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John H. Gutfreund
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Chairman of the Board
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July
2, 2008
Michael
A. Zeher
Missoula,
Montana 59808
Dear
Mr. Zeher:
This
Letter Agreement (“Agreement”) sets forth the
terms on which you are to be employed by Nutrition 21, Inc.
(the “Company”).
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a)
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Effective
July 14, 2008 and continuing thereafter during the Term (as
hereinafter defined), the Company shall employ you, and you shall
be employed by the Company, as its President and Chief Executive
Officer. You shall report to the Board of Directors (the
“Board”).
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b)
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You
shall be elected as a director of the Company effective at the
commencement of the Term, and you shall thereafter be nominated by
the Board for reelection as a director by the shareholders at their
annual meetings during the Term.
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c)
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Your
employment by the Company shall be full time and you shall engage
in no other business or employment during the Term, except that you
may supervise your passive investments. You shall not serve on the
board of any other for-profit company, except that you may serve as
an outside director of Matrixx Initiatives, Inc. and as an outside
director of any other companies that are approved in writing by the
Board. Charitable organizations and similar type activities of a
community service/volunteer nature are not prohibited by this
paragraph.
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d)
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You
shall adhere to the Company’s Standards of Business
Conduct.
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a)
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The
Term means the three-year period beginning on July 14, 2008 and
ending July 13, 2011. However, the Term may be extended for
successive one-year periods (each, a “Renewal Term”)
unless at least 90 days prior to the end of the Term or the then
most recent Renewal Term, the Company shall give notice to you or
you shall give notice to the Company that the Term will not be
further extended. In the event that this agreement is not renewed
by the Company in either the original or renewal Terms, you shall
be entitled to the twelve-month severance as prescribed in section
6.
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b)
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Notwithstanding
the foregoing, your employment with the Company shall terminate on
the earlier of your death or permanent disability, or upon
termination by the Company or by you as provided in Section
6.
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3)
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COMPENSATION
Your base compensation will be at the annual rate of $325,000, and
will be paid in ordinary payroll installments, subject to
withholding and similar deductions. The Board will review your base
compensation in July 2009, and each July after that for the Term,
and may increase your base compensation in its sole discretion,
provided however, that the base salary shall be increased annually
in a minimum amount that reflects the cost of living increase
effective for the New York and vicinity area as published in the
United States Consumer Price Index for the most recent time period
preceding July 14 of the calendar year. This cost of living
adjustment shall be effective for the pay period next following
July 14 of each calendar year during the Term.
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4)
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BONUS
AND STOCK OPTIONS
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a)
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You
will receive, in addition to your base pay set forth above, an
annual cash bonus of up to 60% of your annualized base compensation
based on the extent to which you meet specific Performance
Objectives based on cash flow, profitability and sales growth (in
that order of importance) that the Board will establish in its
discretion. These Performance Objectives for Fiscal Year 2009 are
attached to this agreement as Exhibit A and incorporated herein by
this reference. Each year of the Term, the Performance Objectives
for the following year will be determined by the Board and the
addendum attached hereto shall be amended to reflect the new
Performance Objectives.
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b)
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By
separate grant letter, the Company will on the date you become
employed grant to you stock options to purchase 1,000,000 shares of
the Company common stock (“Stock Options”) under the
Company’s 2002 Inducement Stock Option Plan (the
“Plan”). The Stock Options will vest (i) one-third on
each anniversary of the commencement of the Term so long as on such
anniversary you continue to be employed by the Company, or (ii), if
earlier, on your death or permanent disability. Whether or not
vested, the Stock Options will expire on the earlier of 89 days
after termination of your employment (for any reason or for no
reason and whether or not for cause) or 10 years after the date of
grant. The Stock Options shall also be subject to the terms of the
Plan and the grant letter. A copy of the Plan and grant letter will
be provided to you prior to the date you sign this
agreement.
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Notwithstanding
any of the foregoing, in the event the Company or a
contr
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