def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrant þ
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Definitive Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Soliciting Material Pursuant to §240.14a-12 |
HERBALIFE
LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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HERBALIFE
LTD.
March 15,
2010
Dear Fellow Shareholder:
We are pleased to enclose information about the 2010 Annual
General Meeting of Shareholders, or the Meeting, of Herbalife
Ltd., or the Company, to be held on Thursday, April 29,
2010 at 9:00 a.m., Pacific Daylight Time, at the principal
executive offices of one of the Companys
U.S. subsidiaries located at 800 W. Olympic
Blvd., Suite 406, Los Angeles, California 90015. As
discussed in more detail in the enclosed Proxy Statement, at the
Meeting you will be asked to consider proposals to:
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Elect three directors, each for a term of three years;
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Approve an amendment to and restatement of the Companys
2005 Stock Incentive Plan to, among other things, increase the
authorized number of Common Shares issuable thereunder by
700,000;
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3.
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Ratify the appointment of the Companys independent
registered public accountants for fiscal 2010; and
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Act upon such other matters as may properly come before the
Meeting.
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MY FELLOW DIRECTORS AND I HAVE UNANIMOUSLY APPROVED THE
PROPOSALS INCLUDED HEREIN AND RECOMMEND YOU VOTE FOR THEIR
APPROVAL.
Best Regards,
MICHAEL O. JOHNSON
Chairman and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
All shareholders are cordially invited to attend the Meeting
in person. However, in order to assure your representation at
the Meeting, you are urged to vote promptly. You may vote your
shares via a toll-free telephone number or over the Internet. If
you received a paper copy of the proxy card by mail, you may
sign, date and mail the proxy card in the envelope provided.
Instructions regarding voting are contained in the Notice of
Internet Availability of Proxy Materials and the proxy card.
HERBALIFE
LTD.
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To
Be Held Thursday, April 29, 2010
To the Shareholders:
NOTICE IS HEREBY GIVEN that the 2010 Annual General Meeting of
Shareholders, or the Meeting, of Herbalife Ltd., a Cayman
Islands exempted limited liability company, or the Company, will
be held on Thursday, April 29, 2010 at 9:00 a.m.,
Pacific Daylight Time, at the principal executive offices of one
of the Companys U.S. subsidiaries located at
800 W. Olympic Blvd., Suite 406, Los Angeles,
California 90015 for the following purposes:
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1.
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To elect three directors, each for a term of three years;
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2.
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Approve an amendment to and restatement of the Companys
2005 Stock Incentive Plan to, among other things, increase the
authorized number of Common Shares issuable thereunder by
700,000;
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3.
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To ratify the appointment of the Companys independent
registered public accountants for fiscal 2010; and
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To act upon such other matters as may properly come before the
Meeting.
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Each of the above proposals will be proposed as Ordinary
Resolutions as permitted by the Companies Law (2009 Revision).
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice. Only shareholders of
record at the close of business on March 1, 2010, are
entitled to notice of and to vote at the Meeting and any
subsequent adjournment(s) or postponement(s) thereof.
All shareholders are cordially invited to attend the Meeting in
person. However, to assure your representation at the
Meeting, you are urged to vote promptly. You may vote your
shares via a toll-free telephone number or over the Internet. If
you received a paper copy of the proxy card by mail, you may
sign, date and mail the proxy card in the envelope provided.
Instructions regarding voting are contained in the Notice of
Internet Availability of Proxy Materials and the proxy card.
Sincerely,
BRETT R. CHAPMAN
General Counsel and Corporate Secretary
Los Angeles, California
March 15, 2010
HERBALIFE
LTD.
PROXY STATEMENT FOR
2010
ANNUAL GENERAL MEETING OF
SHAREHOLDERS
Herbalife Ltd., also referred to as we, our, us, Herbalife or
the Company, is calling its 2010 Annual General Meeting of
Shareholders, or the Meeting, to be held on Thursday,
April 29, 2010 at 9:00 a.m., Pacific Daylight Time, at
the principal executive offices of one of the Companys
U.S. subsidiaries located at 800 W. Olympic
Blvd., Suite 406, Los Angeles, California 90015.
At the Meeting, our shareholders will be asked to consider
proposals to:
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Elect three directors, each for a term of three years;
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2.
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Approve an amendment to and restatement of the Companys
2005 Stock Incentive Plan to, among other things, increase the
authorized number of Common Shares issuable thereunder by
700,000;
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3.
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Ratify the appointment of the Companys independent
registered public accountants for fiscal 2010; and
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4.
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Act upon such other matters as may properly come before the
Meeting.
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Our Board of Directors unanimously recommends that you vote in
favor of the proposals outlined herein. YOUR VOTE IS VERY
IMPORTANT. Whether or not you plan to attend the Meeting,
please take the time to vote. You may vote your shares via a
toll-free telephone number or over the Internet. If you received
a paper copy of the proxy card by mail, you may sign, date and
mail the proxy card in the envelope provided. Instructions
regarding voting are contained in the Notice of Internet
Availability of Proxy Materials and proxy card.
You should carefully read this Proxy Statement in its
entirety prior to voting on the proposals listed above and
outlined herein. This Proxy Statement is dated
March 15, 2010, and is first being made available to
shareholders of the Company on or about March 18, 2010. A
Notice Regarding Internet Availability of Proxy Materials for
the Annual General Meeting was mailed to shareholders of the
Company on or about March 18, 2010, which contained
instructions on how to access our proxy materials, including our
Proxy Statement and Annual Report.
Table of
Contents
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A-1
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2
THE
ANNUAL GENERAL MEETING OF SHAREHOLDERS
Information
Concerning Solicitation and Voting
Place, Time and Date of Meeting. This
Proxy Statement is being furnished to the Companys
shareholders in connection with the solicitation of proxies on
behalf of our Board of Directors for use at the Meeting to be
held on Thursday, April 29, 2010, at 9:00 a.m.,
Pacific Daylight Time, and at any subsequent adjournment(s) or
postponement(s) thereof, for the purposes set forth herein and
in the accompanying Notice of Annual General Meeting of
Shareholders. The Meeting will be held at the principal
executive offices of one of the Companys
U.S. subsidiaries, Herbalife International, Inc., at
800 W. Olympic Blvd., Los Angeles, Suite 406
California 90015. Our telephone number is
(213) 745-0500.
Internet Availability of Proxy
Materials. Under rules recently adopted by
the U.S. Securities and Exchange Commission, or the SEC, we
are furnishing proxy materials to our shareholders primarily via
the Internet, instead of mailing printed copies of those
materials to each shareholder. On March 18, 2010, we intend
to mail to our shareholders a Notice of Internet Availability of
Proxy Materials containing instructions on how to access our
proxy materials, including our Proxy Statement and our Annual
Report.
Record Date and Voting Securities. Only
shareholders of record at the close of business on March 1,
2010, or the Record Date, are entitled to notice of and to vote
at the Meeting. The Company has one series of Common Shares
outstanding. As of the Record Date 60,324,654 Common Shares were
issued and outstanding and held of record by 903 registered
holders.
Voting. Each shareholder is entitled to
one vote for each Common Share held on the Record Date on all
matters submitted for consideration at the Meeting. A quorum,
representing the holders of not less than a majority of the
issued and outstanding Common Shares entitled to vote at the
Meeting, must be present in person or by proxy at the Meeting
for the transaction of business. Common Shares that reflect
abstentions are treated as Common Shares that are present and
entitled to vote for the purposes of establishing a quorum and
for purposes of determining the outcome of any matter submitted
to the shareholders for a vote. However, abstentions do not
constitute a vote for or against any
matter and thus will be disregarded in the calculation of a
plurality.
Broker non-votes are Common Shares held in
street name through a broker or other nominee over
which the broker or nominee lacks discretionary power to vote
and for which the broker or nominee has not received specific
voting instructions. Thus, if you do not give your broker or
nominee specific instructions, your Common Shares may not be
voted on certain matters. Common Shares that reflect
broker non-votes are treated as Common Shares that
are present and entitled to vote for the purposes of
establishing a quorum. However, for the purposes of determining
the outcome of any matter as to which the broker or nominee has
indicated on the proxy that it does not have discretionary
authority to vote, those Common Shares will be treated as not
present and not entitled to vote with respect to that matter,
even though those Common Shares are considered present and
entitled to vote for the purposes of establishing a quorum and
may be entitled to vote on other matters.
If you are a beneficial shareholder and your broker or nominee
holds your Common Shares in its name, the broker or nominee is
permitted to vote your Common Shares on matters such as the
ratification of the appointment of independent registered public
accountants, even if the broker or nominee does not receive
voting instructions from you.
Directors are elected by a plurality, and the three nominees who
receive the most votes will be elected. Abstentions and
broker non-votes will not affect the outcome of the
election.
In respect of all other proposals, to be approved, any such
proposal must receive the affirmative vote of a majority of the
Common Shares present or represented by proxy and entitled to
vote. In determining the outcome of such proposals, abstentions
have the effect of a negative vote. Broker non-votes
will not affect the outcome of any such proposals.
Revocability of Proxies. Any proxy
given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by either
(a) delivering to the Corporate Secretary of the Company a
written notice of
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revocation or a duly executed proxy bearing a later date,
(b) granting a subsequent proxy through the Internet or
telephone or (c) attending the Meeting and voting in person.
Solicitation Expenses. This
solicitation of proxies is made by the Board of Directors and
all related costs will be borne by the Company. Proxies may be
solicited by certain of our directors, officers, and regular
employees, without additional compensation, in person, by
telephone, facsimile, or electronic mail. We will, upon request,
reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial
owners of Common Shares.
Additional Information. This Proxy
Statement contains summaries of certain documents, but you are
urged to read the documents themselves for the complete
information. The summaries are qualified in their entirety by
reference to the complete text of the document. In the event
that any of the terms, conditions or other provisions of any
such document is inconsistent with or contrary to the
description or terms in this Proxy Statement, such document will
control. Each of these documents, as well as those documents
referenced in this Proxy Statement as being available in print
upon request, are available upon request to the Company by
following the procedures described under Additional
Information Annual Report, Financial and Additional
Information.
Important
Notice Regarding the Availability of Proxy Materials for the
Annual General
Meeting of Shareholders to Be Held on April 29, 2010.
The Proxy Statement and Annual Report to Shareholders are
available at
http://bnymellon.mobular.net/bnymellon/hlf
4
PROPOSAL 1:
THE
ELECTION OF DIRECTORS
Generally
Our Amended and Restated Memorandum and Articles of Association,
or the Memorandum and Articles of Association, presently provide
for not less than one nor more than fifteen directors. The Board
of Directors has, by resolution, presently fixed the number of
directors at nine. The Memorandum and Articles of Association
divide the Board of Directors into three classes, with the terms
of office of each class of directors ending in different years.
The current terms of office of Class III directors end at
the Meeting. The current terms of office of Classes I
and II directors end at the annual general meetings in 2011
and 2012, respectively. Currently, each class has three
directors.
The nominees for Class III directors are to be voted upon
at the Meeting. The Board of Directors has nominated Leroy T.
Barnes, Jr., Richard P. Bermingham and Jeffrey T. Dunn for
election as Class III directors to serve three-year terms
expiring at the 2013 annual general meeting. The Company did not
receive any shareholder nominations for director.
The persons named as proxies on the accompanying proxy card
intend to vote the Common Shares as to which they are granted
authority to vote for the election of the nominees listed above.
The form of proxy card does not permit shareholders to vote for
a greater number of nominees than three. Although the Board of
Directors does not know of any reason why any nominee will be
unavailable for election, in the event any nominee should be
unavailable at the time of the Meeting, the proxies may be voted
for a substitute nominee as selected by the Board of Directors.
Director
Qualifications
The Board believes that the Board, as a whole, should possess a
combination of skills, professional experience and diversity of
backgrounds necessary to oversee the Companys business. In
addition, the Board believes that there are certain attributes
that every director should possess, as reflected in the
Boards membership criteria discussed below. Accordingly,
the Board and the nominating and corporate governance committee
consider the qualifications of directors and director candidates
individually and in the broader context of the Boards
overall composition and the Companys current and future
needs.
The nominating and corporate governance committee is responsible
for developing and recommending Board membership criteria to the
Board for approval. The criteria, which are set forth in the
Companys Principles of Corporate Governance, include
independent and sound judgment, integrity, the ability to commit
sufficient time and attention to Board activities, and the
absence of potential conflicts with the Companys
interests. In addition, the nominating and corporate governance
committee periodically evaluates the composition of the Board to
assess the skills and experience that are currently represented
on the Board, as well as the skills and experience that the
Board will find valuable in the future, given the Companys
current situation and strategic plans. The nominating and
corporate governance committee seeks a variety of occupational,
educational, and personal backgrounds on the Board in order to
obtain a range of viewpoints and perspectives and to enhance the
diversity of the Board in such areas as professional experience,
geography, race, gender, ethnicity and age. While the nominating
and corporate governance committee does not have a formal policy
with respect to diversity, the nominating and corporate
governance committee believes that it is essential that Board
members represent diverse viewpoints. This periodic assessment
enables the Board to update the skills and experience it seeks
in the Board as a whole, and in individual directors, as the
Companys needs evolve and change over time and to assess
effectiveness of efforts at pursuing diversity. In identifying
director candidates from time to time, the nominating and
corporate governance committee may establish specific skills and
experience that it believes the Company should seek in order to
constitute a balanced and effective board.
In evaluating director candidates, and considering incumbent
directors for renomination to the Board, the nominating and
corporate governance committee has considered a variety of
factors. These include each nominees independence,
financial literacy, personal and professional accomplishments,
and experience, each in light of the
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composition of the Board as a whole and the needs of the Company
in general, and for incumbent directors, past performance on the
Board. The table below sets forth information about the three
nominees and the directors whose terms of office continue beyond
the Meeting, including each such persons specific
experience, qualifications, attributes and skills that led our
Board of Directors to conclude that such nominee/director should
serve on our Board of Directors. The process undertaken by the
nominating and corporate governance committee in recommending
qualified director candidates is described below under The
Board of Directors Board Committees
Nominating and Corporate Governance Committee.
The table below sets forth information about the three nominees
and the directors whose terms of office continue beyond the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR LEROY T. BARNES, JR., RICHARD P. BERMINGHAM AND
JEFFREY T. DUNN.
NOMINEES
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Director
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Name and Experience
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Leroy T. Barnes, Jr., age 58, is the retired
Vice President and Treasurer of PG&E Corporation, a
position he held from 2001 to 2005. From 1997 to 2001,
Mr. Barnes was Vice President and Treasurer of Gap, Inc.
Prior to that, Mr. Barnes held various executive positions
with Pacific Telesis Group/SBC Communications. Earlier in his
career, Mr. Barnes was a consultant at Touche,
Ross & Co., a predecessor of Deloitte &
Touche. Mr. Barnes received his Bachelors and
Masters degrees from Stanford University, and his MBA from
Stanford Business School. Mr. Barnes is a member of the
boards of directors of the McClatchy Newspaper Company, Inc., a
newspaper and Internet publisher, and Frontier Communications,
Inc., a telecommunications-focused company, and was a member of
the board of directors of Longs Drug Stores Corporation from
February 2002 through October 2008. Mr. Barnes
qualifications to serve on our Board of Directors include his
past professional financial experience, which provides the Board
with valuable knowledge of financial matters, as well as his
experience serving on other public company boards, which adds a
depth of knowledge to our Board as to best practices in
corporate governance.
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III
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2004
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Richard P. Bermingham, age 70, currently
retired, has over 40 years of business experience.
Mr. Bermingham has been engaged in real estate development
and investing activities as a private investor during the past
several years. From 1994 to 1997, Mr. Bermingham was the
Vice Chairman of the Board of American Golf. Mr. Bermingham
worked for Collins Food International, which was acquired by
Sizzler International, Inc., from 1967 to 1994. He served as the
Chief Executive Officer and a member of the board of directors
of this publicly traded company for the period from 1987 to
1994. Mr. Bermingham currently serves on the boards of
EaglePicher Corp., Special Value Expansion Fund, LLC,
Interactive Health, Inc. and Joes Crab Shack.
Additionally, Mr. Bermingham served on the Advisory Board
of Missouri River Plastics until March 2007. Mr. Bermingham
was a certified public accountant and received his Bachelor of
Science degree from the University of Colorado.
Mr. Berminghams qualifications to serve on our Board
of Directors include his significant consumer marketing
experience, which is relevant to the Companys business
operations in selling, and in certain circumstances
manufacturing, packaged food and nutritional supplement
products; his past professional financial experience, which
provides the Board with important knowledge regarding financial
reporting rules and also qualify him as an Audit Committee
Financial Expert; his prior service as a chief executive
officer, which helps the Board better understand
managements day-to-day actions and responsibilities; and
his service on other public company boards, which adds a depth
of knowledge to our Board as to best practices in corporate
governance.
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III
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2004
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Jeffrey T. Dunn, age 52, has served as the
President and Chief Executive Officer of W.M. Bolthouse Farms,
LLC, a premium fresh produce grower and processor located in
Bakersfield, California, since May 2008. From January 2006
through December 2007, Mr. Dunn served as the President and
Chief Executive Officer of Ubiquity Brands, Inc., the parent
company of Jay Foods, Inc., the Midwests premier
manufacturer and distributor of a full line of snacks. From
March 2004 until January 2006, Mr. Dunn was a Managing
Partner of Grassy Lake Partners, an investment and consulting
firm. From 1985 to 2004, Mr. Dunn held a variety of senior
executive positions with The
Coca-Cola
Company, serving most recently as Executive Vice President, and
President and Chief Operating Officer of
Coca-Cola
North America and previously serving as President and Chief
Operating Officer of
Coca-Cola
Americas. Mr. Dunn received his Bachelors
degree in business administration from the University of Georgia
and his MBA from Pepperdine University. Mr. Dunn serves on
the Morehouse College board of trustees and the board of
advisors for the Goizueta School of Business at Emory
University. Mr. Dunns qualifications to serve on our
Board of Directors include his significant consumer marketing
experience, which is relevant to the Companys business
operations in selling, and in certain circumstances
manufacturing, packaged food and nutritional supplement
products; his significant knowledge and experience regarding
international business matters, which is relevant to the Company
in light of its operations across 72 countries worldwide; and
his service as a chief executive officer, which helps the Board
better understand managements day-to-day actions and
responsibilities.
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III
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2009
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CONTINUING
DIRECTORS
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Lawrence M. Higby, age 64, has been Advisor
and Vice Chairman of Apria Healthcare Group Inc., a leading
provider of integrated home healthcare products and services,
since October 2008. He served as Chief Executive Officer of
Apria Healthcare Group Inc. from 2002 to 2008, and from 1997 to
2002 served as its President and Chief Operating Officer. Prior
to joining Apria Healthcare Group Inc. Mr. Higby served as
President and Chief Operating Officer of Unocals 76
Products Company and Group Vice President of Unocal Corporation.
Earlier in his career he held various positions with the Times
Mirror Company, Americas Pharmacy Inc., and PepsiCo and served
as a Deputy Assistant to President Nixon from 1968 through 1974.
Mr. Higby serves as a Board Member of the Automobile Club
of Southern California and eHealth, Inc. He served as a Director
of William Lyon Homes from 2006 to 2007 and as a Director of
Apria Healthcare Group Inc. from 2002 to 2008. Mr. Higby
received a Bachelor of Arts in Political Science from the
University of California, Los Angeles. Mr. Higbys
qualifications to serve on our Board of Directors include his
significant experience within the federal government, which is
important to the Board in its government relations activities
and with respect to regulatory matters; his prior service as a
chief executive officer, which helps the Board better understand
managements day-to-day actions and responsibilities; and
his service on other public company boards, which adds a depth
of knowledge to our Board as to best practices in corporate
governance.
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2009
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Michael O. Johnson, age 55, is Chairman and
Chief Executive Officer of the Company. Mr. Johnson joined
the Company in April 2003 after 17 years with The Walt
Disney Company, where he most recently served as President of
Walt Disney International, and also served as President of Asia
Pacific for The Walt Disney Company and President of Buena Vista
Home Entertainment. Mr. Johnson has also previously served
as a publisher of Audio Times magazine, and has directed the
regional sales efforts of Warner Amex Satellite Entertainment
Company for three of its television channels, including MTV,
Nickelodeon and The Movie Channel. Mr. Johnson served as a
director of Univision Communications, Inc., a television company
serving Spanish-speaking Americans until March 19, 2007 and
serves on the Board of Regents for Loyola High School of Los
Angeles. Mr. Johnson received his Bachelor of Arts in
Political Science from Western State College.
Mr. Johnsons qualifications to serve on our Board of
Directors include his seven years of experience as our Chairman
and Chief Executive Officer, which provides the Board with
essential insight into the day-to-day operations of the Company
as well as a broad based understanding of our business.
Mr. Johnson also has significant experience in
international business matters, which brings important knowledge
to our Board regarding international business matters, which is
particularly relevant to the Board in light of the
Companys operations across 72 countries worldwide.
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2003
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John Tartol, age 58, has been an independent
Herbalife distributor for 28 years and a member of the
Companys Chairmans Club since 2000. He is active in
training other Herbalife distributors all over the world and has
served on various strategy and planning groups for Herbalife. He
is also active on behalf of various charities in his community
and worldwide on behalf of the Herbalife Family Foundation. He
has a Bachelors degree in finance from the University of
Illinois. Mr. Tartols qualifications to serve on our
Board of Directors include his 28 years of experience as an
Herbalife distributor, which brings a first-hand understanding
of the function and specific needs of our independent
distributors, the ultimate drivers of our business, to the Board.
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2005
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Pedro Cardoso, age 43, has been an
independent Herbalife distributor for 18 years and a member
of the Companys Chairmans Club since 2005.
Mr. Cardoso has built a successful organization of
Herbalife independent distributors in more than 20 countries. He
has been active in training Herbalife distributors around the
world, and is a member of various strategy and planning groups
for Herbalife. He is also an active volunteer for the Herbalife
Family Foundation. Prior to joining Herbalife, Mr. Cardoso
served as the Transportation Supervisor of the Avon Company from
1990 to 1992. He received his degree in applied mathematics from
the Autonomous University of Lisbon. Mr. Cardosos
qualifications to serve on our Board of Directors include his
18 years of experience as an Herbalife distributor, which
brings a first-hand understanding of the function and specific
needs of our independent distributors, the ultimate drivers of
our business, to the Board.
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II
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2009
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Murray H. Dashe, age 67, currently retired,
has been a member of the Board of Directors of Union Bank of
California NA since 2006. Mr. Dashe was a member of the
Board of Directors of Longs Drug Stores Corporation from August
2002 until November 2008 and served as its Lead Independent
Director from May 2006 through November 2008. From 1997 to 2005
he was with Cost Plus World Market where he had served as a
director and Vice Chairman since June 1997, its President since
September 1997 and as its Chairman, President and Chief
Executive Officer since January 1998. Mr. Dashe received
his Bachelor of Arts in Economics from Albright College and his
Master of Arts in Industrial Relations from Saint Francis
University. Mr. Dashes qualifications to serve on our
Board of Directors include his prior service as a chief
executive officer, which helps the Board better understand
managements day-to-day actions and responsibilities and
his service on other public company boards, including as a lead
independent director, which adds a depth of knowledge to our
Board as to best practices in corporate governance.
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II
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2009
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8
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Director
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Name and Experience
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Class
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Since
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Colombe M. Nicholas, age 65, has served as a
consultant to Financo Global Consulting, the international
consulting division of Financo, Inc., since 2002. Prior to
joining Financo, Ms. Nicholas served as the President and
Chief Executive Officer of The Anne Klein Company from 1996 to
1999. Prior to that role she served as the President and Chief
Executive Officer of Orr Felt Company, President and Chief
Operating Officer of Giorgio Armani Fashion Corp., and President
and Chief Executive Officer of Christian Dior New York.
Ms. Nicholas currently serves on the board of Tandy Brand
Accessories and the Business Advisory Board of the University of
Cincinnati College of Law. From November 2004 through March 2007
Ms. Nicholas served on the Board of Directors of Mills
Corp., and from June 2004 until June 2007 served on the Board of
Directors of Oakley, Inc. She received a bachelor of arts degree
from the University of Dayton and a juris doctorate degree from
the University of Cincinnati College of Law, and holds an
honorary doctorate in business administration from Bryant
College of Rhode Island. Ms. Nicholass qualifications
to serve on our Board of Directors include her significant
consumer marketing experience, which is relevant to the
Companys business operations in selling packaged food and
nutritional supplement products; her prior service as a chief
executive officer, which helps the Board better understand
managements day-to-day actions and responsibilities; and
her service on other public company boards, which adds a depth
of knowledge to our Board as to best practices in corporate
governance.
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II
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2006
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THE BOARD
OF DIRECTORS
Director
Independence
Our Board of Directors has affirmatively determined that each of
Messrs. Barnes, Bermingham, Dashe, Dunn and Higby and
Ms. Nicholas is, and, during their tenure on the Board,
each of Mr. Gaba and Ms. Rico were, independent under
section 303A.02 of the New York Stock Exchange, or the
NYSE, Listed Company Manual and the Companys Categorical
Standards of Independence, which are included as part of our
Principles of Corporate Governance that are available on our
website at www.herbalife.com by following the links
through Investor Relations to Corporate
Governance. The NYSEs independence guidelines and
the Companys Categorical Standards include a series of
objective tests, such as the director is not an employee of the
Company and has not engaged in various types of business
dealings involving the Company which would prevent a director
from being independent. The Board of Directors has affirmatively
determined that none of the Companys independent directors
had any relationship with the Company.
Board
Meetings
The Board of Directors met eight times during fiscal 2009. All
Board members attended at least 75% of the aggregate number of
Board meetings and applicable committee meetings held while such
individuals were serving on the Board of Directors, or such
committees. Under the Companys Principles of Corporate
Governance, which are available on the Companys website
www.herbalife.com, by following the links through
Investor Relations to Corporate
Governance, each director is expected to dedicate
sufficient time, energy and attention to ensure the diligent
performance of his or her duties, including attending meetings
of the shareholders of the Company, the Board of Directors and
committees of which he or she is a member. All then-current
members of the Board of Directors attended the 2009 annual
general meeting other than Mr. Leon Waisbein, whose
directorship term expired at the meeting.
It is the policy of the Board of Directors to hold four
regularly scheduled meetings, each of which include an executive
session of non-management directors without the presence of
management as well as a session of only the independent
directors. Additional meetings of the Board of Directors,
executive sessions of non-management directors and sessions of
independent directors may be held from time to time as required
or determined to be necessary. The Board of Directors has
created the position of Lead Director to preside over executive
sessions of non-management directors. The position is filled by
an independent director elected by the independent directors
9
serving a two year term. Richard P. Bermingham currently serves
as the Lead Director and his term is scheduled to expire in
April 2011.
Board
Leadership
Currently Mr. Johnson serves as our Chairman and CEO. The
Board has determined that a board leadership structure featuring
a single leader as Chairman and CEO combined with a Lead
Director best serves the interests of the Company and its
shareholders. Combining the roles of Chairman and CEO makes
clear that the individual serving in these roles has primary
responsibility for managing the Companys business, under
the oversight and review of the Board. Under this structure, the
Chairman and CEO chairs Board meetings, where the Board
discusses strategic and business issues. The Board believes that
this approach makes sense because the CEO is the individual with
primary responsibility for implementing the Companys
strategy, directing the work of other executive officers and
leading implementation of the Companys strategic plans as
approved by the Board. This structure results in a single leader
being directly accountable to the Board and, through the Board,
to shareholders, and enables the CEO to act as the key link
between the Board and other members of management.
In addition, the Board believes this structure is appropriate
for the Company as the CEO is the person most knowledgeable
about the Company and its business and is therefore the
individual best able to provide guidance for productive board
meetings. The unique nature of the Companys direct selling
business model requires that the Chairman and CEO have forged a
close relationship with, and obtain and maintain the trust of,
the Companys independent distributors.
Because the Board also believes that strong, independent Board
leadership is a critical aspect of effective corporate
governance, the Board has established the position of Lead
Director. The Lead Director is an independent director elected
for a two year term by the independent directors. The Lead
Director chairs the board meetings during all executive sessions
and when the Chairman and CEO is unable to participate in board
meetings, and is a contact point for shareholders and third
parties who may desire to contact the Board independently of the
Chairman and CEO. Mr. Bermingham, who has extensive
business experience, including in the capacity of a CEO,
currently serves as the Lead Director. The responsibilities of
the Lead Director, who chairs the board meetings during all
executive sessions and when the Chairman and CEO is unable to
participate in board meetings, include:
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coordinating the activities of the independent directors;
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presiding at meetings of the Board at which the Chairman and CEO
is not present, including executive sessions of the independent
directors;
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setting the agenda for and leading the non-management and
independent director sessions held by the Board regularly, and
briefs the Chairman and CEO on any issues arising from those
sessions;
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acting as the principal liaison to the Chairman and CEO for the
views, and any concerns and issues, of the independent directors;
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advising on the flow of information sent to the Board, and
reviewing the agenda, materials and schedule for Board meetings;
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being available for consultation and communication with major
shareholders as appropriate;
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maintaining close contact with the chairperson of each standing
committee; and
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performing other duties that the Board may from time to time
delegate to assist the Board in the fulfillment of its
responsibilities.
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The Board believes that a single leader serving as Chairman and
CEO, together with an experienced and engaged Lead Director, is
the most appropriate leadership structure for the Board at this
time. The Board periodically reviews the structure of Board and
Company leadership as part of the succession planning process.
10
The
Boards Role in Risk Oversight
The full Board of Directors has the ultimate responsibility for
risk oversight regarding the Company. The Board oversees a
Company-wide approach to risk management, designed to enhance
shareholder value and to support the achievement of strategic
objectives and to improve long-term organizational performance.
The first aspect of the Boards approach to risk management
is to determine the appropriate level of risk for the Company
generally, followed by an assessment of the specific risks the
Company faces and the steps management is taking to manage those
risks. The full Boards involvement in setting the
Companys business strategy facilitates those assessments,
culminating in the development of a strategic plan that reflects
the Boards and managements concensus as to
appropriate levels of risk as to specific aspects of the
Companys business and the appropriate measures to manage
those risks. Additionally, the full Board of Directors
participates in a periodic enterprise risk management assessment
during its quarterly meetings. In this process, risk is assessed
throughout the business, focusing on risks arising out of
various aspects of the Companys strategic plan and its
implementation, including financial, legal/compliance,
operational/strategic and compensation risks. The Board also
assesses its role in risk oversight throughout our business. In
addition to the discussion of risk with the full Board at least
once a year, the independent directors discuss risk management
during executive sessions without management present with the
Lead Director presiding.
While the full Board of Directors has the ultimate oversight
responsibility for the risk management process, various Board
committees also have responsibility for risk management in
certain areas. In particular, the audit committee focuses on
financial risk, including internal controls and assesses the
Companys risk profile with the Companys internal
auditors. The internal controls risks profile drives the
internal audit plan for the coming year. The audit committee
also handles violations of the Companys Code of Ethics and
related corporate policies. Finally, the compensation committee
periodically reviews compensation practices and policies to
confirm that they do not encourage excessive risk taking.
Management regularly reports on each such risk to the relevant
committee or the full Board, as appropriate, and additional
review or reporting on enterprise risks is conducted as needed
or as requested by the Board or the relevant committee.
2009 Director
Compensation
The table below summarizes the compensation paid by the Company
to non-management directors for the fiscal year ended
December 31, 2009.
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Fees
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Earned or
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Paid in
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Option/SAR
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Name
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Cash ($)
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Awards ($)(1)
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Total ($)
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Leroy T. Barnes, Jr.
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118,000
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100,001
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218,001
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Richard P. Bermingham
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127,236
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100,001
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227,237
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Pedro Cardoso(2)
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50,500
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50,500
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Murray H. Dashe(3)
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69,000
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83,013
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152,013
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Jeffrey T. Dunn(4)
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10,000
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29,586
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39,586
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Hal Gaba(5)
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3,226
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3,226
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Lawrence M. Higby(6)
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80,000
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96,711
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176,011
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Colombe M. Nicholas
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103,250
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100,001
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203,251
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Valeria Rico(7)
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15,981
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15,981
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John Tartol
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71,250
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71,250
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Leon Waisbein(8)
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8,250
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8,250
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(1) |
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Amounts represent the aggregate grant date fair value of the
relevant award(s) presented in accordance with ASC Topic 718,
Compensation Stock Compensation. See
note 9 of the notes to consolidated financial statements
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009 regarding assumptions
underlying valuation of equity awards. |
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(2) |
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Mr. Cardoso was first elected to the Board at our 2009
annual meeting on April 30, 2009. |
11
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(3) |
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Mr. Dashe was first elected to the Board at our 2009 annual
meeting on April 30, 2009. |
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(4) |
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Mr. Dunn was appointed to the Board on October 29,
2009. |
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(5) |
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Mr. Gaba passed away on March 9, 2009. |
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(6) |
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Mr. Higby was appointed to the Board on March 10, 2009. |
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(7) |
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Ms. Rico resigned from the Board on March 6, 2009. |
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(8) |
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Mr. Waisbein declined to stand for reelection in 2009 and
his Board service ended on April 30, 2009. |
Through April 29, 2009, each non-management director
received (i) $25,000 per year for services as a director
and $5,000 for each Board committee on which the director served
(and an additional $20,000 per year for the chair of the audit
committee and for the chair of the compensation committee, and
an additional $10,000 for the chair of the nominating and
corporate governance committee), (ii) $5,000 for each Board
meeting attended by the director in person or $1,000 per Board
meeting attended telephonically, (iii) $3,500 for each
audit committee meeting attended either in person or
telephonically, and (iv) $2,500 for each compensation
committee meeting and for each nominating and corporate
governance committee meeting attended either in person or
telephonically. In order to make the compensation program
competitive with other public company board compensation
programs and to ensure that the Company continued to attract and
retain the services of exemplary director candidates, our
director compensation program was amended effective
April 30, 2009 to provide that, from and after that date,
each non-management director received (i) $60,000 per year
for services as a director and $5,000 for each Board committee
on which the director serves and an additional $20,000 per year
for the Lead Director, an additional $15,000 per year for the
chair of the audit committee, an additional $10,000 per year for
the chair of the compensation committee and an additional $5,000
per year for the chair of the nominating and corporate
governance committee, (ii) $1,500 for each Board meeting
attended by the director in person or $1,000 per Board meeting
attended telephonically, (iii) $2,500 for each audit
committee meeting attended either in person or telephonically
and (iv) $1,500 for each compensation committee and for
each nominating and corporate governance committee meeting
attended either in person or telephonically. Independent
directors also receive a $100,000 equivalent annual equity grant.
The Company has adopted stock ownership guidelines applicable to
each non-management director. Specifically, each non-management
director is encouraged to acquire and hold a number of Common
Shares equal to five times such directors annual retainer
within two years of such directors appointment or election
to the Board of Directors. Each non-management director that has
served on our Board for more than two years is compliant with
these guidelines.
The table below summarizes the equity-based awards held by the
Companys non-management directors as of December 31,
2009.
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Options/Stock Appreciation Rights Awards
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Number of
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Number of
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Securities
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Securities
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Underlying
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Underlying
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Unexercised
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Unexercised
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Options/SARs
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Options/SARs
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(#)
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(#)
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Exercise
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Expiration
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Name
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Exercisable
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Un-Exercisable
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Price ($)
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Date
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Leroy T. Barnes, Jr.
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15,625
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14.00
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12/15/2014
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Leroy T. Barnes, Jr.
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22,059
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7,353
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13.64
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02/27/2019
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Richard P. Bermingham
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7,500
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14.00
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12/15/2014
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Richard P. Bermingham
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22,059
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7,353
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13.64
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02/27/2019
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Pedro Cardoso
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Murray H. Dashe
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10,716
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3,572
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19.82
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04/30/2019
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Jeffrey T. Dunn
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2,085
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41.80
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11/11/2019
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Lawrence M. Higby
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23,703
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7,902
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12.62
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02/27/2019
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Colombe M. Nicholas
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22,059
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7,353
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13.64
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02/27/2019
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John Tartol
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12
Effective January 15, 2006, the Company established the
Independent Directors Deferred Compensation and Stock Unit Plan,
or the Independent Directors Plan, for the award of restricted
stock units, or RSUs, to independent directors and to allow for
deferral of compensation realized in connection with such RSUs
and other director compensation. The purpose of the Independent
Directors Plan is to promote the long term financial interest
and growth of the Company by attracting and retaining
independent directors who can make a substantial contribution to
the success of the Company, and to motivate and to align their
interests with those of the equity holders. The Independent
Directors Plan is part of the Herbalife Ltd. 2005 Stock
Incentive Plan. Effective January 27, 2009, the Independent
Directors Plan and award agreements granted thereunder were
amended to eliminate the ability to make further deferrals of
compensation by independent directors. In addition, the
Independent Directors Plan was further amended such that awards
to independent directors in 2009 and thereafter will be in the
form of stock-settled stock appreciation rights, or SARs,
instead of RSUs, and to eliminate a two-year automatic deferral
feature following vesting with respect to awards (or portions
thereof) that vested in 2009 or that will be granted in 2010 and
beyond.
Shareholder
Communications with the Board of Directors
Shareholders and other parties interested in communicating
directly with the Board of Directors, non-management directors
as a group or individual directors, including Richard P.
Bermingham in his capacity as the Lead Director, may do so by
writing to Herbalife Ltd.,
c/o Corporate
Secretary, 800 W. Olympic Blvd, Suite 406, Los
Angeles, CA 90015, or by email at corpsec@herbalife.com,
indicating to whose attention the communication should be
directed. Under a process approved by the Board of Directors for
handling communications received by the Company and addressed to
non-management directors, the Corporate Secretary of the Company
reviews all such correspondence and forwards to members of the
audit committee a summary
and/or
copies of any such correspondence that, in the opinion of the
Corporate Secretary, deal with the functions of the Board of
Directors or committees thereof, or that he otherwise determines
requires their attention. Directors may at any time review a log
of all communications received by the Company and addressed to
members of the Board of Directors and request copies of any such
correspondence. Concerns relating to accounting, internal
controls or auditing matters are immediately brought to the
attention of the Companys internal audit department and
handled in accordance with procedures established by the audit
committee with respect to such matters.
Committees
of the Board
Our Board of Directors has a standing audit committee,
nominating and corporate governance committee, and compensation
committee.
Audit
Committee
From January 1, 2009 to March 9, 2009, the audit
committee consisted of Messrs. Barnes, Bermingham and Gaba,
each of whom is or was independent as discussed above under
Director Independence. Mr. Gaba
passed away on March 9, 2009. From March 10, 2009
through April 29, 2009, the audit committee consisted of
Messrs. Barnes, Bermingham and Higby, each of whom is
independent as discussed above under Director
Independence. Since April 30, 2009, the audit
committee has consisted of Messrs. Barnes, Bermingham,
Dashe and Higby, each of whom is independent as discussed above
under Director Independence. As required
by Rule 303A.07 of the NYSE Listed Company Manual, the
Board of Directors has affirmatively determined that each of
Messrs. Barnes, Bermingham Dashe and Higby are, and
Mr. Gaba (while on the audit committee) was, financially
literate, and that Mr. Bermingham is an audit
committee financial expert, as defined in
Item 407(d)(5) of
Regulation S-K.
The principal duties of the audit committee are as follows:
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to monitor the integrity of the Companys financial
reporting process and systems of internal controls regarding
finance, accounting and reporting;
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to monitor the independence and performance of the
Companys independent auditors and internal auditing
department; and
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13
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to provide an avenue of communication among the independent
auditors, management, the internal auditing department and the
Board of Directors.
|
Our Board of Directors has adopted a written charter for the
audit committee which is available on the Companys website
at www.herbalife.com by following the links through
Investor Relations to Corporate
Governance, and in print to any shareholder who requests
it as set forth under Additional Information
Annual Report, Financial and Additional Information. In
fiscal 2009, the audit committee met four times.
Nominating
and Corporate Governance Committee
From January 1, 2009 to March 6, 2009, the nominating
and corporate governance committee consisted of Mmes. Nicholas
and Rico and Mr. Barnes, each of whom is or was independent
as discussed above under Director
Independence. Ms. Rico resigned from the Board on
March 6, 2009. Since March 9, 2009, the nominating and
corporate governance committee has consisted of
Ms. Nicholas and Messrs. Barnes and Bermingham, each
of whom is independent as discussed above under
Director Independence. The principal
duties of the nominating and corporate governance committee are
as follows:
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to recommend to the Board of Directors proposed nominees for
election to the Board of Directors both at annual general
meetings and to fill vacancies that occur between annual general
meetings; and
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to review and make recommendations to the Board of Directors
regarding the Companys corporate governance matters and
practices.
|
In identifying candidates to serve on the Board, the nominating
and corporate governance committee first determines the evolving
needs of the Board taking into account such factors as it deems
appropriate, including, among others, the current composition of
the Board of Directors, the range of talents, experiences and
skills that would best complement those already represented on
the Board of Directors, the balance of management and
independent directors and the need for financial or other
specialized expertise, as discussed in greater detail above
under Proposal 1: The Election of
Directors Director Qualifications. Applying
these criteria, the nominating and corporate governance
committee considers candidates for director suggested by its
members and other directors, as well by management and
shareholders. The nominating and corporate governance committee
also retains a third-party executive search firm on an ad-hoc
basis to identify and review candidates upon request of the
committee from time to time.
If the nominating and corporate governance committee decides, on
the basis of its preliminary review, to proceed with further
consideration, the committee members, as well as other directors
as appropriate, interview the nominee. After completing this
evaluation and interview, the nominating and corporate
governance committee makes a recommendation to the full Board of
Directors, which makes the final determination whether to
nominate the candidate after considering the nominating and
corporate governance committees report.
A shareholder who wishes to recommend a prospective nominee for
the Board of Directors pursuant to the provisions of the
Memorandum and Articles of Association should notify the
Corporate Secretary in writing with the appropriate supporting
materials, as more fully described under Additional
Information Shareholder Nominations.
The Board of Directors has adopted a written charter for the
nominating and corporate governance committee, which is
available on the Companys website at www.herbalife.com
by following the links through Investor
Relations to Corporate Governance or in print
to any shareholder who requests it as set forth under
Additional Information Annual Report,
Financial and Additional Information. In fiscal 2009, the
nominating and corporate governance committee met seven times.
Compensation
Committee
From January 1, 2009 to March 6, 2009, the
compensation committee consisted of Mr. Bermingham and
Mmes. Nicholas and Rico, each of whom is or was independent as
discussed above under Director
Independence. Ms. Rico resigned from the Board on
March 6, 2009. From March 9, 2009 through
April 29, 2009, the compensation committee consisted of
Messrs. Barnes and Bermingham and Ms. Nicholas, each
of whom is
14
independent as discussed above under Director
Independence. Since April 30, 2009, the compensation
committee has consisted of Messrs. Bermingham, Dashe and
Higby and Ms. Nicholas, each of whom is independent as
discussed above under Director
Independence. The principal duties of the compensation
committee are as follows:
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to oversee and approve compensation policies and programs;
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to review and approve corporate goals and objectives relevant to
the compensation of the Companys CEO and other executive
officers;
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to evaluate the performance of the CEO and recommend the
compensation level of the CEO for approval by the independent
members of the Board of Directors;
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to evaluate the performance of certain executive officers and,
considering the CEOs recommendations, set the compensation
level for such executive officers;
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to administer existing incentive compensation plans and
equity-based plans;
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to oversee regulatory compliance with respect to executive
compensation matters; and
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to review the compensation of directors.
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Our Board of Directors has adopted a written charter for the
compensation committee which is available on the Companys
website at www.herbalife.com by following the links
through Investor Relations to Corporate
Governance or in print to any shareholder who requests it
as set forth under Additional Information
Annual Report, Financial and Additional Information. Among
other duties, the compensation committee is responsible for
making the initial risk assessment of the Companys
compensation programs and determining whether those programs
require modification to remain consistent with the Boards
determinations as to the levels of risk that are appropriate for
the Company. In its assessment, the compensation committee
reviewed the Companys compensation structure and noted
numerous ways in which risk is potentially mitigated by
practices and policies that include: the balanced mix between
short- and long-term incentives; the use of multiple performance
measures for the CEOs annual incentive; strong internal
controls; the use of stock ownership guidelines; and the
existence of an anti-hedging policy. In light of its analysis,
the committee believes that the architecture of the
Companys compensation programs provide various safeguards
to protect against undue risk. In fiscal 2009, the compensation
committee met eight times.
Compensation
Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2009,
Messrs. Bermingham, Barnes, Dashe and Higby and Mmes.
Nicholas and Rico served on the compensation committee of the
Board of Directors. During the fiscal year ended
December 31, 2009, there were no relationships or
transactions between the Company and any member of the
compensation committee requiring disclosure hereunder.
PROPOSAL 2:
APPROVAL
OF AN AMENDMENT TO THE 2005 STOCK INCENTIVE PLAN
Our Board of Directors has adopted a resolution unanimously
approving, and is recommending to the shareholders for their
approval, a proposed amendment to and restatement of the
Companys 2005 Stock Incentive Plan, or the 2005 Plan, to
among other things, increase the number of Common Shares
authorized for issuance upon the exercise of any stock options,
SARs, restricted stock, RSUs or dividend equivalents granted
thereunder by 700,000 Common Shares, to clarify the prohibition
on repricing without shareholder approval, as well as to make
other immaterial administrative changes. The proposed amendment
to the number of authorized Common Shares available under the
2005 Plan is subject to approval by the shareholders at the
Meeting.
The proposed amendment to and restatement of the 2005 Plan would
increase the aggregate number of Common Shares authorized for
issuance under the 2005 Plan by 700,000 Common Shares. If
approved, the additional Common Shares will be issuable in
connection with each type of award authorized to be granted
pursuant
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to the 2005 Plan. This increase is proposed to provide
sufficient Common Shares to cover new award grants to enable the
Company to attract, retain and motivate directors, officers,
employees and consultants by providing for or increasing their
economic interests in the success of the Company.
Purposes
and Effects of the Amendment and Restatement of the 2005
Plan
The Company currently maintains one active stock incentive plan
for the purpose of granting stock-based compensation awards, the
2005 Plan, which was originally approved by the shareholders on
November 2, 2005. As of March 1, 2010, a total of
675,019 Common Shares remained available for new award grants
under the 2005 Plan. In addition, as of March 1, 2010,
(i) 4,221,347 shares were covered by options and SARs
granted under the 2005 Plan and (ii) 710,243 shares
were subject to unvested awards of stock units and vested stock
units with deferred settlement dates granted under the 2005 Plan.
The Company believes that incentives and stock-based
compensation awards motivate its directors, officers, employees
and consultants to focus on the objective of creating
shareholder value and promoting the success of the Company. The
Company also believes that incentive compensation plans are an
important tool for attracting, retaining and motivating highly
qualified and skilled directors, officers, employees and
consultants. As noted above, the Board of Directors approved the
proposed amendment and restatement of the 2005 Plan, in part,
because the number of shares available under the 2005 Plan as
currently in effect does not provide flexibility to adequately
provide for future incentives or hirings. In addition to the
increase in the number of Common Shares authorized for issuance
in connection with equity awards made under the 2005 Plan, the
amendment and restatement also clarifies the prohibition on
repricing without shareholder approval by including a
prohibition on replacing any stock options or SARs that are
underwater (i.e., awards where the current fair market
value of the Common Share issuable upon exercise of such award
is less than the awards exercise price) with cash or
awards with lower exercise prices. Lastly, each Common Share
issued under awards other than options or SARs (so called
full value awards) will count against the number of
Common Shares available under the 2005 Plan as one and one-half
(1.5), rather than two (2), Common Shares, which ratio better
reflects the relative value of those awards.
Plan
Features and Grant Practices that Protect Shareholder
Interests
The 2005 Plan, as amended and restated, and the Companys
grant practices include a number of features intended to protect
the interests of shareholders:
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The number of additional shares requested, 700,000, represents
only an additional 1.16% of overhang (i.e., the dilutive effect
these additional shares would have on the Companys
shareholders).
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Any additional grants of full value awards will be counted at a
1.5:1 premium factor against the remaining available share pool.
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The 2005 Plan does not permit the use of discounted stock
options or SARs (other than in connection with the assumption
and substitution of options held by employees of an acquired
company), the use of dividend equivalents on stock options or
SARs, or the use of reload stock options.
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Any performance-based restricted stock or RSU awards are subject
to at least a one-year performance period. Although there is no
minimum vesting period for time-based awards, in practice,
grants of awards (whether time-based or performance-based) under
the 2005 Plan to executive officers and other members of senior
management have incorporated at least a three year vesting
schedule.
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The 2005 Plan does not include provisions frequently labeled as
liberal share counting provisions by institutional
investors (e.g., the ability to re-use shares tendered or
surrendered to pay the exercise cost or tax obligations of
grants). The only add backs are for awards that are cancelled or
forfeited or for awards payable in cash.
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The 2005 Plan does not allow for the transfer of options or
other equity awards to third parties for value or consideration
The transfer of awards, if at all, is limited to transfers by
will or the laws of descent and distribution.
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The 2005 Plan specifically prohibits repricing of stock options
or stock SARs without shareholder approval, and, as amended and
restated, also specifically prohibits the replacement of
underwater stock options or SARs with cash or awards with lower
exercise prices.
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All of the Companys current equity compensation programs
are funded by grants under a shareholder approved program.
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Section 162(m)
The Board of Directors continues to believe that it is in the
best interests of the Company and its shareholders to continue
to provide for a stock incentive plan under which stock-based
compensation awards made to the Companys executive
officers can qualify for deductibility by the Company for
federal income tax purposes. Accordingly, the 2005 Plan has been
(and with this amendment and restatement remains) structured in
a manner such that awards under it can satisfy the requirements
for performance-based compensation within the
meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended, or the Code. In general, under
Section 162(m), in order for the Company to be able to
deduct compensation in excess of $1 million paid in any one
year to the Companys Chief Executive Officer or any of the
Companys three other most highly compensated executive
officers (other than the Companys Chief Financial
Officer), such compensation must qualify as
performance-based. One of the requirements of
performance-based compensation for purposes of
Section 162(m) of the Code is that the material terms of
the performance goals under which compensation may be paid be
disclosed to and approved by the Companys shareholders.
For purposes of Section 162(m), the material terms include
(i) the employees eligible to receive compensation,
(ii) a description of the business criteria on which the
performance goal is based and (iii) the maximum amount of
compensation that can be paid to an employee under the
performance goal. With respect to awards of restricted stock,
stock units, and performance units under the 2005 Plan, each of
these aspects is discussed below, and shareholder approval of
this proposal will be deemed to constitute re-approval of each
of these aspects of the 2005 Plan for purposes of the approval
requirements of Section 162(m).
Summary
of the 2005 Plan
The following summary of the material provisions of the 2005
Plan as proposed to be amended and restated is qualified in its
entirety by the complete text of the proposed amended and
restated 2005 Plan, a copy of which is attached hereto as
Appendix A.
General. The 2005 Plan provides for the
grant of incentive stock options, nonqualified stock options,
SARs, restricted stock, stock units, performance units and
dividend equivalents. Incentive stock options granted under the
2005 Plan are intended to qualify as incentive stock
options within the meaning of Section 422 of the
Code. Nonqualified stock options are stock options that are not
intended to qualify as incentive stock options under the Code.
See Federal Income Tax Consequences of the
2005 Plan for a discussion of the tax treatment of awards
that may be granted under the 2005 Plan.
Eligibility. Any person who is a
current or prospective director, officer, employee or consultant
of the Company or any of its subsidiaries is eligible to be
selected as a recipient of an award under the 2005 Plan.
Incentive stock options may only be granted to employees of the
Company and its subsidiaries that are at director level and
above and where participation in the 2005 Plan is permitted by
local law. As of March 1, 2010, there were approximately
230 eligible plan participants.
Shares Subject to the 2005
Plan. Currently, the maximum number of Common
Shares that may be issued pursuant to awards granted under the
2005 Plan is 4,000,000, plus (i) any shares that remained
available for issuance under the Companys 2004 Stock
Incentive Plan, or the 2004 Plan, and (ii) any awards under
the 2004 Plan that expire or are forfeited, terminated or
otherwise cancelled, or that are settled in cash in lieu of
Common Shares. The number of Common Shares described in
clauses (i) and (ii) above are collectively referred
to herein as the Additional Common Shares. To date, 3,238,590
Additional Common Shares have become available for grant under
the 2005 Plan. If the proposed amendment and restatement of the
2005 Plan is approved, the maximum number of Common Shares that
may be issued pursuant to awards granted under the 2005 Plan
will be 4,700,000, plus any Additional Common Shares, for a
total of 7,938,590 Common Shares. In addition, Common Shares
issuable under the 2005 Plan are subject to certain adjustments
for corporate transactions, as described in
Adjustments.
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Any Common Shares subject to awards under the 2005 Plan that
expire or are forfeited, terminated or otherwise cancelled, or
that are settled in cash in lieu of Common Shares, will become
available for subsequent awards under the 2005 Plan. However,
Common Shares subject to awards under the 2005 Plan that are not
issued upon the net settlement or net exercise of options or
SARs, Common Shares that are delivered to or retained by the
Company to pay the exercise price or withholding taxes related
to awards and Common Shares repurchased on the open market with
the proceeds of option exercises, will not be available for
additional grants under the 2005 Plan.
The 2005 Plan provides that each Common Share issued under
awards other than options or SARs will count against the number
of Common Shares available under the 2005 Plan as one and
one-half (1.5) Common Shares. Common Shares issued under options
or SARs count against the Common Shares available under the 2005
Plan as one (1) Common Share. Any Common Shares that again
become available for grant under the 2005 Plan shall be added
back as one (1) Common Share if such shares were subject to
options or SARs, and as one and one-half (1.5) Common Shares if
such shares were subject to awards other than options or SARs.
The 2005 Plan also provides for a per person, per year limit on
Common Shares subject to all awards granted under the 2005 Plan
of 1,250,000, and a per person, per year limit on the amount, in
cash, that may be payable pursuant to that portion of a
performance unit that is intended to satisfy the requirements
for performance based compensation under
Section 162(m) of $5,000,000.
Administration. The 2005 Plan is
administered by the compensation committee, or in the absence of
a compensation committee, the Board of Directors itself. Such
administering body of the 2005 Plan is referred to in this
Summary of the 2005 Plan as the Committee. However,
(i) with respect to any award that is intended to satisfy
SEC
Rule 16b-3,
the Committee must consist solely of two or more directors, each
of whom is a non-employee director for purposes of
Rule 16b-3;
and (ii) with respect to any award that is intended to
qualify as performance-based compensation under
Section 162(m) of the Code, the Committee must be consist
solely of two or more directors, each of whom is an
outside director for purposes of Section 162(m).
The Committee has full and final authority to administer the
2005 Plan to, among other things: prescribe rules relating to
the 2005 Plan; select the persons to whom awards will be granted
under the 2005 Plan; grant awards; determine the terms and
conditions of those awards and whether any such terms and
conditions, such as performances goals, have been satisfied;
interpret and construe the 2005 Plan; and exercise its
discretion with respect to powers and rights granted to it under
the 2005 Plan.
Stock Options. The 2005 Plan authorizes
the Committee to grant incentive stock options and nonqualified
stock options. The terms and conditions of options granted under
the 2005 Plan will be determined by the Committee in its
discretion, subject to certain restrictions contained in the
2005 Plan. Among the restrictions on the Committees
discretion are the following:
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Exercise Price. The per Common Share exercise
price for options may not be less than 100% of the fair market
value of a Common Share on the date of grant, except in the case
of an option granted to an employee of a company acquired by the
Company in assumption and substitution of an option held by such
employee at the time such company is acquired.
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Option Term. An option must expire within
10 years of its date of grant.
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No Repricing. The 2005 Plan prohibits the
repricing of outstanding options other than in connection with
certain corporate transactions as described in
Adjustments. The prohibition on
repricing also include a prohibition on replacing an underwater
option with cash or an option with a lower exercise price.
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The exercise price of an option may be paid through various
means specified by the Committee, including in cash, by delivery
of Common Shares previously acquired by the optionee or by
cashless exercise procedures permitted and established by the
Committee.
Stock Appreciation Rights, or SARs. The
2005 Plan authorizes the Committee to grant SARs. A SAR
represents the right to receive, upon exercise, an amount equal
to the difference between the value of a Common Share on the
date of exercise and the exercise price of the SAR, subject to
limitations imposed by the Committee in its discretion. SARs may
be granted alone or in tandem with other awards granted under
the 2005 Plan. In general, the Committee determines, in its
discretion, the terms and conditions of SARs granted under the
2005 Plan, subject
18
to the terms of the 2005 Plan, including the same restrictions
applicable with respect to options granted under the 2005 Plan
described above. SARs granted in tandem with an option will have
the same terms and conditions as the option with respect to
which it was granted. SARs may be settled in Common Shares, cash
or a combination thereof, as determined by the Committee.
Restricted Stock and Stock Units. The
2005 Plan authorizes the Committee to grant awards of restricted
stock and stock units with time-based vesting or
performance-based vesting. A stock unit represents the right to
receive a specified number of Common Shares upon vesting or at a
later date permitted in the award agreement. Restricted stock
and stock units may be settled in Common Shares, cash, or a
combination thereof, as determined by the Committee. The terms
and conditions of restricted stock and stock units will be
determined by the Committee in its discretion, subject to
certain restrictions contained in the 2005 Plan. Among the
restrictions on the Committees discretion are the
following:
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Minimum Performance Period. Restricted stock
and stock units that are subject to performance conditions may
not be earned for a performance period of less than one year
from the date of grant, except in the event of a Change of
Control or the grantees death or disability.
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Voting and Dividend Rights. Unless otherwise
determined by the Committee, awards of restricted stock will
have full voting and dividend rights.
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Performance Units. The 2005 Plan
authorizes the Committee to grant performance units payable in
cash, Common Shares, or a combination thereof, based upon the
achievement of specified performance goals during a specified
performance period. Subject to the 2005 Plan, the performance
goals, performance period and other terms and conditions
applicable to performance awards will be specified by the
Committee and set forth in the award agreement. Subject to the
terms of the 2005 Plan, the performance goals, performance
period and other terms and conditions of performance units will
be determined by the Committee in its discretion; provided that
the performance period shall not be less than one year.
Performance-Based
Awards. Section 162(m) of the Code
limits the Companys federal income tax deduction for
compensation paid to any of the officers named in its Proxy
Statement. The limit is $1 million per officer per year,
with certain exceptions. This deductibility cap does not apply
to performance-based compensation, if approved in
advance by the Companys shareholders. The 2005 Plan
provides that all or a portion of an award of performance units
or an award of restricted stock or stock units that are subject
to performance-based vesting may be designed to qualify as
deductible performance-based compensation.
The performance criteria for that portion of any award of
performance units, restricted stock or stock units that is
intended to qualify as deductible performance-based compensation
will be a measure based on one or more Qualifying Performance
Criteria (as defined below). Notwithstanding satisfaction of any
performance goals, the number of Common Shares granted, issued,
retained
and/or
vested under an award of restricted stock, stock units, and the
amount paid under an award of performance units, may be reduced
by the Committee on the basis of such further considerations as
the Committee in its sole discretion shall determine. No award
of performance units, restricted stock or stock units granted
under the 2005 Plan that is intended to satisfy the requirements
for performance based compensation under
Section 162(m) of the Code will be payable unless the
Committee certifies in writing that the applicable performance
goals have been satisfied.
Qualifying Performance Criteria. The
performance criteria, or Qualifying Performance Criteria, for
any award of restricted stock, stock units or performance units
that is intended to satisfy the requirements for
performance based compensation under
Section 162(m) of the Code shall be any one or more of the
following performance criteria, either individually,
alternatively or in any combination, applied to either the
Company as a whole or to a business unit or subsidiary, either
individually, alternatively or in any combination, and measured
either annually or cumulatively over a period of years, on an
absolute basis or relative to a pre-established target, to
previous years results or to a designated comparison
group, in each case as specified by the Committee: (i) cash
flow (before or after dividends), (ii) earnings per share
(including earnings before interest, taxes, depreciation and
amortization), (iii) stock price, (iv) return on
equity, (v) total shareholder return, (vi) return on
capital (including return on total capital or return on invested
capital), (vii) return on assets or net assets,
(viii) market capitalization, (ix) economic value
added, (x) debt leverage (debt to capital),
(xi) revenue, (xii) income or net income,
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(xiii) operating income, (xiv) operating profit or net
operating profit, (xv) operating margin or profit margin,
(xvi) return on operating revenue, (xvii) cash from
operations, (xviii) operating ratio, (xix) operating
revenue, or (xx) customer service. The Committee may
appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following
events that occurs during a performance period: (i) asset
write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and
restructuring programs, and (v) any extraordinary
non-recurring items as described in FASB ASC Subtopic
225-20
and/or in
Managements Discussion and Analysis of Financial Condition
and Results of Operations included in the Companys Annual
Report on
Form 10-K
for the applicable year.
Dividend Equivalents. The 2005 Plan
authorizes the Committee to grant dividend equivalents
independently or in tandem with any award other than an award of
stock options or SARs. Dividend equivalents are payable in cash,
Common Shares or stock units in an amount equivalent to the
dividends that would have been paid on Common Shares had the
shares been outstanding from the date an award was granted.
Dividend equivalents may be granted with conditions as
determined by the Committee, including that such amounts (if
any) shall be deemed to have been reinvested in additional
Common Shares.
Adjustments. Upon an increase or
decrease in the number of issued Common Shares resulting from a
reorganization, reclassification, combination of shares, stock
split, reverse stock split, spin-off, dividend (other than
regular, cash dividends) or otherwise, the number of Common
Shares authorized for issuance under the 2005 Plan, and the
number of Common Shares covered by each outstanding award and
the price per Common Share covered by each outstanding award,
shall be proportionately adjusted by the Committee to reflect
such increase or decrease.
Change of Control. Unless otherwise
provided for under the terms of the transaction, the Committee
may provide that any or all of the following shall occur in
connection with a Change of Control of the Company, or upon
termination of an award recipients employment following a
Change of Control:
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the acceleration of the vesting
and/or
exercisability of any outstanding award such that it will become
fully vested
and/or
immediately exercisable as to all or a portion of the Common
Shares covered thereby;
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the substitution of shares of the surviving or successor company
for Common Shares covered by any outstanding award;
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the conversion of any outstanding award into a right to receive
cash and/or
other property; and/or
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the termination of any outstanding award upon or following the
consummation of the Change of Control.
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The definition of a Change of Control for the purposes of the
2005 Plan is set forth under Executive
Compensation Potential Payments upon Termination or
Change in Control Definitions.
Restrictions on Transfer. Unless the
Committee specifies otherwise, awards granted under the 2005
Plan may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated other than by will or the
laws of descent and distribution, and each award is exercisable
only by the recipient thereof during his or her lifetime. In no
event may options or SARs be transferred for value or
consideration.
Plan Amendments. The Board of Directors
may amend or terminate all or any part of the 2005 Plan at any
time and in any manner; provided that, (i) the
Companys shareholders must approve any amendment or
termination if shareholder approval is required under any
applicable law, regulation or NYSE or other applicable listing
requirements; and (ii) award recipients must consent to any
amendment or termination that would materially impair their
rights under outstanding awards, unless the Committee determines
that the amendment or termination is either required or
advisable to satisfy any applicable law or regulation or to meet
the requirements of any accounting standard or avoid adverse
financial accounting consequences thereunder. The Committee may
modify the provisions of any award at any time and in any manner
as may be necessary for it to conform to local rules and
regulations in any jurisdiction outside the United States.
Plan Duration. The 2005 Plan was
adopted by the Board of Directors on September 23, 2005,
and approved by the shareholders on November 2, 2005. No
award may be granted under the 2005 Plan after November 2,
2015,
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the tenth anniversary of the date the 2005 Plan was approved by
the shareholders, but any award granted prior to that date may
extend beyond that date.
New Plan Benefits. Because benefits
under the 2005 Plan will depend on the Committees actions
and the fair market value of Common Shares at various future
dates, it is not possible to determine the benefits that will be
received by directors, executive officers and other employees if
the 2005 Plan, as amended and restated, is approved by the
Companys shareholders.
Federal
Income Tax Consequences of the 2005 Plan
The following is only a summary of the effect of
U.S. federal income taxation upon the participant and the
Company with respect to the grant and exercise of awards under
the 2005 Plan, is not complete, does not discuss the income tax
laws of any state or foreign country in which a participant may
reside, and is subject to change. Recipients of awards under the
2005 Plan should consult their own tax advisors regarding the
specific tax consequences to them of participating in the 2005
Plan.
Incentive Stock Options. Pursuant to
the 2005 Plan, employees may be granted options that are
intended to qualify as incentive stock options under
the provisions of Section 422 of the Code. Except as
described in the following two sentences, the employee is
generally not taxed and the Company is not entitled to a
deduction on the grant or exercise of an incentive stock option,
so long as the option is exercised while the employee is
employed by the Company or its subsidiaries, or within three
months following termination of employment (one year if
termination is due to permanent disability). The amount by which
the fair market value of the Common Shares acquired upon
exercise of the option exceeds the exercise price will be
included as a positive adjustment in the calculation of the
employees alternative minimum taxable income
in the year of exercise. The alternative minimum tax
imposed on individual taxpayers is generally equal to the amount
by which a specified percentage of the individuals
alternative minimum taxable income (reduced by certain exemption
amounts) exceeds his or her regular income tax liability for the
year.
If the employee disposes of Common Shares acquired upon exercise
of an incentive stock option at any time within one year after
the date of exercise or two years after the date of grant of the
option (such a disposition is referred to as a disqualifying
disposition), then the employee will recognize (i) capital
gain in an amount equal to the excess, if any, of the sales
price over the fair market value of the Common Shares on the
date of exercise; (ii) ordinary income in an amount equal
to the excess, if any, of the lesser of the sales price or the
fair market value of the Common Shares on the date of exercise
over the exercise price of the option; and (iii) capital
loss equal to the excess, if any, of the exercise price over the
sales price.
In the event of a disqualifying disposition, the Company will
generally be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the employee. If the
employee sells shares acquired upon exercise of an incentive
stock option at any time after the first anniversary of the date
of exercise and the second anniversary of the date of grant of
the option, then the employee will recognize long-term capital
gain or loss equal to the difference between the sales price and
the exercise price of the option, and the Company will not be
entitled to any deduction.
Nonqualified Stock Options. Pursuant to
the 2005 Plan, eligible individuals may be granted options that
do not qualify for treatment as incentive stock
options (referred to as nonqualified stock options). The
grant of a nonqualified stock option is generally not a taxable
event for the optionee. Upon exercise of a nonqualified stock
option, the optionee will generally recognize ordinary income in
an amount equal to the excess of the fair market value of the
Common Shares on the date of exercise over the exercise price,
and the Company will be entitled to a deduction equal to such
amount. A subsequent disposition of the Common Shares will give
rise to capital gain or loss equal to the difference between the
sales price and the sum of the exercise price paid with respect
to the Common Shares plus the ordinary income recognized with
respect to the Common Shares. Any capital gain or loss on the
subsequent disposition of Common Shares acquired through the
exercise of a nonqualified stock option will generally be
treated as a long-term or short-term capital gain or loss,
depending on whether the holding period for the Common Shares
exceeds one year at the time of the disposition.
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Stock Appreciation Rights, or
SARs. Pursuant to the 2005 Plan, eligible
individuals may be granted SARs. The grant of SARs is generally
not a taxable event for the grantee. Upon exercise of a SAR, the
grantee will generally recognize ordinary income in an amount
equal to the fair market value on the date of exercise of the
Common Shares or other property received upon exercise of the
SAR, and the Company will be entitled to a deduction equal to
such amount. A subsequent disposition of any Common Shares
received by the grantee upon the exercise of a SAR will give
rise to capital gain or loss equal to the difference between the
sales price and the ordinary income recognized with respect to
the Common Shares. Any capital gain or loss on the subsequent
disposition of such Common Shares will generally be treated as a
long-term or short-term capital gain or loss, depending on
whether the holding period for the Common Shares exceeds one
year at the time of the disposition.
Restricted Stock. Pursuant to the 2005
Plan, eligible individuals may be granted restricted stock.
Unless the grantee makes a timely election under
Section 83(b) of the Code, he or she will generally not
recognize any taxable income until the restrictions on the
Common Shares expire or are removed, at which time the grantee
will recognize ordinary income in an amount equal to the excess
of the fair market value of the Common Shares at that time over
the purchase price for the restricted shares, if any. If the
grantee makes an election under Section 83(b) within
30 days after receiving shares of restricted stock, he or
she will recognize ordinary income on the date of receipt equal
to the excess of the fair market value of the Common Shares on
that date over the purchase price, if any, for the restricted
shares, if any. The Company will generally be entitled to a
deduction equal to the amount of ordinary income recognized by
the grantee at the time such income is recognized by the grantee.
Stock Units. Pursuant to the 2005 Plan,
eligible individuals may be granted stock units. The grant of a
stock unit is generally not a taxable event for the grantee. In
general, the grantee will not recognize any taxable income until
the Common Shares subject to the stock unit (or cash equal to
the value of such Common Shares) are distributed to him or her
without of any restrictions, at which time the grantee will
recognize ordinary income equal to the excess of the fair market
value of the Common Shares (or cash) at that time over the
purchase price for the Common Shares, if any. The Company will
generally be entitled to a deduction equal to the amount of
ordinary income recognized by the grantee at the time such
income is recognized by the grantee.
Performance Units. Pursuant to the 2005
Plan, eligible individuals may be granted performance units. The
grant of a performance unit is generally not a taxable event for
the grantee. Upon payment of a performance unit, the grantee
will recognize ordinary income equal to the fair market value of
any Common Shares or cash received. The Company will generally
be entitled to a deduction equal to the amount of ordinary
income recognized by the grantee at the time such income is
recognized by the grantee.
Dividend Equivalents. Pursuant to the
2005 Plan, eligible individuals may be granted dividend
equivalents. Upon payment of amounts associated with a dividend
equivalent, the grantee will recognize ordinary income equal to
the fair market value of any Common Shares or cash received. The
Company will generally be entitled to a deduction equal to the
amount of ordinary income recognized by the grantee at the time
such income is recognized by the grantee.
Withholding of Taxes. Generally, the
Company will be required to withhold applicable taxes with
respect to any ordinary income recognized by a grantee in
connection with awards granted under the 2005 Plan. The grantee
may be required to pay the withholding taxes to the Company or
make other provisions satisfactory to the Company for the
payment of the withholding taxes as a condition to the exercise
of options or the receipt of unrestricted stock pursuant to
stock units and performance units. Special rules will apply in
cases where a grantee pays the exercise or purchase price of an
award, or the applicable withholding tax obligations, by
delivering previously owned Common Shares or by reducing the
number of Common Shares otherwise issuable pursuant to the
award. Such a delivery of Common Shares will in certain
circumstances result in the recognition of income with respect
to those Common Shares.
Other Tax Issues. Awards to eligible
individuals under the 2005 Plan may provide for accelerated
vesting or payment in the event of a change in control of the
Company. In that event, and depending upon the individual
circumstances of the holder of the award, certain amounts with
respect to such awards may constitute excess parachute
payments under the golden parachute provisions
of the Code. Pursuant to these provisions, a grantee will be
subject to a 20% excise tax on any excess parachute
payment and the Company will be denied any deduction with
respect to such payment.
22
As noted above, Section 162(m) of the Code limits the
Companys federal income tax deduction for compensation
paid to any of the Named Executive Officers, as defined under
Executive Compensation Compensation Discussion
and Analysis. In certain instances the Company may be denied a
compensation deduction for awards granted to certain Company
officers that do not qualify as performance-based
compensation to the extent their aggregate compensation
exceeds $1 million in a given year.
Additional
Plan Disclosure
As of December 31, 2009, there were 7,371,832 stock options
and SARs outstanding under our 2005 Stock Incentive Plan and
preceding equity plans with a weighted average exercise price of
$24.84 and a weighted average remaining life of 5.9 years.
The following table sets forth additional information regarding
stock options and SARs outstanding as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted Average
|
|
|
|
Options / SARs
|
|
|
Average
|
|
|
Remaining Years of
|
|
|
|
Outstanding
|
|
|
Exercise Price
|
|
|
Contractual Life
|
|
|
Substantially in-the-money options and SARs outstanding in
excess of six years
|
|
|
731,359
|
|
|
$
|
9.19
|
|
|
|
3.19
|
|
Other options and SARs outstanding in excess of six years
|
|
|
1,182,370
|
|
|
$
|
21.12
|
|
|
|
3.26
|
|
All options and SARs outstanding less than six years
|
|
|
5,458,103
|
|
|
$
|
27.74
|
|
|
|
6.90
|
|
Substantially in-the-money options and SARs outstanding in
excess of six years is defined for this purpose as
Herbalife Ltd. options and SARs that are fully vested and have
an exercise price of less than $12.06. Additional information
regarding these options and SARs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Years of
|
|
|
Exercise
|
|
|
|
|
Grant Date
|
|
Contractual Life
|
|
|
Price
|
|
|
Options Outstanding
|
|
|
10/22/2002
|
|
|
2.81
|
|
|
$
|
0.88
|
|
|
|
9,250
|
|
10/22/2002
|
|
|
2.81
|
|
|
$
|
3.52
|
|
|
|
95,800
|
|
3/27/2003
|
|
|
3.24
|
|
|
$
|
3.52
|
|
|
|
10,500
|
|
4/03/2003
|
|
|
3.26
|
|
|
$
|
3.52
|
|
|
|
19,123
|
|
4/03/2003
|
|
|
3.26
|
|
|
$
|
10.56
|
|
|
|
591,185
|
|
8/11/2003
|
|
|
3.61
|
|
|
$
|
5.00
|
|
|
|
5,501
|
|
Total substantially in-the-money options and SARs outstanding in
excess of six years
|
|
|
|
|
|
|
|
|
|
|
731,359
|
|
The following table sets forth information regarding awards
granted and earned over the last three fiscal years.
Equity
Awards Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(thousands)
|
|
|
(thousands)
|
|
|
(thousands)
|
|
|
Service-based SARs granted
|
|
|
1,009
|
|
|
|
1,127.7
|
|
|
|
1,545
|
|
Performance-based SARs granted(1)
|
|
|
0
|
|
|
|
759.8
|
|
|
|
0
|
|
Service-based RSUs granted
|
|
|
192
|
|
|
|
514.1
|
|
|
|
437.8
|
|
|
|
|
(1) |
|
Includes SARs granted to Mr. Johnson that vest on
March 27, 2012, provided that, during the four years
following their grant date, (i) as to 363,670 SARs, the
Companys share price closed for thirty consecutive trading
days at a price equal to or greater than $67.33, and
(ii) as to 396,120 SARs, the Companys share price
closed for thirty consecutive trading days at a price equal to
or greater than $80.43. Our closing share price on
March 27, 2008 was $48.64. As of December 31, 2009
these market conditions had not been met. |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF
THE 2005 PLAN.
23
PROPOSAL 3:
THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
The audit committee has selected KPMG LLP as the Companys
independent registered public accountants for the fiscal year
ending December 31, 2010. Services provided to the Company
and its subsidiaries by KPMG LLP in fiscal 2008 and 2009 are
described under Fees to Independent Registered
Public Accountants for Fiscal 2008 and 2009. Additional
information regarding the audit committee is set forth in the
Audit Committee Report.
The Company has been advised that representatives of KPMG LLP
will be present at the Meeting where they will have an
opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions.
In the event shareholders do not ratify the appointment of KPMG
LLP, the appointment will be reconsidered by the audit committee
and the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS
THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR
FISCAL 2010.
Audit
Committee Report
The audit committee is responsible for monitoring our financial
auditing, accounting and financial reporting processes and our
system of internal controls, and selecting the independent
public accounting firm on behalf of the Board of Directors. Our
management has primary responsibility for our internal controls
and reporting process. Our independent registered public
accounting firm, KPMG LLP, is responsible for performing an
independent audit of our consolidated financial statements and
the effectiveness of our internal control over financial
reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and issuing an
opinion thereon. In this context, the audit committee met
regularly and held discussions with management and KPMG LLP.
Management represented to the audit committee that the
consolidated financial statements for the fiscal year 2009 were
prepared in accordance with U.S. generally accepted
accounting principles.
The audit committee hereby reports as follows:
|
|
|
|
|
The audit committee has reviewed and discussed the audited
consolidated financial statements and accompanying
managements discussion and analysis of financial condition
and results of operations with our management and KPMG LLP. This
discussion included KPMG LLPs judgments about the quality,
not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of
disclosures in the financial statements.
|
|
|
|
The audit committee also discussed with KPMG LLP the matters
required to be discussed by the Statements on Auditing Standards
No. 61, as amended (AICPA, Professional Standards,
Vol. 1. AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T.
|
|
|
|
KPMG LLP also provided to the audit committee the written
disclosures and the letter required by the applicable
requirements of the Public Company Accounting Oversight Board
regarding KPMG LLPs communications with the audit
committee concerning independence, and the audit committee has
discussed with KPMG LLP the accounting firms independence.
The audit committee also considered whether non-audit services
provided by KPMG LLP during the last fiscal year were compatible
with maintaining the accounting firms independence.
|
Based on the reviews and discussions referred to above, the
audit committee recommended to the Board of Directors that the
audited consolidated financial statements be included in our
Annual Report on
Form 10-K
for the year ended December 31, 2009, which have been filed
with the SEC. The audit committee also selected, subject to
24
shareholder ratification, KPMG LLP to serve as our independent
registered public accounting firm for the year ending
December 31, 2010.
AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Leroy T. Barnes, Jr., Chairman
Richard P. Bermingham
Murray H. Dashe
Lawrence M. Higby
Fees to
Independent Registered Public Accountants for Fiscal 2008 and
2009
The following services were provided by KPMG LLP during fiscal
2008 and 2009:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Audit Fees(1)
|
|
$
|
2,941,000
|
|
|
$
|
3,024,000
|
|
Audit-related fees
|
|
|
|
|
|
|
|
|
Tax fees(2)
|
|
$
|
786,000
|
|
|
$
|
514,000
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,727,000
|
|
|
$
|
3,538,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consist of fees for professional services rendered
for the audit of the Companys consolidated financial
statements included in the Companys Annual Report on
Form 10-K,
including the audit of internal controls required by
Section 404 of the Sarbanes-Oxley Act of 2002, and the
review of financial statements included in the Companys
Quarterly Reports on
Form 10-Q,
and for services that are normally provided by the auditor in
connection with statutory and regulatory filings or engagements. |
|
(2) |
|
Tax fees were billed for the following services: tax compliance
and international tax guidance. |
Pre-Approval
Policy
The audit committee has adopted pre-approval policies and
procedures for audit and non-audit services which the
Companys independent auditors have historically provided.
Pursuant to those policies and procedures, the Companys
external auditor cannot be engaged to provide any audit or
non-audit services to the Company unless the engagement is
pre-approved by the audit committee in compliance with the
Sarbanes-Oxley Act of 2002. All fees and services described in
the table above were pre-approved pursuant to this policy.
25
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes the
material elements of the compensation and benefit programs for
our executive officers identified in the 2009 Summary
Compensation Table, or the Named Executive Officers. The
compensation committee of the Board of Directors, or the
Committee, has responsibility for establishing, developing and
implementing these programs. Compensation and employment
agreements for our Chairman and Chief Executive Officer, Michael
O. Johnson, are recommended by the Committee. These
recommendations are then referred to the independent members of
our Board of Directors for consideration and approval.
Herbalife and other consumer products companies faced a very
uncertain economic environment in 2009 due to the global
financial and economic crisis, the high rate of unemployment,
and the low level of consumer confidence and spending. The
Committee concluded that Company management performed
exceptionally well by delivering growth in a very challenging
environment, as reflected in several highlights:
|
|
|
|
|
Our share price increased 93% during 2009 versus 42% for an
index of seven publicly traded peers whose performance is
indexed in the performance graph included in our Annual Report
on
Form 10-K
for the year ended December 31, 2009 (Avon Products, Inc.,
Natures Sunshine Products, Inc., Tupperware
Corporation, Nu Skin Enterprises Inc., USANA Health Sciences
Inc., Weight Watchers International, Inc. and Mannatech, Inc.).
|
|
|
|
Local currency net sales increased 5.1% in 2009 over 2008.
|
|
|
|
Cash flow from operations increased 4.4% over 2008.
|
|
|
|
Volume points grew 2.1% over 2008.
|
In addition, results trended strongly upward in the fourth
quarter setting a promising base for further improvements in
2010. The Committees compensation decisions reflect that
conclusion.
Overall
Objectives of Executive Compensation Program
As a global leader in network marketing, we operate in an
environment of challenging regulatory, economic and political
issues with approximately 80% of our sales generated outside of
the United States. Our success depends on the leadership of
highly-talented, adaptive and dedicated executives who can apply
the necessary skills to operate effectively in our unique global
business model. Thus, our compensation program for the Named
Executive Officers provides highly-competitive rewards to
executives who contribute to our success, as defined primarily
by superior growth in profitability and shareholder returns.
The Committee believes that it advances shareholder interests by
assembling and maintaining a high-performing management team. To
promote this objective, the Committee was guided by the
following underlying principles in developing our executive
compensation program:
|
|
|
|
|
Our compensation program is designed to attract and encourage a
long-term commitment from the talented executives necessary to
support our global business and advance shareholders
interests consistent with our mission of changing
peoples lives.
|
|
|
|
Our pay should be highly competitive with the pay practices of
companies that operate in related markets and require similar
executive skills and capabilities.
|
|
|
|
A high proportion of total compensation should be at risk and
tied to achievement of performance goals and improvement in
shareholder value.
|
|
|
|
Incentive compensation should provide superior pay for superior
performance that meets or exceeds the high expectations of our
shareholders.
|
|
|
|
Incentive compensation should reflect a balanced time horizon
between annual and long-term performance in order to promote
sustainable growth in the value of the enterprise.
|
26
|
|
|
|
|
Long-term incentives should be provided in Company equity to
encourage executives to plan and act with the perspective of
shareholders in mind and to reward them for successful
implementation of our growth strategy.
|
How
Compensation is Established
In determining base salary, target annual incentives and
guideline equity awards, the Committee uses the Named Executive
Officers current level of compensation as the starting
point. Our compensation decisions consider several factors,
including job scope, level of capabilities and experience,
internal pay relationships, the individuals performance,
and market pay data. In addition, wealth accumulation is
considered when making equity grants. Variations in compensation
among our executive officers reflect differences in the scope
and complexity of the functions they oversee, the contribution
of those functions to our overall performance, their experience
and capabilities, and individual performance. Although we do not
use compensation data regarding other companies as the basis for
our executive compensation decisions or specifically target a
percentile of compensation within our peer group, we do consider
the compensation practices of our peers to obtain a general
understanding of competitive compensation practices. Please
refer to the discussion below under Peer
Group for a more detailed discussion of our use of peer
group and general industry compensation data.
Independent
Compensation Advisor
The Committee has retained Towers Watson, formerly Towers
Perrin, a globally recognized compensation consulting firm, to
assist the Committee in evaluating our executive compensation
programs and in setting executive officers compensation.
The independent compensation advisor provides an additional
objective perspective as to the reasonableness of our executive
compensation programs and practices and their effectiveness in
supporting our business and compensation objectives. During
2009, the advisor regularly participated in Committee meetings
and advised the Committee with respect to compensation trends
and best practices, plan design, competitive pay levels,
consideration of individual employment or severance agreements
(in the case of Messrs. Goudis and Walsh, respectively),
our shareholder approved equity plan, and individual pay
decisions with respect to our Named Executive Officers and other
executive officers. While our advisor regularly consults with
management in performing work requested by the Committee, Towers
Watson did not perform any separate services for management in
2009.
Role of
Executive Officers in Executive Compensation Decisions
The CEO reviews compensation data gathered from the peer group
and general industry compensation surveys, considers each
executive officers performance and makes a recommendation
to the Committee on changes to base salary, annual incentive
awards (except for Messrs. Goudis and Chapman, for whom
incentive awards are determined by formula pursuant to each of
their employment agreements) and equity awards for each
executive officer other than himself. The CEO participates in
Committee meetings at the Committees request to provide
background information regarding the Companys strategic
objectives and to evaluate the performance of and compensation
recommendations for the other executive officers. The Committee
utilizes the information provided by the CEO along with input
from its compensation advisor and the knowledge and experience
of its members in making compensation decisions. With respect to
CEO compensation, the Chair of the Committee, with input from
the independent members of the Board, recommends the CEOs
compensation to the Committee in executive session, not attended
by the CEO. Once a recommendation has been established by the
Committee, the CEOs compensation is reviewed and approved
in a meeting of all independent members of the Board.
Purpose
of Compensation Elements and Pay Mix
The compensation and benefits program for our Named Executive
Officers consists of and is designed to achieve the following:
|
|
|
|
|
Base salary is designed to appropriately reward each executive
for his or her demonstrated sustained performance, capabilities
and experience.
|
27
|
|
|
|
|
Annual incentive compensation is designed to focus the
executives on the achievement of challenging financial and other
operating objectives that should drive growth in shareholder
value over the long-term.
|
|
|
|
Long-term equity incentive compensation in the form of SARs,
that operate and provide value in a manner comparable to stock
options, and RSUs, that operate and provide value like
restricted stock, are designed to enable our executives to share
in the value created for shareholders and to encourage
successful executives to remain with the Company.
|
|
|
|
Other compensation and benefits, intended to complete a
competitive pay package for executives, consist of:
|
|
|
|
|
|
Participation in broad-based and executive-level welfare benefit
plans,
|
|
|
|
Participation in tax-qualified and nonqualified deferred
compensation plans, and
|
|
|
|
Limited executive perquisites.
|
|
|
|
|
|
For Messrs. Johnson, Goudis and Chapman, severance payments
in the event of termination without cause.
|
|
|
|
For Messrs. Johnson, Goudis and Chapman, change in control
payments and benefits designed to focus them on shareholder
interests when considering strategic alternatives.
|
The portion of total compensation that is fixed in the form of
base salary and benefits is intended to provide a competitive
foundation to total compensation with target annual incentive
compensation and equity grant value set as a percentage of base
salary and a fixed rate of pay for the work being performed by
each executive. The annual compensation opportunity above base
salary and limited benefits, perquisites and other personal
benefits is at risk and must be earned through the achievement
of annual performance goals, which represent performance
expectations of the Board and management. In setting target
compensation, the Committee focuses on the total compensation
opportunity for the executive. Although there is no specified
mix of compensation elements, the proportion of compensation
designed to be delivered in base salary versus variable pay
depends on the executives position and the ability of that
position to influence overall Company outcomes. The more senior
the level of the executive, the greater the percentage of pay
opportunity that is variable.
Based on the compensation awarded for 2009, the mix of base
salary, annual incentives and long term incentives in the total
compensation of our Named Executive Officers is set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proportional Mix of Compensation Elements
|
|
|
|
Base Salary
|
|
|
Annual Incentives(1)
|
|
|
Long-Term Incentives(2)
|
|
|
Michael O. Johnson
|
|
|
19
|
%
|
|
|
47
|
%
|
|
|
34
|
%
|
Desmond Walsh
|
|
|
30
|
%
|
|
|
26
|
%
|
|
|
44
|
%
|
Richard Goudis
|
|
|
34
|
%
|
|
|
25
|
%
|
|
|
41
|
%
|
Brett R. Chapman
|
|
|
35
|
%
|
|
|
26
|
%
|
|
|
39
|
%
|
Robert Levy
|
|
|
32
|
%
|
|
|
24
|
%
|
|
|
44
|
%
|
|
|
|
(1) |
|
For purposes of this table, annual incentives include only
annual incentive payments as disclosed in the 2009 Summary
Compensation Table below. |
|
(2) |
|
For purposes of this table, long-term incentives are comprised
of SARs and RSUs granted in 2009, the value of which is reported
in the 2009 Summary Compensation Table below. |
Base
Salaries
In consideration of the economic environment and challenges
facing the Company, during its annual review, the Committee
supported managements recommendation that no increases be
made to the base salaries of our Named Executive Officers in
2009 from base salary levels in effect at the end of 2008.
28
Annual
Incentive Awards
General
Our annual cash incentive plans are designed to motivate and
reward the achievement of annual goals including financial and
operating results that deliver value to our shareholders. The
Committee establishes performance criteria for our incentive
plans each year. Pursuant to the terms of their employment
agreements, incentive awards for Messrs. Johnson, Goudis,
and Chapman are provided under the Herbalife Executive Incentive
Plan, or the EIP, which is based on the achievement of targeted
Earnings Per Share, or EPS. In addition, Mr. Johnsons
agreement provides for an additional Alternative Performance
Target incentive, or APT, to allow the Committee a degree of
flexibility in incentivizing and rewarding him for the
achievement of key strategic, as well as financial, targets. The
Committee selected growth in Volume Points as the APT incentive
performance measure in 2009. The annual incentive payable to
each of Messrs. Johnson, Goudis and Chapman under the EIP
is based solely on achievement of the EPS criteria. Volume
Points were used to determine the APT portion of annual
incentives for Mr. Johnson in 2009 to encourage market
share growth and will be extended to other Named Executive
Officers in 2010.
Other executives, including Messrs. Walsh and Levy,
participate in the Herbalife Senior Management Bonus Incentive
Plan, or the SMBIP. The Committee based funding for this plan on
achievement of a Company Operating Profit target that is in
alignment with and commensurate to the EPS target for the EIP in
2009. Operating Profit was selected as the performance measure
for SMBIP because it reflects the performance of management
below the few senior executives who make decisions affecting
EPS. Please refer to the description of the EPS, Volume Point
and Operating Profit metrics below.
Targets
and Award Determination
Performance targets in the incentive plans are aligned to what
we believe to be the expectations of investors at the time of
the annual budget review, and for 2009 were stated in terms of
EPS, Operating Profit and Volume Points. These budget figures
are built from the bottom up based on input from
operating regions regarding trends in their respective markets,
including the general economic environment, consumption of our
products, distributor methods of operation, and degree of risk
in achieving forecasted revenue and expense levels. In addition,
from time to time the Committee may authorize the payment of
additional discretionary awards in recognition of an
employees performance.
For incentive plan purposes, these performance measures are
defined as follows:
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EPS is the Companys reported fully-diluted earnings per
share calculated according to U.S. Generally Accepted
Accounting Principles, then adjusted for
non-recurring
or exceptional items.
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Volume Points are our weighted unit measure of an increase in
product sales volume. It is a useful measure of sales volume and
growth trends that excludes the impact of foreign currency
fluctuations and ignores the impact from pricing changes. In
general, an increase in Volume Points in a particular geographic
region or country indicates an increase in our sales volume
which results in an increase in our local currency net sales; a
decrease in Volume Points in a particular geographic region or
country indicates a decrease in our sales volume, which results
in decreasing local currency net sales. Given the high
contribution margin in our business model from each incremental
sale, the Committee believes that Volume Point growth is a very
important metric to investors.
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Operating Profit is the Companys net sales less expenses,
including royalty payments, costs of sales and general operating
expenses, adjusted for non-recurring or exceptional items.
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29
2009
Annual Incentive Plan Performance Targets
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Results
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Performance Level
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Threshold
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Target
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Maximum
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Results
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-% of Target
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Incentive Payout % of Target
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Discretionary
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100
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%
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106
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%
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EPS (EIP)
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$2.86
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$
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3.18
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$
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3.38
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$
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3.30
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104
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%
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Volume Point Growth (%) (APT)
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0.00
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0.40
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4.40
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2.10
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525
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%
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Operating Profit (millions) (SMBIP)
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N/A
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$
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289
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$
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308
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$
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307
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106
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%
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The EPS threshold level was introduced in 2009 and applies only
for Mr. Johnson to encourage and reward him for the
Companys achievement of challenging EPS performance
targets; awards for Mr. Johnson for the Companys
achievement of EPS results between threshold and target are
determined at the discretion of the Committee.
Messrs. Goudis and Chapman receive incentive awards under
the EIP only if EPS meets or exceeds the targeted level.
Similarly, there is no incentive plan funding for SMBIP
participants unless Operating Profit meets or exceeds the
targeted level. Under both the EIP and SMBIP, there are no
additional awards for EPS and Operating Profit results between
100% and 102.9% of target, and awards and funding are prorated
in steps for results between 103% and 106%. Under his APT
incentive performance measure, Mr. Johnsons award for
Volume Point growth results between threshold and target and
target and maximum are prorated in similar steps.
The Committee made certain adjustments to EPS and Operating
Profit used to calculate incentive awards in 2009 in order to
measure Operating Profit and EPS on a basis which is consistent
with the Companys public communications to investors and
analysts. Some of the adjustments had the effect of increasing
EPS and Operating Profit for these purposes, while other
adjustments resulted in reductions. In the aggregate, the
adjustments increased EPS from the publicly reported $3.22 to
$3.30 and Operating Profit from $296 million to
$307 million. Additionally, the Committee established a
minimum threshold in 2009 of 90% of target to provide a
discretionary funding pool to reward exceptional employee
performance.
Under the terms of their employment agreements, awards for
Messrs. Johnson, Goudis and Chapman are calculated solely
on the basis of results relative to target performance goals.
The Committee does not have the ability to increase or reduce
awards in the EIP on a discretionary basis. SMBIP funding
determined by Operating Profit results relative to target also
may not be increased or reduced by the Committee. However, under
the SMBIP, the funded amount is allocated to participants based
on performance to individual and group goals. As a result, total
awards under SMBIP are generally below the funded amount but may
not exceed it.
Messrs. Johnson, Goudis and Chapmans target and
Mr. Johnsons maximum incentive as a percentage of
their respective base salary is set forth in their respective
employment agreements. Target incentives for other executives
are set by the Company depending on the level of the
employees position and the scope of the employees
responsibilities. In keeping with our philosophy to have the
proportion of variable pay increase with seniority,
Mr. Johnson has significantly higher target and maximum
incentive levels than other Named Executive Officers. The
following table shows the incentive eligible earnings (i.e.,
2009 base salary), target and maximum incentive
30
percentages and amounts, and 2009 incentive awards for each
Named Executive Officer. All 2009 awards to Named Executive
Officers were based on the calculated results to target
performance levels alone.
2009
Incentive Award Calculation
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Incentive
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Target
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Maximum
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Actual Results -% of Target
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Eligible
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Incentive
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Incentive
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Volume
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Operating
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Award
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Award
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Executive
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Earnings
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%
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Percent
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EPS
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Point
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Profit
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%
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Amount
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Michael O. Johnson
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Base Incentive
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$
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1,200,000
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112.50
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%
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225
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%
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104
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%
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180
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%
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$
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2,160,000
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APT Incentive
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$
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1,200,000
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37.50
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%
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75
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%
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525
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%
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64
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%
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$
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768,000
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TOTAL
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150.00
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%
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300
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%
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244
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%
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$
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2,928,000
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Richard P. Goudis
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$
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606,375
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50
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%
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90
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%
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104
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%
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75
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%
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$
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454,781
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Brett R. Chapman
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$
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550,000
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50
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%
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90
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%
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104
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%
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75
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%
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$
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412,500
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Desmond J. Walsh
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$
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575,000
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50
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%
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90
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%
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106
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%
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87
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%
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$
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500,250
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Robert Levy
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$
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415,000
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40
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%
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60
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%
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|
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|
|
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106
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%
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67
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%
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$
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240,700
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Long
Term Incentive Awards
Equity grants are intended to align executive officers
interests with the interests of shareholders by rewarding
increases in the value of our share price and enabling us to
attract, motivate and retain highly qualified individuals for
positions of responsibility. The Committee also believes that
these long-term incentives foster long-term decision making
necessary for continued success. The 2005 Plan is administered
by the Committee, which has authority to grant the following
types of awards to our directors, executive officers, employees
and consultants: stock options, SARs, restricted stock, RSUs,
other stock-based awards or any combination of these types of
awards.
To frame our equity grant decisions, the Committee established
guideline grant values for the Named Executive Officers in
consideration of prior equity grants, individual performance,
scope of job responsibilities, and competitive practices using
market data compiled by Towers Watson. Using these guidelines,
our Chairman and CEO proposed to the Committee equity grants for
each of the Named Executive Officers other than himself. At the
same time, the Committee, separately and without the involvement
of the Chairman and CEO, evaluated and proposed equity grants
for the Chairman and CEO to the independent members of the Board
of Directors for their approval. In 2009, due to the limited
number of Common Shares available under the 2005 Plan, the
Company did not provide equity grants to the Named Executive
Officers that met these guidelines. Instead, the Company granted
equity to the Named Executive Officers that approximated the
number of Common Shares covered by their 2008 equity grants.
During 2009, we awarded two forms of long term incentives to our
Named Executive Officers: SARs and RSUs, both of which are
time-vested. SARs provide an opportunity for executives to earn
additional compensation only to the extent our share price
increases over the share price on date of grant and are less
dilutive to our shareholders than stock options. SARs have an
exercise price equal to the closing price of our Common Shares
on the applicable grant date. The right to exercise SARs vests
to the executive over future years of service. Executives may
exercise vested SARs at any time while employed at Herbalife and
for 30 days following termination of employment other than for
cause, so long as any such exercise is no later than ten years
following the date of grant. At exercise, the gains on SARs are
settled by issuing Common Shares. RSUs provide Common Shares
that vest to the executive over future years of service,
delivering stock ownership to executives and exposing them to
the same gains and losses in value as are experienced by our
shareholders. Upon vesting, RSUs are settled in Common Shares.
Dividend equivalents are paid with respect to unvested RSUs and
RSUs that have vested but whose receipt has been deferred.
In 2009, we made two types of long term incentive grants to the
Named Executive Officers: an annual grant in accordance with our
recent practice and a special grant to encourage long-term
retention and performance. In order to achieve an appropriate
balance between long-term stock ownership and incentives for
growth in each of the 2009 grants, 50% of each recipients
grant value was awarded in the form of SARs and 50% was awarded
in the form of
31
RSUs. The number of SARs granted is calculated by dividing the
grant value by the option value determined in accordance with
financial accounting and disclosure rules under ASC 718
Share Based Payments using the closing share price
on the date of grant. The number of RSUs granted is calculated
by dividing the grant value by Herbalifes closing share
price on the date of grant.
The annual grant program SARs awarded to our Named Executive
Officers in 2009 vest and become exercisable to the executives
based upon continued Company service over three years at the
rate of 20% on the first anniversary of the award, 20% on the
second anniversary of the award, and 60% on the third
anniversary of the award. The annual grant program RSUs awarded
to our Named Executive Officers in 2009 vest based upon
continued Company service over three years at the rate of
1/3
on each anniversary of award. The SARs and RSUs granted in 2009
to encourage long-term retention and performance vest over five
years vest at a rate of
1/3
on each of the third, fourth and fifth anniversaries of the
award.
Equity
Award Grant Policy
Our annual and long term retention grants of SARs and RSUs were
made to our Named Executive Officers on February 27, 2009
immediately following a meeting of the Committee (and, in the
case of Mr. Johnson, a meeting of the independent members
of the Board approving his awards). It is the Companys
policy to conduct its annual grant award process at a time
subsequent to the release of financial results for the preceding
year. We currently operate a monthly grant approval process
where awards are authorized for new hires, certain selected
retention situations, and to newly promoted managers other than
our executive officers. All equity compensation awards to our
Named Executive Officers and other executives are granted based
on our equity grant policy, which was approved by the Committee.
The policy provides that the exercise price of stock options and
SARs granted to executives will be established as the closing
share price on the date of grant.
Hedging
Company policy prohibits executives from entering into hedging
transactions that would operate to lock-in the value of their
equity compensation awards at specified levels.
Stock
Ownership Guidelines
The Committee believes that Named Executive Officers should be
shareholders and maintain significant holdings of Common Shares.
Because a significant portion of each Named Executive
Officers compensation is paid in the form of equity-based
incentive compensation awards, the Committee believes that the
use of ownership guidelines is an appropriate and beneficial
approach to providing additional motivation to act in the
long-term best interests of shareholders.
Pursuant to our policy, the CEO is encouraged to acquire and
hold Common Shares with a market value equal to five times his
base salary by 2013. The other Named Executive Officers are
encouraged to acquire and hold Common Shares with a market value
equal to two times their respective base salaries within five
years of becoming a Named Executive Officer. The Committee
reviews progress toward these standards annually. The Committee
considers compliance with the guidelines in making new equity
grants.
Benefits
and Perquisites
U.S.-based
employees, including the Named Executive Officers, participate
in a variety of savings, health and welfare, and paid time-off
benefits typically provided by competitors for the services of
the Companys employees. Health and welfare and paid
time-off benefits help ensure that Herbalife has a healthy,
productive and focused workforce.
32
In addition, our Named Executive Officers are eligible to
participate in the following executive benefits and perquisites
that we offer:
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|
Executive Health Benefits We value executive health
and strive to support a healthy lifestyle among our Named
Executive Officers. As such we provide the following
executive-level welfare benefits:
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|
|
|
|
|
Executive Medical Reimbursement We provide certain
senior executives with a supplemental reimbursement program to
our existing medical insurance program. These reimbursement
payments can be used to pay for deductibles, co-pays, and
pharmacy expenses not covered by our medical insurance plan. The
maximum supplemental reimbursement under this plan is $6,000 per
executive per year. We also provide our executives with a
gross-up
payment for all income and employment taxes incurred in
connection with this benefit.
|
|
|
|
Executive Physical We provide our executives with an
annual health screening evaluation. We have arranged services
with the Executive Health Department at UCLA, although this
program allows executives to use other qualified medical
practitioners for the annual health screening. The services are
voluntary and confidential. We provide for a reimbursement of up
to $2,000 annually for each executive under this program. We
also provide our executives with a
gross-up
payment for all income and employment taxes incurred in
connection with this benefit.
|
|
|
|
Executive Wellness We provide a $2,000 annual
benefit to executives for the purchase of fitness training
equipment, personal training services and other reasonable
products or services that support physical conditioning. We
provide our executives with a
gross-up
payment for all income and employment taxes incurred in
connection with this benefit.
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|
|
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|
Financial Planning We reimburse our Named Executive
Officers for financial counseling and tax preparation. This
benefit is intended to encourage executives to engage
knowledgeable experts to assist with personal financial and tax
planning, which we believe enables executives greater focus on
their Company duties. The benefit for Mr. Johnson is up to
$20,000 per year; the other Named Executive Officers receive a
benefit of up to $15,000 per year. We also provide our
executives with a
gross-up
payment for all income and employment taxes incurred in
connection with this benefit.
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|
|
|
Retirement benefits Our Named Executive Officers
participate in our tax-qualified 401(k) Plan and our Senior
Executive Deferred Compensation Plan described in more detail
under Non-Qualified Deferred Compensation
Plans. We maintain these plans for the purposes of
providing a competitive benefit, allowing Named Executive
Officers an opportunity to defer compensation to encourage our
Named Executive Officers to save for retirement. The 401(k) plan
provides an employer match on the first 1% of deferred
compensation at 100%. On the next 5% of deferred compensation,
the employer match is 50%. The annual maximum employee deferral
is $16,500. Employer matching contributions vest 100% after two
years of service.
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|
|
Employee Stock Purchase Plan Our Named Executive
Officers are eligible to participate in our Employee Stock
Purchase Plan, or the ESPP. The ESPP generally allows all
U.S. based employees and officers to purchase Common Shares
through payroll deductions of up to 10 percent of their
annual, eligible compensation up to a maximum of $25,000 per
year. The price of Common Shares purchased under the ESPP is
equal to 85 percent of the fair market value of the Common
Shares on the specified purchase date. We maintain the ESPP for
the purpose of providing eligible employees of the Company and
its subsidiaries with an opportunity to participate in the
Companys success by purchasing the Common Shares through
payroll deductions.
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|
Life Insurance We provide basic life insurance
coverage of two times base salary up to a maximum of $750,000 to
all eligible employees. This is a fully insured benefit and is
not taxable to the employee.
|
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|
|
Long Term Disability We provide long term disability
coverage to all eligible employees in order to provide
replacement for lost income due to extended periods of a medical
related leave of absence. The benefit after 90 days of
disability is 60% of base salary up to a monthly maximum of
$25,000. This is a fully insured benefit plan and is not taxable
to the employee.
|
33
|
|
|
|
|
Company Purchased Event Tickets We maintain season
tickets at the Staples Center and at the Home Depot Center in
Southern California. Like our other employees, our Named
Executive Officers have the opportunity use tickets not
otherwise allocated for Company business purposes.
|
The Committee has decided to eliminate the practice of providing
tax
gross-ups
for fringe benefits in 2010.
Employment
Agreements
In order to attract highly qualified executives capable of
leading the Company, we have previously entered into employment
agreements with Mr. Johnson, Chairman and Chief Executive
Officer, Mr. Goudis, Chief Operating Officer and
Mr. Chapman, General Counsel and Corporate Secretary. Those
agreements establish the terms and conditions for the employment
relationship each executive has with the Company and specifies
compensation, executive benefits, severance provisions, change
in control provisions, preservation of confidential and
proprietary information, non-solicitation, non-disparagement,
and other conditions.
Severance
and Change in Control Arrangements
As a result of these employment agreements, each of
Messrs. Johnson, Goudis, and Chapman is eligible for
certain benefits and payments if his employment terminates for
various reasons or as a result of a change in control of the
Company. The Company has provided these benefits to these three
Named Executive Officers to allow them to focus on the value of
strategic alternatives to shareholders without concern for the
impact on their continued employment, as each of their offices
is at heightened risk of turnover in the event of a change in
control. Separation benefits include cash payments and other
benefits in an amount the Company believes is appropriate,
taking into account the time it is expected to take a separated
executive to find another job. Separation benefits are intended
to ease the consequences to the executive of an unexpected
termination of employment. The Company requires a general
release with non-compete and non-solicitation provisions in
connection with the individual separation agreements.
We consider it likely that it will take more time for
higher-level employees to find new employment commensurate with
their prior experience, and therefore senior management
generally are paid severance for a longer period. Additional
payments may be approved by the Committee in some circumstances
as a result of negotiation with executives, especially where the
Company desires particular non-disparagement, cooperation with
litigation, non-competition and non-solicitation terms.
The employment agreement for each of Messrs. Johnson,
Goudis, and Chapman specifically details various provisions for
benefits and cash payments in the event of a separation.
Generally, these agreements provide for certain benefits upon
death, disability, resignation by the executive with good reason
or termination by the Company without cause.
The equity compensation awards granted to Messrs. Johnson,
Goudis and Chapman contain change in control and termination
provisions. In general, these arrangements provide for benefits
upon a termination of such executives employment in
connection with a change in control. Vesting of outstanding
equity grants is accelerated solely upon the occurrence of a
change of control. These arrangements are intended to preserve
morale and productivity and encourage retention in the face of
the disruptive impact of a change in control of the Company.
Based on a competitive analysis of the severance and change in
control arrangements maintained by the corporations in the
Herbalife Peer Group, the Committee believes that these benefits
are customary among the Herbalife Peer Group for executives in
similar positions as these three executives.
Please refer to the discussion below under
Potential Payments Upon Termination or Change
in Control for a more detailed discussion of our severance
and change in control arrangements.
Peer
Group
We believe that it is appropriate to offer industry competitive
cash and equity compensation to our senior executives in support
of our objective to assemble and maintain a high performing
management team. To help us evaluate our 2009 compensation,
Towers Watson analyzed publicly available information, including
proxy data, as
34
well as recent market trends and certain compensation surveys as
described below. Our current level of compensation for our
executive officers was compared to compensation paid by an
industry peer group approved by the Committee, or the Herbalife
Peer Group. The criteria used to identify the Herbalife Peer
Group were: (1) industry we compete for talent
with consumer product companies and general industry companies
of similar size; (2) financial scope our
management talent should be similar to that of companies of a
similar size in terms of revenues and market capitalization; and
(3) business complexity Herbalife operates in
75 countries around the world in a highly regulated business
where 80% of its revenues are generated outside of the United
States. For 2009, the Herbalife Peer Group was comprised of 16
corporations. All of the peer companies were within 50% and 200%
of Herbalife annual revenues, market capitalization, or both.
The Herbalife Peer Group median revenue of $2.4 billion and
median market capitalization of $2.5 billion were
equivalent to those of Herbalife. The Committee reviews and
approves the Herbalife Peer Group annually to ensure that it
remains appropriate. The following table presents the Herbalife
Peer Group that was used for 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
Revenue
|
|
|
Capitalization
|
|
|
Energizer Holdings Inc
|
|
$
|
4,000
|
|
|
$
|
3,968
|
|
Corn Products International Inc.
|
|
$
|
3,890
|
|
|
$
|
2,186
|
|
J.M. Smucker Co (The)
|
|
$
|
3,758
|
|
|
$
|
7,256
|
|
Del Monte Foods Co
|
|
$
|
3,627
|
|
|
$
|
2,291
|
|
United Natural Foods Inc
|
|
$
|
3,455
|
|
|
$
|
1,173
|
|
McCormick & Company Inc
|
|
$
|
3,192
|
|
|
$
|
4,804
|
|
NBTY Inc
|
|
$
|
2,582
|
|
|
$
|
2,839
|
|
Church & Dwight Co. Inc.
|
|
$
|
2,422
|
|
|
$
|
4,281
|
|
Flowers Foods Inc.
|
|
$
|
2,415
|
|
|
$
|
2,218
|
|
International Flavors & Fragrances Inc.
|
|
$
|
2,389
|
|
|
$
|
3,161
|
|
Tupperware Brands Corp
|
|
$
|
2,162
|
|
|
$
|
2,689
|
|
Perrigo Co
|
|
$
|
2,007
|
|
|
$
|
3,965
|
|
Weight Watchers International Inc.
|
|
$
|
1,556
|
|
|
$
|
2,229
|
|
Alberto-Culver Co
|
|
$
|
1,434
|
|
|
$
|
2,804
|
|
Revlon Inc.
|
|
$
|
1,347
|
|
|
$
|
819
|
|
Nu Skin Enterprises Inc.
|
|
$
|
1,331
|
|
|
$
|
1,482
|
|
Maximum
|
|
$
|
4,000
|
|
|
$
|
7,256
|
|
50th Percentile
|
|
$
|
2,419
|
|
|
$
|
2,746
|
|
Minimum
|
|
$
|
1,331
|
|
|
$
|
819
|
|
Herbalife Ltd
|
|
$
|
2,359
|
|
|
$
|
2,498
|
|
Four companies from the 2008 Peer Group were removed for 2009
and one company was added. The Committee approved removing Avon
Products, Estee Lauder, and Forest Laboratories from the Peer
Group because their revenues and market capitalization are
significantly above 200% of those of Herbalife. Elizabeth Arden
was removed because its revenue and market capitalization are
significantly below 50% of that of Herbalife. United Natural
Foods was added to the Peer Group because it distributes
nutritional supplements and has revenue within 50% and 200% of
those of Herbalife.
Towers Watson also provided the Committee with a proprietary
executive compensation survey of more than 1,000 companies
from a large number of industry classifications that provided
summarized data on levels of base salary, target annual
incentives and stock-based and other long-term incentives that
are used in assessing pay levels for Named Executive Officers
whose roles are not regularly maintained by the companies in the
Herbalife Peer Group. Neither the Company nor the Committee was
provided with the names of those companies included in the
survey information. The summary data reflected pay for companies
with revenues between $1.0 billion and $3.0 billion or
pay that has been size-adjusted based on Herbalifes
revenue size (approximately $2.5 billion). The Committee
considers pay data from the Herbalife Peer Group for Chief
Executive Officer, President, Chief Operating Officer, Chief
Financial Officer, and General Counsel. General industry survey
data was considered
35
when evaluating total pay of Mr. Levy, the Companys
Senior Vice President, Worldwide Sales & Marketing,
for whose position proxy data was not available.
Tax
Implications
Section 162(m)
of the Code
Section 162(m) of the Code limits deductions for certain
executive compensation in excess of $1,000,000 in any fiscal
year. Certain types of compensation are deductible only if
performance criteria are specified in detail and payments are
contingent on stockholder approval of the compensation
arrangement. We attempt to structure our compensation
arrangements to achieve deductibility under Section 162(m),
unless the benefit of such deductibility is outweighed by the
need for flexibility or the attainment of other corporate
objectives. The Committee will continue to monitor issues
concerning the deductibility of executive compensation and will
take appropriate action if and when it is warranted. Since
corporate objectives may not always be consistent with the
requirements for full deductibility, the Committee is prepared,
if it deems appropriate, to enter into compensation arrangements
under which payments may not be deductible under
Section 162(m). Thus, deductibility will not be the sole
factor used by the Committee in ascertaining appropriate levels
or modes of compensation.
Section 280G
of the Code
Section 280G of the Code disallows a companys tax
deduction for what are defined as excess parachute
payments and Section 4999 of the Code imposes a 20%
excise tax on any person who receives excess parachute payments
in connection with a change in control. Each of
Messrs. Johnson, Goudis, and Chapman, as part of their
employment agreements, would be provided with tax
gross-up
payments in the event their change in control payments become
subject to this excise tax. The Committee believes that the
provision of tax
gross-up
protection is appropriate and necessary for executive retention
and consistent with the current practices of the Herbalife Peer
Group. Please refer to the discussion under
Potential Payments upon Termination or Change
in Control for more detail on the potential
gross-up
payments and lost tax deductions.
Compensation
Committee Report
The Committee has reviewed and discussed the foregoing
Compensation Discussion and Analysis with management. Based on
its review and discussion with management, the Committee has
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Lawrence M. Higby, Chairman
Richard P. Bermingham
Murray H. Dashe
Colombe M. Nicholas
Executive
Officers of the Registrant
Set forth below is certain information as of the date hereof
regarding each Named Executive Officer as well certain other
employees of the Company.
36
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position with the Company
|
|
Officer Since
|
|
Michael O. Johnson
|
|
55
|
|
Chief Executive Officer, Director, and Chairman of the Board
|
|
2003
|
Desmond Walsh
|
|
53
|
|
President
|
|
2006
|
Richard Goudis
|
|
48
|
|
Chief Operating Officer
|
|
2004
|
Brett R. Chapman
|
|
54
|
|
General Counsel and Corporate Secretary
|
|
2003
|
Robert Levy
|
|
52
|
|
Senior Vice President, Worldwide Distributor Sales &
Marketing
|
|
2008
|
John DeSimone
|
|
43
|
|
Chief Financial Officer
|
|
2010
|
Steve Henig Ph.D.
|
|
67
|
|
Chief Scientific Officer
|
|
2005
|
Michael O. Johnson is Chairman and Chief Executive
Officer of the Company. Mr. Johnson joined the Company in
April 2003 after 17 years with The Walt Disney Company,
where he most recently served as President of Walt Disney
International, and also served as President of Asia Pacific for
The Walt Disney Company and President of Buena Vista Home
Entertainment. Mr. Johnson has also previously served as a
publisher of Audio Times magazine, and has directed the
regional sales efforts of Warner Amex Satellite Entertainment
Company for three of its television channels, including MTV,
Nickelodeon and The Movie Channel. Mr. Johnson formerly
served as a director of Univision Communications, Inc., a
television company serving Spanish-speaking Americans and
currently serves on the Board of Regents for Loyola High School
of Los Angeles. Mr. Johnson received his Bachelor of Arts
in Political Science from Western State College.
Desmond Walsh became the Companys President
effective January 1, 2010. Mr. Walsh joined the
Company in January 2004 as Senior Vice President, Worldwide
Distributor Sales and was promoted to Executive Vice President
for Worldwide Operations and Sales in April 2008. From 2001 to
2004, Mr. Walsh served as the Senior Vice President of the
commercial division of DMX Music. Prior to DMX Music,
Mr. Walsh spent five years as Vice President and General
Manager of Supercomm, Inc., a subsidiary of The Walt Disney
Company. Mr. Walsh also previously served in management
positions at MovieQuik Systems, a division of The Southland
Corporation (now 7-Eleven) and at Commtron Corporation, a
leading consumer electronics and video distribution company.
Mr. Walsh received his Bachelor of Laws degree from the
University of London.
Richard Goudis served as the Companys Chief
Financial Officer in 2009 and was promoted to Chief Operating
Officer effective January 1, 2010. Mr. Goudis joined
the Company in June 2004 as Chief Financial Officer after
serving in several positions and ultimately as the Chief
Operating Officer of Rexall Sundown, a Nasdaq 100 company
that was sold to Royal Numico in 2000, from 1998 to 2001. After
the sale to Royal Numico, Mr. Goudis had operations
responsibility for all of Royal Numicos
U.S. investments, including General Nutrition Centers,
Unicity International and Rexall Sundown. From 2002 to May 2004,
Mr. Goudis was a partner at Flamingo Capital Partners, a
firm he founded in 2002. Mr. Goudis also previously worked
at Sunbeam Corporation and Pratt & Whitney.
Mr. Goudis graduated from the University of Massachusetts
with a degree in Accounting and he received his MBA from Nova
Southeastern University.
Brett R. Chapman is General Counsel and Corporate
Secretary of the Company. Mr. Chapman joined the Company in
October 2003 after spending thirteen years at The Walt Disney
Company, most recently as its Senior Vice President and Deputy
General Counsel, with responsibility for all legal matters
relating to Disneys Media Networks Group, including the
ABC Television Network, the companys cable properties
including The Disney Channel and ESPN, and Disneys radio
and internet businesses. Prior to working at The Walt Disney
Company, Mr. Chapman was an associate at the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP.
Mr. Chapman received his Bachelor of Science and Master of
Science in Business Administration from California State
University, Northridge and his Juris Doctorate from Southwestern
University School of Law.
Robert Levy is Senior Vice President, Worldwide
Distributor Sales and Marketing of the Company, responsible for
sales strategy, product marketing and business development,
distributor services and operations, distributor marketing and
training and events and promotions. Mr. Levy was promoted
to this position in 2008, after spending six years as managing
director of the Companys Southeast Asia, Americas and,
most recently, its South America
37
region, responsible for all sales and marketing operations in
those region. Mr. Levy joined the Company in 1994 and has
served in a variety of management positions during his tenure,
including overseeing the Companys distributor training and
distributor marketing functions as well as worldwide product
licensing and new country openings.
John DeSimone is Chief Financial Officer of the Company
effective January 1, 2010. Mr. DeSimone joined the
Company in November 2007 as Senior Vice President
Finance and was promoted to the position of Senior Vice
President Finance & Distributor Operations
in December 2008. From June 2004 through October 2007,
Mr. DeSimone served as the Chief Executive Officer of
Mobile Ventures, LLC (formerly known as Autoware, Inc.), an
automotive aftermarket accessory distributor and retailer. Prior
to working at Mobile Ventures, LLC, Mr. DeSimone previously
served as the Controller, Vice President of Finance and Chief
Financial Officer of Rexall Sundown, Inc., a multinational
manufacturer and distributor of nutritional supplements and
sports nutrition products that was publicly traded while
Mr. DeSimone served as its Controller and Vice President of
Finance. Mr. DeSimone received his Bachelor of Science in
Business Administration, Accounting, from Bryant College.
Steve Henig, Ph.D. is Chief Scientific Officer of
the Company. Dr. Henig joined the Company in July 2005
after spending 6 years at Ocean Spray Cranberries, Inc., as
Senior Vice President, Technology and Innovation with
responsibility for the companys new products program and
medical research program. Prior to working at Ocean Spray
Cranberries, Inc. Dr. Henig served as Senior Vice
President, Technology and Marketing services at Con Agras
Grocery products. Dr. Henig holds a Ph.D. in food science
from Rutgers University, a M.S. in food and biotechnology and a
B.S. in chemical engineering from Technion-Israel Institute of
Technology.
38
2009
Summary Compensation Table
The following table sets forth the total compensation for the
fiscal years ended December 31, 2009, 2008 and 2007, of the
Companys Chairman and Chief Executive Officer, Chief
Financial Officer, each of the three other most highly
compensated executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name and Principal Position(1)
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
2009
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
1,197,783
|
|
|
|
921,500
|
|
|
|
2,928,000
|
|
|
|
112,782
|
|
|
|
6,360,065
|
|
Chairman and Chief
|
|
|
2008
|
|
|
|
1,173,847
|
|
|
|
1,500,000
|
|
|
|
8,202,560
|
|
|
|
12,850,388
|
|
|
|
3,600,000
|
|
|
|
332,757
|
|
|
|
27,659,552
|
|
Executive Officer
|
|
|
2007
|
|
|
|
1,100,002
|
|
|
|
|
|
|
|
833,175
|
|
|
|
2,293,900
|
|
|
|
2,200,000
|
|
|
|
417,248
|
|
|
|
6,844,325
|
|
Desmond Walsh
|
|
|
2009
|
|
|
|
575,000
|
|
|
|
|
|
|
|
475,177
|
|
|
|
368,622
|
|
|
|
500,250
|
|
|
|
78,551
|
|
|
|
1,997,600
|
|
Executive Vice
|
|
|
2008
|
|
|
|
517,885
|
|
|
|
|
|
|
|
440,471
|
|
|
|
427,350
|
|
|
|
450,000
|
|
|
|
63,386
|
|
|
|
1,889,092
|
|
President Worldwide Operations and Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett R. Chapman
|
|
|
2009
|
|
|
|
550,000
|
|
|
|
|
|
|
|
352,949
|
|
|
|
273,122
|
|
|
|
412,500
|
|
|
|
75,678
|
|
|
|
1,664,249
|
|
General Counsel
|
|
|
2008
|
|
|
|
550,000
|
|
|
|
|
|
|
|
343,272
|
|
|
|
326,267
|
|
|
|
543,840
|
|
|
|
30,793
|
|
|
|
1,794,172
|
|
and Corporate Secretary
|
|
|
2007
|
|
|
|
517,308
|
|
|
|
|
|
|
|
177,020
|
|
|
|
412,633
|
|
|
|
522,500
|
|
|
|
40,040
|
|
|
|
1,669,501
|
|
Richard Goudis
|
|
|
2009
|
|
|
|
606,375
|
|
|
|
|
|
|
|
414,056
|
|
|
|
320,872
|
|
|
|
454,781
|
|
|
|
66,446
|
|
|
|
1,862,530
|
|
Chief Financial
|
|
|
2008
|
|
|
|
588,606
|
|
|
|
|
|
|
|
343,272
|
|
|
|
421,547
|
|
|
|
599,583
|
|
|
|
78,581
|
|
|
|
2,031,589
|
|
Officer
|
|
|
2007
|
|
|
|
543,173
|
|
|
|
|
|
|
|
177,020
|
|
|
|
412,633
|
|
|
|
548,625
|
|
|
|
93,741
|
|
|
|
1,775,192
|
|
Robert Levy
|
|
|
2009
|
|
|
|
415,000
|
|
|
|
|
|
|
|
325,464
|
|
|
|
252,320
|
|
|
|
240,700
|
|
|
|
85,855
|
|
|
|
1,319,339
|
|
Senior Vice President, Worldwide Distributor Sales and
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Position reflects the position held by each Named Executive
Officer as of December 31, 2009. Certain Named Executive
Officers were promoted to new positions as of January 1,
2010, as described in greater detail above under
Executive Officers of the Registrant. |
|
(2) |
|
Amounts represent the aggregate grant date fair value of the
relevant award(s) presented in accordance with ASC Topic 718,
Compensation Stock Compensation. See
note 9 of the notes to consolidated financial statements
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009 regarding assumptions
underlying valuation of equity awards. |
|
(3) |
|
Incentive plan amounts determined as more specifically discussed
under Compensation Discussion and
Analysis Annual Incentive Awards Targets
and Determination. |
39
|
|
|
(4) |
|
Individual breakdowns of amounts set forth in All Other
Compensation for 2009 are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total All
|
|
|
|
Plan Matching
|
|
|
|
|
|
Financial Planning
|
|
|
Other
|
|
|
Tax
|
|
|
Other
|
|
|
|
Contributions
|
|
|
Medical Plans
|
|
|
Services
|
|
|
Benefits (A)
|
|
|
Gross-Up (B)
|
|
|
Compensation
|
|
Name
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Michael O. Johnson
|
|
|
36,000
|
|
|
|
18,548
|
|
|
|
22,505
|
|
|
|
10,015
|
|
|
|
25,714
|
|
|
|
112,782
|
|
Desmond Walsh
|
|
|
17,250
|
|
|
|
6,197
|
|
|
|
21,051
|
|
|
|
13,845
|
|
|
|
20,208
|
|
|
|
78,551
|
|
Brett R. Chapman
|
|
|
|
|
|
|
18,548
|
|
|
|
21,624
|
|
|
|
14,794
|
|
|
|
20,712
|
|
|
|
75,678
|
|
Richard Goudis
|
|
|
18,191
|
|
|
|
18,548
|
|
|
|
8,207
|
|
|
|
12.196
|
|
|
|
9,304
|
|
|
|
66,446
|
|
Robert Levy
|
|
|
12,450
|
|
|
|
18,548
|
|
|
|
16,875
|
|
|
|
21,436
|
|
|
|
16,546
|
|
|
|
85,855
|
|
|
|
|
(A) |
|
Other Benefits includes Company contributions with
respect to each Named Executive Officer under the Companys
Executive Long-Term Disability Plan, Executive Life Insurance
Plan, Executive Health Benefits program and 401(k) Tax-Sheltered
Savings Plan. |
|
(B) |
|
Tax
gross-ups
provided in connection with Financial Planning Services,
Executive Health Benefits program and other de minimis
perquisites. |
2009
Grants of Plan-Based Awards
The following table sets forth all grants of plan-based awards
made to the Named Executive Officers during the fiscal year
ended December 31, 2009. For further discussion regarding
the grants see Compensation Discussion and
Analysis Annual Incentive Awards Long
Term Incentive Awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
of Stock and
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option/SAR
|
|
|
Option/SAR
|
|
|
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options/SARs
|
|
|
Awards
|
|
|
Awards(2)
|
|
|
|
|
Name
|
|
Date(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/sh)
|
|
|
($)
|
|
|
|
|
|
Michael O. Johnson
|
|
|
|
|
|
|
1,608,000
|
|
|
|
1,800,000
|
|
|
|
3,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,000
|
|
|
|
13.64
|
|
|
|
921,500
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,814
|
|
|
|
|
|
|
|
|
|
|
|
1,197,783
|
|
|
|
|
|
Desmond Walsh
|
|
|
|
|
|
|
|
|
|
|
287,500
|
|
|
|
517,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,195
|
|
|
|
13.64
|
|
|
|
368,622
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,837
|
|
|
|
|
|
|
|
|
|
|
|
475,177
|
|
|
|
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
275,000
|
|
|
|
495,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,195
|
|
|
|
13.64
|
|
|
|
273,122
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,876
|
|
|
|
|
|
|
|
|
|
|
|
352,949
|
|
|
|
|
|
Richard Goudis
|
|
|
|
|
|
|
|
|
|
|
303,188
|
|
|
|
545,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,695
|
|
|
|
13.64
|
|
|
|
320,872
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,356
|
|
|
|
|
|
|
|
|
|
|
|
414,056
|
|
|
|
|
|
Robert Levy
|
|
|
|
|
|
|
|
|
|
|
166,000
|
|
|
|
249,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,573
|
|
|
|
13.64
|
|
|
|
252,320
|
|
|
|
|
|
|
|
|
2/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,861
|
|
|
|
|
|
|
|
|
|
|
|
325,464
|
|
|
|
|
|
|
|
|
(1) |
|
All equity grants reflected in this table were made under the
2005 Plan. |
|
(2) |
|
Computed by measuring the aggregate grant date fair value of the
relevant award(s) presented in accordance with ASC Topic 718,
Compensation Stock Compensation. See
note 9 of the notes to consolidated financial statements
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009 regarding assumptions
underlying valuation of equity awards. |
Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards
We have entered into employment agreements and award agreements
with respect to grants made under the 2005 Plan with each of
Messrs. Johnson, Chapman and Goudis, certain terms of which
are summarized below. A
40
more detailed description of payments that would be due to the
Named Executive Officers in connection with certain terminations
or a change in control of the Company is set forth under
Potential Payments Upon Termination or Change
in Control.
Michael O. Johnson. The Company and one
of our subsidiaries, Herbalife International of America, Inc.,
or Herbalife America, entered into an executive employment
agreement with Mr. Johnson effective as of March 27,
2008, or the Johnson Employment Agreement, pursuant to which he
serves as the Companys Chairman and Chief Executive
Officer.
Pursuant to the Johnson Employment Agreement, Mr. Johnson
currently receives an annual salary of $1,200,000.
Mr. Johnson is also eligible to receive an annual cash
bonus in an amount based on targets that are established
annually by the Board of Directors. In addition to his salary
and bonus, Mr. Johnson is also entitled to participate in
or receive benefits under each benefit plan or arrangement made
available to the Companys senior executives on terms no
less favorable than those generally applicable to senior
executives of Herbalife America. In connection with the entry
into the Johnson Employment Agreement, Mr. Johnson received
a signing bonus of $1,500,000.
Brett R. Chapman. We have also entered
into an executive employment agreement with Mr. Chapman, or
the Chapman Employment Agreement, effective on October 10,
2006, through our subsidiary Herbalife America. Pursuant to the
Chapman Employment Agreement, Mr. Chapman serves as
Herbalife Americas General Counsel and Corporate
Secretary. The base salary for Mr. Chapman, effective
August 20, 2007, is $550,000. Should the Company adopt an
across-the-board reduction in salaries for senior executives and
its Chief Executive Officer, then Mr. Chapmans salary
shall be reduced by a percentage equal to the smallest
percentage reduction imposed on any senior executive or the
Chief Executive Officer, but in no case shall such reduction
exceed ten percent.
Mr. Chapman is entitled to participate in the
Companys employee benefit plans and arrangements made
available to the Companys most senior executives,
including the Chief Operating Officer but excluding the Chief
Executive Officer, as well as the Companys long-term
incentive plan for senior executives, including the Chief
Operating Officer but excluding the Chief Executive Officer.
Pursuant to the Chapman Employment Agreement, should the Company
achieve certain targets established by the compensation
committee, Mr. Chapman shall be entitled to a target bonus
of no less than 50% of his annual salary for the year in
question.
Richard Goudis. We have also entered
into an executive employment agreement with Mr. Goudis, or
the Goudis Employment Agreement, effective on October 24,
2006, through our subsidiary Herbalife America. Mr. Goudis
currently serves as Herbalife Americas Chief Operating
Officer. The base salary for Mr. Goudis, effective
January 1, 2010, is $625,000. Should the Company adopt an
across-the-board reduction in salaries for senior executives and
its Chief Executive Officer, then Mr. Goudis salary
shall be reduced by a percentage equal to the smallest
percentage reduction imposed on any senior executive or the
Chief Executive Officer, but in no case shall such reduction
exceed ten percent.
Mr. Goudis is entitled to participate in the Companys
employee benefit plans and arrangements made available to the
Companys most senior executives excluding the Chief
Executive Officer, as well as the Companys long-term
incentive plan for senior executives excluding the Chief
Executive Officer. Pursuant to the Goudis Employment Agreement,
should the Company achieve certain targets established by the
compensation committee of the Board of Directors,
Mr. Goudis shall be entitled to a target bonus of no less
than 50% of his annual salary, which target bonus level has been
increased to no less than 80% in connection with
Mr. Goudis promotion to Chief Operating Officer.
41
Outstanding
Equity Awards at 2009 Fiscal Year-End
The following table sets forth equity awards of the Named
Executive Officers outstanding as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/Stock Appreciation Rights Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
of Shares
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
or Units of
|
|
|
or Units of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
|
Options/SARs
|
|
|
Options/SARs
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Grant
|
|
|
Expiration
|
|
|
Vested(1)
|
|
|
Vested(2)
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
19,123
|
|
|
|
|
|
|
|
3.52
|
|
|
|
04/03/2003
|
|
|
|
04/03/2013
|
(3)
|
|
|
224,689
|
(7)
|
|
|
9,115,633
|
|
|
|
|
591,185
|
|
|
|
|
|
|
|
10.56
|
|
|
|
04/03/2003
|
|
|
|
04/03/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
591,185
|
|
|
|
|
|
|
|
17.60
|
|
|
|
04/03/2003
|
|
|
|
04/03/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
591,185
|
|
|
|
|
|
|
|
24.64
|
|
|
|
04/03/2003
|
|
|
|
04/03/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
15.50
|
|
|
|
12/01/2004
|
|
|
|
12/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
118,750
|
|
|
|
6,250
|
|
|
|
15.00
|
|
|
|
04/27/2005
|
|
|
|
04/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
112,000
|
|
|
|
28,000
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
58,000
|
|
|
|
87,000
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
96,000
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,670
|
|
|
|
48.64
|
|
|
|
03/27/2008
|
|
|
|
03/27/2015
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,120
|
|
|
|
48.64
|
|
|
|
03/27/2008
|
|
|
|
03/27/2015
|
(6)
|
|
|
|
|
|
|
|
|
Desmond Walsh
|
|
|
22,500
|
|
|
|
|
|
|
|
8.02
|
|
|
|
04/03/2004
|
|
|
|
04/03/2014
|
(3)
|
|
|
44,495
|
(8)
|
|
|
1,805,162
|
|
|
|
|
13,500
|
|
|
|
|
|
|
|
14.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
17.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
21.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
25.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
13,500
|
|
|
|
|
|
|
|
14.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
13.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
62,500
|
|
|
|
|
|
|
|
15.50
|
|
|
|
12/01/2004
|
|
|
|
12/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
23,750
|
|
|
|
1,250
|
|
|
|
15.00
|
|
|
|
04/27/2005
|
|
|
|
04/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
3,500
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
6,448
|
|
|
|
9,670
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
12,000
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
12,000
|
|
|
|
38.75
|
|
|
|
06/30/2008
|
|
|
|
06/30/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,195
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
Brett R. Chapman
|
|
|
45,833
|
|
|
|
|
|
|
|
15.50
|
|
|
|
12/01/2004
|
|
|
|
12/01/2014
|
(3)
|
|
|
33,901
|
(9)
|
|
|
1,375,364
|
|
|
|
|
33,750
|
|
|
|
3,750
|
|
|
|
15.00
|
|
|
|
04/27/2005
|
|
|
|
04/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
25,200
|
|
|
|
6,300
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
10,434
|
|
|
|
15,649
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
4,439
|
|
|
|
17,756
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,195
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
Richard Goudis
|
|
|
10,000
|
|
|
|
|
|
|
|
8.02
|
|
|
|
06/14/2004
|
|
|
|
06/14/2014
|
(3)
|
|
|
38,527
|
(10)
|
|
|
1,563,040
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
12.00
|
|
|
|
06/14/2004
|
|
|
|
06/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
16.00
|
|
|
|
06/14/2004
|
|
|
|
06/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
20.00
|
|
|
|
06/14/2004
|
|
|
|
06/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
24.00
|
|
|
|
06/14/2004
|
|
|
|
06/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
17.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
21.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
25.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
6,750
|
|
|
|
|
|
|
|
14.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
9.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
6,750
|
|
|
|
|
|
|
|
14.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
13.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
15.50
|
|
|
|
12/01/2004
|
|
|
|
12/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
71,250
|
|
|
|
3,750
|
|
|
|
15.00
|
|
|
|
04/27/2005
|
|
|
|
04/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
25,200
|
|
|
|
6,300
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
10,434
|
|
|
|
15,649
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
4,439
|
|
|
|
17,756
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
1,200
|
|
|
|
4,800
|
|
|
|
43.83
|
|
|
|
08/04/2008
|
|
|
|
08/04/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,195
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
Robert Levy
|
|
|
14,000
|
|
|
|
3,500
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
29,441
|
(11)
|
|
|
1,194,421
|
|
|
|
|
4,200
|
|
|
|
1,800
|
|
|
|
30.97
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
6,448
|
|
|
|
9,670
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
3,315
|
|
|
|
13,258
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,573
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The number of shares includes dividend equivalent units that
have accrued through December 31, 2009. |
|
(2) |
|
Market value based on the closing price of a Common Share on the
NYSE on December 31, 2009 of $40.57. |
|
(3) |
|
Options vest quarterly in 20 equal installments beginning on the
date that is three months from the grant date. |
42
|
|
|
(4) |
|
SARs vest annually, 20% on the first anniversary, 20% on the
second anniversary and 60% on the third anniversary of the grant
date. |
|
(5) |
|
SARs vest in equal installments on the third, fourth and
fifth anniversary of the grant date. |
|
(6) |
|
These SARs were granted to Mr. Johnson in connection with
his entry into the Johnson Employment Agreement in March 2008
and are referred to in this Proxy Statement as the 2008 SARs.
The 2008 SARs vest on March 27, 2012, provided that, during
the four years following their grant, (i) as to 363,670
SARs the Companys share price closed for thirty
consecutive trading days at a price equal to or greater than
$67.33, and (ii) as to 396,120 SARs, the Companys
share price closed for thirty consecutive trading days at a
price equal to or greater than $80.43. The exercise price of the
2008 SARs is $48.64 and they expire on March 27, 2015. As
of December 31, 2009 these market conditions had not been
met. |
|
(7) |
|
Consists of (i) 7,374 RSUs granted on May 29, 2007
that vest on May 29, 2010, (ii) 30,369 RSUs granted on
February 28, 2008, of which 15,185 RSUs vest on
February 28, 2010 and 15,184 RSUs vest on February 28,
2011, (iii) 96,275 RSUs granted on March 27, 2008, of
which 41,261 vest on March 27, 2010, 41,261 RSUs vest on
March 27, 2011 and 13,753 RSUs vest on March 27, 2012,
(iv) 44,410 RSUs granted on February 27, 2009 that
vest in equal installments on the first, second and third
anniversary of the grant date and (v) 46,261 RSUs granted
on February 27, 2009 that vest in equal installments on the
third, fourth and fifth anniversary of the grant date. The RSUs
described in (iii) are referred to in this Proxy Statement
as the 2008 RSUs. |
|
(8) |
|
Consists of (i) 968 RSUs granted on May 29, 2007 that
vest on May 29, 2010, (ii) 3,796 RSUs granted on
February 28, 2008, of which 1,898 RSUs vest on
February 28, 2010 and 1,898 RSUs vest on February 28,
2011, (iii) 3,760 RSUs granted on June 30, 2008, of
which 1,880 vest on June 30, 2010 and 1,880 RSUs vest on
June 30, 2011, (iv) 8,214 RSUs granted on
February 27, 2009 that vest in equal installments on the
first, second and third anniversary of the grant date and
(v) 27,757 RSUs granted on February 27, 2009 that vest
in equal installments on the third, fourth and fifth anniversary
of the grant date. |
|
(9) |
|
Consists of (i) 1,567 RSUs granted on May 29, 2007
that vest on May 29, 2010, (ii) 5,616 RSUs granted on
February 28, 2008, of which 2,808 RSUs vest on
February 28, 2010 and 2,808 RSUs vest on February 28,
2011, (iii) 8,214 RSUs granted on February 27, 2009
that vest in equal installments on the first, second and third
anniversary of the grant date and (iv) 18,504 RSUs granted
on February 27, 2009 that vest in equal installments on the
third, fourth and fifth anniversary of the grant date. |
|
(10) |
|
Consists of (i) 1,567 RSUs granted on May 29, 2007
that vest on May 29, 2010, (ii) 5,616 RSUs granted on
February 28, 2008, of which 2,808 RSUs vest on
February 28, 2010 and 2,808 RSUs vest on February 28,
2011, (iii) 8,214 RSUs granted on February 27, 2009
that vest in equal installments on the first, second and third
anniversary of the grant date and (iv) 23,130 RSUs granted
on February 27, 2009 that vest in equal installments on the
third, fourth and fifth anniversary of the grant date. |
|
(11) |
|
Consists of (i) 969 RSUs granted on May 29, 2007 that
vest on May 29, 2010, (ii) 4,193 RSUs granted on
February 28, 2008, of which 2,097 RSUs vest on
February 28, 2010 and 2,096 RSUs vest on February 28,
2011, (iii) 6,044 RSUs granted on February 27, 2009
that vest in equal installments on the first, second and third
anniversary of the grant date and (iv) 18,235 RSUs granted
on February 27, 2009 that vest in equal installments on the
third, fourth and fifth anniversary of the grant date. |
43
2009
Option Exercises and Stock Vested
The following table sets forth information with respect to
Common Shares acquired upon the exercise of stock options and
the vesting of stock awards of the Named Executives Officers
during the fiscal year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
122,062
|
|
|
|
4,700,193
|
|
|
|
68,051
|
|
|
|
1,180,243
|
|
Desmond Walsh
|
|
|
|
|
|
|
|
|
|
|
5,341
|
|
|
|
129,757
|
|
Brett R. Chapman
|
|
|
104,583
|
|
|
|
2,875,574
|
|
|
|
4,310
|
|
|
|
89,672
|
|
Richard Goudis
|
|
|
|
|
|
|
|
|
|
|
5,497
|
|
|
|
106,539
|
|
Robert Levy
|
|
|
|
|
|
|
|
|
|
|
2,015
|
(1)
|
|
|
39,615
|
(1)
|
|
|
|
(1) |
|
Amounts include 2,015 shares with a value of $39,615 that
vested and the receipt of which was deferred to a future date. |
2009
Non-Qualified Deferred Compensation Table
The following table sets forth all non-qualified deferred
compensation of the Named Executive Officers for the fiscal year
ended December 31, 2009 pursuant to the Herbalife
International of America, Inc. Senior Executive Deferred
Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Company
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Balance at Last
|
|
|
|
Last FY
|
|
|
in Last FY
|
|
|
Last FY
|
|
|
Distributions
|
|
|
FYE
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
($)(3)
|
|
|
Michael O. Johnson
|
|
|
36,000
|
|
|
|
36,000
|
|
|
|
24,891
|
|
|
|
|
|
|
|
683,708
|
|
Desmond Walsh
|
|
|
242,250
|
|
|
|
17,250
|
|
|
|
163,521
|
|
|
|
256,629
|
|
|
|
446,409
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Goudis
|
|
|
30,318
|
|
|
|
18,191
|
|
|
|
35,600
|
|
|
|
|
|
|
|
170,016
|
|
Robert Levy
|
|
|
78,850
|
|
|
|
12,450
|
|
|
|
32,295
|
|
|
|
|
|
|
|
886,003
|
|
|
|
|
(1) |
|
All amounts are also reported as compensation in
Salary in the 2009 Summary Compensation
Table. |
|
(2) |
|
All amounts are also reported as compensation in All Other
Compensation Deferred Compensation Plan Matching
Contributions in the 2009 Summary Compensation
Table. |
|
(3) |
|
The following amounts, which are included in the Aggregate
Balances at Last FYE, have been included in the Summary
Compensation Table of the Companys previously filed proxy
statements: $202,384 for Mr. Johnson, $215,490 for
Mr. Walsh and $115,944 for Mr. Goudis. |
Non-Qualified Deferred Compensation
Plans. We maintain the Herbalife Senior
Executive Deferred Compensation Plan, effective January 1,
1996, or the Senior Executive Plan, which is applicable to
eligible employees at the rank of Senior Vice President and
higher. The Senior Executive Plan was amended and restated
effective January 1, 2001.
The Senior Executive Plan is unfunded and benefits are paid from
the Companys general assets, except that the Company has
contributed amounts to a rabbi trust whose assets
will be used to pay benefits if we remain solvent, but can be
reached by our creditors if we become insolvent. The Senior
Executive Plan allows eligible employees, who are selected by
the administrative committee that manages and administers the
plan, or the Deferred Compensation Committee, to elect annually
to defer up to 50% of their annual base salary and up to 100% of
their annual bonus for each calendar year, or the Annual
Deferral Amount. We make matching contributions, or Matching
Contributions, on behalf of each participant in the Senior
Executive Plan, which Matching Contributions are 100% vested at
all times.
44
Effective January 1, 2002, the Senior Executive Plan was
amended to provide that the amount of the Matching Contributions
is to be determined by us in our discretion. Effective
January 1, 2003, the Matching Contribution was set to 3% of
a participants annual base salary and has remained 3%
through 2009.
Each participant in the Senior Executive Plan may determine how
his or her Annual Deferral Amount and Matching Contributions, if
any, will be deemed to be invested by choosing among several
investment funds or indices designated by the Deferred
Compensation Committee. The Senior Executive Plan, however, does
not require us to actually acquire or hold any investment fund
or other assets to fund the Senior Executive Plan. The entire
interest of each participant in the Senior Executive Plan is
always fully vested and non-forfeitable.
In connection with a participants election to defer an
Annual Deferral Amount, the participant may also elect to
receive a short-term payout, equal to the Annual Deferral Amount
and the Matching Contributions, if any, attributable thereto
plus earnings, and shall be payable two or more years from the
first day of the year in which the Annual Deferral Amount is
actually deferred. As of January 2004, the Senior Executive Plan
was amended to allow for deferral of the short-term payout date
if the deferral is made within the time period specified
therein. Subject to the short-term payout provision and
specified exceptions for unforeseeable financial emergencies, a
participant may not withdraw, without incurring a ten percent
(10%) withdrawal penalty, all or any portion of his or her
account under the Senior Executive Plan prior to the date that
such participant either (1) is determined by the Deferred
Compensation Committee to have incurred permanent and total
disability or (2) dies or otherwise terminates employment.
Potential
Payments Upon Termination or Change in Control
The information below describes certain compensation that would
have become payable under existing plans and contractual
arrangements assuming a termination of employment
and/or
change in control had occurred on December 31, 2009 based
upon the closing price of a Common Share on the NYSE on
December 31, 2009 of $40.57, given the Named Executive
Officers compensation and service levels as of such date.
In addition to the benefits described below, upon any
termination of employment, each of the Named Executive Officers
would also be entitled to the amount shown in the column labeled
Aggregate Balance at Last FYE in the 2009
Non-Qualified Deferred Compensation table.
As of December 31, 2009, the Company had entered into
employment agreements with each of Messrs. Johnson, Chapman
and Goudis, as described in more detail below. In addition to
the employment agreements with Messrs. Johnson, Chapman and
Goudis, the Company has also entered into award agreements
governing the equity-based compensation awards (including stock
options, SARs and RSUs) granted to each of Messrs. Johnson,
Chapman and Goudis. Other than the payments pursuant to the
Senior Executive Plan, referenced above, as well payments that
may be available to all employees generally, neither
Mr. Walsh nor Mr. Levy is currently entitled to
payments upon a termination or change in control. In 2010, the
Company expects to enter into a new employment agreement with
Mr. Goudis and a severance agreement with Mr. Walsh
providing for severance benefits consistent with past practice.
Michael
O. Johnson
Pursuant to the Johnson Employment Agreement, upon termination
of Mr. Johnsons employment by Herbalife America for
Cause, or by Mr. Johnson without Good Reason,
Mr. Johnson would be entitled to his then current accrued
and unpaid base salary through the effective date of termination
as well as 100% of any accrued and unpaid bonus for any years
preceding the year of termination, but, not for the year of
termination. Mr. Johnson would also be entitled to any
rights that may exist in his favor to payment of any amount
under any employee benefit plan or arrangement of Herbalife
America, other than those set forth in the Johnson Employment
Agreement, in accordance with the terms and conditions of any
such employee benefit plan or arrangement.
If Mr. Johnson dies or if his employment is terminated as a
result of his disability, in addition to his accrued benefits,
he will be entitled to receive a pro rata bonus payment for the
year of termination based on the Companys actual results
for the entire year. In addition, following a termination of
employment by reason of Mr. Johnsons death or
disability, Mr. Johnson
and/or his
spouse will be eligible to receive retiree medical benefits
until the age of
45
65 without regard as to whether Mr. Johnson was employed by
the Company for at least four years following the effective date
of the Johnson Employment Agreement.
For the term of the Johnson Employment Agreement, we provide a
ten-year fixed premium term life insurance policy in the amount
of $10 million. Mr. Johnson designates both the owner
and beneficiary of this policy. After the expiration of the
term, Mr. Johnson may elect to continue coverage under such
policy at his own cost.
Upon termination of Mr. Johnsons employment by
Herbalife America without Cause, or by Mr. Johnson for Good
Reason, in addition to the benefits described in the preceding
paragraph, Mr. Johnson would also be entitled to an
additional amount equal to two times the sum of his then-current
salary and bonus level (defined as two times his
then-current salary), which in total would be currently equal to
$7,200,000 (based on Mr. Johnsons base salary
effective January 1, 2010), payable in a lump sum due
within 60 days of termination. If the effective date of
such termination without Cause or resignation for Good Reason
occurs during a trading blackout or quiet
period with respect to the Companys Common Shares or
if the Company determines, upon the advice of legal counsel,
that Mr. Johnson may not trade in the Companys Common
Shares on the effective date of such termination due to his
possession of material non-public information, and in each case
the restriction or prohibition continues for a period of at
least twenty consecutive calendar days, Mr. Johnson will be
paid an additional lump sum amount equal to $250,000.
Mr. Johnson will also be eligible to receive outplacement
services for up to six months paid for by the Company in an
amount not to exceed $20,000. As a precondition to the
Companys obligation to pay the amounts described above,
Mr. Johnson must execute a general release of claims.
Upon the occurrence of a Change of Control, 50% of all unvested
stock options, SARs and RSUs granted to Mr. Johnson (other
than the 2008 RSUs and 2008 SARs) shall immediately vest;
however, the compensation committee may, in its sole discretion,
accelerate the vesting of additional stock options, SARs and
RSUs upon the occurrence of a Change of Control. Should
Mr. Johnsons employment be terminated for any reason
other than for Cause or resignation without Good Reason within
the 90-day
period preceding a Change of Control or at any time after a
Change of Control, then all of his unvested stock options, SARs
and RSUs (other than the 2008 RSUs and 2008 SARs) shall vest as
of the effective date of the termination. If
Mr. Johnsons employment is terminated as a result of
his death or disability, all unvested stock options, SARs and
RSUs (other than the 2008 RSUs and 2008 SARs) will vest as of
the date of such termination. Except as set forth above, all
unvested stock options, SARs and RSUs (other than the 2008 RSUs
and 2008 SARs) shall be forfeited upon the termination of
Mr. Johnsons employment with the Company.
The 2008 SARs are subject to full vesting acceleration upon the
occurrence prior to March 17, 2012 of a Change of Control
or a termination of Mr. Johnsons employment by the
Company without Cause, by Mr. Johnson for Good Reason or as
a result of Mr. Johnsons death or disability, in each
case, subject to the achievement by the Company prior to such
event (or, with respect to a Change of Control, as a result of
such event) of an alternate price performance target. For
363,670 of the 2008 SARs, this alternate price performance
target will be achieved if the Companys share price
exceeds $55.64 for a period of 30 consecutive trading days. For
396,120 of the 2008 SARs, this alternate price performance
target will be achieved if the closing Companys share
price exceeds $60.82 for a period of 30 consecutive trading days.
The 2008 RSUs are subject to full vesting acceleration upon the
occurrence of a change in control (as defined in
Section 409A of the Code), as well as upon the termination
of Mr. Johnsons employment due to his death or
disability. The 2008 RSUs are subject to partial vesting upon
Mr. Johnsons termination by the Company without Cause
or by Mr. Johnson for Good Reason, as follows: (i) the
portion of the unvested RSUs that would have become vested on
the next vesting date following termination will vest, pro rata,
based upon the number of months Mr. Johnson was employed
between the last vesting date (or the grant date, as applicable)
and the next vesting date; (ii) if the termination date is
on or prior to the second anniversary of the grant date, an
additional number of unvested RSUs will vest equal to 50% of the
then-remaining unvested RSUs (determined after applying clause
(i)); (iii) if the termination date is after the second
anniversary of the grant date but on or prior to the third
anniversary of the grant date, an additional number of unvested
RSUs will vest equal to 75% of the then-remaining unvested RSUs
(determined after applying clause (i)); and (iv) if the
termination date is after the third anniversary of the grant
date, all of the unvested RSUs shall vest.
46
In the event that Mr. Johnson becomes entitled to payments
and/or
benefits under the Johnson Employment Agreement that are subject
to excise tax pursuant to Section 4999 of the Code, the
Company shall pay Mr. Johnson additional amounts so as to
bear the full burden of that excise tax. In addition, if
Mr. Johnson remains employed by the Company for at least
four years following the effective date of the Johnson
Employment Agreement, following his subsequent termination of
employment for any reason other than for Cause, Mr. Johnson
and his spouse will be entitled to continued medical benefits
under a Company-provided medical plan until they reach
age 65.
Brett
R. Chapman
Pursuant to the Chapman Employment Agreement, if
Mr. Chapman is terminated by the Company without Cause or
resigns for Good Reason, he is entitled to be paid a lump sum
amount equal to two times his then-current annual salary, which
lump sum amount is currently equal to $1,100,000, in addition to
all other accrued but unpaid entitlements. The Company will also
provide Mr. Chapman with outplacement services for up to
six months by a provider selected and paid for by the Company in
an amount not to exceed $20,000. In the event that
Mr. Chapman is qualified for and elects COBRA coverage
under the Companys health plans after a termination
without Cause or a resignation for Good Reason, the Company will
continue to pay its share of the cost of premiums under such
plans until Mr. Chapman is reemployed, or for a period of
two years, whichever occurs first. If Mr. Chapman is
terminated by the Company without Cause, resigns for Good
Reason, or retires, dies, or resigns as a result of a
disability, he will be entitled to receive a pro rata bonus
payment, at such time bonuses are paid to the Companys
other senior executives, based on the number of months worked in
the applicable year. As a precondition to the Companys
obligation to pay the amounts described above, Mr. Chapman
must execute a general release of claims. If the effective date
of a termination without Cause or resignation for Good Reason
occurs during a trading blackout or quiet
period with respect to Common Shares or if the Company
determines, upon the advice of legal counsel, that
Mr. Chapman may not trade in Common Shares on the effective
date of such termination due to his possession of material
non-public information, and in each case the restriction or
prohibition continues for a period of at least twenty
consecutive calendar days, Mr. Chapman will be paid an
additional lump sum amount equal to $100,000.
Upon the occurrence of a Change of Control, 50% of all unvested
stock options, SARs and RSUs granted to Mr. Chapman shall
immediately vest; however, the compensation committee may, in
its sole discretion, accelerate the vesting of additional stock
options, SARs and RSUs upon the occurrence of a Change of
Control. Should Mr. Chapmans employment be terminated
for any reason other than for Cause or resignation without Good
Reason within the
90-day
period preceding a Change of Control or at any time after a
Change of Control, then all of his unvested stock options, SARs
and RSUs shall vest as of the effective date of the termination.
Except as set forth in the immediately preceding sentence,
should Mr. Chapmans employment be terminated for any
reason other than for Cause or resignation without Good Reason
and at the time of such termination Mr. Michael O. Johnson
is no longer serving as the Companys Chief Executive
Officer, then 50% of Mr. Chapmans unvested stock
options, SARs and RSUs shall vest immediately prior to such
termination. If Mr. Chapmans employment is terminated
as a result of his death or disability, all unvested stock
options, SARs and RSUs will vest as of the date of such
termination. Except as set forth above, all unvested stock
options, stock appreciation rights and stock units shall be
forfeited upon the termination of Mr. Chapmans
employment with the Company.
In the event that Mr. Chapman becomes entitled to payments
and/or
benefits under the Chapman Employment Agreement that are subject
to excise tax pursuant to Section 4999 of the Code, the
Company shall pay Mr. Chapman additional amounts so as to
bear the full burden of that excise tax.
Richard
Goudis
Pursuant to the Goudis Employment Agreement, if Mr. Goudis
is terminated by the Company without Cause or resigns for Good
Reason, he is entitled to be paid a lump sum amount equal to two
times his then-current annual salary, which lump sum amount is
currently equal to $1,250,000 (based on Mr. Goudis
base salary effective January 1, 2010), in addition to all
other accrued but unpaid entitlements. The Company will also
provide Mr. Goudis with outplacement services for up to six
months by a provider selected and paid for by the Company in an
amount not to exceed $20,000. In the event that Mr. Goudis
is qualified for and elects COBRA coverage under the
Companys health plans after a termination without Cause or
a resignation for Good Reason, the Company will continue to pay
its share of the cost of premiums under such plans until
Mr. Goudis is reemployed, or for a period of
47
two years, whichever occurs first. If Mr. Goudis is
terminated by the Company without Cause, resigns for Good
Reason, or retires, dies, or resigns as a result of a
disability, he will be entitled to receive a pro rata bonus
payment, at such time bonuses are paid to the Companys
other senior executives, based on the number of months worked in
the applicable year. As a precondition to the Companys
obligation to pay the amounts described above, Mr. Goudis
must execute a general release of claims. If the effective date
of such termination without Cause or resignation for Good Reason
occurs during a trading blackout or quiet
period with respect to Common Shares or if the Company
determines, upon the advice of legal counsel, that
Mr. Goudis may not trade in Common Shares on the effective
date of such termination due to his possession of material
non-public information, and in each case the restriction or
prohibition continues for a period of at least twenty
consecutive calendar days, Mr. Goudis will be paid an
additional lump sum amount equal to $125,000.
Upon the occurrence of a Change of Control, 50% of all unvested
stock options, SARs and RSUs granted to Mr. Goudis shall
immediately vest; however, the compensation committee may, in
its sole discretion, accelerate the vesting of additional stock
options, SARs and RSUs upon the occurrence of a Change of
Control. Should Mr. Goudis employment be terminated
for any reason other than for Cause or resignation without Good
Reason within the
90-day
period preceding a Change of Control or at any time after a
Change of Control, then all of his unvested stock options, SARs
and RSUs shall vest as of the effective date of the termination.
Except as set forth in the immediately preceding sentence,
should Mr. Goudiss employment be terminated for any
reason other than for Cause or resignation without Good Reason
and at the time of such termination Mr. Michael O. Johnson
is no longer serving as the Companys Chief Executive
Officer, then 50% of Mr. Goudiss unvested stock
options, SARs and RSUs shall vest immediately prior to such
termination. If Mr. Goudiss employment is terminated
as a result of his death or disability, all unvested stock
options, SARs and RSUs will vest as of the date of such
termination. Except as set forth above, all unvested stock
options, SARs and RSUs shall be forfeited upon the termination
of Mr. Goudiss employment with the Company.
In the event that Mr. Goudis becomes entitled to payments
and/or
benefits under the Goudis Employment Agreement that are subject
to excise tax pursuant to Section 4999 of the Code, the
Company shall pay Mr. Goudis additional amounts so as to
bear the full burden of that excise tax.
Definitions
For the purposes of the Johnson Employment Agreement, the
following terms have the following definitions:
|
|
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|
|
The Company shall have Cause to terminate
Mr. Johnson in the event of any of the following
circumstances: (i) Mr. Johnsons conviction of a
felony or entering a plea of guilty or nolo contendere to any
crime constituting a felony (other than a traffic violation or
by reason of vicarious liability);
(ii) Mr. Johnsons substantial and repeated
failure to attempt to perform his lawful duties as contemplated
in the Johnson Employment Agreement, except during periods of
physical or mental incapacity;
(iii) Mr. Johnsons gross negligence or willful
misconduct with respect to any material aspect of the business
of the Company or any of its affiliates, which negligence or
misconduct has a material and demonstrable adverse effect on the
Company; or (iv) any material breach of the Johnson
Employment Agreement or any material breach of any other written
agreement between Mr. Johnson and the Companys
affiliates governing his equity compensation arrangements (i.e.,
any agreement with respect to Mr. Johnsons stock
and/or stock
options of any of the Companys affiliates); provided,
however, that Mr. Johnson shall not be deemed to have been
terminated for Cause in the case of clauses (ii), (iii) or
(iv) above, unless any such breach is not fully corrected
prior to the expiration of the thirty (30) calendar day
period following delivery to Mr. Johnson of the
Companys written notice of its intention to terminate his
employment for Cause describing the basis therefore in
reasonable detail.
|
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|
Mr. Johnson will be deemed to have a Good
Reason to terminate his employment if, without
Mr. Johnsons consent, any of the following
circumstances occur, unless such circumstances are fully
corrected prior to the expiration of the thirty
(30) calendar day period following delivery to the Company
of Mr. Johnsons notice of intention to terminate his
employment for Good Reason describing such circumstances in
reasonable detail: (i) an adverse change in
Mr. Johnsons title as CEO of Herbalife America or the
Company, Mr. Johnsons involuntary removal from the
Board, or failure of Mr. Johnson to be elected to the Board
|
48
|
|
|
|
|
at any time during the term of the Johnson Employment Agreement;
(ii) a substantial diminution in Mr. Johnsons
duties, responsibilities or authority for the Company, taken as
a whole (except during periods when Mr. Johnson is unable
to perform all or substantially all of his duties or
responsibilities as a result of his illness (either physical or
mental) or other incapacity); (iii) a change in location of
the Companys chief executive office to a location more
than 50 miles from its current location; (iv) any
other material breach of the Johnson Employment Agreement; or
(v) the failure by any successor to the Company to assume
in writing the Companys obligations under the Johnson
Employment Agreement. Mr. Johnson shall be deemed to have
waived his rights to terminate his services hereunder for
circumstances constituting Good Reason if he shall not have
provided to the Company a notice of termination within sixty
(60) calendar days immediately following his knowledge of
the circumstances constituting Good Reason.
|
For the purposes of the summaries of the Chapman Employment
Agreement and the Goudis Employment Agreement, the following
terms have the following definitions:
|
|
|
|
|
The Company shall have Cause to terminate the
executive in the event of any of the following acts or
circumstances: (i) the executives conviction of a
felony or entering a plea of guilty or nolo contendere to any
crime constituting a felony (other than a traffic violation or
by reason of vicarious liability); (ii) the
executives substantial and repeated failure to attempt to
perform the executives lawful duties as contemplated in
the agreement, except during periods of physical or mental
incapacity; (iii) the executives gross negligence or
willful misconduct with respect to any material aspect of the
business of the Company or any of its affiliates, which gross
negligence or willful misconduct has a material and demonstrable
adverse effect on the Company; (iv) the executives
material violation of a Company policy resulting in a material
and demonstrable adverse effect to the Company or an affiliate,
including but not limited to a violation of the Companys
Code of Business Conduct and Ethics; or (v) any material
breach of the executives agreement or any material breach
of any other written agreement between the executive and the
Companys affiliates governing the executives equity
compensation arrangements (i.e., any agreement with respect to
the executives stock
and/or stock
options of any of the Companys affiliates); provided,
however, that the executive shall not be deemed to have been
terminated for Cause in the case of clause (ii), (iii),
(iv) or (v) above, unless any such breach is not fully
corrected prior to the expiration of the thirty
(30) calendar day period following delivery to the
executive of the Companys written notice of its intention
to terminate his employment for Cause describing the basis
therefore in reasonable detail.
|
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|
|
The executive will be deemed to have a Good Reason
to terminate his employment in the event of (i) a material
diminution of Executives duties, (ii) the failure by
any successor of the Company to assume in writing the
Companys obligations under the agreement, (iii) the
breach by the Company in any respect of any of its obligations
under the agreement, and, in any such case (but only if
correction or cure is possible), the failure by the Company to
correct or cure the circumstance or breach on which such
resignation is based within 30 days after receiving notice
from the executive describing such circumstance or breach in
reasonable detail, (iv) the relocation of the
executives primary office location of more than
50 miles that places the primary office farther from the
executives residence than it was before, or (v) the
imposition by the Company of a requirement that the executive
report to a person other than the Chief Executive Officer of the
Company or the Chairman of the Board. The executive shall not
have a Good Reason to resign if the Company suspends the
executive due to an indictment of the executive on felony
charges, provided that the Company continues to pay the
executives salary and benefits.
|
For the purposes of the summaries of the Johnson, Chapman and
Goudis Employment Agreements, as well as the 2005 Plan (other
than with respect to the treatment of Mr. Johnsons
2008 RSUs):
|
|
|
|
|
a Change of Control means: (i) an acquisition
(other than directly from the Company after advance approval by
a majority of the directors comprising the Board of Directors as
of the effective date of the 2005 Plan, or the incumbent board)
of Common Shares or other voting securities of the Company by
any person (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended, or the Exchange Act), other than the Company,
any subsidiary of the Company, any employee benefit plan of the
Company or any subsidiary of the Company, or any person in
connection with a transaction described in clause (iii) of
this definition, immediately after which such person has
beneficial
|
49
|
|
|
|
|
ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the then
outstanding Common Shares or the combined voting power of the
Companys then outstanding voting securities;
(ii) members of the incumbent board cease for any reason
during any
24-month
period to constitute at least a majority of the members of the
Board; provided, however, that if the election, or nomination
for election by the Companys common shareholders, of any
new director was approved by a vote of at least a majority of
the incumbent board, such new director shall, for purposes of
the 2005 Plan, be considered as a member of the incumbent board;
or (iii) the consummation of: (A) a merger,
consolidation or reorganization with or into the Company, unless
the voting securities of the Company, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation or
reorganization, at least 50% of the combined voting power of the
outstanding voting securities of the entity resulting from such
merger or consolidation or reorganization in substantially the
same proportion as their ownership of the voting securities
immediately before such merger, consolidation or reorganization;
(B) a complete liquidation or dissolution of the Company;
or (C) the sale, lease, transfer or other disposition of
all or substantially all of the assets of the Company to any
person (other than a transfer to a subsidiary of the Company).
|
50
The table below sets forth the estimated value of the potential
payments to each of Messrs. Johnson, Chapman and Goudis,
assuming the executives employment had terminated on
December 31, 2009
and/or that
a change in control of the Company had also occurred on that
date. Amounts are reported without any reduction for possible
delay in the commencement or timing of payments. No other Named
Executive Officer is entitled to the benefits described in the
table.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Termination
|
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|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
without Cause or
|
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|
without Cause or
|
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|
Termination
|
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Change
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|
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|
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with Good Reason
|
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with Good Reason
|
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without Cause when
|
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in Control
|
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|
|
|
|
|
not in connection with
|
|
|
in connection with
|
|
|
Mr. Johnson is
|
|
|
(without
|
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|
Death or
|
|
Name
|
|
a Change of Control
|
|
|
a Change of Control
|
|
|
no longer CEO
|
|
|
termination)
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|
Disability
|
|
|
Michael O. Johnson
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
|
|
$
|
7,200,000
|
|
|
$
|
7,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus(2)
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|
$
|
2,928,000
|
|
|
$
|
2,928,000
|
|
|
|
|
|
|
|
|
|
|
$
|
2,928,000
|
|
Equity Acceleration(3)
|
|
$
|
1,659,998
|
|
|
$
|
16,118,975
|
|
|
|
|
|
|
$
|
10,012,426
|
|
|
$
|
16,118,975
|
|
Outplacement Service
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|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
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$
|
40,000
|
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
|
$
|
40,000
|
|
Trading Blackout Payment(4)
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$
|
250,000
|
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excise Tax
Gross-up(5)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,750,000
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
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|
$
|
1,100,000
|
|
|
$
|
1,100,000
|
|
|
$
|
1,100,000
|
|
|
|
|
|
|
|
|
|
Bonus(2)
|
|
$
|
412,500
|
|
|
$
|
412,500
|
|
|
$
|
412,500
|
|
|
|
|
|
|
$
|
412,500
|
|
Equity Acceleration(3)
|
|
|
|
|
|
$
|
3,469,484
|
|
|
$
|
1,734,742
|
|
|
$
|
1,734,742
|
|
|
$
|
3,469,484
|
|
Outplacement Service
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
Medical Coverage
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
Trading Blackout Payment(4)
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|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
Excise Tax
Gross-up(5)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
750,000
|
|
Richard P. Goudis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
|
|
|
|
|
|
Bonus(2)
|
|
$
|
454,781
|
|
|
$
|
454,781
|
|
|
$
|
454,781
|
|
|
|
|
|
|
$
|
454,781
|
|
Equity Acceleration(3)
|
|
|
|
|
|
$
|
3,993,786
|
|
|
$
|
1,996,893
|
|
|
$
|
1,996,893
|
|
|
$
|
3,993,786
|
|
Outplacement Service
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
Medical Coverage
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
Trading Blackout Payment(4)
|
|
$
|
125,000
|
|
|
$
|
125,000
|
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
|
Excise Tax
Gross-up(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
750,000
|
|
|
|
|
(1) |
|
Based on salary as of December 31, 2009. |
|
(2) |
|
Represents bonus amounts earned in 2009, as disclosed in the
Non-Equity Incentive Plan Compensation column of the
2009 Summary Compensation Table. Per the terms of
his employment agreement, as described above, upon a termination
of his employment by the Company without Cause or by him with
Good Reason, or due to death or disability, each of
Messrs. Johnson, Chapman and Goudis is entitled to a pro
rata bonus for the year in which the termination occurs based on
the Companys actual results for the entire year.
Messrs. Chapman and Goudis are also entitled to a pro rata
bonus upon a termination due to retirement. |
|
(3) |
|
Accelerated vesting of stock awards were based on the closing
traded price of a Common Share on the NYSE on December 31, 2009
of $40.57, and, for stock options and SARs, the difference
between $40.57 and the exercise or base price of the award. |
|
(4) |
|
Payment made if termination occurs during a trading
blackout or a quiet period with respect to
Common Shares. |
51
|
|
|
(5) |
|
If the parachute payment (including any termination
payments and the value of accelerated equity) is greater than
three times the average
W-2 reported
compensation for the executive for the preceding five years,
then an excise tax is imposed on the portion of the
parachute payment that exceeds one times such average
W-2 reported
compensation. Under the employment agreements with
Messrs. Johnson, Chapman and Goudis, each executive will be
entitled to reimbursement for any excise taxes imposed as well
as a
gross-up
payment equal to any income, payroll and excise taxes payable by
the executive as a result of the reimbursement for the excise
taxes. For purposes of computing the excise tax and
gross-up
payments, base amount calculations are based on taxable wages
for the years 2004 through 2008 and annualized for the year in
which the executive commenced employment with the Company (if
after 2002). In addition, all executives were assumed to be
subject to the maximum federal and state income and other
payroll taxes. |
52
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of
Herbalife Common Shares as of March 1, 2010, of
(1) each director or director nominee, (2) each of the
Named Executive Officers, (3) all directors and executive
officers as a group and (4) each person or entity known to
Herbalife to beneficially own more than five percent (5%) of
Herbalifes outstanding Common Shares. The Common Shares
are the Companys only class of voting securities that are
issued and outstanding.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
Nature of
|
|
|
Percentage
|
|
|
Beneficial
|
|
|
Ownership
|
Name of Beneficial Owner
|
|
Ownership
|
|
|
(1)
|
|
Non-Management Directors
|
|
|
|
|
|
|
|
|
Leroy T. Barnes, Jr.(2)**
|
|
|
50,403
|
|
|
|
*
|
|
Richard P. Bermingham(3)**
|
|
|
48,278
|
|
|
|
*
|
|
Pedro Cardoso**
|
|
|
|
|
|
|
|
|
Murray H. Dashe(4)**
|
|
|
7,439
|
|
|
|
*
|
|
Jeffrey T. Dunn**
|
|
|
|
|
|
|
|
|
Lawrence M. Higby(5)**
|
|
|
21,959
|
|
|
|
*
|
|
Colombe M. Nicholas(6)**
|
|
|
31,511
|
|
|
|
*
|
|
John Tartol(7)**
|
|
|
231,716
|
|
|
|
*
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
Michael O. Johnson(8)**
|
|
|
2,817,907
|
|
|
|
4.5%
|
|
Desmond Walsh(9)**
|
|
|
199,054
|
|
|
|
*
|
|
Brett R. Chapman(10)**
|
|
|
113,199
|
|
|
|
*
|
|
Richard Goudis(11)**
|
|
|
387,654
|
|
|
|
*
|
|
Robert Levy(12)**
|
|
|
123,320
|
|
|
|
*
|
|
All Directors and Executive Officers as a Group
(21 persons)
|
|
|
4,090,329
|
|
|
|
6.4%
|
|
Greater than 5% Beneficial Owners
|
|
|
|
|
|
|
|
|
BlackRock, Inc.(13)
|
|
|
4,796,224
|
|
|
|
8.0%
|
|
FMR LLC(14)
|
|
|
3,666,726
|
|
|
|
6.1%
|
|
Wellington Management Company, LLP(15)
|
|
|
4,879,575
|
|
|
|
8.1%
|
|
|
|
|
* |
|
Less than 1% |
|
** |
|
c/o Herbalife
International, Inc., 800 W. Olympic Blvd,
Suite 406, Los Angeles, California 90015. |
|
(1) |
|
Applicable percentage of ownership is based upon 60,324,654
Common Shares outstanding as of March 1, 2010, and the
relevant number of Common Shares issuable upon exercise of stock
options or other awards which are exercisable or have vested or
will be exercisable or will vest within 60 days of
March 1, 2010. Beneficial ownership is determined in
accordance with the rules of the SEC, and includes voting and
investment power with respect to shares. Except as otherwise
indicated below, to our knowledge, all persons listed above have
sole voting and investment power with respect to their Common
Shares, except to the extent authority is shared by spouses
under applicable law. |
|
(2) |
|
Includes 15,625 options to purchase Common Shares, 8,169 RSUs
convertible into Common Shares and 29,412 SARs equivalent to
19,710 Common Shares which are or will be exercisable and have
vested or will vest within 60 days of March 1, 2010. |
|
(3) |
|
Includes 7,500 options to purchase Common Shares, 8,169 RSUs
convertible into Common Shares and 29,412 SARs equivalent to
19,710 Common Shares which are or will be exercisable and have
vested or will vest within 60 days of March 1, 2010. |
|
(4) |
|
Includes 14,288 SARs equivalent to 7,439 Common Shares which are
or will be exercisable and have vested or will vest within
60 days of March 1, 2010. |
53
|
|
|
(5) |
|
Includes 31,605 SARs equivalent to 21,959 Common Shares which
are or will be exercisable and have vested or will vest within
60 days of March 1, 2010. |
|
(6) |
|
Includes 6,853 RSUs convertible into Common Shares and 29,412
SARs equivalent to 19,710 Common Shares which have vested or
will vest within 60 days of March 1, 2010. |
|
(7) |
|
Represents (i) 225 Common Shares held in custodial accounts
for the benefit of Mr. Tartols three children of
which Mr. Tartol disclaims beneficial ownership of 75
Common Shares except to the extent of his pecuniary interest
therein; (ii) 53,130 Common Shares held by the Tartol
Enterprises Profit Sharing Plan, for which Mr. Tartol is
the trustee; and (iii) 178,361 Common Shares held by
Carhill Holdings, Inc., a corporation for which Mr. Tartol
acts as a consultant only, and accordingly, disclaims beneficial
ownership of such Common Shares. |
|
(8) |
|
Includes 2,417,678 options to purchase Common Shares, 71,249
RSUs convertible into Common Shares and 194,000 SARs equivalent
to 31,293 Common Shares which are or will be exercisable and
have vested or will vest within 60 days of March 1,
2010. |
|
(9) |
|
Includes 183,000 options to purchase Common Shares, 4,636 RSUs
convertible into Common Shares and 34,762 SARs equivalent to
6,154 Common Shares which are or will be exercisable and have
vested or will vest within 60 days of March 1, 2010. |
|
(10) |
|
Includes 83,333 options to purchase Common Shares, 8,922 RSUs
convertible into Common Shares and 50,526 SARs equivalent to
8,407 Common Shares which are or will be exercisable and have
vested or will vest within 60 days of March 1, 2010. |
|
(11) |
|
Includes 262,500 options to purchase Common Shares, 5,547 RSUs
convertible into Common Shares and 51,726 SARs equivalent to
8,344 Common Shares which are or will be exercisable and have
vested or will vest within 60 days of March 1, 2010. |
|
(12) |
|
Includes 63,000 options to purchase Common Shares, 9,802 RSUs
convertible into Common Shares and 35,767 SARs equivalent to
6,314 Common Shares which are or will be exercisable and have
vested or will vest within 60 days of March 1, 2010. |
|
(13) |
|
The information regarding the beneficial ownership of Blackrock,
Inc. is based on the Schedule 13G filed with the SEC by
Blackrock, Inc. on January 29, 2010. The address for
Blackrock, Inc. is 40 East 52nd Street, New York, New York 10022. |
|
(14) |
|
The information regarding the beneficial ownership of FMR LLC is
based on the Schedule 13G filed with the SEC by FMR LLC, on
February 16, 2010. The address for FMR LLC is 82 Devonshire
Street, Boston, Massachusetts 01209. |
|
(15) |
|
The information regarding the beneficial ownership of Wellington
Management Company, LLP is based on the Schedule 13G/A
filed with the SEC by Wellington Management Company, LLP on
February 12, 2010. The address for Wellington Management
Company, LLP is 75 State Street, Boston, Massachusetts 02109. |
54
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has several written policies applicable to the
review and approval of related party transactions. Pursuant to
the Audit Committee Charter, any related party transaction in
which a director has an interest must be reviewed and approved
by the audit committee. The Companys Conflicts of Interest
Policy generally prohibits any Company employee from conducting
any activity that is or could be construed as a conflict with
the Companys interests or as an interference with the
employees duty to serve the Company at all times to the
best of his or her ability. Pursuant to that policy, any related
party transaction involving employees, including executive
officers, be reviewed and approved by both the Companys
legal and internal audit departments.
Registration
Rights Agreement
Michael O. Johnson, our Chairman and Chief Executive Officer, is
a party to a registration rights agreement with the Company. If
we at any time propose to register any Company securities under
the Securities Act of 1933, as amended, or the Securities Act,
for sale to the public, in certain circumstances,
Mr. Johnson, may require us to include his shares in the
securities to be covered by the registration statement. Such
registration rights are subject to customary limitations
specified in the agreement.
Indemnification
of Directors and Officers
The Memorandum and Articles of Association provide that, to the
fullest extent permitted by the Companies Law (2009 Revision),
or the Statute, every director, agent or officer of the Company
shall be indemnified out of the assets of the Company against
any liability incurred by him as a result of any act or failure
to act in carrying out his functions other than such liability
(if any) that he may incur by his own willful misconduct. To the
fullest extent permitted by the Statute, such director, agent or
officer shall not be liable to the Company for any loss or
damage in carrying out his functions unless the liability arises
through the willful misconduct of such director, agent or
officer.
The Company is a Cayman Islands exempted limited liability
company. As such, it is governed by the laws of the Cayman
Islands with respect to the indemnification provisions. Cayman
Islands law does not limit the extent to which a companys
articles of association may provide for indemnification of
officers and directors, except to the extent any such provision
may be held by the Cayman Islands courts to be contrary to
public policy, such as to provide indemnification against civil
fraud or the consequences of committing a crime. The Memorandum
and Articles of Association provide for indemnification of
officers and directors for losses, damages, costs and expenses
incurred in their capacities as such, except in the case of
(a) any fraud or dishonesty of such director or officer,
(b) such directors or officers conscious,
intentional or willful breach of his obligation to act honestly,
lawfully and in good faith with a view to the best interests of
the Company or (c) any claims or rights of action to
recover any gain, personal profit or other advantage to which
the director or officer is not legally entitled.
The Company has entered into an indemnification agreement with
each of its directors and certain of its officers to supplement
the indemnification protection available under the Memorandum
and Articles of Association. These indemnity agreements
generally provide that the Company will indemnify the parties
thereto to the fullest extent permitted by law.
In addition to the indemnification provisions set forth above,
the Company maintains insurance policies that indemnify its
directors and officers against various liabilities arising under
the Securities Act and the Exchange Act, that might be incurred
by any director or officer in his capacity as such.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to managers, officers or persons
controlling us pursuant to the foregoing, we have been informed
that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable.
55
ADDITIONAL
INFORMATION
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers and persons who
beneficially own more than ten percent of a registered class of
the Companys equity securities to file with the SEC and
the NYSE initial reports of ownership and reports of changes in
ownership of equity securities of the Company. Directors,
officers and greater-than-ten-percent beneficial owners are
required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms filed by them. To the
Companys knowledge, based solely on a review of the copies
of such filings on file with the Company and written
representations from the Companys directors and executive
officers, all Section 16(a) filing requirements applicable
to the Companys directors, executive officers and
greater-than-ten-percent beneficial owners were complied with on
a timely basis for fiscal year 2009, except for the failure of
Patricio Cuesta to file an Initial Statement of Beneficial
Ownership on or prior to May 9, 2009. The report was filed
on July 29, 2009.
Householding
of Proxy Materials.
The SEC has adopted rules that permit companies and
intermediaries such as brokers to satisfy delivery requirements
for certain proxy materials with respect to two or more
shareholders sharing the same address by delivering a single set
of these proxy materials addressed to those shareholders. This
process, which is commonly referred to as
householding, potentially provides extra convenience
for shareholders and cost savings for companies. The Company and
some brokers household proxy materials, unless contrary
instructions have been received from the affected shareholders.
Once you have received notice from your broker or us that they
or we will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer
wish to participate in householding and would prefer to receive
a separate set of proxy materials, or if you are receiving
multiple copies of the proxy materials and wish to receive only
one, please notify your broker if your Common Shares are held in
a brokerage account or the Company if you hold Common Shares
directly. You can notify the Company by sending a written
request to Herbalife Ltd.,
c/o Herbalife
International, Inc., Assistant Corporate Secretary,
800 W. Olympic Blvd., Suite 406, Los Angeles, CA
90015, or by calling the Assistant Corporate Secretary at
(213) 745-0500.
However, please note that if you want to receive a paper proxy
or voting instruction form or other proxy materials with respect
to the Meeting, you should follow the instructions to request
such materials included in the Notice of Internet Availability
of Proxy Materials that was sent to you.
Shareholder
Nominations
Your attention is drawn to Articles 73 to 76 of the
Memorandum and Articles of Association in relation to the
requirements applicable to any shareholder who wishes to
nominate a person for election as a director.
For such nomination to be properly brought before an annual
general meeting by a shareholder, a shareholder notice addressed
to the Corporate Secretary must have been delivered to or mailed
and received at the registered offices of the Company or such
other address as the Corporate Secretary may designate not less
than 90 days prior to the date of the meeting, or not later
than the 10th day following the date of the first public
announcement of the date of such meeting, whichever is later,
nor more than 120 days prior to the date of such meeting.
The notice to the Corporate Secretary must set forth (a) as
to each person whom the shareholder proposes to nominate, all
information relating to such person that is required to be
disclosed in solicitations of proxies for appointment of
directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Exchange
Act, including such persons written consent to being named
in the proxy statement as a nominee and to serving as a director
if appointed, and (b) as to the shareholder giving the
notice (i) the name and address of such shareholder, as
they appear on the register of members, (ii) the class and
number of Common Shares that are owned beneficially
and/or of
record by such shareholder, (iii) a representation that the
shareholder is a registered holder of Common Shares entitled to
vote at such meeting and intends to appear in person or by proxy
at the meeting to propose such nomination and (iv) a
statement as to whether the shareholder intends or is part of a
group that intends (x) to deliver a proxy statement
and/or form
of proxy to holders of at least the percentage of the
56
Companys outstanding share capital required to approve or
elect the nominee for appointment
and/or
(y) otherwise to solicit proxies from shareholders in
support of such nomination.
The Company may require any proposed nominee to furnish such
other information as may reasonably be required by the Company
to determine the eligibility of such proposed nominee to serve
as a director of the Company. No person nominated by a
shareholder shall be eligible for election as a director of the
Company unless nominated in accordance with these procedures.
Shareholder
Proposals for the 2011 Annual General Meeting
Pursuant to the Memorandum and Articles of Association, for a
shareholder to bring a matter before the 2011 annual general
meeting, the business must be legally proper and written notice
of shareholder proposal must have been filed with the Corporate
Secretary of the Company not less than 90 days prior to the
date of the meeting, or not later than the 10th day
following the date of the first public announcement of the date
of such meeting, whichever is later, nor more than 120 days
prior to the meeting. For notice to be proper, it must set
forth: (i) the name and address of the shareholder who
intends to make the proposal as it appears in the Companys
records, (ii) the class and number of Common Shares of the
Company that are owned by the shareholder submitting the
proposal and (iii) a clear and concise statement of the
proposal and the shareholders reasons for supporting it.
If the Chairman of the meeting determines that any such proposed
business has not been properly brought before the meeting, he
shall declare such business out of order, and such business
shall not be conducted at the meeting.
Shareholders interested in submitting a proposal for inclusion
in the proxy statement and form of proxy for the 2011 annual
general meeting of shareholders may do so by following the
procedures prescribed in SEC
Rule 14a-8
promulgated under the Exchange Act. To be eligible for
inclusion, notice of shareholder proposals must be received by
the Companys Corporate Secretary no later than
November 16, 2010. Proposals should be sent to Corporate
Secretary, Herbalife Ltd.,
c/o Herbalife
International, Inc., 800 W. Olympic Blvd.,
Suite 406, Los Angeles, CA 90015.
Codes of
Business Conduct and Ethics and Principles of Corporate
Governance
Our Board of Directors has adopted a corporate Code of Business
Conduct and Ethics applicable to our directors, officers,
including our principal executive officer, principal financial
officer and principal accounting officer, and employees, as well
as Principles of Corporate Governance, in accordance with
applicable rules and regulations of the SEC and the NYSE. Each
of our Code of Business Conduct and Ethics and Principles of
Corporate Governance are available on our website at
www.herbalife.com by following the links through
Investor Relations to Corporate
Governance, or in print to any shareholder who requests
it, as set forth below under Annual Report, Financial and
Additional Information.
Any amendment to, or waiver from, a provision of the
Companys Code of Business Conduct and Ethics requiring
disclosure under applicable rules with respect to the
Companys principal executive officer, principal financial
officer, principal accounting officer or controller will be
posted on the Companys website at www.Herbalife.com.
Annual
Report, Financial and Additional Information.
The Annual Financial Statements and Review of Operations of the
Company for fiscal year 2009 can be found in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2009. A copy of the
Companys Annual Report on
Form 10-K
will be made available with and, to each shareholder of record
on the Record Date who requests such materials, mailed
concurrently with, this Proxy Statement.
The Companys filings with the SEC are all accessible by
following the links to Investor Relations and
SEC Filings on the Companys website at
www.herbalife.com. The Company will furnish without
charge a copy of its SEC filings to any person requesting in
writing and stating that he or she is a beneficial owner of
Common Shares. In addition, the Company will furnish without
charge a copy of the Companys Annual Report on
Form 10-K,
including the financial statements and schedules thereto, and
the other documents referenced herein as available to
shareholders upon request, to any person requesting in writing
and stating that he or she is the beneficial owner of Common
Shares of the Company.
57
Requests and inquiries should be addressed to:
Investor Relations
Herbalife Ltd.
c/o Herbalife
International, Inc.
800 W. Olympic Blvd.
Suite 406
Los Angeles, California 90015
OTHER
MATTERS
The management of the Company knows of no other business to be
presented at the Meeting. If, however, other matters properly
come before the Meeting, it is intended that the persons named
in the accompanying proxy will vote thereon in accordance with
their best judgment.
By Order of the Board of Directors
BRETT R. CHAPMAN
General Counsel and Corporate Secretary
Dated: March 15, 2010
58
APPENDIX A
HERBALIFE
LTD.
PROPOSED AMENDED AND RESTATED 2005 STOCK INCENTIVE
PLAN
A-1
HERBALIFE
LTD.
2005 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this
Herbalife Ltd. 2005 Stock Incentive Plan (the
Plan) is to enable Herbalife Ltd. (the
Company) to attract, motivate, reward and
retain its directors, officers, employees and consultants, and
to further align the interests of such persons with those of the
stockholders of the Company by providing for or increasing the
proprietary interest of such persons in the Company.
2. Definitions. As used in the
Plan, the following terms shall have the meanings set forth
below:
(a) Award means a grant of an Option, a
Stock Appreciation Right, Restricted Stock, a Stock Unit, a
Performance Unit, or a Dividend Equivalent granted to a
Participant pursuant to the provisions of the Plan.
(b) Award Agreement means a written
agreement or other instrument as may be approved from time to
time by the Committee evidencing the grant of each Award.
(c) Board means the Board of Directors
of the Company.
(d) Change of Control means the first to
occur of:
(i) an acquisition (other than directly from the Company
after advance approval by a majority of the Incumbent Board) of
Common Shares or other voting securities of the Company by any
person (as the term person is used for purposes of
Section 13(d) or 14(d) of the Exchange Act), other than the
Company, any Subsidiary, any employee benefit plan of the
Company or any Subsidiary, or any person in connection with a
transaction described in clause (iii) of this
Section 2(d), immediately after which such person has
beneficial ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the then
outstanding Common Shares or the combined voting power of the
Companys then outstanding voting securities;
(ii) the individuals who, as of the Effective Date, are
members of the Board (the Incumbent Board),
cease for any reason during any
24-month
period to constitute at least a majority of the members of the
Board; provided, however, that if the election, or nomination
for election by the Companys common stockholders, of any
new director was approved by a vote of at least a majority of
the Incumbent Board, such new director shall, for purposes of
the Plan, be considered as a member of the Incumbent
Board; or
(iii) the consummation of: (A) a merger, consolidation
or reorganization with or into the Company, unless the voting
securities of the Company, immediately before such merger,
consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or
reorganization, at least 50% of the combined voting power of the
outstanding voting securities of the entity resulting from such
merger or consolidation or reorganization in substantially the
same proportion as their ownership of the voting securities
immediately before such merger, consolidation or reorganization;
(B) a complete liquidation or dissolution of the Company;
or (C) the sale, lease, transfer or other disposition of
all or substantially all of the assets of the Company to any
person (other than a transfer to a Subsidiary).
(e) Code means the Internal Revenue Code
of 1986, as amended from time to time, and the rulings and
regulations issued thereunder.
(f) Committee means the Compensation
Committee of the Board.
(g) Common Shares means the
Companys common shares, par value $.001, subject to
adjustment as provided in Section 12.
(h) Dividend Equivalent means an Award
granted to a Participant pursuant to Section 11.
(i) Fair Market Value means, as of any
date, the closing price for a Common Share reported for that
date by the New York Stock Exchange (or such other stock
exchange or quotation system on which such shares are then
listed or quoted) or, if no Common Shares are traded on the New
York Stock Exchange (or such other stock exchange or quotation
system) on the date in question, then for the next preceding
date for which such shares traded on the New York Stock Exchange
(or such other stock exchange or quotation system). In the event
that the Common
A-2
Shares are not listed or quoted on any stock exchange or
quotation system, the Fair Market Value shall be determined by
the Committee in its sole discretion in a manner consistent with
Section 409A of the Code.
(j) Incentive Stock Option means a stock
option that is intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.
(k) Option means an Incentive Stock
Option
and/or a
stock option that is not intended to qualify as an Incentive
Stock Option, in each case, granted pursuant to Section 7.
(l) Participant means any individual
described in Section 3 to whom Awards have been granted
from time to time by the Committee and any authorized transferee
of such individual.
(m) Performance Award means an Award,
the grant, issuance, retention, vesting or settlement of which
is subject to satisfaction of one or more Qualifying Performance
Criteria.
(n) Performance Unit means a bonus
opportunity awarded under Section 10 pursuant to which a
Participant may become entitled to receive an amount based on
satisfaction of such performance criteria as are specified in
the Award Agreement.
(o) Prior Plan means the Companys
2004 Stock Incentive Plan.
(p) Restricted Stock means Common Shares
granted pursuant to Section 9.
(q) Stock Unit means an Award granted to
a Participant pursuant to Section 9, pursuant to which
Common Shares may be issued in the future.
(r) Stock Appreciation Right means a
right granted pursuant to Section 8 that entitles the
Participant to receive, in cash or Common Shares or a
combination thereof, as determined by the Committee, an amount
equal to or otherwise based on the excess of (i) the Fair
Market Value of a specified number of Common Shares at the time
of exercise over (ii) the exercise price of the right, as
established by the Committee on the date of grant.
(s) Subsidiary means any corporation
(other than the Company) in an unbroken chain of corporations
beginning with the Company where each of the corporations in the
unbroken chain other than the last corporation owns stock
possessing at least 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain, and if specifically determined by the Committee in
the context other than with respect to Incentive Stock Options,
may include an entity in which the Company has a significant
ownership interest or that is directly or indirectly controlled
by the Company.
(t) Substitute Awards means Awards
granted or Common Shares issued by the Company in assumption of,
or in substitution or exchange for, awards previously granted,
or the right or obligation to make future awards, by a company
acquired by the Company or any Subsidiary or with which the
Company or any Subsidiary combines.
3. Eligibility. Any person who is a
current or prospective director, officer or employee (within the
meaning of Section 303A.08 of the New York Stock Exchange
Listed Company Manual) of the Company or of any Subsidiary shall
be eligible for selection by the Committee for the grant of
Awards hereunder. In addition any person who has been retained
to provide consulting, advisory or other services to the Company
or to any Subsidiary shall be eligible for selection by the
Committee for the grant of Awards hereunder. Options intending
to qualify as Incentive Stock Options may only be granted to
employees of the Company or any Subsidiary.
4. Effective Date and Termination of
Plan. This Plan was adopted by the Board as of
September 23, 2005, and it will become effective (the
Effective Date) when it is approved by the
Companys stockholders, which approval must be obtained
within twelve (12) months of the adoption of this Plan. No
Awards shall be granted pursuant to the Plan after the tenth
(10th) anniversary of the Effective Date. Notwithstanding the
foregoing, the Plan may be terminated at such earlier time as
the Board may determine. Termination of the Plan will not affect
the rights and obligations of the Participants and the Company
arising under Awards theretofore granted and then in effect.
5. Effect on Prior Plan. On and
after the Effective Date, no further grants or awards shall be
made under the Prior Plan. Grants and awards made under the
Prior Plan before the Effective Date, however, shall continue in
effect in accordance with their terms.
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6.
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Shares
Subject to the Plan and to Awards
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(a) Aggregate Limits. The aggregate
number of Common Shares issuable pursuant to all Awards shall
equal 4,700,000, plus (i) any Common Shares that were
authorized for issuance under the Prior Plan that, as of the
Effective Date, remain available for issuance under the Prior
Plan (not including any Common Shares that are subject to, as of
the Effective Date, outstanding awards under the Prior Plan or
any Common Shares that prior to the Effective Date were issued
pursuant to awards granted under the Prior Plan) and
(ii) any Common Shares subject to awards granted under the
Prior Plan that are terminated, expire unexercised, forfeited or
settled in cash. Any Common Shares granted as Options or Stock
Appreciation Rights shall be counted against this limit as one
(1) share for every one (1) share granted. Any Common
Shares granted as Awards other than Options or Stock
Appreciation Rights shall be counted against this limit as one
and one-half (1.5) shares for every one (1) share granted.
The aggregate number of Common Shares available for grant under
this Plan, the number of Common Shares subject to outstanding
Awards, and the number of Common Shares set forth in the proviso
of the preceding sentence shall be subject to adjustment as
provided in Section 12. The Common Shares issued pursuant
to Awards granted under this Plan may be shares that are
authorized and unissued or shares that were reacquired by the
Company, including shares purchased in the open market.
(b) Issuance of Shares. Common Shares
subject to an Award or to an award under the Prior Plan that are
terminated, expire unexercised, forfeited or settled in cash
shall be available for subsequent Awards under this Plan. Any
Common Shares that again become available for grant pursuant to
this Article 6 shall be added back as one (1) Common
Share if such shares were subject to Options or Stock
Appreciation Rights granted under the Plan or options or stock
appreciation rights granted under the Prior Plan, and as one and
one-half (1.5) Common Shares if such shares were subject to
Awards other than Options or Stock Appreciation Rights granted
under the Plan or subject to awards other than options or stock
appreciation rights granted under the Prior Plan. Shares subject
to Options or Stock Appreciation Rights that are exercised shall
not be available for subsequent awards. The following
transactions involving Common Shares will not result in
additional Common Shares becoming available for subsequent
Awards under this Plan: (i) Common Shares tendered or
withheld in payment of an Option; (ii) Common Shares
withheld or tendered for taxes; (iii) Common Shares that
were subject to a stock-settled Stock Appreciation Right and
were not issued upon the net settlement or net exercise of such
Stock Appreciation Right; or (iv) Common Shares repurchased
on the open market with the proceeds of an Option exercise.
(c) Substitute Awards. Substitute Awards
shall not reduce the Common Shares authorized for issuance under
the Plan or authorized for grant to a Participant in any
calendar year. Additionally, in the event that a company
acquired by the Company or any Subsidiary, or with which the
Company or any Subsidiary combines, has shares available under a
pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing
plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under
the Plan and shall not reduce the Common Shares authorized for
issuance under the Plan; provided that Awards using such
available shares shall not be made after the date awards or
grants could have been made under the terms of the pre-existing
plan, absent the acquisition or combination, and shall only be
made to individuals who were employees, directors or consultants
of such acquired or combined company before such acquisition or
combination.
(d) Tax Code Limits. The aggregate number
of Common Shares subject to Awards granted under this Plan
during any calendar year to any one Participant shall not exceed
1,250,000, which number shall be calculated and adjusted
pursuant to Section 12 only to the extent that such
calculation or adjustment will not affect the status of any
Award intended to qualify as performance based
compensation under Section 162(m) of the Code. The
aggregate number of Common Shares that may be issued pursuant to
the exercise of Incentive Stock Options granted under this Plan
shall not exceed 4,000,000, which number shall be calculated and
adjusted pursuant to Section 12 only to the extent that
such calculation or adjustment will not affect the status of any
Option intended to qualify as an incentive stock
option under Section 422 of the Code. The maximum
amount payable pursuant to that portion of a Performance Unit
granted under this Plan for any calendar year to any Participant
that is intended to satisfy the requirements for
performance based compensation under
Section 162(m) of the Code shall not exceed $5,000,000.
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7. Options. Options may be granted
at any time and from time to time to Participants selected by
the Committee. No Participant shall have any rights as a
stockholder with respect to any Common Shares subject to Option
hereunder until such shares have been issued. Each Option shall
be evidenced by an Award Agreement. Options granted pursuant to
the Plan may, but need not be identical; provided that each
Option must contain and be subject to the following terms and
conditions:
(a) Purchase Price. The purchase price
under each Option shall be established by the Committee;
provided that in no event will the purchase price be less than
the Fair Market Value of a Common Share on the date of grant,
except for Options granted to an employee of a company acquired
by the Company in assumption and substitution of options held by
such employee at the time such company is acquired.
(b) Payment of Purchase Price. Unless
otherwise provided for by the Committee and set forth in the
applicable Award Agreement, the purchase price of any Option may
be paid (i) in cash, (ii) by the delivery, either
actually or by attestation, of previously owned Common Shares or
(iii) by a combination the foregoing. In addition, the
purchase price may be paid through such cashless exercise
procedures permitted and established by the Committee, including
an irrevocable commitment by a broker to pay over such amount
from a sale of the Common Shares issuable under an Option, the
delivery of previously owned Common Shares and withholding of
Common Shares otherwise deliverable upon exercise.
(c) Option Vesting. The Committee shall
have the right to make the timing of the ability to exercise any
Option subject to continued employment, the passage of time
and/or such
performance requirements as deemed appropriate by the Committee.
(d) Option Term. Each Option shall expire
within a period of not more than ten (10) years from the
date of grant.
(e) Termination of Employment. The Award
Agreement evidencing the grant of each Option shall set forth
the terms and conditions applicable to such Option upon a
termination or change in the status of the employment or service
of the Participant with the Company or a Subsidiary, which shall
be as the Committee may, in its discretion, determine.
(f) Incentive Stock
Options. Notwithstanding anything to the contrary
in this Section 7, in the case of the grant of an Option
intending to qualify as an Incentive Stock Option, if the
Participant owns stock possessing more than 10% of the combined
voting power of all classes of stock of the Company (a
10% Shareholder), the purchase price of such
Option must be at least 110% of the Fair Market Value of a
Common Share on the date of grant and the Option must expire
within a period of not more than five (5) years from the
date of grant. Notwithstanding anything in this Section 7
to the contrary, Options designated as Incentive Stock Options
shall not be eligible for treatment under the Code as Incentive
Stock Options (and will be deemed to be nonqualified stock
options) to the extent that either (i) the aggregate Fair
Market Value of the Common Shares (determined as of the time of
grant) with respect to which such Options are exercisable for
the first time by the Participant during any calendar year
(under all plans of the Company and any Subsidiary) exceeds
$100,000, taking Options into account in the order in which they
were granted, or (ii) such Options remain exercisable and
unexercised for more than three (3) months following a
termination of employment (or such other period of time provided
in Section 422 of the Code).
(g) No Repricing without Shareholder
Approval. Other than in connection with a change
in the Companys capitalization (as described in
Section 12), the Company may not, without the approval of
stockholders, reprice any Options. For purposes of
this Plan, the term reprice means reducing the
exercise price of outstanding Options or canceling outstanding
Options with a purchase price in excess of Fair Market Value in
exchange for cash, new Options with a lower exercise price or
other Awards.
8. Stock Appreciation Rights. Stock
Appreciation Rights may be granted to Participants from time to
time either in tandem with or as a component of other Awards or
not in conjunction with other Awards. The provisions of Stock
Appreciation Rights may, but need not be the same with respect
to each grant or each recipient. Any Stock Appreciation Right
granted in tandem with an Option may be granted at the same time
such Option is granted or at any time thereafter before the
exercise or expiration of such Option. All Stock Appreciation
Rights under the Plan shall be subject to the same terms and
conditions applicable to Options (as set forth in
Section 7), including no repricing; provided, however, that
Stock Appreciation Rights granted in tandem with a previously
granted Option
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shall be subject to the terms and conditions of such Option.
Subject to the provisions of Section 7, the Committee may
impose such other conditions or restrictions on any Stock
Appreciation Right as it shall deem appropriate, including, but
not limited to, a limit on the amount payable with respect to
any Stock Appreciation Right. Stock Appreciation Rights may be
settled in Common Shares, cash, or combination thereof, as
determined by the Committee.
9. Restricted Stock and Stock
Units. Restricted Stock and Stock Units may be
granted at any time and from time to time to Participants
selected by the Committee. Restricted Stock is an award of
Common Shares the issuance, retention, vesting
and/or
transferability of which is subject during specified periods of
time to such conditions (including continued employment or
performance conditions) and terms as the Committee deems
appropriate. Stock Units are Awards denominated in units of
Common Shares under which the issuance of Common Shares is
subject to such conditions (including continued employment or
performance conditions) and terms as the Committee deems
appropriate. Each grant of Restricted Stock and Stock Units
shall be evidenced by an Award Agreement. Unless determined
otherwise by the Committee, the value of each Stock Unit will be
equal to one Common Share. Restricted Stock and Stock Units
granted pursuant to the Plan may, but need not be identical, but
each grant of Restricted Stock and Stock Units must contain and
be subject to the following terms and conditions:
(a) Number of Shares Subject to
Award. Each Award Agreement evidencing a grant of
Restricted Stock or Stock Units shall contain provisions
regarding the number of Common Shares or Stock Units subject to
such Award or a formula for determining such number and
restrictions on the transferability of the shares or units.
Common Shares issued under a Restricted Stock Award may be
issued in the name of the Participant and held by the
Participant or held by the Company, in each case, as the
Committee may provide.
(b) Form of Payment. To the extent
determined by the Committee, Stock Units may be satisfied or
settled in Common Shares, cash or a combination thereof.
(c) Section 83(b) Election. The
Committee may provide in an Award Agreement for an agreement
between the Company and the holder of an Award of Restricted
Stock as to whether or not such holder will be permitted to make
an election under Section 83(b) of the Code with respect to
the unvested Common Shares subject to the Award.
(d) Vesting. The grant, issuance,
retention, vesting
and/or
settlement of shares subject to Awards of Restricted Stock and
Stock Units shall occur at such time and in such installments as
determined by the Committee or under criteria established by the
Committee. The Committee shall have the right to make the timing
of the grant
and/or the
issuance, ability to retain, vesting
and/or
settlement of such shares subject to Awards of Restricted Stock
and under Stock Units subject to continued employment, passage
of time
and/or such
performance criteria as deemed appropriate by the Committee;
provided that in no event shall the grant, issuance, retention,
vesting
and/or
settlement of shares under Restricted Stock or Stock Unit Awards
that is based on performance criteria be subject to a
performance period of less than one (1) year.
Notwithstanding anything to the contrary herein, the performance
criteria for any Restricted Stock or Stock Unit that is intended
to satisfy the requirements for performance-based
compensation under Section 162(m) of the Code shall
be a measure based on one or more Qualifying Performance
Criteria selected by the Committee and specified at the time the
Restricted Stock or Stock Unit is granted. The Committee shall
certify the extent to which any Qualifying Performance Criteria
has been satisfied, and the amount payable as a result thereof,
prior to payment, vesting
and/or
settlement of any Restricted Stock or Stock Unit that is
intended to satisfy the requirements for performance-based
compensation under Section 162(m) of the Code.
(e) Discretionary Adjustments and
Limits. Subject to the limits imposed under
Section 162(m) of the Code for Awards that are intended to
qualify as performance based compensation,
notwithstanding the satisfaction of any performance goals, the
number of Common Shares granted, issued, retainable
and/or
vested under an Award of Restricted Stock or Stock Units on
account of either financial performance or personal performance
evaluations may, to the extent specified in the Award Agreement,
be reduced, but not increased, by the Committee on the basis of
such further considerations as the Committee shall determine.
(f) Voting Rights. Unless otherwise
determined by the Committee: (i) Participants holding
shares of Restricted Stock granted hereunder may exercise full
voting rights with respect to those shares during the period
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of restriction and (ii) Participants shall have no voting
rights with respect to Common Shares underlying Stock Units
unless and until such shares are reflected as issued and
outstanding shares on the Companys stock ledger.
(g) Dividends and
Distributions. Participants in whose name
Restricted Stock is granted shall be entitled to receive all
dividends and other distributions paid with respect to those
shares, unless determined otherwise by the Committee. Any such
dividends or distributions will be subject to the same
restrictions on transferability as the Restricted Stock with
respect to which they were distributed.
(h) Termination of Employment. The Award
Agreement evidencing the grant of an Award of Restricted Stock
or Stock Units shall set forth the terms and conditions
applicable to such Award upon a termination or change in the
status of the employment or service of the Participant with the
Company or a Subsidiary, which shall be as the Committee may, in
its discretion, determine.
10. Performance Units. Each
Performance Unit Award will confer upon the Participant the
opportunity to earn a future payment tied to the level of
achievement with respect to one or more performance criteria.
Performance Units granted pursuant to the Plan may, but need not
be identical, but each grant of Performance Units must contain
and be subject to the following terms and conditions:
(a) General. The Committee shall
determine and set forth in an Award Agreement provisions
regarding: (i) the target and maximum amount payable to the
Participant under the Performance Unit Award,
(ii) restrictions on the alienation or transfer of the
Performance Unit or Common Shares subject thereto prior to
actual payment and (iii) forfeiture provisions.
(b) Performance Criteria. The Committee
shall establish the performance criteria and level of
achievement versus these criteria that shall determine the
target and maximum amount payable under a Performance Unit,
which criteria may be based on financial performance
and/or
personal performance evaluations. The Committee shall also
establish the term of the performance period as to which
performance shall be measured for determining the amount of any
payment, which shall not be less than one year, except, in
either case, in the event of the Participants death or
disability or a Change of Control. Notwithstanding anything to
the contrary herein, the performance criteria for any portion of
a Performance Unit that is intended by the Committee to satisfy
the requirements for performance-based compensation
under Section 162(m) of the Code shall be a measure based
on one or more Qualifying Performance Criteria selected by the
Committee and specified at the time the Performance Unit is
granted. The Committee shall certify the extent to which any
Qualifying Performance Criteria has been satisfied, and the
amount payable as a result thereof, prior to payment, vesting
and/or
settlement of any Performance Unit that is intended to satisfy
the requirements for performance-based compensation
under Section 162(m) of the Code.
(c) Timing and Form of Payment. The
Committee shall determine the timing of payment of any
Performance Unit. Payment of the amount due under a Performance
Unit may be made in cash, in Common Shares or a combination
thereof, as determined by the Committee. The Committee may
provide for or, subject to such terms and conditions as the
Committee may specify, may permit a Participant to elect for the
payment of any Performance Unit to be deferred to a specified
date or event.
(d) Discretionary
Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under a Performance Unit on
account of either financial performance or personal performance
evaluations may be reduced by the Committee on the basis of such
further considerations, as the Committee shall determine.
11. Dividend Equivalents. Dividend
Equivalents may be granted to Participants independently or in
tandem with any Award other than an Option or Stock Appreciation
Right. Dividend Equivalents are payable in cash, Common Shares,
or Stock Units in an amount equivalent to the dividends that
would have been paid on Common Shares had the shares been
outstanding from the date an Award was granted. Dividend
Equivalents may be granted with conditions as determined by the
Committee, including that such amounts (if any) shall be deemed
to have been reinvested in additional Common Shares, and shall
be evidenced by an Award Agreement.
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12.
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Adjustment
of and Changes in the Stock
|
(a) In the event that the number of Common Shares of the
Company shall be increased or decreased through a
reorganization, reclassification, combination of shares, stock
split, reverse stock split, spin-off, dividend (other than
A-7
regular, cash dividends), or otherwise, each Common Share of the
Company which has been authorized for issuance under the Plan,
whether such share is then currently subject to or may become
subject to an Award under the Plan, as well as the per share
limits set forth in Section 6 of this Plan, shall be
proportionately adjusted by the Committee to reflect such
increase or decrease. The terms of any outstanding Award shall
also be adjusted by the Committee as to price, number of Common
Shares subject to such Award and other terms to reflect the
foregoing events.
(b) Subject to Section 13, in the event there shall be
any other change in the number or kind of outstanding Common
Shares of the Company, or any stock or other securities into
which such Common Shares shall have been changed, or for which
it shall have been exchanged, whether by reason of a change of
control, other merger, consolidation or otherwise, the Committee
shall, in its sole discretion, determine the appropriate
adjustment, if any, to be effected. Notwithstanding anything to
the contrary herein, any adjustment to Options granted pursuant
to this Plan intended to qualify as Incentive Stock Options
shall comply with the requirements, provisions and restrictions
of the Code.
(c) No right to purchase fractional shares shall result
from any adjustment in Awards pursuant to this Section 12.
In case of any such adjustment, the shares subject to the Award
shall be rounded down to the nearest whole share.
13. Effect of a Change of
Control. Unless otherwise provided for under the
terms of a transaction constituting a Change of Control, the
Committee may, through an Award Agreement or otherwise, provide
that any or all of the following shall occur in connection with
a Change of Control, or upon termination of the
Participants employment following a Change of Control:
(a) the acceleration of the vesting and, if applicable,
exercisability of any outstanding Award, or portion thereof, or
the lapsing of any conditions of restrictions on or the time for
payment in respect of any outstanding Award, or portion thereof,
(b) the substitution for Common Shares subject to any
outstanding Award, or portion thereof, stock or other securities
of the surviving corporation or any successor corporation to the
Company, or a parent or subsidiary thereof, in which event the
aggregate purchase or exercise price, if any, of such Award, or
portion thereof, shall remain the same, (c) the conversion
of any outstanding Award, or portion thereof, into a right to
receive cash or other property upon or following the
consummation of the Change of Control in an amount equal to the
value of the consideration to be received by holders of Common
Shares in connection with such transaction for one Common Share,
less the per share purchase or exercise price of such Award, if
any, multiplied by the number of Common Shares subject to such
Award, or a portion thereof,
and/or
(d) the cancellation of any outstanding and unexercised
Awards upon or following the consummation of the Change of
Control. Any actions or determinations of the Committee pursuant
to this Section 13 may, but need not be uniform as to all
outstanding Awards, and the Committee may, but need not treat
all holders of outstanding Awards identically.
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14.
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Qualifying
Performance-Based Compensation
|
(a) General. The Committee may specify
that the grant, retention, vesting, of issuance any Award, or
the amount to be paid out under any Award, be subject to or
based on Qualifying Performance Criteria or other standards of
financial performance
and/or
personal performance evaluations. Notwithstanding satisfaction
of any performance goals, the number of Common Shares issued or
the amount paid under an Award may, to the extent specified in
the Award Agreement, be reduced by the Committee on the basis of
such further considerations as the Committee in its sole
discretion shall determine.
(b) Qualifying Performance Criteria. For
purposes of this Plan, the term Qualifying Performance
Criteria shall mean any one or more of the following
performance criteria, either individually, alternatively or in
any combination, applied to either the Company as a whole or to
a business unit or Subsidiary, either individually,
alternatively or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous
years results or to a designated comparison group, in each
case as specified by the Committee: (i) cash flow (before
or after dividends), (ii) earnings per share (including
earnings before interest, taxes, depreciation and amortization),
(iii) stock price, (iv) return on equity,
(v) total stockholder return, (vi) return on capital
(including return on total capital or return on invested
capital), (vii) return on assets or net assets,
(viii) market capitalization, (ix) economic value
added, (x) debt leverage (debt to capital),
(xi) revenue, (xii) income or net income,
(xiii) operating income, (xiv) operating profit or net
operating
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profit, (xv) operating margin or profit margin,
(xvi) return on operating revenue, (xvii) cash from
operations, (xviii) operating ratio, (xix) operating
revenue, or (xx) customer service. To the extent consistent
with Section 162(m) of the Code, the Committee may
appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following
events that occurs during a performance period: (i) asset
write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary, unusual
or non-recurring items as described in Accounting Principles
Board Opinion No. 30
and/or in
managements discussion and analysis of financial condition
and results of operations appearing in the Companys
Forms 10-K
or 10-Q for
the applicable year.
15. Transferability. Unless the
Committee specifies otherwise, each Award may not be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated by a Participant other than by will or the laws of
descent and distribution, and each Option and Stock Appreciation
Right granted hereunder shall be exercisable only by the
Participant during his or her lifetime. Notwithstanding anything
herein to the contrary, in no event with Options or Stock
Appreciation Rights be transferable for value or consideration.
16. Compliance with Laws and
Regulations. This Plan, the grant, issuance,
vesting, exercise and settlement of Awards thereunder, and the
obligation of the Company to sell, issue or deliver shares under
such Awards, shall be subject to all applicable foreign,
federal, state and local laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be
required. The Company shall not be required to register in a
Participants name or deliver any shares prior to the
completion of any registration or qualification of such shares
under any foreign, federal, state or local law or any ruling or
regulation of any government body, which the Committee shall
determine to be necessary or advisable. No Option shall be
exercisable and no shares shall be issued
and/or
transferable under any other Award unless a registration
statement with respect to the shares underlying such Award is
effective and current or the Company has determined that such
registration is unnecessary. In the event an Award is granted to
or held by a Participant who is employed or providing services
outside the United States, the Committee may, in its sole
discretion, modify the provisions of such Award to comply with
applicable foreign law.
17. Withholding. To the extent
required by applicable federal, state, local or foreign law, a
Participant shall be required to satisfy, in a manner
satisfactory to the Company, any withholding tax obligations
that arise with respect to an Award. The Company and its
Subsidiaries shall not be required to issue Common Shares, make
any payment or to recognize the transfer or disposition of
Common Shares until such obligations are satisfied. The
Committee may permit these obligations to be satisfied by having
the Company withhold a portion of the Common Shares that
otherwise would be issued to the Participant in connection with
the Award, or by the Participant tendering (either actually or
by attestation) Common Shares previously acquired.
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18.
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Administration
of the Plan
|
(a) Committee of the Plan. The Plan shall
be administered by the Committee which shall be the Compensation
Committee of the Board or, in the absence of a Compensation
Committee, the Board itself; provided, however, that
(i) with respect to any Award that is intended to satisfy
the conditions of
Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) the term Committee
shall refer to a committee of two or more non-employee
directors as determined for purposes of applying Exchange
Act
Rule 16b-3;
and (ii) with respect to any Award that is intended to
qualify as performance-based compensation within the
meaning of Section 162(m) of the Code, the term
Committee shall refer to a committee of two or more
outside directors as determined for purposes of
applying Section 162(m) of the Code. Subject to the
provisions of Section 16 of the Exchange Act and
Section 162(m) of the Code, any power of the Committee may
also be exercised by the Board. The Compensation Committee may
by resolution authorize one or more officers of the Company to
perform any or all things that the Committee is authorized and
empowered to do or perform under the Plan; provided, however,
that the resolution so authorizing such officer or officers
shall specify the total number of Awards (if any) such officer
or officers may award pursuant to such delegated authority, and
any such Award shall be subject to the form of Award Agreement
theretofore approved by the Compensation Committee. No such
officer shall designate himself or herself as a recipient of any
Awards granted under authority delegated to such officer.
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(b) Powers of Committee. Subject to the
express provisions of this Plan, the Committee shall be
authorized and empowered to do all things that it determines to
be necessary or appropriate in connection with the
administration of this Plan, including, without limitation:
(i) to prescribe, amend and rescind rules and regulations
relating to this Plan and to define terms not otherwise defined
herein; (ii) to determine which persons are Participants,
to which of such Participants, if any, Awards shall be granted
hereunder and the timing of any such Awards; (iii) to grant
Awards to Participants and determine the terms and conditions
thereof, including the number of Common Shares subject to Awards
and the exercise or purchase price of such Common Shares and the
circumstances under which Awards become exercisable or vested or
are forfeited or expire, which terms may but need not be
conditioned upon the passage of time, continued employment, the
satisfaction of performance criteria, the occurrence of certain
events (including a Change of Control), or other factors;
(iv) to establish and verify the extent of satisfaction of
any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting
and/or
ability to retain any Award; (v) to prescribe and amend the
terms of the agreements or other documents evidencing Awards
made under this Plan (which need not be identical) and the terms
of or form of any document or notice required to be delivered to
the Company by Participants under this Plan; (vi) to
determine the extent to which adjustments are required pursuant
to Section 12; (vii) to interpret and construe this
Plan, any rules and regulations under this Plan and the terms
and conditions of any Award granted hereunder, and to make
exceptions to any such provisions in if the Committee, in good
faith, determines that it is necessary to do so in light of
extraordinary circumstances and for the benefit of the Company;
(viii) to approve corrections in the documentation or
administration of any Award; and (ix) to make all other
determinations deemed necessary or advisable for the
administration of this Plan. The Committee may, in its sole and
absolute discretion, without amendment to the Plan, waive or
amend the operation of Plan provisions respecting exercise after
termination of employment or service to the Company or an
Affiliate and, except as otherwise provided herein, adjust any
of the terms of any Award. The Committee may also
(A) accelerate the date on which any Award granted under
the Plan becomes exercisable or (B) accelerate the vesting
date or waive or adjust any condition imposed hereunder with
respect to the vesting or exercisability of an Award, provided
that the Committee, in good faith, determines that such
acceleration, waiver or other adjustment is necessary or
desirable in light of extraordinary circumstances.
(c) Determinations by the Committee. All
decisions, determinations and interpretations by the Committee
regarding the Plan, any rules and regulations under the Plan and
the terms and conditions of or operation of any Award granted
hereunder, shall be final and binding on all Participants,
beneficiaries, heirs, assigns or other persons holding or
claiming rights under the Plan or any Award.
19. Amendment of the Plan or
Awards. The Board may amend, alter or discontinue
this Plan and the Committee may amend, or alter any agreement or
other document evidencing an Award made under this Plan;
provided that, except as provided pursuant to the provisions of
Sections 13 and 14, to the extent necessary under any
applicable law, regulation or New York Stock Exchange or other
applicable listing requirement, no amendment shall be effective
unless approved by the stockholders of the Company in accordance
with applicable law, regulation or New York Stock Exchange or
other applicable listing requirement. In addition, no amendment
or alteration to the Plan or an Award or Award Agreement shall
be made that would materially impair the rights of the holder of
an Award, without such holders consent, provided that no
such consent shall be required if the Committee determines in
its sole discretion that such amendment or alteration either is
required or advisable in order for the Company, the Plan or the
Award to satisfy any law or regulation or to meet the
requirements of or avoid adverse financial accounting
consequences under any accounting standard.
20. No Liability of Company. The
Company and any Subsidiary or affiliate which is in existence or
hereafter comes into existence shall not be liable to a
Participant or any other person as to: (i) the non-issuance
or sale of Common Shares as to which the Company has been unable
to obtain from any regulatory body having jurisdiction the
authority deemed by the Companys counsel to be necessary
to the lawful issuance and sale of any shares hereunder; and
(ii) any tax consequence expected, but not realized, by any
Participant or other person due to the receipt, exercise or
settlement of any Award granted hereunder.
21. Non-Exclusivity of
Plan. Neither the adoption of this Plan by the
Board nor the submission of this Plan to the stockholders of the
Company for approval shall be construed as creating any
limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as either may deem desirable,
including without
A-10
limitation, the granting of restricted stock or stock options
otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
22. Governing Law. This Plan and
any Award Agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the
State of Delaware and applicable U.S. federal law, without
reference to principles of conflict of laws. Any reference in
this Plan or in the Award Agreement or other document evidencing
any Awards to a provision of law or to a rule or regulation
shall be deemed to include any successor law, rule or regulation
of similar effect or applicability.
23. Compliance with Section 409A of the
Code. This Plan is intended to comply and shall
be administered in a manner that is intended to comply with
Section 409A of the Code and shall be construed and
interpreted in accordance with such intent. To the extent that
an Award or the payment, settlement or deferral thereof is
subject to Section 409A of the Code, the Award shall be
granted, paid, settled or deferred in a manner that will comply
with Section 409A of the Code, including regulations or
other guidance issued with respect thereto, except as otherwise
determined by the Committee. Any provision of this Plan that
would cause the grant of an Award or the payment, settlement or
deferral thereof to fail to satisfy Section 409A of the
Code shall be amended to comply with Section 409A of the
Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued
under Section 409A of the Code.
24. No Right to Employment, Reelection or
Continued Service. Nothing in this Plan or any
Award Agreement shall interfere with or limit in any way the
right of the Company, its Subsidiaries
and/or its
affiliates to terminate any Participants employment,
service on the Board or service for the Company at any time or
for any reason not prohibited by law, nor confer upon any
Participant any right to continue his or her employment or
service for any specified period of time.
A-11
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week. |
Internet and telephone voting is available through 11:59 PM Eastern Time on April 28, 2010,
the day preceding the date of the shareholder meeting. |
100 SMITH DRIVE
ANYWHERE USA XXXXX-XXXX |
SHARE BREAKOUT
RESTRICTED AREA
4 x 11/4 |
INTERNET
http://www.proxyvoting.com/hlf |
Use the Internet to vote your proxy. Have
your proxy card in hand when you access
the web site. |
Use any touch-tone telephone to vote your
proxy. Have your proxy card in hand when
you call. |
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card. |
To vote by mail, mark, sign and date your proxy card
and return it in the enclosed postage-paid envelope. |
Your Internet or telephone vote authorizes the named
proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card. |
CONTROL NUMBER
RESTRICTED AREA
3 x 3/4
BAR CODE AREA RESTRICTED
3 x 1/2 |
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTIONS INDICATED, WILL BE VOTED FOR Please mark your votes as
ITEMS 2 AND 3. indicated in this example T |
1. ELECTION OF DIRECTORS FOR ALL WITHHOLD FOR ALL * EXCEPTIONS
Nominees:ooo 01 Leroy T. Barnes, Jr. 02 Richard P. Bermingham 03 Jeffrey
T. Dunn(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark the
Exceptions box above and write that nominees name in the space provided
below.)* Exceptions JOHN M. DOE |
JANE S. DOE
100 SMITH DRIVE
ANYWHERE USA XXXXX-XXXX |
FOR AGAINST ABSTAIN 2. Vote to approve an amendment to and restatement of the Companys 2005 Stock Incentive Plan to, among other things, increase the authorized number of Common
Shares issuable thereunder by 700,000ooo 3. Vote to ratify the appointment of KPMG LLP as the Companys independent registered public accountants for
fiscal
2010oooMark
Here for Address
Change or Comments
SEE REVERSEo |
RESTRICTED AREA SCAN LINE |
Signature ___Signature ___Date ___ |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian. Please give full title as such. |
You can now access your Herbalife Ltd. account online. |
Access your Herbalife Ltd. account online via Investor ServiceDirect® (ISD). |
BNY Mellon Shareowner Services, the transfer agent for Herbalife Ltd., now makes it easy and
convenient to get current information on your shareholder account. |
View account status View payment history for dividends |
View certificate history Make address changes |
View book-entry information Obtain a duplicate 1099 tax form |
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time |
Choose MLinkSM for fast, easy and secure 24/7 online access to your future |
proxy materials, investment plan statements, tax documents and more. Simply |
log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/isd |
where step-by-step instructions will prompt you through enrollment. |
TOLL FREE NUMBER: 1-800-370-1163 |
Important notice regarding the Internet availability of proxy materials for the Annual General
Meeting of Shareholders. The Proxy Statement and the 2009 Annual Report to Shareholders are
available at: http://bnymellon.mobular.net/bnymellon/hlf |
PROXY
HERBALIFE LTD.
Annual General Meeting of Shareholders April 29, 2010
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY |
The undersigned hereby appoints Michael O. Johnson and Brett R. Chapman, and each of
them, with power to act without the other and with power of substitution, as proxies and
attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side,
all the Common Shares of Herbalife Ltd. which the undersigned is entitled to vote, and, in their
discretion, to vote upon such other business as may properly come before the Annual General Meeting
of Shareholders of the Company to be held April 29, 2010 at 9:00 a.m. Pacific Daylight Time, at 800
W. Olympic Blvd., Suite 406, Los Angeles, California 90015, or at any adjournment(s) or
postponement(s) thereof, with all powers which the undersigned would possess if present at the
meeting. |
BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be
marked, dated and signed, on the other side)
WO# XXXXX |