Document:

Exhibit 10.40

 

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 Victoria J. Reich (hereinafter referred to
as the “Executive”).

 

WHEREAS, the Companies and Executive are parties to an Executive
Employment Agreement dated June 11, 2007 (the “Prior
Agreement”), which the parties desire to amend and restate in its
entirety as set forth in this Agreement; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 1.                            Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Change
of Control” shall mean (a) Any “Person” (having the meaning
ascribed to such term in Section 3(a)(9) of the Exchange Act and used
in Sections 13(d) and 14(d) thereof, including a “group” within the
meaning of Section 13(d)(3)) has or acquires “Beneficial Ownership”
(within the meaning of Rule 13d-3 under the Exchange Act) of 30% or more
of the combined voting power of Holding’s then outstanding voting securities
entitled to vote generally in the election of directors (“Voting Securities”); provided, however,
that the acquisition or holding of Voting Securities by (i) Holding of any
of its subsidiaries, (ii) an employee benefit plan (or a trust forming a
part thereof) maintained by Holding or any of its subsidiaries, or (iii) any
Person in which the Executive has a substantial equity interest shall not constitute
a Change of Control.  Notwithstanding the
foregoing, a Change of Control shall not be deemed to occur solely because any
Person acquired Beneficial Ownership of more than the permitted amount of
Voting Securities as a result of the issuance of Voting Securities by Holding
in exchange for assets (including equity interests) or funds with a fair value
equal to the fair value of the Voting Securities so issued; provided that if a
Change of Control would occur (but for the operation of this sentence) as a
result of the issuance of Voting Securities by Holding, and after such issuance
of Voting Securities by Holding, such Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the Voting
Securities Beneficially Owned by such Person to more than 50% of the Voting
Securities of Holding, then a Change of Control shall occur; (b) At any
time during a period of two consecutive years, the individuals who at the
beginning of such period constituted the Board (the “Incumbent Board”) cease for any reason to constitute more than
50% of the Board; provided, however, that if the election, or nomination for
election by Holding’s stockholders, of any new director was approved by a vote
of more than 50% of the directors then comprising the Incumbent Board, such new
director shall, for purposes of this subsection (b), be considered as though
such person were a member of the Incumbent Board; provided, further, however,
that no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of (i) either an actual “Election
Consent” (as described in Rule 14a-11 promulgated under the Exchange Act)
or other actual solicitation of proxies or consents by or on behalf of a Person
other than the Incumbent Board (a “Proxy
Contest”), or (ii) by reason of an agreement intended to avoid
or settle any actual or threatened Election Contest or Proxy Contest; (c) Consummation
of a merger, consolidation or reorganization or approval by Holding’s
stockholders of a liquidation or dissolution of Holding or the occurrence of a
liquidation or dissolution of Holding (“Business
Combination”), unless, following such Business Combination:  (1) the Persons with Beneficial
Ownership of Holding, immediately before such Business Combination, have
Beneficial Ownership of more than 50% of the combined voting power of the then
outstanding 

 

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voting securities entitled
to vote generally in the election of directors of the corporation (or in the
election of a comparable governing body of any other type of entity) resulting
from such Business Combination (including, without limitation, an entity which
as a result of such transaction owns Holding or all or substantially all of
Holding’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) in substantially the
same proportions as their Beneficial Ownership of the Voting Securities
immediately before such Business Combination, (2) the individuals who were
members of the Incumbent Board immediately prior to the execution of the
initial agreement providing for such Business Combination constitute more than
50% of the members of the board of directors (or comparable governing body of a
noncorporate entity) of the Surviving Company; and (3) no Person (other
than Holding, any of its subsidiaries or any employee benefit plan (or any
trust forming a part thereof) maintained by Holding, the Surviving Company or
any Person who immediately prior to such Business Combination had Beneficial
Ownership of 30% or more of the then Voting Securities) has Beneficial
Ownership of 30% or more of the then combined voting power of the Surviving
Company’s then outstanding voting securities; provided, that notwithstanding
this clause (3), a Change of Control shall not be deemed to occur solely
because any Person acquired Beneficial Ownership of more than 30% of Voting
Securities as a result of the issuance of Voting Securities by Holding in
exchange for assets (including equity interests) or funds with a fair value
equal to the fair value of the Voting Securities so issued; provided, however
that a Business Combination with a Person in which the Executive has a
substantial equity interest shall not constitute a Change of Control, or (d) Approval
by Holding’s stockholders of an agreement for the assignment, sale, conveyance,
transfer, lease or other disposition of all or substantially all of the assets
of Holding to any Person (other than a Person in which the Executive has a
substantial equity interest and other than a subsidiary of Holding or other
entity, the Persons with Beneficial Ownership of which are the same Persons
with Beneficial Ownership of Holding and such Beneficial Ownership is in
substantially the same proportions), or the occurrence of the same.  Notwithstanding the foregoing, a Change of
Control shall not be deemed to occur solely because any Person acquired
Beneficial Ownership of more than the permitted amount of Voting Securities as
a result of the acquisition of Voting 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 

 

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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 she 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 thirty
(30) days after receipt of such notice.

 

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

 

“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(f)

  
	
  “Supervising
  Officer”

  	
  Section 3(a)

  
	
  “Supplier”

  	
  Section 6(d)(2)

  
	
  “Term” and
  “Termination Date”

  	
  Section 2

  

 

SECTION 2.                            Term
and Employment Period.  Subject to Section 19
hereof, the term of this Agreement (“Term”)
shall commence on the Effective Date of this Agreement and shall continue until
the effective date of termination of the Executive’s employment hereunder pursuant
to Section 5 of this Agreement.  The
period during which the Executive is employed by the 

 

5

 

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

 

SECTION 3.                            Duties.

 

(a)                                  During the Employment Period, the Executive (i) shall
serve as Senior Vice President and Chief Financial Officer of the Companies, (ii) shall
report directly to the Chief Executive Officer of the Companies (the “Supervising Officer”), (iii) shall,
subject to and in accordance with the authority and direction of the Board
and/or the Supervising Officer have such authority and perform in a diligent
and competent manner such duties as may be assigned to the Executive from time
to time by the Board and/or the Supervising Officer and (iv) shall devote
the Executive’s best efforts and such time, attention, knowledge and skill to
the operation of the business and affairs of the Companies as shall be
necessary to perform the Executive’s duties. 
During the Employment Period, the Executive’s place of performance for
the Executive’s duties and responsibilities shall be at the Companies’
corporate headquarters office, unless another principal place of 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 (1) 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 $416,000.16 (“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 

 

6

 

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.  Certain details of
Executive’s participation in the Bonus Plan are included in Appendix A
hereto and made a part hereof;

 

(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.  Executive shall
be granted the equity incentives in accordance with Appendix A as attached
hereto and made a part hereof;

 

(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, 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);

 

(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; and

 

(h)                                 appended hereto as Appendix B and made a part
hereof is a summary of the current employee benefit plans and perquisites
available to the Executive, which plans and perquisites are subject to change
by the Company from time to time.

 

SECTION 5.                            Termination of Employment.

 

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

 

(b)                                 Any termination by the Companies, or by the
Executive, of the Employment Period shall be communicated by written notice of
such termination to the Executive, if such notice is delivered by the
Companies, and to the Companies, if such notice is 

 

7

 

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, Good Reason or the Executive’s death, the
effective date of the termination of Executive’s employment shall be no earlier
than thirty (30) days following the date on which notice of termination is
delivered by one party to the other in compliance with the requirements of Section 13
hereof.

 

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

 

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

 

(ii)                                  the
Executive shall be entitled to an amount equal to one and one-half (11⁄2) times
the Executive’s then existing Base Salary, to be paid in such intervals and at
such times in accordance with the Company’s payroll practices in effect from
time to time over the eighteen (18) month period following the Termination
Date; but in no event shall such amount paid under this Section 5 (c)(ii) exceed
the lesser of (A) $460,000.00 or (B) two (2) times Executive’s
annualized compensation based upon the annual rate of pay for services to the
Companies for the calendar year prior to the calendar year in which the
Termination Date occurs (adjusted for any increase during that year that was
expected to continue indefinitely if the Executive had not separated from
service), consistent with the parties’ intention that the payments under this Section 5(c)(ii) constitute
a “separation pay plan due to involuntary “separation from service” under
Treas. Reg. § 1.409A-1(b)(9)(iii);

 

(iii)                               in
the event that an amount equal to one and one-half (1 1⁄2) times the Executive’s
then-existing Base Salary exceeds the limitations of Subsections 5 (c) (ii)(A) or
(B) above, then the Executive shall be entitled to an additional lump sum
payment equal to the difference between (x) one and one-half (1 1⁄2) times
the Executive’s then existing Base Salary and (y) the amount payable to
Executive under Subsection 5(c)(ii), such lump sum payble 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
(1 1⁄2 ) times the actual Annual Bonus award which would otherwise be payable for
the calendar year during which the Termination Date occurs, as if the Executive
had been employed for all of such calendar year based on actual performance, to
be paid at such time as the Annual Bonus award would otherwise be paid in
accordance with the Company’s policies;

 

(v)                                 the
Executive shall continue to be covered, upon the same terms and conditions
described in Section 4(e) hereof, by the same or equivalent medical and/or

 

8

 

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; and

 

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

 

(d)                                 If during the Employment Period, a Change of
Control occurs and the Employment Period is terminated by the Companies for any
reason other than Cause or Disability or by the Executive for Good Reason
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);

 

9

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

(e)                                  Any amounts payable pursuant to Sections 5(c) and
5(d) above shall be considered severance payments and, except for the
Executive’s vested benefits under the Companies’ employee benefit plans (other
than severance plans), shall be in full and complete satisfaction of the
obligations of the Companies to the Executive in connection with the
termination of the Executive’s employment. 
The Company shall deliver a W-2 Form to the Executive reflecting
such payments.

 

(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 

 

11

 

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

 

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

 

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

 

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

 

(g)                                 Notwithstanding anything 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 or
the Indemnification Agreement.

 

(h)                                 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 her education, training and experience, and, upon obtaining any 

 

12

 

such other employment shall
promptly notify the Companies thereof. 
The remaining obligation of the Companies under Section 5(c) shall
be offset by any compensation earned by the Executive from such other
employment during the eighteen-month period commencing on her Termination
Date.  Except as set forth in the first
sentence of this Section 5(i) and subject to the Executive’s
affirmative obligations pursuant to Section 6, the Executive shall be
under no obligation to seek other employment or otherwise mitigate the
obligations of the Companies under this Agreement. Notwithstanding any
provision to the contrary contained in this Agreement, if the cash payments due
and the other benefits to which Executive shall become entitled under Section 5(d),
either alone or together with other payments in the nature of compensation to
Executive which are contingent on a change in the ownership or effective
control of the Company or in the ownership of a substantial portion of the
assets of the Company or otherwise, would constitute a “parachute payment” as
defined in Section 280G of the Code (or any successor provision thereto), such
payments or benefits shall be reduced (but not below zero) to the largest
aggregate amount as will result in no portion thereof being subject to the
excise tax imposed under Section 4999 of the Code (or any successor
provision thereto) or being non-deductible to the Company for Federal Income
Tax purposes pursuant to Section 280G of the Code (or any successor
provision thereto), provided,
however, that no such reduction shall occur, and this Section 5(j) shall
not apply, in the event that the amount of such reduction would be more than
10% of the aggregate value of such payments and benefits. The Companies shall
in good faith determine the amount of any reduction to be made pursuant to this
Section 5(j), and shall make such reduction by first reducing amounts
payable under Section 5(d)(i) and thereafter by reducing amounts
payable under the following Sections of this Agreement in the following order,
as necessary to achieve the reduction: 5(d)(iii), 5(d)(iv), 5(d)(vi),
5(d)(vii). Amounts payable as reimbursements under Sections 5(d)(v) and 5
(d)(x), if any, shall not be subject to reduction. No modification of, or
successor provision to, Section 280G or Section 4999 subsequent to
the date of this Agreement shall, however, reduce the benefits to which the
Executive would be entitled under this Agreement in the absence of this Section 5(j) to
a greater extent than they would have been reduced if Section 280G and Section 4999
had not been modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first sentence of this
Section 5(j).

 

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

 

(i)                                     All computations and determinations relevant
to Section 5(k) and this subsection 5(k)(i) shall be made by a
national accounting firm selected and 

 

13

 

reimbursed by the Companies from among the ten (10) largest
accounting firms in the United States as determined by gross revenues (the “Accounting Firm”), subject to the Executive’s
consent (not to be unreasonably withheld), which firm may be the Companies’
accountants.  Such determinations shall
include whether any of the Total Payments are “parachute payments” (within the
meaning of Section 280G of the Code). 
In making the initial determination hereunder as to 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 (“Overpayment”).  In either such event, the Accounting Firm
shall determine the amount of the Underpayment or Overpayment that has
occurred.  In the case of an
Underpayment, the amount of such Underpayment (together with an amount which
after payment of all taxes thereon is equal to any interest and penalties
payable by the Executive as a result of such Underpayment) shall be promptly
paid by the Companies to or for the benefit of the Executive.

 

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

 

14

 

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

 

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

 

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

 

SECTION 6.                            Further Obligations of the
Executive.

 

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

 

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

 

15

 

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

 

(ii)                                  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.

 

(iii)                               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.

 

(iv)                              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.

 

(v)                                 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.

 

(vi)                              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.

 

(vii)                           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 

 

16

 

thereof and extracts and
derivatives therefrom, shall be and remain the sole property of the Companies
or their Subsidiaries.  Upon termination
of the Executive’s employment for any reason, whether during or after the
Employment Period, the Executive shall immediately return all such records,
files, documents, materials and other property of the Companies and their
Subsidiaries in the Executive’s possession, custody or control, in good
condition, to the Companies.

 

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

 

(d)                                 (1)                                  During (i) the Executive’s employment by
the Companies, whether during or after the Employment Period.  and (ii) the eighteen (18) month period
following the end of the Executive’s employment with the Companies, the Executive
shall not at any time, directly or indirectly, solicit any Customer for or on
behalf of any Person other than the Companies or any of their Subsidiaries with
respect to the purchase of (A) office products, including traditional
office products, computer consumable products, office furniture, janitorial
and/or sanitation products, food service 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 the Employment Period, (B) services the
same as or substantially similar to those provided by the Companies or their
Subsidiaries to such Customer during the last twelve (12) months of the
Executive’s employment with the Companies, whether during or after the
Employment Period or (C) products or services 

 

17

 

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

 

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

 

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

 

18

 

directors, or the business
strategy or plans, policies, practices or operations of the Companies, or of
their respective parents, Subsidiaries or Affiliates.

 

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

 

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

 

(i)                                     During the Executive’s employment by the
Companies and during the twenty-four (24) month period following the end of
Executive’s Employment Period, the Executive shall furnish a copy of this Section 6
in its entirety to any prospective employer prior to accepting employment with
such prospective employer.

 

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

 

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

 

19

 

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

 

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

 

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

 

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, Illinois  60015-2559

Attention:  General Counsel

 

20

 

If to the Executive:

 

Victoria Reich

(at her last address on file
with the Company)

 

With a required copy to:

 

Vedder, Price, Kaufman & Kammholz, P.C.

222 North LaSalle Street

Suite 2600

Chicago, IL  60601

Attention:  William J. Bettman, Esq.

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

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

 

*                                         *                                         *

 

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

 

	
  EXECUTED ON :

  	
  UNITED
  STATIONERS 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

  

 

22

 

	
  EXECUTED ON:

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
   

  
	
   

  	
  Victoria J. Reich

  
			

 

23

 

ATTACHMENT 1

 

24

 

APPENDIX A

 

Short-Term Incentive Plan, Long-Term Incentive Plan,

and Signing Bonus

 

I.                                         Short-Term
Incentive Plan

 

As a key member of the management team, Executive will participate in
the Company’s Management Incentive Plan (MIP), which will provide Executive
with the opportunity to earn a cash award after year-end if a set of
predetermined goals are achieved, with a possible payout of up to 200% of
Executive’s target incentive award. 
Executive’s target MIP award for 2007 will be 60% of Executive’s annual
base salary and Executive’s payout will be pro-rated to reflect the number of
days worked in calendar year 2007.

 

II.                                     Long-Term
Incentive Plan

 

Executive will participate in the Company’s Long-Term Incentive Plan
(LTIP) at an economic value target percent of 120% of base salary effective
with the 2007 annual LTIP grant (currently anticipated to be made on September 1,
2007).

 

III.                                 Signing
Bonus

 

Executive will receive 50,000 non-qualified stock options as a signing
bonus (the “Initial Options”).  The Initial Options have a ten-year life and
vest over a three-year period with one-third of the Initial Options becoming
exercisable each year.  The strike price
for the Initial Options will be the closing price on the date of the next Human
Resources Committee meeting following the date hereof.  In addition, Executive will receive 7,500
shares of restricted stock (the “Initial
Restricted Stock”), all of which will vest upon the third
anniversary of the date hereof, subject to the terms and conditions set forth
in the United Stationers Inc. 2004 Long-term Incentive Plan Restricted Stock
Award Agreement.  Notwithstanding
anything to the contrary contained herein or in any plan or award agreement
related to the Initial Options or Initial Restricted Stock (collectively, the “Signing Bonus Equity”), all Signing Bonus
Equity which are not then vested shall vest in full upon the Companies’
termination of Executive’s employment without Cause or upon the Executive’s
termination of employment for Good Reason. 
The award agreements for the Signing Bonus Equity shall reflect the
foregoing.

 

1

 

APPENDIX B

 

Current Benefits and Perquisites

 

Other Benefits

 

The Company will reimburse Executive’s allowable medical care expenses
after all other Company or non-Company insurance policies and medical plans,
covering the participant, have paid benefits. 
Reimbursement limits are based on grade level.  Executive’s limit is $30,000 per year.

 

Executive will receive not less than 4 weeks (20 days) of paid vacation
per year.

 

Executive is eligible for a yearly perquisite allowance of $20,000 per
year paid in equal bi-monthly installments. 
This allowance is in lieu of the Company offering individual perquisite
programs.

 

In addition, Executive is eligible for the following general benefits:

 

Health Care Coverage

 

The Company offers comprehensive Group Medical and Group Dental plans
for eligible associates and their dependents. 
If elected, coverage begins on the first day after thirty (30) days of
continuous employment.

 

The Open Access Plus, OAP
(similar to a PPO), and the Network Plan, HMO,
are the two healthcare plans offered at most locations through CIGNA
Healthcare.  Prescription Drugs and
Dental coverage is also offered to all associates.  Coverage may be elected for Executive or for
Executive and eligible dependents. 
Associates who participate in these plans will share in the premium
costs by payroll deductions.

 

Vision Care Program

 

This program provides discounts on comprehensive vision care benefits
including examinations, lenses and frames. 
Associates who participate in this program will pay the premium costs by
payroll deduction.  The minimum
participation commitment is two (2) years. 
The plan administrator is Vision Service Plan (VSP) of California.

 

Retiree Medical Program

 

Upon retirement with the Company, Executive may be eligible to
participate in the Medical Insurance Program for Retirees, provided you meet
the requirements of the program.

 

Short-Term Disability (STD)

 

The Company-provided short-term disability program covers exempt
associates who have completed thirty (30) or more days of continuous
service.  Disabled or ill associates
receive full pay for the first month of disability and then 60% of base salary
for up to four (4) additional

 

1

 

months.  This
coverage begins after five (5) days of continuous disability or illness
and is provided by the Company at no cost to the associate.  As they are needed, occasional sick days are
paid under the short-term disability provision at full pay.

 

Long-Term Disability (LTD)

 

Coverage under the Company’s long-term disability program becomes
effective after five (5) months of total disability.  This program provides a monthly income equal
to 60% of base salary at the time disability was determined, less any
additional benefits payable, such as payments made under the Social Security
Act.  The maximum monthly benefit payable
under the program is $15,000 for Officers.

 

The Company provides this benefit at no cost to the associate.  Benefits paid, as a result of a disability,
are considered to be taxable income.  The
program also allows the option to pay the premium through after-tax payroll
deductions.

 

Life Insurance and Accidental Death and Dismemberment (AD&D)
Insurance

 

The Company provides life insurance equal to two and one half times
(21⁄2) annual salary rounded to the nearest whole thousand to a maximum of $1.2
million for Officers.  The Company also
provides AD&D coverage equal to the amount of life insurance.

 

In addition, eligible dependents are also covered under the life
insurance program according to the following schedule:

 

	
  Spouse

  	
  $4,000

  
	
  Dependent
  Children

  	
  $200 from 14
  days, but less than 6 months

  
	
   

  	
  $1,000 over
  6 months of age

  

 

Life insurance, AD&D coverage and dependent life insurance are
provided at no cost to the associate.

 

Supplemental Term Life Insurance

 

The Company provides associates the opportunity to purchase additional
term life insurance for themselves and eligible dependents.  Evidence of Insurability (EOI) may be required
to qualify for this program.

 

Supplemental Accidental Death and Dismemberment (AD&D) Insurance

 

The Company provides associates the opportunity to purchase additional
AD&D insurance for themselves and eligible dependents.

 

Travel and Accident Insurance

 

The Company provides travel and accident insurance in the amount of
$300,000 for Officers.  This benefit is
provided at no cost to the associate.

 

2

 

Employee Assistance Program (EAP)

 

The EAP provides associates and their immediate family members with
confidential counseling and referral services.

 

Flexible Spending Account (FSA)

 

This plan allows eligible associates to direct pre-tax income into two
different savings accounts, an un-reimbursed medical account or a dependent
care account.  The pre-tax income may be
used to pay for expenses that are not covered by the medical plan or costs
associated with dependant care.

 

Pension Plan

 

The Company offers a pension plan to United Stationers’ non-union
associates who are at least 21 years of age and who have completed one (1) year
of continuous service.  A normal
retirement pension is equal to 1% of annual compensation for each year of
credited service to a maximum of 40 years of service subject to IRS
restrictions.  Benefits in this plan do
not vest until five (5) full years of service have been completed.  Normal retirement age is 65 in this
plan.  Early retirement benefits may be
available if the associate is 55 and has completed ten (10) years of
service at the time of his or her retirement or termination.  The Company pays the entire cost of this
benefit.  In addition to participation in
the qualified pension plan, Executive will be provided five (5) years of
additional age and service credits (to be provided on a nonqualified basis) for
purposes of computing Executive’s pension benefit.  Such additional benefits will be calculated
on the basis of Executive’s annual compensation as of the date hereof and,
notwithstanding section 4(h) hereof, shall not be subject to change.

 

401(k) Savings Plan

 

The United Stationers 401(k) Savings Plan (the “Plan”) allows Executive the opportunity to
make pre-tax and after-tax payroll contributions upon meeting the 30 day
eligibility period.  Effective January 1,
2006, the Plan will automatically enroll all newly hired associates in the 401(k) Plan
at a contribution rate of 3%.  Unless
otherwise changed, the contribution will be defaulted to a Company designated
Fund.

 

Executive will have the opportunity to “opt out” of enrollment in the
Plan within 45 days of Executive’s eligibility date.

 

The main highlights (subject to certain Plan and IRS restrictions) of
the 401(k) Plan include:

 

·                                          Before-tax
associate contributions - up to 25% of salary

·                                          After-tax
associate contributions - up to 10% of salary

·                                          Catch-up
contributions for those 50 yrs or older - up to 75% of salary

·                                          The
Company matches 50% of the first 6% of an associate’s before-tax contribution

 

3

 

Deferred Compensation Plan

 

A participant may elect to defer any portion of future compensation
(base salary and/or bonus) to a Fidelity Investment deferred account.  Full details can be found in the Summary Plan
Document.  The available investment funds
for allocations of deferrals are the same as the 401(k) Plan.

 

Tuition Reimbursement

 

The Company will provide financial assistance to associates, who have
completed service requirements, taking educational courses or seeking
professional certification to improve their ability to carry out their
responsibilities within the Company.

 

Associate Purchase Program

 

Associates may purchase at Company cost any regularly stocked item that
the Company carries, provided the item is for their personal use or for that of
their immediate family.  Associate
purchases for resale to any person outside the immediate family are
prohibited.  Non-stocked items cannot be
purchased through the Company.  All
purchases will be paid for by automatic payroll deduction or personal check as
permitted by law.

 

4Exhibit 10.42

 

UNITED
STATIONERS INC.

AND
SUBSIDIARIES

AMENDED
AND RESTATED

MANAGEMENT
INCENTIVE PLAN

 

(As
Amended and Restated Effective January 1, 2009)

 

SECTION 1.

 

EFFECTIVENESS AND PURPOSE

 

1.1          Establishment
and Later Restatement and Effectiveness of the Plan.  United Stationers Inc.  (“USI”) initially established the Plan
as of January 1, 2000, as an annual incentive compensation plan for key
Employees, and it first became effective as of May 10, 2000 upon its
approval by USI’s stockholders.  As of January 1,
2005, the Plan was amended, restated, and continued as of January 1, 2005,
upon its approval by USI’s stockholders. 
As of January 1, 2009 (the “Effective Date” of the Plan as amended,
restated and continued and as set forth herein) the Plan has been again
amended, restated, and continued in the form set forth in this document for the
purpose of compliance with section 409A of the Code (as defined in the
Plan).  The Plan, as amended and restated
herein, shall be applicable to any awards determined or made hereunder for any
periods beginning on or after the Effective Date.  Awards determined or made under the Plan for
any periods prior to the Effective Date shall be subject to the Plan as in
effect from time to time prior to the Effective Date, and the provisions of the
Plan, as amended and restated herein, shall be inapplicable to such awards
except to the extent necessary for such awards to comply with section 409A of
the Code.

 

1.2          Purpose.  The purpose of the Plan is to
motivate and reward Participants for the achievement of operational individual
goals.

 

SECTION 2.

 

DEFINITIONS

 

2.1          Definitions.  Whenever used herein, the
following terms shall have the respective meanings set forth below, unless
otherwise expressly provided.  When the
defined meaning is intended, the term is capitalized.

 

(a)           “Base Salary” shall mean the regular salary, before
any salary reduction contributions made to the Company’s 401(k) or Section 125
plans or other deferred compensation plans, but not including any awards under
this Plan and not including any other bonuses, incentive pay, or special
awards, earned by a Participant.

 

(b)           “Board” shall mean the Board of Directors of USI.

 

(c)           “Cause” shall mean failure to follow directives and
policies of USI or any subsidiaries, insubordination, willful malfeasance,
gross negligence, or acts of dishonesty.

 

 

(d)           “Code” shall mean the Internal Revenue Code of
1986, as amended.

 

(e)           “Committee” shall mean (I) the Human Resources
Committee with respect to Employees who are reasonably likely to be treated as “covered
employees” for the Plan Year under Section 162(m) of the Code and
executive officers of USI; (ii) the Chief Executive Officer of United
Stationers Supply Co.  with respect to
Employees who are not reasonably likely to be treated as “covered employees”
for the Plan Year under Section 162(m) of the Code and who are not
executive officers of USI; or (iii) such other officer, committee or
committees appointed by the Board to serve as the administering committee for
any group of Employees under the Plan.

 

(f)            “Company” shall mean USI and its direct and
indirect consolidated subsidiaries.

 

(g)           “Effective Date” shall have the meaning set forth
in Subsection 1.1.

 

(h)           “Employee” shall mean an employee of the Company
who is in a position meeting the defined eligibility criteria for participation
in the Plan, as stated in Subsection 3.1.

 

(i)            “Final Award” shall mean the award earned by a
Participant based on a comparison of actual year-end results against the
Performance Goals established at the beginning of the Plan Year.

 

(j)            “Human Resources Committee” shall mean the Human
Resources Committee or comparable compensation committee of the Board of
Directors of USI.

 

(k)           “Participant” shall mean an Employee who is
approved by the Committee for participation in the Plan for a specified Plan
Year,

 

(l)            “Performance Goals” may be based on any one or
more of the following measures applicable to the Company, as selected by the
Committee for any Plan Year: (a) earnings per share; (b) net earnings/
income; (c) net operating earnings/income; (d) net operating
earnings/income after taxes; (e) net operating earnings/income per share; (f) EPS
from continuing operations; (g) EBIT; (h) stock price appreciation; (i) total
shareholder return; (j) relative total shareholder return (for example, as
compared to peer group performance); (k) sales/revenues, or any component
thereof; (I) sales/revenue growth; (m) unit volume; (n) gross or
operating margins/margin contribution; (o) economic value added or economic
profit; (p) return on assets (net assets or operating assets); (q) return
on equity; (r) return on invested capital or invested capital efficiency; (s) working
capital or working capital efficiency; (t) cash flow/free cash flow; (u) net
cash provided by operating activities; (v) cash return on assets; (w) waste recovery, cost control
and/or operating efficiency targets; (x) expense targets; and (y) safety
goals.  Each goal may be expressed on an
absolute and/or relative basis, may be based on or otherwise employ comparisons
based on internal targets, the past performance of the Company and/or the past
or current performance of other companies, and in the case of earnings-based
measures, may use or employ comparisons relating to capital, shareholders equity
and/or shares outstanding, investments or assets or net assets.  Such 

 

2

 

Performance Goals may exclude charges for
restructurings, discontinued operations and extraordinary, unusual,
non-recurring or other items specified by the Committee.

 

(m)          “Plan” shall mean (i) this Amended and Restated
Management Incentive Plan with respect to any awards determined or made for any
periods beginning on or after the Effective Date, (ii) the Management
Incentive Plan in the form established as of January 1, 2000 and as in
effect from time to time prior to January 1, 2005 with respect to any
awards determined or made for any periods beginning on or after January 1,
2000 and ended prior to January 1, 2005, and (iii) the Management
Incentive Plan in the form established as of January 1, 2005 and as in
effect from time to time prior to the Effective Date with respect to any awards
determined or made for any periods beginning on or after January 1, 2005
and ended prior to the Effective Date  ;
provided, however, that the provisions of this Amended and Restated Management
Incentive Plan shall apply to awards determined or made for any periods ended
prior to the Effective Date to the extent necessary for such awards to comply
with section 409A of the Code.

 

(n)           “Plan Year” shall mean the Company’s fiscal year,
which, as of the Effective Date, is the calendar year.

 

(o)           “Subsidiary” shall mean any direct or indirect
subsidiary of USI, including, as of the effective date of the Restated Plan,
United Stationers Supply Co.  and any of
its subsidiaries.

 

(p)           “Target Incentive Award” shall mean the award to be
paid to a Participant for meeting the respective target levels of the
Performance Goals applicable to such Participant in a particular Plan
Year.  Such Target Incentive Awards shall
be expressed as a percentage of a Participant’s actual Base Salary on January 1st
of the Plan Year, with promotional adjustments or other Base Salary changes
that occur during the Plan Year made on a pro-rata basis, using whole months.

 

(q)           “Top 5 Employees” shall mean Employees who are
reasonably likely to be treated as “covered employees” for the Plan Year under Section 162(m) of
the Code.

 

(r)            “USI” shall have the meaning set forth in Subsection
1.1.

 

2.2          Gender
and Number.  Except when
otherwise indicated by the context, any masculine terminology used herein also
shall include the feminine, and the definition of any term in the singular
shall include the plural,

 

SECTION 3.

 

ELIGIBILITY AND PARTICIPATION

 

3.1          Eligibility.  Eligibility for participation in
the Plan will be limited to those key Employees who, by the nature and scope of
their position, regularly and directly make or influence policy or operating
decisions which impact the profitability and earnings results of the
Company.  However, any Employee
participating in a sales incentive, commission arrangement, 

 

 

or who is
currently receiving consulting payments pursuant to a consulting agreement
shall be excluded from participation in this Plan.

 

3.2           Participation.  Participation in the Plan shall be
determined annually by the Committee. 
Employees approved for participation shall be notified of their
selection.

 

3.3           Partial
Plan Year Participation.  The
Committee may allow an individual who becomes eligible during the Plan Year to
participate in the Plan.  In such case,
the Participant’s Final Award shall be prorated based on the number of full
months of participation during the pertinent Plan Year.

 

A Participant whose incentive category level
is changed during the Plan Year shall be eligible for a bonus based on the
number of months spent in each incentive category during the Plan Year.  The proration shall be determined by
multiplying the Final Award for a full year of participation at each incentive
category level by a fraction, the numerator of which shall be the number of
months spent at the incentive category level and the denominator of which shall
be twelve (12).  The Participant’s Final
Award shall be the sum of the prorated awards calculated for the time spent at
each incentive category level, with consideration to changes in Base Salary,
when appropriate.

 

3.4           No
Right to Participate.  Participation
by an Employee in a prior Plan Year does not provide a right or entitlement to
be selected for participation in a current or future Plan Year.

 

SECTION 4.

 

AWARD DETERMINATION

 

4.1           Performance
Goals.  The Human Resources
Committee shall establish for each Plan Year one or more Performance Goals and
a level of performance for each at which one hundred percent (100%) of the
Target Incentive Award shall be earned. 
The Human Resources Committee also shall establish for each Performance
Goal a range of performance levels above and below this target performance
level, including levels at which the maximum and minimum incentive awards shall
be earned, with other intermediate performance attainment between such levels
to yield awards prorated between the levels established by the Human Resources
Committee.  The Committee will establish
the Performance Goals applicable for each Participant, taking into
consideration such Participant’s duties and responsibilities, as well as the
related Target Incentive Awards and maximum and minimum award levels for such
Participant.

 

4.2           Adjustment
of Performance Targets.  Subject
to the final sentence of Subsection 4.3, the Human Resources
Committee shall have the right to adjust the Performance Goals (either up or
down) during the Plan Year if it determines that external changes or other
unanticipated business conditions have materially affected the fairness of the
Performance Goals and unduly influenced the Company’s ability to meet
them.  Further, the Human Resources
Committee shall have the right to adjust the Performance Goals and the Final
Award amounts in the event of a Plan Year consisting of less than twelve (12)
months.

 

4.3           Final
Award Determinations.  At the
end of each Plan Year, the Committee shall review performance against
Performance Goals and compute Final Awards for each Participant.  

 

4

 

Participants
must be actively employed by the Company on the last day of the Plan Year,
except as provided in Subsections 6.1 and 6.3, to receive an
award for that Plan Year. 
Notwithstanding the immediately preceding sentence of this Subsection
4.3, with respect to any portion of a Final Award that is based on a
Participant’s personal performance evaluation that is completed after the end
of the Plan Year, the Participant must be actively employed by the Company on
the date of payment of such portion of the Final Award to receive such
portion.  Final Award amounts, may be
adjusted (either up or down) based on the Committee’s assessment of Company
performance results and Participant performance.  In addition, notwithstanding anything herein
to the contrary, with respect to the Top 5 Employees, the Committee may only
make adjustments under Subsection 4.2 and this Subsection 4.3 which
would reduce Final Awards to the Top 5 Employees and may not make adjustments
which would increase Final Awards to the Top 5 Employees; provided, that no
payment that is intended to be performance-based compensation (as that term is
used in Section 162(m) of the Code) for any Plan Year shall be paid
until the Committee has certified in writing the achievement of the Performance
Goals for that year.

 

4.4           Maximum
Final Award.  For any Top 5
Employee, the maximum Final Award for any Plan Year shall not exceed the lesser
of two hundred percent (200%) of the Participant’s Target Incentive Award or
two million dollars ($2,000,000).

 

SECTION 5.

 

PAYMENT OF FINAL AWARDS

 

5.1           Form and
Timing of Payment.  Payment of
Final Awards shall be made in cash following the end of the Plan Year as soon
as practicable thereafter as the Committee shall determine, but not later than
the 15th day of the third month of the Plan Year next
following such Plan Year. 
Notwithstanding the immediately preceding sentence of this Subsection
5.1, with respect to any portion of a Final Award that is based on a
Participant’s personal performance evaluation that is completed after the end
of the Plan Year, payment of such portion of the Final Award shall be made in
cash on April 15 of the Plan Year next following such Plan Year; provided,
however, that for purposes of determining compliance with section 409A of the
Code, a payment will be considered to satisfy the requirement of this sentence
if distribution of such portion of a Final Award is made no later than the end
of the Plan Year following the end of the applicable Plan Year with respect to
which the Final Award was earned.  The
Final Awards shall be a liability of the Company when the Plan Year concludes.

 

SECTION 6.

 

TERMINATION OF EMPLOYMENT

 

6.1           Termination
of Employment due to Death.  In
the event a Participant’s employment is terminated by reason of death, the
Final Award shall be reduced to reflect participation prior to
termination.  This reduction shall be
determined by multiplying the Final Award for a full year of participation by a
fraction, the numerator of which shall be the number of full months of
participation through the date of termination and the denominator of which
shall be twelve (12).  The prorated Final
Award thus determined shall be paid when other awards under the Plan are paid
following the end of the Plan Year.

 

 

6.2          Termination
for Cause.  In the event a
Participant’s employment is terminated for Cause prior to the end of the Plan
Year, the Participant shall not be entitled to an award for the Plan Year in
which the termination occurs.

 

6.3          Termination
for other than Cause or
Death. 
In the event a Participant’s employment is terminated for
reasons other than Cause, a full or prorated Final Award may be paid at the
Committee’s discretion. Any full or prorated Final Award thus determined shall
be paid when other awards under the Plan are paid following the end of the Plan
Year.  (1)

 

6.4          Special 409A Rules.

 

(a)           Notwithstanding any other provision of the Plan to the
contrary, if any payment hereunder is subject to section 409A of the Code, if
such payment is to be paid on account of the Participant’s separation from
service and if the Participant is a specified employee (within the meaning of
section 409A(a)(2)(B) of the Code), such payment shall be delayed until
the first day of the seventh month following the Participant’s separation from
service (or, if later, the date on which such payment is otherwise to be paid
under the Plan).  Any payment which is to
be made as of the first day of the seventh month following separation from service
shall be made no later than 30 days after such date.

 

(b)           References
in the Plan to the Participant’s termination of employment (including
references to the Participant’s employment termination, and to the Participant
terminating employment, a Participant’s separation from service, and other
similar reference) shall mean, respectively, the Participant ceasing to be
employed by the Company and all Related Companies, subject to the following:

 

(i)           The
employment relationship will be deemed to have ended at the time the Participant
and the applicable company reasonably anticipate that a level of bona fide
services the Participant would perform for the Company and Related Companies
after such date would permanently decrease to no more than 20% of the average
level of bona fide services performed over the immediately preceding 36 month
period (or the full period of service to the Company and Related Companies if
the Participant has performed services for the Company and Related Companies
for less than 36 months).  In the absence
of an expectation that the Participant will perform at the above-described
level, the date of termination of employment will not be delayed solely by
reason of the Participant continuing to be on the Company’s and Related
Companies’ payroll after such date.

 

(ii)           The
employment relationship will be treated as continuing intact while the
Participant is on a bona fide leave of absence (determined in accordance with
Treas. Reg. §409A-1(h)).

 

(iii)          The
determination of a Participant’s termination of employment by reason of a sale
of assets, sale of stock, spin-off, or other similar transaction of the 

 

 (1) Confirm that payment
would be made at the time other awards are paid or otherwise provide payment
date.

 

6

 

Company or a Related Company will be made in
accordance with Treas. Reg. §1.409A-1(h).

 

SECTION 7.

 

RIGHTS OF PARTICIPANTS

 

7.1          Employment.  Nothing in this Plan shall
interfere with or limit in any way the right of the Company to terminate or
change a Participant’s employment at any time, nor confer upon any Participant
any right to continue in the employ of the Company, Nothing herein contained
shall limit or affect in any manner or degree the normal and usual powers of
management, exercised by the officers and the Board to change the duties or the
character of employment of any employee of the Company or to remove the
individual from the employment of the Company at any time, all of which rights
and powers are expressly reserved.

 

7.2          Nontransferability.  No right or interest of any
Participant in this Plan shall be assignable or transferable or subject to any
lien, directly, by operation of law or otherwise, including execution, levy,
garnishment, attachment, pledge, and bankruptcy.

 

SECTION 8.

 

ADMINISTRATION

 

8.1          Administration.  This Plan shall be administered by
the Human Resources Committee in accordance with the provisions contained
herein.

 

8.2          Questions
of Construction and Interpretation.  The
determination of the Human Resources Committee in construing or interpreting
this Plan or making any decision with respect to the Plan shall be final,
binding, and conclusive upon all persons. 
The Human Resources Committee’s interpretative responsibility shall
include any and all definitions in the Plan, including, but not limited to,
interpretations of Cause.

 

8.3          Liability.  The Board, the Human Resources
Committee, the Committee, or any other persons acting under the direction of
either, shall not be liable and shall be held harmless for any act or failure
to act hereunder.

 

SECTION 9.

 

AMENDMENTS

 

9.1           Amendments.  The Company, in its absolute discretion,
without notice, at any time and from time to time, subject to the requirements
of section 409A of the Code,  may modify
or amend, in whole or in part, any or all of the provisions of this Plan, or
suspend or terminate it entirely; provided, that no such modification,
amendment, suspension, or termination, may without the consent of the
Participant (or his beneficiary in the case of death of the Participant) reduce
after the end of the Plan Year the right of a Participant (or the Participant’s
beneficiary as the case may be) to a payment or distribution in accordance with
the provisions contained in this 

 

 

Plan or change
to the detriment of a Participant any potential rights in that Plan Year
pursuant to Section 11 of this Plan.

 

SECTION 10.

 

REQUIREMENTS OF LAW

 

10.1        Governing
Law.  The Plan shall be
construed in accordance with and governed by the laws of the State of Illinois.

 

10.2        Withholding
Taxes.  USI or any Subsidiary,
as appropriate, shall have the right to deduct from all payments under the Plan
any Federal, state or other taxes required by law to be withheld with respect
to such payments.

 

SECTION 11.

 

MERGER, CONSIDERATION, OR ACQUISITION

 

11.1        Payment
Upon Change of Control.  If
the Plan terminates upon or after a Change of Control of USI during the Plan
Year in which the Change of Control occurs, a Participant in the Plan for the
Plan Year during which a Change of Control occurs shall be entitled to an
amount equal to the Participant’s Target Incentive Award for such Plan
Year.  Such amount shall be paid in cash
to the Participant on or after the date of termination of the Plan, but in no
event later than the last day of the Plan Year in which the Change of Control
occurs.  Notwithstanding this Subsection
11.1 or Subsection 11.2 below, if any award under the Plan
constitutes deferred compensation (within the meaning of section 409A of the
Code) and becomes payable upon a Change of Control, a change of control event
that otherwise is a Change of Control under the Plan shall be a Change of
Control for purposes of the Plan only if such event also satisfies the
requirements of Treas. Reg. §1.409A-3(i)(5).

 

11.2        Definition
of Change of Control.  The
term “Change of Control” shall mean any one or more of the following events:

 

(a)           Any “Person” (having the meaning ascribed to such term in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (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 USI’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) USI
or any Subsidiaries, or (ii) an employee benefit plan (or a trust forming
a part thereof) maintained by USI or any Subsidiaries shall not constitute a
Change of Control; and provided further that the acquisition or holding of
Voting Securities by any Person in which a Participant has a substantial equity
interest shall not constitute a Change of Control with respect to such
Participant.  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 

 

8

 

a result of the issuance of Voting Securities
by USI 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 USI, and after such issuance
of Voting Securities by USI, 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 USI, 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 USI’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
Contest” (as described in Rule 14a-11 promulgated under the Exchange Act)
or other actual solicitation of proxies or consents by or on behalf of a Person
other than the Incumbent Board (a “Proxy Contest”), or (ii) by
reason of any 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 USI’s stockholders of a liquidation or dissolution of USI or the
occurrence of a liquidation or dissolution of USI (“Business Combination”),
unless, following such Business Combination:

 

(i)            the Persons with Beneficial Ownership of USI, 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 USI or all or substantially all of USI’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;

 

(ii)           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

 

(iii)          no Person (other than USI, any Subsidiaries or any employee
benefit plan (or any trust forming a part thereof) maintained by the Company,
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.  Notwithstanding this
subsection (iii), a Change of Control shall not be deemed to occur solely
because any Person acquired Beneficial Ownership of more than 30% of Voting
Securities as a result of the issuance of Voting Securities by USI 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 a Participant has a substantial
equity interest shall not constitute a Change of Control with respect to such
Participant.

 

(d)           Approval by USI’s stockholders of an agreement for the
assignment, sale, conveyance, transfer, lease or other disposition of all or
substantially all of the assets of USI to any Person (other than a Person in
which the Participant has a substantial equity interest (in which case there
shall not be a Change of Control with respect to such Participant) and other
than a subsidiary of USI or other entity, the Persons with Beneficial Ownership
of which are the same Persons with Beneficial Ownership of USI 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 increase the
percentage of the Voting Securities Beneficially Owned by such Person, then a
Change of Control shall occur.

 

Notwithstanding anything to the contrary
herein, provided the Human Resources Committee (constituted of members of the
Incumbent Board) in good faith determines that an event which would otherwise
be a Change of Control is not a change of effective control of USI, a Change of
Control shall not be deemed to have occurred.

 

SECTION 12.

 

INDEMNIFICATION

 

12.1        Indemnification.  Each person who is or shall have
been a member of the Human Resources Committee, the Committee or the Board or
who is or shall have been an Employee of the Company shall be indemnified and
held harmless by the Company from any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by him in connection with any claim,
action, suit, or proceeding to which he may be a party by reason of any action
taken or failure to act under the Plan. 
The foregoing right of indemnification shall not be exclusive of any 

 

10

 

other rights
of indemnification to which such persons may be entitled under the Company’s
Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.

 

SECTION 13.

 

EXPENSES OF THE PLAN

 

13.1         Expenses
of the Plan.  The expenses of
administering the Plan shall be borne by the Company.

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