Exhibit 10.38

 

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 P. Cody Phipps
(hereinafter referred to as the “Executive”).

 

WHEREAS, the Companies and Executive are parties to an Executive Employment
Agreement dated August 18, 2003 (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 Executive 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

 

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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; (v) gross 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.

 

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“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
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-l I 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

 

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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 Folding 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
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,

 

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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.

 

“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)

“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(0

“Supervising Officer”

Section 3(a)

“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 President, United Stationers Supply Company, of the
Companies, (ii) shall report directly to an officer of the Companies (the
“Supervising Officer”) who shall be selected by the Board or the Chief Executive
Officer in its or his or her sole discretion, (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

 

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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 performance is agreed in writing among the parties and except
for required travel by the 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 (l) for-profit business enterprise.

 

Section 4.                                          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 $478,590 (“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 teens of any applicable policy, plan
or program, in which case the payment terms of such policy, plan or program
shall he 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 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 (1-1/2) 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 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

 

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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 times (1½) 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 (1½) 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 (1½) 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);

 

(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;

 

(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

 

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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 five (5) additional years of credit for purposes of age, benefit service
and vesting;

 

(viii)                        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 twenty percent (20%) of the sum of (i) the Executive’s then existing Base
Salary and (ii) the target incentive compensation award for the calendar year
during which the Termination Date occurs. 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 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 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

 

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employer, provided that the 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 seven (7) additional years of credit
for purposes of age, benefit service and vesting under the Company’s defined
benefit retirement plan;

 

(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
Finn selected by the Executive and paid for by the Companies in an amount not to
exceed twenty percent (20%) of the sum of (i) the Executive’s then existing Base
Salary and (ii) the target incentive compensation award for the calendar year
during which the Termination Date occurs. The Executive shall not be 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

 

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arising from the dispute that could be raised in a court of law; (B) Executive
shall submit to the Company verification of legal expenses 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 expenses
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
pro-rata award to 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), plus (B) 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 five (5) additional years of credit for purposes of age, benefit service and
vesting; or

 

(ii)                                  in the event the Employment Period is
terminated as a result of Executive’s Retirement, an amount equal to: (A) 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 pro-rata
award to 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 Termination Date elapsed prior to the Termination Date and the denominator
of which is three hundred and sixty-five (365); plus (B) 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 five
(5) additional years of credit for purposes of age, benefit service and vesting.

 

(iii)                               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

 

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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
Disability or Retirement and, if after a Change of Control, without Good Reason,
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 eighteenth month period
commencing on his Termination Date. Subject to the preceding sentence and 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)                                     Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that 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

 

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Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.

 

(i)                                     All computations and determinations
relevant to Section 5(j) and this subsection 5(j)(i) shall be made by a national
accounting firm selected and reimbursed by the Companies from among the ten
(10) largest accounting rims 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 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

 

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the Overpayment that Executive has retained after payment of all taxes thereon
or has recovered as a refund from the applicable taxing authorities.

 

(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(j)(iii).

 

(vi)                              Without limiting the intent of this
Section 5(j) 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(j) 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(j) 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(j) 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).

 

(2)                                  For purposes of this Agreement,
“confidential information or proprietary data” means information and data
prepared, compiled, or acquired by or for the

 

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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.

 

(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,

 

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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)                                  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 Executive’s employment with the
Companies, the Executive shall not within the United States and Canada 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
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
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 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 during the last twelve (12)
months of the Executive’s employment with the Companies, whether during or after
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 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, whether during or after
the Employment Period, 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,
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.

 

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(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 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 Employment
Period.

 

(e)                                  During the Executive’s employment by the
Companies, whether during or after the Employment Period, and during 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,
induce or solicit any employee of the 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(0 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.

 

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(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 he 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.

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

 

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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:

 

If to the Companies:

 

United Stationers Inc.

United Stationers Supply Co.

One Parkway North Blvd.

Suite 100

Deerfield, IL

60015-2559Attention:

General Counsel

 

If to the Executive:

 

P. Cody Phipps

 

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 arc 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, maybe 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.

 

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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)(ix) 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 maybe
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 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.

 

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*                                        
*                                         *

 

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 INC.

 

 

 

 

 

, 2008

By:

 

 

 

Name: Richard W. Gochnauer

 

 

Title:   President and Chief Executive Officer

 

 

EXECUTED ON:

UNITED STATIONERS SUPPLY CO.

 

 

 

 

 

, 2008

By:

 

 

 

Name: Richard W. Gochnauer

 

 

Title:   President and Chief Executive Officer

 

 

EXECUTED ON:

EXECUTIVE:

 

 

 

 

 

, 2008

 

 

P. Cody Phipps

 

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