def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrant o
Filed by a Party other than the Registrant x
Check the appropriate box:
|
|
|
o |
|
Preliminary Proxy Statement |
|
|
|
|
x |
|
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):
|
|
|
|
|
x |
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 25,
2008
Dear Fellow Shareholder:
We are pleased to enclose information about the 2008 Annual
General Meeting of Shareholders of Herbalife Ltd., or the
Company, to be held on Thursday, May 1, 2008 at
9:00 a.m., Pacific Daylight Time, at 1800 Century Park
East, Los Angeles, California 90067. As discussed in more detail
in the enclosed Proxy Statement, at the meeting you will be
asked to consider proposals to:
1. Elect two directors, each for a term of three years;
|
|
|
|
2.
|
Approve an amendment to and restatement of the Companys
2005 Stock Incentive Plan to increase the authorized number of
Common Shares issuable thereunder by 3,000,000;
|
|
|
3.
|
Ratify the appointment of the Companys independent
registered public accountants for fiscal 2008; and
|
|
|
4.
|
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 FOR THEIR
APPROVAL.
Best Regards,
MICHAEL O. JOHNSON
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 requested to complete, sign and date the
enclosed proxy card and return it as promptly as possible.
HERBALIFE
LTD.
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To
Be Held Thursday, May 1, 2008
To the Shareholders:
NOTICE IS HEREBY GIVEN that the 2008 Annual General Meeting of
Shareholders of Herbalife Ltd., a Cayman Islands exempted
limited liability company, or the Company, will be held on
Thursday, May 1, 2008 at 9:00 a.m., Pacific Daylight
Time, at 1800 Century Park East, Los Angeles, California 90067
for the following purposes:
|
|
|
|
1.
|
To elect two directors, each for a term of three years;
|
|
|
2.
|
To approve an amendment to and restatement of the Companys
2005 Stock Incentive Plan to increase the authorized number of
Common Shares issuable thereunder by 3,000,000;
|
|
|
3.
|
To ratify the appointment of the Companys independent
registered public accountants for fiscal 2008; and
|
|
|
4.
|
To 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 (2007 Revision).
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice. Only shareholders of
record at the close of business on March 5, 2008, are
entitled to notice of and to vote at the meeting and any
subsequent adjournment(s) or postponement(s) of the meeting.
All shareholders are cordially invited to attend the meeting in
person. However, to assure your representation at the
meeting, you are urged to mark, sign, date and return the
enclosed proxy card as promptly as possible.
Sincerely,
BRETT R. CHAPMAN
General Counsel and Corporate Secretary
Los Angeles, California
March 25, 2008
HERBALIFE
LTD.
PROXY
STATEMENT FOR 2008
ANNUAL
GENERAL MEETING OF SHAREHOLDERS
Herbalife Ltd., also referred to as we, our, us, Herbalife or
the Company, is calling its 2008 Annual General Meeting of
Shareholders, or the Meeting, to be held on Thursday,
May 1, 2008 at 9:00 a.m., Pacific Daylight Time, at
1800 Century Park East, Los Angeles, California 90067.
At the Meeting, our shareholders will be asked to consider
proposals to:
|
|
|
|
1.
|
Elect two directors, each for a term of three years;
|
|
|
2.
|
Approve an amendment to and restatement of the Companys
2005 Stock Incentive Plan to increase the authorized number of
Common Shares issuable thereunder by 3,000,000;
|
|
|
3.
|
Ratify the appointment of the Companys independent
registered public accountants for fiscal 2008; and
|
|
|
4.
|
Act upon such other matters as may properly come before the
Meeting.
|
Our Board of Directors unanimously recommends that you vote in
favor of the proposals outlined herein. YOUR VOTE IS VERY
IMPORTANT. Whether or not you plan to attend the Meeting,
please take the time to vote by completing and returning the
enclosed 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 25, 2008, and is first being mailed to shareholders
of the Company on or about March 28, 2008.
Table of
Contents
|
|
|
|
|
|
|
|
3
|
|
|
|
|
5
|
|
|
|
|
7
|
|
|
|
|
12
|
|
|
|
|
19
|
|
|
|
|
21
|
|
|
|
|
46
|
|
|
|
|
48
|
|
|
|
|
49
|
|
|
|
|
51
|
|
|
|
|
A-1
|
|
|
|
|
B-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, May 1, 2008, at 9:00 a.m., Pacific
Daylight Time, and at any subsequent adjournment(s) or
postponement(s) of the Meeting, for the purposes set forth
herein and in the accompanying Notice of Annual General Meeting
of Shareholders. The Meeting will be held at 1800 Century Park
East, Los Angeles, California 90067. Our telephone number is
c/o Herbalife
International, Inc. at
(310) 410-9600.
Record Date and Voting Securities. Only
shareholders of record at the close of business on March 5,
2008, 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 64,347,235 Common Shares were
issued and outstanding and held of record by 950 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 your 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
election of directors, even if the broker or nominee does not
receive voting instructions from you.
Directors are elected by a plurality, and the two nominees who
receive the most votes will be elected. Abstentions and
broker non-votes will not affect the outcome of the
election.
In respect of all other proposals, to be approved, any such
proposal must receive the affirmative vote of a majority of the
Common Shares present or represented by proxy and entitled to
vote. In determining the outcome of such proposals, abstentions
have the effect of a negative vote. Broker non-votes
will not affect the outcome of any such proposals.
Revocability of Proxies. Any proxy
given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by either
(a) delivering to the Corporate Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a
later date or (b) attending the Meeting and voting in
person.
3
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. The Company has
retained MacKenzie Partners, Inc., a proxy soliciting firm, to
provide advice with respect to the 2008 Annual Shareholders
Meeting and may assist in the solicitation of proxies for an
estimated total fee of $25,000, plus reimbursement of certain
out-of-pocket expenses. 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 May 1, 2008.
The Proxy Statement and Annual Report to Shareholders are
available at
http://bnymellon.mobular.net/bnymellon/hlf.
4
PROPOSAL 1:
THE
ELECTION OF DIRECTORS
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
Memorandum and Articles of Association divide the Board of
Directors into three classes, with the terms of office of each
class of directors ending in different years. The current terms
of office of Class I directors end at the Meeting. The
current terms of office of Classes II and III
directors end at the annual general meetings in 2009 and 2010,
respectively. Currently Class I has two directors,
Class II has three directors and Class III has three
directors.
The nominees for Class I directors are to be voted upon at
the Meeting. The Board of Directors has nominated Michael O.
Johnson and John Tartol for election as Class I directors
to serve three-year terms expiring at the 2011 annual general
meeting.
The Company did not receive any shareholder nominations for
director.
The persons named as proxies on the accompanying proxy card
intend to vote the Common Shares as to which they are granted
authority to vote for the election of the nominees listed above.
The form of proxy card does not permit shareholders to vote for
a greater number of nominees than two. 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.
The table below sets forth information about the two nominees
and the directors whose terms of office continue beyond the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR MESSRS. MICHAEL O. JOHNSON AND JOHN TARTOL.
NOMINEES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
Name and Experience
|
|
Class
|
|
|
Since
|
|
|
Michael O. Johnson, age 53, is Chairman and
Chief Executive Officer of the Company. Mr. Johnson joined
the Company in April 2003 after 17 years with The Walt
Disney Company, where he most recently served as President of
Walt Disney International, and also served as President of Asia
Pacific for The Walt Disney Company and President of Buena Vista
Home Entertainment. Mr. Johnson has also previously served
as a publisher of Audio Times magazine, and has directed
the regional sales efforts of Warner Amex Satellite
Entertainment Company for three of its television channels,
including MTV, Nickelodeon and The Movie Channel.
Mr. Johnson served as a director of Univision
Communications, Inc., a television company serving
Spanish-speaking Americans until March 29, 2007 and serves
on the board of Loyola High School of Los Angeles.
Mr. Johnson received his Bachelor of Arts in Political
Science from Western State College.
|
|
|
I
|
|
|
|
2003
|
|
John Tartol, age 56, has been an independent
Herbalife distributor for 25 years and a member of the
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.
|
|
|
I
|
|
|
|
2005
|
|
5
CONTINUING
DIRECTORS
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Leroy T. Barnes, Jr., age 56, 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 Deloitte &
Touche. Mr. Barnes received his Bachelors and
Masters degrees from Stanford University, and his MBA in
finance from Stanford Business School. Mr. Barnes is a
member of the boards of directors of Longs Drug Stores, Inc., a
retail drug store chain, the McClatchy Newspaper Company, Inc.,
a newspaper and Internet publisher, and Citizens Communications,
Inc., a telecommunications-focused company.
|
|
|
III
|
|
|
|
2004
|
|
Richard P. Bermingham, age 68, 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. Mr. Bermingham has been Chairman of the
Board of Bermingham Investment Company from 1997 to present.
From 1994 to 1997, Mr. Bermingham was the Vice Chairman of
the Board of American Golf. Mr. Bermingham worked for
Collins Food International, which was acquired by Sizzler
International, Inc., from 1967 to 1994. He served as the Chief
Executive Officer and a member of the board of directors of this
publicly traded company for the period from 1987 to 1994.
Mr. Bermingham currently serves on the boards of
EaglePicher Corp., Special Value Expansion Fund, LLC,
Interactive Health, Inc. and Joes Crab Shack. The latter
two companies are controlled by J.H. Whitney & Co.,
LLC or affiliates thereof. Additionally, Mr. Bermingham
served on the Advisory Board of Missouri River Plastics until
March 2007. Mr. Bermingham was a certified public
accountant and received his Bachelor of Science from the
University of Colorado.
|
|
|
III
|
|
|
|
2004
|
|
Hal Gaba, age 62, is the CEO and co-owner of
Act III Communications, a multimedia holding company, a
position he has held since 1990. In addition, he serves as
co-chairman of Village Roadshow Pictures, a co-production and
co-financing partner with Warner Bros. and other major motion
picture studios, and chairman of Concord Music Group, a leading
independent producer of jazz, pop and classical music.
Mr. Gaba is also a board member of Hear Music, a joint
venture between Concord Music Group and Starbucks Coffee
Company; The Curtis School; and a former member of the board of
Univision Communications, Inc., and head of its audit committee.
Mr. Gaba received his Bachelor of Science degree in finance
from the University of California, Berkeley and his Master of
Science degree in finance from the University of California, Los
Angeles. He is a member of the National Association of Recording
Arts & Sciences (NARAS) and the Academy of Motion
Picture Arts and Sciences.
|
|
|
III
|
|
|
|
2008
|
|
Colombe M. Nicholas, age 63, 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 this 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 boards of Tandy Brand
Accessories, and on the Business Advisory Board of the
University of Cincinnati College of Law. 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.
|
|
|
II
|
|
|
|
2006
|
|
6
|
|
|
|
|
|
|
|
|
Name and Experience
|
|
Class
|
|
|
Director Since
|
|
|
Valeria Rico, age 44, is President and Chief
Executive Officer of Lexicon Marketing USA, Inc., a
privately-held direct marketer of
English-language
learning programs to the U.S. Hispanic community. From 1995 to
2004 Ms. Rico served as Lexicons Chief Operating
Officer, and in 2004 she was appointed to her current position.
Ms. Rico also serves on the Board of Trustees for the
Thomas Rivera Institute, and is President of The Sin Barreras
Foundation, a non-profit organization to promote higher
education and to reduce high school drop out rates. Prior to
joining Lexicon, she was Director of Marketing and Sales at
Elico, Inc. Ms. Rico received her degree in law from the
Universidad Complutense de Madrid, Spain.
|
|
|
II
|
|
|
|
2006
|
|
Leon Waisbein, age 40, has been an
independent Herbalife distributor for 17 years. A member of
the Chairmans Club since 1995, Mr. Waisbein has built
a successful organization in more than 30 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 Chairman of a charity foundation supporting
disabled children and an active volunteer for the Herbalife
Family Foundation. He has a Bachelors degree in life
science from Novosibirsk Medical School.
|
|
|
II
|
|
|
|
2005
|
|
THE BOARD
OF DIRECTORS
Director
Independence
Our Board of Directors has affirmatively determined that each of
Messrs. Barnes, Bermingham, Gaba, David Halbert, Peter
Maslen and Mme. Nicholas and Rico is, or in Messrs. Halbert
and Maslens circumstances was, 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 attached hereto as
Appendix A. Mr. Halbert resigned from the Board of
Directors effective the close of business on May 23, 2007.
Mr. Maslen resigned from the Board of Directors effective
as of the close of business on January 23, 2008. The
NYSEs independence guidelines and the Companys
Categorical Standards include a series of objective tests, such
as the director is not an employee of the Company and has not
engaged in various types of business dealings involving the
Company which would prevent a director from being independent.
The Board of Directors has affirmatively determined that none of
the Companys independent directors had any relationship
with the Company.
Board
Meetings
The Board of Directors met 14 times during fiscal 2007. All
Board members attended at least 75% of the aggregate number of
Board meetings and applicable committee meetings held while such
individuals were serving on the Board of Directors, or such
committees, with the exception of Mr. Maslen. Under the
Companys Principles of Corporate Governance, which is
available on the Companys website
www.herbalife.com, by following the links through
Investor Relations to Corporate
Governance, each director is expected to dedicate
sufficient time, energy and attention to ensure the diligent
performance of his or her duties, including attending meetings
of the shareholders of the Company, the Board of Directors and
committees of which he or she is a member. Nine directors
attended the 2007 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 Director In Charge of Executive Sessions
to preside over executive sessions of non-management directors.
The position is filled by rotating independent directors with
each serving a one year term. Mr. Bermingham currently
serves as the Director In Charge of Executive Sessions.
7
2007 Director
Compensation
The table below summarizes the compensation paid by the Company
to non-management directors for the fiscal year ended
December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Stock
|
|
|
|
|
|
|
|
Name
|
|
Cash($)
|
|
|
Awards ($)(1)
|
|
|
Options ($)(1)
|
|
|
Total ($)
|
|
|
Leroy T. Barnes, Jr.(2)
|
|
$
|
269,075
|
|
|
$
|
100,442
|
|
|
$
|
12,748
|
|
|
$
|
382,265
|
|
Richard P. Bermingham
|
|
|
127,000
|
|
|
|
100,442
|
|
|
|
12,748
|
|
|
|
240,190
|
|
Peter M. Castleman(3)
|
|
|
21,931
|
|
|
|
|
|
|
|
|
|
|
|
21,931
|
|
Hal Gaba(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David D. Halbert(3)
|
|
|
30,917
|
|
|
|
49,591
|
|
|
|
|
|
|
|
80,508
|
|
Peter Maslen(2)(5)
|
|
|
202,516
|
|
|
|
100,442
|
|
|
|
12,748
|
|
|
|
315,706
|
|
Colombe M. Nicholas(2)
|
|
|
213,659
|
|
|
|
115,836
|
|
|
|
|
|
|
|
329,495
|
|
Valeria Rico(2)
|
|
|
201,194
|
|
|
|
112,612
|
|
|
|
|
|
|
|
313,806
|
|
John Tartol
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
Leon Waisbein
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
|
|
|
(1) |
|
Amounts are calculated based on provisions of Statement of
Financial Accounting Standards, or SFAS, No. 123R,
Share Based Payments. 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, 2007 regarding assumptions
underlying valuation of equity awards. |
|
(2) |
|
Messrs. Barnes and Maslen and Mme. Nicholas and Rico
received $156,000, $122,000, $128,000, and $128,000,
respectively for their work on special committee(s) of the Board
of Directors. |
|
(3) |
|
Resigned from the Board of Directors effective as of the close
of business on May 23, 2007. |
|
(4) |
|
Appointed to the Board of Directors effective as of the close of
business on January 23, 2008. As a result, Mr. Gaba
did not receive any compensation in respect of the fiscal year
ended December 31, 2007. |
|
(5) |
|
Resigned from the Board of Directors effective as of the close
of business on January 23, 2008. |
Each non-management director receives $25,000 per year for
services as a director, $5,000 for each board committee (an
additional $20,000 per year for the chair of the audit committee
and for the chair of the compensation committee, and an
additional $10,000 for the chair of the nominating and corporate
governance committee). In addition, non-management directors
receive (1) $5,000 for each board meeting attended by the
director in person or $1,000 per board meeting attended
telephonically, (2) $3,500 for each audit committee meeting
attended either in person or telephonically, and (3) $2,500
for each compensation committee meeting, and for each nominating
and corporate governance committee meeting attended either in
person or telephonically. Independent directors also receive a
$100,000 equivalent annual equity grant.
The Company has adopted stock ownership guidelines applicable to
each non-management director. Specifically, each non-management
director is encouraged to acquire and hold a number of Common
Shares equal to five times such directors annual retainer
within two years of such directors appointment or election
to the Board of Directors.
8
The table below summarizes the equity based awards held by the
Companys non-management directors as of December 31,
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
Shares or
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares or
|
|
Units of
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
Units of
|
|
Stock That
|
|
|
Options
|
|
Options
|
|
Option
|
|
Option
|
|
Stock That
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Vested (1)
|
Name
|
|
Exercisable
|
|
Un-Exercisable
|
|
Price ($)
|
|
Date
|
|
Vested (#)
|
|
($)
|
|
Colombe M. Nicholas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
781
|
|
|
$
|
31,458
|
|
Valeria Rico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
781
|
|
|
|
31,458
|
|
Leroy T. Barnes, Jr.
|
|
|
15,625
|
|
|
|
|
|
|
$
|
14.00
|
|
|
|
12/15/2014
|
|
|
|
781
|
|
|
|
31,458
|
|
Richard P. Bermingham
|
|
|
22,500
|
|
|
|
|
|
|
|
14.00
|
|
|
|
12/15/2014
|
|
|
|
781
|
|
|
|
31,458
|
|
David Halbert
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Maslen(2)
|
|
|
62,500
|
|
|
|
|
|
|
|
14.00
|
|
|
|
12/15/2014
|
|
|
|
781
|
|
|
|
31,458
|
|
John Tartol
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leon Waisbein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Market value based on the closing price of a Common Share on the
NYSE on December 31, 2007 of $40.28. |
|
(2) |
|
Resigned from the Board of Directors effective as of the close
of business on January 23, 2008. |
Effective January 15, 2006, the Company established the
Independent Directors Deferred Compensation and Stock Unit Plan,
or the Independent Directors Plan, for the award of stock units
to independent directors and to allow for deferral of
compensation realized in connection with such stock units and
other director compensation. The purpose of the Independent
Directors Plan is to promote the long term financial interest
and growth of the Company by attracting and retaining
independent directors who can make a substantial contribution to
the success of the Company, to motivate and to align the
interests with those of the equity holders. The Independent
Directors Plan is part of the Herbalife Ltd. 2005 Stock
Incentive Plan.
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
Mr. Bermingham in his capacity as the Director In Charge of
Executive Sessions, may do so by writing to Herbalife Ltd.,
c/o Corporate
Secretary, 1800 Century Park East, Los Angeles, CA 90067, 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 letters received
by the Company and addressed to non-management directors, the
Corporate Secretary of the Company reviews all such
correspondence and forwards to members of the audit committee a
summary
and/or
copies of any such correspondence that, in the opinion of the
Corporate Secretary, deal with the functions of the Board of
Directors or committees thereof, or that he otherwise determines
requires their attention. Directors may at any time review a log
of all correspondence 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.
9
Audit
Committee
From January 1, 2007 to November 8, 2007, the audit
committee consisted of Messrs. Barnes, Bermingham and
Maslen, each of whom is, or in Mr. Maslens
circumstances, was, independent as discussed above under
Director Independence. Since
November 8, 2007 the audit committee has consisted of
Messrs. Barnes and Bermingham and Ms. Rico, 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 and Maslen and Ms. Rico are
financially literate, and that Mr. Bermingham is an
audit committee financial expert, as defined in
Item 407(d)(5) of
Regulation S-K.
Mr. Barnes currently serves on the audit committee of three
public companies in addition to that of the Company. As required
by Rule 303A.07 of the NYSE Listed Company Manual, the
Board of Directors has affirmatively determined that such
simultaneous service would not impair his ability to effectively
serve on the Companys audit committee.
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 2007, the audit committee met seven times.
Nominating
and Corporate Governance Committee
The nominating and corporate governance committee consists of
Mr. Barnes and Mme. Nicholas and Rico, each of whom 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.
|
Working closely with the full Board of Directors, the nominating
and corporate governance committee develops criteria for open
board positions, 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. Applying these criteria, the nominating
and corporate governance committee considers candidates for
director suggested by its members and other directors, as well
by management and shareholders. The nominating and corporate
governance committee also retains a third-party executive search
firm on an ad-hoc basis to identify and review candidates upon
request of the committee from time to time.
Once the nominating and corporate governance committee has
identified a prospective nominee, whether the prospective
nominee is recommended by a shareholder or otherwise, it makes
an initial determination as to whether to conduct a full
evaluation. In making this determination, the nominating and
corporate governance committee considers the information
provided to the committee with the recommendation of the
candidate as well as the nominating and corporate governance
committees own knowledge, supplemented as appropriate by
inquiries to third parties. The preliminary determination is
based primarily on the need for additional directors and the
10
likelihood that the prospective nominee can satisfy the criteria
that the nominating and corporate governance committee has
established. If the committee determines, in consultation with
the Chairman of the Board of Directors and other directors as
appropriate, that additional consideration is warranted, it may
request the third-party search firm to gather additional
information about the prospective nominees background and
experience and to report its findings to the nominating and
corporate governance committee. The committee then evaluates the
prospective nominees qualifications against any specific
criteria that it may establish for the position, as well as the
standards and qualifications set out in the Companys
Principles of Corporate Governance. Among other things, the
committee considers the candidates:
|
|
|
|
|
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.
|
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 2007, the
nominating and corporate governance committee met four times.
Compensation
Committee
From January 1, 2007 to May 23, 2007, the compensation
committee consisted of Messrs. Bermingham, Halbert and
Maslen. From May 23, 2007 to October 31, 2007 the
compensation committee consisted of Messrs. Bermingham and
Maslen and Ms. Nicholas. Since October 31, 2007 the
compensation committee has consisted of Mr. Bermingham and
Mme. Nicholas and Rico. Each of these directors is, or in
Messrs. Halbert and Maslens circumstances, was,
independent as discussed 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 Chief Executive Officer
and other executive officers;
|
|
|
|
to evaluate the performance of the Chief Executive Officer and,
recommend the compensation level of the Chief Executive Officer
for approval by the independent members of the Board of
Directors;
|
|
|
|
to evaluate the performance of certain executive officers and,
considering the Chief Executive Officers recommendations,
set the compensation level for such executive officers;
|
|
|
|
to administer existing incentive compensation plans and equity
based plans;
|
11
|
|
|
|
|
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. In
fiscal 2007, the compensation committee met seven times.
Compensation
Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2007,
Messrs. Bermingham, Halbert, Maslen and Mme. Nicholas and
Rico served on the compensation committee of the Board of
Directors. During the fiscal year ended December 31, 2007,
there were no relationships or transactions between the Company
and any member of the compensation committee requiring
disclosure hereunder.
PROPOSAL 2:
APPROVAL
OF AN AMENDMENT TO THE 2005 STOCK INCENTIVE PLAN
On March 18, 2008, the Board of Directors adopted a
resolution unanimously approving, and is recommending to the
shareholders for their approval, a proposed amendment to and
restatement of the Companys 2005 Stock Incentive Plan, or
the 2005 Plan, to among other things, increase the number of
Common Shares authorized for issuance upon the exercise of any
stock options, stock appreciation rights, restricted stock,
stock units or dividend equivalents granted thereunder by
3,000,000 Common Shares, as well as to make other immaterial
administrative changes. The proposed amendment to the number of
authorized Common Shares available under the 2005 Plan is
subject to approval by the shareholders at the Meeting.
The proposed amendment to and restatement of the 2005 Plan would
increase the aggregate number of Common Shares authorized for
issuance under the 2005 Plan by 3,000,000 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 and Restatement of the 2005
Plan
The Company currently maintains one active stock incentive plan
for the purpose of granting stock-based compensation awards, the
2005 Plan, which was originally approved by the shareholders on
November 2, 2005. As of February 29, 2008, a total of
2,440,252 Common Shares remained available for new award
grants under the 2005 Plan. In addition, as of February 29,
2008, (i) 2,847,713 shares were covered by options and
stock appreciation right granted under the 2005 Plan; and
(ii) 568,519 shares were subject to unvested awards of
stock units and vested stock units with deferred settlement
dates granted under the 2005 Plan.
The Company believes that incentives and stock-based
compensation awards motivate its directors, officers, employees
and consultants to focus on the objective of creating
shareholder value and promoting the success of the Company. The
Company also believes that incentive compensation plans are an
important tool for attracting, retaining and motivating highly
qualified, skilled directors, officers, employees and
consultants. As noted above, the Board of Directors approved the
proposed amendment and restatement of the 2005 Plan, in part,
because the number of shares available under the 2005 Plan as
currently in effect does not provide flexibility to adequately
provide for future incentives.
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.
12
Accordingly, the 2005 Plan has been (and with this amendment and
restatement remains) structured in a manner such that awards
under it can satisfy the requirements for
performance-based compensation within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as
amended, or the Code. In general, under Section 162(m), in
order for the Company to be able to deduct compensation in
excess of $1 million paid in any one year to the
Companys Chief Executive Officer or any of the
Companys three other most highly compensated executive
officers (other than the Companys Chief Financial
Officer), such compensation must qualify as
performance-based. One of the requirements of
performance-based compensation for purposes of
Section 162(m) of the Code is that the material terms of
the performance goals under which compensation may be paid be
disclosed to and approved by the Companys shareholders.
For purposes of Section 162(m), the material terms include
(i) the employees eligible to receive compensation,
(ii) a description of the business criteria on which the
performance goal is based and (iii) the maximum amount of
compensation that can be paid to an employee under the
performance goal. With respect to awards of restricted stock,
stock units, and performance units under the 2005 Plan, each of
these aspects is discussed below, and shareholder approval of
this proposal will be deemed to constitute re-approval of each
of these aspects of the 2005 Plan for purposes of the approval
requirements of Section 162(m).
Summary
of the 2005 Plan
The following summary of the material provisions of the 2005
Plan as proposed to be amended and restated is qualified in its
entirety by the complete text of the proposed amended and
restated 2005 Plan, a copy of which is attached hereto as
Appendix B.
General. The 2005 Plan provides for the
grant of incentive stock options, nonqualified stock options,
stock appreciation rights, 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.
Shares Subject to the 2005
Plan. Currently, the maximum number of Common
Shares that may be issued pursuant to awards granted under the
2005 Plan is 4,000,000, plus (i) any shares that remained
available for issuance under the Companys 2004 Stock
Incentive Plan, or the 2004 Plan, and (ii) any awards under
the 2004 Plan that expire or are forfeited, terminated or
otherwise cancelled, or that are settled in cash in lieu of
Common Shares. The number of Common Shares described in
clauses (i) and (ii) above are collectively referred
to herein as the Additional Common Shares. To date, 2,939,955
Additional Common Shares have become available for grant under
the 2005 Plan. If the proposed amendment and restatement of the
2005 Plan is approved, the maximum number of Common Shares that
may be issued pursuant to awards granted under the 2005 Plan
will be 7,000,000, plus any Additional Common Shares, for a
total of 9,939,955 Common Shares. The aggregate number of Common
Shares that may be issued pursuant to the exercise of incentive
stock options granted under the 2005 Plan if the proposed
amendment and restatement is approved shall be increased from
6,939,955 to 9,939,955. 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 upon the net settlement or net exercise of options or
stock appreciation rights, Common Shares that are delivered to
or retained by the Company to pay the exercise price or
withholding taxes related to awards and Common Shares
repurchased on the open market with the proceeds of option
exercises, will not be available for additional grants under the
2005 Plan.
The 2005 Plan provides that each Common Share issued under
awards other than options or stock appreciation rights will
count against the number of Common Shares available under the
2005 Plan as two (2) Common Shares.
13
Common Shares issued under options or stock appreciation rights
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 stock appreciation rights, and as two (2) Common Shares
if such shares were subject to awards other than options or
stock appreciation rights.
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 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 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
14
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. The limit is US$1,000,000 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 stockholder return, (vi) return on
capital (including return on total capital or return on invested
capital), (vii) return on assets or net assets,
(viii) market capitalization, (ix) economic value
added, (x) debt leverage (debt to capital),
(xi) revenue, (xii) income or net income,
(xiii) operating income, (xiv) operating profit or net
operating profit, (xv) operating margin or profit margin,
(xvi) return on operating revenue, (xvii) cash from
operations, (xviii) operating ratio, (xix) operating
revenue, or (xx) customer service. The Committee may
appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following
events that occurs during a performance period: (i) asset
write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and
restructuring programs, and (v) any extraordinary
non-recurring items as described in Accounting Principles Board
Opinion No. 30
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.
15
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 stock appreciation rights. 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 Narrative Disclosure to Summary
Compensation Table and Grants of Plan Based Awards
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.
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.
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 is approved by the Companys shareholders.
Federal
Income Tax Consequences of the 2005 Plan
The following is only a summary of the effect of
U.S. federal income taxation upon the participant and the
Company with respect to the grant and exercise of awards under
the 2005 Plan, is not complete, does not discuss the income tax
laws of any state or foreign country in which a participant may
reside, and is subject to change.
16
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 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
17
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 2007 Summary
Compensation Table). In certain instances the Company may
be denied a compensation deduction for awards granted to certain
Company officers that do not qualify as performance-based
compensation to the extent their aggregate compensation
exceeds $1,000,000 in a given year.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT AND RESTATEMENT OF THE 2005 PLAN.
18
PROPOSAL 3:
THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTANTS
The audit committee has selected KPMG LLP as the Companys
independent registered public accountants for the fiscal year
ending December 31, 2008. Services provided to the Company
and its subsidiaries by KPMG LLP in fiscal 2006 and 2007 are
described under Fees to Independent Registered
Public Accountants for Fiscal 2006 and 2007. 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 RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF KPMG LLP AS THE COMPANYS INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS FOR FISCAL 2008.
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 2007 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 applicable Statements on
Auditing Standards, including SAS No. 61 and No. 90,
as amended (Communication with Audit Committees).
|
|
|
|
KPMG LLP also provided to the audit committee the written
disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees), 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, 2007, which have been filed
with the Securities and Exchange Commission, or the SEC.
19
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,
2008.
AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Leroy T. Barnes, Jr., Chairman
Richard P. Bermingham
Valeria Rico
Fees to
Independent Registered Public Accountants for Fiscal 2006 and
2007
The following services were provided by KPMG LLP during fiscal
2006 and 2007:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
Audit Fees(1)
|
|
$
|
3,012,000
|
|
|
$
|
2,764,000
|
|
Audit-related fees
|
|
|
|
|
|
|
|
|
Tax fees(2)
|
|
|
658,000
|
|
|
|
758,000
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,670,000
|
|
|
$
|
3,522,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 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.
20
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes the
material elements of the compensation and benefit programs for
our executive officers identified in the Summary Compensation
Table, or the Named Executive Officers. The compensation
committee of the Board of Directors has responsibility for
establishing, developing and implementing such programs.
Compensation and employment agreements for our Chairman and
Chief Executive Officer, Michael O. Johnson, are recommended by
the compensation committee and approved by the independent
members of our Board of Directors.
How
Compensation is Established
The compensation committee approves the compensation and
benefits programs for our Named Executive Officers (other than
Mr. Johnson) with input from Mr. Johnson and the
compensation committees compensation consultant. With
respect to Mr. Johnsons compensation, the
compensation committee develops its recommendations with the
assistance of its compensation consultant without input from
management. Mr. Johnson makes recommendations to the
compensation committee regarding the pay of the other Named
Executives Officers. Recommendations regarding
Mr. Johnsons compensation are developed by the
compensation committee and presented to the independent members
of the Board of Directors for final approval.
Independent
Compensation Consultant
The compensation committee has retained Towers Perrin, a
nationally recognized compensation consulting firm, to assist
the compensation committee in evaluating executive compensation
programs and in setting executive officers compensation,
although compensation decisions are made solely by the
compensation committee. During a portion of 2007, prior to its
decision to work with Towers Perrin, the compensation committee
had retained Frederic W. Cook & Co., or Cook, another
nationally recognized compensation consulting firm. The use of
an independent consultant provides additional perspective so
that the compensation committee can determine if our executive
compensation programs are reasonable and consistent with our
objectives (as described in more detail below). The consultant
reports directly to the compensation committee. The consultant
regularly participates in compensation committee meetings and
advises the compensation committee with respect to compensation
trends and best practices, plan design, and the reasonableness
of individual compensation awards by providing competitive
comparison data.
Overall
Objectives of Executive Compensation Program
The purpose of our compensation programs for the Named Executive
Officers is to attract, motivate and retain highly qualified
individuals with the necessary skills to achieve our strategic
goals and objectives. To do so, we provide a mix of cash and
equity-based compensation (as further described below) to
motivate our Named Executive Officers and align their interests
with those of our shareholders.
The compensation committee is focused on continuing the assembly
of a highly qualified management team to further the achievement
of our growth and profitability goals. As such, our compensation
programs have been influenced by labor market demands for
recruiting experienced executives, frequently from outside our
industry. Recruitment and retention of experienced executives
generally requires higher pay rates, which is among the factors
considered by the compensation committee in selecting the
75th percentile
compensation target.
It is the compensation committees intent generally to
emphasize performance-based compensation, which should vary
based on corporate performance. The compensation committee also
emphasizes equity-based compensation in order to better align
the interests of the Named Executive Officers with the interests
of shareholders.
Our executive compensation program is based on the following
underlying principles:
|
|
|
|
|
Compensation plans and payouts should be aligned with the
achievement of our strategic business goals;
|
|
|
|
Compensation plans should align the interests of our Named
Executive Officers with shareholders interests;
|
21
|
|
|
|
|
Compensation programs should assist Herbalife in attracting and
retaining highly qualified executives and engaging our Named
Executive Officers in supporting our independent distributors
and our overall corporate philosophy of changing
peoples lives; and
|
|
|
|
Compensation programs should reinforce behaviors among our Named
Executive Officers that demonstrate our adherence to our
corporate Vision, Mission & Values statement.
|
Competitive
Benchmarking
The compensation committee targets total direct compensation
(consisting of base salary, annual cash incentive compensation,
and long-term equity incentive compensation) for the Named
Executive Officers at the
75th percentile
as compared to the Herbalife Peer Group (described in more
detail below), with the opportunity to earn top-quartile pay for
superior performance and with commensurate downside risk for
underachievement. The actual target total direct compensation
for each Named Executive Officer selected by the compensation
committee may be above or below the
75th percentile
reflecting the executives level in the organization,
overall individual contribution, scope of responsibilities and
level of experience. These factors are described in more detail
below.
Each year the compensation committee assesses the
competitiveness of each Named Executive Officers target
total direct compensation. For 2007 the compensation committee
was aided in its assessment by a 2006 study prepared by Cook.
The analysis contains competitive comparisons with respect to
compensation program design and pay levels versus a direct peer
group (the Herbalife Peer Group described below). Also used were
two proprietary pay surveys from Cook (the Survey Data) which
include non-industry specific information on pay levels and
design practices for similarly-sized companies. Each survey
consists of information on more than 300 companies across
more than 20 different industries, excluding financial services.
Data used from each survey reflect companies with revenues
between $1 billion and $3 billion or that have been
size-adjusted based on Herbalifes revenue size
(approximately $2.1 billion). The Survey Data is not used
as a benchmark but, rather, is used to verify that the pay
levels reflected in the Herbalife Peer Group are not
inconsistent with those of similarly-sized companies generally.
For 2007, the Herbalife Peer Group was comprised of 19
corporations, which are either business competitors or
corporations with which we compete for employees at the Named
Executive Officer level, and which are similar in size to
Herbalife, as measured by revenue and market capitalization. At
the time of the study in 2006, revenue for the corporations in
the Herbalife Peer Group ranged from $955 million to
$8.4 billion and market capitalization for such
corporations ranged from $462 million to $16.2 billion.
The compensation committee reviews and makes adjustments to the
corporations that comprise the Herbalife Peer Group annually to
ensure that the Herbalife Peer Group adequately represents
companies that compete within the same industry as Herbalife
with comparative compensation philosophies and practices, and
companies of similar size that are located in geographic regions
similar to Herbalife. The compensation committee determined that
no changes were necessary for 2007.
22
The following table presents the Herbalife Peer Group list that
was used for 2007.
|
|
|
|
|
Herbalife Peer Group
|
|
|
|
(19 Companies)
|
|
|
|
|
Alberto-Culver Company
|
|
|
|
|
Avon Products, Inc.
|
|
|
|
|
Church & Dwight Co., Inc.
|
|
|
|
|
Corn Products International, Inc.
|
|
|
|
|
Del Monte Corporation
|
|
|
|
|
Elizabeth Arden, Inc.
|
|
|
|
|
Energizer Holdings, Inc.
|
|
|
|
|
Estee Lauder Inc.
|
|
|
|
|
Flowers Foods, Inc.
|
|
|
|
|
Forest Laboratories, Inc.
|
|
|
|
|
International Flavors & Fragrances
Inc.
|
|
|
|
|
McCormick and Company, Inc.
|
|
|
|
|
NBTY Inc.
|
|
|
|
|
Nu Skin Enterprises Inc.
|
|
|
|
|
Perrigo Company
|
|
|
|
|
Revlon, Inc.
|
|
|
|
|
The J.M. Smucker Company
|
|
|
|
|
Tupperware Brands Corporation
|
|
|
|
|
Weight Watchers International, Inc.
|
|
|
|
|
Internal
Equity
In addition to data relating to our compensation peer group, the
compensation committee uses internal pay equity to establish pay
levels for the Named Executive Officers. We believe that
internal pay equity fosters a one-team approach that contributes
to corporate success. To achieve this, the compensation
committee has developed an executive grading structure. Each
executive is assigned to a particular grade based on their
relative responsibilities within Herbalife. Each pay grade has a
salary range, target incentive opportunity, and a range of
long-term equity incentive grant values. This grade structure is
then used by the compensation committee as a guideline and
starting point for making pay decisions based on the premise
that executives with similar responsibilities should have
similar compensation opportunities. For 2007, Mr. Johnson
was placed in salary grade 1. Mr. Probert was placed in
salary grade 2, and the other Named Executive officers were
placed in salary grade 3.
Pay
Elements
The compensation and benefits programs for our Named Executive
Officers consist of:
|
|
|
|
|
Base salary designed to attract and retain Named Executive
Officers over time;
|
|
|
|
Annual cash incentive compensation designed to focus the Named
Executive Officers on annual operating achievement that promotes
long-term shareholder growth;
|
|
|
|
Long-term equity incentive compensation (including stock
appreciation rights and restricted stock units) designed to
retain our Named Executive Officers and to align the interests
of our Named Executive Officers with the interests of
shareholders;
|
|
|
|
|
|
Other compensation and benefits designed to attract and retain
Named Executive Officers, consisting of:
|
|
|
|
|
|
Participation in broad-based and executive-level welfare benefit
plans;
|
23
|
|
|
|
|
Participation in tax-qualified and nonqualified deferred
compensation plans; and
|
|
|
|
Executive perquisites;
|
|
|
|
|
|
Severance arrangements are designed to facilitate our ability to
attract and retain executives at the Named Executive Officer
level as Herbalife competes for talented employees in a
marketplace where such protections are commonly offered for such
individuals; and
|
|
|
|
Change in control arrangements are provided to attract and
retain executives at the Named Executive Officer level and to
focus our Named Executive Officers on shareholder interests when
considering strategic alternatives.
|
Mix of
Compensation Elements
Our compensation program for Named Executive Officers is
designed to be weighted toward variable (at-risk) rewards and
long term equity incentive compensation to drive our Named
Executive Officers towards achieving our long-term strategic and
financial performance objectives. However, the compensation
committee does not target a specified mix of compensation
elements.
Base
Salaries
Named Executive Officer base salaries are a guaranteed element
of the executives annual compensation. Base salaries are
determined through the competitive benchmarking review described
above with 2007 base salaries of each Named Executive Officer
established within the top quartile of executives with similar
positions within the Herbalife Peer Group in order to attract
and retain talented and seasoned executives. Base salaries for
Named Executive Officers are reviewed each November in
preparation for the upcoming fiscal year. Following the review
period, our Chairman and Chief Executive Officer is provided the
opportunity to propose to the compensation committee changes in
the base salaries for each of the other Named Executive
Officers. During this review, the compensation committee,
separately and without the involvement of the Chairman and Chief
Executive Officer, reviews and, to the extent it determines
appropriate, proposes changes to the Chairman and Chief
Executive Officers base salary to the independent members
of the Board of Directors.
The following table summarizes adjustments (if any) made to base
salaries for the Named Executive Officers during 2007:
|
|
|
Named Executive Officer
|
|
Base Pay
|
|
Michael O. Johnson
|
|
No change
|
Gregory Probert
|
|
No change
|
Richard Goudis(1)
|
|
Increased by 10% to $577,500
|
Brett R. Chapman(2)
|
|
Increased by 10% to $550,000
|
Paul Noack
|
|
Increased by 22% to $550,000
|
|
|
|
(1) |
|
Mr. Goudis salary was increased by 10% effective
August 20, 2007 in recognition of additional
responsibilities. |
|
(2) |
|
Mr. Chapmans salary was increased by 10% effective
August 20, 2007 in recognition of additional
responsibilities. |
|
(3) |
|
Mr. Noacks salary was increased by 22% to $550,000
effective as of December 18, 2007 in recognition of the
changes in his duties and responsibilities. |
Annual
Incentive Awards
General
All annual cash-based incentive compensation for our Named
Executive Officers is paid under our shareholder-approved
Executive Incentive Plan. Under this plan, the compensation
committee approves performance criteria for each of our Named
Executive Officers for each year no later than March 31 of each
such year. Following
24
the end of each year, the compensation committee evaluates
corporate and, with respect to Mr. Noack, individual
performance, with respect to the performance criteria and
determines and certifies the annual incentive payable to each
Named Executive Officer based on this performance; provided,
however, with respect to Mr. Noack, but not the other Named
Executive Officers, the compensation committee retains the
discretion to reduce the actual incentive payout based upon the
Chief Executive Officers overall qualitative review with
the compensation committee of Mr. Noacks performance
during the year. Pursuant to the employment agreements between
Herbalife and the Named Executive Officers other than
Mr. Noack, the annual incentive payable to each executive
must be the full amount certified as earned by the compensation
committee based upon actual performance as compared to relevant
performance criteria. Mr. Nowaks employment agreement
does not contain this requirement.
Targets
and Determination
For 2007, annual target incentive award opportunities for the
Named Executive Officers were based upon job responsibilities,
and the study of comparable positions and award levels within
the Herbalife Peer Group. The compensation committee intended
for annual incentive compensation payable upon achievement at
the target level to result in total direct
compensation (when added to base salaries and the value of
long-term equity incentive awards) at the
75th percentile
as compared to the Herbalife Peer Group and for achievement at
the stretch and aspirational levels to
result in upper quartile payouts at year end as compared to the
Herbalife Peer Group.
For 2007, the compensation committee established a performance
goal for each of our Named Executive Officers that was based
upon our earnings per share, or EPS. The compensation committee
believes that EPS is the most appropriate composite financial
measure of overall corporate performance and further aligns the
interests of our Named Executive Officers interests with
those of our shareholders. Achievement of the 100% target level
for the EPS goal for 2007 would equal our budgeted earnings per
share for the year. Budgeted EPS is built from the bottom
up based on input from the regions and individual markets
as to actual business trends, expected growth trends for the
industry in that region, trends of specific distributor methods
of operation within that country and the risks and opportunities
of achieving the forecasted revenue and expense levels.
Historically, since our initial public offering, budgeted EPS
for each year has represented a substantial increase over the
prior year EPS, presenting a significant challenge to the senior
management team to continue improving the Companys revenue
and earnings on a year-over-year basis to achieve the budgeted
target.
Mr. Noacks employment agreement provides that he
participates in the Companys Senior Management Bonus
Incentive Plan with payouts based on specific objectives set
through the Companys Performance Management Program. In
addition to the EPS goals described above, Mr. Noacks
bonus is dependent, in part, upon the achievement of qualitative
performance criteria determined by Mr. Johnson and approved
by the compensation committee. For 2007 these qualitative
performance criteria consisted of goals related to strategic
planning and the evaluation of strategic alternatives,
evaluation of programs related to distributors and increasing
operating efficiencies.
The budgeted EPS target for 2007 was $2.40 per share, which
amount represented a 16.5% increase over our EPS for the
preceding fiscal year (adjusted for certain one-time items), and
exceeds the expected EPS growth rates for our industry and our
business and financial competitors.
25
The following table describes the potential annual incentive
awards for 2007 for our Named Executive Officers based upon
specified levels of performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
|
|
$
|
2.40
|
|
|
$
|
2.50
|
|
|
$
|
2.59
|
|
|
$
|
2.69
|
|
|
$
|
2.78
|
|
|
$
|
2.88
|
|
|
$
|
2.98
|
|
% of Targeted Achievement
|
|
|
100
|
%
|
|
|
104
|
%
|
|
|
108
|
%
|
|
|
112
|
%
|
|
|
116
|
%
|
|
|
120
|
%
|
|
|
124
|
%
|
Named Executive
|
|
Award Payout (Expressed as a Percentage of Base Salary) at
Various Company Performance Levels (Expressed as% of Target EPS
Goal)
|
Michael O. Johnson (regular)
|
|
|
112.50
|
%
|
|
|
131.25
|
%
|
|
|
150.00
|
%
|
|
|
150.00
|
%
|
|
|
150.00
|
%
|
|
|
150.00
|
%
|
|
|
150.00
|
%
|
Michael O. Johnson (alternative)
|
|
|
37.50
|
%
|
|
|
43.75
|
%
|
|
|
50.00
|
%
|
|
|
50.00
|
%
|
|
|
50.00
|
%
|
|
|
50.00
|
%
|
|
|
50.00
|
%
|
Gregory L. Probert
|
|
|
100.00
|
%
|
|
|
150.00
|
%
|
|
|
170.00
|
%
|
|
|
180.00
|
%
|
|
|
190.00
|
%
|
|
|
195.00
|
%
|
|
|
200.00
|
%
|
Richard P. Goudis
|
|
|
50.00
|
%
|
|
|
75.00
|
%
|
|
|
90.00
|
%
|
|
|
95.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Brett R. Chapman
|
|
|
50.00
|
%
|
|
|
75.00
|
%
|
|
|
90.00
|
%
|
|
|
95.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Paul Noack
|
|
|
50.00
|
%
|
|
|
75.00
|
%
|
|
|
90.00
|
%
|
|
|
95.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
|
* |
|
In addition to the figures shown in this table, in 2007
Mr. Johnson (but none of the other Named Executive
Officers) would have received an annual incentive payout
(including both the regular and alternative bonus target) equal
to 37.5% of his base salary for achievement of between 80% and
85% of the EPS target, 56.3% of his base salary for achievement
of between 85% and 90% of the EPS target, 75% of his base salary
for achievement of between 90% and 95% of the EPS target and
112.5% of his base salary for achievement of between 95% and
100% of the EPS target. As described above, none of the Named
Executive Officers other than Mr. Johnson were entitled to
an annual incentive payout if we did not achieve the 100% EPS
target. |
Based on the actual 2007 financial achievement of $2.71 EPS and,
for Mr. Noack, achievement of 100% of his qualitative
performance criteria for 2007, the compensation committee
reviewed and approved incentive payouts to each of the Named
Executive Officers at the 112% achievement tier of the incentive
schedule from above. The specific incentive amounts are
referenced in the Summary Compensation Table.
Pursuant to his employment agreement, Mr. Johnsons
annual incentive award is composed of two annual incentive
programs, the regular and the alternate
performance targets. Mr. Johnsons employment is
structured in this manner to allow the compensation committee a
degree of flexibility in structuring Mr. Johnsons
annual incentive award since the regular performance
target (but not the alternate performance target)
must be based on EPS. However, the compensation committee
established for 2007 (and for prior years) goals under both the
regular and the alternative performance
targets that are identical to each other and to the goals
established for each of the other Named Executive Officers in
order to foster a one team ideal and to ensure that all of our
Named Executive Officers are driving towards the same
objectives. The compensation committee reviews the alternative
performance target annually with Mr. Johnson and makes
changes to the relevant target metric as it deems appropriate.
We do not currently have a policy requiring a fixed course of
action with respect to compensation adjustments following later
restatements of financial performance targets. Under those
circumstances, the compensation committee would evaluate whether
such adjustments are appropriate based upon the facts and
circumstances surrounding the restatement and the existing laws.
Long Term
Incentive Awards
Long-term equity-based awards were provided to Named Executive
Officers in 2007 under our 2005 Stock Incentive Plan. The
compensation committee believes these incentives foster the
long-term perspective necessary for continued growth and
success. Our long-term incentives are designed to ensure our
Named Executive Officers are dedicated to and focused on growing
shareholder value and to better align their interests with the
interests of our shareholders.
As disclosed in the Grants of Plan-Based Awards table below,
during 2007, we awarded two forms of long term
incentives stock-settled stock appreciation rights
(SARs) and time-vested restricted stock units (RSUs). SARs
26
represented 70% of the total long-term incentive opportunity and
RSUs represented 30%. Stock-settled SARs are substantially
similar to stock options and provide an opportunity for Named
Executive Officers to earn additional compensation only if our
share price increases and the Named Executive Officers remain
employed by Herbalife during the period required for the SARs to
vest. RSUs align the interests of Named Executive Officers with
the interests of shareholders through stock ownership, increase
the reward to the Named Executive Officers when our share price
increases (and vice versa), and serve as a retention tool for
the Named Executive Officers. The Compensation Committee elected
to move more of the value of the long term grants into the form
of SARs (from RSUs) in order to increase the performance
alignment of the program, because SARs carry a higher risk to
the executive of delivering no additional compensation unless
the share price increases.
Our approach toward establishing long-term equity-based
incentive compensation grant levels was to first establish the
value of the equity-based compensation awards to be delivered to
each Named Executive Officer based upon competitive grant levels
(as determined by reference to the Herbalife Peer Group), the
scope of each executives responsibility, each
executives individual contribution to Herbalifes
success, and the level of prior awards granted to the executive.
Long term incentives are benchmarked to the Herbalife Peer Group
at the
75th percentile.
Using this target value, the compensation committee, with the
assistance of its consultant, used a Black-Scholes pricing model
to translate the dollar valuation into a blend of 70% SARs and
30% RSUs. In determining the actual number of shares subject to
each award in 2007, a premium was placed on RSUs given the
relative value of an RSU compared to an SAR to recognize the
different risk profile of each award, which resulted in one RSU
equaling the value of three SARs.
The base price for the SARs equaled 100% of the per share fair
market value (closing share price) of our common shares on the
grant dates. The SARs have a ten-year term and vest based upon
continued employment 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. This
three-year vesting schedule, effective for all recipients
beginning with the 2007 annual equity award cycle, is a change
from prior years where the SARs were subject to a five- year
quarterly vesting schedule. The change was made after the
compensation committee considered the relative impact of various
vesting schedules on retention and determined that a three year,
back-loaded schedule will be more effective. The RSUs awarded to
the Named Executive Officers vest over a three-year period based
upon continued employment, one-third per year on each
anniversary of the vesting commencement date. Dividend
equivalents are paid with respect to vested and unvested RSUs.
Summary
of Mix of Compensation Elements for 2007
As a result of the specific compensation information and
decisions described above and consistent with the compensation
committees guiding principles as described above, the
resulting mix of compensation elements provided to our Named
Executive Officers for 2007 evidenced a balance between annual
and long-term compensation elements and a weighting towards more
variable (rather than fixed) compensation elements. The
compensation committee views the annual vs. long term mix of
compensation as appropriate in balancing the short and long term
decision making focus of our Named Executive Officers. The
compensation committee views the mix of fixed vs. variable
compensation as consistent with managing a high growth company.
The following table sets forth the actual mix of compensation
elements provided to each of our Named Executive Officers in
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proportional Mix of
|
|
|
Proportional Mix of
|
|
|
|
Annual vs. Long-term
|
|
|
Fixed vs. Variable
|
|
|
|
Annual(1)
|
|
|
Long-Term(2)
|
|
|
Fixed(3)
|
|
|
Variable(4)
|
|
|
Michael O. Johnson
|
|
|
51
|
%
|
|
|
49
|
%
|
|
|
30
|
%
|
|
|
70
|
%
|
Gregory Probert
|
|
|
48
|
%
|
|
|
52
|
%
|
|
|
31
|
%
|
|
|
69
|
%
|
Richard Goudis
|
|
|
64
|
%
|
|
|
36
|
%
|
|
|
43
|
%
|
|
|
57
|
%
|
Brett R. Chapman
|
|
|
65
|
%
|
|
|
35
|
%
|
|
|
43
|
%
|
|
|
57
|
%
|
Paul Noack
|
|
|
41
|
%
|
|
|
59
|
%
|
|
|
48
|
%
|
|
|
52
|
%
|
|
|
|
(1) |
|
For purposes of this table annual compensation includes base
salary and annual incentive payouts as disclosed in the Summary
Compensation Table below. |
27
|
|
|
(2) |
|
For purposes of this table long-term compensation is comprised
of equity-based compensation awards granted in 2007 the value of
which is reported in the Grants of Plan-Based Awards Table below. |
|
(3) |
|
For purposes of this table fixed compensation (i.e.,
compensation elements that are earned solely by continued
employment over a specified period of time) includes base salary
and restricted stock unit awards. |
|
(4) |
|
For purposes of this table variable compensation (i.e.,
compensation elements that we consider to be at-risk based upon
corporate performance) includes annual incentive payouts and the
grant-date fair value of stock appreciation right awards
calculated in accordance with FAS 123(R). |
The December 18, 2007 employment agreement between the
company and Mr. Noack provides that, in addition to
Mr. Noacks annual equity grant, he received a
one-time discretionary grant of 20,000 SARs and 10,000 RSUs
under the Herbalife Ltd. 2005 Stock Incentive Plan, which shall
vest and otherwise be governed according to the terms of the
2005 Plan and the underlying SAR and RSU Unit Award Agreements
provided separately to Mr. Noack. This award was provided
in recognition of Mr. Noacks increased
responsibilities and his agreement to relocate to Hong Kong.
Equity
Award Grant Policy
In 2007, the annual grant of SARs and RSUs to the Named
Executive Officers and other executives was made in May 2007 at
a meeting of the compensation committee. The Company generally
conducts its annual grant award process at a time subsequent to
the release of financial results for the preceding year. The
Company is reviewing the feasibility of setting a defined date
for the purpose of authorizing stock awards for the annual award
process. We currently operate a monthly grant approval process
where awards are authorized for new hires, certain selected
retention situations, and to newly promoted executives. All
equity compensation awards to our Named Executive Officers and
other executives are granted based on our equity grant policy,
which was approved by the compensation committee. The policy
provides that the exercise price of all stock options or stock
appreciation rights granted to executives will be established as
the closing stock price on the date the awards are granted.
Hedging
The Company currently has a policy that 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
Aligning interests between officers and shareholders is a major
component of our compensation philosophy. A significant portion
of each Named Executive Officers compensation is paid in
form of equity-based incentive compensation awards. The
compensation committee believes this is an appropriate and
beneficial condition for alignment purposes and is an incentive
for long term achievement and individual retention.
After the end of our 2007 fiscal year, in February 2008, the
compensation committee adopted the following guidelines for
ownership of our common shares by the Named Executive Officers.
The CEO is encouraged to acquire and hold a number of Common
Shares equal to five times his base salary within five years
following the adoption of these guidelines. The remaining Named
Executive Officers are encouraged to acquire and hold a number
of Common Shares equal to two times their respective base
salaries within five years following the adoption of these
guidelines.
Benefits
and Perquisites
U.S.-based
employees, including the Named Executive Officers, participate
in a variety of savings, health and welfare, and paid time-off
benefits designed to enable Herbalife to attract and retain its
workforce in a competitive marketplace. Health and welfare and
paid time-off benefits help ensure that Herbalife has a
productive and focused workforce through reliable and
competitive health and other benefits. Savings plans help
employees, especially long-service employees, save and prepare
financially for retirement.
28
In addition, our Named Executive Officers are eligible to
participate in welfare benefit programs we offer in general to
our executive officers. These benefits are as follows:
|
|
|
|
|
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. We also provide our executives with a
gross-up
payment for all income and employment taxes incurred in
connection with this benefit.
|
|
|
|
Executive Physical We provide our executives with an
annual health screening evaluation. We have arranged services
with the Executive Health Department at UCLA, although this
program allows executives to use other qualified medical
practitioners for the annual health screening. The services are
voluntary and confidential. We provide for a reimbursement of up
to $2,000 annually for each executive under this program.
|
|
|
|
Executive Wellness We provide a $2,000 annual
benefit to executives for the purchase of fitness training
equipment, personal training services and other reasonable
products or services that support physical conditioning. We
provide our executives with a
gross-up
payment for all income and employment taxes incurred in
connection with this benefit.
|
|
|
|
|
|
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 benefits Herbalife. The benefit for
Mr. Johnson is up to $20,000 per year; the other Named
Executive Officers receive a benefit of up to $15,000 per year.
|
|
|
|
Personal Use of Aircraft The board of directors has
approved the use of chartered aircraft for business purposes by
certain corporate executives including Mr. Johnson
(Herbalife does not lease or own an aircraft). The compensation
committee has also approved limited personal use of such
chartered aircraft by Mr. Johnson. This benefit provides
better security for Mr. Johnson, allows him to devote
additional time to Herbalife business, and addresses his often
complex travel logistics. After the end of our 2007 fiscal year,
in March 2008, the Company discontinued this benefit to
Mr. Johnson, effective March 31, 2008.
|
|
|
|
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 on page 44. 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.
|
|
|
|
Employee Stock Purchase Plan Our Named Executive
Officers participate in our Employee Stock Purchase Plan (or
ESPP). The ESPP allows generally all 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. No Common Shares were purchased under the ESPP in the year
ended December 31, 2007. 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 Companys common
shares though payroll deductions. No offerings were made under
the ESPP in 2007.
|
Employment
Agreements
The current employment agreement between Herbalife and
Mr. Johnson was entered into prior to our initial public
offering in December 2004. During 2007, each of our Named
Executive Officers was party to employment agreements with
Herbalife. Those agreements establish the terms and conditions
for the employment relationship
29
each executive has with Herbalife and specifies compensation,
executive benefits, severance provisions, change in control
provisions, preservation of confidential and proprietary
information, non-solicitation, non-disparagement, and other
conditions. The compensation committee periodically reviews the
competitiveness of its severance and change in control
arrangements as and when the employment agreements with our
Named Executive Officers near the end of their stated terms. In
2005, the compensation committees compensation consultant
engaged in an in-depth competitive analysis of the employment
agreements between Herbalife and each of Messrs. Probert,
Goudis and Chapman, which formed the basis of the amended
employment agreements entered into with those executives in 2006
and which were in effect during 2007.
On December 18, 2007, the Company entered into an
employment agreement with Mr. Noack, effective as of
December 3, 2007, pursuant to which he ceased serving as
the Companys Chief Strategic Officer and began serving as
the Companys Managing Director, Asia-Pacific region. He
has agreed to relocate to Hong Kong in connection with the
execution of the agreement.
Severance
Arrangements
The Named Executive Officers are eligible for the benefits and
payments if their employment terminates for various reasons or
as a result of a change in control of Herbalife. The Company has
provided this benefit to the Named Executive Officers to allow
them to focus on strategic alternatives and increased
shareholder value without concern for the impact on their
continued employment. Separation benefits include cash payments
and other benefits in an amount the Company believes is
appropriate, taking into account the time it is expected to take
a separated executive to find another job. Separation benefits
are intended to ease the consequences to the executive of an
unexpected termination of employment. Herbalife benefits by
requiring a general release, 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 compensation committee in some
circumstances as a result of negotiation with executives,
especially where Herbalife desires particular non-disparagement,
cooperation with litigation, non-competition and
non-solicitation terms.
The employment agreements for each executive specifically
details various provisions for benefits and cash payments in the
event of a separation. Generally, these agreements specify
conditions and benefits within the following categories: death,
disability, termination by Herbalife for cause; resignation by
the executive without good reason; resignation by the executive
with good reason, and termination by Herbalife without cause.
Other
Change in Control Arrangements
We also have change in control provisions in the equity
compensation awards granted to four of our Named Executive
Officers, Messrs. Johnson, Probert, Goudis and Chapman. In
general, these arrangements provide for benefits upon a
termination of the Named Executive Officers employment in
connection with a change in control, although a portion of the
benefits are triggered solely upon the occurrence of a change in
control of Herbalife. 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
Herbalife. In addition, change in control benefits encourage our
Named Executive Officers to remain focused on our business and
the interests of our shareholders when considering strategic
alternatives. Based on a competitive analysis of the change in
control arrangements maintained by the corporations in the
Herbalife Peer Group, the compensation committee believes that
these benefits are customary among the Herbalife Peer Group for
executives in similar positions as the Named Executive Officers.
Please refer to the discussion on page 34 under
Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards for a more detailed discussion
of our severance and change in control arrangements.
30
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 compensation 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 compensation 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 compensation committee in ascertaining
appropriate levels or modes of compensation.
In 2007, all annual incentive plan payments and SAR awards
qualified as performance-based compensation under
Section 162(m).
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. Our Named Executive
Officers (other than Mr. Noack) as part of their employment
agreements would be provided with tax
gross-up
payments in the event their change in control payments become
subject to this excise tax. The compensation committee believes
that the provision of tax
gross-up
protection is appropriate and necessary for executive retention
and consistent with the current practices of the Herbalife Peer
Group. Please refer to the discussion on page 45 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 compensation committee has reviewed and discussed the
foregoing Compensation Discussion and Analysis with management.
Based on its review and discussion with management, the
compensation 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
Colombe M. Nicholas
Valeria Rico
31
Executive
Officers of the Registrant
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position with the Company
|
|
Officer Since
|
|
Michael O. Johnson
|
|
53
|
|
Chief Executive Officer, Director, and Chairman of the Board
|
|
2003
|
Gregory Probert
|
|
51
|
|
President, Chief Operating Officer
|
|
2003
|
Richard Goudis
|
|
46
|
|
Chief Financial Officer
|
|
2004
|
Brett R. Chapman
|
|
52
|
|
General Counsel and Corporate Secretary
|
|
2003
|
Paul Noack
|
|
46
|
|
Managing Director, Asia-Pacific Region
|
|
2004
|
Michael O. Johnson is Chairman and Chief Executive
Officer of the Company. Mr. Johnson joined the Company in
April 2003 after 17 years with The Walt Disney Company,
where he most recently served as President of Walt Disney
International, and also served as President of Asia Pacific for
The Walt Disney Company and President of Buena Vista Home
Entertainment. Mr. Johnson has also previously served as a
publisher of Audio Times magazine, and has directed the
regional sales efforts of Warner Amex Satellite Entertainment
Company for three of its television channels, including MTV,
Nickelodeon and The Movie Channel. Mr. Johnson formerly
served as a director of Univision Communications, Inc., a
television company serving Spanish-speaking Americans and
currently serves on the board of Loyola High School of Los
Angeles. Mr. Johnson received his Bachelor of Arts in
Political Science from Western State College.
Gregory Probert is President and Chief Operating Officer
of the Company. Mr. Probert joined the Company in August
2003, after serving as President and CEO of DMX MUSIC for over
2 years. Mr. Probert joined DMX MUSIC after serving as
Chief Operating Officer of Planet Lingo from January 2000 to
November 2000, where he led the team that designed and built the
companys first product, an online conversational system
for the $20 billion ESL market in Japan. Immediately prior
to Planet Lingo, Mr. Probert spent 12 years with The
Walt Disney Company, where he most recently served as Executive
Vice President and Chief Operating Officer for the
$3.5 billion Buena Vista Home Entertainment worldwide
business. Mr. Proberts positions with The Walt Disney
Company also included service as Executive Vice President and
Managing Director of the International Home Video Division,
Senior Vice President and Managing Director of Buena Vista Home
Entertainment, Asia Pacific Region, based in Hong Kong, and
Chief Financial Officer of Buena Vista International,
Disneys international theatrical distribution arm, among
others. Mr. Probert received his Bachelor of Science from
the University of Southern California and his MBA from
California State University, Los Angeles.
Richard Goudis is Chief Financial Officer of the Company.
Mr. Goudis joined the Company in June 2004 after serving,
from 1998 to 2001, as the Chief Operating Officer of Rexall
Sundown, a Nasdaq 100 company that was sold to Royal Numico
in 2000. After the sale to Royal Numico, Mr. Goudis had
operations responsibility for all of Royal Numicos
U.S. investments, including General Nutrition Centers, or
GNC, Unicity International and Rexall Sundown. From 2002 to May
2004, Mr. Goudis was a partner at Flamingo Capital
Partners, a firm he founded with several retired executives from
Rexall Sundown. Prior to working at Rexall Sundown,
Mr. Goudis worked at Sunbeam Corporation and
Pratt & Whitney. Mr. Goudis graduated from the
University of Massachusetts with a degree in Accounting and he
received his MBA from Nova Southeastern University.
Brett R. Chapman is General Counsel and Corporate
Secretary of the Company. Mr. Chapman joined the Company in
October 2003 after spending thirteen years at The Walt Disney
Company, most recently as its Senior Vice President and Deputy
General Counsel, with responsibility for all legal matters
relating to Disneys Media Networks Group, including the
ABC Television Network, the companys cable properties
including The Disney Channel and ESPN, and Disneys radio
and internet businesses. Prior to working at The Walt Disney
Company, Mr. Chapman was an associate at the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP.
Mr. Chapman received his Bachelor of Science and Master of
Science in Business Administration from California State
University, Northridge and his Juris Doctorate from Southwestern
University School of Law.
Paul Noack is the Companys Managing Director,
Asia-Pacific region. Mr. Noack joined the Company in
January 2004, as Senior Vice President, Corporate Planning and
Strategy, was promoted to Chief Strategic Officer
32
in 2006 and assumed his current position in December 2007. Prior
to joining the Company, Mr. Noack spent 3 years at DMX
MUSIC as Senior Vice President and Chief Strategic Officer with
responsibility for the companys strategic alliances and
international operations in Asia, Japan, Latin America and
Canada. Prior to working at DMX MUSIC, Mr. Noack served as
Senior Managing Director of Knightsbridge Holdings, a
San Francisco based merchant banking company and spent
11 years at The Walt Disney Company. Mr. Noack holds a
B.A. from St. Johns University.
2007
Summary Compensation Table
The following table sets forth the total compensation for the
fiscal years ended December 31, 2007 and 2006, of the
Companys Chairman and Chief Executive Officer, Chief
Financial Officer and each of the three other most highly
compensated executive officers. These individuals, including the
Chairman and Chief Executive Officer and Chief Financial Officer
are collectively referred to in this proxy statement as the
Named 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
|
|
|
2007
|
|
|
$
|
1,100,002
|
|
|
|
|
|
|
$
|
327,228
|
|
|
$
|
1,445,134
|
|
|
$
|
2,200,000
|
|
|
$
|
417,248
|
|
|
$
|
5,489,612
|
|
Chairman and Chief Executive Officer
|
|
|
2006
|
|
|
|
1,100,002
|
|
|
|
|
|
|
|
124,520
|
|
|
|
847,084
|
|
|
|
2,200,000
|
|
|
|
284,115
|
|
|
|
4,555,721
|
|
Gregory Probert
|
|
|
2007
|
|
|
|
749,998
|
|
|
|
|
|
|
|
297,320
|
|
|
|
1,397,025
|
|
|
|
1,350,000
|
|
|
|
63,800
|
|
|
|
3,858,143
|
|
President and Chief Operating Officer
|
|
|
2006
|
|
|
|
793,075
|
|
|
|
|
|
|
|
150,021
|
|
|
|
870,065
|
|
|
|
1,275,000
|
|
|
|
54,537
|
|
|
|
3,142,698
|
|
Brett R. Chapman
|
|
|
2007
|
|
|
|
517,308
|
|
|
|
|
|
|
|
109,849
|
|
|
|
437,796
|
|
|
|
522,500
|
|
|
|
40,040
|
|
|
|
1,627,493
|
|
General Counsel and Corporate Secretary
|
|
|
2006
|
|
|
|
524,625
|
|
|
|
|
|
|
|
36,374
|
|
|
|
380,627
|
|
|
|
475,000
|
|
|
|
30,717
|
|
|
|
1,447,343
|
|
Richard Goudis
|
|
|
2007
|
|
|
|
543,173
|
|
|
|
|
|
|
|
252,079
|
|
|
|
440,012
|
|
|
|
548,625
|
|
|
|
93,741
|
|
|
|
1,877,630
|
|
Chief Financial Officer
|
|
|
2006
|
|
|
|
540,385
|
|
|
|
|
|
|
|
61,184
|
|
|
|
380,177
|
|
|
|
498,750
|
|
|
|
55,216
|
|
|
|
1,535,712
|
|
Paul Noack
|
|
|
2007
|
|
|
|
455,769
|
|
|
|
|
|
|
|
298,379
|
|
|
|
713,410
|
|
|
|
427,500
|
|
|
|
55,404
|
|
|
|
1,950,462
|
|
Managing Director, Asia-Pacific region
|
|
|
2006
|
|
|
|
441,923
|
|
|
|
|
|
|
|
186,777
|
|
|
|
451,612
|
|
|
|
426,000
|
|
|
|
36,642
|
|
|
|
1,542,954
|
|
|
|
|
(1) |
|
Amounts are calculated based on provisions of SFAS No 123R,
Share Based Payments. 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, 2007 regarding assumptions
underlying valuation of equity awards. |
|
(2) |
|
Bonus 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 2007 are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
Personal Use of
|
|
|
|
|
|
|
|
|
Total All
|
|
|
|
Plan Matching
|
|
|
Company
|
|
|
|
|
|
Other
|
|
|
Other
|
|
|
|
Contributions
|
|
|
Paid Private
|
|
|
Executive
|
|
|
Benefits(1)
|
|
|
Compensation
|
|
Name
|
|
$
|
|
|
Aircraft $
|
|
|
Medical Plans
|
|
|
$
|
|
|
$
|
|
|
Michael O. Johnson
|
|
$
|
33,000
|
|
|
$
|
349,795
|
|
|
$
|
26,363
|
|
|
$
|
8,090
|
|
|
$
|
417,248
|
|
Gregory Probert
|
|
|
22,500
|
|
|
|
|
|
|
|
30,317
|
|
|
|
10,983
|
|
|
|
63,800
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
28,233
|
|
|
|
11,807
|
|
|
|
40,040
|
|
Richard Goudis
|
|
|
16,295
|
|
|
|
|
|
|
|
26,363
|
|
|
|
51,083
|
|
|
|
93,741
|
|
Paul Noack
|
|
|
13,500
|
|
|
|
|
|
|
|
17,657
|
|
|
|
24,247
|
|
|
|
55,404
|
|
|
|
|
(1) |
|
Other Benefits includes Company contributions with
respect to each Named Executive Officer under the Companys
Executive Long-Term Disability Plan, Executive Life Insurance
Plan and 401(k) Tax-Sheltered Savings Plan. Amounts also include
financial advisory services for Messrs. Chapman, Goudis and
Probert. |
33
|
|
|
|
|
With respect to Mr. Goudis and Mr. Noack, such
financial advisory services were in the amount of $41,503 and
$15,373, respectively. |
2007
Grants of Plan-Based Awards
The following table sets forth all grants of plan-based awards
made to the Named Executive Officers during the fiscal year
ended December 31, 2007. For further discussion regarding
the grants under Compensation Discussion and
Analysis Annual Incentive Awards Long
Term Incentive Awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
of Stock and
|
|
|
|
|
|
|
Equity Incentive Plan Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
Stock Option
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards(1)
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/sh)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
|
|
|
|
$
|
412,500
|
|
|
$
|
1,650,000
|
|
|
$
|
2,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,000
|
|
|
$
|
40.25
|
|
|
$
|
2,294,419
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,700
|
|
|
|
|
|
|
|
|
|
|
$
|
833,175
|
|
Gregory Probert
|
|
|
|
|
|
|
750,000
|
|
|
|
750,000
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
$
|
40.25
|
|
|
$
|
1,661,476
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
$
|
603,750
|
|
Brett R. Chapman
|
|
|
|
|
|
|
275,000
|
|
|
|
275,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,083
|
|
|
$
|
40.25
|
|
|
$
|
412,726
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,398
|
|
|
|
|
|
|
|
|
|
|
$
|
177,019
|
|
Richard Goudis
|
|
|
|
|
|
|
288,750
|
|
|
|
288,750
|
|
|
|
577,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,083
|
|
|
$
|
40.25
|
|
|
$
|
412,726
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,398
|
|
|
|
|
|
|
|
|
|
|
$
|
177,019
|
|
Paul Noack
|
|
|
|
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,083
|
|
|
$
|
40.25
|
|
|
$
|
412,726
|
|
|
|
|
12/31/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
40.28
|
|
|
$
|
289,172
|
|
|
|
|
5/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,398
|
|
|
|
|
|
|
|
|
|
|
$
|
177,019
|
|
|
|
|
12/31/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
402,800
|
|
|
|
|
(1) |
|
Computed by measuring the fair value of the award on the grant
date pursuant to the provisions of SFAS 123R, Share
Based Payments. 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, 2007 regarding assumptions
underlying valuation of the equity awards. |
Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards
We have entered into employment agreements with each of the
Named Executive Officers as well as award agreements with
respect to grants made under the 2005 Plan, certain terms of
which, including in respect of payments due upon termination or
a change in control of the Company, are summarized below. A more
detailed break down 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.
34
Michael O. Johnson. Our subsidiaries,
Herbalife International, Inc., or Herbalife International, and
Herbalife International of America, Inc., or Herbalife America,
entered into an executive employment agreement with
Mr. Johnson effective as of April 3, 2003, as amended,
or the Johnson Employment Agreement, pursuant to which he serves
as the Companys Chairman and Chief Executive Officer.
Under the terms of the Johnson Employment Agreement,
Mr. Johnsons employment will continue until it is
terminated for any of a variety of reasons including death,
disability, termination by Herbalife International and Herbalife
America with or without Cause, termination by Mr. Johnson
with or without Good Reason and termination in connection with
certain organic transactions.
Pursuant to the Johnson Employment Agreement, Mr. Johnson
currently receives an annual salary of $1,100,000.
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. Mr. Johnsons
annual bonus for the fiscal year ending December 31, 2007,
was $2,200,000 and was dependent on the Companys 2007
earnings per share. 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 International and Herbalife America. In 2007
Mr. Johnson also received grants of 145,000 stock
appreciation rights and 20,700 stock units, as more fully
described under 2007 Grants of Plan Based
Awards.
In the event of any Change of Control, 50% of the then invested
stock options, stock appreciation rights and stock units granted
to Mr. Johnson on or after May 1, 2005 will become
immediately vested and exercisable. As of December 31, 2007
the market value of 50% of the stock options, stock appreciation
rights and stock units granted but not yet vested was
$8.8 million. If, following any Change of Control, all or
any portion of the options, stock appreciation rights and/or
stock units remain outstanding and Mr. Johnsons
employment is terminated other than by reason of
Mr. Johnsons resignation without Good Reason or
termination by the Company for Cause at any time following such
Change of Control, 100% of any such outstanding awards will
immediately vest and, to the extent applicable, become
exercisable. In the event Mr. Johnsons employment is
terminated by reason of Mr. Johnsons death or
disability or during the 90 day period before a Change of
Control, 100% of the awards will vest and, to the extent
applicable, become exercisable. As of December 31, 2007 the
market value of all unvested options and stock units was
$17.7 million.
Upon termination of Mr. Johnsons employment by
Herbalife International and 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, however 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 International or
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.
Upon termination of Mr. Johnsons employment by
Herbalife International and 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
years base salary and bonus for the year of termination,
which in total would be currently equal to $4,400,000, payable
in twenty four equal monthly installments.
In the event that Mr. Johnsons employment with
Herbalife International and Herbalife America is terminated by
Herbalife International and Herbalife America without Cause, or
by Mr. Johnson for Good Reason, during the period beginning
90 days prior to and ending 90 days following a Sale
Event and such Sale Event results in the cancellation or
termination of Mr. Johnsons stock options, or in the
event that Mr. Johnson delivers written notice of his
resignation upon the consummation of or within 90 days
following such a Sale Event, in addition to the benefits
described in the preceding two paragraphs, Mr. Johnson
would also be entitled to an additional amount based on his then
current base salary and the current option holdings, if any.
Gregory Probert. We have also entered
into an executive employment agreement with Mr. Probert, or
the Probert Employment Agreement, effective on October 10,
2006, through our subsidiary Herbalife America. Pursuant to the
Probert Employment Agreement, Mr. Probert serves as the
Companys President and Chief Operating Officer. The base
salary for Mr. Probert, effective January 1, 2007, is
$750,000. If the Companys Chief
35
Executive Officers salary is increased, then
Mr. Proberts salary set forth above shall be
increased by the same percentage. However, if in any given year
Mr. Probert accepts an increase in base salary of a greater
percentage than that received by the Chief Executive Officer,
then Mr. Proberts salary shall no longer be tied to
any increases in the Chief Executive Officers salary.
Should the Company adopt an
across-the-board
reduction in salaries for senior executives and its Chief
Executive Officer, then Mr. Proberts salary shall be
reduced by a percentage equal to the smallest percentage
reduction imposed on any senior executive or the Chief Executive
Officer, but in no case shall such reduction exceed ten percent.
Mr. Probert is entitled to participate in the
Companys employee benefit plans and arrangements made
available to the Companys most senior executives, as well
as the Companys long-term incentive plan for senior
executives. Pursuant to the Probert Employment Agreement, should
the Company achieve certain targets established by the
compensation committee Mr. Probert shall be entitled to a
target bonus of no less than 100% of his annual salary for the
year in question. Mr. Probert received an annual cash bonus
of $1,350,000 for the fiscal year ended December 31, 2007
as well as grants of 105,000 stock appreciation rights and
15,000 stock units, as more fully described under
2007 Grants of Plan Based Awards.
If Mr. Probert 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 the then-current annual salary,
currently equal to $1,500,000, in addition to all other accrued
but unpaid entitlements. However, Mr. Probert shall not be
entitled to such lump sum payment of salary should his
employment terminate subsequent to his 65th birthday. The
Company will also provide Mr. Probert 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. If
Mr. Probert 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. Probert must execute a general release of claims. If
the effective date of such termination without Cause or
resignation for Good Reason occurs during a trading
blackout or quiet period with respect to
Common Shares or if the Company determines, upon the advice of
legal counsel, that Mr. Probert may not trade in Common
Shares on the effective date of such termination due to his
possession of material non-public information, and in each case
the restriction or prohibition continues for a period of at
least twenty consecutive calendar days, Mr. Probert will be
paid an additional lump sum amount equal to $250,000.
Upon the occurrence of a Change of Control, 50% of all unvested
stock options, stock appreciation rights and stock units granted
to Mr. Probert shall immediately vest; however, the
compensation committee of the Board of Directors may, in its
sole discretion, accelerate the vesting of additional stock
options, stock appreciation rights and stock units upon the
occurrence of a Change of Control. As of December 31, 2007
the market value of 50% of all unvested options, stock
appreciation rights and stock units were $5.8 million.
Should Mr. Proberts employment be terminated for any
reason other than for Cause or resignation without Good Reason
within the
90-day
period preceding a Change of Control or at any time after a
Change of Control, then all of his unvested stock options, stock
appreciation rights and stock units shall vest as of the
effective date of the termination. Except as set forth in the
immediately preceding sentence, should Mr. Proberts
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. Proberts unvested stock options, stock
appreciation rights and stock units shall vest immediately prior
to such termination. If Mr. Proberts employment is
terminated as a result of his death or disability, all unvested
stock options, stock appreciation rights and stock units will
vest as of the date of such termination. Except as set forth
above, all unvested stock options, stock appreciation rights and
stock units shall be forfeited upon the termination of
Mr. Proberts employment with the Company. As of
December 31, 2007 the market value of all unvested options
and stock units was $11.6 million.
Brett R. Chapman. We have also entered
into an executive employment agreement with Mr. Chapman, or
the Chapman Employment Agreement, effective on October 10,
2006, through our subsidiary Herbalife America. Pursuant to the
Chapman Employment Agreement, Mr. Chapman serves as
Herbalife Americas General Counsel and Corporate
Secretary. The base salary for Mr. Chapman, effective
August 20, 2007, is $550,000. If the Companys Chief
Executive Officers salary is increased, then
Mr. Chapmans salary set forth above shall be
increased by the same percentage. However, if in any given year
Mr. Chapman accepts an increase in base salary of a
36
greater percentage than that received by the Chief Executive
Officer, then Mr. Chapmans salary shall no longer be
tied to any increases in the Chief Executive Officers
salary. Should the Company adopt an
across-the-board
reduction in salaries for senior executives and its Chief
Executive Officer, then Mr. Chapmans salary shall be
reduced by a percentage equal to the smallest percentage
reduction imposed on any senior executive or the Chief Executive
Officer, but in no case shall such reduction exceed ten percent.
Mr. Chapman is entitled to participate in the
Companys employee benefit plans and arrangements made
available to the Companys most senior executives,
including the Chief Operating Officer but excluding the Chief
Executive Officer, as well as the Companys long-term
incentive plan for senior executives, including the Chief
Operating Officer but excluding the Chief Executive Officer.
Pursuant to the Chapman Employment Agreement, should the Company
achieve certain targets established by the compensation
committee, Mr. Chapman shall be entitled to a target bonus
of no less that 50% of his annual salary for the year in
question. Mr. Chapman received an annual cash bonus of
$522,500 for the fiscal year ended December 31, 2007 as
well as grants of 26,083 stock appreciation rights and 4,398
stock units, as more fully described under
2007 Grants of Plan Based Awards.
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 the then-current annual salary,
currently equal to $1,100,000, in addition to all other accrued
but unpaid entitlements. The Company will also provide
Mr. Chapman with outplacement services for up to six months
by a provider selected and paid for by the Company in an amount
not to exceed $20,000. If Mr. Chapman is terminated by the
Company without Cause, resigns for Good Reason, or retires,
dies, or resigns as a result of a disability, he will be
entitled to receive a pro rata bonus payment, at such time
bonuses are paid to the Companys other senior executives,
based on the number of months worked in the applicable year. As
a precondition to the Companys obligation to pay the
amounts described above, Mr. Chapman must execute a general
release of claims. If the effective date of such termination
without Cause or resignation for Good Reason occurs during a
trading blackout or quiet period with
respect to Common Shares or if the Company determines, upon the
advice of legal counsel, that Mr. Chapman may not trade in
Common Shares on the effective date of such termination due to
his possession of material non-public information, and in each
case the restriction or prohibition continues for a period of at
least twenty consecutive calendar days, Mr. Chapman will be
paid an additional lump sum amount equal to $100,000.
Upon the occurrence of a Change of Control, 50% of all unvested
stock options, stock appreciation rights and stock units granted
to Mr. Chapman shall immediately vest; however, the
compensation committee of the Board of Directors may, in its
sole discretion, accelerate the vesting of additional stock
options, stock appreciation rights and stock units upon the
occurrence of a Change of Control. As of December 31, 2007
the market value of 50% of all unvested options, stock
appreciation rights and stock units were $2.4 million.
Should Mr. Chapmans employment be terminated for any
reason other than for Cause or resignation without Good Reason
within the
90-day
period preceding a Change of Control or at any time after a
Change of Control, then all of his unvested stock options, stock
appreciation rights and stock units shall vest as of the
effective date of the termination. Except as set forth in the
immediately preceding sentence, should Mr. Chapmans
employment be terminated for any reason other than for Cause or
resignation without Good Reason and at the time of such
termination Mr. Michael O. Johnson is no longer serving as
the Companys Chief Executive Officer, then 50% of
Mr. Chapmans unvested stock options, stock
appreciation rights and stock units 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, stock appreciation rights and stock units will
vest as of the date of such termination. Except as set forth
above, all unvested stock options, stock appreciation rights and
stock units shall be forfeited upon the termination of
Mr. Chapmans employment with the Company. As of
December 31, 2007 the market value of all unvested options
and stock units was $4.8 million.
Richard Goudis. We have also entered
into an executive employment agreement with Mr. Goudis, or
the Goudis Employment Agreement, effective on October 24,
2006, through our subsidiary Herbalife America. Pursuant to the
Goudis Employment Agreement, Mr. Goudis serves as Herbalife
Americas Chief Financial Officer. The base salary for
Mr. Goudis, effective August 20, 2007, is $577,500. If
the Companys Chief Executive Officers salary is
increased, then Mr. Goudis salary set forth above shall be
increased by the same percentage. However, if in any given year
Mr. Goudis accepts an increase in base salary of a greater
percentage than that received by the Chief Executive Officer,
then Mr. Goudis salary shall no longer be tied to any
increases in the Chief Executive Officers salary. Should
the Company adopt an
across-the-board
reduction in salaries for senior executives and its Chief
37
Executive Officer, then Mr. Goudis salary shall be
reduced by a percentage equal to the smallest percentage
reduction imposed on any senior executive or the Chief Executive
Officer, but in no case shall such reduction exceed ten percent.
Mr. Goudis is entitled to participate in the Companys
employee benefit plans and arrangements made available to the
Companys most senior executives, including the Chief
Operating Officer but excluding the Chief Executive Officer, as
well as the Companys long-term incentive plan for senior
executives, including the Chief Operating Officer but excluding
the Chief Executive Officer. Pursuant to the Goudis Employment
Agreement, should the Company achieve certain targets
established by the compensation committee of the Board of
Directors, Mr. Goudis shall be entitled to a target bonus
of 50% of his annual salary for the year in question.
Mr. Goudis received an annual cash bonus of $548,625 for
the fiscal year ended December 31, 2007 as well as grants
of 26,083 stock appreciation rights and 4,398 stock units, as
more fully described under 2007 Grants of Plan
Based Awards.
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 the then-current annual salary,
currently equal to $1,155,000, 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. If Mr. Goudis is terminated by the
Company without Cause, resigns for Good Reason, or retires,
dies, or resigns as a result of a disability, he will be
entitled to receive a pro rata bonus payment, at such time
bonuses are paid to the Companys other senior executives,
based on the number of months worked in the applicable year. As
a precondition to the Companys obligation to pay the
amounts described above, Mr. Goudis must execute a general
release of claims. If the effective date of such termination
without Cause or resignation for Good Reason occurs during a
trading blackout or quiet period with
respect to Common Shares or if the Company determines, upon the
advice of legal counsel, that Mr. Goudis may not trade in
Common Shares on the effective date of such termination due to
his possession of material non-public information, and in each
case the restriction or prohibition continues for a period of at
least twenty consecutive calendar days, Mr. Goudis will be
paid an additional lump sum amount equal to $125,000.
Upon the occurrence of a Change of Control, 50% of all unvested
stock options, stock appreciation rights and stock units granted
to Mr. Goudis shall immediately vest; however, the
compensation committee of the Board of Directors may, in its
sole discretion, accelerate the vesting of additional stock
options, stock appreciation rights and stock units upon the
occurrence of a Change of Control. As of December 31, 2007
the market value of 50% of all unvested options, stock
appreciation rights and stock units were $2.7 million.
Should Mr. Goudis employment be terminated for any
reason other than for Cause or resignation without Good Reason
within the
90-day
period preceding a Change of Control or at any time after a
Change of Control, then all of his unvested stock options, stock
appreciation rights and stock units shall vest as of the
effective date of the termination. Except as set forth in the
immediately preceding sentence, should Mr. Goudiss
employment be terminated for any reason other than for Cause or
resignation without Good Reason and at the time of such
termination Mr. Michael O. Johnson is no longer serving as
the Companys Chief Executive Officer, then 50% of
Mr. Goudiss unvested stock options, stock
appreciation rights and stock units 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, stock appreciation rights and stock units will
vest as of the date of such termination. Except as set forth
above, all unvested stock options, stock appreciation rights and
stock units shall be forfeited upon the termination of
Mr. Goudiss employment with the Company. As of
December 31, 2007 the market value of all unvested options
and stock units was $5.4 million.
Paul Noack. We have also entered into
an executive employment agreement with Mr. Noack, or the
Noack Employment Agreement, effective on December 18, 2007,
through our subsidiary Herbalife America. Pursuant to the Noack
Employment Agreement, Mr. Noack serves as Herbalife
Americas Managing Director, Asia-Pacific Region. The base
salary for Mr. Noack, effective December 18, 2007, is
$550,000. Also, in addition to paying Mr. Noacks
relocation expenses, pursuant to the terms of the Noack
Employment Agreement, the Company will also do the following
during his relocation to Hong Kong: (i) pay Mr. Noack
a monthly cost of living allowance of $1,333, (ii) pay
Mr. Noacks housing, (iii) reimburse
Mr. Noack for the reasonable costs of enrolling his
children in school, (iv) provide the use of a car,
(v) make tax equalization payments and (vi) reimburse
Mr. Noack up to $13,200 per year for a family club
membership.
38
Mr. Noack is entitled to participate in the Companys
employee benefit plans and arrangements made available to the
Companys most senior executives, as well as the
Companys long-term incentive plan for senior executives.
Pursuant to the Noack Employment Agreement, should the Company
and Mr. Noack both achieve certain targets, at the
discretion of the Companys senior executives,
Mr. Noack may receive a target bonus of 50% of his annual
salary for the year in question. Pursuant to the Noack
Employment Agreement, in fiscal year 2007, Mr. Noack
received awards of 20,000 stock appreciation rights and 10,000
restricted stock units. Mr. Noack received an annual cash
bonus of $427,500 for the fiscal year ended December 31,
2007 and in addition to those grants made pursuant to the Noack
Employment Agreement described above, grants of 46,083 stock
appreciation rights and 14,398 stock units, as more fully
described under 2007 Grants of Plan Based
Awards.
If Mr. Noack is terminated by the Company without Cause or
resigns for Good Reason or for any reason within three months
before or six months after a Change of Control, Mr. Noack
is entitled to a lump sum amount equal to two times
Mr. Noacks then-current salary, currently equal to
$1,100,000, in addition to all other accrued but unpaid
entitlements. The Company will also provide Mr. Noack with
outplacement services for up to six months from a provider
selected and paid for by the Company in an amount not to exceed
$20,000, as well as reimbursement for amounts paid to return
from Hong Kong. If Mr. Noack 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. Noack must execute a general release
of claims. If the effective date of any such termination of
employment occurs during a trading blackout or
quiet period with respect to Common Shares or if the
Company determines, upon the advice of legal counsel, that
Mr. Noack may not to trade in Common Shares on the
effective date of such termination due to Mr. Noacks
possession of material nonpublic information, and in each case
the restriction or prohibition continues for a period of at
least twenty consecutive calendar days, Mr. Noack will be
paid an additional lump sum amount equal to $125,000.
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 clause (iv) above,
unless any such breach is not fully corrected prior to the
expiration of the fifteen (15) 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 fifteen
(15) 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 the Company,
Mr. Johnsons involuntary removal from the Board or as
a non-voting member of the Executive Committee of the Board, or
failure of Executive to be elected to the Board or as a
non-voting member of the Executive Committee of 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
|
39
|
|
|
|
|
executive office to a location more than 50 miles from its
current location; or (iv) any other material breach of 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.
|
|
|
|
|
|
A Sale Event means the occurrence of a transaction
described in clauses (i) or (ii) in the definition of
Change of Control set forth immediately above.
|
For the purposes of the summaries of the Probert Employment
Agreement, the Chapman Employment Agreement, the Goudis
Employment Agreement and the Noack Employment Agreement, the
following terms have the following definitions:
|
|
|
|
|
The Company shall have Cause to terminate the
executive in the event of any of the following acts or
circumstances: (i) the executives conviction of a
felony or entering a plea of guilty or nolo contendere to any
crime constituting a felony (other than a traffic violation or
by reason of vicarious liability); (ii) the
executives substantial and repeated failure to attempt to
perform the executives lawful duties as contemplated in
the agreement, except during periods of physical or mental
incapacity; (iii) the executives gross negligence or
willful misconduct with respect to any material aspect of the
business of the Company or any of its affiliates, which gross
negligence or willful misconduct has a material and demonstrable
adverse effect on the Company; (iv) the executives
material violation of a Company policy resulting in a material
and demonstrable adverse effect to the Company or an affiliate,
including but not limited to a violation of the Companys
Code of Business Conduct and Ethics; or (v) any material
breach of the executives agreement or any material breach
of any other written agreement between the executive and the
Companys affiliates governing the executives equity
compensation arrangements (i.e., any agreement with respect to
the executives stock
and/or stock
options of any of the Companys affiliates); provided,
however, that the executive shall not be deemed to have been
terminated for Cause in the case of clause (ii), (iii),
(iv) or (v) above, unless any such breach is not fully
corrected prior to the expiration of the thirty
(30) calendar day period following delivery to the
executive of the Companys written notice of its intention
to terminate his employment for Cause describing the basis
therefore in reasonable detail.
|
|
|
|
The executive will be deemed to have a Good Reason
to terminate his employment if (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 Employment
Agreement, the Probert Employment Agreement, the Chapman
Employment Agreement, the Goudis Employment Agreement and the
Noack Employment Agreement, as well as the 2005 Plan, 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
40
any 24-month
period to constitute at least a majority of the members of the
Board; provided, however, that if the election, or nomination
for election by the Companys common shareholders, of any
new director was approved by a vote of at least a majority of
the incumbent board, such new director shall, for purposes of
the 2005 Plan, be considered as a member of the incumbent board;
or (iii) the consummation of: (A) a merger,
consolidation or reorganization with or into the Company, unless
the voting securities of the Company, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation or
reorganization, at least 50% of the combined voting power of the
outstanding voting securities of the entity resulting from such
merger or consolidation or reorganization in substantially the
same proportion as their ownership of the voting securities
immediately before such merger, consolidation or reorganization;
(B) a complete liquidation or dissolution of the Company;
or (C) the sale, lease, transfer or other disposition of
all or substantially all of the assets of the Company to any
person (other than a transfer to a subsidiary of the Company).
41
Outstanding
Equity Awards at 2007 Fiscal Year-End
The following table sets forth equity awards of the Named
Executive Officers outstanding as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
of Shares
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units of
|
|
|
or Units of
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
|
|
|
|
Options(1)
|
|
|
Options(1)
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested(2)
|
|
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date(1)
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
Michael O. Johnson
|
|
|
232,066
|
|
|
|
59,119
|
|
|
$
|
3.52
|
|
|
|
4/3/2013
|
(3)
|
|
|
30,700
|
(5)
|
|
$
|
1,236,596
|
|
|
|
|
|
|
|
|
532,066
|
|
|
|
59,119
|
|
|
$
|
10.56
|
|
|
|
4/3/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532,066
|
|
|
|
59,119
|
|
|
$
|
17.60
|
|
|
|
4/3/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532,066
|
|
|
|
59,119
|
|
|
$
|
24.64
|
|
|
|
4/3/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,667
|
|
|
|
333,333
|
|
|
$
|
15.50
|
|
|
|
12/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,750
|
|
|
|
56,250
|
|
|
$
|
15.00
|
|
|
|
4/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000
|
|
|
|
84,000
|
|
|
$
|
32.79
|
|
|
|
3/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,000
|
|
|
$
|
40.25
|
|
|
|
5/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Probert
|
|
|
|
|
|
|
75,000
|
|
|
$
|
23.00
|
|
|
|
7/31/2013
|
(3)
|
|
|
29,350
|
(6)
|
|
$
|
1,182,218
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
12,000
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
12,000
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
12,000
|
|
|
$
|
17.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
12,000
|
|
|
$
|
21.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
12,000
|
|
|
$
|
25.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
250,000
|
|
|
$
|
15.50
|
|
|
|
12/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
45,000
|
|
|
$
|
15.00
|
|
|
|
4/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,160
|
|
|
|
61,740
|
|
|
$
|
32.79
|
|
|
|
3/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
$
|
40.25
|
|
|
|
5/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett R. Chapman
|
|
|
18,750
|
|
|
|
11,250
|
|
|
$
|
5.00
|
|
|
|
10/6/2013
|
(3)
|
|
|
7,648
|
(7)
|
|
$
|
308,061
|
|
|
|
|
|
|
|
|
5,468
|
|
|
|
3,282
|
|
|
$
|
7.00
|
|
|
|
10/6/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,468
|
|
|
|
3,282
|
|
|
$
|
11.00
|
|
|
|
10/6/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,593
|
|
|
|
3,282
|
|
|
$
|
17.00
|
|
|
|
10/6/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,593
|
|
|
|
3,282
|
|
|
$
|
23.00
|
|
|
|
10/6/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
4,500
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
4,500
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
4,500
|
|
|
$
|
17.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
4,500
|
|
|
$
|
21.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
4,500
|
|
|
$
|
25.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,834
|
|
|
|
91,666
|
|
|
$
|
15.50
|
|
|
|
12/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
33,750
|
|
|
$
|
15.00
|
|
|
|
4/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,600
|
|
|
|
18,900
|
|
|
$
|
32.79
|
|
|
|
3/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,083
|
|
|
$
|
40.25
|
|
|
|
5/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Goudis
|
|
|
30,000
|
|
|
|
10,000
|
|
|
$
|
8.02
|
|
|
|
6/14/2014
|
(3)
|
|
|
11,648
|
(8)
|
|
$
|
469,181
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
10,000
|
|
|
$
|
12.00
|
|
|
|
6/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
10,000
|
|
|
$
|
16.00
|
|
|
|
6/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
10,000
|
|
|
$
|
20.00
|
|
|
|
6/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
10,000
|
|
|
$
|
24.00
|
|
|
|
6/14/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
$
|
9.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
$
|
13.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
2,250
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
2,250
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
|
2,250
|
|
|
$
|
17.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
|
2,250
|
|
|
$
|
21.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
|
2,250
|
|
|
$
|
25.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
100,000
|
|
|
$
|
15.50
|
|
|
|
12/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,250
|
|
|
|
33,750
|
|
|
$
|
15.00
|
|
|
|
4/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,600
|
|
|
|
18,900
|
|
|
$
|
32.79
|
|
|
|
3/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,083
|
|
|
$
|
40.25
|
|
|
|
5/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Noack
|
|
|
25,000
|
|
|
|
15,000
|
|
|
$
|
8.02
|
|
|
|
4/3/2014
|
(3)
|
|
|
29,981
|
(9)
|
|
$
|
1,207,634
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
$
|
9.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
$
|
13.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
3,000
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
3,000
|
|
|
$
|
14.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
3,000
|
|
|
$
|
17.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
3,000
|
|
|
$
|
21.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
3,000
|
|
|
$
|
25.00
|
|
|
|
9/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,334
|
|
|
|
16,666
|
|
|
$
|
15.50
|
|
|
|
12/1/2014
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
|
9,000
|
|
|
$
|
15.00
|
|
|
|
4/27/2015
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,600
|
|
|
|
18,900
|
|
|
$
|
32.79
|
|
|
|
3/23/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,500
|
|
|
|
84,500
|
|
|
$
|
34.02
|
|
|
|
4/13/2016
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,083
|
|
|
$
|
40.25
|
|
|
|
5/29/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
40.28
|
|
|
|
12/31/2017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All options were granted on the date that is ten years before
their respective expiration dates set forth in the table. |
42
|
|
|
(2) |
|
Market value based on the closing price of a Common Share on the
NYSE on December 31, 2007 of $40.28. |
|
(3) |
|
Options vest quarterly in 20 equal installments beginning on the
date that is three months from the grant date. |
|
(4) |
|
Options vest annually, 20% on the first anniversary of the grant
date, 20% on the second anniversary and 60% on the third
anniversary. |
|
(5) |
|
Consists of: (i) 10,000 shares granted on
March 23, 2006, of which 5,000 shares vest on
March 23, 2008 and 5,000 shares vest on March 23,
2009 and (ii) 20,700 shares granted on May 29,
2007 which vest in equal installments on the first, second and
third anniversary of the grant date. |
|
(6) |
|
Consists of: (i) 7,350 shares granted on
March 23, 2006, of which 3,675 shares vest on
March 23, 2008 and 3,675 shares vest on March 23,
2009, (ii) 7,000 shares granted on October 10,
2006 which vest on June 30, 2008 and
(iii) 15,000 shares granted on May 29, 2007 which
vest in equal installments on the first, second and third
anniversary of the grant date. |
|
(7) |
|
Consists of: (i) 2,250 shares granted on
March 23, 2006, of which 1,125 shares vest on
March 23, 2008 and 1,125 shares vest on March 23,
2009, (ii) 1,000 shares granted on October 10,
2006 which vest on June 30, 2008 and
(iii) 4,398 shares granted on May 29, 2007 which
vest in equal installments on the first, second and third
anniversary of the grant date. |
|
(8) |
|
Consists of: (i) 2,250 shares granted on
March 23, 2006, of which 1,125 shares vest on
March 23, 2008 and 1,125 shares vest on March 23,
2009, (ii) 5,000 shares granted on October 10,
2006 which vest on June 30, 2008 and
(iii) 4,398 shares granted on May 29, 2007 which
vest in equal installments on the first, second and third
anniversary of the grant date. |
|
(9) |
|
Consists of: (i) 2,250 shares granted on
March 23, 2006, of which 1,125 shares vest on
March 23, 2008 and 1,125 shares vest on March 23,
2009, (ii) 13,333 shares granted on April 13,
2006, of which 6,666 shares vest on April 13, 2008 and
6,666 shares vest on April 13, 2009,
(iii) 4,398 shares granted on May 29, 2007 which
vest in equal installments on the first, second and third
anniversary of the grant date and (iv) 10,000 shares
granted on December 31, 2007 which vest in equal
installments on the first, second and third anniversary of the
grant date. |
2007
Option Exercises and Stock Vested
The following table sets forth information with respect to
Common Shares acquired upon the exercise of stock options and
the vesting of stock awards of the Named Executives Officers
during the fiscal year ended December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
488,685
|
|
|
$
|
19,083,242
|
|
|
|
5,000
|
|
|
$
|
199,300
|
|
Gregory Probert
|
|
|
153,000
|
|
|
|
3,934,960
|
|
|
|
10,675
|
|
|
|
424,036
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
2,125
|
|
|
|
84,493
|
|
Richard Goudis
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
243,093
|
|
Paul Noack
|
|
|
5,000
|
|
|
|
175,375
|
|
|
|
7,792
|
|
|
|
304,589
|
|
43
2007
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, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Company
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Balance at Last
|
|
|
|
Last FY
|
|
|
in Last FY
|
|
|
Last FY
|
|
|
Distributions
|
|
|
FYE
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Michael O. Johnson
|
|
$
|
33,000
|
|
|
$
|
33,000
|
|
|
$
|
15,662
|
|
|
|
|
|
|
$
|
497,158
|
|
Gregory Probert
|
|
|
885,000
|
|
|
|
22,500
|
|
|
|
183,426
|
|
|
|
|
|
|
|
2,288,904
|
|
Brett R. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Goudis
|
|
|
21,727
|
|
|
|
16,295
|
|
|
|
(1,260
|
)
|
|
|
|
|
|
|
70,595
|
|
Paul Noack
|
|
|
90,000
|
|
|
|
13,500
|
|
|
|
33,913
|
|
|
|
|
|
|
|
397,943
|
|
|
|
|
(1) |
|
All amounts are also reported as compensation in
Salary in the 2007 Summary Compensation
Table. |
|
(2) |
|
All amounts are also reported as compensation in All Other
Compensation Deferred Compensation Plan Matching
Contributions in the 2007 Summary Compensation
Table. |
Non-Qualified Deferred Compensation
Plans. We maintain two non-qualified deferred
compensation plans for select groups of management or highly
compensated employees: (1) the Herbalife Management
Deferred Compensation Plan, effective January 1, 1996, or
the Management Plan, which is applicable to eligible employees
at the rank of either vice president or director and
(2) the Herbalife Senior Executive Deferred Compensation
Plan, effective January 1, 1996, or the Senior Executive
Plan, which is applicable to eligible employees at the rank of
Senior Vice President and higher. The Management Plan and the
Senior Executive Plan are referred to collectively as the
Deferred Compensation Plans. The Deferred Compensation Plans
were amended and restated effective January 1, 2001.
The Deferred Compensation Plans are 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
Deferred Compensation Plans allow eligible employees, who are
selected by the administrative committee that manages and
administers the plans, 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 on
behalf of each participant in the Senior Executive Plan, which
matching contributions are 100% vested at all times, or Matching
Contributions.
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 2007.
Each participant in a Deferred Compensation 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 Deferred Compensation
Plans, however, do not require us to actually acquire or hold
any investment fund or other assets to fund the Deferred
Compensation Plans. The entire interest of each participant in a
Deferred Compensation 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 Deferred Compensation
Plans were 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 Deferred Compensation Plans 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.
44
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, 2007 based
upon the closing price of a Common Share on the NYSE on
December 31, 2007 of $40.28, 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 2007
Non-Qualified Deferred Compensation table.
As of December 31, 2007, the Company had entered into
employment agreements with each of the Named Executive Officers.
As described in more detail under Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards, the employment agreements with the
Named Executive Officers generally provide for the payment of
benefits if the executives employment with the Company is
terminated either by the Company without Cause or by the
executive for Good Reason. The employment agreements with the
Named Executive Officers do not provide for any additional
payments or benefits upon a termination of employment by the
Company for Cause, upon the executives resignation other
for Good Reason, as applicable, or upon the executives
death or disability. In addition, the employment agreement with
Mr. Johnson provides for enhanced benefits upon termination
of employment in connection with a Sale Event. The receipt of
benefits following termination under each of the employment
agreements is contingent upon the affected executive executing
and not revoking a general release in favor of the Company.
In addition to the employment agreements with the Named
Executive Officers, as described in more detail under
Narrative Disclosure to Summary Compensation
Table and Grants of Plan-Based Awards, the award
agreements governing the equity-based compensation awards
(including stock options, stock appreciation rights and
restricted stock units) granted to each of the Named Executive
Officers other than Mr. Noack generally provide for
accelerated vesting (i) upon the occurrence of a Change of
Control, (ii) upon a termination of employment for any
reason other than a termination for Cause or resignation without
Good Reason in connection with a Change of Control, and
(iii) a termination of employment by reason of the
executives death or disability.
The table below sets forth the estimated value of the potential
payments to each Named Executive Officer, assuming the
executives employment had terminated on December 31,
2007 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated Vesting of Stock Awards(4)($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Than
|
|
|
without
|
|
|
|
|
|
|
Severance Payments
|
|
|
|
|
|
for Cause
|
|
|
Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excise
|
|
|
|
|
|
|
|
|
or without
|
|
|
when
|
|
|
|
|
|
|
|
|
|
|
|
|
Out-
|
|
|
|
|
|
Trading
|
|
|
Tax
|
|
|
|
|
|
|
|
|
Good Reason
|
|
|
Mr. Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement
|
|
|
Medical
|
|
|
Blackout
|
|
|
Reimburse-
|
|
|
|
|
|
Change
|
|
|
in connection
|
|
|
is no
|
|
|
|
|
|
|
Severance
|
|
|
Bonus
|
|
|
Service
|
|
|
Coverage
|
|
|
Payment
|
|
|
ment
|
|
|
Total
|
|
|
in
|
|
|
with a Change
|
|
|
Longer
|
|
|
Death or
|
|
Name
|
|
($)(1)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
Control
|
|
|
in Control
|
|
|
CEO
|
|
|
Disability
|
|
|
Michael O. Johnson
|
|
$
|
2,200,000
|
|
|
$
|
2,200,000
|
|
|
$
|
20,000
|
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4,460,000
|
|
|
$
|
8,773,184
|
|
|
$
|
17,747,769
|
|
|
|
|
|
|
$
|
17,747,769
|
|
Gregory Probert
|
|
|
1,500,000
|
|
|
|
1,350,000
|
|
|
|
20,000
|
|
|
|
40,000
|
|
|
$
|
250,000
|
|
|
|
|
|
|
|
3,160,000
|
|
|
|
5,800,600
|
|
|
|
11,601,201
|
|
|
$
|
5,800,600
|
|
|
|
11,601,201
|
|
Brett R. Chapman
|
|
|
1,100,000
|
|
|
|
522,500
|
|
|
|
20,000
|
|
|
|
40,000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
1,782,500
|
|
|
|
2,403,614
|
|
|
|
4,807,228
|
|
|
|
2,403,614
|
|
|
|
4,807,228
|
|
Richard Goudis
|
|
|
1,155,000
|
|
|
|
548,625
|
|
|
|
20,000
|
|
|
|
40,000
|
|
|
|
125,000
|
|
|
$
|
1,218,881
|
|
|
|
3,107,506
|
|
|
|
2,702,462
|
|
|
|
5,404,925
|
|
|
|
2,702,462
|
|
|
|
5,404,925
|
|
Paul Noack
|
|
|
1,100,000
|
|
|
|
427,500
|
|
|
|
20,000
|
|
|
|
40,000
|
|
|
|
125,000
|
|
|
|
|
|
|
|
1,712,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on 2007 salary. |
|
(2) |
|
Payment made if termination occurs during a trading
blackout or a quiet period with respect to
Common Shares. |
|
(3) |
|
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 the Named
Executive Officers (other than Mr. Noack), each executive
will be entitled to reimbursement for any excise taxes imposed
as well as a
gross-up
payment equal to any income, payroll and excise taxes payable by
the executive as a result of the reimbursement for the excise
taxes. For purposes of computing the excise tax and
gross-up
payments, base amount calculations |
45
|
|
|
|
|
are based on taxable wages for the years 2002 through 2006 and
annualized for the year in which the executive commenced
employment with the Company (if after 2001). In addition, all
executives were assumed to be subject to the maximum federal and
state income and other payroll taxes. |
|
|
|
(4) |
|
Accelerated vesting of stock awards were based on the close
price of a Common Share on the NYSE on December 31, 2007 of
$40.28, and, for stock options and stock appreciation rights,
the difference between $40.28 and the exercise or base price of
the award. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of
Common Shares as of March 5, 2008, and thus the indirect
beneficial ownership of the equity interest of Herbalife as of
that date, 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 the outstanding Common Shares. The Common Shares
are the Companys only class of voting securities that are
issued and outstanding.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
Percentage
|
|
|
|
Beneficial
|
|
|
Ownership
|
|
Name of Beneficial Owner
|
|
Ownership
|
|
|
(1)
|
|
|
Non-Management Directors
|
|
|
|
|
|
|
|
|
Leroy Barnes, Jr.(2)**
|
|
|
22,524
|
|
|
|
|
*
|
Richard Bermingham(3)**
|
|
|
14,399
|
|
|
|
|
*
|
Hal Gaba(4)**
|
|
|
15,621
|
|
|
|
|
*
|
Colombe M. Nicholas(5)**
|
|
|
5,583
|
|
|
|
|
*
|
Valeria Rico(6)**
|
|
|
6,285
|
|
|
|
|
*
|
John Tartol(7)**
|
|
|
231,716
|
|
|
|
|
*
|
Leon Waisbein**
|
|
|
319,091
|
|
|
|
|
*
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
Michael O. Johnson(8)**
|
|
|
2,168,218
|
|
|
|
3.26
|
%
|
Gregory Probert(9)**
|
|
|
148,118
|
|
|
|
|
*
|
Brett R. Chapman(10)**
|
|
|
39,585
|
|
|
|
|
*
|
Richard Goudis(11)**
|
|
|
294,482
|
|
|
|
|
*
|
Paul Noack(12)**
|
|
|
94,833
|
|
|
|
|
*
|
All Directors and Executive Officers as a Group
(20 persons)
|
|
|
3,768,771
|
|
|
|
5.60
|
%
|
Greater than 5% Beneficial Owners
|
|
|
|
|
|
|
|
|
TimesSquare Capital Management, LLC(13)
|
|
|
3,404,752
|
|
|
|
5.29
|
%
|
GS Investment Strategies, LLC(14)
|
|
|
3,517,300
|
|
|
|
5.47
|
%
|
The Bank of New York Mellon Corporation(15)
|
|
|
3,637,800
|
|
|
|
5.65
|
%
|
|
|
|
* |
|
Less than 1% |
|
** |
|
c/o Herbalife
International, Inc., 1800 Century Park East, Los Angeles,
California 90067. |
|
(1) |
|
Applicable percentage of ownership is based upon 64,347,235
Common Shares outstanding as of March 5, 2008, and the
relevant number of Common Shares issuable upon exercise of stock
options or other awards which are exercisable or have vested or
will be exercisable or will vest within 60 days of
March 5, 2008. Beneficial ownership is determined in
accordance with the rules of the SEC, and includes voting and
investment power with respect to shares. Except as otherwise
indicated below, to our knowledge, all persons listed above have
sole voting and investment power with respect to their Common
Shares, except to the extent authority is shared by spouses
under applicable law. |
|
(2) |
|
Includes 15,625 options and 635 restricted stock units to
purchase and acquire Common Shares which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
46
|
|
|
(3) |
|
Includes 7,500 options and 635 restricted stock units to
purchase and acquire Common Shares which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
|
(4) |
|
Includes 621 restricted stock units to purchase and acquire
Common Shares which are or will be exercisable and have vested
or will vest within 60 days of March 5, 2008. |
|
(5) |
|
Includes 635 restricted stock units to purchase and acquire
Common Shares which are or will be exercisable and have vested
or will vest within 60 days of March 5, 2008. |
|
(6) |
|
Includes 635 restricted stock units to purchase and acquire
Common Shares which are or will be exercisable and have vested
or will vest within 60 days of March 5, 2008. |
|
(7) |
|
Represents (i) 225 Common Shares held in custodial accounts
for the benefit of Mr. Tartols three children of
which Mr. Tartol disclaims beneficial ownership of 75
Common Shares except to the extent of his pecuniary interest
therein; (ii) 53,130 Common Shares held by the Tartol
Enterprises Profit Sharing Plan, for which Mr. Tartol is
the trustee; and (iii) 178,361 Common Shares held by
Carhill Holdings, Inc., a corporation for which Mr. Tartol
acts as a consultant only, and accordingly, disclaims beneficial
ownership of such Common Shares. |
|
(8) |
|
Includes 2,038,167 options, 5,000 restricted stock units, and
stock appreciation rights equivalent to 18,141 Common Shares, to
purchase and acquire Common Shares, which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
|
(9) |
|
Includes 113,400 options, 3,675 restricted stock units, and
stock appreciation rights equivalent to 13,333 Common Shares, to
purchase and acquire Common Shares, which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
|
(10) |
|
Includes 31,248 options, 1,125 restricted stock units, and stock
appreciation rights equivalent to 4,082 Common Shares, to
purchase and acquire Common Shares, which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
|
(11) |
|
Includes 283,125 options, 1,125 restricted stock units, and
stock appreciation rights equivalent to 4,082 Common Shares, to
purchase and acquire Common Shares, which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
|
(12) |
|
Includes 61,584 options, 7,792 restricted stock units, and stock
appreciation rights equivalent to 17,666 Common Shares, to
purchase and acquire Common Shares, which are or will be
exercisable and have vested or will vest within 60 days of
March 5, 2008. |
|
(13) |
|
The information regarding the beneficial ownership of
TimesSquare Capital Management, LLC is based on the
Schedule 13G filed with the SEC by TimeSquare Capital
Management, LLC, on February 4, 2008. The address for
TimesSquare Capital Management, LLC is 1177 Avenue of Americas,
39th Floor, New York, NY 10036. |
|
(14) |
|
The information regarding the beneficial ownership of GS
Investment Strategies, LLC is based on the Schedule 13G
filed with the SEC by GS Investment Strategies, LLC on
February 14, 2008. The address for GS Investment
Strategies, LLC is 32 Old Slip, New York, NY 10005. |
|
(15) |
|
The information regarding the beneficial ownership of The Bank
of New York Mellon Corporation and its affiliates is based on
the Schedule 13G jointly filed with the SEC by The Bank of
New York Mellon Corporation and its affiliates on
February 14, 2008. The address for The Bank of New York
Mellon Corporation is
c/o The
Bank of New York Mellon Corporation, One Wall Street, 31st
Floor, New York, New York 10286. |
47
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Certain
Transactions Relating to Herbalife
The Company has several written policies applicable to the
review and approval of related party transactions, each of which
is reviewed on a case by case basis. 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
requires that all related party transactions involving
employees, including executive officers, be reviewed and
approved by both the Companys legal and internal audit
departments.
Mr. Peter Castleman, director and Chairman of the Board of
Directors until May 23, 2007, is a managing director of
Whitney & Co. LLC, or Whitney. The Company has entered
into several transactions with entities in which Whitney has an
interest, as follows:
|
|
|
|
|
Whitney holds a 50 percent indirect ownership interest in
Shuster, a provider of product testing and formula development
for Herbalife. For the year ended December 31, 2005, total
purchases from Shuster were $32,000. There were no purchases for
the years ended December 31, 2006 and 2007.
|
|
|
|
In 2004, Whitney acquired through one of its affiliated
companies a 50 percent indirect ownership interest in TBA,
a provider of creative services to Herbalife. For the year ended
December 31, 2005, a payment of $5.7 million was made
to TBA for services relating to the 25th Anniversary
Extravaganza, the majority of which were reimbursements of
Extravaganza expenses paid to third parties. For the years ended
December 31, 2006 and 2007, payments to TBA were
$1.4 million and $0.8 million, respectively.
|
|
|
|
In January 2005, Whitney, through affiliated companies, acquired
a 77 percent ownership interest in Stauber, a value-added
distributor of bulk specialty for nutraceutical ingredients. For
the years ended December 31, 2005 and 2006, total purchases
from Stauber were $1.8 million and $0.23 million,
respectively. There were no purchases for the year ended
December 31, 2007.
|
As of December 31, 2007, Whitney did not beneficially own
any Common Shares.
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 certain holders
of Common Shares, including Mr. Johnson, may require us to
include their 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 (2007 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, 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
48
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.
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 2007.
Householding
of Proxy Materials.
The SEC has adopted rules that permit companies and
intermediaries such as brokers to satisfy delivery requirements
for proxy statements with respect to two or more shareholders
sharing the same address by delivering a single proxy statement
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 proxy statement, or if you
are receiving multiple copies of the proxy statement and wish to
receive only one, please notify your broker if your shares are
held in a brokerage account or the Company if you hold Common
Shares directly. You can notify us by sending a written request
to Herbalife Ltd.,
c/o Herbalife
International, Inc., Assistant Corporate Secretary, 1800 Century
Park East Los Angeles, CA 90067, or by calling the Assistant
Corporate Secretary at
310-410-9600.
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.
49
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
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 2009 Annual General Meeting
Pursuant to the Memorandum and Articles of Association, for
notice of shareholder proposal to be timely, it 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.
Shareholders interested in submitting a proposal for inclusion
in the proxy statement and form of proxy for the 2009 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 19, 2008. Proposals should be sent to Corporate
Secretary, Herbalife Ltd.,
c/o Herbalife
International, Inc., 1800 Century Park East, Los Angeles, CA
90067.
Codes of
Business Conduct and Ethics and Corporate Governance
Guidelines
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 Corporate Governance Guidelines, in accordance with
applicable rules and regulations of the SEC and the NYSE. Each
of our Code of Business Conduct and Ethics and Corporate
Governance Guidelines 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 with respect
to the Companys principal executive officer, principal
financial officer, principal accounting officer or controller
will be posted on the Companys website
www.Herbalife.com.
Annual
Report, Financial and Additional Information.
The Annual Financial Statements and Review of Operations of the
Company for fiscal year 2007 can be found in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2007. A copy of the
Companys Annual Report on
Form 10-K
is being mailed concurrently with this Proxy Statement to each
shareholder of record on the Record Date.
50
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, 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.
1800 Century Park East
Los Angeles, California 90067
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 25, 2008
51
APPENDIX A
Herbalife
Categorical Standards of Independence
An independent director is a director whom the Board
of Directors has determined has no material relationship with
the Company or any of its consolidated subsidiaries
(collectively, the Company), either directly, or as
a partner, shareholder or officer of an organization that has a
relationship with the Company. For purposes of this definition,
the Board has determined that a director is not independent if:
1. the director is, or in the past three years has been, an
employee of the Company, or an immediate family member of the
director is, or in the past three years has been, an executive
officer of the Company;
2. the director is, or in the past three years has been,
affiliated with or employed by the Companys outside
auditor, or a member of the directors immediate family is,
or in the past three years has been, affiliated with or employed
in a professional capacity by the Companys outside auditor;
3. the director, or a member of the directors
immediate family, is or in the past three years has been, an
executive officer of another company where any of the
Companys present executives serves or served in the past
three years on the compensation committee;
4. the director, or a member of the directors
immediate family, receives or has in the past three years
received any direct compensation from the Company in excess of
$100,000 per year, other than compensation for Board service,
compensation received by the directors immediate family
member for service as a non-executive employee of the Company,
and pension or other forms of deferred compensation for prior
service with the Company;
5. the director is an executive officer or employee, or a
member of the directors immediate family is an executive
officer, of another company that makes payments to or receives
payments from the Company, or during any of the last three years
has made payments to or received payments from the Company, for
property or services in an amount that, in any single fiscal
year, exceeded the greater of $1 million or 2% of the other
companys consolidated gross revenues; or
6. the director, or the directors spouse, is an
executive officer of a nonprofit organization to which the
Company or the Company makes, or in the past three years has
made, payments that, in any single fiscal year, exceeded the
greater of $1 million or 2% of the nonprofit
organizations consolidated gross revenues (amounts that
the Company contributes under matching gifts programs are not
included in the payments calculated for purposes of this
standard).
An immediate family member includes a
directors spouse, parents, children, siblings, mother and
father-in-law,
sons and
daughters-in-law,
brothers and
sisters-in-law,
and anyone (other than a domestic employee) who shares the
directors home.
In addition, a director is not considered independent for
purposes of serving on the Audit Committee, and may not serve on
the Audit Committee, if the director: (a) accepts, directly
or indirectly, from the Company or any of its subsidiaries, any
consulting, advisory, or other compensatory fee, other than
Board and committee fees and fixed amounts of compensation under
a retirement plan (including deferred compensation) for prior
service with the Company; or (b) is an affiliated
person of the Company or any of its subsidiaries; each as
determined in accordance with Securities and Exchange Commission
regulations.
A-1
APPENDIX B
HERBALIFE
LTD.
2005 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Herbalife
Ltd. 2005 Stock Incentive Plan (the Plan) is to
enable Herbalife Ltd. (the Company) to attract,
motivate, reward and retain its directors, officers, employees
and consultants, and to further align the interests of such
persons with those of the stockholders of the Company by
providing for or increasing the proprietary interest of such
persons in the Company.
2. Definitions. As used in the Plan, the
following terms shall have the meanings set forth below:
(a) Award means a grant of an Option, a
Stock Appreciation Right, Restricted Stock, a Stock Unit, a
Performance Unit, or a Dividend Equivalent granted to a
Participant pursuant to the provisions of the Plan.
(b) Award Agreement means a written
agreement or other instrument as may be approved from time to
time by the Committee evidencing the grant of each Award.
(c) Board means the Board of Directors
of the Company.
(d) Change of Control means the first to
occur of:
(i) an acquisition (other than directly from the Company
after advance approval by a majority of the Incumbent Board) of
Common Shares or other voting securities of the Company by any
person (as the term person is used for purposes of
Section 13(d) or 14(d) of the Exchange Act), other than the
Company, any Subsidiary, any employee benefit plan of the
Company or any Subsidiary, or any person in connection with a
transaction described in clause (iii) of this
Section 2(d), immediately after which such person has
beneficial ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the then
outstanding Common Shares or the combined voting power of the
Companys then outstanding voting securities;
(ii) the individuals who, as of the Effective Date, are
members of the Board (the Incumbent Board), cease
for any reason during any
24-month
period to constitute at least a majority of the members of the
Board; provided, however, that if the election, or nomination
for election by the Companys common stockholders, of any
new director was approved by a vote of at least a majority of
the Incumbent Board, such new director shall, for purposes of
the Plan, be considered as a member of the Incumbent
Board; or
(iii) the consummation of: (A) a merger, consolidation
or reorganization with or into the Company, unless the voting
securities of the Company, immediately before such merger,
consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or
reorganization, at least 50% of the combined voting power of the
outstanding voting securities of the entity resulting from such
merger or consolidation or reorganization in substantially the
same proportion as their ownership of the voting securities
immediately before such merger, consolidation or reorganization;
(B) a complete liquidation or dissolution of the Company;
or (C) the sale, lease, transfer or other disposition of
all or substantially all of the assets of the Company to any
person (other than a transfer to a Subsidiary).
(e) Code means the Internal Revenue Code
of 1986, as amended from time to time, and the rulings and
regulations issued thereunder.
(f) Committee means the Compensation
Committee of the Board.
(g) Common Shares means the
Companys common shares, par value $.001, subject to
adjustment as provided in Section 12.
(h) Dividend Equivalent means an Award
granted to a Participant pursuant to Section 11.
(i) Fair Market Value means, as of any
date, the closing price for a Common Share reported for that
date by the New York Stock Exchange (or such other stock
exchange or quotation system on which such shares
B-1
are then listed or quoted) or, if no Common Shares are traded on
the New York Stock Exchange (or such other stock exchange or
quotation system) on the date in question, then for the next
preceding date for which such shares traded on the New York
Stock Exchange (or such other stock exchange or quotation
system). In the event that the Common Shares are not listed or
quoted on any stock exchange or quotation system, the Fair
Market Value shall be determined by the Committee in its sole
discretion in a manner consistent with Section 409A of the
Code,.
(j) Incentive Stock Option means a stock
option that is intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.
(k) Option means an Incentive Stock
Option
and/or a
stock option that is not intended to qualify as an Incentive
Stock Option, in each case, granted pursuant to Section 7.
(l) Participant means any individual
described in Section 3 to whom Awards have been granted
from time to time by the Committee and any authorized transferee
of such individual.
(m) Performance Award means an Award,
the grant, issuance, retention, vesting or settlement of which
is subject to satisfaction of one or more Qualifying Performance
Criteria.
(n) Performance Unit means a bonus
opportunity awarded under Section 10 pursuant to which a
Participant may become entitled to receive an amount based on
satisfaction of such performance criteria as are specified in
the Award Agreement.
(o) Prior Plan means the Companys
2004 Stock Incentive Plan.
(p) Restricted Stock means Common Shares
granted pursuant to Section 9.
(q) Stock Unit means an Award granted to
a Participant pursuant to Section 9, pursuant to which
Common Shares may be issued in the future.
(r) Stock Appreciation Right means a
right granted pursuant to Section 8 that entitles the
Participant to receive, in cash or Common Shares or a
combination thereof, as determined by the Committee, an amount
equal to or otherwise based on the excess of (i) the Fair
Market Value of a specified number of Common Shares at the time
of exercise over (ii) the exercise price of the right, as
established by the Committee on the date of grant.
(s) Subsidiary means any corporation
(other than the Company) in an unbroken chain of corporations
beginning with the Company where each of the corporations in the
unbroken chain other than the last corporation owns stock
possessing at least 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain, and if specifically determined by the Committee in
the context other than with respect to Incentive Stock Options,
may include an entity in which the Company has a significant
ownership interest or that is directly or indirectly controlled
by the Company.
(t) Substitute Awards means Awards
granted or Common Shares issued by the Company in assumption of,
or in substitution or exchange for, awards previously granted,
or the right or obligation to make future awards, by a company
acquired by the Company or any Subsidiary or with which the
Company or any Subsidiary combines.
3. Eligibility. Any person who is a
current or prospective director, officer or employee (within the
meaning of Section 303A.08 of the New York Stock Exchange
Listed Company Manual) of the Company or of any Subsidiary shall
be eligible for selection by the Committee for the grant of
Awards hereunder. In addition any person who has been retained
to provide consulting, advisory or other services to the Company
or to any Subsidiary shall be eligible for selection by the
Committee for the grant of Awards hereunder. Options intending
to qualify as Incentive Stock Options may only be granted to
employees of the Company or any Subsidiary.
4. Effective Date and Termination of Plan
This Plan was adopted by the Board as of September 23,
2005, and it will become effective (the Effective
Date) when it is approved by the Companys
stockholders, which approval must be obtained within twelve
(12) months of the adoption of this Plan. No Awards shall
be granted pursuant to the Plan after the tenth (10th)
B-2
anniversary of the Effective Date. Notwithstanding the
foregoing, the Plan may be terminated at such earlier time as
the Board may determine. Termination of the Plan will not affect
the rights and obligations of the Participants and the Company
arising under Awards theretofore granted and then in effect.
5. Effect on Prior Plan. On and after the
Effective Date, no further grants or awards shall be made under
the Prior Plan. Grants and awards made under the Prior Plan
before the Effective Date, however, shall continue in effect in
accordance with their terms.
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 7,000,000, 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
(2) 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
(2) Common Shares if such shares were subject to Awards
other than Options or Stock Appreciation Rights granted under
the Plan or subject to awards other than options or stock
appreciation rights granted under the Prior Plan. Shares subject
to Options or Stock Appreciation Rights that are exercised shall
not be available for subsequent awards. The following
transactions involving Common Shares will not result in
additional Common Shares becoming available for subsequent
Awards under this Plan: (i) Common Shares tendered or
withheld in payment of an Option; (ii) Common Shares
withheld or tendered for taxes; (iii) Common Shares that
were subject to a stock-settled Stock Appreciation Right and
were not issued upon the net settlement or net exercise of such
Stock Appreciation Right; or (iv) Common Shares repurchased
on the open market with the proceeds of an Option exercise.
(c) Substitute Awards. Substitute Awards
shall not reduce the Common Shares authorized for issuance under
the Plan or authorized for grant to a Participant in any
calendar year. Additionally, in the event that a company
acquired by the Company or any Subsidiary, or with which the
Company or any Subsidiary combines, has shares available under a
pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing
plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under
the Plan and shall not reduce the Common Shares authorized for
issuance under the Plan; provided that Awards using such
available shares shall not be made after the date awards or
grants could have been made under the terms of the pre-existing
plan, absent the acquisition or combination, and shall only be
made to individuals who were employees, directors or consultants
of such acquired or combined company before such acquisition or
combination.
(d) Tax Code Limits. The aggregate number
of Common Shares subject to Awards granted under this Plan
during any calendar year to any one Participant shall not exceed
1,250,000, which number shall be calculated and adjusted
pursuant to Section 12 only to the extent that such
calculation or adjustment will not affect the status of any
Award intended to qualify as performance based
compensation under Section 162(m) of the Code. The
aggregate
B-3
number of Common Shares that may be issued pursuant to the
exercise of Incentive Stock Options granted under this Plan
shall not exceed 4,000,000, which number shall be calculated and
adjusted pursuant to Section 12 only to the extent that
such calculation or adjustment will not affect the status of any
Option intended to qualify as an incentive stock
option under Section 422 of the Code. The maximum
amount payable pursuant to that portion of a Performance Unit
granted under this Plan for any calendar year to any Participant
that is intended to satisfy the requirements for
performance based compensation under
Section 162(m) of the Code shall not exceed $5,000,000.
7. Options. Options may be granted at any
time and from time to time to Participants selected by the
Committee. No Participant shall have any rights as a stockholder
with respect to any Common Shares subject to Option hereunder
until such shares have been issued. Each Option shall be
evidenced by an Award Agreement. Options granted pursuant to the
Plan may, but need not be identical; provided that each Option
must contain and be subject to the following terms and
conditions:
(a) Purchase Price. The purchase price
under each Option shall be established by the Committee;
provided that in no event will the purchase price be less than
the Fair Market Value of a Common Share on the date of grant,
except for Options granted to an employee of a company acquired
by the Company in assumption and substitution of options held by
such employee at the time such company is acquired.
(b) Payment of Purchase Price. Unless
otherwise provided for by the Committee and set forth in the
applicable Award Agreement, the purchase price of any Option may
be paid (i) in cash, (ii) by the delivery, either
actually or by attestation, of previously owned Common Shares or
(iii) by a combination the foregoing. In addition, the
purchase price may be paid through such cashless exercise
procedures permitted and established by the Committee, including
an irrevocable commitment by a broker to pay over such amount
from a sale of the Common Shares issuable under an Option, the
delivery of previously owned Common Shares and withholding of
Common Shares otherwise deliverable upon exercise.
(c) Option Vesting. The Committee shall
have the right to make the timing of the ability to exercise any
Option subject to continued employment, the passage of time
and/or such
performance requirements as deemed appropriate by the Committee.
(d) Option Term. Each Option shall expire
within a period of not more than ten (10) years from the
date of grant.
(e) Termination of Employment. The Award
Agreement evidencing the grant of each Option shall set forth
the terms and conditions applicable to such Option upon a
termination or change in the status of the employment or service
of the Participant with the Company or a Subsidiary, which shall
be as the Committee may, in its discretion, determine.
(f) Incentive Stock
Options. Notwithstanding anything to the contrary
in this Section 7, in the case of the grant of an Option
intending to qualify as an Incentive Stock Option, if the
Participant owns stock possessing more than 10% of the combined
voting power of all classes of stock of the Company (a
10% Shareholder), the purchase price of such
Option must be at least 110% of the Fair Market Value of a
Common Share on the date of grant and the Option must expire
within a period of not more than five (5) years from the
date of grant. Notwithstanding anything in this Section 7
to the contrary, Options designated as Incentive Stock Options
shall not be eligible for treatment under the Code as Incentive
Stock Options (and will be deemed to be nonqualified stock
options) to the extent that either (i) the aggregate Fair
Market Value of the Common Shares (determined as of the time of
grant) with respect to which such Options are exercisable for
the first time by the Participant during any calendar year
(under all plans of the Company and any Subsidiary) exceeds
$100,000, taking Options into account in the order in which they
were granted, or (ii) such Options remain exercisable and
unexercised for more than three (3) months following a
termination of employment (or such other period of time provided
in Section 422 of the Code).
(g) No Repricing without Shareholder
Approval. Other than in connection with a change
in the Companys capitalization (as described in
Section 12), the Company may not, without the approval of
stockholders, reprice any Options. For purposes of
this Plan, the term reprice means reducing the
exercise
B-4
price of outstanding Options or canceling outstanding Options
with a purchase price in excess of Fair Market Value and
granting new Options or other Awards to the holders of canceled
Options.
8. Stock Appreciation Rights. Stock
Appreciation Rights may be granted to Participants from time to
time either in tandem with or as a component of other Awards or
not in conjunction with other Awards. The provisions of Stock
Appreciation Rights may, but need not be the same with respect
to each grant or each recipient. Any Stock Appreciation Right
granted in tandem with an Option may be granted at the same time
such Option is granted or at any time thereafter before the
exercise or expiration of such Option. All Stock Appreciation
Rights under the Plan shall be subject to the same terms and
conditions applicable to Options (as set forth in
Section 7), including no repricing; provided, however, that
Stock Appreciation Rights granted in tandem with a previously
granted Option shall be subject to the terms and conditions of
such Option. Subject to the provisions of Section 7, the
Committee may impose such other conditions or restrictions on
any Stock Appreciation Right as it shall deem appropriate,
including, but not limited to, a limit on the amount payable
with respect to any Stock Appreciation Right. Stock Appreciation
Rights may be settled in Common Shares, cash, or combination
thereof, as determined by the Committee.
9. Restricted Stock and Stock
Units. Restricted Stock and Stock Units may be
granted at any time and from time to time to Participants
selected by the Committee. Restricted Stock is an award of
Common Shares the issuance, retention, vesting
and/or
transferability of which is subject during specified periods of
time to such conditions (including continued employment or
performance conditions) and terms as the Committee deems
appropriate. Stock Units are Awards denominated in units of
Common Shares under which the issuance of Common Shares is
subject to such conditions (including continued employment or
performance conditions) and terms as the Committee deems
appropriate. Each grant of Restricted Stock and Stock Units
shall be evidenced by an Award Agreement. Unless determined
otherwise by the Committee, the value of each Stock Unit will be
equal to one Common Share. Restricted Stock and Stock Units
granted pursuant to the Plan may, but need not be identical, but
each grant of Restricted Stock and Stock Units must contain and
be subject to the following terms and conditions:
(a) Number of Shares Subject to
Award. Each Award Agreement evidencing a grant of
Restricted Stock or Stock Units shall contain provisions
regarding the number of Common Shares or Stock Units subject to
such Award or a formula for determining such number and
restrictions on the transferability of the shares or units.
Common Shares issued under a Restricted Stock Award may be
issued in the name of the Participant and held by the
Participant or held by the Company, in each case, as the
Committee may provide.
(b) Form of Payment. To the extent
determined by the Committee, Stock Units may be satisfied or
settled in Common Shares, cash or a combination thereof.
(c) Section 83(b) Election. The
Committee may provide in an Award Agreement for an agreement
between the Company and the holder of an Award of Restricted
Stock as to whether or not such holder will be permitted to make
an election under Section 83(b) of the Code with respect to
the unvested Common Shares subject to the Award.
(d) Vesting. The grant, issuance,
retention, vesting
and/or
settlement of shares subject to Awards of Restricted Stock and
Stock Units shall occur at such time and in such installments as
determined by the Committee or under criteria established by the
Committee. The Committee shall have the right to make the timing
of the grant
and/or the
issuance, ability to retain, vesting
and/or
settlement of such shares subject to Awards of Restricted Stock
and under Stock Units subject to continued employment, passage
of time
and/or such
performance criteria as deemed appropriate by the Committee;
provided that in no event shall the grant, issuance, retention,
vesting
and/or
settlement of shares under Restricted Stock or Stock Unit Awards
that is based on performance criteria be subject to a
performance period of less than one (1) year.
Notwithstanding anything to the contrary herein, the performance
criteria for any Restricted Stock or Stock Unit that is intended
to satisfy the requirements for performance-based
compensation under Section 162(m) of the Code shall
be a measure based on one or more Qualifying Performance
Criteria selected by the Committee and specified at the time the
Restricted Stock or Stock Unit is granted. The Committee shall
certify the extent to which any Qualifying Performance Criteria
has been satisfied, and the amount payable as a result thereof,
prior to payment, vesting
and/or
settlement of any Restricted Stock or Stock Unit that is
intended to satisfy the requirements for performance-based
compensation under Section 162(m) of the Code.
B-5
(e) Discretionary Adjustments and
Limits. Subject to the limits imposed under
Section 162(m) of the Code for Awards that are intended to
qualify as performance based compensation,
notwithstanding the satisfaction of any performance goals, the
number of Common Shares granted, issued, retainable
and/or
vested under an Award of Restricted Stock or Stock Units on
account of either financial performance or personal performance
evaluations may, to the extent specified in the Award Agreement,
be reduced, but not increased, by the Committee on the basis of
such further considerations as the Committee shall determine.
(f) Voting Rights. Unless otherwise
determined by the Committee: (i) Participants holding
shares of Restricted Stock granted hereunder may exercise full
voting rights with respect to those shares during the period of
restriction and (ii) Participants shall have no voting
rights with respect to Common Shares underlying Stock Units
unless and until such shares are reflected as issued and
outstanding shares on the Companys stock ledger.
(g) Dividends and
Distributions. Participants in whose name
Restricted Stock is granted shall be entitled to receive all
dividends and other distributions paid with respect to those
shares, unless determined otherwise by the Committee. Any such
dividends or distributions will be subject to the same
restrictions on transferability as the Restricted Stock with
respect to which they were distributed.
(h) Termination of Employment. The Award
Agreement evidencing the grant of an Award of Restricted Stock
or Stock Units shall set forth the terms and conditions
applicable to such Award upon a termination or change in the
status of the employment or service of the Participant with the
Company or a Subsidiary, which shall be as the Committee may, in
its discretion, determine.
10. Performance Units. Each Performance
Unit Award will confer upon the Participant the opportunity to
earn a future payment tied to the level of achievement with
respect to one or more performance criteria. Performance Units
granted pursuant to the Plan may, but need not be identical, but
each grant of Performance Units must contain and be subject to
the following terms and conditions:
(a) General. The Committee shall
determine and set forth in an Award Agreement provisions
regarding: (i) the target and maximum amount payable to the
Participant under the Performance Unit Award,
(ii) restrictions on the alienation or transfer of the
Performance Unit or Common Shares subject thereto prior to
actual payment and (iii) forfeiture provisions.
(b) Performance Criteria. The Committee
shall establish the performance criteria and level of
achievement versus these criteria that shall determine the
target and maximum amount payable under a Performance Unit,
which criteria may be based on financial performance
and/or
personal performance evaluations. The Committee shall also
establish the term of the performance period as to which
performance shall be measured for determining the amount of any
payment, which shall not be less than one year, except, in
either case, in the event of the Participants death or
disability or a Change of Control. Notwithstanding anything to
the contrary herein, the performance criteria for any portion of
a Performance Unit that is intended by the Committee to satisfy
the requirements for performance-based compensation
under Section 162(m) of the Code shall be a measure based
on one or more Qualifying Performance Criteria selected by the
Committee and specified at the time the Performance Unit is
granted. The Committee shall certify the extent to which any
Qualifying Performance Criteria has been satisfied, and the
amount payable as a result thereof, prior to payment, vesting
and/or
settlement of any Performance Unit that is intended to satisfy
the requirements for performance-based compensation
under Section 162(m) of the Code.
(c) Timing and Form of Payment. The
Committee shall determine the timing of payment of any
Performance Unit. Payment of the amount due under a Performance
Unit may be made in cash, in Common Shares or a combination
thereof, as determined by the Committee. The Committee may
provide for or, subject to such terms and conditions as the
Committee may specify, may permit a Participant to elect for the
payment of any Performance Unit to be deferred to a specified
date or event.
(d) Discretionary
Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under a Performance Unit on
account of either financial performance or personal performance
evaluations may be reduced by the Committee on the basis of such
further considerations, as the Committee shall determine.
B-6
11. Dividend Equivalents. Dividend
Equivalents may be granted to Participants independently or in
tandem with any Award other than an Option or Stock Appreciation
Right. Dividend Equivalents are payable in cash, Common Shares,
or Stock Units in an amount equivalent to the dividends that
would have been paid on Common Shares had the shares been
outstanding from the date an Award was granted. Dividend
Equivalents may be granted with conditions as determined by the
Committee, including that such amounts (if any) shall be deemed
to have been reinvested in additional Common Shares, and shall
be evidenced by an Award Agreement.
12. Adjustment of and Changes in the Stock
(a) In the event that the number of Common Shares of the
Company shall be increased or decreased through a
reorganization, reclassification, combination of shares, stock
split, reverse stock split, spin-off, dividend (other than
regular, cash dividends), or otherwise, each Common Share of the
Company which has been authorized for issuance under the Plan,
whether such share is then currently subject to or may become
subject to an Award under the Plan, as well as the per share
limits set forth in Section 6 of this Plan, shall be
proportionately adjusted by the Committee to reflect such
increase or decrease. The terms of any outstanding Award shall
also be adjusted by the Committee as to price, number of Common
Shares subject to such Award and other terms to reflect the
foregoing events.
(b) Subject to Section 13, in the event there shall be
any other change in the number or kind of outstanding Common
Shares of the Company, or any stock or other securities into
which such Common Shares shall have been changed, or for which
it shall have been exchanged, whether by reason of a change of
control, other merger, consolidation or otherwise, the Committee
shall, in its sole discretion, determine the appropriate
adjustment, if any, to be effected. Notwithstanding anything to
the contrary herein, any adjustment to Options granted pursuant
to this Plan intended to qualify as Incentive Stock Options
shall comply with the requirements, provisions and restrictions
of the Code.
(c) No right to purchase fractional shares shall result
from any adjustment in Awards pursuant to this Section 12.
In case of any such adjustment, the shares subject to the Award
shall be rounded down to the nearest whole share.
13. Effect of a Change of Control. Unless
otherwise provided for under the terms of a transaction
constituting a Change of Control, the Committee may, through an
Award Agreement or otherwise, provide that any or all of the
following shall occur in connection with a Change of Control, or
upon termination of the Participants employment following
a Change of Control: (a) the acceleration of the vesting
and, if applicable, exercisability of any outstanding Award, or
portion thereof, or the lapsing of any conditions of
restrictions on or the time for payment in respect of any
outstanding Award, or portion thereof, (b) the substitution
for Common Shares subject to any outstanding Award, or portion
thereof, stock or other securities of the surviving corporation
or any successor corporation to the Company, or a parent or
subsidiary thereof, in which event the aggregate purchase or
exercise price, if any, of such Award, or portion thereof, shall
remain the same, (c) the conversion of any outstanding
Award, or portion thereof, into a right to receive cash or other
property upon or following the consummation of the Change of
Control in an amount equal to the value of the consideration to
be received by holders of Common Shares in connection with such
transaction for one Common Share, less the per share purchase or
exercise price of such Award, if any, multiplied by the number
of Common Shares subject to such Award, or a portion thereof,
and/or
(d) the cancellation of any outstanding and unexercised
Awards upon or following the consummation of the Change of
Control. Any actions or determinations of the Committee pursuant
to this Section 13 may, but need not be uniform as to all
outstanding Awards, and the Committee may, but need not treat
all holders of outstanding Awards identically.
14. Qualifying Performance-Based Compensation
(a) General. The Committee may specify
that the grant, retention, vesting, of issuance any Award, or
the amount to be paid out under any Award, be subject to or
based on Qualifying Performance Criteria or other standards of
financial performance
and/or
personal performance evaluations. Notwithstanding satisfaction
of any performance goals, the number of Common Shares issued or
the amount paid under an Award may, to the extent specified in
the Award Agreement, be reduced by the Committee on the basis of
such further considerations as the Committee in its sole
discretion shall determine.
B-7
(b) Qualifying Performance Criteria. For
purposes of this Plan, the term Qualifying Performance
Criteria shall mean any one or more of the following
performance criteria, either individually, alternatively or in
any combination, applied to either the Company as a whole or to
a business unit or Subsidiary, either individually,
alternatively or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous
years results or to a designated comparison group, in each
case as specified by the Committee: (i) cash flow (before
or after dividends), (ii) earnings per share (including
earnings before interest, taxes, depreciation and amortization),
(iii) stock price, (iv) return on equity,
(v) total stockholder return, (vi) return on capital
(including return on total capital or return on invested
capital), (vii) return on assets or net assets,
(viii) market capitalization, (ix) economic value
added, (x) debt leverage (debt to capital),
(xi) revenue, (xii) income or net income,
(xiii) operating income, (xiv) operating profit or net
operating profit, (xv) operating margin or profit margin,
(xvi) return on operating revenue, (xvii) cash from
operations, (xviii) operating ratio, (xix) operating
revenue, or (xx) customer service. To the extent consistent
with Section 162(m) of the Code, the Committee may
appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following
events that occurs during a performance period: (i) asset
write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary, unusual
or non-recurring items as described in Accounting Principles
Board Opinion No. 30
and/or in
managements discussion and analysis of financial condition
and results of operations appearing in the Companys
Forms 10-K
or 10-Q for
the applicable year.
15. Transferability. Unless the Committee
specifies otherwise, each Award may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated by a
Participant other than by will or the laws of descent and
distribution, and each Option and Stock Appreciation Right
granted hereunder shall be exercisable only by the Participant
during his or her lifetime. Notwithstanding anything herein to
the contrary, in no event with Options or Stock Appreciation
Rights be transferable for value or consideration.
16. Compliance with Laws and
Regulations. This Plan, the grant, issuance,
vesting, exercise and settlement of Awards thereunder, and the
obligation of the Company to sell, issue or deliver shares under
such Awards, shall be subject to all applicable foreign,
federal, state and local laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be
required. The Company shall not be required to register in a
Participants name or deliver any shares prior to the
completion of any registration or qualification of such shares
under any foreign, federal, state or local law or any ruling or
regulation of any government body, which the Committee shall
determine to be necessary or advisable. No Option shall be
exercisable and no shares shall be issued
and/or
transferable under any other Award unless a registration
statement with respect to the shares underlying such Award is
effective and current or the Company has determined that such
registration is unnecessary. In the event an Award is granted to
or held by a Participant who is employed or providing services
outside the United States, the Committee may, in its sole
discretion, modify the provisions of such Award to comply with
applicable foreign law.
17. Withholding. To the extent required
by applicable federal, state, local or foreign law, a
Participant shall be required to satisfy, in a manner
satisfactory to the Company, any withholding tax obligations
that arise with respect to an Award. The Company and its
Subsidiaries shall not be required to issue Common Shares, make
any payment or to recognize the transfer or disposition of
Common Shares until such obligations are satisfied. The
Committee may permit these obligations to be satisfied by having
the Company withhold a portion of the Common Shares that
otherwise would be issued to the Participant in connection with
the Award, or by the Participant tendering (either actually or
by attestation) Common Shares previously acquired.
18. Administration of the Plan
(a) Committee of the Plan. The Plan shall
be administered by the Committee which shall be the Compensation
Committee of the Board or, in the absence of a Compensation
Committee, the Board itself; provided, however, that
(i) with respect to any Award that is intended to satisfy
the conditions of
Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) the term Committee shall
refer to a committee of two or more non-employee
directors as determined for purposes of applying Exchange
Act
Rule 16b-3;
and (ii) with respect to any Award that is intended to
qualify as performance-based compensation
B-8
within the meaning of Section 162(m) of the Code, the term
Committee shall refer to a committee of two or more
outside directors as determined for purposes of
applying Section 162(m) of the Code. Subject to the provisions
of Section 16 of the Exchange Act and Section 162(m)
of the Code, any power of the Committee may also be exercised by
the Board. The Compensation Committee may by resolution
authorize one or more officers of the Company to perform any or
all things that the Committee is authorized and empowered to do
or perform under the Plan; provided, however, that the
resolution so authorizing such officer or officers shall specify
the total number of Awards (if any) such officer or officers may
award pursuant to such delegated authority, and any such Award
shall be subject to the form of Award Agreement theretofore
approved by the Compensation Committee. No such officer shall
designate himself or herself as a recipient of any Awards
granted under authority delegated to such officer.
(b) Powers of Committee. Subject to the
express provisions of this Plan, the Committee shall be
authorized and empowered to do all things that it determines to
be necessary or appropriate in connection with the
administration of this Plan, including, without limitation:
(i) to prescribe, amend and rescind rules and regulations
relating to this Plan and to define terms not otherwise defined
herein; (ii) to determine which persons are Participants,
to which of such Participants, if any, Awards shall be granted
hereunder and the timing of any such Awards; (iii) to grant
Awards to Participants and determine the terms and conditions
thereof, including the number of Common Shares subject to Awards
and the exercise or purchase price of such Common Shares and the
circumstances under which Awards become exercisable or vested or
are forfeited or expire, which terms may but need not be
conditioned upon the passage of time, continued employment, the
satisfaction of performance criteria, the occurrence of certain
events (including a Change of Control), or other factors;
(iv) to establish and verify the extent of satisfaction of
any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting
and/or
ability to retain any Award; (v) to prescribe and amend the
terms of the agreements or other documents evidencing Awards
made under this Plan (which need not be identical) and the terms
of or form of any document or notice required to be delivered to
the Company by Participants under this Plan; (vi) to
determine the extent to which adjustments are required pursuant
to Section 12; (vii) to interpret and construe this
Plan, any rules and regulations under this Plan and the terms
and conditions of any Award granted hereunder, and to make
exceptions to any such provisions in if the Committee, in good
faith, determines that it is necessary to do so in light of
extraordinary circumstances and for the benefit of the Company;
(viii) to approve corrections in the documentation or
administration of any Award; and (ix) to make all other
determinations deemed necessary or advisable for the
administration of this Plan. The Committee may, in its sole and
absolute discretion, without amendment to the Plan, waive or
amend the operation of Plan provisions respecting exercise after
termination of employment or service to the Company or an
Affiliate and, except as otherwise provided herein, adjust any
of the terms of any Award. The Committee may also
(A) accelerate the date on which any Award granted under
the Plan becomes exercisable or (B) accelerate the vesting
date or waive or adjust any condition imposed hereunder with
respect to the vesting or exercisability of an Award, provided
that the Committee, in good faith, determines that such
acceleration, waiver or other adjustment is necessary or
desirable in light of extraordinary circumstances.
(c) Determinations by the Committee. All
decisions, determinations and interpretations by the Committee
regarding the Plan, any rules and regulations under the Plan and
the terms and conditions of or operation of any Award granted
hereunder, shall be final and binding on all Participants,
beneficiaries, heirs, assigns or other persons holding or
claiming rights under the Plan or any Award.
19. Amendment of the Plan or Awards. The
Board may amend, alter or discontinue this Plan and the
Committee may amend, or alter any agreement or other document
evidencing an Award made under this Plan; provided that, except
as provided pursuant to the provisions of Sections 13 and
14, to the extent necessary under any applicable law, regulation
or New York Stock Exchange or other applicable listing
requirement, no amendment shall be effective unless approved by
the stockholders of the Company in accordance with applicable
law, regulation or New York Stock Exchange or other applicable
listing requirement. In addition, no amendment or alteration to
the Plan or an Award or Award Agreement shall be made that would
materially impair the rights of the holder of an Award, without
such holders consent, provided that no such consent shall
be required if the Committee determines in its sole discretion
that such amendment or alteration either is required or
advisable in order for the Company, the Plan or the Award to
satisfy any law or regulation or to meet the requirements of or
avoid adverse financial accounting consequences under any
accounting standard.
B-9
20. No Liability of Company. The Company
and any Subsidiary or affiliate which is in existence or
hereafter comes into existence shall not be liable to a
Participant or any other person as to: (i) the non-issuance
or sale of Common Shares as to which the Company has been unable
to obtain from any regulatory body having jurisdiction the
authority deemed by the Companys counsel to be necessary
to the lawful issuance and sale of any shares hereunder; and
(ii) any tax consequence expected, but not realized, by any
Participant or other person due to the receipt, exercise or
settlement of any Award granted hereunder.
21. Non-Exclusivity of Plan. Neither the
adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board
or the Committee to adopt such other incentive arrangements as
either may deem desirable, including without limitation, the
granting of restricted stock or stock options otherwise than
under this Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
22. Governing Law. This Plan and any
Award Agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the
State of Delaware and applicable U.S. federal law, without
reference to principles of conflict of laws. Any reference in
this Plan or in the Award Agreement or other document evidencing
any Awards to a provision of law or to a rule or regulation
shall be deemed to include any successor law, rule or regulation
of similar effect or applicability.
23. Compliance with Section 409A of the
Code. This Plan is intended to comply and shall
be administered in a manner that is intended to comply with
Section 409A of the Code and shall be construed and
interpreted in accordance with such intent. To the extent that
an Award or the payment, settlement or deferral thereof is
subject to Section 409A of the Code, the Award shall be
granted, paid, settled or deferred in a manner that will comply
with Section 409A of the Code, including regulations or
other guidance issued with respect thereto, except as otherwise
determined by the Committee. Any provision of this Plan that
would cause the grant of an Award or the payment, settlement or
deferral thereof to fail to satisfy Section 409A of the
Code shall be amended to comply with Section 409A of the
Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued
under Section 409A of the Code.
24. No Right to Employment, Reelection or Continued
Service. Nothing in this Plan or any Award
Agreement shall interfere with or limit in any way the right of
the Company, its Subsidiaries
and/or its
affiliates to terminate any Participants employment,
service on the Board or service for the Company at any time or
for any reason not prohibited by law, nor confer upon any
Participant any right to continue his or her employment or
service for any specified period of time.
B-10
|
|
|
|
|
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A
PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH A PROPOSAL. |
|
Mark Here
for Address
Change or
Comments
|
c |
|
|
PLEASE SEE REVERSE SIDE |
The Board of Directors recommends a vote FOR each of the names below.
|
|
|
|
|
|
|
|
1. Election of Directors Nominees. |
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
Michael O. Johnson |
|
c |
|
c |
|
c |
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
John Tartol |
|
c |
|
c |
|
c |
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
ITEM 2 |
|
Approve an amendment and restatement of the Companys 2005
Stock Incentive Plan to increase the authorized number of Common Shares issuable thereunder by 3,000,000. |
|
c |
|
c |
|
c |
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
ITEM 3 |
|
Ratify the appointment of the Companys independent registered public accountants
for fiscal 2008.
|
|
c |
|
c |
|
c |
|
|
|
|
|
|
|
|
|
I plan to attend the meeting. |
c |
THIS PROXY WHEN PROPERLY EXECUTE WILL BE VOTED AS DIRECTED OR,
IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING, THE PROXIES ARE AUTHORIZED ON BEHALF OF THE
UNDERSIGNED TO VOTE THEREON IN ACCORDANCE WITH HIS OR HER BEST JUDGEMENT.
PLEASE MARK, DATE, SIGN, AND RETURN THIS CARD PROMPTLY. IN ORDER TO BE COUNTED.
THIS PROXY CARD MUST BE RECEIVED BEFORE THE MEETING.
NOTE: Please sign exactly as your name(s) appears on Proxy.
If held in joint tenancy all persons must sign. Trustees, administrators, etc. should
include title and authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
5 FOLD AND DETACH HERE 5
Choose MLinkSM for fast, easy and secure 24/7 online access
to your future proxy materials, investment plan statements, tax documents and
more. Simply log on to Investor ServiceDirect® at
www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt
you through enrollment.
You can view the Annual Report and Proxy Statement
on the Internet at http://bnymellon.mobular.net/bnymellon/hlf
PROXY
HERBALIFE LTD.
2008 ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD MAY 1, 2008
|
|
|
|
The undersigned shareholder of HERBALIFE LTD. hereby acknowledges receipt of the Notice of 2008 Annual General Meeting of Shareholders and related Proxy Statement, and hereby appoints Michael O. Johnson and Brett R. Chapman, or either of them, proxies and attorneys-in-fact, with full power of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2008 Annual General
Meeting of Shareholders of HERBALIFE LTD., to be held on May 1, 2008 at 9:00 a.m., Pacific Daylight Time, at 1800 Century Park East, Los Angeles, California 90067, and at any adjournment(s) or postponement(s) thereof, and to vote all Common Shares which the undersigned would be entitled to vote if then and there personally present, on the matters set forth on the reverse side.
|
|
| |
|
This proxy is solicited by the Board of Directors for use at the Annual General Meeting of Shareholders on May 1, 2008.
| |
|
|
(Continued, and to be marked, dated and signed, on the other side) |
|
| |
|
|
|
|
|
|
|
|
|
Address Change/Comments (Mark the corresponding box on the reverse
side) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|