Exhibit 10.1
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
the 1st day of December, 2004 (the "Effective Date"), by and between General
Nutrition Centers, Inc., a Delaware corporation (the "Company"), and Xxxxxx X.
XxXxxxxx (the "Executive").
WHEREAS, the Executive is currently a member of the Board of
Directors of the Company (the "Board");
WHEREAS, the Company desires to employ the Executive on the terms
and subject to the conditions set forth herein and the Executive has agreed to
be so employed; and
WHEREAS, the Board of Directors of GNC Corporation, a Delaware
corporation ("GNC"), has appointed the Executive as Chairman of the Board of
Directors of GNC.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Employment of Executive; Duties.
1.1 Title. During the "Employment Period" (as defined in Section
2 hereof), the Executive shall serve as Chairman of the Board and as interim
Chief Executive Officer. The Executive shall have the normal duties,
responsibilities and authority commensurate with such positions.
1.2 Duties. During the Employment Period, the Executive shall do
and perform all services and acts reasonably necessary to fulfill the duties
and responsibilities of his position and shall render such services on the
terms set forth herein. In addition, the Executive shall have such other
executive and managerial powers and duties as may reasonably be assigned to him
by the Board, commensurate with his serving as Chairman of the Board and
interim Chief Executive Officer. Except for sick leave, reasonable vacations,
and excused leaves of absence, the Executive shall, throughout the Employment
Period, devote substantially all his working time, attention, knowledge, skills
and efforts, to the duties and responsibilities of his positions in furtherance
of the business affairs and activities of the Company and its subsidiaries and
Affiliates (as defined herein). During the Employment Period, the Executive
shall spend sufficient time at the Company's corporate headquarters in
Pittsburgh, Pennsylvania as he and the Board shall deem necessary to discharge
his responsibilities hereunder, and the Company shall provide the Executive
with an appropriate office and secretarial support at such corporate
headquarters. Notwithstanding the foregoing, the Company acknowledges that the
Executive currently intends to reside in Texas and agrees that the Executive
shall not be required to relocate to Pittsburgh, Pennsylvania or any other
location.
2. Term of Employment.
2.1 Employment Period. The employment of the Executive hereunder
shall commence as of the Effective Date and continue until the later to occur
of (i) December 31, 2005, or (ii) the applicable expiration date of any
extension of this Agreement as provided in Section 2.2 hereof, unless
terminated earlier in accordance with the provisions of this Agreement (the
"Employment Period").
2.2 Extension. On December 15th, 2005, and on each December 15th
thereafter, the Employment Period shall be extended for an additional one-year
period unless the Company or the Executive notifies the other in writing by the
applicable December 15th of its or his election, in its or his sole discretion,
not to extend the Employment Period.
3. Compensation and General Benefits.
3.1 Base Salary. During the Employment Period the Company agrees
to pay to the Executive an annual base salary (the "Base Salary") in an amount
equal to Five Hundred Thirty-Five Thousand Dollars ($535,000) for his service
as Chairman of the Board. The Executive shall not receive any additional
compensation for his services as interim Chief Executive Officer. The
Executive's Base Salary, less amounts required to be withheld under applicable
law, shall be payable in equal installments in accordance with the practice of
the Company in effect from time to time for the payment of salaries to officers
of the Company, but in no event less frequently than monthly.
3.2 Bonuses.
(a) Annual Bonus. With respect to the 2004 calendar year and
with respect to each calendar year that commences during the Employment Period,
the Executive shall be eligible to receive from the Company an annual
performance bonus (the "Annual Bonus") based upon the Company's attainment of
annual goals established by the Board or the Compensation Committee of the
Board (the "Compensation Committee"), which are based on the Company's earnings
before interest, taxes, depreciation and amortization ("EBITDA") and debt
amortization goals. The Executive's target Annual Bonus shall be fifty percent
(50%) of the Executive's Base Salary with a maximum of one hundred and twenty
percent (120%) of the Executive's Base Salary if the Company exceeds the EBITDA
and debt amortization goals based on levels to be determined by the Board or
the Compensation Committee for the applicable year. Any Annual Bonus earned
shall be payable in full within forty-five (45) days following the
determination of the amount thereof and in accordance with the Company's normal
payroll practices and procedures. Any Annual Bonus payable under this Section
3.2 shall not be payable unless the Executive is employed by the Company on the
last day of the period to which such Annual Bonus relates. The Executive's
Annual Bonus for the 2004 calendar year, if any, shall be prorated based on the
Effective Date.
(b) Success Bonus. In the event of the consummation of (i) an
initial underwritten public offering of GNC common stock (the "Common Stock")
or (ii) a Change of Control (as defined in Section 4.3(f)), in each case where
GNC Investors LLC has received cash or other consideration representing at
least a twenty-five percent (25%) internal rate of return on its investment in
the Common Stock, the Executive shall be entitled to receive a one-time payment
of a cash bonus in the amount of One Million Dollars ($1,000,000) (the "Success
Bonus"), provided that the Executive is serving as Chairman of the Board at the
time of consummation of any such transaction; provided, further that in the
event the Executive is terminated without Cause or terminates for Good Reason
(each as defined herein) (x) within thirty days prior to the consummation of
such underwritten initial public offering of Common Stock or the signing of
such Change of Control transaction or (y) between the signing and closing of
such Change of Control transaction, the Executive shall be entitled to the
Success Bonus.
3.3 Expenses. During the Employment Period, in addition to any
amounts to which the Executive may be entitled pursuant to the other provisions
of this Section 3.3 or elsewhere herein, the Executive shall be entitled to
receive prompt reimbursement from the Company for all reasonable and necessary
expenses incurred by him in performing his duties hereunder on behalf of the
Company, subject to, and consistent with, the Company's policies for expense
payment and reimbursement, in effect from time to time, including, but not
limited to, all reasonable expenses incurred in connection with hotels, meals,
transportation and the like while in Pittsburgh and first-class air travel to
and from Pittsburgh for the Executive and his spouse as reasonably necessary
during the Employment Period.
3.4 Fringe Benefits. Except for sick leave, vacation pay,
Company -paid holidays, or as otherwise expressly set forth in this Agreement,
the Executive shall not be entitled to participate in, or to receive benefits
under, any benefit plans, arrangements or policies made available by the
Company to any of its executives and key management employees or employees
generally. In the event the Executive becomes entitled to any fringe benefits
under this Section 3.4, the award of any such benefits shall be separate and
distinct from the right of the Executive to receive the Annual Bonus payment
from the Company described in Section 3.2.
3.5 Stock Options. As of the Effective Date, pursuant to the GNC
Corporation (f/k/a General Nutrition Centers Holding Company) 2003 Omnibus
Stock Incentive Plan (the "Plan"), the Executive shall be granted an option to
purchase a total of 300,000 shares of Common Stock, with a per share exercise
price equal to $6.00 per share (the "Option") for the Executive's service as
Chairman of the Board of Directors of GNC. The Option shall be an "incentive
stock option" to the maximum extent permitted under applicable law and to the
extent that the Option does not qualify as an "incentive stock option," it
shall constitute a separate non-qualified stock option. The portion of the
Option that constitutes an "incentive stock option" shall be transferable to
the maximum extent permitted under applicable law, and the non-qualified stock
option may be transferred to any "family member" as defined in Section (c)(3)
of Rule 701 under the Securities Act of 1933, as amended. The Option shall, (i)
with respect to one-half of the shares subject to the Option, be immediately
vested and exercisable, and (ii) with respect to the remaining one-half of the
shares subject to the Option, become vested and exercisable on the first
anniversary of the Effective Date, subject to the Executive's continued
employment as Chairman of the Board of Directors of GNC. Except as otherwise
provided herein, the Option shall be subject to the terms and conditions of the
Plan and the form of option agreement applicable for other senior executives of
the Company approved by the Plan administrator. In the event of a Change of
Control, all of the Executive's stock options granted pursuant to the Plan
shall vest in full and become immediately exercisable, but in no event shall
such options be exercisable following their expiration date.
4. Termination.
4.1 General. The employment of the Executive hereunder (and the
Employment Period) shall terminate as provided in Section 2, unless earlier
terminated in accordance with the provisions of this Section 4.
4.2 Death or Disability of the Executive.
(a) The employment of the Executive hereunder (and the
Employment Period) shall terminate upon (i) the death of the Executive, and
(ii) at the option of the Company, upon not less than fifteen (15) days' prior
written notice to the Executive or his personal representative or guardian, if
the Executive suffers a "Total Disability" (as defined in Section 4.2(b)
below). Upon termination for death or Total Disability, the Company shall pay
to the Executive, guardian or personal representative, as the case may be
(reduced by any benefits paid or payable to the Executive, his beneficiaries or
estate under any Company-sponsored disability benefit plan; provided, however,
that no such reduction shall be made for any benefits paid upon the Executive's
death under the Company's life insurance policy), (i) the Executive's current
Base Salary for the remainder of the Employment Period (without giving effect
to any further extensions pursuant to Section 2.2 hereof) and (ii) a prorated
share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period
of actual employment) that the Executive would have been entitled to had he
worked the full year during which the termination occurred, assuming that all
targets have been achieved (the "Pro-Rata Bonus"). The Pro-Rata Bonus shall be
payable in full within forty-five (45) days following the determination of the
amount thereof and in accordance with the Company's normal payroll practices
and procedures. In addition, the Executive or his personal representative or
guardian (as the case may be) shall also receive: (i) the Base Salary through
the date of termination; (ii) any Annual Bonus earned but unpaid as of the date
of termination for any previously completed fiscal year; (iii) reimbursement
for any unreimbursed business expenses incurred by Executive in accordance with
Company policy prior to the date of Executive's termination; and (iv) such
amounts and benefits, if any, as to which Executive may be legally entitled
under the employee benefit plans (including, without limitation, payment for
accrued but unused vacation days) (collectively, the "Accrued Amounts").
(b) For purposes of this Agreement, "Total Disability" shall
mean (i) if the Executive is subject to a legal decree of incompetency (the
date of such decree being deemed the date on which such disability occurred),
(ii) the written determination by a physician selected by the Company (which
expense shall be paid by the Company) that, because of a medically determinable
disease, injury or other physical or mental disability, the Executive is unable
substantially to perform, with or without reasonable accommodation, the
material duties of the Executive required hereby, and that such disability has
lasted for one hundred twenty days (120) days during the immediately preceding
twelve (12) month period or is, as of the date of determination, reasonably
expected to last six (6) months or longer after the date of determination, in
each case based upon medically available reliable information, or (iii)
Executive's qualifying for benefits under the Company's long-term disability
coverage, if any.
(c) In conjunction with determining mental and/or physical
disability for purposes of this Agreement, the Executive hereby consents to (i)
any examinations that the physician selected above determines are reasonably
necessary to a determination of whether he is mentally and/or physically
disabled, or required by the Company physician, (ii) furnish such medical
information as may be reasonably requested, and hereby agrees to provide the
results of such examination to the Company as soon as reasonably practicable
following such examination. All expenses incurred by the Executive under this
subsection shall be paid by the Company.
(d) With respect to outstanding stock options and other
equity based awards held by the Executive as of the date of termination, (i)
any such options that are not vested or exercisable as of such date of
termination shall immediately expire and any such equity based awards that are
not vested as of such date of termination shall immediately be forfeited, and
(ii) any such options that are vested and exercisable as of such date of
termination shall expire immediately following the expiration of the one
hundred eighty (180) day period following such date of termination.
4.3 Termination by the Company Without Cause or by the Executive
for Good Reason.
(a) The Company may terminate Executive's employment without
"Cause" (as defined below) and the Executive may resign for "Good Reason" (as
defined below), and thereby terminate Executive's employment (and the
Employment Period) under this Agreement at any time upon not less than thirty
(30) days' prior written notice.
(b) In the event the Executive's employment is terminated by
the Company without "Cause" or by the Executive for "Good Reason," then, the
Executive shall receive the Accrued Amounts and subject to Section 4.3(d)
hereof, the following provisions shall apply:
(i) The Company shall continue to pay the Executive: the
Base Salary to which the Executive would have been entitled pursuant to Section
3.1 hereof (at the Base Salary in effect at the time of the termination) had
the Executive remained in the employ of the Company for 12 months after such
termination, with all such amounts payable in accordance with the Company's
payroll system in the same manner and at the same time as though the Executive
remained employed by the Company.
(ii) The Company shall pay to the Executive a prorated
share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period
of actual employment) that the Executive would have been entitled to had he
worked the full year during which the termination occurred, provided that bonus
targets are met for the year of such termination. The bonus shall be payable in
full within forty-five (45) days following the determination of the amount
thereof and in accordance with the Company's normal payroll practices and
procedures, subject to Section 4.3(c)(vi) hereof.
(iii) With respect to outstanding options and other
equity based awards held by the Executive as of the date of termination, (x)
any such options that are not vested or exercisable as of such date of
termination shall immediately expire and any such equity based awards that are
not vested as of such date of termination shall immediately be forfeited, and
(y) any such options that are vested and exercisable as of such date of
termination shall expire immediately following the expiration of the one
hundred eighty (180) day period following such date of termination.
(c) If the Executive is entitled to payments and benefits
under Section 4.3 (other than the Accrued Amounts), the Executive agrees to
release the Company and its officers, directors, stockholders, employees,
agents, representatives, and successors from and against any and all claims
that the Executive may have against any such person relating to the Executive's
employment by the Company and the termination thereof, such release by the
Executive to be in form and substance mutually acceptable to the Executive and
the Company (which acceptance shall not be unreasonably withheld or delayed).
(d) Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other person or that any other event occurring with
respect to the Executive and the Company for the Executive's benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a
"Payment") would be subject to or result in the imposition of the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (and any regulations issued thereunder, any successor provision, and
any similar provision of state or local income tax law) (collectively, the
"Excise Tax"), then the amount of the Payment shall be reduced to the highest
amount that may be paid by the Company or other entity without subjecting such
Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have
the right, in his sole discretion, to designate those payments or benefits that
shall be reduced or eliminated under the Payment Reduction to avoid the
imposition of the Excise Tax. Notwithstanding the foregoing, the Payment
Reduction shall not apply if the Executive would, on a net after-tax basis,
receive less compensation than if the Payment were not so reduced.
(i) Subject to the provisions of Section 4.3(d)(ii), all
determinations required to be made under this Section 4.3(d), including whether
and when a Payment is subject to Section 4999 and the assumptions to be
utilized in arriving at such determination and in determining an appropriate
Payment Reduction, shall be made by PricewaterhouseCoopers LLP, or any other
nationally recognized accounting firm that shall be the Company's outside
auditors at the time of such determination (the "Accounting Firm"), which
Accounting Firm shall provide detailed supporting calculations to the Executive
and the Company within fifteen (15) business days of the receipt of notice from
the Company or the Executive that there will be a Payment that the person
giving notice believes may be subject to the Excise Tax. All fees and expenses
of the Accounting Firm shall be borne by the Company. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive in
determining whether a Payment Reduction is required and the amount thereof
(subject to Sections 4.3(d)(ii) and (iii)), in the absence of material
mathematical or legal error.
(ii) As a result of uncertainty in the application of
Section 4999 that may exist at the time of the initial determination by the
Accounting Firm, it may be possible that in making the calculations required to
be made hereunder, the Accounting Firm shall determine that a Payment Reduction
need not be made that properly should be made (an "Overpayment") or that a
Payment Reduction not properly needed to be made should be made (an
"Underpayment"). If, within seventy-five (75) days after the Accounting Firm's
initial determination under the preceding clause (i), the Accounting Firm shall
determine that an Overpayment was made, any such Overpayment shall be treated
for all purposes, to the extent practicable and subject to applicable law, as a
loan to the Executive with interest at the applicable Federal rate provided for
in Section 1274(d) of the Code and shall be repaid by the Executive to the
Company within thirty-five (35) days after the Executive receives notice of the
Accounting Firm's determination; provided, however, that the amount to be
repaid by the Executive to the Company either as a loan or otherwise as a lump
sum payment (where a loan is not practicable or permitted by law) shall be
reduced to the extent that any portion of the Overpayment to be repaid will not
be offset by a corresponding reduction in tax by reason of such repayment of
the Overpayment. If the Accounting Firm shall determine that an Underpayment
was made, any such Underpayment shall be due and payable by the Company to the
Executive within thirty-five (35) days after the Company receives notice of the
Accounting Firm's determination.
(iii) The Executive shall give written notice to the
Company of any claim by the IRS that, if successful, would require the payment
by the Executive of an Excise Tax, such notice to be provided within fifteen
(15) days after the Executive shall have received written notice of such claim.
The Executive shall cooperate with the Company in determining whether to
contest or pay such claim and shall not pay such claim without the written
consent of the Company, which shall not be unreasonably withheld, conditioned
or delayed.
(iv) This Section 4.3(d) shall remain in full force and
effect following the termination of the Executive's employment for any reason
until the expiration of the statute of limitations on the assessment of taxes
applicable to the Executive for all periods in which the Executive may incur a
liability for taxes (including Excise Taxes), interest or penalties arising out
of the operation of this Agreement.
(e) For purposes of this Agreement, "Cause" means the
occurrence of any one or more of the following events, subject to the
Executive's right to cure under Section 4.4(e):
(i) a material failure by the Executive to comply with
any material obligation imposed by this Agreement (including, without
limitation, any violation of Sections 5.1 or 5.2 hereof);
(ii) the Executive's substantial and willful failure to
abide by or follow lawful directions of the Board;
(iii) the Executive's being convicted of, or pleading
guilty or nolo contendere to, any felony;
(iv) theft, embezzlement, or fraud by the Executive in
connection with the performance of his duties hereunder (other than good faith
expense account disputes);
(v) the Executive's engaging in any activity that gives
rise to a material conflict of interest with the Company; or
(vi) the misappropriation by the Executive of any
material business opportunity of the Company.
(f) For purposes of this Agreement, "Change of Control"
shall be defined as set forth in Exhibit A, which is attached hereto.
(g) For purposes of this Agreement, "Good Reason" means the
occurrence of any one or more of the following events, subject to the Company's
right to cure under Section 4.4(e):
(i) any adverse change in the Executive's then
position(s) or titles, or a diminution of his then duties, responsibilities or
authority or the assignment to the Executive of duties or responsibilities that
are adversely inconsistent with his then position(s); provided that Executive's
removal from the position of interim Chief Executive Officer for any reason
shall not constitute Good Reason;
(ii) the Executive is required to relocate his current
residence;
(iii) any material breach by the Company of any provision
of this Agreement;
(iv) failure of any successor to the Company (whether
direct or indirect and whether by merger, acquisition, consolidation or
otherwise) to assume upon the assignee becoming such, the obligations of the
Company hereunder; or
(v) failure of GNC to grant the Executive the Option
pursuant to Section 3.5.
4.4 Termination For Cause and Voluntary Resignation Other
than for Good Reason.
(a) The Company may, upon action of the Board, terminate the
employment of the Executive (and the Employment Period) at any time for "Cause"
and the Executive may voluntarily resign and thereby terminate his employment
(and the Employment Period) under this Agreement at any time upon not less than
thirty (30) days' prior written notice. Upon termination by the Company for
Cause or voluntary resignation other than for Good Reason by the Executive, the
following provisions shall apply:
(b) The Executive shall be entitled to receive the Accrued
Amounts, and all other rights of the Executive (and all obligations of the
Company) hereunder shall terminate as of the date of such termination.
(c) With respect to outstanding options and other equity
based awards held by the Executive as of the date of termination, (i) any such
options that are not vested or exercisable as of such date of termination shall
immediately expire and any such equity based awards that are not vested as of
such date of termination shall immediately be forfeited, and (ii) any such
options that are vested and exercisable as of such date of termination shall
expire immediately following the expiration of the ninety (90)-day period
following such date of termination.
(d) Before the Company may terminate the Executive for Cause
pursuant to Section 4.4(a) above, the Board shall deliver to the Executive a
written notice of the Company's intent to terminate the Executive for Cause,
and the Executive shall have been given a reasonable opportunity to cure any
such acts or omissions (which are susceptible of cure as reasonably determined
in good faith by the Board) within thirty (30) days after the Executive's
receipt of such notice. Before the Executive may resign for Good Reason
pursuant to Section 4.4(a) above, the Executive shall deliver to the Board a
written notice of the Executive's intent to resign for Good Reason, and the
Company shall have a reasonable opportunity to cure any such acts or omissions
(which are susceptible of cure as reasonably determined in good faith by the
Executive) within thirty (30) days after the Board's receipt of such notice.
5. Confidentiality and Non-Competition.
5.1 Confidentiality; Intellectual Property.
(a) The Executive recognizes that the Company's business
interests require a confidential relationship between the Company and the
Executive and the fullest practical protection and confidential treatment of
all "Trade Secrets or Confidential or Proprietary Information" (as defined in
Section 5.3 hereof). Accordingly, the Executive agrees that, except in
connection with the performance of the Executive's duties hereunder or as
required by law, government process or court order, the Executive will keep
confidential and will not disclose to anyone (other than the Company or any
Persons designated by the Company), or publish, utter, exploit, make use of (or
aid others in publishing, uttering, exploiting or using), or otherwise
"Misappropriate" (as defined in Section 5.3 hereof) any Trade Secrets or
Confidential or Proprietary Information at any time. The Executive's
obligations hereunder shall continue during the Employment Period and
thereafter for so long as such Trade Secrets or Confidential or Proprietary
Information remain Trade Secrets or Confidential or Proprietary Information.
(b) The Executive acknowledges and agrees that:
(i) the Executive occupies a unique position within the
Company, and he is and will be intimately involved in the development and/or
implementation of Trade Secrets or Confidential or Proprietary Information;
(ii) in the event the Executive breaches Section 5.1
hereof with respect to any Trade Secrets or Confidential or Proprietary
Information, such breach shall be deemed to be a Misappropriation of such Trade
Secrets or Confidential or Proprietary Information; and
(iii) any Misappropriation of Trade Secrets or
Confidential or Proprietary Information will result in immediate and
irreparable harm to the Company.
(c) The Executive acknowledges and agrees that all ideas,
inventions, marketing, sales and business plans, formulae, designs, pricing,
studies, programs, reviews and related materials, strategies and products,
whether domestic or foreign, developed by him during the Employment Period,
including, without limitation, any process, operation, technique, product,
improvement or development which may be patentable or copyrightable, are and
will be the property of the Company, and that he will do, at the Company's
request and cost, whatever is reasonably necessary to secure the rights thereto
by patent, copyright or otherwise to the Company.
(d) Upon termination or expiration of the Employment Period
and at any other time upon request, the Executive further agrees to surrender
to the Company all documents, writings, notes, business, marketing or strategic
plans, financial information, customer, distributor and supplier lists,
manuals, illustrations, models, and other such materials (collectively,
"Company Documents") produced by the Executive or coming into his possession by
or through employment with the Company during the Employment Period, within the
scope of such employment, and agrees that all Company Documents are at all
times the Company's property, provided that the Executive may maintain a copy
of any Company Documents that are not Trade Secrets or Confidential or
Proprietary Information. Notwithstanding the foregoing, the Executive may
retain his rolodex and similar address and telephone directories (whether in
electronic or written format).
(e) During the Employment Period, the Executive represents
and agrees that he will not use or disclose any confidential or proprietary
information or trade secrets of others, including but not limited to former
employers, and that he will not bring onto the premises of the Company such
confidential or proprietary information or trade secrets of such others, unless
consented to in writing by said others, and then only with the prior written
authorization of the Company.
5.2 Noncompetition and Nonsolicitation. During the
Employment Period and until the end of the Restricted Period (as defined
below), the Executive agrees that the Executive will not, directly or
indirectly, on the Executive's own behalf or as a partner, owner, officer,
director, stockholder, member, employee, agent or consultant of any other
Person within the United States of America or in any other country or territory
in which the businesses of the Company are conducted:
(a) own, manage, operate, control, be employed by, provide
services as a consultant to, or participate in the ownership, management,
operation, or control of, any enterprise that engages in, owns or operates
businesses that market, sell, distribute or manufacture nutritional supplements
(a "Competitive Business").
(b) solicit, hire, or otherwise attempt to establish for any
Person (other than clerical employees), any employment, agency, consulting or
other business relationship with any Person who is or was an employee of the
Company.
(c) The parties hereto acknowledge and agree that,
notwithstanding anything in Section 5.2(a) hereof, (x) the Executive may own or
hold, solely as passive investments, securities of Persons engaged in any
business that would otherwise be included in Section 5.2(a) as long as with
respect to each such investment, the securities held by the Executive do not
exceed five percent (5%) of the outstanding securities of such Person and, such
securities are publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (y) the
Executive may serve on the board of directors (or other comparable position) or
as an officer of any entity at the request of the Board (which consent shall
not be unreasonably withheld or delayed); provided, however, that in the case
of investments otherwise permitted under clause (x) above, the Executive shall
not be permitted to, directly or indirectly, participate in, or attempt to
influence, the management, direction or policies of (other than through the
exercise of any voting rights held by the Executive in connection with such
securities), or lend his name to, any such Person; or (z) the Executive may
provide services to a subsidiary, division or entity of a Competitive Business,
provided that the subsidiary, division or entity that the Executive provides
services to is not itself a Competitive Business.
5.3 Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) An "Affiliate" of any Person shall mean any other
Person, whether now or hereafter existing, directly or indirectly controlling
or controlled by, or under direct or indirect common control with, such
specified Person. For purposes hereof, "control" or any other form thereof,
when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
(b) "Misappropriate", or any form thereof, means:
(i) the acquisition of any Trade Secret or Confidential
or Proprietary Information by a Person who knows or has reason to know that the
Trade Secret or Confidential or Proprietary Information was acquired by theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other means (each, an
"Improper Means"); or
(ii) the disclosure or use of any Trade Secret or
Confidential or Proprietary Information without the express consent of the
Company by a Person who (x) used Improper Means to acquire knowledge of the
Trade Secret or Confidential or Proprietary Information; or (y) at the time of
disclosure or use, knew or had reason to know that his or her knowledge of the
Trade Secret or Confidential or Proprietary Information was (i) derived from or
through a Person who had utilized Improper Means to acquire it, (ii) acquired
under circumstances giving rise to a duty to maintain its secrecy or limit its
use, or (iii) derived from or through a Person who owed a duty to the Company
to maintain its secrecy or limit its use; or (z) before a material change of
his or her position, knew or had reason to know that it was a Trade Secret or
Confidential or Proprietary Information and that knowledge of it had been
acquired by accident or mistake.
(c) "Person" means any individual, corporation,
partnership, limited liability company, joint venture, association, business
trust, joint-stock company, estate, trust, unincorporated organization, or
government or other agency or political subdivision thereof, or any other legal
or commercial entity.
(d) "Restricted Period" shall mean the longer of (i) 12
months after the termination of the Executive's employment hereunder or (ii)
the period during which the Executive is receiving payments from the Company
pursuant to Section 4 hereof.
(e) "Trade Secrets or Confidential or Proprietary
Information" shall mean:
(i) any and all information, formulae, patterns,
compilations, programs, devices, methods, techniques, processes, know how,
plans (marketing, business, strategic or otherwise), arrangements, pricing and
other data (collectively, "Information") that (a) derives independent economic
value, actual or potential, from not being generally known to the public, the
applicable industry or to other Persons who can obtain economic value from its
disclosure or use, and (b) is the subject of efforts by the Company that are
reasonable under the circumstances to maintain its secrecy; or
(ii) any and all other Information (i) unique to the
Company which has a significant business purpose and is not known or generally
available from sources outside of such Persons or typical of industry practice,
or (ii) the disclosure of which would have a material adverse effect on the
business of the Company.
5.4 Remedies. The Executive acknowledges and agrees that if
the Executive breaches any of the provisions of Section 5 hereof, the Company
may suffer immediate and irreparable harm for which monetary damages alone will
not be a sufficient remedy, and that, in addition to all other remedies that
the Company may have, the Company shall be entitled to seek injunctive relief,
specific performance or any other form of equitable relief to remedy a breach
or threatened breach of this Agreement (including, without limitation, any
actual or threatened Misappropriation) by the Executive and to enforce the
provisions of this Agreement. The Executive and the Company each agrees (i) to
submit to the jurisdiction of any competent court where the Company may choose
to seek equitable relief, (ii) to waive any and all defenses the Executive may
have on the grounds of lack of jurisdiction of such court; and (iii) that
neither party shall be required to post any bond, undertaking, or other
financial deposit or guarantee in seeking or obtaining such equitable relief.
The existence of this right shall not preclude or otherwise limit the
applicability or exercise of any other rights and remedies which the Company
may have at law or in equity.
5.5 Interpretation; Severability.
(a) The Executive has carefully considered the possible
effects on the Executive of the covenants not to compete, the confidentiality
provisions, and the other obligations contained in this Agreement, and the
Executive recognizes that the Company has made every effort to limit the
restrictions placed upon the Executive to those that are reasonable and
necessary to protect the Company's legitimate business interests.
(b) The Executive acknowledges and agrees that the
restrictive covenants set forth in this Agreement are reasonable and necessary
in order to protect the Company's valid business interests. It is the intention
of the parties hereto that the covenants, provisions and agreements contained
herein shall be enforceable to the fullest extent allowed by law. If any
covenant, provision, or agreement contained herein is found by a court having
jurisdiction to be unreasonable in duration, scope or character of
restrictions, or otherwise to be unenforceable, such covenant, provision or
agreement shall not be rendered unenforceable thereby, but rather the duration,
scope or character of restrictions of such covenant, provision or agreement
shall be deemed reduced or modified with retroactive effect to render such
covenant, provision or agreement reasonable or otherwise enforceable (as the
case may be), and such covenant, provision or agreement shall be enforced as
modified. If the court having jurisdiction will not review the covenant,
provision or agreement, the parties hereto shall mutually agree to a revision
having an effect as close as permitted by applicable law to the provision
declared unenforceable. The parties hereto agree that if a court having
jurisdiction determines, despite the express intent of the parties hereto, that
any portion of the covenants, provisions or agreements contained herein are not
enforceable, the remaining covenants, provisions and agreements herein shall be
valid and enforceable. Moreover, to the extent that any provision is declared
unenforceable, the Company shall have any and all rights under applicable
statutes or common law to enforce its rights with respect to any and all Trade
Secrets or Confidential or Proprietary Information or unfair competition by the
Executive.
6. Miscellaneous.
6.1 ARBITRATION. SUBJECT TO THE RIGHTS UNDER SECTION 5.4 TO
SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS AGREEMENT, ANY
DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT
OR THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY (INCLUDING, BUT NOT LIMITED TO,
THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE'S TERMINATION OR THE
CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED IN
ACCORDANCE WITH THE NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES OF
THE AMERICAN ARBITRATION ASSOCIATION, PROVIDED, HOWEVER, THAT THE PARTIES AGREE
THAT ANY ARBITRATOR OR ARBITRATORS SELECTED OR APPOINTED TO HEAR THE
ARBITRATION SHALL BE EITHER A RETIRED JUDGE OF THE CIRCUIT OR APPELLATE COURTS
OF NEW YORK OR A PRACTICING ATTORNEY WITH AT LEAST FIFTEEN (15) YEARS OF
EXPERIENCE IN MATTERS REASONABLY RELATED TO THE ISSUE OR ISSUES IN DISPUTE. ANY
RESULTING HEARING SHALL BE HELD IN THE NEW YORK AREA. THE RESOLUTION OF ANY
DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE BINDING AND ENFORCEABLE BY A
COURT OF COMPETENT JURISDICTION. THE COSTS AND FEES OF THE ARBITRATION SHALL BE
BORNE BY THE COMPANY AND THE ATTORNEYS' FEES SHALL BE PAID BY EACH PARTY.
6.2 Indemnification and Insurance. The Company shall
indemnify the Executive pursuant to that certain Indemnification Agreement, by
and between the Company and the Executive attached hereto as Exhibit B. The
Company shall cover the Executive under directors and officers liability
insurance both during and, while potential liability exists, after the
Employment Period in the same amount and to the same extent as the Company
covers its other officers and directors.
6.3 Entire Agreement; Waiver. This Agreement contains the
entire agreement between the Executive and the Company with respect to the
subject matter hereof, and supersedes any and all prior understandings or
agreements, whether written or oral. No modification or addition hereto or
waiver or cancellation of any provision hereof shall be valid except by a
writing signed by the party to be charged therewith. No delay on the part of
any party to this Agreement in exercising any right or privilege provided
hereunder or by law shall impair, prejudice or constitute a waiver of such
right or privilege.
6.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York, including without limitation
Section 5-1401 of the New York General Obligations Law.
6.5 Successors and Assigns; Binding Agreement. The rights
and obligations of the parties under this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, personal
representatives, successors and permitted assigns. This Agreement is a personal
contract, and, except as specifically set forth herein, the rights and
interests of the Executive herein may not be sold, transferred, assigned,
pledged or hypothecated by any party without the prior written consent of the
others. As used herein, the term "successor" as it relates to the Company,
shall include, but not be limited to, any successor by way of merger,
consolidation, or sale of all or substantially all of such Person's assets or
equity interests.
6.6 Representation by Counsel. Each of the parties hereto
acknowledges that (i) it or he has read this Agreement in its entirety and
understands all of its terms and conditions, (ii) it or he has had the
opportunity to consult with any individuals of its or his choice regarding its
or his agreement to the provisions contained herein, including legal counsel of
its or his choice, and any decision not to was his or its alone, and (iii) it
or he is entering into this Agreement of its or his own free will, without
coercion from any source.
6.7 Interpretation. The parties and their respective legal
counsel actively participated in the negotiation and drafting of this
Agreement, and in the event of any ambiguity or mistake herein, or any dispute
among the parties with respect to the provisions hereto, no provision of this
Agreement shall be construed unfavorably against any of the parties on the
ground that he, it, or his or its counsel was the drafter thereof.
6.8 Survival. The provisions of Sections 5 and 6 hereof
shall survive the termination of this Agreement.
6.9 Notices. All notices and communications hereunder shall
be in writing and shall be deemed properly given and effective when received,
if sent by facsimile or telecopy, or by postage prepaid by registered or
certified mail, return receipt requested, or by other delivery service which
provides evidence of delivery, as follows:
If to the Company, to:
General Nutrition Centers, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Board of Directors
with copies to (which shall not constitute notice) to:
General Nutrition Centers, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Executive, to:
Xxxxxx XxXxxxxx
The most recent address of the Executive
on file with the Company.
with a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as one party may provide in writing to the other
party from time to time.
6.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
6.11 Captions. Paragraph headings are for convenience only
and shall not be considered a part of this Agreement.
6.12 No Third Party Beneficiary Rights. Except as otherwise
provided in this Agreement, no entity shall have any right to enforce any
provision of this Agreement, even if indirectly benefited by it.
6.13 Withholding. Any payments provided for hereunder shall
be paid net of any applicable withholding required under Federal, state or
local law and any additional withholding to which Executive has agreed.
6.14 Stockholder Consent. For purposes of avoiding the
Excise Tax, the effectiveness of this Agreement shall be subject to the
approval of the stockholders of the Company in accordance with Section
280G(b)(5) of the Code and the regulations thereunder. As soon as reasonably
practicable following such stockholder approval, the Company shall deliver to
the Executive written notice confirming that such approval has been obtained,
provided, however, that the Company's failure to deliver such notice shall not
constitute Good Reason for termination.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement,
intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
By: /s/
------------------------------ --------------------------------
Name:
Title:
------------------------------
EXECUTIVE
/s/ Xxxxxx XxXxxxxx
------------------------------ ------------------------------
Xxxxxx XxXxxxxx
EXHIBIT A
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as
such term is used in Sections 13(d) and 14(d) of the Exchange Act, other
than one or more Permitted Holders or their Related Parties, becomes the
beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange
Act (except that a Person shall be deemed to have "beneficial ownership"
of all shares that any such Person has the right to acquire within one
year) directly or indirectly, of more than 50% of the Voting Stock of GNC
or any successor company, including, without limitation, through a merger
or consolidation or purchase of Voting Stock of GNC; provided that the
Permitted Holders or their Related Parties do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; provided further that the
transfer of 100% of the Voting Stock of GNC to a Person that has an
ownership structure identical to that of GNC prior to such transfer, such
that GNC becomes a wholly owned Subsidiary of such Person, shall not be
treated as a Change of Control for purposes of the indenture;
(2) after an initial public offering of Capital Stock of GNC, during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors, together with any new
directors whose election by such Board of Directors or whose nomination
for election by the stockholders of GNC was approved by a vote of a
majority of the directors of GNC then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions other than a merger or
consolidation, of all or substantially all of the assets of GNC and its
Subsidiaries taken as a whole to any Person or group of related Persons
other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution
of GNC.
For purposes of this definition, the following terms shall have the meanings
set forth below:
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any
entity controlled thereby or any of the partners thereof.
"Board of Directors" means the Board of Directors of GNC or any
committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in, however designated, equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Permitted Holder" means Apollo.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation
means Capital Stock of any class or classes, however designated, that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Permitted
Holder; or
(2) any trust, corporation, partnership, limited liability company or
other entity, the beneficiaries, stockholders, partners, members, owners or
Persons beneficially holding an 80% or more controlling interest of which
consist of any one or more Permitted Holders and/or such other Persons
referred to in the immediately preceding clause (1).
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency and after giving effect
to any voting agreement or stockholders' agreement that effectively transfers
voting power) to vote in the election of directors, managers or trustees of
the corporation, association or other business entity is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are that Person or one or more Subsidiaries
of that Person (or any combination thereof).
"Voting Stock" of an entity means all classes of Capital Stock of
such entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
