EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT BRUCE J. WOOD PARTIES
Exhibit
10.2
EMPLOYMENT
AND
CHANGE IN CONTROL AGREEMENT
XXXXX
X.
XXXX
PARTIES
This
Employment and
Change in Control Agreement (this “Agreement”) is entered into effective as of
June 1, 2007 (the “Effective Date”) by and between Schiff Nutrition Group, Inc.,
a Utah corporation with offices at 0000 Xxxxx 0000 Xxxx, Xxxx Xxxx Xxxx,
Xxxx
00000-0000 (the “Company”) and Xxxxx X. Xxxx residing at 0000 Xxxx Xxxx
Xxxxxxxx, Xxxxx, Xxxx 00000 (“Executive”).
WITNESSETH:
WHEREAS,
the
Company and Executive are parties to that certain Employment Agreement dated
as
of June 1, 2002, that expired on May 31, 2007 (the “Prior
Agreement”);
WHEREAS,
the
Company and Executive are also parties to that certain Change in Control
Agreement dated as of October 1, 2005 (the “Change in Control Agreement”);
and
WHEREAS,
the
Company and the Executive desire to enter into a single agreement setting
forth
the terms of a new employment agreement and amending and restating the terms
of
the Change in Control Agreement to extend the period during which Executive’s
employment will be deemed to be terminated “in connection with a Change in
Control,” to clarify the intent of certain provisions, and to make certain other
changes.
TERMS
OF
AGREEMENT
NOW,
THEREFORE, in
exchange for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the Company and Executive agree as
follows:
1. Definitions. For
purposes of this Agreement, the terms listed below shall be defined as
indicated.
Affiliate: A
domestic or foreign business entity controlled by, controlling, under common
control with, or in joint venture with, the applicable person or
entity.
Annual
Bonus: See Section 3.2.
Base
Salary: Except as otherwise noted in the Agreement, the base
salary described in Section
3.1 for a 12 month period, as in effect from time to time, but without regard
to
any reduction in Executive’s base salary that would serve as a basis for a
termination of employment by Executive for “Good Reason” pursuant to Section
5.2.
Board: The
Board of Directors of the Company or Schiff Nutrition International, Inc.
(“SNI”).
Cause: See
Section 5.1.
Change
in
Control: The occurrence of any of the following:
(a) A
transaction or
series of transactions (other than an offering of SNI Class A common stock
to
the general public through a registration statement filed with the Securities
and Exchange Commission) whereby any “person” or related “group” of “persons”
(as such terms are used in Sections 13(d) and 14(d)(2) of the
Exchange Act (other than SNI, any of its subsidiaries, an employee benefit
plan
maintained by SNI or any of its subsidiaries or a “person” that, prior to such
transaction, directly or indirectly controls, is controlled by, or is under
common control with, SNI) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of
SNI possessing more than 50% of the total combined voting power of SNI’s
securities outstanding immediately after such acquisition, excluding any
transaction involving a distribution of SNI’s Class A common stock (or any
substituted security) held by Weider Health and Fitness (“WHF”) to
individual stockholders of WHF or their family trusts if and to the extent
the
Board finds such distribution to not be within the intent of this subsection
(a);
(b) During
any period
of two consecutive years, individuals who, at the beginning of such period,
constitute the Board of Directors of SNI together with any new director(s)
(other than a director designated by a person who shall have entered into
an
agreement with SNI to effect a transaction described in subsection (a) or
subsection (c)) whose election by the Board of Directors of SNI or nomination
for election by SNI’s stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the beginning
of the two year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof;
(c) The
consummation by
SNI (whether directly involving SNI or indirectly involving SNI through one
or
more intermediaries) of (x) a merger, consolidation, reorganization, or
business combination or (y) a sale or other disposition of all or
substantially all of SNI’s assets or (z) the acquisition of assets or stock
of another entity, in each case other than a transaction:
(i) Which
results in
SNI’s voting securities outstanding immediately before the transaction
continuing to represent (either by remaining outstanding or by being converted
into voting securities of SNI or the person that, as a result of the
transaction, controls, directly or indirectly, SNI or owns, directly or
indirectly, all or substantially all of SNI’s assets or otherwise succeeds to
the business of SNI (SNI or such person, the “Successor Entity”))
directly or indirectly, at least a majority of the combined voting power
of the
Successor Entity’s outstanding voting securities immediately after the
transaction, and
(ii) After
which no
person or group beneficially owns voting securities representing 50% or more
of
the combined voting power of the Successor Entity; provided, however,
that no person or group shall be treated for purposes of this subsection
(c)(ii) as beneficially owning 50% or more of combined voting power of the
Successor Entity solely as a result of the voting power held in SNI prior
to the
consummation of the transaction; or
(d) SNI’s
stockholders
approve a liquidation or dissolution of SNI.
Code: The
Internal Revenue Code of 1986, as amended.
Competition
Date: See Section 8.4.
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Confidential
Information: All secret proprietary information of the Company
and its Affiliates, not otherwise publicly disclosed, whether or not discovered
or developed by Executive, known by Executive as a consequence of Executive’s
employment with the Company at any time as an employee or
agent. Without limiting the generality of the foregoing, such
proprietary information shall include (a) customer lists; (b) acquisition,
expansion, marketing, financial and other business information and plans;
(c)
research and development; (d) computer programs; (e) sources of supply; (f)
identity of specialized consultants and contractors and confidential information
developed by them for the Company and its Affiliates; (g) purchasing, operating
and other cost data; (h) special customer needs, cost and pricing data; (i)
manufacturing methods; (j) quality control information; (k) inventory
techniques; (l) employee information; any of which information is not generally
known in the industries in which the Company and its Affiliates are conducting
business or shall at any time during Executive’s employment conduct business
including (without limitation) the Nutraceutical
Industry. Confidential Information also includes the overall
business, financial, expansion and acquisition plans of the Company and its
Affiliates, and includes information contained in manuals, memoranda,
projections, minutes, plans, drawings, designs, formula books, specifications,
computer programs and records, whether or not legended or otherwise identified
by the Company and its Affiliates as Confidential Information, as well as
information which is the subject of meetings and discussions and not so
recorded. Notwithstanding the foregoing, Confidential Information shall not
include (i) information, from a source other than the Company, which
is in Executive’s possession on the date hereof or subsequently becomes
available to Executive so long as such information was lawfully obtained
and is
not, to the knowledge of Executive, subject to another confidentiality agreement
or obligation of secrecy to the Company or another person, or (ii) information
which becomes generally available to the public other than directly or
indirectly as a result of disclosure by Executive.
Closing
Price: The closing price, as reported in The Wall Street
Journal, of a share of Common Stock (or any successor company’s equivalent
shares) on the principal exchange on which such shares are traded (currently
the
New York Stock Exchange), subject to equitable adjustment for stock splits,
recapitalizations or similar transactions including stock received or exchanged
on any merger, consolidation or similar event.
Common
Stock: Class A common stock of SNI.
Developments: Those
discoveries, inventions, improvements, advances, methods, practices and
techniques, concepts and ideas, whether or not patentable, relating to or
arising out of Executive’s employment activities with the Company and/or the
Products.
Effective
Date: See preamble.
Employment
Period: The period from the Effective Date through the Expiration
Date, except as terminated earlier or extended as provided in this
Agreement.
Equity
Awards: Restricted stock or other equity awards granted pursuant
to the Equity Incentive Plan.
Exchange
Act: The Securities Exchange Act of 1934, as
amended.
Expiration
Date: May 31, 2008.
Good
Reason: See Section 5.2.
Good
Reason
Date: The day on which the material breach or event occurs
resulting in “Good Reason” pursuant to Section 5.2.
Inventions: Those
discoveries, developments, concepts and ideas, whether or not patentable,
relating to the present, future and prospective activities and Products and
Services of the Company and its Affiliates, which such activities and Products
and Services are known to Executive by virtue of Executive’s employment with the
Company and its Affiliates.
Equity
Incentive
Plan: SNI’s 1997 Equity Participation Plan, SNI’s 2004 Incentive
Award Plan, as either may be amended from time to time, and any other plan
or
arrangement under which SNI (or any successor thereto) or its subsidiaries
grant
equity-based awards.
Options: Stock
option awards granted pursuant to the Equity Incentive Plan.
Nutraceutical
Industry: The manufacture and sale of nutritional products
whether in the form of drinks, bars, herbs, minerals, supplements, powders,
vitamins or pills or otherwise but not the food and beverage industry
generally.
Products
and
Services: All products or services sold, rented, leased, rendered
or otherwise made available to its customers by the Company and its Affiliates,
or otherwise the subject of the business of the Company and its
Affiliates.
Termination
Date: The effective date of the termination of Executive’s
employment with the Company for any reason. In the event of
Executive’s death, the Termination Date shall be his date of
death. In the event of termination under Sections 5.1 through 5.4,
the Termination Date shall be specified in the written notice.
Weider
Group: Weider Health and Fitness (or its successor) and its
Affiliates.
SNI: Schiff
Nutrition International, Inc., a Delaware corporation and the parent of the
Company.
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2. Employment. Subject
to the terms and conditions of this Agreement, Executive hereby agrees to
continue his employment as the President and Chief Executive Officer of the
Company reporting to the Board and to continue to perform to the best of
Executive’s ability, experience and talent those acts and duties and to furnish
those services to the Company and its Affiliates in connection with and related
to such position as the Board shall from time to time direct, provided such
acts
and directives are consistent with the duties of a chief executive
officer. Executive shall continue to use Executive’s best and most
diligent efforts to promote the interests of the Company and its Affiliates.
Executive shall continue to devote his full business time to his duties to
the
Company. Executive shall continue to be provided with secretarial services,
an
office and similar support services and facilitates as appropriate to
Executive’s position and responsibilities.
3. Compensation
and
Benefits; Disability.
3.1. Salary. During
the Employment Period, the Company shall pay Executive a Base Salary at an
annual rate of $488,000, payable in equal installments pursuant to the Company’s
customary payroll policies in force at the time of payment (but in no event
less
frequently than monthly), less required payroll deductions. Executive’s Base
Salary shall be subject to review and increase in the sole discretion of
the
Compensation Committee of the Board.
3.2. Annual
Bonus. In addition to Executive’s Base Salary, during the
Employment Period Executive shall be eligible to participate in a bonus plan
established by the Board or the Board’s Compensation Committee for senior
executives. The bonus plan will correspond to the Company’s fiscal
year and payments under the bonus plan shall be paid to Executive within
75 days
after the end of the Company’s fiscal year. Executive’s target bonus
percentage shall be equal to 70% of his Base Salary, subject to review and
increase in the sole discretion of the Board’s Compensation
Committee. Executive shall not have earned, and shall not be entitled
to payment of, the Annual Bonus unless he remains employed through the end
of
such fiscal year, except as provided in Sections 5.4(c) and
6.1(a)(ii).
3.3. Other
Benefits. Executive shall be entitled, during the Employment
Period, to participate, in any life insurance, disability insurance, health
insurance or hospital plans or other fringe benefits or benefit plans presently
in effect and hereafter maintained by the Company for executives generally.
Executive shall also be entitled to an automobile allowance in the amount
of
$970 per month, subject to review and increase in the sole discretion of
the
Board’s Compensation Committee..
3.4. Vacation. Executive
shall be entitled to the great of four weeks vacation time per year, or such
amount of vacation time provided to senior executives of the Company under
the
Company’s vacation pay policies as in effect from time to time.
3.5. Expenses. Pursuant
to the Company’s customary policies in force at the time of payment, Executive
shall be promptly reimbursed, against presentation of vouchers or receipts
therefor, for all authorized expenses properly incurred by Executive on the
Company’s behalf in the performance of Executive’s duties
hereunder.
4. Employment
Period.
4.1. Termination
of Employment Period. The Employment Period shall continue
through the Expiration Date unless terminated prior to such date by the earliest
of (a) Executive’s discharge for Cause pursuant to Section 5.1, (b) Executive’s
discharge without Cause pursuant to Section 5.3, (c) Executive’s death, (d)
Executive’s termination because of disability, pursuant to Section 5.4(b) or (e)
termination of this Agreement by Executive for Good Reason pursuant to
Section 5.2; unless, however, the Employment Period is extended pursuant to
the following sentence. The Employment Period shall automatically be extended
for up to three successive one year terms unless either party hereto gives
written notice (pursuant to Section 12) of non-extension to the other no
later
than three months prior to the end of the otherwise applicable term. In all
events, the post employment provisions of Section 8 shall survive termination
of
the Employment Period.
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5. Termination
of
Employment.
5.1. By
Company for Cause. The Company may discharge Executive and
terminate this Agreement for Cause upon written notice to
Executive. As used in this Section, “Cause” shall mean any one or
more than one of the following:
(a) Gross
or willful
misconduct of Executive during (i) the Employment Period or (ii) any prior
period of employment of Executive in an executive capacity by any person
or
entity if not disclosed to the Company prior to the execution
hereof;
(b) Executive’s
conviction or plea of guilty or nolo contendere to a fraud or felony
during the Employment Period;
(c) Executive’s
substantial and willful failure to follow specific and lawful substantive
written directives or resolutions of the Board;
(d) Executive’s
willful
and knowing violation of any rules or regulations of any governmental or
regulatory body, which is materially injurious to the financial condition
of the
Company;
(e) Executive’s
drug,
alcohol or substance abuse (to the extent not protected by the Americans
with
Disabilities Act or similar state law) during the Employment Period;
or
(f) any
material breach
of any of the terms of this Agreement which is not corrected after written
notice and a reasonable cure period not to exceed 15 days.
Upon
discharge of
Executive for Cause, the Company shall be relieved and discharged of all
obligations to make payments to Executive which would otherwise be due under
this Agreement, except as to Base Salary earned for actual services rendered
prior to the date of discharge.
5.2. By
Executive. Executive may terminate this Agreement for “Good
Reason” upon written notice to the Company. As used in this Section
5.2, “Good Reason” shall mean: (a) the Company’s material breach of any of the
terms of this Agreement; or (b) a Change in Control occurs and Executive
does
not become the chief executive officer of the principal operating business
of
the surviving entity.
5.3. By
Company without Cause. The Company may, on 30 days
written notice to Executive, terminate this Agreement without cause at any
time
during the Employment Period.
5.4. Termination
on
Executive’s Death or Disability.
(a) This
Agreement and
the Employment Period shall terminate, and the Company shall be relieved
and
discharged of all obligations to make further payment to Executive after
the
date of the death of Executive, except as described in subsection
(c).
(b) If,
during the
Employment Period, Executive shall become ill, disabled, or otherwise
incapacitated so as to be unable regularly to perform Executive’s usual duties
for a period in excess of 180 total days during any consecutive 12 months,
then
the Company shall have the right to terminate this Agreement on 10 days written
notice to Executive.
(c) In
case of
termination of employment described in subsections (a) or (b), the Company
shall
pay to Executive, or his estate, all salary earned for actual services rendered
prior to the Termination Date and, in addition, a pro-rated bonus at the
level
of 100% of his Base Salary (calculated as the product of his then rate of
Base
Salary and the fraction of the fiscal year elapsed through the date of
termination of Executive’s employment) in a single lump sum within ten (10)
business days of the Termination Date.
(d) Upon
a termination
of Executive’s employment pursuant to subsections (a) or (b), unless
otherwise provided in the applicable equity award agreement all Options (or
Equity Awards) that would have become exercisable (or vested) on or before
the
first anniversary of the date of grant following the Termination Date shall
become exercisable (or vested) upon the Termination Date.
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6. Payments
on
Certain Terminations.
6.1. Severance
Payments. Upon a termination of Executive’s employment pursuant
to Sections 5.2 or 5.3 or a notice of non-renewal
given by the Company pursuant to Section 4.1, and in consideration of and
subject to Executive’s delivery to the Company of a release that becomes
irrevocable within 30 days of Executive’s Separation from Service (as defined
below), in form and substance reasonably satisfactory to the Company, of
any
claims that Executive might have against the Company:
(a) the
Company shall
make payments to Executive, as liquidated damages in lieu of all other claims,
of an amount equal to the sum of:
(i) Executive’s
Base
Salary, and
(ii) the
greater of
Executive’s Annual Bonus for the prior fiscal year or Executive’s Base
Salary.
Subject
to Section
9, such amount shall be paid in 24 equal semi-monthly installments, without
interest, beginning on the first business day of the first month that is
at
least 30 days following Executive’s separation from service with the Company
and/or its Affiliates within the meaning of Section 409A(a)(2)(A)(i) of the
Internal Revenue Code and the regulations thereunder (the “Separation from
Service”). The Company shall have no obligation to make such payments
in the event of a breach by Executive of Executive’s covenants in Section
8.
(b) Unless
otherwise
provided in the applicable equity award agreement, all Options (or Equity
Awards) that would have become exercisable (or vested) on or before the first
anniversary of the date of grant following the Termination Date shall become
exercisable (or vested) upon the Termination Date; and,
(c) In
the event
Executive’s employment with the Company is terminated pursuant to Section 5.2 or
5.3, subject to Section 9 of this Agreement, Executive and Executive’s covered
dependents shall be entitled to continue to receive, at the expense of the
Company (other than Executive’s continued payments of the current portion of
such costs for Executive and his covered dependents), and participate in,
for a
period of 12 months from the Termination Date, any life insurance, disability
insurance, dental insurance, health insurance or hospital plans of the Company
in effect at the Termination Date (as such plans may be amended from time
to
time thereafter); provided, that, in the event of Executive’s
termination of employment “in connection with a Change in Control” (as defined
in Section 7), such benefits shall be substantially similar in the aggregate
to
(or greater than) the benefits provided to Executive and his covered dependents
immediately prior to the Change in Control (or, if greater, the benefits
provided to Executive and his covered dependents immediately prior to
Executive’s termination of employment).
7. Change
in
Control Severance Payment.
In
addition to any
severance payments Executive may be entitled to receive under Section 6.1,
if
Executive’s employment with the Company is terminated pursuant to Section 5.2 or
5.3 and such termination is made “in connection with a Change in Control,” then
in consideration of and subject to the delivery by Executive to the Company
of a
release, in form and substance reasonably satisfactory to the Company, of
any
claims that Executive might have against the Company, the Company shall pay
to
Executive an amount equal to his then current Base Salary (the “CIC Severance
Benefit”). Subject to Section 9 of this Agreement and the execution
and non-revocation by Executive of the release described above, the Enhanced
Severance Benefit shall be paid to Executive, without interest, in 24 equal
semi-monthly installments, beginning on the first business day of the
thirteenth month following Executive’s Separation from Service. For
purposes of this Agreement, any termination “in connection with a Change in
Control” shall be any termination pursuant to Section 5.2 or 5.3 of the
Employment Agreement during the period beginning 90 days prior to and concluding
12 months following the consummation of a Change in Control, provided that
the
Change in Control is both (i) subject to a definitive written purchase, sale,
merger or similar agreement entered into during the period beginning on the
Effective Date and ending on the Expiration Date and (ii) consummated on
or
prior to the expiration of six months following the Expiration
Date. The payments provided herein are expressly in addition to and
not a substitution for any payments Executive is entitled to receive under
Section 6.1 of this Agreement for such terminations.
8. Parachute
Payments.
8.1. If
it is determined
(as hereafter provided) that any payment, compensation or other benefit
provided
by the Company (or any successor entity) to or for the benefit of Executive
under this Agreement or any other plan, agreement or arrangement (the
“Payments”) would be subject to the excise tax imposed by Code Section 4999 (a
“Parachute Tax”), or any tax, interest, penalty or other expense incurred by
Executive pursuant to Code Section 409A (a “Deferred Compensation Tax”) to which
Executive would not have been subject but for the Company’s failure to pay any
severance amounts pursuant to the provisions of Section 6, 7 and 9 of this
Agreement or other failure to make such payments in a manner that avoids
such
payments qualifying as deferred compensation under Section 409A of the
Code
(collectively, a “Payment”), then Executive shall be entitled to receive an
additional payment or payments (a “Gross-Up Payment”) in an amount such that,
after payment by Executive of all taxes (including any Parachute Tax or
Deferred
Compensation Tax) imposed upon the Gross-Up Payment, Executive retains
an amount
of the Gross-Up Payment equal to the Parachute Tax and/or Deferred Compensation
Tax imposed upon the Payment.
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8.2. Subject
to the
provisions of Section 8.1 hereof, all determinations required to be made
under
this Section 8, including whether a Parachute Tax or Deferred Compensation
Tax
is payable by Executive with regard to a Payment and the amount of such
Parachute Tax or Deferred Compensation Tax and whether a Gross-Up Payment
is
required and the amount of such Gross-Up Payment, shall be made by the
nationally recognized firm of certified public accountants (the “Accounting
Firm”) used by the Company prior to the Change in Control (or, if such
Accounting Firm declines to serve, the Accounting Firm shall be a nationally
recognized firm of certified public accountants selected by the
Company). For purposes of making the calculations required by this
Section, the Accounting Firm may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G, 4999 and 409A
of
the Code, provided that the Accounting Firm’s determinations must be made with
substantial authority (within the meaning of Section 6662 of the
Code). The Accounting Firm shall be directed by the Company or
Executive to submit its preliminary determination and detailed supporting
calculations to both the Company and Executive within 15 calendar days after
the
determination date, if applicable, and any other such time or times as may
be
requested by the Company or Executive. If the Accounting Firm
determines that any Parachute Tax or Deferred Compensation Tax is payable
by
Executive with regard to a Payment, the Company shall pay the required Gross-Up
Payment to, or for the benefit of, Executive within five business days after
receipt of such determination and calculations. If the Accounting
Firm determines that no Parachute Tax or Deferred Compensation Tax is payable
by
Executive with regard to a Payment, it shall, at the same time as it makes
such
determination, furnish Executive with an opinion that he has substantial
authority not to report any Parachute Tax or Deferred Compensation Tax on
his
federal tax return. Any good faith determination by the Accounting
Firm as to whether a Gross-Up Payment is to be made with regard to a Payment
and
the amount of the Gross-Up Payment shall be binding upon the Company and
Executive absent a contrary determination by the Internal Revenue Service
or a
court of competent jurisdiction; provided, however, that no such determination
shall eliminate or reduce the Company’s obligation to provide any Gross-Up
Payments that shall be due as a result of such contrary
determination. As a result of the uncertainty in the application of
Code Section 4999 or Code Section 409A at the time of any determination by
the
Accounting Firm hereunder, it is possible that Gross-Up Payments that will
not
have been made by the Company should have been made (an “Underpayment”),
consistent with the calculations required to be made hereunder. In
the event that the Company exhausts or fails to pursue its remedies pursuant
to
Section 8.6 hereof and Executive thereafter is required to make a payment
of any
Parachute Tax or Deferred Compensation Tax, Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both
the
Company and Executive as promptly as possible. Any such Underpayment
shall be promptly paid by the Company to, or for the benefit of, Executive
within five business days after receipt of such determination and
calculations.
8.3. The
Company and
Executive shall each provide the Accounting Firm access to and copies of
any
books, records and documents in the possession of the Company or Executive,
as
the case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation and
issuance of the determination contemplated by Section 8.2 hereof.
8.4. The
federal tax
returns filed by Executive (or any filing made by a consolidated tax group
which
includes the Company) shall be prepared and filed on a basis consistent with
the
determination of the Accounting Firm with respect to the Parachute Tax or
Deferred Compensation Tax payable by Executive. Executive shall make
proper payment of the amount of any Parachute Tax or Deferred Compensation
Tax,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with
the
Internal Revenue Service, and such other documents reasonably requested by
the
Company, evidencing such payment. If prior to the filing of
Executive’s federal income tax return, the Accounting Firm determines in good
faith that the amount of the Gross-Up Payment should be reduced, Executive
shall
within five business days pay to the Company the amount of such
reduction.
8.5. The
fees and
expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Sections 8.2 and 8.4 hereof
shall be borne by the Company. If such fees and expenses are
initially advanced by Executive, the Company shall reimburse Executive the
full
amount of such fees and expenses within five business days after receipt
from
Executive of a statement therefor and reasonable evidence of his payment
thereof.
8.6. In
the event that
the Internal Revenue Service claims that any payment or benefit received
under
this Agreement constitutes an “excess parachute payment” within the meaning of
Code Section 280G(b)(1), Executive shall notify the Company in writing of
such
claim. Such notification shall be given as soon as practicable but
not later than 10 business days after Executive is informed in writing of
such
claim and shall apprise the Company of the nature of such claim and the date
on
which such claim is requested to be paid. Executive shall not pay
such claim prior to the expiration of the 30 day period following the date
on
which Executive gives such notice to the Company (or such shorter period
ending
on the date that any payment of taxes with respect to such claim is
due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall
(i) give the Company any information reasonably requested by the Company
relating to such claim; (ii) take such action in connection with contesting
such
claim as the Company shall reasonably request in writing from time to time,
including without limitation, accepting legal representation with respect
to
such claim by an attorney reasonably selected by the Company and reasonably
satisfactory to Executive; (iii) cooperate with the Company in good faith
in
order to effectively contest such claim; and (iv) permit the Company to
participate in any proceedings relating to such claim; provided, however,
that
the Company shall bear and pay directly all costs and expenses (including,
but
not limited to, additional interest and penalties and related legal, consulting
or other similar fees) incurred in connection with such contest and shall
indemnify and hold Executive harmless, on an after-tax basis, for and against
for any Parachute Tax or income tax or other tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and
payment of costs and expenses.
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8.7. The
Company shall
direct Executive with regard to all proceedings taken in connection with
such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority
in
respect of such claim and may, at its sole option, either direct Executive
to
pay the tax claimed and xxx for a refund or contest the claim in any permissible
manner and Executive agrees to prosecute such contest to a determination
before
any administrative tribunal, in a court of initial jurisdiction and in one
or
more appellate courts, as the Company shall determine; provided, however,
that
if the Company directs Executive to pay such claim and xxx for a refund,
the
Company shall advance the amount of such payment to Executive on an
interest-free basis (to the extent permitted by applicable law), and shall
indemnify and hold Executive harmless, on an after tax basis, from any Parachute
Tax or Deferred Compensation Tax (or other tax including interest and penalties
with respect thereto) imposed with respect to such advance or with respect
to
any imputed income with respect to such advance; and provided, further, that
if
Executive is required to extend the statue of limitations to enable the Company
to contest such claim, Executive may limit this extension solely to such
contested amount. The Company’s right to direct Executive with regard
to the contest shall be limited to issues with respect to whether and the
extent
to which a payment or benefit is an “excess parachute payment” pursuant to Code
Section 280G(b)(1), the imposition of the Parachute Tax under Code Section
4999
and the imposition of the Deferred Compensation Tax under Code Section 409A,
and
Executive shall be entitled to settle or contest, as the case may be, any
other
issue raised by the Internal Revenue Service or any other taxing
authority. In addition, the Company shall not direct Executive to
take a position or agree to any final resolution if such position or resolution
could reasonably be expected to adversely affect Executive unrelated to matters
covered hereto, unless Executive consents in writing to such position or
agreement.
8.8. If,
after the
receipt by Executive of an amount advanced by the Company in connection with
the
contest of the Parachute Tax or Deferred Compensation Tax claim, Executive
receives any refund with respect to such claim, Executive shall promptly
pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto); provided, however, if the
amount of that refund exceeds the amount advanced by the Company Executive
may
retain such excess. If, after the receipt by Executive of an amount
advanced by the Company in connection with a Parachute Tax or Deferred
Compensation Tax claim, a determination is made that Executive shall not
be
entitled to any refund with respect to such claim and the Company does not
notify Executive in writing of its intent to direct Executive to contest
the
denial of such refund prior to the expiration of 30 days after such
determination such advance shall be deemed to be in consideration for services
rendered after the Termination Date.
9. Code
Section
409A. If Executive is a “specified employee”, as defined in Code
Section 409A(a)(2)(B)(i), with respect to the Company and its
affiliates, any benefit payable under this Agreement that constitutes
a deferral of compensation subject to Internal Revenue Code Section 409A
that is
payable upon or within the six months following Executive’s Separation from
Service, shall be paid upon the date which is six months after the date of
Executive’s Separation from Service (or, if earlier, the date of Executive’s
death). If any benefit payable under this Agreement is exempt from Code Section
409A (for example certain amounts payable upon an involuntary separation
from
service), such benefit shall not be delayed, but shall be paid in accordance
Sections 6 and/or 7 of this Agreement.
10. Inventions,
Confidential Information and Related Matters.
10.1. Assignment
of
Inventions. Executive hereby assigns and transfers to the Company
any and all works of authorship, inventions and innovations (whether deemed
patentable or not), which relate to the business of the Company and which
are
made by Executive (or by Executive jointly with others) during the term of
Executive’s employment and/or within one year after the termination of
Executive’s employment with the Company or any of its Affiliates, if such work
of authorship, invention, or innovation is based upon or relates to Confidential
Information acquired by Executive during the term of employment with the
Company
or any of its Affiliates. For purposes of copyright law, any such
work of authorship shall be deemed a work made for hire. Executive
agrees to promptly disclose to the Company and its Affiliates all such works
of
authorship, inventions, and innovations. Executive agrees to execute
any document reasonably requested by the Company and/or its Affiliates that
is
necessary or appropriate to document, perfect, or effect the intention of
this
Section 10 or to secure any patent, copyright registration (as a work made
for hire), trademark registration or other protection thereof for the Company
and its Affiliates.
10.2. Restrictions
on
Use and Disclosure. Except as otherwise required by Executive’s
employment duties for the Company or any of its Affiliates, Executive shall
maintain in strict confidence and shall not directly, indirectly or otherwise,
use, publish, disclose or disseminate, or use for Executive’s benefit or the
benefit of any person, firm, corporation or entity, any Confidential Information
of or relating to the Company or its Affiliates (or which the Company or
its
Affiliates has a right to use). For purposes of this Agreement
“Confidential Information” shall mean all confidential and proprietary
information of the Company and its parents, subsidiaries and affiliates,
whether
in oral, written or electronic form or obtained by observation or otherwise,
whether or not legended or otherwise identified as confidential or proprietary
information, and whether or not discovered or developed by Executive or known
or
obtained by Executive as a consequence of Executive’s employment with the
Company or any of its Affiliates at any time as employee or
agent. Confidential Information shall include, without limitation,
all scientific, clinical, engineering, technical, process, method or commercial
data, information or know-how, relating to the research, development,
manufacture, distribution, sale or marketing of any vitamins, minerals,
nutritional supplements, sports nutrition products, beverages, food bars,
powdered food supplements, or other products or product lines of the Company
and
its Affiliates. Confidential Information shall also include, without
limitation, all customer lists, pricing data, sources of supply and related
supplier and vendor information, purchasing, operating or other cost data,
manufacturing methods, quality control information, regulatory information,
employee and compensation information, financial data, trade secrets, formulas,
intellectual property, manuals, financial data, forecasts, business plans,
expansion or acquisition plans and product development information and
plans. Notwithstanding the foregoing, Confidential Information shall
not include (i) information, from a source other than the Company and its
Affiliates, which is in Executive’s possession on the date hereof or
subsequently becomes available to Executive so long as such information was
lawfully obtained and is not, to the knowledge of Executive, subject to another
confidentiality agreement or obligation of secrecy to the Company, its
Affiliates or another person, or (ii) information which becomes generally
available to the public other than directly or indirectly as a result of
disclosure by Executive or another party bound by legal obligations prohibiting
such disclosure.
8
10.3. Return
of
Documents and Materials. Upon termination of Executive’s
employment, Executive shall forthwith deliver to the Company all Confidential
Information and Inventions embodied in any form, including all copies, then
in
Executive’s possession or control, whether prepared by Executive or others, as
well as all other Company property in Executive’s possession or
control.
10.4. Competitive
Activities. From the date hereof and (a) during the term of this
Agreement and (b) thereafter until the “Competition Date” which shall
be
(i) in
the case of
terminations of Executive’s employment pursuant to Sections 5.2 or 5.3, the
182nd day
following the Termination Date, or
(ii) in
the case of any
other termination of Executive’s employment, the first anniversary of the
Termination Date,
Executive
shall
not, directly or indirectly, within the territorial United States, become
an
employee or consultant or otherwise render services to, lend funds to, serve
on
the board of, invest in (other than as a 1% or less shareholder of a
publicly-traded corporation) or guarantee the debts of, any of: Xxxxxx Health
Products, Perrigo, NBTY, Nutraceutical, Inc. or Pharmavite or any newly created,
successor or acquired businesses of same which competes with the Company
in the
Nutraceutical Industry or any business newly created by Executive following
termination of employment which competes with the Company in the Nutraceutical
Industry; provided, however, that in no event shall the restrictions set
forth
in this Section 10.4 prohibit Executive from providing services to, lending
funds to, serving on the board of, investing in or guaranteeing the debts
of any
entity which is an Affiliate of the Company at the time such action is
taken. The Board may in its sole discretion give Executive written
approval to engage in such activities or render such services after termination
of this Agreement if Executive and such prospective firm or business
organization gives the Company written assurances, satisfactory to the Board
in
its sole discretion, that the integrity of the Confidential Information,
the
Inventions and the good will of the Company and its majority owned Affiliates
will not be jeopardized by such employment. Executive shall, for a
period of 12 months after the Competition Date notify the Company of any
change
in address and identify each subsequent employment or business activity in
which
Executive shall engage during such 12 months, stating the name and address
of
the employer or business organization and the nature of Executive’s
position.
10.5. Solicitation
of
Executives. From the date hereof until 12 months after the
termination of Executive’s employment with the Company, Executive shall not,
without the prior written approval of the Board of the Company, directly
or
indirectly, solicit, raid, entice or induce any person who presently is or
at
any time during the term hereof shall be an employee of the Company or its
majority owned Affiliates and who was or is eligible for a grant under the
Equity Incentive Plan or any successor plan, to become employed by any other
person, firm or corporation in any business in competition with the
Company.
11. No
Other
Contracts. Executive represents and warrants that neither the
execution and delivery of this Agreement by Executive nor the performance
by
Executive of Executive’s obligations hereunder, shall constitute a default under
or a breach of the terms of any other agreement, indenture or contract to
which
Executive is a party or by which Executive is bound, nor shall the execution
and
delivery of this Agreement by Executive or the performance of Executive’s duties
and obligations hereunder give rise to any claim or charge against either
Executive or the Company based upon any other contract, indenture or agreement
to which Executive is a party or by which Executive is bound.
12. Notices. Any
notices or communication given by any party hereto to the other party shall
be
in writing and personally delivered or mailed by registered or certified
mail,
return receipt requested, postage prepaid. Notices shall be addressed
to the parties at the addresses set forth above. Mailed notices shall
be deemed given when received. Any person entitled to receive notice
may designate in writing, by notice to the others, such other address to
which
notices to such party shall thereafter be sent.
13. Miscellaneous.
13.1. Entire
Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersede any and all prior
agreements of the parties with respect to such subject matter.
13.2. Amendment;
Waiver. This Agreement may not be amended, supplemented, canceled
or discharged, except by written instrument executed by the party affected
thereby. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver
thereof. No waiver of any preceding or succeeding breach of this
Agreement.
13.3. Binding
Effect;
Successors; Assignment.
(a) The
Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise, including, without limitation,
any
successor due to a Change in Control) to the business or assets of the Company,
by agreement in form and substance reasonably satisfactory to Executive,
to
expressly assume and agree to perform this Agreement in the same manner and
to
the same extent the Company would be required to perform if no such succession
had taken place. This Agreement will be binding upon and inure to the
benefit of the Company and any successor to the Company, including, without
limitation, any person directly or indirectly acquiring the business or assets
of the Company in a transaction constituting a Change in Control (and such
successor shall thereafter be deemed the “Company” for the purpose of this
Agreement), but will not otherwise be assignable, transferable or delegable
by
the Company.
(b) This
Agreement will
inure to the benefit of and be enforceable by Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees
and
legatees, but will not otherwise be assignable, transferable or delegable
by
Executive.
9
13.4. Headings. The
headings contained in this Agreement (except those in Section 1) are for
reference purposes only and shall not affect the meaning or interpretation
of
this Agreement.
13.5. Governing
Law;
Interpretation. This Agreement shall be construed in accordance
with and governed for all purposes by the laws and public policy of the State
of
Utah applicable to contracts executed and to be wholly performed within such
State. Service of process in any dispute shall be effective (a) upon
the Company, if served on any senior officer of the Company; (b) upon Executive,
if served at Executive’s residence last known to the
Company. Executive acknowledges that breach of Sections
10.1 through 10.5 would entail irreparable injury and that, in addition to
the
Company’s other express and implied remedies, the Company shall be entitled to
injunctive and other equitable relief to prevent any actual, intended or
likely
such breach.
13.6. Further
Assurances. Each party agrees at any time, and from time-to-time,
to execute, acknowledge, deliver and perform, and/or cause to be executed,
acknowledged, delivered and performed, all such further acts, deeds assignments,
transfers, conveyances, powers of attorney and/or assurances as may be
necessary, and/or proper to carry out the provisions and/or intent of this
Agreement.
13.7. Gender;
Singular/Plural. In this Agreement, the use of one gender (e.g.,
“he”, “she” and “it”) shall mean each other gender; and the singular shall mean
the plural, and vice versa, all as the context may require.
13.8. Severability. The
parties acknowledge that the terms of this Agreement are fair and reasonable
at
the date signed by them. However, in light of the possibility of a
change of conditions or differing interpretations by a court of what is fair
and
reasonable, the parties stipulate as follows: if any one or more of the terms,
provisions, covenants and restrictions of this Agreement shall be determined
by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated; further, if any one or more of the provisions contained in
this
Agreement shall for any reason be determined by a court of competent
jurisdiction to be excessively broad as to duration, geographical scope,
activity or subject, it shall be construed, by limiting or reducing it, so
as to
be enforceable to the extent compatible with then applicable law.
13.9. Counterparts. This
Agreement may be executed in two or more counterparts, each of which will
be
deemed an original.
13.10.
Indemnification. The
Company indemnifies Executive to the full extent available under the Company’s
Articles of Incorporation and Bylaws.
10
EXECUTION
The
parties,
intending to be legally bound, executed this Agreement as of the date first
above written, whereupon it became effective in accordance with its
terms.
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XXXXX
X.
XXXX
___________________________________
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SCHIFF
NUTRITION GROUP, INC.
By:
___________________________________
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Title:
__________________________________
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