) Organization, Standing and Power. Each of AHI and Associated
Stationers Inc., a Delaware corporation ("Associated") and a wholly owned
Subsidiary of AHI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite power
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and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify would not have a
material adverse effect on AHI.
(b) Capital Structure. The authorized capital stock of AHI consists
of 5,000,000 shares of Class A common stock, $.01 par value, of which 954,911
shares are outstanding (subject to increase as permitted under Section 6.5),
5,000,000 shares of Class B Nonvoting Common Stock, $.01 par value, none of
which are outstanding, 15,000 shares of Class A Preferred Stock, $.01 par value,
of which 5,000 shares are outstanding (subject to increase for dividends
accruing after the date hereof in accordance with the terms existing as of the
date hereof), 15,000 shares of Class B Preferred Stock, $.01 par value, of which
6,724.4436 shares are outstanding (subject to increase for dividends accruing
after the date hereof in accordance with the terms existing as of the date
hereof) and 15,000 shares of Class C Preferred Stock, $.01 par value, of which
10,086.6657 shares are outstanding (subject to increase for dividends accruing
after the date hereof in accordance with the terms existing as of the date
hereof). 31,528 shares of AHI Common are reserved for issuance under
outstanding stock options granted under the Associated Holdings, Inc. 1992
Management Stock Option Plan (the "AHI Option Plan"), and an additional 21,684
shares of AHI Common were reserved for issuance under stock options to be
granted to certain executive officers of AHI prior to January 31, 1996 pursuant
to Executive Stock Purchase Agreements dated January 31, 1992 (the "Executive
Purchase Agreements"). No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders may vote ("AHI Voting
Debt") were issued or outstanding. All outstanding shares of the capital stock
are validly issued, fully paid and nonassessable and were not issued in
violation of any preemptive rights. Except for options to purchase 31,528
shares of AHI Common issued pursuant to the AHI Option Plan, rights of certain
executive officers under the Executive Purchase Agreements to receive options
exercisable for an aggregate of 21,684 additional shares of AHI Common, a
warrant exercisable for 23,129 shares of AHI Common issued to Boise Cascade
Corporation and warrants exercisable for an aggregate of 201,275 shares of AHI
Common Stock issued to certain lenders to AHI (collectively, the "AHI Options")
there are no outstanding options, warrants, calls, rights, commitments or
agreements of any character to which AHI or any Subsidiary of AHI is a party or
by which it is bound obligating AHI or any Subsidiary of AHI to issue, deliver
or sell, or cause to be issued, delivered or sold shares of capital stock or any
Voting Debt of AHI or any Subsidiary of AHI or obligating AHI or any Subsidiary
of AHI to grant, extend or enter
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into any such option, warrant, call right, commitment or agreement, except as
and to the extent permitted pursuant to Section 6.5. AHI has no Subsidiaries
other than Associated, and Associated has no Subsidiaries. Neither AHI nor
Associated nor, to the knowledge of AHI, any affiliate of AHI owns any Company
Shares (other than as purchased pursuant to the Offer).
(c) Authority. AHI has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been approved by all necessary corporate action
including the approval of the holders of capital stock of AHI in accordance with
the DGCL. The execution and delivery of this Agreement by AHI and the
consummation by AHI of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of AHI including the
approval of the stockholders of AHI. This Agreement has been duly executed and
delivered by AHI and constitutes a valid and binding obligation of AHI
enforceable against AHI in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity). The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, any provision of the Certificate of
Incorporation or By-laws of AHI or any Subsidiary of AHI or any loan or credit
agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to AHI or any Subsidiary
of AHI or their respective properties or assets, other than any such conflicts,
violations or defaults which will be extinguished or satisfied on or before the
Effective Time or which individually or in the aggregate do not and would not
have a material adverse effect on AHI. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to AHI in connection with the execution
and delivery of this Agreement by AHI or the consummation by AHI of the
transactions contemplated hereby, except for (i) filings to be made and approval
to be obtained under applicable state securities laws and state takeover laws,
(ii) the filing with the appropriate authorities of the Certificate of Merger
and appropriate documents with the relevant authorities of other states and
municipalities in which AHI is qualified to do business, and (iii) the filing of
the Schedule
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14D-1 with the Commission and such other compliance with the Exchange Act as may
be required in connection with the transactions contemplated hereby.
(d) Information Supplied. The information supplied by AHI to the
Company in writing expressly for inclusion in the Information Statement and all
information (including the pro forma financial information) relating to the
Surviving Corporation, the proposed business and operation of the Company
following consummation of the Offer and the Financing included in the
Information Statement, at the date the Information Statement is first mailed to
the stockholders of the Company, at the date of the stockholders meeting
referred to in Section 6.3 (if held) and at the Effective Time, will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The information supplied by AHI to the Company in writing expressly
for inclusion in the Schedule 14D-9, and all information relating to the
Surviving Corporation, the business and operation of the Company following
consummation of the Offer and the Financing included in the Schedule 14D-9 at
the date the Schedule 14D-9 is first mailed to stockholders of the Company and
at the Expiration Date will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. For purposes of this representation and
warranty, AHI shall be entitled to assume the accuracy in all material respects
of the Company's representations and warranties in this Agreement.
(e) Solvency. At the Effective Time and after giving effect to any
changes in the Surviving Corporation's assets and liabilities as a result of the
Merger and the Financing (as herein defined) therefor and the use of proceeds
therefrom, the Surviving Corporation will not: (i) be insolvent either because
its financial condition is such that the sum of its debts is greater than the
fair value of its assets or because the present fair salable value of its assets
will be less than the amount required to pay its probable liability on its debts
(including any legal liability whether matured or unmatured, liquidated,
absolute, fixed, or contingent with any contingent liability evaluated in light
of all the facts and circumstances existing at the time of such valuation as the
amount that can reasonably be expected to become an actual or matured liability)
as they become absolute and matured; (ii) have unreasonably small capital with
which to continue as a going concern and will not lack sufficient capital for
its needs and anticipated needs; or (iii) have incurred or plan to incur debts
beyond its ability to pay as they become absolute and matured. For the purpose
of the representation and warranty contained in this Section 4.2(e), AHI
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shall be entitled to assume that the representations and warranties of the
Company regarding its liabilities and the liabilities of its Subsidiaries are
true and correct in all material respects and that there has been and will be no
material change in the aggregate of the assets or liabilities of the Company
after the date hereof except to the extent AHI has knowledge to the contrary.
(f) Financing. AHI has obtained and furnished the Company with a true
and correct copy of the commitment letter, dated February 13, 1995 from Chase.
Such commitment letter of Chase, as the same may be amended as permitted herein,
is herein referred to as the "Chase Commitment"; provided, however, that no such
amendment shall increase the aggregate amount of indebtedness, reduce the amount
of required equity contribution or materially increase the aggregate cost of
funds. Pursuant to the Chase Commitment, Chase has committed to provide senior
and subordinate debt financing in an aggregate amount sufficient (together with
the equity infusion contemplated thereby) to (i) pay all amounts required to be
paid to the stockholders of the Company upon consummation of the Offer and
Merger, (ii) pay all amounts required to be paid in respect of employee stock
options pursuant to Section 3.6 hereof, (iii) pay all expenses incurred in
connection with the transactions contemplated by this Agreement (it being
understood that, with respect to such expenses incurred or to be incurred by the
Company, AHI may assume that the Company will not breach Section 6.6 hereof),
(iv) provide working capital to the Company immediately following consummation
of the Offer, (v) provide for the Benefits Letter of Credit and Bonus Trust
Letter of Credit (each as defined in Section 6.10(d) hereof), and (vi) pay all
amounts owing (including penalties, prepayment fees and breakage fees identified
in the Company Disclosure Schedule) under the indebtedness of the Company and
its Subsidiaries to be refinanced under the Chase Commitment. The Chase
Commitment is in full force and effect. It is understood that, in lieu of
utilizing the subordinated debt financing provided in the Chase Commitment, AHI
may, at its option, obtain such portion of the financing for the Merger through
a public or private sale of subordinated debt and/or preferred stock issued by
the Surviving Corporation (which debt and preferred stock will become
obligations of the Company pursuant to the Merger) on terms satisfactory to AHI
(subject to the terms of this Agreement). AHI believes and has a reasonable and
informed basis for believing that the Financing will be available at the
expiration of the Offer and upon consummation of the Merger. The financing
contemplated by this Section 4.2(f) is herein called the "Financing." AHI has
reviewed the form of Solvency Opinion and has no reason to believe that the
Solvency Opinion will not be issued by the Appraiser (as defined in Section
6.11) without material change therein as required herein.
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(g) Offer Documents. The Offer Documents (other than information
supplied by the Company to AHI in writing expressly for inclusion therein, as to
which no representation or warranty is made), at the date the Offer Documents
are first mailed to the stockholders of the Company and at the Expiration Date
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(h) Financial Statements. AHI has furnished to the Company true and
correct copies of the audited balance sheets of AHI and its consolidated
Subsidiaries at December 31, 1992, 1993 and 1994, respectively, and the audited
statements of operations and cash flows of AHI and its consolidated Subsidiaries
for the fiscal years then ended (collectively, the "AHI Financial Statements").
The AHI Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved and fairly present in all material respects the consolidated financial
position of AHI and its consolidated Subsidiaries as at the dates thereof and
the consolidated results of their operations and changes in financial position
for the periods then ended except as otherwise stated therein.
(i) Compliance with Applicable Laws. The businesses of AHI and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, judgment, decree, injunction, rule or order of any Governmental
Entity, except for violations which individually or in the aggregate do not, and
would not reasonably be expected to have a material adverse effect on AHI. No
investigation or proceeding before any Governmental Entity with respect to AHI
or any of its Subsidiaries is pending or, to the knowledge and AHI, threatened,
other than those the outcome of which would not reasonably be expected to have a
material adverse effect on AHI.
(j) Litigation. There is no suit, action or proceeding pending, or,
to the knowledge of AHI or any of Subsidiary of AHI, threatened against AHI or
any Subsidiary of AHI which has a reasonable probability of being decided
adversely to AHI or such Subsidiary and which, if adversely determined, would
reasonably be expected to have a material adverse effect on AHI, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against AHI or any Subsidiary of AHI having, or which in
the future would reasonably be expected to have any such effect.
(k) Liabilities. Neither AHI nor any of its Subsidiaries has any
material liabilities or obligations (absolute, accrued, contingent or otherwise)
of a nature required by generally accepted accounting principles to be
recognized or
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disclosed in consolidated financial statements of AHI and its Subsidiaries,
except those disclosed therein.
(l) Title to Properties. AHI or one of its Subsidiaries has good and
indefeasible title to all properties purported to be owned by it or acquired
after the date thereof (except properties sold or otherwise disposed of since
the date thereof in the ordinary course of business), free and clear of all
claims, liens, charges, security interests or encumbrances of any nature
whatsoever except (i) statutory liens securing payments (including taxes) not
yet due, (ii) such imperfections or irregularities of title, claims, liens,
charges, security interests or encumbrances as do not materially affect the use
of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (iii) such
encumbrances as do not have a material adverse effect on AHI.
(m) Leased Properties. AHI is the lessee of all leasehold estates
reflected in the AHI Financial Statements or acquired after the date thereof
(except for leases that have expired by their terms since the date thereof) and
is in possession of the properties purported to be leased thereunder and each
lease is valid without material default thereunder by the lessee or, to AHI's
knowledge, the lessor, except for such leases the invalidity of which or the
material default under which in the future would not reasonably be expected to
have a material adverse effect on AHI.
(n) Taxes. Each of AHI and its Subsidiaries has filed, or has timely
applied for extensions to file, all tax returns, reports, statements and other
documents ("AHI Tax Returns") required to be filed, distributed, or prepared by
any of them relating to any material taxes. Each of AHI and its Subsidiaries
has paid (or AHI has paid on its behalf), or has set up a reserve believed by
AHI, after consultation with its independent accountants, to be adequate for the
payment of, all material taxes required to be paid, withheld, or deducted in
respect of the periods covered by such AHI Tax Returns, and the most recent
financial statements contained in the AHI Financial Statements reflect an
adequate reserve for all taxes payable, or required to be withheld and remitted,
by AHI and its Subsidiaries accrued through the date of such financial
statements. Neither AHI nor any Subsidiary of AHI is delinquent in the payment
of any material tax, assessment or governmental charge, except those which are
not anticipated to be material to AHI and its Subsidiaries taken as a whole and
except those which are being contested in good faith and for which adequate
reserves have been established. No deficiencies material to AHI and its
Subsidiaries taken as a whole for any taxes have been proposed, asserted or
assessed against AHI or any of its Subsidiaries, and no requests for waivers of
the time to assess any such tax, the
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granting of which would have a material adverse effect on AHI are pending.
(o) Certain Agreements. Neither AHI nor any of its Subsidiaries is a
party to any oral or written agreement, plan or arrangement with any officer,
director or employee of AHI or any Subsidiary of AHI (i) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving AHI or any Subsidiary of AHI of the nature
of any of the transactions contemplated by this Agreement, (ii) providing
severance benefits or other benefits after the termination of employment
regardless of the reason for such termination of employment, (iii) any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. Neither AHI
nor any of its Subsidiaries is a party to any oral or written (i) agreement,
contract, indenture or other instrument relating to the borrowing of money or
the guarantee of any obligation for the borrowing of money material to AHI and
its Subsidiaries taken as a whole or (ii) other contract, agreement or
commitment of AHI or its Subsidiaries material to AHI and its Subsidiaries taken
as a whole (except those entered into in the ordinary course of business).
(p) ERISA Compliance. The present value of all accrued benefits
(vested and unvested) under all the "employee pension benefit plans" as such
term is defined in Section 3(2) of ERISA which are subject to Title IV of ERISA,
and which AHI or any Subsidiary of AHI maintains, or to which AHI or any
Subsidiary of AHI is obligated to contribute (the "AHI Pension Plans"), did not,
as of the respective last annual valuation dates for such AHI Pension Plans,
exceed the value of the assets of such AHI Pension Plans allocable to such
benefits. None of the AHI Pension Plans subject to Section 302 of ERISA has
incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA (whether or not waived), since the effective date of such
Section 302. None of AHI, any Subsidiary of AHI, any officer of AHI or a
Subsidiary of AHI or any of the employee benefit plans of AHI and the
Subsidiaries of AHI which are subject to ERISA, including the AHI Pension Plans,
or any trusts created thereunder, or any trustee or administrator thereof, has
engaged in a "prohibited transaction", as such term is defined in Section 4975
of the Code, which could subject AHI, any Subsidiary of AHI, any officer of AHI
or a Subsidiary of AHI, any of such plans or any trust to any material tax or
penalty on prohibited transactions imposed by such Section 4975 and would
reasonably be expected to have a material adverse effect on AHI. Neither any of
such AHI Pension Plans subject to Title IV of ERISA nor any of their related
trusts have been terminated, nor has there been any material "reportable event",
as that term is defined in Section 4043 of ERISA, for which the 30 day reported
request event have not been waived with respect thereto, which in any case would
have a material adverse effect on AHI and its Subsidiaries taken as a whole. AHI
is not a contributing employer to any "multiemployer plan" as such term is
defined in Section 3(37) or Section 4001(a)(3) of ERISA.
(q) Certain Information. With respect to agreements with customers or
suppliers which AHI has not disclosed to the
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Company prior to date hereof for competitive reasons, (i) such agreements were
entered into in the ordinary cause of AHI's business, (ii) AHI reasonably
believes that such agreements are in the aggregate not materially adverse to AHI
and its Subsidiaries taken as a whole and (iii) such agreements (A) do not
contain terms permitting cancellation or termination thereof upon the
consummation of the transactions contemplated hereby where such cancellation or
termination would reasonably be expected to have individually or in the
aggregate a material adverse effect on AHI and (B) if breached by AHI by reason
of the consummation of this Agreement would result in damages against AHI which
would reasonably be expected to have a material adverse effect on AHI.
(r) Absence of Certain Changes or Events. Since December 31, 1994 AHI
and the Subsidiaries of AHI have conducted their respective businesses only in
the ordinary course, and there has not been (i) any damage, destruction or loss
to any property of AHI or its Subsidiaries, whether covered by insurance or not,
which has or, in the future would reasonably be expected to have a material
adverse effect on AHI or the Surviving Corporation; (ii) any declaration,
setting aside or payment of any dividend (whether in cash, stock or property)
with respect to any of AHI's capital stock other than the accrual or payment of
dividends on the AHI Preferred Stock in accordance with its terms; or (iii) any
transaction, commitment, dispute or other event or condition by or with respect
to AHI or its Subsidiary which, individually or in the aggregate, has had, or in
the future would reasonably be expected to have, a material adverse effect on
AHI or the Surviving Corporation.
(s) Definition of Knowledge. For purposes of the Agreement, "to the
knowledge of AHI" and words of similar import shall be limited to the actual
knowledge of the executive officers of AHI and its Subsidiaries.
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ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
5.1 Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, the Company (except as
expressly permitted or contemplated by this Agreement or to the extent that AHI
shall otherwise consent in writing) shall conduct its business as follows:
(a) Ordinary Course. The Company and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such businesses, use reasonable efforts to preserve their
present business organizations, keep available the services of their present
officers and employees and preserve their relationships with customers and
suppliers, except as any of the foregoing shall have been affected by the
announcement of the transactions contemplated by this Agreement.
(b) Dividends; Changes in Stock. The Company shall not and shall not
propose to (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock except as permitted by Section 6.13 hereof,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of the Company or (iii) repurchase or
otherwise acquire, or permit any Subsidiary of the Company to purchase or
otherwise acquire, any shares of its capital stock (other than in accordance
with the terms of the Company Option Plans) or Company options (except as
contemplated by this Agreement).
(c) Issuance of Securities. The Company shall not, and shall not
permit any Subsidiary of the Company to, issue, deliver or sell, or authorize or
propose the issuance, or delivery or sale of, any shares of its capital stock of
any class, any Voting Debt or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, Voting Debt or convertible
securities (other than the issuance of no more than 10,000 shares of Company
Common Stock upon the exercise of stock options granted under the Company Option
Plans that are outstanding on the date of this Agreement in accordance with
their present terms).
(d) Governing Documents. The Company shall not, and shall not permit
any Subsidiary to, amend or propose to amend its Certificate of Incorporation or
bylaws except as contemplated by Section 1.1(a).
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(e) Takeover Proposals. From and after the date hereof and until the
Effective Time (or earlier termination of this Agreement), provided that AHI is
not in material breach of this Agreement, the Company shall not, nor shall it
permit any Subsidiary of the Company to, nor shall it authorize or permit any
officer, director or employee of or any investment banker, attorney, accountant
or other representative retained by the Company or any Subsidiary of the Company
to, solicit, initiate or encourage submission of any proposal or offer
(including by way of furnishing nonpublic information about the Company) from
any person which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as defined below); provided, however, that the Company and
such other persons shall be entitled to furnish information to any third party
(and enter into agreements with respect to confidentiality and related matters
with such third party) in response to an unsolicited inquiry and to engage in
discussions to clarify and refine any details of any offers that may result from
any such unsolicited inquiry to the extent the Company Board determines in good
faith and after consultation with its legal counsel that the failure to do so
would be inconsistent with its fiduciary duties. The Company shall promptly
communicate to AHI the material terms of any proposal (other than the identity
of the party making such proposal if such party requests that its identity
remain confidential), which it may receive in respect of any actual or potential
Takeover Proposal. As used in this Agreement, "Takeover Proposal" shall mean any
proposal for a merger or other business combination involving the Company or any
Subsidiary of the Company or any proposal or offer to acquire in any manner a
substantial equity interest in the Company or any Subsidiary of the Company or a
substantial portion of the assets of the Company or any Subsidiary of the
Company. If the Company shall enter into any agreement with a third party (a
"TPC Agreement") with respect to any of the matters set forth in that certain
Confidentiality Agreement dated as of November 16, 1994, among the Company,
Associated Stationers, Inc., and Wingate Partners, L.P., as supplemented by
letter agreement dated as of November 16, 1994 (the "Confidentiality Agreement")
and the material terms or condition of any TPC Agreement are less restrictive on
the third party than the corresponding terms and conditions (excluding the no
hire provisions) of the Confidentiality Agreement, the Confidentiality Agreement
shall automatically be amended to such less restrictive terms and conditions.
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(f) No Acquisitions. The Company shall not, and shall not permit any
Subsidiary of the Company to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof which acquisition, if
consummated, would be, individually or in the aggregate, material to the
Company. The Company shall not purchase assets (other than inventory and
capital expenditures) with an aggregate purchase price of more than $5,000,000
in the aggregate.
(g) No Dispositions. The Company shall not, and shall not permit any
Subsidiary of the Company to, sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, assets with a fair market value in excess
of $5,000,000 (individually or in the aggregate), except for inventory, accounts
receivable, supplies obsolete or damaged assets and salvage items and excluding
dispositions of assets which are or will be replaced with a similar type of
asset.
(h) Indebtedness. The Company shall not, and shall not permit any
Subsidiary of the Company to, incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or any Subsidiary of the Company or guarantee any debt securities of
others other than in accordance with the Company Disclosure Schedule or for
working capital purposes in the ordinary course of business or capital
expenditures permitted hereunder and refinancings of existing bank indebtedness
with the consent of AHI, which consent shall not be unreasonably withheld or
delayed. To the extent available to the Company under agreements governing its
bank indebtedness, the Company shall select an interest rate option based on
LIBOR for an interest period not to exceed thirty (30) days.
(i) Benefit Plans, Etc. Other than as provided in the Company
Disclosure Schedule the Company shall not, and shall not permit any Subsidiary
of the Company to, adopt or amend in any material respect any collective
bargaining agreement or material employee benefit plan, stock option plan,
phantom stock plan or material vacation plan other than in the ordinary course
of business consistent with past practice or as contemplated by Section 3.6.
Notwithstanding the foregoing, the Company
(a) may (and after the Expiration Date, to the extent not already
paid, shall) pay to plan participants the following employee benefit
obligations on a date selected by it preceding the first date on which AHI
purchases Company Shares pursuant to the Offer (i) so-called "top-hat" or
supplemental retirement benefits for the benefit of present or past
employees and directors of the Company and (ii)
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deferred compensation owing to present or past employees and directors,
each as disclosed in the Company Disclosure Schedule assuming the Effective
Time is June 30, 1995. The amounts payable shall be computed by the
Company in accordance with its past practices and shall be in amounts which
shall not exceed the amounts accrued on the Company's books through the end
of the month preceding the date on which AHI first purchases Company Shares
pursuant to the Offer, plus amounts which the Company estimates would be
accrued through the Effective Time; and
(b) the Company may (and after the Expiration Date, to the extent not
already paid, shall) prior to the first date on which AHI purchases Shares
in the Offer, make contributions (calculated in accordance with past
practices) to its profit sharing plan for that portion of the fiscal year
ending August 31, 1995 which it estimates will have elapsed through the
Effective Time. The amount which the Company estimates would be
contributed for such fiscal year if the Effective Time occurred on June 30,
1995 is set forth in the Company Disclosure Schedule.
(j) Executive Compensation. The Company shall not, and shall not
permit any Subsidiary of the Company to, (i) increase the aggregate amounts
payable under or otherwise change in a manner materially (in reference to all
Executive Contracts) adverse to the Company any other material term of the
Executive Contracts or any other agreement with its executive officers except as
and to the extent disclosed in the Company Disclosure Schedule and except for
increases in the ordinary course of business consistent with past practice of
the Company, (ii) enter into any employment agreement with any executive officer
except with respect to prospective executive officers, except with the prior
written consent of AHI which shall not be unreasonably withheld or delayed,
(iii) materially increase the compensation payable to any other officer or
employee except for increases in the ordinary course of business consistent with
past practice of the Company. For purposes of this paragraph (j) the wage
freeze currently in effect for the Company shall not be considered part of the
past practice of the Company.
(k) No Capital Expenditures. The Company shall not, and shall not
permit any Subsidiary of the Company to, make any capital expenditures or any
commitments therefor which exceed 120% of the amount set forth in the Company
Disclosure Schedule.
(l) Company SEC Filings. The Company shall file all reports,
schedules and definitive proxy statements (the "Company Filings") required to be
filed by the Company with the SEC and shall provide copies thereof to AHI
promptly upon the filing thereof. As of its respective date, each Company
Filing will comply in all material respects with the requirements of the
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Exchange Act and the applicable rules and regulations of the Commission
thereunder and none of the Company Filings will contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. As of their respective dates, the
financial statements of the Company included in the Company Filings will have
been prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q) and will fairly present
in all material respects the consolidated financial position of the Company as
at the dates thereof and the consolidated results of operations, cash flows or
changes in financial position for the periods indicated therein. Upon the
filing of a Company Filing, the Company Filing shall be considered as an SEC
Document for all purposes of this Agreement.
(m) Other Actions. The Company shall not, and shall not permit any
Subsidiary of the Company to, take any action that would or might result in any
of the representations and warranties of the Company set forth in this Agreement
becoming untrue or in any of the conditions to the Merger set forth in Article 7
not being satisfied.
(n) Advice of Changes. The Company shall promptly advise AHI orally
or in writing of any change or event having, or which would have, a material
adverse effect on the Company other than any changes or events arising from
general economic conditions or generally affecting the industry in which the
Company operates.
5.2 Covenants of AHI. During the period from the date of this
Agreement and continuing until the Effective Time, AHI shall (except as
expressly permitted by this Agreement or to the extent that the Company shall
otherwise consent in writing) conduct its business as follows:
(a) Ordinary Course. AHI and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and, to the extent consistent with such
businesses, use reasonable efforts to preserve their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers and suppliers, except
as any of the foregoing shall have been affected by the announcement of the
transactions contemplated by this Agreement.
(b) Dividends; Changes in Stock. AHI shall not and shall not propose
to (i) declare or pay any dividends on or make other distributions in respect of
any of its capital stock
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other than the accrual of dividends on the AHI Preferred Stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of AHI or (iii) repurchase or otherwise
acquire, or permit any Subsidiary of AHI to purchase or otherwise acquire, any
shares of its capital stock.
(c) Issuance of Securities. Except as contemplated by the AHI
Options, Chase Commitment and Section 6.5 hereof, AHI shall not, and shall not
permit any Subsidiary of AHI to, issue, deliver or sell, or authorize or propose
the issuance, or delivery or sale of, any shares of its capital stock of any
class, any Voting Debt or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, Voting Debt or convertible
securities.
(d) Governing Documents. Except to the extent necessary to permit the
issuance of capital stock as provided in the Chase Commitment or as permitted
under Section 6.5, AHI shall not, and shall not permit any Subsidiary of AHI to,
amend or propose to amend their Certificate of Incorporation or By-laws.
(e) No Acquisitions. AHI shall not, and shall not permit any
Subsidiary of AHI to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof which acquisition, if consummated
would be material, individually or in the aggregate, to AHI.
(f) No Dispositions. AHI shall not, and shall not permit any
Subsidiary of AHI to, sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets, which are material,
individually or in the aggregate, to AHI, except in the ordinary course of
business consistent with prior practice.
(g) Indebtedness. Except as contemplated by the Chase Commitment, AHI
shall not, and shall not permit any Subsidiary of AHI to, incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of AHI or any Subsidiary of AHI or guarantee any debt securities of
others other than for working capital purposes in the ordinary course of
business.
(h) Benefit Plans, Etc. AHI shall not, and shall not permit any
Subsidiary of AHI to, adopt or amend in any material respect any collective
bargaining agreement or employee benefit plan other than in the ordinary course
of business consistent with prior practice.
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(i) Executive Compensation. AHI shall not, and shall not permit any
Subsidiary of AHI to, grant to any executive officer any material increase in
compensation or in severance or termination pay, or enter into any employment
agreement with any executive officer, except as set forth in the AHI Disclosure
Schedule, as may be required under employment or termination agreements in
effect on the date of this Agreement and included in the AHI Disclosure Schedule
or in the ordinary course of business consistent with prior practice.
(j) No Capital Expenditures. AHI shall not, and shall not permit any
Subsidiary of AHI to, make any capital expenditures or any commitments therefor
other than in the ordinary course of business.
(k) Advice of Changes. AHI shall promptly advise the Company orally
or in writing of any change or event having, or which would have, a material
adverse effect on AHI, other than changes or events arising from economic
conditions or generally affecting the business in which AHI operates.
ARTICLE 6
ADDITIONAL AGREEMENTS
---------------------
6.1 Information Statements; Offering Documents.
(a) The Company will prepare and file, as promptly as practicable and
in no event later than ten days after the date hereof, a preliminary Information
Statement (with confidential treatment requested) with the Commission relating
to matters to be acted on by the stockholders of the Company after consummation
of the Offer. AHI agrees to provide to the Company as promptly practicable and
be solely responsible for all information (including all proforma financial
information) relating to AHI and its Subsidiaries and the description,
operations and conduct of the business of the Company following the purchase of
Company Shares in the Offer. The Company will use its reasonable best efforts
to respond to any comments of the Commission and to cause the Information
Statement to be mailed to the Company's stockholders at the earliest practicable
time following consummation of the Offer. The Company will provide to AHI and
its counsel a full opportunity to review and comment upon the preliminary and
definitive Information Statement prior to filing with the Commission. The
Company will notify AHI promptly of the receipt of any comments from the
Commission or its staff and of any request by the Commission or its staff for
amendments or supplements to the Information Statement or for additional
information and will supply AHI with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the Commission or
its staff, on the other hand, with
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respect to the Information Statement or the Merger. If at any time prior to the
Effective Time any event shall occur which should be set forth in an amendment
of, or a supplement to, the Information Statement, the Company will promptly
prepare and mail such an amendment or supplement. The Company will not mail the
Information Statement, or any amendment thereof or supplement thereto, to the
Company's stockholders unless it has first obtained the consent of AHI to such
mailing, which consent shall not be unreasonably withheld.
(b) AHI will prepare and submit to its stockholders, as promptly as
practicable after the date hereof and in a manner in conformance with all
applicable laws, all disclosures required by applicable law. Such action by AHI
will be exempt from the registration requirements of Federal and applicable
state securities laws.
6.2 Access to Information. Each of the Company and AHI shall (and
shall cause each of its Subsidiaries to) afford to the other party and to the
other party's accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time to
all their respective properties, financial statements, books, contracts,
commitments and records and, during such period, each of the Company and AHI
shall (and shall cause each of its Subsidiaries to) furnish promptly to the
other party (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal and state securities laws and (b) all other information
concerning its business, properties and personnel as the other party may
reasonably request; provided, however, that neither party shall be required to
furnish to the other or permit access to information relating to customers,
suppliers, marketing strategy or the like deemed by such party to be sensitive
from a competitive point of view. All information obtained pursuant to this
Agreement by or on behalf of AHI or any Subsidiary of AHI shall be subject to
the provisions of the Confidentiality Agreement.
6.3 Stockholder Approval.
(a) If required by applicable law in order to consummate the Merger,
the Company shall promptly following the date which the Offer is consummated
call a meeting of its stockholders for the purpose of adopting this Agreement
and approving the Merger and related matters. Subject to the fiduciary duties
of the Company Board under applicable law, the Company shall, through its Board
of Directors, otherwise use its reasonable best efforts (including the
engagement of a proxy solicitation firm acceptable to AHI) to obtain stockholder
approval of this Agreement. If a vote or consent of the stockholders is
required under the DGCL or requested, AHI shall
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vote all AHI-owned Shares to be voted in favor of adopting this Agreement and
approving the Merger.
(b) AHI shall as soon as practicable following the date hereof give to
its stockholders notice that this Agreement has been adopted and the
transactions contemplated hereby approved by action by written consent of AHI's
majority stockholder.
6.4 Legal Conditions to Merger. Each of AHI and the Company will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it or any of its Subsidiaries with respect
to the Offer or Merger and will promptly cooperate with and furnish information
in connection with any such requirements imposed upon it or any of its
Subsidiaries in connection with the Offer or Merger. Each of AHI and the Company
will take, and will cause its Subsidiaries to take, all reasonable actions
necessary to obtain (and will cooperate with the other party and its
Subsidiaries in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity, and will take all reasonable actions
necessary to obtain any consent of any other third party, required to be
obtained or made by the Company or any of its Subsidiaries (or by AHI or any of
its Subsidiaries) in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement. The Company shall use reasonable
best efforts to obtain the consent of the parties with respect to the matters
identified on Exhibit D-1 hereto (the "Company Material Consents"). AHI will
use reasonable best efforts to obtain the consents of the party with respect to
the matters identified in Exhibit D-2 hereto. Notwithstanding the foregoing, in
no event shall AHI or the Company be required to agree or consent to the
divestiture of any material amount of assets of AHI, the Company, the Surviving
Corporation or their respective Subsidiaries, or any restriction on the right of
AHI or Wingate Partners, L.P. to control the business of the Surviving
Corporation or any of its Subsidiaries following the Merger.
6.5 Financing. AHI will use its reasonable best efforts to obtain
the Financing in accordance with the Chase Commitment and enter into definitive
documentation with respect thereto, including without limitation the filing and
diligent prosecution of all filings with the Commission and state securities or
blue sky authorities, as may be necessary to effect the Financing, the Offer and
the Merger. AHI agrees that no shares of capital stock or rights to acquire
capital stock of the Company, the Surviving Corporation or any Subsidiary of
either given in connection with the Financing shall dilute the percentage
ownership in the Surviving Corporation of the holders of Company Shares which
are converted pursuant to Section 3.1(a) hereof. The Company acknowledges that
AHI intends to cause all
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or substantially all of the indebtedness of the Company to be refinanced
concurrently with the consummation of the Offer as and to the extent provided in
the Chase Commitment. In connection with the Financing, AHI will issue
additional shares of AHI Common for an aggregate consideration of not less than
$12,000,000 cash and an average equivalent price per share of Company Common
Stock of not less than $10 per share and warrants, options and other rights to
purchase common stock. AHI will promptly but in any event within one business
day issue a public announcement upon entering into definitive documentation with
respect to the Financing.
6.6 Expenses. Except as set forth in Section 8.2(c), all expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses and, for the purposes
of this Section 6.6, expenses to be paid by the Company shall include expenses
incurred in connection with the preparation and mailing of the Information
Statement; provided, however, that each party shall pay one-half of all fees and
expenses of any consultants retained by mutual agreement of the parties (other
than their respective attorneys, which shall be paid by their retaining party)
in connection with obtaining, or seeking to obtain necessary approvals under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and provided,
further, that the Company covenants and agrees that the aggregate third party
expenses (other than legal and accounting fees and expenses) incurred by it in
connection with this Agreement and the transactions contemplated hereby prior to
the Expiration Date shall not exceed $2.75 million (subject to an increase by
the amount by which certain fees payable by the Company disclosed to AHI prior
to the date hereof increase if the price paid in the Offer increases), and that
all such third party expenses will be paid or accrued in full prior to the
Closing Date.
6.7 Brokers or Finders. Each of AHI and the Company represents, as
to itself, its Subsidiaries and its affiliates, that no agent, broker,
investment banker or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except Blair and Lazard, both
of whose fees and expenses will be paid by the Company in accordance with the
Company's agreement with such firm (copies of which have been delivered by the
Company to AHI prior to the date of this Agreement), and Chase Securities, Inc.
and Chase, whose fees and expenses will be paid by AHI in accordance with AHI's
agreement with such firms, and each of AHI and the Company shall indemnify and
hold the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or its affiliate.
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6.8 Indemnification and Insurance.
(a) AHI (from and after the purchase of Company Shares in the Offer),
the Surviving Corporation (and, prior to the Effective Time, the Company),
hereby jointly and severally agree that until June 30, 2000, the Company (prior
to the Effective Time) and the Surviving Corporation (at and after the Effective
Time) shall provide officers' and directors' liability insurance covering each
present and former director, officer, employee and agent of the Company and each
Subsidiary of the Company and each present and former director, officer,
employee, agent or trustee of any employee benefit plan for employees of the
Company (individually, an "Indemnified Person", and collectively, the
"Indemnified Persons"), who is currently covered by the Company's officers' and
directors' liability insurance or will be so covered on the Expiration Date or
the Closing Date with respect to actions and omissions occurring (or alleged to
have occurred) on or prior to the Effective Time (including, without limitation,
any which arise out of or relate to the transaction contemplated by this
Agreement), which liability insurance is no less favorable than such insurance
maintained in effect by the Company on the date hereof in terms of coverage and
amount; provided, however, that if the premiums for such insurance exceed in any
year 175% of the premiums for such insurance paid by the Company for the twelve
month period ended October 31, 1995, such insurance may be modified to provide
the maximum coverage available for 175% of the amount of such premiums for such
period. Proof of such insurance, including a certificate or certificates of
insurance (along with a copy of the underlying policy with respect to which the
certificate is issued) shall be furnished by AHI to the Company on or prior to
the Closing Date and thereafter shall be furnished by AHI to any Indemnified
Persons upon request during such period. On or before each June 30 of each year
the Company or the Surviving Corporation shall furnish a certificate executed by
its chief financial or accounting officer certifying and showing compliance with
the requirements of this Section 6.8 to Joel D. Spungin, in care of Altheimer &
Gray, Attn: Phillip Gordon, 10 South Wacker Drive, Suite 4000, Chicago, Illinois
60606.
(b) The Surviving Corporation (and, prior to the Effective Time, the
Company) shall indemnify and hold harmless to the fullest extent permissible
under the DGCL each of the Indemnified Persons against any losses, claims,
damages, liabilities, costs, expenses (including, without limitation, reasonable
attorneys fees), judgments, fines and amounts paid in settlement in connection
with any threatened, pending or completed claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative
("Indemnifiable Claim"), arising out of or related to any action or omission
occurring on or prior to the Closing Date (including, without limitation, any
which arise out of or relate to the
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transactions contemplated by this Agreement), whether asserted or commenced
prior to, on or after the Closing Date (excluding, however, actions brought by
the Company against persons who are Indemnified Persons for repayment amounts
alleged to have been improperly paid under the Benefits Trust Agreement.
(c) The Surviving Corporation (and, prior to the Effective Time, the
Company) hereby agrees that, until at least June 30, 2000, the provisions of the
Certificate of Incorporation and By-Laws of the Surviving Corporation shall
provide indemnification to the Indemnified Persons on terms, in a manner, and
with respect to matters, which are no less favorable (in favor of persons
indemnified) than the Certificate of Incorporation and By-Laws of the Company
and its Subsidiary, United Stationers Supply Co. ("USSC"), as in effect on the
date hereof, and further agree that such indemnification provisions shall not be
modified or amended except as required by law, unless such modification or
amendment clearly expands the rights of the Indemnified Persons to
indemnification. Without limiting the generality of the foregoing, the
Surviving Corporation shall advance, from time to time, as incurred, expenses
(including reasonable attorneys' fees) to each such Indemnified Person.
(d) In the event of any Indemnifiable Claim (whether asserted or
commenced before, on or after the Closing Date), (i) the Indemnified Person(s)
may retain counsel satisfactory to them, and the Company or the Surviving
Corporation after the Effective Time, shall pay all fees and expenses of such
counsel for the Indemnified Person(s) promptly as statements therefor are
received (whether or not such fees and expenses are incurred prior to the actual
disposition of such Indemnifiable Claim), and (ii) the Company and, after the
Effective Time, the Surviving Corporation shall use their respective best
efforts to assist the Indemnified Person(s) in the defense of any such matter;
provided that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its written consent, which consent, however,
shall not be unreasonably withheld or delayed. Any Indemnified Person wishing
to claim indemnification under this Section 6.8, upon learning of any
Indemnifiable Claim, shall notify the Surviving Corporation thereof, provided
their failure to provide any such notice shall not relieve the Surviving
Corporation of its obligations under this Section 6.8, except to the extent the
Surviving Corporation is actually and materially prejudiced by such lack of
notice. The Indemnified Persons as a group with respect to the same
Indemnifiable Claim may retain only one (1) law firm to represent them with
respect to any such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two (2) or more Indemnified Persons, in which case such Indemnified
Persons may retain such number of additional counsel
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as are necessary to eliminate all conflicts of the type referred to above.
(e) AHI, the Company and the Surviving Corporation expressly
acknowledge the indemnification and like obligations of the Company and USSC
contained in their respective Certificates of Incorporation and By-Laws and
hereby agree, from and after the Expiration Date, to honor in accordance with
their terms all such obligations and further acknowledge that said obligations
(along with the indemnification and like obligations in the Certificate of
Incorporation and By-Laws of the Surviving Corporation) constitute a contract
between the Company and/or USSC (and/or the Surviving Corporation), as the case
may be, on the one hand, and the Indemnified Person(s), on the other hand,
creating binding obligations on the part of the indemnitors and binding rights
on the part of the Indemnified Persons. Without limiting the foregoing
obligations of AHI, the Company and the Surviving Corporation in this Section
6.8, upon consummation of the transactions contemplated by this Agreement, the
Company and USSC shall continue to honor, and the Surviving Corporation will be
bound by and honor such obligations of the Company and USSC referred to in the
next preceding sentence and will reimburse an Indemnified Person for its
expenses in enforcing its rights under this Section 6.8, including reasonable
attorneys fees.
(f) If the Company or the Surviving Corporation or its successors or
assigns shall transfer all or substantially all of its properties and assets to
any individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns thereof shall assume
the obligations set forth in this Section 6.8; provided, however, no such
assignment or assumption shall relieve the Surviving Corporation (or any
successor or assign) of its obligations set forth in (or imposed pursuant to)
this Section 6.8.
(g) Nothing contained in this Section 6.8, or elsewhere in this
Agreement, shall limit an Indemnified Person's right (or impose any obligation
upon an Indemnified Person) to pursue (whether separately, simultaneously or in
seriatim) recovery of the obligations of indemnification provided for in this
Section 6.8, or affect the obligations of the Company prior to the expiration of
the Offer, and the pursuit of one or more rights of indemnification by an
Indemnified Person shall not be deemed to be a waiver of the right to pursue any
other remedy. Nothing herein contained shall be deemed or construed as allowing
an Indemnified Person to recover an aggregate amount in excess of the amount for
which the Indemnified Person is entitled to indemnification. Nothing in this
Section 6.8 shall be deemed to require the Company (prior to the Effective Time)
or the Surviving Corporation to take any action in violation of applicable law.
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6.9 Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
subject, if applicable, to the appropriate approval of stockholders of the
Company required so to approve, and, subject in the case of the Company to the
exercise by the Company Board prior to the Expiration Date of its fiduciary
duties under applicable law as advised by legal counsel. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of the Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either the constituent corporations, the proper officers and directors of each
corporation that is a party to this Agreement shall take all such necessary
action.
6.10 Employee Contracts and Employee Benefit Plans.
(a) From and after the earlier to occur of the consummation of the
Offer and the Effective Time, the Company and the Surviving Corporation shall
cause to be maintained and honored the severance policy of the Company and USSC
for terminated employees as in effect on the date hereof, copies of which appear
in the Company Disclosure Schedule, or shall replace such policy with, and keep
in effect, a policy providing to the employees a severance policy which equals
or has more favorable terms, compensation and benefits than the severance policy
for the Company or USSC, for a period of not less than one (1) year after the
Effective Time.
(b) From and after the earlier to occur of the consummation of the
Offer and the Effective Time, the Company and the Surviving Corporation hereby
agree to duly and punctually perform (or cause to be performed) all obligations
of the Company and its Subsidiaries under all of their existing agreements with
directors, officers, employees and former employees, including, without
limitation, the Executive Contracts and the agreements set forth in the Company
Disclosure Schedule. To the extent not prohibited by applicable law the Company
and the Surviving Corporation shall cause service with the Company prior to the
Effective Time to be treated as service for benefit plan purposes at least to
the extent that service with AHI prior to the Effective Time is treated as
service for benefit plan purposes (including, without limitation, for purposes
of pre-existing conditions limitations, waiting period and vesting
requirements).
(c) The Company (and, following the Effective Time, the Surviving
Corporation) shall not amend the provisions of the United Stationers Pension
Plan ("US Pension Plan") which
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prescribe the interest rate assumption, mortality table assumption and any other
factors that determine the actuarial equivalent of different forms of payment
under the US Pension Plan if the amendment would result in lump sum options
smaller than the lump sum options calculated by using the interest rate
assumption, mortality table assumption, and other factors which would otherwise
be prescribed by the US Pension Plan as in effect on the date of this Agreement.
(d) Prior to the acceptance for payment of Company Shares pursuant to
the Offer, (i) the Company shall execute and deliver the Benefits Trust
Agreement substantially in the form of Exhibit E hereto (the "Benefits Trust
Agreement") and the Bonus Plan Trust Agreement substantially in the form of
Exhibit F hereto (the "Bonus Plan Trust") and (ii) AHI shall give its written
consent to the Benefits Trust Agreement and Bonus Plan Trust. Simultaneous with
the payment for Company Shares accepted for payment pursuant to the Offer, AHI
shall deposit with American National Bank and Trust Company, (A) as trustee
under the Benefits Trust Agreement ("Benefits Trustee") a Letter of Credit
issued by Chase in the face amount of $24,000,000 substantially in the form of
Exhibit G hereto (the "Benefits Letter of Credit") and (B) as trustee under the
Bonus Plan Trust a Letter of Credit issued by Chase substantially in the form of
Exhibit H hereto (the "Bonus Letter of Credit") in a face amount, as reasonably
estimated by the Company, equal to the sum of (x) in respect of the Executive
Bonus Plan, amounts accrued by the Company on its books through the first day on
which Shares are purchased in the Offer plus amounts which the Company estimates
will be accrued through the end of the month in which the Effective Time occurs;
provided, that if the Effective Date occurs on or before the tenth day of the
month, the estimate will be of amounts accrued to the Effective Date (less
amounts theretofore paid under such plan), plus (y) in respect of the Management
Incentive Plan, amounts accrued by the Company on its books through the first
date on which Shares are purchased in the Offer plus amounts which the Company
estimates will be accrued for the remainder of the fiscal year ending August 31,
1995. The accruals under such plans shall be made in accordance with the terms
of the plans. The amounts which the Company currently estimates will be accrued
if the Effective Time occurs on June 30, 1995 are (X) in respect of the
Executive Bonus Plan, $1,001,000, and (Y) in respect of the Management Incentive
Plan, $4,207,000. The Company shall give written notice to AHI of the amount of
the Bonus Letter of Credit not later than two days prior to the then scheduled
Expiration Date. The face amount of the Bonus Letter of Credit shall not exceed
$6,000,000.
(e) The Surviving Corporation shall make contributions to the
Company's 401(k) plan in amounts required by such plan for the portion of its
fiscal year elapsed through the Effective Time.
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6.11 Financial Condition. AHI shall use its reasonable best efforts
to cause to be executed and delivered to the Company prior to or simultaneous
with the acceptance for payment of the Company Shares pursuant to the Offer, (a)
financial condition certificate in the same form to be delivered to Chase which
certificates will address matters customarily addressed in such certificates
(the "Financial Condition Certificate") and (b) the opinion of Valuation
Research Corporation (the "Appraiser") addressed to the Company (among others)
substantially in the form attached hereto as Exhibit I (the "Solvency Opinion").
6.12 Compliance Certificates.
(a) Prior to the acceptance of Shares for payment pursuant to the
Offer Expiration Date (as then scheduled), AHI shall deliver to the Company a
certificate executed on behalf of AHI by the chief executive officer and chief
accounting officer of AHI, stating that the representations and warranties of
AHI set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the date of such certificate
as though made on and as of the date of such certificate, except as otherwise
permitted by this Agreement or if any such representation or warranty is untrue
in any material respect, specifying the respect in which the same is untrue.
(b) Prior to the acceptance of Shares for payment pursuant to the
Offer (as then scheduled), the Company shall, if requested by AHI, deliver to
AHI a certificate executed on behalf of the Company by the chief executive
officer and chief financial officer of the Company, stating that the
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date of such certificate
as though made on and as of the date of such certificate, except as otherwise
permitted by this Agreement, or if any such representation or warranty is untrue
in any material respect, specifying the respect in which the same is untrue.
6.13 Company Dividends. Notwithstanding anything to the contrary
contained in this Agreement, (a) prior to the Expiration Date the Company shall
declare and thereafter promptly pay to stockholders a cash dividend of $.10 per
share in respect of the fiscal quarter ended February 28, 1995 and (b) if the
Merger shall not have occurred on or before June 15, 1995, the Company shall, if
approved by the Company Board (prior to the Expiration Date) or the Continuing
Directors (after the Expiration Date) and, if AHI, any of its Subsidiaries or
Affiliates owns any Company Shares, AHI shall cause the Company to, on or about
June 16, 1995 declare and thereafter promptly pay to stockholders of record as
of a date no later than one day prior to the Effective Time a cash dividend of
$.10 per share.
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6.14 AHI Stockholder Agreements. Prior to the Expiration Date, AHI
will use its reasonable best efforts to deliver to the Company within ten days
from the date of this Agreement a letter signed by each beneficial owner of 5%
or more of the outstanding Shares of AHI Common (including holders of rights to
acquire 5% or more of the AHI Common) agreeing not to sell their shares of
Company Common Stock received in the Merger for a period of one year after the
Effective Time, such letter to be in a form reasonably satisfactory to the
Company and AHI. The Surviving Corporation shall not waive the obligations of
rights such beneficial owners under such letters. The AHI Disclosure Schedule
contains a true and correct copy of certain Letter Agreements between AHI and
certain of its lenders dated February 10, 1995 (the "Bank Letters"). AHI, and
following the Effective Time, the Surviving Corporation, shall not amend,
release or relinquish its rights under such Bank Letters. AHI and the Surviving
Corporation shall not waive any obligation of any stockholder or warrantholder
to not sell its shares or warrants.
6.15 Agreements to be Assumed by the Company. At the Effective Time,
each outstanding option, warrant, or other right to acquire AHI Common or AHI
Class B Common (collectively, "AHI Options") shall be deemed to have been
assumed by the Company, without further action by the Company, and shall
thereafter be deemed an option to acquire, on the same terms and conditions as
were applicable under such AHI Option, a number of Company Shares equal to the
number of Company Shares that would have been received in respect of such AHI
Option if it had been exercised immediately prior to the Effective Time;
provided, however, that no fractional shares shall be issued on exercise of any
such assumed AHI Option and, in lieu thereof, the shares issuable on any such
exercise shall be rounded to the nearest whole share. Also at the Effective
Time the Company shall be deemed to have assumed, without further action by the
Company, the obligations of AHI under Stockholders Agreement, Executive Stock
Purchase Agreements, Voting Trust Agreement, Stockholders Registration Rights
Agreement, the Warrants, Warrant Agreements and Lenders Registration Rights
Agreement, each in substantially the form included in the AHI Disclosure
Schedule, with the effect that after the Effective Time all such agreements
shall be applicable to an appropriate number and class of Company Shares (based
on the exchange ratio of Company Shares for AHI Common Stock pursuant to Section
3.1(c)) in lieu of the shares of AHI Common or Class B Common Stock of AHI
subject thereof immediately prior to the Effective Time. Also after the
Effective Time, no additional options shall be granted under the AHI Stock
Option Plan.
6.16 Subsidiary Merger. Immediately following (and in no event prior
to) the Effective Time, the Company shall cause Associated (which as a result of
the Merger will become a wholly-owned Subsidiary of the Company) to be merged
with and into the
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Company's wholly-owned Subsidiary, United Stationers Supply Company. In
accordance with Treasury Regulation (S) 1.1502-76(b)(1)(ii)(B), each party to
this Agreement hereby acknowledges and agrees, on its own behalf and on behalf
of all persons related to such party under section 267(b) of the Internal
Revenue Code of 1986, as amended (a "Related Party"), to treat such subsidiary
merger as occurring for federal income tax purposes at the beginning of the day
following the Effective Time, and each party to this Agreement shall, and shall
cause all Related Parties with respect to such party to, file all relevant
federal, state, and local income tax returns in a manner consistent with such
treatment.
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to Each Party's Obligations. The respective
obligation of each party to effect the Merger is subject to the satisfaction
prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote or consent of the stockholders of the Company, if
such vote or consent is required by applicable law.
(b) Other Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect.
(d) No Action. No action shall have been taken nor any statute, rule
or regulation shall have been enacted by any government (or any governmental
body or agency) of the United States or any state thereof or any foreign country
that makes the consummation of the Merger illegal.
(e) Financial Condition. The certificates and opinion referred to in
Section 6.11 shall have been executed and delivered to the Company as of the
Closing Date.
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7.2 Conditions to Obligations of AHI. Unless AHI shall have
purchased Company Shares pursuant to the Offer, the obligations of AHI to effect
the Merger are subject to the satisfaction of the following conditions unless
waived by AHI, it being understood that if AHI designates a majority of the
directors of the Company Board pursuant to Section 2.3(a) or otherwise, the
provisions of this Section 7.2 shall not apply:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except as otherwise permitted
by this Agreement and except for changes in any representations and warranties
which do not have a material adverse effect on the Company, and AHI shall have
received a certificate signed on behalf of the Company by the chief executive
officer and by the chief accounting officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed all obligations required to be performed by it under this Agreement on
or prior to the Closing Date including, without limitation, all obligations
which the Company would be required to perform at the Closing if the transaction
contemplated hereby was consummated, and AHI shall have received a certificate
signed on behalf of the Company by the chief executive officer and by the chief
financial officer of the Company to such effect.
(c) Proceeds of the Financing. The proceeds of the Financing
shall have been received.
7.3 Conditions to Obligations of the Company. Unless AHI shall have
purchased Company Shares pursuant to the Offer, the obligation of the Company to
effect the Merger is subject to the satisfaction of the following conditions
unless waived by the Continuing Directors.
(a) Representations and Warranties. The representations and
warranties of AHI set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except as otherwise permitted by this
Agreement and except for changes in any representations and warranties which do
not have a material adverse effect on the Company, and the Company shall have
received a certificate signed on behalf of AHI by the chief executive officer
and by the chief financial officer of each of AHI, respectively, to such effect.
(b) Performance of Obligations of AHI. AHI shall have performed all
obligations required to be performed by it
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under this Agreement prior to the Closing Date including, without limitation,
all obligations which AHI would be required to perform at the Closing if the
transaction contemplated hereby was consummated, and the Company shall have
received a certificate signed on behalf of AHI by the chief executive officer
and by the chief financial officer of AHI to such effect.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1 Termination. This Agreement may be terminated prior to the
Effective Time, and the transactions contemplated hereby abandoned:
(a) by mutual written consent of the Boards of Directors of AHI and
the Company provided that following the purchase of Company Shares pursuant to
the Offer such consent by the Company must be approved by a majority of the
Continuing Directors;
(b) by either AHI or the Company (i) if the Merger shall not have been
consummated on or before 5:00 p.m. New York City Time May 15, 1995 (or such
later date, but not beyond June 30, 1995, to which the Chase Commitment may be
extended (the "Deadline Time")); provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date; and provided further that the right to terminate this Agreement pursuant
to this Section 8.1(b) shall not be available to AHI if AHI acquires any Company
Shares pursuant to the Offer; or (ii) if any court or governmental authority of
competent jurisdiction shall have issued an order, decree or ruling or taken
other action, permanently restraining, enjoining or otherwise prohibiting the
making and consummation of the Offer or consummation of the Merger, and such
order shall be final and nonappealable;
(c) by AHI, if the Offer is not commenced, or terminates or expires
without AHI having purchased any shares of Company Common Stock thereunder, in
any case because of the occurrence and remaining in effect of the events or
conditions set forth in paragraphs (a) through (h) on Annex A hereto;
(d) by the Company, if the Offer is not commenced in accordance with
Section 2.1(a) hereof; provided, however, that the Company shall have no right
to terminate under this Section 8.1(d) if the Offer is not commenced due to a
failure of the Company to fulfill any of its obligations under this Agreement;
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(e) by the Company, if the Offer shall expire or terminate without any
Shares being purchased thereunder prior to the Deadline Time;
(f) by AHI, if no Shares have been purchased pursuant to the Offer and
there has been (i) a material breach of any material agreement on the part of
the Company which, if curable, has not been cured or adequate (in the reasonable
judgement of AHI) assurance of cure given, in either case within five (5)
business days following notice of such breach from AHI or, if less, the time
remaining to the then scheduled Expiration Date or (ii) a breach of a
representation or warranty of the Company (assuming that such representation or
warranty were remade as of the date of such notice) herein which (individually
or, together with other such breaches, in the aggregate) has or would reasonably
be expected to have a material adverse effect on the Company and which has not
been cured within five (5) business days (or, if less, the time remaining to the
then scheduled Expiration Date) following notice of such breach from AHI; or
(g) by the Company, so long as AHI has not purchased Company Shares
pursuant to the Offer:
(i) if there has been (A) a material breach of any material
agreement herein on the part of AHI which, if curable, has not been
cured or adequate (in the Company's reasonable judgment) assurance of
cure given, in either case within five (5) business days following
notice of such breach from the Company or, if less, the time remaining
to the then scheduled Expiration Date (it being agreed that any breach
by AHI of its obligations under Section 6.10(d) or 6.11 is a material
breach of a material agreement herein) or (B) a breach of a
representation or warranty of AHI herein (assuming that such
representation or warranty were remade as of the date of notice of
breach given by the Company) which (individually or, together with
other such breaches, in the aggregate) has or would reasonably be
expected to have a material adverse effect on AHI or the Surviving
Corporation and which has not been cured within five (5) business days
(or, if less, the time remaining to the then scheduled Expiration
Date) after notice from the Company; or
(ii) if the Company determines to accept a Superior Takeover
Proposal (as defined below), provided, however, that the Company shall
not be permitted to terminate this Agreement pursuant to this clause
(ii) unless the Company has provided AHI with twenty-four hours' (or
if less, the
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period then remaining to 4:59 p.m., New York City time, on the
then scheduled Expiration Date) prior written notice of its
intent to so terminate this Agreement (together with a summary of
the material terms of such Superior Takeover Proposal). As used
in this Agreement, "Superior Takeover Proposal" means a Takeover
Proposal which the Company Board determines in good faith (A) is
on terms more favorable to the stockholders of the Company than
the Offer and Merger taken as a whole and (B) has a reasonable
prospect of being consummated in accordance with its terms.
(h) by AHI if (i) the Company shall enter into a definitive
agreement or agreements related to or providing for any Takeover Proposal, or
(ii) any person shall announce its intention to commence a tender offer for all
or any portion of the outstanding shares of Company Common Stock or make a
Takeover Proposal and the Offer has remained open for at least twenty business
days and at least a majority of the outstanding shares of Company Common Stock
shall not have been properly tendered and unwithdrawn prior to the expiration of
the Offer, (iii) the Company Board shall withdraw, modify, or change in a manner
adverse to AHI its recommendation of the Offer or this Agreement as set forth in
Section 2.2(a) (i) (A) hereof (an "Adverse Change in Recommendation"), unless
simultaneously with such Adverse Change in Recommendation the Company shall
deliver to AHI notice of termination of this Agreement pursuant to Section
8.1(g) (ii) and shall publicly announce that it has done so or (iv) any person
(within the meaning of Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) acquires beneficial ownership of 40% of the
outstanding Company Common Stock. Notwithstanding the immediately preceding
sentence, AHI may not terminate this Agreement pursuant to Section 8.1(h) (iii)
if at the time of such Adverse Change in Recommendation and at all times
thereafter the Minimum Condition (as defined in Annex A) is and remains
satisfied; provided, however, that even if the Minimum Condition is and remains
satisfied, AHI may terminate this Agreement pursuant to the first sentence of
this Section 8.1(h) (iii), (x) at any time after an Adverse Change in
Recommendation if AHI has been advised in writing by Chase that the Financing
will not be made available, or (y) at the opening of business on the scheduled
Expiration Date (as it may be extended by AHI in accordance with this Agreement)
if any of the events or circumstances described in clauses (a) through (i),
inclusive of Annex A shall have occurred and be continuing. It is understood
that a termination of this Agreement by the Company under this Section 8.1 shall
not, in and of itself, be deemed to be an Adverse Change in Recommendation.
8.2 Effect of Termination.
---------------------
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(a) Effect on Agreement. In the event of termination of this
Agreement by either the Company or AHI as provided in Section 8.1, this
Agreement shall forthwith become void, the transactions contemplated hereby
shall be abandoned and there shall be no liability or obligation on the part of
AHI or the Company or their respective officers or directors except with respect
to Section 6.2 (last sentence), Section 6.7, and this Section 8.2 and except for
liability for material breach of this Agreement. Termination of this Agreement
shall have no effect on the rights and obligations of the parties under the
Confidentiality Letter.
(b) Return of Documents. Each party, if so requested by the other
party, will return promptly every document furnished to it by or on behalf of
the other party in connection with the transaction contemplated hereby, whether
so obtained before or after the execution of this Agreement, and any copies
thereof (except for copies of documents publicly available) which may have been
made, and will use reasonable efforts to cause its representatives and any
representatives of financial institutions and others to whom such documents were
furnished promptly to return such documents and any copies thereof any of them
may have made.
(c) Expense Reimbursement.
---------------------
(i) If this Agreement is terminated by the Company pursuant to
Section 8.1(g)(ii) or by AHI pursuant to Section 8.1(h)(i), the
Company shall pay to AHI or its designee the sum of $5,000,000 plus
the amount of AHI's Expenses (as herein defined) up to $2,500,000 in
cash by wire transfer of immediately available funds to an account
designated by AHI immediately following such termination.
(ii) If this Agreement is terminated by AHI pursuant to Section
8.1(h)(ii) or 8.1(h)(iv) and the Company within 135 days after such
termination enters into a letter of intent, memorandum of
understanding or similar agreement or definitive transaction agreement
with the person or group acquiring such 40% beneficial ownership or
any affiliate of such person or group (or member of such group or
affiliate of such member) (in the case of Section 8.1(h)(iv)) or the
person or group or any affiliate of such person or group (or member of
such group or affiliate of such member) making the Takeover Proposal
(in the case of Section 8.1(h)(ii)) then the Company shall pay to AHI
immediately upon consummation of the transaction contemplated by such
letter of intent,
52
<PAGE>
memorandum, similar agreement or definitive transaction agreement
the sum of $5,000,000 plus an amount equal to AHI's Expenses up
to $2,500,000 in cash by wire transfer of immediately available
funds.
(iii) If this Agreement is terminated by AHI pursuant to
Section 8.1(h)(iii), then the Company shall pay to AHI the sum of
$7,500,000 plus the amount of its Expenses up to $2,500,000 in
cash by wire transfer of immediately available funds to an
account designated by AHI immediately following such termination.
(iv) The Company shall reimburse AHI for all costs incurred
by AHI in connection with the collection of any amounts due AHI
under clauses (i) through (iii), including reasonable attorneys'
fees.
For purposes of this paragraph (c), "Expenses" includes all out-of-
pocket costs and expenses incurred by AHI or the Company, as the case may be,
including fees and disbursements of counsel, accountants, financial advisors and
other third parties, commitment fees, printing mailing and filing fees and
similar fees incurred in connection with the transactions contemplated by this
Agreement. Each party acknowledges and agrees that the other party's Expenses
exceed $2,500,000 and releases the other party fully and finally from any
obligation to furnish any evidence of such expenses. In the event AHI has
received in full the amounts payable under Section 8.1(c)(i), (ii) or (iii), AHI
shall not assert or pursue in any manner, directly or indirectly, any claim or
cause of action against the Company or the party making a Takeover Proposal or
engaging in a transaction with the Company based in whole or in part upon the
events giving rise to the termination of this Agreement which triggered the
payment of such amounts; provided, however, that this sentence shall not apply
to and shall in no way restrict the right of AHI to assert a counterclaim in (or
any claim asserted in response to) any action brought by the Company or such
party with respect to such events.
8.3 Amendment. Subject to Section 2.3(c), this Agreement may be
amended by the parties hereto, by action taken by their respective boards of
directors, at any time before or after any required approval of matters
presented in connection with the Merger by the stockholders of the Company but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further stockholder approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
53
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8.4 Extension; Waiver. Subject to Section 2.3(c), at any time prior
to the Effective Time, the parties hereto, by action taken by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 9
GENERAL PROVISIONS
------------------
9.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the earlier to
occur of (i) the Effective Time and (ii) the termination of this Agreement and
the agreements made herein shall terminate at the Effective Time or earlier
termination of this Agreement except for the agreements as set forth in Section
6.2 (last sentence) and Sections 6.5, 6.6, 6.7 and 8.2.
9.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally upon request of
telecopy confirmation when telecopied, upon receipt if sent by recognized
overnight courier service or two business days after being mailed by registered
or certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to AHI, to
1075 Hawthorn Drive
Itasca, Illinois 60143
Attention: Daniel H. Bushell
Telecopy: (708) 775-7509
With a copy to:
Weil, Gotshal & Manges
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attention: Lawrence D. Stuart, Jr.
Telecopy: (214) 746-7777
Wingate Partners, L.P.
54
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750 North St. Paul Street
Suite 1200
Dallas, Texas 75201
Attention: Thomas W. Sturgess
Telecopy: (214) 871-8799
(b) if to the Company, to
2200 East Golf Road
Des Plaines, Illinois 60016-1267
Attention: Joel D. Spungin
Telecopy: (708) 699-0891
with a copy to:
Altheimer & Gray
Suite 4000
10 South Wacker
Chicago, Illinois 60606
Attention: Phillip Gordon
Mark Kindelin
Telecopy: (312) 715-4800
9.3 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes", or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; Third Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof;
and (b) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder (except for Sections 6.5, 6.8 and 6.14). Any
breach by the Company of Section 6.13 may be enforced for the benefit of the
stockholders of the Company entitled to dividends under Section 6.13 by any one
or more of the persons named as Continuing Directors on behalf of such
stockholders. This Agreement is not intended to supersede the
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Confidentiality Agreement which shall continue in full force and effect. Each
Exhibit, schedule and the Company Disclosure Schedule and AHI Disclosure
Schedule shall be considered incorporated into this Agreement. Any matter which
is disclosed in any portion of a Disclosure Schedule is deemed to have been
disclosed for the purposes of all relevant provisions of this Agreement. The
inclusion of any item in a Disclosure Schedule is not evidence of the
materiality of such item for the purposes of this Agreement. The parties make
no representations or warranties to each other, except as contained in this
Agreement, and any and all prior representations and warranties made by any
party or its representatives, whether verbally or in writing, are deemed to have
been merged into this Agreement, it being intended that no such prior
representations or warranties shall survive the execution and delivery of this
Agreement. The Company and AHI each acknowledge that they have conducted an
independent investigation satisfactory to them in all respects (including,
without limitation, with respect to the financial condition, assets,
liabilities, properties and projected operations of the Company) in making its
determination as to the propriety of the transaction contemplated by this
Agreement, and in entering into this Agreement, has relied solely on the results
of said investigation and on the representations and warranties of the Company
expressly contained in this Agreement.
9.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to its
conflict of laws rules.
9.7 Publicity. Except as otherwise required by law, so long as this
Agreement is in effect, neither the Company or AHI shall, or shall permit any of
their Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
AHI may collaterally assign its rights under this Agreement in connection with
the Financing or replacement thereof.
IN WITNESS WHEREOF, AHI and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
56
<PAGE>
ASSOCIATED HOLDINGS, INC.
By: /s/ Thomas W. Sturgess
-------------------------------
Its: Chairman
-------------------------------
UNITED STATIONERS INC.
By: /s/ Joel D. Spungin
-------------------------------
Its: Chairman
-------------------------------
<PAGE>
ANNEX A
-------
Notwithstanding any other provision of the Offer, AHI will not be
required to accept for payment, purchase or pay for any Company Shares tendered,
and may postpone the acceptance for payment, the purchase of, or payment for,
Company Shares, and, subject to the terms of the Agreement, may amend, extend or
terminate the Offer if (i) a number of Company Shares, when added to the Company
Shares then beneficially owned by AHI, which is not less than a majority of the
Company Shares outstanding on a fully diluted basis (or, if a lesser number, at
the option of AHI, on an issued and outstanding basis) shall have not been
validly tendered pursuant to the Offer and not withdrawn prior to the Expiration
Date (the "Minimum Condition"), or (ii) at any time on or after February 13,
1995 and prior to acceptance for payment of any Company Shares tendered pursuant
to the Offer, any of the following events shall occur or circumstances exist:
(a) there shall be in effect any temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the Offer or the Merger, which shall remain in effect as of the Expiration
Date;
(b) there shall be any action taken or any statute, rule or regulation
enacted, applicable to the Offer or the Merger by any government (or any
governmental body or agency) of the United States or any state thereof or
any foreign country that makes illegal the consummation of the Offer or the
Merger;
(c) any authorization, consent, order or approval of, or declaration
or filing with, or expiration of waiting period imposed by, any
Governmental Entity necessary for the consummation of the Offer shall not
have been filed, occurred or been obtained;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange or National Association of Securities Dealers Automated Quotations
System, (ii) a declaration of a banking moratorium or any limitation or
suspension of payments by any U.S. governmental authority on the extension
of credit by lending institutions, (iii) a commencement of war or armed
hostilities directly involving the United States, (iv) any limitation
(whether or not mandated) by any governmental authority which will
materially adversely affect the extension of credit by banks or other
lending institutions in the United States, or (v) in the case of any of the
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<PAGE>
foregoing existing on or before February 13, 1995, a material acceleration
or worsening thereof;
(e) the Agreement shall have been terminated by the Company, on the
one hand, or AHI, on the other hand, in accordance with its terms or AHI
and the Company shall have reached an agreement providing for the
termination of the Offer;
(f) AHI shall have failed to obtain the proceeds of Financing;
(g) The representations and warranties of the Company set forth in
the Agreement shall be untrue in any material respect and the facts or
events causing the representation or warranty to be untrue shall have or
would reasonably be expected to have a material adverse effect on the
Company;
(h) The Company shall have failed to perform in all material respects
its material obligations under the Merger Agreement to be performed by it
on or prior to the Expiration Date; or
(i) The Company shall not have obtained the Material Consents on or
prior to the Expiration Date.
The foregoing conditions (i) may be asserted by AHI regardless of the
circumstances (including any action or inaction by AHI or any of its affiliates)
giving rise to such condition and are for the sole benefit of AHI and its
affiliates. The foregoing conditions, other than the Minimum Condition, may be
waived by AHI in whole or in part at any time and from time to time in its sole
discretion. The failure by AHI at any time to exercise any of the foregoing
rights will not be deemed a waiver of any other rights and each such right will
be deemed an ongoing right which may be asserted at any time and from time to
time.
59
<PAGE>
EXHIBIT 99(C)(2)
AGREEMENT TO TENDER
-------------------
This Agreement to Tender (the "Agreement") dated as of February 13, 1995
among Associated Holdings, Inc., a Delaware corporation ("AHI"), and the persons
whose names are set forth on Schedule A hereto (individually a "Shareholder" and
collectively the "Shareholders").
Recitals:
--------
A. AHI and United Stationers Inc., a Delaware corporation (the "Company")
are simultaneously herewith entering into an Agreement and Plan of Merger dated
as of the date hereof (the "Merger Agreement"), which provides, among other
things, that AHI, upon the terms and subject to the conditions thereof, will
make a cash tender offer for up to 92.5% of the outstanding shares of common
stock, par value $.10 per share, of the Company (the "Shares") at a price of
$15.50 per Share, pursuant to an Offer to Purchase and related Letter of
Transmittal which together constitute the "Offer" included in a Tender Offer
Statement on Schedule 14D-1 filed by AHI with the Securities and Exchange
Commission (the "Offer Statement"), or such higher price per share pursuant to
the Offer. Upon completion of the Offer, AHI will merge with the Company (the
"Merger") and each then outstanding Share (other than certain Shares identified
in Section 3.1(b) of the Merger Agreement) would be converted as provided in
Section 3.1(a) of the Merger Agreement (the Offer and Merger being collectively
referred to as the "Transaction").
B. As a condition to entering into the Merger Agreement, AHI has
requested, and each of the Shareholders has agreed, to make certain agreements
and covenants with AHI, upon the terms and subject to the conditions hereinafter
set forth with respect to the respective number of Shares set forth on Schedule
A hereto opposite the name of each of the Shareholders.
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained herein, the parties hereto agree as
follows:
ARTICLE I
Agreement to Tender Shares
--------------------------
Section 1.1 Tender. Subject to the terms and conditions of this
Agreement and of the Offer, each Shareholder agrees severally for itself only to
tender to AHI pursuant to the Offer in accordance with the terms thereof
("Tender") and not withdraw except as permitted hereby all Shares held by such
Shareholder.
<PAGE>
The approximate number of Shares owned by the Shareholder are set forth on
Schedule A hereto opposite the name of such Shareholder and AHI shall accept for
payment and pay for all of such Shares Tendered by such Shareholder at the price
of $15.50 per Share or such higher price to be paid under the terms of the Offer
by means of a wire transfer to an account as specified by the Shareholder at the
following time: one business following the Expiration Date (as defined in the
Offer Statement) if the aggregate number of shares Tendered are less than the
Maximum Number (as defined in the Offer Statement) or one business day following
the announcement of the final proration factor should more than the Maximum
Number be Tendered. In the event that any Shareholder acquires any additional
Shares prior to the Tender of its Shares hereunder, all such additional Shares
shall be subject to the terms of this Agreement. Notwithstanding the foregoing,
no Shareholder shall be required to Tender Shares and, if such Shareholder has
Tendered Shares, shall be permitted to withdraw its Shares, if this Agreement is
terminated as set forth in Section 6.1 hereof.
Section 1.2 Adjustment Upon Changes in Capitalization. In the event of
any change in the Shares by reason of any stock dividends, split-ups, mergers,
recapitalizations or other changes in the corporate or capital structure of the
Company, the number and kind of Shares subject to this Agreement shall be
appropriately adjusted.
ARTICLE II
Related Matters
---------------
Section 2.1 Acquisition Transaction. The parties acknowledge that AHI
would not have entered into the Merger Agreement without the concurrent
execution of this Agreement and that each Shareholder and AHI would not have
entered into this Agreement without the concurrent execution of the Merger
Agreement.
Section 2.2 Agreement to Vote. Subject to Section 6.1 hereof, each
Shareholder agrees to vote all their shares set forth on Schedule A, at any
meeting of shareholders, in favor of the Merger Agreement, the Merger and all
transactions arising out of the Merger Agreement which require shareholder
approval. The Shareholder's agreement to vote their shares shall include an
agreement to execute written consents in lieu of a meeting.
-2-
<PAGE>
ARTICLE III
Representations
and Warranties of the Shareholders
----------------------------------
Each of the Shareholders, severally, and not jointly, hereby represents and
warrants to AHI as follows:
Section 3.1 Ownership of the Shares. Such Shareholder is the record or
beneficial owner with full or shared voting power of the number of Shares set
forth opposite such Shareholder's name on Schedule A hereto (which are all the
Shares which such Shareholder so owns of record or beneficially), and at the
time of Tender will have good title, and (subject to the provisions of Section
2.2 hereof) full voting power, with respect to all such Shares, free and clear
of all liens, charges, encumbrances, equities, claims and options or other
defects in title which may restrict such Shareholder's ability or authority to
tender, sell, and deliver such Shares hereunder.
Section 3.2 Authorization; Valid and Binding Agreement. This Agreement
has been duly and validly executed and delivered by such Shareholder and
constitutes a valid and binding agreement of such Shareholder enforceable
against such Shareholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity, including
principles of good faith and fair dealing (regardless of whether enforcement is
sought in a proceeding at law or equity). Except as set forth in the Merger
Agreement, no consent or approval or any court, federal or state governmental
agency, or any other person or entity is required in connection with the
execution and consummation of the transactions contemplated by this Agreement to
permit each to carry out its obligations hereunder.
Section 3.3 No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation by such Shareholder of the transactions
contemplated hereby will constitute a violation of, or conflict with, or
constitute a default under, any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which such Shareholder is a party or
by which such Shareholder is bound or any judgment, decree or order applicable
to such Shareholder.
-3-
<PAGE>
ARTICLE IV
Representations and
Warranties of AHI
-----------------
AHI hereby represents and warrants to the Shareholders as follows:
Section 4.1 Authorization; Valid and Binding Agreement. AHI has all
requisite corporate power and authority to enter into this Agreement, and this
Agreement has been duly authorized by all necessary corporate action on the part
of AHI. This Agreement has been duly and validly executed and delivered by AHI,
and constitutes a valid and binding obligation of AHI, enforceable against AHI
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principle of equity including principles of good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or equity).
Section 4.2 Securities Matters. AHI is acquiring the Shares for its
own account and not with a view to the public distribution thereof and will not
offer to sell or otherwise dispose of the Shares acquired in violation of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
ARTICLE V
Covenants
---------
Section 5.1 Other Transactions. Each Shareholder agrees severally,
and for itself only, that, prior to the termination of this Agreement, such
Shareholder shall not engage in any action or omission that would have the
effect of preventing or disabling such Shareholder from Tendering its Shares to
AHI. Without limiting the foregoing and except as provided in this Agreement,
until the termination of this agreement such Shareholder agrees not to sell or
transfer, or agree to sell or transfer, any of the Shares provided, however,
that a Shareholder may transfer his or her Shares to a person, partnership,
trust, or other entity so long as such person or entity agrees in writing to be
bound by the terms, provisions and conditions of this Agreement. Upon such
transfer, the transferor shall be released from the terms of this Agreement with
regard to such transferred Shares.
-4-
<PAGE>
ARTICLE VI
Termination
-----------
Section 6.1 Termination. This Agreement shall terminate
automatically upon the occurrence of any of the following: (i) the Effective
Time (as defined in the Merger Agreement), (ii) the termination of the Merger
Agreement for any reason, (iii) any time following the public announcement by
any person of an offer to acquire at least a majority of the outstanding Shares
which the Shareholder reasonably believes is likely to be consummated and offers
a higher economic value to the Shareholder than the Offer and where the
Shareholder gives notice to AHI of such termination, or (iv) the Company Board
(as defined in the Merger Agreement) shall withdraw, modify or change in a
manner adverse to Purchaser, its recommendation set forth in Section
2.2(a)(i)(A) of the Merger Agreement, provided that the Company Board shall have
received an opinion of counsel that the Company Board is required to so
withdraw, modify or change such recommendation in the exercise of its fiduciary
duties.
Section 6.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 6.1, this Agreement (including, without
limitation, the voting agreement set forth herein) shall forthwith become void
and have no effect, without liability on the part of any party or its trustees,
partners, beneficiaries, directors, officers, and shareholders or affiliates.
Nothing contained in this Article VI shall relieve any party from liability for
any material breach of this Agreement or the Offer.
ARTICLE VII
Miscellaneous
-------------
Section 7.1 Expenses. Each of the parties hereto will pay all fees
and expenses it incurs in connection with this Agreement, including without
limitation the fees and expenses of its financial and legal advisors. Each
Shareholder represents and warrants to AHI that such Shareholder has not
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
herein.
Section 7.2 Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements of AHI and the Shareholders in
this Agreement or in any instrument delivered by AHI and the Shareholders
pursuant to this Agreement shall not survive the consummation of the Merger.
-5-
<PAGE>
Section 7.3 Assignment; Parties in Interest. Except as permitted by
Section 5.2 hereof or as required by operation of law, this Agreement shall not
be assignable by the parties hereto without the prior written consent of the
other parties. This Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and permitted
assigns.
Section 7.4 Entire Agreement; Amendments. This Agreement and the
documents referred to herein or delivered pursuant hereto which form a part
hereof, contain the entire understanding of the parties with respect to its
subject matter. There are no representations, warranties, agreements, promises,
covenants or undertakings other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to its subject matter. This Agreement may be
amended only by a written instrument duly executed by all the parties. Any
condition to a party's obligations hereunder may be waived in writing by such
party.
Section 7.5 Notices. All notices, claims, certificates, requests,
demands and other communications ("Notices") required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, upon receipt of the telecopy confirmation when telecopied,
upon receipt if sent by a nationally recognized overnight courier service or two
(2) business days after being mailed (registered or certified mail, postage
prepaid, return receipt requested), addressed as follows:
(a) If to AHI, to:
1075 Hawthorn Drive
Itasca, Illinois 60143
Telecopy: (708) 775-7509
Attention: Daniel H. Bushell
With copies to:
Weil, Gotshal & Manges
100 Crescent Court
Dallas Texas 75201-6950
Telecopy: (214) 746-4777
Attention: Lawrence D. Stuart, Jr.
and:
Wingate Partners, L.P.
750 North St. Paul Street
Suite 1200
Dallas, Texas 75201
Attention: Thomas W. Sturgess
-6-
<PAGE>
(b) If to the Shareholders, to each Shareholder at the address set
forth on their respective signature page to this Agreement:
With copies to:
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, Illinois 60606
Telecopy (312) 715-4800
Attention: Phillip Gordon
or to such other address as the person to whom Notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
Section 7.6 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 7.7 Severability of Provisions. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
Section 7.8 Counterparts; Headings. This Agreement may be executed
simultaneously in several counterparts, each of which will be deemed to be an
original, but all of which together will constitute one and the same instrument.
The article and section headings contained herein are for reference purposes
only and will not affect in any way the meaning or interpretation of this
Agreement.
Section 7.9 Remedies. The parties hereto agree that if for any reason
any party hereto shall have failed to perform its obligations under this
Agreement, then any other party hereto seeking to enforce this Agreement against
such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This provision
is without prejudice to any other rights that any party hereto may have against
any other party hereto for any failure to perform its obligations under this
Agreement.
Section 7.10 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable efforts to
take, or cause to be taken, all action,
-7-
<PAGE>
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective agreement to
tender and vote contemplated by this Agreement.
Section 7.11 Exculpation. Notwithstanding anything to the contrary
contained herein, with respect to Shareholders which are partnerships or trusts,
there shall be no personal liability hereunder on any partners or trustees with
respect to the terms, conditions, representations, warranties or covenants
contained in this Agreement. AHI shall look solely to such Shareholder and not
to any partners or trustees of those Shareholders for the satisfaction of all
remedies which AHI may have hereunder.
[*****]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ASSOCIATED HOLDINGS, INC.
By: /s/ Thomas W. Sturgess
---------------------------------------
Title: Chairman
------------------------------
[Signatures continued on next pages]
-9-
<PAGE>
FISHMAN FAMILY
INVESTMENT PARTNERSHIP
By: /s/ Joan Fishman
--------------------------------
Joan Fishman, General Partner
Address:
/s/ Phillip Gordon
- -----------------------------------
Phillip Gordon, not personally,
but as Trustee of the Joan
Fishman Charitable Remainder
Trust u/a/d 2/1/95
Address:
<PAGE>
JEROLD A. HECKTMAN
FAMILY INVESTMENT
PARTNERSHIP
By: /s/ Jerold A. Hecktman /s/ Jerold A. Hecktman
-------------------------------- --------------------------------
Jerold A. Hecktman, Jerold A. Hecktman
General Partner
Address: Address:
/s/ Phillip Gordon
- -----------------------------------
Phillip Gordon, not personally,
but as Trustee of the Jerold
and Ruth Hecktman Charitable
Remainder Trust u/a/d 2/1/95
Address:
<PAGE>
MELVIN L. HECKTMAN
FAMILY INVESTMENT
PARTNERSHIP
By: /s/ Melvin L. Hecktman /s/ Melvin L. Hecktman
-------------------------------- --------------------------------
Melvin L. Hecktman, Melvin L. Hecktman
General Partner
Address: Address:
MLH INVESTMENT PARTNERSHIP /s/ Phillip Gordon
--------------------------------
Phillip Gordon, not
personally, but as
Trustee of the Julie B.
Hecktman Charitable
By: /s/ Melvin L. Hecktman
--------------------------------
Melvin L. Hecktman, Address:
Managing General Partner
Address:
/s/ Melvin L. Hecktman
- -----------------------------------
Charitable Remainder Trust
u/a/d 2/1/95
Address:
/s/ Phillip Gordon
- -----------------------------------
Phillip Gordon, not personally,
but as Trustee of the Sherri A.
Sheftel Charitable Remainder Trust
u/a/d 2/1/95
Address:
<PAGE>
MILLS FAMILY
INVESTMENT PARTNERSHIP
By: /s/
------------------------------
Barbara Wolf,
General Partner
Address:
/s/
- ---------------------------------
Phillip Gordon, not personally,
but as Trustee of the Barbara
Mills Charitable Remainder Trust
u/a/d 2/1/95
Address:
<PAGE>
WOLF FAMILY
INVESTMENT PARTNERSHIP
By: /s/ Barbara Wolf
-------------------------------
Barbara Wolf Savage,
General Partner
Address:
/s/ Phillip Gordon
- ----------------------------------
Phillip Gordon, not personally,
but as Trustee of the Barbara
Wolf Savage Charitable Remainder
Trust u/a/d 2/1/95
Address:
<PAGE>
/s/ Joel D. Spungin JOEL D. SPUNGIN
- ---------------------------------- INVESTMENT PARTNERSHIP
Joel D. Spungin
/s/ Marilyn G. Spungin By: /s/ Joel D. Spungin
- ---------------------------------- ---------------------------
Marilyn G. Spungin Joel D. Spungin,
Partner
/s/ Debra A. Spungin /s/ Marc A. Spungin
- ---------------------------------- ------------------------------
Debra A. Spungin Marc A. Spungin
/s/ Phillip Gordon /s/ Marilyn G. Spungin
- ---------------------------------- ------------------------------
Phillip Gordon, not personally, Marilyn G. Spungin, not
but as Trustee of the Joel and personally, but as Co-
Marilyn Spungin Charitable Trustee of the Joel J.
Remainder Trust u/a/d 2/1/95 Spungin Family Trust
u/a/d 11/15/90
/s/ Robert B. Scadron
------------------------------
Robert B. Scadron, not
personally, but as Co-
Trustee of the Joel D.
Spungin Family Trust
u/a/d 11/15/90
/s/ Phillip Gordon
------------------------------
Phillip Gordon, not
personally, but as
Trustee of the Joel and
Marilyn Spungin
Charitable
Remainder Trust u/a/d
2/1/95
<PAGE>
SCHEDULE A
----------
Number of Shares
----------------
/s/ Douglas K. Chapman 28,000
- ---------------------------------
Douglas K. Chapman
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
/s/ Doreen Chapman 7,000
- ---------------------------------
Doreen Chapman
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
<PAGE>
SCHEDULE A
----------
Number of Shares
----------------
/s/ E. David Coolidge III 20,000
- ---------------------------------
E. David Coolidge III
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
<PAGE>
SCHEDULE A
----------
Number of Shares
----------------
/s/ Ira A. Eichner 9,175
- ---------------------------------
Ira A. Eichner
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
/s/ Barbara Eichner 1,000
- ---------------------------------
Barbara Eichner
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
<PAGE>
SCHEDULE A
----------
Number of Shares
----------------
/s/ Jeffrey K. Hewson 32,750
- ---------------------------------
Jeffrey K. Hewson
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
<PAGE>
SCHEDULE A
----------
Number of Shares
----------------
/s/ David R. Smith 107,644
- ----------------------------------
David R. Smith
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
/s/ David R. Smith 10,000
- ----------------------------------
David R. Smith as Trustee of the
Trust u/a/d/ December 21, 1993 for
the benefit of Kareen Kanaga.
/s/ George L. Smith same
- ----------------------------------
George L. Smith as Trustee of the
Trust u/a/d/ December 21, 1993 for
the benefit of Kareen Kanaga.
/s/ George L. Smith 56,347
- ----------------------------------
George L. Smith as Trustee of the
Trust under Article Fourth of the
Will of Joan O. Smith.
/s/ George L. Smith 1,000
- ----------------------------------
George L. Smith as Custodian under
the Uniform Gift to Minors Act for
the Benefit of Colleen M. Smith.
/s/ George L. Smith 1,000
- ----------------------------------
George L. Smith as Custodian under
the Uniform Gift to Minors Act for
the Benefit of Maureen E. Smith.
<PAGE>
SCHEDULE A
----------
Number of Shares
----------------
/s/ Jack Twyman 1,000
- ---------------------------------
Jack Twyman
United Stationers Inc.
2200 East Golf Road
Des Plaines, Illinois 60016
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Shareholder Number of
----------- Shares
---------
<S> <C>
Fishman Family Investment Partnership 586,134
Joan Fishman Charitable Remainder Trust u/a/d 50,000
2/1/95
Jerold A. Hecktman Family Investment Partnership 902,795
Jerold A. Hecktman 4,385
Jerold and Ruth Hecktman Charitable Remainder 200,000
Trust u/a/d 2/1/95
Melvin Hecktman 6,667
Melvin L. Hecktman Family Investment Partnership 203,835
Melvin and Judith Hecktman Charitable Remainder 80,000
Trust u/a/d 2/1/95
MLH Investment Partnership 863,670
Mills Family Investment Partnership 533,197
Barbara Mills Charitable Remainder Trust u/a/d 50,000
2/1/95
Wolf Family Investment Partnership 921,057
Barbra Wolf Savage Charitable Remainder Trust 133,333
u/a/d 2/1/95
Joel D. Spungin 101,468
Joel and Marilyn Spungin Charitable Remainder 33,333
Trust u/a/d 2/1/95
Joel D. Spungin Investment Partnership 1,000
Joel D. Spungin Family Trust 57,682
Marilyn G. Spungin 7,648
Debra A. Spungin 4,856
Marc A. Spungin 4,868
Steven M. Spungin 4,856
---------
Total 4,750,784
</TABLE>
<PAGE>
EXHIBIT 99(C)(3)
ASSOCIATED HOLDINGS, INC.
1075 Hawthorn Drive
Itasca, IL 60143
December 21, 1994
United Stationers Inc.
2200 E. Golf Road
Des Plaines, IL 60016
Gentlemen:
The purpose of this letter is to set forth our current intentions with
respect to the proposed acquisition of United Stationers Inc. ("USI") by
Associated Holdings, Inc. ("AHI").
AHI proposed to acquire USI upon the following terms and conditions:
1. Purchase Price. The purchase price to be paid to the stockholders of
--------------
USI would be a total of $258 million in cash plus approximately $2.8 million
(plus the amount of the exercise price of all options exercised hereafter) in
cash to satisfy all outstanding stock options, with the stockholders retaining
common stock of the surviving entity (the "Surviving Corporation") representing
in the aggregate 19% of the common stock of the Surviving Corporation
outstanding immediately after closing. The balance of the outstanding common
stock of the Surviving Corporation would be owned by AHI.
2. Form of Transaction. The transaction would be structured as a merger of
-------------------
AHI's wholly-owned subsidiary, Associated Stationers, Inc. ("ASI") into USI,
with USI being the Surviving Corporation. ASI would make a tender offer for up
to 92.5% of USI's outstanding common stock at a price of not less than $15 per
share net to the seller in cash, which would be consummated only if at least 90%
of the outstanding common stock of USI were tendered to ASI. If such tender
offer is consummated, the merger would immediately be effected under the "short-
form merger" provisions of the Delaware General Corporation law. If the tender
offer is not consummated, the merger would be consummated, if approved by the
USI stockholders at a meeting thereof.
It is further contemplated that the Surviving Corporation would commit
that, on a date specified in the Definitive Agreement (hereafter defined), AHI
or an affiliate of AHI would commence a tender offer for a portion of the shares
of the Surviving Corporation not held by AHI or its affiliates at a price of $15
per share ($7.5 million total).
The definitive merger agreement for the transaction (the "Definitive
Agreement") would contain terms and provisions which are mutually agreeable to
AHI and USI and their respective counsel
<PAGE>
in their sole and absolute discretion. The transaction would involve many
essential and non-essential terms and conditions which have not yet been agreed
upon or, in some cases, discussed by the parties, such as, for example, the
manner of funding the obligations of USI to employees and appropriate security
therefor, transitional and related matters; and ASI's financing for the
transaction. It is contemplated that the parties would execute the Definitive
Agreement, if at all, promptly upon satisfaction of the HSR Condition, as
defined below. Either party may terminate negotiations with or without reason by
notice to the other at any time, and neither party shall be obligated to proceed
with the transaction in any form.
3. HSR Condition. The acquisition is subject to the obtaining of all
-------------
necessary government and other material third party approvals and consents,
including, but not limited to, expiration of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act"). It is
contemplated that USI and AHI (and/or their ultimate parents, if required)
shall, as promptly as practical, promptly make the appropriate filings under the
HSR Act. Expiration of the applicable waiting period under the HSR Act is
hereinafter called the "HSR Condition".
4. Expenses. Each party will bear its own fees and expenses in connection
--------
with the proposed transaction; provided, however, that each party agrees that it
-----------------
shall be responsible for payment of 50% of the fees and expenses of all
consultants (other than their respective attorneys, who shall be paid
exclusively by the retaining party) retained by mutual agreement of the parties
in connection with satisfaction (or efforts to satisfy) the HSR Condition and
accrued prior to the date of termination of negotiations.
5. Confidentiality. This letter does not supersede any prior agreements
---------------
among the parties which are still in effect at the date hereof, including the
Confidentiality Agreement dated November 16, 1994, among USI, ASI, and Wingate
Partners, L.P. (the "Confidentiality Agreement") which shall remain in full
force and effect in accordance with its terms. The parties acknowledge that
premature disclosure of the existence of a possible transaction or any facts
relating thereto would have a highly detrimental effect on their respective
businesses. Therefore, without limitation of anything contained herein, it is
understood that in the event of such disclosure, whether by the parties hereto
or otherwise, either party shall have the right, in addition to any other
remedy, to terminate discussions and negotiations between the parties.
6. Financing Representation. AHI has delivered to you a commitment letter
------------------------
of The Chase Manhattan Bank, N.A. dated October 27, 1994 in our favor (the
"Commitment Letter") which has expired. AHI confirms to USI that, although the
Commitment Letter
2
<PAGE>
has expired according to its terms, AHI has been orally advised by Chase
Manhattan Bank that AHI can obtain a renewal thereof on the terms stated therein
at any time by payment of an additional fee.
7. Nature of Obligations. It is understood that, except for paragraph 4,
---------------------
this letter merely summarizes the status of the parties' discussions to date and
creates no obligations on, or rights in favor of, either party regardless of any
subsequent actions or negotiations of the parties. The parties would only be
legally bound by the Definitive Agreement.
If the foregoing is acceptable to USI, please so indicate by signing and
dating this letter in the space provided below and returning it to the
undersigned no later than December 23, 1994.
Very truly yours,
ASSOCIATED HOLDINGS, INC.
By: /s/ THOMAS W. STURGESS
------------------------------------
Thomas W. Sturgess
Its: Chairman
Accepted as of December 22, 1994
UNITED STATIONERS INC.
By: /s/ JOEL D. SPUNGIN
------------------------------
Joel D. Spungin
Its: Chairman and CEO
3
<PAGE>
EXHIBIT 99(C)(4)
United Stationers Inc.
2200 East Golf Road
Des Plaines, IL 60016
November 16, 1994
Associated Stationers Inc.
1075 Hawthorn Drive
Itasca, IL 60143
Wingate Partners
750 N. St. Paul, Suite 1200
Dallas, TX 75201
Attention: Thomas W. Sturgess, Chairman
Dear Tom:
Simultaneously herewith, we have entered into a confidentiality agreement
dated the date hereof in connection with your evaluation of the possibility of a
transaction between United Stationers Inc. (the "Company") and/or its security
holders and yourself (the "Potential Transaction").
As a further condition to our furnishing you the information which is the
subject of such confidentiality agreement and to our willingness to enter any
discussions regarding the Potential Transaction, we are requiring that both
partners agree, as set forth below, to certain restrictions with respect to our
respective employees.
From and after the date hereof, and until the expiration of two years
following the abandonment or termination of discussions regarding the Potential
Transaction, neither you nor the Company shall, directly or indirectly, solicit
the employment of, or employ, any general management employee of the other. The
restrictions contained in the immediately preceding sentence apply to any person
who is a general management employee of the Company, or you, at any time from
and after the date hereof until the expiration of two years following the
abandonment or termination of discussions regarding the Potential Transaction.
<PAGE>
Thomas W. Sturgess, Chairman
Associated Holdings Inc.
Wingate Partners
November 16, 1994
If you are in agreement with the foregoing, please so indicate by signing
and returning one copy of this letter agreement, which will constitute our
agreement with respect to the matters set forth herein.
By: /s/ JOEL D. SPUNGIN
--------------------------------------
Name: Joel D. Spungin
Title: Chairman and Chief
Executive Officer
Confirmed and Agreed to
this 16th day of November,
1994
By: /s/ THOMAS W. STURGESS
--------------------------
Name: Thomas W. Sturgess
Title: Chairman
WINGATE PARTNERS
By: /s/ THOMAS W. STURGESS
--------------------------
Thomas W. Sturgess
2
<PAGE>
EXHIBIT 99(C)(5)
United Stationers Inc.
2200 East Golf Road
Des Plaines, IL 60016
November 16, 1994
Associated Stationers Inc.
1075 Hawthorn Drive
Itasca, IL 60143
Wingate Partners
750 N. St. Paul, Suite 1200
Dallas, TX 75201
Attention: Thomas W. Sturgess, Chairman
Dear Tom:
You have requested information from United Stationers Inc. (the "Company")
in connection with your evaluation of the possibility of a transaction between
the Company and/or its security holders and yourself. As a condition to our
furnishing such information to you, we are requiring that you agree, as set
forth below, to treat confidentially such information and any other information
we or our agents furnish to you, whether furnished before or after the date of
this letter (such information being collectively referred to herein as the
"Evaluation Material"). For purposes of this letter, it is understood and agreed
that the term "Evaluation Material" shall also include all analyses,
compilations, studies and other documents prepared by you or on your behalf that
contain, reflect or are based upon any such information.
You acknowledge that the Evaluation Material has substantial economic value
to the Company and that the Company would suffer economic injury if any of the
Evaluation Material were disclosed or used in a manner other than as permitted
hereby. You agree that you will not use the Evaluation Material in any way
detrimental, in the judgment of the Company's management, to the Company and
that such information will be kept confidential by you and your agents and
advisors; provided, however, that (i) any of such information may be disclosed
to your directors, officers and employees and to representatives of your
advisors, and to individuals acting in similar capacities on your behalf, in
each case who need to know such information for the purpose of evaluating a
possible transaction between you and the Company and/or its security holders (it
being understood that such directors, officers, employees, representatives and
other persons shall be informed by you of the confidential nature of
<PAGE>
Thomas W. Sturgess, Chairman
Associated Stationers Inc.
November 16, 1994
Page 2
such information and you shall cause them to treat such information
confidentially and to restrict the use of such information in accordance with
the terms hereof as if they were expressly bound hereby), and (ii) any
disclosure of such information may be made to which the Company consents in
writing.
If at any time you consider a transaction which would involve participation
directly or indirectly by a third party, you agree that such third party will
undertake with you to hold such information in confidence (which undertaking
shall be in writing and for the express benefit of the Company) prior to
disclosure by you to any such third party of any Evaluation Material.
In addition, without the prior written consent of the other party, each of
the Company and you will not, and will direct its directors, officers, employees
and representatives of your advisors not to, disclose to any person either the
fact that discussions or negotiations are taking place concerning a possible
transaction between the Company and/or its security holders and yourself or any
of the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof and the possibility thereof. The term
"person" as used in this letter shall be broadly interpreted to include, without
limitation, any corporation, company, partnership, other entity or individual.
In addition, you hereby acknowledge that you are aware, and that you will
advise your directors, officers, employees, agents and advisors who are informed
as to the matters which are the subject of this letter agreement, that the
United States securities laws prohibit any person who has material, non-public
information concerning the matters which are the subject of this letter
agreement from purchasing or selling securities of a company which may be a
party to a transaction of a type contemplated by this letter agreement or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
In the event that you are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process or otherwise by law) to disclose any
information supplied to you or your agents or representatives in the course of
your dealings with the Company or its representatives or agents, you
<PAGE>
Thomas W. Sturgess, Chairman
Associated Stationers Inc.
November 16, 1994
Page 3
will provide the Company with prompt notice of such request(s) and the documents
and other information requested thereby so that the Company may seek an
appropriate protective order and/or waive your compliance with the provisions of
this letter agreement. It is further agreed that, if in the absence of a
protective order or the receipt of a waiver hereunder you are nonetheless, in
the opinion of your counsel (who shall not be an employee of yours), compelled
to disclose information concerning the Company to any tribunal or governmental
agency or authority or else stand liable for contempt or suffer other censure or
penalty, you may disclose such information to such tribunal or governmental
agency or authority without liability hereunder; provided, however, that you
shall give the Company written notice of the information to be so disclosed as
far in advance of its disclosure as is practicable and shall use your best
efforts to obtain an order or other reliable assurance that confidential
treatment will be accorded to such portion of the information required to be
disclosed as the Company designates.
You hereby acknowledge that the Evaluation Material is being furnished to
you in consideration of your agreement that you will not, for a period of three
years from the date hereof: (a) make any public announcement with respect to,
or make any proposal (whether to the Company or any other person) for, a
transaction between or involving the Company or any of its securities or
security holders and yourself (and/or any of your affiliates and/or any "group"
(within the meaning of Section 13(d) under the Securities Exchange Act of 1934
and the rules and regulations thereunder) of which you or your affiliates are a
part), whether or not any other parties are also involved, directly or
indirectly, in such proposal or transaction, unless such proposal is directed
and disclosed solely to the management of the Company or its designated
representatives, and the Company shall have requested in writing in advance the
submission of such proposal (and shall have consented in writing, in advance, in
the case of any proposal from or involving parties in addition to, or other
than, yourself, to the involvement of such additional or other parties); nor (b)
directly or indirectly, without the express prior written request of the Company
(i) by purchase or otherwise, through your affiliates or otherwise, alone or
with others, acquire, seek, offer to acquire, or agree to acquire, ownership
(including, but not limited to, beneficial ownership as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of any voting securities of the
Company or any of its affiliates or direct or indirect rights (including
convertible securities) or options to acquire such ownership, or
<PAGE>
Thomas W. Sturgess, Chairman
Associated Stationers Inc.
November 16, 1994
Page 4
act in concert with any person which so acquires, seeks, offers to acquire, or
agrees to acquire any such ownership, or (ii) seek to influence or control, the
management or policies of the Company or any of its affiliates (including,
without limitation, through the solicitation of proxies or written consents or
the public announcement of an intention to do so). You also agree during such
period not to (i) publicly disclose any intention, plan or arrangement
inconsistent with the foregoing, (ii) advise, assist, solicit or encourage any
other persons in connection with any of the foregoing or (iii) publicly request
the Company (or its directors, officers, employees, agents or representatives),
directly or indirectly, to amend or waive any provision of this paragraph
(including this clause (iii)). You further acknowledge and agree that the
Company reserves the right, in its sole and absolute discretion, to reject any
or all proposals and to terminate discussions and negotiations with, or directly
or indirectly involving, you at any time.
In the event that no transaction is effected between you and the Company or
its security holders after you have been furnished with the Evaluation Material,
you will promptly, upon the request of the Company, deliver to the Company the
Evaluation Material, without retaining any copy thereof (provided, however, to
the extent such Evaluation Material constitutes analyses, compilations, studies
or other document preparation by you or on your behalf, you may instead destroy
the same and certify in writing to the Company such destruction).
Although we have endeavored to include in the Evaluation Material
information known to us which we believe to be relevant for the purpose of your
investigation, you understand that we do not make any representation or warranty
as to the accuracy or completeness of the Evaluation Material and that any
representations and warranties, if any, to be made in connection with a possible
transaction will be contained only in a definitive transaction agreement, if
any, to be executed in connection therewith. You agree that neither the
Company nor its representatives shall have any liability to you or any of your
representatives resulting from the use of the Evaluation Material supplied by us
or our representatives and that any work undertaken by you or your
representatives with respect to a possible transaction is not at the request of
the Company and is entirely at your and your representatives' own risk and
expense. Nothing herein contained shall be deemed to constitute, by implication
or otherwise, a commitment on the part of the Company to pursue, negotiate or
enter into any transaction agreement with
<PAGE>
Thomas W. Sturgess, Chairman
Associated Stationers Inc.
November 16, 1994
Page 5
you. In addition, you acknowledge that you and the Company are direct
competitors and that, without implication that this letter constitutes an
obligation of the Company to furnish information to you, the Company currently
does not intend to furnish to you or your representatives information which the
Company believes to be competitively sensitive.
The term "Evaluation Material" as used herein does not include information
which (i) was or becomes generally available to the public other than as a
result of a disclosure by you or your agents or representatives or (ii) was or
becomes available to you on a non-confidential basis from a source other than
the Company or its representatives, provided that such source is not bound by a
confidentiality agreement with the Company or its representatives.
In addition, it is understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement by you and that the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and you further agree to waive
any requirement for the securing or posting of any bond in connection with such
remedy. Such remedy shall not be deemed to be the exclusive remedy for your
breach of this letter agreement, but shall be in addition to all other remedies
available at law or equity to the Company. You and the Company also agree that
if any action, suit or proceeding is brought to enforce the terms of this letter
agreement, the losing party shall reimburse the prevailing party for all costs
and expenses, including reasonable attorneys' fees, incurred by the prevailing
party in enforcing its rights hereunder.
This letter agreement shall be governed and construed in accordance with
the laws of the State of Illinois, without giving effect to the principles of
conflict of laws thereof.
If you are in agreement with the foregoing, please so indicate by signing
and returning one copy of this letter
<PAGE>
Thomas W. Sturgess, Chairman
Associated Stationers Inc.
November 16, 1994
Page 6
agreement, which will constitute our agreement with respect to the matters set
forth herein.
By: /s/ JOEL D. SPUNGIN
----------------------------
Name: Joel D. Spungin
Title: Chairman and Chief
Executive Officer
Confirmed and Agreed to
this 16th day of November,
1994
By: /s/ THOMAS W. STURGESS
------------------------------
Name: Thomas W. Sturgess
Title: Chairman
WINGATE PARTNERS
By: /s/ THOMAS W. STURGESS
------------------------------
Thomas W. Sturgess
