ESSENDANT INC (Form: 10-Q, Received: 04/20/2016 17:30:06)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-10653

ESSENDANT INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

36-3141189

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015-2559

(847) 627-7000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On April 18, 2016, the registrant had outstanding 37,153,988 shares of common stock, par value $0.10 per share.

ESSENDANT INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2016

TABLE OF CONTENTS

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015		3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2016 and 2015		4
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
Item 4. Controls and Procedures		24
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		24
Item 1A. Risk Factors		24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 6. Exhibits		26
SIGNATURES		27

P ART I – FINANCIAL INFORMATION

I TEM 1.

FINANCIAL STATEMENTS

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	(Unaudited)
	As of March 31,			As of December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	35,430		$	29,983
Accounts receivable, less allowance for doubtful accounts of $17,686 in 2016 and $17,810 in 2015		741,625			716,537
Inventories		894,350			922,162
Other current assets		35,153			27,310
Total current assets		1,706,558			1,695,992
Property, plant and equipment, net		132,452			133,751
Goodwill		299,147			299,355
Intangible assets, net		93,657			96,413
Other long-term assets		54,004			37,348
Total assets	$	2,285,818		$	2,262,859
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	521,132		$	531,949
Accrued liabilities		178,858			177,472
Current maturities of long-term debt		48			51
Total current liabilities		700,038			709,472
Deferred income taxes		7,508			11,901
Long-term debt		753,854			716,264
Other long-term liabilities		89,904			101,488
Total liabilities		1,551,304			1,539,125
Stockholders’ equity:
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 74,435,628 shares in 2016 and 2015		7,444			7,444
Additional paid-in capital		411,485			410,927
Treasury stock, at cost – 37,312,864 shares in 2016 and 37,178,394 shares in 2015		(1,105,119	)		(1,100,867	)
Retained earnings		1,475,216			1,463,821
Accumulated other comprehensive loss		(54,512	)		(57,591	)
Total stockholders’ equity		734,514			723,734
Total liabilities and stockholders’ equity	$	2,285,818		$	2,262,859

See notes to condensed consolidated financial statements.

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

	For the Three Months Ended
	March 31,
	2016		2015 (Revised)*
Net sales	$	1,352,296	$	1,332,375
Cost of goods sold		1,152,214		1,131,980
Gross profit		200,082		200,395
Operating expenses:
Warehousing, marketing and administrative expenses		167,678		197,581
Operating income		32,404		2,814
Interest expense, net		5,897		4,839
Income (loss) before income taxes		26,507		(2,025	)
Income tax expense		9,977		3,982
Net income (loss)	$	16,530	$	(6,007	)
Net income (loss) per share - basic:	$	0.45	$	(0.16	)
Average number of common shares outstanding - basic		36,593		38,115
Net income (loss) per share - diluted:	$	0.45	$	(0.16	)
Average number of common shares outstanding - diluted		36,875		38,115
Dividends declared per share	$	0.14	$	0.14

* During the third quarter of 2015, the Company elected a change in accounting principle for the valuation method of certain inventories to the last-in, first-out (“LIFO”) method from the first-in, first out method (“FIFO”). This change required retrospective application. As such, the financial statements presented for prior periods are titled “Revised”.

See notes to condensed consolidated financial statements.

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

	For the Three Months Ended
	March 31,
	2016			2015 (Revised)*
Net income (loss)	$	16,530		$	(6,007	)
Other comprehensive income (loss), net of tax
Translation adjustments		2,691			(4,630	)
Minimum pension liability adjustments		915			932
Cash flow hedge adjustments		(527	)		(476	)
Total other comprehensive income (loss), net of tax		3,079			(4,174	)
Comprehensive income (loss)	$	19,609		$	(10,181	)

See notes to condensed consolidated financial statements.

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	For the Three Months Ended
	March 31,
	2016			2015 (Revised)*
Cash Flows From Operating Activities:
Net income (loss)	$	16,530		$	(6,007	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		11,731			12,223
Share-based compensation		2,911			2,640
Gain on the disposition of property, plant and equipment		(167	)		(15	)
Amortization of capitalized financing costs		166			272
Excess tax cost (benefit) related to share-based compensation		133			(262	)
Asset impairment charges		-			23,610
Deferred income taxes		(1,881	)		(1,469	)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net		(24,819	)		26,217
Decrease in inventory		28,018			46,023
Increase in other assets		(24,774	)		(10,751	)
Increase in accounts payable		9,571			645
Decrease in checks in-transit		(20,294	)		(13,613	)
Increase (decrease) in accrued liabilities		1,997			(17,534	)
(Decrease) increase in other liabilities		(9,943	)		743
Net cash (used in) provided by operating activities		(10,821	)		62,722
Cash Flows From Investing Activities:
Capital expenditures		(9,877	)		(5,490	)
Proceeds from the disposition of property, plant and equipment		281			18
Net cash used in investing activities		(9,596	)		(5,472	)
Cash Flows From Financing Activities:
Net borrowing (repayments) under revolving credit facility		37,388			(29,630	)
Net proceeds (disbursements) from share-based compensation arrangements		339			(875	)
Acquisition of treasury stock, at cost		(6,839	)		(16,028	)
Payment of cash dividends		(5,160	)		(5,396	)
Excess tax (cost) benefit related to share-based compensation		(133	)		262
Payment of debt issuance costs		-			(36	)
Net cash provided by (used in) financing activities		25,595			(51,703	)
Effect of exchange rate changes on cash and cash equivalents		269			(1,758	)
Transfer of cash to held for sale		-			(970	)
Net change in cash and cash equivalents		5,447			2,819
Cash and cash equivalents, beginning of period		29,983			20,812
Cash and cash equivalents, end of period	$	35,430		$	23,631
Other Cash Flow Information:
Income tax payments, net	$	1,027		$	3,183
Interest paid		7,292			6,213

See notes to condensed consolidated financial statements.

ESSENDANT INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements represent Essendant Inc. (“ESND”) with its wholly owned subsidiary Essendant Co. (“ECO”), and ECO’s subsidiaries (collectively, “Essendant” or the “Company”). The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of ESND and its subsidiaries. All intercompany transactions and balances have been eliminated. The Company operates in a single reportable segment as a leading distributor of workplace essentials.

The accompanying Condensed Consolidated Financial Statements are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2015, was derived from the December 31, 2015 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for further information.

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Essendant at March 31, 2016 and the results of operations and cash flows for the three-month periods ended March 31, 2016 and 2015. The results of operations for the three months ended March 31, 2016 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred the effective date of ASU No. 2014-09. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In May 2015, he FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) . Under the standard, investments for which fair value is measured at net asset value ("NAV") per share (or its equivalent) using the practical expedient will no longer be categorized in the fair value hierarchy. The Company adopted this standard on January 1, 2016, which had no impact on the quarterly financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , that requires lessees to recognize right-of-use assets and lease liabilities for all leases other than those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the lease term on a straight-line basis. This standard will be effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting , the objective of which is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This standard will be effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

Cha nge in Accounting Principle

During the third quarter of 2015, the Company elected a change in accounting principle for the valuation method of certain inventories to the last-in, first-out (“LIFO”) method from the first-in, first out method (“FIFO”). This change required retrospective application. As such, the financial statements presented for prior periods are titled “Revised”. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for further information.

Inventory

Approximately 98.5% and 98.4% of total inventory as of March 31, 2016 and December 31, 2015, respectively, has been valued under the LIFO method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Inventory valued under the LIFO accounting method is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of FIFO cost or market, inventory would have been $148.6 million and $147.8 million higher than reported as of March 31, 2016 and December 31, 2015, respectively.

2. Acquisitions

Nestor Sales LLC

On July 31, 2015, Essendant Co. completed the acquisition of 100% of the capital stock of Nestor Sales LLC (“Nestor”), a leading wholesaler and distributor of tools, equipment and supplies to the transportation industry. This acquisition accelerates the Company’s growth in the automotive aftermarket, complements the Company’s existing industrial offerings while providing access to new customer segments, and advances a key strategic pillar to diversify into channels and categories that leverage our common platform.

The purchase price was $41.8 million. This acquisition was funded through a combination of cash on hand and cash available under the Company’s revolving credit facility.

The Company has developed preliminary estimates of the fair values of assets acquired and liabilities assumed for purposes of allocating the purchase price. The estimates are subject to change as the valuation activities are completed. The fair values of the assets and liabilities were estimated using various valuation methods including estimated selling prices, market approach, and discounted cash flows using both an income and cost approach.

Any changes to the preliminary allocations of the purchase price, some of which may be material, will be allocated to residual goodwill.

At March 31, 2016, the preliminary allocation of the purchase price was as follows (amounts in thousands):

Purchase price, net of cash acquired	$	39,983

Accounts receivable		9,230
Inventories		10,542
Other current assets		338
Property, plant and equipment, net		1,251
Other assets		752
Intangible assets		17,580
Total assets acquired		39,693

Accounts payable		4,992
Accrued liabilities		1,943
Deferred income taxes		3,175
Other long-term liabilities		76
Total liabilities assumed		10,186
Goodwill	$	10,476

The purchased identifiable intangible assets were as follows (amounts in thousands):

	Total		Estimated Life
Customer relationships	$	16,220	13 years
Trademark		1,360	2.5-15 years
Total	$	17,580

Agreement with Staples, Inc.

On February 16, 2016, the Company announced an agreement to purchase from Staples, Inc. contracts and related assets representing more than $550 million in annual sales to minority and woman-owned office supply resellers and their large corporate and other enterprise customers. The transaction is subject to the successful completion of the proposed merger of Staples and Office Depot, as well as other regulatory and customary closing conditions. A court ruling on the preliminary injunction action brought by the Federal Trade Commission to block the proposed merger is expected during the second quarter of 2016. Under the terms of the agreement, Essendant will pay Staples approximately $22.5 million.

3. Share-Based Compensation

As of March 31, 2016, the Company has two active equity compensation plans. Under the 2015 Long-Term Incentive Plan (as amended and restated), award instruments include, but are not limited to, stock options, restricted stock awards, restricted stock units (“RSUs”), and performance-based awards. Associates and non-employee directors of the Company are eligible to become participants in the plan. The Nonemployee Directors’ Deferred Stock Compensation Plan allows non-employee directors to elect to defer receipt of all or a portion of their annual retainer in deferred stock units.

The Company granted 120,376 shares of restricted stock and 247,510 RSUs during the first three months of 2016, compared to 46,229 shares of restricted stock and 145,552 RSUs during the first three months of 2015.

4. Severance and Restructuring Charges

Commencing in the first quarter of 2015, the Company began certain restructuring actions which included workforce reductions and facility closures. In the first quarter of 2015, the Company recorded $6.0 million of pre-tax expense relating to workforce reductions. During the first quarter of 2016 and 2015, the Company recorded $0.3 million and $0.4 million, respectively, of pre-tax expense relating to facility consolidations. These charges were included in “warehousing, marketing and administrative expenses.” Cash outlays for these actions occurred primarily in 2015 and were approximately $0.7 million and $0.5 million, respectively, for the three months ended March 31, 2016 and 2015. As of March 31, 2016, the Company has accrued liabilities for these actions of $1.8 million.

Commencing in the fourth quarter of 2015, the Company executed actions to reduce costs through management delayering in order to achieve broader functional alignment of the organization. In the fourth quarter of 2015, the Company recorded an $11.9 million pre-tax charge relating to this workforce reduction included in “warehousing, marketing and administrative expenses.” Cash outlays associated with these charges were approximately $3.1 million in the three months ended March 31, 2016. As of March 31, 2016, the Company has accrued liabilities for these actions of $7.9 million.

5. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are noted in the following table (in thousands):

Goodwill, balance as of December 31, 2015	$	299,355
Purchase accounting adjustments		(1,095	)
Currency translation adjustments		887
Goodwill, balance as of March 31, 2016	$	299,147

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	March 31, 2016								December 31, 2015
								Weighted								Weighted
								Average								Average
	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	138,422	$	(54,140	)	$	84,282	16	$	137,938	$	(51,357	)	$	86,581	16
Non-compete agreements		4,654		(4,260	)		394	4		4,644		(4,260	)		384	4
Trademarks		13,734		(4,753	)		8,981	14		13,688		(4,240	)		9,448	14
Total	$	156,810	$	(63,153	)	$	93,657		$	156,270	$	(59,857	)	$	96,413

In the first quarter of 2015, the Company recorded a pre-tax non-cash impairment charge of $10.2 million to write-down the trademarks of ORS Nasco and certain OKI brands to their fair value related to the corporate name change that was approved in February 2015 and effective June 1, 2015. This impairment charge was recorded in “warehousing, marketing and administrative expenses.” The Company utilized the discounted cash flow method to determine the fair value of these trademarks based upon management’s current forecasted future revenues from the trademarks. The trademarks were fully amortized as of December 31, 2015.

The following table summarizes the amortization expense to be incurred in 2016 through 2020 on intangible assets (in thousands):

Year	Amount
2016	$	12,314
2017		10,855
2018		8,111
2019		6,993
2020		6,990

6. Accumulated Other Comprehensive Income (Loss)

The change in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the period ended March 31, 2016 was as follows (amounts in thousands):

	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2015	$	(9,866	)	$	146		$	(47,871	)	$	(57,591	)
Other comprehensive (loss) income before reclassifications		2,691			(753	)		-			1,938
Amounts reclassified from AOCI		-			226			915			1,141
Net other comprehensive (loss) income		2,691			(527	)		915			3,079
AOCI, balance as of March 31, 2016	$	(7,175	)	$	(381	)	$	(46,956	)	$	(54,512	)

The following table details the amounts reclassified out of AOCI into the income statement during the three-month period ending March 31, 2016 (in thousands):

	Amount
	Reclassified
	From AOCI
	For the Three
	Months Ended
	March 31,			Affected Line Item In The Statement
Details About AOCI Components	2016			Where Net Income is Presented
Realized and unrealized gains (losses) on cash flow hedges
Gain on interest rate swap, before tax	$	275		Interest expense, net
Gain on foreign exchange hedges, before tax		89		Cost of goods sold
		(138	)	Tax provision
	$	226		Net of tax

Defined benefit pension plan items
Amortization of prior service cost and unrecognized loss	$	1,493		Warehousing, marketing and administrative expenses
		(578	)	Tax provision
		915		Net of tax
Total reclassifications for the period, net of tax	$	1,141

7. Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock, restricted stock units and deferred stock units are considered dilutive securities. For the three-month periods ended March 31, 2016 and 2015, 0.3 million and 0.4 million shares of such securities, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. An additional 0.4 million shares of common stock outstanding at March 31, 2015 were excluded from the computation of diluted earnings per share due to the net loss. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	For the Three Months Ended
	March 31,
	2016		2015
Numerator:
Net income (loss)	$	16,530	$	(6,007	)
Denominator:
Denominator for basic earnings per share -
weighted average shares		36,593		38,115
Effect of dilutive securities:
Employee stock options and restricted stock		282		-
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive securities		36,875		38,115
Net income (loss) per share:
Net income (loss) per share - basic	$	0.45	$	(0.16	)
Net income (loss) per share - diluted ⁽¹⁾	$	0.45	$	(0.16	)

(1)

Diluted earnings per share for the first quarter of 2015 under GAAP equals basic earnings per share due to net loss.

Common Stock Repurchases

As of March 31, 2016 , the Company had Board authorization to repurchase $68.2 million of common stock. During the three-month periods ended March 31, 2016 and 2015, the Company repurchased 241,270 and 402,679 shares of the Company’s common stock at an aggregate cost of $6.8 million and $16.3 million, respectively. Depending on market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice. Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data. During the first three months of 2016 and 2015, the Company reissued 106,800 and 31,745 shares, respectively, of treasury stock to fulfill its obligations under its equity incentive plans.

8. Debt

ESND is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, ECO, and from borrowings by ECO. The 2013 Credit Agreement, the 2013 Note Purchase Agreement, and the Receivables Securitization Program (each as defined in Note 11 of the Company’s Form 10-K for the year ended December 31, 2015) contain restrictions on the use of cash transferred from ECO to ESND.

Debt consisted of the following amounts (in millions):

	As of			As of
	March 31, 2016			December 31, 2015

2013 Credit Agreement	$	405.8		$	368.4
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		200.0			200.0
Mortgage & Capital Lease		0.1			0.1
Transaction Costs		(2.0	)		(2.2	)
Total	$	753.9		$	716.3

As of March 31, 2016, 80.2% of the Company’s outstanding debt, excluding capital leases and transaction costs, was priced at variable interest rates based primarily on the applicable bank prime rate or London InterBank Offered Rate (“LIBOR”).

The Company had outstanding letters of credit of $11.6 million under the 2013 Credit Agreement as of March 31, 2016 and December 31, 2015.

Borrowings under the 2013 Credit Agreement bear interest at LIBOR for specified interest periods or at the Alternate Base Rate (as defined in the 2013 Credit Agreement), plus, in each case, a margin determined based on the Company’s permitted debt to EBITDA ratio calculated as provided in Section 6.20 of the 2013 Credit Agreement (the “Leverage Ratio”). Depending on the Company’s Leverage Ratio, the margin on LIBOR-based loans ranges from 1.00% to 2.00% and on Alternate Base Rate loans ranges from 0.00% to 1.00%. As of March 31, 2016, the applicable margin for LIBOR-based loans was 1.50% and for Alternate Base Rate loans was 0.50%. Effective in April 2016, the applicable margin for LIBOR-based loans was 1.75% and for Alternate Base Rate loans was 0.75%. ECO is required to pay the lenders a fee on the unutilized portion of the commitments under the 2013 Credit Agreement at a rate per annum between 0.15% and 0.35%, depending on the Company’s Leverage Ratio.

As of March 31, 2016 and December 31, 2015, $524.1 million and $448.6 million, respectively, of receivables had been sold to the Investors (as defined in Note 11 of the Company’s Form 10-K for the year ended December 31, 2015). ESR had $200.0 million outstanding under the Receivables Securitization Program as of March 31, 2016 and December 31, 2015.

For additional information about the 2013 Credit Agreement, the 2013 Note Purchase Agreement, and the Receivables Securitization Program, see Note 11 of the Company’s Form 10-K for the year ended December 31, 2015.

9. Pension and Post-Retirement Benefit Plans

The Company maintains pension plans covering union and certain non-union employees. For more information on the Company’s retirement plans, see Note 13 to the Company’s Consolidated Financial Statements in the Form 10-K for the year ended December 31, 2015. A summary of net periodic pension cost related to the Company’s pension plans for the three-month periods ended March 31, 2016 and 2015 was as follows (dollars in thousands):

	For the Three Months Ended March 31,
	2016			2015
Service cost - benefit earned during the period	$	317		$	400
Interest cost on projected benefit obligation		2,343			2,270
Expected return on plan assets		(2,718	)		(2,805	)
Amortization of prior service cost		74			75
Amortization of actuarial loss		1,419			1,450
Net periodic pension cost	$	1,435		$	1,390

The Company made cash contributions of $10.0 million and $2.0 million to its pension plans during the three-month periods ended March 31, 2016 and 2015, respectively. Additional contributions, if any, for 2016 have not yet been determined. As of March 31, 2016 and December 31, 2015, respectively, the Company had accrued $38.4 million and $48.4 million of pension liability within “Other long-term liabilities” on the Condensed Consolidated Balance Sheets.

In February 2016, as a result of an amendment to the Essendant Pension Plan, the Company announced a limited-time voluntary lump-sum pension offering to eligible, terminated, vested plan participants. The lump-sum settlement payments will be made on May 16, 2016, using assets from the Essendant Pension Plan.

Defined Contribution Plan

The Company has defined contribution plans covering certain salaried associates and non-union hourly paid associates (the “Plan”). The Plan permits associates to defer a portion of their pre-tax and after-tax salary as contributions to the Plan. The Plan also provides for Company-funded discretionary contributions as well as matching associates’ salary deferral contributions, at the discretion of the Board of Directors. The Company recorded expense of $1.8 million and $1.4 million, respectively, for the Company match of employee contributions to the Plan for the three-month periods ended March 31, 2016 and 2015.

10. Derivative Financial Instruments

The Company selectively uses derivative financial instruments to reduce its exposure to changes in interest rates and foreign currency exchange rates. Under Company policy, the Company does not enter into derivative financial instruments for trading or speculative purposes. A description of each type of derivative utilized by the Company to manage risk is included in the following paragraphs.

The Company selectively uses interest rate swaps to reduce market risk associated with changes in interest rates for its debt arrangements. In July 2012, the Company entered into an interest rate swap to convert a portion of the Company’s floating-rate debt to a fixed-rate basis. The fair value is determined by using quoted market forward rates (level 2 inputs) and reflects the present value of the amount that the Company would pay for contracts involving the same notional amount and maturity date. The changes in fair value of this instrument is reported in AOCI and reclassified into earnings in interest expense in the same periods during which the related interest payments on the hedged debt affect earnings. This swap matures in July 2017. As of March 31, 2016 and December 31, 2015, the fair value of the Company's interest rate swap included in the Company’s Condensed Consolidated Balance Sheet as a component of “Other long-term liabilities” was $0.9 million and $0.5 million respectively.

The Company maintains a foreign currency cash flow hedge program in order to manage the volatility in exchange rates and the related impacts on the operations of its Canadian functional currency subsidiaries. The Company uses foreign currency exchange contracts to hedge certain of its foreign exchange rate exposures related to inventory purchases. The Company has currently hedged approximately 50%, or $8.1 million, of its Canadian subsidiaries’ US dollar denominated inventory purchases for the next two quarters. The fair value of the foreign currency cash flow hedge is determined by using quoted market spot rates (level 2 inputs). The changes in fair value of ASC 815 designated hedges are reported in AOCI and reclassified into earnings in cost of goods sold in the same periods during which the related inventory is sold and affects earnings. As of March 31, 2016, the fair value of these cash flow hedges were included in the Company’s Condensed Consolidated Balance Sheet as a component of “Accrued liabilities” totaling $0.3 million. As of December 31, 2015, the fair value of these cash flow hedges were included in the Company’s Condensed Consolidated Balance Sheet as a component of “Other current assets” totaling $0.1 million.

The following table depicts the effect of these derivative instruments on the statements of income and comprehensive income for the three-month periods ended March 31, 2016 and 2015 (in thousands).

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)							Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Derivatives in ASC 815 Cash Flow Hedging Relationships	For the Three Months Ended March 31, 2016			For the Three Months Ended March 31, 2015			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	For the Three Months Ended March 31, 2016		For the Three Months Ended March 31, 2015
Interest Rate Swap	$	(121	)	$	(124	)	Interest expense, net	$	242	$	331
Foreign Exchange Hedges		(195	)		-		Cost of goods sold		89		-

11. Fair Value Measurements

The Company measures certain financial assets and liabilities, including interest rate swap and foreign currency derivatives, at fair value on a recurring basis, based on market rates of the Company’s positions and other observable interest rates (see Note 10 “Derivative Financial Instruments”, for more information on these interest rate swaps and foreign currency derivatives).

Accounting guidance on fair value establishes a hierarchy for those instruments measured at fair value which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1—Quoted market prices in active markets for identical assets or liabilities;

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3—Unobservable inputs developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.

Determining which level to apply to an asset or liability requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 (in thousands):

	Fair Value Measurements as of March 31, 2016
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap	$	832	$	-	$	832	$	-
Foreign exchange hedges	$	288	$	-	$	288	$	-


	Fair Value Measurements as of December 31, 2015
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange hedges	$	91	$	-	$	91	$	-

Liabilities
Interest rate swap	$	469	$	-	$	469	$	-

The carrying amount of accounts receivable at March 31, 2016, including $524.1 million of receivables sold under the Receivables Securitization Program, approximates fair value because of the short-term nature of this item.

No assets or liabilities were measured at fair value on a nonrecurring basis.

12. Other Assets and Liabilities

Receivables related to supplier allowances totaling $92.1 million and $111.0 million were included in “Accounts receivable” in the Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, respectively.

Accrued customer rebates of $47.2 million and $63.6 million as of March 31, 2016 and December 31, 2015, respectively, were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

13. Income Taxes

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three months ended March 31, 2016, the Company recorded income tax expense of $10.0 million on pre-tax income of $26.5 million, for an effective tax rate of 37.6%. For the three months ended March 31, 2015, the Company recorded income tax expense of $4.0 million on pre-tax loss of $2.0 million, for an effective tax rate of (196.6)%.

The Company’s U.S. statutory rate is 35.0%. There were no significant discrete items impacting the effective tax rate for the three months ended March 31, 2016. The most significant factor impacting the effective tax rate for the three months ended March 31, 2015 was the discrete impact of the impairment charges for financial reporting purposes related to placing a non-strategic business for sale in the quarter.

14. Legal Matters

The Company has been named as a defendant in two lawsuits alleging that the Company sent unsolicited fax advertisements to the named plaintiffs, as well as other persons and entities, in violation of the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 ("TCPA"). One lawsuit was initially filed in the United States District Court for the Central District of California on May 1, 2015 and has been refiled in an Illinois state court, subject to a motion to dismiss the California case without prejudice. The other lawsuit was filed in the United States District Court for the Northern District of Illinois on January 14, 2016. In both lawsuits the plaintiffs filed a motion asking the Court to certify a class of plaintiffs comprised of persons and entities who allegedly received fax advertisements from the Company. Under the TCPA, recipients of unsolicited fax advertisements can seek damages of $500 per fax for inadvertent violations and up to $1,500 per fax for knowing and willful violations. Other reported TCPA lawsuits have resulted in a broad range of outcomes, with each case being dependent on its own unique set of facts and circumstances. In each lawsuit, the Company is vigorously contesting class certification and denies that any violations occurred. Litigation of this kind, however, is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. Regardless of whether the lawsuits are resolved at trial or through settlement, the Company believes that a loss associated with resolution of pending claims is probable. However, the amount of any such loss, which could be material, cannot be reasonably estimated because the Company is continuing to evaluate its defenses based on its internal review and investigation of prior events, new information and future circumstances.

The Company is also involved in other legal proceedings arising in the ordinary course of or incidental to its business. The Company has established reserves, which are not material, for potential losses that are probable and reasonably estimable that may result from those proceedings. In many cases, however, it is difficult to determine whether a loss is probable or even possible or to estimate the amount or range of potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developed before a loss or range of loss can reasonably be estimated. The Company believes that such ordinary course legal proceedings will be resolved with no material adverse effect upon its financial condition or results of operations.

I TEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements often contain words such as “expects,” “anticipates,” “estimates,” “intends,” “plans,” “believes,” “seeks,” “will,” “is likely,” “scheduled,” “positioned to,” “continue,” “forecast,” “predicting,” “projection,” “potential” or similar expressions. Forward-looking statements include references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These forward-looking statements are based on management’s current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, without limitation, those set forth in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2015.

Readers should not place undue reliance on forward-looking statements contained in this Quarterly Report on Form 10-Q. The forward-looking information herein is given as of this date only, and the Company undertakes no obligation to revise or update it.

Company Overview

Essendant Inc. is a leading supplier of workplace essentials, with 2015 net sales of approximately $5.4 billion. Essendant Inc. stocks over 180,000 items and is a leading national wholesale distributor of workplace items including traditional office products and office furniture, janitorial, sanitation and breakroom supplies , technology products, industrial supplies, and automotive aftermarket tools and equipment. These items include a broad spectrum of manufacturer-branded and private branded products. Essendant sells through a network of 74 distribution centers to approximately 30,000 reseller customers, who in turn sell directly to end consumers. The Company also operates CPO Commerce which sells tools and do-it-yourself equipment online to the consumer market.

Our strategy is comprised of three key strategic pillars:

Grow share in core office products and janitorial and breakroom businesses;

Win the shift to online; and

Transition the business to the Company’s common operating platform.

Essendant will focus on the following five key objectives over the next two years:

Generate profitable sales growth through alignment with customers who are taking share in each channel they serve.

Move businesses onto a common operating, technology and digital platform, which began with the office products and janitorial and breakroom product categories in 2015 and will continue with the direct online and automotive businesses.

Simplify the business and continue to control costs, which will gain operating leverage and reduce overhead, by fully integrating recently acquired businesses.

Pursue merchandising excellence to optimize assortment and create additional value for customers.

Refine the industrial channel value proposition to diversify and lessen its dependence on the oilfield and energy sectors.

Execution on these priorities will help us achieve our goal of becoming the fastest and most convenient solution for workplace essentials.

Key Trends and Recent Results

The following is a summary of selected trends, events or uncertainties that the Company believes may have a significant impact on its future performance.

First Quarter Results

Diluted earnings per share for the first quarter of 2016 were $0.45 compared to a net loss per share of $0.16 in the prior year quarter. Adjusted diluted earnings per share were $0.45 compared with $0.46 in the prior-year period. Refer to the Adjusted Operating Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share table included later in this section for more detail.

·	First quarter net sales increased 1.5%, from the prior-year quarter to $1.4 billion.

·	Gross margin as a percent of net sales in the first quarter of 2016 was 14.8% versus 15.0% in the prior-year quarter. Gross profit for the first quarter of 2016 was $200.1 million, compared to $200.4 million in the first quarter of 2015.

Operating expenses in the first quarter of 2016 were $167.7 million or 12.4% of net sales, compared with $197.6 million or 14.8% of net sales in the prior-year quarter, including impacts of the Repositioning Actions discussed below. Adjusted operating expenses in the first quarter of 2016 were $167.4 million or 12.4% of net sales compared to $167.1 million or 12.5% of net sales in the prior-year quarter.

Operating income for the quarter ended March 31, 2016 was $32.4 million or 2.4% of net sales, compared with $2.8 million or 0.2% of net sales in the prior year quarter. Excluding the Repositioning Actions, adjusted operating income in the first quarter of 2016 was $32.7 million or 2.4% of net sales, versus $33.3 million or 2.5% of net sales in the first quarter of 2015.

Cash flows used in operating activities for the first quarter of 2016 were $10.8 million versus operating cash flows provided by operating activities of $62.7 million in 2015. The $73.5 million decrease over the prior year was primarily driven by a $24.8 million increase in accounts receivable in the current year versus a $26.2 million decrease in accounts receivable in the prior year. Also, inventory decreased $28.0 million in the first quarter of 2016, compared with a decrease of $46.0 million in the prior year quarter. Cash flow used in investing activities for capital expenditures totaled $9.9 million in 2016 compared with $5.5 million in 2015.

·	Implementation of our initiative to combine the office products and janitorial businesses on a common operating platform began in the third quarter of 2015 and facility conversions were completed in April of 2016.

·	On July 31, 2015, we acquired 100% of the capital stock of Nestor Sales LLC (“Nestor”), a leading wholesaler and distributor of tools, equipment and supplies to the transportation industry. This acquisition contributed $16.9 million of net sales in the first quarter of 2016.

On February 16, 2016, we announced an agreement to purchase from Staples, Inc. contracts and related assets representing more than $550 million in annual sales to minority and woman-owned office supply resellers and their large corporate and other enterprise customers. The transaction is subject to the successful completion of the proposed merger of Staples and Office Depot, as well as other regulatory and customary closing conditions. A court ruling on the preliminary injunction action brought by the Federal Trade Commission to block the proposed merger is expected during the second quarter of 2016. Under the terms of the agreement, Essendant will pay Staples approximately $22.5 million.

Repositioning Actions

On June 1, 2015 we officially rebranded the Company to Essendant Inc. When we announced in the first quarter of 2015 our decision to rebrand the company, the ORS Nasco trademark and certain OKI brands were determined to be impaired. Pre-tax, non-cash, impairment charges and accelerated amortization totaling $10.5 million were recorded in the first quarter of 2015.

In 2015 we exited non-strategic channels, including the sale of Azerty de Mexico, our operations in Mexico. The total charges in the first quarter of 2015 related to the disposition of this subsidiary were $13.6 million. In the first quarter of 2015, this subsidiary had net sales of $23.2 million and a $0.4 million operating income, excluding the charges previously mentioned.

Restructuring actions were taken in 2015 to improve our operational utilization, labor spend, inventory performance and functional alignment of the organization. This included workforce reductions and facility consolidations with an expense impact of $0.3 million in the first quarter of 2016 and $6.4 million in the first quarter of 2015.

Guidance

The Company reaffirms its previously announced outlook regarding 2016, and currently expects the following:

·	+1% to +5% revenue growth compared to prior year, or total company revenue in the range of $5.4 billion to $5.6 billion;

·	+4% to +10% adjusted earnings per share growth compared to prior year, or adjusted EPS in the range of $3.20 to $3.40;

·	Annual free cash flow equal to or better than net income.

The guidance above excludes the impact of assets acquired in the proposed Staples transaction, any new acquisitions and any unusual charges, such as impacts from our pension lump-sum offer described in Note 9.

For a further discussion of selected trends, events or uncertainties the Company believes may have a significant impact on its future performance, readers should refer to “Key Trends and Recent Results” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2015.

Critical Accounting Policies, Judgments and Estimates

In the first quarter of 2016, there were no significant changes to the Company’s critical accounting policies, judgments or estimates from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015

Adjusted Operating Expenses, Adjusted Opera ting Income, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share

The following table presents Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income, and Adjusted Diluted Earnings Per Share for the three-month periods ended March 31, 2016 and 2015 (in thousands, except per share data), excluding the effects of the pre-tax charges related to workforce reduction and facility consolidations in the first three months of 2016, and workforce reductions and facility consolidations, intangible asset impairment charge and accelerated amortization related to rebranding and asset held for sale impairment in the first three months of 2015. Generally Accepted Accounting Principles require that the effects of these items be included in the Condensed Consolidated Statements of Income. Management believes that excluding these items is an appropriate comparison of its ongoing operating results and to the results of last year. It is helpful to provide readers of its financial statements with a reconciliation of these items to its Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.

	For the Three Months Ended March 31,
	2016			2015 (Revised)

Operating expenses	$	167,678		$	197,581
Workforce reduction and facility closure charge		(254	)		(6,433	)
Intangible asset impairment charge and accelerated amortization related to rebranding		-			(10,462	)
Asset held for sale impairment		-			(13,566	)
Adjusted operating expenses	$	167,424		$	167,120

Operating income	$	32,404		$	2,814
Operating expense items noted above		254			30,461
Adjusted operating income	$	32,658		$	33,275
Depreciation and amortization	$	10,489		$	10,711
Equity compensation		2,911			2,640
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)	$	46,058		$	46,626

Net income (loss)	$	16,530		$	(6,007	)
Operating expense items noted above, net of tax		155			23,896
Adjusted net income	$	16,685		$	17,889

Diluted net income (loss) per share ⁽¹⁾	$	0.45		$	(0.16	)
Per share operating expense items noted above		0.00			0.62
Adjusted diluted net income per share	$	0.45		$	0.46

(1)

Diluted net income (loss) per share for the first quarter of 2015 under GAAP equals basic earnings per share due to the net loss. The diluted earnings per share shown here does not reflect this adjustment.

Results of Operations—Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Net Sales. Net sales for the first quarter of 2016 were $1.35 billion. The following table summarizes net sales by product category for the three-month periods ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015 ⁽¹⁾
Janitorial and breakroom supplies (JanSan)	$	362,387	$	358,677
Technology products		351,113		353,047
Traditional office products (including cut-sheet paper)		308,055		296,177
Industrial supplies		139,764		149,074
Automotive		79,408		60,240
Office furniture		74,158		78,053
Freight revenue		33,201		31,959
Services, Advertising and Other		4,210		5,148
Total net sales	$	1,352,296	$	1,332,375

(1)

Certain prior period amounts have been reclassified to conform to the current presentation. Such changes include reclassification of specific products to different product categories and did not impact the Condensed Consolidated Statements of Income. All percentage presentations described below are based on the reclassified amounts.

Net sales in the janitorial and breakroom supplies (JanSan) product category increased 1.0% in the first quarter of 2016 compared to the first quarter of 2015. This category accounted for 26.8% of the Company’s first quarter 2016 consolidated net sales. Net sales increased due to new e-tail growth, partially offset by a decline in sales to the independent dealer channel.

Net sales in the technology products category (primarily ink and toner) decreased 0.5% from the first quarter of 2015. This category accounted for 26.0% of net sales for the first quarter of 2016. Excluding our Mexican subsidiary, which was sold in the third quarter of 2015, net sales in this category increased 4.8% compared to the prior year quarter, which was driven by sales to new customers.

Net sales of traditional office products increased in the first quarter of 2016 by 4.0% versus the first quarter of 2015. Traditional office supplies represented 22.8% of the Company’s consolidated net sales for the first quarter of 2016. The sales increase was driven by increases in cut-sheet paper sales and higher government spending.

Industrial supplies net sales in the first quarter of 2016 decreased by 6.2% compared to the same prior-year period. Net sales of industrial supplies accounted for 10.3% of the Company’s net sales for the first quarter of 2016. The decline in industrial supplies net sales was primarily due to challenges in the oilfield sector and macro-economic environment. This decline was partially offset by growth in retail channel sales.

Automotive net sales in the first quarter of 2016 increased 31.8% compared to the first quarter of 2015. Automotive net sales represented 5.9% of the Company’s first quarter of 2016 net sales. This increase was primarily due to the acquisition of Nestor which contributed $16.9 million in net sales.

Office furniture net sales in the first quarter of 2016 decreased 5.0% compared to the first quarter of 2015. Office furniture accounted for 5.5% of the Company’s first quarter of 2016 consolidated net sales. This decline was due to declines in sales in national accounts and independent dealer channels.

The remainder of the Company’s first quarter 2016 net sales was composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit for the first quarter of 2016 was $200.1 million, compared to $200.4 million in the first quarter of 2015. The gross margin rate of 14.8% was down 20 basis points (bps) from the prior-year quarter gross margin rate of 15.0%. Our gross margin was impacted by lower inflation (22 bps) and higher freight (22 bps), partially offset by increased sales.

Operating Expenses. Operating expenses for the first quarter of 2016 were $167.7 million or 12.4% of net sales, compared to $197.6 million in the prior year, including $30.5 million related to the first quarter of 2015 Repositioning Actions. Adjusted operating expenses were $167.4 million or 12.4% of net sales compared with $167.1 million or 12.5% of net sales in the same period last year. The $0.3 million increase was driven by incremental costs related to the common platform project (22 bps).

Interest Expense, net. Interest expense, net for the first quarter of 2016 was $5.9 million compared to $4.8 million in the first quarter of 2015. This was driven by higher debt outstanding related to our acquisitions in the past year. Interest expense is expected to be higher in 2016 than in the prior year.

Income Taxes. Income t ax expense was $10.0 million for the first quarter of 2016, compared with $4.0 million for the same period in 2015. The Company’s effective tax rate was 37.6% for the current-year quarter and (196.6)% for the same period in 2015, driven by unfavorable disc rete tax impacts of placing a non-strategic business for sale in the first quarter of 2015.

Net Income (Loss). Net income for the first quarter of 2016 totaled $16.5 million or $0.45 per diluted share, compared to $(6.0) million in the prior year, which included $23.9 million after-tax, or $0.62 per diluted share, of costs related to the first quarter charges. Adjusted net income was $16.7 million, or $0.45 per diluted share, compared with adjusted net income of $17.9 million or $0.46 per diluted share for the same three-month period in 2015.

Pension Settlement

In February 2016, as a result of plan amendment, the Company announced a limited-time voluntary lump-sum pension offering to eligible, terminated, vested plan participants of the Essendant Pension Plan. The Company estimates approximately 1,400 plan participants took this offering during the election period which terminated on April 12, 2016. The lump-sum settlement payments will be made on May 16, 2016, using assets from the Essendant Pension Plan. The settlement payments will result in a remeasurement of the Essendant Pension Plan’s assets and obligations in the second quarter of 2016. The remeasurement will result in a non-cash settlement charge in the second quarter of 2016 and will reduce net income and retained earnings, with a partial offset to accumulated other comprehensive income in shareholders’ equity. The amount of the remeasurement will depend on a variety of factors, including plan assets values and discount rates at the date of valuation.

Cash Flows

The following discussion focuses on information included in the accompanying Condensed Consolidated Statements of Cash Flows.

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2016 totaled $10.8 million, compared with $62.7 million cash provided by operating activities in the three months ended March 31, 2015. The $73.5 million decrease over the prior year was primarily driven by a $24.8 million increase in accounts receivable in the current year versus a $26.2 million decrease in accounts receivable in the prior year. Also, inventory decreased $28.0 million in the first quarter of 2016, compared with a decrease of $46.0 million in the prior year quarter.

Investing Activities

Net cash used in investing activities for the first three months of 2016 was $9.6 million, compared with $5.5 million for the three months ended March 31, 2015.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2016 totaled $25.6 million, compared with $51.7 million cash used in financing activities in the prior-year period. Net cash provided by financing activities during the first three months of 2016 was impacted by $37.0 million in net borrowing under our revolving credit facility, $6.8 million in share repurchases and $5.2 million in payments of cash dividends.

On February 10, 2016, the Board of Directors approved a dividend of $0.14 which was paid on April 15, 2016 to shareholders of record as of March 15, 2016.

In the first quarter of 2016, the Company had a Leverage Ratio, as defined in its 2013 Credit Agreement, 2013 Note Purchase Agreement and the Amended and Restated Transfer and Administration Agreement, that exceeds the 3.00 to 1.00 maximum per the agreements and, therefore, is currently limited in its ability to repurchase its stock.

Liquidity and Capital Resources

Essendant’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. We believe that our cash from operations and collections of receivables, coupled with our sources of borrowings and available cash on hand, are sufficient to fund currently anticipated requirements. These requirements include payments of interest and dividends, scheduled debt repayments, capital expenditures, working capital needs, restructuring activities, the funding of pension plans, and funding for additional share repurchases and acquisitions, if any. Due to our credit profile over the years, external funds have been available at an acceptable cost. We believe that current credit arrangements are sound and that the strength of our balance sheet affords us the financial flexibility to respond to both internal growth opportunities and those available through acquisitions.

Financing available from debt and the sale of accounts receivable as of March 31, 2016, is summarized below (in millions):

Availability

Maximum financing available under:
2013 Credit Agreement	$	700.0
2013 Note Purchase Agreement		150.0
Receivables Securitization Program ⁽¹⁾		200.0
Maximum financing available			$	1,050.0
Amounts utilized:
2013 Credit Agreement		405.8
2013 Note Purchase Agreement		150.0
Receivables Securitization Program ⁽¹⁾		200.0
Outstanding letters of credit		11.6
Total financing utilized				767.4
Available financing, before restrictions				282.6
Restrictive covenant limitation				94.3
Available financing as of March 31, 2016			$	188.3

(1)	The Receivables Securitization Program provides for maximum funding available of the lesser of $200.0 million or the total amount of eligible receivables less excess concentrations and applicable reserves.

The Company’s total capitalization consisted of the following amounts (in millions):

	As of			As of
	March 31,			December 31,
	2016			2015
2013 Credit Agreement	$	405.8		$	368.4
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		200.0			200.0
Mortgage & Capital Lease		0.1			-
Debt		755.9			718.4
Stockholders’ equity		734.5			723.7
Total capitalization	$	1,490.4		$	1,442.1

Debt-to-total capitalization ratio		50.7	%		49.8	%

We believe that our operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future. Refer to Note 8, “Debt”, for further descriptions of the provisions of our financing facilities as well as Note 11 “Debt” in our Annual Report on Form 10-K for the year-ended December 31, 2015.

I TEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market risk associated principally with changes in interest rates and foreign currency exchange rates. There were no material changes to the Company’s exposures to market risk during the first three months of 2016 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

I TEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that material information required to be disclosed in our reports filed with or submitted to the Securities and Exchange Commission under the Securities Exchange Act is made known to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended March 31, 2016, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

I TEM 1.

LEGAL PROCEEDINGS.

I TEM 1A.

RISK FACTORS.

For information regarding risk factors, see “Risk Factors” in Item 1A of Part I of the Company’s Form 10-K for the year ended December 31, 2015. There have been no material changes to the risk factors described in such Form 10-K.

I TEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a)

Not applicable.

(b)

Not applicable.

(c)

Common Stock Purchases.

During the three-month periods ended March 31, 2016 and 2015, the Company repurchased 241,270 and 402,679 shares of common stock at an aggregate cost of $6.8 million and $16.3 million, respectively. The Company did not repurchase any additional shares through April 18, 2016. As of that date, the Company had approximately $68.2 million remaining of existing share repurchase authorization from the Board of Directors.

2016 Fiscal Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
January 1, 2016 to January 31, 2016		-	$	-		-	$	75,000,020
February 1, 2016 to February 29, 2016		178,278		27.80		178,278		70,044,065
March 1, 2016 to March 31, 2016		62,992		29.90		62,992		68,160,702
Total Third Quarter		241,270	$	28.85		241,270	$	68,160,702

I TEM 6.

EXHIBITS

(a)

Exhibits

This Quarterly Report on Form 10-Q includes as exhibits certain documents that the Company has previously filed with the SEC. Such previously filed documents are incorporated herein by reference from the respective filings indicated in parentheses at the end of the exhibit descriptions (all made under the Company’s file number of 0-10653). Each of the management contracts and compensatory plans or arrangements included below as an exhibit is identified as such by a double asterisk at the end of the related exhibit description.

Exhibit No.		Description
3.1		Third Restated Certificate of Incorporation of Essendant Inc. (“ESND” or the “Company”), dated as of June 1, 2015 (Exhibit 3.1 to the Form 10-Q, filed on July 23,2015)

3.2		Amended and Restated Bylaws of Essendant Inc., dated as of June 1, 2015 (Exhibit 3.2 to the Form 10-Q, filed on July 23, 2015)

4.1		Note Purchase Agreement, dated as of November 25, 2013, among ESND, Essendant Co. (“ECO”), and the note purchasers identified therein (the “2013 Note Purchase Agreement”) (Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 19, 2014 (the “2013 Form 10-K”))

4.2*		Amendment No. 1 to Note Purchase Agreement, dated as of January 27, 2016, among ECO, ESND and the holders of Notes issued by the Company that are parties thereto.

4.3		Parent Guaranty, dated as of November 25, 2013, by ESND in favor of the holders of the promissory notes identified therein (Exhibit 4.5 to the 2013 Form 10-K)

4.4		Subsidiary Guaranty, dated as of November 25, 2013, by all of the domestic subsidiaries of ECO (Exhibit 4.6 to the 2013 Form 10-K)

10.1*		Essendant Inc. 2016 Annual Cash Incentive Award Plan For Section 16 Officers**

10.2*		Form of Performance Based Restricted Stock Unit Award Agreement Under the 2015 Long-Term Incentive Plan**

10.3*		Form of 2016 Restricted Stock Award Agreement with EPS Minimum Under the 2015 Long-Term Incentive Plan**

10.4*		Amendment No. 1 to Fourth Amended and Restated Five-Year Revolving Credit Agreement, dated as of January 27, 2016, among ECO, ESND, the financial institutions that are parties theret,o and JPMorgan Chase Bank, National Association, as agent

10.5*		Fifth Amendment to Amended and Restated Transfer and Administration Agreement, dated as of March 30, 2016 among Essendant Receivables LLC, ECO, Essendant Financial Services LLC, PNC Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch

10.6*		Amendment to the Amended and Restated Transfer and Administration Agreement, dated as of January 22, 2016

18.1		Preferability Letter on Change in Accounting Principle

31.1*		Certification of Chief Executive Officer, dated as of April 20, 2016, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer, dated as of April 20, 2016, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer and Chief Financial Officer, dated as of April 20, 2016, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		The following financial information from Essendant Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2016, filed with the SEC on April 20, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statement of Income for the three-month periods ended March 31, 2016 and 2015, (ii) the Condensed Consolidated Balance Sheet at March 31, 2016 and December 31, 2015, (iii) the Condensed Consolidated Statement of Cash Flows for the three-month periods ended March 31, 2016 and 2015, and (iv) Notes to Condensed Consolidated Financial Statements.

*	- Filed herewith

**	- Represents a management contract or compensatory plan or arrangement

S IGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			ESSENDANT INC.
			(Registrant)

Date: April 20, 2016			/s/ Earl C. Shanks
			Earl C. Shanks
			Senior Vice President and Chief Financial Officer

Exhibit 4.2

AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT

This AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT, dated as of January 27, 2016 (this “ Amendment ”), is entered into by and among Essendant Co., an Illinois corporation (formerly known as United Stationers Supply Co.; the “ Company ”), Essendant Inc., a Delaware corporation (formerly known as United Stationers Inc.; the “ Parent ”), and the holders of Notes issued by the Company that are parties hereto.

RECITALS

A. Pursuant to a Note Purchase Agreement dated as of November 25, 2013, among the Company, the Parent and the purchasers listed on Schedule A thereto (the “ Note Purchase Agreement ”), the Company issued $150,000,000 of its 3.75% Secured Senior Notes due January 15, 2021 (the “ Notes ”). Capitalized terms that are used herein without definition and that are defined in the Note Purchase Agreement shall have the same meanings herein as in the Note Purchase Agreement

B. The parties hereto wish to amend the Note Purchase Agreement in the respects, but only in the respects, hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Amendment to the Note Purchase Agreement . (a) Effective as of the date first above written and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the definition of “Consolidated EBITDA” in Schedule B to the Note Purchase Agreement is hereby amended and restated to read in its entirety as follows:

consummation thereof, which the Company determines in good faith are reasonable and whi ch are so set forth in a certificate of a financial officer of the Company delivered to the holders of Notes; provided that amounts added back pursuant to this subclause (2) shall be permitted only to the extent to the aggregate additions under subclauses (1) and (2) for such period do not exceed 10% of the amount which could have been included in Consolidated EBITDA in the absence of the adjustment under this clause ( ix x ) , minus (C) to the extent included in Consolidated Net Income for such period, any ex traordinary non-cash or nonrecurring non-cash gains, all calculated for the Parent and its Subsidiaries on a consolidated basis.

Solely for the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “ Reference Period ”), if at any time during such Reference Period, the Parent or any of its Subsidiaries shall have made any Material Disposition, Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, in each case, calculated on a pro forma basis based on the Parent’s most recent financial statements delivered pursuant to Section 7.1.

(b) The Company hereby agrees to pay an amendment fee to or on behalf of the holders of the Notes (the “ Noteholders’ Amendment Fee ”) as set forth in Exhibit A hereto. The holders hereby waive the requirements of the first sentence of Section 17.2(b) of the Note Purchase Agreement.

2. Conditions of Effectiveness . This Amendment shall become effective and be deemed effective as of the date hereof, if, and only if, each of the following conditions is satisfied:

(a) The warranties and representations of the Company and the Parent contained in Section 3 of this Amendment shall be true and correct as of the date of this Amendment.

(b) Executed counterparts of th is Amendment, duly executed by the Company and the holders and acknowledged and agreed to by the Subsidiary Guarantors, shall have been delivered to Chapman and Cutler LLP, as special counsel to the holders.

(c) The holders (or Chapman and Cutler LLP, on b ehalf of the holders) shall have received (i) a true, complete and correct copy of the amendment to the Credit Agreement relating to the subject matter of this Amendment (the “ Credit Agreement Amendment ”) and (ii) a true, complete and correct copy of the consent of the lenders under the Company’s asset backed securities facility (the “ ABS Facility ”) relating to the subject matter of this Amendment (the “ ABS Consent ”), and each of such Credit Agreement Amendment and ABS Consent shall be in full force and effect prior to the effective date of this Amendment or simultaneously therewith.

(d) The Company shall have paid the Noteholders’ Amendment Fee.

(e) The Company shall have paid the reasonable and documented fees and expenses of Chapman and Cutler LLP, special counsel to the holders, in connection with the preparation, execution and delivery of this Amendment, to the extent invoiced prior to the date hereof.

3. Representations and Warranties . Each of the Company and the Parent hereby represents and warrants (which representations shall survive the execution and delivery of this Amendment) to the holders that:

(a) this Amendment and the Note Purchase Agreement as amended hereby, constitute legal, valid and binding obligations of the Company and the Parent and are enforceable against the Company and the Parent in accordance with their terms;

(b) the execution, delivery and performance by the Company and the Parent of this Amendment (i) have been duly authorized by all necessary corporate action on the part of the Company and the Parent; (ii) do not require the consent, approval or authorization of any Governmental Authority, except for the filing of a Form 8-K with the SEC or any state blue sky laws; and (iii) do not and will not (A) contravene, result in any breach of, or constitute a default under, or, except for the Liens under the Collateral Documents, result in the creation of any Lien in respect of any property of the Parent, the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, shareholders agreement or any other agreement or instrument to which the Parent, the Company or any Subsidiary is bound or by which the Parent, the Company or any Subsidiary or any of their respective properties may be bound, (B) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Parent, the Company or any Subsidiary, or (C) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Parent, the Company or any Subsidiary;

(c) no Default or Event of Default has occurred which is continuing as of t he date hereof or would exist after giving effect to this Amendment ; and

(d) neither the Company nor the Parent has paid any fees or other form of consideration in connection with the solicitation of an amendment or consent in connection with any other agreements pursuant to which Indebtedness of the Company is outstanding which relate to the subject matter of this Amendment (including, without limitation, the Credit Agreement and the ABS Facility), except for the Noteholders’ Amendment Fees and an amendment fee to the lenders under Credit Agreement as described in the Credit Agreement Amendment.

4. Reference to and Effect on the Note Purchase Agreement .

(a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Note Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Note Purchase Agreement, as amended hereby.

(b) Except as specifically amended above, the Financing Documents and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expr essly provided herein, operate as a waiver of any right, power or remedy of any of the holders of the Notes, nor constitute a waiver of any provision of any Financing Document or any other documents, instruments and agreements executed and/or delivered in connection therewith.

5. Governing Law . This Amendment shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the state of New York excluding choice of law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state.

6. Headings . Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

7. Counterparts; Electronic Execution . This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart hereof by facsimile or email transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

8. Entirety. This Amendment embodies the entire agreement among the parties hereto and supersedes all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof.

[signature pages begin on next page]

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

ESSENDANT CO.

By:

Name:

Title:

ESSENDANT INC.

By:

Name:

Title:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By:

Name:

Title:

PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY

By: PGIM, Inc.

(as Investment Manager)

By:

Name:

Title:

THE PRUDENTIAL LIFE INSURANCE COMPANY, LTD.

By: Prudential Investment Management (Japan), Inc. (as Investment Manager)

By: PGIM, Inc. (as Sub-Adviser)

By:

Name:

Title:

FARMERS INSURANCE EXCHANGE

MID CENTURY INSURANCE COMPANY

FARMERS NEW WORLD LIFE INSURANCE COMPANY

PHYSICIANS MUTUAL INSURANCE COMPANY

By: Prudential Private Placement Investors, L.P. (as Investment Advisor)

By: Prudential Private Placement Investors, Inc.

(as its General Partner)

By:

Name:

Title:

METLIFE INSURANCE COMPANY USA

f/k/a METLIFE INSURANCE COMPANY OF CONNECTICUT

by Metropolitan Life Insurance Company, its Investment Manager

METROPOLITAN LIFE INSURANCE COMPANY

By:

Name:

Title:

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

By: Babson Capital Management LLC as Investment Adviser

By:

Name:

Title:

MASSMUTUAL ASIA LIMITED

By: Babson Capital Management LLC as Investment Adviser

By:

Name:

Title:

WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY

By:

Name:

Title:

Acknowledged and agreed to by:

SUBSIDIARY GUARANTORS:

ESSENDANT FINANCIAL SERVICES LLC

ESSENDANT MANAGEMENT SERVICES LLC

ESSENDANT INDUSTRIAL, LLC

O.K.I. SUPPLY, LLC

OKI MIDDLE EAST HOLDING CO.

CPO COMMERCE ACQUISITION, LLC

CPO COMMERCE, LLC

LIBERTY BELL EQUIPMENT CORPORATION

TRANSSUPPLY GROUP, LLC

LABEL INDUSTRIES, INC.

XL CHAMPION HOLDINGS, LLC

AJS GROUP, LLC

NESTOR HOLDING COMPANY

NESTOR SALES HOLDCO, LLC

NESTOR SALES, LLC

By:

Name:

Title:

EXHIBIT A

NOTEHOLDERS’ AMENDMENT FEES


AMOUNT	PAYABLE TO	WIRING INSTRUCTIONS
$2,500	See Appendix I.	See Appendix I.
$2,500	Metropolitan Life Insurance Company	Bank Name: ABA Routing #: Account No.: Account Name: Ref: Amendment Fee
$2,500	Massachusetts Mutual Life Insurance Company	Citibank New York, New York ABA # Acct # RE:
$2,500	Woodmen of the World Life Insurance Society	Northern CHGO/Trust ABA # Credit Wire Account # Account # Account Name: Swift# RE: Amendment Fee

Appendix 1

Exhibit 10.1

Essendant Inc.

2016 Annual Cash Incentive Award Plan

For Section 16 Officers

Essendant Inc. maintains the 2015 Long-Term Incentive Plan, as the same may be subsequently amended, restated or modified (the “LTIP”), under which the Human Resources Committee (“Committee”) has the discretion to grant Cash Incentive Awards (“Awards”). Pursuant to the LTIP, the Committee has established a 2016 Umbrella Bonus Pool (the “Umbrella Bonus Pool”, also referred to as the “LTIP Cash Award Pool”) that, within the individual limitations specified under the LTIP for Cash Incentive Awards, determines the maximum potential Cash Incentive Awards that can be paid to the Chief Executive Officer and the other “covered employees” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and to certain other executive officers. The Committee wishes to exercise its discretion to grant Awards pursuant to the terms and conditions of the LTIP, the Umbrella Bonus Pool, and this 2016 Annual Cash Incentive Award Plan (the “CIP”), which is hereby established by the Committee for the purpose of granting Awards (subject to the terms and conditions of the LTIP and the Umbrella Bonus Pool). This CIP has been designated by the Committee as a part of the Umbrella Bonus Pool.

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

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

Awards. Unless otherwise designated by the Committee pursuant to Section 6 below, Awards made under this CIP are intended to be “performance-based compensation” as defined under the LTIP to meet the requirements for Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and are subject to the maximum Award amounts specified in the LTIP and the Umbrella Bonus Pool. Any Award granted under this CIP will be evidenced by a separate writing and subject to the terms and conditions of the LTIP, the Umbrella Bonus Pool, and this CIP.

Performance Period. The Performance Period for an Award granted under this CIP shall be the calendar year specified by the Committee in the separate writing evidencing the Award.

Performance Measurement. Payment of Awards granted under this CIP will be conditioned upon the achievement of one or more performance measures during the applicable Performance Period. The applicable performance measures will be (a) determined by the Committee, (b) set forth in the separate writing evidencing the Award, and (c) based on one or more of the Performance Measures (as defined in Section 9(z) of the LTIP).

Employment on Last Day of Performance Period. Except as otherwise provided in Section 6 below or in a superseding Employment Agreement, a Participant must be actively employed by the Company on the last day of the Performance Period to receive any payment due for that Performance Period for a final Award determined under Section 7 below.

Partial Year Participation. The Committee or President and Chief Executive Officer, as applicable, may allow an individual who transfers into or out of an eligible position (Section 16 Officers) or who terminates employment under certain circumstances during a Performance Period to participate in the CIP for that Performance Period on a prorated basis. In such a case, the Participant’s final Award will be prorated based on the number of active months of participation during the Performance Period, and credit for active months of participation will be given as specified below. Such situations include, but are not limited to: (a) new hire, (b) transfer from a position that does not meet the eligibility criteria to a position that meets the eligibility

criteria, (c) transfer from a position that does meet the eligibility criteria to a position that does not meet the eligibility criteria, (d) changes in participation such as target incentive level, salary, leave of absence, etc. during the Performance Period, and (e) terminations under certain circumstances which are described below. In the case of prorated Awards, the Participant’s final Award will be the sum of all prorated Awards.

Transfers and New Hires – An associate who becomes eligible and is designated as a Participant (whether due to transfer or new hire) during the 1st through 15th day of a month will receive credit for that month. An associate who becomes eligible and is designated as a Participant (whether due to transfer or new hire) during the 16th through last day of a month will not receive credit for that month, but rather will receive credit beginning on the first day of the following month. A Participant who ceases to be eligible (for a reason other than termination of employment) during the 1st through 15th day of a month will not receive credit for that month, but rather will receive credit through the last day of the previous month. A Participant who ceases to be eligible (for a reason other than termination of employment) during the 16th through last day of a month will receive credit through the last day of that month.

Terminations – Except as otherwise provided in any written employment agreement between the Participant and the Company, if a Participant's employment terminates during a Performance Period due to death, disability (as defined by the Social Security Administration), retirement (which is a voluntary termination of employment by the Participant on or after reaching age 60 if the Participant also has at least 10 years of service with the Company) or a reduction in force to be determined by the Company in its sole discretion, the Participant shall be eligible to receive a prorated portion of the Award as determined based on actual performance through the end of the Performance Period in accordance with Section 7 below. The prorated portion shall be determined by multiplying the Award by a fraction, the numerator of which shall be the number of months elapsed during the Performance Period at termination (as determined in the following sentence), and the denominator of which shall be twelve. For purposes of determining the months elapsed during the Performance Period, a Participant whose employment terminates during the 1st through 15th day of a month will not receive credit for that month, but rather will receive credit through the last day of the previous month; and a Participant whose employment terminates during the 16th through last day of a month will receive credit through the last day of that month. Payment of all such prorated Awards shall be made at the same time as Awards are paid to Participants who remain employed through the end of the Performance Period.

Leaves of Absence - Incentive compensation, including any Award payable under the CIP, is prorated based on the number of days a Participant takes an unpaid leave of absence during the incentive measurement timeframe (i.e., the Performance Period) unless otherwise required by state law. A leave day where a Participant only receives benefit payments (e.g., short term disability, long term disability and workers’ compensation) is deemed unpaid for the purpose of determining incentive pay. An approved intermittent, partial leave day is deemed paid for the purpose of determining incentive compensation.

Adjustment of Performance Measure Targets and Determination and Payment of Final Awards – The Committee has the right to adjust the performance measure targets (either up or down) during the Performance Period if it determines that external changes or other unanticipated business conditions have materially affected the fairness of the targets or unduly influenced the Company’s ability to meet them, subject to the terms and provisions of the Umbrella Bonus Pool. The Committee also has the right to adjust the performance measure targets during the Performance Period in the event an extraordinary and unanticipated corporate event such as a Change of Control requires that the CIP be amended to provide for a Performance Period consisting of less than twelve months. The occurrence of the event requiring an amendment to the CIP to provide for a Performance Period of less than twelve months must be objectively determinable and must be certified by the Committee, and the certification of the event must be

strictly ministerial and not involve any discretionary authority. Notwithstanding the foregoing, the Committee has the right to adjust Awards in accordance with the provisions of the Umbrella Bonus Pool.

As soon as practicable after the close of the Performance Period, the Committee or President and Chief Executive Officer, as applicable, will review performance against the previously established performance measures and approve final Awards for each Participant who remains actively employed by the Company on the last day of the Performance Period (or who satisfies the provisions of Section (6)). A Participant will be eligible to receive payment with respect to an Award only to the extent that the performance measures for such Award are achieved and it is determined that all or some portion of the Participant’s Award has been earned for the Performance Period. In the case of the Participants whose compensation is subject to Section 162(m) of the Code, the Committee must certify, in writing, prior to payment of the final Awards that the performance measures were achieved and, if so, calculate and certify in writing the amount of the Award earned by each such Participant for the Performance Period. Such amount may be adjusted in accordance with the provisions of the Umbrella Bonus Pool. The Company will pay the final Awards in cash as soon as administratively practicable, but no later than March 15th following the last day of the Performance Period, in accordance with each Participant's payroll election (i.e., direct deposit or pay card) at the time the Award is distributed. Final Awards shall be a liability of the Company on the last day of the Performance Period.

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

Administration and Interpretation. The Committee has the authority to control and manage the operation and administration of the LTIP, the Umbrella Bonus Pool and this CIP. Any interpretations of the LTIP, the Umbrella Bonus Pool or this CIP by the Committee and any decisions made by it under the LTIP, the Umbrella Bonus Pool or this CIP are final and binding on the Participant and all other persons.

10.

Governing Law. This CIP and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the state of Delaware, without regard to principles of conflicts of law of Delaware or any other jurisdiction.

11.

Controlling Terms and Conditions. Notwithstanding anything in this CIP to the contrary, the terms of this CIP shall be subject to all of the terms and conditions of the LTIP and the Umbrella Bonus Pool (as the same may be amended in accordance with its terms), a copy of which may be obtained by the Participant from the office of the Secretary of the Company. In addition, this CIP and the Participant’s rights hereunder shall be subject to all interpretations, determinations, guidelines, rules and regulations adopted or made by the Committee from time to time pursuant to the LTIP, the Umbrella Bonus Pool and this CIP. The LTIP (along with the Umbrella Bonus Pool, this CIP and any individual Award granted to a Participant) supersedes any and all prior oral and written discussions, commitments, undertakings, representations or agreements (including, without limitation, any terms of any employment offers, discussions or agreements) involving cash incentive Awards.

12.

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

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

Exhibit 10.2

ESSENDANT INC.

2015 LONG-TERM INCENTIVE PLAN

Performance Based Restricted Stock Unit Award Agreement

This Restricted Stock Unit Award Agreement (this “Agreement”), dated March 1, 2016 (the “Award Date”), is by and between [[FIRSTNAME]] [[LASTNAME]] (the “Participant”), and Essendant Inc., a Delaware corporation (the “Company”). Any term capitalized but not defined in this Agreement will have the meaning set forth in the Company’s 2015 Long-Term Incentive Plan (the “Plan”).

In the exercise of its discretion to grant awards under the Plan, the Committee has determined that the Participant should receive an award of restricted stock units (“Units”) under the Plan, on the following terms and conditions:

Grant . The Company hereby grants to the Participant a Restricted Stock Unit Award (the “Award”) consisting of [[SHARESGRANTED]] Units (the “Target Number of Units”), subject to possible increase to as many as two times the Target Number of Units (the “Maximum Number of Units”), or decrease to as low as zero, depending on the degree to which the Company has satisfied the performance-based objectives specified in Appendix A to this Agreement. Each Unit that vests represents the right to receive one share of the Company’s common stock as provided in Section 5 of this Agreement. The Award will be subject to the terms and conditions of the Plan and this Agreement.

No Rights as a Stockholder . The Units granted pursuant to this Award do not entitle the Participant to any rights of a stockholder of the Company unless and until the Units vest as set forth in Section 3 and the Company has caused the Stock to be delivered as set forth in Section 5. The Participant’s rights with respect to the Units shall remain forfeitable at all times until satisfaction of the vesting conditions set forth in Section 3 of this Agreement.

3.	Vesting; Effect of Date of Termination . For purposes of this Agreement, “Vesting Date” means the earlier of March 1, 2019 , or such other date upon which a vesting event occurs pursuant to this Section 3.

(a)

Units will vest on the Vesting Date (i) if the Participant’s Date of Termination has not occurred before the Vesting Date, and (ii) only to the extent the Units have been earned as provided in Section 4 during the period (the “Performance Period”) from January 1, 2016 to December 31, 2018 (the “Determination Date”). The period from the Award Date through the Vesting Date is referred to as the “Vesting Period.” Except as provided in paragraphs 3(b) through 3(f), if the Participant’s Date of Termination occurs for any reason during the Vesting Period, the Participant’s Units that have not yet vested will be forfeited as of the Participant’s Date of Termination.

(b)

If the Participant’s Date of Termination occurs during the Vesting Period, but prior to a Change of Control, by reason of the Participant’s death or Permanent and Total Disability (as defined in paragraph 3(f)), a portion of the then unvested Units subject to this Award will become vested as of the Participant’s Date of Termination. That portion shall be equal to a number of Units determined by multiplying the Target Number of Units by a fraction, the numerator of which shall be the number of whole months elapsed from the Award Date through the Date of Termination, and the denominator of which shall be 36. Any remaining Units subject to this Award that do not vest as provided in this paragraph shall be forfeited as of the Participant’s Date of Termination.

(c)

If the Participant’s Date of Termination occurs during the Vesting Period, but prior to a Change of Control, by reason of the Participant’s Retirement (as defined in paragraph 3(h)), then except as provided in paragraph 3(d), the Units will remain outstanding until the Vesting Date, at which point

a prorated portion of the unvested Units will vest to the extent that the Units have been earned as provided in Section 4 during the Performance Period, but only if the following conditions have been satisfied: (i) the Participant has provided the Company with written notice of his or her intent to retire at least 3 months prior to the Participant’s Date of Termination (but such advance notice shall not be required if Retirement occurs as a result of the Participant’s involuntary Separation from Service without Cause or the Participant’s Separation from Service for Good Reason); and (ii) the Participant executes a release of claims and an agreement not to compete in such forms as the Company may prescribe, and such release and agreement have become fully effective, within 60 days following the Participant’s Date of Termination. If the conditions described in the preceding sentence are not satisfied, any unvested Units as of the Date of Termination shall be forfeited. The proration described in this paragraph 3(c) shall be accomplished as follows: (i) following the Determination Date, the Committee shall determine the number of Units that the Participant would have earned pursuant to Section 4 if he or she had remained employed through the Vesting Date, then (ii) that number of Units shall be multiplied by a fraction, the numerator of which is the number of full months occurring between the Award Date and the Participant’s Date of Termination, and the denominator of which is 36.

(d)

If (i) a Change of Control occurs during the Vesting Period and prior to the Participant’s Date of Termination, or (ii) a Change of Control occurs after the Participant’s Retirement, but prior to the Determination Date, then in either case the Target Number of Units will become fully vested as of the date of such Change of Control. For the avoidance of doubt, the provisions of this paragraph 3(d) will apply after the Participant’s Retirement only if the conditions set forth in paragraph 3(c) have been satisfied in connection with such Retirement.

(e)

If (i) the Participant’s Date of Termination occurs during the Vesting Period, but prior to a Change of Control, as a result of the Participant’s involuntary Separation from Service without Cause or the Participant’s Separation from Service for Good Reason (but excluding the Participant’s Retirement if the conditions in paragraph 3(c) are satisfied in connection with such Retirement), (ii) a Change of Control then occurs within six months following the Participant’s Date of Termination, and (iii) the Committee determines that there is clear evidence that the Participant’s termination of employment was made in contemplation of the Change of Control, then a number of shares of Stock (subject to paragraph 5.2(f) of the Plan) equal to the Target Number of Units shall be delivered to the Participant on a fully vested basis promptly, but in no event later than two and one-half months after the end of the calendar year in which the Change of Control occurs.

(f)

For purposes of this Agreement, the term “Permanent and Total Disability” means the Participant’s inability, due to illness, accident, injury, physical or mental incapacity or other disability, effectively to carry out his duties and obligations as an employee of the Company or its Subsidiaries or to participate effectively and actively as an employee of the Company or its Subsidiaries for 90 consecutive days or shorter periods aggregating at least 180 days (whether or not consecutive) during any twelve-month period. Notwithstanding the foregoing, to the extent necessary to cause the Award to comply with the requirements of Section 409A of the Internal Revenue Code, as amended (the “Code”), “Permanent and Total Disability” shall mean a “disability” as described in Treasury Regulations Section 1.409A-3(i)(4).

(g)

For purposes of this Agreement, a Date of Termination shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Code Section 409A (a “Separation from Service”).

(h)

For purposes of this Agreement, “Retirement” means the Participant’s Separation from Service occurring after the Participant has reached age 60 and, as of the applicable Date of Termination, has completed at least five years of continuous service with the Company and its Subsidiaries.

(i)

For purposes of this Agreement, a Change of Control shall be deemed to have occurred only if such event would also be deemed to constitute a “change in control event” (as described in Treasury Regulation Section 1.409A-3(i)(5)(i)) with respect to the Company.

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

Earned Units . Except as specifically provided in Section 3, the number of Units subject to this Award that the Participant will be deemed to have earned (“Earned Units”) and that are eligible for vesting as of the Vesting Date will be determined by the extent to which the Company has satisfied the performance-based objectives for the Performance Period ending on the Determination Date as set forth in Appendix A to this Agreement. The portion of the Units subject to this Award that will be deemed Earned Units as of the Vesting Date during the Vesting Period will be determined according to the formula specified in Appendix A , but in no event will the cumulative number of Units that are deemed Earned Units exceed the Maximum Number of Units. Any Units that are not earned and do not vest as of the Vesting Date will be forfeited. Notwithstanding any contrary provision of this Agreement, the Committee, in its sole discretion, may reduce the number of Earned Units that would otherwise be deemed vested as of the Vesting Date in recognition of such performance or other factors that the Committee deems relevant.

Settlement of Units . After any Units vest pursuant to Section 3, the Company will promptly, but in no event later than two and one-half months after the applicable Vesting Date, cause to be delivered to the Participant, or to the Participant’s beneficiary or legal representative in the event of Participant’s death, one share of Stock in payment and settlement of each Earned Unit. Such issuance shall be evidenced by a stock certificate or appropriate entry on the books of the Company or a duly authorized transfer agent of the Company, shall be subject to the tax withholding provisions of Section 6, and shall be in complete satisfaction of the Units subject to this Award. If the Units that vest include a fractional Unit, the Company will round the number of vested Units down to the nearest whole Unit prior to issuance of the shares as provided herein. To the greatest extent possible, it is intended that this Award and any payments made in connection herewith shall be exempt from, or comply with, Code Section 409A, and this Agreement shall be interpreted and administered in accordance with that intent. Notwithstanding the payment timing provisions otherwise set forth in this Section 5, if any amount shall be payable with respect to this Award as a result of the Participant’s Separation from Service at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s Separation from Service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter.

Tax Matters . The Committee may require the Participant, or the alternate recipient identified in Section 5, to satisfy any potential federal, state, local or other tax withholding liability. Such liability must be satisfied at the time such Units are settled in shares of Stock. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied: (i) through a cash payment by the Participant, (ii) through the surrender of shares of Stock that the Participant already owns, (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled in respect of the Award under this Agreement; provided, however, that such shares under this clause (iii) may be used to satisfy not more than the minimum statutory withholding obligation of the Company or applicable Subsidiary (based on minimum statutory withholding rates for federal, state and local tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), or (iv) any combination of clauses (i), (ii) and (iii); provided , however , that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii)-(iv) and that the Committee may require that the method of satisfying such an obligation be in compliance with Section 16 of the Exchange Act (if the Participant is subject thereto) and any other applicable laws and the respective rules and regulations thereunder. Any fraction of a share of Stock which would be required to satisfy such an obligation will be disregarded and the remaining amount due will be paid in cash by the Participant.

Compliance with Laws . Despite the provisions of Section 5 hereof, the Company is not required to deliver any certificates for shares of Stock if at any time the Company determines that the listing, registration or qualification of such shares upon any securities exchange or under any law, the consent or approval of any governmental body or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of the shares hereunder in compliance with all applicable laws and regulations, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.

Restrictive Covenants; Recovery of Payments . Notwithstanding any contrary provision of this Agreement, the Company may recover the Award granted or paid under this Agreement to the extent required by the terms of any clawback or compensation recovery policy adopted by the Company. Furthermore, and in consideration of the grant of the Award under the terms of this Agreement and in recognition of the fact that Participant has received and will receive Confidential Information (as defined in paragraph 8(e)(iv)) during Participant’s Service (as defined in paragraph 8(e)(v)), Participant agrees to be bound by the restrictive covenants set forth in paragraphs 8(a), 8(b), 8(c), and 8(d), below (the “Restrictive Covenants”). In addition, but subject to the last sentence of this paragraph, Participant agrees that if Participant violates any provision of such Restrictive Covenants, then (i) all unvested Units shall immediately become null and void, and (ii) any shares of Stock delivered upon vesting of any Units at any time during the three-year period immediately preceding the date on which such violation occurred shall immediately become null and void (collectively, the “Forfeited Shares”). Subject to the last sentence of this paragraph, Participant hereby agrees that upon demand from the Company at any time after discovery of the violation of a Restrictive Covenant or other imposition of a claw back, (A) Participant shall pay to the Company an amount equal to the proceeds Participant has received from any sales or distributions of Forfeited Shares, and (B) if Participant still holds all or any part of the Forfeited Shares at the time the Company makes such demand, Participant shall either (1) deliver to the Company all such unsold Forfeited Shares or (2) pay to the Company the aggregate fair market value of such Forfeited Shares as of the date of the Participant’s receipt of the Company’s demand. Subject to the last sentence of this paragraph and any applicable limitations of Code Section 409A, by accepting this Agreement, Participant consents to a deduction from any amounts the Company owes Participant from time to time (including amounts owed to Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Participant by the Company), to the extent of the amounts Participant owes the Company under this Section 8. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount Participant owes pursuant to this Section 8, Participant hereby agrees to pay immediately the unpaid balance to the Company. Notwithstanding the foregoing, if and to the extent that a violation of a Restrictive Covenant is curable at the time of discovery by the Company, Participant will not be deemed to have violated such Restrictive Covenant unless and until the Company gives Participant written notice of such violation and Participant fails to cure such violation within 30 calendar days after receipt of such written notice.

(a)

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

(b)

its business during the term of the Participant’s Service. In the event that any portion of this paragraph 8(b) shall be determined by any court of competent jurisdiction to be unenforceable because it is unreasonably restrictive in any respect, it shall be interpreted to extend over the maximum period of time for which it reasonably may be enforced and to the maximum extent for which it reasonably may be enforced in all other respects, and enforced as so interpreted, all as determined by such court in such action. Participant acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

(c)

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

(vi)

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

(d)

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

(e)

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

Participant will be deemed to be in “Service” to the Company so long as he or she renders continuous servic es on a periodic basis to the Company in the capacity of an employee, director, consultant, independent contractor, or other advisor (but, in the case of Participant’s continued Service as a consultant, independent contractor, or other advisor, only as determined by the Committee or the Board, in its sole and absolute discretion, following Participant’s initial Service as an employee or director).

(f)

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

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

10.

Nontransferability . Except as otherwise provided by the Committee or as provided in Section 5, and except with respect to shares of Stock delivered in settlement of vested Units, the Participant’s interests and rights in and under this Agreement may not be assigned, transferred, exchanged, pledged or otherwise encumbered other than as designated by the Participant by will or by the laws of descent and distribution. Issuance of shares of Stock in settlement of Units will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the Participant is legally incompetent, the Participant’s personal representative; or, if the Participant is deceased, to

the designated beneficiary or other appropriate recipient in accordance with Section 5 hereof. The Committee may require personal receipts or endorsements of a Participant’s personal representative, designated beneficiary or alternate recipient provided for herein, and the Committee shall extend to those individuals the rights otherwise exercisable by the Participant with regard to any withholding tax election in accordance with Section 6 hereof. Any effort to otherwise assign or transfer any Units or any rights or interests therein or thereto under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights and interests of the Participant and his or her beneficiary in and under this Agreement.

11.

Administration and Interpretation . The Committee has the authority to control and manage the operation and administration of the Plan and to make all interpretations and determinations necessary or appropriate for the administration of the Plan and this Agreement, including the enforcement of any recovery of payments pursuant to Section 8 or otherwise. Any interpretations of the Plan or this Agreement by the Committee and any decisions made by it under the Plan or this Agreement are final and binding on the Participant and all other persons. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan except to the extent such resolution would result in a violation of Code Section 409A.

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

13.

Sole Agreement . Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to all of the terms and conditions of the Plan (as the same may be amended in accordance with its terms), a copy of which may be obtained by the Participant from the office of the Secretary of the Company. In addition, this Agreement and the Participant’s rights hereunder shall be subject to all interpretations, determinations, guidelines, rules and regulations adopted or made by the Committee from time to time pursuant to the Plan. This Agreement is the entire agreement between the parties to it with respect to the subject matter hereof, and supersedes any and all prior oral and written discussions, commitments, undertakings, representations or agreements (including, without limitation, any terms of any employment offers, discussions or agreements between the parties).

14.	Binding Effect . This Agreement will be binding upon and will inure to the benefit of the Company and the Participant and, as and to the extent provided herein and under the Plan, their respective heirs, executors, administrators, legal representatives, successors and assigns.

15.

Amendment and Waiver . This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement between the Company and the Participant without the consent of any other person. No course of conduct or failure or delay in enforcing the provisions of this Agreement will affect the validity, binding effect or enforceability of this Agreement.

[Signature Page Follows]

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

ESSENDANT INC.

PARTICIPANT

By:

______________________________

Charles Crovitz

Chairman of the Board

APPENDIX A

Performance-Based Restricted Stock Unit Award Agreement

Earned Units and Performance-Based Objectives

Vesting Period: March 15, 2016 through March 1, 2019

The determination of the number of Units that will be earned and vested as of the Vesting Date as provided in Section 4 of the Agreement will be determined as follows:

The Company’s Cumulative Adjusted Net Income (as defined below) and Working Capital Efficiency (as defined below) as well as relative Total Shareholder Return (“TSR”) as determined by a peer group approved by Essendant’s Human Resources Committee, for the Performance Period beginning on January 1, 2016 and ending on the Determination Date will be calculated.

Based on that actual Cumulative Adjusted Net Income and Working Capital Efficiency, the Performance Factors for the Performance Period will be determined from the following table by determining where each of the Company’s actual Cumulative Adjusted Net Income and Working Capital Efficiency falls relative to the goals specified in the applicable column of the table below, and then selecting the corresponding Performance Factor. If the Company’s actual Cumulative Adjusted Net Income and/or Working Capital Efficiency for the Performance Period is between two amounts shown in the applicable column of the table, the corresponding Performance Factor will be determined by linear interpolation between the two relevant Performance Factors shown in the table. If actual Cumulative Adjusted Net Income and/or Working Capital Efficiency for the Performance Period is less than or equal to the Minimum amount specified, the corresponding Performance Factor is zero, and if actual Cumulative Adjusted Net Income and/or Working Capital Efficiency for the Performance Period is greater than the Maximum amount specified, the corresponding Performance Factor will be equal to the percentage specified for the Maximum amount.

Based on performance of Essendant stock over the performance period as compared to the identified peer group, payout will occur according to the terms of the chart below.

Company’s Cumulative Adjusted Net Income, Working Capital Efficiency and Total Shareholder Return (TSR) Goals and Corresponding Performance Factors during the Performance Period

The number of Earned Units during the Performance Period that will vest as of the Vesting Date will be calculated using the following formula:

(Performance Factor for Cumulative Adjusted Net Income x Target Number of Units x 0.60) +

(Performance Factor for Working Capital Efficiency x Target Number of Units x 0.25)

(Performance Factor for TSR x Target Number of Units x 0.15) where:

“Performance Factor for Cumulative Adjusted Net Income” and “Performance Factor for Working Capital Efficiency” and “Performance Factor for TSR) are the percentages determined as provided in item 2 above; and

“Target Number of Units” is the number associated with that term in Section 1 of the Agreement.

For purposes of this Appendix A, the Company’s “Working Capital Efficiency” for the Performance Period shall mean the monthly average of total current assets (excluding cash and cash equivalents) less total current liabilities (excluding short term debt), divided by net sales, and the Company’s “Cumulative Adjusted Net Income” for the Performance Period shall mean the sum of the adjusted net income for each of the three years in such period, all as reported in the Company’s 2016 through 2018 quarterly earnings releases in the table titled Reconciliation of Non-GAAP Financial Measures, Adjusted Operating Income, Net Income and Diluted Earnings Per Share and re-calculated based on accounting standards promulgated by the Financial Accounting Standards Board or similar accounting standards body in place as of December 31, 2015, and adjusted to eliminate the effects of any and all of the following (net of any tax effects) to the extent not already included in the aforementioned table: (i) write-offs of previously capitalized financing costs; (ii) subsidiary charitable contributions to the Essendant Charitable Foundation; (iii) projected impacts on financial results of any acquisition or disposition (including liquidation of at least 90% of the assets) of any business during the Performance Period as reflected in the final financial valuation of the transaction presented to the Board prior to the Board’s approval of the transaction; (iv) impairment of goodwill and other intangible assets (as defined by ASC 350); (v) curtailment, settlement or termination of any of the Company’s pension plans (as defined in ASC 715); (vi) litigation or claim judgments and settlements; and (vii) restructuring costs (as defined by ASC 420).

Exhibit 10.3

ESSENDANT INC.
2015 LONG-TERM INCENTIVE PLAN
2016 Restricted Stock Award Agreement with EPS Minimum

This Restricted Stock Award Agreement (this "Agreement"), dated as of March 15, 2016 (the "Award Date"), is by and between [[FIRSTNAME]] [[LASTNAME]] (the "Participant"), and Essendant Inc., a Delaware corporation (the "Company"). Any term capitalized but not defined in this Agreement will have the meaning set forth in the Company’s 2015 Long-Term Incentive Plan (the "Plan"). In the exercise of its discretion to deliver stock of the Company, the Committee has determined that the Participant should receive a restricted stock award, on the following terms and conditions:

Grant . The Company hereby grants to the Participant a Restricted Stock Award (the "Award") of [[SHARESGRANTED]] shares of Stock (the "Restricted Shares"). The Award will be subject to the terms and conditions of the Plan and this Agreement. The Award constitutes the right, subject to the terms and conditions of the Plan and this Agreement, to distribution of the Restricted Shares.

Stock Certificates . The Company will deliver certificates for, or cause its transfer agent to maintain a book entry account reflecting the issuance of, the Restricted Shares in the Participant’s name. The Secretary of the Company, or the Company's transfer agent, will hold the certificates for the Restricted Shares, or cause such Restricted Shares to be maintained as restricted shares in a book entry account, until the Restricted Shares either vest or are forfeited. Any certificates that are delivered for Restricted Shares will bear a legend, and any book entry accounts that are maintained therefor will have an appropriate notation, in accordance with Section 6 hereof. The Participant's right to receive the Award hereunder is contingent upon the Participant's execution and delivery to the Secretary of the Company of all stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which would permit transfer to the Company of all or a portion of the Restricted Shares in the event such Restricted Shares are forfeited in whole or in part. The Company, or its transfer agent, will distribute to the Participant (or, if applicable, the Participant's designated beneficiary or other appropriate recipient in accordance with Section 5 hereof) certificates evidencing ownership of vested Restricted Shares as and when provided in Sections 4 and 5 hereof.

Rights as Stockholder . On and after the Award Date, and except to the extent provided in this Section 3 and in Section 9 below, the Participant will be entitled to all of the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares, the right to receive dividends and other distributions payable with respect to the Restricted Shares, and the right to participate in any capital adjustment applicable to all holders of Stock. The Participant will not, however, have the right to receive any regular cash dividend with respect to Restricted Shares that are not yet vested as of the applicable dividend record date, and hereby waives his or her right to receive such dividends with respect to unvested Restricted Shares. Any dividend or distribution other than a regular cash dividend that is payable or distributable with respect to Restricted Shares that are not yet vested as of the applicable payment date will be deposited with the Company and will be subject to the same restrictions, vesting conditions and other terms of this Agreement to which the underlying Restricted Shares are subject. If the Participant forfeits any rights he or she may have under this Award in accordance with Section 4 hereof, the Participant shall, on the day following the event of forfeiture, no longer have any rights as a stockholder with respect to any and all Restricted Shares not then vested and so forfeited, or any interest therein, and the Participant shall no longer be entitled to receive dividends on or vote any such Restricted Shares as of any record date occurring thereafter.

Vesting; Effect of Date of Termination . The Participant's Restricted Shares will vest in three annual increments of one-third of the Restricted Shares on each of March 1, 2017, March 1, 2018, and March 1, 2019 (the “Scheduled Vesting Dates”), provided that the Participant’s Date of Termination has not occurred

before a Scheduled Vesting Date, and provided further that the Company’s cumulative Earnings Per Share (as defined in paragraph 4(g)) for the four calendar quarters immediately preceding an applicable Scheduled Vesting Date exceeds $0.50 per share. If the Participant’s Date of Termination occurs for any reason before all of the Participant's Restricted Shares have become vested under this Agreement, the Participant's Restricted Shares that have not theretofore become vested will be forfeited on and after the Participant's Date of Termination, subject to the following:

(a)

If, prior to a Change of Control, the Participant's Date of Termination occurs by reason of the Participant's death or Permanent and Total Disability (as defined in paragraph 4(e)), a portion of the Restricted Shares that have not otherwise vested under this Agreement will become vested as of the Participant's Date of Termination. That portion of the then unvested Restricted Shares shall be determined by multiplying (i) the number of Restricted Shares eligible to vest on the next Scheduled Vesting Date following the Date of Termination by (ii) a fraction, the numerator of which shall be the number of whole months elapsed from the Scheduled Vesting Date immediately prior to the Date of Termination (or the Award Date if there was no Scheduled Vesting Date prior to the Date of Termination) to the Date of Termination, and the denominator of which shall be twelve.

(b)

If the Participant’s Date of Termination occurs by reason of the Participant’s Retirement (as defined in paragraph 4(f)), then the unvested Restricted Shares at that time will continue to vest on the remaining Scheduled Vesting Dates to the extent that the Restricted Shares have been earned based on the Company’s achievement of the Earnings Per Share goal specified in Section 4 for the four calendar quarters immediately preceding any such Scheduled Vesting Date, but only if the following conditions have been satisfied: (i) the Participant has provided the Company with written notice of his or her intent to retire at least 3 months prior to the Participant’s Date of Termination (but such advance notice shall not be required if Retirement occurs as a result of Participant’s involuntary termination of employment without Cause, Participant’s death or Permanent and Total Disability, or Participant’s termination of employment for Good Reason); and (ii) the Participant executes a release of claims and an agreement not to compete in such forms as the Company may reasonably prescribe, and such release and agreement have become fully effective within 60 days following the Participant’s Date of Termination. If these conditions described in the preceding sentence are not satisfied, any unvested Restricted Shares shall be forfeited.

(c)

If a Change of Control occurs either (i) after the Award Date and prior to the Participant's Date of Termination, or (ii) after the Participant’s Retirement but prior to full vesting hereunder, and if following the Change of Control the surviving company assumes and continues in full force and effect the Company’s rights and obligations under this Agreement or substitutes for this Agreement a substantially similar award for the surviving company’s stock, then (A) 50% of the Restricted Shares that have not otherwise vested under this Agreement will become fully vested as of the date of such event; and (B) the portion of the Restricted Shares that does not vest in accordance with the preceding clause (A) shall be subject to the vesting provisions of this Agreement without regard to the acceleration of vesting under clause (A). If following the applicable Change of Control the surviving company does not assume and continue in full force and effect the Company’s rights and obligations under this Agreement or substitute for this Agreement a substantially similar award for the surviving company’s stock, then 100% of the Restricted Shares that have not otherwise vested under this Agreement will become fully vested as of the date of such event. For the avoidance of doubt, the provisions of this paragraph 4(c) will apply after the Participant’s Retirement only if the conditions set forth in paragraph 4(b) have been satisfied in connection with such Retirement.

(d)

If a Change of Control occurs after the Award Date and prior to the Participant's Date of Termination, and if following the Change of Control the surviving company assumes and continues in full force and effect the Company’s rights and obligations under this Agreement or

substitutes for this Agreement a substantially similar award for the surviving company’s stock, and if, during the two-year period following the date of such Change of Control the Participant's Date of Termination occurs by reason of termination of the Participant’s employment by the Company or its Subsidiaries without Cause or by the Participant for Good Reason, then the Restricted Shares that have not otherwise vested under this Agreement will be fully vested as of the Participant's Date of Termination.

(e)

For purposes of this Agreement, the term “Permanent and Total Disability” means the Participant's inability, due to illness, accident, injury, physical or mental incapacity or other disability, effectively to carry out his or her duties and obligations as an employee of the Company or its Subsidiaries or to participate effectively and actively as an employee of the Company or its Subsidiaries for 90 consecutive days or shorter periods aggregating at least 180 days (whether or not consecutive) during any twelve-month period.

(f)

For purposes of this Agreement, “Retirement” means the Participant’s termination of employment (as described in the definition of “Date of Termination” in the Plan) occurring after the Participant has reached age 60 and, as of such Date of Termination, has completed at least five years of continuous Service with the Company and its Subsidiaries

(g)

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

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

Terms and Conditions of Distribution . The Company, or its transfer agent, will distribute to the Participant certificates for any portion of the Restricted Shares which becomes vested in accordance with this Agreement within 30 days after the vesting thereof (except that, to the extent the Participant in eligible for Retirement, such distribution will occur no later than the first March 15 occurring after the applicable Scheduled Vesting Date). If the Participant dies before the Company has distributed certificates for any vested portion of the Restricted Shares, the Company will distribute certificates for that vested portion of the Restricted Shares and, to the extent provided under Section 4 hereof, the remaining balance of the Restricted Shares which become vested upon the Participant’s death to the beneficiary designated by the Participant, or if no such beneficiary has been designated, to the Participant’s estate.

Notwithstanding the foregoing, the Committee may require the Participant, or the alternate recipient identified in the preceding paragraph, to satisfy any potential federal, state, local or other tax withholding liability. Such liability must be satisfied at the time such Restricted Shares become "substantially vested" (as defined in the regulations issued under Section 83 of the Code). At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied: (a) through a cash payment by the Participant, (b) through the surrender of shares of Stock that the Participant already owns (provided, however, to the extent shares described in this clause (b) are used to satisfy more than the minimum statutory withholding obligation, as

described below, then payments made with shares of Stock in accordance with this clause (b) shall be limited to shares held by the Participant for not less than six months prior to the payment date), (c) through the surrender of shares of Stock to which the Participant is otherwise entitled in respect of the Award under this Agreement; provided, however, that such shares under this clause (c) may be used to satisfy not more than the minimum statutory withholding obligation of the Company or applicable Subsidiary (based on minimum statutory withholding rates for federal, state and local tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), or (d) any combination of (a), (b) and (c); provided , however , that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (b)-(d) and that the Committee may require that the method of satisfying such an obligation be in compliance with Section 16 of the Exchange Act (if the Participant is subject thereto) and any other applicable laws and the respective rules and regulations thereunder. Any fraction of a share of Stock which would be required to satisfy such an obligation will be disregarded and the remaining amount due will be paid in cash by the Participant.

The Company will not be required to make any distribution of any portion of the Restricted Shares under this Section 5 (i) before the first date that such portion of the Restricted Shares may be distributed to the Participant without penalty or forfeiture under federal or state laws or regulations governing short swing trading of securities, or (ii) at any other time when the Company or the Committee reasonably determines that such distribution or any subsequent sale of the Restricted Shares would not be in compliance with other applicable securities or other laws or regulations. In determining whether a distribution would result in any such penalty, forfeiture or noncompliance, the Company and the Committee may rely upon information reasonably available to them or upon representations of the Participant or the Participant’s legal or personal representative.

Legend on Stock Certificates . If one or more certificates for all or any portion of the Restricted Shares are delivered in the Participant's name under this Agreement before such Restricted Shares become vested, the certificates shall bear the following legend, or any alternate legend that counsel to the Company believes is necessary or desirable, to facilitate compliance with applicable securities or other laws:

“The securities represented by this Certificate are subject to certain restrictions on transfer specified in the Restricted Stock Award Agreement dated as of the Award Date between the issuer (the "Company") and the holder named on this Certificate, and the Company reserves the right to refuse the transfer of such securities, whether voluntary, involuntary or by operation of law, until such conditions have been fulfilled with respect to such transfer. A copy of such conditions shall be furnished by the Company to the holder hereof upon written request and without charge."

If any such Restricted Shares are not represented by certificate(s) prior to their vesting, but are instead maintained by the Company’s transfer agent in uncertificated form in a book entry account, the account shall bear an appropriate notation to the effect that the Restricted Shares included therein are subject to the restrictions of this Agreement. Whether maintained in certificated or uncertificated book entry form, the Company may instruct its transfer agent to impose stop transfer instructions with respect to any such unvested Restricted Shares.

The foregoing legend or notation and stop transfer instructions will be removed from the certificates evidencing or account maintained for all or any portion of the Restricted Shares after the conditions set forth in Sections 4 and 5 hereof have been satisfied as to such Restricted Shares.

Delivery of Certificates . Despite the provisions of Sections 4 and 5 hereof, the Company is not required to deliver any certificates for Restricted Shares if at any time the Company determines that the listing, registration or qualification of such Restricted Shares upon any securities exchange or under any law, the consent or approval of any governmental body or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of the Restricted Shares hereunder in compliance with all applicable laws and regulations, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.

Restrictive Covenants; Recovery of Payments . Notwithstanding any contrary provision of this Agreement, the Company may recover the Award granted or paid under this Agreement to the extent required by the terms of any clawback or compensation recovery policy adopted by the Company. Furthermore, and in consideration of the grant of the Award under the terms of this Agreement and in recognition of the fact that Participant has received and will receive Confidential Information (as defined in paragraph 8(e)(iv)) during Participant’s Service (as defined in paragraph 8(e)(v)), Participant agrees to be bound by the restrictive covenants set forth in paragraphs 8(a), 8(b), 8(c), and 8(d), below (the “Restrictive Covenants”). In addition, but subject to the last sentence of this paragraph, Participant agrees that if Participant violates any provision of such Restrictive Covenants, then (i) all unvested Restricted Shares shall immediately be forfeited back to the Company, and (ii) any Restricted Shares that have vested at any time during the three-year period immediately preceding the date on which such violation occurred shall immediately be forfeited back to the Company (collectively, the “Forfeited Shares”). Subject to the last sentence of this paragraph, Participant hereby agrees that upon demand from the Company at any time after discovery of the violation of a Restrictive Covenant or imposition of a claw back, (A) Participant shall pay to the Company an amount equal to the proceeds Participant has received from any sales or distributions of Forfeited Shares, and (B) if Participant still holds all or any part of the Forfeited Shares at the time the Company makes such demand, Participant shall either (1) deliver to the Company all such unsold Forfeited Shares or (2) pay to the Company the aggregate fair market value of such Forfeited Shares as of the date of the Participant’s receipt of the Company’s demand. Subject to the last sentence of this paragraph and any applicable limitations of Code Section 409A, by accepting this Agreement, Participant consents to a deduction from any amounts the Company owes Participant from time to time (including amounts owed to Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Participant by the Company), to the extent of the amounts Participant owes the Company under this Section 8. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount Participant owes pursuant to this Section 8, Participant hereby agrees to pay immediately the unpaid balance to the Company. Notwithstanding the foregoing, if and to the extent that a violation of a Restrictive Covenant is curable at the time of discovery by the Company, Participant will not be deemed to have violated such Restrictive Covenant unless and until the Company gives Participant written notice of such violation and Participant fails to cure such violation within 30 calendar days after receipt of such written notice.

(a)

(b)

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

its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

(c)

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

(i)

(ii)

(iii)

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

(iv)

(v)

(vi)

(d)

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

(e)

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

(i)

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

(ii)

(iii)

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

(iv)

(v)

(f)

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

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

10.

Nontransferability . Except as otherwise provided by the Committee or as provided in Section 5, and except with respect to vested shares, the Participant's interests and rights in and under this Agreement are not assignable or transferable other than as designated by the Participant by will or by the laws of descent and distribution. Distribution of Restricted Shares will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the Participant is legally incompetent, the Participant’s personal representative; or, if the Participant is deceased, to the designated beneficiary or other appropriate recipient in accordance with Section 5 hereof. The Committee may require personal receipts or endorsements of a Participant’s personal representative, designated beneficiary or alternate recipient provided for herein, and the Committee shall extend to those individuals the rights otherwise exercisable by the Participant with regard to any withholding tax election in accordance with Section 5 hereof. Any effort to otherwise assign or transfer any Restricted Shares (before they are distributed) or any rights or interests therein or thereto under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights and interests of the Participant and his or her beneficiary in and under this Agreement.

11.

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

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

13.

14.	Binding Effect . This Agreement will be binding upon and will inure to the benefit of the Company and the Participant and, as and to the extent provided herein and under the Plan, their respective heirs, executors, administrators, legal representatives, successors and assigns.

15.

[SIGNATURE PAGE FOLLOWS]

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

ESSENDANT INC.

PARTICIPANT

By:

______________________________

Charles Crovitz

[INSERT PARTICIPANT’S NAME]

Chairman of the Board

Exhibit 10.5

EXECUTION COPY

AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED FIVE-YEAR REVOLVING CREDIT AGREEMENT

This AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED FIVE-YEAR REVOLVING CREDIT AGREEMENT, dated as of January 27, 2016 (this “ Amendment ”), is entered into by and among Essendant Co., an Illinois corporation (formerly known as United Stationers Supply Co.; the “ Borrower ”), Essendant Inc., a Delaware corporation (formerly known as United Stationers Inc.; the “ Parent ”), the financial institutions that are parties hereto and JPMorgan Chase Bank, National Association, as agent (in such capacity, the “ Agent ”).

RECITALS

A. The Borrower, the Parent, certain financial institutions and the Agent are parties to that certain Fourth Amended and Restated Five-Year Revolving Credit Agreement, dated as of July 8, 2013 (as amended or otherwise modified prior to the date hereof, the “ Credit Agreement ”; capitalized terms that are used herein without definition and that are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement).

B. Subject to the terms and conditions hereof, the parties hereto wish to amend the Credit Agreement in certain respects.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Amendments to the Credit Agreement . Effective as of the date first above written and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows:

(a) The definition of “Consolidated EBITDA” in Section 1.1 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

(2) any demonstrable cost-savings and operating expense reductions (net of continuing associated expenses) that relate to such Qualifying Permitted Acquisition or Material Disposition or are reasonably anticipated by the Borrower to be achieved in connection with such Qualifying Permitted Acquisition or Material Disposition within the 12-month period following the consummation thereof, which the Borrower determines in good faith are reasonable and which are so set forth in a certificate of a financial officer of the Borrower delivered to the Agent; provided that amounts added back pursuant to this subclause (2) shall be permitted only to the extent to the aggregate additions under subclauses (1) and (2) for such period do not exceed 10% of the amount which could have been included in Consolidated EBITDA in the absence of the adjustment under this clause (x) , minus (C) to the extent included in Consolidated Net Income for such period, any extraordinary non-cash or nonrecurring non-cash gains, all calculated for USI and its Subsidiaries on a consolidated basis.

Solely for the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “ Reference Period ”), if at any time during such Reference Period, USI or any of its Subsidiaries shall have made any Material Disposition, Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, in each case, calculated on a pro forma basis based on USI’s most recent financial statements delivered pursuant to Section 6.1 (or, prior to delivery of the first such financial statements delivered hereunder, as of March 31, 2013).

(b) Section 3.5 of the Credit Agreement is amended to insert the following new subclause (x) at the end thereof:

(x) For purposes of determining withholding Taxes imposed under the FATCA, from and after January 27, 2016, the Borrower and the Agent shall treat (and the Lenders hereby authorize the Agent to treat) this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

2. Conditions of Effectiveness . This Amendment shall become effective and be deemed effective as of the date hereof, if, and only if, (a) the Agent shall have received duly executed copies of (i) this Amendment from the Borrower, the Parent and the Required Lenders and (ii) a Reaffirmation in the form of Attachment A hereto from each of the Parent and the Guarantors and (b) the Borrower shall have paid (or caused to be paid or reimbursed) the Amendment Fee (as defined below) and, to the extent invoiced, all Costs and Expenses (as defined below).

3. Representations and Warranties . Each of the Borrower and the Parent hereby represents and warrants as follows:

(a) This Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Borrower and the

Parent and are enforceable against the Borrower and the Parent in accordance with their terms.

(b) Upon the effectiveness of this Amendment, each of the Borrower and the Parent hereby reaffirms that the representations and warranties of each Loan Party contained in the Credit Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof, except to the extent that any such representation or warranty expressly relates solely to a specific earlier date, in which case such representation or warranty was true and correct in all material respects as of such earlier date ( provided , however , that the representation and warranty specified in Section 5.5 of the Credit Agreement shall be made only as of the Restatement Effective Date).

4. Reference to and Effect on the Credit Agreement .

(a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Credit Agreement, as amended hereby.

(b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent or any of the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

5. Costs and Expenses . The Borrower agrees to pay all reasonable out-of-pocket costs, fees and out-of-pocket expenses (including attorneys’ fees and expenses charged to the Agent) incurred by the Agent in connection with the preparation, execution and delivery of this Amendment (“ Costs and Expenses ”).

6. Amendment Fee . Upon the effectiveness of this Amendment, the Borrower agrees to pay to each Lender that shall have delivered a signature page to this Amendment prior to 5:00 p.m., Chicago time, on January 27, 2016, an amendment fee of $2,500 (all such fees in the aggregate being the “ Amendment Fee ”).

7. Governing Law . This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York.

8. Headings . Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

9. Counterparts . This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

[signature pages begin on next page]

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

ESSENDANT CO.

By:

Name:

Title:

ESSENDANT INC.

By:

Name:

Title:

S-1

JPMORGAN CHASE BANK, N.A., individually, as an LC Issuer, as Swing Line Lender and as Agent

By:

Name:

Title:

S-2

U.S. BANK NATIONAL ASSOCIATION, as an LC Issuer and Lender

By:

Name:

Title:

S-3

WELLS FARGO BANK, NATIONAL ASSOCIATION, as an LC Issuer and Lender

By:

Name:

Title:

S-4

BANK OF AMERICA, N.A., as a Lender

By:

Name:

Title:

S-5

PNC BANK, NATIONAL ASSOCIATION, as a Lender

By:

Name:

Title:

S-6

MUFG UNION BANK, N.A., as a Lender

By:

Name:

Title:

S-7

RBS CITIZENS, N.A., as a Lender

By:

Name:

Title:

S-8

FIFTH THIRD BANK, as a Lender

By:

Name:

Title:

S-9

KEYBANK NATIONAL ASSOCIATION, as a Lender

By:

Name:

Title:

S-10

THE NORTHERN TRUST COMPANY, as a Lender

By:

Name:

Title:

S-11

TD BANK, N.A., as a Lender

By:

Name:

Title:

S-12

FIRST HAWAIIAN BANK, as a Lender

By:

Name:

Title:

S-13

ATTACHMENT A

REAFFIRMATION

Each of the undersigned hereby acknowledges receipt of a copy of Amendment No. 1 to the Fourth Amended and Restated Five-Year Revolving Credit Agreement dated as of July 8, 2013 by and among Essendant Co., an Illinois corporation (formerly known as United Stationers Supply Co.; the “ Borrower ”), Essendant Inc., a Delaware corporation (formerly known as United Stationers Inc.; the “ Parent ”), the financial institutions from time to time parties thereto (the “ Lenders ”) and JPMorgan Chase Bank, N.A., in its capacity as administrative agent (the “ Agent ”) (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), which Amendment No. 1 is dated as of January 27, 2016 (the “ Amendment ”). Capitalized terms used in this Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement. The undersigned acknowledge and agree that nothing in the Credit Agreement, the Amendment or any other Loan Document shall be deemed to require the Agent or any Lender to consent to any future amendment or other modification to the Credit Agreement or any Loan Document. Each of the undersigned reaffirms the terms and conditions of each of the Collateral Documents and any other Loan Document executed by it and acknowledges and agrees that such agreement and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.

Dated: January 27, 2016

ESSENDANT INC.

By:

Name:

Title:

SIGNATURE PAGE TO REAFFIRMATION

ESSENDANT FINANCIAL SERVICES LLC

ESSENDANT MANAGEMENT SERVICES LLC

ESSENDANT INDUSTRIAL, LLC

O.K.I. SUPPLY, LLC

OKI MIDDLE EAST HOLDING CO.

CPO COMMERCE ACQUISITION, LLC

CPO COMMERCE, LLC

LIBERTY BELL EQUIPMENT CORPORATION

TRANSSUPPLY GROUP, LLC

LABEL INDUSTRIES, INC.

XL CHAMPION HOLDINGS, LLC

AJS GROUP, LLC

NESTOR HOLDING COMPANY

NESTOR SALES HOLDCO, LLC

NESTOR SALES, LLC

By:

Name:

Title:

SIGNATURE PAGE TO REAFFIRMATION

Exhibit 10.6

Execution Version

FIFTH AMENDMENT

AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT

THIS FIFTH AMENDMENT TO AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT, dated as of March 30, 2016 (this “ Amendment ”), is entered into by and among (i) Essendant Receivables LLC, an Illinois limited liability company (the “ SPV ”), (ii) Essendant Co., an Illinois corporation, as originator (the “ Originator ”), (iii) Essendant Financial Services LLC, an Illinois limited liability company, as seller (the “ Seller ”) and as Servicer, PNC Bank, National Association (“ PNC Bank ”), a national banking association, as agent (the “ Agent ”), as a Class Agent and as an Alternate Investor, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (“ BTMU ”), a Japanese banking corporation acting through its New York Branch, as a Class Agent and an Alternate Investor.

Reference is herein made to that certain Amended and Restated Transfer and Administration Agreement, dated as of January 18, 2013 (as amended by (i) that certain Assignment and Assumption and First Amendment to Amended and Restated Transfer and Administration Agreement, dated as of June 14, 2013, (ii) that certain Second Amendment to Amended and Restated Transfer and Administration Agreement, dated as of January 23, 2014, (iii) that certain Third Amendment to Amended and Restated Transfer and Administration Agreement, dated as of July 25, 2014, (iv) that certain Fourth Amendment to Amended and Restated Transfer and Administration Agreement, dated as of December 4, 2014, (v) that certain Third Omnibus Amendment to Transaction Documents, dated as of June 26, 2015, (vi) as amended hereby and (vii) as the same may be further amended, modified, supplemented, restated or replaced from time to time, the “ Transfer Agreement ”), by and among the SPV, the Originator, the Seller, PNC Bank, as Agent, as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties thereto as Conduit Investors and Alternate Investors. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Transfer Agreement.

WHEREAS, the parties hereto desire to amend the Transfer Agreement as set forth below.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Transfer Agreement . Effective as of the Effective Date (as defined below), the Transfer Agreement is hereby amended as follows:

(a) Section 1.1 of the Transfer Agreement is amended as follows:

(i)

The definition of “Loss Reserve Ratio” is deleted in its entirety and the following is inserted in lieu thereof:

“ Loss Reserve Ratio : For any Monthly Period, the product of:

(i) Stress Factor,

4175790

(ii) the highest three-month average Default Ratio during the most recent 12 month period; provided , that for purposes of determining the foregoing calcula tion with respect to this clause (ii) and solely with respect to:

(x) the months of February 2016 to and including July 2016, such amount shall be deemed to be 0.55%;

(y) the month of August 2016, such amount shall be deemed to be an amount equal to the three-month average Default Ratio calculated by averaging the Default Ratios with respect to December 2015, January 2016 and August 2016; and

(z) the month of September 2016, such amount shall be deemed to be an amount equal to the three-month average Default Ratio calculated by averaging the Default Ratios with respect to January 2016, August 2016 and September 2016, and

(iii) the Loss Horizon Ratio for such Monthly Period.”

(ii)

The definition of “Specified Ineligible Receivable” is deleted in its entirety and the following is inserted in lieu thereof:

“ Specified Ineligible Receivable : (i) On and after the Fifth Amendment Effective Date, each Receivable the Obligor of which is identified on a list (which list may be in electronic format) provided by the Servicer to the Agent on or about the Fifth Amendment Effective Date and (ii) from time to time after the Fifth Amendment Effective Date, each Receivable, the Obligor of which is identified by the Servicer to the Class Agents on a list or other writing (which may be in electronic format) provided by the Servicer to the Agent (it being understood that for purposes of this clause (ii) , the Servicer shall not designate as additional Specified Ineligible Receivables, the Receivables of more than two Obligors per calendar year). Any designation by the Servicer of a Receivable as a Specified Ineligible Receivable shall

be effective beginning with the Monthly Period immediately following the date of such designation. Any Receivable that has been designated as a Specified Ineligible Receivable shall not become an Eligible Receivable without the prior consent of the Agent. On any Business Day during the month of January of each calendar year, the SPV may, but shall not be required to, submit an updated list (which may be in electronic format) designating Receivables as Specified Ineligible Receivables which shall be subject to the review and approval of the Agent, in its sole discretion, in all respects. Any updated list (which may be in electronic format) designating Receivables as Specified Ineligible Receivables submitted by the SPV pursuant to the immediately preceding sentence shall, upon receipt of the Agent’s approval thereof, supersede and replace any previously effective list designating Receivables as Specified Ineligible Receivables and such list shall set forth the Specified Ineligible Receivables for purposes of this Agreement unless and until such list is updated, supplemented or otherwise modified in accordance with the terms of this definition. ”

(iii)

The following definitions are added in their proper alphabetical sequence:

“ Fifth Amendment Effective Date : March 30, 2016.”

“ Fifth Amendment Effective Period : The period beginning on the Fifth Amendment Effective Date to but excluding September 20, 2016.”

(b) The third paragraph appearing in Section 2.8 of the Transfer Agreement is deleted in its entirety and the following is inserted in lieu thereof:

“If, on any day, (a) the average of the three (3) most recent Trigger Delinquency Ratios exceeds four and one half percent (4.50%), (b) the average of the three (3) most recent Trigger Default Ratios exceeds one and three quarters of one percent (1.75%) or (c) the average of the three (3) most recent Trigger Dilution Ratios exceeds seven and one half percent (7.50%), then for so long as any of those conditions continue to exist (such period of time being an “ Exception Funding Period ”), any Class Agent may require the Servicer to deliver to each Class Agent, within one (1) Business Day after the end of each week any portion of which constituted an Exception Funding Period, an Interim Report covering the week most recently then-ended, in the form attached hereto as Exhibit K ;

provided , that for any day occurring during the Fift h Amendment Effective Period, (x ) clauses (a) and (b) shall not apply and (y) any Class Agent may require at any time the Servicer to deliver an Interim Report as set forth above.”

(c) Sections 8.1(l) and (m) of the Transfer Agreement are deleted in their entirety and the following are inserted in lieu thereof as follows:

“(l) the three-month average Trigger Delinquency Ratio shall exceed 14.00% during the Fifth Amendment Effective Period and 6.25% at all times thereafter; or

(m) the three-month average Trigger Default Ratio shall exceed 10.00% during the Fifth Amendment Effective Period and 2.25% at all times thereafter; or”

2. Representations and Warranties . Each of the Originator, the SPV, the Seller and the Servicer hereby certifies that, subject to the effectiveness of this Amendment, each of the representations and warranties set forth in the Transfer Agreement and the other Transaction Documents is true and correct on the date hereof, as if each representation and warranty were made on the date hereof.

3. No Default . The SPV, the Originator, the Seller and the Servicer each hereby represent and warrant that, as of the date hereof, no Termination Event or Potential Termination Event has occurred or is continuing.

4. Transaction Documents in Full Force and Effect As Amended . Except as specifically amended hereby, the Transfer Agreement and the other Transaction Documents shall remain in full force and effect. All references to the Transfer Agreement therein and in each other Transaction Document shall be deemed to mean the Transfer Agreement as modified hereby. The parties hereto agree to be bound by the terms and conditions of the Transfer Agreement, as amended by this Amendment, as though such terms and conditions were set forth herein.

5. Consent of Performance Guarantor . The Performance Guarantor hereby consents to the amendments to the Transfer Agreement set forth in this Amendment.

6. Conditions to Effectiveness . This Amendment shall be effective as of the date (the “ Effective Date ”) on which the Agent shall have received counterparts of this Amendment duly executed by each of the parties hereto.

7. Miscellaneous .

(a) This Amendment may be executed in any number of counterparts and by different parties hereto on the same or separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original instrument but all of which, together, shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

(b) The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

(d) Any provision in this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

(e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAWS PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

[signatures appear on the following pages]

Exhibit 10.6

Execution Version

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.

ESSENDANT RECEIVABLES LLC

By:

Name: Robert J. Kelderhouse

Title: Vice President and Treasurer

ESSENDANT CO. , as Originator

By:

Name: Robert J. Kelderhouse

Title: Vice President and Treasurer

ESSENDANT FINANCIAL SERVICES LLC , as Seller and as Servicer

By:

Name: Robert J. Kelderhouse

Title: Vice President and Treasurer

[signatures continue on the following pages]

Fifth Amendment to A&R Transfer and Administration Agreement

Acknowledged and consented to by :

ESSENDANT INC. , as the Performance Guarantor

By:

Name: Robert J. Kelderhouse

Title: Vice President and Treasurer

[signatures continue on the following pages]

Fifth Amendment to A&R Transfer and Administration Agreement

PNC BANK, NATIONAL ASSOCIATION , as an Alternate Investor, a Class Agent and the Agent

By:

Name:

Title:

[signatures continue on the following page]

Fifth Amendment to A&R Transfer and Administration Agreement

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH , as an Alternate Investor

By:

Name:

Title:

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH , as a Class Agent

By:

Name:

Title:

[end of signatures]

Fifth Amendment to A&R Transfer and Administration Agreement

Exhibit 10.6

Essendant Receivables LLC

One Parkway North Boulevard
Deerfield, Illinois 60015

January 22, 2016

PNC Bank, National Association,

as Class Agent, Alternative Investor and the Agent

The Bank of Tokyo-Mitsubishi UFJ, LTD., New York Branch,

as Class Agent and Alternative Investor

Re: Consent Letter

Ladies Gentlemen:

Reference is hereby made to the Amended and Restated Transfer and Administration Agreement (as amended through the date hereof, the “ Transfer Agreement ”), dated as of January 18, 2013, by and among Essendant Receivables LLC (the “ SPV ”), Essendant Co. (the “ Originator ”), Essendant Financial Services LLC, as Seller and as Servicer (the “ Seller ” or “ Servicer ”), PNC Bank, National Association (“ PNC Bank ”), as Agent, as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties thereto as Conduit Investors and Alternate Investors. Capitalized terms used but not defined herein shall have the meanings ascribed to them in Transfer Agreement.

Pursuant to the terms of the Transfer Agreement, no amendment, modification, waiver, replacement to the Revolving Credit Agreement has any effect under the Transfer Agreement unless consented to in writing by each Class Agent. Section 6.3 of the Transfer Agreement incorporates into the Transfer Agreement by reference thereto, certain financial covenants as used and defined in the Revolving Credit Agreement as in effect as of July 8, 2013. The SPV hereby notifies each Class Agent, that the Originator and the other parties thereto, intend to amend the definition of “Consolidated EBITDA” as defined in Section 1.1 of the Revolving Credit Agreement (and as such term is used in the calculation of various financial covenants (including those incorporated into the Transfer Agreement by reference to the Revolving Credit Agreement)) in the manner set forth on Exhibit A attached hereto. The SPV hereby requests that each Class Agent consent to such amendment so that such amendment is effective under the Transfer Agreement. Accordingly, each Class Agent hereby consents to the amendment to the definition of “Consolidated EBITDA” in the Revolving Credit Agreement and further agrees that such amendment shall be effective to amend the definition thereof as used in the calculation of the financial covenants referred to and incorporated by reference in Section 6.3 of the Transfer Agreement.

This letter agreement shall be effective as of the date on which the Class Agents receive a counterpart of this letter agreement duly executed by each of the parties hereto.

This letter agreement (i) shall be governed by and construed in accordance with the Laws of the State of New York (without reference to the conflicts of law principles thereof other than Section 5 ‑1401 of the New York General Obligations Law) and (ii) may be executed in any number of counterparts, and by the different parties thereto on separate counterparts; each such counterpart shall be deemed an original a nd all of such counterparts taken together shall be deemed to constitute one and the same instrument; a facsimile or electronic copy of an executed counterpart of this letter agreement shall be effective as an original for all purposes.

[ signatures begin on following page ]

Please indicate your consent to and agreement with the foregoing by signing where indicated below.

Very truly yours,

Essendant Receivables LLC

By:

Title:

S- 1 January 2016

Amendment Consent Letter

Consented and Agreed

PNC BANK, NATIONAL ASSOCIATION,

as Class Agent, Alternate Investor and the Agent

By:

Title:

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

NEW YORK BRANCH, as Class Agent

By:

Title:

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

NEW YORK BRANCH, as Alternate Investor

By:

Title:

S- 2 January 2016

Amendment Consent Letter

EXHIBIT A

“ Consolidated EBITDA ” means, with respect to any period, (A) Consolidated Net Income for such period, plus (B) to the extent deducted from revenues in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv) amortization, (v) losses attributable to equity in Affiliates, (vi) non-cash charges related to employee compensation, (vii) any extraordinary non-cash or nonrecurring non-cash charges or losses, (viii) fees, costs and expenses incurred in connection with Permitted Acquisitions in an aggregate amount not to exceed $10,000,000 in any fiscal year, (ix) any expense under settlement accounting arising from an offer to terminated vested participants in the Essendant Pension Plan to accept a lump sum in lieu of future pension payments made during a window offering period in 2016 and (x) in connection with any Qualifying Permitted Acquisition or Material Disposition, calculated on a pro forma basis based on USI’s most recent financial statements delivered pursuant to Section 6.1 (or, prior to the delivery of the first such financial statements delivered hereunder, as of March 31, 2013), (1) any cost savings and expenses that relate to such Qualifying Permitted Acquisition or Material Disposition in accordance with Article 11 of Regulation S-X under the Securities Act and (2) any demonstrable cost-savings and operating expense reductions (net of continuing associated expenses) that relate to such Qualifying Permitted Acquisition or Material Disposition or are reasonably anticipated by the Borrower to be achieved in connection with such Qualifying Permitted Acquisition or Material Disposition within the 12-month period following the consummation thereof, which the Borrower determines in good faith are reasonable and which are so set forth in a certificate of a financial officer of the Borrower delivered to the Agent; provided that amounts added back pursuant to this subclause (2) shall be permitted only to the extent to the aggregate additions under subclauses (1) and (2) for such period do not exceed 10% of the amount which could have been included in Consolidated EBITDA in the absence of the adjustment under this clause (x) , minus (C) to the extent included in Consolidated Net Income for such period, any extraordinary non-cash or nonrecurring non-cash gains, all calculated for USI and its Subsidiaries on a consolidated basis.

Solely for the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “ Reference Period ”), if at any time during such Reference Period, USI or any of its Subsidiaries shall have made any Material Disposition, Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, in each case, calculated on a pro forma basis based on USI’s most recent financial statements delivered pursuant to Section 6.1 (or, prior to delivery of the first such financial statements delivered hereunder, as of March 31, 2013).

A- 1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Robert B. Aiken, certify that:

1.	I have reviewed this annual report on Form 10-Q of Essendant Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 20, 2016

/s/ ROBERT B. AIKEN

Robert B. Aiken

President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Earl C. Shanks, certify that:

1.	I have reviewed this annual report on Form 10-Q of Essendant Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 20, 2016

/s/ EARL C. SHANKS

Earl C. Shanks

Senior Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Essendant Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert B. Aiken, Chief Executive Officer of the Company, and Earl C. Shanks, Senior Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ ROBERT B. AIKEN

Robert B. Aiken
President and Chief Executive Officer
April 20, 2016

/s/ EARL C. SHANKS

Earl C. Shanks
Senior Vice President and Chief Financial Officer
April 20, 2016