10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to            

Commission File Number:  0-10653

UNITED STATIONERS INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	36-3141189
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

One Parkway North Boulevard
Suite 100
Deerfield, Illinois 60015-2559
(847) 627-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s
Principal Executive Offices)

Securities registered pursuant to
Section 12(b) of the Act:	Name of Exchange on which registered:
Common Stock, $0.10 par value per share	NASDAQ Global Select Market
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the 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.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No x

On April 28, 2010, United Stationers Inc. had 24,202,397 shares of common stock outstanding.

UNITED STATIONERS INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2010

TABLE OF CONTENTS

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009	3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009	4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	31
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6. Exhibits	33
SIGNATURES	34

2

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)
(Unaudited)

	As of March 31, 2010			As of December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	92,117		$	18,555
Accounts receivable and retained interest in receivables sold, less allowance for doubtful accounts of $33,744 in 2010 and $35,216 in 2009	606,174			641,317
Inventories	610,095			590,854
Other current assets	33,333			33,026
Total current assets	1,341,719			1,283,752
Property, plant and equipment, at cost	425,730			422,334
Less - accumulated depreciation and amortization	295,061			287,302
Net property, plant and equipment	130,669			135,032
Intangible assets, net	65,335			62,932
Goodwill	328,328			314,429
Other	11,546			12,371
Total assets	$	1,877,597		$	1,808,516
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	433,806		$	390,883
Accrued liabilities	168,933			171,366
Total current liabilities	602,739			562,249
Deferred income taxes	3,010			4,052
Long-term debt	441,800			441,800
Other long-term liabilities	99,542			93,702
Total liabilities	1,147,091			1,101,803
Stockholders’ equity:
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 37,217,814 shares in 2010 and 2009	3,722			3,722
Additional paid-in capital	392,323			387,131
Treasury stock, at cost - 13,069,391 shares in 2010 and 13,237,495 shares in 2009	(699,499		)	(700,294		)
Retained earnings	1,076,299			1,058,074
Accumulated other comprehensive loss	(42,339		)	(41,920		)
Total stockholders’ equity	730,506			706,713
Total liabilities and stockholders’ equity	$	1,877,597		$	1,808,516

See notes to condensed consolidated financial statements.

3

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)
(Unaudited)

	For the Three Months Ended March 31,
	2010		2009
Net sales	$	1,154,309	$	1,121,307
Cost of goods sold	987,443		956,971
Gross profit	166,866		164,336
Operating expenses:
Warehousing, marketing and administrative expenses	131,068		135,452
Operating income	35,798		28,884
Interest expense, net	6,229		7,180
Other expense, net	—		204
Income before income taxes	29,569		21,500
Income tax expense	11,344		7,979
Net income	$	18,225	$	13,521
Net income per share - basic:
Net income per share - basic	$	0.77	$	0.57
Average number of common shares outstanding - basic	23,673		23,707
Net income per share - diluted:
Net income per share - diluted	$	0.73	$	0.57
Average number of common shares outstanding - diluted	24,820		23,810

See notes to condensed consolidated financial statements.

4

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)
(Unaudited)

	For the Three Months Ended March 31,
	2010			2009
Cash Flows From Operating Activities:
Net income	$	18,225		$	13,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,258			10,588
Share-based compensation	3,266			2,884
Gain on the disposition of property, plant and equipment	(15		)	(19		)
Amortization of capitalized financing costs	182			218
Excess tax benefits related to share-based compensation	(3,419		)	(10		)
Deferred income taxes	(1,586		)	(3,071		)
Changes in operating assets and liabilities:
Decrease in accounts receivable and retained interest in receivables sold, net	35,851			36,384
(Increase) decrease in inventory	(18,126		)	108,053
Decrease in other assets	145			11,480
Increase (decrease) in accounts payable	95,204			(13,964		)
Decrease in checks in-transit	(52,745		)	(8,347		)
Decrease in accrued liabilities	(3,630		)	(41,842		)
Increase (decrease) in other liabilities	337			(67		)
Net cash provided by operating activities	82,947			115,808
Cash Flows From Investing Activities:
Capital expenditures	(5,658		)	(1,985		)
Acquisition, net of cash acquired	(10,527		)	—
Proceeds from the disposition of property, plant and equipment	—			21
Net cash used in investing activities	(16,185		)	(1,964		)
Cash Flows From Financing Activities:
Net repayments under Revolving Credit Facility	—			(110,600		)
Net proceeds from share-based compensation arrangements	15,079			67
Acquisition of treasury stock, at cost	(11,720		)	—
Excess tax benefits related to share-based compensation	3,419			10
Payment of debt issuance costs	—			(51		)
Net cash provided by (used in) financing activities	6,778			(110,574		)
Effect of exchange rate changes on cash and cash equivalents	22			(16		)
Net change in cash and cash equivalents	73,562			3,254
Cash and cash equivalents, beginning of period	18,555			10,662
Cash and cash equivalents, end of period	$	92,117		$	13,916
Other Cash Flow Information:
Income tax payments, net	$	4,148		$	789
Interest paid	5,732			6,413
Loss on the sale of accounts receivable	—			423

See notes to condensed consolidated financial statements.

5

UNITED STATIONERS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements represent United Stationers Inc. (“USI”) with its wholly owned subsidiary United Stationers Supply Co. (“USSC”), and USSC’s subsidiaries (collectively, “United” or the “Company”). The Company is a leading wholesale distributor of business products, with net sales for the trailing 12 months of $4.7 billion. The Company operates in a single reportable segment as a national wholesale distributor of business products. The Company offers more than 100,000 items from over 1,000 manufacturers. These items include a broad spectrum of technology products, traditional business products, office furniture, janitorial and breakroom supplies, and industrial supplies. In addition, the Company also offers private brand products. The Company primarily serves commercial and contract office products dealers. The Company sells its products through a national distribution network of 64 distribution centers to approximately 25,000 resellers, who in turn sell directly to end-consumers.

The accompanying Condensed Consolidated Financial Statements are unaudited, except for the Condensed Consolidated Balance Sheet as of December 31, 2009, which was derived from the December 31, 2009 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 for further information.

In the opinion of the management of the Company, the Condensed Consolidated Financial Statements for the periods presented include all adjustments necessary to fairly present the Company’s results for such periods. Certain interim estimates of a normal, recurring nature are recognized throughout the year, relating to accounts receivable, supplier allowances, inventory, customer rebates, price changes and product mix. The Company evaluates these estimates periodically and makes adjustments where facts and circumstances dictate.

Acquisition of MBS Dev, Inc.

The Company completed the acquisition of all of the capital stock of MBS Dev, Inc. (“MBS Dev”) during the quarter for a purchase price of $15 million and an additional potential $3 million earn-out based upon the achievement of certain financial goals.  The purchase price consisted of $12 million in cash at closing plus $3 million to be paid to the former owners over the course of the next three years, the timing (but not the amount) of which is based upon achievement of certain financial goals.  Net of cash held by MBS Dev at closing, the initial cash outlay was $10.5 million.  MBS Dev is a software solutions provider to business products resellers and allows the Company to accelerate e-business development and enable customers and suppliers to leverage the internet.  As a result of the acquisition the Company recorded $13.9 million of goodwill, $3.7 million in intangible assets, and $4.1 million of liabilities to be paid upon achievement of certain financial metrics agreed to in the purchase agreement.  The $4.1 million liability represents the combined fair value of both earn-outs.

2.Summary of Significant Accounting Policies

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company. All intercompany accounts and transactions have been eliminated in consolidation. For all acquisitions, account balances and results of operations are included in the Condensed Consolidated Financial Statements as of the date acquired.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Various assumptions and other factors underlie the determination of significant accounting estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. The Company periodically reevaluates these significant factors and makes adjustments where facts and circumstances dictate. Historically, actual results have not significantly deviated from estimates.

6

Supplier Allowances

Supplier allowances (fixed or variable) are common practice in the business products industry and have a significant impact on the Company’s overall gross margin. Gross margin is determined by, among other items, file margin (determined by reference to invoiced price), as reduced by customer discounts and rebates as discussed below, and increased by supplier allowances and promotional incentives. Receivables related to supplier allowances totaled $58.8 million and $78.2 million as of March 31, 2010 and December 31, 2009, respectively.  These receivables are included in “Accounts receivable” in the Condensed Consolidated Balance Sheets.

In the first quarter of 2010, approximately 14% of the Company’s estimated supplier allowances and incentives were fixed, based on supplier participation in various Company advertising and marketing publications. Fixed allowances and incentives are taken to income through lower cost of goods sold as inventory is sold.

The remaining 86% of the Company’s supplier allowances and incentives in the first quarter of 2010 were variable, based on the volume and mix of the Company’s product purchases from suppliers.  These variable allowances are recorded based on the Company’s annual inventory purchase volumes and product mix and are included in the Company’s financial statements as a reduction to cost of goods sold, thereby reflecting the net inventory purchase cost. Supplier allowances and incentives attributable to unsold inventory are carried as a component of net inventory cost. The potential amount of variable supplier allowances often differs based on purchase volumes by supplier and product category. As a result, changes in the Company’s sales volume (which can increase or reduce inventory purchase requirements) and changes in product sales mix (especially because higher-margin products often benefit from higher supplier allowance rates) can create fluctuations in variable supplier allowances.

Customer Rebates

Customer rebates and discounts are common practice in the business products industry and have a significant impact on the Company’s overall sales and gross margin. Such rebates are reported in the Condensed Consolidated Financial Statements as a reduction of sales. Customer rebates of $39.1 million and $59.5 million as of March 31, 2010 and December 31, 2009, respectively, are included as a component of “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

Customer rebates include volume rebates, sales growth incentives, advertising allowances, participation in promotions and other miscellaneous discount programs. These rebates are paid to customers monthly, quarterly and/or annually. Estimates for volume rebates and growth incentives are based on estimated annual sales volume to the Company’s customers.

The aggregate amount of customer rebates depends on product sales mix and customer mix changes. Reported results reflect management’s current estimate of such rebates. Changes in estimates of sales volumes, product mix, customer mix or sales patterns, or actual results that vary from such estimates, may impact future results.

Revenue Recognition

Revenue is recognized when a service is rendered or when title to the product has transferred to the customer. Management records an estimate for future product returns related to revenue recognized in the current period. This estimate is based on historical product return trends and the gross margin associated with those returns. Management also records customer rebates that are based on estimated annual sales volume to the Company’s customers. Annual rebates earned by customers include growth components, volume hurdle components, and advertising allowances.

Shipping, handling and fuel costs billed to customers are treated as revenues and recognized at the time title to the product has transferred to the customer. Freight costs for inbound and outbound shipments are included in the Company’s financial statements as a component of cost of goods sold and not netted against shipping and handling revenues. Net sales do not include sales tax charged to customers.

Valuation of Accounts Receivable

The Company makes judgments as to the collectability of accounts receivable based on historical trends and future expectations. Management estimates an allowance for doubtful accounts, which addresses the collectability of trade accounts receivable. This allowance adjusts gross trade accounts receivable downward to its estimated collectible or net realizable value. To determine the allowance for doubtful accounts, management reviews specific customer risks and the Company’s accounts receivable aging.  Uncollectible receivable balances are written off against the allowance for doubtful accounts when it is determined that the receivable balance is uncollectible.

7

Insured Loss Liability Estimates

The Company is primarily responsible for retained liabilities related to workers’ compensation, vehicle, property and general liability and certain employee health benefits. The Company records expense for paid and open claims and an expense for claims incurred but not reported based on historical trends and on certain assumptions about future events. The Company has an annual per-person maximum cap, provided by a third-party insurance company, on certain employee medical benefits. In addition, the Company has both a per-occurrence maximum loss and an annual aggregate maximum cap on workers’ compensation claims.

Leases

The Company leases real estate and personal property under operating leases. Certain operating leases include incentives from landlords including landlord “build-out” allowances, rent escalation clauses and rent holidays or periods in which rent is not payable for a certain amount of time. The Company accounts for landlord “build-out” allowances as deferred rent at the time of possession and amortizes this deferred rent on a straight-line basis over the term of the lease.

The Company also recognizes leasehold improvements and amortizes these improvements over the shorter of (1) the term of the lease or (2) the expected life of the respective improvements.

The Company accounts for rent escalation and rent holidays as deferred rent at the time of possession and amortizes this deferred rent on a straight-line basis over the term of the lease. As of March 31, 2010, the Company is not a party to any capital leases.

Inventories

Inventory valued under the last-in, first-out (“LIFO”) accounting method constituted approximately 80% and 79% of total inventory as of March 31, 2010 and December 31, 2009, respectively. LIFO results in a better matching of costs and revenues. The remaining inventory is valued under the first-in, first-out (“FIFO”) accounting method. Inventory valued under the FIFO and LIFO accounting methods is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of FIFO cost or market, inventory would have been $81.9 million and $80.9 million higher than reported as of March 31, 2010 and December 31, 2009, respectively. The change in the LIFO reserve since December 31, 2009, resulted in a $1.0 million increase in cost of sales.

The Company also records adjustments to inventory for shrinkage. Inventory that is obsolete, damaged, defective or slow moving is recorded to the lower of cost or market. These adjustments are determined using historical trends and are adjusted, if necessary, as new information becomes available.  The Company charges certain warehousing and administrative expenses to inventory each period with $25.6 million and $25.3 million remaining in inventory as of March 31, 2010 and December 31, 2009, respectively.

Cash and Cash Equivalents

An unfunded check balance (payments in-transit) exists for the Company’s primary disbursement accounts.  Under the Company’s cash management system, the Company utilizes available cash and borrowings, on an as-needed basis, to fund the clearing of checks as they are presented for payment.  As of March 31, 2010 and December 31, 2009, outstanding checks totaling $35.7 million and $88.4 million, respectively, were included in “Accounts payable” in the Condensed Consolidated Balance Sheets.

All highly-liquid investments with original maturities of three months or less are considered to be short-term investments.  Short-term investments consist primarily of money market funds rated AAA and are stated at cost, which approximates fair value.

	As of March 31, 2010		As of December 31, 2009
Cash	$	10,717	$	10,655
Short-term investments	81,400		7,900
Total cash and cash equivalents	$	92,117	$	18,555

Property, Plant and Equipment

Property, plant and equipment are 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 10 years; the estimated useful life assigned to buildings does not exceed 40 years; leasehold improvements are amortized over the lesser of their useful lives or the term of the applicable lease. Repairs and maintenance costs are charged to expense as incurred.

8

Software Capitalization

The Company capitalizes internal use software development costs in accordance with accounting guidance on accounting for costs of computer software developed or obtained for internal use. Amortization is recorded on a straight-line basis over the estimated useful life of the software, generally not to exceed seven years. Capitalized software is included in “Property, plant and equipment, at cost” on the Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009. The total costs are as follows (in thousands):

	As of March 31, 2010			As of December 31, 2009
Capitalized software development costs	$	57,493		$	56,183
Write-off of capitalized software development costs	—			(271		)
Accumulated amortization	(41,860		)	(40,375		)
Net capitalized software development costs	$	15,633		$	15,537

Derivative Financial Instruments

The Company’s risk management policies allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure.  The policies do not allow such derivative financial instruments to be used for speculative purposes.  At this time, the Company primarily uses interest rate swaps, which are subject to the management, direction and control of our financial officers.  Risk management practices, including the use of all derivative financial instruments, are presented to the Board of Directors for approval.

All derivatives are recognized on the balance sheet date at their fair value.  All derivatives in a net receivable position are included in “Other assets”, and those in a net liability position are included in “Other long-term liabilities”.  The interest rate swaps that the Company has entered into are classified as cash flow hedges in accordance with accounting guidance on derivative instruments as they are hedging a forecasted transaction or the variability of cash flow to be paid by the Company.

Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in other comprehensive income, net of tax, until earnings are affected by the forecasted transaction or the variability of cash flow, and then are reported in current earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives designated as cash flow hedges to specific forecasted transactions or variable cash flows.

The Company formally assesses, at both the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.  When it is determined that a derivative is not highly effective as a hedge then hedge accounting is discontinued prospectively in accordance with accounting guidance on derivative instruments and hedging activities.  At this time, this has not occurred as all cash flow hedges contain no ineffectiveness.  See Note 13, “Derivative Financial Instruments” and Note 14, “Fair Value Measurements”, for further detail.

Income Taxes

The Company accounts for income taxes using the liability method in accordance with accounting guidance on income taxes.  The Company estimates actual current tax expense and assesses temporary differences that exist due to differing treatments for tax and financial statement purposes.  These temporary differences result in the recognition of deferred tax assets and liabilities.  A provision has not been made for deferred U.S. income taxes on the undistributed earnings of the Company’s foreign subsidiaries as these earnings have historically been permanently invested.  It is not practicable to determine the amount of unrecognized deferred tax liability for such unremitted foreign earnings.  The Company accounts for interest and penalties related to uncertain tax positions as a component of income tax expense.

Foreign Currency Translation

The functional currency for the Company’s foreign operations is the local currency. Assets and liabilities of these operations are translated into U.S. currency at the rates of exchange at the balance sheet date. The resulting translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ equity. Income and expense items are translated at average monthly rates of exchange. Realized gains and losses from foreign currency transactions were not material.

9

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (ASC) Topic 805 “Business Combinations”, which is a revision to previous guidance, originally issued in June 2001.  ASC Topic 805 retains the fundamental requirements of the previous guidance but also defines the acquirer and establishes the acquisition date as the date that the acquirer achieves control. The main features of ASC Topic 805 are that it requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions.  ASC Topic 805 also requires the acquirer to recognize goodwill as of the acquisition date.  Finally, ASC Topic 805 makes a number of other significant amendments to other prior guidance and other authoritative guidance including requiring research and development costs acquired to be capitalized separately from goodwill and requiring the expensing of transaction costs directly related to an acquisition.  ASC Topic 805 is effective for acquisitions on or after the beginning of the first fiscal year beginning on or after December 15, 2008.  The adoption of ASC Topic 805 on January 1, 2009 did not have a material impact on the Company’s financial position and/or its results of operations.

In December 2007, as part of ASC Topic 805 “Business Combinations”, the FASB issued new guidance on non-controlling interests in consolidated financial statements which requires, among other items, that ownership interest in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity.  The new guidance on non-controlling interests also requires that the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of income. Finally, the new guidance requires that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners.  This new guidance on non-controlling interests is effective for fiscal years beginning on or after December 15, 2008.  The adoption of this new guidance on January 1, 2009 did not have an impact on the Company’s financial position and/or its results of operations.

In December 2008, the FASB issued ASC Topic 715 “Compensation — Retirement Benefits”.  ASC Topic 715 requires enhanced disclosures about the plan assets of a Company’s defined benefit pension and other postretirement plans intended to provide financial users with a greater understanding of: 1) how investment allocations are made ; 2) the major categories of plan assets; 3) the inputs and valuation techniques used to measure the fair value of plan assets; 4) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and 5) significant concentrations of risk within plan assets.  The Company adopted ASC Topic 715 for the year ending December 31, 2009.  These additional disclosure requirements required by ASC Topic 715 had no impact on the Company’s financial position, results of operations or cash flows.

In May 2009, the FASB issued ASC Topic 855 “Subsequent Events”, intended to improve disclosure of significant events that occur after the interim and/or annual financial statement date as well as to specify a time period through which management has included analysis of such subsequent events.  ASC Topic 855 is effective for all interim and annual periods beginning on or after June 15, 2009. Accordingly, the Company adopted ASC Topic 855 during the second quarter of 2009. The Company has evaluated subsequent events through May 5, 2010.

In June 2009, the FASB issued ASC Topic 810 “Accounting for Transfers of Financial Assets”.  ASC Topic 810 is a revision to prior guidance and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. Also, in June 2009, the FASB issued ASC Topic 810 “Amendments to FASB Interpretation No. 46 (R)” for accounting for variable interest entities (VIEs). This new guidance on VIEs is a revision to prior guidance, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. ASC Topic 810 was effective at the start of a company’s first fiscal year beginning after November 15, 2009. The adoption of ASC Topic 810 did not have an impact on the Company’s financial position and/or its results of operations.

In January 2010, the FASB issued ASC Topic 820 “Fair Value Measurements and Disclosures”, which updated and clarified previously issued guidance to improve disclosures about fair value measurements.  These new disclosures include stating separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers.  In addition, it states that a reporting entity should present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using Level 3 inputs. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASC Topic 820 did not have an impact on the Company’s financial position and/or its results of operations. See Note 14, “Fair Value Measurements”, for information and related disclosures regarding the Company’s fair value measurements.

10

3. Share-Based Compensation

Overview

As of March 31, 2010, the Company has two active equity compensation plans under which share-based awards are issued. A description of these plans is as follows:

Amended and Restated 2004 Long-Term Incentive Plan (“LTIP”)

In March 2004, the Company’s Board of Directors adopted the LTIP to, among other things, attract and retain managerial talent, further align the interest of key associates to those of the Company’s stockholders and provide competitive compensation to key associates. Award vehicles include stock options, stock appreciation rights, full value awards, cash incentive awards and performance-based awards. Key associates and non-employee directors of the Company are eligible to become participants in the LTIP, except that non-employee directors may not be granted incentive stock options. The Company granted 11,288 shares of restricted stock and 103,624 restricted stock units (RSUs) under the LTIP during the first three months of 2010. The Company did not grant stock options under the LTIP during 2010.

Nonemployee Directors’ Deferred Stock Compensation Plan

Pursuant to the United Stationers Inc. Nonemployee Directors’ Deferred Stock Compensation Plan, non-employee directors may defer receipt of all or a portion of their retainer and meeting fees. Fees deferred are credited quarterly to each participating director in the form of stock units based on the fair market value of the Company’s common stock on the quarterly deferral date. Each stock unit account generally is distributed and settled in whole shares of the Company’s common stock on a one-for-one basis, with a cash-out of any fractional stock unit interests, after the participant ceases to serve as a Company director.

Accounting For Share-Based Compensation

The Company recorded pre-tax expense of $3.3 million ($2.0 million after-tax), or $0.09 per basic and $0.08 per diluted share, for share-based compensation in the first quarter of 2010. During the first quarter of 2009, the Company recorded $2.9 million ($1.8 million after-tax), or $0.08 per basic and diluted share, for share-based compensation.

The following tables summarize the intrinsic value of options outstanding, exercisable, and exercised for the applicable periods listed below:

Intrinsic Value of Options

(in thousands of dollars)

	Outstanding		Exercisable
As of March 31, 2010	$	24,272	$	24,242
As of March 31, 2009	679		679

Intrinsic Value of Options Exercised

(in thousands of dollars)

	For the Three Months Ended
March 31, 2010	$	9,069
March 31, 2009	26

The following tables summarize the intrinsic value of restricted shares outstanding and vested for the applicable periods listed below:

Value of Restricted Shares Outstanding

(in thousands of dollars)

As of March 31, 2010	$	44,062
As of March 31, 2009	17,738

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Value of Restricted Shares Vested

(in thousands of dollars)

	For the Three Months Ended
March 31, 2010	$	3,439
March 31, 2009	126

As of March 31, 2010, there was $0.8 million of total unrecognized compensation cost related to non-vested stock option awards granted and $22.1 million of total unrecognized compensation cost related to non-vested restricted stock awards and RSUs granted. These costs are expected to be recognized over a weighted-average period of 1.8 years.

Accounting guidance from the FASB on share-based payments requires that cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) be classified as financing cash flows. For the three months ended March 31, 2010, excess tax benefits of $3.4 million, classified as financing cash inflows on the Consolidated Statement of Cash Flows, would have been classified as operating cash inflows if the Company had not adopted this guidance on share-based payments. For the three months ended March 31, 2009 this amount was not significant.

Stock Options

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses various assumptions including the expected stock price volatility, risk-free interest rate, and expected life of the option.  Stock options generally vest in annual increments over three years and have a term of 10 years. Compensation costs for all stock options are recognized, net of estimated forfeitures, on a straight-line basis as a single award typically over the vesting period. The Company estimates expected volatility based on historical volatility of the price of its common stock. The Company estimates the expected term of share-based awards by using historical data relating to option exercises and employee terminations to estimate the period of time that options granted are expected to be outstanding. The interest rate for periods during the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  There were no stock options granted during the first three months of 2010 or 2009.

The following table summarizes the transactions relating to stock options under the Company’s equity compensation plans for the three months ended March 31, 2010:

Stock Options Only	Shares		Weighted Average Exercise Price		Weighted Average Exercise Contractual Life	Aggregate Intrinsic Value ($000)
Options outstanding - December 31, 2009	2,384,224		$	45.01
Granted	—		—
Exercised	(475,036	)	39.56
Canceled	(1,651	)	59.02
Options outstanding - March 31, 2010	1,907,537		$	46.35	5.5	$	24,272
Number of options exercisable	1,771,705		$	45.33	5.3	$	24,242

Restricted Stock and Restricted Stock Units

During the first quarter of 2010, the Company granted 11,288 shares of restricted stock and 103,624 RSUs.  During the first three months of 2009, 182,781 shares of restricted stock and 206,474 RSUs were granted.  The restricted stock granted in each period vests in three equal annual installments on the anniversaries of the date of the grant.  The RSUs granted in 2009 vest on December 31, 2012, and the RSUs granted in 2010 vest in these annual installments on the anniversaries of the grant date, in each case to the extent earned based on the Company’s cumulative economic profit performance against target economic profit goals.  A summary of the status of the Company’s restricted stock award and RSU grants and changes during the first three months of 2010 is as follows:

Restricted Stock and RSUs	Shares		Weighted Average Grant Date Fair Value		Weighted Average Contractual Life	Aggregate Intrinsic Value ($000)
Shares/units outstanding - December 31, 2009	704,810		$	36.41
Granted	114,912		59.10
Vested	(60,456	)	33.83
Canceled	(10,557	)	36.32
Outstanding - March 31, 2010	748,709		$	40.12	2.0	$	44,062

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4. Goodwill and Intangible Assets

Accounting guidance from the FASB on goodwill and intangible assets requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value.  The Company performs an annual impairment test on goodwill and intangible assets with indefinite lives at December 31st of each year.  Based on this latest test, the Company concluded that the fair value of each of the reporting units was in excess of the carrying value as of December 31, 2009. The Company did not consider there to be any triggering event during the three-month period ended March 31, 2010 that would require an interim impairment assessment.  As a result, none of the goodwill or intangible assets with indefinite lives were tested for impairment during the three-month period ended March 31, 2010.

As of March 31, 2010 and December 31, 2009, the Company’s Condensed Consolidated Balance Sheets reflect $328.3 million and $314.4 million of goodwill, and $65.3 million and $62.9 million in net intangible assets, respectively.

The net intangible assets consist primarily of customer lists and non-compete agreements purchased as part of past acquisitions.  The Company has no intention to renew or extend the terms of acquired intangible assets and accordingly, did not incur any related costs during the first three months of 2010.  Amortization of intangible assets totaled $1.3 million and $1.2 million for the three months ended March 31, 2010 and 2009, respectively.  Accumulated amortization of intangible assets as of March 31, 2010 and December 31, 2009 totaled $17.7 million and $16.4 million, respectively.

5. 2009 Severance Charge

On January 27, 2009, the Company announced a plan to eliminate staff positions through an involuntary separation plan.  The severance charge included workforce reductions of 250 associates. The Company recorded a pre-tax charge of $3.4 million in the first quarter of 2009 for estimated severance pay and benefits, prorated bonuses, and outplacement costs.  This charge is included in “Warehousing, marketing and administrative expenses” on the Company’s Statements of Income. Cash outlays associated with the severance charge in the three months ended March 31, 2009 totaled $1.1 million.  The Company had accrued liabilities for the severance charge of $2.3 million as of March 31, 2009 which were paid throughout the remainder of 2009.  As a result, the Company had no accrued reserves for this workforce reduction as of December 31, 2009.

6.  Comprehensive Income

Comprehensive income is a component of stockholders’ equity and consists of the following components (in thousands):

	For the Three Months Ended March 31,
(dollars in thousands)	2010			2009
Net income	$	18,225		$	13,521
Unrealized foreign currency translation adjustment	893			(654		)
Unrealized (loss) gain - interest rate swaps, net of tax	(1,312		)	566
Minimum pension liability adjustment, net of tax	—			7,439
Total comprehensive income	$	17,806		$	20,872

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7.Earnings Per Share

Basic earnings per share (“EPS”) are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, non-vested restricted stock and restricted stock units are considered dilutive securities.  Stock options to purchase 0.4 million and 0.1 million shares of common stock were outstanding at March 31, 2010 and March 31, 2009, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive.  The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	For the Three Months Ended March 31,
	2010		2009
Numerator:
Net income	$	18,225	$	13,521
Denominator:
Denominator for basic earnings per share - weighted average shares	23,673		23,707
Effect of dilutive securities:
Employee stock options and restricted units	1,147		103
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive securities	24,820		23,810
Net income per share:
Net income per share - basic	$	0.77	$	0.57
Net income per share - diluted	$	0.73	$	0.57

Common Stock Repurchase

As of March 31, 2010, the Company had $89.2 million remaining of Board authorizations to repurchase USI common stock.  During the three-month period ended March 31, 2010, the Company repurchased 198,074 shares of common stock at a cost of $11.7 million.  There were no share repurchases in the first three months of 2009. Depending on market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice.  Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data. During the first quarter of 2010 and 2009, the Company reissued 438,177 and 178,780 shares, respectively, of treasury stock to fulfill its obligations under its equity compensation plans.

8.  Off-Balance Sheet Financing

General

On March 28, 2003, USSC entered into a third-party receivables securitization program with JP Morgan Chase Bank, as trustee (the “Prior Receivables Securitization Program” or the “Prior Program”). On November 10, 2006, the Company entered into an amendment to its revolving credit agreement which, among other things, increased the permitted size of the Prior Receivables Securitization Program to $350 million, a $75 million increase from the $275 million limit under the prior credit agreement.  During the first quarter of 2007, the Company increased its commitments for third party purchases of receivables, and the maximum funding available under the Prior Program became $250 million.  On March 2, 2009, in preparation for entering into a new securitization program (see Note 9, “Debt” for more information on the new program), USI’s subsidiaries United Stationers Financial Services (“USFS”) and USS Receivables Company, Ltd. (“USSRC”) terminated the Prior Program. The Prior Program typically had been the Company’s preferred source of floating rate financing, primarily because it generally carried a lower cost than other traditional borrowings.

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Under the Prior Program, USSC sold, on a revolving basis, its eligible trade accounts receivable (except for certain excluded accounts receivable, which initially included all accounts receivable of Lagasse, Inc. and foreign operations) to USSRC. USSRC, in turn, ultimately transferred the eligible trade accounts receivable to a trust. The trust then sold investment certificates, which represented an undivided interest in the pool of accounts receivable owned by the trust, to third-party investors. Affiliates of J.P. Morgan Chase Bank, PNC Bank and Fifth Third Bank acted as funding agents. The funding agents, or their affiliates, provided standby liquidity funding to support the sale of the accounts receivable by USSRC under 364-day liquidity facilities. The Prior Program provided for the possibility of other liquidity facilities that may have been provided by other commercial banks rated at least A-1/P-1.

Financial Statement Presentation

The Prior Program was accounted for as a sale in accordance with FASB accounting guidance on the accounting for transfers and servicing of financial assets and extinguishments of liabilities. Trade accounts receivable sold under the Prior Program were excluded from accounts receivable in the Consolidated Financial Statements.

The Company recognized certain costs and/or losses related to the Prior Program. Costs related to the Prior Program varied on a daily basis and generally were related to certain short-term interest rates. The annual interest rate on the certificates issued under the Prior Program for the first two months of 2009 ranged between 0.6% and 2.3%. In addition to the interest on the certificates, the Company paid certain bank fees related to the program. Losses recognized on the sale of accounts receivable, which represent the interest and bank fees that are the financial cost of funding under the Prior Program including amortization of previously capitalized bank fees and excluding servicing revenues, totaled $0.2 million for the three months ended March 31, 2009. Proceeds from collections for the first quarter of 2009 totaled $0.6 billion under the Prior Program.  All costs and/or losses related to the Prior Program are included in the Condensed Consolidated Statements of Income under the caption “Other Expense, net.”

The Company maintained responsibility for servicing the sold trade accounts receivable and those transferred to the trust. No servicing asset or liability was recorded because the fees received for servicing the receivables approximated the related costs.

Retained Interest

USSRC determined the level of funding achieved by the sale of trade accounts receivable under the Prior Program, subject to a maximum amount. It retained a residual interest in the eligible receivables transferred to the trust, such that amounts payable in respect of the residual interest would be distributed to USSRC upon payment in full of all amounts owed by USSRC to the trust (and by the trust to its investors).

The Company measured the fair value of its retained interest throughout the term of the Prior Program using a present value model incorporating the following two key economic assumptions: (1) an average collection cycle of approximately 45 days; and (2) an assumed discount rate of 3% per annum, which approximated the Company’s interest cost on the Prior Program. In addition, the Company estimated and recorded an allowance for doubtful accounts related to the Company’s retained interest. Considering the above noted economic factors and estimates of doubtful accounts, the book value of the Company’s retained interest approximated fair value at year-end 2008. A 10% or 20% adverse change in the assumed discount rate or average collection cycle would not have a material impact on the Company’s financial position or results of operations. Accounts receivable sold to the trust and written off during the first quarter of 2009 were not material.

9.Debt

USI is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, USSC, and from borrowings by USSC. The 2007 Credit Agreement (as defined below), the 2007 Master Note Purchase Agreement (as defined below) and the 2009 Receivables Securitization Program (as defined below) contain restrictions on the ability of USSC to transfer cash to USI.

Long-term debt consisted of the following amounts (in thousands):

	As of March 31, 2010		As of December 31, 2009
2007 Credit Agreement - Revolving Credit Facility	$	100,000	$	100,000
2007 Credit Agreement - Term Loan	200,000		200,000
2007 Master Note Purchase Agreement (Private Placement)	135,000		135,000
Industrial development bond, at market-based interest rates, maturing in 2011	6,800		6,800
Total	$	441,800	$	441,800

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As of March 31, 2010, 100% of the Company’s outstanding debt was priced at variable interest rates based primarily on the applicable bank prime rate, the London InterBank Offered Rate (“LIBOR”) or the applicable commercial paper rates related to the 2009 Receivables Securitization Program (the “2009 Program”). While the Company had primarily all of its outstanding debt based on LIBOR at March 31, 2010, the Company had hedged $435.0 million of this debt with three separate interest rate swaps further discussed in Note 2, “Summary of Significant Accounting Policies”; and Note 13, “Derivative Financial Instruments”, to the Consolidated Financial Statements.  As of March 31, 2010, the overall weighted average effective borrowing rate of the Company’s debt was 5.0%.  At March 31, 2010 funding levels, a 50 basis point movement in interest rates would not result in a material increase or decrease in annualized interest expense on a pre-tax basis, nor upon cash flows from operations.

2009 Receivables Securitization Program

On March 3, 2009, USI entered into an accounts receivables securitization program (as amended to date, the 2009 Receivables Securitization Program” or the “2009 Program”) that replaced the securitization program that USI terminated on March 2, 2009 (the “Prior Receivables Securitization Program” or the “Prior Program”). The parties to the 2009 Program are USI, USSC, USFS, and United Stationers Receivables, LLC (“USR”), and Bank of America, National Association (“Bank of America”) and Enterprise Funding Company LLC (“Enterprise” and, together with Bank of America, the “Investors”).  The 2009 Program is governed by the following agreements:

·Transfer and Administration Agreement among USSC, USFS, USR, and the Investors;

·Receivables Sale Agreement between USSC and USFS;

·Receivables Purchase Agreement between USFS and USR; and

·Performance Guaranty executed by USI in favor of USR.

Pursuant to the Receivables Sale Agreement, USSC sells to USFS, on an on-going basis, all the customer accounts receivable and related rights originated by USSC.  Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC, as well as the accounts receivable and related rights USFS acquired from its then subsidiary, USSRC, upon the termination of the Prior Program.  Pursuant to the Transfer and Administration Agreement, USR then sells the receivables and related rights to Bank of America, as agent on behalf of Enterprise.  The maximum investment to USR at any one time outstanding under the 2009 Program cannot exceed $100 million. USFS retains servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS.

The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the facility are repaid and the 2009 Program has been terminated.  The maturity date of the 2009 Program is November 23, 2013, subject to the Investors’ renewing their commitments as liquidity providers supporting the 2009 Program, which expire on January 21, 2011.

The receivables sold to Bank of America will remain on USI’s Condensed Consolidated Balance Sheet, and amounts advanced to USR by Enterprise, Bank of America or any successor Investor will be recorded as debt on USI’s Condensed Consolidated Balance Sheet. The cost of such debt will be recorded as interest expense on USI’s income statement.  As of March 31, 2010 and December 31, 2009, $429.5 million and $445.3 million, respectively, of receivables have been sold and no amounts have been advanced to USR.

The Transfer and Administration Agreement prohibits the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and imposes other restrictions on the Company’s ability to incur additional debt. This agreement also contains additional covenants, requirements and events of default that are customary for this type of agreement, including the failure to make any required payments when due.

Credit Agreement and Other Debt

On July 5, 2007, USI and USSC entered into a Second Amended and Restated Five-Year Revolving Credit Agreement with PNC Bank, National Association and U.S. Bank National Association, as Syndication Agents, KeyBank National Association and LaSalle Bank, National Association, as Documentation Agents, and JPMorgan Chase Bank, National Association, as Agent (as amended on December 21, 2007, the “2007 Credit Agreement”).  The 2007 Credit Agreement provides a Revolving Credit Facility with a committed principal amount of $425 million and a Term Loan in the principal amount of $200 million.  Interest on both the Revolving Credit Facility and the Term Loan is based on the three-month LIBOR plus an interest margin based upon the Company’s debt to EBITDA ratio (or “Leverage Ratio”, as defined in the 2007 Credit Agreement).  The Revolving Credit Facility expires on July 5, 2012, which is also the maturity date of the Term Loan.

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On October 15, 2007, USI and USSC entered into a Master Note Purchase Agreement (the “2007 Note Purchase Agreement”) with several purchasers.  The 2007 Note Purchase Agreement allows USSC to issue up to $1 billion of senior secured notes, subject to the debt restrictions contained in the 2007 Credit Agreement.  Pursuant to the 2007 Note Purchase Agreement, USSC issued and sold $135 million of floating rate senior secured notes due October 15, 2014 at par in a private placement (the “Series 2007-A Notes”).  Interest on the Series 2007-A Notes is payable quarterly in arrears at a rate per annum equal to three-month LIBOR plus 1.30%, beginning January 15, 2008.  USSC may issue additional series of senior secured notes from time to time under the 2007 Note Purchase Agreement but has no specific plans to do so at this time.  USSC used the proceeds from the sale of these notes to repay borrowings under the 2007 Credit Agreement.

USSC has entered into several interest rate swap transactions to mitigate its floating rate risk on a portion of its total long-term debt.  See Note 13, “Derivative Financial Instruments” and Note 14, “Fair Value Measurements”, for further details on these swap transactions and their accounting treatment.

The 2007 Credit Agreement also provides for the issuance of letters of credit in an aggregate amount of up to a sublimit of $90 million and provides a sublimit for swingline loans in an aggregate outstanding principal amount not to exceed $30 million at any one time. These amounts, as sublimits, do not increase the maximum aggregate principal amount, and any undrawn issued letters of credit and all outstanding swingline loans under the facility reduce the remaining availability under the 2007 Credit Agreement. As of both March 31, 2010 and December 31, 2009, the Company had outstanding letters of credit under the 2007 Credit Agreement of $17.9 million.  Approximately, $7.0 million of these letters of credit were used to guarantee the industrial development bond. The industrial development bond had $6.8 million outstanding as of March 31, 2010 and carried market-based interest rates.

Obligations of USSC under the 2007 Credit Agreement and the 2007 Note Purchase Agreement are guaranteed by USI and certain of USSC’s domestic subsidiaries.  USSC’s obligations under these agreements and the guarantors’ obligations under the guaranties are secured by liens on substantially all Company assets, including accounts receivable, chattel paper, commercial tort claims, documents, equipment, fixtures, instruments, inventory, investment property, pledged deposits and all other tangible and intangible personal property (including proceeds) and certain real property, but excluding accounts receivable (and related credit support) subject to any accounts receivable securitization program permitted under the 2007 Credit Agreement.  Also securing these obligations are first priority pledges of all of the capital stock of USSC and the domestic subsidiaries of USSC.

The 2007 Credit Agreement and 2007 Note Purchase Agreement prohibit the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and impose other restrictions on the Company’s ability to incur additional debt. Those agreements also contain additional covenants, requirements and events of default that are customary for those types of agreements, including the failure to pay principal or interest when due. The 2007 Credit Agreement, 2007 Note Purchase Agreement, and the Transfer and Administration Agreement all contain cross-default provisions.  As a result, if a termination event occurs under any of those agreements, the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party.

10.          Retirement Plans

Pension and Postretirement Health Care Benefit Plans

The Company maintains pension plans covering a majority of its employees. In addition, the Company has a postretirement health care benefit plan covering substantially all retired employees and their dependents. For more information on the Company’s retirement plans, see Notes 12 and 13 to the Company’s Consolidated Financial Statements for the year ended December 31, 2009. A summary of net periodic benefit cost related to the Company’s pension and postretirement health care benefit plans for the three months ended March 31, 2010 and 2009 is as follows (dollars in thousands):

	Pension Benefits
	For the Three Months Ended March 31,
	2010			2009
Service cost - benefit earned during the period	$	217		$	392
Interest cost on projected benefit obligation	2,055			2,010
Expected return on plan assets	(2,159		)	(1,718		)
Amortization of prior service cost	34			28
Amortization of actuarial loss	476			884
Net loss	623			1,596
Curtailment loss	—			182
Net periodic pension cost	$	623		$	1,778

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	Postretirement Healthcare
	For the Three Months Ended March 31,
	2010			2009
Service cost - benefit earned during the period	$	58		$	56
Interest cost on projected benefit obligation	65			55
Amortization of actuarial gain	(85		)	(80		)
Net periodic postretirement healthcare benefit cost	$	38		$	31

Effective March 1, 2009, the Company froze pension service benefits for employees not covered by collective bargaining agreements.  As a result, the Company incurred a curtailment loss of $0.2 million in the first quarter of 2009.  The Company also reduced the Pension Benefit Obligation (“PBO”) by $11.8 million as a result of this action.  The PBO reduction led to an $11.8 million reduction in the “Accrued pension benefits liability” and a corresponding increase in accumulated other comprehensive income, net of tax.

The Company did not make cash contributions to its pension plans during the first quarters of 2010 and 2009.  The Company plans to contribute $7.4 million to the non-union pension plan and $1.3 million to the union pension plan in 2010.

On April 15, 2010, the Company notified the participants in the Retiree Medical Plan that, effective December 31, 2010, the Company would be terminating the Retiree Medical Plan.  The termination of the Retiree Medical Plan will eliminate any future obligation of the Company to provide cost sharing benefits to current or future retirees.  The Company anticipates that the curtailment of the Retiree Medical Plan will result in a future gain ranging from approximately $3.5 million to $4.0 million.  This gain will be amortized equally over the remaining quarters of 2010.

Defined Contribution Plan

The Company has defined contribution plans covering certain salaried employees and non-union hourly paid employees (the “Plan”). The Plan permits employees to defer a portion of their pre-tax and after-tax salary as contributions to the Plan.  The Plan also provides for discretionary Company contributions and Company contributions matching employees’ salary deferral contributions, at the discretion of the Board of Directors. The Company recorded expense of $0.8 million for the Company match of employee contributions to the Plan for the first quarter ended March 31, 2010.  During the same period last year, the Company recorded $1.3 million for the same match.  Effective May 1, 2009 through December 31, 2009, the Company temporarily suspended the matching of employee contributions to the Plan for all exempt associates, which was reinstated beginning January 1, 2010 at a reduced matching percentage.

11. Other Long-Term Assets and Long-Term Liabilities

Other long-term assets and long-term liabilities as of March 31, 2010 and December 31, 2009 were as follows (in thousands):

	As of March 31, 2010		As of December 31, 2009
Other Long-Term Assets, net:
Investment in deferred compensation	$	4,047	$	3,939
Long-term accounts receivable	4,367		5,146
Capitalized financing costs	1,925		2,069
Long-term prepaid expenses	1,154		1,154
Other	53		63
Total other long-term assets, net	$	11,546	$	12,371
Other Long-Term Liabilities:
Accrued pension obligation	$	33,707	$	33,707
Deferred rent	18,125		18,067
Postretirement benefits liability	4,157		4,132
Deferred compensation	4,054		3,939
Restructuring and exit costs reserves	762		887
Long-term swap liability	28,183		26,070
Long-term income tax liability	5,571		5,380
Other	4,983		1,520
Total other long-term liabilities	$	99,542	$	93,702

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12. Accounting for Uncertainty in Income Taxes

For each of the periods ended March 31, 2010 and December 31, 2009, the Company had $5.0 million in gross unrecognized tax benefits.  The entire amount of these gross unrecognized tax benefits would, if recognized, decrease the Company’s effective tax rate.

The Company recognizes net interest and penalties related to unrecognized tax benefits in income tax expense.  The gross amount of interest and penalties reflected in the Consolidated Statement of Income for the quarter ended March 31, 2010, was not material. The Condensed Consolidated Balance Sheets for each of the periods ended March 31, 2010 and December 31, 2009, include $1.1 million accrued for the potential payment of interest and penalties.

As of March 31, 2010, the Company’s U.S. Federal income tax returns for 2006 and subsequent years remained subject to examination by tax authorities. In addition, the Company’s state income tax returns for 2001 and subsequent years remain subject to examination by state and local income tax authorities.

Due to the potential for resolution of ongoing examinations and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $2.6 million.  These unrecognized tax benefits are currently accrued for in the Condensed Consolidated Balance Sheets.

13. Derivative Financial Instruments

Interest rate movements create a degree of risk to the Company’s operations by affecting the amount of interest payments.  Interest rate swap agreements are used to manage the Company’s exposure to interest rate changes.  The Company designates its floating-to-fixed interest rate swaps as cash flow hedges of the variability of future cash flows at the inception of the swap contract to support hedge accounting.

On November 6, 2007, USSC entered into an interest rate swap transaction (the “November 2007 Swap Transaction”) with U.S. Bank National Association as the counterparty. USSC entered into the November 2007 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $135 million of LIBOR based interest rate risk. Under the terms of the November 2007 Swap Transaction, USSC is required to make quarterly fixed-rate payments to the counterparty calculated based on a notional amount of $135 million at a fixed rate of 4.674%, while the counterparty is obligated to make quarterly floating-rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The November 2007 Swap Transaction has an effective date of January 15, 2008 and a termination date of January 15, 2013. Notwithstanding the terms of the November 2007 Swap Transaction, USSC is ultimately obligated for all amounts due and payable under its credit agreements.

Subsequently, on December 20, 2007, USSC entered into another interest rate swap transaction (the “December 2007 Swap Transaction”) with Key Bank National Association as the counterparty. USSC entered into the December 2007 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $200 million of LIBOR based interest rate risk. Under the terms of the December 2007 Swap Transaction, USSC is required to make quarterly fixed-rate payments to the counterparty calculated based on a notional amount of $200 million at a fixed rate of 4.075%, while the counterparty is obligated to make quarterly floating-rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The December 2007 Swap Transaction has an effective date of December 21, 2007 and a termination date of June 21, 2012. Notwithstanding the terms of the December 2007 Swap Transaction, USSC is ultimately obligated for all amounts due and payable under its credit agreements.

On March 13, 2008, USSC entered into an interest rate swap transaction (the “March 2008 Swap Transaction”) with U.S. Bank National Association as the counterparty. USSC entered into the March 2008 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $100 million of LIBOR based interest rate risk. Under the terms of the March 2008 Swap Transaction, USSC is required to make quarterly fixed-rate payments to the counterparty calculated based on a notional amount of $100 million at a fixed rate of 3.212%, while the counterparty is obligated to make quarterly floating-rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The March 2008 Swap Transaction has an effective date of March 31, 2008 and a termination date of June 29, 2012. Notwithstanding the terms of the March 2008 Swap Transaction, USSC is ultimately obligated for all amounts due and payable under its credit agreements.

These hedged transactions described above qualify as cash flow hedges under the FASB accounting guidance on derivative instruments and hedging activities. This guidance requires companies to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The Company does not offset fair value amounts recognized for interest rate swaps executed with the same counterparty.

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For derivative instruments that are designated and qualify as a cash flow hedge (for example, hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate debt).

The Company has entered into these interest rate swap agreements, described above, that effectively convert a portion of its floating-rate debt to a fixed-rate basis. This then reduces the impact of interest rate changes on future interest expense.  By using such derivative financial instruments, the Company exposes itself to credit risk and market risk.  Credit risk is the risk that the counterparty to the interest rate swap agreements (as noted above) will fail to perform under the terms of the agreements.  The Company attempts to minimize the credit risk in these agreements by only entering into transactions with credit worthy counterparties like the two counterparties above.  The market risk is the adverse effect on the value of a derivative financial instrument that results from a change in interest rates.

Approximately 98% ($435 million) of the Company’s outstanding long-term debt had its interest payments designated as the hedged forecasted transactions to interest rate swap agreements at March 31, 2010.

The interest rate swap agreements accounted for as cash flow hedges that were outstanding and recorded at fair value on the statement of financial position as of March 31, 2010 were as follows (in thousands):

As of March 31, 2010	Notional Amount		Receive	Pay		Maturity Date	Fair Value Net Liability (1)
November 2007 Swap Transaction	$	135,000	Floating 3-month LIBOR	4.674	%	January 15, 2013	$	(11,435	)
December 2007 Swap Transaction	200,000		Floating 3-month LIBOR	4.075	%	June 21, 2012	(12,445		)
March 2008 Swap Transaction	100,000		Floating 3-month LIBOR	3.212	%	June 29, 2012	(4,303		)

(1)These interest rate derivatives qualify for hedge accounting.  Therefore, the fair value of each interest rate derivative is included in the Company’s Condensed Consolidated Balance Sheets as a component of “Other long-term liabilities” with an offsetting component in “Stockholders’ Equity” as part of “Accumulated Other Comprehensive Loss”.  Fair value adjustments of the interest rate swaps will be deferred and recognized as an adjustment to interest expense over the remaining term of the hedged instrument.

The Company’s agreements with its derivative counterparties provide that if an event of default occurs on any Company debt of $25 million or more, the counterparties can terminate the swap agreements.  If an event of default had occurred and the counterparties had exercised their early termination rights under the swap agreements as of March 31, 2010, the Company would have been required to pay the aggregate fair value net liability of $28.2 million plus accrued interest to the counterparties.

These interest rate swap agreements contain no ineffectiveness; therefore, all gains or losses on these derivative instruments are reported as a component of other comprehensive income (“OCI”) and reclassified into earnings as “interest expense” in the same period or periods during which the hedged transaction affects earnings.  The following table depicts the effect of these derivative instruments on the statement of income for the three-month period ended March 31, 2010.

								Amount of Gain (Loss)
								Reclassified
								from Accumulated OCI
							Location of Gain (Loss)	into Income
	Amount of Gain (Loss) Recognized in						Reclassified from	(Effective Portion)
	OCI on Derivative						Accumulated OCI into	For the Three
	(Effective Portion)						Income (Effective	Months Ended
	At December 31, 2009			At March 31, 2010			Portion)	March 31, 2010
November 2007 Swap Transaction	$	(6,614	)	$	(7,085	)	Interest expense, net; income tax expense	$	(471	)
December 2007 Swap Transaction	(7,230		)	(7,711		)	Interest expense, net; income tax expense	(481		)
March 2008 Swap Transaction	(2,306		)	(2,666		)	Interest expense, net; income tax expense	(360		)

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14. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including interest rate swap liabilities related to interest rate swap derivatives based on the mark-to-market position of the Company’s interest rate swap positions and other observable interest rates (see Note 13, “Derivative Financial Instruments”, for more information on these interest rate swaps).

FASB accounting guidance on fair value establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).  The hierarchy consists of three levels:

·Level 1 — Quoted market prices in active markets for identical assets or liabilities;

·Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable; and

·Level 3 — Unobservable inputs developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment.  The Company evaluates its hierarchy disclosures each quarter.  The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheet as of March 31, 2010 (in thousands):

	Fair Value Measurements as of March 31, 2010
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap liability	$	28,183	$	—	$	28,183	$	—

The carrying amount of accounts receivable at March 31, 2010, including $429.5 million of receivables sold under the New Receivables Securitization Program, approximates fair value because of the short-term nature of this item.

FASB accounting guidance requires separate disclosure of assets and liabilities measured at fair value on a recurring basis, as noted above, from those measured at fair value on a nonrecurring basis.  As of March 31, 2010, no assets or liabilities are measured at fair value on a nonrecurring basis.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements often contain words such as “expects,” “anticipates,” “estimates,” “intends,” “plans,” “believes,” “seeks,” “will,” “is likely,” “scheduled,” “positioned to,” “continue,” “forecast,” “predicting,” “projection,” “potential” or similar expressions. Forward-looking statements include references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These forward-looking statements are based on management’s current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, without limitation, those set forth in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2009.

Readers should not place undue reliance on forward-looking statements contained in this Quarterly Report on Form 10-Q. The forward-looking information herein is given as of this date only, and the Company undertakes no obligation to revise or update it.

Overview and Recent Results

The Company is a leading wholesale distributor of business products, with 2009 net sales of approximately $4.7 billion. The Company sells its products through a national distribution network of 64 distribution centers to approximately 25,000 resellers, who in turn sell directly to end consumers.

As reported in the Company’s press release dated April 29, 2010, month-to-date sales in April were up approximately 4%.  The Company has begun to successfully execute its growth strategies and has seen modestly improving economic conditions.

Key Company and Industry Trends

The following is a summary of selected trends, events or uncertainties that the Company believes may have a significant impact on its future performance.

·There have been signs of improvement in the economy, particularly in industrial markets.  However, the Company remains cautious since white collar employment is recovering slowly from the economic downturn.  Furthermore, small business confidence levels have not returned to previously-seen levels.  Regardless, the Company is focused to deliver sales growth from several key initiatives, such as Cost-to-Serve, e-business development, private brands penetration, and new channels growth.

·Sales in the first quarter of 2010 grew by 3% to $1.15 billion, compared with last year’s $1.12 billion.  Revenue for the quarter was positively affected by increases across all product categories except for a 9% decline in furniture.  However, the year-over-year rate of decline within the furniture category improved each of the previous three quarters.  ORS Nasco sales grew 8%, primarily in the industrial and oil-field pipeline customer channels, as market share improvement efforts implemented in 2009 have begun to produce sales in 2010.  Sales in the janitorial and breakroom category increased by 5% mainly due to strong growth in the Company’s OfficeJan offerings.  The technology supplies category saw a 3% increase driven by printer imaging and double-digit growth in hardware.  Office products also grew 3% with relatively flat cut-sheet paper sales.

·Gross margin as a percent of sales for the first quarter of 2010 was 14.5%, down 20 basis points versus 14.7% last year. Gross margin benefited from higher inventory purchase-related allowances earned from suppliers.  This improvement was more than offset by the negative effect of significantly lower product cost inflation.

·Operating expenses as a percent of sales for the first quarter of 2010 were 11.4 % compared to 12.1% for the same quarter of the prior year.  Operating expenses in the 2009 quarter were 11.8% of sales after excluding a $3.4 million severance charge related to a workforce reduction.  This decline in operating expenses reflected lower depreciation resulting from reduced capital expenditures over the past several years and lower bad debt expense as the need for additional reserves stabilized.  Employee-related costs increased due to the reinstatement of certain costs that were part of prior period cost reduction actions and higher distribution labor to serve higher sales and inventory levels.

·Net income was $18.2 million for the quarter versus $13.5 million in the prior-year quarter.  As noted above, first quarter 2009 net income was negatively impacted by a $3.4 million severance charge.  The tax rate rose to 38.4% in the first quarter 2010 from 37.1% in the prior-year quarter.  This was due to discrete tax items in both periods.  The Company still expects the full-year tax rate to be approximately 38%.

·Diluted earnings per share for the 2010 quarter were $0.73, up from $0.57 in the prior-year quarter.  Adjusted for the previously mentioned severance charge, diluted earnings per share rose 11% to $0.73 versus last year’s adjusted $0.66.

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·Net cash provided by operating activities for the first three months of 2010 was $83.0 million versus $115.8 million in the same period last year. Excluding the impact of accounts receivable sold, net cash provided by operating activities for the prior-year quarter was $138.8 million. The decline in operating cash flows for the first three months of 2010 was driven by a $19.2 million increase in inventories during the first quarter of 2010 whereas inventories declined $108.3 million in the prior-year quarter.  Payables increased $42.9 million during the first quarter of 2010 versus a decline or use of cash of $22.2 million in the prior-year quarter.

·Outstanding debt totaled $441.8 million at March 31, 2010 versus $552.5 million at March 31, 2009.  The $110.7 million reduction in debt was the result of the Company’s strong operating cash flows and brought the Company’s debt-to-total capitalization to 37.7% at March 31, 2010 from 48.4% at March 31, 2009. The decline in debt led to a reduction in interest and other expense of $1.2 million from the prior-year quarter.  In addition, the Company’s cash and cash equivalents balances grew by $78.2 million over the past twelve months.

·During the first quarter 2010, the Company repurchased 198,074 shares for $11.7 million.  Through April 26, 2010, the Company has repurchased 417,411 shares for $24.8 million.

·The Company completed the acquisition of all of the capital stock of MBS Dev, Inc. (“MBS Dev”) during the quarter for a purchase price of $15 million and an additional potential $3 million earn-out based upon the achievement of certain financial goals.  The purchase price consisted of $12 million in cash at closing plus $3 million to be paid to the former owners over the course of the next three years, the timing (but not the amount) of which is based upon achievement of certain financial goals.  Net of cash held by MBS Dev at closing, the initial cash outlay was $10.5 million.  MBS Dev is a software solutions provider to business products resellers and allows the Company to accelerate e-business development and enable customers and suppliers to leverage the internet.  As a result of the acquisition the Company recorded $13.9 million of goodwill, $3.7 million in intangible assets, and $4.1 million of liabilities to be paid upon achievement of certain financial metrics agreed to in the purchase agreement.  The $4.1 million liability represents the combined fair value of both earn-outs.

For a further discussion of selected trends, events or uncertainties the Company believes may have a significant impact on its future performance, readers should refer to “Key Company and Industry Trends” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2009.

Stock Repurchase Program

During the first three months of 2010, the Company repurchased 198,074 shares at an aggregate cost of $11.7 million. No shares were repurchased in the first three months of 2009. Through April 26, 2010, the Company repurchased 417,411 shares for $24.8 million.  As of that date, the Company had $76.1 million remaining of existing share repurchase authorization from the Board of Directors.

Critical Accounting Policies, Judgments and Estimates

During the first quarter of 2010, there were no significant changes to the Company’s critical accounting policies, judgments or estimates from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

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Results of Operations

The following table presents the Condensed Consolidated Statements of Income as a percentage of net sales:

	Three Months Ended March 31,
	2010		2009
Net sales	100.0	%	100.0	%
Cost of goods sold	85.5		85.3
Gross margin	14.5		14.7
Operating expenses
Warehousing, marketing and administrative expenses	11.4		12.1
Operating income	3.1		2.6
Interest expense, net	0.5		0.7
Other expense, net	—		0.0
Income before income taxes	2.6		1.9
Income tax expense	1.0		0.7
Net income	1.6	%	1.2	%

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Adjusted Operating Income, Net Income and Earnings Per Share

The following tables present Adjusted Operating Income, Net Income and Earnings Per Share for the three-month periods ended March 31, 2010 and 2009 (in millions, except per share data).  The tables show Adjusted Operating Income, Net Income and Earnings per Share excluding the effects of the first quarter 2009 severance charge. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies.  It should be considered supplemental data.  Generally Accepted Accounting Principles (GAAP) require that the effect of this item be included in the Condensed Consolidated Statements of Income.  The Company believes that excluding this item is an appropriate comparison of its ongoing operating results to last year and that it is helpful to provide readers of its financial statements with a reconciliation of these items to its Condensed Consolidated Statements of Income reported in accordance with GAAP.

	For the Three Months Ended March 31,
	2010				2009
	Amount		% to Net Sales		Amount			% to Net Sales
Net sales	$	1,154.3	100.00	%	$	1,121.3		100.0	%
Gross profit	$	166.9	14.5	%	$	164.3		14.7	%
Operating expenses	$	131.1	11.4	%	$	135.4		12.1	%
Severance charge relate to workforce reduction	—		—		(3.4		)	(0.3	)%
Adjusted operating expenses	$	131.1	11.4	%	$	132.0		11.8	%
Operating income	$	35.8	3.1	%	$	28.9		2.6	%
Operating expense item noted above	—		—		3.4			0.3	%
Adjusted operating income	$	35.8	3.1	%	$	32.3		2.9	%
Net income	$	18.2			$	13.5
Operating expense item noted above, net of tax	—				2.1
Adjusted net income	$	18.2			$	15.6
Net income per share — diluted	$	0.73			$	0.57
Per share operating expense item noted above	—				0.09
Adjusted net income per share — diluted	$	0.73			$	0.66
Weighted average number of common shares — diluted	24.8				23.8

Results of Operations—Three Months Ended March 31, 2010 Compared with the Three Months Ended March 31, 2009

Net Sales. Net sales for the first quarter of 2010 were $1.15 billion, up 3% compared with sales of $1.12 billion for the same three-month period of 2009.  The following table summarizes net sales by product category for the three-month periods ended March 31, 2010 and 2009 (in millions):

	Three Months Ended March 31,
	2010		2009
Technology products	$	403	$	390
Traditional office products (including cut-sheet paper)	324		315
Janitorial and breakroom supplies	262		249
Office furniture	80		88
Industrial supplies	63		58
Freight revenue	20		20
Other	2		1
Total net sales	$	1,154	$	1,121

Sales in the technology products category increased in the first quarter of 2010 by approximately 3% versus the first quarter of 2009.  This category, which continues to represent the largest percentage of the Company’s consolidated net sales, accounted for approximately 35% of net sales for the first quarter of 2010.  This growth was driven by increases in printer imaging products and double-digit growth in hardware.

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Sales of traditional office supplies grew in the first quarter of 2010 by approximately 3% versus the first quarter of 2009. Traditional office supplies represented approximately 28% of the Company’s consolidated net sales for the first quarter of 2010. Within this category, cut-sheet paper sales were relatively flat.

Sales in the janitorial and breakroom supplies product category increased 5% in the first quarter of 2010 compared to the first quarter of 2009.  This category accounted for approximately 23% of the Company’s first quarter of 2010 consolidated net sales. The Company saw strong double-digit growth in its OfficeJan offerings despite slowing growth contributions from products related to the H1N1 flu.

Office furniture sales in the first quarter of 2010 decreased by approximately 9% compared to the same three-month period of 2009. Office furniture accounted for 7% of the Company’s first quarter of 2010 consolidated net sales.  This quarterly decline represents a sequential improvement from the past three quarters which were down 23%, 30%, and 33% respectively. Stronger performance was seen later in the quarter.

Industrial sales in the first quarter of 2010 increased approximately 8% compared to the same prior-year period.  Sales of industrial supplies accounted for 5% of the Company’s net sales for the first quarter of 2010. Industrial sales grew most significantly in the industrial and oilfield-pipeline channels.  Market share improvement efforts implemented in 2009 have begun to produce sales in 2010.

The remaining 2% of the Company’s first quarter 2010 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate.  Gross profit (gross margin dollars) for the first quarter of 2010 was $166.9 million, compared to $164.3 million in the first quarter of 2009.  The gross margin rate of 14.5% was 20 basis points lower than the prior-year quarter.  Low product cost inflation in the first quarter of 2010 compared to unusually high levels of price increase activity in the prior-year quarter depressed inventory-related margins by 130 basis points.  Competitive pricing pressures and a lower-margin product mix led to a 45 basis points decline.  Margins benefited from higher supplier allowances and purchase discounts which added about 115 basis points for the quarter.  The allowance improvement was driven by sales growth and related higher inventory purchases, especially compared with the prior-year quarter when inventories were aggressively reduced.  Other improvements were seen in reduced inventory obsolescence and shrinkage costs of 20 basis points and reduced occupancy margin costs of 15 basis points.  Rising fuel costs versus the prior-year quarter had a negative affect on gross margins but were offset by savings from War on Waste (“WOW”) initiatives.

Operating Expenses. Operating expenses for the first quarter of 2010 totaled $131.1 million, or 11.4% of net sales, compared with $135.4 million, or 12.1% of net sales in the first quarter of 2009. Included in the first quarter 2009 amount is a $3.4 million severance charge related to a workforce reduction.  Adjusting for this item, operating expenses for the first quarter 2009 were $132.0 million or 11.8% of sales.  The decline in operating expenses as a percentage of sales was due to lower depreciation expense of 15 basis points and lower bad debt expense of 25 basis points as the need for additional reserves stabilized.  Rising inventory levels contributed to approximately 15 basis points improvement in expense as certain expenses were capitalized into inventories.  Employee-related costs increased 20 basis points due to the reinstatement of certain costs that were part of prior period cost reduction actions and higher distribution labor to serve higher sales and inventory levels.

Interest and Other Expense, net.  Interest and other expense for the first quarter of 2010 was $6.2 million, down by $1.2 million for the same period in 2009 as a result of strong cash flow performance that has led to reduced funding needs.

Income Taxes.  Income tax expense was $11.3 million for the first quarter of 2010, compared with $8.0 million for the same period in 2009. The Company’s effective tax rate was 38.4% for the current-year quarter and 37.1% for the same period in 2009.  The higher rate in the first quarter 2010 resulted from discrete tax items in both periods.

Net Income. Net income for the first quarter of 2010 totaled $18.2 million, or $0.73 per diluted share, compared with net income of $13.5 million, or $0.57 per diluted share for the same three-month period in 2009.  Adjusted for the impact of the net $3.4 million severance charge in the first quarter of 2009, net income was $15.6 million and diluted earnings per share were $0.66.

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Liquidity and Capital Resources

Debt

The Company’s outstanding debt consisted of the following amounts (in thousands):

	As of March 31, 2010			As of December 31, 2009
2007 Credit Agreement — Revolving Credit Facility	$	100,000		$	100,000
2007 Credit Agreement — Term Loan	200,000			200,000
2007 Master Note Purchase Agreement	135,000			135,000
Industrial development bond, at market-based interest rates, maturing in 2011	6,800			6,800
Debt under GAAP	441,800			441,800
Stockholders’ equity	730,506			706,713
Total capitalization	$	1,172,306		$	1,148,513
Adjusted debt-to-total capitalization ratio	37.7		%	38.5		%

Operating cash requirements and capital expenditures are funded from operating cash flow and available financing. Financing available from debt and the sale of accounts receivable as of March 31, 2010, is summarized below (in millions):

Availability

Maximum financing available under:
2007 Credit Agreement — Revolving Credit Facility	$	425.0
2007 Credit Agreement — Term Loan	200.0
2007 Master Note Purchase Agreement	135.0
2009 Receivables Securitization Program (1)	100.0
Industrial Development Bond	6.8
Maximum financing available			$	866.8
Amounts utilized:
2007 Credit Agreement - Revolving Credit Facility	100.0
2007 Credit Agreement — Term Loan	200.0
2007 Master Note Purchase Agreement	135.0
2009 Receivables Securitization Program(1)	—
Outstanding letters of credit	17.9
Industrial Development Bond	6.8
Total financing utilized			459.7
Available financing, before restrictions			407.1
Restrictive covenant limitation			69.5
Available financing as of March 31, 2010			$	337.6

(1) The 2009 Receivables Securitization Program provides for maximum funding available of the lesser of $100 million or the total amount of eligible receivables less excess concentrations and applicable reserves.

The Credit Agreement, 2007 Note Purchase Agreement, and Transfer and Administration Agreement prohibit the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and impose other restrictions on the Company’s ability to incur additional debt. These agreements also contain additional covenants, requirements and events of default that are customary for these types of agreements, including the failure to make any required payments when due. The 2007 Credit Agreement, 2007 Note Purchase Agreement, and the Transfer and Administration Agreement all contain cross-default provisions.  As a result, if an event of default occurs under any of those agreements, the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party.

The Company believes that its operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future.

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Contractual Obligations

During the three-month period ended March 31, 2010, the Company entered into several operating leases committing the Company to an additional $17.6 million in contractual obligations from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Credit Agreement and Other Debt

On March 3, 2009, USI entered into an accounts receivables securitization program (as amended to date, the “2009 Receivables Securitization Program” or the “2009 Program”) that replaced the securitization program that USI terminated on March 2, 2009 (the “Prior Receivables Securitization Program” or the “Prior Program”). The parties to the 2009 Program are USI, USSC, United Stationers Financial Services (“USFS”), and United Stationers Receivables, LLC (“USR”), and Bank of America, National Association (“Bank of America”) and Enterprise Funding Company LLC (“Enterprise” and, together with Bank of America and Enterprise, the “Investors”).  The 2009 Program is governed by the following agreements:

·Transfer and Administration Agreement among USSC, USFS, USR and the Investors;

·Receivables Sale Agreement between USSC and USFS;

·Receivables Purchase Agreement between USFS and USR; and

·Performance Guaranty executed by USI in favor of USR.

Pursuant to the Receivables Sale Agreement, USSC sells to USFS, on an on-going basis, all the customer accounts receivable and related rights originated by USSC.  Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC, as well as the accounts receivable and related rights USFS acquired from its then subsidiary USS Receivables Company, Ltd. (“USSRC”), upon the termination of the Prior Program.  Pursuant to the Transfer and Administration Agreement, USR then sells the receivables and related rights to Bank of America, as agent on behalf of Enterprise.  The maximum investment to USR at any one time outstanding under the 2009 Program cannot exceed $100 million. USFS retains servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS. The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the facility are repaid and the 2009 Program has been terminated.  The maturity date of the 2009 Program is November 23, 2013, subject to the Investors’ renewing their commitments as liquidity providers supporting the 2009 Program, which expire on January 21, 2011.

The receivables sold to Bank of America will remain on USI’s Condensed Consolidated Balance Sheet, and amounts advanced to USR by Enterprise, Bank of America or any successor Investor will be recorded as debt on USI’s Condensed Consolidated Balance Sheet. The cost of such debt will be recorded as interest expense on USI’s income statement.  As of March 31, 2010 and December 31, 2009, $429.5 million and $445.3 million of receivables have been sold and no amounts have been advanced to USR.

On July 5, 2007, USI and USSC entered into a Second Amended and Restated Five-Year Revolving Credit Agreement with PNC Bank, National Association and U.S. Bank National Association, as Syndication Agents, KeyBank National Association and LaSalle Bank, National Association, as Documentation Agents, and JPMorgan Chase Bank, National Association, as Agent (as amended on December 21, 2007, the “2007 Credit Agreement”).  The 2007 Credit Agreement provides a Revolving Credit Facility with a committed principal amount of $425 million and a Term Loan in the principal amount of $200 million.  Interest on both the Revolving Credit Facility and the Term Loan is based on the three-month LIBOR plus an interest margin based upon the Company’s debt to EBITDA ratio (or “Leverage Ratio”, as defined in the 2007 Credit Agreement).  The 2007 Credit Agreement prohibits the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and imposes other restrictions on the Company’s ability to incur additional debt.  The Revolving Credit Facility expires on July 5, 2012, which is also the maturity date of the Term Loan.

On October 15, 2007, USI and USSC entered into a Master Note Purchase Agreement (the “2007 Note Purchase Agreement”) with several purchasers.  The 2007 Note Purchase Agreement allows USSC to issue up to $1 billion of senior secured notes, subject to the debt restrictions contained in the 2007 Credit Agreement.  Pursuant to the 2007 Note Purchase Agreement, USSC issued and sold $135 million of floating rate senior secured notes due October 15, 2014 at par in a private placement (the “Series 2007-A Notes”).  Interest on the Series 2007-A Notes is payable quarterly in arrears at a rate per annum equal to three-month LIBOR plus 1.30%, beginning January 15, 2008.  USSC may issue additional series of senior secured notes from time to time under the 2007 Note Purchase Agreement but has no specific plans to do so at this time.  USSC used the proceeds from the sale of these notes to repay borrowings under the 2007 Credit Agreement.

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On November 6, 2007, USSC entered into an interest rate swap transaction (the “November 2007 Swap Transaction”) with U.S. Bank National Association as the counterparty. USSC entered into the November 2007 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $135 million of LIBOR based interest rate risk. Under the terms of the November 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $135 million at a fixed rate of 4.674%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The November 2007 Swap Transaction has an effective date of January 15, 2008 and a termination date of January 15, 2013.

On December 20, 2007, USSC entered into an interest rate swap transaction (the “December 2007 Swap Transaction”) with Key Bank National Association as the counterparty. USSC entered into the December 2007 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $200 million of LIBOR based interest rate risk. Under the terms of the December 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $200 million at a fixed rate of 4.075%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The December 2007 Swap Transaction has an effective date of December 21, 2007 and a termination date of June 21, 2012.

On March 13, 2008, USSC entered into an interest rate swap transaction (the “March 2008 Swap Transaction”) with U.S. Bank National Association as the counterparty. USSC entered into the March 2008 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $100 million of LIBOR based interest rate risk. Under the terms of the March 2008 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $100 million at a fixed rate of 3.212%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The March 2008 Swap Transaction had an effective date of March 31, 2008 and a termination date of June 29, 2012.

The Company had outstanding letters of credit under the 2007 Credit Agreement of $17.9 million as of both March 31, 2010 and December 31, 2009.

At March 31, 2010 funding levels (including amounts sold under the 2009 Receivables Securitization Program), a 50 basis point movement in interest rates would not result in a material increase or decrease in annualized interest expense on a pre-tax basis, nor upon cash flows from operations.

As of March 31, 2010, the Company had an industrial development bond outstanding with a balance of $6.8 million.  This bond is scheduled to mature in 2011 and carries market-based interest rates.

Refer to Note 9, “Long-Term Debt”, for further descriptions of the provisions of 2007 Credit Agreement and the 2007 Note Purchase Agreement.

Off-Balance Sheet Arrangements — Prior Receivables Securitization Program

USSC maintained a third-party receivables securitization program (the “Prior Receivables Securitization Program” or the “Prior Program”). On March 2, 2009, in preparation for entering into a new securitization program, USI’s subsidiaries USFS and USSRC terminated the Prior Program. Under the Prior Program, USSC sold, on a revolving basis, its eligible trade accounts receivable (except for certain excluded accounts receivable, which initially include all accounts receivable of Lagasse, Inc. and foreign operations) to USSRC. USSRC, in turn, ultimately transferred the eligible trade accounts receivable to a trust. The trust then sold investment certificates, which represented an undivided interest in the pool of accounts receivable owned by the trust, to third-party investors. As of December 31, 2008, the Company sold $23 million of interests in trade accounts receivable.

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Cash Flows

Cash flows for the Company for the three-month periods ended March 31, 2010 and 2009 are summarized below (in thousands):

	For the Three Months Ended March 31,
	2010			2009
Net cash provided by operating activities	$	82,947		$	115,808
Net cash used in investing activities	(16,185		)	(1,964		)
Net cash provided by (used in) financing activities	6,778			(110,574		)

Cash Flow From Operations

Net cash provided by operating activities for the three months ended March 31, 2010 totaled $83.0 million, compared with $115.8 million in the same three-month period of 2009.  After excluding the impacts of accounts receivable sold under the Prior Receivables Securitization Program (see table below), the Company’s adjusted operating cash flows were $138.8 million for the three months ended March 31, 2009.

Operating cash flows for the first three months of 2010 were lower than adjusted operating cash flows for the prior-year quarter mainly due to an increase in inventories which rose $19.2 million during the first quarter of 2010.  During the first quarter of 2009, inventories declined $108.3 million due to reduced purchasing during the economic downturn in late 2008 and early 2009.  Conversely, accounts payable balances increased from year-end 2009 by $42.9 million due to increased purchasing activity and the timing of purchases.  During the first quarter of 2009, payables declined by $22.2 million.

Internally, the Company views accounts receivable sold through its Prior Receivables Securitization Program (the “Prior Program”) and the 2009 Receivables Securitization Program (the “2009 Program”), or collectively, the “Programs”, to be a financing mechanism based on the following considerations and reasons:

·During the first quarter of 2009, the Company entered into the 2009 Program that was structured to maintain the related accounts receivable and debt on its balance sheet, with costs of the 2009 Program now included within “Interest Expense, net”.  In contrast, the Prior Program was structured for off-balance sheet treatment with costs included in “Other Expense, net”;

·The Prior Program historically was the Company’s preferred source of floating rate financing, primarily because it had generally carried a lower cost than other traditional borrowings;

·The Programs’ characteristics are similar to those of traditional debt, including being securitized, having an interest component and being viewed as traditional debt by the Programs’ financial providers in determining capacity to support and service debt;

·The terms of the Programs are structured similarly to those in many revolving credit facilities, including provisions addressing maximum commitments, costs of borrowing, financial covenants and events of default;

·As with debt, the Company elects, in accordance with the terms of the Programs, how much is funded through the Programs at any given time;

·Provisions of the 2007 Credit Agreement and the 2007 Note Purchase Agreement aggregate true debt (including borrowings under the Credit Facility) together with the balance of accounts receivable sold under the Programs into the concept of “Consolidated Funded Indebtedness.”  This effectively treats the Programs as debt for purposes of requirements and covenants under those agreements; and

·For purposes of managing working capital requirements, the Company evaluates working capital before any sale of accounts receivables sold through the Programs to assess accounts receivable requirements and performance, on measures such as days outstanding and working capital efficiency.

Net cash provided by operating activities excluding the effects of receivables sold and net cash used in financing activities including the effects of receivables sold for the three months ended March 31, 2010 and March 31, 2009 are provided below as an additional liquidity measure (in thousands).  This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies.  It should be considered supplemental data.

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	For the Three Months Ended March 31,
	2010		2009
Cash Flows From Operating Activities:
Net cash provided by operating activities	$	82,947	$	115,808
Excluding the change in accounts receivable sold	—		23,000
Net cash provided by operating activities excluding the effects of receivables sold	$	82,947	$	138,808
Cash Flows From Financing Activities:
Net cash provided by (used in) financing activities	$	6,778	$	(110,574	)
Including the change in accounts receivable sold	—		(23,000		)
Net cash provided by (used in) financing activities including the effects of receivables sold	$	6,778	$	(133,574	)

Cash Flow From Investing Activities

Net cash used in investing activities for the first three months of 2010 was $16.2 million, compared to net cash used in investing activities of $2.0 million for the three months ended March 31, 2009. The increase primarily relates to the acquisition of MBS Dev for approximately $10.5 million, net of cash acquired.  Gross capital spending also increased in the first three months of 2010 to $5.7 million from $2.0 million in the same period in 2009.  For the full year 2010, the Company expects gross capital expenditures to be approximately $30 million.

Cash Flow From Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2010 totaled $6.8 million, compared with a use of cash of $110.6 million in the prior-year period.  Strong operating cash flows in the first three months of 2009 led to repayment of debt of $110.6 million with no short-term investments included in cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2009.  Debt remained constant at $441.8 million from year end 2009 to March 31, 2010 while short-term investments included in cash and cash equivalents on the Condensed Consolidated Balance Sheets rose to $81.4 million as a result of strong operating cash flows and lower working capital needs. First quarter 2010 cash provided by financing activities was positively impacted by $15.1 million in net proceeds from share-based compensation arrangements, mostly stock option exercises, partially offset by $11.7 million in share repurchases.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market risk associated principally with changes in interest rates and foreign currency exchange rates. There were no material changes to the Company’s exposures to market risk during the first three months of 2010 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 4.CONTROLS AND PROCEDURES.

Attached as exhibits to this Quarterly Report are certifications of the Company’s President and Chief Executive Officer (“CEO”) and Senior Vice President and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 under the Exchange Act. This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in such certifications.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that the Company’s Disclosure Controls or its internal control over financial reporting will prevent or detect all error or all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the existence of resource constraints. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the fact that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by managerial override. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and no design is likely to succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks, including that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report the Company’s management performed an evaluation, under the supervision and with the participation of the Company’s CEO and CFO, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Such disclosure controls and procedures (“Disclosure Controls”) are controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Management’s quarterly evaluation of Disclosure Controls includes an evaluation of some components of the Company’s internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual basis.

Based on this evaluation, the Company’s management (including its CEO and CFO) concluded that as of March 31, 2010, the Company’s Disclosure Controls were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes to the Company’s internal control over financial reporting during the quarter ended March 31, 2010, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS.

The Company is involved in legal proceedings arising in the ordinary course of or incidental to its business. The Company is not involved in any legal proceedings that it believes will result, individually or in the aggregate, in a material adverse effect upon its financial condition or results of operations.

ITEM 1A.RISK FACTORS.

For information regarding risk factors, see “Risk Factors” in Item 1A of Part I of the Company’s Form 10-K for the year ended December 31, 2009. There have been no material changes to the risk factors described in such Form 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Common Stock Purchase

As of March 31, 2010, the Company had $89.2 million remaining of Board authorizations to repurchase USI common stock.  During the three-month period ended March 31, 2010, the Company repurchased 198,074 shares of common stock at a cost of $11.7 million.  There were no share repurchases in the first three months of 2009.

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ITEM 6.EXHIBITS

(a)Exhibits

This Quarterly Report on Form 10-Q includes as exhibits certain documents that the Company has previously filed with the SEC. Such previously filed documents are incorporated herein by reference from the respective filings indicated in parentheses at the end of the exhibit descriptions (all made under the Company’s file number of 0-10653). Each of the management contracts and compensatory plans or arrangements included below as an exhibit is identified as such by a double asterisk at the end of the related exhibit description.

Exhibit No.	Description
2.1*	Agreement for Purchase and Sale of Stock of MBS Dev, Inc., dated as of February 26, 2010, among the Stockholders of MBS Dev, Inc. and United Stationers Supply Co. (“USSC”)
3.1	Second Restated Certificate of Incorporation of the Company, dated as of March 19, 2002 (Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed on April 1, 2002 (the “2001 Form 10-K”))
3.2	Amended and Restated Bylaws of the Company, dated as of July 16, 2009 (Exhibit 3.1 to the Form 10-Q filed on November 5, 2009)
10.1*	Form of Performance Based Restricted Stock Unit Award Agreement under the 2004 Long-Term Incentive Plan**
10.2*	United Stationers Inc. (“USI”) 2004 Long-Term Incentive Plan Management Cash Incentive Award Plan Summary for Section 16 Officers and Grade Level 3 and above**
10.3*	Executive Employment Agreement, effective as of December 31, 2008, by and among USI, United Stationers Supply Co. (“USSC”) and Eric A. Blanchard**
10.4	Third Amendment to the Transfer and Administration Agreement, dated as of January 22, 2010, among USSC, United Stationers Financial Services LLC (USFS), United Stationers Receivables, LLC (“USR”), Enterprise Funding Company LLC, and Bank of America, National Association (Exhibit 10.45 to the 2009 Form 10-K)
10.5*	Fourth Amendment to the Transfer and Administration Agreement, dated as of March 30, 2010, among USSC, USFS, USR, Enterprise Funding Company LLC, and Bank of America, National Association
31.1*	Certification of Chief Executive Officer, dated as of May 5, 2010, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer, dated as of May 5, 2010, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer, dated as of May 5, 2010, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*   -Filed herewith

** -Represents a management contract or compensatory plan or arrangement.

33

SIGNATURES

Pursuant to the requirements 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.
	(Registrant)
Date:  May 5, 2010	/s/ VICTORIA J. REICH
	Victoria J. Reich
	Senior Vice President and Chief Financial Officer(Duly authorized signatory and principal financial officer)

34

EX-2.1

Exhibit 2.1

Execution Version

AGREEMENT FOR PURCHASE AND SALE OF STOCK

of

MBS DEV, INC.

among

THE STOCKHOLDERS OF MBS DEV, INC.

and

UNITED STATIONERS SUPPLY CO.

AGREEMENT FOR PURCHASE AND SALE OF STOCK

THIS AGREEMENT (this “Agreement”), dated as of the 26th day of February, 2010, is made by and among Steve Guillaume, an individual, Laura Guillaume, an individual (individually referred to herein as a “Seller” and collectively as “Sellers”), being the holders of all of the outstanding shares of capital stock of MBS Dev, Inc., a Colorado corporation (the “Company”), and United Stationers Supply Co., an Illinois corporation (“Buyer”).

ARTICLE I.
PURCHASE AND SALE; PRICE

1.1        Purchase and Sale of the Shares.  In the manner herein provided, the Sellers shall (a) at the Closing (defined below), sell and deliver to Buyer 500,000 shares of the common stock, par value $.001, of the Company (collectively, the “Shares”), constituting all of the issued and outstanding shares of the capital stock of the Company as of the Closing.   Buyer shall purchase the Shares from the Sellers on the terms and conditions set forth herein.

1.2        Purchase Price.  Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties of the Sellers contained herein, and in consideration of the sale, conveyance, transfer and delivery of the Shares as provided in this Agreement, Buyer agrees to pay to the Sellers at the Closing an aggregate purchase price of Twelve Million Dollars ($12,000,000) (the “Base Purchase Price”).  Except as otherwise provided herein, the Base Purchase Price shall be paid as follows:

(a)  Cash Payment to Sellers at Closing.  At the Closing, an amount equal to the Base Purchase Price, less the Payoff Amount (defined below), by delivery to the Sellers of funds by wire transfer or transfers to an account or accounts which have been designated by the Sellers to Buyer in writing no later than five (5) business days prior to Closing.

(b)  Cash Payment of Payoff Amount at Closing.  At the Closing, an amount equal to the aggregate of all indebtedness of the Company (if any), other than the Accrueds (defined below) (the “Payoff Amount”), by delivery to the lenders, creditors or other holders of the Company’s indebtedness who have delivered letters stating that upon payment of a sum certain amount, such holder will file a full UCC release on any assets of the Company securing such indebtedness (or permit such UCC release to be filed by the Company), thereby rendering all assets of the Company free and clear of all liens.

1.3        Payment of Liabilities.  The Sellers acknowledge and agree that the Base Purchase Price has been calculated, and is being paid, based on the agreement that the Company will have paid in full immediately prior to the Closing all liabilities and obligations of the Company other than the current portion of: (A) trade accounts payable; (B) accrued payroll; (C) accrued Taxes; (D) accrued operating expenses, (in the case of A-D, to the extent reflected as a current liability on the Balance Sheet (as defined in Section 2.7 below), or incurred by the Company after the Financial Statement Date in the ordinary course of business); (E) Seller Transaction Expenses

(subject to the limitations set forth in Section 12.3) and (F) contractual obligations of the Company (items A-F collectively referred to herein as “Accrueds”).

1.4        Additional Amount of Purchase Price - Earn-Out Payment Amount. Subject to and on the terms and conditions set forth in this Agreement, Buyer shall deliver to Sellers an additional Purchase Price amount based on the achievement of the benchmarks set forth below, as follows:

(a)   As used in this Agreement, the following terms shall have the meanings set forth below:

(i)            “Company Revenue” means revenue recognized on an accrual basis in accordance with GAAP, generated solely from the operation of the business of the Company.

(ii)           “Company Revenue Earn-Out Amount” means $3,000,000, payable in accordance with Section 1.4(c)(i) below.

(iii)          “GAAP” or “generally accepted accounting principles” shall mean such principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board which are applicable in the circumstances as of the date in question.  For purposes of this definition, the requirement that such principles be applied on a “consistent basis” shall mean that accounting principles observed in the current period are comparable in all material respects to those applied in the preceding periods, except as change is permitted or required under or pursuant to such accounting principles.

(iv)          “Hosted Solution” means a template based software product to be developed by the Company based upon Microsoft’s Dynamics AX software and the Company’s Intellectual Property (defined below) for licensing to Buyer’s customers through a hosted environment.

(v)           “Hosted Solution Revenue” means the Buyer’s net merchandise sales (excluding customer rebates) recognized on an accrual basis in accordance with GAAP and consistent with past practices, generated solely from sales of Buyer’s products to customers that utilize the Hosted Solution to resell such products.

(vi)          “Hosted Solution Revenue Earn-Out Amount” means an amount up to $2,000,000, determined and payable in accordance with Section 1.4(c)(ii) below.

(vii)         “Measurement Period” means each of the calendar years ending December 31, 2010, December 31, 2011, December 31, 2012, December 31, 2013, and December 31, 2014.

(viii)        “Non-Hosted Revenue” means the Buyer’s net merchandise sales (excluding customer rebates) recognized on an accrual basis in accordance with GAAP and consistent with past practices, generated solely from sales of Buyer’s

2

products to customers, other than any customers as of the date hereof, that utilize the Non-Hosted Solution to resell such products, plus the amount (if any) by which the Hosted Solution Revenue exceeds the Hosted Solution Revenue Target.

(ix)           “Non-Hosted Revenue Earn-Out Amount” means an amount up to $1,000,000, determined and payable in accordance with Section 1.4(c)(iii) below).

(x)            “Non-Hosted Solution” means those software products developed by the Company based on Microsoft’s Dynamics AX software and the Company’s Intellectual Property and licensed to customers for installation on the customer’s premises or at the customer’s designated hosting provider.

(xi)           “Selected Accounting Firm” means KPMG or PricewaterhouseCoopers, as may be selected by mutual agreement of the parties hereto.

(b)  Financial Information.  (i) Buyer shall prepare or cause to be prepared a statement for each fiscal quarter within each Measurement Period which sets forth a reasonably detailed calculation of the Company Revenue, the Hosted Solution Revenue the Non-Hosted Revenue, and the amount of Earn-Out Amounts payable (if any) in accordance therewith for such fiscal quarter or Measurement Period (together, the “Earn-Out Statements”).  Buyer shall deliver the Earn-Out Statements to Sellers as soon as practicable following the end of each fiscal quarter within each Measurement Period.

(ii)  If Sellers have any objections to or otherwise dispute any calculations, methods or other information set forth in the Earn-Out Statements, such objections or disputes shall be made to Buyer in writing within ten (10) days after receipt by Sellers of the applicable Earn-Out Statement, stating in reasonable detail and specificity the objection or dispute and reason therefor, and the parties agree that the provisions of Section 1.5 below will apply in resolving said dispute.  Any dispute or objection for which such written notice is not provided to Buyer within such ten (10) day period shall be waived for all purposes.

(c)  Calculation and Payment of Earn-Out Amounts.

(i)            The Company Revenue Earn-Out Amount shall be paid upon the Company’s achievement of Company Revenues, measured on a cumulative basis beginning on the Closing Date as follows:

Company Revenue (Cumulative)		Company Revenue Earn-Out Amount
$	9,000,000	$	1,000,000
$	21,000,000	$	1,000,000
$	36,000,000	$	1,000,000

3

Notwithstanding the foregoing or anything to the contrary set forth herein, Buyer shall deliver to Sellers any portion of the Company Revenue Earn-Out Amount that remains unpaid upon the earliest to occur of (A) a sale of all or substantially all of the assets of the Company,  (B) a Change in Control (defined below) of either the Company or Buyer (other than a merger or consolidation with a subsidiary or affiliate, a reincorporation of the Buyer or the Company, as applicable, in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Buyer or the Company, as applicable, or their relative stock holdings), or (C) the delivery of the Earn-Out Statements for the Measurement Period ending December 31, 2014, regardless of whether the Company Revenue targets set forth above have been achieved as of the occurrence of any of the events in the foregoing (A) - (C). For purposes of the preceding sentence, a “Change in Control” shall mean a consolidation or merger of the Company or Buyer, as applicable, with or into any other corporation or other entity or person, or any other corporate reorganization or sale of shares, in which the stockholders of such company immediately prior to such consolidation, merger or reorganization or sale own less than 50% of the voting power of the surviving entity immediately after such consolidation, merger or reorganization or sale.

(ii)           The Hosted Solution Revenue Earn-Out Amount shall be paid upon the achievement of Hosted Solution Revenue in any period of four (4) consecutive fiscal quarters ending on or prior to December 31, 2014 of at least $350,000,000 (the “Hosted Solution Revenue Target”).  In the event that the Hosted Solution Revenue Target is not achieved for any consecutive four-quarter period ending on or before December 31, 2012, (A) a partial payment (the “First Partial Hosted Revenue Payment”) of the Hosted Solution Revenue Earn-Out Amount shall be paid to Sellers following delivery of the Earn-Out Statements for the Measurement Period ending December 31, 2012, the amount of such First Partial Hosted Revenue Payment to be determined by multiplying (i) the percentage of the Hosted Solution Revenue Target actually achieved by the Buyer (i.e., the Hosted Solution Revenue to date as a percentage of the Hosted Solution Revenue Target) for the four-quarter period ended December 31, 2012, by (ii) $2,000,000, and (B) a second partial payment (the “Second Partial Hosted Revenue Payment”) of the Hosted Solution Revenue Earn-Out Amount shall be paid to Sellers following delivery of the Earn-Out Statements for the Measurement Period ending December 31, 2014, the amount of such Second Partial Hosted Revenue Payment to be determined by multiplying (i) the percentage of the Hosted Solution Revenue Target actually achieved by the Buyer for the four-quarter period ended December 31, 2014, by (ii) $2,000,000, and then subtracting from the product thereof the First Partial Hosted Revenue Payment; provided however, that for purposes of determining the percentages of the Hosted Solution Revenue Target actually achieved by the Buyer in (A) and (B) above, the Hosted Solution Revenue and the Hosted Solution Revenue Target shall each by reduced by $100,000,000, and provided further, that in no event shall the aggregate of the First Partial Hosted Revenue Payment and the Second Partial Hosted Revenue Payment exceed $2,000,000.

By way of illustration only, assuming that the Hosted Solution Revenue for the four quarters ending December 31, 2012 and December 31, 2014 are $200,000,000 and $300,000,000, respectively, the First Partial Hosted Revenue Payment and the Second Partial Hosted Revenue Payment shall be calculated as follows:

4

First Partial Hosted Revenue Payment:

$350M (Hosted Revenue Target)

- $100M

$250M

$200M (actual Hosted Solution Revenue)

 - $100M   =

 $100M    ÷   $250M    =    40%

 X $2M (Hosted Revenue Earn-Out Amount   =

   $800,000

Second Partial Hosted Revenue Payment:

$350M (Hosted Revenue Target)

- $100M

$250M

$300M (actual Hosted Solution Revenue)

 - $100M  =

$200M  ÷   $250M    =    80%

X $2M (Hosted Revenue Earn-Out Amount)   =

    $1,600,000

- $800,000 (First Partial Hosted Revenue Payment)     

   =

$800,000

(iii)          The Non-Hosted Revenue Earn-Out Amount shall be paid upon the achievement of Non-Hosted Revenue in any period of four (4) consecutive fiscal quarters ending on or prior to December 31, 2014 of at least $200,000,000 (the “Non-Hosted Revenue Target”).  In the event that the Non-Hosted Revenue Target is not achieved for any consecutive four-quarter period ending on or before December 31, 2012, (A) a partial payment (the “First Partial Non-Hosted Revenue Payment”) of the Non-Hosted Revenue Earn-Out Amount shall be paid to Sellers following delivery of the Earn-Out Statements for the Measurement Period ending December 31, 2012, the amount of such First Partial Non-Hosted Revenue Payment to be determined by multiplying (i) the percentage of the Non-Hosted Revenue Target actually achieved by the Buyer for the four-quarter period ended December 31, 2012, by (ii) $1,000,000, and (B) a second partial payment (the “Second Partial Non-Hosted Revenue Payment”) of the Non-Hosted Revenue Earn-Out Amount shall be paid to Sellers following delivery of the Earn-Out Statements for the Measurement Period ending December 31, 2014, the amount of such Second Partial Non-Hosted Revenue Earn-Out Payment to be determined by multiplying (i) the percentage of

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the Non-Hosted Revenue Target actually achieved by the Buyer for the four-quarter period ended December 31, 2014, by (ii) $1,000,000, and then subtracting from the product thereof the First Partial Non-Hosted Revenue Payment; provided however, that for purposes of determining the percentages of the Non-Hosted Revenue Target actually achieved by the Buyer in (A) and (B) above, the Non-Hosted Revenue and the Non-Hosted Revenue Target shall each by reduced by $100,000,000 and the Non-Hosted Revenue shall be increased by the amount, if any, that the Hosted Solution Revenue exceeds the Hosted Solution Revenue Target, and provided further, that in no event shall the aggregate of the First Partial Non-Hosted Revenue Payment and the Second Partial Non- Hosted Revenue Payment exceed $1,000,000.

(iv)          Any Earn-Out Amounts to be paid to Sellers pursuant to Sections 1.4(c)(i), (ii) or (iii) above shall be payable within fifteen (15) days following delivery of the Earn-Out Statements, or resolution of any dispute relating to the calculation of such Earn-Out Amounts as set forth in Section 1.4(b)(ii) above; provided, however, that any Earn-Out Amount payable to Sellers hereunder shall be subject to holdback against any obligations or amounts owed to Buyer by Sellers, or either one of them, pursuant to the indemnification provisions set forth in Section 6.4 or Article XI hereof.

1.5        Dispute Resolution.  In the event of any dispute between Buyer and Sellers relating to the calculation of the Earn-Out Statements, Buyer and Sellers shall submit the dispute to the Selected Accounting Firm for review.  Buyer and Sellers shall make available to the Selected Accounting Firm all work papers and all other information and material in their possession relating to the matters that are the subject of the dispute.  The Selected Accounting Firm shall be instructed to use its commercially reasonable efforts to deliver its determination as promptly as practicable (but in no event more than thirty (30) days) after such submission of the dispute to the Selected Accounting Firm.  The Selected Accounting Firm shall act as experts and not arbiters and shall determine only those items that are the subject of the dispute, with such determination being made in accordance with the guidelines and procedures set forth in this Agreement and the definitions to be used herein.  The parties hereto expressly agree that the determination of the Selected Accounting Firm shall be final and binding on the parties (absent fraud or manifest bad faith by the Selected Accounting Firm).  The costs, expenses and fees of the Selected Accounting Firm shall be borne by Buyer, on the one hand, and Sellers, on the other hand, based on the percentage which the portion of the contested amount not awarded to such party bears to the amount actually contested by such party.

1.6        Withholding.            Buyer shall be entitled to deduct, withhold, and pay over to the applicable Governmental Authority from any and all payments made under this Agreement such amounts required to be deducted and withheld under applicable laws.  To the extent such amounts are deducted, withheld, and paid over to the applicable Governmental Authority for the account of Sellers, such paid over amounts shall be treated for all purposes of this Agreement as having been paid to the person to whom such amounts would have otherwise been paid.

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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Except as disclosed in the disclosure schedule attached hereto (the “Disclosure Schedule”), the Sellers hereby jointly and severally represent and warrant to Buyer as of the date hereof and as of the Closing Date as follows:

2.1        Corporate Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado with all requisite corporate power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets.  Section 2.1 of the Disclosure Schedule lists each of the states where the Company is qualified as a foreign corporation.  The conduct of its business and its ownership or use of property do not require the Company to be qualified or licensed to do business as a foreign corporation in any state except those listed in Section 2.1 of the Disclosure Schedule, except where failure to be so qualified or licensed would not have a material adverse effect on the Company.  Section 2.1 of the Disclosure Schedule contains complete and correct copies of the Company’s (i) articles of incorporation, (ii) bylaws, and (iii) good standing certificates from the Secretary of State of (A) the State of Colorado and (B) each of the states listed in Exhibit 2.1, each as amended to date.  The Company has all federal, state, local and foreign Permits (defined below) or other approvals required for the operation of its business as now being conducted.

2.2        Capital Stock; Options.  The authorized capital stock of the Company and the shares of capital stock of the Company issued and outstanding are as set forth in Section 2.2 of the Disclosure Schedule. The Shares represent 100% of the issued and outstanding capital stock of the Company.  The Company has no treasury stock.  All of the Shares are validly issued, fully paid and nonassessable and are owned by the Sellers, free and clear of all encumbrances or claims.  There are no issued and outstanding options, warrants, rights, securities, contracts, commitments, understandings or arrangements by which the Company is bound to issue any additional shares of its capital stock or options to purchase shares of its capital stock.

2.3        Subsidiaries and Affiliates.  Section 2.3 of the Disclosure Schedule sets forth all of the Company’s subsidiaries, Affiliates (defined herein) and the Company’s ownership interest in any other entity or business operation.  The term “Affiliates” includes the shareholders, directors, and officers of the Company and any corporation, partnership or other entity in which the Company, any of the Sellers, any family member of any of the Sellers, or any director or officer of the Company is a controlling person, as that term is used in connection with the federal securities laws, if such person or entity has, or had in the past twenty-four (24) months, a contractual relationship with or is transacting, or has in the past twenty-four (24) months transacted, business with the Company.  The Company does not have any Affiliate whose liabilities or obligations will be assumed by Buyer.

2.4        Authorization. The Sellers have full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby.  None of Sellers are a resident of any state that has enacted community property statutes nor are any of the Sellers subject to any community property statutes.

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2.5        No Violation.  The Company is not subject to or obligated under its articles of incorporation, bylaws, any Law (defined below) or any agreement or instrument, or any Permit (defined below) that would be breached or violated by the Sellers’ execution, delivery and performance of this Agreement.  The Sellers will comply with all applicable Laws in connection with their execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.  As used herein, “Laws” shall mean, without limitation, all foreign, federal, state and local laws, statutes, rules, regulations, codes, ordinances, plans, orders, judicial decrees, writs, injunctions, notices, decisions or demand letters issued, entered or promulgated pursuant to any foreign, federal, state or local law.

2.6        Governmental Authorities.  The Sellers are not required to submit any notice, report or other filing with, and no consent, approval or authorization is required, by any national, supra-national, federal, state, provincial or local government, political subdivision, governmental, regulatory, department, bureau, board or other administrative authority, instrumentality, agency, body or commission, self-regulatory organization or any court, tribunal, or judicial or arbitral body (each a “Governmental Authority”) in connection with the execution, delivery, consummation or performance of this Agreement or the transactions contemplated hereby.

2.7        Financial Statements.  Sellers have delivered to Buyer true and complete copies of the balance sheets of the Company as of December 31, 2007, 2008 and 2009 and the related statements of income and retained earnings and cash flows for the twelve-month periods then ended (the “Financial Statements”).  Except as indicated in Section 2.7 of the Disclosure Schedule, all Financial Statements and the notes thereto were prepared in accordance with GAAP, are complete and accurate in all material respects and fairly present the financial position of the Company as of the respective dates thereof, and all Financial Statements and the notes thereto fairly present the results of operations for the periods therein referred to, all in accordance with the Company’s past practices consistently applied throughout the periods indicated (except as stated therein or in the notes thereto).  The balance sheet of the Company as of December 31, 2009, including the notes thereto, is referred to as the “Balance Sheet.”  December 31, 2009 is referred to as the “Financial Statement Date.”

2.8        No Undisclosed Liabilities, Claims, etc. Except for (a) liabilities fully reflected or reserved against in the Balance Sheet, (b) regular and usual liabilities and obligations incurred in the ordinary course of business consistent with past practices after the Financial Statement Date, (c) Accrueds and (d) liabilities incurred in connection with the transactions contemplated hereby, the Company does not have any liabilities, obligations or claims.  With respect to any amounts reflected in the Balance Sheet as amounts prepaid by customers for services to be provided (“Customer Retainers”), the Company has not billed against or reduced any such Customer Retainers except to the extent services have been provided to such customers.

2.9        Absence of Certain Changes.

(a)     Since the Financial Statement Date, there has not been:

(i)            any adverse change in the business, prospects, financial condition, earnings or operations of the Company;

8

(ii)           any damage, destruction or loss, whether covered by insurance or not, adversely affecting the Company’s properties, business or prospects;

(iii)          any declaration, setting aside or payment of any dividend whether in cash, stock or property with respect to the Shares, or any redemption or other acquisition of such Shares;

(iv)          any issuance or sale of any shares of the capital stock of the Company or any securities convertible into shares of capital stock of the Company;

(v)           any increase in the compensation payable or to become payable by the Company to its respective directors, officers, employees, Affiliates or any of the Sellers or any adoption of or increase in any bonus or perquisite payment or arrangement made to, for or with any such party, nor has the Company paid, set aside, accrued, agreed to or become liable in any manner for any bonus, of any nature or type, to the Seller or to any employee or officer of the Company, nor has the Company paid any excessive compensation to the Sellers;

(vi)          any entry by the Company into any commitment or transaction other than in the ordinary course of business, including, without limitation, any borrowing or capital expenditure, whether or not in the ordinary course of business;

(vii)         any change by the Company in accounting methods, practices or principles, including with respect to any change in any Tax accounting period, any change in any election with respect to Taxes, or any other change, action, consent or omission that could reasonably be expected to have the effect of increasing the Tax liability of the Company;

(viii)        to the Sellers’ Knowledge (defined herein), any adoption of any statute, rule, regulation or order which adversely affects the Company;

(ix)           any termination or waiver of any rights of value to the business of the Company;

(x)            any transaction or conduct inconsistent with past business practices, other than any transaction or expenses incurred in connection with this Agreement and the transactions contemplated herein;

(xi)           except as required by law, any adoption or amendment of any collective bargaining, bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, or other plan, agreement, trust, fund or arrangement for the benefit of employees; or

(xii)          any agreement or understanding made or entered into to do any of the foregoing.

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(b)     Since the Financial Statement Date, the Company has at all times:

(i)            except as provided in Section 2.9(a) above, operated its business in the ordinary course, diligently and in good faith, consistent with past practices, including but not limited to with respect to its collection and treatment of Customer Retainers and accounts receivable, communications, dealings and relationships with customers and suppliers, dealings and relationships with Microsoft (defined below, and fulfillment of customer orders and other contractual obligations, including but not limited to any obligations under or relating to the Microsoft Contracts (defined below);

(ii)           maintained all of its properties in customary repair, order and condition, reasonable wear and tear excepted;

(iii)          complied with the provisions of all Laws applicable to the conduct of its business;

(iv)          not engaged in any significant or unusual transaction, other than any transaction or expenses incurred in connection with this Agreement and the transactions contemplated herein; and

(v)           not canceled, released, waived or compromised any debt, claim or right in its favor.

As used herein, “Knowledge” of the Sellers or the Company shall mean the actual knowledge, after reasonable inquiry under the circumstances, of either Steve Guillaume or Laura Guillaume.

2.10      Contracts.

(a)  Except with respect to Microsoft Contracts, Section 2.10(a) contains a true, accurate and complete schedule of, and Buyer has been provided copies of, all written or electronic Contracts (as defined herein) providing for (i) payment or receipt by the Company of more than $50,000 during the life of the contract, including any such contracts and agreements with customers or clients, (ii) any limitation on the ability of the Company to compete in any line of business or in any geographic area; (iii) any agreement or arrangement regarding non-disclosure or confidentiality; (iv) the development or implementation of any software, content (including textual content and visual or graphics content), technology or Intellectual Property Assets by or for (or for the benefit or use of) the Company; or (v) any other Contract that is material to the Company (the “Material Contracts”).   The term “Contracts” shall include, but shall not be limited to, all written contracts, agreements, agency agreements, loan agreements, mortgages, indentures, deeds of trust, guarantees, commitments, joint venture agreements, purchase and/or sale agreements, collective bargaining, union, consulting and/or employment contracts, leases of real or personal property, easements, distribution or dealer agreements, service agreements, license agreements and advertising agreements.  The Company is not in default of any provision or alleged to be in default under any Material Contract nor, to Sellers’ Knowledge, is

10

there any default by any other party to any Material Contract, and there exists no event, condition or occurrence which, after notice or lapse of time, or both, would constitute a default under any Material Contract.  None of the Material Contracts contain any provisions which would require the Company to sell products or services to any third party on the same or substantially similar terms as the Company sells to any other party.  All of the Material Contracts are in full force and effect and constitute legal, valid and binding obligations of the parties thereto in accordance with their terms, and will remain in full force and effect after the Closing without any notice to or consent by any other party.  The Company has not waived any rights under the Material Contracts.  The Company has not given any notice of termination or non-renewal under any Material Contract, nor has it received a notice of termination, intent to terminate or non-renewal of any Material Contract.  Except as indicated on Section 2.10(a) of the Disclosure Schedule, all Material Contracts are transferable to Buyer pursuant to the transactions contemplated by this Agreement without the consent of any other person.

(b)  Microsoft Contracts.  Without limiting the generality of Section 2.10(a), Section 2.10(b) of the Disclosure Schedule contains a true, accurate and complete schedule of, and Buyer has been provided copies of, all written or electronic Contracts entered into between Company and Microsoft Corporation or any or its affiliates (collectively, “Microsoft”) (collectively, the “Microsoft Contracts”).  The Company is in compliance with all Microsoft Contracts and all terms, guidelines, programs, and requirements referred to therein or associated therewith.  The Company is in good standing in the Microsoft Partnership Program and properly authorized as an Independent Software Vendor for Microsoft Dynamics. All of Company’s agreements with third parties licensing any software of Microsoft comply with all requirements of the Microsoft Contracts.  Except as set forth in Section 2.10(b) of the Disclosure Schedule, the Microsoft Contracts are transferable pursuant to the transactions contemplated under this Agreement, and the consummation of such transactions: (i) does not breach the terms of any of the Microsoft Contracts; (ii) require any consent of Microsoft that has not been obtained in writing prior to the Closing; (iii) does not change the scope of Company’s rights under the Microsoft Contracts; and (iv) does not give Microsoft the right to terminate any Microsoft Contract.  Neither the Company nor either of the Sellers has received notice or has Knowledge that Microsoft does not intend to renew and extend the term of the Microsoft Contracts.

(c)  Section 2.10(c) of the Disclosure Schedule identifies any amounts required to be paid by the Company to any software vendor based on any licensing or sales of software by the Company.

2.11      Title and Related Matters.  The Company has good and marketable title to, or a valid leasehold interest in, all of the properties and assets reflected in the Balance Sheet or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business and consistent with past practices), including, without limitation, the specific assets referred to in Sections 2.12 (a), (b) and (c) below, free and clear of all mortgages, security interests, liens, pledges, claims, escrows, options, rights of first refusal, indentures, easements, licenses, security agreements or other agreements, arrangements,

11

contracts, commitments, understandings, obligations, charges or encumbrances of any kind or character (“Encumbrances”), except as reflected on the Balance Sheet.  The Company owns or leases, directly or indirectly, all of the assets and properties, and is a party to all licenses and other agreements, presently used or necessary to carry on the business or operations of the Company as presently conducted.  All items of personal property are in good condition and working order, ordinary wear and tear excepted.  Except as expressly set forth in this Agreement, the Sellers make no warranties regarding the condition of the Company’s tangible assets, and all implied warranties, including the implied warranties of merchantability and fitness for a particular purpose, are hereby excluded.

2.12      Property and Assets.

(a)  Owned Real Property.  The Company has never owned, held any interest in, or held title to, any real property.

(b)  Leased Property.  Section 2.12(b) of the Disclosure Schedule sets forth a list of each lease for real or personal property to which the Company, or any Seller on behalf of the Company, is a party or which covers any premises at which the Company operates its business or maintains any of its assets.  With respect to all such leased property:  (A) all such leases are in full force and effect and constitute valid and binding obligations of the respective parties thereto; (B) there have not been and there currently are not any defaults thereunder by any party thereto; (C) no event has occurred which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default thereunder entitling the lessor to terminate any lease; and (D) the continuation, validity and effectiveness of all such leases under the current rentals and other current terms thereof will in no way be affected by the transactions contemplated by this Agreement.

(c)  No Disposition of Assets.  There has not been since the Financial Statement Date any sale, lease or any other disposition or distribution by the Company of any of its assets or properties and any other assets now or hereafter owned by it, except (i) as contemplated by this Agreement or (ii) assets and properties sold or otherwise disposed of since the Financial Statement Date in the ordinary course of business and consistent with past practices.

2.13      Litigation.  There is no suit, action, investigation or proceeding pending or, to the Knowledge of any of the Sellers, threatened against the Company or any of the Sellers, nor is there any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against the Company.

2.14      Tax Matters.  For the purposes of this Agreement, “Taxes” means any federal, state, county, local or foreign taxes, charges, fees, levies, or other assessments, including all net income, gross income, sales and use, transfer, gains, profits, excise, franchise, annual report, real and tangible and intangible personal property, value added, environmental, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance or withholding taxes or charges imposed by a Governmental Authority, abandoned property, escheat, unclaimed property, alternative, minimum, add-on, fee,

12

information, 1099, reportable transaction, unemployment, independent and includes any interest and penalties (civil or criminal) on or additions to any such taxes.  Except as described in Section 2.14 of the Disclosure Schedule:

(a)           The Company has filed or caused to be filed all returns, reports, or other statements, including all returns relating to or required under applicable laws (“Tax Returns”) relating to income or franchise Taxes and all other Tax Returns relating to other Taxes required to be filed by the Company under applicable laws, and such Tax Returns are true and correct in all respects;

(b)           The Company has, within the time and in the manner prescribed by law, paid all Taxes that were due and payable by the Company;

(c)           There is no currently effective agreement, waiver or consent providing for an extension of time with respect to the assessment of any Taxes or the filing of any Tax Returns;

(d)           There are no (i) currently effective powers of attorney granted by the Company concerning any Tax matter, (ii) agreements entered into by the Company with any taxing authority that would have a continuing effect on the Company after the Closing Date or (iii) Encumbrances (and immediately following the Closing Date there will be no Encumbrances) on the assets of the Company relating to or attributable to Taxes other than Encumbrances for Taxes not yet due and payable;

(e)           There is no examination, action, suit, proceeding, investigation, audit, claim, demand, notice of deficiency or assessment against the Company pending (or any threat of any of the foregoing that has been communicated to the Company in writing, or, to the Knowledge of Sellers, has been communicated to the Company orally) with respect to any Tax;

(f)            The Company is not a party to any Tax allocation or sharing agreement;

(g)           The Company has not now nor has it ever elected to be treated as an S corporation pursuant to Section 1362(a) of the Internal Revenue Code of 1986, as amended (the “Code”) or the laws of any state in which the Company conducts business, since its date of incorporation;

(h)           As of the Closing Date, the Company’s liability for any unpaid Taxes will not exceed the reserve for unpaid Taxes then carried on its books and records;

(i)            All Taxes required by applicable law to be withheld by the Company on or before the Closing Date have been or will be withheld and paid when due to the appropriate agency or authority;

(j)            The Company has delivered to Buyer correct and complete copies of its federal and state income and franchise Tax Returns which have been filed since their inception.  None of the Company’s Tax Returns have been audited by any taxing authority; and

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(k)           The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Financial Statement Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Financial Statement Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Financial Statement Date; (iii) installment sale or open transaction disposition made on or prior to the Financial Statement Date or (iv) prepaid amount received on or prior to the Financial Statement Date.

2.15      Compliance with Law.

(a)  The Company has not previously failed, and is not currently failing, to comply with any applicable Laws relating to its business or the operation of its assets where such failure or failures would individually or in the aggregate have an adverse effect on the financial condition, business, operations or prospects of the Company.  There are no proceedings of record and, to the Sellers’ Knowledge no proceedings are pending or threatened, nor has the Company or any of the Sellers received any written notice regarding any violation of any Law.

(b)  Neither the Company nor any of the Sellers has Knowledge of any non-compliance by the Company with any registration, safety, health, environmental, insurance, anti-competitive or discrimination Law that would have an adverse effect on the financial condition, business, assets, operations, prospects, earnings or employment practices of the Company.

(c)  The Company has all approvals, authorizations, consents, registrations, franchises, licenses, permits or certificates of a Governmental Authority (“Permits”) that are required or desirable for the lawful operation of the business of the Company as conducted from January 1, 2007 through the date hereof, other than those the failure of which to possess has not had and would not reasonably be expected to have, individually or in the aggregate, an adverse effect on the financial condition, business, operations or prospects of the Company.  All Permits are valid and in full force and effect.  The Company is in compliance in all material respects with all terms required for the continued effectiveness of each such Permit, and there is no pending or, to the Knowledge of the Sellers, threatened, revocation, involuntary non-renewal, limitation, amendment, modification, suspension or restriction of any such Permit and there is no pending or, to the Knowledge of Sellers, threatened proceeding which could reasonably be expected to lead to the revocation, non-renewal, limitation, amendment, modification, suspension or restriction of any Permit.  The Company is not operating under any formal or informal agreement or understanding with any Governmental Authority which restricts its ability to do business or requires the Company to take, or refrain from taking, any action otherwise permitted by Law.

2.16      Absence of Certain Business Practices.  None of the Sellers nor any Affiliate, acting alone or together, has (a) received, directly or indirectly, any rebates, payments, commissions, promotional allowances or any other economic benefit, regardless of its nature or type, from any customer, supplier, trading company, shipping company, governmental employee

14

or other entity or individual with whom the Company has done business directly or indirectly or (b) directly or indirectly, given or agreed to give any gift or similar benefit to any customer, supplier, trading company, shipping company, governmental employee or other person or entity who is or may be in a position to help or hinder the business of the Company (or assist the Company in connection with any actual or proposed transaction) which (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had an adverse effect on the assets, business or operations of the Company as reflected in the financial statements set forth in Section 2.7 of the Disclosure Schedule or (iii), if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company or which might subject the Company to suit or penalty in any private or governmental litigation or proceeding.

2.17      ERISA and Related Employee Benefit Matters.

(a)  Employee Benefit Plans and Agreements.  Section 2.17(a) of the Disclosure Schedule lists each employee welfare benefit plan (as such term is defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), fringe benefit, cafeteria, profit sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, welfare, or other incentive plan or agreement, or employment agreement not terminable on thirty (30) days or less written notice, and any other employee benefit plan, agreement, arrangement, or commitment not otherwise listed on the Disclosure Schedule (collectively referred to as “Company Benefit Plans”) that is or has been maintained by the Company or to which the Company contributes, is required to contribute, has contributed, or has been required to contribute, or for which the Company has any liability.  Section 2.17(a) also contains a complete list of all employees of the Company and the amount of vacation pay currently accrued to each such employee.

(b)  Compliance with Applicable Law.  Each of the Company Benefit Plans that is intended to be qualified under section 401(a) of the Code is either the recipient of a favorable determination letter from the Internal Revenue Service (“IRS”) or the adopter of a prototype plan entitled to rely on the opinion letter issued by the IRS as to the qualified status of such plan under section 401(a) of the Code to the extent provided in Revenue Procedure 2005-16; and no amendment has been made nor has any event occurred with respect to any such Company Benefit Plan which could cause the loss or denial of such qualification under section 401(a) of the Code.  The trusts maintained thereto are exempt from federal income taxation under section 501(a) of the Code, and nothing has occurred that could adversely affect such exemption.  There are no material actions, suits or claims (other than routine claims for benefits) pending or threatened against or with respect to any Company Benefit Plans or the assets of such plans, and to the Knowledge of the Sellers, no facts exist that could give rise to any material actions, suits or claims (other than routine claims for benefits) against such plans or the assets of such plans.

(c)  Administration of Plans.  Each Company Benefit Plan has at all times been administered and funded in compliance with its terms, ERISA, the Code and all

15

applicable laws.  No plan fiduciary of any Company Benefit Plan has engaged in (i) any transaction in violation of Section 406(a) or (b) of ERISA, or (ii) any “prohibited transaction” (within the meaning of Section 4975(c)(1) of the Code) that would result in a material liability to the Company and for which no exemption exists under Section 408 of ERISA or Section 4975(d) of the Code, including, but not limited to, loans to any Benefit Plan to acquire “qualifying employer securities” within the meaning of Section 4975(e)(8) of the Code.

(d)  Certain Plans.  No Company Benefit Plan is or has been (i) a “multiple employer welfare arrangement” as defined in Section 3(40) of ERISA; (ii) an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) that is subject to the provisions of Title IV of ERISA, or (iii) a multiemployer plan (within the meaning of Section 3(37) of ERISA, and there is no current or potential liability for any such plan that the Company (for purposes of this subsection “Company” shall include each trade or business (“ERISA Affiliate”), whether or not incorporated, which is a member of a group of which the Company is a member and which is under common control within the meaning of Section 414 of the Code and the regulations thereunder or Section 4001(b) of ERISA and the regulations thereunder) maintains or has maintained, or in which the Company participates or has participated, or to which the Company contributes, is required to contribute, has contributed, or has been required to contribute, or for which the Company has any liability.  Additionally, no Company Benefit Plan promises or provides retiree medical or other retiree welfare or life insurance benefits to any person, except as may be required under Code Section 4980B and ERISA Sections 601 through 608, inclusive, or similar applicable state or local Law

(e)  Copies of Plans.  Section 2.17(e) of the Disclosure Schedule includes, to the extent not otherwise included in the Disclosure Schedule, true and complete copies of: each Company Benefit Plan, related trust agreements, annuity contracts, insurance contracts, and other funding arrangements; favorable determination letters; annual reports (Form 5500 series) required to be filed with any governmental agency for each Company Benefit Plan, for the most recent three plan years, including, without limitation, all schedules thereto and all financial statements with attached opinions of independent accountants; and current summary plan descriptions.

(f)   Valid Obligations.  Except as specified in Section 2.17(f) of the Disclosure Schedule, none of the rights of the Company under any Company Benefit Plan will be impaired by the consummation of the transactions contemplated by this Agreement, and all of the rights of the Company thereunder will be enforceable by Buyer at and after the Closing without the consent or agreement of any other party other than consents and agreements specifically listed in Section 2.17(f).  The transactions contemplated by this Agreement will not result in the acceleration of the time of payment or vesting of any such benefits.  Each Company Benefit Plan can be terminated without further liability to the Company.

(g)  All required payments and contributions due with respect to any Company Benefit Plan for periods prior to Closing have been made or properly accrued.

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2.18      Intellectual Property.

(a)  Section 2.18(a) of the Disclosure Schedule contains a complete and accurate list of (i) all United States and foreign (A) registered trade names, service marks, trademarks, trade dress, domain names, logos and proprietary designations and pending applications for trade names, service marks, trademarks, trade dress, domain names, logos and proprietary designations, (B)  patents and pending patent applications, (C) registered copyrights and pending applications for copyright registration (D) domain name registrations (collectively, the “Registered Intellectual Property”); (ii) all Company software and services that are currently sold or offered for sale by the Company;  (iii) all licenses to the Company of any software (other than off the shelf software licensed solely for internal use having an aggregate value that is less than $5,000 per software program) or Intellectual Property (as defined below; and (iv) all licenses from the Company of any software or Intellectual Property.

(b)  Except for Intellectual Property licensed to the Company from a third party, including computer software and programs (including all source code and object code) (the “Third Party Intellectual Property”) pursuant to the agreements scheduled in Section 2.18(a) of the Disclosure Schedule (the “Inbound License Agreements”), the Company is the sole and exclusive owner of the entire right, title and interest in and to all (i) United States and foreign patents and applications therefor; (ii) proprietary know-how, trade secrets, inventions, discoveries, developments, research, and formulas, whether or not patentable and all other proprietary information or property relating to Seller’s current business, (iii) all copyrights, copyrights registrations and applications therefor (iv) trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor and (v) domain names and websites (“Intellectual Property”) that the Company uses to conduct the Company’s current business and any improvements, updates, enhancements or modifications related to any of the foregoing (collectively referred to as “Intellectual Property Assets”), and has good and marketable title to the Intellectual Property Assets free and clear of all royalty obligations, restrictions, and Encumbrances, except those set forth in the licenses disclosed in Section 2.18(a)(iii) of the Disclosure Schedule.  Subject to the information scheduled on Section 2.10(a) of the Disclosure Schedule, the Intellectual Property owned or used by the Company immediately prior to the Closing Date will be owned or available for use by Buyer on identical terms and conditions immediately subsequent to the Closing Date hereunder.  The Company has all rights to all Intellectual Property needed by Company to operate Company’s business as currently conducted, and such Intellectual Property constitutes all of the Intellectual Property necessary to operate the Company’s business in the ordinary course consistent with past practices.

(c)  The Company has not breached the terms of any agreement or arrangement under which the Company has obtained rights to the Third Party Intellectual Property.  Subject to the information set forth on Schedule 2.18(c) of the Disclosure Schedule, the rights to the Third Party Intellectual Property are transferable pursuant to the transactions contemplated under this Agreement, and the consummation of such transactions: (i) does not breach the terms of any agreement Company has entered into

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associated with the rights to such Third Party Intellectual Property; (ii) does not require the consent of any third party licensor of such Third Party Intellectual Property; (iii) does not change the scope of Company’s rights in or to the Third Party Intellectual Property; and (iv) does not give any third party the right to terminate any of Company’s rights in or to the Third Party Intellectual Property or any agreement associated therewith.

(d)  To the Sellers’ Knowledge, the Company does not unlawfully or wrongfully use or possess any Intellectual Property Assets and did not misappropriate the Intellectual Property Assets from another person or entity.  To the Sellers’ Knowledge, the Company’s use of the Intellectual Property Assets does not conflict with or infringe upon the rights of any third party and no such claim of infringement or violation has been threatened or asserted or is pending against the Company, its end-user customers, licensees or licensors.  To the Sellers’ Knowledge, the operation of Company’s business as previously conducted, currently conducted, and currently proposed to be conducted does not infringe or misappropriate the intellectual property rights of any third party and there are no third party patents or other intellectual property rights that present a risk of infringement for the operation of the business of Company as previously conducted, currently conducted, or currently proposed to be conducted.  Sellers represent and warrant that neither Sellers nor Company have received any threat or notice that the operation of the business of Company as previously conducted, currently conducted, or currently proposed to be conducted will infringe the intellectual property rights of any third party.    To Sellers’ Knowledge, none of the foregoing claims or demands by any third party will be, or is likely to be made and there is no fact or circumstance that could reasonably give rise to any such claim or demand.  Subject to a joint interest agreement to preserve the attorney-client privilege to be entered into where necessary, Sellers have disclosed to Buyer all information regarding: (i) any patent that Sellers or Company have reviewed to assess any infringement by the Company or any software distributed by the Company non-infringement; and (ii) any freedom to operate study, opinion, or assessment received by Company or Sellers or of which Sellers have Knowledge with regard to the operation of Company or any software distributed by Company.  To the Knowledge of Sellers, none of the software distributed by Company is the subject of any litigation, claim, demand, notification, or license request to resolve any of the foregoing and Sellers have received no notice from any third party regarding the foregoing.

(e)  Except as set forth in the licenses disclosed in Section 2.18(a)(iii) restricting use of the Third Party Intellectual Property, the Company has not entered into any agreement, license, release, or order that restrict the Company’s or Buyer’s freedom to operate the business of Company or the right of the Company or Buyer to exploit the Intellectual Property Assets in any way, including, without limitation, any covenant not to sue, agreement not to compete, or agreement not to solicit customers.

(f)   The Intellectual Property Assets are valid and enforceable and the Company and the Sellers have taken commercially reasonable steps to ensure the validity and enforceability of the Intellectual Property Assets.

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(g)  Except for rights granted to third parties pursuant to the agreements scheduled in Section 2.18(g) of the Disclosure Schedule (the “Outbound License Agreements”), the Company has not granted any third party rights in, to, or under the Intellectual Property Assets.

(h)  Neither the Company nor the Sellers (i) have represented to any customers that any Intellectual Property licensed by Company complies with any PCI Compliance Standards, or (ii) received any complaint, allegation, notice or claim that any Intellectual Property licensed by Company to any customers fails to meet any PCI Compliance Standard.

(i)   The Company and the Sellers have at all times complied with the terms of (i) the Settlement Agreement and General Release dated as of December 8, 2004 among Junction Solutions, LLC (“Junction”), the Company and the other parties named therein, and (ii) the Settlement Agreement and General Release dated April 10, 2009 among Junction, the Company and the other parties named therein (the “2009 Settlement Agreement”), including but not limited to any terms or provisions relating to the non-use by the Company or the Sellers of the “Junction Asserted Source Code” (as defined in the 2009 Settlement Agreement), and no Junction Asserted Source Code is contained within any software developed or licensed by the Company following the date of the 2009 Settlement Agreement.

2.19      Warranties.  There are no claims existing or, to the Sellers’ Knowledge threatened, under or pursuant to any express warranty issued by the Company on products or services sold or provided by the Company and the Balance Sheet reserves, if any, for anticipated claims are adequate to cover any such claims.

2.20      Employees.  The Company is in full compliance with all Laws respecting employment and employment practices, terms and conditions of employment and wages and hours. The Company currently has satisfactory relationships with its employees.  Section 2.20 of the Disclosure Schedule sets forth the name of each employee and/or officer currently, or within the preceding six (6) months, employed by the Company; the positions held; the beginning and, for any employee who has terminated employment with the Company within the preceding six (6) months, ending employment dates; and, if applicable, the reason for the cessation of employment.  All persons who have performed services for the Company or any direct or indirect subsidiary of the Company and have been classified by the Company or such subsidiary as an independent contractor have been properly classified as such in accordance with the requirements of applicable Law, and the Company and each subsidiary have fully, accurately and properly reported their compensation to the proper Governmental Authorities when required to do so.  All independent contractors providing services to the Company or any of its subsidiaries have been properly classified as independent contractors for purposes of federal and applicable state Tax laws, laws applicable to employee benefits and other Applicable Laws.  No director, officer, employee or consultant of the Company is subject to any written or unwritten agreement that specifies a particular employment or service term, or limits the Company’s right to terminate the employment or service relationship of such individual, and the Company does not have any contractual obligation to pay any such individual any severance benefits in connection with their

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termination of employment or service.  To the Knowledge of the Sellers, no employee or consultant has a present intention to terminate his or her relationship with the Company.

2.21      Insurance.  Section 2.21 of the Disclosure Schedule lists and includes copies of all certificates of coverage regarding all of the Company’s existing insurance policies, the premiums therefor and the coverage of each policy.  Such policies and the amount of coverage and the risks insured are, in the aggregate, sufficient to protect and insure members of the Company against perils which good business practice demands be insured against or which are normally insured against by other industry members similarly situated, and will remain in full force and effect after the Closing.

2.22      Liability for Products or Services.  There exist no claims against the Company, and to the Sellers’ Knowledge there is no event or occurrence likely to result in the assertion of any claim, for injury to person or property of its employees or any third parties suffered as a result of the provision of any product or the performance of any service by the Company, including, but not limited to, claims arising out of the defective or unsafe nature of its products or services.

2.23      Environmental.  The operations and activities of the Company comply, and have in the past complied, in all respects, with all applicable Laws relating to protection of the environment.  Neither the Company nor any Seller has received any notices from any Governmental Authority alleging that the Company is currently in noncompliance with or violation of any applicable Laws relating to protection of the environment.

2.24      Dealings with Affiliates.  Section 2.24 of the Disclosure Schedule sets forth a complete list (including the parties) and copies of all written or oral contracts or other agreements entered into between the Company and any Affiliate of the Company that will be effective on the Closing Date.

2.25      Bank Accounts.  Section 2.25 of the Disclosure Schedule is a list of all bank accounts, lock boxes, post office boxes and safe deposit boxes maintained in the name of or controlled by the Company and the names of the persons having access thereto.

2.26      Customers.  No customer of the Company that has made purchases representing, individually or in the aggregate, more than $50,000 in payments or commitments to the Company within the last twelve (12) months has (a) ceased, or indicated any intention to cease, doing business with the Company, or (b) changed or indicated any intention to change any terms or conditions for future purchase of products or services from the terms or conditions that existed with respect to the purchase of such products or services during the twelve (12) month period ending on the date hereof.

2.27      Disclosure.  No representation or warranty made by any of the Sellers in this Agreement, contains any untrue statement of fact or omits to state a fact necessary in order to make the statements herein not misleading in light of the circumstances in which they are made.

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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to the Sellers, as follows:

3.1     Organization, etc.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois.

3.2     Authorization, etc.  Buyer has authority to enter into this Agreement and to carry out the transactions contemplated hereby.  The Board of Directors of Buyer has duly authorized the execution and delivery of this Agreement and the transactions contemplated hereby, and no other proceedings on its part are necessary to authorize this Agreement and the transactions contemplated hereby.

3.3     No Violation.  Buyer is not subject to or obligated under any certificate of incorporation, bylaw, Law, or any agreement or instrument, or any Permit, which would be breached or violated by its execution, delivery or performance of this Agreement.  Buyer will comply with all Laws in connection with its execution, delivery and performance of this Agreement and the transactions contemplated hereby.

3.4     Governmental Authorities.  Buyer is not required to submit any notice, report or other filing with and no consent, approval or authorization is required by any governmental or regulatory authority in connection with Buyer’ execution or delivery of this Agreement or the consummation of the transactions contemplated hereby.

3.5     Access.  Buyer has been given access to the assets, books, records, contracts and employees of the Company, and has been given the opportunity to meet with the Sellers, officers and other representatives of the Company for the purpose of investigating and obtaining information regarding the Company’s business, operations and legal affairs.

3.6     Acquisition of Shares.  Buyer is acquiring the Shares for its own account and for investment, and not with a view to, or for sale in connection with, any distribution of any of the Shares.

ARTICLE IV.
[Intentionally left blank.]

ARTICLE V.
COVENANTS OF BUYER

Buyer hereby covenants and agrees with the Company that:

5.1     Books and Records.  Buyer shall preserve and keep the Company’s books and records delivered hereunder for a period of three (3) years from the date hereof and shall, during such period, make such books and records available to former officers and directors of the Company for any reasonable purpose.

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ARTICLE VI.
OTHER AGREEMENTS

Buyer, the Company and the Sellers covenant and agree that:

6.1     Agreement to Defend.  In the event any action, suit, proceeding or investigation of the nature specified in Section 6.4, Section 7.2 or Section 8.2 hereof is commenced, whether before or after the Closing Date, all the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto.

6.2     Consultants, Brokers and Finders.  The Sellers and Buyer each represent and warrant that they have not retained any consultant, broker or finder in connection with the transactions contemplated by this Agreement.  The Sellers and Buyer each hereby agree to indemnify, defend and hold the other party and its officers, directors, managers, members, employees and Affiliates, harmless from and against any and all claims, liabilities or expenses for any brokerage fees, commissions or finders fees due to any consultant, broker or finder retained by the indemnifying party.

6.3     Intentionally Omitted.

6.4     Taxes.

(a)  The Sellers shall be jointly and severally liable and indemnify Buyer, the Company and any affiliates of Buyer and the Company, from and against any loss, claim, liability, expense, or other damage attributable to (A) Taxes of the Company to the extent such Taxes are not adequately provided for as current Taxes (rather than any reserve for deferred Taxes established to reflect timing differences between tax and book) on the Balance Sheet (i) for taxable periods ending on or before the Financial Statement Date and (ii) for any period that includes but does not end on or before the Financial Statement Date (a “Straddle Period”), the portion of any Taxes attributable to the period ending on the Financial Statement Date; (B) all Taxes of any Person, other than the Company, that the Company is liable for as a result of joint and several liability (including under Treasury Regulation section 1.1502-6), transferee liability, successor liability, or a contractual obligation, in each case, (i) for taxable periods ending on or before the Financial Statement Date and (ii) for the portion of any Taxes attributable to the portion of a Straddle Period ending on the Financial Statement Date; (C) all Taxes resulting from a breach of a representation or warranty contained in Section 2.14 or a covenant contained in this Section 6.4; (D) all Taxes due and payable after the Financial Statement Date for any remaining installments of Tax arising from the Company’s change in accounting method filed in 2007 which exceed the deferred Tax account for such Tax on the Balance Sheet; and (E) an amount equal to forty percent (40%) of deferred revenue arising from Customer Retainers or other support or maintenance services that is required to be recognized as income for federal income tax purposes after the Financial Statement Date, but only to the extent that (i) such recognized income is attributable to payments received prior to or on the Financial Statement Date and (ii) such recognized income exceeds the deferred revenue on the Balance Sheet. Notwithstanding anything to the contrary in this Agreement, Sellers

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shall have no liability for, and shall not be required to make any payment of any Tax under this Agreement or otherwise, with respect to any Tax that is an Accrued.

(b)  For purposes of determining the Taxes that relate to periods ending on or before the Financial Statement Date (or the portions of any Straddle Period ending on the Financial Statement Date) for purposes of determining the Sellers’ requirement to indemnify for Taxes under Section 6.4(a), Taxes in the form of interest, penalties, additions to tax or other additional amounts that relate to Taxes for any period ending on the Financial Statement Date (or portion of any Straddle Period ending on the Financial Statement Date) shall be treated as occurring in a period ending on the Financial Statement Date (or the portion of the Straddle Period ending on the Financial Statement Date) whether such items are incurred, accrued, assessed or similarly charged on, before or after the Financial Statement Date.  Interest, penalties, additions to tax or other additional amounts shall be allocated to the portion of any Straddle Period ending on the Financial Statement Date in the same manner as the underlying Tax to which such interest, penalties, additions to tax or other additional amounts relates as provided for in Section 6.4(c).

(c)  For purposes of determining the Taxes that relate to any Straddle Period, the portion of any such Tax that is attributable to the portion of the Straddle Period ending on the Financial Statement Date shall be (A) in the case of income Taxes, or any other Taxes resulting from, or imposed on, sales, receipts, uses, transfers or assignments of property or other assets, payments or accruals to other persons (including, without limitation, wages), or any other similar transaction or transactions, the amount that would be payable for the portion of the Straddle Period ending on the Financial Statement Date if the Company filed a separate Tax Return with respect to such Taxes solely for the portion of the Straddle Period ending on the Financial Statement Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company holds a beneficial interest shall be deemed to terminate at such time); and (B) in the case of ad valorem and property taxes and all other Taxes not described in (A), above, an amount equal to the amount of Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of calendar days in the portion of the period ending on the Financial Statement Date and the denominator of which is the number of calendar days in the entire Straddle Period.  For purposes of clause (A), any item determined on an annual or periodic basis (including amortization and depreciation deductions and the effects of graduated rates) shall be allocated to the portion of the Straddle Period ending on the Financial Statement Date based on the relative number of days in such portion of the Straddle Period as compared to the number of days in the entire Straddle Period.

(d)  The Sellers shall cause the Company to prepare and file all Tax Returns of the Company due on or prior to the Closing Date, which Tax Returns shall be prepared and filed timely and on a basis consistent with existing procedures for preparing such Tax Returns and in a manner consistent with prior practice with respect to the treatment of specific items on the Tax Returns.

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(e)  Buyer shall cause the Company to prepare and file all Tax Returns of the Company due after the Closing Date, which Tax Returns, to the extent they relate to taxable periods beginning prior to, but including the Closing Date, and for the purpose of determining the Sellers’ liability for Taxes, if any, shall be prepared and filed timely and on a basis consistent with existing procedures for preparing such Tax Returns and in a manner consistent with prior practice with respect to the treatment of specific items on the Tax Returns, unless such treatment does not have sufficient legal support to avoid the imposition of penalties.  In the event that any Seller could reasonably be expected to be liable for any Taxes shown on such Tax Returns under this Agreement or otherwise, Buyer shall provide Sellers with such Tax Returns twenty (20) days before the filing thereof, Sellers shall have ten (10) days to comment thereon, and Buyer shall take into account any reasonable comments made by the Sellers thereon. In the event the Sellers are liable under Section 6.4(a) hereof for Taxes due in connection with the Tax Returns described in this Section 6.4(e), the Sellers shall pay the amount of such liability to the Company immediately upon request or at least three (3) business days prior to the filing of such Tax Returns, whichever is later

(f)   Buyer, the Company and the Sellers shall provide each other with such assistance as may reasonably be requested by the others in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liabilities for Taxes.  Such assistance shall include making employees available on a mutually convenient basis to provide additional information or explanation of material provided hereunder and shall include providing copies of relevant Tax Returns and supporting material.  The party requesting assistance hereunder shall reimburse the assisting party for reasonable out-of-pocket expenses incurred in providing assistance.  Buyer, the Company and the Sellers will retain for the full period of any statute of limitations and provide the others with any records or information which may be relevant to such preparation, audit, examination, proceeding or determination.

(g)  If any Governmental Authority issues to the Company a written notice of deficiency, a notice of reassessment, a proposed adjustment, an assertion of claim or demand with respect to Taxes or Tax Returns of the Company for periods ending on or prior to the Closing Date (including any portion of any Straddle Period ending on the Closing Date), Buyer or the Company shall notify the Sellers of its receipt of such communication from the Governmental Authority within ten (10) business days after receiving such notice of deficiency, reassessment, adjustment or assertion of claim or demand.  No failure or delay of Buyer or the Company in the performance of the foregoing shall reduce or otherwise affect the obligations or liabilities of the Sellers pursuant to this Agreement, except to the extent that such failure or delay shall effectively preclude the Sellers’ ability to defend against any liability or claim for Taxes that the Sellers are obligated to pay hereunder.  Except as provided below, the Sellers shall, at their expense, have the nonexclusive right to participate in any examination, investigation, audit or other proceeding in respect of any Tax Return or Taxes of the Company (a “Tax Contest”) where such Tax Contest relates to taxable periods or partial taxable periods of the Company ending on or before the Closing Date or could reasonably be expected to give rise to a liability of any Seller for Taxes

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under this Agreement or otherwise.  Buyer and the Company will not be obligated to settle or resolve any Tax Contest related to any Tax Return or Taxes for such a period, which, if so settled or resolved, could have an adverse effect on the Company or Buyer for periods after the Closing Date, unless the Sellers agree in writing with Buyer and the Company, in terms reasonably satisfactory to Buyer and the Company, to indemnify Buyer and the Company from any cost, damage, loss or expense arising from such settlement or resolution.

(h)  If there is an adjustment to any Tax Return for the Company which creates a deficiency in any Taxes for which the Sellers are liable under the provisions of Section 6.4(a) hereof, Sellers shall pay to Buyer the amount of such deficiency in Taxes.  No liability of the Sellers under this Section 6.4(h) shall be payable until the occurrence of any action by any Tax authority that is final or, if not final, is acquiesced in by the Sellers during the course of any audit or any proceeding relating to any Tax Return or Taxes.  All payments required to be made by the Sellers pursuant to this Section 6.4(h) shall be made within ten (10) days of the occurrence of the event described in the immediately preceding sentence.

(i)   All federal, state, local, foreign and other transfer, sales, use or similar Taxes applicable to, imposed upon or arising out of the transfer of the Shares shall (or any other transaction contemplated by this Agreement) be paid by the Sellers.

(j)   The provisions of this Section 6.4 shall not be governed by any limitations contained in Article XI and to the extent of any inconsistency between this Section 6.4 and Article XI, the provisions of this Section 6.4 shall control.

(k)  The Sellers shall provide Buyer with any information that Buyer requests to allow Buyer to comply with Code Section 6043A or any other information reporting requirements under the Code or other applicable law.

6.5     Microsoft Contracts.  The Sellers will use their best commercial efforts to facilitate communications with Microsoft as necessary or advisable to ensure the smooth transition of all such Microsoft Contracts to the Company following the Closing, and to assist Company and Buyer in renewing and extending the terms of the Microsoft Contracts and to enter into any new contracts desired to be entered into to replace the Microsoft Contracts.

6.6     Restrictive Covenants.

(a)     Reasonableness of Restrictions.  Each of the Sellers hereby acknowledges that Buyer has paid valuable consideration for the Shares and assets of the Company, and that the use by Sellers of such assets and proprietary information of the Company in a business or activity that competes with the Company or the Buyer in violation of the covenants set forth in this Section 6.6 would provide an unfair advantage over the Company and/or the Buyer.  Each of the Sellers agrees to comply with the terms of this Section 6.6 and each of the Sellers hereby acknowledges that all such restrictive covenants contained herein are reasonable and necessary to protect the business interests of the Buyer.

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(b)   Non-Compete.  Each of the Sellers agrees, for a period commencing on the Closing Date and ending on three-year anniversary of the Closing Date (the “Restricted Period”), he or she will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by him or her to compete directly with the Company, anywhere in the world, in any line of business engaged in by the Company during the Restricted Period; provided, however, that any Seller may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended.

(c)  Non-Solicitation.  Each of the Sellers agrees that, during the Restricted Period, such Seller shall not, without first obtaining the prior written approval of the Company, directly or indirectly (a) induce or attempt to induce any employee, independent contractor or consultant of the Company or any of its affiliates, or anyone who was employed by or provided services to the Company or any of its affiliates within the immediately preceding twenty-four (24) months, to terminate or negatively alter his or her relationship with the Company or such affiliate, (b) hire or attempt to hire any employee of the Company or any of its affiliates, or any former employee who was employed by the Company or any of its affiliates during the immediately preceding twenty-four (24) months, (c) solicit or attempt to solicit the business of any client or customer of the Company or any of its affiliates (other than on behalf of the Company or such affiliate), or any client or customer who purchased products or services of or from the Company within the immediately preceding twenty-four (24) months, in any manner that is competitive with the Company or such affiliate, or (d) induce or attempt to induce any supplier, content provider, vendor, or consultant of the Company or any of its affiliates, or anyone who acted as a supplier, content provider, vendor, consultant or independent contractor of the Company or such affiliate within the immediately preceding twenty-four (24) months,  to terminate or negatively alter his, her or its relationship with the Company.

(d)  Proprietary Information.  Each of the Sellers hereby agrees to hold in strictest confidence, and not to disclose, use, lecture upon or publish any Proprietary Information of the Buyer or the Company, or any confidential or proprietary information received by the Company and subject to a duty of confidentiality on the Company’s part, except as such disclosure, use or publication may be required in connection with such Seller’s employment by the Company.  As used herein, “Proprietary Information” means any an all proprietary knowledge, data or information of the Buyer or the Company, including but not limited to (i) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; and (ii) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (iii) information regarding the skills and compensation of other

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employees of the Company.  Notwithstanding the foregoing, “Proprietary Information” shall not include any information which is generally known in the trade or industry, or which is not gained as result of a breach of this Agreement.

(e)  Remedies.  Each of the Sellers agrees that upon the breach or threatened breach of any of the covenants and agreements contained in this Section 6.6, Buyer shall have the right to seek and obtain, without posting any bond or security, all appropriate injunctive and other equitable remedies therefor, in addition to any other rights and remedies that may be available at law, it being acknowledged and agreed that any such breach would cause irreparable injury to Buyer and that money damages would not provide an adequate remedy therefor.

6.7     Further Assurances.  Each party hereto shall execute and cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (prior to, at or after the Closing) for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.

6.8     Intentionally Omitted.

6.9     Purchase Price Adjustment. Amounts paid to or on behalf of the Sellers or Buyer as Earn-Out Amounts pursuant to Section 1.4 above or as indemnification pursuant to Section 6.4 or Article XI below shall be treated as adjustments to the Purchase Price.

ARTICLE VII.
CONDITIONS TO THE OBLIGATIONS OF BUYER

Each and every obligation of Buyer under this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions unless waived in writing by Buyer:

7.1     Representations and Warranties; Performance.  The representations and warranties made by the Sellers herein shall be true and correct on the Closing Date with the same effect as though made on such date; the Sellers shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by them prior to the Closing Date; Sellers shall have, and shall have caused the President and Chief Financial Officer of the Company to have delivered to Buyer a certificate, dated the Closing Date, certifying to such matters and the other conditions contained in this Article VII.

7.2     Consents and Approvals.  All consents from and filings with the third parties, regulators and governmental agencies identified on Schedule 7.2 and required to consummate the transactions contemplated hereby shall have been obtained and delivered to Buyer in a form acceptable to Buyer.

7.3     Assignment of Contracts.  Seller shall have obtained and delivered to Buyer valid written consents to the assignment or other transfer of (a) any Contracts identified on Sections 2.10(a) or 2.18(c) of the Disclosure Schedule requiring such consent, and (b) the Microsoft Contracts (assuming that the transactions contemplated by this Agreement may be characterized by Microsoft as a transfer or assignment of the Microsoft Contracts requiring such consent).

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7.4     No Adverse Change.  There shall have been no adverse change since the Financial Statement Date in the business, prospects, financial condition, earnings or operations of the Company’s business.

7.5     No Proceeding or Litigation.  No action, suit or proceeding before any court or any governmental or regulatory authority shall have been commenced or threatened, and no investigation by any governmental or regulatory authority shall have been commenced or threatened against any of the Sellers, the Company, Buyer or any of their respective principals, officers, directors or managers seeking to restrain, prevent or change the transactions contemplated hereby or questioning the validity or legality of any of such transactions or seeking damages in connection with any of such transactions.

7.6     Review.  A full due diligence review of the Company’s business shall be completed by Buyer, its legal counsel, its outside consultants, or others appointed by Buyer.  Buyer shall be satisfied in its sole and absolute discretion with the results of Buyer’ due diligence review of the Company and its business operations, prospects and assets.  Buyer shall bear the costs of this review.

7.7     Other Documents.  Sellers will furnish or cause the Company to furnish Buyer with such other and further documents and certificates of its officers and others as Buyer shall reasonably request to evidence compliance with the conditions set forth in this Agreement.

7.8     Intentionally Omitted.

7.9     Intentionally Omitted.

7.10   Retention of Key Personnel.  None of the key management personnel of the Company identified on Schedule 7.10 shall have terminated his or her respective position with the Company.

ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS

Each and every obligation of the Sellers under this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions unless waived in writing by all of the Sellers:

8.1     Representations and Warranties; Performance.  The representations and warranties made by Buyer herein shall be true and correct on the Closing Date with the same effect as though made on such date; Buyer shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing Date; Buyer shall have delivered to the Sellers a certificate of an appropriate officer of Buyer, dated the Closing Date, certifying to the fulfillment of the conditions set forth herein and the other conditions contained in this Article VIII.

8.2     No Proceeding or Litigation.  No action, suit or proceeding before any court or any governmental or regulatory authority shall have been commenced, or threatened, and no investigation by any governmental or regulatory authority shall have been commenced, or

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threatened, against the Company, Buyer, any of the Sellers, or any of their respective principals, officers, directors or managers, seeking to restrain, prevent or change the transactions contemplated hereby or questioning the validity or legality of any of such transactions or seeking damages in connection with any of such transactions.

8.3     Payment.  The payment of the Purchase Price described in Section 1.2 shall have been made.

8.4     Other Documents.  Buyer will furnish the Sellers with such other documents and certificates to evidence compliance with the conditions set forth in this Article as may be reasonably requested by the Sellers.

ARTICLE IX.
CLOSING

9.1     Closing.  Unless this Agreement shall have been terminated or abandoned, a closing (the “Closing”) shall be held on the date hereof, or on such other date (the “Closing Date”) mutually agreed upon at such place or places as Buyer shall designate.

9.2     Deliveries at Closing.

(a)  At the Closing, Sellers shall transfer and assign to Buyer all of the Shares by delivering certificates representing each of the Shares, duly endorsed for transfer to Buyer with signatures guaranteed and the other agreements, certifications and other documents required to be executed and delivered hereunder at the Closing shall be duly and validly executed and delivered.

(b)  At the Closing, Buyer shall transfer to Sellers the Base Purchase Price, as described in Section 1.2.  Additionally, the other agreements, certifications and other documents required to be executed and delivered by Buyer hereunder shall be duly and validly executed and delivered.

(c)  From time to time after the Closing, at Buyer’ request and without further consideration from Buyer, the Sellers shall execute and deliver such other instruments of conveyance and transfer and take such other action as Buyer reasonably may require to convey, transfer to and vest in Buyer and to put Buyer in possession of the Shares to be sold, conveyed, transferred and delivered hereunder.

9.3     Legal Actions.  If, prior to the Closing Date, any action or proceeding shall have been instituted by any third party before any court or governmental agency to restrain or prohibit this Agreement or the consummation of the transactions contemplated herein, the Closing shall be adjourned at the option of any party hereto for a period of up to one hundred twenty (120) days.  If, at the end of such one hundred twenty (120) day period, the action or proceeding shall not have been favorably resolved, any party hereto may, by written notice thereof to the other party or parties, terminate its obligation hereunder.

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ARTICLE X.
[Intentionally left blank.]

[Termination provisions to be added if transaction will not

sign and close simultaneously)

ARTICLE XI.
INDEMNIFICATION

11.1      Indemnification by the Sellers.  The Sellers, jointly and severally, agree to indemnify to the extent set forth herein Buyer and each of its affiliates (including, after the Closing, the Company) and their respective officers, shareholders, directors or employees against any loss, damage, or expense (including, but not limited, to reasonable attorneys’ fees) (“Damages”), incurred or sustained by the Company, Buyer or any of their respective officers, shareholders, directors or employees as a result of (i) any breach of any term, provision, covenant or agreement contained in this Agreement by the Sellers; (ii) any breach of any of the representations or warranties made by the Sellers in Article II of this Agreement; or (iii) any breach of any representation or warranty in any certificate or other document or instrument delivered by the Sellers or the Company in accordance with any provision of this Agreement.

11.2      Indemnification by Buyer.  Buyer agrees to indemnify the Sellers against any Damages incurred or sustained by the Sellers as a result of (i) any breach of any term, provision, covenant or agreement contained in this Agreement by Buyer; (ii) any breach of any of the representations or warranties made by Buyer in Article III of this Agreement; or (iii) any breach of any representation or warranty in any certificate or other document or instrument delivered by Buyer in accordance with any provision of this Agreement.

11.3      Limitations.

(a)  No claim for Damages pursuant to Section 11.1 or Section 11.2 above shall be made until the cumulative amount of such Damages equal or exceed an amount equal to $150,000 (the “Basket”), at which time a claim for Damages can be made for any and all amounts of Damages (and not just the amount in excess of the Basket); ); provided, however, that such Basket shall not apply to any Damages resulting from breaches of any Fundamental Representation (defined below) or any covenant set forth herein.

(b)  Sellers’ indemnification obligations shall be effective only until the dollar amount paid in respect of Damages under Section 11.1 above is equal to (i) during the period (the “Initial Period”) beginning on the Closing Date and continuing until the date that is one (1) month following delivery to the Buyer of audited financial statements of the Company for the fiscal year ended December 31, 2010, which financial statements shall be delivered not later than April 30, 2011, an amount (the “Cap Amount”) equal to fifty percent (50%) of all amounts paid by Buyer in respect of Purchase Price during the Initial Period, and (ii) for a period of twelve (12) months following expiration of the Initial Period (the “Subsequent Period”), an amount equal to twenty-five percent (25%) of all amounts paid by Buyer in respect of Purchase Price during the Initial

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Period and the Subsequent Period; provided, however, that the Cap Amount payable by Sellers for Damages arising from a breach of (A) any of the representations and warranties set forth in Sections 2.1 (Corporate Organization), 2.2 (Capital Stock), 2.4 (Authorization), 2.11 (Title and Related Matters), or 2.14 (Tax Matters) or the covenants set forth in Section 6.4 (Taxes) (each, a “Fundamental Representations”); or (B) fraudulent actions or intentional misrepresentations with respect to this Agreement shall be equal to all amounts paid by Buyer in respect of Purchase Price.  The Initial Period and the Subsequent Period shall hereinafter be together referred to as the “Indemnity Period.”  No claims for Damages may be made by the Buyer after the expiration of the Indemnity Period, provided, however, that claims for Damages in respect of a breach of a Fundamental Representation may be brought at any time prior to thirty (30) days following the expiration of the applicable statute of limitations.  For purposes of calculating the Cap Amount under this Section 11.3(b), amounts paid by Buyer shall include any amounts in respect of the Earn-Out Amounts described in Section 1.4 paid during the Initial Period, Subsequent Period, and/or the applicable statute of limitations, as applicable.

(c)  Any claim for Damages under Section 6.4 or this Article XI shall first be satisfied by, but shall not be limited to, reducing the amount of any unpaid Company Revenue Earn-Out Amount owed to Sellers.

(d)  The indemnification provisions of this Article XI set forth the sole and exclusive remedy for all claims under this Agreement other than any claim in respect of fraudulent actions or intentional misrepresentations with respect to this Agreement.

11.4      Procedure Claims for Damages.  If a party hereto (the “Claimant”) wishes to assert an indemnification claim against another party hereto, the Claimant shall deliver, prior to the expiration of the Indemnity Period, to such other party a written notice stating (a) the specific representation and warranty alleged to have been breached by such other party, (b) a detailed description of the facts and circumstances giving rise to the alleged breach of such representation and warranty and (c) a detailed description of, and a reasonable estimate of the total amount of, the Damages actually incurred or expected to be incurred by the Claimant as a direct result of such alleged breach (a “Claim Notice”).  The indemnifying party will have 30 days from receipt of such Claim Notice to dispute the claim and will reasonably cooperate and assist the Claimant in determining the validity of the claim for indemnity.  If the indemnifying party does not give notice to the Claimant that they dispute such claim within 30 days after receipt of the Notice of Claim, the claim specified in such Claim Notice will be conclusively deemed Damages subject to indemnification hereunder.  In the event that the indemnifying party does give notice to the Claimant that the indemnifying party disputes such claim within 30 days after receipt of the Claim Notice, the parties shall, in good faith, attempt to resolve such dispute pursuant to the provisions of Section 12.8 hereof.

11.5      Tender of Defense of Third Party Claims for Damages.  Promptly upon receipt by either party (the “Indemnitee”) of a notice of a claim by a third party which may give rise to a claim for Damages against the other party (the “Indemnitor”), the Indemnitee shall give written notice thereof to the Indemnitor.  No failure or delay of the Indemnitee in the performance of the foregoing shall relieve, reduce or otherwise affect the Indemnitor’s obligations and liability to

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indemnify the Indemnitee pursuant to this Agreement, except to the extent that such failure or delay shall have adversely affected the Indemnitor’s ability to defend against such claim for Damages.  If the Indemnitor gives to the Indemnitee an agreement in writing, in a form reasonably satisfactory to Indemnitee’s counsel, to defend a claim for Damages, the Indemnitor may, at its sole expense, undertake the defense against such claim and may contest or settle such claim on such terms, at such time and in such manner as the Indemnitor, in its sole discretion, shall elect and the Indemnitee shall execute such documents and take such steps as may be reasonably necessary in the opinion of counsel for the Indemnitor to enable the Indemnitor to conduct the defense of such claim for Damages.  If the Indemnitor fails or refuses to defend any claim for Damages, the Indemnitor may nevertheless, at its own expense, participate in the defense of such claim for Damages and in any and all settlement negotiations relating thereto.  In any and all events, the Indemnitor shall have such access to the records and files of the Indemnitee relating to any claim for Damages as may be reasonably necessary to effectively defend or participate in the defense thereof.

ARTICLE XII.
MISCELLANEOUS PROVISIONS

12.1      Amendment and Modification.  Subject to applicable law, this Agreement may be amended, modified and supplemented only by written agreement of the Sellers and Buyer.

12.2      Waiver of Compliance; Consents.  Any failure of the Sellers on the one hand, or Buyer on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived in writing by Buyer or the Sellers, respectively, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.  Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 12.2.

12.3      Expenses. Buyer will pay its own legal, accounting and other expenses incurred by it or on its behalf in connection with this Agreement and the transactions contemplated herein.  The Company shall pay or the Buyer will cause the Company to pay all legal, accounting and other expenses incurred by or on behalf of the Company or Sellers in connection with this Agreement and the transactions contemplated herein (collectively, the “Seller Transaction Expenses”); provided, however, that Sellers shall pay any Seller Transaction Expenses to the extent such Seller Transaction Expenses, when added to Seller Transaction Expenses paid by the Company prior to the Closing, exceed $75,000.

12.4      Investigations; Survival of Warranties.  The respective representations and warranties of the Sellers and Buyer contained herein or in any certificates or other documents delivered prior to or at the Closing are true, accurate and correct and shall not be deemed waived or otherwise affected by any investigation made by any party hereto or by the occurrence of the Closing.  Each and every such representation and warranty shall survive for the Indemnity Period; provided, however, all representations and warranties that constitute Fundamental Representations shall survive until the date that is thirty (30) days following the expiration of the

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applicable statute of limitations; and all claims for Damages based on intentional misrepresentations or fraudulent actions shall never expire.

12.5      Notices.  Any notice, request, consent or communication (collectively, a “Notice”) under this Agreement shall be effective only if it is in writing and (i) personally delivered, (ii) sent by certified or registered mail, return receipt requested, postage prepaid, (iii) sent by a nationally recognized overnight delivery service, with delivery confirmed, or (iv) telecopied, with receipt confirmed, addressed as follows:

(a)           If to the Sellers, to:

Steve and Laura Guillaume

9800 Mount Pyramid Court, Suite 150

Englewood, Colorado 80221-5999

Facsimile:

with a copy to:

Jonathan Taylor

Kendall, Koenig & Oelsner PC
999 Eighteenth Street, Suite 1825
Denver, Colorado 80202
Facsimile: (303) 672-0101

(b)           If to Buyer, to:

Eric Blanchard

United Stationers Supply Co.

One Parkway North, Suite 100

Deerfield, Illinois 60015

Facsimile:  (847) 627-7087

with a copy to:

Mitchell E. Albert

Sonnenschein Nath & Rosenthal LLP

4520 Main Street, Suite 1100

Kansas City, Missouri 64111

Facsimile:  (816) 531-7545

or such other persons or addresses as shall be furnished in writing by any party to the other party.  A Notice shall be deemed to have been given as of the date when (i) personally delivered, (ii) five (5) days after the date when deposited with the United States mail properly addressed, (iii) when receipt of a Notice sent by an overnight delivery service is confirmed by such overnight delivery service, or (iv) when receipt of the telecopy is confirmed, as the case may be, unless the sending party has actual knowledge that a Notice was not received by the intended recipient.

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12.6      Assignment.  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the Sellers without the prior written consent of Buyer.

12.7      Governing Law.  This Agreement shall be governed by the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of law of the State of Delaware) as to all matters including, but not limited to, matters of validity, construction, effect, performance and remedies.

12.8  Dispute Resolution.  Subject to Section 1.5 above, any controversy or claim arising out of or relating to this Agreement (other than for injunctive relief), or the negotiation or breach thereof, shall be settled using the following procedure prior to either party pursuing other available remedies:

(a)  Negotiation.  A meeting shall be held promptly (in no event more than fourteen (14) days after either Buyer or Sellers has notified the other in writing that it considers that a dispute has arisen) between the parties, attended by individuals with decision-making authority regarding the dispute, to attempt in good faith to negotiate a resolution of the dispute (the “Negotiation”).

(b)  Mediation.  If, within fifteen (15) days after such meeting, the parties have not succeeded in negotiating a resolution of the dispute, they will jointly appoint a mutually acceptable neutral person not affiliated with either of the parties (the “Neutral”), seeking assistance in such regard from the American Arbitration Association if they have been unable to agree upon such appointment within thirty (30) days from the initial meeting under Section 12.8(a).  The fees of the Neutral shall be shared equally by the parties, one half by Buyer and one half by Seller.  In consultation with the Neutral, the parties will select or devise a mediation procedure (“Mediation”) by which they will attempt to resolve the dispute, and a time and place for the Mediation to be held, with the neutral making the decision as to the procedure, and/or place and time (but not later than twenty (20) days after selection of the Neutral), if the parties have been unable to agree on any such matters within fifteen (15) days after initial consultation with the Neutral.  The parties agree to participate in good faith in the Mediation to its conclusion as designated by the Neutral, but in no event shall this obligation extend for more than sixty (60) days after selection of the Neutral, after which the parties shall be entitled to seek all remedies available to them hereunder, at law, in equity or otherwise.

(c)  Arbitration.  If the parties are not successful in resolving the dispute through the Negotiation or the Mediation within 90 days after the initial notice pursuant to Section 12.8(a), any controversy or claim arising out of or relating to this Agreement (other than for injunctive relief), or the negotiation or breach thereof, shall be subject to arbitration in accordance with the Arbitration Rules of the American Arbitration Association, including, but not limited to, the Optional Rules for the Emergency Measures of Protection, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  The prevailing party in any such

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arbitration shall be entitled to collect from the non-prevailing party its reasonable attorneys’ fees and costs.  The provisions of this Section 12.8 shall not be deemed to preclude any party hereto from seeking preliminary injunctive or other equitable relief to protect or enforce its rights hereunder, or to prohibit any court from making preliminary findings of fact in connection with granting or denying such preliminary injunctive relief pending arbitration, or to preclude any party hereto from seeking permanent injunctive or other equitable relief after and in accordance with the decision of the arbitrators.  The arbitration shall take place in a location mutually agreed to by the parties hereto.

12.9      Counterparts.  This Agreement may be executed in two or more counterparts and each counterpart with a hand-written signature, whether an original or an electronic date text (including facsimile, electronic data interchange and electronic mail) is considered an original and all counterparts constitute one and the same instrument.

12.10    Neutral Interpretation.  This Agreement constitutes the product of the negotiation of the parties hereto and the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the source of the draftsmanship hereof.

12.11    Headings.  The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

12.12    Public Announcement.  Without in any way limiting the confidentiality obligations of the parties contained herein, unless required by law or the rules of any stock exchange on which any party hereto is listed or unless otherwise agreed to by Buyer, none of Sellers nor the Company nor any of their respective affiliates, employees or agents will make any press release or other public disclosure of this Agreement or its contents or the existence or status of any expressions of interest or discussions between the parties with respect to the transactions contemplated hereby.  The parties agree that neither party will disclose the terms of this Agreement other than to their advisors, employees and representatives in connection with the negotiation of this Agreement or in compliance with the terms, conditions and covenants hereof and only to disclose such information as is necessary to effect the transactions contemplated hereby.

12.13    Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, including without limitation the restrictions contained in Sections 6.6 above, this determination will not affect the enforceability of any other provision or restriction contained in this Agreement, and the provision or restriction in question will be modified so as to be rendered enforceable to the maximum extent as a court of competent jurisdiction may determine or indicate to be enforceable and in a manner consistent with the intent of the parties insofar as possible.

12.14    Entire Agreement.  This Agreement, which term as used throughout includes the Exhibits hereto, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, representations,

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warranties, covenants or undertakings other than those expressly set forth or referred to herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first hereinabove set forth.

BUYER:

UNITED STATIONERS SUPPLY CO.

By:

Richard W. Gochnauer

President and Chief Executive Officer

SELLERS:

Steve Guillaume

Laura Guillaume

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EX-10.1

Exhibit 10.1

UNITED STATIONERS INC.

2004 LONG-TERM INCENTIVE PLAN

Performance Based Restricted Stock Unit Award Agreement

This Restricted Stock Unit Award Agreement (this “Agreement”), dated March 1, 2010, (the “Award Date”), is by and between <First Name, Last Name> (the “Participant”), and United Stationers Inc., a Delaware corporation (the “Company”).  Any term capitalized but not defined in this Agreement will have the meaning set forth in the Company’s 2004 Long-Term Incentive Plan (the “Plan”).

In the exercise of its discretion to grant awards under the Plan, the Committee has determined that the Participant should receive an award of restricted stock units (“Units”) under the Plan, on the following terms and conditions:

1.Grant.  The Company hereby grants to the Participant a Restricted Stock Unit Award (the “Award”) consisting of *[target number] Units (the “Target Number of Units”), subject to possible increase to as many as *[number 50% greater than target number] Units (the “Maximum Number of Units”) depending on the degree to which the Company has satisfied the performance-based objectives specified in Appendix A to this Agreement.  Each Unit that vests represents the right to receive one share of the Company’s common stock as provided in Section 5 of this Agreement.  The Award will be subject to the terms and conditions of the Plan and this Agreement.

2.No Rights as a Stockholder.  The Units granted pursuant to this Award do not entitle the Participant to any rights of a stockholder of the Company’s Stock.  The Participant’s rights with respect to the Units shall remain forfeitable at all times until satisfaction of the vesting conditions set forth in Section 3 of this Agreement.

3.Vesting; Effect of Date of Termination.  For purposes of this Agreement, “Vesting Date” means any date, including the Scheduled Vesting Dates (as defined below), on which Units subject to this Award vest as provided in this Section 3.

(a)   Subject to paragraphs 3(b) through 3(f), a portion of the Participant’s Units will be eligible to vest on each of December 31, 2010, December 31, 2011 and December 31, 2012 (the “Scheduled Vesting Dates”).  Units will vest on a Scheduled Vesting Date (i) if the Participant’s Date of Termination has not occurred before that Scheduled Vesting Date, and (ii) only to the extent the Units have been earned during the period from January 1, 2010 to that Scheduled Vesting Date as provided in Section 4.  The period from January 1, 2010 through December 31, 2012 is referred to as the “Performance Period,” and the period from January 1, 2010 through an applicable Scheduled Vesting Date is referred to as a “Vesting Period.”  If the Participant’s Date of Termination occurs for any reason during the Performance Period, the Participant’s Units that have not yet vested will be forfeited on and after the Participant’s Date of Termination, except as provided in paragraphs 3(b) through 3(f).

(b)If the Participant’s Date of Termination occurs during the Performance Period by reason of the Participant’s death or Permanent and Total Disability (as defined in paragraph 3(g)), a portion of the then unvested Units subject to this Award will become vested as of the Participant’s Date of Termination.  That portion shall be equal to a number of Units determined by multiplying the lesser of (i) one-third of the Target Number of Units or (ii) the Target Number of Units not yet vested immediately prior to the Participant’s Date of Termination, by a fraction, the numerator of which shall be the number of whole months elapsed from the beginning of the calendar year in which the termination of employment occurred to the Date of Termination, and the denominator of which shall be twelve.  Any remaining Units subject to this Award that do not vest as provided in this paragraph shall be forfeited.

(c)If the Participant’s Date of Termination occurs during the Performance Period by reason of the Participant’s Retirement (as defined in paragraph 3(j)), a portion of the then unvested Units will become vested as of the Scheduled Vesting Date at the end of the calendar year in which the Participant’s Date of Termination occurs.  That portion shall be equal to the product of (i) the number of Units that otherwise would have vested on that Scheduled Vesting Date had the Participant’s employment not been terminated, and (ii) a fraction, the numerator of which shall be the number of whole months elapsed from the beginning of the calendar year in which the termination of employment occurred to the Date of Termination, and the denominator of which shall be twelve.  Any remaining Units subject to this Award that do not vest as provided in this paragraph shall be forfeited.

(d)If a Change of Control occurs during the Performance Period and prior to the Participant’s Date of Termination, then a portion of the then unvested Units will become fully vested as of the date of such Change of Control.  That portion shall be equal to the greater of (i) 50% of the Target Number of Units not yet vested immediately prior to the Change of Control, or (ii) an amount determined by multiplying 50% of the Target Number of Units not yet vested immediately prior to the Change of Control by the Performance Factor (determined as provided in Appendix A) for the longest completed Vesting Period (if any) prior to the date of the Change in Control.  The remaining Units subject to this Award that do not vest in accordance with the previous sentence shall remain subject to the vesting provisions of this Agreement, with all Units that have vested as a result of the Change of Control deemed Earned Units for purposes of applying the formula specified in Appendix A.

(e)If, during the Performance Period but within two years after a Change of Control described in paragraph 3(d), the Participant’s Date of Termination occurs by reason of the involuntary termination of the Participant’s employment by the Company or its Subsidiaries without Cause or by the Participant for Good Reason (as defined in paragraph 3(h)), all of the Target Number of Units that did not vest as a result of the Change of Control as provided in paragraph 3(d) will vest as of the Participant’s Date of Termination.

(f)If the Participant’s Date of Termination occurs during the Performance Period and during an Anticipated Change of Control by reason of the involuntary termination of the Participant’s employment by the Company or its Subsidiaries without Cause or by the Participant for Good Reason, and a Change of Control then occurs within two years following the Participant’s Date of Termination, a number of shares of Stock equal to the portion of the Target Number of Units forfeited on the Participant’s Date of Termination (subject to paragraph 5.2(f) of the Plan) shall be issued to the Participant on a fully vested basis promptly, but in no event later than two and one-half months after the end of the calendar year in which the Change of Control occurred.

(g)For purposes of this Agreement, the term “Permanent and Total Disability” means the Participant’s inability, due to illness, accident, injury, physical or mental incapacity or other disability, effectively to carry out his duties and obligations as an employee of the Company or its Subsidiaries or to participate effectively and actively as an employee of the Company or its Subsidiaries for 90 consecutive days or shorter periods aggregating at least 180 days (whether or not consecutive) during any twelve-month period.

(h)For purposes of this Agreement, “Good Reason” shall mean:  (i) any material breach by the Company of this Agreement or of any employment agreement with the Participant without Participant’s written consent, (ii) any material reduction, without the Participant’s written consent, in the Participant’s duties, responsibilities or authority; provided, however, that for purposes of this clause (ii), neither (A) a change in the Participant’s supervisor or the number or identity of the Participant’s direct reports, nor (B) a change in the Participant’s title, duties, responsibilities or authority as a result of a realignment or restructuring of the Company’s executive organizational chart nor (C) a change in the Participant’s title, duties, responsibilities or authority as a result of a realignment or restructuring of the Company shall be deemed by itself to materially reduce Participant’s duties, responsibilities or authority, as long as, in the case of either (B) or (C), Participant continues to report to either the supervisor to whom he or she reported immediately prior to the Change of Control or a supervisor of equivalent responsibility and authority; or (iii) without Participant’s written consent: (A) a material reduction in the Participant’s base salary, (B) the relocation of the Participant’s principal place of employment more than fifty (50) miles from its location on the date of a Change in Control, or (C) the relocation of the Company’s corporate headquarters office outside of the metropolitan area in which it is located on the date of a Change in Control.  For purposes of this Agreement, a Change of Control, alone, does not constitute Good Reason.  Furthermore, notwithstanding the above, the occurrence of any of the events described above will not constitute Good Reason unless the Participant gives the Company written notice within thirty (30) days after the initial occurrence of any of such events that the Participant believes that such event constitutes Good Reason, and the Company thereafter fails to cure any such event within sixty (60) days after receipt of such notice.

(i)For purposes of this Agreement, a Date of Termination shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Code Section 409A.

(j)For purposes of this Agreement, “Retirement” means the Participant’s separation from service (as defined in the regulations promulgated under Code Section 409A) occurring after the earlier of (i) the Participant reaching age 65 or (ii) the Participant reaching age 55 and having completed at least 10 years of Service with the Company and its Subsidiaries.

(k)For purposes of this Agreement, a Change of Control shall be deemed to have occurred only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.

Except as otherwise specifically provided, the Company will not have any further obligations to the Participant under this Agreement if the Participant’s Units are forfeited as provided herein.

4.Earned Units.  The number of Units subject to this Award that the Participant will be deemed to have earned (“Earned Units”) and that are eligible for vesting as of each Scheduled Vesting Date during the Performance Period will be determined by the extent to which the Company has satisfied the performance-based objectives for the Vesting Period ending on the applicable Scheduled Vesting Date as set forth in Appendix A to this Agreement.  The portion of the Units subject to this Award that will be deemed Earned Units as of each Scheduled Vesting Date during the Performance Period will be determined according to the formula specified in Appendix A, but in no event will the cumulative number of Units that are deemed Earned Units as of any Scheduled Vesting Date during the Performance Period exceed the Maximum Number of Units.  Any Units that are not earned as of either of the first two Scheduled Vesting Dates during the Performance Period solely because of the failure to fully satisfy an applicable performance-based objective shall remain eligible to be earned as of a subsequent Scheduled Vesting Date during the Performance Period.

5.Settlement of Units.  After any Units vest pursuant to Section 3, the Company will promptly, but in no event later than two and one-half months after the end of the calendar year in which the Vesting Date occurred, cause to be issued to the Participant, or to the Participant’s beneficiary or legal representative in the event of Participant’s death, one share of Stock in payment and settlement of each vested Unit.  Such issuance shall be evidenced by a stock certificate or appropriate entry on the books of the Company or a duly authorized transfer agent of the Company, shall be subject to the tax withholding provisions of Section 6, and shall be in complete satisfaction of such vested Units.  If the Units that vest include a fractional Unit, the Company will round the number of vested Units down to the nearest whole Unit prior to issuance of the shares as provided herein.  Notwithstanding the foregoing, if any amount shall be payable with respect to this Award as a result of the Participant’s “separation from service” at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s separation from service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter.

6.Tax Matters.  The Committee may require the Participant, or the alternate recipient identified in Section 5, to satisfy any potential federal, state, local or other tax withholding liability.  Such liability must be satisfied at the time such Units are settled in shares of Stock.  At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied: (i) through a cash payment by the Participant, (ii) through the surrender of shares of Stock that the Participant already owns (provided, however, to the extent shares described in this clause (ii) are used to satisfy more than the minimum statutory withholding obligation, as described below, then payments made with shares of Stock in accordance with this clause (ii) shall be limited to shares held by the Participant for not less than six months prior to the payment date), (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled in respect of the Award under this Agreement; provided, however, that such shares under this clause (iii) may be used to satisfy not more than the minimum statutory withholding obligation of the Company or applicable Subsidiary (based on minimum statutory withholding rates for federal, state and local tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), or (iv) any combination of clauses (i), (ii) and (iii); provided, however, that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii)-(iv) and that the Committee may require that the method of satisfying such an obligation be in compliance with Section 16 of the Exchange Act (if the Participant is subject thereto) and any other applicable laws and the respective rules and regulations thereunder.  Any fraction of a share of Stock which would be required to satisfy such an obligation will be disregarded and the remaining amount due will be paid in cash by the Participant.

7.Compliance with Laws.  Despite the provisions of Section 5 hereof, the Company is not required to issue or deliver any certificates for shares of Stock if at any time the Company determines that the listing, registration or qualification of such shares upon any securities exchange or under any law, the consent or approval of any governmental body or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of the shares hereunder in compliance with all applicable laws and regulations, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.

8.No Right to Employment.  Nothing herein confers upon the Participant any right to continue in the employ of the Company or any Subsidiary.

9.Nontransferability.  Except as otherwise provided by the Committee or as provided in Section 5, and except with respect to shares of Stock issued in settlement of vested Units, the Participant’s interests and rights in and under this Agreement may not be assigned, transferred, exchanged, pledged or otherwise encumbered other than as designated by the Participant by will or by the laws of descent and distribution.  Issuance of shares of Stock in settlement of Units will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the Participant is legally incompetent, the Participant’s personal representative; or, if the Participant is deceased, to the designated beneficiary or other appropriate recipient in accordance with Section 5 hereof.  The Committee may require personal receipts or endorsements of a Participant’s personal representative, designated beneficiary or alternate recipient provided for herein, and the Committee shall extend to those individuals the rights otherwise exercisable by the Participant with regard to any withholding tax election in accordance with Section 6 hereof.  Any effort to otherwise assign or transfer any Units or any rights or interests therein or thereto under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights and interests of the Participant and his or her beneficiary in and under this Agreement.

10.Administration and Interpretation.  The Committee has the authority to control and manage the operation and administration of the Plan.  Any interpretations of the Plan by the Committee and any decisions made by it under the Plan are final and binding on the Participant and all other persons.

11.Governing Law.  This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the state of Delaware, without regard to principles of conflicts of law of Delaware or any other jurisdiction.

12.Sole Agreement.  Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to all of the terms and conditions of the Plan (as the same may be amended in accordance with its terms), a copy of which may be obtained by the Participant from the office of the Secretary of the Company.  In addition, this Agreement and the Participant’s rights hereunder shall be subject to all interpretations, determinations, guidelines, rules and regulations adopted or made by the Committee from time to time pursuant to the Plan.  This Agreement is the entire agreement between the parties to it with respect to the subject matter hereof, and supersedes any and all prior oral and written discussions, commitments, undertakings, representations or agreements (including, without limitation, any terms of any employment offers, discussions or agreements between the parties).

13.Binding Effect.  This Agreement will be binding upon and will inure to the benefit of the Company and the Participant and, as and to the extent provided herein and under the Plan, their respective heirs, executors, administrators, legal representatives, successors and assigns.

14.Amendment and Waiver.  This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement between the Company and the Participant without the consent of any other person.  No course of conduct or failure or delay in enforcing the provisions of this Agreement will affect the validity, binding effect or enforceability of this Agreement.

IN WITNESS WHEREOF, the Company has duly executed this Agreement as of the Award Date.

	Very truly yours,
	UNITED STATIONERS INC.
	By:
Fredrick B. Hegi Jr.
Chairman of the Board

EX-10.2

Exhibit 10.2

United Stationers, Inc.

2004 Long-Term Incentive Plan

Management Cash Incentive Award Plan Summary

For Section 16 Officers and Grade Level 3 and Above

Under the 2004 Long-Term Incentive Plan (“LTIP”), the Human Resources Committee (“Committee”) has the discretion to grant Cash Incentive Awards. The Committee wishes to exercise its discretion to grant Cash Incentive Awards pursuant to the terms and conditions of the LTIP and this Cash Incentive Award Plan (“CIP”), which is hereby established by the Committee for the purpose of granting Cash Incentive Awards. Any term that is capitalized but not defined in this CIP will have the meaning set forth in the LTIP.

1.Eligibility. For any Performance Period (as defined in Section 3 below), the Committee shall determine and designate those Section 16 Officers and/or Salary Grade Level 3 (or above) associates who will be granted an award under this CIP and such persons shall be “Participants” in this CIP for that Performance Period.

2.Award.  Unless otherwise designated by the Committee pursuant to Section 6 below, Awards made under this CIP are intended to be “Performance-Based Compensation” as defined under the LTIP to meet the requirements for Section 162(m) of the Internal Revenue Code.  Any Award granted under this CIP will be evidenced by a separate writing and subject to the terms and conditions of the LTIP and this CIP.

3.Performance Period. The Performance Period for an Award granted under this CIP shall be the calendar year specified by the Committee in the separate writing evidencing the Award.

4.Performance Measurement.  Payment of Awards granted under this CIP will be conditioned the achievement of one or more performance objectives during the applicable Performance Period. The applicable performance objections will be (a) determined by the Committee, (b) set forth in the separate writing evidencing the Award, and (c) based on one or more of the Performance Measures (as defined in Section 9(aa) of the LTIP).

5.Employment on Last Day of Performance Period. Except as otherwise provided in Section 6 below or in a superseding Employment Agreement, a Participant must be actively employed by the Company on the last day of the Performance Period to receive any payment due for that Performance Period for a finally determined award under Section 7 below.

6.Partial Year Participation. The Committee or President & Chief Executive Officer, as applicable, may allow an individual who transfers into or out of an eligible position (Section 16 Officers and/or Salary Grade Level 3 and above) or who terminates employment under certain circumstances during a Performance Period to participate in the CIP for that Performance Period on a prorated basis.  In such a case, the Participant’s final award will be prorated based on the number of active months of participation during the Performance Period, and credit for active months of participation will be given as specified below.  Such situations include, but are not limited to: (a) new hire, (b) transfer from a position that does not meet the eligibility criteria to a position that meets the eligibility criteria, (c) transfer from a position that does meet the eligibility criteria to a position that does not meet the eligibility criteria, (d) changes in participation such as target incentive level, salary, leave of absence, etc. during the Performance Period, and (e) terminations under certain circumstances which are described below.  For prorated awards, the Participant’s final award will be the sum of all prorated awards.

a.Transfers and New Hires — An associate who becomes eligible and is designated as a Participant (whether due to transfer or new hire) during the 1st through 15th day of a month will receive credit for that month. An associate who becomes eligible and is designated as a

Participant (whether due to transfer or new hire) during the 16th through last day of a month will not receive credit for that month, but rather will receive credit beginning on the first day of the following month. A Participant who ceases to be eligible (for a reason other than termination of employment) during the 1st through 15th day of a month will not receive credit for that month, but rather will receive credit through the last day of the previous month.  A Participant who ceases to be eligible (for a reason other than termination of employment) during the 16th through last day of a month will receive credit through the last day of that month.

b.Terminations — This paragraph applies if a Participant’s employment terminates during a Performance Period due to death, disability (as defined by the Social Security Administration) or retirement (which is a voluntary termination of employment by the Participant on or after reaching age 65 or reaching age 55 if the Participant also has at least 10 years of service with the Company) and the Committee or President & Chief Executive Officer, as applicable, decides to allow that Participant to participate in the CIP for that Performance Period on a prorated basis. In such a case, a Participant whose employment terminates during the 1st through 15th day of a month will not receive credit for that month, but rather will receive credit through the last day of the previous month; and a Participant whose employment terminates during the 16th through last day of a month will receive credit through the last day of that month.

c.Leaves of Absence —

i.Family or Medical Leave — A Participant on a family or medical leave of absence, as defined by the Company’s Leave of Absence (“medical LOA”) Policy, is eligible for payment under this Plan.  A Participant on medical LOA is eligible for full payment (non-pro-rated) for medical LOA time and will be paid at the same time as active Participants.

ii.Other Leave — A Participant on any other leave shall have their payment prorated for the number of days not worked during the Performance Period.

7.Adjustment of Performance Goals and Determination and Payment of Final Awards — The Committee has the right to adjust the performance objectives (either up or down) during the Performance Period if it determines that external changes or other unanticipated business conditions have materially affected the fairness of the objectives or unduly influenced the Company’s ability to meet them. However, no such adjustment shall increase the final award payable to any of the Named Executive Officers unless, at the time the Committee initially set the participation of such individual for the Performance Period, it designated his or her award as not intended to qualify as “Performance-Based Compensation” as defined under the LTIP. The Committee also has the right to adjust the performance objectives and the final award amounts in the event of a Performance Period consisting of less than twelve months.

The Committee or Chief Executive Officer, as applicable, will review performance against the previously established performance objectives and compute final awards for each Participant who remains actively employed by the Company on the last day of the Performance Period.  The Company will pay final awards in cash as soon as administratively practicable, but no later than the March 15 following the last day of the Performance Period. Final awards will be paid in accordance with the Participant’s payroll election (i.e., direct deposit or pay card) at the time the award is distributed. Based on an assessment of Company and/or participant performance and, except as limited by the preceding paragraph, final award amounts may be adjusted (either up or down) by the Committee or Chief Executive Officer.

8.No Right to Employment.  Nothing herein confers upon a Participant any right to continue in the employ of the Company or any Subsidiary.

9.Administration and Interpretation.  The Committee has the authority to control and manage the operation and administration of the LTIP and this CIP. Any interpretations of the LTIP or CIP by the Committee and any decisions made by it under the LTIP or this CIP are final and binding on the Participant and all other persons.

10.Governing Law.  This CIP and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the state of Delaware, without regard to principles of conflicts of law of Delaware or any other jurisdiction.

11.Sole Agreement.  Notwithstanding anything in this CIP to the contrary, the terms of this CIP shall be subject to all of the terms and conditions of the LTIP (as the same may be amended in accordance with its terms), a copy of which may be obtained by the Participant from the office of the Secretary of the Company.  In addition, this CIP and the Participant’s rights hereunder shall be subject to all interpretations, determinations, guidelines, rules and regulations adopted or made by the Committee from time to time pursuant to the LTIP and this CIP.  The LTIP (along with this CIP and any individual award granted to a Participant) is the entire agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior oral and written discussions, commitments, undertakings, representations or agreements (including, without limitation, any terms of any employment offers, discussions or agreements between the parties).

12.Binding Effect.  This CIP will be binding upon and will inure to the benefit of the Company and the Participant and, as and to the extent provided herein and under the LTIP, their respective heirs, executors, administrators, legal representatives, successors and assigns.

13.Amendment and Waiver.  This CIP may be amended in accordance with the provisions of the LTIP, and may otherwise be amended by written agreement between the Company and the Participant without the consent of any other person, provided that this CIP shall not be amended in any manner that would inconsistent with Sections 162(m) (unless otherwise provided pursuant to Section 6 above) or Section 409A of the Internal Revenue Code.  No course of conduct or failure or delay in enforcing the provisions of this Agreement will affect the validity, binding effect or enforceability of this Agreement.

UNITED STATIONERS INC.

By:

Frederick B. Hegi, Jr.

Chairman of the Board

EX-10.3

Exhibit 10.3

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made, entered into and effective as of December 31, 2008 (the “Effective Date”) by and among UNITED STATIONERS INC., a Delaware corporation (hereinafter, together with its successors, referred to as “Holding”), UNITED STATIONERS SUPPLY CO., an Illinois corporation (hereinafter, together with its successors, referred to as the “Company”, and, together with Holding, the “Companies”), and Eric A. Blanchard (hereinafter referred to as the “Executive”).

WHEREAS, the Companies and Executive are parties to an Executive Employment Agreement dated December 1, 2006 (the “Prior Agreement”), which the parties desire to amend and restate in its entirety as set forth in this Agreement; and

WHEREAS, in October 2004, the American Jobs Creation Act of 2004 (the “Act”) was enacted, Section 885 of which Act added new provisions to the Internal Revenue Code pertaining to deferred compensation and for which the Treasury Department has issued final regulations and guidance regarding the deferred compensation provisions of the Act permitting service providers and service recipients a transition period to modify existing deferred compensation arrangements to bring them into compliance with the Act; and

WHEREAS, the parties agree that it is in their mutual best interests to modify, amend and clarify the terms and conditions of the Prior Agreement, as set forth in this Agreement, with the full intention of complying with the Act so as to avoid the additional taxes and penalties imposed under the Act; and

WHEREAS, Executive is a key member of the management of the Companies and is expected to devote substantial skill and effort to the affairs of the Companies, and the Companies desire to recognize the significant personal contribution that Executive makes and is expected to continue to make to further the best interests of the Companies and their shareholders; and

WHEREAS, it is desirable and in the best interests of the Companies and its shareholders to obtain the benefits of Executive’s services and attention to the affairs of the Companies, and to provide inducement for Executive (1) to remain in the service of the Companies in the event of any proposed or anticipated Change of Control and (2) to remain in the service of the Companies in order to facilitate an orderly transition in the event of a Change of Control; and

WHEREAS, it is desirable and in the best interests of the Companies and their shareholders that Executives be in a position to make judgments and advise the Companies with respect to any proposed Change of Control without regard to the possibility that Executive’s employment may be terminated without compensation in the event of a Change of Control; and

WHEREAS, Executive will have access to confidential, proprietary and trade secret information of the Companies and their subsidiaries, and it is desirable and in the best interests of the Companies and their shareholders to protect confidential, proprietary and trade secret information of the Companies and their subsidiaries, to prevent unfair competition by former

executives of the Companies following separation of their employment with the Company and to secure cooperation from former executives with respect to matters related to their employment with the Company; and

WHEREAS, it is desirable and in the best interests of the Companies and their shareholders to obtain commitments from Executive with respect to Executive’s service with the Company, and to facilitate a smooth transition upon separation from service for former executives,

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties agree as follows:

Section 1.Definitions.

(a)As used in this Agreement, the following terms have the respective meanings set forth below:

“Accrued Benefits” means (i) all salary earned or accrued through the date the Executive’s employment is terminated; (ii) reimbursement for any and all monies expended by Executive in connection with the Executive’s employment for reasonable and necessary out-of-pocket business expenses incurred by the Executive in performance of services for the Company through the date the Executive’s employment is terminated; (iii) all accrued and unpaid annual incentive compensation awards for the year immediately prior to the year in which the Executive’s employment is terminated; and (iv) all other payments and benefits payable on or after termination of employment to which the Executive is entitled at the date of termination under the terms of any applicable compensation arrangement or benefit plan or program of the Company. “Accrued Benefits” shall not include any entitlement to severance pay or severance benefits under any Company severance policy or plan generally applicable to the Company’s salaried employees.

“Affiliate” shall have the meaning given such term in Rule 12b-2 of the Exchange Act.

“Board” shall mean, so long as Holding owns all of the outstanding Voting Securities (as hereinafter defined in the definition of Change of Control) of the Company, the board of directors of Holding. In all other cases, Board means the board of directors of the Company.

“Cause” shall mean (i) conviction of, or plea of nolo contendere to, a felony (excluding motor vehicle violations); (ii) theft or embezzlement, or attempted theft or embezzlement, of money or property or assets of the Company or any of its Affiliates; (iii) illegal use of drugs; (iv) material breach of this Agreement or any employment-related undertakings provided in a writing signed by the Executive prior to or concurrently with this Agreement; (v) gross

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negligence or willful misconduct in the performance of Executive’s duties; (vi) breach of any fiduciary duty owed to the Company, including, without limitation, engaging in competitive acts while employed by the Company, or (vii) the Executive’s willful refusal to perform the assigned duties for which the Executive is qualified as directed by the Executive’s Supervising Officer (as hereinafter defined) or the Board; provided, that in the case of any event constituting Cause within clauses (iv) through (vii) which is curable by the Executive, the Executive has been given written notice by the Companies of such event said to constitute Cause, describing such event in reasonable detail, and has not cured such action within thirty (30) days of such written notice as reasonably determined by the Chief Executive Officer. For purposes of this definition of Cause, action or inaction by the Executive shall not be considered “willful” unless done or omitted by the Executive (A) intentionally or not in good faith and (B) without reasonable belief that the Executive’s action or inaction was in the best interests of the Companies, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.

“Change of Control” shall mean (a) Any “Person” (having the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” within the meaning of Section 13(d)(3)) has or acquires “Beneficial Ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of 30% or more of the combined voting power of Holding’s then outstanding voting securities entitled to vote generally in the election of directors (“Voting Securities”); provided, however, that the acquisition or holding of Voting Securities by (i) Holding of any of its subsidiaries, (ii) an employee benefit plan (or a trust forming a part thereof) maintained by Holding or any of its subsidiaries, or (iii) any Person in which the Executive has a substantial equity interest shall not constitute a Change of Control. Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because any Person acquired Beneficial Ownership of more than the permitted amount of Voting Securities as a result of the issuance of Voting Securities by Holding in exchange for assets (including equity interests) or funds with a fair value equal to the fair value of the Voting Securities so issued; provided that if a Change of Control would occur (but for the operation of this sentence) as a result of the issuance of Voting Securities by Holding, and after such issuance of Voting Securities by Holding, such Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the Voting Securities Beneficially Owned by such Person to more than 50% of the Voting Securities of Holding, then a Change of Control shall occur; (b) At any time during a period of two consecutive years, the individuals who at the beginning of such period constituted the Board (the “Incumbent Board”) cease for any reason to constitute more than 50% of the Board; provided, however, that if the election, or nomination for election by Holding’s stockholders, of any new director was approved by a vote of more than 50% of the directors then comprising the Incumbent Board, such new director shall, for purposes of this subsection (b), be considered as though such person were a member of the Incumbent Board; provided, further, however, that no individual

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shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of (i) either an actual “Election Consent” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board (a “Proxy Contest”), or (ii) by reason of an agreement intended to avoid or settle any actual or threatened Election Contest or Proxy Contest; (c) Consummation of a merger, consolidation or reorganization or approval by Holding’s stockholders of a liquidation or dissolution of Holding or the occurrence of a liquidation or dissolution of Holding (“Business Combination”), unless, following such Business Combination: (1) the Persons with Beneficial Ownership of Holding, immediately before such Business Combination, have Beneficial Ownership of more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation (or in the election of a comparable governing body of any other type of entity) resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns Holding or all or substantially all of Holding’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) in substantially the same proportions as their Beneficial Ownership of the Voting Securities immediately before such Business Combination, (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the initial agreement providing for such Business Combination constitute more than 50% of the members of the board of directors (or comparable governing body of a noncorporate entity) of the Surviving Company; and (3) no Person (other than Holding, any of its subsidiaries or any employee benefit plan (or any trust forming a part thereof) maintained by Holding, the Surviving Company or any Person who immediately prior to such Business Combination had Beneficial Ownership of 30% or more of the then Voting Securities) has Beneficial Ownership of 30% or more of the then combined voting power of the Surviving Company’s then outstanding voting securities; provided, that notwithstanding this clause (3), a Change of Control shall not be deemed to occur solely because any Person acquired Beneficial Ownership of more than 30% of Voting Securities as a result of the issuance of Voting Securities by Holding in exchange for assets (including equity interests) or funds with a fair value equal to the fair value of the Voting Securities so issued; provided, however that a Business Combination with a Person in which the Executive has a substantial equity interest shall not constitute a Change of Control, or (d) Approval by Holding’s stockholders of an agreement for the assignment, sale, conveyance, transfer, lease or other disposition of all or substantially all of the assets of Holding to any Person (other than a Person in which the Executive has a substantial equity interest and other than a subsidiary of Holding or other entity, the Persons with Beneficial Ownership of which are the same Persons with Beneficial Ownership of Holding and such Beneficial Ownership is in substantially the same proportions), or the occurrence of the same. Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because any Person acquired Beneficial Ownership of more than the permitted amount of Voting Securities as a result of the acquisition of Voting

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Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Person; provided that if a Change of Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such acquisition of Voting Securities by the Company, such Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the Voting Securities Beneficially Owned by such Person, then a Change of Control shall occur.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Good Reason” shall mean (i) any material breach by the Companies of this Agreement without Executive’s written consent, (ii) any material reduction, without the Executive’s written consent, in the Executive’s duties, responsibilities or authority; provided, however, that for purposes of this clause (ii), neither (A) a change in the Executive’s Supervising Officer or the number or identity of the Executive’s direct reports, nor (B) a change in the Executive’s title, duties, responsibilities or authority as a result of a realignment or restructuring of the Companies’ executive organizational chart nor (C) a change in the Executive’s title, duties, responsibilities or authority as a result of a realignment or restructuring of the Companies shall necessarily be deemed by itself to materially reduce Executive’s duties, responsibilities or authority, as long as, in the case of either (A), (B) or (C), Executive continues to report to either the Chief Executive Officer or Chief Operating Officer of the Companies or to the Supervising Officer to whom he reported immediately prior to the Change of Control or a Supervising Officer of equivalent responsibility and authority, or (iii) without Executive’s written consent: (A) a material reduction in the Executive’s Base Salary, (B) the relocation of the Executive’s principal place of employment more than fifty (50) miles from its location on the date of a Change in Control, or (C) the relocation of the Company’s corporate headquarters office outside of the metropolitan area in which it is located on the date of a Change in Control. For purposes of this Agreement, a Change of Control, alone, does not constitute Good Reason. Furthermore, notwithstanding the above, the occurrence of any of the events described above will not constitute Good Reason unless the Executive gives the Companies written notice within thirty (30) days after the initial occurrence of any of such events that the Executive believes that such event constitutes Good Reason, and the Companies thereafter fail to cure any such event within sixty (60) days after receipt of such notice.

“Person” shall mean any natural person, firm, corporation, limited liability company, trust, partnership, limited or limited liability partnership, business association, joint venture or other entity and, for purposes of the definition of Change of Control herein, shall comprise any “person”, within the meaning of Sections 13(d) and 14(d) of the Exchange Act, including a “group” as therein defined.

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“Subsidiary” shall mean, with respect to any Person, any other Person of which such first Person owns 20% or more of the economic interest in such Person or owns or has the power to vote, directly or indirectly, securities representing 20%or more of the votes ordinarily entitled to be cast for the election of directors or other governing Persons.

(b)The capitalized terms used in Section 5(j) have the respective meanings assigned to them in such Section and the following additional terms have the respective meanings assigned to them in the Sections hereof set forth opposite them:

“Annual Bonus”	Section 4(b)
“Base Salary”	Section 4(a)
“Bonus Plan”	Section 4(b)
“Code”	Section 2
“Confidential information or proprietary data”	Section 6(a)(2)
“Customer”	Section 6(d)(2)
“Disability”	Section 5(c)
“Employment Period”	Section 2
“Retirement”	Section 5(f)
“Supervising Officer”	Section 3(a)
“Supplier”	Section 6(d)(2)
“Term” and “Termination Date”	Section 2

Section 2.Term and Employment Period.  Subject to Section 19 hereof, the term of this Agreement (“Term”) shall commence on the Effective Date of this Agreement and shall continue until the effective date of termination of the Executive’s employment hereunder pursuant to Section 5 of this Agreement. The period during which the Executive is employed by the Companies pursuant to this Agreement is referred to herein as the “Employment Period.” The date on which termination of the Executive’s employment hereunder shall become effective is referred to herein as the “Termination Date.” For purposes of Section 5 of this Agreement only, the Termination Date shall mean the date on which a “separation from service” has occurred for purposes of Section 409A of the Internal Revenue Code and the regulations and guidance thereunder (the “Code”).

Section 3.Duties.

(a)During the Employment Period, the Executive (i) shall serve as Senior Vice President, General Counsel and Secretary, (ii) shall report directly to the Chief Executive Officer (the “Supervising Officer”); (iii) shall, subject to and in accordance with the authority and direction of the Board and/or the Supervising Officer have such authority and perform in a diligent and competent manner such duties as may be assigned to the Executive from time to time by the Board and/or the Supervising Officer and (iv) shall devote the Executive’s best efforts and such time, attention, knowledge and skill to the operation of the business and affairs of the Companies as shall be necessary to perform the Executive’s duties. During the Employment Period, the Executive’s place of performance for the Executive’s duties and responsibilities shall be at the Companies’ corporate headquarters office, unless another principal place of

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Executive on the Companies’ business or as may be reasonably required by the Companies.

(b)Notwithstanding the foregoing, it is understood during the Employment Period, subject to any conflict of interest policies of the Companies, the Executive may (i) serve in any capacity with any civic, charitable, educational or professional organization provided that such service does not materially interfere with the Executive’s duties and responsibilities hereunder, (ii) make and manage personal investments of the Executive’s choice, and (iii) with the prior consent of the Companies’ Chief Executive Officer, which shall not be unreasonably withheld, serve on the board of directors of one (1) for-profit business enterprise.

Section4.Compensation.  During the Employment Period, the Executive shall be compensated as follows:

(a)the Executive shall receive, at such intervals and in accordance with such Company payroll policies as may be in effect from time to time, an annual salary (pro rata for any partial year) equal to $306,329.76 (“Base Salary”). The Base Salary shall be reviewed by the Board from time to time and may, in the Board’s sole discretion, be increased when deemed appropriate by the Board; if so increased, it shall not thereafter be reduced (other than an across-the-board reduction applied in the same percentage at the same time to all of the Companies’ senior executives at the same grade level);

(b)during the Employment Period, the Executive shall be eligible to earn an annual incentive compensation award under the Companies’ management incentive or bonus plan, or a successor plan thereto, as shall be in effect from time to time (the “Bonus Plan”), subject to achievement of performance goals determined in accordance with the terms of the Bonus Plan (such annual incentive compensation award, the “Annual Bonus”), with such Annual Bonus to be payable in a cash lump sum at such time as bonuses are ordinarily paid to the Companies’ senior executives at the same grade level;

(c)the Executive shall be reimbursed, at such intervals and in accordance with such Company policies as may be in effect from time to time, for any and all reasonable and necessary out-of-pocket business expenses incurred by the Executive during the Employment Period for the benefit of the Companies, subject to documentation in accordance with the Companies’ policies;

(d)the Executive shall be entitled to participate in all incentive, savings and retirement plans, stock option plans, practices, policies and programs applicable generally to other senior executives of the Companies at the same grade level and as determined by the Board from time to time;

(e)the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company to senior executives of the Companies at the same grade level (including, without limitation, medical, prescription,

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dental, disability, salary continuance, employee life, group life, and accidental death and travel accident insurance plans and programs) to the extent applicable generally to other executives of the Companies at the same grade level;

(f)the Executive shall be entitled to not less than twenty (20) paid vacation days per calendar year (pro rata for any partial year); and

(g)the Executive shall be entitled to participate in the Company’s other executive fringe benefits and perquisites generally applicable to the Companies’ senior executives at the same grade level in accordance with the terms and conditions of such arrangements as are in effect from time to time.

Section 5.Termination of Employment.

(a)All Accrued Benefits to which the Executive (or the Executive’s estate or beneficiary) is entitled shall be payable within thirty (30) days following the Termination Date, except as otherwise specifically provided herein or under the terms of any applicable policy, plan or program, in which case the payment terms of such policy, plan or program shall be determinative.

(b)Any termination by the Companies, or by the Executive, of the Employment Period shall be communicated by written notice of such termination to the Executive, if such notice is delivered by the Companies, and to the Companies, if such notice is delivered by the Executive, each in compliance with the requirements of Section 13 hereof. Except in the event of termination of the Employment Period by reason of Cause or the Executive’s death, the effective date of the termination of Executive’s employment shall be no earlier than thirty (30) days following the date on which notice of termination is delivered by one party to the other in compliance with the requirements of Section 13 hereof.

(c)If the Employment Period is terminated prior to the expiration of the Term by the Executive for Good Reason or by the Companies for any reason other than Cause or the Executive’s permanent disability, as defined in the Companies’ Board-approved disability plan or policy as in effect from time to time (“Disability”) and other than within two (2) years following a Change of Control, then, as the Executive’s exclusive right and remedy in respect of such termination:

(i)the Executive shall be entitled to receive from the Company the Executive’s Accrued Benefits in accordance with Section 5(a);

(ii)the Executive shall be entitled to an amount equal to one and one-half (11/2) times the Executive’s then existing Base Salary, to be paid in such intervals and at such times in accordance with the Company’s payroll practices in effect from time to time over the eighteen (18) month period following the Termination Date; but in no event shall such amount paid under this Section 5(c)(ii) exceed the lesser of (A) $460,000.00 or (B) two (2) times Executive’s annualized compensation based upon the annual rate of pay for services to the Companies for the calendar year prior to the calendar year in which the

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Companies for the calendar year prior to the calendar year in which the Termination Date occurs (adjusted for any increase during that year that was expected to continue indefinitely if the Executive had not separated from service), consistent with the parties’ intention that the payments under this Section 5(c)(ii) constitute a “separation pay plan due to involuntary “separation from service” under Treas. Reg. § 1.409A-1(b)(9)(iii);

(iii)in the event that an amount equal to one and one-half (11/2) times the Executive’s then-existing Base Salary exceeds the limitations of Subsections 5(c) (ii)(A) or (B) above, then the Executive shall be entitled to an additional lump sum payment equal to the difference between (x) one and one-half (11/2) times the Executive’s then existing Base Salary and (y) the amount payable to Executive under Subsection 5(c)(ii), such lump sum payable to Executive on the first regular payroll date of the Company to occur following the date that is six months after the Termination Date;

(iv)the Executive shall be entitled to a payment in an amount equal to one and one-half (11/2) times the actual Annual Bonus award which would otherwise be payable for the calendar year during which the Termination Date occurs, as if the Executive had been employed for all of such calendar year based on actual performance, to be paid at such time as the Annual Bonus award would otherwise be paid in accordance with the Company’s policies;

(v)the Executive shall continue to be covered, upon the same terms and conditions described in Section 4(e) hereof, by the same or equivalent medical and/or dental insurance plans, programs and/or arrangements as in effect for the Executive immediately prior to the Termination Date, beginning on the Termination Date and continuing until the earlier of: (A) the eighteen (18) month anniversary following the date of the Executive’s Termination Date, and (B) the date the Executive receives substantially equivalent coverage under the plans, programs and/or arrangements of a subsequent employer; provided that Executive timely pays the Executive’s portion of such coverage, and provided further that if the Company determines that the coverage to be provided under this Section 5(c)(v) would cause a self-insured plan maintained by the Company to be in violation of the nondiscrimination requirements of Section 105(h) of the Code, then such coverage will be paid for by the Executive by means of the Company reporting imputed income to Executive on a monthly basis for the fair market value of such coverage plus additional imputed amounts to pay any income tax at source on resulting wages subject to FICA or the income tax withholding provisions of federal or state tax law, including pyramiding wages and taxes (and the Company shall be responsible for depositing all applicable withholding amounts in a timely manner with the appropriate tax authority), with the intent that any amounts payable under this Section 5(c)(v) that are not otherwise excluded from deferred compensation under Code Section 409A shall be excluded from deferred compensation pursuant to a “separation pay plan due to involuntary separation from service” under Treas. Reg. §1.409A-1(b)(9)(iii);

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(vi)the Executive shall receive a lump sum payment in an amount equal to the amount the Company would otherwise expend for 18 month’s coverage for its share of the premiums for life and disability insurance plans or programs as in effect for Executive immediately prior to the Termination Date, payable to Executive within thirty (30) days following the Termination Date; and

(vii)for the period commencing on the Termination Date and ending not later than the last day of the second calendar year after the Termination Date, the Executive shall be entitled to receive executive level career transition assistance services provided by a career transition assistance firm selected by the Executive and paid for by the Companies in an amount not to exceed ten percent (10%) of the Executive’s then existing Base Salary. The Executive shall not be eligible to receive cash in lieu of executive level career transition assistance services.

(d)If during the Employment Period, a Change of Control occurs and the Employment Period is terminated by the Companies for any reason other than Cause or Disability or by the Executive for Good Reason, each within two (2) years from the date of such Change of Control, and, in the case of Executive’s resignation for Good Reason, the Executive’s separation from service occurs within two years following the initial existence of the condition giving rise to Good Reason, then:

(i)the Executive shall be entitled to receive from the Company the Executive’s Accrued Benefits in accordance with Section 5(a);

(ii)the Executive shall be entitled to a lump-sum payment in an amount equal to two (2) times the Executive’s then existing Base Salary, to be paid within thirty (30) days following the Termination Date;

(iii)the Executive shall be entitled to a lump-sum payment in an amount equal to two (2) times the Executive’s target incentive compensation award for the calendar year during which the Termination Date occurs, to be paid within thirty (30) days following the Termination Date;

(iv)the Executive shall be entitled to a lump-sum payment to be paid within thirty (30) days following the Termination Date in an amount equal to the pro-rata target incentive compensation award for the calendar year during which the Termination Date occurs. Such pro-rata target incentive compensation award shall be determined by multiplying the target incentive compensation award amount by a fraction, the numerator of which is the number of days in the calendar year of the Termination Date elapsed prior to the Termination Date and the denominator of which is three hundred and sixty-five (365).

(v)the Executive shall continue to be covered, upon the same terms and conditions described in Section 4(e) hereof, by the same or equivalent medical and/or dental, insurance plans, programs and/or arrangements as in effect for the Executive immediately prior to the Change of Control, beginning on the

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Termination Date and continuing until the earlier of: (A) the second anniversary following the date of the Executive’s Termination Date, and (B) the date the Executive receives substantially equivalent coverage under the plans, programs and/or arrangements of a subsequent employer; provided that Executive timely pays the Executive’s portion of such coverage, and provided further that if the Company determines that the coverage to be provided under this Section 5(d)(v) would cause a self-insured plan maintained by the Company to be in violation of the nondiscrimination requirements of Section 105(h) of the Code, then such coverage will be paid for by the Executive by means of the Company reporting imputed income to Executive on a monthly basis for the fair market value of such coverage plus additional imputed amounts to pay any income tax at source on resulting wages subject to FICA or the income tax withholding provisions of federal or state tax law, including pyramiding wages and taxes (and the Company shall be responsible for depositing all applicable withholding amounts in a timely manner with the appropriate tax authority), with the intent that any amounts payable under this Section 5(d)(v) that are not otherwise excluded from deferred compensation under Code Section 409A shall be excluded from deferred compensation pursuant to a “separation pay plan due to involuntary separation from service” under Treas. Reg. §1.409A-1(b)(9)(iii);

(vi)the Executive shall receive a lump sum payment in an amount equal to the amount the Company would otherwise expend for 24-month’s coverage for its share of the premiums for life and disability insurance plans or programs as in effect for Executive immediately prior to the Termination. Date, payable to Executive within thirty (30) days following the Termination Date;

(vii)the Executive shall receive a lump sum cash payment, payable to Executive within thirty (30) days following the Termination Date, in an amount equal to the additional benefit value (on a present value, differential basis) that would be payable to Executive under the Company’s defined benefit retirement plan if he had two additional years of credit for purposes of age, benefit service and vesting;

(viii)if the Executive’s outstanding stock options have not by then fully vested pursuant to the terms of the Companies’ applicable stock option plan(s) and applicable option agreement(s), then to the extent permitted in the Companies’ applicable stock option plan(s) and as provided in the applicable stock option agreement(s), the Executive shall continue to vest in the Executive’s unvested stock options following the Termination Date;

(ix)for the period commencing on the Termination Date and ending not later than the last day of the second calendar year after the Termination Date, the Executive shall be entitled to receive executive level career transition assistance services provided by a career transition assistance firm selected by the Executive and paid for by the Companies in an amount not to exceed ten percent (10%) of the Executive’s then existing Base Salary, The Executive shall not be

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eligible to receive cash in lieu of executive level career transition assistance services; and

(x)the Executive shall be entitled to be reimbursed by the Company for the Executive’s reasonable attorneys’ fees, costs and expenses incurred in conjunction with any dispute regarding Section 5(d) if Executive prevails in any material respect in such dispute, provided that (A) the applicable statutes of limitations shall not have expired for any claim arising from the dispute that could be raised in a court of law; (B) Executive shall submit to the Company verification of legal expense for reimbursement within 60 days from the date the expense was incurred; (C) the Company shall reimburse Executive for eligible expenses promptly thereafter, but in any event not earlier than the first day of the seventh month following the Termination Date and not later than December 31 of the calendar year following the calendar year in which the expense was incurred; (D) the expenses eligible for reimbursement during any given calendar year shall not affect the expense eligible for reimbursement in any other calendar year; and (E) the right to reimbursement hereunder may not be liquidated or exchanged for cash or any other benefit.

(e)Any amounts payable pursuant to Sections 5(c) and 5(d) above shall be considered severance payments and, except for the Executive’s vested benefits under the Companies’ employee benefit plans (other than severance plans), shall be in full and complete satisfaction of the obligations of the Companies to the Executive in connection with the termination of the Executive’s employment.

(f)If the Employment Period is terminated as a result of the Executive’s death, Disability or retirement, as defined in the Companies’ Board-approved retirement plan or policy, as in effect from time to time (“Retirement”), then the Executive shall be entitled to (i) the Executive’s Accrued Benefits in accordance with Section 5(a), (ii) any benefits that may be payable to the Executive under any applicable Board-approved disability, life insurance or retirement plan or policy in accordance with the terms of such plan or policy, and (iii) a lump sum payment in an amount equal to:

(i)in the event the Employment Period is terminated as a result of Executive’s death or Disability, an amount equal to the pro-rata target Annual Bonus award for the calendar year during which the Termination Date occurs by reason of the Executive’s death or Disability. Such lump sum payment shall be determined by multiplying the target Annual Bonus award amount by a fraction, the numerator of which is the number of days in the calendar year of the Termination Date elapsed prior to the Termination Date and the denominator of which is three hundred and sixty-five (365); or

(ii)in the event the Employment Period is terminated as a result of Executive’s Retirement, an amount equal to the pro-rata actual Annual Bonus award for the calendar year during which the Termination Date occurs by reason of the Executive’s Retirement. Such lump sum payment shall be determined by multiplying the actual Annual Bonus award amount by a fraction, the numerator of which is the number of days in the calendar year of the

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Termination Date elapsed prior to the Termination Date and the denominator of which is three hundred and sixty-five (365).

In the event the Employment Period is terminated as a result of Executive’s death, such lump sum payment shall be made within 30 days following the Termination Date; in the event the Employment Period is terminated as a result of Executive’s Disability, such lump sum payment shall be made on the first regular payroll date of the Company to occur following the date that is six months after the Termination Date; and in the event the Employment Period is terminated as a result of Executive’s Retirement, such lump sum payment shall be made on the later of the date that Annual Bonus payments are made to other participants in the plan or the first regular payroll date of the Company to occur following the date that is six months after the Termination Date.

(g)Notwithstanding anything else contained herein, if the Executive terminates his employment for any reason other than Good Reason, Disability or Retirement, or the Companies terminate the Executive’s employment for Cause, all of the Executive’s rights to payment from the Companies (including pursuant to any plan or policy of the Companies) shall terminate immediately, except the right to payment for Accrued Benefits in respect of periods prior to such termination.

(h)Notwithstanding anything to the contrary contained in this Section 5, the Executive shall be required to execute the Companies’ then current standard release agreement as a condition to receiving any of the payments and benefits provided for in Sections 5(c) and (d), excluding the Accrued Benefits in accordance with Section 5(a), and no payments and benefits provided for in Sections 5(c) and (d) other than the Accrued Benefits in accordance with Section 5(a) shall be payable to Executive unless and until all applicable consideration and rescission periods for the release agreement have expired, Executive has not rescinded the release agreement and Executive is in compliance with each of the terms and conditions of such release agreement and this Agreement as of the date of such payments and benefits. It is acknowledged and agreed that the then current standard release agreement shall not diminish or terminate the Executive’s rights under this Agreement.

(i)In the event of a termination of the Executive’s employment entitling the Executive to benefits under Section 5(c) above, the Executive shall use reasonable efforts to obtain employment suitable to his education, training and experience, and, upon obtaining any such other employment shall promptly notify the Companies thereof. The remaining obligation of the Companies under Section 5(c) shall be offset by any compensation earned by the Executive from such other employment during the eighteen month period commencing on his Termination Date. Except as set forth in the first sentence of this Section 5(i) and subject to the Executive’s affirmative obligations pursuant to Section 6, the Executive shall be under no obligation to seek other employment or otherwise mitigate the obligations of the Companies under this Agreement.

(j)Notwithstanding any provision to the contrary contained in this Agreement, if the cash payments due and the other benefits to which Executive shall become entitled under Section 5(d), either alone or together with other payments in the

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nature of compensation to Executive which are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company or otherwise, would constitute a “parachute payment” as defined in Section 280G of the Code (or any successor provision thereto), such payments or benefits shall be reduced (but not below zero) to the largest aggregate amount as will result in no portion thereof being subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or being non-deductible to the Company for Federal Income Tax purposes pursuant to Section 280G of the Code (or any successor provision thereto), provided, however, that no such reduction shall occur, and this Section 5(j) shall not apply, in the event that the amount of such reduction would be more than 10% of the aggregate value of such payments and benefits. The Companies shall in good faith determine the amount of any reduction to be made pursuant to this Section 5(j), and shall make such reduction by first reducing amounts payable under Section 5(d)(i) and thereafter by reducing amounts payable under the following Sections of this Agreement in the following order, as necessary to achieve the reduction: 5(d)(iii), 5(d)(iv), 5(d)(vi), 5(d)(vii). Amounts payable as reimbursements under Sections 5(d)(v) and 5 (d)(x), if any, shall not be subject to reduction. No modification of, or successor provision to, Section 280G or Section 4999 subsequent to the date of this Agreement shall, however, reduce the benefits to which the Executive would be entitled under this Agreement in the absence of this Section 5(j) to a greater extent than they would have been reduced if Section 280G and Section 4999 had not been modified or superseded subsequent to the date of this Agreement, notwithstanding anything to the contrary provided in the first sentence of this Section 5(j).

(k)Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that Section 5(j) above does not apply and any payment or distribution of any type to or in respect of the Executive made directly or indirectly, by the Companies or by any other party in connection with a Change of Control, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payments”), is or will be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.

(i)All computations and determinations relevant to Section 5(k) and this subsection 5(k)(i) shall be made by a national accounting firm selected and reimbursed by the Companies from among the ten (10) largest accounting firms in the United States as determined by gross revenues (the “Accounting Firm”), subject to the Executive’s consent (not to be unreasonably withheld), which firm may be the Companies’ accountants. Such determinations shall include whether any of the Total Payments are “parachute payments” (within the meaning of Section 280G of the Code). In making the initial determination hereunder as to

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Section 280G of the Code). In making the initial determination hereunder as to whether a Gross-Up Payment is required, the Accounting Firm shall determine that no Gross-Up Payment is required if the Accounting Firm is able to conclude that no “Change of Control” has occurred (within the meaning of Section 280G of the Code). If the Accounting Firm determines that a Gross-Up Payment is required, the Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter both to the Companies and the Executive by no later than thirty (30) days following the Termination Date, if applicable, or such earlier time as is requested by the Companies or the Executive (if the Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive and the Companies with a written statement that such Accounting Firm has concluded that it is more likely than not that no Excise Tax is payable (including the reasons therefor) and the Executive is not required to report any Excise Tax on Executive’s federal income tax return.

(ii)If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive within twenty (20) days after the Determination (and all accompanying calculations and other material supporting the Determination) is delivered to the Companies by the Accounting Firm. Any determination by the Accounting Firm shall be binding upon the Companies and the Executive, absent manifest error.

(iii)As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Companies should have been made (“Underpayment”), or that Gross-Up Payments will have been made by the Companies which should not have been made (“Overpayments”). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with an amount which after payment of all taxes thereon is equal to any interest and penalties payable by the Executive as a result of such Underpayment) shall be promptly paid by the Companies to or for the benefit of the Executive.

(iv)In the case of an Overpayment, the Executive shall, at the direction and expense of the Companies, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Companies, and otherwise reasonably cooperate with the Companies to correct such Overpayment, provided, however, that the Executive shall not in any event be obligated to return to the Companies an amount greater than the portion of the Overpayment that Executive has retained after payment of all taxes thereon or has recovered as a refund from the applicable taxing authorities.

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(v)The Executive shall notify the Companies in writing of any claim by the Internal Revenue Service relating to the possible application of the Excise Tax under Section 4999 of the Code to any of the payments and amounts referred to herein and shall afford the Companies, at their expense, the opportunity to control the defense of such claim (for the sake of clarity, if the Internal Revenue Service is successful in any such claim or the Executive reaches a final settlement with the Internal Revenue Service with respect to such claim (after having afforded the Companies, at their expense, the opportunity to control the defense of such claim), the amount of the Excise Tax resulting from such successful claim or settlement shall be determinative as to whether or not there has been an Underpayment or an Overpayment for purposes of subsection 5(k)(iii).

(vi)Without limiting the intent of this Section 5(k) to make the Executive whole, on an after-tax basis, from the application of the Excise Taxes, all determinations by the Accounting Firm shall be made with a view to minimizing the application of Sections 280G and 4999 of the Code of any of the Total Payments, subject, however, to the following: the Accounting Firm shall make its determination on the basis of “substantial authority” (within the meaning of Section 6230 of the Code) and shall provide opinions to that effect to both the Companies and the Executive upon the request of either of them.

(vii)Notwithstanding any provision above to the contrary, any Gross-Up Payment payable under this Section 5(k) shall be made by the end of the calendar year following the calendar year in which the Executive remits the taxes. Further, notwithstanding any provision above to the contrary, any right to reimbursement under this Section 5(k) of expense incurred by Executive due to a tax audit or litigation addressing the existence or amount of a tax liability shall be made by the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted, or where as a result of the audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation. Any Gross-Up Payment and any reimbursement of expense payable under this Section 5(k) shall not be made before the date that is six months after the Termination Date.

Section 6.Further Obligations of the Executive.

(a)(1)           During the Executive’s employment by the Companies, whether before or after the Employment Period, and after the termination of Executive’s employment by the Companies, the Executive shall not, directly or indirectly, disclose, disseminate, make available or use any confidential information or proprietary data of the Companies or any of their Subsidiaries, except as reasonably necessary or appropriate for the Executive to perform the Executive’s duties for the Companies, or as authorized in writing by the Board or as required by any court or administrative agency (and then only after prompt notice to the Companies to permit the Companies to seek a protective order).

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(2) For purposes of this Agreement, “confidential information or proprietary data” means information and data prepared, compiled, or acquired by or for the Executive during or in connection with the Executive’s employment by the Companies (including, without limitation, information belonging to or provided in confidence by any Customer, Supplier, trading partner or other Person to which the Executive had access by reason of Executive’s employment with the Companies) which is not generally known to the public or which could be harmful to the Companies or their Subsidiaries if disclosed to Persons outside of the Companies. Such confidential information or proprietary data may exist in any form, tangible or intangible, or media (including any information technology-related or electronic media) and includes, but is not limited to, the following information of or relating to the Companies or any of their Subsidiaries, Customers or Suppliers:

(i)Business, financial and strategic information, such as sales and earnings information and trends, material, overhead and other costs, profit margins, accounting information, banking and financing information, pricing policies, capital expenditure/investment plans and budgets, forecasts, strategies, plans and prospects.

(ii)Organizational and operational information, such as personnel and salary data, information concerning the utilization or capabilities of personnel, facilities or equipment, logistics management techniques, methodologies and systems, methods of operation data and facilities plans.

(iii)Advertising, marketing and sales information, such as marketing and advertising data, plans, programs, techniques, strategies, results and budgets, pricing and volume strategies, catalog, licensing or other agreements or arrangements, and market research and forecasts and marketing and sales training and development courses, aids, techniques, instruction and materials.

(iv)Product and merchandising information, such as information concerning offered or proposed products or services and the sourcing of the same, product or services specifications, data, drawings, designs, performance characteristics, features, capabilities and plans and development and delivery schedules.

(v)Information about existing or prospective Customers or Suppliers, such as Customer and Supplier lists and contact information, Customer preference data, purchasing habits, authority levels and business methodologies, sales history, pricing and rebate levels, credit information and contracts.

(vi)Technical information, such as information regarding plant and equipment organization, performance and design, information technology and logistics systems and related designs, integration, capabilities, performance and plans, computer hardware and software, research and development objectives, budgets and results, intellectual property applications, and other design and performance data.

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(b)All records, files, documents and materials, in whatever form and media, relating to the Companies’ or any of their Subsidiaries’ business (including, but not limited to, those containing or reflecting any confidential information or proprietary data) which the Executive prepares, uses, or comes into contact with, including the originals and all copies thereof and extracts and derivatives therefrom, shall be and remain the sole property of the Companies or their Subsidiaries. Upon termination of the Executive’s employment for any reason, whether during or after the Employment Period, the Executive shall immediately return all such records, files, documents, materials and other property of the Companies and their Subsidiaries in the Executive’s possession, custody or control, in good condition, to the Companies.

(c)The Companies maintain, and Executive acknowledges and agrees, the Companies have and will entrust Executive with proprietary information, strategies, knowledge, customer relationships and know-how which would be detrimental to the Companies’ interest in protecting relationships with Customers and/or Suppliers if Executive were to provide services or otherwise participate in the operation of a competitor of the Company. Therefore, during (i) the Executive’s employment by the Companies, whether during or after the Employment Period, and (ii) the eighteen (18) month period following the end of the Executive’s employment with the Companies, the Executive shall not in any capacity (whether as an owner, employee, consultant or otherwise), at any time perform, manage, supervise, or be responsible or accountable for anyone else who is performing services — which are the same as, substantially similar or related to the services the Executive is providing, or during the last two years of the Executive’s employment by the Companies has provided, for the Companies or their Subsidiaries — for, or on behalf of, any other Person who or which is (1) a wholesaler of office products, including traditional office products, computer consumable products, office furniture, janitorial and/or sanitation products, food service paper/non-food products, audio/visual and business machines or such other products whether or not related to the foregoing provided by the Companies or their Subsidiaries during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period, (2) a provider of services the same as or substantially similar to those provided by the Companies or their Subsidiaries during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period, or (3) engaged in a line of business other than described in (1) or (2) hereinabove which is the same or substantially similar to the lines of business engaged in by the Companies or their Subsidiaries, or to any line of business which to the Executive’s knowledge is under active consideration or planning by the Companies and their Subsidiaries, during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period,.

(d)(1) During (i) the Executive’s employment by the Companies, whether during or after the Employment Period, and (ii) the eighteen (18) month period following the end of the Executive’s employment with the Companies , the Executive shall not at any time, directly or indirectly, solicit any Customer for or on behalf of any Person other than the Companies or any of their Subsidiaries with respect to the purchase of (A) office products, including traditional office products, computer consumable products, office furniture, janitorial and/or sanitation products, food service

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paper/non-food products, audio/visual and business machines, or such other products whether or not related to the foregoing provided by the Companies or their Subsidiaries to such Customer and/or Vendor during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period, (B) services the same as or substantially similar to those provided by the Companies or their Subsidiaries to such Customer during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period or (C) products or services from a line of business other than as described in (A) or (B) herein which are the same or substantially similar to the products and services provided to such Customer from a line of business engaged in by the Companies or their Subsidiaries during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period. Without limiting the foregoing, (i) during the Executive’s employment by the Companies and (ii) insofar as the Executive may be employed by, or acting for or on behalf of, a Supplier at any time within the eighteen (18) month period following the end of the Executive’s employment with the Companies, whether during or after the Employment Period, the Executive shall not at any time, directly or indirectly, solicit any Customer to switch the purchase of the products or services described hereinabove from the Companies or their Subsidiaries to Supplier.

(2)For purposes of this Agreement, a “Customer” is any Person who or which has ordered or purchased by or from the Companies or any of their Subsidiaries (A) office products, including traditional office products, computer consumable products, office furniture, janitorial and/or sanitation products, food service paper/non-food products, audio/visual and business machines or such other products whether or not related to the foregoing, (B) services provided by or from the Companies or any of their Subsidiaries or (C) products or services from a line of business other than as described in (A) or (B) herein which are the same or substantially similar to the products and services from a line of business engaged in by the Companies or their Subsidiaries during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period. For purposes of this Agreement, a “Supplier” is any Person who or which has furnished to the Companies or their Subsidiaries for resale (A) office products, including traditional office products, computer consumable products, office furniture, janitorial and/or sanitation products, food service paper/non-food products, audio/visual and business machines or such other products whether or nor related to the foregoing (B) services provided by or from the Companies or any of their Subsidiaries or (C) products or services from a line of business other than as described in (A) or (B) herein which are the same or substantially similar to the products and services from a line of business engaged in by the Companies or their Subsidiaries during the last twelve (12) months of the Executive’s employment with the Companies, whether during or after the Employment Period.

(e)During the Executive’s employment by the Companies, whether during or after the Employment Period, and during the twenty-four (24) month period following the end of the Executive’s employment with the Companies, the Executive shall not at any time, directly or indirectly, induce or solicit any employee of the

19

Companies or any of their Subsidiaries for the purpose of causing such employee to terminate his or her employment with the Companies or such Subsidiary.

(f)The Executive shall not, directly or indirectly, make or cause to be made (and shall prohibit the officers, directors, employees, agents and representatives of any Person controlled by Executive not to make or cause to be made) any disparaging, derogatory, misleading or false statement, whether orally or in writing, to any Person, including members of the investment community, press, and customers, competitors and advisors to the Companies, about the Companies, their respective parents, Subsidiaries or Affiliates, their respective officers or members of their boards of directors, or the business strategy or plans, policies, practices or operations of the Companies, or of their respective parents, Subsidiaries or Affiliates.

(g)If any court determines that any portion of this Section 6 is invalid or unenforceable, the remainder of this Section 6 shall not thereby be affected and shall be given full effect without regard to the invalid provision. If any court construes any of the provisions of Section 6(c), 6(d), 6(e) or 6(f) above, or any part thereof, to be unreasonable because of the duration or scope of such provision, such court shall have the power to reduce the duration or scope of such provision and to enforce such provision as so reduced.

(h)During the Executive’s employment with the Companies, whether during or after the Employment Period and during the eighteen (18) month period following the end of Executive’s employment with the Companies, the Executive agrees that, prior to accepting employment with a Customer or Supplier of the Companies, the Executive will give notice to the Chief Executive Officer of the Companies. The Companies reserve the right to make such Customer or Supplier aware of the Executive’s obligations under Section 6 of this Agreement.

(i)During and following Executive’s Employment Period, the Executive shall furnish a copy of this Section 6 in its entirety to any prospective employer prior to accepting employment with such prospective employer.

(j)The Executive hereby acknowledges and agrees that damages will not be an adequate remedy for the Executive’s breach of any provision of this Section 6, and further agrees that the Companies shall be entitled to obtain appropriate injunctive and/or other equitable relief for any such breach, without the posting of any bond or other security, in addition to all other legal remedies to which the Companies may be entitled.

Section 7.Successors.  The Companies may assign their rights under this Agreement to any successor to all or substantially all the assets of the Companies, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Companies. Any such assignment by the Companies shall remain subject to the Executive’s rights under Section 5 hereof. The rights of the Executive under this Agreement may not be assigned or encumbered by the Executive, voluntarily or involuntarily, during the Executive’s lifetime, and any such purported assignment shall be void ab initio.

20

Notwithstanding the foregoing, all rights of the Executive under this Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive hereunder shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs or representatives.

Section 8.Third Parties.  Except for the rights granted to the Companies and their Subsidiaries pursuant hereto (including, without limitation, pursuant to Section 6 hereof) and except as expressly set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give any person other than the parties hereto and their successors and permitted assigns any rights or remedies under or by reason of this Agreement.

Section 9.Enforcement.  The provisions of this Agreement shall be regarded as divisible and, if any of said provisions or any part or application thereof is declared invalid or unenforceable by a court of competent jurisdiction, the same shall not affect the other provisions hereof, other parts or applications thereof or the whole of this Agreement, but such provision shall be deemed modified to the extent necessary to render such provision enforceable, and the rights and obligations of the parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreements of the parties herein set forth.

Section 10.Amendment.  This Agreement may not be amended or modified at any time except by a written instrument approved by the Board, and executed by the Companies and the Executive; provided, however, that any attempted amendment or modification without such approval and execution shall be null and void ab initio and of no effect.

Section 11.Payment; Taxes and Withholding.  The Company shall be responsible as employer for payment of all cash compensation and severance payments provided herein and Holding shall cause the Company to make such payments. The Executive shall not be entitled to receive any additional compensation from either of the Companies for any services the Executive provides to Holding or the Companies’ Subsidiaries. The Company shall be entitled to withhold from any amounts to be paid to the Executive hereunder any federal, state, local, or foreign withholding or other taxes or charges which it is from time to time required to withhold. The Company shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise. Executive shall be solely responsible for the payment of all taxes due and owing with respect to wages, benefits, and other compensation provided to him hereunder. This Agreement is intended to satisfy, or be exempt from, the requirements of Section 409A(a)(2), (3) and (4) of the Code, including current and future guidance and regulations interpreting such provisions, and should be interpreted accordingly.

Section 12.Governing Law.  This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to principles of conflicts of law of Illinois or any other jurisdiction.

Section 13.Notice.  Notices given pursuant to this Agreement shall be in writing and shall be deemed given when received and, if mailed, shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid:

21

If to the Companies:

United Stationers Inc.

United Stationers Supply Co.

2200 E. Golf Road

Des Plaines, IL 60016-1267

Attention: President and Chief Executive Officer

If to the Executive:

Eric A. Blanchard

or to such other address as the party to be notified shall have given to the other in accordance with the notice provisions set forth in this Section 13.

Section 14.No Waiver.  No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at any time.

Section 15.Headings.The headings contained herein are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

Section 16.Indemnification.The provisions set forth in the Indemnification Agreement appended hereto as Attachment A are hereby incorporated into this Agreement and made a part hereof. The parties shall execute the Indemnification Agreement contemporaneously with the execution of this Agreement.

Section 17.Execution in Counterparts.This Agreement, including the Indemnification Agreement, may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 18.Arbitration.  Any dispute, controversy or question arising under, out of, or relating to this Agreement (or the breach thereof), or, the Executive’s employment with the Companies or termination thereof, shall be referred for arbitration in Chicago, Illinois to a neutral arbitrator selected by the Executive and the Companies (or if the parties are unable to agree on selection of such an arbitrator, one selected by the American Arbitration Association pursuant to its rules referred to below) and this shall be the exclusive and sole means for resolving such dispute. Such arbitration shall be conducted in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association. Except as provided in Section 5(d)(x) above, the arbitrator shall have the discretion to award reasonable attorneys’ fees, costs and expenses to the prevailing party. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Nothing in this Section 18 shall be construed so as to deny the Companies the right and power to seek and obtain injunctive relief in a court of equity for any breach or threatened breach by the Executive of any of the Executive’s covenants in Section 6 hereof. Moreover, this Section 18 and Section 12

22

hereof shall not be applicable to any dispute, controversy or question arising under, out of, or relating to the Indemnification Agreement.

Section 19.Survival.  Notwithstanding the stated Term of this Agreement, the provisions of this Agreement necessary to carry out the intention of the parties as expressed herein, including without limitation those in Sections 5, 6, 7, 16 and 18, shall survive the termination or expiration of this Agreement.

Section 20.Construction.  The parties acknowledge that this Agreement is the result of arm’s-length negotiations between sophisticated parties each afforded representation by legal counsel. Each and every provision of this Agreement shall be construed as though both parties participated equally in the drafting of same, and any rule of construction that a document shall be construed against the drafting party shall not be applicable to this Agreement.

Section 21.Free to Contract.  The Executive represents and warrants to the Companies that the Executive is able freely to accept employment by the Companies as described in this Agreement and that there are no existing agreements, arrangements or understandings, written or oral, that would prevent the Executive from entering into this Agreement, would prevent or restrict the Executive in any way from rendering services to the Companies as provided herein during the Employment Period or would be breached by the future performance by the Executive of the Executive’s duties and responsibilities hereunder.

Section 22.Entire Agreement.  This Agreement, including the Indemnification Agreement and any other written undertakings by the Executive referred to herein, supersedes all other agreements, arrangements or understandings (whether written or oral) between the Companies and the Executive with respect to the subject matter of this Agreement including without limitation the Prior Agreement and the Executive’s employment relationship with the Companies and any of their Subsidiaries, and this Agreement contains the sole and entire agreement among the parties hereto with respect to the subject matter hereof.

*          *          *

IN WITNESS WHEREOF, the parties have executed this Agreement in one or more counterparts, each of which shall be deemed one and the same instrument, as of the day and year first written above.

EXECUTED ON:	UNITED STATIONERS 1NC.
12/31, 2008	By:	/s/ Richard W. Gochnauer
		Name: Richard W. Gochnauer
		Title: President and Chief Executive Officer
EXECUTED ON:	UNITED STATIONERS SUPPLY CO.
12/31, 2008	By:	/s/ Richard W. Gochnauer
		Name: Richard W. Gochnauer
		Title: President and Chief Executive Officer

23

EXECUTED ON:	EXECUTIVE:
12/31, 2008	/s/ Eric A. Blanchard
	Eric A. Blanchard

24

EX-10.5

Exhibit 10.5

EXECUTION COPY

FOURTH AMENDMENT TO THE

TRANSFER AND ADMINISTRATION AGREEMENT

THIS FOURTH AMENDMENT TO THE TRANSFER AND ADMINISTRATION AGREEMENT, dated as of March 30, 2010 (this “Amendment”), is entered into by and among (i) UNITED STATIONERS RECEIVABLES, LLC (the “SPV”), (ii) UNITED STATIONERS SUPPLY CO., as Originator (the “Originator”), (iii) UNITED STATIONERS FINANCIAL SERVICES LLC, as Seller (the “Seller”) and as Servicer (the “Servicer”), (iv) ENTERPRISE FUNDING COMPANY LLC, as a conduit investor (“Enterprise Funding”) and (v) BANK OF AMERICA, NATIONAL ASSOCIATION, as an Alternate Investor (“Alternate Investor”) and Agent (the “Agent”).  Capitalized terms used and not otherwise defined herein are used as defined in the Transfer and Administration Agreement, including by reference therein, dated as of March 3, 2009 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Transfer Agreement”), among the SPV, the Originator, the Seller, the Alternate Investors party thereto, the Conduit Investors party thereto, the Class Agents party thereto and the Agent.

WHEREAS, the parties hereto desire to amend the Transfer Agreement in certain respects as provided herein;

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.Amendments to the Transfer Agreement.  The following amendment is made to the Transfer Agreement:

(a)Section 6.1(a)(i)(a) of the Transfer Agreement is hereby amended and restated in its entirety as follows:

“(a) Within ninety (90) days after the close of the SPV’s and the Performance Guarantor’s fiscal years, (A) unaudited financial statements, prepared in accordance with GAAP on a consolidated basis for the SPV and (B) audited financial statements, prepared in accordance with GAAP on a consolidated basis for the Performance Guarantor and its Subsidiaries, in each case, including balance sheets as of the end of such period, related statements of operations, shareholder’s equity and cash flows; provided that the audited financial statements for the Performance Guarantor and its Subsidiaries shall be accompanied by an unqualified audit report certified by independent registered public accountants of national or regional recognition, acceptable to the Agent, prepared in accordance with GAAP and by a certificate of said accountants that, in the course of the foregoing, they have obtained no knowledge of any Termination Event or Potential Termination Event, or if, in the opinion of such accountants, any Termination Event or Potential Termination Event shall exist, stating the nature and status thereof, and”

SECTION 2.Effective Date.This Amendment shall become effective as of the date (the “Effective Date”) that the Agent shall have received counterparts hereof duly executed by each of the parties hereto.

SECTION 3.Representations and Warranties.

Each of the Originator, the SPV, the Seller and the Servicer hereby certifies that, subject to the effectiveness of this Amendment, each of the representations and warranties set forth in the Transfer Agreement is true and correct on the date hereof, as if each such representation and warranty were made on the date hereof.

SECTION 4.Transfer Agreement in Full Force and Effect as Amended.

Except as specifically amended hereby, the Transfer Agreement shall remain in full force and effect.  All references to the Transfer Agreement shall be deemed to mean the Transfer Agreement as modified hereby.  The parties hereto agree to be bound by the terms and conditions of the Transfer Agreement, as amended by this Amendment, as though such terms and conditions were set forth herein.

SECTION 5.Consent of Performance Guarantor.

The Performance Guarantor hereby consents to the amendments to the Transfer Agreement set forth in this Amendment.

SECTION 6.Miscellaneous.

6.1This Amendment may be executed in any number of counterparts, and by the different parties hereto on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.  This Amendment shall become effective upon the Agent’s receipt of counterparts of this Amendment, duly executed by all parties hereto (including the Performance Guarantor).

6.2The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

6.3This Amendment may not be amended or otherwise modified except as provided in the Transfer Agreement.

6.4Any provision in this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

2

6.5THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

3

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

UNITED STATIONERS RECEIVABLES, LLC

By:

Name:

Title:

UNITED STATIONERS SUPPLY CO., as Originator

By:

Name:

Title:

UNITED STATIONERS FINANCIAL SERVICES LLC, as Seller and as Servicer

By:

Name:

Title:

[signatures continued on next page]

Fourth Amendment to TAA - United Stationers

S-1

BANK OF AMERICA, NATIONAL ASSOCIATION,
as an Alternate Investor and Agent

By:

Name:

Title:

ENTERPRISE FUNDING, as a Conduit Investor

By:

Name:

Title:

[signatures continued on next page]

Fourth Amendment to TAA - United Stationers

S-2

Acknowledged and consented to by:

UNITED STATIONERS INC.,
as the Performance Guarantor

By:

Name:

Title:

[end of signatures]

Fourth Amendment to TAA - United Stationers

S-3

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Richard W. Gochnauer, certify that:

1.I have reviewed this quarterly report on Form 10-Q of United Stationers Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 5, 2010	/s/ RICHARD W. GOCHNAUER
	Richard W. Gochnauer President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Victoria J. Reich, certify that:

1.I have reviewed this quarterly report on Form 10-Q of United Stationers Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2010	/s/ VICTORIA J. REICH
	Victoria J. Reich Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of United Stationers Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard W. Gochnauer, President and Chief Executive Officer of the Company, and Victoria J. Reich, Senior Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ RICHARD W. GOCHNAUER

Richard W. Gochnauer
President and Chief Executive Officer
May 5, 2010

/s/ VICTORIA J. REICH

Victoria J. Reich
Senior Vice President and Chief Financial Officer
May 5, 2010