Document:

EXHIBIT 10.2

 

WAIVER AND FIRST AMENDMENT TO

STOCK PURCHASE AGREEMENT

 

This Waiver and First Amendment to Stock Purchase Agreement (this “Amendment”) dated as of March 17, 2011, is by and between Granite City Food & Brewery Ltd., a Minnesota corporation (the “Company”), and Concept Development Partners LLC, a Delaware limited liability company (the “Buyer”).

 

RECITALS

 

WHEREAS, the Company and Buyer are parties to a Stock Purchase Agreement dated February 8, 2011 (the “Original Agreement”); and

 

WHEREAS, the Company and Buyer desire to amend the terms of the Original Agreement and to provide for a waiver of certain actions of the Company as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises made in this Amendment, and in consideration of the representations, warranties, and covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, each of the parties hereby agrees as follows intending to be legally bound:

 

1.     Defined Terms.  Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Original Agreement.

 

2.     Amendment.  The parties hereto agree to the following amendment to the Original Agreement:

 

Exhibit A to the Original Agreement is hereby amended in its entirety by replacing it with Exhibit A attached hereto.

 

3.     Waiver.  Section 5.1 of the Original Agreement provides that the Company shall not take certain actions prior to the Closing without the prior written consent of the Buyer. The Buyer hereby consents to the actions taken or to be taken by the Company prior to the Closing as set forth in Schedule A attached hereto.

 

4.     Original Agreement Continues.  Other than as amended by this Amendment, the Original Agreement shall continue in full force and effect.

 

5.     Miscellaneous.  This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Amendment, once executed by a party, may be delivered to the other party hereto by facsimile or other electronic transmission of a copy of this Amendment bearing the signature of the party so delivering this Amendment. This Amendment shall be enforced, governed by and construed in accordance with the laws of the State of Minnesota applicable to agreements made and to be performed entirely within such state, without regard to the principles of conflict of laws.

 

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IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

 

 

	
 
    	
GRANITE CITY FOOD & BREWERY LTD.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   JAMES G. GILBERTSON
    
	
 
    	
Name:
    	
James   G. Gilbertson
    
	
 
    	
Title:
    	
CFO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CONCEPT DEVELOPMENT PARTNERS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   FOUAD BASHOUR
    
	
 
    	
Name:
    	
Fouad   Bashour
    
	
 
    	
Title:
    	
Manager
    

 

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Schedule A

 

WAIVERS

 

1.     The Company intends to execute, deliver and perform Amendment No. 8 to Bridge Loan Agreement, by and among the Company, Granite City Restaurant Operations, Inc., Harmony Equity Income Fund, L.L.C. (“HEIFLLC”) and Harmony Equity Income Fund II, L.L.C. (together with HEIFLLC, the “Harmony Funds”), pursuant to which the Harmony Funds agree to (1) a deferral until June 30, 2011 of all payments of principal and interest under the notes due to them (the “Notes”) and (2) an amendment to the conversion provisions of the Notes to provide that the holder of the Notes shall have the right until December 1, 2011 to convert any or all of the outstanding principal balance of the Notes, together with accrued and unpaid interest thereon, into shares of Common Stock at a conversion price equal to $3.00, up to a maximum of 215,656 shares of Common Stock to be issued by the Company.

 

2.     The Company intends to issue to its independent directors options to purchase a maximum aggregate of 62,500 shares of Common Stock, which options shall be issued on terms substantially similar to prior options granted to the members of the Company’s Board of Directors.

 

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Exhibit A

 

GRANITE CITY FOOD & BREWERY LTD.

 

CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES

 

OF

 

SERIES A CONVERTIBLE PREFERRED STOCK

 

Granite City Food & Brewery Ltd., a Minnesota corporation (the “Corporation”), does hereby certify that pursuant to authority vested in it by the provisions of the Articles of Incorporation, as amended, of the Corporation, the Board of Directors of the Corporation by action in writing by the Board of Directors taken pursuant to Section 302A.239 of the Minnesota Business Corporation Act, did adopt the following resolution authorizing the creation and issuance of a series of preferred stock designated as Series A Convertible Preferred Stock:

 

RESOLVED that, pursuant to authority expressly granted to the Board of Directors of the Corporation by the provisions of the Articles of Incorporation of the Corporation, the Board of Directors of the Corporation hereby creates and authorizes the issuance of a series of shares of preferred stock of the Corporation and hereby fixes, in addition to the relative rights, voting power, preferences and restrictions stated in the Articles of Incorporation of the Corporation, the following designation and number of shares of such preferred stock of the Corporation and the following voting, dividend rate, liquidation preference, conversion and other rights, preferences and restrictions with respect to such shares of preferred stock of the Corporation:

 

1.     Designation of Series of Preferred Stock.

 

Of the 10,000,000 shares of preferred stock which the Corporation is authorized to issue pursuant to its Articles of Incorporation, 3,000,000 of such shares are designated as shares of Series A Convertible Preferred Stock of the Corporation, par value $.01 per share (“Series A Preferred”). Shares of Series A Preferred shall have a stated value of $3.00 per share (the “Stated Value”). Such shares of Series A Preferred, together with the 90,000,000 shares of authorized common stock of the Corporation, the remaining balance of the undesignated shares of preferred stock of the Corporation and any other common stock or preferred stock that may hereafter be authorized in or pursuant to the Articles of Incorporation of the Corporation, are sometimes hereinafter collectively referred to as the “capital stock.”

 

2.     Voting Privileges.

 

(a) General.  Each holder of Series A Preferred shall have 0.77922 votes per Series A Preferred share on all matters submitted to the shareholders. Except as otherwise provided herein, and except as otherwise required by agreement or law, all shares of capital stock of the Corporation shall vote as a single class on all matters submitted to the shareholders.

 

(b) Additional Class Votes by Series A Preferred.  Without the affirmative vote or written consent of the holders (acting together as a class) of a majority of the shares of Series A Preferred at the time outstanding, the Corporation shall not: (i) declare, or pay, or set apart for payment, any dividends (other than dividends payable in stock ranking junior to Series A Preferred as to dividends and upon liquidation, dissolution or winding-up) or make any distribution in cash or other property on any other class or series of stock of the Corporation ranking junior to Series A Preferred either as to dividends or upon liquidation, dissolution or winding-up and will not redeem, purchase or otherwise acquire any shares of any such junior class or series if at the time of making such declaration, payment, distribution, redemption, purchase or acquisition the Corporation shall be in default with respect to any dividend payable on, or any obligation to retire shares of, Series A Preferred; (ii) authorize, create or issue, or increase the authorized or issued amount, of any class or series of stock ranking senior to Series A Preferred as to payment of dividends, as to payment or distribution of assets upon the 

 

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liquidation or dissolution of the corporation, or as to voting rights (on an as-if-converted basis or otherwise); (iii) amend, alter or repeal (whether by merger, consolidation or otherwise) any of the provisions of the Corporation’s Articles of Incorporation, or of this Certificate of Designation, so as to adversely affect the preferences, rights, privileges or powers of Series A Preferred; (iv) acquire or agree to acquire (x) by merging or consolidating with, or by purchasing a substantial portion of the stock, or other ownership interests in, or substantial portion of assets of, or by any other manner, any business or any corporation, partnership, association, joint venture, limited liability company or other entity or division thereof or (y) any assets that would be material, individually or in the aggregate, to the Corporation, except purchases of supplies, equipment and inventory in the ordinary course of business consistent with past practice; or (v) sell, lease, exchange or dispose in any other manner, all or substantially all of the assets of the Corporation.

 

3.     Dividends.

 

(a) The holders of shares of Series A Preferred shall be entitled to receive cumulative dividends, out of funds legally available therefor, at a rate of nine percent (9%) per annum, before any dividend or distribution in cash or other property on common stock or any class or series of stock of the Corporation ranking junior to Series A Preferred as to dividends or on liquidation, dissolution or winding-up shall be declared or paid or set apart for payment.

 

(b) Dividends on Series A Preferred shall be payable on March 31, June 30, September 30 and December 31 of each year through December 31, 2013 (each such date being hereinafter individually a “Dividend Payment Date”), except that if such date is a Saturday, Sunday or legal holiday then such dividend shall be payable on the first immediately preceding calendar day which is not a Saturday, Sunday or legal holiday, to holders of record as they appear on the books of the Corporation on such respective dates, not exceeding sixty (60) days preceding such Dividend Payment Date, as may be determined by the Board of Directors in advance of the payment of each particular dividend. Dividends in arrears may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date as may be fixed by the Board of Directors of the Corporation. Dividends declared and paid in arrears shall be applied first to the earliest dividend period or periods for which any dividends remain outstanding. The amount of dividends payable per share of Series A Preferred for each dividend period shall be computed by dividing the annual rate of 9% by four. Dividends payable on Series A Preferred for the initial dividend period and for any other period less than a full quarterly period shall be computed and prorated on the basis of a 360-day year of twelve 30-day months.

 

(c)  If the Corporation is unable to pay a dividend on a Dividend Payment Date, the dividend shall be cumulative and shall accrue from and after the date of original issuance thereof, whether or not declared by the Board of Directors. Accrued dividends shall bear interest at a rate of ten percent (10%) per annum.

 

(d) No cash dividend may be declared on any other class or series of stock ranking on a parity or junior with Series A Preferred as to dividends in respect of any dividend period unless there shall also be or have been declared and paid on Series A Preferred accrued, unpaid dividends for all quarterly periods coinciding with or ending before such quarterly period, ratably in proportion to the respective annual dividend rates fixed therefor.

 

(e)  Dividends on Series A Preferred shall be paid 50% in cash and 50% in shares of fully-paid and nonassessable common stock of the Corporation, valued at the market price per share of the common stock of the Corporation. As used in this Section 3, the term “market price” shall mean (i) if the common stock is traded on a securities exchange or on the NASDAQ Stock Market, the closing sale price of the common stock on such exchange or the NASDAQ Stock Market, or if the common stock is otherwise traded in the over-the-counter market, the closing bid price, in each case averaged over a period of ninety (90) consecutive trading days prior to the date as of which “market price” is

 

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being determined, (ii) if the common stock is not traded on an exchange or the NASDAQ Stock Market, or otherwise traded in the over-the-counter market, the higher of (A) the book value thereof as determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Corporation as of the last day of any month ending within sixty (60) days preceding the date as of which the determination is to be made, or (B) the fair value thereof determined in good faith by the Board of Directors of the Corporation as of a date which is within fifteen (15) days of the date as of which the determination is to be made.

 

(f)  Any portion of a dividend that would result in issuance of a fractional share of common stock shall be paid in cash at the dividend rate set forth in Section 3(a).

 

4.     Liquidation Preference.

 

(a) In the event of an involuntary or voluntary liquidation or dissolution of the Corporation at any time, the holders of shares of Series A Preferred shall be entitled to receive out of the assets of the Corporation an amount per share equal to the Stated Value, plus dividends unpaid and accumulated or accrued thereon, and any interest due thereon if any. In the event of either an involuntary or a voluntary liquidation or dissolution of the Corporation, payment shall be made to the holders of shares of Series A Preferred in the amounts herein fixed before any payment shall be made or any assets distributed to the holders of the common stock or any other class of shares of the Corporation ranking junior to Series A Preferred with respect to payment upon dissolution or liquidation of the Corporation. If upon any liquidation or dissolution of the Corporation, the assets available for distribution shall be insufficient to pay the holders of all outstanding shares of Series A Preferred and any liquidation preference on any other class or series of preferred stock of the Corporation ranking on a parity with Series A Preferred, to which they respectively shall be entitled, the holders of such shares of Series A Preferred and the holders of any such other class or series of preferred stock of the Corporation ranking on a parity with Series A Preferred shall share pro rata in any such distribution in proportion to the full amounts to which they would otherwise be respectively entitled.

 

(b) Nothing hereinabove set forth shall affect in any way the right of each holder of shares of Series A Preferred to convert such shares at any time and from time to time in accordance with Section 5 below.

 

5.     Optional Conversion Right.

 

(a) The holder of any shares of Series A Preferred may at any time prior to the Automatic Conversion Date, as defined in Section 6(a) hereof, convert any or all of the shares of Series A Preferred into fully paid and non-assessable shares of common stock of the Corporation at the rate of two shares of common stock for each share of Series A Preferred, equivalent to a conversion price of $1.50 per share (the “Conversion Price”), subject to adjustment pursuant to Section 5(c). Subject to the provisions of the next sentence, shares of Series A Preferred surrendered for conversion during the period from the close of business on any record date for the payment of dividends next preceding any Dividend Payment Date to the opening of business on such Dividend Payment Date shall be accompanied by payment of an amount equal to the dividend payable on such Dividend Payment Date on the shares being surrendered for conversion. A holder of Series A Preferred on the record date preceding a Dividend Payment Date who (or whose transferee) converts shares of Series A Preferred on a Dividend Payment Date, will receive the dividend payable on such Series A Preferred by the Corporation on such Dividend Payment Date together with all accumulated but unpaid dividends on such Series A Preferred, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Series A Preferred for conversion.

 

(b) In order to convert shares of Series A Preferred into shares of common stock of the Corporation, the holder thereof shall give written notice to the Corporation at such office that such holder elects to convert such shares and shall surrender at the Corporation’s corporate offices the 

 

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certificate or certificates therefor, duly endorsed to the Corporation or in blank, within two business days following delivery of such notice. Shares of Series A Preferred shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion as herein provided, and the person entitled to receive the shares of common stock of the Corporation issuable upon such conversion shall be treated for all purposes as the record holder of such shares of common stock at such time. As promptly as practicable on or after the conversion date, the Corporation shall issue and deliver or cause to be issued and delivered a certificate or certificates for the number of shares of common stock of the Corporation issuable upon such conversion.

 

(c)  The Conversion Price shall be subject to adjustment from time to time as hereinafter provided. Upon each adjustment of the Conversion Price each holder of shares of Series A Preferred shall thereafter be entitled to receive the number of shares of common stock of the Corporation obtained by multiplying the Conversion Price in effect immediately prior to such adjustment by the number of shares issuable pursuant to conversion immediately prior to such adjustment and dividing the product thereof by the Conversion Price resulting from such adjustment.

 

(d) Except for (i) options, warrants or other rights to purchase securities outstanding on the date of the first issuance of Series A Preferred (provided there is no adjustment to the terms of such options, warrants or other securities on or after the date of issuance of Series A Preferred, other than pursuant to the Corporation’s option exchange program approved by the compensation committee of the Board of Directors of the Corporation on December 28, 2010); (ii) options to purchase shares of common stock and the issuance of awards of common stock pursuant to stock option or employee stock purchase plans adopted by the Corporation and shares of common stock issued upon the exercise of such options granted pursuant to such plans (provided there is no adjustment to the terms of such options, awards or other securities on or after the date of issuance of Series A Preferred), appropriately adjusted to reflect stock splits, combinations, stock dividends, reorganizations, consolidations and similar changes; or (iii) common stock issued to holders of Series A Preferred or upon conversion or in lieu of cash dividends on Series A Preferred, if and whenever the Corporation shall issue any additional securities, warrants or rights or any security convertible or exchangeable into equity, securities, warrants or rights (collectively, “Convertible Securities”) without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the Conversion Price shall be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of common stock outstanding immediately prior to such issuance plus the number of shares of common stock that the aggregate consideration received by the Corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of such additional common stock and the number of shares of common stock outstanding prior to such issuance. For the purpose of the above calculation, the number of shares of common stock immediately prior to such issuance shall be calculated on a fully-diluted basis, as if all shares of Series A Preferred had been fully converted into shares of common stock and any outstanding warrants, options or other rights for the purchase of shares of stock or Convertible Securities with an exercise price at or less than the then current market value of the common stock of the Corporation had been fully exercised as of such date. Except as provided in Section 5(g) below, no further adjustments of the Conversion Price shall be made upon the actual issuance of common stock or of any Convertible Securities upon the exercise of such rights or options or upon the actual issue of such common stock upon conversion or exchange of such Convertible Securities.

 

(e)  For purposes of this Section 5, in case any shares of common stock or Convertible Securities or any rights or options to purchase any such common stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor, without deducting therefrom any expenses incurred or any underwriting commissions, discounts or concessions paid or allowed by the Corporation in connection therewith. In 

 

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case any shares of common stock or Convertible Securities or any rights or options to purchase any such common stock or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to be the fair value of such consideration as determined by the Board of Directors of the Corporation, without deducting therefrom any expenses incurred or any underwriting commissions, discounts or concessions paid or allowed by the Corporation in connection therewith. In case any shares of common stock or Convertible Securities or any rights or options to purchase such common stock or Convertible Securities shall be issued in connection with any merger or consolidation in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value as determined by the Board of Directors of the Corporation of such portion of the assets and business of the non-surviving corporation or corporations as such Board shall determine to be attributable to such common stock, Convertible Securities, rights or options, as the case may be. In the event of any consolidation or merger of the Corporation in which the Corporation is not the surviving corporation or in the event of any sale of all or substantially all of the assets of the Corporation for stock or other securities of any other corporation, the Corporation shall be deemed to have issued a number of shares of its common stock for stock or securities of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated and for a consideration equal to the fair market value on the date of such transaction of such stock or securities of the other corporation, and if any such calculation results in adjustment of the Conversion Price, the determination of the number of shares of common stock issuable upon conversion immediately prior to such merger, conversion or sale, for purposes of Section 5(h), shall be made after giving effect to such adjustment of the Conversion Price.

 

(f)  In case the Corporation shall at any time subdivide its outstanding shares of common stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of common stock of the Corporation shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

 

(g)  If (i) the purchase price provided for in any right or option referred to in Section 5(d), or (ii) the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities, or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for common stock, shall change at any time (other than under or by reason of provisions designed to protect against dilution and other than pursuant to the Corporation’s option exchange program approved by the compensation committee of the Board of Directors of the Corporation on December 28, 2010), or any Convertible Securities shall terminate, expire or cease to be outstanding without exercise thereof, the Conversion Price then in effect hereunder shall forthwith be increased or decreased to such Conversion Price as would have applied had the adjustments made upon the issuance of such rights, options or Convertible Securities been made upon the basis of (x) the issuance of the number of shares of common stock theretofore actually delivered upon the exercise of such options or rights or upon the conversion or exchange of such Convertible Securities, and the total consideration received therefor, and (y) the issuance at the time of such change of any such options, rights, or Convertible Securities then still outstanding for the consideration, if any, received by the Corporation therefor and to be received on the basis of such changed price; and on the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to such Conversion Price as would have been obtained had the adjustments made upon the issuance of such rights or options or Convertible Securities been made upon the basis of the issuance of the shares of common stock theretofore actually delivered (and the total consideration received therefor) upon the exercise of such rights or options or upon the conversion or exchange of such Convertible Securities. If the purchase price provided for in any right or option referred to in Section 5(d), or the rate at which any Convertible Securities referred to in Section 5(d) are convertible into or exchangeable for common 

 

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stock, shall decrease at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of common stock upon the exercise of any such right or option or upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be decreased to such Conversion Price as would have applied had the adjustments made upon the issuance of such right, option or Convertible Securities been made upon the basis of the issuance of (and the total consideration received for) the shares of common stock delivered as aforesaid.

 

(h) If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of common stock shall be entitled to receive stock, securities or assets with respect to or in exchange for common stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, and except as otherwise provided herein, lawful and adequate provision shall be made whereby the holders of Series A Preferred shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of the common stock of the Corporation immediately theretofore receivable upon the conversion of Series A Preferred, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such common stock equal to the number of shares of such stock immediately theretofore receivable upon the conversion of Series A Preferred had such reorganization, reclassification, consolidation, merger or sale not taken place, plus all dividends unpaid and accumulated or accrued thereon to the date of such reorganization, reclassification, consolidation, merger or sale, and in any such case appropriate provision shall be made with respect to the rights and interests of the holders of Series A Preferred to the end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price and of the number of shares receivable upon the conversion of Series A Preferred) shall thereafter be applicable, as nearly as may be in relation to any shares of stock, securities or assets thereafter receivable upon the conversion of Series A Preferred. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument executed and mailed to the registered holders of Series A Preferred, at the last addresses of such holders appearing on the books of the Corporation, the obligation to deliver to such holders such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to receive.

 

(i)   Upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holders of Series A Preferred, at the addresses of such holders as shown on the books of the Corporation, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares receivable at such price upon the conversion of Series A Preferred, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. No adjustment to the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in such Conversion Price; provided, however, that any adjustments which by reason of this Section 5(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and, provided further, that adjustment shall be required and made in accordance with the provisions of this Section 5 (other than this Section 5(i)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of common stock. All calculations under this Section 5 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section 5 to the contrary notwithstanding, the Corporation shall be entitled to make such increases in the Conversion Price in addition to those required by this Section 5 as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distribution of rights to purchase stock or 

 

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securities, or distribution of securities convertible into or exchangeable for stock, hereafter made by the Corporation to its stockholders shall not be taxable.

 

(j)  In case at any time: (i) there shall be any capital reorganization, or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation; or (ii) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in any one or more of said cases, the Corporation shall give written notice, by first-class mail, postage prepaid, addressed to the registered holders of Series A Preferred at the addresses of such holders as shown on the books of the Corporation, of the date on which (x) the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights, or (y) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of common stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their common stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, as the case may be. Such written notice shall be given at least twenty (20) days prior to the action in question and not less than twenty (20) days prior to the record date or the date on which the Corporation’s transfer books are closed in respect thereto.

 

(k) If any event occurs as to which in the opinion of the Board of Directors of the Corporation the other provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of Series A Preferred in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid.

 

(l)   As used in this Section 5 the term “common stock” shall mean and include the Corporation’s presently authorized common stock and any additional common stock that may be authorized by due action of the Corporation’s Board of Directors and shareholders entitled to vote thereon.

 

(m) No fractional shares of common stock shall be issued upon conversion, but, instead of any fraction of a share which would otherwise be issuable, the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the market price per share of common stock as of the close of business on the day of conversion. As used in this Section 5, the term “market price” shall mean (i) if the common stock is traded on a securities exchange or on the NASDAQ Stock Market, the closing sale price of the common stock on such exchange or the NASDAQ Stock Market, or if the common stock is otherwise traded in the over-the-counter market, the closing bid price, in each case averaged over a period of twenty (20) consecutive trading days prior to the date as of which “market price” is being determined, (ii) if at any time the common stock is not traded on an exchange or the NASDAQ Stock Market, or otherwise traded in the over-the-counter market, the higher of (A) the book value thereof as determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Corporation as of the last day of any month ending within sixty (60) days preceding the date as of which the determination is to be made, or (B) the fair value thereof determined in good faith by the Board of Directors of the Corporation as of a date which is within fifteen (15) days of the date as of which the determination is to be made.

 

(n) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the shares of Series A Preferred, such number of shares of common stock as shall be issuable upon the conversion of all such outstanding shares; provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations 

 

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in respect of the conversion of the shares by delivery of purchased shares of common stock of the Corporation.

 

(o) The Corporation covenants that if any shares of common stock required to be reserved for purposes of conversion of the shares of Series A Preferred require approval of any governmental authority under any federal or state law, before such shares may be issued upon conversion, the Corporation will cause such shares to be duly approved.

 

(p) The Corporation covenants that all shares of common stock issued upon conversion of the shares of Series A Preferred will upon issue be fully paid and nonassessable and not subject to any preemptive rights.

 

6.     Automatic Conversion.

 

(a) Series A Preferred shall automatically be converted into shares of common stock of the Corporation, without any act by the Corporation or the holders of Series A Preferred, on the first business day on or after December 31, 2014 (the “Automatic Conversion Date”), on which the average of the closing sale prices of the Corporation’s common stock on the NASDAQ Capital Market (or other principal exchange or market on which the common stock is then traded) for the trading days within the ninety (90) calendar day period ending on the date prior to the Automatic Conversion Date is greater than $4.00 per share, as such per share amount may be adjusted for any share combination, split or distribution.

 

(b) Upon such automatic conversion, each holder of certificates for shares of Series A Preferred shall immediately surrender such certificates in exchange for appropriate stock certificates representing shares of common stock of the Corporation. Each holder of a share of Series A Preferred so converted shall be entitled to receive the full number of shares of common stock into which such share of Series A Preferred held by such holder could be converted if such holder had exercised its conversion right.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation of Rights and Preferences on behalf of the Corporation as of the               day of                             , 2011.

 

	
 
    	
GRANITE   CITY FOOD & BREWERY LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

A-8Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made,  entered into and effective as of                   , 20     (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                                  (hereinafter referred to as the “Executive”).

 

WHEREAS, the Companies and Executive are parties to an Executive Employment Agreement dated               , 20    , and amended as of                and              (the “Prior Agreement”);

 

WHEREAS, the Companies and Executive acknowledge and agree that it is in their mutual best interests to amend and restate the Prior Agreement to provide more consistency among the severance and change of control benefits provided to the Company’s various executive officers, to facilitate shareholder communication about this aspect of the Company’s executive compensation program, and conform to shareholder expectations for compensation terms provided to executives;

 

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

 

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 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 and include any of the following:

 

(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

 

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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 (A) 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 or (B) 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 issuance of Voting Securities or the acquisition of Voting Securities by Holding, and after such issuance or acquisition, such Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the Voting Securities Beneficially Owned by such Person to more than 50% of the Voting Securities of Holding, then a Change of Control shall occur;

 

(b) At any time during a period of two consecutive years, the individuals who at the beginning of such period constituted the Board (the “Incumbent Board”) cease for any reason to constitute more than 50% of the Board; provided, however, that if the election, or nomination for election by Holding’s stockholders, of any new director was approved by a vote of more than 50% of the directors then comprising the Incumbent Board, such new director shall, for purposes of this subsection (b), be considered as though such person were a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of (i) either an actual “Election Consent” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board (a “Proxy Contest”), or (ii) by reason of an agreement intended to avoid or settle any actual or threatened Election Contest or Proxy Contest;

 

(c) Consummation of a merger, consolidation or reorganization or approval by Holding’s stockholders of a liquidation or dissolution of Holding or the occurrence of a liquidation or dissolution of Holding (“Business Combination”), unless, following such Business Combination:

 

(i) 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,

 

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(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the initial agreement providing for such Business Combination constitute more than 50% of the members of the board of directors (or comparable governing body of a noncorporate entity) of the Surviving Company; and

 

(iii) no Person (other than 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 (iii), a Change of Control shall not be deemed to occur solely because any Person acquired Beneficial Ownership of more than 30% of Voting Securities as a result of the issuance of Voting Securities by 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 with respect to such Participant.

 

(d) The closing of any 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 (in which case there shall not be a Change of Control with respect to such Participant) 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.

 

“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, or (ii) without Executive’s written consent:  (A) a material reduction in the Executive’s Base Salary or, (B) the relocation of the Executive’s principal place of employment more than fifty (50) miles from its location on the Effective Date.  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.

 

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(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”).

 

Section 3.              Duties.

 

(a)           During the Employment Period, the Executive (i) shall serve as                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 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.

 

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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 $                         (“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)           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, equity-based compensation 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, 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.

 

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(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, other than on or within two (2) years following the date of a Change of Control, by the Executive for Good Reason such that the Executive’s separation from service occurs within two years following the initial existence of the condition giving rise to Good Reason, or by the Companies for any reason other than Cause or the Executive’s death or permanent disability, as defined in the Companies’ Board-approved disability plan or policy as in effect from time to time (“Disability”), then, as the Executive’s exclusive right and remedy in respect of such termination:

 

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

 

(ii)           the Executive shall be entitled to an amount equal to one and one-half (11⁄2) times the Executive’s then existing Base Salary, to be paid in such intervals and at such times in accordance with the Company’s payroll practices in effect from time to time over the eighteen (18) month period following the Termination Date, but in no event shall such amount paid under this Section 5(c)(ii) exceed the lesser of (A) $460,000.00 or (B) two (2) times the sum of 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 be entitled to a lump-sum payment in an amount equal to the pro-rata actual Annual Bonus  award which would otherwise be payable for the calendar year during which the Termination Date occurs, with such pro-rata actual Annual Bonus

 

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award determined by multiplying the 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); such lump sum payment to be made on the date that Annual Bonus payments are made to other participants in the plan, except that if the Termination Date occurs in 2011, such lump sum payment will 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;

 

(vi)          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)(vi) 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);

 

(vii)        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 ninety (90) days following the Termination Date; and

 

(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 ten percent (10%) of the Executive’s then existing Base Salary.  The Executive shall not be eligible to receive cash in lieu of executive level career transition assistance services.

 

(d)           If during the Employment Period, a Change of Control occurs and the Employment Period is terminated on or within two (2) years following the date of such Change of Control by the Companies for any reason other than Cause or Executive’s death or Disability or by the Executive for Good Reason, 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);

 

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(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 ninety (90) days following the Termination Date, subject to the requirements of both Section 5(e) and Section 11;

 

(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 ninety (90) days following the Termination Date;

 

(iv)          the Executive shall be entitled to a lump-sum payment to be paid within ninety (90)  days following the Termination Date in an amount equal to the pro-rata target incentive compensation award for the calendar year during which the Termination Date occurs.  Such pro-rata target incentive compensation award shall be determined by multiplying the target incentive compensation award amount by a fraction, the numerator of which is the number of days in the calendar year of the Termination Date elapsed prior to the Termination Date and the denominator of which is three hundred and sixty-five (365);

 

(v)           the Executive shall continue to be covered, upon the same terms and conditions described in Section 4(e) hereof, by the same or equivalent medical and/or dental insurance plans, programs and/or arrangements as in effect for the Executive immediately prior to the Change of Control, beginning on the Termination Date and continuing until the earlier of: (A) the second anniversary following the date of the Executive’s Termination Date, and (B) the date the Executive receives substantially equivalent coverage under the plans, programs and/or arrangements of a subsequent employer, provided that Executive timely pays the Executive’s portion of such coverage, and provided further that if the Company determines that the coverage to be provided under this Section 5(d)(v) would cause a self-insured plan maintained by the Company to be in violation of the nondiscrimination requirements of Section 105(h) of the Code, then such coverage will be paid for by the Executive by means of the Company reporting imputed income to Executive on a monthly basis for the fair market value of such coverage plus additional imputed amounts to pay any income tax at source on resulting wages subject to FICA or the income tax withholding provisions of federal or state tax law, including pyramiding wages and taxes (and the Company shall be responsible for depositing all applicable withholding amounts in a timely manner with the appropriate tax authority);

 

(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 ninety (90) days following the Termination Date;

 

(vii)         the Executive shall receive a lump sum cash payment, payable to Executive within ninety (90) 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 equity-based incentive awards have not by then fully vested pursuant to the terms of the Companies’ applicable equity-based incentive plan(s) and applicable award agreement(s), then to the extent permitted in those plan(s) and

 

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as provided in the applicable award agreement(s), the Executive shall continue to vest in the Executive’s unvested equity-based incentive awards following the Termination Date;

 

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

 

(x)            the Executive shall be entitled to be reimbursed by the Company for the Executive’s reasonable attorneys’ fees, costs and expenses incurred in conjunction with any dispute regarding Section 5(d) if Executive prevails in any material respect in such dispute, provided that (A) the applicable statutes of limitations shall not have expired for any claim arising from the dispute that could be raised in a court of law; (B) Executive shall submit to the Company verification of legal 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.    Any cash payment due under Section 5(c) or (d) of this Agreement (with the exception of a cash payment due under Section 5(c)(ii) which is exempt from Code section 409A under Treas. Reg. § 1.409A-1(b)(9)(iii)), a cash payment due under Section 5(c)(iii) that constitutes deferred compensation, any portion of a cash payment due under Section 5(d)(ii) that constitutes deferred compensation and any reimbursement under Section 5(d)(x) is intended to constitute a short-term deferral under Treas. Reg. § 1.409A-1(b)(4) and, accordingly, notwithstanding any longer time period specified in Section 5(c) or (d), such payment shall be made no later than two and one-half (2-1/2) months after the end of the calendar year in which the right to the payment is no longer subject to a substantial risk of forfeiture within the meaning of the regulations under Code section 409A, with payment in all cases being conditioned on satisfaction of the requirements of Section 5(h).

 

(f)            If the Employment Period is terminated as a result of the Executive’s death, Disability or Retirement (as defined below), 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:

 

(A)          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

 

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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

 

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

 

In the event the Employment Period is terminated as a result of Executive’s death, such lump sum payment shall be made within 30 days following the Termination Date; in the event the Employment Period is terminated as a result of Executive’s Disability, such lump sum payment shall be made on the first regular payroll date of the Company to occur following the date that is six months after the Termination Date; and in the event the Employment Period is terminated as a result of Executive’s Retirement, such lump sum payment shall be made on the date that Annual Bonus payments are made to other participants in the plan except that if the Termination Date occurs in 2011, 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.  As used in this Agreement, “Retirement” shall mean the Executive’s separation from service (as defined in the regulations promulgated under Code Section 409A) occurring after the earlier of (i) the Executive reaching age 65 or (ii) the Executive reaching age 55 and having completed at least 10 years of Service with the Company and its Subsidiaries.

 

(g)          Notwithstanding anything else contained herein, if the Executive terminates his employment for any reason other than Disability or Retirement and 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 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, subject to the Executive’s affirmative obligations pursuant to

 

11

 

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, either alone or together with other payments in the nature of compensation to Executive which are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company or otherwise, would constitute a “parachute payment” (as defined in Section 280G of the Code or any successor provision thereto), such payments or benefits shall be reduced (but not below zero) to the largest aggregate amount as will result in no portion thereof being subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or being non-deductible to the Company for Federal Income Tax purposes pursuant to Section 280G of the Code (or any successor provision thereto), provided, however, that the foregoing reduction will be made only if and to the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided to Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes). Executive agrees to take such action as Employer reasonably requests to mitigate or challenge the application of such tax, provided that Employer shall supply such counsel and expert advice, including legal counsel and accounting advice, as may reasonably be required, and shall be responsible for the payment of such experts’ fees.  If requested by Executive or the Company, the determination of whether any reduction in payments or benefits to be provided under this Section 5 or otherwise is required pursuant to this Section 5(j) will 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, not then-engaged as the Company’s independent public auditor (the “Accounting Firm”), subject to Executive’s consent (not to be unreasonably withheld) and the determination such independent accounting firm will be final and binding on all parties. In making its determination, the independent accountant will allocate a reasonable portion of such payments and benefits to the value of any personal services rendered following the Change in Control and the value of any non-competition agreement or similar agreements to the extent that such items reduce the amount of the parachute payment. In the event that any payment or benefit intended to be provided under this Section 5 or otherwise is required to be reduced pursuant to this Section 5(j), the Companies shall  make such reduction first by 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), and 5(d)(ii).  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).

 

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,

 

12

 

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 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

 

13

 

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

 

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

 

14

 

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.

 

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

 

(e)           During the Executive’s employment by the Companies, whether during or after the Employment Period, and during the twenty-four (24) month period following the end of the Executive’s employment with the Companies, the Executive shall not at any time, directly or indirectly, induce or solicit any employee of the Companies or any of their Subsidiaries for the purpose of causing such employee to terminate his or her employment with the Companies or such Subsidiary.

 

(f)            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(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.

 

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

 

(i)            During 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 be entitled.

 

Section 7.              Successors.  The Companies may assign their rights under this Agreement to any successor to all or substantially all the assets of the Companies, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Companies.  Any such assignment by the Companies shall remain subject to the Executive’s rights under Section 5 hereof.  The rights of the Executive under this Agreement may not be assigned or encumbered by the Executive, voluntarily or involuntarily, during the Executive’s lifetime, and any such purported assignment shall be void ab initio.  Notwithstanding the foregoing, all rights of the Executive under this Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, estates, executors, administrators, heirs and beneficiaries.  All amounts payable to the Executive hereunder shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs or representatives.

 

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

 

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.  Except as otherwise provided in this Section 10, 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.  Notwithstanding the foregoing, effective upon 30 days’ notice to Executive and without further consideration from the Company, this Agreement may be amended by the Company in its sole discretion to the limited extent it deems necessary and appropriate to conform the terms of this Agreement to the requirements of any applicable laws, rules and regulations enacted or promulgated after the Effective Date

 

16

 

of this Agreement.  Any such amendments shall preserve the value of any payments or benefits payable to Executive under this Agreement to the extent practicable without defeating the purpose of the amendment, as determined in the sole discretion of the Company.

 

Section 11.            Payment; Taxes and Withholding.  The Company shall be responsible as employer for payment of all cash compensation and severance payments provided herein and Holding shall cause the Company to make such payments.  The Executive shall not be entitled to receive any additional compensation from either of the Companies for any services the Executive provides to Holding or the Companies’ Subsidiaries.  The Company shall be entitled to withhold from any amounts to be paid to the Executive hereunder any federal, state, local, or foreign withholding or other taxes or charges which it is from time to time required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise.  Executive shall be solely responsible for the payment of all taxes due and owing with respect to wages, benefits, and other compensation provided to him hereunder.  This Agreement is intended to satisfy, or be exempt from, the requirements of Section 409A(a)(2), (3) and (4) of the Code, including current and future guidance and regulations interpreting such provisions, and should be interpreted accordingly.  Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable under this Agreement by reason of Executive’s “separation from service” (as defined under Treas. Reg. Section 1.409A-1(h)) during a period in which Executive is a “specified employee” (as defined in Code Section 409A(2)(B)(i)), then: (i) the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following Executive’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Executive’s separation from service (or, if Executive dies during such period, within 30 days after Executive’s death) (in either case, the “Required Delay Period”); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.  If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, including without limitation under Sections 5(c)(vi) and 5(d)(v), and such payments or reimbursements are includible in Executive’s federal taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred.  No right of Executive to reimbursement of expenses under this Agreement, including without limitation under Sections 5(c)(v) and 5(d)(v), shall be subject to liquidation or exchange for another benefit.

 

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

 

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

 

If to the Companies:

 

United Stationers Inc.

United Stationers Supply Co.

One Parkway North Blvd.

Suite 100

Deerfield, Illinois  60015-2559

Attention:  General Counsel

 

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If to the Executive:

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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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.

 

Section 23.            Recovery of Payments.  The Company may recover any cash or equity awarded to Executive under this Agreement or any plan or program of the Company, or proceeds from the sale of such equity, to the extent required by any rule of the Securities and Exchange Commission or any listing standard of the Nasdaq Stock Market, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.

 

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.
    
	
 
    	
 
    
	
                                            ,   2011
    	
By:
    	
 
    
	
 
    	
Name: Richard W.   Gochnauer
    
	
 
    	
Title:   Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
EXECUTED ON:
    	
UNITED   STATIONERS SUPPLY CO.
    
	
 
    	
 
    
	
 
    	
 
    
	
                                            ,   2011
    	
By:
    	
 
    
	
 
    	
Name: Richard W.   Gochnauer
    
	
 
    	
Title: Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
EXECUTED ON:
    	
EXECUTIVE:
    
	
 
    	
 
    
	
                                            ,   2011
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
				

 

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