<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required) For the transition period
from __________ to ____________
Commission file numbers: United Stationers Inc.: 0-10653
United Stationers Supply Co.: 33-59811
UNITED STATIONERS INC.
UNITED STATIONERS SUPPLY CO.
(Exact name of Registrant as specified in its charter)
UNITED STATIONERS INC.: DELAWARE UNITED STATIONERS INC.: 36-3141189
UNITED STATIONERS SUPPLY CO.: ILLINOIS UNITED STATIONERS SUPPLY CO.: 36-2431718
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2200 EAST GOLF ROAD
DES PLAINES, ILLINOIS 60016-1267
(847) 699-5000
(Address, Including Zip Code and Telephone Number, Including Area Code,
of Registrants' Principal Executive Offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
NONE N/A
------------------- ---------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
United Stationers Inc.: Common Stock $0.10 par value
(Title of Class)
INDICATE BY CHECK MARK WHETHER EACH REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
UNITED STATIONERS INC.: YES ( X ) NO ( )
UNITED STATIONERS SUPPLY CO.: YES ( X ) NO ( )
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENT
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. ( X )
AGGREGATE MARKET VALUE OF THE VOTING STOCK (WHICH CONSISTS SOLELY OF SHARES OF
COMMON STOCK) HELD BY NON-AFFILIATES OF UNITED STATIONERS INC. AS OF MARCH 11,
1997, BASED ON THE LAST SALE PRICE OF THE COMMON STOCK AS QUOTED BY THE NASDAQ
NATIONAL MARKET SYSTEM ON SUCH DATE: $61,807,011. UNITED STATIONERS SUPPLY CO.
HAS NO SHARES OF VOTING STOCK OUTSTANDING HELD BY NON-AFFILIATES.
ON MARCH 11, 1997, UNITED STATIONERS INC. HAD OUTSTANDING 11,446,306 SHARES OF
COMMON STOCK, PAR VALUE $0.10 PER SHARE, AND 758,994 SHARES OF NONVOTING COMMON
STOCK, $0.01 PAR VALUE PER SHARE. ON MARCH 11, 1997, UNITED STATIONERS SUPPLY
CO. HAD 880,000 SHARES OF COMMON STOCK, $1.00 PAR VALUE PER SHARE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE:
PART OF FORM 10-K
Part III Portions of United Stationers Inc.'s definitive Proxy Statement
relating to the 1997 Annual Meeting of Stockholders of United
Stationers Inc., to be filed within 120 days of the fiscal year end of
United Stationers Inc.
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UNITED STATIONERS INC. AND SUBSIDIARIES
UNITED STATIONERS SUPPLY CO.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
CONTENTS AND CROSS REFERENCE SHEET
FURNISHED PURSUANT TO GENERAL INSTRUCTION G(4) OF FORM 10-K
FORM 10-K FORM 10-K FORM 10-K
PART NO. ITEM NO. DESCRIPTION PAGE NO.
- --------- --------- ----------- ---------
I Explanatory Note 1
1 Business 1
General 1
Products 1-2
Customers 2
Marketing and Customer Support 3
Distribution 4
Purchasing and Merchandising 4
Competition 4-5
Employees 5
2 Properties 5
3 Legal Proceedings 6
4 Submission of Matters to a Vote of Security
Holders 6
II 5 Market for Registrant's Common Equity
and Related Stockholder Matters 6
Quarterly Stock Price Data 7
6 Selected Consolidated Financial Data 7-10
7 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-18
8 Financial Statements and Supplementary Data 18-54
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 55
III 10 Directors and Executive Officers of the
Registrant 55-57
11 Executive Compensation 58
12 Security Ownership of Certain Beneficial
Owners and Management 58
13 Certain Relationships and Related Transactions 58
IV 14 Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 58-64
Signatures 65
<PAGE>
PART I
EXPLANATORY NOTE
THIS INTEGRATED FORM 10-K IS FILED PURSUANT TO THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, FOR EACH OF UNITED STATIONERS INC., A DELAWARE CORPORATION,
AND ITS WHOLLY OWNED SUBSIDIARY, UNITED STATIONERS SUPPLY CO., AN ILLINOIS
CORPORATION (COLLECTIVELY, THE "COMPANY"). UNITED STATIONERS INC. IS A HOLDING
COMPANY WITH NO OPERATIONS SEPARATE FROM ITS OPERATING SUBSIDIARY, UNITED
STATIONERS SUPPLY CO. AND ITS SUBSIDIARIES. NO SEPARATE FINANCIAL INFORMATION
FOR UNITED STATIONERS SUPPLY CO. AND ITS SUBSIDIARIES HAS BEEN PROVIDED HEREIN
BECAUSE MANAGEMENT FOR THE COMPANY BELIEVES SUCH INFORMATION WOULD NOT BE
MEANINGFUL BECAUSE (i) UNITED STATIONERS SUPPLY CO. IS THE ONLY DIRECT
SUBSIDIARY OF UNITED STATIONERS INC., WHICH HAS NO OPERATIONS OTHER THAN THOSE
OF UNITED STATIONERS SUPPLY CO. AND (ii) ALL ASSETS AND LIABILITIES OF UNITED
STATIONERS INC. ARE RECORDED ON THE BOOKS OF UNITED STATIONERS SUPPLY CO. THERE
IS NO MATERIAL DIFFERENCE BETWEEN UNITED STATIONERS INC. AND UNITED STATIONERS
SUPPLY CO. FOR THE DISCLOSURES REQUIRED BY THE INSTRUCTIONS TO FORM 10-K AND
THEREFORE, UNLESS OTHERWISE INDICATED, THE RESPONSES SET FORTH HEREIN APPLY TO
EACH OF UNITED STATIONERS INC. AND UNITED STATIONERS SUPPLY CO.
ITEM 1. BUSINESS
GENERAL
On March 30, 1995, Associated Holdings, Inc., ("Associated"), was merged with
and into United Stationers Inc., ("United"), with United surviving (the
"Merger"). Immediately thereafter, Associated Stationers, Inc. ("ASI"), the
wholly owned subsidiary of Associated, was merged with and into United
Stationers Supply Co. ("USSC"), the wholly owned subsidiary of United, with USSC
surviving. Although United was the surviving corporation in the Merger, the
transaction was treated as a reverse acquisition for accounting purposes with
Associated as the acquiring corporation.
The terms "Associated" and "United" will be used to refer to either the
respective pre-Merger corporations or specific aspects of the post-Merger
Company's business. United is the parent company of its direct wholly owned
subsidiary, USSC. Except where the context clearly indicates otherwise,
including references to the capital structure of United Stationers Inc., the
term "Company" hereinafter used includes United Stationers Inc. together with
its subsidiary
On October 31, 1996, USSC acquired all of the capital stock of Lagasse Bros.,
Inc. ("Lagasse"), an $80 million wholesaler of janitorial and sanitary supplies.
Lagasse operates as a subsidiary of USSC.
The Company is the largest general line business products wholesaler in the
United States with 1996 net sales of $2.3 billion. The Company sells its
products through a single national distribution network to more than 15,000
resellers, who in turn sell directly to end users. These products are
distributed through a computer-based network of warehouse facilities and truck
fleets radiating from 41 distribution centers and 14 Lagasse distribution
centers.
PRODUCTS
The Company markets the broadest product line in the industry, including
traditional office products, computer supplies, office furniture, and facilities
and maintenance supplies. As part of the Company's business strategy to acquire
incremental sales and increase market share through complementary product
offerings, the Company began to focus on specialty product segments in 1991 and
has expanded steadily upon this concept since then. The Company's product
offerings, comprised of more than 30,000 items, may be divided into four primary
categories:
1
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TRADITIONAL OFFICE PRODUCTS. The Company's core business continues to be
traditional office products, which include both brand-name products and the
Company's private brand products. Traditional office products include writing
instruments, paper products, organizers and calendars and various office
accessories. Traditional office products constituted the majority of the
Company's 1996 net sales.
COMPUTERS AND RELATED SUPPLIES. The Company sells brand name computer
supplies, peripherals and hardware to computer resellers and office products
dealers. Such office technology constituted approximately 25% of the Company's
1996 net sales.
OFFICE FURNITURE. The Company's sale of office furniture including leather
chairs, wooden and steel desks and computer furniture has enabled it to become
the nation's largest office furniture wholesaler, with the Company currently
offering nearly 3,000 furniture items from 70 different manufacturers. Office
furniture constituted approximately 14% of the Company's 1996 net sales. The
Company's "Pro-Image" program enables resellers with no previous expertise to
provide high-end furniture and office design services to end-users. The Company
offers national delivery and product "set-up" capabilities to resellers.
OTHER PRODUCTS. The Company's newest product categories encompass the
facilities management supplies market, which includes janitorial and sanitation
supplies, specialty mailroom and warehouse items, kitchen and cafeteria items,
first aid products and ergonomic products designed to enhance worker
productivity, comfort and safety. Additionally, the Company offers its
"Signature Image" program, which provides resellers with access into the
advertising specialties market (such as imprinted and logo items).
CUSTOMERS
The Company sells exclusively to resellers of business products. Its 15,000
customers include commercial, contract and retail office products dealers;
members of affiliated groups; members of buying cooperatives; mega-dealers
linked through common ownership; contract and retail office furniture dealers,
office products superstores; mass merchandisers; computer products resellers;
mail order companies; and sanitary supply distributors. No single reseller
accounted for more than 6% of the Company's net sales in 1996.
Commercial dealers and contract stationers are the most significant reseller
channel for office products distribution and typically serve large businesses,
institutions and government agencies. Through industry consolidation, the number
of such dealers has decreased, with the remaining dealers getting larger. Net
sales to these commercial dealers and contract stationers as a group are growing
rapidly.
The number of retail dealers has been declining for some time as the result of
individual retail dealers' inability to compete successfully with the growing
number of superstores and, more recently, as a result of dealerships being
acquired and brought under an umbrella of common ownership. However, many retail
office products dealers have adapted to this highly competitive environment.
Many retail dealers, commercial dealers and contract stationers have joined
forces in marketing or buying groups in order to increase purchasing leverage.
The Company believes it is the leading wholesale source for many of these
groups, providing not only merchandise but also special programs that enable
these dealers to take advantage of their combined strengths.
While the Company maintains and builds its business with commercial dealers,
contract stationers (including the contract stationer divisions of national
office product superstores) and retail dealers, it has also initiated
relationships with most major office products superstore chains. In addition,
the Company supplies inventory and other fulfillment services to the retail
operations of certain superstores, including their direct-to-business delivery
programs.
2
<PAGE>
MARKETING AND CUSTOMER SUPPORT
Substantially all of the Company's 30,000 products are sold through its
comprehensive office products catalogs and flyers. These materials include
general line catalogs, promotional pieces and specialty catalogs for the office
products, office furniture, facilities management supplies and other specialty
markets. The Company produces numerous catalogs for placement with dealers' end-
user customers, including the following annual catalogs: General Line Catalog;
Office Furniture Catalog featuring furniture and accessories; Universal Catalog
promoting the Company's private-brand merchandise; Computer Products Catalog
offering hardware, supplies, accessories and furniture; Facilities and
Maintenance Supplies Catalog featuring janitorial, maintenance, food service,
warehouse and mailroom supplies and a Lagasse catalog offering janitorial and
sanitary supplies. In addition, the Company produces the following quarterly
promotional catalogs: Action 2000 and Office Saver, each featuring over 1,000
high-volume commodity items, and Computer Concepts, featuring computer supplies,
peripherals, accessories and furniture. The Company also produces separate 8-
page quarterly flyers covering general office supplies, office furniture and
Universal-TM-products. Because commercial dealers, contract stationers and
retail dealers typically distribute only one wholesaler's catalogs in order to
streamline and concentrate order entry, the Company attempts to maximize the
distribution of its catalogs by offering advertising credits to resellers, which
can be used to offset the cost of catalogs. The Company also offers an
electronic catalog available on CD-Rom and through the Company's web site. This
catalog features 24,000 business products.
In addition to marketing its products and services through the use of its
catalogs, the Company employs a sales force of approximately 160 salespersons.
The sales force is responsible for sales and service to resellers with which the
Company has an existing relationship, as well as for establishing new
relationships with additional resellers. The Company supplements the efforts of
its sales force through telemarketing.
The Company concentrates its marketing efforts on providing value-added services
to resellers. The Company 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, the Company seeks to
differentiate itself from its competitors through a broader product offering, a
higher degree of product availability, a variety of high quality customer
services and prompt distribution capabilities. In addition to emphasizing its
broad product line, extensive inventory, computer integration and national
distribution capabilities, the Company's marketing programs have relied upon two
additional major components. First, the Company produces an extensive array of
catalogs for commercial dealers, contract stationers and retail dealers that are
usually custom imprinted with each reseller's name and sold to these resellers
who, in turn, distribute the catalogs to their customers. Second, the Company
provides its resellers with a variety of dealer support and marketing services,
including business management systems, promotional programs and pricing
services. These services are designed to aid resellers in differentiating
themselves from their competitors by addressing the steps in the end-user's
procurement process.
To assist its resellers with pricing, the Company offers matrix pricing
software. Traditionally, many resellers have priced products on a discount from
the manufacturer's suggested retail price, but recently pricing has shifted
toward a net pricing approach, whereby resellers sell certain products at
significant discounts, assuming that it can recapture the discounts through the
sale of other higher margin products. The Company's matrix pricing program
provides resellers with a resource to assist them in identifying the optimum
pricing mix between high and low margin items and, as a result, enables
resellers to more efficiently manage their gross margins.
The Company offers to its resellers a variety of electronic order entry systems
and business management and marketing programs which enhance the resellers'
ability to manage their businesses profitably. For instance, the Company
maintains EDI systems that link the Company to selected resellers, and
interactive order systems that link the Company to selected resellers and such
resellers to the ultimate end-user. In addition, the Company's electronic order
entry systems allow the reseller to seamlessly forward its customers' orders to
the Company, resulting in the delivery of pre-sold products to the reseller or
directly to its customers. The Company estimates that in 1996, approximately 90%
of its orders were received electronically.
3
<PAGE>
DISTRIBUTION
The Company has a network of 41 regional distribution centers located in 36
metropolitan areas in 25 states, most of which carry the Company's full line of
inventory. In addition, the Company serves sanitary supply distributors through
14 Lagasse distribution centers. The Company supplements its regional
distribution centers with 24 local distribution points throughout the United
States that serve as reshipment points for orders filled at the regional
distribution centers. The Company utilizes more than 350 trucks, substantially
all of which are contracted for by the Company, to enable direct delivery from
the regional distribution centers and local distribution points to resellers.
The Company's distribution capabilities are augmented by its proprietary,
computer-driven system. If a reseller places an order for an item that is out of
stock at the Company location which usually serves the particular reseller, the
Company's system will automatically search for the item at alternative
distribution centers. If the item is available at an alternative location, the
system will automatically forward the order to that alternate location, which
will then coordinate shipping with the primary facility and, for the majority of
resellers, provide a single on-time delivery. The system effectively provides
the Company with added inventory support, 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 the Company's
high order fill rate and efficient levels of inventory balances.
Another service offered by the Company to resellers is its "wrap and label"
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, the Company groups and
wraps the items individually by end-user so that the reseller need only deliver
the package. The "wrap and label" 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.
PURCHASING AND MERCHANDISING
As the largest national business products wholesaler in the United States, the
Company has substantial purchasing power and can realize significant economies
of scale. The Company obtains products from over 500 manufacturers. For many of
its manufacturers, the Company believes that it is a significant customer. In
1996, no supplier accounted for more than 11% of the Company's aggregate
purchases. As a centralized corporate function, the Company'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.
COMPETITION
The Company competes with business products manufacturers and with other
national, regional and specialty wholesalers of office products, office
furniture, computer supplies and facility management supplies. Competition
between the Company and manufacturers is based primarily upon net pricing,
minimum order quantity and product availability. Although manufacturers may
provide lower prices to resellers than the Company does, the Company's marketing
and catalog programs, combined with speed of delivery and its ability to offer
resellers a broad line of business products from multiple manufacturers on a
"one-stop shop" basis and with lower minimum order quantities, are important
factors in enabling the Company to compete effectively. See "Marketing and
Customer Support" and "Distribution." Manufacturers typically sell their
products through a variety of distribution channels, including wholesalers and
resellers.
4
<PAGE>
Competition between the Company and other wholesalers is based primarily on net
pricing to resellers, breadth of product lines, availability of products, speed
of delivery to resellers, order fill rates and the quality of its marketing and
other services. The Company believes it is competitive in each of these areas.
Most wholesale distributors of business products conduct operations regionally
and locally, sometimes with limited product lines such as writing instruments or
computer products. Only one other national wholesaler carries a full line of
office products.
Consolidation has occurred in recent years at all levels of the business
products industry. Consolidation of commercial dealers and contract stationers
has resulted in an increased ability of those resellers to buy goods directly
from manufacturers. In addition, over the last decade, office products
superstores (which largely buy directly from manufacturers) have entered
virtually every major metropolitan market.
Increased competition in the business products industry, together with increased
advertising, has heightened price awareness among end-users. As a result,
purchasers of commodity type office products have become extremely price
sensitive, and therefore the Company has increased its efforts to market to
resellers the continuing advantages of its competitive strengths (as compared to
those of manufacturers and other wholesalers), such as marketing and catalog
programs, speed of delivery, and the ability to offer resellers a "one-stop
shop" for a broad line of business products from multiple manufacturers with
lower minimum order quantities. In addition, such heightened price awareness has
led to margin pressure on commodity office products. In the event that such
trend continues, the Company's profit margins could be adversely affected.
EMPLOYEES
At December 31, 1996, the Company employed approximately 4,900 persons.
The Company considers its relationship with its employees to be good.
Approximately 900 of the shipping, warehouse and maintenance employees at
certain of the Chicago, Detroit, Philadelphia, Baltimore, Los Angeles,
Minneapolis and New York City facilities are covered by collective bargaining
agreements. The agreements expire at various times during the next three years.
ITEM 2. PROPERTIES
The Company considers its properties to be suitable and adequate for their
intended uses. These properties consist of the following:
EXECUTIVE OFFICES. The Company's office facility in Des Plaines, Illinois has
approximately 135,800 square feet of office and storage space. In September
1993, approximately 47,000 square feet of office space located in Mt. Prospect,
Illinois was leased by the Company. This lease expires in September of 1999
with an option to renew for two five-year terms.
USSC REGIONAL DISTRIBUTION CENTERS. The Company presently operates 41
distribution centers in 25 states. These centers represent, in total,
approximately 7.1 million square feet, of which approximately 4.3 million is
owned and the balance is leased.
LOCAL DISTRIBUTION POINTS. The Company also operates 24 local distribution
points. Two are leased by the Company; the other local distribution points are
operated through cross-docking arrangements with third party distribution
companies.
LAGASSE DISTRIBUTION CENTERS. Lagasse operates 14 leased distribution centers,
specifically serving janitorial and sanitary supply distributors. These centers
represent, in total, approximately 400,000 square feet. Its New Orleans
distribution center also includes 22,000 square feet of executive office space.
5
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings arising in the ordinary course of
its business. The Company is not involved in any legal proceeding that it
believes will result, individually or in the aggregate, in a material adverse
effect upon its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through the
solicitation of proxies in the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
QUARTERLY FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)(UNAUDITED)
THE COMPANY/ASSOCIATED
<TABLE>
<CAPTION>
Income Income (Loss)
(Loss) Per Share
Before Net Before Net Income
Net Gross Extraordi- Income Extraordinary (Loss)
Sales Profit (1) nary Item (Loss) Item (2)(5) Per Share (2)(5)
------------ ---------- ---------- ------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended
DECEMBER 31, 1996
First Quarter $ 586,881 $102,526 $ 8,209 $ 8,209 $0.51 $0.51
Second Quarter 535,690 87,212 5,273 5,273 0.32 0.32
Third Quarter 576,254 98,207 8,781 8,781 0.56 0.56
Fourth Quarter 599,345 103,016 9,730 9,730 0.63 0.63
---------- -------- ------ ------
Totals $2,298,170 $390,961 $31,993 $31,993 2.03 2.03
---------- -------- ------ ------
---------- -------- ------ ------
Year Ended
DECEMBER 31, 1995
First Quarter (3) $ 134,997 $ 24,978 ($4,233)(4) ($5,682) ($0.72) ($0.94)
Second Quarter 529,429 90,563 1,524 1,524 0.07 0.07
Third Quarter 537,624 93,818 4,173 4,173 0.27 0.27
Fourth Quarter 549,412 95,154 4,779 4,779 0.29 0.29
---------- -------- ------ ------
Totals $1,751,462 $304,513 $6,243 $4,794 0.33 0.22
---------- -------- ------ ------
---------- -------- ------ ------
</TABLE>
(1) Gross profit is net of delivery and occupancy costs. See Note 3
(Reclassification) to the Consolidated Financial Statements of the Company
included elsewhere herein.
(2) Historical earnings per share amounts have been restated to reflect the
share conversion resulting from the Merger and the 100% stock dividend
effective November 9, 1995. Earnings per share are net of preferred stock
dividends.
(3) Reflects the results of Associated only.
(4) The extraordinary item reflects the write-off of financing costs and
original issue discount relating to the retired debt which was being
amortized over the life of the original debt.
(5) As a result of changes in the number of common and common equivalent shares
during the year, the sum of four quarters' earnings per share will not
equal earnings per share for the total year.
6
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QUARTERLY STOCK PRICE DATA
The common stock is quoted through the NASDAQ National Market System under
the symbol "USTR." The following table sets forth on a per share basis,
for the periods indicated, the high and low closing sale prices per share
for the common Stock as reported by the NASDAQ National Market System. All
stock price information has been restated to reflect the 100% stock dividend
effective November 9, 1995.
High Low
1995
First Quarter * *
Second Quarter $9 5/16 $ 8 9/16
Third Quarter $15 1/2 $ 8 11/16
Fourth Quarter $27 3/4 $13 3/4
1996
First Quarter $30 1/4 $21 1/2
Second Quarter $24 1/2 $19 1/2
Third Quarter $24 1/2 $17 1/2
Fourth Quarter $23 $19 1/2
* Due to the significant changes in the Company's capital structure
resulting from the Merger, stock price information for the period prior
to the Merger has not been included as it is not comparable to the
stock price information since the Merger.
On February 28, 1997, there were approximately 1,020 holders of record of common
stock.
The Company does not currently intend to pay any cash dividends on the common
stock. Furthermore, as a holding company, the ability of United to pay
dividends in the future is dependent upon the receipt of dividends or other
payments from its operating subsidiary, USSC. The payment of dividends by
USSC is subject to certain restrictions imposed by the Company's debt
agreements. See Note 5 to the Consolidated Financial Statements of the
Company included elsewhere herein.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below and on the following pages is selected historical consolidated
financial data for the Company and its predecessors. Although United was the
surviving corporation in the Merger, the Acquisition was treated as a reverse
acquisition for accounting purposes, with Associated as the acquiring
corporation. Therefore, the income statement and operating and other data for
the year ended December 31, 1995 reflect the financial information of Associated
only for the three months ended March 30, 1995, and the results of the Company
for the nine months ended December 31, 1995. The balance sheet data at
December 31, 1996 and 1995 reflects the consolidated balances of the Company,
including various Merger-related adjustments. Income statement data for all
periods presented reflects a reclassification of delivery and occupancy costs
to cost of goods sold from operating expenses.
THE COMPANY/ASSOCIATED
The selected consolidated financial data of Associated's predecessor (the
wholesale division of Boise Cascade Office Products Corporation "BCOP") set
forth below for the one-month period ended January 31, 1992 (when Associated
purchased the wholesale division of BCOP (the "Associated Transaction")) are
derived from the unaudited financial statements of Associated's predecessor for
such period. Associated accounted for the Associated Transaction using the
purchase method of accounting. There are material operational and accounting
differences between Associated's predecessor and Associated resulting from the
Associated Transaction. Accordingly, the historical financial data of
Associated's predecessor may not be comparable in all material respects with
data of Associated.
7
<PAGE>
The selected consolidated financial data of Associated set forth below for the
period from January 31, 1992 to December 31, 1992 and for the years ended
December 31, 1993 and 1994 has been derived from the Consolidated Financial
Statements of Associated which have been audited by Arthur Andersen LLP,
independent public accountants. The selected consolidated financial data of the
Company for the years ended December 31, 1996 and 1995 (which for Income
Statement and Operating and Other Data includes Associated only for the three
months ended March 30, 1995 and the results of the Company for the nine months
ended December 31, 1995) has been derived from the Consolidated Financial
Statements of the Company which have been audited by Ernst & Young LLP,
independent auditors. All selected consolidated financial data set forth below
should be read in conjunction with, and is qualified in its entirety by,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Historical Results of Operations of the Company/Associated,"
"Liquidity and Capital Resources of the Company/Associated" and the Consolidated
Financial Statements of the Company included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
PREDECES-
THE COMPANY SOR(1)(2)
----------------------------------------------------------------------- ----------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JAN 31 TO JAN. 1 TO
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, JAN. 31,
1996 1995 1994 1993 1992 1992 (3)
---------- ---------- ---------- ---------- --------- ---------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales. . . . . . . . . . . . . $2,298,170 $1,751,462 $470,185 $455,731 $359,779 $39,016
Cost of goods sold . . . . . . . . 1,907,209 1,446,949 382,299 375,226 295,668 31,612
---------- ---------- -------- -------- -------- -------
Gross profit. . . . . . . . . . 390,961 304,513 87,886 80,505 64,111 7,404
Operating expenses . . . . . . . . 277,957 246,956 (4) 69,765 69,527 53,758 5,985
---------- ---------- -------- -------- -------- -------
Income from operations. . . . . 113,004 57,557 18,121 10,978 10,353 $ 1,419
-------
-------
Interest expense, net. . . . . . . 57,456 46,186 7,725 7,235 5,626
---------- ---------- -------- -------- --------
Income before income taxes
and extraordinary item . . . 55,548 11,371 10,396 3,743 4,727
Income taxes . . . . . . . . . . . 23,555 5,128 3,993 781 1,777
---------- ---------- -------- -------- --------
Income before extraordinary
item . . . . . . . . . . . . 31,993 6,243 $ 6,403 2,962 2,950
Extraordinary item - loss on
early retirement of debt, net
of tax benefit of $967 . . . - - (1,449) - - - - - -
---------- ---------- -------- -------- --------
Net income . . . . . . . . . . . . $ 31,993 $ 4,794 $ 6,403 $ 2,962 $ 2,950
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
Net income attributable to
common stockholders . . . . . . $ 30,249 $ 2,796 $ 4,210 $ 915 $ 1,501
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
Net income per common and
common equivalent share
Income before
extraordinary item. . . . $2.03 $0.33 $0.51 $0.11 $0.19
Extraordinary item . . . . . - - (0.11) - - - - - -
----- ----- ----- ----- ----
Net income . . . . . . . . . $2.03 $0.22 $0.51 $0.11 $0.19
----- ----- ----- ----- ----
----- ----- ----- ----- ----
Cash dividends declared per
common share. . . . . . . . . . - - - - - - - - - -
Operating and Other Data:
EBITDA (5) . . . . . . . . . . . . $ 139,046 $ 81,241 $ 23,505 $ 16,481 $ 14,875 $ 1,661
EBITDA margin (6). . . . . . . . . 6.1% 4.6% (7) 5.0% 3.6% 4.1% 4.3%
Depreciation and
amortization (8). . . . . . . . $ 26,042 $ 23,684 $ 5,384 $ 5,503 $ 4,522 $ 242
Capital expenditures . . . . . . . (2,886)(9) 8,017 554 3,273 4,289 (36)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------
AT DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital. . . . . . . . . . . . . . . . . . $ 404,973 $ 355,465 $ 56,454 $ 57,302 $ 46,396
Total assets . . . . . . . . . . . . . . . . . . . 1,109,867 1,001,383 192,479 190,979 179,069
Total debt and capital leases (10) . . . . . . . . 600,002 551,990 64,623 86,350 78,297
Redeemable preferred stock . . . . . . . . . . . . 19,785 18,041 23,189 20,996 18,949
Redeemable warrants. . . . . . . . . . . . . . . . 23,812 39,692 1,650 1,435 1,435
Total stockholders' equity . . . . . . . . . . . . 75,820 30,024 24,775 11,422 10,466
</TABLE>
(1) The capital structure and accounting basis of the assets and liabilities
of Associated's predecessor differ from those of Associated (i.e. the
Company). Accordingly, certain financial information for the period before
January 31, 1992 is not comparable to that for periods after
January 31, 1992 and therefore is not presented in this table.
(2) Associated's predecessor operated as a segment of a company which did not
allocate income tax or interest expense to the predecessor. Accordingly,
actual operating results for Associated's predecessor reflect only income
from operations before interest expense and income taxes.
(3) Derived from the unaudited financial statements of Associated's predecessor
for the one month ended January 31, 1992.
(4) Includes a restructuring charge of $9.8 million.
(5) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and extraordinary item and is presented 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. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure of
profitability or liquidity.
(6) EBITDA margin represents EBITDA as a percent of net sales.
(7) EBITDA margin would have been 5.2% if adjusted to exclude the restructuring
charge.
(8) Excludes amortization of deferred financing costs.
(9) Includes $11.1 million of proceeds from the sale of property, plant and
equipment.
(10) Total debt and capital leases include current maturities.
UNITED
The selected consolidated financial data of United (a predecessor of the
Company) set forth below for the seven months ended March 30, 1995 (at which
time United and Associated merged to create the Company) has been derived from
the Consolidated Financial Statements of United which have been audited by Ernst
& Young LLP, independent auditors. The selected financial data at and for the
seven-month period ended March 31, 1994 is unaudited and in the opinion of
management reflects all adjustments considered necessary for a fair presentation
of such data. The selected consolidated financial data of United for each of the
three fiscal years ended August 31, 1994, 1993 and 1992 have been derived from
the Consolidated Financial Statements of United which have been audited by
Arthur Andersen LLP, independent public accountants. All selected consolidated
financial data set forth
9
<PAGE>
below should be read in conjunction with, and is qualified in its entirety by,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Historical Results of Operations of United" and "Historical
Liquidity and Capital Resources of United" and the Consolidated Financial
Statements of United, together with the related notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEAR ENDED AUGUST 31,
------------------------ ----------------------------------------
MARCH 30, MARCH 31,
--------- ---------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales. . . . . . . . . . . . . . . . . . . . . $ 980,575 $ 871,585 $1,473,024 $1,470,115 $1,094,275
Cost of sales. . . . . . . . . . . . . . . . . . . 814,780 717,546 1,220,245 1,197,664 887,418
--------- --------- ---------- ---------- ----------
Gross profit on sales. . . . . . . . . . . . . . . 165,795 154,039 252,779 272,451 206,857
Operating expenses . . . . . . . . . . . . . . . . 133,098 128,594 216,485 226,337 180,455
Merger-related costs . . . . . . . . . . . . . . . 27,780(1) - - - - - - - -
--------- --------- ---------- ---------- ----------
Income from operations . . . . . . . . . . . . . . 4,917 25,445 36,294 46,114 26,402
Interest expense, net. . . . . . . . . . . . . . . 7,500 5,837 10,461 9,550 6,503
Other income, net. . . . . . . . . . . . . . . . . 41 117 225 355 364
--------- --------- ---------- ---------- ----------
Income (loss) before income taxes. . . . . . . . . (2,542) 19,725 26,058 36,919 20,263
Income taxes.. . . . . . . . . . . . . . . . . . . 4,692 8,185 10,309 15,559 8,899
--------- --------- ---------- ---------- ----------
Net income (loss). . . . . . . . . . . . . . . . . $ (7,234) $ 11,540 $ 15,749 $ 21,360 $ 11,364
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
Net income (loss) per common share . . . . . . . . $ (0.39) $ 0.62 $ 0.85 $ 1.15 $ 0.71
Cash dividends declared per share. . . . . . . . . 0.30 0.30 0.40 0.40 0.40
OPERATING AND OTHER DATA:
EBITDA(2). . . . . . . . . . . . . . . . . . . . . 17,553 37,665 57,755 67,712 46,645
EBITDA margin(3) . . . . . . . . . . . . . . . . . 1.8% 4.3% 3.9% 4.6% 4.3%
Depreciation and amortization. . . . . . . . . . . $ 12,595 $ 12,103 $ 21,236 $ 21,243 $ 19,879
Net capital expenditures . . . . . . . . . . . . . 7,764 4,287 10,499 29,958 8,291
BALANCE SHEET DATA (AT PERIOD END):
Working capital. . . . . . . . . . . . . . . . . . 257,600 297,099 239,827 216,074 214,611
Total assets . . . . . . . . . . . . . . . . . . . 711,839 608,728 618,550 634,786 601,465
Total debt and capital leases(4) . . . . . . . . . 233,406 227,626 155,803 150,251 150,728
Stockholders' investment.. . . . . . . . . . . . . 233,125 243,636 246,010 237,697 223,387
</TABLE>
(1) In connection with the Merger, United incurred approximately $27.8 million
of Merger-related costs, consisting of severance payments under employment
contracts ($9.6 million); insurance benefits under employment contracts
($7.4 million); legal, accounting and other professional services fees
($5.2 million); retirement of stock options ($3.0 million); and fees for
letters of credit related to employment contracts and other costs ($2.6
million).
(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and is presented 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. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability
or liquidity.
(3) EBITDA margin represents EBITDA as a percentage of net sales.
(4) Total debt and capital leases include current maturities.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes thereto appearing elsewhere in this Form
10-K.
Certain information presented in this Form 10-K includes forward-looking
statements regarding the Company's future results of operations. The Company is
confident that its expectations are based on reasonable assumptions given its
knowledge of its operations and business. However, there can be no assurance
that the Company's actual results will not differ materially from its
expectations. The matters referred to in forward-looking statements may be
affected by the risks and uncertainties involved in the Company's business
including, among others, competition with business products manufacturers and
other wholesalers, consolidation of the business products industry, the ability
to maintain gross profit margins, the ability to achieve future cost savings,
changing end-user demands, changes in manufacturer pricing, service
interruptions and availability of liquidity and capital resources.
OVERVIEW
On March 30, 1995, Associated merged with and into United. Although the Company
was the surviving corporation in the Merger, the transaction was treated as a
reverse acquisition for accounting purposes, with Associated as the acquiring
corporation. Therefore, the results of operations for the year ended December
31, 1995 reflects the financial information of Associated only for the three
months ended March 30, 1995 and the results of the Company for the nine months
ended December 31, 1995. As a result of the Merger, the results of operations of
the Company for the year ended December 31, 1995 are not comparable to those of
previous and subsequent periods.
To facilitate a meaningful comparison, the following supplemental discussion and
analysis is based on certain components of the combined historical results of
operations without any pro forma adjustments for Associated and United for the
year ended December 31, 1994 and on the pro forma results of operations for the
Company for the year ended December 31, 1995. The pro forma and combined
historical results of operations do not purport to be indicative of the results
that would have been obtained had such transactions been completed for the
periods presented or that may be obtained in the future.
GENERAL INFORMATION
GROSS PROFIT MARGINS. In recent years, a number of factors have adversely
affected gross profit margins in the office products industry, including those
of the Company. These factors reflect the increasingly competitive nature of the
industry. Competitive pressures have increased due in part to the growth of
large resellers such as national office products superstores that have
heightened price awareness at the end-user level. The increasing price
sensitivity of end-users has contributed to the decline in industrywide gross
profit margins. These pressures are expected to continue in the future.
The Company's gross profit margins vary across product categories, so that
material changes in its product mix can impact the Company's overall margin. For
example, the gross profit margin on the Company's sales of commodity products,
such as copier paper and laser printer toner--product categories that have grown
over the past few years--tend to be lower than the gross profit margins on most
other product categories. While the recent increase in sales of these types of
products have adversely affected the Company's overall gross profit margin, they
have contributed to higher operating income. The Company expects such sales to
increase as a percentage of revenues in the future.
11
<PAGE>
RESTRUCTURING CHARGE. The historical results for the twelve months ended
December 31, 1995 include a restructuring charge of $9.8 million ($5.9 million
net of tax benefit of $3.9 million). The restructuring charge included severance
costs totaling $1.8 million. The Company's consolidation plan specified that
330 distribution, sales and corporate positions, 180 of which related to pre-
Merger Associated, were to be eliminated substantially within one year following
the Merger. The Company has achieved its target, with the related termination
costs of approximately $1.8 million charged against the reserve. The
restructuring charge also included distribution center closing costs totaling
$6.7 million and stockkeeping unit reduction costs totaling $1.3 million. The
consolidation plan called for the closing of eight redundant distribution
centers, six of which related to pre-Merger Associated, and the
elimination of overlapping inventory items from the Company's catalogs
substantially within the one-year period following the Merger. Estimated
distribution center closing costs included (i) the net occupancy costs of leased
facilities after they are vacated until expiration of leases and (ii) the losses
on the sale of owned facilities and the facilities' furniture, fixtures, and
equipment. Estimated stockkeeping unit reduction costs included losses on the
sale of inventory items which have been discontinued solely as a result of the
Acquisition. As of December 31, 1996, five of the six redundant pre-Merger
Associated distribution centers have been closed with $5.5 million charged
against the reserve and $2.0 million related to stockkeeping unit reduction
costs have also been charged against the reserve. As of December 31, 1996, the
Company's consolidation plan has been substantially completed. Seven of the
eight redundant distribution centers have been closed. The restructuring
reserve balance at December 31, 1996 of $0.5 million is expected to be adequate
to cover the remaining estimated expenditures related to integration and
transition costs. See Note 4 to the Consolidated Financial Statements of the
Company included elsewhere herein.
EMPLOYEE STOCK OPTIONS. In September 1995, the Board of Directors approved an
amendment to the Company's employee stock option plan (the "Plan") that allows
for the issuance of employee stock options to key management employees of the
Company exercisable for up to approximately 2.2 million additional shares of
Common Stock. The Plan was designed to build increased employee commitment
through participation in the growth and performance of the Company.
Subsequently, employee stock options exercisable for an aggregate of
approximately 2.2 million shares of Common Stock were granted to key management
employees. Some of the employee stock options were granted at an exercise price
below the then fair market value of the Common Stock. The exercise price of
certain options increases by $0.625 on a quarterly basis effective April 1,
1996.
The employee stock options granted under the Plan do not vest to the employee
until the occurrence of an event (a "Vesting Event") that causes the present
non-public equity investors to have received at least a full return of their
investment (at cost) in cash, fully tradable marketable securities or the
equivalent. A Vesting Event will cause the Company to recognize compensation
expense based upon the difference between the fair market value of the Common
Stock and the exercise prices of the employee stock options. Based upon a
stock price of $19.50 and options outstanding as of December 31, 1996, the
Company would recognize a nonrecurring noncash charge of $18.4 million in
compensation expense ($10.6 million net of tax benefit of $7.8 million), if a
Vesting Event were to occur. Each $1.00 change in the fair market value of
Common Stock could result in a maximum adjustment to such compensation
expense of approximately $2.5 million ($1.4 million net of tax effect of $1.1
million).
CHANGE IN ACCOUNTING METHOD. Effective January 1, 1995, Associated changed its
method of accounting for the cost of inventory from the FIFO method to the LIFO
method. Associated made this change in contemplation of its acquisition of
United (accounted for as a reverse acquisition) so that its method would conform
to that of United. Associated believed that the LIFO method provides a better
matching of current costs and current revenues, and that earnings reported under
the LIFO method are more easily compared to that of other companies in the
wholesale industry where the LIFO method is common. In 1995, this change
resulted in the reduction of pre-tax income of the Company of approximately
$8.8 million ($5.3 million net of tax benefit of $3.5 million). See Note 3
(Inventories) to the Consolidated Financial Statements of the Company included
elsewhere herein.
RECLASSIFICATION OF DELIVERY AND OCCUPANCY COSTS.
During the fourth quarter of 1996, the Company reclassified its delivery and
occupancy costs from operating expenses to cost of goods sold to conform the
Company's presentation to others in the business products industry. See Note 3
(Reclassification) to the Consolidated Financial Statements included elsewhere
herein.
12
<PAGE>
ACTUAL, PRO FORMA AND COMBINED RESULTS OF OPERATIONS
The following table of summary actual, pro forma (see Note 4 to the Consolidated
Financial Statements of the Company included elsewhere herein) and combined
historical financial data is intended for informational purposes only and is not
necessarily indicative of either financial position or results of operations in
the future, or that would have occurred had the events described in the first
paragraph under "Overview" occurred on January 1, 1995. The following
information should be read in conjunction with, and is qualified in its entirety
by, the historical Consolidated Financial Statements of the Company and its
predecessors, including the related notes thereto, included elsewhere herein.
The following table also presents unaudited summary combined historical
financial data for Associated and United for the year ended December 31, 1994.
This data has not been prepared in accordance with generally accepted accounting
principles, which do not allow for the combination of financial data for
entities that are not under common ownership. Nevertheless, management believes
that this combined historical financial data, when read in conjunction with the
separate historical financial statements of Associated and United prepared in
accordance with generally accepted accounting principles and included elsewhere
herein, may be helpful in understanding the past operations of the companies
that were combined in the Merger. This combined historical financial data for
1994 represents a combination of the historical financial data for Associated
and United for the periods indicated without any pro forma adjustments, and is
supplemental to the historical financial data of Associated and United included
elsewhere herein.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA COMBINED
--------------------- --------------------- ---------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- ---------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,298,170 100.0% $2,201,860 100.0% $1,990,363 100.0%
Gross profit 390,961 17.0 381,270 17.3 344,542 17.3
Operating expenses 277,957 12.1 299,861 13.6 285,500 14.3
Income from operations 113,004 4.9 81,409 3.7 59,042 3.0
</TABLE>
COMPARISON OF ACTUAL RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 AND PRO
FORMA RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales increased 4.4% to $2,298.2 million for 1996 from $2,201.9
million for 1995. This increase is primarily the result of higher unit sales in
all product categories. In addition, our Micro United division continues to
report strong growth resulting from the underlying strength in the marketplace.
The Company's year-long focus on improving the consistency and reliability of
its service has led to increased sales and higher customer and consumer
satisfaction. The Company's core strengths, coupled with the strategic
initiatives already under way, position it to deliver continued growth in both
sales and earnings.
GROSS MARGIN. Gross margin declined to 17.0% in 1996 from 17.3% in 1995. This
decrease reflects a shift in our product mix, the continuing consolidation of
our dealer base and deflation across our product mix.
OPERATING EXPENSES. Operating expenses decreased as a percent of net sales
to 12.1% in 1996, compared with 13.6% in 1995. This decrease is primarily
due to the realization of merger synergies, cost containment, productivity
improvements and leveraging of fixed expenses. The Company's operating
efficiency allows it to join forces with its customers to produce high levels
of customer and consumer satisfaction. The Company's management believes
there is further room for improvement, primarily through warehouse and
systems efficiencies.
INCOME FROM OPERATIONS. Income from operations as a percent of net sales
increased to 4.9% in 1996 from 3.7% in 1995.
13
<PAGE>
COMPARISON OF PRO FORMA RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 AND
COMBINED RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales were $2,201.9 million for 1995, a 10.6% increase over net
sales of $1,990.4 million in 1994. The increase in net sales was primarily the
result of changes in unit volume rather than changes in prices. Sales grew in
all geographic regions. In addition, the sales growth was attributable to an
increase in the sale of computer-related products through the Company's Micro
United division.
GROSS MARGIN. Gross profit as a percent of net sales was 17.3% in 1995 and
1994. The gross profit margin in 1995 reflects a shift in product mix and a
larger LIFO charge due to Associated's change in its method of accounting for
inventory from the FIFO method to the LIFO method. Also, gross profit was
adversely affected in 1995 by higher sales of computer-related products and
commodity items which typically carry lower gross profit margins, offset by
lower freight and occupancy costs.
OPERATING EXPENSES. Operating expenses as a percent of net sales decreased to
13.6% in 1995 from 14.3% in 1994. The decrease in operating expenses as a
percent of net sales was primarily due to increased operating efficiencies,
improved productivity and increased economies of scale as a result of a higher
sales base.
INCOME FROM OPERATIONS. Income from operations as a percent of net sales was
3.7% in 1995 compared with 3.0% in 1994.
HISTORICAL RESULTS OF OPERATIONS
COMPARISON OF HISTORICAL FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
NET SALES. Net sales increased 31.2% to $2,298.2 million for 1996 from $1,751.5
million for 1995. This increase was primarily the result of the Merger for a
full twelve months in 1996. Sales in 1995 include only nine months of United's
sales.
GROSS MARGIN. Gross margin declined to 17.0% in 1996 from 17.4% in 1995. This
decrease reflects a shift in our product mix, the continuing consolidation of
our dealer base and deflation across our product mix.
OPERATING EXPENSES. Operating expenses decreased as a percent of net sales
to 12.1% in 1996, compared with 14.1% in 1995. The results for 1995 include the
impact of a restructuring charge of $9.8 million ($5.9 million net of tax
benefit of $3.9 million). The decline in the operating expense ratio before the
restructuring charge (12.1% in 1996 versus 13.5% in 1995) was primarily due to
the realization of merger synergies, cost containment, productivity improvements
and leveraging of fixed expenses.
INCOME FROM OPERATIONS. Income from operations as a percent of net sales
increased to 4.9% in 1996 from 3.3% in 1995.
INTEREST EXPENSE. Interest expense as a percent of net sales was 2.5% in
1996, compared with 2.6% in 1995. This reduction reflects the leveraging of
fixed interest costs against higher sales, partially offset by funding required
to acquire Lagasse Bros., Inc. (see Note 1 to the Consolidated Financial
Statements of the Company included elsewhere herein).
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income taxes
and extraordinary item as a percent of net sales increased to 2.4% in 1996 from
0.7% in 1995.
NET INCOME. Net income as a percent of net sales increased to 1.4% in 1996 from
0.3% in 1995 resulting from the aforementioned reasons. Net income in 1995
includes an extraordinary item, loss on the early retirement of debt related to
the Merger of $2.4 million ($1.4 million net of tax benefit of $1.0 million) or
0.1% of net sales.
14
<PAGE>
FOURTH QUARTER RESULTS. Certain expense and cost of sale estimates are recorded
throughout the year including inventory shrinkage, required LIFO reserve,
manufacturers' allowances, advertising costs and various expense items. During
the fourth quarter of 1996, the Company recorded approximately $3.0 million of
additional net income relating to the refinement of estimates recorded in the
prior three quarters.
COMPARISON OF HISTORICAL FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994
NET SALES. Net sales were $1,751.5 million for 1995 compared with $470.2
million in 1994. The increase is primarily the result of the Merger. Sales in
1995 include nine months of United's sales.
GROSS MARGIN. Gross profit as a percent of net sales decreased to 17.4% in
1995 from 18.7% in 1994. The lower gross profit margin reflects a shift in
product mix, the Acquisition and the change in the method of accounting for
inventory from the FIFO method to the LIFO method. See Note 3 (Inventories)
to the Consolidated Financial Statements of the Company included elsewhere
herein.
OPERATING EXPENSES. Operating expenses as a percent of net sales decreased
to 14.1% in 1995 from 14.8% in 1994. The actual results for 1995 include the
impact of a restructuring charge of $9.8 million ($5.9 million net of tax
benefit of $3.9 million) in the first quarter of 1995. Operating expenses
before the restructuring charge were 13.5% in 1995. The decrease in operating
expenses as a percent of net sales before the restructuring charge was
primarily due to increased operating efficiencies and improved productivity,
partially offset by Merger-related compensation expense relating to an
increase in the value of employee stock options of approximately $1.5 million
($0.9 million net of tax benefit of $0.6 million).
INCOME FROM OPERATIONS. Income from operations as a percent of net sales was
3.3% in 1995 (after the restructuring charge) compared with 3.9% in 1994. Before
such restructuring charge, income from operations in 1995 was 3.9%.
INTEREST EXPENSE. Interest expense as a percent of net sales was 2.6% in 1995
compared to 1.7% in 1994. The increase reflects additional debt needed to
consummate the Merger and higher interest rates in 1995.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income taxes
and extraordinary item as a percent of net sales was 0.7% in 1995 compared with
2.2% in 1994.
INCOME BEFORE EXTRAORDINARY ITEM. Income before extraordinary item was $6.2
million in 1995 compared with $6.4 million in 1994. An extraordinary item, the
loss on early retirement of debt related to the Merger of $2.4 million ($1.4
million net of tax benefit of $1.0 million), was recognized in the first quarter
of 1995.
NET INCOME. Net income was $4.8 million in 1995 compared with $6.4 million in
1994. Excluding the extraordinary item, net income would have been $6.2 million.
FOURTH QUARTER RESULTS. Certain interim expense and inventory estimates are
recorded throughout the year relating to shrinkage, inflation and product mix.
The results of the year-end close and physical inventory reflected a favorable
adjustment with respect to such estimates, resulting in approximately $0.9
million of additional net income, which is reflected in the fourth quarter of
1995.
HISTORICAL RESULTS OF OPERATIONS OF UNITED
COMPARISON OF THE SEVEN MONTHS ENDED MARCH 30, 1995 AND 1994
NET SALES. Net sales were $980.6 million in the seven months ended March 30,
1995, a 12.5% increase from net sales of $871.6 million in the comparable period
in 1994. The primary reason for the increase is growth in unit volume.
15
<PAGE>
GROSS PROFIT ON SALES. Gross profit as a percent of net sales was 16.9% for the
seven months ended March 30, 1995, compared with 17.7% in the comparable period
in 1994. This lower gross profit margin is primarily the result of a shift in
the sale of computer related products that have lower gross profit margins and
is consistent with the gross profit margins achieved in the latter half of
United's fiscal year ended August 31, 1994.
OPERATING EXPENSES. Operating expenses as a percent of net sales increased to
16.4% in the seven-month period ended March 30, 1995 from 14.8% in the
comparable period in 1994. The increase is primarily attributable to $27.8
million ($18.5 million net of tax benefit of $9.3 million) of non-recurring
Merger-related costs consisting of severance payments under employment
contracts; insurance benefits under employment contracts; legal, accounting and
other professional services fees; the repurchase of stock options; and fees for
letters of credit related to employment contracts and other costs. Operating
expenses as a percent of net sales prior to the Merger-related costs were 13.6%
for the seven-month period ended March 30, 1995. This decline from the
comparable period in 1994 is due to a reduction in payroll expense.
INCOME FROM OPERATIONS Income from operations as a percent of net sales was
0.5% in the seven-month period ended March 30, 1995, compared with 2.9% in the
comparable period in 1994. The decrease was attributable to the Merger-related
costs discussed under "Operating Expenses" above. Income from operations as a
percent of net sales was 3.3% in the seven-month period ended March 30, 1995,
excluding the Merger-related costs.
INTEREST EXPENSE. Interest expense was $7.6 million for the seven-month period
ended March 30, 1995, compared with $6.1 million for the same period in 1994.
The increase was due to higher interest expense from increased debt to meet
working capital and other capital expenditure needs and higher interest rates on
borrowings.
INCOME (LOSS) BEFORE INCOME TAXES. Income (loss) before income taxes as a
percent of net sales was a loss of 0.3% in the seven-month period ended March
30, 1995, compared to income of 2.3% in the comparable period of 1994. The
decrease in income before income taxes was attributable to the factors stated
above.
INCOME TAXES. The effective tax rate for the seven-month period ended March 30,
1995 was (184.6%), compared with 41.5% for the seven-month period ended March
31, 1994. The increase is primarily due to non-deductible Merger-related costs
and non-deductible amortization of goodwill.
NET INCOME (LOSS). Net income (loss) was a loss of $7.2 million for the seven-
month period ended March 30, 1995, compared with income of $11.5 million for the
same period in 1994. The loss was primarily due to $27.8 million ($18.5 million
net of tax benefit of $9.3 million) of non-recurring Merger-related costs
discussed under "Operating Expenses" above. Net income (loss) per share was a
loss of $0.39 in the seven-month period ended March 30, 1995, compared with
income of $0.62 for the same period in 1994.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY/ASSOCIATED
As of December 31, 1996, the credit facilities under the Amended and Restated
Credit Agreement (the "Credit Agreement") consisted of $209.1 million of term
loan borrowings (the "Term Loan Facilities"), and up to $325.0 million of
revolving loan borrowings (the "Revolving Credit Facility"). This agreement was
amended to provide funding for the acquisition of Lagasse Bros., Inc., to extend
the maturities, to adjust the pricing and to revise certain covenants. In
addition, the Company has $150.0 million of 12-3/4% Senior Subordinated Notes
due 2005.
The Term Loan Facilities consist of a $144.4 million Tranche A term loan
facility (the "Tranche A Facility") and a $64.7 million Tranche B term loan
facility (the "Tranche B Facility). Quarterly payments under the Tranche A
facility range from $5.63 million at December 31, 1996 to $8.30 million at
September 30, 2001. Quarterly payments under the Tranche B Facility range from
$0.25 million at December 31, 1996 to $6.64 million at September 30, 2003. On
March 31, 1997, principal payments of $15.9 million and $7.4 million are
required to be paid from Excess Cash Flow (as defined) at December 31, 1996 for
the Tranche A and Tranche B Facilities, respectively.
16
<PAGE>
The Revolving Credit Facility is limited to the lesser of $325.0 million or a
borrowing base equal to: 80% of Eligible Receivables (as defined); plus 50% of
Eligible Inventory (as defined) (provided that no more than 60% or, during
certain periods 65%, of the Borrowing Base may be attributable to Eligible
Inventory); plus the aggregate amount of cover for Letter of Credit Liabilities
(as defined). In addition, for each fiscal year, the Company must repay
revolving loans so that for a period of 30 consecutive days in each fiscal year
the aggregate revolving loans do not exceed $250.0 million. The Revolving
Credit Facility matures on October 31, 2001.
The Term Loan Facilities and the Revolving Credit Facility are secured by first
priority pledges of the stock of USSC, all of the stock of the domestic direct
and indirect subsidiaries of USSC, certain of the stock of all of the foreign
direct and indirect subsidiaries of USSC and security interests in, and liens
upon, all accounts receivable, inventory, contract rights and other certain
personal and certain real property of USSC and its domestic subsidiaries.
The loans outstanding under the Term Loan Facilities and the Revolving Credit
Facility bear interest as determined within a set range with the rate based on
the ratio of total debt (excluding any undrawn amounts under any letters of
credit) to EBITDA. The Tranche A Facility and the Revolving Credit Facility
bear interest at prime plus 0.25% to 1.25% or, at the Company's option, LIBOR
plus 1.50% to 2.50%. The Tranche B Facility bears interest at prime plus 1.25%
to 1.75% or, at the Company's option, LIBOR plus 2.50% to 3.00%.
The Credit Agreement contains representations and warranties, affirmative and
negative covenants and events of default customary for financings of this type.
As of December 31, 1996 the Company was in compliance with all covenants
contained in the Credit Agreement.
The Credit Agreement permits capital expenditures for the Company of up to $15.0
million for its fiscal year ending December 31, 1997, plus $6.2 million of
unused capital expenditures, approximately $7.8 million of unused Excess Cash
Flow (as defined), and $11.1 million of proceeds from the disposition of certain
property, plant and equipment from the Company's fiscal year ended December 31,
1996. Capital expenditures will be financed from internally generated funds and
available borrowings under the Credit Agreement. The Company expects gross
capital expenditures to be approximately $14.0 million to $18.0 million in 1997.
Management believes that the Company's cash on hand, anticipated funds generated
from operations and available borrowings under the Credit Agreement, will be
sufficient to meet the short-term (less than twelve months) and long-term
operating and capital needs of the Company as well as to service its debt in
accordance with its terms. There is, however, no assurance that this will be
accomplished.
United is a holding company and, as a result, its primary source of funds is
cash generated from operating activities of its operating subsidiary, USSC, and
bank borrowings by USSC. The Credit Agreement and the indenture governing the
Notes contain restrictions on the ability of USSC to transfer cash to United.
The statements of cash flows for the Company for the periods indicated is
summarized below:
<TABLE>
<CAPTION>
THE COMPANY
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Net cash provided by operating activities $ 1,609 $ 26,329 $ 14,088
Net cash used in investing activities (49,871) (266,291) (554)
Net cash provided by (used in) financing activities 47,221 249,773 (12,676)
</TABLE>
Net cash provided by operating activities for 1996 declined to $1.6 million from
$26.3 in 1995. This reduction was due to an increased investment in inventory
and a decrease in accrued liabilities offset by higher net income and an
increase in accounts payable. The increase in net cash provided by operating
activities of $26.3 million in 1995 from $14.1 million in 1994 was primarily the
result of the Merger.
17
<PAGE>
Net cash used in investing activities during 1996 was $49.9 million compared
with $266.3 million in 1995. The decrease is due to the Merger in 1995 offset
by the acquisition of Lagasse Bros., Inc. on October 31, 1996. Also, the
Company collected $11.1 million in 1996 from the successful sale of closed
facilities and related equipment. The increase in net cash used in investing
activities of $266.3 million in 1995 from $0.6 million in 1994 was primarily the
result of the Merger.
Net cash provided by financing activities in 1996 was $47.2 million compared
with $249.8 million in 1995. The decrease was due to the financing of the
Merger in 1995 offset by additional borrowings to finance the purchase of
Lagasse Bros., Inc. The increase in net cash provided by financing
activities of $249.8 million in 1995 from net cash used of $12.7 million in
1994 was also primarily the result of the Merger.
INFLATION/DEFLATION AND CHANGING PRICES
Inflation can have an impact on the Company's earnings. During inflationary
times, the Company generally seeks to increase prices to its customers creating
incremental gross profit resulting from the sale of inventory purchased at lower
prices. Alternatively, significant deflation may adversely affect the Company's
profitability.
SEASONALITY
Although the Company's sales are generally relatively level throughout the year,
the Company's sales vary to the extent of seasonal differences in the buying
patterns of end-users who purchase office products. In particular, the Company's
sales are generally higher than average during the months of January through
March when many businesses begin operating under new annual budgets.
The Company experiences seasonality in terms of its working capital needs, with
highest requirements in December through February reflecting a build up in
inventory prior to and during the peak sales period. The Company believes that
its current availability under the Revolving Credit Facility is sufficient to
satisfy such seasonal capital needs for the foreseeable future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Set forth on the following pages are the financial statements of (i) the Company
for the years ended December 31, 1996, 1995 and 1994 and (ii) pre-Merger United
for the seven months ended March 30, 1995, March 31, 1994 and the twelve months
ended August 31, 1994, 1993 and 1992. Although United was the surviving
corporation in the Merger, the Acquisition was treated as a reverse acquisition
for accounting purposes, with Associated as the acquiring corporation.
Therefore, the statements of income and cash flows for the year ended December
31, 1995 reflect the results of Associated only for the three months ended March
30, 1995, and the results of the Company for the nine months ended December 31,
1995. The financial statements of the Company for the year ended December 31,
1994 reflect the financial position, results of operations and cash flows of
Associated only. The financial statements of pre-Merger United are included
because United is considered a significant predecessor for accounting purposes.
18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE STOCKHOLDERS AND BOARD OF
DIRECTORS OF UNITED STATIONERS INC.
We have audited the accompanying consolidated balance sheets of United
Stationers Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the years then ended. Our audits also included the
financial statement schedules for 1996 and 1995 listed in the index at Item
14(A). These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 United Stationers
Inc. and Subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the years then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules for 1996 and 1995, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Note 3 to the consolidated financial statements, in 1995, the
Company changed its method of valuing inventory from the first-in, first-out
(FIFO) method to the last-in, first-out (LIFO) method.
/s/ERNST & YOUNG LLP
Chicago, Illinois
January 28, 1997
19
<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 the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended. 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 audit 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 audit provides 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 the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements for 1994
and, in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ARTHUR ANDERSEN LLP
Chicago, Illinois
January 23, 1995
20
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NET SALES $ 2,298,170 $ 1,751,462 $ 470,185
COST OF GOODS SOLD 1,907,209 1,446,949 382,299
----------- ----------- ----------
Gross profit 390,961 304,513 87,886
OPERATING EXPENSES:
Warehousing, marketing and
administrative expenses 277,957 237,197 69,765
Restructuring charge - - 9,759 - -
----------- ----------- ----------
Total operating expenses 277,957 246,956 69,765
----------- ----------- ----------
Income from operations 113,004 57,557 18,121
INTEREST EXPENSE 57,456 46,186 7,725
----------- ----------- ----------
Income before income taxes
and extraordinary item 55,548 11,371 10,396
INCOME TAXES 23,555 5,128 3,993
----------- ----------- ----------
Income before extraordinary item 31,993 6,243 6,403
EXTRAORDINARY ITEM - LOSS ON EARLY RETIREMENT
OF DEBT, NET OF TAX BENEFIT OF $967 - - (1,449) - -
----------- ----------- ----------
NET INCOME 31,993 4,794 6,403
PREFERRED STOCK DIVIDENDS ISSUED
AND ACCRUED 1,744 1,998 2,193
----------- ----------- ----------
NET INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ 30,249 $ 2,796 $ 4,210
----------- ----------- ----------
----------- ----------- ----------
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Income before extraordinary item $ 2.03 $ 0.33 $ 0.51
Extraordinary item - - (0.11) - -
Net income $ 2.03 $ 0.22 $ 0.51
----------- ----------- ----------
----------- ----------- ----------
AVERAGE NUMBER OF COMMON SHARES 14,923,477 12,913,229 8,308,780
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
21
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,619 $ 11,660
Accounts receivable, less allowance for doubtful
accounts of $6,318 in 1996 and $7,315 in 1995 291,401 265,827
Inventories 463,239 381,618
Other 25,221 30,903
---------- ----------
TOTAL CURRENT ASSETS 790,480 690,008
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 21,878 24,856
Buildings 97,029 105,136
Fixtures and equipment 102,092 96,467
Leasehold improvements 1,040 1,634
Assets under capital lease 3,002 3,002
---------- ----------
Total property, plant and equipment 225,041 231,095
Less - accumulated depreciation and amortization 51,266 31,114
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 173,775 199,981
GOODWILL 115,449 77,786
OTHER 30,163 33,608
---------- ----------
TOTAL ASSETS $1,109,867 $1,001,383
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
22
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease $ 46,923 $ 23,886
Accounts payable 238,124 194,567
Accrued expenses 93,789 107,622
Accrued income taxes 6,671 8,468
---------- ----------
TOTAL CURRENT LIABILITIES 385,507 334,543
DEFERRED INCOME TAXES 36,828 34,380
LONG-TERM DEBT 552,613 526,198
OTHER LONG-TERM LIABILITIES 15,502 18,505
REDEEMABLE PREFERRED STOCK
Preferred Stock Series A, $0.01 par value; 15,000 authorized;
5,000 issued and outstanding; 3,086 and
2,437, respectively, accrued 8,086 7,437
Preferred Stock Series C, $0.01 par value; 15,000 authorized;
11,699 and 10,604, respectively, issued and outstanding 11,699 10,604
---------- ----------
TOTAL REDEEMABLE PREFERRED STOCK 19,785 18,041
REDEEMABLE WARRANTS 23,812 39,692
STOCKHOLDERS' EQUITY
Common Stock (voting), $0.10 par value;
40,000,000 authorized; 11,446,306
issued and outstanding 1,145 1,145
Common Stock (nonvoting), $0.01 par value;
5,000,000 authorized; 758,994
issued and outstanding 8 8
Capital in excess of par value 44,418 28,871
Retained earnings 30,249 - -
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 75,820 30,024
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,109,867 $1,001,383
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
23
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Number of
Redeemable Preferred Stock Common
-------------------------------------------------- Redeemable Shares
A B C Total Warrants (Voting)
----- ----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1993 $6,138 $ 5,943 $ 8,915 $20,996 $ 1,435 896,258
Net income - - - - - - - - - - - -
Preferred stock dividends 650 617 926 2,193 - - - -
Other - - - - - - - - - - - -
Issuance of common shares - - - - - - - - - - 58,653
Common shares accrued - - - - - - - - - - 5,435
Warrants accrued - - - - - - - - 215 - -
------ ------- ------- ------- ------- ----------
DECEMBER 31, 1994 6,788 6,560 9,841 23,189 1,650 960,346
Net income - - - - - - - - - - - -
Preferred stock dividends 649 332 763 1,744 - - - -
Repurchase of Series B
preferred stock - - (6,892) - - (6,892) - - - -
Cash dividends - - - - - - - - - - - -
Accretion of warrants to
fair market value - - - - - - - - 37,275 - -
Issuance of warrants from
option grant - - - - - - - - 2,900 - -
Nonvoting common stock
issued for services related to
financing the Acquisition issued
in exchange for common stock,
warrants and options - - - - - - - - (460) (109,159)
Increase in value of stock
option grants - - - - - - - - - - - -
Common stock issued:
Acquisition - - - - - - - - - - 4,831,873
Exercise of warrants - - - - - - - - (1,673) 58,977
100% stock dividend - - - - - - - - - - 5,683,463
Stock option exercises - - - - - - - - - - 20,806
Other - - - - - - - - - - - -
------ ------- ------- ------- ------- ----------
DECEMBER 31, 1995 $7,437 $ - - $10,604 $18,041 $39,692 11,446,306
------ ------- ------- ------- ------- ----------
------ ------- ------- ------- ------- ----------
<CAPTION>
Number of Total
Common Common Common Capital in Stock-
Stock Shares Stock Excess Retained holders'
(Voting) (Nonvoting) (Nonvoting) of par Earnings Equity
-------- ----------- ----------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1993 $ 9 - - $ - - $ 8,997 $ 2,416 $11,422
Net income - - - - - - - - 6,403 6,403
Preferred stock dividends - - - - - - - - (2,193) (2,193)
Other - - - - - - 51 - - 51
Issuance of common shares 1 - - - - 8,999 - - 9,000
Common shares accrued - - - - - - 63 - - 63
Warrants accrued - - - - - - 29 - - 29
------ ------- ----- -------- ------- -------
DECEMBER 31, 1994 10 - - - - 18,139 6,626 24,775
Net income - - - - - - - - 4,794 4,794
Preferred stock dividends
issued or accrued - - - - - - (1,744) (1,744)
Repurchase of Series B
preferred stock - - - - - - - - - - - -
Cash dividends - - - - - - - - (254) (254)
Accretion of warrants to
fair market value - - - - - - (28,538) (8,737) (37,275)
Issuance of warrants from
option grant - - - - - - (2,900) - - (2,900)
Nonvoting common stock
issued for services related to
financing the Acquisition issued
in exchange for common stock,
warrants and options (11) 139,474 1 2,749 - - 2,739
Increase in value of stock
option grants - - - - - - 2,407 - - 2,407
Common stock issued:
Acquisition 563 215,614 3 35,223 - - 35,789
Exercise of warrants 6 - - - - 1,673 - - 1,679
100% stock dividend 575 403,906 4 - - (579) - -
Stock option exercises 2 - - - - 28 - - 30
Other - - - - - - 90 (106) (16)
------ ------- ----- -------- ------- -------
DECEMBER 31, 1995 $1,145 758,994 $ 8 $ 28,871 $ - - $30,024
------ ------- ----- -------- ------- -------
------ ------- ----- -------- ------- -------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
24
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Number of
Redeemable Preferred Stock Common
-------------------------------------------------- Redeemable Shares
A B C Total Warrants (Voting)
----- ----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1995 $7,437 $ - - $10,604 $18,041 $39,692 11,446,306
Net Income - - - - - - - - - - - -
Preferred stock dividends
issued or accrued 649 - - 1,095 1,744 - - - -
Reduction of warrants
to fair market value - - - - - - - - (15,880) - -
Decrease in value of
stock option grants - - - - - - - - - - - -
Other - - - - - - - - - - - -
------ ------ ------- ------- ------- ----------
DECEMBER 31, 1996 $8,086 $ - - $11,699 $19,785 $23,812 11,446,306
------ ------ ------- ------- ------- ----------
------ ------ ------- ------- ------- ----------
<CAPTION>
Number of Total
Common Common Common Capital in Stock-
Stock Shares Stock Excess Retained holders'
(Voting) (Nonvoting) (Nonvoting) of par Earnings Equity
-------- ----------- ----------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1995 $1,145 758,994 $ 8 $28,871 $ - - $30,024
Net Income - - - - - - - - 31,993 31,993
Preferred stock dividends
issued or accrued - - - - - - - - (1,744) (1,744)
Reduction of warrants
to fair market value - - - - 15,880 - - 15,880
Decrease in value of
stock option grants - - - - - - (339) - - (339)
Other - - - - - - 6 - - 6
------ ------- ---- ------- ------- -------
DECEMBER 31, 1996 $1,145 758,994 $ 8 $44,418 $30,249 $75,820
------ ------- ---- ------- ------- -------
------ ------- ---- ------- ------- -------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
25
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,993 $ 4,794 $ 6,403
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 22,766 19,708 4,869
Amortization 8,609 10,564 1,487
Deferred income taxes 5,299 (163) - -
Compensation expense on stock option grants (339) 2,407 - -
Other 1,584 301 307
Changes in operating assets and liabilities,
net of acquisitions:
Increase in accounts receivable (15,379) (32,330) (128)
(Increase) decrease in inventory (71,282) 31,656 (5,579)
Decrease (increase) in other assets 1,814 2,765 (598)
Increase (decrease) in accounts payable 36,352 (5,104) 3,806
(Decease) increase in accrued liabilities (17,185) (3,474) 2,260
(Decrease) increase in other liabilities (2,623) (4,795) 1,261
--------- --------- --------
Net cash provided by operating activities 1,609 26,329 14,088
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions:
United Stationers Inc., net of cash
acquired of $14,500 - - (258,438) - -
Lagasse Bros., Inc. (51,896) - - - -
Capital expenditures (8,190) (8,086) (625)
Proceeds from disposition of property, plant & equipment 11,076 69 71
Other (861) 164 - -
--------- --------- --------
Net cash used in investing activities (49,871) (266,291) (554)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolver 22,000 (3,608) (7,900)
Retirements and principal payments of debt (30,861) (412,342) (4,827)
Borrowings under financing agreements 57,933 686,854 - -
Financing costs (1,851) (25,290) - -
Issuance of common stock - - 12,006 - -
Retirement of Series B Preferred Stock - - (6,892) - -
Cash dividend - - (254) - -
Other - - (701) 51
--------- --------- --------
Net cash provided by (used in) financing activities 47,221 249,773 (12,676)
--------- --------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,041) 9,811 858
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,660 1,849 991
--------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,619 $ 11,660 $ 1,849
--------- --------- --------
--------- --------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
26
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND PURCHASE ACCOUNTING
On March 30, 1995, Associated Holdings, Inc. ("Associated") purchased 92.5% of
the then outstanding shares of the common stock, $0.10 par value ("Common
Stock") of United Stationers Inc. ("United") for approximately $266.6 million in
the aggregate pursuant to a tender offer (the "Offer"). Immediately thereafter,
Associated merged with and into United (the "Merger" and, collectively with the
Offer, the "Acquisition"), and Associated Stationers, Inc. ("ASI"), a wholly
owned subsidiary of Associated merged with and into United Stationers Supply Co.
("USSC"), a wholly owned subsidiary of United, with United and USSC continuing
as the respective surviving corporations. United, as the surviving corporation
following the Merger, is referred to herein as the "Company." As a result of
share conversions in the Merger, immediately after the Merger, (i) the former
holders of common stock and common stock equivalents of Associated owned shares
of Common Stock and warrants or options to purchase shares of Common Stock
constituting in the aggregate approximately 80% of the shares of Common Stock on
a fully diluted basis, and (ii) holders of pre-Merger United common stock owned
in the aggregate approximately 20% of the shares of Common Stock on a fully
diluted basis. Although United was the surviving corporation in the Merger, the
transaction was treated as a reverse acquisition for accounting purposes with
Associated as the acquiring corporation.
The financial information for the year ended December 31, 1995 includes
Associated only for the three months ended March 30, 1995 and the results of the
Company for the nine months ended December 31, 1995. Financial information
prior to 1995 reflects that of Associated only. All common and common
equivalent shares have been adjusted to reflect the 100% stock dividend
effective November 9, 1995.
The Acquisition has been accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets purchased
and the liabilities assumed based upon the 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.
The total purchase price of United by Associated and its allocation to assets
and liabilities acquired are as follows (dollars in thousands):
Purchase price:
Price of United shares purchased by Associated $ 266,629
Fair value of United shares not acquired in the Offer 21,618
Transaction costs 6,309
---------
Total purchase price $ 294,556
---------
---------
Allocation of purchase price:
Current assets $ 542,993
Property, plant and equipment 151,012
Goodwill 74,503
Other assets 7,699
Liabilities assumed (481,651)
---------
Total purchase price $ 294,556
---------
---------
27
<PAGE>
Immediately following the Merger, the number of outstanding shares of Common
Stock was 11,996,154 (or 13,947,440 on a fully diluted basis), of which (i) the
former holders of Class A Common Stock, $0.01 par value, and Class B Common
Stock, $0.01 par value, of Associated (collectively "Associated Common Stock")
and warrants or options to purchase Associated Common Stock in the aggregate
owned 9,206,666 shares constituting approximately 76.7% of the outstanding
shares of Common Stock and outstanding warrants or options for 1,951,286 shares
(collectively 80.0% on a fully diluted basis) and
(ii) pre-Merger holders of shares of Common Stock (other than Associated-owned
and treasury shares) in the aggregate owned 2,789,488 shares of Common Stock
constituting approximately 23.3% of the outstanding shares (or 20.0% on a fully
diluted basis). As used in this paragraph, the term "Common Stock" includes
shares of Nonvoting Common Stock, $0.01 par value, of the Company, which are
immediately convertible into Voting Common Stock.
On October 31, 1996, the Company acquired all of the capital stock of Lagasse
Bros., Inc. ("Lagasse") for approximately $51.9 million. The acquisition was
financed primarily through senior debt . The Lagasse acquisition has been
accounted for using the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets purchased and the liabilities
assumed based upon the estimated fair values at the date of acquisition with
the excess of cost over fair value of approximately $39.0 million allocated to
goodwill. The financial information for the year ended December 31, 1996
includes the results of Lagasse for two months ended December 31, 1996. The
actual and pro forma effects of this acquisition are not material.
2. OPERATIONS
The Company is a national wholesale distributor of business products. The
Company offers approximately 30,000 items from more than 500 manufacturers.
This includes a broad spectrum of office products, computer supplies, office
furniture and facilities management supplies. The Company primarily serves
commercial and contract office products dealers. Its customers include more
than 15,000 resellers -- such as computer products resellers, office furniture
dealers, mass merchandisers, sanitary supply distributors, warehouse clubs, mail
order houses and office products superstores. The Company has a distribution
network of 41 Regional Distribution Centers. Through its integrated computer
system, the Company provides a high level of customer service and overnight
delivery. In addition, the Company has 14 Lagasse Distribution Centers,
specifically serving janitorial and sanitary supply distributors.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
REVENUE RECOGNITION
Revenue is recognized when a product is shipped and title is transferred to the
customer in the period the sale is reported.
CASH AND CASH EQUIVALENTS
Investments in low-risk instruments that have original maturities of three
months or less are considered to be cash equivalents. Cash equivalents are
stated at cost which approximates market value.
28
<PAGE>
INVENTORIES
Inventories constituting approximately 94% of total inventories at December 31,
1996 and 1995 have been valued under the last-in, first-out (LIFO) method.
Prior to 1995, all inventories were valued under the first-in, first-out (FIFO)
method. Effective January 1, 1995, Associated changed its method of accounting
for the cost of inventory from the FIFO method to the LIFO method. Associated
made this change in contemplation of its acquisition of United (accounted for as
a reverse acquisition) so that its method would conform to that of United.
Associated believed that the LIFO method provided a better matching of current
costs and current revenues and that earnings reported under the LIFO method were
more easily compared to that of other companies in the wholesale industry where
the LIFO method is common. This change resulted in a charge to pre-tax income
of the Company of approximately $8.8 million ($5.3 million net of tax benefit of
$3.5 million) or $0.37 per common and common equivalent share for the year ended
December 31, 1995. The cumulative effect of this accounting change for years
prior to 1995 is not determinable, nor are the pro forma effects of retroactive
application of the LIFO method to prior years. Inventory valued under the FIFO
and LIFO accounting methods are recorded at the lower of cost or market. If the
lower of FIFO cost or market method of inventory accounting had been used by the
Company for all inventories, merchandise inventories would have been
approximately $4.8 million and $8.8 million higher than reported at December 31,
1996 and 1995, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation and
amortization are determined by using the straight-line method over the estimated
useful lives of the assets.
The estimated useful life assigned to fixtures and equipment is from two to ten
years; the estimated useful life assigned to buildings does not exceed 40 years;
leasehold improvements and assets under capital leases are amortized over the
lesser of their useful lives or the term of the applicable lease.
GOODWILL
Goodwill represents the excess cost over the value of net assets of businesses
acquired and is amortized on a straight-line basis over 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 will use an estimate of undiscounted future operating income
compared to the carrying value of goodwill to determine if a write-off is
necessary. The cumulative amount of goodwill amortized at December 31, 1996 and
1995 is $4,047,000 and $1,953,000, respectively.
SOFTWARE CAPITALIZATION
The Company capitalizes major internal and external systems development costs
determined to have benefits for future periods. Amortization is recognized over
the periods in which the benefits are realized, generally not to exceed three
years.
INCOME TAXES
Income taxes are accounted for using the liability method under which deferred
income taxes are recognized for the estimated tax consequences for temporary
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities. Provision has not been made for deferred U.S. income
taxes on the undistributed earnings of the Company's foreign subsidiaries since
these earnings are intended to be permanently invested.
29
<PAGE>
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is based on net income after
preferred stock dividend requirements. Primary and fully diluted earnings per
share are based on the weighted average number of common and common equivalent
shares outstanding during the period. Stock options and warrants are considered
to be common equivalent shares.
FOREIGN CURRENCY TRANSLATION
The functional currency for the Company's foreign operations is the local
currency.
RECLASSIFICATION
Certain amounts from prior periods have been reclassified to conform to the 1996
basis of presentation. During the fourth quarter of 1996, the Company
reclassified certain delivery and occupancy costs from operating expenses to
cost of goods sold to conform the Company's presentation to others in the
business products industry. The following table sets forth the impact of the
reclassification for the years presented in the Consolidated Statements of
Income:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 (1) 1994 (2)
---- ------- -------
<S> <C> <C> <C>
Gross Margin as a Percent of Net Sales:
Gross margin prior to reclassification 21.0% 21.8% 24.0%
Gross margin as reported 17.0% 17.4% 18.7%
Operating Expenses as a Percent of Net Sales:
Operating expense ratio prior to reclassification 16.1% 17.9% (3) 20.1%
Operating expense ratio as reported 12.1% 13.5% (3) 14.8%
</TABLE>
(1) Includes Associated only for the three months ended March 30, 1995 and the
results of the Company for the nine months ended December 31, 1995.
(2) Reflects the results of Associated only.
(3) Excludes a restructuring charge of $9.8 million.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the Consolidated Financial Statements and
accompanying notes. Actual results could differ from these estimates.
NEW ACCOUNTING PRONOUNCEMENTS
During 1996, the Company adopted the supplemental disclosure requirement of
Financial Accounting Standards Board Statement No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation." SFAS No. 123 encourages but does
not require adoption of a fair value method of accounting for stock options.
For those entities which do not elect to adopt the fair value method, the new
standard requires supplemental disclosure regarding the pro forma effects of
that method. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value based method of accounting prescribed
by Accounting Principles Board Opinion No. 25 (APB No. 25). "Accounting for
Stocks Issued to Employees," and related Interpretations. Adoption of SFAS
No. 123 will have no impact on the financial position or results of
operations of the Company.
30
<PAGE>
During 1996, the Company adopted Financial Accounting Standards Board Statement
No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that an impairment
loss be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed.
The effect of adoption was not material.
4. BUSINESS COMBINATION AND RESTRUCTURING CHARGE
The following summarized unaudited pro forma operating data for the years ended
December 31, 1995 and 1994 is presented giving effect to the Acquisition as if
it had been consummated at the beginning of the respective periods and,
therefore, reflects the results of United and Associated on a consolidated
basis. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations that actually
would have resulted had the combination been in effect on the dates indicated,
or which may result in the future. The pro forma results exclude one-time
nonrecurring charges or credits directly attributable to the transaction
(dollars in thousands, except share data):
PRO FORMA TWELVE MONTHS
-------------------------
ENDED DECEMBER 31,
-------------------------
1995 1994
---------- ----------
Net sales $2,201,860 $1,990,363
Income before income taxes 22,737 4,237
Net income 13,063 2,581
Net income per primary and
fully diluted common and
common equivalent share $0.80 $0.07
The pro forma income statement adjustments consist of (i) increased depreciation
expense resulting from the write-up of certain fixed assets to fair value, (ii)
additional incremental goodwill amortization, (iii) additional incremental
interest expense due to debt issued, net of debt retired, and (iv) reduction in
preferred stock dividends due to the repurchase of the Series B preferred stock.
The historical results for the twelve months ended December 31, 1995 included
a restructuring charge of $9.8 million ($5.9 million net of tax benefit of
$3.9 million). The restructuring charge included severance costs totaling
$1.8 million. The Company's consolidation plan specified that 330
distribution, sales and corporate positions, 180 of which related to
pre-Merger Associated, were to be eliminated substantially within one year
following the Merger. The Company has achieved its target, with the related
termination costs of approximately $1.8 million charged against the reserve.
The restructuring charge also included distribution center closing costs
totaling $6.7 million and stockkeeping unit reduction costs totaling $1.3
million. The consolidation plan called for the closing of eight redundant
distribution centers, six of which related to pre-Merger Associated, and the
elimination of overlapping inventory items from the Company's catalogs
substantially within the one-year period following the Merger. Estimated
distribution center closing costs included (i) the net occupancy costs of
leased facilities after they are vacated until expiration of leases and (ii)
the losses on the sale of owned facilities and the facilities' furniture,
fixtures, and equipment. Estimated stockkeeping unit reduction costs
included losses on the sale of inventory items which have been discontinued
solely as a result of the Acquisition. As of December 31, 1996, five of the
six redundant pre-Merger Associated distribution centers have been closed
with $5.5 million charged against the reserve and $2.0 million related to
stockkeeping unit reduction costs have also been charged against the reserve.
As of December 31, 1996, the Company's consolidation plan has been
substantially completed. Seven of the eight redundant distribution centers
have been closed. The restructuring reserve balance at December 31, 1996 of
$0.5 million is expected to be adequate to cover the remaining estimated
expenditures related to integration and transition costs.
31
<PAGE>
The historical results for 1995 also included an extraordinary charge of
approximately $2.4 million ($1.4 million net of tax benefit of $1.0 million) of
financing costs and original issue discount relating to the debt retired. In
addition, the historical results for 1995 included compensation expense relating
to an increase in the value of employee stock options of approximately $1.5
million ($0.9 million net of tax benefit of $0.6 million) as a result of the
Acquisition and Merger. The pro forma twelve months ended December 31, 1995 do
not include the extraordinary write-off.
5. LONG-TERM DEBT
Long-term debt consists of the following amounts (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revolver $207,000 $185,000
Term Loans
Tranche A, due in installments until September 30, 2001 144,374 - -
Tranche B, due in installments until September 30, 2003 64,750 - -
Tranche A, due in installments until March 31, 2000 - - 110,053
Tranche B, due in installments until March 31, 2002 - - 71,837
Senior Subordinated Notes 150,000 150,000
Mortgage at 9.4%, due in installments until 1999 2,071 2,174
Industrial development bonds, at market interest rates,
maturing at various dates through 2011 14,300 14,300
Industrial development bonds, at 66% to 79% of prime,
maturing at various dates through 2004 15,500 15,500
Other long-term debt 175 313
-------- --------
598,170 549,177
Less - current maturities (45,557) (22,979)
-------- --------
$552,613 $526,198
-------- --------
-------- --------
</TABLE>
The prevailing prime interest rate at the end of 1996 and 1995 was 8.25% and
8.5%, respectively.
As of December 31, 1996, the credit facilities under the Amended and Restated
Credit Agreement (the "Credit Agreement") consisted of $209.1 million of term
loan borrowings (the "Term Loan Facilities"), and up to $325.0 million of
revolving loan borrowings (the "Revolving Credit Facility"). This agreement was
amended to provide funding for the acquisition of Lagasse Bros., Inc., to extend
the maturities, adjust the pricing and to revise certain covenants. In
addition, the Company has $150.0 million of 12-3/4% Senior Subordinated Notes
due 2005 (the "Notes").
The Term Loan Facilities consist of a $144.4 million Tranche A term loan
facility (the "Tranche A Facility") and a $64.7 million Tranche B term loan
facility (the "Tranche B Facility). Quarterly payments under the Tranche A
facility range from $5.63 million at December 31, 1996 to $8.30 million at
September 30, 2001. Quarterly payments under the Tranche B Facility range
from $0.25 million at December 31, 1996 to $6.64 million at September 30,
2003. On March 31, 1997, principal payments of $15.9 million and $7.4
million are required to be paid from Excess Cash Flow (as defined in the
Credit Agreement) at December 31, 1996 for the Tranche A and Tranche B
Facilities, respectively.
The Revolving Credit Facility is limited to the lesser of $325.0 million or a
borrowing base equal to: 80% of Eligible Receivables (as defined in the
Credit Agreement); plus 50% of Eligible Inventory (as defined in the Credit
Agreement) (provided that no more than 60% or, during certain periods 65%, of
the Borrowing Base may be attributable to Eligible Inventory); plus the
aggregate amount of cover for Letter of Credit Liabilities (as defined in the
Credit Agreement). In addition, for each fiscal year, the Company must repay
revolving loans so that for a period of 30 consecutive days in each fiscal
year the aggregate revolving loans do not exceed $250.0 million. The
Revolving Credit Facility matures on October 31, 2001.
32
<PAGE>
The Term Loan Facilities and the Revolving Credit Facility are secured by first
priority pledges of the stock of USSC, all of the stock of the domestic direct
and indirect subsidiaries of USSC, certain of the stock of all of the foreign
direct and indirect subsidiaries of USSC and security interests in, and liens
upon, all accounts receivable, inventory, contract rights and other certain
personal and certain real property of USSC and its domestic subsidiaries.
The loans outstanding under the Term Loan Facilities and the Revolving Credit
Facility bear interest as determined within a set range with the rate based
on the ratio of total debt to earnings before interest, taxes, depreciation
and amortization ("EBITDA"). The Tranche A Facility and the Revolving Credit
Facility bear interest, at prime plus 0.25% to 1.25% or, at the Company's
option, LIBOR plus 1.50% to 2.50%. The Tranche B Facility bears interest at
prime plus 1.25% to 1.75% or, at the Company's option, LIBOR plus 2.50% to
3.00%.
The Credit Agreement contains representations and warranties, affirmative and
negative covenants and events of default customary for financings of this
type. As of December 31, 1996, the Company was in compliance with all
covenants contained in the Credit Agreement.
The Company is exposed to market risk for changes in interest rates. The
Company may enter into interest rate protection agreements, including collar
agreements, to reduce the impact of fluctuations in interest rates on a portion
of its variable rate debt. Such agreements generally require the Company to pay
to or entitle the Company to receive from the other party the amount, if any, by
which the Company's interest payments fluctuate beyond the rates specified in
the agreements. The Company is subject to the credit risk that the other party
may fail to perform under such agreements. The Company's allocated cost of such
agreements is amortized to interest expense over the term of the agreements, and
the unamortized cost is included in other assets. Payments received or made as
a result of the agreements, if any, are recorded as an addition or a reduction
to interest expense. At December 31, 1996, the Company had agreements which
collar $200.0 million of the Company's borrowings under the Credit Facilities at
interest rates between 8.0% and 6.0%, which expire in April 1998. For the years
ended December 31, 1996 and 1995, the Company recorded $0.9 million and $0.1
million, respectively, to interest expense resulting from interest rate
fluctuations beyond the rates specified in the collar agreements.
The right of United to participate in any distribution of earnings or
assets of USSC is subject to the prior claims of the creditors of USSC. In
addition, the Credit Agreement contains certain restrictive covenants, including
covenants that restrict or prohibit USSC's ability to pay dividends and make
other distributions to United.
Debt maturities for the years subsequent to December 31, 1996 are as follows
(dollars in thousands):
Year Amount
- ---- ------
1997 $45,557
1998 26,609
1999 32,724
2000 34,717
2001 242,996
Later Years 215,567
- --------------------------------------------------
$598,170
- --------------------------------------------------
- --------------------------------------------------
At December 31, 1996 and 1995, the Company had available letters of credit of
$55.3 million and $56.0 million, respectively, of which $52.8 million and $56.0
million, respectively, were outstanding.
33
<PAGE>
6. LEASES
The Company has entered into several non-cancelable long-term leases for
property and equipment. Future minimum lease payments for non-cancelable leases
in effect at December 31, 1996 having initial remaining terms of more than one
year are as follows (dollars in thousands):
Capital Operating
Year Lease Leases (1)
- ---- ----- ---------
1997 $1,479 $18,191
1998 487 15,452
1999 - - 13,000
2000 - - 10,285
2001 - - 8,185
Later years - - 21,660
- ------------------------------------------------------------ -------
Total minimum lease payments 1,966 $86,773
-------
-------
Less amount representing interest 134
- ------------------------------------------------------------
Present value of net minimum
lease payments (including current
portion of $1,366) $1,832
- ------------------------------------------------------------
- ------------------------------------------------------------
(1) Operating leases are net of immaterial sublease income.
Rental expense for all operating leases was approximately $18.8 million, $14.2
million and $3.0 million in 1996, 1995 and 1994, respectively.
7. PENSION PLANS AND DEFINED CONTRIBUTION PLAN
PENSION PLANS
In connection with the Merger and Acquisition, the Company assumed the pension
plans of United. Associated did not have a pension plan. Former Associated
employees entered the pension plans on July 1, 1996. As of this date, the
Company has pension plans covering substantially all of its employees. Non-
contributory plans covering non-union employees provide pension benefits that
are based on years of credited service and a percentage of annual compensation.
Non-contributory plans covering union members generally provide benefits of
stated amounts based on years of service. The Company funds the plans in
accordance with current tax laws.
The following table sets forth the plans' funded status at December 31, 1996 and
1995 (dollars in thousands):
1996 1995
- ------------------------------------------------------------------------------
Actuarial Present Value of Benefit Obligation
Vested benefits $19,015 $ 18,776
Non-vested benefits 1,431 1,996
- ------------------------------------------------------------------------------
Accumulated benefit obligation 20,446 20,772
Effect of projected future compensation levels 3,110 2,861
- ------------------------------------------------------------------------------
Projected benefit obligation 23,556 23,633
Plan assets at fair value 28,373 26,713
- ------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 4,817 3,080
Unrecognized prior service cost 720 - -
Unrecognized net gain due to past
experience different from assumptions (4,348) (507)
- ------------------------------------------------------------------------------
Prepaid pension asset recognized
in the Consolidated Balance Sheets $1,189 $ 2,573
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
34
<PAGE>
The plans' assets consist of corporate and government debt securities and equity
securities. Net periodic pension cost for 1996 and 1995 for pension and
supplemental benefit plans includes the following components (dollars in
thousands):
1996 1995
- ------------------------------------------------------------------------------
Service cost-benefit earned during the period $1,884 $ 1,142
Interest cost on projected benefit obligation 1,652 1,157
Actual return on assets (3,468) (2,711)
Net amortization and deferral 1,495 1,382
- ------------------------------------------------------------------------------
Net periodic pension cost $1,563 $ 970
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The assumptions used in accounting for the Company's defined benefit plans for
the two years presented are set forth below:
1996 1995
- ------------------------------------------------------------------------------
Assumed discount rate 7.5% 7.25%
Rates of compensation increase 0.0%-5.5% 0.0%-5.5%
Expected long-term rate of return on plan assets 7.5% 7.5%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
DEFINED CONTRIBUTION
The Company has a defined contribution plan in which all salaried employees and
certain hourly paid employees of the Company are eligible to participate
following completion of six consecutive months of employment. The plan permits
employees to have contributions made as 401(k) salary deferrals on their behalf,
or as voluntary after-tax contributions, and provides for Company contributions,
or contributions matching employee salary deferral contributions, at the
discretion of the Board of Directors. The Company has no present intention to
make Company contributions other than matching contributions. Company
contributions for matching of employee contributions were approximately $0.9
million, $0.6 million and $0.3 million in 1996, 1995 and 1994, respectively.
8. POSTRETIREMENT BENEFITS
In connection with the Merger, the Company assumed the postretirement plan of
United on March 30, 1995. Associated did not have a postretirement plan. The
plan is unfunded and provides health care benefits to substantially all retired
non-union employees and their dependents. Eligibility requirements are based on
the individual's age (minimum age of 55), years of service and hire date. The
benefits are subject to retiree contributions, deductibles, co-payment
provisions and other limitations. Retirees pay one-half of the projected plan
costs.
The following table sets forth the amounts recognized in the Company's
Consolidated Balance Sheets as of December 31, 1996 and 1995 (dollars in
thousands):
1996 1995
- ------------------------------------------------------------------------------
Retirees $ (877) $ (762)
Other fully eligible plan participants (632) (697)
Other active plan participants (1,588) (1,362)
- ------------------------------------------------------------------------------
Total APBO (3,097) (2,821)
Unrecognized net (gain)/loss (1) 76
- ------------------------------------------------------------------------------
Accrued postretirement
benefit obligation $(3,098) $(2,745)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The cost of postretirement health care benefits for the year ended December 31,
1996 and 1995 were as follows (dollars in thousands):
1996 1995
- ------------------------------------------------------------------------------
Service cost $239 $161
Interest on accumulated
benefit obligation 204 109
- ------------------------------------------------------------------------------
Net postretirement benefit cost $443 $270
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
35
<PAGE>
The assumptions used in accounting for the Company's postretirement plan for the
two years presented are set forth below (dollars in thousands):
1996 1995
- ------------------------------------------------------------------------------
Assumed average heath care cost trend rate 3.0% 3.0%
Assumed discount rate 7.5% 7.5%
Impact of 1% increase in health care costs on:
Accumulated benefit obligation $450 $396
Annual service and interest cost $ 79 $ 46
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
9. STOCK OPTION PLAN
The Management Equity Plan (the "Plan"), as amended, is administered by the
Board of Directors, although the Plan provides that the Board of Directors of
the Company may designate an option committee to administer the Plan.
In September 1995, the Company's Board of Directors approved an amendment to the
Plan which provided for the issuance of options to key management employees of
the Company exercisable for up to 2.2 million additional shares of its Common
Stock. Subsequently, approximately 2.2 million options were granted during 1995
and 1996 to management employees. Some of the options were granted at an option
price below market value and the option price of certain options increases by
$0.625 on a quarterly basis effective April 1, 1996.
The stock options granted under the Plan do not vest to the employee until
the occurrence of an event (a "Vesting Event") that causes the present
non-public equity investors to have received at least a full return of their
investment (at cost) in cash, fully tradable marketable securities or the
equivalent. A Vesting Event will cause the Company to recognize compensation
expense based upon the difference between the fair market value of the Common
Stock and the exercise prices of the stock options. If a Vesting Event were
to occur, based upon a stock price of $19.50, the Company would recognize a
nonrecurring noncash charge of $18.4 million in compensation expense ($10.6
million net of tax benefit of $7.8 million). Each $1.00 change in the fair
market value of Common Stock price could result in a maximum adjustment to
such compensation expense of approximately $2.5 million ($1.4 million net of
tax effect of $1.1 million).
An optionee under the 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 the
Company, by delivering shares of Common Stock already owned by such optionee
(including shares to be received upon 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. The Company may require the optionee to satisfy federal tax
withholding obligations with respect to the exercise of options by (i)
additional withholding from the employee's salary, (ii) requiring the optionee
pay in cash or (iii) reducing the number of shares of Common Stock to be issued
(except in the case of incentive options).
The following table summarizes the transactions of the Plan for the last three
years:
<TABLE>
<CAPTION>
Management Equity Plan Weighted Average Weighted Average Weighted Average
(excluding restricted stock) 1996 Exercise Prices 1995 Exercise Prices 1994 Exercise Prices
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of the period 2,030,996 $10.73 217,309 $ 1.45 367,160 $1.45
- -----------------------------------------------------------------------------------------------------------------------------------
Granted 650,772 $ 7.95 1,854,649 $11.65 28,694 $1.45
- -----------------------------------------------------------------------------------------------------------------------------------
Exercised - - - - (20,804) $ 1.45 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Canceled (184,000) $ 7.64 (20,158) $ 1.45 (178,545) $1.45
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding at
end of the period 2,497,768 $11.61 2,030,996 $10.73 217,309 $1.45
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
The following table summarizes information concerning outstanding options of the
Plan at December 31, 1996:
Remaining
Exercise Number Contractual
Prices Outstanding Life (years)
- -------------------------------------------------
$ 1 45 385,120 5.09
- -------------------------------------------------
$ 5.12 207,148 5.74
- -------------------------------------------------
$14.38 1,905,500 5.74
- -------------------------------------------------
2,497,768
- -------------------------------------------------
- -------------------------------------------------
All share and per share data have been restated to reflect the 100% stock
dividend effective November 9, 1995 and the conversion of Associated common
stock as a result of the Merger.
During 1996, the Company adopted the supplemental disclosure requirements of
SFAS No. 123. Accordingly, the Company is required to disclose pro forma net
income and earnings per share as if the fair value-based accounting method in
SFAS No. 123 had been used to account for stock-based compensation cost. The
Company's stock options granted under the Plan are considered "all or nothing"
awards since the options do not vest to the employee until the occurrence of a
Vesting Event. The fair value of "all or nothing" awards are measured at the
grant date; however, amortization of compensation expense only begins when it is
probable that the awards will vest and be earned. Presently, the Company
believes that it is less than likely that a Vesting Event will occur.
Therefore, there is no compensation expense for pro forma purposes and pro forma
net income and earnings per share are the same as that recorded on the face of
the income statement.
The Company uses a binomial option pricing model to estimate the fair value of
options at the date of grant. The weighted average assumptions used to value
options and the weighted average fair value of options granted during 1996 and
1995 were as follows:
1996 1995
- ------------------------------------------------------------------------------
Fair value of options granted $17.67 $ 9.33
Exercise price $ 8.59 $11.65
Expected stock price volatility 80.7% 102.2%
Expected dividend yield 0.0% 0.0%
Risk-free interest rate 5.2% 5.9%
Expected life of options 2 years 3 years
10. REDEEMABLE PREFERRED STOCK
At December 31, 1996 and 1995, the Company had 1,500,000 authorized shares of
$0.01 par value preferred stock, of which 15,000 shares were designated as
Series A preferred stock, 15,000 shares were designated as Series B preferred
stock, 15,000 shares were designated as Series C preferred stock, and
1,455,000 shares remained undesignated. Series B and C preferred stock are
junior in relation to the Series A preferred stock. All preferred stock
issued at the date of inception was valued at the amount of cash paid or
assets received for the stock at $1,000 per share. On July 28, 1995, the
Company repurchased all 6,892 shares of Series B preferred stock issued and
outstanding for $7.0 million, including accrued and unpaid dividends thereon.
All outstanding shares of preferred stock are senior in preference to the
Common Stock of United.
Series A preferred stock must be redeemed by the Company on or before July
31, 2006. Dividends are cumulative at a rate of 10% per annum, payable
quarterly. In the event that the Company does not pay dividends in cash, the
dividend rate increases to 13% per annum and is payable in stock. During
each of the years ended December 31, 1996, 1995, and 1994, 649 shares of
Series A preferred stock were accrued but not issued. As of December 31,
1996 and 1995, 3,086 and 2,437 shares, respectively, of Series A preferred
stock have been accrued as dividends but not issued.
37
<PAGE>
Series C preferred stock is redeemable in four consecutive quarterly
installments commencing on April 30, 2001. Dividends are cumulative at a rate
of 9% per annum, payable quarterly. 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, 1996, noncash dividends were
declared and issued for Series C preferred stock in the amount of 1,095 shares.
During the year ended December 31, 1995, noncash dividends were declared and
issued for both Series B and C preferred stock in the amount of 332 and 763
shares, respectively. In addition, during 1995 a cash dividend of approximately
$254,000 was paid to Series C preferred stockholders in connection with the
repurchase of Series B preferred stock. During the year ended December 31,
1994, non-cash dividends were declared and issued for both Series B and C
preferred stock in the amount of 617 and 926 shares, respectively.
All series of preferred stock may be redeemed at the option of the Company at
any time. All series 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. Required redemption of preferred stock for the five years
following the year ended December 31, 1996 is $14.0 million in 2001 for the
Series C preferred stock.
11. REDEEMABLE WARRANTS
The Company had 1,227,438 and 1,430,468 warrants ("Lender Warrants") outstanding
as of December 31, 1996 and 1995, respectively, which allow holders thereof to
buy shares of Common Stock at an exercise price of $0.10 per share. Outstanding
Lender Warrants as of December 31, 1996 and 1995 were valued at $19.50 and
$27.75 per warrant, respectively. During 1996, 203,030 warrants were
contributed back to the Company and terminated in connection with anti-dilution
agreements. The exercise period for Lender Warrants expires January 31, 2002.
During 1995, 117,954 warrants were exercised, 284,484 warrants were issued or
accrued resulting from anti-dilution agreements and 47,153 were contributed back
to the Company and terminated in connection with fees paid by the Company
relating to the issuance of the Notes.
The Lender Warrants contain certain put rights which allow the holders thereof
to put the warrants to the Company. The purchase price payable upon the
exercise of the put rights is the greater of the then fair market value or
equity value of the warrants, as defined, less the applicable exercise price of
the warrants. Payment of the Lender Warrants can only occur after repayment of
all debt outstanding under the Credit Agreement or with the consent of the
lenders and/or agent under the Credit Agreement.
12. TRANSACTIONS WITH RELATED PARTIES
The Company has management advisory service agreements with three investor
groups. These investor groups provide certain advisory services to the Company
in connection with the Acquisition as defined below.
Pursuant to an agreement, Wingate Partners, L.P. ("Wingate Partners") had agreed
to provide certain oversight and monitoring services to the Company in exchange
for an annual fee of up to $725,000, payment (but not accrual) of which is
subject to restrictions under the Credit Agreement related to certain Company
performance criteria. At the Merger, the Company paid aggregate fees to Wingate
Partners of $2.3 million for services rendered in connection with the
Acquisition. Wingate Partners earned an aggregate of $725,000, $603,000 and
$350,000 with respect to each of the fiscal years ended 1996, 1995 and 1994,
respectively, for such oversight and monitoring services. Under the agreement,
the Company is obligated to reimburse Wingate Partners for its out-of-pocket
expenses and indemnify Wingate Partners and its affiliates from loss in
connection with these services. The agreement expires on January 31, 2002,
provided that the agreement continues in effect on a year-to-year basis
thereafter unless terminated in writing by one of the parties at least 180 days
before the expiration of the primary term or any subsequent yearly term.
38
<PAGE>
Pursuant to an agreement, Cumberland Capital Corporation ("Cumberland") has
agreed to provide certain oversight and monitoring services to the Company in
exchange for (i) an annual fee of up to $137,500, payment (but not accrual) of
which is subject to restrictions under the Credit Agreement related to certain
Company performance criteria and (ii) previously issued shares of Associated
Common Stock that converted in the Merger into 154,126 shares. Subject to
certain exceptions, the issuance of such shares is subject to rescission if the
agreement is terminated before January 31, 2002. At the Merger, the Company
paid aggregate fees to Cumberland of $100,000 for services rendered in
connection with the Acquisition. Pursuant to the agreement, Cumberland earned
an aggregate of $137,500, $129,000 and $75,000 with respect to the fiscal years
ended 1996, 1995 and 1994, respectively, for such oversight and monitoring
services. The Company is also obligated to reimburse Cumberland for its out-of-
pocket expenses and indemnify Cumberland and its affiliates from loss in
connection with these services. The agreement expires on January 31, 2002,
provided that the agreement continues in effect on a year-to-year basis
thereafter unless terminated in writing by one of the parties at least 180 days
before the expiration of the primary term or any subsequent yearly term.
Pursuant to an agreement, Good Capital Co., Inc. ("Good Capital") has an
agreement to provide certain oversight and monitoring services to the Company in
exchange for (i) an annual fee of up to $137,500, payment (but not accrual) of
which is subject to restrictions under the Credit Agreement related to certain
Company performance criteria and (ii) previously issued shares of Associated
Common Stock that converted in the Merger into 154,126 shares. Subject to
certain exceptions, the issuance of such shares is subject to rescission if the
agreement is terminated before January 31, 2002. At the Merger, the Company
paid aggregate fees to Good Capital of $100,000 for services rendered in
connection with the Acquisition. Pursuant to the agreement, Good Capital earned
an aggregate of $137,500, $129,000 and $75,000 in each of the fiscal years ended
1996, 1995 and 1994, respectively, for such oversight and monitoring services.
The Company is also obligated to reimburse Good Capital for its out-of-pocket
expenses and indemnify Good Capital and its affiliates from loss in connection
with these services. The agreement expires on January 31, 2002, provided that
the agreement continues in effect thereafter on a year-to-year basis unless
terminated in writing by one of the parties at least 180 days before the
expiration of the primary term or any subsequent yearly term.
13. INCOME TAXES
The provision for (benefit from) income taxes consists of the following (dollars
in thousands):
Year Ended December 31,
---------------------------
1996 1995 1994
------- ------ ------
Currently payable -
Federal $14,724 $4,172 $3,090
State 3,532 1,119 903
------- ------ ------
Total currently payable 18,256 5,291 3,993
Deferred, net -
Federal 4,614 (142) (24)
State 685 (21) 24
------- ------ ------
Total deferred, net 5,299 (163) - -
------- ------ ------
Provision for income taxes $23,555 $5,128 $3,993
------- ------ ------
------- ------ ------
39
<PAGE>
The Company's effective income tax rates for the years ended December 31, 1996,
1995 and 1994 varied from the statutory Federal income tax rate as set forth in
the following table (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1996 1995 1994
---------------------- ---------------------- ---------------------
% of % of % of
Pre-tax Pre-tax Pre-tax
Amount Income Amount Income Amount Income
------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Tax provision based on the
federal statutory rate $19,442 35.0% $3,980 35.0% $3,535 34.0%
State and local income taxes -
net of federal income tax
benefit 3,000 5.4 705 6.2 607 5.8
Non-deductible and other 1,113 2.0 443 3.9 (149) (1.4)
------- ---- ------ ---- ------ ----
Provision for income taxes $23,555 42.4% $5,128 45.1% $3,993 38.4%
------- ---- ------ ---- ------ ----
------- ---- ------ ---- ------ ----
</TABLE>
The deferred tax assets and liabilities result from timing differences in the
recognition of certain income and expense items for financial and tax accounting
purposes. The sources of these differences and the related tax effects were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1996 1995
--------------------------- ---------------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Accrued expenses $17,882 $ - - $20,351 $ - -
Allowance for doubtful accounts 11,036 - - 10,645 - -
Inventory reserves and adjustments - - 13,795 - - 14,756
Depreciation and amortization - - 43,798 - - 42,300
Reserve for restructuring charges
and other 6,915 - - 13,970 331
------- ------- ------- -------
Total $35,833 $57,593 $44,966 $57,387
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
In the Consolidated Balance Sheets, these deferred assets and liabilities are
classified on a net basis as current and non-current based on the classification
of the related asset or liability or the expected reversal date of the temporary
difference.
14. SUPPLEMENTAL CASH FLOW INFORMATION
In addition to the information provided in the Consolidated Statements of Cash
Flows, the following are supplemental disclosures of cash flow information for
the years ended December 31, 1996, 1995 and 1994 (dollars in thousands):
1996 1995 1994
---- ---- ----
Cash paid during the year for:
Interest $52,871 $36,120 $6,588
Income taxes 17,482 8,171 2,118
40
<PAGE>
The following are supplemental disclosures of noncash investing and financing
activities for the years ended December 31, 1996, 1995 and 1994 (dollars in
thousands):
- On May 3, 1995, the Company issued stock valued at $2,406 in exchange
for services related to the issuance of the Notes.
- On March 30, 1995, the Company issued stock valued at $2,162 in
exchange for services related to financing the Acquisition.
- In 1994, the Company issued $9,000 of common stock to retire a $9,000
deferred obligation related to a transition services agreement.
- In 1994, the Company accrued $244 for warrants which had an exercise
price less than the fair market value of the common stock.
- In 1994, the Company accrued $63 for common stock shares to be issued
at less than fair market value.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Cash and cash equivalents $10,619 $10,619 $11,660 $11,660
Current maturities of long-term
obligations and capital lease 46,923 46,923 23,886 23,886
Long-term debt and capital lease:
Notes 150,000 168,000 150,000 163,875
All other 403,079 403,079 376,198 376,198
Interest rate collar - - 1,200 - - 3,900
</TABLE>
The fair value of the Notes and interest rate collar are based on quoted market
prices and quotes from counterparties, respectively.
41
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Balance At Additions Balance
Beginning Charged to At End
of Period Expenses Other (3) Deductions of Period
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Reserve for Doubtful Accounts:
Year Ended:
December 31, 1996 $7,315 $7,791 $ - - $8,788 (A) $6,318
December 31, 1995 (1) 3,496 5,169 4,776 6,126 (A) 7,315
December 31, 1994 (2) 3,544 1,528 1,576 (A) 3,496
Sales Returns:
Year Ended:
December 31, 1996 $8,973 $49,183 $ - - $49,993 (B) $8,163
December 31, 1995 (1) 540 60,598 12,051 64,216 (B) 8,973
December 31, 1994 (2) 514 42,792 42,766 (B) 540
</TABLE>
(1) Reflects the results of Associated only for the three months ended March
30, 1995 and the Company for the nine months ended December 31, 1995.
(2) Reflects the results of Associated only.
(3) Reflects the liability assumed as a result of the Merger.
(A) Accounts determined to be uncollectible and charged against reserves, net
of collections on accounts previously written off.
(B) Credit memos issued for sales returns.
42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE STOCKHOLDERS AND BOARD OF
DIRECTORS OF UNITED STATIONERS INC.
We have audited the accompanying consolidated statements of operations, changes
in stockholders' investment and cash flows of United Stationers Inc. and
Subsidiary for the seven months ended March 30, 1995. Our audit also included
the financial statement schedule as of March 30, 1995 and for the seven months
then ended listed in the index at Item 14(A). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
United Stationers Inc. and Subisidiary for the seven months ended March 30, 1995
in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ERNST & YOUNG LLP
Chicago, Illinois
June 27, 1995
43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF
DIRECTORS OF UNITED STATIONERS INC.
We have audited the accompanying consolidated statement of operations,
changes in stockholders' investment and cash flows of UNITED STATIONERS INC.
(a Delaware Corporation) AND SUBSIDIARIES for the year ended August 31, 1994.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations and cash flows of United Stationers Inc. and Subsidiaries for the
year ended August 31, 1994, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements for 1994
and, in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/Arthur Andersen LLP
Chicago, Illinois,
October 6, 1994.
44
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the
SEVEN MONTHS ENDED Year Ended
------------------------------ ----------
(UNAUDITED)
MARCH 30, March 31, August 31,
1995 1994 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $980,575 $871,585 $1,473,024
COST OF SALES 814,780 717,546 1,220,245
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit on sales 165,795 154,039 252,779
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Warehousing, marketing and
administrative expenses 133,098 128,594 216,485
Merger-related costs 27,780 - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 160,878 128,594 216,485
- -----------------------------------------------------------------------------------------------------------------------------
Income from operations 4,917 25,445 36,294
- -----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (7,640) (6,095) (10,722)
Interest income 140 258 261
Other, net 41 117 225
- -----------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (7,459) (5,720) (10,236)
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) before income taxes (2,542) 19,725 26,058
INCOME TAXES 4,692 8,185 10,309
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(7,234) $11,540 $15,749
- -----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,593,614 18,585,451 18,587,282
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE $(0.39) $0.62 $0.85
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
45
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Number of Capital in Total
Common Common Excess of Retained Treasury Stockholders'
Shares Stock Par Value Earnings Stock Investment
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1993 18,586,627 $1,859 $91,687 $144,292 $(141) $237,697
Net Income - - - - - - 15,749 - - 15,749
Issuance of common shares 5,427 - - 42 - - - - 42
Cash dividends - $0.40 per
share on common stock - - - - - - (7,593) - - (7,593)
Disposition of treasury stock - - - - - - - - 115 115
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1994 18,592,054 $1,859 $91,729 $152,448 $ (26) $246,010
Net Loss - - - - - - (7,234) - - (7,234)
Issuance of common shares 18,875 2 183 - - - - 185
Cash dividends - $0.30 per share
on common stock - - - - - - (5,719) - - (5,719)
Acquisition of treasury stock - - - - - - - - (117) (117)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 30, 1995 18,610,929 $1,861 $91,912 $139,495 $(143) $233,125
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
46
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
For the
Seven Months Ended Year Ended
------------------------------ ----------
(Unaudited)
March 30, March 31, August 31,
FOR THE PERIOD ENDED 1995 1994 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ (7,234) $ 11,540 $ 15,749
Loss on sale of fixed assets 200 494 579
Depreciation and amortization 12,595 12,103 21,236
(Decrease)/increase in deferred taxes (3,933) 1,298 2,943
Increase/(decrease) in accounts payable 24,429 (64,918) (28,581)
Increase/(decrease) in accrued liabilities 17,260 (14,407) (7,522)
(Increase)/decrease in accounts receivable (1,107) 8,062 831
(Increase)/decrease in inventories (80,947) (7,818) 3,966
(Increase)/decrease in prepaid expenses (7,475) (752) 914
Increase in other assets (1,341) (1,359) (2,007)
- -----------------------------------------------------------------------------------------------------------------------------
Total Adjustments (40,319) (67,297) (7,641)
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (47,553) (55,757) 8,108
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (7,799) (4,487) (10,719)
Proceeds from disposition of property, plant & equipment 35 200 220
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (7,764) (4,287) (10,499)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(decrease) in short-term debt 5,660 33 (2,855)
Payments on long-term obligations (4,541) (1,269) (1,533)
Additions to long-term obligations 67,444 69,348 13,246
Issuance of common shares 185 25 42
Payment of dividends (5,719) (5,738) (7,593)
(Acquisition)/disposition of treasury stock (117) 115 115
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 62,912 62,514 1,422
- -----------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 7,595 2,470 (969)
Cash and Cash Equivalents at the beginning of the year 6,920 7,889 7,889
- -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 14,515 $ 10,359 $ 6,920
- -----------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 6,851 $ 5,943 $ 10,199
Income taxes 9,257 6,054 6,229
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
47
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUBSEQUENT EVENT
On March 30, 1995, Associated Holdings, Inc. ("Associated") purchased 92.5% of
the then outstanding shares of the common stock, $0.10 par value ("Common
Stock") of United Stationers Inc. ("United") for approximately $266.6 million in
the aggregate pursuant to a tender offer (the "Tender Offer"). Immediately
thereafter, Associated merged with and into United (the "Merger" and,
collectively with the Tender Offer, the "Acquisition"), and Associated
Stationers, Inc., a wholly-owned subsidiary of Associated ("ASI") merged with
and into United Stationers Supply Co., a wholly-owned subsidiary of United
("USSC"), with United and USSC continuing as the respective surviving
corporations. United, as the surviving corporation following the Merger, is
referred to herein as the "Company." As a result of share conversions in the
Merger, immediately after the Merger, (i) the former holders of common stock and
common stock equivalents of Associated owned shares of Common Stock and warrants
or options to purchase shares of Common Stock constituting in the aggregate
approximately 80% of the shares of Common Stock on a fully diluted basis, and
(ii) holders of pre-Merger United common stock owned in the aggregate
approximately 20% of the shares of Common Stock on a fully diluted basis.
Although United was the surviving corporation in the Merger, the transaction was
treated as a reverse acquisition for accounting purposes with Associated as the
acquiring corporation.
Immediately following the Merger, the number of outstanding Shares was 5,998,177
(or 6,973,720 on a fully diluted basis), of which (i) the former holders of
Class A Common Stock, $0.01 par value, and Class B Common Stock, $0.01 par
value, of Associated ("Associated Common Stock") and warrants or options to
purchase Associated Common Stock in the aggregate owned 4,603,373 Shares
constituting approximately 76.8% of the outstanding Shares and outstanding
warrants or options for 975,603 Shares (collectively 80.0% on a fully diluted
basis) and (ii) pre-Merger holders of Shares (other than Associated-owned Shares
and treasury Shares) in the aggregate owned 1,394,744 Shares constituting
approximately 23.2% of the outstanding Shares (or 20.0% on a fully diluted
basis). As used in this paragraph, the term "Shares" includes shares of
Nonvoting Common Stock, $0.01 par value, of the Company, which are immediately
convertible into Shares for no additional consideration.
To finance the Offer, refinance existing debt of ASI, the Company and USSC,
repurchase stock options and pay related fees and expenses, Associated, ASI,
USSC and the Company entered into (i) new credit facilities ("New Credit
Facilities") with a group of banks and financial institutions providing for term
loan borrowings of $200.0 million and revolving loan borrowings of up to $300.0
million and (ii) a senior subordinated bridge loan facility in the aggregate
principal amount of $130.0 million (the "Subordinated Bridge Facility"). In
addition, simultaneously with the consummation of the Offer, Associated obtained
$12.0 million from the sale of additional shares of Associated Common Stock,
which proceeds were used to finance the purchase of a portion of the Shares
pursuant to the Offer.
On May 3, 1995, USSC completed the issuance of $150.0 million of 12 3/4% Senior
Subordinated Notes (the "Notes") due 2005. The net proceeds of the Notes (after
discount and fees of approximately $5.5 million) were used to pay certain
expenses, to repay the $130.0 million Subordinated Bridge Facility (together
with $1.6 million in accrued and unpaid interest thereon), to repay a portion of
the Tranche A and Tranche B term loans (totaling approximately $6.5 million) and
provide working capital. The Company expects to repurchase the Series B
Preferred Stock, together with accrued and unpaid dividends thereon
(approximately $7.0 million).
The New Credit Facilities contain certain financial covenants covering the
Company and its subsidiaries on a consolidated basis, including, without
limitation, covenants relating to tangible net worth, capitalization, fixed
charge coverage, capital expenditures and payment of dividends by the Company.
48
<PAGE>
Effective for 1995, the Company changed its fiscal year from a year end of
August 31 to December 31. The financial statements included herein represent
the final financial statements of the Company through the date of the
consummation of the Merger. Future financial statements of the Company will
reflect Associated and its acquisition of the Company, and will be on the basis
of a December 31 fiscal year end.
As part of the Merger, the Company incurred approximately $27.8 million of
merger-related costs. The amount consisted of severance payments under
employment contracts ($9.6 million); insurance benefits under employment
contracts($7.4 million); legal, accounting and other professional services fees
($5.2 million); retirement of stock options ($3.0 million); and fees for letters
of credit related to employment contracts and other costs ($2.6 million).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of United Stationers
Inc. and its wholly owned subsidiaries ("the Company"). Investments in 20% to
50% owned companies are accounted for by the equity method. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain prior-year amounts have been reclassified to conform with current-year
presentations.
REVENUE RECOGNITION
Sales and provisions for estimated sales returns and allowances are recorded at
the time of shipment.
CASH AND CASH EQUIVALENTS
Investments in low-risk instruments which have an original maturity of three
months or less are considered to be cash equivalents. Cash equivalents are
stated at cost which approximates market value. The Company's cash equivalent
policy conforms to the requirements of Financial Accounting Standard No. 95.
INVENTORIES
Inventories constituting approximately 82% of total inventories at March 30,
1995, August 31, 1994 and August 31, 1993 have been valued under the last-in,
first-out (LIFO) method with the remainder of the inventory valued under the
first-in, first-out (FIFO) method. Inventory valued under the FIFO and LIFO
accounting methods are recorded at the lower of cost or market.
In 1994, liquidations of certain LIFO inventories had the effect of increasing
net earnings by $830,000 or $0.04 per share.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are determined by using the straight-line method
over the estimated useful lives of the assets.
The estimated useful life assigned to fixtures and equipment is from two to 10
years; the estimated useful life assigned to buildings does not exceed 40 years;
leasehold improvements and assets under capital leases are amortized over the
lesser of their useful lives or the term of the applicable lease.
Goodwill reflecting the excess of cost over the value of net assets of
businesses acquired is being amortized on a straight-line basis over 40 years.
49
<PAGE>
SOFTWARE CAPITALIZATION
The Company capitalizes major internal and external systems development costs
determined to have benefits for future periods. Amortization expense is
recognized over the periods in which the benefits are realized, generally not to
exceed three years. Amortization expense was $1,795,000 and$2,376,000 in 1995
and 1994, respectively.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of the Company's foreign operations are translated at
current exchange rates. Revenues and expenses are translated at average
exchange rates for the year in accordance with Statement of Financial Accounting
Standard No. 52. The amounts for all years presented were immaterial.
EARNINGS PER SHARE
Earnings per share and the effect on earnings per share of potentially dilutive
stock options are computed by the treasury stock method. This computation takes
into account the weighted average number of shares outstanding during each year,
outstanding stock options and their exercise prices, and the market price of the
stock throughout the year. The exercise of outstanding stock options would not
result in a material dilution of earnings per share.
RECLASSIFICATION
The Consolidated Statements of Operations reflect a reclassification of certain
delivery and occupany costs from operating expense to cost of goods sold to
conform the Company's presentation to the presentation used by others in the
busienss products industry. The following table sets forth the impact of the
reclassification for the years presented in the Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
Seven Months Ended For the Year Ended
----------------------- ------------------
March 30, March 31, August 31,
1995 1994 1994
---- ---- ----
<S> <C> <C> <C>
Gross Margin as a Percent of Net Sales:
Gross margin prior to reclassification 21.1% 22.5% 21.9%
Gross margin as reported herein 16.9% 17.7% 17.2%
Operating Expenses as a Percent of Net Sales:
Operating expense ratio prior to
reclassification 20.6% (1) 19.6% 19.4%
Operating expense ratio as reported herein 16.4% (1) 14.8% 14.7%
</TABLE>
(1) Includes $27.8 million nonrecurring Merger-related costs.
3. PENSION PLANS AND POSTRETIREMENT BENEFITS
The Company has pension plans in effect for substantially all employees. Non-
contributory plans covering non-union employees provide pension benefits that
are based on years of credited service and a percentage of annual compensation.
Non-contributory plans covering union members generally provide benefits of
stated amounts based on years of service. The Company funds the plans in
accordance with current tax laws.
The Company also has a non-contributory, non-qualified plan ("Supplemental
Benefit Plan") in effect for certain executives. The Company has not funded
this plan.
50
<PAGE>
Net periodic pension cost for 1995 and 1994 for pension and supplemental
benefits plans includes the following components (in thousands of dollars):
- ---------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------
Service cost - benefits earned during the period $1,084 $1,863
Interest cost on projected benefits obligation 909 1,436
Actual return on assets (780) 263
Net Amortization and Deferral 494 (1,807)
- ----------------------------------------------------------------------------
Net periodic pension cost $1,707 $1,755
- ---------------------------------------------------------------------------
The projected benefit obligations for 1995 and 1994 were determined using an
assumed discount rate of 7.5%. The assumed rate of compensation increase ranged
from 0% to 5.5%, andthe expected long-term rate of return on assets used in
determining net periodic pension cost was 7.5%.
The Company provides an unfunded health care plan to substantially all retired
non-union employees and their dependents. Eligibility requirements are based on
the individual's age (minimum age of 55), years of service and hire date. The
benefits are subject to retiree contributions, deductibles, co-payment
provisions and other limitations.
During the first quarter of 1994, the Company adopted Statement of Financial
Accounting Standard No. 106 (SFAS 106), "Employer's Accounting for
Postretirement Benefits Other Than Pensions." SFAS 106 requires companies to
accrue the expected cost of postretirement health care and life insurance
benefits throughout the employee's active service period. Previously,
postretirement health care costs were recognized as claims were paid. The
Company elected to amortize the unfunded Accumulated Postretirement Benefit
Obligation (APBO) over 20 years.
The assumed health care average cost trend rate used in measuring the APBO at
March 30, 1995 was 11.0% in 1995 and 3% in 1996 and beyond. Beginning in 1996,
retirees will pay the difference between actual plan costs and the portion of
cost paid by the Company which is limited to a cost trend rate of 3%. The
assumed discount rate was 7.75%. A 1% increase in the care cost trend rate
would increase the APBO as of March 30, 1995 by approximately $339,000 and the
sum of the 1995 annual service cost and interest cost by approximately $35,000.
The cost of postretirement health care benefits for the seven months ended March
30, 1995 and the year ended August 31, 1994 are as follows (in thousands of
dollars):
1995 1994
- ---------------------------------------------------------------------------
Service cost $ 109 $ 246
Interest on accumulated benefits obligation 106 146
Amortization of transition obligation 58 100
- ---------------------------------------------------------------------------
Net postretirement benefit cost $ 273 $ 492
- ---------------------------------------------------------------------------
The Company has a qualified Profit Sharing Plan in which all salaried employees
and certain hourly paid employees of the Company are eligible to participate
upon completion of six consecutive months of employment. The Profit Sharing
Plan provides for annual contributions by the Company in an amount determined by
the Board of Directors. The Plan also permits employees to have contributions
made as 401(k) salary deferrals on their behalf and to make after-tax voluntary
contributions. The Plan provides that the Company may match employee
contributions as 401(k) salary deferrals. Company contributions to the Plan for
both profit sharing and matching of employee contributions were approximately
$0.8 million in 1995 and $0.5 million in 1994.
51
<PAGE>
4. STOCK INCENTIVE PLANS
As a result of the change in control of the Company, the Company paid out
approximately $3.0 million to option holders representing the difference between
the tender offer price of the stock ($15.50 per share) and the option exercise
price. The amount was included in merger-related costs in 1995.
Under the Directors' Stock Option Plan, the Company granted options for 7,500
shares at a price of $13.75 per share in 1995 and 7,500 shares at a price of
$15.25 per share in 1994. The Directors' Option Plan provides for the granting
of options covering up to 100,000 shares of the Company's common stock, subject
to anti-dilution adjustments. Options are exercisable at any time after they
are granted, but for not more than ten years after the option's grant. As of
the period ended 1995 and 1994, 0 and 41,000 options were outstanding,
respectively.
During fiscal 1995, options for a total of 100,000 shares at $10.50 were granted
to certain officers. The grant was approved at the 1995 Annual Meeting held in
January. Under the Company's 1981 Stock Incentive Award Plan, options
outstanding had an exercisable life of either five, six or ten years from the
date of grant. The Company granted certain officers 15,000 and 16,700 shares of
restricted stock in 1992 and 1991, respectively. There have been no restricted
stock grants since 1992. The grants of restricted shares resulted in deferred
compensation expense of $699,000 of which $16,000, $39,000, $132,000 and
$185,000 was recognized in 1995, 1994, 1993 and 1992, respectively. The
unrecognized portion of deferred compensation was $0, $16,000 and $55,000 as of
March 30, 1995, August 31, 1994 and August 31, 1993, respectively. Under the
terms of the grant, the stock does not vest to the employee until completion of
three years of employment after the date of grant. The 1981 Stock Incentive
Award Plan was terminated by the Company's Board of Directors on March 30, 1995.
In 1989, the Board of Directors terminated the 1985 Non-qualified Stock Option
Plan so that no further stock options would be issued under this plan. The
termination of the plan did not affect the options previously granted and
outstanding. No option could have been exercised more than ten years after its
grant.
The following table summarizes the transactions of the 1981 and 1985 Option
Plans for 1995 and 1994:
<TABLE>
<CAPTION>
1981 Stock Incentive Award Plan Option Price Option Price
(excluding restricted stock) 1995 Range 1994 Range
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of the period 1,135,060 $8.64-$19.39 891,350 $8.64-$19.39
Granted 100,000 $10.50 401,050 $10.00-$16.25
Exercised (22,860) $8.64-$9.29 (3,520) $ 8.64-$13.75
Canceled(1) (1,212,200) $8.64-$19.39 (153,820) $ 8.64-$19.39
----------- ---------
Options outstanding at end
of the period - - 1,135,060
- --------------------------------------------------------------------------------------------------------------
1985 Non-qualified Stock Option Price Option Price
Option Plan 1995 Range 1994 Range
- --------------------------------------------------------------------------------------------------------------
Options outstanding at
beginning of the period 109,500 $14.78-$18.09 109,500 $14.78-$18.09
Granted - - - - - - - -
Exercised - - - - - - - -
Canceled(1) (109,500) $14.78-$18.09 - - - -
--------- ------------
Options outstanding at end
of the period - - 109,500
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1 As a result in change in control of the Company, the Company paid out to
option holders the difference between the tender offer price of the stock
($15.50 per share) and the option exercise price. The total amount was
included in merger-related costs in 1995.
52
<PAGE>
5. LEASES
The Company has entered into several non-cancelable long-term leases on property
and equipment. Rental expense for all operating leases was approximately
$7,731,000 and $13,549,000 in 1995 and 1994, respectively.
6. INCOME TAXES
The Company provides for income taxes at statutory rates based on income
reported for financial statement purposes. A summary of income tax expense is
shown below (in thousands of dollars):
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
Taxes currently payable
Federal $14,122 $7,059
Other tax credits - - (5)
State 2,584 1,591
Prepaid and deferred taxes (12,014) 1,664
- -------------------------------------------------------------------------------
$ 4,692 $10,309
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The table below records the differences between the statutory income tax rate
and the Company's effective income tax rate:
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
Statutory Federal income tax 35.0% 35.0%
State income taxes, net of the Federal
income tax benefit (4.9) 4.8
Losses from foreign subsidiaries - - 1.9
Liquidation of a foreign subsidiary - - (3.9)
Non-deductible goodwill amortization (9.0) 1.5
Non-deductible merger-related expenses (208.3) - -
Other, net 2.6 .3
- -------------------------------------------------------------------------------
Effective income tax rate (184.6)% 39.6%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
53
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
--------- -------- ---------- ---------
Reserve for Doubtful Accounts:
Period ended:
March 30, 1995* $ 4,010 $ 2,510 $1,745 (A) $ 4,775
August 31, 1994 3,964 5,750 5,704 (A) 4,010
Sales Returns, Rebates and
Allowances Period ended:
March 30, 1995* $31,293 $43,523 $48,371 (B) $26,445
August 31, 1994 25,552 67,970 62,229 (B) 31,293
* Reflects the transition period of September 1, 1994 through March 30, 1995
(A) Accounts determined to be uncollectible and charged against reserves, net
of collections on accounts previously written off.
(B) Credit memos issued for sales returns, rebates and allowances.
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Registrant had no disagreements on accounting and financial disclosure of
the type referred to in Item 304 of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to those individuals who are
currently serving as members of the Board of Directors or as executive officers
of the Company on February 1, 1997:
Name Age Position
- --------------------------------------------------------------------------------
Frederick B Hegi, Jr.. . . 53 Director, Chairman of the Board, President
and Chief Executive Officer
Michael D. Rowsey. . . . . 44 Director and Executive Vice President
Daniel H. Bushell. . . . . 45 Executive Vice President, Chief Financial
Officer and Assistant Secretary
Steven R. Schwarz. . . . . 43 Executive Vice President
Robert H. Cornell. . . . . 57 Vice President, Human Resources
Otis H. Halleen. . . . . . 62 Vice President, Secretary and General Counsel
James A. Pribel. . . . . . 43 Treasurer
Albert Shaw. . . . . . . . 47 Vice President, Operations
Ergin Uskup. . . . . . . . 59 Vice President, Management Information
Systems and Chief Information Officer
Gary G. Miller . . . . . . 46 Director and Assistant Secretary
Thomas W. Sturgess . . . . 46 Director
James T. Callier, Jr.. . . 61 Director
Daniel J. Good . . . . . . 56 Director
Jeffrey K. Hewson. . . . . 53 Director
James A. Johnson . . . . . 42 Director
Joel D. Spungin. . . . . . 59 Director
Set forth below is a description of the backgrounds of the directors and
executive officers of the Company. There is no family relationship between any
directors or executive officers of the Company. Officers of the Company are
elected by the Board of Directors and hold office until their respective
successors are duly elected and qualified.
FREDERICK B. HEGI, JR. assumed the position of Chairman of the Board,
President and Chief Executive Officer on an interim basis on November 18,
1996 as a result of the resignation of Thomas W. Sturgess. Mr. Hegi was
elected to the Board of Directors upon consummation of the Merger. Prior to
the Merger, he had been a director of Associated since 1992. Mr. Hegi 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 serves as Chairman of the Executive Committee
of the Board of LoomisFargo & Co., a provider of armored car and related
services ("Loomis"). Mr. Hegi also serves as Chairman of ITCO Holding
Company, Inc., the parent corporation of ITCO Tire Company, a tire
distributor, Tahoka First Bancorp, Inc., a bank holding company, and Cedar
Creek Bancshares, Inc., a bank holding company, Lone Star Technologies, Inc.,
a diversified company engaged in the manufacturing of steel pipe, Cattle
Resources, Inc., a manufacturer of animal feeds and operator of commercial
cattle feedlots.
55
<PAGE>
MICHAEL D. ROWSEY was elected to the Board of Directors upon consummation of the
Merger and became Executive Vice President of the Company upon consummation of
the Merger with primary responsibility for field operations. Prior to the
Merger, Mr. Rowsey had been a director of Associated since 1992 and President
and Chief Operating Officer of Associated since January 1992. From 1979 to
January 1992, Mr. Rowsey served in various capacities with Boise Cascade Office
Products Corp., most recently as the North Regional Manager.
DANIEL H. BUSHELL became Executive Vice President and Chief Financial Officer of
the Company upon consummation of the Merger. Mr. Bushell has served as Assistant
Secretary of the Company since January 1996, and served as Secretary of the
Company from June 1995 through such date. Mr. Bushell also served as Assistant
Secretary of the Company from the consummation of the Merger until June 1995.
Prior thereto, Mr. Bushell had been Chief Administrative and Chief Financial
Officer of Associated and ASI since January 1992. From 1978 to January 1992, Mr.
Bushell served in various capacities with ACE Hardware Corporation, most
recently as Vice President of Finance.
STEVEN R. SCHWARZ became Executive Vice President of the Company upon
consummation of the Merger with primary responsibility for marketing and
merchandising. Prior thereto, he was Senior Vice President, Marketing of United
since June 1992 and had previously been Senior Vice President, General Manager,
Micro United since 1990 and Vice President, General Manager, Micro United since
September 1989. He had held a staff position in the same capacity since February
1987.
ROBERT H. CORNELL became Vice President, Human Resources of the Company upon
consummation of the Merger. Prior thereto, he was Vice President, Human
Resources of United since February 1988, and since 1987 had been Vice President,
Human Resources for USG Interiors Inc., a subsidiary of USG Corporation.
OTIS H. HALLEEN became Vice President, Secretary and General Counsel of the
Company as of January 30, 1996. Since November 1, 1995 he has served as Vice
President, Secretary and General Counsel at USSC. From 1986 through March 1995
he had been Vice President, Secretary and General Counsel of United.
JAMES A. PRIBEL became Treasurer of the Company upon consummation of the Merger.
Prior thereto, he was Treasurer of United since 1992. Prior thereto he had been
Assistant Treasurer of USSC since 1984 and had served in various positions since
joining USSC in 1978.
ALBERT SHAW became Vice President, Operations of the Company shortly after
consummation of the Merger. Prior thereto, he was Vice President, Midwest Region
of USSC since March 1994. He had been a Vice President of USSC since 1992 and
prior to that had served in various management positions since joining USSC in
1974.
ERGIN USKUP became Vice President, Management Information Systems and Chief
Information Officer of the Company upon consummation of the Merger. Prior
thereto, he was Vice President, Management Information Systems and Chief
Information Officer of United since February 1994, and since 1987 had been Vice
President, Corporate Information Services for Baxter International Inc., a
global manufacturer and distributor of health care products.
GARY G. MILLER was elected to the Board of Directors upon consummation of the
Merger and became Assistant Secretary of the Company on June 27, 1995. Mr.
Miller served as Vice President and Secretary of the Company from consummation
of the Merger until June 27, 1995. Prior thereto, Mr. Miller had been a director
of Associated since 1992 and Vice President and Secretary of Associated since
January 1992. Mr. Miller also currently serves as President of Cumberland
Capital, a private investment firm which is located in Fort Worth, Texas. 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 both
CFData Corp., a nationwide provider of check collection and check verification
services, and Fore Star Golf, Inc., which was formed in 1993 to own and operate
golf course facilities.
56
<PAGE>
THOMAS W. STURGESS became President and Chief Executive Officer of the Company
on May 31, 1995 and Chairman of the Board of the Company upon consummation of
the Merger. On November 18, 1996, Mr. Sturgess resigned as Chairman of the
Board, President and Chief Executive Officer of the Company. Prior to the
Merger, Mr. Sturgess served as Chairman of the Board and Chief Executive Officer
of Associated since January 1992 and had been Chairman of the Board and Chief
Executive Officer of ASI since December 1994. Since 1987, Mr. Sturgess has
served as a general partner of various Wingate entities, including the indirect
general partner of each of Wingate Partners and a special limited partner of
Wingate II. Mr. Sturgess has not actively participated in the management of
Wingate Partners or the Wingate entities since December 31, 1995.
JAMES T. CALLIER, JR. was elected to the Board of Directors upon consummation
of the Merger. Prior to the Merger, he had been a director of Associated
since 1992. Mr. Callier is a general partner of Wingate Partners, and has
served as President of Callier Consulting, Inc., an operating management
firm, since 1985. Mr. Callier currently serves as Chairman of the Board of
Century Products, a manufacturer of baby seats and other juvenile products
("Century Products"), as a director of Redman Building Products, Inc., a
manufacturer of aluminum and vinyl windows, as a Director of Loomis, and as
an advisory director of Wingate II.
DANIEL J. GOOD was elected to the Board of Directors upon consummation of the
Merger. Prior to the Merger, he had been a director of Associated since 1992.
Mr. Good is Chairman of Good Capital Co., Inc., an investment firm in Lake
Forest, Illinois. Until June 1995, Mr. Good was Vice Chairman of Golden Cat
Corp., the largest producer of cat litter in the United States, and prior
thereto he was Managing Director of Merchant Banking for Shearson Lehman Bros.,
President of A.G. Becker Paribas, Inc.
JEFFREY K. HEWSON was elected to the Board of Directors in 1991. Mr. Hewson
served as President and Chief Executive Officer of the Company from consummation
of the Merger until May 31, 1995. Prior thereto, he was President and Chief
Operating Officer of United since April 1991. He had been Executive Vice
President of United since March 1990. Prior to that, he had been President of
ACCO International's U.S. Division since 1989 and President of its Canadian
Division since 1987. ACCO International is a manufacturer of traditional office
products and a subsidiary of American Brands, Inc., which is a global consumer
products holding company. Mr. Hewson currently serves as President and Chief
Executive Officer of Beckley Cardy Group, a distributor of supplies, furniture
and equipment to the educational market.
JAMES A. JOHNSON was elected to the Board of Directors upon consummation of
the Merger. Prior to the Merger, he had been a director of Associated since
1992. Mr. Johnson is a general partner of various Wingate entities, including
the indirect general partner of Wingate II. From 1980 until he joined Wingate
Partners in 1990, Mr. Johnson served as a Principal of Booz-Allen & Hamilton,
an international management consulting firm. Mr. Johnson currently serves as
a director of Century Products, and Chairman of the Board of Directors of
Redman Building Products.
JOEL D. SPUNGIN has served as a member of the Board of Directors since 1972 and
prior to the consummation of the Merger was Chairman of the Board of Directors
and Chief Executive Officer of United since August 1988. From October 1989 until
April 1991, he was also President of United. Prior to that, since March 1987,
Mr. Spungin was Vice Chairman of the Board and Chief Executive Officer of
United. Previously, since August 1981, Mr. Spungin was President and Chief
Operating Officer of United. He also serves as a general partner of DMS
Enterprises, L.P., a management advisory and investment partnership, and as a
director of AAR Corp., an aviation and aerospace company, and Home Products
International, Inc., a manufacturer of home improvement products.
Messrs. Sturgess, Rowsey, Miller, Callier, Good, Hegi and Johnson were elected
to the Board of Directors pursuant to a voting trust.
The Charter provides that the Board of Directors shall be divided into three
classes, each class as nearly equal in number as possible, and each term
consisting of three years. The directors currently in each class are as follows:
Class I (having terms expiring in 1999)--Messrs. Good, Johnson and Hewson; Class
II (having terms expiring in 1997)--Messrs. Hegi, Rowsey, Miller and Sturgess
(who will not be standing for re-election) and Class III (having terms expiring
in 1998)--Messrs. Callier and Spungin.
57
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference, pursuant to General Instruction G(3) to Form
10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on May 14, 1997, to be filed within 120 days
after the end of the Registrant's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference, pursuant to General Instruction G(3) to Form
10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on May 14, 1997, to be filed within 120 days
after the end of the Registrant's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference, pursuant to General Instruction G(3) to Form
10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on May 14, 1997, to be filed within 120 days
after the end of the Registrant's fiscal year.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) The following financial statements, schedules and exhibits are filed as
part of this report:
PAGE NO.
--------
(1) Financial Statements of the Company
Report of Independent Auditors 19
Report of Independent Public Accountants 20
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 21
Consolidated Balance Sheets as of December 31, 1996 and 1995 22-23
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 24-25
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 26
Notes to Consolidated Financial Statements 27-41
Financial Statement Schedule
II. Valuation and Qualifying Accounts. . . . . . . . . . . 42
All other financial statements and schedules not listed have been
omitted because they are not applicable, not required or because
the required information is included in the consolidated
financial statements or notes thereto.
(2) Financial Statements of United
Report of Independent Auditors . . . . . . . . . . . . . . 43
Report of Independent Public Accountants . . . . . . . . . 44
Consolidated Statements of Operations for the seven
months ended March 30, 1995 and March 31, 1994
(unaudited), and for the year ended August 31, 1994 . . . 45
Consolidated Statements of Changes in Stockholders'
Investment for the seven months ended March 30, 1995,
and for the year ended August 31, 1994. . . . . . . . . . 46
Consolidated Statements of Cash Flows for the for the
seven months ended March 30, 1995 and March 31, 1994
(unaudited), and for the year ended August 31, 1994 . . . 47
58
<PAGE>
Notes to Consolidated Financial Statements . . . . . . . . 48-53
Financial Statement Schedule . . . . . . . . . . . . . . .
II. Valuation and Qualifying Accounts . . . . . . . . . . 54
All other financial statements and schedules not
listed have been omitted because they are not
applicable, not required or because the required
information is included in the consolidated financial
statements or notes thereto.
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Charter (Exhibit 3(a) to the Company's Annual Report on Form 10-K
dated November 19, 1987)(3).
4.2 Certificate of Ownership and Merger merging Associated into
United(2).
4.3 Restated Bylaws(1).
9.1 Voting Trust Agreement, dated as of January 31, 1992, among the
Company, the stockholders party thereto and Messrs. Sturgess,
Hegi, Miller, Good and Johnson, as voting trustees(1).
9.2 First Amendment to Voting Trust Agreement, dated as of March 30,
1995, among the Company, the stockholders party thereto and
Messrs. Sturgess, Hegi, Miller, Good and Johnson, as voting
trustees(1).
10.1 Credit Agreement, dated as of March 30, 1995, among USSC, the
Company, certain Lenders named therein and Chase Bank, as Agent
and Lender (Exhibit 4.A.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995)(3).
10.2 Waiver and Amendment No. 1, dated as of April 13, 1995, among
USSC, the Company, each of the lenders party thereto and Chase
Bank(1).
10.3 Waiver and Amendment No. 2, dated as of December 21, 1995, among
the Company, United, each of the lenders party thereto and Chase
Bank(4).
10.4 Assumption Agreement, dated as of March 30, 1995, among USSC, the
Company and Chase Bank, as agent (included in Exhibit 10.1,
Exhibit F).
10.5 Form of Revolving Credit Note, issuable under the Credit
Agreement (included in Exhibit 10.1, Exhibit A-I).
10.6 Form of Tranche A Term Loan Note, issuable under the Credit
Agreement (included in Exhibit 10.1, Exhibit A-2).
10.7 Form of Tranche B Term Loan Note, issuable under the Credit
Agreement (included in Exhibit 10.1, Exhibit A-3).
10.8 Security Agreement, dated as of March 30, 1995, between USSC and
Chase Bank, as agent (included in Exhibit 10.1, Exhibit C).
10.9 Form of Indenture of Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing, dated as of March 30, 1995, by USSC
in favor of Chase Bank (included in Exhibit 10.1, Exhibit E).
10.10 Registration Rights Agreement, dated as of April 26, 1995, among
the Company, USSC and the Initial Purchaser(1).
10.11 Purchase Agreement, dated April 26, 1995, among the Company,
USSC, and the Initial Purchaser(1).
10.12 Registration Rights Agreement, dated as of January 31, 1992,
between the Company and CMIHI (included in Exhibit 10.15, Annex
2).
10.13 Amendment No. 1 to Registration Rights Agreement, dated as of
March 30, 1995, among the Company, CMIHI and certain other
holders of Lender Warrants(1).
10.14 Amended and Restated Registration Rights Agreement, dated as of
March 30, 1995, among the Company, Wingate Partners, Cumberland,
Good Capital Co., Inc. and certain other Company stockholders(1).
10.15 Warrant Agreement, dated as of January 31, 1992, among the
Company, USSC and CMIHI(1).
59
<PAGE>
10.16 Amendment No. 1 to Warrant Agreement, dated as of October 27,
1992, among the Company, USSC, CMIHI and the other parties
thereto(1).
10.17 Letter Agreement dated as of February 10, 1995, amending certain
provisions of the Warrant Agreement, among the Company, USSC,
CMIHI and the other parties thereto(4).
10.18 Amendment No. 2 to Warrant Agreement, dated as of March 30, 1995,
among the Company, USSC, CMIHI and the other parties thereto(1).
10.19 Amendment No. 3 to Warrant Agreement, dated as of July 28, 1995,
among the Company, USSC, CMIHI and the other parties thereto(4).
10.20 Exhibit intentionally omitted.
10.21 Warrant Agreement, dated as of January 31, 1992, between the
Company and Boise Cascade Corporation(1).
10.22 Amendment No. 1 to Warrant Agreement, dated as of March 30, 1995,
between the Company and Boise Cascade Corporation(1).
10.23 Indenture, dated as of May 3, 1995, among USSC, the Company and
The Bank of New York(1).
10.24 First Supplemental Indenture, dated as of July 28, 1995, among
USSC, the Company, and the Bank of New York(1).
10.25 Investment Banking Fee and Management Agreements, dated as of
January 31, 1992, among the Company, USSC and each of Wingate
Partners, Cumberland and Good Capital Co., Inc.(1).
10.26 Amendment No. 1 to Investment Banking Fee and Management
Agreements, dated as of March 30, 1995, among USSC, the Company
and each of Wingate Partners, Cumberland and Good Capital Co.,
Inc.(1).
10.27 1992 Management Stock Option Plan, dated as of January 31,
1992(1).
10.28 Amendment No. 1 to 1992 Management Stock Option Plan, dated as of
March 30, 1995(1).
10.29 Amendment No. 2 to 1992 Management Stock Option Plan, dated as of
September 27, 1995(4).
10.30 Letter agreements, dated January 31, 1992, between the Company
(as successor-in-interest to Associated) and each of Michael D.
Rowsey, Robert W. Eberspacher, Lawrence E. Miller, Daniel J.
Schleppe, Duane J. Ratay and Daniel H. Bushell regarding grants
of stock options(1).
10.31 Amendment to Stock Option Grants, dated as of March 30, 1995,
between the Company and each of Michael D. Rowsey, Robert W.
Eberspacher, Lawrence E. Miller, Daniel J. Schleppe, Duane J.
Ratay and Daniel H. Bushell(1).
10.32 Forms of Stock Option Agreements, dated October 2, 1995, granting
options to certain management employees, subject to stockholder
approval of Amendment No. 2 to Stock Option Plan(4).
10.33 Forms of Amendments to Stock Option Grants, dated September 29,
1995, between the Company and each of Michael D. Rowsey, Robert
W. Eberspacher, Lawrence E. Miller, Daniel J. Schleppe and Daniel
H. Bushell(4).
10.34 Stock Option Agreements, dated as of January 1, 1996, between the
Company and Thomas W. Sturgess, granting options subject to
stockholder approval of Amendment No. 2 to Stock Option Plan(4).
10.35 Executive Stock Purchase Agreements, dated as of January 31,
1992, among the Company, Wingate Partners, ASI Partners, L.P. and
each of Michael D. Rowsey, Robert W. Eberspacher, Lawrence E.
Miller and Daniel J. Schleppe(1).
10.36 First Amendments to Executive Stock Purchase Agreements, dated as
of March 30, 1995, among the Company, Wingate Partners, ASI
Partners, L.P. and each of Michael D. Rowsey, Robert W.
Eberspacher, Lawrence E. Miller and Daniel J. Schleppe(1).
10.37 Management Incentive Plan for period 4/1/95 through 12/31.95(4).
10.38 Management Incentive Plan for 1996(4).
10.39 Management Incentive Plan for 1997 *
60
<PAGE>
10.40 1997 Special Bonus Plan *
10.41 Intentionally Omitted
10.42 Intentionally Omitted
10.43 Intentionally Omitted
10.44 Intentionally Omitted
10.45 Profit Sharing PluSavings Plan (Exhibit 10(a)(i)(F)(2)(f) to the
Company's Report on Form 10-K dated November 20, 1989(3).
10.45.1 United Stationers 401(k) Savings Plan, restated as of March 1,
1996*
10.46 United Stationers Supply Co. Pension Plan as amended (See the
Company's Reports on Form 10-K for the fiscal years ended August
31, 1985, 1986, 1987 and 1989(3).
10.47 Amendment to Pension Plan adopted February 10, 1995(2).
10.48 One Time Merger Integration Bonus Plan(4).
10.49 Employment Agreements, dated as of January 31, 1992, among the
Company, USSC and each of Michael D. Rowsey, Robert W.
Eberspacher, Lawrence E. Miller, Daniel J. Shleppe, Duane J.
Ratay and Daniel H. Bushell(1).
10.50 Amended and Restated Employment and Consulting Agreement dated
April 15, 1993 among the Company, USSC and Joel D. Spungin
(Exhibit 10(b) to the Company's Report on Form 10-K dated
November 22, 1993(3).
10.51 Amendment dated February 13, 1995 to the Amended and Restated
Employment and Consulting Agreement among the Company, USSC and
Joel D. Spungin(2).
10.52 Intentionally Omitted
10.53 Intentionally Omitted
10.54 Intentionally Omitted
10.55 Intentionally Omitted
10.56 Intentionally Omitted
10.57 Intentionally Omitted
10.58 Employment and Consulting Agreement dated March 1, 1990 between
the Company, USSC and Jeffrey K. Hewson (Exhibit 10(1) to the
Company's Report on Form 10-K dated November 20, 1990)(3).
10.59 Amendment dated April 10, 1991 of Employment and Consulting
Agreement between the Company, USSC and Jeffrey K. Hewson
(Exhibit 10(1)(I) to the Company's Report on Form 10-K dated
November 25, 1991)(3).
10.60 Amendment dated September 1, 1994 of Hewson Employment and
Consulting Agreement (Exhibit 10(e)(ii) to the Company's Report
on Form 10-K dated November 23, 1994)(3).
10.61 Amendment to Employment and Consulting Agreement dated February
13, 1995 between the Company, USSC and Jeffrey K. Hewson(2).
10.62 Amendment dated May 25, 1995 to Employment and Consulting
Agreement between the Company, USSC and Jeffrey K. Hewson(4).
10.63 Severance Agreement between the Company, USSC and James A. Pribel
dated February 13, 1995(2).
10.64 Letter Agreement dated February 13, 1995 between the Company and
Ergin Uskup(2).
10.65 Amendment dated August 30, 1995 to Employment and Consulting
Agreement between the Company, USSC and Steven R. Schwarz(4).
10.66 Amendment dated August 30, 1995 to Employment and Consulting
Agreement between the Company, USSC and Ted S. Rzeszuto(4).
10.67 Employment Agreements dated October 1, 1995 between USSC and each
of Daniel H. Bushell, Michael D. Rowsey, Steven R. Schwarz,
Robert H. Cornell, Ted S. Rzeszuto, and Al Shaw(4).
10.68 Employment Agreement dated November 1, 1995 between USSC and Otis
H. Halleen(4).
10.69 Employment Agreement dated as of January 1, 1996 between the
Company, USSC and Thomas W. Sturgess(4).
61
<PAGE>
10.70 Deferred Compensation Plan. (Exhibit 10(f) to the Company's
Annual Report on Form 10-K dated October 6, 1994)(3).
10.71 Consulting Agreement dated October 1,1995 between the Company and
Jeffrey K. Hewson(4).
10.72 Letter Agreement dated November 29, 1995 granting shares of
restricted stock to Joel D. Spungin(4).
10.73 Option Agreement dated November 29, 1995 between the Company and
Jeffrey K. Hewson(4).
10.74 Lease Agreement dated as of March 4, 1988 between Crow-Alameda
Limited Partnership and Stationers Distributing Company, Inc., as
amended(1).
10.75 Industrial Real Estate Lease, dated as of May 17, 1993, among
Majestic Realty Co. and Patrician Associates, Inc., as landlord,
and United Stationers Supply Co., as tenant(1).
10.76 Standard Industrial Lease, dated as of March 15, 1991, between
Shelley B. and Barbara Detrik and Lynn Edwards Corp.(1).
10.77 Lease Agreement, dated as of January 12, 1993, as amended, among
Stationers Antelope Joint Venture, AVP Trust, Adon V. Panattoni
and Yolanda M. Panattoni, as landlord, and United Stationers
Supply Co., as tenant(1).
10.78 Lease dated as of February 1, 1993, between CMD Florida Four
Limited Partnership and United Stationers Supply Co., as
amended(1).
10.79 Standard Industrial Lease, dated March 2, 1992, between Carol
Point Builders I and Associated Stationers, Inc.(1).
10.79.1 First Amendment to Industrial Lease dated January 23, 1997
between ERI-CA, Inc. as successor to Carol Poaint Builders I and
USSC as successor to Associated Stationers, Inc.*
10.80 Lease, dated March 22, 1973, between National Boulevard Bank of
Chicago, a trustee under Trust Agreement dated March 15, 1973 and
known as Trust No. 4722, and United Supply Co., as amended(1).
10.81 Lease Agreement, dated July 20, 1993, between OTR, acting as the
duly authorized nominee of the Board of the State Teachers
Retirement System of Ohio, and United Stationers Supply Co., as
amended(1).
10.82 Lease Agreement, dated as of December 20, 1988, between Corporate
Property Associates 8, L.P., and Stationers Distributing Company,
Inc., as amended(1).
10.83 Industrial Lease, dated as of February 22, 1988, between
Northtown Devco and Stationers Distributing Company, as
amended(1).
10.84 Lease, dated as of April 17, 1989, between Isaac Heller and
United Stationers Supply Co., as amended(1).
10.85 Lease Agreement, dated as of May 10, 1984, between Westbelt
Business Park Joint Venture and Boise Cascade Corporation, as
amended(1).
10.86 Lease, dated as of January 19, 1981, between Propco, Inc. and
Crown Zellerbach Corporation, as amended(1).
10.87 Lease Agreement, dated as of August 17, 1981, between Gulf United
Corporation and Crown Zellerbach Corporation, as amended(1).
10.88 Lease Agreement, dated as of March 31, 1978, among Gillich O.
Traughber and J. T. Cruin, Joint Venturers, and Boise Cascade
Corporation, as amended(1).
10.89 Lease Agreement, dated November 7, 1988, between Dalware II
Associates and Stationers Distributing Company, Inc., as
amended(1).
10.90 Lease Agreement, dated November 7, 1988, between Central East
Dallas Development Limited Partnership and Stationers
Distributing Company, Inc., as amended(1).
10.91 Lease Agreement, dated as of March 17, 1989, between Special
Asset Management Company of Texas, Inc., and Stationers
Distributing Company, Inc., as amended(1).
10.92 Sublease, dated January 9, 1992, between Shadrall Associates and
Stationers Distributing Company, Inc.(1).
10.93 Industrial Lease, dated as of June 12, 1989, between Stationers
Distributing Company, Inc. and Dual Asset Fund V, as amended(1).
62
<PAGE>
10.94 Lease Agreement, dated as of July, 1994, between Bettilyon
Mortgage Loan Company and United Stationers Supply Co.(1).
10.95 Agreement of Lease, dated as of January 5, 1994, between the
Estate of James Campbell, deceased, and United Stationers Supply
Co.(1).
10.96 Lease Agreement dated January 5, 1996 between Robinson
Properties, L.P. and USSC(4).
10.97 Real Estate Agreement dated January 9, 1996 between USSC as
seller and Seid Street, Ltd. as purchaser (4).
10.98 Real Estate Agreement dated October 19, 1995 between USSC as
seller and Boise Cascade Office Products Corporation as
purchaser(4).
10.99 Agreement for Data Processing Services, dated January 31, 1992,
between USSC (as successor-in-interest to ASI) and Affiliated
Computer Services, Inc.(1).
10.99.1 Stock Purchase Agreement between United Stationers Supply Co.
("Purchaser") and Lagasse Bros., Inc. ("Company") and Kevin C.
Lagasse, Cynthia Lagasse, David C. Lagasse, Linette Lagasse
Abadie, Clinton G. Lagasse, Raymond J. Lagasse and Rickey Lagasse
being all of the shareholders of the Company (the
"Shareholders")(Exhibit 99.1 to Registrant's Report on Form 8-K
filed November 5, 1996)(3)
10.99.2 Amended and Restated Credit Agreement dated October 31, 1996
(amending and restating the Credit Agreement dated as of March
30, 1995)(Exhibit 99.2 to Registrant's Report on Form 8-K filed
November 5, 1996)(3)
10.100 Amended and Restated First Amendment to Agreement for Data
Processing Services, dated as of August 29, 1995, between USSC
and Affiliated Computer Services, Inc.(1).
10.101 Intentionally omitted
10.102 Intentionally omitted
10.103 US Employee Benefits Trust Agreement dated March 21, 1995 between
the Company and American National Bank and Trust Company of
Chicago as Trustee(2).
10.104 USI Bonus Benefits Trust Agreement dated March 21, 1995 between
the Company and American National Bank and Trust Company of
Chicago as Trustee(2).
10.105 Certificate of Insurance covering directors' and officers'
liability insurance effective November 1, 1994 through
November 1, 1995 (Exhibit 10.57 to the Company's Report on Form
10-K dated June 27, 1995)(3).
10.106 Certificate of Insurance covering directors' and officers'
liability insurance effective March 30, 1995 through March 30,
1996 (Exhibit 10.81 to the Company's Form S-3 (No. 33-62739), as
amended)(3).
10.107 Amendment to Medical Plan Document for the Company(2).
10.108 The Company Severance Plan, adopted February 10, 1995(2).
10.109 Securities Purchase Agreement, dated as of July 28, 1995, among
the Company, Boise Cascade, Wingate Partners, Wingate II, Wingate
Affiliates, Wingate Affiliates II, ASI Partners III, L.P., the
Julie Good Mora Grantor Trust and the Laura Good Stathos Grantor
Trust(2).
10.110 Amendment dated February 23, 1996 to Option Agreements between
the Company and Thomas W. Sturgess (Exhibit 10.110 to the
Company's report on Form 10-K dated March 28, 1996).
10.111 Amendment No. 3 to United Stationers Inc. Management Equity Plan,
dated as of September 27, 1995 (Exhibit 10.111 to the Company's
report on Form 10-K dated March 28, 1996).
10.112 Amendment No. 2 dated March 5, 1996 to Stock Option Agreements
between the Company and Thomas W. Sturgess (Exhibit 10.112 to the
Company's report on Form 10-K dated March 28, 1996).
10.113 Amendment to Employment Agreement dated March 5, 1996 between the
Company, USSC and Thomas W. Sturgess (Exhibit 10.113 to the
Company's report on Form 10-K dated March 28, 1996).
63
<PAGE>
10.114 Agreement dated November 18, 1996 between Thomas W. Sturgess, the
Company and USSC.*
10.115 Lease Agreement commencing March 1, 1997 between Amber Jack
Limited Partnership and USSC.*
10.116 Lease Agreement dated September 20, 1996 between Davis
Partnership and USSC.*
21 Subsidiaries of the Company.*
23.1 Consent of Ernst & Young LLP, Independent Auditors.*
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants.*
23.3 Consent of Arthur Andersen LLP, Independent Public Accountants.*
24.1 Powers of Attorney of directors and executive officers of the
Registrant. (Included on Page II-8 of Registration Statement on
Form S-2)(4).
27.1 Financial Data Schedule for the Company (EDGAR filing only).*
27.2 Financial Data Schedule for USSC (EDGAR filing only).*
* Filed herewith.
(1) Incorporated by reference to the Company's Form S-1 (No. 33-
59811), as amended, initially filed with the Commission on June
12, 1995.
(2) Incorporated by reference to the Company's Schedule 14D-9 dated
February 21, 1995.
(3) Incorporated by reference to other prior filings of the Company
as indicated.
(4) Incorporated by reference to the Company's Form S-2 (No. 333-
01089) as filed with the Commission on February 20, 1996.
B) Reports on Form 8-K were filed by the Registrant on October 21, 1996,
November 5, 1996, and November 19, 1996
For the purpose of complying with the amendments to the rules governing Form S-8
(effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statement on Form S-8 No. 3332453
(filed December 6, 1989).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITED STATIONERS INC.
BY: /s/Daniel H. Bushell
----------------------------
Daniel H. Bushell
Executive Vice President,
Chief Financial Officer and
Assistant Secretary
(principal accounting officer)
Dated:
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/Frederick B. Hegi, Jr. Chairman of the Board of Directors,
- ----------------------------- President and Chief Executive Officer
Frederick B. Hegi, Jr.
/s/Michael D. Rowsey Executive Vice President
- ------------------------- and a Director
Michael D. Rowsey
/s/JAMES T. CALLIER, JR. Director
- -------------------------
James T. Callier, Jr.
/s/Daniel J. Good Director
- -------------------------
Daniel J. Good
/s/Jeffrey K. Hewson Director
- -------------------------
Jeffrey K. Hewson
/s/James A. Johnson Director
- -------------------------
James A. Johnson
/s/Gary G. Miller Director
- -------------------------
Gary G. Miller
/S/JOEL D. SPUNGIN Director
- -------------------------
Joel D. Spungin
/s/Thomas W. Sturgess Director
- -------------------------
Thomas W. Sturgess
65
<PAGE>
Exhibit 10.39
[Logo]
- -------------------------------------------------------------------------------
1997
MANAGEMENT INCENTIVE PLAN
EFFECTIVE 1/1/97
- -------------------------------------------------------------------------------
PURPOSE
It is deemed desirable and in the best interests of the Stockholders and
Corporation that a portion of total compensation be made available to key
employees, in the form of incentive opportunity, when they discharge their
responsibilities in a manner which makes a measurable contribution to the
Corporation.
This is a general summary description of the Plan and is provided as an
information communication to Plan participants. A detailed Plan document is
available through the Vice President, Human Resources and upon request, any
participant may review the full text.
January, 1997
<PAGE>
MANAGEMENT INCENTIVE PLAN - JANUARY, 1997 PAGE 1
- --------------------------------------------------------------------------------
CONCEPT
Participants are eligible to earn an annual incentive award based on attainment
of pre-approved Corporate, Area, Region, Division, or Safety goals.
Participants are assigned a target incentive award stated as a percent of base
salary. The target incentive award, or a greater or lesser amount as based on a
preset schedule, will be calculated at year-end based on the attainment of
predetermined goals. The plan year shall be January 1, 1997 - December 31,
1997.
ELIGIBILITY
Eligibility for participation in the Plan will be limited to those key employees
who, by the nature and scope of their position, regularly and directly make or
influence policy or operating decisions which impact the profitability and
earnings results of the Company. However, employees participating in a sales
incentive, or commission arrangement, or those covered by a consulting
agreement, shall be excluded from participation in this Plan.
PARTICIPATION
Participation in the Plan shall be determined annually and approved by the Board
of Directors. The Board shall base its approval upon the recommendations of the
Compensation Committee of the Board of Directors. Employees approved for
participation shall be notified of their selection as soon after approval as
practicable.
PARTIAL PLAN YEAR PARTICIPATION
The Board may allow an individual who becomes eligible during the Plan year to
participate in the Plan. In such case, the participant's final award shall be
prorated based on the number of full months of participation during the
pertinent Plan year.
A participant whose incentive category level is changed during the Plan year
shall receive a bonus based on the number of months spent in each incentive
category during the Plan year. The proration shall be determined by multiplying
the final award for a full year of participation at each incentive category
level by a fraction; the numerator of which shall be the number of months spent
at the incentive category level and the denominator of which shall be twelve
(12). The participant's final award shall be the sum of the prorated awards
calculated for the time spent at each incentive category level, with
consideration to changes in base salary, when appropriate.
GOALS
TARGET INCENTIVE - At the beginning of each Plan year, the Board shall establish
the target incentive levels for participants. The target incentive (expressed
as a percent of salary) will vary according to the participant's duties and
responsibilities.
PERFORMANCE GOALS - The Board shall establish, at the beginning of each Plan
year, a planned level of performance at which participant bonus awards shall be
earned. The Board also shall establish a range of performance levels at which
the maximum and minimum incentive awards shall be earned.
ADJUSTMENT OF PERFORMANCE TARGETS - The Board shall have the right to adjust the
performance goals (either up or down) during the Plan year if it determines that
external changes or other unanticipated business conditions have materially
affected the fairness of the goals and unduly influenced the Company's ability
to meet them.
At the end of each Plan year, final awards shall be computed for each
participant. Participants must be actively employed by the Company on the last
day of the Plan year to receive an award for that Plan year. Final award
amounts, may be adjusted (either up or down) based on the Board's assessment of
Company performance results. Further, the Board shall have the right to adjust
the performance goals and the final award amounts in the event of a Plan year
consisting of less than twelve (12) months.
<PAGE>
MANAGEMENT INCENTIVE PLAN - JANUARY, 1997 PAGE 2
- --------------------------------------------------------------------------------
HOW THE PLAN WORKS
1. TARGET INCENTIVE - Target incentives are based on level of
responsibility, expressed as a percent of annual salary and represent a
reasonable and competitive incentive opportunity for the achievement of an
Earnings Per Share (EPS) goal pre-bonus for Corporate and EBIT goals for Area,
Region or Division. January 1, 1997 base salary is used for calculations under
this plan, along with promotional adjustments or other salary changes that occur
during the Plan year. Such changes will be made on pro-rata basis, using whole
months. Participant target incentives are:
TARGET INCENTIVE EXPRESSED
PARTICIPANT INCENTIVE CATEGORY AS A % OF BASE SALARY
------------------------------ ---------------------
Executive Vice Presidents 60.0%
RVP's, Corp. Officers & Executive Committee Members 40.0%
Other Officers / Staff Directors / Area Managers 33.0%
Other Participants 20.0%, 15.0%, 10.0%
The Chairman and Chief Executive Officer shall participate in this Plan,
receiving incentive awards, as determined by the Board of Directors.
2. WEIGHTING OF TARGET INCENTIVE - The Plan contains an EPS goal to reward
Corporate performance, EBIT goals to reward Area, Region or Division
performance, and Safety goals to reward safety performance. Participant's
target incentives are weighted as follows:
<TABLE>
<CAPTION> WEIGHTING BY ORGANIZATION LEVEL
PARTICIPANTS CORPORATE AREA REGION DIVISION* SAFETY PERFORMANCE**
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Officers 100%
Corporate Staff 100%
Area Managers 50% 25% 25%
Region Staff 100%
Division Managers & Staff 25% 50% 25%
</TABLE>
3. POSSIBLE PAYOUTS (BASED ON PERFORMANCE) FOR CORPORATE, AREA, REGION OR
DIVISION PERFORMANCE
a) Corporate Performance will be calculated on Earnings Per Share (EPS)
using the following scale:
EPS PAYOUT AS PERCENT OF
LEVEL OF PERFORMANCE PERFORMANCE TARGET BONUS OPPORTUNITY
-------------------- ----------- ------------------------
Maximum 109% 150%
Target 100% 100%
Minimum 96% 50%
b) Area, Region and Division performance will be calculated on the following
scale. Bonuses earned under this scale will be limited to the lesser of
Corporate performance or actual Area, Region or Division performance
achieved. However, a "pool" will be established equal to field bonuses
at the Corporate rate less field bonuses paid, to be shared among the
field locations that performed at a rate higher than the Corporate rate.
EBIT PAYOUT AS PERCENT OF
LEVEL OF PERFORMANCE PERCENT OF PROFIT PLAN TARGET BONUS OPPORTUNITY
-------------------- ---------------------- ------------------------
Maximum 110% 150%
Target 100% 100%
Minimum 70% 50%
* TWO FACILITIES IN ONE LOCATION ARE MEASURED SEPARATELY, I.E.,
MINNEAPOLIS: BROOKLYN PARK & EAGAN, ETC.
** SAFETY TARGETS ARE PROVIDED THROUGH SEPARATE CORRESPONDENCE
<PAGE>
MANAGEMENT INCENTIVE PLAN - JANUARY, 1997 PAGE 3
- --------------------------------------------------------------------------------
HOW THE PLAN WORKS (CONTINUED)
c) Discretionary Award - A Discretionary bonus will be set aside for the
use of the Compensation Committee of the Board of Directors to reward
extraordinary performance at the Area, Region and Division level(s).
Such discretionary bonus will be over and above any other bonus
entitlements.
GENERAL PROVISIONS
OTHER
1. The Compensation Committee shall review performance against goals at the
conclusion of the plan and shall approve awards for individuals eligible to
participate in this plan.
2. The judgment of the Compensation Committee in construing this plan or any
provision thereof, or in making any decision hereunder, shall be final and
binding upon all participants and their beneficiaries, heirs, executors,
personal representatives and assigns.
3. Except as expressly provided in point 6 below, nothing herein contained
shall limit or affect in any manner or degree the normal and usual powers
of management, exercised by the Officers and the Board of Directors to
change the duties or the character of employment of any employee of the
Company or to remove the individual from the employment of the Company at
any time, all of which rights and powers are expressly reserved.
4. Except as expressly provided in point 6 below, no award will be paid an
individual who is not a regular full time employee in good standing when
the plan concludes, except an award may be considered in the event of
retirement or death of a participant during the plan year, at the
discretion of the Compensation Committee.
5. Except as expressly provided in point 6 below, the awards to participants
shall become a liability of the Company when the plan concludes, and all
payments to be made hereunder will be made as soon as practicable
thereafter.
6. In the event the involuntary termination of a participant occurs prior to
the conclusion of this plan, he or she may be entitled to payment of a
reduced award for the year at the discretion of the Compensation Committee.
Such award shall be paid to such employee as soon as practicable after
awards have been approved. For purposes of understanding "involuntary
termination" shall mean actual or express termination of employment by the
Company for its convenience, or any of its subsidiaries, provided, however,
that in no event shall it include a termination based upon (a) any willful
and continued failure to substantially perform assigned duties (other than
as a result of incapacity) after demand giving specifics has been made for
such performance, or (b) any willful misconduct which is materially
injurious to the Company or any of its subsidiaries. As used here, the
word "willful" means any act done or omitted to be done not in good faith
and without reasonable belief that such action or omission was in the best
interest of the Company.
<PAGE>
Exhibit 10.40
[LOGO]
December 17, 1996
UNITED STATIONERS SUPPLY CO.
1997 SPECIAL BONUS PLAN
This is a special bonus plan aimed at encouraging and rewarding participants for
creating the operational foundation such that a "Liquidity Event", as defined
herein, can be achieved.
This Plan is effective immediately.
PARTICIPANTS AND AWARD VALUE
The participants, and the amount of their awards, are as approved by the Board
of Directors at the time of adoption of this Plan. The total number of
participants is 177.
PAYMENT OF AWARDS
Fifty percent of the bonus will be payable in cash on the first anniversary of a
Liquidity Event, and fifty percent will be payable on the second anniversary of
such Liquidity Event. Except as provided in point 3 below, no award or portion
of an award will be earned by or paid to an individual who is not a regular full
time employee of the Company when the payment is due.
OTHER
1. The judgment of the Compensation Committee in construing this plan or any
provision thereof, or in making any decision hereunder, shall be final and
binding upon all participants and their beneficiaries, heirs, executors,
personal representatives and assigns.
2. Nothing herein shall limit or affect in any manner the normal powers of
management to change the duties or the character of employment of any
participant or to remove the individual from the employment of the Company
at any time, all of which rights and powers are expressly reserved.
3. If a participant retires, becomes permanently disabled, or is involuntarily
terminated by the Company, other than "For Cause", after a Liquidity Event
but before the bonus is payable under this Plan, he or she will continue to
be entitled to payment of the unpaid portion of the bonus at the time
payment otherwise would have been payable. If a participant dies after a
Liquidity Event but before the bonus is payable, the participant's estate
will be entitled to payment of the unpaid portion of the bonus as soon as
practicable after the participant's death.
<PAGE>
DEFINITIONS
"LIQUIDITY EVENT" shall mean the occurrence of a transaction or group of
transactions that cause the Sponsor Holders (as defined below) to realize a
return of Liquid Proceeds (as defined below) at least equal to their
Investment (as defined below).
(a) "SPONSOR HOLDERS" shall mean, collectively, Wingate Partners,
L.P., Wingate Partners II, L.P., Wingate Affiliates, L.P., Wingate
Affiliates II, L.P., and their affiliates.
(b) "LIQUID PROCEEDS" shall mean (i) currency of the United States;
(ii) negotiable instruments drawn on a bank with at least $10 billion
in assets and payable in U.S. currency; (iii) obligations issued or
assumed by the United States of America or any agency or
instrumentality thereof; or (iv) shares of stock or other securities
that are registered under the Securities Exchange Act of 1933, are
traded on the New York Stock Exchange, the American Stock Exchange or
one approved for quotation on the NASDAQ National Market System, and
can be sold on such market by the holder without significant discount
from the average of the bid and asked prices for such shares or other
securities at such time.
(c) "INVESTMENT" shall mean the purchase price for the shares of
stock of United Stationers Inc., purchased by the Sponsor Holders in
connection with the acquisition of United Stationers Inc. as of
March 30, 1995.
For purposes of determining whether a Liquidity Event has occurred, the good
faith determination of the Board of Directors of United Stationers Inc. shall
be conclusive.
"FOR CAUSE" termination shall mean termination of employment by the Company
based upon (a) any continued failure to substantially perform assigned duties
(other than as a result of incapacity) after demand giving specifics has been
made for such performance; (b) theft or embezzlement, or attempted theft or
embezzlement, of money or property or assets of the Company or any of its
affiliates; (c) use of illegal drugs; (d) breach of any fiduciary duty owed
to the Company, including, without limitation, engaging in directly
competitive acts while employed by the Company or (e) any other misconduct
which is materially injurious to the Company or any of its subsidiaries or
affiliates.
<PAGE>
UNITED STATIONERS
401(K) SAVINGS PLAN
RESTATED AS OF
MARCH 1, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Definitions and Construction . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Principal Entities. . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Determination of Benefits . . . . . . . . . . . . . . . . . . . 3
2.4 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
Participation and Service. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Participation and Service Upon Reemployment . . . . . . . . . . 8
3.4 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Controlled Groups . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Affiliated Service Groups . . . . . . . . . . . . . . . . . . . 10
3.7 Leased Employees. . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
Contributions and Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Employer Contributions. . . . . . . . . . . . . . . . . . . . . 10
4.2 Contributions by Participants . . . . . . . . . . . . . . . . . 11
4.3 Disposition of Forfeitures. . . . . . . . . . . . . . . . . . . 12
4.4 Participant Salary Deferral . . . . . . . . . . . . . . . . . . 13
4.5 Special Rules for Owner-Employees . . . . . . . . . . . . . . . 16
ARTICLE V
Allocations to Participants' Accounts. . . . . . . . . . . . . . . . . . . . 16
5.1 Individual Accounts . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Account Adjustments . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Maximum Additions . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Nondiscrimination Requirements. . . . . . . . . . . . . . . . . 20
5.5 Rollover Contributions. . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Retirement or Disability. . . . . . . . . . . . . . . . . . . . 31
6.2 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.3 Termination for Other Reasons . . . . . . . . . . . . . . . . . 31
1
<PAGE>
PAGE
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6.4 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . 32
6.5 Distribution of Unallocated Employee Contributions and Salary
Deferral Contributions. . . . . . . . . . . . . . . . . . . . . 39
6.6 Designation of Beneficiary. . . . . . . . . . . . . . . . . . . 39
6.7 Optional Direct Transfer of Eligible Rollover Distributions . . 41
6.8 Loans to Participants . . . . . . . . . . . . . . . . . . . . . 42
6.9 Cash-Out Procedure. . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.1 Appointment of Trustee. . . . . . . . . . . . . . . . . . . . . 44
7.2 Assets of the Trust . . . . . . . . . . . . . . . . . . . . . . 44
7.3 Earmarked Investments . . . . . . . . . . . . . . . . . . . . . 44
7.4 Reversion of Employer Contributions . . . . . . . . . . . . . . 45
ARTICLE VIII
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Allocation of Responsibility Among
Fiduciaries for Plan and Trust Administration . . . . . . . . . 45
8.2 Appointment of Committee. . . . . . . . . . . . . . . . . . . . 46
8.3 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . . . 46
8.4 Records and Reports . . . . . . . . . . . . . . . . . . . . . . 46
8.5 Other Committee Powers and Duties . . . . . . . . . . . . . . . 46
8.6 Rules and Decisions . . . . . . . . . . . . . . . . . . . . . . 47
8.7 Committee Procedures. . . . . . . . . . . . . . . . . . . . . . 47
8.8 Authorization of Benefit Payments . . . . . . . . . . . . . . . 47
8.9 Application and Forms for Benefits. . . . . . . . . . . . . . . 47
8.10 Facility of Payment . . . . . . . . . . . . . . . . . . . . . . 47
8.11 Indemnification of the Committee. . . . . . . . . . . . . . . . 48
ARTICLE IX
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Nonguarantee of Employment. . . . . . . . . . . . . . . . . . . 48
9.2 Rights to Trust Assets. . . . . . . . . . . . . . . . . . . . . 48
9.3 Nonalienation of Benefits . . . . . . . . . . . . . . . . . . . 48
9.4 Nonforfeitability of Benefits . . . . . . . . . . . . . . . . . 48
9.5 Discontinuance of Employer Contributions. . . . . . . . . . . . 48
ARTICLE X
Amendments and Action by Employers . . . . . . . . . . . . . . . . . . . . . 49
10.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.2 Action by Employers . . . . . . . . . . . . . . . . . . . . . . 49
2
<PAGE>
PAGE
----
ARTICLE XI
Successor Employer and Merger or Consolidation of Plans. . . . . . . . . . . 49
11.1 Successor Employer. . . . . . . . . . . . . . . . . . . . . . . 49
11.2 Conditions Applicable to Mergers or Consolidations of Plans . . 49
ARTICLE XII
Plan Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.1 Right to Terminate. . . . . . . . . . . . . . . . . . . . . . . 50
12.2 Partial Termination . . . . . . . . . . . . . . . . . . . . . . 50
12.3 Liquidation of the Trust Fund . . . . . . . . . . . . . . . . . 50
12.4 Manner of Distribution. . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIII
Plan Adoption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.1 Adoption Procedure. . . . . . . . . . . . . . . . . . . . . . . 51
13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.3 Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.4 Transferred Assets. . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XIV
Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.3 Minimum Allocation Requirements . . . . . . . . . . . . . . . . 54
14.4 Special 415 Limitations . . . . . . . . . . . . . . . . . . . . 55
3
<PAGE>
PURPOSE
In order to provide retirement benefits for eligible employees, United
Stationers Supply Co. and Utility Stationery Stores, Inc. created the United
Stationers Supply Co. Profit Sharing Plan and Trust, which was embodied in a
trust agreement executed on January 2, 1939, and amended from time to time
thereafter and subsequently renamed as the United Stationers Inc. Profit
Sharing PluSavings Plan ("USI Plan").
Effective June 24, 1992, Stationers Distributing Company, Incorporated was
merged into United Stationers Supply Co. Stationers Distributing Company,
Incorporated maintained the Stationers Distributing Company, Incorporated Profit
Sharing Retirement and Tax Sheltered Savings Plan ("Distributing Plan"). After
the merger of Stationers Distributing Company, Incorporated into United
Stationers Supply Co., United Stationers Supply Co. deemed it desirable to merge
the Distributing Plan into the USI Plan. The USI Plan and the Distributing Plan
were merged effective December 31, 1992. The USI Plan was amended and restated
effective January 1, 1993, to continue the retirement programs previously
maintained by the respective USI Plan and the Distributing Plan prior to their
merger.
Effective March 30, 1995, Associated Stationers, Inc. was merged into
United Stationers Inc. ("Company"), the parent corporation of United Stationers
Supply Co. Associated Stationers, Inc. previously maintained the Associated
Stationers, Inc. Profit Sharing and Savings Plan ("Plan"). The Plan was
originally established effective April 1, 1992 by Associated Stationers, Inc.
for the benefit of its eligible employees and has been amended from time to time
thereafter. After the merger of Associated Stationers, Inc. into United
Stationers, Inc. ("Company"), the Company deemed it desirable to merge the USI
Plan into this Plan effective March 1, 1996. This Plan is herein amended and
restated effective March 1, 1996 ("Effective Date"), and renamed as the United
Stationers 401(K) Savings Plan. The Plan, as restated, represents a
continuation of the retirement programs previously maintained by the USI Plan
and the Plan prior to their merger.
It is intended that on or about March 1, 1996, the assets of the USI Plan
and this Plan will be combined to form the assets of this Plan following the
merger. The sum of the participant account balances in the USI Plan and this
Plan shall equal the fair market value (determined as of the date of the merger)
of the entire plan assets. Immediately after the merger, each participant in
this Plan shall have an account balance equal to the account balance the
participant had in this Plan or the USI Plan immediately prior to the merger.
The Plan and the trust established pursuant to the Plan are intended to
meet the requirements of sections 401(a) and 501(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and the Employee Retirement Income Security Act
of 1974, as amended.
The provisions of this Plan shall apply only to a participant who
terminates employment on or after the Effective Date. The provisions of this
Plan as herein amended and restated shall not be construed to alter in any way
the rights of any former participant (or any former participant's beneficiaries)
who has retired or died, or who has terminated employment before the Effective
Date. A former participant's eligibility for benefits, and the amount of
benefits, if any, payable to or on behalf of a former participant shall be
determined in accordance with the provisions of the respective plan in effect on
the date the participant's employment terminated.
<PAGE>
DEFINITIONS AND CONSTRUCTION
DEFINITIONS: Where the following words and phrases appear in this Plan, they
shall have the respective meanings set forth in this Article, unless the
context clearly indicates to the contrary.
PRINCIPAL ENTITIES:
(a) BENEFICIARY: A person or persons designated by a Participant in
accordance with the provisions of Section 6.6 DESIGNATION OF
BENEFICIARY to receive any death benefit which shall be payable under
the Plan.
(b) COMMITTEE: The persons appointed pursuant to Article VIII
ADMINISTRATION to administer the Plan in accordance with said Article.
(c) COMPANY: United Stationers Inc., a Delaware corporation, with its
principal place of business in Des Plaines, Illinois, or its successor
or successors.
(d) DISTRIBUTING PLAN: The Stationers Distributing, Incorporated Profit
Sharing Retirement and Tax Sheltered Savings Plan prior to its merger
into the USI Plan on June 24, 1992.
(e) EMPLOYEE: Any person who is receiving remuneration on a salary or
commission basis for personal services rendered to the Employers (or
who would be receiving such remuneration except for an Authorized
Leave of Absence). Notwithstanding anything herein to the contrary,
no leased employee within the meaning of section 414(n) of the Code
with respect to any Employer shall be considered an Employee.
(f) EMPLOYERS: The Company and such subsidiary or affiliated corporations
of the Company, including, without limitation, United Stationers
Supply Co., which adopt the Plan with the Company's consent.
(g) FIDUCIARIES: The Employers, the Committee and the Trustee but only
with respect to the specific responsibilities of each for Plan and
Trust administration, all as described in Section 8.1 ALLOCATION OF
RESPONSIBILITY AMONG FIDUCIARIES FOR PLAN AND TRUST ADMINISTRATION.
(h) FORMER PARTICIPANT: A Participant whose employment with the Employers
has terminated but who has a vested Account balance under the Plan
which has not been paid in full, and therefore, is continuing to
participate in the allocation of Trust Fund Income.
(i) PARTICIPANT: An Employee participating in the Plan in accordance with
the provisions of Section 3.1 PARTICIPATION.
2
<PAGE>
(j) PLAN: UNITED STATIONERS INC. 401(K) SAVINGS PLAN, the Plan set forth
herein, as amended from time to time, formerly known as the Associated
Stationers, Inc. Profit Sharing and Savings Plan, prior to this
amendment and restatement of the Plan.
(k) TRUST (OR TRUST FUND): The fund, maintained in accordance with the
terms of the trust agreement entered into between the Company and the
Trustee, as from time to time amended, which constitutes a part of
this Plan.
TRUSTEE: The corporation or individuals appointed by the Board of
Directors to administer the Trust.
(m) USI PLAN: The United Stationers Inc. Profit Sharing Plus Savings Plan
prior to its merger into this Plan on the Effective Date.
DETERMINATION OF BENEFITS:
(a) ACCOUNT(S): The separate account or accounts which are maintained for
each Participant.
(b) ADDITIONS: With respect to each Limitation Year, defined at Section
5.3 MAXIMUM ADDITIONS, the total of the Employer Contributions and
forfeitures allocated to a Participant's Employer Contribution
Account, Basic Employer Contribution Account and Matching Employer
Contribution Account determined without regard to rollover
contributions and direct transfer contributions, if any, the Employee
Contributions which are allocated to the Participant's Employee
Contribution Account, and the Salary Deferral Contributions which are
allocated to the Participant's Salary Deferral Contribution Account,
but excluding Salary Deferral Contributions attributable to Excess
Deferrals, as defined in Section 5.4(a)(v), which are distributed no
later than the first April 15 following the close of the Participant's
taxable year, and including amounts allocated to an individual medical
account, as defined in section 415(l)(2) of the Code, which is part of
a pension or annuity plan maintained by the Employer, and amounts
derived from contributions which are attributable to post-retirement
medical benefits, allocated to the separate account of a key employee,
as defined in section 419A(d)(3) of the Code, under a welfare benefit
fund, as defined in section 419(e) of the Code, maintained by the
Employer.
(c) AUTHORIZED LEAVE OF ABSENCE: Any absence authorized in writing by an
Employer under the Employer's standard personnel practices provided
that all persons under similar circumstances must be treated alike in
the granting of such Authorized Leaves of Absence and provided further
that the Employee returns or retires within the period of authorized
absence. An absence due to service in the Armed Forces of the United
States shall be considered an Authorized Leave of Absence provided
that the absence is caused
3
<PAGE>
by war or other emergency, or provided that the Employee is
required to serve under the laws of conscription in time of
peace, and further provided that the Employee returns to
employment with the Employers within the period provided by law.
(d) BASE CONTRIBUTION RATE: The rate at which Basic Contributions and
Additional Pro-rata Contributions are allocated to Participant
Accounts for the Year with respect to Compensation at or below the
Integration Level.
(e) BASIC EMPLOYER CONTRIBUTIONS: Contributions of the Employers as
described in Section 5.2(b)(i).
(f) BASIC EMPLOYER CONTRIBUTION ACCOUNT: The separate account which shall
be maintained by the Committee for each Participant to reflect the
aggregate of all Basic Employer Contributions made on behalf of such
Participant under this Plan on or after the Effective Date and the
Participants' Qualified Nonelective Contribution Account and Qualified
Matching Contribution Account balances under this Plan or the
Participant's Post-1986 Basic Employer Contribution Account balance
under the USI Plan immediately prior to the Effective Date, together
with any earnings and losses thereon.
(g) COMPENSATION: Total gross pay less compensation attributable to the
following items: relocation allowances, imputed life insurance,
awards and prizes, non-qualified stock options, referral awards, other
pay classified under special pay number 21 as of the date hereof, car
loans, officer perks, disability non-taxable (year end), severance
pay, car allowances, and relocation-interest and taxes gross-up.
The annual Compensation of each Participant taken into account under
the Plan for any Plan Year shall not exceed $150,000, as adjusted for
changes in the cost of living as provided in section 401(a)(17) of the
Code. In determining the Compensation of a Participant for purposes
of this limitation, the rules of section 414(q)(6) of the Code shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants
of the Participant who have not attained age nineteen (19) before the
close of the year. If, as a result of the application of such rules
the adjusted annual Compensation Limit as defined in section
401(a)(17) of the Code is exceeded, the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined prior to the application of this
limitation.
(h) DISABILITY: A physical or mental condition which, in the judgment of
the Committee, based upon medical reports and other evidence
satisfactory to the Committee, presumably permanently prevents an
Employee from satisfactorily performing the Employee's usual duties
for the Employers or the duties of such other position or job which
the Employers make available to the Employee and for which such
Employee is
4
<PAGE>
qualified by reason of training, education or experience.
(i) DISTRIBUTING PLAN ACCOUNT: The separate account which shall be
maintained by the Committee for a Participant to reflect the monetary
value of the Participant's individual interest in the Trust
attributable to Elective Deferrals, Matching Company Contributions and
Optional Company Contributions made to the Distributing Plan on the
Participant's behalf, and any earnings or losses thereon.
(j) DISTRIBUTING SALARY DEFERRAL CONTRIBUTION SUBACCOUNT: The separate
subaccount which shall be maintained by the Committee for a
Participant to reflect the monetary value of the Participant's
individual interest in the Trust attributable to Elective Deferrals
made to the Distributing Plan on the Participant's behalf, and any
earnings or losses thereon.
(k) EMPLOYEE CONTRIBUTIONS: Contributions by the Participant as described
in Section 4.2 CONTRIBUTIONS BY PARTICIPANTS.
(l) EMPLOYEE CONTRIBUTION ACCOUNT: The separate account which shall be
maintained by the Committee for each Participant who elects to make
Employee Contributions pursuant to Section 4.2 CONTRIBUTIONS BY
PARTICIPANTS or Rollover Contributions pursuant to Section 5.5
ROLLOVER CONTRIBUTIONS or who had an Employee Contribution Account
Balance under the USI Plan or an After-Tax Deposit Account or a
Rollover Deposit Account balance under this Plan immediately prior to
the Effective Date, to reflect the aggregate of such Participant's
Employee Contributions under this Plan on or after the Effective Date
and the Participant's After-Tax Deposit Account and Rollover Deposit
Account Balance under this Plan or the Participant's Employee
Contribution Account balance under the USI Plan immediately prior to
the Effective Date, together with any earnings and losses thereon. A
separate account may be maintained for Employee Contributions made
under the USI Plan on or before January 1, 1987.
(m) EMPLOYER CONTRIBUTIONS: Contributions of the Employer as described in
Section 4.1 EMPLOYEE CONTRIBUTIONS.
(n) EMPLOYER CONTRIBUTION ACCOUNT: The separate account which shall be
maintained by the Committee for each Participant to reflect the
aggregate of all Employer Contributions other than Basic Employer
Contributions and Matching Employer Contributions made on behalf of
such Participant on or after the Effective Date and the Participant's
Company Basic Deposit Account balance under this Plan or Employer
Contribution Account balance under the USI Plan immediately prior to
the Effective Date, together with any earnings and losses thereon.
(o) EXCESS COMPENSATION: The portion, if any, of a Participant's
Compensation that exceeds eighty-five percent (85%) of the Taxable
Wage Base (sometimes referred to herein as
5
<PAGE>
the "Integration Level").
(p) FORFEITURE: The portion of a Participant's Employer Contribution
Account and Matching Employer Contribution Account which is forfeited
because of termination of employment before full vesting.
(q) INCOME: The net gain or loss of the Trust Fund from investments, as
reflected by interest payments, dividends, realized and unrealized
gains and losses on securities, other investment transactions and
expenses paid from the Trust Fund. In determining the Income of the
Trust Fund as of any date, assets shall be valued on the basis of
their then fair market value.
(r) INTEGRATION RATE: The greater of 5.4% or the percentage equal to the
portion of the rate of tax under section 3111(a) of the Code
attributable to old age insurance applicable as of the first day of
the Year multiplied by the fraction 5.4/5.7.
(s) MATCHING EMPLOYER CONTRIBUTIONS: Employer Contributions which match
(at percentages to be determined by the Employers) all or a portion of
the Salary Deferral Contributions made.
(t) MATCHING EMPLOYER CONTRIBUTION ACCOUNT: The separate account which
shall be maintained by the Committee for each Participant to reflect
the aggregate of all Matching Employer Contributions made on behalf of
such Participant under this Plan on or after the Effective Date and
the Participant's Company Matching Employer Contribution Account
balance under the USI Plan or Company Matching Deposit Account balance
under this Plan immediately prior to the Effective Date together with
any earnings and losses thereon.
(u) NORMAL RETIREMENT AGE: Age sixty-five (65).
PARTICIPATION: The period commencing as of the date the Employee became a
Participant and ending on the date employment with the Employers
terminated, except that, with respect to a Former Participant, limited
Participation in the Trust Fund Income continues until the Former
Participant's vested Account balance is distributed.
(w) PRE-1987 EMPLOYEE CONTRIBUTION ACCOUNT: The separate account
maintained to reflect Employee Contributions made under the USI Plan
prior to January 1, 1987.
(x) SALARY DEFERRAL CONTRIBUTIONS: Contributions described in Section 4.4
PARTICIPANT SALARY DEFERRAL.
(y) SALARY DEFERRAL CONTRIBUTION ACCOUNT: The separate account which
shall be maintained
6
<PAGE>
by the Committee for each Participant to reflect all Salary
Deferral Contributions made on behalf of such Participant
under this Plan on or after the Effective Date and the Participant's
Before-Tax Deposit Account balance under this Plan or the
Participant's Salary Deferral Contribution Account balance under the
USI Plan immediately prior to the Effective Date, together with any
earnings and losses thereon.
(z) SERVICE: A Participant's period of employment with the Employers
determined in accordance with Section 3.2 SERVICE.
(aa) TAXABLE WAGE BASE: The maximum amount of earnings for a Participant
which may as of the first day of the Year be considered wages for any
Year under section 3121(a)(1) of the Code.
OTHER DEFINITIONS:
(a) ALLOCATION DATE: December 31 of each year and such other dates as may
be established by the Company.
(b) CONTRIBUTION DATE: Such dates as selected by the Company for the
making of contributions accrued under the Plan which are within a
reasonable time following the fifteenth (15th) and last day of each
month of the Year and any such other date or dates as shall be
determined by the Board of Directors of the Company.
EFFECTIVE DATE: The merger of the Plan with the USI Plan and the provisions of
this amended and restated Plan are effective on March 1, 1996.
(d) ERISA: The Employee Retirement Income Security Act of 1974, as
amended from time to time.
(e) VALUATION DATE: Each day of the Year or such other date or dates
as may be established by the Company to assure proper
administration of the Plan. In no event shall there be less than
one (1) Valuation Date within any twelve (12) consecutive month
period. The Company may direct a special Valuation Date in order
to avoid prejudice either to continuing Participants or to
terminating Participants. Such special Valuation Date shall be
deemed equivalent to a regular Valuation Date. Adjustments
hereunder shall apply uniformly to all accounts hereunder.
YEAR: The twelve (12) month period commencing on January 1 and ending on
December 31.
II.5 CONSTRUCTION: The singular, where appearing in the Plan, may include the
plural, and the masculine gender shall be deemed to include the feminine
gender, unless the context clearly indicates to the contrary. Any headings
used herein are included for ease of reference only, and
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are not to be construed so as to alter any term of the Plan.
PARTICIPATION AND SERVICE
PARTICIPATION: Each Employee who was a Participant in the Plan or the USI Plan
on February 29, 1996, shall continue to participate in the Plan on March 1,
1996. Each other Employee shall become a Participant on the first day of
the month after the Employee has completed a consecutive six (6) month
period of employment with the Employers. Notwithstanding the foregoing
provisions of this Section, any Employee who is a member of a unit of
Employees which is covered by a collective bargaining agreement to which an
Employer is a party, shall not be a Participant unless such bargaining
agreement provides for such unit's participation; and any otherwise
eligible Employee or participant in a unit of Employees which is not
covered by a collective bargaining agreement to which an Employer is a
party, but which subsequently becomes so covered, shall continue to be
eligible to participate hereunder until and unless such unit is excluded
from Participation pursuant to collective bargaining. If a Participant
ceases to be eligible to participate in the Plan for any reason the
Participant shall not be eligible to share in any Employer Contributions
made as of any date after the Participant's eligibility ceases, but for all
other purposes the Participant's Accounts shall be held, administered and
distributed as provided in the Plan. After a termination of employment, a
rehired Employee's subsequent Participation in the Plan shall be subject to
the provisions of Section 3.3 PARTICIPATION AND SERVICE UPON REEMPLOYMENT.
SERVICE: A Participant's eligibility for benefits under the Plan shall be
determined by the Participant's period of Service. Subject to the
reemployment provisions of Section 3.3 PARTICIPATION AND SERVICE UPON
REEMPLOYMENT, a Participant's last period of continuous employment with the
Employers shall be recognized as Service hereunder. Service shall be
deemed to include years and fractional years of employment. Periods of
temporary illness or disability and Authorized Leaves of Absence shall not
be deemed as breaking continuity of employment and shall be counted as
periods of Service. Notwithstanding the foregoing, in the case of an
Employee who is absent from employment for maternity or paternity reasons,
an absence during the twelve (12) month consecutive period beginning on the
first anniversary of the first date of such absence shall not constitute a
break in employment for purposes of determining the Employee's Service.
For this purpose, an absence from employment for maternity or paternity
reasons, means an absence (a) by reason of the pregnancy of the Employee,
(b) by reason of the birth of a child of the Employee, (c) by reason of the
placement of a child with the Employee in connection with the adoption of
such child by the Employee, or (d) for purposes of caring for such child
for a period beginning immediately following such birth or placement.
Anything herein to the contrary notwithstanding, during the continuance of
any Authorized Leaves of Absence or periods of temporary illness or
disability the Employee's interest in the Trust shall nevertheless be held
for the Employee's benefit and the Employee shall continue as a Participant
in the Plan as if the Employee were in the active employment of the
Employer and Employer Contributions shall be allocated to the Accounts of
such Participant.
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III.2
PARTICIPATION AND SERVICE UPON REEMPLOYMENT: Except for the continuing
participation in Trust Fund Income of a Former Participant, Participation
in the Plan shall cease upon termination of employment with the Employers.
Termination of employment may have resulted from retirement, death,
voluntary or involuntary termination of employment, unauthorized absence,
or by failure to return to active employment with the Employers or to
retire by the date on which an Authorized Leave of Absence expired.
Upon reemployment of any person who had previously been employed by the
Employers the following rules shall apply in determining Participation in
the Plan and Service under Section 3.2 SERVICE:
(a) REEMPLOYMENT WITHIN ONE (1) YEAR: If an Employee is rehired within
the one (1) year period following the date of the Employee's
termination of employment, the Employee shall participate in the Plan
as of the first day of the month following the date of reemployment
or, if later, the date the Employee would have initially participated
in the Plan under the provisions of Section 3.1 PARTICIPATION had the
Employee not terminated employment. Reemployment within such one (1)
year period shall result in no break in employment and the period
after the Employee's termination of employment shall be counted as a
period of Service. In addition, if such Employee was a Participant
during the Employee's prior period of employment, the Employee may
also be entitled to a beginning Employer Contribution Account as
provided in Section 4.3 DISPOSITION OF FORFEITURES.
(b) REEMPLOYMENT AFTER ONE (1) YEAR: If an Employee is rehired more than
one (1) year after the Employee's termination of employment, the
Employee shall participate in the Plan as of the date the Employee
meets the eligibility requirements for Participation under the
provisions of Section 3.1 PARTICIPATION.
If the reemployed Employee was a Participant in the Plan when the
Employee's prior period of employment terminated, any Service attributable
to the Employee's prior period of employment shall be reinstated as of the
date of the Employee's reparticipation. If the reemployed Employee was not
a Participant in the Plan during the Employee's prior period of employment,
any Service attributable to the Employee's prior period of employment shall
be cancelled and the Employee shall receive no Service credit for the
period of termination of employment as of the date that the length of the
Employee's period of employment equalled the greater of five (5)
consecutive years of breaks in employment or the length of the Employee's
prior period of employment.
TRANSFERS:
(a) A Participant shall receive Service for employment by an Employer,
whether or not such employment provided eligibility for inclusion in
the Plan, or by any corporation which is
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a member of the controlled group of corporations of which the Employer
is a part or by any trades or businesses (whether or not incorporated)
which are under common control (as provided in sections 414(b), (c) or
(o) of the Code) or constitute an affiliated service group (as defined
in Section 414(m) of the Code). Notwithstanding the previous
sentence, all such employment shall be determined in accordance with
the reemployment provisions of Section 3.3 PARTICIPATION AND SERVICE
UPON REEMPLOYMENT.
(a)
(b) If a Participant is transferred to employment with a member of the
controlled group of which the Employer is a part to a position which
is not eligible for participation in the Plan, the Participant's
Participation under the Plan shall be suspended, provided, however,
that during the period of employment in such ineligible position: (i)
subject to the reemployment provisions of Section 3.3 PARTICIPATION
AND SERVICE UPON REEMPLOYMENT, Service for vesting purposes shall
continue to accrue, (ii) the Participant's Employer Contribution
Account, Basic Employer Contribution Account and Matching Employer
Contribution Account shall receive no Employer Contributions under
Sections 5.2(b), (iii) the Participant shall continue to participate
in Income allocations pursuant to Section 5.2(a) and (iv) the
provisions of Article VI BENEFITS shall continue to apply.
(c) In the event of transfer as described in the foregoing subparagraph
(b) to eligible employment by an Employer without a break in
employment, the prior period of employment shall be recognized in
determining eligibility to participate in the Plan in accordance with
Section 3.1 PARTICIPATION.
(d) Transfer between Employers shall not interrupt Service under the Plan.
CONTROLLED GROUPS: For the purposes of determining Service for eligibility,
vesting and compliance with certain top-heavy rules, all employees of all
corporations which are members of a controlled group of corporations (as
defined in section 414(b) of the Code) and all employees of all trades or
businesses (whether or not incorporated) which are under common control (as
defined in section 414(c) of the Code) and all employees of any other
entity required to be aggregated pursuant to regulations under section
414(o) of the Code will be treated as employed by a single employer.
AFFILIATED SERVICE GROUPS: For the purpose of determining Service for
eligibility, vesting and compliance with certain top-heavy rules, all
employees of all members of an affiliated service group (as defined in
section 414(m) of the Code) will be treated as employed by a single
employer.
LEASED EMPLOYEES: For the purpose of determining Service for eligibility,
vesting, and compliance with certain top-heavy rules, all leased employees
(as defined in section 414(n) of the Code) providing services to the
Employers will be treated as employed by the Employers. A leased
10
<PAGE>
employee will not be treated as employed by the Employers under this
Section if leased employees constitute less than twenty percent (20%) of
the Employers' non-highly compensated work force within the meaning of
section 414(n)(5)(C)(ii) of the Code, and the leased employee is covered
by a plan described in section 414(n)(5) of the Code.
CONTRIBUTIONS AND FORFEITURES
EMPLOYER CONTRIBUTIONS: The Employers may make a contribution to the Plan for
each contribution period in an amount equal to the sum of the "Basic
Contribution", "Excess Contribution", "Additional Pro-rata Contribution",
and "Matching Employer Contribution" as herein defined. For each
contribution period the Board of Directors of the Company may determine an
amount that may be contributed to the Plan to be allocated to the Accounts
of Participants on the basis of total Compensation for the contribution
period and pursuant to subsection 5.2(b)(i) (the "Basic Contribution") and
pursuant to subsection 5.2(b)(iii) (the "Additional Pro-rata Contribution")
and an amount that may be contributed to the Plan to be allocated to the
Accounts of Participants on the basis of Excess Compensation for the
contribution period pursuant to subsection 5.2(b)(ii) (the "Excess
Contribution"); provided, however, that the Employers' Excess Contributions
for a Year shall not exceed the lesser of the Integration Rate or Base
Contribution Rate times all eligible Participants' Excess Compensation
during the Year. In addition, for each contribution period the Board of
Directors of the Company may determine an amount that may be contributed to
the Plan as Matching Employer Contributions. The amount, if any,
contributed as Matching Employer Contributions shall equal a percentage,
determined by the Board of Directors of the Company, of all or a portion,
determined by the Board of Directors of the Company, of Salary Deferral
Contributions made during the contribution period. All Salary Deferral
Contributions for a Year shall be paid to the Trustee in no event later
than the earlier of (a) ninety (90) days following the date of the salary
deferral with respect to which the Salary Deferral Contribution is made or
(b) not later than the time prescribed by law for the filing of a Federal
income tax return, including any extensions which have been granted for
such filing. All other contributions of the Employers for a Year shall be
paid to the Trustee, and payment shall be made not later than the time
prescribed by law for the filing of a Federal income tax return, including
any extensions which have been granted for such filing.
CONTRIBUTIONS BY PARTICIPANTS:
(a) Each Participant may elect to contribute to the Trust Fund in each
Year while a Participant an amount equal to between one percent (1%)
and ten percent (10%) of the Participant's Compensation. A
Participant may commence or resume making Employee Contributions by
filing a written notice with the Committee at least thirty (30) days
prior to the date such Employee Contributions are to commence or
resume. In addition, a Participant may contribute in any Year an
amount which, together with all other Employee Contributions made by
that Participant in prior Years, will cause the
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<PAGE>
Participant's total Employee Contributions not to exceed ten percent
(10%) of the Compensation received by the Participant for all Years
that the Participant has been a Participant in the Plan. All Employee
Contributions are subject to the continuing approval of the Committee
and may be revoked or suspended at any time if the Company determines
that such revocation or suspension is necessary to ensure that (a) a
Participant's Annual Additions for any Year will not exceed the
limitations of Section 5.3 MAXIMUM ADDITIONS or (b) violate the
nondiscrimination tests of Section 401(m) of the Code. Any revocation
or suspension of Employee Contributions made by an Employer pursuant
to this subsection in order to ensure compliance with the
nondiscrimination tests of Section 401(m) of the Code shall be made
pursuant to the provisions of Section 5.4 NONDISCRIMINATION
REQUIREMENTS.
(a)
(b) A Participant who elects to contribute may make voluntary Employee
Contributions:
(i) by payroll deductions. The Employer shall deduct each
Participant's Employee Contribution, in integral
percentages, from the Participant's Compensation for each
pay period as authorized by the Participant in writing on a
form approved by the Employer; or
(ii) by a series of quarterly cash payments as specified by the
Participant in writing on a form approved by the Employer;
or
(iii) by an annual lump-sum contribution in each Year while a
Participant. A lump-sum contribution shall be made in cash
as specified by the Participant in writing on a form
approved by the Employer.
As soon as practicable, the Employer shall pay the amounts received to the
Trustee to be held and administered in trust pursuant to the Trust.
(c) The Employer shall direct the Committee to establish and maintain an
Employee Contribution Account in the name of each Participant who
elects to make Employee Contributions.
(d) A Participant may change the amount or percentage of the Participant's
Employee Contributions with respect to any future Employee
Contributions by filing another authorization form with the Committee
to be effective on the first day of any subsequent month.
(e) A Participant may elect to discontinue Employee Contributions as of
any pay period during the Year. Such notification must be submitted
to the Committee, in a form approved by the Employer, prior to the
date upon which the payroll preparation commences for the pay period.
In the event of such a discontinuance, a Participant may
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<PAGE>
resume making Employee Contributions as of the first day of any
subsequent month by filing written notice with the Committee.
(f) A Participant may elect in writing to withdraw the entire value of the
Participant's Employee Contribution Account, or any portion of the
Participant's Employee Contribution Account but not less than five
hundred dollars ($500). Such request must be submitted at least
ninety (90) days prior to the Valuation Date immediately preceding the
withdrawal and must be in a form approved by the Employer. In the
event of such withdrawal, the Participant shall not be allowed to make
any Employee Contributions until the first day of any subsequent month
after the Participant has filed a written notice with the Committee
and at least thirty (30) days has elapsed since the date of
withdrawal. The value of the Employee Contribution Account for
purposes of this subsection (f), shall be determined as of the
Valuation Date immediately preceding the date of the withdrawal.
DISPOSITION OF FORFEITURES: Upon termination of employment, a Participant's
Forfeiture, if any, shall be utilized as provided in Section 5.2(c) as of
the Contribution Date following the date of the Participant's termination
of employment. If the Participant returns to the employ of an Employer
before five (5) consecutive one (1) year periods of absence, the
Participant shall have the right to repay the entire amount distributed to
the Participant upon the Participant's return to the employ of an Employer,
provided such repayment is prior to the earlier of the Participant's
incurring five (5) consecutive one (1) year periods of absence or five (5)
years after the date of such Participant's reemployment.
Upon such repayment, the amount of the Forfeiture shall be reinstated in
full, unadjusted by any gains or losses, in the Participant's new Employer
Contribution Account. Such restoration shall be made out of the current
year's Forfeitures and, if they are insufficient, out of the Employer
Contributions and, if they are insufficient, out of the current Year's
earnings.
PARTICIPANT SALARY DEFERRAL:
(a) A Participant may, pursuant to a uniform and nondiscriminatory
procedure established by the Committee, elect to enter into a written
salary deferral agreement with the Employer. The terms of any such
salary deferral agreement shall provide that the Participant agrees to
accept a deferral in salary from the Employer equal to a stated
percentage or amount of the Participant's Compensation not to exceed
sixteen percent (16%) of such Compensation. In consideration of such
agreement, the Employer will make a Salary Deferral Contribution to
the Participant's Salary Deferral Contribution Account on behalf of
the Participant for such Year in an amount equal to the total amount
by which the Participant's salary from the Employer was deferred
during the Year pursuant to the salary deferral agreement.
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<PAGE>
(b) Amounts credited to a Participant's Salary Deferral Contribution
Account shall be one hundred percent (100%) vested and nonforfeitable
at all times.
(c) Further, salary deferral agreements shall be governed by the following
provisions:
(i) An Employer may amend or revoke its salary deferral
agreement with any Participant at any time, if the Company
determines that such revocation or amendment is necessary to
ensure that (A) a Participant's Annual Additions for any
Year will not exceed the limitations of Section 5.3 MAXIMUM
ADDITIONS, (B) the nondiscrimination tests of section 401(k)
of the Code are met for such Year, or (C) no more than seven
thousand dollars ($7,000), as adjusted by the Secretary of
Treasury, is deferred by any individual for the individual's
taxable year. Any amendment or revocation of salary
deferral agreements made by the Employers pursuant to this
subsection in order to ensure compliance with the
nondiscrimination tests of section 401(k) of the Code shall
be made pursuant to the provisions of Section 5.4
NONDISCRIMINATION REQUIREMENTS.
(ii) Except as provided in the salary deferral agreement itself,
a salary deferral agreement applicable to any given Year,
once made, may be revoked or amended prospectively by the
Participant in accordance with uniform and nondiscriminatory
procedures established by the Committee.
Withdrawals from the Participant's Salary Deferral Contribution Account or
Distributing Salary Deferral Contribution Subaccount shall be governed
by the following rules:
(i) No amounts may be withdrawn by a Participant from the
Participant's Salary Deferral Contribution Account or
Distributing Salary Deferral Contribution Subaccount prior
to termination of employment with the Employers, unless the
Participant has either attained age fifty-nine and one-half
(59-1/2) or is able to demonstrate financial hardship.
Pursuant to uniform and nondiscriminatory procedures
established by the Committee, a Participant who has either
attained age fifty-nine and one-half (59-1/2) or is able to
demonstrate financial hardship may elect to withdraw up to
an amount not less than five hundred ($500.00) and not more
than the aggregate of the Salary Deferral Contributions
under this Plan, the Elective Deferral under the
Distributing Plan and the Before-Tax Deposits under the Plan
prior to June 24, 1992 and the Salary Deferral Contributions
under the USI Plan prior to the Effective Date made by the
Participant, less the aggregate of such amounts previously
14
<PAGE>
withdrawn by the Participant. A Participant's withdrawal
request will require the consent of the Committee.
Committee consent for withdrawal because of financial
hardship shall be given only if, under uniform and
nondiscriminatory procedures, the Committee determines that
the requirements of subparagraph (ii) are met. In
determining whether the requirements of subparagraph (ii)
are met, the Committee may rely upon the Participant's
written representations if such reliance is reasonable. Any
request for withdrawal pursuant to this subparagraph (i)
shall be made to the Committee in writing. Any Participant
who makes or has made withdrawals from the Participant's
Salary Deferral Contribution Account or Distributing Salary
Deferral Contribution Subaccount shall continue as a
Participant in the Plan but will not be allowed to have
Salary Deferral Contributions made on the Participant's
behalf for twelve (12) months from the date of withdrawal.
(ii) For the purposes of subparagraph (i) of this subsection (d),
a withdrawal is on account of financial hardship if the
withdrawal is made on account of an immediate and heavy
financial need of the Participant and is necessary to
satisfy the immediate and heavy financial need.
(A) A withdrawal is deemed made on account of an immediate
and heavy financial need of the Participant if the
withdrawal is on account of:
(1) Medical expenses described in section 213(d) of
the Code incurred by or necessary for the
Participant, the Participant's spouse, or any
dependents of the Participant;
Purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Payment of tuition and related educational fees
for the next twelve (12) months of post-secondary
education for the Participant or the Participant's
spouse, children, or dependents; or
(4) Payments to prevent the eviction of the
Participant from the Participant's principal
residence or the foreclosure on the mortgage of
the Participant's principal residence.
(B) A withdrawal is deemed necessary to satisfy an
immediate and
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<PAGE>
heavy financial need if all of the following
requirements are met:
(1) The withdrawal is not in excess of the amount of
the immediate and heavy financial need of the
Participant (including amounts necessary to pay
any federal, state or local income taxes or
penalties reasonably anticipated to result from
the distribution);
(2) The Participant has obtained all distributions,
other than hardship withdrawals, and all
nontaxable loans currently available under all
plans maintained by the Employers;
(3) The Plan and all other plans of the Employers will
not permit any Salary Deferral Contributions or
Employee Contributions on behalf of the
Participant for twelve (12) months after receipt
of the withdrawal by the Participant; and
(4) The Plan and all other plans of the Employers will
not permit any Salary Deferral Contributions for
the Participant's taxable year immediately
following the taxable year of the withdrawal in
excess of the applicable limit under section
402(g) for such next taxable year less the amount
of such Participant's Salary Deferral
Contributions for the taxable year of the
withdrawal.
SPECIAL RULES FOR OWNER-EMPLOYEES:
(a) Where the Plan provides contributions for one or more Owner-Employees
who control both the business for which this Plan is established and
one or more other trades or businesses, this Plan and the plan or
plans established for the other trades or businesses must satisfy
sections 401(a) and 401(d) of the Code for employees of this and all
other controlled trades or businesses.
(b) Where the Plan provides contributions for one or more Owner-Employees
who control one or more other trades or businesses, the employees of
the other trades or businesses must be included in a plan which
satisfies sections 401(a) and 401(d) of the Code, and which provides
contributions or benefits not less favorable than those provided to
Owner-Employees under this Plan.
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(c) For purposes of this Section 4.5, one or more Owner-Employees will be
considered to control a trade or business if one or more Owner-
Employees (i) own the entire interest in an unincorporated trade or
business, or (ii) own more than fifty percent (50%) of either the
capital interest or the profits interest in a partnership. For
purposes of the preceding sentence, one or more Owner-Employees shall
be treated as owning an interest in a partnership which is owned,
directly or indirectly, by a partnership which one or more such Owner-
Employees are considered to control for purposes of this subsection
(c).
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
INDIVIDUAL ACCOUNTS: The Committee shall create and maintain adequate records
to disclose the interest in the Trust of each Participant, Former
Participant, and Beneficiary. Such records shall be in the form of
individual Accounts, and credits and charges shall be made to such Accounts
in the manner herein described. A Participant shall have as many as seven
(7) separate Accounts, an Employer Contribution Account, a Basic Employer
Contribution Account, an Employee Contribution Account, an Employee
Contribution Account for Pre-1987 Employee Contributions, a Salary Deferral
Contribution Account, a Matching Employer Contribution Account and a
Distributing Plan Account. The amount, if any, in a Participant's Employee
Contribution Account, Basic Employer Contribution Account, Salary Deferral
Contribution Account and Distributing Plan Account shall be one hundred
percent (100%) vested and nonforfeitable at all times. The maintenance of
individual Accounts is only for accounting purposes, and a segregation of
the assets of the Trust Fund to each Account shall not be required.
Distributions made from an Account shall be charged to the Account as of
the date paid.
ACCOUNT ADJUSTMENTS: The Accounts of Participants, Former Participants and
Beneficiaries shall be adjusted in accordance with the following:
(a) INCOME: As of each Valuation Date, the Income of the Trust Fund since
the last Valuation Date shall be allocated among the Accounts of
Participants, Former Participants and Beneficiaries by adjusting the
stated value of each Account to reflect its actual value as of the
current Valuation Date. The Company shall establish a reasonable
accounting method which shall carry out the intent of the preceding
sentence.
As of each Valuation Date, the Trustee shall value the Trust Fund
excluding earmarked investments. The Trustee shall determine the fair
market value of assets of the Trust in compliance with this Section
and the principles of Section 3(26) of ERISA and regulations issued
pursuant thereto. Earmarked investments shall be valued separately,
at the same time and by the same method as hereinabove provided. All
gains and losses on investments earmarked to a Participant's Account
shall be credited to that Account.
The value of an Account for all purposes of the Plan shall be its
value as last determined under this Section on or before the date in
question, increased by contributions thereafter
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<PAGE>
credited to the Account and decreased by amounts thereafter
withdrawn or distributed from the Account.
(b) EMPLOYER CONTRIBUTIONS: As of each Allocation Date, the Employer
Contributions for the contribution period shall be allocated among
those Participants who were in the employ of an Employer on the
Allocation Date (or if necessary for the Plan to meet the requirements
of Section 410(b) of the Code, such Participants with the highest
number of Hours of Service with the number of Participants as required
to meet the requirements of Section 410(b) of the Code, whether or not
such Participants are employed as of the Allocation Date) (hereinafter
referred to as "eligible Participant"). Such allocation shall be made
in accordance with the following:
(i) BASIC ALLOCATION: First, each Employer's Basic Contribution
for the contribution period, if any, shall be allocated to
the Basic Employer Contribution Accounts of all eligible
Participants who were employed by such Employer according to
the ratio that each eligible Participant's Compensation for
the contribution period bears to the total Compensation of
all eligible Participants during the contribution period.
(ii) EXCESS ALLOCATION: Second, each Employer's Excess
Contribution for the contribution period, if any, shall be
allocated to the Employer Contribution Accounts of all
eligible Participants who were employed by such Employer and
who earned Excess Compensation. Such allocation shall be
made on a pro-rata basis according to the ratio that each
eligible Participant's Excess Compensation bears to the
total Excess Compensation for the contribution period of all
eligible Participants during the contribution period.
However, the portion of the Employer Contributions to be
allocated pursuant to the subparagraph shall not exceed the
Integration Rate times all eligible Participants' Excess
Compensation during the Year. If, after the above
allocations are made, the rate at which such allocation of
Employer Contributions is made with respect to each
Participant's Excess Compensation exceeds the Base
Contribution Rate, Employer Contributions to be allocated
pursuant to this subparagraph shall be reduced (and, at the
Employers' election, the Base Contribution under
subparagraph (i) above or the Additional Pro-rata
Contribution under subparagraph (iii) below shall be
increased) until the rate of allocation under this
subparagraph equals the Base Contribution Rate.
(ii) V(x) ADDITIONAL PRO-RATA ALLOCATION: Third, each Employer's
Additional Pro-rata Contribution for the contribution
period, if any, shall be allocated to the Employer
Contribution Accounts of all eligible
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<PAGE>
Participants who were employed by such Employer according
to the ratio that each eligible Participant's
Compensation for the contribution period bears to the
total Compensation of all eligible Participants during
the contribution period.
(ii) V(xi) MATCHING EMPLOYER ALLOCATION: Fourth, each
Employer's Matching Employer Contribution for the
contribution period, if any, shall be allocated to the
Matching Employer Contribution Accounts of all eligible
Participants who made Salary Deferral Contributions for the
contribution period and were employed by such Employer in
accordance with uniform and nondiscriminatory procedures
established by the Committee and in a manner proportionate
to all or a portion of the Salary Deferral Contributions
made for such contribution period as determined by the Board
of Directors of the Company.
(c) FORFEITURES: As of the end of each Year, Forfeitures which have
become available for distribution under Section 4.3 DISPOSITION OF
FORFEITURES during such Year shall first be utilized to restore any
Forfeitures required to be reinstated pursuant to Section 4.3 and any
remaining Forfeitures will be used to reduce the Employer
Contributions to the Plan.
(d) ALLOCATION OF EMPLOYEE CONTRIBUTIONS: As of each Contribution Date,
after the allocation of Income, Employee Contributions made to the
Plan by each Participant shall be credited to the Participant's
Employee Contribution Account.
(e) ALLOCATION OF SALARY DEFERRAL CONTRIBUTIONS: As of each Contribution
Date, after the allocation of Income, Salary Deferral Contributions
made to the Plan on behalf of each Participant shall be credited to
the Participant's Salary Deferral Contribution Account.
MAXIMUM ADDITIONS: The "Limitation Year" referred to in this Section 5.3 shall
be the twelve (12) month period beginning on January 1 and ending on
December 31.
(a) The sum of the Additions to a Participant's Accounts in any Year shall
not exceed the lesser of (A) thirty thousand dollars ($30,000), or
such other amount as may be established by the Secretary of the
Treasury pursuant to section 415 of the Code, or (B) twenty-five
percent (25%) of the Participant's compensation as defined under
section 415 of the Code during the Year. The compensation limitation
referred to in (B) shall not apply to any contribution for medical
benefits (within the meaning of section 401(h) or section 419A(f)(2)
of the Code) which is otherwise treated as an Addition under section
415(l)(1) or section 419A(d)(2) of the Code.
(b) In the event that such Additions to a Participant's Accounts in any
Year are in excess of the maximum limits, and if sufficient correction
has not been made under any other plan
19
<PAGE>
in which the Participant participates, then to the extent necessary
to bring the Additions within the required limits, first, the
Participant's own Employee Contributions will be returned to the
Participant and, second, the Salary Deferral Contributions will be
returned to the Participant. If the Additions to such
Participant's Accounts shall continue in excess of the maximum
limits, the Employer Contribution otherwise allocable to the
Participant shall be allocated to a suspense account which shall
not share in the allocation of Income under Section 5.2(a). Amounts
in such a suspense account will be used to reduce the next Employer
Contribution as provided by Internal Revenue Service Regulation
1.415-6(b)(6).
(c) For purposes of this Section, all defined benefit plans maintained by
the Employers, whether or not terminated, shall be considered as one
defined benefit plan and all defined contribution plans maintained by
the Employers, whether or not terminated, shall be considered as one
defined contribution plan if a Participant is a participant in both
plans.
(d) In the event that any Participant under this Plan is also a
participant in any defined benefit plan maintained by the Employers,
then for any year, the sum of the "Defined Benefit Plan Fraction" for
such year and the "Defined Contribution Plan Fraction" for such year
shall not exceed 1.0. The "Defined Benefit Plan Fraction" for any
year is a fraction, the numerator of which is the projected annual
benefit of the Participant under all defined benefit plans under which
the Participant has or may have a right to receive benefits
(determined as of the close of the Limitation Year) and the
denominator of which is the lesser of the maximum dollar limit
allowable for such Limitation Year times 1.25, or the percentage of
compensation limit (one hundred percent (100%) of the average
compensation paid during the Employee's highest three consecutive
years of Participation) times 1.4. Notwithstanding the foregoing, if
the Participant was a participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be
less than 125 percent of the sum of the annual benefits under such
plans which the participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986.
The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
section 415 of the Code for all Limitation Years before January 1,
1987. The "Defined Contribution Plan Fraction" for any year is a
fraction, the numerator of which is the sum of the Annual Additions to
the Participant's Account as of the close of that Limitation Year and
the denominator of which is the lesser of the sum of the maximum
dollar amount of Annual Additions to such Account which could have
been made under section 415(c) of the Code for such year, and for each
prior Limitation Year of service with the Employer, times 1.25, or the
percentage of compensation limit for such year times 1.4. If it is
determined that, as a result of this
20
<PAGE>
limitation, there must be a reduction in the Participant's combined
benefits, then the Employer shall make any necessary reduction
under the defined benefit plan.
(e) Notwithstanding anything herein to the contrary, no allocation shall
be made to any Participant's Account for any Limitation Year in excess
of the limitations of section 415 of the Code, which limitations, as
amended from time-to-time, are incorporate herein by reference.
NONDISCRIMINATION REQUIREMENTS:
(a) For purposes of this Section, the terms listed below shall have the
meanings indicated:
(i) ADP: A fraction, the numerator of which is the amount of
the Salary Deferral Contributions actually paid on behalf of
that Participant to the Participant's Salary Deferral
Contribution Account (including Excess Deferrals of Highly
Compensated Employees, but excluding (A) Excess Deferrals of
nonhighly compensated employees that arise solely from
Elective Deferrals made under the Plan or other plans of the
Employer and (B) Elective Deferrals that are taken into
account in the Contribution Percentage provided the ADP
Requirement is satisfied both with and without exclusion of
such Elective Deferrals) for the Year and, to that extent so
elected by the Employer, the Basic Employer Contribution
made to the Participant's Basic Employer Contribution
Account for the Year and the denominator of which is the
Participant's Compensation for the Year. The ADP for any
group of Participants is equivalent to the average of the
ADPs of all Participants in that group.
If two or more plans which include cash or deferred
arrangements are considered one plan for purposes of the
nondiscrimination requirements of section 401(a)(4) of the
Code or the eligibility requirements of section 410(b) of
the Code, the cash or deferred arrangements included in such
plans shall be treated as one plan for purposes of
determining the ADP. In the event any Highly Compensated
Employee participates under two or more cash or deferred
arrangements of the Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred
arrangement for purposes of determining the ADP with respect
to such Employee. Notwithstanding the foregoing, certain
plans shall be treated as separate if mandatorily
disaggregated under regulations under section 401(k) of the
Code.
(ii) COMPENSATION: Any definition of compensation as determined
under section 414(s) of the Code selected by the Employer
and consistently
21
<PAGE>
taken into account with respect to all Employees to
determine compliance with the requirements of this
Section for the applicable determination period.
(iii) ELECTIVE DEFERRAL: With respect to a Participant, the
sum of (A) any employer contribution under a qualified cash
or deferred arrangement (as defined in section 401(k) of the
Code) to the extent not includable in gross income for the
taxable year under section 402(e)(3) of the Code (determined
without regard to section 402(g) of the Code); (B) any
employer contribution to the extent not includable in gross
income for the taxable year under section 402(h)(1)(B) of
the Code (determined without regard to section 402(g) of the
Code); and (C) any employer contribution to purchase an
annuity contract under section 403(b) of the Code under a
salary reduction agreement (within the meaning of section
3121(a)(5)(D) of the Code). Elective Deferrals shall not
include any deferrals properly distributed as excess annual
additions.
(iv) EXCESS CONTRIBUTIONS: With respect to any Year, the excess
of: (A) the aggregate amount of Salary Deferral
Contributions and, to the extent elected by the Employer,
Basic Employer Contributions actually paid over to the Trust
on behalf of Highly Compensated Employees who are
Participants for such Year, over (B) the maximum amount of
such contributions permitted as determined under subsection
(b) of this Section (determined by reducing Salary Deferral
Contributions made on behalf of Highly Compensated Employees
who are Participants in the order of ADP beginning with the
highest ADP).
(v) EXCESS DEFERRAL: The amount of a Participant's Elective
Deferrals in excess of seven thousand dollars ($7,000), as
adjusted by the Secretary of the Treasury, for a calendar
year. Excess Deferrals, together with any income allocable
to such deferrals, may be distributed from the Plan pursuant
to a uniform and nondiscriminatory procedure established by
the Employer. A Participant may assign to the Plan any
Excess Deferrals made during the taxable year of the
Participant by notifying the Plan Administrator on or before
March 1 following the close of the year in which the Excess
Deferrals were made of the amount of Excess Deferrals to be
assigned to the Plan. A Participant is deemed to notify the
Plan Administrator of any Excess Deferrals that arise by
taking into account only those Excess Deferrals made to the
Plan and any other plans of the Employer.
(vi) FAMILY: With respect to any Employee, such Employee's
spouse and
22
<PAGE>
lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants. A Family member who is
excluded for purposes of determining the number of
Employees in the Top-Paid Group shall, however, be
aggregated with a Highly Compensated Employee who is
either a five percent (5%) owner or who is in the group
consisting of the ten (10) Highly Compensated Employees
paid the greatest Compensation during the Year as
described herein in the definition of Highly Compensated
Employee.
(vii) HIGHLY COMPENSATED EMPLOYEE: Any Employee who:
(A) During the Year or the preceding Year was at any time
an owner (or one considered to own within the meaning
of section 318 of the Code) of more than a five percent
(5%) interest in the Employer;
(B) During the preceding Year (1) received Compensation
from the Employer in excess of seventy-five thousand
dollars ($75,000) (as adjusted from time to time); (2)
was at any time an Officer, as hereinafter defined; or
(3) received Compensation from the Employer in excess
of fifty thousand dollars ($50,000) (as adjusted from
time to time) and was among the Top-Paid Group of
Employees for such Year; or
(C) During the Year was among the one hundred (100) most
highly compensated Employees and (1) received
Compensation from the Employer in excess of seventy-
five thousand dollars ($75,000) (as adjusted from time
to time); (2) was an Officer, as hereinafter defined;
or (3) received Compensation from the Employer in
excess of fifty thousand dollars ($50,000) (as adjusted
from time to time) and was among the Top-Paid Group of
employees during such year.
(D) If the Employer elects, "Highly Compensated Employee"
may be defined as any Employee who during the Year or
the preceding Year (1) was at any time an owner (or one
considered to own within the meaning of section 318 of
the Code) of more than a five percent (5%) interest in
the Employer; (2) was at any time an Officer as
hereinafter defined; or (3) received Compensation from
the Employer in excess of fifty thousand dollars
($50,000) (as adjusted from time to time).
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<PAGE>
In the determination of a Highly Compensated Employee, the
following rules shall apply:
(A) An Employee who is a member of the Family of either a
five percent (5%) owner, as described above, or of a
Highly Compensated Employee in the group consisting of
the ten (10) Highly Compensated Employees paid the
greatest Compensation during the Year and such Highly
Compensated Employee who is either a five percent (5%)
owner or who is in the group consisting of the ten (10)
Highly Compensated Employees paid the greatest
Compensation during the Year shall be considered as a
single Highly Compensated Employee hereunder.
(B) A former Employee shall be treated as a Highly
Compensated Employee if such former Employee was Highly
Compensated when (A) such Employee separated from
service, or (B) at any time after the Employee attained
age fifty-five (55).
(viii) LOWER PAID EMPLOYEES: Employees who are eligible to
participate in the Plan who are not Highly Compensated
Employees.
(ix) OFFICER: An individual who at any time during the Year, or
during the preceding Year, was at any time an individual
having the authority of an officer of the Employer and
received Compensation for the Year greater than fifty
percent (50%) of the dollar limit under section 415(b)(1)(A)
of the Code for the calendar year in which such Year ends
(however, no more than the fifty (50) Employees (or, if
lesser, the greater of three (3) Employees or ten percent
(10%) of all Employees)) who earned the highest annual
Compensation during the Year, or the preceding Year, shall
be treated as Officers; provided that the highest paid
officer of the Company for any such Year shall be treated as
described in this subparagraph if for any Year no officer of
the Employer otherwise meets the requirements of an Officer
described herein.
TOP-PAID GROUP: For any Year an Employee is in the Top-Paid Group
if such Employee is in the group consisting of the top
twenty percent (20%) of the Employees when determined on the
basis of Compensation paid for such Year. For purposes of
determining the number of Employees in the Top-Paid Group,
the following Employees shall be excluded:
(A) Employees who have not completed six (6) months of
service;
24
<PAGE>
(B) Employees who normally work less than seventeen and
one-half (17-1/2) hours per week;
(C) Employees who normally work during not more than six
(6) months during any Year;
(D) Except to the extent provided in regulations, Employees
who are included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a
collective bargaining agreement between Employee
representatives and the Employer; and
(E) Employees who are nonresident aliens and who receive no
earned income (within the meaning of section 911(d)(2)
of the Code) from the Employer which constitutes income
from sources within the United States (within the
meaning of section 861(a)(3) of the Code).
(b) NONDISCRIMINATION TEST FOR SALARY DEFERRAL CONTRIBUTIONS: In no event
may the ADP of the Highly Compensated Employees who are eligible to
participate in the Plan exceed in any Year (i) 2 times the ADP of the
Lower Paid Employees who are Participants if the Lower Paid Employees'
ADP is less than or equal to two percent (2%); (ii) the ADP of the
Lower Paid Employees plus two percent (2%) (or such lesser amount as
the Secretary of the Treasury shall prescribe to prevent the multiple
use of this alternative limitation with respect to any Highly
Compensation Employee) if the Lower Paid Employees' ADP is greater
than two percent (2%) but less than eight percent (8%); or (iii) 1.25
times the ADP of the Lower Paid Employees if the Lower Paid Employees'
ADP is eight percent (8%) or more ("ADP Requirement").
In the event Excess Contributions exist after the determination of the
ADP Requirement, the amount, if any, of such Excess Contributions for
such Year shall generally be distributed together with any income
allocable to such contributions within two and one-half (2-1/2) months
after the end of the Year, to Participants on whose behalf such Excess
Contributions were made for such Year, but in no event shall such
Excess Contributions and income be distributed later than the end of
the Year following the Year in which such Excess Contributions were
made. Excess Contributions of Participants who are members of a
Family and are treated as a single Highly Compensated Employee shall
be allocated among such Participants in the same proportion as the
portion of the numerator of the ADP attributable to each Family member
bears to the entire numerator of the ADP determined by treating such
Family members as a single Highly Compensated Employee.
25
<PAGE>
Distribution of Excess Contributions, if any, for any Year shall be
made to Highly Compensated Employees who are Participants by leveling
the highest ADP in accordance with Treas. Reg. Section 1.401(k)-
l(f)(2) and subsection (c) until the nondiscrimination test set forth
in the first sentence of this subsection is met. Notwithstanding the
foregoing, the Employer may amend or revoke its salary deferral
agreements with Highly Compensated Employees who are Participants
pursuant to Section 4.4 PARTICIPANT SALARY DEFERRAL to the extent
necessary to ensure compliance with the ADP Requirement including, but
not by way of limitation, to recharacterize as Employee Contributions
to be added to the Employee Contribution Account of any such
Participant, the amount of any Excess Contributions necessary to
ensure such compliance.
(c) LEVELING METHOD. The amount of Excess Contributions or Excess
Aggregate Contributions for a Highly Compensated Employee for a Year
is to be determined by the following leveling method, under which the
ADP or Contribution Percentage, respectively, of the Highly
Compensated Employee with the highest ADP or Contribution Percentage,
respectively, is reduced to the extent required to:
(i) Enable the arrangement to satisfy the ADP test or
Contribution Percentage test, respectively, or
(ii) Cause such Highly Compensated Employee's ADP or Contribution
Percentage, respectively, to equal the ratio of the Highly
Compensated Employee with the next highest ADP or
Contribution Percentage, respectively.
This process must be repeated until the Plan satisfies the ADP and
Contribution Percentage tests. For each Highly Compensated Employee,
the amount of Excess Contributions is equal to the total Salary
Deferral Contributions and, to the extent elected by the Employer, the
Basic Employer Contributions made on behalf of the Highly Compensated
Employee (determined prior to the application of this subsection (c))
minus the amount determined by multiplying the Highly Compensated
Employee's ADP (determined after application of this subparagraph) by
the Participant's Compensation used in determining such ratio. For
each Highly Compensated Employee, the amount of Excess Aggregate
Contributions is equal to the total Employee Contributions, Matching
Employer Contributions and, to the extent not treated by the Employer
as included in the ADP, Basic Employer Contributions on behalf of the
Highly Compensated Employee (determined prior to the application of
this subsection) minus the amount determined by multiplying the Highly
Compensated Employee's Contribution Percentage (determined after
application of this subparagraph) by the Participant's Compensation
used in determining such ratio.
26
<PAGE>
(d) INCOME ALLOCABLE TO EXCESS DEFERRALS, EXCESS CONTRIBUTIONS AND EXCESS
AGGREGATE CONTRIBUTIONS.
(i) INCOME ALLOCABLE TO EXCESS DEFERRALS. The income allocable
to Excess Deferrals is equal to the allocable gain or loss
for the taxable year of the respective Participant. Income
allocable to Excess Deferrals shall be computed by either
(i)
(A) using a reasonable method which does not discriminate
in favor of Highly Compensated Employees, is used
consistently for all Participants and for all
corrective distributions under the Plan for the taxable
year, and is used by the Plan for allocating income
among the accounts of Participants; or
(B) multiplying the income for the taxable year which is
allocable either to Salary Deferral Contributions or
Basic Employer Contributions elected by the Employer to
be included in the numerator of the ADP, by a
fraction -
(1) the numerator of which is the Excess Deferrals by
the Participant for the taxable year, and
(2) the denominator of which is equal to the sum of
(I) as of the beginning of the taxable year,
the Participant's Salary Deferral
Contribution Account, plus
(II) for the taxable year, the Participant's
Salary Deferral Contributions.
(ii) INCOME ALLOCABLE TO EXCESS CONTRIBUTIONS. The income
allocable to Excess Contributions is equal to the allocable
gain or loss for the Year. Income allocable to Excess
Contributions shall be computed by either
(A) using a reasonable method which does not discriminate
in favor of Highly Compensated Employees, is used
consistently for all Participants and for all
corrective distributions under the Plan for the Year,
and is used by the Plan for allocating income among the
accounts of Participants; or
(B) multiplying the income for the Year which is allocable
to Salary
27
<PAGE>
Deferral Contributions and Basic Employer
Contributions to the extent elected by the Employer to
be included in the numerator of the ADP, by a
fraction -
(1) the numerator of which is the Excess Contributions
for the Participant for the Year, and
(2) the denominator of which is equal to the sum of
(I) as of the beginning of the Year, the
Participant's Salary Deferral
Contribution Account and that portion of
the Participant's Basic Employer
Contribution Account attributable to
Basic Employer Contributions elected by
the Employer to be included in the
numerator of the ADP, plus
(II) for the Year, the Participant's Salary
Deferral Contributions, and Basic
Employer Contributions elected by the
Employer to be included in the numerator
of the ADP.
(iii) INCOME ALLOCABLE TO EXCESS AGGREGATE CONTRIBUTIONS.
The income allocable to Excess Aggregate Contributions is
equal to the allocable gain or loss for the Year. Income
allocable to Excess Aggregate Contributions shall be
computed by either
(A) using a reasonable method which does not discriminate
in favor of Highly Compensated Employees, is used
consistently for all Participants and for all
corrective distributions under the Plan for the Year,
and is used by the Plan for allocating income among the
accounts of Participants; or
(B) multiplying the income for the Year which is allocable
to Employee Contributions, Matching Employer
Contributions and Basic Employer Contributions to the
extent not elected by the Employer to be included in
the numerator of the ADP, by a fraction -
(1) the numerator of which is the Excess Aggregate
28
<PAGE>
Contributions for the Participant for the Year,
and
(2) the denominator of which is equal to the sum of
(I) as of the beginning of the Year, the
Employee Contribution Account, Matching
Employer Contribution Account and that
portion of the Participant's Basic
Employer Contribution Account
attributable to Basic Employer
Contributions not elected by the
Employer to be included in the numerator
of the ADP, plus
(II) for the Year, the Participant's Employee
Contributions, Matching Employer
Contributions and Basic Employer
Contributions to the extent not elected
by the Employer to be included in the
numerator of the ADP.
(e) NONDISCRIMINATION TEST FOR EMPLOYEE CONTRIBUTIONS AND MATCHING
EMPLOYER CONTRIBUTIONS: In no event may the Contribution Percentage
of the Highly Compensated Employees who are eligible to participate in
the Plan exceed (i) 2 times the Contribution Percentage of the Lower
Paid Employees if the Lower Paid Employees' Contribution Percentage is
less than or equal to two percent (2%); (ii) the Contribution
Percentage of the Lower Paid Employees plus two percent (2%) (or such
lesser amount as the Secretary of the Treasury shall prescribe to
prevent the multiple use of this alternative limitation with respect
to any Highly Compensation Employee) if the Lower Paid Employees'
Contribution Percentage is greater than two percent (2%) but less than
eight percent (8%); or (iii) 1.25 times the Contribution Percentage of
the Lower Paid Employees if the Lower Paid Employees' Contribution
Percentage is eight percent (8%) or more.
The determination of the amount of Excess Aggregate Contributions with
respect to the Plan shall be made after (i) first determining the
Excess Deferrals and (ii) then determining the Excess Contributions.
The amount, if any, of such Excess Aggregate Contributions for such
Year shall generally be distributed or if forfeitable, forfeited
together with any income allocable to such contributions within two
and one-half (2-1/2) months after the end of the Year to Participants
on whose behalf Excess Aggregate Contributions were allocated for such
Year, but in no event shall such Excess Aggregate Contributions and
income be distributed or if forfeitable, forfeited later than the end
of
29
<PAGE>
the Year following the Year in which such Excess Aggregate
Contributions were made. Excess Aggregate Contributions of
Participants who are members of a Family and are treated as a single
Highly Compensated Employee shall be allocated among such Participants
in the same proportion as the portion of the numerator of the
Contribution Percentage attributable to each Family member bears to
the entire numerator of the Contribution Percentage determined by
treating such Family members as a single Highly Compensated Employee.
Distribution of Excess Aggregate Contributions, if any, for any Year
shall be made to Highly Compensated Employees who are Participants by
leveling the highest Contribution Percentage in accordance with Treas.
Reg. Section 1.401(m)-l(e)(2) until the nondiscrimination test set
forth in the first sentence of this subsection (e) is met; provided,
however, that forfeitures of Excess Aggregate Contributions, if any,
shall not be allocated to Participants whose contributions are reduced
under this Section.
To the extent required by law, if the sum of the ADP and the
Contribution Percentage for Highly Compensated Employees exceeds the
Aggregate Limit, then the Contribution Percentage of Highly
Compensated Employees will be reduced in the manner described in
subsection (c) so that the Aggregate Limit is not exceeded. The
amount by which each Highly Compensated Employee's Contribution
Percentage is reduced shall be treated as an Excess Aggregate
Contribution. This paragraph does not apply if the sum of the ADP and
the Contribution Percentage of the Highly Compensated Employee does
not exceed 1.25 times the ADP and the Contribution Percentage of the
Lower Paid Employees. For purposes of this paragraph, "Aggregate
Limit" shall mean the greater of (i) the sum of (A) 125% of the
greater of the ADP or the Contribution Percentage of the Lower Paid
Employees and (B) two (2) percentage points plus the lesser of the ADP
or the Contribution Percentage of the Lower Paid Employees, but in no
event greater than twice the lesser of the ADP or the Contribution
Percentage of the Lower Paid Employees; or (ii) the sum of (A) 125% of
the lesser of the ADP or the Contribution Percentage of the Lower Paid
Employees and (B) two (2) percentage points plus the greater of the
ADP or the Contribution Percentage of the Lower Paid Employees, but in
no event greater than twice the greater of the ADP or the Contribution
Percentage of the Lower Paid Employees.
For purposes of this Section 5.4(e), the terms listed below shall have
the meanings indicated:
(i) CONTRIBUTION PERCENTAGE: A fraction, the numerator of which
is the amount of the contributions actually paid on behalf
of that Participant, in the aggregate, to the Participant's
Matching Employer Contribution Account (excluding
contributions paid to the Participant's Matching Employer
Contribution Account that are forfeited either to correct
30
<PAGE>
Excess Aggregate Contributions or because the contributions
to which they relate are Excess Deferrals, Excess
Contributions, or Excess Aggregate Contributions), Employee
Contribution Account, and, to the extent not treated by the
Employer as included in the ADP, Basic Employer Contribution
Account and the denominator of which is the Participant's
Compensation for the Year. The Contribution Percentage for
any group of Participants is equivalent to the average of
the Contribution Percentages of all Participants in that
group.
If two or more plans of the Employer to which matching
contributions or employee voluntary contributions are made
are treated as one plan for purposes of the eligibility
requirements of section 410(b) of the Code, such plans shall
be treated as one plan for purposes of determining the
Contribution Percentage. In the event a Highly Compensated
Employee participates in two or more plans of the Employer
to which such contributions are made, all such contributions
shall be aggregated for purposes of determining the
Contribution Percentage. Notwithstanding the foregoing,
certain plans shall be treated as separate if mandatorily
disaggregated under regulations under section 401(m) of the
Code.
(ii) EXCESS AGGREGATE CONTRIBUTIONS: With respect to any Year,
the excess of (A) the aggregate amount of Matching Employer
Contributions, Employee Contributions and Basic Employer
Contributions not treated by the Employer as included in the
ADP actually made on behalf of Highly Compensated Employees
who are Participants for such Year, over (B) the maximum
amount of such contributions permitted as determined under
subsection (e) of this Section (determined by reducing
Excess Aggregate Contributions made on behalf of Highly
Compensated Employees who are Participants in order of
Contribution Percentage, beginning with the highest
Contribution Percentage, as set forth in subsection (c)).
ROLLOVER CONTRIBUTIONS.
(a) Anything herein contained to the contrary notwithstanding, the
Committee may authorize an Employee to transfer to the Trust, to be
held as part of the Employee's Employee Contribution Account, cash
received by the Employee in one or more distributions together
constituting, under the Code, a lump sum distribution from or under
another qualified trust, qualified plan, an employee annuity or
custodian account, or an amount paid or distributed out of an
individual retirement account, individual retirement annuity or
retirement bond consisting of a prior rollover contribution from a
qualified trust or annuity plan. The amount so transferred to this
Trust is a "Rollover
31
<PAGE>
Contribution." The Trustee may also authorize the acceptance of a
direct payment on behalf of an Employee from a plan or trust for which
the Internal Revenue Service has issued a favorable determination
letter. The amount so transferred by a direct payment from the plan
or trust to this Trust is a "Direct Transfer Contribution." The
interest of a Participant with respect to a Rollover Contribution and
a Direct Transfer Contribution to the Trust, together with the
earnings thereon, shall be fully vested, and assets attributable
thereto shall be held, invested, and distributed pursuant to the terms
of the Plan governing the Participant's Employee Contribution Account;
provided, however, that the interest of a Participant with respect to
Rollover Contributions and Direct Transfer Contributions shall be
segregated for accounting and reporting purposes. An Employee making
a Rollover Contribution or on whose behalf a Direct Transfer
Contribution is made, if otherwise not eligible to become a
Participant, shall be deemed a Participant to the extent of the
Employee's Rollover Contribution and Direct Transfer Contribution only
and not for any other purpose until the Employee otherwise is eligible
to be and becomes a Participant for all purposes hereunder.
(b) A Participant may, pursuant to a uniform and nondiscriminatory
procedure established by the Committee, withdraw any part of such
Participant's Employee Contribution Account attributable to Rollover
Contributions or Direct Transfer Contributions, as adjusted by any
investment gains or losses, but not including any amounts directly
transferred to the Plan from the Distributing Plan pursuant to
subsection (b) of this Section.
BENEFITS
RETIREMENT OR DISABILITY: If a Participant's employment with the Employers is
terminated at or after the date upon which the Participant attains Normal
Retirement Age, or if the Participant's employment is terminated at an
earlier age because of Disability, the Participant shall be vested in,
and entitled to receive, the entire amount in each of the Participant's
Accounts in accordance with Section 6.4 PAYMENT OF BENEFITS.
DEATH: In the event that the termination of employment of a Participant is
caused by the Participant's death, the Participant's Beneficiary shall be
vested in and paid the entire amount in each of the Participant's
Accounts in accordance with Section 6.4 PAYMENT OF BENEFITS.
TERMINATION FOR OTHER REASONS: If a Participant's employment with the Employers
is terminated before Normal Retirement Age for any reason other than
Disability or death, the Participant shall be entitled to:
(a) The entire amount, if any, credited to the Participant's Employee
Contribution Account, Salary Deferral Contribution Account, Basic
Employer Contribution Account and Distributing Plan Account; plus
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The Participant shall be vested in, and entitled to receive, an amount
equal to a percentage of the balance of the Participant's Employer
Contribution Account, if any, and Matching Employer Contribution
Account, if any. Such percentage shall be determined in accordance
with the following schedule:
VESTED FORFEITED
YEARS OF SERVICE PERCENTAGE PERCENTAGE
---------------- ---------- ----------
less than 1 0 100
1 but less than 2 20 80
2 but less than 3 40 60
3 but less than 4 60 40
4 but less than 5 80 20
5 or more 100 0
; provided that a Participant who was a Participant in the Plan prior to
March 1, 1996 shall be vested in and entitled to receive, the amount
credited to the Participant's Employer Contribution Account, attributable
to the Participant's Company Basic Deposit Account as of February 28, 1996,
if any, and Company Matching Deposit Account, if any, after having made
Salary Deferral Contributions (referred to as Before-Tax Deposits prior to
March 1, 1996) and/or Employee Contributions (referred to as After-Tax
Deposits prior to March 1, 1996) under this Plan for an aggregate period of
thirty-six (36) consecutive months.
Payment of benefits due under this Section shall be made in accordance with
Section 6.4 PAYMENT OF BENEFITS.
(c) Notwithstanding anything herein to the contrary, if the Plan's vesting
schedule is amended, or if the Plan is amended in any way that
directly or indirectly affects the computation of the participant's
nonforfeitable percentage or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each
Participant with at least three (3) Years of Service with the Employer
may elect, within a reasonable period after the adoption of the
amendment or change, to have such Participant's vested interest in
such Participant's Employer Contribution Account and
Matching Employer Contribution Account computed under the Plan without
regard to such amendment or change.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end
on the latest of:
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(i) Sixty (60) days after the amendment is adopted;
(ii) Sixty (60) days after the amendment becomes effective; or
(iii) Sixty (60) days after the Participant is issued written
notice of the amendment by the Employer or Plan
Administrator.
PAYMENT OF BENEFITS:
ACCOUNTS OTHER THAN DISTRIBUTING PLAN ACCOUNTS: The Committee shall direct
the Trustee to distribute the amounts due from the Accounts other than
the Distributing Plan Account of a Participant, if so directed by the
Participant, as soon as practicable after the Participant's
termination of employment, as of the Valuation Date coincident with or
next following the Participant,s termination of employment in any one
of the following methods selected by the Participant:
(i) One (1) single lump sum;
(ii) Periodic payments of substantially equal amounts for the
lesser of a specified number of years not in excess of ten
(10) or, over a period not exceeding such Participant's
normal life expectancy or the joint normal life expectancy
of the Participant and the Participant's Beneficiary, and
such payments shall be made not less frequently than
annually, in which event the unpaid balance at the end of
each Year shall receive an Income allocation.
(b) DISTRIBUTING PLAN ACCOUNTS: The Committee shall direct the Trustee to
distribute the amounts due from the Participant's Distributing Plan
Account, if so directed by the Participant, as soon as practicable
after the Participant's termination of employment, as of the Valuation
Date coincident with or next following the Participant's termination
of employment as follows:
(i) (A) The amount to which a Participant is entitled
after such Participant's termination of employment
shall be payable by the Trustee in the form of a
Qualified Joint and Survivor Annuity for the benefit of
the Participant and the Participant's Qualified Spouse.
If a Participant has no Qualified Spouse, the amount to
which such Participant is entitled after the
Participant's termination of employment shall be
payable by the Trustee in the form of a Life Annuity
for the benefit of the Participant.
(A) The amount to which a surviving Qualified Spouse is
entitled, if
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the Participant had a vested Account balance at the
Participant's death and had not yet commenced receiving
benefits under the Plan, shall be payable by the
Trustee in the form of a Qualified Preretirement
Survivor Annuity for the benefit of the Qualified
Spouse.
(B) Notwithstanding anything herein to the contrary,
however, if a Participant has made an election pursuant
to subparagraphs (iii) or (iv) of this subsection (b),
whichever is applicable, and the election made by the
Participant is still in effect, the Participant's
nonforfeitable Account balance may be distributed by
the Trustee pursuant to subparagraph (ix) of this
subsection (b) or subsections (d) or (f) of this
Section.
For purposes of this subsection (b) and subsection (b) of
Section 6.6 DESIGNATION OF BENEFICIARY the following terms
shall have the meanings indicated:
(A) "Qualified Spouse":
(1) For purposes of the Qualified Joint and Survivor
Annuity and the Life Annuity, a Participant's
legal spouse as of the Participant's Annuity
Starting Date.
(2) For purposes of the Qualified Preretirement
Survivor Annuity, a Participant's legal spouse
throughout the one (1) year period ending at the
Participant's death.
(B) "Qualified Joint and Survivor Annuity":
An immediate annuity for the life of the Participant
with a survivor annuity for the life of the
Participant's Qualified Spouse which is fifty percent
(50%) of the amount of the annuity which is payable
during the joint lives of the Participant and the
Participant's Qualified Spouse and which is the
actuarial equivalent of the Participant's Account
balance.
(C) "Qualified Preretirement Survivor Annuity":
An annuity for the life of the surviving Qualified
Spouse of a Participant who dies prior to the
Participant's Annuity Starting Date, the actuarial
equivalent of which is fifty percent (50%) of the
Participant's Account balance as of the date of the
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Participant's death.
(D) "Annuity Starting Date":
The first day of the first period for which an amount
is paid as an annuity or in any other form.
(E) "Applicable Election Period":
(1) with respect to a Qualified Preretirement Survivor
Annuity, the period which begins on the earlier
of:
(A) the first day of the Plan Year in which the
Participant attains age thirty-five (35); or
(B) the date the Participant terminates
employment;
and ends on the date of the Participant's death; and
with respect to a Qualified Joint and Survivor Annuity
or a Life Annuity, the ninety (90) day period
ending on the Annuity Starting Date.
(F) "Life Annuity":
An annuity for the life of the Participant which is the
actuarial equivalent of the Participant's Account
balance.
(G) "Joint and Survivor Annuity":
An annuity for the life of the Participant with a
survivor annuity for the life of the Participant's
Qualified Spouse or alternate beneficiary which is
either fifty percent (50%), sixty-six and two-thirds
percent (66-2/3%), or one hundred percent (100%) of the
amount of the annuity which is payable during the joint
lives of the Participant and the Participant,s
Qualified Spouse or alternate beneficiary and which is
the actuarial equivalent of the Participant's Account
balance. The actual percentage of the survivor benefit
will be elected by the Participant.
(iii) A Participant who has a Qualified Spouse may elect in
writing to waive the Qualified Joint and Survivor Annuity or
Qualified Preretirement
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Survivor Annuity at any time during the Applicable Election
Period (provided, however, that a Participant may elect in
writing to waive the Qualified Preretirement Survivor
Annuity at any time prior to the Applicable Election Period,
if such election becomes invalid on the first day of the
Year in which the Participant attains age thirty-five (35)).
Such election must be consented to by the Participant's
Qualified Spouse. The election and the Qualified Spouse's
consent thereto must designate specific Beneficiary(ies)
including any class of Beneficiaries or any contingent
Beneficiaries, and, with respect to a Qualified Joint and
Survivor Annuity, the form of benefits that the designated
Beneficiary(ies) shall receive, which designations may
not be changed without spousal consent unless the
Qualified Spouse expressly permits designations by the
Participant without any further spousal consent. Such
Qualified Spouse's consent must acknowledge the effect of
such election and be witnessed by a Plan representative
or a notary public. Such consent shall not be required
if it is established to the satisfaction of the Plan
Administrator that the required consent cannot be
obtained because there is no Qualified Spouse, the
Qualified Spouse cannot be located, or other
circumstances that may be prescribed by Treasury
regulations. The election made by the Participant and
consented to by the Participant's Qualified Spouse may be
revoked by the Participant in writing without the consent
of the Qualified Spouse at any time during the Applicable
Election Period. Any new election must comply with the
requirements of this subparagraph (iii). A former
Qualified Spouse's waiver shall not be binding on the
Qualified Spouse.
A Participant without a Qualified Spouse may elect to waive the
Life Annuity at any time during the Applicable Election
Period. The election made by the Participant may be revoked
by the Participant in writing at any time during the
Applicable Election Period. Any new election must comply
with the requirements of this Section 6.4(b).
(v) With regard to the election to waive a Qualified Joint and
Survivor Annuity, the Plan Administrator shall no less than
thirty (30) days and no more than ninety (90) days prior to
the Annuity Starting Date provide the Participant a written
explanation of:
(A) The terms and conditions of the Qualified Joint and
Survivor Annuity;
(B) The Participant's right to make, and the effect of, an
election to waive the Qualified Joint and Survivor
Annuity;
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<PAGE>
(C) The right of the Participant's Qualified Spouse to
consent to any election to waive the Qualified Joint
and Survivor Annuity, and
(D) The right of the Participant to revoke such election,
and the effect of such revocation.
(vi) With regard to the election to waive a Qualified
Preretirement Survivor Annuity, the Plan Administrator shall
supply comparable notice and information to that described
in subparagraph (v) of this subsection (b) within the period
beginning on the first day of the Year in which the
Participant attains age thirty-two (32) and ending with the
close of the Year preceding the Year in which the
Participant attains age thirty-five (35). If the
Participant enters the Plan after the first day of the Year
in which the Participant attained age thirty-two (32), the
Plan Administrator shall provide notice no later than the
end of the one (1) year period after the entry of the
Participant into the Plan. In the case of a Participant's
termination of employment before the Participant attains age
thirty-two (32), the Plan Administrator shall provide notice
at the time of the Participant's termination of employment
or within one (1) year prior to or after the Participant's
termination of employment.
(vii) With regard to the election to waive a Life Annuity,
the Plan Administrator shall no less than thirty (30) days
and no more than ninety (90) days prior to the Annuity
Starting Date provide the Participant a written explanation
of:
(A) The terms and conditions of the Life Annuity;
(B) The Participant's right to make, and the effect of, an
election to waive the Life Annuity; and
The right of the Participant to revoke such election and the
effect of such revocation.
(viii) The annuities provided under this subsection (b) shall
commence within a reasonable time after the Participant's
retirement or after attainment of (A) age fifty-five (55)
and five (5) Years of Service or (B) Normal Retirement Age,
as elected by the Participant, or within a reasonable period
of time after the Participant's death if so directed by the
Participant's surviving Qualified Spouse. In no event shall
an Annuity Starting Date be later than sixty (60) days after
the close of the Year
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<PAGE>
during which the later of the Normal Retirement Age of
the Participant or the date of the Participant's
termination of employment occurs, unless specifically
authorized by the Participant.
(ix) (A) For a Participant who makes a qualified election
pursuant to subparagraphs (iii) or (iv) of this
subsection (b), whichever is applicable, which
qualified election is still in effect, the amount of
the Participant's Trust Account balance to which the
Participant is entitled after termination of employment
shall be paid by the Trustee to such Participant in one
of the following optional methods of payment, in the
actuarial equivalent of the Participant's Trust Account
balance attributable to the Participant's Distributing
Plan Account:
(1) One (1) single lump sum payable after termination
of employment for reasons other than death,
Disability or retirement; or
(2) Installments commencing after termination of
employment for reasons other than death,
Disability or retirement, over a period not to
exceed the Participant's life expectancy or the
combined life expectancy of the Participant and
such Participant's designated Beneficiary, or a
period certain and continuous not to exceed the
Participant's life expectancy or the combined life
expectancy of the Participant and such
Participant's designated Beneficiary; or
(3) An annuity for the Participant's life commencing
on the Annuity Starting Date and payable until the
Participant's death; or
(4) An annuity for the Participant's life with one
hundred twenty (120) monthly payments guaranteed;
or
(5) A Joint and Survivor Annuity for the life of the
Participant and the Participant's Qualified Spouse
or alternate beneficiary; or
A full cash refund annuity for the Participant's life.
(c) Unless a Participant elects otherwise in writing, payment of benefits
under this Plan shall
39
<PAGE>
be made or commence within sixty (60) days after the latest to occur
of (i) the end of the Year of the Participant's sixty-fifth (65th)
birthday, or (i) the end of the Year in which the Participant's
employment terminates.
(d) Distributions to a Participant must commence no later than the first
day of April following the calendar year in which such Participant
attains age 70-1/2. The distributions required herein may be made
over the life of the Participant (or lives of the Participant and the
Participant's beneficiary) or over a period not exceeding the life
expectancy of the Participant (or the life expectancies of the
Participant and the Participant's beneficiary) and shall be determined
and made in accordance with section 401(a)(9) of the Code, including
for lifetime distributions the minimum distribution incidental benefit
requirement of section 1.401(a)(9)-2 of the regulations. Life
expectancies will not be recalculated unless the Participant elects
otherwise.
(e) If a Participant has, prior to January 1, 1984, made a designation and
election under either the Distributing Plan or the USI Plan to have
the Participant's nonforfeitable Account balances paid in an
alternative method acceptable under section 401(a) of the Code as in
effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982, by an instrument in writing executed by
such Participant and filed with the Trustee, the provisions of
subsection (d) shall not apply. Any such written designation and
election shall be binding upon the Trustee and the Employer, to the
extent permitted by law.
(f) Subject to the Qualified Preretirement Survivor Annuity requirements
with respect to Distributing Plan Accounts set forth above, upon the
death of the Participant, the following distribution provisions will
become effective:
(i) If the Participant dies after distribution of the
Participant's interest has commenced, the remaining portion
of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior
to the Participant's death without regard to any
acceleration of distributions because of the minimum
distribution incidental benefit requirement of
section 1.4(a)(9)-2 of the regulations.
(ii) If the Participant dies before distribution of the
Participant's interest commences, the Participant's entire
interest will be distributed no later than five (5) years
after the Participant's death except to the extent that:
(A) If any portion of the Participant's interest is payable
to a designated Beneficiary, distributions may be made
in substantially equal installments over the life
expectancy of the designated Beneficiary, commencing no
later than one (1) year
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<PAGE>
after the Participant's death.
(B) If the designated Beneficiary is the surviving spouse
of the Participant, distributions shall not be required
to commence earlier than the later of December 31 of
the calendar year immediately following the calendar
year of the Participant's death or December 31 of the
calendar year in which the Participant would have
attained age 70-1/2. If the spouse dies before
payments begin, subsequent distributions shall be made
as if the spouse had been the Participant.
(g) The amount to which a designated Beneficiary is entitled pursuant to
Section 6.6 DESIGNATION OF BENEFICIARY after a Participant's death
shall be paid by the Trustee at the direction of the Committee in the
manner selected by the Participant or the Participant's
Beneficiary(ies), as applicable, with payments to commence (if
elected) within a reasonable time after the Participant's death.
DISTRIBUTION OF UNALLOCATED EMPLOYEE CONTRIBUTIONS AND SALARY DEFERRAL
CONTRIBUTIONS: If on the date of termination of a Participant's
employment, the Employer shall be holding contributions made or designated
by the Participant but not yet allocated to the Participant's Employee
Contribution Account or Salary Deferral Contribution Account, the Employer
shall pay such amounts either directly to the Participant (or the
Participant's Beneficiary, as the case may be) or to the Trustee, to be
distributed by the Trustee in accordance with the method of distribution
determined under Section 6.4 PAYMENT OF BENEFITS.
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<PAGE>
DESIGNATION OF BENEFICIARY:
(a) ACCOUNTS OTHER THAN DISTRIBUTING PLAN ACCOUNTS:
(i) If a Participant is married on the date of the Participant's
death, the Beneficiary of such Participant shall be the
Participant's Eligible Spouse, as herein defined, unless the
Participant's Eligible Spouse consents in writing not to be
said Beneficiary and such written consent acknowledges the
effect of the consent and is witnessed by either a
representative of the Plan or a notary public. The
provisions of the preceding sentence shall not apply if it
is established to the satisfaction of the Plan Administrator
either that the Eligible Spouse cannot be located or that
other circumstances set forth in Income Tax Regulations
which preclude the necessity of the Eligible Spouse's
consent are present with respect to the Participant. Such
consent shall be valid only with respect to the Eligible
Spouse who signs the consent. Any spousal consent necessary
under this provision shall not be effective unless the
Participant's Beneficiary designation designates a specific
Beneficiary(ies) or any contingent Beneficiary(ies), which
designations may not be changed without spousal consent
unless the spouse expressly permits designations by the
Participant without any further spousal consent. The
"Eligible Spouse" of a Participant covered by this paragraph
is the husband or wife to whom the Participant had been
married for at least one (1) year as of the date of the
Participant's death.
(b) DISTRIBUTING PLAN ACCOUNTS:
(i) An amount equal to fifty percent (50%) of the nonforfeitable
balance of the Distributing Plan Account of such Participant
shall be payable on the death of such Participant to such
Participant's surviving Qualified Spouse pursuant to Section
6.4(b)(i) or, if there is no surviving Qualified Spouse, or
if an election has been made pursuant to Section 6.4(b)(iii)
and if a Beneficiary designation pursuant to subparagraph
(ii) below is made, to the Participant's designated
Beneficiary. The remaining fifty percent (50%) of the
Participant's nonforfeitable Account balance shall be
payable on the death of the Participant to the Participant's
designated Beneficiary.
(ii) Subject to the provisions of Section 6.4(b)(i) regarding
automatic annuities for Qualified Spouses, each Participant
shall, and from time to time, have the right to name and to
change the beneficiary or beneficiaries to whom payment of
the sum owing in the event of such
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<PAGE>
Participant's death shall be made. However, a
Participant's Distributing Plan Account balance shall be
paid to the Beneficiary the Participant has designated only
if the Participant's Qualified Spouse waives pursuant to
Section 6.4(b)(iii), any right to a benefit from the Plan,
except as provided in any Beneficiary designation executed
by the Participant.
(c) GENERAL RULES REGARDING BENEFICIARY DESIGNATIONS. If a Participant
shall fail to designate a Beneficiary, if such designation shall for
any reason be illegal or ineffective, or if no surviving Qualified
Spouse, Eligible Spouse or Beneficiary shall survive the Participant,
the Participant's death benefits shall be paid:
(i) to the Participant's surviving spouse; or
(ii) if there is no surviving spouse, to the estate of the
Participant.
Except as otherwise provided above in this Section, each Participant
shall have the right to designate, by giving a written designation to
the Plan Administrator, a person or persons or entity to receive any
death benefit which may become payable upon the death of such
Participant. A Participant may, with consent of the Participant's
Qualified Spouse or Eligible Spouse, change such Beneficiary
designation from time to time upon written notice to the Committee,
and the last designation received by the Committee prior to the death
of the Participant shall be effective and shall revoke all prior
designations.
The Plan Administrator may determine the identity of the distributees
and in so doing may act and rely upon any information it may deem
reliable upon reasonable inquiry, and upon any affidavit, certificate,
or other paper believed by it to be genuine, and upon any evidence
believed by it sufficient.
OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTIONS: Notwithstanding
any provision of the Plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may elect, at the
time and in the manner prescribed by the Plan Administrator, to have any
portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover. For
purposes of this Section, the following definitions shall apply:
ELIGIBLE ROLLOVER DISTRIBUTION: An Eligible Rollover Distribution is
any distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: (i) any distribution that is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's
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designated beneficiary, or for a specified period of ten (10)
years or more; (ii) any distribution to the extent such
distribution is required under section 401(a)(9) of the Code;
and (iii) the portion of any distribution that is not includable
in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
(b) ELIGIBLE RETIREMENT PLAN: An Eligible Retirement Plan is an
individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section
408(b) of the Code, an annuity plan described in section 403(a)
of the Code or a qualified trust described in section 401(a) of
the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement Plan
is an individual retirement account or individual retirement
annuity.
(c) DISTRIBUTEE: A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the
Code, are Distributees with regard to the interest of the spouse
or former spouse.
(d) DIRECT ROLLOVER: A Direct Rollover is a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
LOANS TO PARTICIPANTS: The Trustee may, at the Committee's direction,
administer a Participant loan program, whereby upon the application of any
Participant who is an active employee or a party-in-interest as defined in
ERISA Section 3(14) who is not an Owner-Employee, a family member of an
Owner-Employee, or a Shareholder-Employee of the Employer or a family
member of a Shareholder-Employee (an "Eligible Individual"), the Trustee,
in accordance with a uniform, nondiscriminatory policy, may make a loan or
loans to such Eligible Individual. The total amount of a loan to any
Eligible Individual shall not exceed the lesser of (i) fifty thousand
dollars ($50,000), or (ii) one-half (1/2) of the nonforfeitable value of
the Participant's Accounts excluding the Participant's Distributing Plan
Account under the Plan as of the date on which the loan is approved. The
Committee may not grant a loan in an amount in excess of fifty thousand
dollars ($50,000), reduced by the excess, if any, of (i) the highest
outstanding balance of loans from the Plan during the one (1) year period
ending on the day before the date on which such loan is made over (ii) the
outstanding balance of loans from the Plan on the date on which such loan
is made. All loans shall be subject to the approval of the Committee which
shall follow a uniform, nondiscriminatory policy.
In addition to such rules and regulations as the Committee may adopt, all
loans shall comply
44
<PAGE>
with the following terms and conditions:
An application for a loan by an Eligible Individual shall be made in
writing to the Committee whose action thereon shall be final. The
Committee shall specify the form of the application and any supporting
data required.
(b) The period of repayment for any loan shall be five (5) years from the
date the loan is made. Any loan used to acquire a dwelling unit which
within a reasonable time will be used as the principal residence of
the Participant does not have to be repaid within five (5) years, but
shall be paid in a time agreed by the Committee and the Eligible
Individual. Loans shall be repayable in substantially equal
installments. In no event shall the substantially equal installments
be made less frequently than quarterly. To the extent permitted by
law, repayment shall be through payroll deductions for all periods
while the Eligible Individual is on an Employer's payroll.
(c) Each loan shall bear interest at a rate which is reasonable within the
meaning of section 4975(d)(1) of the Code, provided that such rate
does not violate any applicable usury laws.
(d) Each loan shall be supported by collateral which is the Eligible
Individual's entire interest in the Trust or if so determined by the
Committee, the Eligible Individual's interest in the Eligible
Individual's Employer Contribution Account, Matching Employer
Contribution Account and Employee Contribution Account. A loan shall
also be supported by the Eligible Individual's promissory note for the
amount of the loan, including interest, payable to the order of the
Trustee. The promissory note shall require that the unpaid principal
and interest will (at the Committee's option) become due and payable
if a loan payment is not made within thirty (30) days after the due
date of any installment.
(e) At the time the balance of an Eligible Individual's Accounts is in
excess of $3,500 and is used as security for a loan, if the
requirements of section 401(a)(11) of the Code apply to any part of
such balance which is loaned to the Eligible Individual, the Eligible
Individual's spouse must consent in writing to the loan and the
possible reduction in the Accounts of the Participant to satisfy the
loan. Such consent must be made within the ninety (90) day period
which ends on the date on which the loan is to be so secured. The
spouse's written consent must be witnessed by a representative of the
Plan or a notary public. The provisions of the preceding sentences
shall not apply if it is established to the satisfaction of the
Committee either that the spouse cannot be located or that other
circumstances set forth in regulations issued by the Secretary of the
Treasury which preclude the necessity of the spouse's consent are
present with respect to the Eligible Individual. Further spousal
consent is not required regardless of whether the Eligible Individual
subsequently has a change in spouse or change in marital status. Any
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renegotiation, extension, renewal, or other revision of a loan shall
be treated as a new loan requiring the obtaining of a new consent of
the spouse in accordance with this subsection (e).
CASH-OUT PROCEDURE. If at the time of a Participant's termination of employment
the Participant's nonforfeitable Account balance shall be in an amount not
in excess of $3,500.00 or such other amount to be prescribed in regulations
by the Secretary of the Treasury or the Secretary's delegate, the Trustee
shall pay such amount to the Participant as soon as practicable after the
Participant's termination of employment, as of the Valuation Date
coincident with or next following the Participant's termination of
employment. For purposes of this Section, if the value of the
Participant's nonforfeitable Account balance is zero, the Participant shall
be deemed to have received a distribution of such nonforfeitable Account
balance. If such amount is in excess of $3,500.00 and the Account balance
is immediately distributable, the Participant, and the Participant's
Qualified Spouse if the Participant is entitled to a distribution from a
Distributing Plan Account and payment is to be made in a form other than a
Qualified Joint and Survivor Annuity, must consent to any distribution of
such Account balance. The consent of the Participant, and the
Participant's Qualified Spouse if the Participant is entitled to a
distribution from a Distributing Plan Account and payment is to be made in
a form other than a Qualified Joint and Survivor Annuity, shall be obtained
in writing within the ninety (90) day period ending on the annuity starting
date. The annuity starting date is the first day of the first period for
which an amount is paid as an annuity or any other form. The Plan
Administrator shall notify the Participant, and the Participant's Qualified
Spouse if the Participant is entitled to a distribution from a Distributing
Plan Account and payment is to be made in a form other than a Qualified
Joint and Survivor Annuity, of the right to defer any distribution until
the Participant's Account balance is no longer immediately distributable.
Such notification shall include a general description of the material
features and an explanation of the relative values of the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of section 417(a)(3) of the Code, and shall be provided no
less than thirty (30) days and no more than ninety (90) days prior to the
annuity starting date. The consent of the Participant, and the
Participant's Qualified Spouse if the Participant is entitled to a
distribution from a Distributing Plan Account and payment is to be made in
a form other than a Qualified Joint and Survivor Annuity, shall not be
required to the extent that a distribution is required to satisfy section
401(a)(9) or section 415 of the Code. In addition, upon termination of the
Plan the Participant's Account balance may be distributed to the
Participant, provided the Employer does not maintain or establish a
successor plan (as defined under regulations under section 401(k) of the
Code), or transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in section 4975(e)(7) of the Code)
within the same controlled group if the Participant does not consent to an
immediate distribution. An Account balance is immediately distributable to
the Participant before the Participant attains (or would have attained if
not deceased) the later of Normal Retirement Age or age sixty-two (62) (or
any such other times as may be prescribed by law or by regulations
promulgated by the Secretary of the Treasury). Such payment shall satisfy
all obligations of the Trust to such Participant.
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Upon a distribution or deemed distribution made to a Participant pursuant
to this Section, the nonvested portion of such Participant's Employer
Contribution Account, if any, and Matching Employer Contribution Account,
if any, will be forfeited and shall be allocated along with Forfeitures at
the time and in the manner specified in Section 4.3 DISPOSITION OF
FORFEITURES.
TRUST FUND
APPOINTMENT OF TRUSTEE: A trustee shall be appointed by the Company to
administer the Trust Fund. The Trustee shall serve at the pleasure of the
Company, and shall have the rights, powers and duties set forth in the
Trust Agreement. All assets of the Trust Fund shall be held, invested and
reinvested by the Trustee.
ASSETS OF THE TRUST: All contributions under this Plan shall be paid to the
Trustee and, except as provided in Section 7.4 REVERSION OF EMPLOYER
CONTRIBUTIONS, all assets of the Trust Fund, including income from
investments and from all other sources, shall be retained for the exclusive
benefit of Participants, Former Participants, and Beneficiaries, and shall
be used to pay benefits to such persons, or to pay expenses of
administration of the Plan and trust to the extent not paid by the Company.
All contributions made by an Employer are expressly conditioned upon the
continued qualification of the Plan under section 401 of the Code, and upon
the deductibility of the contributions under section 404 of the Code.
EARMARKED INVESTMENTS: At such times as the Employer shall designate, and if so
permitted by the Employer, in the Employer's sole discretion exercised in a
uniform, nondiscriminatory manner, every Participant under the Plan may
request, in writing and on the form provided by the Employer that the total
amount standing to the Participant's credit in the Participant's Account or
any uniform lesser amount as determined by the Employer, be invested in any
form of investment permitted by the Employer and selected by the
Participant; provided, however, that if any Participant is permitted to
earmark such Participant's Account or any portion thereof in any particular
form or type of investment, all Participants shall have the same right of
direction.
REVERSION OF EMPLOYER CONTRIBUTIONS: At no time shall any part of the corpus or
income of the Trust Fund be used for or diverted to purposes other than for
the exclusive benefit of Participants and their Beneficiaries.
Notwithstanding the above, in the case of a contribution which is made by
the Employer by a mistake of fact, such contribution may be returned to the
Employer within one (1) year after the payment of the contribution to the
Trust Fund. If a contribution is conditioned on initial qualification of
the Plan under section 501 of the Code, and if the Plan does not qualify,
then such contribution may be returned to the Employer within one (1) year
after the date of denial of initial qualification of the Plan (provided the
application for qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan is
adopted or such later date as the Secretary of the Treasury may prescribe).
If a contribution is conditioned upon the deductibility of the contribution
under section 404 of the
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Code, then, to the extent the deduction is disallowed, such a contribution
may be returned to the Employer within one (1) year after the disallowance
of the deduction.
ADMINISTRATION
ALLOCATION OF RESPONSIBILITY AMONG FIDUCIARIES FOR PLAN AND TRUST
ADMINISTRATION: The Fiduciaries shall have only those specific powers,
duties, responsibilities and obligations as are specifically given them
under this Plan or the Trust. The Employers shall have the sole
responsibility for making the contributions provided for under Section 4.1
EMPLOYER CONTRIBUTIONS. The Company shall have the sole authority to
appoint and remove the Trustee, members of the Committee and any investment
manager which may be provided for under the Trust, and to amend or
terminate, in whole or in part, this Plan or the Trust. The Committee
shall have sole responsibility for the administration of this Plan, which
responsibility is specifically described in this Plan and the Trust. The
Trustee shall have such responsibility for the administration of the Trust
as specifically provided in the Trust. Each Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan or the Trust, as the case may
be, authorizing or providing for such direction, information or action.
Furthermore, each Fiduciary may rely upon any such direction, information
or action of another Fiduciary as being proper under this Plan or the
Trust, and is not required under this Plan or the Trust to inquire into the
propriety of any such direction, information or action. It is intended
under this Plan and the Trust that each Fiduciary shall be responsible for
the proper exercise of its own powers, duties, responsibilities and
obligations under this Plan and the Trust and shall not be responsible for
any act or failure to act of another Fiduciary. No Fiduciary guarantees
the Trust Fund in any manner against investment loss or depreciation in
asset value.
APPOINTMENT OF COMMITTEE: The Plan shall be administered by a Profit Sharing
Committee consisting of at least three (3) persons who shall be appointed
by and serve at the pleasure of the Board of Directors of the Company. All
usual and reasonable expenses of the Committee may be paid in whole or in
part by the Employers, and any expenses not paid by the Employers shall be
paid by the Trustee out of the principal or income of the Trust Fund. Any
members of the Committee who are Employees shall not receive compensation
with respect to their services for the Committee.
CLAIMS PROCEDURE: The Committee shall make all determinations as to the right
of any person to a benefit. Any denial by the Committee of the claim for
benefits under the Plan by a Participant or Beneficiary shall be stated in
writing by the Committee and delivered or mailed to the Participant or
Beneficiary; and such notice shall set forth the specific reasons for the
denial, written to the best of the Committee's ability in a manner that may
be understood without legal counsel. In addition, the Committee shall
afford a reasonable opportunity to any Participant or Beneficiary whose
claim for benefits has been denied for a review of the decision denying the
claim.
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RECORDS AND REPORTS: The Committee shall exercise such authority and
responsibility as it deems appropriate in order to comply with ERISA and
governmental regulations issued thereunder relating to records of
Participants' Service, Account balances and the percentage of such Account
balances which are nonforfeitable under the Plan; notifications to
Participants; annual registration with the Internal Revenue Service; and
annual reports to the Department of Labor.
OTHER COMMITTEE POWERS AND DUTIES: The Committee shall have such duties and
powers as may be necessary to discharge its duties hereunder, including,
but not by way of limitation, the following:
(a) to construe and interpret the Plan, decide all questions of
eligibility and determine the amount, manner and time of payment of
any benefits hereunder;
(b) to prescribe procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(c) to prepare and distribute, in such manner as the Committee determines
to be appropriate, information explaining the Plan;
(d) to receive from the Employers and from Participants such information
as shall be necessary for the proper administration of the Plan;
(e) to furnish the Employers, upon request, such annual reports with
respect to the administration of the Plan as are reasonable and
appropriate;
(f) to receive, review and keep on file (as it deems convenient or proper)
reports of benefit payments by the Trustee and reports of
disbursements for expenses directed by the Committee;
(g) to appoint, or employ individuals to assist in the administration of
the Plan and any other agents it deems advisable, including legal
counsel.
The Committee shall have no power to add to, subtract from or modify any of
the terms of the Plan, or to change or add to any benefits provided by the
Plan, or to waive or fail to apply any requirements of eligibility for a
benefit under the Plan.
RULES AND DECISIONS: The Committee may adopt such rules as it deems necessary,
desirable or appropriate. All rules and decisions of the Committee shall
be uniformly and consistently applied to all Participants in similar
circumstances. When making a determination or calculation, the Committee
shall be entitled to rely upon information furnished by a Participant or
Beneficiary, the Employers, the legal counsel of the Company or the
Trustee.
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COMMITTEE PROCEDURES: The Committee may act at a meeting or in writing without
a meeting. The Committee shall elect one of its members as chairman,
appoint a secretary, who may or may not be a Committee member, and advise
the Trustee of such actions in writing. The secretary shall keep a record
of all meetings and forward all necessary communications to the Employers
or the Trustee. The Committee may adopt such bylaws and regulations as it
deems desirable for the conduct of its affairs. All decisions of the
Committee shall be made by the vote of the majority including actions in
writing taken without a meeting. A dissenting Committee member who, within
a reasonable time after such Committee member has knowledge of any action
or failure to act by the majority, registers a dissent in writing delivered
to the other Committee members, the Company and the Trustee shall not be
responsible for any such action or failure to act.
AUTHORIZATION OF BENEFIT PAYMENTS: The Committee shall issue directions to the
Trustee concerning all benefits which are to be paid from the Trust Fund
pursuant to the provisions of this Plan, and warrants that all such
directions are in accordance with this Plan.
APPLICATION AND FORMS FOR BENEFITS: The Committee may require a Participant to
complete and file with the Committee an application for a benefit and all
other forms approved by the Committee, and to furnish all pertinent
information requested by the Committee. The Committee may rely upon all
such information so furnished it, including the Participant's current
mailing address.
FACILITY OF PAYMENT: Whenever, in the Committee's opinion, a person is entitled
to receive any payment of a benefit or installment thereof, hereunder is
under a legal disability or is incapacitated in any way so as to be unable
to manage the person's financial affairs, the Committee may direct the
Trustee to make payments to such person or to the person's legal
representative or to a relative or friend of such person for the person's
benefit, or the Committee may direct the Trustee to apply the payment for
the benefit of such person in such a manner as the Committee considers
advisable. Any payment of a benefit or installment thereof in accordance
with the provisions of this Section shall be a complete discharge of any
liability for the making of such payment under the provisions of the Plan.
INDEMNIFICATION OF THE COMMITTEE: The Committee and the individual members
thereof shall be indemnified by the Employers and not from the Trust Fund
against any and all liabilities arising by reason of any act or failure to
act made in good faith pursuant to the provisions of the Plan, including
expenses reasonably incurred in the defense of any claim relating thereto.
MISCELLANEOUS
NONGUARANTEE OF EMPLOYMENT: Nothing contained in this Plan shall be construed
as a contract of employment between an Employer and any Employee, or as a
right of any Employee to be continued in the employment of an Employer, or
as a limitation of the right of an Employer to discharge any of its
Employees, with or without cause.
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RIGHTS TO TRUST ASSETS: No Employee or Beneficiary shall have any right to, or
interest in, any assets of the Trust Fund upon termination of employment or
otherwise, except as provided from time to time under this Plan, and then
only to the extent of the benefits payable under the Plan to such Employee
or Beneficiary out of the assets of the Trust Fund. All payments of
benefits as provided for in this Plan shall be made solely out of the
assets of the Trust Fund and none of the Fiduciaries shall be liable
therefor in any manner.
NONALIENATION OF BENEFITS: Except to the extent provided in Section 6.6,
benefits payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
involuntary, including any such liability which is for alimony or other
payments for the support of a spouse or former spouse, or for any relative
of the Employee, prior to actually being received by the person entitled to
the benefit under the terms of the Plan; and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise
dispose of any right to benefits payable hereunder shall be void. The
Trust Fund shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any person entitled to
benefits hereunder. The preceding sentence shall not apply with respect to
the creation, assignment or recognition of a right to any benefit payable
with respect to a Participant pursuant to a qualified domestic relations
order as defined in section 414(p) of the Code.
NONFORFEITABILITY OF BENEFITS: Subject only to the specific provisions of this
Plan, nothing shall be deemed to divest a Participant of the right to the
nonforfeitable benefit to which the Participant becomes entitled in
accordance with the provisions of this Plan.
DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS: In the event of a permanent
discontinuance of contributions to the Plan by an Employer, the Accounts of all
Participants employed by such Employer shall, as of the date of such
discontinuance, become one hundred percent (100%) vested and nonforfeitable.
AMENDMENTS AND ACTION BY EMPLOYERS
AMENDMENTS: The Company reserves the right to make from time to time any
amendment or amendments to this Plan.
Notwithstanding anything herein to the contrary, the Plan may not be
amended to the extent the amendment will have the effect of decreasing the
accrued benefit of a Participant in violation of section 411(d)(6) of the
Code.
ACTION BY EMPLOYERS: Any action by an Employer under this Plan may be by
resolution of its Board of Directors, or by any person or persons duly
authorized by resolution of said Board to take such action.
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SUCCESSOR EMPLOYER AND MERGER OR CONSOLIDATION OF PLANS
SUCCESSOR EMPLOYER: In the event of the dissolution, merger, consolidation or
reorganization of any Employer, provision may be made by which the Plan
as applied to such Employer will be continued by the successor; and, in
that event, the successor shall be substituted for such Employer under
the Plan. The substitution of the successor for such Employer shall
constitute an assumption of the Employer's Plan liabilities by the
successor and, if such Employer is the Company, the successor shall have
all of the powers, duties and responsibilities of the Company under the
Plan.
CONDITIONS APPLICABLE TO MERGERS OR CONSOLIDATIONS OF PLANS: In the event of
any merger or consolidation of the Plan as applied to any Employer or to
all Employers with, or transfer in whole or in part of the assets and
liabilities of the Trust Fund to another trust fund held under any other
plan of deferred compensation maintained or to be established for the
benefit of all or some of the Participants of this Plan, the assets of the
Trust Fund applicable to such Participants shall be merged or consolidated
with or transferred to the other trust fund only if:
(a) each Participant would (if either this Plan or the other plan then
terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the
benefit the Participant would have been entitled to receive
immediately before the merger, consolidation or transfer (if this Plan
had then terminated);
(b) resolutions of the Boards of Directors of the Employers under this
Plan, and of any new or successor Employer of the affected
Participants, shall authorize such transfer of assets; and, in the
case of the new or successor Employer of the affected Participants,
its resolutions shall include an assumption of liabilities with
respect to such Participants' inclusion in the new employer's plan,
and
(c) such other plan and trust are qualified under sections 401(a) and
501(a) of the Code.
PLAN TERMINATION
RIGHT TO TERMINATE: An Employer may at any time terminate the Plan with respect
to the Employees employed by said Employer. If the Plan is terminated by
fewer than all Employers, the Plan shall continue in effect for Employees
of the remaining Employers. In the event of the dissolution, merger,
consolidation or reorganization of an Employer, the Plan shall be
terminated with respect to the Employees of such Employer, unless the Plan
is continued by a successor to such Employer in accordance with Section
11.1 SUCCESSOR EMPLOYER.
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PARTIAL TERMINATION: Upon termination of the Plan with respect to one or more
but not all of the Employers, or upon termination of the Plan by an
Employer with respect to a group of Participants, the Trustee shall
allocate and segregate for the benefit of such group of Participants, or of
the Employees then or theretofore employed by the Employer with respect to
which the Plan is being terminated, the proportionate interest of such
Participants in the Trust Fund. The funds so allocated and segregated
shall be used by the Trustee to pay benefits to or on behalf of
Participants in accordance with Section 12.3 LIQUIDATION OF THE TRUST FUND.
LIQUIDATION OF THE TRUST FUND: Upon termination of the Plan, the Accounts of
all Participants affected thereby shall become fully vested, and the
Committee shall direct the Trustee: (a) to continue to administer the
Trust Fund and pay Account balances in accordance with Section 6.4 PAYMENT
OF BENEFITS, to Participants affected by the termination upon their
termination of employment or to their Beneficiaries upon such a
Participant's death, until the Trust Fund has been liquidated, or (b) to
distribute the assets remaining in the Trust Fund, after payment of any
expenses properly chargeable thereto, to Participants, Former Participants
and Beneficiaries in proportion to their respective Account balances.
In case the Committee directs liquidation of the Trust Fund pursuant to (a)
above, the expenses of administering the Plan and Trust, if not paid by the
Employer, shall be paid from the Trust Fund.
MANNER OF DISTRIBUTION: To the extent that no discrimination in value results,
any distribution after termination of the Plan may be made, in whole or in
part, in cash, in securities or other assets in kind as the Committee (in
its discretion) may determine. All noncash distributions shall be valued
at fair market value at the date of distribution.
PLAN ADOPTION
ADOPTION PROCEDURE: With the written consent of the Company, any company which
is a subsidiary or affiliate of an Employer may adopt the Plan for its
eligible Employees by appropriate resolution, which shall specify the
effective date of such adoption and which may contain such changes and
variations in Plan terms as the Company approves.
Each subsidiary or affiliated company upon becoming an Employer shall
appoint and designate one of its officers, by resolution of its Board of
Directors, to take such action and to furnish and supply to the Committee
and the Trustee such data and information as may be necessary or required
to administer the Plan; and the Committee and the Trustee shall be entitled
to accept and rely upon all matters and facts furnished them, or either of
them, by such officer and to act thereon without incurring any liability
for so doing.
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EXPENSES: Each participating Employer shall pay such proportionate part of the
expenses incurred in the administration of the Plan as hereinabove provided
in Section 8.2 APPOINTMENT OF COMMITTEE as the Company shall determine.
WITHDRAWAL: A participating Employer may withdraw from the Plan by giving sixty
(60) days' written notice of its intention to the Company, unless a shorter
notice shall be agreed to by the Company; provided, however, that such
withdrawal shall be subject to the provisions of Article XII PLAN
TERMINATION.
TRANSFERRED ASSETS: If an Employer adopting the Plan already maintains a thrift
or profit sharing plan covering employees who will be covered by this Plan,
it may, with the consent of the Company, provide in its resolution adopting
this Plan for the merger, restatement and continuation, without
discontinuance or termination, of its plan by this Plan. In such case, the
account balances of employees in such previous plan shall be valued as of
the date the Employer adopts this Plan and such account balances shall be
transferred to the Trust Fund and shall constitute initial Account balances
under this Plan for the Participants to whom they pertain.
TOP-HEAVY PROVISIONS
GENERAL: Notwithstanding anything herein to the contrary, the following
provisions shall apply with respect to any Year in which the Plan is deemed
to be Top Heavy.
DEFINITIONS:
(a) KEY EMPLOYEE: Any Employee or former Employee (and the Beneficiaries
of such Employee) who at any time during the determination period was:
(i) an officer of the Employer if such individual's annual
Compensation exceeds fifty percent (50%) of the dollar
limitation under section 415(b) of the Code for the
calendar year in which any such Year ends,
(ii) an owner (or considered an owner under section 318 of the
Code) of one of the ten (10) largest interests in the
Employer if such individual's Compensation exceeds one
hundred percent (100%) of such dollar limitation under
section 415(c)(1)(A) of the Code,
(iii) an owner of more than a five percent (5%) interest in
the Employer, or
(iv) an owner of more than a one percent (1%) interest in the
Employer who has annual Compensation of more than one
hundred fifty thousand dollars ($150,000).
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An officer is defined as an actual officer of the Employer, provided that
not more than the greater of three (3) Employees or ten percent (10%) of
the Employees (but in no event more than fifty (50) Employees) shall be
considered as officers in determining whether a plan is Top Heavy.
The determination period is the Year containing the Determination Date and
the four (4) preceding Years. The determination of who is a Key Employee
will be made in accordance with section 416(i)(1) of the Code, and the
regulations thereunder.
(b) NON-KEY EMPLOYEE: Any Employee who is not included in the definition
of Key Employee.
(c) TOP-HEAVY PLAN: This Plan is Top Heavy if any of the following
conditions exists:
(i) If the Top-Heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
(ii) If this Plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the group of plans exceeds sixty percent
(60%).
If this Plan is a part of a Required Aggregation Group and part
of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio of the Permissive Aggregation Group exceeds sixty
(60%).
(d) TOP-HEAVY RATIO:
(i) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and
the Employer has not maintained any defined benefit plan
which during the five (5) year period ending on the
Determination Date(s) has or has had accrued benefits, the
Top-Heavy Ratio for this Plan alone or for the Required or
Permissive Aggregation Group as appropriate is a fraction,
the numerator of which is the sum of the Account balances of
all Key Employees as of the Determination Date(s) (including
any part of any Account balance distributed in the five (5)
year period ending on the Determination Date(s)), and the
denominator of which is the sum of all Account balances
(including any part of any Account balance distributed in
the five (5) year period ending on the Determination
Date(s)), of all Participants as of the Determination
Date(s), both computed in
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accordance with section 416 of the Code, and the
regulations thereunder. Both the numerator and
denominator of the Top-Heavy Ratio are adjusted to
reflect any contribution not actually made as of the
Determination Date, but which is required to be taken
into account on that date under section 416 of the Code,
and the regulations thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and
the Employer maintains or has maintained one or more defined
benefit plans which during the five (5) year period ending
on the Determination Date(s) has or has had any accrued
benefits, the Top-Heavy Ratio for any Required or Permissive
Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of the Account balances under
the aggregated defined contribution plan or plans for all
Key Employees, determined in accordance with subparagraph
(i) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all Key
Employees as of the Determination Date(s)), and the
denominator of which is the sum of the Account balances
under the aggregated defined contribution plan or plans for
all Participants, determined in accordance with subparagraph
(i) above, and the present value of accrued benefits under
the defined benefit plan or plans for all Participants as of
the Determination Date(s), all determined in accordance with
section 416 of the Code, and the regulations thereunder.
The accrued benefits under a defined benefit plan in both
the numerator and denominator of the Top-Heavy Ratio are
adjusted for any distribution of an accrued benefit made in
the five (5) year period ending on the Determination Date.
(iii) For purposes of subparagraphs (i) and (ii) above, the
value of Account balances and the present value of accrued
benefits will be determined as of the most recent
Determination Date, except as provided in section 416 of the
Code, and the regulations thereunder for the first and
second Years of a defined benefit plan. The Account
balances and accrued benefits of a Participant (1) who is
not a Key Employee but who was a Key Employee in a prior
year, or (2) who has not been employed (as defined by
section 416(g) of the Code) by the Company maintaining the
Plan at any time during the five (5) year period ending on
the Determination Date will be disregarded. The calculation
of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into
account will be made in accordance with section 416 of the
Code, and the regulations thereunder. When aggregating
plans, the value of Account balances and accrued benefits
will be
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calculated with reference to the Determination Date
that falls within the same calendar year.
(e) PERMISSIVE AGGREGATION GROUP: The required aggregation group of plans
plus any other plan or plans of the Employer which, when considered as
a group with the Required Aggregation Group, would continue to satisfy
the requirements of section 401(a)(4) and 410 of the Code.
(f) REQUIRED AGGREGATION GROUP: (i) Each qualified plan of the Employer
in which at least one Key Employee participates, and (ii) any other
qualified plan of the Employer which enables a plan described in (i)
to meet the requirements of sections 401(a)(4) and 410 of the Code.
(g) DETERMINATION DATE: For any Year subsequent to the first Year, the
last day of the preceding Year.
MINIMUM ALLOCATION REQUIREMENTS:
(a) Except as otherwise provided in subsections (c) and (d) below, the
Employer Contributions (excluding Salary Deferral Contributions and
Matching Employer Contributions) and forfeitures for the Year
allocated on behalf of any Participant who is not a Key Employee shall
not be less than the lesser of three percent (3%) of such
Participant's Compensation or, in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy section 401
of the Code, the largest percentage of Employer Contributions
(including Salary Deferral Contributions and Matching Employer
Contributions) and forfeitures, as a percentage of the first two
hundred thousand dollars ($200,000) of the Key Employee's
Compensation, allocated on behalf of any Key Employee for that year.
The minimum allocation is determined without regard to any Social
Security contribution.
This minimum allocation shall be made even though, under other Plan
provisions, the Participant would not otherwise be entitled to receive
an allocation, or would have received a lesser allocation for the Year
because of (i) the Participant's failure to complete 1,000 hours of
service (or any equivalent provided in the Plan), (ii) the
Participant's failure to make mandatory contributions to the Plan, or
(iii) Compensation less than a stated amount.
For purposes of computing the minimum allocation, Compensation means the
amount reported on the Participant's Internal Revenue Service
Form W-2, Wage and Tax Statement (or in the event such reporting form
is at some future time change modified or amended, such successor
corresponding form) for the Year. Notwithstanding the foregoing, for
Years beginning after December 31, 1988, in determining if an
individual is a Key Employee,
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Compensation shall include amounts which are contributed by the
Employer pursuant to a salary reduction agreement or salary deferral
agreement which are not included in the gross income of the
Participant under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code.
(c) The provision of subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of
the Year.
(d) The provision in (a) above shall not apply to any Participant to the
extent the Participant is covered under any other plan or plans of the
Company and the Company has provided that the minimum allocation or
benefit requirement applicable to Top-Heavy plans will be met in the
other plan or plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under section 416(b) of the Code) may not be forfeited
under section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
SPECIAL 415 LIMITATIONS: In any Year in which the Plan is deemed to be a Top-
Heavy Plan, the number 1.25 shall be replaced by the number 1.0 to the
extent required under section 416(h) of the Code and regulations issued
thereunder; provided, however, that such adjustment will not occur where
benefits for Key Employees do not exceed ninety percent (90%) of total
benefits and additional benefits are provided for Non-Key Employees in
accordance with the provisions of section 416(h)(2)(A) and (B) of the Code.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed as of
this __ day of _________, 1996.
ATTEST: UNITED STATIONERS INC.
By:
Its:
58
<PAGE>
EXHIBIT 10.79.1
FIRST AMENDMENT TO INDUSTRIAL LEASE
THIS FIRST AMENDMENT TO INDUSTRIAL LEASE (this "First Amendment") is
entered into as of the 23rd day of January, 1997 by and between ERI-CP, INC.,
a Delaware corporation (successor-in-interest to Carol Point Builders I
General Partnership, a California general partnership) ("Landlord") and
UNITED STATIONERS SUPPLY CO., an Illinois corporation (successor-in-interest
to Associated Stationers, Inc. ["Original Tenant"]) ("Tenant").
R E C I T A L S:
WHEREAS, Landlord's predecessor-in-interest and Original Tenant
entered into that certain Industrial Lease undated (said Industrial Lease is
hereinafter referred to as the "Lease") for certain premises containing
approximately 139,444 rentable square feet located at 898 Carol Court, Carol
Stream, Illinois (the "Demised Premises").
WHEREAS, Original Tenant subsequently was merged with and into
Tenant and in connection therewith, Tenant assumed all of the obligations and
rights of tenant in the Lease.
WHEREAS, Landlord and Tenant desire to amend the Lease to extend the
term (the "Term") of the Lease and to otherwise amend the Lease as provided
below.
NOW, THEREFORE, for and in consideration of the recitals hereinabove
set forth and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
1. INCORPORATION OF RECITALS AND TERMS. The foregoing recitals are
hereby incorporated in and made a part of this First Amendment. Unless
otherwise defined in this First Amendment to the contrary, all capitalized
terms used herein shall have the respective meanings as are ascribed to the
terms in the Lease.
2. MERGER AND ASSIGNMENT. Tenant has informed Landlord that Original
Tenant merged into and with Tenant (the "Merger") effective as of March 30,
1995. Tenant represents and warrants to Landlord that pursuant to such
Merger, Tenant has heretofore assumed all obligations and liabilities of
Original Tenant thereunder effective as of said date.
3. EXTENSION OF TERM. Landlord and Tenant hereby agree to extend the
Term of the Lease for an additional five (5) year period, commencing on June
1, 1997 and ending on May 31, 2002 (sometimes herein referred to as the
"Extended Term").
<PAGE>
4. FIXED RENT. Effective as of June 1, 1997, Fixed Rent payable
under the Lease during the Term of the Lease shall be as follows:
Monthly Installment
Period Annual Fixed Rent of Fixed Rent
------ ----------------- -------------
June 1, 1997 - May 31, 1999 $594,031.44 $49,502.62
June 1, 1999 - May 31, 2002 634,470.24 52,872.52
5. CONDITION OF THE DEMISED PREMISES. Landlord shall not be required
to provide any alterations or modifications to the Demised Premises. Tenant
is currently in possession of the Demised Premises and accepts the Demised
Premises in its "As-Is" condition.
Tenant at Tenant's expense, (subject to the application of the
"Tenant Allowance" [as such term is defined in the form of Work Letter attached
hereto as Exhibit A]) may install a washroom, a conference room and perform
certain other work in the Demised Premises all as shall be more particularly
set forth in the Working Plans (as defined in the Work Letter) as Tenant's
Work (as defined in the Work Letter). Tenant shall not undertake any
construction nor shall Tenant install any equipment, trade fixtures or
personal property without first executing and delivering to Landlord a
counterpart copy of the Work Letter and thereafter obtaining Landlord's
written approval of the Working Plans, which Working Plans shall be submitted
to Landlord in a timely fashion in accordance with the provisions of
Paragraph 3 of the Work Letter. Thereafter no material changes will be made
in the Working Plans without the prior written consent of Landlord. Tenant
shall not commence any work until among other things, Tenant delivers to
Landlord the insurance and any bond required under the terms of the Work
Letter.
6. ADDITIONAL AMENDMENTS TO LEASE.
(a) Article A-l(n) and (o) of the Lease are hereby deleted in
their entirety and the following substituted therefor:
"(n) Landlord's Address:
ERI-CP, INC.
c/o LaSalle Advisors Limited
200 East Randolph
Chicago, Illinois 60601
(o) Tenant's Address:
United Stationers Supply Co.
2200 East Golf Road
Des Plaines, Illinois 60016
<PAGE>
Attention: President"
(b) The following words are added after the word, "instance", at
the end of the first sentence of Article N-l of the Lease:
"which consent shall not be unreasonably withheld or delayed."
(c) As a condition to and in consideration of Landlord's covenants
hereunder, Tenant expressly agrees that Paragraph 4 of Rider No. One to the
Lease is hereby deleted in its entirety; it being the express intent of the
parties that Tenant shall have no further rights to extend the Term of the
Lease following the expiration of the Extended Term.
(d) The "Right of First Notification" provision appearing at the
end of Rider No. One of the Lease is hereby deleted in its entirety and the
following substituted therefor:
"RIGHT OF FIRST OFFER. If at any time during the Extended Term, that
certain space contiguous to the Demised Premises depicted on Exhibit B
hereto and containing approximately 135,508 square feet (the "Option
Space") becomes available for leasing, and if no Event of Default by
Tenant exists under the Lease, then Landlord shall not lease such
Option Space to any third party without first giving Tenant (i) notice
of the availability of such space which shall include the proposed
term and rental rate (including escalations, if any), abatements and
allowances, if any, and other economic concessions that Landlord would
agree to with respect to such Option Space (the "Offered Terms"), and
(ii) three (3) business days after the date of such notice in which to
commit in writing to lease such Option Space on the Offered Terms for
the remainder of Term, taking into account any modifications in such
Offered Terms required by the fact that the remaining Term may be
longer or shorter than that proposed by Landlord, and otherwise on the
terms, covenants and conditions contained in the Lease. Landlord and
Tenant expressly agree that the Offered Terms, in any event, shall
limit Landlord's liability for the payment of a brokerage commission
to any Tenant's broker to the payment of the then-current market
expansion commission (i.e., a commission equal to 50% of the then
market commission payable to outside brokers in connection with new
leases of space in the Building).
If Tenant fails, refuses or is otherwise unable to commit to such a
lease within the three (3) business day period, Landlord shall have
the right to lease the Option Space to any third party or parties on
such terms as are acceptable to Landlord."
7. BROKERS. Tenant represents and warrants to Landlord that
neither it nor its officers or agents nor anyone acting on its behalf has
dealt with any real estate broker, other than LaSalle Partners and Grubb &
Ellis (the fees of which shall be payable by Landlord) in the negotiation or
making of this First Amendment and Tenant agrees to indemnify and hold
harmless Landlord from any and all claims, liability, costs and expenses
(including attorneys' fees) incurred as a result of any inaccuracy in the
foregoing representation and warranty.
<PAGE>
8. FULL FORCE AND EFFECT: INCONSISTENCY. Except as otherwise
expressly set forth in this First Amendment, all provisions of the Lease
shall remain in full force and effect. In the event of any inconsistency
between the terms of the Lease and the terms of this First Amendment, the
terms of this First Amendment shall control.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the day and year first above written.
LANDLORD:
ERI-CP, INC., a Delaware corporation
By: LaSalle Advisors Limited,
its duly authorized agent
By:
Name: K. C. Woodrow
Title: Managing Director
TENANT:
UNITED STATIONERS SUPPLY CO.,
an Illinois corporation
By:
Name: Daniel H. Bushell
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT A
UNITED STATIONERS SUPPLY CO.
WORK LETTER
1. DEFINITIONS. Terms which are defined in the Lease shall have the
same meanings when used in this Work Letter. In addition, the following terms
shall have the following meanings:
(a) "Space Plans" means plans, drawings, and specifications showing
the intended design, character, and finishes of the Tenant's Work in the
Demised Premises, including partition and door locations and storefront
signs.
(b) "Systems Plans" means drawings, plans and specifications for
the mechanical, sprinkler, heating, air conditioning, electrical and plumbing
systems to be installed by Tenant's contractors in the Demised Premises.
(c) "Tenant Improvement Plans" means the Space Plans and the
Working Plans.
(d) "Tenant's Work" means the work described in Paragraph 4 below.
(e) "Working Plans" means the final working plans and
specifications prepared by or for Tenant (including, without limitation, the
Systems Plans) for the work to be performed by Tenant in the Demised
Premises, which Working Plans shall contain sufficient detail and shall be
otherwise suitable in all respects for submission to the building department
of the Village of Carol Stream to obtain a building permit. Working Plans
shall be consistent with the Space Plans approved by Landlord.
(f) "Tenant's Contractors" means any contractor hired by Tenant and
any subcontractor hired by such contractor.
2 INTENTIONALLY OMITTED.
3. PREPARATION AND APPROVAL OF TENANT IMPROVEMENT PLANS.
(a) Tenant hereby agrees to cause to be prepared by a registered
architect or a space planner, and submitted to Landlord for Landlord's review
and approval, the (i) Space Plans, and (ii) the Working Plans.
A-1
<PAGE>
(b) Within fifteen (15) business days after Landlord has received
the Space Plans and within twenty (20) business days after Landlord has
received the Working Plans, Landlord shall notify Tenant of Landlord's
approval or disapproval thereof, and in the event of disapproval, Landlord
shall specify the reasons for such disapproval. Tenant shall cause the Space
Plans or the Working Plans, as the case may be, to be revised and resubmitted
to Landlord for Landlord's review and approval within five (5) days after
Landlord notifies Tenant of disapproval thereof.
(c) Neither review nor approval by Landlord of the Space Plans or the
Working Plans shall constitute a representation or warranty by Landlord that any
of such plans either (i) are complete or suitable for their intended purpose, or
(ii) comply with applicable laws, ordinances, codes and regulations, it being
expressly agreed by Tenant that Landlord assumes no responsibility or liability
whatsoever to Tenant or to any other person or entity for such completeness,
suitability, or compliance.
(d) Once approved by Landlord, Tenant shall not make any material
changes, modifications or additions to the Tenant Improvement Plans without
the prior written consent of Landlord.
4. TENANT'S WORK.
(a) Tenant, at its sole cost and expense (but subject to the
application of the Tenant Allowance described in Paragraph 9 below) shall
perform all work in accordance with the Tenant Improvement Plans approved by
Landlord.
(b) All Tenant's Work shall be performed by contractors and
suppliers as are reasonably approved, in advance, in writing, by Landlord.
(c) Tenant hereby agrees to deliver to Landlord, within three (3)
days following the execution of the general contract for the Tenant's Work, a
true correct and complete copy of such general contract together with a total
project budget outlining the aggregate cost of all Tenant's Work to be performed
in the Demised Premises, all fees payable to Tenant's contractor for overhead,
general conditions and profit and all other hard and soft costs associated with
preparing the Demised Premises for Tenant's occupation thereof (other than
Tenant's furniture installation, phone installation and equipment installation)
(all of such costs are herein collectively referred to as "Tenant's Project
Cost").
5. PROCEDURE AND SCHEDULES FOR THE CONSTRUCTION OF TENANT'S WORK.
(a) General Requirements.
At least five (5) days prior to the commencement of Tenant's
Work hereunder, Tenant shall submit to Landlord the following:
A-2
<PAGE>
(i) All required building and other permits.
(ii) A construction schedule setting forth, in detail, the
construction sequence of the various trades, furnishing and move-in activities,
which shall set forth, among other things, the estimated date of completion of
Tenant's Work.
(iii) Evidence that appropriate public utility companies have
been notified as necessary to provide service for construction and occupancy
purposes.
(iv) Tenant's general contractor's sworn statement in form
satisfactory to Landlord identifying by trade the names, addresses and
telephone numbers of each subcontractor and supplier.
(v) In addition to the foregoing, Tenant shall not permit
Tenant's Contractors to commence any work until Tenant has received evidence
of the following insurance covering Tenant's Contractors' performance of the
work:
(1) Workers' Compensation Insurance in compliance with law
and Employer's Liability Insurance in the minimum amount of Five
Hundred Thousand Dollars ($500,000.00) and as required under any
applicable employee benefit act or statute, as will protect Tenant's
Contractors from any and all liability under such acts.
(2) Commercial General Liability Insurance including
premises/operations liability, independent contractors' liability,
products and completed operations liability (to be maintained in
effect for two (2) years following completion and acceptance of such
contract work), contractual liability and broad form property damage
liability in a minimum amount of One Million Dollars ($1,000,000) per
occurrence, combined single limit of bodily injury, personal injury or
property damage with annual aggregate of One Million Dollars
($1,000,000) for all such occurrences.
(3) Commercial Automobile Liability Insurance covering the
ownership, operation, maintenance, use, loading and unloading of any
owned, non-owned and hired automobile in the amount of One Million
Dollars ($1,000,000) per occurrence of bodily injury or property
damage.
(4) Umbrella Liability Insurance providing limits in excess
of those limits indicated in 5.(a)(v)(1), (2) and (3) (except Worker's
Compensation Insurance) in the amount of Five Million Dollars
($5,000,000) per occurrence, combined single limit for bodily injury,
personal injury and property damage.
A-3
<PAGE>
(5) Builder's Risk Insurance, written on a completed value
form, insuring against risks of direct physical loss or damage
excluding only standard perils, covering Tenant's Work and all other
improvements to the Demised Premises and all furniture, trade
fixtures, equipment, merchandise and all other items of Tenant's
property in the Demised Premises, in an amount not less than the
actual replacement cost of the work, and shall not include a co-
insurance provision of less than one hundred percent (100%).
Tenant shall furnish the insurance to be provided by Tenant under
Article F of the Lease prior to the commencement of Tenant's Work, and shall
furnish to Landlord certificates evidencing the coverages required by this
Paragraph, which certificates shall state that such insurance coverage may not
be changed or canceled without at least thirty (30) days' prior written notice
to Landlord and shall name as additional named insured parties (i) Landlord,
(ii) the holder of each mortgage encumbering the Demised Premises of which
Landlord shall have notified Tenant, and (iii) such other persons as Landlord
may from time to time designate. All insurance shall otherwise be in form and
substance satisfactory to Landlord.
(b) COMMENCEMENT OF CONSTRUCTION. Tenant shall commence construction
of Tenant's Work promptly following the approval of the Working Plans and
Tenant's receipt of Landlord's written notice to proceed with such work.
6. REQUIREMENTS DURING PERFORMANCE OF TENANT'S WORK. Tenant shall fully
perform and comply with each of the following covenants, conditions and
requirements:
(a) Tenant and Tenant's agents, contractors, workmen, mechanics,
suppliers and invitees shall work in harmony and not interfere with Landlord and
Landlord's contractors in doing work for other tenants and occupants of the
Building.
(b) Tenant shall require all entities performing work on behalf of
Tenant to provide protection for existing improvements to an extent that is
reasonably satisfactory to Landlord and shall allow Landlord or its agent access
to the Demised Premises, for inspection purposes, at all times during the period
when Tenant is undertaking construction activities thereon. In the event any
entity performing work on behalf of Tenant causes any damage to the property of
Landlord or others, Tenant shall cause such damage to be repaired at Tenant's
expense and if Tenant fails to cause such damage to be repaired promptly upon
Landlord's demand therefor, Landlord, in addition to any other rights or
remedies available to Landlord under the Lease or at law or equity, may cause
such damage to be repaired, in which event Tenant, upon Landlord's demand, shall
promptly pay to Landlord the cost of such repairs.
(c) All contractors and subcontractors shall use only those entrances
designated by Landlord for ingress and egress of personnel and the delivery and
removal of equipment and material through or across any common areas shall only
be permitted with the written approval of Landlord and during hours determined
by Landlord. Construction equipment
A-4
<PAGE>
and materials are to be located in confined areas approved by Landlord and truck
traffic is to be routed to and from the Building as directed by Landlord so as
not to burden the operation of the Building. Landlord shall have the right to
order any contractor or subcontractor who violates the above requirements to
cease work and to immediately remove it, its equipment, and its employees from
the Buildings.
(d) Tenant shall be responsible for providing trash removal service.
Tenant shall cause each entity employed by it to perform work on the Demised
Premises to abide by the provisions of this Work Letter as to the storage of
trash and shall cause Tenant's general contractor to leave the Demised Premises
in a clean and safe condition at the end of each day. Should Landlord deem it
necessary to remove Tenant's trash because of accumulation, an additional charge
to Tenant will be on a time and material basis.
(e) Tenant agrees that all services and work performed on the Demised
Premises by, on behalf of, or for the account of Tenant, shall be done in a
first-class workmanlike manner using only good grades of material and shall be
performed only by bondable licensed contractors, covered by a collective
bargaining agreement with the appropriate trade union.
(f) Tenant agrees to protect, indemnify, defend and hold Landlord
harmless from and against any and all losses, damages, liabilities, claims,
liens, costs, and expenses, including reasonable attorney's fees of whatever
nature, including those to the person and property of Tenant, its employees,
agents, invitees, licensees and others arising out of or in connection with the
performance of Tenant's Work by Tenant or Tenant's contractors in or about the
Demised Premises, the Building, and the cost of any repairs to the Demised
Premises, necessitated by activities of Tenant or Tenant's Contractors.
(g) Following any material default by Tenant hereunder, Landlord
shall have the right (but not the obligation) to perform on behalf of and for
the account of Tenant, subject to reimbursement by Tenant, any of Tenant's Work
which Landlord determines shall be so performed, provided that Landlord notifies
Tenant at the time Landlord approves the Tenant Improvement Plans of any such
work to be performed by Landlord. The cost to Landlord of any Tenant's Work
performed or supplied to Tenant by Landlord shall become due and payable within
five (5) business days after Tenant has been invoiced for same by Landlord.
8. COMPLETION DELIVERIES. Within five (5) business days after the
substantial completion of the Tenant's Work, Tenant shall deliver to Landlord
the following (collectively, the "Closing Deliveries"):
(a) An Architect's Certificate, in form and substance satisfactory to
Landlord, certifying that the Tenant's Work is in place and has been performed
in accordance with the approved Working Plans;
A-5
<PAGE>
(b) A detailed breakdown, in a form and substance satisfactory to
Landlord, of the final and total costs of Tenant's Work prepared by Tenant
and its Contractor(s), together with receipted invoices showing payment
thereof; subject to any punch list matters;
(c) Original waivers of lien and contractor's affidavits in such form
as may be required by Landlord, from all parties performing labor or supplying
materials in connection with Tenant's Work and sworn statements and long form
affidavits and waivers from Tenant's architect, engineer and contractors and any
other party with whom Tenant contracted directly for labor or materials
furnished Tenant in or for the Demised Premises;
(d) Copies of all warranties for workmanship, materials and equipment
received by Tenant from manufacturers and/or installers in connection with
Tenant's Work;
(e) "As-built" drawings of all improvements, certified by the
appropriate architect or engineer, and information regarding any special
requirements for cleaning the improvements completed on behalf of Tenant;
(f) Information with regard to any special security systems installed
by Tenant;
(g) An Estoppel Certificate in the form and substance reasonably
satisfactory to the parties;
(h) Such other supporting documentation as Landlord may reasonably
require.
9. TENANT ALLOWANCE. (a) Provided that Tenant has obtained Landlord's
approval of the Tenant Improvement Plans as provided above and has completed
Tenant's Work prior to July 1, 1997 ("Tenant's Work Completion Date"), Tenant
shall be entitled to an allowance (the "Tenant Allowance") to be applied
toward Tenant's costs incurred in the performance of the Tenant's Work in an
amount up to $20,000.00.
(b) Landlord shall disburse the Tenant Allowance to Tenant within
thirty (30) days of Landlord's receipt of all of the Closing Deliveries
described in Paragraph 8 above. Notwithstanding the foregoing, Landlord shall
reimburse Tenant out of the Tenant Allowance for costs incurred by Tenant for
the preparation of the Tenant Improvement Plans within thirty (30) days
following Landlord's receipt from Tenant of paid invoices evidencing to
Landlord's reasonable satisfaction such costs.
(c) Notwithstanding anything contained herein to the contrary,
provided that the "hard costs" of Tenant's Work shall not be less than
$10,000.00, if Tenant does not timely use the entire amount of the Tenant
Allowance for the purposes stated above, then any excess thereof (not to exceed
$10,000.00) shall be applied and credited to Fixed Rent first becoming due after
Tenant's Work Completion Date.
A-6
<PAGE>
10. MISCELLANEOUS.
(a) Tenant hereby appoints Otis H. Halleen as Tenant's representative
in connection with the matters set forth in this Work Letter and such person has
and shall have full authority and responsibility to act on behalf of Tenant and
to make all decisions and determinations as may be necessary or desirable in
connection with preparing the Demised Premises for the operation of Tenant's
business therein. Tenant shall inform Landlord in writing of any change in
Tenant's representative.
(b) Tenant's obligation to pay Fixed Rent and Additional Rent with
respect to the Demised Premises during the Extended Term shall commence on
June 1, 1997 irrespective of the status of completion of the Tenant's Work.
(c) This Work Letter shall not be deemed applicable to any additional
space added to the original Demised Premises at any time or from time to time or
to any portion of the original Demised Premises or any additions thereto in the
event of a renewal or extension of the initial term of the Lease unless
expressly so provided in the Lease or any amendment or supplement thereto signed
by both Landlord and Tenant.
(d) The failure by Tenant to pay any monies due Landlord pursuant to
this Work Letter within the time period herein stated shall deemed an Event of
Default under the terms of the Lease for which Landlord shall be entitled to
exercise all remedies available to Landlord for nonpayment of rent. All late
payments shall be subject to a service charge pursuant to Articles Q-16 and Q-17
of the Lease.
(e) This Work Letter is expressly made a part of the Lease and is
subject to each and every term and condition thereof, including, without
limitation, the limitations on liability set forth therein.
(f) Tenant shall be solely responsible to determine at the site all
dimensions of the Demised Premises and the Building in which the Demised
Premises are located which affect any work to be performed by Tenant hereunder.
A-7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Work Letter as of the
23rd day of January, 1997.
LANDLORD:
ERI-CP, INC., a Delaware corporation
By: LaSalle Advisors Limited,
its duly authorized agent
By:
Name: K. C. Woodrow
Title: Managing Director
TENANT:
UNITED STATIONERS SUPPLY CO.,
an Illinois corporation
By:
Name: Executive Vice President and
Title: Chief Financial Officer
<PAGE>
A-8
<PAGE>
EXHIBIT 10.114
AGREEMENT
This AGREEMENT (the "Agreement"), made and entered into as of the
18th day of November, 1996, by and between THOMAS W. STURGESS ("Sturgess")
and UNITED STATIONERS SUPPLY CO., an Illinois corporation (sometimes
hereinafter referred to as "Supply") and UNITED STATIONERS INC., a Delaware
corporation (sometimes hereinafter referred to as "Parent" and, together with
Supply, sometimes hereinafter collectively referred to as the "Company").
WITNESSETH
WHEREAS, the Company and Sturgess are parties to that certain
Employment Agreement dated as of January 1, 1996, (the "Employment Agreement");
WHEREAS, Company and Sturgess desire to terminate Sturgess's
employment with Company under the Employment Agreement upon the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual premises herein contained
and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. RESIGNATION; TERMINATION OF EMPLOYMENT; SERVICES AS DIRECTOR.
Sturgess acknowledges that as of November 18, 1996, he has resigned as (i) an
officer (including the offices of President, Chairman of the Board and Chief
Executive Officer of Parent) and employee of Company, (ii) an officer, director
and employee of all subsidiaries of Parent (including Supply). whether or not
wholly owned by Company and whether owned directly or indirectly by Company
(collectively, the "Subsidiaries") and (iii) a member of any committees on which
he may have served for any of the Subsidiaries. The Employment Agreement and
any other understandings or agreements between the Company or any Subsidiary are
hereby terminated and of no further force and effect, except as otherwise
expressly set forth herein. Sturgess shall continue to serve as a member of
the Board of Directors of Parent until his successor is elected and duly
qualified or until removed in accordance with the bylaws of the Company. Unless
mutually agreed or unless requested by an appropriate officer of the Company,
Sturgess agrees not to take or attempt to take any further action on behalf of
or purportedly on behalf of the Company or any Subsidiary, except in his
capacity as a member of the Board of Directors of the Company.
2. BENEFITS. In consideration of his covenants herein contained,
Sturgess will receive the following payments, all of which will be subject to
applicable federal and state withholding taxes:
<PAGE>
a. SALARY. The Company agrees to pay to Sturgess his current base
salary at the annual rate of $495,000, in accordance with the Company's normal
payment schedule for senior executives, through December 31, 1996.
b. BONUS. The Company agrees to pay to Sturgess the bonus
Sturgess would have received in respect of fiscal year 1996 under Section 2(c)
of the Employment Agreement if Sturgess had continued as an employee of the
Company under the Employment Agreement through December 31, 1996.
c. ACCRUED VACATION. The Company agrees to pay to Sturgess in
accordance with the Company's customary policies for his earned unused vacation
time through the date hereof. Such payment will be made by the Company to
Sturgess within 10 days of the date hereof.
d. OTHER BENEFITS. Sturgess will be permitted to participate in the
Company's medical and dental plans in which Sturgess currently participates to
the extent such plans remain in effect (and in any plan which replaces any such
plan which is discontinued) at regular rates until December 31, 1999, provided
Sturgess is eligible to participate under the terms of such plans, and in the
event Sturgess is not eligible to participate in any such plan, the Company
shall use its best efforts to provide substantially similar coverages for
Sturgess. All other employee benefits for Sturgess, including, without
limitation, any of the benefit plans, programs and policies set forth on
Exhibit A to the Employment Agreement not expressly continued pursuant to this
Agreement, shall cease on the date hereof.
3. OPTIONS.
a. CANCELED OPTION. Sturgess agrees that the option for 120,000
shares of Company Common Stock referenced in Section 9 of the Employment
Agreement shall terminate effective as of the date hereof and such option is
hereby canceled and shall be of no further force and effect.
b. CONTINUED OPTION. The option for 240,000 shares of Company
Common Stock referenced in Section 8 of the Employment Agreement shall remain in
effect, in accordance with the terms of that certain Management Equity Plan
Stock Option Agreement, dated January 1, 1996 (the "Stock Agreement"), as such
Stock Agreement is amended as hereinafter set forth, which amendments have been
approved by the Compensation Committee of the Company's Board of Directors and
are hereby agreed to by Sturgess:
A. Clauses (i), (ii) and (iii) of Section 3 of the Stock Agreement
are hereby deleted and the following new clauses (i) and (ii) are
substituted therefor:
"(i) Options for 160,000 shares after the occurrence of an Event;
and
(ii) Options for 80,000 shares on or after the earliest date, if
any, that both (1) the Company shall, on or prior to
September 30, 1997,
<PAGE>
have acquired, been acquired by, entered into a joint venture
with or otherwise engaged in a business combination with, an
entity designated in writing as an "entity" for the purposes
of the application of this Section 3(ii) by the Compensation
Committee of the Board of Directors of the Company; provided that
a definitive agreement with respect to such transaction shall
have been entered into by the Company and such entity not later
than March 31, 1997; and (2) an Event has occurred.
B. Section 5 of the Stock Agreement is hereby deleted.
4. COOPERATION AND CONSULTING SERVICES. From and after the date
hereof through December 31, 1999, Sturgess shall cooperate and consult
reasonably on a non-full-time basis with the Company and its employees,
agents and representatives to assist the businesses and operations of the
Company, including. without limitation, cooperation with the transition of
management. Such cooperation shall also include, without limitation,
Sturgess' provision of any information (in connection with legal proceedings
or otherwise) relating to his activities while an employee of the Company.
Compensation for such cooperation and consulting services provided hereunder
shall be determined on a project by project basis and on the basis of good
faith negotiations between the Company and Sturgess.
5. CONFIDENTIAL INFORMATION.
a. GENERAL. Sturgess acknowledges the Company's exclusive ownership
of all information useful in the Company's business (including its dealings with
suppliers, customers and other third parties, whether or not a true "trade
secret"), which at the time or times concerned is not generally known to persons
engaged in businesses similar to those conducted by the Company and which has
been or is from time to time disclosed to, discovered by, or otherwise known by
Sturgess as a consequence of his prior employment by or future consulting
services to the Company or service on the Board of Directors of the Company
(including information conceived, discovered or developed by Sturgess during his
employment with or engagement as consultant by the Company or with Associated
Stationers, Inc. or service on the Board of Directors of
(i) The identity, purchase and payment patterns of, and special
relations with, the Company's customers;
(ii) The identity, net prices and credit terms of, and special
relations with, the Company's suppliers;
(iii) The Company's inventory selection and management techniques;
(iv) The Company's product development and marketing plans; and
(v) The Company's finances, except to the extent publicly disclosed.
<PAGE>
b. PROPRIETARY MATERIALS. The term "Proprietary Materials" shall mean
all business records, documents, drawings, writings, software, programs and
other tangible things which were or are created or received by or for the
Company in furtherance of its business, including, by or but not limited to,
those which contain Confidential Information. For example, Proprietary
Materials include, but are not limited to the following especially sensitive
types of materials: applications software, the data bases of Confidential
Information maintained in connection with such software, and printouts generated
from such data bases; market studies and strategic plans; customer, supplier and
employee lists; contracts and correspondence with customers and suppliers;
documents evidencing transactions with customers and suppliers; sales calls
reports, appointment books, calendars, expense statements and the like,
reflecting conversations with any company, customer or supplier, architectural
plans; and purchasing, sales and policy manuals. Proprietary Materials also
include, but are not limited to, any such things which are created by Sturgess
or with Sturgess' assistance and all notes, memoranda and the like prepared
using the Proprietary Materials and/or Confidential Information.
c. INVENTIONS. While some of the information contained in Proprietary
Materials may have been known to Sturgess prior to employment with the Company,
or may now or in the future be in the public domain, Sturgess acknowledges that
the compilation of that information contained in the Proprietary Materials has
or will cost the Company a great effort and expense, and affords persons to whom
Proprietary Materials are disclosed, including Sturgess, a competitive advantage
over persons who do not know the information or have the compilation of the
Proprietary Materials. Sturgess further acknowledges that Confidential
Information and Proprietary Materials include commercially valuable trade
secrets and automatically become the Company's exclusive property when they are
conceived, created or received. Sturgess shall report to the Company fully and
promptly, orally (or, at the Company's request, in writing) all discoveries,
inventions and improvements, whether or not patentable, and all other ideas,
developments, processes, techniques, designs and other information which may be
of benefit to the Company, which Sturgess conceived, made or developed during
his employment with the Company or conceives, makes or develops in connection
with the provisions of any consulting services on behalf of the Company (whether
or not during working hours or with the use or assistance of Company facilities,
materials or personnel, and which either (i) relate to or arise out of any part
of the Company's business in which Sturgess participates, or (ii) incorporate or
make use of Confidential Information or Proprietary materials) (all items
referred to in this Section 5(c) being sometimes collectively referred to herein
as the "Intellectual Property") All Intellectual Property shall be deemed
Confidential Information of the Company, and any writing or other tangible
things describing, referred to, or containing Intellectual Property shall be
deemed the Company's Proprietary Materials. At the request of the Company,
during or after the term of employment or consultancy, Sturgess (or after
Sturgess' death, Sturgess' personal representative) shall, at the expense of the
Company, make, execute and deliver all papers, assignments, conveyances,
installments or other documents, and perform or cause to be performed such other
lawful acts, and give such testimony, as the Company deems necessary or
desirable to protect the Company's ownership rights and Intellectual Property.
<PAGE>
d. CONFIDENTIAL DUTIES. Sturgess shall, except as may be required by
law, during the term of service on the Company's Board of Directors or
engagement as a consultant by the Company, and thereafter for the longest time
permitted by applicable law:
(i) Comply with all of the Company's instructions (whether oral or
written) for preserving the confidentiality of Confidential
Information and Proprietary Materials.
(ii) Use Confidential Information and Proprietary Materials only at
places designated by the Company, in furtherance of the Company's
business, and pursuant to the Company's directions.
(iii) Exercise appropriate care to advise other employees of the
Company (and, as appropriate, subcontractors) of the sensitive nature
of Confidential Information and Proprietary Materials prior to their
disclosure, and to disclose the same only on a need-to-know basis.
(iv) Not copy all or any part of Proprietary Materials, except as the
Company directs.
(v) Not sell, give, loan or otherwise transfer any copy of all or any
part of Proprietary Materials to any person who is not an employee of
the Company, except as the Company directs.
(vi) Not publish, lecture on or otherwise disclose to any person who
is not an employee of the Company, except as the Company directs, all
or any part of Confidential Information or Proprietary Materials.
(vii) Not use all or any part of any Confidential Information or
Proprietary Materials for the benefit of any third party without
the Company's written consent.
Upon the termination of Sturgess' consultation and board services for
whatever reason, Sturgess (or in the event of death, Sturgess' personal
representative) shall promptly surrender to the Company the original and all
copies of Proprietary Materials (including all notes, memoranda and the like
concerning or derived therefrom), whether prepared by Sturgess or others, which
are then in Sturgess' possession or control. Records or payments made by the
Company to or for the benefit of Sturgess, Sturgess' copy of this Agreement and
other such things lawfully possessed by Sturgess which relate solely to taxes
payable by Sturgess, benefits due to Sturgess or the terms of Sturgess' prior
employment with the Company, shall not be deemed Proprietary Materials for
purposes of this Section 5.
6. NON-COMPETITION.
a. During Sturgess' service as a consultant hereunder, and during
the two year period following the expiration of such period of service as a
consultant), Sturgess shall not, in
<PAGE>
any way, directly or indirectly, (i) manage, operate, control (or participate
in any of the foregoing), accept employment or a consulting position with or
otherwise advise or assist or be connected with or directly or indirectly own
or have any other interest in or right with respect to (other than through
ownership of not more than 1 % of the outstanding shares of a corporation's
stock which is listed on a national securities exchange) any enterprise
(other than for the Company or for the benefit of the Company) which is a
wholesaler of office products having annual sales in excess of $1 ,000,000 or
(ii) take any non-privileged action, disparage, dissipate or negatively
affect the goodwill, business, prospects, or reputation of the Company or its
relationships with its employees, customers, suppliers. competitors, vendors,
stockholders, lenders, prospective investors, prospective purchasers of any
businesses or assets of the Company or others.
b. Notwithstanding Section 6(a), following the date hereof, Sturgess may
be engaged in the business of selling office products at retail and Sturgess may
be engaged by any company whose principal business is the manufacture of office
products.
c. Sturgess recognizes that the foregoing limitations are reasonable and
properly required for the adequate protection of the business of the Company. If
any such limitations are deemed to be unreasonable by a court having
jurisdiction of the matter and parties, Sturgess hereby agrees and submits to
the reduction of any such limitations or such territory or time as to such court
shall appear reasonable.
d. If Sturgess shall be in violation of any of the foregoing restrictive
covenants and if the Company seeks relief from such breach in any court or other
tribunal, such covenants shall be extended for a period of time equal to the
pendency of such proceedings, including all appeals.
e. Sturgess agrees that the remedy at law for any breach of the
provisions of Section 5 or this Section 6 shall be inadequate and that the
Company shall be entitled to injunctive relief in addition to any other remedies
it may have.
7. REPRESENTATIONS AND WARRANTIES OF STURGESS. Sturgess has the full
right, power and authority to enter into this Agreement. This Agreement has
been duly and validly executed and delivered by Sturgess and constitutes a valid
and binding obligation on his part, enforceable against him in accordance with
its terms. The execution, delivery and performance of this Agreement will not,
with or without the giving of notice or the passage of time or both, (a) violate
any judgment, injunction or order of any court, arbitrator or governmental
agency applicable to Sturgess, or (b) conflict with, result in the breach of any
provision of or constitute a default under any agreement or instrument to which
Sturgess is a party or by which he may be bound.
8. REPRESENTATIONS AND WARRANTIES OF COMPANY. Parent and Supply hereby
represent and warrant that they are corporations duly organized and validly
existing in good standing under the laws of the State of Delaware and Illinois,
respectively, and have all requisite corporate power and authority to enter into
and perform all of its obligations under this Agreement. The execution,
delivery and performance of this Agreement by the Company and all
<PAGE>
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on its part. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding obligation
on its part, enforceable against it in accordance with its terms. The
execution, delivery and performance of this Agreement will not, with or
without the giving of notice or the passage of time or both, (a) violate any
judgment, injunction or order of any court, arbitrator or governmental agency
applicable to the Company, or (b) conflict with, result in the breach of any
provision of or constitute a default under any agreement or instrument to
which the Company is a party or by which it may be bound.
9. RELEASE. Effective immediately, Sturgess releases and discharges
the Company, each subsidiary and affiliate of the Company and each present
and former director, officer and employee of the Company or any subsidiary or
affiliate of the Company (collectively "Company Affiliates") from all manner
of claims, actions, causes of action or suits, in law or in equity, which
Sturgess has or hereafter can, shall or may have against the Company or
Company Affiliates or any of them by reason of any matter, cause or thing
whatsoever, arising out of an event or matter occurring prior to the date
hereof, including any action arising from or during his employment with the
Company, resulting from his termination of such employment or related to his
status as a shareholder, officer, employee or participant in any Company
employee benefit plan, except for any claims or action Sturgess may have that
results from a breach of the Company's obligations under this Agreement or a
failure by the Company to perform its obligations under this Agreement. From
and after the date hereof, Sturgess agrees and covenants not to sue or
initiate arbitration, or threaten suit or arbitration against, or make any
claim against, the Company or any Company Affiliate for or alleging any of
the claims, actions, causes of action or suits as discussed above. Sturgess
acknowledges that this release includes but is not limited to all claims
arising under federal, state or local laws prohibiting employment
discrimination and all claims growing out of any legal restrictions on the
Company's right to terminate its employees. This release specifically
encompasses all claims of employment discrimination based on race, color,
religion, sex, handicap and national origin, as provided under Title VII of
the Civil Rights Act of 1964, as amended, the 1991 Civil Rights Act, all
claims of discrimination based on age, as provided under the Age
Discrimination in Employment Act of 1967, as amended, all claims of
discrimination based on handicap, as provided in the Americans with
Disabilities Act, as amended. Notwithstanding anything hereto to the
contrary, Sturgess shall not be deemed to have released the Company's
obligation to Sturgess, if any, under indemnification provisions of the
Company's charter or bylaws, whether or not covered by insurance, or any
rights Sturgess may have under any directors' and officers' liability policy.
Nothing herein shall limit Sturgess's ability to seek contribution from
directors for liabilities for claims brought by third parties who are
unrelated to Sturgess. The Company and the Company Affiliates hereby release
Sturgess from all claims, actions, causes of action or suits, in law or in
equity, which the Company or the Company Affiliates have or hereafter can,
shall or may have against Sturgess by reason of any matter, cause of action
or thing whatsoever, arising out of an event or matter occurring prior to the
date hereof, including any alleged breach by Sturgess of the Employment
Agreement or based on his actions as an employee, officer or director of the
Company or a Company Affiliate, except for matters relating to a breach of
fiduciary duty by Sturgess of which the Company is not now aware.
<PAGE>
10. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the Company, its successors and assigns, and
Sturgess, his heirs, personal representatives, successors and assigns.
b. SURVIVAL. All representations and warranties contained
in this Agreement shall survive the execution and delivery hereof.
c. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to injunctive relief to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction,
this being in addition to any other remedy to which they are entitled under
this Agreement or at law or in equity. In addition, a party that is
required to enforce the terms and provisions of this Agreement and is
successful therein shall be reimbursed by the other party for all costs and
expenses, including reasonable legal fees, that it may incur with respect
to such enforcement.
d. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the Company and Sturgess relating to the subject matter
hereof and there are no terms other than those contained herein. This
Agreement may not be modified or amended except in a writing signed by the
parties hereto.
e. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without
giving effect to principles of conflicts of law.
f. COUNTERPARTS. This Agreement may be executed in counterparts,
which together shall constitute one and the same agreement.
g ENFORCEABILITY. If any provision of this Agreement shall
be held or deemed to be or shall, in fact, be invalid, inoperative or
unenforceable as applied in any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions, because it conflicts with any
provisions of any constitution, statute, rule or public policy, or for any
reason, such circumstances shall not have the effect of rendering the
provision in question invalid, inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions of
this Agreement invalid, inoperative or unenforceable to any extent
whatever. If any provision of this Agreement shall be held or deemed to
impose restrictions which are too broad, too lengthy or otherwise
unreasonable, the parties hereto agree to be bound by a court's decision as
to what restrictions would be reasonable and acknowledge that such court
has the authority and discretion to make such a determination.
<PAGE>
h. ACKNOWLEDGMENT BY STURGESS. Sturgess hereby acknowledges
that he has carefully read and fully understands all the provisions of this
Agreement. He further acknowledges that this Agreement sets forth the
entire agreement between himself and the Company with respect to the
subject matter of this Agreement. Finally, Sturgess hereby acknowledges
that, in considering whether to sign this Agreement, he has not relied upon
any representation or statement, written or oral, not set forth in this
Agreement and that he has not been threatened or coerced into signing this
Agreement by any official of the Company and that he has read, understood,
and fully and voluntarily accepts the terms of this Agreement.
i. CAPTIONS. The captions herein are for purposes of
identification only and shall not be considered in construing this
Agreement.
j. NOTICES. All notices hereunder shall be given in writing
and sent to the party for whom such is intended by hand delivery or United
States certified or registered mail, return receipt requested, postage
prepaid, or overnight courier service, addressed to the party for whom
intended at the following respective addresses;
If to the Company: United Stationers Supply Co.
2200 East Golf Road
Des Plaines, IL 60016
Attn: Executive Vice President
and Chief Financial Officer
If to Sturgess: Thomas W. Sturgess
c/o Wingate Partners
750 North St. Paul/Suite #1200
Dallas, TX 75201
or to such other persons and/or at such other addresses as may be
designated by written notice served in accordance with the provisions
hereof. Such notices shall be deemed to have been served, if hand
delivered, on the day delivered, and if mailed, on the third day following
the date deposited in the mail. Urgent notices shall be given by Telex or
cable to the same addresses and confirmed by mail as provided above. All
notices sent by Telex or cable shall be deemed to have been served upon
receipt of the Telex or cable, but only if in fact confirmed by mail
promptly after dispatch of the Telex or cable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
UNITED STATIONERS INC.
UNITED STATIONERS SUPPLY CO.
<PAGE>
By: /s/ F. B. Hegi, Jr.
-------------------
Name: F. B. HEGI, JR.
Title: CHAIRMAN, EXECUTIVE COMMITTEE
/s/ Thomas W. Sturgess
---------------------
THOMAS W. STURGESS
<PAGE>
Exhibit 10.115
L E A S E A G R E E M E N T
STATE OF TEXAS
COUNTY OF HARRIS
This Lease Agreement is made and entered into by and between AMBERJACK LIMITED
PARTNERSHIP, a Texas Limited Partnership, hereinafter referred to as "Landlord",
and UNITED STATIONERS SUPPLY CO., AN ILLINOIS CORPORATION, hereinafter referred
to as "Tenant".
W I T N E S S E T H:
1. PREMISES and TERM
In consideration of the obligation of Tenant to pay rent as
herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby takes from Landlord certain premises situated within the County of
Harris, State of Texas, more particularly described on Exhibit "A" attached
hereto and incorporated herein by reference, and as follows:
Approximately 23,600 square feet of office/warehouse space located in
building "A" containing approximately 138,800 square feet and situated on a
tract of land out of the John Flowers Survey, Abstract 269, Houston, Harris
County, Texas, and being more particularly described on Exhibit "A"
attached hereto and made a part hereof. The address of this facility is
6600 Long Point Road, Suite 140, Houston, Texas 77055.
together with all rights, privileges, easements, appurtenances and immunities
belonging to or in any way pertaining to the premises and together with the
building and other improvements situated or to be situated upon said premises
(said real property, building and improvements being hereinafter referred to as
the "Premises").
TO HAVE AND TO HOLD the same for a term commencing on the
"commencement date" as March 1 1997, and ending eighteen (18) months
thereafter; provided, however, that in the event the "commencement date" is a
date other than the first day of a calendar month, said term shall extend for
said number of months in addition to the remainder of the calendar month
following the "commencement date".
Tenant acknowledges that no representations as to the repair of the Premises
have been made by Landlord, unless such are expressly set forth in this lease.
After such "commencement date" Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises. In the event of
any dispute as to substantial completion or work performed or required to be
performed by Landlord, the certificate of Landlord's architect or general
contractor shall be conclusive.
2. BASE RENT and SECURITY DEPOSIT
A. Tenant agrees to pay to Landlord rent for the Premises, in
advance, without demand, deduction or set off, for the entire term hereof as
follows: Month 1 to month 18 will be paid in equal monthly payments of Five
Thousand Nine Hundred Sixty-eight Dollars ($5,968.00). One such monthly
installment, plus monthly common area maintenance payments, shall be due
and payable on the date hereof and a like monthly installment shall be due
and payable on or before the first day of each calendar month succeeding the
commencement date recited above during the hereby demised term, except that
the rental payment for any fractional calendar month at the commencement or
end of the lease period shall be prorated. Failure by Tenant to pay any one
monthly installment of rent by the fifth (5th) day
<PAGE>
from the date such payment was due shall be considered an event of default in
accordance with the provisions of Paragraph 18(a) of this Lease Agreement.
Upon such failure by Tenant to pay any rental installment within five (5)
days of when such installment is due, Tenant shall pay to Landlord, on
demand, a late charge in an amount equal to five percent (5%) of such
installment. Failure to pay such late charge within ten (10) days after
demand shall likewise be considered an event of default hereunder. The
provision for such late charge shall be in addition to all of Landlord's
other rights and remedies hereunder or at law and shall not be construed as
liquidated damages or as limiting Landlord's remedies in any manner.
B. Tenant agrees to pay to Landlord, as additional rental, all
charges for any services, goods, or materials furnished by Landlord at
Tenant's request which are not required to be furnished by Landlord under
this lease (as well as all other sums payable by Tenant hereunder) within ten
(10) days after Landlord renders a statement therefor to Tenant. All past
due additional rental amounts shall bear interest from the date due until
paid at the maximum rate allowed by law.
C. In addition, Tenant agrees to deposit with Landlord on the
date hereof the sum of Six Thousand Six Hundred Eight Dollars ($6,608.00),
which sum shall be held by Landlord, without obligation for interest, as
security for the performance of Tenant's covenants and obligations under this
lease, it being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in case of Tenant's
default. Upon the occurrence of any event of default by Tenant, Landlord
may, from time to time, without prejudice to any other remedy provided herein
or provided by law, use such fund to the extent necessary to make good any
arrears of rent or other payments due Landlord hereunder, and any other
damage, injury, expense or liability caused by such event of default; and
Tenant shall pay to Landlord, on demand, the amount so applied in order to
restore the security deposit to its original amount. Although the security
deposit shall be deemed the property of Landlord, any remaining balance of
such deposit shall be returned by Landlord to Tenant within thirty (30) days
after termination of this lease, providing that all of Tenant's obligations
under this lease have been fulfilled.
3. USE
The demised Premises shall be used only for the purpose of receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful
purposes as may be incidental thereto. Outside storage, including, without
limitation, trucks and other vehicles, is prohibited without Landlord's prior
written consent. Tenant shall obtain, at its own cost and expense, any and
all licenses and permits necessary for any such use. Tenant shall comply
with all governmental laws, ordinances and regulations applicable to the
Tenant's use of the Premises, and shall promptly comply with all governmental
orders and directives for the correction, prevention and abatement of
nuisances caused by Tenant in, upon, or in connection with the Premises, all
at Tenant's sole expense. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the
Premises, nor take any other action which would constitute a nuisance or
would disturb or endanger any other tenants of the building in which the
Premises are situated or unreasonably interfere with their use of their
respective Premises. Without Landlord's prior written consent, Tenant shall
not receive, store or otherwise handle any product, material or merchandise
which is explosive or highly inflammable. Tenant will not permit the Premises
to be used for any purpose or in any manner (including, without limitation,
any method of storage) which would render the insurance thereon void or the
insurance risk more hazardous or cause the State Board of Insurance or other
insurance authority to disallow any sprinkler credits.
4. TAXES *
A. Landlord agrees to pay, before they become delinquent, all
taxes, assessments, and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys around
<PAGE>
the Building. If the Tenant's proportionate share of taxes levied or
assessed against the Building and the grounds, parking areas, driveways and
alleys around the Building during a real estate tax year, occurring within
the term hereof or during any renewal or extension of this term, shall exceed
an amount equal to the actual cost for this expense for the calendar year
1997 or $64,630.00, which is the total estimated taxes for the entire
building of which Tenant's prorated share at 17.0028% is $10,989.00, Tenant
shall pay to Landlord as additional rental, upon demand, the amount of such
excess. In the event any such amount is not paid within ten (10) days after
the date of Landlord's invoice to Tenant, the unpaid amount shall bear
interest from the date due until paid at the maximum interest rate allowed by
law.
* SEE SPECIAL PROVISIONS EXHIBIT "C" ATTACHED HERETO AND MADE A PART HEREOF
B. Tenant's "proportionate share", as used in this lease, shall mean
a fraction, the numerator of which is the space contained in the Premises and
the denominator of which is the entire space contained in the building(s).
C. If at any time during the term of this lease the present
method of taxation shall be changed so that in lieu of the whole or any part
of any taxes, assessments or governmental charges levied, assessed or imposed
on real estate and the improvements thereon, there shall be levied, assessed
or imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rents for the present or
any future building(s) on the Premises, then all such taxes, assessments,
levies or charges or the part thereof so measured or based, shall be deemed
to be included within the term "taxes" for the purposes hereof.
D. The Landlord shall have the right to employ a tax consulting firm
to attempt to assure a fair tax burden on the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord the amount of
Tenant's "proportionate share" (as defined in subparagraph 4.B above) of the
cost of such service.
E. Any payment to be made pursuant to this Paragraph 4 with
respect to the real estate tax year in which this lease commences or
terminates shall be prorated.
F. Tenant shall pay all ad valorem and similar taxes or assessments
levied upon or applicable to all equipment, fixtures, furniture, and other
property placed by Tenant in the Premises and all license and other fees or
charges imposed on the business conducted by Tenant on the Premises. It is
agreed that Tenant will also be responsible for ad valorem taxes on the value
of leasehold improvements to the extent that such leasehold improvements
exceed standard building allowances.
5. LANDLORD'S REPAIRS
Landlord shall, at his expense, maintain only the roof,
foundation, and the structural soundness of the exterior walls of the building
in good repair, reasonable wear and tear excepted. Tenant shall repair and pay
for any damage caused by the negligence of Tenant, or Tenant's employees, agents
or invitees, or caused by Tenant's default hereunder. The term "walls" as used
herein shall not include windows, glass or plate glass, doors, special store
fronts or office entries. Tenant shall promptly give Landlord written notice of
defect or need for repairs, after which Landlord shall have reasonable
opportunity to repair same or cure such defect. Landlord's liability with
respect to any defects, repairs or maintenance for which Landlord is responsible
under any of the provisions of this lease shall be limited to the cost of such
repairs or maintenance or the curing of such defect.
6. TENANT'S REPAIRS
A. Tenant shall, at its own cost and expense, keep and maintain all
parts of the Premises (except those for which Landlord is expressly
responsible under the terms of this lease) in good condition, reasonable wear
and tear excepted - See Exhibit "C", paragraph 28.f, promptly making all
necessary repairs and replacements, including, but not limited to, windows,
glass and plate glass, doors, special store fronts or office entries,
interior walls and finish work,
<PAGE>
floors and floor covering, downspouts, gutters, truck doors, dock bumpers,
paving (not to exceed S2,000.00/year and is part of common area services),
plumbing work and fixtures, termite and pest extermination, regular removal
of trash and debris, keeping the parking areas, driveways, alleys and the
whole of the Premises in a clean and sanitary condition. Tenant shall not be
obligated to repair any damage caused by fire, tornado or other casualty
covered by the insurance to be maintained by Landlord pursuant to
subparagraph 13.A below, except that Tenant shall be obligated to repair all
wind damage to glass, except with respect to tornado or hurricane damage.
B. Tenant shall not damage any demising wall or disturb the
integrity and support provided by any demising wall and shall, at its sole cost
and expense, promptly repair any damage or injury to any demising wall caused by
Tenant or its employees, agents or invitees.
C. Tenant and its employees, customers and licensees shall have
the right to use the parking areas, if any, as may be designated by Landlord in
writing, subject to such reasonable rules and regulations as Landlord may from
time to time prescribe and subject to rights of ingress and egress of other
tenants. Landlord shall not be responsible for enforcing Tenant's parking
rights against any third parties. Landlord reserves the right to perform the
paving and landscape maintenance, exterior painting, common sewage line
plumbing, and care for the grounds around the Building, and Tenant shall be
liable for its proportionate share (as defined in subparagraph 4.B above) of the
cost and expense. If Tenant or any other particular tenant of the Building can
be clearly identified as being responsible for obstructions or stoppage of the
common sanitary sewage line, then Tenant, if Tenant is responsible, or such
other responsible tenant, shall pay the entire cost thereof, upon demand, as
additional rent. Tenant shall pay, when due, its share, determined as
aforesaid, of such costs and expenses along with the other tenants of the
building to Landlord upon demand, as additional rent, for the amount of its
share as aforesaid of such costs and expenses in the event Landlord elects to
perform or cause to be performed such work. In the event any such amount is
not paid within ten (10) days after the date of Landlord's invoice to Tenant,
the unpaid amount shall bear interest from the date due until paid at the
maximum interest rate allowed by law.
7. COMMON AREA MAINTENANCE *
A. Tenant agrees to pay Landlord $0.0271 per square foot per month as
its estimated share of the common area services which are provided by
Landlord for the mutual benefit of all tenants, including all expenses
incurred by Landlord with respect to the maintenance and operation of the
building and/or project of which the Premises are a part. These services may
include, but are not limited to, general landscaping, mowing of grass, care
of shrubs (including replacement of expired plants); operation and
maintenance of lawn sprinkler system; operation and maintenance of exterior
lighting; water service and sewer charges; repainting of exterior surfaces of
truck doors, handrails, downspouts, and other parts of the building which
require periodic preventive maintenance; parking lot maintenance; pro rata
share of the project's common area maintenance and monitoring service; and a
management fee equal to 3% of the gross rental due under this lease, payable
monthly.
* SEE SPECIAL PROVISIONS EXHIBIT "C" ATTACHED HERETO AND MADE A PART HEREOF
B. The actual cost of these services, other than Tenant's management fee,
shall be prorated among tenants on the basis of square footage occupied in
the same manner as provided in subparagraph 4.B above. Landlord shall send
Tenant an annual statement of actual common area service costs, along with
either an invoice or a rebate for the amount that Tenant's actual
proportionate share exceeded or was less than Tenant's $0.0271 per square
foot per month common area service payment for the year then ended. Tenant
agrees to reimburse Landlord within thirty (30) days after receipt of such
invoice from Landlord. Subject to Landlord's reasonable discretion, this
monthly common area service charge may be renegotiated periodically based
upon increases in Landlord's annual cost of providing these services,
provided, however, that at no time during the term of this lease shall an
increase, if any, in the monthly common area service charge payable by
Tenant, hereunder, exceed an aggregate of 5% per year cumulative as
calculated on an annual basis.
<PAGE>
8. ALTERATIONS
Tenant shall not make any alterations, additions or
improvements to the Premises (including, but not limited to, roof and wall
penetrations) without the prior written consent of Landlord. If Landlord
consents to Tenant's contractors doing the work, Landlord may require, at
Landlord's sole option, that Tenant provide, at Tenant's expense, a lien and
completion bond in an amount equal to 1-1/2 times any and all estimated costs of
improvements, additions or alterations in the Premises to insure Landlord
against any liability or mechanic's and materialmen's lien which may arise in
accordance with Paragraph 23 of this Lease Agreement and to insure completion of
the work. Tenant may, without the consent of Landlord, but at its own cost and
expense and in a good workmanlike manner, erect such shelves, bins, machinery
and trade fixtures as it may deem advisable, without altering the basic
character of the Building or improvements and without overloading or damaging
such Building or improvements, and in each case complying with all applicable
governmental laws, ordinances, regulations and other requirements. All
alterations, additions, improvements and partitions erected by Tenant shall be
and remain the property of Tenant during the term of this lease; and Tenant
shall, unless Landlord otherwise elects as hereinafter provided, remove all
alterations, additions, improvements and partitions erected by Tenant and
restore the Premises to their original condition by the date of termination of
this lease or upon earlier vacating of the Premises, provided, however, that, if
Landlord so elects, prior to termination of this lease or upon earlier vacating
of the Premises, such alterations, additions, improvements and partitions shall
become the property of Landlord as of the date of termination of this lease or
upon earlier vacating of the Premises and shall be delivered up to the Landlord
with the Premises. All shelves, bins, machinery and trade fixtures installed by
Tenant may be removed by Tenant prior to the termination of this lease, if
Tenant so elects, and shall be removed by the date of termination of this lease
or upon earlier vacating of the Premises if required by Landlord. Upon any such
removal, Tenant shall restore the Premises to their original condition. All
such removals and restoration shall be accomplished in a good workmanlike manner
so as not to damage the primary structure or structural qualities of the
Buildings and other improvements situated on the Premises.
9. SIGNS
Tenant shall have the right to install signs upon the Premises only when
first approved in writing by Landlord and subject to any applicable
governmental laws, ordinances, regulations, Landlord's standard sign criteria
and other requirements. At Landlord's direction, Tenant shall be responsible
for the removal of all such signs by the termination of this lease. Such
installations and removals shall be made in such a manner as to avoid injury
or defacement of the building and other improvements, and Tenant shall be
responsible for the repair of any injury or defacement, including, without
limitation, discoloration caused by such installation and/or removal.
10. INSPECTION
Landlord and Landlord's agents and representatives shall have the
right to enter and inspect the Premises at any reasonable time during business
hours, on reasonable notice, for the purpose of ascertaining the condition of
the Premises or in order to make such repairs as may be required or permitted to
be made by Landlord under the terms of this lease. During the period that is
six (6) months prior to the end of the term hereof, Landlord and Landlord's
agents and representatives shall have the right to enter the Premises at any
reasonable time during business hours on reasonable notice, for the purpose of
showing the Premises and shall have the right to erect on the Premises a
suitable sign indicating the Premises are available. Tenant shall give written
notice to Landlord at least thirty (30) days prior to vacating the Premises and
shall arrange to meet with Landlord for a joint inspection of the Premises prior
to vacating. In the event of Tenant's failure to give such notice or arrange
such joint inspection, Landlord's inspection at or after Tenant's vacating the
Premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
11. UTILITIES
<PAGE>
Landlord agrees to provide, at its cost, water, electricity and
telephone service connections into the Premises; but Tenant shall pay for all
water, gas, heat, light, power, telephone, sewer, sprinkler charges and other
utilities and services used on or from the Premises, together with any taxes,
penalties, surcharges or the like pertaining thereto and any maintenance charges
for utilities, and shall furnish all electric light bulbs and tubes. If any
such services are not separately metered to Tenant, Tenant shall pay its
proportionate share, as determined by Landlord, of all charges jointly metered
with other Premises. Landlord shall in no event be liable for any interruption
or failure of utility services on the Premises.
12. ASSIGNMENT and SUBLETTING
Tenant shall not have the right to assign this lease or to
sublet the whole or any part of the Premises without the prior written
consent of Landlord, which consent shall not unreasonably withheld or delayed
- - See Exhibit "C", paragraph 28.g. Notwithstanding any permitted assignment
or subletting, Tenant shall at all times remain directly, primarily and fully
responsible and liable for the payment of the rent herein specified and for
compliance with all of its other obligations under the terms, provisions and
covenants of this lease. Upon the occurrence of an "event of default" as
hereinafter defined, if the Premises or any part thereof are then assigned or
sublet, Landlord, in addition to any other remedies herein provided or
provided by law, may, at its option, collect directly from such assignee or
subtenant all rents becoming due to Tenant under such assignment or sublease
and apply such rent against any sums due to Landlord from Tenant hereunder,
and no such collection shall be construed to constitute a novation or a
release of Tenant from the further performance of Tenant's obligations
hereunder. Notwithstanding the terms above, Landlord reserves the right to
either: 1) enter into a new Lease Agreement with the proposed assignee or
subtenant and terminate the lease coincident with occupancy by the new tenant
and commencement of the new lease; or, 2) Landlord and Tenant may mutually
agree to terminate this lease.
13. FIRE and CASUALTY DAMAGE *
A. Landlord agrees to maintain standard fire and extended
coverage insurance covering the Building, of which the Premises are a part, in
an amount not less than eighty percent (80%) (or such greater percentage as may
be necessary to comply with the provisions of any co-insurance clauses of the
policy) of the "replacement cost" thereof, as such term is defined in the
Replacement Cost Endorsement to be attached thereto insuring against the perils
of Fire, Lighting and Extended Coverage, such coverage and endorsements to be as
defined, provided and limited in the standard bureau forms prescribed by the
insurance regulatory authority for the State of Texas for use by insurance
companies admitted in the State of Texas for the writing of such insurance on
risks located within the State of Texas. Subject to the provisions of
subparagraphs 13.C, 13.D and 13.E below, such insurance shall be for the sole
benefit of Landlord and under its sole control. In addition Landlord agrees to
maintain general liability coverage insurance in an amount deemed prudent and
necessary by Landlord or required by mortgagee presently (or in the future)
holding a mortgage and/or deed(s) of trust constituting a lien against the
Building of which the Premises are a part. If the annual premiums charged
Landlord for insurance exceed the standard premium rates because the nature of
the Tenant's operation results in extra hazardous exposure, and if Landlord
permits such operations, then Tenant, upon receipt of appropriate premium
notices, shall reimburse Landlord for such increase in such premiums as
additional rent hereunder. Tenant shall maintain, at its own expense, fire and
extended coverage insurance on all of its personal property, including removable
trade fixtures, located in the Premises and on all additions and improvements
made by Tenant and not required to be insured by Landlord. In addition, Tenant
shall reimburse Landlord annually, as additional rent and upon receipt of notice
from Landlord, for Tenant's proportionate share of all amounts paid by Landlord
for insurance premiums which exceed an amount equal to the actual cost of such
premium for the calendar year 1997 or $6,070.00, which is the total estimated
insurance for the entire building. Tenant's prorated share at 17.0028% equates
to $1,032.00. In the event the Premises constitute a portion of a multiple-
occupancy building, Tenant shall be responsible for reimbursing Landlord for
Tenant's full proportionate share of such excess, as such share is defined in
subparagraph 4.B above. Said payment shall be made to Landlord within ten (10)
days after presentation to Tenant of Landlord's statement setting forth the
amount due. Any
<PAGE>
payment to be made pursuant to this subparagraph A with respect to the year
in which this lease commences or terminates shall bear the same ratio to the
payment which would be required to be made for the full year as the part of
such year covered by the term of this lease bears to a full year. In the
event any such additional rental amount is not paid within ten (10) days
after the date of Landlord's invoice to Tenant, the unpaid amount shall bear
interest from the date due until paid at the maximum interest rate allowed by
law.
* SEE SPECIAL PROVISIONS EXHIBIT "C" ATTACHED HERETO AND MADE A PART HEREOF
B. If the buildings situated upon the Premises should be
damaged or destroyed by fire, tornado or other casualty, Tenant shall give
immediate written notice thereof to Landlord.
C. If the buildings situated upon the Premises should be totally
destroyed by fire, tornado, or other casualty, or if they should be so
damaged thereby that rebuilding or repairs cannot, in Landlord's estimation,
be completed within two hundred (200) days after the date upon which Landlord
is notified by Tenant of such damage occurs, this lease shall terminate and
the rent shall be abated during the unexpired portion of this lease,
effective upon the date of the occurrence of such damage.
D. If the Building of which the Premises is a part should be
damaged by any peril covered by the insurance to be provided by Landlord
under subparagraph 13.A above, but only to such extent that rebuilding or
repairs can, in Landlord's estimation, be completed within 200 days after the
date upon which Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall, at its sole cost and expense,
thereupon proceed with reasonable diligence to rebuild and repair such
buildings to substantially the condition in which they existed prior to such
damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other
improvements which may have been placed in, on or about the Premises by
Tenant. If the Premises are untenable in whole or in part following such
damage, the rent payable hereunder during the period in which they are
untenable shall be reduced to such extent as may be fair and reasonable under
all of the circumstances. In the event that Landlord should fail to complete
such repairs and rebuilding within 200 days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may, at its option,
terminate this lease by delivering written notice of termination to Landlord
as Tenant's exclusive remedy, whereupon all rights and obligations hereunder
shall cease and terminate.
E. Notwithstanding anything herein to the contrary, in the
event the holder of any indebtedness secured by a mortgage or deed of trust
covering the Building requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
F. Landlord and Tenant each hereby releases the other from any loss
or damage to property caused by fire or any other perils insured through or
under them by way of subrogation, or otherwise for any loss or damage to
property caused by fire or any other perils insured in policies of insurance
covering such property, even if such loss or damage shall have been caused by
the fault or negligence of the other party or anyone for whom such party may
be responsible; provided, however, that his release shall be applicable and
in force and effect only with respect to loss or damage occurring during such
times in which the releasor's policies contain a clause or endorsement
stating that any such release shall not adversely affect or impair said
policies or prejudice the right of the releasor to recover thereunder and
then only to the extent of the insurance proceeds payable under such
policies. Both Landlord and Tenant agree that they will request their
insurance carriers to include such a clause or endorsement in their policies.
If extra cost shall be charged therefor, each party shall advise the other
thereof and of the amount of the extra cost, and the other party, at its
election, may pay the same, but shall not be obligated to do so.
14. LIABILITY
<PAGE>
Landlord shall not be liable to Tenant or Tenant's employees,
agents, patrons or visitors, or to any other person whomsoever, for any
injury to person or damage to property on or about the Premises, resulting
from and/or caused in part or whole by the negligence or misconduct of
Tenant, its agents, servants, employees, invitee or of any other person
entering upon the Premises, or caused by the buildings and improvements
located on the Premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the Premises, and Tenant
hereby covenants and agrees that it will at all times indemnify and hold safe
and harmless the property, the Landlord (including, without limitation, the
trustee and beneficiaries if Landlord is a trust), Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses,
including, without limitation, attorney's fees and damages, both real and
alleged, arising out of any such damage or injury; except injury to persons
or damage to property the sole cause of which is negligence of Landlord, or
the failure of Landlord to repair any part of the Premises which Landlord is
obligated to repair and maintain hereunder within a reasonable time after the
receipt of written notice from Tenant of needed repairs. Tenant shall, at
Tenant's sole cost and expense, fully insure its property located within the
Premises against fire and other casualty, and shall maintain public liability
insurance with combined limits of at least $1,000,000. The limits or amounts
of said insurance coverage shall not, however, limit the liability of the
Tenant hereunder. Tenant shall cause Landlord, and Landlord's Manager, to
be named as an additional insured under such public liability insurance
policy. In addition, Landlord shall be named as additional insured on the
fire and casualty insurance policy which Tenant is required to maintain with
respect to Tenant's property located in the Premises. If Tenant shall fail
to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, and in such event, premiums and costs
thereof shall be reimbursed and paid by Tenant to Landlord on demand by
Landlord. All such policies shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certificates of insurance,
together with receipt evidencing payment of premiums therefor, shall be
delivered to Landlord prior to the commencement date of this lease. Not less
than fifteen (15) days prior to the expiration date of any such policies,
certificates evidencing the renewals thereof (bearing notations evidencing
the payment of renewal premiums) shall be delivered to Landlord. Such
policies shall further provide that not less than thirty (30) days written
notice shall be given to Landlord before such policy may be canceled or
changed to reduce insurance provided thereby.
15. CONDEMNATION
A. If the whole or any substantial part of the Premises should be
taken for any public or quasi-public use under any governmental law,
ordinance or regulation or by right of eminent domain, or by private purchase
in lieu thereof and the taking would prevent or materially interfere with the
use of the Premises for the purpose for which they are being used, this lease
shall terminate and the rent shall be abated during the unexpired portion of
this lease, effective when the physical taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and the
taking does not prevent or materially interfere with the use of the Premises,
and this lease is not terminated as provided in the subparagraph above, this
lease shall not terminate but the rent payable hereunder during the unexpired
portion of this lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances.
C. In the event of any such taking or private purchase in lieu
thereof, Landlord shall be entitled to receive and retain all compensation
awarded in any condemnation proceedings.
16. HOLDING OVER
Tenant will, at the termination of this lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Landlord agrees in
writing that Tenant may hold over after the expiration or termination of this
lease, unless the parties hereto otherwise agree in writing on the terms of such
holding over, the hold-over tenancy
<PAGE>
shall be subject to termination by Landlord at any time upon not less than
thirty (30) days advance written notice, or by Tenant at any time upon not
less than thirty (30) days advance written notice, and all of the other terms
and provisions of this lease shall be applicable during that period, except
that Tenant shall pay Landlord from time to time upon demand, as rental for
the period of any hold-over, an amount equal to two (2) times rent in effect
on the termination date, computed on a daily basis for each day of the
hold-over period. No holding over by Tenant, whether with or without consent
of Landlord, shall operate to extend this lease except as otherwise expressly
provided. The preceding provisions of this paragraph 16 shall not be
construed as Landlord's consent for Tenant to hold over.
17. QUIET ENJOYMENT
Landlord covenants that it now has, or will acquire before
Tenant takes possession of the Premises, good title to the Premises, free and
clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms
of this lease, zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions and other conditions of record. In the event this lease is a
sublease, then Tenant agrees to take the Premises subject to the provisions
of the prior leases. Landlord represents and warrants that it has full right
and authority to enter into this lease and that Tenant, upon paying the
rental herein set forth and performing its other covenants and agreements
herein set forth, shall peaceably and quietly have, hold and enjoy the
Premises for the term hereof without hindrance or molestation from Landlord,
subject to the terms and provisions of this lease.
18. EVENTS OF DEFAULT
The following events shall be deemed to be events of default by
Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes hereunder when due,
or any other payment or reimbursement to Landlord required herein when due,
and such failure shall continue for a period of five (5) days from the date
such payment was due after written notice of such default.
(b) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall be adjudged bankrupt or insolvent in proceedings
filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
Premises.
(f) Tenant shall fail to comply with any term, provision or
covenant of this lease (other than the foregoing in this Paragraph 18), and
shall not cure such failure within fifteen (15) days after written notice
thereof to Tenant.
19. REMEDIES
Upon the occurrence of any of such events of default described
in Paragraph 18 hereof, Landlord shall have the option to pursue any one or
more of the following remedies without any notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord
may, without prejudice to any other remedy which it may have for possession
or arrearage in rent, enter upon and take possession of the Premises and
expel or remove Tenant and any other person who may be occupying such
Premises or any part thereof, by force if necessary, without being liable for
prosecution or any claim of damages therefor; and Tenant agrees to pay
Landlord, on demand, the amount of all loss and damage which Landlord may
suffer by reason of such termination, whether through inability to relet the
Premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, by force if necessary, without being liable for prosecution or
any claim for damages therefor, and relet the Premises and receive the rent
therefore; and Tenant agrees to pay to the Landlord, on demand, any
deficiency that may arise by reason of such reletting. In the event Landlord
is successful in reletting the Premises at a rental in excess of that agreed
to be paid by Tenant pursuant to the terms of this lease, Landlord and Tenant
each mutually agree that Tenant shall not be entitled, under any
circumstances, to such excess rental, and Tenant does hereby specifically
waive any claim to such excess rental.
(c) Enter upon the Premises, by force if necessary, without being
liable for prosecution or any claim for damages therefor, and do whatever
Tenant is obligated to do under the terms of this lease; and Tenant agrees
to reimburse Landlord, on demand, for any expenses which Landlord may incur
in thus effecting compliance with Tenant's obligations under this lease, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action, whether caused by the negligence of
Landlord or otherwise.
(d) Alter locks and other securing devices at the Premises,
without being liable for prosecution or any claim of damages therefor, and
such alteration of locks and securing devices shall not be deemed
unauthorized or constitute a conversion. Tenant acknowledges that Landlord
may require full payment of all sums then due to Landlord under this lease as
a condition to Tenant's entitlement to a key to new or altered locks that
Landlord may have placed on the leased premises after an Event of Default.
(e) Receive payment from Tenant, in addition to any sum provided to
be paid above, for any and all of the following expenses for which Tenant shall
be considered liable:
<PAGE>
1. Broker's fees incurred by Landlord in connection with
reletting the whole or any part of the Premises;
2. The cost of removing and storing Tenant's or other
occupant's property;
3. The cost of repairing, altering, remodeling or
otherwise putting the Premises into condition acceptable to a new tenant or
tenants, plus a reasonable charge to cover overhead; and
4. All reasonable expenses incurred by Landlord in
enforcing Landlord's remedies.
Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any other remedies
provided by law, nor shall pursuit of any remedy herein provided constitute a
forfeiture or waiver of any rent due to Landlord hereunder or of any damages
accruing to Landlord by reason of the violation of any of the terms, provisions
and covenants herein contained. No act or thing done by the Landlord or its
agents during the term hereby granted shall be deemed a termination of this
lease or an acceptance of the surrender of the Premises, and no agreement to
terminate this lease or accept a surrender of said Premises shall be valid
unless it is in writing and signed by Landlord. No waiver by Landlord of any
violation or breach of any of the terms, provisions and covenants herein
contained shall be deemed or construed to constitute a waiver of any other
violation or breach of any of the other terms, provisions and covenants herein
contained. Landlord's acceptance of the payment of rental or other payments
hereunder after the occurrence of an event of default shall not be construed as
a waiver of such default, unless Landlord so notifies Tenant in writing.
Forbearance of default shall not be deemed or construed to constitute a waiver
of such default or of Landlord's right to enforce any such remedies with respect
to such default of any subsequent default. If, on account of any breach or
default by Tenant in Tenant's obligations under the terms and conditions of this
lease, it shall become necessary or appropriate for Landlord to employ or
consult with an attorney concerning any of Landlord's rights or remedies
hereunder, Tenant agrees to pay any reasonable attorney's fees so incurred.
20. LANDLORD'S LIEN
Any statutory lien for rent is not hereby waived, the express
contractual lien herein granted being in addition and supplementary thereto.
21. MORTGAGES
Tenant accepts this lease subject and subordinate to any mortgage(s)
and/or deed(s) of trust now or at any time hereafter constituting a lien or
charge upon the Premises or the improvements situated thereon; provided,
however, that if the mortgagee, trustee or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this lease shall be deemed superior to such lien, whether this lease was
executed before or after said mortgage or deed of trust. Tenant shall at any
time hereafter on demand execute any instruments, releases or other documents
which may be required by any mortgagee for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage.
22. LANDLORD'S DEFAULT
23. MECHANIC'S LIENS
Tenant shall have no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind, the interest of Landlord in the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in
<PAGE>
connection with any work performed on the Premises on which any lien is or can
be validly and legally asserted against its leasehold interest in the Premises
or the improvements thereon, and that it will save and hold Landlord harmless
from any and all loss, cost or expenses based on or arising out of asserted
claims or liens against the leasehold estate or against the right, title and
interest of the Landlord in the Premises or under the terms of this lease.
24. ASSIGNMENT BY LANDLORD
Landlord shall have the right to assign or transfer, in whole or in part,
every feature of its rights and obligations hereunder and in the Building and
leased Premises. Such assignments or transfers may be made to a corporation,
trust, trust company, individual or group of individuals, and howsoever made
shall be in all things respected and recognized by Tenant.
25. DISCLAIMER
This lease and the obligations of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on the part of the
Tenant to be performed shall not be affected, impaired or executed because
Landlord is unable to fulfill any of its covenants and obligations under this
lease, expressly or impliedly to be performed by Landlord, if Landlord is
prevented or delayed from doing so by reason of strike, labor troubles,
accident, adjustment to insurance, or by any reason or cause whatsoever
reasonably beyond Landlord's control. Reasons beyond Landlord's control shall
include, but not be limited to, laws, governmental preemption in connection with
a National Emergency or by any reason of any rule, order or regulation of any
governmental agency, federal, state, county or municipal authority or any
department or subdivision thereof, or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency.
26. NOTICES
Each provision of this instrument or of any applicable governmental
laws, ordinances, regulations and other requirements with reference to the
sending, mailing or delivery of any notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivery of any
notice or the making of any payment by Tenant to Landlord shall be deemed to be
complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered, whether actually received or not,
three (3) days after being deposited in the United States mail, postage prepaid,
certified or registered mail return receipt requested, addressed to the parties
hereto at the respective addresses set out below, or at such other address as
they have theretofore specified by written notice delivered in accordance
herewith.
Landlord: Tenant:
c/o RW Management Company, Inc. United Stationers Supply Co.
<PAGE>
8554 Katy Freeway, Suite 300 2200 E. Golf Road
Houston, Texas 77024 Des Plaines, IL. 60016
Attn.: President
Copy to: General Counsel
If and when included within the term "Landlord", as used in this instrument,
there is more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions to this paragraph to the same
effect as if each had received such notice.
27. MISCELLANEOUS
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
lease shall apply to, inure to the benefit of, and be binding upon the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord shall
have the right to assign any of its rights and obligations under this lease.
Each party agrees to furnish to the other, promptly upon demand, a corporate
resolution, proof of due authorization by partners, or other appropriate
documentation evidencing the due authorization of such party to enter into this
lease.
C. Whenever a clause or provision of this lease requires Landlord's
consent or approval, Landlord agrees not to withhold or delay its consent or
approval unreasonably.
D. The captions inserted in this lease are for convenience only and
in no way define, limit or otherwise describe the scope or intent of this
lease, or any provision hereof, or in any way affect the interpretation of this
lease.
E. Tenant agrees, if requested in writing by Landlord, to
furnish financial statements, bank references, credit references, or any other
financial data to Landlord as may be reasonably required to establish Tenant's
financial stability and credit-worthiness. Such information will be furnished
with 10 days of request.
F. This lease may not be altered, changed or amended except by
an instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as
of the expiration or earlier termination of the term of this lease shall survive
the expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the Premises, including, without limitation,
equipment therein, in good repair. Tenant shall also, prior to vacating the
Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which the lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefor upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have been
determined and satisfied, as
<PAGE>
the case may be. Any security deposit held by Landlord shall be credited
against the amount payable by Tenant under this Paragraph 27.G.
H. If any clause or provision of this lease is illegal, invalid
or unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that, in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the Premises are on the open market and are presently
being shown, this lease shall be treated as an offer with the Premises being
subject to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the Premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this lease.
K. Tenant agrees, from time to time within ten (10) days after
request of Landlord, to deliver an estoppel certificate to Landlord or
Landlord's designee. Such estoppel certificate shall state that this lease is
in full force and effect, the date to which rent has been paid, the unexpired
term of this lease and such other matters pertaining to this lease as may be
requested by Landlord.
L. See Exhibits "A", "B", "C" and "D" attached hereto and made a
part hereof.
EXECUTED by the parties this day of , 19 _.
LANDLORD: Amberjack Limited Partnership
By: _________________________________________________
Robert S. Wilson
Title: Manager
ATTEST:
By: _________________________________________________
Janet L. Wilson
Title: V.P. for Manager
Before me, the above signed authority on this day personally appeared Robert S.
Wilson, of RW Management Company, Inc., a Corporation, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged to
me that he executed the same for the purposes and consideration therein
expressed, and in the capacity stated.
Given under my hand and seal of office on this, the _______ day of
__________________, 1997.
_______________________________________________
Notary Public, State of Texas, County of Harris
TENANT: United Stationers Supply Co., an Illinois corporation
<PAGE>
By: _______________________________________
Title: ____________________________________
ATTEST:
By: _______________________________________
Title: _____________________________________
Before me, the above signed authority on this day personally appeared Daniel
Bushell, of United Stationers Supply Co., an Illinois corporation, known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, and in the capacity stated.
Given under my hand and seal of office on this, the _______day of ____________,
1997.
____________________________________
Notary Public, State of Illinois
County of Cook
<PAGE>
EXHIBIT "A"
Legal Description
BUILDING A
All that certain 5.914 acres of land out of a 31.015 acre tract of land
described in a deed dated January 24, 1977 from Longhemp Corp. to I.D.S. Realty
Trust filed in the official public records at County Clerk File No. F-037766 out
of the John Flowers Survey, Abstract 269, Harris County, Texas and being more
particularly described by metes and bounds as follows:
Commencing at a 1-1/2" pinched-top pipe found marking the northwest corner of
the above mentioned 31.015 acre tract, said pipe located in the southwesterly
right-of-way line of the H.& T.C.R.R. (100' wide), thence south 49DEG. 40' 00"
East - 1234.76' along said southwesterly right-of-way line to the POINT OF
BEGINNING of the herein described tract.
THENCE South 49DEG. 40' 00" East - 365.96', continuing with said southwesterly
right-of-way line to a point for corner;
THENCE South 00DEG. 15' 00" West - 801.65' to a point for corner, located in
the north right-of-way line of Long Point Road (60.00' wide);
THENCE North 89DEG. 59' 00" West - 280.00' along said north right-of-way line
to a point for corner;
THENCE North 00DEG. 15' 00" East - 1038.43' to the POINT OF BEGINNING and
containing 5.914 acres of land, more or less.
<PAGE>
EXHIBIT "B"
[FLOOR PLAN OF BUILDING]
Leased premises approximately 23,600 square feet of space located at
6600 Long Point, Suite 140, Houston, Texas
<PAGE>
Special Provisions
Exhibit "C" - Paragraph 28
a. EARLY OCCUPANCY:
In the event Tenant shall occupy the leased premises prior to March 1,
1997, then all of the terms, covenants and conditions of this lease shall be in
full force and effect beginning on the date of occupancy. Tenant's rental for
the partial month of February, 1997 (if any) shall be prorated at the rate of
$220.26 per day; such amount being due and payable upon occupancy by Tenant.
b. OCCUPANCY COSTS:
Tenant shall pay its proportionate share of projected operating expenses
for common area services, providing monitoring services, if any, and
reimbursable operating expenses as the actual expenses exceed the amounts
specified in Paragraphs 4. and 7. and 13. of the Lease Agreement. As used
herein, building(s), Building or Project are synonymous with the total area
combined in the one (1) buildings consisting of approximately 138,800 square
feet. Tenant's proportionate share of the taxes, insurance, and common area
services is 17.0028 %. Tenant agrees to pay Landlord such sums as additional
rental upon demand. At the end of each calendar year, or from time to time
thereafter, as Landlord may elect, Tenant agrees to pay Landlord as additional
rental, upon demand, the amount that the actual Taxes, Insurance and Common Area
Maintenance Expenses exceed Tenant's total estimated payments. At the end of
each calendar year, or from time to time thereafter, as Landlord may elect,
Landlord may raise or lower the estimated amount paid monthly by Tenant, so that
Tenant's payments are equal to the projected Taxes, Insurance and Common Area
Maintenance Expenses for that calendar year. Effective March 1, 1997, Tenant
shall pay monthly Base Rent and estimated payments as follows:
Base Rent as set forth in Paragraph 2A $ 5,968.00
Estimated Common Area Service Payment 640.00
--------
Initial Monthly Payment Total $ 6,608.00
c. ADA:
The leased premises, excluding uses for retail sales and premises open to the
general public, comply fully with (and no notices of violation have been
received in connection with) all environmental, air quality, building, health,
fire, safety, and governmental or regulatory rules, laws, ordinances, statutes,
codes and requirements applicable to the leased premises, including the
Americans with Disabilities Act of 1990. However, in the event that through
amendment, interpretation or through Tenant's use of the leased premises,
modifications to same become necessary to fully comply with the terms and
provisions of the Americans with Disabilities Act of 1990, the parties agree
that it shall be the sole responsibility of the Tenant to comply with any and
all provisions of the Americans with Disabilities Act of 1990, as same may be
amended or interpreted in the future, and Tenant agrees to be fully responsible
for all expenses related to the tenant improvements or the later modifications
of the leased premises and/or the entire entry area of the leased premises
during the term of this Lease Agreement. The Tenant further agrees to
indemnify and hold the Landlord harmless against any claims which may arise out
of Tenant's failure to comply with the Americans with Disabilities Act of 1990.
Such indemnification shall include, but shall not be limited to, all fines, fees
and penalties, and all legal and other expenses (including attorney's fees),
incurred by Landlord and for the costs of collection of the sums due under the
terms of this indemnity.
d. INDEPENDENT COVENANTS:
<PAGE>
Landlord shall have no liability by reason of any apparent or latent
defect therein. Tenant hereby waives and relinquishes any right to assert,
either as a claim or a defense, that Landlord is bound to perform or is
liable for the nonperformance of any implied covenant or implied duty of
Landlord not expressly set forth in this Lease. Tenant hereby waives any
implied warranty by Landlord that the Premises are suitable for their
intended commercial purposes and, further acknowledges that the obligations
of Tenant under this Lease (including, without limitation, the obligation of
Tenant to pay rent) are independent of any such implied warranty and are
independent of all other covenants and warranties of Landlord. Tenant agrees
to perform all of its obligations under this Lease (including, without
limitation, the obligation of Tenant to pay rent) irrespective of any breach
or alleged breach by Landlord of any such implied warranty. It is the intent
and agreement of Landlord and Tenant that, so long as Tenant has not been
wrongfully evicted or constructively evicted from the Premises, the doctrine
of independent covenants will apply in all matters relating to this Lease
(including, without limitation, the obligation of Landlord to perform
Landlord's lease covenants and the obligation of Tenant to pay rent and the
other monetary amounts and perform Tenant's other covenants provided under
this Lease).
e. PRE-OCCUPANCY INSPECTION:
Prior to Tenant's occupancy of the Leased Premises, Tenant and
Landlord's representative shall conduct an inspection of the Leased Premises
to document the existing condition of the space not affected by any work
stipulated in the lease documents. Such inspection shall identify the
location and condition of any existing damage and/or above ordinary wear and
tear that exists in the Leased Premises at the time of Tenant's taking
possession of the space. An inspection report will be prepared by the
Landlord's representative and submitted to Tenant for execution and
acknowledgment. Tenant's acceptance of the Leased Premises shall be subject
to the existing condition of the Leased Premises, and Tenant shall not be
responsible for restoring any damage/above ordinary wear and tear that
existed as of Tenant's occupancy of the Leased Premises, per the
pre-occupancy inspection letter agreement.
f. WEAR AND TEAR:
Pursuant to Paragraph 6. of this Lease Agreement, at the termination of
this Lease Agreement, Tenant agrees to surrender the leased premises to
Landlord in the same condition as when occupancy was taken by Tenant,
ordinary wear & tear excluded. Ordinary wear and tear as described above
shall be that condition or conditions which may exist as a result of the use
of the leased premises in the ordinary course of business which does not
physically alter the character of the leased premises, beyond smudges to the
paint, washable blemishes to any wallcoverings, or carpet wear as a result of
normal foot traffic. Damages to the leased premises which exceed ordinary
wear and tear include but shall not be limited to:
1. Doors: holes, stains, chips, missing hardware, and/or
displacement.
2. Overhead Doors: holes, bent panels or tracks, missing or damaged
rollers, inoperable condition, and/or missing hardware.
3. Office Walls: holes, stains, unwashable marks and/or gouges.
4. Warehouse Walls: holes, cracks, displacement, gouges, unwashable
marks, and/or graffiti.
5. Ceiling Tile: holes, chips, and/or missing.
6. Pipe Bollards and Structural Columns: bent, dented, cracked, and/or
displaced.
7. Floors: cracks or gouges caused by Tenant's operation, holes,
equipment mounting plates or bolts and/or any unremoved foreign
material from the floor surface; i.e. spilled epoxy, glues, oils, etc.
8. Carpet: unremovable stains, mildew, chair wear, and/or tears.
9. Electrical: broken light lenses or lights, chipped electrical
outletsor switches, damaged electrical panels, inoperable fixtures,
any unremoved electrical conduits, boxes or wiring added by Tenant.
10. Sprinklers: heads damaged or missing; damaged pipes, valves, and/or
risers.
<PAGE>
11. Warehouse Heaters: missing or damaged thermostats, covers bent or
missing, units displaced, vents damaged or missing, gas piping damaged
or missing, and/or unit inoperable.
12. Air Conditioning Systems: thermostats missing and/or inoperable,
disconnected duct work; dirty air diffusers, coils and/or filters;
unit inoperable, improperly serviced and/or not in proper working
condition.
13. Exterior Building: bent or displaced downspouts, damaged or missing
truck bumpers, any cracks or damages to the exterior wall, any broken
or cracked windows, and/or any graffiti.
14. Parking Lot: cracks, gouges, or any damage caused by Tenant's
operation.
15. Any equipment or part of the Premises described in Paragraph 6 of
the Lease Agreement that is not operational and in proper condition as
described therein.
g. ASSIGNMENT AND SUBLETTING CRITERIA:
i. Pursuant to Paragraph 12 of the lease, Landlord shall look at the
following criteria in making a decision as to consenting to any request by
Tenant to sublease or assignment of the leased premises, other than to an
affiliate or subsidiary of Tenant:
(1). Tenant shall, at the time of making such request, not be in
default of any of the terms, covenants or conditions of this lease;
and
(2). The prospective subtenant or assignee's parking shall be no
greater than that amount allocated to Tenant; and
(3). The prospective subtenant or assignee's credit shall be
acceptable to Landlord; and
(4). The prospective subtenant or assignee's use of the leased
premises shall be compatible with the other tenants in the project and
in compliance with the terms of this lease; and
(5) If Landlord is in negotiations with a prospective subtenant
or assignee prior to Tenant's request to sublease or assign the space,
Landlord shall have the right to refuse Tenant's request to sublease
or assignment of the leased premises.
ii. In the event Landlord consents to a sublease or assignment and is
called upon to prepare the necessary documentation, Landlord shall be entitled
to a fee of $300.00 for preparation of said documents. This fee shall be apart
from, and in addition to, any leasing commissions, renovations, or other costs
incidental to the subleasing or assignment of the leased premises.
iii. In the event Tenant subleases or assigns the leased premises, Landlord
shall be entitled to all net rents in excess of Tenant's monthly rent collected
or received by Landlord, less the monthly proration of Tenant's costs for
renovations, construction, or direct costs incidental to the subleasing or
assignment of the leased premises.
h. DEMISING WALL:
One boundary of the Leased Premises is defined by the yellow tape attached
to the floor and wall. Tenant is not allowed to expand beyond that point and
will be monitored by RW Management Company personnel. Should any infraction of
this boundary line be detected, Tenant shall be responsible for a full month's
rental on the adjacent bay(s) or $1,S12.00/bay. Landlord, at Landlord's sole
cost and expense, shall have the option to construct a permanent demising wall
at any time during the term of this lease. <PAGE>
<PAGE>
EXHIBIT "D"
HAZARDOUS MATERIAL
1. Tenant shall not cause or permit any Hazardous Material to be
brought upon, manufactured, kept, or used in or about the Premises by Tenant,
its agents, employees, contractors, or invitees, except for such Hazardous
Material as is necessary or useful to Tenant's business and the use of which is
expressly approved by Landlord in writing.
2. Any Hazardous Material permitted on the Premises as provided in
Section 1, and all containers therefor, shall be used, kept, stored, and
disposed of in a manner that complies with all federal, state, and local laws
or regulations applicable to this Hazardous Material.
3. Tenant shall not discharge, leak, or emit, or permit to be
discharged, leaked, or emitted, any material into the Premises, the building
which includes the Premises, the atmosphere, ground, sewer system, or any
body of water, if that material (as is reasonably determined by the Landlord,
or any governmental authority) does or may pollute or contaminate the same,
or may adversely affect (a) the health, welfare, or safety of persons,
whether located on the Premises or elsewhere, or (b) the condition, use, or
enjoyment of the building or any other real or personal property.
4. At the commencement of each Lease Year, Tenant shall disclose to
Landlord the names and approximate amounts of all Hazardous Material that
Tenant intends to store, use, or dispose of on the Premises in the coming
Lease Year. In addition, at the commencement of each Lease Year, beginning
with the second Lease Year, Tenant shall disclose to Landlord the names and
amounts of all Hazardous Materials that were actually used, stored, or
disposed of on the Premises if those material were not previously identified
to the Landlord at the commencement of the previous Lease Year.
5. As used herein, the term "Hazardous Material" means (a) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act of
1976, as amended from time to time, and regulations promulgated thereunder;
(b) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to
time, and regulations promulgated thereunder; (c) any oil, petroleum
products, and their by-products; (d) any substance that is or become
regulated by any federal, state, or local governmental authority; and (e)
any other ignitable, reactive, corrosive, hazardous, toxic or dangerous
substance or material.
6. Tenant hereby agrees that it shall be fully liable for all costs and
expenses related to the use, manufacture, storage, and disposal of Hazardous
Material kept on the Premises, and the Tenant shall give immediate notice to
the Landlord of any violation or potential violation of the provisions of
Section 2. Tenant shall defend, indemnify, and hold harmless Landlord, and
its agents, and employees from and against all claims, demands, penalties,
fines, liabilities, settlements, damages, costs, expenses (including, without
limitation, attorneys and consultants fees, court costs, and litigation
expenses), or losses (including, without limitation, a decrease in value of
the Premises or the land or building on which the Premises are a part, loss
or restriction of rentable or usable space) of whatever kind or nature, known
or unknown, contingent or otherwise, arising out of or in any way related to
(a) the presence, disposal, release, or threatened release of any such
Hazardous Material that is on, from, or affecting the soil, water,
vegetation, buildings, personal property, persons, animals, or otherwise; (b)
any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to that Hazardous Material; (c) any
lawsuit brought or threatened, settlement reached, or government order
relating to that Hazardous Material; (d) any violation of any laws applicable
thereto; or (e) any violation of any requirements or provisions of this lease
concerning Hazardous Material. The provisions of this Section 6 shall be
in addition to any other obligations and liabilities Tenant may have to
Landlord at law or equity and shall survive the transactions contemplated
herein and shall survive the termination of this lease.
TENANT'S RESPONSIBILITY REGARDING HAZARDOUS SUBSTANCES
<PAGE>
1. Hazardous Substances.
The term "Hazardous Substances", as used in this lease, shall include,
without limitations, flammable, explosives, radioactive materials,
asbestos, polychlorinated biphenyl (PCB), chemicals known to cause cancer
or reproductive toxicity, pollutants, contaminants, hazardous wastes,
toxic substances or related materials, petroleum and petroleum products,
and substances declared to be hazardous or toxic under any law or
regulation now or hereafter enacted or promulgated by any governmental
authority.
2. Tenant's Restrictions.
Tenant shall not cause or permit to occur:
(a) Any violation of any federal, state, or local law, ordinance, or
regulation now or hereafter enacted, related to environmental
conditions on, under, or about the Premises, or arising from
Tenant's use or occupancy of the Premises, including, but not
limited to, soil and ground water conditions; or
(b) The use, generation, release, manufacture, refining, production,
processing, storage, or disposal of any Hazardous Substance on, under
or about the Premises, or the transportation to or from the Premises
of any Hazardous Substance, except as specifically disclosed on
Schedule A to this lease.
3. Environmental Clean-up.
(a) Tenant shall, at Tenant's own expense, comply with all laws
regulating the use, generation, storage, transportation, or
disposal of Hazardous Substances ("Laws").
(b) Tenant shall, at Tenant's own expense, make all submissions
to, provide all information required by, and comply with all
requirements of all governmental authorities (the "Authorities")
under the Laws.
(c) Should any Authority or any third party demand that a clean-up
plan be prepared and that a clean-up be undertaken because of any
deposit, spill, discharge, or other release of Hazardous Substances
that occurs during the term of this lease, at or from the Premises, or
which arises at any time from Tenant's use or occupancy of the
Premises, then Tenant shall, at Tenant's own expense, prepare and
submit the required plans and all related bonds and other financial
assurances; and Tenant shall carry out all such clean-up plans.
(d) Tenant shall promptly provide all information regarding the use,
generation, storage, transportation, or disposal of Hazardous
Substances that is requested by Owner. If Tenant fails to fulfill any
duty imposed under this Paragraph (3) within reasonable time, Owner
may do so; and in such case, Tenant shall cooperate with Owner in
order to prepare all documents Owner deems necessary or appropriate to
determine the applicability of the Laws to the Premises and Tenant's
use thereof, and for compliance therewith, the Tenant shall execute
all documents promptly upon Owner's request. No such action by Owner
and no attempt made by Owner to mitigate damages under any Law shall
constitute a waiver of any of Tenant's obligations under this
Paragraph (3).
(e) Tenant's obligations and liabilities under this Paragraph (3)
shall survive the expiration of this lease.
4. Tenant's Indemnity.
<PAGE>
(a) Tenant shall indemnify, defend, and hold harmless the Owner,
manager of the property, and their respective officers, directors,
beneficiaries, shareholders, partners, agents, and employees from all
fines, suits, procedures, claims and actions of every kind, and all
costs associated therewith (including attorneys' and consultants'
fees) arising out of or in any way connected with any deposit, spill,
discharge, or other release of Hazardous Substances that occurs during
the term of this lease, at or from the Premises, or which arises at
any time from Tenant's use or occupancy of the Premises, or from
Tenant's failure to provide all information, make all submissions,
and take all steps required by all Authorities under the laws and
all other environmental laws.
(b) Tenant's obligations and liabilities under this Paragraph (4)
shall survive the expiration of this lease.
<PAGE>
Exhibit 10.116
LEASE
A. Lessor:
Name: Davis Partnership
Address: c/o Robert Davis
1244 North Shore Road
Lake Oswego, OR 97034
B. Lessee: United Stationers Supply Co.
an Illinois corporation qualified to do business in Oregon.
Address: United Stationers Supply Co.
2200 East Golf Road
Des Plaines, IL 60016-1267
C Date of execution of Lease September 20, 1996
D. Address of premises
4409 S.E. 24th Avenue, Portland, OR 97202
E. Legal description
Spantons Add TL3 of Lots 6-11 and 20-25 Block 6 Map 3432 plus TL1
of Block 6 Map 3432 plus the south 35@ feet of Lot 18 Block 3 and
the north 24 1/2 feet of Lot 19 Block 3 Map 3432, all per the
Multnomah County Assessor's tax maps for 1995-96.
F. Commencement date of Lease: March 1, 1997
G. Expiration date of Lease: February 28, 2002
H. Initial rental: $ 21,5B2.00 per month.
J. Lease deposit $ none
K. Rental adjustments: See First Addendum
L. Lessee's use of premises: Office and Warehouse
M. Additional provisions regarding repairs: See First Addendum
N. Liability insurance coverages to be provided by Lessee:
Injury to one person: $ 0ne Million
Injuries arising out of a single occurrence: $ Five Mi11ion
Property damage: $ Full Replacement Value
P. Term of payment for business interruption: 12 months at 100% occupancy
Q. Permitted period for display of Lessor's signs: 180 days
R. Liquidated damages for holding over: $ Double the latest rent, prorated
on a daily basis.
S. Additional terms and conditions: See First Addendum
Davis Partnership United Stationers Supply Co.
By: By:
Title: Title:
Lessor Lessee
<PAGE>
THIS AGREEMENT AND LEASE was made and entered into by and between the
"Lessor" identified at paragraph A. above and the "Lessee" identified at
Paragraph B. above on the date set forth at Paragraph C. above.
Lessor does hereby lease, demise and let unto Lessee the premises
located and described in Paragraphs D. and E. above for a term commencing at
12:01 a m on the date set forth at Paragraph F. above and expiring at
midnight on the date set forth at Paragraph G. above.
1. TENANT'S ACCEPTANCE OF PROPERTY. The Lessee accepts the building,
improvements, and personalty on the leased premises (all of which are
hereinafter referred to as "the Leased Property".) in their present state and
without any representation or warranty by the Lessor as to the condition of
such property or as to the use which may be made thereof, except as stated in
the first addendum. The lessee acknowledges that the Leased Property, the
title thereto, the streets, sidewalks, driveways, parking areas, curbs,
utilities and structures adjoining the same, any subsurface conditions
thereof, and the present use and non-uses thereof have been examined by the
Tenant. The Lessor shall not be responsible for any later defect or change
of condition in the Leased Property and the rent hereunder shall in no case
be withheld or diminished on account of any defect in the Leased Property and
change in conditions thereof, any damage occurring thereto, or the existence
with respect thereto of any violations of the laws or regulations of any
government authority except as may be otherwise specifically provided herein.
The obligation of the Lessee to pay the full rent herein reserved shall not
be affected by any future act of omission on the part of the Lessor with
respect to the tenantability of the Leased Property, or the building of which
it is a part, except as otherwise specifically provided herein. The taking
of possession of the Leased Property by the Lessee shall be conclusive
evidence that the Lessee accepts the same "as is" and that the Leased
Property and the building and land of which the same form a part were in good
condition at the time possession was taken.
2. RENTAL. The initial rent to be paid by the Lessee to the Lessor is
the sum set forth at Paragraph H. above, said sum to be due and payable
monthly commencing on the commencement date set forth at Paragraph F. above
and paid monthly thereafter on the first day of each month during the term
hereof.
3. LEASE DEPOSIT. Concurrently with the execution of this Lease, the
Lessee has deposited with the Lessor the sum set forth at Paragraph J. above
as security for the performance by the Lessee of all the conditions required
to be performed by the Lessee under this Lease.
4. RENT REVISION. At the time or times, and in accordance with the
terms et forth in Paragraph K. above, the rental set forth in Paragraph H.
above shall be adjusted for the remaining term of the Lease.
5. USE OF PREMISES.
(i) The Lessee shall use the Leased Property for the conduct of the
business described at Paragraph L. above and for no other purposes whatsoever
without the Lessor's prior written consent.
(ii) The Lessee will not make any unlawful, improper or offensive use of
the Leased Property; he will not suffer any strip or waste thereof; he will
not permit an objectionable noise or odor to escape or to be emitted from the
Leased Property or do anything or permit anything to be done upon or about
the Leased Property in any way tending to create a nuisance.
(iii) The Lessee will not allow the Leased Property at any time to fall
into such a state of repair or disorder as to increase the fire hazard
thereon; he shall not install any power machinery on the Leased Property
except under the supervision and with written consent of the Lessor; he shall
not store gasoline or other highly combustible materials on the Leased
Property in such a way or for such a purpose that the fire insurance rate on
the building in which the Leased Property is locates is thereby increased or
that would prevent the Lessor from taking advantage of any rulings of the
Insurance Rating Bureau of the state in which the Leased Property is situated
which would allow the Lessor to obtain reduced premium rates for long term
fire insurance policies.
(iv) The Lessee shall comply at the Lessee's own expense with all laws
and requiations of any municipal, county, state, federal or other public
authority respecting the use of the Leased Property, including the Americans
With Disabilities Act.
(v) The Lessee will not overload the floors of the Leased Property in
such a way as to cause any undue or serious stress or strain upon the
building in which the Leased Property is located, or any part thereof, and
the Lessor shall have the right, at any time, to call upon any competent
engineer or architect whom the Lessor may choose to decide whether or not the
floors of the Leased Property, or any part thereof, are being overloaded so
as to cause any undue or serious stress or strain on said building, or any
part thereof, and the decision of said engineer or architect shall be final
and binding upon the Lessee; and in the event that the engineer or architect
so called upon shall decide that in his opinion the stress or strain is such
as to endanger or injure said building, or any part thereof, then and in that
event the Lessee agrees immediately to relieve said stress or strain either
by reinforcing the building or by lightening the load which causes such
stress or strain in a manner satisfactory to the Lessor.
6. UTILITIES. The Lessee shall pay for all heat, light, water, power,
garbage and other services of utilities used in the Leased Property during
the term of this Lease.
7. REPAIRS AND IMPROVEMENTS.
(i) The Lessor shall not be required to make any repairs, alterations,
additions or improvements to or upon the Leased Property during the term of
his Lease, except only those hereinafter specifically provided for; the
Lessee hereby agrees to maintain and keep the Leased Property including, but
not limited to, all interior and exterior doors, heating, ventilating and
cooling systems, interior wiring, plumbing and drain pipes to sewers or
septic tank, in good order and repair during the entire term of the Lease at
the Lessee's own cost and expense, and to replace all glass which may be
broken or damaged during the term hereof in the windows and doors of the
Leased Property with glass of as good or better quality as that now in use;
the Lessee hereby agrees to keep and maintain the sidewalks, driveways and
parking areas immediately adjoining the Leased Property in a safe and orderly
condition.
(ii) Except as otherwise provided in Paragraph M. above, the lessor
agrees to maintain in good order and repair during the term of this Lease the
exterior walls, roof, gutters, downspouts and foundations of the building in
which the Leased Property is situated. It is understood and agreed that the
Lessor reserves and at any and all times shall have the right to alter,
repair or improve the building of which the Leased Property is a part, or to
add thereto, and for that purpose at any time may erect scaffolding and all
other necessary structures upon the Leased Property, and the Lessor and
Lessor's representatives, contractors and workmen for the aforedescribed
purposes may, upon reasonable advance notice, enter in or about the Leased
Property with such materials and equipment as Lessor may deem necessary
therefore. Lessee waives any claim to damages, including loss of business
resulting therefrom.
8. RIGHT OF ENTRY. It shall be lawful for the Lessor, his agents and
representatives, at any reasonable time upon reasonable notice, except in the
case of emergency, to enter into or upon the Leased Property for the purpose
of examining into the condition thereof,
<PAGE>
or any other lawful purpose. If during the last month of the term the Lessee
shall have removed all, or substantially all, of the Lessee's property from
the Leased Property, the Lessor may immediately enter and alter, renovate,
and redecorate the Leased Property, without elimination or abatement of rent
without liability to the Lessee for any compensation, and such acts shall
have no effect upon this Lease.
9. RIGHTS OF ASSIGNMENT. The Lessee will not assign, transfer, pledge,
hypothecate, surrender or dispose of this Lease, or any interest herein, or
permit any other person or persons whomsoever to occupy the Leased Property
without the written consent of the Lessor being first obtained in writing.
This Lease is personal to the Lessee. Lessor interest, in whole or in part,
cannot be sold, assigned, transferred, seized or taken by operation at law,
or under or by virtue of any execution or legal process, attachment
proceedings instituted against Lessee, or under or by virtue of any
bankruptcy or insolvency proceedings had in regard to the Lease or in any
other manner, except as above mentioned. Subject to the foregoing, all
rights, remedies and liabilities herein given or imposed upon either of the
parties hereto, shall extend to, inure to the benefit of, and bind, as the
circumstances may require, the heirs, personal representative, successors
and, so far as this Lease is assignable by the terms hereof, the assigns of
all parties.
10. LIENS. The Lessee will not permit any lien of any kind, type or
description to be placed or imposed upon the Leased Property or any part
thereof.
11. ICE, SNOW AND DEBRIS. If the Leased Property is located at street
level, then at all times Lessee shall keep the sidewalks, curbs, driveways,
and parking spaces immediately adjoining the building (whether or not they
are included herein as Leased Property), in front thereof free and clear of
ice, snow, rubbish, debris and obstructions and if the Lessee occupies the
entire building, he will not permit rubbish, debris, ice or snow to
accumulate on the roof of said building so as to stop up or obstruct gutter
downspouts or cause damage to said roof,
12. ADVERTISING SIGNS. The lessee will not use the outside walls of the
Leased Property, or allow signs or devices of any kind to be attached thereto
or suspend therefrom, for advertising or displaying the name or business of
the Lessee or for any purpose whatsoever without the written consent of the
Lessor.
13. INSURANCE COVERAGES. The Lessee shall, at all times during the term
hereof, at his own expense, keep in effect, furnish and deliver to the Lessor
insurance policies (or certificates evidencing same,) in form and with an
insurer satisfactory to the Lessor insuring:
(I) Both the Lessor and Lessee against all liability for damage to
personal property in or about said Leased Property. The amount of said
liability insurance shall be not less than the amount set forth in Paragraph
N. above.
(ii) The Lessor against the damage or destruction of the Leased Property
by fire or other casualty under a standard fire insurance policy with
standard specific extended form coverage endorsement to 100% of the full,
current replacement value.
(iii) The Lessor against business interruption including the payment of
rental to the Lessor for the period set forth in Paragraph P. above.
The renewal forms of each such policy or certificate shall be delivered
to the Lessor not less than 30 days prior to the expiration of the current
policy. Each policy shall provide that it cannot be canceled as to the Lessor
with less than 15 days' notice to it.
14. INDEMNIFICATION. The Lessee agrees to and shall indemnify and hold
the Lessor harmless against any and all claims and demands arising from,
(i)the negligence of the Lessee, his officers, agents, invitees and/or
employees; (ii)the failure by the Lessee to perform any covenant required to
be performed by the Lessee hereunder, (iii)accident, injury, or damage which
shall happen in or about the Leased Property or appurtenances, or on or under
the adjoining streets, sidewalks, driveways, parking areas, or curbs, or
resulting from the condition, maintenance, or operation of the Leased
Property or of the adjoining streets, sidewalks, driveways, parking areas or
curbs. Lessee's failure to comply with any requirements of any governmental
authority; and (iv)any mechanic's lien, or security agreement, filed against
the Leased Property as a result of the acts of the Lessee. The Lessee shall
at his own expense defend the Lessor against any and all suits or actions
arising out of the aforedescribed acts or acts, and all appeals therefrom and
shall satisfy and discharge any judgment which may be awarded against Lessor,
including but not limited to, the Lessor's attorney in any such suit or
action.
15. TAXES AND ASSESSMENTS. The Lessee shall pay all real property
taxes, assessments (general and special) and other public charges levied,
assessed or otherwise imposed upon the Leased Property, all promptly before
the same or any part thereof become past due; provided, however, that any
municipal, county or state assessment over $2,000.00 total which become or
may become a lien on the premises, may be bonded by the Lessee as provided by
law, and the Lessee shall pay all installment on principal and interest on
such bonds during his tenancy, but shall be released from all obligation for
payment of installments becoming due after the end of the lease herein
reserved without proration. The Lessee shall also pay promptly, when due, all
taxes levied against his own personal property and all taxes, assessments and
public charges whatsoever arising in respect to, and because of, the Lessee's
occupancy, use or possession of the leased property. Such real property
taxes for which the commencement and expiration of the term of this Lease
shall fall shall be appropriately pro-rated and adjusted between the Lessor
and the Lessee. The Lessee shall furnish to the Lessor, within 30 days after
the date any amount is payable by the Lessee, as provided in this Paragraph,
copies of official receipts of the appropriate taxing authority or other
proof satisfactory to the Lessor evidencing payment.
16. LESSEE'S ALTERATIONS AND IMPROVEMENTS. No alteration, addition, or
improvement to the Leased Property shall be made by the Lessee without the
written consent of the Lessor. Any alteration, addition, or improvement made
by the Lessee after such consent shall have been given, and any fixtures
installed as part thereof, (except Lessee movable trade fixtures), shall at
the Lessor's option, become the property of the Lessor upon the expiration or
other sooner termination of this Lease; provided, however, the Lessor shall
have the right to require the Lessee to remove such fixtures at the Lessee's
cost upon such termination of this Lease.
17. DAMAGE BY CASUALTY OR FIRE AND DUTY TO REPAIR. If all or any part
of the Leased Property is damaged or destroyed by fire or other casualty
subject to coverage under the standard fire insurance policy with standard
special or extended form coverage endorsement applicable to the Leased
Property, the Lessor shall, except as otherwise provided herein, repair and
rebuild the Leased Property with reasonable diligence. If there is a
substantial interference with the operation of the Lessee's business in the
leased Property, the then applicable rental shall be equitably apportioned
for the duration of such repairs. Notwithstanding the foregoing provisions,
if at any time within eighteen months prior to the end of the initial or any
renewal term, and provided the Lessee shall not have served upon the Lessor
notice of renewal or extension as herein provided, the Leased Property is
completely destroyed or so damaged by fire or other casualty covered by
insurance as to render it unfit for the use as set forth at Paragraph L.
above, the Lessor may terminate this Lease on 30 days' written notice tot he
Lessee. If all or any substantial part of the Leased Property is damaged or
destroyed by casualty which
<PAGE>
is not subject to coverage under the standard fire insurance policy with
standard special or extended form coverage endorsement applicable to the
Leased Property, or if subject to such coverage, the loss is, in fact, not
covered to within 100% of replacement, the Lessor may terminate this Lease
upon 30 days' written notice to the Lessee. If the Lessor shall terminate
this Lease as provided herein, all rent shall be apportioned to the date of
termination and all insurance proceeds shall belong to the Lessor. Except to
the extent provided for in the Paragraph, neither the rent payable by the
Lessee nor any of the Lessee's other obligations under any provision of this
Lease shall be affected by any damage to or destruction of the Leased
Property by any cause whatsoever, and the Lessee hereby expressly waives any
and all additional rights it might otherwise have under any law or statute.
18. WAIVER OF SUBROGATION RIGHTS. Neither the Lessor nor the Lessee
shall be liable to the other for loss arising out of damage to, or
destruction of, the Leased Property or the contents thereof, when such loss
is caused by any of the perils which are or could be included within or
insured against by a standard fire insurance policy with standard extended or
special form coverage endorsement, including sprinkler leakage insurance and
business interruption insurance, if any. All such claims for any and all
loss, however caused, hereby are waived. Said absence of liability shall
exist whether or not the damage or destruction is caused by the negligence of
either Lessor or Lessee or by any of their respective agents, servants or
employees. Neither the Lessor nor the Lessee shall have any interest or claim
in the other's insurance policy or policies or the proceeds thereof, unless
specifically covered therein as a joint assured and notwithstanding any
provision hereof requiring the Lessee to furnish such coverages on behalf of
the Lessor. If the Lessee, at any time, is unable to obtain inclusion of any
of the matters set forth above in any of its policies, the Lessee shall, at
its own expense, have the Lessor named in such policies as one of the
insureds.
19. EMINENT DOMAIN.
(i) If the whole of the Leased Property shall be taken for any public or
any quasi-public use under any statute or by right of eminent domain, or by
private purchase in lieu thereof, then the Lease shall automatically
terminate as of the date that title shall be taken. If any part of the Leased
Property shall be so taken as to render the remainder thereof unusable for
the purposes for which the Leased Property was leased as set forth in
Paragraph L., then the Lessor and the Lessee shall each have the right to
terminate this Lease on 30 days' notice to the other given not later than the
date of such taking. In the event that this Lease shall terminate or be
terminated, the rental shall, if and as necessary, be equitably adjusted.
(ii) If a part of the Leased Property shall be taken as provided in
Subparagraph (i) above, without so rendering the remainder of the Leased
Property unusable, then the Lessor shall rebuild and restore the Leased
Property with reasonable diligence, and if there is a substantial
interference with the operation of the Lessee's business in the Leased
Property the then applicable rental shall be equitably apportioned for the
duration of such rebuilding and restoration; provided, however, that the cost
of such work shall not exceed the proceeds of its condemnation award; and
provided, further, that if such taking occurs within 18 months prior to the
end of the initial or any renewal term, the Lessor may upon 30 days' notice
given to the Lessee on or before the date of such taking elect not to so
rebuild or restore the Leased Property.
(iii) All compensation awarded or paid upon such a total or partial
taking of the Leased Property shall belong to and be the property of the
Lessor without any participation by the Lessee; provided, however, that
nothing contained herein shall be construed to preclude the Lessee from
prosecuting any claim directly against the condemning authority in such
condemnation proceedings for loss of business, or depreciation to damage to,
or cost of removal of, or for the value of stock, trade fixtures, furniture,
and other personal property belonging to he Lessee; provided, further,
however, that no such claim shall diminish or otherwise adversely affect the
Lessor's award or the award of any fee mortgagee.
20. LESSOR'S SIGNS. During the periods specified in Paragraph Q. above,
the Lessor may post on the Leased Property, including the windows thereof,
signs of moderate size notifying the public that the premises are "for sale"
or "for rent" or "for lease".
21. SURRENDER UPON TERMINATION. At the expiration of this term of the
Lease or upon any sooner termination hereof, the Lessee will quit and deliver
up said Leased Property and all future erections or additions to or upon the
same, broom clean, to the Lessor or those having Lessor's estate in the
premises, peaceably quiet, and in a good order and condition, reasonable use
and wear thereof, damage or loss excused pursuant to the terms hereof
excepted, as the same are now in or hereafter may be put in by the Lessor and
Lessee.
22. LIQUIDATED DAMAGES. In the event that the Lessee shall fail to
deliver up the Leased Property as above agreed, he shall become liable for
the payment, at the option of the Lessor, of a sum for each and every day
which he holds possession and fails to deliver over possession in the amount
set forth at Paragraph R. above. The lessor by availing itself of the rights
and privileges granted by this provision and the acceptance of said
liquidated rental shall not be deemed to have waived any of the rights and
privileges granted in other parts of this Lease, but the rights granted under
this provision shall be considered, in any event, as in addition to, and not
in exclusion of, such rights and privileges.
23. HOLDING OVER. In the event the Lessee for any reason shall hold
over after the expiration of this Lease, such holding over shall not be
deemed to operate as a renewal or extension of this Lease, but shall only
create a tenancy from month-to-month which may be terminated at will at any
time by the Lessor.
24. ATTORNEY'S FEES AND COURT COSTS. In case suit, action, or
arbitration is instituted to enforce compliance with any of the terms,
covenants or conditions of this Lease, or to collect the rental which may
become due hereunder, or any portion thereof or to enforce any right of
Lessor while Lessee is holding over after expiration hereof, the losing party
agrees to pay such sum as the trial court or arbitrators may adjudge
reasonable as attorney's fees to be allowed the prevailing party in such
suit, action, or arbitration and in the event any appeal is taken from any
judgment or decree in such suit or action , the losing party agrees to pay
such further sum as the appellate court shall adjudge reasonable as
prevailing party's attorney's fees on such appeal.
25. WAIVER. Any waiver by either party of any breach of any covenant
herein contained to be kept and performed by the other party shall not be
deemed or considered as a continuing waiver, and shall not operate to bar or
prevent the party from declaring as forfeiture for any succeeding breach,
either of the same condition or covenant or otherwise.
26. NOTICES. Any notice required by the terms of this Lease to be given
by one party to the other or desired so to be given, shall be sufficient if
in writing contained in a sealed envelope, deposited in the U.S. Registered
or Certified Mails with postage fully prepaid, and if intended for the
Lessor, then if addressed to said Lessor at the address set forth in
Paragraph A. above and if intended for the Lessee, then if addressed to the
Lessee at the address set forth for it in Paragraph B. above.
<PAGE>
27. DELAY OF POSSESSION. If the Lessor for any reason cannot deliver
possession of the Leased Property to the Lessee at the commencement of the
Lease term, this Lease shall not be void or voidable, nor shall the Lessor be
liable to the Lessee for any loss or damage resulting therefrom, but there
shall be an abatement of rent for the period between the commencement of the
Lease term and the time when the Lessor does deliver possession.
28. QUIET ENJOYMENT. The Lessee, upon the payment of the rent herein
reserved and upon the performance of, and subject to the provisions of this
Lease, shall at all times during the Lease term and during any extension or
renewal term peaceably and quietly enjoy the Leased Property without any
disturbance from the Lessor or from any other person claiming through the
Lessor.
29. PERFORMANCE OF LESSEE'S OBLIGATIONS. If the Lessee shall be in
default hereunder, the lessor may cure such default on behalf of the Lessee,
in which event the Lessee shall reimburse the Lessor for all sums paid to
effect such cure, together with interest at the highest legal rate. In order
to collect such reimbursement the Lessor shall have all the remedies
available under this Lease for a default in the payment of rent.
30. ARBITRATION. In the event of any controversy between the parties
over the application of Paragraphs 17., 19., or 27. hereof, the same shall be
settled by arbitration at Portland, Oregon in accordance with the then
existing rules of the American Arbitration Association, and judgment upon
the award rendered may be entered in any court having jurisdiction thereof.
31. DEFAULT.
(I) The Lessor may give the Lessee five days' notice of intention to
terminate this lease in any of the following circumstances:
1. If the Lessee shall be in default in the performance of any
covenant of the lease (other than the covenants for the payment of basic rent
or additional rent) and such is not cured within 15 days after written notice
thereof given by the Lessor; or, if such default shall be of such nature that
it cannot be cured completely within such 15-day period, if the Lessee shall
not have promptly commenced the cure within such 15-day period or shall not
thereafter proceed with reasonable diligence and in good faith to remedy such
default.
2. If the Lessee shall be adjudicated a bankrupt, make a general
assignment for the benefit of creditors, or the benefit of any insolvency
act, or if a permanent receiver or trustee in bankruptcy shall be appointed
for the Lessee's property and such appointment is not vacated within 90 days.
For these purposes the "Lessee" shall mean the tenant then in possession of
the Leased Property.
3. If the Leased Property becomes abandoned for a period of 30
days.
4. If this Lease shall be assigned or the Leased Property sublet
other than in accordance with the terms of this Lease and such default is not
cured within 15 days after notice.
(ii) The Lessor may give the Lessee 10 days written notice of intention
to terminate this Lease if the Lessee shall be in default in the payment of
the initial rent or any additional rent.
(iii) If the Lessor shall give the notice of intention to terminate
provided above, then at the expiration of such period this Lease shall
terminate as completely as if that were the date herein definitely fixed for
the expiration of the term of this Lease, and the Lessee shall then surrender
the Leased Property to the Lessor. If this Lease shall so terminate, it
shall be lawful for the Lessor, at its option, without formal demand or
notice of any kind, to re-enter the Leased Property by a forcible entry and
detainer action or by any other means, including force, and to remove the
Lessee and his possessions therefrom without being liable for any damages
therefor. Upon the termination of this Lease, as herein provided, the Lessor
shall have the right, at its election , to terminate any sublease then in
effect, without the consent of the sublessee concerned.
(iv) The Lessee shall remain liable for all its obligations under this
Lease despite the Lessor's re-entry, and the Lessor may re-rent or use the
Leased Property as agent for the Lessee, if the Lessor so elects. The Lessee
waives any legal requirement for notice of intention to re-enter and any
right of redemption.
(v) If this Lease shall terminate as provided in this Paragraph the
Lessor shall have the right, at its election at any time, to recover from the
Lessee the amount by which the rent and charges equivalent to rent reserved
herein for the balance of the term shall exceed the reasonable rental value
of the Leased Property for the same period.
32. ESTOPPEL CERTIFICATE. Each party, within ten (10) days after
notice from the other party, shall execute and deliver to the other party, in
recordable form a certificate stating that this Lease is unmodified and in
full force and effect, or in full force and effect as modified, and stating
the modifications. The certificate shall also state the day on which the term
of the Lease commenced, the date of expiration of the initial term of the
Lease, the amount of the minimum monthly rent, the dates to which the rent
has been paid in advance, and that the Lease represents the entire agreement
between the parties, that there are no defaults by the party to whom the
certificate is given not any defenses or offsets against such party, that all
amounts due as rental under the Lease have been paid through and including a
date specified in the certificate, and the amount of any security deposit or
prepaid rent. Failure to deliver the certificate within such ten (10) days
shall be conclusive upon the party failing to deliver the certificate for the
benefit of the party requesting the certificate that this Lease is in full
force and effect, that it has not been modified except as may be requested by
the party requesting the certificate, and that there are no defaults by or
offsets or defenses against the party requesting the certificate.
33. SUBORDINATION.
(a) This Lease , at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust or other security now or hereafter placed upon
the real property of which the premises are a party and to any and all
advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding such
subordination, Lessee's right to quiet possession of the premises shall not
be disturbed if Lessee is not in default and so long as Lessee shall pay the
rent and observe and perform all of the provisions of this Lease, unless this
Lease is otherwise terminated pursuant to its terms . If any mortgagee,
trustee or ground lessee shall elect to have this Lease prior to the lien of
its mortgage, deed of trust or ground lease and shall give written notice
thereof to Lessee, this Lease shall be deemed prior to such mortgage, deed of
trust or ground lease, whether this Lease is dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's
failure to execute such documents within 10 days after written demand shall
constitute a material default by Lessee hereunder.
34. MISCELLANEOUS PROVISIONS.
(i) Time is of the essence of this Lease with respect of performance by
each party of his obligations hereunder.
<PAGE>
(ii) In construing this Lease, masculine or feminine pronouns shall be
substituted for those neuter in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the
context requires.
(iii) If there is more than one party tenant, the covenants of the
Lessee shall be the joint and several obligations of each such party, and, if
the Lessee is a partnership the covenants of the Lessee shall be the joint
and several obligations of each of the partners and the obligations of the
firm.
(iv) The parties agree to execute and deliver any instruments in writing
necessary to carry out any agreement, term, conditions, or assurance in this
Lease whenever occasion shall arise and request for such instruments shall be
made.
(v) The specified remedies to which the Lessor may resort under the
terms of this Lease are cumulative and are not intended to be exclusive of
any other remedies or means of redress, as provided herein or by law, to
which the Lessor may be lawfully entitled in case of any breach or threatened
breach by the Lessee of any provision or provisions of this Lease.
(vi) The captions of this Lease are inserted only as a matter of
convenience and for reference and in no way define, limit, or describe the
scope or intent of the Lease , nor in any way affect this Lease.
(vii) This Lease, together with any written agreements which shall have
been executed simultaneously herewith, contains the entire agreement and
understanding between the parties. There are no oral understandings, terms,
or conditions, and neither party has relied upon any representation, express
or implied, not contained in the Lease or the simultaneous writings
heretofore referred to. Al l prior understandings, terms, or conditions are
deemed merged in this Lease. This Lease cannot be changed or supplemented
orally.
(viii) If any provision of this Lease shall be declared invalid or
unenforceable, the remainder of this Lease shall continue in full force and
effect.
35. ADDITIONAL TERMS AND CONDITIONS. Additional terms and conditions
of this Lease are set forth at Paragraph S. above (and attached) and have the
same force and effect as if printed here; provided, however, that in the
event that any provisions of Paragraph S. conflict with any other provision
hereof, and both may not be given effect Paragraph S. shall control.
36. ENVIRONMENTAL MATTERS. Tenant warrants for itself, and for any
subtenant or assignee, that it does not and shall not during any time when
it, its subtenant or assignee is in possession of the Property allow,
possess, generate, sue, release, store or deposition, over or beneath the
Property any hazardous substances (as defined in ORS 466.540, et seq. and
regulations related thereto), any substances, materials or contaminants
regulated under 42 USC Section 3001, and regulations related thereto, or any
polychlorinated biphenyls, nor shall it install, use or decommission any
underground storage tank, except in accordance with governing federal, state
and local laws or regulations. The use of the premises for any activities
involving, directly or indirectly, the use, generation, treatment, storage or
disposal of any hazardous or toxic chemical material, substance or waster,
except as required or allowed in the normal course of each Tenant's business
in accordance with local, state or federal environmental protection laws and
regulations is hereby prohibited. Tenant agrees to indemnify Landlord and any
lender suing the Property as security from and against any and all costs,
expenses, including, without limitation, attorneys' fees for settlement, at
trial or on appeal; losses; actions; suits; claims, judgments and any other
liability whatsoever in connection with the breach by Tenant, tenant's
subtenant or assignee of any federal, state or local environmental protection
laws or regulations. Upon request from Landlord, Tenant will furnish an
environmental estoppel certificate in commercially reasonable form to
Landlord.
IN WITNESS WHEREOF, the Lessor identified at Paragraph A. above and the
Lessee identified at Paragraph B. above have executed this instrument in
duplicate, the day and year set forth at Paragraph C. above, any corporate
signature being by the authority of the board of directors of such
corporation.
<PAGE>
FIRST ADDENDUM
LESSOR: Davis Partnership
LESSEE: United Stationers Supply Co.
LOCATION: 4409 S.E. 24TH Avenue, Portland, Oregon
RENTAL:
First year-$21,582.00 per month
(March 1, 1997-February 28, 1998)
Second year-$22,230.00 per month
(March 1, 1998-February 28, 1999)
Third year-$22,896.00 per month
(March 1,1999-February 29, 2000)
Fourth year-$23,583.00 per month
(March 1, 2000-February 28, 2001)
Fifth year-$24,291.00 per month
(March 1, 2001-February 28, 2002)
REPAIRS: Lessor shall be responsible for the maintenance of the
concrete floors if major settlements should occur to said
floors. Lessee shall be responsible for all other maintenance
of the concrete floors, except where major settlements occur.
IMPROVEMENTS: Lessor, at Lessor's sole cost and expense, shall perform those
tenant improvements listed on the attached exhibit entitled
"Tenant Improvements" unless the parties subsequently agree in
writing on additional improvements. The first $2,000 of cost
overrun in excess of $59,723 for the listed items shall be
paid by Lessor, but still cause the monthly rent to be increased
by an amount which shall permit such costs to be amortized over
the term of the lease assuming a nine (9) percent interest rate.
Any cost overruns over $2,000 shall be paid for by the Lessee.
Savings on any allowance item may be applied to overruns on
other items. Any net savings on allowance items will be applied
as a credit against rent at project completion. Lessor will use
best efforts to complete the Tenant Improvements as soon as
possible. All parties hereto acknowledge that the exterior
painting and parking lot striping will probably not be completed
until May or June of 1997.
If the parties subsequently agree to additional tenant
improvements, in writing, the cost of the additional
improvements will cause the rent to be increased by an amount
which shall permit such costs to be amortized over the terms
of the Lease assuming a nine (9) percent interest rate.
RIGHT TO CANCEL: The Lessee, upon not less than 180 days advance written
notice, may terminate the lease effective February 28, 1999
or any date thereafter. Lessee may only exercise this right of
termination if the reason for termination is the relocation of
Lessee's business to a new building in the states of Oregon or
Washington that is at least 150 percent larger than the building
that is the subject of this lease. As consideration for so
terminating this Lease, the Lessee agrees to pay as cost
reimbursement to Lessor an amount equal to the unamortized
portion of the Tenant Improvements and the unamortized portion
of a $20,000 real estate fee. Said amortization shall assume a
9 percent interest rate and five-year amortization period.
Lease cancellation fee must be paid at the time cancellation
notice if delivered.
CONSENT: Where the consent of either party is required, such consent shall
not be unreasonably withheld or delayed.
LESSOR'S
REPRESENTATIONS: Lessor represents and warrants to Lessee that the premises,
when originally built, was in compliance with the building code
in effect at that time.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
SUBSIDIARIES OF UNITED STATIONERS INC.
United Stationers Supply Co., an Illinois corporation
SUBSIDIARIES OF UNITED STATIONERS SUPPLY CO.
United Stationers Hong Kong Limited, a Hong Kong corporation
United Worldwide Limited, a Hong Kong corporation
Lagasse Bros., Inc., a Louisiana corporation
SAH, Inc., an Illinois corporation
CJS/GT Corp., a Georgia corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-02247) of United Stationers Inc. and in the related
Prospectus of our reports dated June 27, 1995 with respect to the
consolidated financial statements and schedule of United Stationers Inc. for
the seven-month period ended March 30, 1995 and January 28, 1996 with respect
to the consolidated financial statements and schedules of United Stationers
Inc. as of and for the years ended December 31, 1996 and 1995 included in
this Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/Ernst & Young LLP
Chicago, Illinois
March 25, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statement (Form S-3 No.
33-62739) of United Stationers Inc. and in the related Prospectus of our
report dated January 23, 1995 on the consolidated financial statements and
schedule of Associated Holdings, Inc. as of December 31, 1994 and for the
year ended December 31, 1994 and to all references to our Firm included in
the Annual Report (Form 10-K) of United Stationers Inc. for the year ended
December 31, 1996.
/S/ Arthur Andersen LLP
Chicago, Illinois
March 25, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statement (Form S-3 No.
33-62739) of United Stationers Inc. and in the related Prospectus of our
report dated October 6, 1994 on the consolidated financial statements and
schedule of United Stationers Inc. for the year ended August 31, 1994, and to
all references to our Firm included in the Annual Report (Form 10-K) of
United Stationers Inc. for the year ended December 31, 1996.
/S/ Arthur Andersen LLP
Chicago, Illinois
March 25, 1997
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<PAGE>
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