Exhibit 10.2
DRUGSTORE.COM,
INC.
CHANGE IN CONTROL
AGREEMENT
This Change in Control Agreement
(the “Agreement”) is made and entered into by and
between _________ (“Executive”) and drugstore.com, inc.
(the “Company”), effective as of ________, 2009 (the
“Effective Date”).
RECITALS
1. It is expected that the Company
from time to time will consider the possibility of an acquisition
by another company or other change in control. The Board of
Directors of the Company (the “Board”) recognizes that
such consideration can be a distraction to Executive and can cause
Executive to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication and objectivity of Executive,
notwithstanding the possibility, threat or occurrence of a Change
in Control (as defined herein) of the Company.
2. The Board believes that it is in
the best interests of the Company and its stockholders to provide
Executive with an incentive to continue his or her employment and
to motivate Executive to maximize the value of the Company upon a
Change in Control for the benefit of its stockholders.
3. The Board believes that it is
imperative to provide Executive with certain severance benefits
upon Executive’s termination of employment following a Change
in Control. These benefits will provide Executive with enhanced
financial security and incentive and encouragement to remain with
the Company notwithstanding the possibility of a Change in
Control.
4. Certain capitalized terms used in
the Agreement are defined in Section 6 below.
AGREEMENT
NOW, THEREFORE, in consideration of
the mutual covenants contained herein, the parties hereto agree as
follows:
1. Term of Agreement . This
Agreement will terminate upon the date that all of the obligations
of the parties hereto with respect to this Agreement have been
satisfied.
2. At-Will Employment . The
Company and Executive acknowledge that Executive’s employment
is and will continue to be at-will, as defined under applicable
law.
3. Severance Benefits
.
(a) Involuntary Termination
Following a Change in Control . If upon or within twelve
(12) months following a Change in Control (i) Executive
terminates his or her employment with the Company (or any parent,
subsidiary or successor of the Company) for Good Reason (as defined
herein) or (ii) the Company (or any parent, subsidiary or
successor of the Company) terminates Executive’s employment
without Cause (as defined herein), and Executive signs and does not
revoke the release of claims as required by Section 4,
Executive will receive the following severance benefits from the
Company:
(i) Severance Payment .
Executive will receive a single lump sum severance payment (less
applicable withholding taxes) in an amount equal to twelve
(12) months of Executive’s annual salary (the
“Severance Period”) determined at a rate equal to the
greater of (A) Executive’s annual salary as in effect
immediately prior to the Change in Control, or
(B) Executive’s Base Salary (as defined
herein).
(ii) Bonus Payment .
Executive will receive a lump sum cash payment (less applicable
withholding taxes) in an amount equal to one hundred percent
(100%) of Executive’s target annual incentive for the
year of the Change in Control.
(iii) Benefits . The Company
agrees to pay for health continuation coverage premiums for
Executive at the same level of health coverage and benefits as in
effect for on the day immediately preceding the date of
termination; provided, however, that (1) Executive constitutes
a qualified beneficiary, as defined in Section 4980(B)(g)(1)
of the Internal Revenue Code of 1986, as amended (the
“Code”); and (2) Executive elects continuation
coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”), within the time
period prescribed pursuant to COBRA. The Company will pay such
COBRA premiums to provide for continuation benefits on behalf of
the Executive through the Severance Period. Executive will
thereafter be responsible for the payment of COBRA premiums
(including, without limitation, all administrative expenses) for
the remaining COBRA period.
(b) Timing of Severance
Payments . Unless otherwise required pursuant to
Section 10 of this Agreement, the Company will pay the cash
severance payments to which Executive is entitled under this
Agreement in a lump sum as soon as practicable following the date
of termination, provided, however, that such payment will be
delayed to the extent required by Section 4 and/or
Section 10 of this Agreement. Except to the extent payment is
delayed pursuant to Section 9(b), all cash severance payments
under this Agreement will be paid no later than March 15 of
the year following the year in which the termination
occurs.
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(c) Voluntary Resignation;
Termination For Cause . If Executive’s employment with
the Company terminates (i) voluntarily by Executive (other
than for Good Reason) or (ii) for Cause by the Company, then
Executive will not be entitled to receive severance or other
benefits except for those (if any) as may then be established under
the Company’s then existing severance and benefits plans and
practices or pursuant to other written agreements with the Company,
including, without limitation, any Equity Award
agreement.
(d) Disability; Death . If
the Company terminates Executive’s employment as a result of
Executive’s Disability, or Executive’s employment
terminates due to his or her death, then Executive will not be
entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company’s then
existing written severance and benefits plans and practices or
pursuant to other written agreements with the Company, including,
without limitation, any Equity Award agreement.
(e) Termination Apart from Change
in Control . In the event Executive’s employment is
terminated for any reason, either prior to the occurrence of a
Change in Control or after the twelve (12) month period
following a Change in Control, then Executive will be entitled to
receive severance and any other benefits only as may then be
established under the Company’s existing written severance
and benefits plans and practices or pursuant to other written
agreements with the Company, including, without limitation, any
Equity Award agreement.
(f) Exclusive Remedy . In the
event of a termination of Executive’s employment upon or
within twelve (12) months following a Change in Control, the
provisions of this Section 3 are intended to be and are
exclusive and in lieu of any other rights or remedies to which
Executive or the Company may otherwise be entitled, whether at law,
tort or contract, in equity, or under this Agreement. Executive
will be entitled to no benefits, compensation or other payments or
rights upon termination of employment following a Change in Control
other than those benefits expressly set forth in this
Section 3, except as may be provided in any Equity Award
agreement.
4. Conditions to Receipt of
Severance .
(a) Release of
Claims Agreement . The receipt of any severance or other
benefits pursuant to Section 3 will be subject to Executive
signing and not revoking a release of claims agreement in a form
reasonably acceptable to the Company, and such release becoming
effective and irrevocable within sixty (60) days of
Executive’s termination or such earlier deadline required by
the release (such deadline, the “Release Deadline”). No
severance or other benefits will be paid or provided until the
release of claims agreement becomes effective and irrevocable, and
any severance amounts or benefits otherwise payable between the
date of Executive’s termination and the date such release
becomes effective shall be paid on the effective date of such
release. Notwithstanding the foregoing, and subject to the release
becoming effective and irrevocable by the Release Deadline, any
severance payments or benefits under this Agreement that would be
considered Deferred Compensation Separation Benefits (as defined in
Section 10(b)) shall be paid on the sixtieth (60
th
) day
following Executive’s “separation from service”
within the meaning of Section 409A of the Code, or, if later,
such time as required by Section 10(b). If the release does
not become effective by the Release Deadline, Executive will
forfeit all rights to severance payments and benefits under this
Agreement.
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(b) Other Requirement .
Executive’s receipt of any payments or benefits under
Section 3 will be subject to Executive continuing to comply
with the terms of any form of confidential information
agreement.
(c) No Duty to Mitigate .
Executive will not be required to mitigate the amount of any
payment contemplated by this Agreement, nor will any earnings that
Executive may receive from any other source reduce any such
payment.
5. Limitation on Payments .
In the event that the severance and other benefits provided for in
this Agreement or otherwise payable to Executive
(i) constitute “parachute payments” within the
meaning of Section 280G of the Code and (ii) but for this
Section 5, would be subject to the excise tax imposed by
Section 4999 of the Code, then Executive’s severance
benefits under Section 3 will be either:
(a) delivered in full, or
(b) delivered as to such lesser
extent which would result in no portion of such severance benefits
being subject to excise tax under Section 4999 of the
Code,
whichever of the foregoing amounts,
taking into account the applicable federal, state and local income
taxes and the excise tax imposed by Section 4999, results in
the receipt by Executive on an after-tax basis, of the greatest
amount of severance benefits, notwithstanding that all or some
portion of such severance benefits may be taxable under
Section 4999 of the Code. Unless the Company and Executive
otherwise agree in writing, any determination required under this
Section 5 will be made in writing by the Company’s
independent public accountants immediately prior to a Change in
Control or a “Big Four” national accounting firm
selected by the Company (the “Accountants”), whose
determination will be conclusive and binding upon Executive and the
Company for all purposes. For purposes of making the calculations
required by this Section 5, the Accountants may make
reasonable assumptions and approximations concerning applicable
taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code.
The Company and Executive will furnish to the Accountants such
information and documents as the Accountants may reasonably request
in order to make a determination under this Section. The Company
will bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this
Section 5. Any reduction in payments and/or benefits required
by this Section 5 shall occur in the following order:
(1) reduction of cash payments; (2) reduction of vesting
acceleration of Equity Awards; and (3) reduction of other
benefits paid or provided to Executive. In the event that
acceleration of vesting of Equity Awards is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of
the date of grant for Executive’s Equity Awards. If two or
more Equity Awards are granted on the same date, each Equity Award
will be reduced on a pro-rata basis. In no event will Executive
exercise any discretion with respect to the ordering of any
reduction of payments or benefits pursuant to this
Section 5.
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6. Definition of Terms . The
following terms referred to in this Agreement will have the
following meanings:
(a) Base Salary . For
purposes of determining the severance payment under this Agreement,
“Base Salary” will mean Executive’s annual salary
as in ef
