GNC 2008 Annual Report Download - page 153

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employment agreements provides, and Messrs. Dowd's, Weiss's and Locke's employment agreements provided, that if any payment to the executive would be
subject to, or result in, the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code, then the amount of such payments will be
reduced to the highest amount that may be paid by us without subjecting such payment to the excise tax. Mr. Fortunato's employment agreement provides that
the reduction will not apply if he would, on a net after-tax basis, receive less compensation than if the payment were not so reduced.
In connection with the Merger, Messrs. Fortunato, Larrimer, Dowd, Weiss, DiNicola and Weintrub each agreed to irrevocably waive any and all rights to
receive any amounts in connection with the Merger that, individually or in the aggregate, would result in an excess "parachute payment" under Section 280G
of the Internal Revenue Code. However, in connection with the Merger, and in accordance with Section 280G of the Internal Revenue Code, the stockholders
of our Parent subsequently consented to each of the forgoing executive's receiving such waived amounts and, pursuant to such waiver, not be subject to the
adverse tax consequences to us and to the executive's that would otherwise result from the payment of such amounts.
In November 2006, in contemplation of a possible change in control of us, we entered into letter agreements with each of Messrs. Larrimer, Dowd and
Weiss with respect to the payment of a success bonus if we completed a change in control transaction on or before June 30, 2007. The Merger was a change in
control for purposes of the success bonuses and payments were made on the closing date as follows: Larrimer, $200,000; Dowd, $50,000; Weiss, $50,000.
In March 2007, Messrs. Fortunato, Larrimer, Dowd, Weiss and Locke purchased shares of our Parent's Class A common stock and Series A preferred stock
in connection with the completion of the Merger. Under the terms of call agreements entered into with each of these 2007 Named Executive Officers, our
Parent has the option to repurchase all or any portion of the shares held by each of these 2007 Named Executive Officers upon the termination of the 2007
Named Executive Officer's employment with the Company for any reason. The option must be exercised within 180 days after the 2007 Named Executive
Officer's termination. Our Parent is generally entitled to repurchase the shares for the fair market value on the date of such termination. In the event that the
2007 Named Executive Officer is terminated for cause or the 2007 Named Executive Officer terminates employment without good reason, the purchase price
will be the lesser of the 2007 Named Executive Officer's cost and the fair market value on the date of termination. Our Parent exercised its option to purchase
Mr. Larrimer's shares at the fair market value on the date of termination following the termination of his employment effective December 31, 2007.
Former Executive Officers
In December 2005, we entered into an employment agreement with Mr. DiNicola, effective as of January 1, 2006. The employment agreement provided
for an employment term through December 31, 2008, subject to automatic annual one-year renewals commencing on December 31, 2007 and each
December 31 thereafter, unless we or Mr. DiNicola provided at least one year advance notice of termination. The employment agreement provided for an
annual base salary of $750,000. Mr. DiNicola was entitled to an annual performance bonus pursuant to the terms of his employment agreement. He had a
target bonus of 50% to 120% of his annual base salary, which was based upon our attainment of annual sales, EBITDA, and cash flow generation goals set by
the Company Board or the Compensation Committee. Mr. DiNicola was also entitled to a one-time cash success bonus of $1.0 million upon a change in
control of us meeting criteria established in the employment agreement. In connection with the employment agreement, in January 2006, we also granted to
Mr. DiNicola 42,675 shares of our common stock. Mr. DiNicola resigned as our Executive Chairman of the Company Board effective immediately prior to
the closing of the Merger. He was not entitled to any severance compensation under his employment agreement, but he was entitled to receive the $1.0 million
success bonus, which was paid to him on March 16, 2007, the acquisition closing date.
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