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Exhibit 10.42
INTERLINE BRANDS, INC.
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the
[ ] day of
[ ], 2007 (the "Effective Date") by
and between INTERLINE BRANDS, INC., a Delaware corporation (the
"Company"), and
("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance
of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders;
and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control
may arise and that such possibility may result in the departure or
distraction of management personnel to the detriment of the Company
and its stockholders; and
WHEREAS, the Compensation Committee of the "Board" (as defined
in Section 1) has determined that it is in the best interests of
the Company and its stockholders to secure Executive’s
continued services and to ensure Executive’s continued and
undivided dedication to Executive’s duties in the event of
any threat or occurrence of a "Change in Control" (as defined in
Section 1) of the Company; and
WHEREAS, the Compensation Committee, at a meeting held on
[ ],
2007, has authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, the Company and Executive hereby
agree as follows:
1.
Definitions . As used in this
Agreement, the following terms shall have the respective meanings
set forth below:
(a)
"Affiliate" means, with respect to a specified
person, a person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, the person specified.
(b)
"Board" means the Board of Directors of the
Company.
(c)
"Bonus Amount" means (i) the average of the annual
bonus earned by Executive from the Company (or its Affiliates) in
respect of the last three (3) completed fiscal years of the Company
or such lesser number of fiscal years for which Executive was
employed by the Company and eligible to earn an annual bonus from
the Company immediately preceding Executive’s Date of
Termination (annualized in the
event Executive was not employed by the Company
(or its Affiliates) for the whole of any such fiscal year), or (ii)
if the Date of Termination occurs before Executive has been
employed for a full fiscal year, and before the date Company pays
Executive Executive’s annual bonus for the fiscal year in
which Executive’s employment commenced, Executive’s
target annual bonus for the fiscal year of the Company which
includes Executive’s Date of Termination.
(d)
"Cause" means (i) Executive’s conviction of,
or pleading nolo contendere to, a felony, (ii) Executive’s
gross neglect of Executive’s duties to the Company, (iii)
Executive’s willful misconduct in connection with the
performance of Executive’s duties to the Company, which
results in material and demonstrable damage to the Company or (iv)
Executive’s failure to follow the lawful directions of the
Board, consistent with Executive’s position with the Company;
provided, however that Executive shall not be deemed to have been
terminated for Cause unless (A) written notice has been delivered
to Executive setting forth the reasons for the Company’s
intention to terminate Executive for Cause and (B) a period of 14
days has elapsed since delivery of such notice and, in the case of
clauses (ii) and (iv) above, Executive has failed to cure the
circumstances claimed to constitute Cause within such 14-day
period. For purpose of the preceding sentence, no act or
failure to act by Executive shall be considered "willful" unless
done or omitted to be done by Executive in bad faith and without
reasonable belief that Executive’s action or omission was in
the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board, based upon the advice of counsel for the
Company (or upon the instructions of any other officer of the
Company senior to Executive) shall be conclusively presumed to be
done, or omitted to be done, by Executive in good faith and in the
best interests of the Company. Cause shall not exist unless
and until the Company has delivered to Executive a copy of a
resolution duly adopted by three-quarters (3/4) of the entire Board
(excluding Executive if Executive is a Board member) at a meeting
of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with
counsel, to be heard before the Board), finding that in the good
faith opinion of the Board an event set forth in clauses (i), (ii),
(iii), or (iv) has occurred and specifying the particulars thereof
in detail. The Company must notify Executive of any event
constituting Cause within ninety (90) days following knowledge of
any member of the Board other than Executive (if applicable) of its
existence or such event shall not constitute Cause under this
Agreement.
(e)
"Change in Control" means any of the
following: (i) any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (other than a
Subsidiary or any employee benefit plan (or any related trust) of
the Company), (a "Person") becomes after the date hereof the
beneficial owner of 50% or more of either the then outstanding
Stock or the combined voting power of the then outstanding voting
securities of the Company entitled to vote in the election of
directors; (ii) during any 24-month period individuals who, as of
the Effective Date, constitute the Board (the "Incumbent
Directors") cease for any reason to constitute at least a majority
of the Board; provided that any individual who becomes a director
after the Effective Date whose election, or nomination for election
by the Company’s shareholders, was approved by a
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vote or written consent of at least a majority of
the directors then comprising the Incumbent Directors shall be
considered as though such individual were an Incumbent Director,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the
Company (as such terms are used in Rule 14a-11 under the Exchange
Act); (iii) the consummation of a merger, reorganization or
consolidation with respect to which the individuals and entities
who were the respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, in substantially
the same proportion as their ownership, immediately before such
merger, reorganization or consolidation, directly or indirectly,
more than 50% of, respectively, the then outstanding common shares
and the combined voting power of the then outstanding voting
securities entitled to vote in the election of directors; or (iv)
the approval by shareholders of the Company of (A) the sale or
other disposition of all or substantially all of the assets of the
Company (other than to a Subsidiary of the Company), or (B) the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any Person
acquires beneficial ownership of more than 50% of the then
outstanding Stock as a result of the acquisition of the Stock by
the Company which reduces the number of shares of Stock
outstanding; provided , that if after such
acquisition by the Company such person becomes the beneficial owner
of additional Stock that increases the percentage of outstanding
Stock beneficially owned by such person, a Change in Control of the
Company shall then occur.
(f)
"Code" means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References
to a particular section of the Code shall include references to
successor provisions.
(g)
"Date of Termination" means (1) the effective date
on which Executive’s employment by the Company terminates as
specified in a prior written notice by the Company or Executive, as
the case may be, to the other, delivered pursuant to
Section 13 or (2) if Executive’s employment by the
Company terminates by reason of death, the date of death of
Executive.
(h)
"Disability" means termination of Executive’s
employment by the Company due to Executive’s absence from
Executive’s duties with the Company on a full-time basis for
at least one hundred eighty (180) consecutive days as a result of
Executive’s incapacity due to physical or mental
illness.
(i)
"Exchange Act" means the Securities Exchange Act of
1934, as amended. References to a particular section of, or
rule under, the Exchange Act shall include references to successor
provisions.
(j)
"Good Reason" means, without Executive’s
express written consent, the occurrence of any of the following
events after a Change in Control:
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(i)
any (A) change in the duties or responsibilities
(including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with
Executive’s position(s), duties or responsibilities with the
Company immediately prior to such Change in Control (including any
material and adverse diminution of such duties or
responsibilities); provided , however , that Good
Reason shall not be deemed to occur upon a change in duties or
responsibilities (other than reporting responsibilities) that is
solely and directly a result of the Company no longer being a
publicly traded entity and does not involve any other event set
forth in this paragraph (j) or (B) material and adverse change in
Executive’s titles or offices (including, if applicable,
membership on the Board) with the Company as in effect immediately
prior to such Change in Control;
(ii)
a material breach of an employment agreement to
which Executive and the Company are parties;
(iii)
a reduction by the Company in Executive’s rate
of annual base salary or target annual bonus opportunity as in
effect immediately prior to such Change in Control or as the same
may be increased from time to time thereafter;
(iv)
any requirement of the Company that Executive (A) be
based anywhere more than thirty-five (35) miles from the office
where Executive is located at the time of the Change in Control, if
such relocation increases Executive’s commute by more than
twenty (20) miles, or (B) travel on Company business to an extent
substantially greater than the travel obligations of Executive
immediately prior to such Change in Control;
(v)
a reduction by the Company of more than 5% in
Executive’s aggregate benefits under employee benefit plans,
welfare benefit plans and fringe benefit plans in which Executive
is participating immediately prior to such Change in Control,
unless Executive is permitted to participate in other plans
providing Executive with substantially equivalent benefits in the
aggregate (at substantially equivalent cost with respect to welfare
benefit plans);
(vi)
the failure of the Company to provide Executive with
paid vacation in accordance with the most favorable vacation
policies of the Company and its Affiliates as in effect for
Executive immediately prior to such Change in Control, including
the crediting of all service for which Executive had been credited
under such vacation policies prior to the Change in
Control;
(vii)
any refusal by the Company to continue to permit
Executive to engage in activities not directly related to the
business of the Company in which Executive was permitted to engage
prior to the Change in Control;
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(viii)
any purported termination of Executive’s
employment which is not effectuated pursuant to Section 14 (and
which will not constitute a termination hereunder); or
(ix)
the failure of the Company to obtain the assumption
and, if applicable, guarantee, agreement from any successor (and
parent corporation) as contemplated in Section 12(b).
An isolated, insubstantial and inadvertent action taken in good
faith and which is remedied by the Company within ten (10) days
after receipt of notice thereof given by Executive shall not
constitute Good Reason. Executive’s right to terminate
employment for Good Reason shall not be affected by
Executive’s incapacity due to mental or physical illness and
Executive’s continued employment shall not constitute consent
to, or a waiver of rights with respect to, any event or condition
constituting Good Reason; provided , however , that
Executive must provide notice of termination of employment for Good
Reason within ninety (90) days following Executive’s
knowledge of an event constituting Good Reason or such event shall
not constitute a termination for Good Reason under this
Agreement.
(k)
"Qualifying Termination" means a termination of
Executive’s employment (i) by the Company other than for
Cause or (ii) by Executive for Good Reason. Termination
of Executive’s employment on account of death or Disability
shall not be treated as a Qualifying Termination.
(l)
"Safe Harbor Amount" means the greatest pre-tax
amount of "Payments" (as defined in Section 4(a)) that could be
paid to Executive without causing Executive to become liable for
any "Excise Tax" (as defined in Section 4(a)) in connection
therewith.
(m)
"SEC" means the Securities and Exchange
Commission.
(n)
"Stock" means the Common Stock of the
Company.
(o)
"Subsidiary" means a corporation or other entity,
whether incorporated or unincorporated, of which at least a
majority of its voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by the
Company.
(p)
"Termination Period" means the period of time
beginning with a Change in Control and ending two (2) years
following such Change in Control. Notwithstanding anything in
this Agreement to the contrary, if (i) Executive’s
employment is terminated prior to a Change in Control for reasons
that would have constituted a Qualifying Termination if they had
occurred following a Change in Control and (ii) (A) such
termination (or Good Reason event) was at the request of a third
party who had indicated an intention or taken steps reasonably
calculated to effect a Change in Control and a Change in Control
involving such third party (or a party competing with such third
party to effectuate a Change in Control) does occur, or (B) such
termination (or
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Good Reason event) otherwise occurs in connection
with a potential Change in Control and such Change in Control does
occur, then for purposes of this Agreement, the date immediately
prior to the date of such termination of employment or event
constituting Good Reason shall be treated as the date of a Change
in Control. For purposes of determining the timing of
payments and benefits to Executive under Section 3, the date of the
actual Change in Control shall be treated as Executive’s Date
of Termination under Section 1(g).
2.
Term of Agreement . This Agreement
shall be effective on the date hereof and shall continue in effect
until and unless the Company shall have given one (1) years’
written notice of cancellation; provided , that ,
notwithstanding the delivery of any such notice, this Agreement
shall continue in effect for a period of two (2) years after a
Change in Control, if such Change in Control shall have occurred
during the term of this Agreement. Notwithstanding anything
in this Section to the contrary, this Agreement shall terminate if
Executive or the Company terminates Executive’s employment
prior to a Change in Control except as provided in the second
sentence of Section 1(o).
3.
Payments Upon Termination of Employment
.
(a)
Qualifying Termination - Severance .
If during the Termination Period the employment of Executive shall
terminate pursuant to a Qualifying Termination, then the Company
shall provide to Executive, subject to the proviso to the first
sentence of Section 10:
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(i)
within ten (10) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (A)
Executive’s base salary through the Date of Termination and
any bonus amounts which have become payable, to the extent not
theretofore paid or deferred, (B) a pro rata portion of
Executive’s annual bonus for the fiscal year in which
Executive’s Date of Termination occurs in an amount equal to
(1) Executive’s target annual bonus, multiplied by (2) a
fraction, the numerator of which is the number of days in the
fiscal year in which the Date of Termination occurs through the
Date of Termination and the denominator of which is three hundred
sixty-five (365), and (C) any accrued vacation pay, in each case to
the extent not theretofore paid; plus
(ii)
within ten (10) days following the Date of
Termination, a lump-sum cash amount equal to (i) one and
one-half (1.5) times Executive’s highest annual rate of base
salary during the 12-month period immediately prior to
Executive’s Date of Termination plus (ii) one and
one-half (1.5) times Executive’s Bonus Amount, paid within
ten (10) days following the Date of Termination; provided that, if
necessary to avoid tax penalties under Section 409A of the
Code, the payment shall be delayed, without interest, until the
first day which is at least six months following the Date of
Termination.
(b)
Qualifying Termination - Benefits .
If during the Termination Period the employment of Executive shall
terminate pursuant to a Qualifying Termination, the Company shall,
subject to the proviso to the first sentence of
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Section 10, continue to provide, for a period of
eighteen (18) months following Executive’s Date of
Termination, Executive (and Executive’s dependents, if
applicable) with the same level of medical and dental benefits upon
substantially the same terms and conditions (including
contributions required by Executive for such benefits) as existed
immediately prior to Executive’s Date of Termination (or, if
more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control);
provided , that , if Executive cannot continue to
participate in the Company plans providing such benefits, the
Company shall otherwise provide such benefits on the same after-tax
basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes
reemployed with another employer and becomes eligible to receive
medical and/or dental benefits from such employer, the
Company’s obligation to provide such medical and/or dental
benefits described herein shall cease.
(c)
Execution of Release . Any payments
or benefits that would otherwise be payable or provided to
Executive under Sections 4(a)(i)(B), 4(a)(ii) and 4(b) shall not be
payable or provided unless and until the Company has received from
Executive a signed release of employment-related claims against the
Company, its Subsidiaries and their respective employees, officers
and directors, in a form prepared by the Company and reasonably
acceptable to Executive.
(d)
Nonqualifying Terminatio
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