The atomic structure of the Pd(110)- $c(4\times2)$-benzene system has been determined by means of ab initio slab calculations. A C2 low-symmetry equilibrium configuration is predicted. The corresponding azimuthal angle $\theta\sim11^{\circ}$ of the adsorbed molecule is partly due to lateral interactions. The aromatic ring looses planar geometry and the C-H bonds bend away from the metal. STM images calculated for the C2 configuration are compatible with recent experimental data.