NTY » Topics » Potential Payments upon Termination or Change of Control

This excerpt taken from the NTY DEF 14A filed Jan 16, 2008.

Potential Payments upon Termination or Change of Control

        With the exception of Messrs. Rudolph and Kamil, all our executive officers are employed at-will, without employment agreements or severance or change of control agreements. As noted above, although the Company's agreements with Mr. Rudolph and Mr. Kamil expired by their terms on September 30, 2007, Mr. Rudolph and Mr. Kamil remain actively employed by the Company and new agreements are being negotiated. Set forth below is an outline of what amounts would be due to

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Mr. Rudolph and Mr. Kamil if that executive's employment with the Company ended on September 30, 2007 under the expired employment agreements.

        Scott Rudolph.    If Mr. Rudolph terminated his employment in the event of a material breach by the Company or for other "good reason" (as defined in the Expired Rudolph Agreement) on September 30, 2007, or if the Company terminated Mr. Rudolph's employment without "cause" (as defined in the Expired Rudolph Agreement) on that date, then (i) Mr. Rudolph would have been entitled to receive a lump sum payment equal to $6,310,172 (which is equal to three times the sum of (x) his base salary of $853,391 plus (y) the annual bonus Mr. Rudolph received with respect to the year preceding such termination of $1,250,000), (ii) Mr. Rudolph would have been entitled to the continuation of his welfare benefits for three years; (iii) all of his outstanding equity incentive awards (including stock options) would have vested immediately and remained exercisable for a period of one year following the date of such termination, or, if earlier, until the end of the option term (which would not have added any value on September 30, 2007 because all Mr. Rudolph's options were already exercisable on that date regardless of this provision); and (iv) if a subsequent Change of Control (as defined in the Expired Rudolph Agreement) occurred and the severance payments were subject to the excise tax ("Excise Tax") imposed under Section 4999 of the Code, he would have been entitled to a gross-up payment for such Excise Tax. (For purposes of this paragraph, the Company has assumed that the termination of the executive's employment was not in connection with a Change of Control and, accordingly, no gross-up payment for the Excise Tax would be triggered as a result of the receipt of the foregoing severance benefits. A description of the severance benefits that would have been payable upon a termination of employment following a Change of Control is set forth in the next paragraph).

        If a Change of Control occurred on September 30, 2007, and a termination of Mr. Rudolph's employment by the Company without "cause" or as a result of Mr. Rudolph's resignation for "good reason" occurred on that date (i) Mr. Rudolph would have been entitled to receive a lump sum payment of $4,759,547 (which is 2.99 times the average compensation Mr. Rudolph received during the five years immediately preceding such termination of $1,591,822); (ii) all his outstanding equity incentive awards (including stock options) would have vested (which would not have added any value on September 30, 2007 because all Mr. Rudolph's options were already exercisable on that date regardless of this provision); (iii) he would have had the right to receive a cash payment equal to the "spread" on all outstanding stock options (see "—Outstanding Equity Awards at Fiscal Year End"); and (iv) he would have been entitled to a payment sufficient to offset the effects of any Excise Tax (which would have been $0 because Mr. Rudolph would not have been subject to such Excise Tax).

        Harvey Kamil.    If Mr. Kamil terminated his employment in the event of a material breach by the Company or for other "good reason" (as defined in the Expired Kamil Agreement) on September 30, 2007, or if the Company terminated Mr. Kamil's employment without "cause" (as defined in the Expired Kamil Agreement) on that date, (i) Mr. Kamil would have been entitled to receive a lump sum payment equal to $3,383,696 (which is equal to three times the sum of (x) his base salary of $477,899 plus (y) the annual bonus Mr. Kamil received with respect to the year preceding such termination $650,000); (ii) Mr. Kamil would have been entitled to the continuation of his welfare benefits for three years; (iii) all his outstanding equity incentive awards (including stock options) would have vested immediately and remained exercisable until September 30, 2008, or, if earlier, until the end of the option term (which would not have added any value on September 30, 2007 because all Mr. Kamil's options were already exercisable on that date regardless of this provision); and (iv) if a subsequent Change of Control (as defined in the Expired Kamil Agreement) occurred and the severance payments were subject to an Excise Tax, he would have been entitled to a gross-up payment for such Excise Tax. (For purposes of this paragraph, the Company has assumed that the termination of the executive's employment was not in connection with a Change of Control and, accordingly, no gross-up payment for the Excise Tax would be triggered as a result of the receipt of the foregoing severance benefits. A description of the severance benefits that would have been payable upon a termination of employment following a Change of Control is set forth in the next paragraph).

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        If a Change of Control occurred on September 30, 2007, and a termination of Mr. Kamil's employment by the Company without "cause" or as a result of Mr. Kamil's resignation for "good reason" occurred on that date, (i) Mr. Kamil would have been entitled to receive a lump sum payment of $2,617,096 (which is 2.99 times the average compensation Mr. Kamil received during the five years immediately preceding such termination of $875,283); (ii) all his outstanding equity incentive awards (including stock options) would have vested (which would not have added any value on September 30, 2007 because all of Mr. Kamil's options were already exercisable on that date regardless of this provision); (iii) he would have had the right to receive a cash payment equal to the "spread" on all outstanding stock options (see "—Outstanding Equity Awards at Fiscal Year End"); and (iv) he would have been entitled to a payment sufficient to offset the effects of any Excise Tax (which would have been $0 because Mr. Kamil would not have been subject to such Excise Tax).


EXECUTIVE OFFICERS OF THE REGISTRANT

        The Company's executive officers of NBTY, all of whom are U.S. citizens, and their ages as of January 10, 2008, are as follows:

Name

  Age
  Position
  Commenced term of
office as Officer

Scott Rudolph   50   Chairman of the Board and Chief Executive Officer   1986
Harvey Kamil   63   President and Chief Financial Officer   1982
James P. Flaherty   50   Senior Vice President—Marketing and Advertising   1988
Hans Lindgren   47   Senior Vice President—Operations and Corporate Secretary   2008
John Leahy   54   Senior Vice President—Wholesale Business   2008

        Certain information regarding Messrs. Kamil, Flaherty, Lindgren and Leahy, including each of their principal occupations during the past five years and current directorships, is set forth below. See "Information as to Director Nominees" above for additional information regarding Mr. Rudolph. Unless indicated otherwise, all executive officers have had the indicated principal occupations for the past five years.

        Harvey Kamil is the President and Chief Financial Officer of the Company. He serves on the Board of Directors of the Council for Responsible Nutrition and on the Board of Directors of the National Nutritional Food Association. He joined the Company in 1982.

        James P. Flaherty is the Senior Vice President—Marketing and Advertising. He joined the Company in 1979.

        Hans Lindgren is the Senior Vice President—Operations and Corporate Secretary, effective January 1, 2008. He has been involved in various aspects of the Company's operations since joining the Company in 1992. Mr. Lindgren is Scott Rudolph's brother-in-law.

        John Leahy is the Senior Vice President—Wholesale Business, effective January 1, 2008. He has been involved in the Company's Wholesale and International operations since joining the Company in July 2006. Before joining the Company, Mr. Leahy was President—International/Corporate Sales Division of Playtex Products, Inc., where he worked for 23 years.


REPORT OF THE AUDIT COMMITTEE

        The following is the report of the Audit Committee with respect to the Company's audited financial statements for the 2007 Fiscal Year.

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        The Audit Committee has reviewed and discussed the Company's audited financial statements for the 2007 Fiscal Year with management. The Audit Committee also has discussed with PricewaterhouseCoopers LLP, the Company's independent registered public accountants for the 2007 Fiscal Year, the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as modified or supplemented, which includes, among other items, matters related to the conduct of the audit of the Company's financial statements. The Audit Committee also has received written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1, as modified or supplemented, which relates to the accountant's independence from the Company and its related entities, and has discussed with PricewaterhouseCoopers LLP their independence from the Company.

        The Audit Committee acts pursuant to the Audit Committee Charter. Each member of the Audit Committee qualifies as an "independent" Director under the current listing standards of the NYSE, where the Common Stock is listed.

        PricewaterhouseCoopers LLP served as the Company's independent registered public accountants for the 2007 Fiscal Year. As stated in Proposal 3, the Board has selected PricewaterhouseCoopers LLP to serve as the Company's independent registered public accountants for the 2008 Fiscal Year.

        PricewaterhouseCoopers LLP audit services during the 2007 Fiscal Year consisted of the examination of the Company's financial statements and services related to the Company's filings with the SEC. All fees paid to PricewaterhouseCoopers LLP and all services provided by PricewaterhouseCoopers LLP during the 2007 Fiscal Year were reviewed, considered for independence and approved by the Audit Committee.

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