Document:

Exhibit 10.38

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

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

 

WHEREAS, the Companies and Executive are
parties to an Executive Employment Agreement dated August 18, 2003 (the “Prior Agreement”), which the parties desire to amend and
restate in its entirety as set forth in this Agreement; and

 

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

 

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

 

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

 

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

 

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

 

WHEREAS, Executive will have access to confidential, proprietary and
trade secret information of the Companies and their subsidiaries, and it is
desirable and in the best interests of the Companies and their shareholders to
protect confidential, proprietary and trade secret information of the Companies
and their subsidiaries, to prevent unfair competition by former executives of
the Companies following separation of their employment with the Company and to
secure cooperation from former executives with respect to matters related to
their employment with the Company; and

 

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

 

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

 

Section 1.                                          Definitions.

 

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

 

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

 

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

 

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

 

“Cause” shall mean (i) conviction
of, or plea of nolo contendere to, a felony (excluding motor
vehicle violations); (ii) theft or embezzlement, or attempted theft or
embezzlement, of money or property or assets of the Company or any of its
Affiliates; (iii) illegal use of drugs; (iv) material breach of this
Agreement; (v) gross negligence or willful misconduct in the performance
of Executive’s duties; (vi) breach of any fiduciary duty owed to the
Company, including, without limitation, engaging in competitive acts while
employed by the Company; or (vii) the Executive’s willful refusal to
perform the assigned duties for which the Executive is qualified as directed by
the Executive’s Supervising Officer (as hereinafter defined) or the Board;
provided, that in the case of any event constituting Cause within clauses (iv) through
(vii) which is curable by the Executive, the Executive has been given
written notice by the Companies of such event said to constitute Cause,
describing such event in reasonable detail, and has not cured such action within
thirty (30) days of such written notice as reasonably determined by the Chief
Executive Officer. For purposes of this definition of Cause, action or inaction
by the Executive shall not be considered “willful” unless done or omitted by
the Executive (A) intentionally or not in good faith and (B) without
reasonable belief that the Executive’s action or inaction was in the best
interests of the Companies, and shall not include failure to act by reason of
total or partial incapacity due to physical or mental illness.

 

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“Change of Control” shall
mean (a) Any “Person” (having the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a “group” within the meaning of Section 13(d)(3))
has or acquires “Beneficial Ownership” (within the meaning of Rule 13d-3
under the Exchange Act) of 30% or more of the combined voting power of Holding’s
then outstanding voting securities entitled to vote generally in the election
of directors (“Voting Securities”); provided,
however, that the acquisition or holding of Voting Securities by (i) Holding
of any of its subsidiaries, (ii) an employee benefit plan (or a trust
forming a part thereof) maintained by Holding or any of its subsidiaries, or (iii) any
Person in which the Executive has a substantial equity interest shall not
constitute a Change of Control. Notwithstanding the foregoing, a Change of
Control shall not be deemed to occur solely because any Person acquired
Beneficial Ownership of more than the permitted amount of Voting Securities as
a result of the issuance of Voting Securities by Holding in exchange for assets
(including equity interests) or funds with a fair value equal to the fair value
of the Voting Securities so issued; provided that if a Change of Control would
occur (but for the operation of this sentence) as a result of the issuance of
Voting Securities by Holding, and after such issuance of Voting Securities by
Holding, such Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the Voting Securities Beneficially
Owned by such Person to more than 50% of the Voting Securities of Holding, then
a Change of Control shall occur; (b) At any time during a period of two
consecutive years, the individuals who at the beginning of such period
constituted the Board (the “Incumbent Board”)
cease for any reason to constitute more than 50% of the Board;
provided, however, that if the election, or nomination for election by Holding’s
stockholders, of any new director was approved by a vote of more than 50% of
the directors then comprising the Incumbent Board, such new director shall, for
purposes of this subsection (b), be considered as though such person were a
member of the Incumbent Board; provided, further, however, that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of (i) either an actual “Election
Consent” (as described in Rule 14a-l I promulgated under the Exchange Act)
or other actual solicitation of proxies or consents by or on behalf of a Person
other than the Incumbent Board (a “Proxy
Contest”), or (ii) by reason of an agreement intended to avoid
or settle any actual or threatened Election Contest or Proxy Contest; (c) Consummation
of a merger, consolidation or reorganization or approval by Holding’s
stockholders of a liquidation or dissolution of Holding or the occurrence of a
liquidation or dissolution of Holding (“Business
Combination”), unless, following such Business Combination: (1) the
Persons with Beneficial Ownership of Holding, immediately before such Business
Combination, have Beneficial Ownership of more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation (or in the election of a
comparable governing body of any other type of entity) resulting from such
Business Combination (including, without limitation, an entity which as a
result of such transaction owns Holding or all or substantially all of Holding’s
assets either directly or through one or more subsidiaries) (the “Surviving Company”) in substantially the
same proportions as their Beneficial Ownership of the Voting Securities
immediately before such Business Combination, (2) the individuals who were
members of the Incumbent Board immediately prior to the execution of the
initial agreement providing for such Business Combination constitute more than
50% of the members of the board of directors (or comparable governing body of a
noncorporate entity) of the Surviving Company; and (3) no Person (other
than Holding, any of its subsidiaries or any employee benefit plan (or any
trust forming a part thereof) maintained by Holding, the Surviving Company or
any Person who immediately prior to such Business Combination had Beneficial
Ownership of 30% or more of the then Voting Securities) has Beneficial
Ownership of 30% or more of the then combined voting power of the Surviving Company’s
then outstanding voting securities; provided, that notwithstanding this clause
(3), a Change of Control shall not be 

 

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deemed to occur solely because any Person acquired Beneficial Ownership
of more than 30% of Voting Securities as a result of the issuance of Voting
Securities by Holding in exchange for assets (including equity interests) or
funds with a fair value equal to the fair value of the Voting Securities so
issued; provided, however that a Business Combination with a Person in which
the Executive has a substantial equity interest shall not constitute a Change
of Control, or (d) Approval by Holding’s stockholders of an agreement for
the assignment, sale, conveyance, transfer, lease or other disposition of all
or substantially all of the assets of Folding to any Person (other than a
Person in which the Executive has a substantial equity interest and other than
a subsidiary of Holding or other entity, the Persons with Beneficial Ownership
of which are the same Persons with Beneficial Ownership of Holding and such
Beneficial Ownership is in substantially the same proportions), or the
occurrence of the same. Notwithstanding the foregoing, a Change of Control
shall not be deemed to occur solely because any Person acquired Beneficial
Ownership of more than the permitted amount of Voting Securities as a result of
the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by such Person; provided that if a Change of Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such acquisition of
Voting Securities by the Company, such Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the Voting
Securities Beneficially Owned by such Person, then a Change of Control shall
occur.

 

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

 

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

 

“Person” shall mean
any natural person, firm, corporation, limited liability company, 

 

4

 

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

 

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

 

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

 

	
  “Annual Bonus”

  	
  Section 4(b)

  
	
  “Base Salary”

  	
  Section 4(a)

  
	
  “Bonus Plan”

  	
  Section 4(b)

  
	
  “Confidential information or proprietary data”

  	
  Section 6(a)(2)

  
	
  “Customer”

  	
  Section 6(d)(2)

  
	
  “Disability”

  	
  Section 5(c)

  
	
  “Employment Period”

  	
  Section 2

  
	
  “Retirement”

  	
  Section 5(0

  
	
  “Supervising Officer”

  	
  Section 3(a)

  
	
  “Term” and “Termination Date”

  	
  Section 2

  

 

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

 

Section 3.                                          Duties.

 

(a)                                       During the
Employment Period, the Executive (i) shall serve as President, United
Stationers Supply Company, of the Companies, (ii) shall report directly to
an officer of the Companies (the “Supervising
Officer”) who shall be selected by the Board or the Chief Executive
Officer in its or his or her sole discretion, (iii) shall, subject to and
in accordance with the authority and direction of the Board and/or the
Supervising Officer have such authority and perform in a diligent and competent
manner such duties as may be assigned to the Executive from time to time by the
Board and/or the Supervising Officer and (iv) shall devote the Executive’s
best efforts and such time, attention, knowledge and skill to the operation of
the business and affairs of the Companies as shall be necessary to perform the
Executive’s duties. During the Employment Period, the 

 

5

 

Executive’s place of performance
for the Executive’s duties and responsibilities shall be at the Companies’
corporate headquarters office, unless another principal place of
performance is agreed in writing among the parties and except for required
travel by the Executive on the Companies’ business or as may be reasonably
required by the Companies.

 

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

 

Section 4.                                          Compensation.  During the Employment
Period, the Executive shall be compensated as follows:

 

(a)                                       the Executive
shall receive, at such intervals and in accordance with such Company payroll
policies as may be in effect from time to time, an annual salary (pro rata for
any partial year) equal to $478,590 (“Base
Salary”). The Base Salary shall be reviewed by the Board from time
to time and may, in the Board’s
sole discretion, be increased when deemed appropriate by the Board; if so
increased, it shall not thereafter be reduced (other than an across-the-board
reduction applied in the same percentage at the same time to all of the
Companies’ senior executives at the same grade level);

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

Section 5.                                          Termination
of Employment.

 

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

 

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

 

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

 

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

 

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

 

7

 

parties’ intention that the payments under this Section 5(c)(ii) constitute
a “separation pay plan due to involuntary separation from service” under Treas.
Reg. § 1.409A-1(b)(9)(iii);

 

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

 

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

 

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

 

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

 

(vii)                           the Executive shall receive
a lump sum cash payment, payable to Executive within thirty (30) days following
the Termination Date, in an amount equal to 

 

8

 

the additional benefit value (on a present value, differential basis)
that would be payable to Executive under the Company’s defined benefit
retirement plan if he had five (5) additional
years of credit for purposes of age, benefit service and vesting;

 

(viii)                        for the period commencing on
the Termination Date and ending not later than the last day of the second
calendar year after the Termination Date, the Executive shall be entitled to
receive executive level career transition assistance services provided by a
career transition assistance firm selected by the Executive and paid for by the
Companies in an amount not to exceed twenty percent (20%) of the sum of (i) the
Executive’s then existing Base Salary and (ii) the target incentive
compensation award for the calendar year during which the Termination Date
occurs. The Executive shall not be eligible to receive cash in lieu of
executive level career transition assistance services.

 

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

 

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

 

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

 

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

 

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

 

(v)                                      the Executive
shall continue to be covered, upon the same terms and conditions described in Section 4(e)
hereof, by the same or equivalent medical and/or dental insurance plans,
programs and/or arrangements as in effect for the Executive immediately prior
to the Change of Control, beginning on the Termination Date and continuing
until the earlier of: (A) the second anniversary following the date of the
Executive’s Termination Date, and (B) the date the Executive receives
substantially equivalent coverage under the plans, programs and/or arrangements
of a subsequent 

 

9

 

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

 

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

 

(vii)                           the Executive shall receive
a lump sum cash payment, payable to Executive within thirty (30) days following
the Termination Date, in an amount equal to the additional benefit value (on a
present value, differential basis) that would be payable to Executive under the
Company’s defined benefit retirement plan if he had seven (7) additional
years of credit for purposes of age, benefit service and vesting under the
Company’s defined benefit retirement plan;

 

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

 

(ix)                                for the period
commencing on the Termination Date and ending not later than the last day of
the second calendar year after the Termination Date, the Executive shall be
entitled to receive executive level career transition assistance services
provided by a career transition assistance Finn selected by the Executive and
paid for by the Companies in an amount not to exceed twenty percent (20%) of
the sum of (i) the Executive’s then existing Base Salary and (ii) the
target incentive compensation award for the calendar year during which the
Termination Date occurs. The Executive shall not be eligible to receive cash in
lieu of executive level career transition assistance services; and

 

(x)                                   the Executive shall
be entitled to be reimbursed by the Company for the Executive’s reasonable
attorneys’ fees, costs and expenses incurred in conjunction with any dispute
regarding Section 5(d)  if Executive prevails in any material respect
in such dispute, provided that (A) the applicable statutes of limitations
shall not have expired for any claim 

 

10

 

arising from the dispute that could be raised in a court of law; (B) Executive
shall submit to the Company verification of legal expenses for reimbursement
within 60 days from the date the expense was incurred; (C) the Company shall
reimburse Executive for eligible expenses promptly thereafter, but in any event
not earlier than the first day of the seventh month following the Termination
Date and not later than December 31 of the calendar year following the
calendar year in which the expense was incurred; (D) the expenses eligible
for reimbursement during any given calendar year shall not affect the expenses
eligible for reimbursement in any other calendar year; and (E) the right
to reimbursement hereunder may not be liquidated or exchanged for cash or any
other benefit.

 

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

 

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

 

(i)                                     in the event the
Employment Period is terminated as a result of Executive’s death or Disability,
an amount equal to the pro-rata target Annual Bonus award for the calendar year
during which the Termination Date occurs by reason of the Executive’s death or
Disability, such pro-rata award to be determined by multiplying the target
Annual Bonus award amount by a fraction, the numerator of which is the number
of days in the calendar year of the Termination Date elapsed prior to the
Termination Date and the denominator of which is three hundred and sixty-five
(365), plus (B) the additional benefit value (on a present value,
differential basis) that would be payable to Executive under the Company’s
defined benefit retirement plan if he had five (5) additional years of credit for purposes of age, benefit
service and vesting; or

 

(ii)                                  in the event the
Employment Period is terminated as a result of Executive’s Retirement, an
amount equal to: (A) the pro-rata actual Annual Bonus award for the
calendar year during which the Termination Date occurs by reason of the
Executive’s Retirement, such pro-rata award to be determined by multiplying the
actual Annual Bonus award amount by a fraction, the numerator of which is the
number of days in the calendar year of the Termination Date elapsed prior to
the Termination Date and the denominator of which is three hundred and
sixty-five (365); plus (B) the additional benefit value (on a present
value, differential basis) that would be payable to Executive under the Company’s
defined benefit retirement plan if he had five (5) additional years of credit for purposes of age, benefit
service and vesting.

 

(iii)                               In the event the
Employment Period is terminated as a result of Executive’s death, such lump sum
payment shall be made within 30 days following the 

 

11

 

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

 

(g)                                 Notwithstanding
anything else contained herein, if the Executive terminates his employment for
any reason other than Disability or Retirement and, if after a Change of
Control, without Good Reason, or the Companies terminate the Executive’s
employment for Cause, all of the Executive’s rights to payment from the
Companies (including pursuant to any plan or policy of the Companies) shall
terminate immediately, except the right to payment for Accrued Benefits in
respect of periods prior to  such termination.

 

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

 

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

 

(j)                                     Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution of any type to or in
respect of the Executive made directly or indirectly, by the Companies or by
any other party in connection with a Change of Control, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (the “Total Payments”). is
or will be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
collectively referred to as the “Excise Tax”),
then the Executive shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes) imposed upon the
Gross-Up Payment, the Executive retains an amount of the

 

12

 

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

 

(i)                                     All computations
and determinations relevant to Section 5(j) and this subsection 5(j)(i) shall
be made by a national accounting firm selected and reimbursed by the Companies
from among the ten (10) largest accounting rims in the United States as
determined by gross revenues (the “Accounting
Firm”), subject to the Executive’s consent (not to be unreasonably
withheld), which firm may be the Companies’ accountants. Such determinations
shall include whether any of the Total Payments are “parachute payments”
(within the meaning of Section 280G of the Code). In making the initial
determination hereunder as to whether a Gross-Up Payment is required, the
Accounting Firm shall determine that no Gross-Up Payment is required if the
Accounting Firm is able to conclude that no “Change of Control” has occurred
(within the meaning of Section 280G of the Code). If the Accounting Firm
determines that a Gross-Up Payment is required, the Accounting Firm shall
provide its determination (the “Determination”),
together with detailed supporting calculations regarding the amount
of any Gross-Up Payment and any other relevant matter both to the Companies and
the Executive by no later than thirty (30) days following the Termination Date,
if applicable, or such earlier time as is requested by the Companies or the
Executive (if the Executive reasonably believes that any of the Total Payments
may be subject to the Excise Tax). If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive and the
Companies with a written statement that such Accounting Firm has concluded that
it is more likely than not that no Excise Tax is payable (including the reasons
therefor) and the Executive is not required to report any Excise Tax on
Executive’s federal income tax return.

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

Section 6.                                          Further
Obligations of the Executive.

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

documents, materials and other property of the Companies and their
Subsidiaries in the Executive’s possession, custody or control, in good
condition, to the Companies.

 

(c)                                  During (i) the
Executive’s employment by the Companies, whether during or after the Employment
Period, and (ii) the eighteen (18) month period following the end of
Executive’s employment with the Companies, the Executive shall not within the
United States and Canada in any capacity (whether as an owner, employee,
consultant or otherwise) at any time perform, manage, supervise, or be
responsible or accountable for anyone else who is performing services — which
are the same as, substantially similar or related to the services the Executive
is providing, or during the last two years of the Executive’s employment by the
Companies has provided, for the Companies or their Subsidiaries — for, or on
behalf of, any other Person who or which is (1) a wholesaler of office
products, including traditional office products, computer consumable products,
office furniture, janitorial and/or sanitation products, food service
paper/non-food products, audio/visual and business machines or such other
products whether or not related to the foregoing provided by the Companies or
their Subsidiaries during the last twelve (12) months of the Executive’s
employment with the Companies, whether during or after the Employment Period, (2) a
provider of services the same as or substantially similar to those provided by
the Companies or their Subsidiaries during the last twelve (12) months of the
Executive’s employment with the Companies, whether during or after Employment
Period, or (3) engaged in a line of business other than described in (1) or
(2) hereinabove which is the same or substantially similar to the lines of
business engaged in by the Companies or their Subsidiaries, or to any line of
business which to the Executive’s knowledge is under active consideration or
planning by the Companies and their Subsidiaries, during the last twelve (12)
months of the Executive’s employment with the Companies, whether during or
after Employment Period.

 

(d)                                 (1)                                  During
(i) the Executive’s employment by the Companies, whether during or after
the Employment Period, and (ii) the eighteen (18) month period following
the end of the Executive’s employment with the Companies, the Executive shall
not at any time, directly or indirectly, solicit any Customer for or on behalf
of any Person other than the Companies or any of their Subsidiaries with
respect to the purchase of (A) office
products, including traditional office products, computer consumable
products, office furniture, janitorial and/or sanitation products, food service
paper/non-food products, audio/visual and business machines, or such other
products whether or not related to the foregoing provided by the Companies or
their Subsidiaries to such Customer during the last twelve (12) months of the
Executive’s employment with the Companies, whether during or after Employment
Period, (B) services the same as
or substantially similar to those provided by the Companies or their
Subsidiaries to such Customer during the last twelve (12) months of the
Executive’s employment with the Companies, whether during or after Employment
Period or (C) products or services from a line of business other than as
described in (A) or (B) herein which are the same or substantially
similar to the products and services provided to such Customer from a line of
business engaged in by the Companies or their Subsidiaries during the last
twelve (12) months of the Executive’s employment with the Companies, whether
during or after the Employment Period. Without limiting the foregoing, (i) during
the Executive’s employment by the Companies, whether during or after the
Employment Period, and (ii) insofar as the Executive may be employed by, or acting for or on behalf of, a Supplier
at any time within the eighteen (18) month period following the end of the
Executive’s employment with the Companies, the Executive shall not at any time,
directly or indirectly, solicit any Customer to switch the purchase of the
products or services described hereinabove from the Companies or their
Subsidiaries to Supplier.

 

16

 

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

 

(e)                                  During
the Executive’s employment by the Companies, whether during or after the
Employment Period, and during the eighteen (18) month period following the end
of the Executive’s employment with the Companies, the Executive shall not at
any time, directly or indirectly, induce or solicit any employee of the
Companies or any of their Subsidiaries for the purpose of causing such employee
to terminate his or her employment with the Companies or such Subsidiary.

 

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

 

(g)                                 If
any court determines that any portion of this Section 6 is invalid or
unenforceable, the remainder of this Section 6 shall not thereby be
affected and shall be given full effect without regard to the invalid
provision. If any court construes any of the provisions of Section 6(c),
6(d), 6(e) or 6(0 above, or any part thereof, to be unreasonable because
of the duration or scope of such provision, such court shall have the power to
reduce the duration or scope of such provision and to enforce such provision as
so reduced.

 

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

 

17

 

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

 

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

 

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

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

 

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

 

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

 

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

 

Section 11.                                   Payment;
Taxes and Withholding.  The Company shall be responsible as employer for
payment of all cash compensation and severance payments provided herein and
Holding shall cause the Company to make such payments. The Executive shall not
be entitled to receive any additional compensation from either of the Companies
for any services the Executive provides to Holding or the Companies’
Subsidiaries. The Company shall be entitled to withhold from  any amounts
to be paid to the Executive hereunder any federal, state, local, or foreign
withholding or other taxes or charges which it is from time to time required to
withhold. The 

 

18

 

Company shall be entitled to rely on an opinion of counsel if any
question as to the amount or requirement of any such withholding shall arise.
Executive shall be solely responsible for the payment of all taxes due and
owing with respect to wages, benefits, and other compensation provided to him
hereunder.  This Agreement is intended to
satisfy, or be exempt from the requirements of Section 409A(a)(2), (3) and
(4) of the Code, including current and future guidance and regulations
interpreting such provisions, and should be interpreted accordingly.

 

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

 

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

 

If to the Companies:

 

United Stationers Inc.

United Stationers Supply Co.

One Parkway North Blvd.

Suite 100

Deerfield, IL

60015-2559Attention:

General Counsel

 

If to the Executive:

 

P. Cody Phipps

 

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

 

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

 

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

 

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

 

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

 

19

 

Section 18.                                   Arbitration.
Any dispute, controversy or question arising under, out of, or relating to
this Agreement (or the breach thereof), or, the Executive’s employment with the
Companies or termination thereof, shall be referred for arbitration in Chicago,
Illinois to a neutral arbitrator selected by the Executive and the Companies
(or if the parties are unable to agree on selection of such an arbitrator, one
selected by the American Arbitration Association pursuant to its rules referred to below)
and this shall be the exclusive  and sole means  for  resolving such dispute. Such
arbitration shall be conducted in accordance with the National Rules for
Resolution of Employment Disputes of the American Arbitration Association.
Except as provided in Section 5(d)(ix) above, the arbitrator shall
have the discretion to award reasonable attorneys’ fees, costs and expenses to
the prevailing party. Judgment upon the award rendered by the arbitrator maybe
entered in any court having jurisdiction thereof. Nothing in this Section 18
shall be construed so as to deny the Companies the right and power to seek and
obtain injunctive relief in a court of equity for any breach or threatened
breach by the Executive of any of the Executive’s covenants in Section 6
hereof. Moreover, this Section 18 and Section 12 hereof shall not be
applicable to any dispute, controversy or question arising under, out of, or
relating to the Indemnification Agreement.

 

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

 

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

 

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

 

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

 

20

 

*                                         *                                         *

 

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

 

	
  EXECUTED ON :

  	
  UNITED STATIONERS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Richard W. Gochnauer

  
	
   

  	
   

  	
  Title:   President and Chief
  Executive Officer

  
	
   

  	
   

  
	
  EXECUTED ON:

  	
  UNITED STATIONERS SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Richard W. Gochnauer

  
	
   

  	
   

  	
  Title:   President and Chief Executive Officer

  
	
   

  	
   

  
	
  EXECUTED ON:

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
   

  
	
   

  	
  P. Cody Phipps

  

 

21Exhibit 10.39

 

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
Patrick T. Collins (hereinafter referred to as the “Executive”).

 

WHEREAS, the Companies and Executive are parties to an Executive
Employment Agreement dated October 19, 2004 (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 continue to obtain the
benefits of Executive’s services and attention to the affairs of the Companies,
and to provide inducement for Executive (1) to remain in the service of
the Companies in the event of any proposed or anticipated Change of Control and
(2) to remain in the service of the Companies in order to facilitate an
orderly transition in the event of a Change of Control; and

 

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

 

WHEREAS, Executive will continue to have
access to confidential, proprietary and trade secret information of the
Companies and their subsidiaries, and it is desirable and in the best interests
of the Companies and their shareholders to protect confidential, proprietary
and trade secret information of the Companies and their subsidiaries, to
prevent unfair competition by former executives of the Companies following
separation of their employment with the Company and to secure cooperation from
former executives with respect to matters related to their employment with 

 

1

 

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 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 

 

2

 

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-l
I promulgated under the Exchange Act) or other actual solicitation of proxies
or consents by or on behalf of a Person other than the Incumbent Board (a “Proxy Contest”), or (ii) by reason of
an agreement intended to avoid or settle any actual or threatened Election
Contest or Proxy Contest; (c) Consummation of a merger, consolidation or
reorganization or approval by Holding’s stockholders of a liquidation or
dissolution of Holding or the occurrence of a liquidation or dissolution of
Holding (“Business Combination”), unless,
following such Business Combination: (1) the Persons with Beneficial Ownership
of Holding, immediately before such Business Combination, have Beneficial
Ownership of more than 50% of
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors of the corporation (or in the
election of a comparable governing body of any other type of entity) resulting
from such Business Combination (including, without limitation, an entity which
as a result of such transaction owns Holding or all or substantially all of
Holding’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) in substantially the
same proportions as their Beneficial Ownership of the Voting Securities 

 

3

 

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 notbe 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 authority, as long as, in the case of
either (A), (B) or (C), Executive continues to report to either the Chief
Executive Officer or Chief Operating Officer of the Companies or to the
Supervising Officer to whom he reported immediately prior to the Change of
Control or a Supervising Officer of equivalent responsibility and authority, or
(iii) without Executive’s written consent: (A) a material reduction
in the Executive’s Base Salary, (B) the relocation of the Executive’s principal
place of employment more than fifty (50) miles from its location on the date of
a Change in Control, or (C) the relocation of the 

 

4

 

Company’s corporate headquarters office outside of the metropolitan
area in which it is located on the date of a Change in Control. For purposes of
this Agreement, a Change of Control, alone, does not constitute Good Reason.
Furthermore, notwithstanding the above, the occurrence of any of the events
described above will not constitute Good Reason unless the Executive gives the
Companies written notice within thirty (30) days after the initial occurrence
of any of such events that the Executive believes that such event constitutes
Good Reason, and the Companies thereafter fail to cure any such event within
sixty (60) days after receipt of such notice.

 

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

 

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

 

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

 

	
  “Annual Bonus”

  	
  Section 4(b)

  
	
  “Base Salary”

  	
  Section 4(a)

  
	
  “Bonus Plan”

  	
  Section 4(b)

  
	
  “Code”

  	
  Section 2

  
	
  “Confidential information or proprietary data”

  	
  Section 6(a)(2)

  
	
  “Customer”

  	
  Section 6(d)(2)

  
	
  “Disability”

  	
  Section 5(c)

  
	
  “Employment Period”

  	
  Section 2

  
	
  “Retirement”

  	
  Section 5(f)

  
	
  “Supervising Officer”

  	
  Section 3(a)

  
	
  “Supplier”

  	
  Section 6(d)(2)

  
	
  “Term” and “Termination Date”

  	
  Section 2

  

 

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

 

5

 

Section 3.                                          Duties.

 

(a)                                       During the
Employment Period, the Executive (i) shall serve as Senior Vice President,
Sales, of the Companies, (ii) shall report directly to an officer of the
Companies (the “Supervising Officer”) who
shall he selected by the Board or the Chief Executive Officer in its or his or
her sole discretion, (iii) shall, subject to and in accordance with the
authority and direction of the Board and/or the Supervising Officer have such
authority and perform in a diligent and competent manner such duties as may be
assigned to the Executive from time to time by the Board and/or the Supervising
Officer and (iv) shall devote the Executive’s best efforts and such time,
attention, knowledge and skill to the operation of the business and affairs of
the Companies as shall be necessary to perform the Executive’s duties. During
the Employment Period, the 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 $337,394.16 (“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 Bonus Plan
(such annual incentive compensation award, the “Annual Bonus”), with such Annual Bonus to be payable in a
cash lump sum at such time as bonuses are ordinarily paid to the Companies’
senior executives at the same grade level;

 

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

 

6

 

accordance with the Companies’ policies;

 

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

 

(e)                                        the Executive
and/or the Executive’s family, as the case may be, shall he 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); and

 

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

 

Section 5.                                          Termination
of Employment.

 

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

 

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

 

(c)                                  If
the Employment Period is terminated prior to the expiration of the Term by the
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 

 

7

 

time (“Disability”) and other than within
two (2) years following a Change of Control, then, as the Executive’s
exclusive right and remedy in respect of such termination:

 

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

 

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

 

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

 

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

 

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

 

8

 

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 twenty percent (20%) of the sum of (i) the
Executive’s then existing Base Salary and (ii) the target incentive
compensation award for the calendar year during which the Termination Date
occurs. The Executive shall not be eligible to receive cash in lieu of executive
level career transition assistance services.

 

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

 

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

 

(ii)                                  the Executive shall
be entitled to a lump-sum payment in an mount 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 he
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 

 

9

 

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;

 

(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 (2) 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;

 

10

 

(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 twenty percent (20%) of the sum of (i) the
Executive’s then existing Base Salary and (ii) the target incentive
compensation award for the calendar year during which the Termination Date
occurs. The Executive shall not he 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 expenses for reimbursement within 60 days from the date
the expense was incurred; (C) the Company shall reimburse Executive for
eligible expenses promptly thereafter, but in any event not earlier than the
first day of the seventh month following the Termination Date and not later
than December 31 of the calendar year following the calendar year in which
the expense was incurred; (D) the expenses eligible for reimbursement
during any given calendar year shall not affect the expenses eligible for
reimbursement in any other calendar year; and (E) the right to
reimbursement hereunder may not be liquidated or exchanged for cash or any
other benefit.

 

(e)                                  Any amounts payable
pursuant to Sections 5(c) and 5(d) above shall be considered
severance payments and, except for the Executive’s vested benefits under the
Companies’ employee benefit plans (other than severance plans), shall be in
full and complete satisfaction of the obligations of the Companies to the
Executive in connection with the termination of the Executive’s employment. The
Company shall deliver a Form 1 099 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 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 

 

11

 

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)                                 employment
for any reason other than Disability or Retirement and, if after a Change of
Control, without Good Reason, or the Companies terminate the Executive’s
employment for Cause, all of the Executive’s rights to payment from the
Companies (including pursuant to any plan or policy of the Companies) shall
terminate immediately, except the right to payment for Accrued Benefits in
respect of periods prior to such termination.

 

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

 

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

 

(j)                                     Notwithstanding
any provision to the contrary contained in this Agreement, if the cash payments
due and the other benefits to which Executive shall become entitled under Section 5(d),
either alone or together with other payments in the nature of compensation to
Executive which are contingent on a change in the ownership or effective
control of the Company or in the

 

12

 

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

 

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

 

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

 

13

 

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 therefore) and the Executive is
not required to report any Excise Tax on Executive’s federal income tax return.

 

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

 

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

 

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

 

(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).

 

14

 

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

 

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

 

(i)                                     Business,
financial and strategic information, such as sales and 

 

15

 

earnings information and trends, material, overhead and other costs,
profit margins, accounting information, banking and financing information,
pricing policies, capital expenditure/investment plans and budgets, forecasts,
strategies, plans and prospects.

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)                                  During
(i) the Executive’s employment by the Companies, whether during or after
the Employment Period, and (ii) the eighteen (18) month period following
the end of Executive’s employment with the Companies,, the Executive shall not
within the United States and Canada in 

 

16

 

any capacity (whether as an owner, employee, consultant or otherwise)
at any time perform, manage, supervise, or be responsible or accountable for
anyone else who is performing services — which are the same as, substantially
similar or related to the services the Executive is providing, or during the
last two years of the Executive’s employment by the Companies has provided, for
the Companies or their Subsidiaries — for, or on behalf of, any other Person
who or which is (1) a wholesaler of office products, including traditional
office products, computer consumable products, office furniture, janitorial
and/or sanitation products, food service paper/non-food products, audio/visual
and business machines or such other products whether or not related to the
foregoing provided by the Companies or their Subsidiaries during the last
twelve (12) months of the Executive’s employment with the Companies, whether
during or after the Employment Period, (2) a provider of services the same
as or substantially similar to those provided by the Companies or their
Subsidiaries during the last twelve (12) months of the Executive’s employment
with the Companies, whether during or after Employment Period, or (3) engaged
in a line of business other than described in (1) or (2) hereinabove
which is the same or substantially similar to the lines of business engaged in by the Companies or their
Subsidiaries, or to any line of business which to the Executive’s knowledge is
under active consideration or planning by the Companies and their Subsidiaries,
(luring the last twelve (12) months of
the Executive’s employment with the Companies, whether during or after
Employment Period,.

 

(d)                                 (1)                                  During
(i) the Executive’s employment by the Companies, whether during or after
the Employment Period, and (ii) the eighteen (18) month period following
the end of the Executive’s employment with the Companies, the Executive shall
not at any time, directly or indirectly, solicit any Customer for or on behalf of any Person other
than the Companies or any of their Subsidiaries with respect to the purchase of
(A) office products, including traditional office products, computer
consumable products, office furniture, janitorial and/or sanitation products,
food service paper/non-food products, audio/visual and business machines, or
such other products whether or not related to the foregoing provided by the
Companies or their Subsidiaries to such Customer during the last twelve (12)
months of the Executive’s employment with the Companies, whether during or
after the Employment Period, (B) services the same as or substantially
similar to those provided by the Companies or their Subsidiaries to such
Customer during the last twelve (12) months of the Executive’s employment with the
Companies, whether during or after the Employment Period or (C) products
or services from a line of business other than as described in (A) or (B) herein
which are the same or substantially similar to the products and services
provided to such Customer from a line of business engaged in by the Companies
or their Subsidiaries during the last twelve (12) months of the Executive’s
employment with the Companies, whether during or after Employment Period. Without
limiting the foregoing, (i) during the Executive’s employment by the
Companies, whether during or after the Employment Period, and (ii) insofar
as the Executive maybe employed by, or acting for or on behalf of, a Supplier
at any time within the eighteen (18) month period following the end of the
Executive’s employment with the Companies, the Executive shall not at any time,
directly or indirectly, solicit any Customer to switch the purchase of the
products or services described hereinabove from the Companies or their
Subsidiaries to Supplier.

 

(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, audio/visual and business machines or such other
products whether or not related to the foregoing, (B) services provided by
or from the 

 

17

 

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 Period. For purposes of
this Agreement, a “Supplier” is
any Person who or which has furnished to the Companies or their Subsidiaries
for resale (A) office products, including traditional office products,
computer consumable products, office furniture, janitorial and/or sanitation
products, food service paper/non-food products audio/visual and business
machines or such other products whether or nor related to the foregoing (B) services
provided by or from the Companies or any of their Subsidiaries or (C) products
or services from a line of business other than as described in (A) or (B) herein
which are the same or substantially similar to the products and services from a
line of business engaged in by the Companies or their Subsidiaries during the
last twelve (12) months of the Executive’s employment with the Companies,
whether during or after Employment Period.

 

(e)                                  During the Executive’s
employment by the Companies, whether during or after the Employment Period, and
during the eighteen (18) month period following the end of the Executive’s employment
with the Companies, the Executive shall not at any time, directly or
indirectly, induce or solicit any employee of the Companies or any of their
Subsidiaries for the purpose of causing such employee to terminate his or her
employment with the Companies or such Subsidiary.

 

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

 

(g)                                 If any court
determines that any portion of this Section 6 is invalid or unenforceable,
the remainder of this Section 6 shall not thereby be affected and shall he
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 Employment Period, and
during the eighteen (18) month period following the end of Executive’s employment
with the Companies, the Executive agrees that, prior to accepting employment
with a Customer or Supplier of the Companies, the Executive will give notice to
the Chief Executive Officer of the Companies. The Companies reserve the right
to make such Customer or Supplier aware of the Executive’s obligations under Section 6
of this Agreement.

 

(i)                                     During and
following Executive’s Employment Period, the Executive shall 

 

18

 

furnish a copy of this Section 6 in its entirety to any
prospective employer prior to accepting employment with such prospective
employer.

 

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

 

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

 

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

 

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

 

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

 

19

 

entitled to withhold from any amounts to be paid to the Executive
hereunder any federal, state, local, or foreign withholding or other taxes or
charges which it is from time to time required to withhold. The Company shall
be entitled to rely on an opinion of counsel if any question as to the amount
or requirement of any such withholding shall arise. Executive shall be solely
responsible for the payment of all taxes due and owing with respect to wages,
benefits, and other compensation provided to him hereunder.  This Agreement is intended to satisfy, or be
exempt from, the requirements of Section 409A(a)(2), (3) and (4) of
the Code, including current and future guidance and regulations interpreting
such provisions, and should be interpreted accordingly.

 

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

 

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

 

If to the Companies:

 

United Stationers the

United Stationers Supply Co.

One Parkway North Blvd.,

Deerfield, IL 60015-2559

 

Attention: General Counsel

 

If to the Executive:

 

Patrick T. Collins

 

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.

 

20

 

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 I8 shall be
construed so as to deny the Companies the right and power to seek and obtain
injunctive relief in a court of equity for any breach or threatened breach by
the Executive of any of the Executive’s covenants in Section 6 hereof.
Moreover, this Section 18 and Section 12 hereof shall not be
applicable to any dispute, controversy or question arising under, out of, or
relating to the Indemnification Agreement.

 

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

 

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

 

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

 

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

 

21

 

*                                         *                                         *

 

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

 

	
  EXECUTED ON :

  	
  UNITED STATIONERS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Richard W. Gochnauer

  
	
   

  	
   

  	
  Title:   President and Chief
  Executive Officer

  
	
   

  	
   

  
	
  EXECUTED ON:

  	
  UNITED STATIONERS SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Richard W. Gochnauer

  
	
   

  	
   

  	
  Title:   President and Chief
  Executive Officer

  
	
   

  	
   

  
	
  EXECUTED ON:

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , 2008

  	
   

  
	
   

  	
  Patrick T. Collins

  

 

22

 

APPENDIX I

 

23

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