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CHANGE IN CONTROL EMPLOYMENT AGREEMENT

Change of Control Agreement

CHANGE IN CONTROL EMPLOYMENT AGREEMENT | Document Parties: GRAINGER W W INC | WW Grainger, Inc You are currently viewing:
This Change of Control Agreement involves

GRAINGER W W INC | WW Grainger, Inc

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Title: CHANGE IN CONTROL EMPLOYMENT AGREEMENT
Governing Law: Illinois     Date: 2/28/2011
Industry: Appliance and Tool     Sector: Consumer Cyclical

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Exhibit 10b (xxvii)

 

CHANGE IN CONTROL EMPLOYMENT AGREEMENT

(Executive)

 

 

AGREEMENT by and between W.W. Grainger, Inc., an Illinois corporation (the “ Company ”), and INSERT NAME (“ Executive ”), dated as _____________________(the “ Agreement Date ”).

 

Recitals

 

A.  The Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company.

 

B.  The Board believes it is imperative to diminish the inevitable distraction of Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control, to encourage Executive's full attention and dedication to the Company, and to provide Executive with compensation and benefits arrangements upon a Change in Control which (i) will satisfy Executive's compensation and benefits expectations and (ii) are competitive with those of other major corporations.

 

Agreement

 

In consideration of the mutual agreements contained herein, and of certain other commitments separately made by the Executive to the Company concerning the Company's competitors, the protection of the Company's confidential information, and the non-solicitation of the Company's customers and employees, the Company and Executive hereby agree as follows:

 

1.   Certain Definitions .  The terms set forth below in alphabetical order have the following meanings (such meanings to be applicable to both the singular and plural forms):

 

Accrued Annual Bonus ” means the amount of any annual bonus accrued but not yet paid with respect to each fiscal year of the Company ended prior to the Date of Termination.

 

Accrued Base Salary ” means the amount of Executive's Annual Base Salary which is accrued but not yet paid as of the Date of Termination.

 

Accrued Obligations ” -- see Section 4(a)(i)(A).

 

 

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Agreement Term ” means the period commencing on the Agreement Date and ending on the third anniversary of such date or, if later, such later date to which the Agreement Term is extended pursuant to the following sentence.  On each day after the second anniversary of the Agreement Date, the Agreement Term shall be automatically extended by one day to create a new one-year term until, at any time on or after the second anniversary of the Agreement Date, the Company delivers a written notice (an “ Expiration Notice ”) to Executive stating that this Agreement shall expire on a date specified in the Expiration Notice (the “ Expiration Date ”) that is at least 12 months after the date the Expiration Notice is delivered to Executive; provided, however, that if a Change in Control occurs before the Expiration Date specified in an Expiration Notice, then (a) such Expiration Notice shall automatically be cancelled and of no further effect and (b) the Company shall not give Executive any additional Expiration Notice prior to the date which is 24 months after the Effective Date.

 

Annual Base Salary ” -- see Section 2(b)(i).

 

Annual Bonus ” -- see Section 2(b)(ii).

 

Average Profit Sharing Plan Contribution ” -- see Section 2(b)(iii).

 

Cause ” -- see Section 3(b).

 

Change in Control ” means any one or more of the following events:

 

(a)  the consummation of:

 

 

(i) any merger, reorganization or consolidation of the Company or any Subsidiary with or into any corporation or other Person if Persons who were the beneficial owners (as such term is used in Rule 13d-3 under the Act) of the Company’s Common Stock and securities of the Company entitled to vote generally in the election of directors (“ Voting Securities ”) immediately before such merger, reorganization or consolidation are not, immediately thereafter, the beneficially owners, directly or indirectly, of at least 60% of the then-outstanding common shares and the combined voting power of the then-outstanding Voting Securities (“ Voting Power ”) of the corporation or other Person surviving or resulting from such merger, reorganization or consolidation (or the parent corporation thereof) in substantially the same respective proportions as their beneficial ownership, immediately before the consummation of such merger, reorganization or consolidation, of the then-outstanding Common Stock and Voting Power of the Company; or

 

 

(ii)  the sale or other disposition of all or substantially all of the consolidated assets of the Company, other than a sale or other disposition by the Company of all or substantially all of its consolidated assets to an entity of which at least 60% of the common shares and the Voting Power outstanding

 

 

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immediately after such sale or other disposition are then beneficially owned (as such term is used in Rule 13d-3 under the Act) by shareholders of the Company in substantially the same respective proportions as their beneficial ownership of Common Stock and Voting Power of the Company immediately before the consummation of such sale or other disposition; or

 

(b)  approval by the shareholders of the Company of a liquidation or dissolution of the Company; or

 

(c)  the following individuals cease for any reason to constitute a majority of the directors of the Company then serving: individuals who, on the Agreement Date, constitute the Board and any subsequently-appointed or elected director of the Company whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds of the Company’s directors then in office whose appointment, election or nomination for election was previously so approved or recommended or who were directors on the Agreement Date; or

 

(d)  the acquisition or holding by any person, entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act), other than by any Exempt Person, the Company, any Subsidiary, any employee benefit plan of the Company or a Subsidiary, of beneficial ownership (as such term is used in Rule 13d-3 under the Act) of 20% or more of either the Company’s then-outstanding Common Stock or Voting Power; provided that:

 

 

(i)  no such person, entity or group shall be deemed to own beneficially any securities held by the Company or a Subsidiary or any employee benefit plan (or any related trust) of the Company or a Subsidiary;

 

 

(ii)  no Change in Control shall be deemed to have occurred solely by reason of any such acquisition if both (x) after giving effect to acquisition, such person, entity or group has beneficial ownership of less than 30% of the then-outstanding Common Stock and Voting Power of the Company and (y) prior to such acquisition, at least two-thirds of the directors described in paragraph (c) of this definition vote to adopt a resolution of the Board to the specific effect that such acquisition shall not be deemed a Change in Control; and

 

 

(iii)  no Change in Control shall be deemed to have occurred solely by reason any such acquisition or holding in connection with any merger, reorganization or consolidation of the Company or any Subsidiary which is not a Change in Control within the meaning of paragraph (a)(i) of this definition.

 

Notwithstanding the occurrence of any of the foregoing events, no Change in Control shall occur with respect to Executive if (i) the event which otherwise would be a

 

 

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Change in Control (or the transaction which resulted in such event) was initiated by Executive or was discussed by him with any third party, in either case without the approval of the Board with respect to Executive’s initiation or discussion, as applicable, or (ii) Executive is, by written agreement, a participant on his own behalf in a transaction in which the persons (or their affiliates) with whom Executive has the written agreement cause the Change in Control to occur and, pursuant to the written agreement, Executive has an equity interest (or a right to acquire such equity interest) in the resulting entity.

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Date of Termination ” means the effective date of any termination of Executive's employment for any or no reason, whether by the Company or by Executive, as specified in the Notice of Termination; provided, however, that if Executive's employment is terminated by reason of his death or Disability, the Date of Termination shall be the date of death or the Disability Effective Date, as the case may be.

 

Effective Date ” means the first date during the Agreement Term on which a Change in Control occurs.  Anything in this Agreement to the contrary notwithstanding, if Executive's employment with the Company is terminated prior to the date on which a Change in Control occurs, and Executive reasonably demonstrates that such termination of employment (i) was requested by a third party who has taken steps reasonably calculated to effect the Change in Control or (ii) otherwise arose in connection with or anticipation of the Change in Control, then for all purposes of this Agreement the Effective Date shall be the date immediately prior to the Date of Termination.

 

Employment Period ” means the period commencing on the Effective Date and ending on the second anniversary of such date.

 

Exempt Person ” means any one or more of the following:

 

(a)  any descendant of W.W. Grainger, or any spouse, widow or widower of W.W. Grainger or any such descendant (any such descendants, spouses, widows and widowers collectively defined as the “ Grainger Family Members ”);

 

(b)  any descendant of E.O. Slavik, or any spouse, widow or widower of E.O. Slavik or any such descendant (any such descendants, spouses, widows and widowers collectively defined as the “ Slavik Family Members ” and with the Grainger Family Members collectively defined as the “ Family Members ”);

 

(c)  any trust which is in existence on the Agreement Date and which has been established by one or more Grainger Family Members, any estate of a Grainger Family Member who died on or before the Agreement Date, and The

 

 

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Grainger Foundation (such trusts, estates and named entity collectively defined as the “ Grainger Family Entities ”);

 

(d)  any trust which is in existence on the Agreement Date and which has been established by one or more Slavik Family Members, any estate of a Slavik Family Member who died on or before the Agreement Date and Mark IV Capital, Inc. (such trusts, estates and named entities collectively defined as the “ Slavik Family Entities ” and with the Grainger Family Entities collectively defined as the “ Existing Family Entities ”);

 

(e)  any estate of a Family Member who dies after the Agreement Date or any trust established after the Agreement Date by one or more Family Members or Existing Family Entities; provided that one or more Family Members, Existing Family Entities or charitable organizations which qualify as exempt organizations under Section 501(c) of the Code (“ Charitable Organizations ”), collectively are the beneficiaries of at least 50% of the actuarially-determined beneficial interests in such estate or trust;

 

(f)  any Charitable Organization which is established by one or more Family Members or Existing Family Entities (a “ Family Charitable Organization ”);

 

(g)  any corporation of which a majority of the voting power and a majority of the equity interest is held, directly or indirectly, by or for the benefit of one or more Family Members, Existing Family Entities, estates or trusts described in clause (e) above, or Family Charitable Organizations; or

 

(h)  any partnership or other entity or arrangement of which a majority of the voting interest and a majority of the economic interest is held, directly or indirectly, by or for the benefit of one or more Family Members, Existing Family Entities, estates or trusts described in clause (e) above, or Family Charitable Organizations.

 

Good Reason ” -- see Section 3(c).

 

including ” means including without limitation.

 

Non-Employee Director ” means a director of the Company who is not an employee of (i) the Company, (ii) any Subsidiary or (iii) any Person who beneficially owns more than 30% of the Common Stock then outstanding.

 

Person ” means any individual, corporation, partnership, limited liability company, sole proprietorship, trust or other entity.

 

Policies ” means policies, practices and programs.

 

 

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Prorated Annual Bonus ” means the product of (i) the amount of the annual bonus to which Executive would have been entitled (based on target-level performance) if he had been employed by the Company on the last day of the Company's fiscal year that includes the Date of Termination and if performance were achieved at the target level for such fiscal year, multiplied by (ii) a fraction of which the numerator is the numbers of days that have elapsed in such fiscal year through the Date of Termination and the denominator is 365.

 

Subsidiary ” means corporation, limited liability company, partnership or other business entity in which the Company, directly or indirectly, holds a majority of the voting power of the outstanding securities.

 

Target Bonus ”  means the amount of the annual bonus which Executive was, as of the Date of Termination, eligible to receive in respect of the fiscal year of the Date of Termination, assuming for purposes of this paragraph (i) that target-level performance had been achieved for such fiscal year, (ii) that Executive's employment would have continued until the first date on which such annual bonus would have been payable, and (iii) if the amount of such annual bonus that Executive was eligible to receive was reduced after the Effective Date (whether or not such reduction qualified as Good Reason), that such reduction had not occurred.

 

Taxes ” means the incremental United States federal, state and local income, excise and other taxes payable by Executive with respect to any applicable item of income.

 

2.   Terms of Employment .  The Company shall continue Executive in its employ during the Employment Period on the following terms and conditions:

 

(a)   Position and Duties .

 

 

(i)  During the Employment Period, (A) Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) Executive's services shall be performed at the location where Executive was employed immediately preceding the Effective Date or any office or location less than 50 miles from such location.

 

 

(ii)  During the Employment Period, and excluding any periods of vacation, sick leave and disability to which Executive is entitled, Executive shall devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to Executive thereunder, use Executive's reasonable best efforts to perform faithfully and efficiently such

 

 

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responsibilities.  During the Employment Period, Executive may (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities are consistent with the policies of the Company at the Effective Date and do not significantly interfere with the performance of Executive's responsibilities (as set forth in this Agreement) as an employee of the Company.  To the extent that any such activities have been conducted by Executive prior to the Effective Date and were consistent with the policies of the Company at the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities to the Company.

 

 

 

(b)   Compensation .

 

 

(i)   Base Salary .  During the Employment Period, Executive shall receive an annual base salary in cash (“ Annual Base Salary ”), which shall be paid in a manner consistent with the Company's payroll practices immediately preceding the Effective Date at a rate at least equal to 12 times the highest monthly base salary (unreduced by any salary reductions or deferrals pursuant to a plan maintained under Section 401(k) of the Code or any similar plan) paid or payable to Executive by the Company in respect of the 12-month period immediately preceding the month in which the Effective Date occurs.  During the Employment Period, the Company shall review the Annual Base Salary at least annually and may increase Annual Base Salary at any time and from time to time based on the performance of the Executive and the Company.  Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to Executive under this Agreement.  Annual Base Salary shall not be reduced after any such increase and the term “Annual Base Salary” shall refer to Annual Base Salary as so increased.

 

 

(ii)   Annual Bonus .  In addition to Annual Base Salary, during the Employment Period Executive shall be entitled to participate in the Management Incentive Program or other annual bonus program maintained by the Company for peer executives, and the Executive's target bonus thereunder shall be not be less than the Target Bonus.  Any annual bonus due to Executive under such program (the " Annual Bonus ") shall be paid in cash no later than 90 days after the end of the fiscal year for which the Annual Bonus is awarded, unless Executive shall elect to defer the receipt of such Annual Bonus.

 

 

(iii)   Incentive, Savings and Retirement Plans .  In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans and Policies applicable to peer

 

 

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executives of the Company, but in no event shall such plans and Policies provide Executive with incentive, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under such plans and Policies as in effect at any time during the 90-day period immediately preceding the Effective Date.  Benefits to which this paragraph shall apply include, but are not limited to, a contribution (“ Average Profit Sharing Plan Contribution ”) for each calendar year of Executive's employment during the Employment Period, on Executive's behalf to the W.W. Grainger, Inc. Profit Sharing Plan (the “ PST ”) and, if applicable, a credit under the W.W. Grainger, Inc. Supplemental Profit Sharing Plan (the “ Supplemental Plan ” and with the PST, collectively referred to as the “ Profit Sharing Plans ”) equal to not less than the product of (A) the average percentage of the sum of Executive's base salary and annual bonus paid or payable as a contribution to or credit under the Profit Sharing Plans, as applicable, for the three fiscal years preceding the Effective Date, and (B) the sum of Executive's Annual Base Salary and annual bonus, each as of the first day of such calendar year.  In the event that a contribution or credit, as applicable, of less than the Average Profit Sharing Plan Contribution is made to the Profit Sharing Plans on Executive's behalf for any calendar year of Executive's employment during the Employment Period, Executive shall be entitled to a cash payment equal to the difference between the Average Profit Sharing Plan Contribution and the amount of the Company's contribu


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