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Exhibit 10.1

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SCHIFF NUTRITION INTERNATIONAL, INC.
2004 INCENTIVE AWARD PLAN
 
PERFORMANCE AWARD GRANT NOTICE

 
Section 1:
  Notice of Grant

 
Schiff Nutrition International, Inc. (the “Company”), pursuant to our 2004
Incentive Award Plan, as amended (the “Plan”), hereby grants this performance
award (the “Performance Award”) to the holder listed below (“Holder”) pursuant
to the Plan.  The Performance Award shall be subject to all of the terms and
conditions as set forth herein and in the Award Agreement attached hereto as
Exhibit A (the “Award Agreement”) and the Plan, each of which are incorporated
herein by reference.  Unless otherwise defined in this Performance Award Grant
Notice (the “Grant Notice”) or the attachments hereto, the terms defined in the
Plan shall have the same defined meanings in this Grant Notice and the
attachments hereto.
 
Holder:
__________________________________________
Grant Date:
December 12, 2008
Performance Period:
October 1, 2008 through May 31, 2011
Target Award Value:
$_____________.  This is the dollar denomination of the award granted.  The
actual value of the award payable, if any, will be based on the Earned Value (as
discussed below and in the Award Agreement) of the award and the extent to which
the award vests.
The Earned Value of the award is based on how well the Company performs against
targeted goals for three financial performance measures (as discussed
below).  Earned Value may be as small as $0 and as large as 150% of the Target
Award Value.  Earned Value will equal Target Award Value when the Company
performs at target performance for each of the three financial performance
goals, as set forth on Exhibit B.
Full vesting is based on Holder’s continued service with the Company throughout
the Performance Period, and may be less than 100% in certain events discussed
below.
Earned Value:
The “Earned Value” (as defined in the Award Agreement) will be based on the
Company’s actual performance over the Performance Period against the specified
performance goals for Cumulative Performance Period Operating Income, Cumulative
Performance Period Net Sales and Cumulative Performance Period Net Cash Flow,
as set forth on Exhibit B and discussed further in the Award Agreement. If the
threshold level of Cumulative Performance Period Operating Income over the
Performance Period is not met, then regardless of how the Company performs
against the Cumulative Performance Period Net Sales goal and the Cumulative
Performance Period Net Cash Flow goal, the Earned Value will be $0 and no
amounts will be payable.

 

 
 
 

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Vesting:
If the Holder remains continuously in service throughout the Performance Period
and does not experience a “Separation from Service” (as defined in the Award
Agreement) prior to May 31, 2011, then one hundred percent (100%) of the Earned
Value shall vest and become nonforfeitable on May 31, 2011.  Vesting of the
Earned Value shall be accelerated in whole or in part upon the happening of
certain qualifying terminations of employment and change in control events, as
specified in Section 2.2 of the Award Agreement.  If Holder has a Separation
from Service prior to May 31, 2011 that does not qualify for accelerated
vesting, then Holder will forfeit the entire Performance Award.
Form of Payment:
The vested portion of the Earned Value shall be paid in a combination of cash
and shares of Class A common stock of the Company (“Common Stock”), as
determined in accordance with the Award Agreement.
Time of Payment:
Subject to the terms and conditions of the Plan, the cash and shares of Common
Stock payable in settlement of the vested portion of the Earned Value will be
distributed during the thirty (30) day period following the earlier of (i) the
date following the end of the Performance Period on which the Compensation
Committee certifies the level of achievement of the performance goals set forth
on Exhibit B and determines the Earned Value, and (ii) a “Change in Control” (as
defined in the Award Agreement); provided, however, that Holder may elect to
defer the distribution of some or all of the cash and shares of Common Stock
otherwise distributable by completing the Deferral Election attached as Exhibit
C to this Grant Notice (the “Deferral Election”) within the timeframe set forth
in Exhibit C.

 
Section 2:
  Miscellaneous

 

By my signature below, I hereby agree to be bound by the terms and conditions of
the Plan, the Award Agreement and this Grant Notice.  I have reviewed the Award
Agreement, the Plan and this Grant Notice in their entirety, have had an
opportunity to obtain the advice of counsel prior to executing this Grant Notice
and fully understand all provisions of this Grant Notice, the Award Agreement
and the Plan.  I hereby agree to accept as final, binding, and conclusive all
decisions or interpretations of the Administrator of the Plan upon any questions
arising under the Plan, this Grant Notice or the Award Agreement.
 
SCHIFF NUTRITION INTERNATIONAL, INC.
HOLDER:
   
By:                                                                
By:                                                                
Print Name:                                                                
Print Name:                                                                
Title:                                                                
Address:                                                                
Address: 2002 South 5070 West
                                                                                                                                      
 Salt Lake City, UT 84104
                                                                                

 
You must return this Performance Award Grant Notice to the Office of the General
Counsel of
Schiff Nutrition International, Inc. on or before December 31, 2008
 

 

 
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EXHIBIT A TO PERFORMANCE AWARD GRANT NOTICE

 
AWARD AGREEMENT
 
Pursuant to the Performance Award Grant Notice (“Grant Notice”) to which this
Award Agreement (this “Agreement”) is attached, Schiff Nutrition International,
Inc. (the “Company”) has granted to Holder this award (the “Performance Award”)
under its 2004 Incentive Award Plan, as amended (the “Plan”).
 
ARTICLE I

 
GENERAL
 
1.1 Defined Terms.  Wherever the following terms are used in this Agreement they
shall have the meanings specified below, unless the context clearly indicates
otherwise.  Capitalized terms not specifically defined herein shall have the
meanings specified in the Grant Notice or, if not defined in the Grant Notice,
the Plan.
 
“Agreement” shall have the meaning assigned to such term in the preamble.
 
“Board” shall mean the Board of Directors of the Company.
 
“Cause” shall mean Holder’s:
 
(a) gross or willful misconduct of Holder at any time during Holder’s employment
by the Company, or any such misconduct during any prior period of employment in
an executive capacity with any person or entity if not disclosed to the Company
in writing prior to the execution hereof;
 
(b) substantial failure to perform specific and lawful directives of the Board
or a superior employee of the Company; 
 
(c) knowing violation of any rules or regulations of any governmental or
regulatory body, which is materially injurious to the financial condition of the
Company;
 
(d) conviction of or plea of guilty or nolo contendere to a felony or fraud
during Holder’s employment with the Company; 
 
(e) drug, alcohol or substance abuse (to the extent not inconsistent with the
Americans with Disability Act or similar state law); or
 
(f) material breach of the terms of any of Holder’s employment-related or
non-disclosure agreement(s) with the Company which is not corrected after
written notice and a reasonable cure period not to exceed 15 days.
 
“Certification Date” shall have the meaning assigned to such term in Section
2.3(a).
 

 
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“Change in Control” shall mean each occurrence of any of the following:
 
(a) A transaction or series of transactions (other than an offering of 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 the Company, any of its subsidiaries, an employee benefit plan
maintained by the Company 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, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of securities of the Company possessing more than 50% of the total combined
voting power of the Company’s securities outstanding immediately after such
acquisition; or, excluding any transaction involving a distribution of Stock
held by Weider Health and Fitness (“WHF”) to individual stockholders of WHF or
their family trusts;
 
(b) During any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board together with any new director(s)
(other than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in subsection (a)
above or subsection (c) below) whose election by the Board or nomination for
election by the Company’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 the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination pursuant to which
shares of Common Stock are sold at a price greater than $5.00 per outstanding
share, as adjusted from time to time consistent with any adjustment under
Section 11.1 of the Plan, or (y) a sale or other disposition of all or
substantially all of the Company’s assets pursuant to which the consideration
received by the Company or its stockholders is in excess of $5.00 per
outstanding share, as adjusted from time to time consistent with any adjustment
under Section 11.1 of the Plan, or (z) the acquisition of assets or stock of
another entity, in each case other than a transaction:
 
(i) Which results in the Company’s voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of the Company or the person that,
as a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets
or otherwise succeeds to the business of the Company (the Company 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, or
 
(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 the
Company prior to the consummation of the transaction; or

 
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(d) The Company’s stockholders approve a liquidation or dissolution of the
Company.
 
“Code” shall mean the Internal Revenue Code of 1986, as amended.
 
“Common Stock” shall mean the Class A common stock, par value $.01 per share, of
the Company.
 
“Company” shall have the meaning assigned to such term in the preamble.
 
“Deferral Election Effective Date” shall mean the earliest of (a) November 30,
2010, (b) the date of Holder’s Separation from Service or (c) the date that the
Settlement Amount has become “readily ascertainable” within the meaning of
Treasury Regulation Section 1.409A-2(a)(8).
 
“Deferred Amount” shall have the meaning assigned to such term in Section
2.5(a).
 
“Disabled” shall have the meaning assigned to such term in Code Section
409A(2)(C) and the Treasury Regulations thereunder.
 
“Distribution Event” shall have the meaning assigned to such term in Section
2.5(b).
 
“Dividend Equivalents” shall have the meaning assigned to such term in Section
2.5(e).
 
“Earned Value” shall have the meaning assigned to such term in Section 2.3(a).
 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
 
“Good Reason” shall mean any one of the following conduct or events which occurs
without Holder’s consent, and is not cured by the Company within 30 days after
Holder’s notice in writing to the Company within 90 days of the first happening
of the conduct or event (and Holder thereafter terminates employment with the
Company no later than 180 days after the first happening of such conduct or
event specified in the notice):
 
(a) the Company’s material diminution of Holder’s authority, responsibilities,
duties, or compensation; or
 
(b) any involuntary relocation of Holder’s principal place of business to a
location that represents a material change in geographic location (including,
without limitation, any involuntary relocation that is more than 75 miles from
Holder’s current principal place of business with the Company).
 

 
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“Grant Date” shall mean the grant date set forth in the Grant Notice.
 
“Grant Notice” shall have the meaning assigned to such term in the preamble.
 
“Normal Retirement Eligibility Date”1 shall mean the later of:
 
(a) the date on which Holder attains the age of 62, and
 
(b) the date Holder completes 6 years of continuous employment with the Company
or any Subsidiary.
 
“Performance Award” shall have the meaning assigned to such term in the
preamble.
 
“Performance Period” shall mean the performance period indicated in the Grant
Notice.
 
“Plan” shall have the meaning assigned to such term in the preamble.
 
“Pro Rata Vesting Event” shall have the meaning assigned to such term in Section
2.2(b).
 
“Section 409A Change in Control” shall mean a Change in Control that qualifies
as a “change in the ownership or effective control,” or a “change in the
ownership of a substantial portion of assets,” of the Company (or the corporate
successor thereto), within the meaning of Code Section 409A(a)(2)(A)(v) and the
Treasury Regulations thereunder
 
“Separation from Service” shall mean Holder’s “separation from service” (within
the meaning of Code Section 409A(a)(2)(A)(i) and the Treasury Regulations and
other guidance issued thereunder) with the Company or Subsidiary employing
Holder, as determined by the Administrator.
 
“Settlement Amount” shall have the meaning assigned to such term in Section
2.3(c).
 
“Target Award Value” shall mean the target award value set forth in the Grant
Notice.
 
“Unforeseeable Emergency” shall have the meaning assigned to such term in
Section 2.6(b).
 
1.2 Incorporation of Terms of Plan.  The Performance Award and the cash and
shares of Common Stock to be paid or issued with respect thereto, are subject to
the terms and conditions of the Plan, which are incorporated herein by
reference.  In the event of any conflict between the terms of the Plan and the
terms of this Agreement, the terms of the Plan shall control.

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1 For T. Elitharp, “Normal Retirement Eligibility Date” shall mean May 31, 2010.
 

 
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ARTICLE II

 
GRANT, VALUE, VESTING AND DISTRIBUTION
 
2.1 Grant of Performance Award.  In consideration of Holder’s past and/or
continued employment with or service to the Company or its Subsidiaries and for
other good and valuable consideration, effective as of the Grant Date, the
Company irrevocably grants to Holder this award, consisting of a Performance
Bonus Award granted pursuant to Section 8.8 of the Plan and a Stock Payment
award granted pursuant to Section 8.4 of the Plan.
 
2.2 Vesting of Performance Award; Accelerated Vesting Events.
 
(a) Subject to Section 2.2(b) and (c), Holder shall vest in full in the Earned
Value on May 31, 2011; provided, that Holder does not experience a Separation
from Service prior to such date.  Notwithstanding the vesting of the Earned
Value in accordance with Section 2.2(a) or 2.2(b), no amount shall become
payable pursuant to the Performance Award until there is a certification by the
Compensation Committee of the Earned Value and the resulting amount payable to
the Holder, in accordance with Section 2.4.
 
(b) Notwithstanding anything to the contrary in the first sentence of
Section 2.2(a), Holder shall vest in only a portion of the Earned Value upon the
earliest to occur of the events listed below (each, a “Pro Rata Vesting Event”):
 
(i) Holder’s employment with the Company or any Subsidiary is terminated by the
Company or Subsidiary without Cause;
 
(ii) Holder’s employment with the Company or any Subsidiary is terminated by
Holder for Good Reason;
 
(iii) Holder voluntarily resigns from employment following the Normal Retirement
Eligibility Date;
 
(iv) Holder becomes Disabled; or
 
(v) Holder’s death.
 
The percentage of the Earned Value that shall vest upon the occurrence of a Pro
Rata Vesting Event shall be determined by a fraction, the numerator of which is
the number of full calendar months from the first day of the Performance Period
through the date of such termination of employment, becoming Disabled, or death,
and the denominator of which is 32.  The portion of the Earned Value that is not
vested as of the date of the Pro Rata Vesting Event shall not become vested and
the portion of the Performance Award relating thereto shall terminate
automatically and be forfeited immediately following such Pro Rata Vesting Event
without further notice or consideration to Holder.  In addition, in the event
that prior to May 31, 2011, Holder has a Separation from Service that does not
qualify as a Pro Rata Vesting Event, then the full Performance Award shall
terminate automatically and be forfeited immediately upon such Separation from
Service without further notice or consideration to Holder.

 
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(c) Notwithstanding anything to the contrary in the first sentence of
Section 2.2(a), or any provision in any employment-related agreement between
Holder and the Company or any of its Subsidiaries, if any, in the event of a
Change in Control prior to Holder’s Separation from Service, then, immediately
prior to such Change in Control, Holder shall vest in the Earned Value (as
determined in accordance with Section 2.3(b)) only to the extent determined as
follows: (i) if the Change in Control occurs on or before May 31, 2009,
thirty-three and one-third percent (33 1/3%) of the Earned Value shall vest;
(ii) if the Change in Control occurs after May 31, 2009 and on or before May 31,
2010, sixty-six and two-thirds percent (66 2/3%) of the Earned Value shall vest;
and (iii) if the Change in Control occurs after May 31, 2010 and on or before
May 31, 2011, one hundred percent (100%) of the Earned Value shall vest.  Except
as otherwise provided in this Section 2.2(c), the portion of the Earned Value
that is not vested at the time of the Change in Control shall not become vested
and the portion of the Performance Award relating thereto shall terminate
automatically and be forfeited at the time of the Change in Control without
further notice or consideration to Holder.
 
(d) Holder shall have no right to any distribution of cash or shares of Common
Stock with respect to all or any portion of the Earned Value that does not vest.
 
2.3 Earned Value and Settlement Amount.
 
(a) In the event a Change in Control does not occur prior to the expiration of
the Performance Period, on a date that is no later than 90 days following the
end of the Performance Period (the “Certification Date”), the Administrator
shall certify (i) the Company’s actual performance against target performance
under the performance goals listed on, and in accordance with, Exhibit B to the
Grant Notice, and (ii) the percent of Target Award Value resulting from the
Company’s actual performance against such target performance, determined in
accordance with Exhibit B (the “Earned Value”).
 
(b) In the event a Change in Control occurs prior to the expiration of the
Performance Period, then the Earned Value shall equal the Target Award Value as
set forth on the Grant Notice.
 
(c) The aggregate amount payable to the Holder pursuant to the Performance Award
(the “Settlement Amount”) shall equal the product of (i) the percentage of the
Earned Value that vests in accordance with Section 2.2 and (ii) the Earned Value
certified by the Administrator pursuant to Section 2.3(a) or determined in
accordance with Section 2.3(b), as applicable.
 
2.4 Form of Payment; Distribution.
 
(a) The Settlement Amount shall be paid to Holder in a combination of cash and
shares of Common Stock, determined as follows:
 
(i) sixty-six and two-thirds percent (66 2/3%) of the Settlement Amount shall be
paid to Holder in cash; provided, however, that in no event shall the cash
 

 
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amount payable to Holder exceed $1,000,000, less the maximum amount of Holder’s
annual performance bonus for the Company’s fiscal year ending May 31, 2011 (or,
if the Company’s stockholders approve an amendment to Section 8.8 of the Plan on
or before the Deferral Election Effective Date, such greater amount as may be
permitted under the Plan, less the maximum amount of Holder’s annual performance
bonus for the Company’s fiscal year ending May 31, 2011); and
 
(ii) thirty-three and one-third percent (33 1/3%) of the Settlement Amount (plus
any portion of the Settlement Amount that would otherwise be payable in cash,
but that may not be paid in cash as a result of the limitation set forth in
Section 8.8 of the Plan) shall be paid to Holder in whole shares of Common
Stock, based on the Fair Market Value of a share of Common Stock as of the
Certification Date; provided, however, that in no event shall the number of
shares of Common Stock to be issued or transferred to Holder exceed 500,000
shares (or, if the Company’s stockholders approve an amendment to Section 3.3 of
the Plan on or before the Deferral Election Effective Date, such greater amount
as may be permitted under the Plan), as adjusted from time to time consistent
with any adjustment under Section 11.1 of the Plan.
 
(b) Subject to the terms and conditions of the Plan and Section 2.5, the cash
and shares of Common Stock payable upon settlement of the Performance Award
shall be distributed during the 30-day period following the earlier of (i) the
Certification Date and (ii) a Change in Control.  Notwithstanding any provision
to the contrary, the distribution of the Settlement Amount (other than the
“Deferred Amount” (as defined below)) shall in all events be made on or before
the later of (i) the fifteenth day of the third month following Holder’s first
taxable year in which such amount is no longer subject to a substantial risk of
forfeiture, and (ii) the fifteenth day of the third month following the first
taxable year of the Company in which such amount is no longer subject to a
substantial risk of forfeiture, as determined in accordance with Code Section
409A and any Treasury Regulations and other guidance issued thereunder.
 
(c) Any portion of the Settlement Amount payable in shares of Common Stock shall
be made by the Company in the form of whole shares.  Any fractional share of
Common Stock otherwise distributable pursuant to this Agreement shall be rounded
up to the next whole share.
 
2.5 Deferrals.
 
(a) Holder may elect to defer the receipt of some or all of the Settlement
Amount otherwise payable pursuant to Section 2.4 by timely completing the
Deferral Election attached as Exhibit C to the Grant Notice.  Any such portion
of the Settlement Amount, the deferral of which has been requested by the Holder
pursuant to a timely Deferral Election that becomes effective and irrevocable,
shall be referred to herein as the “Deferred Amount.”  The Deferred Amount shall
be distributed to Holder in equal annual or semi-annual installments or in a
lump sum, as elected by Holder in the Deferral Election.
 
(b) Subject to Section 2.5(c) and (d), the distribution of the Deferred Amount
shall be made or, if the Deferred Amount is distributable in installments, shall
commence during the 30-day period following the earliest to occur of the events
listed below (each, a “Distribution Event”):
 

 
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(i) the Distribution Commencement Date (if any) set forth in Holder’s Deferral
Election;
 
(ii) Holder’s Separation from Service;
 
(iii) the day immediately preceding a Section 409A Change in Control;
 
(iv) Holder becomes Disabled; or
 
(v) Holder’s death.
 
Notwithstanding any provision to the contrary in this Section 2.5(b), if Holder
is deemed to be a “specified employee” (within the meaning of Code Section
409A(a)(2)(B)(i) and the Treasury Regulations thereunder) at the time of
Holder’s Separation from Service, then with regard to the distribution of any
portion of the Deferred Amount required to be delayed in compliance with Code
Section 409A(a)(2)(B), such portion of the Deferred Amount shall be distributed
to Holder during the 30-day period commencing with the earliest to occur of (i)
the expiration of the six (6)-month period measured from the date of Holder’s
Separation from Service or (ii) the date of Holder’s death.
 
(c) Except as otherwise provided in Section 2.6, the time for the distribution
of the Deferred Amount may not be changed for any reason following the
commencement of the distribution of the Deferred Amount; provided, however, that
in the event of a Section 409A Change in Control prior to the distribution of
all of the Deferred Amount, the remaining portion of the Deferred Amount shall
be distributed to Holder in a lump sum on the day immediately preceding such
Section 409A Change in Control.
 
(d) Notwithstanding the foregoing, the Deferred Amount shall be payable at such
times and upon such events as are specified in this Agreement only to the extent
issuance under such terms will not cause the Performance Award or the amounts
payable pursuant to the Performance Award to be includible in the gross income
of Holder under Code Section 409A prior to such times or the occurrence of such
events, as permitted by the Code and the regulations and other guidance
thereunder.
 
(e) In the event that Holder elects to defer all or a portion of the Settlement
Amount, the Company hereby grants to Holder dividend equivalents with respect to
each share of Common Stock so deferred, in an amount equal to the aggregate
amount of all normal and special cash dividends, if any, paid to the Company’s
stockholders on one share of Common Stock where the record dates for such
dividends paid occurred during the period from May 31, 2011 (or, with respect to
any special dividends, the Certification Date) through and including the day
immediately preceding the date on which the share of Common Stock deferred is
distributed to Holder (or his or her estate) pursuant to this Section 2.5
(“Dividend Equivalents”).  The Dividend Equivalents shall be paid to Holder in
the same form as the original dividend at the time the deferred share of Common
Stock to which such Dividend Equivalent relates is distributed pursuant to this
Section 2.5.  Each Dividend Equivalent shall terminate as of the date the
deferred share of Common Stock to which such Dividend Equivalent relates is
distributed.
 

 
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2.6 Unforeseeable Emergency.
 
(a) If Holder experiences an Unforeseeable Emergency (as defined below), Holder
may petition the Administrator for the right to receive a partial or full
distribution of the Deferred Amount.  If, in the sole discretion of the
Administrator, Holder’s petition is approved, the Unforeseeable Emergency shall
be deemed a “Distribution Event” with respect to the portion of the Deferred
Amount approved for distribution by the Administrator.  Holder shall then be
entitled to receive such cash and shares of Common Stock pursuant to Section
2.5(b).
 
(b) For purposes of this Section 2.6, an “Unforeseeable Emergency” shall mean a
severe financial hardship to Holder resulting from an illness or accident of
Holder, Holder’s spouse, Holder’s beneficiary or a dependent (as defined in Code
Section 152, without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B)) of
Holder, loss of Holder’s property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of Holder, as determined by the Administrator in accordance
with Code Section 409A(a)(2)(B)(ii)(I) and the Treasury Regulations
thereunder.  The aggregate amount of cash and the Fair Market Value of the
shares of Common Stock distributed to Holder with respect to the Unforeseeable
Emergency shall not exceed the amounts necessary to satisfy such Unforeseeable
Emergency, plus amounts necessary to pay taxes reasonably anticipated as a
result of the distribution, after taking into account the extent to which such
Unforeseeable Emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of Holder’s assets (to
the extent liquidation of such assets would not itself cause severe financial
hardship), as determined by the Administrator in accordance with Code Section
409A(a)(2)(B)(ii) and the Treasury Regulations thereunder.
 
2.7 Changes to Form or Time of Distribution.  Except as otherwise provided
herein, the time and form of distribution of the Settlement Amount shall be as
set forth in the Grant Notice and Deferral Election and may only be changed in
compliance with the requirements of Code Section 409A(a)(4)(C) and the Treasury
Regulations thereunder, and only with the prior written consent of the Company’s
General Counsel.
 
2.8 Restrictions on Transfer.  Unless otherwise permitted by the Administrator
in accordance with the terms of the Plan, no portion of the Performance Award or
the cash or shares of Common Stock payable with respect thereto or any interest
or right therein or part thereof shall be liable for the debts, contracts or
engagements of Holder or his or her successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.
 
2.9 Conditions to Issuance of Stock Certificates.  The shares of Common Stock
deliverable in payment of the Settlement Amount in accordance with Section 2.4
may be either previously authorized but unissued shares or issued shares which
have then been reacquired by the Company.  Such shares shall be fully paid and
nonassessable.  The Company shall not be required to issue or deliver any such
shares of Common Stock prior to fulfillment of all of the following conditions:
 

 
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(a) The admission of such shares to listing on all stock exchanges on which such
Common Stock is then listed;
 
(b) The completion and maintenance of any registration or other qualification of
such shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental regulatory
body, which the Administrator shall, in its absolute discretion, deem necessary
or advisable;
 
(c) The obtaining and maintenance of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable;
 
(d) The lapse of such reasonable period of time following the specified date for
distribution as the Administrator may from time to time establish in good faith
for reasons of administrative convenience; and
 
(e) The receipt by the Company of full payment of all amounts required to be
withheld under federal, state, local and foreign tax laws, with respect to the
issuance of such shares or any other taxable event arising out of or relating to
this Agreement and the Grant Notice in accordance with Section 15.3 of the Plan.
 
2.10 Rights as Stockholder.  Holder shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares of Common
Stock issuable pursuant to the Performance Award unless and until such shares of
Common Stock shall have been issued by the Company to Holder.

 

 
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ARTICLE III
 
OTHER PROVISIONS
 
3.1 Adjustment for Stock Split, Other Events.  In the event of any stock
dividend, stock split, reverse stock split, distribution of Company assets to
stockholders (other than normal or special cash dividends), recapitalization,
combination, reclassification, or similar change in the capital structure of the
Company, in each case, occurring on or after the Certification Date, appropriate
adjustments shall be made in the Dividend Equivalents and/or the shares of
Common Stock issuable with respect the Deferred Amount, consistent with any
adjustment under Section 11.1 of the Plan.  The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to the Dividend
Equivalents and the shares of Common Stock issuable with respect to any Deferred
Amount, to any and all shares of capital stock or other securities which may be
issued in respect of, or in exchange for, in substitution of the Dividend
Equivalents and the shares of Common Stock issuable with respect to the Deferred
Amount, and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof.
 
3.2 Taxes.
 
(a) Notwithstanding anything to the contrary in this Agreement, the Company
shall be entitled to require payment to the Company or any of its Subsidiaries
of any sums required by federal, state or local tax law to be withheld with
respect to the payment of cash or the distribution of shares of Common Stock in
connection with the Performance Award, or any other taxable event related to the
Performance Award.  The Company may permit Holder to make such payment in one or
more of the forms specified below:
 
(i) by cash or check made payable to the Company;
 
(ii) by the deduction of such amount from any compensation otherwise payable to
Holder, including any amounts payable as part of the Settlement Amount;
 
(iii) with the consent of the Administrator, by requesting that the Company
withhold shares of Common Stock payable as part of the Settlement Amount, or by
tendering vested shares of Common Stock, in each case,  having a then current
Fair Market Value not exceeding the amount necessary to satisfy the withholding
obligation of the Company and its Subsidiaries based on the minimum applicable
statutory withholding rates for federal, state, local and foreign income tax and
payroll tax purposes; or
 
(iv) in any combination of the foregoing.
 
(b) In the event Holder fails to provide timely payment of all sums required by
the Company pursuant to Section 3.2(a), the Company shall have the right and
option, but not obligation, to treat such failure as an election by Holder to
satisfy all or any portion of his or her required payment obligation pursuant to
Section 3.2(a)(ii) or 3.2(a)(iii) above, or any combination of the foregoing as
the Company may determine to be appropriate.  The Company shall not be obligated
to deliver any new certificate representing shares of Common Stock issuable with
respect to the Performance Award to
 

 
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Holder or his legal representative unless and until Holder or his legal
representative shall have paid or otherwise satisfied in full the amount of all
federal, state, local and foreign taxes applicable to the taxable income of
Holder resulting from the grant of the Performance Award, the payment of cash or
the distribution of the shares of Common Stock issuable with respect thereto, or
any other taxable event related to the Performance Award.
 
3.3 Limitations Applicable to Section 16 Persons.  Notwithstanding any other
provision of the Plan or this Agreement, if Holder is subject to Section 16 of
the Exchange Act, the Plan, the Performance Award and the shares of Common Stock
issuable with respect thereto and this Agreement shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule.  To the
extent permitted by applicable law, this Agreement shall be deemed amended to
the extent necessary to conform to such applicable exemptive rule.
 
3.4 Administration.  The Administrator shall have the power to interpret the
Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules.  All actions taken and all
interpretations and determinations made by the Administrator in good faith shall
be final, binding, and conclusive upon Holder, the Company and all other
interested persons.  No member of the Administrator shall be personally liable
for any action, determination or interpretation made in good faith with respect
to the Plan, this Agreement or the Performance Award.
 
3.5 Notices.  Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of the Secretary of the
Company, and any notice to be given to Holder shall be addressed to Holder at
the address given beneath Holder’s signature on the Grant Notice.  By a notice
given pursuant to this Section 3.5, either party may hereafter designate a
different address for notices to be given to that party.  Any notice shall be
deemed duly given when sent via email or when sent by certified mail (return
receipt requested) and deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
 
3.6 Titles.  Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
 
3.7 Governing Law; Severability.  This Agreement and all disputes arising out of
or relating to it shall be administered, interpreted and enforced in accordance
with the laws of the State of Delaware, without regard to the law that might be
applied under principles of conflicts of laws.  Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
 
3.8 Conformity to Securities Laws.  Holder acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, and state
securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Performance Award is granted,
only in such a manner as to conform to such laws, rules and regulations.  To the
extent permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.
 

 
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3.9 Amendments.  This Agreement may be wholly or partially amended at any time
or from time to time by the Administrator; provided, that no amendment of this
Agreement shall, without the written consent of Holder, impair any rights of
Holder under this Agreement.
 
3.10 Not a Contract of Employment.  As partial consideration for the grant of
the Performance Award by the Company, the Holder agrees to remain in the employ
of the Company or any Subsidiary (whichever is applicable) with such duties and
responsibilities as the Company or any Subsidiary (as applicable) shall from
time to time prescribe, for a period of at least one year after the Grant
Date.  Nothing in this Agreement shall confer upon the Holder any right to
continue in the employ of the Company or any Subsidiary, or shall interfere with
or restrict in any way any otherwise existing rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge the Holder at any
time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in a written agreement between the Company and
Holder.
 
3.11 Successors and Assigns.  The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company.  Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Holder and his or her heirs, executors, administrators, successors and assigns.
 
3.12 Unfunded, Unsecured Obligations.  The obligations of the Company under the
Plan and this Agreement shall be unfunded and unsecured, and nothing contained
herein shall be construed as providing for assets to be held in trust or escrow
or any other form of segregation of the assets of the Company for the benefit of
Holder or any other person.  Holder shall have only the rights of a general,
unsecured creditor of the Company with respect to the Performance Award, unless
and until cash shall be paid or shares of Common Stock shall be distributed to
Holder under the terms and conditions of this Agreement.
 
3.13 Compliance in Form and Operation.  This Agreement and the Performance Award
are intended to comply with Code Section 409A and the Treasury Regulations
thereunder and shall be interpreted in a manner consistent with that intention.
 

 
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EXHIBIT C TO PERFORMANCE AWARD GRANT NOTICE

 
DEFERRAL ELECTION
 
Name of Participant:
Social Security No.:
Address:
Grant Date:  December 12, 2008

 
Unless otherwise defined herein or in the Performance Award Grant Notice
evidencing the Performance Award granted to you on the date set forth above (the
“Grant Notice”) or the Award Agreement attached to the Grant Notice (the “Award
Agreement”), the terms defined in our 2004 Incentive Award Plan, as amended (the
“Plan”) shall have the same defined meanings in this Deferral Election.  Please
complete Section 1, 2, and 3 and sign where indicated in Section 4.

 
Section 1:
  Deferral Election

 
Please select whether you would like to defer receipt of all or a portion of the
Settlement Amount beyond the date determined in accordance with Section 2.4 of
the Award Agreement.
 

 
o
I elect to defer receipt of the following portion of the Settlement Amount that
may become payable to me:

 
Specify Deferral Percentage:
 
  _____% of the cash portion of the Settlement Amount (the “Cash Deferral”)
 
  _____% of the shares of Class A common stock, par value $.01 per share, of the
Company (“Common Stock”) issuable as the share portion of the Settlement Amount
(the “Share Deferral”)
 
(Each specified percentage must be a whole percentage from 0%, for no deferral,
to 100% for full deferral, of that portion of the Settlement Amount.)
 
I understand that unless I elect to defer the payment of 100% of the cash
portion of the Settlement Amount and 100% of the shares of Common Stock issuable
as the share portion of the Settlement Amount, any portion of the Settlement
Amount that is not deferred will be paid to me in accordance with Section 2.4 of
the Award Agreement.  I further understand that the deferral percentages
specified will be applied separately to the portion of the Performance Award
payable in cash and the portion of the Performance Award payable in shares of
Common Stock.
 
For purposes of this Deferral Election, the Grant Notice and the Award
Agreement, the Cash Deferral and the Share Deferral shall be collectively
referred to as the “Deferred Amount”.
 
 
 
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Section 2:
  Distribution Event Election – Deferred Amount

 
You may elect either to have payment of the Deferred Amount commence upon the
earlier of (1) a specified date not earlier than August 30, 2011 or (2) the 30th
day following your Separation from Service (within the meaning of Code Section
409A(a)(2)(A)(i), as determined by the Secretary of the Treasury) with the
Company or Subsidiary employing you.  Dates and methods of issuance may not be
accelerated or changed.
 
 
o
Distribution Commencement Date Election:

 
I hereby irrevocably elect the following Distribution Commencement Dates for the
commencement of the payment of the Cash Deferral and the Share Deferral, as
applicable:
 
Distribution Commencement Date for the Cash Deferral:  ______________, 20____
 
Distribution Commencement Date for the Share Deferral: ______________, 20____
 
(The specified dates must be no earlier than August 30, 2011.)
 
I understand that if I do not make a Distribution Commencement Date Election
above (or, if my Separation from Service occurs prior to the specified date),
the Cash Deferral and the Share Deferral, as applicable, will be paid to me
shortly following my Separation from Service (or, in the event I am a “specified
employee” within the meaning of Code Section 409A(a)(2)(B)(i), the date which is
six months following my Separation from Service).
 
I understand that in the event of my death, or I become Disabled (as defined in
the Award Agreement), prior to the Distribution Commencement Date(s) specified
above, or if there is a 409A Change in Control (as defined in the Award
Agreement) before or after the Distribution Commencement Date(s) specified
above, the Cash Deferral and the Share Deferral, as applicable, will be
distributed to me, my beneficiary, or my estate, as the case may be, on an
accelerated basis in a single lump sum in accordance with Section 2.5(b) of the
Award Agreement.
 
I understand that the payment of the Deferred Amount will result in a tax
liability and I have considered this and the Company’s policies regarding
trading during blackout periods in electing my Distribution Commencement Date.
 

 
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Section 3:
  Lump Sum Payment or Installments – Deferred Amount

 
You may elect either to have the Deferred Amount paid to you in a single lump
sum or in equal installments.  In the event that you do not elect a distribution
form in accordance with this Section 3, the Deferred Amount will be issued to
you in a single lump sum.  PLEASE SELECT FOR EACH CASH DEFERRAL AND SHARE
DEFERRAL ONE ELECTION (LUMP SUM OR INSTALLMENTS):
 
 
Lump Sum on the Distribution Commencement Date (specified above):

 
 
o
I hereby irrevocably elect to have the Cash Deferral paid to me in a single lump
sum on the Distribution Commencement Date (specified above).

 

     
o
I hereby irrevocably elect to have the Share Deferral paid to me in a single
lump sum on the Distribution Commencement Date (specified above).

 
 
Equal Annual or Semi-Annual Installments:

 
 
o
I hereby irrevocably elect to have the Cash Deferral paid to me in (check one):

 
 
o
equal annual installments, or

 
 
o
equal semi-annual installments over the following number of years:_____,

 
with the first installment occurring shortly following my Distribution
Commencement Date (specified above) and applicable installments thereafter
occurring on the last business day of each additional 12-month or 6-month period
after such date.
 
 
o
I hereby irrevocably elect to have the Share Deferral paid to me in (check one):

 
 
o
equal annual installments, or

 
 
o
equal semi-annual installments over the following number of years:_____,

 
with the first installment occurring shortly following my Distribution
Commencement Date (specified above) and applicable installments thereafter
occurring on the last business day of each additional 12-month or 6-month period
after such date.  Only whole shares of Common Stock will be issued on each
distribution date.
 
The specified number of years for these elections must be a whole number of
years equal or greater than 2.)
 
I understand that if I do not elect a distribution in installments, the Cash
Deferral or the Share Deferral, as applicable, will be distributed to me in a
lump sum.
 
I understand that in the event of my death, or I become Disabled (as defined in
the Award Agreement), prior to the Distribution Commencement Date(s) specified
above, or if there is a 409A Change in Control (as defined in the Award
Agreement) before or after the Distribution Commencement Date(s) specified
above, the Cash Deferral and the Share Deferral, as applicable, will be
distributed to me, my beneficiary, or my estate, as the case may be, on an
accelerated basis in a single lump sum in accordance with Section 2.5(b) of the
Award Agreement.
 

 
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I understand that my elections set forth in this Deferral Election apply only
with respect to the Deferred Amount payable under the Award Agreement, if any,
and that such elections will not effect the payment of any other deferred
amounts pursuant to any other award I may have received in the past or may
receive in the future.

 
Section 4: 
 Authorization

 
I acknowledge that I have reviewed the Plan, the Grant Notice, the Award
Agreement, and this Deferral Election in their entirety, have had an opportunity
to obtain the advice of counsel prior to executing this Deferral Election, and
fully understand all provisions of the Plan, the Grant Notice, the Award
Agreement and this Deferral Election.  On behalf of myself, my successors in
interest and my assigns and all persons claiming under me, I agree to be bound
by the statements contained herein and by the provisions of the Plan and this
Deferral Election as they now exist and as they may be amended from time to
time.  I hereby agree to accept as final, binding, and conclusive all decisions
or interpretations of the Administrator of the Plan upon any questions arising
under the Plan, the Grant Notice, the Award Agreement or this Deferral Election.
 
I acknowledge and agree that this Deferral Election shall not become effective
and irrevocable until the earliest of (a) November 30, 2010, (b) the date of my
Separation from Service or (c) the date that the Settlement Amount has become
“readily ascertainable” within the meaning of Treasury Regulation Section
1.409A-2(a)(8), regardless of the date I file this Deferral Election with the
Company (the “Deferral Election Effective Date”).  I further understand that I
will not be able to make any change to my Deferral Election after it becomes
effective and irrevocable.

 
 

HOLDER:
 
By:                                                                
Print Name:                                                                
Address:                                                                
                                                                                
Date:                                                                

 
You must return this Deferral Election to the General Counsel
of Schiff Nutrition International, Inc. on or before the Deferral Election
Effective Date.
 

 
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