INDEMNIFICATION AGREEMENT
Exhibit 10.2
AGREEMENT, executed this , 200 , to be effective for all purposes as of
, 200 , among General Nutrition Centers, Inc., a Delaware corporation (the
“Company”), and (the “Indemnitee”).
WHEREAS, it is essential to the Company to retain and attract as directors and officers the
most capable persons available;
WHEREAS, Indemnitee is a director or officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other
claims being asserted against directors and officers of companies with registered securities in
today’s environment;
WHEREAS, the By-Laws of the Company require the Company to indemnify and advance expenses to
its directors and officers to the full extent permitted by law and the Indemnitee has been serving
and continues to serve as a director or officer of the Company in part in reliance on such By-Laws;
WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal
liability in order to enhance Indemnitee’s continued service to the Company in an effective manner,
the increasing difficulty in obtaining satisfactory director and officer liability insurance
coverage, and Indemnitee’s reliance on the aforesaid By-Laws, and in part to provide Indemnitee
with specific contractual assurance that the protection promised by such By-Laws will be available
to Indemnitee (regardless of, among other things, any amendment to or revocation of such By-Laws or
any change in the composition of the Company’s Board of Directors or acquisition transaction
relating to the Company), the Company wishes to provide in this Agreement for the indemnification
of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete)
permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained,
for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability
insurance policies;
NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the
Company directly or, at its request, another enterprise, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Certain Definitions:
(a) Affiliate: as to any person, 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.
(b) Change of Control: the occurrence of any of the following events:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that for purposes of this clause (i) such person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or indirectly, of more than
35% of the total voting power of the then outstanding Voting Securities of the Company;
provided, however, that no Change of Control shall be deemed to have occurred under
this paragraph (i) if the Permitted Holders either (a) beneficially own (as defined above),
directly or indirectly, (x) in the aggregate more than 40% of the total voting power of the then
outstanding Voting Securities of the Company and (y) a greater percentage of the total voting power
of the then outstanding Voting Securities of the Company than any other person or (b) have the
right or ability by voting power, contract or otherwise to elect or designate for election a
majority of the Company’s Board of Directors;
(ii) during any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new members of the
Board of Directors whose election by such Board of Directors or whose nomination for election by
the equityholders of the Company was approved by a vote of the majority of the members of the Board
of Directors of the Company then still in office who were either members of the Board of Directors
at the beginning of such period or whose election or nomination for election was previously so
approved including new members of the Board of Directors designated in or provided for in an
agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or
substantially all of the assets of the Company, if such agreement was approved by a vote of such
majority of members of the Board of Directors) cease for any reason to constitute a majority of the
Board of Directors then in office;
(iii) the adoption by the holders of Capital Stock of the Company of any plan or proposal for
the liquidation or dissolution of the Company by way of merger, consolidation or otherwise; or
(iv) the merger or consolidation of the Company with or into another Person or the merger of
another Person with or into the Company, or the sale of all or substantially all the assets of the
Company and its subsidiaries, taken as a whole, to another Person (other than to a subsidiary of
the Company or to one or more Permitted Holders or any entity controlled by one or more Permitted
Holders), in which, in the case of any such merger, consolidation or sale, the securities of the
Company that are outstanding immediately prior to such transaction and that represent 100% of the
aggregate Voting Securities of the Company are changed into or exchanged for cash, securities or
property; provided, however, that no Change of Control shall be deemed to have
occurred under this paragraph (iv) if pursuant to such transaction the securities of the Company
are changed into or exchanged for, in addition to any other consideration, securities of the
surviving Person that represent immediately after such transaction, (a) at least 30% of the
aggregate voting power of the Voting Securities of the surviving Person and (b) a greater
percentage of the Voting Securities of the surviving Person
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than the percentage of such Voting Securities beneficially owned by any other person (as
defined in paragraph (i) above).
(c) Claim: any threatened, pending or completed action, suit or proceeding, or any
inquiry or investigation, whether instituted by the Company or any other party, that Indemnitee in
good faith believes might lead to the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other.
(d) Expenses: include attorneys’ fees and all other costs, expenses and obligations
paid or incurred in connection with investigating, defending, being a witness in or participating
in (including on appeal), or preparing to defend, be a witness in or participate in, any Claim
relating to any Indemnifiable Event.
(e) Indemnifiable Event: any event or occurrence related to the fact that Indemnitee
is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at
the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by
reason of anything done or not done by Indemnitee in any such capacity.
(f) Independent Legal Counsel: an attorney or firm of attorneys, selected in
accordance with the provisions of Section 3, who shall not have otherwise performed services for
the Company or Indemnitee within the last five years (other than with respect to matters concerning
the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity
agreements).
(g) Permitted Holders: GNC Investors, LLC and its Affiliates and members.
(h) Potential Change in Control: shall be deemed to have occurred if (i) the Company
enters into an agreement, the consummation of which would result in the occurrence of a Change in
Control; (ii) any person (including the Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a Change in Control; or (iii) the
Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(i) Reviewing Party: any appropriate person or body consisting of a member or members
of the Company’s Board of Directors or any other person or body appointed by the Board who is not a
party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal
Counsel.
(j) Voting Securities: any securities of the Company, the holders of which vote
generally in the election of directors.
2. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is or becomes a party to or witness or other participant in,
or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the
fullest extent permitted by law as soon as practicable but in any event no later
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than thirty days after written demand is presented to the Company, against any and all
Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with or in respect of such Expenses,
judgments, fines, penalties or amounts paid in settlement) of such Claim. If so requested by
Indemnitee, the Company shall advance to the fullest extent permitted by law (within two business
days of such request) any and all Expenses to Indemnitee (an “Expense Advance”). Notwithstanding
anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be
entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by
Indemnitee unless the Board of Directors has authorized or consented to the initiation of such
Claim.
(b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall
be subject to the condition that the Reviewing Party shall not have determined (in a written
opinion, in any case in which the Independent Legal Counsel referred to in Section 2 hereof is
involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii)
the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject
to the condition that, if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such
amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a determination that
Indemnitee should be indemnified under applicable law, any determination made by the Reviewing
Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until
a final judicial determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing
Party shall be selected by the Board of Directors, and if there has been such a Change in Control
(other than a Change in Control which has been approved by a majority of the Company’s Board of
Directors who were directors immediately prior to such Change in Control), the Reviewing Party
shall be the Independent Legal Counsel referred to in Section 2 hereof. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any court in the State of Delaware
having subject matter jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
3. Change in Control. The Company agrees that if there is a Change in Control of the
Company (other than a Change in Control which has been approved by a majority of the Company’s
Board of Directors who were directors immediately prior to such Change in Control) then with
respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments
and Expense Advances under this Agreement or any other agreement or Company By-Law now or hereafter
in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only
from Independent Legal Counsel selected by Indemnitee
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and approved by the Company (which approval shall not be unreasonably withheld). Such
counsel, among other things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified under applicable
law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to
above and to indemnify fully such counsel against any and all expenses (including attorneys’ fees),
claims, liabilities and damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
4. Establishment of Trust. In the event of a Potential Change in Control, the Company
shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee and from
time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to
satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for and defending any Claim relating to an
Indemnifiable Event, and any and all judgments, fines, penalties and settlement amounts of any and
all Claims relating to an Indemnifiable Event from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid, provided that in no event shall more than $250,000
be required to be deposited in any trust created hereunder (and no more than $1,000,000 in the
aggregate with respect to any such trusts created under this Agreement and all Indemnification
Agreements with directors and officers) in excess of amounts deposited in respect of reasonably
anticipated Expenses. The amount or amounts to be deposited in the trust pursuant to the foregoing
funding obligation shall be determined by the Reviewing Party, in any case in which the Independent
Legal Counsel referred to above is involved. The terms of the trust shall provide that upon a
Change in Control (i) the trust shall not be revoked or the principal thereof invaded, without the
written consent of the Indemnitee, (ii) the trustee shall advance, within two business days of a
request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees
to reimburse the trust under the circumstances under which the Indemnitee would be required to
reimburse the Company under Section 2(b) of this Agreement), (iii) the trust shall continue to be
funded by the Company in accordance with the funding obligation set forth above, (iv) the trustee
shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to
indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such trust
shall revert to the Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the
terms of this Agreement. The trustee shall be chosen by Indemnitee. Nothing in this Section 4
shall relieve the Company of any of its obligations under this Agreement.
5. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee
against any and all expenses (including attorneys’ fees and retainers) and, if requested by
Indemnitee, shall (within two business days of such request) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i)
indemnification or advance payment of Expenses by the Company under this Agreement or any other
agreement or Company By-Law now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by
the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may be.
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6. Partial Indemnity, Etc. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all
Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter
therein, including dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
7. Contribution.
(a) Contribution Payment. To the extent the indemnification provided for under any
provision of this Agreement is determined (in the manner hereinabove provided) not to be permitted
under applicable law, the Company, in lieu of indemnifying Indemnitee, shall, to the extent
permitted by law, contribute to the amount of any and all Expenses, judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other charges paid or payable
in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in
settlement) of a Claim by reason of (or arising in part out of) an Indemnifiable Event incurred or
paid by Indemnitee for which such indemnification is not permitted. The amount the Company
contributes shall be in such proportion as is appropriate to reflect the relative fault of
Indemnitee, on the one hand, and of the Company and any and all other parties (including officers
and directors of the Company other than Indemnitee) who may be at fault (collectively, including
the Company, the “Third Parties”), on the other hand.
(b) Relative Fault. The relative fault of the Third Parties and the Indemnitee shall
be determined (i) by reference to the relative fault of Indemnitee as determined by the court or
other governmental agency or (ii) to the extent such court or other governmental agency does not
apportion relative fault, by the Reviewing Party after giving effect to, among other things, the
relative intent, knowledge, access to information, and opportunity to prevent or correct the
relevant events, of each party, and other relevant equitable considerations. The Company and
Indemnitee agree that it would not be just and equitable if contribution were determined by pro
rata allocation or by any other method of allocation that does not take account of the equitable
considerations referred to in this Section 7(b).
8. Burden of Proof. In connection with any determination by the Reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified or contribution hereunder the
burden of proof shall be on the Company to establish that Indemnitee is not so entitled.
9. No Presumptions. For purposes of this Agreement, the termination or conclusion of
any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not permitted by
applicable law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of conduct or had any
particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met
such standard of
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conduct or did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be indemnified under
applicable law shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has
not met any particular standard of conduct or did not have any particular belief.
10. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition
to any other rights Indemnitee may have under the Company’s By-Laws or the Delaware General
Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law
(whether by statute or judicial decision) permits greater indemnification by agreement than would
be afforded currently under the Company’s By-Laws and this Agreement, it is the intent of the
parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change.
11. Liability Insurance. To the extent the Company maintains an insurance policy or
policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by
such policy or policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any Company director or officer.
12. Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs,
executors or personal or legal representatives after the expiration of two years from the date of
the occurrence of the events leading to such cause of action, and any claim or cause of action of
the Company shall be extinguished and deemed released unless asserted by the timely filing of a
legal action within such two-year period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action such shorter period shall govern.
13. Amendments, Etc. No supplement, modification or amendment of this Agreement shall
be binding unless executed in writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
14. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all papers required and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company effectively to bring suit
to enforce such rights.
15. No Duplication of Payments. The Company shall not be liable under this Agreement
to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, By-Law or otherwise) of the
amounts otherwise indemnifiable hereunder.
16. Binding Effect, Etc. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or otherwise to all
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or substantially all of the business and/or assets of the Company, spouses, heirs, executors
and personal and legal representatives. This Agreement shall continue in effect regardless of
whether Indemnitee continues to serve as an officer or director of the Company or of any other
enterprise at the Company’s request.
17. Severability. The provisions of this Agreement shall be severable in the event
that any of the provisions hereof (including any provision within a single section, paragraph or
sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable in any respect, and the validity and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the fullest extent permitted by law.
18. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made and to be performed
in such state without giving effect to the principles of conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
set forth above.
| GENERAL NUTRITION CENTERS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
