Document:

EXHIBIT 10.15

 

SECURITY AGREEMENT

 

Dated October 1, 2010

 

From

 

The Grantors referred to herein

 

as Grantors

 

to

 

BARCLAYS BANK PLC

 

as Administrative Agent

 

 

TABLE OF CONTENTS

 

	
Section
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 1.
    	
 
    	
Grant of Security
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 2.
    	
 
    	
Security for Obligations
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 3.
    	
 
    	
Grantors Remain Liable
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 4.
    	
 
    	
Delivery and Control of Security Collateral
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 5.
    	
 
    	
Maintaining Collateral Accounts, Electronic Chattel Paper,   Transferable Records and Letter-of-Credit Rights and Giving Notice of   Commercial Tort Claims
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 6.
    	
 
    	
Representations and Warranties
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 7.
    	
 
    	
Further Assurances
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 8.
    	
 
    	
As to Insurance
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 9.
    	
 
    	
Post-Closing Changes; Bailees; Collections on Assigned   Agreements and Accounts
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 10.
    	
 
    	
As to Intellectual Property Collateral
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 11.
    	
 
    	
Voting Rights; Dividends; Etc.
    	
 
    	
14
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 12.
    	
 
    	
Additional Shares
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 13.
    	
 
    	
Administrative Agent Appointed Attorney-in-Fact
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 14.
    	
 
    	
Administrative Agent May Perform
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 15.
    	
 
    	
The Administrative Agent’s Duties
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 16.
    	
 
    	
Remedies
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 17.
    	
 
    	
Indemnity and Expenses
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 18.
    	
 
    	
Amendments; Waivers; Additional Grantors; Etc.
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 19.
    	
 
    	
Notices, Etc.
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 20.
    	
 
    	
Continuing Security Interest; Assignments under the Credit   Agreement
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 21.
    	
 
    	
Release; Termination
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 22.
    	
 
    	
Execution in Counterparts
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 23.
    	
 
    	
The Mortgages
    	
 
    	
20
    

 

 

	
Section 24.
    	
 
    	
Governing Law
    	
 
    	
21
    

 

	
Schedules   I
    	
—
    	
 
    	
Location,   Chief Executive Office, Place Where Agreements Are Maintained, Type Of   Organization, Jurisdiction Of Organization And Organizational Identification   Number
    
	
Schedule   II
    	
—
    	
 
    	
Pledged   Equity
    
	
Schedule   III
    	
—
    	
 
    	
Patents,   Trademarks and Trade Names, Copyrights and IP Agreements
    
	
Schedule   IV
    	
—
    	
 
    	
Commercial   Tort Claims
    
	
 
    	
 
    	
 
    	
 
    
	
Exhibits
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Exhibit A
    	
—
    	
 
    	
Form of   Security Agreement Supplement
    
	
Exhibit B
    	
—
    	
 
    	
Form of   Intellectual Property Security Agreement
    
	
Exhibit C
    	
—
    	
 
    	
Form of   Intellectual Property Security Agreement Supplement
    

 

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT dated October 1, 2010 made by ALPHABET MERGER SUB, INC. (“Merger Sub” and, immediately prior to the consummation of the Merger (as defined in the Credit Agreement), the “Borrower”), a Delaware corporation to be merged with and into NBTY, INC., a Delaware corporation (the “Company” and, upon and after the consummation of the Merger, the “Borrower”) ALPHABET HOLDING COMPANY, INC., a Delaware corporation (“Holdings”), the other Persons listed on the signature pages hereof and the Additional Grantors (as hereinafter defined) (the Borrower, Holdings, the other Persons so listed and the Additional Grantors being, collectively, the “Grantors”), to BARCLAYS BANK PLC, as administrative agent (in such capacity, together with any successor administrative agent, the “Administrative Agent”) for the Secured Parties.

 

PRELIMINARY STATEMENTS.

 

(1)           The Borrower has entered into a Credit Agreement dated of even date herewith (said Agreement, as it may hereafter be amended, amended and restated, supplemented,  replaced, refinanced or otherwise modified from time to time  (including any increases of the principal amount outstanding thereunder), being the “Credit Agreement”) with Holdings, the Lenders, the Swing Line Lender, the L/C Issuers and the Administrative Agent.

 

(2)           Pursuant to the Credit Agreement, the Grantors are entering into this Agreement in order to grant to the Administrative Agent for the ratable benefit of the Secured Parties a security interest in the Collateral (as hereinafter defined).

 

(3)           It is a condition precedent to the making of Loans by the Lenders and the issuance of Letters of Credit by the L/C Issuers under the Credit Agreement, the entry into Secured Hedge Agreements by the Hedge Banks from time to time and the entry into Secured Cash Management Agreements by the Cash Management Banks from time to time that the Grantors shall have granted the security interest and made the pledge contemplated by this Agreement.

 

(4)           Each Grantor will derive substantial direct and indirect benefit from the transactions contemplated by the Loan Documents and the other Secured Documents (as defined herein).

 

(5)           Terms defined in the Credit Agreement and not otherwise defined in this Agreement are used in this Agreement as defined in the Credit Agreement.  Further, unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9 (including Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Commodity Account, Commodity Contract, Deposit Accounts, Documents, Equipment, Farm Products, Financial Assets, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit Rights, Securities Accounts, Securities Intermediary, Security, Security Entitlements and Supporting Obligations).  “UCC” means the Uniform Commercial Code as defined in the Credit Agreement.

 

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NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Loans and the L/C Issuers to issue Letters of Credit under the Credit Agreement, to induce the Hedge Banks to enter into Secured Hedge Agreements from time to time and to induce the Cash Management Banks to enter into Secured Cash Management Agreements from time to time, each Grantor hereby agrees with the Administrative Agent for the ratable benefit of the Secured Parties as follows:

 

Section 1.       Grant of Security.  Each Grantor hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in such Grantor’s right, title and interest in and to the following, other than Excluded Property (as hereinafter defined), in each case, as to each type of property described below, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (collectively, the “Collateral”):

 

(a)   all Accounts;

 

(b)   all cash and Cash Equivalents;

 

(c)   all Chattel Paper;

 

(d)   all Commercial Tort Claims set forth on Schedule IV hereto or for which notice is provided pursuant to Section 5(b) below;

 

(e)   all Deposit Accounts;

 

(f)    all Documents;

 

(g)   all Equipment;

 

(h)   all Farm Products;

 

(i)    Subject to Section 23 hereof, all Fixtures;

 

(j)    all General Intangibles;

 

(k)   all Goods;

 

(l)    all Instruments;

 

(m)  all Inventory;

 

(n)   all Letter-of-Credit Rights;

 

(o)   the following (the “Security Collateral”):

 

(i)            all indebtedness from time to time owed to such Grantor (the “Pledged Debt”), and the instruments and promissory notes, if any, evidencing such indebtedness, and all interest, cash, instruments and other property from time

 

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to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt;

 

(ii)           all Equity Interests from time to time acquired, owned or held by such Grantor in any manner, including, without limitation, the Equity Interests of each Grantor set forth opposite such Grantor’s name on and otherwise described on Schedule II (as such Schedule II may be supplemented from time to time by supplements to this Agreement) (all such Equity Interests, being the “Pledged Equity”), and the certificates, if any, representing such additional shares or units or other Equity Interests, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other Equity Interests and all warrants, rights or options issued thereon or with respect thereto;  provided  that such Grantor shall not be required to pledge, and the terms “Pledged Equity” and “Security Collateral” used in this Agreement shall not include any Equity Interests in any Foreign Subsidiary (or any Domestic Subsidiary if substantially all of its assets consist of Equity Interests of one or more Foreign Subsidiaries) acquired, owned or otherwise held by such Grantor which, when aggregated with all of the other shares of stock in such Subsidiary pledged by such Grantor, would result in more than 65% of the shares of stock in such Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under the Code) (the “Voting Foreign Stock”) being pledged to the Administrative Agent, on behalf of the Secured Parties under this Agreement; provided, further, that all of the shares of stock or units or other Equity Interests in such Foreign Subsidiary not entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under the Code) (the “Non-Voting Foreign Stock”) shall be pledged by such Grantor; and

 

(iii)          all Investment Property and all Financial Assets, and all dividends, distributions, return of capital, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange therefor and all warrants, rights or options issued thereon or with respect thereto;

 

(p)   all contracts and agreements between any Grantor and one or more additional parties (including, without limitation, any Swap Contracts, licensing agreements and any partnership agreements, joint venture agreements, limited liability company agreements) and the IP Agreements (as hereinafter defined), in each case as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time (collectively, the “Assigned Agreements”), including, without limitation, all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Agreements, (all such Collateral being the “Agreement Collateral”);

 

(q)   the following (collectively, the “Intellectual Property Collateral”):

 

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(i)            all patents, patent applications, utility models, statutory invention registrations and all inventions claimed or disclosed therein and all improvements thereto (“Patents”);

 

(ii)           all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source identifiers, whether registered or unregistered (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together, in each case, with the goodwill symbolized thereby (“Trademarks”);

 

(iii)          all copyrights, including, without limitation, copyrights in Computer Software (as hereinafter defined), internet web sites and the content thereof, whether registered or unregistered (“Copyrights”);

 

(iv)          all computer software, programs and databases (including, without limitation, source code, object code and all related applications and data files), firmware and documentation and materials relating thereto, together with any and all maintenance rights, service rights, programming rights, hosting rights, test rights, improvement rights, renewal rights and indemnification rights and any substitutions, replacements, improvements, error corrections, updates and new versions of any of the foregoing (“Computer Software”);

 

(v)           all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, databases and data, including, without limitation, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information (collectively, “Trade Secrets”), and all other intellectual, industrial and intangible property of any type, including, without limitation, industrial designs and mask works;

 

(vi)          all registrations and applications for registration for any of the foregoing, including, without limitation, those registrations and applications for registration set forth in Schedule III hereto (as such Schedule III may be supplemented from time to time by supplements to this Agreement, each such supplement being substantially in the form of Exhibit C hereto (an “IP Security Agreement Supplement”) executed by such Grantor to the Administrative Agent from time to time), together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof;

 

(vii)         all tangible embodiments of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

 

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(viii)        all agreements, permits, consents, orders and franchises relating to the license, development, use or disclosure of any of the foregoing to which such Grantor, now or hereafter, is a party or a beneficiary (“IP Agreements”); and

 

(ix)           any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages;

 

(r)    all books and records (including, without limitation, customer lists, credit files, printouts and other computer output materials and records) of such Grantor pertaining to any of the Collateral;

 

(s)           and all other tangible and intangible personal property of whatever nature whether or not covered by Article 9 of the UCC; and

 

(t)            all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and Supporting Obligations relating to, any and all of the Collateral (including, without limitation, proceeds, collateral and Supporting Obligations that constitute property of the types described in clauses (a) through (s) of this Section 1), and, to the extent not otherwise included, all payments under insurance (whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, and cash;

 

provided that notwithstanding anything to the contrary contained in the foregoing clauses (a) through (t), the security interest created by this Agreement shall not extend to, and the terms “Collateral,” “Security Collateral,” “Agreement Collateral,” “Intellectual Property Collateral” and other terms defining the components of the Collateral in the foregoing clauses (a) through (t) shall not include, any of the following (collectively, the “Excluded Property”):

 

(i)        any Equity Interests issued by an Unrestricted Subsidiary;

 

(ii)       any Voting Foreign Stock excluded from the Pledged Equity and Security Collateral pursuant to the proviso to clause (o)(ii) above;

 

(iii)      any lease, license or other agreement or any property subject to a purchase money Lien permitted under the Credit Agreement to the extent that (and only for so long as) a grant of a security interest therein would violate or invalidate such lease, license, agreement, or purchase money arrangement, or create a right of termination in favor of any other party thereto (other than any Grantor), in each case to the extent not rendered unenforceable pursuant to applicable provisions of the UCC or other applicable law, provided, that the Collateral includes proceeds and receivables of any property excluded under this clause (iii), the assignment of which is expressly deemed effective under the UCC notwithstanding such prohibition; and

 

(iv)      any Equity Interests in Joint Ventures to the extent that the grant of a security interest therein would require the consent of any Person who owns Equity

 

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Interests in such Joint Venture (other than an Affiliate of the Borrower) which consent has not been obtained;

 

provided, further, that notwithstanding anything to the contrary contained in the foregoing clauses (a) through (t), no Grantor shall be required to (x) except with respect to Cash Collateral Accounts, enter into control agreements with respect to, or otherwise perfect any security interest by “control” over, securities accounts, deposit accounts, other bank accounts, cash and cash equivalents and accounts related to the clearing, payment processing and similar operations of the Borrower and its Restricted Subsidiaries, (y) except with respect to Pledged Equity in Material Foreign Subsidiaries, take any action in any jurisdiction (other than in the United States of America, any state thereof and the District of Columbia) to perfect any security interest in Equity Interests of Foreign Subsidiaries, or (z) perfect the security interest in the following other than by the filing of a UCC financing statement: (1) crops or farm products, (2) vehicles and other equipment subject to a certificate of title statute, (3) Fixtures, except to the extent that the same are Equipment or are related to real property covered or intended by the Loan Documents to be covered by a mortgage in favor of the Lenders, (4) leasehold interests, (5) Assigned Agreements and (6) Letter-of-Credit Rights (collectively, the “Perfection Exceptions”).

 

Section 2.       Security for Obligations.  This Agreement secures, in the case of each Grantor, the payment of all Obligations of such Grantor now or hereafter existing under the Loan Documents, any Secured Cash Management Agreement or any Secured Hedge Agreement (the Loan Documents, Secured Cash Management Agreements and Secured Hedge Agreements, collectively, the “Secured Documents”) (as such Secured Documents may be amended, amended and restated, supplemented, replaced, refinanced or otherwise modified from time to time (including any increases of the principal amount outstanding thereunder)),  whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise (all such Obligations being the “Secured Obligations”).  Without limiting the generality of the foregoing, this Agreement secures, as to each Grantor, the payment of all amounts that constitute part of the Secured Obligations that would be owed by such Grantor to any Secured Party under the Secured Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, or reorganization or similar proceeding involving a Loan Party.

 

Section 3.       Grantors Remain Liable.  Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Secured Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

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Section 4.       Delivery and Control of Security Collateral.  (a)  All certificates representing or evidencing the Pledged Equity and all instruments representing or evidencing the Pledged Debt in an aggregate principal amount in excess of $7,500,000 shall be delivered to and held by or on behalf of the Administrative Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Administrative Agent.  During the continuation of an Event of Default, the Administrative Agent shall have the right, at any time in its discretion and without notice to any Grantor, to (i) transfer to or to register in the name of the Administrative Agent or any of its nominees any or all of the Security Collateral, subject only to the revocable rights specified in Section 11(a), (ii) exchange certificates or instruments representing or evidencing Security Collateral for certificates or instruments of smaller or larger denominations, and (iii) convert Security Collateral consisting of Financial Assets credited to any Securities Account to Security Collateral consisting of Financial Assets held directly by the Administrative Agent, and to convert Security Collateral consisting of Financial Assets held directly by the Administrative Agent to Security Collateral consisting of Financial Assets credited to any Securities Account.

 

(b)   Promptly upon the request of the Administrative Agent, with respect to any Security Collateral in which any Grantor has any right, title or interest and that constitutes an uncertificated security of a Subsidiary, such Grantor will cause the issuer thereof either (i) to register the Administrative Agent as the registered owner of such security or (ii) to agree in an authenticated record with such Grantor and the Administrative Agent that such issuer will comply with instructions with respect to such security originated by the Administrative Agent without further consent of such Grantor, such authenticated record to be in form and substance satisfactory to the Administrative Agent.  During the continuation of an Event of Default, with respect to any Security Collateral in which any Grantor has any right, title or interest and that is not an uncertificated security, promptly upon the request of the Administrative Agent, such Grantor will notify each such issuer of Pledged Equity that such Pledged Equity is subject to the security interest granted hereunder.

 

(c)           During the continuation of an Event of Default, promptly upon the request of the Administrative Agent, such Grantor will notify each such issuer of Pledged Debt that such Pledged Debt is subject to the security interest granted hereunder.

 

Section 5.       Maintaining Collateral Accounts, Electronic Chattel Paper, Transferable Records and Letter-of-Credit Rights and Giving Notice of Commercial Tort Claims.  So long as any Loan or any other Obligation of any Loan Party under any Secured Document shall remain unpaid (other than contingent indemnification obligations as to which no claim has been asserted and obligations and liabilities under Secured Cash Management Agreements and Secured Hedge Agreements as to which arrangements satisfactory to the applicable Cash Management Bank or Hedge Bank shall have been made), any Letter of Credit shall be outstanding (other than Letters of Credit which have been Cash Collateralized):

 

(a)   During the continuation of an Event of Default, promptly upon the request of the Administrative Agent, each Grantor will maintain all (i) Electronic Chattel Paper so that the Administrative Agent has control of the Electronic Chattel Paper in the manner specified in Section 9-105 of the UCC and (ii) all transferable records so that the

 

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Administrative Agent has control of the transferable records in the manner specified in Section 16 of the Uniform Electronic Transactions Act, as in effect in the jurisdiction governing such transferable record (“UETA” );

 

(b)   Each Grantor will give prompt notice to the Administrative Agent of any Commercial Tort Claim in excess of $7,500,000 that may arise in the future and will promptly execute or otherwise authenticate a supplement to this Agreement and otherwise take all necessary action, to subject such Commercial Tort Claim to the first priority security interest created under this Agreement; and

 

(c)           With respect to any Deposit Accounts constituting Cash Collateral Accounts, each Grantor will maintain such Deposit Accounts only with the Administrative Agent or with another commercial bank reasonably acceptable to the Administrative Agent that has agreed with such Grantor and the Administrative Agent to comply with instructions originated by the Administrative Agent directing the disposition of funds in such accounts without the further consent of such Grantor, such agreement to be in form and substance reasonably satisfactory to the Administrative Agent.

 

Section 6.       Representations and Warranties.  Each Grantor represents and warrants as follows  (it being understood that none of the foregoing applies to the Excluded Property):

 

(a)   As of the Closing Date and, after the Closing Date, except as otherwise notified to the Administrative Agent pursuant to Section 9(a), (i) such Grantor’s exact legal name, as defined in Section 9-503(a) of the UCC, type of organization, jurisdiction of organization, organizational identification number (if any) and taxpayer identification number, is correctly set forth in Schedule I hereto (as such Schedule I may be supplemented from time to time by supplements to this Agreement), (ii) such Grantor is located (within the meaning of Section 9-307 of the UCC) and has its chief executive office, in the state or jurisdiction set forth in Schedule I hereto and (iii) such Grantor has no trade names other than as listed on Schedule I hereto and within the 5 years preceding the date hereof, has not changed its name, location, chief executive office, type of organization, jurisdiction of organization, organizational identification number or taxpayer identification number from those set forth on Schedule I, except as described on Schedule I.

 

(b)   All of the Equipment and Inventory of such Grantor, in each case, with value (together with the value of all Equipment and Inventory of all other Grantors located at the same place) in excess of $7,500,000 are located at the places specified therefor in Schedules 5.08(b), (c) and (d) to the Credit Agreement as of the date specified in Section 5.08(b), (c) and (d), respectively, and as of the date each such schedule is required to be updated pursuant to the terms of the Credit Agreement.  All Pledged Equity consisting of certificated securities and Pledged Debt in an aggregate principal amount in excess of $7,500,000 have been delivered to the Administrative Agent in accordance herewith and the Credit Agreement.

 

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(c)   Such Grantor is the legal and beneficial owner of the Collateral granted or purported to be granted by it free and clear of any Lien, claim, option or right of others, except for the security interest created under this Agreement, and Liens permitted under Section 7.01 of the Credit Agreement.

 

(d)   The Pledged Equity pledged by such Grantor on the Closing Date constitutes the percentage of the issued and outstanding Equity Interests of the issuers thereof indicated on Schedule II hereto.

 

(e)   Upon the filing of appropriate financing statements and the recordation of the Intellectual Property Security Agreement with the U.S. Patent and Trademark Office and the U.S. Copyright Office, all actions necessary to perfect the security interest in the Collateral of such Grantor created under this Agreement with respect to which a Lien may be perfected by filing pursuant to the UCC or 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 shall have been duly made or taken and are in full force and effect, and this Agreement creates in favor of the Administrative Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions, perfected first priority security interest in such Collateral of such Grantor (subject to the Perfection Exceptions, Liens permitted by Sections 7.01(b), (i), (p), (ee) and (ff) of the Credit Agreement and non-consensual Liens arising by operation of Law and permitted by Section 7.01 of the Credit Agreement), securing the payment of the Secured Obligations.

 

(f)    Except as could not reasonably be expected to have a Material Adverse Effect as to itself and its Intellectual Property Collateral:

 

(i)            The operation of such Grantor’s business as currently conducted or as contemplated to be conducted and the use of the Intellectual Property Collateral in connection therewith do not conflict with, infringe, misappropriate, dilute, misuse or otherwise violate the intellectual property rights of any third party.

 

(ii)           Such Grantor is the exclusive owner of all right, title and interest in and to the Intellectual Property Collateral, and is entitled to use all Intellectual Property Collateral subject only to the terms of the IP Agreements.

 

(iii)          As of the Closing Date, the Intellectual Property Collateral set forth on Schedule III hereto includes (A) all of the patents, patent applications, trademark registrations and applications, copyright registrations and applications and IP Agreements owned by such Grantor and material to such Grantor’s business, (B) all domain names owned by any Grantor and (C) all material IP Agreements of any Grantor.

 

(iv)          The Intellectual Property Collateral is subsisting and has not been adjudged invalid or unenforceable in whole or part, and to such Grantor’s knowledge, is valid and enforceable.  Such Grantor is not aware of any uses of any item of Intellectual Property Collateral that could be expected to lead to such item becoming invalid or unenforceable.

 

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(v)           Such Grantor has made or performed all filings, recordings and other acts and has paid all required fees and taxes to maintain and protect its interest in each and every item of Intellectual Property Collateral in full force and effect throughout the world, and to protect and maintain its interest therein including, without limitation, recordations of any of its interests in the Patents and Trademarks with the U.S. Patent and Trademark Office and in corresponding national and international patent offices, and recordation of any of its interests in the Copyrights with the U.S. Copyright Office and in corresponding national and international copyright offices.  Such Grantor has used proper statutory notice in connection with its use of each patent, trademark and copyright in the Intellectual Property Collateral.

 

(vi)          No claim, action, suit, investigation, litigation or proceeding has been asserted or is pending or threatened against such Grantor (i) based upon or challenging or seeking to deny or restrict the Grantor’s rights in or use of any of the Intellectual Property Collateral, (ii) alleging that the Grantor’s rights in or use of the Intellectual Property Collateral or that any services provided by, processes used by, or products manufactured or sold by, such Grantor infringe, misappropriate, dilute, misuse or otherwise violate any patent, trademark, copyright or any other proprietary right of any third party, or (iii) alleging that the Intellectual Property Collateral is being licensed or sublicensed in violation or contravention of the terms of any license other agreement. No Person is engaging in any activity that infringes, misappropriates, dilutes, misuses or otherwise violates the Intellectual Property Collateral or the Grantor’s rights in or use thereof.

 

(vii)         With respect to each IP Agreement: (A) such IP Agreement is valid and binding and in full force and effect and represents the entire agreement between the respective parties thereto with respect to the subject matter thereof; (B) such IP Agreement will not cease to be valid and binding and in full force and effect on terms identical to those currently in effect as a result of the rights and interest granted herein, nor will the grant of such rights and interest constitute a breach or default under such IP Agreement or otherwise give any party thereto a right to terminate such IP Agreement; (C) such Grantor has not received any notice of termination or cancellation under such IP Agreement; (D) such Grantor has not provided any notice of a breach or default under such IP Agreement, which breach or default has not been cured; (E) such Grantor has not granted to any other third party any rights, adverse or otherwise, under such IP Agreement; and (F) neither such Grantor nor any other party to such IP Agreement is in breach or default thereof in any material respect, and no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such IP Agreement.

 

(viii)        To such Grantor’s knowledge, (A) none of the Trade Secrets of such Grantor has been used, divulged, disclosed or appropriated to the detriment of such Grantor for the benefit of any other Person other than such Grantor; (B) no employee, independent contractor or agent of such Grantor has

 

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misappropriated any trade secrets of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of such Grantor; and (C) no employee, independent contractor or agent of such Grantor is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of inventions agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of such Grantor’s Intellectual Property Collateral.

 

(ix)           No Grantor or Intellectual Property Collateral is subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling restricting the use of any Intellectual Property Collateral or that would impair the validity or enforceability of such Intellectual Property Collateral.

 

(h)           Such Grantor has no Commercial Tort Claims with a value in excess of $7,500,000 other than those listed in Schedule IV and additional Commercial Tort Claims as to which such Grantor has complied with the requirements of Section 5(b) hereof.

 

Section 7.       Further Assurances.  (a)  Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be necessary or that the Administrative Agent may reasonably request, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Grantor hereunder or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Grantor, subject in each case to the Perfection Exceptions.  Without limiting the generality of the foregoing, each Grantor will, upon the Administrative Agent’s reasonable request, promptly with respect to Collateral of such Grantor:  (i) if any such Collateral with a value in excess of $7,500,000 shall be evidenced by a promissory note or other instrument or Chattel Paper, deliver and pledge to the Administrative Agent hereunder such note or instrument or Chattel Paper duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to the Administrative Agent; (ii) execute or authenticate and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be reasonably necessary or desirable, or as the Administrative Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted by such Grantor hereunder; (iii) deliver and pledge to the Administrative Agent for benefit of the Secured Parties certificates representing Security Collateral that constitutes certificated securities, accompanied by undated stock or bond powers executed in blank (to the extent required to be pledged pursuant to the Credit Agreement or this Agreement) and (iv) deliver to the Administrative Agent evidence that all other action (subject to the Perfection Exceptions) that the Administrative Agent may deem reasonably necessary or desirable in order to perfect and protect the security interest granted or purported to be granted by such Grantor under this Agreement has been taken.

 

(b)   Each Grantor hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, including, without limitation, one or more financing statements indicating that such financing statements cover all assets or all personal property (or words of similar effect) of such Grantor, in each case without the signature of such Grantor, and regardless of whether any particular asset described in such financing

 

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statements falls within the scope of the UCC or the granting clause of this Agreement.  A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.  Each Grantor ratifies its authorization for the Administrative Agent to have filed such financing statements, continuation statements or amendments filed prior to the date hereof.

 

Section 8.       As to Insurance.  Each insurance policy of each Grantor shall name the Administrative Agent as loss payee and additional insured thereunder, in each case in a manner reasonably satisfactory to the Administrative Agent, and shall in addition (i) provide for all losses to be paid on behalf of the Administrative Agent and such Grantor as their interests may appear, (ii) name such Grantor and the Administrative Agent as insured parties thereunder (without any representation or warranty by or obligation upon the Administrative Agent) as their interests may appear, (iii) provide that there shall be no recourse against the Administrative Agent for payment of premiums or other amounts with respect thereto and (iv) provide that at least 10 days’ prior written notice of cancellation or of lapse shall be given to the Administrative Agent by the insurer.

 

Section 9.       Post-Closing Changes; Bailees; Collections on Assigned Agreements and Accounts.  (a)  No Grantor will change its name, type of organization, jurisdiction of organization, organizational identification number, taxpayer identification number or location from those set forth in Section 6(a) of this Agreement without first giving at least 10 days’ (or such lesser period of time as the Administrative Agent may agree) prior written notice (or subsequent written notice if the Administrative Agent agrees in its reasonable discretion) to the Administrative Agent and taking all action required by the Administrative Agent for the purpose of perfecting or protecting the security interest granted by this Agreement.

 

(b)   During the continuation of an Event of Default, if Collateral of any Grantor with an aggregate value in excess of $7,500,000 is at any time in the possession or control of a warehouseman, bailee or agent, upon the request of the Administrative Agent such Grantor will (i) notify such warehouseman, bailee or agent of the security interest created hereunder, (ii) instruct such warehouseman, bailee or agent to hold all such Collateral solely for the Administrative Agent’s account subject only to the Administrative Agent’s instructions, (iii) use commercially reasonable efforts to cause such warehouseman, bailee or agent to authenticate a record (in form and substance reasonably satisfactory to the Administrative Agent) acknowledging that it holds possession of such Collateral for the Administrative Agent’s benefit and shall act solely on the instructions of the Administrative Agent without the further consent of the Grantor or any other Person, and (iv) make such authenticated record available to the Administrative Agent.

 

(c)   Except as otherwise provided in this Section 9(c), each Grantor will continue to collect, at its own expense, all amounts due or to become due such Grantor under the Accounts.  In connection with such collections, such Grantor may take (and, at the Administrative Agent’s direction during the continuation of an Event of Default, shall take) such commercially reasonable action as such Grantor (or the Administrative Agent) may deem necessary or advisable to enforce collection thereof; provided, however, that the Administrative Agent shall have the right at any time upon the occurrence and during the continuance of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the

 

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Obligors under any Accounts, of the assignment of such Accounts, to the Administrative Agent and to direct such Obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Administrative Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Accounts, to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done, and to otherwise exercise all rights with respect to such Accounts, including, without limitation, those set forth set forth in Section 9-607 of the UCC.  After receipt by any Grantor of the notice from the Administrative Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including, without limitation, instruments) received by such Grantor in respect of the Accounts, of such Grantor shall be received in trust for the benefit of the Administrative Agent hereunder, shall be segregated from other funds of such Grantor and shall be either (A) released to such Grantor to the extent permitted under the terms of the Credit Agreement so long as no Event of Default shall have occurred and be continuing or (B) if any Event of Default shall have occurred and be continuing, applied as provided in Section 8.04 of the Credit Agreement and (ii) except with the consent of the Administrative Agent, such Grantor will not adjust, settle or compromise the amount or payment of any Account, release wholly or partly any Obligor thereof, or allow any credit or discount thereon.  No Grantor will permit or consent to the subordination of its right to payment under any of the Accounts to any other indebtedness or obligations of the Obligor thereof.

 

Section 10.     As to Intellectual Property Collateral.  (a)  With respect to each item of its Intellectual Property Collateral, each Grantor agrees to take, at its expense, all commercially reasonable steps, including, without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other domestic governmental authority, to (i) maintain the validity and enforceability of such Intellectual Property Collateral and maintain such Intellectual Property Collateral in full force and effect, and (ii) pursue the registration and maintenance of each patent, trademark, or copyright registration or application, now or hereafter included in such Intellectual Property Collateral of such Grantor, including, without limitation, the payment of required fees and taxes, the filing of responses to office actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other domestic governmental authorities, the filing of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings, except, in each case, to the extent failure to act could not reasonably be expected to cause a Material Adverse Effect.

 

(b)   Each Grantor shall use property statutory notice in connection with its use of Intellectual Property Collateral that is material to the business of the Borrower and its Restricted Subsidiaries.  Except as could not be reasonably expected to have a Material Adverse Effect, no Grantor shall do or permit any act or knowingly omit to do any act whereby any of its Intellectual Property Collateral may lapse or become invalid or unenforceable or placed in the public domain.

 

(c)   Except where failure to do so could not reasonably be expected to cause a Material Adverse Effect, each Grantor shall take all commercially reasonable steps which it or the Administrative Agent (during the continuation of an Event of Default) deems reasonable and

 

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appropriate under the circumstances to preserve and protect each item of its Intellectual Property Collateral, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks, consistent with the quality of the products and services as of the date hereof, and taking all steps necessary to ensure that all licensed users of any of the Trademarks use such consistent standards of quality.

 

(d)   With respect to its Intellectual Property Collateral, each Grantor agrees to execute or otherwise authenticate an agreement, in substantially the form set forth in Exhibit B hereto or otherwise in form and substance satisfactory to the Administrative Agent (an “Intellectual Property Security Agreement”), for recording the security interest granted hereunder to the Administrative Agent in such Intellectual Property Collateral with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other domestic governmental authorities necessary to perfect the security interest hereunder in such Intellectual Property Collateral.

 

(e)   Each Grantor agrees that should it obtain an ownership interest in any item of the type set forth in Section 1(q) that is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral subject to the terms and conditions of this Agreement with respect thereto.  Each Grantor shall, concurrently with the delivery of financial statements under Section 6.01(a) and (b) of the Credit Agreement, execute and deliver to the Administrative Agent, or otherwise authenticate, an agreement substantially in the form of Exhibit C hereto or otherwise in form and substance satisfactory to the Administrative Agent (an “IP Security Agreement Supplement”) covering such After-Acquired Intellectual Property which IP Security Agreement Supplement shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other domestic governmental authorities necessary to perfect the security interest hereunder in such After-Acquired Intellectual Property.

 

Section 11.     Voting Rights; Dividends; Etc.  (a)  So long as no Event of Default shall have occurred and be continuing:

 

(i)            Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral of such Grantor or any part thereof for any purpose; provided, however, that such Grantor will not exercise or refrain from exercising any such right in a manner prohibited by the Credit Agreement.

 

(ii)           Each Grantor shall be entitled to receive and retain any and all dividends, interest and other distributions paid in respect of the Security Collateral of such Grantor if and to the extent that the payment thereof is not otherwise prohibited by the terms of the Loan Documents; provided, however, that any and all

 

(A)  dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Security Collateral,

 

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(B)   dividends and other distributions paid or payable in cash in respect of any Security Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus and

 

(C)   cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Security Collateral,

 

(x) in the case of the foregoing clause (A), any such property distributed in respect of any Security Collateral, shall be deemed to constitute acquired property and shall be forthwith delivered to the Administrative Agent as Security Collateral in the same form as so received (with any necessary indorsement) in accordance with the provisions of Section 6.12 of the Credit Agreement and (y) in the case of the foregoing clauses (B) and (C), any such cash distributed in respect of any Security Collateral shall be subject to the provisions of the Credit Agreement applicable to the proceeds of a Disposition of property.

 

(iii)          The Administrative Agent will execute and deliver (or cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above.

 

(b)   Upon the occurrence and during the continuance of an Event of Default:

 

(i)            Upon notice to the applicable grantor, all rights of each Grantor (x) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 11(a)(i) shall, upon notice to such Grantor by the Administrative Agent, cease and (y) to receive the dividends, interest and other distributions that it would otherwise be authorized to receive and retain pursuant to Section 11(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends, interest and other distributions.

 

(ii)           All dividends, interest and other distributions that are received by any Grantor contrary to the provisions of paragraph (i) of this Section 11(b) shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Administrative Agent as Security Collateral in the same form as so received (with any necessary indorsement).

 

Section 12.     Additional Shares.  Any issuance of Equity Interests or other securities by an issuer of Pledged Equity (to the extent that such issuer is a Subsidiary) in addition to or in substitution for the Pledged Equity, in each case to any Person other than any Grantor, shall

 

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constitute a Disposition of property by the Grantor owning such Pledged Equity of such Subsidiary.

 

Section 13.     Administrative Agent Appointed Attorney-in-Fact.  Each Grantor hereby irrevocably appoints the Administrative Agent such Grantor’s attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time, upon the occurrence and during the continuance of an Event of Default, in the Administrative Agent’s discretion, to take any action and to execute any instrument that the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

 

(a)   to obtain and adjust insurance required to be paid to the Administrative Agent,

 

(b)   to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,

 

(c)   to receive, indorse and collect any drafts or other instruments, documents and Chattel Paper, in connection with clause (a) or (b) above, and

 

(d)   to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Administrative Agent with respect to any of the Collateral.

 

Section 14.     Administrative Agent May Perform.  If any Grantor fails to perform any agreement contained herein, the Administrative Agent may, after providing notice to such Grantor of its intent to do so, but without any obligation to do so and without notice, itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor under Section 17.

 

Section 15.     The Administrative Agent’s Duties.  The powers conferred on the Administrative Agent hereunder are solely to protect the Secured Parties’ interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral.  The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property.

 

Section 16.     Remedies.  If any Event of Default shall have occurred and be continuing:

 

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(a)   The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral) and also may:  (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place and time to be designated by the Administrative Agent that is reasonably convenient to both parties; (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable; (iii) occupy any premises owned or leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; and (iv) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral, including, without limitation, (A) any and all rights of such Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Assigned Agreements, the Accounts and the other Collateral, (B) withdraw, or cause or direct the withdrawal, of all funds with respect Cash Collateral Accounts and (C) exercise all other rights and remedies with respect to the Assigned Agreements, the Accounts and the other Collateral, including, without limitation, those set forth in Section 9-607 of the UCC.  Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.  The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

(b)   All payments received by any Grantor under or in connection with any Assigned Agreement or otherwise in respect of the Collateral shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary indorsement).

 

(c)   The Administrative Agent may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Secured Obligations against any funds held with respect to any Deposit Account that is not an Exempt Deposit Account.

 

(d)  Any cash held by or on behalf of the Administrative Agent and all cash proceeds received by or on behalf of the Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral

 

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for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Administrative Agent pursuant to Section 17) in whole or in part by the Administrative Agent against, all or any part of the Secured Obligations, in the manner set forth in Section 8.04 of the Credit Agreement.

 

(e)  In the event of any sale or other disposition of any of the Intellectual Property Collateral of any Grantor, the goodwill symbolized by any Trademarks subject to such sale or other disposition shall be included therein, and such Grantor shall supply to the Administrative Agent or its designee such Grantor’s know-how and expertise, and documents and things relating to any Intellectual Property Collateral subject to such sale or other disposition, and such Grantor’s customer lists and other records and documents relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of products and services of such Grantor.

 

(f)  If the Administrative Agent shall determine to exercise its right to sell all or any of the Security Collateral of any Grantor pursuant to this Section 16, each Grantor agrees that, upon request of the Administrative Agent, such Grantor will, at its own expense, do or cause to be done all such other acts and things as may be necessary to make such sale of such Security Collateral or any part thereof valid and binding and in compliance with applicable law.

 

(g)  The Administrative Agent is authorized, in connection with any sale of the Security Collateral pursuant to this Section 16, to deliver or otherwise disclose to any prospective purchaser of the Security Collateral:  (i) any registration statement or prospectus, and all supplements and amendments thereto; (ii) any information and projections; and (iii) any other information in its possession relating to such Security Collateral.

 

(h)  Each Grantor acknowledges the impossibility of ascertaining the amount of damages that would be suffered by the Secured Parties by reason of the failure by such Grantor to perform any of the covenants contained in Section 16(f) above and, consequently, agrees that, if such Grantor shall fail to perform any of such covenants, it will pay, as liquidated damages and not as a penalty, an amount equal to the value of the Security Collateral on the date the Administrative Agent shall demand compliance with Section 9(f) above.

 

Section 17.     Indemnity and Expenses.  Each Grantor will upon demand pay to the Administrative Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of its counsel that the Administrative Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral of such Grantor, (iii) the exercise or enforcement of any of the rights of the Administrative Agent or the other Secured Parties hereunder or (iv) the failure by such Grantor to perform or observe any of the provisions hereof, in each case, in the manner and to the extent set forth in Section 10.04 of the Credit Agreement.

 

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Section 18.     Amendments; Waivers; Additional Grantors; Etc.  (a)  Subject to Section 10.01 of the Credit Agreement, no amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.  No failure on the part of the Administrative Agent or any other Secured Party to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.

 

(b)   Upon the execution and delivery, or authentication, by any Person of a security agreement supplement in substantially the form of Exhibit A hereto (each a “Security Agreement Supplement”), (i) such Person shall be referred to as an “Additional Grantor” and shall be and become a Grantor hereunder, and each reference in this Agreement and the other Loan Documents to “Grantor” shall also mean and be a reference to such Additional Grantor,  and each reference in this Agreement and the other Loan Documents to “Collateral” shall also mean and be a reference to the Collateral of such Additional Grantor, and (ii) the supplemental schedules I through IV attached to each Security Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I through IV, respectively, hereto, and the Administrative Agent may attach such supplemental schedules to such Schedules; and each reference to such Schedules shall mean and be a reference to such Schedules as supplemented pursuant to each Security Agreement Supplement.

 

Section 19.     Notices, Etc.  All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication or facsimile transmission) and mailed, telegraphed, telecopied, telexed, faxed or delivered to it, if to any Grantor, addressed to it in care of the Borrower at the Borrower’s address specified in Section 10.02 of the Credit Agreement, if to the Administrative Agent, at its address specified in Section 10.02 of the Credit Agreement.  All such notices and other communications shall be deemed to be given or made at such time as shall be set forth in Section 10.02 of the Credit Agreement.  Delivery by telecopier or in .pdf or similar format by electronic mail of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Security Agreement Supplement or Schedule hereto shall be effective as delivery of an original executed counterpart thereof.

 

Section 20.     Continuing Security Interest; Assignments under the Credit Agreement.  This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the termination of the Aggregate Commitments and the payment in full in cash of the Secured Obligations (other than (A) contingent indemnification obligations as to which no claim has been asserted and (B) obligations and liabilities under Secured Cash Management Agreements and Secured Hedge Agreements as to which arrangements satisfactory to the applicable Cash Management Bank or Hedge Bank shall have been made) and the termination or expiration of all Letters of Credit (other than Letters of Credit which have been Cash Collateralized), (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns.  Without limiting the generality of the foregoing clause (c), any Lender may assign or

 

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otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Loans owing to it and the Note or Notes, if any, held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 10.07 of the Credit Agreement.

 

Section 21.     Release; Termination.  (a)  Upon any sale, lease, transfer or other disposition of any item of Collateral of any Grantor permitted by, and in accordance with, the terms of the Loan Documents, the Administrative Agent will, at such Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that such Grantor shall have delivered to the Administrative Agent a written request for release, together with a form of release for execution by the Administrative Agent, a certificate of such Grantor to the effect that the transaction is in compliance with the Loan Documents and such other supporting information as the Administrative Agent may reasonably request.

 

(b)   Upon the termination of the Aggregate Commitments and the payment in full in cash of the Secured Obligations (other than (A) contingent indemnification obligations as to which no claim has been asserted and (B) obligations and liabilities under Secured Cash Management Agreements and Secured Hedge Agreements as to which arrangements satisfactory to the applicable Cash Management Bank or Hedge Bank shall have been made) and the termination or expiration of all Letters of Credit (other than Letters of Credit which have been Cash Collateralized), the pledge and security interest granted hereby shall automatically terminate and all rights to the Collateral shall revert to the applicable Grantor.  Upon any such termination, the Administrative Agent will, at the applicable Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

 

Section 22.     Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by telecopier or in .pdf or similar format by electronic mail shall be effective as delivery of an original executed counterpart of this Agreement.

 

Section 23.     The Mortgages.  In the event that any of the Collateral hereunder is also subject to a valid and enforceable Lien under the terms of any Mortgage and the terms of such Mortgage are inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such Mortgage shall be controlling in the case of fixtures and real estate leases, letting and licenses of, and contracts and agreements relating to the lease of, real property, and the terms of this Agreement shall be controlling in the case of all other Collateral.  For the avoidance of doubt, in the event that any lien or security interest other than a Permitted Encumbrance or a Permitted Lien (as defined in the Mortgage) is asserted against any Mortgaged Property, then Grantor, as mortgagee, shall promptly give the holder of the applicable Mortgage a detailed written notice of such lien or security interest (including origin, amount and other terms) and otherwise comply with Section 3.2 of such Mortgage.

 

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Section 24.     Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

 

	
 
    	
ALPHABET   MERGER SUB, INC.
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NBTY, INC.
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ALPHABET   HOLDING COMPANY, INC.,
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Each   Subsidiary Grantor]
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

Signature Page to

Project Alphabet Security Agreement

 

 

Schedule I to the
 Security Agreement

 

LOCATION, CHIEF EXECUTIVE OFFICE, TYPE OF ORGANIZATION, JURISDICTION OF ORGANIZATION, ORGANIZATIONAL IDENTIFICATION NUMBER AND TAX IDENTIFICATION NUMBER

 

	
Grantor
    	
 
    	
Chief
   Executive
   Office
    	
 
    	
Type of
   Organization
    	
 
    	
Jurisdiction of
   Organization
    	
 
    	
Organizational
   I.D. No.
    	
 
    	
Tax I.D. No.
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Schedule II to the
 Security Agreement

 

PLEDGED EQUITY

 

	
Grantor
    	
 
    	
Issuer
    	
 
    	
Class of
   Equity
   Interest
    	
 
    	
Certificate
   No(s)
    	
 
    	
Number
   of Shares
    	
 
    	
Percentage
   of
   Outstanding
   Shares
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Schedule III to the
 Security Agreement

 

INTELLECTUAL PROPERTY

 

I.  Patents

 

	
Grantor
    	
 
    	
Patent
   Titles
    	
 
    	
Country
    	
 
    	
Patent No.
    	
 
    	
Applic. No.
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

II.  Domain Names and Trademarks

 

	
Grantor
    	
 
    	
Domain
   Name/Mark
    	
 
    	
Country
    	
 
    	
Mark
    	
 
    	
Reg.
   No.
    	
 
    	
Applic.
   No.
    	
 
    	
Filing
   Date
    	
 
    	
Issue
   Date
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

III.  Trade Names

 

	
Names
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

IV.  Copyrights

 

	
Grantor
    	
 
    	
Title of
   Work
    	
 
    	
Country
    	
 
    	
Title
    	
 
    	
Reg. No.
    	
 
    	
Applic. No.
    	
 
    	
Filing
   Date
    	
 
    	
Issue
   Date
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

V.  IP Agreements

 

	
Grantor
    	
 
    	
IP Agreements
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

 

Schedule IV to the
 Security Agreement

 

COMMERCIAL TORT CLAIMS

 

[Describe nature of claim(s)-see Comment 5 to UCC Section 9-108]

 

 

Exhibit A to the
 Security Agreement

 

FORM OF SECURITY AGREEMENT SUPPLEMENT

 

[Date of Security Agreement Supplement]

 

Barclays Bank PLC,
 as the Administrative Agent for the
 Secured Parties referred to in the
 Credit Agreement referred to below
                                                 
                                                 
 Attn:                                       

 

NBTY, Inc.

 

Ladies and Gentlemen:

 

Reference is made to (i) the Credit Agreement dated as of October 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among NBTY, Inc., a Delaware corporation, as the Borrower, Alphabet Holdings Company, Inc., a Delaware corporation (“Holdings”), the Lenders party thereto, Barclays Bank PLC, as the Swing Line Lender, an L/C Issuer and the Administrative Agent (together with any successor administrative agent, the “Administrative Agent”), and the Lenders party thereto, and (ii) the Security Agreement dated October 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) made by the Grantors from time to time party thereto in favor of the Administrative Agent for the Secured Parties.  Terms defined in the Credit Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement or the Security Agreement.

 

SECTION 1.  Grant of Security.  The undersigned hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in, all of its right, title and interest in and to all of the Collateral of the undersigned (including all Accounts, cash and Cash Equivalents, Chattel Paper, Commercial Tort Claims set forth on Schedule IV of the Security Agreement, Deposit Accounts, Documents, Equipment, Farm Products, Fixtures (subject to Section 23 of the Security Agreement), General Intangibles, Goods, Instruments, Inventory, Letter-of-Credit Rights, Financial Assets, Equity Interests and Indebtedness), except for any Excluded Property, whether now owned or hereafter acquired by the undersigned, wherever located and whether now or hereafter existing or arising, including, without limitation, the property and assets of the undersigned set forth on the attached supplemental schedules to the Schedules to the Security Agreement.

 

 

SECTION 2.  Security for Obligations.  The grant of a security interest in, the Collateral by the undersigned under this Security Agreement Supplement and the Security Agreement secures the payment of all Obligations of the undersigned now or hereafter existing under or in respect of the Secured Documents (as such Secured Documents may be amended, amended and restated, supplemented, replaced, refinanced or otherwise modified from time to time (including any increases of the principal amount outstanding thereunder)),  whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.  Without limiting the generality of the foregoing, this Security Agreement Supplement and the Security Agreement secures the payment of all amounts that constitute part of the Secured Obligations that would be owed by the Grantor to any Secured Party under the Secured Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, or reorganization or similar proceeding involving a Loan Party.

 

SECTION 3.  Supplements to Security Agreement Schedules.  The undersigned has attached hereto supplemental Schedules I through IV to Schedules I through IV, respectively, to the Security Agreement, and the undersigned hereby certifies, as of the date first above written, that such supplemental schedules have been prepared by the undersigned in substantially the form of the equivalent Schedules to the Security Agreement and are complete and correct in all material respects.

 

SECTION 4.  Representations and Warranties.  The undersigned hereby makes each representation and warranty set forth in Section 6 of the Security Agreement with respect to itself (as supplemented by the attached supplemental schedules) as of the date hereof.

 

SECTION 5.  Obligations Under the Security Agreement.  The undersigned hereby agrees, as of the date first above written, to be bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as each of the other Grantors.  The undersigned further agrees, as of the date first above written, that each reference in the Security Agreement to an “Additional Grantor” or a “Grantor” shall also mean and be a reference to the undersigned and that each reference to the “Collateral” or any part thereof shall also mean and be a reference to the undersigned’s Collateral or part thereof, as the case may be.

 

SECTION 6.  Governing Law.  This Security Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

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Very   truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[NAME   OF ADDITIONAL GRANTOR]
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    	
Address   for notices:
    
				

 

3

 

Exhibit B to the
 Security Agreement

 

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, the “IP Security Agreement”) dated October 1, 2010, is made by the Persons listed on the signature pages hereof (collectively, the “Grantors”) in favor of Barclays Bank PLC, as administrative agent (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

 

WHEREAS, NBTY, Inc., a Delaware corporation, has entered into a Credit Agreement dated as of October 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), with Alphabet Holding Company Inc., a Delaware corporation (“Holdings”), Barclays Bank PLC, as the Swing Line Lender, an L/C Issuer and the Administrative Agent, and the Lenders party thereto.  Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement.

 

WHEREAS, as a condition precedent to the making of the Loans by the Lenders and the issuance of Letters of Credit by the L/C Issuers under the Credit Agreement, the entry into Secured Hedge Agreements by the Hedge Banks from time to time and the entry into Secured Cash Management Agreements by the Cash Management Banks from time to time, each Grantor has executed and delivered that certain Security Agreement dated October 1, 2010 made by the Grantors to the Administrative Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”).

 

WHEREAS, under the terms of the Security Agreement, the Grantors have granted to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of the Grantors, and have agreed as a condition thereof to execute this IP Security Agreement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and any other appropriate domestic governmental authorities.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:

 

SECTION 1.  Grant of Security.  Each Grantor hereby grants to the Administrative Agent for the ratable benefit of the Secured Parties a security interest in all of such Grantor’s right, title and interest in and to the following (the “Collateral”):

 

(i)            the patents and patent applications set forth in Schedule A hereto (the “Patents”);

 

(ii)           the trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no security interest shall be granted in

 

 

United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together with the goodwill symbolized thereby (the “Trademarks”);

 

(iii)          all copyrights, whether registered or unregistered, now owned or hereafter acquired by such Grantor, including, without limitation, the copyright registrations and applications and exclusive copyright licenses set forth in Schedule C hereto (the “Copyrights”);

 

(iv)          all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

 

(v)           any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

 

(vi)          any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral of or arising from any of the foregoing.

 

provided that notwithstanding anything to the contrary contained in the foregoing clauses (i) through (vi), the security interest created hereby shall not extend to, and the term “Collateral,” shall not include any lease, license or other agreement to the extent that (and only for so long as) a grant of a security interest therein would violate or invalidate such lease, license, or agreement, or create a right of termination in favor of any other party thereto (other than any Grantor), in each case to the extent not rendered unenforceable pursuant to applicable provisions of the UCC or other applicable law, provided, that the Collateral includes proceeds and receivables of any property excluded under the foregoing proviso, the assignment of which is expressly deemed effective under the UCC notwithstanding such prohibition.

 

SECTION 2.  Security for Obligations.  The grant of a security interest in, the Collateral by each Grantor under this IP Security Agreement secures the payment of all Obligations of such Grantor now or hereafter existing under or in respect of the Secured Documents (as such Secured Documents may be amended, amended and restated, supplemented, replaced, refinanced or otherwise modified from time to time (including any increases of the principal amount outstanding thereunder)), whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise. Without limiting the generality of the foregoing, this IP Security Agreement secures, as to each Grantor, the payment

 

2

 

of all amounts that constitute part of the Secured Obligations that would be owed by such Grantor to any Secured Party under the Secured Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, or reorganization or similar proceeding involving a Loan Party.

 

SECTION 3.  Recordation.  Each Grantor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer record this IP Security Agreement.

 

SECTION 4.  Execution in Counterparts.  This IP Security Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

SECTION 5.  Grants, Rights and Remedies.  This IP Security Agreement has been entered into in conjunction with the provisions of the Security Agreement.  Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Administrative Agent with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein.

 

3

 

SECTION 6.  Governing Law.  This IP Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

IN WITNESS WHEREOF, each Grantor has caused this IP Security Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

 

	
 
    	
ALPHABET   MERGER SUB, INC.
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NBTY, INC.
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ALPHABET   HOLDING COMPANY, INC.,
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Each   Subsidiary Grantor]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

 

Exhibit C to the
 Security Agreement

 

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT

 

This INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT (this “IP Security Agreement Supplement”) dated [                      ], is made by the Person listed on the signature page hereof (the “Grantor”) in favor of Barclays Bank PLC (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

 

WHEREAS, NBTY, Inc., a Delaware corporation, has entered into a Credit Agreement dated as of October 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), with Alphabet Holding Company Inc., a Delaware corporation (“Holdings”), Barclays Bank PLC, as the Swing Line Lender, an L/C Issuer and the Administrative Agent, and the Lenders party thereto.  Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement.

 

WHEREAS, pursuant to the Credit Agreement, the Grantors have executed and delivered that certain Security Agreement dated October 1, 2010, made by the Grantor and such other Persons to the Administrative Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) and that certain Intellectual Property Security Agreement dated October 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “IP Security Agreement”).

 

WHEREAS, under the terms of the Security Agreement, the Grantor has agreed to grant to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in any after-acquired intellectual property collateral of the Grantor and has agreed in connection therewith to execute this IP Security Agreement Supplement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and other domestic governmental authorities.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as follows:

 

SECTION 1.  Grant of Security.  Each Grantor hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of such Grantor’s right, title and interest in and to the following (the “Additional Collateral”):

 

(i)            the patents and patent applications set forth in Schedule A hereto (the “Patents”);

 

(ii)           the trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair

 

 

the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together with the goodwill symbolized thereby (the “Trademarks”);

 

(iii)          the copyright registrations and applications and exclusive copyright licenses set forth in Schedule C hereto (the “Copyrights”);

 

(iv)          all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

 

(v)           all any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

 

(vi)          any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the foregoing or arising from any of the foregoing.

 

provided that notwithstanding anything to the contrary contained in the foregoing clauses (i) through (vi), the security interest created hereby shall not extend to, and the term “Additional Collateral,” shall not include any lease, license or other agreement to the extent  that (and only for so long as) a grant of a security interest therein would violate or invalidate such lease, license, or agreement, or create a right of termination in favor of any other party thereto (other than any Grantor), in each case to the extent not rendered unenforceable pursuant to applicable provisions of the UCC or other applicable law, provided, that the Additional Collateral includes proceeds and receivables of any property excluded under the foregoing proviso, the assignment of which is expressly deemed effective under the UCC notwithstanding such prohibition.

 

SECTION 2.  Supplement to Security Agreement.  Schedule III to the Security Agreement is, effective as of the date hereof, hereby supplemented to add to such Schedule the Additional Collateral.

 

SECTION 3.  Security for Obligations.  The grant of a security interest in the Additional Collateral by the Grantor under this IP Security Agreement Supplement secures the payment of all Obligations of the Grantor now or hereafter existing under or in respect of the Secured Documents (as such Secured Documents may be amended, amended and restated, supplemented, replaced, refinanced or otherwise modified from time to time (including any increases of the principal amount outstanding thereunder)), whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.  Without limiting the generality of the foregoing, this IP Security Agreement Supplement secures the payment of all amounts that constitute part of the Secured Obligations that would be owed by the Grantor to

 

 

any Secured Party under the Secured Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, or reorganization or similar proceeding involving a Loan Party.

 

SECTION 4.  Recordation.  The Grantor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer to record this IP Security Agreement Supplement.

 

SECTION 5.  Grants, Rights and Remedies.  This IP Security Agreement Supplement has been entered into in conjunction with the provisions of the Security Agreement.  The Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Administrative Agent with respect to the Additional Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein.

 

SECTION 6.  Governing Law.  This IP Security Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

IN WITNESS WHEREOF, the Grantor has caused this IP Security Agreement Supplement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

	
 
    	
[NAME   OF GRANTOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
Address   for Notices:EXHIBIT 10.17

 

Employment Agreement

 

This Employment Agreement (this “Agreement”), dated as of November 8, 2010, is made by and among Alphabet Holding Company, Inc., a Delaware corporation (“Parent”), Parent’s wholly-owned subsidiary, NBTY, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and Jeffrey Nagel (“Executive”) (collectively referred to herein as the “Parties”).

 

RECITALS

 

A.                                   It is the desire of the Company to assure itself of the services of Executive to the Company by entering into this Agreement.

 

B.                                     Executive and the Company mutually desire that Executive provide services to the Company on the terms herein provided.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree as follows:

 

1.                                      Employment.

 

(a)                                  General.  The Company shall employ Executive and Executive shall enter the employ of the Company, for the period and in the position set forth in this Section 1, and upon the other terms and conditions herein provided.

 

(b)                                 Employment Term.  The initial term of employment under this Agreement (the “Term”) shall be for the period beginning no later than December 6, 2010 and ending on December 6, 2015, subject to earlier termination as provided in Section 3.  The Term shall automatically renew for additional one (1) year periods unless no later than sixty (60) days prior to the end of the otherwise applicable Term, either party gives written notice of non-renewal (“Notice of Non-Renewal”) to the other, in which case Executive’s employment will terminate at the end of the then-applicable Term or any earlier date set by the Company in accordance with Section 3 and subject to earlier termination as provided in Section 3.  The first date that Executive begins his employment with the Company shall be referred to herein as the “Start Date.”

 

(c)                                  Position and Duties.

 

(i)                                     Executive shall serve as Chief Executive Officer of the Company and Parent (“CEO”) with the responsibilities, duties and authority customarily associated with such positions in a company the size and nature of the Company and such other responsibilities, duties and authority commensurate with such positions, as may from time to time be assigned to Executive by the Board of Directors of Parent (the “Board”).  Executive shall report only to the Board, the Board of Directors of the Company or any committee of any such board.  Executive shall devote substantially all of his working

 

 

time and efforts to the business and affairs of the Company, and Executive shall not serve on any corporate, industry or civic boards or committees without the prior consent of the Board; provided that Executive shall be permitted to serve on charitable boards, be involved in charitable activities and manage his passive personal and family investments so long as such activities do not materially interfere with Executive’s duties hereunder or violate any covenant contained in Section 5, 6 or 7.

 

(ii)                                  As of the Start Date, the Parent and the Company shall cause the Executive to be appointed or elected to the Board and to the Board of Directors of the Company.  During the Term, the Board shall propose Executive for re-election to the Board and cause the Executive to be appointed or elected to the Board of Directors of the Company, and cause the Principal Stockholders to vote all of their shares of Common Stock in favor of such re-election or re-appointment to the Board.  Notwithstanding the foregoing, if the Principal Stockholders do not “control” the Parent, within the meaning of Section 405 of the Securities Act of 1933, the obligation to appoint or elect the Executive to the Board (but not the foregoing obligations to nominate and to cause the Principal Stockholders to vote for elections) shall not apply.

 

(iii)                               Executive’s principal place of employment shall be the offices of the Company in Ronkonkoma, New York.

 

2.                                      Compensation and Related Matters.

 

(a)                                  Annual Base Salary.  During the Term, Executive shall receive a base salary at a rate of $750,000 per annum (as increased from time to time, the “Annual Base Salary”), which shall be paid in accordance with the customary payroll practices of the Company.  Such Annual Base Salary shall be reviewed (and may be increased, but not decreased) from time to time by the Board or an authorized committee of the Board.

 

(b)                                 Annual Bonus Opportunity. For the fiscal year ending September 30, 2011 and for each full fiscal year of the Company that begins thereafter during the Term, Executive will be eligible to participate in an annual bonus program established by the Board (the “Annual Bonus”).  Executive’s Annual Bonus compensation under such bonus program shall be targeted at 100% of his Annual Base Salary, subject to adjustments between the range of 50% to 200% for under or over performance, as determined in good faith by the Board (or an authorized committee of the Board).  Unless other written criteria is agreed to in writing by the Board (or another committee of the Board) and Executive, the bonus awards payable under the incentive program shall be based on the achievement of EBITDA based performance goals to be mutually determined by the Board (or an authorized committee of the Board) and Executive.  The Annual Bonus for fiscal year ending September 30, 2011 shall be pro-rated based on the number of days Executive is employed by the Company during such fiscal year. The Annual Bonus shall be paid as soon as reasonably practicable following the end of the applicable fiscal year, but in no event shall it be paid after March 15th of the calendar year following the calendar year in which the fiscal year to which the Annual Bonus relates.

 

(c)                                  Sign-On Bonus.  Executive shall receive a one-time guaranteed sign-on bonus of $2.5 million in cash (the “Sign-on Bonus”), payable within 15 days following the Start Date.

 

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The Company shall provide Executive with the opportunity to invest all or any portion of his after-tax proceeds in respect of the Sign-on Bonus in Common Stock, subject to such terms and conditions as may be approved by the Board.   Executive agrees to reimburse the Company for the Sign-on Bonus if the Company terminates Executive for Cause or Executive resigns without Good Reason prior to November 29, 2011; provided, that any portion of the Sign-on Bonus that is used by Executive to purchase Common Stock shall not be subject to the reimbursement provisions of this Section 2(c).   The Company is hereby authorized to deduct from Executive’s final paycheck(s), net of tax withholding, any amounts due and owing to the Company pursuant to this Section 2(c) and in the event the amount deducted from Executive’s final paycheck(s) is less than the Sign-on Bonus, Executive agrees to pay the Company the balance due within thirty (30) days of the Date of Termination.

 

(d)                                 Stock Option Award.  On or following the Start Date and no later than December 15, 2010, Executive will receive an award of stock options to purchase Common Stock (the “Options”).  The terms and conditions of the Options will be governed by Parent’s 2010 Equity Incentive Plan and the Stock Option Agreement in substantially the form attached hereto as Exhibit A.  The number of shares covered by such Options shall equal 1.5% of the fully diluted shares of Common Stock of Parent, as determined as of the date such Options are granted to Executive and based on the assumed issuance of all shares reserved for issuance thereunder.  The Options shall have a per share exercise price equal to the per share price paid by the Principal Stockholders, which was $77,500 per share but after a proposed stock split is expected to be $500 per share, and Executive shall have the ability to pay the exercise price with the shares of Common Stock underlying the Options provided that, if the fair market value of such Option on the date of grant, as determined for purpose of Section 409A of the Internal Revenue Code, is greater than the foregoing, such Option shall be issued with an exercise price equal to such fair market value.

 

(e)                                  Benefits.  During the Term, Executive (and his eligible dependents) shall be eligible to participate in employee benefit plans, programs and arrangements of the Company applicable to senior-level executives (including, without limitation, retirement, health insurance, sick leave and other benefits) and consistent with the terms thereof, as in effect from time to time.

 

(f)                                    Vacation.  During the Term, Executive shall be entitled to paid vacation in accordance with the Company’s vacation policies applicable to senior executives of the Company, as it may be amended from time to time; provided, however, that, in no event shall Executive be entitled to less than four (4) weeks of paid vacation annually.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.

 

(g)                                 Expenses.  During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred by Executive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement policy.

 

(h)                                 Reimbursement for Relocation Expenses.  Executive shall be entitled to reimbursement for reasonable and necessary expenses incurred during the Term in connection with Executive’s relocation from the Florence, Italy area to the New York metro area (which

 

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area shall include Long Island, New York), which reasonable and necessary expenses shall be subject to the terms of the Company’s relocation policy, but shall in any event include the expenses set forth on Exhibit B (collectively the “Moving Expenses”).  Except as otherwise set forth on Exhibit B, the Moving Expenses must be incurred in calendar year 2011 and the Company shall reimburse all Moving Expenses as soon as practicable after the date they are incurred and submitted to the Company but in any event prior to March 15, 2012.  Except as otherwise set forth on Exhibit B, Executive agrees to submit reasonable documentation relating to his requests for Moving Expense reimbursements no later than January 15, 2012.

 

(i)                                     Key Person Insurance.  At any time during the Term, the Company shall have the right (but not the obligation) to insure the life of Executive for the Company’s sole benefit.   The Company shall have the right to determine the amount of insurance and the type of policy.  Executive shall reasonably cooperate with the Company in obtaining such insurance by submitting to reasonable physical examinations, by supplying all information reasonably required by any insurance carrier, and by executing all necessary documents reasonably required by any insurance carrier.  Executive shall incur no financial obligation by executing any required document, and shall have no interest in any such policy.

 

3.                                      Termination.

 

Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of this Agreement under the following circumstances:

 

(a)                                  Circumstances.

 

(i)                                     Death.  Executive’s employment hereunder shall terminate upon Executive’s death.

 

(ii)                                  Disability.  If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment while the Executive remains Disabled, provided that a Disability termination shall occur automatically in the event of a Disability pursuant to the second sentence of the definition thereof.

 

(iii)                               Termination for Cause.  The Company may terminate Executive’s employment for Cause, as defined below.

 

(iv)                              Termination without Cause.  The Company may terminate Executive’s employment without Cause.

 

(v)                                 Resignation from the Company for Good Reason.  Executive may resign Executive’s employment with the Company for Good Reason, as defined below.

 

(vi)                              Resignation from the Company Without Good Reason.  Executive may resign Executive’s employment with the Company for any reason other than Good Reason or for no reason.

 

(vii)                           Non-extension of Term by the Company.  The Company may give notice of non-extension to Executive pursuant to Section 1.

 

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(viii)                        Non-extension of Term by Executive.  Executive may give notice of non-extension to the Company pursuant to Section 1.

 

(b)                                 Notice of Termination.  Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by Executive, shall be at least thirty (30) days following the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination.  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion, but not more than thirty (30) days after the giving of the notice without the Executive’s prior written consent.  The failure by either Party hereunder to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason (as applicable) shall not waive any right of such Party or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.

 

(c)                                  Company Obligations upon Termination (including due to death and Disability).  Upon termination of Executive’s employment pursuant to any of the circumstances listed in Section 3, Executive (or Executive’s estate) shall be entitled to receive the sum of:  (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination, but not yet paid to Executive within thirty (30) days of termination; (ii) any accrued vacation owed to Executive under the Company’s vacation policy within thirty (30) days of termination; (iii) any expenses owed to Executive pursuant to Section 2(g) and Section 2(h) in accordance with each such section; (iv) except in the case of a termination by the Company for Cause, the bonus earned for any completed fiscal year at the time it would otherwise have been paid if Executive continued to be employed (including as to any deferrals); (v) except in the case of a termination by the Company for Cause, by the Executive without Good Reason or by the Executive by notice under Section 1(b), a pro rata bonus for the fiscal year of termination based on actual results for such fiscal year and paid when it would otherwise have been paid if the Executive continued to be employed (including as to any deferrals); and (vi) any amount accrued and arising from Executive’s participation in, or benefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (collectively, the “Company Arrangements”).  Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder.  In the event that Executive’s employment is terminated by the Company for any reason, Executive’s sole and exclusive remedy with regard to the nonequity compensation for services shall be to receive the severance payments and benefits described in this Section 3(c) or Section 4, as applicable.  The foregoing shall not limit any of Executive’s rights with regard to equity (which shall be controlled by the relevant plan and grants) or any rights to

 

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indemnification, advancement of legal fees, and coverage under directors and officers liability insurance.

 

(d)                                 Deemed Resignation.  Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its Affiliates.

 

4.                                      Severance Payments.

 

(a)                                  Termination for Cause, or Termination Upon Death, Disability, Resignation from the Company Without Good Reason, or Non-extension of Term by Executive.  If Executive’s employment shall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, pursuant to Section 3(a)(vi) for Executive’s resignation from the Company without Good Reason, or for no reason, or pursuant to Section 3(a)(viii) due to non-extension of the Term by Executive, Executive shall not be entitled to any severance payments or benefits, except as provided in Section 3(c).

 

(b)                                 Termination without Cause, Resignation from the Company With Good Reason or Termination upon Non-Extension of the Term by the Company.  If Executive’s employment shall terminate without Cause pursuant to Section 3(a)(iv), pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, or pursuant to Section 3(a)(vii) due to non-extension of the Term by the Company, then, subject to Executive signing on or before the 50th day following Executive’s Separation from Service (as defined below), and not revoking, a release of claims in the form attached as Exhibit C to this Agreement (the “Release”), and Executive’s continued compliance with Sections 5 and 6 up to the date of any such payment, subject to Section 11(m) hereof, Executive shall receive, in addition to payments and benefits set forth in Section 3(c), an amount in cash equal to two times the Annual Base Salary of Executive as of the Date of Termination, payable in the form of salary continuation payments in regular installments over the twenty-four month period following the date of Executive’s Date of Termination (the “Severance Period”) in accordance with the Company’s normal payroll practices.

 

(c)                                  Survival.  Notwithstanding anything to the contrary in this Agreement, the provisions of Sections  5 through 9 and Section 11 will survive the termination of Executive’s employment and the expiration or termination of the Term.

 

5.                                      Competition.  Executive acknowledges that the Company will provide Executive with access to its Confidential Information (as defined below). In consideration for the rights provided to Executive as set forth in this Agreement and the Company’s provision of Confidential Information to Executive, the Company and Executive agree to the following provisions against unfair competition, which Executive acknowledges represent a fair balance of the Company’s rights to protect its business and Executive’s right to pursue employment:

 

(a)                                  Executive shall not, at any time during the Restriction Period, directly or indirectly engage in, have any equity interest in or manage or operate any person, firm, corporation, partnership or business (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in any business which competes with any part of any material portion of the Business (as defined below) of the

 

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Company.  Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding equity interest in any entity that is publicly traded, so long as Executive has no active participation in the business of such entity.  The parties acknowledge that retail outlet companies shall not be deemed competitive with the Company unless their primary business is selling products competitive with those of the Company.  “Materiality” for purposes of this paragraph will be measured only at the time of Executive’s Date of Termination, provided that, if it is intended at such time for the Company to (i) acquire another entity, such target entity shall also be considered in the determination, or (ii) to enter into any other business, such other business shall also be considered in the determination so long as the Company has taken any substantial steps in furtherance of such business during the Term.

 

(b)                                 Executive shall not, at any time during the Restriction Period, except in the good faith performance of his duties with the Company, directly or indirectly, recruit or otherwise solicit or induce any employee, customer, other than a customer with regard to matters that are not competitive under Section 5(a), or supplier of the Company (i) to terminate its employment or arrangement with the Company, or (ii) to otherwise change its relationship with the Company. Executive shall not, at any time during the Restriction Period, directly or indirectly, either for Executive or for any other person or entity, (x) solicit any employee of the Company to terminate his or her employment with the Company, (y) employ any such individual during his or her employment with the Company and for a period of six months after such individual terminates his or her employment with the Company or (z) solicit any vendor or business affiliate of the Company to cease to do business with the Company.  The foregoing shall not be violated by general advertising not specifically targeted at the prohibited group or by providing upon request of an employee or a former employee a reference to any entity with which Executive is not affiliated so long as Executive is not initially identifying the individual to said entity.

 

(c)                                  In the event the terms of this Section 5 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

 

(d)                                 As used in this Section 5, (i) the term “Company” shall include the Parent, the Company and the Company’s direct and indirect subsidiaries, (ii) the term “Business” shall mean the business of the Company and shall include, without limitation, the manufacturing, marketing and/or retailing of vitamins, minerals and health supplements throughout the world as such business may be expanded or altered by the Company during the Term, provided, however, that the term “Business” shall not include any business of the Company materially entered into after the Executive’s termination of employment so long as the Company has not taken any substantial steps in furtherance of such business during the Term; and (iii) the term “Restriction Period” shall mean the period beginning on the Start Date and ending on the date that is two (2) years following the Date of Termination.

 

(e)                                  Each of the Parties hereto agrees that at no time during Executive’s employment by the Company or at any time within two (2) years thereafter shall such Party (which, in the

 

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case of the Company and Parent, shall mean their officers and the members of the Board and Board of Directors of the Company) make, or cause or assist any other person to make, with intent to damage, any public statement or other public communication which impugns or attacks, or is otherwise critical, in any material respect, of, the reputation, business or character of the other party (including, in the case of Parent, any of its directors or officers).  Notwithstanding the foregoing, nothing in this paragraph shall prevent the Company, Parent, Executive or any other person from (i) responding to incorrect, disparaging or derogatory public statements to the extent necessary to correct or refute such public statements, or (ii) making any truthful statement (A) to the extent necessary in connection with any litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement, (B) to the extent required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction or authority to order or require such person to disclose or make accessible such information, or (C) that is a normal comparative statement in the context of advertising, promotion or solicitation of customers, without reference to Executive’s prior relationship with the Company or Parent.

 

(f)                                    Executive represents that Executive’s employment by the Company does not and will not breach any agreement with any former employer, including any non-compete agreement or any agreement to keep in confidence or refrain from using information acquired by Executive prior to Executive’s employment by the Company.  During Executive’s employment by the Company, Executive agrees that Executive will not violate any non-solicitation agreements Executive entered into with any former employer or improperly make use of, or disclose, any information or trade secrets of any former employer or other third party, nor will Executive bring onto the premises of the Company or use any unpublished documents or any property belonging to any former employer or other third party, in violation of any lawful agreements with that former employer or third party.  The Company represents that it will not require or request Executive to breach any agreement with any former employer as to non-competition, non-solicitation, confidentiality or restrictions of similar nature that it is made aware of by Executive; furthermore, the Company recognizes that the Executive may be subject to certain post employment cooperation obligations to his former employer and will permit Executive to reasonably fulfill such obligations.

 

6.                                      Nondisclosure of Proprietary Information.

 

(a)                                  Except in connection with the good faith performance of Executive’s duties hereunder or pursuant to Sections 6(c) and (e), Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for Executive’s benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets of or relating to the Company (including, without limitation, business plans, business strategies and methods, acquisition targets, intellectual property in the form of patents, trademarks and copyrights and applications therefor, ideas, inventions, works, discoveries, improvements, information, documents, formulae, practices, processes, methods, developments, source code, modifications, technology, techniques, data, programs, other know-how or materials, owned, developed or possessed by the Company, whether in tangible or intangible form, information with respect to the Company’s operations, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual

 

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relationships, regulatory status, prospects and compensation paid to employees or other terms of employment) (collectively, the “Confidential Information”), or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such Confidential Information.  The Parties hereby stipulate and agree that, as between them, any item of Confidential Information is important, material and confidential and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company).  Notwithstanding the foregoing, Confidential Information shall not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information, provided, that such publishing of the Confidential Information shall not have resulted from Executive directly or indirectly breaching Executive’s obligations under this Section 6(a) or any other similar provision by which Executive is bound.  For the purposes of the previous sentence, Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.

 

(b)                                 Upon termination of Executive’s employment with the Company for any reason, Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents or property of the Company or concerning the Company’s customers, business plans, marketing strategies, products, property or processes.  Executive may retain and utilize his rolodex and similar address books (hard copy or electronic) containing only contact information.

 

(c)                                  Executive may respond to a lawful and valid subpoena or other legal process but (i) shall give the Company prompt notice thereof, (ii) upon request of the Company, shall make available to the Company and its counsel the documents and other information sought, as much in advance of the due date thereof as reasonably possible, and (iii) shall reasonably assist such counsel at the Company’s expense in resisting or otherwise responding to such process.

 

(d)                                 As used in this Section 6 and Section 7, the term “Company” shall include the Company and its direct and indirect subsidiaries and the Parent.

 

(e)                                  Nothing in this Agreement shall prohibit Executive from (i) disclosing information and documents when required by law, subpoena or court order (subject to the requirements of Section 6(c) above), (ii) disclosing information and documents to Executive’s attorney or tax adviser for the purpose of securing legal or tax advice or to governmental taxing authorities, (iii) disclosing Executive’s post-employment restrictions in this Agreement or elsewhere in confidence to any potential new employer, or (iv) retaining, at any time, Executive’s personal correspondence, Executive’s personal contacts and documents related to Executive’s own personal benefits, entitlements and obligations.

 

(f)                                    No equity plan or grant or other arrangement shall have any restrictive covenants or forfeiture provisions applicable to Executive that relate to the same type of limitations that are covered by Sections 5 and 6 hereof that are any broader than the related provisions in Sections 5 and 6.

 

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7.                                      Inventions.

 

All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the business of the Company, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that Executive may discover, invent or originate during the Term, either alone or with others and whether or not during working hours or by the use of the facilities of the Company (“Inventions”), shall be the exclusive property of the Company.  Executive shall promptly disclose all Inventions to the Company, shall execute at the request of the Company, and at its expense, any assignments or other documents the Company may deem reasonably necessary to protect or perfect its rights therein, and shall reasonably assist the Company, upon reasonable request and at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein. Executive hereby appoints the Company as Executive’s attorney-in-fact to execute on Executive’s behalf any assignments or other documents reasonably deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

8.                                      Injunctive Relief.

 

It is recognized and acknowledged by Executive that a breach of the covenants contained in Sections 5, 6 and 7 will cause irreparable damage to the Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, Executive agrees that in the event of a breach of any of the covenants contained in Sections 5, 6 and 7, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

 

9.                                      Assignment and Successors.

 

The Company may assign its rights and obligations under this Agreement to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise), and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates, provided that the assignee delivers to Executive a written assumption of the obligations hereunder.  The Company’s rights and obligations may not otherwise be assigned hereunder.  This Agreement shall be binding upon and inure to the benefit of the Company, Parent, Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.  None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may be transferred only by will or operation of law.  Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death by giving written notice thereof to the Company.

 

10.                               Certain Definitions.

 

(a)                                  Affiliate.  “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person

 

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where “control” shall have the meaning given such term under Rule 405 of the Securities Act of 1933, as amended; provided, that, with respect to the Company, “Affiliate” shall not include any Principal Stockholder or any portfolio companies of the relevant Principal Stockholder.

 

(b)                                 Cause.  The Company shall have “Cause” to terminate Executive’s employment hereunder upon:

 

(i)                                     The Executive’s willful misconduct with regard to the Company that results in a significant adverse impact on the Company; provided that no act or failure to act on Executive’s part will be considered “willful” unless done, or omitted to be done, by Executive not in good faith or without reasonable belief that his action or omission was in the best interests of the Company;

 

(ii)                                  The Executive being indicted for, convicted of, or pleading nolo contendere to, a felony or intentional crime involving material dishonesty other than, in any case, vicarious liability or traffic violations;

 

(iii)                               The Executive’s conduct involving the use of illegal drugs;

 

(iv)                              The Executive’s failure to attempt in good faith (other than when absent because of physical or mental incapacity) to follow a lawful directive of the Board within ten (10) days after written notice of such failure; and/or

 

(v)                                 The Executive’s breach of any provision contained in Sections 5 through 7, which continues beyond ten (10) days after written demand for substantial performance is delivered to Executive by the Company (to the extent that, in the reasonable judgment of the Board, such breach can be cured by Executive), so long as the breach (which shall be deemed to refer to all breaches in this paragraph) is (A) material and (B) results in a significant adverse impact on the Company.

 

The Executive shall not be terminated for “Cause” unless reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before the Board, and thereafter whether or not an event giving rise to “Cause” has occurred will be determined by the Board reasonably and in good faith; provided that any such determination by the Board shall be subject to de novo review by the arbitrator pursuant to Section 11(i) based on the facts thereof.

 

(b)                                 Common Stock.  “Common Stock” shall mean the common stock of Parent.

 

(c)                                  Date of Termination.  “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’s death; (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) — (vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 3(b), whichever is earlier; (iii) if Executive’s employment is terminated pursuant to Section 3(a)(vii) or Section 3(a)(viii), the expiration of the then-applicable Term.

 

(d)                                 Disability.  “Disability” shall have occurred when the Executive has been unable to perform his material duties because of physical or mental incapacity for a period of at least

 

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180 days in any 365 day period, as determined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed.  Notwithstanding the foregoing, a Disability termination shall be deemed to occur earlier if, as a result of physical or mental incapacity, Executive experiences a “separation from service” within the meaning of Code Section 409A.

 

(e)                                  Good Reason.  Executive shall have “Good Reason” to resign his employment within ninety (90) days after the occurrence of any of the following without his prior written consent:

 

(i)                                     Failure of the Company to continue Executive in the position of CEO or as a member of the Board; provided that failure to elect or appoint Executive, or to continue Executive’s election or appointment, as a member of the Board shall not constitute “Good Reason” if prohibited by, or impracticable under, law or prevailing corporate practice;

 

(ii)                                  A material diminution in the nature or scope of Executive’s responsibilities, duties or authority;

 

(iii)                               The Company’s or Parent’s material breach of this Agreement or other agreements with Executive which results in a significant adverse impact upon Executive, provided that, for clarity, the parties acknowledge that a breach of Section 1(c)(ii) hereof shall be deemed to have a significant adverse impact upon Executive;

 

(iv)                              The relocation by the Company of Executive’s primary place of employment with the Company by more than 50 miles from Ronkonkoma, New York;

 

(v)                                 The failure of the Company to obtain the assumption in writing delivered to Executive of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company; or

 

(vi)                              The failure of the Company to timely pay to Executive any significant amounts due under the terms of this Agreement;

 

in any case of the foregoing, that remains uncured after ten (10) business days after Executive has provided the Company written notice that Executive believes in good faith that such event giving rise to such claim of Good Reason has occurred.

 

(f)                                    Liquidity Event.  “Liquidity Event” shall mean either (a) the consummation of the sale, transfer, conveyance or other disposition in one or a series of transactions, of the equity securities of Parent or its successor held, directly or indirectly, by any of the Principal Stockholders in exchange for cash, or in the case of any transaction resulting in the exchange for consideration other than cash (“non-cash consideration”) the receipt of cash upon the disposition of such non-cash consideration, such that immediately following such transaction or disposition (or series of transactions or dispositions), the total number of all equity securities of Parent or its successor held, directly or indirectly, by the Principal Stockholders is, in the aggregate, less than 25% of the total number of equity securities (as such securities may be adjusted for the occurrence of a corporate event) held, directly or indirectly, by the Principal Stockholders as

 

12

 

of the Effective Date (as such securities may be adjusted for the occurrence of a corporate event); or (b) the consummation of the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation (other than any transaction otherwise covered under the preceding sub-clause(a))), in one or a series of related transactions, of all or substantially all of the assets of the Company, or the Company and its subsidiaries taken as a whole, to any “person” (as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) other than to any Principal Stockholders or an Affiliate of any Principal Stockholders.

 

(g)                                 Person.  “Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

 

(h)                                 Principal Stockholders.  “Principal Stockholders” shall mean (i) Carlyle Partners V, L.P., a Delaware limited partnership, Carlyle Partners V-A, L.P., a Delaware limited partnership, CP V Coinvestment A, L.P., a Delaware limited partnership, CP V Coinvestment B, L.P., a Delaware limited partnership, and CEP III Participations, SARL SICAR, and (ii) any of their Affiliates to which (a) any of the Principal Stockholders transfers Common Stock or (b) Parent issues Common Stock.

 

11.                               Miscellaneous Provisions.

 

(a)                                  Governing Law.  This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise in accordance with the substantive laws of the State of New York without reference to the principles of conflicts of law of the State of New York or any other jurisdiction, and where applicable, the laws of the United States.

 

(b)                                 Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

(c)                                  Notices.  Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:

 

(i)                                     If to the Company:

 

NBTY, Inc.

2100 Smithtown Avenue

Ronkonkoma, NY 11779

Attention:  General Counsel

Facsimile: (631) 567-7148

 

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and copies to:

 

The Carlyle Group

520 Madison Avenue

New York, NY 10022

Attention: Sandra Horbach

Elliot Wagner

Facsimile: (212) 813-4901

 

and:

 

Latham & Watkins LLP

555 Eleventh Street, N.W.

10th Floor

Washington, DC  20004

Fax:  (202) 637-2201

Attn:  David T. Della Rocca

 

(ii)                                  If to Executive, at the last address that the Company has in its personnel records for Executive.

 

or at any other address as any Party shall have specified by notice in writing to the other Parties hereto.

 

(d)                                 Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.  Signatures delivered by facsimile shall be deemed effective for all purposes.

 

(e)                                  Entire Agreement.  The terms of this Agreement are intended by the Parties to be the final expression of their agreement with respect to the employment of Executive by the Company and supersede all prior understandings and agreements, whether written or oral.  The Parties further intend that this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

 

(f)                                    Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive, a duly authorized officer of the Company and a duly authorized officer of Parent.  By an instrument in writing similarly executed, Executive, a duly authorized officer of the Company, or a duly authorized officer of Parent may waive compliance by the other Parties hereto with any specifically identified provision of this Agreement that each such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

 

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(g)                                 No Inconsistent Actions.  The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

 

(h)                                 Construction.  This Agreement shall be deemed drafted equally by all the Parties. Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any Party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

(i)                                     Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in New York, New York, in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitration award in any court having jurisdiction; provided, however, that the Company or Executive shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 5, 6 or 7 of the Agreement, as applicable, and the Company, Parent and Executive hereby consent that such restraining order or injunction may be granted without requiring the Company to post a bond.  Only individuals who are (a) lawyers engaged full-time in the practice of law, as in-house counsel, as a judge or as a professor of law; and (b) on the AAA register of arbitrators shall be selected as an arbitrator.  Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law.  It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable; provided  however, that the Parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such arbitration.  In the event that an action is brought to enforce the provisions of this Agreement pursuant to this paragraph, (x) if the arbitrator determines that Executive is the prevailing party in such action, the Company shall be required to pay the arbitrator’s full fees and expenses (but not the Company’s or the Parent’s legal fees), (y) if the Company (or Parent) prevails in such action, Executive shall be required to pay the reasonable attorney’s fees and expenses of the Company and Parent in connection with such arbitration, as well as the arbitrator’s full fees and expenses and (z) if, in the opinion of the arbitrator deciding such action, there is no prevailing party, each party shall pay his or its own attorney’s fees and expenses and the arbitrator’s fees and expenses will be borne equally by the Parties thereto.

 

(j)                                     Enforcement.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the Term, such provision shall be

 

15

 

fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

(k)                                  Attorneys Fees.  The Company shall pay for all reasonable and documented legal fees incurred by Executive in calendar year 2010 in connection with the negotiation of this Agreement and any other agreements related to Executive’s employment arrangement with the Company, up to a maximum of $50,000.

 

(l)                                     Withholding.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

(m)                               Section 409A.

 

(i)                                     General.  The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.

 

(ii)                                  Separation from Service.  Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the sixtieth (60th) day following Executive’s Separation from Service.  Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the sixtieth (60th) day following Executive’s Separation from Service and the remaining payments shall be made as provided in this Agreement.

 

(iii)                               Specified Employee.  Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date of Executive’s death.  Upon

 

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the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or to Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.  Any tax gross up payment, within the meaning of Section 409A, provided for in this Agreement shall be made by the end of the Executive’s taxable year next following the Executive’s taxable year in which the Executive remits the related taxes, provided that, Executive provides the Company with a reimbursement request reasonably promptly following the date such tax is due.

 

(iii)                               Expense Reimbursements.  To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred; provided, that Executive submits Executive’s reimbursement request reasonably promptly following the date the expense is incurred, the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, during one taxable year shall not affect the amount eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; provided however, that the foregoing shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.  Executive’s right to reimbursement, or in-kind benefits, under this Agreement will not be subject to liquidation or exchange for another benefit.

 

(v)                                 Installments.  Executive’s right to receive any installment payments under this Agreement, including without limitation any salary continuation payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A.  To the extent any deferred compensation is intended to comply with and be subject to Section 409A (as opposed to any exception thereto), the Company may accelerate any such deferred compensation as long as such acceleration would not result in additional tax or interest pursuant to Section 409A and as long as such acceleration is permitted by Section 409A.  The decision as to when to make any payment within any specified time period shall solely be that of the Company.

 

(n)                                 Indemnification.  Executive shall receive indemnification protection pursuant to the indemnification agreements attached hereto as Exhibits D and E.

 

(o)                                 No Mitigation; No Offset.  The Executive shall not be required to seek other employment or otherwise mitigate the amount of any payments to be made by the Company pursuant to this Agreement. The payments provided pursuant to this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer after the Date of Termination or otherwise. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.

 

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(p)                                 Joint and Several Liability.  The Company and the Parent shall be jointly and severally liable for all obligations of each hereunder.

 

12.                               Section 280G

 

(a)                                  So long as the Company is described in Section 280G(b)(5)(A)(ii)(I) of the Code, if any payment or benefit (within the meaning of Section 280G(b)(2) of the Code), to the Executive or for the Executive’s benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, the Executive’s employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets, would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then, to the extent, if any, Executive elects to waive the right to receive such payments or benefits unless shareholder approval is obtained in accordance with Section 280G(b)(5)(B) of the Code, the Company shall use its commercially reasonable best efforts to prepare and deliver to its stockholders the disclosure required by Section 280G(b)(5)(B) of the Code with respect to the Payments and to obtain the approval of the Company’s stockholders in accordance with Section 280G(b)(5)(B) of the Code and the regulation codified at 26 C.F.R. §1.280G-1.

 

(b)                                 In the event that (i) the Executive is entitled to receive any payments or benefits, whether payable, distributed or distributable pursuant to the terms of this Agreement or otherwise, that constitute “excess parachute payments” within the meaning of Section 280G of the Code, and (ii) the net after tax amount of such payments, after the Executive has paid all taxes due thereon (including, without limitation, taxes due under Section 4999 of the Code) is less than the net after-tax amount of all such payments and benefits otherwise due to the Executive in the aggregate, if such aggregate payments and benefits were reduced to an amount equal to 2.99 times the Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), then the aggregate amount of such payments and benefits payable to Executive shall be reduced to an amount that will equal 2.99 times the Executive’s base amount.  To the extent such aggregate parachute payment amounts are required to be so reduced, the parachute payment amounts due to the Executive (but no non -parachute payment amounts) shall be reduced in the following order: (i) payments and benefits due under Section 4 of this Agreement shall be reduced (if necessary, to zero) with amounts that are payable last reduced first; (ii) payments and benefits due in respect of any equity fully valued (or only reduced by a present value factor) for purpose of the calculation to be made under Section 280G calculation of the Code for purposes of this Section 12 (the “280G Calculation”) in reverse order of when payable; and (iii) payments and benefits due in respect of any options or stock appreciation rights with regard to Common Stock or equity securities valued under the 280G Calculation based on time of vesting shall be reduced in an order that is most beneficial to the Executive.

 

(c)                                  The determinations to be made with respect to this Section 12 shall be made by a certified public accounting firm designated by the Company and reasonably acceptable to the Executive.  The Company shall be responsible for all charges of the Accountant.

 

(d)                                 In the event that the Internal Revenue Service or court ultimately makes a determination that the excess parachute payments or the base amount is an amount other than as

 

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determined initially, an appropriate adjustment shall be made with regard to Section 12(a) or (b) above, as applicable to reflect the final determination and the resulting impact.

 

(e)                                  The provisions of Sections 12(b), (c) and (d) shall override provisions as to cutback below the 2.99 level in any equity plan or grant or any other arrangement.

 

13.                               Employee Acknowledgement.

 

Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own judgment.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written.

 

	
 
    	
COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
PARENT
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Jeffrey   Nagel
    

 

[Signature Page to Jeffrey Nagel Employment Agreement]

 

 

EXHIBIT A

 

Form of Stock Option Agreement

 

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EXHIBIT B

 

Moving Expenses

 

General.  Executive shall receive $130,000 to assist with the following items:

 

·                  Home lease, utilities, cost of living expenses and school bus expenses in Florence, Italy

 

·                  Immigration vendor fee

 

·                  Household goods storage

 

·                  Relocation airfare to New York

 

The $130,000 payment shall be paid in a lump sum cash payment to Executive in December 2010.

 

Household Goods Shipment.  Executive shall receive reimbursement for up to $40,000 for the shipment of household goods from Florence, Italy to New York.  To the extent any portion of the $40,000 is taxable to Executive, the Company will provide Executive with a full gross-up for any ordinary income and employment taxes incurred by Executive with respect to such portion.

 

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EXHIBIT C

 

Form of Release

 

This Agreement and Release (“Agreement”) is made by and among Alphabet Holding Company, Inc., a Delaware corporation (“Parent”), Parent’s wholly-owned subsidiary, NBTY, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and Jeffrey Nagel (the “Employee”) (collectively, referred to as the “Parties” or individually referred to as a “Party”).  Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Employment Agreement (as defined below).

 

WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of                           , 2010 (the “Employment Agreement”); and

 

WHEREAS, in connection with Employee’s termination of employment with the Company or a subsidiary or affiliate of the Company effective                 , 20    , the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Employee may have against the Company, Parent, and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Employee’s employment with or separation from the Company or its subsidiaries or affiliates.

 

NOW, THEREFORE, in consideration of the Severance Payments described in Section 4 of the Employment Agreement, which, pursuant to the Employment Agreement, are conditioned on Employee’s execution and non-revocation of this Agreement, and in consideration of the mutual promises made herein, the Company and Employee hereby agree as follows:

 

1.                                       Severance Payments; Salary and Benefits.  The Company agrees to provide Employee with the severance payments and benefits described in Section 4(b) of the Employment Agreement, payable at the times set forth in, and subject to the terms and conditions of, the Employment Agreement. In addition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay or provide to Employee all other payments or benefits described in Section 3(c) of the Employment Agreement, subject to and in accordance with the terms thereof.

 

2.                                       Release of Claims.  Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company, Parent, any of their direct or indirect subsidiaries and affiliates (including, without limitation, TC Group, L.L.C. and its affiliated entities), and, in their capacities related to the foregoing, any of their current and former officers, directors, equity holders, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”).  Employee, on his own behalf and on behalf of any of Employee’s affiliated companies or entities and any of their respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess against any of the Releasees

 

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arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement (as defined in Section 7 below), including, without limitation:

 

(a)                                  any and all claims relating to or arising from Employee’s employment  or service relationship with the Company or any of its direct or indirect subsidiaries or affiliates and the termination of that relationship;

 

(b)                                 any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of any shares of stock or other equity interests of the Company or any of its affiliates, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

 

(c)                                  any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

 

(d)                                 any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Sarbanes-Oxley Act of 2002; the New York City Human Rights Law;

 

(e)                                  any and all claims for violation of the federal or any state constitution;

 

(f)                                    any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

 

(g)                                 any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

 

(h)                                 any and all claims for attorneys’ fees and costs.

 

Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.  This release does not release claims that cannot be released as a matter of law, including, but not limited to, Employee’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with

 

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the understanding that Employee’s release of claims herein bars Employee from recovering such monetary relief from the Company or any Releasee), claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law, claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA, claims to any benefit entitlements vested as the date of separation of Employee’s employment, rights with regard to any vested equity (including under any stockholders agreement governing such equity and any side letter relating thereto), and rights (including under Section 11(n) of the Employment Agreement) to indemnity, advancement of legal fees and coverage under the Company’s directors and officers insurance policies and rights under Section 12 of the Employment Agreement.

 

3.                                       Acknowledgment of Waiver of Claims under ADEA.  Employee understands and acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary.  Employee understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement.  Employee understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled.  Employee further understands and acknowledges that he has been advised by this writing that:  (a) he should consult with an attorney prior to executing this Agreement; (b) he has at least 21 days within which to consider this Agreement; (c) he has 7 days following his execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.  In the event Employee signs this Agreement and returns it to the Company in less than the 21-day period identified above, Employee hereby acknowledges that he has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.

 

4.                                       Severability.  In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.

 

5.                                       No Oral Modification.  This Agreement may only be amended in a writing signed by Employee, a duly authorized officer of the Company and a duly authorized officer of Parent.

 

6.                                       Governing Law; Dispute Resolution.  This Agreement shall be subject to the provisions of Sections 11(a) and 11(i) of the Employment Agreement.

 

7.                                       Effective Date.  If Employee has attained or is over the age of 40 as of the date of Employee’s termination of employment, then the Employee has seven days after he signs this Agreement to revoke it and this Agreement will become effective on the eighth day after Employee signed this Agreement, so long as it has been signed by the Parties and has not been revoked by the Employee before that date (the “Effective Date”).

 

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8.                                       Voluntary Execution of Agreement.  Employee understands and agrees that he executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company, Parent or any third party, with the full intent of releasing all of his claims against the Company, Parent and any of the other Releasees.  Employee acknowledges that:  (a) he has read this Agreement; (b) he has not relied upon any representations or statements made by the Company or Parent that are not specifically set forth in this Agreement; (c) he has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of his own choice or has elected not to retain legal counsel; (d) he understands the terms and consequences of this Agreement and of the releases it contains; and (e) he is fully aware of the legal and binding effect of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

 

	
Dated:
    	
 
    	
 
    	
COMPANY   (or any successor thereto)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
PARENT   (or any successor thereto)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
Jeffrey   Nagel
    

 

26

 

EXHIBIT D

 

Form of Company Indemnification Agreement

 

27

 

EXHIBIT E

 

Form of Parent Indemnification Agreement

 

28

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