Exhibit 10.7

 

 

Essendant Inc.

Annual Cash Incentive Award Plan

For Section 16 Officers

 

Essendant, Inc. maintains the 2015 Long-Term Incentive Plan, as amended and
restated effective May 20, 2015, and as the same may be subsequently amended,
restated or modified (the “LTIP”), under which the Human Resources Committee
(“Committee”) has the discretion to grant Cash Incentive Awards (“Awards”).
Pursuant to the LTIP, the Committee established an annual Umbrella Bonus Pool
(the “Umbrella Bonus Pool”, also referred to as the “LTIP Cash Award Pool”)
that, within the individual limitations specified under the LTIP for Cash
Incentive Awards, determines the maximum potential Cash Incentive Awards that
can be paid to the Chief Executive Officer and the other “covered employees” for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and
to certain other executive officers. The Committee wishes to exercise its
discretion to grant Awards pursuant to the terms and conditions of the LTIP, the
Umbrella Bonus Pool, and this Annual Cash Incentive Award Plan (the “CIP”),
which is hereby established by the Committee effective as of January 1, 2017,
for the purpose of granting Awards (subject to the terms and conditions of the
LTIP and the Umbrella Bonus Pool).  This CIP has been designated by the
Committee as a part of the Umbrella Bonus Pool.

Any term that is capitalized but not defined in this CIP will have the meaning
set forth in the LTIP or in the Umbrella Bonus Pool.

 

1.

Eligibility. For any Performance Period (as defined in Section 3 below), the
Committee shall determine and designate those officers of the Company for
purposes of Section 16 of the Securities Exchange Act of 1934 (“Section 16
Officers”) and who will be granted an Award under this CIP and such persons
shall be “Participants” in this CIP for that Performance Period.

 

2.

Awards. 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 of 1986, as amended (the “Code”) and are
subject to the maximum Award amounts specified in the LTIP and the Umbrella
Bonus Pool.  Any Award granted under this CIP will be evidenced by a separate
writing and subject to the terms and conditions of the LTIP, the Umbrella Bonus
Pool, 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 upon the achievement of one or more performance measures during the
applicable Performance Period. The applicable performance measures 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(z) 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 final Award determined
under Section 7 below.

 

6.

Partial Year Participation. The Committee may allow an individual who transfers
into or out of an eligible position (Section 16 Officers) 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 as reasonably determined
by the Committee, but generally based on the Participant’s compensation earned
during the Performance Period by the Participant at each applicable, position,
salary and bonus level.  Situations in which proration may be appropriate
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 the
conditions of 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. In the case of prorated Awards, the
Participant’s final Award will be the sum of all prorated Awards.

 

a.

Terminations – Except as otherwise provided in any written employment agreement
between the Participant and the Company, if a Participant's employment
terminates during a Performance Period due to death, disability (as defined by
the Social Security Administration), retirement (which is a voluntary
termination of employment by the Participant on or after reaching age 60 if the
Participant also has at least 10 years of service with the Company) or a
reduction in force to be determined by the Company in its sole discretion, the
Participant shall be eligible to receive a prorated portion of the Award as
determined based on actual performance through the end of the Performance Period
in accordance with Section 7 below.

 

b.

Leaves of Absence - Incentive compensation, including any Award payable under
the CIP,  is prorated based on the number of days a Participant takes an unpaid
leave of absence during the incentive measurement timeframe (i.e., the
Performance Period) unless otherwise required by state law.  A leave day where a
Participant only receives benefit

 

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Exhibit 10.7

 

 

payments (e.g., short term disability, long term disability and workers’
compensation) is deemed unpaid for the purpose of determining incentive pay.  An
approved intermittent, partial leave day is deemed paid for the purpose of
determining incentive compensation.

 

7.

Adjustment of Performance Measure Targets and Determination and Payment of Final
Awards – The Committee has the right to adjust the performance measure targets
(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 targets or unduly influenced the Company’s ability to meet them,
subject to the terms and provisions of the Umbrella Bonus Pool.  The Committee
also has the right to adjust the performance measure targets during the
Performance Period in the event an extraordinary and unanticipated corporate
event such as a Change of Control requires that the CIP be amended to provide
for a Performance Period consisting of less than twelve months.  The occurrence
of the event requiring an amendment to the CIP to provide for a Performance
Period of less than twelve months must be objectively determinable and must be
certified by the Committee, and the certification of the event must be strictly
ministerial and not involve any discretionary authority.  Notwithstanding the
foregoing, the Committee has the right to adjust Awards in accordance with the
provisions of the Umbrella Bonus Pool.  

As soon as practicable after the close of the Performance Period, the Committee
will review performance against the previously established performance measures
and approve final Awards for each Participant who remains actively employed by
the Company on the last day of the Performance Period (or who satisfies the
provisions of Section (6)). A Participant will be eligible to receive payment
with respect to an Award only to the extent that, (a) the Umbrella Bonus Pool
was funded, (b) the performance measures for such Award are achieved, and (c) it
is determined that all or some portion of the Participant’s Award has been
earned for the Performance Period.  In the case of the Participants whose
compensation is subject to Section 162(m) of the Code, the Committee must
certify, in writing, prior to payment of the final Awards that the performance
measures in the Umbrellas Bonus Pool were achieved and, if so, calculate and
certify in writing the amount of the Award earned by each such Participant for
the Performance Period under the Umbrella Bonus Pool. Such amount may be
adjusted in accordance with the provisions of the Umbrella Bonus Pool. The
Company will pay the final Awards in cash as soon as administratively
practicable, but no later than March 15th of the calendar year following the
calendar year in which the last day of the Performance Period occurred, in
accordance with each Participant's payroll election (i.e., direct deposit or pay
card) at the time the Award is distributed. Final Awards shall be a liability of
the Company on the last day of the Performance Period. Notwithstanding anything
herein to the contrary, if the Committee determines that payment or accrual of
any final Award is likely to cause the Company to violate a covenant under any
agreement between the Company and any lender, Committee may reduce or eliminate
any Final Award to the extent earned based on a Participant’s performance
against management business objectives.

 

 

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, the Umbrella Bonus Pool
and this CIP. Any interpretations of the LTIP, the Umbrella Bonus Pool or this
CIP by the Committee and any decisions made by it under the LTIP, the Umbrella
Bonus Pool 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.

Controlling Terms and Conditions. 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 and the Umbrella Bonus Pool (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, the Umbrella Bonus
Pool and this CIP.  The LTIP (along with the Umbrella Bonus Pool, this CIP and
any individual Award granted to a Participant) 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) involving cash incentive Awards.

 

 

12.

Recovery of Payments. Notwithstanding any contrary provision of this CIP, the
Companies may recover any Award granted or paid under the CIP, to the extent
required by the terms of any clawback or compensation recovery policy adopted by
the Companies.

 

 

13.

Amendment and Termination. This CIP may be amended or terminated in accordance
with the provisions of the LTIP and the Umbrella Bonus Pool, and may otherwise
be amended or terminated by the Company without the consent of any other person,
provided that this CIP shall not be amended or terminated in any manner that
would be inconsistent with Section 162(m) (unless otherwise provided pursuant to
Section 6 above) or Section 409A of the Code (to the extent applicable).

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