Exhibit 10.2

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN

OMITTED AND FILED SEPARATELY WITH THE

SECURITIES AND EXCHANGE COMMISSION

PURSUANT TO A REQUEST FOR CONFIDENTIAL

TREATMENT FILED WITH THE COMMISSION.

THE OMITTED PORTIONS ARE INDICATED BY [**].

 

ESSENDANT INC.
2015 LONG-TERM INCENTIVE PLAN
2016 Cash Incentive Award Agreement With EPS Minimum

 

This Cash Incentive Award Agreement (this “Agreement”), dated as of July 15,
2016 (the “Award Date”), is by and between Ric Phillips (the “Participant”), and
Essendant 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
2015 Long-Term Incentive Plan (the “Plan”). In the exercise of its discretion to
grant cash incentives, the Committee has determined that the Participant should
receive a Cash Incentive Award, on the following terms and conditions:

 

1.

Grant. The Company hereby grants to the Participant a Cash Incentive Award (the
“Award”). The Award will be subject to the terms and conditions of the Plan and
this Agreement. The Award constitutes the right, subject to the terms and
conditions of the Plan and this Agreement, to receive a future payment of cash.

 

2.

Maximum and Target. The maximum amount the Participant may be paid under this
Agreement (“Maximum”) is eight hundred thousand dollars ($800,000.00). The
“Target” for purposes of this Agreement is one-half (1/2) of the Maximum or four
hundred thousand dollars ($400,000.00).

 

3.

Vesting and Effect of Date of Termination. The Participant’s right to receive
payment under this Cash Incentive Award will vest on December 31, 2018 (the
“Scheduled Vesting Date”), provided that the Participant’s Date of Termination
has not occurred before the Scheduled Vesting Date, and provided further that
the Company’s cumulative Earnings Per Share (as defined in Section 6) for the
four (4) calendar quarters ending June 30, 2017 exceeds fifty cents ($0.50) per
share.

If the Participant’s Date of Termination occurs for any reason before the
Scheduled Vesting Date all of the rights to receive payment under this Agreement
will be forfeited, subject to the following exceptions:

 

 

(a)

If (i) the Company meets the Earnings Per Share goal of fifty cents ($0.50) per
share stated above, and (ii) prior to the Participant’s Date of Termination
substantially all of the assets or equity of the ORS Nasco business is sold to
an unrelated third party (as determined by the Committee), Participant will
receive a payment equal to the percentage specified in Section 4 below (the
“Applicable Vesting Percentage”) times Target.

 

 

(b)

If (i) the Company undergoes a Change of Control and (ii) the Participant’s Date
of Termination occurs after such Change of Control and prior to the occurrence
of the event described in Section 3(a)(ii) as a result of the Participant’s
death, Disability (as defined below), or involuntary “separation from service”
(as described in Treasury Regulation Section 1.409A-1(h)) without Cause or for
Good Reason, the Participant will receive a payment equal to the Applicable
Vesting Percentage times Target.

 

(c)

If, (i) the Company meets the Earnings Per Share goal of fifty cents ($0.50) per
share stated above, and (ii) prior to a Change of Control and prior to the
occurrence of the event described in Section 3(a)(ii), the Participant’s Date of
Termination occurs as a result of his death or Disability (as defined below),
the Participant will receive a payment equal to the Applicable Vesting
Percentage times Target.  

 

E103243/LTI002DS.DOCx/001-Z7-03354  05/20161

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For purposes of this Agreement, the term “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.  Notwithstanding the foregoing, to
the extent necessary to cause the Award to comply with the requirements of
Section 409A of the Internal Revenue Code, as amended (the “Code”), “Disability”
shall mean a “disability” as described in Treasury Regulations Section
1.409A-3(i)(4).

 

4.

Applicable Vesting Percentage. If (i) the Company’s Committee has certified in
writing that the cumulative Earnings Per Share (as defined in Section 6) for the
four (4) calendar quarters ending June 30, 2017 exceeds fifty cents ($0.50) per
share (which certification shall occur no later than December 15, 2017), (ii)
the Participant is still actively employed on the Scheduled Vesting Date, and
(iii) an event described in Section 3(a)(ii), 3(b)(ii) or 3(c)(ii) (a “Vesting
Event”) has not occurred prior to the Scheduled Vesting Date, then the
Applicable Vesting Percentage is one hundred percent (100%).  For the avoidance
of doubt, only the occurrence of the first Vesting Event will be considered a
Vesting Event for purposes of this Agreement.

Otherwise, except with respect to a Vesting Event described in Section 3(b)(ii)
(for which no such certification shall be required), if the Committee has
certified in writing the Company’s cumulative Earnings Per Share (as defined in
Section 6) for the four (4) calendar quarters ending June 30, 2017 exceeds fifty
cents ($0.50) per share (which certification shall occur no later than December
15, 2017), and if a Vesting Event has occurred prior to the Scheduled Vesting
Date, the Participant’s Applicable Vesting Percentage shall be determined
according to the date the Vesting Event occurs as follows:

 

 

§

Thirty-five percent (35%) if the Vesting Event occurs after December 31, 2016
and prior to July 1, 2017;

 

 

§

Forty percent (40%) if the Vesting Event occurs after June 30, 2017 and prior to
January 1, 2018.

 

 

§

Sixty percent (60%) if the Vesting Event occurs after December 31, 2017 and
prior to July 1, 2018.

 

 

§

Eighty percent (80%) if the Vesting Event occurs after June 30, 2018 and prior
to December 31, 2018.

 

Notwithstanding anything to the contrary in this Section 4, (a) if either (I) a
Vesting Event occurs prior to January 1, 2017, or (II) except with respect to a
Vesting Event described in Section 3(b)(ii), the Committee does not certify in
writing that the cumulative Earnings Per Share (as defined in Section 6) for the
four (4) calendar quarters ending June 30, 2017 has exceeded fifty cents ($0.50)
per share (which certification shall occur no later than December 15, 2017),
then in either case the Applicable Vesting Percentage shall be zero percent
(0%), and (b) if the Participant becomes entitled to payment hereunder pursuant
to Section 3(b), the Applicable Vesting Percentage shall be determined pursuant
to this Section 4 irrespective of whether the Committee’s certification has
occurred.

 

5.

Amount and Time of Payment. If the Applicable Vesting Percentage is one hundred
percent (100%), then the amount of the Participant’s payment will equal the
Maximum subject to the Committee’s right to reduce the payment in accordance
with the guidelines in Exhibit I attached to this Agreement. Otherwise, the
amount of the Participant’s payment will equal the Applicable Vesting Percentage
times Target.

If the Participant’s Date of Termination does not occur prior to the Scheduled
Vesting Date, payment shall be made in the first calendar quarter following the
Scheduled Vesting Date. If the

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Participant’s Date of Termination does occur prior to the Scheduled Vesting
Date, payment shall be made on the first business day following a period of six
(6) months after the Date of Termination, or if later, the first business day
following the Committee’s certification in writing that the cumulative Earnings
Per Share (as defined in Section 6) for the four (4) calendar quarters ending
June 30, 2017 has exceeded fifty cents ($0.50) per share (which certification
shall occur no later than December 15, 2017); provided that any payment that
becomes due pursuant to Section 3(b) hereof shall not be subject to delay
pending such certification.

 

6.

Earnings Per Share. For purposes of this Agreement, Earnings Per Share will be
the amount as reported in the Company’s quarterly earnings releases in the table
titled Reconciliation of Non-GAAP Financial Measures, Adjusted Operating Income,
Net Income and Diluted Earnings Per Share, and re-calculated based on accounting
standards promulgated by the Financial Accounting Standards Board or similar
accounting standards body in place as of December 31, 2015, and adjusted to
eliminate the effects of any and all of the following (net of any tax effects)
to the extent not already included in the aforementioned table: (i) write-offs
of previously capitalized financing costs; (ii) subsidiary charitable
contributions to the Essendant Charitable Foundation; (iii) projected impacts on
financial results of any acquisition or disposition (including liquidation of at
least ninety percent (90%) of the assets) of any business during the applicable
measurement period as reflected in the final financial valuation of the
transaction presented to the Board prior to the Board’s approval of the
transaction; (iv) impairment of goodwill and other intangible assets (as defined
by ASC 350); (v) curtailment, settlement, or termination of any of the Company’s
pension plans (as defined in ASC 715); (vi) litigation or claim judgments and
settlements; and (vii) restructuring costs (as defined by ASC 420).

 

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

 

7.

Payment in the Event of the Participant’s Death. If the Participant dies before
the Company has paid the amount due under this Agreement, the Company will pay
the amount due (if any) to the beneficiary designated by the Participant, or if
no such beneficiary has been designated, to the Participant’s estate.

 

8.

Restrictive Covenants; Recovery of Payments. Notwithstanding any contrary
provision of this Agreement, the Company may recover the Award granted or paid
under this Agreement to the extent required by the terms of any clawback or
compensation recovery policy adopted by the Company. Furthermore, and in
consideration of the grant of the Award under the terms of this Agreement and in
recognition of the fact that Participant has received and will receive
Confidential Information (as defined in paragraph 8(e)(iv)) during Participant’s
Service (as defined in paragraph 8(e)(v)), Participant agrees to be bound by the
restrictive covenants set forth in paragraphs 8(a), 8(b), 8(c), and 8(d), below
(the “Restrictive Covenants”). In addition, but subject to the last sentence of
this paragraph, Participant agrees that if Participant violates any provision of
such Restrictive Covenants, then any payment received under this Agreement at
any time during the three (3) year period immediately preceding the date on
which such violation occurred shall immediately be repaid back to the Company
(the “Forfeited Payment”). Subject to the last sentence of this paragraph,
Participant hereby agrees that upon demand from the Company at any time after
discovery of the violation of a Restrictive Covenant or imposition of a claw
back, Participant shall pay to the Company an amount equal to the payment
(before tax withholdings) made by Company to Participant under this Agreement.
Subject to the last sentence of this paragraph and any applicable limitations of
Code Section 409A, by accepting this Agreement, Participant consents to a
deduction from any amounts the Company owes Participant from time to time
(including amounts owed to Participant as wages or other compensation, fringe
benefits, or vacation pay, as well as any other amounts owed to Participant by
the Company), to the extent of the amounts Participant owes the Company under
this Section 8. Whether or not the Company elects to make any set-off in whole
or in part, if the Company does not recover by means of set-off the full amount
Participant owes

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pursuant to this Section 8, Participant hereby agrees to pay immediately the
unpaid balance to the Company. Notwithstanding the foregoing, if and to the
extent that a violation of a Restrictive Covenant is curable at the time of
discovery by the Company, Participant will not be deemed to have violated such
Restrictive Covenant unless and until the Company gives Participant written
notice of such violation and Participant fails to cure such violation within
thirty (30) calendar days after receipt of such written notice.

 

(a)

Confidential Information. Participant acknowledges that during the course of his
or her Service, he or she has received and will receive Confidential
Information. Participant further acknowledges that he or she has received a copy
of the Company’s Confidentiality and Nondisclosure Policy. Participant
acknowledges and agrees that it is his or her responsibility to protect the
integrity and confidential nature of the Confidential Information, both during
and after his or her Service, and Participant shall not directly or indirectly
use, disclose, disseminate, or otherwise make available any such Confidential
Information, either during or after the term of his or her Service, except as
necessary for the performance of his or her duties to the Company or as
expressly permitted in writing by the Company.

 

 

(b)

Competitive Activities. During Participant’s Service and for two (2) years after
the termination of Participant’s Service for any reason whatsoever (including
Retirement), Participant shall not engage in any Competitive Activity (as
defined in paragraph 8(e)(iii)). Participant’s obligations under this paragraph
8(b) shall apply in any geographic territory in which the Company conducts its
business during the term of the Participant’s Service. In the event that any
portion of this paragraph 8(b) shall be determined by any court of competent
jurisdiction to be unenforceable because it is unreasonably restrictive in any
respect, it shall be interpreted to extend over the maximum period of time for
which it reasonably may be enforced and to the maximum extent for which it
reasonably may be enforced in all other respects, and enforced as so
interpreted, all as determined by such court in such action. Participant
acknowledges the uncertainty of the law in this respect and expressly stipulates
that this Agreement is to be given the construction that renders its provisions
valid and enforceable to the maximum extent (not exceeding its express terms)
possible under applicable law.

 

 

(c)

Non-Solicitation. During Participant’s Service and for two (2) years after the
termination of Participant’s Service for any reason whatsoever, Participant
shall not:

 

 

(i)

Solicit, induce, or attempt to solicit or induce any employee, consultant, or
independent contractor of the Company (each, a “Service Provider”) to leave or
otherwise terminate such Service Provider’s relationship with the Company, or in
any way interfere adversely with the relationship between any such Service
Provider and the Company;

 

 

(ii)

Solicit, induce, or attempt to solicit or induce any Service Provider to work
for, render services to, provide advice to, or supply Confidential Information
or trade secrets of the Company to any third person, firm, or entity;

 

 

(iii)

Employ or otherwise pay for services rendered by, any Service Provider in any
business enterprise with which Participant may be associated, connected, or
affiliated;

 

 

(iv)

Call upon, induce, or attempt to induce any current or potential customer,
vendor, supplier, licensee, licensor, or other business relation of the Company
for the purpose of soliciting or selling products or services in direct
competition with the Company or to induce any such person to cease or refrain
from doing business with the Company, or in any way interfere with the
then-existing or potential

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business relationship between any such current or potential customer, vendor,
supplier, licensee, licensor, or other business relation and the Company;

 

 

(v)

Call upon any entity that is a prospective acquisition candidate that
Participant knows or has reason to know was called upon by the Company or for
which the Company made an acquisition analysis for the purpose of acquiring such
entity; or

 

 

(vi)

Assist, solicit, or encourage any other person, directly or indirectly, in
carrying out any activity set forth above that would be prohibited by any of the
provisions of this Agreement if such activity were carried out by Participant.
In particular, Participant will not, directly or indirectly, induce any Service
Provider of the Company to carry out any such activity.

 

 

(d)

Other Restricted Activities. During Participant’s Service and for two (2) years
after the termination of Participant’s Service for any reason whatsoever,
Participant shall not engage in any other activity that is inimical, contrary,
or harmful to the interests of the Company including, but not limited to (i)
conduct related to Participant’s Service for which either criminal or civil
penalties against Participant may be sought, (ii) violation of Company policies,
including, without limitation, the Company's insider trading policy, or (iii)
participating in a hostile takeover attempt.

 

 

(e)

Definitions. For purposes of this Section 8, the following terms shall have the
following definitions:

 

 

(i)

The term “Company” shall include any Subsidiary of the Company that may exist at
a given time.

 

 

(ii)

The term “Competing Business” shall mean any business activities that are
directly or indirectly competitive with the business conducted by the Company or
its Subsidiaries at or prior to the date of the termination of Participant’s
Service, all as described in the Company’s periodic reports filed pursuant to
the Exchange Act (e.g., the Company’s Annual Report on Form 10-K) or other
comparable publicly disseminated information.

 

 

(iii)

The term “Competitive Activity” shall mean directly or indirectly investing in,
owning, operating, financing, controlling, or providing services to a Competing
Business if the nature of such services are the same as or similar in position
scope and geographic scope to any position held by Participant during the last
two (2) years of his or her employment with the Company, such that Participant’s
engaging in such services on behalf of a Competing Business does or may pose
competitive harm to the Company, provided that passive investments of less than
a two percent (2%) ownership interest in any entity that is a Competing Business
will not be considered to be a “Competitive Activity.”

 

 

(iv)

The term “Confidential Information” has the meaning set forth in the Company’s
Confidentiality and Nondisclosure Policy. Confidential Information includes not
only information contained in written or digitized Company documents but also
all such information that Participant may commit to memory during the course of
his or her Service. “Confidential Information” does not include information that
is available in reasonably similar form to the general public through no fault
of Participant, or that was received by Participant outside of the Company,
without an obligation of confidentiality.

 

 

(v)

Participant will be deemed to be in “Service” to the Company so long as he or
she renders continuous services on a periodic basis to the Company in the
capacity of an employee, director, consultant, independent contractor, or other
advisor (but, in

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the case of Participant’s continued Service as a consultant, independent
contractor, or other advisor, only as determined by the Committee or the Board,
in its sole and absolute discretion, following Participant’s initial Service as
an employee or director).

 

 

(f)

Equitable Relief; Enforceability. By accepting this Agreement and the Restricted
Shares granted hereby, Participant agrees that the Restrictive Covenants set
forth in this Section 8 are reasonable and necessary to protect the legitimate
interests of the Company. In the event a violation of any of the restrictions
contained in this Section 8 is established, the Company shall be entitled to
seek enforcement of the provisions of this Section 8 through proceedings at law
or in equity in any court of competent jurisdiction, including preliminary and
permanent injunctive relief. In the event of a violation of any provision of
subsection (b), (c), or (d) of this Section 8, the period for which those
provisions would remain in effect shall be extended for a period of time equal
to that period beginning when such violation commenced and ending when the
activities constituting such violation have been finally terminated in good
faith. Participant is aware that there may be defenses to the enforceability of
the Restrictive Covenants set forth in this Section 8, based on time or
territory considerations, and Participant knowingly, consciously, intentionally,
entirely voluntarily, and irrevocably waives any and all such defenses and
agrees that he or she will not assert the same in any action or other proceeding
brought by the Company for the purpose of enforcing the Restrictive Covenants.

 

9.

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

 

10.

Nontransferability. Except as otherwise provided by the Committee or as provided
in Section 5, the Participant's interests and rights in and under this Agreement
are not assignable or transferable other than as designated by the Participant
by will or by the laws of descent and distribution. Payment 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 5 hereof. Any effort to otherwise assign or
transfer any Restricted Shares (before they are distributed) 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.

 

11.

Administration and Interpretation. The Committee has the authority to control
and manage the operation and administration of the Plan and to make all
interpretations and determinations necessary or appropriate for the
administration of the Plan and this Agreement, including the enforcement of any
recovery of payments pursuant to Section 8 or otherwise. Any interpretations of
the Plan or this Agreement by the Committee and any decisions made by it under
the Plan or this Agreement are final and binding on the Participant and all
other persons. Any inconsistency between this Agreement and the Plan shall be
resolved in favor of the Plan.

 

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 Delaware,
without regard to principles of conflicts of law of Delaware or any other
jurisdiction.

 

13.

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

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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). 

 

14.

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.

 

15.

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.

 

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company and the Participant have duly executed this
Agreement as of the Award Date.

 

 

ESSENDANT INC.

PARTICIPANT

By: /s/Charles Crovitz

/s/Ric Phillips

Charles Crovitz

Ric Phillips 

Chairman of the Board

 

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EXHIBIT I

 

Set forth below are the goals that the Committee shall assess in determining the
Participant’s payment under Section 5 of the Agreement in those circumstances
where the Applicable Vesting Percentage is 100%. As specified in the Agreement,
the payment to the Participant in such circumstances shall be the Maximum unless
the Committee elects (in its sole discretion) to reduce the payment to an amount
between the Target and the Maximum because it determines (in its sole
discretion) that the Participant has not fully achieved the goals specified
below relating to the performance of ORS Nasco during the three-year period (the
“Performance Period”) commencing January 1, 2016 and ending December 31, 2018.
On an annual basis, the Company and the Participant shall provide to the
Committee an assessment of the Participant’s progress toward achieving the goals
specified below.

The Committee shall also have the right to modify and update the goals from time
to time to reflect the evolving nature of the Company’s strategies and long
range plan between now and the Scheduled Vesting Date.

 

 

ORS Nasco Performance Goals:

 

 

•

Achieve cumulative earnings before interest and taxes (“EBIT”) (as reflected in
the Company’s audited financial statements) of $[**] over the Performance
Period, provided that this goal may be adjusted at the discretion of the
Committee based on the impact of significant market events, such as changes in
oil rig counts from current projections (415-1000 rigs versus 2014 rig count of
1,862), as well as the impact of acquisitions and other corporate transactions
on EBIT (50% of total pay-out)

 

•

Achieve annualized sales in the Government sector of $[**]-[**] by last year of
Performance Period (25% of total pay-out)

 

•

Achieve annualized sales in the Retail channel of  $[**]-[**] by last year of
Performance Period (25% of total pay-out)

 

 

9