pre14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrant
þ
Filed by a Party other than the Registrant o
Check the appropriate box:
|
|
|
þ |
|
Preliminary Proxy Statement |
|
|
|
|
o |
|
Definitive Proxy Statement |
|
|
|
|
o |
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
|
|
|
|
o |
|
Definitive Additional Materials |
|
|
|
|
o |
|
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):
|
|
|
|
|
þ |
Fee not required. |
|
|
|
|
o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
|
|
|
|
|
|
(1)
|
|
Title of each class of securities to which transaction applies:
|
|
|
|
|
|
|
(2)
|
|
Aggregate number of securities to which transaction applies:
|
|
|
|
|
|
|
(3)
|
|
Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
|
|
|
|
|
|
|
(4)
|
|
Proposed maximum aggregate value of transaction:
|
|
|
|
|
|
|
(5)
|
|
Total fee paid:
|
|
|
|
|
o |
|
Fee paid previously with preliminary materials. |
|
|
|
|
o |
|
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
|
|
|
|
|
|
(1)
|
|
Amount Previously Paid:
|
|
|
|
|
|
|
(2)
|
|
Form, Schedule or Registration Statement No.:
|
|
|
|
|
|
|
(3)
|
|
Filing Party:
|
|
|
|
|
|
|
(4)
|
|
Date Filed:
|
HERBALIFE
LTD.
March ,
2011
Dear Fellow Shareholder:
We are pleased to enclose information about the 2011 Annual
General Meeting of Shareholders, or the Meeting, of Herbalife
Ltd., or the Company, to be held on Thursday, April 28,
2011 at 8:00 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 accompanying Proxy Statement, at
the Meeting you will be asked to consider proposals to:
|
|
|
|
1.
|
Elect four directors, each for a term of three years;
|
|
|
2.
|
Approve an amendment to the Companys Amended and Restated
2005 Stock Incentive Plan to increase the authorized number of
Common Shares issuable thereunder by 3,200,000 and to provide
that full value awards will be counted at a 2.6:1 premium factor
against the remaining available share pool;
|
|
|
3.
|
Effect a
two-for-one
stock split of the Companys Common Shares;
|
|
|
4.
|
Advise as to the Companys executive compensation;
|
|
|
5.
|
Advise as to the frequency of shareholder advisory votes on the
Companys executive compensation;
|
|
|
6.
|
Ratify the appointment of the Companys independent
registered public accountants for fiscal 2011;
|
|
|
7.
|
Re-approve the performance goals under the Herbalife Ltd.
Executive Incentive Plan for compliance with Section 162(m)
of the Internal Revenue Code; and
|
|
|
8.
|
Act upon such other matters as may properly come before the
Meeting.
|
MY FELLOW DIRECTORS AND I HAVE UNANIMOUSLY APPROVED THE
PROPOSALS INCLUDED HEREIN AND RECOMMEND YOU VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS FOR
EACH OF THE DIRECTOR NOMINEES NAMED HEREIN, FOR THE APPROVAL OF
PROPOSALS 2, 3, 4, 6 AND 7 AND FOR ONE YEAR WITH
RESPECT TO PROPOSAL 5.
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 28, 2011
To our Shareholders:
NOTICE IS HEREBY GIVEN that the 2011 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 28, 2011 at 8:00 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:
|
|
|
|
1.
|
Elect four directors, each for a term of three years;
|
|
|
2.
|
Approve an amendment to the Companys Amended and Restated
2005 Stock Incentive Plan to increase the authorized number of
Common Shares issuable thereunder by 3,200,000 and to provide
that full value awards will be counted at a 2.6:1 premium factor
against the remaining available share pool;
|
|
|
3.
|
Effect a
two-for-one
stock split of the Companys Common Shares;
|
|
|
4.
|
Advise as to the Companys executive compensation;
|
|
|
5.
|
Advise as to the frequency of shareholder advisory votes on the
Companys executive compensation;
|
|
|
6.
|
Ratify the appointment of the Companys independent
registered public accountants for fiscal 2011;
|
|
|
7.
|
Re-approve the performance goals under the Herbalife Ltd.
Executive Incentive Plan for compliance with Section 162(m)
of the Internal Revenue Code; and
|
|
|
8.
|
Act upon such other matters as may properly come before the
Meeting.
|
Each of the above proposals will be proposed as Ordinary
Resolutions as permitted by the Companies Law (2010 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 February 28, 2011, 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 , 2011
HERBALIFE
LTD.
PROXY STATEMENT FOR
2011
ANNUAL GENERAL MEETING OF
SHAREHOLDERS
Herbalife Ltd., also referred to as we, our, us, Herbalife or
the Company, is calling its 2011 Annual General Meeting of
Shareholders, or the Meeting, to be held on Thursday,
April 28, 2011 at 8:00 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:
|
|
|
|
1.
|
Elect four directors, each for a term of three years;
|
|
|
2.
|
Approve an amendment to the Companys Amended and Restated
2005 Stock Incentive Plan to increase the authorized number of
Common Shares issuable thereunder by 3,200,000 and to provide
that full value awards will be counted at a 2.6:1 premium factor
against the remaining available share pool;
|
|
|
3.
|
Effect a
two-for-one
stock split of the Companys Common Shares;
|
|
|
4.
|
Advise as to the Companys executive compensation;
|
|
|
5.
|
Advise as to the frequency of shareholder advisory votes on the
Companys executive compensation;
|
|
|
6.
|
Ratify the appointment of the Companys independent
registered public accountants for fiscal 2011;
|
|
|
7.
|
Re-approve the performance goals under the Herbalife Ltd.
Executive Incentive Plan for compliance with Section 162(m)
of the Internal Revenue Code; and
|
|
|
8.
|
Act upon such other matters as may properly come before the
Meeting.
|
Our Board of Directors unanimously recommends that you vote for
each of the director nominees named herein, for the approval of
proposals 2, 3, 4, 6 and 7 and for One Year
with respect to proposal 5. 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 , 2011,
and is first being made available to shareholders of the Company
on or about March , 2011. A Notice Regarding
Internet Availability of Proxy Materials for the Annual General
Meeting was mailed to shareholders of the Company on or about
March , 2011, which contained instructions on
how to access our proxy materials, including our Proxy Statement
and Annual Report.
Table of
Contents
|
|
|
|
|
|
|
|
3
|
|
|
|
|
5
|
|
|
|
|
10
|
|
|
|
|
16
|
|
|
|
|
24
|
|
|
|
|
25
|
|
|
|
|
26
|
|
|
|
|
26
|
|
|
|
|
28
|
|
|
|
|
31
|
|
|
|
|
58
|
|
|
|
|
60
|
|
|
|
|
61
|
|
|
|
|
63
|
|
|
|
|
A-1
|
|
|
|
|
B-1
|
|
|
|
|
C-1
|
|
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 28, 2011, at 8:00 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 at 800 W. Olympic Blvd.,
Suite 406, Los Angeles, California 90015. Our telephone
number is
(213) 745-0500.
Internet Availability of Proxy
Materials. Under rules 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, 2011, 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
February 28, 2011, 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
59,090,332 Common Shares were issued and outstanding and
held of record by 798 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 four nominees who
receive the most votes will be elected. Abstentions and
broker non-votes will not affect the outcome of the
election. The advisory vote on the frequency of advisory votes
on the Companys executive compensation will also be
determined based on a plurality of the votes cast. This means
that the option that receives the most votes will be recommended
by the shareholders to the Board of Directors. Abstentions and
broker non-votes will not affect the outcome of this
proposal.
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.
3
The results of the advisory votes on the Companys
executive compensation and on the frequency of advisory votes on
the Companys executive compensation are not binding on the
Board of Directors.
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 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 28, 2011.
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.
Currently each class has three directors; however, effective at
the Meeting, the board will consist of ten directors, with
Class I expanding to four directors and Class II and
Class III each continuing to have three directors. The
current terms of office of Class I directors end at the
Meeting. The current terms of office of Classes II
and III directors end at the annual general meetings in
2012 and 2013, respectively.
The nominees for Class I directors are to be voted upon at
the Meeting. The Board of Directors has nominated Michael O.
Johnson, John Tartol, Carole Black and Michael J. Levitt
for election as Class I directors to serve three-year terms
expiring at the 2014 annual general meeting. The Company did not
receive any shareholder nominations for director. Lawrence M.
Higby, a Class I director, has notified the Board of his
decision not to stand for reelection.
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 four. 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, which are
available on the Companys website
www.herbalife.com, by following the links through
Investor Relations to Corporate
Governance, include business experience and skills,
independence, 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
5
independence, financial literacy, personal and professional
accomplishments, and experience, each in light of the
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 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 four 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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR MICHAEL O. JOHNSON, JOHN TARTOL, CAROLE BLACK
AND MICHAEL J. LEVITT.
NOMINEES
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Michael O. Johnson, age 56, is Chairman and
Chief Executive Officer of the Company. Mr. Johnson joined
the Company in April 2003 as Chief Executive Officers and became
Chairman of the Board in May 2007. Mr. Johnson spent
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 until March 19, 2007 and 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
eight 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 75 countries
worldwide.
|
|
|
I
|
|
|
|
2003
|
|
John Tartol, age 59, has been an independent
Herbalife distributor for 29 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 29 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.
|
|
|
I
|
|
|
|
2003
|
|
6
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Carole Black, age 67, is the former President
and Chief Executive Officer of Lifetime Entertainment Services.
Ms. Black served as the President and Chief Executive
Officer of Lifetime Entertainment Services, a multi-media brand
for women, including Lifetime Network, Lifetime Movie Network,
Lifetime Real Women Network, Lifetime Online and Lifetime Home
Entertainment, from March 1999 to March 2005. Prior to that,
Ms. Black served as the President and General Manager of
NBC4, Los Angeles, a commercial television station, from 1994 to
1999, and in various marketing-related positions at The Walt
Disney Company, a media and entertainment company, from 1986 to
1993. Ms. Black has served as a director of Time Warner
Cable Inc. since July 2006. Ms. Blacks qualifications
to serve on our Board of Directors include 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.
|
|
|
I
|
|
|
|
|
|
Michael J. Levitt, age 52, is the Chairman
and Chief Executive Officer of Stone Tower Capital LLC.
Mr. Levitt founded Stone Tower in 2001 as an alternative
investment management firm. Prior to forming Stone Tower,
Mr. Levitt was a partner with the private equity firm
Hicks, Muse, Tate and Furst Incorporated, from 1996 to 2001.
Prior to joining Hicks Muse, Mr. Levitt served as a
Managing Director and the Co-Head of the Investment Banking
Division of Smith Barney Inc. from 1993 to 1995, with
responsibility for the advisory, private equity sponsor and
leveraged finance activities of the firm. Prior thereto,
Mr. Levitt was a Managing Director with
Morgan Stanley & Co. He was responsible for the
firms corporate finance, merger and acquisition and
leveraged finance activities with private equity firms and
non-investment grade companies. From October 2001 to March 2006,
Mr. Levitt served as the lead outside director and chairman
of the audit committee for IDT Corporation. Mr. Levitt also
served as director to Alternative Asset Management Acquisition
Corp from March 2007 to May 2009. He served as Chairman of the
Board from October 2009 to April 2010 of 57th Street
General Acquisition Corp. In addition he serves on the board for
Great American Group, Inc. (July 2009 present) and
NXTM LLC (January 2010 present). Mr. Levitt
received his undergraduate and Juris Doctor Degrees from the
University of Michigan. Mr. Levitts qualifications to
serve on our Board of Directors include his significant consumer
products investment experience, which is relevant to the
Companys business operations in selling packaged food and
nutritional supplement products, his service as a Chief
Executive Officer, which helps the Board better understand
managements
day-to-day
actions and responsibilities, and his past professional
financial experience, which provides the Board with valuable
knowledge of financial matters.
|
|
|
I
|
|
|
|
|
|
7
CONTINUING
DIRECTORS
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Pedro Cardoso, age 44, has been an
independent Herbalife distributor for 19 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
19 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.
|
|
|
II
|
|
|
|
2009
|
|
Murray H. Dashe, age 68, 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.
|
|
|
II
|
|
|
|
2009
|
|
Colombe M. Nicholas, age 66, 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.
|
|
|
II
|
|
|
|
2006
|
|
8
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Leroy T. Barnes, Jr., age 59, 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.
|
|
|
III
|
|
|
|
2004
|
|
Richard P. Bermingham, age 71, 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
Special Value Expansion Fund, LLC, Interactive Health, Inc. and
Joes Crab Shack. Additionally, Mr. Bermingham served
on the board of EaglePicher Corp. until 2010 and 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.
|
|
|
III
|
|
|
|
2004
|
|
9
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Jeffrey T. Dunn, age 53, 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 75 countries worldwide; and his service as a
chief executive officer, which helps the Board better understand
managements
day-to-day
actions and responsibilities.
|
|
|
III
|
|
|
|
2009
|
|
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 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. Our Board of Directors also affirmatively
determined that each of Ms. Black and Mr. Levitt is
independent under the NYSE Listed Company Manual and the
Companys Categorical Standards in connection with
approving the nomination of Ms. Black and Mr. Levitt
to serve as members of the Board of Directors. The NYSEs
independence guidelines and the Companys Categorical
Standards include a series of objective tests, such as the
person is not an employee of the Company and has not engaged in
various types of business dealings involving the Company which
would prevent the person from being an independent director. The
Board of Directors has affirmatively determined that none of the
foregoing directors or nominees had any relationship with the
Company that would classify him or her as not independent.
Board
Meetings
The Board of Directors met five times during fiscal 2010. 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 such committees. 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
members of the Board of Directors attended the 2010 annual
general 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
10
non-management directors. The position is filled by an
independent director elected by the independent directors
serving a two year term. Richard P. Bermingham currently serves
as the Lead Director and his term is scheduled to expire in
April 2011 following the Meeting.
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, include:
|
|
|
|
|
coordinating the activities of the independent directors;
|
|
|
|
presiding at meetings of the Board at which the Chairman and CEO
is not present, including executive sessions of the independent
directors;
|
|
|
|
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;
|
|
|
|
acting as the principal liaison to the Chairman and CEO for the
views, and any concerns and issues, of the independent directors;
|
|
|
|
advising on the flow of information sent to the Board, and
reviewing the agenda, materials and schedule for Board meetings;
|
|
|
|
being available for consultation and communication with major
shareholders as appropriate;
|
|
|
|
maintaining close contact with the chairperson of each standing
committee; and
|
|
|
|
performing other duties that the Board may from time to time
delegate to assist the Board in the fulfillment of its
responsibilities.
|
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.
11
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 consensus 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 risk 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.
2010 Director
Compensation
The table below summarizes the compensation paid by the Company
to non-management directors for the fiscal year ended
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Option/SAR
|
|
|
|
|
Name
|
|
Cash ($)
|
|
|
Awards ($)(1)
|
|
|
Total ($)
|
|
|
Leroy T. Barnes, Jr.
|
|
|
110,133
|
|
|
|
100,000
|
|
|
|
210,133
|
|
Richard P. Bermingham
|
|
|
129,034
|
|
|
|
100,000
|
|
|
|
229,034
|
|
Pedro Cardoso
|
|
|
67,500
|
|
|
|
100,000
|
|
|
|
167,500
|
|
Murray H. Dashe
|
|
|
99,000
|
|
|
|
100,000
|
|
|
|
199,000
|
|
Jeffrey T. Dunn
|
|
|
101,762
|
|
|
|
100,000
|
|
|
|
201,762
|
|
Lawrence M. Higby
|
|
|
86,958
|
|
|
|
100,000
|
|
|
|
186,958
|
|
Colombe M. Nicholas
|
|
|
84,121
|
|
|
|
100,000
|
|
|
|
184,121
|
|
John Tartol
|
|
|
70,833
|
|
|
|
100,000
|
|
|
|
170,833
|
|
|
|
|
(1) |
|
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, 2010 regarding assumptions
underlying valuation of equity awards. |
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
12
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. Cash fees with
respect to Board or committee membership or service as the Lead
Director or a committee chair are paid ratably assuming twelve
consecutive months of service from the date the particular
membership or service commences. Fees for attending Board or
committee meetings are paid in the month following the meeting
date. Non-management directors also receive a $100,000
equivalent annual equity grant pursuant to the Companys
Amended and Restated Non-Management Directors Compensation Plan,
which is part of the Herbalife Ltd. Amended and Restated 2005
Stock Incentive Plan. Prior to 2009, the annual equity grant was
made in the form of restricted stock units, or RSUs. Since 2009,
the annual equity grant has been made in the form of
stock-settled stock appreciation rights, or SARs, with a grant
date fair value (as determined for financial reporting purposes)
of $100,000, which vest in four equal installments of 25% on
July 15 and October 15 of the year of grant and January 15 and
April 15 of the following year.
The Company has adopted stock ownership guidelines applicable to
each non-management director. Specifically, each non-management
director is encouraged to hold Common Shares
and/or
vested equity awards with a value equal to five times such
directors annual retainer within two years of such
directors appointment or election to the Board of
Directors. Each non-management director that has served on our
Board for more than two years is compliant with these guidelines.
The table below summarizes the equity-based awards held by the
Companys non-management directors as of December 31,
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/Stock Appreciation Rights Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
Options/SARs
|
|
|
Options/SARs
|
|
|
|
|
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Exercise
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Un-Exercisable
|
|
|
Price ($)
|
|
|
Date
|
|
|
Leroy T. Barnes, Jr.
|
|
|
|
|
|
|
29,412
|
|
|
|
13.64
|
|
|
|
02/27/2019
|
|
Leroy T. Barnes, Jr.
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
Richard P. Bermingham
|
|
|
7,500
|
|
|
|
|
|
|
|
14.00
|
|
|
|
12/15/2014
|
|
Richard P. Bermingham
|
|
|
|
|
|
|
29,412
|
|
|
|
13.64
|
|
|
|
02/27/2019
|
|
Richard P. Bermingham
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
Pedro Cardoso
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
Murray H. Dashe
|
|
|
|
|
|
|
14,288
|
|
|
|
19.82
|
|
|
|
04/30/2019
|
|
Murray H. Dashe
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
Jeffrey T. Dunn
|
|
|
|
|
|
|
2,085
|
|
|
|
41.80
|
|
|
|
11/11/2019
|
|
Jeffrey T. Dunn
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
Lawrence M. Higby
|
|
|
|
|
|
|
31,605
|
|
|
|
12.62
|
|
|
|
03/10/2019
|
|
Lawrence M. Higby
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
Colombe M. Nicholas
|
|
|
|
|
|
|
29,412
|
|
|
|
13.64
|
|
|
|
02/27/2019
|
|
Colombe M. Nicholas
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
John Tartol
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
45.88
|
|
|
|
05/07/2020
|
|
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
13
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
During 2010, the audit committee 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 is 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:
|
|
|
|
|
to monitor the integrity of the Companys financial
reporting process and systems of internal controls regarding
finance, accounting and reporting;
|
|
|
|
to monitor the independence and performance of the
Companys independent auditors and internal auditing
department; and
|
|
|
|
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 2010, the audit committee met four times.
Nominating
and Corporate Governance Committee
From January 1, 2010 through April 28, 2010, the
nominating and corporate governance committee consisted of Mme.
Nicholas and Messrs. Barnes and Bermingham. Since
April 29, 2010, the nominating and corporate governance
committee has consisted of Mme. Nicholas and Messrs. Barnes
and Dunn. Each director who served on the nominating and
corporate governance committee in 2010 is independent as
discussed above under Director
Independence. The principal duties of the nominating and
corporate governance committee are as follows:
|
|
|
|
|
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
|
|
|
|
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
14
directors, as well as 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. Carole Black and Michael J. Levitt were both introduced to
the nominating and corporate governance committee and
recommended for consideration by our Chairman and Chief
Executive Officer, Mr. Johnson.
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 2010, the
nominating and corporate governance committee met four times.
Compensation
Committee
From January 1, 2010 through April 28, 2010, the
compensation committee consisted of Mme. Nicholas and
Messrs. Bermingham, Dashe and Higby. From April 29,
2010 through May 7, 2010, the compensation committee
consisted of Messrs. Bermingham, Dashe, Dunn and Higby.
Since that date, the compensation committee has consisted of
Messrs. Bermingham, Dashe and Dunn. Each director who
served on the compensation committee in 2010 is independent as
discussed above under Director
Independence. The principal duties of the compensation
committee are as follows:
|
|
|
|
|
to oversee and approve compensation policies and programs;
|
|
|
|
to review and approve corporate goals and objectives relevant to
the compensation of the Companys CEO and other executive
officers;
|
|
|
|
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;
|
|
|
|
to evaluate the performance of certain executive officers and,
considering the CEOs recommendations, set the compensation
level for such executive officers;
|
|
|
|
to administer existing incentive compensation plans and
equity-based plans;
|
|
|
|
to oversee regulatory compliance with respect to executive
compensation matters; and
|
|
|
|
to review the compensation of directors.
|
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
15
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 2010, the compensation committee
met seven times.
Compensation
Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2010, Mme.
Nicholas and Messrs. Bermingham, Dashe, Dunn and Higby
served on the compensation committee of the Board of Directors.
During the fiscal year ended December 31, 2010, 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 AMENDED AND RESTATED 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 the Companys Amended and
Restated 2005 Stock Incentive Plan, or the 2005 Plan, to
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 3,200,000
Common Shares and to revise the share counting formula under the
2005 Plan to provide that, from and after amendment of the 2005
Plan by shareholders, each Common Share issued under a full
value award will be counted as 2.6 Common Shares. The proposed
amendment is subject to approval by the shareholders at the
Meeting.
The proposed amendment to the 2005 Plan would increase the
aggregate number of Common Shares authorized for issuance under
the 2005 Plan by 3,200,000 Common Shares (without giving effect
to the proposed
two-for-one
stock split of the Common Shares). If approved, the additional
Common Shares will be issuable in connection with each type of
award authorized to be granted pursuant 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 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. The following table includes information
regarding outstanding equity awards (including awards under the
2005 Plan and the Companys prior stock incentive plans)
and shares available for future awards under the 2005 Plan
(there are no additional shares available for grant under any of
the prior stock inventive plans) as of February 28, 2011
and without giving effect to approval of the proposed amendment
to the 2005 Plan or the proposed
two-for-one
stock split of the Common Shares:
|
|
|
|
|
Total Common Shares underlying outstanding stock options and SARs
|
|
|
6,305,493
|
|
Weighted average exercise price of outstanding stock options and
SARs
|
|
$
|
28.73
|
|
Weighted average remaining contractual life of outstanding stock
options and SARs
|
|
|
5.5
|
|
Total Common Shares underlying outstanding unvested RSU awards
|
|
|
472,501
|
|
Total Common Shares underlying outstanding vested RSU awards
with deferred settlement
|
|
|
51,492
|
|
Total Common Shares currently available for grant
|
|
|
891,441
|
|
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 of the 2005 Plan, in part, because the number
of
16
shares available under the 2005 Plan as currently in effect does
not provide flexibility to adequately provide for future
incentives or hirings.
Additional
Plan Disclosure
The following table sets forth information regarding awards
granted and earned over the last three fiscal years.
Equity
Awards Granted and Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(thousands)
|
|
|
(thousands)
|
|
|
(thousands)
|
|
|
Service-based SARs granted
|
|
|
1,127.7
|
|
|
|
1,544.6
|
|
|
|
890.1
|
|
Performance-based SARs granted(1)
|
|
|
759.8
|
|
|
|
|
|
|
|
|
|
Performance-based SARs earned(1)
|
|
|
363.7
|
|
|
|
|
|
|
|
|
|
Service-based RSUs granted
|
|
|
514.1
|
|
|
|
437.8
|
|
|
|
121.1
|
|
|
|
|
(1) |
|
As of December 31, 2010, the market conditions had been met
as to 363,670 of the SARs granted to Mr. Johnson in 2008.
In 2008, 759,790 SARs were 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. |
Plan
Features and Grant Practices that Promote Good Corporate
Governance
The 2005 Plan and the Companys grant practices include a
number of features intended to promote good corporate governance:
|
|
|
|
|
The number of additional shares requested, 3,200,000, represents
only an additional 4.4% of overhang (i.e., the dilutive
effect these additional shares would have on the Companys
shareholders).
|
|
|
|
Any additional grants of full value awards are counted at a
2.6:1 premium factor against the remaining available share pool.
|
|
|
|
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.
|
|
|
|
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 either a two or three year vesting
schedule.
|
|
|
|
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 Common Shares that are added back to the
equity pool under the 2005 Plan are Common Shares subject to
awards that are cancelled or forfeited or for awards paid in
cash rather than Common Shares.
|
|
|
|
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.
|
|
|
|
The 2005 Plan specifically prohibits repricing of stock options
or SARs without shareholder approval and specifically prohibits
the replacement of underwater stock options or SARs with cash or
awards with lower exercise prices.
|
17
|
|
|
|
|
All of the Companys current equity compensation programs
are funded by grants under a shareholder approved program.
|
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
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, is qualified in its entirety by
the complete text of the 2005 Plan, a copy of which is available
as Exhibit 99.1 to our Current Report on
Form 8-K
filed on April 29, 2010, and the proposed amendment
attached hereto as Appendix A. The following summary does
not, however, give effect to the stock split contemplated in
proposal 5.
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 February 28, 2011, there were
approximately 264 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 4,700,000, 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. The maximum number of Common Shares that may be
issued pursuant to awards granted under the 2005 Plan will be
7,900,000 plus any Additional Common Shares, for a total of
11,138,590 Common Shares. In addition, Common Shares issuable
under the 2005 Plan are subject to certain adjustments for
corporate transactions, as described in
Adjustments.
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
18
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.
As amended, 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 two and
six-tenths (2.6) 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 amended, as two and
six-tenths (2.6) 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:
|
|
|
|
|
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.
|
|
|
|
Option Term. An option must expire within
10 years of its date of grant.
|
|
|
|
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.
|
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 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
19
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:
|
|
|
|
|
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.
|
|
|
|
Voting and Dividend Rights. Unless otherwise
determined by the Committee, awards of restricted stock will
have full voting and dividend rights.
|
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 other than the chief financial officer. 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 (including adjusted revenue, Volume Points,
net sales and analogous financial measures), (xii) income
or net income, (xiii) operating income,
(xiv) operating profit or net operating profit,
(xv) operating margin or profit margin, (xvi) return
on operating
20
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:
|
|
|
|
|
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;
|
|
|
|
the substitution of shares of the surviving or successor company
for Common Shares covered by any outstanding award;
|
|
|
|
the conversion of any outstanding award into a right to receive
cash and/or
other property; and/or
|
|
|
|
the termination of any outstanding award upon or following the
consummation of the Change of Control.
|
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, 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.
21
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, is approved by the Companys
shareholders. The closing price of the Common Shares on
February 28, 2011 was $78.41.
Federal
Income Tax Consequences of the 2005 Plan
The following is only a summary of the effects 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.
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
22
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.
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
23
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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE AMENDMENT OF THE 2005
PLAN.
PROPOSAL 3:
EFFECT A
TWO-FOR-ONE
STOCK SPLIT OF THE COMPANYS COMMON SHARES
The Companys Board of Directors has approved, and is
recommending to shareholders for approval at the Meeting, a
resolution (the Resolution) to effect a
two-for-one
stock split of the Companys Common Shares. If the
Resolution is approved, on May 10, 2011, the record date
established by our Board of Directors, each issued and
outstanding Common Share, par value US $0.002 per share, would
be subdivided into two Common Shares, par value US $0.001 per
share, and the Companys currently authorized share capital
of 500,000,000 Common Shares, par value US $0.002 per share,
would be subdivided into 1,000,000,000 Common Shares, par value
US $0.001 per share. The Company is currently authorized to
issue 7,500,000 preferred shares, par value US $0.002 per share,
and the proposed stock split will not affect this authorization.
The description of the proposed
two-for-one
stock split contained in this Proxy Statement does not purport
to be complete and is qualified in its entirety by reference to
the full text of the Resolution contained in Appendix B to
this Proxy Statement.
The purpose of the Resolution is to effect a
two-for-one
stock split of the Common Shares. The
two-for-one
stock split will increase the number of shares held in the
public market, and the Board of Directors believes that this
will place the market price of a Common Share in a range that is
more affordable to investors, particularly individuals. As a
result, potentially more people would be able to buy our Common
Shares and provide more liquidity in each shareholders
investment. We cannot be certain that these effects will occur.
If the Resolution is approved by the shareholders, it will be
effective on May 10, 2011, the record date for the stock
split. The Company will apply to the New York Stock Exchange for
the listing of the additional Common Shares that would be issued
as a result of the stock split. Provided the listing application
is approved by the New York Stock Exchange, the stock split
would be accomplished by mailing each shareholder of record as
of the close of business on the stock split record date who
holds Common Shares in certificated form a certificate
representing one Common Share, par value US $0.001 per share,
and providing each shareholder of record as of the close of
business on the stock split record date who holds Common Shares
in book entry form an additional Common Share, par value $0.001
per share, in each case for each Common Share held by the
shareholder on that date. The additional Common Shares will be
distributed on or about May 17, 2011.
FOLLOWING THE STOCK SPLIT, EXISTING STOCK CERTIFICATES
REPRESENTING COMMON SHARES, PAR VALUE US $0.002 PER SHARE, WOULD
BE DEEMED TO REPRESENT THE SAME NUMBER OF COMMON
SHARES HAVING A PAR VALUE OF US $0.001 PER SHARE. EXISTING
CERTIFICATES WILL NOT BE EXCHANGED FOR NEW CERTIFICATES AND
CERTIFICATES SHOULD NOT BE RETURNED TO THE COMPANY OR ITS
TRANSFER AGENT UNTIL THE SHARES REPRESENTED BY THE
CERTIFICATE ARE TRANSFERRED.
There are no preemptive rights with respect to the Common
Shares, and shareholders will not have any dissenters or
appraisal rights in connection with adoption of the Resolution.
The additional Common Shares issuable upon the effective date of
the stock split would have the identical powers, preferences and
rights as the currently outstanding Common Shares. Adoption of
the Resolution would not affect the rights of the holders of
currently outstanding Common Shares, except for rights
incidental to increasing the number of Common Shares
outstanding. Appropriate adjustments will be made to all awards
granted under the Companys equity incentive and other
employee incentive plans as well as the number of Common Shares
reserved for issuance thereunder.
Assuming transactions of an equivalent dollar amount, brokerage
commissions on purchases and sales of Common Shares after the
stock split may be higher than before the stock split because
the same ownership interest would be represented by a greater
number of shares.
24
Tax
Effect of the
Two-for-One
Stock Split
Under existing United States federal income tax laws, the
proposed
two-for-one
stock split would not result in any gain or loss or realization
of taxable income to owners of Common Shares. The cost basis for
tax purposes of each new Common Share and each retained Common
Share would be equal to one-half of the cost basis for tax
purposes of the corresponding Common Share immediately preceding
the stock split. The holding period for each additional Common
Share issued pursuant to the stock split would be deemed to be
the same as the holding period for the original Common Share.
The laws of jurisdictions other than the United States may
impose income taxes on the receipt of additional shares pursuant
to the stock split.
This summary is based upon the Code, existing and proposed
Treasury Regulations promulgated thereunder, administrative
pronouncements and judicial decisions, all as in effect on the
date of this Proxy Statement, and all of which are subject to
change, possibly on a retroactive basis. Any such change could
affect the continuing validity of this discussion. This
discussion does not address the effect of any applicable state,
local or foreign tax laws. The foregoing summary does not
purport to be a complete analysis of all potential tax effects
of the stock split. Each shareholder is urged to consult with
his or her own tax advisor to determine the particular tax
consequences to such shareholder of the stock split, including
the applicability and effect of state, local and foreign tax
laws and the possible effects of any changes in
U.S. federal or other applicable tax laws.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE PROPOSED
TWO-FOR-ONE
STOCK SPLIT CONTEMPLATED BY THE RESOLUTION.
PROPOSAL 4:
ADVISE AS
TO THE COMPANYS EXECUTIVE COMPENSATION
Our executive compensation program is intended to attract,
motivate and retain a talented and high-performing executive
team to lead the Companys success through a unique global
business model. The Companys executive compensation
program is designed to incent and create long-term growth and
value for shareholders and is simple in design; the vast
majority of the compensation of the Companys named
executive officers the officers identified in the
section entitled Executive Compensation
Compensation Discussion and Analysis, is tied
to Company operating and share price performance. Volume Point
growth, operating income and earnings per share are used to
determine executives annual incentive compensation. SARs,
subject to share price vesting criteria as well as service
criteria in the 2008 performance-based SAR grant to
Mr. Johnson, and RSUs directly align the long-term
interests of our executives with those of our shareholders.
The Board of Directors believes the compensation program for the
named executive officers was instrumental in helping the Company
achieve strong financial performance in 2010 and in recent
years. In 2010, the Company posted strong operating results in a
challenging economic environment. The Companys share price
increased 72% for the year surpassing the share price
performance of industry peers and the S&P 500 as a whole.
In addition, the management team accomplished major strategic
objectives in 2010 that provided significant support for the
Companys continued growth and success, including:
|
|
|
|
|
Streamlining the supply chain through the consolidation of raw
material suppliers and contract manufacturers, the expansion and
retrofit of its three manufacturing facilities and the
initiation of construction of a botanical extraction facility in
Changsha, China.
|
|
|
|
Extending the daily consumption model into new geographies
around the world in an effort to drive top line growth,
including the increase in distributor access points in many of
our key markets.
|
|
|
|
Introducing new innovative products to stimulate distributor and
consumer demand and excitement and the globalization of
successful products into new markets.
|
|
|
|
Increasing the brand awareness of the Company through expansion
of our sports marketing associations, including becoming the
Official Nutrition Sponsor for FC Barcelona.
|
25
Additional information regarding the Companys compensation
program applicable to the named executive officers is described
in the Compensation Discussion and Analysis section
of this Proxy Statement and the related tables and narrative
disclosure.
For the reasons discussed above, the Board of Directors
unanimously recommends that shareholders vote in favor of the
following resolution:
Resolved, that the shareholders approve the
compensation of the named executive officers, as disclosed
pursuant to Item 402 of
Regulation S-K
and described in the Compensation Discussion and Analysis, the
compensation tables and the accompanying narrative disclosure,
in the proxy statement.
While the resolution is non-binding, the Board of Directors
values the opinions that shareholders express in their votes and
in any additional dialogue. It will consider the outcome of the
vote and those opinions when making future compensation
decisions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE ADVISORY RESOLUTION APPROVING THE
COMPANYS EXECUTIVE COMPENSATION.
PROPOSAL 5:
ADVISE AS
TO THE FREQUENCY OF ADVISORY VOTES ON
EXECUTIVE COMPENSATION
In Proposal 4 above, we are asking shareholders to vote on
an advisory resolution on executive compensation. As part of the
Boards commitment to excellence and pursuant to recently
adopted Section 14A of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, in this Proposal Number 5
we are asking shareholders to vote on whether future advisory
votes on executive compensation should occur every one, two or
three years.
After careful consideration, the Board has determined that
holding an advisory vote on executive compensation every year is
the most appropriate policy for the Company, and recommends that
shareholders vote for future advisory votes on executive
compensation to occur every year. While the Companys
executive compensation programs are designed to promote a
long-term connection between pay and performance, the Board
recognizes that compensation disclosures are made annually.
Holding an annual advisory vote on executive compensation would
provide the Company with more direct and immediate feedback on
those compensation disclosures. However, shareholders should
note that because the advisory vote on executive compensation
occurs well after the beginning of the compensation year, and
because the different elements of our executive compensation
programs are designed to operate in an integrated manner and to
complement one another, in many cases it may not be appropriate
or feasible to change our executive compensation by the time of
the following years annual meeting of shareholders.
Please mark on the Proxy Card your preference as to the
frequency of holding
Say-on-Pay
shareholder advisory votes as either every year, every two
years, or every three years or mark abstain. You are
not voting to approve or disapprove the Board of Directors
recommendation on this item.
While the result of this advisory vote on the frequency of the
vote on executive compensation is non-binding, the Board of
Directors values the opinions that shareholders express in their
votes and in any additional dialogue. It will consider the
outcome of the vote and those opinions when deciding how
frequently to conduct the vote on executive compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR ONE YEAR AS TO THE FREQUENCY FOR VOTING ON
SAY ON PAY PROPOSALS.
PROPOSAL 6:
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, 2011. Services provided to the Company
and its subsidiaries by KPMG LLP in
26
fiscal 2009 and 2010 are described under Fees
to Independent Registered Public Accountants for Fiscal 2009 and
2010. 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 2011.
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 2010 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, 2010, which have been filed
with the SEC. The audit committee also selected, subject to
shareholder ratification, KPMG LLP to serve as our independent
registered public accounting firm for the year ending
December 31, 2011.
AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Leroy T. Barnes, Jr., Chairman
Richard P. Bermingham
Murray H. Dashe
Lawrence M. Higby
27
Fees to
Independent Registered Public Accountants for Fiscal 2009 and
2010
The following services were provided by KPMG LLP during fiscal
2009 and 2010:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
Audit Fees(1)
|
|
$
|
3,024,000
|
|
|
$
|
3,396,000
|
|
Audit-related fees
|
|
|
|
|
|
|
|
|
Tax fees(2)
|
|
$
|
514,000
|
|
|
$
|
452,000
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,538,000
|
|
|
$
|
3,848,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
PROPOSAL 7:
RE-APPROVE
THE PERFORMANCE GOALS UNDER THE HERBALIFE LTD. EXECUTIVE
INCENTIVE PLAN FOR COMPLIANCE WITH SECTION 162(m) OF THE
CODE
The Company maintains the Herbalife Ltd. Executive
Incentive Plan, or the Incentive Plan, which governs the award
and payment of annual bonuses to certain Company executives.
In order to allow for certain awards under the Incentive Plan to
qualify as tax-deductible performance-based
compensation within the meaning of Section 162(m) of
the Code, the Company is asking shareholders to re-approve the
material terms of the performance goals under the Incentive
Plan. 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. Shareholders are not
being asked to approve any amendment to the Incentive Plan or to
approve the Incentive Plan itself, but are only asked to
re-approve the material terms for compliance with
Section 162(m) of the Code.
The Board of Directors believes that it is in the best interests
of the Company and its shareholders to provide for a
shareholder-approved plan under which bonuses paid to its
executive officers can be deducted by the Company for federal
income tax purposes. Accordingly, the Company has structured the
Incentive Plan in a manner such that payments made under the
Incentive Plan can satisfy the requirements for
performance-based compensation within the meaning of
Section 162(m) of the Code. Under Section 162(m), the
federal income tax deductibility of compensation paid to the
Companys CEO and certain executive officers may be limited
to the extent that such compensation exceeds $1,000,000 in any
fiscal year. However, compensation that satisfies the
requirements for performance-based compensation as
defined in Section 162(m) is not subject to this limit and,
therefore, is generally deductible in full by the Company. 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
28
Section 162(m) the material terms of the performance goals
under which compensation may be paid include (i) the
employees eligible to receive compensation, (ii) a
description of the business criteria on which the performance
goals are based and (iii) the maximum amount of
compensation that can be paid to an employee under the
performance goals. Each of these aspects of the Incentive Plan
is discussed below. The following summary of the material
features of the Incentive Plan is qualified in its entirety by
reference to the complete text of the Incentive Plan. The full
text of the Incentive Plan is attached hereto as Appendix C.
Administration
The Incentive Plan shall be administered by the compensation
committee, which shall consist of two or more
outside directors as such term is defined under
Section 162(m) of the Code. The compensation committee
shall have complete authority to make any and all decisions
regarding the administration of the Incentive Plan, including
interpreting the terms and provisions of the Incentive Plan,
selecting the participants to receive awards under the Incentive
Plan, determining the terms of the awards made under the
Incentive Plan, and establishing any incentive program under the
Incentive Plan.
The compensation committee may delegate various functions to a
subcommittee or certain officers of the Company to the extent
such delegation is not inconsistent with Section 162(m) of
the Code.
Eligibility
Participants in the Incentive Plan are the Companys Chief
Executive Officer and such other executives of the Company as
selected by the compensation committee.
Establishment
of Incentive Program
Within 90 days after the end of each fiscal year, the
compensation committee may establish an incentive program under
the Incentive Plan for the current year by determining the
performance criteria to be used to determine amounts payable to
participants under the Incentive Plan and the performance bonus
amount payable to each participant under the Incentive Plan,
which amount will be based upon one or more performance criteria
and/or the
level of achievement with respect thereto. In its sole
discretion, the compensation committee may also reduce, but may
not increase, an individuals incentive calculated under an
award under the Incentive Plan.
The performance criteria can be measured individually or in
combination and can be applied to the Companys performance
as a whole or, alternatively, individual business units or
subsidiaries of the Company. The performance criteria can be
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. The performance criteria will include one or more of the
following: (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 (including adjusted revenue, Volume Points,
net sales and analogous financial measures), (xii) income
or net income, (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 maximum amount payable to any participant with respect to a
year shall not exceed $5,000,000.
Committee
Certification and Determination of Awards
As soon as practicable after the end of each fiscal year, the
compensation committee will determine the level of achievement
with respect to the performance criteria and targets established
under the Incentive Plan for each executive officer who is
subject to Section 162(m) of the Code.
Mr. Johnsons level of achievement is then submitted
to the independent members of the Board for their approval.
29
Payment
of Awards
Following the compensation committees determination of
awards to be paid to participants, such awards shall be paid in
cash, or, subject to the terms of any employment agreement and,
in the case of Mr. Johnson, approval by the independent members
of the Board, in the compensation committees discretion,
in Common Shares, which Common Shares will be issued pursuant to
and subject to the limitations of the 2005 Plan, another plan
approved by the shareholders of the Company, or any combination
thereof.
Duration
and Amendment
The Board of Directors may suspend or terminate the Incentive
Plan at any time, although the effect on any Incentive Plan
participant of any suspension or termination of the Incentive
Plan would be subject to the terms of any applicable employment
agreement. Additionally, the Board of Directors may amend the
Incentive Plan as it deems advisable except that no amendment
which is material for purposes of shareholder approval imposed
by applicable law, including the requirement of
Section 162(m) of the Code, shall be effective without the
approval of the shareholders of the Company.
New Plan
Benefits
The bonuses, if any, that will be paid to the participants who
are not subject to conflicting employment agreements for any
fiscal year under the Incentive Plan are subject to the
discretion of the compensation committee and, therefore, are not
determinable at this time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE RE-APPROVAL OF THE PERFORMANCE GOALS UNDER
THE EXECUTIVE INCENTIVE PLAN FOR COMPLIANCE WITH
SECTION 162(m) OF THE CODE.
30
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
This section explains the Companys executive compensation
program as it relates to the following named executive
officers whose compensation information is presented in
the tables following this discussion in accordance with SEC
rules:
|
|
|
Michael O. Johnson
|
|
Chairman and Chief Executive Officer
|
Desmond Walsh
|
|
President
|
Richard P. Goudis
|
|
Chief Operating Officer
|
Brett R. Chapman
|
|
General Counsel and Corporate Secretary
|
John DeSimone
|
|
Chief Financial Officer
|
Executive
Summary
Our executive compensation program is intended to attract,
motivate and retain a talented and high-performing executive
team to lead the Companys success through a unique global
direct selling business model. The compensation program is
designed to accomplish this in a way that incents and creates
long-term growth and value for our shareholders. The
compensation committee of the Board of Directors, or, for
purposes of this Compensation Discussion and Analysis, the
Committee, has responsibility for establishing, developing and
implementing these programs.
The Committee believes the compensation program for the named
executive officers was instrumental in helping the Company
achieve strong financial performance in 2010 and over the most
recent years. Several key operating performance measures that
drive our share value Volume Point growth, operating
profit and earnings per share are used in the
annual incentive plan for our named executive officers. Each of
these measures is more fully described in Annual Incentive
Awards Targets and Award Determination, below.
Long-term incentives provided through grants of SARs and RSUs
provide a direct alignment to long-term shareholder interests.
In 2010, the Company reported strong operating results in a
challenging global economic environment. These included Volume
Point growth of 14% and increases in operating profit and
earnings per share of 31% and 45%, respectively, as reflected in
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ Millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
(Except Per Share Data)
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
Growth
|
|
|
Volume Points
|
|
|
1,678
|
|
|
|
2,020
|
|
|
|
2,434
|
|
|
|
2,688
|
|
|
|
2,779
|
|
|
|
2,838
|
|
|
|
3,233
|
|
|
|
14
|
%
|
Operating Profit
|
|
|
138.7
|
|
|
|
219.1
|
|
|
|
256.9
|
|
|
|
313.2
|
|
|
|
332.3
|
|
|
|
296.0
|
|
|
|
387.5
|
|
|
|
31
|
%
|
Earnings per Share (Diluted)
|
|
|
(0.27
|
)
|
|
|
1.28
|
|
|
|
1.92
|
|
|
|
2.63
|
|
|
|
3.36
|
|
|
|
3.22
|
|
|
|
4.67
|
|
|
|
45
|
%
|
The Companys share price increased 69% for the year,
surpassing the share price performance of industry peers and the
S&P 500 as a whole.
In addition, the management team achieved major strategic
objectives in 2010 that provided significant support for the
Companys continued growth and success, including:
|
|
|
|
|
Streamlining the supply chain through the consolidation of raw
material suppliers and contract manufacturers, the expansion and
retrofit of its three manufacturing facilities and the
initiation of construction of a botanical extraction facility in
Changsha, China.
|
|
|
|
Extending the daily consumption model into new geographies
around the world in an effort to drive top line growth,
including the increase in distributor access points in many of
our key markets.
|
|
|
|
Introducing new innovative products to stimulate distributor and
consumer demand and excitement and the globalization of
successful products into new markets.
|
|
|
|
Increasing the brand awareness of the Company through expansion
of our sports marketing associations, including becoming the
Official Nutrition Sponsor for FC Barcelona.
|
31
The compensation of the Companys named executive officers
consists almost exclusively of base salary, annual cash
incentives, and grants of equity in the form of SARs and RSUs.
As a result, the vast majority of their total compensation is
tied to the Companys financial performance. In setting
target compensation, the Committee focuses on the total
compensation opportunity for the executive. Although there is no
targeted mix of compensation elements, the proportion of
compensation designed to be delivered in variable pay versus
base salary increases with the ability of the executive to
influence overall Company results. For 2010, as reflected in the
Summary Compensation Table, 82% of CEO compensation was provided
in the form of annual and long-term incentives that are tied to
the Companys top line performance, operating profit
results and stock price. For the other NEOs as a group, 77% of
total compensation was similarly based on performance-based
compensation.
The Companys executive compensation program emphasizes pay
for performance and is simple in design. The Company, in 2010,
eliminated all tax gross ups (other than with respect to
benefits payable to Mr. Johnson with respect to a change in
control, as provided in his March 27, 2008 employee
agreement) and does not provide supplemental retirement benefits
to its executives and offers limited perquisites deemed
appropriate to meet competitive practice or to reinforce the
Companys strategy and culture of supporting healthy
lifestyles.
Executive
Compensation Program Objectives
As a global leader in network marketing and nutritional products
generating approximately 78% of our revenues outside the United
States, we operate in an environment of challenging regulatory,
economic and political uncertainty. Our success depends on the
leadership of highly-talented, adaptive and dedicated executives
who can apply the necessary skills to operate effectively
through our unique global direct selling business model and our
nutritional supplement product line. Our compensation program
for the named executive officers provides highly-competitive
rewards to executives who contribute to our success over time in
achieving superior growth in profitability and shareholder
returns over time.
The Committee believes that shareholder interests are advanced
if the Company assembles, motivates and rewards a
high-performing management team. To promote this objective, the
Committee was guided by the following underlying principles in
developing our executive compensation program:
|
|
|
|
|
The program should be designed to attract and encourage a
long-term commitment from the talented executives necessary to
lead our global direct selling business in advancing
shareholders interests in a manner consistent with our
mission of changing peoples lives.
|
|
|
|
Compensation opportunities should be highly competitive with the
pay practices of companies that operate in highly regulated,
global markets and require similar executive skills and
capabilities.
|
|
|
|
A meaningful 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.
|
32
|
|
|
|
|
Long-term incentives should be provided in Company equity to
encourage executives to plan and act with the perspective of
shareholders and the Companys Vision, Mission and Values
in mind and to reward them for successful implementation of our
growth strategies.
|
Compensation
Advisor
The Committee retained Towers Watson through August 2010 and Pay
Governance, LLC, thereafter to assist the Committee in
evaluating our executive compensation programs and in setting
any executive officers compensation. Both firms are
nationally recognized compensation consulting firms. The
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
2010, the then-current compensation 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, the 2005 plan, and
individual pay decisions with respect to our named executive
officers and other executive officers. While our compensation
advisor regularly consults with management in performing work
requested by the Committee, neither Towers Watson nor Pay
Governance has been permitted to perform any separate services
for management.
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 Mr. Chapman, for whom incentive awards
are determined by formula pursuant to his employment agreement)
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
by the independent members of the Board.
Purpose
of Compensation Elements
The compensation and benefits program for our named executive
officers consists of and is designed to achieve the following:
|
|
|
|
|
Base salary designed to competitively pay each executive for his
or her demonstrated sustained performance, capabilities, job
scope and experience.
|
|
|
|
Annual incentive compensation designed to focus the executives
on the achievement of challenging financial and other specified
operating objectives that should drive growth in shareholder
value over the long-term.
|
|
|
|
Long-term equity incentive compensation in the form of SARs and
RSUs 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 and 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.
|
33
|
|
|
|
|
Severance payments in the event of termination without cause or
resignation for good reason designed to enable each executive to
focus his full time and attention on meeting the financial and
operating objectives set by the Committee without fearing the
financial consequences of an unexpected termination of
employment.
|
|
|
|
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 for the total compensation package with target annual
incentive compensation and equity grant value set as a
percentage of base salary. The annual incentive compensation
opportunity is at risk and must be earned through the
achievement of annual performance goals, which represent
performance expectations of the Board and executive management.
In setting target annual incentive compensation levels, the
Committee focuses on the total compensation opportunity for each
executive. 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 there is no targeted mix of
compensation elements, the proportion of compensation designed
to be delivered in variable pay vs. base salary increases with
the ability of the executive to influence overall Company
results. We do consider the compensation practices of our peers
to obtain a general understanding of competitive compensation
practices and target metrics. 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.
Base
Salaries
Base Salaries for the Companys named executive officers
were frozen in 2009. In 2010, each of the named executive
officers received an increase in base salary. The base salaries
of Messrs. Walsh, Goudis and DeSimone were increased in
recognition of their performance and promotions to higher
offices within the Company and the base salary of
Mr. Chapman was increased in consideration of his
performance and signing an extension to his existing employment
agreement. The amount of each of these increases was established
after the Committee considered the effect of the 2009 salary
freeze, individual performance and competitive market trends. A
summary of base salary increases for our named executive
officers is provided in the following table:
|
|
|
|
|
|
|
|
|
Executive
|
|
2009 Salary
|
|
|
2010 Salary
|
|
|
Michael O. Johnson
|
|
$
|
1,200,000
|
|
|
$
|
1,230,000
|
|
Desmond Walsh
|
|
$
|
575,000
|
|
|
$
|
650,000
|
|
Richard P. Goudis
|
|
$
|
606,375
|
|
|
$
|
650,000
|
|
Brett R. Chapman
|
|
$
|
550,000
|
|
|
$
|
615,500
|
|
John DeSimone
|
|
$
|
345,000
|
|
|
$
|
525,000
|
|
Annual
Incentive Awards
General
Our annual cash incentive plans are designed to motivate and
reward the achievement of financial and operating goals that
drive value creation for our shareholders. The Committee
establishes performance criteria and goals for our incentive
plans each year that are aligned with public investor
expectations. The performance measures used for each named
executive officer are based on their primary area of focus and
their ability to affect the Companys results.
Pursuant to the terms of their employment agreements, which were
the result of arms-length negotiation, annual incentive awards
for Messrs. Johnson and Chapman are provided under the
Incentive Plan and are based on the achievement of targeted
Earnings Per Share, or EPS, which the Committee believes to be
an important indicia of the creation of shareholder value and
aligns the interest of our executives with the expectations of
our investors. In addition, Mr. Johnsons employment
agreement provides for a supplemental 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. As
in 2009, the Committee selected growth in Volume
34
Points as the APT incentive performance measure in 2010. The
annual incentive payable to each of Messrs. Johnson and
Chapman under the Incentive Plan 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 2010 to
encourage market share growth.
The other named executive officers, Messrs. Goudis, Walsh
and DeSimone, participate in the Herbalife Senior Management
Bonus Incentive Plan, or the SMBIP. The Committee based funding
for this plan on achievement of targets for Company Operating
Profit and Volume Points for Messrs. Goudis and Walsh and
Operating Profit and EPS for Mr. DeSimone. A summary of
2010 annual incentive plan performance goals, results, and
incentive amounts is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weight in Determining
|
|
|
|
Annual Incentive
|
|
|
|
|
|
|
Operating
|
|
|
Volume
|
|
Executive
|
|
EPS
|
|
|
Profit
|
|
|
Points
|
|
|
Michael O. Johnson, Chairman
|
|
|
75%
|
|
|
|
|
|
|
|
25%
|
|
Desmond Walsh, President
|
|
|
|
|
|
|
50%
|
|
|
|
50%
|
|
Richard A. Goudis, Chief Operating Officer
|
|
|
|
|
|
|
50%
|
|
|
|
50%
|
|
Brett Chapman, General Counsel & Secretary
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
John DeSimone, CFO
|
|
|
50%
|
|
|
|
50%
|
|
|
|
|
|
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. 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, sale and consumption of our
products, distributor activity and retention, and the degree of
risk in achieving forecasted revenue and expense levels. In
setting performance targets, the Committee also considers
analyst expectations for the Company and selected peer companies.
For incentive plan purposes, the annual incentive plan
performance measures are defined as follows:
|
|
|
|
|
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.
|
|
|
|
Volume Points are point values assigned to each of our products
that are usually equal in all countries for a similar product
and are essentially based on the suggested retail price of
U.S. products. The Company uses Volume Points to measure
product sales volume. Volume Points are a useful measure of top
line performance results because they exclude the impact of
foreign currency fluctuations and pricing changes. In general,
an increase in Volume Points indicates an increase in our
revenue and our local currency net sales. As incremental revenue
provides a high profit contribution, Volume Point growth is a
key metric to our investors.
|
|
|
|
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.
|
2010
Annual Incentive Plan Performance Targets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
|
|
Results
|
|
|
(CEO Only)
|
|
Target
|
|
Maximum
|
|
Results
|
|
-% of Target
|
|
Performance % of Target
|
|
|
94%
|
|
|
|
100%
|
|
|
|
106%
|
|
|
|
|
|
|
|
|
|
EPS
|
|
|
$3.38
|
|
|
|
$3.60
|
|
|
|
$3.81
|
|
|
|
$4.73
|
|
|
|
131%
|
|
Volume Point Growth (%)
|
|
|
5.17
|
|
|
|
5.50
|
|
|
|
5.84
|
|
|
|
13.9
|
|
|
|
109%
|
|
Operating Profit (millions)
|
|
|
N/A
|
|
|
|
$342
|
|
|
|
$363
|
|
|
|
$408
|
|
|
|
119%
|
|
The EPS threshold level applies only to Mr. Johnson in
order to encourage and reward him for the Companys
achievement of challenging EPS performance targets.
Mr. Johnson is entitled to an incentive award of 44.44% of
his
35
target award for the Companys achievement of EPS results
between threshold and target. Mr. Chapman and
Mr. DeSimone receive incentive awards with respect to EPS
results only if EPS meets or exceeds the targeted level.
Similarly, the Volume Point growth threshold level only applies
to Mr. Johnson through his APT incentive to encourage and
reward him for
year-over-year
revenue growth. Mr. Johnson is entitled to an APT incentive
award of 50% of his target APT incentive award for the
Companys achievement of Volume Point growth between
threshold and target. Mr. Goudis and Mr. Walsh receive
incentive awards as to the Volume Point growth portion of the
SMBIP only if Volume Point growth meets or exceeds the targeted
level.
Under both the Incentive Plan and SMBIP, target-level bonuses
are awarded for EPS and Operating Profit results between 100%
and 102.9% of target, and bonus awards and funding increase on a
prorated basis in steps for results between 103% and up to 106%.
Under Mr. Johnsons APT incentive performance measure
and the Volume Point growth portion of the SMBIP incentive
payable to Messrs. Goudis and Walsh, target-level bonuses
are awarded for Volume Point growth at 100% of target, and bonus
awards and funding increase ratably in steps for each 0.5%
achievement in excess of the incentive target, up to 106%.
The Committee made certain adjustments from the audited
financial results to EPS and Operating Profit used to calculate
incentive awards in 2010 in order to measure Operating Profit
and EPS on a basis which is consistent with the Companys
target setting as well as public communications to investors and
analysts. These adjustments related to the effect of the
SECs classification of Venezuela as a hyperinflationary
economy on the Companys results and to the settlement of a
tax dispute in Korea in the third quarter. 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 resulted in a
positive adjustment of $0.06 to EPS from the publicly reported
EPS of $4.67 and in a positive adjustment to Operating Profit
from $388 million to $408 million. These adjustments
did not affect the achievement of the maximum performance
targets for 2010. The adjusted results are reflected in the
results column of the table above.
Under the terms of Messrs. Johnson and Chapmans employment
agreements, bonus payouts under the Incentive Plan are
determined formulaically solely on the basis of results relative
to performance goals described above. Operating Profit and
Volume Point growth results relative to performance goals
described above also is the sole basis for funding SMBIP.
Mr. Johnsons target and maximum incentive as a
percentage of his base salary is set forth in his employment
agreement. Target incentives for other executives are set by the
Company depending on the employees position, scope of
responsibilities, ability to influence Company results, and
competitive pay practices among the Herbalife Peer Group,
although the target incentives for each of Messrs. Chapman
and Goudis are subject to minimums set forth in their employment
agreements. Thus, Mr. Johnson has significantly higher
target and maximum incentive percentages than other named
executive officers. The following table shows the incentive
eligible earnings (i.e., 2010 base salary), target and
maximum incentive percentages and amounts, and 2010 incentive
awards for each
36
named executive officer. All 2010 awards to named executive
officers were based solely on the calculated results to target
performance levels.
2010
Incentive Award Calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Target
|
|
|
Maximum
|
|
|
Actual Results -% of Target
|
|
|
|
|
|
|
|
|
|
Eligible
|
|
|
Incentive
|
|
|
Incentive
|
|
|
|
|
|
Volume
|
|
|
Operating
|
|
|
Award
|
|
|
Award
|
|
Executive
|
|
Earnings
|
|
|
%
|
|
|
Percent
|
|
|
EPS
|
|
|
Point
|
|
|
Profit
|
|
|
%
|
|
|
Amount
|
|
|
Michael O. Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Incentive
|
|
$
|
1,230,000
|
|
|
|
112.50
|
%
|
|
|
225
|
%
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
225
|
|
|
$
|
2,767,500
|
|
APT Incentive
|
|
$
|
1,230,000
|
|
|
|
37.50
|
%
|
|
|
75
|
%
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
75
|
|
|
$
|
922,500
|
|
TOTAL
|
|
$
|
1,230,000
|
|
|
|
150.00
|
%
|
|
|
300
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
$
|
3,690,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desmond J. Walsh and Richard P. Goudis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume Point Incentive
|
|
$
|
650,000
|
|
|
|
40
|
%
|
|
|
80
|
%
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
80
|
|
|
$
|
520,000
|
|
Operating Profit Incentive
|
|
$
|
650,000
|
|
|
|
40
|
%
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
80
|
|
|
$
|
520,000
|
|
Total
|
|
$
|
650,000
|
|
|
|
80
|
%
|
|
|
160
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
$
|
1,040,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett R. Chapman
|
|
$
|
615,500
|
|
|
|
55
|
%
|
|
|
99
|
%
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
$
|
609,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John DeSimone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS Incentive
|
|
$
|
525,000
|
|
|
|
27.5
|
%
|
|
|
49.5
|
%
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
49.5
|
|
|
$
|
259,875
|
|
Operating Profit Incentive
|
|
$
|
525,000
|
|
|
|
27.5
|
%
|
|
|
49.5
|
%
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
49.5
|
|
|
$
|
259,875
|
|
Total
|
|
$
|
525,000
|
|
|
|
55
|
%
|
|
|
99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
$
|
519,750
|
|
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 teamwork and long-term
decision making necessary for continued success.
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
published Herbalife Peer Group information compiled by Towers
Watson and Pay Governance. The guidelines are intended to
provide highly competitive awards, generally in the top quartile
of competitive practices. 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 order to achieve an appropriate
balance between long-term stock ownership and incentives for
growth in each of the 2010 grants, 50% of each recipients
grant value was awarded in the form of SARs and 50% was awarded
in the form of 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 Topic 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. In
our 2010 annual grant program, our named executive officers
received SAR and RSU awards that were equal to those provided by
the guidelines. On May 7, 2010, the grant date, the option
value was $18.88 and our closing share price was $45.88.
37
2010 Long
Term Incentive Award Guidelines & Awards
Annual Grant Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAR Guideline
|
|
|
RSU Guideline
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
SAR Guideline
|
|
|
RSU Guideline
|
|
Executive
|
|
Grant Value
|
|
|
Value
|
|
|
Award
|
|
|
Award
|
|
|
Michael O. Johnson
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
|
|
66,208
|
|
|
|
27,245
|
|
Desmond J. Walsh
|
|
$
|
626,500
|
|
|
$
|
626,500
|
|
|
|
33,183
|
|
|
|
13,655
|
|
Richard P. Goudis
|
|
$
|
626,500
|
|
|
$
|
626,500
|
|
|
|
33,183
|
|
|
|
13,655
|
|
Brett R. Chapman
|
|
$
|
359,500
|
|
|
$
|
359,500
|
|
|
|
19,041
|
|
|
|
7,836
|
|
John DeSimone
|
|
$
|
359,500
|
|
|
$
|
359,500
|
|
|
|
19,041
|
|
|
|
7,836
|
|
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 the Company 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 which point in time they expire.
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.
The SARs awarded to our named executive officers in 2010 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
2010 vest based upon continued Company service over three years
at the rate of
1/3
on each anniversary of award.
In addition to our regular annual grants, Messrs. Walsh,
Goudis and DeSimone received a one-time special grant of SARs
following their promotions at the beginning of 2010. The special
grants were intended to reward each of the executives for
assuming a greater scope of responsibilities in the Company and
to motivate performance and continued service on behalf of
shareholders. The SARs vest in equal installments on the third,
fourth and fifth anniversaries of the grant date. The Committee
used its discretion to determine the size of the grants which
were near the value of an annual grant under Company guidelines.
At the recommendation of Mr. Johnson, the Committee also
made special grants of RSUs to Messrs. Walsh, Goudis and
Chapman in recognition of their respective contributions to the
Companys financial success in fiscal year 2009. The
Committee also recommended, and the independent members of the
Board approved, a special grant of RSUs to Mr. Johnson in
recognition of his contribution to the Companys financial
success in 2009. These RSUs vest in equal installments on the
first and second anniversaries of the grant date. The Committee
used its discretion to determine the size of these grants, which
were determined based on the Committees views as to the
value of the contribution of the respective executive.
Additional details of the 2010 equity awards made to our
executives can be found in the tabular disclosure below under
2010 Grants of Plan-Based Awards.
Equity
Award Grant Policy
Our annual and long term retention grants of SARs and RSUs were
made to our named executive officers on May 7, 2010
following a meeting of the Committee and the release of the
Companys First Quarter 2010 earnings. It is the
Companys policy to conduct its annual grant award process
at a time subsequent to the release of financial results after
the annual shareholder meeting. We currently operate a monthly
grant approval process where awards are authorized for new
hires, certain selected retention situations, and to newly
promoted executives other than our executive officers. In
addition, in January 2010 the Committee granted SARs to each of
Messrs. Walsh, Goudis and DeSimone in connection with their
promotions. All equity compensation awards to our named
executive officers
38
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
and/or
vested equity awards with an aggregate value equal to five times
his base salary by 2013. The other named executive officers are
encouraged to acquire and hold Common Shares
and/or
vested equity awards with an aggregate value equal to two times
their respective base salaries within five years of becoming a
named executive officer. As of February 28, 2011, all of
our named executive officers were in compliance with these
guidelines. The Committee reviews progress toward these
standards annually.
Benefits
and Perquisites
The Companys
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.
In addition, our named executive officers are eligible to
participate in the following executive benefits and perquisites
that we offer. The Company no longer provides tax
gross-up
payments with respect to any of these executive benefits:
|
|
|
|
|
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:
|
|
|
|
|
|
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.
|
|
|
|
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.
|
|
|
|
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.
|
|
|
|
|
|
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.
|
39
|
|
|
|
|
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 employee deferral
at 100%. On the next 5% of employee deferral, the employer match
is 50%. The annual maximum employee deferral is $16,500.
Employer matching contributions vest 100% after two years of
service.
|
|
|
|
Employee Stock Purchase Plan Our named executive
officers are eligible to participate in our broad-based 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.
|
|
|
|
Life Insurance We provide basic life insurance
coverage of 200% of base salary up to a maximum of $1,000,000 to
our executives and up to $750,000 to all other eligible
employees. This is a fully insured benefit. Employees are taxed
on their imputed income from this benefit on coverage exceeding
$50,000.
|
|
|
|
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.
|
|
|
|
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 to use tickets not
otherwise allocated for Company business purposes.
|
Employment
and Severance 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. In 2010, the Company amended the
employment agreements with Messrs. Goudis and Chapman to,
among other things, remove the Companys obligation to pay
Mr. Chapman or Mr. Goudis a
gross-up
payment in the event that payments made to them under their
respective employment agreements were subject to excise tax
pursuant to Section 4999 of the Code.
In June 2010, the Company entered into a severance agreement
with Mr. Walsh that was amended in February 2011. The
Company separately entered into a severance agreement with
Mr. DeSimone in February 2011. These agreements contain
severance and change in control provisions similar to those
found in the employment agreements of Messrs. Goudis and
Chapman, as detailed below. Neither agreement provides for an
excise tax
gross-up.
Severance
and Change in Control Arrangements
As a result of these agreements, each of the named executive
officers 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 the 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
40
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 and the severance agreement for each of
Messrs. Walsh and Mr. DeSimone 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.
They also provide for the acceleration of unvested equity awards
in connection with a change in control.
The employment agreements and 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. 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 highly performing
management team. To help us evaluate our 2010 compensation,
Towers Watson and Pay Governance analyzed publicly available
information, including proxy data, as well as recent market
trends and certain compensation surveys as described below. Our
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 those
highly regulated consumer product companies and general industry
companies of similar size; (2) business
complexity Herbalife operates in 75 countries around
the world in a highly regulated business where 78% of its
revenues are generated outside of the United States; and
(3) financial scope our management talent
should be similar to that of companies of a similar size in
terms of revenues and market capitalization.
With respect to pay decisions regarding 2010 named executive
officer compensation, the Herbalife Peer Group was comprised of
16 companies. 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
$3.2 billion and median
41
market capitalization of $5.8 billion were comparable to
those of Herbalife. During this period, the Herbalife Peer Group
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
12 Month
|
|
|
|
|
|
|
Revenue
|
|
|
Market
|
|
|
|
as of
|
|
|
Capitalization
|
|
|
|
12/31/10
|
|
|
12/31/10
|
|
Company Name
|
|
($ Millions)
|
|
|
($ Millions)
|
|
|
Avon Products Inc.
|
|
|
10,863
|
|
|
|
12,472
|
|
Sara Lee Corp.
|
|
|
10,795
|
|
|
|
11,194
|
|
Estee Lauder Companies Inc.
|
|
|
8,284
|
|
|
|
15,799
|
|
Hershey Co.
|
|
|
5,671
|
|
|
|
10,725
|
|
Dr Pepper Snapple Group, Inc.
|
|
|
5,636
|
|
|
|
7,985
|
|
Clorox Corporation
|
|
|
5,461
|
|
|
|
8,824
|
|
The J. M. Smucker Company
|
|
|
4,708
|
|
|
|
7,816
|
|
Energizer Holdings Inc.
|
|
|
4,249
|
|
|
|
5,146
|
|
Del Monte Foods Co.
|
|
|
3,713
|
|
|
|
3,671
|
|
McCormick & Co. Inc.
|
|
|
3,337
|
|
|
|
6,183
|
|
Mead Johnson Nutrition Company
|
|
|
3,142
|
|
|
|
12,735
|
|
NBTY, Inc.
|
|
|
2,826
|
|
|
|
N/A*
|
|
International Flavors & Fragrances Inc.
|
|
|
2,623
|
|
|
|
4,444
|
|
Church & Dwight Co. Inc.
|
|
|
2,589
|
|
|
|
4,910
|
|
Perrigo Co.
|
|
|
2,517
|
|
|
|
5,841
|
|
Tupperware Brands Corporation
|
|
|
2,300
|
|
|
|
3,010
|
|
Alberto-Culver Company
|
|
|
1,640
|
|
|
|
3,670
|
|
Nu Skin Enterprises Inc.
|
|
|
1,537
|
|
|
|
1,880
|
|
Weight Watchers International, Inc.
|
|
|
1,452
|
|
|
|
2,761
|
|
Hansen Natural Corporation
|
|
|
1,304
|
|
|
|
4,631
|
|
Median
|
|
|
3,239
|
|
|
|
5,841
|
|
Herbalife Ltd.
|
|
|
2,734
|
|
|
|
4,050
|
|
|
|
|
* |
|
Acquired in private equity transaction in 2010 |
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. Mr. Johnson, as
part of his employment agreement entered into in
42
March 2008, would be provided with tax
gross-up
payments in the event his 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 his 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
Richard P. Bermingham, Chairman
Murray H. Dashe
Jeffrey T. Dunn
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.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position with the Company
|
|
Officer Since
|
|
Michael O. Johnson
|
|
56
|
|
Chief Executive Officer, Director, and Chairman of the Board
|
|
2003
|
Desmond Walsh
|
|
54
|
|
President
|
|
2006
|
Richard Goudis
|
|
49
|
|
Chief Operating Officer
|
|
2004
|
Brett R. Chapman
|
|
55
|
|
General Counsel and Corporate Secretary
|
|
2003
|
John DeSimone
|
|
44
|
|
Chief Financial Officer
|
|
2009
|
Michael O. Johnson is Chairman and Chief Executive
Officer of the Company. Mr. Johnson joined the Company in
April 2003 as Chief Executive Officer and became Chairman of the
Board in May 2007. Mr. Johnson spent 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 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 is the Companys
President. 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. He became President
effective January 1, 2010. 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 is the Companys Chief Operating
Officer. Mr. Goudis joined the Company in June 2004 as
Chief Financial Officer and was promoted to Chief Operating
Officer effective January 1, 2010. Prior to Herbalife,
43
Mr. Goudis was the Chief Operating Officer of Rexall
Sundown, a Nasdaq 100 company that was sold to Royal Numico
in 2000, where he served in several positions 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 the General Counsel and Corporate
Secretary of the Company and has held this position since
October 2003. Before joining the Company in October 2003,
Mr. Chapman spent 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.
John DeSimone is Chief Financial Officer of the Company.
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. He
was promoted to Chief Financial Officer effective
January 1, 2010. 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 from Bryant College (now
known as Bryant University).
44
2010
Summary Compensation Table
The following table sets forth the total compensation for the
fiscal years ended December 31, 2010, 2009 and 2008, 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()
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
2010
|
|
|
|
1,229,998
|
|
|
|
|
|
|
|
2,052,066
|
|
|
|
1,250,418
|
|
|
|
3,690,000
|
|
|
|
338,857
|
|
|
|
8,561,339
|
|
Chairman and Chief
|
|
|
2009
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
1,197,783
|
|
|
|
921,500
|
|
|
|
2,928,000
|
|
|
|
120,757
|
(4)
|
|
|
6,368,040
|
|
Executive Officer
|
|
|
2008
|
|
|
|
1,173,847
|
|
|
|
1,500,000
|
|
|
|
8,202,560
|
|
|
|
12,850,388
|
|
|
|
3,600,000
|
|
|
|
340,732
|
(4)
|
|
|
27,667,527
|
|
Desmond Walsh
|
|
|
2010
|
|
|
|
650,001
|
|
|
|
|
|
|
|
776,238
|
|
|
|
1,729,027
|
|
|
|
1,040,000
|
|
|
|
174,582
|
|
|
|
4,369,848
|
|
President
|
|
|
2009
|
|
|
|
575,000
|
|
|
|
|
|
|
|
475,177
|
|
|
|
368,622
|
|
|
|
500,250
|
|
|
|
78,551
|
|
|
|
1,997,600
|
|
|
|
|
2008
|
|
|
|
517,885
|
|
|
|
|
|
|
|
440,471
|
|
|
|
427,350
|
|
|
|
450,000
|
|
|
|
63,386
|
|
|
|
1,889,092
|
|
Brett R. Chapman
|
|
|
2010
|
|
|
|
598,389
|
|
|
|
|
|
|
|
490,840
|
|
|
|
359,612
|
|
|
|
609,345
|
|
|
|
161,026
|
|
|
|
2,219,212
|
|
General Counsel
|
|
|
2009
|
|
|
|
550,000
|
|
|
|
|
|
|
|
352,949
|
|
|
|
273,122
|
|
|
|
412,500
|
|
|
|
75,678
|
|
|
|
1,664,249
|
|
and Corporate Secretary
|
|
|
2008
|
|
|
|
550,000
|
|
|
|
|
|
|
|
343,272
|
|
|
|
326,267
|
|
|
|
543,840
|
|
|
|
30,793
|
|
|
|
1,794,172
|
|
Richard Goudis
|
|
|
2010
|
|
|
|
650,001
|
|
|
|
|
|
|
|
821,695
|
|
|
|
1,729,027
|
|
|
|
1,040,000
|
|
|
|
186,799
|
|
|
|
4,427,522
|
|
Chief Operating
|
|
|
2009
|
|
|
|
606,375
|
|
|
|
|
|
|
|
414,056
|
|
|
|
320,872
|
|
|
|
454,781
|
|
|
|
66,446
|
|
|
|
1,862,530
|
|
Officer
|
|
|
2008
|
|
|
|
588,606
|
|
|
|
|
|
|
|
343,272
|
|
|
|
421,547
|
|
|
|
599,583
|
|
|
|
78,581
|
|
|
|
2,031,589
|
|
John DeSimone
|
|
|
2010
|
|
|
|
451,443
|
|
|
|
|
|
|
|
359,516
|
|
|
|
1,094,496
|
|
|
|
519,750
|
|
|
|
100,921
|
|
|
|
2,526,126
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
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, 2010 regarding assumptions
underlying valuation of equity awards. |
|
(2) |
|
Incentive plan amounts determined as more specifically discussed
under Compensation Discussion and
Analysis Annual Incentive Awards Targets
and Determination. |
|
(3) |
|
Individual breakdowns of amounts set forth in All Other
Compensation for 2010 are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total All
|
|
|
|
Plan Matching
|
|
|
|
|
|
Financial Planning
|
|
|
Vacation
|
|
|
Other
|
|
|
Tax
|
|
|
Other
|
|
|
|
Contributions
|
|
|
Medical Plans
|
|
|
Services
|
|
|
Pay-out(A)
|
|
|
Benefits(B)
|
|
|
Gross-Up(C)
|
|
|
Compensation
|
|
Name
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Michael O. Johnson
|
|
|
42,688
|
|
|
|
10,248
|
|
|
|
20,000
|
|
|
|
236,006
|
|
|
|
29,915
|
|
|
|
|
|
|
|
338,857
|
|
Desmond Walsh
|
|
|
22,429
|
|
|
|
3,771
|
|
|
|
17,143
|
|
|
|
114,906
|
|
|
|
16,333
|
|
|
|
|
|
|
|
174,582
|
|
Brett R. Chapman
|
|
|
17,693
|
|
|
|
10,248
|
|
|
|
8,177
|
|
|
|
103,273
|
|
|
|
21,635
|
|
|
|
|
|
|
|
161,026
|
|
Richard Goudis
|
|
|
22,448
|
|
|
|
10,248
|
|
|
|
11,682
|
|
|
|
109,156
|
|
|
|
26,944
|
|
|
|
6,321
|
|
|
|
186,799
|
|
John DeSimone
|
|
|
15,499
|
|
|
|
10,248
|
|
|
|
|
|
|
|
57,234
|
|
|
|
17,940
|
|
|
|
|
|
|
|
100,921
|
|
|
|
|
(A) |
|
In 2010, the Committee decided to eliminate vacation accruals
for our named executive officers and paid out the current
accrued and unused vacation balance. Following that elimination,
our named executive officers are entitled to take vacation on an
as-available basis. |
|
(B) |
|
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. |
|
(C) |
|
Tax gross-up
provided in connection with Financial Planning Services prior to
the Companys elimination of elimination of tax
gross-ups on
perquisites in 2010. |
|
|
|
(4) |
|
Amounts previously reported for 2009 and 2008 inadvertently
excluded life insurance premiums amounting to $7,975 for each
year. |
45
2010
Grants of Plan-Based Awards
The following table sets forth all grants of plan-based awards
made to the named executive officers during the fiscal year
ended December 31, 2010. For further discussion regarding
the grants see Compensation Discussion and
Analysis Annual Incentive Awards Long
Term Incentive Awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
of Stock and
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option/SAR
|
|
|
Option/SAR
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options/SARs
|
|
|
Awards
|
|
|
Awards(2)
|
|
Name
|
|
Date(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/sh)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
|
|
|
$
|
1,648,200
|
|
|
$
|
1,845,000
|
|
|
$
|
3,690,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/20/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,478
|
|
|
|
|
|
|
|
|
|
|
|
45.89
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,245
|
|
|
|
|
|
|
|
|
|
|
|
45.88
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,208
|
|
|
|
45.88
|
|
|
|
18.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desmond Walsh
|
|
|
|
|
|
|
|
|
|
$
|
520,000
|
|
|
$
|
1,040,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/04/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
41.33
|
|
|
|
18.37
|
|
|
|
|
02/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
40.05
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,665
|
|
|
|
|
|
|
|
|
|
|
|
45.88
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,183
|
|
|
|
45.88
|
|
|
|
18.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
$
|
338,525
|
|
|
$
|
609,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,279
|
|
|
|
|
|
|
|
|
|
|
|
40.05
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,836
|
|
|
|
|
|
|
|
|
|
|
|
45.88
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,041
|
|
|
|
45.88
|
|
|
|
18.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Goudis
|
|
|
|
|
|
|
|
|
|
$
|
520,000
|
|
|
$
|
1,040,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/04/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
41.33
|
|
|
|
18.37
|
|
|
|
|
02/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,874
|
|
|
|
|
|
|
|
|
|
|
|
40.05
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,655
|
|
|
|
|
|
|
|
|
|
|
|
45.88
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,183
|
|
|
|
45.88
|
|
|
|
18.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John DeSimone
|
|
|
|
|
|
|
|
|
|
$
|
288,750
|
|
|
$
|
519,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/04/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
41.33
|
|
|
|
18.37
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,041
|
|
|
|
45.88
|
|
|
|
18.89
|
|
|
|
|
05/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,836
|
|
|
|
|
|
|
|
|
|
|
|
45.88
|
|
|
|
|
(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, 2010 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 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.
46
Pursuant to the Johnson Employment Agreement, Mr. Johnson
currently receives an annual salary of $1,230,000.
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 and Herbalife America
have also entered into an executive employment agreement with
Mr. Chapman effective as of July 28, 2010 and as
amended on December 26, 2010, or the Chapman Employment
Agreement. Pursuant to the Chapman Employment Agreement,
Mr. Chapman serves as Herbalife Americas General
Counsel and Corporate Secretary. Mr. Chapmans base
salary, effective June 1, 2010, is $615,500. Prior to
June 1, 2010, Mr. Chapmans base salary was
$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.
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 55% of his annual salary for the year in
question. 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.
Richard Goudis. We and Herbalife America have
also entered into an executive employment agreement with
Mr. Goudis effective January 1, 2010 and as amended on
December 28, 2010, or the Goudis Employment Agreement.
Mr. Goudis currently serves as Herbalife Americas
Chief Operating Officer. Mr. Goudis base salary is
$650,000. Should the Company adopt an
across-the-board
reduction in salaries for senior executives and its Chief
Executive Officer, then Mr. Goudis salary shall be
reduced by a percentage equal to the smallest percentage
reduction imposed on any senior executive or the Chief Executive
Officer, but in no case shall such reduction exceed ten percent.
Pursuant to the Goudis Employment Agreement, should the Company
achieve certain targets established by the compensation
committee, Mr. Goudis shall be entitled to a target bonus
of no less than 80% of his annual salary. Mr. Goudis is
entitled to participate in the Companys employee benefit
plans and arrangements made available to the Companys most
senior executives excluding the Chief Executive Officer, as well
as the Companys long-term incentive plan for senior
executives excluding the Chief Executive Officer.
47
Outstanding
Equity Awards at 2010 Fiscal Year-End
The following table sets forth equity awards of the named
executive officers outstanding as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/Stock Appreciation Rights Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
of Shares
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
or Units of
|
|
|
or Units of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
|
Options/SARs
|
|
|
Options/SARs
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Grant
|
|
|
Expiration
|
|
|
Vested(1)
|
|
|
Vested(2)
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,927
|
(7)
|
|
|
13,258,789
|
|
|
|
|
122,061
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
15.00
|
|
|
|
04/27/2005
|
|
|
|
04/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
140,000
|
|
|
|
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
145,000
|
|
|
|
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
|
|
|
72,000
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
96,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,208
|
|
|
|
45.88
|
|
|
|
05/07/2010
|
|
|
|
05/07/2020
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,670
|
|
|
|
48.64
|
|
|
|
03/27/2008
|
|
|
|
03/27/2015
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,120
|
|
|
|
48.64
|
|
|
|
03/27/2008
|
|
|
|
03/27/2015
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desmond Walsh
|
|
|
15,000
|
|
|
|
|
|
|
|
25.00
|
|
|
|
09/01/2004
|
|
|
|
09/01/2014
|
(3)
|
|
|
55,292
|
(8)
|
|
|
3,780,314
|
|
|
|
|
62,500
|
|
|
|
|
|
|
|
15.50
|
|
|
|
12/01/2004
|
|
|
|
12/01/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
15.00
|
|
|
|
04/27/2005
|
|
|
|
04/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
16,118
|
|
|
|
|
|
|
|
40.25
|
|
|
|
05/29/2007
|
|
|
|
05/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
9,000
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
9,000
|
|
|
|
38.75
|
|
|
|
06/30/2008
|
|
|
|
06/30/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
4,439
|
|
|
|
17,756
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
41.33
|
|
|
|
01/04/2010
|
|
|
|
01/04/2020
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,183
|
|
|
|
45.88
|
|
|
|
05/07/2010
|
|
|
|
05/07/2020
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett R. Chapman
|
|
|
|
|
|
|
13,317
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
38,529
|
(9)
|
|
|
2,634,228
|
|
|
|
|
|
|
|
|
17,756
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,041
|
|
|
|
45.88
|
|
|
|
05/07/2010
|
|
|
|
05/07/2020
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard P. Goudis
|
|
|
1,575
|
|
|
|
|
|
|
|
32.79
|
|
|
|
03/23/2006
|
|
|
|
03/23/2016
|
(3)
|
|
|
50,753
|
(10)
|
|
|
3,469,983
|
|
|
|
|
|
|
|
|
13,317
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,600
|
|
|
|
43.83
|
|
|
|
08/04/2008
|
|
|
|
08/04/2018
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,756
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
41.33
|
|
|
|
01/04/2010
|
|
|
|
01/04/2020
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,183
|
|
|
|
45.88
|
|
|
|
05/07/2010
|
|
|
|
05/07/2020
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John DeSimone
|
|
|
|
|
|
|
6,655
|
|
|
|
43.13
|
|
|
|
02/28/2008
|
|
|
|
02/28/2018
|
(4)
|
|
|
27,189
|
(11)
|
|
|
1,858,912
|
|
|
|
|
|
|
|
|
35,800
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
13.64
|
|
|
|
02/27/2009
|
|
|
|
02/27/2019
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
41.33
|
|
|
|
01/04/2010
|
|
|
|
01/04/2020
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,041
|
|
|
|
45.88
|
|
|
|
05/07/2010
|
|
|
|
05/07/2020
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The number of shares includes dividend equivalent units that
have accrued through December 31, 2010. |
|
(2) |
|
Market value based on the closing price of a Common Share on the
NYSE on December 31, 2010 of $68.37. |
|
(3) |
|
Options vest quarterly in 20 equal installments beginning on the
date that is three months from the grant date. |
|
(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, 2010 these market conditions had been met
as to award of 363,670 SARs but not as to the award of 396,120
SARs. |
48
|
|
|
(7) |
|
Consists of (i) 15,451 RSUs granted on February 28,
2008 that vest on February 28, 2011, (ii) 55,979 RSUs
granted on March 27, 2008, of which 42,129 RSUs vest on
March 27, 2011 and 13,850 RSUs vest on March 27, 2012,
(iii) 30,126 RSUs granted on February 27, 2009 that
vest in equal installments on the second and third anniversary
of the grant date, (iv) 47,072 RSUs granted on
February 27, 2009 that vest in equal installments on the
third, fourth and fifth anniversary of the grant date,
(v) 17,703 RSUs granted on April 20, 2010 that vest in
equal installments on the first, second and third anniversary of
the grant date, and (vi) 27,596 RSUs granted on May 7,
2010 that vest in equal installments on the first, second and
third anniversary of the grant date. The RSUs described in
clause (ii), above, are referred to in this Proxy Statement as
the 2008 RSUs. |
|
(8) |
|
Consists of (i) 1,931 RSUs granted on February 28,
2008 that vest on February 28, 2011, (ii) 1,912 RSUs
granted on June 30, 2008 that vest on June 30, 2011,
(iii) 5,571 RSUs granted on February 27, 2009 that
vest in equal installments on the second and third anniversary
of the grant date, (iv) 28,243 RSUs granted on
February 27, 2009 that vest in equal installments on the
third, fourth and fifth anniversary of the grant date,
(v) 3,804 RSUs granted on February 26, 2010 that vest
in equal installments on the first and second anniversary of the
grant date, and (vi) 13,831 RSUs granted on May 7,
2010 that vest in equal installments on the first, second and
third anniversary of the grant date. |
|
(9) |
|
Consists of (i) 2,857 RSUs granted on February 28,
2008 that vest on February 28, 2011, (ii) 5,571 RSUs
granted on February 27, 2009 that vest in equal
installments on the second and third anniversary of the grant
date, (iii) 18,828 RSUs granted on February 27, 2009
that vest in equal installments on the third, fourth and fifth
anniversary of the grant date, (iv) 3,336 RSUs granted on
February 26, 2010 that vest in equal installments on the
first and second anniversary of the grant date, and
(v) 7,937 RSUs granted on May 7, 2010 that vest in
equal installments on the first, second and third anniversary of
the grant date. |
|
(10) |
|
Consists of (i) 2,857 RSUs granted on February 28,
2008 that vest on February 28, 2011, (ii) 5,571 RSUs
granted on February 27, 2009 that vest in equal
installments on the second and third anniversary of the grant
date, (iii) 23,535 RSUs granted on February 27, 2009
that vest in equal installments on the third, fourth and fifth
anniversary of the grant date, (iv) 4,959 RSUs granted on
February 26, 2010 that vest in equal installments on the
first and second anniversary of the grant date, and
(v) 13,831 RSUs granted on May 7, 2010 that vest in
equal installments on the first, second and third anniversary of
the grant date. |
|
(11) |
|
Consists of (i) 1,428 RSUs granted on February 28,
2008 that vest on February 28, 2011, (ii) 3,703 RSUs
granted on February 27, 2009 that vest in equal
installments on the second and third anniversary of the grant
date, (iv) 14,121 RSUs granted on February 27, 2009
that vest in equal installments on the third, fourth and fifth
anniversary of the grant date, and (v) 7,937 RSUs granted
on May 7, 2010 that vest in equal installments on the
first, second and third anniversary of the grant date. |
2010
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 executive officers
during the fiscal year ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
488,247
|
|
|
|
20,655,899
|
|
|
|
78,946
|
|
|
|
3,457,184
|
|
Desmond Walsh
|
|
|
80,500
|
|
|
|
4,397,102
|
|
|
|
7,522
|
|
|
|
330,263
|
|
Brett R. Chapman
|
|
|
154,233
|
|
|
|
3,961,855
|
|
|
|
7,139
|
|
|
|
306,587
|
|
Richard Goudis
|
|
|
334,225
|
|
|
|
13,588,982
|
|
|
|
7,139
|
|
|
|
306,587
|
|
John DeSimone
|
|
|
43,388
|
|
|
|
1,408,129
|
|
|
|
6,855
|
|
|
|
386,522
|
|
49
2010
Non-Qualified Deferred Compensation Table
The following table sets forth all non-qualified deferred
compensation of the named executive officers for the fiscal year
ended December 31, 2010 pursuant to the Herbalife
International of America, Inc. Senior Executive Deferred
Compensation Plan, effective January 1, 1996, or the Senior
Executive Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Company
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Balance at
|
|
|
|
Last FY
|
|
|
Last FY
|
|
|
Last FY
|
|
|
Distributions
|
|
|
Last FYE
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
($)(3)
|
|
|
Michael O. Johnson
|
|
|
42,689
|
|
|
|
42,689
|
|
|
|
28,840
|
|
|
|
|
|
|
|
797,925
|
|
Desmond Walsh
|
|
|
275,783
|
|
|
|
22,429
|
|
|
|
66,846
|
|
|
|
403,084
|
|
|
|
408,383
|
|
Brett R. Chapman
|
|
|
17,693
|
|
|
|
17,693
|
|
|
|
675
|
|
|
|
|
|
|
|
36,060
|
|
Richard Goudis
|
|
|
32,069
|
|
|
|
22,448
|
|
|
|
35,120
|
|
|
|
47,132
|
|
|
|
212,520
|
|
John DeSimone
|
|
|
44,284
|
|
|
|
15,499
|
|
|
|
6,295
|
|
|
|
|
|
|
|
66,078
|
|
|
|
|
(1) |
|
All amounts are also reported as compensation in
Salary in the 2010 Summary Compensation
Table. |
|
(2) |
|
All amounts are also reported as compensation in All Other
Compensation Deferred Compensation Plan Matching
Contributions in the 2010 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: $683,708 for Mr. Johnson, $446,409 for
Mr. Walsh and $170,016 for Mr. Goudis. |
Non-Qualified Deferred Compensation
Plans. We maintain 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.
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 2010.
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.
50
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, 2010 based
upon the closing price of a Common Share on the NYSE on
December 31, 2010 of $68.37, 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 2010
Non-Qualified Deferred Compensation table.
As of December 31, 2010, the Company had entered into
employment agreements with each of Messrs. Johnson, Chapman
and Goudis and a severance agreement with Mr. Walsh, each
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.
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 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
$7,380,000, 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
51
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 18, 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 had been achieved as of December 31, 2010. For
396,120 of the 2008 SARs, this alternate price performance
target will be achieved if the closing Companys share
price exceeds $80.43 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.
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.
Desmond
Walsh
We entered into a severance agreement with Desmond Walsh, or the
Walsh Severance Agreement, on June 11, 2010, through our
subsidiary Herbalife America. Pursuant to the Walsh Severance
Agreement, if Mr. Walsh 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
$1,300,000, in addition to all other accrued but unpaid
entitlements. The Company will also provide Mr. Walsh 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. Walsh 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. Walsh is reemployed,
or for a period of two years, whichever occurs first. If
Mr. Walsh 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. Walsh 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. Walsh shall
immediately vest. Effective February 23, 2011,
Mr. Walshs severance agreement was amended to provide
that 100% of his unvested stock options, SARs and RSUs would
vest upon the occurrence of a Change of
52
Control. If Mr. Walshs 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. Walshs employment with the Company.
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 $1,231,000, 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.
Upon the occurrence of a Change of Control, 100% of all unvested
stock options, SARs and RSUs granted to Mr. Chapman shall
immediately vest. 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, SARs and RSUs shall be
forfeited upon the termination of Mr. Chapmans
employment with the Company.
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 $1,300,000, 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 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.
Upon the occurrence of a Change of Control, 100% of all unvested
stock options, SARs and RSUs granted to Mr. Goudis shall
immediately vest. Should Mr. Goudis 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.
53
Definitions
For the purposes of the Johnson Employment Agreement, the
following terms have the following definitions:
|
|
|
|
|
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.
|
|
|
|
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
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 Walsh Severance
Agreement, 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
|
54
|
|
|
|
|
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.
|
|
|
|
|
|
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 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 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 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).
|
55
The table below sets forth the estimated value of the potential
payments to each of Messrs. Johnson, Walsh, Chapman and
Goudis, assuming the executives employment had terminated
on December 31, 2010
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
without Cause or
|
|
|
without Cause or
|
|
|
Termination
|
|
|
Change
|
|
|
|
|
|
|
with Good Reason
|
|
|
with Good Reason
|
|
|
without Cause when
|
|
|
in Control
|
|
|
|
|
|
|
not in connection with
|
|
|
in connection with
|
|
|
Mr. Johnson is
|
|
|
(without
|
|
|
Death or
|
|
Name
|
|
a Change of Control
|
|
|
a Change of Control
|
|
|
no longer CEO
|
|
|
termination)
|
|
|
Disability
|
|
|
Michael O. Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
|
|
$
|
7,380,000
|
|
|
$
|
7,380,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus(2)
|
|
$
|
3,690,000
|
|
|
$
|
3,690,000
|
|
|
|
|
|
|
|
|
|
|
$
|
3,690,000
|
|
Equity Acceleration(3)
|
|
$
|
10,045,672
|
|
|
$
|
35,835,626
|
|
|
|
|
|
|
$
|
23,419,060
|
|
|
$
|
35,835,626
|
|
Outplacement Service
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
|
|
$
|
167,400
|
|
|
$
|
167,400
|
|
|
|
|
|
|
|
|
|
|
$
|
167,400
|
|
Trading Blackout Payment(4)
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excise Tax
Gross-up(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,000,000
|
|
Desmond Walsh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
|
|
$
|
1,300,000
|
|
|
$
|
1,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus(2)
|
|
$
|
1,040,000
|
|
|
$
|
1,040,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,040,000
|
|
Equity Acceleration(3)
|
|
|
|
|
|
$
|
5,859,775
|
|
|
|
|
|
|
$
|
5,859,775
|
|
|
$
|
11,719,549
|
|
Outplacement Service
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
|
|
$
|
7,509
|
|
|
$
|
7,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000,000
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
|
|
$
|
1,231,000
|
|
|
$
|
1,231,000
|
|
|
$
|
1,231,000
|
|
|
|
|
|
|
|
|
|
Bonus(2)
|
|
$
|
609,345
|
|
|
$
|
609,345
|
|
|
$
|
609,345
|
|
|
|
|
|
|
$
|
609,345
|
|
Equity Acceleration(3)
|
|
|
|
|
|
$
|
7,107,072
|
|
|
$
|
3,553,536
|
|
|
$
|
7,107,072
|
|
|
$
|
7,107,072
|
|
Outplacement Service
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
Medical Coverage
|
|
$
|
20,463
|
|
|
$
|
20,463
|
|
|
$
|
20,463
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000,000
|
|
Richard P. Goudis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(1)
|
|
$
|
1,300,000
|
|
|
$
|
1,300,000
|
|
|
$
|
1,300,000
|
|
|
|
|
|
|
|
|
|
Bonus(2)
|
|
$
|
1,040,000
|
|
|
$
|
1,040,000
|
|
|
$
|
1,040,000
|
|
|
|
|
|
|
$
|
1,040,000
|
|
Equity Acceleration(3)
|
|
|
|
|
|
$
|
10,655,681
|
|
|
$
|
5,327,840
|
|
|
$
|
10,655,681
|
|
|
$
|
10,655,681
|
|
Outplacement Service
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
Medical Coverage
|
|
$
|
20,463
|
|
|
$
|
20,463
|
|
|
$
|
20,463
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000,000
|
|
|
|
|
(1) |
|
Based on salary as of December 31, 2010. |
|
(2) |
|
Represents bonus amounts earned in 2010, as disclosed in the
Non-Equity Incentive Plan Compensation column of the
2010 Summary Compensation Table. Per the terms of
his employment agreement or his severance agreement, as the case
may be, 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, Walsh,
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
price of a Common Share on the NYSE on December 31, 2010 of
$68.37, and, for stock options and SARs, the difference between
$68.37 and the exercise or base price of the award. |
56
|
|
|
(4) |
|
Payment made if termination occurs during a trading
blackout or a quiet period with respect to
Common Shares. |
|
(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
Mr. Johnson, he 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
him 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 2006 through 2010 and annualized for the year in
which the executive commenced employment with the Company (if
after 2002). In addition, Mr. Johnson was assumed to be
subject to the maximum federal and state income and other
payroll taxes. |
57
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of
Herbalife Common Shares as of February 28, 2011, 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 and Nominees
|
|
|
|
|
|
|
|
|
Leroy T. Barnes, Jr.(2)**
|
|
|
35,132
|
|
|
|
*
|
|
Richard P. Bermingham(3)**
|
|
|
41,732
|
|
|
|
*
|
|
Carole Black
|
|
|
|
|
|
|
|
|
Pedro Cardoso(4)**
|
|
|
2,032
|
|
|
|
*
|
|
Murray H. Dashe(5)**
|
|
|
12,708
|
|
|
|
*
|
|
Jeffrey T. Dunn(6)**
|
|
|
3,905
|
|
|
|
*
|
|
Lawrence M. Higby(7)**
|
|
|
29,550
|
|
|
|
*
|
|
Michael Levitt
|
|
|
|
|
|
|
|
|
Colombe M. Nicholas(8)**
|
|
|
28,232
|
|
|
|
*
|
|
John Tartol(9)**
|
|
|
233,748
|
|
|
|
*
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
Michael O. Johnson(10)**
|
|
|
2,571,668
|
|
|
|
4.2%
|
|
Desmond Walsh(11)**
|
|
|
161,385
|
|
|
|
*
|
|
Brett R. Chapman(12)**
|
|
|
29,020
|
|
|
|
*
|
|
Richard Goudis(13)**
|
|
|
35,637
|
|
|
|
*
|
|
John DeSimone(14)**
|
|
|
12,988
|
|
|
|
*
|
|
All Directors and Executive Officers as a Group
(22 persons)
|
|
|
3,504,058
|
|
|
|
5.7%
|
|
Greater than 5% Beneficial Owners
|
|
|
|
|
|
|
|
|
FMR LLC(15)
|
|
|
8,978,407
|
|
|
|
15.2%
|
|
|
|
|
* |
|
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 59,090,332
Common Shares outstanding as of February 28, 2011, 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
February 28, 2011. 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 34,311 SARs equivalent to 26,327 Common Shares which
have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(3) |
|
Includes 7,500 options to purchase Common Shares which are
exercisable and 34,311 SARs equivalent to 26,327 Common Shares
which have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(4) |
|
Includes 4,899 SARs equivalent to 2,032 Common Shares which have
vested or will vest and become exercisable within 60 days
of February 28, 2011. |
|
(5) |
|
Includes 19,187 SARs equivalent to 12,708 Common Shares which
have vested or will vest and become exercisable within
60 days of February 28, 2011. |
58
|
|
|
(6) |
|
Includes 6,984 SARs equivalent to 3,005 Common Shares which
have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(7) |
|
Includes 36,504 SARs equivalent to 28,550 Common Shares
which have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(8) |
|
Includes 34,311 SARs equivalent to 26,328 Common Shares
which have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(9) |
|
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; (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; and (iv) 4,899 SARs
equivalent to 2,032 Common Shares which have vested or will
vest and become exercisable within 60 days of
February 28, 2011. |
|
(10) |
|
Includes 1,929,431 options to purchase Common Shares which are
exercisable and 453,000 SARs equivalent to 245,663 Common
Shares which have vested or will vest and become exercisable,
and 51,268 RSUs with restrictions that will lapse and be paid in
Common Shares, in each case within 60 days of
February 28, 2011. |
|
(11) |
|
Includes 102,500 options to purchase Common Shares which are
exercisable and 63,496 SARs equivalent to 35,141 Common
Shares which have vested or will vest and become exercisable
within 60 days of February 28, 2011. |
|
(12) |
|
Includes 17,756 SARs equivalent to 9,657 Common Shares
which have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(13) |
|
Includes 19,331 SARs equivalent to 10,573 Common Shares
which have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(14) |
|
Includes 15,605 SARs equivalent to 10,387 Common Shares
which have vested or will vest and become exercisable within
60 days of February 28, 2011. |
|
(15) |
|
The information regarding the beneficial ownership of FMR LLC is
based on the Schedule 13G filed jointly with the SEC by FMR
LLC and Edward C. Johnson 3d on February 14, 2011.
According to this Schedule 13G, each of FMR LLC and Edward
C. Johnson 3d has (i) sole power to vote 664,926 Common
Shares, (ii) shared power to vote 0 Common Shares,
(iii) sole power to dispose of 8,978,407 Common Shares and
(iv) shared power to dispose of 0 Common Shares. The
address for each of FRM LLC and Edward C. Johnson 3d is 82
Devonshire Street, Boston, MA 02109. |
59
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, must 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 (2010 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.
60
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 2010.
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
61
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 2012 Annual General Meeting
Pursuant to the Memorandum and Articles of Association, for a
shareholder to bring a matter before the 2012 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 2012 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 15, 2011. 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 2010 can be found in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2010. 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
62
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.
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 , 2011
63
APPENDIX A
PROPOSED
AMENDMENT TO AMENDED AND RESTATED 2005 STOCK INCENTIVE
PLAN
Section 6(a) and Section 6(b) of the Plan shall read
in their entirety as follows (new language underlined;
replaced language in strikethrough):
|
|
6.
|
Shares Subject
to the Plan and to Awards
|
(a) Aggregate Limits. The aggregate
number of Common Shares issuable pursuant to all Awards shall
equal 7,900,000 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 two and six-tenths (2.6)
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 two
and six-tenths (2.6) 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.
A-1
APPENDIX B
HERBALIFE
LTD.
HERBALIFE LTD. SHAREHOLDERS RESOLUTION
It is proposed THAT from the Effective Time, the Companys
outstanding Common Shares be subject to a stock split at a ratio
of
two-for-one
(2:1) by:
|
|
|
|
(a)
|
the authorized share capital of the Company being amended by the
subdivision of 500,000,000 Common Shares of a nominal or par
value of US$0.002 each, into 1,000,000,000 Common Shares of a
nominal or par value of US$0.001 each; and
|
|
|
|
|
(b)
|
each issued and outstanding Common Share of a nominal or par
value of US$0.002 each, being subdivided into two
(2) Common Shares of a nominal or par value of US$0.001
each.
|
The Effective Time for the purposes of the above resolution is
May 10, 2011.
B-1
APPENDIX C
HERBALIFE
LTD.
EXECUTIVE INCENTIVE PLAN
1. Purpose. The purpose of this
Herbalife Ltd. Executive Incentive Plan (the
Plan) is to enable Herbalife Ltd. (the
Company) to attract, motivate, reward and
retain its executive officers by providing such individuals with
incentive compensation based upon the success of the Company.
2. Definitions. As used in the
Plan, the following terms shall have the meanings set forth
below:
(a) Award means an opportunity granted
to a Participant under Section 5 to receive an amount under
the Plan.
(b) Board means the Board of Directors
of the Company.
(c) Certification shall have the meaning
set forth in Section 5(c).
(d) Chief Executive Officer means the
chief executive officer of the Company, or the person performing
the function of the principal executive office of the Company,
as of the end of the year.
(e) Code means the Internal Revenue Code
of 1986, as amended, or the corresponding provisions of any
successor statute.
(f) Committee means the Compensation
Committee of the Board, or such other committee of the Board as
may from time to time be designated by the Board to administer
the Plan pursuant to Section 4.
(g) Covered Employee means, with respect
to any year, the Chief Executive Officer, any other executive of
the Company or of any Subsidiary who is a covered
employee within the meaning of Section 162(m) of the
Code, or any successor provision thereto, and any other
executive of the Company.
(h) Maximum Payment shall have the
meaning set forth in Section 5(b).
(i) Participant means any executive of
the Company or of a Subsidiary of the Company selected by the
Committee pursuant to Section 5(a) to receive an Award
under this Plan with respect to any given Year. A Participant
may be a person who becomes an executive during the Year.
(j) 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 (including adjusted revenue, volume points,
net sales and analogous financial measures), (xii) income
or net income, (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.
(k) Shares means the Companys
common shares, par value $.001, or a stock-based award, issued
pursuant to and subject to the limitations of the Herbalife Ltd.
2004 Stock Incentive Plan or another stockholder-approved plan
of the Company.
(l) Subsidiary means any corporation of
which the Company owns directly or indirectly at least a
majority of the outstanding shares of voting stock.
(m) Year means a fiscal year.
C-1
3. Eligibility. The individuals
entitled to participate in the Plan shall be the Companys
Chief Executive Officer and such other Participants as shall be
selected from time to time by the Committee.
4. Administration.
(a) Composition of the Committee. The
Plan shall be administered by the Committee, as appointed from
time to time. The Board shall fill vacancies on, and from time
to time may remove or add members to, the Committee. The
Committee shall act pursuant to a majority vote at a meeting or
unanimous written consent. The Committee shall consist of two or
more directors, each of whom is an outside director
as such term is defined under Section 162(m) of the Code.
(b) Powers of the Committee. The
Committee shall have full power and authority, subject to the
provisions of the Plan and subject to such orders or resolutions
not inconsistent with the provisions of the Plan as may from
time to time be adopted by the Board, to: (i) select the
Participants to whom Awards may from time to time be granted
hereunder; (ii) determine the terms of an Award and whether
an Award shall be paid in cash or Shares, not inconsistent with
the provisions of the Plan; (iii) determine the time when
Awards will be made; (iv) certify whether and the extent to
which Performance Criteria have been satisfied in respect of a
Year; (v) interpret and administer the Plan;
(vi) correct any defect, supply any omission or reconcile
any inconsistency in the Plan in the manner and to the extent
that the Committee shall deem desirable to carry it into effect;
(vii) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper
administration of the Plan; and (viii) make any other
determination and take any other action that the Committee deems
necessary or desirable for administration of the Plan.
(c) Decisions of the Committee. All
decisions, determinations and interpretations by the Committee
regarding the Incentive Plan shall be final and binding on all
covered individuals who are participants under the Incentive
Plan. The Committee shall consider such factors as it deems
relevant to making such decisions, determinations and
interpretations including, without limitation, the
recommendations or advice of any director, officer or employee
of the Company and such attorneys, consultants and accountants
as it may select. A covered individual or other person claiming
any benefits under the Incentive Plan may contest a decision or
action by the Committee with respect to such person or an actual
or potential incentive under the Incentive Plan only on the
grounds that such decision or action was arbitrary or capricious
or was unlawful, and any review of such decision or action shall
be limited to determining whether the Committees decision
or action was arbitrary or capricious or was unlawful.
(d) Delegation of Authority. To the
extent not inconsistent with the applicable provisions of
Section 162(m) of the Code, the Committee may delegate to a
subcommittee or to one or more officers of the Company or any of
its Subsidiaries the authority to take actions on its behalf
pursuant to the Plan.
5. Awards
(a) Establishment of Incentive
Program. Not later than 90 days after the
commencement of each Year, the Committee may establish, in
writing, the incentive program under this Plan for the Year by
determining the performance bonus amount payable to each
Participant pursuant to an Award under this Plan, which amount
shall be based on one or more Performance Criteria
and/or the
level of achievement with respect thereto. The Committee shall
for each Year, within such
90-day
period, select (i) the target bonus amount for each
Participant, (ii) the relevant Performance Criteria and
their respective targets and (iii) the bonus amounts
payable depending upon if and the extent to which the targets
for such Performance Criteria are realized. In its sole
discretion, the Committee may also reduce, but may not increase,
an individuals incentive calculated under an Award.
(b) Maximum Payment for Covered
Employees. Notwithstanding any other provision of
the Plan to the contrary, the maximum amount payable under an
Award to any Covered Employee for any Year (such amount, the
Maximum Payment) shall not exceed $5,000,000.
(c) Certification. As soon as reasonably
practicable following the conclusion of each Year, the Committee
shall certify, in writing, if and the extent to which the
Performance Criteria have been satisfied as and to the extent
required by Section 162(m) of the Code (the
Certification).
C-2
(d) Payment of Awards. Following the
Certification, the Committee shall determine the amount, if any,
actually to be paid under an Award to a Participant. The amount
payable to a Covered Employee shall not exceed the Maximum
Payment. The actual amount of the Award determined by the
Committee for a Year shall be paid to each Participant at such
time as determined by the Committee in its discretion. Awards
shall be paid in cash or, in the Committees discretion, in
Shares, or any combination thereof.
6. Generally Applicable Provisions
(a) Amendment and Termination of the
Plan. The Board may, from time to time, alter,
amend, suspend or terminate the Plan in whole or in part and, if
suspended or terminated, may reinstate any or all of its
provisions, except that without the consent of the Participant,
no amendment, suspension or termination of the Plan shall be
made which materially adversely affects Awards previously made
to the Participant. Notwithstanding the foregoing, no amendment
which is material for purposes of shareholder approval imposed
by applicable law, including the requirement of
Section 162(m) of the Code, shall be effective in the
absence of action by the shareholders of the Company.
(b) Section 162(m) of the
Code. Unless otherwise determined by the
Committee, the provisions of this Plan shall be administered and
interpreted in accordance with Section 162(m) of the Code
to ensure the deductibility by the Company or its Subsidiaries
of the payment of Awards to Covered Employees.
(c) Section 409A of the Code. This
Plan is not intended to be a nonqualified deferred
compensation plan within the meaning of Section 409A
of the Code and shall be administered and interpreted to ensure
that no Award under the Plan provides for a deferral of
compensation within the meaning of Section 409A of
the Code.
(d) Tax Withholding. The Company or any
Subsidiary shall have the right to make all payments or
distributions pursuant to the Plan to a Participant, net of any
applicable Federal, State and local taxes required to be paid or
withheld. The Company or any Subsidiary shall have the right to
withhold from wages, Awards or other amounts otherwise payable
to such Participant such withholding taxes as may be required by
law, or to otherwise require the Participant to pay such
withholding taxes. If the Participant shall fail to make such
tax payments as are required, the Company or any Subsidiary
shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to
such Participant or to take such other action as may be
necessary to satisfy such withholding obligations.
(e) Right of Discharge Reserved; Claims to
Awards. Nothing in the Plan nor the grant of an
Award hereunder shall confer upon any Participant the right to
continue in the employment of the Company or any Subsidiary or
affect any right that the Company or any Subsidiary may have to
terminate the employment of (or to demote or to exclude from
future Awards under the Plan) any such Participant at any time
for any reason. No Participant shall have any claim to be
granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants under the Plan.
(f) Other Plans. Nothing contained in the
Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if
such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(g) Severability. If any provision of the
Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent
jurisdiction, such provision shall (i) be deemed limited to
the extent that such court of competent jurisdiction deems it
lawful, valid
and/or
enforceable and as so limited shall remain in full force and
effect, and (ii) not affect any other provision of the Plan
or part thereof, each of which shall remain in full force and
effect. If the making of any payment or the provision of any
other benefit required under the Plan shall be held unlawful or
otherwise invalid or unenforceable by a court of competent
jurisdiction, such unlawfulness, invalidity or unenforceability
shall not prevent any other payment or benefit from being made
or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the
Plan in full would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or
unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not
be unlawful, invalid or unenforceable, and the maximum payment
or benefit that would not be unlawful, invalid or unenforceable
shall be made or provided under the Plan.
C-3
(h) Construction. All references in the
Plan to Section or Sections, are
intended to refer to the Section or Sections, as the case may
be, of the Plan. As used in the Plan, the words
include and including, and variations
thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words without
limitation.
(i) Unfunded Status of the Plan. The Plan
is intended to constitute an unfunded plan for
incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Company or any Subsidiary.
(j) Governing Law. The Plan and all
determinations made and actions taken thereunder, to the extent
not otherwise governed by the Code or the laws of the United
States, shall be governed by the laws of the State of Delaware
and construed accordingly.
(k) Effective Date of Plan. The Plan
shall be effective on the date of the approval of the Plan by
the holders of a majority of the shares voting at a duly
constituted meeting of the shareholders of the Company. The Plan
shall be null and void and of no effect if the foregoing
condition is not fulfilled.
(l) Captions. The captions in the Plan
are for convenience of reference only, and are not intended to
narrow, limit or affect the substance or interpretation of the
provisions contained herein.
C-4
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 27, 2011, the day preceding the date of the
shareholder meeting. INTERNET http://www.proxyvoting.com/hlf Use the Internet to vote your proxy.
HERBALIFE LTD. Have your proxy card in hand when you access the web site. OR TELEPHONE
1-866-540-5760 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. Fulfillment 91256
91374 FOLD AND DETACH HERE THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
WILL BE VOTED FOR Please mark your votes as indicated in this example X PROPOSALS 2, 3, 4, 6 AND
7. FOR WITHHOLD *EXCEPTIONS 1. ELECTION OF DIRECTORS ALL FOR ALL FOR AGAINST ABSTAIN Nominees: 2.
Vote to approve an amendment to the Companys Amended and Restated 2005 Stock 01 Michael O. Johnson
Incentive Plan to increase the authorized number of Common Shares issuable thereunder 02 John
Tartol by 3,200,000 and to provide that full value awards will be counted at a 2.6:1 premium 03
Carole Black factor against the remaining available share pool 04 Michael J. Levitt 3. Vote to
effect a two-for-one stock split of the Companys Common Shares 4. Vote to advise as to the
Companys executive compensation (INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the Exceptions box above and write that nominees name in the space provided
below.) 1 year 2 years 3 years Abstain *Exceptions 5. Vote to advise as to the frequency of
shareholder advisory votes on the Companys executive compensation FOR AGAINST ABSTAIN 6. Vote to
ratify the appointment of the Companys independent registered public accountants for fiscal 2011
7. Vote to re-approve the performance goals under the Herbalife Ltd. Executive Incentive Plan for
compliance with Section 162(m) of the Internal Revenue Code Mark Here for Address Change RESTRICTED
AREA SCAN LINE or Comments SEE REVERSE 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. Signature Signature Date PRINT AUTHORIZATION (THIS BOXED AREA DOES NOT
PRINT) To commence printing on this proxy card please sign, date and fax this card to: 212-269-1116
SIGNATURE: |
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/equityaccess For Technical Assistance
Call 1-877-978-7778 between 9am-7pm Monday-Friday Eastern Time Investor ServiceDirect®
Available 24 hours per day, 7 days per week TOLL FREE NUMBER: 1-800-370-1163 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/equityaccess where step-by-step instructions will prompt you
through enrollment. Important notice regarding the Internet availability of proxy materials for the
Annual General Meeting of Shareholders. The Proxy Statement and the 2010 Annual Report to
Shareholders are available at: http://www.proxyvoting.com/hlf FOLD AND DETACH HERE PROXY HERBALIFE
LTD. Annual General Meeting of Shareholders April 28, 2011 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 28, 2011 at 8:00 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. Address Change/Comments (Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER SERVICES P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250 RESTRICTED AREA SCAN
LINE Fulfillment (Continued and to be marked, dated and signed, on the other side) 91256 91374
RESTRICTED AREA SIGNATURE LINES |