Exhibit (c)(6)
July 5, 1999
Xx. Xxxxxxx X. Xxxxx
President and Chief Executive Officer
General Nutrition Companies, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Dear Xxxx:
This will confirm our agreement as to certain matters affecting the
executive officers and employees of General Nutrition Companies, Inc. and its
subsidiaries (collectively, "Company" and, after the Merger, the "Surviving
Corporation") on or after the Merger contemplated by the Agreement and Plan
of Merger, dated as of the date hereof, by and among Royal Numico N.V.
("Parent"), Numico Investment Corp. and General Nutrition Companies, Inc.
(the "Merger Agreement"). Capitalized terms not defined herein shall have the
meaning ascribed to them in the Merger Agreement. This letter (the "Benefits
Letter") is the letter described in Section 5.5 of the Merger Agreement.
I. COMPANY BENEFIT PLANS
A. Parent shall cause the Surviving Corporation to assume and honor
in accordance with their terms all Company Benefit Plans listed on Schedule
3.1(l)(i) of the Company Disclosure Schedule, subject to any modifications or
amendments contemplated by the Merger Agreement or this letter. Notwithstanding
the foregoing, except as expressly provided in the Agreement or this letter,
no provision hereunder shall be construed to in any way limit or restrict the
ability of Parent or the Surviving Corporation following the Effective Time
to modify, amend or terminate any Company Benefit Plan in accordance with the
terms of such Company Benefit Plan. No provision hereunder shall be construed
to limit or restrict the ability of Parent or the Surviving Corporation to
terminate the employment of any officer or employee of Company.
B. For the period commencing on the Effective Date and ending no
earlier than December 31, 2000, Parent shall, and shall cause the Surviving
Corporation to, provide employee pension benefit plan and welfare benefit
plan benefits to employees of the Surviving Corporation and its subsidiaries
that, when taken as a whole, are no less favorable in the aggregate than such
benefits provided to such employees immediately prior to the Effective Time;
provided, however, that nothing in this paragraph shall restrict or limit the
ability of Parent or the Surviving Corporation to alter such benefits where
such alteration has been made with the prior written consent of Xxxxxxx X.
Xxxxx.
C. For the period commencing on the Effective Date and ending no
earlier than December 31, 2000, Parent shall, and shall cause the Surviving
Corporation and its subsidiaries to, provide severance benefits described in
Company Human Resources Manual Policy Number 720, as revised March 25, 1999,
to eligible employees whose employment is terminated on or prior to December
31, 2000 due to job elimination; PROVIDED; HOWEVER; such severance benefit
shall be the minimum benefit provided to officers of the Company or its
subsidiaries without employment agreements whose employment is terminated on
or prior to December 31, 2000 to the extent consistent with past practices of
the Company prior to the Effective Time. In no event shall such severance
benefit for officers of the Company or its subsidiaries exceed 100% of such
officer's then current annual base salary.
II. PAYMENTS UNDER COMPANY ANNUAL INCENTIVE PLAN, COMPANY EQUITY PLANS AND
DEFERRED COMPENSATION PLAN
A. Parent confirms that in accordance with the action taken by the
Compensation Committee of Company on June 30, 1999, a pro rata bonus equal to
7/13th of the maximum potential bonus (the "Current Bonus") for each
participant under any Company annual incentive plan, program or arrangement
(the "Existing Bonus Plans") in effect immediately prior to the Effective
Time (including, for this purpose, performance-based employer contributions
under the Company's 401(k) Savings and Incentive Plan, Canadian Savings Plan
(RRSP) and the Executive Retirement Arrangement) which are tied to the
achievement of annual earnings per share objectives of Company, shall be paid
or, as applicable, contributed immediately prior to the Effective Time.
Parent shall cause the Surviving Corporation to adopt an incentive plan with
respect to the remainder of the Surviving Corporation's fiscal year ending in
2000 which shall provide to each participant of the Existing Bonus Plans a
maximum potential bonus equal to 6/13th of such participant's Current Bonus
based upon performance standards established by Xxxxxxx X. Xxxxx.
B. Parent shall cause the Surviving Corporation to make the payments
to holders of Company Stock Options contemplated by Section 5.11 of the
Merger Agreement. Each purchase loan outstanding under the Company's 1996
Management and Director Stock Purchase Plan shall be forgiven upon the change
in control of the Company caused by the transactions contemplated by the
Merger Agreement, in accordance with the terms of such Plan and the purchase
loans.
C. The Company shall pay to each participant under the Company's
1993 and 1999 Deferred Compensation Plans an amount equal to the balance of
such participant's deferral account thereunder as of the Effective Time in
accordance with the terms of such Plans.
III. RETENTION BONUS POLICY
Parent shall cause the Surviving Corporation to pay to each of those
employees (Vice Presidents of the Company and above) listed on Appendix A
hereto the retention bonus set opposite such officer's name in accordance
with the policy adopted by the Company on March 22, 1997, and modified on
June 30, 1999, which policy provides:
A. 50% of the retention bonus shall be paid as of the Effective Time.
B. The remaining 50% of the retention bonus shall be paid on the
first anniversary of the Effective Time, provided the employee has remained
in the continuous employment of the Surviving Corporation during the one-year
period ending on that date.
C. Notwithstanding the above, the remaining 50% shall be paid to the
employee's beneficiary in the event of death or disability during such
continuous employment, or in the event such continuous employment terminates
by reason of an involuntary termination for Cause or a resignation with Good
Reason. "Cause" shall mean (i) the employee'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 the employee; or
(ii) any criminal act constituting bad faith by the employee in dealing with
or on behalf of the Company. "Good Reason" shall mean (i) a significant
reduction in the employee's duties and responsibilities from those in effect
immediately after the Effective Time, or (ii) a reduction in base salary of
the employee, which in each case continued after notice and a reasonable
opportunity to cure such action shall have been provided to Company and
Parent.
The amount of such retention bonuses has been provided to Parent on
the compensation report from the Company, dated as of July 2, 1999.
IV. EXECUTIVE EMPLOYMENT AGREEMENTS AND RELATED MATTERS
Parent confirms that it will comply and/or will cause the Surviving
Corporation to comply with the Employment Agreements of even date herewith
entered into by Parent (where applicable), the Company and the senior
officers of Company listed on Appendix B hereof.
Parent confirms that it will cause the Surviving Corporation to pay
to Xxxxxxx X. Xxxxx the change in control payment provided for in the
above-described Employment Agreement.
Parent confirms that the termination of the service of the Chairman
of the Board of Company immediately following the Effective Time shall
constitute a termination without cause under his employment agreement with
Company. As a result, Parent confirms that it will cause the Surviving
Corporation to pay to the Chairman the full amount of the change in control
payment provided for in the employment agreement following the Effective Time
and shall continue to pay to the Chairman the base salary set forth in the
employment agreement through February 1, 2002, subject to any election by the
Chairman to receive such amount in a lump sum payment in accordance with the
terms thereunder.
V. PARENT EQUITY INCENTIVE PROGRAMS
Parent agrees to establish or cause the Surviving Corporation to
establish the Parent Management Stock Purchase Plan and Parent Stock Option
Program as described on Appendices C and D, respectively.
VI. TAX MATTERS
Parent confirms that it will cause the Surviving Corporation to pay
to affected individuals an excise tax reimbursement payment in accordance
with the action of the Compensation Committee of Company on June 30, 1999.
The amount of the tax reimbursement payment shall be determined and payable
in the manner described in the Employment Agreements referred to above.
With regard to payments to the Chief Executive Officer of the
Company otherwise to be made as of the Effective Date relating to (1) the
Company's 1993 and 1999 Deferred Compensation Plans, and (2) the
change-in-control retention bonus under his employment agreement with the
Company in effect immediately prior to the Effective Time, the Company shall
automatically defer any such payment otherwise payable at the Effective Time
to the extent necessary to avoid the disallowance of the deduction thereof
for tax purposes due to Code Section 162(m). Parent shall cause the Surviving
Corporation to pay interest on any amounts so deferred at the rate of 6% per
annum, simple interest, and Parent shall provide a guaranty of the payment
thereof. Payment of such deferred amounts shall be made not later than (i) in
case of the amounts payable under clause (1) of the preceding sentence
hereof, one day after the Effective Time and (ii) in the case of the amounts
payable under clause (2) of the preceding sentence hereof, one day after the
end of the 2 and 1/2 month period following the Effective Time.
VII. COUNTERPARTS
This Benefits Letter may be executed in one or more counterparts,
which shall together constitute a valid and binding agreement.
Please confirm your agreement with the foregoing by signing and
returning to me the enclosed copy of this letter.
Very truly yours,
ROYAL NUMICO N.V.
/s/ Johannes C.T. van der Wielen
--------------------------------
ACCEPTED AND AGREED TO this
5th day of July, 1999.
GENERAL NUTRITION COMPANIES, INC.
/s/ Xxxxxxx X. Xxxxx
--------------------------
APPENDIX C
Summary of Principal Terms
NUMICO MANAGEMENT STOCK PURCHASE PLAN
The opportunity to purchase shares of Numico under the new
management stock purchase plan would be subject to the terms and conditions
described below. The new management stock purchase plan is not intended to
qualify as an "employee stock purchase plan" under Section 423 of the U.S.
Internal Revenue Code.
ELIGIBLE EMPLOYEES Officers and key employees of the Company (and
its subsidiaries) specified on the attached
schedule.
PURCHASE PRICE The purchase price per share will be equal
to the average closing share price for the 15
trading days preceding the date of the Merger
Agreement. Such purchase price will be expressed
in U.S. dollars based on the U.S. dollars-to-Euro
exchange rate as of the last day of such
15-trading day period.
EMPLOYEE PURCHASE The opportunity to purchase shares will be
OF SHARES extended to the eligible employees as promptly as
practicable after the Closing Date. Those
electing to participate will be required to pay
for such shares no earlier than the date on which
option holders are cashed out pursuant to the
Merger Agreement. The maximum value of shares
purchased will be as follows:
PARTICIPANT MAXIMUM VALUE
Category A 200% of base salary
Category B 150% of base salary
Category C 100% of base salary
MATCHING LOAN For each share purchased, the Company will make a
loan in U.S. dollars to finance the participant's
purchase of up to 2 additional shares. The Company
would retain a security interest in the initial
purchased shares and any additional purchased
shares. The loan will be due 36 full months after
the Closing Date (the "Maturity Date"). The interest
on the loan will be at the rate of 6% per annum,
payable at the Maturity Date.
TIME-VESTING 50% of the loan (including interest thereon)
will be forgiven upon completion of continuous
employment with the Company (or its subsidiaries)
from the Closing Date until the Maturity Date.
If the participant incurs an Involuntary
Termination Without Cause prior to the loan
forgiveness date, 1/3 of the loan will be forgiven
for each full year of employment with the Company
(or its subsidiaries) following the Closing Date.
An "Involuntary Termination Without Cause" means
a termination of employment by the Company and its
subsidiaries (including a termination by reason of
death or disability) for reasons other than
continuing misconduct, a continuing failure to
substantially perform assigned duties, or other
material violation of Company policy as applied
in a manner consistent with past practices of the
Company prior to the Effective Time, in each case
after notice and a reasonable opportunity to cure
such action shall have been provided to the
employee.
PERFORMANCE-VESTING 50% of the loan (including interest thereon) will
be forgiven as of the Maturity Date if the
Company has attained its cumulative "Operating
EBIT" goal for such period, as prepared by the
CEO of the Company in accordance with the long-
term model presented to Numico prior to the date
of the Merger Agreement. If a participant
is involuntarily terminated without Cause prior
to the Maturity Date, 1/3 of the loan (including
interest thereon) will be forgiven for each annual
Operating EBIT goal attained during such period.
SHARE ACCOUNTS All shares purchased under this plan will be held
in an account by Numico or Company until the
Maturity Date or, if earlier, the date of
termination of employment. Participants will
have voting (if any), dividend and any other
shareholder rights with respect to such shares
during such period. Immediately after the Maturity
Date, shares held in such account will be delivered
to participants (or their nominees) and may be
freely sold or transferred.
SECURITIES LAW If the purchase of shares of Numico under this
plan by eligible employees of the Company (or its
subsidiaries) is not permissible by reason of the
application of U.S. securities laws or compliance
with such laws or other applicable laws would be
unduly burdensome, such employees will be granted
substitute awards substantially equivalent to the
economic benefit under this plan.
MISCELLANEOUS In addition to any limitations on transfer or sale
described above or upon the lifting of such
limitations, the sale of shares of Numico acquired
under this plan will be subject to applicable
law and the policies of Numico generally
2
applicable to holders of shares of Numico. For
purposes of this plan, "shares" shall mean the
depositary receipts exchangeable into ordinary
shares on a restricted scale which are directly
traded on the Amsterdam Stock Exchange.
3
APPENDIX D
Summary of Principal Terms
NUMICO STOCK OPTION PROGRAM
1. NUMBER OF OPTIONS
Options to purchase 500,000 shares of Numico would be available for
grant to key employees of the Company (and its subsidiaries) immediately
following the Closing Date. Additional options to purchase at least 250,000
shares of Numico would be available for grant annually following the first,
second and third anniversaries of the Closing Date.
2. TERMS OF OPTION
The options granted under the new stock option plan would be on the
terms and conditions provided below.
ELIGIBLE EMPLOYEES Employees of the Company (including its
subsidiaries).
GRANTS Option grants as determined by CEO of the Company
and approved by the Supervisory Board of
Numico. With regard to the initial grants of
options to purchase 500,000 ordinary shares of
Numico as soon as practicable following Closing,
it is anticipated that such options will not be
granted to participants in the Numico Management
Stock Purchase Plan; PROVIDED; HOWEVER; any
participant without an employment agreement with
the Company who participates at the maximum level
permissible under the Numico Management Stock
Purchase Plan will be eligible for such initial
grants.
TYPE OF OPTIONS Nonqualified options to purchase ordinary
shares of Numico.
EXERCISE PRICE Initial grants of options to purchase 500,000
ordinary shares of Numico as soon as practicable
following Closing Date have an exercise price
equal to the average closing share price for the
15 trading days preceding the date of the Merger
Agreement. Subsequent grants of options shall
have an exercise price equal to the fair market
value of an ordinary share of Numico on the date
of grant. The exercise price will be expressed
in Euros. Initial grants fully vest upon
completion of 3 years of employment with the
Company (or its subsidiaries) following the
Closing Date. Subsequent grants fully vest upon
completion of 3 years of employment following the
date of grant. If option holder incurs an
Involuntary Termination Without Cause prior
to the vesting date, 1/3 of such option will be
exercisable on the date of such termination for
each full year of employment with the Company
(or its subsidiaries) following the date of
grant. An "Involuntary Termination Without
Cause" means a termination of employment by the
Company and its subsidiaries (including a
termination by reason of death or disability)
for reasons other than continuing misconduct,
continuing failure to substantially perform
assigned duties, or other material violation of
Company policy as applied in a manner consistent
with past practices of the Company prior to the
Effective Time, in each case after notice and a
reasonable opportunity to cure such action shall
have been provided to the employee.
OPTION TERM Options expire after 5 years.
SECURITIES LAW If option grants to purchase ordinary shares of
Numico to eligible employees of the Company (or
its subsidiaries) are not permissible by reason
of the application of U.S. securities laws or
compliance with such laws or other applicable laws
would be unduly burdensome, such employees will
be granted substitute cash awards substantially
equivalent to such option grants.
MISCELLANEOUS Exercise of options and the sale of shares of
Numico acquired upon exercise of options will
be subject to applicable law and the policies of
Numico generally applicable to its world-wide
option holders to purchase shares of Numico.
For purposes of this program, "shares" shall
mean the depositary receipts exchangeable into
ordinary shares on a restricted scale which are
directly traded on the Amsterdam Stock Exchange.
