Exhibit (c)(3)(i)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 5, 1999 among General Nutrition Companies,
Inc., a Delaware corporation ("Company"), Royal Numico N.V., a company
organized under the laws of The Netherlands ("Parent") and Xxxxxxx X. Xxxxx
("Executive").
WHEREAS, Executive is employed by General Nutrition, Incorporated, a
Pennsylvania corporation and subsidiary of Company ("Subsidiary") as
President and Chief Executive Officer under the terms of an employment
agreement dated June 16, 1997 and amendments thereto (the "Prior Agreement");
and
WHEREAS, in connection with an Agreement and Plan of Merger dated as of
July 5, 1999, a subsidiary of Parent will merge with and into Company (the
"Merger");
WHEREAS, Parent and Company wish to assure itself of the services of
Executive for the period provided in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereto hereby agree as follows:
1. EMPLOYMENT. Company and Parent agree to employ Executive, and
Executive agrees to serve, as (a) President and Chief Executive Officer of
Company and (b) a member of the Board of Managing Directors of Parent (the
"Management Board"), for the period commencing at the effective time of the
Merger (the "Effective Time") and ending December 31, 2002 (the "Employment
Period"), unless Executive's employment with Company and Parent is earlier
terminated by either party (or parties) as specified in Paragraph 6 hereof.
The Supervisory Board of Parent ("Supervisory Board") or the Management
Board, as applicable, shall propose Executive for election or appointment to
the positions specified above throughout the period of Executive's employment
under this Agreement.
2. DUTIES. Executive is engaged to perform such duties as are
assigned to him by the Supervisory Board or Management Board, as applicable,
in his position as specified in Section 1 hereof. Executive shall devote his
full time and attention to the performance of such duties, which shall remain
similar to the duties he is performing as of the date of this Agreement. At
no time during the Employment Period shall Executive take on additional
employment without permission in writing from Company.
3. COMPENSATION.
(a) BASE SALARY. For all services rendered by Executive during
the Employment Period, Company shall pay Executive a base salary of not less
than $954,965. Salary payments shall be subject to withholding of applicable
taxes. Executive's base salary shall be adjusted as of each January 1 during
the Employment Period to reflect changes from the prior January 1 in the
Consumer Price Index For all Urban Consumers prepared by the United States
Department of Labor. Executive shall not be eligible to participate in any
annual bonus or annual incentive compensation plan, program or arrangement
(but he shall be eligible to participate in the plans described in the first
sentence of Section 3(b) hereof).
(b) LONG-TERM INCENTIVE COMPENSATION. Executive shall be eligible to
participate during the Employment Period in any stock option plans, stock
purchase plans and any other long-
term compensation plans, programs or arrangements generally available to
members of the senior management of Company. With regard to any stock option
plan maintained or adopted for the benefit of any employees of Company or its
subsidiaries, Executive shall be granted for each calendar year commencing
after December 31, 1999 during the Employment Period, an option to purchase a
number of shares of Parent (which, for purposes hereof, shall mean the
depository shares with respect to the ordinary shares which are directly
traded on the Amsterdam Stock Exchange) ("Parent Shares") not less than 15%
of the aggregate number of Parent Shares for which options were granted to
all employees of Company and its subsidiaries in any such year. The terms
and conditions of such stock options shall be set forth in the option
agreement and stock option plan sponsored by Parent in accordance with the
terms of the letter agreement of even date herewith between the Company and
Parent relating to certain employee benefit matters (the "Benefits Letter");
PROVIDED, HOWEVER; in no event shall any such options granted hereunder be
forfeited for any termination of Executive's employment on or after the
scheduled expiration date of the Employment Period.
(c) DISABILITY. During the Employment Period, Company shall continue
in effect a program comparable to its long-term disability insurance program as
in effect immediately prior to the date of this Agreement so as to provide
insurance payments to Executive upon complete disability of $120,000 per year
for a period and under terms reasonably comparable to those provided under such
long-term disability insurance program.
(d) COMPANY AIRCRAFT. Executive shall be entitled to personal use of
the Company's private airplane for up to 100 hours per year plus up to $35,000
per year in airplane related expenses, (pilots lodging, meals and other
incidental expenses related to operation of the airplane) as part of his
compensation, and such compensation shall include additional amounts to
approximate the federal and any state income taxes applicable to such additional
compensation. If Company does not have available a Company-owned or leased
private airplane, then Executive may in the alternative, charter on the same
compensation terms herein discussed, a private airplane substantially similar to
the type of plane primarily used by the Company for up to the aggregate number
of hours of private use per year when combined with actual use of Company-owned
or leased airplane during such year, equivalent to the costs of 100 hours of
such personal use at the preferential use rate offered to the Company by a
private airplane transportation provider for the corporate lease of such
airplanes. If personal use of a Company-owned or leased private airplane by
Executive exceeds 100 hours per year or when combined with Executive's use of a
chartered airplane, aggregate use exceeds the cost of 100 hours of such use per
year at the Company's preferential use rate, then Executive shall reimburse the
Company for the incremental cost of such excess use.
(e) OTHER COMPENSATION. Executive shall be eligible during the
Employment Period to participate in all employee benefit plans to which the
Company's executives are generally entitled to participate.
(f) PRIOR EMPLOYMENT AGREEMENT. In exchange for the cancelation of
his change-in-control benefit under the Prior Agreement, Company shall pay to
Executive a bonus equal to three times Executive's base salary. This bonus
shall be in addition to Executive's regular salary and other forms of
compensation. Such bonus shall be paid as follows:
(i) 50% within 30 days after the Effective Time (subject to
deferral by the Company in accordance with Section 8 hereof); and
(ii) 50% within 30 days of the first anniversary of the
Effective Time, if Executive is still in the Company's employ as of
that date.
2
Should Executive's employment be involuntarily terminated without Cause
(as defined in Section 6(b)), or if Executive resigns with Good Reason (as
defined in Section 6(b)), or his employment terminates as a result of his
death or disability prior to such first anniversary, Executive (or
Executive's estate in the event of death) shall be entitled to the "first
anniversary payment" within 30 days of such termination.
4. REIMBURSEMENT OF EXPENSES. During the Employment Period, Company
shall provide Executive an automobile allowance and associated operating
expenses in accordance with the Company's policy in effect on the date hereof
and with membership dues to a luncheon club and a golf club. Executive shall
furnish Company with periodic, itemized expense reports if directed by
Company.
5. EMPLOYMENT COVENANTS. (a) During the Employment Period (as set
forth in Section 1 hereof and determined without regard to the termination of
Executive's employment), Executive shall not
(i) engage in any way, directly or indirectly, in any Competing
Business (as defined below) in the Geographic Area (as defined below);
PROVIDED, HOWEVER, in no event shall this provision be construed to
prohibit Executive's employment with any business in which less than 5% of
its consolidated gross revenues for its most recent fiscal year relates to
a Competing Business if Executive's responsibilities at such business do
not directly relate to a Competing Business. "Competing Business" shall
mean any activity relating to the development, manufacture, or the retail
or wholesale sale or distribution (including but not limited to sale or
distribution through retail, specialty retail, Internet, e-commerce, mail
order, multi-level marketing, mass market, or any other channel of
distribution) of specialized nutrition products (including, but not limited
to, infant milk formula, foods and drinks, clinical nutrition products, and
nutriceuticals), vitamin and mineral supplements, sports nutrition
products, herbs, personal care or other health-related products.
"Geographic Area" shall mean the United States and any other country in
which the Parent, Company or any affiliate thereof maintains owned or
franchised facilities or hosts web sites; or
(ii) directly or indirectly solicit, encourage, assist, entice,
or induce any employee of Parent or Company or any of its subsidiaries or
approach any such employee for any of the foregoing purposes, to be
employed by, or render any services to, any person, firm, corporation or
other entity engaged in a Competing Business.
(b) During the Employment Period and thereafter, Executive shall
not, without the Parent's and Company's prior written permission or in
connection with his duties under this Agreement, use or disclose all or any
part of the following valuable, special and unique assets of Parent's or
Company's business to any person, corporation, association or other entity
(but excluding information that had become public knowledge without any
action by, or involvement of, Executive) for any reason whatsoever: the
confidential information and trade secrets of Parent, the Company or any
affiliate thereof, including, but not limited to, the financial and sales
information, manufacturing formulas and processes, business plans and
projections, and personnel information and records.
(c) Executive acknowledges that the restrictions contained in this
Section 5 in view of the nature of the business in which Parent or Company is
engaged, are reasonable and necessary in order to protect the legitimate
interests of the Parent or Company and that any violation of such restrictions
would result in irreparable harm to the Parent or Company. In the event of
3
Executive's violation of any of these restrictions, the Parent or Company
shall be entitled to seek from any court of competent jurisdiction
preliminary and permanent injunctive relief without proving actual damage or
immediate or irreparable harm and without posting any bond. Nothing herein
shall prohibit the Parent or Company from pursuing any other remedies legally
available to the Parent or Company for such breach or threatened breach,
including the recovery of damages from Executive.
(d) If any of the provisions of this Section 5 should ever be
adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then the
affected provisions shall be deemed reformed in such jurisdiction to the
maximum time, geographic, product or service, or other limitations permitted
by applicable law.
6. TERMINATION ARRANGEMENTS.
(a) DEATH OR DISABILITY. In the event Executive's employment
hereunder is terminated by reason either of his death during the Employment
Period or by reason of his medically determined physical or mental disability
during the Employment Period, the Company shall continue to provide Executive
(or Executive's estate in the event of Executive's death) the compensation,
including adjustments, set forth in Section 3(a) hereof for the remainder of
the Employment Period; or, at Executive's (or Executive's estate's) option
and in lieu thereof, the Company shall pay Executive (or Executive's estate)
a lump sum equal to the total aggregate base salary, excluding adjustments,
payable for such period discounted at the rate of 6% per annum, simple
interest. Any such lump sum payment shall be made within 30 days after
termination.
(b) TERMINATION WITHOUT CAUSE; RESIGNATION WITH GOOD REASON. In
the event Executive's employment is involuntarily terminated by Company
without Cause or Executive resigns with Good Reason during the Employment
Period, Company shall continue to provide Executive (or Executive's estate in
the event of Executive's death) the compensation, including adjustments, set
forth in Section 3 hereof for the remainder of the Employment Period; or, at
Executive's (or Executive's estate's) option and in lieu thereof, Company
shall pay Executive (or Executive's estate) a lump sum equal to the total
aggregate base salary, excluding adjustments, payable for such period,
discounted at the rate of 6% per annum, simple interest. In addition, in the
event of such involuntary termination without Cause or resignation with Good
Reason, the value of the Company aircraft benefit set forth in Section 3(e)
hereof shall be fixed at $200,000 per year and Executive shall be provided
with a lump sum payment equal to the total aggregate value of the aircraft
benefit for such period, discounted at the rate of 9% per annum, simple
interest. Any such lump sum payment shall be made within 30 days of
termination.
"GOOD REASON" shall mean (i) the failure to elect or re-elect or
appoint or re-appoint Executive to the positions specified in Section 1
hereof, (ii) a significant reduction in Executive's duties and
responsibilities hereunder (other than solely by reason of the Company
ceasing to be a public corporation as of the date of this Agreement), or
(iii) a material breach of this Agreement by Company or Parent, which in each
case continued after notice and a reasonable opportunity to cure such action
shall have been provided to Company and Parent.
"CAUSE" shall mean (i) Executive's continued gross negligence,
willful misconduct or gross neglect of duty, after notice and a reasonable
opportunity to cure such action shall have been provided to Executive; or
(ii) any criminal act constituting bad faith by Executive in dealing with or
on behalf of the Company.
(c) RESIGNATION WITHOUT GOOD REASON. In the event Executive's
employment is terminated during the Employment Period by reason of
Executive's resignation without Good
4
Reason, no additional payments, beyond those earned or vested prior to the
date of such resignation, shall be payable hereunder.
(d) TERMINATION FOR CAUSE. In the event Executive's employment is
involuntarily terminated for Cause during the Employment Period, no
additional payments, beyond those earned or vested prior to the date of such
termination, shall be payable hereunder.
7. CHANGE OF CONTROL.
(a) CASH BONUS. In the event of a Change of Control of the
Company, as defined in subparagraph (d) below, while Executive is employed
under this Agreement, and in consideration for his remaining in the
employment of the Company for one year following the date of the Change of
Control (or, if earlier, until December 31, 2002), Company shall pay to
Executive a bonus equal to two (2) times Executives' then current base
salary. This bonus shall be in addition to Executive's regular salary and
other forms of compensation. Such bonus shall be paid as follows:
(i) 50% within 30 days after the date of Change of Control; and
(ii) 50% within 30 days of the earlier of the first anniversary
of such Change of Control or December 31, 2002, if Executive is still in
the Company's employ as of such applicable date.
Should Executive's employment be involuntarily terminated without
Cause or if Executive resigns with Good Reason or as a result of his death or
disability prior to such first anniversary, Executive (or Executive's estate
in the event of death) shall be entitled to the "first anniversary payment"
described in clause (ii) of this Section 7(a) within 30 days of such
termination.
Should Executive resign without Good Reason or his employment be
involuntarily terminated with Cause prior to the first anniversary date, he
shall not be eligible to receive any further amount on the first anniversary
date.
Payments under this Section 7 are separate and distinct from and in
addition to any other payments contemplated under this Agreement.
(b) GROSS-UP PAYMENTS. In the event Executive is subject to an
excise tax under Code Section 4999, in respect of payments or other compensation
made under this Agreement, as determined by the Company's independent auditors,
Company agrees to pay Executive an additional amount which, after the payment by
Executive of all federal, state and local income, employment and excise taxes on
such additional amount, is equal to the amount of the excise tax payable without
regard to the additional amount. Should Executive fail to pay such excise tax
or be determined, pursuant to any administrative or judicial proceeding, not to
be subject to such excise tax, Company's obligation to make an additional
payment hereunder shall cease as to the amount not paid or so determined and
Executive shall promptly refund to Company any such additional payment
previously paid to Executive.
(c) EXPENSES OF ENFORCEMENT. In the event Executive's employment
is involuntarily terminated by Company other than for Cause or if Executive
resigns with Good Reason during the Employment Period or following a Change
of Control, then, notwithstanding any provisions to this Agreement to the
contrary, Company shall pay all reasonable legal fees and expenses incurred
by Executive in the successful enforcement of Executive's rights under this
Agreement.
5
(d) DEFINITION. For purposes of this Agreement, a Change of
Control shall occur if, after the Merger
(i) Parent and its "affiliates" (as such term is defined in
Rule 12b-2 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), cease to beneficially own, directly
or indirectly, securities representing at least 50% of the combined voting
power of outstanding securities of Subsidiary or any successor entity
(including by merger, sale of assets or otherwise); or
(ii) (A) any person (as such term is used under Sections 13(d)
and 14(d) of the Exchange Act), other than the Parent, the Company or any
affiliate thereof, or any employee benefit plan maintained by Parent, the
Company or any affiliate thereof, or becomes a beneficial owner, directly
or indirectly, of more than 50% of the outstanding equity securities of the
Parent; or (B) the sale or other disposition of all or substantially all of
the assets of Parent, or approval of a plan of liquidation or dissolution
of Parent.
8. DEFERRED PAYMENT. In accordance with Section VI of the Benefits
Letter, Parent and Company acknowledge and agree that any amount deferred
pursuant thereto shall be paid to Executive with interest accruing thereon
from the Effective Time to the date of payment at a rate of 6%, simple
interest, and Parent hereby guarantees that such payment shall be made by
Company.
9. NOTICES. Any notice to be given under this Agreement shall be
deemed received five (5) business days thereafter if sent in writing,
properly addressed, by certified mail, and one (1) business day thereafter if
sent in writing, properly addressed, by overnight express courier or by hand.
Notices to Executive shall be sent to Executive's residence. Notices to
Parent and Company shall be sent to Company's home office.
10. WAIVER OF BREACH. The failure by a party to enforce its rights
against the other party following a breach of any provision of the Agreement
shall not operate or be construed as a waiver of any other provision hereof
or any subsequent breach by such other party.
11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
12. ENTIRE AGREEMENT. Effective as of and conditioned upon the
effective time of the Merger, this Agreement supersedes and replaces any and
all prior employment agreements (including the Prior Agreement), both written
and oral, between the parties. It contains the entire understanding between
parties and can only be amended or supplemented by a written agreement signed
by the parties. Notwithstanding the foregoing, this Agreement does not
supersede any excise tax reimbursement to which Executive is entitled under
his Prior Agreement or as otherwise provided by action of the Compensation
Committee of the Board at its meeting held on June 30, 1999. In the event
the Merger shall not have become effective, this Agreement shall be of no
force or effect.
6
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, which shall together constitute a valid and binding agreement.
PARENT COMPANY
By: /s/ Johannes C.T. van der Wielen By: /s/ Xxxxx X. Xxxxxx
-------------------------------- ---------------------------
Title: Vice President
Title: President and Chief Executive
Officer
Xxxxxxx X. Xxxxx
-------------------------------
EXECUTIVE
/s/ Xxxxxxx X. Xxxxx
-------------------------------
EXECUTIVE'S SIGNATURE
000 Xxxxxxxx Xxxx
-------------------------------
XXXXXXX
Xxxxxxxxx, XX 00000
-------------------------------
7
